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) 533-0777
Date of fiscal year end: September 30
Date of reporting period: September 30, 2007
| Item 1: | Report to Shareholders. |
 | Annual Report |
| SEPTEMBER 30, 2007 | WASATCH CORE GROWTH FUND | |
| WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND | ||
| WASATCH HERITAGE GROWTH FUND | ||
| WASATCH HERITAGE VALUE 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 | ||
| WASATCH-HOISINGTON U.S. TREASURY FUND | ||
Wasatch Funds, Inc.
Salt Lake City, Utah
www.wasatchfunds.com
800.551.1700
| TABLEOF CONTENTS | ||
| 2 | ||
| 4 | ||
| 5 | ||
Wasatch Global Science & Technology Fund® Management Discussion | 6 | |
| 7 | ||
| 8 | ||
| 9 | ||
| 10 | ||
| 11 | ||
| 12 | ||
| 13 | ||
Wasatch International Opportunities Fund™ Management Discussion | 14 | |
| 15 | ||
| 16 | ||
| 17 | ||
| 18 | ||
| 19 | ||
| 20 | ||
| 21 | ||
| 22 | ||
| 23 | ||
| 24 | ||
| 25 | ||
| 26 | ||
| 27 | ||
Wasatch-Hoisington U.S. Treasury Fund® Management Discussion | 28 | |
| 29 | ||
| 30 | ||
| 32 | ||
| 64 | ||
| 67 | ||
| 70 | ||
| 76 | ||
| 83 | ||
| 95 | ||
| 96 | ||
| 98 | ||
| 98 | ||
| 98 | ||
| 98 | ||
| 100 | ||
| 101 | ||
| 102 |
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:
Living through the market of the past year has felt a bit like riding a roller coaster — rapid climbs, big drops and frequent curves. In the end, we enjoyed a remarkably resilient economy and a robust market, with the S&P 500® Index gaining over 16%. I am pleased with the performance of our funds in this environment, with eight of our 11 equity funds outperforming their primary benchmarks for the year. This despite continued headwinds from strong cyclical sectors like energy, which were underweight across most Wasatch Funds, and a challenged financials sector. These results are at least partially due to the increasing traction we’re seeing on two major initiatives. First, we have expanded our research team over the last few years to better “cover the waterfront” across all industry segments. I think this year we saw the first true fruits from this expansion as we found a broader array of interesting companies. Second is what we call the “Alpha Project” — an intensive study of Wasatch’s past 20 years to better understand common drivers of our successes and failures. Several portfolio managers modified holdings and weightings this year based on this analysis. We are encouraged by what we have learned and have more digging to do. |
We also continued to benefit from our global focus and international holdings. Our international research team is uncovering a breadth of companies that we believe are high quality with exciting growth potential. In fact our two international funds, the Wasatch International Growth Fund and the Wasatch International Opportunities Fund, were our best performing funds this year. The collaborative research culture at Wasatch allowed many of the companies held in these international funds to find their way into other appropriate Wasatch funds as well.
We were reassured by this year’s results, but more importantly, we are pleased with the long-term success of our funds. As of 9/30/07, the Wasatch Micro Cap Fund remains the #1 performing small cap growth fund out of 246 funds in the Morningstar U.S. domiciled Small Growth category for the past 10-year period.* The Wasatch Small Cap Value Fund is also coming up on its 10-year anniversary in December and has had solid long-term results. As long-term investors we take great pride when one of our funds ranks near the top of its class.
Just as we continuously look for ways to become better investors, we are also committed to improving our relationship with you, our shareholders. Identifying and addressing your specific needs, interests, and concerns is important to us, so earlier this year we conducted in-depth shareholder discussions and surveys. If you were part of this research, thank you for your input.
This research project provided insight into how we can serve you better. We will be using your feedback to make improvements to our web site and shareholder communications in the year ahead.
THE ECONOMY
The housing market collapse and subprime mortgage meltdown sent shockwaves through the economy in recent months. Whether this crisis has peaked is not known, as vibrations continue to be felt in the broader economy. I recently heard Jim Grant, a popular financial market commentator, sarcastically say, “Yes, the subprime crisis has been contained . . . to the planet earth.” But from a more optimistic view, the September interest rate cut by the Federal Reserve shows that the Fed is actively working to prevent this issue from spilling further into the economy. Meanwhile, the overall health of the economy is good and growth on the global front remains solid.
At a time when we’re hearing about some funds being hit hard by the subprime collapse, we are again reassured by our discipline to skip investments that don’t make sense to us. We had very little invested directly in the subprime arena because frankly we had trouble understanding the long-term business model of most of these companies. We want to clearly see what will drive the long-term success of companies in which we invest. This is not to say that we escaped the subprime issue unscathed though, as several of our housing related and financial companies experienced collateral damage. We still believe most of these companies have bright long-term prospects.
*The Morningstar ranking for the fund was derived using the total return of the performance figures associated with its three-, five- and 10-year periods, as of 9/30/07. The Wasatch Micro Cap Fund was ranked against the following numbers of U.S.-domiciled Small Growth funds over the following time periods: 656 funds in the last three years, 548 funds in the last five years, and 246 funds in the last 10 years. With respect to these Small Growth funds, Wasatch Micro Cap Fund received an absolute rank of 75, 36, and 1 for the three-, five- and 10-year periods, respectively. The absolute rank is the actual numerical rank of a fund among its category peers, which rank is based on a comparison of a fund’s performance to its peers over a given time period.
© 2007 Morningstar, Inc. All rights reserved. The information contained herein (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
2
| SEPTEMBER 30, 2007 | ||
While market volatility can cause our stomachs to churn right along with yours, I also think it can let us do some of our best work. Our bottom-up research helps us separate the stocks that we believe are poised for long-term success from those that aren’t. Making this distinction is crucial, because volatility can drive the prices of good companies down along with those of the bad. Since we constantly monitor the markets and these stocks, we’re prepared to act when market fluctuations give us the chance to snap up great companies at unduly low valuations.
As bottom-up investors, we also lay no claim to being great predictors of the economy or the market — and we don’t want to be seen that way. But of course we can’t ignore the potential subprime aftershocks. With this uncertainty hanging over the economy, we don’t expect the double-digit equity returns of the past year to be repeated in the coming 12 months. But, we are continuing to find a broad spectrum of interesting investments that we believe are well positioned for long-term success regardless of economic gyrations.
NEW PRODUCTS
We recently introduced two funds. As with all new Wasatch funds, we chose products in which we believe (a) that our expertise can add value for shareholders, and (b) will make our existing funds stronger through our collaborative research approach.
The Wasatch Emerging Markets Small Cap Fund™, launched on October 1, 2007, builds on the work that our international team is already doing as part of their global due diligence. This fund’s investment approach echoes what has been part of the Wasatch way from the very beginning — rooting out undiscovered companies that we believe are high-quality and have fundamental strengths that can fuel above-average growth over a long period of time. We think small cap companies in emerging markets are particularly interesting because these countries are rapidly developing and yet there are only two other funds focused on small cap companies within these markets.
The Wasatch Heritage Value Fund™, launched on August 30, 2007, focuses on larger companies, many of which we already actively follow as part of our deep due diligence on their smaller competitors. This new Fund employs the same time-tested value investing discipline that we use in our Small and Micro Cap Value funds — finding value companies with a catalyst for future growth. Given the greater market efficiency among larger stocks, the Heritage Value Fund is comprised of about 30 holdings so that we can take larger positions when we find compelling values.
I believe these new funds reflect a natural evolution for Wasatch as we continue to broaden our perspectives in an increasingly connected and global market place.
As we end this year, I feel like I have just gotten off the roller coaster. A somewhat wild ride, but enjoyable none the less. The difference in this amusement park is that we don’t get to select the rides we go on — making it that much more stimulating. I look forward with anticipation to each new day in the market; but more importantly, I feel good about the diligence that goes into managing each of our funds as we work to be successful over the long-term in an ever-changing world.
We genuinely appreciate the trust you have placed in us. Our goal every day, and in every action we take, is to repay that trust with our very best efforts and judgment, year in and year out.
Thank you for allowing us to manage your assets.
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 28 and 29. 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
| WASATCH CORE GROWTH FUND (WGROX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch Core Growth Fund is managed by a team of Wasatch portfolio managers, led by JB Taylor and Paul Lambert.
JB Taylor |
Paul Lambert | OVERVIEW
The Wasatch Core Growth Fund gained 14.28% in the 12 months ended September 30, 2007, outperforming the Russell 2000 Index, which returned 12.34%. |
The year began with generally stable equity market conditions, but the environment became increasingly choppy. The markets experienced some steep single-day declines in late February and early March, triggered by concerns over a slowing U.S. economy, weakness in international equity markets, and worries about the potential impact of difficulties among subprime mortgage lenders. Volatility subsided somewhat in the late spring and early summer, but returned in 2007’s third quarter, as more concrete signs of the impact of the subprime mortgage crisis became apparent.
Small cap stocks outperformed larger stocks in the first half of the period, which was somewhat surprising given the uncertain economic climate. In the second half, investors grew wary of risk, and began to favor large caps.
DETAILSOFTHE YEAR
Acquisitions by private equity funds and corporate suitors affected the equity markets and our performance during the year. Although some of this activity tapered off due to the liquidity crunch resulting from the subprime mortgage crisis, the number and dollar amount of announced deals climbed for much of the year. We don’t seek out companies specifically because they might be acquisition targets, even though the stocks of such companies can rise rapidly. Rather, the same qualities that attract us to a company — experienced management team, sustainable competitive advantages, outstanding business model, and the ability to sustain above-average growth over the long term — often draw attention from private equity firms and strategic buyers.
Several of our holdings were acquired over the past year, with positive impact on the Fund’s performance. One of our top contributors for the year, Global Imaging Systems, is a prominent example. This supplier of copiers, imaging systems and related services consistently impressed us with its experienced management team and the sales force they built. Early in 2007’s second quarter, Xerox* acquired Global Imaging at a nearly 50% premium to its then-current stock price and we sold our position.
Acquisitions weren’t the only source of strong performance in the portfolio. Copart, one of our largest holdings, uses an online system to auction salvaged and recovered vehicles. The company’s positive results reflected its ability to improve margins by drawing a wider audience of avid
bidders than traditional salvage auctions. In the financials sector, Axis Bank (formerly UTI Bank), is an India-based financial institution that is benefiting from the country’s economic expansion and rising demand for financial services from its growing middle class.
Notable contributions also came from Fund holdings that may be benefiting from the current economic environment. Strayer Education, a for-profit provider of post-secondary education, has a strong business model and solid management team that have enabled the company to improve same-school enrollment figures by a healthy level and raise forward earnings guidance. We believe that Strayer may benefit as economic uncertainty leads more workers to pursue additional education in order to improve their earnings and career prospects. In the health care sector — which tends to be relatively shielded from economic conditions — Pediatrix Medical Group enjoyed strong revenue growth during the year. The company began to broaden out from its core pediatric and neonatology practices to incorporate specialized practices that should drive future growth.
Our biggest detractor from performance was Pool Corp., a distributor of swimming pool equipment and supplies. Pool suffered from negative sentiment surrounding the new-housing market; management lowered forward earnings guidance as a larger-than-expected downturn in new pool construction in the company’s largest markets proved difficult to overcome. Our view is that the housing downturn will eventually pass. In the meantime, we are attracted to Pool’s large recurring revenues, as most of its business involves providing consumable maintenance products and services for existing pools. Over the longer term, we expect Pool’s repair and maintenance operations — an area in which it is gaining market share — to drive returns for shareholders.
OUTLOOK
In recent months, we’ve seen a more cautious tone enter the equity markets, and we don’t expect that to change in the immediate future. As the ultimate impact of the subprime mortgage crisis becomes clearer, however, the markets may begin to stabilize. Observers will be keeping a close eye on consumer spending, both during the coming holiday season and in the year that follows as consumers respond to rising energy prices and potentially greater inflation.
On average, we believe the earnings of the companies held in the Fund will grow around 19% over the next 12 months and the stocks are currently trading at approximately 22 times trailing earnings. Our companies’ earnings overall have been accelerating, and we believe they are positioned to continue to do so. Also, given the prevailing air of uncertainty, investors may be increasingly drawn to higher-quality companies like the ones we believe we hold. Market volatility has given us the opportunity to add a number of companies to the Fund for what we believe are favorable valuations. As the market comes to fully recognize these companies’ strong fundamental qualities, we believe they offer the potential for meaningful appreciation.
Thank you for the opportunity to manage your assets.
| *As | of September 30, 2007, none of the Wasatch Funds were invested in Xerox Corp. |
4
| WASATCH CORE GROWTH FUND (WGROX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Wasatch Core Growth Fund | 14.28% | 15.98% | 12.52% | |||
Russell 2000 Index | 12.34% | 18.75% | 7.22% |
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.
The Total Annual Fund Operating Expenses for the Wasatch Core Growth Fund are 1.17%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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 will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
TOP 10 EQUITY HOLDINGS*
| Company | % of Fund | |
Copart, Inc. Vehicle salvage services. | 5.66% | |
O’Reilly Automotive, Inc. Automotive parts retailer/distributor. | 4.09% | |
Strayer Education, Inc. Post-secondary education. | 3.98% | |
Sunrise Senior Living, Inc. Assisted living centers. | 3.63% | |
| SEI Investments Co. | 3.38% | |
| Outsource financial services provider. |
| Company | % of Fund | |
| Healthways, Inc | 3.12% | |
| Disease management services. | ||
Pool Corp. Swimming pool supplies distributor. | 2.79% | |
| Life Time Fitness, Inc. | 2.74% | |
| Physical fitness centers. | ||
| PSS World Medical, Inc. | 2.70% | |
| Medical products distributor. | ||
Pediatrix Medical Group, Inc. National network of neonatologists. | 2.23% |
| * | As of September 30, 2007, the Fund had 34.32% invested in the Top 10 equity holdings and there were 69 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
| WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND (WAGTX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch Global Science & Technology Fund is managed by a team of Wasatch portfolio managers, led by Noor Kamruddin.
Noor Kamruddin Portfolio Manager | OVERVIEW
The Wasatch Global Science & Technology Fund performed well during the 12-month period ended September 30, 2007. The Fund delivered a gain of 31.63%, well above the 19.48% return of its benchmark, the Russell 2000 Technology Index. We are pleased with the Fund’s outperformance in light of the fact that large cap stocks, in which the Fund held a lower-than-average weighting, outperformed their mid and |
small cap counterparts during the period.
The most important factor helping the Fund overcome this headwind was the strength of individual stock selection. We believe this helps to illustrate the effectiveness of our bottom-up, research-driven approach. The Fund’s performance was helped by our ability to take advantage of the Multiple Eyes™ approach to research at Wasatch, where findings are shared across investment groups. Additionally, our ongoing search for investment opportunities in the international markets enabled the Fund to gain a boost from the strong performance of a number of companies located overseas. At year-end, more than half of the Fund was invested outside of the United States. While in the past, technology investors largely have been restricted to the United States, globalization is leading other regions to take a bigger share of the pie. Countries in which the Fund has a large weighting are Brazil and India, where we have a positive outlook for companies that can capitalize on strength in consumer spending, and Singapore, a key manufacturing hub for China’s booming economy.
DETAILSOFTHE YEAR
A number of the Fund’s leading contributors to performance during the past 12 months were companies based overseas. For example, the Singapore-based hard disk drive maker MMI Holdings Ltd. generated a 70%+ return for the Fund when it was acquired at a substantial premium by a private equity firm. The cellular provider America Movil S.A.B. de C.V. based in Mexico, also delivered a strong gain for the Fund. The company is benefiting as cheaper handset prices and robust economic growth are making wireless service affordable for a rapidly expanding pool of consumers. Weg S.A., a maker of high-end motors, generators and transformers; and B2W Companhia Global do Varejo, an Internet consumer company often referred to as the “Amazon.com of Brazil,” were also among the overseas holdings that made strong contributions to performance.
O2Micro International Ltd., a semiconductor company and long-term portfolio holding, also performed well. The company settled litigation issues that allowed its strong fundamentals to be more accurately reflected in its stock price. Another notable contributor was Intuitive Surgical,
Inc., a maker of robotic machines for minimally-invasive surgery. The stock has benefited as adoption of robotic machines accelerates.
The leading detractor from performance was Isilon Systems, Inc., a maker of storage solutions for digital content. We bought the stock at its initial public offering in December 2006, and added to our position after the company missed earnings in the second quarter. Unfortunately, Isilon announced another quarterly miss in July, causing its shares to suffer a second down leg. We believe that these earnings shortfalls do not indicate a fundamental problem, but are simply an issue of a young company learning how to provide correct earnings guidance to investors. We continue to hold the stock in the Fund, believing its technology is compelling and its potential market is huge. Also faring poorly were Neurochem, Inc. and Symyx Technologies, Inc., both of which have been sold. The biotechnology company Amgen, Inc., whose shares fell due to an unfavorable ruling regarding dosage levels for two of its key drugs, was another notable detractor. We believe investors have overestimated the potential impact of the ruling. In our opinion, Amgen’s shares have become undervalued — particularly in light of its strong pipeline of new treatments — and we continue to hold it in the Fund.
OUTLOOK
Investors who follow the financial press will know that the outlook for the economy and the markets is unclear at this stage. Further, the “consensus” view seems to shift with each new release of economic data. We avoid looking at such trends so we can focus our energy on what we do best: conducting intensive fundamental research in an effort to find high-quality companies with sales momentum and identifiable competitive advantages. This emphasis is particularly crucial in the health care and technology sectors, where research and company visits can reveal important information about new products, competitive threats, and potential opportunities. We believe this hands-on approach will help the Fund navigate whatever environment might unfold in the months ahead.
Thank you for the opportunity to manage your assets.
6
| WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND (WAGTX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 12/19/00 | ||||
Wasatch Global Science & Technology Fund | 31.63% | 24.08% | 10.05% | |||
Russell 2000 Technology Index | 19.48% | 20.24% | -3.65% | |||
Nasdaq Composite Index | 20.52% | 18.94% | 1.00% | |||
Lipper Science & Technology Index | 25.52% | 19.47% | -4.34% |
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.
The Total Annual Fund Operating Expenses for the Wasatch Global Science & Technology Fund are 1.94%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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 will 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*
| Company | % of Fund | |
Weg S.A. (Brazil) Electric motors and components. | 3.46% | |
| Cognizant Technology Solutions Corp., Class A Professional technology services. | 3.45% | |
America Movil S.A.B. de C.V., Series L (Mexico) Wireless telecommunication services. | 2.94% | |
NII Holdings, Inc. Wireless communications provider. | 2.36% | |
F5 Networks, Inc. Network management applications. | 2.36% |
| Company | % of Fund | |
RaySearch Laboratories AB (Sweden) Dosage software for radiology. | 2.17% | |
NetLogic Microsystems, Inc. Semiconductors. | 2.14% | |
| O2Micro International Ltd. ADR (Cayman Islands) Semiconductors. | 2.14% | |
Tessera Technologies, Inc. Miniaturization technologies for the electronics industry. | 2.10% | |
B2W Companhia Global do Varejo (Brazil) Online retailer. | 2.06% |
| * | As of September 30, 2007, the Fund had 25.18% 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
† | Inception: December 19, 2000. 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. 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. You cannot invest directly in these indexes. |
7
| WASATCH HERITAGE GROWTH FUND (WAHGX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch Heritage Growth Fund is managed by a team of Wasatch portfolio managers, led by Chris Bowen and Ryan Snow.
Chris Bowen Portfolio Manager |
Ryan Snow Portfolio Manager | OVERVIEW
The 12-month period ended September 30, 2007 was a rewarding period to be invested in equities as the Russell Midcap Growth Index, the Fund’s benchmark, delivered a 21.22% return. |
Despite the substantial rise in stock prices, the year was not without volatility. In fact, market turbulence was reminiscent of the frequent and profound swings of the dot-com era. Investor fear caused the market to pull back significantly in March and then again in August, but by the end of September it had regained all of its losses and then some.
The Wasatch Heritage Growth Fund also enjoyed a nice return of 13.59%. However, despite the positive return, we were disappointed with the underperformance versus the benchmark.
The Index has a much higher weight than the Fund in materials and energy, two of the best performing sectors over the past year due to a general rise in commodity prices. While it can be frustrating to miss out on such oversized gains, we believe that our success is dependent upon remaining true to our investing philosophy.
For example, the aforementioned sectors are laden with companies whose earnings are tied to the price of an underlying commodity. When commodity prices go up and down, the companies’ earnings and stock prices generally follow. Because commodity prices are difficult to forecast and largely beyond management’s control, we believe that if we had high exposure to these types of companies it could leave us vulnerable to a reversion to the mean.
An eclectic group of companies contributed to the Fund’s success during the year. Fashion retailers and wholesalers like Esprit Holdings Ltd. and Coach, Inc. fared well, as did technology companies Amphenol Corp., ON Semiconductor Corp. and Cisco Systems, Inc.
The dominant theme among our underperforming stocks was exposure to the housing and credit markets, sparked by investor reaction to subprime issues that enveloped lenders. As credit risk was repriced, companies like CB Richard Ellis Group, Inc., AmeriCredit Corp. and Capital One Financial Corp. that have little, if any, direct exposure to subprime mortgage lending, saw their stock prices, by our estimation, unjustly punished. The pullback gave us opportunities to bargain shop.
DETAILSOFTHE YEAR
We are bottom up investors with the goal of building a portfolio of quality companies that we think can control
their own destinies, ideally doubling their earnings about every five years. We do look at macroeconomic factors as they relate to our holdings, but we do not make investment decisions based on short term market trends and fluctuations.
Although benchmarks serve a purpose, we don’t hold ourselves hostage to them. When we find a compelling opportunity to purchase a stake in a company, we’re willing to wait until the market recognizes what we believe is the pent up value. Sometimes that reward comes immediately, but more often it takes time. As long as a company’s business results continue to meet our expectations, we don’t mind waiting for its stock to be rewarded.
Over the past year, and particularly during the last few months, the stock prices of many of our highest-conviction holdings struggled. While being wary of value traps —companies with declining momentum or growth that look inexpensive compared to prior valuations — we believe that these high conviction companies will continue to grow their earnings and they are trading at increasingly attractive valuations.
Esprit Holdings Ltd., a European fashion retailer, is an example of a company that gained some traction in the market over the past year, and was the Fund’s top contributor to performance. Although the company stumbled on some fashion and inventory issues about a year ago, it has recaptured momentum and is benefiting from a global presence. We think that Esprit will continue to capture market share in Europe and gradually increase its presence in Asia and North America, which should continue to drive growth.
During the last three months, we decided to sell our stake in Countrywide Financial, which was a long-term holding in the Fund. As subprime mortgage issues caused liquidity in the credit markets to dry up, Countrywide was driven into a financial crisis. When we determined that we couldn’t accurately forecast earnings, we sold our position, fortunately at prices well above the stock’s eventual lows.
OUTLOOK
We are constantly reassessing companies in the Fund. This frequent exercise continues to reaffirm our belief that the Fund holds quality companies and that becoming impatient would be a mistake.
Even though economic uncertainty is prevalent in the market, we seek to tune out the noise by focusing on critical components that we believe determine a company’s long-term potential. Two of the simplest measurements, when used in conjunction with each other, form one of our preferred forecasting mechanisms — a company with a P/E ratio roughly equal to its growth rate is one that we’re interested in pursuing.
While this is not a complex formula, it often takes considerable discipline to adhere to it. We believe it is our disciplined investment process that sets us apart from the crowd.
Thank you for the opportunity to manage your assets.
8
| WASATCH HERITAGE GROWTH FUND (WAHGX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 6/18/04 | ||||
Wasatch Heritage Growth Fund | 13.59% | N/A | 9.08% | |||
Russell Midcap Growth Index | 21.22% | N/A | 14.58% | |||
Russell 1000 Growth Index | 19.35% | N/A | 9.46% |
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.
The Total Annual Fund Operating Expenses for the Wasatch Heritage Growth Fund are 0.95%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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 will 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.
TOP 10 EQUITY HOLDINGS*
| Company | % of Fund | |
Amphenol Corp., Class A Interconnect products manufacturer. | 3.61% | |
WellPoint, Inc. Health maintenance organization. | 3.56% | |
Alliance Data Systems Corp. Transaction, marketing and credit services. | 3.48% | |
Infosys Technologies Ltd. Business and information technology consulting. | 3.35% | |
America Movil S.A.B. de C.V., Series L (Mexico) Wireless telecommunication services. | 3.12% |
| Company | % of Fund | |
DaVita, Inc. Kidney dialysis centers. | 2.95% | |
Cisco Systems, Inc. Internet Protocol-based networking products. | 2.74% | |
Coach, Inc. Handbags and accessories. | 2.55% | |
L-3 Communications Holdings, Inc. Defense contractor. | 2.37% | |
Covance, Inc. Drug development services. | 2.35% |
| * | As of September 30, 2007, the Fund had 30.08% invested in the Top 10 equity holdings and there were 66 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
| WASATCH HERITAGE VALUE FUND (WAHVX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch Heritage Value Fund is managed by a team of Wasatch portfolio managers, led by Brian Bythrow.
Brian Bythrow, CFA Portfolio Manager
| OVERVIEW
The Wasatch Heritage Value
|
BACKGROUND
Over the better part of the last decade Wasatch has developed a core competency in value investing. Our value origins date back to 1997 when we launched the Wasatch Small Cap Value Fund to invest in “fallen angels” — growth companies that have hit a bump in the road but not the end of the road. After gaining experience, we broadened our definition of value to include additional types of value stocks. In 2003, we expanded our capabilities once again with the opening of the Wasatch Micro Cap Value Fund.
With the success of the Small Cap Value and Micro Cap Value funds, we decided that the most logical extension of our value process was to apply it to mid and large cap stocks, since we were already researching larger companies to better understand our smaller names. A larger cap fund would allow us to invest in some of the interesting value stocks that we were seeing but not able to purchase because they were too big for our existing funds.
As we researched these larger value stocks, we were pleased with the opportunities we were finding in this space. Confident in our approach, we opened the Heritage Value Fund, choosing the “Heritage” name since the Fund is a direct extension of our proven heritage in value investing.
The Heritage Value Fund will typically own approximately 30 attractively priced stocks with market capitalizations of $3 billion or more. We manage the portfolio using the same investment process that has worked so well in our other value funds. The process is driven by bottom-up fundamental research aimed at finding stocks whose discounted prices seem unwarranted.
One of the unique aspects of the Fund is our broad definition of value — we don’t limit ourselves to one box within the style. Specifically, we invest in these four subcomponents of value:
| • | Fallen angels. A fallen angel is a growth company whose stock has fallen sharply over a short period of time due to some kind of bump in the road — perhaps quarterly earnings were disappointing or a regulatory filing was delayed. Based on our assessment of its long-term potential, we believe that the market has overreacted and that the company will return to growth. |
| • | Value momentum. A stock in this category is inexpensive because it hasn’t shown any growth for a while. Wall Street may have left the company for dead, but we have identified a positive catalyst brewing beneath the surface that should cause earnings to accelerate. |
| • | Deep value. A deep value company is one that is exceptionally cheap relative to its five- or 10-year history but whose business seems to have stabilized. This is the type of name that most investors think of when they hear “value stock” — it is the traditional definition of value. |
| • | Special situations. A special situation may be a company that has been spun off from another, has just emerged from bankruptcy or is undergoing financial restructuring. These stocks often trade at discounts because they are misunderstood or overlooked by the market. |
Although we think about value stocks in terms of these four categories, we haven’t set any targets for how much of the Fund should be invested in each one. We are purely opportunistic buyers and evaluate each holding on its own merits. If we think that a stock can return 15% or more including dividends over the next 18 months, we are willing to own it, regardless of which value “bucket” it falls into.
In addition to our broad value approach, Heritage Value’s concentration and global focus also distinguish it from other value funds. The reason the portfolio holds only about 30 stocks is that we want to take full advantage of price inefficiencies when we see them. Undervalued companies are fewer and farther between in the widely covered larger cap arena, so when we find a name that appears poised for significant appreciation, we want to take a sizeable position. We feel comfortable running such a concentrated portfolio given the intense research we do on each holding and because these are generally liquid stocks — they are relatively easy to buy and sell — of financially solid companies.
In terms of our global focus, up to 30% of the Heritage Value Fund has been earmarked for non-U.S. stocks. This is another example of how the Fund leverages research that Wasatch is already doing. Not only have we been covering larger cap stocks of U.S. companies to broaden our perspective on smaller names, we have also been following many larger cap stocks outside the United States.
All of us at Wasatch are pleased to be offering our value discipline and research process to investors through the new Heritage Value Fund. I look forward to updating you on the progress of the Fund in the quarters and years ahead.
Thank you for the opportunity to manage your assets.
10
| WASATCH HERITAGE VALUE FUND (WAHVX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 8/30/07* | ||||
Wasatch Heritage Value Fund | N/A | N/A | 2.40% | |||
Russell 1000 Value Index | N/A | N/A | 3.92% |
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.
The Total Annual Fund Operating Expenses for the Wasatch Heritage Value Fund are 0.97%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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 value stocks can perform differently from the market as a whole and other types of stocks and can continue to be undervalued by the market for long periods of time. Loss of principal is a risk of investing. 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.
*Not annualized.
TOP 10 EQUITY HOLDINGS**
| Company | % of Fund | |
America Movil S.A.B. de C.V., Series L ADR (Mexico) Wireless telecommunication services. | 3.55% | |
HudBay Minerals, Inc. (Canada) Integrated mining company. | 2.98% | |
Deere & Co. Agricultural, commercial and construction equipment. | 2.93% | |
Alcoa, Inc. Aluminum producer. | 2.93% | |
Uranium One, Inc. (Canada) Uranium producer. | 2.92% | |
Sun Microsystems, Inc. Computer networking technologies. | 2.92% |
| Company | % of Fund | |
Goodrich Corp. Systems and services for aerospace and defense. | 2.92% | |
Anadarko Petroleum Corp. Oil and gas developer. | 2.91% | |
Teva Pharmaceutical Industries Ltd. ADR (Israel) Generic pharmaceutical developer. | 2.89% | |
Cisco Systems, Inc. Internet Protocol-based networking products. | 2.89% |
| * | As of September 30, 2007, the Fund had 29.84% invested in the Top 10 equity holdings and there were 31 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: August 30, 2007. † The Russell 1000 Value Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index. The Russell 3000 Index is an unmanaged total return index of the 3,000 largest U.S. companies based on total market capitalization. You cannot invest in these indexes. |
11
| WASATCH INTERNATIONAL GROWTH FUND (WAIGX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch International Growth Fund is managed by a team of Wasatch portfolio managers, led by Roger D. Edgley and Laura G. Hoffman.
Roger D. Edgley, CFA Portfolio Manager |
Laura G. Hoffman, CFA Portfolio Manager | OVERVIEW
The Wasatch International Growth Fund produced a robust gain of 34.02% for the 12 months ended September 30, 2007 and outperformed the MSCI World Ex-U.S.A. Small Cap Index, which gained 21.25%. |
Strong global economic growth provided a favorable backdrop for international equities throughout the year. Infrastructure growth in emerging countries like China and India supported growth in industrial economies in Continental Europe and Scandinavia. The Fund did well in this environment and positive performance was broad based across sectors and geographic regions. The financials, industrials, consumer discretionary and energy sectors contributed the most to the Fund’s performance. Geographically, the only notable area of weakness was Japan.
While the subprime mortgage problems and credit crunch that began to unfold during the summer in the U.S. created volatility in the global equity markets, the fundamentals and operations of the companies we held were largely unaffected. The Fund had little to no weight in companies with exposure to subprime credit.
DETAILSOFTHE YEAR
Economic growth in many emerging markets is creating a halo effect that we believe is fueling economic growth throughout the world. This has provided some interesting themes and attractive investment opportunities, especially in the financials, industrials and consumer discretionary sectors.
In the past 12 months, the financials sector was by far the best contributor to the Fund’s performance. Several securities exchanges did especially well as they benefited from increased trading volume. Two banks in India were also strong performers. Infrastructure Development Finance Co. Ltd., a provider of financing for infrastructure projects in India, saw profits rise 26% as the company benefited from India’s 40% increase in infrastructure spending this year. HDFC Bank Ltd. has done well by providing financial products and services to India’s growing middle class.
Global real estate, part of the financials sector, has been another source of interesting opportunities in part due to the growth of emerging markets, where better employment and lower interest rates have increased demand for housing and commercial buildings. A notable example of the real estate trend in emerging markets is Brazil where we have seen urbanization and increasing home ownership rates. The Fund benefited from investments in two Brazilian homebuilders — Even Construtora e Incorporadora S.A. and Gafisa.
Growth of industrial companies largely has been fueled by infrastructure projects in emerging countries. During the year, the Fund benefited from a number of investments in European industrial companies. Palfinger, an Austria-based manufacturer of hydraulic lifting, loading and handling systems, enjoyed increased orders and posted strong revenues and earnings. Outotec Oyj, a Finland-based minerals and metals processor, benefited from an industry-wide imbalance in supply and demand resulting in a backlog of orders.
Better job prospects are contributing to the growth of a middle class in many emerging countries. These consumers have the discretionary income to buy clothes, accessories and electronics. They also have the means to finance big-ticket purchases like homes and cars and are doing so at an unprecedented rate. Consumers, particularly in China, have been positive catalysts for the Fund over the past 12 months. The Fund’s top overall contributor was China Hongxing Sports, a designer, manufacturer and retailer of athletic shoes and apparel. The company is expanding throughout China, and has strong same store sales and improving margins.
Oil rose to an all-time high over $80 per barrel this year, supporting the stock prices of many of the Fund’s energy investments. TGS-NOPEC Geophysical Co. ASA, a provider of geoseismic data for energy exploration, was a top contributor as tight supply and insatiable demand led to increased exploration for new sources of oil and gas.
The Japanese market struggled throughout the year as economic growth slowed from an already sluggish pace, and political turmoil culminated in the resignation of prime minister Shinzo Abe in September. The Fund avoided much of the negative impact from Japan because it was significantly underweight with an average weight of nearly 11% compared to an Index weight of over 26%. Our low weighting does not mean we are ignoring this market. Two Wasatch analysts recently visited Japan and we have developed a strong watch list of companies, especially some in the industrials sector that we believe can grow even in a stagnant economy.
OUTLOOK
We are excited about the prospects of small companies in developed and emerging countries and we like the stable economic growth we’re seeing outside the U.S. The global economy is less tied to the U.S. than in the past, although what happens in the U.S. will undoubtedly continue to affect markets worldwide. Economies in emerging countries continue to benefit from infrastructure spending and better access to capital from domestic sources. Infrastructure projects in emerging countries are creating strong demand for the products and services of industrial companies in Europe and other parts of the world, helping to sustain global economic growth.
As always, our focus remains on investing in international small companies that we think have outstanding growth prospects and are reasonably valued. We believe our success at investing in companies with these qualities, will be more important to the Fund’s long term performance than the investing environment.
Thank you for the opportunity to manage your assets.
12
| WASATCH INTERNATIONAL GROWTH FUND (WAIGX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 6/28/02 | ||||
Wasatch International Growth Fund | 34.02% | 27.07% | 22.69% | |||
MSCI World Ex-U.S.A. Small Cap Index | 21.25% | 27.78% | 22.40% |
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.
The Total Annual Fund Operating Expenses for the Wasatch International Growth Fund are 1.78%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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 will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
TOP 10 EQUITY HOLDINGS*
| Company | % of Fund | |
China Hongxing Sports Ltd. (China) Athletic wear retailer. | 2.84% | |
Arques Industries AG (Germany) Industrial turnaround specialist. | 2.05% | |
Thielert AG (Germany) High performance engine and | 1.78% | |
Outotec Oyj (Finland) Minerals and metals processor. | 1.75% | |
The Bank of N.T. Butterfield & Son Ltd. (Bermuda) Wealth management and financial services. | 1.74% |
| Company | % of Fund | |
Infrastructure Development Finance Co. Ltd. (India) Financing for infrastructure projects. | 1.63% | |
TGS-NOPEC Geophysical Co. ASA (Norway) Geoscience data for energy exploration. | 1.61% | |
Burckhardt Compression Holding AG (Switzerland) Compressors for industrial applications. | 1.60% | |
JSE Ltd. (South Africa) Securities exchange. | 1.59% | |
WorleyParsons Ltd. (Australia) Professional services for the energy, resources and complex processes industries. | 1.52% |
| * | As of September 30, 2007, the Fund had 18.11% invested in the Top 10 equity holdings and there were 120 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. |
13
| WASATCH INTERNATIONAL OPPORTUNITIES FUND (WAIOX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch International Opportunities Fund is managed by a team of Wasatch portfolio managers, led by Roger D. Edgley and Blake H. Walker.
Roger D. Edgley, CFA Portfolio Manager |
Blake H. Walker Portfolio Manager | OVERVIEW
The Wasatch International Opportunities Fund gained 42.73% in the 12 months ended September 30, 2007 and outperformed the MSCI World Ex-U.S.A. Small Cap Index, which gained 21.25%. |
The Fund and the global markets were able to outperform their U.S. counterparts at a time when there were significant uncertainties on the macroeconomic front. Among the areas of concern were fears that a slowing housing market and difficulties among U.S. subprime mortgage lenders and borrowers would reverberate throughout global economies.
Although the subprime mortgage crisis in the U.S. had little impact on international companies’ operations, concerns about problems it might cause weighed on market sentiment and on global stock prices. Market uncertainty also sparked a flight to quality that saw investors favor more liquid, larger-cap stocks over smaller caps. Given that we lean toward the micro cap end of the global equity spectrum, this created a significant headwind for us to contend with later in the period.
Holdings in the consumer discretionary and financials sectors continued to serve as the driving forces in the Fund’s performance. Every major sector posted positive results in the 12-month period, despite the challenges seen in the last three months. We feel confident in the quality of our top holdings, and believe in their long-term growth potential.
Our intensive due diligence, which includes extensive travel to a wide range of companies and countries, played a critical role in our selection of individual stocks. We believe this approach to international fund management sets us apart from the bulk of our peers, and gives us insights into companies that might otherwise be overlooked.
DETAILSOFTHE YEAR
In the consumer discretionary sector, athletic shoe and apparel maker China Hongxing Sports Ltd., our largest holding, was the top contributor to performance. We think the company’s success is due to its appealing products, efficient operations, and effectiveness at reaching emerging market consumers. Looking ahead, the company’s stock may benefit from an entirely different situation, as China is relaxing some of its tight investment regulations, and may allow Chinese investment dollars to flow into Singapore-based stocks like China Hongxing. Given the size of this potential asset flow, the impact on Singapore equity valuations could be significant.
Our financial stocks performed well overall for the year, benefiting from the increased sophistication of foreign financial markets and international consumers. Unfortunately, late in the period, worries about the fallout from subprime mortgages in the U.S. pressured financial stocks almost indiscriminately, hurting even those companies with no exposure to subprime lending. Home Capital Group, Inc., a Canadian mortgage lender and credit-card issuer, and Korean online securities broker Kiwoom Securities Co. Ltd. are two examples of companies that were punished this way. Both still produced positive results for the year, however, as the market once again recognized their fundamental strengths and lack of involvement in the subprime area.
Former top-five holding EganaGoldpfeil Holdings Ltd., which markets jewelry, watches, and other luxury goods in Asian and European markets, had been a strong performer for the Fund, but suffered severe losses recently. It appears that the financial reports put forth to the public — including ourselves — were not accurate. The extent of the misstatements remains unclear.
This turn of events has been quite shocking, given that the company did not display many of the characteristics that normally would have sent up a red flag. Unfortunately, even a careful, hands-on research process cannot eliminate the risk of misrepresentation on a company’s part.
OUTLOOK
We continue to have confidence in the power of emerging market consumers. Encouraging factors include the size of the markets, such as China, India, and Brazil, where consumer spending is rising. Emerging economies also continue to benefit from infrastructure spending and better access to capital. Further, infrastructure projects in emerging nations are creating strong demand for the products and services of industrial companies in Europe and other parts of the world, helping to sustain global economic growth.
While subprime lending woes are weighing heavily in the U.S., in our recent travels through Asia we have found that many companies are not concerned with these developments. International markets are increasingly decoupling from the U.S., which enhances the diversification aspect of international investing, and creates exciting new opportunities.
Until the subprime problems are closer to being resolved, we expect to see continued emphasis on liquidity and larger cap stocks in the equity markets. We anticipate that micro cap stocks are thus likely to face somewhat of a headwind, perhaps for much of the coming year. As the situation stabilizes, though, we believe the companies held by the Fund will be more fully appreciated in the marketplace. In the meantime, we will carefully monitor our holdings, and remain on the lookout for attractive investment opportunities. We believe our success at investing in companies with outstanding growth prospects at reasonable valuations, more than movements in the broader equity markets, will drive the long-term outcome for the Fund.
Thank you for the opportunity to manage your assets.
14
| WASATCH INTERNATIONAL OPPORTUNITIES FUND (WAIOX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 1/27/05 | ||||
Wasatch International Opportunities Fund | 42.73% | N/A | 27.94% | |||
MSCI World Ex-U.S.A. Small Cap Index | 21.25% | N/A | 19.31% |
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.
The Total Annual Fund Operating Expenses for the Wasatch International Opportunities Fund are 2.63%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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.
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 will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. 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*
| Company | % of Fund | |
China Hongxing Sports Ltd. (China) Athletic wear retailer. | 5.21% | |
Arques Industries AG (Germany) Industrial turnaround specialist. | 2.31% | |
Acta Holdings ASA (Norway) Financial advisory services. | 2.24% | |
RaySearch Laboratories AB (Sweden) Dosage software for radiology. | 2.22% | |
Goodpack Ltd. (Singapore) Shipping containers and packaging solutions. | 1.90% |
| Company | % of Fund | |
KIWOOM Securities Co. Ltd. (Korea) Online securities broker. | 1.85% | |
| JSE Ltd. (South Africa) Securities exchange. | 1.82% | |
IMAREX ASA (Norway) Financial derivatives exchange. | 1.78% | |
| MegaStudy Co. Ltd. (Korea) Online education provider. | 1.69% | |
Ezra Holdings Ltd. (Singapore) Marine services support. | 1.61% |
| * | As of September 30, 2007, the Fund had 22.63% invested in the Top 10 equity holdings and there were 119 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. |
15
| WASATCH MICRO CAP FUND (WMICX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch Micro Cap Fund is managed by a team of Wasatch portfolio managers, led by Daniel Chace.
Daniel Chace, CFA Portfolio Manager | OVERVIEW
The 12-month period ended September 30, 2007 was a good year for the Wasatch Micro Cap Fund. The Fund gained 18.72% and outperformed the Russell 2000 Index (the “Index”), which rose 12.34%, and the Russell Microcap Index, up 9.68%. Overall, the portfolio’s investments in both U.S. and international companies generated substantial increases and contributed to outperformance of the Index. Our foreign holdings in the |
consumer discretionary and financials sectors were the reason for such strong results in these sectors, which were two of the weakest areas of the U.S. market, particularly in the volatile third quarter of 2007. The Fund’s positions in the information technology and health care sectors also posted significant gains and added value on a relative basis.
The outlook for the U.S. economy is uncertain due to problems in the housing and subprime mortgage markets. However, we believe that the portfolio is well positioned for the future, regardless of how these big-picture developments unfold. By remaining focused on the quality, value and growth prospects of individual companies, we feel confident that the Fund has the potential to succeed over the long term.
DETAILSOFTHE YEAR
Wasatch casts a wide net when looking for interesting companies, and approximately 20% of the Fund’s total market value was invested in foreign-listed stocks* this period. In aggregate, our international holdings outpaced the healthy gain from our domestic holdings and were an important source of strength relative to the Index. Five of the portfolio’s top 10 contributors were foreign stocks, including three consumer names that benefited from rising affluence in emerging Asia: China Hongxing Sports Ltd. (China), an athletic shoe and apparel manufacturer; Raffles Education Corp. Ltd. (Singapore), a provider of training and design courses; and Ports Design Ltd. (Hong Kong), a fashion retailer.
Our investments in China Hongxing, Raffles Education and Ports Design drove strong absolute and relative returns in the consumer discretionary sector. We have highlighted these stocks as top contributors in previous reports, since they have been consistently good performers over the past 18 to 24 months. Adhering to our valuation discipline, we have been trimming our positions in China Hongxing and Raffles on price strength. We sold Ports in early 2007, concluding that the stock had become expensive relative to our assessment of its earnings potential. That said, we continue to find many attractively priced non-U.S. companies with exciting growth prospects. For example, we recently added auto parts manufacturer Martinrea International, Inc. (Canada) to the Fund, and the stock was a significant contributor this period. The company made a major, strategic acquisition in late 2006 that is expected to generate operational efficiencies and, in turn, greater profitability.
Losses on securities tied to subprime mortgages created headwinds for the financials sector, as investors tried to sort out the magnitude and extent of the damage. In fact, financials was the only group in the Index to post a loss. Our holdings in this challenging area of the market did well, led by strong gains from a number of our international stocks. One of the Fund’s best-performing names was Arques Indus- tries AG (Germany), a company that acquires, restructures and then sells businesses that are in special situations, such as turnaround candidates. Arques made good progress towards its goal of acquiring 18 businesses in 2007 and announced several successful exits. The portfolio also benefited from our low direct exposure to the subprime mortgage market.
While the Fund’s overall performance was strong, a hand- ful of individual investments turned in particularly disappoint- ing results, including EganaGoldpfeil Holdings Ltd. (Hong Kong) and Beacon Roofing Supply, Inc. EganaGoldpfeil Holdings Ltd., a distributor of jewelry and leather products, fell sharply over the summer as a chain of negative events raised doubts about management’s integrity and the company’s future profitability. Beacon Roofing Supply, a U.S.-based distributor of building materials, came under pressure due to the weaker environment for residential housing construction. We were disappointed by its performance but, as patient investors, remain focused on the company’s long-term prospects, which we believe are bright. Approximately 70% of its sales are related to replacement roofing, rather than new construction, where demand tends to be more stable. In addition, Beacon has embarked on an acquisition strategy that should drive margin expansion given the scalable nature of its business model.
OUTLOOK
We remain positive in our long-term outlook for the Fund. Valuations in the portfolio appear reasonable, and we feel comfortable with the quality and earnings growth potential of our holdings. On a weighted-average basis, we estimate that our companies will deliver mid-teens earnings growth in the upcoming reporting season. That level of growth is significantly higher than the approximately 4% growth rate expected from the broad small cap market, as measured by Merrill Lynch using consensus estimates.
The full economic impact of the downturn in the housing and subprime mortgage markets remains unknown — uncertainty which may fuel continued volatility. The silver lining of the big price swings is that they create buying opportunities, and we recently added some interesting names to the portfolio. We remain focused on identifying and investing in what we believe are high-quality companies at reasonable values. By sticking with our bottom-up discipline throughout economic and stock market cycles, we believe that the Fund has the potential to generate solid results over time.
Thank you for the opportunity to manage your assets.
| * | These holdings excluded American Depositary Receipts (ADRs — receipts issued by domestic banks for shares of foreign-based corporations that trade on U.S. stock exchanges) and companies incorporated in other countries but whose shares trade on U.S. stock exchanges. |
16
| WASATCH MICRO CAP FUND (WMICX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Wasatch Micro Cap Fund | 18.72% | 21.89% | 20.32% | |||
Russell 2000 Index | 12.34% | 18.75% | 7.22% | |||
Russell Microcap Index | 9.68% | 19.46% | N/A |
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.
The Total Annual Fund Operating Expenses for the Wasatch Micro Cap Fund are 2.15%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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 will 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*
| Company | % of Fund | |
O2Micro International Ltd. ADR (Cayman Islands) Semiconductors. | 3.71% | |
China Hongxing Sports Ltd. (China) Athletic wear retailer. | 2.52% | |
VNUS Medical Technologies, Inc. Minimally invasive varicose vein treatment. | 2.47% | |
Power Integrations, Inc. Semiconductors. | 1.85% | |
Healthways, Inc. Disease management services. | 1.65% | |
Big 5 Sporting Goods Corp. Sporting goods retailer. | 1.61% |
| Company | % of Fund | |
Providence Service Corp. (The) Management of U.S. government-sponsored social services. | 1.57% | |
Abaxis, Inc. Portable blood analysis systems. | 1.57% | |
LMA International N.V. (Singapore) Devices for airway supoport during surgery. | 1.56% | |
SM&A Competition management services. | 1.55% |
| * | As of September 30, 2007, the Fund had 20.06% invested in the Top 10 equity holdings and there were 140 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. The Russell Microcap Index is an unmanaged total return index of the smallest 1,000 securities in the small cap Russell 2000 Index along with the next smallest 1,000 companies, based on a ranking of all U.S. equities by market capitalization. No data was available for the Index prior to 6/30/00. Data for the Index from 6/30/00 until its official start date of July 1, 2005 was from a paper portfolio. You cannot invest directly in these indexes.
17
| WASATCH MICRO CAP VALUE FUND (WAMVX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch Micro Cap Value Fund is managed by a team of Wasatch portfolio managers, led by John Malooly and Brian Bythrow.
John Malooly, CFA Portfolio Manager |
Brian Bythrow, CFA Portfolio Manager | OVERVIEW
The Wasatch Micro Cap Value Fund gained 22.84% for the 12 month period ended September 30, 2007 and significantly outperformed the Russell 2000 Index, which gained 12.34%. |
The market environment was generally positive in the last three months of 2006, but in the first quarter of 2007 a considerable amount of uncertainty began to permeate the market. Equities endured some precipitous one-day declines when faced with concerns about the overall strength of the U.S. economy and the potential impact of problems with subprime mortgage lenders and borrowers. These worries seemed to ease in the spring, but returned during the sum-mer, as difficulties with subprime mortgages led to a liquidity crunch that had broad impact on the equity markets.
In the first six months of the period, small cap stocks continued to outperform large caps, despite economic concerns that would normally lead investors to favor larger stocks. Micro caps, however, underperformed small caps, suggesting that some degree of caution was entering the market. In the period’s second half, that caution gained momentum, and investors began to favor large caps, with micro caps turning in the weakest performance.
We believe a key to the Fund’s outperformance during this period was our strategy of underexposing the portfolio to companies that rely heavily on spending by U.S. consumers. Instead, we favored companies that are focused on consumers from emerging economies where growth is occurring at a faster rate and the markets are not oversaturated. Strong individual stock selection, as well as the somewhat defensive characteristics of many of our companies, also contributed to outperformance in the uncertain climate.
DETAILSOFTHE YEAR
Even though the full impact of falling real estate values and the subprime mortgage crunch is not yet clear, these issues weighed on consumer sentiment. By seeking out companies that focus on consumers in emerging markets, we hope to sidestep problems in the U.S.
In keeping with these efforts, China Hongxing Sports Ltd. (China) was the single-largest contributor to the Fund’s performance in the past 12 months, just as it was in 2006. The company, which produces and sells branded athletic shoes and apparel, has been benefiting from the buildup to the 2008 Beijing Olympics. It also appears positioned for growth long after the Games conclude, as demand for its products is likely to remain strong in an economy that still has much room for expansion. Even the entry of a com-
petitor in the public market was a benefit, as comparisons between the two companies favored China Hongxing. Although the company has already enjoyed a great run, we believe it has strong long-term growth potential.
VNUS Medical Technologies, Inc. exemplifies another of our strategies: to identify companies that combine defensive characteristics — such as being involved in an industry with a favorable demographic backdrop — with innovative products and strong leadership. VNUS Medical Technologies has introduced new products that have gained solid acceptance in the medical community, a key step in continuing to build market share.
Another top contributor was O2Micro International Ltd. ADR, a maker of computer power management and security components. Improving fundamentals, as well as positive developments with respect to litigation, both played a role in the company’s performance. We think O2Micro remains reasonably valued, and is experiencing positive momentum in some of its market segments.
Interactive Intelligence, Inc., a developer of business communications software, was also a top contributor for the year. We were attracted to Interactive Intelligence because of its product lineup, customer base, and high level of inside ownership, and the company has benefited from growing demand for its cost-efficient communications systems. The company may also be in a position to gain market share. Its largest competitor is going private, and other participants in the industry are involved in mergers. Such activities can take a company’s attention away from its core operations. Interactive Intelligence, being free of such distractions, may be able to take advantage of these changes in its industry landscape.
While we are encouraged by the solid returns of many of our larger positions, some positions were less than successful, particularly late in the period. One former top-10 holding, EganaGoldpfeil Holdings Ltd. (Hong Kong), was especially disappointing. This marketer of luxury brands in Asia and Europe is under investigation following allegations of fraud. The company’s stock declined by more than 90% in the last three months, and trading was halted. Situations like this can be painful, and remind us of the risks that can be part of equity investing.
OUTLOOK
Although recent market turbulence — particularly within the micro cap area — presented challenges, it also offered opportunities to invest in what we believe are some sound companies at reasonable valuations.
We weren’t very surprised when large cap stocks captured the market’s favor, given the uncertain and sometimes volatile conditions we’ve seen in recent months. Our emphasis on companies with modest valuations and undiscovered growth potential helps us contend with the current environment.
Our outlook for U.S. consumers continues to be wary. On the other hand, we retain a strong sense of conviction about the potential for growth provided by emerging market consumers. We expect to keep our international holdings fairly close to the portfolio maximum of 30% of assets.
Thank you for the opportunity to manage your assets.
18
| WASATCH MICRO CAP VALUE FUND (WAMVX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 7/28/03 | ||||
Wasatch Micro Cap Value Fund | 22.84% | N/A | 21.43% | |||
Russell 2000 Index | 12.34% | N/A | 14.86% |
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.
The Total Annual Fund Operating Expenses for the Wasatch Micro Cap Value Fund are 2.33%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investments companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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 will 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*
| Company | % of Fund | |
VNUS Medical Technologies, Inc. Minimally invasive varicose vein treatment. | 2.73% | |
Arques Industries AG (Germany) Industrial turnaround specialist. | 2.09% | |
China Hongxing Sports Ltd. (China) Athletic wear retailer. | 2.08% | |
Martinrea International, Inc. (Canada) Metal forming and fluid management products. | 1.85% | |
Interactive Intelligence, Inc. Business communications software. | 1.62% |
| Company | % of Fund | |
O2Micro International Ltd. ADR (Cayman Islands) Semiconductors. | 1.62% | |
Globe Specialty Metals, Inc. (United Kingdom) Silicon metals producer. | 1.61% | |
Opnet Technologies, Inc. Communications network management software. | 1.58% | |
SiRF Technology Holdings, Inc. Software and semiconductors for global positioning systems. | 1.45% | |
MTS Medication Technologies, Inc. Medication dispensing systems. | 1.42% |
| * | As of September 30, 2007, the Fund had 18.05% invested in the Top 10 equity holdings and there were 148 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: 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. |
19
| WASATCH SMALL CAP GROWTH FUND (WAAEX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch Small Cap Growth Fund is managed by a team of Wasatch portfolio managers, led by Jeff Cardon.
Jeff Cardon, CFA Portfolio Manager
| OVERVIEW
The Wasatch Small Cap Growth Fund gained 16.94% in the 12 months ended September 30, 2007. The Russell 2000 Growth Index rose 18.94% and the Russell 2000 Index advanced 12.34%. One of the main reasons the Russell 2000 lagged the Russell 2000 Growth was because of its significantly higher weighting in the financials sector, which was weak. |
We are pleased to report such a substantial gain in the Fund and that our stock selection was strong during the period. Performance trailed the Russell 2000 Growth Index because of the sector weightings that resulted from our bottom-up investment decisions.
Our holdings continue to be concentrated in what we believe are high-quality companies with strong earnings growth prospects and healthy balance sheets. This gives us confidence that the Fund has the potential to deliver the strong results we expect over time.
DETAILSOFTHE YEAR
The Fund’s substantial gain was supported by the solid operating performance of many of our portfolio companies. Holdings in a broad range of sectors experienced significant growth in sales and earnings, driven by factors specific to the company, positive industry dynamics and/or the tailwind of a robust global economy. Overall, our stock selection added value versus the Russell 2000 Growth Index and was particularly strong in the consumer discretionary, financials and health care sectors.
Blue Nile, Inc., an online retailer of fine jewelry, was one of the Fund’s best-performing stocks and is a good example of a company that is experiencing rapid growth — its sales have increased at a 35% annual rate over the past five years. Blue Nile is taking market share from traditional “brick-and-mortar” jewelry stores, as people are becoming more and more comfortable making large purchases over the Internet. One of the company’s key strengths is its efficient supply chain, which helps keep prices low and service levels high.
Amid rising defaults among subprime borrowers, the Fund benefited from minimal direct exposure to the subprime mortgage market. We owned just one company that had a small subprime lending business and it was a low weighting in the portfolio. Results were also favorably affected by strong gains in several of the financial stocks we owned, including HDFC Bank Ltd. ADR, India’s second-largest private bank. HDFC is capitalizing on India’s transition from a cash to credit economy, as steady job and income growth make consumers more willing to assume
debt. Our position in the stock is a good example of
Wasatch’s Multiple Eyes approach to investing, which includes working closely with our international research team as we look for exciting opportunities around the world.
Other top performers included Techne Corp., a manufacturer of research kits used in drug development, and Icon plc (Ireland), a contract research organization. Both companies have been doing well, as reflected in positive trends in sales and earnings, and they exemplify how we like to gain exposure to the biotechnology industry. Although we own a number of biotechnology stocks, our position sizes are small due to the inherent risk of these companies. We take larger positions in names like Techne and Icon, which provide tools and services that enable drug discovery but are not dependent on the success of individual drugs.
On the other hand, American Reprographics Co., a provider of document management services to the construction industry, was one of our weakest holdings due to softness in its residential business. Despite the recent decline, we continue to believe that the stock is a good, long-term investment. American Reprographics operates in a fragmented industry where we think there is an opportunity for the company to gain market share based on its dominant competitive position and expanding national footprint.
While our stock selection was strong, sector weightings were a headwind and caused the Fund to trail the Russell 2000 Growth Index. For example, our bottom-up research process has identified many financial services companies that meet our criteria for quality and growth but very few materials companies. This weighed on results, since financials was the worst-performing sector in the Index and materials was the best. Over the years, our focus on investing in what we believe are high-quality growth companies has more than offset the periodic headwinds of these types of sector exposures.
OUTLOOK
In our view, the Fund includes a good selection of high-quality companies poised to generate stable, long-term earnings growth regardless of broad trends in the economy and stock market. At September 30, we had considerable expo- sure to companies tied to the health of spending by U.S. consumers, which has the potential to benefit the portfolio if the Federal Reserve continues to lower interest rates. And if the market remains volatile or a softer economy causes the earnings growth of our holdings to decelerate, it is likely that the quality of the companies themselves will attract investors.
The Fund generated a strong return over the past year — a return that slightly exceeded the weighted-average earnings growth rate of our companies. Because performance has historically tended to be a little less than earnings growth, we don’t expect the kind of return that we have seen over the last 12 months to occur in the next 12 months. Nonetheless, we believe that the quality of our companies and the mid-teens earnings growth we expect from them have the potential to pave the way for solid returns over time.
Thank you for the opportunity to manage your assets.
20
| WASATCH SMALL CAP GROWTH FUND (WAAEX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Wasatch Small Cap Growth Fund | 16.94% | 16.11% | 12.38% | |||
Russell 2000 Growth Index | 18.94% | 18.70% | 3.65% | |||
Russell 2000 Index | 12.34% | 18.75% | 7.22% |
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.
The Total Annual Fund Operating Expenses for the Wasatch Small Cap Growth Fund are 1.18%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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 will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
TOP 10 EQUITY HOLDINGS*
| Company | % of Fund | |
O’Reilly Automotive, Inc. Automotive parts retailer/distributor. | 5.01% | |
Knight Transportation, Inc. Long haul trucking and logistic services. | 4.20% | |
HDFC Bank Ltd. ADR (India) Consumer bank. | 3.59% | |
Healthways, Inc. Disease management services. | 3.56% | |
Techne Corp. Complex, disposable research kits for biotechnology. | 3.29% |
| Company | % of Fund | |
Resources Connection, Inc. Outsourcing of professional business services. | 2.74% | |
Strayer Education, Inc. Post-secondary education. | 2.49% | |
Power Integrations, Inc. Semiconductors. | 2.45% | |
FactSet Research Systems, Inc. Financial and economic information for investment managers. | 2.24% | |
Life Time Fitness, Inc. Physical fitness centers. | 2.20% |
| * | As of September 30, 2007, the Fund had 31.77% invested in the Top 10 equity holdings and there were 117 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 is an unmanaged total return index that 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 Fund has changed its primary market index from the Russell 2000 Index to the Russell 2000 Growth Index, which the Advisor believes better represents the types of companies in which the Fund typically invests. You cannot invest directly in these indexes.
21
| WASATCH SMALL CAP VALUE FUND (WMCVX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch Small Cap Value Fund is managed by a team of Wasatch portfolio managers, led by Jim Larkins and John Mazanec.
Jim Larkins, MBA Portfolio Manager |
John Mazanec, MBA Portfolio Manager | OVERVIEW
The Wasatch Small Cap Value Fund gained 13.32% in the year ended September 30, 2007, outperforming the Russell 2000 Value Index, which returned 6.09%. The strong relative performance came |
in a volatile and challenging investment environment, but provided many opportunities for the Fund’s investment style to prosper.
DETAILSOFTHE YEAR
A mix of factors explains the Fund’s outperformance of its benchmark. Some fortuitous stockpicking in the consumer discretionary sector provided a major boost. International holdings also fared well, even some holdings in the lending industry, which was so weak in the United States. A spate of acquisitions helped significantly on the plus side.
Our consumer companies delivered strong returns versus the Index, led by Fossil, Inc., up more than 70%. We originally purchased the watch and accessories company nearly two years ago as a fallen angel* investment, and it is now well into its recovery. Many value investors would have sold Fossil by now, but we sometimes hold and even add to stocks that are between value and growth stories if the valuation is still reasonable.
Energy investments also contributed notably to the year’s results led by NuSTAR, a large pipeline and storage facility operator. NuSTAR, was separated from its parent Valero Energy during the year, and had a total return of over 60%.
Given the turmoil of the subprime mortgage meltdown that has played out in the last several months, it may seem unlikely that financial services was a positive for the Fund. But thanks largely to two international holdings, the sector added nearly 4% to the Fund’s return. The underpinnings here were Axis Bank Ltd., which more than doubled, and Housing Development Finance Corp. Ltd., up almost 90%. Both of these are financial services companies based in India, and the broad story is that the nation is rapidly embracing consumer finance.
Our investments in mortgage real estate investment trusts (REITs) were negative for the year, with much of the decline coming during the quarter ended September 30. Well before the meltdown did its worst damage, we sold all our companies with direct exposure to subprime mortgage financing because we felt that all the credit risk was not being factored into their valuations. We still were not totally insulated, as concerns spread to all mortgage and real estate related companies.
Of the Fund’s three base-level investment strategies, fallen angels, hidden opportunities and undiscovered gems*, the latter make up the bulk of the Fund’s holdings. Undiscovered gems are companies that have yet to be broadly discovered by Wall Street. One of this group’s best performers was Canadian auto parts maker Martinrea International, Inc. up 90%. Fallen angels, the next largest group, sported winners like Fossil. Hidden value had a harder time of it, although our private investment in energy company BPZ Energy, Inc. was up nearly 50%.
Some discoveries were disappointing, as was the case with EganaGoldpfeil Holdings Ltd. (Hong Kong), a marketer of luxury brands in Asia and Europe. An investigation following allegations of fraud drove Egana’s stock down over 80%.
One of the biggest reasons for the Fund’s outperformance of the Index was our timing on sell decisions. Buying undervalued stocks clearly is a critical part of value investing. But, as our experience with Fossil shows, selling (or not selling) is more nuanced. Keystone Automotive Industries, Inc. stayed in the Fund long after its original value story had played out, which proved to be a good move when it was acquired by a competitor at a premium. Selling discipline likewise gets a big part of the credit for the way the Fund avoided much of the downdraft in financial services.
OUTLOOK
We take a bottom-up approach to investing, closely examining the business fundamentals of individual companies rather than attempting to identify and capitalize on macroeconomic trends. Still, broad economic themes clearly affect the portfolio. Currently, the main themes we see in addition to the mopping up phase of the mortgage crisis are interest rates — recently cut for the first time in four years — and oil prices, which hit a new all-time high near the end of the 12 months.
We believe these trends will play out in the form of economic expansion, which is potentially good news for our trucking, financial and commercial real estate-related companies. We foresee no broad long-term retreat in oil prices, which may help our holdings.
The Wasatch Small Cap Value Fund will soon mark its 10th anniversary. Collectively, Jim Larkins and John Mazanec, your co-portfolio managers, have been working on the Fund for over 16 years. It has been a pleasure to serve you. We believe the Fund is attractively positioned for a strong beginning to the next 10 years.
Thank you for the opportunity to manage your assets.
| * | Fallen angels are defined as companies with a solid long-term growth history and outlook whose current earnings have gotten off track. Hidden opportunities include companies that in our opinion are not being priced correctly given their book value or cash flow, special situations where we determine that a company is being misvalued by the market, companies that have hidden assets that we believe are not reflected in their current stock price, and spin-offs that we believe are underpriced. Undiscovered gems are companies that may be undervalued because they currently receive little coverage from Wall Street analysts. |
22
| WASATCH SMALL CAP VALUE FUND (WMCVX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 12/17/97 | ||||
Wasatch Small Cap Value Fund | 13.32% | 20.28% | 17.24% | |||
Russell 2000 Value Index | 6.09% | 18.70% | 10.35% |
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.
The Total Annual Fund Operating Expenses for the Wasatch Small Cap Value Fund are 1.98%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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 small cap funds will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
TOP 10 EQUITY HOLDINGS*
| Company | % of Fund | |
Fossil, Inc. Fashion watches and accessories. | 2.92% | |
MSC Industrial Direct Co., Inc., Class A Industrial products distributor. | 2.80% | |
Crystal River Capital, Inc. Specialty finance company. | 2.46% | |
Dollar Financial Corp. Payday lender. | 2.45% | |
Aegean Marine Petroleum Network, Inc. Marine fuel logistics. | 2.37% |
| Company | % of Fund | |
Redwood Trust, Inc. Jumbo ARM mortgage REIT. | 2.34% | |
World Fuel Services Corp. Marine, aviation and land fuel products and services. | 2.34% | |
TETRA Technologies, Inc. Oil and gas industry services. | 2.30% | |
NorthStar Realty Finance Corp. Real estate finance company. | 2.20% | |
Schawk, Inc. Digital imaging graphic services. | 2.05% |
| * | As of September 30, 2007, the Fund had 24.23% invested in the Top 10 equity holdings and there were 84 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. |
23
| WASATCH STRATEGIC INCOME FUND (WASIX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch Strategic Income Fund is managed by a team of Wasatch portfolio managers, led by Sam Stewart.
Sam Stewart, PhD, CFA Portfolio Manager | OVERVIEW
The performance of the Wasatch Strategic Income Fund this year was right in line with our goal of delivering total returns between stocks and bonds. For the 12-month period ended September 30, 2007, the Fund returned 9.77%. In comparison, the S&P 500® Index returned 16.44% and the Lehman Brothers Aggregate Bond Index posted a 5.14% gain. While we do not expect to capture |
the entire up side during a robust stock market, we believe that our emphasis on healthy dividend yield and global diversification in high quality companies may alleviate much of the downside during a market swoon. This year has been a demonstration of both the risks and rewards of investing in the equity markets. Although the stock market posted a healthy gain, it was anything but a smooth ride.
A key driver of the market volatility was uncertainty surrounding the economy. Despite challenges, primarily weakness in the housing and credit markets, the economy remained remarkably resilient. The Fed and others are working hard to prevent this problem from leaking further into the economy, but we are not out of the woods yet. Nearly a million subprime loans come due for refinancing over the next few years in a much tougher credit environment.
As you’ll recall, the Strategic Income Fund began with a concentration in real estate investment trusts (REITs). Midway through this year, we broadened the concentration to include all financials, providing more investment flexibility. While this shift was helpful, it was a tough year for the financials sector due to the credit crisis. The S&P 500 financials were up less than 2%, so the Fund’s heavy weighting here was a tough headwind.
We remain satisfied with the Fund’s concentration in the financials sector for two reasons. First, many of these companies pay attractive dividends. Second, we believe that financial companies will be key beneficiaries of long-term global expansion. We see the sector’s recent challenges as a blip, albeit painful, in a long-term view.
In the face of one of the most severe events to hit the financials sector in recent memory, the Fund came away relatively unscathed. Fortunately, as we saw the storm clouds approaching we were able to hedge our exposure and minimize the damage. We also took the opportunity to reduce and consolidate our financial holdings into the companies we believe have the best long-term potential.
DETAILSOFTHE YEAR
We had strong results from the Fund’s international holdings. They were up over 42% for the 12-month period. An example is Redecard S.A., a company that processes credit
and debit card transactions for retailers in Brazil. Time and again, we’ve seen that as a country becomes more sophisticated, its reliance on credit significantly increases. Clearly, credit cards are one of the most elementary credit tools. So, in an emerging market like Brazil we believe a significant growth opportunity exists.
One of the Fund’s top holdings is Redwood Trust, Inc. We think Redwood has a great business model, focused primarily on the jumbo prime mortgage market. Because Redwood is an underwriter of mortgage credit risk, and the market has been so hypersensitive to that exposure recently, the stock was driven down significantly.
We agree that this is not a great housing/mortgage market even for Redwood, but the management team has a long track record of assessing credit risk. We believe they will steer themselves through this tough period and emerge as a stronger player in a weakened market. We added to our position recently at what we perceive to be bargain prices relative to the company’s long-term prospects.
The price of Pool Corp., a provider of swimming pool maintenance and construction services, also fell this year. We believe that the market misunderstands Pool’s exposure to new pool construction. A fairly small percentage of the firm’s revenue comes from new construction. When Pool recently reported weaker than expected quarterly earnings, the market assumed that it was correlated to the housing slump and punished the stock.
The bulk of Pool’s revenue is actually tied to existing pools, where Pool holds a dominant market position. This portion of Pool’s business was weaker than expected due to poor weather in one of the company’s core geographic locations, which has no meaningful bearing on its long-term growth potential. Given our conviction about Pool’s long-term prospects and its management team, the pullback provided us with an opportunity to take a larger stake.
OUTLOOK
Although the recent pullback in some of our holdings dampened the Fund’s short-term performance, this decline may be advantageous over the long haul. Market volatility often provides us the good fortune of being able to purchase stocks at a discount to our perceived long-term value.
Going forward, we still like foreign stocks because they have the potential for higher dividends and may deliver greater growth. While in recent years we invested in these stocks because they felt undervalued, they now command higher prices, holding us somewhat at bay. We are currently keeping a little cash on hand to take advantage of opportunities as they emerge.
While the economic cloud is still out there, the Fed seems to be actively trying to mitigate further spillover of the subprime issue into the broader economy. We feel good about the Fund’s positioning under such a forecast, but regardless of the weather, we remain confident in the Fund’s long-term potential to deliver total returns between those of stocks and bonds.
Thank you for the opportunity to manage your assets.
24
| WASATCH STRATEGIC INCOME FUND (WASIX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 2/1/06 | ||||
Wasatch Strategic Income Fund | 9.77% | N/A | 10.52% | |||
Lehman Brothers Aggregate Bond Index | 5.14% | N/A | 4.94% | |||
S&P 500 Index | 16.44% | N/A | 13.31% |
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.
The Total Annual Fund Operating Expenses for the Wasatch Strategic Income Fund are 2.95%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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.
TOP 10 EQUITY HOLDINGS*
| Company | % of Fund | |
Redwood Trust, Inc. Jumbo ARM mortgage REIT. | 6.93% | |
Pool Corp. Swimming pool supplies distributor. | 5.81% | |
CapitalSource, Inc. Financial services to businesses. | 5.21% | |
KKR Financial Holdings LLC Mortgage REIT. | 4.95% | |
iStar Financial, Inc. REIT. | 4.49% |
| Company | % of Fund | |
Capital One Financial Corp. Credit cards and financial services. | 4.07% | |
Paychex, Inc. Payroll and human resource services provider. | 3.98% | |
McGrath RentCorp Modular building rentals. | 3.20% | |
Apollo Investment Corp. Investments for businesses. | 3.09% | |
Ares Capital Corp. Investment manager. | 2.89% |
| * | As of September 30, 2007, the Fund had 44.62% invested in the Top 10 equity holdings and there were 53 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. |
25
| WASATCH ULTRA GROWTH FUND (WAMCX) — Management Discussion | SEPTEMBER 30, 2007 | |
The Wasatch Ultra Growth Fund is managed by a team of Wasatch portfolio managers, led by Ajay Krishnan and Neal Dihora.
Ajay Krishnan, CFA Portfolio Manager |
Neal Dihora, CFA Portfolio Manager | OVERVIEW
The Wasatch Ultra Growth Fund gained 23.80% during the 12 months ended September 30, 2007 and outperformed the Russell 2000 Growth Index, which returned 18.94%. The |
Fund’s positive results were driven by a number of our highest-conviction investments, many of which had been out of favor until recently.
We are constantly trying to leverage our expanding research capabilities for the benefit of shareholders. In that spirit, we added several new positions to the Fund during the year that are in non-traditional growth sectors, such as energy and materials. Consistent with our efforts to capitalize on long-term trends in the global economy, some of our new investments, as well as some of our existing holdings, have significant international exposure.
Looking forward, we believe the 12-month, weighted-average earnings growth rate of our companies will remain above our 20% target. This earnings growth profile, combined with our attention to valuation, makes us confident that the Fund has the potential to generate strong long-term performance.
DETAILSOFTHE YEAR
The Fund’s gain was driven by significant price appreciation in many of our highest-conviction, “classic” Ultra Growth positions — companies like O2Micro International Ltd., a semiconductor supplier, and ArthroCare Corp., a medical technology firm. These are larger holdings that we believe will deliver outstanding long-term earnings growth by virtue of their talented management teams, attractive business models and strong competitive positions, among other factors. Until recently, a number of these stocks had posted flat-to-negative returns, and we highlighted several of them in prior reports, using comments such as, “Despite recent weakness, we remain positive on the company’s long-run prospects.” We have been patient with these companies, as we believed that the market would ultimately recognize the values of these businesses. Our patience was rewarded this period when the stocks were top contributors.
We think that having a long time horizon is particularly important when investing in the types of rapidly growing companies that we strive to own in the portfolio. Fast growth often comes with growing pains, which can lead to price volatility from quarter to quarter. When a company is facing difficulties, our job is to decipher whether that particular issue is likely to clear up in a matter of months or persist for several
years. Our ability to make those judgments is, in our view, where we add the most value for our shareholders. Often, we are willing to hold onto a stock through some difficult periods if we have high conviction in a company and some visibility into the ultimate resolution of the issue.
One of our weaker performers this year, which we sold, was Shuffle Master. The company, a manufacturer of products for the gaming industry, was having problems integrating an acquisition made in early 2006. Based on our due diligence, we concluded that the problems would impact earnings for an extended period and decided it was best to sell our position. We may revisit Shuffle Master in the future if we can better discern the ultimate outcome of the transaction.
We expanded our research coverage of non-traditional growth sectors, which enabled us to add a number of companies with high growth potential in areas such as energy and materials. The Fund’s holdings are now more broadly diversified by sector, with less exposure to health care, information technology and consumer discretionary stocks than we have had in the past. These changes make the portfolio less susceptible to the periodic headwinds created by exceptionally strong- or weak-performing sectors. At the same time, we have concentrated a greater percentage of the Fund’s assets in our highest-conviction names within each sector to try and capture higher returns from our best ideas.
We continue to see attractive growth opportunities overseas, which we are capitalizing on by investing both in U.S. companies that generate revenue abroad and companies headquartered outside the United States. Earlier this year, for example, we added Bucyrus International, Inc. and CSE Global Ltd. to the portfolio. Bucyrus is a U.S.-based manufacturer of mining equipment that derived more than 70% of its 2006 revenue overseas. Singapore-based CSE Global provides control and safety systems to the global oil and gas industry. Overall, these and other companies with international exposure lifted performance during the past year, and we expect to see positive contributions in the future.
OUTLOOK
While the possibility of a downturn in the U.S. economy is a legitimate concern, we believe that the fundamental characteristics of our holdings make the Fund well-positioned for a wide variety of economic environments. In our view, we have invested in a good selection of high-quality companies whose differentiated business models and proprietary products have the potential to drive future growth. Our one-year estimate of the weighted-average earnings growth rate of the portfolio is greater than 20%. Valuations are somewhat high, but we are picking our spots and taking advantage of both market volatility and stock specific movements to selectively add and trim positions.
We continue to conduct deep due diligence on both existing holdings and new opportunities, including meeting with management teams, touring operating facilities and developing detailed earnings models. Our research gives us confidence in the prospects of many of the positions we hold that have struggled in previous periods.
Thank you for the opportunity to manage your assets.
26
| WASATCH ULTRA GROWTH FUND (WAMCX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Wasatch Ultra Growth Fund | 23.80% | 17.01% | 10.92% | |||
Russell 2000 Growth Index | 18.94% | 18.70% | 3.65% |
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.
The Total Annual Fund Operating Expenses for the Wasatch Ultra Growth Fund are 1.48%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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 will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
TOP 10 EQUITY HOLDINGS*
| Company | % of Fund | |
Cognizant Technology Solutions Corp., Class A Professional technology services. | 4.38% | |
Healthways, Inc. Disease management services. | 3.90% | |
O2Micro International Ltd. ADR (Cayman Islands) Semiconductors. | 3.43% | |
Intuitive Surgical, Inc. Robotic surgical systems. | 3.14% | |
Psychiatric Solutions, Inc. Inpatient behavioral health care services. | 2.73% |
| Company | % of Fund | |
HDFC Bank Ltd. ADR (India) Consumer bank. | 2.72% | |
ArthroCare Corp. Disposable devices for minimally invasive surgery. | 2.71% | |
NuVasive, Inc. Medical devices for spine treatments. | 2.63% | |
HDFC Bank Ltd. (India) Consumer bank. | 2.52% | |
Kyphon, Inc. Medical devices for spine treatments. | 2.39% |
| * | As of September 30, 2007, the Fund had 30.55% invested in the Top 10 equity holdings and there were 99 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. You cannot invest directly in these indexes.
27
| WASATCH-HOISINGTON U.S. TREASURY FUND (WHOSX) — Management Discussion | SEPTEMBER 30, 2007 | |
Van R. Hoisington Portfolio Manager | OVERVIEW
The U.S. Treasury Fund seeks to provide a rate of return that exceeds the rate of inflation over a business cycle by investing in U.S. Treasury securities, with an emphasis on both income and capital appreciation. The Fund returned 2.68% in the 12 months ended September 30, 2007 versus 5.14% for the Lehman Brothers Aggregate Bond Index. For the last three, five and 10 years the Fund’s |
average annual returns were 5.00%, 4.68% and 7.16%, respectively. Thus, the Fund outperformed the Lehman Aggregate’s average annual returns over the same time periods by 1.14%, 0.55% and 1.19%, respectively.
For the 12 months ended September, the Fund’s performance was affected by rising yields in long-term U.S. Treasury bonds, which yielded 4.84%, or slightly above the year earlier level of 4.76%. As a result, the market value of the Fund’s portfolio fell and resulted in a return that was less than the coupon interest on the Treasury bonds held in the Fund. The Fund produced a strong return of 5.56% in the final quarter of the fiscal year, far outpacing the Lehman Index return of 2.84%.
DETAILSOFTHE YEAR
Over the past fiscal year, the economy experienced a growth recession which occurs when the economy grows at a pace insufficient to provide jobs for all labor force entrants, thus increasing the unemployment rate. An alternative way of defining a growth recession is to say that the economy grew at less than its potential growth rate which is equal to increases in productivity and the labor force. In the third quarter of 2007, real gross domestic product (GDP) grew at an estimated 3.5% annual rate or approximately equal to the economy’s potential growth rate. But, in the past four quarters, the 2.5% growth was well below potential. Measures of housing slumped badly while vehicle sales fell to the slowest pace since the third quarter of 1998. Not surprisingly, the unemployment rate in September stood at 4.7%, up 0.3% from the low of 4.4% reached six months earlier.
Similarly, other measures of labor market performance have deteriorated, serving to confirm the arrival of a growth recession. For example, in the first nine months of 2007, the average monthly gains in total nonfarm employment as well as the private subcomponent registered increases that were 35% and 40% lower than the yearly average gains of 2006. Total household employment and household employment adjusted to a similar configuration as the payroll series posted declines of 86% and 70%, respectively. In the past six months, household employment was up a mere 3,000 jobs. Weakness in the labor markets explains why consumer sentiment, as measured by the University of Michigan, fell to a 14 month low in early October.
The more subdued pace was clearly evident in the labor markets. The inflation rate, in spite of higher oil prices, moved lower. The Core Personal Consumption Expenditures (PCE) Deflator* rose a modest 1.8%, down from a peak of 2.5% reached in February of this year. Historically, bond yields have declined when the inflation rate falls. While that did not happen in this fiscal year, one of the strongest economic relationships is for bond yields to follow inflation, indicating that the pattern of the past year was an aberration and likely to be reversed.
OUTLOOK
A continuing contraction in the growth of total reserves and transactions based monetary aggregates, as well a downturn in the velocity of money (the number of times money turns over in creating nominal GDP in a year), suggests that monetary conditions remain restrictive. These monetary considerations, combined with greater slack in the labor markets, will serve to put additional downward pressure on the inflation rate. Even though a weak dollar and increases in commodity prices suggest that inflation will rise, this is not likely to be the case. Demand will be too weak to allow cost increases to be passed along to consumers. Thus, weakness in domestic demand suggests that profit margins will be compressed in this environment.
Over the next six months, this measure of inflation should ease toward 1.5%. This is good news for bond investors. Moreover, the highly indebted condition of the U.S. economy, as well as the huge volume of mortgage resets scheduled for the first half of 2008, suggest that exiting the growth recession will not occur quickly or easily. Indeed, no growth, or an outright recession, is a distinct possibility. In this environment, the entire Treasury yield should shift downward. We believe the U.S. Treasury Fund is well positioned for such an environment with investments in long-dated Treasury securities**.
Thank you for the opportunity to manage your assets.
| * | 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. |
| ** | Treasury securities with maturities longer than 20 years. |
28
| WASATCH-HOISINGTON U.S. TREASURY FUND (WHOSX) — Portfolio Summary | SEPTEMBER 30, 2007 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Wasatch-Hoisington U.S. Treasury Fund | 2.68% | 4.68% | 7.16% | |||
Lehman Brothers Aggregate Bond Index | 5.14% | 4.13% | 5.97% |
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.
The Total Annual Fund Operating Expenses for the Wasatch-Hoisington U.S. Treasury Fund are 0.72%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor as well as indirect expenses incurred by the Fund as a result of its investments in other investment companies (each an “Acquired Fund”), before any expense reimbursements by the Advisor. The Net Expenses may differ due to waivers and reimbursements by the Advisor. See the prospectus for additional information regarding Fund expenses.
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 | 39.80 | % | ||
| U.S. Treasury Bond, 4.75% | 2/15/37 | 18.74 | % | ||
| U.S. Treasury Bond, 5.25% | 2/15/29 | 12.28 | % | ||
| U.S. Treasury Bond, 5.25% | 11/15/28 | 7.24 | % | ||
| U.S. Treasury Bond, 5.50% | 8/15/28 | 5.13 | % |
| Holding | Maturity Date | % of Fund | ||
| U.S. Treasury Bond, 5.375% | 2/15/31 | 4.62% | ||
| U.S. Treasury Strip, principal only | 2/15/37 | 3.58% | ||
| U.S. Treasury Strip, principal only | 8/15/25 | 2.88% | ||
| U.S. Treasury Bond, 4.50% | 2/15/36 | 2.87% | ||
| U.S. Treasury Strip, principal only | 11/15/21 | 2.18% |
| * | As of September 30, 2007, the Fund had 99.32% invested in the Top 10 holdings and there were 10 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.
29
| WASATCH FUNDS — Operating Expenses (UNAUDITED) | ||
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, 2007.
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.
30
| SEPTEMBER 30, 2007 | ||
| Account Value | Expenses Paid During Period* | Annualized Expense Ratio* | ||||||
| Fund/Class and Return | Beginning of Period April 1, 2007 | End of Period September 30, 2007 | ||||||
Core Growth Fund | ||||||||
Actual | $1,000.00 | $1,031.70 | $5.91 | 1.16% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,019.25 | $5.87 | 1.16% | ||||
Global Science & Technology Fund | ||||||||
Actual | $1,000.00 | $1,165.30 | $9.77 | 1.80% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,016.04 | $9.10 | 1.80% | ||||
Heritage Growth Fund | ||||||||
Actual | $1,000.00 | $1,058.10 | $4.90 | 0.95% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,020.31 | $4.81 | 0.95% | ||||
Heritage Value Fund**1 | ||||||||
Actual | $1,000.00 | $1,024.00 | $0.84 | 0.95% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,020.31 | $4.81 | 0.95% | ||||
International Growth Fund | ||||||||
Actual | $1,000.00 | $1,085.30 | $9.20 | 1.76% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,016.24 | $8.90 | 1.76% | ||||
International Opportunities Fund | ||||||||
Actual | $1,000.00 | $1,089.80 | $11.79 | 2.25% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,013.79 | $11.36 | 2.25% | ||||
Micro Cap Fund | ||||||||
Actual | $1,000.00 | $1,051.20 | $11.00 | 2.14% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,014.34 | $10.81 | 2.14% | ||||
Micro Cap Value Fund | ||||||||
Actual | $1,000.00 | $1,053.00 | $11.58 | 2.25% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,013.79 | $11.36 | 2.25% | ||||
Small Cap Growth Fund | ||||||||
Actual | $1,000.00 | $1,073.30 | $6.18 | 1.19% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,019.10 | $6.02 | 1.19% | ||||
Small Cap Value Fund | ||||||||
Actual | $1,000.00 | $998.10 | $8.47 | 1.69% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,016.60 | $8.54 | 1.69% | ||||
Strategic Income Fund2 | ||||||||
Actual | $1,000.00 | $985.50 | $4.88 | 0.98% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,020.16 | $4.96 | 0.98% | ||||
Ultra Growth Fund | ||||||||
Actual | $1,000.00 | $1,143.20 | $7.95 | 1.48% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,017.65 | $7.49 | 1.48% | ||||
U.S. Treasury Fund | ||||||||
Actual | $1,000.00 | $1,023.50 | $3.60 | 0.71% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,021.51 | $3.60 | 0.71% | ||||
*Expenses are equal to the Funds’ 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), except for the Heritage Value Fund’s actual return information, which had 32 days in the most recent fiscal period due to its inception date of August 30, 2007.
**The Heritage Value Fund’s hypothetical expense ratio reflects amounts as if the Fund had been in existence for the entire fiscal half year.
1Fund inception date was August 30, 2007.
2The annualized expense ratio includes dividend payments for securities sold short and/or line of credit interest fees. Excluding these items the annualized expense ratios would have been 0.95%. Dividend payments for securities sold short and line of credit interest fees are not reimbursable expenses under the contractual agreement between the Fund and the Advisor.
31
| WASATCH CORE GROWTH FUND (WGROX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 97.1% | |||||
| Aerospace & Defense 0.3% | |||||
| 687,880 | DataPath, Inc.* *** † | $ | 3,439,400 | ||
| Apparel Retail 0.7% | |||||
| 1,378,735 | Truworths International Ltd. (South Africa) | 6,339,173 | |||
| 579,875 | Wet Seal, Inc./The, Class A* | 2,244,116 | |||
| 8,583,289 | |||||
| Apparel, Accessories and Luxury Goods 0.9% | |||||
| 14,539,000 | EganaGoldpfeil Holdings Ltd.*** (Hong Kong) | 1,234,854 | |||
| 2,761,000 | Ports Design Ltd. (Hong Kong) | 9,575,517 | |||
| 10,810,371 | |||||
| Asset Management and Custody Banks 3.4% | |||||
| 1,549,049 | SEI Investments Co. | 42,258,057 | |||
| Automotive Retail 4.4% | |||||
| 1,531,369 | O’Reilly Automotive, Inc.* | 51,163,038 | |||
| 142,695 | Sonic Automotive, Inc., Class A | 3,416,119 | |||
| 54,579,157 | |||||
| Construction and Engineering 2.2% | |||||
| 491,538 | URS Corp.* | 27,747,320 | |||
| Construction and Farm Machinery and Heavy Trucks 0.1% | |||||
| 17,878 | Demag Cranes AG (Germany) | 842,411 | |||
| Consumer Finance 4.2% | |||||
| 1,424,609 | AmeriCredit Corp.* | 25,044,627 | |||
| 747,674 | Dollar Financial Corp.* | 21,331,139 | |||
| 722,367 | United PanAm Financial Corp.* | 5,952,304 | |||
| 52,328,070 | |||||
| Data Processing and Outsourced Services 1.3% | |||||
| 555,551 | Euronet Worldwide, Inc.* | 16,538,753 | |||
| Diversified Banks 2.3% | |||||
| 955,201 | Axis Bank Ltd. (India) | 18,314,162 | |||
| 274,705 | HDFC Bank Ltd. (India) | 9,899,652 | |||
| 28,213,814 | |||||
| Diversified Capital Markets 1.0% | |||||
| 880,060 | Solar Capital, LLC* ** *** † | 13,200,900 | |||
| Diversified Commercial and Professional Services 7.0% | |||||
| 2,059,540 | Copart, Inc.* | 70,827,581 | |||
| 335,421 | CRA International, Inc.* | 16,163,938 | |||
| 86,991,519 | |||||
| Education Services 4.0% | |||||
| 295,431 | Strayer Education, Inc. | 49,818,530 | |||
| Footwear 1.1% | |||||
| 17,878,000 | China Hongxing Sports Ltd. (China) | 13,605,509 | |||
| Health Care Distributors 2.7% | |||||
| 1,768,557 | PSS World Medical, Inc.* | 33,832,495 | |||
| Health Care Facilities 5.3% | |||||
| 792,895 | Emeritus Corp.* | 21,487,455 | |||
| 1,284,762 | Sunrise Senior Living, Inc.* | 45,442,032 | |||
| 66,929,487 | |||||
| Health Care Services 5.3% | |||||
| 722,527 | Healthways, Inc.* | 38,994,782 | |||
| 425,584 | Pediatrix Medical Group, Inc.* | 27,841,705 | |||
| 66,836,487 | |||||
| Shares | Value | ||||
| Homebuilding 0.7% | |||||
| 19,523 | NVR, Inc.* | $ | 9,180,691 | ||
| Homefurnishing Retail 1.2% | |||||
| 669,715 | Aaron Rents, Inc. | 14,934,645 | |||
| Human Resource and Employment Services 1.2% | |||||
| 676,485 | Resources Connection, Inc. | 15,660,628 | |||
| Industrial Conglomerates 1.0% | |||||
| 324,220 | Raven Industries, Inc. | 12,985,011 | |||
| Industrial Machinery 3.6% | |||||
| 346,425 | Graco, Inc. | 13,548,682 | |||
| 351,520 | IDEX Corp. | 12,791,813 | |||
| 1,578,590 | Weg S.A. (Brazil) | 19,182,756 | |||
| 45,523,251 | |||||
| Insurance Brokers 1.1% | |||||
| 257,710 | National Financial Partners Corp. | 13,653,476 | |||
| Internet Software and Services 0.5% | |||||
| 621,950 | Liquidity Services, Inc.* | 6,835,231 | |||
| Investment Banking and Brokerage 3.2% | |||||
| 5,797,210 | ABG Sundal Collier ASA (Norway) | 15,371,227 | |||
| 170,523 | GFI Group, Inc.* | 14,685,441 | |||
| 130,231 | KIWOOM Securities Co. Ltd. (Korea) | 9,733,705 | |||
| 39,790,373 | |||||
| IT Consulting and Other Services 0.9% | |||||
| 409,655 | SRA International, Inc., Class A* | 11,503,112 | |||
| Leisure Facilities 2.7% | |||||
| 559,719 | Life Time Fitness, Inc.* | 34,333,163 | |||
| Leisure Products 2.8% | |||||
| 1,397,530 | Pool Corp. | 34,910,299 | |||
| Life Sciences Tools and Services 1.0% | |||||
| 344,894 | Pharmaceutical Product Development, Inc. | 12,223,043 | |||
| Marine 1.0% | |||||
| 516,915 | American Commercial Lines, Inc.* | 12,266,393 | |||
| Mortgage REIT’s 3.7% | |||||
| 945,605 | Annaly Mortgage Management, Inc. | 15,063,488 | |||
| 914,885 | NorthStar Realty Finance Corp. | 9,084,808 | |||
| 677,773 | Redwood Trust, Inc. | 22,515,619 | |||
| 46,663,915 | |||||
| Oil and Gas Equipment and Services 1.9% | |||||
| 428,790 | TETRA Technologies, Inc.* | 9,064,620 | |||
| 718,815 | TGS-NOPEC Geophysical Co. ASA* (Norway) | 14,727,631 | |||
| 23,792,251 | |||||
| Oil and Gas Exploration and Production 2.2% | |||||
| 205,270 | GMX Resources, Inc.* | 6,603,536 | |||
| 345,270 | Ultra Petroleum Corp.* (Canada) | 21,420,551 | |||
| 28,024,087 | |||||
| Personal Products 0.4% | |||||
| 791,157 | Emami Ltd. (India) | 4,383,900 | |||
| Property and Casualty Insurance 1.5% | |||||
| 721,765 | Tower Group, Inc. | 18,895,808 | |||
32
| SEPTEMBER 30, 2007 | ||
| Shares | Value | ||||
| Real Estate Management and Development 3.3% | |||||
| 213,010 | Jones Lang LaSalle, Inc. | $ | 21,888,907 | ||
| 1,312,915 | LPS Brasil Consultoria de Imoveis S.A.* (Brazil) | 18,930,069 | |||
| 40,818,976 | |||||
| Regional Banks 3.0% | |||||
| 347,967 | First Community Bancorp, Inc. | 19,037,275 | |||
| 1,031,653 | UCBH Holdings, Inc. | 18,033,294 | |||
| 37,070,569 | |||||
| Semiconductors 3.5% | |||||
| 116,365 | Hittite Microwave Corp.* | 5,137,515 | |||
| 1,095,784 | Micrel, Inc. | 11,834,467 | |||
| 516,775 | National Semiconductor Corp. | 14,014,938 | |||
| 304,248 | Silicon Laboratories, Inc.* | 12,705,396 | |||
| 43,692,316 | |||||
| Specialized Finance 0.7% | |||||
| 497,007 | KKR Financial Holdings, LLC | 8,374,568 | |||
| Specialty Stores 0.7% | |||||
| 377,970 | Hibbett Sports, Inc.* | 9,373,656 | |||
| Systems Software 0.9% | |||||
| 312,435 | Quality Systems, Inc. | 11,444,494 | |||
| Thrifts and Mortgage Finance 0.9% | |||||
| 169,340 | Housing Development Finance Corp. Ltd. (India) | 10,750,471 | |||
| Trading Companies and Distributors 3.0% | |||||
| 493,977 | MSC Industrial Direct Co., Inc., Class A | 24,990,296 | |||
| 260,000 | Watsco, Inc. | 12,071,800 | |||
| 37,062,096 | |||||
| Trucking 4.3% | |||||
| 1,322,764 | Knight Transportation, Inc. | 22,764,768 | |||
| 1,857,220 | Localiza Rent A Car S.A. (Brazil) | 18,967,785 | |||
| 514,235 | Old Dominion Freight Line, Inc.* | 12,326,213 | |||
| 54,058,766 | |||||
| Total Common Stocks (cost $983,907,317) | 1,214,760,758 | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 0.7% | |||||
| Repurchase Agreement 0.7% | |||||
| $8,870,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $8,725,000 of United States Treasury Notes 4.875% due 6/30/12; value: $9,052,188; repurchase proceeds: $8,872,809 (cost $8,870,000) | $ | 8,870,000 | ||
| Total Short-Term Investments (cost $8,870,000) | 8,870,000 | ||||
| Total Investments (cost $992,777,317) 97.8% | 1,223,630,758 | ||||
| Other Assets less Liabilities 2.2% | 26,987,208 | ||||
| NET ASSETS 100.0% | $ | 1,250,617,966 | |||
*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).
See notes to financial statements. | |||||
At September 30, 2007, Wasatch Core Growth Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Brazil | 4.8 | ||
Canada | 1.8 | ||
China | 1.2 | ||
Germany | 0.1 | ||
Hong Kong | 0.9 | ||
India | 3.6 | ||
Korea | 0.8 | ||
Norway | 2.5 | ||
South Africa | 0.5 | ||
United States | 83.8 | ||
TOTAL | 100.0 | % | |
33
| WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND (WAGTX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 96.0% | |||||
| Air Freight & Logistics 1.2% | |||||
| 1,697,000 | Goodpack Ltd. (Singapore) | $ | 2,388,612 | ||
| Alternative Carriers 1.7% | |||||
| 69,400 | Global Village Telecom Holding S.A.* (Brazil) | 1,478,209 | |||
| 90,725 | Tulip IT Services Ltd. (India) | 1,969,436 | |||
| 3,447,645 | |||||
| Application Software 7.0% | |||||
| 60,470 | Adobe Systems, Inc.* | 2,640,120 | |||
| 42,970 | Autodesk, Inc.* | 2,147,211 | |||
| 75,240 | Duzon Digital Ware Co. Ltd. (Korea) | 1,373,008 | |||
| 100,275 | Interactive Intelligence, Inc.* | 1,905,225 | |||
| 1,854,000 | Kingdee International Software Group Co. Ltd. (Hong Kong) | 1,460,152 | |||
| 144,030 | Opnet Technologies, Inc.* | 1,670,748 | |||
| 6,584,740 | Silverlake Axis Ltd. (Singapore) | 3,192,924 | |||
| 14,389,388 | |||||
| Biotechnology 1.6% | |||||
| 40,730 | Amgen, Inc.* | 2,304,096 | |||
| 12,280 | Celgene Corp.* | 875,687 | |||
| 3,179,783 | |||||
| Broadcasting & Cable TV 0.5% | |||||
| 105,085 | Outdoor Channel Holdings, Inc.* | 948,918 | |||
| Communications Equipment 5.0% | |||||
| 91,195 | Acme Packet, Inc.* | 1,406,227 | |||
| 129,330 | F5 Networks, Inc.* | 4,809,783 | |||
| 124,622 | Packeteer, Inc.* | 947,127 | |||
| 39,905 | QUALCOMM, Inc. | 1,686,385 | |||
| 69,070 | Starent Networks Corp.* | 1,458,068 | |||
| 10,307,590 | |||||
| Computer Storage & Peripherals 7.9% | |||||
| 290,470 | Catcher Technology Co. Ltd. (Taiwan) | 2,113,885 | |||
| 7,280 | Data Domain, Inc.* | 225,316 | |||
| 101,975 | Intevac, Inc.* | 1,550,020 | |||
| 258,635 | Isilon Systems, Inc.* | 1,991,490 | |||
| 6,810 | Netezza Corp.* | 85,193 | |||
| 95,900 | Network Appliance, Inc.* | 2,580,669 | |||
| 91,165 | QLogic Corp.* | 1,226,169 | |||
| 2,417,675 | Unisteel Technology Ltd. (Singapore) | 3,500,691 | |||
| 115,385 | Western Digital Corp.* | 2,921,548 | |||
| 16,194,981 | |||||
| Construction & Engineering 0.7% | |||||
| 1,210,000 | Midas Holdings Ltd. (Singapore) | 1,409,772 | |||
| Construction & Farm Machinery & Heavy Trucks 0.4% | |||||
| 1,684,000 | China Farm Equipment Ltd. (Singapore) | 714,496 | |||
| Data Processing & Outsourced Services 1.2% | |||||
| 131,500 | Redecard S.A.* (Brazil) | 2,456,199 | |||
| Diversified Banks 1.7% | |||||
| 95,770 | HDFC Bank Ltd. (India) | 3,451,301 | |||
| Electrical Components & Equipment 0.5% | |||||
| 1,728,000 | Wasion Meters Group Ltd. (Hong Kong) | 1,065,164 | |||
| Electronic Equipment Manufacturers 0.3% | |||||
| 1,891,690 | QRSciences Holdings Ltd.* (Australia) | 604,122 | |||
| Shares | Value | ||||
| Electronic Manufacturing Services 1.2% | |||||
| 218,115 | TTM Technologies, Inc.* | $ | 2,523,591 | ||
| Health Care Equipment 7.8% | |||||
| 113,030 | Abaxis, Inc.* | 2,537,524 | |||
| 40,805 | ArthroCare Corp.* | 2,280,591 | |||
| 84,130 | Dexcom, Inc.* | 840,459 | |||
| 12,215 | Intuitive Surgical, Inc.* | 2,809,450 | |||
| 7,853,270 | LMA International N.V.* (Singapore) | 3,014,691 | |||
| 43,375 | Medtronic, Inc. | 2,446,784 | |||
| 34,215 | NxStage Medical, Inc.* | 495,775 | |||
| 91,395 | VNUS Medical Technologies, Inc.* | 1,452,266 | |||
| 15,877,540 | |||||
| Health Care Technology 2.2% | |||||
| 141,625 | RaySearch Laboratories AB* (Sweden) | 4,440,654 | |||
| Industrial Machinery 4.6% | |||||
| 6,238,586 | Innovalues Ltd. (Singapore) | 2,331,828 | |||
| 580,705 | Weg S.A. (Brazil) | 7,056,628 | |||
| 9,388,456 | |||||
| Integrated Telecommunication Services 0.5% | |||||
| 27,190 | NeuStar, Inc., Class A* | 932,345 | |||
| Internet Retail 2.1% | |||||
| 89,180 | B2W Companhia Global do Varejo (Brazil) | 4,213,037 | |||
| Internet Software & Services 1.7% | |||||
| 3,245 | Google, Inc., Class A* | 1,840,791 | |||
| 550,135 | Kana Software, Inc.* | 1,721,923 | |||
| 3,562,714 | |||||
| IT Consulting & Other Services 6.3% | |||||
| 88,315 | Cognizant Technology Solutions Corp., Class A* ††† | 7,044,887 | |||
| 1,247,000 | CSE Global Ltd. (Singapore) | 1,074,964 | |||
| 87,830 | Infosys Technologies Ltd. (India) | 4,159,458 | |||
| 65,450 | Tier Technologies, Inc., Class B* | 667,590 | |||
| 12,946,899 | |||||
| Life & Health Insurance 1.2% | |||||
| 80,795 | OdontoPrev S.A. (Brazil) | 2,515,191 | |||
| Life Sciences Tools & Services 3.2% | |||||
| 28,655 | Covance, Inc.* | 2,232,224 | |||
| 43,925 | Icon plc ADR* (Ireland) | 2,241,493 | |||
| 36,995 | Pharmaceutical Product | ||||
| Development, Inc. | 1,311,103 | ||||
| 13,030 | Techne Corp.* | 821,932 | |||
| 6,606,752 | |||||
| Oil & Gas Equipment & Services 3.4% | |||||
| 4,217,010 | Advanced Holdings Ltd. (Singapore) | 1,462,613 | |||
| 49,410 | Pason Systems, Inc. (Canada) | 740,366 | |||
| 669,000 | Swiber Holdings Ltd.* (Singapore) | 1,558,905 | |||
| 151,140 | TGS-NOPEC Geophysical Co. ASA* (Norway) | 3,096,672 | |||
| 6,858,556 | |||||
| Photographic Products 0.3% | |||||
| 50,337 | Largan Precision Co. Ltd. (Taiwan) | 547,560 | |||
| Real Estate Management & Development 1.3% | |||||
| 186,780 | LPS Brasil Consultoria de Imoveis S.A.* (Brazil) | 2,693,060 | |||
34
| SEPTEMBER 30, 2007 | ||
| Shares | Value | ||||
| Semiconductor Equipment 3.9% | |||||
| 88,170 | ASE Test Ltd.* | $ | 1,267,003 | ||
| 147,430 | inTEST Corp.* | 470,302 | |||
| 66,490 | Nanometrics, Inc.* | 596,415 | |||
| 93,465 | Rudolph Technologies, Inc.* | 1,292,621 | |||
| 114,495 | Tessera Technologies, Inc.* | 4,293,562 | |||
| 7,919,903 | |||||
| Semiconductors 17.4% | |||||
| 17,105 | austriamicrosystems AG* (Austria) | 899,219 | |||
| 54,300 | Melexis N.V. (Belgium) | 1,001,298 | |||
| 119,735 | Micrel, Inc. | 1,293,138 | |||
| 65,435 | Microchip Technology, Inc. | 2,376,599 | |||
| 104,185 | MIPS Technologies, Inc.* | 823,061 | |||
| 112,015 | National Semiconductor Corp. | 3,037,847 | |||
| 121,210 | NetLogic Microsystems, Inc.* | 4,376,893 | |||
| 282,310 | O2Micro International Ltd. ADR* (Cayman Islands) | 4,367,336 | |||
| 70,630 | ON Semiconductor Corp.* | 887,113 | |||
| 164,616 | PLX Technology, Inc.* | 1,777,853 | |||
| 86,450 | Power Integrations, Inc.* | 2,568,430 | |||
| 52,640 | PSi Technologies Holdings, Inc. ADR* | 77,907 | |||
| 4,060 | Samsung Electronics Co. Ltd. GDR (Korea) | 1,273,825 | |||
| 65,730 | Silicon Laboratories, Inc.* | 2,744,885 | |||
| 108,045 | SiRF Technology Holdings, Inc.* | 2,306,761 | |||
| 24,190 | Supertex, Inc.* | 964,697 | |||
| 52,085 | Techwell, Inc.* | 553,143 | |||
| 88,870 | Texas Instruments, Inc. | 3,251,753 | |||
| 71,405 | Volterra Semiconductor Corp.* | 876,853 | |||
| 35,458,611 | |||||
| Specialized Finance 0.5% | |||||
| 24,275 | GP Investments Ltd. GDR (Brazil) | 1,070,433 | |||
| Systems Software 0.0% | |||||
| 8,140 | Sourcefire, Inc.* | 73,911 | |||
| Technology Distributors 1.0% | |||||
| 225,884 | Nu Horizons Electronics Corp.* | 2,130,086 | |||
| Thrifts & Mortgage Finance 1.2% | |||||
| 37,055 | Housing Development Finance Corp. Ltd. (India) | 2,352,419 | |||
| Trucking 0.7% | |||||
| 144,375 | Localiza Rent A Car S.A. (Brazil) | 1,474,502 | |||
| Wireless Telecommunication Services 5.8% | |||||
| 1,870,300 | America Movil S.A.B. de C.V., Series L (Mexico) | 5,991,287 | |||
| 321,880 | Idea Cellular Ltd.* (India) | 1,013,763 | |||
| 58,625 | NII Holdings, Inc.* | 4,816,044 | |||
| 11,821,094 | |||||
| Total Common Stocks (cost $158,836,301) | 195,965,285 | ||||
| PREFERRED STOCKS 0.3% | |||||
| Broadcasting & Cable TV 0.0% | |||||
| 1 | Net Servicos de Comunicacao S.A., Series 4 Pfd.* (Brazil) | 12 | |||
| Integrated Telecommunication Services 0.1% | |||||
| 17,684 | Neutral Tandem, Inc., Series C | ||||
| Pfd.* *** † | 111,107 | ||||
| Shares | Value | |||||
| Internet Software & Services 0.2% | ||||||
| 78,502 | BlueArc Corp., Series DD Pfd.* *** † | $ | 407,426 | |||
| 30,265 | Incipient, Inc., Series D Pfd.* *** † | 31,960 | ||||
| 6,528 | Xtera Communications, Inc., Series A-1 Series A-1 Pfd.* *** † | 7,076 | ||||
| 446,462 | ||||||
| Pharmaceuticals 0.0% | ||||||
| 283,018 | Point Biomedical Corp., Series F Pfd.* *** † | 64,151 | ||||
| 29,666 | Point Biomedical Corp., Series G Pfd.* *** † | 6,724 | ||||
| 70,875 | ||||||
| Total Preferred Stocks (cost $748,131) | 628,456 | |||||
| LIMITED PARTNERSHIP INTEREST 0.1% | ||||||
| Other 0.1% | ||||||
| Montagu Newhall Global Partners II-B, L.P.* *** † | 286,800 | |||||
| Total Limited Partnership Interest (cost $312,144) | 286,800 | |||||
| WARRANTS 0.1% | ||||||
| Air Freight & Logistics 0.1% | ||||||
| 212,125 | Goodpack Ltd. expiring 7/16/09* (Singapore) | 107,859 | ||||
| Electronic Equipment Manufacturers 0.0% | ||||||
| 945,845 | QRSciences Holdings Ltd. expiring 2/15/08* *** † (Australia) | — | ||||
| Pharmaceuticals 0.0% | ||||||
| 768 | Acusphere, Inc. expiring 10/20/08* *** † | — | ||||
| 3,832 | Acusphere, Inc. expiring 8/02/08* *** † | — | ||||
| 84,905 | Point Biomedical Corp. Series F expiring 2/16/12* *** † | — | ||||
| 41,532 | Point Biomedical Corp. Series G expiring 5/11/14* *** † | 8,999 | ||||
| 8,999 | ||||||
| Total Warrants (cost $0) | 116,858 | |||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 4.1% | ||||||
| Repurchase Agreement 4.1% | ||||||
| $8,440,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $8,300,000 of United States Treasury Notes 4.875% due 6/30/12; value: $8,611,250; repurchase proceeds: $8,442,673††† (cost $8,440,000) | $ | 8,440,000 | |||
| Total Short-Term Investments (cost $8,440,000) | 8,440,000 | |||||
| Total Investments (cost $168,336,576) 100.6% | 205,437,399 | |||||
| Liabilities less Other Assets (0.6)% | (1,294,909 | ) | ||||
| NET ASSETS 100.0% | $ | 204,142,490 | ||||
35
| WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND (WAGTX) — Schedule of Investments (continued) | ||
*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.
GDR Global Depositary Receipts.
See notes to financial statements. | ||||
At September 30, 2007, Wasatch Global Science & Technology Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 0.3 | ||
Austria | 0.5 | ||
Belgium | 0.5 | ||
Brazil | 11.7 | ||
Canada | 0.4 | ||
Cayman Islands | 2.2 | ||
Hong Kong | 1.3 | ||
India | 6.5 | ||
Ireland | 1.1 | ||
Korea | 1.3 | ||
Mexico | 3.0 | ||
Norway | 1.6 | ||
Singapore | 10.5 | ||
Sweden | 2.3 | ||
Taiwan | 1.4 | ||
United States | 55.4 | ||
TOTAL | 100.0 | % | |
36
| WASATCH HERITAGE GROWTH FUND (WAHGX) — Schedule of Investments | SEPTEMBER 30, 2007 | |
| Shares | Value | ||||
| COMMON STOCKS 99.1% | |||||
| Aerospace & Defense 2.4% | |||||
| 48,565 | L-3 Communications Holdings, Inc. | $ | 4,960,429 | ||
| Air Freight & Logistics 1.5% | |||||
| 56,210 | C.H. Robinson Worldwide, Inc. | 3,051,641 | |||
| Apparel Retail 3.3% | |||||
| 125,002 | Aeropostale, Inc.* | 2,382,538 | |||
| 219,535 | Esprit Holdings Ltd. (Hong Kong) | 3,489,055 | |||
| 235,830 | Truworths International Ltd. (South Africa) | 1,084,303 | |||
| 6,955,896 | |||||
| Apparel, Accessories & Luxury Goods 2.6% | |||||
| 112,625 | Coach, Inc.* | 5,323,784 | |||
| Asset Management & Custody Banks 2.6% | |||||
| 92,175 | SEI Investments Co. | 2,514,534 | |||
| 53,225 | T. Rowe Price Group, Inc. | 2,964,100 | |||
| 5,478,634 | |||||
| Automotive Retail 0.9% | |||||
| 58,800 | O’Reilly Automotive, Inc.* | 1,964,508 | |||
| Communications Equipment 4.2% | |||||
| 172,755 | Cisco Systems, Inc.* | 5,719,918 | |||
| 82,000 | F5 Networks, Inc.* | 3,049,580 | |||
| 8,769,498 | |||||
| Computer & Electronics Retail 0.8% | |||||
| 36,367 | Best Buy Co., Inc. | 1,673,609 | |||
| Construction & Farm Machinery & Heavy Trucks 1.8% | |||||
| 60,660 | Oshkosh Truck Corp. | 3,759,100 | |||
| Consumer Finance 3.1% | |||||
| 182,680 | AmeriCredit Corp.* | 3,211,514 | |||
| 50,301 | Capital One Financial Corp. | 3,341,496 | |||
| 6,553,010 | |||||
| Data Processing & Outsourced Services 4.5% | |||||
| 93,800 | Alliance Data Systems Corp.* | 7,263,872 | |||
| 112,600 | Redecard S.A.* (Brazil) | 2,103,179 | |||
| 9,367,051 | |||||
| Department Stores 2.0% | |||||
| 73,750 | Kohl’s Corp.* | 4,228,088 | |||
| Diversified REIT’s 1.8% | |||||
| 187,285 | CapitalSource, Inc. | 3,790,648 | |||
| Education Services 1.4% | |||||
| 49,080 | Apollo Group, Inc., Class A* | 2,952,162 | |||
| Electronic Equipment Manufacturers 3.6% | |||||
| 189,630 | Amphenol Corp., Class A | 7,539,689 | |||
| General Merchandise Stores 1.7% | |||||
| 86,425 | Dollar Tree Stores, Inc.* | 3,503,670 | |||
| Health Care Distributors 1.2% | |||||
| 62,620 | Patterson Companies, Inc.* | 2,417,758 | |||
| Health Care Equipment 2.2% | |||||
| 62,875 | St. Jude Medical, Inc.* | 2,770,901 | |||
| 22,863 | Zimmer Holdings, Inc.* | 1,851,674 | |||
| 4,622,575 | |||||
| Shares | Value | ||||
| Health Care Services 5.2% | |||||
| 97,615 | DaVita, Inc.* | $ | 6,167,316 | ||
| 57,260 | Express Scripts, Inc.* | 3,196,253 | |||
| 42,737 | Lincare Holdings, Inc.* | 1,566,311 | |||
| 10,929,880 | |||||
| Home Furnishings 1.2% | |||||
| 69,940 | Tempur-Pedic International, Inc. | 2,500,355 | |||
| Home Improvement Retail 0.4% | |||||
| 27,365 | Lowe’s Companies, Inc. | 766,767 | |||
| Homebuilding 1.2% | |||||
| 5,539 | NVR, Inc.* | 2,604,715 | |||
| Homefurnishing Retail 0.4% | |||||
| 25,507 | Bed Bath & Beyond, Inc.* | 870,299 | |||
| Hotels, Resorts & Cruise Lines 0.7% | |||||
| 445,230 | Shangri-La Asia Ltd. (Hong Kong) | 1,501,145 | |||
| Internet Software & Services 2.0% | |||||
| 106,180 | eBay, Inc.* | 4,143,144 | |||
| IT Consulting & Other Services 4.5% | |||||
| 29,150 | Cognizant Technology Solutions Corp., Class A* | 2,325,295 | |||
| 147,650 | Infosys Technologies Ltd. (India) | 6,992,416 | |||
| 9,317,711 | |||||
| Life Sciences Tools & Services 2.4% | |||||
| 63,065 | Covance, Inc.* | 4,912,763 | |||
| Managed Health Care 3.6% | |||||
| 94,140 | WellPoint, Inc.* | 7,429,529 | |||
| Office Services & Supplies 0.5% | |||||
| 56,635 | Knoll, Inc. | 1,004,705 | |||
| Oil & Gas Equipment & Services 1.1% | |||||
| 24,915 | Cameron International Corp.* | 2,299,405 | |||
| Oil & Gas Exploration & Production 5.7% | |||||
| 42,725 | Anadarko Petroleum Corp. | 2,296,469 | |||
| 62,905 | Chesapeake Energy Corp. | 2,218,030 | |||
| 52,720 | Plains Exploration & Production Co.* | 2,331,278 | |||
| 32,590 | Ultra Petroleum Corp.* (Canada) | 2,021,884 | |||
| 50,295 | XTO Energy, Inc. | 3,110,243 | |||
| 11,977,904 | |||||
| Pharmaceuticals 3.7% | |||||
| 70,785 | Biovail Corp. (Canada) | 1,229,536 | |||
| 98,185 | Endo Pharmaceuticals Holdings, Inc.* | 3,044,717 | |||
| 78,820 | Teva Pharmaceutical Industries Ltd. ADR (Israel) | 3,505,125 | |||
| 7,779,378 | |||||
| Real Estate Management & Development 1.2% | |||||
| 86,170 | CB Richard Ellis Group, Inc., Class A* | 2,398,973 | |||
| Regional Banks 0.7% | |||||
| 37,270 | Commerce Bancorp, Inc. | 1,445,331 | |||
| Semiconductor Equipment 1.6% | |||||
| 61,780 | KLA-Tencor Corp. | 3,446,088 | |||
37
| WASATCH HERITAGE GROWTH FUND (WAHGX) — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| Semiconductors 7.0% | |||||
| 97,300 | Linear Technology Corp. | $ | 3,404,527 | ||
| 115,440 | Maxim Integrated Products, Inc. | 3,388,164 | |||
| 67,980 | Microchip Technology, Inc. | 2,469,034 | |||
| 168,735 | ON Semiconductor Corp.* | 2,119,311 | |||
| 326,484 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan) | 3,304,018 | |||
| 14,685,054 | |||||
| Specialized Finance 1.2% | |||||
| 15,850 | IntercontinentalExchange, Inc.* | 2,407,615 | |||
| Specialty Stores 0.8% | |||||
| 77,900 | Staples, Inc. | 1,674,071 | |||
| Systems Software 1.0% | |||||
| 69,155 | BMC Software, Inc.* | 2,159,711 | |||
| Thrifts & Mortgage Finance 1.2% | |||||
| 39,235 | Housing Development Finance Corp. Ltd. (India) | 2,490,816 | |||
| Trading Companies & Distributors 3.7% | |||||
| 59,020 | Fastenal Co. | 2,680,098 | |||
| 46,540 | MSC Industrial Direct Co., Inc., Class A | 2,354,459 | |||
| 59,425 | TransDigm Group, Inc.* | 2,716,317 | |||
| 7,750,874 | |||||
| Trucking 1.1% | |||||
| 85,025 | J.B. Hunt Transport Services, Inc. | 2,236,158 | |||
| Wireless Telecommunication Services 5.4% | |||||
| 2,033,520 | America Movil S.A.B. de C.V., Series L (Mexico) | 6,514,143 | |||
| 58,190 | NII Holdings, Inc.* | 4,780,308 | |||
| 11,294,451 | |||||
| Total Common Stocks (cost $171,562,684) | 206,938,592 | ||||
| Total Investments (cost $171,562,684) 99.1% | 206,938,592 | ||||
| Other Assets less Liabilities 0.9% | 1,979,519 | ||||
| NET ASSETS 100.0% | $ | 208,918,111 | |||
*Non-income producing.
ADR American Depositary Receipts.
See notes to financial statements. | |||||
At September 30, 2007, Wasatch Heritage Growth Fund’s investments were in the following countries:
| Country | % | ||
Brazil | 1.0 | ||
Canada | 1.6 | ||
Hong Kong | 2.4 | ||
India | 4.6 | ||
Israel | 1.7 | ||
Mexico | 3.1 | ||
South Africa | 0.5 | ||
Taiwan | 1.6 | ||
United States | 83.5 | ||
TOTAL | 100.0 | % | |
38
| WASATCH HERITAGE VALUE FUND (WAHVX) — Schedule of Investments | SEPTEMBER 30, 2007 | |
| Shares | Value | ||||
| COMMON STOCKS 76.5% | |||||
| Aerospace & Defense 2.9% | |||||
| 1,040 | Goodrich Corp. | $ | 70,959 | ||
| Agricultural Products 2.8% | |||||
| 2,080 | Archer-Daniels-Midland Co. | 68,806 | |||
| Aluminum 2.9% | |||||
| 1,820 | Alcoa, Inc. | 71,198 | |||
| Asset Management & Custody Banks 2.1% | |||||
| 590 | Legg Mason, Inc. | 49,731 | |||
| Automobile Manufacturers 2.8% | |||||
| 1,055 | Bayerische Motoren Werke (BMW) AG (Germany) | 68,052 | |||
| Broadcasting & Cable TV 2.9% | |||||
| 2,870 | Comcast Corp., Class A* | 69,397 | |||
| Coal & Consumable Fuels 2.9% | |||||
| 5,365 | Uranium One, Inc.* (Canada) | 71,044 | |||
| Communications Equipment 5.7% | |||||
| 2,120 | Cisco Systems, Inc.* | 70,193 | |||
| 3,475 | Comverse Technology, Inc.* | 68,805 | |||
| 138,998 | |||||
| Computer Hardware 2.9% | |||||
| 12,660 | Sun Microsystems, Inc.* | 71,023 | |||
| Construction & Farm Machinery & Heavy Trucks 2.9% | |||||
| 480 | Deere & Co. | 71,242 | |||
| Consumer Finance 1.9% | |||||
| 700 | Capital One Financial Corp. | 46,501 | |||
| Diversified Metals & Mining 3.0% | |||||
| 2,795 | HudBay Minerals, Inc.* (Canada) | 72,475 | |||
| Drug Retail 1.4% | |||||
| 730 | Walgreen Co.††† | 34,485 | |||
| Gold 1.0% | |||||
| 2,010 | Yamana Gold, Inc. (Canada) | 23,678 | |||
| Health Care Equipment 1.9% | |||||
| 1,130 | Covidien Ltd.* (Bermuda) | 46,895 | |||
| Home Improvement Retail 2.7% | |||||
| 3,000 | RONA, Inc.* (Canada) | 65,797 | |||
| Industrial Machinery 1.6% | |||||
| 1,005 | Graco, Inc. | 39,306 | |||
| Life & Health Insurance 2.0% | |||||
| 720 | Lincoln National Corp. | 47,498 | |||
| Oil & Gas Drilling 2.7% | |||||
| 1,255 | Fred Olsen Energy ASA (Norway) | 66,203 | |||
| Oil & Gas Exploration & Production 2.9% | |||||
| 1,315 | Anadarko Petroleum Corp. | 70,681 | |||
| Oil & Gas Storage & Transportation 2.8% | |||||
| 2,805 | Spectra Energy Corp. | 68,666 | |||
| Pharmaceuticals 4.9% | |||||
| 2,790 | Biovail Corp. (Canada) | 48,462 | |||
| 1,580 | Teva Pharmaceutical Industries Ltd. ADR (Israel) | 70,263 | |||
| 118,725 | |||||
| Shares | Value | ||||
| Railroads 2.6% | |||||
| 770 | Burlington Northern Santa Fe Corp. | $ | 62,501 | ||
| Semiconductors 1.8% | |||||
| 3,200 | Advanced Micro Devices, Inc.* | 42,240 | |||
| Specialty Chemicals 1.9% | |||||
| 670 | Cytec Industries, Inc. | 45,821 | |||
| Systems Software 2.9% | |||||
| 2,375 | Microsoft Corp. | 69,968 | |||
| Wireless Telecommunication Services 7.7% | |||||
| 1,350 | America Movil S.A.B. de C.V., Series L ADR (Mexico) | 86,400 | |||
| 1,665 | Globe Telecom, Inc. (Philippines) | 54,450 | |||
| 1,590 | SK Telecom Co. Ltd. ADR (Korea) | 47,223 | |||
| 188,073 | |||||
| Total Common Stocks (cost $1,816,079) | 1,859,963 | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 19.9% | |||||
| Repurchase Agreement 19.9% | |||||
| $484,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $430,000 of United States Treasury Bonds 6.25% due 8/15/23; value: $497,188; repurchase proceeds: $484,153††† (cost $484,000) | 484,000 | |||
| Total Short-Term Investments (cost $484,000) | 484,000 | ||||
| Total Investments (cost $2,300,079) 96.4% | 2,343,963 | ||||
| Other Assets less Liabilities 3.6% | 88,421 | ||||
| NET ASSETS 100.0% | $ | 2,432,384 | |||
| Number of Contracts | Value | ||||
| CALL OPTIONS WRITTEN | |||||
| 4 | Deere & Co. expiring 10/20/07 exercise price $145 | $ | 2,560 | ||
| 7 | Walgreen Co. expiring 10/20/07 exercise price $45 | 1,806 | |||
| Total Call Options Written (premium $3,542) | 4,366 | ||||
*Non-income producing.
†††All or a portion of this security has been designated as collateral for written options (see Note 10).
ADR American Depositary Receipts.
See notes to financial statements. | |||||
39
| WASATCH HERITAGE VALUE FUND (WAHVX) — Schedule of Investments (continued) | ||
At September 30, 2007, Wasatch Heritage Value Fund’s investments, excluding short-term investments and written options were in the following countries:
| Country | % | ||
Bermuda | 2.5 | ||
Canada | 15.1 | ||
Germany | 3.7 | ||
Israel | 3.8 | ||
Korea | 2.5 | ||
Mexico | 4.7 | ||
Norway | 3.6 | ||
Philippines | 2.9 | ||
United States | 61.2 | ||
TOTAL | 100.0 | % | |
40
| WASATCH INTERNATIONAL GROWTH FUND (WAIGX) — Schedule of Investments | SEPTEMBER 30, 2007 | |
| Shares | Value | ||||
| COMMON STOCKS 95.2% | |||||
| Aerospace & Defense 1.8% | |||||
| 348,943 | Thielert AG* (Germany) | $ | 9,514,967 | ||
| Agricultural Products 2.8% | |||||
| 4,366,895 | Chaoda Modern Agriculture Holdings Ltd. (Hong Kong) | 3,534,764 | |||
| 4,005,870 | China Green Ltd. (Hong Kong) | 4,335,407 | |||
| 2,958,920 | Wilmar International Ltd. (Singapore) | 7,293,429 | |||
| 15,163,600 | |||||
| Alternative Carriers 0.6% | |||||
| 151,700 | Global Village Telecom Holding S.A.* (Brazil) | 3,231,185 | |||
| Apparel Retail 1.5% | |||||
| 42,840 | Point, Inc. (Japan) | 1,478,013 | |||
| 539,176 | Pumpkin Patch Ltd. (New Zealand) | 1,268,276 | |||
| 1,164,790 | Truworths International Ltd. (South Africa) | 5,355,493 | |||
| 8,101,782 | |||||
| Apparel, Accessories & Luxury Goods 2.8% | |||||
| 16,820 | Bijou Brigitte AG (Germany) | 3,131,611 | |||
| 87,390 | Mariella Burani Fashion Group S.p.A. (Italy) | 2,870,256 | |||
| 1,415,030 | Ports Design Ltd. (Hong Kong) | 4,907,513 | |||
| 405,515 | Ted Baker plc (United Kingdom) | 4,310,770 | |||
| 15,220,150 | |||||
| Application Software 0.5% | |||||
| 80,885 | Nemetschek AG (Germany) | 2,699,285 | |||
| Asset Management & Custody Banks 2.2% | |||||
| 151,885 | AWD Holding AG (Germany) | 5,075,187 | |||
| 690 | Bank Sarasin & Cie AG, Class B (Switzerland) | 3,034,660 | |||
| 4,758,000 | Macquarie International Infrastructure Fund Ltd. (Singapore) | 3,524,801 | |||
| 11,634,648 | |||||
| Biotechnology 0.6% | |||||
| 1,396,565 | Ark Therapeutics Group plc* (United Kingdom) | 3,397,447 | |||
| Building Products 0.5% | |||||
| 368,000 | Satipel Industrial S.A.* (Brazil) | 2,693,173 | |||
| Computer Storage & Peripherals 0.9% | |||||
| 3,410,484 | Unisteel Technology Ltd. (Singapore) | 4,938,237 | |||
| Construction & Engineering 2.5% | |||||
| 285,970 | Boart Longyear Group* (Australia) | 603,767 | |||
| 2,972,000 | Midas Holdings Ltd. (Singapore) | 3,462,680 | |||
| 132,660 | Outotec Oyj (Finland) | 9,365,050 | |||
| 13,431,497 | |||||
| Construction & Farm Machinery & Heavy Trucks 3.0% | |||||
| 168,084 | Demag Cranes AG (Germany) | 7,920,112 | |||
| 62,865 | Haulotte Group (France) | 2,371,371 | |||
| 99,825 | Takeuchi Manufacturing Co. Ltd. (Japan) | 5,722,674 | |||
| 16,014,157 | |||||
| Consumer Finance 0.5% | |||||
| 491,065 | Banco Compartamos S.A. de C.V.* (Mexico) | 2,669,723 | |||
| Shares | Value | ||||
| Diversified Banks 3.9% | |||||
| 249,555 | Axis Bank Ltd. (India) | $ | 4,784,743 | ||
| 465,874 | Bank of N.T. Butterfield & Son Ltd. (Bermuda) | 9,317,480 | |||
| 189,615 | HDFC Bank Ltd. (India) | 6,833,230 | |||
| 20,935,453 | |||||
| Diversified Capital Markets 1.2% | |||||
| 1,383,845 | Acta Holdings ASA (Norway) | 6,235,154 | |||
| Diversified Commercial & Professional Services 1.2% | |||||
| 150,677 | Campbell Brothers Ltd. (Australia) | 3,929,766 | |||
| 5,621,830 | Chemoil Energy Ltd. (Hong Kong) | 2,670,369 | |||
| 6,600,135 | |||||
| Diversified Metals & Mining 4.7% | |||||
| 226,870 | Anvil Mining Ltd.* (Canada) | 3,952,320 | |||
| 127,130 | HudBay Minerals, Inc.* (Canada) | 3,296,508 | |||
| 643,290 | Independence Group N.L. (Australia) | 3,737,838 | |||
| 338,310 | Lundin Mining Corp.* (Canada) | 4,330,014 | |||
| 79,895 | Major Drilling Group Intl., Inc.* (Canada) | 4,270,507 | |||
| 1,580,856 | Perilya Ltd. (Australia) | 5,595,484 | |||
| 25,182,671 | |||||
| Diversified REIT’s 1.7% | |||||
| 1,067,840 | Babcock & Brown Japan Property Trust** (Australia) | 1,624,586 | |||
| 2,985,695 | Charter Hall Group (Australia) | 7,654,481 | |||
| 9,279,067 | |||||
| Education Services 0.1% | |||||
| 25,875 | Anhanguera Educacional Participacoes S.A.* ** (Brazil) | 471,290 | |||
| Electrical Components & Equipment 3.9% | |||||
| 39,830 | Conergy AG (Germany) | 3,783,114 | |||
| 115,185 | SGL Carbon AG* (Germany) | 6,603,693 | |||
| 58,240 | Solarworld AG (Germany) | 3,353,088 | |||
| 4,504,000 | Walsin Lihwa Corp. (Taiwan) | 2,235,784 | |||
| 7,689,270 | Wasion Meters Group Ltd. (Hong Kong) | 4,739,775 | |||
| 20,715,454 | |||||
| Electronic Equipment Manufacturers 1.8% | |||||
| 1,036,000 | Chroma ATE, Inc. (Taiwan) | 2,539,605 | |||
| 356,654 | Rotork plc (United Kingdom) | 7,363,988 | |||
| 9,903,593 | |||||
| Environmental & Facilities Services 0.7% | |||||
| 116,000 | Asahi Pretec Corp. (Japan) | 3,789,859 | |||
| Fertilizers & Agricultural Chemicals 0.2% | |||||
| 8,447,000 | Century Sunshine Ecological Technology Holdings Ltd. (Hong Kong) | 967,452 | |||
| Footwear 2.8% | |||||
| 19,931,675 | China Hongxing Sports Ltd. (China) | 15,168,396 | |||
| Gold 0.3% | |||||
| 5,356,000 | Redcorp Ventures Ltd.* (Canada) | 1,564,110 | |||
| Health Care Equipment 2.3% | |||||
| 321,835 | Elekta AB, Class B (Sweden) | 5,245,396 | |||
| 17,710 | Nakanishi, Inc. (Japan) | 2,282,026 | |||
| 16,608 | Straumann Holding AG (Switzerland) | 4,665,048 | |||
| 12,192,470 | |||||
41
| WASATCH INTERNATIONAL GROWTH FUND (WAIGX) — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| Health Care Facilities 0.9% | |||||
| 240,910 | Curanum AG (Germany) | $ | 2,405,015 | ||
| 39,740 | Orpea* (France) | 2,367,321 | |||
| 4,772,336 | |||||
| Health Care Supplies 0.5% | |||||
| 32,008 | Omega Pharma S.A. (Belgium) | 2,807,363 | |||
| Health Care Technology 1.3% | |||||
| 224,540 | RaySearch Laboratories AB* (Sweden) | 7,040,456 | |||
| Homebuilding 1.5% | |||||
| 123,200 | Japan General Estate Co. Ltd. | ||||
| (The) (Japan) | 1,990,005 | ||||
| 1,537,700 | SARE Holding S.A.B. de C.V., Class B* (Mexico) | 2,322,183 | |||
| 1,086,465 | Urbi Desarrollos Urbanos S.A. de C.V.* (Mexico) | 3,907,951 | |||
| 8,220,139 | |||||
| Homefurnishing Retail 1.7% | |||||
| 69,590 | Beter Bed Holding N.V. (Netherlands) | 1,959,110 | |||
| 371,830 | Hemtex AB (Sweden) | 6,925,982 | |||
| 8,885,092 | |||||
| Household Appliances 1.4% | |||||
| 192,845 | Fourlis Holdings S.A. (Greece) | 7,244,177 | |||
| Human Resource & Employment Services 1.1% | |||||
| 684,970 | Michael Page International plc (United Kingdom) | 5,776,172 | |||
| Industrial Conglomerates 0.9% | |||||
| 1,285,123 | Mexichem S.A.B. de C.V. (Mexico) | 4,563,701 | |||
| Industrial Machinery 5.2% | |||||
| 154,160 | Biesse S.p.A. (Italy) | 4,496,038 | |||
| 38,818 | Burckhardt Compression Holding AG (Switzerland) | 8,536,192 | |||
| 173,880 | Frigoglass S.A. (Greece) | 5,996,127 | |||
| 86,310 | Konecranes Oyj (Finland) | 3,472,395 | |||
| 119,128 | Palfinger AG (Austria) | 5,224,249 | |||
| 27,725,001 | |||||
| Industrial REIT’s 0.6% | |||||
| 3,987,175 | Mapletree Logistics Trust (Singapore) | 3,356,547 | |||
| Internet Retail 0.6% | |||||
| 33,145 | B2W Companhia Global do Varejo GDR*** (Brazil) | 3,131,669 | |||
| Investment Banking & Brokerage 1.8% | |||||
| 132,450 | D. Carnegie & Co. AB (Sweden) | 2,785,781 | |||
| 90,232 | KIWOOM Securities Co. Ltd. (Korea) | 6,744,106 | |||
| 9,529,887 | |||||
| Life Sciences Tools & Services 2.8% | |||||
| 52,653 | Eurofins Scientific (France) | 4,827,602 | |||
| 81,020 | Icon plc ADR* (Ireland) | 4,134,451 | |||
| 31,025 | MorphoSys AG* (Germany) | 1,918,961 | |||
| 200,435 | QIAGEN N.V.* (Netherlands) | 3,890,443 | |||
| 14,771,457 | |||||
| Marine 0.4% | |||||
| 557,605 | Eitzen Chemical ASA* (Norway) | 2,326,284 | |||
| Office Electronics 0.4% | |||||
| 16,320 | Neopost S.A. (France) | 2,302,339 | |||
| Shares | Value | ||||
| Oil & Gas Equipment & Services 6.0% | |||||
| 965,663 | Anhui Tianda Oil Pipe Co. Ltd., Class H (China) | $ | 748,099 | ||
| 198,355 | Pason Systems, Inc. (Canada) | 2,972,179 | |||
| 64,385 | Schoeller-Bleckmann Oilfield Equipment AG (Austria) | 5,481,809 | |||
| 419,315 | TGS-NOPEC Geophysical Co. ASA* (Norway) | 8,591,246 | |||
| 139,340 | Trican Well Service Ltd. (Canada) | 2,841,383 | |||
| 294,110 | Wavefield Inseis ASA* (Norway) | 3,053,875 | |||
| 216,590 | WorleyParsons Ltd. (Australia) | 8,148,527 | |||
| 31,837,118 | |||||
| Oil & Gas Exploration & Production 2.3% | |||||
| 563,007 | JKX Oil and Gas plc (United Kingdom) | 4,028,343 | |||
| 88,095 | Premier Oil plc* (United Kingdom) | 1,818,935 | |||
| 153,165 | Soco International plc* (United Kingdom) | 6,644,305 | |||
| 12,491,583 | |||||
| Other Diversified Financial Services 0.5% | |||||
| 643,395 | African Bank Investments Ltd. (South Africa) | 2,930,138 | |||
| Pharmaceuticals 0.6% | |||||
| 355,155 | Hikma Pharmaceuticals plc (United Kingdom) | 3,049,382 | |||
| Precious Metals & Minerals 0.6% | |||||
| 79,290 | Aber Diamond Corp. (Canada) | 3,112,355 | |||
| Real Estate Management & Development 5.2% | |||||
| 9,600 | ARDEPRO Co. Ltd. (Japan) | 2,492,420 | |||
| 580 | Creed Corp. (Japan) | 1,323,924 | |||
| 350,219 | DTZ Holdings plc (United Kingdom) | 3,381,087 | |||
| 734,715 | Even Construtora e Incorporadora S.A.* (Brazil) | 6,957,924 | |||
| 1,100,315 | Growthpoint Properties Ltd.** (South Africa) | 2,591,142 | |||
| 817,350 | Invista Real Estate Investment Management Holdings plc (United Kingdom) | 1,587,363 | |||
| 201,090 | Joint Corp. (Japan) | 5,378,518 | |||
| 353,365 | Norwegian Property ASA (Norway) | 4,258,830 | |||
| 27,971,208 | |||||
| Regional Banks 0.8% | |||||
| 148,440 | Canadian Western Bank (Canada) | 4,260,148 | |||
| Restaurants 1.1% | |||||
| 1,906,295 | FU JI Food & Catering Services Holdings Ltd. (China) | 5,863,070 | |||
| Retail REIT’s 0.5% | |||||
| 1,870,000 | Suntec Real Estate Investment Trust (Singapore) | 2,455,804 | |||
| Semiconductors 1.3% | |||||
| 29,815 | austriamicrosystems AG* (Austria) | 1,567,391 | |||
| 122,190 | Melexis N.V. (Belgium) | 2,253,196 | |||
| 185,740 | O2Micro International Ltd. ADR* (Cayman Islands) | 2,873,398 | |||
| 6,693,985 | |||||
| Specialized Finance 7.7% | |||||
| 236,330 | Arques Industries AG (Germany) | 10,953,858 | |||
| 66,135 | GP Investments Ltd. GDR (Brazil) | 2,916,297 | |||
| 167,495 | Hellenic Exchanges S.A. (Greece) | 5,374,639 | |||
| 2,443,405 | Infrastructure Development Finance Co. Ltd. (India) | 8,704,218 | |||
| 732,740 | JSE Ltd. (South Africa) | 8,526,429 | |||
| 1,095 | Osaka Securities Exchange Co. Ltd. (Japan) | 4,846,315 | |||
| 41,321,756 | |||||
42
| SEPTEMBER 30, 2007 | ||
| Shares | Value | ||||
| Steel 0.8% | |||||
| 272,285 | Maharashtra Seamless Ltd. (India) | $ | 4,202,404 | ||
| Thrifts & Mortgage Finance 1.0% | |||||
| 154,280 | Home Capital Group, Inc. (Canada) | 5,359,911 | |||
| Trucking 0.7% | |||||
| 362,925 | Localiza Rent A Car S.A. (Brazil) | 3,706,552 | |||
| Total Common Stocks (cost $364,632,314) | 509,422,989 | ||||
| PREFERRED STOCKS 1.3% | |||||
| Railroads 1.3% | |||||
| 462,585 | All America Latina Logistica S.A. Pfd.** (Brazil) | 6,593,921 | |||
| Total Preferred Stocks (cost $2,379,556) | 6,593,921 | ||||
| WARRANTS 0.0% | |||||
| Gold 0.0% | |||||
| 2,678,000 | Redcorp Ventures Ltd. expiring 7/10/09* *** † (Canada) | — | |||
| Total Warrants (cost $0) | — | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 2.8% | |||||
| Repurchase Agreement 2.8% | |||||
| $15,002,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $15,115,000 of United States Treasury Notes 4.50% due 5/15/17; value: $15,303,938; repurchase proceeds: $15,006,751 (cost $15,002,000) | $ | 15,002,000 | ||
| Total Short-Term Investments (cost $15,002,000) | 15,002,000 | ||||
| Total Investments (cost $382,013,870) 99.3% | 531,018,910 | ||||
| Other Assets less Liabilities 0.7% | 3,883,775 | ||||
| NET ASSETS 100.0% | $ | 534,902,685 | |||
*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).
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
See notes to financial statements.
| |||||
At September 30, 2007, Wasatch International Growth Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 6.0 | ||
Austria | 2.4 | ||
Belgium | 1.0 | ||
Bermuda | 1.8 | ||
Brazil | 5.8 | ||
Canada | 7.0 | ||
Cayman Islands | 0.6 | ||
China | 3.1 | ||
Finland | 2.5 | ||
France | 2.3 | ||
Germany | 11.2 | ||
Greece | 3.6 | ||
Hong Kong | 5.3 | ||
India | 4.8 | ||
Ireland | 0.8 | ||
Italy | 1.4 | ||
Japan | 5.7 | ||
Korea | 1.3 | ||
Mexico | 2.6 | ||
Netherlands | 1.1 | ||
New Zealand | 0.3 | ||
Norway | 4.7 | ||
Singapore | 4.9 | ||
South Africa | 3.8 | ||
Sweden | 4.3 | ||
Switzerland | 3.8 | ||
Taiwan | 0.9 | ||
United Kingdom | 7.0 | ||
TOTAL | 100.0 | % | |
43
| WASATCH INTERNATIONAL OPPORTUNITIES FUND (WAIOX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 93.1% | |||||
| Aerospace & Defense 1.1% | |||||
| 7,570 | Ceramic Protection Corp.* (Canada) | $ | 47,644 | ||
| 21,540 | Thielert AG* (Germany) | 587,352 | |||
| 634,996 | |||||
| Air Freight & Logistics 1.9% | |||||
| 759,941 | Goodpack Ltd. (Singapore) | 1,069,655 | |||
| Apparel, Accessories & Luxury Goods 4.4% | |||||
| 1,885,000 | EganaGoldpfeil Holdings Ltd.*** (Hong Kong) | 160,100 | |||
| 473,005 | Moiselle Int’l. Holdings Ltd. (Hong Kong) | 155,218 | |||
| 171,045 | Mulberry Group plc (United Kingdom) | 804,235 | |||
| 23,900 | New Wave Group AB, Class B (Sweden) | 237,429 | |||
| 231,475 | Ports Design Ltd. (Hong Kong) | 802,786 | |||
| 28,025 | Ted Baker plc (United Kingdom) | 297,916 | |||
| 2,457,684 | |||||
| Apparel Retail 0.3% | |||||
| 67,241 | Pumpkin Patch Ltd. (New Zealand) | 158,168 | |||
| Application Software 2.8% | |||||
| 65,655 | Bri-Chem Corp.* (Canada) | 79,998 | |||
| 983,100 | Guestlogix, Inc.* (Canada) | 782,085 | |||
| 10,315 | Nemetschek AG (Germany) | 344,231 | |||
| 801,336 | Silverlake Axis Ltd. (Singapore) | 388,566 | |||
| 1,594,880 | |||||
| Asset Management & Custody Banks 1.6% | |||||
| 8,675 | Addenda Capital, Inc. (Canada) | 175,762 | |||
| 460,000 | Macquarie International Infrastructure Fund Ltd. (Singapore) | 340,775 | |||
| 29,575 | Treasury Group Ltd. (Australia) | 386,981 | |||
| 903,518 | |||||
| Auto Parts & Equipment 1.3% | |||||
| 42,540 | Martinrea International, Inc.* (Canada) | 732,525 | |||
| Automobile Manufacturers 0.4% | |||||
| 26,145 | Fleetwood Corp. Ltd. (Australia) | 223,815 | |||
| Automotive Retail 0.7% | |||||
| 11,142 | ARB Corp. Ltd. (Australia) | 41,019 | |||
| 93,050 | Super Cheap Auto Group Ltd. (Australia) | 370,625 | |||
| 411,644 | |||||
| Biotechnology 0.5% | |||||
| 123,110 | Ark Therapeutics Group plc* (United Kingdom) | 299,492 | |||
| Building Products 0.5% | |||||
| 39,000 | Satipel Industrial S.A.* (Brazil) | 285,418 | |||
| Communications Equipment 0.5% | |||||
| 38,435 | Celrun Co. Ltd.* (Korea) | 264,171 | |||
| Computer Storage & Peripherals 1.0% | |||||
| 394,063 | Unisteel Technology Ltd. (Singapore) | 570,586 | |||
| Construction & Engineering 1.8% | |||||
| 21,475 | Churchill Corp., Class A* (Canada) | 362,224 | |||
| 86,050 | Lycopodium Ltd. (Australia) | 309,920 | |||
| 315,960 | Midas Holdings Ltd. (Singapore) | 368,125 | |||
| 1,040,269 | |||||
| Shares | Value | ||||
| Construction & Farm Machinery & Heavy Trucks 3.3% | |||||
| 883,000 | China Farm Equipment Ltd. (Singapore) | $ | 374,644 | ||
| 16,700 | Demag Cranes AG (Germany) | 786,903 | |||
| 12,200 | Takeuchi Manufacturing Co. Ltd. (Japan) | 699,390 | |||
| 1,860,937 | |||||
| Consumer Finance 0.5% | |||||
| 54,145 | Banco Compartamos S.A. de C.V.* (Mexico) | 294,365 | |||
| Diversified Capital Markets 2.7% | |||||
| 280,250 | Acta Holdings ASA (Norway) | 1,262,715 | |||
| 41,430 | Numis Corp. plc (United Kingdom) | 230,371 | |||
| 1,493,086 | |||||
| Diversified Commercial & Professional Services 2.5% | |||||
| 46,175 | Credit Corp. Group Ltd. (Australia) | 449,761 | |||
| 23,305 | D+S europe AG* (Germany) | 422,102 | |||
| 49,840 | Intermap Technologies Corp.* (Canada) | 311,171 | |||
| 270,155 | Management Consulting Group plc (United Kingdom) | 218,150 | |||
| 1,401,184 | |||||
| Diversified Metals & Mining 0.9% | |||||
| 721,560 | CBH Resources Ltd.* (Australia) | 339,251 | |||
| 54,530 | Perilya Ltd. (Australia) | 193,010 | |||
| 532,261 | |||||
| Diversified REIT’s 2.3% | |||||
| 234,540 | Babcock & Brown Japan Property Trust** (Australia) | 356,824 | |||
| 149,360 | Charter Hall Group (Australia) | 382,917 | |||
| 60,735 | Star Asia Finance Ltd.*** † (Guernsey) | 561,799 | |||
| 1,301,540 | |||||
| Education Services 3.6% | |||||
| 12,520 | Anhanguera Educacional Participacoes S.A.* ** (Brazil) | 228,040 | |||
| 538,031 | China Education Ltd.* (Singapore) | 167,050 | |||
| 3,120 | MegaStudy Co. Ltd. (Korea) | 951,188 | |||
| 390,150 | Oriental Century Ltd.* (Singapore) | 252,244 | |||
| 280,765 | Raffles Education Corp. Ltd. (Singapore) | 433,008 | |||
| 2,031,530 | |||||
| Electrical Components & Equipment 1.2% | |||||
| 1,117,000 | Wasion Meters Group Ltd. (Hong Kong) | 688,535 | |||
| Electronic Equipment Manufacturers 1.3% | |||||
| 216,285 | Chroma ATE, Inc. (Taiwan) | 530,191 | |||
| 618,710 | QRSciences Holdings Ltd.* (Australia) | 197,589 | |||
| 727,780 | |||||
| Electronic Manufacturing Services 0.2% | |||||
| 207,670 | Virtek Vision International, Inc.* (Canada) | 129,657 | |||
| Fertilizers & Agricultural Chemicals 0.4% | |||||
| 2,094,000 | Century Sunshine Ecological Technology Holdings Ltd. (Hong Kong) | 239,830 | |||
| Footwear 5.8% | |||||
| 3,866,625 | China Hongxing Sports Ltd. (China) | 2,942,577 | |||
| 500,000 | Hongguo International Holdings Ltd. (Singapore) | 340,102 | |||
| 3,282,679 | |||||
44
| SEPTEMBER 30, 2007 | ||
| Shares | Value | ||||
| Gold 0.4% | |||||
| 855,000 | Redcorp Ventures Ltd.* (Canada) | $ | 249,685 | ||
| Health Care Equipment 0.9% | |||||
| 1,279,445 | LMA International N.V.* (Singapore) | 491,150 | |||
| Health Care Facilities 0.5% | |||||
| 27,815 | Curanum AG (Germany) | 277,678 | |||
| Health Care Technology 3.3% | |||||
| 101,760 | Profdoc ASA* (Norway) | 632,085 | |||
| 40,020 | RaySearch Laboratories AB* (Sweden) | 1,254,828 | |||
| 1,886,913 | |||||
| Home Improvement Retail 0.6% | |||||
| 43,435 | Swedol AB, Class B (Sweden) | 326,992 | |||
| Homebuilding 1.2% | |||||
| 25,300 | Japan General Estate Co. Ltd. (The) (Japan) | 408,662 | |||
| 180,360 | SARE Holding S.A.B. de C.V., Class B* (Mexico) | 272,373 | |||
| 681,035 | |||||
| Homefurnishing Retail 1.9% | |||||
| 10,170 | Beter Bed Holding N.V. (Netherlands) | 286,308 | |||
| 41,205 | Hemtex AB (Sweden) | 767,515 | |||
| 1,053,823 | |||||
| Hotels, Resorts & Cruise Lines 0.8% | |||||
| 52,700 | Club Cruise Entertainment & Travelling Services Europe N.V.* (Norway) | 464,149 | |||
| Household Appliances 0.9% | |||||
| 13,640 | Fourlis Holdings S.A. (Greece) | 512,383 | |||
| Human Resource & Employment Services 0.1% | |||||
| 31,805 | Carter & Carter Group plc (United Kingdom) | 52,178 | |||
| Industrial Conglomerates 1.4% | |||||
| 228,480 | Mexichem S.A.B. de C.V. (Mexico) | 811,373 | |||
| Industrial Machinery 2.7% | |||||
| 168,262 | Awea Mechantronic Co. Ltd. (Taiwan) | 384,628 | |||
| 2,565 | Burckhardt Compression Holding AG (Switzerland) | 564,051 | |||
| 1,034,886 | Innovalues Ltd. (Singapore) | 386,815 | |||
| 5,355 | Muehlbauer Holding AG & Co. KGaA (Germany) | 179,394 | |||
| 1,514,888 | |||||
| Internet Retail 0.8% | |||||
| 9,100 | B2W Companhia Global do Varejo (Brazil) | 429,902 | |||
| Investment Banking & Brokerage 3.9% | |||||
| 123,005 | ABG Sundal Collier ASA (Norway) | 326,146 | |||
| 31,040 | HQ AB (Sweden) | 852,807 | |||
| 13,946 | KIWOOM Securities Co. Ltd. (Korea) | 1,042,350 | |||
| 2,221,303 | |||||
| Leisure Products 0.6% | |||||
| 19,175 | KABE Husvagnar AB, Class B (Sweden) | 322,939 | |||
| Marine 0.7% | |||||
| 28,605 | Euroseas Ltd. | 415,631 | |||
| Office REIT’s 0.7% | |||||
| 701,235 | Axis Real Estate Investment Trust (Malaysia) | 393,062 | |||
| Oil & Gas Drilling 0.6% | |||||
| 106,150 | Ithaca Energy, Inc.* (Canada) | 366,643 | |||
| Shares | Value | ||||
| Oil & Gas Equipment & Services 6.0% | |||||
| 101,575 | Anhui Tianda Oil Pipe Co. Ltd., Class H (China) | $ | 78,690 | ||
| 144,965 | Bayou Bend Petroleum Ltd.* *** (Canada) | 188,314 | |||
| 14,050 | Bonnett’s Energy Services Trust** (Canada) | 68,761 | |||
| 61,965 | Deep Sea Supply plc* (Norway) | 273,449 | |||
| 210,800 | Ezra Holdings Ltd. (Singapore) | 908,590 | |||
| 41,875 | Pason Systems, Inc. (Canada) | 627,461 | |||
| 38,305 | Petrowest Energy Services Trust** (Canada) | 157,764 | |||
| 70,530 | Seabird Exploration Ltd.* (Norway) | 357,018 | |||
| 40,750 | Sondex plc (United Kingdom) | 385,703 | |||
| 31,450 | Wavefield Inseis ASA* (Norway) | 326,559 | |||
| 3,372,309 | |||||
| Oil & Gas Exploration & Production 1.7% | |||||
| 34,170 | Bow Valley Energy Ltd.* (Canada) | 201,638 | |||
| 16,655 | Highpine Oil & Gas Ltd.* (Canada) | 171,070 | |||
| 44,125 | JKX Oil and Gas plc (United Kingdom) | 315,716 | |||
| 18,060 | ProEx Energy Ltd.* (Canada) | 257,156 | |||
| 945,580 | |||||
| Real Estate Management & Development 5.7% | |||||
| 1,715 | ARDEPRO Co. Ltd. (Japan) | 445,261 | |||
| 45 | Century 21 Real Estate of Japan Ltd. (Japan) | 168,583 | |||
| 78,235 | Even Construtora e Incorporadora S.A.* (Brazil) | 740,904 | |||
| 16,100 | Joint Corp. (Japan) | 430,624 | |||
| 41,360 | LPS Brasil Consultoria de Imoveis S.A.* (Brazil) | 596,343 | |||
| 50,915 | Norwegian Property ASA (Norway) | 613,638 | |||
| 7,800 | Vivacon AG (Germany) | 203,012 | |||
| 3,198,365 | |||||
| Restaurants 0.8% | |||||
| 141,000 | FU JI Food & Catering Services Holdings Ltd. (Hong Kong) | 433,665 | |||
| Semiconductors 1.3% | |||||
| 15,765 | Melexis N.V. (Belgium) | 290,708 | |||
| 28,360 | O2Micro International Ltd. ADR* (Cayman Islands) | 438,729 | |||
| 729,437 | |||||
| Specialized Finance 8.3% | |||||
| 28,095 | Arques Industries AG (Germany) | 1,302,199 | |||
| 46,380 | IMAREX ASA* (Norway) | 1,006,167 | |||
| 88,444 | JSE Ltd. (South Africa) | 1,029,166 | |||
| 105 | Osaka Securities Exchange Co. Ltd. (Japan) | 464,715 | |||
| 32,625 | Oslo Bors Holdings ASA (Norway) | 865,048 | |||
| 4,667,295 | |||||
| Specialty Chemicals 0.9% | |||||
| 55,175 | Allen-Vanguard Corp.* (Canada) | 527,831 | |||
| Specialty Stores 1.1% | |||||
| 32,005 | easyhome Ltd. (Canada) | 620,408 | |||
| Thrifts & Mortgage Finance 1.0% | |||||
| 15,985 | Home Capital Group, Inc. (Canada) | 555,342 | |||
| Trading Companies & Distributors 0.3% | |||||
| 42,555 | Commercial Solutions, Inc.* (Canada) | 143,557 | |||
| Trucking 0.5% | |||||
| 23,860 | TransForce Income Fund** (Canada) | 263,095 | |||
| Total Common Stocks (cost $35,532,762) | 52,558,816 | ||||
45
| WASATCH INTERNATIONAL OPPORTUNITIES FUND (WAIOX) — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| WARRANTS 0.6% | |||||
| Air Freight & Logistics 0.1% | |||||
| 119,242 | Goodpack Ltd. expiring 7/16/09* (Singapore) | $ | 60,631 | ||
| Electronic Equipment Manufacturers 0.0% | |||||
| 309,355 | QRSciences Holdings Ltd. expiring 2/15/08* *** † (Australia) | — | |||
| Gold 0.0% | |||||
| 427,500 | Redcorp Ventures Ltd. expiring 7/10/09* *** † (Canada) | — | |||
| Hotels, Resorts & Cruise Lines 0.5% | |||||
| 124,456 | Club Cruise Entertainment & Travelling Services Europe N.V. expiring 4/25/12* (Norway) | 288,456 | |||
| Total Warrants (cost $280,622) | 349,087 | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 4.4% | |||||
| Repurchase Agreement 4.4% | |||||
| $2,452,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $2,415,000 of United States Treasury Notes 4.875% due 6/30/12; value: $2,505,563; repurchase proceeds: $2,452,776 (cost $2,452,000) | $ | 2,452,000 | ||
| Total Short-Term Investments (cost $2,452,000) | 2,452,000 | ||||
| Total Investments (cost $38,265,384) 98.1% | 55,359,903 | ||||
| Other Assets less Liabilities 1.9% | 1,073,274 | ||||
| NET ASSETS 100.0% | $ | 56,433,177 | |||
*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).
ADR American Depositary Receipts.
See notes to financial statements. | |||||
At September 30, 2007, Wasatch International Opportunities Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 6.1 | ||
Belgium | 0.6 | ||
Brazil | 4.3 | ||
Canada | 13.3 | ||
Cayman Islands | 0.8 | ||
China | 5.7 | ||
Germany | 7.8 | ||
Greece | 1.0 | ||
Guernsey | 1.1 | ||
Hong Kong | 4.7 | ||
Japan | 5.0 | ||
Korea | 4.3 | ||
Malaysia | 0.7 | ||
Mexico | 2.6 | ||
Netherlands | 0.5 | ||
New Zealand | 0.3 | ||
Norway | 12.1 | ||
Singapore | 11.6 | ||
South Africa | 1.9 | ||
Sweden | 7.1 | ||
Switzerland | 1.1 | ||
Taiwan | 1.7 | ||
United Kingdom | 4.9 | ||
United States | 0.8 | ||
TOTAL | 100.0 | % | |
46
| WASATCH MICRO CAP FUND (WMICX) — Schedule of Investments | SEPTEMBER 30, 2007 | |
| Shares | Value | ||||
| COMMON STOCKS 98.4% | |||||
| Aerospace & Defense 0.5% | |||||
| 128,280 | Limco-Piedmont, Inc.* | $ | 1,702,276 | ||
| 404,970 | Luna Innovations, Inc.* | 1,737,321 | |||
| 3,439,597 | |||||
| Air Freight & Logistics 1.7% | |||||
| 2,206,015 | AutoInfo, Inc.* †† | 1,478,030 | |||
| 6,475,605 | Goodpack Ltd. (Singapore) | 9,114,735 | |||
| 10,592,765 | |||||
| Apparel, Accessories & Luxury Goods 1.5% | |||||
| 23,990 | Bijou Brigitte AG (Germany) | 4,466,548 | |||
| 9,443,536 | EganaGoldpfeil Holdings Ltd.*** (Hong Kong) | 802,076 | |||
| 175,035 | Kenneth Cole Productions, Inc., Class A | 3,390,428 | |||
| 136,060 | Swank, Inc.* | 1,020,450 | |||
| 9,679,502 | |||||
| Application Software 3.7% | |||||
| 969,640 | Bri-Chem Corp.* †† (Canada) | 1,181,476 | |||
| 327,525 | Interactive Intelligence, Inc.* | 6,222,975 | |||
| 317,690 | NetScout Systems, Inc.* | 3,462,821 | |||
| 583,601 | Opnet Technologies, Inc.* | 6,769,772 | |||
| 152,892 | Retalix Ltd.* (Israel) | 2,826,973 | |||
| 6,125,991 | Silverlake Axis Ltd. (Singapore) | 2,970,477 | |||
| 23,434,494 | |||||
| Asset Management & Custody Banks 1.5% | |||||
| 149,630 | Addenda Capital, Inc. (Canada) | 3,031,626 | |||
| 481,196 | Treasury Group Ltd. (Australia) | 6,296,315 | |||
| 9,327,941 | |||||
| Auto Parts & Equipment 1.0% | |||||
| 364,410 | Martinrea International, Inc.* (Canada) | 6,275,022 | |||
| Automotive Retail 0.6% | |||||
| 331,715 | America’s Car-Mart, Inc.* | 3,751,697 | |||
| Broadcasting & Cable TV 0.4% | |||||
| 270,681 | Outdoor Channel Holdings, Inc.* | 2,444,249 | |||
| Computer & Electronics Retail 0.4% | |||||
| 261,345 | hhgregg, Inc.* | 2,744,123 | |||
| Computer Storage & Peripherals 1.1% | |||||
| 197,685 | Intevac, Inc.* | 3,004,812 | |||
| 242,587 | Qualstar Corp.* | 929,108 | |||
| 2,259,756 | Unisteel Technology Ltd. (Singapore) | 3,272,031 | |||
| 7,205,951 | |||||
| Construction & Engineering 0.8% | |||||
| 161,168 | Stantec, Inc.* (Canada) | 5,321,767 | |||
| Consumer Finance 2.9% | |||||
| 116,005 | Dollar Financial Corp.* | 3,309,623 | |||
| 211,345 | First Cash Financial Services, Inc.* | 4,949,700 | |||
| 432,040 | United PanAm Financial Corp.* | 3,560,009 | |||
| 196,415 | World Acceptance Corp.* | 6,497,408 | |||
| 18,316,740 | |||||
| Distributors 1.0% | |||||
| 129,885 | Keystone Automotive Industries, Inc.* | 6,203,308 | |||
| Diversified Capital Markets 0.9% | |||||
| 1,240,425 | Acta Holdings ASA (Norway) | 5,588,950 | |||
| Diversified Commercial & Professional Services 0.6% | |||||
| 75,225 | CRA International, Inc.* | 3,625,093 | |||
| Shares | Value | ||||
| Education Services 1.3% | |||||
| 4,143,815 | Oriental Century Ltd.* (Singapore) | $ | 2,679,100 | ||
| 2,222,445 | Raffles Education Corp. Ltd. (Singapore) | 3,427,551 | |||
| 125,591 | Universal Technical Institute, Inc.* | 2,260,638 | |||
| 8,367,289 | |||||
| Electrical Components & Equipment 0.4% | |||||
| 105,715 | Encore Wire Corp. | 2,656,618 | |||
| Electronic Equipment Manufacturers 0.8% | |||||
| 163,230 | DTS, Inc.* | 4,957,295 | |||
| Electronic Manufacturing Services 1.8% | |||||
| 208,635 | Excel Technology, Inc.* | 5,205,443 | |||
| 506,540 | TTM Technologies, Inc.* | 5,860,668 | |||
| 11,066,111 | |||||
| Environmental & Facilities Services 1.1% | |||||
| 324,730 | American Ecology Corp. | 6,881,029 | |||
| Footwear 2.9% | |||||
| 20,902,020 | China Hongxing Sports Ltd. (China) | 15,906,848 | |||
| 3,860,981 | Hongguo International Holdings Ltd. (Singapore) | 2,626,252 | |||
| 18,533,100 | |||||
| General Merchandise Stores 0.4% | |||||
| 283,015 | Tuesday Morning Corp. | 2,544,305 | |||
| Health Care Equipment 8.0% | |||||
| 440,320 | Abaxis, Inc.* | 9,885,184 | |||
| 292,221 | Cardica, Inc.* | 2,802,399 | |||
| 25,654,495 | LMA International N.V.* (Singapore) | 9,848,175 | |||
| 100,465 | Northstar Neuroscience, Inc.* | 1,121,190 | |||
| 128,730 | NuVasive, Inc.* | 4,625,269 | |||
| 118,425 | NxStage Medical, Inc.* | 1,715,978 | |||
| 226,815 | Thoratec Corp.* | 4,692,802 | |||
| 979,852 | VNUS Medical Technologies, Inc.* †† | 15,569,848 | |||
| 50,260,845 | |||||
| Health Care Facilities 2.2% | |||||
| 398,903 | AmSurg Corp.* | 9,202,692 | |||
| 330,157 | U.S. Physical Therapy, Inc.* | 4,886,324 | |||
| 14,089,016 | |||||
| Health Care Services 6.0% | |||||
| 245,110 | CorVel Corp.* | 5,666,943 | |||
| 192,840 | Healthways, Inc.* | 10,407,575 | |||
| 301,485 | LHC Group, Inc.* | 6,472,883 | |||
| 216,815 | Nighthawk Radiology Holdings, Inc.* | 5,314,136 | |||
| 338,275 | Providence Service Corp. (The)* | 9,931,754 | |||
| 37,793,291 | |||||
| Health Care Supplies 0.4% | |||||
| 527,626 | CryoCor, Inc.* | 2,231,858 | |||
| Health Care Technology 1.6% | |||||
| 181,570 | Computer Programs & Systems, Inc. | 4,786,185 | |||
| 787,000 | Ophthalmic Imaging Systems* | 1,180,500 | |||
| 645,425 | Profdoc ASA* (Norway) | 4,009,074 | |||
| 9,975,759 | |||||
| Household Appliances 0.2% | |||||
| 5,290,210 | Aupu Group Holding Co. Ltd. (Hong Kong) | 1,157,334 | |||
| Human Resource & Employment Services 0.3% | |||||
| 88,710 | Resources Connection, Inc. | 2,053,637 | |||
| Industrial Conglomerates 0.5% | |||||
| 87,035 | Raven Industries, Inc. | 3,485,752 | |||
| Industrial Machinery 0.4% | |||||
| 7,108,662 | Innovalues Ltd. (Singapore) | 2,657,041 | |||
47
| WASATCH MICRO CAP FUND (WMICX) — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| Internet Retail 0.6% | |||||
| 418,350 | US Auto Parts Network, Inc.* | $ | 3,643,829 | ||
| Internet Software & Services 1.6% | |||||
| 112,865 | DealerTrack Holdings, Inc.* | 4,726,786 | |||
| 734,340 | Kana Software, Inc.* | 2,298,484 | |||
| 293,155 | Liquidity Services, Inc.* | 3,221,774 | |||
| 10,247,044 | |||||
| Investment Banking & Brokerage 2.4% | |||||
| 1,376,140 | ABG Sundal Collier ASA (Norway) | 3,648,817 | |||
| 49,997 | Diamond Hill Investment Group, Inc.* | 4,087,255 | |||
| 100,765 | KIWOOM Securities Co. Ltd. (Korea) | 7,531,362 | |||
| 15,267,434 | |||||
| IT Consulting & Other Services 2.5% | |||||
| 302,390 | NCI, Inc., Class A* | 5,721,219 | |||
| 1,436,475 | SM&A* †† | 9,796,759 | |||
| 15,517,978 | |||||
| Leisure Products 0.8% | |||||
| 273,870 | Sturm, Ruger & Co., Inc.* | 4,905,012 | |||
| Life Sciences Tools & Services 1.0% | |||||
| 127,397 | Icon plc ADR* (Ireland) | 6,501,069 | |||
| Marine 0.6% | |||||
| 264,035 | Euroseas Ltd. | 3,836,429 | |||
| Marine Ports & Services 0.8% | |||||
| 346,120 | CAI International, Inc.* | 4,880,292 | |||
| Mortgage REIT’s 0.9% | |||||
| 553,380 | NorthStar Realty Finance Corp. | 5,495,063 | |||
| Multi-Sector Holdings 0.5% | |||||
| 194,660 | Resource America, Inc., Class A | 3,073,681 | |||
| Oil & Gas Drilling 0.6% | |||||
| 1,090,430 | Ithaca Energy, Inc.* (Canada) | 3,766,351 | |||
| Oil & Gas Equipment & Services 3.5% | |||||
| 13,117,400 | Advanced Holdings Ltd. (Singapore) | 4,549,592 | |||
| 2,007,345 | Bayou Bend Petroleum Ltd.* *** (Canada) | 2,607,598 | |||
| 94,685 | Gulf Island Fabrication, Inc. | 3,634,957 | |||
| 252,800 | Pason Systems, Inc. (Canada) | 3,787,990 | |||
| 2,680,000 | Swiber Holdings Ltd.* (Singapore) | 6,244,941 | |||
| 99,600 | Wavefield Inseis ASA* (Norway) | 1,034,191 | |||
| 21,859,269 | |||||
| Oil & Gas Exploration & Production 0.3% | |||||
| 177,550 | Toreador Resources Corp.* | 2,100,416 | |||
| Oil & Gas Refining & Marketing 0.3% | |||||
| 41,715 | World Fuel Services Corp. | 1,702,389 | |||
| Publishing 1.6% | |||||
| 164,550 | Courier Corp. | 5,793,806 | |||
| 67,915 | Morningstar, Inc.* | 4,169,981 | |||
| 9,963,787 | |||||
| Real Estate Management & Development 1.7% | |||||
| 679,149 | DTZ Holdings plc (United Kingdom) | 6,556,645 | |||
| 280,560 | LPS Brasil Consultoria de Imoveis S.A.* (Brazil) | 4,045,212 | |||
| 10,601,857 | |||||
| Regional Banks 1.6% | |||||
| 115,800 | Bank of the Ozarks, Inc. | 3,535,374 | |||
| 133,114 | Commonwealth Bankshares, Inc. | 2,760,784 | |||
| 240,743 | Epic Bancorp†† | 3,081,511 | |||
| 283,940 | First Bank of Delaware* | 724,047 | |||
| 10,101,716 | |||||
| Shares | Value | ||||
| Semiconductor Equipment 2.6% | |||||
| 276,960 | ASE Test Ltd.* | $ | 3,979,915 | ||
| 584,675 | inTEST Corp.* †† | 1,865,113 | |||
| 438,900 | Rudolph Technologies, Inc.* | 6,069,987 | |||
| 127,035 | Tessera Technologies, Inc.* | 4,763,813 | |||
| 16,678,828 | |||||
| Semiconductors 13.5% | |||||
| 58,331 | Melexis N.V. (Belgium) | 1,075,630 | |||
| 857,105 | Micrel, Inc. | 9,256,734 | |||
| 206,675 | MIPS Technologies, Inc.* | 1,632,733 | |||
| 1,514,175 | O2Micro International Ltd. ADR* (Cayman Islands) | 23,424,287 | |||
| 372,935 | Okmetic Oyj* (Finland) | 1,824,283 | |||
| 824,871 | Pericom Semiconductor Corp.* | 9,667,488 | |||
| 751,505 | PLX Technology, Inc.* | 8,116,254 | |||
| 392,272 | Power Integrations, Inc.* | 11,654,401 | |||
| 455,235 | PSi Technologies Holdings, Inc. ADR* | 673,748 | |||
| 63,940 | Silicon Laboratories, Inc.* | 2,670,134 | |||
| 293,120 | SiRF Technology Holdings, Inc.* | 6,258,112 | |||
| 170,060 | Supertex, Inc.* | 6,781,993 | |||
| 223,558 | Techwell, Inc.* | 2,374,186 | |||
| 85,409,983 | |||||
| Specialized Finance 1.8% | |||||
| 207,435 | Arques Industries AG (Germany) | 9,614,580 | |||
| 154,000 | Goldwater Bank, N.A.* *** † | 1,540,000 | |||
| 11,154,580 | |||||
| Specialty Stores 3.8% | |||||
| 544,370 | Big 5 Sporting Goods Corp. | 10,179,719 | |||
| 119,098 | easyhome Ltd. (Canada) | 2,308,672 | |||
| 113,275 | Guitar Center, Inc.* | 6,717,207 | |||
| 198,417 | Hibbett Sports, Inc.* | 4,920,742 | |||
| 24,126,340 | |||||
| Steel 0.8% | |||||
| 238,510 | Claymont Steel Holdings, Inc.* | 4,829,828 | |||
| Systems Software 0.2% | |||||
| 171,363 | Sourcefire, Inc.* | 1,555,976 | |||
| Technology Distributors 1.0% | |||||
| 696,149 | Nu Horizons Electronics Corp.* | 6,564,685 | |||
| Thrifts & Mortgage Finance 1.9% | |||||
| 152,525 | Encore Bancshares, Inc.* | 3,207,601 | |||
| 123,300 | Home Capital Group, Inc. (Canada) | 4,283,621 | |||
| 212,800 | United Western Bancorp, Inc. | 4,498,592 | |||
| 11,989,814 | |||||
| Trading Companies & Distributors 2.6% | |||||
| 585,045 | Beacon Roofing Supply, Inc.* | 5,979,160 | |||
| 617,550 | Commercial Solutions, Inc.* (Canada) | 2,083,271 | |||
| 345,205 | Rush Enterprises, Inc., Class B* | 8,236,591 | |||
| 16,299,022 | |||||
| Trucking 2.0% | |||||
| 135,870 | Knight Transportation, Inc. | 2,338,323 | |||
| 274,500 | Universal Truckload Services, Inc.* | 6,028,020 | |||
| 249,025 | Vitran Corp., Inc.* (Canada) | 4,123,854 | |||
| 12,490,197 | |||||
| Total Common Stocks (cost $492,426,183) | 621,224,348 | ||||
48
| SEPTEMBER 30, 2007 | ||
| Shares | Value | |||||
| PREFERRED STOCKS 0.1% | ||||||
| Pharmaceuticals 0.1% | ||||||
| 1,886,792 | Point Biomedical Corp., Series F Pfd.* *** † | $ | 427,674 | |||
| 312,222 | Point Biomedical Corp., Series G Pfd.* *** † | 70,770 | ||||
| 498,444 | ||||||
| Total Preferred Stocks (cost $1,165,477) | 498,444 | |||||
| WARRANTS 0.1% | ||||||
| Air Freight & Logistics 0.1% | ||||||
| 888,830 | Goodpack Ltd. expiring 7/16/09* (Singapore) | 451,942 | ||||
| Health Care Distributors 0.0% | ||||||
| 25,946 | Familymeds Group, Inc. expiring 12/01/09* *** † | — | ||||
| Health Care Equipment 0.0% | ||||||
| 121,124 | Cardica, Inc. expiring 6/7/12* *** † | 433,417 | ||||
| Health Care Supplies 0.0% | ||||||
| 106,208 | CryoCor, Inc. expiring 4/24/12* *** † | — | ||||
| Pharmaceuticals 0.0% | ||||||
| 566,037 | Point Biomedical Corp. Series F expiring 2/16/12* *** † | — | ||||
| 437,111 | Point Biomedical Corp. Series G expiring 5/11/14* *** † | 94,708 | ||||
| 94,708 | ||||||
| Total Warrants (cost $26,814) | 980,067 | |||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 1.9% | ||||||
| Repurchase Agreement 1.9% | ||||||
| $12,093,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $11,890,000 of United States Treasury Notes 4.875% due 6/30/12; value: $12,335,875; repurchase proceeds: $12,096,829 (cost $12,093,000) | $ | 12,093,000 | |||
| Total Short-Term Investments (cost $12,093,000) | 12,093,000 | |||||
| Total Investments (cost $505,711,474) 100.5% | 634,795,859 | |||||
| Liabilities less Other Assets (0.5)% | (3,378,631 | ) | ||||
| NET ASSETS 100.0% | $ | 631,417,228 | ||||
*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, 2007, Wasatch Micro Cap Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 1.0 | ||
Belgium | 0.2 | ||
Brazil | 0.6 | ||
Canada | 6.2 | ||
Cayman Islands | 3.8 | ||
China | 2.6 | ||
Finland | 0.3 | ||
Germany | 2.3 | ||
Hong Kong | 0.3 | ||
Ireland | 1.0 | ||
Israel | 0.4 | ||
Korea | 1.2 | ||
Norway | 2.3 | ||
Singapore | 7.7 | ||
United Kingdom | 1.1 | ||
United States | 69.0 | ||
TOTAL | 100.0 | % | |
49
| WASATCH MICRO CAP VALUE FUND (WAMVX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 98.4% | |||||
| Advertising 0.5% | |||||
| 52,660 | MDC Partners, Inc., Class A* (Canada) | $ | 571,888 | ||
| Aerospace & Defense 2.6% | |||||
| 35,000 | AAR Corp.* | 1,061,900 | |||
| 25,350 | Ceramic Protection Corp.* (Canada) | 159,546 | |||
| 27,290 | Limco-Piedmont, Inc.* | 362,138 | |||
| 205,945 | Luna Innovations, Inc.* | 883,504 | |||
| 268,430 | Magellan Aerospace Corp.* (Canada) | 646,038 | |||
| 3,113,126 | |||||
| Air Freight & Logistics 0.4% | |||||
| 800,000 | AutoInfo, Inc.* | 536,000 | |||
| Alternative Carriers 0.9% | |||||
| 50,000 | Global Village Telecom Holding S.A.* (Brazil) | 1,064,992 | |||
| Apparel Retail 0.4% | |||||
| 86,650 | New York & Company, Inc.* | 528,565 | |||
| Apparel, Accessories & Luxury Goods 0.8% | |||||
| 2,100,000 | EganaGoldpfeil Holdings Ltd.*** (Hong Kong) | 178,361 | |||
| 2,486,467 | Moiselle Int’l. Holdings Ltd. (Hong Kong) | 815,943 | |||
| 994,304 | |||||
| Application Software 6.2% | |||||
| 164,705 | Bri-Chem Corp.* (Canada) | 200,688 | |||
| 123,085 | Catapult Communications Corp.* | 940,369 | |||
| 2,146,615 | Guestlogix, Inc.* (Canada) | 1,707,694 | |||
| 102,460 | Interactive Intelligence, Inc.* | 1,946,740 | |||
| 163,370 | Opnet Technologies, Inc.* | 1,895,092 | |||
| 113,705 | Veraz Networks, Inc.* | 798,209 | |||
| 7,488,792 | |||||
| Asset Management & Custody Banks 2.2% | |||||
| 28,000 | Addenda Capital, Inc. (Canada) | 567,303 | |||
| 67,270 | GSC Investment Corp. | 801,186 | |||
| 94,802 | Treasury Group Ltd. (Australia) | 1,240,457 | |||
| 2,608,946 | |||||
| Auto Parts & Equipment 1.9% | |||||
| 129,100 | Martinrea International, Inc.* (Canada) | 2,223,060 | |||
| Automotive Retail 0.4% | |||||
| 47,610 | America’s Car-Mart, Inc.* | 538,469 | |||
| Biotechnology 0.6% | |||||
| 40,000 | Cytori Therapeutics, Inc.* | 240,000 | |||
| 41,455 | NeurogesX, Inc.* | 363,975 | |||
| 10,000 | Targacept, Inc.* | 89,300 | |||
| 693,275 | |||||
| Building Products 1.3% | |||||
| 15,105 | Ameron International Corp. | 1,597,656 | |||
| Communications Equipment 1.7% | |||||
| 550,000 | Airspan Networks, Inc.* | 1,375,000 | |||
| 391,140 | AltiGen Communications, Inc.* | 614,090 | |||
| 1,989,090 | |||||
| Computer & Electronics Retail 0.3% | |||||
| 30,010 | hhgregg, Inc.* | 315,105 | |||
| Computer Storage & Peripherals 0.8% | |||||
| 162,755 | Presstek, Inc.* | 1,020,474 | |||
Construction & Farm Machinery & Heavy Trucks 0.7% | |||||
| 1,839,600 | China Farm Equipment Ltd. (Singapore) | 780,515 | |||
| Shares | Value | ||||
| Consumer Finance 2.1% | |||||
| 46,335 | Dollar Financial Corp.* | $ | 1,321,938 | ||
| 49,605 | First Cash Financial Services, Inc.* | 1,161,749 | |||
| 2,483,687 | |||||
| Data Processing & Outsourced Services 0.8% | |||||
| 32,033 | Euronet Worldwide, Inc.* | 953,622 | |||
| Distributors 0.6% | |||||
| 15,000 | Keystone Automotive Industries, Inc.* | 716,400 | |||
| Diversified Banks 0.4% | |||||
| 55,556 | Idaho Trust Bancorp* *** † | 500,004 | |||
| Diversified Capital Markets 0.3% | |||||
| 91,000 | Acta Holdings ASA (Norway) | 410,016 | |||
Diversified Commercial & Professional Services 0.5% | |||||
| 30,000 | Healthcare Services Group | 608,100 | |||
| Diversified REIT’s 0.7% | |||||
| 575,910 | Babcock & Brown Japan Property Trust** (Australia) | 876,176 | |||
| Education Services 0.8% | |||||
| 50,110 | Corinthian Colleges, Inc.* | 797,250 | |||
| 9,925 | Universal Technical Institute, Inc.* | 178,650 | |||
| 975,900 | |||||
| Electrical Components & Equipment 0.5% | |||||
| 40,190 | Tat Technologies Ltd.* (Israel) | 548,594 | |||
| Electronic Equipment Manufacturers 0.4% | |||||
| 1,489,600 | QRSciences Holdings Ltd.* (Australia) | 475,713 | |||
| Electronic Manufacturing Services 0.3% | |||||
| 506,650 | Virtek Vision International, Inc.* (Canada) | 316,321 | |||
| Environmental & Facilities Services 1.1% | |||||
| 61,885 | American Ecology Corp. | 1,311,343 | |||
| Food Distributors 0.8% | |||||
| 160,785 | G. Willi-Food International Ltd.* (Israel) | 956,671 | |||
| Footwear 2.1% | |||||
| 3,274,000 | China Hongxing Sports Ltd. (China) | 2,491,578 | |||
| General Merchandise Stores 0.4% | |||||
| 60,000 | Tuesday Morning Corp. | 539,400 | |||
| Gold 0.6% | |||||
| 2,490,995 | Redcorp Ventures Ltd.* (Canada) | 727,444 | |||
| Health Care Equipment 8.1% | |||||
| 103,020 | AtriCure, Inc.* | 1,096,133 | |||
| 43,103 | Cardica, Inc.* | 413,358 | |||
| 98,300 | Electro-Optical Sciences, Inc.* | 540,650 | |||
| 147,364 | Encision, Inc.* | 412,619 | |||
| 1,149,000 | LMA International N.V.* (Singapore) | 441,075 | |||
| 140,570 | MTS Medication Technologies, Inc.* | 1,707,926 | |||
| 44,080 | NuVasive, Inc.* | 1,583,794 | |||
| 35,594 | SenoRx, Inc.* | 303,617 | |||
| 206,305 | VNUS Medical Technologies, Inc.* | 3,278,186 | |||
| 9,777,358 | |||||
| Health Care Facilities 1.3% | |||||
| 75,000 | Capital Senior Living Corp.* | 631,500 | |||
| 66,740 | Five Star Quality Care, Inc.* | 548,603 | |||
| 239,723 | HearUSA, Inc.* | 383,557 | |||
| 1,563,660 | |||||
50
| SEPTEMBER 30, 2007 | ||
| Shares | Value | ||||
| Health Care Services 3.6% | |||||
| 38,000 | Birner Dental Management Services, Inc. | $ | 722,380 | ||
| 35,115 | CorVel Corp.* | 811,859 | |||
| 59,484 | LHC Group, Inc.* | 1,277,122 | |||
| 28,040 | Nighthawk Radiology Holdings, Inc.* | 687,260 | |||
| 30,000 | Providence Service Corp. (The)* | 880,800 | |||
| 4,379,421 | |||||
| Health Care Supplies 1.4% | |||||
| 34,242 | Abcam plc (United Kingdom) | 215,253 | |||
| 293,516 | CryoCor, Inc.* | 1,241,572 | |||
| 138,215 | Retractable Technologies, Inc.* | 262,609 | |||
| 1,719,434 | |||||
| Health Care Technology 0.9% | |||||
| 34,000 | Computer Programs & Systems, Inc. | 896,240 | |||
| 113,300 | Ophthalmic Imaging Systems* | 169,950 | |||
| 1,066,190 | |||||
| Homefurnishing Retail 0.5% | |||||
| 182,370 | Fantastic Holdings Ltd. (Australia) | 647,121 | |||
| Hotels, Resorts & Cruise Lines 0.8% | |||||
| 116,000 | Club Cruise Entertainment & Travelling Services Europe N.V.* (Norway) | 1,021,657 | |||
| Industrial Machinery 2.0% | |||||
| 2,000,000 | Innovalues Ltd. (Singapore) | 747,550 | |||
| 27,160 | Kadant, Inc.* | 760,480 | |||
| 13,075 | Paul Mueller Co. | 896,945 | |||
| 2,404,975 | |||||
| Internet Retail 0.7% | |||||
| 91,180 | US Auto Parts Network, Inc.* | 794,178 | |||
| Internet Software & Services 4.2% | |||||
| 40,785 | CyberSource Corp.* | 476,777 | |||
| 96,691 | Jacada Ltd.* | 406,102 | |||
| 363,795 | Kana Software, Inc.* | 1,138,678 | |||
| 399,601 | Optio Software, Inc.* | 595,405 | |||
| 122,210 | RealNetworks, Inc.* | 828,584 | |||
| 144,935 | Saba Software, Inc.* | 707,283 | |||
| 51,015 | TechTarget* | 862,154 | |||
| 5,014,983 | |||||
| Investment Banking & Brokerage 4.4% | |||||
| 598,270 | ABG Sundal Collier ASA (Norway) | 1,586,305 | |||
| 36,375 | FCStone Group, Inc.* | 1,173,821 | |||
| 20,311 | KIWOOM Securities Co. Ltd. (Korea) | 1,518,082 | |||
| 67,515 | Thomas Weisel Partners Group, Inc.* | 979,643 | |||
| 5,257,851 | |||||
| IT Consulting & Other Services 3.8% | |||||
| 67,630 | NCI, Inc., Class A* | 1,279,560 | |||
| 989,312 | PFSweb, Inc.* | 1,305,892 | |||
| 94,000 | Tier Technologies, Inc., Class B* | 958,800 | |||
| 96,010 | WPCS International, Inc.* | 993,703 | |||
| 4,537,955 | |||||
| Managed Health Care 0.6% | |||||
| 187,200 | United American Healthcare Corp.* | 731,952 | |||
| Marine 1.0% | |||||
| 81,830 | Euroseas Ltd. | 1,188,990 | |||
| Mortgage REIT’s 0.9% | |||||
| 105,225 | NorthStar Realty Finance Corp. | 1,044,884 | |||
| Multi-Sector Holdings 0.8% | |||||
| 61,835 | Resource America, Inc., Class A | 976,375 | |||
| Oil & Gas Drilling 0.5% | |||||
| 172,285 | Ithaca Energy, Inc.* (Canada) | 595,073 | |||
| Shares | Value | ||||
| Oil & Gas Equipment & Services 0.4% | |||||
| 347,690 | Bayou Bend Petroleum Ltd.* *** (Canada) | $ | 451,659 | ||
| Oil & Gas Exploration & Production 0.9% | |||||
| 138,195 | BPZ Energy, Inc.* | 1,077,921 | |||
| Personal Products 0.8% | |||||
| 1,100,000 | Beauty China Holdings Ltd. (Singapore) | 911,203 | |||
| Publishing 1.2% | |||||
| 25,610 | Courier Corp. | 901,728 | |||
| 24,520 | Dolan Media Co.* | 595,836 | |||
| 1,497,564 | |||||
| Real Estate Management & Development 1.1% | |||||
| 87,700 | LPS Brasil Consultoria de Imoveis S.A.* (Brazil) | 1,264,489 | |||
| Regional Banks 3.2% | |||||
| 164,622 | City Union Bank Ltd. (India) | 908,886 | |||
| 49,500 | Commonwealth Bankshares, Inc. | 1,026,630 | |||
| 218,162 | First Bank of Delaware* | 556,313 | |||
| 38,773 | Mercantile Bank Corp. | 832,069 | |||
| 30,090 | Security Business Bank of San Diego* | 496,485 | |||
| 3,820,383 | |||||
| Restaurants 1.0% | |||||
| 726,000 | Ajisen China Holdings Ltd.* (Hong Kong) | 810,014 | |||
| 60,000 | Jamba, Inc.* | 421,800 | |||
| 1,231,814 | |||||
| Semiconductor Equipment 4.4% | |||||
| 58,770 | Cascade Microtech, Inc.* | 582,998 | |||
| 128,200 | inTEST Corp.* | 408,958 | |||
| 551,564 | LogicVision, Inc.* | 463,314 | |||
| 135,675 | Nanometrics, Inc.* | 1,217,005 | |||
| 92,900 | PDF Solutions, Inc.* | 917,852 | |||
| 118,525 | Rudolph Technologies, Inc.* | 1,639,201 | |||
| 5,229,328 | |||||
| Semiconductors 4.2% | |||||
| 125,465 | O2Micro International Ltd. ADR* (Cayman Islands) | 1,940,944 | |||
| 122,890 | PLX Technology, Inc.* | 1,327,212 | |||
| 81,600 | SiRF Technology Holdings, Inc.* | 1,742,160 | |||
| 5,010,316 | |||||
| Specialized Finance 3.0% | |||||
| 54,085 | Arques Industries AG (Germany) | 2,506,831 | |||
| 41,900 | Goldwater Bank, N.A.* *** † | 419,000 | |||
| 113,000 | MicroFinancial, Inc. | 672,350 | |||
| 3,598,181 | |||||
| Specialty Chemicals 0.6% | |||||
| 70,600 | Allen-Vanguard Corp.* (Canada) | 675,394 | |||
| Specialty Stores 1.0% | |||||
| 60,770 | easyhome Ltd. (Canada) | 1,178,010 | |||
| Steel 2.4% | |||||
| 49,335 | Claymont Steel Holdings, Inc.* | 999,034 | |||
| 250,000 | Globe Specialty Metals, Inc.* (United Kingdom) | 1,937,500 | |||
| 2,936,534 | |||||
| Technology Distributors 0.7% | |||||
| 94,000 | Nu Horizons Electronics Corp.* | 886,420 | |||
51
| WASATCH MICRO CAP VALUE FUND (WAMVX) — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| Thrifts & Mortgage Finance 1.7% | |||||
| 24,278 | Encore Bancshares, Inc.* | $ | 510,566 | ||
| 15,000 | Home Capital Group, Inc. (Canada) | 521,122 | |||
| 45,000 | United Western Bancorp, Inc. | 951,300 | |||
| 1,982,988 | |||||
| Trading Companies & Distributors 1.7% | |||||
| 90,000 | Beacon Roofing Supply, Inc.* | 919,800 | |||
| 138,500 | Commercial Solutions, Inc.* (Canada) | 467,222 | |||
| 25,000 | Rush Enterprises, Inc., Class A* | 633,750 | |||
| 2,020,772 | |||||
| Trucking 0.5% | |||||
| 38,000 | Vitran Corp., Inc.* (Canada) | 629,280 | |||
| Total Common Stocks (cost $100,375,335) | 118,079,539 | ||||
| PREFERRED STOCKS 0.1% | |||||
| Pharmaceuticals 0.1% | |||||
| 377,358 | Point Biomedical Corp., Series F Pfd.* *** † | 85,535 | |||
| 62,444 | Point Biomedical Corp., Series G Pfd.* *** † | 14,154 | |||
| 99,689 | |||||
| Total Preferred Stocks (cost $233,095) | 99,689 | ||||
| WARRANTS 0.4% | |||||
| Electronic Equipment Manufacturers 0.0% | |||||
| 744,800 | QRSciences Holdings Ltd. expiring 2/15/08* *** † (Australia) | — | |||
| Gold 0.0% | |||||
| 855,000 | Redcorp Ventures Ltd. expiring 7/10/09* *** † (Canada) | — | |||
| Health Care Distributors 0.0% | |||||
| 6,486 | Familymeds Group, Inc. expiring 12/1/09* *** † | — | |||
| Health Care Equipment 0.2% | |||||
| 58,140 | Cardica, Inc. expiring 6/7/12* *** † | 208,042 | |||
| 5,295 | Electro-Optical Sciences, Inc. expiring 10/31/11* *** † | — | |||
| 208,042 | |||||
| Health Care Supplies 0.0% | |||||
| 26,551 | CryoCor, Inc. expiring 4/24/12* *** † | — | |||
| Hotels, Resorts & Cruise Lines 0.2% | |||||
| 92,748 | Club Cruise Entertainment & Travelling Services Europe N.V. expiring 4/25/12* (Norway) | 214,965 | |||
| Pharmaceuticals 0.0% | |||||
| 7,164 | Acusphere, Inc. expiring 8/2/08* *** † | — | |||
| 1,436 | Acusphere, Inc. expiring 10/20/08* *** † | — | |||
| 113,207 | Point Biomedical Corp. Series F expiring 2/16/12* *** † | — | |||
| 87,422 | Point Biomedical Corp. Series G expiring 5/11/14* *** † | 18,942 | |||
| 18,942 | |||||
| Precious Metals & Minerals 0.0% | |||||
| 603,880 | Farallon Resources Ltd. expiring 12/21/08* *** † (Canada) | — | |||
| Total Warrants (cost $220,288) | 441,949 | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 0.8% | |||||
| Repurchase Agreement 0.8% | |||||
| $1,018,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $1,005,000 of United States Treasury Notes 4.875% due 6/30/12; value: $1,042,688; repurchase proceeds: $1,018,322 (cost $1,018,000)††† | $ | 1,018,000 | ||
| Total Short-Term Investments (cost $1,018,000) | 1,018,000 | ||||
| Total Investments (cost $101,846,718) 99.7% | 119,639,177 | ||||
| Other Assets less Liabilities 0.3% | 400,252 | ||||
| NET ASSETS 100.0% | $ | 120,039,429 | |||
| Number of Contracts | Value | ||||
| CALL OPTIONS WRITTEN | |||||
| 594 | LHC Group, Inc. expiring 10/20/07 exercise price $20 | $ | 98,010 | ||
| Total Call Options Written (premium $91,902) | $ | 98,010 | |||
*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).
†††All or a portion of this security has been designated as collateral for written options.
ADR American Depositary Receipts.
See notes to financial statements. | |||||
At September 30, 2007, Wasatch Micro Cap Value Fund’s investments, excluding short-term investments and written options, were in the following countries:
| Country | % | ||
Australia | 2.8 | ||
Brazil | 2.0 | ||
Canada | 9.8 | ||
Cayman Islands | 1.6 | ||
China | 2.1 | ||
Germany | 2.1 | ||
Hong Kong | 1.5 | ||
India | 0.8 | ||
Israel | 1.3 | ||
Korea | 1.3 | ||
Norway | 2.7 | ||
Singapore | 2.4 | ||
United Kingdom | 1.8 | ||
United States | 67.8 | ||
TOTAL | 100.0 | % | |
52
| WASATCH SMALL CAP GROWTH FUND (WAAEX) — Schedule of Investments | SEPTEMBER 30, 2007 | |
| Shares | Value | ||||
| COMMON STOCKS 98.6% | |||||
| Airlines 0.8% | |||||
| 481,435 | WestJet Airlines Ltd.* *** (Canada) | $ | 8,353,180 | ||
Apparel, Accessories & Luxury Goods 0.3% | |||||
| 20,365 | Bijou Brigitte AG (Germany) | 3,791,632 | |||
| Apparel Retail 0.2% | |||||
| 212,223 | Monsoon plc* (United Kingdom) | 1,800,467 | |||
| Application Software 2.9% | |||||
| 351,730 | FactSet Research Systems, Inc. | 24,111,091 | |||
| 380,810 | Retalix Ltd.* (Israel) | 7,041,177 | |||
| 31,152,268 | |||||
Asset Management & Custody Banks 0.5% | |||||
| 175,289 | Addenda Capital, Inc. (Canada) | 3,551,497 | |||
| 49,523 | AWD Holding AG (Germany) | 1,654,795 | |||
| 5,206,292 | |||||
| Automotive Retail 5.0% | |||||
| 1,612,347 | O’Reilly Automotive, Inc.* | 53,868,513 | |||
| Biotechnology 1.3% | |||||
| 177,340 | LifeCell Corp.* | 6,662,664 | |||
| 95,283 | Myriad Genetics, Inc.* | 4,969,008 | |||
| 151,615 | Orexigen Therapeutics, Inc.* | 2,002,834 | |||
| 13,634,506 | |||||
| Broadcasting & Cable TV 0.2% | |||||
| 251,246 | Outdoor Channel Holdings, Inc.* | 2,268,751 | |||
| Communications Equipment 1.1% | |||||
| 294,255 | F5 Networks, Inc.* | 10,943,343 | |||
| 42,525 | Starent Networks Corp.* | 897,703 | |||
| 11,841,046 | |||||
| Computer & Electronics Retail 0.6% | |||||
| 609,505 | hhgregg, Inc.* | 6,399,803 | |||
| Computer Storage & Peripherals 0.7% | |||||
| 55,415 | Data Domain, Inc.* | 1,715,094 | |||
| 774,610 | Isilon Systems, Inc.* | 5,964,497 | |||
| 7,679,591 | |||||
| Construction & Engineering 2.3% | |||||
| 6,373,790 | Midas Holdings Ltd. (Singapore) | 7,426,108 | |||
| 407,854 | Stantec, Inc.* (Canada) | 13,467,339 | |||
| 66,095 | URS Corp.* | 3,731,063 | |||
| 24,624,510 | |||||
Construction & Farm Machinery & Heavy Trucks 0.8% | |||||
| 124,210 | Bucyrus International, Inc., Class A | 9,058,635 | |||
| Distributors 1.1% | |||||
| 327,735 | LKQ Corp.* | 11,408,455 | |||
| Diversified Banks 4.7% | |||||
| 573,056 | Bank of N.T. Butterfield & Son Ltd. (Bermuda) | 11,461,120 | |||
| 360,665 | HDFC Bank Ltd. ADR (India) | 38,638,042 | |||
| 50,099,162 | |||||
Diversified Commercial & Professional Services 3.9% | |||||
| 194,849 | Advisory Board Co. (The)* | 11,392,821 | |||
| 461,296 | Copart, Inc.* | 15,863,970 | |||
| 307,853 | CRA International, Inc.* ††† | 14,835,436 | |||
| 42,092,227 | |||||
| Shares | Value | ||||
| Education Services 3.2% | |||||
| 49,750 | Capella Education Co.* | $ | 2,781,523 | ||
| 158,945 | Strayer Education, Inc. | 26,802,895 | |||
| 273,208 | Universal Technical Institute, Inc.* | 4,917,744 | |||
| 34,502,162 | |||||
| Health Care Distributors 0.1% | |||||
| 41,795 | MWI Veterinary Supply, Inc.* | 1,577,761 | |||
| Health Care Equipment 3.8% | |||||
| 699,947 | Abaxis, Inc.* ††† | 15,713,810 | |||
| 72,865 | ArthroCare Corp.* | 4,072,425 | |||
| 332,588 | Dexcom, Inc.* | 3,322,554 | |||
| 757,396 | NxStage Medical, Inc.* | 10,974,668 | |||
| 152,437 | ResMed, Inc.* | 6,534,974 | |||
| 40,618,431 | |||||
| Health Care Facilities 1.2% | |||||
| 552,354 | AmSurg Corp.* ††† | 12,742,807 | |||
| Health Care Services 7.2% | |||||
| 232,856 | Bio-Reference Laboratories, Inc.* | 7,861,219 | |||
| 708,719 | Healthways, Inc.* | 38,249,564 | |||
| 505,530 | Nighthawk Radiology Holdings, Inc.* | 12,390,540 | |||
| 289,700 | Pediatrix Medical Group, Inc.* | 18,952,174 | |||
| 77,453,497 | |||||
| Health Care Technology 0.3% | |||||
| 148,450 | Vital Images, Inc.* | 2,897,744 | |||
Human Resource & Employment Services 2.7% | |||||
| 1,273,955 | Resources Connection, Inc. | 29,492,058 | |||
| Insurance Brokers 1.0% | |||||
| 392,266 | eHealth, Inc.* | 10,865,768 | |||
Integrated Telecommunication Services 1.1% | |||||
| 332,140 | NeuStar, Inc., Class A* | 11,389,081 | |||
| Internet Retail 1.7% | |||||
| 91,220 | B2W Companhia Global do Varejo (Brazil) | 4,309,410 | |||
| 71,545 | Blue Nile, Inc.* | 6,733,816 | |||
| 136,420 | Shutterfly, Inc.* | 4,353,162 | |||
| 312,185 | US Auto Parts Network, Inc.* | 2,719,131 | |||
| 18,115,519 | |||||
| Internet Software & Services 4.1% | |||||
| 1,015,746 | CyberSource Corp.* | 11,874,071 | |||
| 177,988 | DealerTrack Holdings, Inc.* | 7,454,137 | |||
| 542,890 | Liquidity Services, Inc.* | 5,966,361 | |||
| 589,385 | LoopNet, Inc.* | 12,105,968 | |||
| 179,685 | VistaPrint Ltd.* (Bermuda) | 6,714,829 | |||
| 44,115,366 | |||||
| Investment Banking & Brokerage 3.3% | |||||
| 141,552 | FCStone Group, Inc.* | 4,567,899 | |||
| 186,845 | GFI Group, Inc.* | 16,091,092 | |||
| 121,951 | KIWOOM Securities Co. Ltd. (Korea) | 9,114,843 | |||
| 434,677 | Thomas Weisel Partners Group, Inc.* | 6,307,163 | |||
| 36,080,997 | |||||
| IT Consulting & Other Services 0.3% | |||||
| 8,524 | EnerNOC, Inc.* | 325,446 | |||
| 111,580 | SRA International, Inc., Class A* | 3,133,167 | |||
| 3,458,613 | |||||
| Leisure Facilities 2.2% | |||||
| 386,310 | Life Time Fitness, Inc.* | 23,696,255 | |||
| Leisure Products 0.5% | |||||
| 206,172 | Pool Corp. | 5,150,177 | |||
53
| WASATCH SMALL CAP GROWTH FUND (WAAEX) — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| Life Sciences Tools & Services 7.3% | |||||
| 134,710 | Helicos BioSciences Corp.* | $ | 1,177,366 | ||
| 446,513 | Icon plc ADR* (Ireland) | 22,785,558 | |||
| 973,415 | QIAGEN N.V.* (Netherlands) | 18,893,985 | |||
| 561,350 | Techne Corp.* | 35,409,958 | |||
| 78,266,867 | |||||
| Managed Health Care 1.0% | |||||
| 327,200 | AMERIGROUP Corp.* | 11,281,856 | |||
| Marine 0.5% | |||||
| 247,177 | American Commercial Lines, Inc.* | 5,865,510 | |||
| Mortgage REIT’s 0.4% | |||||
| 135,086 | Redwood Trust, Inc. | 4,487,557 | |||
| Office Services & Supplies 0.7% | |||||
| 390,320 | American Reprographics Co.* | 7,306,790 | |||
| Oil & Gas Equipment & Services 2.1% | |||||
| 559,290 | Pason Systems, Inc. (Canada) | 8,380,479 | |||
| 391,910 | TGS-NOPEC Geophysical Co. ASA* (Norway) | 8,029,751 | |||
| 308,480 | Trican Well Service Ltd. (Canada) | 6,290,439 | |||
| 22,700,669 | |||||
| Pharmaceuticals 0.5% | |||||
| 577,015 | Alexza Pharmaceuticals, Inc.* | 4,996,950 | |||
| 20,645 | Dechra Pharmaceuticals plc (United Kingdom) | 147,083 | |||
| 5,144,033 | |||||
| Real Estate Management & Development 0.7% | |||||
| 747,797 | DTZ Holdings plc (United Kingdom) | 7,219,387 | |||
| Regional Banks 3.4% | |||||
| 711,878 | Bank of the Ozarks, Inc. | 21,733,635 | |||
| 73,590 | First Community Bancorp, Inc. | 4,026,109 | |||
| 77,525 | Prosperity Bancshares, Inc. | 2,570,729 | |||
| 494,204 | UCBH Holdings, Inc. | 8,638,686 | |||
| 36,969,159 | |||||
| Restaurants 1.5% | |||||
| 582,762 | Peet’s Coffee & Tea, Inc.* | 16,264,887 | |||
| Semiconductor Equipment 1.1% | |||||
| 315,815 | Tessera Technologies, Inc.* | 11,843,063 | |||
| Semiconductors 9.4% | |||||
| 100,553 | Melexis N.V. (Belgium) | 1,854,208 | |||
| 1,443,050 | Micrel, Inc. | 15,584,940 | |||
| 763,983 | Microtune, Inc.* | 4,599,178 | |||
| 335,445 | NetLogic Microsystems, Inc.* | 12,112,919 | |||
| 1,518,825 | O2Micro International Ltd. ADR* (Cayman Islands) | 23,496,223 | |||
| 515,784 | PLX Technology, Inc.* | 5,570,467 | |||
| 888,409 | Power Integrations, Inc.* | 26,394,631 | |||
| 396,962 | SiRF Technology Holdings, Inc.* | 8,475,139 | |||
| 307,896 | Techwell, Inc.* | 3,269,855 | |||
| 101,357,560 | |||||
| Specialized Finance 0.3% | |||||
| 62,410 | ASX Ltd. (Australia) | 2,975,809 | |||
| Specialty Stores 1.7% | |||||
| 720,336 | Hibbett Sports, Inc.* | 17,864,333 | |||
| Systems Software 0.7% | |||||
| 195,520 | Quality Systems, Inc. | 7,161,898 | |||
| Thrifts & Mortgage Finance 1.5% | |||||
| 471,386 | Home Capital Group, Inc. (Canada) | 16,376,635 | |||
| Shares | Value | ||||
| Trading Companies & Distributors 2.0% | |||||
| 4,446,295 | Emeco Holdings Ltd. (Australia) | $ | 5,660,081 | ||
| 306,805 | MSC Industrial Direct Co., Inc., Class A | 15,521,265 | |||
| 21,181,346 | |||||
| Trucking 4.7% | |||||
| 2,622,089 | Knight Transportation, Inc. | 45,126,152 | |||
| 517,670 | Localiza Rent A Car S.A. (Brazil) | 5,286,963 | |||
| 50,413,115 | |||||
| Total Common Stocks (cost $765,789,275) | 1,060,115,748 | ||||
| PREFERRED STOCKS 1.2% | |||||
| Biotechnology 0.6% | |||||
| 625,000 | Fluidigm Corp., Series E Pfd.* *** † | 2,500,000 | |||
| 677,966 | Nanosys, Inc., Series D Pfd.* *** † | 2,000,000 | |||
| 146,199 | Orexigen Therapeutics, Inc. PIPE, Series C Pfd.* *** † | 1,783,407 | |||
| 6,283,407 | |||||
| Health Care Equipment 0.2% | |||||
| 750,000 | Orqis Medical Corp., Series D Pfd.* *** † | 840,000 | |||
| 1,620,220 | Zonare Medical Systems, Inc., Series E Pfd.* *** † | 1,343,162 | |||
| 2,183,162 | |||||
| Health Care Services 0.1% | |||||
| 516,161 | Bravo Health, Inc., Series G Pfd.* *** † | 571,428 | |||
| 362,782 | TargetRX, Inc., Series D Pfd.* *** † | 504,267 | |||
| 1,075,695 | |||||
| Integrated Telecommunication Services 0.1% | |||||
| 236,372 | Neutral Tandem, Inc., Series C Pfd.* *** † | 1,485,102 | |||
| Internet Software & Services 0.1% | |||||
| 404,517 | Incipient, Inc., Series D Pfd.* *** † | 427,170 | |||
| Pharmaceuticals 0.1% | |||||
| 3,773,584 | Point Biomedical Corp., Series F Pfd.* *** † | 855,347 | |||
| 395,550 | Point Biomedical Corp., Series G Pfd.* *** † | 89,658 | |||
| 945,005 | |||||
| Total Preferred Stocks (cost $15,096,048) | 12,399,541 | ||||
| LIMITED PARTNERSHIP INTEREST 0.3% | |||||
| Other 0.3% | |||||
| Montagu Newhall Global Partners II-B, L.P.* *** † | 2,868,000 | ||||
| Montagu Newhall Global Partners III-B, L.P.* *** † | 403,452 | ||||
| 3,271,452 | |||||
| Total Limited Partnership Interest (cost $3,541,435) | 3,271,452 | ||||
54
| SEPTEMBER 30, 2007 | ||
| Shares | Value | |||||
| WARRANTS 0.0% | ||||||
| Health Care Equipment 0.0% | ||||||
| 243,033 | Zonare Medical Systems, Inc. expiring 6/30/11* *** † | $ | — | |||
| Pharmaceuticals 0.0% | ||||||
| 1,132,075 | Point Biomedical Corp. Series F expiring 2/16/12* *** † | — | ||||
| 553,770 | Point Biomedical Corp. Series G expiring 5/11/14* *** † | 119,984 | ||||
| 119,984 | ||||||
| Total Warrants (cost $0) | 119,984 | |||||
| CONTINGENT STOCK RIGHTS 0.0% | ||||||
| 417,050 | Indevus Pharmaceuticals, Inc.* *** † †† | — | ||||
| — | ||||||
| Total Contingent Stock Rights (cost $406,537) | — | |||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 0.3% | ||||||
| Repurchase Agreement 0.3% | ||||||
| $3,340,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $3,285,000 of United States Treasury Notes 4.875% due 6/30/12; value: $3,408,188; repurchase proceeds: $3,341,058††† (cost $3,340,000) | $ | 3,340,000 | |||
| Total Short-Term Investments (cost $3,340,000) | 3,340,000 | |||||
| Total Investments (cost $788,173,295) 100.4% | 1,079,246,725 | |||||
| Liabilities less Other Assets (0.4)% | (3,813,676 | ) | ||||
| NET ASSETS 100.0% | $ | 1,075,433,049 | ||||
| Shares | Value | ||||
| SECURITIES SOLD SHORT | |||||
| 107,030 | Genomic Health, Inc.* (proceeds $1,750,502) | $ | 2,053,906 | ||
*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).
††On April 18, 2007, Indevus Pharmaceuticals, Inc. (“Indevus”) acquired Valera Pharmaceuticals, Inc. (“Valera”), shares of which the Fund formerly held. Indevus issued stock and contingent stock rights (“CSRs”) to shareholders of Valera as of record date April 17, 2007. The CSRs provide for receipt of Indevus shares contingent upon whether any of three Valera products received approval from the U.S. Food and Drug Administration (“FDA”). The Fund disposed of the initial Indevus shares received. One such product subsequently received FDA approval which resulted in the Fund subsequently receiving and disposing of additional Indevus shares. The two remaining products pending FDA approval underlying the CSRs are as follows:
| |||||
| Product | Remaining Rights | ||||
| Valera VP003 | 208,525 | ||||
| Valera Ureteral Stent | 208,525 | ||||
| 417,050 | |||||
†††All or a portion of this security has been designated as collateral for open short positions and purchase commitments (see Note 10).
| |||||
ADR American Depositary Receipts.
PIPE Private Investment in a Public Equity.
See notes to financial statements.
| |||||
At September 30, 2007, Wasatch Small Cap Growth Fund’s investments, excluding short-term investments and securities sold short, were in the following countries:
| Country | % | ||
Australia | 0.8 | ||
Belgium | 0.2 | ||
Bermuda | 1.7 | ||
Brazil | 0.9 | ||
Canada | 5.3 | ||
Cayman Islands | 2.2 | ||
Germany | 0.5 | ||
India | 3.6 | ||
Ireland | 2.1 | ||
Israel | 0.7 | ||
Korea | 0.9 | ||
Netherlands | 1.8 | ||
Norway | 0.7 | ||
Singapore | 0.7 | ||
United Kingdom | 0.9 | ||
United States | 77.0 | ||
TOTAL | 100.0 | % | |
55
| WASATCH SMALL CAP VALUE FUND (WMCVX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 99.4% | |||||
| Air Freight & Logistics 1.2% | |||||
| 5,769,747 | Goodpack Ltd. (Singapore) | $ | 8,121,205 | ||
| Alternative Carriers 1.2% | |||||
| 360,000 | Global Village Telecom Holding S.A.* (Brazil) | 7,667,941 | |||
| Apparel Retail 0.5% | |||||
| 520,960 | New York & Company, Inc.* | 3,177,856 | |||
| Apparel, Accessories & Luxury Goods 5.3% | |||||
| 37,815 | Bijou Brigitte AG (Germany) | 7,040,539 | |||
| 414,600 | Carter’s, Inc.* | 8,271,270 | |||
| 6,959,145 | EganaGoldpfeil Holdings Ltd.*** (Hong Kong) | 591,067 | |||
| 515,445 | Fossil, Inc.* | 19,257,025 | |||
| 35,159,901 | |||||
| Application Software 0.9% | |||||
| 571,715 | NetScout Systems, Inc.* | 6,231,694 | |||
| Asset Management & Custody Banks 1.8% | |||||
| 313,870 | Apollo Investment Corp. | 6,528,496 | |||
| 357,388 | MCG Capital Corp. | 5,142,813 | |||
| 11,671,309 | |||||
| Auto Parts & Equipment 2.0% | |||||
| 758,515 | Martinrea International, Inc.* (Canada) | 13,061,383 | |||
| Automotive Retail 1.1% | |||||
| 193,878 | America’s Car-Mart, Inc.* | 2,192,760 | |||
| 152,129 | Monro Muffler Brake, Inc. | 5,140,439 | |||
| 7,333,199 | |||||
| Broadcasting & Cable TV 0.3% | |||||
| 242,279 | Outdoor Channel Holdings, Inc.* | 2,187,779 | |||
| Building Products 1.2% | |||||
| 72,975 | Ameron International Corp. | 7,718,566 | |||
| Communications Equipment 1.2% | |||||
| 284,100 | Plantronics, Inc. | 8,111,055 | |||
| Consumer Finance 4.1% | |||||
| 271,070 | AmeriCredit Corp.* | 4,765,411 | |||
| 566,868 | Dollar Financial Corp.* | 16,172,744 | |||
| 770,355 | United PanAm Financial Corp.* | 6,347,725 | |||
| 27,285,880 | |||||
| Diversified Banks 2.6% | |||||
| 523,312 | Axis Bank Ltd. (India) | 10,033,512 | |||
| 370,200 | Bank of N.T. Butterfield & Son Ltd. (Bermuda) | 7,404,000 | |||
| 17,437,512 | |||||
| Diversified Capital Markets 2.1% | |||||
| 723,130 | JMP Group, Inc. | 6,782,959 | |||
| 471,940 | Solar Capital, LLC* ** *** † | 7,079,100 | |||
| 13,862,059 | |||||
| Diversified Commercial & Professional Services 5.1% | |||||
| 203,260 | McGrath RentCorp | 6,756,362 | |||
| 539,334 | Mobile Mini, Inc.* | 13,030,309 | |||
| 600,508 | Schawk, Inc. | 13,553,466 | |||
| 33,340,137 | |||||
| Diversified REITs 0.8% | |||||
| 600,000 | Star Asia Finance Ltd.* ** † (Guernsey) | 5,550,000 | |||
| Shares | Value | ||||
| Electrical Components & Equipment 0.9% | |||||
| 239,170 | Encore Wire Corp. | $ | 6,010,342 | ||
| Electronic Manufacturing Services 2.0% | |||||
| 257,140 | Excel Technology, Inc.* | 6,415,643 | |||
| 599,780 | TTM Technologies, Inc.* | 6,939,455 | |||
| 13,355,098 | |||||
| Gold 0.5% | |||||
| 11,330,000 | Redcorp Ventures Ltd.* (Canada) | 3,308,695 | |||
| Health Care Equipment 1.0% | |||||
| 286,010 | Invacare Corp. | 6,686,914 | |||
| Health Care Facilities 3.5% | |||||
| 715,725 | Capital Senior Living Corp.* | 6,026,404 | |||
| 271,880 | Emeritus Corp.* | 7,367,948 | |||
| 774,725 | Five Star Quality Care, Inc.* | 6,368,240 | |||
| 229,003 | U.S. Physical Therapy, Inc.* | 3,389,244 | |||
| 23,151,836 | |||||
| Health Care Services 2.1% | |||||
| 101,766 | Amedisys, Inc.* | 3,909,850 | |||
| 177,155 | CorVel Corp.* | 4,095,824 | |||
| 281,599 | LHC Group, Inc.* | 6,045,930 | |||
| 14,051,604 | |||||
| Home Furnishings 0.8% | |||||
| 319,935 | Stanley Furniture Co., Inc. | 5,198,944 | |||
| Homefurnishing Retail 1.7% | |||||
| 802,125 | Select Comfort Corp.* | 11,189,644 | |||
| Industrial Machinery 1.4% | |||||
| 242,575 | Graco, Inc. | 9,487,108 | |||
| Internet Retail 1.1% | |||||
| 844,400 | US Auto Parts Network, Inc.* | 7,354,724 | |||
| IT Consulting & Other Services 1.0% | |||||
| 929,177 | SM&A* | 6,336,987 | |||
| Leisure Products 2.4% | |||||
| 346,240 | Pool Corp. | 8,649,075 | |||
| 397,455 | Sturm, Ruger & Co., Inc.* | 7,118,419 | |||
| 15,767,494 | |||||
| Marine Ports & Services 2.4% | |||||
| 432,542 | Aegean Marine Petroleum Network, Inc. | 15,683,973 | |||
| Mortgage REIT’s 7.0% | |||||
| 966,200 | Crystal River Capital, Inc. | 16,241,822 | |||
| 1,460,435 | NorthStar Realty Finance Corp. | 14,502,120 | |||
| 465,375 | Redwood Trust, Inc. | 15,459,758 | |||
| 46,203,700 | |||||
| Oil & Gas Equipment & Services 4.0% | |||||
| 224,635 | Oil States International., Inc.* | 10,849,870 | |||
| 720,305 | TETRA Technologies, Inc.* | 15,227,248 | |||
| 26,077,118 | |||||
| Oil & Gas Exploration & Production 4.4% | |||||
| 874,353 | BPZ Energy, Inc.* | 6,819,953 | |||
| 1,474,740 | Far East Energy Corp.* | 1,563,225 | |||
| 318,440 | Petrohawk Energy Corp.* | 5,228,785 | |||
| 174,065 | Plains Exploration & Production Co.* | 7,697,154 | |||
| 121,690 | Ultra Petroleum Corp.* (Canada) | 7,549,648 | |||
| 28,858,765 | |||||
| Oil & Gas Refining & Marketing 2.3% | |||||
| 378,255 | World Fuel Services Corp.††† | 15,436,587 | |||
56
| SEPTEMBER 30, 2007 | ||
| Shares | Value | ||||
| Publishing 1.7% | |||||
| 321,244 | Courier Corp. | $ | 11,311,001 | ||
| Real Estate Management & Development 1.1% | |||||
| 513,400 | LPS Brasil Consultoria de Imoveis S.A.* (Brazil) | 7,402,381 | |||
| Regional Banks 1.4% | |||||
| 232,840 | Commonwealth Bankshares, Inc. | 4,829,102 | |||
| 206,485 | Mercantile Bank Corp. | 4,431,168 | |||
| 9,260,270 | |||||
| Restaurants 1.2% | |||||
| 299,275 | Landry’s Restaurants, Inc. | 7,918,816 | |||
| Semiconductors 4.3% | |||||
| 739,820 | Micrel, Inc. | 7,990,056 | |||
| 931,085 | Pericom Semiconductor Corp.* | 10,912,316 | |||
| 241,553 | Supertex, Inc.* | 9,633,134 | |||
| 28,535,506 | |||||
| Specialized Finance 1.3% | |||||
| 97,830 | GP Investments Ltd. GDR (Brazil) | 4,313,924 | |||
| 670,108 | MicroFinancial, Inc. | 3,987,142 | |||
| 8,301,066 | |||||
| Specialty Stores 1.9% | |||||
| 668,141 | Big 5 Sporting Goods Corp. | 12,494,237 | |||
| Steel 2.3% | |||||
| 320,475 | Claymont Steel Holdings, Inc.* | 6,489,619 | |||
| 1,110,385 | Globe Specialty Metals, Inc.* (United Kingdom) | 8,605,484 | |||
| 15,095,103 | |||||
| Technology Distributors 1.1% | |||||
| 796,388 | Nu Horizons Electronics Corp.* | 7,509,939 | |||
| Thrifts & Mortgage Finance 2.7% | |||||
| 174,535 | Housing Development Finance Corp. Ltd. (India) | 11,080,273 | |||
| 310,405 | United Western Bancorp, Inc. | 6,561,962 | |||
| 17,642,235 | |||||
| Trading Companies & Distributors 5.7% | |||||
| 1,107,884 | Beacon Roofing Supply, Inc.* | 11,322,574 | |||
| 365,610 | MSC Industrial Direct Co., Inc., Class A††† | 18,496,210 | |||
| 172,958 | Rush Enterprises, Inc., Class A* | 4,384,485 | |||
| 134,980 | Rush Enterprises, Inc., Class B* | 3,220,623 | |||
| 37,423,892 | |||||
| Trucking 4.8% | |||||
| 206,525 | J.B. Hunt Transport Services, Inc. | 5,431,608 | |||
| 366,650 | Knight Transportation, Inc. | 6,310,046 | |||
| 409,860 | Old Dominion Freight Line, Inc.* | 9,824,344 | |||
| 613,525 | Vitran Corp., Inc.* (Canada) | 10,159,974 | |||
| 31,725,972 | |||||
| Total Common Stocks (cost $606,163,428) | 656,697,427 | ||||
| WARRANTS 0.1% | |||||
| Air Freight & Logistics 0.1% | |||||
| 1,147,094 | Goodpack Ltd. expiring 7/16/09* (Singapore) | 583,262 | |||
| Shares | Value | ||||
| Gold 0.0% | |||||
| 5,665,000 | Redcorp Ventures Ltd. expiring 7/10/09* *** † (Canada) | $ | — | ||
| Total Warrants (cost $0) | 583,262 | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 0.4% | |||||
| Repurchase Agreement 0.4% | |||||
| $2,447,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $2,410,000 of United States Treasury Notes 4.875% due 6/30/12; value: $2,500,375; repurchase proceeds: $2,447,775††† (cost $2,447,000) | $ | 2,447,000 | ||
Total Short-Term Investments (cost $2,447,000) | 2,447,000 | ||||
| Total Investments (cost $608,610,428) 99.9% | 659,727,689 | ||||
| Other Assets less Liabilities 0.1% | 909,379 | ||||
| NET ASSETS 100.0% | $ | 660,637,068 | |||
| Shares | Value | ||||
| SECURITIES SOLD SHORT | |||||
| 261,000 | SPDR S&P Homebuilders ETF | $ | 5,590,620 | ||
| Total Securities Sold Short (proceeds $6,535,836) | $ | 5,590,620 | |||
*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).
†††All or a portion of this security has been designated as collateral for open short positions.
See notes to financial statements. | |||||
At September 30, 2007, Wasatch Small Cap Value Fund’s investments, excluding short-term investments and securities sold short, were in the following countries:
| Country | % | ||
Bermuda | 1.1 | ||
Brazil | 3.0 | ||
Canada | 5.3 | ||
Germany | 1.1 | ||
Guernsey | 0.9 | ||
Hong Kong | 0.1 | ||
India | 3.3 | ||
Singapore | 1.3 | ||
United Kingdom | 1.3 | ||
United States | 82.6 | ||
TOTAL | 100.0 | % | |
57
| WASATCH STRATEGIC INCOME FUND (WASIX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 85.2% | |||||
| Asset Management & Custody Banks 6.0% | |||||
| 35,092 | Apollo Investment Corp.††† | $ | 729,914 | ||
| 41,982 | Ares Capital Corp.††† | 683,047 | |||
| 1,412,961 | |||||
| Automotive Retail 1.0% | |||||
| 6,700 | Monro Muffler Brake, Inc. | 226,393 | |||
| Consumer Finance 4.1% | |||||
| 14,484 | Capital One Financial Corp.††† | 962,172 | |||
| Data Processing & Outsourced Services 5.8% | |||||
| 22,940 | Paychex, Inc.††† | 940,540 | |||
| 23,100 | Redecard S.A.* (Brazil) | 431,469 | |||
| 1,372,009 | |||||
| Diversified Banks 3.7% | |||||
| 47,968 | Bank of East Asia Ltd. (Hong Kong) | 270,064 | |||
| 30,603 | Bank of N.T. Butterfield & Son Ltd. (Bermuda) | 612,060 | |||
| 882,124 | |||||
| Diversified Capital Markets 1.2% | |||||
| 19,600 | Solar Capital, LLC* ** *** † | 294,000 | |||
| Diversified Commercial & Professional Services 3.2% | |||||
| 22,728 | McGrath RentCorp | 755,479 | |||
| Diversified REITs 11.0% | |||||
| 60,820 | CapitalSource, Inc. | 1,230,997 | |||
| 31,235 | iStar Financial, Inc. | 1,061,678 | |||
| 34,265 | Star Asia Finance Ltd.*** † (Guernsey) | 316,951 | |||
| 2,609,626 | |||||
| Education Services 0.0% | |||||
| 9,000 | Hartford Education Corp. Ltd. (Singapore) | 1,091 | |||
| Gold 0.1% | |||||
| 95,680 | Redcorp Ventures Ltd.* (Canada) | 27,941 | |||
| Health Care Services 0.5% | |||||
| 6,840 | Birner Dental Management Services, Inc. | 130,028 | |||
| Home Improvement Retail 1.3% | |||||
| 9,200 | Home Depot, Inc. | 298,448 | |||
| Hypermarkets & Super Centers 1.3% | |||||
| 6,830 | Wal-Mart Stores, Inc. | 298,130 | |||
| Industrial Machinery 1.8% | |||||
| 35,500 | Weg S.A. (Brazil) | 431,390 | |||
| Leisure Products 5.8% | |||||
| 54,915 | Pool Corp.††† | 1,371,777 | |||
| Mortgage REIT’s 20.4% | |||||
| 70,055 | Anthracite Capital, Inc. | 637,501 | |||
| 95,070 | Anworth Mortgage Asset Corp. | 512,427 | |||
| 21,855 | Arbor Realty Trust, Inc.††† | 412,841 | |||
| 17,010 | Capital Trust, Inc., Class A | 603,855 | |||
| 389,165 | New York Mortgage Trust, Inc. | 326,899 | |||
| 68,795 | NorthStar Realty Finance Corp.††† | 683,134 | |||
| 49,250 | Redwood Trust, Inc.††† | 1,636,085 | |||
| 4,812,742 | |||||
| Office REIT’s 1.1% | |||||
| 450,365 | Axis Real Estate Investment Trust (Malaysia) | 252,442 | |||
| Oil & Gas Equipment & Services 0.7% | |||||
| 40,995 | Petrowest Energy Services Trust** (Canada) | 168,843 | |||
| Shares | Value | ||||
| Real Estate Management & Development 1.7% | |||||
| 27,310 | LPS Brasil Consultoria de Imoveis S.A.* (Brazil) | $ | 393,765 | ||
| Semiconductors 4.2% | |||||
| 6,770 | Linear Technology Corp. | 236,882 | |||
| 8,275 | Maxim Integrated Products, Inc. | 242,871 | |||
| 6,590 | Microchip Technology, Inc. | 239,349 | |||
| 10,420 | Xilinx, Inc. | 272,379 | |||
| 991,481 | |||||
| Specialized Finance 7.9% | |||||
| 5,965 | Arques Industries AG (Germany) | 276,477 | |||
| 8,100 | Goldwater Bank, N.A.* *** † | 81,000 | |||
| 69,379 | KKR Financial Holdings, LLC††† | 1,169,036 | |||
| 13,035 | Oslo Bors Holdings ASA (Norway) | 345,621 | |||
| 1,872,134 | |||||
| Steel 1.2% | |||||
| 35,185 | Globe Specialty Metals, Inc.* (United Kingdom) | 272,684 | |||
| Wireless Telecommunication Services 1.2% | |||||
| 4,600 | America Movil S.A.B. de C.V., Series L ADR (Mexico) | 294,400 | |||
| Total Common Stocks (cost $22,237,640) | 20,132,060 | ||||
| Principal Amount | Value | ||||
| CORPORATE BONDS 2.4% | |||||
| Gold 1.1% | |||||
| $299,000 | Redcorp Ventures Ltd. 13.00%, 7/11/12*** † | ||||
| (Canada) | $ | 255,928 | |||
| Integrated Telecommunication Services 1.3% | |||||
| 300,000 | Broadview Networks Holdings, Inc., 11.375%, 9/1/12 | 311,250 | |||
| Total Corporate Bonds (cost $597,272) | 567,178 | ||||
58
| SEPTEMBER 30, 2007 | ||
| Number of Contracts | Value | |||||
| PUT OPTIONS PURCHASED 8.5% | ||||||
| 1,000 | Delta Financial Corp. expiring 10/20/07 exercise price $7.50 | $ | 265,000 | |||
| 1,200 | Delta Financial Corp. expiring 10/20/07 exercise price $10 | 588,000 | ||||
| 500 | Delta Financial Corp. expiring 10/20/07 exercise price $12.50 | 370,000 | ||||
| 838 | Delta Financial Corp. expiring 1/19/08 exercise price $2.50 | 20,950 | ||||
| 175 | Delta Financial Corp. expiring 1/19/08 exercise price $7.50 | 57,750 | ||||
| 200 | Delta Financial Corp. expiring 1/19/08 exercise price $10 | 108,000 | ||||
| 140 | NovaStar Financial, Inc. expiring 1/19/08 exercise price $12.50 | 142,800 | ||||
| 300 | NovaStar Financial, Inc. expiring 1/17/09 exercise price $15 | 375,000 | ||||
| 69 | RAIT Financial Trust expiring 10/20/07 exercise price $15 | 45,540 | ||||
| 31 | RAIT Financial Trust expiring 1/19/08 exercise price $17.50 | 28,830 | ||||
| Total Put Options Purchased (premium $869,659) | 2,001,870 | |||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 4.5% | ||||||
| Repurchase Agreement 4.5% | ||||||
| $1,060,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $835,000 of United States Treasury Bonds 7.875% due 2/15/21; value: $1,084,465; repurchase proceeds: $1,060,336 (cost $1,060,000)††† | $ | 1,060,000 | |||
| Total Short-Term Investments (cost $1,060,000) | 1,060,000 | |||||
| Total Investments (cost $24,764,571) 100.6% | 23,761,108 | |||||
| Liabilities less Other Assets (0.6)% | (139,892 | ) | ||||
| NET ASSETS 100.0% | $ | 23,621,216 | ||||
| Shares | Value | ||||
| SECURITIES SOLD SHORT | |||||
| 10,000 | American Capital Strategies Ltd. | $ | 427,300 | ||
| 35,655 | Delta Financial Corp. | 175,066 | |||
| Total Securities Sold Short (proceeds $737,713) | $ | 602,366 | |||
*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).
†††All or a portion of this security has been designated as collateral for open short positions.
ADR American Depositary Receipt.
See notes to financial statements. | |||||
At September 30, 2007, Wasatch Strategic Income Fund’s investments, excluding short-term investments and securities sold short, were in the following countries:
| Country | % | ||
Bermuda | 2.7 | ||
Brazil | 5.6 | ||
Canada | 2.0 | ||
Germany | 1.2 | ||
Guernsey | 1.4 | ||
Hong Kong | 1.2 | ||
Malaysia | 1.1 | ||
Mexico | 1.3 | ||
Norway | 1.5 | ||
Singapore | < 0.1 | ||
United Kingdom | 1.2 | ||
United States | 80.8 | ||
TOTAL | 100.0 | % | |
59
| WASATCH ULTRA GROWTH FUND (WAMCX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 96.4% | |||||
| Advertising 1.4% | |||||
| 161,400 | National CineMedia, Inc. | $ | 3,615,360 | ||
| Aerospace & Defense 1.3% | |||||
| 86,845 | AAR Corp.* | 2,634,877 | |||
| 39,530 | Limco-Piedmont, Inc.* | 524,563 | |||
| 86,215 | Luna Innovations, Inc.* | 369,862 | |||
| 3,529,302 | |||||
| Application Software 2.6% | |||||
| 31,935 | FactSet Research Systems, Inc. | 2,189,144 | |||
| 161,730 | Interactive Intelligence, Inc.* | 3,072,870 | |||
| 147,780 | Opnet Technologies, Inc.* | 1,714,248 | |||
| 6,976,262 | |||||
| Auto Parts & Equipment 1.1% | |||||
| 165,400 | Martinrea International, Inc.* (Canada) | 2,848,135 | |||
| Automotive Retail 1.6% | |||||
| 124,005 | O’Reilly Automotive, Inc.* | 4,143,007 | |||
| Communications Equipment 3.0% | |||||
| 349,624 | Astra Microwave Products Ltd. (India) | 1,282,766 | |||
| 152,220 | F5 Networks, Inc.* | 5,661,062 | |||
| 49,630 | Starent Networks Corp.* | 1,047,689 | |||
| 7,991,517 | |||||
| Computer Storage & Peripherals 0.2% | |||||
| 12,670 | Data Domain, Inc.* | 392,137 | |||
| Construction & Engineering 0.6% | |||||
| 1,434,000 | Midas Holdings Ltd. (Singapore) | 1,670,755 | |||
| Construction & Farm Machinery & Heavy Trucks 2.1% | |||||
| 60,374 | Bucyrus International, Inc., Class A | 4,403,076 | |||
| 35,850 | Wabtec Corp. | 1,342,941 | |||
| 5,746,017 | |||||
| Consumer Finance 1.3% | |||||
| 149,428 | First Cash Financial Services, Inc.* | 3,499,604 | |||
| Distributors 0.8% | |||||
| 59,260 | LKQ Corp.* | 2,062,841 | |||
| Diversified Banks 5.2% | |||||
| 187,665 | HDFC Bank Ltd. (India) | 6,762,957 | |||
| 68,265 | HDFC Bank Ltd. ADR (India) | 7,313,230 | |||
| 14,076,187 | |||||
| Diversified Commercial & Professional Services 0.3% | |||||
| 14,040 | Healthcare Services Group, Inc. | 284,591 | |||
| 9,660 | IHS, Inc., Class A* | 545,693 | |||
| 830,284 | |||||
| Education Services 1.1% | |||||
| 17,752 | Strayer Education, Inc. | 2,993,520 | |||
| Electronic Manufacturing Services 0.3% | |||||
| 1,369,680 | Virtek Vision International, Inc.* (Canada) | 855,145 | |||
| Environmental & Facilities Services 0.7% | |||||
| 65,410 | American Ecology Corp. | 1,386,038 | |||
| 6,070 | Stericycle, Inc.* | 346,961 | |||
| 1,732,999 | |||||
| Footwear 1.2% | |||||
| 4,374,000 | China Hongxing Sports Ltd. (China) | 3,328,700 | |||
| Shares | Value | ||||
| Gold 0.3% | |||||
| 2,995,000 | Redcorp Ventures Ltd.* (Canada) | $ | 874,629 | ||
| Health Care Distributors 0.2% | |||||
| 15,510 | MWI Veterinary Supply, Inc.* | 585,502 | |||
| Health Care Equipment 13.5% | |||||
| 39,085 | Abaxis, Inc.* | 877,458 | |||
| 130,160 | ArthroCare Corp.* | 7,274,642 | |||
| 101,500 | Electro-Optical Sciences, Inc.* | 558,250 | |||
| 36,695 | Intuitive Surgical, Inc.* | 8,439,850 | |||
| 91,855 | Kyphon, Inc.* | 6,429,850 | |||
| 196,776 | NuVasive, Inc.* | 7,070,162 | |||
| 80,420 | ResMed, Inc.* | 3,447,605 | |||
| 138,908 | VNUS Medical Technologies, Inc.* | 2,207,248 | |||
| 36,305,065 | |||||
| Health Care Facilities 3.0% | |||||
| 186,909 | Psychiatric Solutions, Inc.* | 7,341,786 | |||
| 20,040 | VCA Antech, Inc.* | 836,670 | |||
| 8,178,456 | |||||
| Health Care Services 6.1% | |||||
| 194,276 | Healthways, Inc.* ††† | 10,485,076 | |||
| 4,885 | Pediatrix Medical Group, Inc.* | 319,577 | |||
| 191,410 | Providence Service Corp. (The)* | 5,619,798 | |||
| 16,424,451 | |||||
| Health Care Technology 0.7% | |||||
| 72,390 | Computer Programs & Systems, Inc. | 1,908,200 | |||
| Household Appliances 0.5% | |||||
| 33,880 | Fourlis Holdings S.A. (Greece) | 1,272,694 | |||
| Integrated Telecommunication Services 1.9% | |||||
| 146,525 | NeuStar, Inc., Class A* | 5,024,342 | |||
| Internet Software & Services 1.8% | |||||
| 112,395 | DealerTrack Holdings, Inc.* | 4,707,102 | |||
| 7,445 | j2 Global Communications, Inc.* | 243,675 | |||
| 4,950,777 | |||||
| Investment Banking & Brokerage 2.9% | |||||
| 84,510 | FCStone Group, Inc.* | 2,727,138 | |||
| 57,165 | GFI Group, Inc.* | 4,923,050 | |||
| 7,650,188 | |||||
| IT Consulting & Other Services 5.0% | |||||
| 147,568 | Cognizant Technology Solutions Corp., Class A* | 11,771,499 | |||
| 1,878,000 | CSE Global Ltd. (Singapore) | 1,618,911 | |||
| 13,390,410 | |||||
| Leisure Facilities 1.5% | |||||
| 65,770 | Life Time Fitness, Inc.* | 4,034,332 | |||
| Life Sciences Tools & Services 1.7% | |||||
| 75,474 | Icon plc ADR* (Ireland) | 3,851,438 | |||
| 10,385 | Techne Corp.* | 655,086 | |||
| 4,506,524 | |||||
| Marine 2.1% | |||||
| 86,015 | American Commercial Lines, Inc.* | 2,041,136 | |||
| 134,445 | Eagle Bulk Shipping, Inc. | 3,460,614 | |||
| 5,501,750 | |||||
| Marine Ports & Services 0.7% | |||||
| 140,625 | CAI International, Inc.* | 1,982,812 | |||
| Mortgage REIT’s 0.7% | |||||
| 188,220 | NorthStar Realty Finance Corp. | 1,869,025 | |||
60
| SEPTEMBER 30, 2007 | ||
| Shares | Value | ||||
| Oil & Gas Equipment & Services 2.8% | |||||
| 970,000 | Swiber Holdings Ltd.* (Singapore) | $ | 2,260,296 | ||
| 110,450 | TETRA Technologies, Inc.* | 2,334,913 | |||
| 147,415 | TGS-NOPEC Geophysical Co. ASA* (Norway) | 3,020,351 | |||
| 7,615,560 | |||||
| Oil & Gas Exploration & Production 0.4% | |||||
| 70,110 | Petrohawk Energy Corp.* | 1,151,206 | |||
| Pharmaceuticals 0.7% | |||||
| 62,900 | Medicis Pharmaceutical Corp., Class A | 1,919,079 | |||
| Publishing 2.3% | |||||
| 100,140 | Morningstar, Inc.* | 6,148,596 | |||
| Real Estate Management & Development 1.8% | |||||
| 45,760 | Jones Lang LaSalle, Inc. | 4,702,298 | |||
| Restaurants 0.3% | |||||
| 24,880 | Peet’s Coffee & Tea, Inc.* | 694,401 | |||
| Semiconductor Equipment 2.3% | |||||
| 163,110 | Tessera Technologies, Inc.* | 6,116,625 | |||
| Semiconductors 14.2% | |||||
| 20,385 | Diodes, Inc.* | 654,359 | |||
| 15,000 | Hittite Microwave Corp.* | 662,250 | |||
| 113,815 | Micrel, Inc. | 1,229,202 | |||
| 82,230 | Microchip Technology, Inc. | 2,986,594 | |||
| 123,120 | NetLogic Microsystems, Inc.* | 4,445,863 | |||
| 595,063 | O2Micro International Ltd. ADR* (Cayman Islands) | 9,205,625 | |||
| 114,848 | PLX Technology, Inc.* | 1,240,358 | |||
| 204,733 | Power Integrations, Inc.* | 6,082,617 | |||
| 136,750 | Silicon Laboratories, Inc.* ††† | 5,710,680 | |||
| 281,686 | SiRF Technology Holdings, Inc.* | 6,013,996 | |||
| 38,231,544 | |||||
| Steel 1.9% | |||||
| 15,045 | Carpenter Technology Corp. | 1,956,000 | |||
| 414,500 | Globe Specialty Metals, Inc.* (United Kingdom) | 3,212,375 | |||
| 5,168,375 | |||||
| Systems Software 0.2% | |||||
| 17,040 | VASCO Data Security International, Inc.* | 601,682 | |||
| Trucking 2.1% | |||||
| 197,792 | Knight Transportation, Inc. | 3,404,000 | |||
| 98,730 | Old Dominion Freight Line, Inc.* | 2,366,558 | |||
| 5,770,558 | |||||
| Total Common Stocks (cost $189,244,175) | 258,870,853 | ||||
| PREFERRED STOCKS 2.1% | |||||
| Biotechnology 0.2% | |||||
| 169,492 | Nanosys, Inc., Series D Pfd.* *** † | 500,001 | |||
| Health Care Equipment 1.0% | |||||
| 243,902 | TherOx, Inc., Series I Pfd.* *** † | 1,290,242 | |||
| 253,064 | Transoma Medical, Inc., Series B Pfd.* *** † | 604,823 | |||
| 1,080,146 | Zonare Medical Systems, Inc., Series E Pfd.* *** † | 895,441 | |||
| 2,790,506 | |||||
| Shares | Value | ||||
| Health Care Services 0.3% | |||||
| 516,161 | Bravo Health, Inc., Series G Pfd.* *** † | $ | 571,428 | ||
| 108,917 | TargetRX, Inc., Series D Pfd.* *** † | 151,395 | |||
| 722,823 | |||||
| Household Products 0.2% | |||||
| 201,613 | Ophthonix, Inc., Series C Pfd.* *** † | 500,000 | |||
| Integrated Telecommunication Services 0.2% | |||||
| 64,269 | Neutral Tandem, Inc., Series C Pfd.* *** † | 403,796 | |||
| Internet Software & Services 0.0% | |||||
| 91,388 | Xtera Communications, Inc., Series A-1 Pfd.* *** † | 99,065 | |||
| Pharmaceuticals 0.2% | |||||
| 2,830,188 | Point Biomedical Corp., Series F Pfd.* *** † | 641,510 | |||
| Total Preferred Stocks (cost $6,280,195) | 5,657,701 | ||||
| LIMITED PARTNERSHIP INTEREST 1.1% | |||||
| Other 1.1% | |||||
| Montagu Newhall Global Partners II-B, L.P.* *** † | 2,581,200 | ||||
| Montagu Newhall Global Partners III-B, L.P.* *** † | 403,452 | ||||
| 2,984,652 | |||||
| Total Limited Partnership Interest (cost $3,229,292) | 2,984,652 | ||||
| WARRANTS 0.0% | |||||
| Gold 0.0% | |||||
| 1,497,500 | Redcorp Ventures Ltd. | ||||
| expiring 7/10/09* *** † (Canada) | — | ||||
| Health Care Equipment 0.0% | |||||
| 15,510 | Electro-Optical Sciences, Inc. expiring 10/31/11* *** † | — | |||
| 162,021 | Zonare Medical Systems, Inc. expiring 6/30/11* *** † | — | |||
| — | |||||
| Pharmaceuticals 0.0% | |||||
| 849,056 | Point Biomedical Corp. | ||||
| expiring 2/16/12* *** † | — | ||||
| Precious Metals & Minerals 0.0% | |||||
| 451,620 | Farallon Resources Ltd. expiring 12/21/08* *** † (Canada) | — | |||
| Total Warrants (cost $0) | — | ||||
61
| WASATCH ULTRA GROWTH FUND (WAMCX) — Schedule of Investments (continued) | SEPTEMBER 30, 2007 | |
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 1.0% | ||||||
| Repurchase Agreement 1.0% | ||||||
| $2,647,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $2,605,000 of United States Treasury Notes 4.875% due 6/30/12; value: $2,702,688; repurchase proceeds: $2,647,838††† (cost $2,647,000) | $ | 2,647,000 | |||
| Total Short-Term Investments (cost $2,647,000) | 2,647,000 | |||||
| Total Investments (cost $201,400,662) 100.6% | 270,160,206 | |||||
| Liabilities less Other Assets (0.6)% | (1,527,096 | ) | ||||
| NET ASSETS 100.0% | $ | 268,633,110 | ||||
| Shares | Value | |||||
| SECURITIES SOLD SHORT | ||||||
| 91,500 | MarketAxess Holdings, Inc.* | $ | 1,372,500 | |||
Total Securities Sold Short (proceeds $1,299,138) | $ | 1,372,500 | ||||
*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 Depository Receipts.
See notes to financial statements. | ||||||
At September 30, 2007, Wasatch Ultra Growth Fund’s investments, excluding short-term investments and securities sold short, were in the following countries:
| Country | % | ||
Canada | 1.7 | ||
Cayman Islands | 3.5 | ||
China | 1.3 | ||
Greece | 0.5 | ||
India | 5.9 | ||
Ireland | 1.5 | ||
Norway | 1.2 | ||
Singapore | 2.1 | ||
United Kingdom | 1.2 | ||
United States | 81.1 | ||
TOTAL | 100.0 | % | |
62
| WASATCH-HOISINGTON U.S. TREASURY FUND (WHOSX) — Schedule of Investments | SEPTEMBER 30, 2007 | |
| Principal Amount | Value | ||||
| U.S. GOVERNMENT OBLIGATIONS 99.3% | |||||
| $ 3,500,000 | U.S. Treasury Bond, 4.50%, 2/15/36 | $ | 3,318,165 | ||
| 22,000,000 | U.S. Treasury Bond, 4.75%, 2/15/37 | 21,695,784 | |||
| 8,000,000 | U.S. Treasury Bond, 5.25%, 11/15/28 | 8,385,000 | |||
| 13,570,000 | U.S. Treasury Bond, 5.25%, 2/15/29 | 14,223,056 | |||
| 5,000,000 | U.S. Treasury Bond, 5.375%, 2/15/31 | 5,352,345 | |||
| 5,500,000 | U.S. Treasury Bond, 5.50%, 8/15/28 | 5,936,562 | |||
| 5,100,000 | U.S. Treasury Strip, principal only, 11/15/21 | 2,525,153 | |||
| 8,100,000 | U.S. Treasury Strip, principal only, 8/15/25 | 3,333,458 | |||
| 124,000,000 | U.S. Treasury Strip, principal only, 11/15/27 | 46,084,104 | |||
| 17,000,000 | U.S. Treasury Strip, principal only, 2/15/37 | 4,148,680 | |||
| Total U.S. Government Obligations (cost $114,395,888) | 115,002,307 | ||||
| SHORT-TERM INVESTMENTS 0.5% | |||||
| Repurchase Agreement 0.5% | |||||
| 574,000 | Repurchase Agreement dated 9/28/07, 3.80% due 10/1/07 with State Street Bank and Trust Co. collateralized by $565,000 of United States Treasury Notes 4.875% due 6/30/12; value: $586,188; repurchase proceeds: $574,182 (cost $574,000) | 574,000 | |||
| Total Short-Term Investments (cost $574,000) | 574,000 | ||||
| Total Investments (cost $114,969,888) 99.8% | 115,576,307 | ||||
| Other Assets less Liabilities 0.2% | 211,615 | ||||
| NET ASSETS 100.0% | $ | 115,787,922 | |||
| See notes to financial statements. | |||||
63
| WASATCH FUNDS — Statements of Assets and Liabilities | ||
| CORE GROWTH FUND | GLOBAL SCIENCE & TECHNOLOGY FUND | HERITAGE GROWTH FUND | HERITAGE VALUE FUND1 | ||||||||||||
Assets: | |||||||||||||||
Investments, at cost | |||||||||||||||
Unaffiliated issuers | $ | 983,907,317 | $ | 159,896,576 | $ | 171,562,684 | $ | 1,816,079 | |||||||
Affiliated issuers* | — | — | — | — | |||||||||||
Repurchase agreements | 8,870,000 | 8,440,000 | — | 484,000 | |||||||||||
| $ | 992,777,317 | $ | 168,336,576 | $ | 171,562,684 | $ | 2,300,079 | ||||||||
Investments, at value | |||||||||||||||
Unaffiliated issuers | $ | 1,214,760,758 | $ | 196,997,399 | $ | 206,938,592 | $ | 1,859,963 | |||||||
Affiliated issuers* | — | — | — | — | |||||||||||
Repurchase agreements | 8,870,000 | 8,440,000 | — | 484,000 | |||||||||||
| 1,223,630,758 | 205,437,399 | 206,938,592 | 2,343,963 | ||||||||||||
Cash | 1,301 | 1,175 | 450 | 381,703 | |||||||||||
Foreign currency on deposit (cost of $0, $103,406, $0, $0, $332,783, $74,198, $116,595, $26,824, $120,226, and $98, respectively) | — | 104,497 | — | — | |||||||||||
Receivable for investment securities sold | 37,790,968 | — | 8,337,431 | — | |||||||||||
Receivable from broker for securities sold short | — | — | — | 1,033 | |||||||||||
Capital shares receivable | 293,582 | 307,249 | 21,504 | 49,408 | |||||||||||
Interest and dividends receivable | 1,205,636 | 31,460 | 34,851 | 394 | |||||||||||
Receivable from Investment Advisor | — | — | — | 34,240 | |||||||||||
Prepaid expenses and other assets | 48,797 | 15,931 | 16,977 | 21,722 | |||||||||||
Unrealized appreciation on foreign currency contracts | — | 368 | 9,804 | 439 | |||||||||||
Total Assets | 1,262,971,042 | 205,898,079 | 215,359,609 | 2,832,902 | |||||||||||
Liabilities: | |||||||||||||||
Options written at value (premiums of $0, $0, $0, $3,542, $0, $0, $0, $91,902, $0, and $0, respectively) | — | — | — | 4,366 | |||||||||||
Securities sold short, at value (proceeds of $0, $0, $0, $0, $0, $0, $0, $0, $1,750,502, and $6,535,836, respectively) | — | — | — | — | |||||||||||
Bank overdraft | — | — | — | — | |||||||||||
Line of credit payable | — | — | 1,451,000 | — | |||||||||||
Payable for securities purchased | 9,260,922 | 1,284,618 | 4,541,653 | 366,304 | |||||||||||
Capital shares payable | 1,677,083 | 91,999 | 208,564 | — | |||||||||||
Accrued investment advisory fees | 1,025,378 | 237,206 | 130,584 | �� | 1,006 | ||||||||||
Accrued fund administration fees | 25,071 | 3,830 | 4,232 | 33 | |||||||||||
Accrued expenses and other liabilities | 349,093 | 85,202 | 105,465 | 28,809 | |||||||||||
Accrued deferred foreign capital gains taxes | — | 52,734 | — | — | |||||||||||
Other payables | — | — | — | — | |||||||||||
Unrealized depreciation on foreign currency contracts | 15,529 | — | — | — | |||||||||||
Total Liabilities | 12,353,076 | 1,755,589 | 6,441,498 | 400,518 | |||||||||||
Net Assets | $ | 1,250,617,966 | $ | 204,142,490 | $ | 208,918,111 | $ | 2,432,384 | |||||||
Net Assets Consist of: | |||||||||||||||
Capital stock | $ | 290,957 | $ | 115,419 | $ | 166,154 | $ | 2,377 | |||||||
Paid-in capital in excess of par | 837,743,869 | 152,218,623 | 162,156,341 | 2,363,560 | |||||||||||
Undistributed net investment income (loss) | (869,706 | ) | (561,209 | ) | (28,414 | ) | 23,446 | ||||||||
Undistributed net realized gain (loss) on investments and foreign currency translations | 182,593,504 | 15,326,630 | 11,250,695 | — | |||||||||||
Net unrealized appreciation on investments and foreign currency translations | 230,859,342 | 37,043,027 | 35,373,335 | 43,001 | |||||||||||
Net Assets | $ | 1,250,617,966 | $ | 204,142,490 | $ | 208,918,111 | $ | 2,432,384 | |||||||
Capital Stock, $.01 par value: | |||||||||||||||
Authorized | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | |||||||||||
Issued and outstanding | 29,095,746 | 11,541,854 | 16,615,394 | 237,728 | |||||||||||
NET ASSET VALUE, REDEMPTION PRICEAND OFFERING | $ | 42.98 | $ | 17.69 | $ | 12.57 | $ | 10.23 | |||||||
1 | Fund inception date was August 30, 2007. |
| * | See Note 8 for information on affiliated issuers. |
See notes to financial statements.
64
| SEPTEMBER 30, 2007 | ||
| INTERNATIONAL GROWTH FUND | INTERNATIONAL OPPORTUNITIES FUND | MICRO CAP FUND | MICRO CAP VALUE FUND | SMALL CAP GROWTH FUND | SMALL CAP VALUE FUND | ||||||||||||||
| $ | 367,011,870 | $ | 35,813,384 | $ | 462,231,816 | $ | 100,828,718 | $ | 784,833,295 | $ | 606,163,428 | ||||||||
| — | — | 31,386,658 | — | — | — | ||||||||||||||
| 15,002,000 | 2,452,000 | 12,093,000 | 1,018,000 | 3,340,000 | 2,447,000 | ||||||||||||||
| $ | 382,013,870 | $ | 38,265,384 | $ | 505,711,474 | $ | 101,846,718 | $ | 788,173,295 | $ | 608,610,428 | ||||||||
| $ | 516,016,910 | $ | 52,907,903 | $ | 589,730,122 | $ | 118,621,177 | $ | 1,075,906,725 | $ | 657,280,689 | ||||||||
| — | — | 32,972,737 | — | — | — | ||||||||||||||
| 15,002,000 | 2,452,000 | 12,093,000 | 1,018,000 | 3,340,000 | 2,447,000 | ||||||||||||||
| 531,018,910 | 55,359,903 | 634,795,859 | 119,639,177 | 1,079,246,725 | 659,727,689 | ||||||||||||||
| — | 289,062 | 1,885 | 584,470 | 56,547 | 1,586,159 | ||||||||||||||
| | 333,589 | | 76,121 | 116,595 | 26,948 | 121,381 | 99 | ||||||||||||
| 6,366,392 | 1,371,798 | 113,819 | 760,003 | 12,121,182 | 2,221,393 | ||||||||||||||
| — | — | — | 231,248 | 2,398,512 | 6,543,342 | ||||||||||||||
| 834,153 | 48,457 | 11,228 | 352,547 | 517,875 | 235,932 | ||||||||||||||
| 507,522 | 100,995 | 115,579 | 39,418 | 249,316 | 1,236,721 | ||||||||||||||
| — | 10,494 | — | — | — | — | ||||||||||||||
| 30,165 | 7,092 | 26,783 | 16,865 | 45,080 | 36,645 | ||||||||||||||
| | — | | — | 10,959 | 1,922 | — | — | ||||||||||||
| 539,090,731 | 57,263,922 | 635,192,707 | 121,652,598 | 1,094,756,618 | 671,587,980 | ||||||||||||||
| | — | | — | — | 98,010 | — | — | ||||||||||||
| | — | | — | — | — | 2,053,906 | 5,590,620 | ||||||||||||
| 1,121,863 | — | — | — | — | — | ||||||||||||||
| — | — | — | — | — | — | ||||||||||||||
| 1,440,572 | 689,971 | 2,219,596 | 1,204,472 | 14,939,862 | 3,005,185 | ||||||||||||||
| 185,810 | — | 415,512 | 26,742 | 1,052,528 | 1,302,921 | ||||||||||||||
| 623,000 | 88,223 | 1,010,879 | 193,036 | 866,493 | 812,073 | ||||||||||||||
| 10,122 | 1,074 | 12,320 | 2,310 | 21,187 | 13,247 | ||||||||||||||
| 166,648 | 45,097 | 117,172 | 56,014 | 373,843 | 210,136 | ||||||||||||||
| 600,281 | — | — | 32,585 | — | — | ||||||||||||||
| — | — | — | — | — | 16,730 | ||||||||||||||
| | 39,750 | | 6,380 | — | — | 15,750 | — | ||||||||||||
| 4,188,046 | 830,745 | 3,775,479 | 1,613,169 | 19,323,569 | 10,950,912 | ||||||||||||||
| $ | 534,902,685 | $ | 56,433,177 | $ | 631,417,228 | $ | 120,039,429 | $ | 1,075,433,049 | $ | 660,637,068 | ||||||||
| $ | 219,068 | $ | 154,821 | $ | 877,763 | $ | 402,591 | $ | 268,180 | $ | 1,266,459 | ||||||||
| 342,811,658 | 32,956,902 | 425,765,473 | 87,225,641 | 677,169,002 | 481,137,203 | ||||||||||||||
| (788,351 | ) | 324,678 | (484,240 | ) | (121,769 | ) | 8,751 | 333,131 | |||||||||||
| | 44,254,392 | | 5,895,473 | 76,173,352 | 14,778,119 | 107,211,538 | 125,837,120 | ||||||||||||
| | 148,405,918 | | 17,101,303 | 129,084,880 | 17,754,847 | 290,775,578 | 52,063,155 | ||||||||||||
| $ | 534,902,685 | $ | 56,433,177 | $ | 631,417,228 | $ | 120,039,429 | $ | 1,075,433,049 | $ | 660,637,068 | ||||||||
| 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | ||||||||||||||
| 21,906,783 | 15,482,127 | 87,776,297 | 40,259,090 | 26,817,981 | 126,645,898 | ||||||||||||||
| $ | 24.42 | | $ | 3.65 | $ | 7.19 | $ | 2.98 | $ | 40.10 | $ | 5.22 | |||||||
65
| WASATCH FUNDS — Statements of Assets and Liabilities (continued) | SEPTEMBER 30, 2007 | |
| STRATEGIC INCOME FUND | ULTRA GROWTH FUND | U.S. TREASURY FUND | ||||||||||
Assets: | ||||||||||||
Investments, at cost | ||||||||||||
Unaffiliated issuers | $ | 23,704,571 | $ | 198,753,662 | $ | 114,395,888 | ||||||
Affiliated issuers* | — | — | — | |||||||||
Repurchase agreements | 1,060,000 | 2,647,000 | 574,000 | |||||||||
| $ | 24,764,571 | $ | 201,400,662 | $ | 114,969,888 | |||||||
Investments, at market value | ||||||||||||
Unaffiliated issuers | $ | 22,701,108 | $ | 267,513,206 | $ | 115,002,307 | ||||||
Affiliated issuers* | — | — | — | |||||||||
Repurchase agreements | 1,060,000 | 2,647,000 | 574,000 | |||||||||
| 23,761,108 | 270,160,206 | 115,576,307 | ||||||||||
Cash | 1,030 | 1,188 | 1,405 | |||||||||
Foreign currency on deposit (cost of $2, $0, and $0, respectively) | 2 | — | — | |||||||||
Receivable for investment securities sold | 190,642 | 257,936 | — | |||||||||
Receivable from broker for securities sold short | 357,994 | 1,340,645 | — | |||||||||
Capital shares receivable | 700 | 70,613 | 156,875 | |||||||||
Interest and dividends receivable | 125,181 | 2,725 | 476,351 | |||||||||
Receivable from Investment Advisor | 17,513 | — | — | |||||||||
Prepaid expenses and other assets | 7,532 | 19,450 | 13,192 | |||||||||
Total Assets | 24,461,702 | 271,852,763 | 116,224,130 | |||||||||
Liabilities: | ||||||||||||
Securities sold short, at value (proceeds of $737,713, $1,299,138, and $0, respectively) | 602,366 | 1,372,500 | — | |||||||||
Payable for securities purchased | 123,657 | 1,407,777 | — | |||||||||
Capital shares payable | 51,744 | 53,049 | 184,134 | |||||||||
Dividends payable to shareholders | 6,969 | — | 130,010 | |||||||||
Accrued investment advisory fees | 13,892 | 265,547 | 49,394 | |||||||||
Accrued fund administration fees | 487 | 5,180 | 2,411 | |||||||||
Accrued expenses and other liabilities | 40,533 | 115,600 | 70,259 | |||||||||
Accrued deferred foreign capital gains taxes | 838 | — | — | |||||||||
Total Liabilities | 840,486 | 3,219,653 | 436,208 | |||||||||
Net Assets | $ | 23,621,216 | $ | 268,633,110 | $ | 115,787,922 | ||||||
Net Assets Consist of: | ||||||||||||
Capital stock | $ | 21,466 | $ | 96,687 | $ | 83,660 | ||||||
Paid-in capital in excess of par | 23,116,681 | 181,910,539 | 121,791,327 | |||||||||
Undistributed net investment income (loss) | 85,088 | (759 | ) | (283 | ) | |||||||
Undistributed net realized gain (loss) on investments and foreign currency translations | 1,265,601 | 17,940,461 | (6,693,201 | ) | ||||||||
Net unrealized appreciation (depreciation) on investments and foreign currency translations | (867,620 | ) | 68,686,182 | 606,419 | ||||||||
Net Assets | $ | 23,621,216 | $ | 268,633,110 | $ | 115,787,922 | ||||||
Capital Stock, $.01 par value: | ||||||||||||
Authorized | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | |||||||||
Issued and outstanding | 2,146,637 | 9,668,744 | 8,365,980 | |||||||||
NET ASSET VALUE, REDEMPTION PRICEAND OFFERING | $ | 11.00 | $ | 27.78 | $ | 13.84 | ||||||
| * | See Note 8 for information on affiliated issuers. |
See notes to financial statements.
66
| WASATCH FUNDS — Statements of Operations | FOR THE YEAR OR PERIOD ENDED SEPTEMBER 30, 2007 | |
| CORE GROWTH FUND | GLOBAL SCIENCE & TECHNOLOGY FUND | HERITAGE GROWTH FUND | HERITAGE VALUE FUND1 | |||||||||||||
Investment Income: | ||||||||||||||||
Interest | $ | 1,249,259 | $ | 223,591 | $ | 187,023 | $ | 3,183 | ||||||||
Dividends2 | ||||||||||||||||
Unaffiliated issuers | 13,317,169 | 1,087,799 | 1,919,129 | 328 | ||||||||||||
Affiliated issuers* | — | — | — | — | ||||||||||||
Total investment income | 14,566,428 | 1,311,390 | 2,106,152 | 3,511 | ||||||||||||
Expenses: | ||||||||||||||||
Investment advisory fees | 13,387,336 | 2,233,272 | 1,664,814 | 1,006 | ||||||||||||
Shareholder servicing fees | 966,905 | 200,166 | 276,934 | 5,089 | ||||||||||||
Fund administration fees | 330,310 | 36,677 | 58,695 | 33 | ||||||||||||
Fund accounting fees | 163,223 | 39,268 | 40,779 | 1,237 | ||||||||||||
Reports to shareholders | 174,991 | 33,407 | 56,869 | 585 | ||||||||||||
Custody fees | 444,726 | 125,136 | 65,601 | 3,430 | ||||||||||||
Federal and state registration fees | 31,757 | 22,554 | 20,766 | 1,494 | ||||||||||||
Legal fees | 69,383 | 7,753 | 12,446 | 913 | ||||||||||||
Directors’ fees | 51,733 | 5,072 | 9,324 | 230 | ||||||||||||
Audit fees | 25,140 | 25,140 | 25,140 | 19,528 | ||||||||||||
Interest | 4,915 | 388 | 1,774 | — | ||||||||||||
Other | 97,388 | 21,596 | 22,573 | 2,060 | ||||||||||||
Total expenses before reimbursement | 15,747,807 | 2,750,429 | 2,255,715 | 35,605 | ||||||||||||
Reimbursement of expenses by Advisor | — | — | — | (34,240 | ) | |||||||||||
Net Expenses | 15,747,807 | 2,750,429 | 2,255,715 | 1,365 | ||||||||||||
Net Investment Income (Loss) | (1,181,379 | ) | (1,439,039 | ) | (149,563 | ) | 2,146 | |||||||||
Realized and Unrealized Gain: | ||||||||||||||||
Net realized gain on investments and foreign currency translations | ||||||||||||||||
Unaffiliated issuers | 224,229,226 | 18,695,988 | 13,095,407 | 249 | ||||||||||||
Affiliated issuers* | — | — | — | — | ||||||||||||
Net realized gain on options written | — | 66,092 | 160,696 | — | ||||||||||||
Realized foreign capital gains taxes | — | 8,044 | (35,186 | ) | — | |||||||||||
Change in unrealized appreciation (depreciation) on | (42,206,156 | ) | 24,320,201 | 17,972,838 | 43,001 | |||||||||||
Deferred foreign capital gains taxes | — | (60,778 | ) | — | — | |||||||||||
Net gain on investments | 182,023,070 | 43,029,547 | 31,193,755 | 43,250 | ||||||||||||
Net Increase in Net Assets Resulting from Operations | $ | 180,841,691 | $ | 41,590,508 | $ | 31,044,192 | $ | 45,396 | ||||||||
1 | Fund inception date was August 30, 2007. |
2 | Net of $97,274, $60,042, $41,446, and $0 in foreign withholding taxes, respectively. |
| * | See Note 8 for information on affiliated issuers. |
See notes to financial statements.
67
| WASATCH FUNDS — Statements of Operations (continued) | ||
| INTERNATIONAL GROWTH FUND | INTERNATIONAL OPPORTUNITIES FUND | MICRO CAP FUND | ||||||||||
Investment Income: | ||||||||||||
Interest1 | $ | 519,941 | $ | 59,276 | $ | 1,021,937 | ||||||
Dividends2 | ||||||||||||
Unaffiliated issuers | 8,112,495 | 951,006 | 4,523,786 | |||||||||
Affiliated issuers* | — | — | 33,920 | |||||||||
Total investment income | 8,632,436 | 1,010,282 | 5,579,643 | |||||||||
Expenses: | ||||||||||||
Investment advisory fees | 6,924,780 | 975,240 | 12,569,493 | |||||||||
Shareholder servicing fees | 383,297 | 65,810 | 276,650 | |||||||||
Fund administration fees | 113,728 | 12,008 | 154,967 | |||||||||
Fund accounting fees | 87,344 | 42,178 | 92,799 | |||||||||
Reports to shareholders | 69,897 | 4,430 | 47,794 | |||||||||
Custody fees | 420,595 | 69,260 | 155,938 | |||||||||
Federal and state registration fees | 31,760 | 15,143 | 21,544 | |||||||||
Legal fees | 23,497 | 2,486 | 33,785 | |||||||||
Directors’ fees | 15,550 | 1,569 | 23,134 | |||||||||
Audit fees | 25,140 | 25,140 | 25,140 | |||||||||
Dividends on securities sold short | — | — | — | |||||||||
Interest | 1,207 | 127 | 1,658 | |||||||||
Other | 31,261 | 8,511 | 40,280 | |||||||||
Total expenses before reimbursement | 8,128,056 | 1,221,902 | 13,443,182 | |||||||||
Reimbursement of expenses by Advisor | — | (124,659 | ) | — | ||||||||
Net Expenses | 8,128,056 | 1,097,243 | 13,443,182 | |||||||||
Net Investment Income (Loss) | 504,380 | (86,961 | ) | (7,863,539 | ) | |||||||
Realized and Unrealized Gain (Loss): | ||||||||||||
Net realized gain (loss) on investments and foreign currency translations | ||||||||||||
Unaffiliated issuers | 58,040,332 | 6,802,947 | 97,920,322 | |||||||||
Affiliated issuers* | — | — | 2,601,727 | |||||||||
Net realized gain on options written | — | — | 162,745 | |||||||||
Net realized gain (loss) on short positions | — | — | — | |||||||||
Realized foreign capital gains taxes | (46,710 | ) | — | — | ||||||||
Change in unrealized appreciation (depreciation) on | 68,919,910 | 9,327,438 | 13,434,587 | |||||||||
Deferred foreign capital gains taxes | (613,723 | ) | — | — | ||||||||
Net gain (loss) on investments | 126,299,809 | 16,130,385 | 114,119,381 | |||||||||
Net Increase in Net Assets Resulting from Operations | $ | 126,804,189 | $ | 16,043,424 | $ | 106,255,842 | ||||||
1 | Net of $0, $0, $0, $0, $0, $0, $838, $0, and $0 in foreign withholding taxes, respectively. |
2 | Net of $661,761, $109,445, $243,946, $60,064, $179,612, $65,420, $21,095, $1,918, and $0 in foreign withholding taxes, respectively. |
| * | See Note 8 for information on affiliated issuers. |
See notes to financial statements.
68
| FOR THE YEAR ENDED SEPTEMBER 30, 2007 | ||
| MICRO CAP VALUE FUND | SMALL CAP GROWTH FUND | SMALL CAP VALUE FUND | STRATEGIC INCOME FUND | ULTRA GROWTH FUND | U.S. TREASURY FUND | |||||||||||||||||
| $ | 325,215 | $ | 433,155 | $ | 622,976 | $ | 82,930 | $ | 206,417 | $ | 9,280,506 | |||||||||||
| 1,001,037 | 7,687,098 | 12,523,555 | 1,139,227 | 861,673 | — | |||||||||||||||||
| — | — | — | — | — | — | |||||||||||||||||
| 1,326,252 | 8,120,253 | 13,146,531 | 1,222,157 | 1,068,090 | 9,280,506 | |||||||||||||||||
| 2,226,845 | 12,059,914 | 10,553,428 | 164,728 | 3,556,825 | 940,898 | |||||||||||||||||
| 110,519 | 1,170,825 | 585,387 | 73,372 | 333,631 | 194,930 | |||||||||||||||||
| 27,440 | 297,527 | 173,516 | 5,805 | 70,205 | 46,455 | |||||||||||||||||
| 39,179 | 150,672 | 94,689 | 21,648 | 48,953 | 25,358 | |||||||||||||||||
| 15,639 | 231,222 | 110,185 | 11,270 | 56,965 | 35,280 | |||||||||||||||||
| 68,914 | 150,797 | 158,102 | 18,245 | 72,783 | 5,636 | |||||||||||||||||
| 15,320 | 31,217 | 26,527 | 17,872 | 19,079 | 26,643 | |||||||||||||||||
| 5,898 | 65,483 | 37,231 | 1,228 | 15,142 | 11,275 | |||||||||||||||||
| 3,903 | 47,197 | 26,077 | 666 | 11,447 | 7,598 | |||||||||||||||||
| 25,140 | 25,140 | 25,140 | 25,024 | 25,140 | 25,140 | |||||||||||||||||
| 2,023 | — | 16,730 | 23,122 | — | — | |||||||||||||||||
| 2,019 | 32,938 | 9,092 | 1,478 | 7,114 | — | |||||||||||||||||
| 13,193 | 78,414 | 45,245 | 6,877 | 26,249 | 10,526 | |||||||||||||||||
| 2,556,032 | 14,341,346 | 11,861,349 | 371,335 | 4,243,533 | 1,329,739 | |||||||||||||||||
| (46,857 | ) | — | — | (123,442 | ) | — | — | |||||||||||||||
| 2,509,175 | 14,341,346 | 11,861,349 | 247,893 | 4,243,533 | 1,329,739 | |||||||||||||||||
| (1,182,923 | ) | (6,221,093 | ) | 1,285,182 | 974,264 | (3,175,443 | ) | 7,950,767 | ||||||||||||||
| 18,016,172 | 141,381,665 | 155,890,863 | 52,706 | 28,680,187 | (899,982 | ) | ||||||||||||||||
| — | 481,126 | (111,586 | ) | — | — | — | ||||||||||||||||
| 950,991 | — | 1,078,508 | 24,907 | 18,525 | — | |||||||||||||||||
| (104,027 | ) | (694,035 | ) | — | 1,290,734 | (119,136 | ) | — | ||||||||||||||
| (13,030 | ) | — | — | — | (35,766 | ) | — | |||||||||||||||
| | 4,363,877 | | 54,045,856 | (74,483,105 | ) | (1,281,957 | ) | 35,146,031 | (3,610,027 | ) | ||||||||||||
| (32,585 | ) | — | — | — | — | — | ||||||||||||||||
| 23,181,398 | 195,214,612 | 82,374,680 | 86,390 | 63,689,841 | (4,510,009 | ) | ||||||||||||||||
| $ | 21,998,475 | $ | 188,993,519 | $ | 83,659,862 | $ | 1,060,654 | $ | 60,514,398 | $ | 3,440,758 | |||||||||||
69
| WASATCH FUNDS — Statements of Changes in Net Assets | ||
| CORE GROWTH FUND | GLOBAL SCIENCE & TECHNOLOGY FUND | |||||||||||||||
| Year or period ended September 30 | 2007 | 2006 | 2007 | 2006 | ||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | (1,181,379 | ) | $ | 6,089,288 | $ | (1,439,039 | ) | $ | (1,314,171 | ) | |||||
Net realized gain on investments and foreign | 224,229,226 | 130,484,166 | 18,704,032 | 6,249,861 | ||||||||||||
Net realized gain on options written | — | — | 66,092 | — | ||||||||||||
Net realized gain on short positions | — | — | — | 21,058 | ||||||||||||
Change in unrealized appreciation (depreciation) on | (42,206,156 | ) | (98,543,578 | ) | 24,259,423 | 1,779,861 | ||||||||||
Net increase in net assets resulting from operations | 180,841,691 | 38,029,876 | 41,590,508 | 6,736,609 | ||||||||||||
Dividends paid from: | ||||||||||||||||
Net investment income | (4,207,921 | ) | (23,612,852 | ) | — | — | ||||||||||
Net realized gains | (110,525,247 | ) | (123,744,637 | ) | (5,210,791 | ) | (1,860,003 | ) | ||||||||
| (114,733,168 | ) | (147,357,489 | ) | (5,210,791 | ) | (1,860,003 | ) | |||||||||
Capital share transactions: | ||||||||||||||||
Shares sold | 117,646,419 | 130,442,780 | 79,536,256 | 66,278,469 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 110,575,393 | 141,564,243 | 4,944,636 | 1,820,831 | ||||||||||||
Shares redeemed | (424,777,597 | ) | (486,370,736 | ) | (43,106,438 | ) | (36,009,645 | ) | ||||||||
Redemption fees | 38,660 | 27,471 | 29,507 | 39,558 | ||||||||||||
Net increase (decrease) | (196,517,125 | ) | (214,336,242 | ) | 41,403,961 | 32,129,213 | ||||||||||
Total increase (decrease) in net assets | (130,408,602 | ) | (323,663,855 | ) | 77,783,678 | 37,005,819 | ||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 1,381,026,568 | 1,704,690,423 | 126,358,812 | 89,352,993 | ||||||||||||
End of period | $ | 1,250,617,966 | $ | 1,381,026,568 | $ | 204,142,490 | $ | 126,358,812 | ||||||||
Undistributed net investment income (loss) included in | $ | (869,706 | ) | $ | (209,317 | ) | $ | (561,209 | ) | $ | (149,555 | ) | ||||
Capital share transactions — shares: | ||||||||||||||||
Shares sold | 2,744,829 | 3,073,183 | 4,944,939 | 4,659,422 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 2,761,623 | 3,444,385 | 334,097 | 137,317 | ||||||||||||
Shares redeemed | (10,027,035 | ) | (11,718,400 | ) | (2,780,070 | ) | (2,638,897 | ) | ||||||||
Net increase (decrease) in shares outstanding | (4,520,583 | ) | (5,200,832 | ) | 2,498,966 | 2,157,842 | ||||||||||
1 | Fund inception date was August 30, 2007. |
See notes to financial statements.
70
| SEPTEMBER 30, 2007 | ||
| HERITAGE GROWTH FUND | HERITAGE VALUE FUND | INTERNATIONAL GROWTH FUND | ||||||||||||||||
| 2007 | 2006 | 20071 | 2007 | 2006 | ||||||||||||||
| $ | (149,563 | ) | $ | 42,790 | $ | 2,146 | $ | 504,380 | $ | (1,612,059 | ) | |||||||
| | 13,060,221 | | 8,992,963 | 249 | 57,993,622 | 67,609,292 | ||||||||||||
| 160,696 | — | — | — | — | ||||||||||||||
| — | — | — | — | — | ||||||||||||||
| | 17,972,838 | | (2,397,326 | ) | 43,001 | 68,306,187 | (7,047,206 | ) | ||||||||||
| 31,044,192 | 6,638,427 | 45,396 | 126,804,189 | 58,950,027 | ||||||||||||||
| (23,660 | ) | (386,224 | ) | — | — | — | ||||||||||||
| (7,225,236 | ) | (8,141,020 | ) | — | (69,456,586 | ) | (9,365 | ) | ||||||||||
| (7,248,896 | ) | (8,527,244 | ) | — | (69,456,586 | ) | (9,365 | ) | ||||||||||
| 27,445,666 | 70,694,924 | 2,407,615 | 123,708,001 | 90,728,441 | ||||||||||||||
| 6,995,484 | 8,190,379 | — | 67,578,664 | 9,068 | ||||||||||||||
| (93,704,397 | ) | (137,309,726 | ) | (21,048 | ) | (96,891,205 | ) | (105,387,826 | ) | |||||||||
| 5,710 | 23,494 | 421 | 24,983 | 52,133 | ||||||||||||||
| (59,257,537 | ) | (58,400,929 | ) | 2,386,988 | 94,420,443 | (14,598,184 | ) | |||||||||||
| (35,462,241 | ) | (60,289,746 | ) | 2,432,384 | 151,768,046 | 44,342,478 | ||||||||||||
| 244,380,352 | 304,670,098 | — | 383,134,639 | 338,792,161 | ||||||||||||||
| $ | 208,918,111 | $ | 244,380,352 | $ | 2,432,384 | $ | 534,902,685 | $ | 383,134,639 | |||||||||
| $ | (28,414 | ) | $ | 21,667 | $ | 23,446 | $ | (788,351 | ) | $ | (512,754 | ) | ||||||
| 2,286,187 | 6,164,555 | 239,802 | 5,358,055 | 4,311,049 | ||||||||||||||
| 596,884 | 717,196 | — | 3,306,197 | 461 | ||||||||||||||
| (7,712,736 | ) | (12,096,491 | ) | (2,074 | ) | (4,305,020 | ) | (5,080,255 | ) | |||||||||
| (4,829,665 | ) | (5,214,740 | ) | 237,728 | 4,359,232 | (768,745 | ) | |||||||||||
71
| WASATCH FUNDS — Statements of Changes in Net Assets (continued) | ||
| INTERNATIONAL OPPORTUNITIES FUND | MICRO CAP FUND | |||||||||||||||
| Year ended September 30 | 2007 | 2006 | 2007 | 2006 | ||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | (86,961 | ) | $ | (99,504 | ) | $ | (7,863,539 | ) | $ | (8,206,446 | ) | ||||
Net realized gain on investments and foreign | 6,802,947 | 2,561,582 | 100,522,049 | 70,834,183 | ||||||||||||
Net realized gain on options written | — | — | 162,745 | — | ||||||||||||
Net realized gain (loss) on short positions | — | — | — | — | ||||||||||||
Change in unrealized appreciation (depreciation) on | 9,327,438 | 4,519,447 | 13,434,587 | (14,703,647 | ) | |||||||||||
Net increase in net assets resulting from operations | 16,043,424 | 6,981,525 | 106,255,842 | 47,924,090 | ||||||||||||
Dividends paid from: | ||||||||||||||||
Net investment income | (62,484 | ) | — | — | — | |||||||||||
Net realized gains | (2,442,244 | ) | — | (67,720,917 | ) | (101,306,137 | ) | |||||||||
| (2,504,728 | ) | — | (67,720,917 | ) | (101,306,137 | ) | ||||||||||
Capital share transactions: | ||||||||||||||||
Shares sold | 6,367,976 | 2,977,585 | 15,698,971 | 17,003,311 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 2,448,543 | — | 65,068,973 | 95,482,943 | ||||||||||||
Shares redeemed | (2,761,827 | ) | (2,560,576 | ) | (71,789,168 | ) | (54,449,841 | ) | ||||||||
Redemption fees | 1,247 | 15 | 2,432 | 2,863 | ||||||||||||
Net increase (decrease) | 6,055,939 | 417,024 | 8,981,208 | 58,039,276 | ||||||||||||
Total increase (decrease) in net assets | 19,594,635 | 7,398,549 | 47,516,133 | 4,657,229 | ||||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 36,838,542 | 29,439,993 | 583,901,095 | 579,243,866 | ||||||||||||
End of period | $ | 56,433,177 | $ | 36,838,542 | $ | 631,417,228 | $ | 583,901,095 | ||||||||
Undistributed net investment income (loss) included in net assets at end of period | $ | 324,678 | $ | (65,706 | ) | $ | (484,240 | ) | $ | — | ||||||
Capital share transactions — shares: | ||||||||||||||||
Shares sold | 1,935,461 | 1,138,942 | 2,240,904 | 2,506,938 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 830,015 | — | 9,799,544 | 14,989,473 | ||||||||||||
Shares redeemed | (857,324 | ) | (999,753 | ) | (10,257,044 | ) | (7,969,522 | ) | ||||||||
Net increase (decrease) in shares outstanding | 1,908,152 | 139,189 | 1,783,404 | 9,526,889 | ||||||||||||
See notes to financial statements.
72
| SEPTEMBER 30, 2007 | ||
| MICRO CAP VALUE FUND | SMALL CAP GROWTH FUND | SMALL CAP VALUE FUND | ||||||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||||
| $ | (1,182,923 | ) | $ | (926,578 | ) | $ | (6,221,093 | ) | $ | (8,645,084 | ) | $ | 1,285,182 | $ | 5,759,674 | |||||||
| | 18,003,142 | | 18,831,298 | 141,862,791 | 101,042,259 | 155,779,277 | 80,060,094 | |||||||||||||||
| 950,991 | 28,361 | — | — | 1,078,508 | 133,119 | |||||||||||||||||
| (104,027 | ) | 149,589 | (694,035 | ) | — | — | (900,860 | ) | ||||||||||||||
| | 4,331,292 | | (1,980,425 | ) | 54,045,856 | (72,428,953 | ) | (74,483,105 | ) | (29,137,020 | ) | |||||||||||
| 21,998,475 | 16,102,245 | 188,993,519 | 19,968,222 | 83,659,862 | 55,915,007 | |||||||||||||||||
| — | — | — | — | (4,575,097 | ) | (8,588,688 | ) | |||||||||||||||
| (18,395,781 | ) | (8,245,400 | ) | (92,697,704 | ) | (159,627,544 | ) | (84,556,633 | ) | (89,640,909 | ) | |||||||||||
| (18,395,781 | ) | (8,245,400 | ) | (92,697,704 | ) | (159,627,544 | ) | (89,131,730 | ) | (98,229,597 | ) | |||||||||||
| 12,406,622 | 2,557,227 | 130,032,208 | 192,646,962 | 91,496,417 | 44,209,723 | |||||||||||||||||
| 18,013,951 | 8,086,056 | 90,344,199 | 153,540,530 | 86,009,646 | 94,863,257 | |||||||||||||||||
| (9,491,736 | ) | (9,895,964 | ) | (476,277,049 | ) | (329,428,284 | ) | (176,041,666 | ) | (166,979,115 | ) | |||||||||||
| 178 | 126 | 59,777 | 16,285 | 19,685 | 3,571 | |||||||||||||||||
| 20,929,015 | 747,445 | (255,840,865 | ) | 16,775,493 | 1,484,082 | (27,902,564 | ) | |||||||||||||||
| 24,531,709 | 8,604,290 | (159,545,050 | ) | (122,883,829 | ) | (3,987,786 | ) | (70,217,154 | ) | |||||||||||||
| 95,507,720 | 86,903,430 | 1,234,978,099 | 1,357,861,928 | 664,624,854 | 734,842,008 | |||||||||||||||||
| $ | 120,039,429 | $ | 95,507,720 | $ | 1,075,433,049 | $ | 1,234,978,099 | $ | 660,637,068 | $ | 664,624,854 | |||||||||||
| $ | (121,769 | ) | $ | (14,869 | ) | $ | 8,751 | $ | (1,982,758 | ) | $ | 333,131 | $ | 4,523,035 | ||||||||
| 4,359,135 | 903,762 | 3,396,315 | 4,994,782 | 17,057,164 | 8,200,453 | |||||||||||||||||
| 6,647,215 | 3,183,486 | 2,431,876 | 4,151,988 | 17,133,396 | 18,822,075 | |||||||||||||||||
| (3,313,686 | ) | (3,521,837 | ) | (12,399,974 | ) | (8,688,441 | ) | (33,076,044 | ) | (31,046,713 | ) | |||||||||||
| 7,692,664 | 565,411 | (6,571,783 | ) | 458,329 | 1,114,516 | (4,024,185 | ) | |||||||||||||||
73
| WASATCH FUNDS — Statements of Changes in Net Assets (continued) | ||
| STRATEGIC INCOME FUND | ULTRA GROWTH FUND | |||||||||||||||
| Year or period ended September 30 | 2007 | 20061 | 2007 | 2006 | ||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | 974,264 | $ | 326,699 | $ | (3,175,443 | ) | $ | (4,286,204 | ) | ||||||
Net realized gain (loss) on investments and foreign | 52,706 | 35,569 | 28,644,421 | 26,032,281 | ||||||||||||
Net realized gain on options written | 24,907 | — | 18,525 | 51,190 | ||||||||||||
Net realized gain (loss) on short positions | 1,290,734 | — | (119,136 | ) | — | |||||||||||
Change in unrealized appreciation (depreciation) on | (1,281,957 | ) | 414,337 | 35,146,031 | (23,377,185 | ) | ||||||||||
Net increase (decrease) in net assets resulting from operations | 1,060,654 | 776,605 | 60,514,398 | (1,579,918 | ) | |||||||||||
Dividends paid from: | ||||||||||||||||
Net investment income | (903,928 | ) | (273,109 | ) | — | — | ||||||||||
Net realized gains | (54,564 | ) | — | (21,145,437 | ) | (51,353,961 | ) | |||||||||
| (958,492 | ) | (273,109 | ) | (21,145,437 | ) | (51,353,961 | ) | |||||||||
Capital share transactions: | ||||||||||||||||
Shares sold | 21,723,688 | 12,884,756 | 20,390,670 | 34,763,287 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 924,221 | 260,187 | 20,567,611 | 49,694,426 | ||||||||||||
Shares redeemed | (11,873,932 | ) | (917,103 | ) | (118,109,285 | ) | (115,021,608 | ) | ||||||||
Redemption fees | 13,045 | 696 | 8,878 | 9,719 | ||||||||||||
Net increase (decrease) | 10,787,022 | 12,228,536 | (77,142,126 | ) | (30,554,176 | ) | ||||||||||
Total increase (decrease) in net assets | 10,889,184 | 12,732,032 | (37,773,165 | ) | (83,488,055 | ) | ||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 12,732,032 | — | 306,406,275 | 389,894,330 | ||||||||||||
End of period | $ | 23,621,216 | $ | 12,732,032 | $ | 268,633,110 | $ | 306,406,275 | ||||||||
Undistributed net investment income (loss) included in | $ | 85,088 | $ | 72,250 | $ | (759 | ) | $ | 125,528 | |||||||
Capital share transactions — shares: | ||||||||||||||||
Shares sold | 1,898,641 | 1,280,032 | 809,631 | 1,344,846 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 81,799 | 25,265 | 848,849 | 2,050,946 | ||||||||||||
Shares redeemed | (1,048,448 | ) | (90,652 | ) | (4,710,330 | ) | (4,609,864 | ) | ||||||||
Net increase (decrease) in shares outstanding | 931,992 | 1,214,645 | (3,051,850 | ) | (1,214,072 | ) | ||||||||||
1 | Fund inception date was February 1, 2006. |
See notes to financial statements.
74
| SEPTEMBER 30, 2007 | ||
| U.S. TREASURY FUND | ||||||||||||||
| 2007 | 2006 | |||||||||||||
| $ | 7,950,767 | $ | 7,369,958 | |||||||||||
| (899,982 | ) | (157,464 | ) | ||||||||||
| — | — | |||||||||||||
| — | — | |||||||||||||
| (3,610,027 | ) | (1,981,422 | ) | ||||||||||
| 3,440,758 | 5,231,072 | |||||||||||||
| (7,951,409 | ) | (9,215,585 | ) | |||||||||||
| — | — | |||||||||||||
| (7,951,409 | ) | (9,215,585 | ) | |||||||||||
| 57,301,220 | 182,225,053 | |||||||||||||
| 7,407,666 | 8,678,644 | |||||||||||||
| (149,451,060 | ) | (64,651,364 | ) | |||||||||||
| 46,441 | 127,924 | |||||||||||||
| (84,695,733 | ) | 126,380,257 | ||||||||||||
| (89,206,384 | ) | 122,395,744 | ||||||||||||
| 204,994,306 | 82,598,562 | |||||||||||||
| $ | 115,787,922 | $ | 204,994,306 | |||||||||||
$ | (283 | ) | $ | 359 | ||||||||||
| 4,157,573 | 12,942,909 | |||||||||||||
| 539,219 | 622,640 | |||||||||||||
| (10,853,212 | ) | (4,671,486 | ) | |||||||||||
| (6,156,420 | ) | 8,894,063 | ||||||||||||
75
| WASATCH FUNDS — Financial Highlights | ||
| CORE GROWTH FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Net asset value, beginning of period | $ | 41.08 | $ | 43.92 | $ | 38.49 | $ | 33.54 | $ | 25.46 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.05 | ) | 0.17 | 0.56 | 0.13 | (0.01 | ) | |||||||||||||
Net realized and unrealized gains on investments | 5.65 | 0.90 | 6.41 | 4.84 | 8.09 | |||||||||||||||
Net increase from payment by affiliate | — | — | — | 1 | — | — | ||||||||||||||
Total from investment operations | 5.60 | 1.07 | 6.97 | 4.97 | 8.08 | |||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.63 | ) | (0.22 | ) | (0.02 | ) | — | |||||||||||
Distributions from net realized gains | (3.56 | ) | (3.28 | ) | (1.32 | ) | — | — | ||||||||||||
Total distributions | (3.70 | ) | (3.91 | ) | (1.54 | ) | (0.02 | ) | — | |||||||||||
Net asset value, end of period | $ | 42.98 | $ | 41.08 | $ | 43.92 | $ | 38.49 | $ | 33.54 | ||||||||||
Total return2 | 14.28% | 2.46% | 18.58% | 14.80% | 31.68% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,250,618 | $ | 1,381,027 | $ | 1,704,690 | $ | 1,496,969 | $ | 1,318,341 | ||||||||||
Ratio of expenses to average net assets | 1.18% | 1.17% | 1.20% | 1.21% | 1.25% | |||||||||||||||
Ratio of net investment income (loss) to average net assets | (0.09)% | 0.38% | 1.30% | 0.34% | (0.02)% | |||||||||||||||
Portfolio turnover rate | 54% | 42% | 42% | 47% | 47% | |||||||||||||||
| GLOBAL SCIENCE & TECHNOLOGY FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Net asset value, beginning of period | $ | 13.97 | $ | 12.98 | $ | 10.15 | $ | 10.73 | $ | 6.38 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.12 | ) | (0.14 | ) | (0.16 | ) | (0.18 | ) | (0.13 | ) | ||||||||||
Net realized and unrealized gains (losses) on investments | 4.43 | 1.40 | 2.99 | (0.41 | ) | 4.47 | ||||||||||||||
Net increase from payment by affiliate | — | — | — | 1 | — | — | ||||||||||||||
Total from investment operations | 4.31 | 1.26 | 2.83 | (0.59 | ) | 4.34 | ||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | 0.01 | 0.01 | ||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | (0.59 | ) | (0.27 | ) | — | — | — | |||||||||||||
Total distributions | (0.59 | ) | (0.27 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 17.69 | $ | 13.97 | $ | 12.98 | $ | 10.15 | $ | 10.73 | ||||||||||
Total return3 | 31.63% | 9.81% | 27.88% | (5.49)% | 68.34% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 204,142 | $ | 126,359 | $ | 89,353 | $ | 69,301 | $ | 51,517 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements | 1.85% | 1.94% | 1.95% | 1.95% | 1.95% | |||||||||||||||
Before waivers and reimbursements | 1.85% | 1.94% | 1.97% | 1.97% | 2.13% | |||||||||||||||
Ratio of net investment loss to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements | (0.97)% | (1.15)% | (1.52)% | (1.66)% | (1.87)% | |||||||||||||||
Before waivers and reimbursements | (0.97)% | (1.15)% | (1.54)% | (1.68)% | (2.05)% | |||||||||||||||
Portfolio turnover rate | 78% | 58% | 80% | 55% | 88% | |||||||||||||||
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 Fund’s 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.
76
| SEPTEMBER 30, 2007 | ||
| HERITAGE GROWTH FUND | Year or Period Ended September 30 | |||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 2006 | 2005 | 20041 | ||||||||||||||
Net asset value, beginning of period | $ | 11.40 | $ | 11.43 | $ | 9.86 | $ | 10.00 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||
Net investment income (loss) | (0.01 | ) | — | 2 | 0.02 | — | 2 | |||||||||||
Net realized and unrealized gains (losses) on investments | 1.53 | 0.28 | 1.55 | (0.14 | ) | |||||||||||||
Net increase from payment by affiliate | — | — | — | 2 | — | |||||||||||||
Total from investment operations | 1.52 | 0.28 | 1.57 | (0.14 | ) | |||||||||||||
Redemption fees (see Note 2) | — | 2 | — | 2 | — | 2 | — | 2 | ||||||||||
Less distributions: | ||||||||||||||||||
Dividends from net investment income | — | 2 | (0.01 | ) | — | — | ||||||||||||
Distributions from net realized gains | (0.35 | ) | (0.30 | ) | — | 2 | — | |||||||||||
Total distributions | (0.35 | ) | (0.31 | ) | — | 2 | — | |||||||||||
Net asset value, end of period | $ | 12.57 | $ | 11.40 | $ | 11.43 | $ | 9.86 | ||||||||||
Total return3 5 | 13.59% | 2.46% | 15.95% | (1.40)% | ||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||
Net assets, end of period (in thousands) | $ | 208,918 | $ | 244,380 | $ | 304,670 | $ | 128,136 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||
Net of waivers and reimbursements4 | 0.95% | 0.95% | 0.95% | 0.95% | ||||||||||||||
Before waivers and reimbursements4 | 0.95% | 0.95% | 0.99% | 1.26% | ||||||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||
Net of waivers and reimbursements4 | (0.06)% | 0.01% | 0.17% | (0.01)% | ||||||||||||||
Before waivers and reimbursements4 | (0.06)% | 0.01% | 0.13% | (0.32)% | ||||||||||||||
Portfolio turnover rate3 | 56% | 54% | 36% | 5% | ||||||||||||||
| HERITAGE VALUE FUND | Period Ended September 30 | |||||||||||||||||
| (for a share outstanding throughout each period) | 20076 | |||||||||||||||||
Net asset value, beginning of period | $ | 10.00 | ||||||||||||||||
Income from investment operations: | ||||||||||||||||||
Net investment income | 0.01 | |||||||||||||||||
Net realized and unrealized gains on investments | 0.22 | |||||||||||||||||
Total from investment operations | 0.23 | |||||||||||||||||
Redemption fees (see Note 2) | — | 2 | ||||||||||||||||
Less distributions: | ||||||||||||||||||
Dividends from net investment income | — | |||||||||||||||||
Distributions from net realized gains | — | |||||||||||||||||
Total distributions | — | |||||||||||||||||
Net asset value, end of period | $ | 10.23 | ||||||||||||||||
Total return3 | 2.40% | |||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,432 | ||||||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||
Net of waivers and reimbursements4 | 0.95% | |||||||||||||||||
Before waivers and reimbursements4 | 24.78% | |||||||||||||||||
Ratio of net investment income to average net assets: | ||||||||||||||||||
Net of waivers and reimbursements4 | 1.49% | |||||||||||||||||
Before waivers and reimbursements4 | (22.34)% | |||||||||||||||||
Portfolio turnover rate3 | 0% | |||||||||||||||||
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 | 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. |
6 | Fund inception date was August 30, 2007. |
See notes to financial statements.
77
| WASATCH FUNDS — Financial Highlights (continued) | ||
| INTERNATIONAL GROWTH FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Net asset value, beginning of period | $ | 21.83 | $ | 18.50 | $ | 14.71 | $ | 12.06 | $ | 8.85 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.03 | (0.09 | ) | (0.10 | ) | (0.11 | ) | (0.07 | ) | |||||||||||
Net realized and unrealized gains on investments | 6.61 | 3.42 | 3.91 | 2.76 | 3.28 | |||||||||||||||
Net increase from payment by affiliate | — | — | 0.01 | — | — | |||||||||||||||
Total from investment operations | 6.64 | 3.33 | 3.82 | 2.65 | 3.21 | |||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | (4.05 | ) | — | 1 | (0.03 | ) | — | — | ||||||||||||
Total distributions | (4.05 | ) | — | 1 | (0.03 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 24.42 | $ | 21.83 | $ | 18.50 | $ | 14.71 | $ | 12.06 | ||||||||||
Total return2 3 | 34.02% | 18.00% | 26.02% | 21.97% | 36.27% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 534,903 | $ | 383,135 | $ | 338,792 | $ | 196,990 | $ | 44,482 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements | 1.76% | 1.78% | 1.84% | 1.92% | 1.95% | |||||||||||||||
Before waivers and reimbursements | 1.76% | 1.78% | 1.84% | 1.92% | 2.30% | |||||||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements | 0.11% | (0.42)% | (0.64)% | (1.06)% | (1.12)% | |||||||||||||||
Before waivers and reimbursements | 0.11% | (0.42)% | (0.64)% | (1.06)% | (1.47)% | |||||||||||||||
Portfolio turnover rate | 60% | 64% | 32% | 31% | 62% | |||||||||||||||
| INTERNATIONAL OPPORTUNITIES FUND | Year or Period Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 2006 | 20054 | |||||||||||||||||
Net asset value, beginning of period | $ | 2.71 | $ | 2.19 | $ | 2.00 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.01 | ) | (0.01 | ) | — | 1 | ||||||||||||||
Net realized and unrealized gains on investments | 1.13 | 0.53 | 0.19 | |||||||||||||||||
Total from investment operations | 1.12 | 0.52 | 0.19 | |||||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | — | 1 | — | — | ||||||||||||||||
Distributions from net realized gains | (0.18 | ) | — | — | ||||||||||||||||
Total distributions | (0.18 | ) | — | — | ||||||||||||||||
Net asset value, end of period | $ | 3.65 | $ | 2.71 | $ | 2.19 | ||||||||||||||
Total return5 | 42.73% | 23.74% | 9.50% | |||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 56,433 | $ | 36,839 | $ | 29,440 | ||||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements6 | 2.25% | 2.25% | 2.25% | |||||||||||||||||
Before waivers and reimbursements6 | 2.51% | 2.62% | 3.09% | |||||||||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements6 | (0.18)% | (0.29)% | (0.21)% | |||||||||||||||||
Before waivers and reimbursements6 | (0.44)% | (0.66)% | 1.05% | |||||||||||||||||
Portfolio turnover rate5 | 54% | 43% | 12% | |||||||||||||||||
1 | Represents amounts less than $.005 per share. |
2 | 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. |
3 | 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. |
4 | Fund inception date was January 27, 2005. |
5 | Not annualized for periods less than one year. |
6 | Annualized. |
See notes to financial statements.
78
| SEPTEMBER 30, 2007 | ||
| MICRO CAP FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Net asset value, beginning of period | $ | 6.79 | $ | 7.58 | $ | 7.05 | $ | 6.98 | $ | 5.01 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.09 | ) | (0.10 | ) | (0.11 | ) | (0.15 | ) | (0.12 | ) | ||||||||||
Net realized and unrealized gains on investments | 1.29 | 0.65 | 1.70 | 0.81 | 2.43 | |||||||||||||||
Net increase from payment by affiliate | — | — | — | 1 | — | — | ||||||||||||||
Total from investment operations | 1.20 | 0.55 | 1.59 | 0.66 | 2.31 | |||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | (0.80 | ) | (1.34 | ) | (1.06 | ) | (0.59 | ) | (0.34 | ) | ||||||||||
Total distributions | (0.80 | ) | (1.34 | ) | (1.06 | ) | (0.59 | ) | (0.34 | ) | ||||||||||
Net asset value, end of period | $ | 7.19 | $ | 6.79 | $ | 7.58 | $ | 7.05 | $ | 6.98 | ||||||||||
Total return2 | 18.72% | 8.51% | 26.42% | 9.96% | 50.28% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 631,417 | $ | 583,901 | $ | 579,244 | $ | 518,291 | $ | 517,179 | ||||||||||
Ratio of expenses to average net assets | 2.14% | 2.14% | 2.18% | 2.19% | 2.24% | |||||||||||||||
Ratio of net investment loss to average net assets | (1.25)% | (1.39)% | (1.58)% | (1.95)% | (2.13)% | |||||||||||||||
Portfolio turnover rate | 48% | 46% | 50% | 56% | 50% | |||||||||||||||
| MICRO CAP VALUE FUND | Year or Period Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 2006 | 2005 | 2004 | 20033 | |||||||||||||||
Net asset value, beginning of period | $ | 2.93 | $ | 2.72 | $ | 2.57 | $ | 2.09 | $ | 2.00 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.03 | ) | (0.03 | ) | (0.04 | ) | (0.05 | ) | (0.01 | ) | ||||||||||
Net realized and unrealized gains on investments | 0.64 | 0.50 | 0.49 | 0.53 | 0.10 | |||||||||||||||
Net increase from payment by affiliate | — | — | — | 1 | — | — | ||||||||||||||
Total from investment operations | 0.61 | 0.47 | 0.45 | 0.48 | 0.09 | |||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | (0.56 | ) | (0.26 | ) | (0.30 | ) | — | 1 | — | |||||||||||
Total distributions | (0.56 | ) | (0.26 | ) | (0.30 | ) | — | 1 | — | |||||||||||
Net asset value, end of period | $ | 2.98 | $ | 2.93 | $ | 2.72 | $ | 2.57 | $ | 2.09 | ||||||||||
Total return4 6 | 22.84% | 18.89% | 19.87% | 23.06% | 4.50% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 120,039 | $ | 95,508 | $ | 86,903 | $ | 84,835 | $ | 70,706 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements5 7 | 2.25% | 2.25% | 2.25% | 2.27% | 2.50% | |||||||||||||||
Before waivers and reimbursements5 | 2.30% | 2.33% | 2.36% | 2.38% | 2.73% | |||||||||||||||
Ratio of net investment loss to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements5 | (1.06)% | (0.99)% | (1.41)% | (1.76)% | (1.97)% | |||||||||||||||
Before waivers and reimbursements5 | (1.11)% | (1.07)% | (1.52)% | (1.87)% | (2.20)% | |||||||||||||||
Portfolio turnover rate4 | 105% | 95% | 85% | 101% | 4% | |||||||||||||||
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 | Fund inception date was July 28, 2003. |
4 | Not annualized for periods less than one year. |
5 | Annualized. |
6 | 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. |
7 | 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%. |
See notes to financial statements.
79
| WASATCH FUNDS — Financial Highlights (continued) | ||
| SMALL CAP GROWTH FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Net asset value, beginning of period | $ | 36.99 | $ | 41.23 | $ | 34.94 | $ | 32.43 | $ | 23.83 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.25 | ) | (0.26 | ) | (0.25 | ) | (0.33 | ) | (0.28 | ) | ||||||||||
Net realized and unrealized gains on investments | 6.28 | 0.84 | 7.32 | 3.01 | 8.88 | |||||||||||||||
Net increase from payment by affiliate | — | — | — | 1 | — | — | ||||||||||||||
Total from investment operations | 6.03 | 0.58 | 7.07 | 2.68 | 8.60 | |||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | (2.92 | ) | (4.82 | ) | (0.78 | ) | (0.17 | ) | — | 1 | ||||||||||
Total distributions | (2.92 | ) | (4.82 | ) | (0.78 | ) | (0.17 | ) | — | 1 | ||||||||||
Net asset value, end of period | $ | 40.10 | $ | 36.99 | $ | 41.23 | $ | 34.94 | $ | 32.43 | ||||||||||
Total return2 | 16.94% | 1.40% | 20.73% | 8.27% | 36.15% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,075,433 | $ | 1,234,978 | $ | 1,357,862 | $ | 1,191,702 | $ | 1,134,398 | ||||||||||
Ratio of expenses to average net assets3 | 1.19% | 1.18% | 1.18% | 1.20% | 1.25% | |||||||||||||||
Ratio of net investment loss to average net assets | (0.52)% | (0.64)% | (0.62)% | (0.91)% | (1.08)% | |||||||||||||||
Portfolio turnover rate | 43% | 41% | 36% | 41% | 63% | |||||||||||||||
| SMALL CAP VALUE FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Net asset value, beginning of period | $ | 5.29 | $ | 5.67 | $ | 5.54 | $ | 4.62 | $ | 3.21 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.01 | 0.05 | 0.05 | (0.01 | ) | (0.02 | ) | |||||||||||||
Net realized and unrealized gains on investments | 0.67 | 0.36 | 0.86 | 0.93 | 1.43 | |||||||||||||||
Net increase from payment by affiliate | — | — | — | 1 | — | — | ||||||||||||||
Total from investment operations | 0.68 | 0.41 | 0.91 | 0.92 | 1.41 | |||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.04 | ) | (0.07 | ) | — | — | — | |||||||||||||
Distributions from net realized gains | (0.71 | ) | (0.72 | ) | (0.78 | ) | — | 1 | — | |||||||||||
Total distributions | (0.75 | ) | (0.79 | ) | (0.78 | ) | — | 1 | — | |||||||||||
Net asset value, end of period | $ | 5.22 | $ | 5.29 | $ | 5.67 | $ | 5.54 | $ | 4.62 | ||||||||||
Total return4 | 13.32% | 7.88% | 19.47% | 19.73% | 43.93% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 660,637 | $ | 664,625 | $ | 734,842 | $ | 734,266 | $ | 651,261 | ||||||||||
Ratio of expenses to average net assets | 1.69% | 1.68% | 1.72% | 1.73% | 1.78% | |||||||||||||||
Ratio of net investment income (loss) to average net assets | 0.18% | 0.81% | 0.94% | (0.26)% | (0.43)% | |||||||||||||||
Portfolio turnover rate | 84% | 40% | 43% | 56% | 69% | |||||||||||||||
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. The effect of net realized gains on the disposal of investments in violation of an investment restriction on total return was less than .01%. |
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%. |
4 | 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.
80
| SEPTEMBER 30, 2007 | ||
| STRATEGIC INCOME FUND | Year or Period Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 20061 | ||||||||||||||||||
Net asset value, beginning of period | $ | 10.48 | $ | 10.00 | ||||||||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.48 | 0.31 | ||||||||||||||||||
Net realized and unrealized gains on investments | 0.54 | 0.44 | ||||||||||||||||||
Total from investment operations | 1.02 | 0.75 | ||||||||||||||||||
Redemption fees (see Note 2) | 0.01 | — | 2 | |||||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.47 | ) | (0.27 | ) | ||||||||||||||||
Distributions from net realized gains | (0.04 | ) | — | |||||||||||||||||
Total distributions | (0.51 | ) | (0.27 | ) | ||||||||||||||||
Net asset value, end of period | $ | 11.00 | $ | 10.48 | ||||||||||||||||
Total return3 | 9.77% | 7.58% | ||||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 23,621 | $ | 12,732 | ||||||||||||||||
Ratio of expenses to average net assets (including interest and dividend payments for securities sold short): | ||||||||||||||||||||
Net of waivers and reimbursements4 | 1.05% | 0.95% | ||||||||||||||||||
Before waivers and reimbursements4 | 1.57% | 2.66% | ||||||||||||||||||
Ratio of expenses to average net assets (excluding interest and dividend payments for securities sold short): | ||||||||||||||||||||
Net of waivers and reimbursements4 | 0.95% | 0.95% | ||||||||||||||||||
Before waivers and reimbursements4 | 1.47% | 2.66% | ||||||||||||||||||
Ratio of net investment income to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements4 | 4.14% | 5.40% | ||||||||||||||||||
Before waivers and reimbursements4 | 3.62% | 3.69% | ||||||||||||||||||
Portfolio turnover rate3 | 86% | 14% | ||||||||||||||||||
| ULTRA GROWTH FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Net asset value, beginning of period | $ | 24.09 | $ | 27.98 | $ | 24.07 | $ | 25.43 | $ | 16.52 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.33 | ) | (0.34 | ) | (0.38 | ) | (0.42 | ) | (0.29 | ) | ||||||||||
Net realized and unrealized gains (losses) on investments | 5.80 | 0.23 | 5.26 | (0.68 | ) | 9.19 | ||||||||||||||
Net increase from payment by affiliate | — | — | — | 2 | — | — | ||||||||||||||
Total from investment operations | 5.47 | (0.11 | ) | 4.88 | (1.10 | ) | 8.90 | |||||||||||||
Redemption fees (see Note 2) | — | 2 | — | 2 | — | 2 | — | 2 | 0.01 | |||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | (1.78 | ) | (3.78 | ) | (0.97 | ) | (0.26 | ) | — | |||||||||||
| �� | ||||||||||||||||||||
Total distributions | (1.78 | ) | (3.78 | ) | (0.97 | ) | (0.26 | ) | — | |||||||||||
Net asset value, end of period | $ | 27.78 | $ | 24.09 | $ | 27.98 | $ | 24.07 | $ | 25.43 | ||||||||||
Total return5 | 23.80% | (0.48)% | 21.00% | (4.44)% | 53.93% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 268,633 | $ | 306,406 | $ | 389,894 | $ | 427,013 | $ | 538,939 | ||||||||||
Ratio of expenses to average net assets6 | 1.49% | 1.48% | 1.50% | 1.50% | 1.57% | |||||||||||||||
Ratio of net investment loss to average net assets | (1.12)% | (1.19)% | (1.30)% | (1.39)% | (1.50)% | |||||||||||||||
Portfolio turnover rate2 | 55% | 76% | 65% | 67% | 76% | |||||||||||||||
1 | Fund inception date was February 1, 2006. |
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. |
6 | 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 notes to financial statements.
81
| WASATCH FUNDS — Financial Highlights (continued) | SEPTEMBER 30, 2007 | |
| U.S. TREASURY FUND | Year Ended September 30 | |||||||||||||||||||
| (for a share outstanding throughout each period) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Net asset value, beginning of period | $ | 14.12 | $ | 14.68 | $ | 13.77 | $ | 13.68 | $ | 14.04 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | 0.64 | 0.39 | 0.45 | 0.70 | 0.72 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.29 | ) | (0.24 | ) | 1.05 | 0.11 | (0.48 | ) | ||||||||||||
Total from investment operations | 0.35 | 0.15 | 1.50 | 0.81 | 0.24 | |||||||||||||||
Redemption fees (see Note 2) | 0.01 | 0.01 | 0.01 | 0.01 | 0.03 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.64 | ) | (0.72 | ) | (0.60 | ) | (0.73 | ) | (0.63 | ) | ||||||||||
Total distributions | (0.64 | ) | (0.72 | ) | (0.60 | ) | (0.73 | ) | (0.63 | ) | ||||||||||
Net asset value, end of period | $ | 13.84 | $ | 14.12 | $ | 14.68 | $ | 13.77 | $ | 13.68 | ||||||||||
Total return | 2.68% | 1.21% | 11.41% | 6.27% | 2.17% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 115,788 | $ | 204,994 | $ | 82,599 | $ | 45,088 | $ | 67,134 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements | 0.71% | 0.72% | 0.75% | 0.75% | 0.75% | |||||||||||||||
Before waivers and reimbursements | 0.71% | 0.72% | 0.86% | 0.94% | 0.91% | |||||||||||||||
Ratio of net investment income to average net assets: | ||||||||||||||||||||
Net of waivers and reimbursements | 4.23% | 4.21% | 4.01% | 4.50% | 4.67% | |||||||||||||||
Before waivers and reimbursements | 4.23% | 4.21% | 3.90% | 4.31% | 4.51% | |||||||||||||||
Portfolio turnover rate | 19% | 2% | 19% | 4% | 37% | |||||||||||||||
See notes to financial statements.
82
| WASATCH FUNDS — Notes to Financial Statements | SEPTEMBER 30, 2007 | |
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 14 series or “funds” (each a “Fund” and collectively the “Funds”). The Core Growth, Global Science & Technology, Heritage Growth, International Growth, Micro Cap, Micro Cap Value, Small Cap Growth, Small Cap Value, Ultra Growth and the Wasatch-Hoisington U.S. Treasury Fund (“U.S. Treasury Fund”) are each diversified funds. The Emerging Markets Small Cap, Heritage Value, International Opportunities and Strategic Income Funds are each non-diversified funds. The Emerging Markets Small Cap Fund commenced operations on October 1, 2007. 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 related to investments of the Funds held at September 30, 2007.
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 by considering factors including, but not limited to: index options and futures traded subsequent to the close; American Depositary Receipts (“ADRs”), Global Depositary Receipts (“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 Standard & Poor’s Depository Receipts (“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, 2007, 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 | 1.43 | % | |
Global Science & Technology Fund | 0.45 | % | |
Heritage Growth Fund | — | ||
Heritage Value Fund | — | ||
International Growth Fund | 0.59 | % | |
International Opportunities Fund | 1.61 | % | |
Micro Cap Fund | 0.95 | % | |
Micro Cap Value Fund | 1.56 | % | |
Small Cap Growth Fund | 2.25 | % | |
Small Cap Value Fund | 2.00 | % | |
Strategic Income Fund | 4.01 | % | |
Ultra Growth Fund | 3.22 | % | |
U.S. Treasury Fund | — |
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 FAS 157.
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 prevailing exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized gains or losses on securities is reflected as a component of such gains or losses. Transactions in foreign denominated assets may involve greater
83
| WASATCH FUNDS — Notes to Financial Statements (continued) | ||
risks than domestic transactions, including currency, political, economic, regulatory and market risks.
At September 30, 2007, 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 | $ | 103,406 | $ | 104,497 | ||
International Growth Fund | ||||||
British Pound | $ | 55,635 | $ | 56,142 | ||
Euro | 10,173 | 10,301 | ||||
Japanese Yen | 253,886 | 253,886 | ||||
Taiwan Dollar | 13,089 | 13,260 | ||||
| $ | 332,783 | $ | 333,589 | |||
International Opportunities Fund | ||||||
Australian Dollar | $ | 9,103 | $ | 9,182 | ||
Japanese Yen | 40,823 | 42,362 | ||||
Taiwan Dollar | 24,272 | 24,577 | ||||
| $ | 74,198 | $ | 76,121 | |||
Micro Cap Fund | ||||||
Australian Dollar | $ | 116,595 | $ | 116,595 | ||
Micro Cap Value Fund | ||||||
Australian Dollar | $ | 26,824 | $ | 26,948 | ||
Small Cap Growth Fund | ||||||
Australian Dollar | $ | 116,418 | $ | 117,437 | ||
Brazilian Real | 3,808 | 3,944 | ||||
| $ | 120,226 | $ | 121,381 | |||
Small Cap Value Fund | ||||||
Taiwan Dollar | $ | 98 | $ | 99 | ||
Strategic Income Fund | ||||||
Hong Kong Dollar | $ | 2 | $ | 2 | ||
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 when the Fund is informed of the dividend. Interest income is 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, Core Growth, Global Science & Technology, Heritage Growth, Heritage Value, International Growth, International Opportunities, Micro Cap, Micro Cap Value, Small Cap Growth, Small Cap Value, Strategic Income and the Ultra Growth Funds (each, an “Equity Fund,” and collectively 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. Estimated expenses are accrued daily. 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 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.
84
| SEPTEMBER 30, 2007 | ||
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 its
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.
Accordingly, at September 30, 2007, reclassifications were recorded as follows:
| Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | Heritage Value Fund1 | International Growth Fund | International Opportunities Fund | |||||||||||||||||||
Increase (decrease) paid-in capital in excess of par | $ | 22,662,598 | $ | 1,997,465 | $ | 1,542,061 | $ | (21,051 | ) | $ | 4,485,663 | $ | 102,549 | |||||||||||
Increase (decrease) undistributed net investment income | 4,728,911 | 1,027,385 | 123,142 | 21,300 | (779,977 | ) | 539,829 | |||||||||||||||||
Increase (decrease) undistributed net realized gain (loss) | (27,391,509 | ) | (3,024,850 | ) | (1,665,203 | ) | (249 | ) | (3,705,686 | ) | (642,378 | ) | ||||||||||||
| Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | Ultra Growth Fund | |||||||||||||||||||
Increase (decrease) paid-in capital in excess of par | $ | 3,610,164 | $ | 1,413,239 | $ | 14,901,801 | $ | 16,465,086 | $ | 139,883 | $ | (678,856 | ) | |||||||||||
Increase (decrease) undistributed net investment income | 7,379,299 | 1,076,023 | 8,212,602 | (899,989 | ) | (57,498 | ) | 3,049,156 | ||||||||||||||||
Increase (decrease) undistributed net realized gain (loss) | (10,989,463 | ) | (2,489,262 | ) | (23,114,403 | ) | (15,565,097 | ) | (82,385 | ) | (2,370,300 | ) | ||||||||||||
| U.S. Treasury Fund | ||||||||||||||||||||||||
Increase (decrease) paid-in capital in excess of par | $ | — | ||||||||||||||||||||||
Increase (decrease) undistributed net investment income | — | |||||||||||||||||||||||
Increase (decrease) undistributed net realized gain (loss) | — | |||||||||||||||||||||||
1 | Inception date of the Fund was August 30, 2007. |
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, 2007 are summarized below:
| Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | Heritage Value Fund1 | International Growth Fund | International Opportunities Fund | |||||||||||||
Purchases | $ | 714,297,918 | $ | 146,087,616 | $ | 130,313,387 | $ | 1,816,079 | $ | 280,528,650 | $ | 26,381,543 | ||||||
Sales | 1,051,994,797 | 113,261,843 | 193,850,616 | — | 269,146,921 | 25,391,980 | ||||||||||||
| Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | Ultra Fund | |||||||||||||
Purchases | $ | 287,827,988 | $ | 114,651,827 | $ | 506,245,530 | $ | 577,529,751 | $ | 28,904,369 | $ | 152,895,662 | ||||||
Sales | 354,694,110 | 110,150,261 | 857,124,266 | 652,503,161 | 17,838,134 | 252,222,924 | ||||||||||||
1 | Inception date of the Fund was August 30, 2007. |
Purchases and sales of U.S. government securities in the U.S. Treasury Fund were $35,922,034 and $(128,202,994), respectively.
85
| WASATCH FUNDS — Notes to Financial Statements (continued) | ||
5. OPTIONS CONTRACTS WRITTEN
Options written activity during the year or period ended September 30, 2007 was as follows:
| Options Outstanding at Beginning of Period | Written | Closed | Exercised | Expired | Options Outstanding at End of Period | ||||||||||||||||
Global Science & Technology Fund | |||||||||||||||||||||
Premium amount | $ | — | $ | 73,065 | $ | (28,479 | ) | $ | — | $ | (44,586 | ) | $ | — | |||||||
Number of contracts | — | 328 | (53 | ) | — | (275 | ) | — | |||||||||||||
Heritage Growth Fund | |||||||||||||||||||||
Premium amount | $ | — | $ | 160,696 | $ | — | $ | — | $ | (160,696 | ) | $ | — | ||||||||
Number of contracts | — | 2,100 | — | — | (2,100 | ) | — | ||||||||||||||
Heritage Value Fund1 | |||||||||||||||||||||
Premium amount | $ | — | $ | 3,542 | $ | — | $ | — | $ | — | $ | 3,542 | |||||||||
Number of contracts | — | 11 | — | — | — | 11 | |||||||||||||||
Micro Cap Fund | |||||||||||||||||||||
Premium amount | $ | — | $ | 162,745 | $ | — | $ | — | $ | (162,745 | ) | $ | — | ||||||||
Number of contracts | — | 2,100 | — | — | (2,100 | ) | — | ||||||||||||||
Micro Cap Value Fund | |||||||||||||||||||||
Premium amount | $ | 71,028 | $ | 1,005,372 | $ | (151,035 | ) | $ | (29,946 | ) | $ | (803,517 | ) | $ | 91,902 | ||||||
Number of contracts | 450 | 9,652 | (1,246 | ) | (205 | ) | (8,057 | ) | 594 | ||||||||||||
Small Cap Value Fund | |||||||||||||||||||||
Premium amount | $ | 230,882 | $ | 922,186 | $ | (238,081 | ) | $ | (171,135 | ) | $ | (743,852 | ) | $ | — | ||||||
Number of contracts | 1,500 | 7,195 | (1,890 | ) | (1,174 | ) | (5,631 | ) | — | ||||||||||||
Strategic Income Fund | |||||||||||||||||||||
Premium amount | $ | — | $ | 24,907 | $ | — | $ | (6,075 | ) | $ | (18,832 | ) | $ | — | |||||||
Number of contracts | — | 123 | — | (30 | ) | (93 | ) | — | |||||||||||||
Ultra Growth Fund | |||||||||||||||||||||
Premium amount | $ | — | $ | 18,525 | $ | — | $ | — | $ | (18,525 | ) | $ | — | ||||||||
Number of contracts | — | 190 | — | — | (190 | ) | — | ||||||||||||||
1 | Inception date of the Fund was August 30, 2007. |
86
| SEPTEMBER 30, 2007 | ||
6. FEDERAL INCOME TAX INFORMATION
As of September 30, 2007, 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 | Heritage Value Fund1 | International Growth Fund | International Opportunities Fund | |||||||||||||||||||
Cost | $ | 993,399,279 | $ | 168,700,979 | $ | 171,634,241 | $ | 2,300,079 | $ | 393,478,481 | $ | 39,782,317 | ||||||||||||
Gross appreciation | $ | 298,174,140 | $ | 40,481,507 | $ | 39,437,821 | $ | 52,020 | $ | 150,091,491 | $ | 18,318,941 | ||||||||||||
Gross (depreciation) | (67,942,661 | ) | (3,745,087 | ) | (4,133,470 | ) | (8,136 | ) | (12,551,062 | ) | (2,741,355 | ) | ||||||||||||
Net appreciation | $ | 230,231,479 | $ | 36,736,420 | $ | 35,304,351 | $ | 43,884 | $ | 137,540,429 | $ | 15,577,586 | ||||||||||||
| Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | Ultra Growth Fund | |||||||||||||||||||
Cost | $ | 506,093,987 | $ | 102,173,105 | $ | 788,708,157 | $ | 609,829,885 | $ | 24,847,961 | $ | 201,699,304 | ||||||||||||
Gross appreciation | $ | 172,959,633 | $ | 23,697,875 | $ | 327,244,129 | $ | 105,172,160 | $ | 2,391,608 | $ | 75,732,660 | ||||||||||||
Gross (depreciation) | (44,257,761 | ) | (6,231,803 | ) | (36,705,561 | ) | (55,274,356 | ) | (3,478,461 | ) | (7,271,758 | ) | ||||||||||||
Net appreciation (depreciation) | $ | 128,701,872 | $ | 17,466,072 | $ | 290,538,568 | $ | 49,897,804 | $ | (1,086,853 | ) | $ | 68,460,902 | |||||||||||
| U.S. Treasury Fund | ||||||||||||||||||||||||
Cost | $ | 114,969,888 | ||||||||||||||||||||||
Gross appreciation | $ | 1,374,102 | ||||||||||||||||||||||
Gross (depreciation) | (767,683 | ) | ||||||||||||||||||||||
Net appreciation | $ | 606,419 | ||||||||||||||||||||||
1 | Inception date of Fund was August 30, 2007. |
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.
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. Management is currently evaluating the impact to the Funds as FIN 48 becomes effective in March 2008.
87
| WASATCH FUNDS — Notes to Financial Statements (continued) | ||
The components of accumulated earnings on a tax basis as of September 30, 2007 were as follows:
| Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | Heritage Value Fund1 | International Growth Fund | International Opportunities Fund | |||||||||||||||||||
Undistributed ordinary income | $ | 8,521,343 | $ | 5,351,619 | $ | — | $ | 27,540 | $ | 16,539,102 | $ | 3,291,278 | ||||||||||||
Undistributed capital gains | 174,694,125 | 10,169,156 | 11,322,253 | — | 38,373,861 | 4,466,603 | ||||||||||||||||||
Accumulated earnings | 183,215,468 | 15,520,775 | 11,322,253 | 27,540 | 54,912,963 | 7,757,881 | ||||||||||||||||||
Accumulated capital and other losses | — | — | — | — | — | — | ||||||||||||||||||
Other undistributed ordinary losses | (869,706 | ) | (390,952 | ) | (18,608 | ) | (4,094 | ) | — | (28,310 | ) | |||||||||||||
Net unrealized appreciation* | 230,237,378 | 36,678,625 | 35,291,971 | 43,051 | 136,958,996 | 15,591,883 | ||||||||||||||||||
Total accumulated earnings | $ | 412,583,140 | $ | 51,808,448 | $ | 46,595,616 | $ | 66,497 | $ | 191,871,959 | $ | 23,321,454 | ||||||||||||
| Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | Ultra Growth Fund | |||||||||||||||||||
Undistributed ordinary income | $ | 1,153,139 | $ | 3,517,746 | $ | — | $ | 30,752,970 | $ | 1,200,628 | $ | — | ||||||||||||
Undistributed capital gains | 75,050,231 | 11,483,993 | 107,746,400 | 96,636,737 | 255,181 | 18,239,103 | ||||||||||||||||||
Accumulated earnings | 76,203,370 | 15,001,739 | 107,746,400 | 127,389,707 | 1,455,809 | 18,239,103 | ||||||||||||||||||
Accumulated capital and other losses | — | — | — | — | — | — | ||||||||||||||||||
Other undistributed ordinary losses | (126,003 | ) | (17,233 | ) | — | — | (21,730 | ) | (759 | ) | ||||||||||||||
Net unrealized appreciation/depreciation* | 128,696,625 | 17,426,691 | 290,249,467 | 50,843,699 | (951,010 | ) | 68,387,540 | |||||||||||||||||
Total accumulated earnings | $ | 204,773,992 | $ | 32,411,197 | $ | 397,995,867 | $ | 178,233,406 | $ | 483,069 | $ | 86,625,884 | ||||||||||||
| U.S. Treasury Fund | ||||||||||||||||||||||||
Undistributed ordinary income | $ | 129,727 | ||||||||||||||||||||||
Undistributed capital gains | — | |||||||||||||||||||||||
Accumulated earnings | 129,727 | |||||||||||||||||||||||
Accumulated capital and other losses | (6,693,201 | ) | ||||||||||||||||||||||
Other undistributed ordinary losses | (130,010 | ) | ||||||||||||||||||||||
Net unrealized appreciation* | 606,419 | |||||||||||||||||||||||
Total accumulated earnings | $ | (6,087,065 | ) | |||||||||||||||||||||
1 | Inception date of Fund was August 30, 2007. |
| * | 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 | 2015 | ||||||||
U.S. Treasury Fund | $ | 485,296 | $ | 4,318,964 | $ | 831,495 | $ | 225,538 | ||||
The U.S. Treasury Funds had $831,908 of post-October capital losses. The Core Growth, Global Science & Technology, Heritage Growth, Micro Cap, Micro Cap Value, and Ultra Growth Funds had $869,706, $390,352, $17,353, $126,003, $13,502, and $759, 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.
88
| SEPTEMBER 30, 2007 | ||
The tax character of distributions paid during the year or period ended September 30, 2007 was as follows:
| 2007 | Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | Heritage Value Fund1 | International Growth Fund | International Opportunities Fund | ||||||||||||
Ordinary income | $ | 7,290,307 | $ | — | $ | 23,657 | $ | — | $ | — | $ | 62,484 | ||||||
Capital gain | 107,442,861 | 5,210,791 | 7,225,239 | — | 69,456,586 | 2,442,244 | ||||||||||||
Total | $ | 114,733,168 | $ | 5,210,791 | $ | 7,248,896 | $ | — | $ | 69,456,586 | $ | 2,504,728 | ||||||
| 2007 | Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | Ultra Growth Fund | ||||||||||||
Ordinary income | $ | 2,745,719 | $ | 5,585,055 | $ | — | $ | 13,942,266 | $ | 958,492 | $ | 5,456,463 | ||||||
Capital gain | 64,975,198 | 12,810,726 | 92,697,704 | 75,189,464 | — | 15,688,974 | ||||||||||||
Total | $ | 67,720,917 | $ | 18,395,781 | $ | 92,697,704 | $ | 89,131,730 | $ | 958,492 | $ | 21,145,437 | ||||||
| 2007 | U.S. Treasury Fund | |||||||||||||||||
Ordinary income | $ | 7,951,409 | ||||||||||||||||
Capital gain | — | |||||||||||||||||
Total | $ | 7,951,409 | ||||||||||||||||
1 | Inception date of the Fund was August 30, 2007. |
The tax character of dividends 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. |
The tax character of dividends 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 $129,040,317, $6,519,523, $8,959,750, $72,591,223, $2,501,287, $68,746,271, $13,893,267, $111,779,099, $87,679,742, $26,529, and $18,238,271 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, Strategic Income, and Ultra Growth Funds, respectively, for the purpose of the dividends paid deduction.
89
| WASATCH FUNDS — Notes to Financial Statements (continued) | ||
For the fiscal year ended September 30, 2007 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 2007 complete information will be reported on a shareholder’s 2007 Form 1099-DIV. The amount designated as qualified dividend income for the year or period ended September 30, 2007 will be at the highest allowable amount permitted by law.
Corporate shareholders should note that for the year ended September 30, 2007, the percentage of the Funds’ investment income (i.e., net investment income plus short-term capital gains) that qualified for the corporate dividends received deductions was as follows:
| Core Growth Fund | Heritage Growth Fund | International Opportunities Fund | Micro Cap Fund | Micro Cap Value Fund | Small Cap Value Fund | Strategic Income Fund | Ultra Growth Fund | |||||||||||||||||
Percentage | 32 | % | 100 | % | 1 | % | 31 | % | 4 | % | 28 | % | 17 | % | 8 | % |
7. RELATED PARTY TRANSACTIONS
Investment Advisory Fees — As the Funds’ investment advisor, the Advisor receives a monthly fee calculated on average daily net assets of each Fund. 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, 2009. Investment advisory fees and fees waived, if any, for the year or period ended September 30, 2007 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 | Heritage Value Fund | International Growth Fund | International Opportunities Fund | |||||||||||||
Advisory Fee | 1.00 | % | 1.50 | % | 0.70 | % | 0.70 | % | 1.50 | % | 2.00 | % | ||||||
Expense Limitation | 1.50 | % | 1.95 | % | 0.95 | % | 0.95 | % | 1.95 | % | 2.25 | % | ||||||
| Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | Ultra Growth Fund | |||||||||||||
Advisory Fee | 2.00 | % | 2.00 | % | 1.00 | % | 1.50 | % | 0.70 | % | 1.25 | % | ||||||
Expense Limitation | 2.50 | % | 2.25 | % | 1.50 | % | 1.95 | % | 0.95 | % | 1.75 | % | ||||||
| U.S. Treasury Fund | ||||||||||||||||||
Advisory Fee | 0.50 | % | ||||||||||||||||
Expense Limitation | 0.75 | % | ||||||||||||||||
Affiliated Interests — An officer of the Funds owns approximately 14% and 11% of the shares outstanding of the International Opportunities and Strategic Income Funds, respectively, as of September 30, 2007.
90
| SEPTEMBER 30, 2007 | ||
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, 2007 with “affiliated companies” as so defined:
| Share Activity | Dividends Credited to Income | Gain (loss) Realized on Sale of Shares | ||||||||||||||
| Balance 9/30/06 | Purchases/ Additions | Sales/ Reductions | Balance 9/30/07 | |||||||||||||
Micro Cap Fund | ||||||||||||||||
AutoInfo, Inc. | 2,206,015 | — | — | 2,206,015 | $ | — | $ | — | ||||||||
Bri-Chem Corp. | — | 969,640 | — | 969,640 | — | — | ||||||||||
Cardica, Inc. | 215,055 | 484,496 | 407,330 | 292,221 | * | — | 939,375 | |||||||||
Enpath Medical, Inc. | 436,825 | — | 436,825 | — | * | — | 1,682,554 | |||||||||
Epic Bancorp | 192,400 | 48,343 | — | 240,743 | 33,920 | — | ||||||||||
inTEST Corp. | 528,550 | 56,125 | — | 584,675 | — | — | ||||||||||
SM&A | 1,341,985 | 110,040 | 15,550 | 1,436,475 | — | (20,202 | ) | |||||||||
VNUS Medical Technologies, Inc. | 918,051 | 61,801 | — | 979,852 | — | — | ||||||||||
| $ | 33,920 | $ | 2,601,727 | |||||||||||||
Small Cap Growth Fund | ||||||||||||||||
Power Integrations, Inc. | 1,455,490 | 45,360 | 612,441 | 888,409 | * | $ | — | $ | 481,126 | |||||||
Small Cap Value Fund | ||||||||||||||||
SM&A | 673,153 | 288,844 | 32,820 | 929,177 | * | $ | — | $ | (31,031 | ) | ||||||
United PanAm Financial Corp. | 594,610 | 201,685 | 25,940 | 770,355 | * | — | (170,866 | ) | ||||||||
Vitran Corp., Inc. | 680,315 | 8,710 | 75,500 | 613,525 | * | — | 90,311 | |||||||||
| $ | — | $ | (111,586 | ) | ||||||||||||
| * | No longer affiliated as of September 30, 2007. |
91
| 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, 2007, the Funds held the following restricted securities:
| Security Type | Acquisition Date | Acquisition Cost | Fair Value | Value as % of Net Assets | |||||||||
Core Growth Fund | |||||||||||||
DataPath, Inc. | Common Stock | 6/23/06 | $ | 7,566,680 | $ | 3,439,400 | 0.27 | % | |||||
Solar Capital, LLC | Common Stock | 3/7/07 | 13,200,900 | 13,200,900 | 1.06 | % | |||||||
| $ | 20,767,580 | $ | 16,640,300 | 1.33 | % | ||||||||
Global Science & Technology Fund | |||||||||||||
Acusphere, Inc. | Warrants | 7/29/04 - 10/20/04 | $ | — | $ | — | — | ||||||
BlueArc Corp., Series DD | Preferred Stock | 6/6/06 | 324,998 | 407,426 | 0.20 | % | |||||||
Incipient, Inc., Series D | Preferred Stock | 2/7/06 | 139,219 | 31,960 | 0.02 | % | |||||||
Montagu Newhall Global Partners II-B, L.P. | LP Interest | 10/10/03 - 9/5/07 | 312,144 | 286,800 | 0.14 | % | |||||||
Neutral Tandem, Inc., Series C | Preferred Stock | 2/2/06 | 111,107 | 111,107 | 0.05 | % | |||||||
Point Biomedical Corp. | Warrants | 2/16/05 | — | — | — | ||||||||
Point Biomedical Corp. | Warrants | 5/11/07 | — | 8,999 | 0.01 | % | |||||||
Point Biomedical Corp., Series F | Preferred Stock | 2/16/05 | 150,000 | 64,151 | 0.03 | % | |||||||
Point Biomedical Corp., Series G | Preferred Stock | 5/11/07 | 15,723 | 6,724 | — | ||||||||
QRSciences Holdings Ltd. | Warrants | 2/7/07 | — | — | — | ||||||||
Xtera Communications, Inc., Series A-1 | Preferred Stock | 9/3/03 | 7,076 | 7,076 | — | ||||||||
| $ | 1,060,267 | $ | 924,243 | 0.45 | % | ||||||||
International Growth Fund | |||||||||||||
Redcorp Ventures Ltd. | Warrants | 7/5/07 | $ | — | $ | — | — | ||||||
International Opportunities Fund | |||||||||||||
QRSciences Holdings Ltd. | Warrants | 2/7/07 | $ | — | $ | — | — | ||||||
Redcorp Ventures Ltd. | Warrants | 7/5/07 | — | — | — | ||||||||
Star Asia Finance Ltd. | Common Stock | 2/22/07 | 607,350 | 561,799 | 1.00 | % | |||||||
| $ | 607,350 | $ | 561,799 | 1.00 | % | ||||||||
Micro Cap Fund | |||||||||||||
Cardica, Inc. | Warrants | 6/7/07 | $ | 19,380 | $ | 433,417 | 0.07 | % | |||||
CryoCor, Inc. | Warrants | 4/24/07 | 7,435 | — | — | ||||||||
Familymeds Group, Inc. | Warrants | 12/1/04 | — | — | — | ||||||||
Goldwater Bank, N.A. | Common Stock | 2/28/07 | 1,540,000 | 1,540,000 | 0.24 | % | |||||||
Point Biomedical Corp. | Warrants | 2/16/05 | — | — | — | ||||||||
Point Biomedical Corp. | Warrants | 5/11/07 - 9/7/07 | — | 94,708 | 0.02 | % | |||||||
Point Biomedical Corp., Series F | Preferred Stock | 2/16/05 | 1,000,000 | 427,674 | 0.07 | % | |||||||
Point Biomedical Corp., Series G | Preferred Stock | 5/11/07 - 9/7/07 | 165,478 | 70,770 | 0.01 | % | |||||||
| $ | 2,732,293 | $ | 2,566,569 | 0.41 | % | ||||||||
Micro Cap Value Fund | |||||||||||||
Acusphere, Inc. | Warrants | 7/29/04 - 10/20/04 | $ | — | $ | — | — | ||||||
Cardica, Inc. | Warrants | 6/7/07 | 9,302 | 208,042 | 0.17 | % | |||||||
CryoCor, Inc. | Warrants | 4/24/07 | 1,859 | — | — | ||||||||
Electro-Optical Sciences, Inc. | Warrants | 10/31/06 | — | — | — | ||||||||
Familymeds Group, Inc. | Warrants | 12/1/04 | — | — | — | ||||||||
Farallon Resources Ltd. | Warrants | 12/21/06 | — | — | — | ||||||||
Goldwater Bank, N.A. | Common Stock | 2/28/07 | 419,000 | 419,000 | 0.35 | % | |||||||
Idaho Trust Bancorp | Common Stock | 8/30/06 | 500,004 | 500,004 | 0.42 | % | |||||||
Point Biomedical Corp. | Warrants | 2/16/05 | — | — | — | ||||||||
Point Biomedical Corp. | Warrants | 5/11/07 - 9/7/07 | — | 18,942 | 0.02 | % | |||||||
Point Biomedical Corp., Series F | Preferred Stock | 2/16/05 | 200,000 | 85,535 | 0.07 | % | |||||||
Point Biomedical Corp., Series G | Preferred Stock | 5/11/07 - 9/7/07 | 33,095 | 14,154 | 0.01 | % | |||||||
QRSciences Holdings Ltd. | Warrants | 2/7/07 | — | — | — | ||||||||
Redcorp Ventures Ltd. | Warrants | 7/5/07 | — | — | — | ||||||||
| $ | 1,163,260 | $ | 1,245,677 | 1.04 | % | ||||||||
92
| SEPTEMBER 30, 2007 | ||
9. RESTRICTED SECURITIES (continued)
| Security Type | Acquisition Date | Acquisition Cost | Fair Value | Value as % of Net Assets | |||||||||
Small Cap Growth Fund | |||||||||||||
Bravo Health, Inc., Series G | Preferred Stock | 11/1/04 | $ | 571,428 | $ | 571,428 | 0.05 | % | |||||
Fluidigm Corp., Series E | Preferred Stock | 12/22/06 | 2,500,000 | 2,500,000 | 0.23 | % | |||||||
Incipient, Inc., Series D | Preferred Stock | 2/7/06 | 1,860,778 | 427,170 | 0.04 | % | |||||||
Montagu Newhall Global Partners II-B, L.P. | LP Interest | 10/10/03 - 9/5/07 | 3,121,435 | 2,868,000 | 0.27 | % | |||||||
Montagu Newhall Global Partners III-B, L.P. | LP Interest | 3/16/06 - 8/7/07 | 420,000 | 403,452 | 0.04 | % | |||||||
Nanosys, Inc., Series D | Preferred Stock | 11/8/05 | 2,000,000 | 2,000,000 | 0.19 | % | |||||||
Neutral Tandem, Inc., Series C | Preferred Stock | 2/2/06 | 1,485,102 | 1,485,102 | 0.14 | % | |||||||
Orexigen Therapeutics, Inc. PIPE, Series C | Preferred Stock | 11/21/06 | 1,000,001 | 1,783,407 | 0.16 | % | |||||||
Orqis Medical Corp., Series D | Preferred Stock | 2/28/07 | 1,200,000 | 840,000 | 0.08 | % | |||||||
Point Biomedical Corp. | Warrants | 2/16/05 | — | — | — | ||||||||
Point Biomedical Corp. | Warrants | 5/11/07 | — | 119,984 | 0.01 | % | |||||||
Point Biomedical Corp., Series F | Preferred Stock | 2/16/05 | 2,000,000 | 855,347 | 0.08 | % | |||||||
Point Biomedical Corp., Series G | Preferred Stock | 5/11/07 | 209,642 | 89,658 | 0.01 | % | |||||||
TargetRX, Inc., Series D | Preferred Stock | 4/8/05 | 769,098 | 504,267 | 0.05 | % | |||||||
Indevus Pharmaceuticals, Inc. | Rights | 2/1/06 - 2/2/06 | 406,537 | — | — | ||||||||
Zonare Medical Systems, Inc. | Warrants | 6/30/04 | — | — | — | ||||||||
Zonare Medical Systems, Inc., Series E | Preferred Stock | 6/30/04 | 1,500,000 | 1,343,162 | 0.12 | % | |||||||
| $ | 19,044,021 | $ | 15,790,977 | 1.47 | % | ||||||||
Small Cap Value Fund | |||||||||||||
Redcorp Ventures Ltd. | Warrants | 7/5/07 | $ | — | $ | — | — | ||||||
Solar Capital, LLC | Common Stock | 3/7/07 | 7,079,100 | 7,079,100 | 1.07 | % | |||||||
Star Asia Finance Ltd. | Common Stock | 2/22/07 | 6,000,000 | 5,550,000 | 0.84 | % | |||||||
| $ | 13,079,100 | $ | 12,629,100 | 1.91 | % | ||||||||
Strategic Income Fund | |||||||||||||
Goldwater Bank, N.A. | Common Stock | 2/28/07 | $ | 81,000 | $ | 81,000 | 0.34 | % | |||||
Redcorp Ventures Ltd. | Corporate Bond | 7/5/07 | 282,956 | 255,928 | 1.09 | % | |||||||
Solar Capital, LLC | Common Stock | 3/7/07 | 294,000 | 294,000 | 1.24 | % | |||||||
Star Asia Finance Ltd. | Common Stock | 2/22/07 | 342,650 | 316,951 | 1.34 | % | |||||||
| $ | 1,000,606 | $ | 947,879 | 4.01 | % | ||||||||
Ultra Growth Fund | |||||||||||||
Bravo Health, Inc., Series G | Preferred Stock | 11/1/04 | $ | 571,428 | $ | 571,428 | 0.21 | % | |||||
Electro-Optical Sciences, Inc. | Warrants | 10/31/06 | — | — | — | ||||||||
Farallon Resources Ltd. | Warrants | 12/21/06 | — | — | — | ||||||||
Montagu Newhall Global Partners II-B, L.P. | LP Interest | 10/10/03 - 9/5/07 | 2,809,292 | 2,581,200 | 0.96 | % | |||||||
Montagu Newhall Global Partners III-B, L.P. | LP Interest | 3/16/06 - 8/7/07 | 420,000 | 403,452 | 0.15 | % | |||||||
Nanosys, Inc., Series D | Preferred Stock | 11/8/05 | 500,001 | 500,001 | 0.19 | % | |||||||
Neutral Tandem, Inc., Series C | Preferred Stock | 2/2/06 | 403,796 | 403,796 | 0.15 | % | |||||||
Ophthonix, Inc., Series C | Preferred Stock | 9/23/05 | 500,000 | 500,000 | 0.19 | % | |||||||
Point Biomedical Corp. | Warrants | 2/16/05 | — | — | — | ||||||||
Point Biomedical Corp., Series F | Preferred Stock | 2/16/05 | 1,500,000 | 641,510 | 0.24 | % | |||||||
Redcorp Ventures Ltd. | Warrants | 7/5/07 | — | — | — | ||||||||
TargetRX, Inc., Series D | Preferred Stock | 4/8/05 | 230,904 | 151,395 | 0.06 | % | |||||||
TherOx, Inc., Series I | Preferred Stock | 7/7/05 | 1,000,000 | 1,290,242 | 0.48 | % | |||||||
Transoma Medical, Inc., Series B | Preferred Stock | 1/20/06 | 475,001 | 604,823 | 0.22 | % | |||||||
Xtera Communications, Inc., Series A-1 | Preferred Stock | 9/3/03 | 99,065 | 99,065 | 0.04 | % | |||||||
Zonare Medical Systems, Inc. | Warrants | 6/30/04 | — | — | — | ||||||||
Zonare Medical Systems, Inc., Series E | Preferred Stock | 6/30/04 | 1,000,000 | 895,441 | 0.33 | % | |||||||
| $ | 9,509,487 | $ | 8,642,353 | 3.22 | % | ||||||||
L.P. Limited Partnership Interest
PIPE Private Investment in a Public Equity
93
| WASATCH FUNDS — Notes to Financial Statements (continued) | SEPTEMBER 30, 2007 | |
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, 2007 were $185,000, $1,850,000, and $1,665,000, respectively. Securities held by the 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 Bravo Health, Inc., Series G Pfd. The remaining commitment amounts at September 30, 2007 were $428,572 per Fund. Securities held by the 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, 2007 were $1,080,000 per Fund. Securities held by the 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 and Ultra Growth Funds, 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 $1,202,820 and $361,190, respectively, based on future events occurring on or before December 31, 2007.
12. LINEOF CREDIT
The Equity Funds opened a $75,000,000 Line of Credit (the “Line”), of which $50,000,000 is committed, with State Street Bank and Trust Company on June 4, 2007. The Line is for temporary or emergency purposes such as to provide liquidity for shareholder redemptions. The Equity Funds incur commitment fees on the undrawn portion of the committed part of the Line, and interest expense to the extent of amounts drawn (borrowed) under the entire Line. Interest is based on the federal funds rate in effect at the time of borrowing, plus a margin. Commitment fees are pro-rated among the Equity Funds based upon relative average net assets. Interest expense is charge directly to a Fund based upon actual amounts borrowed by the Fund.
The following Funds had borrowings:
| Fund | Average Daily Borrowings | Number of Days Outstanding | Interest Expense | Weighted Average Annualized Interest Rate | Balance at September 30, 2007 | |||||||||
Core Growth | $ | 8,589,000 | 1 | $ | 1,372 | 5.75 | % | $ | — | |||||
Heritage Growth | 1,455,600 | 5 | 1,143 | 5.65 | % | 1,451,000 | ||||||||
Micro Cap Value | 1,464,875 | 8 | 1,726 | 5.30 | % | — | ||||||||
Small Cap Growth | 4,230,386 | 44 | 29,738 | 5.75 | % | — | ||||||||
Small Cap Value | 2,104,636 | 22 | 7,233 | 5.62 | % | — | ||||||||
Strategic Income | 353,680 | 25 | 1,417 | 5.77 | % | — | ||||||||
Ultra Growth | 2,187,222 | 18 | 6,358 | 5.81 | % | — | ||||||||
94
| WASATCH FUNDS — Report of Independent Registered Public Accounting Firm | SEPTEMBER 30, 2007 | |
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, and Wasatch Heritage Value Fund (constituting Wasatch Funds, Inc., hereafter referred to as the “Funds”) at September 30, 2007, 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 indicated, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Kansas City, MO
November 20, 2007
95
| WASATCH FUNDS — Directors and Officers | ||
MANAGEMENTOFTHE COMPANY
Management Information. The business affairs of Wasatch Funds are supervised by its Board of Directors. The Board consists of four directors who are elected and serve until their successors are elected and qualified.
The directors and executive officers of Wasatch Funds and their principal occupations for at least the last five years are set forth below.
| Name, Address and Age | Position(s) Held with Funds | Term of Office1 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 Director2 | |||||
Interested Director | ||||||||||
Samuel S. Stewart, Jr., Ph.D. CFA3 150 Social Hall Ave. 4th Floor Salt Lake City, UT 84111 Age 65 | 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. | 14 | None | |||||
Independent Directors | ||||||||||
James U. Jensen, J.D., MBA 44 North Wolcott Salt Lake City, UT 84103 Age 63 | 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. | 14 | Private companies and foundations only. | |||||
William R. Swinyard, Ph.D. 470 S. Woodland Hills Drive Woodland Hills, UT 84653 Age 67 | 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. | 14 | None | |||||
D. James Croft, Ph.D. 9209 Hidden Creek Drive Great Falls, VA 22066-2211 Age 65 | Director | Indefinite Served as Director since 2005 | Consultant since 2004 and Founder and Executive Director, Mortgage Asset Research Institute from 1990 to 2004. | 14 | None | |||||
1 | Director may serve until his death, resignation, removal or retirement. Each Independent Director shall retire as Director at the end of the calendar year in which he attains the age of 72 years. |
2 | Directorships are those held by a Director in any company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or subject to the requirements of Section 15(d) of the Securities Exchange Act or any company registered as an investment company under the 1940 Act. |
3 | Mr. Stewart is an Interested Director because he serves as a director and officer of the Advisor. |
96
| WASATCH FUNDS — Directors and Officers (continued) | ||
| 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 | |||||
Officers | ||||||||||
Venice F. Edwards, CFA 150 Social Hall Ave. 4th Floor Salt Lake City, UT 84111 Age 57 | Vice President | Indefinite Served as Vice President since September 2004 | Senior Compliance Officer for the Advisor since 2006; Chief Compliance Officer for the Advisor from 2004 to 2006; Treasurer of the Funds from 1996 to 2007; Director of Compliance for the Advisor from 1995 to 2004 and Secretary of the Advisor since 1999. | Not Applicable | Not Applicable | |||||
Daniel D. Thurber 150 Social Hall Ave. 4th Floor Salt Lake City, UT 84111 Age 38 | Vice President | Indefinite Served as Vice President since February 2007 | General Counsel, Chief Compliance Officer and Director of Compliance for the Advisor since 2006; Chief Compliance Officer and Secretary for Wasatch Funds from May 2006 to February 2007; Associate and Partner at Dorsey & Whitney LLP from 2001 to 2006. | Not Applicable | Not Applicable | |||||
Russell Biles 150 Social Hall Ave. 4th Floor Salt Lake City, UT 84111 Age 40 | Chief Compliance Officer and Vice President | Served as Chief Compliance Officer and Vice President since February 2007 | Chief Compliance Officer and Vice President for Wasatch Funds since February 2007; Counsel for the Advisor since October 2006; Senior Compliance Administrator for the Advisor from October 2005 to October 2006; Attorney and Managing Member of Nicholls Nicholls Biles & Bower, LLC from 2002 to 2005 | Not Applicable | Not Applicable | |||||
Melanie H. Zimdars 150 Social Hall Ave. 4th Floor Salt Lake City, UT 84111 Age 31 | Treasurer and Secretary | Indefinite Served as Treasurer and Secretary since February 2007 | Treasurer and Secretary for Wasatch Funds since February 2007; Assistant Treasurer for Wasatch Funds from November 2006 to February 2007; Senior Fund Administrator for the Advisor since 2005; Compliance Officer at U.S. Bancorp Fund Services, LLC from 2001 to 2005. | Not Applicable | Not Applicable | |||||
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.
97
| WASATCH FUNDS — Supplemental Information | SEPTEMBER 30, 2007 | |
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).
BOARD APPROVAL DISCLOSUREFORTHE HERITAGE VALUE FUND
At a meeting held on August 29, 2007 (the “August Meeting”), the Board of Directors of Wasatch Funds, Inc. (the “Company”), including the Independent Directors, unanimously approved the Advisory and Service Contract (the “Advisory Contract”) between the Company on behalf of the Heritage Value Fund (the “New Fund”) and Wasatch Advisors, Inc. (the “Advisor”). To assist the Board in its evaluation of the Advisory Contract, the Independent Directors received materials and other information, in adequate time in advance of the August Meeting, which outlined, among other things:
| • | the terms and conditions of the Advisory Contract, including the nature, extent and quality of services to be provided to the New Fund by the Advisor; |
| • | the organization and business operations of the Advisor, including the experience of persons who will manage the New Fund; |
| • | the proposed management fees of the Advisor, including comparisons of such fees with the management fees of comparable, unaffiliated funds prepared by an independent third party; |
| • | the projected expenses of the New Fund, including comparisons with the expense ratios of comparable, unaffiliated funds compiled by an independent third party; |
| • | the profitability of the Advisor for advisory services; and |
| • | the soft dollar practices of the Advisor. |
In addition to the foregoing materials, independent legal counsel to the Independent Directors provided, in advance of the meeting, a legal memorandum outlining, among
other things, the duties of the Independent Directors under the Investment Company Act of 1940, as amended (the “1940 Act”), as well as the general principles of relevant state law in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; an advisor’s fiduciary duty with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards of directors have fulfilled their duties and factors to be considered by the board in voting on advisory agreements.
At a meeting held on May 11, 2007 (the “May Meeting”), the Board received materials describing the philosophy, investment objectives and strategies of the New Fund. At the May Meeting, the Advisor made a presentation to, and responded to questions from, the Board regarding the proposed New Fund. The Independent Directors met with the portfolio managers designated for the New Fund to discuss, among other things, the New Fund’s investment objectives, strategies and experience of the team. At the August Meeting, the Advisor further explained its investment strategies for the New Fund, discussed market conditions, described proposed fees and expenses, highlighted any changes from the previous presentation at the May Meeting and responded to questions from the Board.
During the previous day and then again after reviewing the written materials and discussing issues pertaining to the proposed approval of the Advisory Contract with representatives of the Advisor, the Independent Directors met privately with their legal counsel to review the Board’s duties in reviewing advisory contracts and consider approval of the Advisory Contract on behalf of the New Fund. It is with this background that the Independent Directors considered the approval of the Advisory Contract for the New Fund.
The Independent Directors, in consultation with independent counsel, reviewed the factors set out in judicial decisions and SEC directives relating to the approval of advisory contracts. As outlined in more detail below, the Independent Directors considered all factors they believed relevant with respect to the New Fund, including the following: (a) the nature, extent and quality of the services to be provided by the Advisor; (b) the performance of the Advisor; (c) the costs of the services to be provided and profits estimated to be realized by the Advisor and its affiliates; (d) the extent to which economies of scale may be realized as the New Fund grows; and (e) whether fee levels reflect any such economies of scale.
With respect to the nature, extent and quality of services to be provided by the Advisor, the Independent Directors reviewed the information regarding the types of services (advisory and non-advisory or administrative) to be provided under the Advisory Contract for the New Fund; narrative and statistical information concerning the Advisor’s performance record with other funds it advises; and information describing the Advisor’s organization and business. As noted above, the Independent Directors met at the May Meeting with the proposed lead manager for the New Fund and reviewed and evaluated their professional experience, qualifications and credentials. Further, given the
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| SEPTEMBER 30, 2007 | ||
Independent Directors’ experience with other Wasatch funds, the Independent Directors noted that they were familiar with and have a good understanding of the organization, operations and personnel of the Advisor, including its research department and personnel. Based on their review, the Independent Directors concluded that, overall, the nature, extent and quality of services expected to be provided to the New Fund under the Advisory Contract were satisfactory.
With respect to investment performance, it was noted that because the New Fund had not commenced operations and does not yet have its own performance history, the Board reviewed and considered performance information regarding the Advisor’s past performance record with other funds.
In evaluating the proposed management fees and expenses, the Independent Directors considered the New Fund’s proposed management fees and expected expense ratio in absolute terms and as compared with the fees and expenses of a peer group of comparable unaffiliated funds provided by an independent third party. In addition, the Independent Directors considered the expense limitation agreement provided by the Advisor on behalf of the New Fund. Although the Advisor does not currently manage other funds or separately managed accounts with the same investment style as the New Fund, the Independent Directors had at previous meetings reviewed the fees charged by the Advisor for non-mutual fund institutional clients and for “high net worth” separate accounts and were familiar with the fees the Advisor assesses to these other clients. Based upon this information, the Independent Directors noted that the Heritage Value Fund had advisory fees and an estimated expense ratio lower than the median advisory fees and expense ratio of its peer group. The Independent Directors also considered the costs of the research intensive approach followed by the Advisor, the overall expense structure of the New Fund and peer group, and the overall expense limitation provided by the Advisor.
In conjunction with its review of fees, the Independent Directors also considered the profitability of the Advisor for its advisory services provided to Wasatch Funds. The Independent Directors reviewed information provided by the Advisor concerning the estimated revenue to the Advisor as a result of the proposed relationship with the New Fund. The Independent Directors also reviewed the revenues and expenses of the Advisor for advisory services to Wasatch Funds for the calendar year ending December 31, 2006 and the allocation methodology used in preparing the profitability data. In reviewing profitability, the Independent Directors recognized the subjective nature of determining profitability, which may be affected by numerous factors including the allocation of expenses. The Independent Directors also recognized the difficulties in making comparisons, as the profitability from other advisors generally is not publicly available and the profitability information that is available for certain advisors or management firms may not be representative of the industry and may be affected by,
among other things, the advisor’s particular business mix, capital costs, types of funds managed and expense allocations. The Independent Directors also noted that the Advisor is privately held and is taxed as a Subchapter S corporation, thus certain expenses had to be attributed and/or estimated. As noted below, in considering profitability, the Independent Directors also considered the effect of fall-out benefits (such as soft-dollar arrangements) on the Advisor’s expenses. The Independent Directors further considered the profitability of the Advisor before taxes and marketing expenses (including supermarket fees). Based on their review, the Directors were satisfied that the Advisor’s level of profitability was reasonable in light of the services to be provided.
In reviewing compensation, the Independent Directors noted that similar to other Wasatch funds, the advisory fee schedule for the New Fund did not contain breakpoints that reduce the fee rate on assets above specified levels. The Independent Directors recognized that breakpoints may be one way for the benefits of economies of scale to be shared with investors. The Independent Directors noted that most of the Wasatch Funds invest in small- and micro-cap securities, and that, traditionally, the Advisor has periodically closed certain equity funds at asset levels it believes necessary or appropriate to manage the respective fund effectively. The Independent Directors noted, however, that the Advisor does not expect, based on current market conditions, that it will need to close the New Fund to control asset levels in the near term since the New Fund is not expected to experience the same capacity constraints. The Independent Directors also are aware of the Advisor’s position that for small-cap funds, the fees reflect the limited profit potential and research personnel-intensive process and for large-cap funds, the fees reflect the potential economies that may be received over time as assets grow. Considering the above, the Independent Directors concluded that the absence of breakpoints in the New Fund’s advisory fee schedule was acceptable.
In evaluating fees, the Independent Directors also considered any indirect benefits or profits the Advisor or its affiliates may receive as a result of their relationship with the New Fund. In this regard, in connection with their experience with the Advisor for other Wasatch Funds, the Independent Directors have previously reviewed information concerning the Advisor’s soft dollar arrangements, including its policies for allocating for brokerage and research services. In light of their experience, the Independent Directors are familiar with the Advisor’s soft dollar arrangements and recognize that the Advisor’s profitability may be lower if the Advisor was required to pay for this research with hard dollars.
The Independent Directors did not identify any single factor discussed previously as all-important or controlling. The Directors, including a majority of Independent Directors, concluded that the terms of the Advisory Contract were fair and reasonable, that the Advisor’s fees are reasonable in light of the services expected to be provided to the New Fund, and that the Advisory Contract should be and was approved.
99
| WASATCH FUNDS — Service Providers | SEPTEMBER 30, 2007 | |
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.
1290 Broadway, Suite 1100
Denver, CO 80203
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
100
| 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 98. 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 informa- tion 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 amount 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 102.
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 the 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
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| SEPTEMBER 30, 2007 | ||
Assets show the increase or decrease in a Fund’s net assets during the reporting period. Investment operations, 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 sharehold-ers 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 distribu- tions. 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 101. 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.
| ||
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
102
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, 2007 and September 30, 2006 were $231,606 and $220,700, 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, 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. The Registrant was not billed any fees by the independent registered public accounting firm for the fiscal year ended September 30, 2007 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, 2007 and 2006, 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, 2007 and September 30, 2006 were $58,289 and $49,583, 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, 2007 and 2006, 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 - The aggregate fees billed for professional services rendered by the independent public accounting firm to the Registrant regarding the implementation of Financial Accounting Standards Board Release No. 48 for the fiscal year ended September 30, 2007 was $1,928. There were no fees billed for the fiscal year ended September 30, 2006 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, 2007 and 2006, 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, 2007 and 2006 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, 2007
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, 2007
| By: | /s/ Melanie H. Zimdars | |
| Melanie H. Zimdars | ||
| Secretary/Treasurer (principal financial and accounting officer) of Wasatch Funds, Inc. |
Date: November 29, 2007