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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, 2008
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| Item 1: | Report to Shareholders. |
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| ANNUAL REPORT |
| SEPTEMBER 30, 2008 | WASATCH CORE GROWTH FUND | |
| WASATCH EMERGING MARKETS SMALL CAP 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 | ||
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WASATCH FUNDS, INC.
Salt Lake City, Utah
www.wasatchfunds.com
800.551.1700
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| TABLEOF CONTENTS | ||
| 2 | ||
| 4 | ||
| 5 | ||
Wasatch Emerging Markets Small Cap Fund™ Management Discussion | 6 | |
| 7 | ||
Wasatch Global Science & Technology Fund® Management Discussion | 8 | |
| 9 | ||
| 10 | ||
| 11 | ||
| 12 | ||
| 13 | ||
| 14 | ||
| 15 | ||
Wasatch International Opportunities Fund® Management Discussion | 16 | |
| 17 | ||
| 18 | ||
| 19 | ||
| 20 | ||
| 21 | ||
| 22 | ||
| 23 | ||
| 24 | ||
| 25 | ||
| 26 | ||
| 27 | ||
| 28 | ||
| 29 | ||
Wasatch-Hoisington U.S. Treasury Fund® Management Discussion | 30 | |
| 31 | ||
| 32 | ||
| 34 | ||
| 66 | ||
| 69 | ||
| 72 | ||
| 78 | ||
| 85 | ||
| 96 | ||
| 97 | ||
| 99 | ||
| 99 | ||
| 99 | ||
| 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.
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| LETTERTO SHAREHOLDERS | ||
Samuel S. Stewart, Jr., PhD, CFA® President of
| DEAR FELLOW SHAREHOLDERS:
What a week, month, quarter, and year it’s been for the stock market! Let me start by confirming that the Wasatch Funds do not have direct investments in the big financial firms that have recently been in the news — Fannie Mae, Freddie Mac, Lehman, AIG, WaMu, and Wachovia, nor do we own any of the Collateralized Debt Obligations (CDOs) or other mortgage-related securities that you’re hearing mentioned so often. However, our holdings are always subject to risk, and we will all be individually affected by this financial crisis as will the Wasatch Funds you own. The financial crisis has reached a new level as many of our country’s biggest financial institutions teeter on the edge of insolvency. Those who have heard me over the years know that I’m not a big supporter of government meddling, but this situation is quite serious and requires some form of intervention to keep our financial system from collapsing. Beyond simply the bad subprime mortgage loans that were made, we have seen how mortgage securitization, mark-to-market accounting rules, and the lack of enforcement against illegal short selling have all played a meaningful role in turning a small percentage of bad loans into a broad financial meltdown. To give perspective on the magnitude of this crisis, Lehman had $613 billion in liabilities when it recently filed for bankruptcy. WorldCom, previously the largest corporate bankruptcy, owed just $34 billion. The |
Resolution Trust Corporation — the government entity that led the resolution of the Savings and Loan crisis in the 1980s — ended up shuttering over 700 firms, but the total assets of all those companies combined were still $245 billion less than Lehman’s assets alone. Yet, of all the firms currently in trouble, Lehman was judged to be small enough to let fail. This crisis clearly hits at the major infrastructure of our financial system.
Japan faced a financial crisis in the 1990s and failed to deal with it in a timely and effective manner. As a result, the Japanese economy has suffered for a decade and is still not completely out of the woods. The U.S. government needs to swiftly end the self-perpetuating downward spiral and restore confidence in the fundamentals of our financial system. Will a rescue plan be completely fair? No. Should we be upset about bailing out the bad decisions and poor oversight of others? Absolutely. But not supporting our financial system has much deeper consequences to our economy and to us as individuals. Those who are responsible should be held accountable, remuneration to taxpayers should happen to the fullest extent possible, and mechanisms must be put in place to prevent such reckless behavior in the future. Unfortunately, letting these large financial institutions collapse would poison the blood stream of our economy.
The financial crisis creates a pretty bleak landscape, but if you look past it, the underlying economy, although weakening, is still hanging on. We are not officially in a recession; as most economists believe that gross domestic product (GDP) grew slightly during the third quarter. Unemployment has risen to 6.1%, but is still not high in historical terms. Inflation remains reasonably in check. Oil prices have retreated over the last couple of months, and government actions should continue to be stimulative. Needless to say, the resolution of the financial crisis is pivotal to our future economy. With the government’s intervention I expect the economy will still remain weak over the near-term, but it will allow us to begin the recovery process.
We are a country that overcomes challenges. Recall the 1980s when we saw double-digit unemployment, double-digit inflation, and an S&L collapse. We learned good lessons and built a stronger economy from those experiences. The market responded with the S&P 500 Index posting a 17.6% annualized return over that same decade. I know that it is difficult to see past the storm when the eye is upon you, but this country was built to withstand such storms. I just expect it will take us time to re-build.
GLOBAL MARKETS
The U.S. financial crisis has clearly had global impact. With the financial backbone of the global economy in question, investors have been taking a closer look at foreign stock markets. Over the last couple of years many foreign markets had become somewhat overvalued due to speculative buying. This speculative bubble burst, with the MSCI All Country World Ex-U.S.A. Small Cap Index down over 25% in the third quarter, and dropping nearly 35% so far in 2008.
Although many foreign markets were overvalued, I believe this retreat has swung too far the other way. The MSCI World Ex-U.S.A. Small Cap Index now trades at an average price-to-earnings (P/E) ratio of just 6.7. This is the lowest P/E at quarter-end since September of 2001, and is far below last September’s P/E ratio of 17.2 as well this decade’s average P/E of 14.9. The Chinese market is a good example of the over-reaction — off 56% this year due primarily to two exaggerated investor concerns:
| 1) | That China’s growth is slowing — True, but it will still remain one of the fastest growing economies, growing at perhaps 8% instead of 10%. |
| 2) | That the Chinese economy is dependent on exports — China actually consumes much more than it exports, and the country’s growth will continue to drive internal consumption. |
With the S&P 500 down another 8% this quarter the U.S. market is starting to feel cheap, but in comparison, many foreign markets are now even cheaper.
WASATCH PERFORMANCE
To say that we’re disappointed in our performance over the last year would be an understatement. This has been one of the toughest periods we’ve ever faced. I offer my profound apology and my commitment that we have never worked harder to make sure that we are filling your Fund with the highest quality companies.
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| SEPTEMBER 30, 2008 | ||
The year has been rough for most active managers due to the market’s narrow focus — with big swings in energy and finance. The biggest macro challenge for Wasatch has been our underweight position in energy. This sector continued rising through the first half of the year. Then in the third quarter when oil prices and energy stocks finally began to retreat, our funds were hit by the rapid drop in international stock markets.
In turbulent times like these it is critical that we stay focused on the elements that we can most control. So let me share with you what we’re doing to be better positioned for the future:
| • | We are shortening our list of holdings, and focusing on what we believe are the highest quality companies — those that will be least impacted by a weak economy. We have reduced our number of holdings by roughly 25% across the firm. |
| • | We are paying closer attention to valuation. Valuation has always been a Wasatch pillar, but over the last year we have watched too many of our companies grow their earnings yet decline in value due to unexpected P/E compression. As we narrow our lists we are trying to avoid companies that appear to have further room for P/E declines. |
| • | We are letting the numbers speak for themselves. The few stocks that we look back on this year and say “we blew it” were generally because we failed to heed the signals in the numbers — we talked ourselves into believing a different picture. The numbers must support our long-term thesis, and we will use greater diligence to make sure they do. |
The frustration that I’ve alluded to in our performance ties back to our fundamental belief that over time earnings growth drives stock prices. We continue to see companies deliver earnings growth without being rewarded for it. It reminds us of a beach ball held under water struggling to get back to the surface. Imagine that more air (i.e. earnings growth) is continuously being pumped into the beach ball — we believe it is only a matter of time before the ball simply has to shoot out of the water.
Our Funds feel very inexpensive today. As an example, the Wasatch Small Cap Growth Fund hasn’t carried a P/E ratio this low in over a decade. Yet, its realized earnings growth has remained in the 13% to 17% range for the last four quarters. When there are positive economic signs on the horizon I believe we’ll see the beach ball begin moving toward the surface.
Predicting market gyrations is beyond our scope at Wasatch. It is in volatile times where we find it particularly helpful to keep a long-term focus, look for irrational valuation opportunities, and take comfort knowing that over time the market generally goes up. We believe we are well positioned for that future.
Thank you for your calm approach and continued trust during this turbulent year.
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 30 and 31. 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.
Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. A Recession is officially defined as two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP).
A Price-to-Earnings Ratio (P/E) is a valuation ratio of a company’s current share price compared to its per-share earnings, calculated as: Price per Share/ Earnings per Share (EPS). For example, if a company is currently trading at $30 a share and earnings over the last 12 months were $2.00 per share, the P/E ratio for the stock would be 15. EPS is usually taken from the last four quarters (trailing P/E).
CFA® | is a registered trademark owned by CFA Institute. |
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| WASATCH CORE GROWTH FUND (WGROX) — Management Discussion | SEPTEMBER 30, 2008 | |
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 returned -24.82% during the 12-month period ended September 30, 2008, and underperformed the -14.48% return of its benchmark, the Russell 2000 Index. Despite outperforming their |
large company peers during the past year, small company stocks were pressured by the same worries that affected all segments of the market. The combination of a deepening credit crisis, a lack of liquidity across debt markets, the failure of numerous high-profile financial institutions, and unprecedented levels of government intervention all increased the likelihood that an already weak U.S. economy would slip into a deep recession. These factors weighed heavily on stock prices, causing the Russell 2000 Index to close September at a level just shy of its low for the past three years.
DETAILSOFTHE YEAR
A large portion of the Fund’s underperformance of the Russell 2000 Index was the result of its positioning in the financials sector, where investors showed little discrimination between high- and low-quality companies or among the many different types of financial businesses. The result was that the Fund’s holdings underperformed the broader financials sector by a wide margin. Asset manager SEI Investments and finance company KKR Financial Holdings were the notable detractors, despite having solid outlooks for earnings growth. In our view, market prices did not accurately reflect the intrinsic value of such businesses because investors’ fear caused higher-quality financial companies to be “thrown out” along with other, less attractive companies.
The industrials sector was another challenging area for the Fund. The primary reason for our underperformance in this segment was weakness in two engineering and construction (E&C) stocks: Chicago Bridge & Iron Co. and URS Corp. These stocks sold off with the broader E&C industry on the expectation that slowing global growth would lead to a downturn in infrastructure spending. But as is the case with our holdings in financials, we believe the recent stock price performance of these companies does not reflect the strength in their underlying businesses.
The Fund’s position in international stocks, which were hit hard by the combination of slowing growth and a strengthening U.S. dollar, also was a drag on its return. Despite the underperformance of this segment of the Fund, we continue to see the international markets as being fertile
ground for the types of fast-growing, stable companies in which we seek to invest.
The Fund had a number of bright spots during the 12-month period. Most notable among these was our performance in the consumer discretionary sector, an area of the market that has been a veritable minefield for investors amid rising evidence of a slowdown in consumer spending. Our leaders in this sector were Jos. A. Bank Clothiers and Aaron Rents. The top individual contributor for the year was Copart, a leading provider of auto salvage auction services in the United States. The Fund’s investment in Emeritus, an operator of assisted living facilities, also did well. Current and future portfolio holdings are subject to risk.
OUTLOOK
We are clearly disappointed with the Fund’s results of the past year. During a period of broader market turmoil — a time when the stocks of high-quality companies would normally be expected to outperform — the results of our stocks failed to show the underlying strength of the companies held in the Fund. We strongly believe that this disconnection in stock price performance and company fundamentals is a short-term anomaly, and we expect that our focus on fundamentals will ultimately be reflected in improved results.
Two key factors form the basis for our optimistic view. First, we expect the companies in the Fund to deliver average annual earnings growth of approximately 18% over the next 12 months. While earnings growth estimates for the broader small cap market will likely fall in the months ahead as the economy slows, we feel confident in our individual company projections. We have redoubled our research efforts to confirm expectations for each of the companies held in the Fund, and have eliminated positions where we felt the earnings outlook was in question. The Fund is now more concentrated than it has been in several years as we continue to move capital into our highest-conviction holdings.
The second factor underlying our outlook is that the Fund’s holdings are attractively valued overall. The Fund’s forward price-to-earnings (P/E) ratio* was approximately 14 at the end of September, which is near the lowest levels in its history. Given our expectation for 18% earnings growth, this placed the Fund’s P/E-to-growth rate ratio** at about 0.8 —nearly 20% below what we view as an attractive level.
Together, these factors form the basis for our favorable outlook despite the Fund’s poor performance of the past year. While we remain cautious regarding the general environment for U.S. stocks, we believe our investment process and research discipline can help us identify attractive opportunities even in the toughest markets. We are convinced that our emphasis on high-quality companies whose stocks are trading at attractive prices has the potential to translate into solid long-term results.
Thank you for the opportunity to manage your assets.
* | The sum of the stock prices of the Fund’s holdings divided by the aggregate expected earnings per share of those holdings over the next 12 months, calculated as a weighted harmonic average. |
| ** | The P/E ratio divided by the estimated 5-year earnings per share growth rate. |
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| WASATCH CORE GROWTH FUND (WGROX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Core Growth | -24.82% | 3.68% | 11.47% | |||
Russell 2000 Index | -14.48% | 8.15% | 7.81% |
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 60 days 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 1.18%. 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 may have absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
Investing 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 | |
| Emeritus Corp. | 6.21% | |
| Pediatrix Medical Group, Inc. | 4.98% | |
| Copart, Inc. | 4.93% | |
| Annaly Capital Management, Inc. | 4.31% | |
| O’Reilly Automotive, Inc. | 4.12% |
| Company | % of Fund | |
| SEI Investments Co. | 3.82% | |
| Resources Connection, Inc. | 3.50% | |
| Pool Corp. | 2.69% | |
| Herbalife Ltd. (Cayman Islands) | 2.68% | |
| MSC Industrial Direct Co., Inc., Class A | 2.63% |
| * | As of September 30, 2008, the Fund had 39.87% invested in the Top 10 equity holdings and there were 57 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. 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 this or any index.
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| WASATCH EMERGING MARKETS SMALL CAP FUND (WAEMX) — Management Discussion | SEPTEMBER 30, 2008 | |
The Wasatch Emerging Markets Small Cap Fund is managed by a team of Wasatch portfolio managers, led by Roger D. Edgley.
Roger D. Edgley, CFA® Portfolio Manager |
OVERVIEW
The Wasatch Emerging Markets Small Cap Fund lost 37.88% in the 12 months ended September 30, 2008 versus a loss of 44.42% for the MSCI Emerging Markets Small Cap Index, which we use as our benchmark. The Fund was started just a year ago, to invest in small companies in emerging markets. Clearly, if we knew the year would have been like this, we would have started the Fund this October |
instead of a year ago, but our belief in the potential of this asset class remains unchanged. It has been a tremendously difficult year to invest, with no asset class or geographical area offering a safe haven for investors. Performance versus the Index was helped by the Fund’s cash position over the year, but also by the team’s performance across sectors. This was a year where little worked. In an environment where returns were strongly negative across all sectors and all regions, it was more a question of making the fewest negative returns possible.
It is hard to envision markets worse than this — with huge challenges for debt and stock markets as well as currencies. This was the first time in decades that the International Monetary Fund (IMF) helped a developed country (Iceland) and it has had to assist a number of countries in Eastern Europe which were affected by debt holders taking out foreign currency loans.
DETAILSOFTHE YEAR
Given the extent of the negative performance, there’s little to say about any specific holdings, but our weighting in certain regions and sectors helped our performance relative to the benchmark. In terms of geography, we were underweight in Asia, which helped performance significantly. Asia was the worst performing region in emerging markets, with stocks down over 48% for the Index. The benchmark’s Asia weighting averaged 62% with large parts of that in Taiwan and South Korea, where we were substantially underweight. Conversely, Latin America and the Middle East/Africa were significant areas of underperformance. Brazil is a major portion of the Fund’s and the Index’s Latin American weight, and the country’s economy was rolling along on the strength of oil prices earlier in the year. When oil prices fell quickly and significantly, stocks in Brazil were indiscriminately punished.
Compared to the Index, two of our best sectors for the year were information technology and consumer discretionary. One of our aims in managing the Fund is to do well in all sectors, and we were able to equal or outperform the Index in most sectors with the notable exceptions being energy and financials. These, of course, were the two most volatile sectors over the past year.
We build the Fund’s portfolio company by company, but the team pays much more attention to macro-economic factors than when investing in developed markets. Macro factors — when they turn negative in structurally weak countries — can overwhelm the stock market and the currency, so for a U.S. dollar investor, returns can be amplified by this. Analyzing country risk is part of our selection process and judgment. Russia, for example, has been an underweight area for the Fund due to our concerns regarding governance (or lack thereof). We have also reduced our weighting in South Africa, even though we see some well managed companies there, with macro-economic risks marked by fiscal and current-account deficits as well as increasing political risk.
OUTLOOK
It is worth emphasizing that the Wasatch team, since before the Fund’s inception, has believed strongly that emerging market small companies represent a real and long-term investment opportunity. This belief is even stronger today as values are compelling with a large number of stocks in our universe trading below companies’ book values.
We believe that the Fund’s outlook is promising. The stocks held in the Fund are very cheap. The financial systems of most of the countries we invest in (especially in Asia and Latin America) are obviously attempting to deal with a highly stressed environment, but they have not had the write-downs of bank assets characteristic of developed markets. The less evolved nature of banking systems in emerging markets means that they are not as sophisticated as the rest of the world-banks — they take deposits and make loans with a reasonable down payment. The highly leveraged, subprime securities that hurt the developed markets are not offered by emerging markets banks. We think it’s just a matter of time before investors recognize that these systems remain intact.
Finally, no discussion of emerging markets would be complete without mentioning China. In China, we are seeing a government pushing a balanced and stimulative approach to growing the economy by encouraging higher consumer expenditure and investment. The income growth of Chinese consumers remains an incredibly powerful story. China’s export growth will slow, but we do not see any scenario where it would completely offset domestic growth.
Thank you for the opportunity to manage your assets.
| CFA® is a registered trademark owned by CFA Institute. |
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| WASATCH EMERGING MARKETS SMALL CAP FUND (WAEMX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 10/1/07 | ||||
Emerging Markets Small Cap | -37.88% | N/A | -37.88% | |||
MSCI Emerging Markets Small Cap Index | -44.42% | N/A | -44.42% | |||
MSCI Emerging Markets Index | -33.20% | N/A | -33.20% |
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 60 days 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 Emerging Markets Small Cap Fund are 2.54%. 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 may have absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
Investing in foreign securities, especially in emerging markets, entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. Investing 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 | |
| Shandong Weigao Group Medical Polymer Co. Ltd., Class H (China) | 2.15% | |
| Philex Mining Corp. (Philippines) | 2.07% | |
| Kingdee International Software Group Co. Ltd. (China) | 1.68% | |
| Chaoda Modern Agriculture (Holdings) Ltd. (China) | 1.65% | |
| China Green Holdings Ltd. (China) | 1.61% |
| Company | % of Fund | |
| AKR Corporindo Tbk PT (Indonesia) | 1.58% | |
| Corporativo Fragua S.A.B., Class B (Mexico) | 1.56% | |
| Anadolu Efes Biracilik ve Malt Sanayii AS (Turkey) | 1.50% | |
| Anta Sports Products Ltd. (China) | 1.45% | |
| Axis Real Estate Investment Trust (Malaysia) | 1.40% |
| * | As of September 30, 2008, the Fund had 16.65% invested in the Top 10 equity holdings and there were 85 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. †Inception: October 1, 2007. The MSCI Emerging Markets and Small-Mid Cap Indexes are free float-adjusted market capitalization indexes that are designed to measure equity market performance in the global emerging markets. As of June 2006, the MSCI Emerging Markets Index consisted of the following 25 emerging market country indexes: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. You cannot invest directly in these or any indexes.
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| WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND (WAGTX) — Management Discussion | SEPTEMBER 30, 2008 | |
The Wasatch Global Science & Technology Fund is managed by a team of Wasatch portfolio managers, led by Sam Stewart Jr. Noor Kamruddin was lead manager of the Fund until May 20, 2008.
Samuel S. Stewart, Jr., PhD, CFA® Portfolio Manager | OVERVIEW
The Wasatch Global Science & Technology Fund returned -36.07% during the 12 months ended September 30, 2008, lagging both the -25.33% return of its primary benchmark, the Russell 2000 Technology Index, and the -26.59% return of its peer group, as measured by the Lipper Science and Technology Index. The annual period proved to be an exceptionally challenging time for the U.S. stock market. The continued |
evolution of the financial crisis, numerous bank failures, and the prospect of slower economic growth all weighed heavily on investor sentiment. This backdrop proved difficult for technology stocks, which underperformed the broader market on concerns that slower economic growth would cause consumers and corporations to sharply curtail their spending. Health care stocks performed somewhat better due to their lower economic sensitivity, but the sector did not outperform to the extent that would typically be expected in a down market.
DETAILSOFTHE YEAR
Since becoming lead manager of the Fund during the second quarter, I have managed the Fund by assembling the “best ideas” of Wasatch’s team of health care and technology analysts. The result of this change is that some of the Fund’s characteristics have shifted, but most have stayed the same. As always, the Fund’s focus is on fast growing, smaller companies that are trading at a discount to their expected growth rate — a reflection of the broader Wasatch philosophy. In terms of what has changed, the most notable difference is that the Fund now holds fewer stocks with larger individual positions. Accordingly, the number of individual holdings in the Fund declined from 107 to 80 during the past year. In addition, the Fund’s weighting in health care has increased, reflecting the growing number of opportunities our analysts are finding in this area.
As would be expected in such a difficult period, a number of the Fund’s holdings registered significant declines. Many of these were companies where we were correct in our fundamental analysis but where stock performance was negative due to broader market weakness. An excellent example is India-based technology outsourcing firm Cognizant Technology Solutions. The company continued to report earnings growth in excess of 25%, but the stock fell sharply as investors factored in an outsized decline in global growth. Similarly, the fundamentals of Tessera Technologies. continue to improve but the stock was pummeled following the resignation of the Chief Executive Officer. Over time, we expect that the valuations of such companies
will move back in line with their fundamentals. In the short term, however, investor fear was the deciding factor in the performance of their stocks.
There were also a handful of companies where our fundamental analysis missed the mark. Included in this category were O2Micro International and RaySearch Laboratories, which we continue to hold; and SiRF Technology Holdings, which we sold. While it’s inevitable that any annual period will bring some “torpedoes,” what has been unusual this year was the extent of the punishment the market meted out to companies that suffered a deterioration of fundamentals.
The Fund also had its share of winners during the year. Most notable among these was VNUS Medical Technologies, whose devices treat venous reflux disease — the underlying cause of varicose veins — in a minimally invasive fashion. Its stock rose over 30% for the year. Also performing well was Emeritus Corp., an operator of senior assisted-living facilities. The stock came under pressure during the first half of 2008, but we maintained our position based on the positive supply-and-demand dynamic of the underlying business. Emeritus’s shares ultimately recovered to rise over 70% during the third quarter. Quality Systems, whose shares rose nearly 15% for the year, and Intuitive Surgical, which has been moving into new geographic markets and applying its technology to new types of surgeries, also delivered solid gains for the Fund. However, outperformers such as these proved to be a rarity in an otherwise difficult year. Current and future portfolio holdings are subject to risk.
OUTLOOK
The annual period was disappointing for the Fund. We are responding to the Fund’s underperformance by redoubling our research efforts to verify all of the fundamental drivers for each company held in the Fund. During markets such as this, it is critical that we hold only the highest quality companies. While the stocks of high quality companies have been marked down to the same extent as their weaker counterparts, it is ultimately the fundamentally sound companies that are likely to survive — and even thrive — under adverse economic conditions.
From a broader standpoint, we continue to proceed with caution due to the unprecedented nature of this financial crisis. Overall, however, we believe the extreme market volatility has created opportunities for patient investors who maintain an appropriate focus on fundamentals and valuations. We believe the Fund, drawing from a large team of research analysts using our Multiple Eyes™ approach, is well positioned to take advantage of these opportunities in the months ahead.
Thank you for the opportunity to manage your assets.
| CFA® is a registered trademark of CFA Institute. |
| * | Multiple Eyes is a Wasatch term and refers to the firm’s collaborative research process. |
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| WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND (WAGTX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 12/19/00 | ||||
Global Science & Technology | -36.07% | 2.23% | 2.63% | |||
Russell 2000 Technology Index | -25.33% | -0.31% | -6.75% | |||
Lipper Science and Technology Index | -26.59% | 2.71% | -7.54% | |||
Nasdaq Composite Index | -21.92% | 3.94% | -2.29% |
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 60 days 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 1.87%. 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 may have absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
Investing in concentrated funds will be more volatile and loss of principal could be greater than investing in more diversified funds. Investing in foreign securities, especially in emerging markets, 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 | |
| Cognizant Technology Solutions Corp., | ||
| Class A | 3.05% | |
| Pediatrix Medical Group, Inc. | 2.96% | |
| Emeritus Corp. | 2.64% | |
| DealerTrack Holdings, Inc. | 2.54% | |
| Tulip IT Services Ltd. (India) | 2.54% |
| Company | % of Fund | |
| Providence Service Corp. (The) | 2.39% | |
| VNUS Medical Technologies, Inc. | 2.32% | |
| NetLogic Microsystems, Inc. | 2.16% | |
| O2Micro International Ltd. ADR (Cayman Islands) | 2.14% | |
| Power Integrations, Inc. | 2.10% |
| ** | As of September 30, 2008, the Fund had 24.84% invested in the Top 10 equity holdings and there were 81 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. †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 Lipper Science and Technology Index is a composite of mutual funds that invest in science and technology companies and have investment objectives similar to those of the Fund. The Nasdaq Composite Index is unmanaged and measures all Nasdaq domestic and non-U.S. based common stocks listed on The Nasdaq Stock Market. The Index is market-value weighted. This means each company’s security affects the Index in proportion to its market value. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Due to their number and size, technology stocks tend to dominate the direction of the Index. You cannot invest directly in these or any indexes.
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| WASATCH HERITAGE GROWTH FUND (WAHGX) — Management Discussion | SEPTEMBER 30, 2008 | |
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 volatility witnessed in the stock market over the last year was of historic proportions. The Russell Midcap Growth Index suffered a precipitous 45% decline between June and |
early October of this year, finishing the one-year period ended September 30, 2008 down 24.65%. While there is no satisfaction in beating the benchmark in a declining market, the Wasatch Heritage Growth Fund performed slightly better, falling 21.54% over the same period, while the Russell 1000 Growth Index lost 20.88%.
While down markets can be excruciatingly painful, much of the discomfort stems from the day-to-day — often irrational — fluctuations in the market. Our approach to investing isn’t driven by the short-term whims of market disposition. Even though fear and panic seemed to grip the market into the start of the fourth quarter, we remained focused on the fundamental performance of each of the companies we own.
The market sell-off over the preceding 12 months was broad-based as every sector in the Russell Midcap Growth Index declined in value. The breadth of the decline made individual stock selection even more pertinent than normal. Recession-resistant companies like Apollo Group, and St. Jude Medical helped moderate the Fund’s performance throughout the year.
DETAILSOFTHE YEAR
As the credit crisis persisted, several high-profile financial firms saw their heavily leveraged business models begin to crumble. Consequently, the credit markets tightened, which limited capital availability for both businesses and consumers. Late in the third quarter, government intervention attempted to prop up the struggling financial system. The ultimate success of the bailout will not be known for some time. In the short term, its passage failed to quell market fears, credit markets remained frozen and recessionary conditions became more apparent leading to the continued sell off of stocks in early October.
While our financial stocks performed about in-line with the market, given the challenges that most financial companies are facing in the current economic environment, the Fund was hurt by having more exposure to financials than the benchmarks, which established a significant headwind. We remain confident, however, that the Fund is appropriately weighted to benefit from an eventual recovery across the wide spectrum of our financial holdings.
After a multi-year run-up, foreign stocks suffered a dramatic pullback during the year nearly across the board. Although the Fund’s direct foreign exposure is limited, it still felt the effect of a retrenching global economy as holdings such as Infosys Technologies in India and NII Holdings and Redecard in Latin America saw their stock prices trimmed. Despite the retreat in share prices, we feel that these companies have unique competitive advantages that will allow them to grow their businesses significantly in future years.
Infosys, a leading provider of outsourced information technology services in India, was hurt by rising salary demands in India and the prospect that macroeconomic conditions would force clients to cut their technology budgets. Looking beyond its current struggles, the company continues to increase earnings and we think the future remains bright. Not only does Infosys benefit from a stellar reputation and being a low cost alternative for the developed world, the stock is also reasonably valued.
St. Jude Medical ended the year as the Fund’s largest holding. The company’s product line, which includes vital medical devices related to cardiac rhythm management and atrial fibrillation, allows it to traverse challenging economic times. We are enthusiastic that St. Jude Medical is well positioned to take market share and increase sales and earnings at a double-digit pace for at least the next several years.
Apollo Group, a long-time Fund holding, offers post-secondary educational opportunities, particularly geared to working adults. The stock had a strong rally late in the year as it became apparent that individuals would likely be returning to school to improve their marketability during the economic struggle. Current and future portfolio holdings are subject to risk.
OUTLOOK
While worldwide governmental intervention is attempting to address the credit crisis and the resulting panic in the stock markets, recessionary concerns remain on the horizon. It is impossible to know whether the markets have reached a low or if further downside remains. Ultimately, that’s not where our focus lies. We are more concerned with following our disciplined investment process, which emphasizes finding reasonably valued growth companies that we conclude will be more profitable in the future than they are today.
We will continue to keep the bar high in constructing the Fund. We are committed to finding unique companies that possess sustainable competitive advantages, market leadership, talented management teams, and that are attractively valued with further room to grow. As long as our companies continue to meet our high standards, we feel certain that our patience will be rewarded when their outstanding qualities are recognized.
Thank you for the opportunity to manage your assets.
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| WASATCH HERITAGE GROWTH FUND (WAHGX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 6/18/04 | ||||
Heritage Growth | -21.54% | N/A | 1.01% | |||
Russell Midcap Growth Index | -24.65% | N/A | 3.90% | |||
S&P 500 Index | -21.98% | N/A | 2.63% | |||
Russell 1000 Growth Index | -20.88% | N/A | 1.48% |
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 60 days 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 may have absorbed, currently or 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 | |
| St. Jude Medical, Inc. | 4.82% | |
| Express Scripts, Inc. | 3.92% | |
| Amphenol Corp., Class A | 3.63% | |
| NII Holdings, Inc. | 2.92% | |
| Infosys Technologies Ltd. (India) | 2.91% |
| Company | % of Fund | |
| BMC Software, Inc. | 2.75% | |
| Altera Corp. | 2.70% | |
| Covance, Inc. | 2.63% | |
| CVS Caremark Corp. | 2.62% | |
| Alliance Data Systems Corp. | 2.56% |
| * | As of September 30, 2008, the Fund had 31.46% invested in the Top 10 equity holdings and there were 52 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. †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 stocks in the Russell Midcap Growth Index are also members of the Russell 1000 Growth Index. The S&P 500 Index represents 500 of the United States’ largest stocks from a broad variety of industries. The index is unmanaged, and a common measure of common stock total return performance. 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 or any indexes.
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| WASATCH HERITAGE VALUE FUND (WAHVX) — Management Discussion | SEPTEMBER 30, 2008 | |
The Wasatch Heritage Value Fund is managed by a team of Wasatch portfolio managers, led by Brian Bythrow.
Brian Bythrow, CFA® Portfolio Manager
| OVERVIEW
For virtually all of its existence, the Heritage Value Fund has faced a complex and volatile market environment. The housing market has been in distress, the subprime lending crisis and subsequent credit crunch have reverberated throughout the economy, and the U.S. economy has appeared to be on the brink — if not in the midst — of a recession. In the spring and summer of 2008, commodity prices remained high and even rose further, contributing to |
significant increases in food and fuel prices. Consumers also felt the pinch from high health care costs, declining home values, poor wage growth, and a weak employment market. The results were an erosion of confidence in the economy, and negative stock market returns.
Then, at the end of the third quarter, stock markets were roiled by a number of shocking developments involving some of the world’s major financial institutions. This series of events came at a breakneck pace, offering investors little time to digest one piece of news before being confronted with another. It wasn’t much of a surprise that these conditions sparked a massive flight to safety, in which investors shed stocks and riskier bonds in favor of Treasuries. In this environment, the Wasatch Heritage Value Fund posted a return of -19.42% for the year ended September 30, 2008. This placed it ahead of our benchmark, the Russell 1000 Value Index, which returned -23.56% for the same period.
Much of the Fund’s relative outperformance can be attributed to investments in consumer staples companies, particularly in food and beverage related areas. In a skittish market environment, investors found some comfort in these companies and the basic — but highly desired — goods they produce. Our selection of individual holdings in other areas also played a significant role in our outperformance.
DETAILSOFTHE YEAR
Although information technology was one of the weaker sectors for the year, it was home to our top contributor for the 12-month period, Visa Inc., the electronic payment-processing giant. Visa came to market in an initial public offering (IPO) in mid-March, and we were able to take a significant position. In advance of the offering, our calculations indicated that Visa was being offered at a discounted value relative to rival payment processor MasterCard, which itself went public not long before. We benefited when Visa’s stock price soared after trading began, and in the wake of that increase we scaled back our position. We continue to monitor the company closely.
Other top contributors during the period came from the food and beverage area. One of these was Hansen Natural Corp., maker of the popular Monster Energy drinks. The company was attractive to us for its distinctive products and
growing market share. For a long time, the stock’s hefty price tag put it out of our range, but September’s market uproar gave us the opportunity to pick it up at an attractive price. We were pleased to be able to purchase a stock with growth characteristics at a value price with Hansen.
Soy-product maker Bunge Ltd. also contributed to results. We purchased Bunge as a fallen angel — a company whose stock price was beaten down excessively in part due to concerns about higher commodity costs. Use of soy products has been rising, as health-conscious and aging consumers seek out such products for their health benefits. Unlike the producers of many other foods, Bunge has been able to pass through virtually all of its higher production costs to its end users, and the stock price has benefited.
As we have mentioned, information technology was one of the weakest sectors for the year, with many technology companies facing concerns that slower economic activity could cut into corporate spending.
One of our larger holdings, Cognizant Technology Solutions, detracted from performance over the year largely because of this trend. The company provides technology outsourcing services, primarily to the financial sector. The recent dramatic developments in that sector raised the concern that Cognizant might face a landscape with not only fewer clients, but also lower spending by those that remain.
Wasatch analysts have followed Cognizant for years and at this point we feel comfortable continuing to hold it in the Fund. Even if spending on technology slows for a time, we believe the practice of sending computing work offshore is firmly entrenched as a cost-saving measure — though we’re aware that Cognizant, with fewer potential clients on the horizon, will likely need to expand the share of business it gets from existing customers. Current and future portfolio holdings are subject to risk.
OUTLOOK
Although it can be difficult to be optimistic in the wake of extreme market turbulence, we retain a sense of confidence that in time the U.S. economy and its counterparts around the world will be able to work through the many issues they currently face. That said, we believe that the tight credit situation will impair consumer spending for some time to come. Given that about 70% of economic activity in the U.S. comes from consumers, that means there are not likely to be any quick fixes for the current troubles.
In this difficult environment, we have redoubled our focus on company-specific research. We continue to seek out companies that offer the essential fundamental qualities of strong cash-flow generation, solid balance sheets, good dividend-paying ability, and management attuned to the interests of shareholders. There’s no denying that a recovery may take some time, and we recognize that it’s not easy to stay invested when the markets are in such turmoil. But if you believe, as we do, that the U.S. will rebound from this crisis and live to fight another day, then it’s our conviction that in time investors should be rewarded for holding strong companies.
Thank you for the opportunity to manage your assets.
| CFA® is a registered trademark of CFA Institute. |
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| WASATCH HERITAGE VALUE FUND ( WAHVX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 8/30/07 | ||||
Heritage Value | -19.42% | N/A | -16.20% | |||
Russell 1000 Value Index | -23.56% | N/A | -19.04% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held 60 days 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 may have absorbed, currently or 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, especially in emerging markets, 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 | |
| Hansen Natural Corp. | 3.99% | |
| American Water Works Co., Inc. | 3.68% | |
| Whole Foods Market, Inc. | 3.49% | |
| Microsoft Corp. | 3.48% | |
| Plains Exploration & Production Co. | 3.43% |
| Company | % of Fund | |
| Burlington Northern Santa Fe Corp. | 3.41% | |
| Old Republic International Corp. | 3.19% | |
| Thomas & Betts Corp. | 3.19% | |
| Baker Hughes, Inc. | 3.19% | |
| Biogen Idec, Inc. | 3.18% |
| * | As of September 30, 2008, the Fund had 34.23% invested in the Top 10 equity holdings and there were 33 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. †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 directly in these or any indexes.
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| WASATCH INTERNATIONAL GROWTH FUND (WAIGX) — Management Discussion | SEPTEMBER 30, 2008 | |
The Wasatch International Growth Fund is managed by a team of Wasatch portfolio managers, led by Roger D. Edgley. Laura Hoffman was a lead manager for the Fund until October 24, 2008.
Roger D. Edgley, CFA® Portfolio Manager | OVERVIEW
The 12-month period became increasingly challenging as the financial crisis spread from the U.S. to other parts of the developed world. Global markets reacted with extreme volatility and stock prices dropped sharply. During this tumultuous time, the Wasatch International Growth Fund returned -44.01% and underperformed the MSCI AC World Ex-U.S.A. Small Cap Index, which returned -37.29% and the MSCI |
World Ex-U.S.A. Small Cap Index, which returned -35.34%.
Ordinarily, we would expect the quality of the companies we have invested in and the Fund’s broad sector and geographic diversification to provide some downside protection, but in these extraordinary conditions there was no place to hide. Areas of the Fund that were particularly hard hit included the financials, industrials and consumer discretionary sectors. Many of our industrial companies are in Western Europe so our performance in that region struggled. Our heavy weighting in emerging markets, especially Asia and Latin America, was another source of weakness.
The Fund is invested in what we believe to be high quality growth companies that are well managed and have strong balance sheets. But these types of companies generally fared no better than lesser companies. However, when global markets get back on track we expect quality companies to lead. Looking on the bright side, the market turmoil has presented us with plentiful opportunities to invest in quality companies at especially attractive prices. Throughout the year, we have worked to concentrate the Fund into our best investment ideas, which should provide better upside potential when markets rebound. In addition, we have increased our weighting in companies on the larger end of the small cap spectrum as we expect that larger companies will fare better than smaller ones.
DETAILSOFTHE YEAR
These are trying times indeed. They remind us of the Asian financial crisis in the late 1990s. Having lived and invested through that time, we remember how quickly the contagion spread and the damage that was done. We also remember how the markets bounced back.
In the current crisis, the more evolved the bank — meaning one that is more likely to use exotic financial instruments — the worse its business has been affected. These banks are a far cry from the banks we like to invest in. We favor “plain-vanilla” banks — they offer saving and checking accounts and make loans to their customers supported by large down payments. Examples include India-based HDFC Bank and Axis Bank. Another is Seven Bank, one of the
Fund’s top contributors for the year. This bank operates a network of ATM machines located in 7-11 stores throughout Japan. Seven Bank’s business model is straightforward — it takes in deposits from its customers and dispenses cash to them for a fee when they need it. Current and future portfolio holdings are subject to risk.
On the other hand, Banco Daycoval, a plain vanilla bank based in Brazil, didn’t fare so well this year. The company’s stock priced declined over 60% although we couldn’t see anything in the company’s fundamentals to justify a decline of this magnitude. We chalk it up to the contagion that has caused general weakness in emerging markets and has driven down bank stocks in these areas more than in developed markets. It is worth noting that, having already survived a financial crisis, banks in Asia and Latin America are generally better positioned to come through the current crisis than their counterparts in the developed world.
Themes that we like and areas where we see good growth opportunities include Indian banks and companies that are focused on Chinese consumers. Declining export volume will no doubt slow China’s economic growth, but we expect it to remain in the high single digits, much stronger than the rest of the world. We also like the prospects of certain industrial companies such those we hold in Western Europe that appear well positioned to benefit from ongoing infrastructure projects in emerging markets.
OUTLOOK
Market volatility, however painful, is not without opportunities. Think of going into a department store where everything is 60% off. Cost becomes less important than choosing what to spend your money on. We find ourselves in a similar situation now. We are selectively investing in what we believe are the best small growth companies money can buy. A year ago, we couldn’t invest in many of these companies because we thought they were overpriced. Now we can buy them at extremely reasonable prices.
It will be hard for markets to recover without banks doing well, so we will look for them to lead coming out of this period. Given that financial institutions in emerging economies are more straightforward, we expect that they won’t have suffered as much damage when the financial crisis has passed. However, we do expect that the breakdown of structured finance in the developed world will cause financial institutions in these regions to be impaired because they will have fewer instruments at their disposal.
We are continuing to invest in what we believe are great growth companies at reasonable prices. In addition, we want to make sure the Fund is well positioned in the financials, consumer discretionary, and industrials sectors, and we want to have a reasonable weight in energy. It is our expectation that these sectors will be the leaders coming out of the downturn. We also want to remain broadly diversified by geographic region. These are uncertain times, but we are confident that our discipline and experience as international investors will serve the Fund well in the coming months and years.
Thank you for the opportunity to manage your assets.
| CFA® is a registered trademark of CFA Institute. |
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| WASATCH INTERNATIONAL GROWTH FUND (WAIGX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 6/28/02 | ||||
International Growth | -44.01% | 6.36% | 8.24% | |||
MSCI World Ex-U.S.A. Small Cap Index | -35.34% | 9.25% | 10.54% | |||
MSCI AC World Ex-U.S.A. Small Cap Index | -37.29% | N/A | 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 60 days 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 may have absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
Investing in foreign securities, especially in emerging markets, entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. Investing 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 | |
| Bank of N.T. Butterfield & Son Ltd. (Bermuda) | 2.86% | |
| Rotork plc (United Kingdom) | 2.63% | |
| Seven Bank Ltd. (Japan) | 2.55% | |
| AEON DELIGHT Co. Ltd. (Japan) | 2.29% | |
| Osaka Securities Exchange Co. Ltd. (Japan) | 2.16% |
| Company | % of Fund | |
| BIM Birlesik Magazalar AS (Turkey) | 2.13% | |
| Ports Design Ltd. (Hong Kong) | 2.10% | |
| Campbell Brothers Ltd. (Australia) | 2.00% | |
| DiaSorin S.p.A (Italy) | 1.89% | |
| Home Capital Group, Inc. (Canada) | 1.86% |
| * | As of September 30, 2008, the Fund had 22.47% invested in the Top 10 equity holdings and there were 83 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10, 000 investment at the beginning of the time period shown. †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 US $200 million and $1.5 billion across 22 developed markets, excluding the United States. The MSCI AC World Ex-U.S.A. Small Cap Index is an unmanaged index and includes reinvestment of all dividends of issuers located in countries throughout the world representing developed and emerging markets, excluding securities of U.S. issuers. This index is a free float-adjusted market capitalization index designed to measure the performance of small capitalization securities. The Index recently commenced operations, therefore, data since the Fund’s inception is not available. You cannot invest directly in these or any indexes.
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| WASATCH INTERNATIONAL OPPORTUNITIES FUND (WAIOX) — Management Discussion | SEPTEMBER 30, 2008 | |
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 global credit crunch that hampered international stock performance for much of the year culminated in extreme volatility at the end of September. At that point, a tumultuous series of events involving some of the world’s largest |
financial institutions provoked a massive flight to safety. Investors rapidly shed stocks and riskier bonds in favor of Treasuries and cash.
As part of this trend, international stocks underperformed U.S. stocks, and international micro-cap stocks were harder hit than those with larger market capitalizations. For the year ended September 30, 2008, the Fund returned -45.33%, and underperformed the MSCI World Ex-U.S.A. Small Cap Index, which returned -35.34%, and the MSCI AC World Ex-U.S.A. Small Cap Index, which returned -37.29%.
Most of our underperformance relative to the indexes during the period can be attributed to our overweighting in China and other Asian markets. These areas suffered most from the flight to safety, and also were hurt by concerns that a global economic slowdown could dampen profits. This Fund’s emphasis on the stocks of the smallest companies also played an important role in its underperformance in a risk-wary environment. The Fund’s weighted average market capitalization at the end of the period was $427 million, while the indexes’ was over $1 billion.
Even in the face of steep stock price declines, the fundamentals among the companies held in the Fund remain reasonably strong. Although there are serious questions about the outlook for consumers in the U.S. and other established markets, we believe prospects for consumer spending within emerging markets remain solid. Many of the companies we hold are aimed at these emerging consumers, positioning their stocks to benefit once a degree of stability returns to the global markets. We anticipate continued volatility in international markets for the remainder of 2008 and well into next year, but feel confident that investors will in time recognize the strong fundamental qualities of these companies.
DETAILSOFTHE YEAR
In a difficult period for Asian stocks, the greatest detractor from the Fund’s performance for the year was our position in China Hongxing Sports. This athletic shoe and sportswear company caters to China’s growing consumer base, rather than making products for export. We believe that approach positions the company well, as we believe consumer spending in China will continue to rise over time. Nonetheless, in this year’s negative environment, the stock was punished severely.
Established international economies were, of course, far from immune to the difficulties facing the world’s stock markets. Sweden-based RaySearch Laboratories was another of our weakest performers for the year. The company
develops software used in the radiation treatment of cancer patients. RaySearch came under significant pressure this year from competing products that reduce the amount of time each patient’s therapy session takes, thus allowing hospitals to generate more revenue from the same equipment. RaySearch is, however, due to launch its own similar system — at a lower cost — in partnership with Philips Electronics in the first half of 2009.
Another detractor that we nonetheless retain confidence in is Hong Kong-listed Wasion Group. The company makes metering equipment used in electrical grids. We believe Wasion is positioned to benefit from the rapid expansion of the electrical grid in China, and is also experiencing some success selling products elsewhere in the world. The company encountered production delays during the year due to heavy snowstorms and a major earthquake, which constrained revenue growth. However, Wasion’s plan for contending with recent challenges seems clear, and management and conservation of energy are high priorities for the Chinese government. These factors led us to maintain our position, though we are continuing to monitor Wasion carefully.
Even in such a difficult year, it’s important not to lose sight of the Fund’s brighter spots — not only for their own value, but also for the insight they can offer into how companies can find ways to compete even in a challenging economic environment. The top contributor to the Fund’s performance for the year was Mexichem, a producer of chemical products — particularly PVC pipe — used in the construction industry. The company has benefited from infrastructure improvements in Mexico’s emerging economy, which continue despite the global slowdown.
Our second best contributor was Canada-based GuestLogix, a provider of equipment and software systems that allow crew members to make retail sales to passengers on airlines, trains, and ships. The products sold generally include food, drink, and tickets to popular attractions. A recent positive development for the company was the deployment of its systems on Southwest Airlines. Current and future portfolio holdings are subject to risk.
OUTLOOK
As unpleasant as this period has been, we strongly believe that in future years we could look back on this time as a great buying opportunity. With the stock prices of so many fundamentally strong companies now at such low levels, it’s possible even a moderate stabilization in the global markets could have positive impact on stock prices. All that said, we fully recognize that a loss like the one the Fund has recently endured is difficult to accept. We share your disappointment not only as professionals, but also as fellow shareholders in the Fund.
To contend with the current environment, we have reduced the number of companies held in the Fund and are focusing more assets on what we believe are the strongest companies. We have also renewed our emphasis on value. Many of the companies we own have clean balance sheets with little to no debt and significant cash positions. These companies look cheap even if earnings growth slows, and we’re looking for more opportunities like this. The Fund’s substantial cash position temporarily serves as a modest cushion but, more importantly, it gives us the resources to take action as new opportunities emerge.
Thank you for the opportunity to manage your assets.
| CFA® is a registered trademark of CFA Institute. |
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| WASATCH INTERNATIONAL OPPORTUNITIES FUND (WAIOX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 1/27/05 | ||||
International Opportunities | -45.33% | N/A | 1.53% | |||
MSCI World Ex USA Small Cap Index | -35.34% | N/A | 1.00% | |||
MSCI AC World Ex USA Small Cap Index | -37.29% | N/A | 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 60 days 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 2.51%. 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 may have absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
Investing in foreign securities, especially in emerging markets, entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. Investing 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) | 5.82% | |
| Anta Sports Products Ltd. (China) | 3.32% | |
| Osaka Securities Exchange Co. Ltd. (Japan) | 2.17% | |
| Kingdee International Software Group Co. Ltd. (China) | 2.14% | |
| Goodpack Ltd. (Singapore) | 2.02% |
| Company | % of Fund | |
| Ports Design Ltd. (Hong Kong) | 1.76% | |
| Ezra Holdings Ltd. (Singapore) | 1.64% | |
| Swiber Holdings Ltd. (Singapore) | 1.58% | |
| China Green Holdings Ltd. (China) | 1.58% | |
| China Automation Group Ltd. (China) | 1.57% |
| * | As of September 30, 2008, the Fund had 23.60% invested in the Top 10 equity holdings and there were 95 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. †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 US $200 million and $1.5 billion across 22 developed markets, excluding the United States. The MSCI AC World Ex-U.S.A. Small Cap Index is an unmanaged index and includes reinvestment of all dividends of issuers located in countries throughout the world representing developed and emerging markets, excluding securities of U.S. issuers. This index is a free float-adjusted market capitalization index designed to measure the performance of small capitalization securities. The Index recently commenced operations, therefore, data since the Fund’s inception is not available. You cannot invest directly in these or any indexes.
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| WASATCH MICRO CAP FUND (WMICX) — Management Discussion | SEPTEMBER 30, 2008 | |
The Wasatch Micro Cap Fund is managed by a team of Wasatch portfolio managers, led by Daniel Chace.
Daniel Chace, CFA® Portfolio Manager | OVERVIEW
During the 12 months ended September 30, the Wasatch Micro Cap Fund posted a 30.46% loss and the Russell 2000 and Russell Microcap indexes fell 14.48% and 22.51%, respectively. The credit crisis that erupted in the summer of 2007 intensified, clouding the outlook for the global economy and sending stock prices lower around the world. The Fund’s performance during the period was disappointing, both in |
absolute terms and relative to the indexes. The main driver of our weak results was a contraction in the price-to-earnings (P/E) multiples* of stocks that we believed were already attractively valued.
Recent developments in the stock and credit markets have been remarkable. But with history as a guide, we think the global economy will work through the financial crisis and be strengthened in the process. As this scenario begins to unfold, we expect the stock markets to stabilize and P/E multiples to return to more normal levels. This bodes well for the Fund, since the prices of many of our holdings are at multi-year lows.
DETAILSOFTHE YEAR
This was one of the most volatile and difficult periods that we have experienced in our years of investing. The number of cross currents in the market and the pace of change taking place were amazing. Commodity prices swung wildly, major financial institutions disappeared, government intervention redrew the line between the public and private sectors — and the list goes on.
In this extraordinary year, a large part of our performance challenge was that value often simply didn’t matter. Being inexpensively valued provided almost no cushion to stock prices, even for companies with strong balance sheets. As a result, we suffered big declines in stocks that, in our opinion, were already quite inexpensive. This lack of support may have been due to rising risk aversion or selling pressure from hedge funds and financial institutions needing to reduce their debt or meet redemptions. Perhaps our own framework for valuing companies was not working as it traditionally has given the extreme volatility — or maybe a combination of these factors came into play. Whatever the cause, the magnitude of the losses in a number of our stocks was surprising. There may have been valid reasons for some sort of price decline, such as macroeconomic headwinds or company-specific issues. But the declines we saw were much bigger than we would have expected to see in a more normal environment.
The market’s disregard for value was particularly evident when looking at the performance of our foreign-listed** stocks, which substantially lagged our domestic holdings. For example, China Hongxing Sports (China), an athletic shoe and apparel retailer, was a major detractor in the Fund.
The company’s decision to help its distributors finance store improvements has raised some eyebrows, and its earnings growth has decelerated. That said, China Hongxing reported trailing earnings-per-share growth of 40%+ during the period, and order bookings at a recent trade event were strong. In addition, we think its P/E ratio of 8x trailing earnings is very low for such a highly profitable growth company. Despite the weakness in the stock, we remain positive on China Hongxing’s long-term prospects — and on investing in international companies in general. Our foreign stocks were a drag on results this period but have benefited the Fund over time.
Just as the value of our stocks fell to unexpected levels, several of the year’s best-performing stocks were unexpected. For example, Beacon Roofing Supply, a distributor of roofing products, generated a significant gain in the face of weakness in the housing industry. Old Dominion Freight Line, a trucking company, did well amid record gasoline prices and a sluggish economy. Seeing these names on the list of top contributors further highlights the challenging nature of the market. Current and future portfolio holdings are subject to risk.
One of the few bright spots this period was that the Russell Microcap Index outperformed the Russell 2000 Index during the July-to-September quarter for the first time since the fourth quarter of 2006. Although it may not be the start of a trend, we find it encouraging after six straight quarters of Russell 2000 leadership.
OUTLOOK
When we review the operating performance and value of our holdings, it is hard not to be optimistic in our outlook for the Fund. We believe we own strong businesses, many of which are currently facing macro headwinds but whose stocks are trading at compelling values. Yes, the economy is deteriorating rapidly and could easily get worse before it gets better. However, we think this is already reflected in stock prices to a large extent.
A look back at history also spurs optimism, since crises tend to be followed by rebounds. Mexico came back from a crushing debt and housing crisis that left almost every mortgage in the country under water. Brazil recovered from its currency devaluations and misguided economic policies, and the Asian economies survived their debt crisis and devaluations. Even Russia withstood its massive bond default. Maybe it will be different this time for the United States and rest of the world. But it is our strong belief that the global economy will ultimately recover and grow and that stock prices will resume an upward path.
Thank you for the opportunity to manage your assets.
| CFA® is a registered trademark of CFA Institute. |
| * | The price-to-earnings (P/E) multiple, also referred to as the P/E ratio, is the price of a stock divided by its earnings per share. |
| ** | 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. |
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| WASATCH MICRO CAP FUND (WMICX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Micro Cap | -30.46% | 4.49% | 17.09% | |||
Russell 2000 Index | -14.48% | 8.15% | 7.81% | |||
Russell Microcap Index | -22.51% | 4.09% | 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 60 days 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 2.14%. 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 may have absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
Investing 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, especially in emerging markets, 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. | 3.08% | |
| Power Integrations, Inc. | 2.83% | |
| China Hongxing Sports Ltd. (China) | 2.15% | |
| CorVel Corp. | 2.06% | |
| Micrel, Inc. | 1.97% |
| Company | % of Fund | |
| NCI, Inc., Class A | 1.96% | |
| DealerTrack Holdings, Inc. | 1.94% | |
| Dollar Financial Corp. | 1.72% | |
| World Acceptance Corp. | 1.72% | |
| Vitran Corp., Inc. (Canada) | 1.67% |
| * | As of September 30, 2008, the Fund had 21.10% invested in the Top 10 equity holdings and there were 96 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. 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 data of July 1, 2005 was from a paper portfolio. You cannot invest directly in these or any indexes.
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| WASATCH MICRO CAP VALUE FUND (WAMVX) — Management Discussion | SEPTEMBER 30, 2008 | |
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
Over the past 12 months, stocks faced an array of challenges that became more complex and severe as the year progressed. From the beginning, the credit crunch began to impact the economy, and |
it appeared all but certain that the U.S. would move into a recession. In an increasingly uncertain environment, investors’ aversion to risk gained in intensity. Micro cap stocks, which tend to be more illiquid and volatile than the stocks of larger companies, remained out of favor. Over the spring and summer, soaring prices for energy and energy-related commodities raised new concerns.
As the period came near its close, the issues that had been weighing on the markets and the financial system reached crisis proportions. Increasingly stressed homeowners began to default on their mortgages in greater numbers, casting doubt on the soundness of complex securities backed by mortgages. Banks and other financial institutions then faced a cloudier future, as it appeared no one was entirely sure just how much risk they were carrying through those mortgages and the related securities.
This ultimately led to a series of shocking developments involving some of the world’s major financial institutions, and to a near-lockdown on credit that affected consumers and corporations alike. In this environment, investors fled from securities posing any level of risk. In these challenging conditions, the Wasatch Micro Cap Value Fund returned
-29.67% for the 12 months ended September 30, 2008, placing it well behind the Russell 2000 Index, which returned -14.48% for the same period.
Our underperformance is partly explained by the fact that the Russell 2000 Index represents small company stocks, which are generally considered less volatile than the micro caps we emphasize in the Fund. Further more, the Index’s performance benefited from changes that accompanied its annual rebalancing at the end of June. These circumstances do not account for our disappointing absolute performance, but they do help to explain why our results were out of step with the benchmark.
DETAILSOFTHE YEAR
The Fund’s overweighting in information technology also contributed to our underperformance, as investors feared a slowing economy would cut into corporate spending on systems, software, and equipment. A number of the Fund’s weaker stocks came from the sector, including the greatest detractor from performance, O2Micro International. The company makes computer power management and security components, areas that are sensitive to cuts in corporate
spending. In addition, the company’s far-flung operations — and the imperfect communication style of its management — added a layer of uncertainty in many investors’ minds. We are monitoring O2Micro closely but retain a sense of confidence in the company’s long-term prospects, particularly in light of its reasonable valuation.
Another technology holding that hurt performance was SiRF Technology Holdings, a maker of chips for GPS-based navigation devices. The company suffered from declining demand for stand-alone GPS devices, and an unexpected loss of market share hit its stock hard. After reassessing SiRF’s prospects, we elected to sell the stock.
On the more positive side of things, our top contributor for the period benefited from the pursuit of alternative-energy solutions. Globe Specialty Metals, a producer of materials used in solar cells, profited from rapidly growing demand and solid pricing power. Late in the summer, we decided to sell the stock, as its strong run-up had begun to push it outside our market capitalization range. Unfortunately, a hedge fund that came under pressure in the early days of the global financial crisis rushed to sell its significant position in the company, cutting the stock’s value nearly in half before we were able to complete our more deliberately paced sale. Our results were still strongly positive, but we believe this reduced our potential profits from the stock.
Longtime holding VNUS Medical Technologies, was another top contributor for the year. This maker of minimally invasive devices for treating venous disorders benefited from good execution of its business plan and the resolution of long-pending litigation. The company has been gaining market share, and enjoys good acceptance among doctors for its newer products. Current and future portfolio holdings are subject to risk.
OUTLOOK
After a challenging period like the one we have just been through, it can be difficult to be optimistic. But as we look over the Fund, we can’t help but conclude that we have never before owned a portfolio so full of fundamentally sound companies whose stocks are trading as cheaply as these.
We’re not underestimating the myriad challenges facing the stock markets, though. To contend with this difficult environment, we have trimmed the number of holdings in the Fund, and are focusing a greater percentage of assets on what we consider to be our strongest names. Also, we still have some cash available from the Fund’s brief reopening in the second quarter. We are investing it cautiously, in keeping with the market environment, but we are ready to act decisively when we identify attractive opportunities.
We recognize that it’s not easy to stay invested when the markets are in such turmoil, and when returns are so disappointing. As fellow shareholders in the Fund, as well as professionals concerned with doing the best job possible for you, we are unhappy with these recent results. But we firmly believe that the markets will rebound from this crisis, allowing companies to once again be judged on their earnings growth and other fundamental strengths. Given the solid growth potential and low valuations among the companies we hold, we look forward to that time.
Thank you for the opportunity to manage your assets.
| CFA® is a registered trademark of CFA Institute. |
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| WASATCH MICRO CAP VALUE FUND (WAMVX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 7/28/03 | ||||
Micro Cap Value | -29.67% | 8.66% | 9.28% | |||
Russell 2000 Index | -14.48% | 8.15% | 8.50% | |||
Russell Microcap Index | -22.51% | 4.09% | 5.47% |
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 60 days 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 2.32%. 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 may have absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
Investing 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, especially emerging markets, 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. | 3.47% | |
| Intevac, Inc. | 2.38% | |
| Invacare Corp. | 1.92% | |
| Heritage-Crystal Clean, Inc. | 1.88% | |
| Opnet Technologies, Inc. | 1.87% |
| Company | % of Fund | |
| GuestLogix, Inc. (Canada) | 1.76% | |
| Globe Specialty Metals, Inc. (United Kingdom) | 1.75% | |
| Westwood Holdings Group, Inc. | 1.65% | |
| NCI, Inc., Class A | 1.64% | |
| CastlePoint Holdings Ltd. (Bermuda) | 1.54% |
| * | As of September 30, 2008, the Fund had 19.86% invested in the Top 10 equity holdings and there were 92 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. †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. 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 or any indexes.
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| WASATCH SMALL CAP GROWTH FUND (WAAEX) — Management Discussion | SEPTEMBER 30, 2008 | |
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
During the 12 months ended September 30, the Wasatch Small Cap Growth Fund lost 25.42% and the Russell 2000 Growth and Russell 2000 indexes fell 17.07% and 14.48%, respectively. The period was extremely volatile, as the turmoil in the credit markets that began with rising defaults on subprime mortgages spread throughout the U.S. financial system. The financial crisis dampened the |
outlook for the U.S. economy, and concerns about a slowdown pressured many of our stocks. In addition to the broad sell-off in U.S. stocks, the Fund was hurt by our exposure to the foreign small cap market, which significantly lagged the U.S. small cap market. Our traditionally lower weighting in the energy sector was another challenge as the price of oil surged to a record high.
This period’s results were obviously disappointing. However, as we look forward, we strongly believe the next several years could shape up well for the Fund. The balance sheet strength of our holdings helps us feel comfortable in this uncertain economic environment and, overall, our portfolio companies continue to grow their earnings at a healthy rate. In addition, if you look back over the last 10 years, there has been only one other instance when the price-to-earnings ratios* of the stocks in the Fund were as low as they are now. That period turned out to be an especially opportune time to invest in our style.
DETAILSOFTHE YEAR
The past year in the U.S. stock market was extraordinary, as the unwinding of leverage in the U.S. economy intensified and brought the financial system to the brink of collapse. At the eye of the storm were several of the nation’s largest financial institutions whose mortgage-related losses and debt-heavy balance sheets impaired their ability to access the capital markets. With their stock prices plummeting, some of these companies were rescued by the government, others were sold and one filed for bankruptcy.
As small cap investors, we do not buy stocks of this size and did not own shares of these large financial institutions. Furthermore, we were not overly concerned that any of the companies we did own would be overwhelmed by credit problems given their strong balance sheets, and none of them were. Our companies do not operate in a vacuum, however, and the deepening financial crisis had a second-derivative effect due to its negative implications for the economy. So while we believe our companies will deliver strong earnings growth and stock price appreciation over the long run, worries about the economy pressured many of our stocks this year. The economically sensitive information technology sector was an especially weak area in the Fund,
where major detractors included SiRF Technology Holdings, a semiconductor company, and DealerTrak Holdings, a software firm selling to the automobile dealership industry.
The Fund’s international exposure was another significant headwind. Although our international holdings performed broadly in line with the foreign small cap indexes, the foreign indexes did much worse than their U.S. counterparts. International stocks were hurt by the risk-averse climate and darkening outlook for many of the world’s economies amid the financial crisis in the United States, tighter credit market conditions and high food and fuel prices. Despite recent weakness, we remain enthusiastic about investing abroad, since we believe many international economies will grow faster than the U.S. economy in the long run.
Macro concerns were also apparent when looking at stocks in the Fund that performed well. Strayer Education, a provider of post-secondary education services and one of our largest holdings, posted a substantial gain as investors gravitated toward its defensive characteristics. The company has delivered consistently strong revenue and earnings growth over the past several years and tends to do well even in tough economic times, when higher unemployment motivates people to change or enhance their job skills. Other positive performers included MWI Veterinary Supply, a distributor of animal health products, and Kendle International, a clinical research organization serving the biopharmaceutical industry. Like Strayer, these stocks were beneficiaries of the “flight to stability” that occurred as investors sought refuge in companies with resilient demand. Current and future portfolio holdings are subject to risk.
Energy was the only sector in the small cap growth market to post a gain, supported by a rapid rise in the price of oil throughout much of the period. This negatively impacted the Fund’s performance relative to the Russell 2000 Growth Index in light of our traditionally lower exposure to commodity-driven companies. That said, energy stocks fell sharply toward the end of the period, as the price of oil dropped over 30% from July through September in the face of cooling demand from developed countries.
OUTLOOK
We feel confident in our long-term outlook for the Fund given the characteristics of our companies — their valuations, long-run earnings prospects and, in particular, their capital structures. Despite all of the volatility in the market, we have stayed focused on owning quality businesses with strong balance sheets. We believe this approach has the potential to be rewarded over the next several years as the economy continues to grapple with the aftermath of the credit boom. A reasonable post-recessionary scenario is a low-growth economy with no new emerging asset bubble. This type of environment has historically been favorable for the Fund, since it allows steady, quality growth companies to shine.
Thank you for the opportunity to manage your assets.
| CFA® is a registered trademark of CFA Institute. |
| * | The price-to-earnings (P/E) ratio is the price of a stock divided by its earnings per share. |
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| WASATCH SMALL CAP GROWTH FUND (WAAEX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Small Cap Growth | -25.42% | 2.94% | 11.48% | |||
Russell 2000 Growth Index | -17.07% | 6.64% | 4.67% | |||
Russell 2000 Index | -14.48% | 8.15% | 7.81% |
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 60 days 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 1.19%. 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 may have absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
Investing 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. | 5.36% | |
| Resources Connection, Inc. | 3.90% | |
| Techne Corp. | 3.68% | |
| Pediatrix Medical Group, Inc. | 3.47% | |
| FactSet Research Systems, Inc. | 2.59% |
| Company | % of Fund | |
| HDFC Bank Ltd. ADR (India) | 2.52% | |
| Power Integrations, Inc. | 2.26% | |
| Peet’s Coffee & Tea, Inc. | 2.21% | |
| MSC Industrial Direct Co., Inc., Class A | 2.14% | |
| Copart, Inc. | 2.10% |
| *As | of September 30, 2008, the Fund had 30.23% invested in the Top 10 equity holdings and there were 98 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. 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. You cannot invest directly in these or any indexes.
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| WASATCH SMALL CAP VALUE FUND (WMCVX) — Management Discussion | SEPTEMBER 30, 2008 | |
The Wasatch Small Cap Value Fund is managed by a team of Wasatch portfolio managers, led by Jim Larkins. John Mazanec was a lead manager for the Fund until May 20, 2008.
Jim Larkins, MBA Portfolio Manager | OVERVIEW
The Wasatch Small Cap Value Fund was down 26.26% during the 12-month period ended September 30, 2008, and underperformed the -12.25% return of its benchmark, the Russell 2000 Value Index. U.S. stocks performed poorly during the past year due to the combination of slowing economic growth, a broadening financial crisis, and concerns that rising energy costs would lead to heightened inflation pressures. Small |
cap value stocks, while producing a negative absolute return, performed well compared to their large-cap counterparts. Unfortunately, the Fund did not participate in the relative strength of small cap value stocks due to the underperformance of our holdings in three important sectors — consumer discretionary, financials, and energy. Additionally, our international holdings detracted from performance. We are disappointed with these results. Still, as we will discuss in detail below, we feel confident that the Fund remains well positioned to produce the long-term results we expect.
DETAILSOFTHE YEAR
A leading cause of the Fund’s underperformance of the Russell 2000 Index was our positioning in the consumer discretionary group, a sector that was pressured by concerns that slower economic growth and higher gas prices would force consumers to curtail their spending. Many of the Fund’s consumer stocks were hit disproportionately hard by these worries, including Big 5 Sporting Goods, which was hurt by the outsized weakness in California’s economy, and Sleep Number® Beds company Select Comfort, which lost ground when sales of higher end merchandise plummeted.
The financials sector was also a source of weakness for the Fund. We held an underweight in financials throughout the annual period based on our concerns about the deepening effects of the credit crisis. While this positioning was a positive throughout most of the year, it caused us to lose ground relative to the Index late in the period when the sector rallied on hopes for the government’s bailout plan. Despite our generally cautious approach to the financial sector, we continue to find compelling individual company stories among smaller banks with strong niche businesses and healthy balance sheets. Included in this category are the Fund’s holdings in City National, Boston Private Financial Holdings, and Nara Bancorp, all of which made positive contributions to performance during the past year.
Our positioning within energy was a further detractor from performance. The bulk of gains for energy stocks occurred in the first half of the period. When the price of oil began to decline during the summer — falling from a high of about $140 in early July to a low near $95 in mid-September — energy stocks began to lose ground with many stocks giving back their previous gains, and more. Small-cap energy stocks, including many of those held in the Fund, were generally among the sector’s worst performers during this time. Although the Fund had its share of winners,
including BPZ Resources and Ultra Petroleum, these were more than offset by positions in weaker stocks such as TETRA Technologies and World Fuel Services. Current and future portfolio holdings are subject to risk.
On the positive side, trucking companies were an area of strength for the Fund. The industry rallied in the first half of 2008 as investors searched for stocks that could perform well in the early stages of an economic recovery. This boosted shares of the Fund’s holdings in Old Dominion Freight Line and JB Hunt Transport Services. We elected to sell a large portion of the Fund’s position in truckers in order to protect profits — a well-timed move given that these stocks subsequently turned lower on fears that the economic slowdown would prove more lengthy than expected.
The health care sector was a source of outperformance for the Fund. Not only did we add value by being overweight in this defensive sector, but our selection of holdings also did well led by LHC Group, CorVel and Invacare.
For the last few years, the Fund has invested a portion of its assets in international companies, which helped performance until this year. With the dollar weakening and international markets dropping more than domestic markets, our international holdings detracted from performance over the past 12 months. Canadian auto parts manufacturer Martinrea International was hurt by the huge slowdown in auto production, both in the U.S. and abroad. Chinese apparel company China Hongxing Sports and electrical equipment manufacturer Wasion Meters Group were pulled down along with most Chinese stocks, which dropped almost 57% on average according to the MSCI AC World Ex-U.S.A. Small Cap Index. We believe that China’s strong domestic growth will continue, and that these two companies are positioned to benefit. Long term, we expect that shareholders will benefit from having some exposure to international companies.
OUTLOOK
When confronted with the market volatility witnessed in recent months, professional investors had two obvious choices. One was to adopt a short-term strategy in order to outperform their benchmarks by a few percentage points. The other was to do what we have done, which is to build long-term positions in undervalued stocks that we believe have the potential to do well over a two- to three-year time frame. We feel our approach — which focuses on buying great companies when they stumble and undiscovered companies when they’re cheap — is a time-tested way to generate the long-term results we seek.
We remain cautious regarding the outlook for U.S. stocks, as the credit crisis and financial sector meltdown continue to unfold. Nevertheless, we believe fundamental research can help us identify attractive investment opportunities even in the toughest markets, and there is no shortage of attractively valued companies right now. We remain enthusiastic about the long-term prospects for the individual companies held in the Fund, and we feel confident that our emphasis on high-quality companies with attractive valuations will ultimately be reflected in our results.
Thank you for the opportunity to manage your assets.
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| WASATCH SMALL CAP VALUE FUND (WMCVX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Small Cap Value | -26.26% | 5.22% | 14.54% | |||
Russell 2000 Value Index | -12.25% | 9.45% | 10.14% | |||
Russell 2000 Index | -14.48% | 8.15% | 7.81% |
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 60 days 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 1.96%. 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 may have absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
Investing 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 | |
| CorVel Corp. | 3.25% | |
| TETRA Technologies, Inc. | 2.99% | |
| Emeritus Corp. | 2.87% | |
| MFA Mortgage Investments, Inc. | 2.48% | |
| Invacare Corp. | 2.34% |
| Company | % of Fund | |
| Zumiez, Inc. | 2.30% | |
| TTM Technologies, Inc. | 2.23% | |
| Globe Specialty Metals, Inc. (United Kingdom) | 2.21% | |
| Petrohawk Energy Corp. | 2.10% | |
| Vitran Corp., Inc. (Canada) | 1.98% |
| * | As of September 30, 2008, the Fund had 24.75% invested in the Top 10 equity holdings and there were 77 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. 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 these or any indexes.
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| WASATCH STRATEGIC INCOME FUND (WASIX) — Management Discussion | SEPTEMBER 30, 2008 | |
The Wasatch Strategic Income Fund is managed by a team of Wasatch portfolio managers, led by Sam Stewart, Jr.
Sam Stewart, Jr., PhD, CFA® Portfolio Manager | OVERVIEW
In a beleaguered market for stocks, the Wasatch Strategic Income Fund suffered an 18.17% loss and slightly outperformed the S&P 500 Index, which declined 21.98%, during the 12 months ended September 30, 2008. The Lehman Brothers Aggregate Bond Index gained 3.65% over the same period. The market’s volatility continued to increase as economic uncertainty prevailed. Late in September, the S&P 500 Index fell nearly 9% one day, |
regained more than 5% the next and then two days later dropped another 4%. The Chicago Board Options Exchange Volatility Index (the “VIX”) — a popular measure of volatility often referred to as the “fear index” — reached all-time highs.
Widespread concern over the growing financial crisis and its impact on the global economy sent stock prices down across the board. Like many, I was surprised at just how far the tentacles of this crisis had penetrated into the core of our financial system. The need for swift and strong government intervention became imperative to end the downward spiral and restore confidence in the financial system.
While the financial crisis creates a pretty bleak landscape, the economy, although weakening, is still hanging on. Unemployment has risen to 6.1%, but is still not high in historical terms. Inflation remains reasonably in check. Oil prices have retreated, and government actions should continue to be stimulative. Needless to say, the resolution of the financial crisis is pivotal to our future economy. Even with strong government intervention I expect the economy will remain weak, but these actions should allow us to begin the recovery process.
Financial stocks experienced a particularly wild year. We narrowed our financial holdings, but the financials sector still accounted for nearly half of the Fund’s decline. The other significant headwind was the rapid fall in international stock markets — the MSCI AC World Ex-U.S.A. Small Cap Index fell over 35% this year. Beyond these two significant challenges, the Fund performed well in other sectors, including positive results in consumer staples, health care, and information technology.
DETAILSOFTHE YEAR
The financial crisis reached a new level in September with the bankruptcy of Lehman Brothers, Merrill Lynch’s forced merger, AIG’s crippling capitalization issues, and the failure of Washington Mutual (none of which were owned by the Fund). Our financial holdings were not immune as the Fund was bruised by our international financial holdings as well as by exposure to real estate investment trusts (REITs). Although I am generally not a proponent of government meddling, I am optimistic that the government’s aggressive intervention in this crisis will help stabilize the situation and allow the recovery to begin.
The global spread of the financial crisis led to a broad and sharp retreat in foreign markets. Prices had become slightly inflated last year, which likely exacerbated the pullback. Although we scaled back new foreign investment due to valuation concerns, the Fund’s existing holdings still subtracted over 6% from the year’s return. If foreign stocks felt slightly expensive coming into the year, many now feel cheap.
While our international holdings outperformed the broad international small cap market, the Fund was still greatly impacted by market declines. For example, the Brazilian market fell over 45% in the last 12 months, despite having what we consider a well-positioned economy. Not only does Brazil have an abundance of natural resources, but it also has a burgeoning middle class.
Redecard, a technology/finance company that captures, transmits and manages debit and credit card transactions in Brazil, saw its stock price drop nearly 31% this year. We think the company’s prospects are bright as the credit card market is large and under-penetrated in Brazil and in the coming years we expect it to more closely resemble the U.S. ‘swipe for sale’ market.
Over the course of the year, we built up a fairly large cash position. Recently, we put some of this cash to work by buying blue chip companies with beaten down share prices, as well as foreign companies, particularly in Brazil. The Fund ended the 12-month period still holding about 6% cash. Even though many stocks feel cheap, we are waiting to see some additional clarity in the unsettled economy before putting more of the money to work. Holding a larger than normal cash position provides a bit of safety while giving us the chance to be opportunistic and exploit market inefficiencies. Current and future portfolio holdings are subject to risk.
OUTLOOK
The details of the U.S. government’s support efforts can be debated, but it rapidly became clear that the government had to intervene. Ultimately, its actions should prove to be stabilizing and stimulative for the economy. However, I expect the recovery will be prolonged. I believe the worst of the crisis has just passed, but we will maintain our defensive posture until the picture becomes clearer. We will be conservative in our financial holdings and will deploy cash into what we view as attractively valued opportunities. These investments will likely include blue chip firms that pay a healthy dividend and foreign companies that we see as deeply undervalued.
Bear markets (defined by the Wall Street Journal as a drop of 20% or more) are not enjoyable for anyone. Often it feels like there will be no tomorrow. But over decades of investing, we have learned that times like now — when the eye of the storm is directly upon us — establish the foundation for subsequent success. Bear markets create the types of conditions that are necessary for change, not to mention tremendous buying opportunities.
Thank you for your steady hand during these uncertain times. We appreciate the opportunity to manage your assets.
| CFA® is a registered trademark of CFA Institute. |
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| WASATCH STRATEGIC INCOME FUND (WASIX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | SINCE INCEPTION 2/1/06 | ||||
Strategic Income | -18.17% | N/A | -1.28% | |||
Lehman Brothers Aggregate Bond Index | 3.65% | N/A | 4.45% | |||
S&P 500 Index | -21.98% | N/A | -1.50% |
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 60 days 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 2.01%. 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 may have 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, especially in emerging markets, 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 | |
| General Electric Co. | 5.36% | |
| Redwood Trust, Inc. | 4.86% | |
| Pool Corp. | 4.25% | |
| Paychex, Inc. | 4.08% | |
| MFA Mortgage Investments, Inc. | 3.41% |
| Company | % of Fund | |
| Chesapeake Energy Corp. | 3.26% | |
| Wal-Mart Stores, Inc. | 3.22% | |
| Procter & Gamble Co. | 2.26% | |
| CapitalSource, Inc. | 2.26% | |
| Redecard S.A. (Brazil) | 2.22% |
| * | As of September 30, 2008, the Fund had 35.18% invested in the Top 10 equity holdings and there were 60 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. †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 nonconvertible. All corporate and asset-backed securities must be registered with the SEC and must be publicly issued. The S&P 500 Index represents 500 of the United States’ largest stocks from a broad variety of industries. The Index is unmanaged, and a common measure of common stock total return performance. You cannot invest directly in these or any indexes.
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| WASATCH ULTRA GROWTH FUND (WAMCX) — Management Discussion | SEPTEMBER 30, 2008 | |
The Wasatch Ultra Growth Fund is managed by a team of Wasatch portfolio managers, led by Ajay Krishnan. Neal Dihora was a lead manager for the Fund until October 24, 2008.
Ajay Krishnan, CFA® Portfolio Manager
| OVERVIEW
The Wasatch Ultra Growth Fund lost 35.09% and the Russell 2000 Growth Index fell 17.07% during the 12 months ended September 30. A deepening in the housing-induced credit crisis pushed the U.S. financial system to the brink of collapse and sent stock prices sharply lower around the world. In the turbulent environment, fear and emotion obscured the underlying business strength of our portfolio companies, and the majority of our |
stocks declined. In particular, our emphasis on rapidly growing companies hurt the Fund, since the stocks of the fastest growing small companies were the most out of favor. Our results were further impacted by positions in a handful of companies that experienced fundamental problems.
Over the years, we have learned the importance of adhering to our investment philosophy and process in all markets, no matter how volatile they might be. The consistent application of our approach has led to strong long-term performance in the Fund, and we feel confident it has the potential to do so in the future.
DETAILSOFTHE YEAR
The U.S. stock market was extremely volatile during the 12 months ended September 30. Rising defaults on subprime mortgages led to huge write-downs by financial firms, which weakened their balance sheets and impaired their ability to access the capital markets. A large securities dealer filed for bankruptcy, and other major institutions were rescued by the government or sold. Investors became unwilling to assume even the slightest amount of risk, banks started hoarding cash and the credit markets slowed to a near standstill.
As the credit crisis worsened, risk aversion soared and stock prices declined across the U.S. market. The Fund was especially hard hit as investors abandoned the high growth small company stocks like those we emphasize and flocked to less volatile assets. Many of our companies reported strong operating results and provided favorable outlooks, only to see their stock prices fall. And if a company’s earnings missed consensus estimates or future guidance was reduced, its stock was severely punished, regardless of the company’s long-term prospects.
Cognizant Technology Solutions, a supplier of information technology (IT) services and a major detractor in the Fund, was a good example of the market’s unforgiving mood. During the period, Cognizant reported four quarters of 29%+ year-over-year revenue and earnings growth.
Management did lower 2008 revenue guidance in late July, but from “approximately 38%” to “at least 32%,” which is still a healthy rate of growth. Nonetheless, the stock was weak throughout much of the year on concerns about Cognizant’s exposure to the financial sector. While these were legitimate concerns, we did not think they warranted such a big decline in the stock. It was discouraging to see Cognizant and other companies with strong fundamentals lose so much of their value. However, we feel confident that their strength will be recognized as volatility decreases and the market gets back on track.
The Fund was also impacted by positions in several companies that had material business issues. One of our largest detractors was Providence Service Corp., a provider of government-sponsored social service programs. Last December, Providence acquired a company that provides transportation services to Medicaid beneficiaries. Our due diligence led us to conclude that there was little risk of cuts to the Medicaid budgets used to pay for these services, because the services are necessary and cost-effective. However, Providence materially reduced their 2008 earnings guidance in July, citing delays in funding allocations. The announcement made it clear to us that budget cuts were on the way and that we had overestimated the stability of the company’s Medicaid funding, which is a key source of revenue. This realization changed our investment thesis on Providence, and we sold our position. Current and future portfolio holdings are subject to risk.
While the Fund’s performance was disappointing, we would like to point out that the magnitude of the shortfall relative to the Russell 2000 Growth Index was unusual for our investment style. For example, 1999 was the only calendar year in the Fund’s 16-year history when we trailed the Index by more than we trailed it in this 12-month period. 1999 was another unique environment that saw technology stock prices rise to stratospheric heights before falling back to earth in 2000. Fortunately, there also have been years when we beat the Index by a wide margin, including 2000, and the Fund has outperformed over long time periods.
OUTLOOK
The stock market is likely to remain volatile in the months ahead as investors assess the recent changes in the financial sector and their long-term implications for U.S. and international economies. In the uncertain environment, we will continue to focus on what is within our control, which is researching and investing in companies that we believe have sustainable competitive advantages, experienced management teams and solid balance sheets. By continuing to methodically execute our approach — and not getting caught up in the day-to-day volatility — we feel confident the Fund has the potential to generate long-term results we seek.
Thank you for the opportunity to manage your assets.
| CFA® is a registered trademark of CFA Institute. |
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| WASATCH ULTRA GROWTH FUND (WAMCX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
Ultra Growth | -35.09% | -1.55% | 8.91% | |||
Russell 2000 Growth Index | -17.07% | 6.64% | 4.67% |
Performance data quoted represents past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the performance quoted. Wasatch Funds will deduct a fee of 2% from redemption proceeds on Fund shares held 60 days 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 1.50%. 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 may have absorbed, currently or in the past, certain Fund expenses, without which total returns would have been lower.
Investing 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 | 4.35% | |
| HDFC Bank Ltd. ADR (India) | 4.09% | |
| Psychiatric Solutions, Inc. | 3.73% | |
| Bucyrus International, Inc., Class A | 3.36% | |
| Power Integrations, Inc. | 3.19% |
| Company | % of Fund | |
| Silicon Laboratories, Inc. | 3.01% | |
| NetLogic Microsystems, Inc. | 2.52% | |
| VNUS Medical Technologies, Inc. | 2.25% | |
| Montagu Newhall Global Partners II-B, L.P. | 2.22% | |
| Pediatrix Medical Group, Inc. | 2.06% |
| * | As of September 30, 2008, the Fund had 30.78% invested in the Top 10 equity holdings and there were 79 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. Current and future holdings are subject to risk. |
SECTOR BREAKDOWN**
** | Excludes securities sold short and written options, if any. |
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. 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. You cannot invest directly in these or any indexes.
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| WASATCH-HOISINGTON U.S. TREASURY FUND (WHOSX) — Management Discussion | SEPTEMBER 30, 2008 | |
Van R. Hoisington Portfolio Manager | OVERVIEW
The Wasatch-Hoisington U.S. Treasury Fund returned 12.33% in the 12 months ended September 30, 2008 and significantly outperformed the Lehman Brothers Aggregate Bond Index, which returned 3.65%. Falling yields on long-term U.S. Treasury bonds (maturities longer than 20 years) boosted the Fund’s performance for the 12-month period. The yield on 30-year Treasury bonds fell |
to 4.31%, down a substantial 0.53 percentage points over the course of the year. Consequently, the Fund performed well as the market value of its portfolio was far greater than the coupon interest on the Treasury bonds it held.
DETAILSOFTHE YEAR
The Coincident Economic Index (comprised of payroll employment, industrial production, real business sales and real personal income less transfer payments) peaked in October 2007 and has declined 0.8% since then indicating the recession began at least nine months ago.
Reflecting the recession, unused labor and plant capacity increased meaningfully. The unemployment rate in September stood at 6.1%, up sharply from 4.7% a year earlier. Employment fell.
Core consumer prices rose 2.5% in the past 12 months, down from a peak of 2.9% in September 2006. Treasury bond yields followed the core inflation rate lower over the past 12 months.
OUTLOOK
We believe the U.S. faces a prolonged period of economic weakness. Here are the most critical problems. First, the economy is at least nine months into a recession, and the Leading Economic Index (LEI)* is declining at an increasing rate. In view of the LEI’s nine-month visibility, the recession will persist, at a minimum, into late spring of next year.
Second, major foreign economies are in as much trouble as the U.S., with the result that the world is on the verge of a synchronized downturn. Real domestic demand in 15 large countries outside the U.S. rose just 1% in the latest four quarters, down substantially from the peak of 3% registered in early 2007. Like the U.S., leading indicators in these countries point to even greater weakness. In the last 12 months, the OECD’s World Leading Economic Index** slumped 3.2%. Declines of this magnitude have always been associated with global recessions.
Third, monetary policy has not gained traction and should not be expected to for some time. While M2† has expanded sharply in recent weeks, this increase is meaningless since velocity is estimated to have declined even more significantly. Velocity, which is the measure of the turnover of the economy’s stock of money, is outside the Fed’s control. Since many of the financial innovations of the past two decades are being reversed, further sizeable decreases in velocity are likely.
Fourth, in real terms by the end of the third quarter, wealth of the household sector declined an estimated $4.5 trillion since the second quarter of 2007. This poses a major restraint on consumer spending for both domestic and imported goods.
Fifth, leverage of the U.S. economy pushed to a new height in the second quarter, with conditions deteriorating dramatically in the pivotal corporate sector. Indeed, unwarranted debt levels are apparent in all major sectors of the economy, including households, financial and non-financial businesses, and the government.
Sixth, the presumably grand fiscal policy actions that have been taken are not only ineffectual, but probably harmful to the economy. Fiscal policy is often considered to be a powerful tool because it supposedly worked in the Great Depression. We believe that assessment is incorrect. The dismal conditions of the 1930s only improved materially after Europe and Asia went to war, thus benefiting the U.S., initially a non-combatant selling to both sides of the conflict. Instead, we feel the massive Treasury bailout will make conditions worse than if nothing was done. Remember that earlier this year the experts on Wall Street, in Washington, and in the media predicted that the tax rebate/stimulus package was a panacea, just as they now predict success for the bailout. When it becomes clear that the bailout bill has not righted the economy, additional equally ill-conceived fiscal policies could be adopted, serving to reinforce negative unintended consequences of earlier actions.
With aggregate demand continuing to falter, the risk of deflation is far greater than inflation. Since commodity prices and rents are now falling, negative readings on the monthly inflation gauges may occur before this year ends. In Japan in the 1990s, the budget deficit reached 14% of GDP, but because deflation prevailed, short, intermediate, and long-term Treasury bond yields fell to extremely low levels. This experience reminds us of the overwhelming relevancy of the Fisher equation in determining the long-term bond yield. In this equation the Treasury bond yield is equal to the real interest rate plus expected inflation. Much empirical research has indicated that the dominant independent variable of this equation, over time, is expected inflation. With inflation moving lower and possibly considerably lower, long Treasury bond yields will follow, creating a positive scenario for investors who are able to look beyond the extreme volatility present in today’s markets.
Thank you for the opportunity to manage your assets.
| * | Leading Economic Index (LEI) was developed by the Conference Board and is comprised of 10 components that lead changes in overall economic activity. The Conference Board, Inc. is a non-profit global business organization supported by business executives that holds conferences, convenes executives and conducts business management research. |
| ** | OECD World Leading Economic Index is an aggregate weighting of leading indicators from OECD countries. The Organisation for Economic Co-operation and Development (OECD) is an international organization of 30 countries that accept the principles of representative democracy and free-market economy. |
† | M2 money supply consists of currency and checking accounts, consumer-type time and savings accounts and equivalent near monies, while M3 money supply consists of M2 plus business-type time deposits and less liquid near monies. Both M2 and M3 exclude monies and near monies owned by the Treasury, depository institutions and foreign banks and official institutions and IRA and Keogh balances owned by consumers. |
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| WASATCH-HOISINGTON U.S. TREASURY FUND (WHOSX) — Portfolio Summary | SEPTEMBER 30, 2008 | |
AVERAGE ANNUAL TOTAL RETURNS
| 1 YEAR | 5 YEARS | 10 YEARS | ||||
U.S. Treasury | 12.33% | 6.68% | 6.08% | |||
Lehman Brothers Aggregate Bond Index | 3.65% | 3.78% | 5.20% |
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 60 days 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 0.71%. Total Annual Fund Operating Expenses include direct expenses paid to the Advisor 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 may have absorbed, currently or 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 | 34.72% | ||
| U.S. Treasury Bond, 4.75% | 2/15/37 | 19.38% | ||
| U.S. Treasury Bond, 5.25% | 11/15/28 | 10.68% | ||
| U.S. Treasury Bond, 4.50% | 2/15/36 | 9.30% | ||
| U.S. Treasury Bond, 5.25% | 2/15/29 | 6.00% |
| Holding | Maturity Date | % of Fund | ||
| U.S. Treasury Strip, principal only | 2/15/37 | 4.62% | ||
| U.S. Treasury Strip, principal only | 2/15/36 | 4.58% | ||
| U.S. Treasury Bond, 5.375% | 2/15/31 | 2.81% | ||
| U.S. Treasury Bond, 3.125% | 8/31/13 | 2.49% | ||
| U.S. Treasury Bond, 4.50% | 5/15/38 | 1.36% |
| * | As of September 30, 2008, the Fund had 95.94% invested in the Top 10 holdings and there were 11 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. Current and future holdings are subject to risk. |
INVESTMENTS & CASH
GROWTHOFA $10,000 INVESTMENT
Past performance does not predict future performance and the graph above does not reflect the deduction of taxes that you would pay on fund distributions or the redemption of fund shares. Performance shown in the chart above does not include any applicable sales charges and fees. Wasatch does not charge any sales fees. The chart represents a hypothetical $10,000 investment at the beginning of the time period shown. 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 nonconvertible. All corporate and asset-backed securities must be registered with the SEC and must be publicly issued. You cannot invest directly in this or any index.
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| 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, 2008.
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.
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| SEPTEMBER 30, 2008 | ||
| Account Value | Expenses Paid During Period* | Annualized Expense Ratio* | ||||||
| Fund/Class and Return | Beginning of Period April 1, 2008 | End of Period September 30, 2008 | ||||||
Core Growth Fund | ||||||||
Actual | $1,000.00 | $893.90 | $5.73 | 1.21% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,018.95 | $6.11 | 1.21% | ||||
Emerging Markets Small Cap Fund | ||||||||
Actual | $1,000.00 | $738.10 | $9.13 | 2.10% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,014.50 | $10.58 | 2.10% | ||||
Global Science & Technology Fund | ||||||||
Actual | $1,000.00 | $874.50 | $9.51 | 2.03% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,014.85 | $10.23 | 2.03% | ||||
Heritage Growth Fund | ||||||||
Actual | $1,000.00 | $915.60 | $4.55 | 0.95% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,020.25 | $4.80 | 0.95% | ||||
Heritage Value Fund | ||||||||
Actual | $1,000.00 | $899.40 | $4.51 | 0.95% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,020.25 | $4.80 | 0.95% | ||||
International Growth Fund | ||||||||
Actual | $1,000.00 | $697.10 | $7.98 | 1.88% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,015.60 | $9.47 | 1.88% | ||||
International Opportunities Fund | ||||||||
Actual | $1,000.00 | $692.60 | $9.52 | 2.25% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,013.75 | $11.33 | 2.25% | ||||
Micro Cap Fund | ||||||||
Actual | $1,000.00 | $882.70 | $10.26 | 2.18% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,014.10 | $10.98 | 2.18% | ||||
Micro Cap Value Fund | ||||||||
Actual | $1,000.00 | $837.20 | $10.29 | 2.24% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,013.80 | $11.28 | 2.24% | ||||
Small Growth Fund | ||||||||
Actual | $1,000.00 | $892.90 | $5.77 | 1.22% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,018.90 | $6.16 | 1.22% | ||||
Small Cap Value Fund | ||||||||
Actual | $1,000.00 | $865.00 | $8.11 | 1.74% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,016.30 | $8.77 | 1.74% | ||||
Strategic Income Fund1 | ||||||||
Actual | $1,000.00 | $872.30 | $4.63 | 0.99% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,020.05 | $5.00 | 0.99% | ||||
Ultra Growth Fund | ||||||||
Actual | $1,000.00 | $819.00 | $7.00 | 1.54% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,017.30 | $7.77 | 1.54% | ||||
U.S. Treasury Fund | ||||||||
Actual | $1,000.00 | $1,013.90 | $3.73 | 0.74% | ||||
Hypothetical (5% before expenses) | $1,000.00 | $1,021.30 | $3.74 | 0.74% | ||||
*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 (183/366).
1The annualized expense ratio includes dividend payments for securities sold short and/or line of credit interest fees. Excluding these items the annualized expense ratio would have been 0.95%. Dividend payments for securities sold short and line of credit interest fees are not a reimbursable expense under the contractual agreement between the Fund and the Advisor.
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| WASATCH CORE GROWTH FUND (WGROX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 94.2% | |||||
| Aerospace & Defense 0.2% | |||||
| 687,880 | DataPath, Inc.* *** † | $ | 1,375,760 | ||
| Agricultural Products 1.3% | |||||
| 5,181,607 | Chaoda Modern Agriculture (Holdings) Ltd. (China) | 4,376,868 | |||
| 5,348,400 | China Green Holdings Ltd. (China) | 4,311,733 | |||
| 8,688,601 | |||||
| Apparel Retail 0.9% | |||||
| 178,005 | Jos. A. Bank Clothiers, Inc.* | 5,980,968 | |||
| Apparel, Accessories & Luxury Goods 1.0% | |||||
| 14,539,000 | EganaGoldpfeil Holdings Ltd.* *** (Hong Kong) | 18,726 | |||
| 3,601,187 | Ports Design Ltd. (Hong Kong) | 6,596,568 | |||
| 6,615,294 | |||||
| Application Software 1.1% | |||||
| 140,245 | FactSet Research Systems, Inc. | 7,327,801 | |||
| Asset Management & Custody Banks 7.5% | |||||
| 139,694 | Affiliated Managers Group, Inc.* | 11,573,648 | |||
| 1,110,324 | SEI Investments Co. | 24,649,193 | |||
| 880,060 | Solar Capital, LLC* ** *** † | 12,012,819 | |||
| 48,235,660 | |||||
| Automotive Retail 4.1% | |||||
| 994,684 | O’Reilly Automotive, Inc.* | 26,627,691 | |||
| Construction & Engineering 4.0% | |||||
| 362,850 | Chicago Bridge & Iron Co. | ||||
| N.V. (Netherlands) | 6,981,234 | ||||
| 155,115 | Outotec Oyj (Finland) | 4,173,776 | |||
| 393,018 | URS Corp.* | 14,411,970 | |||
| 25,566,980 | |||||
| Consumer Finance 2.2% | |||||
| 907,514 | Dollar Financial Corp.* | 13,966,641 | |||
| Data Processing & Outsourced Services 1.2% | |||||
| 444,346 | Euronet Worldwide, Inc.* | 7,433,909 | |||
| Diversified Banks 2.5% | |||||
| 508,066 | Axis Bank Ltd. (India) | 7,967,904 | |||
| 312,330 | HDFC Bank Ltd. (India) | 8,280,172 | |||
| 16,248,076 | |||||
| Diversified Support Services 5.5% | |||||
| 838,282 | Copart, Inc.* | 31,854,716 | |||
| 517,571 | LPS Brasil-Consultoria de Imoveis S.A. (Brazil) | 3,556,541 | |||
| 35,411,257 | |||||
| Environmental & Facilities Services 0.9% | |||||
| 571,343 | EnergySolutions, Inc. | 5,713,430 | |||
| Footwear 1.2% | |||||
| 35,997,935 | China Hongxing Sports Ltd. (China) | 7,649,361 | |||
| Health Care Distributors 2.0% | |||||
| 662,707 | PSS World Medical, Inc.* | 12,922,786 | |||
| Health Care Facilities 6.2% | |||||
| 1,609,819 | Emeritus Corp.* | 40,084,493 | |||
| Health Care Services 5.0% | |||||
| 596,064 | Pediatrix Medical Group, Inc.* | 32,139,771 | |||
| Shares | Value | ||||
| Homefurnishing Retail 1.9% | |||||
| 450,170 | Aaron Rents, Inc. | $ | 12,186,102 | ||
| Industrial Machinery 3.2% | |||||
| 194,540 | Graco, Inc. | 6,927,570 | |||
| 445,570 | IDEX Corp. | 13,821,581 | |||
| 20,749,151 | |||||
| Internet Software & Services 0.9% | |||||
| 353,751 | DealerTrack Holdings, Inc.* | 5,957,167 | |||
| Leisure Facilities 2.1% | |||||
| 436,704 | Life Time Fitness, Inc.* | 13,655,734 | |||
| Leisure Products 2.7% | |||||
| 745,559 | Pool Corp. | 17,393,891 | |||
| Marine 0.6% | |||||
| 296,767 | Eagle Bulk Shipping, Inc. | 4,136,932 | |||
| Mortgage REITs 4.3% | |||||
| 2,067,185 | Annaly Capital Management, Inc. | 27,803,638 | |||
| Oil & Gas Equipment & Services 3.6% | |||||
| 131,040 | Dril-Quip, Inc.* | 5,685,825 | |||
| 244,755 | Helix Energy Solutions Group, Inc.* | 5,942,651 | |||
| 840,955 | TETRA Technologies, Inc.* | 11,647,227 | |||
| 23,275,703 | |||||
| Oil & Gas Exploration & Production 3.3% | |||||
| 310,685 | GMX Resources, Inc.* | 14,850,743 | |||
| 297,100 | Petrohawk Energy Corp.* | 6,426,273 | |||
| 21,277,016 | |||||
| Personal Products 3.1% | |||||
| 439,316 | Emami Ltd. (India) | 2,798,957 | |||
| 437,170 | Herbalife Ltd. (Cayman Islands) | 17,276,958 | |||
| 20,075,915 | |||||
| Property & Casualty Insurance 2.1% | |||||
| 567,235 | Tower Group, Inc. | 13,364,057 | |||
| Research & Consulting Services 4.7% | |||||
| 282,913 | CRA International, Inc.* | 7,774,449 | |||
| 1,004,222 | Resources Connection, Inc.* | 22,625,122 | |||
| 30,399,571 | |||||
| Semiconductors 4.7% | |||||
| 166,900 | Hittite Microwave Corp.* | 5,607,840 | |||
| 387,065 | Melexis N.V. (Belgium) | 5,388,057 | |||
| 680,169 | Micrel, Inc. | 6,169,133 | |||
| 192,450 | NetLogic Microsystems, Inc.* | 5,819,688 | |||
| 234,708 | Silicon Laboratories, Inc.* | 7,205,536 | |||
| 30,190,254 | |||||
| Specialized Finance 2.0% | |||||
| 1,177,147 | KKR Financial Holdings, LLC | 7,486,655 | |||
| 232,560 | MSCI, Inc., Class A* | 5,581,440 | |||
| 13,068,095 | |||||
| Specialty Stores 0.9% | |||||
| 305,015 | Hibbett Sports, Inc.* | 6,106,400 | |||
| Thrifts & Mortgage Finance 1.2% | |||||
| 163,075 | Housing Development Finance Corp. Ltd. (India) | 7,456,477 | |||
| Trading Companies & Distributors 3.6% | |||||
| 368,307 | MSC Industrial Direct Co., Inc., Class A | 16,967,904 | |||
| 486,090 | Rush Enterprises, Inc., Class B* | 6,105,290 | |||
| 23,073,194 | |||||
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| SEPTEMBER 30, 2008 | ||
Shares | Value | ||||
| Trucking 2.5% | |||||
| 843,585 | Localiza Rent A Car S.A. (Brazil) | $ | 4,356,367 | ||
| 412,875 | Old Dominion Freight Line, Inc.* | 11,700,878 | |||
| 16,057,245 | |||||
| Total Common Stocks (cost $639,985,623) | 608,215,021 | ||||
| PREFERRED STOCKS 0.4% | |||||
| Regional Banks 0.4% | |||||
| 798,675 | Banco Daycoval S.A. Pfd. (Brazil) | 2,448,890 | |||
| Total Preferred Stocks (cost $7,079,280) | 2,448,890 | ||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 5.7% | ||||||
| Repurchase Agreement 5.7% | ||||||
| $36,810,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/01/08 with Fixed Income Clearing Corporation collateralized by $26,445,000 of United States Treasury Bonds 8.00% due 11/15/21; value: $37,551,900; repurchase proceeds: $36,810,102 (cost $36,810,000) | $ | 36,810,000 | |||
| Total Short-Term Investments (cost $36,810,000) | 36,810,000 | |||||
| Total Investments (cost $683,874,903) 100.3%†† | 647,473,911 | |||||
| Liabilities less Other Assets (0.3)% | (1,704,803 | ) | ||||
| NET ASSETS 100.0% | $ | 645,769,108 | ||||
*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).
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 9.14%.
REIT Real Estate Investment Trust.
See notes to financial statements. |
| |||||
At September 30, 2008, Wasatch Core Growth Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Belgium | 0.9 | ||
Brazil | 1.7 | ||
Cayman Islands | 2.8 | ||
China | 2.7 | ||
Finland | 0.7 | ||
Hong Kong | 1.1 | ||
India | 4.3 | ||
Netherlands | 1.1 | ||
United States | 84.7 | ||
TOTAL | 100.0 | % | |
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| WASATCH EMERGING MARKETS SMALL CAP FUND (WAEMX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 83.6% | |||||
| Agricultural Products 4.0% | |||||
| 705,692 | Chaoda Modern Agriculture (Holdings) | ||||
| Ltd. (China) | $ | 596,093 | |||
| 722,595 | China Green Holdings Ltd. (China) | 582,536 | |||
| 28,000 | Sao Martinho S.A.* (Brazil) | 268,930 | |||
| 1,447,559 | |||||
| Air Freight & Logistics 1.0% | |||||
| 686,477 | Aramex PJSC* (United Arab Emirates) | 376,999 | |||
| Alternative Carriers 2.6% | |||||
| 30,955 | Global Village Telecom Holding S.A.* (Brazil) | 463,934 | |||
| 24,575 | Tulip IT Services Ltd. (India) | 477,992 | |||
| 941,926 | |||||
| Apparel Retail 1.1% | |||||
| 113,415 | Truworths International Ltd. (South Africa) | 401,478 | |||
| Apparel, Accessories & Luxury Goods 2.3% | |||||
| 912,210 | Anta Sports Products Ltd. (China) | 523,946 | |||
| 169,515 | Ports Design Ltd. (Hong Kong) | 310,514 | |||
| 834,460 | |||||
| Application Software 2.4% | |||||
| 11,815 | Financial Technologies (India) Ltd. (India) | 263,749 | |||
| 3,157,180 | Kingdee International Software Group | ||||
| Co. Ltd. (China) | 608,714 | ||||
| 872,463 | |||||
| Asset Management & Custody Banks 0.5% | |||||
| 27,660 | Tata Investment Corp. Ltd. (India) | 200,702 | |||
| Automobile Manufacturers 1.2% | |||||
| 58,590 | Ghabbour Auto* (Egypt) | 425,884 | |||
| Brewers 1.5% | |||||
| 53,140 | Anadolu Efes Biracilik ve Malt Sanayii AS (Turkey) | 542,764 | |||
| Coal & Consumable Fuels 1.2% | |||||
| 432,000 | Tambang Batubara Bukit Asam Tbk PT (Indonesia) | 423,446 | |||
| Communications Equipment 0.9% | |||||
| 75,000 | GeoVision, Inc. (Taiwan) | 312,506 | |||
| Construction & Engineering 0.8% | |||||
| 1,008,000 | Midas Holdings Ltd. (China) | 297,418 | |||
| Construction & Farm Machinery & Heavy Trucks 1.0% | |||||
| 1,404,000 | China Farm Equipment Ltd. (China) | 169,063 | |||
| 41,674 | TIL Ltd. (India) | 190,528 | |||
| 359,591 | |||||
| Consumer Finance 1.0% | |||||
| 130,805 | Banco Compartamos S.A. de C.V. (Mexico) | 369,245 | |||
| Department Stores 1.8% | |||||
| 424,000 | Golden Eagle Retail Group Ltd. (China) | 346,640 | |||
| 25,895 | Lojas Renner S.A. (Brazil) | 316,787 | |||
| 663,427 | |||||
| Diversified Banks 2.8% | |||||
| 52,140 | Commercial Int’l. Bank GDR (Egypt) | 331,089 | |||
| 81,895 | Federal Bank Ltd. (India) | 366,113 | |||
| 115,900 | Yes Bank Ltd.* (India) | 308,317 | |||
| 1,005,519 | |||||
| Shares | Value | ||||
| Diversified Chemicals 0.9% | |||||
| 38,370 | Omnia Holdings Ltd. (South Africa) | $ | 324,827 | ||
| Diversified Metals & Mining 2.9% | |||||
| 4,785,300 | Philex Mining Corp. (Philippines) | 747,779 | |||
| 302,465 | Sentula Mining Ltd.*** † (South Africa) | 309,271 | |||
| 1,057,050 | |||||
| Diversified Support Services 0.4% | |||||
| 21,355 | LPS Brasil — Consultoria de Imoveis S.A. (Brazil) | 146,743 | |||
| Drug Retail 1.6% | |||||
| 44,300 | Corporativo Fragua S.A.B., Class B (Mexico) | 564,755 | |||
| Electric Utilities 1.0% | |||||
| 58,345 | Equatorial Energia S.A. (Brazil) | 349,289 | |||
| Electrical Components & Equipment 0.7% | |||||
| 1,036,970 | Wasion Meters Group Ltd. (Hong Kong) | 250,585 | |||
| Electronic Equipment & Instruments 0.9% | |||||
| 253,313 | Chroma ATE, Inc. (Taiwan) | 310,879 | |||
| Food Retail 1.4% | |||||
| 16,230 | BIM Birlesik Magazalar AS (Turkey) | 500,741 | |||
| Footwear 0.9% | |||||
| 1,622,000 | China Hongxing Sports Ltd. (China) | 344,666 | |||
| Forest Products 0.8% | |||||
| 85,000 | Satipel Industrial S.A. (Brazil) | 309,300 | |||
| General Merchandise Stores 0.8% | |||||
| 64,055 | Eurocash S.A. (Poland) | 273,861 | |||
| Health Care Equipment 1.0% | |||||
| 3,439,165 | Mingyuan Medicare Development Co. Ltd. (China) | 367,353 | |||
| Health Care Facilities 0.3% | |||||
| 114,110 | Bumrungrad Hospital PCL (Thailand) | 107,842 | |||
| Health Care Supplies 2.2% | |||||
| 519,000 | Shandong Weigao Group Medical Polymer Co. Ltd., Class H (China) | 779,106 | |||
| Homebuilding 2.4% | |||||
| 35,180 | PDG Realty S.A. Empreendimentos e Participacoes (Brazil) | 246,321 | |||
| 38,770 | Rodobens Negocios Imobiliarios S.A. (Brazil) | 264,394 | |||
| 152,695 | Urbi Desarrollos Urbanos S.A. de C.V.* (Mexico) | 354,980 | |||
| 865,695 | |||||
| Hotels, Resorts & Cruise Lines 0.9% | |||||
| 1,046,200 | Minor International PCL (Thailand) | 342,966 | |||
| Industrial Conglomerates 0.9% | |||||
| 86,820 | Allied Electronics Corp. Ltd. (South Africa) | 340,997 | |||
| Industrial Machinery 3.3% | |||||
| 345,450 | Awea Mechantronic Co. Ltd. (Taiwan) | 336,905 | |||
| 47,660 | Hamlet (Israel-Canada) Ltd.* (Israel) | 350,067 | |||
| 8,735 | JVM Co. Ltd. (Korea) | 126,255 | |||
| 258,025 | Shanthi Gears Ltd. (India) | 398,611 | |||
| 1,211,838 | |||||
| Investment Banking & Brokerage 1.2% | |||||
| 37,675 | Egyptian Financial Group-Hermes | ||||
| Holding GDR (Egypt) | 433,262 | ||||
36
Table of Contents
| SEPTEMBER 30, 2008 | ||
| Shares | Value | ||||
| IT Consulting & Other Services 1.1% | |||||
| 77,830 | Rolta India Ltd. (India) | $ | 402,104 | ||
| Managed Health Care 0.8% | |||||
| 19,035 | OdontoPrev S.A. (Brazil) | 282,411 | |||
| Marine 1.0% | |||||
| 159,170 | Grindrod Ltd. (South Africa) | 345,553 | |||
| Marine Ports & Services 2.0% | |||||
| 634,749 | Int’l. Container Terminal Services, Inc. (Philippines) | 353,749 | |||
| 39,290 | Santos Brasil Participacoes S.A.** (Brazil) | 359,980 | |||
| 713,729 | |||||
| Multi-Sector Holdings 0.9% | |||||
| 68,210 | Macquarie Korea Infrastructure Fund (Korea) | 317,406 | |||
| Office REITs 1.4% | |||||
| 1,072,600 | Axis Real Estate Investment Trust (Malaysia) | 504,753 | |||
| Oil & Gas Equipment & Services 0.6% | |||||
| 1,188,435 | Anhui Tianda Oil Pipe Co. Ltd., Class H (China) | 210,287 | |||
| Oil & Gas Exploration & Production 3.1% | |||||
| 244,730 | Afren plc* (South Africa) | 290,034 | |||
| 50,810 | Dragon Oil plc* (United Arab Emirates) | 159,155 | |||
| 68,180 | JKX Oil & Gas plc (United Kingdom) | 340,710 | |||
| 53,330 | Pacific Rubiales Energy Corp.* (Colombia) | 337,910 | |||
| 1,127,809 | |||||
| Other Diversified Financial Services 0.9% | |||||
| 170,555 | PSG Group Ltd. (South Africa) | 326,291 | |||
| Packaged Foods & Meats 1.4% | |||||
| 49,385 | Strauss Group Ltd. (Israel) | 493,482 | |||
| Pharmaceuticals 1.8% | |||||
| 5,885 | Daewoong Pharmaceutical Co. Ltd. (Korea) | 265,845 | |||
| 21,660 | Pharmstandard GDR* (Egypt) | 384,516 | |||
| 650,361 | |||||
| Precious Metals & Minerals 1.1% | |||||
| 69,675 | Northam Platinum Ltd. (South Africa) | 381,899 | |||
| Property & Casualty Insurance 1.4% | |||||
| 10,820 | Qatar Insurance Co. (Qatar) | 500,677 | |||
| Real Estate Operating Companies 0.6% | |||||
| 627,000 | Ascendas India Trust** (China) | 229,230 | |||
| Regional Banks 1.0% | |||||
| 237,280 | Asya Katilim Bankasi AS* (Turkey) | 363,034 | |||
| Restaurants 2.3% | |||||
| 555,275 | Ajisen China Holdings Ltd. (China) | 321,338 | |||
| 458,525 | Jollibee Foods Corp. (Philippines) | 497,295 | |||
| 818,633 | |||||
| Security & Alarm Services 1.3% | |||||
| 9,550 | S1 Corp. (Korea) | 486,517 | |||
| Specialized Finance 4.5% | |||||
| 205,770 | Bursa Malaysia Bhd (Malaysia) | 384,409 | |||
| 63,952 | GP Investments Ltd.* (Brazil) | 376,198 | |||
| 65,510 | JSE Ltd. (South Africa) | 429,866 | |||
| 57,610 | Philippine Stock Exchange, Inc. (Philippines) | 449,273 | |||
| 1,639,746 | |||||
| Shares | Value | ||||
| Specialty Chemicals 1.0% | |||||
| 185,850 | China Steel Chemical Corp. (Taiwan) | $ | 358,967 | ||
| Steel 2.4% | |||||
| 7,460 | Anglo Ferrous Brazil S.A.* (Brazil) | 107,573 | |||
| 136,900 | Industrias CH, S.A.B. de C.V., Series B* (Mexico) | 503,632 | |||
| 102,400 | Sesa Goa Ltd. (India) | 265,345 | |||
| 876,550 | |||||
| Trading Companies & Distributors 1.6% | |||||
| 4,310,000 | AKR Corporindo Tbk PT (Indonesia) | 569,889 | |||
| Trucking 0.8% | |||||
| 54,725 | Localiza Rent A Car S.A. (Brazil) | 282,606 | |||
| Total Common Stocks (cost $46,569,868) | 30,239,076 | ||||
| PREFERRED STOCKS 0.9% | |||||
| Regional Banks 0.9% | |||||
| 104,145 | Banco Daycoval S.A. Pfd. (Brazil) | 319,328 | |||
| Total Preferred Stocks (cost $968,751) | 319,328 | ||||
| RIGHTS 0.0% | |||||
| Asset Management & Custody Banks 0.0% | |||||
| 5,532 | Tata Investment Corp. Ltd.* (India) | 1,178 | |||
| Total Rights (cost $0) | 1,178 | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 15.1% | |||||
| Repurchase Agreement 15.1% | |||||
| $5,478,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/1/08 with Fixed Income Clearing Corporation collateralized by $4,260,000 of United States Treasury Bonds 7.125% due 2/15/23; value: $5,591,250; repurchase proceeds: $5,478,015 (cost $5,478,000) | $ | 5,478,000 | ||
| Total Short-Term Investments (cost $5,478,000) | 5,478,000 | ||||
| Total Investments (cost $53,016,619) 99.6%†† | 36,037,582 | ||||
| Other Assets less Liabilities 0.4% | 138,654 | ||||
| NET ASSETS 100.0% | $ | 36,176,236 | |||
*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).
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 61.02%.
GDR Global Depositary Receipt.
REIT Real Estate Investment Trust.
See notes to financial statements. | |||||
37
Table of Contents
| WASATCH EMERGING MARKETS SMALL CAP FUND (WAEMX) — Schedule of Investments (continued) | ||
At September 30, 2008, Wasatch Emerging Markets Small Cap Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Brazil | 13.4 | ||
China | 17.6 | ||
Colombia | 1.1 | ||
Egypt | 5.2 | ||
Hong Kong | 1.8 | ||
India | 9.4 | ||
Indonesia | 3.2 | ||
Israel | 2.8 | ||
Korea | 3.9 | ||
Malaysia | 2.9 | ||
Mexico | 5.9 | ||
Philippines | 6.7 | ||
Poland | 0.9 | ||
Qatar | 1.6 | ||
South Africa | 10.3 | ||
Taiwan | 4.3 | ||
Thailand | 1.5 | ||
Turkey | 4.6 | ||
United Arab Emirates | 1.8 | ||
United Kingdom | 1.1 | ||
TOTAL | 100.0 | % | |
38
Table of Contents
| WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND (WAGTX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 96.0% | |||||
| Air Freight & Logistics 2.0% | |||||
| 1,697,000 | Goodpack Ltd. (Singapore) | $ | 1,680,251 | ||
| Alternative Carriers 4.3% | |||||
| 103,600 | Global Village Telecom Holding S.A.* (Brazil) | 1,552,692 | |||
| 107,144 | Tulip IT Services Ltd. (India) | 2,083,984 | |||
| 3,636,676 | |||||
| Application Software 5.9% | |||||
| 24,970 | Adobe Systems, Inc.* ††† | 985,566 | |||
| 28,590 | Autodesk, Inc.* | 959,194 | |||
| 17,945 | FactSet Research Systems, Inc. | 937,626 | |||
| 94,050 | Interactive Intelligence, Inc.* | 848,331 | |||
| 5,843,510 | Kingdee International Software Group Co. Ltd. (China) | 1,126,647 | |||
| 4,857,364 | |||||
| Communications Equipment 3.3% | |||||
| 42,005 | Cisco Systems, Inc.* | 947,633 | |||
| 33,545 | F5 Networks, Inc.* | 784,282 | |||
| 76,825 | Starent Networks Corp.* | 994,115 | |||
| 2,726,030 | |||||
| Computer Storage & Peripherals 1.9% | |||||
| 79,405 | Intevac, Inc.* | 844,869 | |||
| 31,910 | Western Digital Corp.* | 680,321 | |||
| 1,525,190 | |||||
| Construction & Engineering 0.9% | |||||
| 28,305 | Outotec Oyj (Finland) | 761,620 | |||
| Data Processing & Outsourced Services 3.6% | |||||
| 16,440 | Alliance Data Systems Corp.* | 1,041,967 | |||
| 69,500 | Redecard S.A. (Brazil) | 900,159 | |||
| 136,550 | Wirecard AG* (Germany) | 1,008,414 | |||
| 2,950,540 | |||||
| Electrical Components & Equipment 0.8% | |||||
| 2,882,000 | Wasion Meters Group Ltd. (Hong Kong) | 696,439 | |||
| Electronic Equipment & Instruments 1.2% | |||||
| 57,700 | Rotork plc (United Kingdom) | 964,696 | |||
| Electronic Manufacturing Services 0.9% | |||||
| 74,205 | TTM Technologies, Inc.* | 736,114 | |||
| Health Care Equipment 9.1% | |||||
| 44,100 | Abaxis, Inc.* | 868,770 | |||
| 90,414 | Cardica, Inc.* | 735,970 | |||
| 55,805 | DiaSorin S.p.A (Italy) | 1,090,047 | |||
| 34,775 | Invacare Corp. | 839,468 | |||
| 8,586,000 | Mingyuan Medicare Development Co. Ltd. (China) | 917,111 | |||
| 22,025 | NuVasive, Inc.* | 1,086,493 | |||
| 91,060 | VNUS Medical Technologies, Inc.* | 1,905,886 | |||
| 7,443,745 | |||||
| Health Care Facilities 6.7% | |||||
| 141,275 | Capital Senior Living Corp.* | 1,073,690 | |||
| 87,260 | Emeritus Corp.* | 2,172,774 | |||
| 38,605 | Psychiatric Solutions, Inc.* | 1,465,060 | |||
| 54,765 | Sunrise Senior Living, Inc.* | 755,209 | |||
| 5,466,733 | |||||
| Shares | Value | ||||
| Health Care Services 8.9% | |||||
| 30,387 | CorVel Corp.* | $ | 869,372 | ||
| 74,565 | Healthways, Inc.* | 1,202,733 | |||
| 30,145 | LHC Group, Inc.* | 858,530 | |||
| 45,040 | Pediatrix Medical Group, Inc.* | 2,428,557 | |||
| 200,170 | Providence Service Corp. (The)* | 1,961,666 | |||
| 7,320,858 | |||||
| Health Care Technology 1.0% | |||||
| 317,100 | RaySearch Laboratories AB (Sweden) | 800,285 | |||
| Industrial Machinery 1.2% | |||||
| 3,092,000 | China Automation Group Ltd. (China) | 543,311 | |||
| 32,945 | JVM Co. Ltd. (Korea) | 476,186 | |||
| 1,019,497 | |||||
| Internet Software & Services 3.5% | |||||
| 123,960 | DealerTrack Holdings, Inc.* | 2,087,486 | |||
| 1,880 | Google, Inc., Class A* | 752,978 | |||
| 2,840,464 | |||||
| IT Consulting & Other Services 6.9% | |||||
| 109,750 | Cognizant Technology Solutions Corp., Class A* | 2,505,593 | |||
| 31,360 | Infosys Technologies Ltd. (India) | 957,795 | |||
| 42,110 | NCI, Inc., Class A* | 1,199,293 | |||
| 190,000 | Rolta India Ltd. (India) | 981,623 | |||
| 5,644,304 | |||||
| Life Sciences Tools & Services 5.3% | |||||
| 11,845 | Covance, Inc.* | 1,047,216 | |||
| 31,250 | Icon plc ADR* (Ireland) | 1,195,313 | |||
| 18,720 | MorphoSys AG* (Germany) | 1,144,008 | |||
| 13,430 | Techne Corp.* | 968,572 | |||
| 4,355,109 | |||||
| Managed Health Care 0.8% | |||||
| 44,495 | OdontoPrev S.A. (Brazil) | 660,146 | |||
| Oil & Gas Equipment & Services 3.6% | |||||
| 20,935 | OYO Geospace Corp.* | 822,327 | |||
| 76,110 | Pason Systems, Inc. (Canada) | 938,700 | |||
| 693,610 | Swiber Holdings Ltd.* (Singapore) | 527,096 | |||
| 85,500 | TGS-NOPEC Geophysical Co. ASA* (Norway) | 687,047 | |||
| 2,975,170 | |||||
| Pharmaceuticals 1.0% | |||||
| 17,470 | Daewoong Pharmaceutical Co. Ltd. (Korea) | 789,179 | |||
| Semiconductor Equipment 0.9% | |||||
| 47,703 | Tessera Technologies, Inc.* | 779,467 | |||
| Semiconductors 16.0% | |||||
| 29,680 | Hittite Microwave Corp.* | 997,248 | |||
| 31,540 | Linear Technology Corp. | 967,016 | |||
| 77,250 | Melexis N.V. (Belgium) | 1,075,343 | |||
| 112,815 | Micrel, Inc. | 1,023,232 | |||
| 33,275 | Microchip Technology, Inc. | 979,283 | |||
| 58,681 | NetLogic Microsystems, Inc.* ††† | 1,774,513 | |||
| 485,129 | O2Micro International Ltd. ADR* (Cayman Islands) | 1,761,018 | |||
| 70,750 | Pericom Semiconductor Corp.* | 742,875 | |||
| 71,768 | Power Integrations, Inc.* | 1,729,609 | |||
| 31,405 | Silicon Laboratories, Inc.* | 964,134 | |||
| 120,605 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan) | 1,130,069 | |||
| 13,144,340 | |||||
39
Table of Contents
WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND (WAGTX) — Schedule of Investments (continued) | ||
Shares | Value | ||||
| Systems Software 4.5% | |||||
| 27,570 | BMC Software, Inc.* | $ | 789,329 | ||
| 83,780 | Opnet Technologies, Inc.* | 1,020,440 | |||
| 49,275 | Oracle Corp.* | 1,000,775 | |||
| 20,125 | Quality Systems, Inc. | 850,483 | |||
| 3,661,027 | |||||
| Wireless Telecommunication Services 1.8% | |||||
| 38,465 | NII Holdings, Inc.* | 1,458,593 | |||
| Total Common Stocks (cost $101,823,482) | 78,893,837 | ||||
| PREFERRED STOCKS 1.3% | |||||
| Computer Storage & Peripherals 1.2% | |||||
| 78,502 | BlueArc Corp., Series DD Pfd.* *** † | 355,412 | |||
| 138,725 | BlueArc Corp., Series FF Pfd.* *** † | 628,066 | |||
| 983,478 | |||||
| Internet Software & Services 0.1% | |||||
| 30,265 | Incipient, Inc., Series D Pfd.* *** † | 35,047 | |||
| 6,528 | Xtera Communications, Inc., Series A-1 Pfd.* *** † | 7,076 | |||
| 42,123 | |||||
| Pharmaceuticals 0.0% | |||||
| 39,337 | Point Biomedical Corp., Series A Pfd.* *** † | 197 | |||
| Total Preferred Stocks (cost $1,120,867) | 1,025,798 | ||||
| LIMITED PARTNERSHIP INTEREST 0.4% | |||||
| Other 0.4% | |||||
| Montagu Newhall Global Partners II-B, L.P.*** † | 354,986 | ||||
| Total Limited Partnership Interest (cost $364,387) | 354,986 | ||||
| WARRANTS 0.0% | |||||
| Air Freight & Logistics 0.0% | |||||
| 212,125 | Goodpack Ltd. expiring 7/16/09* (Singapore) | 38,407 | |||
| Computer Storage & Peripherals 0.0% | |||||
| 620 | BlueArc Corp. expiring 4/2/18* *** † | — | |||
| Pharmaceuticals 0.0% | |||||
| 768 | Acusphere, Inc. expiring 10/20/08* *** † | — | |||
| Total Warrants (cost $0) | 38,407 | ||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 2.8% | ||||||
| Repurchase Agreement 2.8% | ||||||
| $2,253,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/1/08 with Fixed Income Clearing Corporation collateralized by $1,870,000 of United States Treasury Bonds 6.25% due 8/15/23; value: $2,302,438; repurchase proceeds: $2,253,006††† (cost $2,253,000) | $ | 2,253,000 | |||
| Total Short-Term Investments (cost $2,253,000) | 2,253,000 | |||||
| Total Investments (cost $105,561,736) 100.5%†† | 82,566,028 | |||||
| Liabilities less Other Assets (0.5)% | (402,009 | ) | ||||
| NET ASSETS 100.0% | $ | 82,164,019 | ||||
*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).
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 22.29%.
†††All or a portion of this security has been designated as collateral for purchase commitments. Collateral is valued at $5,013,079 (see Note 10).
ADR American Depositary Receipt.
See notes to financial statements.
|
| |||||
At September 30, 2008, Wasatch Global Science & Technology Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Belgium | 1.3 | ||
Brazil | 3.9 | ||
Canada | 1.1 | ||
Cayman Islands | 2.2 | ||
China | 3.2 | ||
Finland | 0.9 | ||
Germany | 2.7 | ||
Hong Kong | 0.9 | ||
India | 5.0 | ||
Ireland | 1.5 | ||
Italy | 1.4 | ||
Korea | 1.6 | ||
Norway | 0.9 | ||
Singapore | 2.8 | ||
Sweden | 1.0 | ||
Taiwan | 1.4 | ||
United Kingdom | 1.2 | ||
United States | 67.0 | ||
TOTAL | 100.0 | % | |
40
Table of Contents
| WASATCH HERITAGE GROWTH FUND (WAHGX) — Schedule of Investments | SEPTEMBER 30, 2008 | |
| Shares | Value | ||||
| COMMON STOCKS 94.5% | |||||
| Aerospace & Defense 3.1% | |||||
| 12,140 | L-3 Communications Holdings, Inc. | $ | 1,193,605 | ||
| 51,075 | TransDigm Group, Inc.* | 1,748,297 | |||
| 2,941,902 | |||||
| Air Freight & Logistics 1.6% | |||||
| 30,035 | C.H. Robinson Worldwide, Inc. | 1,530,584 | |||
| Apparel Retail 0.6% | |||||
| 92,545 | Esprit Holdings Ltd. (Hong Kong) | 573,720 | |||
| Asset Management & Custody Banks 4.6% | |||||
| 91,310 | SEI Investments Co. | 2,027,082 | |||
| 43,870 | T. Rowe Price Group, Inc. | 2,356,258 | |||
| 4,383,340 | |||||
| Automotive Retail 1.2% | |||||
| 43,925 | O’Reilly Automotive, Inc.* | 1,175,872 | |||
| Communications Equipment 2.2% | |||||
| 61,150 | Cisco Systems, Inc.* | 1,379,544 | |||
| 31,130 | F5 Networks, Inc.* | 727,820 | |||
| 2,107,364 | |||||
| Consumer Finance 0.2% | |||||
| 3,981 | Capital One Financial Corp. | 203,031 | |||
| Data Processing & Outsourced Services 7.1% | |||||
| 38,545 | Alliance Data Systems Corp.* | 2,442,982 | |||
| 55,065 | Fidelity National Information Services, Inc. | 1,016,500 | |||
| 30,532 | Lender Processing Services, Inc. | 931,836 | |||
| 185,030 | Redecard S.A. (Brazil) | 2,396,495 | |||
| 6,787,813 | |||||
| Diversified Metals & Mining 1.7% | |||||
| 6,535 | Rio Tinto plc ADR (United Kingdom) | 1,630,482 | |||
| Diversified Support Services 2.1% | |||||
| 51,545 | Copart, Inc.* | 1,958,710 | |||
| Drug Retail 2.6% | |||||
| 74,160 | CVS Caremark Corp. | 2,496,226 | |||
| Education Services 2.0% | |||||
| 32,595 | Apollo Group, Inc., Class A* | 1,932,884 | |||
| Electronic Components 3.6% | |||||
| 86,200 | Amphenol Corp., Class A | 3,460,068 | |||
| Health Care Equipment 4.8% | |||||
| 105,730 | St. Jude Medical, Inc.* | 4,598,198 | |||
| Health Care Services 4.8% | |||||
| 14,927 | DaVita, Inc.* | 850,988 | |||
| 50,665 | Express Scripts, Inc.* | 3,740,091 | |||
| 4,591,079 | |||||
| Homebuilding 2.0% | |||||
| 3,314 | NVR, Inc.* | 1,895,608 | |||
| Industrial Conglomerates 2.1% | |||||
| 79,560 | General Electric Co. | 2,028,780 | |||
| Investment Banking & Brokerage 2.3% | |||||
| 85,430 | Charles Schwab Corp. (The) | 2,221,180 | |||
| IT Consulting & Other Services 4.3% | |||||
| 56,145 | Cognizant Technology Solutions Corp., Class A* | 1,281,791 | |||
| 90,800 | Infosys Technologies Ltd. (India) | 2,773,208 | |||
| 4,054,999 | |||||
| Shares | Value | ||||
| Life Sciences Tools & Services 2.6% | |||||
| 28,420 | Covance, Inc.* | $ | 2,512,612 | ||
| Mortgage REITs 1.9% | |||||
| 134,634 | Annaly Capital Management, Inc. | 1,810,827 | |||
| Multi-Line Insurance 1.5% | |||||
| 51,215 | HCC Insurance Holdings, Inc. | 1,382,805 | |||
| Oil & Gas Equipment & Services 2.7% | |||||
| 40,080 | Cameron International Corp.* | 1,544,683 | |||
| 42,810 | Helix Energy Solutions Group, Inc.* | 1,039,427 | |||
| 2,584,110 | |||||
| Oil & Gas Exploration & Production 5.2% | |||||
| 30,610 | Chesapeake Energy Corp. | 1,097,675 | |||
| 46,385 | Petrohawk Energy Corp.* | 1,003,308 | |||
| 28,340 | Plains Exploration & Production Co.* | 996,434 | |||
| 40,518 | XTO Energy, Inc. | 1,884,897 | |||
| 4,982,314 | |||||
| Pharmaceuticals 1.4% | |||||
| 28,565 | Teva Pharmaceutical Industries Ltd. ADR (Israel) | 1,307,991 | |||
| Semiconductors 9.3% | |||||
| 124,715 | Altera Corp. | 2,579,106 | |||
| 74,650 | Linear Technology Corp. | 2,288,769 | |||
| 26,265 | Maxim Integrated Products, Inc. | 475,397 | |||
| 45,995 | Microchip Technology, Inc. | 1,353,633 | |||
| 237,292 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan) | 2,223,426 | |||
| 8,920,331 | |||||
| Specialized Finance 2.0% | |||||
| 9,720 | IntercontinentalExchange, Inc.* | 784,209 | |||
| 176,080 | KKR Financial Holdings, LLC | 1,119,869 | |||
| 1,904,078 | |||||
| Specialty Stores 1.2% | |||||
| 52,035 | Staples, Inc. | 1,170,788 | |||
| Systems Software 2.8% | |||||
| 91,640 | BMC Software, Inc.* | 2,623,653 | |||
| Thrifts & Mortgage Finance 3.4% | |||||
| 21,035 | Housing Development Finance Corp. Ltd. (India) | 961,809 | |||
| 135,150 | New York Community Bancorp, Inc. | 2,269,168 | |||
| 3,230,977 | |||||
| Trading Companies & Distributors 3.2% | |||||
| 38,620 | Fastenal Co. | 1,907,442 | |||
| 24,175 | MSC Industrial Direct Co., Inc., Class A | 1,113,742 | |||
| 3,021,184 | |||||
| Trucking 1.5% | |||||
| 41,685 | J.B. Hunt Transport Services, Inc. | 1,391,028 | |||
| Wireless Telecommunication Services 2.9% | |||||
| 73,610 | NII Holdings, Inc.* | 2,791,291 | |||
| Total Common Stocks (cost $91,039,900) | 90,205,829 | ||||
41
Table of Contents
| WASATCH HERITAGE GROWTH FUND (WAHGX) — Schedule of Investments (continued) | SEPTEMBER 30, 2008 | |
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 6.5% | ||||||
| Repurchase Agreement 6.5% | ||||||
| $6,239,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/1/08 with Fixed Income Clearing Corporation collateralized by $5,430,000 of United States Treasury Bonds 5.50% due 8/15/28; value: $6,366,675; repurchase proceeds: $6,239,017 (cost $6,239,000) | $ | 6,239,000 | |||
| Total Short-Term Investments (cost $6,239,000) | 6,239,000 | |||||
| Total Investments (cost $97,278,900) 101.0%†† | 96,444,829 | |||||
| Liabilities less Other Assets (1.0)% | (1,030,792 | ) | ||||
| NET ASSETS 100.0% | $ | 95,414,037 | ||||
*Non-income producing.
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 4.52%.
ADR American Depositary Receipt.
REIT Real Estate Investment Trust.
See notes to financial statements. |
| |||||
At September 30, 2008, Wasatch Heritage Growth Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Brazil | 2.7 | ||
Hong Kong | 0.6 | ||
India | 4.1 | ||
Israel | 1.5 | ||
Taiwan | 2.5 | ||
United Kingdom | 1.8 | ||
United States | 86.8 | ||
TOTAL | 100.0 | % | |
42
Table of Contents
| WASATCH HERITAGE VALUE FUND (WAHVX) — Schedule of Investments | SEPTEMBER 30, 2008 | |
| Shares | Value | ||||
| COMMON STOCKS 91.7% | |||||
| Aerospace & Defense 2.8% | |||||
| 2,600 | Honeywell Int’l., Inc. | $ | 108,030 | ||
| Apparel, Accessories & Luxury Goods 2.0% | |||||
| 3,000 | Coach, Inc.* | 75,120 | |||
| Automotive Retail 2.9% | |||||
| 4,100 | O’Reilly Automotive, Inc.* | 109,757 | |||
| Biotechnology 3.2% | |||||
| 2,400 | Biogen Idec, Inc.* | 120,696 | |||
| Communications Equipment 2.0% | |||||
| 7,900 | Comverse Technology, Inc.* | 75,603 | |||
| Computer Storage & Peripherals 2.6% | |||||
| 8,000 | Seagate Technology (Cayman Islands) | 96,960 | |||
| Data Processing & Outsourced Services 5.2% | |||||
| 3,300 | Lender Processing Services, Inc. | 100,716 | |||
| 1,600 | Visa Inc., Class A | 98,224 | |||
| 198,940 | |||||
| Electric Utilities 2.4% | |||||
| 7,255 | EDP — Energias do Brasil S.A. (Brazil) | 89,963 | |||
| Electrical Components & Equipment 3.2% | |||||
| 3,100 | Thomas & Betts Corp.* | 121,117 | |||
| Electronic Manufacturing Services 2.5% | |||||
| 13,500 | Flextronics International Ltd.* | 95,580 | |||
| Food Retail 3.5% | |||||
| 6,600 | Whole Foods Market, Inc. | 132,198 | |||
| Health Care Technology 2.4% | |||||
| 4,800 | IMS Health, Inc. | 90,768 | |||
| Hypermarkets & Super Centers 3.1% | |||||
| 1,800 | Costco Wholesale Corp. | 116,874 | |||
| Industrial Conglomerates 2.3% | |||||
| 3,000 | Textron, Inc. | 87,840 | |||
| IT Consulting & Other Services 2.2% | |||||
| 3,700 | Cognizant Technology Solutions Corp., Class A* | 84,471 | |||
| Life Sciences Tools & Services 2.9% | |||||
| 2,900 | Invitrogen Corp.* | 109,620 | |||
| Mortgage REITs 2.8% | |||||
| 7,900 | Annaly Capital Management, Inc. | 106,255 | |||
| Oil & Gas Equipment & Services 3.2% | |||||
| 2,000 | Baker Hughes, Inc. | 121,080 | |||
| Oil & Gas Exploration & Production 3.4% | |||||
| 3,700 | Plains Exploration & Production Co.* | 130,092 | |||
| Oil & Gas Storage & Transportation 2.8% | |||||
| 4,500 | Spectra Energy Corp. | 107,100 | |||
| Packaged Foods & Meats 3.1% | |||||
| 4,300 | Unilever plc ADR (United Kingdom) | 117,003 | |||
| Pharmaceuticals 5.0% | |||||
| 7,700 | Biovail Corp. (Canada) | 75,229 | |||
| 10,100 | Mylan Laboratories, Inc.* | 115,342 | |||
| 190,571 | |||||
| Shares | Value | |||||
| Property & Casualty Insurance 3.2% | ||||||
| 9,500 | Old Republic International Corp. | $ | 121,125 | |||
| Railroads 3.4% | ||||||
| 1,400 | Burlington Northern Santa Fe Corp. | 129,402 | ||||
| Soft Drinks 4.0% | ||||||
| 5,000 | Hansen Natural Corp.* | 151,250 | ||||
| Specialized Finance 5.6% | ||||||
| 1,200 | IntercontinentalExchange, Inc. | 96,816 | ||||
| 3,800 | NASDAQ OMX Group, Inc. (The)* | 116,166 | ||||
| 212,982 | ||||||
| Specialty Chemicals 2.8% | ||||||
| 3,400 | Albemarle Corp. | 104,856 | ||||
| Systems Software 3.5% | ||||||
| 4,950 | Microsoft Corp. | 132,116 | ||||
| Water Utilities 3.7% | ||||||
| 6,500 | American Water Works Co., Inc. | 139,750 | ||||
| Total Common Stocks (cost $3,908,492) | 3,477,119 | |||||
| RIGHTS 0.3% | ||||||
| Electric Utilities 0.3% | ||||||
| 2,427,559 | EDP — Energias do Brasil S.A.* (Brazil) | 12,637 | ||||
| Total Rights (cost $0) | 12,637 | |||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 14.0% | ||||||
| Repurchase Agreement 14.0% | ||||||
| $531,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/1/08 with Fixed Income Clearing Corporation collateralized by $440,000 of United States Treasury Bonds 6.25% due 8/15/23; value: $541,750; repurchase proceeds: $531,001 (cost $531,000) | $ | 531,000 | |||
| Total Short-Term Investments (cost $531,000) | 531,000 | |||||
| Total Investments (cost $4,439,492) 106.0% | 4,020,756 | |||||
| Liabilities less Other Assets (6.0)% | (228,590 | ) | ||||
| NET ASSETS 100.0% | $ | 3,792,166 | ||||
*Non-income producing.
ADR American Depositary Receipt.
REIT Real Estate Investment Trust.
See notes to financial statements. | ||||||
At September 30, 2008, Wasatch Heritage Value Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Brazil | 2.9 | ||
Canada | 2.2 | ||
Cayman Islands | 2.8 | ||
United Kingdom | 3.3 | ||
United States | 88.8 | ||
TOTAL | 100.0 | % | |
43
Table of Contents
| WASATCH INTERNATIONAL GROWTH FUND (WAIGX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 96.9% | |||||
| Agricultural Products 2.7% | |||||
| 3,096,481 | Chaoda Modern Agriculture (Holdings) Ltd. (China) | $ | 2,615,576 | ||
| 3,323,870 | China Green Holdings Ltd. (China) | 2,679,613 | |||
| 5,295,189 | |||||
| Alternative Carriers 0.9% | |||||
| 118,400 | Global Village Telecom Holding S.A.* (Brazil) | 1,774,505 | |||
| Apparel Retail 1.9% | |||||
| 251,500 | KappAhl Holding AB* (Sweden) | 1,318,678 | |||
| 64,039 | Point, Inc. (Japan) | 2,453,861 | |||
| 3,772,539 | |||||
| Apparel, Accessories & Luxury Goods 4.1% | |||||
| 2,166,254 | Anta Sports Products Ltd. (China) | 1,244,232 | |||
| 2,234,475 | Ports Design Ltd. (Hong Kong) | 4,093,058 | |||
| 423,750 | Ted Baker plc (United Kingdom) | 2,660,584 | |||
| 7,997,874 | |||||
| Application Software 0.6% | |||||
| 70,825 | Nemetschek AG (Germany) | 1,223,940 | |||
| Asset Management & Custody Banks 2.2% | |||||
| 45,005 | Bank Sarasin & Cie AG, Class B (Switzerland) | 1,725,345 | |||
| 20,705 | Partners Group Holding AG (Switzerland) | 2,595,939 | |||
| 4,321,284 | |||||
| Brewers 1.1% | |||||
| 118,665 | Efes Breweries International N.V. GDR* (Netherlands) | 2,115,563 | |||
| Commodity Chemicals 0.9% | |||||
| 235,775 | TOKAI CARBON Co. Ltd. (Japan) | 1,730,763 | |||
| Communications Equipment 1.4% | |||||
| 202,835 | Tandberg ASA (Norway) | 2,760,190 | |||
| Construction & Engineering 1.8% | |||||
| 132,660 | Outotec Oyj (Finland) | 3,569,565 | |||
| Construction & Farm Machinery & Heavy Trucks 2.3% | |||||
| 91,114 | Demag Cranes AG (Germany) | 3,604,323 | |||
| 70,355 | Takeuchi Manufacturing Co. Ltd. (Japan) | 927,834 | |||
| 4,532,157 | |||||
| Data Processing & Outsourced Services 1.5% | |||||
| 407,143 | Wirecard AG* (Germany) | 3,006,727 | |||
| Department Stores 1.1% | |||||
| 1,859,000 | Parkson Retail Group Ltd. (China) | 2,062,148 | |||
| Diversified Banks 4.3% | |||||
| 102,671 | Axis Bank Ltd. (India) | 1,610,170 | |||
| 445,261 | Bank of N.T. Butterfield & Son Ltd. (Bermuda) | 5,565,763 | |||
| 47,747 | HDFC Bank Ltd. (India) | 1,265,819 | |||
| 8,441,752 | |||||
| Diversified Metals & Mining 1.4% | |||||
| 465,168 | Independence Group N.L. (Australia) | 1,001,815 | |||
| 62,040 | Major Drilling Group International, Inc.* (Canada) | 1,733,020 | |||
| 2,734,835 | |||||
| Diversified Support Services 0.6% | |||||
| 178,965 | Transfield Services Ltd. (Australia) | 1,105,013 | |||
| Shares | Value | ||||
| Education Services 0.3% | |||||
| 76,931 | Kroton Educational S.A.* ** (Brazil) | $ | 560,678 | ||
| Electrical Components & Equipment 3.1% | |||||
| 62,825 | SGL Carbon AG* (Germany) | 2,440,630 | |||
| 49,430 | Solarworld AG (Germany) | 2,079,306 | |||
| 6,267,270 | Wasion Meters Group Ltd. (Hong Kong) | 1,514,493 | |||
| 6,034,429 | |||||
| Electronic Equipment & Instruments 3.7% | |||||
| 1,630,111 | Chroma ATE, Inc. (Taiwan) | 2,000,558 | |||
| 306,329 | Rotork plc (United Kingdom) | 5,121,567 | |||
| 7,122,125 | |||||
| Environmental & Facilities Services 2.3% | |||||
| 191,122 | AEON DELIGHT Co. Ltd. (Japan) | 4,454,831 | |||
| Food Retail 2.1% | |||||
| 134,700 | BIM Birlesik Magazalar AS (Turkey) | 4,155,873 | |||
| Footwear 0.4% | |||||
| 3,909,675 | China Hongxing Sports Ltd. (China) | 830,784 | |||
| Forest Products 0.7% | |||||
| 368,000 | Satipel Industrial S.A. (Brazil) | 1,339,087 | |||
| Health Care Equipment 3.6% | |||||
| 188,403 | DiaSorin S.p.A (Italy) | 3,680,103 | |||
| 131,095 | Elekta AB, Class B (Sweden) | 2,232,538 | |||
| 13,450 | Nakanishi, Inc. (Japan) | 1,150,299 | |||
| 7,062,940 | |||||
| Health Care Supplies 4.5% | |||||
| 254,400 | Abcam plc (United Kingdom) | 2,165,868 | |||
| 79,383 | Omega Pharma S.A. (Belgium) | 3,400,447 | |||
| 2,190,000 | Shandong Weigao Group Medical Polymer Co. Ltd., Class H (China) | 3,287,559 | |||
| 8,853,874 | |||||
| Health Care Technology 0.9% | |||||
| 659,370 | RaySearch Laboratories AB (Sweden) | 1,664,094 | |||
| Home Furnishings 1.2% | |||||
| 118,040 | Fourlis Holdings S.A. (Greece) | 2,276,990 | |||
| Homebuilding 1.1% | |||||
| 907,665 | Urbi Desarrollos Urbanos S.A. de C.V.* (Mexico) | 2,110,109 | |||
| Human Resource & Employment Services 1.0% | |||||
| 461,520 | Michael Page International plc (United Kingdom) | 1,920,688 | |||
| Industrial Machinery 5.1% | |||||
| 63,125 | Andritz AG (Austria) | 2,723,168 | |||
| 16,143 | Burckhardt Compression Holding AG (Switzerland) | 3,151,436 | |||
| 72,740 | Konecranes Oyj (Finland) | 1,738,386 | |||
| 139,350 | Yushin Precision Equipment Co. Ltd. (Japan) | 2,276,528 | |||
| 9,889,518 | |||||
| Internet Retail 1.1% | |||||
| 785 | START TODAY Co. Ltd. (Japan) | 2,221,406 | |||
| Leisure Products 2.2% | |||||
| 1,196,375 | Li Ning Co. Ltd. (Hong Kong) | 2,099,122 | |||
| 62,625 | Shimano, Inc. (Japan) | 2,157,748 | |||
| 4,256,870 | |||||
44
Table of Contents
| SEPTEMBER 30, 2008 | ||
| Shares | Value | ||||
| Life Sciences Tools & Services 7.2% | |||||
| 708 | EPS Co. Ltd. (Japan) | $ | 2,256,149 | ||
| 43,277 | Eurofins Scientific (France) | 3,403,071 | |||
| 80,400 | Icon plc ADR* (Ireland) | 3,075,300 | |||
| 42,680 | MorphoSys AG* (Germany) | 2,608,241 | |||
| 139,100 | QIAGEN N.V.* (Netherlands) | 2,744,443 | |||
| 14,087,204 | |||||
| Oil & Gas Equipment & Services 6.1% | |||||
| 171,855 | Pason Systems, Inc. (Canada) | 2,119,569 | |||
| 43,425 | Schoeller-Bleckmann Oilfield Equipment AG (Austria) | 2,634,373 | |||
| 1,741,000 | Swiber Holdings Ltd.* (Singapore) | 1,323,040 | |||
| 374,320 | TGS-NOPEC Geophysical Co. ASA* (Norway) | 3,007,899 | |||
| 113,965 | WorleyParsons Ltd. (Australia) | 2,819,925 | |||
| 11,904,806 | |||||
| Oil & Gas Exploration & Production 4.2% | |||||
| 368,722 | JKX Oil & Gas plc (United Kingdom) | 1,842,583 | |||
| 189,870 | Oilexco, Inc.* (Canada) | 1,868,042 | |||
| 105,495 | Premier Oil plc* (United Kingdom) | 1,841,912 | |||
| 96,790 | Soco International plc* (United Kingdom) | 2,580,337 | |||
| 8,132,874 | |||||
| Precious Metals & Minerals 0.5% | |||||
| 66,988 | Harry Winston Diamond Corp. (Canada) | 882,956 | |||
| Real Estate Services 0.4% | |||||
| 350,219 | DTZ Holdings plc (United Kingdom) | 798,909 | |||
| Regional Banks 3.6% | |||||
| 103,975 | Canadian Western Bank (Canada) | 1,949,990 | |||
| 1,865 | Seven Bank Ltd. (Japan) | 4,974,753 | |||
| 6,924,743 | |||||
| Research & Consulting Services 2.8% | |||||
| 152,370 | Campbell Brothers Ltd. (Australia) | 3,890,367 | |||
| 386 | Nihon M&A Center, Inc. (Japan) | 1,657,371 | |||
| 5,547,738 | |||||
| Semiconductors 1.0% | |||||
| 143,746 | Melexis N.V. (Belgium) | 2,000,986 | |||
| Specialized Finance 4.9% | |||||
| 112,205 | Hellenic Exchanges S.A. (Greece) | 1,303,014 | |||
| 150,220 | IMAREX ASA* (Norway) | 2,156,264 | |||
| 1,200,205 | Infrastructure Development Finance Co. Ltd. (India) | 1,876,216 | |||
| 1,495 | Osaka Securities Exchange Co. Ltd. (Japan) | 4,206,349 | |||
| 9,541,843 | |||||
| Systems Software 1.4% | |||||
| 6,292 | Simplex Technology, Inc. (Japan) | 2,696,150 | |||
| Thrifts & Mortgage Finance 1.9% | |||||
| 121,815 | Home Capital Group, Inc. (Canada) | 3,612,647 | |||
| Trucking 0.8% | |||||
| 291,025 | Localiza Rent A Car S.A. (Brazil) | 1,502,886 | |||
| Total Common Stocks (cost $223,733,595) | 188,832,082 | ||||
| PREFERRED STOCKS 1.9% | |||||
| Railroads 1.0% | |||||
| 281,455 | All America Latina Logistica S.A. Pfd.** (Brazil) | 1,904,742 | |||
| Shares | Value | ||||
| Regional Banks 0.9% | |||||
| 521,575 | Banco Daycoval S.A. Pfd. (Brazil) | $ | 1,599,249 | ||
| Total Preferred Stocks (cost $5,644,641) | 3,503,991 | ||||
| WARRANTS 0.0% | |||||
| Gold 0.0% | |||||
| 2,678,000 | Redcorp Ventures Ltd. expiring 7/10/09* (Canada) | 25,213 | |||
| Total Warrants (cost $0) | 25,213 | ||||
| Total Investments (cost $229,378,236) 98.8%†† | 192,361,286 | ||||
| Other Assets less Liabilities 1.2% | 2,418,633 | ||||
| NET ASSETS 100.0% | $ | 194,779,919 | |||
*Non-income producing.
**Common units.
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 81.11%.
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
See notes to financial statements. | |||||
At September 30, 2008, Wasatch International Growth Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 4.6 | ||
Austria | 2.8 | ||
Belgium | 2.8 | ||
Bermuda | 2.9 | ||
Brazil | 4.5 | ||
Canada | 6.3 | ||
China | 6.6 | ||
Finland | 2.8 | ||
France | 1.8 | ||
Germany | 7.8 | ||
Greece | 1.9 | ||
Hong Kong | 4.0 | ||
India | 2.5 | ||
Ireland | 1.6 | ||
Italy | 1.9 | ||
Japan | 17.2 | ||
Mexico | 1.1 | ||
Netherlands | 2.5 | ||
Norway | 4.1 | ||
Singapore | 0.7 | ||
Sweden | 2.7 | ||
Switzerland | 3.9 | ||
Taiwan | 1.0 | ||
Turkey | 2.2 | ||
United Kingdom | 9.8 | ||
TOTAL | 100.0 | % | |
45
Table of Contents
| WASATCH INTERNATIONAL OPPORTUNITIES FUND (WAIOX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 77.6% | |||||
| Agricultural Products 1.6% | |||||
| 1,089,000 | China Green Holdings Ltd. (China) | $ | 877,922 | ||
| Air Freight & Logistics 3.3% | |||||
| 1,348,500 | Aramex PJSC* (United Arab Emirates) | 740,569 | |||
| 1,135,183 | Goodpack Ltd. (Singapore) | 1,123,979 | |||
| 1,864,548 | |||||
| Alternative Carriers 0.4% | |||||
| 11,175 | Tulip IT Services Ltd. (India) | 217,357 | |||
| Apparel Retail 0.7% | |||||
| 69,455 | KappAhl Holding AB* (Sweden) | 364,170 | |||
| Apparel, Accessories & Luxury Goods 6.3% | |||||
| 3,217,836 | Anta Sports Products Ltd. (China) | 1,848,230 | |||
| 1,885,000 | EganaGoldpfeil Holdings Ltd.* *** (Hong Kong) | 2,428 | |||
| 130,850 | Mulberry Group plc (United Kingdom) | 270,637 | |||
| 536,503 | Ports Design Ltd. (Hong Kong) | 982,753 | |||
| 67,765 | Ted Baker plc (United Kingdom) | 425,474 | |||
| 3,529,522 | |||||
| Application Software 4.2% | |||||
| 716,334 | GuestLogix, Inc.* (Canada) | 762,093 | |||
| 6,182,000 | Kingdee International Software Group Co. Ltd. (China) | 1,191,909 | |||
| 21,665 | Nemetschek AG (Germany) | 374,397 | |||
| 2,328,399 | |||||
| Auto Parts & Equipment 0.4% | |||||
| 42,540 | Martinrea International, Inc.* (Canada) | 243,509 | |||
| Biotechnology 1.2% | |||||
| 5,194,000 | Sino Biopharmaceutical Ltd. (China) | 692,982 | |||
| Communications Equipment 0.6% | |||||
| 3,294,000 | Sinotel Technologies Ltd.* (China) | 308,574 | |||
| Construction & Engineering 2.6% | |||||
| 170,795 | Lycopodium Ltd. (Australia) | 566,684 | |||
| 2,167,960 | Midas Holdings Ltd. (China) | 639,672 | |||
| 287,965 | Swick Mining Services Ltd.* (Australia) | 243,136 | |||
| 1,449,492 | |||||
| Construction & Farm Machinery & Heavy Trucks 1.9% | |||||
| 447,000 | ASL Marine Holdings Ltd. (Singapore) | 265,340 | |||
| 2,873,000 | China Farm Equipment Ltd. (China) | 345,952 | |||
| 11,770 | Demag Cranes AG (Germany) | 465,602 | |||
| 1,076,894 | |||||
| Consumer Finance 1.1% | |||||
| 219,445 | Banco Compartamos S.A. de C.V. (Mexico) | 619,464 | |||
| Data Processing & Outsourced Services 0.8% | |||||
| 60,625 | Wirecard AG* (Germany) | 447,712 | |||
| Diversified Metals & Mining 0.3% | |||||
| 85,265 | Independence Group N.L. (Australia) | 183,632 | |||
| Diversified REITs 0.6% | |||||
| 182,205 | Star Asia Finance Ltd.*** † (Guernsey) | 327,969 | |||
| Diversified Support Services 1.1% | |||||
| 88,223 | LPS Brasil-Consultoria de Imoveis S.A. (Brazil) | 606,233 | |||
| Drug Retail 0.4% | |||||
| 12,760 | CREATE SD Co. Ltd. (Japan) | 221,644 | |||
| Shares | Value | ||||
| Education Services 0.9% | |||||
| 47,085 | Kroton Educational S.A.* ** (Brazil) | $ | 343,158 | ||
| 861,150 | Oriental Century Ltd. (Singapore) | 153,240 | |||
| 496,398 | |||||
| Electrical Components & Equipment 1.2% | |||||
| 2,649,902 | Wasion Meters Group Ltd. (Hong Kong) | 640,352 | |||
| Food Retail 0.7% | |||||
| 1,496,397 | BreadTalk Group Ltd. (Singapore) | 382,475 | |||
| Footwear 6.6% | |||||
| 15,253,080 | China Hongxing Sports Ltd. (China) | 3,241,195 | |||
| 2,154,000 | China Sports International Ltd. (China) | 408,067 | |||
| 3,649,262 | |||||
| Forest Products 0.3% | |||||
| 39,000 | Satipel Industrial S.A. (Brazil) | 141,914 | |||
| Gold 0.2% | |||||
| 855,000 | Redcorp Ventures Ltd.* (Canada) | 84,522 | |||
| Health Care Equipment 2.7% | |||||
| 29,261 | DiaSorin S.p.A (Italy) | 571,559 | |||
| 10,925 | Infopia Co. Ltd. (Korea) | 176,902 | |||
| 6,807,775 | Mingyuan Medicare Development Co. Ltd. (China) | 727,170 | |||
| 1,475,631 | |||||
| Health Care Supplies 1.0% | |||||
| 65,870 | Abcam plc (United Kingdom) | 560,793 | |||
| Health Care Technology 1.1% | |||||
| 253,230 | RaySearch Laboratories AB (Sweden) | 639,093 | |||
| Home Furnishings 0.5% | |||||
| 13,640 | Fourlis Holdings S.A. (Greece) | 263,115 | |||
| Home Improvement Retail 0.3% | |||||
| 43,435 | Swedol AB, Class B (Sweden) | 170,836 | |||
| Homebuilding 0.3% | |||||
| 78,235 | Even Construtora e Incorporadora S.A. (Brazil) | 162,909 | |||
| Industrial Machinery 4.7% | |||||
| 2,565 | Burckhardt Compression Holding AG (Switzerland) | 500,739 | |||
| 4,987,000 | China Automation Group Ltd. (China) | 876,291 | |||
| 11,035 | JVM Co. Ltd. (Korea) | 159,499 | |||
| 10,595 | Muehlbauer Holding AG & Co. KGaA (Germany) | 316,021 | |||
| 47,700 | Yushin Precision Equipment Co. Ltd. (Japan) | 779,264 | |||
| 2,631,814 | |||||
| Internet Retail 0.4% | |||||
| 82 | START TODAY Co. Ltd. (Japan) | 232,045 | |||
| Internet Software & Services 0.7% | |||||
| 165 | MACROMILL, Inc. (Japan) | 167,644 | |||
| 250,000 | Vendtek Systems, Inc.* (Canada) | 211,835 | |||
| 379,479 | |||||
| IT Consulting & Other Services 0.1% | |||||
| 1,515 | Telvent GIT S.A. (Spain) | 36,102 | |||
| Life Sciences Tools & Services 1.2% | |||||
| 809 | CMIC Co. Ltd. (Japan) | 214,880 | |||
| 7,105 | MorphoSys AG* (Germany) | 434,197 | |||
| 649,077 | |||||
46
Table of Contents
| SEPTEMBER 30, 2008 | ||
| Shares | Value | ||||
| Oil & Gas Drilling 1.3% | |||||
| 106,150 | Ithaca Energy, Inc.* (Canada) | $ | 127,921 | ||
| 55,660 | Phoenix Technology Income Fund** (Canada) | 613,117 | |||
| 741,038 | |||||
| Oil & Gas Equipment & Services 6.0% | |||||
| 1,682,715 | Anhui Tianda Oil Pipe Co. Ltd., Class H (China) | 297,747 | |||
| 1,130,600 | Ezra Holdings Ltd. (Singapore) | 914,691 | |||
| 127,827 | Forbes Energy Services Ltd.* (Canada) | 452,506 | |||
| 63,685 | Pason Systems, Inc. (Canada) | 785,457 | |||
| 1,157,804 | Swiber Holdings Ltd.* (Singapore) | 879,851 | |||
| 3,330,252 | |||||
| Oil & Gas Exploration & Production 2.2% | |||||
| 264,895 | Afren plc* (South Africa) | 313,932 | |||
| 448,825 | Bayou Bend Petroleum Ltd.* (Canada) | 84,513 | |||
| 5,920 | Ithaca Energy, Inc.* (Canada) | 7,134 | |||
| 44,125 | JKX Oil & Gas plc (United Kingdom) | 220,502 | |||
| 61,225 | Petrominerales Ltd.* (Colombia) | 579,307 | |||
| 1,205,388 | |||||
| Other Diversified Financial Services 0.6% | |||||
| 314,680 | Count Financial Ltd. (Australia) | 354,421 | |||
| Packaged Foods & Meats 0.4% | |||||
| 22,225 | Zhongpin, Inc.* | 236,252 | |||
| Personal Products 0.5% | |||||
| 865,000 | Beauty China Holdings Ltd.* (China) | 301,662 | |||
| Pharmaceuticals 1.6% | |||||
| 376,000 | China Shineway Pharmaceutical Group Ltd. (China) | 268,117 | |||
| 4,630 | Daewoong Pharmaceutical Co. Ltd. (Korea) | 209,153 | |||
| 55,484 | Dechra Pharmaceuticals plc (United Kingdom) | 403,984 | |||
| 881,254 | |||||
| Real Estate Services 0.7% | |||||
| 64 | Century 21 Real Estate of Japan Ltd. (Japan) | 182,749 | |||
| 255 | Funai Zaisan Consultants Co. Ltd. (Japan) | 211,250 | |||
| 393,999 | |||||
| Research & Consulting Services 0.9% | |||||
| 270,155 | Management Consulting Group plc (United Kingdom) | 162,310 | |||
| 85 | Nihon M&A Center, Inc. (Japan) | 364,965 | |||
| 527,275 | |||||
| Restaurants 1.1% | |||||
| 581,950 | FU JI Food & Catering Services Holdings Ltd. (China) | 595,308 | |||
| Semiconductors 1.6% | |||||
| 54,045 | ELMOS Semiconductor AG* (Germany) | 323,965 | |||
| 24,600 | Melexis N.V. (Belgium) | 342,439 | |||
| 65,820 | O2Micro International Ltd. ADR* (Cayman Islands) | 238,927 | |||
| 905,331 | |||||
| Specialized Finance 5.8% | |||||
| 28,095 | Arques Industries AG* (Germany) | 227,262 | |||
| 53,680 | IMAREX ASA* (Norway) | 770,525 | |||
| 73,074 | JSE Ltd. (South Africa) | 479,500 | |||
| 155 | Money Partners Co. Ltd. (Japan) | 113,079 | |||
| 430 | Osaka Securities Exchange Co. Ltd. (Japan) | 1,209,853 | |||
| 32,625 | Oslo Bors VPS Holding ASA (Norway) | 443,685 | |||
| 3,243,904 | |||||
| Shares | Value | |||||
| Specialty Stores 0.9% | ||||||
| 39,405 | easyhome Ltd. (Canada) | $ | 519,390 | |||
| Systems Software 1.4% | ||||||
| 1,884 | Simplex Technology, Inc. (Japan) | 807,302 | ||||
| Textiles 0.9% | ||||||
| 418,000 | FibreChem Technologies Ltd. (China) | 114,298 | ||||
| 1,355,000 | Li Heng Chemical Fibre Technologies Ltd. (China) | 380,136 | ||||
| 494,434 | ||||||
| Thrifts & Mortgage Finance 1.3% | ||||||
| 23,915 | Home Capital Group, Inc. (Canada) | 709,243 | ||||
| Total Common Stocks (cost $55,755,742) | 43,202,293 | |||||
| PREFERRED STOCKS 0.4% | ||||||
| Regional Banks 0.4% | ||||||
| 78,510 | Banco Daycoval S.A. Pfd. (Brazil) | 240,727 | ||||
| Total Preferred Stocks (cost $248,999) | 240,727 | |||||
| WARRANTS 0.0% | ||||||
| Gold 0.0% | ||||||
| 427,500 | Redcorp Ventures Ltd. expiring 7/10/09* (Canada) | 4,025 | ||||
| Hotels, Resorts & Cruise Lines 0.0% | ||||||
| 124,456 | Club Cruise Entertainment & Travelling Services Europe N.V. expiring 4/25/12* *** † (Norway) | — | ||||
| Total Warrants (cost $280,622) | 4,025 | |||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 25.0% | ||||||
| Repurchase Agreement 25.0% | ||||||
| $13,924,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/1/08 with Fixed Income Clearing Corporation collateralized by $9,770,000 of United States Treasury Bonds 8.75% due 8/15/20; value: $14,203,138; repurchase proceeds: $13,924,039 (cost $13,924,000) | $ | 13,924,000 | |||
| Total Short-Term Investments (cost $13,924,000) | 13,924,000 | |||||
| Total Investments (cost $70,209,363) 103.0%†† | 57,371,045 | |||||
| Liabilities less Other Assets (3.0)% | (1,680,534 | ) | ||||
| NET ASSETS 100.0% | $ | 55,690,511 | ||||
*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).
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 62.03%.
ADR American Depositary Receipt.
REIT Real Estate Investment Trust.
See notes to financial statements. |
| |||||
47
Table of Contents
| WASATCH INTERNATIONAL OPPORTUNITIES FUND (WAIOX) — Schedule of Investments (continued) | ||
At September 30, 2008, Wasatch International Opportunities Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 3.1 | ||
Belgium | 0.8 | ||
Brazil | 3.4 | ||
Canada | 10.6 | ||
Cayman Islands | 0.5 | ||
China | 30.2 | ||
Colombia | 1.3 | ||
Germany | 6.0 | ||
Greece | 0.6 | ||
Guernsey | 0.8 | ||
Hong Kong | 3.7 | ||
India | 0.5 | ||
Italy | 1.3 | ||
Japan | 10.4 | ||
Korea | 1.3 | ||
Mexico | 1.4 | ||
Norway | 2.8 | ||
Singapore | 8.6 | ||
South Africa | 1.8 | ||
Spain | 0.1 | ||
Sweden | 2.7 | ||
Switzerland | 1.2 | ||
United Arab Emirates | 1.7 | ||
United Kingdom | 4.7 | ||
United States | 0.5 | ||
TOTAL | 100.0 | % | |
48
Table of Contents
| WASATCH MICRO CAP FUND (WMICX) — Schedule of Investments | SEPTEMBER 30, 2008 | |
| Shares | Value | ||||
| COMMON STOCKS 94.5% | |||||
| Air Freight & Logistics 1.6% | |||||
| 5,556,415 | Goodpack Ltd. (Singapore) | $ | 5,501,574 | ||
| Apparel Retail 1.4% | |||||
| 304,493 | Zumiez, Inc.* | 5,018,045 | |||
| Apparel, Accessories & Luxury Goods 1.3% | |||||
| 9,443,536 | EganaGoldpfeil Holdings Ltd.* *** (Hong Kong) | 12,163 | |||
| 265,962 | Volcom, Inc.* | 4,595,823 | |||
| 4,607,986 | |||||
| Application Software 1.0% | |||||
| 395,025 | Interactive Intelligence, Inc.* | 3,563,126 | |||
| Asset Management & Custody Banks 4.4% | |||||
| 57,790 | Diamond Hill Investment Group, Inc.* | 5,196,477 | |||
| 893,042 | Treasury Group Ltd. (Australia) | 5,652,858 | |||
| 106,587 | Westwood Holdings Group, Inc. | 5,052,224 | |||
| 15,901,559 | |||||
| Auto Parts & Equipment 0.2% | |||||
| 4,290,000 | Azure Dynamics Corp.* (Canada) | 605,847 | |||
| Biotechnology 0.3% | |||||
| 327,555 | Luna Innovations, Inc.* | 1,247,985 | |||
| Building Products 0.5% | |||||
| 23,970 | Ameron International Corp. | 1,717,450 | |||
| Cable & Satellite 0.7% | |||||
| 270,681 | Outdoor Channel Holdings, Inc.* | 2,381,993 | |||
| Computer Storage & Peripherals 1.1% | |||||
| 359,795 | Intevac, Inc.* | 3,828,219 | |||
| Consumer Finance 5.0% | |||||
| 402,286 | Dollar Financial Corp.* | 6,191,182 | |||
| 245,680 | First Cash Financial Services, Inc.* | 3,685,200 | |||
| 542,750 | United PanAm Financial Corp.* | 1,997,320 | |||
| 171,180 | World Acceptance Corp.* | 6,162,480 | |||
| 18,036,182 | |||||
| Education Services 0.4% | |||||
| 180,872 | Kroton Educational S.A.* ** (Brazil) | 1,318,206 | |||
| Electronic Manufacturing Services 1.4% | |||||
| 506,540 | TTM Technologies, Inc.* | 5,024,877 | |||
| Environmental & Facilities Services 1.0% | |||||
| 135,030 | American Ecology Corp. | 3,736,280 | |||
| Footwear 2.1% | |||||
| 36,336,155 | China Hongxing Sports Ltd. (China) | 7,721,231 | |||
| Health Care Distributors 1.2% | |||||
| 112,936 | MWI Veterinary Supply, Inc.* | 4,437,255 | |||
| Health Care Equipment 6.6% | |||||
| 225,445 | Abaxis, Inc.* | 4,441,266 | |||
| 313,596 | Cardica, Inc.* | 2,552,671 | |||
| 24,315,170 | LMA International N.V.* (Singapore) | 2,492,339 | |||
| 65,450 | NuVasive, Inc.* | 3,228,648 | |||
| 528,372 | VNUS Medical Technologies, Inc.* | 11,058,826 | |||
| 23,773,750 | |||||
| Health Care Facilities 1.4% | |||||
| 1,085,375 | NovaMed, Inc.* | 5,144,678 | |||
| Shares | Value | ||||
| Health Care Services 6.2% | |||||
| 147,741 | Bio-Reference Laboratories, Inc.* | $ | 4,269,715 | ||
| 259,313 | CorVel Corp.* | 7,418,945 | |||
| 153,365 | Healthways, Inc.* | 2,473,777 | |||
| 149,170 | LHC Group, Inc.* | 4,248,362 | |||
| 401,645 | Providence Service Corp. (The)* | 3,936,121 | |||
| 22,346,920 | |||||
| Health Care Supplies 2.5% | |||||
| 432,710 | Abcam plc (United Kingdom) | 3,683,934 | |||
| 107,333 | Cynosure, Inc., Class A* | 1,925,554 | |||
| 109,940 | ICU Medical, Inc.* | 3,343,275 | |||
| 8,952,763 | |||||
| Health Care Technology 0.3% | |||||
| 454,005 | RaySearch Laboratories AB (Sweden) | 1,145,801 | |||
| Internet Software & Services 3.0% | |||||
| 414,275 | DealerTrack Holdings, Inc.* | 6,976,391 | |||
| 334,151 | Liquidity Services, Inc.* | 3,625,538 | |||
| 10,601,929 | |||||
| IT Consulting & Other Services 2.0% | |||||
| 247,900 | NCI, Inc., Class A* | 7,060,192 | |||
| Life Sciences Tools & Services 4.4% | |||||
| 2,449 | CMIC Co. Ltd. (Japan) | 650,483 | |||
| 116,084 | Icon plc ADR* (Ireland) | 4,440,213 | |||
| 126,745 | Kendle International, Inc.* | 5,666,769 | |||
| 143,445 | Life Sciences Research, Inc.* | 5,020,575 | |||
| 15,778,040 | |||||
| Marine Ports & Services 1.2% | |||||
| 394,787 | CAI International, Inc.* | 4,366,344 | |||
| Mortgage REITs 1.3% | |||||
| 691,340 | MFA Mortgage Investments, Inc. | 4,493,710 | |||
| Multi-Sector Holdings 0.7% | |||||
| 273,870 | Resource America, Inc., Class A | 2,601,765 | |||
| Oil & Gas Drilling 0.3% | |||||
| 1,030,430 | Ithaca Energy, Inc.* (Canada) | 1,241,774 | |||
| Oil & Gas Equipment & Services 3.1% | |||||
| 9,718,140 | Advanced Holdings Ltd. (Singapore) | 1,062,099 | |||
| 637,740 | Forbes Energy Services Ltd.* (Canada) | 2,257,593 | |||
| 252,800 | Pason Systems, Inc. (Canada) | 3,117,902 | |||
| 6,362,830 | Swiber Holdings Ltd.* (Singapore) | 4,835,312 | |||
| 11,272,906 | |||||
| Oil & Gas Exploration & Production 2.4% | |||||
| 268,350 | Approach Resources, Inc.* | 3,880,341 | |||
| 3,751,565 | Bayou Bend Petroleum Ltd.* (Canada) | 706,410 | |||
| 86,175 | GMX Resources, Inc.* | 4,119,165 | |||
| 8,170 | Ithaca Energy, Inc.* (Canada) | 9,846 | |||
| 8,715,762 | |||||
| Oil & Gas Refining & Marketing 0.9% | |||||
| 148,130 | World Fuel Services Corp. | 3,411,434 | |||
| Pharmaceuticals 0.2% | |||||
| 908,620 | Osteologix, Inc.* | 681,465 | |||
| Real Estate Services 0.5% | |||||
| 809,274 | DTZ Holdings plc (United Kingdom) | 1,846,091 | |||
| Regional Banks 2.9% | |||||
| 420,580 | Boston Private Financial Holdings, Inc. | 3,675,869 | |||
| 133,114 | Commonwealth Bankshares, Inc. | 1,891,550 | |||
| 168,040 | Nara Bancorp, Inc. | 1,882,048 | |||
| 254,618 | Tamalpais Bancorp‡ | 2,991,762 | |||
| 10,441,229 | |||||
49
Table of Contents
| WASATCH MICRO CAP FUND (WMICX) — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| Reinsurance 1.2% | |||||
| 382,245 | CastlePoint Holdings Ltd. (Bermuda) | $ | 4,254,387 | ||
| Research & Consulting Services 2.0% | |||||
| 86,465 | CRA International, Inc.* | 2,376,058 | |||
| 206,710 | Resources Connection, Inc.* | 4,657,176 | |||
| 7,033,234 | |||||
| Semiconductor Equipment 1.1% | |||||
| 565,045 | inTEST Corp.* ‡ | 593,297 | |||
| 199,375 | Tessera Technologies, Inc.* | 3,257,788 | |||
| 3,851,085 | |||||
| Semiconductors 12.1% | |||||
| 246,210 | Melexis N.V. (Belgium) | 3,427,315 | |||
| 779,715 | Micrel, Inc. | 7,072,015 | |||
| 763,160 | Microtune, Inc.* | 2,045,269 | |||
| 165,061 | NetLogic Microsystems, Inc.* | 4,991,445 | |||
| 1,596,457 | O2Micro International Ltd. ADR* (Cayman Islands) | 5,795,139 | |||
| 332,404 | Pericom Semiconductor Corp.* | 3,490,242 | |||
| 697,405 | PLX Technology, Inc.* | 3,570,714 | |||
| 422,467 | Power Integrations, Inc.* | 10,181,455 | |||
| 104,545 | Supertex, Inc.* | 2,943,987 | |||
| 43,517,581 | |||||
| Specialized Finance 1.8% | |||||
| 207,435 | Arques Industries AG* (Germany) | 1,677,949 | |||
| 154,000 | Goldwater Bank, N.A.* *** † | 1,221,220 | |||
| 1,260 | Osaka Securities Exchange Co. Ltd. (Japan) | 3,545,150 | |||
| 6,444,319 | |||||
| Specialty Chemicals 0.5% | |||||
| 1,063,635 | Neo Material Technologies, Inc.* (Canada) | 1,852,586 | |||
| Specialty Stores 3.6% | |||||
| 482,640 | Big 5 Sporting Goods Corp. | 4,980,845 | |||
| 197,015 | easyhome Ltd. (Canada) | 2,596,818 | |||
| 267,657 | Hibbett Sports, Inc.* | 5,358,493 | |||
| 12,936,156 | |||||
| Systems Software 1.2% | |||||
| 340,420 | Opnet Technologies, Inc.* | 4,146,316 | |||
| Technology Distributors 0.3% | |||||
| 293,396 | Nu Horizons Electronics Corp.* | 1,173,584 | |||
| Thrifts & Mortgage Finance 2.0% | |||||
| 190,425 | Encore Bancshares, Inc.* | 3,427,650 | |||
| 123,300 | Home Capital Group, Inc. (Canada) | 3,656,687 | |||
| 7,084,337 | |||||
| Trading Companies & Distributors 2.6% | |||||
| 284,460 | Beacon Roofing Supply, Inc.* | 4,443,265 | |||
| 393,437 | Rush Enterprises, Inc., Class B* | 4,941,568 | |||
| 9,384,833 | |||||
| Trucking 2.6% | |||||
| 115,965 | Old Dominion Freight Line, Inc.* | 3,286,448 | |||
| 445,450 | Vitran Corp., Inc.* (Canada) | 6,000,211 | |||
| 9,286,659 | |||||
| Total Common Stocks (cost $383,991,293) | 339,489,445 | ||||
| Shares | Value | ||||
| PREFERRED STOCKS 0.0% | |||||
| Pharmaceuticals 0.0% | |||||
| 414,022 | Point Biomedical Corp., Series A Pfd.* *** † | $ | 2,070 | ||
| Total Preferred Stocks (cost $226,364) | 2,070 | ||||
| WARRANTS 0.1% | |||||
| Air Freight & Logistics 0.0% | |||||
| 888,830 | Goodpack Ltd. expiring 7/16/09* (Singapore) | 160,930 | |||
| Health Care Distributors 0.0% | |||||
| 25,946 | Familymeds Group, Inc. expiring 11/30/09* *** † | — | |||
| Health Care Equipment 0.1% | |||||
| 121,124 | Cardica, Inc. expiring 6/7/12* *** † | 301,599 | |||
| Total Warrants (cost $19,379) | 462,529 | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 4.7% | |||||
| Repurchase Agreement 4.7% | |||||
| $16,850,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/1/08 with Fixed Income Clearing Corporation collateralized by $12,105,000 of United States Treasury Bonds 8.00% due 11/15/21; value: $17,189,100; repurchase proceeds: $16,850,047 (cost $16,850,000) | $ | 16,850,000 | ||
| Total Short-Term Investments (cost $16,850,000) | 16,850,000 | ||||
| Total Investments (cost $401,087,036) 99.3%†† | 356,804,044 | ||||
| Other Assets less Liabilities 0.7% | 2,589,469 | ||||
| NET ASSETS 100.0% | $ | 359,393,513 | |||
*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).
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 12.03%.
‡Affiliated company (see Note 8).
ADR American Depositary Receipts.
REIT Real Estate Investment Trust.
See notes to financial statements. | |||||
50
Table of Contents
| SEPTEMBER 30, 2008 | ||
At September 30, 2008, Wasatch Micro Cap Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 1.7 | ||
Belgium | 1.0 | ||
Bermuda | 1.3 | ||
Brazil | 0.4 | ||
Canada | 6.5 | ||
Cayman Islands | 1.7 | ||
China | 2.3 | ||
Germany | 0.5 | ||
Hong Kong | <0.1 | ||
Ireland | 1.3 | ||
Japan | 1.2 | ||
Singapore | 4.1 | ||
Sweden | 0.3 | ||
United Kingdom | 1.6 | ||
United States | 76.1 | ||
TOTAL | 100.0 | % | |
51
Table of Contents
| WASATCH MICRO CAP VALUE FUND (WAMVX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 83.8% | |||||
| Aerospace & Defense 1.5% | |||||
| 52,985 | HEICO Corp., Class A | $ | 1,486,759 | ||
| Air Freight & Logistics 0.3% | |||||
| 617,500 | AutoInfo, Inc.* | 308,750 | |||
| Apparel, Accessories & Luxury Goods 1.5% | |||||
| 2,150,000 | EganaGoldpfeil Holdings Ltd.* *** (Hong Kong) | 2,769 | |||
| 85,000 | Volcom, Inc.* | 1,468,800 | |||
| 1,471,569 | |||||
| Application Software 3.2% | |||||
| 1,622,096 | GuestLogix, Inc.* (Canada) | 1,725,715 | |||
| 152,000 | Interactive Intelligence, Inc.* | 1,371,040 | |||
| 3,096,755 | |||||
| Asset Management & Custody Banks 2.5% | |||||
| 128,411 | Treasury Group Ltd. (Australia) | 812,828 | |||
| 33,996 | Westwood Holdings Group, Inc. | 1,611,410 | |||
| 2,424,238 | |||||
| Auto Parts & Equipment 1.2% | |||||
| 2,135,000 | Azure Dynamics Corp.* (Canada) | 301,511 | |||
| 145,000 | Martinrea International, Inc.* (Canada) | 830,015 | |||
| 1,131,526 | |||||
| Biotechnology 1.8% | |||||
| 88,610 | Cytori Therapeutics, Inc.* | 467,861 | |||
| 289,430 | Luna Innovations, Inc.* | 1,102,728 | |||
| 101,331 | NeurogesX, Inc.* | 217,862 | |||
| 1,788,451 | |||||
| Building Products 1.4% | |||||
| 19,000 | Ameron International Corp. | 1,361,350 | |||
| Commercial Printing 1.4% | |||||
| 65,000 | Courier Corp. | 1,323,400 | |||
| Communications Equipment 0.7% | |||||
| 1,136,945 | Airspan Networks, Inc.* | 386,561 | |||
| 343,691 | AltiGen Communications, Inc.* | 340,254 | |||
| 726,815 | |||||
| Computer Storage & Peripherals 2.4% | |||||
| 219,200 | Intevac, Inc.* | 2,332,288 | |||
| Construction & Engineering 2.1% | |||||
| 33,300 | Michael Baker Corp.* | 1,158,840 | |||
| 71,145 | MYR Group, Inc.* | 900,696 | |||
| 2,059,536 | |||||
| Consumer Finance 2.8% | |||||
| 90,000 | Dollar Financial Corp.* | 1,385,100 | |||
| 38,000 | World Acceptance Corp.* | 1,368,000 | |||
| 2,753,100 | |||||
| Data Processing & Outsourced Services 1.1% | |||||
| 65,000 | Euronet Worldwide, Inc.* | 1,087,450 | |||
| Diversified Banks 0.5% | |||||
| 55,556 | Idaho Trust Bancorp* *** † | 500,004 | |||
| Diversified Chemicals 1.3% | |||||
| 90,000 | LSB Industries, Inc.* | 1,246,500 | |||
| Shares | Value | ||||
| Diversified Support Services 0.8% | |||||
| 33,754 | Healthcare Services Group, Inc. | $ | 617,361 | ||
| 401,000 | ProLink Holdings Corp.* | 128,320 | |||
| 745,681 | |||||
| Education Services 0.4% | |||||
| 50,424 | Kroton Educational S.A.* ** (Brazil) | 367,493 | |||
| Electrical Components & Equipment 0.7% | |||||
| 2,753,619 | Wasion Meters Group Ltd. (Hong Kong) | 665,415 | |||
| Electronic Manufacturing Services 1.9% | |||||
| 650,000 | Sanmina-SCI Corp.* | 910,000 | |||
| 97,000 | TTM Technologies, Inc.* ††† | 962,240 | |||
| 1,872,240 | |||||
| Environmental & Facilities Services 2.5% | |||||
| 22,400 | American Ecology Corp. | 619,808 | |||
| 136,000 | Heritage-Crystal Clean, Inc.* | 1,836,000 | |||
| 2,455,808 | |||||
| Footwear 1.1% | |||||
| 4,854,000 | China Hongxing Sports Ltd. (China) | 1,031,448 | |||
| Gold 0.3% | |||||
| 2,710,000 | Redcorp Ventures Ltd.* (Canada) | 267,900 | |||
| Health Care Equipment 11.7% | |||||
| 135,000 | AtriCure, Inc.* | 1,352,700 | |||
| 87,000 | Cardica, Inc.* | 708,180 | |||
| 53,000 | Infopia Co. Ltd. (Korea) | 858,195 | |||
| 78,000 | Invacare Corp. | 1,882,920 | |||
| 171,000 | MTS Medication Technologies, Inc.* | 861,840 | |||
| 27,740 | NuVasive, Inc.* | 1,368,414 | |||
| 284,300 | Thermage, Inc.* | 975,149 | |||
| 162,445 | VNUS Medical Technologies, Inc.* ††† | 3,399,974 | |||
| 11,407,372 | |||||
| Health Care Services 2.7% | |||||
| 24,000 | Bio-Reference Laboratories, Inc.* | 693,600 | |||
| 35,221 | CorVel Corp.* | 1,007,673 | |||
| 100,000 | Providence Service Corp. (The)* | 980,000 | |||
| 2,681,273 | |||||
| Health Care Supplies 1.1% | |||||
| 36,700 | ICU Medical, Inc.* | 1,116,047 | |||
| Health Care Technology 0.1% | |||||
| 310,080 | Ophthalmic Imaging Systems* | 117,830 | |||
| Hotels, Resorts & Cruise Lines 0.0% | |||||
| 131,090 | Club Cruise Entertainment & Travelling | ||||
| Services Europe N.V.* *** (Norway) | 2,228 | ||||
| Integrated Telecommunication Services 0.8% | |||||
| 53,000 | Cbeyond, Inc.* | 762,670 | |||
| Internet Software & Services 1.2% | |||||
| 71,000 | DealerTrack Holdings, Inc.* | 1,195,640 | |||
| Investment Banking & Brokerage 1.0% | |||||
| 210,000 | GFI Group, Inc. | 989,100 | |||
| IT Consulting & Other Services 3.7% | |||||
| 675,000 | Management Network Group, Inc.* | 607,500 | |||
| 56,500 | NCI, Inc., Class A* | 1,609,120 | |||
| 59,063 | Telvent GIT S.A. (Spain) | 1,407,471 | |||
| 3,624,091 | |||||
52
Table of Contents
| SEPTEMBER 30, 2008 | ||
| Shares | Value | ||||
| Life Sciences Tools & Services 1.0% | |||||
| 21,500 | Kendle International, Inc.* | $ | 961,265 | ||
| Oil & Gas Equipment & Services 2.3% | |||||
| 408,000 | Aeroquest Int’l. Ltd.* (Canada) | 422,539 | |||
| 205,000 | Forbes Energy Services Ltd.* (Canada) | 725,698 | |||
| 81,725 | TETRA Technologies, Inc.* | 1,131,891 | |||
| 2,280,128 | |||||
| Oil & Gas Exploration & Production 1.2% | |||||
| 84,155 | Approach Resources, Inc.* | 1,216,881 | |||
| Oil & Gas Refining & Marketing 0.9% | |||||
| 40,000 | World Fuel Services Corp. | 921,200 | |||
| Other Diversified Financial Services 1.2% | |||||
| 150,000 | Hyde Park Acquisition Corp.* | 1,128,000 | |||
| Packaged Foods & Meats 1.3% | |||||
| 115,000 | Zhongpin, Inc.* | 1,222,450 | |||
| Pharmaceuticals 0.2% | |||||
| 286,000 | Osteologix, Inc.* | 214,500 | |||
| Regional Banks 4.5% | |||||
| 110,055 | Boston Private Financial Holdings, Inc. | 961,881 | |||
| 2,000,000 | City Union Bank Ltd. (India) | 1,001,879 | |||
| 300,000 | First Bank of Delaware* | 540,000 | |||
| 45,000 | First of Long Island Corp. | 1,091,250 | |||
| 65,498 | Tamalpais Bancorp | 769,602 | |||
| 4,364,612 | |||||
| Reinsurance 1.5% | |||||
| 135,000 | CastlePoint Holdings Ltd. (Bermuda) | 1,502,550 | |||
| Restaurants 0.9% | |||||
| 177,000 | Brazil Fast Food Corp. | 886,947 | |||
| Semiconductor Equipment 2.6% | |||||
| 184,400 | inTEST Corp.* | 193,620 | |||
| 287,088 | LogicVision, Inc.* | 284,217 | |||
| 195,085 | PDF Solutions, Inc.* | 1,014,442 | |||
| 62,850 | Tessera Technologies, Inc.* | 1,026,969 | |||
| 2,519,248 | |||||
| Semiconductors 2.2% | |||||
| 226,040 | O2Micro International Ltd. ADR* (Cayman Islands) | 820,525 | |||
| 56,555 | Power Integrations, Inc.* | 1,362,976 | |||
| 2,183,501 | |||||
| Specialized Finance 1.0% | |||||
| 41,900 | Goldwater Bank, N.A.* *** † | 332,267 | |||
| 245 | Osaka Securities Exchange Co. Ltd. (Japan) | 689,335 | |||
| 1,021,602 | |||||
| Specialty Stores 1.0% | |||||
| 73,600 | easyhome Ltd. (Canada) | 970,108 | |||
| Steel 3.2% | |||||
| 90,310 | Globe Specialty Metals, Inc.* (United Kingdom) | 1,715,890 | |||
| 31,090 | Haynes International, Inc.* | 1,455,945 | |||
| 3,171,835 | |||||
| Systems Software 1.9% | |||||
| 150,520 | Opnet Technologies, Inc.* ††† | 1,833,334 | |||
| Trucking 1.2% | |||||
| 90,000 | Vitran Corp., Inc.* (Canada) | 1,212,300 | |||
| Total Common Stocks (cost $93,243,437) | 82,011,188 | ||||
| Shares | Value | |||||
| PREFERRED STOCKS 0.0% | ||||||
| Pharmaceuticals 0.0% | ||||||
| 82,803 | Point Biomedical Corp., Series A Pfd.* *** † | $ | 414 | |||
| Total Preferred Stocks (cost $45,272) | 414 | |||||
| WARRANTS 0.2% | ||||||
| Biotechnology 0.0% | ||||||
| 30,399 | NeurogesX, Inc. expiring 12/28/12* *** † | — | ||||
| Gold 0.0% | ||||||
| 855,000 | Redcorp Ventures Ltd. expiring 7/10/09* (Canada) | 8,050 | ||||
| Health Care Distributors 0.0% | ||||||
| 6,486 | Familymeds Group, Inc. expiring 11/30/09* *** † | — | ||||
| Health Care Equipment 0.2% | ||||||
| 58,140 | Cardica, Inc. expiring 6/7/12* *** † | 144,768 | ||||
| Hotels, Resorts & Cruise Lines 0.0% | ||||||
| 94,548 | Club Cruise Entertainment & Travelling Services Europe N.V. expiring 4/25/12* *** † (Norway) | — | ||||
| Pharmaceuticals 0.0% | ||||||
| 1,436 | Acusphere, Inc. expiring 10/20/08* *** † | — | ||||
| Precious Metals & Minerals 0.0% | ||||||
| 603,880 | Farallon Resources Ltd. expiring 12/21/08* *** † (Canada) | — | ||||
| Total Warrants (cost $226,367) | 152,818 | |||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 17.1% | ||||||
| Repurchase Agreement 17.1% | ||||||
| $16,791,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/01/08 with Fixed Income Clearing Corporation collateralized by $13,915,000 of United States Treasury Bonds 6.25% due 8/15/23; value $17,132,844; repurchase proceeds: $16,791,047††† (cost $16,791,000) | $ | 16,791,000 | |||
| Total Short-Term Investments (cost $16,791,000) | 16,791,000 | |||||
| Total Investments (cost $110,306,076) 101.1%†† | 98,955,421 | |||||
| Liabilities less Other Assets (1.1)% | (1,043,877 | ) | ||||
| NET ASSETS 100.0% | $ | 97,911,544 | ||||
53
Table of Contents
| WASATCH MICRO CAP VALUE FUND (WAMVX) — Schedule of Investments (continued) | SEPTEMBER 30, 2008 | |
| Contracts | Net Unrealized Depreciation | ||||
| FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | |||||
| 7,200,000 | |||||
| CAD | USD, settlement date 11/12/08, (cost $6,789,161 value $6,725,703) | $ | 63,458 | ||
| Total Forward Foreign Currency Exchange Contracts (cost $6,789,161 value $6,725,703) | 63,458 | ||||
*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).
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 5.17%.
†††All or a portion of this security has been designated as collateral for a forward foreign currency contracts. Collateral is valued at $22,986,547 (see Note 10).
ADR American Depositary Receipts.
See notes to financial statements. | |||||
At September 30, 2008, Wasatch Micro Cap Value Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 1.0 | ||
Bermuda | 1.8 | ||
Brazil | 0.5 | ||
Canada | 7.9 | ||
Cayman Islands | 1.0 | ||
China | 1.3 | ||
Hong Kong | 0.8 | ||
India | 1.2 | ||
Japan | 0.8 | ||
Korea | 1.0 | ||
Norway | <0.1 | ||
Spain | 1.7 | ||
United Kingdom | 2.1 | ||
United States | 78.9 | ||
TOTAL | 100.0 | % | |
54
Table of Contents
| WASATCH SMALL CAP GROWTH FUND (WAAEX) — Schedule of Investments | SEPTEMBER 30, 2008 | |
| Shares | Value | ||||
| COMMON STOCKS 91.1% | |||||
| Air Freight & Logistics 1.8% | |||||
| 13,767,902 | Aramex PJSC* (United Arab Emirates) | $ | 7,561,051 | ||
| 5,549,982 | Goodpack Ltd. (Singapore) | 5,495,205 | |||
| 13,056,256 | |||||
| Apparel Retail 1.2% | |||||
| 522,370 | Zumiez, Inc.* | 8,608,658 | |||
| Apparel, Accessories & Luxury Goods 1.6% | |||||
| 3,614,640 | Ports Design Ltd. (Hong Kong) | 6,621,211 | |||
| 316,968 | Volcom, Inc.* | 5,477,207 | |||
| 12,098,418 | |||||
| Application Software 2.6% | |||||
| 364,110 | FactSet Research Systems, Inc. | 19,024,748 | |||
| Asset Management & Custody Banks 1.3% | |||||
| 332,056 | Cohen & Steers, Inc. | 9,407,147 | |||
| Automotive Retail 5.3% | |||||
| 1,473,792 | O’Reilly Automotive, Inc.* | 39,453,412 | |||
| Biotechnology 1.4% | |||||
| 43,268 | Myriad Genetics, Inc.* | 2,807,228 | |||
| 297,814 | Orexigen Therapeutics, Inc.* | 3,213,413 | |||
| 243,840 | Seattle Genetics, Inc.* | 2,609,088 | |||
| 204,600 | ZymoGenetics, Inc.* | 1,362,636 | |||
| 9,992,365 | |||||
| Communications Equipment 1.9% | |||||
| 287,425 | F5 Networks, Inc.* | 6,719,996 | |||
| 414,959 | Neutral Tandem, Inc.* | 7,693,340 | |||
| 14,413,336 | |||||
| Computer & Electronics Retail 0.9% | |||||
| 686,503 | hhgregg, Inc.* | 6,693,404 | |||
| Computer Storage & Peripherals 1.0% | |||||
| 314,325 | Data Domain, Inc.* | 7,000,018 | |||
| Construction & Engineering 1.0% | |||||
| 4,855,790 | Midas Holdings Ltd. (China) | 1,432,735 | |||
| 127,790 | Outotec Oyj (Finland) | 3,438,525 | |||
| 66,095 | URS Corp.* | 2,423,704 | |||
| 7,294,964 | |||||
| Construction & Farm Machinery & Heavy Trucks 1.5% | |||||
| 241,666 | Bucyrus International, Inc., Class A | 10,797,637 | |||
| Data Processing & Outsourced Services 2.5% | |||||
| 311,875 | NeuStar, Inc., Class A* | 6,203,194 | |||
| 187,230 | Syntel, Inc. | 4,587,135 | |||
| 1,067,550 | Wirecard AG* (Germany) | 7,883,793 | |||
| 18,674,122 | |||||
| Distributors 0.9% | |||||
| 372,165 | LKQ Corp.* | 6,315,640 | |||
| Diversified Banks 3.4% | |||||
| 520,361 | Bank of N.T. Butterfield & Son Ltd. (Bermuda) | 6,504,512 | |||
| 218,385 | HDFC Bank Ltd. ADR (India) | 18,551,806 | |||
| 25,056,318 | |||||
| Shares | Value | ||||
| Diversified Support Services 3.9% | |||||
| 406,841 | Copart, Inc.* | $ | 15,459,959 | ||
| 425,234 | Stantec, Inc.* (Canada) | 10,120,569 | |||
| 508,186 | Transfield Services Ltd. (Australia) | 3,137,775 | |||
| 28,718,303 | |||||
| Education Services 1.2% | |||||
| 112,777 | Capella Education Co.* | 4,833,622 | |||
| 18,666 | Strayer Education, Inc. | 3,738,053 | |||
| 8,571,675 | |||||
| Environmental & Facilities Services 1.2% | |||||
| 405,742 | EnergySolutions, Inc. | 4,057,420 | |||
| 202,485 | Tetra Tech, Inc.* | 4,871,789 | |||
| 8,929,209 | |||||
| Footwear 0.5% | |||||
| 18,556,345 | China Hongxing Sports Ltd. (China) | 3,943,120 | |||
| Health Care Distributors 1.7% | |||||
| 313,700 | MWI Veterinary Supply, Inc.* | 12,325,273 | |||
| Health Care Equipment 1.5% | |||||
| 462,527 | Abaxis, Inc.* | 9,111,782 | |||
| 332,588 | Dexcom, Inc.* | 2,058,720 | |||
| 11,170,502 | |||||
| Health Care Services 5.4% | |||||
| 369,816 | Bio-Reference Laboratories, Inc.* | 10,687,682 | |||
| 229,019 | Healthways, Inc.* | 3,694,076 | |||
| 473,225 | Pediatrix Medical Group, Inc.* | 25,516,292 | |||
| 39,898,050 | |||||
| Integrated Telecommunication Services 0.7% | |||||
| 354,475 | Cbeyond, Inc.* | 5,100,895 | |||
| Internet Software & Services 4.3% | |||||
| 159,930 | Bankrate, Inc.* | 6,222,876 | |||
| 662,932 | DealerTrack Holdings, Inc.* | 11,163,775 | |||
| 625,640 | LoopNet, Inc.* | 6,150,041 | |||
| 244,315 | VistaPrint Ltd.* | 8,023,305 | |||
| 31,559,997 | |||||
| Investment Banking & Brokerage 0.7% | |||||
| 256,960 | optionsXpress Holdings, Inc. | 4,990,163 | |||
| Leisure Facilities 0.8% | |||||
| 187,180 | Life Time Fitness, Inc.* | 5,853,119 | |||
| Life Sciences Tools & Services 6.6% | |||||
| 86,890 | Helicos BioSciences Corp.* | 149,451 | |||
| 279,041 | Icon plc ADR* (Ireland) | 10,673,318 | |||
| 241,425 | Kendle International, Inc.* | 10,794,112 | |||
| 375,511 | Techne Corp.* | 27,081,853 | |||
| 208,525 | Valera Pharmaceuticals, Inc. Ureteral | ||||
| Stent* *** † | — | ||||
| 48,698,734 | |||||
| Managed Health Care 0.3% | |||||
| 88,215 | AMERIGROUP Corp.* ††† | 2,226,547 | |||
| Marine 0.6% | |||||
| 290,845 | Eagle Bulk Shipping, Inc. | 4,054,379 | |||
| Mortgage REITs 0.7% | |||||
| 253,261 | Redwood Trust, Inc. | 5,503,362 | |||
55
Table of Contents
| WASATCH SMALL CAP GROWTH FUND (WAAEX) — Schedule of Investments (continued) | ||
| Shares | Value | ||||
| Oil & Gas Equipment & Services 4.6% | |||||
| 251,220 | Dril-Quip, Inc.* | $ | 10,900,436 | ||
| 147,265 | Helix Energy Solutions Group, Inc.* | 3,575,594 | |||
| 66,355 | NATCO Group, Inc., Class A* | 2,666,144 | |||
| 700,385 | Pason Systems, Inc. (Canada) | 8,638,180 | |||
| 455,035 | TGS-NOPEC Geophysical Co. ASA* (Norway) | 3,656,496 | |||
| 169,920 | Willbros Group, Inc.* (Panama) | 4,502,880 | |||
| 33,939,730 | |||||
| Oil & Gas Exploration & Production 1.5% | |||||
| 534,550 | Brigham Exploration Co.* | 5,874,705 | |||
| 109,165 | GMX Resources, Inc.* | 5,218,087 | |||
| 11,092,792 | |||||
| Other Diversified Financial Services 0.4% | |||||
| 2,661,038 | Count Financial Ltd. (Australia) | 2,997,097 | |||
| Pharmaceuticals 1.1% | |||||
| 577,015 | Alexza Pharmaceuticals, Inc.* | 2,850,454 | |||
| 680,112 | Dechra Pharmaceuticals plc (United Kingdom) | 4,951,955 | |||
| 208,525 | Valera Pharmaceuticals, Inc. CSR VP003* *** † | — | |||
| 7,802,409 | |||||
| Regional Banks 1.8% | |||||
| 109,605 | City National Corp. | 5,951,551 | |||
| 133,775 | Glacier Bancorp, Inc. | 3,313,607 | |||
| 90,720 | PrivateBancorp, Inc. | 3,779,395 | |||
| 13,044,553 | |||||
| Research & Consulting Services 5.2% | |||||
| 346,598 | CRA International, Inc.* | 9,524,513 | |||
| 1,273,267 | Resources Connection, Inc.* | 28,686,706 | |||
| 38,211,219 | |||||
| Restaurants 2.2% | |||||
| 582,762 | Peet’s Coffee & Tea, Inc.* | 16,270,715 | |||
| Semiconductor Equipment 0.6% | |||||
| 264,845 | Tessera Technologies, Inc.* | 4,327,567 | |||
| Semiconductors 5.6% | |||||
| 215,590 | Hittite Microwave Corp.* | 7,243,824 | |||
| 439,871 | Melexis N.V. (Belgium) | 6,123,132 | |||
| 189,556 | NetLogic Microsystems, Inc.* | 5,732,173 | |||
| 1,500,385 | O2Micro International Ltd. ADR* (Cayman Islands) | 5,446,398 | |||
| 689,193 | Power Integrations, Inc.* | 16,609,551 | |||
| 41,155,078 | |||||
| Specialty Stores 2.0% | |||||
| 736,304 | Hibbett Sports, Inc.* | 14,740,806 | |||
| Systems Software 2.0% | |||||
| 432,985 | NetSuite, Inc.* | 7,802,390 | |||
| 157,095 | Quality Systems, Inc. | 6,638,834 | |||
| 14,441,224 | |||||
| Thrifts & Mortgage Finance 1.3% | |||||
| 332,541 | Home Capital Group, Inc. (Canada) | 9,862,111 | |||
| Trading Companies & Distributors 2.5% | |||||
| 3,751,320 | Emeco Holdings Ltd. (Australia) | 2,422,918 | |||
| 341,285 | MSC Industrial Direct Co., Inc., Class A | 15,723,000 | |||
| 18,145,918 | |||||
| Shares | Value | ||||
| Trucking 1.9% | |||||
| 834,284 | Knight Transportation, Inc. | $ | 14,157,799 | ||
| Total Common Stocks (cost $640,596,359) | 669,618,789 | ||||
| PREFERRED STOCKS 1.1% | |||||
| Biotechnology 0.3% | |||||
| 677,966 | Nanosys, Inc., Series D Pfd.* *** † | 2,000,000 | |||
| Health Care Equipment 0.3% | |||||
| 750,000 | Orqis Medical Corp., Series D Pfd.* *** † | 825,000 | |||
| 1,620,220 | Zonare Medical Systems, Inc., Series E Pfd.* *** † | 1,343,162 | |||
| 2,168,162 | |||||
| Health Care Services 0.1% | |||||
| 516,161 | Bravo Health, Inc., Series G Pfd.* *** † | 851,665 | |||
| 362,782 | TargetRX, Inc., Series D Pfd.* *** † | 3,628 | |||
| 855,293 | |||||
| Internet Software & Services 0.1% | |||||
| 404,517 | Incipient, Inc., Series D Pfd.* *** † | 468,431 | |||
| Life Sciences Tools & Services 0.3% | |||||
| 625,000 | Fluidigm Corp., Series E Pfd.* *** † | 1,931,250 | |||
| Pharmaceuticals 0.0% | |||||
| 524,519 | Point Biomedical Corp., Series A Pfd. * *** † | 2,623 | |||
| Total Preferred Stocks (cost $10,688,081) | 7,425,759 | ||||
| LIMITED PARTNERSHIP INTEREST 0.5% | |||||
| Other 0.5% | |||||
| Montagu Newhall Global Partners II-B, L.P.*** † | 3,549,864 | ||||
| Montagu Newhall Global Partners III-B, L.P.*** † | 703,298 | ||||
| 4,253,162 | |||||
| Total Limited Partnership Interest (cost $4,408,853) | 4,253,162 | ||||
| WARRANTS 0.0% | |||||
| Health Care Equipment 0.0% | |||||
| 243,033 | Zonare Medical Systems, Inc. expiring 6/30/11* *** † | — | |||
| Total Warrants (cost $0) | — | ||||
56
Table of Contents
| SEPTEMBER 30, 2008 | ||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 5.7% | |||||
| Repurchase Agreement 5.7% | |||||
| $42,161,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/01/08 with Fixed Income Clearing Corporation collateralized by $34,840,000 of United States Treasury Bonds 5.5% - 6.75% due 8/15/23 - 08/15/28; value $43,005,025; repurchase proceeds: $42,161,117 ††† (cost $42,161,000) | $ | 42,161,000 | ||
| Total Short-Term Investments (cost $42,161,000) | 42,161,000 | ||||
| Total Investments (cost $697,854,293) 98.4%†† | 723,458,710 | ||||
| Other Assets less Liabilities 1.6% | 12,087,496 | ||||
| NET ASSETS 100.0% | $ | 735,546,206 | |||
*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).
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 8.11%.
†††All or a portion of this security has been designated as collateral for purchase commitments. Collateral is valued at $44,387,547 (see Note 10).
ADR American Depositary Receipt.
REIT Real Estate Investment Trust.
See notes to financial statements. | |||||
At September 30, 2008, Wasatch Small Cap Growth Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Australia | 1.2 | ||
Belgium | 0.9 | ||
Bermuda | 1.0 | ||
Canada | 4.2 | ||
Cayman Islands | 0.8 | ||
China | 0.8 | ||
Finland | 0.5 | ||
Germany | 1.2 | ||
Hong Kong | 1.0 | ||
India | 2.7 | ||
Ireland | 1.6 | ||
Norway | 0.5 | ||
Panama | 0.7 | ||
Singapore | 0.8 | ||
United Arab Emirates | 1.1 | ||
United Kingdom | 0.7 | ||
United States | 80.3 | ||
TOTAL | 100.0 | % | |
57
Table of Contents
| WASATCH SMALL CAP VALUE FUND (WMCVX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 95.2% | |||||
| Aerospace & Defense 1.2% | |||||
| 143,570 | HEICO Corp., Class A | $ | 4,028,574 | ||
| Air Freight & Logistics 1.9% | |||||
| 6,611,821 | Goodpack Ltd. (Singapore) | 6,546,564 | |||
| Alternative Carriers 0.9% | |||||
| 198,200 | Global Village Telecom Holding S.A.* (Brazil) | 2,970,498 | |||
| Apparel Retail 2.3% | |||||
| 469,704 | Zumiez, Inc.* | 7,740,722 | |||
| Apparel, Accessories & Luxury Goods 1.9% | |||||
| 6,959,145 | EganaGoldpfeil Holdings Ltd.* *** (Hong Kong) | 8,964 | |||
| 368,389 | Volcom, Inc.* | 6,365,762 | |||
| 6,374,726 | |||||
| Asset Management & Custody Banks 3.0% | |||||
| 125,703 | Cohen & Steers, Inc. | 3,561,166 | |||
| 471,940 | Solar Capital, LLC* ** *** † | 6,441,981 | |||
| 10,003,147 | |||||
| Auto Parts & Equipment 1.1% | |||||
| 672,680 | Martinrea International, Inc.* (Canada) | 3,850,581 | |||
| Building Products 0.7% | |||||
| 32,165 | Ameron International Corp. | 2,304,622 | |||
| Communications Equipment 1.4% | |||||
| 207,335 | Plantronics, Inc. | 4,669,184 | |||
| Computer Storage & Peripherals 0.7% | |||||
| 2,186,171 | Quantum Corp.* | 2,295,480 | |||
| Construction & Engineering 2.8% | |||||
| 140,160 | Chicago Bridge & Iron Co. N.V. (Netherlands) | 2,696,679 | |||
| 95,070 | Michael Baker Corp.* | 3,308,436 | |||
| 277,730 | MYR Group, Inc.* | 3,516,062 | |||
| 9,521,177 | |||||
| Consumer Finance 4.2% | |||||
| 419,348 | Dollar Financial Corp.* | 6,453,766 | |||
| 532,416 | United PanAm Financial Corp.* | 1,959,291 | |||
| 157,345 | World Acceptance Corp.* | 5,664,420 | |||
| 14,077,477 | |||||
| Data Processing & Outsourced Services 1.2% | |||||
| 234,790 | Euronet Worldwide, Inc.* | 3,928,037 | |||
| Diversified Banks 1.5% | |||||
| 407,220 | Bank of N.T. Butterfield & Son Ltd. (Bermuda) | 5,090,250 | |||
| Diversified Capital Markets 0.5% | |||||
| 314,735 | JMP Group, Inc. | 1,636,622 | |||
| Diversified REITs 0.3% | |||||
| 600,000 | Star Asia Finance Ltd.*** † (Guernsey) | 1,080,000 | |||
| Diversified Support Services 0.8% | |||||
| 399,024 | LPS Brasil-Consultoria de Imoveis S.A. (Brazil) | 2,741,933 | |||
| Education Services 0.3% | |||||
| 157,160 | Kroton Educational S.A.* ** (Brazil) | 1,145,392 | |||
| Electrical Components & Equipment 0.8% | |||||
| 11,617,078 | Wasion Meters Group Ltd. (Hong Kong) | 2,807,281 | |||
| Shares | Value | ||||
| Electronic Manufacturing Services 3.6% | |||||
| 3,234,390 | Sanmina-SCI Corp.* | $ | 4,528,146 | ||
| 758,420 | TTM Technologies, Inc.* | 7,523,526 | |||
| 12,051,672 | |||||
| Environmental & Facilities Services 1.4% | |||||
| 461,441 | EnergySolutions, Inc. | 4,614,410 | |||
| Footwear 1.2% | |||||
| 19,343,000 | China Hongxing Sports Ltd. (China) | 4,110,280 | |||
| Gold 0.4% | |||||
| 13,628,640 | Redcorp Ventures Ltd.* (Canada) | 1,347,274 | |||
| Health Care Equipment 2.3% | |||||
| 326,220 | Invacare Corp. | 7,874,951 | |||
| Health Care Facilities 4.7% | |||||
| 446,312 | Capital Senior Living Corp.* | 3,391,971 | |||
| 388,331 | Emeritus Corp.* | 9,669,442 | |||
| 712,703 | Five Star Quality Care, Inc.* | 2,672,636 | |||
| 15,734,049 | |||||
| Health Care Services 3.3% | |||||
| 382,932 | CorVel Corp.* | 10,955,685 | |||
| Health Care Supplies 1.1% | |||||
| 117,302 | ICU Medical, Inc.* | 3,567,154 | |||
| Industrial Machinery 2.1% | |||||
| 118,645 | IDEX Corp. | 3,680,368 | |||
| 154,450 | Kadant, Inc.* | 3,516,826 | |||
| 7,197,194 | |||||
| Insurance Brokers 1.1% | |||||
| 164,045 | Brown & Brown, Inc. | 3,546,653 | |||
| Internet Retail 0.5% | |||||
| 747,913 | US Auto Parts Network, Inc.* | 1,578,096 | |||
| Internet Software & Services 1.3% | |||||
| 265,909 | DealerTrack Holdings, Inc.* | 4,477,908 | |||
| IT Consulting & Other Services 1.0% | |||||
| 136,651 | Telvent GIT S.A. (Spain) | 3,256,393 | |||
| Leisure Products 1.5% | |||||
| 248,402 | RC2 Corp.* | 4,968,040 | |||
| Marine 0.9% | |||||
| 213,765 | Eagle Bulk Shipping, Inc. | 2,979,884 | |||
| Mortgage REITs 4.4% | |||||
| 1,286,680 | MFA Mortgage Investments, Inc. | 8,363,420 | |||
| 300,045 | Redwood Trust, Inc. | 6,519,978 | |||
| 14,883,398 | |||||
| Oil & Gas Equipment & Services 5.3% | |||||
| 210,575 | Helix Energy Solutions Group, Inc.* | 5,112,761 | |||
| 726,851 | TETRA Technologies, Inc.* | 10,066,886 | |||
| 102,655 | Willbros Group, Inc.* (Panama) | 2,720,358 | |||
| 17,900,005 | |||||
| Oil & Gas Exploration & Production 6.6% | |||||
| 433,895 | Brigham Exploration Co.* | 4,768,506 | |||
| 524,833 | Northern Oil and Gas, Inc.* | 4,266,892 | |||
| 327,490 | Petrohawk Energy Corp.* | 7,083,609 | |||
| 169,630 | Plains Exploration & Production Co.* | 5,964,191 | |||
| 22,083,198 | |||||
| Oil & Gas Refining & Marketing 1.7% | |||||
| 244,700 | World Fuel Services Corp. | 5,635,441 | |||
58
Table of Contents
| SEPTEMBER 30, 2008 | ||
| Shares | Value | ||||
| Packaged Foods & Meats 1.0% | |||||
| 329,735 | Zhongpin, Inc.* | $ | 3,505,083 | ||
| Personal Products 1.1% | |||||
| 126,755 | NBTY, Inc.* | 3,741,807 | |||
| Property & Casualty Insurance 1.9% | |||||
| 274,925 | Tower Group, Inc. | 6,477,233 | |||
| Regional Banks 4.3% | |||||
| 334,702 | Boston Private Financial Holdings, Inc. | 2,925,295 | |||
| 100,965 | City National Corp. | 5,482,400 | |||
| 232,840 | Commonwealth Bankshares, Inc. | 3,308,656 | |||
| 261,300 | Nara Bancorp, Inc. | 2,926,560 | |||
| 14,642,911 | |||||
| Semiconductors 2.8% | |||||
| 363,857 | Pericom Semiconductor Corp.* | 3,820,499 | |||
| 81,402 | Power Integrations, Inc.* | 1,961,788 | |||
| 129,602 | Supertex, Inc.* | 3,649,592 | |||
| 9,431,879 | |||||
| Specialized Finance 1.7% | |||||
| 438,130 | KKR Financial Holdings, LLC | 2,786,507 | |||
| 742,623 | MicroFinancial, Inc.‡ | 2,948,213 | |||
| 5,734,720 | |||||
| Steel 3.4% | |||||
| 391,370 | Globe Specialty Metals, Inc.* (United Kingdom) | 7,436,030 | |||
| 84,675 | Haynes International, Inc.* | 3,965,330 | |||
| 11,401,360 | |||||
| Technology Distributors 0.5% | |||||
| 462,916 | Nu Horizons Electronics Corp.* | 1,851,664 | |||
| Thrifts & Mortgage Finance 1.4% | |||||
| 106,300 | Housing Development Finance Corp. | ||||
| Ltd. (India) | 4,860,484 | ||||
| Trading Companies & Distributors 1.8% | |||||
| 70,585 | MSC Industrial Direct Co., Inc., Class A | 3,251,851 | |||
| 102,407 | Rush Enterprises, Inc., Class A* | 1,310,810 | |||
| 108,920 | Rush Enterprises, Inc., Class B* | 1,368,035 | |||
| 5,930,696 | |||||
| Trucking 3.4% | |||||
| 173,661 | Old Dominion Freight Line, Inc.* | 4,921,553 | |||
| 494,280 | Vitran Corp., Inc.* (Canada) | 6,657,951 | |||
| 11,579,504 | |||||
| Total Common Stocks (cost $385,361,694) | 320,731,293 | ||||
| WARRANTS 0.0% | |||||
| Gold 0.0% | |||||
| 5,665,000 | Redcorp Ventures Ltd. expiring 7/10/09* (Canada) | 53,335 | |||
| Total Warrants (cost $0) | 53,335 | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 2.3% | |||||
| Repurchase Agreement 2.3% | |||||
| $7,721,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/1/08 with Fixed Income Clearing Corporation collateralized by $6,720,000 of United States Treasury Bonds 5.50% due 8/15/28; value: $7,879,200; repurchase proceeds: $7,721,021 (cost $7,721,000) | $ | 7,721,000 | ||
| Total Short-Term Investments (cost $7,721,000) | 7,721,000 | ||||
| Total Investments (cost $393,082,694) 97.5%†† | 328,505,628 | ||||
| Other Assets less Liabilities 2.5% | 8,408,520 | ||||
| NET ASSETS 100.0% | $ | 336,914,148 | |||
*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).
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 5.44%.
‡Affiliated company (see Note 8).
REIT Real Estate Investment Trust.
See notes to financial statements. | |||||
At September 30, 2008, Wasatch Small Cap Value Fund’s investments, excluding short-term investments, were in the following countries:
| Country | % | ||
Bermuda | 1.6 | ||
Brazil | 2.2 | ||
Canada | 3.7 | ||
China | 1.3 | ||
Guernsey | 0.3 | ||
Hong Kong | 0.9 | ||
India | 1.5 | ||
Netherlands | 0.8 | ||
Panama | 0.9 | ||
Singapore | 2.0 | ||
Spain | 1.0 | ||
United Kingdom | 2.3 | ||
United States | 81.5 | ||
TOTAL | 100.0 | % | |
59
Table of Contents
| WASATCH STRATEGIC INCOME FUND (WASIX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 87.6% | |||||
| Asset Management & Custody Banks 4.5% | |||||
| 26,636 | Apollo Investment Corp. | $ | 454,144 | ||
| 24,930 | Ares Capital Corp. | 260,020 | |||
| 19,600 | Solar Capital, LLC* ** *** † | 267,540 | |||
| 981,704 | |||||
| Construction & Engineering 0.8% | |||||
| 54,650 | Lycopodium Ltd. (Australia) | 181,324 | |||
| Construction & Farm Machinery & Heavy Trucks 2.5% | |||||
| 4,380 | Joy Global, Inc. | 197,713 | |||
| 14,030 | Trinity Industries, Inc. | 360,992 | |||
| 558,705 | |||||
| Consumer Finance 1.8% | |||||
| 7,664 | Capital One Financial Corp. | 390,864 | |||
| Data Processing & Outsourced Services 6.3% | |||||
| 27,060 | Paychex, Inc.††† | 893,792 | |||
| 37,600 | Redecard S.A. (Brazil) | 486,992 | |||
| 1,380,784 | |||||
| Diversified Banks 3.0% | |||||
| 44,040 | Bank of East Asia Ltd. (Hong Kong) | 138,648 | |||
| 22,388 | Bank of N.T. Butterfield & Son Ltd. (Bermuda) | 279,850 | |||
| 2,800 | HDFC Bank Ltd. ADR (India) | 237,860 | |||
| 656,358 | |||||
| Diversified REITs 3.9% | |||||
| 40,250 | CapitalSource, Inc.††† | 495,075 | |||
| 20,200 | Gramercy Capital Corp. | 52,318 | |||
| 172,795 | Star Asia Finance Ltd.* *** † (Guernsey) | 311,031 | |||
| 858,424 | |||||
| Diversified Support Services 2.9% | |||||
| 24,843 | LPS Brasil-Consultoria de Imoveis S.A. (Brazil) | 170,711 | |||
| 15,883 | McGrath RentCorp | 457,748 | |||
| 628,459 | |||||
| Gold 0.1% | |||||
| 295,680 | Redcorp Ventures Ltd.* (Canada) | 29,230 | |||
| Home Improvement Retail 1.2% | |||||
| 10,400 | Home Depot, Inc. | 269,256 | |||
| Household Products 2.3% | |||||
| 7,105 | Procter & Gamble Co. | 495,147 | |||
| Hypermarkets & Super Centers 3.2% | |||||
| 11,755 | Wal-Mart Stores, Inc. | 704,007 | |||
| Industrial Conglomerates 5.4% | |||||
| 45,995 | General Electric Co. | 1,172,873 | |||
| Industrial Machinery 1.7% | |||||
| 50,700 | Weg S.A. (Brazil) | 374,519 | |||
| Industrial REITs 0.8% | |||||
| 4,500 | ProLogis | 185,715 | |||
| Investment Banking & Brokerage 0.7% | |||||
| 103,400 | Dubai Islamic Bank (United Arab Emirates) | 162,454 | |||
| Leisure Products 4.3% | |||||
| 39,905 | Pool Corp.††† | 930,984 | |||
| Life Sciences Tools & Services 1.1% | |||||
| 3,000 | Eurofins Scientific (France) | 235,904 | |||
| Shares | Value | ||||
| Mortgage REITs 13.8% | |||||
| 29,880 | Annaly Capital Management, Inc. | $ | 401,886 | ||
| 40,280 | Anthracite Capital, Inc. | 215,901 | |||
| 11,615 | Arbor Realty Trust, Inc. | 116,150 | |||
| 42,890 | Capstead Mortgage Corp. | 469,645 | |||
| 114,700 | MFA Mortgage Investments, Inc. | 745,550 | |||
| 48,905 | Redwood Trust, Inc.††† | 1,062,706 | |||
| 3,011,838 | |||||
| Oil & Gas Drilling 1.0% | |||||
| 20,000 | Phoenix Technology Income Fund** (Canada) | 220,308 | |||
| Oil & Gas Equipment & Services 1.4% | |||||
| 85,995 | Petrowest Energy Services Trust** (Canada) | 103,633 | |||
| 2,700 | Schlumberger Ltd. | 210,843 | |||
| 314,476 | |||||
| Oil & Gas Exploration & Production 3.3% | |||||
| 19,900 | Chesapeake Energy Corp. | 713,614 | |||
| Oil & Gas Storage & Transportation 0.8% | |||||
| 10,535 | Magellan Midstream Holdings L.P.** | 180,991 | |||
| Personal Products 1.5% | |||||
| 8,250 | Herbalife Ltd. (Cayman Islands) | 326,040 | |||
| Pharmaceuticals 3.1% | |||||
| 6,295 | Johnson & Johnson | 436,117 | |||
| 5,135 | Teva Pharmaceutical Industries Ltd. ADR (Israel) | 235,132 | |||
| 671,249 | |||||
| Railroads 2.0% | |||||
| 9,720 | Kansas City Southern* | 431,179 | |||
| Semiconductors 6.0% | |||||
| 10,270 | Linear Technology Corp. | 314,878 | |||
| 14,715 | Microchip Technology, Inc. | 433,062 | |||
| 26,010 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan) | 243,714 | |||
| 13,375 | Xilinx, Inc. | 313,644 | |||
| 1,305,298 | |||||
| Specialized Finance 2.1% | |||||
| 71,434 | KKR Financial Holdings, LLC††† | 454,320 | |||
| Steel 0.9% | |||||
| 10,920 | Globe Specialty Metals, Inc.* (United Kingdom) | 207,480 | |||
| Trading Companies & Distributors 2.1% | |||||
| 5,000 | MSC Industrial Direct Co., Inc., Class A | 230,350 | |||
| 2,530 | W.W. Grainger, Inc. | 220,034 | |||
| 450,384 | |||||
| Water Utilities 1.0% | |||||
| 16,290 | Companhia de Saneamento Basico do Estado de Sao Paulo (Brazil) | 223,453 | |||
| Wireless Telecommunication Services 2.1% | |||||
| 9,845 | America Movil S.A.B. de C.V., Series L ADR (Mexico) | 456,414 | |||
| Total Common Stocks (cost $23,466,658) | 19,163,755 | ||||
60
Table of Contents
| SEPTEMBER 30, 2008 | ||
| Shares | Value | ||||
| PREFERRED STOCKS 3.1% | |||||
| Diversified REITs 0.5% | |||||
| 15,745 | Gramercy Capital Corp., Series A Pfd., 8.125% | $ | 116,513 | ||
| Mortgage REITs 2.6% | |||||
| 18,335 | Anthracite Capital, Inc., Series C Pfd, 9.375% | 198,018 | |||
| 22,390 | Anthracite Capital, Inc., Series D Pfd, 8.25% | 204,197 | |||
| 18,500 | NorthStar Realty Finance Corp., Series B Pfd, 8.25% | 168,720 | |||
| 570,935 | |||||
| Total Preferred Stocks (cost $1,096,796) | 687,448 | ||||
| Principal Amount | Value | ||||
| CORPORATE BONDS 2.7% | |||||
| Gold 1.0% | |||||
| $299,000 | Redcorp Ventures Ltd., 13.00%, 7/11/12*** † (Canada) | $ | 211,129 | ||
| Integrated Telecommunication Services 1.7% | |||||
| 500,000 | Broadview Networks Holdings, Inc., 11.375%, 9/1/12 | 385,000 | |||
| Total Corporate Bonds (cost $782,944) | 596,129 | ||||
| Number of Contracts | Value | ||||
| CALL OPTIONS PURCHASED 0.0% | |||||
| 25 | Redwood Trust, Inc. expiring 1/17/09 exercise price $35 | $ | 1,000 | ||
| Total Call Options Purchased (premium $15,463) | 1,000 | ||||
| PUT OPTIONS PURCHASED 0.6% | |||||
| 100 | NovaStar Financial, Inc. expiring 1/17/09 exercise price $15 | 122,000 | |||
| Total Put Options Purchased (premium $105,250) | 122,000 | ||||
| Principal Amount | Value | ||||
| SHORT-TERM INVESTMENTS 5.7% | |||||
| Repurchase Agreement 5.7% | |||||
| $1,257,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/1/08 with Fixed Income Clearing Corporation collateralized by $1,095,000 of United States Treasury Bonds 5.50% due 8/15/28; value: $1,283,888; repurchase proceeds: $1,257,003 ††† (cost $1,257,000) | $ | 1,257,000 | ||
| Total Short-Term Investments (cost $1,257,000) | 1,257,000 | ||||
| Total Investments (cost $26,724,111) 99.7%†† | 21,827,332 | ||||
| Other Assets less Liabilities 0.3% | 61,848 | ||||
| NET ASSETS 100.0% | $ | 21,889,180 | |||
| Shares | Value | ||||
| SECURITIES SOLD SHORT | |||||
| 11,570 | Bank of the Ozarks, Inc. | $ | 312,389 | ||
| 8,322 | First Federal Bancshares of Arkansas, Inc. | 82,388 | |||
| 10,575 | Heartland Financial USA, Inc. | 265,010 | |||
| 3,500 | NovaStar Financial, Inc. | 3,535 | |||
| Total Securities Sold Short (proceeds $677,692) | 663,322 | ||||
*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).
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 3.28%.
†††All or a portion of this security has been designated as collateral for securities sold short. Collateral is valued at $5,093,876.
ADR American Depositary Receipt.
REIT Real Estate Investment Trust.
See notes to financial statements. | |||||
At September 30, 2008, Wasatch Strategic Income Fund’s investments, excluding short-term investments and securities sold short, were in the following countries:
| Country | % | ||
Australia | 0.9 | ||
Bermuda | 1.4 | ||
Brazil | 6.1 | ||
Canada | 2.7 | ||
Cayman Islands | 1.6 | ||
France | 1.1 | ||
Guernsey | 1.5 | ||
Hong Kong | 0.7 | ||
India | 1.2 | ||
Israel | 1.1 | ||
Mexico | 2.2 | ||
Taiwan | 1.2 | ||
United Arab Emirates | 0.8 | ||
United Kingdom | 1.0 | ||
United States | 76.5 | ||
TOTAL | 100.0 | % | |
61
Table of Contents
| WASATCH ULTRA GROWTH FUND (WAMCX) — Schedule of Investments | ||
| Shares | Value | ||||
| COMMON STOCKS 89.9% | |||||
| Advertising 1.0% | |||||
| 127,215 | National CineMedia, Inc. | $ | 1,405,726 | ||
| Apparel Retail 1.0% | |||||
| 415,600 | Wet Seal, Inc., Class A (The)* | 1,508,628 | |||
| Application Software 1.2% | |||||
| 34,440 | FactSet Research Systems, Inc. | 1,799,490 | |||
| Asset Management & Custody Banks 1.4% | |||||
| 44,399 | Westwood Holdings Group, Inc. | 2,104,513 | |||
| Auto Parts & Equipment 1.0% | |||||
| 251,880 | Martinrea International, Inc.* (Canada) | 1,441,821 | |||
| Automotive Retail 1.3% | |||||
| 70,640 | O’Reilly Automotive, Inc.* | 1,891,033 | |||
| Communications Equipment 3.1% | |||||
| 121,785 | F5 Networks, Inc.* | 2,847,333 | |||
| 121,355 | Starent Networks Corp.* | 1,570,334 | |||
| 4,417,667 | |||||
| Construction & Engineering 0.5% | |||||
| 1,164,000 | Midas Holdings Ltd. (China) | 343,446 | |||
| 15,310 | Outotec Oyj (Finland) | 411,956 | |||
| 755,402 | |||||
| Construction & Farm Machinery & Heavy Trucks 4.9% | |||||
| 108,382 | Bucyrus International, Inc., Class A | 4,842,508 | |||
| 141,835 | TIL Ltd. (India) | 648,451 | |||
| 29,980 | Wabtec Corp. | 1,535,875 | |||
| 7,026,834 | |||||
| Data Processing & Outsourced Services 1.1% | |||||
| 66,250 | Syntel, Inc. | 1,623,125 | |||
| Distributors 2.0% | |||||
| 171,950 | LKQ Corp.* | 2,917,992 | |||
| Diversified Banks 5.5% | |||||
| 77,050 | HDFC Bank Ltd. (India) | 2,042,670 | |||
| 69,290 | HDFC Bank Ltd. ADR (India) | 5,886,186 | |||
| 7,928,856 | |||||
| Diversified Chemicals 0.3% | |||||
| 26,975 | LSB Industries, Inc.* | 373,604 | |||
| Electronic Manufacturing Services 1.0% | |||||
| 1,001,120 | Sanmina-SCI Corp.* | 1,401,568 | |||
| Environmental & Facilities Services 3.5% | |||||
| 43,585 | American Ecology Corp. | 1,205,997 | |||
| 199,640 | EnergySolutions, Inc. | 1,996,400 | |||
| 30,370 | Stericycle, Inc.* | 1,789,097 | |||
| 4,991,494 | |||||
| Footwear 1.1% | |||||
| 7,316,000 | China Hongxing Sports Ltd. (China) | 1,554,609 | |||
| General Merchandise Stores 1.6% | |||||
| 64,445 | Dollar Tree, Inc.* | 2,343,220 | |||
| Health Care Distributors 0.1% | |||||
| 4,997 | MWI Veterinary Supply, Inc.* | 196,332 | |||
| Health Care Equipment 4.5% | |||||
| 142,425 | Cardica, Inc.* | 1,159,339 | |||
| 41,966 | NuVasive, Inc.* | 2,070,183 | |||
| 154,533 | VNUS Medical Technologies, Inc.* | 3,234,376 | |||
| 6,463,898 | |||||
| Shares | Value | ||||
| Health Care Facilities 5.5% | |||||
| 141,643 | Psychiatric Solutions, Inc.* | $ | 5,375,352 | ||
| 88,090 | VCA Antech, Inc.* | 2,596,012 | |||
| 7,971,364 | |||||
| Health Care Services 4.0% | |||||
| 172,346 | Healthways, Inc.* ††† | 2,779,941 | |||
| 54,930 | Pediatrix Medical Group, Inc.* | 2,961,826 | |||
| 5,741,767 | |||||
| Health Care Technology 1.6% | |||||
| 79,710 | Computer Programs & Systems, Inc. | 2,307,604 | |||
| Internet Software & Services 1.3% | |||||
| 113,575 | DealerTrack Holdings, Inc.* | 1,912,603 | |||
| Investment Banking & Brokerage 0.9% | |||||
| 265,030 | GFI Group, Inc. | 1,248,291 | |||
| IT Consulting & Other Services 5.5% | |||||
| 274,496 | Cognizant Technology Solutions Corp., Class A* ††† | 6,266,744 | |||
| 1,602,000 | CSE Global Ltd. (Singapore) | 959,286 | |||
| 138,110 | Rolta India Ltd. (India) | 713,536 | |||
| 7,939,566 | |||||
| Leisure Facilities 0.9% | |||||
| 39,940 | Life Time Fitness, Inc.* | 1,248,924 | |||
| Life Sciences Tools & Services 3.1% | |||||
| 29,868 | Icon plc ADR* (Ireland) | 1,142,451 | |||
| 35,730 | Kendle International, Inc.* | 1,597,489 | |||
| 23,335 | Techne Corp.* | 1,682,920 | |||
| 4,422,860 | |||||
| Marine 2.3% | |||||
| 153,705 | Eagle Bulk Shipping, Inc. | 2,142,648 | |||
| 34,500 | Genco Shipping & Trading Ltd. | 1,146,780 | |||
| 3,289,428 | |||||
| Marine Ports & Services 1.5% | |||||
| 192,398 | CAI International, Inc.* | 2,127,922 | |||
| Oil & Gas Drilling 1.3% | |||||
| 49,940 | Atwood Oceanics, Inc.* | 1,817,816 | |||
| Oil & Gas Equipment & Services 6.0% | |||||
| 50,575 | Dril-Quip, Inc.* | 2,194,449 | |||
| 43,530 | Oil States International, Inc.* | 1,538,786 | |||
| 20,801 | OYO Geospace Corp.* | 817,063 | |||
| 627,415 | Swiber Holdings Ltd.* (Singapore) | 476,792 | |||
| 141,065 | TETRA Technologies, Inc.* | 1,953,750 | |||
| 59,985 | Willbros Group, Inc.* (Panama) | 1,589,603 | |||
| 8,570,443 | |||||
| Oil & Gas Exploration & Production 3.2% | |||||
| 3,125 | Approach Resources, Inc. | 45,187 | |||
| 138,455 | Brigham Exploration Co.* | 1,521,620 | |||
| 61,820 | Petrohawk Energy Corp.* | 1,337,167 | |||
| 108,030 | Rex Energy Corp.* | 1,702,553 | |||
| 4,606,527 | |||||
| Personal Products 1.1% | |||||
| 38,445 | Herbalife Ltd. (Cayman Islands) | 1,519,346 | |||
| Publishing 1.1% | |||||
| 28,361 | Morningstar, Inc.* | 1,573,185 | |||
| Railroads 1.0% | |||||
| 32,010 | Kansas City Southern* | 1,419,963 | |||
| Semiconductor Equipment 1.8% | |||||
| 158,982 | Tessera Technologies, Inc.* | 2,597,766 | |||
62
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| SEPTEMBER 30, 2008 | ||
| Shares | Value | ||||
| Semiconductors 9.9% | |||||
| 120,190 | NetLogic Microsystems, Inc.* | $ | 3,634,545 | ||
| 465,810 | O2Micro International Ltd. ADR* (Cayman Islands) | 1,690,890 | |||
| 190,490 | Power Integrations, Inc.* | 4,590,809 | |||
| 141,185 | Silicon Laboratories, Inc.* ††† | 4,334,379 | |||
| 14,250,623 | |||||
| Trading Companies & Distributors 1.0% | |||||
| 92,595 | Textainer Group Holdings Ltd. (Bermuda) | 1,406,518 | |||
| Trucking 0.8% | |||||
| 38,260 | Old Dominion Freight Line, Inc.* | 1,084,288 | |||
| Total Common Stocks (cost $149,038,128) | 129,202,616 | ||||
| PREFERRED STOCKS 3.6% | |||||
| Biotechnology 0.3% | |||||
| 169,492 | Nanosys, Inc., Series D Pfd.* *** † | 500,001 | |||
| Health Care Equipment 0.6% | |||||
| 1,080,146 | Zonare Medical Systems, Inc., Series E Pfd.* *** † | 895,441 | |||
| Health Care Services 0.6% | |||||
| 516,161 | Bravo Health, Inc., Series G Pfd.* *** † | 851,665 | |||
| 108,917 | TargetRX, Inc., Series D Pfd.* *** † | 1,089 | |||
| 852,754 | |||||
| Health Care Technology 1.7% | |||||
| 243,902 | TherOx, Inc., Series I Pfd.* *** † | 1,557,119 | |||
| 253,064 | Transoma Medical, Inc., Series B Pfd.* *** † | 820,105 | |||
| 2,377,224 | |||||
| Internet Software & Services 0.1% | |||||
| 91,388 | Xtera Communications, Inc., Series A-1 Pfd.* *** † | 99,065 | |||
| Personal Products 0.3% | |||||
| 201,613 | Ophthonix, Inc., Series C Pfd.* *** † | 500,001 | |||
| Total Preferred Stocks (cost $4,376,400) | 5,224,486 | ||||
| LIMITED PARTNERSHIP INTEREST 2.7% | |||||
| Other 2.7% | |||||
| Montagu Newhall Global Partners II-B, L.P.*** † | 3,194,869 | ||||
| Montagu Newhall Global Partners III-B, L.P.*** † | 703,298 | ||||
| 3,898,167 | |||||
| Total Limited Partnership Interest (cost $4,044,467) | 3,898,167 | ||||
| WARRANTS 0.0% | |||||
| Gold 0.0% | |||||
| 1,497,500 | Redcorp Ventures Ltd. expiring 7/10/09* (Canada) | 14,099 | |||
| Health Care Equipment 0.0% | |||||
| 162,021 | Zonare Medical Systems, Inc. expiring 6/30/11* *** † | — | |||
| Precious Metals & Minerals 0.0% | |||||
| 451,620 | Farallon Resources Ltd. expiring 12/21/08* *** † (Canada) | — | |||
| Total Warrants (cost $0) | 14,099 | ||||
| Principal Amount | Value | |||||
| SHORT-TERM INVESTMENTS 6.3% | ||||||
| Repurchase Agreement 6.3% | ||||||
| $9,201,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/1/08 with Fixed Income Clearing Corporation collateralized by $6,460,000 of United States Treasury Bonds 8.75% due 8/15/20; value: $9,391,225; repurchase proceeds: $9,201,026 ††† (cost $9,201,000) | $ | 9,201,000 | |||
| Total Short-Term Investments (cost $9,201,000) | 9,201,000 | |||||
| Total Investments (cost $166,659,995) 102.5%†† | 147,540,368 | |||||
| Liabilities less Other Assets (2.5)% | (3,536,790 | ) | ||||
| NET ASSETS 100.0% | $ | 144,003,578 | ||||
| Shares | Value | |||||
| SECURITIES SOLD SHORT | ||||||
| 26,250 | Ultimate Software Group, Inc. (proceeds $890,400) | $ | 708,750 | |||
*Non-income producing.
***Security was fair valued under procedures adopted by the Board of Directors (see Note 2).
†Security purchased in a private placement transaction or under Rule 144A of the Securities Act of 1933 (see Note 9).
††The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 4.97%.
†††All or a portion of this security has been designated as collateral for purchase commitments, and securities sold short. Collateral is valued at $22,582,064 (see Note 10).
ADR American Depositary Receipt.
See notes to financial statements. |
| |||||
At September 30, 2008, Wasatch Ultra Growth Fund’s investments, excluding short-term investments and securities sold short, were in the following countries:
| Country | % | ||
Bermuda | 1.0 | ||
Canada | 1.1 | ||
Cayman Islands | 2.3 | ||
China | 1.4 | ||
Finland | 0.3 | ||
India | 6.7 | ||
Ireland | 0.8 | ||
Panama | 1.1 | ||
Singapore | 1.1 | ||
United States | 84.2 | ||
TOTAL | 100.0 | % | |
63
Table of Contents
| WASATCH-HOISINGTON U.S. TREASURY FUND (WHOSX) — Schedule of Investments | SEPTEMBER 30, 2008 | |
| Principal Amount | Value | ||||
| U.S. GOVERNMENT OBLIGATIONS 97.1% | |||||
| $ 3,000,000 | U.S. Treasury Bond, 3.125%, 8/31/13 | $ | 3,022,968 | ||
| 1,400,000 | U.S. Treasury Bond, 4.375%, 2/15/38 | 1,417,828 | |||
| 11,000,000 | U.S. Treasury Bond, 4.50%, 2/15/36 | 11,290,466 | |||
| 1,600,000 | U.S. Treasury Bond, 4.50%, 5/15/38 | 1,651,750 | |||
| 22,000,000 | U.S. Treasury Bond, 4.75%, 2/15/37 | 23,533,136 | |||
| 11,700,000 | U.S. Treasury Bond, 5.25%, 11/15/28 | 12,962,325 | |||
| 6,570,000 | U.S. Treasury Bond, 5.25%, 2/15/29 | 7,285,000 | |||
| 3,000,000 | U.S. Treasury Bond, 5.375%, 2/15/31 | 3,408,984 | |||
| 101,000,000 | U.S. Treasury Strip, principal only, 11/15/27 | 42,154,875 | |||
| 18,100,000 | U.S. Treasury Strip, principal only, 2/15/36 | 5,562,836 | |||
| 19,000,000 | U.S. Treasury Strip, principal only, 2/15/37 | 5,613,322 | |||
| Total U.S. Government Obligations (cost $111,059,196) | 117,903,490 | ||||
| SHORT-TERM INVESTMENTS 2.3% | |||||
| Repurchase Agreement 2.3% | |||||
| 2,821,000 | Repurchase Agreement dated 9/30/08, 0.10% due 10/1/08 with Fixed Income Clearing Corporation collateralized by $2,195,000 of United States Treasury Bonds 7.125% due 2/15/23; value: $2,880,938; repurchase proceeds: $2,821,008 (cost $2,821,000) | 2,821,000 | |||
| Total Short-Term Investments (cost $2,821,000) | 2,821,000 | ||||
| Total Investments (cost $113,880,196) 99.4% | 120,724,490 | ||||
| Other Assets less Liabilities 0.6% | 695,395 | ||||
| NET ASSETS 100.0% | $ | 121,419,885 | |||
| See notes to financial statements. | |||||
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65
Table of Contents
| WASATCH FUNDS — Statements of Assets and Liabilities | ||
| CORE GROWTH FUND | EMERGING MARKETS SMALL CAP FUND | GLOBAL SCIENCE & TECHNOLOGY FUND | HERITAGE GROWTH FUND | |||||||||||||
Assets: | ||||||||||||||||
Investments, at cost | ||||||||||||||||
Unaffiliated issuers | $ | 647,064,903 | $ | 47,538,619 | $ | 103,308,736 | $ | 91,039,900 | ||||||||
Affiliated issuers* | — | — | — | — | ||||||||||||
Repurchase agreements | 36,810,000 | �� | 5,478,000 | 2,253,000 | 6,239,000 | |||||||||||
| $ | 683,874,903 | $ | 53,016,619 | $ | 105,561,736 | $ | 97,278,900 | |||||||||
Investments, at market value | ||||||||||||||||
Unaffiliated issuers | $ | 610,663,911 | $ | 30,559,582 | $ | 80,313,028 | $ | 90,205,829 | ||||||||
Affiliated issuers* | — | — | — | — | ||||||||||||
Repurchase agreements | 36,810,000 | 5,478,000 | 2,253,000 | 6,239,000 | ||||||||||||
| 647,473,911 | 36,037,582 | 82,566,028 | 96,444,829 | |||||||||||||
Cash | 12,945 | 424 | 96 | 574 | ||||||||||||
Foreign currency on deposit (cost of $65,506, $116,284, $9,794, $0, $0, $105,852, $9,556, $184,674, $42,435, and $0, respectively) | 65,079 | 112,492 | 9,496 | — | ||||||||||||
Receivable for investment securities sold | — | 46,889 | 1,322 | 66,532 | ||||||||||||
Receivable from broker for securities sold short | — | — | 3,533 | — | ||||||||||||
Capital shares receivable | 107,151 | 82,717 | 1,161 | 3,068 | ||||||||||||
Interest and dividends receivable | 1,374,894 | 54,476 | 10,606 | 126,051 | ||||||||||||
Receivable from Investment Advisor | — | 28,517 | — | 2,099 | ||||||||||||
Prepaid expenses and other assets | 44,796 | 20,358 | 19,828 | 16,900 | ||||||||||||
Unrealized appreciation on foreign currency contracts | 113 | — | — | — | ||||||||||||
Total Assets | 649,078,889 | 36,383,455 | 82,612,070 | 96,660,053 | ||||||||||||
Liabilities: | ||||||||||||||||
Bank overdraft of foreign currency (cost of $0, $0, $0, $0, $0, $0, $0, $0, $0, and $4,868, respectively) | — | — | — | — | ||||||||||||
Line of credit payable | — | — | — | — | ||||||||||||
Payable for securities purchased | 1,810,893 | — | — | 1,021,039 | ||||||||||||
Capital shares payable | 600,486 | 76,120 | 207,789 | 84,025 | ||||||||||||
Accrued investment advisory fees | 585,734 | 53,856 | 123,270 | 59,259 | ||||||||||||
Accrued expenses and other liabilities | 312,668 | 76,979 | 116,976 | 81,693 | ||||||||||||
Unrealized depreciation on foreign currency contracts | — | 264 | 16 | — | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | — | — | ||||||||||||
Total Liabilities | 3,309,781 | 207,219 | 448,051 | 1,246,016 | ||||||||||||
Net Assets | $ | 645,769,108 | $ | 36,176,236 | $ | 82,164,019 | $ | 95,414,037 | ||||||||
Net Assets Consist of: | ||||||||||||||||
Capital stock | $ | 244,757 | $ | 292,559 | $ | 79,717 | $ | 105,997 | ||||||||
Paid-in capital in excess of par | 689,019,059 | 57,320,044 | 112,203,957 | 96,218,075 | ||||||||||||
Undistributed net investment income (loss) | 1,509,194 | 29,714 | (656,537 | ) | 164,107 | |||||||||||
Undistributed net realized loss on investments and foreign currency translations | (8,602,478 | ) | (4,482,499 | ) | (6,467,041 | ) | (240,070 | ) | ||||||||
Net unrealized appreciation (depreciation) on investments and foreign currency translations | (36,401,424 | ) | (16,983,582 | ) | (22,996,077 | ) | (834,072 | ) | ||||||||
Net Assets | $ | 645,769,108 | $ | 36,176,236 | $ | 82,164,019 | $ | 95,414,037 | ||||||||
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 | 24,475,730 | 29,255,870 | 7,971,732 | 10,599,657 | ||||||||||||
NET ASSET VALUE, REDEMPTION PRICEAND OFFERING | $ | 26.38 | $ | 1.24 | $ | 10.31 | $ | 9.00 | ||||||||
| * | See Note 8 for information on affiliated issuers. |
See notes to financial statements.
66
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| SEPTEMBER 30, 2008 | ||
| HERITAGE VALUE FUND | INTERNATIONAL GROWTH FUND | INTERNATIONAL OPPORTUNITIES FUND | MICRO CAP FUND | MICRO CAP VALUE FUND | SMALL CAP GROWTH FUND | |||||||||||||||||
| $ | 3,908,492 | $ | 229,378,236 | $ | 56,285,363 | $ | 377,778,610 | $ | 93,515,076 | $ | 655,693,293 | |||||||||||
| — | — | — | 6,458,426 | — | — | |||||||||||||||||
| 531,000 | — | 13,924,000 | 16,850,000 | 16,791,000 | 42,161,000 | |||||||||||||||||
| $ | 4,439,492 | $ | 229,378,236 | $ | 70,209,363 | $ | 401,087,036 | $ | 110,306,076 | $ | 697,854,293 | |||||||||||
| $ | 3,489,756 | $ | 192,361,286 | $ | 43,447,045 | $ | 336,368,985 | $ | 82,164,421 | $ | 681,297,710 | |||||||||||
| — | — | — | 3,585,059 | — | — | |||||||||||||||||
| 531,000 | — | 13,924,000 | 16,850,000 | 16,791,000 | 42,161,000 | |||||||||||||||||
| 4,020,756 | 192,361,286 | 57,371,045 | 356,804,044 | 98,955,421 | 723,458,710 | |||||||||||||||||
| 39 | 577 | 659 | 384,758 | 70,903 | 444 | |||||||||||||||||
| — | 102,785 | 9,393 | 174,591 | 41,018 | — | |||||||||||||||||
| — | 2,981,066 | 97,632 | 5,873,541 | 149,721 | 16,193,333 | |||||||||||||||||
| 3 | — | 2,922 | 821 | 206,730 | — | |||||||||||||||||
| 15,539 | 26,254 | 44,945 | 4,083 | 70,420 | 242,490 | |||||||||||||||||
| 4,900 | 539,621 | 93,967 | 126,743 | 23,992 | 569,066 | |||||||||||||||||
| 8,465 | — | 19,831 | — | 22,308 | — | |||||||||||||||||
| 12,967 | 29,727 | 16,079 | 28,884 | 22,961 | 43,291 | |||||||||||||||||
| — | 54,567 | — | — | 124 | 104,949 | |||||||||||||||||
| 4,062,669 | 196,095,883 | 57,656,473 | 363,397,465 | 99,563,598 | 740,612,283 | |||||||||||||||||
| — | — | — | — | — | 8,416 | |||||||||||||||||
| — | 499,000 | — | — | — | — | |||||||||||||||||
| 235,804 | — | 1,735,058 | 2,681,971 | 1,060,760 | 2,997,105 | |||||||||||||||||
| — | 351,167 | 33,813 | 556,519 | 263,671 | 1,082,970 | |||||||||||||||||
| 2,296 | 270,758 | 93,066 | 634,097 | 175,375 | 648,374 | |||||||||||||||||
| 32,403 | 195,039 | 70,520 | 130,952 | 88,790 | 329,212 | |||||||||||||||||
| — | — | 33,505 | 413 | — | — | |||||||||||||||||
| — | — | — | — | 63,458 | — | |||||||||||||||||
| 270,503 | 1,315,964 | 1,965,962 | 4,003,952 | 1,652,054 | 5,066,077 | |||||||||||||||||
| $ | 3,792,166 | $ | 194,779,919 | $ | 55,690,511 | $ | 359,393,513 | $ | 97,911,544 | $ | 735,546,206 | |||||||||||
| $ | 4,636 | $ | 164,601 | $ | 348,003 | $ | 867,640 | $ | 543,553 | $ | 277,582 | |||||||||||
| 4,646,582 | 263,529,010 | 72,765,630 | 420,222,613 | 120,313,200 | 714,542,186 | |||||||||||||||||
| 33,894 | (6,497,413 | ) | (1,759,002 | ) | (332,765 | ) | (153,784 | ) | (205,808 | ) | ||||||||||||
| (474,209 | ) | (25,390,296 | ) | (2,816,230 | ) | (17,067,380 | ) | (11,374,482 | ) | (4,667,870 | ) | |||||||||||
| (418,737 | ) | (37,025,983 | ) | (12,847,890 | ) | (44,296,595 | ) | (11,416,943 | ) | 25,600,116 | ||||||||||||
| $ | 3,792,166 | $ | 194,779,919 | $ | 55,690,511 | $ | 359,393,513 | $ | 97,911,544 | $ | 735,546,206 | |||||||||||
| 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | 10,000,000,000 | |||||||||||||||||
| 463,585 | 16,460,059 | 34,800,328 | 86,764,032 | 54,355,253 | 27,758,209 | |||||||||||||||||
| $ | 8.18 | $ | 11.83 | $ | 1.60 | $ | 4.14 | $ | 1.80 | $ | 26.50 | |||||||||||
67
Table of Contents
| WASATCH FUNDS — Statements of Assets and Liabilities (continued) | SEPTEMBER 30, 2008 | |
| SMALL CAP VALUE FUND | STRATEGIC INCOME FUND | ULTRA GROWTH FUND | U.S. TREASURY FUND | |||||||||||||
Assets: | ||||||||||||||||
Investments, at cost | ||||||||||||||||
Unaffiliated issuers | $ | 377,406,535 | $ | 25,467,111 | $ | 157,458,995 | $ | 111,059,196 | ||||||||
Affiliated issuers* | 7,955,159 | — | — | — | ||||||||||||
Repurchase agreements | 7,721,000 | 1,257,000 | 9,201,000 | 2,821,000 | ||||||||||||
| $ | 393,082,694 | $ | 26,724,111 | $ | 166,659,995 | $ | 113,880,196 | |||||||||
Investments, at market value | ||||||||||||||||
Unaffiliated issuers | $ | 317,836,415 | $ | 20,570,332 | $ | 138,339,368 | $ | 117,903,490 | ||||||||
Affiliated issuers* | 2,948,213 | — | — | — | ||||||||||||
Repurchase agreements | 7,721,000 | 1,257,000 | 9,201,000 | 2,821,000 | ||||||||||||
| 328,505,628 | 21,827,332 | 147,540,368 | 120,724,490 | |||||||||||||
Cash | 283,197 | — | 246 | — | ||||||||||||
Foreign currency on deposit (cost of $24,765, $1, $159,370, and $0, respectively) | 24,604 | 1 | 155,086 | — | ||||||||||||
Receivable for investment securities sold | 9,547,713 | 217,585 | 259,012 | — | ||||||||||||
Receivable from broker for securities sold short | — | 645,390 | 813,598 | — | ||||||||||||
Capital shares receivable | 34,944 | — | 34,885 | 508,512 | ||||||||||||
Interest and dividends receivable | 256,578 | 154,426 | 14,376 | 536,399 | ||||||||||||
Prepaid expenses and other assets | 33,791 | 8,324 | 18,018 | 17,896 | ||||||||||||
Unrealized appreciation on foreign currency contracts | 108 | 118 | — | — | ||||||||||||
Total Assets | 338,686,563 | 22,853,176 | 148,835,589 | 121,787,297 | ||||||||||||
Liabilities: | ||||||||||||||||
Securities sold short, at value (proceeds of $0, $677,692, $890,400, and $0, respectively) | — | 663,322 | 708,750 | — | ||||||||||||
Bank overdraft | — | 5,140 | — | 129,401 | ||||||||||||
Payable for securities purchased | 203,100 | 225,523 | 3,671,108 | — | ||||||||||||
Capital shares payable | 918,847 | 16,391 | 185,041 | 123,735 | ||||||||||||
Accrued investment advisory fees | 461,653 | 14,093 | 161,890 | 49,966 | ||||||||||||
Accrued expenses and other liabilities | 188,815 | 39,527 | 103,740 | 64,310 | ||||||||||||
Unrealized depreciation on foreign currency contracts | — | — | 1,482 | — | ||||||||||||
Total Liabilities | 1,772,415 | 963,996 | 4,832,011 | 367,412 | ||||||||||||
Net Assets | $ | 336,914,148 | $ | 21,889,180 | $ | 144,003,578 | $ | 121,419,885 | ||||||||
Net Assets Consist of: | ||||||||||||||||
Capital stock | $ | 1,196,323 | $ | 28,722 | $ | 91,387 | $ | 81,224 | ||||||||
Paid-in capital in excess of par | 440,948,108 | 28,887,106 | 166,620,215 | 119,095,930 | ||||||||||||
Undistributed net investment income (loss) | (574,907 | ) | 84,045 | (19,428 | ) | 53 | ||||||||||
Undistributed net realized loss on investments | (40,076,374 | ) | (2,226,519 | ) | (3,744,853 | ) | (4,601,615 | ) | ||||||||
Net unrealized appreciation (depreciation) on investments and foreign currency translations | (64,579,002 | ) | (4,884,174 | ) | (18,943,743 | ) | 6,844,293 | |||||||||
Net Assets | $ | 336,914,148 | $ | 21,889,180 | $ | 144,003,578 | $ | 121,419,885 | ||||||||
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 | 119,632,266 | 2,872,154 | 9,138,678 | 8,122,428 | ||||||||||||
NET ASSET VALUE, REDEMPTION PRICEAND OFFERING | $ | 2.82 | $ | 7.62 | $ | 15.76 | $ | 14.95 | ||||||||
| * | See Note 8 for information on affiliated issuers. |
See notes to financial statements.
68
Table of Contents
| WASATCH FUNDS — Statements of Operations | FOR THE YEAR ENDED SEPTEMBER 30, 2008 | |
| CORE GROWTH FUND | EMERGING MARKETS SMALL CAP FUND | GLOBAL SCIENCE & TECHNOLOGY FUND | HERITAGE GROWTH FUND | |||||||||||||
Investment Income: | ||||||||||||||||
Interest | $ | 312,914 | $ | 131,603 | $ | 117,228 | $ | 71,502 | ||||||||
Dividends1 | ||||||||||||||||
Unaffiliated issuers | 15,825,018 | 966,671 | 890,385 | 1,882,577 | ||||||||||||
Affiliated issuers* | — | — | — | — | ||||||||||||
Total investment income | 16,137,932 | 1,098,274 | 1,007,613 | 1,954,079 | ||||||||||||
Expenses: | ||||||||||||||||
Investment advisory fees | 9,358,442 | 809,003 | 2,240,531 | 980,213 | ||||||||||||
Shareholder servicing fees | 868,830 | 107,698 | 281,273 | 215,946 | ||||||||||||
Fund administration fees | 274,666 | 13,568 | 43,788 | 41,055 | ||||||||||||
Fund accounting fees | 146,948 | 29,093 | 40,046 | 32,166 | ||||||||||||
Reports to shareholders | 100,269 | 43,532 | 45,518 | 21,227 | ||||||||||||
Custody fees | 232,023 | 147,849 | 122,511 | 39,052 | ||||||||||||
Federal and state registration fees | 31,522 | 38,632 | 23,202 | 17,429 | ||||||||||||
Legal fees | 61,472 | 3,073 | 11,267 | 9,010 | ||||||||||||
Directors’ fees | 52,830 | 1,651 | 8,189 | 8,479 | ||||||||||||
Audit fees | 23,283 | 29,990 | 23,283 | 23,284 | ||||||||||||
Interest | 42,368 | 446 | 5,742 | 5,703 | ||||||||||||
Other | 89,151 | 9,270 | 15,799 | 23,059 | ||||||||||||
Total expenses before reimbursement | 11,281,804 | 1,233,805 | 2,861,149 | 1,416,623 | ||||||||||||
Reimbursement of expenses by Advisor | — | (262,554 | ) | — | (80,630 | ) | ||||||||||
Net Expenses | 11,281,804 | 971,251 | 2,861,149 | 1,335,993 | ||||||||||||
Net Investment Income (Loss) | 4,856,128 | 127,023 | (1,853,536 | ) | 618,086 | |||||||||||
Realized and Unrealized Gain (Loss): | ||||||||||||||||
Net realized gain (loss) on investments and foreign currency translations | ||||||||||||||||
Unaffiliated issuers | 12,903,463 | (4,510,609 | ) | (3,438,302 | ) | 2,923,875 | ||||||||||
Affiliated issuers* | — | — | — | — | ||||||||||||
Net realized gain on options written | 65,169 | — | 35,850 | 187,516 | ||||||||||||
Realized foreign capital gains taxes | — | — | (87,191 | ) | — | |||||||||||
Change in unrealized depreciation on | (267,260,766 | ) | (16,983,582 | ) | (60,039,104 | ) | (36,207,407 | ) | ||||||||
Net loss on investments | (254,292,134 | ) | (21,494,191 | ) | (63,528,747 | ) | (33,096,016 | ) | ||||||||
Net Decrease in Net Assets Resulting from Operations | $ | (249,436,006 | ) | $ | (21,367,168 | ) | $ | (65,382,283 | ) | $ | (32,477,930 | ) | ||||
1 | Net of $304,991, $91,570, $26,813, and $28,256 in foreign withholding taxes, respectively. |
| * | See Note 8 for information on affiliated issuers. |
See notes to financial statements.
69
Table of Contents
| WASATCH FUNDS — Statements of Operations (continued) | ||
| HERITAGE VALUE FUND | INTERNATIONAL GROWTH FUND | INTERNATIONAL OPPORTUNITIES FUND | MICRO CAP FUND | |||||||||||||
Investment Income: | ||||||||||||||||
Interest | $ | 16,988 | $ | 224,187 | $ | 123,678 | $ | 298,918 | ||||||||
Dividends1 | ||||||||||||||||
Unaffiliated issuers | 75,509 | 6,271,084 | 945,368 | 4,055,475 | ||||||||||||
Affiliated issuers* | — | — | — | 52,776 | ||||||||||||
Total investment income | 92,497 | 6,495,271 | 1,069,046 | 4,407,169 | ||||||||||||
Expenses: | ||||||||||||||||
Investment advisory fees | 28,687 | 5,812,423 | 992,629 | 9,714,834 | ||||||||||||
Shareholder servicing fees | 20,404 | 402,862 | 80,113 | 276,542 | ||||||||||||
Fund administration fees | 1,206 | 113,534 | 14,562 | 142,496 | ||||||||||||
Fund accounting fees | 9,620 | 87,510 | 39,128 | 89,744 | ||||||||||||
Reports to shareholders | 22,787 | 53,306 | 4,999 | 35,163 | ||||||||||||
Custody fees | 10,992 | 429,679 | 95,731 | 104,963 | ||||||||||||
Federal and state registration fees | 33,040 | 37,057 | 17,510 | 19,655 | ||||||||||||
Legal fees | 101 | 28,912 | 3,182 | 32,192 | ||||||||||||
Directors’ fees | 31 | 22,221 | 2,391 | 26,575 | ||||||||||||
Audit fees | 24,414 | 23,283 | 23,283 | 23,283 | ||||||||||||
Dividends on securities sold short | — | — | — | — | ||||||||||||
Interest | 56 | 26,786 | 503 | 5,229 | ||||||||||||
Other | 8,277 | 36,340 | 9,193 | 44,438 | ||||||||||||
Total expenses before reimbursement | 159,615 | 7,073,913 | 1,283,224 | 10,515,114 | ||||||||||||
Reimbursement of expenses by Advisor | (120,626 | ) | — | (166,014 | ) | — | ||||||||||
Net Expenses | 38,989 | 7,073,913 | 1,117,210 | 10,515,114 | ||||||||||||
Net Investment Income (Loss) | 53,508 | (578,642 | ) | (48,164 | ) | (6,107,945 | ) | |||||||||
Realized and Unrealized Gain (Loss): | ||||||||||||||||
Net realized gain (loss) on investments and foreign currency translations | ||||||||||||||||
Unaffiliated issuers | (776,364 | ) | (6,309,108 | ) | (761,977 | ) | 8,712,944 | |||||||||
Affiliated issuers* | — | — | — | (4,061,561 | ) | |||||||||||
Net realized gain on options written | 316,005 | — | 21,037 | — | ||||||||||||
Net realized gain (loss) on short positions | (986 | ) | — | 112,630 | — | |||||||||||
Realized foreign capital gains taxes | — | (502,129 | ) | — | — | |||||||||||
Change in unrealized appreciation (depreciation) on investments and foreign currency translations | (461,738 | ) | (185,431,901 | ) | (29,949,193 | ) | (173,381,475 | ) | ||||||||
Net gain (loss) on investments | (923,083 | ) | (192,243,138 | ) | (30,577,503 | ) | (168,730,092 | ) | ||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (869,575 | ) | $ | (192,821,780 | ) | $ | (30,625,667 | ) | $ | (174,838,037 | ) | ||||
1 | Net of $4,744, $427,687, $47,904, $144,374, $30,983, $139,644, $52,668, $6,595, $0, and $0 in foreign withholding taxes, respectively. |
| * | See Note 8 for information on affiliated issuers. |
See notes to financial statements.
70
Table of Contents
| FOR THE YEAR ENDED SEPTEMBER 30, 2008 | ||
| MICRO CAP VALUE FUND | SMALL CAP GROWTH FUND | SMALL CAP VALUE FUND | STRATEGIC INCOME FUND | ULTRA GROWTH FUND | U.S. TREASURY FUND | ||||||||||||||||
| $ | 218,654 | $ | 334,154 | $ | 200,863 | $ | 104,322 | $ | 147,625 | $ | 5,490,922 | ||||||||||
| 945,396 | 6,474,155 | 8,610,106 | 1,326,307 | 1,106,223 | — | ||||||||||||||||
| — | — | 111,393 | — | — | — | ||||||||||||||||
| 1,164,050 | 6,808,309 | 8,922,362 | 1,430,629 | 1,253,848 | 5,490,922 | ||||||||||||||||
| 2,234,480 | 9,170,234 | 7,018,944 | 144,363 | 2,637,128 | 597,531 | ||||||||||||||||
| 143,407 | 989,793 | 546,713 | 42,501 | 294,461 | 141,943 | ||||||||||||||||
| 32,812 | 269,218 | 137,241 | 6,060 | 61,886 | 35,205 | ||||||||||||||||
| 38,272 | 147,192 | 81,023 | 16,229 | 45,283 | 20,044 | ||||||||||||||||
| 18,896 | 166,127 | 91,695 | 16,559 | 34,430 | 13,357 | ||||||||||||||||
| 84,982 | 108,521 | 115,284 | 22,767 | 41,699 | 2,730 | ||||||||||||||||
| 21,430 | 32,242 | 28,124 | 14,822 | 21,864 | 30,100 | ||||||||||||||||
| 6,958 | 57,878 | 30,082 | 1,251 | 13,928 | 6,618 | ||||||||||||||||
| 5,318 | 48,888 | 26,751 | 995 | 11,749 | 6,196 | ||||||||||||||||
| 23,284 | 23,283 | 23,283 | 23,283 | 23,283 | 23,284 | ||||||||||||||||
| — | — | 20,691 | 4,615 | — | — | ||||||||||||||||
| 1,299 | 52,524 | 60,926 | 773 | 12,249 | — | ||||||||||||||||
| 17,204 | 71,982 | 47,248 | 7,618 | 26,917 | 10,529 | ||||||||||||||||
| 2,628,342 | 11,137,882 | 8,228,005 | 301,836 | 3,224,877 | 887,537 | ||||||||||||||||
| (113,253 | ) | — | — | (100,526 | ) | — | — | ||||||||||||||
| 2,515,089 | 11,137,882 | 8,228,005 | 201,310 | 3,224,877 | 887,537 | ||||||||||||||||
| (1,351,039 | ) | (4,329,573 | ) | 694,357 | 1,229,319 | (1,971,029 | ) | 4,603,385 | |||||||||||||
| (12,384,948 | ) | 10,759,204 | (26,463,524 | ) | (3,227,582 | ) | 5,945,886 | 2,091,586 | |||||||||||||
| 378,561 | — | — | — | — | — | ||||||||||||||||
| 2,052,817 | — | 1,264,596 | 387,076 | 274,600 | — | ||||||||||||||||
| 605,545 | (847,296 | ) | 862,688 | 1,439,965 | (414,078 | ) | — | ||||||||||||||
| — | — | — | — | — | — | ||||||||||||||||
| (29,171,790 | ) | (265,175,462 | ) | (116,642,157 | ) | (4,016,554 | ) | (87,629,925 | ) | 6,237,874 | |||||||||||
| (38,519,815 | ) | (255,263,554 | ) | (140,978,397 | ) | (5,417,095 | ) | (81,823,517 | ) | 8,329,460 | |||||||||||
| $ | (39,870,854 | ) | $ | (259,593,127 | ) | $ | (140,284,040 | ) | $ | (4,187,776 | ) | $ | (83,794,546 | ) | $ | 12,932,845 | |||||
71
Table of Contents
| WASATCH FUNDS — Statements of Changes in Net Assets | ||
| CORE GROWTH FUND | EMERGING MARKETS SMALL CAP FUND | |||||||||||
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | Year Ended September 30, 2008 | ||||||||||
Operations: | ||||||||||||
Net investment income (loss) | $ | 4,856,128 | $ | (1,181,379 | ) | $ | 127,023 | |||||
Net realized gain (loss) on investments and foreign | 12,903,463 | 224,229,226 | (4,510,609 | ) | ||||||||
Net realized gain on options written | 65,169 | — | — | |||||||||
Net realized loss on short positions | — | — | — | |||||||||
Change in unrealized appreciation (depreciation) on | (267,260,766 | ) | (42,206,156 | ) | (16,983,582 | ) | ||||||
Net increase (decrease) in net assets resulting from operations | (249,436,006 | ) | 180,841,691 | (21,367,168 | ) | |||||||
Dividends paid from: | ||||||||||||
Net investment income | — | (4,207,921 | ) | (99,236 | ) | |||||||
Net realized gains | (205,306,297 | ) | (110,525,247 | ) | — | |||||||
| (205,306,297 | ) | (114,733,168 | ) | (99,236 | ) | |||||||
Capital share transactions: | ||||||||||||
Shares sold | 75,441,442 | 117,646,419 | 75,870,364 | |||||||||
Shares issued to holders in reinvestment of dividends | 196,357,419 | 110,575,393 | 97,575 | |||||||||
Shares redeemed | (421,955,118 | ) | (424,777,597 | ) | (18,336,592 | ) | ||||||
Redemption fees | 49,702 | 38,660 | 11,293 | |||||||||
Net increase (decrease) | (150,106,555 | ) | (196,517,125 | ) | 57,642,640 | |||||||
Total increase (decrease) in net assets | (604,848,858 | ) | (130,408,602 | ) | 36,176,236 | |||||||
Net assets: | ||||||||||||
Beginning of period | 1,250,617,966 | 1,381,026,568 | — | |||||||||
End of period | $ | 645,769,108 | $ | 1,250,617,966 | $ | 36,176,236 | ||||||
Undistributed net investment income (loss) included in | $ | — | $ | (869,706 | ) | $ | — | |||||
Capital share transactions — shares: | ||||||||||||
Shares sold | 2,304,714 | 2,744,829 | 40,105,645 | |||||||||
Shares issued to holders in reinvestment of dividends | 5,657,085 | 2,761,623 | 50,039 | |||||||||
Shares redeemed | (12,581,815 | ) | (10,027,035 | ) | (10,899,814 | ) | ||||||
Net increase (decrease) in shares outstanding | (4,620,016 | ) | (4,520,583 | ) | 29,255,870 | |||||||
See notes to financial statements.
72
Table of Contents
| SEPTEMBER 30, 2008 | ||
| GLOBAL SCIENCE & TECHNOLOGY FUND | HERITAGE GROWTH FUND | HERITAGE VALUE FUND | ||||||||||||||||||||
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | Year Ended September 30, 2008 | Year Ended September 30, 2007 | Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||||||
| $ | (1,853,536 | ) | $ | (1,439,039 | ) | $ | 618,086 | $ | (149,563 | ) | $ | 53,508 | $ | 2,146 | ||||||||
| (3,525,493 | ) | 18,704,032 | 2,923,875 | 13,060,221 | (776,364 | ) | 249 | |||||||||||||||
| 35,850 | 66,092 | 187,516 | 160,696 | 316,005 | — | |||||||||||||||||
| — | — | — | — | (986 | ) | — | ||||||||||||||||
| (60,039,104 | ) | 24,259,423 | (36,207,407 | ) | 17,972,838 | (461,738 | ) | 43,001 | ||||||||||||||
| (65,382,283 | ) | 41,590,508 | (32,477,930 | ) | 31,044,192 | (869,575 | ) | 45,396 | ||||||||||||||
| — | — | — | (23,660 | ) | (40,797 | ) | — | |||||||||||||||
| (17,434,195 | ) | (5,210,791 | ) | (14,407,067 | ) | (7,225,236 | ) | (15,127 | ) | — | ||||||||||||
| (17,434,195 | ) | (5,210,791 | ) | (14,407,067 | ) | (7,248,896 | ) | (55,924 | ) | — | ||||||||||||
| 35,585,007 | 79,536,256 | 7,026,838 | 27,445,666 | 3,275,032 | 2,407,615 | |||||||||||||||||
| 16,802,106 | 4,944,636 | 14,080,421 | 6,995,484 | 55,698 | — | |||||||||||||||||
| (91,579,559 | ) | (43,106,438 | ) | (87,728,948 | ) | (93,704,397 | ) | (1,046,240 | ) | (21,048 | ) | |||||||||||
| 30,453 | 29,507 | 2,612 | 5,710 | 791 | 421 | |||||||||||||||||
| (39,161,993 | ) | 41,403,961 | (66,619,077 | ) | (59,257,537 | ) | 2,285,281 | 2,386,988 | ||||||||||||||
| (121,978,471 | ) | 77,783,678 | (113,504,074 | ) | (35,462,241 | ) | 1,359,782 | 2,432,384 | ||||||||||||||
| 204,142,490 | 126,358,812 | 208,918,111 | 244,380,352 | 2,432,384 | — | |||||||||||||||||
| $ | 82,164,019 | $ | 204,142,490 | $ | 95,414,037 | $ | 208,918,111 | $ | 3,792,166 | $ | 2,432,384 | |||||||||||
| $ | (316,339 | ) | $ | (561,209 | ) | $ | 164,107 | $ | (28,414 | ) | $ | (2,761 | ) | $ | 23,446 | |||||||
| 2,381,520 | 4,944,939 | 643,479 | 2,286,187 | 334,711 | 239,802 | |||||||||||||||||
| 1,098,177 | 334,097 | 1,267,365 | 596,884 | 5,678 | — | |||||||||||||||||
| (7,049,819 | ) | (2,780,070 | ) | (7,926,581 | ) | (7,712,736 | ) | (114,532 | ) | (2,074 | ) | |||||||||||
| (3,570,122 | ) | 2,498,966 | (6,015,737 | ) | (4,829,665 | ) | 225,857 | 237,728 | ||||||||||||||
73
Table of Contents
| WASATCH FUNDS — Statements of Changes in Net Assets (continued) | ||
| INTERNATIONAL GROWTH FUND | INTERNATIONAL OPPORTUNITIES FUND | |||||||||||||||
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | (578,642 | ) | $ | 504,380 | $ | (48,164 | ) | $ | (86,961 | ) | |||||
Net realized gain (loss) on investments and foreign | (6,811,237 | ) | 57,993,622 | (761,977 | ) | 6,802,947 | ||||||||||
Net realized gain on options written | — | — | 21,037 | — | ||||||||||||
Net realized gain (loss) on short positions | — | — | 112,630 | — | ||||||||||||
Change in unrealized appreciation (depreciation) on investments and foreign currency translations | (185,431,901 | ) | 68,306,187 | (29,949,193 | ) | 9,327,438 | ||||||||||
Net increase (decrease) in net assets resulting from operations | (192,821,780 | ) | 126,804,189 | (30,625,667 | ) | 16,043,424 | ||||||||||
Dividends paid from: | ||||||||||||||||
Net investment income | (14,999,689 | ) | — | (2,089,316 | ) | (62,484 | ) | |||||||||
Net realized gains | (53,899,506 | ) | (69,456,586 | ) | (8,029,593 | ) | (2,442,244 | ) | ||||||||
| (68,899,195 | ) | (69,456,586 | ) | (10,118,909 | ) | (2,504,728 | ) | |||||||||
Capital share transactions: | ||||||||||||||||
Shares sold | 56,044,771 | 123,708,001 | 41,682,055 | 6,367,976 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 67,297,473 | 67,578,664 | 9,911,885 | 2,448,543 | ||||||||||||
Shares redeemed | (201,780,070 | ) | (96,891,205 | ) | (11,598,986 | ) | (2,761,827 | ) | ||||||||
Redemption fees | 36,035 | 24,983 | 6,956 | 1,247 | ||||||||||||
Net increase (decrease) | (78,401,791 | ) | 94,420,443 | 40,001,910 | 6,055,939 | |||||||||||
Total increase (decrease) in net assets | (340,122,766 | ) | 151,768,046 | (742,666 | ) | 19,594,635 | ||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 534,902,685 | 383,134,639 | 56,433,177 | 36,838,542 | ||||||||||||
End of period | $ | 194,779,919 | $ | 534,902,685 | $ | 55,690,511 | $ | 56,433,177 | ||||||||
Undistributed net investment income (loss) included in | $ | (187,003 | ) | $ | (788,351 | ) | $ | (517,057 | ) | $ | 324,678 | |||||
Capital share transactions — shares: | ||||||||||||||||
Shares sold | 2,743,933 | 5,358,055 | 21,166,986 | 1,935,461 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 3,356,483 | 3,306,197 | 3,604,322 | 830,015 | ||||||||||||
Shares redeemed | (11,547,140 | ) | (4,305,020 | ) | (5,453,107 | ) | (857,324 | ) | ||||||||
Net increase (decrease) in shares outstanding | (5,446,724 | ) | 4,359,232 | 19,318,201 | 1,908,152 | |||||||||||
See notes to financial statements.
74
Table of Contents
| SEPTEMBER 30, 2008 | ||
| MICRO CAP FUND | MICRO CAP VALUE FUND | SMALL CAP GROWTH FUND | ||||||||||||||||||||
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | Year Ended September 30, 2008 | Year Ended September 30, 2007 | Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||||||
| $ | (6,107,945 | ) | $ | (7,863,539 | ) | $ | (1,351,039 | ) | $ | (1,182,923 | ) | $ | (4,329,573 | ) | $ | (6,221,093 | ) | |||||
| 4,651,383 | 100,522,049 | (12,006,387 | ) | 18,003,142 | 10,759,204 | 141,862,791 | ||||||||||||||||
| — | 162,745 | 2,052,817 | 950,991 | — | — | |||||||||||||||||
| — | — | 605,545 | (104,027 | ) | (847,296 | ) | (694,035 | ) | ||||||||||||||
| (173,381,475 | ) | 13,434,587 | (29,171,790 | ) | 4,331,292 | (265,175,462 | ) | 54,045,856 | ||||||||||||||
| (174,838,037 | ) | 106,255,842 | (39,870,854 | ) | 21,998,475 | (259,593,127 | ) | 188,993,519 | ||||||||||||||
| — | — | — | — | — | — | |||||||||||||||||
| (98,389,979 | ) | (67,720,917 | ) | (16,429,060 | ) | (18,395,781 | ) | (120,648,854 | ) | (92,697,704 | ) | |||||||||||
| (98,389,979 | ) | (67,720,917 | ) | (16,429,060 | ) | (18,395,781 | ) | (120,648,854 | ) | (92,697,704 | ) | |||||||||||
| 16,149,674 | 15,698,971 | 46,417,131 | 12,406,622 | 154,963,117 | 130,032,208 | |||||||||||||||||
| 94,126,664 | 65,068,973 | 16,104,543 | 18,013,951 | 117,697,647 | 90,344,199 | |||||||||||||||||
| (109,078,570 | ) | (71,789,168 | ) | (28,353,838 | ) | (9,491,736 | ) | (232,359,422 | ) | (476,277,049 | ) | |||||||||||
| 6,533 | 2,432 | 4,193 | 178 | 53,796 | 59,777 | |||||||||||||||||
| 1,204,301 | 8,981,208 | 34,172,029 | 20,929,015 | 40,355,138 | (255,840,865 | ) | ||||||||||||||||
| (272,023,715 | ) | 47,516,133 | (22,127,885 | ) | 24,531,709 | (339,886,843 | ) | (159,545,050 | ) | |||||||||||||
| 631,417,228 | 583,901,095 | 120,039,429 | 95,507,720 | 1,075,433,049 | 1,234,978,099 | |||||||||||||||||
| $ | 359,393,513 | $ | 631,417,228 | $ | 97,911,544 | $ | 120,039,429 | $ | 735,546,206 | $ | 1,075,433,049 | |||||||||||
| $ | (96,244 | ) | $ | (484,240 | ) | $ | (70,806 | ) | $ | (121,769 | ) | $ | (205,808 | ) | $ | 8,751 | ||||||
| 3,153,341 | 2,240,904 | 20,583,227 | 4,359,135 | 4,910,006 | 3,396,315 | |||||||||||||||||
| 16,778,372 | 9,799,544 | 6,493,767 | 6,647,215 | 3,294,085 | 2,431,876 | |||||||||||||||||
| (20,943,978 | ) | (10,257,044 | ) | (12,980,831 | ) | (3,313,686 | ) | (7,263,863 | ) | (12,399,974 | ) | |||||||||||
| (1,012,265 | ) | 1,783,404 | 14,096,163 | 7,692,664 | 940,228 | (6,571,783 | ) | |||||||||||||||
75
Table of Contents
| WASATCH FUNDS — Statements of Changes in Net Assets (continued) | ||
| SMALL CAP VALUE FUND | STRATEGIC INCOME FUND | |||||||||||||||
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | 694,357 | $ | 1,285,182 | $ | 1,229,319 | $ | 974,264 | ||||||||
Net realized gain (loss) on investments and foreign | (26,463,524 | ) | 155,779,277 | (3,227,582 | ) | 52,706 | ||||||||||
Net realized gain on options written | 1,264,596 | 1,078,508 | 387,076 | 24,907 | ||||||||||||
Net realized gain (loss) on short positions | 862,688 | — | 1,439,965 | 1,290,734 | ||||||||||||
Change in unrealized appreciation (depreciation) on investments and foreign currency translations | (116,642,157 | ) | (74,483,105 | ) | (4,016,554 | ) | (1,281,957 | ) | ||||||||
Net increase (decrease) in net assets resulting from operations | (140,284,040 | ) | 83,659,862 | (4,187,776 | ) | 1,060,654 | ||||||||||
Dividends paid from: | ||||||||||||||||
Net investment income | (1,304,069 | ) | (4,575,097 | ) | (1,057,146 | ) | (903,928 | ) | ||||||||
Net realized gains | (141,790,472 | ) | (84,556,633 | ) | (2,217,011 | ) | (54,564 | ) | ||||||||
| (143,094,541 | ) | (89,131,730 | ) | (3,274,157 | ) | (958,492 | ) | |||||||||
Capital share transactions: | ||||||||||||||||
Shares sold | 66,338,622 | 91,496,417 | 11,271,913 | 21,723,688 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 137,074,565 | 86,009,646 | 3,204,301 | 924,221 | ||||||||||||
Shares redeemed | (243,774,324 | ) | (176,041,666 | ) | (8,749,445 | ) | (11,873,932 | ) | ||||||||
Redemption fees | 16,798 | 19,685 | 3,128 | 13,045 | ||||||||||||
Net increase (decrease) | (40,344,339 | ) | 1,484,082 | 5,729,897 | 10,787,022 | |||||||||||
Total increase (decrease) in net assets | (323,722,920 | ) | (3,987,786 | ) | (1,732,036 | ) | 10,889,184 | |||||||||
Net assets: | ||||||||||||||||
Beginning of period | 660,637,068 | 664,624,854 | 23,621,216 | 12,732,032 | ||||||||||||
End of period | $ | 336,914,148 | $ | 660,637,068 | $ | 21,889,180 | $ | 23,621,216 | ||||||||
Undistributed net investment income (loss) included in | $ | (61,217 | ) | $ | 333,131 | $ | (7,265 | ) | $ | 85,088 | ||||||
Capital share transactions — shares: | ||||||||||||||||
Shares sold | 18,735,565 | 17,057,164 | 1,304,234 | 1,898,641 | ||||||||||||
Shares issued to holders in reinvestment of dividends | 38,504,091 | 17,133,396 | 347,534 | 81,799 | ||||||||||||
Shares redeemed | (64,253,288 | ) | (33,076,044 | ) | (926,251 | ) | (1,048,448 | ) | ||||||||
Net increase (decrease) in shares outstanding | (7,013,632 | ) | 1,114,516 | 725,517 | 931,992 | |||||||||||
See notes to financial statements.
76
Table of Contents
| SEPTEMBER 30, 2008 | ||
| ULTRA GROWTH FUND | U.S. TREASURY FUND | |||||||||||||||||
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||||
| $ | (1,971,029 | ) | $ | (3,175,443 | ) | $ | 4,603,385 | $ | 7,950,767 | |||||||||
| 5,945,886 | 28,644,421 | 2,091,586 | (899,982 | ) | ||||||||||||||
| 274,600 | 18,525 | — | — | |||||||||||||||
| (414,078 | ) | (119,136 | ) | — | — | |||||||||||||
| (87,629,925 | ) | 35,146,031 | 6,237,874 | (3,610,027 | ) | |||||||||||||
| (83,794,546 | ) | 60,514,398 | 12,932,845 | 3,440,758 | ||||||||||||||
| — | — | (4,603,049 | ) | (7,951,409 | ) | |||||||||||||
| (32,302,048 | ) | (21,145,437 | ) | — | — | |||||||||||||
| (32,302,048 | ) | (21,145,437 | ) | (4,603,049 | ) | (7,951,409 | ) | |||||||||||
| 23,567,676 | 20,390,670 | 78,165,995 | 57,301,220 | |||||||||||||||
| 31,508,337 | 20,567,611 | 4,167,049 | 7,407,666 | |||||||||||||||
| (63,614,008 | ) | (118,109,285 | ) | (85,104,785 | ) | (149,451,060 | ) | |||||||||||
| 5,057 | 8,878 | 73,908 | 46,441 | |||||||||||||||
| (8,532,938 | ) | (77,142,126 | ) | (2,697,833 | ) | (84,695,733 | ) | |||||||||||
| (124,629,532 | ) | (37,773,165 | ) | 5,631,963 | (89,206,384 | ) | ||||||||||||
| 268,633,110 | 306,406,275 | 115,787,922 | 204,994,306 | |||||||||||||||
| $ | 144,003,578 | $ | 268,633,110 | $ | 121,419,885 | $ | 115,787,922 | |||||||||||
| $ | (19,428 | ) | $ | (759 | ) | $ | 53 | $ | (283 | ) | ||||||||
| 1,068,307 | 809,631 | 5,302,453 | 4,157,573 | |||||||||||||||
| 1,297,708 | 848,849 | 282,613 | 539,219 | |||||||||||||||
| (2,896,081 | ) | (4,710,330 | ) | (5,828,618 | ) | (10,853,212 | ) | |||||||||||
| (530,066 | ) | (3,051,850 | ) | (243,552 | ) | (6,156,420 | ) | |||||||||||
77
Table of Contents
| WASATCH FUNDS — Financial Highlights | ||
| CORE GROWTH FUND | Year Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||
Net asset value, beginning of period | $ | 42.98 | $ | 41.08 | $ | 43.92 | $ | 38.49 | $ | 33.54 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income (loss) | 0.19 | (0.05 | ) | 0.17 | 0.56 | 0.13 | ||||||||||||||||
Net realized and unrealized gains (losses) on investments | (8.98 | ) | 5.65 | 0.90 | 6.41 | 4.84 | ||||||||||||||||
Net increase from payment by affiliate | — | — | — | — | 1 | — | ||||||||||||||||
Total from investment operations | (8.79 | ) | 5.60 | 1.07 | 6.97 | 4.97 | ||||||||||||||||
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 | (7.81 | ) | (3.56 | ) | (3.28 | ) | (1.32 | ) | — | |||||||||||||
Total distributions | (7.81 | ) | (3.70 | ) | (3.91 | ) | (1.54 | ) | (0.02 | ) | ||||||||||||
Net asset value, end of period | $ | 26.38 | $ | 42.98 | $ | 41.08 | $ | 43.92 | $ | 38.49 | ||||||||||||
Total return | (24.82)% | 14.28% | 2.46% | 18.58% | 2 | 14.80% | ||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 645,769 | $ | 1,250,618 | $ | 1,381,027 | $ | 1,704,690 | $ | 1,496,969 | ||||||||||||
Ratio of expenses to average net assets | 1.21% | 1.18% | 1.17% | 1.20% | 1.21% | |||||||||||||||||
Ratio of net investment income (loss) to average net assets | 0.52% | (0.09 | )% | 0.38% | 1.30% | 0.34% | ||||||||||||||||
Portfolio turnover rate | 44% | 54% | 42% | 42% | 47% | |||||||||||||||||
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%. |
See notes to financial statements.
78
| EMERGING MARKETS SMALL CAP FUND | Year Ended 2008 | |||||||||||||
| (for a share outstanding throughout each period) | ||||||||||||||
Net asset value, beginning of period | $ | 2.00 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||
Net realized and unrealized losses on investments | (0.76 | ) | ||||||||||||
Total from investment operations | (0.76 | ) | ||||||||||||
Redemption fees (see Note 2) | — | 1 | ||||||||||||
Less distributions: | ||||||||||||||
Dividends from net investment income | — | 1 | ||||||||||||
Total Distributions | — | 1 | ||||||||||||
Net asset value, end of period | $ | 1.24 | ||||||||||||
Total return | (37.88)% | |||||||||||||
Supplemental data and ratios: | ||||||||||||||
Net assets, end of period (in thousands) | $ | 36,176 | ||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||
Net of waivers and reimbursements | 2.10% | |||||||||||||
Before waivers and reimbursements | 2.67% | |||||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||
Net of waivers and reimbursements | 0.27% | |||||||||||||
Before waivers and reimbursements | (0.29)% | |||||||||||||
Portfolio turnover rate | 38% | |||||||||||||
Table of Contents
| SEPTEMBER 30, 2008 | ||
| GLOBAL SCIENCE & TECHNOLOGY FUND | Year Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||
Net asset value, beginning of period | $ | 17.69 | $ | 13.97 | $ | 12.98 | $ | 10.15 | $ | 10.73 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment loss | (0.25 | ) | (0.12 | ) | (0.14 | ) | (0.16 | ) | (0.18 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | (5.65 | ) | 4.43 | 1.40 | 2.99 | (0.41 | ) | |||||||||||||||
Net increase from payment by affiliate | — | — | — | — | 1 | — | ||||||||||||||||
Total from investment operations | (5.90 | ) | 4.31 | 1.26 | 2.83 | (0.59 | ) | |||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | 0.01 | |||||||||||||
Less distributions: | ||||||||||||||||||||||
Distributions from net realized gains | (1.48 | ) | (0.59 | ) | (0.27 | ) | — | — | ||||||||||||||
Total distributions | (1.48 | ) | (0.59 | ) | (0.27 | ) | — | — | ||||||||||||||
Net asset value, end of period | $ | 10.31 | $ | 17.69 | $ | 13.97 | $ | 12.98 | $ | 10.15 | ||||||||||||
Total return | (36.07)% | 31.63% | 9.81% | 27.88% | 5 | (5.49)% | ||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 82,164 | $ | 204,142 | $ | 126,359 | $ | 89,353 | $ | 69,301 | ||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements | 1.92% | 1.85% | 1.94% | 1.95% | 1.95% | |||||||||||||||||
Before waivers and reimbursements | 1.92% | 1.85% | 1.94% | 1.97% | 1.97% | |||||||||||||||||
Ratio of net investment loss to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements | (1.24)% | (0.97)% | (1.15)% | (1.52)% | (1.66)% | |||||||||||||||||
Before waivers and reimbursements | (1.24)% | (0.97)% | (1.15)% | (1.54)% | (1.68)% | |||||||||||||||||
Portfolio turnover rate | 89% | 78% | 58% | 80% | 55% | |||||||||||||||||
| HERITAGE GROWTH FUND | Year or Period Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 2006 | 2005 | 20042 | |||||||||||||||||
Net asset value, beginning of period | $ | 12.57 | $ | 11.40 | $ | 11.43 | $ | 9.86 | $ | 10.00 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income (loss) | 0.06 | (0.01 | ) | — | 1 | 0.02 | — | 1 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (2.57 | ) | 1.53 | 0.28 | 1.55 | (0.14 | ) | |||||||||||||||
Net increase from payment by affiliate | — | — | — | — | 1 | — | ||||||||||||||||
Total from investment operations | (2.51 | ) | 1.52 | 0.28 | 1.57 | (0.14 | ) | |||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||||
Less distributions: | ||||||||||||||||||||||
Dividends from net investment income | — | — | 1 | (0.01 | ) | — | — | |||||||||||||||
Distributions from net realized gains | (1.06 | ) | (0.35 | ) | (0.30 | ) | — | 1 | — | |||||||||||||
Total distributions | (1.06 | ) | (0.35 | ) | (0.31 | ) | — | 1 | — | |||||||||||||
Net asset value, end of period | $ | 9.00 | $ | 12.57 | $ | 11.40 | $ | 11.43 | $ | 9.86 | ||||||||||||
Total return3 | (21.54)% | 13.59% | 2.46% | 15.95% | 5 | (1.40)% | ||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 95,414 | $ | 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% | 0.95% | |||||||||||||||||
Before waivers and reimbursements4 | 1.01% | 0.95% | 0.95% | 0.99% | 1.26% | |||||||||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements4 | 0.44% | (0.06)% | 0.01% | 0.17% | (0.01)% | |||||||||||||||||
Before waivers and reimbursements4 | 0.38% | (0.06)% | 0.01% | 0.13% | (0.32)% | |||||||||||||||||
Portfolio turnover rate3 | 48% | 56% | 54% | 36% | 5% | |||||||||||||||||
1 | Represents amounts less than $.005 per share. |
2 | Fund inception date was June 18, 2004. |
3 | Not annualized for periods less than one year. |
4 | Annualized. |
5 | In 2005, the Fund’s total return included a voluntary reimbursement by the Advisor for amounts relating to errors in applying the Funds’ cross-trading policies that had no impact on the total return. |
See notes to financial statements.
79
Table of Contents
| WASATCH FUNDS — Financial Highlights (continued) | ||
| HERITAGE VALUE FUND | Year Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 20071 | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.23 | $ | 10.00 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income | 0.08 | 0.01 | ||||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.99 | ) | 0.22 | |||||||||||||||||||
Total from investment operations | (1.91 | ) | 0.23 | |||||||||||||||||||
Redemption fees (see Note 2) | — | 2 | — | 2 | ||||||||||||||||||
Less distributions: | ||||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | — | |||||||||||||||||||
Distributions from net realized gains | (0.04 | ) | — | |||||||||||||||||||
Total distributions | (0.14 | ) | — | |||||||||||||||||||
Net asset value, end of period | $ | 8.18 | $ | 10.23 | ||||||||||||||||||
Total return | (19.42)% | 2.40% | 3 | |||||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,792 | $ | 2,432 | ||||||||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements4 | 0.95% | 0.95% | ||||||||||||||||||||
Before waivers and reimbursements4 | 3.89% | 24.78% | ||||||||||||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements4 | 1.31% | 1.49% | ||||||||||||||||||||
Before waivers and reimbursements4 | (1.63)% | (22.34)% | ||||||||||||||||||||
Portfolio turnover rate3 | 246% | 0% | ||||||||||||||||||||
| INTERNATIONAL GROWTH FUND | Year Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||
Net asset value, beginning of period | $ | 24.42 | $ | 21.83 | $ | 18.50 | $ | 14.71 | $ | 12.06 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income (loss) | (0.28 | ) | 0.03 | (0.09 | ) | (0.10 | ) | (0.11 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (9.19 | ) | 6.61 | 3.42 | 3.91 | 2.76 | ||||||||||||||||
Net increase from payment by affiliate | — | — | — | 0.01 | — | |||||||||||||||||
Total from investment operations | (9.47 | ) | 6.64 | 3.33 | 3.82 | 2.65 | ||||||||||||||||
Redemption fees (see Note 2) | — | 2 | — | 2 | — | 2 | — | 2 | — | 2 | ||||||||||||
Less distributions: | ||||||||||||||||||||||
Dividends from net investment income | (0.68 | ) | — | — | — | — | ||||||||||||||||
Distributions from net realized gains | (2.44 | ) | (4.05 | ) | — | 2 | (0.03 | ) | — | |||||||||||||
Total distributions | (3.12 | ) | (4.05 | ) | — | 2 | (0.03 | ) | — | |||||||||||||
Net asset value, end of period | $ | 11.83 | $ | 24.42 | $ | 21.83 | $ | 18.50 | $ | 14.71 | ||||||||||||
Total return | (44.01)% | 34.02% | 18.00% | 6 | 26.02% | 5 | 21.97% | |||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 194,780 | $ | 534,903 | $ | 383,135 | $ | 338,792 | $ | 196,990 | ||||||||||||
Ratio of expenses to average net assets | 1.83% | 1.76% | 1.78% | 1.84% | 1.92% | |||||||||||||||||
Ratio of net investment income (loss) to average net assets | (0.15 | )% | 0.11% | (0.42 | )% | (0.64 | )% | (1.06 | )% | |||||||||||||
Portfolio turnover rate | 44% | 60% | 64% | 32% | 31% | |||||||||||||||||
1 | Fund inception date was August 30, 2007. |
2 | Represents amounts less than $.005 per share. |
3 | Not annualized for periods less than one year. |
4 | Annualized. |
5 | 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. |
6 | In 2006, the Fund’s total return included a voluntary reimbursement by the Advisor for an amount relating to an incorrect settlement that had no impact on the total return. |
See notes to financial statements.
80
Table of Contents
| SEPTEMBER 30, 2008 | ||
| INTERNATIONAL OPPORTUNITIES FUND | Year or Period Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 2006 | 20051 | ||||||||||||||||||
Net asset value, beginning of period | $ | 3.65 | $ | 2.71 | $ | 2.19 | $ | 2.00 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income (loss) | 0.07 | (0.01 | ) | (0.01 | ) | — | 2 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.45 | ) | 1.13 | 0.53 | 0.19 | |||||||||||||||||
Total from investment operations | (1.38 | ) | 1.12 | 0.52 | 0.19 | |||||||||||||||||
Redemption fees (see Note 2) | — | 2 | — | 2 | — | 2 | — | 2 | ||||||||||||||
Less distributions: | ||||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | — | 2 | — | — | ||||||||||||||||
Distributions from net realized gains | (0.53 | ) | (0.18 | ) | — | — | ||||||||||||||||
Total distributions | (0.67 | ) | (0.18 | ) | — | — | ||||||||||||||||
Net asset value, end of period | $ | 1.60 | $ | 3.65 | $ | 2.71 | $ | 2.19 | ||||||||||||||
Total return | (45.33)% | 42.73% | 23.74% | 9.50% | 3 | |||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 55,691 | $ | 56,433 | $ | 36,839 | $ | 29,440 | ||||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements4 | 2.25% | 2.25% | 2.25% | 2.25% | ||||||||||||||||||
Before waivers and reimbursements4 | 2.59% | 2.51% | 2.62% | 3.09% | ||||||||||||||||||
Ratio of net investment loss to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements4 | (0.09)% | (0.18)% | (0.29)% | (0.21)% | ||||||||||||||||||
Before waivers and reimbursements4 | (0.43)% | (0.44)% | (0.66)% | (1.05)% | ||||||||||||||||||
Portfolio turnover rate3 | 63% | 54% | 43% | 12% | ||||||||||||||||||
| MICRO CAP FUND | Year Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||
Net asset value, beginning of period | $ | 7.19 | $ | 6.79 | $ | 7.58 | $ | 7.05 | $ | 6.98 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment loss | (0.07 | ) | (0.09 | ) | (0.10 | ) | (0.11 | ) | (0.15 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | (1.81 | ) | 1.29 | 0.65 | 1.70 | 0.81 | ||||||||||||||||
Net increase from payment by affiliate | — | — | — | — | 2 | — | ||||||||||||||||
Total from investment operations | (1.88 | ) | 1.20 | 0.55 | 1.59 | 0.66 | ||||||||||||||||
Redemption fees (see Note 2) | — | 2 | — | 2 | — | 2 | — | 2 | — | 2 | ||||||||||||
Less distributions: | ||||||||||||||||||||||
Distributions from net realized gains | (1.17 | ) | (0.80 | ) | (1.34 | ) | (1.06 | ) | (0.59 | ) | ||||||||||||
Total distributions | (1.17 | ) | (0.80 | ) | (1.34 | ) | (1.06 | ) | (0.59 | ) | ||||||||||||
Net asset value, end of period | $ | 4.14 | $ | 7.19 | $ | 6.79 | $ | 7.58 | $ | 7.05 | ||||||||||||
Total return | (30.46)% | 18.72% | 8.51% | 26.42% | 5 | 9.96% | ||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 359,394 | $ | 631,417 | $ | 583,901 | $ | 579,244 | $ | 518,291 | ||||||||||||
Ratio of expenses to average net assets | 2.16% | 2.14% | 2.14% | 2.18% | 2.19% | |||||||||||||||||
Ratio of net investment loss to average net assets | (1.26)% | (1.25)% | (1.39)% | (1.58)% | (1.95)% | |||||||||||||||||
Portfolio turnover rate | 54% | 48% | 46% | 50% | 56% | |||||||||||||||||
1 | Fund inception date was January 27, 2005. |
2 | Represents amounts less than $.005 per share. |
3 | Not annualized for periods less than one year. |
4 | Annualized. |
5 | In 2005, the Fund’s total return included a voluntary reimbursement by the Advisor for amounts relating to errors in applying the Funds’ cross-trading policies that had no impact on the total return. |
See notes to financial statements.
81
Table of Contents
| WASATCH FUNDS — Financial Highlights (continued) | ||
| MICRO CAP VALUE FUND | Year Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||
Net asset value, beginning of period | $ | 2.98 | $ | 2.93 | $ | 2.72 | $ | 2.57 | $ | 2.09 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment loss | (0.02 | ) | (0.03 | ) | (0.03 | ) | (0.04 | ) | (0.05 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | (0.75 | ) | 0.64 | 0.50 | 0.49 | 0.53 | ||||||||||||||||
Net increase from payment by affiliate | — | — | — | — | 1 | — | ||||||||||||||||
Total from investment operations | (0.77 | ) | 0.61 | 0.47 | 0.45 | 0.48 | ||||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||||
Less distributions: | ||||||||||||||||||||||
Dividends from net investment income | — | — | — | — | — | |||||||||||||||||
Distributions from net realized gains | (0.41 | ) | (0.56 | ) | (0.26 | ) | (0.30 | ) | — | 1 | ||||||||||||
Total distributions | (0.41 | ) | (0.56 | ) | (0.26 | ) | (0.30 | ) | — | |||||||||||||
Net asset value, end of period | $ | 1.80 | $ | 2.98 | $ | 2.93 | $ | 2.72 | $ | 2.57 | ||||||||||||
Total return | (29.67)% | 22.84% | 18.89% | 19.87% | 3 | 23.06% | ||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 97,912 | $ | 120,039 | $ | 95,508 | $ | 86,903 | $ | 84,835 | ||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements2 4 | 2.25% | 2.25% | 2.25% | 2.25% | 2.27% | |||||||||||||||||
Before waivers and reimbursements2 | 2.35% | 2.30% | 2.33% | 2.36% | 2.38% | |||||||||||||||||
Ratio of net investment loss to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements2 | (1.21)% | (1.06)% | (0.99)% | (1.41)% | (1.76)% | |||||||||||||||||
Before waivers and reimbursements2 | (1.31)% | (1.11)% | (1.07)% | (1.52)% | (1.87)% | |||||||||||||||||
Portfolio turnover rate | 144% | 105% | 95% | 85% | 101% | |||||||||||||||||
| SMALL CAP GROWTH FUND | Year Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||
Net asset value, beginning of period | $ | 40.10 | $ | 36.99 | $ | 41.23 | $ | 34.94 | $ | 32.43 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment loss | (0.16 | ) | (0.25 | ) | (0.26 | ) | (0.25 | ) | (0.33 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | (8.85 | ) | 6.28 | 0.84 | 7.32 | 3.01 | ||||||||||||||||
Net increase from payment by affiliate | — | — | — | — | 1 | — | ||||||||||||||||
Total from investment operations | (9.01 | ) | 6.03 | 0.58 | 7.07 | 2.68 | ||||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||||
Less distributions: | ||||||||||||||||||||||
Dividends from net investment income | — | — | — | — | — | |||||||||||||||||
Distributions from net realized gains | (4.59 | ) | (2.92 | ) | (4.82 | ) | (0.78 | ) | (0.17 | ) | ||||||||||||
Total distributions | (4.59 | ) | (2.92 | ) | (4.82 | ) | (0.78 | ) | (0.17 | ) | ||||||||||||
Net asset value, end of period | $ | 26.50 | $ | 40.10 | $ | 36.99 | $ | 41.23 | $ | 34.94 | ||||||||||||
Total return | (25.42)% | 16.94% | 1.40% | 20.73% | 5 | 8.27% | ||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 735,546 | $ | 1,075,433 | $ | 1,234,978 | $ | 1,357,862 | $ | 1,191,702 | ||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements2 6 | 1.21% | 1.19% | 1.18% | 1.18% | 1.20% | |||||||||||||||||
Before waivers and reimbursements2 | 1.21% | 1.19% | 1.18% | 1.18% | 1.20% | |||||||||||||||||
Ratio of net investment loss to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements2 | (0.47)% | (0.52)% | (0.64)% | (0.62)% | (0.91)% | |||||||||||||||||
Before waivers and reimbursements2 | (0.47)% | (0.52)% | (0.64)% | (0.62)% | (0.91)% | |||||||||||||||||
Portfolio turnover rate | 51% | 43% | 41% | 36% | 41% | |||||||||||||||||
1Represents | amounts less than $.005 per share. |
2 | Annualized. |
3In | 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. |
4 | 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%. |
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. The effect of net realized gains on the disposal of investments in violation of an investment restriction on total return was less than 0.01% |
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%. |
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| SEPTEMBER 30, 2008 | ||
| SMALL CAP VALUE FUND | Year Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||
Net asset value, beginning of period | $ | 5.22 | $ | 5.29 | $ | 5.67 | $ | 5.54 | $ | 4.62 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income (loss) | 0.01 | 0.01 | 0.05 | 0.05 | (0.01 | ) | ||||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.11 | ) | 0.67 | 0.36 | 0.86 | 0.93 | ||||||||||||||||
Net increase from payment by affiliate | — | — | — | — | 1 | — | ||||||||||||||||
Total from investment operations | (1.10 | ) | 0.68 | 0.41 | 0.91 | 0.92 | ||||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||||
Less distributions: | ||||||||||||||||||||||
Dividends from net investment income | (0.01 | ) | (0.04 | ) | (0.07 | ) | — | — | ||||||||||||||
Distributions from net realized gains | (1.29 | ) | (0.71 | ) | (0.72 | ) | (0.78 | ) | — | 1 | ||||||||||||
Total distributions | (1.30 | ) | (0.75 | ) | (0.79 | ) | (0.78 | ) | — | |||||||||||||
Net asset value, end of period | $ | 2.82 | $ | 5.22 | $ | 5.29 | $ | 5.67 | $ | 5.54 | ||||||||||||
Total return | (26.26)% | 13.32% | 7.88% | 19.47% | 5 | 19.73% | ||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 336,914 | $ | 660,637 | $ | 664,625 | $ | 734,842 | $ | 734,266 | ||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements3 | 1.76% | 1.69% | 1.68% | 1.72% | 1.73% | |||||||||||||||||
Before waivers and reimbursements3 | 1.76% | 1.69% | 1.68% | 1.72% | 1.73% | |||||||||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements3 | 0.15% | 0.18% | 0.81% | 0.94% | (0.26)% | |||||||||||||||||
Before waivers and reimbursements3 | 0.15% | 0.18% | 0.81% | 0.94% | (0.26)% | |||||||||||||||||
Portfolio turnover rate | 78% | 84% | 40% | 43% | 56% | |||||||||||||||||
| STRATEGIC INCOME FUND | Year or Period Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 20064 | |||||||||||||||||||
Net asset value, beginning of period | $ | 11.00 | $ | 10.48 | $ | 10.00 | ||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income | 0.55 | 0.48 | 0.31 | |||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (2.29 | ) | 0.54 | 0.44 | ||||||||||||||||||
Total from investment operations | (1.74 | ) | 1.02 | 0.75 | ||||||||||||||||||
Redemption fees (see Note 2) | — | 1 | 0.01 | — | 1 | |||||||||||||||||
Less distributions: | ||||||||||||||||||||||
Dividends from net investment income | (0.50 | ) | (0.47 | ) | (0.27 | ) | ||||||||||||||||
Distributions from net realized gains | (1.14 | ) | (0.04 | ) | — | |||||||||||||||||
Total distributions | (1.64 | ) | (0.51 | ) | (0.27 | ) | ||||||||||||||||
Net asset value, end of period | $ | 7.62 | $ | 11.00 | $ | 10.48 | ||||||||||||||||
Total return | (18.17)% | 9.77% | 7.58% | 2 | ||||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 21,889 | $ | 23,621 | $ | 12,732 | ||||||||||||||||
Ratio of expenses to average net assets (including dividend payments for securities sold short): | ||||||||||||||||||||||
Net of waivers and reimbursements3 | 0.97% | 1.05% | 0.95% | |||||||||||||||||||
Before waivers and reimbursements3 | 1.46% | 1.57% | 2.66% | |||||||||||||||||||
Ratio of expenses to average net assets (excluding dividend payments for securities sold short): | ||||||||||||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements3 | 0.95% | 0.95% | 0.95% | |||||||||||||||||||
Before waivers and reimbursements3 | 1.44% | 1.47% | 2.66% | |||||||||||||||||||
Ratio of net investment income to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements3 | 5.96% | 4.14% | 5.40% | |||||||||||||||||||
Before waivers and reimbursements3 | 5.47% | 3.62% | 3.69% | |||||||||||||||||||
Portfolio turnover rate2 | 81% | 86% | 14% | |||||||||||||||||||
1 | Represents amounts less than $.005 per share. |
2 | Not annualized for periods less than one year. |
3 | Annualized. |
4 | Fund inception date was February 1, 2006. |
5 | In 2005, the Fund’s total return included a voluntary reimbursement by the Advisor for amounts relating to errors in applying the Funds’ cross-trading policies that had no impact on the total return. |
See notes to financial statements.
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| WASATCH FUNDS — Financial Highlights (continued) | SEPTEMBER 30, 2008 | |
| ULTRA GROWTH FUND | Year Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||
Net asset value, beginning of period | $ | 27.78 | $ | 24.09 | $ | 27.98 | $ | 24.07 | $ | 25.43 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment loss | (0.22 | ) | (0.33 | ) | (0.34 | ) | (0.38 | ) | (0.42 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | (8.28 | ) | 5.80 | 0.23 | 5.26 | (0.68 | ) | |||||||||||||||
Net increase from payment by affiliate | — | — | — | 1 | — | 1 | — | |||||||||||||||
Total from investment operations | (8.50 | ) | 5.47 | (0.11 | ) | 4.88 | (1.10 | ) | ||||||||||||||
Redemption fees (see Note 2) | — | 1 | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||||
Less distributions: | ||||||||||||||||||||||
Distributions from net realized gains | (3.52 | ) | (1.78 | ) | (3.78 | ) | (0.97 | ) | (0.26 | ) | ||||||||||||
Total distributions | (3.52 | ) | (1.78 | ) | (3.78 | ) | (0.97 | ) | (0.26 | ) | ||||||||||||
Net asset value, end of period | $ | 15.76 | $ | 27.78 | $ | 24.09 | $ | 27.98 | $ | 24.07 | ||||||||||||
Total return | (35.09)% | 23.80% | (0.48)% | 21.00% | 3 | (4.44)% | ||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 144,004 | $ | 268,633 | $ | 306,406 | $ | 389,894 | $ | 427,013 | ||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements2 | 1.53% | 1.49% | 1.48% | 1.50% | 1.50% | |||||||||||||||||
Before waivers and reimbursements2 | 1.53% | 1.49% | 1.48% | 1.50% | 1.50% | |||||||||||||||||
Ratio of net investment loss to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements2 | (0.93)% | (1.12)% | (1.19)% | (1.30)% | (1.39)% | |||||||||||||||||
Before waivers and reimbursements2 | (0.93)% | (1.12)% | (1.19)% | (1.30)% | (1.39)% | |||||||||||||||||
Portfolio turnover rate | 84% | 55% | 76% | 65% | 67% | |||||||||||||||||
| U.S. TREASURY FUND | Year Ended September 30 | |||||||||||||||||||||
| (for a share outstanding throughout each period) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||
Net asset value, beginning of period | $ | 13.84 | $ | 14.12 | $ | 14.68 | $ | 13.77 | $ | 13.68 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income | 0.58 | 0.64 | 0.39 | 0.45 | 0.70 | |||||||||||||||||
Net realized and unrealized gains (losses) on investments | 1.10 | (0.29 | ) | (0.24 | ) | 1.05 | 0.11 | |||||||||||||||
Total from investment operations | 1.68 | 0.35 | 0.15 | 1.50 | 0.81 | |||||||||||||||||
Redemption fees (see Note 2) | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | |||||||||||||||||
Less distributions: | ||||||||||||||||||||||
Dividends from net investment income | (0.58 | ) | (0.64 | ) | (0.72 | ) | (0.60 | ) | (0.73 | ) | ||||||||||||
Total distributions | (0.58 | ) | (0.64 | ) | (0.72 | ) | (0.60 | ) | (0.73 | ) | ||||||||||||
Net asset value, end of period | $ | 14.95 | $ | 13.84 | $ | 14.12 | $ | 14.68 | $ | 13.77 | ||||||||||||
Total return | 12.33% | 2.68% | 1.21% | 11.41% | 6.27% | |||||||||||||||||
Supplemental data and ratios: | ||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 121,420 | $ | 115,788 | $ | 204,994 | $ | 82,599 | $ | 45,088 | ||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements2 | 0.74% | 0.71% | 0.72% | 0.75% | 0.75% | |||||||||||||||||
Before waivers and reimbursements2 | 0.74% | 0.71% | 0.72% | 0.86% | 0.94% | |||||||||||||||||
Ratio of net investment income to average net assets: | ||||||||||||||||||||||
Net of waivers and reimbursements2 | 3.85% | 4.23% | 4.21% | 4.01% | 4.50% | |||||||||||||||||
Before waivers and reimbursements2 | 3.85% | 4.23% | 4.21% | 3.90% | 4.31% | |||||||||||||||||
Portfolio turnover rate | 31% | 19% | 2% | 19% | 4% | |||||||||||||||||
1 | Represents amounts less than $.005 per share. |
2 | Annualized. |
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.
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| WASATCH FUNDS — Notes to Financial Statements | SEPTEMBER 30, 2008 | |
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. 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 the financial statements of the Funds held at September 30, 2008.
Valuation of Securities — Securities are valued as of the close of the New York Stock Exchange (generally 4:00 p.m. Eastern Time) on the valuation date. Equity securities are valued using a commercial pricing service at the latest quoted sales price taken from the primary market in which each security trades and, with respect to equity securities traded on Nasdaq, such securities are valued using the Nasdaq Official Closing Price (“NOCP”) or last sales price if no NOCP is available. If there are no sales on any exchange or market on a given day, then the security is valued at the most recent bid price. Debt securities (other than short-term instruments) are valued at current market value by a commercial pricing service, or by using the last sale or bid price. Short term securities, which mature in 60 days or less, are valued at amortized cost, which approximates market value. Exchange-traded options are valued at the last sale price in the market where they are principally traded. If there are no sales on any exchange or market on a given day, then the option is valued at the most recent bid price. If market quotations are not readily available for the Funds’ investments in securities such as restricted securities, private placements, securities for which trading has been halted or other illiquid securities, these investments will be valued at fair value in accordance with Board-approved Pricing Policies and Procedures by the Pricing Committee of the Advisor (“Pricing Committee”) with oversight by the Board of Directors. Fair value is defined as the amount the owner of a security might reasonably expect to receive upon a current sale. For each applicable investment that is fair valued, the Pricing Committee considers, to the extent applicable, various factors including, but not limited to, the financial condition of the company or limited partnership, operating results, prices paid in follow-on rounds, comparable
companies in the public market, the nature and duration of the restrictions for holding the securities, and other relevant factors.
Additionally, a Fund’s investments will be valued at fair value by the Pricing Committee if the Advisor determines that an event impacting the value of an investment occurred between the closing time of a security’s primary market or exchange (for example, a foreign exchange or market) and the time the Fund’s share price is calculated. Significant events include, but are not limited to the following: significant fluctuations in domestic markets, foreign markets or foreign currencies; occurrences not directly tied to the securities markets such as natural disasters, armed conflicts or significant governmental actions; and major announcements affecting a single issuer or an entire market or market sector. In responding to a significant event, the Pricing Committee would determine the fair value of affected securities considering factors including, but not limited to: index options and futures traded subsequent to the close; 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, 2008, 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 | 2.08 | % | |
Emerging Markets Small Cap Fund | 0.85 | % | |
Global Science & Technology Fund | 1.68 | % | |
Heritage Growth Fund | — | ||
Heritage Value Fund | — | ||
International Growth Fund | — | ||
International Opportunities Fund | 0.59 | % | |
Micro Cap Fund | 0.43 | % | |
Micro Cap Value Fund | 1.00 | % | |
Small Cap Growth Fund | 1.59 | % | |
Small Cap Value Fund | 2.24 | % | |
Strategic Income Fund | 3.61 | % | |
Ultra Growth Fund | 6.34 | % | |
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 evaluated the impact of adopting FAS 157.
In March 2008, the Financial Accounting Standards Board (FASB) issued FASB Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161 is intended to
85
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| WASATCH FUNDS — Notes to Financial Statements (continued) | ||
improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact the adoption of SFAS 161 will have on the Fund’s financial statement disclosures.
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 security gains or losses is reflected as a component of such gains or losses. Transactions in foreign denominated assets may involve greater risks than domestic transactions, including currency, political, economic, regulatory and market risks.
At September 30, 2008, the foreign currencies held by the Funds were as follows (amounts in U.S. dollars):
| Cost of Currency | Value of Currency | |||||||
Core Growth Fund | ||||||||
Singapore Dollar | $ | 65,501 | $ | 65,074 | ||||
South Korean Won | 5 | 5 | ||||||
| $ | 65,506 | $ | 65,079 | |||||
Emerging Markets Small Cap Fund | ||||||||
New Taiwan Dollar | $ | 112,732 | $ | 108,963 | ||||
Singapore Dollar | 3,547 | 3,524 | ||||||
South Korean Won | 5 | 5 | ||||||
| $ | 116,284 | $ | 112,492 | |||||
Global Science & Technology Fund | ||||||||
British Pound | $ | 9,794 | $ | 9,496 | ||||
International Growth Fund | ||||||||
Hong Kong Dollar | $ | 15,761 | $ | 15,783 | ||||
British Pound | 51,999 | 50,411 | ||||||
Singapore Dollar | 8,550 | 8,495 | ||||||
South Korean Won | 3 | 3 | ||||||
Swedish Krona | 29,539 | 28,093 | ||||||
| $ | 105,852 | $ | 102,785 | |||||
International Opportunities Fund | ||||||||
Australian Dollar | $ | 7,015 | $ | 7,014 | ||||
Hong Kong Dollar | 579 | 579 | ||||||
Japanese Yen | 2,298 | 2,311 | ||||||
Singapore Dollar | 27,251 | 27,076 | ||||||
South Korean Won | 1 | 1 | ||||||
United Arab Emirates Dirham | (27,588 | ) | (27,588 | ) | ||||
| $ | 9,556 | $ | 9,393 | |||||
Micro Cap Fund | ||||||||
Australian Dollar | $ | 214,710 | $ | 203,244 | ||||
Canadian Dollar | $ | (80,231 | ) | $ | (78,520 | ) | ||
Singapore Dollar | 50,184 | 49,857 | ||||||
South Korean Won | 11 | 10 | ||||||
| $ | 184,674 | $ | 174,591 | |||||
| Cost of Currency | Value of Currency | |||||||
Micro Cap Value Fund | ||||||||
Australian Dollar | $ | 25,488 | $ | 24,127 | ||||
Indian Rupee | 8,517 | 8,517 | ||||||
Singapore Dollar | 8,429 | 8,373 | ||||||
South Korean Won | 1 | 1 | ||||||
| $ | 42,435 | $ | 41,018 | |||||
Small Cap Growth Fund | ||||||||
Australian Dollar | $ | 120,183 | $ | 116,900 | ||||
Singapore Dollar | 40,582 | 40,317 | ||||||
South Korean Won | 5 | 5 | ||||||
United Arab Emirates Dirham | (165,638 | ) | (165,638 | ) | ||||
| $ | (4,868 | ) | $ | (8,416 | ) | |||
Small Cap Value Fund | ||||||||
Singapore Dollar | $ | 24,765 | $ | 24,604 | ||||
Strategic Income Fund | ||||||||
Hong Kong Dollar | $ | 1 | $ | 1 | ||||
Ultra Growth Fund | ||||||||
Canadian Dollar | $ | 159,370 | $ | 155,086 | ||||
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 and estimated expenses are accrued daily. Bond discount and premium are amortized using the interest method. To the extent dividends received from Real Estate Investment Trust securities include return of capital distributions, such distributions are recorded as income, and adjusted accordingly for tax purposes.
Short Sales — To a limited extent, the Equity Funds may enter into short sales whereby a fund sells a security it generally does not own (the security is borrowed), in anticipation of a decline in the security’s price. The initial amount of a short sale is recorded as a liability which is marked to market daily. Fluctuations in the value of the short liability are recorded as unrealized gains or losses. If a fund shorts a security when also holding a long position in the security (a “short against the box”), as the security’s price declines, the short position increases in value, offsetting the long position’s decrease in value. The opposite effect occurs if the security’s price rises. A fund realizes a gain or loss upon closing of the short sale (returning the security to the counterparty by way of purchase or delivery of a long position owned). The Funds are liable to the buyer for any dividends payable on securities while those securities are in a short position. These dividends are an expense of the Funds. The Funds designate collateral consisting of cash, U.S. government securities or other liquid assets sufficient to collateralize the market value of short positions.
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Options Transactions — The Equity Funds may buy and sell put and call options, write covered put and call options, including over-the-counter options, on portfolio securities where the completion of the obligation is dependent upon the credit standing of another party. The risk in writing a call option is that a Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that a fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that a fund pays a premium whether or not the option is exercised. A fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily and unrealized appreciation or depreciation is recorded. A fund will realize a gain or loss upon expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid.
Repurchase Agreements — The Funds may engage in repurchase transactions. Under the terms of a typical repurchase agreement, a fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase and the fund to resell the obligation at an agreed upon price and time. The market value of the collateral must be equal at all times to the total amount of the repurchase obligation, including interest. Generally, in the event of counterparty default, the fund has the right to use the collateral to offset losses incurred.
Federal Income Taxes — It is the Funds’ policy to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute substantially all taxable income to shareholders. Accordingly, no provision for federal income or excise taxes has been made.
Expenses — The Funds contract for various services mostly on a collective basis. Most expenses are directly attributable to each Fund and therefore are charged accordingly. Expenses that are not directly attributable to one or more Funds are allocated among applicable Funds on an equitable and consistent basis considering such things as the nature and type of expense and the relative net assets of the Funds.
Use of Management Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported changes in net assets during the reporting period. Actual results could differ from those estimates.
Guarantees and Indemnifications — In the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or 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 60 days 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, 2008, reclassifications were recorded as follows:
| Core Growth Fund | Emerging Markets Small Cap Fund | Global Science & Technology Fund | Heritage Growth Fund | Heritage Value Fund | International Growth Fund | |||||||||||||||||||
Increase (decrease) paid-in capital in excess of par | $ | 1,335,545 | $ | (30,037 | ) | $ | (888,375 | ) | $ | 620,654 | $ | — | $ | (935,324 | ) | |||||||||
Increase (decrease) undistributed net investment income | (2,477,228 | ) | 1,927 | 1,758,208 | (425,565 | ) | (2,263 | ) | 9,869,269 | |||||||||||||||
Increase (decrease) undistributed net realized gain (loss) | 1,141,683 | 28,110 | (869,833 | ) | (195,089 | ) | 2,263 | (8,933,945 | ) | |||||||||||||||
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| International Opportunities Fund | Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | |||||||||||||||||||
Increase (decrease) paid-in capital in excess of par | $ | — | $ | (6,757,284 | ) | $ | (943,508 | ) | $ | (2,972,552 | ) | $ | 85,108 | $ | 47,784 | |||||||||
Increase (decrease) undistributed net investment income | 53,800 | 6,259,420 | 1,319,024 | 4,115,014 | (298,326 | ) | (173,216 | ) | ||||||||||||||||
Increase (decrease) undistributed net realized gain (loss) | (53,800 | ) | 497,864 | (375,516 | ) | (1,142,462 | ) | 213,218 | 125,432 | |||||||||||||||
| Ultra Growth Fund | U.S. Treasury Fund | |||||||||||||||||||||||
Increase (decrease) paid-in capital in excess of par | $ | (6,762,686 | ) | $ | — | |||||||||||||||||||
Increase undistributed net investment income | 1,952,360 | — | ||||||||||||||||||||||
Increase undistributed net realized gain | 4,810,326 | — | ||||||||||||||||||||||
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, 2008 are summarized below:
| Core Growth Fund | Emerging Markets Small Cap Fund | Global Science & Technology Fund | Heritage Growth Fund | Heritage Value Fund | International Growth Fund | International Opportunities Fund | |||||||||||||||
Purchases | $ | 404,840,336 | $ | 68,518,309 | $ | 127,952,131 | $ | 65,844,161 | $ | 10,941,919 | $ | 167,421,334 | $ | 49,261,475 | |||||||
Sales | 751,117,569 | 16,482,652 | 181,401,943 | 149,277,585 | 8,075,413 | 298,992,686 | 27,917,851 | ||||||||||||||
| Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | Ultra Growth Fund | ||||||||||||||||
Purchases | $ | 255,204,911 | $ | 148,069,417 | $ | 457,365,111 | $ | 359,906,958 | $ | 20,829,015 | $ | 172,220,896 | |||||||||
Sales | 369,286,543 | 145,008,730 | 594,913,006 | 554,246,812 | 14,832,831 | 219,042,144 | |||||||||||||||
Purchases and sales of U.S. government securities in the U.S. Treasury Fund were $36,416,680 and $(44,484,685), respectively.
5. OPTIONS CONTRACTS WRITTEN
Options written activity during the year ended September 30, 2008 was as follows:
| Options Outstanding at Beginning of Period | Written | Closed | Exercised | Expired | Options Outstanding at End of Period | |||||||||||||||
Core Growth Fund | ||||||||||||||||||||
Premium amount | $ | — | $ | 102,799 | $ | (55,900 | ) | $ | — | $ | (46,899 | ) | $ | — | ||||||
Number of contracts | — | 200 | (100 | ) | — | (100 | ) | — | ||||||||||||
Global Science & Technology Fund | ||||||||||||||||||||
Premium amount | $ | — | $ | 35,850 | $ | (35,850 | ) | $ | — | $ | — | $ | — | |||||||
Number of contracts | — | 150 | (150 | ) | — | — | — | |||||||||||||
Heritage Growth Fund | ||||||||||||||||||||
Premium amount | $ | — | $ | 189,903 | $ | (80,390 | ) | $ | — | $ | (109,513 | ) | $ | — | ||||||
Number of contracts | — | 1,280 | (434 | ) | — | (846 | ) | — | ||||||||||||
Heritage Value Fund | ||||||||||||||||||||
Premium amount | $ | 3,542 | $ | 349,098 | $ | (161,757 | ) | $ | (190,883 | ) | $ | — | ||||||||
Number of contracts | 11 | 1,494 | (555 | ) | (950 | ) | — | |||||||||||||
International Opportunities Fund | ||||||||||||||||||||
Premium amount | $ | — | $ | 21,037 | $ | — | $ | — | $ | (21,037 | ) | $ | — | |||||||
Number of contracts | — | 143 | — | — | (143 | ) | — | |||||||||||||
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| SEPTEMBER 20, 2008 | ||
| Options Outstanding at Beginning of Period | Written | Closed | Exercised | Expired | Options Outstanding at End of Period | |||||||||||||||
Micro Cap Value Fund | ||||||||||||||||||||
Premium amount | $ | 91,902 | $ | 2,405,065 | $ | (1,322,555 | ) | $ | — | $ | (1,174,412 | ) | $ | — | ||||||
Number of contracts | 594 | 14,740 | (7,324 | ) | — | (8,010 | ) | — | ||||||||||||
Small Cap Value Fund | ||||||||||||||||||||
Premium amount | $ | — | $ | 1,648,058 | $ | (734,530 | ) | $ | — | $ | (913,528 | ) | $ | — | ||||||
Number of contracts | — | 4,077 | (1,555 | ) | — | (2,522 | ) | — | ||||||||||||
Strategic Income Fund | ||||||||||||||||||||
Premium amount | $ | — | $ | 2,573,867 | $ | (2,277,689 | ) | $ | — | $ | (296,178 | ) | $ | — | ||||||
Number of contracts | — | 16,149 | (13,519 | ) | — | (2,630 | ) | — | ||||||||||||
Ultra Growth Fund | ||||||||||||||||||||
Premium amount | $ | — | $ | 274,600 | $ | — | $ | — | $ | (274,600 | ) | $ | — | |||||||
Number of contracts | — | 1,940 | — | — | (1,940 | ) | — | |||||||||||||
6. FEDERAL INCOME TAX INFORMATION
As of September 30, 2008, 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 | Emerging Markets Small Cap Fund | Global Science & Technology Fund | Heritage Growth Fund | Heritage Value Fund | International Growth Fund | |||||||||||||||||||
Cost | $ | 685,610,592 | $ | 53,016,619 | $ | 105,572,522 | $ | 97,742,339 | $ | 4,447,590 | $ | 230,982,379 | ||||||||||||
Gross appreciation | $ | 87,608,851 | $ | 148,455 | $ | 4,703,147 | $ | 8,591,552 | $ | 117,061 | $ | 20,033,729 | ||||||||||||
Gross (depreciation) | (125,745,532 | ) | (17,127,492 | ) | (27,709,642 | ) | (9,889,063 | ) | (543,896 | ) | (58,654,822 | ) | ||||||||||||
Net depreciation | $ | (38,136,681 | ) | $ | (16,979,037 | ) | $ | (23,006,495 | ) | $ | (1,297,511 | ) | $ | (426,835 | ) | $ | (38,621,093 | ) | ||||||
| International Opportunities Fund | Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | |||||||||||||||||||
Cost | $ | 70,875,989 | $ | 401,882,925 | $ | 111,011,768 | $ | 702,631,508 | $ | 394,297,556 | $ | 27,177,214 | ||||||||||||
Gross appreciation | $ | 1,296,337 | $ | 48,884,060 | $ | 7,688,370 | $ | 133,536,198 | $ | 18,997,428 | $ | 506,014 | ||||||||||||
Gross (depreciation) | (14,801,281 | ) | (93,962,941 | ) | (19,744,717 | ) | (112,708,996 | ) | (84,789,356 | ) | (5,855,896 | ) | ||||||||||||
Net appreciation (depreciation) | $ | (13,504,944 | ) | $ | (45,078,881 | ) | $ | (12,056,347 | ) | $ | 20,827,202 | $ | (65,791,928 | ) | $ | (5,349,882 | ) | |||||||
| Ultra Growth Fund | U.S. Treasury Fund | |||||||||||||||||||||||
Cost | $ | 167,399,458 | $ | 113,880,196 | ||||||||||||||||||||
Gross appreciation | $ | 14,710,816 | $ | 6,881,187 | ||||||||||||||||||||
Gross (depreciation) | (34,569,906 | ) | (36,893 | ) | ||||||||||||||||||||
Net appreciation (depreciation) | $ | (19,859,090 | ) | $ | 6,844,294 | |||||||||||||||||||
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.
The FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”), in June 2006. FIN 48 permits the recognition of tax benefits of an uncertain tax position only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. The Funds adopted the provisions of FIN 48 on March 31, 2008. Management has reviewed the Fund’s tax positions for all open tax years, and concluded that adoption had no effect on the Fund’s financial position or results of operations. As of September 30, 2008, the Funds have recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions they have taken or expect to take in future tax returns. However, the conclusions regarding FIN 48 are subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance expected from FASB, and on-going analysis of tax laws, regulation, and interpretations thereof.
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The components of accumulated earnings on a tax basis as of September 30, 2008 were as follows:
| Core Growth Fund | Emerging Markets Small Cap Fund1 | Global Science & Technology Fund | Heritage Growth Fund | Heritage Value Fund | International Growth Fund | |||||||||||||||||||
Undistributed ordinary income | $ | 1,509,194 | $ | 29,714 | $ | — | $ | 164,629 | $ | 37,714 | $ | — | ||||||||||||
Undistributed capital gains | — | — | — | 223,369 | — | — | ||||||||||||||||||
Accumulated earnings | 1,509,194 | 29,714 | — | 387,998 | 37,714 | — | ||||||||||||||||||
Accumulated capital and other losses | (6,866,787 | ) | (4,482,499 | ) | (6,456,255 | ) | — | (466,111 | ) | (23,786,153 | ) | |||||||||||||
Other undistributed ordinary losses | — | — | (656,537 | ) | (522 | ) | (3,820 | ) | (6,446,639 | ) | ||||||||||||||
Net unrealized depreciation* | (38,137,115 | ) | (16,983,582 | ) | (23,006,863 | ) | (1,297,511 | ) | (426,835 | ) | (38,680,900 | ) | ||||||||||||
Total accumulated earnings | $ | (43,494,708 | ) | $ | (21,436,367 | ) | $ | (30,119,655 | ) | $ | (910,035 | ) | $ | (859,052 | ) | $ | (68,913,692 | ) | ||||||
| International Opportunities Fund | Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | |||||||||||||||||||
Undistributed ordinary income | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 91,310 | ||||||||||||
Undistributed capital gains | — | — | — | 1,539,212 | — | — | ||||||||||||||||||
Accumulated earnings | — | — | — | 1,539,212 | — | 91,310 | ||||||||||||||||||
Accumulated capital and other losses | (2,545,997 | ) | (16,271,491 | ) | (10,668,793 | ) | (1,429,868 | ) | (38,861,513 | ) | (1,766,910 | ) | ||||||||||||
Other undistributed ordinary gains/losses | (1,392,082 | ) | (332,841 | ) | (217,095 | ) | (100,930 | ) | (574,907 | ) | (13,654 | ) | ||||||||||||
Net unrealized appreciation (depreciation)* | (13,485,043 | ) | (45,092,408 | ) | (12,059,321 | ) | 20,718,024 | (65,793,863 | ) | (5,337,394 | ) | |||||||||||||
Total accumulated earnings | $ | (17,423,122 | ) | $ | (61,696,740 | ) | $ | (22,945,209 | ) | $ | 20,726,438 | $ | (105,230,283 | ) | $ | (7,026,648 | ) | |||||||
| Ultra Growth Fund | U.S. Treasury Fund | |||||||||||||||||||||||
Undistributed ordinary income | $ | — | $ | 53 | ||||||||||||||||||||
Undistributed capital gains | — | — | ||||||||||||||||||||||
Accumulated earnings | — | 53 | ||||||||||||||||||||||
Accumulated capital and other losses | (3,005,390 | ) | (4,601,615 | ) | ||||||||||||||||||||
Other undistributed ordinary losses | (20,910 | ) | — | |||||||||||||||||||||
Net unrealized appreciation (depreciation)* | (19,681,724 | ) | 6,844,293 | |||||||||||||||||||||
Total accumulated earnings | $ | (22,708,024 | ) | $ | 2,242,731 | |||||||||||||||||||
1 | Inception date of Fund was October 1, 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 | 2009 | 2010 | 2015 | 2016 | ||||||||
U.S. Treasury Fund | $ | 3,544,582 | $ | 831,495 | $ | 225,538 | $ | — | ||||
Emerging Markets Small Cap Fund | $ | — | $ | — | $ | — | $ | 158,461 | ||||
The Core Growth, Global Science and Technology, International Growth, Micro Cap, Small Cap Growth, Small Cap Value, Ultra Growth, Micro Cap Value, International Opportunities, Strategic Income, Heritage Value, and Emerging Markets Small Cap Funds had $6,866,787, $6,456,255, $23,786,153, $16,271,491, $1,429,868, $38,861,513, $3,005,390, $10,668,793, $2,545,997, $1,766,910, $466,111, and $4,234,038 of post-October capital losses. The Global Science & Technology, International Growth, Micro Cap, Micro Cap Value , Small Cap Growth, Small Cap Value, Ultra Growth, and International Opportunities Funds had $316,339, $136,229, $96,320, $100,930, $61,217, $20,910, $134,117, and $124,125 respectively, of post-October currency losses. The Global Science and Technology, International Growth, Micro Cap, Micro Cap Value, Small Cap Value, and International Opportunities Fund had $340,198, $6,310,410, $236,521, $82,978, $513,690, and $1,241,945 of post-October Passive Foreign Investment Company 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.
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The tax character of distributions paid during the year or period ended September 30, 2008 was as follows:
| 2008 | Core Growth Fund | Emerging Markets Small Cap Fund1 | Global Science & Technology Fund | Heritage Growth Fund | Heritage Value Fund | International Growth Fund | ||||||||||||
Ordinary income | $ | 9,254,596 | $ | 99,236 | $ | 6,265,922 | $ | — | $ | 55,924 | $ | 20,995,608 | ||||||
Capital gain | 196,051,701 | — | 11,168,273 | 14,407,067 | — | 47,903,587 | ||||||||||||
Total | $ | 205,306,297 | $ | 99,236 | $ | 17,434,195 | $ | 14,407,067 | $ | 55,924 | $ | 68,899,195 | ||||||
| 2008 | International Opportunities Fund | Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | ||||||||||||
Ordinary income | $ | 3,840,037 | $ | 4,999,978 | $ | 3,944,821 | $ | — | $ | 35,199,888 | $ | 2,956,671 | ||||||
Capital gain | 6,278,872 | 93,390,001 | 12,484,239 | 120,648,854 | 107,894,653 | 317,486 | ||||||||||||
Total | $ | 10,118,909 | $ | 98,389,979 | $ | 16,429,060 | $ | 120,648,854 | $ | 143,094,541 | $ | 3,274,157 | ||||||
| 2008 | Ultra Growth Fund | U.S. Treasury Fund | ||||||||||||||||
Ordinary income | $ | 4,736,134 | $ | 4,603,049 | ||||||||||||||
Capital gain | 27,565,914 | — | ||||||||||||||||
Total | $ | 32,302,048 | $ | 4,603,049 | ||||||||||||||
1 | Inception date of the Fund was October 1, 2007. |
The tax character of distributions paid during the period ended September 30, 2007 was as follows:
| 2007 | Core Growth Fund | Global Science & Technology Fund | Heritage Growth Fund | International Growth Fund | Heritage Value Fund1 | 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 Fund1 | Ultra Growth Fund | ||||||||||||
Ordinary income | $ | 2,745,719 | $ | 5,585,055 | $ | — | $ | 13,942,266 | $ | 2,956,671 | $ | 5,456,463 | ||||||
Capital gain | 64,975,198 | 12,810,726 | 92,697,704 | 75,189,464 | 317,486 | 15,688,974 | ||||||||||||
Total | $ | 67,720,917 | $ | 18,395,781 | $ | 92,697,704 | $ | 89,131,730 | $ | 3,274,157 | $ | 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 distributions paid may differ from that shown in the Statements of Changes in Net Assets due to short-term gains being treated as ordinary income for tax purposes.
SUPPLEMENTAL TAX INFORMATION (UNAUDITED):
The Funds hereby designate approximately, or the maximum amount needed, $196,051,701, $11,168,273, $14,867,646, $47,903,587, $6,278,872, $93,390,001, $12,484,239, $121,072,259, $107,979,761, $317,486, and $27,565,914 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.
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| WASATCH FUNDS — Notes to Financial Statements (continued) | ||
For the fiscal year ended September 30, 2008 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 extent dividends are paid during the calendar year 2008 complete information will be reported on shareholder’s 2008 Form 1099-DIV. The amount designated as qualified dividend income for the year or period ended September 30, 2008 will be at the highest allowable amount permitted by law.
Corporate shareholders should note for the year ended September 30, 2008, 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 are as follows:
| Core Growth Fund | Global Science & Technology Fund | International Opportunities Fund | Micro Cap Fund | Micro Cap Value Fund | Small Cap Value Fund | Strategic Income Fund | |||||||||||||||
Percentage | 38 | % | 17 | % | 1 | % | 7 | % | 7 | % | 20 | % | 19 | % |
7. RELATED PARTY TRANSACTIONS
Investment Advisory Fees — As the Fund’s investment advisor, the Advisor receives a monthly fee calculated on average daily net assets. The Advisor has contractually agreed to waive its fees and/or reimburse a Fund should a Fund’s operating expenses exceed a specified annual limitation through at least January 31, 2009. Investment advisory fees and fees waived, if any, for the year ended September 30, 2008 are disclosed in the Statements of Operations. Investment advisory fee and expense limitation annual rates are shown below.
| Core Growth Fund | Emerging Markets Small Cap Fund | Global Science & Technology Fund | Heritage Growth Fund | Heritage Value Fund | International Growth Fund | |||||||||||||
Advisory Fee | 1.00 | % | 1.75 | % | 1.50 | % | 0.70 | % | 0.70 | % | 1.50 | % | ||||||
Expense Limitation | 1.50 | % | 2.10 | % | 1.95 | % | 0.95 | % | 0.95 | % | 1.95 | % | ||||||
| International Opportunities Fund | Micro Cap Fund | Micro Cap Value Fund | Small Cap Growth Fund | Small Cap Value Fund | Strategic Income Fund | |||||||||||||
Advisory Fee | 2.00 | % | 2.00 | % | 2.00 | % | 1.00 | % | 1.50 | % | 0.70 | % | ||||||
Expense Limitation | 2.25 | % | 2.50 | % | 2.25 | % | 1.50 | % | 1.95 | % | 0.95 | % | ||||||
| Ultra Growth Fund | U.S. Treasury Fund | |||||||||||||||||
Advisory Fee | 1.25 | % | 0.50 | % | ||||||||||||||
Expense Limitation | 1.75 | % | 0.75 | % | ||||||||||||||
Affiliated Interests — An officer of the Funds owns approximately 38% of the shares outstanding of the Strategic Income Fund as of September 30, 2008.
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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, 2008 with “affiliated companies” as so defined:
| Share Activity | Market Value 09/30/08 | Dividends Credited to Income for the Fiscal Year ended 9/30/08 | Gain (Loss) Realized on Sale of Shares for the Fiscal Year ended 9/30/08 | |||||||||||||||
| Balance 9/30/07 | Purchases/ Additions | Sales/ Reductions | Balance 9/30/08 | |||||||||||||||
Micro Cap Fund | ||||||||||||||||||
AutoInfo, Inc. | 2,206,015 | — | 2,206,015 | — | * | — | $ | — | $ | (760,564 | ) | |||||||
Bri-Chem Corp. | 969,640 | — | 969,640 | — | * | — | — | (542,429 | ) | |||||||||
Tamalpais Bancorp** | 240,743 | 13,875 | — | 254,618 | 2,991,762 | 52,776 | — | |||||||||||
inTEST Corp. | 584,675 | — | 19,630 | 565,045 | 593,297 | — | (124,348 | ) | ||||||||||
SM&A | 1,436,475 | — | 1,436,475 | — | * | — | `— | (5,895,798 | ) | |||||||||
VNUS Medical Technologies, Inc. | 979,852 | 83,370 | 534,850 | 528,372 | * | 11,058,826 | — | 3,261,578 | ||||||||||
| $ | 52,776 | $ | (4,061,561 | ) | ||||||||||||||
Micro Cap Value Fund | ||||||||||||||||||
GuestLogix, Inc. | 2,146,615 | 113,285 | 637,804 | 1,622,096 | * | 1,725,715 | $ | — | $ | 214,277 | ||||||||
UltraShort Russell 2000 Growth ProShares | — | 35,000 | 35,000 | — | * | — | — | 164,284 | ||||||||||
| $ | — | $ | 378,561 | |||||||||||||||
Small Cap Value Fund | ||||||||||||||||||
MicroFinancial, Inc. | 670,108 | 72,515 | — | 742,623 | 2,948,213 | $ | 111,393 | $ | — | |||||||||
| * | No longer affiliated as of September 30, 2008. |
| **Name | changed from Epic Bancorp effective June 18, 2008. |
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, 2008, 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 | $ | 1,375,760 | 0.21 | % | |||||
Solar Capital, LLC | Common Stock | 3/7/07 | 13,200,900 | 12,012,819 | 1.86 | % | |||||||
| $ | 20,767,580 | $ | 13,388,579 | 2.07 | % | ||||||||
Emerging Markets Small Cap Fund | |||||||||||||
Sentula Mining Ltd. | Common Stock | 11/15/07 - 6/5/08 | $ | 852,010 | $ | 309,271 | 0.85 | % | |||||
Global Science & Technology Fund | |||||||||||||
Acusphere, Inc. | Warrants | 10/20/04 | $ | — | $ | — | — | ||||||
BlueArc Corp. | Warrants | 4/2/08 - 5/30/08 | — | — | — | ||||||||
BlueArc Corp., Series DD | Preferred Stock | 6/6/06 | 324,998 | 355,412 | 0.43 | % | |||||||
BlueArc Corp., Series FF | Preferred Stock | 5/30/08 | 628,066 | 628,066 | 0.76 | % | |||||||
Incipient, Inc., Series D | Preferred Stock | 2/7/06 | 139,219 | 35,047 | 0.04 | % | |||||||
Montagu Newhall Global Partners II-B, L.P. | LP Interest | 10/10/03 - 5/12/08 | 364,387 | 354,986 | 0.43 | % | |||||||
Point Biomedical Corp., Series A Pfd. | Preferred Stock | 12/6/07 - 12/7/07 | 21,508 | 197 | — | ||||||||
Xtera Communications, Inc., Series A-1 | Preferred Stock | 9/3/03 | 7,076 | 7,076 | 0.01 | % | |||||||
| $ | 1,485,254 | $ | 1,380,784 | 1.67 | % | ||||||||
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| WASATCH FUNDS — Notes to Financial Statements (continued) | ||
| Security Type | Acquisition Date | Acquisition Cost | Fair Value | Value as % of Net Assets | |||||||||
International Opportunities Fund | |||||||||||||
Club Cruise Entertainment & Travelling Services Europe N.V. | Warrants | 9/24/07 | $ | 280,622 | $ | — | — | ||||||
Star Asia Finance Ltd. | Common Stock | 2/22/07 - 4/18/08 | 850,290 | 327,969 | 0.59 | % | |||||||
| $ | 1,130,912 | $ | 327,969 | 0.59 | % | ||||||||
Micro Cap Fund | |||||||||||||
Cardica, Inc. | Warrants | 6/7/07 | $ | 19,380 | $ | 301,599 | 0.08 | % | |||||
Familymeds Group, Inc. | Warrants | 12/1/04 | — | — | — | ||||||||
Goldwater Bank, N.A. | Common Stock | 2/28/07 | 1,540,000 | 1,221,220 | 0.34 | % | |||||||
Point Biomedical Corp., Series A | Preferred Stock | 12/6/07 - 12/7/07 | 226,364 | 2,070 | — | ||||||||
| $ | 1,785,744 | $ | 1,524,889 | 0.42 | % | ||||||||
Micro Cap Value Fund | |||||||||||||
Acusphere, Inc. | Warrants | 10/20/04 | $ | — | $ | — | — | ||||||
Cardica, Inc. | Warrants | 6/7/07 | 9,302 | 144,768 | 0.15 | % | |||||||
Club Cruise Entertainment & Travelling Services Europe N.V. | Warrants | 9/24/07 - 10/4/07 | 213,265 | — | — | ||||||||
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 | 332,267 | 0.34 | % | |||||||
Idaho Trust Bancorp | Common Stock | 8/30/06 | 500,004 | 500,004 | 0.51 | % | |||||||
NeurogesX, Inc. | Warrants | 12/28/07 | 3,800 | — | — | ||||||||
Point Biomedical Corp., Series A | Preferred Stock | 12/6/07 - 12/7/07 | 45,272 | 414 | — | ||||||||
| $ | 1,190,643 | $ | 977,453 | 1.00 | % | ||||||||
Small Cap Growth Fund | |||||||||||||
Bravo Health, Inc., Series G | Preferred Stock | 11/1/04 | $ | 571,428 | $ | 851,665 | 0.12 | % | |||||
Fluidigm Corp., Series E | Preferred Stock | 12/22/06 | 2,500,000 | 1,931,250 | 0.26 | % | |||||||
Incipient, Inc., Series D | Preferred Stock | 2/7/06 | 1,860,778 | 468,431 | 0.06 | % | |||||||
Montagu Newhall Global Partners II-B, L.P. | LP Interest | 10/10/03 - 5/12/08 | 3,671,435 | 3,549,864 | 0.48 | % | |||||||
Montagu Newhall Global Partners III-B, L.P. | LP Interest | 3/16/06 - 6/27/08 | 840,000 | 703,298 | 0.10 | % | |||||||
Nanosys, Inc., Series D | Preferred Stock | 11/8/05 | 2,000,000 | 2,000,000 | 0.27 | % | |||||||
Orqis Medical Corp., Series D | Preferred Stock | 2/28/07 | 1,200,000 | 825,000 | 0.11 | % | |||||||
Point Biomedical Corp., Series A | Preferred Stock | 12/6/07 - 12/7/07 | 286,777 | 2,623 | — | ||||||||
TargetRX, Inc., Series D | Preferred Stock | 4/8/05 | 769,098 | 3,628 | — | ||||||||
Valera Pharmaceuticals, Inc. CSR VP003 | Common Stock | 2/1/06 - 2/2/06 | 243,922 | — | — | ||||||||
Valera Pharmaceuticals, Inc. Ureteral Stent | Common Stock | 2/1/06 - 2/2/06 | 162,615 | — | — | ||||||||
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 | 0.18 | % | |||||||
| $ | 15,606,053 | $ | 11,678,921 | 1.58 | % | ||||||||
Small Cap Value Fund | |||||||||||||
Solar Capital, LLC | Common Stock | 3/7/07 | $ | 7,079,100 | $ | 6,441,981 | 1.91 | % | |||||
Star Asia Finance Ltd. | Common Stock | 2/22/07 | 6,000,000 | 1,080,000 | 0.32 | % | |||||||
| $ | 13,079,100 | $ | 7,521,981 | 2.23 | % | ||||||||
Strategic Income Fund | |||||||||||||
Redcorp Ventures Ltd. | Corporate Bond | 7/5/07 | $ | 282,956 | $ | 211,129 | 0.96 | % | |||||
Solar Capital, LLC | Common Stock | 3/7/07 | 294,000 | 267,540 | 1.22 | % | |||||||
Star Asia Finance Ltd. | Common Stock | 2/22/07 - 4/28/08 | 619,710 | 311,031 | 1.42 | % | |||||||
| $ | 1,196,666 | $ | 789,700 | 3.60 | % | ||||||||
Ultra Growth Fund | |||||||||||||
Bravo Health, Inc., Series G | Preferred Stock | 11/1/04 | $ | 571,428 | $ | 851,665 | 0.59 | % | |||||
Farallon Resources Ltd. | Warrants | 12/21/06 | — | — | — | ||||||||
Montagu Newhall Global Partners II-B, L.P. | LP Interest | 10/10/03 - 5/12/08 | 3,279,467 | 3,194,869 | 2.22 | % | |||||||
Montagu Newhall Global Partners III-B, L.P. | LP Interest | 3/16/06 - 6/27/08 | 765,000 | 703,298 | 0.49 | % | |||||||
Nanosys, Inc., Series D | Preferred Stock | 11/8/05 | 500,001 | 500,001 | 0.35 | % | |||||||
Ophthonix, Inc., Series C | Preferred Stock | 9/23/05 | 500,000 | 500,001 | 0.35 | % | |||||||
TargetRX, Inc., Series D | Preferred Stock | 4/8/05 | 230,904 | 1,089 | — | ||||||||
TherOx, Inc., Series I | Preferred Stock | 7/7/05 | 1,000,000 | 1,557,119 | 1.08 | % | |||||||
Transoma Medical, Inc., Series B | Preferred Stock | 1/20/06 | 475,001 | 820,105 | 0.57 | % | |||||||
Xtera Communications, Inc., Series A-1 | Preferred Stock | 9/3/03 | 99,065 | 99,065 | 0.07 | % | |||||||
Zonare Medical Systems, Inc. | Warrants | 6/30/04 | — | — | — | ||||||||
Zonare Medical Systems, Inc., Series E | Preferred Stock | 6/30/04 | 1,000,000 | 895,441 | 0.62 | % | |||||||
| $ | 8,420,866 | $ | 9,122,653 | 6.34 | % | ||||||||
LP Limited Partnership Interest
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| SEPTEMBER 30, 2008 | ||
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, 2008 were $130,000, $1,300,000 and $1,170,000, 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, 2008 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, 2008 were $735,000 per Fund. Securities held by the Funds have been designated to meet these purchase commitments.
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, 2008 | |||||||||
Core Growth | $ | 6,853,156 | 45 | $ | 32,192 | 3.76 | % | $ | — | |||||
Global Science & Technology | 1,522,591 | 22 | 4,066 | 4.36 | % | — | ||||||||
Heritage Growth | 1,349,091 | 22 | 4,147 | 5.03 | % | — | ||||||||
Heritage Value | 75,000 | 3 | 17 | 2.80 | % | — | ||||||||
International Growth | 3,271,446 | 74 | 22,366 | 3.33 | % | 499,000 | ||||||||
Micro Cap Value | 246,400 | 5 | 182 | 5.33 | % | — | ||||||||
Small Cap Growth | 6,197,603 | 63 | 42,878 | 3.95 | % | — | ||||||||
Small Cap Value | 8,154,560 | 50 | 55,856 | 4.93 | % | — | ||||||||
Strategic Income | 252,531 | 16 | 568 | 5.06 | % | — | ||||||||
Ultra Growth | 2,039,837 | 43 | 9,960 | 4.09 | % | — | ||||||||
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| WASATCH FUNDS — Report of Independent Registered Public Accounting Firm | SEPTEMBER 30, 2008 | |
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 Emerging Markets Small Cap 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, and Wasatch-Hoisington U.S. Treasury Fund (constituting Wasatch Funds, Inc., hereafter referred to as the “Funds”) at September 30, 2008, the results of each of their operations for the year 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 audit. 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, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Kansas City, MO
November 24, 2008
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| WASATCH FUNDS — Directors and Officers (UNAUDITED) | SEPTEMBER 30, 2008 | |
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 Wasatch 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 | |||||
Independent Directors | ||||||||||
James U. Jensen, J.D., MBA c/o Wasatch Funds 150 Social Ave. 4th Floor Salt Lake City, Utah 84111 Age 64 | Director and Chairman of the Board | Indefinite Served as Chairman of the Board since 2004 and Director since 1986 | Chief Executive Officer of Clearwater Governance Group (an operating board governance consulting company) July 2008 to present; Co-Founder and Chairman of the Board of Intelisum, Inc. (a company pursuing computer and measurement technology and products) 2001 - 2008; 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.
Director of Cognigen Networks, Inc. (internet and relationship enabled marketing company) since December 2007.
Director of Bayhill Capital Corporation (telephone communications) since December 2007. | |||||
William R. Swinyard, Ph.D. c/o Wasatch Funds 150 Social Ave. 4th Floor Salt Lake City, Utah 84111 Age 68 | 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. c/o Wasatch Funds 150 Social Ave. 4th Floor Salt Lake City, Utah 84111 Age 66 | Director | Indefinite Served as Director since 2005 | Consultant since 2004 and Founder & Executive Director, Mortgage Asset Research Institute from 1990 to 2004. | 14 | None | |||||
Interested Director | ||||||||||
Samuel S. Stewart, Jr., Ph.D. CFA3 150 Social Hall Ave. 4th Floor Salt Lake City, UT 84111 Age 66 | 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 | |||||
1 | A 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. |
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| WASATCH FUNDS — Directors and Officers (continued) | SEPTEMBER 30, 2008 | |
| Name, Address and Age | Position(s) Held with Wasatch Funds | Term of Office and Length of Time Served | Principal Occupation(s) during Past 5 Years | |||
Officers | ||||||
Daniel D. Thurber 150 Social Hall Ave. 4th Floor Salt Lake City, UT 84111 Age 39 | 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. | |||
Russell L. Biles 150 Social Hall Ave. 4th Floor Salt Lake City, UT 84111 Age 40 | Chief Compliance Officer and Vice President | Indefinite 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. | |||
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. | |||
Eric Huefner 150 Social Hall Ave. 4th Floor Salt Lake City, UT 84111 Age 44 | Vice President | Indefinite Served as Vice President since February 2008. | Vice President for Wasatch Funds since February 2008; Director of Mutual Funds for the Advisor since June 2006; Business Director, Campbell Soup Company, March 2003 to May 2006. | |||
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.
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| WASATCH FUNDS — Supplemental Information (UNAUDITED) | SEPTEMBER 30, 2008 | |
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).
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| WASATCH FUNDS — Service Providers | SEPTEMBER 30, 2008 | |
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 and Cutler, LLP
111 West Monroe Street
Chicago, IL 60603
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
1055 Broadway, 10th Floor
Kansas City, MO 64105
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| WASATCH FUNDS — Guide to Understanding Financial Statements | SEPTEMBER 30, 2008 | |
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 99. These reports provide shareholders with important information that will help them evaluate the management and performance of their investments. It is the desire of Wasatch Funds to help shareholders stay in tune with their investments. If you have any questions about the information in this report, a shareholder services representative will be happy to assist you when you call 800.551.1700.
SCHEDULEOF INVESTMENTS
The holdings of each Wasatch Fund are detailed in the “Schedule of Investments.” This section provides a snapshot of the securities each Fund was invested in on the last day of the reporting period. The Wasatch Equity Funds invest primarily in Common Stocks of companies which are grouped together by industry. The Wasatch-Hoisington U.S. Treasury Fund invests primarily in U.S. Treasury securities. The Equity Funds will typically have only minor holdings in Short-Term Investments. At times the Funds may take temporary defensive positions by increasing cash or holdings in Short-Term Investments. Please see the prospectus under “Other Investment Strategies and Their Risks.”
STATEMENTSOF ASSETSAND LIABILITIES
These financial statements show the Assets and Liabilities of a Fund on the last day of the reporting period. A Fund’s Assets include the value of securities owned, amounts receivable for purchases of Fund shares (capital shares receivable), securities sold, interest and dividends, prepaid expenses and other assets. Liabilities are amounts owed for shareholder redemptions (capital shares payable), securities purchased, investment advisory fees and other expenses. Totaling up the assets and subtracting the liabilities results in a Fund’s Net Assets.
Net Assets consist of capital stock, paid-in capital in excess of par, undistributed net investment income or loss, undistributed net realized gain or loss on investments and net unrealized appreciation or depreciation on investments. Capital stock is stock authorized by a company’s charter and having par value, stated value or no par value. Par value is set by the company issuing the shares and has no relation to Net Asset Value. The par value of one share of each Wasatch Fund is $.01. Paid-in capital in excess of par is capital received from shareholders in exchange for Fund shares that exceeds the par value of the shares. For example, if you bought one share of a Fund for $10, $.01 would show as “Capital stock” on the books of the Fund, and $9.99 would be accounted for under “Paid-in capital in excess of par.” Undistributed net investment income or loss is the 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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| WASATCH FUNDS — Guide to Understanding Financial Statements | SEPTEMBER 30, 2008 | |
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 of expenses to average net assets 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 of net investment income to average net assets 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.
| CONTACT WASATCH | ||
TELEPHONE
800.551.1700
M - F, 7:00 a.m. to 7:00 p.m. CT
Automated Line, 24 Hours
U.S. MAIL
Wasatch Funds
P.O. Box 2172
Milwaukee, WI 53201-2172
OVERNIGHT MAIL
Wasatch Funds
803 West Michigan Street, Suite A
Milwaukee, WI 53233-2301
ONLINE
www.wasatchfunds.com
shareholderservice@wasatchfunds.com
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WWW.WASATCHFUNDS.COM
800.551.1700
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| 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, 2008 and September 30, 2007 were $263,400 and $228,953, 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, 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. The Registrant was not billed any fees by the independent registered public accounting firm for the fiscal year ended September 30, 2008 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.
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During the fiscal years ended September 30, 2008 and 2007, 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, 2008 and September 30, 2007 were $66,500 and $58,300, 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, 2008 and 2007, 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 years ended September 30, 2008 and September 30, 2007 were $2,500 and $2,500, respectively. 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.
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(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, 2008 and 2007 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 |
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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. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| WASATCH FUNDS, INC. | ||
| By: | /s/ Samuel S. Stewart, Jr. | |
| Samuel S. Stewart, Jr. | ||
| President (principal executive officer) of Wasatch Funds, Inc. | ||
Date: December 3, 2008
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: December 3, 2008
| By: | /s/ Eric Huefner | |
| Eric Huefner | ||
| Treasurer (principal financial and accounting officer) of Wasatch Funds, Inc. | ||
Date: December 3, 2008