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: 811-4920
WASATCH FUNDS, INC.
(Exact name of registrant as specified in charter)
150 Social Hall Avenue
4th Floor
Salt Lake City, Utah 84111
(Address of principal executive offices)(Zip code)
| (Name and Address of Agent for Service) | Copy to: | |
Samuel S. Stewart, Jr. Wasatch Funds, Inc. 150 Social Hall Avenue, 4th Floor Salt Lake City, Utah 84111 | Eric F. Fess, Esq. Chapman & Cutler LLP 111 West Monroe Street Chicago, IL 60603 | |
Registrant’s telephone number, including area code: (801) 553-0777
Date of fiscal year end: September 30
Date of reporting period: September 30, 2006
Item 1: Report to Shareholders.
 | Annual Report |
| SEPTEMBER 30, 2005 | CORE GROWTH FUND | |
| GLOBAL SCIENCE & TECHNOLOGY FUND | ||
| HERITAGE GROWTH FUND | ||
| INTERNATIONAL GROWTH FUND | ||
| INTERNATIONAL OPPORTUNITIES FUND | ||
| MICRO CAP FUND | ||
| MICRO CAP VALUE FUND | ||
| SMALL CAP GROWTH FUND | ||
| SMALL CAP VALUE FUND | ||
| STRATEGIC INCOME FUND | ||
| ULTRA GROWTH FUND | ||
| WASATCH-HOISINGTON U.S. TREASURY FUND | ||
Wasatch Funds, Inc.
P.O. Box 2172
Milwaukee, WI 53201-2172
www.wasatchfunds.com
800.551.1700
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This material must be accompanied or preceded by a prospectus.
Please read the prospectus carefully before you invest.
Wasatch Funds are distributed by ALPS Distributors, Inc.
1
| LETTERTO SHAREHOLDERS | ||
Samuel S. Stewart, Jr., PhD, CFA President of
| FELLOW SHAREHOLDERS:
War in Iraq. A nuclear weapons test in North Korea and the threat of nuclear weapons in Iran. The ongoing fight against terrorism. Record high prices for gasoline. And on it goes. Lately, the media has been awash in bad news of one degree or another, and, in my humble opinion, that’s exactly how they like it. On the other hand, the same daily drumbeat of depressing headlines is enough to make a fairly normal person want to go out behind the barn and swallow a bedspring. I wouldn’t recommend that. Despite the battery of negative news, on balance I think the world — and, more specifically, the world’s economy — is in pretty good shape. Likewise, here at home inflation is largely in check. Interest rates remain at historically low levels. Unemployment has experienced a slight decline, with plenty of new jobs being created. The domestic economic recovery continues. |
If you’ve been around the block as long as I have, all in all that seems like a pretty positive economic scenario. That’s not to say everything is picture perfect. There are a number of things that bear watching — the inflationary effect of commodities like oil and copper working their way through the system; the asset bubble apparent in parts of the U.S. real estate market; and, maybe most disturbing, my sense that there is such unbridled lust for yield lately that too many folks have turned a blind eye toward risk.
One thing I know: When investors ignore risk, it inevitably ends badly. As Warren Buffet once noted, “When the tide goes back out, everyone will see who wasn’t really wearing a swimsuit.” I suspect that when the water recedes, those who have taken on too much risk will be blushingly exposed, and there will be a number of embarrassed investors left sunburned in the sand.
PERFORMANCE
I have not been particularly pleased with our investment record over the past year. While several of our Funds and many of our international holdings have done quite well, the bread-and-butter portfolios that have earned Wasatch its reputation — Small Cap Growth, Core, and Ultra — have performed relatively poorly.
I think there is one overriding reason why we’ve lagged our benchmarks and peers: The sectors of the market that have been putting up big numbers are places that we have traditionally been underweight.
The market has witnessed a big run up in the energy, materials and consumer durables sectors. These are not places where Wasatch has historically focused its analytical time and efforts, mainly because these sectors have not been deep pools of companies that meet our investment criteria. Rather, we’ve made our money over the years in the non-cyclical, growth sectors of the economy, i.e., technology, health care, consumer discretionary, and, to some extent, financial services.
In the past, when the market plays to our strengths, Wasatch tends to look pretty smart. Even when the market favors only half of our core sectors, we tend to hold up our end. Where we look lousy is when the sectors we know well are struggling and, to add insult to injury, those in which we have minimal exposure are doing quite nicely. This has not happened often, but we have unfortunately been sitting in the middle of that intersection for the past few years.
In a number of ways, what we are experiencing today reminds me of the technology tear of the late ‘90s. If you were in tech stocks — including stocks of virtually imaginary companies that had no real products and no real earnings — you were making gobs of money. If you were not invested heavily in the dot coms — and we deliberately were not — you looked slow and stupid by comparison.
We focus on finding what we refer to as WBGC’s — the World’s Best Growth Companies. They tend to be high-quality, high-potential companies that we believe can grow earnings at 15%+ year after year. That general guideline has been the beating heart of the Wasatch way of investing. While we don’t believe that today’s market has the same irrationality that characterized the late ‘90s, we have continued to see money moving this year into companies and sectors that we just don’t believe have strong long-term prospects.
Meanwhile, the companies we are invested in continue to meet our expected earnings growth targets, but they have not yet been rewarded in their stock prices.
After the tech (i.e. dot com) market cratered, we enjoyed several years in which we seemed terribly clever for having exercised restraint. Truth to tell, all we did was stick to the same tried-and-true investment discipline that we had built, brick by brick, through the decades.
Of course, the fact is that we were not nearly as dumb as the market made us appear when our style was out-of-favor; likewise, we were hardly as smart as we seemed when high quality companies returned to favor.
Extended periods in which Wasatch struggles — this one has lasted about three years — inevitably inspire bouts of intense introspection. Why in the world are we getting whipped by our competitors? Why doesn’t the investment world recognize and reward real quality? Has the market gone haywire? Is our time-tested approach to picking stocks fundamentally flawed?
For the last few years we have again been asking ourselves these hard questions. Fundamentally, we continue to believe that we have one of the best investment philosophies and processes in the industry for any long-term investor. That said, we have also recognized areas for continued improvement, and we are making those improvements. One such area is in our level of diligence when it comes to certain investment sectors, most notably energy, materials and other cyclicals. Over the years, we have come to believe that commodity-based stocks are not an intelligent play for long-term growth investors. We think it is hard to gain a competitive advantage in that space.
2
| SEPTEMBER 30, 2006 | ||
I suspect we’ve been partially wrong in our assessment of cyclical sectors. I think that while the kind of growth companies we like may be harder to find in the oil patch, nevertheless, they are out there. We just have to dispatch smart people to dig deeper in those sectors to find stocks that fit our style. To that end, we’re making internal changes that will allow us to be better investors in those areas.
Rest assured, this does not constitute a fundamental change in direction for Wasatch. Our mission remains the same — finding and investing in the best growth companies from around the globe.
In a phrase, we intend to do a better job of “covering the waterfront.”
Back in 2001, when we were shooting the lights out in the wake of the tech wreck, we published a rather pointed note in our company newsletter. It said, simply, that if you’d suddenly gone ga-ga over Wasatch because it was on a hot streak, you probably ought to take your money elsewhere. We were most likely the wrong place for you.
On the other hand, we wrote, if you truly believe in our investment discipline — and if you understand that we are in it for the long term and there are undoubtedly going to be times when the sun doesn’t exactly shine on our approach — Wasatch might well be the right place for you.
My gut tells me that we are nearing the end of the current investment cycle. In the not-too-distant future, I believe that the sorts of quality companies with which we populate our portfolios will again return to favor. History, reason and more than three decades of experiences reinforce my gut.
To mix a few metaphors and butcher the prose of Mr. Buffet, I glimpse the sun peeking through the clouds, the tide receding, and, as always, our swimsuits are tied firmly in place. Hopefully, that gives you as much comfort as it does us. We appreciate the trust you have placed in us, as well as your long-term view.
Sincerely,
Samuel S. Stewart, Jr.
President of Wasatch Funds
WASATCH-HOISINGTON U.S. TREASURY FUND
For information about the performance and outlook of the Fund, please see the management discussion and portfolio summary on pages 26 and 27. The views expressed in the management discussion are those of Hoisington Investment Management Company, sub-advisor to the Fund, and may differ from the views of Wasatch Advisors, investment advisor to Wasatch Funds.
Information in this shareholder report regarding market or economic trends or the factors influencing the Funds’ historical or future performance reflects the opinions of Fund management as of the date of this report. These statements should not be relied upon for any other purpose. Past performance is no guarantee of future results, and there is no guarantee that the market forecasts discussed will be realized.
3
| CORE GROWTH FUND (WGROX) — Management Discussion | SEPTEMBER 30, 2006 | |
JB Taylor Portfolio Manager |
Paul Lambert Portfolio Manager | OVERVIEW
The Wasatch Core Growth Fund gained 2.46% in the 12 months ended September 30, while the Russell 2000 Index increased 9.92% over the same period. While we are disappointed that |
we trailed the Index, we are more disappointed in the low absolute level of performance for the year. It is our expectation that the Fund will behave quite differently than the Index at times. The Fund is not constructed to track any particular market index, but rather is built with a bottom-up approach of adding individual companies with unique business models and attractive valuations. Our captured earnings growth averaged a healthy 12% for the year, but was below our target hurdle of 15%. We could have done better here, and we aim to do so over the next 12 months.
Digging deeper, the year’s disappointing results were driven by several factors. First, our investments in the homebuilding sector turned sour this year. They contributed to more than half of the shortfall versus the Index. Second, our stock selection was poor in the areas of financial services and technology, sectors where we typically have a strong showing. Finally, our minimal exposure to companies in cyclical and commodity-oriented sectors was a headwind, since stocks in these sectors generated some of the strongest returns in the Index.
We end the year with continued conviction that over the long-term “earnings growth drives stock prices” — i.e. we believe that buying quality companies with sustainable prospects for 15%+ earnings growth, and paying reasonable prices for them, will lead to satisfying long-term results. Our portfolio is filled with such companies, and we have taken advantage of the softness this year to increase our positions in some of our favorite holdings. With the beginning of a market retreat from cyclical and commodity-oriented sectors happening in the latest quarter, we are additionally encouraged about how the Fund is positioned for the future.
DETAILSOFTHE YEAR
Some of our biggest performance detractors this year were homebuilders, specifically M.D.C. Holdings, NVR and D.R. Horton. Our investment thesis for these home builders is that they are major players that will continue to consolidate a highly fragmented industry, using their financial and economic scale to drive increased market share and profits as they have done for the last 15 years. We did anticipate a real estate slow down this year; however, we underestimated the severity of the market’s negative reaction to the first real reports of bad news. We have maintained positions in these companies believing that they continue to have strong long-
term prospects and are undervalued at their current prices. We do not try to predict when the market will again recognize the value of these companies, but we believe they are continuing to build value that will eventually be recognized in the market.
Commodity prices were strong throughout much of the period. Against this backdrop, the producer durables and materials and processing sectors in the Index registered double-digit gains. This was a significant headwind for the Fund versus the Index since we tend to invest in companies whose prospects do not rely so heavily on macroeconomic or commodity forces. That being said, we have expanded our internal resources to broaden our coverage of the “waterfront” in an effort to find more companies in these sectors with differentiated businesses that meet our criteria for long-term growth and quality.
On the positive side of performance, our consumer discretionary holdings were among the key contributors to the Fund this year. Two of our favorite companies, Copart and O’Reilly Automotive led the charge. We continue to think they are both great long term investments.
Copart provides an auction market used by the auto insurance industry to sell off their inventory of “totaled” automobiles. O’Reilly is an auto parts retailer and accessory provider. Both companies have immense competitive advantages in growing industries with little cyclicality. We first bought O’Reilly nearly 10 years ago. It’s been one of our top performers since then and hit a new all-time high price this year.
OUTLOOK
We are energized by the quality and value of the companies held in the Core Growth Fund. So much so that we have increased our overall weight of the top 10 and top 25 holdings.* We are projecting and seeing earnings growth acceleration from our companies, which we believe may be recognized and rewarded when the market returns to valuing quality and consistent earnings growth.
It’s worth noting that there are early signs of a possible market shift taking place toward large capitalization leadership following a lengthy period of small cap outperformance. However, regardless of which size segment leads in the months ahead, we are confident that we will continue to find interesting companies in which to invest. We have long believed that small cap is the most attractive long-run sector of the market and should be an integral part of any long-term investment plan.
Thank you for the opportunity to manage your assets. We appreciate the confidence you have shown in us during this recent commodity driven market cycle.
| * | Being non-diversified, the Fund can invest a larger portion of its assets in the stocks of a limited number of companies than a diversified fund. Non-diversification increases the risk of loss to the Fund if the values of these securities decline. |
4
| CORE GROWTH FUND (WGROX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Wasatch Core Growth Fund | 2.46% | 9.64% | 14.62% | |||
Russell 2000 Index | 9.92% | 13.78% | 9.06% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, in the past, certain Fund expenses, without which total returns would have been lower.
Investments in small cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
TOP 10 EQUITY HOLDINGS*
| Ticker | Company | % of Fund | ||
| CPRT | Copart, Inc. Vehicle salvage services. | 5.32% | ||
| POOL | Pool Corp. Swimming pool supplies distributor. | 5.24% | ||
| ORLY | O’Reilly Automotive, Inc. Automotive parts retailer/distributor. | 4.74% | ||
| ACF | AmeriCredit Corp. Subprime automobile lender. | 3.38% | ||
| PDX | Pediatrix Medical Group, Inc. National network of neonatalogists. | 3.34% |
| Ticker | Company | % of Fund | ||
| NVR | NVR, Inc. Homebuilder. | 3.15% | ||
| SRX | SRA International, Inc., Class A Information technology services for government agencies. | 2.84% | ||
| MSM | MSC Industrial Direct Co., Inc., Class A Industrial products distributor. | 2.64% | ||
| SEIC | SEI Investments Co. Outsource financial services provider. | 2.53% | ||
| GISX | Global Imaging Systems, Inc. Office imaging equipment sales and service. | 2.48% |
| * | As of September 30, 2006, the Fund had 35.66% invested in the Top 10 equity holdings and there were 76 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. |
SECTOR BREAKDOWN**
| ** | Excludes short-term investments, securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
The Russell 2000 Index is an unmanaged total return index of the smallest 2,000 companies in the Russell 3000 Index, as ranked by total market capitalization. The Russell 2000 Index is widely regarded in the industry as accurately capturing the universe of small company stocks. You cannot invest directly in the Index.
5
| GLOBAL SCIENCE & TECHNOLOGY FUND (WAGTX) — Management Discussion | SEPTEMBER 30, 2006 | |
Noor Kamruddin Portfolio Manager |
James S. Gulbrandsen Portfolio Manager |
Ajay Krishnan, CFA Portfolio Manager |
OVERVIEW
The Wasatch Global Science & Technology Fund gained 9.81% for the 12 months ended September 30, 2006 and outperformed the Lipper Science & Technology Index (the “Lipper Index”), which gained 4.28%, and the Nasdaq Composite Index, which gained 5.83%, but underperformed the Russell 2000 Technology Index, which gained 10.12%.
Electronic technology was the dominant component of the Lipper Index, with an average weighting of nearly 53%. It was also the major focus of the Fund, with an average weighting of over 44%. The Fund’s performance in electronic technology eclipsed that of the Lipper Index, despite the significant headwind of being, on average, more than 8% underweight. Within electronic technology, strong results from our electronic production equipment, electronic components and computer communications groups more than offset weakness in the semiconductors and telecommunications equipment groups. These two groups struggled due to higher than expected earnings disappointments, lackluster financial results and a modest inventory buildup.
In technology services, our overweighting in companies that provide information technology services worked to the Fund’s advantage but our underweighting in software companies was a disadvantage. Software stocks generally performed well during the year and our stocks were no exception. Even so, solid performance did not counteract the low relative weight. We continue working to find interesting new software companies in which to invest.
Overall, our international investments contributed to the Fund’s return and we continue to find attractive companies overseas both in terms of business fundamentals and valuations. Singapore and India are the countries where the Fund is most heavily weighted and we have been increasing our weighting in Brazil given the opportunities we see there.
The U.S. economy appears to be slowing so we are keeping a close eye on companies with exposure to the U.S. consumer. Overall, however, we feel the Fund is well positioned given our focus on investing in quality companies and the strict attention we have paid to position size and valuation.
DETAILSOFTHE YEAR
A long-term theme for the Fund has been to invest in companies that outsource information technology services to India. Two of these companies — Cognizant Technology
Solutions and Infosys Technologies — were among the top five contributors for the year.
As mentioned above, our semiconductor group was disappointing. The group’s biggest detractor was O2Micro International whose stock fell over 56%, as investors became uneasy about pending litigation. We continue to hold O2Micro because we like its potential to benefit from growth in the LCD-TV market. Although business momentum among our semiconductor names has been somewhat weaker than we would like, many of them are attractively valued.
We continue to look for investments in the software arena but given our concerns about investing in these types of companies we must have a high degree of confidence in the opportunity or great valuation. An example is Adobe Systems, Inc. Adobe was hit hard due to slowing sales but there was a product cycle coming up so the opportunity was there, the valuation was attractive and the stock made a comeback, gaining about 28% since we’ve held it.
We like Singapore as a low cost manufacturing hub for U.S. companies. One of the Fund’s top contributors this year was MMI Holdings, a Singapore-based manufacturer of hard disk drives and lasers. In addition to operating in a low cost environment, we like the company for its high quality management, good products on the hard disk drive side and penetration story on the laser side.
In addition to Singapore, our other large country weight outside the U.S. was India, although we have lowered our exposure by nearly 2% since last year as valuations have risen due to the strong equity market.
The long-term opportunity we see for investing in broadband and consumer strength in Brazil was the impetus behind our increased weighting. In Brazil, broadband penetration is extremely low relative to the U.S. and also to other Latin American countries. We invested in two companies that may benefit from Brazil’s broadband growth. Submarino is an online retailer, and Net Servicos de Communicacao is a provider of broadband and cable services with a strong market position in Brazil’s largest cities. A declining interest rate environment is beneficial to the purchasing power of Brazilian consumers and supportive of our investment in Submarino.
OUTLOOK
On balance, we’re cautious regarding the near term but feel that the market has been fairly efficient with valuations. If business momentum picks up, we could see really interesting growth off the Fund’s valuation base as of September 30. While the U.S. economy appears to be slowing, stocks could benefit from positive macro events such as lower energy prices and interest rates as well as strength in the consumer segment.
We continue to search the world for best-of-breed science and technology companies and we leverage the entire Wasatch research team to cover a long list of tech names. Knowing that multiple eyes have looked at every name we consider for the Fund enables us to invest with confidence. We are happy with our holdings and feel they have the potential to help the Fund achieve long-term growth of capital for our shareholders.
Thank you for investing in the Fund.
6
| GLOBAL SCIENCE & TECHNOLOGY FUND (WAGTX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 12/19/00 | ||||
Wasatch Global Science & Technology Fund | 9.81% | 12.64% | 6.69% | |||
Lipper Science & Technology Index | 4.28% | 5.37% | -8.73% | |||
Russell 2000 Technology Index | 10.12% | 4.99% | -7.17% | |||
Nasdaq Composite Index | 5.83% | 9.16% | -2.04% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, in the past, certain Fund expenses, without which total returns would have been lower.
Investments in concentrated funds can be more volatile and loss of principal could be greater than investing in more diversified funds. Investing in foreign securities entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus.
TOP 10 EQUITY HOLDINGS*
| Ticker | Company | % of Fund | ||
| INFO IN | Infosys Technologies Ltd. (India) Business and information technology consulting. | 2.35% | ||
| CTSH | Cognizant Technology Solutions Corp., Class A Professional technology services. | 2.35% | ||
| MXIM | Maxim Integrated Products, Inc. Semiconductors. | 2.22% | ||
| MMI SP | MMI Holdings Ltd. (Singapore) Electro-mechanical components and equipment. | 2.08% | ||
| MCRL | Micrel, Inc. Semiconductors. | 2.00% |
| Ticker | Company | % of Fund | ||
| OIIM | O2Micro International Ltd. ADR (Cayman Islands) Semiconductors. | 1.92% | ||
| LMA SP | LMA International N.V. (Singapore) Devices for airway support during surgery. | 1.92% | ||
| PLXT | PLX Technology, Inc. Semiconductors. | 1.88% | ||
| SRX | SRA International, Inc., Class A Information technology services for government agencies. | 1.87% | ||
| MCHP | Microchip Technology, Inc. Semiconductors. | 1.86% |
| * | As of September 30, 2006, the Fund had 20.45% invested in the Top 10 equity holdings and there were 125 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. |
SECTOR BREAKDOWN**
| ** | Excludes short-term investments, securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
| † | Inception: December 19, 2000. The Lipper Science & Technology Index is a composite of mutual funds that invest in science and technology companies and have investment objectives similar to those of the Fund. The Russell 2000 Technology Index is a capitalization-weighted index of companies that serve the electronics and computer industries or that manufacture products based on the latest applied science. The Russell 2000 Index is an unmanaged total return index of the smallest 2,000 companies in the Russell 3000 Index, as ranked by total market capitalization. The Russell 2000 Index is widely regarded in the industry as accurately capturing the universe of small company stocks. The Nasdaq Composite Index is unmanaged and measures all Nasdaq domestic and non-U.S. based common stocks listed on The Nasdaq Stock Market. The Index is market-value weighted. This means each company’s security affects the Index in proportion to its market value. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Due to their number and size, technology stocks tend to dominate the direction of the Index. You cannot invest directly in these indexes. |
7
| HERITAGE GROWTH FUND (WAHGX) — Management Discussion | SEPTEMBER 30, 2006 | |
Chris Bowen Portfolio Manager |
Ryan Snow Portfolio Manager | OVERVIEW
For the year ended September 30, the Wasatch Heritage Growth Fund returned 2.46%, compared to a return of 7.03% for our primary benchmark, the Russell Midcap Growth Index (the “Index”), and a |
return of 6.04% for the Russell 1000 Growth Index.
Although we underperformed the Index, we feel good about the Fund’s current composition. It is our fundamental belief that earnings growth is a vital driver of stock performance and we have focused our efforts on capturing earnings growth. Consistent with our strategy, the average earnings per share growth for the companies in the Fund exceeded 15% for the year. Unfortunately, the timeline between when companies deliver earnings growth and when the market recognizes those results is not always predictable. With an average price-to-earnings ratio in the high teens, we believe the portfolio is reasonably valued, especially given its expected earnings growth.
DETAILSOFTHE YEAR
Through most of the year, we sustained vigorous head-winds as commodity-related companies and cyclical industrials continued to demonstrate strong performance in the market. Generally, these companies are heavily driven by the underlying prices of commodities or large macroeconomic cycles, which means that the respective management teams of these companies are less in control of their earnings growth trajectory and, therefore, we are less able to reliably model the long term earnings of these businesses. This has traditionally been an area of the market that is less suited for our investment strategy, but we continue to work to try to find companies that meet our investment criteria.
Another area of underperformance came from the producer durables sector. While the producer durables sector includes companies in several different industries, almost all of our exposure to the sector is concentrated in the stocks of homebuilders. These holdings struggled as many of the nation’s housing markets experienced a slowdown. Homebuilding has traditionally been a cyclical industry. Our investment thesis hasn’t changed. We believe that this cyclical downturn is a long run opportunity for large homebuilders that enjoy scale advantages and strong balance sheets, such as NVR, to continue to consolidate national market share as they have done for many years. These stocks look attractive from a valuation standpoint and we believe they will continue to create value for long term shareholders.
Four core sectors, financial services, technology, health care and consumer discretionary, accounted for most of the Fund’s weighting. Financial services, technology, and health
care delivered strong absolute and relative performance for the year.
Overall, Amphenol was the top contributor to the Fund’s return, adding 1.27% to performance. Amphenol is a designer and manufacturer of a wide array of electronic interconnect cables that are used in a vast assortment of products. The company has been a leading consolidator in this fragmented industry. During the year, management continued to execute on this strategy with a large acquisition that is generating good results for the company.
Infosys was another strong contributor within the technology sector. Infosys is an information technology and business process outsourcing company based in India. It is positioned as a leader in offshoring and during the year it continued to execute its business plan with rapid growth in both the demand for its services and in its hiring, which should enable it to meet current and future demand.
Commerce Bancorp, a New Jersey-based bank holding company, was our primary driver of performance in the financial services sector as the company continued to deliver on its deposit growth strategy and executed better than expected in a difficult interest rate environment.
The Fund’s health care group delivered a solid gain. Covance, a leading drug development services company, was our top contributor in the sector. Covance experienced good growth as it continued to execute on its strategy to become more ingrained in its clients’ development processes.
Our consumer discretionary holdings underperformed the Index, but contributed to performance for the year. Apollo Group lost nearly 26% of its value, costing the Fund 1.06%. Apollo is a for-profit provider of adult educational programs. We believe that our long-term thesis that many adults are looking to further their education in order to improve their career opportunities still rings true. We believe Apollo has a great business model. It has generated a high return on capital and a significant amount of free cash flow. However, we are continuing to evaluate our investment thesis and monitor the progress of the company carefully.
OUTLOOK
Since the beginning, we’ve compared managing the Fund to running a marathon. Our goal is to stay the course, not deviating off the path in pursuit of fads or hot sectors in the market. Perseverance can be difficult because no investment will be the top performing at all times and under all circumstances. That’s why we believe that it’s so critical that we maintain our investment thesis of selectively purchasing companies that meet our target growth rate and that can also be purchased at attractive prices. Indeed, a disciplined process is the key to achieving success. We’re convinced that the Fund will have the potential to deliver rewarding results over the long-term if we stay the course and maintain our focus on our core strategy.
Thank you for investing in the Wasatch Heritage Growth Fund.
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| HERITAGE GROWTH FUND (WAHGX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 6/18/04 | ||||
Wasatch Heritage Growth Fund | 2.46% | N/A | 7.16% | |||
Russell Midcap Growth Index | 7.03% | N/A | 11.79% | |||
Russell 1000 Growth Index | 6.04% | N/A | 5.40% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, in the past, certain Fund expenses, without which total returns would have been lower.
Investing in mid cap funds can be more volatile and loss of principal could be greater than investing in large cap funds. Equity investing involves risks, including potential loss of the principal amount invested. Being non-diversified, the Fund can invest a larger portion of its assets in the stocks of a limited number of companies than a diversified fund. Non-diversification increases the risk of loss to the Fund if the values of these securities decline.
TOP 10 EQUITY HOLDINGS*
| Ticker | Company | % of Fund | ||
| APOL | Apollo Group, Inc., Class A Higher education for working adults. | 3.84% | ||
| WLP | WellPoint, Inc. Health maintenance organization. | 3.57% | ||
| INFO IN | Infosys Technologies Ltd. Business and information technology consulting. | 3.20% | ||
| NVR | NVR, Inc. Homebuilder. | 3.19% | ||
| ZMH | Zimmer Holdings, Inc. Orthopedic implants. | 3.01% |
| Ticker | Company | % of Fund | ||
| CMX | Caremark Rx, Inc. Pharmacy benefits manager. | 2.93% | ||
| APH | Amphenol Corp., Class A Interconnect products manufacturer. | 2.67% | ||
| MXIM | Maxim Integrated Products, Inc. Semiconductors. | 2.58% | ||
| BBBY | Bed Bath & Beyond, Inc. Household goods retailer. | 2.39% | ||
| CBH | Commerce Bancorp, Inc. Commercial banking, corporate trust and insurance brokerage services. | 2.01% |
| * | As of September 30, 2006, the Fund had 29.39% invested in the Top 10 equity holdings and there were 68 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. |
SECTOR BREAKDOWN**
| ** | Excludes short-term investments, securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
| † | Inception: June 18, 2004. The Russell Midcap Growth Index measures the performance of those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell Midcap Index is an unmanaged total return index of the 800 smallest companies in the Russell 1000 Index, as ranked by total market capitalization. The stocks in the Russell Midcap Growth Index are also members of the Russell 1000 Growth Index. The Russell 1000 Growth Index measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. You cannot invest directly in these indexes. |
9
| INTERNATIONAL GROWTH FUND (WAIGX) — Management Discussion | SEPTEMBER 30, 2006 | |
The Wasatch International Growth Fund is managed by a team of Wasatch portfolio managers.
OVERVIEW
The Wasatch International Growth Fund gained 18.00% during the past 12 months and outperformed the MSCI World Ex-U.S.A. Small-Cap Index, which gained 14.81%. The Fund’s top contributing countries relative to the Index were Japan and Brazil. In contrast, a few stocks in Continental Europe were primarily responsible for the Fund’s underperformance of the Index in this region. All sectors in which the Fund was invested produced a gain and contributed to performance, but we had no holdings in the materials sector, which added nearly 3% to the Index’s return.
Throughout the year, we continued to enhance the breadth and depth of our international team and improve our processes. This has enabled us to better cover our universe of small international companies. The team has traveled extensively, visiting over 200 companies in nine countries in the last three months alone.
Over the course of the year, the Fund’s weighted average market capitalization decreased from $1.5 billion to $1.4 billion. Estimated earnings growth for our portfolio companies over the next three to five years is about 17% and we are paying on average less than 15 times forward earnings for that growth. This tells us that the Fund holds solid growth companies that overall are reasonably valued. The number of holdings in the Fund increased from 86 to 105 and the number of countries increased from 22 to 27 in the last 12 months.
DETAILSOFTHE YEAR
On a country basis, the Fund’s outperformance of the Index was driven by Japan and Brazil. As of September 30, Japan was our largest country weighting at about 19%. The Japanese companies in the portfolio strongly outperformed those in the Index. Japanese real estate was a very strong sector and was a significant contributor to the outperformance. The Fund had a weight of just over 3% in Brazil where the largest contribution came from Gol Lineas Aereas Inteligentes, a low cost airline.
Continental Europe was a detractor from performance relative to the Index as select stocks struggled. Notable detractors included Straumann, a Swiss manufacturer of dental implants and AWD Holding, a German financial services firm. We remain positive on the long-term prospects of our investments in Continental Europe as many companies stand to benefit from improving consumer sentiment, financial restructuring and more efficient operations.
Scandinavia was also a strong region for the Fund with two sizeable positions in the financials sector, Acta Holdings and D. Carnegie, as well as a large position in TGS-NOPEC, a Norwegian provider of seismic surveys and geoscience data to energy exploration companies. Positions in both the financial and energy sectors were diversified in the last 12 months
increasing the Fund’s exposure to faster growing sub-industries and countries. Growing global demand, the increasing need for services to maintain production at current levels and the belief that oil and natural gas prices will move higher over the next five years are the tenets of our long-term thesis for energy investing. Energy was a good place to be invested over the past 12 months and the Fund benefited from our overweight position.
While consumer spending in the U.S. has been a concern, the same has not been true for non-U.S. consumers. An emerging consumer class, particularly in Asia, has provided the impetus to invest in retailers and affordable luxury goods manufacturers. We like the growth potential of companies like Peace Mark (a top-performer for the year), Ports Design and EganaGoldpfeil, that cater to these brand-conscious buyers.
OUTLOOK
As global growth has slowed, we have seen a migration to large and mid cap stocks and defensive companies such as those in the financials and utilities sectors. In the last three months, mid cap stocks outperformed small cap stocks in Europe, the U.K. and most dramatically in Japan, where the large cap Nikkei Index was up about 4% and the MSCI Small Cap Japan Index was down 6.2%. Going forward, we think small cap valuations look really interesting throughout the world.
We expect that in the near-term the U.S. may continue to experience slower growth relative to the rest of the world. We see infrastructure growth in emerging markets being one of the drivers for industrials, increased pension restructuring driving financials, and emerging consumers driving the earnings growth of many of our consumer discretionary companies. While we see good long-term opportunities in Japan, there are some short-term challenges including the need to refinance fiscal debt, pressure on currency, demographics and poor capital management. To mitigate these challenges we think the key is to find Japanese companies with good or improving capital structure.
In Hong Kong/China we’re focused on the consumer and, while the government is trying to control growth, we expect that the leading consumer companies will continue to do well. Scandinavia is likely to continue as one of the strongest performing regions in the world spurred by a growing financial services sector, globally competitive industrials in Sweden and a significant energy sector in Norway. Valuations in India remain higher than the emerging markets average and, as a result, we are closely monitoring our holdings. In Latin America, we feel we own Brazilian companies that have good long-term growth prospects and we think that growth in Mexico’s mortgage market has created favorable conditions for Mexican homebuilders.
Thank you for investing in the Wasatch International Growth Fund.
10
| INTERNATIONAL GROWTH FUND (WAIGX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 6/28/02 | ||||
Wasatch International Growth Fund | 18.00% | N/A | 20.17% | |||
MSCI World Ex-U.S.A. Small Cap Index | 14.81% | N/A | 22.67% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, in the past, certain Fund expenses, without which total returns would have been lower.
Investing in foreign securities entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. Investments in small cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
TOP 10 EQUITY HOLDINGS*
| Ticker | Company | % of Fund | ||
| ACTA NO | Acta Holdings ASA (Norway) Financial advisory services. | 2.66% | ||
| TGS NO | TGS-NOPEC Geophysical Co. ASA (Norway) Geoscience data for energy exploration. | 2.42% | ||
| EKTAB SS | Elekta AB, Class B (Sweden) Radiology equipment. | 2.16% | ||
| SIA LN | Soco International plc (United Kingdom) Oil and gas developer. | 2.11% | ||
| CAR SS | D. Carnegie & Co. AB (Sweden) Financial services. | 2.09% |
| Ticker | Company | % of Fund | ||
| NTB BH | The Bank of N.T. Butterfield & Son Ltd. (Bermuda) Wealth management and financial services. | 2.04% | ||
| AWD GR | AWD Holding AG (Germany) Financial services. | 2.02% | ||
| 6432 JP | Takeuchi Manufacturing Co. Ltd. (Japan) Construction machinery manufacturer. | 1.95% | ||
| ORP FP | Orpea (France) Nursing homes. | 1.92% | ||
| 8874 JP | Joint Corp. (Japan) Residential condominium developer. | 1.71% |
| * | As of September 30, 2006, the Fund had 21.08% invested in the Top 10 equity holdings and there were 105 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. |
SECTOR BREAKDOWN**
| ** | Excludes short-term investments, securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
† Inception: June 28, 2002. The MSCI World Ex-U.S.A. Small Cap Index is an unmanaged index that measures the performance of stocks with market capitalizations between U.S. $200 million and $1.5 billion across 22 developed markets, excluding the United States. You cannot invest directly in the Index.
11
| INTERNATIONAL OPPORTUNITIES FUND (WAIOX) —Management Discussion | SEPTEMBER 30, 2006 | |
The Wasatch International Opportunities Fund is managed by a team of Wasatch portfolio managers.
OVERVIEW
The Wasatch International Opportunities Fund gained 23.74% in the past 12 months and outperformed the MSCI World Ex-U.S.A. Small Cap Index, which gained 14.81%.
After achieving strong gains in the first half of the 12-month period, small cap markets around the world generally weakened over the last six months. Concern over a possible global economic slowdown caused many investors to migrate from small cap stocks to larger cap stocks. This was most evident in Japan where, in the last three months, the large cap Nikkei Index was up about 4% and the MSCI Small Cap Japan Index was down over 6%.
In the past 12 months, the Fund benefited from our focus on non-U.S. consumers, particularly those in Europe and Asia. Overall our performance from Japan was strong and our Japanese real estate companies did particularly well as a supportive environment encouraged solid growth. The Fund’s investments in Scandinavian asset managers, stock exchanges and investment banks also did well.
Energy was a favorite news topic throughout the year. Given the speculation in energy during the year, we think it is worth pointing out that the Fund has been invested in energy since its inception. The Fund benefited from an overweight position in energy this year.
In contrast, being underweighted in consumer staples and materials was a disadvantage. Wasatch has not typically invested in the materials space but we like the opportunities we have been able to find for the Fund, particularly in companies with ties to infrastructure development. We believe the industrials sector should be one of the pillars of the Fund and indeed it was this year. The strength of our industrial holdings overcame the handicap of being underweight in the sector.
This past year has seen tremendous growth for the international team at Wasatch as we doubled the number of analysts to six and dedicated an analyst to screening the world for new investment ideas. This expansion allows us to spend even more time visiting with management teams and gaining insight into existing and prospective investments.
DETAILSOFTHE YEAR
Our consumer coverage is primarily in Sweden, the U.K. and Asia. We have consciously moved into consumer names that won’t be as affected by a slowing U.S. economy. One such company is Raffles Education, a provider of art and design courses in Singapore that was the Fund’s top contributor. We also favor retail companies like China Hongxing Sports, an athletic wear retailer, and EganaGoldpfeil, a Hong Kong-based designer, manufacturer and distributor of fashion accessories. Egana focuses on brand-conscious buyers of affordable luxury goods in Europe and China, a niche we find appealing from a growth perspective.
A major investment thesis for the Fund is that the financials sector in much of the world is immature relative to the U.S. and primed for growth as industries mature. For example, we
believe Scandinavia’s growing financial planning industry will help drive the long-term growth of companies like Acta Holdings, a Norwegian asset manager, and Hagstromer & Qviberg, a Swedish investment bank that has also built out its private banking business.
The Fund continues to be underweight in Japan at about 15% compared to the Index’s weight of nearly 30%, which seems prudent as the Japanese market consolidates after a substantial run up. Of our Japanese holdings, we remain most confident in real estate given our belief that property prices in Japan have bottomed out after a 14-year bear market. As a result, we expect strong long-term growth from holdings like Joint Corp., a residential condominium developer, and Creed Corp., a real estate investment company. Our biggest disappointment in Japan was Kibun Food Chemifa, a producer of soymilk products that struggled as soymilk sales declined relative to other healthy beverages on negative publicity surrounding Isoflavone.
Our long-term thesis for investing in energy is supported by our belief that the trend of oil and natural gas prices more likely will be up rather than down over the next five years as reserves are used up and energy companies must continue fighting an uphill battle to maintain production at current levels. Energy, while prone to volatility, historically has been a profitable sector. To combat its cyclical nature, we focus on finding companies with proven management teams, good asset bases and low operating costs.
We continue to find attractive companies in industrials. The sector’s strong performance was led by MMI Holdings, a Singapore-based manufacturer that has benefited from the proliferation of hard disk drives in consumer applications.
While the Fund’s materials sector produced a positive return, Consolidated Minerals, an Australian mining company that provides raw materials for producing carbon and stainless steel, detracted the most from overall performance. The company was hurt by higher operating costs and lower revenue due to falling manganese prices.
OUTLOOK
Concerns that may affect our holdings include whether the migration to larger cap stocks continues, the time it may take for the energy sector to rebound, Japan’s economic progress under the new prime minister, and the effects of a possible U.S. slowdown on overseas companies.
We feel the Fund is invested in high quality, generally undiscovered, growth companies. We are confident in the long-term outlook for our largest positions and feel that the portfolio overall is reasonably valued.
In the year and a half since the Fund’s inception, we have learned much. We have also built a stronger international team that is covering the globe in search of outstanding investments.
We appreciate your investment in the International Opportunities Fund.
12
| INTERNATIONAL OPPORTUNITIES FUND (WAIOX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 1/27/05 | ||||
Wasatch International Opportunities Fund | 23.74% | N/A | 19.86% | |||
MSCI World Ex-U.S.A. Small Cap Index | 14.81% | N/A | 18.16% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, in the past, certain Fund expenses, without which total returns would have been lower.
Investing in foreign securities entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. Investments in small cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
TOP 10 EQUITY HOLDINGS*
| Ticker | Company | % of Fund | ||
| ACTA NO | Acta Holdings ASA (Norway) Financial advisory services. | 3.81% | ||
| 8697 JP | Osaka Securities Exchange Co. (Japan) Securities exchange. | 2.87% | ||
| CHHS SP | China Hongxing Sports Ltd. (China) Athletic wear retailer. | 2.75% | ||
| RAYB SS | RaySearch Laboratories AB (Sweden) Dosage software for radiology. | 2.47% | ||
| 072870 KS | MegaStudy Co. Ltd. (Korea) Online education provider. | 2.44% |
| Ticker | Company | % of Fund | ||
| 589 HK | Ports Design Ltd. (Hong Kong) Fashion retailer. | 2.35% | ||
| RLS SP | Raffles Education Corp. Ltd. (Singapore) For-profit education. | 2.24% | ||
| MMI SP | MMI Holdings Ltd. (Singapore) Electro-mechanical components and equipment. | 2.20% | ||
| EZRA SP | Ezra Holdings Ltd. (Singapore) Marine services support. | 2.07% | ||
| 6432 JP | Takeuchi Manufacturing Co. Ltd. (Japan) Construction machinery manufacturer. | 2.04% |
| * | As of September 30, 2006, the Fund had 25.24% invested in the Top 10 equity holdings and there were 127 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. |
SECTOR BREAKDOWN**
| ** | Excludes short-term investments, securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
| † | Inception: January 27, 2005. The MSCI World Ex-U.S.A. Small Cap Index is an unmanaged index that measures the performance of stocks with market capitalizations between U.S. $200 million and $1.5 billion across 22 developed markets, excluding the United States. You cannot invest directly in the Index. |
13
| MICRO CAP FUND (WMICX) — Management Discussion | SEPTEMBER 30, 2006 | |
Robert Gardiner, CFA Portfolio Manager |
Daniel Chace, CFA Portfolio Manager | OVERVIEW
The Wasatch Micro Cap Fund gained 8.51% in the 12 months ended September 30, while the Russell 2000 Index (the “Index”) rose 9.92% and the Russell Microcap Index rose 7.02%. |
The Fund’s solid increase was driven by gains in the heavily weighted consumer discretionary and technology sectors. A number of positive factors, including strong results from our international investments, combined with several negative factors, such as our emphasis on growth-oriented companies, resulted in performance that was broadly in line with that of the Index.
Rather than trying to make top-down predictions about the stock market and economy, we remain focused on researching companies and investing in those we believe offer the best combination of quality, earnings growth and value. We feel comfortable with the fundamentals and valuations of our companies, and we believe the Fund may produce strong results over time.
DETAILSOFTHE YEAR
Wasatch has found many interesting micro cap companies outside the United States, and approximately 25% of the Fund’s total market value was invested in non-U.S. companies* this period. Our international holdings outperformed our domestic holdings and positively impacted results versus the Index. Raffles Education (Singapore), a provider of training and design education courses, and China Hongxing Sports (China), a sports apparel retailer, helped drive the gain in our consumer discretionary sector. Raffles Education continued to benefit from the rising affluence throughout emerging Asian countries that is fueling demand for post-secondary education. China Hongxing Sports also experienced robust demand and is a good example of our efforts to capitalize on “inexpensive growth” overseas. We have invested in China Hongxing Sports and other non-U.S. consumer companies at low price-to-earnings (P/E) multiples, and their strong operating performance is causing those multiples to expand. Through bottom-up fundamental research, we continue to look for more of these types of opportunities for the Fund.
Many of our U.S. technology companies performed well, including Opnet Technologies, a provider of network management software, and PLX Technology, a maker of interconnect semiconductor devices. Opnet Technologies’ stock advanced on double-digit growth in license revenue and the favorable settlement of patent litigation. Shares of PLX Technology rose amid signs that the company was an early leader in the rapidly growing market for PCI Express, the new standard for computer input/output (I/O) system technology.
Several technology-related investments in the producer durables sector also posted strong gains. For example, Intevac,
a manufacturer of equipment used to produce hard disk drives, saw healthy order bookings as escalating demand for digital data storage has created a shortage of media production capacity. Our minimal exposure to homebuilding companies was another plus in the producer durables sector, since these stocks were hurt by weakness in the housing market.
In managing the Fund, we focus on investing in companies that we believe are capable of sustaining attractive earnings growth rates due to their differentiated business models and proprietary products, among other factors. Because we find many of these companies in the consumer discretionary, health care and technology sectors, this is where the Fund’s holdings are concentrated. The heavy weighting in these growth-oriented sectors was a headwind this period, as stocks in cyclical, commodity-oriented sectors turned in some of the best results. For example, the materials and processing sector, which the Fund was underweight, was the best-performing sector in the Index on rising commodity prices. Health care, which the Fund was overweight, was among the worst, partly due to concerns about how government reimbursement polices will affect companies’ revenues. Over longer periods of time, however, our emphasis on growth investing has more than compensated for our relatively low exposure to cyclical, commodity-oriented sectors.
Stock selection in the financial services sector also weighed down results versus the Index. Much of the underperformance came from our position in United PanAm Financial, a subprime auto lender. The company provided a disappointing earnings outlook for 2006 and 2007, citing higher funding costs and modest deterioration in the credit quality of its loan portfolio. Despite recent weakness, we remain positive on United PanAm’s long-term prospects given its unique, service-oriented business model that supports premium pricing and in-depth credit evaluation.
The Fund’s cash balance varied considerably throughout the year, reflecting the close attention we pay to valuations. After the big run-up in small cap stocks in early 2006, our cash position was high because we had trimmed and sold holdings that seemed richly valued. When prices of small cap stocks declined in the spring, we were able to redeploy excess cash at more attractive P/E multiples. At September 30, cash represented 1.8% of the Fund’s total market value.
OUTLOOK
Overall, the earnings growth of our portfolio companies has been strong over the past year, and we expect continued strength in the months ahead. We believe we have invested in a good selection of companies that reflect a favorable combination of quality, earnings growth and value. This gives us confidence that the Fund has the potential to deliver strong long-term performance, regardless of what is happening in the broader investment environment.
Thank you for the opportunity to manage your assets.
| * | These holdings included American Depositary Receipts (ADRs — receipts issued by domestic banks for shares of foreign-based corporations that trade on U.S. stock exchanges), companies incorporated in other countries but whose shares trade on U.S. stock exchanges, and non-U.S. companies whose shares trade on non-U.S. exchanges. |
14
| MICRO CAP FUND (WMICX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Wasatch Micro Cap Fund | 8.51% | 17.45% | 22.71% | |||
Russell 2000 Index | 9.92% | 13.78% | 9.06% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, in the past, certain Fund expenses, without which total returns would have been lower.
Investments in micro cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. Investing in foreign securities entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus.
TOP 10 EQUITY HOLDINGS*
| Ticker | Company | % of Fund | ||
| BGFV | Big 5 Sporting Goods Corp. Sporting goods retailer. | 2.69% | ||
| OIIM | O2Micro International Ltd. (Cayman Islands) Semiconductors. | 2.02% | ||
| AMSG | AmSurg Corp. Ambulatory surgery centers. | 1.99% | ||
| RLS SP | Raffles Education Corp. Ltd. (Singapore) For-profit education. | 1.94% | ||
| KEYS | Keystone Automotive Industries, Inc. Auto collision replacement parts. | 1.81% |
| Ticker | Company | % of Fund | ||
| PLXT | PLX Technology, Inc. Semiconductors. | 1.81% | ||
| POWI | Power Integrations, Inc. Semiconductors. | 1.78% | ||
| LMA SP | LMA International N.V. (Singapore) Devices for airway support during surgery. | 1.74% | ||
| PRSC | Providence Service Corp. (The) Management of U.S. government-sponsored social services. | 1.74% | ||
| GTRC | Guitar Center, Inc. Music stores. | 1.57% |
| * | As of September 30, 2006, the Fund had 19.09% invested in the Top 10 equity holdings and there were 138 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. |
SECTOR BREAKDOWN**
| ** | Excludes short-term investments, securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
The Russell 2000 Index is an unmanaged total return index of the smallest 2,000 companies in the Russell 3000 Index, as ranked by total market capitalization. The Russell 2000 Index is widely regarded in the industry as accurately capturing the universe of small company stocks. You cannot invest directly in the Index.
15
| MICRO CAP VALUE FUND (WAMVX) — Management Discussion | SEPTEMBER 30, 2006 | |
John Malooly, CFA Portfolio Manager |
Brian Bythrow, CFA Portfolio Manager |
OVERVIEW The Wasatch Micro Cap Value Fund gained 18.89% for the 12 months ended September 30, 2006 and outperformed the Russell 2000 Index, which gained 9.92%. We were pleased |
to have outperformed the Index where it mattered most, in the heavily weighted financial services, technology and consumer discretionary sectors. We gave up a small amount of ground in two of the Index’s lower weight sectors — consumer staples and utilities. Increasing our exposure to non-U.S. consumers proved to be a good move and helped drive the strong gain in the consumer discretionary sector. Some energy and mining stocks added to the Fund’s return, while lower quality technology and health care names cost us.
Undiscovered gems (names trading a sizeable discount to their growth rates) were the real winners over the past year and powered the bulk of the Fund’s return. We believe the great thing about undiscovered gems in the micro cap space is that they have the potential to deliver strong returns. The trick is to turn over enough stones to find them.
Given the rise of domestic small cap markets, the tailwind of low valuations has disappeared. Going forward, we expect to rely more heavily on our stock picking ability to generate returns.
DETAILSOFTHE YEAR
Interest rate increases enacted by the Federal Reserve over a two year period helped to slow the U.S. economy so our best call was to lower our exposure to companies that sell to U.S. consumers in favor of investing in emerging market consumer names. Our top-contributing stock was China Hongxing Sports Ltd., an athletic wear retailer in China. If the emerging Chinese economy follows anything like the U.S. consumer growth curve of the past 30 years, then investing in brands is a good bet. From Wasatch travels to China, we think the Asian consumer is actually more focused on buying brands that denote prestige. The companies we invest in focus on brand name shoes, apparel and jewelry. Examples include Ports Design, Moiselle International Holdings and EganaGoldpfeil.
Another source of positive returns was natural resources. Specifically, some energy and mining stocks enjoyed a period of good returns due to record high commodity prices driven by insatiable demand from Asia and limited new supply.
We were attracted to commercial construction companies in the producer durables sector because, unlike many homebuilders, they are seeing robust demand. These names were Perini, a contractor building the $7 billion MGM
Grand in Las Vegas; IVRCL Infrastructure & Projects, a commercial builder operating in India; and Sterling Construction, a Texas based highway and municipal contractor.
Some of our lower quality technology and health care stocks gapped down on unpleasant news. While the long-term prospects of these names in many cases may still be positive, thin balance sheets or current operating losses magnified setbacks and pushed their stock prices down. Further, liquidity flows and investor risk tolerance levels have substantial impact on micro cap stocks, so although these areas have some compelling companies, we plan to act more cautiously and limit our overall exposure to riskier stocks.
It has been over three years since the Fund’s inception, so it’s worthwhile to look at where we have made money and where we have fallen short.
The majority of the Fund’s returns have come from undiscovered gems. Since all of you were investors on day one, you’ll remember us talking about names like Bijou Brigitte, Wilshire Bancorp, Home Capital Group, and EuroZinc Mining. These companies were our top four contributors for the three-year period and all started as undiscovered gems. To fit this classification, the stock must be of low or reasonable current valuation, growing top and bottom line, and have no or minimal analyst coverage. We believe that if the company can deliver earnings growth, other investors will be attracted to the stock, allowing us to capture both earnings growth and P/E expansion. In addition, lower valuations provide downside protection if growth is not as we projected.
In contrast to our positive results, most of our misses were due to companies whose growth had slipped as marginal balance sheets came into play negatively affecting their stock prices. While a company can do well with a thin balance sheet, such a condition decreases the margin for error. We’ve learned our lesson and will be more selective on these stocks going forward.
OUTLOOK
In prior years, the Fund’s double-digit annual returns were achieved in part due to a tailwind of low valuations. With the rise of domestic small cap markets, that’s gone now. Going forward, we still expect that the Fund has the potential to do well versus the Index. But, we think that investors should temper their expectations. Without the valuation tailwind we enjoyed in the past, we’ll need to rely more heavily on good stock picking to generate returns. At Wasatch, that means doing what we’ve always done — find companies through an intensive process of bottom-up, fundamental research.
Overall, we’re pleased with the performance we’ve delivered over the past year and since the Fund’s inception. We continue to work hard at monitoring the companies we hold and we are confident we can continue to find attractive micro cap investment ideas.
Thank you for investing in the Wasatch Micro Cap Value Fund.
16
| MICRO CAP VALUE FUND (WAMVX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 7/28/03 | ||||
Wasatch Micro Cap Value Fund | 18.89% | N/A | 21.00% | |||
Russell 2000 Index | 9.92% | N/A | 15.66% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
Investments in micro cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. Investing in foreign securities entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus.
TOP 10 EQUITY HOLDINGS*
| Ticker | Company | % of Fund | ||
| PLXT | PLX Technology, Inc. Semiconductors. | 1.91% | ||
| CSA CN | Commercial Solutions, Inc. (Canada) Industrial supplies distributor. | 1.58% | ||
| NPTH | Enpath Medical, Inc. Advanced vascular delivery products. | 1.46% | ||
| CHHS SP | China Hongxing Sports Ltd. (China) Athletic wear retailer. | 1.39% | ||
| BECN | Beacon Roofing Supply, Inc. Roofing supplies distributor. | 1.38% |
| Ticker | Company | % of Fund | ||
| VNUS | VNUS Medical Technologies, Inc. Minimally invasive varicose vein treatment. | 1.29% | ||
| CWBS | Commonwealth Bankshares, Inc. Financial services for businesses. | 1.28% | ||
| ACTA NO | Acta Holdings ASA (Norway) Financial advisory services. | 1.27% | ||
| LHCG | LHC Group, Inc. Health care services to Medicare recipients. | 1.24% | ||
| DLLR | Dollar Financial Corp. Payday lender. | 1.20% |
| * | As of September 30, 2006, the Fund had 14.00% invested in the Top 10 equity holdings and there were 151 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. |
SECTOR BREAKDOWN**
| ** | Excludes short-term investments, securities sold short and written options, if any. |
GROWTH OF A $10,000 INVESTMENT
†Inception: July 28, 2003. The Russell 2000 Index is an unmanaged total return index of the smallest 2,000 companies in the Russell 3000 Index, as ranked by total market capitalization. The Russell 2000 Index is widely regarded in the industry as accurately capturing the universe of small company stocks. You cannot invest directly in the Index.
17
| SMALL CAP GROWTH FUND (WAAEX) — Management Discussion | SEPTEMBER 30, 2006 | |
Jeff Cardon, CFA Portfolio Manager | OVERVIEW
The Wasatch Small Cap Growth Fund gained 1.40% in the 12 months ended September 30. During the same time, the Russell 2000 Index (the “Index”) advanced 9.92% and the Russell 2000 Growth Index rose 5.88%. This year’s disappointing results were driven by two factors. First, our stock selection was weak in areas of the market where we have traditionally done well. Second, our minimal exposure to |
companies in cyclical and commodity-oriented sectors was a headwind, since stocks in these sectors generated some of the market’s highest returns.
While results fell short of expectations, the solid business fundamentals and reasonable valuations of our portfolio companies give us confidence that the Fund has the potential to produce strong returns over time.
DETAILS OF THE YEAR
In a year when we trailed the Index by as much as we did, we would have expected to see a handful of individual stocks that subtracted 1% or more from performance. This was not the case, however, as we observed smaller magnitudes of underperformance across the Fund. Meritage Homes was the largest detractor from return, yet cost the portfolio only about 0.9% of performance. In general, our homebuilding investments were weak due to the slowdown in the housing market.
Some of the Fund’s other large detractors were in the retail, electronic technology and health services industries, areas where our stock selection has historically been good. The apparent end to the housing cycle impacted the stock price of Tuesday Morning, a retailer of household merchandise. O2Micro International, a semiconductor company, saw its stock decline on several concerns, including large legal fees paid to defend the company’s intellectual property. Shares of Guitar Center, a chain of music stores, and AmSurg, an operator of ambulatory surgery centers, were down more than 15%. These two companies are industry leaders with very good management teams.
In fact, many of our investments in companies with strong fundamentals and earnings growth produced lackluster results, which is consistent with the smaller magnitudes of underperformance we observed across the Fund. We attribute this disconnect between earnings growth and stock price appreciation to investors’ preferences for lower quality stocks this period. Because the economy was doing well throughout most of the year, investors didn’t seem overly concerned about the quality of their holdings. In contrast, we remain committed to investing in what we believe are high quality companies in all market environments.
Like the economy, commodity prices were strong throughout much of the period. Against this backdrop, stocks in the producer durables and materials and processing sectors registered double-digit gains. This was a headwind for the
Fund since we tend to invest in companies whose prospects do not rely so heavily on macroeconomic forces. That being said, we continue to look for stocks in these sectors with differentiated businesses that meet our criteria for growth and quality.
It is important to note that, as concerns of an economic slowdown emerged and commodity prices fell during the third quarter of 2006, higher-quality stocks outperformed lower-quality stocks and growth-oriented sectors outperformed cyclical, commodity-oriented sectors. In this environment, the Fund outperformed the Index.
Our stock selection in the financial services sector was a bright spot this period. Holdings in diverse financial sub-sectors posted significant gains, including FactSet Research Systems, a provider of database services to the investment community; HDFC Bank, an Indian bank; and Brown & Brown, an insurance brokerage firm.
Top-performing stocks in other sectors included Icon plc, a contract research organization with accelerating revenue growth, and Cognizant Technology Solutions, a provider of information technology (IT) services that is benefiting from the ongoing trend among corporations to outsource IT functions.
Trading activity was higher than average this year, as the market presented us with many opportunities to upgrade the quality of the portfolio. We were able to add to positions in what we consider to be some of our highest-quality names at attractive prices. Because of this, we have fewer stocks in the portfolio and a heavier weight in our highest-quality companies. We believe this strategy may pay off over the long run, once the market begins to refocus on quality stocks.
OUTLOOK
Valuations in the Fund appear reasonable, and we remain comfortable with the fundamentals of our portfolio companies. If the economy and commodity prices continue to weaken, the low-teens earnings growth we expect from our holdings should look very attractive compared to the growth rates of lower-quality and more cyclical companies, many of which are dependent on commodity pricing. We have been anticipating this potential scenario for some time now and are encouraged by the Fund’s recent performance amid signs that the commodity cycle may be coming to an end.
Another possible shift taking place in the market is a change in capitalization leadership, following a protracted period of small cap outperformance. Regardless of which size segment leads in the months ahead, we are confident that we will continue to find interesting small cap companies in which to invest. Furthermore, our holdings tend to be on the larger cap end of the small cap spectrum, which could help the Fund if large caps outperform. We also believe that small caps are the most attractive long-run sector of the market and should be an integral part of any long-term investment plan.
Thank you for the opportunity to manage your assets, and we appreciate the confidence you have shown in us during this recent market cycle.
18
| SMALL CAP GROWTH FUND (WAAEX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Wasatch Small Cap Growth Fund | 1.40% | 10.79% | 13.53% | |||
Russell 2000 Index | 9.92% | 13.78% | 9.06% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, in the past, certain Fund expenses, without which total returns would have been lower.
Investments in small cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
TOP 10 EQUITY HOLDINGS*
| Ticker | Company | % of Fund | ||
| ORLY | O’Reilly Automotive, Inc. Automotive parts retailer/distributor. | 5.42% | ||
| CPRT | Copart, Inc. Vehicle salvage services. | 3.80% | ||
| KNX | Knight Transportation, Inc. Long haul trucking and logistic services. | 3.66% | ||
| GTRC | Guitar Center, Inc. Music stores. | 3.38% | ||
| FDS | FactSet Research Systems, Inc. Financial and economic information for investment managers. | 3.22% |
| Ticker | Company | % of Fund | ||
| TECH | Techne Corp. Complex, disposable research kits for biotech. | 2.84% | ||
| HDB | HDFC Bank Ltd. ADR Consumer bank. | 2.50% | ||
| USPI | United Surgical Partners Ambulatory surgery centers. | 2.33% | ||
| POWI | Power Integrations, Inc. Semiconductors. | 2.31% | ||
| AMSG | AmSurg Corp. Ambulatory surgery centers. | 2.18% |
| * | As of September 30, 2006, the Fund had 31.64% invested in the Top 10 equity holdings and there were 110 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. |
SECTOR BREAKDOWN**
| ** | Excludes short-term investments, securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
The Russell 2000 Index is an unmanaged total return index of the smallest 2,000 companies in the Russell 3000 Index, as ranked by total market capitalization. The Russell 2000 Index is widely regarded in the industry as accurately capturing the universe of small company stocks. You cannot invest directly in the Index.
19
| SMALL CAP VALUE FUND (WMCVX) — Management Discussion | SEPTEMBER 30, 2006 | |
Jim Larkins, MBA Portfolio Manager |
John Mazanec, MBA Portfolio Manager | OVERVIEW
The Wasatch Small Cap Value Fund gained 7.88% in the year ended September 30, 2006, underper-forming the Russell 2000 Value Index, which returned 14.01%. Although the |
Fund’s return was positive, it was a disappointing year, as we trailed the benchmark by a substantial margin.
The Fund’s relative underperformance occurred primarily in four sectors — producer durables, energy, financial services, and materials and processing. Strength in the technology, autos and transportation, and consumer discretionary sectors partially offset the areas of weakness.
DETAILSOFTHE YEAR
The dominant story this year was the poor performance of our homebuilders’ stocks within the producer durables sector. The sub-par showing of these stocks was generally caused by the national housing slowdown. While we anticipated this, it has been more dramatic than we predicted. We did reduce our exposure to these stocks during the year, but in hindsight, not quickly enough to offset short-term underperformance. Over the long-term, we have realized significant positive returns by investing in these companies.
In the energy sector, our focus on natural gas rather than oil companies hurt performance, as the price of natural gas fell substantially. We don’t think it will take much — possibly a cold spell in the winter or a heat wave next summer — for the natural gas market to recover. One particularly disappointing stock was Toreador Resources, an international oil and gas producer. Toreador reported some disappointing exploration activity, but it currently trades at an attractive valuation and we are optimistic about its long-term prospects.
The financial services sector was an area of weak returns versus the Index, but it contributed significantly to the Fund’s return. United PanAm Financial, a subprime auto lender, was the primary detractor. The increase in short-term interest rates caused the company’s profit margin to compress, but we believe that United PanAm’s finance costs will stabilize as the yield curve normalizes. Despite this head-wind, the company has grown its loan portfolio, and hence its potential earnings power, by 15% or more during the year and recently announced a significant stock buyback program, which will increase shareholder value.
On the positive side, we saw good performance from Dollar Financial and NorthStar Realty Finance. Dollar is a payday lender benefiting from diversification across the U.S., U.K. and Canada. NorthStar is a commercial mortgage finance company that was rewarded by the market as its assets and dividends have grown.
Our materials and processing stocks averaged over a 16% return for the year, but the sector performed even better for the Index and our underweight position hurt significantly. We have found it difficult to identify companies in this sector whose performance is not tied directly to the price of an underlying commodity, but we continue to look for additional investment opportunities.
We achieved strong results in the technology and autos and transportation sectors. In technology, we like the prospects for TTM Technologies, which manufactures printed circuit boards and has a strong balance sheet. The stock did extremely well this year, rising from significantly undervalued to appropriately valued. Semiconductor companies Supertex and Nu Horizons Electronics were also strong contributors, while Micrel was our biggest detractor in the sector. Micrel has focused on attracting high margin business, which has hurt the stock price in the short-term, but we believe this approach will drive stronger earnings growth over time.
In autos and transportation, we have a large stake in Keystone Automotive Industries, a distributor of auto collision replacement parts. The stock performed well overall and was the single largest contributor to performance for the year. We also own a number of trucking companies, most of which did well as the industry has benefited from limited supply and solid demand. Quality Distribution was our best performing trucker, as the management team has done a good job improving profitability and cash flow.
The Fund’s consumer discretionary companies also posted strong performance. Many of our consumer stocks are “fallen angels,” companies that have hit a temporary bump in the road, but have the potential to emerge stronger than before. Monro Muffler Brake, an operator of over 700 auto repair shops, posted strong stock performance despite weakness in consumer spending. Hotel and resort owner/operator Orient Express Hotels also contributed significantly to performance. Both Monro and Orient Express were “fallen angels” that are now performing well and continue to exhibit many of the attributes we look for: strong brand value, solid management teams, and significant value within their businesses that we believe is not always fully accounted for in the stock price.
OUTLOOK
We see interesting opportunities in today’s market, as many investors are focused on near-term business momentum and are ignoring attractive valuation, company stock buyback activity, and earnings potential. About one-quarter of the companies in the Fund are buying back stock, which we think is a healthy sign. We feel this is an opportune time to invest in well-managed companies that have strong balance sheets and that can achieve good economic returns.
We are as committed as ever to identifying companies whose stocks, in our opinion, are temporarily undervalued but have significant potential for appreciation. We remain confident in the Fund’s potential to produce the results we expect over time, and we appreciate your investment.
20
| SMALL CAP VALUE FUND (WMCVX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 12/17/97 | ||||
Wasatch Small Cap Value Fund | 7.88% | 14.25% | 17.69% | |||
Russell 2000 Value Index | 14.01% | 16.96% | 10.85% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, in the past, certain Fund expenses, without which total returns would have been lower.
Investments in small cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
TOP 10 EQUITY HOLDINGS*
| Ticker | Company | % of Fund | ||
| KEYS | Keystone Automotive Industries, Inc. Auto collision replacement parts. | 2.99% | ||
| HBG | Hub International Ltd. Insurance broker. | 2.59% | ||
| RWT | Redwood Trust, Inc. Jumbo ARM mortgage REIT. | 2.47% | ||
| BECN | Beacon Roofing Supply, Inc. Roofing supplies distributor. | 2.40% | ||
| NRF | NorthStar Realty Finance Corp. Real estate finance company. | 2.09% |
| Ticker | Company | % of Fund | ||
| MNRO | Monro Muffler Brake, Inc. Automobile repair services. | 2.06% | ||
| DLLR | Dollar Financial Corp. Payday lender. | 1.99% | ||
| GISX | Global Imaging Systems, Inc. Office imaging equipment sales and service. | 1.91% | ||
| VTNC | Vitran Corp., Inc. Trucking company. | 1.89% | ||
| FNF | Fidelity National Financial, Inc. Title insurance. | 1.85% |
| * | As of September 30, 2006, the Fund had 22.24% invested in the Top 10 equity holdings and there were 102 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. |
SECTOR BREAKDOWN**
| ** | Excludes short-term investments, securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
†Inception: December 17, 1997. The Russell 2000 Value Index measures the performance of those Russell 2000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Index is an unmanaged total return index of the smallest 2,000 companies in the Russell 3000 Index, as ranked by total market capitalization. The Russell 2000 Index is widely regarded in the industry as accurately capturing the universe of small company stocks. You cannot invest directly in the Index.
21
| STRATEGIC INCOME FUND (WASIX) — Management Discussion | SEPTEMBER 30, 2006 | |
The Wasatch Strategic Income Fund is managed by a team of Wasatch portfolio managers, led by Sam Stewart.
OVERVIEW
Since inception on February 1 of this year, the Wasatch Strategic Income Fund returned 7.58%, topping the 3.05% from the Lehman Brothers Aggregate Bond Index and the 5.73% delivered by the S&P 500® Index.
With eight months now in the books, overall we’re happy with the performance of the Fund. That said, we believe the Fund’s report card should ultimately be judged over a period of years and not just a handful of months.
The primary purpose for commencing the Strategic Income Fund was to fill a void for investors. Over the long-term, we seek to deliver total returns that fall somewhere between stocks and bonds, with an annual dividend yield roughly in the 4% to 6% range. Given this focus, it would be surprising—maybe even concerning—if the Fund were to repeatedly achieve total returns significantly above both stocks and bonds. If that were to happen, we’d probably be taking on too much risk. On the other hand, we’d also hope to significantly limit our downside exposure, by cushioning falling markets with the dividend income component.
For both strategic and opportunistic reasons, about a third of the Fund is currently made up of mortgage REITs. We like REITs because they are required to pay out at least 90% of their income to shareholders. Most of the REITs we own are unique in that they don’t actually own property, but rather they own interests in portfolios of commercial and residential mortgages. These companies aren’t directly affected by a slowdown in real estate. Instead, their exposure is to the foreclosure rate—which has remained below 1% this year.
We ended this period feeling good about the Fund’s performance since inception. We believe the Fund is well positioned for the future, but also expect the composition of the portfolio will likely evolve toward more Blue Chip, Dividend Growth, and International stocks.
DETAILS SINCE INCEPTION
In constructing the Fund, we’ve broken our investments into three primary categories: Blue Chip, Dividend Growth and Value.
We define Blue Chips as cream of the crop companies. They include the likes of Pfizer and Citigroup, that have paid a good dividend and at the core are solid, high quality companies that we have been able to buy at attractive prices.
Pool is a good example of a recent Blue Chip purchase by the Fund. It is a stock widely owned among other Wasatch Funds. Pool is the leading wholesale distributor of swimming pool equipment and supplies. Over time, its operating margins have widened as it dictates the terms of business in an industry with relatively small manufacturers and retailers.
We purchased the stock after the market drove the price down in sympathy to the weakening housing market. Interestingly, only 3% to 6% of Pool’s business involves building pools for new homes, while 70% of revenues stem from maintenance and
repairs—a residual and somewhat recession-proof business. Pool has what we consider an extremely sturdy business model—its financial performance, including cash flow, is solid and it has been increasing its dividend payout.
The Dividend Growth section of the Fund consists of stocks that pay a dividend, but likely not as high as Blue Chips because they are still growing at a faster rate. We find these companies interesting because we believe we can capture capital appreciation through the company’s growth, while becoming recipients of higher dividend payouts over time.
Value is our final category. Most of our mortgage REIT holdings fall into this category. These REITs represent an opportunity for the Fund to buy companies with high dividend yields that we believe the market is undervaluing.
MortgageIT, a mortgage loan originator, was one of the Fund’s leading performers. It’s a good illustration of a REIT success story. We made an investment in what we believed to be a solid business at a value price. Then, we were nicely rewarded when another party recognized the value and agreed to acquire MortgageIT at roughly a 20% premium.
From a sector standpoint, with nearly 60% of the Fund’s holdings assigned to the financial services sector — including a broad array of mortgage REITs—it should come as no surprise that this grouping drove performance. It is worthwhile to note, however, that the Fund’s financial services holdings are well spread across Blue Chip, Dividend Growth and Value. In fact, we currently hold more Blue Chip financial companies than Value financial companies. This is a dividend play, but also a play on applied technology—we are finding financial companies that are using technology to truly accelerate their business models.
Of course it wasn’t all roses. A couple of companies that hurt our performance this period were Computer Programs & Systems, an information technology outsourcer that develops and supports computerized technology in hospitals, and M.D.C. Holdings, a homebuilder that fell victim to the slowing new house construction environment.
OUTLOOK
We envision that as the Fund matures, we will see some shifting from Value names to more Blue Chip companies and names owned by other Wasatch Funds. Ideally, we expect the underlying quality of our Value names to be recognized by the market, which, by definition, will cause them to cease being categorized as such. International holdings, where companies typically pay out more of their earnings as dividends, make up 21% of the portfolio, and we anticipate further increasing our exposure outside of the U.S. over time.
Overall, we feel good about our first eight months and think the Fund is well positioned for a market that many pundits are predicting will produce high single digit returns over the coming years. If we are able to deliver dividend income and competitive total returns while minimizing exposure on the downside, we will feel like we’ve done our job.
Thank you for the opportunity to manage your assets.
22
| STRATEGIC INCOME FUND (WASIX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 2/1/06* | ||||
Wasatch Strategic Income Fund | N/A | N/A | 7.58% | |||
Lehman Brothers Aggregate Bond Index | N/A | N/A | 3.05% | |||
S&P 500® Index | N/A | N/A | 5.73% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
With respect to the Fund’s assets invested in fixed income securities, you are subject, but not limited to, the same interest rate, inflation and credit risk associated with the underlying fixed-income securities owned by the Fund. Return of principal is not guaranteed. Equity investing involves risks, including potential loss of the principal amount invested. Being non-diversified, the Fund can invest a larger portion of its assets in the securities of a limited number of companies than a diversified fund. Non-diversification increases the risk of loss to the Fund if the values of these securities decline. Investing in foreign securities entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus.
| * | Returns less than one year are not annualized. |
TOP 10 EQUITY HOLDINGS**
| Ticker | Company | % of Fund | ||
| RWT | Redwood Trust, Inc. Jumbo ARM mortgage REIT. | 3.13% | ||
| COF | Capital One Financial Corp. Credit cards and financial services. | 2.57% | ||
| CFC | Countrywide Financial Corp. Real estate mortgage lender. | 2.56% | ||
| ARCC | Ares Capital Corp. Investment manager. | 2.49% | ||
| AHR | Anthracite Capital, Inc. Mortgage lender. | 2.40% |
| Ticker | Company | % of Fund | ||
| CSE | CapitalSource, Inc. Financial services to businesses. | 2.20% | ||
| FAF | First American Corp. Title insurance and real estate services. | 2.03% | ||
| ABR | Arbor Realty Trust, Inc. Multi-family and commercial property REIT. | 2.00% | ||
| NRF | NorthStar Realty Finance Corp. Real estate finance company. | 1.98% | ||
| KFN | KKR Financial Corp. Mortgage REIT. | 1.96% |
| ** | As of September 30, 2006, the Fund had 23.32% invested in the Top 10 equity holdings and there were 89 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor |
SECTOR BREAKDOWN†
| † | Excludes short-term investments, securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
| †† | Inception: February 1, 2006. The Lehman Brothers Aggregate Bond Index covers the U.S. investment grade fixed rate bond market, including government and corporate securities, agency mortgage pass-through securities, and asset-backed securities. To be included in the index the security must meet the following criteria: must have at least one year to final maturity, regardless of call features; must have at least $100 million par amount outstanding; must be rated investment grade or better by Moody’s Investors Service, Standard & Poor’s, or Fitch Investor’s Service; must be fixed rate, although it can carry a coupon that steps up or changes to a predetermined schedule; must be dollar-denominated and must be nonconvertible. All corporate and asset-backed securities must be registered with the SEC; and must be publicly issued. The S&P 500 Index includes 500 of the United States’ largest stocks from a broad variety of industries. The Index is unmanaged but is a commonly used measure of common stock total return performance. You cannot invest directly in these indexes. |
23
| ULTRA GROWTH FUND (WAMCX) — Management Discussion | SEPTEMBER 30, 2006 | |
Ajay Krishnan, CFA Portfolio Manager |
Neal Dihora, CFA Portfolio Manager |
Karey Barker, CFA Portfolio Manager |
OVERVIEW
The Wasatch Ultra Growth Fund lost 0.48% in the 12 months ended September 30. During the same time period, the Russell 2000 Growth Index (the “Index”) gained 5.88% and the Russell 2500 Growth Index advanced 6.53%.
The Fund’s disappointing performance was largely attributable to two factors. First, our stock selection was below average in the technology and health care sectors, sectors in which we have historically been successful at identifying top performers. Second, our traditionally minimal exposure to cyclical, commodity-oriented sectors was a headwind.
While results fell short of expectations this period, the fundamentals of our companies, combined with reasonable valuations, give us confidence that the Fund has the potential to generate strong returns over time. We are also encouraged by recent weakness in some of the cyclical, commodity-oriented sectors that we are traditionally underweight and that were “hot” throughout much of the year.
DETAILSOFTHE YEAR
In managing the Fund, we focus on investing in companies that we believe are capable of sustaining high earnings growth rates due to their talented management teams, strong competitive positions, innovative products and services and high-quality financial structures. We have found many of these companies in technology- and health care-related businesses, which make up the bulk of the Fund’s holdings. The performance of our technology and health care stocks has historically more than compensated for our lack of exposure to other sectors of the market. Unfortunately, this was not the case during the past 12 months.
Our stock selection in the technology and health care sectors detracted from results versus the Index. Underperformance was concentrated in a handful of names that experienced large price declines but which we still have confidence in over the long term. For example, shares of O2Micro International, a semiconductor supplier, were down sharply on concerns including continuing expenses associated with the company’s intellectual property litigation and that a new product would hurt gross margins. Despite recent weakness, we remain positive on O2Micro’s long-run prospects. We believe the company has the right product portfolio in place to drive substantial earnings growth, particularly in the LCD-TV market where we expect demand to be strong.
United Surgical Partners International, an operator of ambulatory surgery centers and surgical hospitals, significantly underperformed. The company’s stock price dropped after it reported disappointing revenues related to the mix of procedures conducted at its specialty hospitals. However, the sell-off in its shares did not change our favorable long-term view of United Surgical Partners. We think the company’s unique approach to partnering with doctors and hospitals gives it a major competitive advantage in the rapidly growing ambulatory surgery market.
The Fund’s sector allocations, a byproduct of our bottom-up, fundamental analysis on individual companies, also negatively impacted performance. Throughout much of the period, the U.S. economy was healthy and the price of oil and other commodities was rising due to robust global demand. In this environment, several of the cyclical, commodity-oriented sectors we are typically underweight posted some of the best returns, including autos and transportation, materials and processing, and producer durables. While we continue to research companies in these areas, we have found very few that meet our investment criteria and will not deviate from our criteria simply to gain exposure.
On a positive note, many of the Fund’s holdings delivered substantial gains, such as Cognizant Technology Solutions, a provider of information technology (IT) services and one of our largest positions. The Fund has owned shares of the company since 1999, the year following its initial public offering, and its long-term price appreciation has been exceptional. After all of these years and despite a few bumps along the way we believe our original investment thesis remains intact and that Cognizant will continue to benefit from the ongoing trend among corporations to outsource IT application development and maintenance.
Two other positions that performed well were Intuitive Surgical and ArthroCare, which make products that help doctors perform minimally invasive surgeries. Both companies are experiencing strong demand, as minimally invasive procedures reduce the trauma, cost and duration of medical treatment. We own several of these types of stocks and are researching additional investment opportunities in this important, high-growth segment of the health care market.
OUTLOOK
Overall, the earnings growth of our portfolio companies has been exceeding our expectation of 20%, confirmation of the fundamental business strength of our holdings. With what we believe to be reasonable valuations for our portfolio companies, we feel good about the Fund’s composition and long-term return prospects.
We continue to adhere to our investment disciplines in all market environments. We were rewarded for doing so in the last three months of the period when several of the cyclical, commodity-oriented sectors that have been “hot” and that we were underweight produced lackluster results. If prices of oil and other commodities have peaked after a relentless multi-year climb, and global growth moderates, our minimal exposure to these sectors should be a tailwind for the Fund.
Thank you for the opportunity to manage your assets.
24
| ULTRA GROWTH FUND (WAMCX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Wasatch Ultra Growth Fund | -0.48% | 9.84% | 10.74% | |||
Russell 2000 Growth Index | 5.88% | 10.15% | 4.03% | |||
Russell 2500 Growth Index | 6.53% | 10.92% | 6.36% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, in the past, certain Fund expenses, without which total returns would have been lower.
Investments in small cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
TOP 10 EQUITY HOLDINGS*
| Ticker | Company | % of Fund | ||
| USPI | United Surgical Partners International, Inc. Ambulatory surgery centers. | 3.98% | ||
| SLAB | Silicon Laboratories, Inc. Analog and mixed signal integrated circuits. | 3.30% | ||
| ARTC | ArthroCare Corp. Disposable devices for minimally invasive surgery. | 3.07% | ||
| KNX | Knight Transportation, Inc. Long haul trucking and logistics services. | 2.94% | ||
| HWAY | Healthways, Inc. Disease management services. | 2.90% |
| Ticker | Company | % of Fund | ||
| ORLY | O’Reilly Automotive, Inc. Automotive parts retailer/distributor. | 2.88% | ||
| PDX | Pediatrix Medical Group, Inc. National network of neonatalogists. | 2.69% | ||
| SRX | SRA International, Inc., Class A Information technology services for government agencies. | 2.63% | ||
| CTSH | Cognizant Technology Solutions Corp., Class A Professional technology services. | 2.52% | ||
| XPRT | LECG Corp. Economic and financial consulting. | 2.48% |
| * | As of September 30, 2006, the Fund had 29.39% invested in the Top 10 equity holdings and there were 93 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. |
SECTOR BREAKDOWN**
| ** | Excludes short-term investments, securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
The Russell 2000 Growth Index measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged total return index of the smallest 2,000 companies in the Russell 3000 Index, as ranked by total market capitalization. The Russell 2000 Index is widely regarded in the industry as accurately capturing the universe of small company stocks. The Russell 2500 Growth Index measures the performance of those Russell 2500 Index companies with higher price-to-book ratios and higher forecasted growth values. You cannot invest directly in these indexes.
25
| U.S. TREASURY FUND (WHOSX) — Management Discussion | SEPTEMBER 30, 2006 | |
Van R. Hoisington Portfolio Manager | OVERVIEW
The Fund returned 1.21% in the 12 months ended September 30, versus 3.67% for the Lehman Brother’s Aggregate Bond Index. In the prior fiscal year, the Fund exceeded the rise in the Lehman by 8.6%. For the last three, five and 10 years the Fund’s average annual returns were 6.21%, 7.15% and 8.22%, respectively, and outperformed the Lehman Aggregate’s average annual returns over the same time periods by 2.83%, 2.34% and 1.80%, respectively. |
Investment decisions for the Fund are based on the Sub-Advisor’s assessment of multi-year trends in national and international economic conditions and interest rates, changes in inflationary pressures, and the value of long-term U.S. Treasury bonds (maturities longer than 20 years) relative to inflation. Given the Fund’s multi-year investment horizon and that it invests exclusively in U.S. Treasury securities, we would expect the Fund’s performance relative to the Index to be volatile, particularly in periods as short as one year. For the 12 months ended September 30, the Fund’s performance was affected by rising yields in long-term U.S. Treasury bonds, which yielded 4.76%, or slightly above the year earlier level of 4.57%. As a result, the market value of the Fund’s portfolio fell and resulted in a return that was less than that of the Index.
DETAILSOFTHE YEAR
The main source of upward pressure on long-term rates in the 2006 fiscal year was an increase in the Federal funds rate from 3.75% to 5.25%, which was part of an upward cycle in the Federal funds from a low of 1% in the spring of 2004.
Over this two year tightening cycle the yield curve gradually flattened, and then in late June of this year the curve inverted, with short term yields rising above long term ones. On June 30, 2004, the entire yield curve was upward sloping, with the two, five, 10 and 30 year Treasury yields at 2.70%, 3.81%, 4.62% and 5.29%, respectively, compared with a Fed funds rate of 1.25%. On the last day of September 2006, those same yields were 4.71%, 4.59%, 4.64% and 4.76%, respectively. As such, all yields were below the Fed funds rate of 5.25%.
Over the past fiscal year, economic activity slowed, as all major measures of housing activity declined noticeably and vehicle sales fell below the year earlier level. The more subdued pace was clearly evident in the labor markets. The inflation rate, reflecting a dramatic surge in oil prices, moved slightly higher. The Core Personal Consumption Expenditures (PCE) Deflator* rose 2.5% in the latest 12 months, compared with 2.1% for the 12 months ended September 2005. However, wage increases remained modest, productivity continued to rise rapidly for non-financial firms, and monetary growth was slow, suggesting that the up-tick in inflation in fiscal 2006 was transitory. By the end
of the fiscal year, a broad gauge of commodity prices was 8.2% lower than a year earlier.
OUTLOOK
The yield curve inversion, while unusual, is not unprecedented. Similar inversions occurred prior to six post WWII recessions. In the inversions prior to the 1990 and 2000 recessions, the curve became more inverted until the Federal Reserve lowered the Fed funds target rate. A similar outcome should prevail in this business cycle, with the inversion process only halting when the Fed begins to reduce rates.
Historically, inverted yield curves have preceded either lower inflation and/or weaker economic growth. When faltering, economic activity can either slow (and remain positive) or contract. In either case, inflation, the key fundamental determinant of long bond yields, will moderate. Accordingly, cyclical financial history points to disinflationary/sub-par growth rates over the next several quarters and a continuing bond market rally.
Whether a recession or merely a slowdown ensues will be determined by intervening events between now and the spring of next year. Currently, oil prices and other inflationary forces are moderating sharply, and this will help to support economic growth. But even the beneficial impact of lower oil prices could easily be negated by a severe drop in housing prices or by some economic shock. Among the unknowns is how the financial intermediaries will react to more restrictive mortgage lending standards that went into effect at the end of September or the ruling of the Financial Accounting Standards Board (FASB) that corporations must now disclose their unfunded pension liabilities.
In summary, sub-par economic growth is likely over the next year in response to the lagged effects of two years of tightening actions by the Federal Reserve and a reversal in the housing bubble. A highly over-leveraged consumer balance sheet will become even more unwieldy by the decline in house values and will restrain consumer spending.
From a bond manager’s perspective, the question of whether the economy experiences an extended slowdown or a recession is not of paramount importance. Either circumstance will produce lower inflation. The core inflation rate should peak soon and then move lower in 2007. With long bond yields heavily influenced by the multi-year trend in inflation, the Treasury bonds held by the Fund appear poised to generate positive returns in the year ahead.
Thank you for investing in the Wasatch-Hoisington U.S. Treasury Fund.
| * | Personal Consumption Expenditures (PCE) Deflator is part of the National Income and Products Accounts developed by the Bureau of Economic Analysis of the U.S. Commerce Department. The PCE Deflator is a variable weighted index and is widely considered to be the most reliable of all the price indexes. |
26
| U.S. TREASURY FUND (WHOSX) — Portfolio Summary | SEPTEMBER 30, 2006 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Wasatch-Hoisington U.S. Treasury Fund | 1.21% | 7.15% | 8.22% | |||
Lehman Bros. Aggregate Bond Index | 3.67% | 4.81% | 6.42% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held two months or less. Performance data does not reflect the deduction of this fee which, if charged, would reduce the performance quoted. The table above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares.
To obtain the most recent month-end performance, please visit www.wasatchfunds.com or call 800.551.1700. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. The Advisor has absorbed, in the past, certain Fund expenses, without which total returns would have been lower.
Investments in fixed income funds are subject to the same interest rate, inflation, credit and other risks associated with the underlying bonds. Return of principal is not guaranteed.
TOP 10 HOLDINGS*
| Holding | Maturity Date | % of Fund | |||
| U.S. Treasury Strip, principal only | 11/15/27 | 32.98 | % | ||
| U.S. Treasury Bond, 5.25% | 2/15/29 | 17.04 | % | ||
| U.S. Treasury Strip, principal only | 8/15/25 | 15.58 | % | ||
| U.S. Treasury Bond, 5.25% | 11/15/28 | 7.43 | % | ||
| U.S. Treasury Bond, 5.50% | 8/15/28 | 5.74 | % |
| Holding | Maturity Date | % of Fund | |||
| U.S. Treasury Bond, 6.125% | 11/15/27 | 3.88 | % | ||
| U.S. Treasury Strip, principal only | 11/15/21 | 3.80 | % | ||
| U.S. Treasury Bond, 6.75% | 8/15/26 | 3.42 | % | ||
| U.S. Treasury Bond, 7.50% | 11/15/24 | 3.17 | % | ||
| U.S. Treasury Bond, 6.875% | 8/15/25 | 2.90 | % |
| * | As of September 30, 2006, the Fund had 95.94% invested in the Top 10 holdings and there were 12 long-term holdings in the Fund. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. |
INVESTMENTS & CASH
GROWTHOFA $10,000 INVESTMENT
The Lehman Brothers Aggregate Bond Index covers the U.S. investment grade fixed rate bond market, including government and corporate securities, agency mortgage pass-through securities, and asset-backed securities. To be included in the index the security must meet the following criteria: must have at least one year to final maturity, regardless of call features; must have at least $100 million par amount outstanding; must be rated investment grade or better by Moody’s Investors Service, Standard & Poor’s, or Fitch Investor’s Service; must be fixed rate, although it can carry a coupon that steps up or changes to a predetermined schedule; must be dollar-denominated and must be nonconvertible. All corporate and asset-backed securities must be registered with the SEC; and must be publicly issued. You cannot invest directly in the Index.
27
| WASATCH FUNDS — Operating Expenses | ||
EXPENSE EXAMPLE
As a shareholder of Wasatch Funds, you incur two types of costs (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Wasatch Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000.00 invested at the beginning of the period and held for the entire six month period ended September 30, 2006.
ACTUAL EXPENSES
The first line of the table below provides information about actual account values and actual expenses, based upon the actual total return of the fund during the most recent six month period ended September 30. You may use the information in this line, together with the amount you invested, to estimate the expenses you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
In addition, the Funds charge a $15.00 IRA distribution fee, a $12.50 IRA annual maintenance fee and a $15.00 fee for redemptions paid by wire. To the extent these fees apply to your account, your expenses paid during the period would be higher and your ending account value would be lower than the amounts shown in the table below.
HYPOTHETICAL EXAMPLEFOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on a fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Wasatch Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
In addition, the Funds charge a $15.00 IRA distribution fee, a $12.50 IRA annual maintenance fee and a $15.00 fee for redemptions paid by wire. To the extent these fees apply to your account, your expenses paid during the period would be higher and your ending account value would be lower than the amounts shown in the table below. If another fund’s fees differ from those listed above, your expenses paid and your ending account value could be higher or lower than those of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
28
| SEPTEMBER 30, 2006 | ||
| Account Value | ||||||||
| Beginning of Period April 1, 2006 | End of Period September 30, 2006 | Expenses Paid | Annualized Ratio* | |||||
Core Growth Fund | ||||||||
Actual | $1,000.00 | $926.10 | $5.75 | 1.19% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,019.10 | $6.02 | 1.19% | ||||
Global Science & Technology Fund | ||||||||
Actual | $1,000.00 | $930.70 | $9.58 | 1.98% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,015.14 | $10.00 | 1.98% | ||||
Heritage Growth Fund | ||||||||
Actual | $1,000.00 | $974.40 | $4.85 | 0.98% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,020.16 | $4.96 | 0.98% | ||||
International Growth Fund | ||||||||
Actual | $1,000.00 | $977.60 | $8.87 | 1.79% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,016.09 | $9.05 | 1.79% | ||||
International Opportunities Fund | ||||||||
Actual | $1,000.00 | $978.30 | $11.16 | 2.25% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,013.79 | $11.36 | 2.25% | ||||
Micro Cap Fund | ||||||||
Actual | $1,000.00 | $949.70 | $10.51 | 2.15% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,014.29 | $10.86 | 2.15% | ||||
Micro Cap Value Fund | ||||||||
Actual | $1,000.00 | $976.70 | $11.15 | 2.25% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,013.79 | $11.36 | 2.25% | ||||
Small Cap Growth Fund1 | ||||||||
Actual | $1,000.00 | $926.40 | $5.70 | 1.18% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,019.15 | $5.97 | 1.18% | ||||
Small Cap Value Fund | ||||||||
Actual | $1,000.00 | $948.00 | $8.20 | 1.68% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,016.65 | $8.49 | 1.68% | ||||
Strategic Income Fund | ||||||||
Actual | $1,000.00 | $1,056.90 | $4.90 | 0.95% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,020.31 | $4.81 | 0.95% | ||||
Ultra Growth Fund1 | ||||||||
Actual | $1,000.00 | $903.60 | $7.16 | 1.50% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,017.55 | $7.59 | 1.50% | ||||
U.S. Treasury Fund | ||||||||
Actual | $1,000.00 | $1,059.10 | $3.87 | 0.75% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,021.31 | $3.80 | 0.75% | ||||
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the full fiscal year (183/365). |
| 1 | In 2006, the Fund received a reimbursement of investment advisory fees which had an impact on the Fund’s expense dollars and ratio of less than $0.01 and 0.01%, respectively. See Note 7 in Notes to Financial Statements. |
29
| CORE GROWTH FUND — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 99.4% | |||||
| Aerospace and Defense 0.6% | |||||
| 691,180 | DataPath, Inc.* *** † | $ | 7,602,980 | ||
| Auto Parts — After Market 0.0% | |||||
| 695 | Keystone Automotive Industries, Inc.* | 26,424 | |||
| Banks 9.1% | |||||
| 876,040 | Commerce Bancorp, Inc. | 32,159,428 | |||
| 475,877 | First Community Bancorp, Inc. | 26,625,318 | |||
| 1,113,255 | HDFC Bank Ltd. | 22,500,928 | |||
| 1,155 | HDFC Bank Ltd. ADR | 70,513 | |||
| 797,143 | UCBH Holding, Inc. | 13,918,117 | |||
| 3,722,391 | UTI Bank Ltd. | 30,809,919 | |||
| 126,084,223 | |||||
| Biotechnology Research and Production 0.0% | |||||
| 606 | Charles River Laboratories International, Inc.* | 26,306 | |||
| Commercial Services and Supplies 6.9% | |||||
| 2,608,260 | Copart, Inc.* | 73,526,850 | |||
| 285,573 | Gevity HR, Inc. | 6,505,353 | |||
| 801 | Monro Muffler Brake, Inc. | 27,242 | |||
| 384,429 | Waste Connections, Inc.* | 14,573,703 | |||
| 62 | WCA Waste Corp.* | 349 | |||
| 94,633,497 | |||||
| Computer Services Software and Systems 4.5% | |||||
| 445 | CACI International, Inc., Class A* | 24,479 | |||
| 458,859 | Kanbay International, Inc.* | 9,434,141 | |||
| 734,515 | QLogic Corp.* | 13,882,334 | |||
| 1,302,415 | SRA International, Inc., Class A* | 39,150,595 | |||
| 62,491,549 | |||||
| Diversified Financial Services 1.8% | |||||
| 738,365 | Housing Development Finance Corp. Ltd. | 24,711,604 | |||
| 120,000 | JSE Ltd. | 586,394 | |||
| 25,297,998 | |||||
| Education Services 4.7% | |||||
| 576,636 | Laureate Education, Inc.* | 27,597,799 | |||
| 255,401 | Strayer Education, Inc. | 27,636,942 | |||
| 530,609 | Universal Technical Institute, Inc.* | 9,492,595 | |||
| 64,727,336 | |||||
| Electronics — Medical Systems 1.2% | |||||
| 351,401 | Haemonetics Corp.* | 16,445,567 | |||
| Electronics — Semiconductors/Components 4.2% | |||||
| 1,048,587 | ASE Test Ltd.* | 8,954,933 | |||
| 1,274,194 | Micrel, Inc.* | 12,219,520 | |||
| 765,028 | Silicon Laboratories, Inc.* | 23,731,169 | |||
| 526,117 | SiRF Technology Holdings, Inc.* | 12,621,547 | |||
| 57,527,169 | |||||
| Energy Equipment and Services 1.5% | |||||
| 252,020 | Calfrac Well Services Ltd. | 4,926,758 | |||
| 959,025 | TGS-NOPEC Geophysical Co. ASA* | 15,185,733 | |||
| 20,112,491 | |||||
| Engineering and Contracting Services 1.1% | |||||
| 395,673 | URS Corp.* | 15,387,723 | |||
| Shares | Value | ||||
| Finance Companies 1.4% | |||||
| 400,600 | Dollar Financial Corp.* | $ | 8,741,092 | ||
| 722,367 | United PanAm Financial Corp.* | 11,182,241 | |||
| 19,923,333 | |||||
| Finance — Small Loan 3.4% | |||||
| 1,867,494 | AmeriCredit Corp.* | 46,668,675 | |||
| Financial Information Services 1.1% | |||||
| 310,917 | FactSet Research Systems, Inc. | 15,101,239 | |||
| Financial — Miscellaneous 3.3% | |||||
| 365,517 | Fidelity National Financial, Inc. | 15,223,783 | |||
| 700,545 | First American Corp. | 29,661,075 | |||
| 44,884,858 | |||||
| Health Care Facilities 5.3% | |||||
| 379,299 | Pharmaceutical Product Development, Inc. | 13,537,181 | |||
| 931,677 | Sunrise Senior Living, Inc.* | 27,829,192 | |||
| 1,304,296 | United Surgical Partners International, Inc.* | 32,385,670 | |||
| 73,752,043 | |||||
| Health Care Management Services 4.1% | |||||
| 1,011,259 | Pediatrix Medical Group, Inc.* | 46,113,410 | |||
| 187,419 | WellCare Health Plans, Inc.* | 10,613,538 | |||
| 56,726,948 | |||||
| Health Care Services 0.9% | |||||
| 363,766 | Lincare Holdings, Inc.* | 12,600,854 | |||
| Home Building 5.1% | |||||
| 577,976 | M.D.C. Holdings, Inc. | 26,846,985 | |||
| 81,257 | NVR, Inc.* | 43,472,495 | |||
| 70,319,480 | |||||
| Insurance 1.7% | |||||
| 806,303 | Hub International Ltd. | 23,318,283 | |||
| Investment Management Companies 2.5% | |||||
| 600 | Brantley Mezzanine Finance, LLC* ** *** † | — | |||
| 621,982 | SEI Investments Co. | 34,949,169 | |||
| 34,949,169 | |||||
| Leisure Time 7.0% | |||||
| 513,739 | Life Time Fitness, Inc.* | 23,780,978 | |||
| 1,880,810 | Pool Corp. | 72,411,185 | |||
| 96,192,163 | |||||
| Machinery 0.6% | |||||
| 159,443 | Hydril Co.* | 8,938,375 | |||
| Medical and Dental Instruments and Supplies 2.0% | |||||
| 1,406,852 | PSS World Medical, Inc.* | 28,122,971 | |||
| Medical Services 0.5% | |||||
| 259,944 | PRA International* | 6,937,905 | |||
| Multi-Sector Companies 0.7% | |||||
| 341,255 | Raven Industries, Inc. | 10,241,063 | |||
| Oil and Gas 1.9% | |||||
| 445,260 | Highpine Oil & Gas Ltd.* | 6,768,335 | |||
| 960 | Toreador Resources Corp.* | 17,683 | |||
| 397,230 | Ultra Petroleum Corp.* | 19,110,735 | |||
| 25,896,753 | |||||
30
| SEPTEMBER 30, 2006 | ||
| Shares | Value | ||||
| Real Estate Investment Trusts (REIT) 2.6% | |||||
| 1,421,605 | HomeBanc Corp. | $ | 8,742,871 | ||
| 548,378 | Redwood Trust, Inc. | 27,621,800 | |||
| 36,364,671 | |||||
| Rental and Leasing Services — Consumer 0.8% | |||||
| 450,875 | Aaron Rents, Inc. | 10,361,108 | |||
| Retail 13.9% | |||||
| 46,805 | Bijou Brigitte AG | 12,114,786 | |||
| 1,552,544 | Global Imaging Systems, Inc.* | 34,264,646 | |||
| 623,224 | Guitar Center, Inc.* | 27,845,648 | |||
| 2,695 | Hibbett Sporting Goods, Inc.* | 70,555 | |||
| 311,734 | Lithia Motors, Inc., Class A | 7,706,064 | |||
| 893,242 | MSC Industrial Direct Co., Inc., Class A | 36,390,679 | |||
| 1,969,119 | O’Reilly Automotive, Inc.* | 65,394,442 | |||
| 332,040 | Sonic Automotive, Inc. | 7,666,804 | |||
| 191,453,624 | |||||
| Road and Rail 1.1% | |||||
| 739,745 | Localiza Rent A Car S.A. | 15,347,195 | |||
| Savings and Loans 0.3% | |||||
| 686,343 | W Holding Co., Inc. | 4,056,287 | |||
| Securities Brokerage and Services 0.6% | |||||
| 162,073 | GFI Group, Inc.* | 8,961,016 | |||
| Textiles, Apparel and Luxury Goods 0.3% | |||||
| 2,761,000 | Ports Design Ltd. | 4,252,681 | |||
| Truckers 2.2% | |||||
| 1,794,914 | Knight Transportation, Inc. | 30,423,792 | |||
| Wholesalers 0.5% | |||||
| 347,199 | Beacon Roofing Supply, Inc.* | 7,027,308 | |||
| Total Common Stocks (cost $1,100,207,429) | 1,373,185,057 | ||||
| PREFERRED STOCKS 0.4% | |||||
| Machinery 0.4% | |||||
| 1,086,890 | Weg S.A. Pfd. | 4,914,842 | |||
| Total Preferred Stocks (cost $4,221,267) | 4,914,842 | ||||
| Principal Amount | Value | |||||
| CORPORATE BONDS 0.2% | ||||||
| Investment Management Companies 0.2% | ||||||
| $3,000,000 | Brantley Mezzanine Finance, LLC, 10.00%, 9/21/09*** † ‡ | $ | 2,664,600 | |||
| Total Corporate Bonds (cost $2,960,692) | 2,664,600 | |||||
| SHORT-TERM INVESTMENTS 0.0% | ||||||
| Repurchase Agreement 0.0% | ||||||
| $ 589,000 | Repurchase Agreement dated 9/29/06, 4.30% due 10/2/06 with State Street Bank and Trust Co. collateralized by $450,000 of United States Treasury Bonds 7.625% due 2/15/25; value: $604,125; repurchase proceeds: $589,211 (cost $589,000) | $ | 589,000 | |||
| Total Short-Term Investments (cost $589,000) | 589,000 | |||||
| Total Investments (cost $1,107,978,388) 100.0% | 1,381,353,499 | |||||
| Liabilities less Other Assets (0.0)% | (326,931 | ) | ||||
| NET ASSETS 100.0% | $ | 1,381,026,568 | ||||
| * Non-income producing. | ||||||
| ** Common units. | ||||||
| *** Security was fair valued under procedures adopted by the Board of Directors (See Note 2). | ||||||
| † Security purchased in a private placement transaction or under Rule 144A of the Securities Act of 1933 (see Note 9). | ||||||
| ‡ Defaulted security. | ||||||
| ADR American Depositary Receipt. | ||||||
| See notes to financial statements. | ||||||
31
| GLOBAL SCIENCE & TECHNOLOGY FUND — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 93.8% | |||||
| Banks 1.1% | |||||
| 71,225 | HDFC Bank Ltd. (India) | $ | 1,439,588 | ||
| Biotechnology Research and Production 2.3% | |||||
| 24,045 | ArthroCare Corp.* | 1,126,749 | |||
| 16,495 | Celgene Corp.* | 714,233 | |||
| 33,375 | Neurochem, Inc.* (Canada) | 618,439 | |||
| 18,800 | Pharmion Corp.* | 405,140 | |||
| 2,864,561 | |||||
| Building Products 0.5% | |||||
| 117,875 | IVRCL Infrastructure and Projects Ltd. (India) | 649,999 | |||
| Casinos and Gambling 0.8% | |||||
| 35,782 | Shuffle Master, Inc.* | 966,472 | |||
| Chemicals 0.3% | |||||
| 15,190 | Cabot Microelectronics Corp.* | 437,776 | |||
| Commercial Services and Supplies 0.5% | |||||
| 22,420 | eBay, Inc.* | 635,831 | |||
| Communications Technology 3.5% | |||||
| 27,755 | Corning, Inc.* | 677,500 | |||
| 100,075 | Novatel Wireless, Inc.* | 963,722 | |||
| 48,780 | QUALCOMM, Inc. | 1,773,153 | |||
| 75,215 | Sonus Networks, Inc.* | 395,631 | |||
| 16,355 | WebEx Communications, Inc.* | 638,172 | |||
| 4,448,178 | |||||
| Computer Services Software and Systems 12.0% | |||||
| 35,890 | Adobe Systems, Inc.* | 1,344,080 | |||
| 40,030 | Cognizant Technology Solutions Corp., Class A* | 2,964,622 | |||
| 31,220 | F5 Networks, Inc.* | 1,677,138 | |||
| 2,375 | Google, Inc., Class A* | 954,512 | |||
| 237,880 | Kana Software, Inc.* | 739,807 | |||
| 68,295 | Kanbay International, Inc.* | 1,404,145 | |||
| 34,755 | NeuStar, Inc., Class A* | 964,451 | |||
| 68,395 | Opnet Technologies, Inc.* | 896,659 | |||
| 90,815 | QLogic Corp.* | 1,716,404 | |||
| 5,345 | Riverbed Technology, Inc.* | 104,228 | |||
| 78,485 | SRA International, Inc., Class A* | 2,359,259 | |||
| 15,125,305 | |||||
| Computer Technology 1.6% | |||||
| 15,895 | Apple Computer, Inc.* | 1,224,392 | |||
| 34,610 | Trident Microsystems, Inc.* | 805,029 | |||
| 2,029,421 | |||||
| Computers and Peripherals 0.5% | |||||
| 75,439 | Catcher Technology Co. Ltd. (Taiwan) | 647,076 | |||
| Diversified Financial Services 1.1% | |||||
| 40,115 | Housing Development Finance Corp. Ltd. (India) | 1,342,569 | |||
| Diversified Telecommunication Services 1.3% | |||||
| 255,667 | Astra Microwave Products Ltd. (India) | 938,023 | |||
| 35,255 | Option N.V.* (Belgium) | 711,232 | |||
| 1,649,255 | |||||
| Drugs and Pharmaceuticals 0.3% | |||||
| 41,355 | Novacea, Inc.* | 311,817 | |||
| Shares | Value | ||||
| Electrical and Electronics 2.1% | |||||
| 104,180 | Power Integrations, Inc.* | $ | 2,041,928 | ||
| 55,730 | TTM Technologies, Inc.* | 652,041 | |||
| 2,693,969 | |||||
| Electrical Equipment 2.4% | |||||
| 608,000 | Magnecomp International Ltd. (Singapore) | 325,769 | |||
| 1,529,125 | Unisteel Technology Ltd. (Singapore) | 1,975,987 | |||
| 812,900 | XAC Automation Corp. (Taiwan) | 773,372 | |||
| 3,075,128 | |||||
| Electronic Equipment and Instruments 2.0% | |||||
| 1,856,793 | Innovalues Precision Ltd. (Singapore) | 912,947 | |||
| 3,915 | Samsung Electronics Co. Ltd. GDR (Korea) | 1,374,165 | |||
| 190,440 | Syntech Information Co. Ltd. (Taiwan) | 291,613 | |||
| 2,578,725 | |||||
| Electronics 0.8% | |||||
| 76,130 | Nu Horizons Electronics Corp.* | 969,896 | |||
| Electronics — Medical Systems 2.8% | |||||
| 16,815 | Intuitive Surgical, Inc.* | 1,773,142 | |||
| 22,110 | Medtronic, Inc. | 1,026,788 | |||
| 34,215 | NXStage Medical, Inc.* | 300,065 | |||
| 20,710 | Somanetics Corp.* | 413,372 | |||
| 3,513,367 | |||||
| Electronics — Semiconductors/Components 21.2% | |||||
| 62,085 | Advanced Analogic Technologies, Inc.* | 340,847 | |||
| 20,990 | Advanced Micro Devices, Inc.* | 521,601 | |||
| 140,060 | ASE Test Ltd.* (Taiwan) | 1,196,112 | |||
| 19,925 | Broadcom Corp., Class A* | 604,524 | |||
| 58,162 | Cascade Microtech, Inc.* | 724,698 | |||
| 29,840 | Marvell Technology Group Ltd.* (Bermuda) | 578,001 | |||
| 99,715 | Maxim Integrated Products, Inc.††† | 2,799,000 | |||
| 263,345 | Micrel, Inc.* | 2,525,479 | |||
| 72,685 | Microchip Technology, Inc. | 2,356,448 | |||
| 25,600 | Microsemi Corp.* | 482,560 | |||
| 92,300 | MIPS Technologies, Inc.* | 623,025 | |||
| 89,340 | National Semiconductor Corp. | 2,102,170 | |||
| 38,335 | Netlogic Microsystems, Inc.* | 972,559 | |||
| 202,995 | ON Semiconductor Corp.* | 1,193,611 | |||
| 229,260 | PLX Technology, Inc.* | 2,377,426 | |||
| 94,300 | PMC-Sierra, Inc.* | 560,142 | |||
| 53,155 | Silicon Laboratories, Inc.* | 1,648,868 | |||
| 42,543 | SiRF Technology Holdings, Inc.* | 1,020,607 | |||
| 46,520 | Techwell, Inc.* | 696,870 | |||
| 43,250 | Tessera Technologies, Inc.* | 1,504,235 | |||
| 57,770 | Texas Instruments, Inc. | 1,920,852 | |||
| 26,749,635 | |||||
| Energy Equipment and Services 1.8% | |||||
| 1,772,010 | Advanced Holdings Ltd. (Singapore) | 402,120 | |||
| 122,000 | TGS-NOPEC Geophysical Co. ASA* (Norway) | 1,931,816 | |||
| 2,333,936 | |||||
| Food and Drug Retailing 0.7% | |||||
| 47,200 | Sugi Pharmacy Co. Ltd. (Japan) | 843,250 | |||
| Food Products 0.3% | |||||
| 26,400 | Cosan S.A. Industria e Comercio* (Brazil) | 425,660 | |||
32
| SEPTEMBER 30, 2006 | ||
| Shares | Value | ||||
| Health Care Equipment and Supplies 3.9% | |||||
| 5,239,270 | LMA International N.V.* (Singapore) | $ | 2,427,423 | ||
| 102,515 | RaySearch Laboratories AB* (Sweden) | 1,833,937 | |||
| 2,925 | Straumann Holding AG (Switzerland) | 630,020 | |||
| 4,891,380 | |||||
| Health Care Facilities 1.5% | |||||
| 75,200 | United Surgical Partners International, Inc.* | 1,867,216 | |||
| Health Care Providers and Services 1.0% | |||||
| 33,915 | Diagnosticos da America S.A.* (Brazil) | 639,655 | |||
| 8,920 | Icon plc ADR* (Ireland) | 629,574 | |||
| 1,269,229 | |||||
| Internet and Catalog Retail 1.1% | |||||
| 73,420 | Submarino S.A. (Brazil) | 1,435,402 | |||
| Internet Software and Services 0.4% | |||||
| 230,625 | Opera Software ASA* (Norway) | 495,165 | |||
| Leisure Equipment and Products 0.8% | |||||
| 49,350 | Largan Precision Co. Ltd. (Taiwan) | 1,010,550 | |||
| Machinery 3.5% | |||||
| 59,585 | Bharat Forge Ltd. (India) | 468,065 | |||
| 4,195,950 | MMI Holdings Ltd. (Singapore) | 2,631,726 | |||
| 95,400 | Pason Systems, Inc. (Canada) | 1,346,884 | |||
| 4,446,675 | |||||
| Medical and Dental Instruments and Supplies 6.6% | |||||
| 69,055 | Abaxis, Inc.* | 1,615,197 | |||
| 19,790 | Cyberonics, Inc.* | 346,919 | |||
| 46,610 | Dexcom, Inc.* | 518,769 | |||
| 56,535 | Enpath Medical, Inc.* | 606,055 | |||
| 22,865 | FoxHollow Technologies, Inc.* | 781,754 | |||
| 102,080 | IntraLase Corp.* | 2,011,997 | |||
| 18,610 | Kyphon, Inc.* | 696,386 | |||
| 54,030 | NuVasive, Inc.* | 1,086,543 | |||
| 13,030 | Techne Corp.* | 662,706 | |||
| 8,326,326 | |||||
| Miscellaneous Materials and Commodities 0.8% | |||||
| 50,085 | Symyx Technologies, Inc.* | 1,061,301 | |||
| Personal Products 0.6% | |||||
| 56,215 | Natura Cosmeticos S.A. (Brazil) | 690,194 | |||
| Production Technology Equipment 2.4% | |||||
| 30,420 | Eagle Test Systems, Inc.* | 502,538 | |||
| 107,430 | inTEST Corp.* | 616,648 | |||
| 54,525 | Intevac, Inc.* | 916,020 | |||
| 55,665 | Rudolph Technologies, Inc.* | 1,020,340 | |||
| 3,055,546 | |||||
| Road and Rail 1.0% | |||||
| 61,810 | Localiza Rent A Car S.A. (Brazil) | 1,282,347 | |||
| Shares | Value | ||||
| Semiconductor Equipment and Products 5.3% | |||||
| 11,345 | austriamicrosystems AG* (Austria) | $ | 643,009 | ||
| 725,752 | Holtek Semiconductor, Inc. (Taiwan) | 1,251,599 | |||
| 351,756 | O2Micro International Ltd. ADR* (Cayman Islands) | 2,430,634 | |||
| 58,595 | PSi Technologies Holdings, Inc. ADR* (Philippines) | 34,571 | |||
| 17,420 | SEZ Holding AG* (Switzerland) | 444,540 | |||
| 194,050 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan) | 1,862,880 | |||
| 6,667,233 | |||||
| Software 4.2% | |||||
| 43,920 | Belzberg Technologies, Inc.* (Canada) | 373,302 | |||
| 42,510 | Duzon Digital Ware Co. Ltd. (Korea) | 831,063 | |||
| 73,515 | Infosys Technologies Ltd. (India) | 2,970,783 | |||
| 1,800,000 | Kingdee International Software Group Co. Ltd. (Hong Kong) | 887,195 | |||
| 4,650 | NCsoft Corp.* (Korea) | 286,479 | |||
| 5,348,822 | |||||
| Wireless Telecommunication Services 0.8% | |||||
| 484,785 | America Movil S.A. de C.V., Series L (Mexico) | 957,254 | |||
| Total Common Stocks (cost $105,840,285) | 118,536,054 | ||||
| PREFERRED STOCKS 3.5% | |||||
| Banks 0.9% | |||||
| 39,900 | Banco Itau Holding Financeira S.A. Pfd. (Brazil) | 1,194,880 | |||
| Communications Technology 0.0% | |||||
| 30,265 | Incipient, Inc., Series D Pfd.* *** † | 43,884 | |||
| 6,528 | Xtera Communications, Inc., Series A-1 Pfd.* *** † | 7,076 | |||
| 50,960 | |||||
| Computer Technology 0.3% | |||||
| 78,502 | BlueArc Corp., Series DD Pfd.* *** † | 324,998 | |||
| Drugs and Pharmaceuticals 0.1% | |||||
| 283,018 | Point Biomedical Corp., Series F Pfd.* *** † | 105,000 | |||
| Machinery 0.9% | |||||
| 257,115 | Weg S.A. Pfd. (Brazil) | 1,162,656 | |||
| Media 0.6% | |||||
| 88,287 | Net Servicos de Comunicacao S.A., Series 4 Pfd. (Brazil) | 793,579 | |||
| Road and Rail 0.6% | |||||
| 91,000 | All America Latina Logistica S.A. Pfd.** (Brazil) | 707,455 | |||
| Utilities — Telecommunications 0.1% | |||||
| 17,684 | Neutral Tandem, Inc., Series C Pfd.* *** † | 111,107 | |||
| Total Preferred Stocks (cost $4,168,969) | 4,450,635 | ||||
33
| GLOBAL SCIENCE & TECHNOLOGY FUND — Schedule of Investments (continued) | SEPTEMBER 30, 2006 | |
| Shares | Value | ||||
| LIMITED PARTNERSHIP INTEREST 0.1% | |||||
| Other 0.1% | |||||
| Montagu Newhall Global Partners II-B, L.P.* *** † | $ | 176,311 | |||
| Total Limited Partnership Interest (cost $199,644) | 176,311 | ||||
| WARRANTS 0.5% | |||||
| Drugs and Pharmaceuticals 0.0% | |||||
| 3,832 | Acusphere, Inc. expiring 8/2/08* *** † | — | |||
| 768 | Acusphere, Inc. expiring 10/20/08* *** † | — | |||
| 84,905 | Point Biomedical Corp. expiring | ||||
| 2/16/2012* *** † | — | ||||
| — | |||||
| Transportation Infrastructure 0.5% | |||||
| 1,697,000 | Goodpack Ltd. expiring 4/13/07* (Singapore) | 620,436 | |||
Total Warrants (cost $819,273) | 620,436 | ||||
| Number of Contracts | Value | ||||
| PUT OPTIONS PURCHASED 0.2% | |||||
| 210 | Kinetic Concepts, Inc. expiring 1/20/07 exercise price $40 | $ | 184,800 | ||
| Total Put Options Purchased (premium $151,595) | 184,800 | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 1.8% | |||||
| Repurchase Agreement 1.8% | |||||
| $2,234,000 | Repurchase Agreement dated 9/29/06, 4.30% due 10/2/06 with State Street Bank and Trust Co. collateralized by $1,700,000 of United States Treasury Bonds 7.625% due 2/15/25; value: $2,282,250; repurchase proceeds: $2,234,801 (cost $ 2,234,000) | $ | 2,234,000 | ||
| Total Short-Term Investments (cost $2,234,000) | 2,234,000 | ||||
| Total Investments (cost $113,413,766) 99.9% | 126,202,236 | ||||
| Other Assets less Liabilities 0.1% | 156,576 | ||||
| NET ASSETS 100.0% | $ | 126,358,812 | |||
| *Non-income producing. | |||||
| **Each unit consists of four shares of common stock and one warrant. | |||||
| ***Security was fair valued under procedures adopted by the Board of Directors (see Note 2). | |||||
| †Security purchased in a private placement transaction or under Rule 144A of the Securities Act of 1933 (see Note 9). | |||||
| ††† All or a portion of this security has been designated as collateral for purchase commitments (see Note 10). | |||||
| ADR American Depositary Receipts. | |||||
| GDR Global Depositary Receipts. | |||||
| See notes to financial statements. | |||||
At September 30, 2006, Wasatch Global Science & Technology Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Austria | 0.5 | ||
Belgium | 0.6 | ||
Bermuda | 0.4 | ||
Brazil | 6.7 | ||
Canada | 1.9 | ||
Cayman Islands | 2.0 | ||
Hong Kong | 0.7 | ||
India | 6.3 | ||
Ireland | 0.5 | ||
Japan | 0.7 | ||
Korea | 2.0 | ||
Mexico | 0.8 | ||
Norway | 2.0 | ||
Philippines | <0.1 | ||
Singapore | 7.4 | ||
Sweden | 1.5 | ||
Switzerland | 0.9 | ||
Taiwan | 5.7 | ||
United States | 59.4 | ||
TOTAL | 100.0 | % | |
34
| HERITAGE GROWTH FUND — Schedule of Investments | SEPTEMBER 30, 2006 | |
| Shares | Value | ||||
| COMMON STOCKS 98.1% | |||||
| Banks 5.6% | |||||
| 133,520 | Commerce Bancorp, Inc. | $ | 4,901,519 | ||
| 131,485 | New York Community Bancorp, Inc. | 2,153,724 | |||
| 123,000 | North Fork Bancorporation, Inc. | 3,522,720 | |||
| 114,305 | TCF Financial Corp. | 3,005,079 | |||
| 13,583,042 | |||||
| Commercial Services and Supplies 0.9% | |||||
| 76,810 | eBay, Inc.* | 2,178,332 | |||
| Communications Technology 2.9% | |||||
| 110,630 | Cisco Systems, Inc.* | 2,544,490 | |||
| 58,815 | L-3 Communications Holdings, Inc. | 4,606,979 | |||
| 7,151,469 | |||||
| Computer Services Software and Systems 3.5% | |||||
| 22,830 | Affiliated Computer Services, Inc., Class A* | 1,183,964 | |||
| 26,045 | Cognizant Technology Solutions Corp., Class A* | 1,928,892 | |||
| 220,850 | QLogic Corp.* | 4,174,065 | |||
| 58,480 | Websense, Inc.* | 1,263,753 | |||
| 8,550,674 | |||||
| Computer Technology 1.0% | |||||
| 110,155 | Dell, Inc.* | 2,515,940 | |||
| Diversified Financial Services 2.9% | |||||
| 111,000 | Countrywide Financial Corp. | 3,889,440 | |||
| 96,250 | Housing Development Finance Corp. Ltd. | 3,221,296 | |||
| 7,110,736 | |||||
| Drugs and Pharmaceuticals 2.2% | |||||
| 48,455 | Forest Laboratories, Inc.* | 2,452,308 | |||
| 86,500 | Teva Pharmaceutical Industries Ltd. ADR | 2,948,785 | |||
| 5,401,093 | |||||
| Education Services 3.8% | |||||
| 190,365 | Apollo Group, Inc., Class A* | 9,373,573 | |||
| Electronics 2.7% | |||||
| 105,280 | Amphenol Corp., Class A | 6,519,990 | |||
| Electronics — Medical Systems 0.9% | |||||
| 49,775 | Medtronic, Inc. | 2,311,551 | |||
| Electronics — Semiconductors/ Components 8.2% | |||||
| 150,750 | Linear Technology Corp. | 4,691,340 | |||
| 91,945 | Marvell Technology Group Ltd.* | 1,780,975 | |||
| 224,820 | Maxim Integrated Products, Inc. | 6,310,697 | |||
| 85,380 | Microchip Technology, Inc. | 2,768,019 | |||
| 187,660 | National Semiconductor Corp. | 4,415,640 | |||
| 19,966,671 | |||||
| Energy — Miscellaneous 1.1% | |||||
| 90,750 | Chesapeake Energy Corp. | 2,629,935 | |||
| Finance Companies 1.6% | |||||
| 50,750 | Capital One Financial Corp. | 3,991,995 | |||
| Finance — Small Loan 1.2% | |||||
| 117,500 | AmeriCredit Corp.* | 2,936,325 | |||
| Financial Data Processing Services and Systems 2.2% | |||||
| 35,940 | Alliance Data Systems Corp.* | 1,983,529 | |||
| 70,635 | Fiserv, Inc.* | 3,326,202 | |||
| 5,309,731 | |||||
| Shares | Value | ||||
| Financial — Miscellaneous 1.9% | |||||
| 63,750 | Fidelity National Financial, Inc. | $ | 2,655,188 | ||
| 45,750 | First American Corp. | 1,937,055 | |||
| 4,592,243 | |||||
| Health Care Facilities 1.6% | |||||
| 62,270 | Quest Diagnostics, Inc. | 3,808,433 | |||
| Health Care Management Services 8.0% | |||||
| 50,750 | AMERIGROUP Corp.* | 1,499,663 | |||
| 126,200 | Caremark Rx, Inc. | 7,151,754 | |||
| 46,500 | UnitedHealth Group, Inc. | 2,287,800 | |||
| 113,250 | WellPoint, Inc.* | 8,725,912 | |||
| 19,665,129 | |||||
| Health Care Services 1.9% | |||||
| 133,920 | Lincare Holdings, Inc.* | 4,638,989 | |||
| Home Building 4.9% | |||||
| 45,520 | Lennar Corp., Class A | 2,059,780 | |||
| 44,950 | M.D.C. Holdings, Inc. | 2,087,927 | |||
| 14,573 | NVR, Inc.* | 7,796,555 | |||
| 11,944,262 | |||||
| Hotels, Restaurants and Leisure 0.8% | |||||
| 903,230 | Shangri-La Asia Ltd. | 1,994,077 | |||
| Investment Management Companies 1.3% | |||||
| 58,675 | SEI Investments Co. | 3,296,948 | |||
| Leisure Time 0.5% | |||||
| 31,750 | Pool Corp. | 1,222,375 | |||
| Medical and Dental Instruments and Supplies 3.0% | |||||
| 108,840 | Zimmer Holdings, Inc.* | 7,346,700 | |||
| Medical Services 1.9% | |||||
| 71,545 | Covance, Inc.* | 4,749,157 | |||
| Oil and Gas 3.6% | |||||
| 86,385 | BJ Services Co. | 2,602,780 | |||
| 75,000 | Ultra Petroleum Corp.* | 3,608,250 | |||
| 86,135 | W&T Offshore, Inc. | 2,516,003 | |||
| 8,727,033 | |||||
| Production Technology Equipment 0.9% | |||||
| 49,050 | KLA-Tencor Corp. | 2,181,254 | |||
| Recreational Vehicles and Boats 2.0% | |||||
| 76,000 | Harley-Davidson, Inc. | 4,769,000 | |||
| Retail 16.2% | |||||
| 57,220 | Advance Auto Parts, Inc. | 1,884,827 | |||
| 55,365 | Aeropostale, Inc.* | 1,618,319 | |||
| 36,815 | American Eagle Outfitters, Inc. | 1,613,601 | |||
| 152,377 | Bed Bath & Beyond, Inc.* | 5,829,944 | |||
| 43,912 | Best Buy Co., Inc. | 2,351,927 | |||
| 76,510 | CDW Corp. | 4,719,137 | |||
| 121,935 | Dollar Tree Stores, Inc.* | 3,775,108 | |||
| 483,740 | Esprit Holdings Ltd. | 4,386,714 | |||
| 95,250 | Home Depot, Inc. | 3,454,717 | |||
| 40,290 | Kohl’s Corp.* | 2,615,627 | |||
| 163,320 | Lowe’s Companies, Inc. | 4,582,759 | |||
| 83,500 | O’Reilly Automotive, Inc.* | 2,773,035 | |||
| 39,605,715 | |||||
| Securities Brokerage and Services 0.6% | |||||
| 19,165 | Intercontinentalexchange, Inc.* | 1,438,717 | |||
35
| HERITAGE GROWTH FUND — Schedule of Investments (continued) | SEPTEMBER 30, 2006 | |
| Shares | Value | ||||
| Semiconductor Equipment And Products 1.6% | |||||
| 405,814 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR | $ | 3,895,814 | ||
| Software 3.2% | |||||
| 193,700 | Infosys Technologies Ltd. | 7,827,527 | |||
| Textiles, Apparel and Luxury Goods 1.9% | |||||
| 132,725 | Coach, Inc.* | 4,565,740 | |||
| Transportation — Miscellaneous 1.0% | |||||
| 56,210 | C.H. Robinson Worldwide, Inc. | 2,505,842 | |||
| Truckers 0.6% | |||||
| 72,500 | J.B. Hunt Transport Services, Inc. | 1,505,825 | |||
| Total Common Stocks (cost $221,980,348) | 239,811,837 | ||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 2.1% | ||||||
| Repurchase Agreement 2.1% | ||||||
| $5,025,000 | Repurchase Agreement dated 9/29/06, 4.30% due 10/2/06 with State Street Bank and Trust Co. collateralized by $3,820,000 of United States Treasury Bonds 7.625% due 2/15/25; value: $5,128,350; repurchase proceeds: $5,026,801 (cost $ 5,025,000) | $ | 5,025,000 | |||
| Total Short-Term Investments (cost $5,025,000) | 5,025,000 | |||||
| Total Investments (cost $227,005,348) 100.2% | 244,836,837 | |||||
| Liabilities less Other Assets (0.2)% | (456,485 | ) | ||||
| NET ASSETS 100.0% | $ | 244,380,352 | ||||
* Non-income producing.
ADR American Depositary Receipts.
See notes to financial statements. |
| |||||
36
| INTERNATIONAL GROWTH FUND — Schedule of Investments | SEPTEMBER 30, 2006 | |
| Shares | Value | ||||
| COMMON STOCKS 97.6% | |||||
| Aerospace and Defense 1.3% | |||||
| 170,263 | Thielert AG* (Germany) | $ | 4,970,845 | ||
| Airlines 1.0% | |||||
| 110,465 | Gol Linhas Aereas Inteligentes S.A. ADR (Brazil) | 3,794,473 | |||
| Banks 6.2% | |||||
| 74,220 | Canadian Western Bank (Canada) | 2,812,883 | |||
| 296,135 | HDFC Bank Ltd. (India) | 5,985,432 | |||
| 78,720 | Musashino Bank Ltd. (Japan) | 4,365,742 | |||
| 136,013 | The Bank of N.T. Butterfield & Son Ltd. (Bermuda) | 7,821,613 | |||
| 12,180 | Verwaltungs- und Privat-Bank AG (Liechtenstein) | 2,903,596 | |||
| 23,889,266 | |||||
| Beverages 0.2% | |||||
| 67,445 | Kibun Food Chemifa Co. Ltd. (Japan) | 663,571 | |||
| Biotechnology Research and Production 1.7% | |||||
| 1,396,565 | Ark Therapeutics Group plc* (United Kingdom) | 2,600,952 | |||
| 245,360 | QIAGEN N.V.* (Netherlands) | 3,886,503 | |||
| 6,487,455 | |||||
| Building Products 0.9% | |||||
| 103,559 | Demag Cranes AG* (Germany) | 3,547,684 | |||
| Commercial Services and Supplies 4.8% | |||||
| 623,455 | Bloomsbury Publishing plc (United Kingdom) | 3,649,645 | |||
| 457 | En-Japan, Inc. (Japan) | 2,132,060 | |||
| 888,640 | Michael Page International plc (United Kingdom) | 6,399,597 | |||
| 187,245 | Park24 Co. Ltd. (Japan) | 6,151,396 | |||
| 18,332,698 | |||||
| Computers and Peripherals 2.2% | |||||
| 210,510 | Logitech International S.A.* (Switzerland) | 4,572,095 | |||
| 3,984,560 | TPV Technology Ltd. (Hong Kong) | 3,784,663 | |||
| 8,356,758 | |||||
| Construction and Engineering 0.5% | |||||
| 111,440 | Stantec, Inc.* (Canada) | 2,038,962 | |||
| Diversified Financial Services 14.9% | |||||
| 2,517,870 | Acta Holdings ASA (Norway) | 10,194,196 | |||
| 643,395 | African Bank Investments Ltd. (South Africa) | 1,828,497 | |||
| 214,475 | AWD Holding AG (Germany) | 7,752,869 | |||
| 1,125 | Bank Sarasin & Cie AG, Class B (Switzerland) | 3,320,867 | |||
| 378,725 | D. Carnegie & Co. AB (Sweden) | 7,990,579 | |||
| 585,885 | Evolution Group plc (United Kingdom) | 1,529,800 | |||
| 285,791 | FIM Group Oyj* (Finland) | 1,867,451 | |||
| 154,280 | Home Capital Group, Inc. (Canada) | 4,237,627 | |||
| 187,740 | Ichiyoshi Securities Co. Ltd. (Japan) | 2,513,162 | |||
| 762,480 | JSE Ltd. (South Africa) | 3,725,943 | |||
| 5,357,000 | Nissin Co. Ltd. (Japan) | 3,356,488 | |||
| 459,671 | Numis Corp. plc (United Kingdom) | 2,301,543 | |||
| 1,815 | Osaka Securities Exchange Co. Ltd. (Japan) | 6,392,955 | |||
| 57,011,977 | |||||
| Diversified Telecommunication Services 0.9% | |||||
| 178,287 | Option N.V.* (Belgium) | 3,596,749 | |||
| Shares | Value | ||||
| Drugs and Pharmaceuticals 1.6% | |||||
| 279,860 | Hikma Pharmaceuticals plc (United Kingdom) | $ | 2,163,411 | ||
| 2,032,693 | Sigma Pharmaceuticals Ltd. (Australia) | 3,959,100 | |||
| 6,122,511 | |||||
| Electrical Equipment 2.9% | |||||
| 106,140 | Conergy AG (Germany) | 5,129,599 | |||
| 29,120 | Solarworld AG (Germany) | 1,600,934 | |||
| 3,449,387 | Unisteel Technology Ltd. (Singapore) | 4,457,415 | |||
| 11,187,948 | |||||
| Electronic Equipment and Instruments 0.9% | |||||
| 154,629 | Rotork plc (United Kingdom) | 2,222,800 | |||
| 693,440 | Syntech Information Co. Ltd. (Taiwan) | 1,061,836 | |||
| 3,284,636 | |||||
| Energy Equipment and Services 3.2% | |||||
| 585,700 | TGS-NOPEC Geophysical Co. ASA* (Norway) | 9,274,298 | |||
| 172,380 | Trican Well Service Ltd. (Canada) | 2,904,103 | |||
| 12,178,401 | |||||
| Food and Drug Retailing 1.5% | |||||
| 44,020 | Nihon Chouzai Co. Ltd. (Japan) | 1,647,419 | |||
| 233,230 | Sugi Pharmacy Co. Ltd. (Japan) | 4,166,761 | |||
| 5,814,180 | |||||
| Food Products 1.3% | |||||
| 137,025 | Cosan S.A. Industria e Comercio* (Brazil) | 2,209,318 | |||
| 68,700 | Unicharm PetCare Corp. (Japan) | 2,815,359 | |||
| 5,024,677 | |||||
| Health Care Equipment and Supplies 6.3% | |||||
| 439,170 | Elekta AB, Class B (Sweden) | 8,276,325 | |||
| 8,060,890 | LMA International N.V.* (Singapore) | 3,734,716 | |||
| 2,016,000 | Moulin International Holdings Ltd.* *** (Hong Kong) | 2,588 | |||
| 38,710 | Nakanishi, Inc. (Japan) | 5,093,378 | |||
| 86,075 | RaySearch Laboratories AB* (Sweden) | 1,539,835 | |||
| 26,213 | Straumann Holding AG (Switzerland) | 5,646,054 | |||
| 24,292,896 | |||||
| Health Care Providers and Services 4.6% | |||||
| 43,900 | Diagnosticos da America S.A.* (Brazil) | 827,978 | |||
| 71,363 | Eurofins Scientific* (France) | 4,527,270 | |||
| 70,975 | Icon plc ADR* (Ireland) | 5,009,416 | |||
| 96,953 | Orpea* (France) | 7,362,388 | |||
| 17,727,052 | |||||
| Hotels, Restaurants and Leisure 0.4% | |||||
| 956,000 | FU JI Food & Catering Services Holdings Ltd. (Cayman Islands) | 1,595,205 | |||
| Household Durables 4.2% | |||||
| 166,700 | Japan General Estate Co. Ltd. (The) (Japan) | 3,987,363 | |||
| 191,590 | Joint Corp. (Japan) | 6,553,690 | |||
| 1,699,410 | Nien Made Enterprise Co. Ltd. (Taiwan) | 1,390,940 | |||
| 1,052,215 | Techtronic Industries Company Ltd. (Hong Kong) | 1,547,762 | |||
| 902,235 | Urbi Desarrollos Urbanos S.A. de C.V.* (Mexico) | 2,540,964 | |||
| 16,020,719 | |||||
| Household Products 1.1% | |||||
| 118,500 | Milbon Co. Ltd. (Japan) | 4,073,579 | |||
| Internet and Catalog Retail 0.5% | |||||
| 46,585 | Submarino S.A. GDR*** (Brazil) | 1,821,526 | |||
37
| INTERNATIONAL GROWTH FUND — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| Machinery 6.9% | |||||
| 214,500 | Aichi Corp. (Japan) | $ | 2,005,063 | ||
| 232,365 | Bharat Forge Ltd. (India) | 1,825,326 | |||
| 137,925 | Biesse S.p.A. (Italy) | 2,178,741 | |||
| 8,703,050 | MMI Holdings Ltd. (Singapore) | 5,458,608 | |||
| 46,280 | Palfinger AG (Austria) | 4,735,188 | |||
| 198,355 | Pason Systems, Inc. (Canada) | 2,800,431 | |||
| 160,570 | Takeuchi Manufacturing Co. Ltd. (Japan) | 7,463,946 | |||
| 26,467,303 | |||||
| Office Electronics 1.3% | |||||
| 40,050 | Neopost S.A. (France) | 4,781,735 | |||
| Oil and Gas 4.7% | |||||
| 1,689,555 | ARC Energy Ltd.* (Australia) | 1,815,595 | |||
| 213,915 | Centurion Energy International, Inc.* (Canada) | 1,311,012 | |||
| 869,080 | Det Norske Oljeselskap (DNO) ASA* (Norway) | 1,210,212 | |||
| 307,087 | JKX Oil and Gas plc (United Kingdom) | 1,682,699 | |||
| 173,330 | ProEx Energy Ltd.* (Canada) | 1,986,541 | |||
| 269,455 | Revus Energy ASA* (Norway) | 1,954,624 | |||
| 289,850 | Soco International plc* (United Kingdom) | 8,072,803 | |||
| 18,033,486 | |||||
| Real Estate 2.0% | |||||
| 80,942 | Foncia Groupe (France) | 3,797,818 | |||
| 400,070 | Savills plc (United Kingdom) | 3,987,528 | |||
| 7,785,346 | |||||
| Retail 7.7% | |||||
| 16,820 | Bijou Brigitte AG (Germany) | 4,353,610 | |||
| 1,665,000 | China Hongxing Sports Ltd. (China) | 1,700,265 | |||
| 295,555 | Hemtex AB (Sweden) | 3,965,488 | |||
| 382,795 | Monsoon plc* (United Kingdom) | 2,835,537 | |||
| 5,947,510 | Peace Mark Holdings Ltd. (Hong Kong) | 3,900,958 | |||
| 90,140 | Point, Inc. (Japan) | 4,762,488 | |||
| 1,645,662 | Pumpkin Patch Ltd. (New Zealand) | 4,357,531 | |||
| 1,164,790 | Truworths International Ltd. (South Africa) | 3,491,516 | |||
| 29,367,393 | |||||
| Road and Rail 0.7% | |||||
| 120,975 | Localiza Rent A Car (Brazil) | 2,509,820 | |||
| Semiconductor Equipment and Products 5.0% | |||||
| 183,125 | CSR plc* (United Kingdom) | 2,889,504 | |||
| 84,725 | Disco Corp. (Japan) | 5,200,933 | |||
| 1,281,630 | Holtek Semiconductor, Inc. (Taiwan) | 2,210,241 | |||
| 86,674 | ICOS Vision Systems N.V.* (Belgium) | 3,364,044 | |||
| 122,190 | Melexis N.V. (Belgium) | 2,065,063 | |||
| 185,740 | O2Micro International Ltd. ADR* (Cayman Islands) | 1,283,463 | |||
| 85,610 | SEZ Holding AG* (Switzerland) | 2,184,680 | |||
| 19,197,928 | |||||
| Software 0.6% | |||||
| 80,885 | Nemetschek AG (Germany) | 2,185,953 | |||
| Textiles, Apparel and Luxury Goods 5.6% | |||||
| 12,348,545 | EganaGoldpfeil (Holdings) Ltd. (Hong Kong) | 5,785,272 | |||
| 2,175,725 | Li Ning Co. Ltd. (Hong Kong) | 2,485,474 | |||
| 87,390 | Mariella Burani Fashion Group S.p.A. (Italy) | 2,093,423 | |||
| 46,414 | Pantaloon Retail India Ltd. (India) | 1,914,742 | |||
| 1,415,030 | Ports Design Ltd. (Hong Kong) | 2,179,526 | |||
| 10,435 | Puma AG Rudolf Dassler Sport (Germany) | 3,561,542 | |||
| 374,745 | Ted Baker plc (United Kingdom) | 3,468,569 | |||
| 21,488,548 | |||||
| Shares | Value | ||||
| Total Common Stocks (cost $294,746,170) | $ | 373,651,280 | |||
| PREFERRED STOCKS 1.0% | |||||
| Road and Rail 1.0% | |||||
| 499,450 | All America Latina Logistica S.A. Pfd.**(Brazil) | 3,882,837 | |||
| Total Preferred Stocks (cost $2,595,393) | 3,882,837 | ||||
| Principal Amount | Value | ||||
| SHORT -TERM INVESTMENTS 0.7% | |||||
| Repurchase Agreement 0.7% | |||||
| $2,728,000 | Repurchase Agreement dated 9/29/06, 4.30% due 10/2/06 with State Street Bank and Trust Co. collateralized by $2,075,000 of United States Treasury Bonds 7.625% due 2/15/25; value: $2,785,688; repurchase proceeds: $2,728,978 (cost $2,728,000) | $ | 2,728,000 | ||
| Total Short-Term Investments (cost $2,728,000) | 2,728,000 | ||||
| Total Investments (cost $300,069,563) 99.3% | 380,262,117 | ||||
| Other Assets less Liabilities 0.7% | 2,872,522 | ||||
| NET ASSETS 100.0% | $ | 383,134,639 | |||
| * Non-income producing. | |||||
| ** Each unit consists of four shares of preferred stock and one common stock. | |||||
| *** Security was fair valued under procedures adopted by the Board of Directors (see Note 2). | |||||
ADR American Depositary Receipts. GDR Global Depositary Receipts. See notes to financial statements. | |||||
38
| SEPTEMBER 30, 2006 | ||
At September 30, 2006, Wasatch International Growth Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 1.5 | ||
Austria | 1.2 | ||
Belgium | 2.4 | ||
Bermuda | 2.1 | ||
Brazil | 4.0 | ||
Canada | 4.8 | ||
Cayman Islands | 0.8 | ||
China | 0.5 | ||
Finland | 0.5 | ||
France | 5.4 | ||
Germany | 8.8 | ||
Hong Kong | 5.2 | ||
India | 2.6 | ||
Ireland | 1.3 | ||
Italy | 1.1 | ||
Japan | 19.4 | ||
Liechtenstein | 0.8 | ||
Mexico | 0.7 | ||
Netherlands | 1.0 | ||
New Zealand | 1.1 | ||
Norway | 6.0 | ||
Singapore | 3.6 | ||
South Africa | 2.4 | ||
Sweden | 5.8 | ||
Switzerland | 4.2 | ||
Taiwan | 1.2 | ||
United Kingdom | 11.6 | ||
TOTAL | 100.0 | % | |
39
| INTERNATIONAL OPPORTUNITIES FUND — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 96.6% | |||||
| Auto Components 1.5% | |||||
| 58,750 | ARB Corp. Ltd. (Australia) | $ | 156,517 | ||
| 24,455 | Inzi Controls Co. Ltd. (Korea) | 222,248 | |||
| 93,050 | Super Cheap Auto Group Ltd. (Australia) | 173,596 | |||
| 552,361 | |||||
| Beverages 0.3% | |||||
| 11,125 | Kibun Food Chemifa Co. Ltd. (Japan) | 109,456 | |||
| Biotechnology Research and Production 1.2% | |||||
| 41,525 | Abcam plc (United Kingdom) | 207,524 | |||
| 123,110 | Ark Therapeutics Group plc* (United Kingdom) | 229,279 | |||
| 436,803 | |||||
| Building Products 0.4% | |||||
| 26,145 | Fleetwood Corp. Ltd. (Australia) | 129,941 | |||
| Chemicals 0.7% | |||||
| 440,000 | Century Sunshine Ecological Technology Holdings Ltd. (Hong Kong) | 252,450 | |||
| Commercial Services and Supplies 7.8% | |||||
| 3,275 | Acadomia Group* (France) | 97,235 | |||
| 55,175 | Allen-Vanguard Corp.* (Canada) | 187,586 | |||
| 21,875 | Carter & Carter Group plc (United Kingdom) | 282,517 | |||
| 171,500 | Environmental Management Solutions, Inc.* (Canada) | 72,117 | |||
| 7,950 | MegaStudy Co. Ltd. (Korea) | 898,922 | |||
| 514,470 | Raffles Education Corp. Ltd. (Singapore) | 823,723 | |||
| 45,115 | Semcon AB* (Sweden) | 355,794 | |||
| 170 | Take and Give Needs Co. Ltd. (Japan) | 168,409 | |||
| 2,886,303 | |||||
| Communications Equipment 0.5% | |||||
| 492,000 | Sim Technology Group Ltd. (Hong Kong) | 195,137 | |||
| Communications Technology 0.8% | |||||
| 20,560 | Comtech Group, Inc.* | 307,783 | |||
| Computers and Peripherals 0.1% | |||||
| 1,743,000 | Anwell Technologies Ltd.* (Singapore) | 49,442 | |||
| Construction and Engineering 1.0% | |||||
| 86,050 | Lycopodium Ltd. (Australia) | 205,487 | |||
| 424,360 | PCH Group Ltd. (Australia) | 171,007 | |||
| 376,494 | |||||
| Construction Materials 0.8% | |||||
| 465 | Getaz Romang Holding S.A. (Switzerland) | 297,588 | |||
| Distributors 0.7% | |||||
| 42,555 | Commercial Solutions, Inc.* (Canada) | 256,998 | |||
| Shares | Value | ||||
| Diversified Financial Services 16.3% | |||||
| 347,050 | Acta Holdings ASA (Norway) | $ | 1,405,115 | ||
| 8,675 | ADDENDA Capital, Inc. (Canada) | 184,335 | |||
| 46,175 | Credit Corp. Group Ltd. (Australia) | 279,111 | |||
| 54,460 | Evolution Group plc (United Kingdom) | 142,200 | |||
| 33,604 | FIM Group Oyj* (Finland) | 219,579 | |||
| 15,520 | Hagstromer & Qviberg AB (Sweden) | 391,033 | |||
| 13,150 | Home Capital Group, Inc. (Canada) | 361,193 | |||
| 31,540 | International Maritime Exchange ASA (Norway) | 435,331 | |||
| 105,834 | JSE Ltd. (South Africa) | 517,170 | |||
| 41,430 | Numis Corp. plc (United Kingdom) | 207,437 | |||
| 300 | Osaka Securities Exchange Co. Ltd. (Japan) | 1,056,687 | |||
| 6,525 | Oslo Bors Holdings ASA (Norway) | 570,389 | |||
| 29,575 | Treasury Group Ltd. (Australia) | 247,188 | |||
| 6,016,768 | |||||
| Electrical Equipment 2.2% | |||||
| 321,250 | Unisteel Technology Ltd. (Singapore) | 415,130 | |||
| 515,000 | Wasion Meters Group Ltd. (Hong Kong) | 226,073 | |||
| 162,000 | XAC Automation Corp. (Taiwan) | 154,123 | |||
| 795,326 | |||||
| Electronic Equipment and Instruments 1.6% | |||||
| 208,117 | Chroma ATE, Inc. (Taiwan) | 247,025 | |||
| 517,443 | Innovalues Precision Ltd. (Singapore) | 254,416 | |||
| 57,840 | Syntech Information Co. Ltd. (Taiwan) | 88,568 | |||
| 590,009 | |||||
| Energy Equipment and Services 3.5% | |||||
| 506,960 | Advanced Holdings Ltd. (Singapore) | 115,044 | |||
| 43,705 | APL ASA* (Norway) | 288,215 | |||
| 14,050 | Bonnett’s Energy Services Trust (Canada) | 271,396 | |||
| 56,900 | Canadian Sub-Surface Energy Services Corp., Class A* (Canada) | 251,995 | |||
| 26,195 | Deepwell Energy Services Trust (Canada) | 244,443 | |||
| 65,745 | Hyduke Energy Services, Inc.* (Canada) | 108,820 | |||
| 1,279,913 | |||||
| Food and Drug Retailing 1.3% | |||||
| 6,800 | Daikokutenbussan Co. Ltd. (Japan) | 155,455 | |||
| 4,500 | Nihon Chouzai Co. Ltd. (Japan) | 168,409 | |||
| 6,490 | Welcia Kanto Co. Ltd. (Japan) | 153,863 | |||
| 477,727 | |||||
| Health Care Equipment and Supplies 5.3% | |||||
| 1,364,725 | LMA International N.V.* (Singapore) | 632,295 | |||
| 2,900 | MANI, Inc. (Japan) | 188,332 | |||
| 1,600 | Nakanishi, Inc. (Japan) | 210,525 | |||
| 50,875 | RaySearch Laboratories AB* (Sweden) | 910,126 | |||
| 1,941,278 | |||||
| Hotels, Restaurants and Leisure 1.7% | |||||
| 42,000 | Club Cruise Entertainment & Travelling Services Europe B.V.* *** † (Sweden) | 373,027 | |||
| 141,000 | FU JI Food & Catering Services Holdings Ltd. (Cayman Islands) | 235,276 | |||
| 608,303 | |||||
40
| SEPTEMBER 30, 2006 | ||
| Shares | Value | ||||
| Household Durables 3.5% | |||||
| 13,060 | Beter Bed Holding N.V. (Netherlands) | $ | 252,203 | ||
| 38,435 | Celrun Co. Ltd.* (Korea) | 264,005 | |||
| 40,800 | Homebuy Group plc, Class A* *** (United Kingdom) | 764 | |||
| 12,800 | Joint Corp. (Japan) | 437,848 | |||
| 142,080 | Nien Made Enterprise Co. Ltd. (Taiwan) | 116,290 | |||
| 7,600 | Nihon Eslead Corp. (Japan) | 229,084 | |||
| 1,300,194 | |||||
| Industrial Conglomerates 0.7% | |||||
| 204,000 | Mexichem S.A. de C.V. (Mexico) | 259,882 | |||
| Internet and Catalog Retail 0.5% | |||||
| 9,100 | Submarino S.A. (Brazil) | 177,910 | |||
| Leisure Equipment and Products 0.8% | |||||
| 19,175 | KABE Husvagnar AB, Class B (Sweden) | 305,061 | |||
| Machinery 7.7% | |||||
| 21,000 | Asahi Diamond Industrial Co. Ltd. (Japan) | 148,825 | |||
| 178,420 | Awea Mechantronic Co. Ltd. (Taiwan) | 308,234 | |||
| 1,293,940 | MMI Holdings Ltd. (Singapore) | 811,567 | |||
| 41,875 | Pason Systems, Inc. (Canada) | 591,203 | |||
| 285,000 | Sarin Technologies Ltd. (Israel) | 94,317 | |||
| 16,200 | Takeuchi Manufacturing Co. Ltd. (Japan) | 753,042 | |||
| 32,075 | Titan Europe plc (United Kingdom) | 128,778 | |||
| 2,835,966 | |||||
| Marine 2.1% | |||||
| 406,800 | Ezra Holdings Ltd. (Singapore) | 764,160 | |||
| Metals and Mining 1.5% | |||||
| 76,062 | Avocet Mining plc* (United Kingdom) | 145,217 | |||
| 721,560 | CBH Resources Ltd.* (Australia) | 247,693 | |||
| 107,708 | Consolidated Minerals Ltd. (Australia) | 140,660 | |||
| 533,570 | |||||
| Oil and Gas 9.2% | |||||
| 141,325 | ARC Energy Ltd.* (Australia) | 151,868 | |||
| 34,170 | Bow Valley Energy Ltd.* (Canada) | 160,501 | |||
| 22,395 | Breaker Energy Ltd., Class A* (Canada) | 120,220 | |||
| 9,990 | Crew Energy, Inc.* (Canada) | 106,005 | |||
| 128,024 | Det Norske Oljeselskap (DNO) ASA* (Norway) | 178,276 | |||
| 77,450 | Dragon Oil plc* (Ireland) | 218,538 | |||
| 42,150 | Fairquest Energy Ltd.* (Canada) | 150,845 | |||
| 16,655 | Highpine Oil & Gas Ltd.* (Canada) | 253,170 | |||
| 106,150 | Ithaca Energy, Inc. (Canada) | 213,687 | |||
| 44,125 | JKX Oil and Gas plc (United Kingdom) | 241,785 | |||
| 17,225 | Melrose Resources plc (United Kingdom) | 122,515 | |||
| 18,060 | ProEx Energy Ltd.* (Canada) | 206,986 | |||
| 22,940 | Revus Energy ASA* (Norway) | 166,407 | |||
| 9,650 | Rider Resources Ltd.* (Canada) | 80,467 | |||
| 68,750 | Saxon Energy Services, Inc.* (Canada) | 242,965 | |||
| 46,460 | Seabird Exploration Ltd.* (Norway) | 242,256 | |||
| 40,750 | Sondex plc (United Kingdom) | 211,279 | |||
| 18,315 | Sound Energy Trust (Canada) | 109,625 | |||
| 6,106 | Sure Energy, Inc.* (Canada) | 5,736 | |||
| 96,540 | TAG Oil Ltd.* (Canada) | 49,233 | |||
| 130,975 | Tap Oil Ltd.* (Australia) | 162,249 | |||
| 3,394,613 | |||||
| Shares | Value | ||||
| Real Estate 3.1% | |||||
| 725 | ARDEPRO Co. Ltd. (Japan) | $ | 222,525 | ||
| 9 | Century 21 Real Estate of Japan Ltd. (Japan) | 224,800 | |||
| 55 | Creed Corp. (Japan) | 196,054 | |||
| 37,200 | Erinaceous Group plc (United Kingdom) | 219,680 | |||
| 16,500 | Takara Leben Co. Ltd. (Japan) | 279,133 | |||
| 1,142,192 | |||||
| Retail 6.8% | |||||
| 993,035 | China Hongxing Sports Ltd. (China) | 1,014,068 | |||
| 33,305 | Hemtex AB (Sweden) | 446,856 | |||
| 23,900 | New Wave Group AB, Class B (Sweden) | 270,080 | |||
| 567,000 | Pertama Holdings Ltd. (Singapore) | 142,965 | |||
| 100,271 | Pumpkin Patch Ltd. (New Zealand) | 265,507 | |||
| 39,536 | Topps Tiles plc (United Kingdom) | 191,665 | |||
| 30 | Village Vanguard Co. Ltd. (Japan) | 187,968 | |||
| 2,519,109 | |||||
| Semiconductor Equipment and Products 1.4% | |||||
| 5,125 | austriamicrosystems AG* (Austria) | 290,473 | |||
| 129,369 | Holtek Semiconductor, Inc. (Taiwan) | 223,104 | |||
| 513,577 | |||||
| Software 3.1% | |||||
| 12,815 | Belzberg Technologies, Inc.* (Canada) | 108,922 | |||
| 656,000 | DMX Technologies Ltd.* (Singapore) | 268,785 | |||
| 18,050 | Duzon Digital Ware Co. Ltd. (Korea) | 352,874 | |||
| 9,200 | Isra Vision Systems AG* (Germany) | 241,047 | |||
| 9,100 | Profdoc ASA* (Norway) | 159,097 | |||
| 1,130,725 | |||||
| Textiles, Apparel and Luxury Goods 7.2% | |||||
| 369,000 | Egana Jewelry & Pearls Ltd. (Hong Kong) | 114,145 | |||
| 1,373,000 | EganaGoldpfeil (Holdings) Ltd. (Hong Kong) | 643,248 | |||
| 473,005 | Moiselle Int’l. Holdings Ltd. (Hong Kong) | 127,497 | |||
| 171,045 | Mulberry Group plc (United Kingdom) | 533,056 | |||
| 561,470 | Ports Design Ltd. (Hong Kong) | 864,815 | |||
| 17,200 | United Arrows Ltd. (Japan) | 263,013 | |||
| 141,000 | YGM Trading Ltd. (Hong Kong) | 119,448 | |||
| 2,665,222 | |||||
| Transportation Infrastructure 1.3% | |||||
| 238,000 | Goodpack Ltd.* (Singapore) | 258,043 | |||
| 10,000 | Trancom Co. Ltd. (Japan) | 206,596 | |||
| 464,639 | |||||
| Total Common Stocks (cost $27,731,826) | 35,566,900 | ||||
41
| INTERNATIONAL OPPORTUNITIES FUND — Schedule of Investments (continued) | SEPTEMBER 30, 2006 | |
| Shares | Value | ||||
| WARRANTS 0.5% | |||||
| Transportation Infrastructure 0.5% | |||||
| 528,875 | Goodpack Ltd. expiring 4/13/07* (Singapore) | $ | 193,361 | ||
| Total Warrants (cost $229,771) | 193,361 | ||||
| Total Investments (cost $27,961,597) 97.1% | 35,760,261 | ||||
| Other Assets less Liabilities 2.9% | 1,078,281 | ||||
| NET ASSETS 100.0% | $ | 36,838,542 | |||
* Non-income producing.
*** Security was fair valued under procedures adopted by the Board of Directors (see Note 2).
† Security purchased in a private placement transaction or under Rule 144A of the Securities Act of 1933 (see Note 9).
See notes to financial statements. | |||||
At September 30, 2006, Wasatch International Opportunities Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 5.8 | ||
Austria | 0.8 | ||
Brazil | 0.5 | ||
Canada | 12.1 | ||
Cayman Islands | 0.7 | ||
China | 2.8 | ||
Finland | 0.6 | ||
France | 0.3 | ||
Germany | 0.7 | ||
Hong Kong | 7.1 | ||
Ireland | 0.6 | ||
Israel | 0.3 | ||
Japan | 15.0 | ||
Korea | 4.9 | ||
Mexico | 0.7 | ||
Netherlands | 0.7 | ||
New Zealand | 0.7 | ||
Norway | 9.6 | ||
Singapore | 13.2 | ||
South Africa | 1.5 | ||
Sweden | 8.5 | ||
Switzerland | 0.8 | ||
Taiwan | 3.2 | ||
United Kingdom | 8.0 | ||
United States | 0.9 | ||
TOTAL | 100.0 | % | |
42
| MICRO CAP FUND — Schedule of Investments | SEPTEMBER 30, 2006 | |
| Shares | Value | ||||
| COMMON STOCKS 98.4% | |||||
| Auto Parts — After Market 2.2% | |||||
| 141,275 | Aftermarket Technology Corp.* | $ | 2,509,044 | ||
| 278,035 | Keystone Automotive Industries, Inc.* | 10,570,891 | |||
| 13,079,935 | |||||
| Banks 3.6% | |||||
| 103,755 | Bank of the Ozarks, Inc. | 3,514,182 | |||
| 121,013 | Commonwealth Bankshares, Inc. | 3,293,974 | |||
| 192,400 | Epic Bancorp †† | 2,837,900 | |||
| 226,480 | Omni Financial Services, Inc.* | 2,375,775 | |||
| 207,125 | Placer Sierra Bancshares | 4,600,246 | |||
| 212,800 | United Western Bancorp, Inc.* | 4,528,384 | |||
| 21,150,461 | |||||
| Chemicals 0.6% | |||||
| 114,675 | Cabot Microelectronics Corp.* | 3,304,933 | |||
| Commercial Information Services 2.0% | |||||
| 477,072 | LECG Corp.* | 8,949,871 | |||
| 76,240 | Morningstar, Inc.* | 2,813,256 | |||
| 11,763,127 | |||||
| Commercial Services and Supplies 8.4% | |||||
| 102,310 | Acadomia Group* (France) | 3,037,577 | |||
| 244,960 | AMN Healthcare Services, Inc.* | 5,817,800 | |||
| 58,420 | CRA International, Inc.* | 2,784,297 | |||
| 44,315 | HMS Holdings Corp.* | 559,255 | |||
| 137,075 | Monro Muffler Brake, Inc. | 4,661,921 | |||
| 368,475 | Providence Service Corp. (The)* | 10,166,225 | |||
| 7,070,625 | Raffles Education Corp. Ltd. (Singapore) | 11,320,845 | |||
| 88,710 | Resources Connection, Inc.* | 2,376,541 | |||
| 1,341,985 | SM&A* †† | 8,199,528 | |||
| 48,923,989 | |||||
| Computer Services Software and Systems 4.9% | |||||
| 131,075 | DealerTrack Holdings, Inc.* | 2,898,068 | |||
| 150,510 | Interactive Intelligence, Inc.* | 1,739,896 | |||
| 219,660 | Kanbay International, Inc.* | 4,516,210 | |||
| 849,900 | NetScout Systems, Inc.* | 5,515,851 | |||
| 423,235 | Opnet Technologies, Inc.* | 5,548,611 | |||
| 148,267 | Retalix Ltd.* (Israel) | 2,698,459 | |||
| 168,200 | Rightnow Technologies, Inc.* | 2,625,602 | |||
| 273,995 | Unica Corp.* | 2,822,148 | |||
| 28,364,845 | |||||
| Computer Technology 0.2% | |||||
| 321,130 | Qualstar Corp.* | 1,043,672 | |||
| Consumer Electronics 0.8% | |||||
| 212,930 | DTS, Inc.* | 4,509,857 | |||
| Distributors 0.9% | |||||
| 881,195 | Commercial Solutions, Inc.* (Canada) | 5,321,702 | |||
| Diversified Financial Services 2.8% | |||||
| 1,763,320 | Acta Holdings ASA (Norway) | 7,139,221 | |||
| 125,075 | ADDENDA Capital, Inc. (Canada) | 2,657,718 | |||
| 123,300 | Home Capital Group, Inc. (Canada) | 3,386,696 | |||
| 375,525 | Treasury Group Ltd. (Australia) | 3,138,637 | |||
| 16,322,272 | |||||
| Diversified Telecommunication Services 0.3% | |||||
| 420,010 | Astra Microwave Products Ltd. (India) | 1,540,984 | |||
| Shares | Value | ||||
| Drugs and Pharmaceuticals 0.9% | |||||
| 238,925 | La Jolla Pharmaceutical Co.* | $ | 888,801 | ||
| 312,275 | Salix Pharmaceuticals Ltd.* | 4,234,449 | |||
| 5,123,250 | |||||
| Education Services 0.4% | |||||
| 147,131 | Universal Technical Institute, Inc. * | 2,632,174 | |||
| Electrical and Electronics 2.5% | |||||
| 529,572 | Power Integrations, Inc.* | 10,379,611 | |||
| 346,875 | TTM Technologies, Inc.* | 4,058,438 | |||
| 14,438,049 | |||||
| Electrical Equipment 1.3% | |||||
| 3,530,500 | Unisteel Technology Ltd. (Singapore) | 4,562,232 | |||
| 3,166,000 | XAC Automation Corp. (Taiwan) | 3,012,051 | |||
| 7,574,283 | |||||
| Electronics 1.5% | |||||
| 408,123 | Nu Horizons Electronics Corp.* | 5,199,487 | |||
| 98,790 | Supertex, Inc.* | 3,839,967 | |||
| 9,039,454 | |||||
| Electronics — Medical Systems 1.2% | |||||
| 215,055 | Cardica, Inc.* | 903,231 | |||
| 126,340 | EPIX Pharmaceuticals, Inc.* | 523,048 | |||
| 320,505 | IRIDEX Corp.* | 2,804,419 | |||
| 118,425 | NXStage Medical, Inc.* | 1,038,587 | |||
| 787,000 | Ophthalmic Imaging Systems, Inc.* | 1,629,090 | |||
| 6,898,375 | |||||
| Electronics — Semiconductors/ Components 8.6% | |||||
| 336,575 | ASE Test Ltd.* (Taiwan) | 2,874,351 | |||
| 137,926 | Cascade Microtech, Inc.* | 1,718,558 | |||
| 934,635 | Micrel, Inc.* | 8,963,150 | |||
| 892,076 | Pericom Semiconductor Corp.* | 8,697,741 | |||
| 1,016,985 | PLX Technology, Inc.* | 10,546,134 | |||
| 63,940 | Silicon Laboratories, Inc.* | 1,983,419 | |||
| 113,900 | SiRF Technology Holdings, Inc.* | 2,732,461 | |||
| 347,380 | Techwell, Inc.* | 5,203,752 | |||
| 216,730 | Tessera Technologies, Inc.* | 7,537,869 | |||
| 50,257,435 | |||||
| Energy Equipment and Services 0.7% | |||||
| 10,888,400 | Advanced Holdings Ltd. (Singapore) | 2,470,892 | |||
| 95,100 | Bonnett’s Energy Services Trust (Canada) | 1,836,995 | |||
| 4,307,887 | |||||
| Engineering and Contracting Services 1.1% | |||||
| 363,508 | Stantec, Inc.* (Canada) | 6,681,277 | |||
| Entertainment 0.3% | |||||
| 182,185 | Outdoor Channel Holdings, Inc.* | 1,983,995 | |||
| Finance Companies 1.2% | |||||
| 205,145 | Nicholas Financial, Inc.* | 2,835,104 | |||
| 272,705 | United PanAm Financial Corp.* | 4,221,473 | |||
| 7,056,577 | |||||
| Financial — Miscellaneous 0.5% | |||||
| 154,200 | First Cash Financial Services, Inc. * | 3,174,978 | |||
| Health Care Equipment and Supplies 1.7% | |||||
| 21,990,630 | LMA International N.V.* (Singapore) | 10,188,548 | |||
| Health Care Facilities 1.9% | |||||
| 122,525 | Healthways, Inc.* | 5,464,615 | |||
| 242,300 | LHC Group, Inc.* | 5,408,136 | |||
| 10,872,751 | |||||
43
| MICRO CAP FUND — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| Health Care Management Services 3.5% | |||||
| 522,338 | AmSurg Corp.* | $ | 11,627,244 | ||
| 246,521 | CorVel Corp.* | 8,647,957 | |||
| 20,275,201 | |||||
| Health Care Providers and Services 1.5% | |||||
| 123,246 | Icon plc ADR* (Ireland) | 8,698,703 | |||
| Home Building 0.4% | |||||
| 60,950 | Meritage Homes Corp.* | 2,536,129 | |||
| Household Durables 0.3% | |||||
| 117,188 | easyhome Ltd. (Canada) | 1,677,552 | |||
| Insurance 1.1% | |||||
| 219,905 | Hub International Ltd. (Canada) | 6,359,653 | |||
| Investment Management Companies 0.3% | |||||
| 27,832 | Diamond Hill Investment Group, Inc.* | 1,760,374 | |||
| Machinery 2.8% | |||||
| 199,150 | Gulf Island Fabrication, Inc. | 5,195,824 | |||
| 12,289,240 | MMI Holdings Ltd. (Singapore) | 7,707,888 | |||
| 252,800 | Pason Systems, Inc. (Canada) | 3,569,101 | |||
| 16,472,813 | |||||
| Medical and Dental Instruments and Supplies 8.1% | |||||
| 365,840 | Abaxis, Inc.* | 8,556,998 | |||
| 334,520 | Cryocor, Inc.* | 1,107,261 | |||
| 177,305 | Cyberonics, Inc.* | 3,108,157 | |||
| 82,715 | Dexcom, Inc.* | 920,618 | |||
| 148,400 | Encision, Inc.* | 341,320 | |||
| 396,750 | Endologix, Inc.* | 1,590,968 | |||
| 436,825 | Enpath Medical, Inc.* †† | 4,682,764 | |||
| 101,135 | FoxHollow Technologies, Inc.* | 3,457,806 | |||
| 393,250 | IntraLase Corp.* | 7,750,957 | |||
| 100,465 | Northstar Neuroscience, Inc.* | 1,326,138 | |||
| 243,385 | NuVasive, Inc.* | 4,894,472 | |||
| 226,815 | Thoratec Corp.* | 3,540,582 | |||
| 918,051 | VNUS Medical Technologies, Inc.* †† | 6,105,039 | |||
| 47,383,080 | |||||
| Medical Services 1.0% | |||||
| 483,272 | U.S. Physical Therapy, Inc.* | 5,760,602 | |||
| Miscellaneous Materials and Commodities 0.5% | |||||
| 301,890 | Luna Innovations, Inc.* | 1,110,955 | |||
| 77,600 | Symyx Technologies, Inc.* | 1,644,344 | |||
| 2,755,299 | |||||
| Multi-Sector Companies 0.5% | |||||
| 102,040 | Raven Industries, Inc. | 3,062,220 | |||
| Oil and Gas 2.2% | |||||
| 1,454,800 | ARC Energy Ltd.* (Australia) | 1,563,328 | |||
| 1,705,710 | Ithaca Energy, Inc. (Canada) | 3,433,701 | |||
| 776,325 | Saxon Energy Services, Inc.* (Canada) | 2,743,566 | |||
| 926,800 | Tap Oil Ltd.* (Australia) | 1,148,096 | |||
| 206,060 | Toreador Resources Corp.* | 3,795,625 | |||
| 12,684,316 | |||||
| Shares | Value | ||||
| Production Technology Equipment 3.3% | |||||
| 158,955 | Eagle Test Systems, Inc.* | $ | 2,625,936 | ||
| 279,525 | Entegris, Inc.* | 3,049,618 | |||
| 528,550 | inTEST Corp.* †† | 3,033,877 | |||
| 298,790 | Intevac, Inc.* | 5,019,672 | |||
| 165,400 | Nanometrics, Inc.* | 1,529,950 | |||
| 223,700 | Rudolph Technologies, Inc.* | 4,100,421 | |||
| 19,359,474 | |||||
| Real Estate Investment Trusts (REIT) 1.0% | |||||
| 382,308 | New York Mortgage Trust, Inc. | 1,475,709 | |||
| 334,880 | NorthStar Realty Finance Corp. | 4,252,976 | |||
| 5,728,685 | |||||
| Retail 11.9% | |||||
| 187,325 | America’s Car-Mart, Inc.* | 3,081,496 | |||
| 689,890 | Big 5 Sporting Goods Corp. | 15,729,492 | |||
| 23,990 | Bijou Brigitte AG (Germany) | 6,209,459 | |||
| 7,064,880 | China Hongxing Sports Ltd. (China) | 7,214,514 | |||
| 202,600 | Global Imaging Systems, Inc.* | 4,471,382 | |||
| 205,555 | Guitar Center, Inc.* | 9,184,197 | |||
| 239,837 | Hibbett Sporting Goods, Inc.* | 6,278,933 | |||
| 5,930,006 | Hongguo Int’l. Holdings Ltd.* (Bermuda) | 2,485,788 | |||
| 174,485 | Lithia Motors, Inc., Class A | 4,313,269 | |||
| 406,075 | Monsoon plc* (United Kingdom) | 3,007,983 | |||
| 281,925 | Rush Enterprises, Inc., Class B* | 4,395,211 | |||
| 210,865 | Tuesday Morning Corp. | 2,926,806 | |||
| 69,298,530 | |||||
| Semiconductor Equipment and Products 2.3% | |||||
| 679,698 | Holtek Semiconductor, Inc. (Taiwan) | 1,172,176 | |||
| 1,706,005 | O2Micro International Ltd. ADR* (Cayman Islands) | 11,788,495 | |||
| 506,725 | PSi Technologies Holdings, Inc. ADR* (Philippines) | 298,968 | |||
| 13,259,639 | |||||
| Shoes 1.0% | |||||
| 206,275 | Kenneth Cole Productions, Inc., Class A | 5,026,922 | |||
| 134,525 | Shoe Pavilion, Inc.* | 982,032 | |||
| 6,008,954 | |||||
| Textiles, Apparel and Luxury Goods 1.3% | |||||
| 4,932,630 | Ports Design Ltd. (Hong Kong) | 7,597,574 | |||
| Transportation — Miscellaneous 0.4% | |||||
| 2,206,015 | AutoInfo, Inc.* †† | 2,294,256 | |||
| Transportation Infrastructure 0.5% | |||||
| 2,697,535 | Goodpack Ltd.* (Singapore) | 2,924,710 | |||
| Truckers 2.8% | |||||
| 135,870 | Knight Transportation, Inc. | 2,302,997 | |||
| 165,325 | Universal Truckload Services, Inc.* | 4,293,490 | |||
| 270,415 | USA Truck, Inc.* | 5,151,406 | |||
| 249,025 | Vitran Corp., Inc.* (Canada) | 4,606,962 | |||
| 16,354,855 | |||||
| Wholesalers 1.2% | |||||
| 316,375 | Beacon Roofing Supply, Inc.* | 6,403,430 | |||
| 32,460 | Houston Wire & Cable Co.* | 610,248 | |||
| 7,013,678 | |||||
| Total Common Stocks (cost $458,869,006) | 574,821,107 | ||||
44
| SEPTEMBER 30, 2006 | ||
| Shares | Value | |||||
| PREFERRED STOCKS 0.1% | ||||||
| Drugs and Pharmaceuticals 0.1% | ||||||
| 1,886,792 | Point Biomedical Corp., Series F Pfd.* *** † | $ | 700,000 | |||
| Total Preferred Stocks (cost $1,000,000) | 700,000 | |||||
| WARRANTS 0.0% | ||||||
| Drugs and Pharmaceuticals 0.0% | ||||||
| 566,037 | Point Biomedical Corp. expiring 2/16/2012* *** † | — | ||||
| Health Care Services 0.0% | ||||||
| 25,946 | Familymeds Group, Inc. expiring 11/30/2009* *** † | — | ||||
| Total Warrants (cost $0) | — | |||||
| Principal Amount | Value | |||||
| SHORT -TERM INVESTMENTS 1.8% | ||||||
| Repurchase Agreement 1.8% | ||||||
| $10,367,000 | Repurchase Agreement dated 9/29/06, 4.30% due 10/2/06 with State Street Bank and Trust Co. collateralized by $7,880,000 of United States Treasury Bonds 7.625% due 2/15/25; value: $10,578,900; repurchase proceeds: $10,370,715 (cost $10,367,000) | $ | 10,367,000 | |||
| Total Short-Term Investments (cost $10,367,000) | 10,367,000 | |||||
| Total Investments (cost $470,236,006) 100.3% | 585,888,107 | |||||
| Liabilities less Other Assets (0.3)% | (1,987,012 | ) | ||||
| NET ASSETS 100.0% | $ | 583,901,095 | ||||
| * Non-income producing. | ||||||
| *** Security was fair valued under procedures adopted by the Board of Directors (see Note 2). | ||||||
| † Security purchased in a private placement transaction or under Rule 144A of the Securities Act of 1933 (see Note 9). | ||||||
| †† Affiliated company (see Note 8). | ||||||
| ADR American Depositary Receipts. | ||||||
| See notes to financial statements. | ||||||
At September 30, 2006, Wasatch Micro Cap Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 1.0 | ||
Bermuda | 0.4 | ||
Canada | 7.3 | ||
Cayman Islands | 2.1 | ||
China | 1.3 | ||
France | 0.5 | ||
Germany | 1.1 | ||
Hong Kong | 1.3 | ||
India | 0.3 | ||
Ireland | 1.5 | ||
Israel | 0.5 | ||
Norway | 1.2 | ||
Philippines | 0.1 | ||
Singapore | 6.8 | ||
Taiwan | 1.2 | ||
United Kingdom | 0.5 | ||
United States | 72.9 | ||
TOTAL | 100.0 | % | |
45
| MICRO CAP VALUE FUND — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 95.8% | |||||
| Agriculture, Fishing and Ranching 0.5% | |||||
| 20,000 | Terra Nitrogen Co., L.P. | $ | 523,000 | ||
| Air Transport 0.6% | |||||
| 25,000 | Air Methods Corp.* | 590,000 | |||
| Auto Parts — After Market 1.2% | |||||
| 20,000 | Aftermarket Technology Corp.* | 355,200 | |||
| 20,000 | Keystone Automotive Industries, Inc.* | 760,400 | |||
| 1,115,600 | |||||
| Banks 8.3% | |||||
| 45,000 | Commonwealth Bankshares, Inc. | 1,224,900 | |||
| 25,000 | Cornerstone Bancshares, Inc. | 669,500 | |||
| 147,030 | First Bank of Delaware* | 426,387 | |||
| 12,000 | First State Financial Corp. | 213,000 | |||
| 13,340 | Home Bancshares, Inc. | 294,547 | |||
| 55,556 | Idaho Trust Bancorp* *** † | 500,004 | |||
| 15,000 | Intervest Bancshares Corp.* | 653,400 | |||
| 55,230 | Omni Financial Services, Inc.* | 579,363 | |||
| 35,000 | Placer Sierra Bancshares | 777,350 | |||
| 30,000 | Royal Bancshares of Pennsylvania, Inc., Class A | 812,700 | |||
| 40,000 | Security Business Bank of San Diego* | 820,000 | |||
| 45,000 | United Western Bancorp, Inc.* | 957,600 | |||
| 7,928,751 | |||||
| Biotechnology Research and Production 0.3% | |||||
| 48,035 | Abcam plc (United Kingdom) | 240,059 | |||
| Building Materials 0.9% | |||||
| 15,000 | NCI Building Systems, Inc.* | 872,550 | |||
| Building Products 1.7% | |||||
| 110,000 | Fleetwood Corp. Ltd. (Australia) | 546,702 | |||
| 200,000 | IVRCL Infrastructure and Projects Ltd. (India) | 1,102,861 | |||
| 1,649,563 | |||||
| Commercial Information Services 1.0% | |||||
| 50,000 | LECG Corp.* | 938,000 | |||
| Commercial Services and Supplies 3.5% | |||||
| 200,000 | Allen-Vanguard Corp.* (Canada) | 679,968 | |||
| 20,000 | AMN Healthcare Services, Inc.* | 475,000 | |||
| 10,000 | MegaStudy Co. Ltd. (Korea) | 1,130,719 | |||
| 14,295 | Monro Muffler Brake, Inc. | 486,173 | |||
| 100,000 | SM&A* | 611,000 | |||
| 3,382,860 | |||||
| Communications and Media 0.2% | |||||
| 30,000 | Triple Crown Media, Inc.* | 218,400 | |||
| Computer Services Software and Systems 5.2% | |||||
| 18,350 | DealerTrack Holdings, Inc.* | 405,718 | |||
| 98,385 | Interactive Intelligence, Inc.* | 1,137,331 | |||
| 200,000 | Kana Software, Inc.* | 622,000 | |||
| 132,750 | NetScout Systems, Inc.* | 861,547 | |||
| 66,325 | Opnet Technologies, Inc.* | 869,521 | |||
| 126,370 | Saba Software, Inc.* | 665,970 | |||
| 35,000 | Unica Corp.* | 360,500 | |||
| 4,922,587 | |||||
| Computer Technology 0.1% | |||||
| 19,955 | Qualstar Corp.* | 64,854 | |||
| Shares | Value | ||||
| Consumer Products 0.2% | |||||
| 87,535 | Natural Health Trends Corp.* | $ | 227,591 | ||
| Distributors 1.6% | |||||
| 250,000 | Commercial Solutions, Inc.* (Canada) | 1,509,797 | |||
| Diversified Financial Services 4.4% | |||||
| 300,000 | Acta Holdings ASA (Norway) | 1,214,621 | |||
| 25,000 | ADDENDA Capital, Inc. (Canada) | 531,225 | |||
| 18,905 | Euronet Worldwide, Inc.* | 464,118 | |||
| 20,000 | Home Capital Group, Inc. (Canada) | 549,342 | |||
| 240 | Osaka Securities Exchange Co. Ltd. (Japan) | 845,350 | |||
| 75,869 | Treasury Group Ltd. (Australia) | 634,113 | |||
| 4,238,769 | |||||
| Drugs and Pharmaceuticals 0.3% | |||||
| 25,000 | La Jolla Pharmaceutical Co.* | 93,000 | |||
| 16,000 | Novacea, Inc. * | 120,640 | |||
| 10,000 | Targacept, Inc.* | 56,600 | |||
| 270,240 | |||||
| Electrical Equipment 1.3% | |||||
| 500,000 | Unisteel Technology Ltd. (Singapore) | 646,117 | |||
| 650,000 | XAC Automation Corp. (Taiwan) | 618,393 | |||
| 1,264,510 | |||||
| Electronic Equipment and Instruments 0.9% | |||||
| 1,299,764 | Innovalues Precision Ltd. (Singapore) | 639,067 | |||
| 122,480 | Syntech Information Co. Ltd. (Taiwan) | 187,549 | |||
| 826,616 | |||||
| Electronics 1.2% | |||||
| 30,000 | Nu Horizons Electronics Corp.* | 382,200 | |||
| 20,000 | Supertex, Inc.* | 777,400 | |||
| 1,159,600 | |||||
| Electronics — Medical Systems 1.7% | |||||
| 177,620 | Allied Healthcare International, Inc.* | 353,464 | |||
| 44,050 | Cardica, Inc.* | 185,010 | |||
| 90,865 | IRIDEX Corp.* | 795,069 | |||
| 127,500 | Ophthalmic Imaging Systems, Inc.* | 263,925 | |||
| 1,597,468 | |||||
| Electronics — Semiconductors/Components 5.5% | |||||
| 45,000 | Cascade Microtech, Inc.* | 560,700 | |||
| 85,000 | Micrel, Inc.* | 815,150 | |||
| 100,000 | Pericom Semiconductor Corp.* | 975,000 | |||
| 175,460 | PLX Technology, Inc.* | 1,819,520 | |||
| 40,000 | QuickLogic Corp.* | 141,600 | |||
| 40,000 | SiRF Technology Holdings, Inc.* | 959,600 | |||
| 5,271,570 | |||||
| Energy Equipment and Services 3.0% | |||||
| 1,400,000 | Advanced Holdings Ltd. (Singapore) | 317,700 | |||
| 30,000 | Bonnett’s Energy Services Trust (Canada) | 579,494 | |||
| 120,000 | Canadian Sub-Surface Energy Services Corp., Class A* (Canada) | 531,448 | |||
| 68,365 | Deepwell Energy Services Trust (Canada) | 637,959 | |||
| 63,525 | Hyduke Energy Services, Inc.* (Canada) | 105,146 | |||
| 40,000 | TGS-NOPEC Geophysical Co. ASA* (Norway) | 633,382 | |||
| 2,805,129 | |||||
| Engineering and Contracting Services 1.1% | |||||
| 50,000 | Michael Baker Corp.* | 1,018,000 | |||
46
| SEPTEMBER 30, 2006 | ||
| Shares | Value | ||||
| Finance Companies 2.6% | |||||
| 52,460 | Dollar Financial Corp.* | $ | 1,144,677 | ||
| 60,000 | Nicholas Financial, Inc.* | 829,200 | |||
| 35,000 | United PanAm Financial Corp.* | 541,800 | |||
| 2,515,677 | |||||
| Financial Data Processing Services and Systems 0.6% | |||||
| 46,300 | CyberSource Corp.* | 547,729 | |||
| Financial Information Services 0.5% | |||||
| 40,000 | Clayton Holdings, Inc.* | 502,800 | |||
| Financial — Miscellaneous 0.9% | |||||
| 40,000 | First Cash Financial Services, Inc.* | 823,600 | |||
| Health Care Equipment and Supplies 0.8% | |||||
| 55,500 | CryoCath Technologies, Inc.* (Canada) | 110,732 | |||
| 1,349,000 | LMA International N.V.* (Singapore) | 625,009 | |||
| 735,741 | |||||
| Health Care Facilities 1.5% | |||||
| 48,375 | Allion Healthcare, Inc.* | 202,208 | |||
| 53,114 | LHC Group, Inc.* | 1,185,504 | |||
| 1,387,712 | |||||
| Health Care Management Services 1.1% | |||||
| 35,000 | Birner Dental Management Services, Inc. | 766,850 | |||
| 10,000 | Computer Programs & Systems, Inc. | 327,700 | |||
| 1,094,550 | |||||
| Health Care Services 1.4% | |||||
| 75,000 | Five Star Quality Care, Inc.* | 807,000 | |||
| 20,000 | Healthcare Services Group | 503,200 | |||
| 1,310,200 | |||||
| Hotels, Restaurants and Leisure 1.0% | |||||
| 108,000 | Club Cruise Entertainment & Travelling Services Europe B.V.* *** † (Sweden) | 959,213 | |||
| Household Durables 0.7% | |||||
| 50,000 | easyhome Ltd. (Canada) | 715,756 | |||
| Household Products 0.5% | |||||
| 200,000 | Fantastic Holdings Ltd. (Australia) | 470,137 | |||
| Insurance 0.5% | |||||
| 60,425 | CRM Holdings Ltd.* (Bermuda) | 456,209 | |||
| Investment Management Companies 0.9% | |||||
| 55,000 | Thomas Weisel Partners Group, Inc.* | 882,750 | |||
| Machinery 4.3% | |||||
| 440,000 | Awea Mechantronic Co. Ltd. (Taiwan) | 760,133 | |||
| 50,000 | CE Franklin Ltd.* (Canada) | 561,500 | |||
| 45,000 | Kadant, Inc.* | 1,105,200 | |||
| 1,699,095 | MMI Holdings Ltd. (Singapore) | 1,065,683 | |||
| 45,000 | Pason Systems, Inc. (Canada) | 635,323 | |||
| 4,127,839 | |||||
| Marine 0.6% | |||||
| 302,650 | Ezra Holdings Ltd. (Singapore) | 568,518 | |||
| Shares | Value | ||||
| Medical and Dental Instruments and Supplies 7.9% | |||||
| 52,070 | AtriCure, Inc.* | $ | 355,638 | ||
| 100,000 | Cryocor, Inc.* | 331,000 | |||
| 26,908 | Cyberonics, Inc.* | 471,697 | |||
| 40,000 | Cytori Therapeutics, Inc.* | 192,400 | |||
| 147,364 | Encision, Inc.* | 338,937 | |||
| 135,250 | Endologix, Inc.* | 542,353 | |||
| 129,875 | Enpath Medical, Inc.* | 1,392,260 | |||
| 30,000 | IntraLase Corp.* | 591,300 | |||
| 125,570 | MTS Medication Technologies, Inc.* | 1,002,049 | |||
| 50,025 | NuVasive, Inc.* | 1,006,003 | |||
| 63,000 | RemoteMDx, Inc.* | 125,370 | |||
| 185,219 | VNUS Medical Technologies, Inc.* | 1,231,706 | |||
| 7,580,713 | |||||
| Miscellaneous Materials and Commodities 0.3% | |||||
| 81,630 | Luna Innovations, Inc.* | 300,398 | |||
| Miscellaneous Materials and Processing 0.3% | |||||
| 75,000 | Metalico, Inc.* | 273,750 | |||
| Oil and Gas 1.7% | |||||
| 275,720 | Ithaca Energy, Inc. (Canada) | 555,042 | |||
| 100,000 | Saxon Energy Services, Inc.* (Canada) | 353,404 | |||
| 40,000 | Toreador Resources Corp.* | 736,800 | |||
| 1,645,246 | |||||
| Production Technology Equipment 3.2% | |||||
| 197,800 | inTEST Corp.* | 1,135,372 | |||
| 445,000 | LogicVision, Inc.* | 587,400 | |||
| 100,000 | Nanometrics, Inc.* | 925,000 | |||
| 23,775 | Rudolph Technologies, Inc.* | 435,796 | |||
| 3,083,568 | |||||
| Real Estate 0.5% | |||||
| 83,970 | Erinaceous Group plc (United Kingdom) | 495,874 | |||
| Real Estate Investment Trusts (REIT) 1.6% | |||||
| 50,000 | Medical Properties Trust, Inc. | 669,500 | |||
| 57,625 | New York Mortgage Trust, Inc. | 222,432 | |||
| 54,435 | NorthStar Realty Finance Corp. | 691,325 | |||
| 1,583,257 | |||||
| Rental and Leasing Services — Commercial 0.4% | |||||
| 113,000 | MicroFinancial, Inc. | 368,380 | |||
| Retail 5.7% | |||||
| 55,000 | America’s Car-Mart, Inc.* | 904,750 | |||
| 45,000 | Big 5 Sporting Goods Corp. | 1,026,000 | |||
| 2,500 | Bijou Brigitte AG (Germany) | 647,088 | |||
| 1,300,000 | China Hongxing Sports Ltd. (China) | 1,327,534 | |||
| 30,000 | Golf Galaxy, Inc.* | 390,000 | |||
| 40,000 | Rush Enterprises, Inc., Class A* | 667,200 | |||
| 35,000 | Tuesday Morning Corp. | 485,800 | |||
| 5,448,372 | |||||
| Semiconductor Equipment and Products 1.5% | |||||
| 9,000 | austriamicrosystems AG* (Austria) | 510,100 | |||
| 125,465 | O2Micro International Ltd. ADR* (Cayman Islands) | 866,963 | |||
| 55,320 | PSi Technologies Holdings, Inc. ADR* (Philippines) | 32,639 | |||
| 1,409,702 | |||||
47
| MICRO CAP VALUE FUND — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| Software 1.1% | |||||
| 50,000 | Belzberg Technologies, Inc.* (Canada) | $ | 424,980 | ||
| 30,000 | Duzon Digital Ware Co. Ltd. (Korea) | 586,495 | |||
| 1,011,475 | |||||
| Telecommunications Equipment 1.8% | |||||
| 350,000 | Peco II, Inc.* | 434,000 | |||
| 97,940 | Telular Corp.* | 212,520 | |||
| 110,000 | WPCS International, Inc.* | 1,092,300 | |||
| 1,738,820 | |||||
| Textiles, Apparel and Luxury Goods 2.2% | |||||
| 1,754,765 | EganaGoldpfeil (Holdings) Ltd. (Hong Kong) | 822,105 | |||
| 1,998,870 | Moiselle Int’l. Holdings Ltd. (Hong Kong) | 538,789 | |||
| 500,000 | Ports Design Ltd. (Hong Kong) | 770,134 | |||
| 2,131,028 | |||||
| Transportation — Miscellaneous 0.9% | |||||
| 800,000 | AutoInfo, Inc.* | 832,000 | |||
| Truckers 2.4% | |||||
| 70,000 | Smithway Motor Xpress Corp.* | 580,300 | |||
| 50,000 | USA Truck, Inc.* | 952,500 | |||
| 40,000 | Vitran Corp., Inc.* (Canada) | 740,000 | |||
| 2,272,800 | |||||
| Wholesalers 1.7% | |||||
| 65,000 | Beacon Roofing Supply, Inc.* | 1,315,600 | |||
| 15,905 | Houston Wire & Cable Co.* | 299,014 | |||
| 1,614,614 | |||||
Total Common Stocks (cost $78,102,044) | 91,523,942 | ||||
| PREFERRED STOCKS 0.2% | |||||
| Drugs and Pharmaceuticals 0.2% | |||||
| 377,358 | Point Biomedical Corp., Series F Pfd.* *** † | 140,000 | |||
Total Preferred Stocks (cost $200,000) | 140,000 | ||||
| WARRANTS 0.0% | |||||
| Computer Services Software and Systems 0.0% | |||||
| 200,000 | CorVu Corp. expiring 11/19/06* *** † | — | |||
| Drugs and Pharmaceuticals 0.0% | |||||
| 7,164 | Acusphere, Inc. expiring 8/2/08* *** † | — | |||
| 1,436 | Acusphere, Inc. expiring 10/20/08* *** † | — | |||
| 113,207 | Point Biomedical Corp. expiring 2/16/12* *** † | — | |||
| — | |||||
| Health Care Services 0.0% | |||||
| 6,486 | Familymeds Group, Inc. expiring 11/30/09* *** † | — | |||
| Metals and Mining 0.0% | |||||
| 125,000 | Equigold NL expiring 5/31/07* (Australia) | 17,723 | |||
| Total Warrants (cost $0) | 17,723 | ||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 4.2% | ||||||
| Repurchase Agreement 4.2% | ||||||
| $4,009,000 | Repurchase Agreement dated 9/29/06, 4.30% due 10/2/06 with State Street Bank and Trust Co. collateralized by $3,050,000 of United States Treasury Bonds 7.625% due 2/15/25; value: $4,094,625; repurchase proceeds: $4,010,437 (cost $4,009,000) | $ | 4,009,000 | |||
Total Short-Term Investments (cost $4,009,000) | 4,009,000 | |||||
Total Investments (cost $82,311,044) 100.2% | 95,690,665 | |||||
| Liabilities less Other Assets (0.2)% | (182,945 | ) | ||||
| NET ASSETS 100.0% | $ | 95,507,720 | ||||
| Number of Contracts | Value | |||||
| CALL OPTIONS WRITTEN | ||||||
| 100 | Air Methods Corp. expiring 10/21/06 exercise price $25 | $ | 5,000 | |||
| 150 | NCI Buildings Systems, Inc. expiring 10/21/06 exercise price $60 | 9,750 | ||||
| 200 | Supertex, Inc. expiring 10/21/06 exercise price $40 | 19,000 | ||||
Total Call Options Written (premium $71,028) | $ | 33,750 | ||||
* Non-income producing.
*** Security was fair valued under procedures adopted by the Board of Directors (see Note 2).
† Security purchased in a private placement transaction or under Rule 144A of the Securities Act of 1933 (see Note 9).
††† All or a portion of this security has been designated as collateral for written options or purchase commitments (see Note 10).
ADR American Depositary Receipts.
See notes to financial statements. |
| |||||
48
| SEPTEMBER 30, 2006 | ||
At September 30, 2006, Wasatch Micro Cap Value Fund’s investments, excluding short-term investments and written options, were in the following countries:
| Country | % | ||
Australia | 1.8 | ||
Austria | 0.6 | ||
Bermuda | 0.5 | ||
Canada | 10.1 | ||
Cayman Islands | 1.0 | ||
China | 1.5 | ||
Germany | 0.7 | ||
Hong Kong | 2.3 | ||
India | 1.2 | ||
Japan | 0.9 | ||
Korea | 1.9 | ||
Norway | 2.0 | ||
Philippines | < 0.1 | ||
Singapore | 4.2 | ||
Sweden | 1.0 | ||
Taiwan | 1.7 | ||
United Kingdom | 0.8 | ||
United States | 67.8 | ||
TOTAL | 100.0 | % | |
49
| SMALL CAP GROWTH FUND — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 99.1% | |||||
| Airlines 0.5% | |||||
| 709,650 | WestJet Airlines Ltd.* *** | $ | 6,380,945 | ||
| Banks 8.1% | |||||
| 677,038 | Bank of the Ozarks, Inc. | 22,931,277 | |||
| 197,560 | First Community Bancorp, Inc. | 11,053,482 | |||
| 506,780 | HDFC Bank Ltd. ADR | 30,938,919 | |||
| 316,225 | Prosperity Bancshares, Inc. | 10,764,299 | |||
| 210,297 | The Bank of N.T. Butterfield & Son Ltd. | 12,093,416 | |||
| 685,270 | UCBH Holding, Inc. | 11,964,814 | |||
| 99,746,207 | |||||
| Beverage — Soft Drinks 0.1% | |||||
| 69,882 | Peet’s Coffee & Tea, Inc.* | 1,747,749 | |||
| Biotechnology Research and Production 3.4% | |||||
| 199,055 | ArthroCare Corp.* | 9,327,717 | |||
| 467,420 | Encysive Pharmaceuticals, Inc.* | 2,009,906 | |||
| 189,190 | Myriad Genetics, Inc.* | 4,663,534 | |||
| 486,265 | Neurochem, Inc.* | 9,010,490 | |||
| 1,070,525 | QIAGEN N.V.* | 16,957,116 | |||
| 41,968,763 | |||||
| Commercial Services and Supplies 6.9% | |||||
| 135,070 | Advisory Board Co.* | 6,823,736 | |||
| 1,666,240 | Copart, Inc.* | 46,971,306 | |||
| 43,570 | Corporate Executive Board Co. | 3,917,379 | |||
| 72,285 | CoStar Group, Inc.* | 2,986,816 | |||
| 111,309 | CRA International, Inc.* | 5,304,987 | |||
| 98,310 | LoopNet, Inc.* | 1,244,605 | |||
| 650,550 | Resources Connection, Inc.* | 17,428,234 | |||
| 84,677,063 | |||||
| Computer Services Software and Systems 6.6% | |||||
| 217,266 | Cognizant Technology Solutions Corp., Class A* | 16,090,720 | |||
| 498,918 | DealerTrack Holdings, Inc.* | 11,031,077 | |||
| 191,825 | F5 Networks, Inc.* | 10,304,839 | |||
| 299,600 | Macrovision Corp.* | 7,097,524 | |||
| 393,035 | NeuStar, Inc., Class A* | 10,906,721 | |||
| 548,506 | Retalix Ltd.* | 9,982,809 | |||
| 52,765 | Riverbed Technology, Inc.* | 1,028,918 | |||
| 492,080 | SRA International, Inc., Class A* | 14,791,925 | |||
| 81,234,533 | |||||
| Diversified Financial Services 1.6% | |||||
| 62,410 | Australian Stock Exchange Ltd. | 1,513,637 | |||
| 193,820 | AWD Holding AG | 7,006,229 | |||
| 431,090 | Home Capital Group, Inc. | 11,840,801 | |||
| 20,360,667 | |||||
| Drugs and Pharmaceuticals 1.0% | |||||
| 444,260 | Alexza Pharmaceuticals, Inc.* | 3,611,834 | |||
| 295,215 | Ligand Pharmaceuticals, Inc., Class B* | 2,963,958 | |||
| 338,555 | NeoPharm, Inc.* | 1,641,992 | |||
| 220,580 | Novacea, Inc * | 1,663,173 | |||
| 359,360 | Valera Pharmaceuticals, Inc.* | 2,303,498 | |||
| 12,184,455 | |||||
| Education Services 2.9% | |||||
| 231,940 | Strayer Education, Inc. | 25,098,228 | |||
| 570,570 | Universal Technical Institute, Inc.* | 10,207,497 | |||
| 35,305,725 | |||||
| Electrical and Electronics 2.3% | |||||
| 1,455,490 | Power Integrations, Inc.* | 28,527,604 | |||
| Shares | Value | ||||
| Electronics 0.2% | |||||
| 228,685 | Semtech Corp.* | $ | 2,918,021 | ||
| Electronics — Medical Systems 0.3% | |||||
| 474,556 | NXStage Medical, Inc.* | 4,161,856 | |||
| Electronics — Semiconductors/ Components 8.0% | |||||
| 699,572 | Integrated Device Technology, Inc.* | 11,235,126 | |||
| 2,231,545 | Micrel, Inc.* | 21,400,517 | |||
| 992,838 | Microtune, Inc.* | 4,825,193 | |||
| 1,070,480 | PLX Technology, Inc.* | 11,100,877 | |||
| 542,920 | Silicon Laboratories, Inc.* | 16,841,378 | |||
| 482,827 | SiRF Technology Holdings, Inc.* | 11,583,020 | |||
| 617,495 | Tessera Technologies, Inc.* | 21,476,476 | |||
| 98,462,587 | |||||
| Energy Equipment and Services 0.4% | |||||
| 308,480 | Trican Well Service Ltd. | 5,196,992 | |||
| Engineering and Contracting Services 2.1% | |||||
| 987,060 | Stantec, Inc.* | 18,142,163 | |||
| 210,130 | URS Corp.* | 8,171,956 | |||
| 26,314,119 | |||||
| Entertainment 0.5% | |||||
| 522,140 | Outdoor Channel Holdings, Inc.* | 5,686,105 | |||
| Financial Data Processing Services and Systems 0.8% | |||||
| 816,224 | CyberSource Corp.* | 9,655,930 | |||
| Financial Information Services 3.2% | |||||
| 817,685 | FactSet Research Systems, Inc. | 39,714,960 | |||
| Health Care Facilities 4.2% | |||||
| 359,835 | Healthways, Inc.* | 16,048,641 | |||
| 207,375 | Pharmaceutical Product Development, Inc. | 7,401,214 | |||
| 1,160,182 | United Surgical Partners International, Inc.* | 28,807,319 | |||
| 52,257,174 | |||||
| �� | |||||
| Health Care Management Services 3.9% | |||||
| 1,211,348 | AmSurg Corp.* | 26,964,606 | |||
| 367,940 | HealthSpring, Inc.* | 7,082,845 | |||
| 311,590 | Pediatrix Medical Group, Inc.* | 14,208,504 | |||
| 48,255,955 | |||||
| Health Care Providers and Services 1.9% | |||||
| 330,204 | Icon plc ADR* | 23,305,798 | |||
| Home Building 1.3% | |||||
| 324,930 | Meritage Homes Corp.* | 13,520,337 | |||
| 5,664 | NVR, Inc.* | 3,030,240 | |||
| 16,550,577 | |||||
| Household Durables 0.6% | |||||
| 194,130 | Desarrolladora Homex S.A. de C.V. ADR* | 7,330,349 | |||
| Investment Management Companies 0.3% | |||||
| 251,990 | Thomas Weisel Partners Group, Inc.* | 4,044,440 | |||
| Leisure Time 1.1% | |||||
| 280,960 | Life Time Fitness, Inc.* | 13,005,638 | |||
| Machinery 1.6% | |||||
| 6,395,000 | Emeco Holdings Ltd.* | 8,733,248 | |||
| 806,230 | Pason Systems, Inc. | 11,382,580 | |||
| 20,115,828 | |||||
50
| SEPTEMBER 30, 2006 | ||
| Shares | Value | ||||
| Medical and Dental Instruments and Supplies 9.1% | |||||
| 699,947 | Abaxis, Inc.* | $ | 16,371,760 | ||
| 416,565 | Cyberonics, Inc.* | 7,302,384 | |||
| 405,007 | Dexcom, Inc.* | 4,507,728 | |||
| 354,010 | FoxHollow Technologies, Inc.* | 12,103,602 | |||
| 375,470 | Kyphon, Inc.* | 14,050,087 | |||
| 247,740 | Northstar Neuroscience, Inc.* | 3,270,168 | |||
| 472,400 | NuVasive, Inc.* | 9,499,964 | |||
| 242,710 | ResMed, Inc.* | 9,769,078 | |||
| 690,608 | Techne Corp.* | 35,124,323 | |||
| 111,999,094 | |||||
| Medical Services 0.6% | |||||
| 254,375 | PRA International* | 6,789,269 | |||
| Miscellaneous Materials and Commodities 0.3% | |||||
| 165,974 | Symyx Technologies, Inc.* | 3,516,989 | |||
| Oil and Gas 0.6% | |||||
| 432,591 | Toreador Resources Corp.* | 7,968,326 | |||
| Real Estate Investment Trusts (REIT) 1.1% | |||||
| 263,878 | Redwood Trust, Inc. | 13,291,535 | |||
| Recreational Vehicles and Boats 0.4% | |||||
| 170,280 | Winnebago Industries, Inc. | 5,343,386 | |||
| Restaurants 0.4% | |||||
| 136,750 | PF Chang’s China Bistro, Inc.* | 4,746,592 | |||
| Retail 15.7% | |||||
| 43,465 | Bijou Brigitte AG | 11,250,276 | |||
| 386,535 | Blue Nile, Inc.* | 14,050,547 | |||
| 220,187 | Central Garden & Pet Co.* | 10,626,225 | |||
| 219,135 | Golf Galaxy, Inc.* | 2,848,755 | |||
| 933,960 | Guitar Center, Inc.* | 41,729,333 | |||
| 1,014,506 | Hibbett Sporting Goods, Inc.* | 26,559,767 | |||
| 1,161,795 | Monsoon plc* | 8,605,945 | |||
| 2,013,774 | O’Reilly Automotive, Inc.* | 66,877,435 | |||
| 245,315 | Pacific Sunwear of California, Inc.* | 3,699,350 | |||
| 545,985 | Tuesday Morning Corp. | 7,578,272 | |||
| 193,825,905 | |||||
| Securities Brokerage and Services 0.8% | |||||
| 172,490 | GFI Group, Inc.* | 9,536,972 | |||
| Semiconductor Equipment and Products 0.8% | |||||
| 1,482,345 | O2Micro International Ltd. ADR* | 10,243,004 | |||
| Textiles, Apparel and Luxury Goods 0.7% | |||||
| 4,196,000 | Li Ning Co. Ltd. | 4,793,367 | |||
| 2,570,000 | Ports Design Ltd. | 3,958,490 | |||
| 8,751,857 | |||||
| Truckers 3.7% | |||||
| 2,663,204 | Knight Transportation, Inc. | 45,141,308 | |||
| Wholesalers 1.1% | |||||
| 696,297 | Beacon Roofing Supply, Inc.* | 14,093,051 | |||
| Total Common Stocks (cost $985,089,123) | 1,224,357,328 | ||||
| Shares | Value | ||||
| PREFERRED STOCKS 0.6% | |||||
| Biotechnology Research and Production 0.2% | |||||
| 677,966 | Nanosys, Inc., Series D Pfd.* *** † | $ | 2,000,000 | ||
| Communications Technology 0.0% | |||||
| 404,517 | Incipient, Inc., Series D Pfd.* *** † | 586,550 | |||
| Drugs and Pharmaceuticals 0.1% | |||||
| 3,773,584 | Point Biomedical Corp., Series F Pfd.* *** † | 1,400,000 | |||
| Electronics — Medical Systems 0.1% | |||||
| 1,620,220 | Zonare Medical Systems, Inc., Series E Pfd.* *** † | 1,343,161 | |||
| Health Care Management Services 0.1% | |||||
| 516,161 | Elder Health, Inc., Series G Pfd.* *** † | 571,428 | |||
| 362,782 | TargetRX, Inc., Series D Pfd.* *** † | 504,267 | |||
| 1,075,695 | |||||
| Utilities — Telecommunications 0.1% | |||||
| 236,372 | Neutral Tandem, Inc., Series C Pfd.* *** † | 1,485,102 | |||
| Total Preferred Stocks (cost $10,186,405) | 7,890,508 | ||||
| LIMITED PARTNERSHIP INTEREST 0.2% | |||||
| Other 0.2% | |||||
| Montagu Newhall Global Partners II-B, L.P.* *** † | 1,763,112 | ||||
| Montagu Newhall Global Partners III-B, L.P.* *** † | 118,257 | ||||
| 1,881,369 | |||||
| Total Limited Partnership Interest (cost $2,123,935) | 1,881,369 | ||||
51
| SMALL CAP GROWTH FUND — Schedule of Investments (continued) | SEPTEMBER 30, 2006 | |
| Shares | Value | ||||
| WARRANTS 0.0% | |||||
| Drugs and Pharmaceuticals 0.0% | |||||
| 1,132,075 | Point Biomedical Corp. expiring 2/16/12* *** † | $ | — | ||
| Electronics — Medical Systems 0.0% | |||||
| 243,033 | Zonare Medical Systems, Inc. expiring 6/30/11* *** † | — | |||
| Total Warrants (cost $0) | — | ||||
| Total Investments (cost $997,399,463) 99.9% | 1,234,129,205 | ||||
| Other Assets less Liabilities 0.1% | 848,894 | ||||
| NET ASSETS 100.0% | $ | 1,234,978,099 | |||
| *Non-income producing. | |||||
| ***Security was fair valued under procedures adopted by the Board of Directors (see Note 2). | |||||
| † Security purchased in a private placement transaction or under Rule 144A of the Securities Act of 1933 (see Note 9). | |||||
| ††† All or a portion of this security has been designated as collateral for purchase commitments (see Note 10). | |||||
| ADR American Depositary Receipts. | |||||
| See notes to financial statements. | |||||
52
| SMALL CAP VALUE FUND — Schedule of Investments | SEPTEMBER 30, 2006 | |
| Shares | Value | ||||
| COMMON STOCKS 98.3% | |||||
| Aerospace 0.4% | |||||
| 83,743 | HEICO Corp., Class A | $ | 2,432,734 | ||
| Air Transport 0.6% | |||||
| 110,585 | Copa Holdings S.A. | 3,796,383 | |||
| Auto Parts — After Market 4.1% | |||||
| 414,344 | Aftermarket Technology Corp.* | 7,358,749 | |||
| 521,884 | Keystone Automotive Industries, Inc.* | 19,842,030 | |||
| 27,200,779 | |||||
| Banks 5.4% | |||||
| 419,840 | Franklin Bank Corp.* | 8,346,419 | |||
| 449,640 | Placer Sierra Bancshares | 9,986,505 | |||
| 343,465 | United Western Bancorp, Inc.* | 7,308,935 | |||
| 1,238,722 | UTI Bank Ltd. | 10,252,798 | |||
| 35,894,657 | |||||
| Building Materials 1.7% | |||||
| 130,205 | NCI Building Systems, Inc.* | 7,574,025 | |||
| 147,814 | Trex Company, Inc.* | 3,571,186 | |||
| 11,145,211 | |||||
| Building — Miscellaneous 0.4% | |||||
| 102,460 | Drew Industries, Inc.* | 2,588,140 | |||
| Commercial Services and Supplies 4.2% | |||||
| 280,102 | AMN Healthcare Services, Inc.* | 6,652,422 | |||
| 402,269 | Monro Muffler Brake, Inc. | 13,681,169 | |||
| 673,153 | SM&A* | 4,112,965 | |||
| 91,285 | World Fuel Services Corp. | 3,692,478 | |||
| 28,139,034 | |||||
| Computer Services Software and Systems 1.0% | |||||
| 76,420 | DealerTrack Holdings, Inc.* | 1,689,646 | |||
| 769,075 | NetScout Systems, Inc.* | 4,991,297 | |||
| 6,680,943 | |||||
| Computers and Peripherals 0.2% | |||||
| 1,719,580 | Torex Retail plc | 1,400,102 | |||
| Consumer Electronics 0.7% | |||||
| 723,141 | PLATO Learning, Inc.* | 4,606,408 | |||
| Consumer Products 1.4% | |||||
| 280,683 | Helen of Troy Ltd.* | 4,928,793 | |||
| 140,880 | Jarden Corp.* | 4,644,814 | |||
| 9,573,607 | |||||
| Containers and Packaging — Metal and Glass 0.6% | |||||
| 145,484 | Mobile Mini, Inc.* | 4,133,200 | |||
| Diversified Financial Services 2.6% | |||||
| 349,350 | Housing Development Finance Corp. Ltd. | 11,692,048 | |||
| 401,290 | U.S.I. Holdings Corp.* | 5,437,479 | |||
| 17,129,527 | |||||
| Education Services 0.5% | |||||
| 189,330 | Universal Technical Institute, Inc.* | 3,387,114 | |||
| Electrical and Electronics 1.4% | |||||
| 135,960 | Power Integrations, Inc.* | 2,664,816 | |||
| 549,495 | TTM Technologies, Inc.* | 6,429,092 | |||
| 9,093,908 | |||||
| Electronics 2.1% | |||||
| 422,949 | Nu Horizons Electronics Corp.* | 5,388,370 | |||
| 225,343 | Supertex, Inc.* | 8,759,083 | |||
| 14,147,453 | |||||
| Shares | Value | ||||
| Electronics — Semiconductors/ Components 4.3% | |||||
| 421,245 | ASE Test Ltd.* | $ | 3,597,432 | ||
| 764,995 | Micrel, Inc.* | 7,336,302 | |||
| 1,172,720 | ON Semiconductor Corp.* | 6,895,594 | |||
| 1,112,885 | Pericom Semiconductor Corp.* | 10,850,629 | |||
| 28,679,957 | |||||
| Engineering and Contracting Services 0.5% | |||||
| 160,035 | Michael Baker Corp.* | 3,258,313 | |||
| Finance Companies 3.8% | |||||
| 83,935 | Accredited Home Lenders Holding Co.* | 3,016,624 | |||
| 606,730 | Dollar Financial Corp.* | 13,238,848 | |||
| 594,610 | United PanAm Financial Corp.* | 9,204,563 | |||
| 25,460,035 | |||||
| Finance — Small Loan 1.8% | |||||
| 476,155 | AmeriCredit Corp.* | 11,899,113 | |||
| Financial Data Processing Services and Systems 0.6% | |||||
| 626,202 | Hypercom Corp.* | 4,245,650 | |||
| Financial — Miscellaneous 1.8% | |||||
| 295,004 | Fidelity National Financial, Inc. | 12,286,917 | |||
| Foods 0.3% | |||||
| 74,466 | NBTY, Inc.* | 2,179,620 | |||
| Health Care Facilities 1.7% | |||||
| 470,990 | Capital Senior Living Corp.* | 4,356,657 | |||
| 303,034 | LHC Group, Inc.* | 6,763,719 | |||
| 11,120,376 | |||||
| Health Care Management Services 0.8% | |||||
| 145,124 | CorVel Corp.* | 5,090,950 | |||
| Health Care Services 1.2% | |||||
| 60,150 | Amedisys, Inc.* | 2,386,151 | |||
| 499,215 | Five Star Quality Care, Inc.* | 5,371,553 | |||
| 7,757,704 | |||||
| Home Building 0.8% | |||||
| 78,002 | M.D.C. Holdings, Inc. | 3,623,193 | |||
| 2,990 | NVR, Inc.* | 1,599,650 | |||
| 5,222,843 | |||||
| Hotels, Restaurants and Leisure 0.5% | |||||
| 91,760 | Orient-Express Hotels Ltd., Class A | 3,429,989 | |||
| Household Durables 0.4% | |||||
| 3,258,960 | Nien Made Enterprise Co. Ltd. | 2,667,406 | |||
| Household Furnishings 0.8% | |||||
| 155,635 | American Woodmark Corp. | 5,243,343 | |||
| Insurance 3.0% | |||||
| 596,137 | Hub International Ltd. | 17,240,282 | |||
| 411,750 | KMG America Corp.* | 3,026,363 | |||
| 20,266,645 | |||||
| Investment Management Companies 4.3% | |||||
| 413,575 | Apollo Investment Corp. | 8,482,423 | |||
| 556,410 | Ares Capital Corp. | 9,692,662 | |||
| 400 | Brantley Mezzanine Finance, LLC* ** *** † | — | |||
| 638,293 | MCG Capital Corp. | 10,423,325 | |||
| 28,598,410 | |||||
53
| SMALL CAP VALUE FUND — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| Jewelry, Watches and Gemstones 1.2% | |||||
| 370,000 | Fossil, Inc.* | $ | 7,969,800 | ||
| Medical Services 1.8% | |||||
| 121,395 | Magellan Health Services, Inc.* | 5,171,427 | |||
| 542,600 | U.S. Physical Therapy, Inc.* | 6,467,792 | |||
| 11,639,219 | |||||
| Metals and Mining 0.4% | |||||
| 2,074,275 | Consolidated Minerals Ltd. | 2,708,872 | |||
| Miscellaneous Producer Durables 0.3% | |||||
| 165,830 | Blount International, Inc.* | 1,661,617 | |||
| Oil and Gas 7.4% | |||||
| 304,520 | CNX Gas Corp.* | 7,055,729 | |||
| 1,474,740 | Far East Energy Corp.* | 1,681,203 | |||
| 318,440 | Petrohawk Energy Corp.* | 3,305,407 | |||
| 135,750 | Plains Exploration & Production Co.* | 5,825,033 | |||
| 2,833,875 | Saxon Energy Services, Inc.* | 10,015,036 | |||
| 537,585 | Toreador Resources Corp.* | 9,902,316 | |||
| 237,890 | Ultra Petroleum Corp.* | 11,444,888 | |||
| 49,229,612 | |||||
| Printing and Copying Services 0.5% | |||||
| 181,160 | Schawk, Inc. | 3,300,735 | |||
| Production Technology Equipment 0.3% | |||||
| 229,645 | Nanometrics, Inc.* | 2,124,216 | |||
| Publishing — Miscellaneous 0.5% | |||||
| 93,515 | Courier Corp. | 3,473,147 | |||
| Real Estate Investment Trusts (REIT) 13.0% | |||||
| 314,195 | Arbor Realty Trust, Inc. | 8,030,824 | |||
| 475,000 | CBRE Realty Financial, Inc.***† | 6,671,494 | |||
| 280,205 | Crystal River Capital, Inc. | 6,411,090 | |||
| 300,000 | Crystal River Capital, Inc.***† | 6,726,720 | |||
| 1,483,470 | HomeBanc Corp. | 9,123,341 | |||
| 321,880 | KKR Financial Corp. | 7,898,935 | |||
| 838,535 | Medical Properties Trust, Inc. | 11,227,984 | |||
| 1,093,920 | NorthStar Realty Finance Corp. | 13,892,784 | |||
| 326,065 | Redwood Trust, Inc. | 16,423,894 | |||
| 86,407,066 | |||||
| Rental and Leasing Services — Commercial 1.8% | |||||
| 381,410 | McGrath RentCorp | 9,764,096 | |||
| 670,108 | MicroFinancial, Inc. | 2,184,552 | |||
| 11,948,648 | |||||
| Retail 8.4% | |||||
| 447,307 | America’s Car-Mart, Inc.* | 7,358,200 | |||
| 460,466 | Big 5 Sporting Goods Corp. | 10,498,625 | |||
| 576,300 | Global Imaging Systems, Inc.* | 12,718,941 | |||
| 384,495 | Lithia Motors, Inc., Class A | 9,504,716 | |||
| 250,023 | Rush Enterprises, Inc., Class A* | 4,170,384 | |||
| 134,980 | Rush Enterprises, Inc., Class B* | 2,104,338 | |||
| 275,080 | Sonic Automotive, Inc. | 6,351,597 | |||
| 231,275 | Tuesday Morning Corp. | 3,210,097 | |||
| 55,916,898 | |||||
| Shoes 0.5% | |||||
| 139,515 | Kenneth Cole Productions, Inc., Class A | 3,399,981 | |||
| Textiles, Apparel and Luxury Goods 0.1% | |||||
| 1,370,000 | EganaGoldpfeil (Holdings) Ltd. | 641,843 | |||
| Shares | Value | ||||
| Truckers 5.7% | |||||
| 90,905 | Con-way, Inc. | $ | 4,074,362 | ||
| 120,970 | Covenant Transport, Inc., Class A* | 1,477,044 | |||
| 336,710 | J.B. Hunt Transport Services, Inc. | 6,993,467 | |||
| 323,829 | Quality Distribution, Inc.* | 4,766,763 | |||
| 417,581 | USA Truck, Inc.* | 7,954,918 | |||
| 680,315 | Vitran Corp., Inc.* | 12,585,827 | |||
| 37,852,381 | |||||
| Wholesalers 2.5% | |||||
| 787,560 | Beacon Roofing Supply, Inc.* | 15,940,214 | |||
| 38,890 | Houston Wire & Cable Co.* | 731,132 | |||
| 16,671,346 | |||||
Total Common Stocks (cost $527,063,258) | 653,701,852 | ||||
54
| SEPTEMBER 30, 2006 | ||
| Principal Amount | Value | ||||
| CORPORATE BONDS 0.3% | |||||
| Investment Management Companies 0.3% | |||||
| $2,000,000 | Brantley Mezzanine Finance, LLC, 10.00%, 9/21/09***†‡ | $ | 1,776,400 | ||
| Total Corporate Bonds (cost $ 1,973,795) | 1,776,400 | ||||
| SHORT-TERM INVESTMENTS 1.0% | |||||
| Repurchase Agreement 1.0% | |||||
| 6,326,000 | Repurchase Agreement dated 9/29/06, 4.30% due 10/2/06 with State Street Bank and Trust Co. collateralized by $ 4,810,000 of United States Treasury Bonds 7.625% due 2/15/25; value: $6,457,425; repurchase proceeds: $ 6,328,267 (cost $ 6,326,000) | $ | 6,326,000 | ||
| Total Short-Term Investments (cost $6,326,000) | 6,326,000 | ||||
| Total Investments (cost $535,363,053) 99.6% | 661,804,252 | ||||
| Other Assets less Liabilities 0.4% | 2,820,602 | ||||
| NET ASSETS 100.0% | $ | 664,624,854 | |||
| Number of Contracts | Value | ||||
| CALL OPTIONS WRITTEN | |||||
| 600 | NCI Buildings Systems, Inc. expiring 10/21/06 exercise $ 60 | $ | 39,000 | ||
| 900 | Supertex, Inc. expiring 10/21/06 exercise $ 40 | 85,500 | |||
| Total Call Options Written (premium $230,882) | $ | 124,500 | |||
| * Non-income producing. | |||||
| ** Common units. | |||||
| *** Security was fair valued under procedures adopted by the Board of Directors (see Note 2). | |||||
| † Security purchased in a private placement transaction or under Rule 144A of the Securities Act of 1933 (see Note 9). | |||||
| Affiliated company (see Note 8). | |||||
| All or a portion of this security has been designated as collateral for written options. | |||||
| ‡ Defaulted security. | |||||
| See notes to financial statements. | |||||
55
| STRATEGIC INCOME FUND — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 95.3% | |||||
| Agriculture, Fishing and Ranching 0.5% | |||||
| 2,250 | Terra Nitrogen Co., L.P. | $ | 58,837 | ||
| Auto Components 0.6% | |||||
| 42,845 | Super Cheap Auto Group Ltd. (Australia) | 79,933 | |||
| Banks 6.4% | |||||
| 129,985 | Fubon Bank Ltd. (Hong Kong) | 50,387 | |||
| 4,483 | HSBC Holdings plc (United Kingdom) | 81,769 | |||
| 5,390 | Indymac Bancorp, Inc. | 221,853 | |||
| 2,980 | North Fork Bancorporation, Inc. | 85,347 | |||
| 3,235 | Popular, Inc. (Puerto Rico) | 62,888 | |||
| 17,042 | The Bank of East Asia Ltd. (Hong Kong) | 77,437 | |||
| 4,116 | The Bank of N.T. Butterfield & Son Ltd. (Bermuda) | 236,696 | |||
| 816,377 | |||||
| Chemicals 0.9% | |||||
| 2,935 | Dow Chemical Co. | 114,406 | |||
| Commercial Services and Supplies 4.7% | |||||
| 1,495 | Corporate Executive Board Co. | 134,415 | |||
| 6,705 | Macquarie Infrastructure Company Trust | 209,062 | |||
| 5,065 | Monro Muffler Brake, Inc. | 172,261 | |||
| 54,000 | Raffles Education Corp. Ltd. (Singapore) | 86,460 | |||
| 602,198 | |||||
| Cosmetics 1.2% | |||||
| 4,865 | Avon Products, Inc. | 149,161 | |||
| Diversified Financial Services 13.1% | |||||
| 43,285 | Acta Holdings ASA (Norway) | 175,250 | |||
| 4,325 | Adjustable Rate MBS Trust (Canada) | 77,585 | |||
| 2,600 | Australian Stock Exchange Ltd. (Australia) | 63,058 | |||
| 3,640 | AWD Holding AG (Germany) | 131,579 | |||
| 2,722 | Banco de Chile ADR (Chile) | 113,154 | |||
| 1,360 | Citigroup, Inc. | 67,551 | |||
| 9,300 | Countrywide Financial Corp. | 325,872 | |||
| 7,505 | D. Carnegie & Co. AB (Sweden) | 158,345 | |||
| 241,000 | Macquarie International Infrastructure Fund Ltd. (Bermuda) | 144,320 | |||
| 1,260 | Oslo Bors Holdings ASA (Norway) | 110,144 | |||
| 1,740 | Perpetual Ltd. (Australia) | 94,919 | |||
| 13,518 | Treasury Group Ltd. (Australia) | 112,983 | |||
| 1,545 | Union Financiere de France Banque S.A. (France) | 91,742 | |||
| 1,666,502 | |||||
| Drugs and Pharmaceuticals 0.4% | |||||
| 1,695 | Pfizer, Inc. | 48,070 | |||
| Electronics — Semiconductors/ Components 2.6% | |||||
| 5,300 | Maxim Integrated Products, Inc. | 148,771 | |||
| 5,560 | Microchip Technology, Inc. | 180,255 | |||
| 329,026 | |||||
| Energy Equipment and Services 1.2% | |||||
| 4,960 | Bonnett’s Energy Services Trust (Canada) | 95,810 | |||
| 5,440 | Deepwell Energy Services Trust (Canada) | 50,764 | |||
| 146,574 | |||||
| Finance Companies 3.5% | |||||
| 4,155 | Capital One Financial Corp. | 326,832 | |||
| 13,340 | Delta Financial Corp. | 122,195 | |||
| 449,027 | |||||
| Shares | Value | ||||
| Financial Data Processing Services and Systems 1.0% | |||||
| 3,625 | Paychex, Inc. | $ | 133,581 | ||
| Financial — Miscellaneous 3.9% | |||||
| 2,895 | Fidelity National Financial, Inc. | 120,577 | |||
| 6,115 | First American Corp. | 258,909 | |||
| 1,945 | MGIC Investment Corp. | 116,641 | |||
| 496,127 | |||||
| Health Care Management Services 2.2% | |||||
| 6,840 | Birner Dental Management Services, Inc. | 149,864 | |||
| 3,980 | Computer Programs & Systems, Inc. | 130,425 | |||
| 280,289 | |||||
| Home Building 2.1% | |||||
| 5,665 | D.R. Horton, Inc. | 135,677 | |||
| 2,825 | M.D.C. Holdings, Inc. | 131,221 | |||
| 266,898 | |||||
| Investment Management Companies 5.5% | |||||
| 940 | AllianceBernstein Holding L.P. | 64,851 | |||
| 3,935 | Allied Capital Corp. | 118,876 | |||
| 10,048 | Apollo Investment Corp. | 206,085 | |||
| 18,203 | Ares Capital Corp. | 317,096 | |||
| 706,908 | |||||
| Leisure Time 1.4% | |||||
| 4,500 | Pool Corp. | 173,250 | |||
| Medical and Dental Instruments and Supplies 0.8% | |||||
| 2,135 | Landauer, Inc. | 108,351 | |||
| Metals and Mining 0.4% | |||||
| 42,423 | Consolidated Minerals Ltd. (Australia) | 55,402 | |||
| Oil and Gas 0.6% | |||||
| 1,285 | ConocoPhillips | 76,496 | |||
| Personal Products 0.9% | |||||
| 9,525 | Natura Cosmeticos S.A. (Brazil) | 116,946 | |||
| Real Estate 0.6% | |||||
| 78,000 | Suntec Real Estate Investment Trust (Singapore) | 72,769 | |||
56
| SEPTEMBER 30, 2006 | ||
| Shares | Value | ||||
| Real Estate Investment Trusts (REIT) 33.6% | |||||
| 5,785 | American Home Mortgage Investment Corp. | $ | 201,723 | ||
| 6,705 | American Mortgage Acceptance Co. | 120,958 | |||
| 23,730 | Anthracite Capital, Inc. | 305,168 | |||
| 17,365 | Anworth Mortgage Asset Corp. | 144,998 | |||
| 9,940 | Arbor Realty Trust, Inc. | 254,066 | |||
| 12,585 | Capital Lease Funding, Inc. | 139,568 | |||
| 10,855 | CapitalSource, Inc. | 280,276 | |||
| 3,150 | Capital Trust, Inc., Class A | 128,300 | |||
| 8,400 | CBRE Realty Finance, Inc. | 128,100 | |||
| 6,165 | Deerfield Triarc Capital Corp. | 80,823 | |||
| 7,395 | Fieldstone Investment Corp. | 64,558 | |||
| 9,765 | Gramercy Capital Corp. | 246,176 | |||
| 34,495 | HomeBanc Corp. | 212,144 | |||
| 4,440 | iStar Financial, Inc. | 185,148 | |||
| 7,540 | JER Investors Trust, Inc. | 129,386 | |||
| 10,155 | KKR Financial Corp. | 249,204 | |||
| 19,340 | MFA Mortgage Investments, Inc. | 144,083 | |||
| 835 | New Century Financial Corp. | 32,824 | |||
| 52,070 | New York Mortgage Trust, Inc. | 200,990 | |||
| 19,830 | NorthStar Realty Finance Corp. | 251,841 | |||
| 2,365 | NovaStar Financial, Inc. | 69,034 | |||
| 17,185 | Opteum, Inc. | 138,339 | |||
| 4,370 | RAIT Investment Trust | 126,075 | |||
| 7,910 | Redwood Trust, Inc. | 398,427 | |||
| 3,490 | Spirit Finance Corp. | 40,519 | |||
| 4,272,728 | |||||
| Rental and Leasing Services — Commercial 2.0% | |||||
| 6,430 | McGrath RentCorp | 164,608 | |||
| 28,450 | MicroFinancial, Inc. | 92,747 | |||
| 257,355 | |||||
| Retail 2.8% | |||||
| 3,515 | Home Depot, Inc. | 127,489 | |||
| 18,315 | Topps Tiles plc (United Kingdom) | 88,788 | |||
| 2,750 | Wal-Mart Stores, Inc. | 135,630 | |||
| 351,907 | |||||
| Savings and Loans 0.7% | |||||
| 3,930 | Washington Federal, Inc. | 88,189 | |||
| Securities Brokerage and Services 0.6% | |||||
| 3,630 | CharterMac | 72,455 | |||
| Transportation Infrastructure 0.6% | |||||
| 770 | Grupo Aeroportuario del Pacifico S.A. de C.V. ADR (Mexico) | 26,180 | |||
| 88,000 | Singapore Post Ltd. (Singapore) | 56,026 | |||
| 82,206 | |||||
| Wireless Telecommunication Services 0.5% | |||||
| 300 | SK Telecom Co. Ltd. (Korea) | 63,880 | |||
| Total Common Stocks (cost $11,732,888) | 12,135,848 | ||||
| PREFERRED STOCKS 1.0% | |||||
| Machinery 1.0% | |||||
| 27,500 | Weg S.A. Pfd. (Brazil) | 124,353 | |||
| Total Preferred Stocks (cost $112,958) | 124,353 | ||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 5.4% | ||||||
| Repurchase Agreement 5.4% | ||||||
| $684,000 | Repurchase Agreement dated 9/29/06, 4.30% due 10/2/06 with State Street Bank and Trust Co. collateralized by $520,000 of United States Treasury Bonds 7.625% due 2/15/25; value: $698,100; repurchase proceeds: $684,245 (cost $684,000) | $ | 684,000 | |||
| Total Short-Term Investments (cost $684,000) | 684,000 | |||||
| Total Investments (cost $12,529,846) 101.7% | 12,944,201 | |||||
| Liabilities less Other Assets (1.7)% | (212,169 | ) | ||||
| NET ASSETS 100.0% | $ | 12,732,032 | ||||
ADR American Depositary Receipts.
See notes to financial statements. |
| |||||
At September 30, 2006, Wasatch Strategic Income Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 3.3 | ||
Bermuda | 3.1 | ||
Brazil | 2.0 | ||
Canada | 1.8 | ||
Chile | 0.9 | ||
France | 0.8 | ||
Germany | 1.1 | ||
Hong Kong | 1.0 | ||
Korea | 0.5 | ||
Mexico | 0.2 | ||
Norway | 2.3 | ||
Puerto Rico | 0.5 | ||
Singapore | 1.8 | ||
Sweden | 1.3 | ||
United Kingdom | 1.4 | ||
United States | 78.0 | ||
TOTAL | 100.0 | % | |
57
| ULTRA GROWTH FUND — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 96.6% | |||||
| Banks 3.9% | |||||
| 255,300 | HDFC Bank Ltd. | $ | 5,160,082 | ||
| 108,580 | HDFC Bank Ltd. ADR | 6,628,809 | |||
| 11,788,891 | |||||
| Beverage — Soft Drinks 0.6% | |||||
| 76,420 | Peet’s Coffee & Tea, Inc.* | 1,911,264 | |||
| Biotechnology Research and Production 3.1% | |||||
| 200,645 | ArthroCare Corp.* | 9,402,225 | |||
| Casinos and Gambling 1.6% | |||||
| 183,950 | Shuffle Master, Inc.* | 4,968,490 | |||
| Chemicals 0.4% | |||||
| 40,765 | Cabot Microelectronics Corp.* | 1,174,847 | |||
| Commercial Information Services 3.6% | |||||
| 405,295 | LECG Corp.* | 7,603,334 | |||
| 94,650 | Morningstar, Inc.* | 3,492,585 | |||
| 11,095,919 | |||||
| Commercial Services and Supplies 5.9% | |||||
| 52,947 | Advisory Board Co.* | 2,674,882 | |||
| 47,770 | Corporate Executive Board Co. | 4,295,001 | |||
| 18,819 | CoStar Group, Inc.* | 777,601 | |||
| 249,820 | Providence Service Corp. (The)* | 6,892,534 | |||
| 2,235,000 | Raffles Education Corp. Ltd. | 3,578,480 | |||
| 18,218,498 | |||||
| Communications Technology 1.7% | |||||
| 101,105 | Comtech Group, Inc.* | 1,513,542 | |||
| 128,765 | Novatel Wireless, Inc.* | 1,240,007 | |||
| 61,035 | WebEx Communications, Inc.* | 2,381,586 | |||
| 5,135,135 | |||||
| Computer Services Software and Systems 10.5% | |||||
| 104,445 | Cognizant Technology Solutions Corp., Class A* | 7,735,197 | |||
| 149,740 | DealerTrack Holdings, Inc.* | 3,310,751 | |||
| 88,980 | F5 Networks, Inc.* | 4,780,006 | |||
| 83,390 | Kanbay International, Inc.* | 1,714,498 | |||
| 156,350 | NeuStar, Inc., Class A* | 4,338,713 | |||
| 176,070 | Opnet Technologies, Inc.* | 2,308,278 | |||
| 268,088 | SRA International, Inc., Class A* | 8,058,725 | |||
| 32,246,168 | |||||
| Computer Technology 0.5% | |||||
| 64,151 | Trident Microsystems, Inc.* | 1,492,152 | |||
| Diversified Telecommunication Services 0.5% | |||||
| 438,838 | Astra Microwave Products Ltd. | 1,610,063 | |||
| Drugs and Pharmaceuticals 0.3% | |||||
| 30,465 | Aspreva Pharmaceuticals Corp.* | 790,567 | |||
| Education Services 2.5% | |||||
| 86,065 | Laureate Education, Inc.* | 4,119,071 | |||
| 31,426 | Strayer Education, Inc. | 3,400,607 | |||
| 7,519,678 | |||||
| Electrical and Electronics 1.8% | |||||
| 282,323 | Power Integrations, Inc.* | 5,533,531 | |||
| Electronics 0.3% | |||||
| 30,620 | FLIR Systems, Inc.* | 831,639 | |||
| Shares | Value | ||||
| Electronics — Medical Systems 1.0% | |||||
| 30,090 | Intuitive Surgical, Inc.* | $ | 3,172,991 | ||
| Electronics — Semiconductors/Components 15.2% | |||||
| 118,820 | Advanced Analogic Technologies, Inc.* | 652,322 | |||
| 127,807 | Integrated Device Technology, Inc.* | 2,052,580 | |||
| 540,455 | Micrel, Inc.* | 5,182,963 | |||
| 233,735 | Microchip Technology, Inc. | 7,577,689 | |||
| 127,625 | Microsemi Corp.* | 2,405,731 | |||
| 274,895 | Microtune, Inc.* | 1,335,990 | |||
| 139,738 | PLX Technology, Inc.* | 1,449,083 | |||
| 58,975 | Saifun Semiconductors Ltd.* | 1,703,788 | |||
| 325,840 | Silicon Laboratories, Inc.* | 10,107,557 | |||
| 200,101 | SiRF Technology Holdings, Inc.* | 4,800,423 | |||
| 161,870 | Techwell, Inc.* | 2,424,813 | |||
| 201,780 | Tessera Technologies, Inc.* | 7,017,908 | |||
| 46,710,847 | |||||
| Energy Equipment and Services 0.6% | |||||
| 123,520 | TGS-NOPEC Geophysical Co. ASA* | 1,955,884 | |||
| Financial Information Services 1.1% | |||||
| 106,130 | Clayton Holdings, Inc.* | 1,334,054 | |||
| 41,510 | FactSet Research Systems, Inc. | 2,016,141 | |||
| 3,350,195 | |||||
| Financial — Miscellaneous 0.9% | |||||
| 128,498 | First Cash Financial Services, Inc.* | 2,645,774 | |||
| Health Care Facilities 9.3% | |||||
| 198,911 | Healthways, Inc.* | 8,871,431 | |||
| 213,849 | Psychiatric Solutions, Inc.* | 7,290,112 | |||
| 491,606 | United Surgical Partners International, Inc.* | 12,206,577 | |||
| 28,368,120 | |||||
| Health Care Management Services 4.4% | |||||
| 116,677 | AmSurg Corp.* | 2,597,230 | |||
| 180,895 | Pediatrix Medical Group, Inc.* | 8,248,812 | |||
| 44,405 | WellCare Health Plans, Inc.* | 2,514,655 | |||
| 13,360,697 | |||||
| Health Care Providers and Services 1.0% | |||||
| 44,217 | Icon plc ADR* | 3,120,836 | |||
| Leisure Time 0.7% | |||||
| 46,335 | Life Time Fitness, Inc.* | 2,144,847 | |||
| Machinery 0.5% | |||||
| 100,800 | Pason Systems, Inc. | 1,423,122 | |||
| Medical and Dental Instruments and Supplies 8.1% | |||||
| 63,965 | Abaxis, Inc.* | 1,496,141 | |||
| 27,185 | Dexcom, Inc.* | 302,569 | |||
| 88,230 | FoxHollow Technologies, Inc.* | 3,016,584 | |||
| 321,420 | IntraLase Corp.* | 6,335,188 | |||
| 167,415 | Kyphon, Inc.* | 6,264,669 | |||
| 156,186 | NuVasive, Inc.* | 3,140,901 | |||
| 78,685 | ResMed, Inc.* | 3,167,071 | |||
| 15,645 | Techne Corp.* | 795,705 | |||
| 64,714 | VNUS Medical Technologies, Inc.* | 430,348 | |||
| 24,949,176 | |||||
| Miscellaneous Materials and Commodities 1.4% | |||||
| 168,760 | Luna Innovations, Inc.* | 621,037 | |||
| 177,680 | Symyx Technologies, Inc.* | 3,765,039 | |||
| 4,386,076 | |||||
58
| SEPTEMBER 30, 2006 | ||
| Shares | Value | ||||
| Oil and Gas 0.5% | |||||
| 152,490 | Petrohawk Energy Corp.* | $ | 1,582,846 | ||
| Production Technology Equipment 1.8% | |||||
| 132,780 | Eagle Test Systems, Inc.* | 2,193,525 | |||
| 172,920 | Rudolph Technologies, Inc.* | 3,169,624 | |||
| 5,363,149 | |||||
| Retail 6.6% | |||||
| 23,710 | Blue Nile, Inc.* | 861,858 | |||
| 45,435 | Charlotte Russe Holdings, Inc.* | 1,251,280 | |||
| 149,610 | Guitar Center, Inc.* | 6,684,575 | |||
| 6,319,640 | Hongguo Int’l. Holdings Ltd.* | 2,649,118 | |||
| 265,625 | O’Reilly Automotive, Inc.* | 8,821,406 | |||
| 20,268,237 | |||||
| Securities Brokerage and Services 1.5% | |||||
| 80,440 | GFI Group, Inc.* | 4,447,528 | |||
| Semiconductor Equipment and Products 1.9% | |||||
| 55,535 | CSR plc* | 876,279 | |||
| 719,535 | O2Micro International Ltd. ADR* | 4,971,987 | |||
| 5,848,266 | |||||
| Truckers 2.9% | |||||
| 531,492 | Knight Transportation, Inc. | 9,008,789 | |||
Total Common Stocks (cost $261,386,242) | 295,826,447 | ||||
| PREFERRED STOCKS 1.8% | |||||
| Biotechnology Research and Production 0.2% | |||||
| 169,492 | Nanosys, Inc., Series D Pfd.**** † | 500,001 | |||
| Communications Technology 0.0% | |||||
| 91,388 | Xtera Communications, Inc., Series A-1 Pfd.**** † | 99,065 | |||
| Consumer Products 0.2% | |||||
| 201,613 | Ophthonix, Inc., Series C Pfd.**** † | 500,000 | |||
| Drugs and Pharmaceuticals 0.3% | |||||
| 2,830,188 | Point Biomedical Corp., Series F Pfd.**** † | 1,050,000 | |||
| Electronics — Medical Systems 0.3% | |||||
| 1,080,146 | Zonare Medical Systems, Inc., Series E Pfd.****† | 895,441 | |||
| Health Care Management Services 0.2% | |||||
| 516,161 | Elder Health, Inc., Series G Pfd.**** † | 571,428 | |||
| 108,917 | TargetRX, Inc., Series D Pfd.**** † | 151,395 | |||
| 722,823 | |||||
| Medical and Dental Instruments and Supplies 0.5% | |||||
| 243,902 | TherOx, Inc., Series I Pfd.**** † | 999,998 | |||
| 253,064 | Transoma Medical, Inc., Series B Pfd.**** † | 475,001 | |||
| 1,474,999 | |||||
| Utilities — Telecommunications 0.1% | |||||
| 64,269 | Neutral Tandem, Inc., Series C Pfd.**** † | 403,796 | |||
Total Preferred Stocks (cost $6,280,195) | 5,646,125 | ||||
| Shares | Value | ||||
| LIMITED PARTNERSHIP INTEREST 0.6% | |||||
| Other 0.6% | |||||
| Montagu Newhall Global Partners II-B, L.P.**** † | $ | 1,586,801 | |||
| Montagu Newhall Global Partners III-B, L.P.**** † | 118,257 | ||||
| 1,705,058 | |||||
Total Limited Partnership Interest (cost $1,924,292) | 1,705,058 | ||||
| WARRANTS 0.0% | |||||
| Drugs and Pharmaceuticals 0.0% | |||||
| 849,056 | Point Biomedical Corp. expiring 2/16/12* *** † | — | |||
| Electronics — Medical Systems 0.0% | |||||
| 162,021 | Zonare Medical Systems, Inc. expiring 6/30/11* *** † | — | |||
Total Warrants (cost $0) | — | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 0.7% | |||||
| Repurchase Agreement 0.7% | |||||
| $2,226,000 | Repurchase Agreement dated 9/29/06, 4.30% due 10/2/06 with State Street Bank and Trust Co. collateralized by $1,695,000 of United States Treasury Bonds 7.625% due 2/15/25; value: $2,275,538; repurchase proceeds: $2,226,798 (cost $2,226,000) | $ | 2,226,000 | ||
Total Short-Term Investments (cost $2,226,000) | 2,226,000 | ||||
Total Investments (cost $271,816,729) 99.7% | 305,403,630 | ||||
| Other Assets less Liabilities 0.3% | 1,002,645 | ||||
| NET ASSETs 100.0% | $ | 306,406,275 | |||
| *Non-income producing. | |||||
| ***Security was fair valued under procedures adopted by the Board of Directors (see Note 2). | |||||
| †Security purchased in a private placement transaction or under Rule 144A of the Securities Act of 1933 (see Note 9). | |||||
| (1)All or a portion of this security has been designated as collateral for purchase commitments (see Note 10). | |||||
ADR American Depositary Receipts. See notes to financial statements. | |||||
59
| U.S. TREASURY FUND — Schedule of Investments | SEPTEMBER 30, 2006 | |
| Principal Amount | Value | |||||
| U.S. GOVERNMENT OBLIGATIONS 101.1% | ||||||
| $14,400,000 | U.S. Treasury Bond, 5.25%, 11/15/28 | $ | 15,223,507 | |||
| 33,040,000 | U.S. Treasury Bond, 5.25%, 2/15/29 | 34,937,223 | ||||
| 10,800,000 | U.S. Treasury Bond, 5.50%, 8/15/28 | 11,768,630 | ||||
| 6,800,000 | U.S. Treasury Bond, 6.125%, 11/15/27 | 7,953,341 | ||||
| 4,300,000 | U.S. Treasury Bond, 6.375%, 8/15/27 | 5,162,017 | ||||
| 4,500,000 | U.S. Treasury Bond, 6.625%, 2/15/27 | 5,533,596 | ||||
| 5,650,000 | U.S. Treasury Bond, 6.75%, 8/15/26 | 7,013,944 | ||||
| 4,755,000 | U.S. Treasury Bond, 6.875%, 8/15/25 | 5,941,149 | ||||
| 4,930,000 | U.S. Treasury Bond, 7.50%, 11/15/24 | 6,500,284 | ||||
| 16,216,000 | U.S. Treasury Strip, principal only, 11/15/21 | 7,788,123 | ||||
| 79,600,000 | U.S. Treasury Strip, principal only, 8/15/25 | 31,930,346 | ||||
| 186,800,000 | U.S. Treasury Strip, principal only, 11/15/27 | 67,615,996 | ||||
Total U.S. Government Obligations (cost $203,151,710) | 207,368,156 | |||||
| SHORT-TERM INVESTMENTS 0.9% | ||||||
| Repurchase Agreement 0.9% | ||||||
| 1,808,000 | Repurchase Agreement dated 9/29/06, 4.30% due 10/2/06 with State Street Bank and Trust Co. collateralized by $1,375,000 of United States Treasury Bonds 7.625% due 2/15/25; value: $1,845,938; repurchase proceeds: $1,808,648 (cost $1,808,000) | 1,808,000 | ||||
Total Short-Term Investments (cost $1,808,000) | 1,808,000 | |||||
Total Investments (cost $204,959,710) 102.0% | 209,176,156 | |||||
| Liabilities less Other Assets (2.0)% | (4,181,850 | ) | ||||
| NET ASSETS 100.0% | $ | 204,994,306 | ||||
| See notes to financial statements. | ||||||
60
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61
| WASATCH FUNDS — Statements of Assets and Liabilities | ||
| CORE GROWTH FUND | GLOBAL SCIENCE & TECHNOLOGY FUND | HERITAGE GROWTH FUND | |||||||||
Assets: | |||||||||||
Investments, at cost | |||||||||||
Unaffiliated issuers | $ | 1,107,389,388 | $ | 111,179,766 | $ | 221,980,348 | |||||
Affiliated issuers* | — | — | — | ||||||||
Repurchase agreements | 589,000 | 2,234,000 | 5,025,000 | ||||||||
| $ | 1,107,978,388 | $ | 113,413,766 | $ | 227,005,348 | ||||||
Investments, at value | |||||||||||
Unaffiliated issuers | $ | 1,380,764,499 | $ | 123,968,236 | $ | 239,811,837 | |||||
Affiliated issuers* | — | — | — | ||||||||
Repurchase agreements | 589,000 | 2,234,000 | 5,025,000 | ||||||||
| 1,381,353,499 | 126,202,236 | 244,836,837 | |||||||||
Cash | 1,019 | 279 | 744 | ||||||||
Foreign currency on deposit (cost of $0, $542,516, $0, $2,063,633, $1,816,999, $199,667, $1,029,487, $1,579,848, and $102,465, respectively) | — | 537,675 | — | ||||||||
Receivable for investment securities sold | 1,754,364 | 4,566 | 538,069 | ||||||||
Receivable from broker | 42,053 | — | — | ||||||||
Capital shares receivable | 346,754 | 89,638 | 10,919 | ||||||||
Interest and dividends receivable | 739,080 | 18,878 | 83,606 | ||||||||
Prepaid expenses and other assets | 53,622 | 12,180 | 20,469 | ||||||||
Unrealized appreciation on foreign currency contracts | — | — | — | ||||||||
Total Assets | 1,384,248,338 | 126,907,505 | 245,490,644 | ||||||||
Liabilities: | |||||||||||
Call options written at value (premiums of $0, $0, $0, $0, $0, $0, $71,028, $0, and $230,882, respectively) | — | — | — | ||||||||
Bank overdraft | — | — | — | ||||||||
Payable for securities purchased | 391,203 | 273,963 | 187,797 | ||||||||
Capital shares payable | 997,584 | 25,141 | 264,837 | ||||||||
Accrued investment advisory fees | 1,137,867 | 166,023 | 149,344 | ||||||||
Accrued fund administration fees | 27,886 | 2,524 | 4,907 | ||||||||
Accrued expenses and other liabilities | 357,598 | 81,042 | 107,614 | ||||||||
Accrued deferred foreign capital gains taxes | 309,632 | — | 395,793 | ||||||||
Unrealized depreciation on foreign currency contracts | — | — | — | ||||||||
Total Liabilities | 3,221,770 | 548,693 | 1,110,292 | ||||||||
Net Assets | $ | 1,381,026,568 | $ | 126,358,812 | $ | 244,380,352 | |||||
Net Assets Consist of: | |||||||||||
Capital stock | $ | 336,163 | $ | 90,429 | $ | 214,451 | |||||
Paid-in capital in excess of par | 1,011,553,190 | 108,842,187 | 219,823,520 | ||||||||
Undistributed net investment income (loss) | (209,317 | ) | (149,555 | ) | 21,667 | ||||||
Undistributed net realized gain on investments and foreign currency translations | 96,281,034 | 4,792,147 | 6,920,217 | ||||||||
Net unrealized appreciation on investments and foreign currency translations | 273,065,498 | 12,783,604 | 17,400,497 | ||||||||
Net Assets | $ | 1,381,026,568 | $ | 126,358,812 | $ | 244,380,352 | |||||
Capital Stock, $.01 par value: | |||||||||||
Authorized | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | ||||||||
Issued and outstanding | 33,616,329 | 9,042,888 | 21,445,059 | ||||||||
NET ASSET VALUE , REDEMPTION PRICE AND OFFERING PRICE PER SHARE | $ | 41.08 | $ | 13.97 | $ | 11.40 | |||||
| * | See Note 8 for information on affiliated issuers. |
See notes to financial statements.
62
| SEPTEMBER 30, 2006 | ||
| INTERNATIONAL GROWTH FUND | INTERNATIONAL OPPORTUNITIES FUND | MICRO CAP FUND | MICRO CAP VALUE FUND | SMALL CAP GROWTH FUND | SMALL CAP VALUE FUND | |||||||||||||||
| $ | 297,341,563 | $ | 27,961,597 | $ | 427,468,093 | $ | 78,302,044 | $ | 997,399,463 | $ | 518,704,840 | |||||||||
| — | 32,400,913 | — | — | 10,332,213 | ||||||||||||||||
| 2,728,000 | — | 10,367,000 | 4,009,000 | — | 6,326,000 | |||||||||||||||
| $ | 300,069,563 | $ | 27,961,597 | $ | 470,236,006 | $ | 82,311,044 | $ | 997,399,463 | $ | 535,363,053 | |||||||||
$ |
377,534,117 |
| $ | 35,760,261 | $ | 548,367,743 | $ | 91,681,665 | $ | 1,234,129,205 | $ | 642,892,425 | ||||||||
| — | — | 27,153,364 | — | — | 12,585,827 | |||||||||||||||
| 2,728,000 | — | 10,367,000 | 4,009,000 | — | 6,326,000 | |||||||||||||||
| 380,262,117 | 35,760,261 | 585,888,107 | 95,690,665 | 1,234,129,205 | 661,804,252 | |||||||||||||||
| 979 | — | 826 | 544,467 | — | 223,233 | |||||||||||||||
| 2,025,698 | 1,789,418 | 198,486 | 1,028,405 | 1,579,848 | 101,012 | |||||||||||||||
| 2,345,419 | 1,531 | 2,722,769 | 127,461 | — | 5,567,966 | |||||||||||||||
| — | — | — | 1,273,462 | — | 1,940,949 | |||||||||||||||
| 69,703 | — | 18,247 | — | 2,961,712 | 55,928 | |||||||||||||||
| 448,516 | 63,635 | 255,315 | 131,715 | 335,314 | 821,267 | |||||||||||||||
| 23,190 | 7,237 | 25,116 | 12,488 | 45,580 | 30,856 | |||||||||||||||
| — | — | — | 121 | — | 89 | |||||||||||||||
| 385,175,622 | 37,622,082 | 589,108,866 | 98,808,784 | 1,239,051,659 | 670,545,552 | |||||||||||||||
| — | — | — | 33,750 | — | 124,500 | |||||||||||||||
| — | 214,956 | — | — | 1,410,179 | — | |||||||||||||||
| 1,286,720 | 478,178 | 4,071,064 | 3,062,286 | — | 3,142,559 | |||||||||||||||
| 94,761 | — | 56,591 | 915 | 1,258,276 | 1,610,559 | |||||||||||||||
| 471,815 | 50,424 | 956,165 | 150,028 | 1,017,182 | 820,883 | |||||||||||||||
| 7,679 | 746 | 11,687 | 1,907 | 24,930 | 13,402 | |||||||||||||||
| 139,176 | 39,003 | 112,264 | 52,178 | 362,993 | 208,795 | |||||||||||||||
| 40,067 | — | — | — | — | — | |||||||||||||||
| 765 | 233 | — | — | — | — | |||||||||||||||
| 2,040,983 | 783,540 | 5,207,771 | 3,301,064 | 4,073,560 | 5,920,698 | |||||||||||||||
| $ | 383,134,639 | $ | 36,838,542 | $ | 583,901,095 | $ | 95,507,720 | $ | 1,234,978,099 | $ | 664,624,854 | |||||||||
| $ | 175,476 | $ | 135,740 | $ | 859,929 | $ | 325,664 | $ | 333,898 | $ | 1,255,314 | |||||||||
| 243,949,144 | 26,817,495 | 413,191,935 | 64,960,314 | 918,042,348 | 463,199,180 | |||||||||||||||
| (512,754 | ) | (65,706 | ) | — | (14,869 | ) | (1,982,758 | ) | 4,523,035 | |||||||||||
| 59,423,042 | 2,177,148 | 54,198,938 | 16,813,056 | 81,854,889 | 69,101,065 | |||||||||||||||
| 80,099,731 | 7,773,865 | 115,650,293 | 13,423,555 | 236,729,722 | 126,546,260 | |||||||||||||||
| $ | 383,134,639 | $ | 36,838,542 | $ | 583,901,095 | $ | 95,507,720 | $ | 1,234,978,099 | $ | 664,624,854 | |||||||||
| 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | |||||||||||||||
| 17,547,551 | 13,573,975 | 85,992,893 | 32,566,426 | 33,389,764 | 125,531,382 | |||||||||||||||
| $ | 21.83 | $ | 2.71 | $ | 6.79 | $ | 2.93 | $ | 36.99 | $ | 5.29 | |||||||||
63
| WASATCH FUNDS — Statements of Assets and Liabilities (continued) | SEPTEMBER 30, 2006 | |
| STRATEGIC INCOME FUND1 | ULTRA GROWTH FUND | U.S. TREASURY FUND | ||||||||
Assets: | ||||||||||
Investments, at cost | ||||||||||
Unaffiliated issuers | $ | 11,845,846 | $ | 269,590,729 | $ | 203,151,710 | ||||
Affiliated issuers* | — | — | — | |||||||
Repurchase agreements | 684,000 | 2,226,000 | 1,808,000 | |||||||
| $ | 12,529,846 | $ | 271,816,729 | $ | 204,959,710 | |||||
Investments, at value | ||||||||||
Unaffiliated issuers | $ | 12,260,201 | $ | 303,177,630 | $ | 207,368,156 | ||||
Affiliated issuers* | — | — | — | |||||||
Repurchase agreements | 684,000 | 2,226,000 | 1,808,000 | |||||||
| 12,944,201 | 305,403,630 | 209,176,156 | ||||||||
Receivable for investment securities sold | 26,209 | 1,774,720 | — | |||||||
Receivable from broker | — | 455,652 | — | |||||||
Capital shares receivable | 56,672 | 10,767 | 75,866 | |||||||
Interest and dividends receivable | 60,766 | 532 | 1,043,915 | |||||||
Receivable from Investment Advisor | 908 | — | — | |||||||
Prepaid expenses and other assets | 9,491 | 20,796 | 15,518 | |||||||
Unrealized appreciation on foreign currency contracts | 20 | — | — | |||||||
Total Assets | 13,098,267 | 307,666,097 | 210,311,455 | |||||||
Liabilities: | ||||||||||
Bank overdraft | 5,355 | 328,967 | 149,002 | |||||||
Payable for securities purchased | 325,629 | 24,628 | — | |||||||
Capital shares payable | 5,385 | 447,992 | 5,011,577 | |||||||
Accrued investment advisory fees | — | 317,332 | 88,079 | |||||||
Accrued fund administration fees | 246 | 6,231 | 4,177 | |||||||
Accrued expenses and other liabilities | 29,620 | 123,690 | 64,314 | |||||||
Accrued deferred foreign capital gains taxes | — | 10,982 | — | |||||||
Total Liabilities | 366,235 | 1,259,822 | 5,317,149 | |||||||
Net Assets | $ | 12,732,032 | $ | 306,406,275 | $ | 204,994,306 | ||||
Net Assets Consist of: | ||||||||||
Capital stock | $ | 12,146 | $ | 127,206 | $ | 145,224 | ||||
Paid-in capital in excess of par | 12,199,096 | 259,701,002 | 206,425,496 | |||||||
Undistributed net investment income (loss) | 72,250 | 125,528 | 359 | |||||||
Undistributed net realized gain (loss) on investments and foreign currency translations | 34,203 | 12,912,388 | (5,793,219 | ) | ||||||
Net unrealized appreciation on investments and foreign currency translations | 414,337 | 33,540,151 | 4,216,446 | |||||||
Net Assets | $ | 12,732,032 | $ | 306,406,275 | $ | 204,994,306 | ||||
Capital Stock, $.01 par value: | ||||||||||
Authorized | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | |||||||
Issued and outstanding | 1,214,645 | 12,720,594 | 14,522,400 | |||||||
NET ASSET VALUE , REDEMPTION PRICE AND OFFERING PRICE PER S HARE | $ | 10.48 | $ | 24.09 | $ | 14.12 | ||||
| 1 | Fund inception date was February 1, 2006. |
| * | See Note 8 for information on affiliated issuers. |
See notes to financial statements.
64
| WASATCH FUNDS — Statements of Operations | FORTHEYEARENDED SEPTEMBER 30, 2006 | |
| CORE GROWTH FUND | GLOBAL SCIENCE & TECHNOLOGY FUND | HERITAGE GROWTH FUND | ||||||||||
Investment Income: | ||||||||||||
Interest | $ | 1,536,278 | $ | 210,533 | $ | 397,852 | ||||||
Dividends1 | ||||||||||||
Unaffiliated issuers | 23,460,743 | 688,700 | 2,424,030 | |||||||||
Affiliated issuers* | — | — | — | |||||||||
Total investment income | 24,997,021 | 899,233 | 2,821,882 | |||||||||
Expenses: | ||||||||||||
Investment advisory fees | 16,119,161 | 1,712,281 | 2,056,173 | |||||||||
Shareholder servicing fees | 1,155,719 | 207,232 | 358,904 | |||||||||
Fund administration fees | 382,133 | 27,153 | 69,598 | |||||||||
Fund accounting fees | 186,366 | 38,673 | 45,255 | |||||||||
Reports to shareholders | 236,700 | 40,738 | 75,845 | |||||||||
Custody fees | 549,113 | 123,941 | 76,842 | |||||||||
Federal and state registration fees | 36,123 | 23,585 | 33,633 | |||||||||
Legal fees | 74,408 | 4,962 | 13,189 | |||||||||
Directors’ fees | 52,254 | 2,952 | 9,193 | |||||||||
Audit fees | 22,777 | 22,777 | 22,777 | |||||||||
Other | 92,979 | 9,110 | 17,683 | |||||||||
Total expenses before reimbursement | 18,907,733 | 2,213,404 | 2,779,092 | |||||||||
Reimbursement of expenses by Advisor | — | — | — | |||||||||
Net Expenses | 18,907,733 | 2,213,404 | 2,779,092 | |||||||||
Net Investment Income (Loss) | 6,089,288 | (1,314,171 | ) | 42,790 | ||||||||
Realized and Unrealized Gain (Loss): | ||||||||||||
Net realized gain on investments and foreign currency translations | ||||||||||||
Unaffiliated issuers | 133,503,152 | 6,251,182 | 8,957,777 | |||||||||
Affiliated issuers* | (3,018,986 | ) | — | — | ||||||||
Net realized gain on short positions | — | 21,058 | — | |||||||||
Realized foreign capital gains taxes | — | (1,321 | ) | 35,186 | ||||||||
Change in unrealized appreciation (depreciation) on investments and foreign currency translations | (98,233,946 | ) | 1,779,861 | (1,966,347 | ) | |||||||
Deferred foreign capital gains taxes | (309,632 | ) | — | (430,979 | ) | |||||||
Net gain on investments | 31,940,588 | 8,050,780 | 6,595,637 | |||||||||
Net Increase in Net Assets Resulting from Operations | $ | 38,029,876 | $ | 6,736,609 | $ | 6,638,427 | ||||||
| 1 | Net of $134,828, $67,769, and $30,491 in foreign withholding taxes, respectively. |
| * | See Note 8 for information on affiliated issuers. |
See notes to financial statements.
65
| WASATCH FUNDS — Statements of Operations (continued) | ||
| INTERNATIONAL GROWTH FUND | INTERNATIONAL OPPORTUNITIES FUND | MICRO FUND | ||||||||||
Investment Income: | ||||||||||||
Interest | $ | 432,642 | $ | 29,156 | $ | 612,637 | ||||||
Dividends2 | ||||||||||||
Unaffiliated issuers | 4,765,886 | 650,369 | 3,870,261 | |||||||||
Affiliated issuers* | — | — | 15,392 | |||||||||
Total investment income | 5,198,528 | 679,525 | 4,498,290 | |||||||||
Expenses: | ||||||||||||
Investment advisory fees | 5,743,150 | 692,471 | 11,847,396 | |||||||||
Shareholder servicing fees | 401,451 | 64,030 | 292,178 | |||||||||
Fund administration fees | 90,897 | 8,229 | 140,610 | |||||||||
Fund accounting fees | 71,174 | 41,842 | 86,244 | |||||||||
Reports to shareholders | 87,232 | 5,497 | 59,318 | |||||||||
Custody fees | 317,152 | 43,339 | 157,629 | |||||||||
Federal and state registration fees | 28,666 | 16,167 | 19,894 | |||||||||
Legal fees | 15,946 | 1,410 | 27,088 | |||||||||
Directors’ fees | 10,827 | 957 | 18,089 | |||||||||
Audit fees | 22,777 | 22,777 | 22,777 | |||||||||
Other | 21,315 | 9,823 | 33,513 | |||||||||
Total expenses before reimbursement | 6,810,587 | 906,542 | 12,704,736 | |||||||||
Reimbursement of expenses by Advisor | — | (127,513 | ) | — | ||||||||
Reimbursement of investment advisory fees | — | — | — | |||||||||
Net Expenses | 6,810,587 | 779,029 | 12,704,736 | |||||||||
Net Investment Income (Loss) | (1,612,059 | ) | (99,504 | ) | (8,206,446 | ) | ||||||
Realized and Unrealized Gain (Loss): | ||||||||||||
Net realized gain (loss) on investments and foreign currency translations | ||||||||||||
Unaffiliated issuers | 67,610,875 | 2,561,582 | 65,161,605 | |||||||||
Affiliated issuers* | — | — | 5,672,578 | |||||||||
Net realized gain on options written | — | — | — | |||||||||
Net realized gain (loss) on short positions | — | — | — | |||||||||
Realized foreign capital gains taxes | (1,583 | ) | — | — | ||||||||
Change in unrealized appreciation (depreciation) on investments and foreign currency translations | (7,052,852 | ) | 4,519,447 | (14,703,647 | ) | |||||||
Net increase from payment by affiliates** | 56,566 | — | — | |||||||||
Deferred foreign capital gains taxes | (50,920 | ) | — | — | ||||||||
Net gain (loss) on investments | 60,562,086 | 7,081,029 | 56,130,536 | |||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 58,950,027 | $ | 6,981,525 | $ | 47,924,090 | ||||||
| 1 | Fund inception date was February 1, 2006. |
| 2 | Net of $448,992, $60,927, $218,272, $60,437, $126,820, $63,457, $3,991, $1,748, and $0 in foreign withholding taxes, respectively. |
| * | See Note 8 for information on affiliated issuers. |
| ** | See Note 7. |
See notes to financial statements.
66
| FORTHEYEARORPERIODENDED SEPTEMBER 30, 2006 | ||
| MICRO CAP VALUE FUND | SMALL CAP GROWTH FUND | SMALL CAP VALUE FUND | STRATEGIC INCOME FUND1 | ULTRA GROWTH FUND | U.S. TREASURY FUND | |||||||||||||||||
| $ | 297,706 | $ | 1,469,325 | $ | 580,831 | $ | 41,712 | $ | 326,609 | $ | 8,637,574 | |||||||||||
| 879,144 | 5,688,033 | 17,188,666 | 342,456 | 699,323 | — | |||||||||||||||||
| — | — | — | — | — | — | |||||||||||||||||
| 1,176,850 | 7,157,358 | 17,769,497 | 384,168 | 1,025,932 | 8,637,574 | |||||||||||||||||
| 1,869,714 | 13,442,242 | 10,712,885 | 42,346 | 4,491,391 | 875,268 | |||||||||||||||||
| 114,268 | 1,244,316 | 624,568 | 35,546 | 426,469 | 193,895 | |||||||||||||||||
| 22,205 | 318,878 | 169,435 | 1,460 | 85,178 | 41,678 | |||||||||||||||||
| 34,692 | 161,951 | 93,120 | 10,355 | 55,598 | 22,729 | |||||||||||||||||
| 18,171 | 298,959 | 135,561 | 6,769 | 91,994 | 41,630 | |||||||||||||||||
| 63,583 | 97,129 | 126,876 | 12,795 | 57,966 | 4,751 | |||||||||||||||||
| 14,855 | 35,610 | 25,181 | 17,026 | 21,893 | 45,053 | |||||||||||||||||
| 5,527 | 74,490 | 34,041 | 7,778 | 25,449 | 6,846 | |||||||||||||||||
| 2,785 | 42,359 | 22,727 | 107 | 11,954 | 4,004 | |||||||||||||||||
| 22,777 | 22,777 | 22,777 | 22,057 | 22,777 | 22,777 | |||||||||||||||||
| 9,434 | 75,699 | 42,652 | 4,728 | 25,099 | 8,985 | |||||||||||||||||
| 2,178,011 | 15,814,410 | 12,009,823 | 160,967 | 5,315,768 | 1,267,616 | |||||||||||||||||
| (74,583 | ) | — | — | (103,498 | ) | — | — | |||||||||||||||
| — | (11,968 | ) | — | — | (3,632 | ) | — | |||||||||||||||
| 2,103,428 | 15,802,442 | 12,009,823 | 57,469 | 5,312,136 | 1,267,616 | |||||||||||||||||
| (926,578 | ) | (8,645,084 | ) | 5,759,674 | 326,699 | (4,286,204 | ) | 7,369,958 | ||||||||||||||
| 18,589,973 | 98,041,095 | 78,954,913 | 35,569 | 25,996,515 | (157,464 | ) | ||||||||||||||||
| — | 3,001,164 | 1,105,181 | — | — | — | |||||||||||||||||
| 290,791 | — | 133,119 | — | — | — | |||||||||||||||||
| 149,589 | — | (900,860 | ) | — | 51,190 | — | ||||||||||||||||
| (21,105 | ) | — | — | — | 35,766 | — | ||||||||||||||||
| (1,980,425 | ) | (72,428,953 | ) | (29,137,020 | ) | 414,337 | (23,330,436 | ) | (1,981,422 | ) | ||||||||||||
| — | — | — | — | — | — | |||||||||||||||||
| — | — | — | — | (46,749 | ) | — | ||||||||||||||||
| 17,028,823 | 28,613,306 | 50,155,333 | 449,906 | 2,706,286 | (2,138,886 | ) | ||||||||||||||||
| $ | 16,102,245 | $ | 19,968,222 | $ | 55,915,007 | $ | 776,605 | $ | (1,579,918 | ) | $ | 5,231,072 | ||||||||||
67
| WASATCH FUNDS — Statements of Changes in Net Assets | ||
| CORE GROWTH FUND | GLOBAL SCIENCE & TECHNOLOGY FUND | |||||||||||||||
| Year ended September 30 | 2006 | 2005 | 2006 | 2005 | ||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | 6,089,288 | $ | 21,719,652 | $ | (1,314,171 | ) | $ | (1,110,223 | ) | ||||||
Net realized gain (loss) on investments and foreign currency translations | 130,484,166 | 133,310,170 | 6,249,861 | 4,224,406 | ||||||||||||
Net increase from payments by affiliates* | — | 113,441 | — | 962 | ||||||||||||
Net realized gain (loss) on short positions | — | — | 21,058 | (9,462 | ) | |||||||||||
Change in unrealized appreciation (depreciation) on investments and foreign currency translations | (98,543,578 | ) | 117,956,992 | 1,779,861 | 14,848,603 | |||||||||||
Net increase in net assets resulting from operations | 38,029,876 | 273,100,255 | 6,736,609 | 17,954,286 | ||||||||||||
Dividends paid from: | ||||||||||||||||
Net investment income | (23,612,852 | ) | (8,590,232 | ) | — | — | ||||||||||
Net realized gains | (123,744,637 | ) | (51,489,127 | ) | (1,860,003 | ) | — | |||||||||
| (147,357,489 | ) | (60,079,359 | ) | (1,860,003 | ) | — | ||||||||||
Capital share transactions: | ||||||||||||||||
Shares sold | 130,442,780 | 218,428,841 | 66,278,469 | 29,530,068 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 141,564,243 | 57,346,243 | 1,820,831 | — | ||||||||||||
Shares redeemed | (486,370,736 | ) | (281,086,709 | ) | (36,009,645 | ) | (27,441,436 | ) | ||||||||
Redemption fees | 27,471 | 12,284 | 39,558 | 8,785 | ||||||||||||
Net increase (decrease) | (214,336,242 | ) | (5,299,341 | ) | 32,129,213 | 2,097,417 | ||||||||||
Total increase (decrease) in net assets | (323,663,855 | ) | 207,721,555 | 37,005,819 | 20,051,703 | |||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 1,704,690,423 | 1,496,968,868 | 89,352,993 | 69,301,290 | ||||||||||||
End of period | $ | 1,381,026,568 | $ | 1,704,690,423 | $ | 126,358,812 | $ | 89,352,993 | ||||||||
Undistributed net investment income (loss) included in net assets at end of period | $ | (209,317 | ) | $ | 14,126,218 | $ | (149,555 | ) | $ | (41,845 | ) | |||||
Capital share transactions — shares: | ||||||||||||||||
Shares sold | 3,073,183 | 5,156,215 | 4,659,422 | 2,491,304 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 3,444,385 | 1,434,966 | 137,317 | — | ||||||||||||
Shares redeemed | (11,718,400 | ) | (6,661,983 | ) | (2,638,897 | ) | (2,433,544 | ) | ||||||||
Net increase (decrease) in shares outstanding | (5,200,832 | ) | (70,802 | ) | 2,157,842 | 57,760 | ||||||||||
| 1 | Fund inception date was January 27, 2005. |
| * | See Note 7. |
See notes to financial statements.
68
| SEPTEMBER 30, 2006 | ||
| HERITAGE GROWTH FUND | INTERNATIONAL GROWTH FUND | INTERNATIONAL OPPORTUNITIES FUND | ||||||||||||||||||||
| 2006 | 2005 | 2006 | 2005 | 2006 | 20051 | |||||||||||||||||
| $ | 42,790 | $ | 402,176 | $ | (1,612,059 | ) | $ | (1,761,958 | ) | $ | (99,504 | ) | $ | (37,347 | ) | |||||||
| 8,992,963 | 8,686,628 | 67,609,292 | (521,314 | ) | 2,561,582 | (687,169 | ) | |||||||||||||||
| — | 42 | — | 130,700 | — | — | |||||||||||||||||
| — | — | — | — | — | — | |||||||||||||||||
| (2,397,326 | ) | 19,121,309 | (7,047,206 | ) | 63,321,371 | 4,519,447 | 3,254,418 | |||||||||||||||
| 6,638,427 | 28,210,155 | 58,950,027 | 61,168,799 | 6,981,525 | 2,529,902 | |||||||||||||||||
| (386,224 | ) | — | — | — | — | — | ||||||||||||||||
| (8,141,020 | ) | (45,181 | ) | (9,365 | ) | (411,692 | ) | — | — | |||||||||||||
| (8,527,244 | ) | (45,181 | ) | (9,365 | ) | (411,692 | ) | — | — | |||||||||||||
| 70,694,924 | 189,734,440 | 90,728,441 | 129,835,485 | 2,977,585 | 27,983,805 | |||||||||||||||||
| 8,190,379 | 43,091 | 9,068 | 396,621 | — | — | |||||||||||||||||
| (137,309,726 | ) | (41,428,689 | ) | (105,387,826 | ) | (49,214,202 | ) | (2,560,576 | ) | (1,073,830 | ) | |||||||||||
| 23,494 | 20,737 | 52,133 | 27,200 | 15 | 116 | |||||||||||||||||
| (58,400,929 | ) | 148,369,579 | (14,598,184 | ) | 81,045,104 | 417,024 | 26,910,091 | |||||||||||||||
| (60,289,746 | ) | 176,534,553 | 44,342,478 | 141,802,211 | 7,398,549 | 29,439,993 | ||||||||||||||||
| 304,670,098 | 128,135,545 | 338,792,161 | 196,989,950 | 29,439,993 | — | |||||||||||||||||
| $ | 244,380,352 | $ | 304,670,098 | $ | 383,134,639 | $ | 338,792,161 | $ | 36,838,542 | $ | 29,439,993 | |||||||||||
| $ | 21,667 | $ | 383,500 | $ | (512,754 | ) | $ | (511,543 | ) | $ | (65,706 | ) | $ | (321,540 | ) | |||||||
| 6,164,555 | 17,432,879 | 4,311,049 | 7,851,927 | 1,138,942 | 13,973,158 | |||||||||||||||||
| 717,196 | 3,932 | 461 | 26,871 | — | — | |||||||||||||||||
| (12,096,491 | ) | (3,775,893 | ) | (5,080,255 | ) | (2,956,166 | ) | (999,753 | ) | (538,372 | ) | |||||||||||
| (5,214,740 | ) | 13,660,918 | (768,745 | ) | 4,922,632 | 139,189 | 13,434,786 | |||||||||||||||
69
| WASATCH FUNDS — Statements of Changes in Net Assets (continued) | ||
| MICRO CAP FUND | MICRO CAP VALUE FUND | |||||||||||||||
| Year or period ended September 30 | 2006 | 2005 | 2006 | 2005 | ||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | (8,206,446 | ) | $ | (8,707,499 | ) | $ | (926,578 | ) | $ | (1,225,328 | ) | ||||
Net realized gain on investments and foreign currency translations | 70,834,183 | 111,007,800 | 18,831,298 | 9,839,366 | ||||||||||||
Net increase from payments by affiliates* | — | 43,671 | — | 3,016 | ||||||||||||
Net realized gain on options written | — | — | 28,361 | 150,365 | ||||||||||||
Net realized gain (loss) on short positions | — | — | 149,589 | (82,718 | ) | |||||||||||
Net realized gain on the disposal of investments in violation of an investment restriction* | — | — | — | — | ||||||||||||
Change in unrealized appreciation (depreciation) on investments and foreign currency translations | (14,703,647 | ) | 25,581,379 | (1,980,425 | ) | 6,568,977 | ||||||||||
Net increase in net assets resulting from operations | 47,924,090 | 127,925,351 | 16,102,245 | 15,253,678 | ||||||||||||
Dividends paid from: | ||||||||||||||||
Net investment income | — | — | — | — | ||||||||||||
Net realized gains | (101,306,137 | ) | (77,564,156 | ) | (8,245,400 | ) | (9,882,992 | ) | ||||||||
| (101,306,137 | ) | (77,564,156 | ) | (8,245,400 | ) | (9,882,992 | ) | |||||||||
Capital share transactions: | ||||||||||||||||
Shares sold | 17,003,311 | 12,639,078 | 2,557,227 | 2,473,175 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 95,482,943 | 73,644,336 | 8,086,056 | 9,621,240 | ||||||||||||
Shares redeemed | (54,449,841 | ) | (75,691,802 | ) | (9,895,964 | ) | (15,397,013 | ) | ||||||||
Redemption fees | 2,863 | 333 | 126 | 40 | ||||||||||||
Net increase (decrease) | 58,039,276 | 10,591,945 | 747,445 | (3,302,558 | ) | |||||||||||
Total increase (decrease) in net assets | 4,657,229 | 60,953,140 | 8,604,290 | 2,068,128 | ||||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 579,243,866 | 518,290,726 | 86,903,430 | 84,835,302 | ||||||||||||
End of period | $ | 583,901,095 | $ | 579,243,866 | $ | 95,507,720 | $ | 86,903,430 | ||||||||
Undistributed net investment income (loss) included in net assets at end of period | $ | — | $ | — | $ | (14,869 | ) | $ | (12,815 | ) | ||||||
Capital share transactions — shares: | ||||||||||||||||
Shares sold | 2,506,938 | 1,848,406 | 903,762 | 998,439 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 14,989,473 | 12,243,690 | 3,183,486 | 4,257,186 | ||||||||||||
Shares redeemed | (7,969,522 | ) | (11,136,267 | ) | (3,521,837 | ) | (6,264,493 | ) | ||||||||
Net increase (decrease) in shares outstanding | 9,526,889 | 2,955,829 | 565,411 | (1,008,868 | ) | |||||||||||
| 1 | Fund inception date was February 1, 2006. |
| * | See Note 7. |
See notes to financial statements.
70
| SEPTEMBER 30, 2006 | ||
| SMALL CAP GROWTH FUND | SMALL CAP VALUE FUND | STRATEGIC INCOME FUND | ||||||||||||||||
| 2006 | 2005 | 2006 | 2005 | 20061 | ||||||||||||||
| $ | (8,645,084 | ) | $ | (8,089,875 | ) | $ | 5,759,674 | $ | 7,014,344 | $ | 326,699 | |||||||
| 101,042,259 | 179,011,698 | 80,060,094 | 95,883,822 | 35,569 | ||||||||||||||
| — | 36,988 | — | 37,975 | — | ||||||||||||||
| — | — | 133,119 | — | — | ||||||||||||||
| — | — | (900,860 | ) | (45,511 | ) | — | ||||||||||||
| — | 33,787 | — | — | — | ||||||||||||||
| (72,428,953 | ) | 64,800,488 | (29,137,020 | ) | 28,258,650 | 414,337 | ||||||||||||
| 19,968,222 | 235,793,086 | 55,915,007 | 131,149,280 | 776,605 | ||||||||||||||
| — | — | (8,588,688 | ) | — | (273,109 | ) | ||||||||||||
| (159,627,544 | ) | (26,587,298 | ) | (89,640,909 | ) | (103,737,575 | ) | — | ||||||||||
| (159,627,544 | ) | (26,587,298 | ) | (98,229,597 | ) | (103,737,575 | ) | (273,109 | ) | |||||||||
| 192,646,962 | 204,118,853 | 44,209,723 | 45,035,086 | 12,884,756 | ||||||||||||||
| 153,540,530 | 25,598,301 | 94,863,257 | 99,650,145 | 260,187 | ||||||||||||||
| (329,428,284 | ) | (272,771,150 | ) | (166,979,115 | ) | (171,523,403 | ) | (917,103 | ) | |||||||||
| 16,285 | 7,864 | 3,571 | 2,221 | 696 | ||||||||||||||
| 16,775,493 | (43,046,132 | ) | (27,902,564 | ) | (26,835,951 | ) | 12,228,536 | |||||||||||
| (122,883,829 | ) | 166,159,656 | (70,217,154 | ) | 575,754 | 12,732,032 | ||||||||||||
| 1,357,861,928 | 1,191,702,272 | 734,842,008 | 734,266,254 | — | ||||||||||||||
| $ | 1,234,978,099 | $ | 1,357,861,928 | $ | 664,624,854 | $ | 734,842,008 | $ | 12,732,032 | |||||||||
| $ | (1,982,758 | ) | $ | (446,570 | ) | $ | 4,523,035 | $ | 6,189,432 | $ | 72,250 | |||||||
| 4,994,782 | 5,171,559 | 8,200,453 | 8,444,021 | 1,280,032 | ||||||||||||||
| 4,151,988 | 758,389 | 18,822,075 | 20,978,978 | 25,265 | ||||||||||||||
| (8,688,441 | ) | (7,107,315 | ) | (31,046,713 | ) | (32,494,623 | ) | (90,652 | ) | |||||||||
| 458,329 | (1,177,367 | ) | (4,024,185 | ) | (3,071,624 | ) | 1,214,645 | |||||||||||
71
| WASATCH FUNDS — Statements of Changes in Net Assets (continued) | SEPTEMBER 30, 2006 | |
| ULTRA GROWTH FUND | U.S. TREASURY FUND | |||||||||||||||
| Year ended September 30 | 2006 | 2005 | 2006 | 2005 | ||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | (4,286,204 | ) | $ | (5,247,793 | ) | $ | 7,369,958 | $ | 2,350,859 | ||||||
Net realized gain (loss) on investments and foreign currency translations | 26,032,281 | 59,076,338 | (157,464 | ) | 1,294,598 | |||||||||||
Net increase from payments by affiliates* | — | 21,246 | — | — | ||||||||||||
Net realized gain on short positions | 51,190 | 765,582 | — | — | ||||||||||||
Change in unrealized appreciation (depreciation) on investments and foreign currency translations | (23,377,185 | ) | 23,127,484 | (1,981,422 | ) | 1,491,811 | ||||||||||
Net increase (decrease) in net assets resulting from operations | (1,579,918 | ) | 77,742,857 | 5,231,072 | 5,137,268 | |||||||||||
Dividends paid from: | ||||||||||||||||
Net investment income | — | — | (9,215,585 | ) | (2,078,313 | ) | ||||||||||
Net realized gains | (51,353,961 | ) | (16,837,407 | ) | — | — | ||||||||||
| (51,353,961 | ) | (16,837,407 | ) | (9,215,585 | ) | (2,078,313 | ) | |||||||||
Capital share transactions: | ||||||||||||||||
Shares sold | 34,763,287 | 31,883,939 | 182,225,053 | 51,490,595 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 49,694,426 | 16,008,572 | 8,678,644 | 2,022,708 | ||||||||||||
Shares redeemed | (115,021,608 | ) | (145,918,730 | ) | (64,651,364 | ) | (19,099,451 | ) | ||||||||
Redemption fees | 9,719 | 2,387 | 127,924 | 37,721 | ||||||||||||
Net increase (decrease) | (30,554,176 | ) | (98,023,832 | ) | 126,380,257 | 34,451,573 | ||||||||||
Total increase (decrease) in net assets | (83,488,055 | ) | (37,118,382 | ) | 122,395,744 | 37,510,528 | ||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 389,894,330 | 427,012,712 | 82,598,562 | 45,088,034 | ||||||||||||
End of period | $ | 306,406,275 | $ | 389,894,330 | $ | 204,994,306 | $ | 82,598,562 | ||||||||
Undistributed net investment income (loss) included in net assets at end of period | $ | 125,528 | $ | (375,543 | ) | $ | 359 | $ | 1,845,986 | |||||||
Capital share transactions — shares: | ||||||||||||||||
Shares sold | 1,344,846 | 1,226,242 | 12,942,909 | 3,532,880 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 2,050,946 | 667,812 | 622,640 | 150,611 | ||||||||||||
Shares redeemed | (4,609,864 | ) | (5,697,076 | ) | (4,671,486 | ) | (1,329,647 | ) | ||||||||
Net increase (decrease) in shares outstanding | (1,214,072 | ) | (3,803,022 | ) | 8,894,063 | 2,353,844 | ||||||||||
| * | See Note 7. |
See notes to financial statements.
72
| WASATCH FUNDS — Financial Highlights | SEPTEMBER 30, 2006 | |
| CORE GROWTH FUND | Year Ended September 30 | ||||||||||||||
| (for a share outstanding throughout each period) | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||
Net asset value, beginning of period | $ | 43.92 | $ | 38.49 | $ | 33.54 | $ | 25.46 | $ | 31.57 | |||||
Income (loss) from investment operations: | |||||||||||||||
Net investment income (loss) | 0.17 | 0.56 | 0.13 | (0.01) | (0.01) | ||||||||||
Net realized and unrealized gains (losses) on investments | 0.90 | 6.41 | 4.84 | 8.09 | (3.97) | ||||||||||
Net increase from payment by affiliate | — | —1 | — | — | — | ||||||||||
Total from investment operations | 1.07 | 6.97 | 4.97 | 8.08 | (3.98) | ||||||||||
Redemption fees (see Note 2) | —1 | —1 | —1 | —1 | 0.01 | ||||||||||
Less distributions: | |||||||||||||||
Dividends from net investment income | (0.63) | (0.22) | (0.02) | — | — | ||||||||||
Distributions from net realized gains | (3.28) | (1.32) | — | — | (2.14) | ||||||||||
Total distributions | (3.91) | (1.54) | (0.02) | — | (2.14) | ||||||||||
Net asset value, end of period | $ | 41.08 | $ | 43.92 | $ | 38.49 | $ | 33.54 | $ | 25.46 | |||||
Total return2 | 2.46% | 18.58% | 14.80% | 31.68% | (13.73)% | ||||||||||
Supplemental data and ratios: | |||||||||||||||
Net assets, end of period (in thousands) | $ | 1,381,027 | $ | 1,704,690 | $ | 1,496,969 | $ | 1,318,341 | $ | 1,062,944 | |||||
Ratio of expenses to average net assets | 1.17% | 1.20% | 1.21% | 1.25% | 1.29% | ||||||||||
Ratio of net investment income (loss) to average net assets | 0.38% | 1.30% | 0.34% | (0.02)% | (0.02)% | ||||||||||
Portfolio turnover rate | 42% | 42% | 47% | 47% | 76% | ||||||||||
| GLOBAL SCIENCE & TECHNOLOGY FUND | Year Ended September 30 | ||||||||||||||
| (for a share outstanding throughout each period) | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||
Net asset value, beginning of period | $ | 12.98 | $ | 10.15 | $ | 10.73 | $ | 6.38 | $ | 8.02 | |||||
Income (loss) from investment operations: | |||||||||||||||
Net investment loss | (0.14) | (0.16) | (0.18) | (0.13) | (0.15) | ||||||||||
Net realized and unrealized gains (losses) on investments | 1.40 | 2.99 | (0.41) | 4.47 | (1.34) | ||||||||||
Net increase from payment by affiliate | — | —1 | — | — | — | ||||||||||
Total from investment operations | 1.26 | 2.83 | (0.59) | 4.34 | (1.49) | ||||||||||
Redemption fees (see Note 2) | —1 | —1 | 0.01 | 0.01 | 0.03 | ||||||||||
Less distributions: | |||||||||||||||
Distributions from net realized gains | (0.27) | — | — | — | (0.18) | ||||||||||
Total distributions | (0.27) | — | — | — | (0.18) | ||||||||||
Net asset value, end of period | $ | 13.97 | $ | 12.98 | $ | 10.15 | $ | 10.73 | $ | 6.38 | |||||
Total return3 | 9.81% | 27.88% | (5.49)% | 68.34% | (18.83)% | ||||||||||
Supplemental data and ratios: | |||||||||||||||
Net assets, end of period (in thousands) | $ | 126,359 | $ | 89,353 | $ | 69,301 | $ | 51,517 | $ | 20,811 | |||||
Ratio of expenses to average net assets: | |||||||||||||||
Net of waivers and reimbursements | 1.94% | 1.95% | 1.95% | 1.95% | 1.95% | ||||||||||
Before waivers and reimbursements | 1.94% | 1.97% | 1.97% | 2.13% | 2.42% | ||||||||||
Ratio of net investment loss to average net assets: | |||||||||||||||
Net of waivers and reimbursements | (1.15)% | (1.52)% | (1.66)% | (1.87)% | (1.90)% | ||||||||||
Before waivers and reimbursements | (1.15)% | (1.54)% | (1.68)% | (2.05)% | (2.37)% | ||||||||||
Portfolio turnover rate | 58% | 80% | 55% | 88% | 95% | ||||||||||
| 1 | Represents amounts less than $.005 per share. |
| 2 | In 2005, 0.03% of the Fund’s total return consisted of a voluntary reimbursement by the Advisor for amounts relating to errors in applying the Funds’ cross-trading policies. Excluding this item, the total return would have been 18.55%. |
| 3 | In 2005, the Fund’s total return included a voluntary reimbursement by the Advisor for amounts relating to errors in applying the Funds’ cross-trading policies that had no impact on the total return. |
See notes to financial statements.
73
| WASATCH FUNDS — Financial Highlights (continued) | ||
| HERITAGE GROWTH FUND | Year or Period Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2006 | 2005 | 20041 | |||||||||||||||||
Net asset value, beginning of period | $ | 11.43 | $ | 9.86 | $ | 10.00 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | — | 2 | 0.02 | — | 2 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.28 | 1.55 | (0.14 | ) | ||||||||||||||||
Net increase from payment by affiliate | — | —2 | — | |||||||||||||||||
Total from investment operations | 0.28 | 1.57 | (0.14 | ) | ||||||||||||||||
Redemption fees (see Note 2) | — | 2 | —2 | — | 2 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.01 | ) | — | — | ||||||||||||||||
Distributions from net realized gains | (0.30 | ) | — | 2 | — | |||||||||||||||
Total distributions | (0.31 | ) | — | 2 | — | |||||||||||||||
Net asset value, end of period | $ | 11.40 | $ | 11.43 | $ | 9.86 | ||||||||||||||
Total return3 6 | 2.46% | 15.95% | (1.40)% | |||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 244,380 | $ | 304,670 | $ | 128,136 | ||||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements4 | 0.95% | 0.95% | 0.95% | |||||||||||||||||
Before waivers and reimbursements4 | 0.95% | 0.99% | 1.26% | |||||||||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements4 | 0.01% | 0.17% | (0.01)% | |||||||||||||||||
Before waivers and reimbursements4 | 0.01% | 0.13% | (0.32)% | |||||||||||||||||
Portfolio turnover rate3 | 54% | 36% | 5% | |||||||||||||||||
| INTERNATIONAL GROWTH FUND | Year or Period Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2006 | 2005 | 2004 | 2003 | 20025 | |||||||||||||||
Net asset value, beginning of period | $ | 18.50 | $ | 14.71 | $ | 12.06 | $ | 8.85 | $ | 10.00 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.09 | ) | (0.10 | ) | (0.11 | ) | (0.07 | ) | (0.03 | ) | ||||||||||
Net realized and unrealized gains (losses) on investments | 3.42 | 3.91 | 2.76 | 3.28 | (1.13 | ) | ||||||||||||||
Net increase from payment by affiliate | — | 0.01 | — | — | — | |||||||||||||||
Total from investment operations | 3.33 | 3.82 | 2.65 | 3.21 | (1.16 | ) | ||||||||||||||
Redemption fees (see Note 2) | —2 | —2 | —2 | —2 | 0.01 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | —2 | (0.03 | ) | — | — | — | ||||||||||||||
Total distributions | —2 | (0.03 | ) | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 21.83 | $ | 18.50 | $ | 14.71 | $ | 12.06 | $ | 8.85 | ||||||||||
Total return3 7 8 | 18.00% | 26.02% | 21.97% | 36.27% | (11.50)% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 383,135 | $ | 338,792 | $ | 196,990 | $ | 44,482 | $ | 18,008 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements4 | 1.78% | 1.84% | 1.92% | 1.95% | 1.95% | |||||||||||||||
Before waivers and reimbursements4 | 1.78% | 1.84% | 1.92% | 2.30% | 4.26% | |||||||||||||||
Ratio of net investment loss to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements4 | (0.42)% | (0.64)% | (1.06)% | (1.12)% | (1.39)% | |||||||||||||||
Before waivers and reimbursements4 | (0.42)% | (0.64)% | (1.06)% | (1.47)% | (3.70)% | |||||||||||||||
Portfolio turnover rate3 | 64% | 32% | 31% | 62% | 3% | |||||||||||||||
| 1 | Fund inception date was June 18, 2004. |
| 2 | Represents amounts less than $.005 per share. |
| 3 | Not annualized for periods less than one year. |
| 4 | Annualized. |
| 5 | Fund inception date was June 28, 2002. |
| 6 | In 2005, the Fund’s total return included a voluntary reimbursement by the Advisor for amounts relating to errors in applying the Funds’ cross-trading policies that had no impact on the total return. |
7 In 2005, 0.07% of the Fund’s total return consisted of a voluntary reimbursement by the Advisor for a realized investment loss. Excluding this item, the total return would have been 25.95%. The Fund’s total return also included, in 2005, a voluntary reimbursement by the Advisor for amounts relating to errors in applying the Funds’ cross-trading policies that had no impact on the total return.
| 8 | In 2006, the Fund’s total return included a voluntary reimbursement by the Advisor for an amount relating to an incorrect settlement that had no impact on the total return. |
See notes to financial statements.
74
| SEPTEMBER 30, 2006 | ||
| INTERNATIONAL OPPORTUNITIES FUND | Year or Period Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2006 | 20051 | ||||||||||||||||||
Net asset value, beginning of period | $ | 2.19 | $ | 2.00 | ||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.01 | ) | — | 2 | ||||||||||||||||
Net realized and unrealized gainson investments | 0.53 | 0.19 | ||||||||||||||||||
Total from investment operations | 0.52 | 0.19 | ||||||||||||||||||
Redemption fees (see Note 2) | — | 2 | — | 2 | ||||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | — | — | ||||||||||||||||||
Distributions from net realized gains | — | — | ||||||||||||||||||
Total distributions | — | — | ||||||||||||||||||
Net asset value, end of period | $ | 2.71 | $ | 2.19 | ||||||||||||||||
Total return3 | 23.74% | 9.50% | ||||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 36,839 | $ | 29,440 | ||||||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements4 | 2.25% | 2.25% | ||||||||||||||||||
Before waivers and reimbursements4 | 2.62% | 3.09% | ||||||||||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements4 | (0.29)% | (0.21)% | ||||||||||||||||||
Before waivers and reimbursements4 | (0.66)% | (1.05)% | ||||||||||||||||||
Portfolio turnover rate3 | 43% | 12% | ||||||||||||||||||
| MICRO CAP FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||
Net asset value, beginning of period | $ | 7.58 | $ | 7.05 | $ | 6.98 | $ | 5.01 | $ | 5.64 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.10 | ) | (0.11 | ) | (0.15 | ) | (0.12 | ) | (0.14 | ) | ||||||||||
Net realized and unrealized gainson investments | 0.65 | 1.70 | 0.81 | 2.43 | 0.11 | |||||||||||||||
Net increase from payment by affiliate | — | —2 | — | — | — | |||||||||||||||
Total from investment operations | 0.55 | 1.59 | 0.66 | 2.31 | (0.03 | ) | ||||||||||||||
Redemption fees (see Note 2) | —2 | —2 | —2 | —2 | —2 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | (1.34 | ) | (1.06 | ) | (0.59 | ) | (0.34 | ) | (0.60 | ) | ||||||||||
Total distributions | (1.34 | ) | (1.06 | ) | (0.59 | ) | (0.34 | ) | (0.60 | ) | ||||||||||
Net asset value, end of period | $ | 6.79 | $ | 7.58 | $ | 7.05 | $ | 6.98 | $ | 5.01 | ||||||||||
Total return5 | 8.51% | 26.42% | 9.96% | 50.28% | (1.41)% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 583,901 | $ | 579,244 | $ | 518,291 | $ | 517,179 | $ | 327,548 | ||||||||||
Ratio of expenses to average net assets | 2.14% | 2.18% | 2.19% | 2.24% | 2.28% | |||||||||||||||
Ratio of net investment loss to average net assets | (1.39)% | (1.58)% | (1.95)% | (2.13)% | (2.21)% | |||||||||||||||
Portfolio turnover rate | 46% | 50% | 56% | 50% | 62% | |||||||||||||||
| 1 | Fund inception date was January 27, 2005. |
| 2 | Represents amounts less than $.005 per share. |
| 3 | Not annualized for periods less than one year. |
| 4 | Annualized. |
| 5 | In 2005, the Fund’s total return included a voluntary reimbursement by the Advisor for amounts relating to errors in applying the Funds’ cross-trading policies that had no impact on the total return. |
See notes to financial statements.
75
| WASATCH FUNDS — Financial Highlights (continued) | ||
| MICRO CAP VALUE FUND | Year or Period Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2006 | 2005 | 2004 | 20031 | ||||||||||||||||
Net asset value, beginning of period | $ | 2.72 | $ | 2.57 | $ | 2.09 | $ | 2.00 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.03 | ) | (0.04 | ) | (0.05 | ) | (0.01 | ) | ||||||||||||
Net realized and unrealized gainson investments | 0.50 | 0.49 | 0.53 | 0.10 | ||||||||||||||||
Net increase from payment by affiliate | — | —2 | — | — | ||||||||||||||||
Total from investment operations | 0.47 | 0.45 | 0.48 | 0.09 | ||||||||||||||||
Redemption fees (see Note 2) | —2 | — | 2 | —2 | —2 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | (0.26 | ) | (0.30 | ) | —2 | — | ||||||||||||||
Total distributions | (0.26 | ) | (0.30 | ) | — | — | ||||||||||||||
Net asset value, end of period | $ | 2.93 | $ | 2.72 | $ | 2.57 | $ | 2.09 | ||||||||||||
Total return3 5 | 18.89% | 19.87% | 23.06% | 4.50% | ||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 95,508 | $ | 86,903 | $ | 84,835 | $ | 70,706 | ||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements4 6 | 2.25% | 2.25% | 2.27% | 2.50% | ||||||||||||||||
Before waivers and reimbursements4 | 2.33% | 2.36% | 2.38% | 2.73% | ||||||||||||||||
Ratio of net investment loss to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements4 | (0.99)% | (1.41)% | (1.76)% | (1.97)% | ||||||||||||||||
Before waivers and reimbursements4 | (1.07)% | (1.52)% | (1.87)% | (2.20)% | ||||||||||||||||
Portfolio turnover rate3 | 95% | 85% | 101% | 4% | ||||||||||||||||
| SMALL CAP GROWTH FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||
Net asset value, beginning of period | $ | 41.23 | $ | 34.94 | $ | 32.43 | $ | 23.83 | $ | 26.18 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.26 | ) | (0.25 | ) | (0.33 | ) | (0.28 | ) | (0.35 | ) | ||||||||||
Net realized and unrealized gains (losses)on investments | 0.84 | 7.32 | 3.01 | 8.88 | (1.55 | ) | ||||||||||||||
Net increase from payment by affiliate | — | —2 | — | — | — | |||||||||||||||
Total from investment operations | 0.58 | 7.07 | 2.68 | 8.60 | (1.90 | ) | ||||||||||||||
Redemption fees (see Note 2) | —2 | —2 | —2 | —2 | —2 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | (4.82 | ) | (0.78 | ) | (0.17 | ) | —2 | (0.45 | ) | |||||||||||
Total distributions | (4.82 | ) | (0.78 | ) | (0.17 | ) | — | (0.45 | ) | |||||||||||
Net asset value, end of period | $ | 36.99 | $ | 41.23 | $ | 34.94 | $ | 32.43 | $ | 23.83 | ||||||||||
Total return7 | 1.40% | 20.73% | 8.27% | 36.15% | (7.53)% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,234,978 | $ | 1,357,862 | $ | 1,191,702 | $ | 1,134,398 | $ | 735,417 | ||||||||||
Ratio of expenses to average net assets8 | 1.18% | 1.18% | 1.20% | 1.25% | 1.31% | |||||||||||||||
Ratio of net investment loss to average net assets | (0.64)% | (0.62)% | (0.91)% | (1.08)% | (1.25)% | |||||||||||||||
Portfolio turnover rate | 41% | 36% | 41% | 63% | 51% | |||||||||||||||
| 1 | Fund inception date was July 28, 2003. |
| 2 | Represents amounts less than $.005 per share. |
| 3 | Not annualized for periods less than one year. |
| 4 | Annualized. |
| 5 | In 2005, the Fund’s total return included a voluntary reimbursement by the Advisor for a realized investment loss that had no impact on the total return. |
| 6 | On February 1, 2004, the Advisor reduced the contractual expense limitation from 2.50% to 2.25% through January 31, 2005. As a result, the effective expense ratio net of waivers and reimbursements for the period ended September 30, 2004 was 2.27%. |
| 7 | In 2005, the Fund’s total return included a voluntary reimbursement by the Advisor for amounts relating to errors in applying the Funds’ cross-trading policies that had no impact on the total return. The effect of net realized gains on the disposal of investments in violation of an investment restriction on total return was less than .01%. |
| 8 | In 2006, the Fund received a reimbursement of investment advisory fees, which had an impact on the Fund’s expense ratio of less than 0.01%. See Note 7 in Notes to Financial Statements. |
See notes to financial statements.
76
| SEPTEMBER 30, 2006 | ||
| SMALL CAP VALUE FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||
Net asset value, beginning of period | $ | 5.67 | $ | 5.54 | $ | 4.62 | $ | 3.21 | $ | 3.76 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.05 | 0.05 | (0.01 | ) | (0.02 | ) | (0.02 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | 0.36 | 0.86 | 0.93 | 1.43 | (0.43 | ) | ||||||||||||||
Net increase from payment by affiliate | — | — | 1 | — | — | — | ||||||||||||||
Total from investment operations | 0.41 | 0.91 | 0.92 | 1.41 | (0.45 | ) | ||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.07 | ) | — | — | — | — | ||||||||||||||
Distributions from net realized gains | (0.72 | ) | (0.78 | ) | —1 | — | (0.10 | ) | ||||||||||||
Total distributions | (0.79 | ) | (0.78 | ) | — | — | (0.10 | ) | ||||||||||||
Net asset value, end of period | $ | 5.29 | $ | 5.67 | $ | 5.54 | $ | 4.62 | $ | 3.21 | ||||||||||
Total return5 | 7.88% | 19.47% | 19.73% | 43.93% | (12.35)% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 664,625 | $ | 734,842 | $ | 734,266 | $ | 651,261 | $ | 428,082 | ||||||||||
Ratio of expenses to average net assets | 1.68% | 1.72% | 1.73% | 1.78% | 1.81% | |||||||||||||||
Ratio of net investment income (loss) to average net assets | 0.81% | 0.94% | (0.26)% | (0.43)% | (0.44)% | |||||||||||||||
Portfolio turnover rate | 40% | 43% | 56% | 69% | 69% | |||||||||||||||
| STRATEGIC INCOME FUND | Period Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout the period) | 20063 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.00 | ||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.31 | |||||||||||||||||||
Net realized and unrealized gainson investments | 0.44 | |||||||||||||||||||
Total from investment operations | 0.79 | |||||||||||||||||||
Redemption fees (see Note 2) | — | 1 | ||||||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.27 | ) | ||||||||||||||||||
Total distributions | (0.27 | ) | ||||||||||||||||||
Net asset value, end of period | $ | 10.48 | ||||||||||||||||||
Total return4 | 7.58% | |||||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 12,732 | ||||||||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements2 | 0.95% | |||||||||||||||||||
Before waivers and reimbursements2 | 2.66% | |||||||||||||||||||
Ratio of net investment income to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements2 | 5.40% | |||||||||||||||||||
Before waivers and reimbursements2 | 3.69% | |||||||||||||||||||
Portfolio turnover rate4 | 14% | |||||||||||||||||||
| 1 | Represents amounts less than $.005 per share. |
| 2 | Annualized. |
| 3 | Fund inception date was February 1, 2006. |
| 4 | Not annualized for periods less than one year. |
| 5 | In 2005, the Fund’s total return included a voluntary reimbursement by the Advisor for amounts relating to errors in applying the Funds’ cross-trading policies that had no impact on the total return. |
See notes to financial statements.
77
| WASATCH FUNDS — Financial Highlights (continued) | SEPTEMBER 30, 2006 | |
| ULTRA GROWTH FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||
Net asset value, beginning of period | $ | 27.98 | $ | 24.07 | $ | 25.43 | $ | 16.52 | $ | 19.15 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.34 | ) | (0.38 | ) | (0.42 | ) | (0.29 | ) | (0.25 | ) | ||||||||||
Net realized and unrealized gains (losses) on investments | 0.23 | 5.26 | (0.68 | ) | 9.19 | (1.48 | ) | |||||||||||||
Net increase from payment by affiliate | — | — | 1 | — | — | — | ||||||||||||||
Total from investment operations | (0.11 | ) | 4.88 | (1.10 | ) | 8.90 | (1.73 | ) | ||||||||||||
Redemption fees (see Note 2) | — | 1 | —1 | — | 1 | 0.01 | 0.02 | |||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | (3.78 | ) | (0.97 | ) | (0.26 | ) | — | (0.92 | ) | |||||||||||
Total distributions | (3.78 | ) | (0.97 | ) | (0.26 | ) | — | (0.92 | ) | |||||||||||
Net asset value, end of period | $ | 24.09 | $ | 27.98 | $ | 24.07 | $ | 25.43 | $ | 16.52 | ||||||||||
Total return2 | (0.48)% | 21.00% | (4.44)% | 53.93% | (9.74)% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 306,406 | $ | 389,894 | $ | 427,013 | $ | 538,939 | $ | 277,404 | ||||||||||
Ratio of expenses to average net assets3 | 1.48% | 1.50% | 1.50% | 1.57% | 1.71% | |||||||||||||||
Ratio of net investment loss to average net assets | (1.19)% | (1.30)% | (1.39)% | (1.50)% | (1.67)% | |||||||||||||||
Portfolio turnover rate | 76% | 65% | 67% | 76% | 78% | |||||||||||||||
| U.S. TREASURY FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||
Net asset value, beginning of period | $ | 14.68 | $ | 13.77 | $ | 13.68 | $ | 14.04 | $ | 12.97 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | 0.39 | 0.45 | 0.70 | 0.72 | 0.66 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.24 | ) | 1.05 | 0.11 | (0.48 | ) | 1.17 | |||||||||||||
Total from investment operations | 0.15 | 1.50 | 0.81 | 0.24 | 1.83 | |||||||||||||||
Redemption fees (see Note 2) | 0.01 | 0.01 | 0.01 | 0.03 | 0.01 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.72 | ) | (0.60 | ) | (0.73 | ) | (0.63 | ) | (0.77 | ) | ||||||||||
Total distributions | (0.72 | ) | (0.60 | ) | (0.73 | ) | (0.63 | ) | (0.77 | ) | ||||||||||
Net asset value, end of period | $ | 14.12 | $ | 14.68 | $ | 13.77 | $ | 13.68 | $ | 14.04 | ||||||||||
Total return | 1.21% | 11.41% | 6.27% | 2.17% | 15.38% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 204,994 | $ | 82,599 | $ | 45,088 | $ | 67,134 | $ | 83,879 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements | 0.72% | 0.75% | 0.75% | 0.75% | 0.75% | |||||||||||||||
Before waivers and reimbursements | 0.72% | 0.86% | 0.94% | 0.91% | 0.98% | |||||||||||||||
Ratio of net investment income to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements | 4.21% | 4.01% | 4.50% | 4.67% | 5.51% | |||||||||||||||
Before waivers and reimbursements | 4.21% | 3.90% | 4.31% | 4.51% | 5.28% | |||||||||||||||
Portfolio turnover rate | 2% | 19% | 4% | 37% | 22% | |||||||||||||||
| 1 | Represents amounts less than $.005 per share. |
| 2 | In 2005, the Fund’s total return included a voluntary reimbursement by the Advisor for amounts relating to errors in applying the Funds’ cross-trading policies that had no impact on the total return. |
| 3 | In 2006, the Fund received a reimbursement of investment advisory fees, which had an impact on the Fund’s expense ratio of less than 0.01%. See Note 7 in Notes to Financial Statements. |
See notes to financial statements.
78
| WASATCH FUNDS — Notes to Financial Statements | SEPTEMBER 30, 2006 | |
1. ORGANIZATION
Wasatch Funds, Inc. is a Minnesota corporation registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and consists of 12 series or “funds” (each a “Fund” and collectively the “Funds”). The Core Growth, Global Science & Technology, Heritage Growth, International Growth, International Opportunities, Micro Cap, Micro Cap Value, Small Cap Growth, Small Cap Value, Strategic Income and Ultra Growth Funds (collectively the “Equity Funds”) are non-diversified funds and the Wasatch-Hoisington U.S. Treasury Fund (“U.S. Treasury Fund”) is a diversified fund. Each Fund maintains its own investment objective. The Funds have entered into an investment advisory agreement with Wasatch Advisors, Inc. (the “Advisor”) as investment advisor.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in conformity with United States of America generally accepted accounting principles (“GAAP”). The following is a summary of significant policies of the Funds at September 30, 2006.
In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 addresses the accounting for uncertainty in income taxes. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”), in September 2006, which is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands financial statement disclosures about fair value measurements. Management is currently evaluating the impact of adopting FIN 48 and FAS 157.
Valuation of Securities — Securities are valued as of the close of the New York Stock Exchange (generally 4:00 p.m. Eastern Time) on the valuation date. Equity securities are valued using a commercial pricing service at the latest quoted sales price taken from the primary market in which each security trades and, with respect to equity securities traded on Nasdaq, such securities are valued using the Nasdaq Official Closing Price (“NOCP”) or last sales price if no NOCP is available. If there are no sales on any exchange or market on a given day, then the security is valued at the most recent bid price. Debt securities (other than short-term instruments) are valued at current market value by a commercial pricing service, or by using the last sale or bid price. Short term securities, which mature in 60 days or less, are valued at amortized cost, which approximates market value. Exchange-traded options are valued at the last sale price in the market where they are principally traded. If there are no sales on any exchange or market on a given day, then the option is valued at the most recent bid price. If market quotations are not readily available for the Funds’ investments in securities such as restricted securities, private
placements, securities for which trading has been halted or other illiquid securities, these investments will be valued at fair value in accordance with Board-approved Pricing Policies and Procedures by the Pricing Committee of the Advisor (“Pricing Committee”) with oversight by the Board of Directors. Fair value is defined as the amount the owner of a security might reasonably expect to receive upon a current sale. For each applicable investment that is fair valued, the Pricing Committee considers, to the extent applicable, various factors including, but not limited to, the financial condition of the company or limited partnership, operating results, prices paid in follow-on rounds, comparable companies in the public market, the nature and duration of the restrictions for holding the securities, and other relevant factors.
Additionally, a Fund’s investments will be valued at fair value by the Pricing Committee if the Advisor determines that an event impacting the value of an investment occurred between the closing time of a security’s primary market or exchange (for example, a foreign exchange or market) and the time the Fund’s share price is calculated. Significant events include, but are not limited to the following: significant fluctuations in domestic markets, foreign markets or foreign currencies; occurrences not directly tied to the securities markets such as natural disasters, armed conflicts or significant governmental actions; and major announcements affecting a single issuer or an entire market or market sector. In responding to a significant event, the Pricing Committee would determine the fair value of affected securities considering factors including, but not limited to: index options and futures traded subsequent to the close; ADRs, GDRs or other related receipts; currency spot or forward markets that trade after pricing of the foreign exchange; other derivative securities traded after the close such as SPDRs and other exchange traded funds (ETFs); and alternative market quotes on the affected securities. In addition, the Funds may use a systematic fair valuation model provided by an independent third party in certain circumstances to assist in adjusting the valuation of foreign securities.
As of September 30, 2006, the aggregate amount of fair valued securities, excluding any foreign securities fair valued pursuant to a systematic fair valuation model, as a percentage of net assets for the Funds was as follows:
Core Growth Fund | 0.74 | % | |
Global Science & Technology Fund | 0.61 | % | |
Heritage Growth Fund | — | ||
International Growth Fund | 0.48 | % | |
International Opportunities Fund | 1.01 | % | |
Micro Cap Fund | 0.12 | % | |
Micro Cap Value Fund | 1.67 | % | |
Small Cap Growth Fund | 1.31 | % | |
Small Cap Value Fund | 2.28 | % | |
Strategic Income Fund | — | ||
Ultra Growth Fund | 2.40 | % | |
U.S. Treasury Fund | — |
Foreign Currency Translations — Values of investments denominated in foreign currencies are converted into U.S. dollars using the current exchange rate. Purchases and sales of investments and dividend income are translated into U.S. dollars using the current exchange rate prevail-
79
| WASATCH FUNDS — Notes to Financial Statements (continued) | ||
ing on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. Transactions in foreign denominated assets may involve greater risks than domestic transactions, including currency, political, economic, regulatory and market risks.
At September 30, 2006, the foreign currencies held by the Funds were as follows (amounts in U.S. dollars):
| Cost of Currency | Market Value of Currency | |||||
Global Science & Technology Fund | ||||||
Taiwan Dollar | $ | 542,516 | $ | 537,675 | ||
International Growth Fund | ||||||
Bermuda Dollar | $ | 39,362 | $ | 39,362 | ||
Hong Kong Dollar | 28,225 | 28,226 | ||||
Swedish Krona | 51,033 | 50,977 | ||||
Taiwan Dollar | 1,945,013 | 1,907,133 | ||||
| $ | 2,063,633 | $ | 2,025,698 | |||
International Opportunities Fund | ||||||
Euro | $ | 373,438 | $ | 373,027 | ||
Japanese Yen | 1,133,931 | 1,110,677 | ||||
Taiwan Dollar | 309,630 | 305,714 | ||||
| $ | 1,816,999 | $ | 1,789,418 | |||
Micro Cap Fund | ||||||
Taiwan Dollar | $ | 199,667 | $ | 198,486 | ||
Micro Cap Value Fund | ||||||
Euro | $ | 960,271 | $ | 959,213 | ||
Indian Rupee | 65,923 | 65,899 | ||||
Taiwan Dollar | 3,293 | 3,293 | ||||
| $ | 1,029,487 | $ | 1,028,405 | |||
Small Cap Growth Fund | ||||||
Bermuda Dollar | $ | 1,559,867 | $ | 1,559,867 | ||
Hong Kong Dollar | 19,981 | 19,981 | ||||
| $ | 1,579,848 | $ | 1,579,848 | |||
Small Cap Value Fund | ||||||
Taiwan Dollar | $ | 102,465 | $ | 101,012 | ||
Investment in Securities and Related Investment Income — Security transactions are accounted for on the trade date. Gains or losses on securities sold are determined on the identified cost basis. Dividend income and distributions to shareholders are recorded on the ex-dividend date except that certain dividends from foreign securities may be recorded after the ex-dividend date based on the date the Fund is informed of the dividend. Interest income and estimated expenses are accrued daily. Bond discount and premium are amortized using the interest method. To the extent dividends received from Real Estate Investment Trust securities include return of capital distributions; such distributions are recorded as income, and adjusted accordingly for tax purposes.
Short Sales — To a limited extent, the Equity Funds may enter into short sales whereby a fund sells a security it generally does not own (the security is borrowed), in anticipation of a decline in the security’s price. The initial amount of a short sale is recorded as a liability which is marked to market daily. Fluctuations in the value of the short liability
are recorded as unrealized gains or losses. If a fund shorts a security when also holding a long position in the security (a “short against the box”), as the security’s price declines, the short position increases in value, offsetting the long position’s decrease in value. The opposite effect occurs if the security’s price rises. A fund realizes a gain or loss upon closing of the short sale (returning the security to the counterparty by way of purchase or delivery of a long position owned). The Funds are liable to the buyer for any dividends payable on securities while those securities are in a short position. These dividends are an expense of the Funds. The Funds designate collateral consisting of cash, U.S. government securities or other liquid assets sufficient to collateralize the market value of short positions.
Options Transactions — The Equity Funds may buy and sell put and call options, write covered put and call options, including over-the-counter options, on portfolio securities where the completion of the obligation is dependent upon the credit standing of another party. The risk in writing a call option is that a fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that a fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that a fund pays a premium whether or not the option is exercised. A fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily and unrealized appreciation or depreciation is recorded. A fund will realize a gain or loss upon expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid.
Repurchase Agreements — The Funds may engage in repurchase transactions. Under the terms of a typical repurchase agreement, a fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase and the fund to resell the obligation at an agreed upon price and time. The market value of the collateral must be equal at all times to the total amount of the repurchase obligation, including interest. Generally, in the event of counterparty default, the fund has the right to use the collateral to offset losses incurred.
Federal Income Taxes — It is the Funds’ policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all taxable income to shareholders. Accordingly, no provision for federal income or excise taxes has been made.
Expenses — The Funds contract for various services mostly on a collective basis. Most expenses are directly attributable to each Fund and therefore are charged accordingly. Expenses that are not directly attributable to one or more Funds are allocated among applicable Funds on an equitable and consistent basis considering such things as the nature and type of expense and the relative net assets of the Funds.
Use of Management Estimates — The preparation of financial statements in conformity with GAAP requires
80
| SEPTEMBER 30, 2006 | ||
management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported changes in net assets during the reporting period. Actual results could differ from those estimates.
Guarantees and Indemnifications — In the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The maximum exposure under
these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. Based on experience, however, the risk of loss is expected to be remote.
Redemption Fees — The Funds deduct a fee of 2.00% from redemption proceeds on shares of the Funds held two months or less. Redemption fees retained by the Funds are credited to additional paid-in capital.
3. DISTRIBUTIONS
Dividends from net investment income and net realized gains, if any, are declared and paid at least annually for all Funds, except for dividends from net investment income for the Strategic Income and U.S. Treasury Funds, which are declared and paid quarterly. The amount of dividends and distributions from net investment income and net realized gains are determined in accordance with federal income tax regulations, which may differ from GAAP. The Funds may utilize earnings and profits distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
To the extent these book and tax differences are permanent in nature, such amounts are reclassified at the end of the fiscal year among paid-in capital in excess of par value, undistributed net investment income (loss) and undistributed net realized gain (loss) on investments and foreign currency translations.
The Core Growth Fund incurred a shareholder redemption substantially in-kind as of June 29, 2006, at which date the market value of the securities provided was $689,743 resulting in a realized gain of $115,499 for financial reporting purposes. For federal income tax purposes, the Fund has not recognized a realized gain on the disposition of the securities.
Accordingly, at September 30, 2006, reclassifications were recorded as follows:
| Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | International Growth Fund | International Opportunities Fund | Micro Cap Fund | |||||||||||||||||||
Increase (decrease) paid-in capital in excess of par | $ | 14,034,580 | $ | 97,026 | $ | 2,033,172 | $ | 6,262,396 | $ | (347,643 | ) | $ | 2,441,943 | |||||||||||
Increase (decrease) undistributed net investment income | 3,188,029 | 1,206,461 | (18,399 | ) | 1,610,848 | 355,338 | 8,206,446 | |||||||||||||||||
Increase (decrease) undistributed net realized gain (loss) | (17,222,609 | ) | (1,303,487 | ) | (2,014,773 | ) | (7,873,244 | ) | (7,695 | ) | (10,648,389 | ) | ||||||||||||
| Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund1 | Ultra Growth Fund | U.S. Treasury Fund | |||||||||||||||||||
Increase (decrease) paid-in capital in excess of par | $ | 829,362 | $ | 2,088,769 | $ | 5,724,993 | $ | (17,294 | ) | $ | 1,290,508 | $ | — | |||||||||||
Increase (decrease) undistributed net investment income | 924,524 | 7,108,896 | 1,162,617 | 18,660 | 4,787,275 | — | ||||||||||||||||||
Increase (decrease) undistributed net realized gain (loss) | (1,753,886 | ) | (9,197,665 | ) | (6,887,610 | ) | (1,366 | ) | (6,077,783 | ) | — | |||||||||||||
| 1 | Inception date of the Fund was February 1, 2006. |
4. PURCHASESAND SALESOF SECURITIES
Cost of investment securities purchased and proceeds from sales of investment securities, excluding U.S. government and short-term securities, for the year or period ended September 30, 2006 are summarized below:
| Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | International Growth Fund | International Opportunities Fund | Micro Cap Fund | |||||||||||||||||||
Purchases | $ | 653,474,677 | $ | 96,634,926 | $ | 151,843,213 | $ | 236,746,138 | $ | 15,685,143 | $ | 263,853,687 | ||||||||||||
Sales | (943,748,335 | ) | (62,702,102 | ) | (205,150,240 | ) | (236,834,369 | ) | (14,434,014 | ) | (302,794,369 | ) | ||||||||||||
(Continued on page 82)
81
| WASATCH FUNDS — Notes to Financial Statements (continued) | ||
(Continued from page 81)
| Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund1 | Ultra Growth Fund | ||||||||||||||||
Purchases | $ | 82,507,317 | $ | 537,926,755 | $ | 282,781,086 | $ | 12,999,780 | $ | 268,267,019 | ||||||||||
Sales | (89,682,882 | ) | (588,129,992 | ) | (391,365,272 | ) | (1,189,237 | ) | (349,316,217 | ) | ||||||||||
| 1 | Inception date of the Fund was February 1, 2006. |
Purchases and sales of U.S. government securities in the U.S. Treasury Fund were $125,854,556 and $(2,668,550), respectively.
5. OPTIONS CONTRACTS WRITTEN
Options written activity during the year ended September 30, 2006 was as follows:
| Options Outstanding at Beginning of Period | Written | Closed | Exercised | Expired | Options Outstanding at End of Period | |||||||||||||||
Micro Cap Value Fund | ||||||||||||||||||||
Premium amount | $ | 180,487 | $ | 317,939 | $ | — | $ | (136,607 | ) | $ | (290,791 | ) | $ | 71,028 | ||||||
Number of contracts | 946 | 1,740 | — | (701 | ) | (1,535 | ) | 450 | ||||||||||||
Small Cap Value Fund | ||||||||||||||||||||
Premium amount | $ | 123,745 | $ | 246,507 | $ | — | $ | — | $ | (139,369 | ) | $ | 230,882 | |||||||
Number of contracts | 500 | 1,610 | — | — | (610 | ) | 1,500 | |||||||||||||
6. FEDERAL INCOME TAX INFORMATION
As of September 30, 2006, the cost and unrealized appreciation (depreciation) of securities, excluding written options and securities sold short, on a tax basis were as follows:
| Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | International Growth Fund | International Opportunities Fund | Micro Cap Fund | |||||||||||||||||||
Cost | $ | 1,108,107,311 | $ | 113,523,289 | $ | 227,310,376 | $ | 300,504,917 | $ | 27,996,695 | $ | 470,281,258 | ||||||||||||
Gross appreciation | $ | 319,622,571 | $ | 21,089,471 | $ | 31,005,344 | $ | 94,912,762 | $ | 9,920,229 | $ | 153,011,447 | ||||||||||||
Gross (depreciation) | (46,376,383 | ) | (8,410,524 | ) | (13,478,883 | ) | (15,155,562 | ) | (2,156,663 | ) | (37,404,598 | ) | ||||||||||||
Net appreciation | $ | 273,246,188 | $ | 12,678,947 | $ | 17,526,461 | $ | 79,757,200 | $ | 7,763,566 | $ | 115,606,849 | ||||||||||||
| Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund1 | Ultra Growth Fund | U.S. Treasury Fund | |||||||||||||||||||
Cost | $ | 82,431,689 | $ | 1,000,290,984 | $ | 535,759,196 | $ | 12,538,591 | $ | 272,420,279 | $ | 205,004,090 | ||||||||||||
Gross appreciation | $ | 19,059,422 | $ | 302,401,997 | $ | 151,288,704 | $ | 722,392 | $ | 47,077,244 | $ | 4,603,290 | ||||||||||||
Gross (depreciation) | (5,800,446 | ) | (68,563,776 | ) | (25,243,648 | ) | (316,782 | ) | (14,093,893 | ) | (431,224 | ) | ||||||||||||
Net appreciation | $ | 13,258,976 | $ | 233,838,221 | $ | 126,045,056 | $ | 405,610 | $ | 32,983,351 | $ | 4,172,066 | ||||||||||||
| 1 | Inception date of the Fund was February 1, 2006. |
The difference between cost amounts for financial statement and federal income tax purposes is due primarily to timing differences in recognizing certain securities gains and losses.
82
| SEPTEMBER 30, 2006 | ||
The components of accumulated earnings on a tax basis as of September 30, 2006 were as follows:
| Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | International Growth Fund | International Opportunities Fund | Micro Cap Fund | |||||||||||||||||||
Undistributed ordinary income | $ | — | $ | — | $ | 23,657 | $ | — | $ | — | $ | — | ||||||||||||
Undistributed capital gains | 96,409,958 | 4,818,138 | 7,225,246 | 59,539,561 | 2,177,148 | 54,244,190 | ||||||||||||||||||
Accumulated earnings | 96,409,958 | 4,818,138 | 7,248,903 | 59,539,561 | 2,177,148 | 54,244,190 | ||||||||||||||||||
Accumulated capital and other losses | — | — | — | — | — | — | ||||||||||||||||||
Other undistributed ordinary losses | (209,317 | ) | (66,023 | ) | (1,991 | ) | (194,099 | ) | (30,608 | ) | — | |||||||||||||
Net unrealized appreciation* | 272,936,574 | 12,674,081 | 17,095,469 | 79,664,557 | 7,738,767 | 115,605,041 | ||||||||||||||||||
Total accumulated earnings | $ | 369,137,215 | $ | 17,426,196 | $ | 24,342,381 | $ | 139,010,019 | $ | 9,885,307 | $ | 169,849,231 | ||||||||||||
| Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund1 | Ultra Growth Fund | U.S. Treasury Fund | |||||||||||||||||||
Undistributed ordinary income | $ | 4,854,052 | $ | — | $ | 12,833,283 | $ | 131,066 | $ | 722,080 | $ | 359 | ||||||||||||
Undistributed capital gains | 12,079,649 | 82,763,654 | 61,239,054 | — | 12,926,978 | — | ||||||||||||||||||
Accumulated earnings | 16,933,701 | 82,763,654 | 74,072,337 | 131,066 | 13,649,058 | 359 | ||||||||||||||||||
Accumulated capital and other losses | — | — | — | — | — | (5,748,839 | ) | |||||||||||||||||
Other undistributed ordinary losses | (14,869 | ) | — | (52,094 | ) | (15,868 | ) | (7,592 | ) | — | ||||||||||||||
Net unrealized appreciation* | 13,302,910 | 233,838,199 | 126,150,117 | 405,592 | 32,936,601 | 4,172,066 | ||||||||||||||||||
Total accumulated earnings | $ | 30,221,742 | $ | 316,601,853 | $ | 200,170,360 | $ | 520,790 | $ | 46,578,067 | $ | (1,576,414 | ) | |||||||||||
| 1 | Inception date of the Fund was February 1, 2006. |
| * | On investments, securities sold short, derivative and foreign currency denominated assets and liabilities. |
Capital loss carryforwards are available through the date specified below to offset future realized net capital gains. To the extent future gains are offset by capital loss carryforwards, such gains will not be distributed.
Capital loss carryforwards expire September 30:
| Fund | 2008 | 2009 | 2010 | ||||||
U.S. Treasury Fund | $ | 485,296 | $ | 4,318,964 | $ | 831,495 | |||
The U.S. Treasury Fund had $113,084 of post-October capital losses. The Core Growth, Global Science & Technology, International Growth, Micro Cap Value, Small Cap Value and Ultra Growth Funds had $209,317, $66,024, $194,099, $6,617, $52,093 and $7,592, respectively, of post-October currency losses. Net capital losses incurred after October 31 and within the taxable year are deemed to arise on the first day of the following tax year.
The tax character of distributions paid during the year or period ended September 30, 2006 was as follows:
| 2006 | Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | International Growth Fund | International Opportunities Fund | Micro Cap Fund | |||||||||||||
Ordinary income | $ | 25,301,016 | $ | — | $ | 5,846,002 | $ | — | $ | — | $ | 9,692,672 | |||||||
Capital gain | 122,056,473 | 1,860,003 | 2,681,242 | 9,365 | — | 91,613,465 | |||||||||||||
Total | $ | 147,357,489 | $ | 1,860,003 | $ | 8,527,244 | $ | 9,365 | $ | — | $ | 101,306,137 | |||||||
| 2006 | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund1 | Ultra Growth Fund | U.S. Treasury Fund | |||||||||||||
Ordinary income | $ | 2,115,580 | $ | 3,535,845 | $ | 17,898,270 | $ | 273,109 | $ | 5,104,375 | $ | 9,215,585 | |||||||
Capital gain | 6,129,820 | 156,091,699 | 80,331,327 | — | 46,249,586 | — | |||||||||||||
Total | $ | 8,245,400 | $ | 159,627,544 | $ | 98,229,597 | $ | 273,109 | $ | 51,353,961 | $ | 9,215,585 | |||||||
| 1 | Inception date of the Fund was February 1, 2006. |
83
| WASATCH FUNDS — Notes to Financial Statements (continued) | ||
The tax character of distributions paid during the year or period ended September 30, 2005 was as follows:
| 2005 | Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | International Growth Fund | International Opportunities Fund 1 | Micro Cap Fund | ||||||||||||||
Ordinary income | $ | 9,428,971 | $ | — | $ | 45,181 | $ | — | $ | — | $ | 3,229,671 | ||||||||
Capital gain | 50,650,388 | — | — | 411,692 | — | 74,334,485 | ||||||||||||||
Total | $ | 60,079,359 | $ | — | $ | 45,181 | $ | 411,692 | $ | — | $ | 77,564,156 | ||||||||
| 2005 | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Ultra Growth Fund | U.S. Treasury Fund | |||||||||||||||
Ordinary income | $ | 8,935,853 | $ | — | $ | 24,887,725 | $ | — | $ | 2,078,313 | ||||||||||
Capital gain | 947,139 | 26,587,298 | 78,849,850 | 16,837,407 | — | |||||||||||||||
Total | $ | 9,882,992 | $ | 26,587,298 | $ | 103,737,575 | $ | 16,837,407 | $ | 2,078,313 | ||||||||||
| 1 | Inception date of the Fund was January 27, 2005. |
The tax character of distributions paid may differ from that shown in the Statements of Changes in Net Assets due to short-term gains being treated as ordinary income for tax purposes.
Supplemental Tax Information (unaudited) — The Funds hereby designate approximately $140,631,737, $2,363,876, $4,711,086, $6,543,253, $26,648, $96,875,030, $6,725,120, $165,541,017, $85,064,446 and $47,471,822 as a capital gain dividend for the Core Growth, Global Science & Technology, Heritage Growth, International Growth, International Opportunities, Micro Cap, Micro Cap Value, Small Cap Growth, Small Cap Value and Ultra Growth Funds, respectively, for the purpose of the dividends paid deduction.
For the fiscal year ended September 30, 2006 certain dividends paid by each Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. To the extend dividends are paid during the calendar year 2006, complete information will be reported on shareholder’s 2006 Form 1099-DIV. The amount designated as qualified dividend income for the year or period ended September 30, 2006 will be at the highest allowable amount permitted by law.
Corporate shareholders should note for the year ended September 30, 2006, the percentage of the Funds’ investment income (i.e., net investment income plus short-term capital gains) that qualified for the corporate dividends received deduction is as follows:
| Core Growth Fund | Heritage Growth Fund | Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | Ultra Growth Fund | |||||||||||||||||
Percentage | 91 | % | 25 | % | 13 | % | 7 | % | 88 | % | 46 | % | 22 | % | 8 | % |
7. RELATED PARTY TRANSACTIONS
Investment Advisory Fees — As the Fund’s investment advisor, the Advisor receives a monthly fee calculated on average daily net assets. The Advisor has contractually agreed to waive its fees and/or reimburse a Fund should a Fund’s operating expenses exceed a specified annual limitation through at least January 31, 2007. Investment advisory fees and fees waived, if any, for the year or period ended September 30, 2006 are disclosed in the Statements of Operations. Investment advisory fee and expense limitation annual rates are shown below.
| Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | International Growth Fund | International Opportunities Fund | Micro Cap Fund | |||||||||||||
Advisory Fee | 1.00 | % | 1.50 | % | 0.70 | % | 1.50 | % | 2.00 | % | 2.00 | % | ||||||
Expense Limitation | 1.50 | % | 1.95 | % | 0.95 | % | 1.95 | % | 2.25 | % | 2.50 | % |
(Continued on page 85)
84
| SEPTEMBER 30, 2006 | ||
(Continued from page 84)
| Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | Ultra Growth Fund | U.S. Treasury Fund | |||||||||||||
Advisory Fee | 2.00 | % | 1.00 | % | 1.50 | % | 0.70 | % | 1.25 | % | 0.50 | % | ||||||
Expense Limitation | 2.25 | % | 1.50 | % | 1.95 | % | 0.95 | % | 1.75 | % | 0.75 | % |
Payments by Affiliates — The Advisor reimbursed the Wasatch International Growth Fund during the year for an amount relating to an incorrect settlement of a security transaction. The amount of the reimbursement was $56,566 or $0.0031 per share as of the effective date of the correction.
Affiliated Interests — An officer of the Funds owns approximately 15% and 17% of the shares outstanding of the International Opportunities Fund and Strategic Income Fund, respectively, as of September 30, 2006.
Voluntary Investment Advisory Fee Reimbursement— In 2006, the Advisor received payments from issuers of private securities to offset certain due diligence expenses the Advisor incurred for the Small Cap Growth and Ultra Growth Funds. In turn, the Advisor waived equal amounts of investment advisory fees in order to reimburse the Funds. These amounts are disclosed in the Statements of Operations.
8. TRANSACTIONSWITH AFFILIATES
If a Fund’s holding represents ownership of 5% or more of the voting securities of a company, the company is deemed to be an affiliate as defined by the 1940 Act. The following Funds conducted transactions during the year ended September 30, 2006 with “affiliated companies” as so defined:
| Share Activity | Dividends Credited to Income | Gain (loss) Realized on Sale of Shares | ||||||||||||||
| Balance 9/30/05 | Purchases | Sales | Balance 9/30/06 | |||||||||||||
Core Growth Fund | ||||||||||||||||
WCA Waste Corp. | 778,075 | 62 | 778,075 | 62 | * | $ | — | $ | (3,018,986 | ) | ||||||
Micro Cap Fund | ||||||||||||||||
Advanced Power Technology, Inc. | 835,495 | 725 | 836,220 | — | * | $ | — | $ | 3,855,576 | |||||||
AutoInfo, Inc. | — | 2,206,015 | — | 2,206,015 | — | — | ||||||||||
Commercial Solutions, Inc. | 1,000,000 | — | 118,805 | 881,195 | * | — | 507,957 | |||||||||
Encision, Inc. | 340,000 | — | 191,600 | 148,400 | * | — | 5,375 | |||||||||
Enpath Medical, Inc. | 436,825 | — | — | 436,825 | — | — | ||||||||||
Epic Bancorp | — | 192,400 | — | 192,400 | 15,392 | — | ||||||||||
inTEST Corp. | 528,550 | — | — | 528,550 | — | — | ||||||||||
IRIDEX Corp. | 650,575 | — | 330,070 | 320,505 | * | — | 2,052,831 | |||||||||
Ophthalmic Imaging Systems, Inc. | — | 797,000 | 10,000 | 787,000 | * | — | 1,449 | |||||||||
SM&A | 857,000 | 647,375 | 162,390 | 1,341,985 | — | (464,067 | ) | |||||||||
U.S. Physical Therapy, Inc. | 632,862 | 87,150 | 236,740 | 483,272 | * | — | (286,543 | ) | ||||||||
VNUS Medical Technologies, Inc. | 347,655 | 570,396 | — | 918,051 | — | — | ||||||||||
| $ | 15,392 | $ | 5,672,578 | |||||||||||||
Small Cap Growth Fund | ||||||||||||||||
AmSurg Corp. | 1,486,133 | 261,270 | 536,055 | 1,211,348 | * | $ | — | $ | 3,001,164 | |||||||
Small Cap Value Fund | ||||||||||||||||
Transport Corporation of America, Inc. | 392,442 | — | 392,442 | — | * | $ | — | $ | 1,394,261 | |||||||
U.S. Physical Therapy, Inc. | 541,025 | 80,505 | 78,930 | 542,600 | * | — | (289,080 | ) | ||||||||
Vitran Corp., Inc. | 601,900 | 78,415 | — | 680,315 | — | — | ||||||||||
| $ | — | $ | 1,105,181 | |||||||||||||
| * | No longer affiliated as of September 30, 2006. |
85
| WASATCH FUNDS — Notes to Financial Statements (continued) | ||
9. RESTRICTED SECURITIES
The Funds may own investments that were purchased through private placement transactions or under Rule 144A of the Securities Act of 1933 (the “Securities Act”) and cannot be sold without prior registration under the Securities Act or may be limited due to certain restrictions. These securities are generally deemed to be illiquid and are valued at fair value as determined by a designated Pricing Committee, comprised of personnel of the Advisor, with oversight by the Board of Directors and in accordance with Board-approved Pricing Policies and Procedures. If and when such securities are registered, the costs of registering such securities are paid by the issuer. At September 30, 2006, the Funds held the following restricted securities:
| Security Type | Acquisition Date | Acquisition Cost | Fair Value | Value as % of Net Assets | |||||||||
Core Growth Fund | |||||||||||||
Brantley Mezzanine Finance, LLC | Common Units | 9/21/04 | $ | 60,000 | $ | — | — | ||||||
Brantley Mezzanine Finance, LLC, | Corporate Bond | 9/21/04 | 2,940,000 | 2,664,600 | 0.19 | % | |||||||
DataPath, Inc. | Common Stock | 6/23/06 | 7,602,980 | 7,602,980 | 0.55 | % | |||||||
| $ | 10,602,9890 | $ | 10,267,580 | 0.74 | % | ||||||||
Global Science & Technology Fund | |||||||||||||
Acusphere, Inc. | Warrants | 7/29/04 - 10/20/04 | $ | — | $ | — | — | ||||||
BlueArc Corp., Series DD | Preferred Stock | 6/6/06 | 324,998 | 324,998 | 0.26 | % | |||||||
Incipient, Inc., Series D | Preferred Stock | 2/7/06 | 139,219 | 43,884 | 0.03 | % | |||||||
Montagu Newhall Global Partners II-B, L.P. | LP Interest | 10/10/03 - 8/07/06 | 199,644 | 176,311 | 0.14 | % | |||||||
Neutral Tandem Inc., Series C | Preferred Stock | 2/2/06 | 111,107 | 111,107 | 0.09 | % | |||||||
Point Biomedical Corp. | Warrants | 2/16/05 | — | — | — | ||||||||
Point Biomedical Corp., Series F | Preferred Stock | 2/16/05 | 150,000 | 105,000 | 0.08 | % | |||||||
Xtera Communications, Inc., Series A-1 | Preferred Stock | 9/3/03 | 7,076 | 7,076 | 0.01 | % | |||||||
| $ | 932,044 | $ | 768,376 | 0.61 | % | ||||||||
International Opportunities Fund | |||||||||||||
Club Cruise Entertainment & Travelling Services Europe B.V. | Common Stock | 9/22/06 | $ | 376,246 | $ | 373,027 | 1.01 | % | |||||
Micro Cap Fund | |||||||||||||
Familymeds Group, Inc. | Warrants | 12/1/04 | $ | — | $ | — | — | ||||||
Point Biomedical Corp. | Warrants | 2/16/05 | — | — | — | ||||||||
Point Biomedical Corp., Series F | Preferred Stock | 2/16/05 | 1,000,000 | 700,000 | 0.12 | % | |||||||
| $ | 1,000,000 | $ | 700,000 | 0.12 | % | ||||||||
Micro Cap Value Fund | |||||||||||||
Acusphere, Inc. | Warrants | 7/29/04 - 10/20/04 | $ | — | $ | — | — | ||||||
Club Cruise Entertainment & Travelling Services Europe B.V. | Common Stock | 9/22/06 | 967,491 | 959,213 | 1.00 | % | |||||||
CorVu Corp. | Warrants | 11/17/03 | — | — | — | ||||||||
Familymeds Group, Inc. | Warrants | 12/1/04 | — | — | — | ||||||||
Idaho Trust Bancorp | Common Stock | 8/30/06 | 500,004 | 500,004 | 0.52 | % | |||||||
Point Biomedical Corp. | Warrants | 2/16/05 | — | — | — | ||||||||
Point Biomedical Corp., Series F | Preferred Stock | 2/16/05 | 200,000 | 140,000 | 0.15 | % | |||||||
| $ | 1,667,495 | $ | 1,599,217 | 1.67 | % | ||||||||
Small Cap Growth Fund | |||||||||||||
Elder Health, Inc., Series G | Preferred Stock | 11/1/04 | $ | 571,428 | $ | 571,428 | 0.05 | % | |||||
Incipient, Inc., Series D | Preferred Stock | 2/7/06 | 1,860,778 | 586,550 | 0.05 | % | |||||||
Montagu Newhall Global Partners II-B, L.P. | LP Interest | 10/10/03 - 8/7/06 | 1,996,435 | 1,763,112 | 0.14 | % | |||||||
Montagu Newhall Global Partners III-B, L.P. | LP Interest | 3/16/06 - 6/22/06 | 127,500 | 118,257 | 0.01 | % | |||||||
Nanosys, Inc., Series D | Preferred Stock | 11/8/05 | 2,000,000 | 2,000,000 | 0.16 | % | |||||||
Neutral Tandem Inc., Series C | Preferred Stock | 2/2/06 | 1,485,102 | 1,485,102 | 0.12 | % | |||||||
Point Biomedical Corp. | Warrants | 2/16/05 | — | — | — | ||||||||
Point Biomedical Corp., Series F | Preferred Stock | 2/16/05 | 2,000,000 | 1,400,000 | 0.11 | % | |||||||
TargetRX, Inc., Series D | Preferred Stock | 4/8/05 | 769,098 | 504,267 | 0.04 | % | |||||||
Zonare Medical Systems, Inc. | Warrants | 6/30/04 | — | — | — | ||||||||
Zonare Medical Systems, Inc., Series E | Preferred Stock | 6/30/04 | 1,500,000 | 1,343,161 | 0.11 | % | |||||||
| $ | 12,310,341 | $ | 9,771,877 | 0.79 | % | ||||||||
86
| SEPTEMBER 30, 2006 | ||
| Security Type | Acquisition Date | Acquisition Cost | Fair Value | Value as % of Net Assets | |||||||||
Small Cap Value Fund | |||||||||||||
Brantley Mezzanine Finance, LLC | Common Units | 9/21/04 | $ | 40,000 | $ | — | — | ||||||
Brantley Mezzanine Finance, LLC, 10.00%, 9/21/09 | Corporate Bond | 9/21/04 | 1,960,000 | 1,776,400 | 0.27 | % | |||||||
CBRE Realty Financial, Inc. | Common Stock | 6/2/05 | 7,125,000 | 6,671,494 | 1.00 | % | |||||||
Crystal River Capital, Inc. | Common Stock | 3/9/05 | 7,500,000 | 6,726,720 | 1.01 | % | |||||||
| $ | 16,625,000 | $ | 15,174,614 | 2.28 | % | ||||||||
Ultra Growth Fund | |||||||||||||
Elder Health, Inc., Series G | Preferred Stock | 11/1/04 | $ | 571,428 | $ | 571,428 | 0.19 | % | |||||
Montagu Newhall Global Partners II-B, L.P. | LP Interest | 10/10/03 - 8/7/06 | 1,796,792 | 1,586,801 | 0.52 | % | |||||||
Montagu Newhall Global Partners III-B, L.P. | LP Interest | 3/16/06 - 6/22/06 | 127,500 | 118,257 | 0.04 | % | |||||||
Nanosys, Inc., Series D | Preferred Stock | 11/8/05 | 500,001 | 500,001 | 0.16 | % | |||||||
Neutral Tandem Inc., Series C | Preferred Stock | 2/2/06 | 403,796 | 403,796 | 0.13 | % | |||||||
Ophthonix, Inc., Series C | Preferred Stock | 9/23/05 | 500,000 | 500,000 | 0.16 | % | |||||||
Point Biomedical Corp. | Warrants | 2/16/05 | — | — | — | ||||||||
Point Biomedical Corp., Series F | Preferred Stock | 2/16/05 | 1,500,000 | 1,050,000 | 0.34 | % | |||||||
TargetRX, Inc., Series D | Preferred Stock | 4/8/05 | 230,904 | 151,395 | 0.05 | % | |||||||
TherOx, Inc., Series I | Preferred Stock | 7/7/05 | 1,000,000 | 999,998 | 0.33 | % | |||||||
Transoma Medical, Inc., Series B | Preferred Stock | 1/20/06 | 475,001 | 475,001 | 0.16 | % | |||||||
Xtera Communications, Inc., Series A-1 | Preferred Stock | 9/3/03 | 99,065 | 99,065 | 0.03 | % | |||||||
Zonare Medical Systems, Inc. | Warrants | 6/30/04 | — | — | — | ||||||||
Zonare Medical Systems, Inc., Series E | Preferred Stock | 6/30/04 | 1,000,000 | 895,441 | 0.29 | % | |||||||
| $ | 8,204,487 | $ | 7,351,183 | 2.40 | % | ||||||||
LP Limited Partnership Interest
10. PURCHASE COMMITMENTS
In September 2003, the Global Science & Technology, Small Cap Growth and Ultra Growth Funds entered into subscription agreements to acquire limited partnership interests in Montagu Newhall Global Partners II-B, L.P. The remaining commitment amounts at September 30, 2006 were $297,500, $2,975,000 and $2,677,500, respectively. Securities held by these Funds have been designated to meet these purchase commitments.
In November 2004, the Small Cap Growth and Ultra Growth Funds entered into subscription agreements to acquire shares of Elder Health, Inc., Series G Pfd. The remaining commitment amounts at September 30, 2006 were $428,572 per Fund. Securities held by these Funds have been designated to meet these purchase commitments.
In December 2005, the Small Cap Growth and Ultra Growth Funds entered into subscription agreements to acquire limited partnership interests in Montagu Newhall Global Partners III-B, L.P. The remaining commitment amounts at September 30, 2006 were $1,372,500 per Fund. Securities held by these Funds have been designated to meet these purchase commitments.
11. CONTINGENT PAYMENTS
In February 2006, GeneOhm Sciences, Inc., a holding in the Small Cap Growth Fund and Ultra Growth Fund, was acquired by Becton, Dickinson and Company. The purchase price consisted of an up-front cash payment and may include additional contingent payments up to $1,576,538 and $473,412, respectively, based on future events occurring on or before December 31, 2007.
12. SUBSEQUENT EVENT
On October 12, 2006, the value of Brantley Mezzanine Finance, LLC, 10.00%, 9/21/09, a position held by the Core Growth and Small Cap Value Funds, was reduced to zero value as a result of new information in accordance with Board-approved Pricing Policies and Procedures.
87
| WASATCH FUNDS — Report of Independent Registered Public Accounting Firm | SEPTEMBER 30, 2006 | |
To the Board of Directors
and Shareholders of
Wasatch Funds, Inc.:
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Wasatch Core Growth Fund, Wasatch Global Science & Technology Fund, Wasatch Heritage Growth Fund, Wasatch International Growth Fund, Wasatch International Opportunities Fund, Wasatch Micro Cap Fund, Wasatch Micro Cap Value Fund, Wasatch Small Cap Growth Fund, Wasatch Small Cap Value Fund, Wasatch Strategic Income Fund, Wasatch Ultra Growth Fund, and Wasatch-Hoisington U.S. Treasury Fund (constituting Wasatch Funds, Inc., hereafter referred to as the “Funds”) at September 30, 2006, the results of each of their operations for the year or period then ended and the changes in each of their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Kansas City, MO
November 17, 2006
88
| WASATCH FUNDS — Directors and Officers | SEPTEMBER 30, 2006 | |
| Name, Address and Age | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director | |||||
Interested Director: | ||||||||||
Samuel S. Stewart, Jr., Ph.D., CFA* 150 Social Hall Avenue 4th Floor Salt Lake City, UT 84111 Age: 64 | President and Director | Indefinite Served as President and Director since 1986 | Chairman of the Board for the Advisor since 1975; Chief Investment Officer of the Advisor since 2004; Director of Research of the Advisor from 1975 to 2004; Chairman of the Board of Wasatch Funds from 1986 to 2004. | 12 | None | |||||
Independent Directors: | ||||||||||
James U. Jensen, J.D., MBA 44 North Wolcott Salt Lake City, UT 84103 Age: 62 | Director and Chairman of the Board | Indefinite Served as Chairman of the Board since 2004 and Director since 1986 | Co-Founder and Chairman of the Board of Intelisum, Inc. (a company pursuing computer and measurement technology and products) since 2001; Consultant on corporate growth and technology transfer since 2004; Vice President, Corporate Development, Legal Affairs and General Counsel and Secretary, NPS Pharmaceuticals, Inc. from 1991 to 2004. | 12 | Private companies and foundations only. | |||||
William R. Swinyard, Ph.D. 470 S. Woodland Hills Drive Woodland Hills, UT 84653 Age: 66 | Director and Chairman of the Audit Committee | Indefinite Served as Chairman of the Audit Committee since 2004 and Director since 1986 | Professor of Business Management and Holder of the Fred G. Meyer Chair of Marketing (Emeritus), Brigham Young University since 1978. | 12 | None | |||||
D. James Croft, Ph.D. 12030 Sunrise Valley Drive Suite 200 Reston, VA 20191 Age: 64 | Director | Indefinite Served as Director since 2005 | Consultant since 2004 and Founder & Executive Director, Mortgage Asset Research Institute from 1990 to 2004. | 12 | None | |||||
Officers: | ||||||||||
Jeff S. Cardon, CFA 150 Social Hall Avenue 4th Floor Salt Lake City, UT 84111 Age: 49 | Vice President | Indefinite Served as Vice President since 1986 | President and Treasurer of the Advisor since 1999; Director of Wasatch Funds from 1986 to 2004; Director of the Advisor since 1985; Security Analyst for the Advisor since 1980. | N/A | N/A | |||||
Venice F. Edwards, CFA 150 Social Hall Avenue 4th Floor Salt Lake City, UT 84111 Age: 56 | Vice President and Treasurer | Indefinite Served as Treasurer since 1996 and Vice President since September 2004 | Senior Compliance Officer for the Advisor since 2006; Chief Compliance Officer for the Advisor from 2004 to 2006; Director of Compliance for the Advisor from 1995 to 2004 and Secretary of the Advisor since 1999. | N/A | N/A | |||||
Daniel D. Thurber 150 Social Hall Avenue 4th Floor Salt Lake City, UT 84111 Age: 37 | Chief Compliance Officer/ Secretary | Indefinite Served as Chief Compliance Officer and Secretary since May 2006 | Chief Compliance Officer and Secretary for Wasatch Funds since 2006; General Counsel, Chief Compliance Officer and Director of Compliance for the Advisor since 2006; Associate and Partner at Dorsey & Whitney LLP from 2001 to 2006. | N/A | N/A | |||||
| * | Mr. Stewart is an Interested Director because he serves as a director and an officer of the Advisor. |
Additional information about the Funds’ directors is provided in the Statement of Additional Information and is available without charge, upon request, by calling 800.551.1700.
89
| WASATCH FUNDS — Supplemental Information | SEPTEMBER 30, 2006 | |
PROXY VOTING POLICIES, PROCEDURESAND RECORD
A description of the policies and procedures that Wasatch Advisors uses to vote proxies related to the Funds’ portfolio securities is set forth in the Funds’ Statement of Additional Information which is available without charge, upon request, on the Funds’ web site at www.wasatchfunds.com or by calling 800.551.1700 and on the Securities and Exchange Commission’s (SEC) web site at www.sec.gov.
Wasatch Funds’ proxy voting record is available on the Funds’ web site at www.wasatchfunds.com and the SEC’s web site at www.sec.gov no later than August 31 for the prior 12 months ending June 30.
QUARTERLY PORTFOLIO HOLDINGS DISCLOSUREON FORM N- Q
The Funds file their complete schedules of investments with the SEC for their first and third fiscal quarters of each fiscal year, commencing with the quarter ended December 31, 2004, on Form N-Q. The Funds’ Form N-Q is available on the SEC’s web site at www.sec.gov, and may be viewed 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).
90
| WASATCH FUNDS — Service Providers | SEPTEMBER 30, 2006 | |
Investment Advisor
Wasatch Advisors, Inc.
150 Social Hall Avenue, 4th Floor
Salt Lake City, UT 84111
Sub-Advisor for U.S. Treasury Fund
Hoisington Investment Management Co.
1250 Capital of Texas Highway South
Building 3, #600
Austin, TX 78746
Administrator and Fund Accountant
State Street Bank and Trust Company
801 Pennsylvania Avenue
Kansas City, MO 64105
Distributor
ALPS Distributors, Inc.
1625 Broadway, Suite 2200
Denver, CO 80202
Transfer Agent
UMB Fund Services, Inc.
803 West Michigan Street, Suite A
Milwaukee, WI 53233-2301
Custodian
State Street Bank and Trust Company
801 Pennsylvania Avenue
Kansas City, MO 64105
Legal Counsel to Wasatch Funds and Independent Directors
Chapman & Cutler, LLP
111 West Monroe Street
Chicago, IL 60603
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
1055 Broadway, 10th Floor
Kansas City, MO 64105
91
| WASATCH FUNDS — Guide to Understanding Financial Statements | ||
Wasatch Funds provides reports to shareholders twice a year. The annual report is for the Funds’ fiscal year which ends September 30. The semi-annual report is for the six months or period ending March 31. Additionally, the Funds’ schedules of investments for the first and third quarters of each fiscal year are available to shareholders as described on page 90. These reports provide shareholders with important information that will help them evaluate the management and performance of their investments. It is the desire of Wasatch Funds to help shareholders stay in tune with their investments. If you have any questions about the information in this report, a shareholder services representative will be happy to assist you when you call 800.551.1700.
SCHEDULEOF INVESTMENTS
The holdings of each Wasatch Fund are detailed in the “Schedule of Investments.” This section provides a snapshot of the securities each Fund was invested in on the last day of the reporting period. The Wasatch Equity Funds invest primarily in Common Stocks of companies which are grouped together by industry. The Wasatch-Hoisington U.S. Treasury Fund invests primarily in U.S. Treasury securities. The Equity Funds will typically have only minor holdings in Short-Term Investments. At times the Funds may take temporary defensive positions by increasing cash or holdings in Short-Term Investments. Please see the prospectus under “Other Investment Strategies and Their Risks.”
STATEMENTSOF ASSETSAND LIABILITIES
These financial statements show the Assets and Liabilities of a Fund on the last day of the reporting period. A Fund’s Assets include the value of securities owned, amounts receivable for purchases of Fund shares (capital shares receivable), securities sold, interest and dividends, prepaid expenses and other assets. Liabilities are amounts owed for shareholder redemptions (capital shares payable), securities purchased, investment advisory fees and other expenses. Totaling up the assets and subtracting the liabilities results in a Fund’s Net Assets.
Net Assets consist of capital stock, paid-in capital in excess of par, undistributed net investment income or loss, undistributed net realized gain or loss on investments and net unrealized appreciation or depreciation on investments. Capital stock is stock authorized by a company’s charter and having par value, stated value or no par value. Par value is set by the company issuing the shares and has no relation to Net Asset Value. The par value of one share of each Wasatch Fund is $.01. Paid-in capital in excess of par is capital received from shareholders in exchange for Fund shares that exceeds the par value of the shares. For example, if you bought one share of a Fund for $10, $.01 would show as “Capital stock” on the books of the Fund, and $9.99 would be accounted for under “Paid-in capital in excess of par.” Undistributed net investment income or loss is the a mount of net investment income or loss of a Fund since inception that has not been paid to shareholders as a dividend.
Undistributed net realized gain (loss) on investments is the amount of net realized gains or losses generated by a Fund since inception that have not been distributed to shareholders in the form of a capital gain distribution. A gain or loss is realized when a security is sold by a Fund. Net unrealized appreciation (depreciation) on investments is the change in value from the purchase price of securities a Fund continues to hold.
The number of shares a Fund is authorized to sell can be found under Capital Stock, $.01 par value. Issued and outstanding indicates the number of shares owned by shareholders.
Net Asset Value (NAV), Redemption Price and Offering Price Per Share shows the value of one outstanding share of a Fund on the date of the report. A Fund’s share price (NAV) is calculated by dividing the value of all securities and other assets owned by a Fund, less the liabilities charged to that Fund, by the number of Fund shares outstanding. The share price is calculated at the close of business of the New York Stock Exchange on each day the Exchange is open for trading. Please see Wasatch Funds’ prospectus for more information about how share prices are calculated. Information about how the share price is affected by a Fund’s operation can be found under “Financial Highlights” on page 93.
STATEMENTSOF OPERATIONS
Statements of Operations show investment income and expenses for each Fund as well as realized gains or losses from securities sold and the appreciation or depreciation in the value of a Fund’s holdings during the reporting period.
Investment Income shows Interest and Dividends earned from interest-bearing and dividend-paying securities in a Fund’s portfolio.
Expenses show the various fees and expenses paid out of a Fund’s assets such as the fee paid to Wasatch Advisors, the Funds’ investment advisor. Additional fees include shareholder servicing, fund administration and accounting, custody of fund assets, federal and state registration, legal counsel, auditing and directors’ fees. The Funds pay for printing and mailing statements, prospectuses, annual reports and semi-annual reports to shareholders.
Net Investment Income (Loss) is the amount of dividends and interest income earned on securities held by a Fund, less the Fund’s expenses.
Net realized gain (loss) on investments and foreign currency translations is the net gain or loss on securities a Fund has sold. Change in unrealized appreciation (depreciation) on investments and foreign currency translations is the change in value of securities a Fund continues to hold.
Net gain (loss) on investments is the result of changes in market value of securities a Fund has sold and securities it continues to hold.
STATEMENTSOF CHANGESIN NET ASSETS
Net Assets are a Fund’s remaining assets after taking into consideration any liabilities. Statements of Changes in Net Assets show the increase or decrease in a Fund’s net assets during the reporting period. Investment operations,
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dividends and capital share transactions affect a Fund’s net assets. Operations is a summary of the Statements of Operations. It includes investment income or loss, net realized gain or loss on investments and foreign currency translations a Fund has sold as well as the change in appreciation or depreciation in the value of investments a Fund continues to hold.
Dividends are distributed by Wasatch Funds to shareholders when Fund investments have earned income in excess of net expenses or when capital gains in excess of capital losses are realized from the sale of securities. Most shareholders choose to reinvest their dividends and capital gain distributions. Each Fund is required by Internal Revenue Code regulations to distribute substantially all of its net investment income and capital gains to shareholders in order to retain its status as a “regulated investment company.”
Capital share transactions are any transactions involving shares of a Fund, including the selling of Fund shares, shares issued by a Fund to shareholders for the reinvestment of dividends, and share redemptions.
FINANCIAL HIGHLIGHTS
The Financial Highlights contain important historical operating information that you may find useful in making decisions or understanding the performance of your investment.
Net Asset Value (NAV) is defined under “Statements of Assets and Liabilities” on page 92. The difference between the Net asset value, beginning of period and the Net asset value, end of period in the Financial Highlights is the change in value of a Fund’s shares over the reporting period, but not its total return.
Income (loss) from investment operations shows how the share price was affected by a Fund’s operations on a per share basis. Net investment income (loss) is the per share amount of dividends and interest income earned on securities held by a Fund, less the Fund’s expenses. Net realized
and unrealized gains (losses) on securities is the per share increase or decrease in the value of securities a Fund holds or has sold during the reporting period. Gains or (losses) are realized when securities are sold. Gains or (losses) are unrealized when securities increase or decrease in value but are not sold.
Distributions are the per share amount that a Fund paid to shareholders from net investment income and net realized gains.
Total return is the percentage increase or decrease in the value of an investment over a stated period of time. A total return percentage includes both changes in unrealized and realized gains and income. For the purposes of calculating total return, it is assumed that dividends and distributions are reinvested at the share price on the ex-dividend day of the distribution. A FUND’S TOTAL RETURN CANNOT BE COMPUTED DIRECTLY FROM THE FINANCIAL HIGHLIGHTS.
Supplemental data and ratios are provided to help you better understand your investment. Net assets, end of period, are the net assets of a Fund on the reporting date.
Ratio to average net assets of: Expenses shows the total of a Fund’s operating expenses divided by its average net assets for the stated period before and after waivers and reimbursements by the Advisor, if any. Ratio to average net assets of: Net investment income shows a Fund’s net investment income (loss) divided by its average net assets for the stated period before and after waivers and reimbursements by the Advisor, if any. Portfolio turnover rate measures a Fund’s buying and selling activity during the reporting period. It is computed by dividing total purchases or sales, whichever is less, by the average monthly market value of a Fund’s portfolio securities. This calculation does not include securities with a maturity date of less than 12 months.
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TELEPHONE
800.551.1700
M - F, 7:00 a.m. to 7:00 p.m. CT
Automated Line, 24 Hours
U.S. MAIL
Wasatch Funds
P.O. Box 2172
Milwaukee, WI 53201-2172
OVERNIGHT MAIL
Wasatch Funds
803 West Michigan Street, Suite A
Milwaukee, WI 53233-2301
ONLINE
www.wasatchfunds.com
shareholderservice@wasatchfunds.com
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| WASATCH FUNDS — Notes | SEPTEMBER 30, 2006 | |
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WWW.WASATCHFUNDS.COM
800.551.1700
Item 2: Code of Ethics.
| (a) | Wasatch Funds, Inc. (the “Registrant”) has adopted a Code of Ethics that applies to the Registrant’s principal executive officer and principal financial officer. |
| (b) | No disclosures are required by this Item 2(b). |
| (c) | There have been no amendments to the Registrant’s Code of Ethics during the reporting period for Form N-CSR. |
| (d) | There have been no waivers granted by the Registrant to individuals covered by the Registrant’s Code of Ethics during the reporting period for Form N-CSR. |
| (e) | Not applicable. |
| (f) | A copy of the Registrant’s Code of Ethics is attached as an exhibit to this Form N-CSR. |
Item 3: Audit Committee Financial Expert.
| (a) | (1) | The Board of Directors of the Registrant has determined that the Registrant has one member serving on the Registrant’s Audit Committee that possesses the attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as “audit committee financial expert.” | ||
| (2) | For the reporting period, the name of the audit committee financial expert was James U. Jensen. Mr. Jensen was deemed to be “independent” as that term is defined in Item 3(a)(2) of Form N-CSR. | |||
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees - The aggregate fees billed for professional services rendered by the independent registered public accounting firm for the audit of the Registrant’s annual financial statements or services normally provided in connection with statutory and regulatory filings or engagements for the last two fiscal years ended September 30, 2006 and September 30, 2005 were $220,700 and $176,250, respectively.
(b) Audit Related Fees –The Registrant was not billed any fees by the independent registered public accounting firm for the fiscal year ended September 30, 2005 for assurance and related services rendered by the independent registered public accounting firm to the registrant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item 4. The Registrant was not billed any fees by the independent registered public accounting firm for the fiscal year ended September 30, 2006 for assurance and related services rendered by the independent registered public accounting firm to the registrant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item 4.
During the fiscal years ended September 30, 2006 and 2005, no fees for assurance and related services that relate directly to the operations and financial reporting of the Registrant were billed by the independent registered public accounting firm to the Registrant’s investment adviser or any other entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant.
(c) Tax Fees - The aggregate fees billed for professional services rendered by the independent registered public accounting firm to the Registrant for tax compliance, tax advice, tax planning and tax return preparation for the last two fiscal years ended September 30, 2006 and September 30, 2005 were $49,583 and $49,722, respectively. These services consisted of the independent registered public accounting firm reviewing the Registrant’s excise tax returns, distribution requirements and RIC tax returns, as well as consultations regarding the tax consequences of specific investments.
During the fiscal years ended September 30, 2006 and 2005, no fees for tax compliance, tax advice or tax planning services that relate directly to the operations and financial reporting of the Registrant were billed by the independent registered public accounting firm to the Registrant’s investment adviser or any other entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant.
(d) All Other Fees – There were no fees billed for the fiscal years ended September 30, 2006 and September 30, 2005, respectively, for products and services provided by the independent registered public accounting firm to the Registrant, other than the services reported in paragraph (a) – (c) of this Item 4.
During the fiscal years ended September 30, 2006 and 2005, no fees for other services that relate directly to the operations and financial reporting of the Registrant were billed by the independent registered public accounting firm to the Registrant’s investment adviser or any other entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant.
(e) Pre-Approval Policies and Procedures
(1) Pursuant to the registrant’s Audit Committee Charter, the Audit Committee shall evaluate the independence of the independent public accountants, including evaluating whether the independent public accountants provide audit services or consulting services to the Registrant or consulting services to the investment adviser, and to receive the specific representations of the independent registered public accounting firm as to their independence. Specifically, the Audit Committee will be responsible for evaluating the provision of non-audit services to the Registrant as required by Section 201 of the Sarbanes-Oxley Act, any pre-approval requests submitted by the independent registered public accounting firm as required by Section 202 of the Sarbanes-Oxley Act or as otherwise required under Section 2-01 of Regulation S-X, and shall monitor the conflict of interest requirements in Section 206 of the Sarbanes-Oxley Act, and the prohibitions on improper influence on the conduct of audits in Section 303 of the Sarbanes-Oxley Act. The Audit Committee shall pre-approve any engagement of the independent registered public accounting firm to provide any services (other than prohibited non-audit services) including the fees and other compensation to be paid to the independent registered public accounting firm.
The independent registered public accounting firm is authorized by the Audit Committee to provide non-audit services to the extent allowable under the Sarbanes-Oxley Act of 2002 for the Registrant provided that (i) the fees payable with respect to such services do not exceed $5,000 in any calendar quarter and (ii) such fees are ratified by the Audit Committee at its next meeting. The fees payable with respect to non-audit services may be increased by the affirmative vote of a majority of the members of the Audit Committee.
(2) There were no pre-approval requirements waived for the services provided to the Registrant described in paragraphs (b)-(d) of Item 4 by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X (the “De Minimis Rule”). There were no fees billed for services provided to the investment adviser described in paragraphs (b)-(d) of Item 4 that were required to be pre-approved by the Audit Committee as described in paragraph (e)(1) of Item 4.
(f) No disclosures are required by this Item 4(f).
(g) The independent registered public accounting firm did not bill the Registrant for any other non-audit services for the fiscal years ended September 30, 2006 and 2005 for the Registrant other than as disclosed above.
(h) No disclosures are required by this Item 4(h).
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Schedule of Investments is included as a part of the report to shareholders filed under Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End 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.
The Board of Directors has not adopted procedures by which shareholders may recommend nominees to the Board.
Item 11. Controls and Procedures.
| (a) | The Registrant’s principal executive and principal financial officers have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c)) are effective, as of a date within 90 days of the filing date of this Form N-CSR based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) 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. Exhibits.
| (a)(1) | Code of Ethics is attached hereto. | |
| (a)(2) | The certifications required by Rule 30a-2 of the 1940 Act are attached hereto. | |
| (a)(3) | Not applicable. | |
| (b) | The certifications required by Rule 30a-2(b) of the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. | |
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.
| WASATCH FUNDS, INC. | ||
By: | /s/ Samuel S. Stewart, Jr. | |
| Samuel S. Stewart, Jr. | ||
| President (principal executive officer) of Wasatch Funds, Inc. | ||
Date: | November 29, 2006 | |
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: | /s/ Samuel S. Stewart, Jr. | |
| Samuel S. Stewart, Jr. | ||
| President (principal executive officer) of Wasatch Funds, Inc. | ||
Date: | November 29, 2006 | |
By: | /s/ Venice F. Edwards | |
| Venice F. Edwards | ||
| Vice President/Treasurer (principal financial and accounting officer) of Wasatch Funds, Inc. | ||
Date: | November 29, 2006 | |