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. Michael J. Radmer, Esq.
Wasatch Funds, Inc. Dorsey & Whitney LLP
150 Social Hall Avenue, 4th Floor 50 South Sixth Street, Suite 1500
Salt Lake City, Utah 84111 Minneapolis, Minnesota 55402-1498
Registrant's telephone number, including area code: (801) 533-0777
Date of fiscal year end: September 30
Date of reporting period: September 30, 2003
ITEM 1: REPORT OF SHAREHOLDER
FRONT COVER:
ANNUAL REPORT
September 30, 2003
[Logo: Wasatch Funds]
- Core Growth Fund - Global Science & Technology Fund -
- International Growth Fund - Micro Cap Fund - Micro Cap Value Fund -
- Small Cap Growth Fund - Small Cap Value Fund - Ultra Growth Fund -
- Wasatch-Hoisington U.S. Treasury Fund -
INSIDE FRONT COVER:
Cover Painting, "Upper Provo River" by John Hughes
5082 La Mancha Way, Taylorsville, Utah 84118 www.johnhughesstudio.com
TABLE OF CONTENTS
LETTER FROM THE INVESTMENT ADVISOR ............................................. 1
Wasatch Equity Funds ....................................................... 2
Wasatch-Hoisington U.S. Treasury Fund ...................................... 3
CORE GROWTH FUND PORTFOLIO SUMMARY ............................................. 4
Review of the Year ......................................................... 4
Average Annual Total Returns & Growth of a $10,000 Investment .............. 5
GLOBAL SCIENCE & TECHNOLOGY FUND PORTFOLIO SUMMARY ............................. 6
Review of the Year ......................................................... 6
Average Annual Total Returns & Growth of a $10,000 Investment .............. 7
INTERNATIONAL GROWTH FUND PORTFOLIO SUMMARY .................................... 8
Review of the Year ......................................................... 8
Average Annual Total Returns & Growth of a $10,000 Investment .............. 9
MICRO CAP FUND PORTFOLIO SUMMARY ............................................... 10
Review of the Year ......................................................... 10
Average Annual Total Returns & Growth of a $10,000 Investment .............. 11
MICRO CAP VALUE FUND PORTFOLIO SUMMARY ......................................... 12
Review Since Inception ..................................................... 12
Average Annual Total Returns & Growth of a $10,000 Investment .............. 13
SMALL CAP GROWTH FUND PORTFOLIO SUMMARY ........................................ 14
Review of the Year ......................................................... 14
Average Annual Total Returns & Growth of a $10,000 Investment .............. 15
SMALL CAP VALUE FUND PORTFOLIO SUMMARY ......................................... 16
Review of the Year ......................................................... 16
Average Annual Total Returns & Growth of a $10,000 Investment .............. 17
ULTRA GROWTH FUND PORTFOLIO SUMMARY ............................................ 18
Review of the Year ......................................................... 18
Average Annual Total Returns & Growth of a $10,000 Investment .............. 19
WASATCH-HOISINGTON U.S. TREASURY FUND PORTFOLIO SUMMARY ........................ 20
Review of the Year ......................................................... 20
Average Annual Total Returns & Growth of a $10,000 Investment .............. 21
FUND DISCLOSURES ............................................................... 22
SCHEDULE OF INVESTMENTS ........................................................ 24
STATEMENTS OF ASSETS AND LIABILITIES ........................................... 72
STATEMENTS OF OPERATIONS ....................................................... 78
STATEMENTS OF CHANGES IN NET ASSETS ............................................ 84
FINANCIAL HIGHLIGHTS ........................................................... 90
NOTES TO FINANCIAL STATEMENTS .................................................. 99
REPORT OF INDEPENDENT AUDITORS ................................................. 114
DIRECTORS AND OFFICERS ......................................................... 116
GUIDE TO UNDERSTANDING FINANCIAL STATEMENTS .................................... 118
Annual Report..........
WASATCH FUNDS, INC.
P.O. Box 2172
Milwaukee,WI 53201-2172
800.551.1700
LETTER FROM THE INVESTMENT ADVISOR
SEPTEMBER 30, 2003
FELLOW SHAREHOLDERS:
On a recent weekend, when I drove up a winding road into the Wasatch
mountains to enjoy the brilliant fall colors, I thought about the many twists
and turns the stock market has taken during the 40 years I have been investing.
I have never been able to predict, with any degree of certainty, which way
stock prices will go next. Investment performance over short periods follows the
rise and fall of stock prices--a course as erratic as a mountain road.
Everyone wants great performance.Fund managers attract a lot of
attention when they have outstanding short-term performance. But is performance
really what we owe our shareholders? How can we promise great performance when
so much of it depends on the whims of the market or economic conditions that we
have no ability to control?
While short-term performance may be driven by any number of
unpredictable forces, we believe that over the long term stock prices are driven
by earnings growth. That is why at Wasatch, rather than focus on the direction
of stock prices or the economy, we focus on finding and investing in companies
we believe have the potential to grow earnings over time.
WE BELIEVE WE OWE SHAREHOLDERS A SYSTEMATIC, CAREFUL APPROACH TO
PICKING STOCKS THAT IS EXECUTED WITH DISCIPLINE.
Wasatch was founded on the premise that investing in small company
stocks may offer the potential for above average long-term returns for two
reasons. First, we believe small companies can grow faster for a longer time
than large companies. Second, the research of most Wall Street analysts is
focused on large companies. As a result, there is a general lack of information
about small companies that often causes their stocks to be inefficiently
priced. In our opinion, it is this growth potential and inefficient pricing that
makes small companies attractive investments.
While we can't promise performance, we can promise that Wasatch is
committed to consistently pursuing the investment strategies of each of our
Funds. We believe these strategies are based on sound principles that have the
potential to help shareholders achieve their long-term investment goals.
There's an ad I've seen recently comparing mail carriers to
professional ath-
Annual Report 1
letes. Pro athletes often celebrate making a basket or scoring a touchdown--in
other words, doing their jobs. On the other hand, the mail carrier doesn't
celebrate the act of putting the mail in the box. At Wasatch, we think of
ourselves more like mail carriers. We want to do our jobs. We expect to do our
jobs well. We can't promise you that the envelope we drop through the slot will
contain a check, but you can feel free to celebrate if it does. We won't be
celebrating. We were just doing our jobs.
WASATCH EQUITY FUNDS
What a ride the last 12 months have been! A year ago the stock market
was in the doldrums. The war with Iraq was looming, the economy seemed to take
two steps back for every one step forward, there was a spate of corporate
scandals and fear of SARS was widespread. Over the past 12 months, stock prices
have risen dramatically as uncertainties have been resolved.
The Wasatch Equity Funds ended the fiscal year with strong gains. We
believe this was the result of investing in companies with strong fundamentals
early in the year when prices were lower. This meant the Funds were well
positioned to benefit from rising stock prices.
In the past three months, however, the Equity Funds began to lag their
benchmark indices. This is not unusual. Historically, the Funds have typically
outperformed in down and moderately up markets. We think this is because we
focus on investing in profitable, high quality companies at rational prices.
These are the types of companies that shine in a weak environment.
In a strong market a rising tide lifts all boats. The stock prices of
our holdings tend to rise with the tide, but more speculative stocks usually
do better as momentum investors aggressively bid up stock prices. We may lag in
momentum driven markets because we do not care to invest in high-priced stocks
that do not meet our quality standards.
This was the position we found ourselves in at the end of the Funds'
fiscal year. In general, we were not invested in the companies--mostly
non-profitable technology and biotechnology companies--whose stock prices were
being driven up by momentum investors. We were also trimming positions that had
appreciated significantly to keep them in line with our assessment of their risk
versus reward potential. In some cases, this caused us to miss gains as stock
prices continued to rise.
We feel our actions were consistent with our efforts to position the
Funds to achieve long-term performance. As a result, we are not overly concerned
with the short-term underperformance.
EQUITY FUNDS OUTLOOK
We believe stock prices have run up in anticipation of a strong
economic recovery. It is true that economic news generally has been better.
Interest rates have been lowered and tax cuts have been enacted to stimulate the
economy. However, there is a real possibility that the recovery won't be as
strong as these signs indicate. One reason is the level of consumer and
corporate debt, which makes consumers and companies sensitive to borrowing. If
interest rates increase they will become even more sensitive. Consumers may
become hesitant to open their wallets. Ongoing turmoil in the Middle East,
the growing budget and trade deficits and the weak job market also weigh on the
economy. If the recovery is tepid, stock prices would have to adjust.
In nearly 30 years of investing, Wasatch has found that it is not
productive to focus our attention on the everchanging direction of stock
prices. In our opinion, the best defense for weak-
2 Annual Report
ness in the macro environment is to try to invest in the best companies we can
find at prices that make sense. The track records for our Equity Funds were
achieved by investing consistently in all types of market conditions including
the stock market crash of 1987 and the bursting of the Internet bubble in 2000.
We believe that adhering to our investment discipline is the best way to
achieve long-term results.
WASATCH-HOISINGTON
U.S. TREASURY FUND
For information about the performance and outlook of the U.S. Treasury
Fund, please see the portfolio summary beginning on page 20.
WORTH NOTING
We opened the new Micro Cap Value Fund on July 28, 2003. In its first
day of operation, the Fund took in $65 million in assets. This was well above
the $20 million at which we planned to close the Fund. On July 29, 2003, we
closed the Fund to new investors and existing shareholders. We are working to
invest the Fund's assets in companies that we believe will be compatible with
our long-term goal of creating wealth for shareholders.
Over the past 12 months, we have closed the Core Growth, Micro Cap,
Small Cap Growth, Small Cap Value and Ultra Growth Funds to existing
shareholders. These Funds were already closed to new investors. We recognize
that it may be frustrating to be unable to add to your investments. Please
understand, we made this choice in an effort to look after your interests and
preserve our potential to produce favorable long-term returns. We expect to
reopen these Funds to existing shareholders as soon as capacity permits.
If you have any questions about this report, fund closings, or your
investments, please visit our web site at www.wasatchfunds.com or call us at
800.551.1700.
You can refer to the Wasatch Funds prospectus for more information
about each Fund's investment objectives and strategies. Information about the
Micro Cap Value Fund's investment objectives and strategies can be found in the
Wasatch Micro Cap Value Fund prospectus.
We appreciate your investments with Wasatch Funds. We are committed to
consistently following a disciplined course for investing your assets. We
believe this is the best way we can help you as you strive to achieve your long-
term investment objectives. Thank you for investing with Wasatch.
Sincerely,
/s/ Samuel S. Stewart
- ------------------------------
Samuel S. Stewart, Jr.
Chairman of the Board
Annual Report 3
CORE GROWTH FUND-PORTFOLIO SUMMARY
SEPTEMBER 30, 2003
[PHOTO OF SAMUEL S. STEWART]
SAMUEL S. STEWART, JR, PHD, CFA--
LEAD MANAGER, JB TAYLOR--CO-MANAGER
The Wasatch Core Growth Fund seeks long-term growth of capital through
investments in stable companies that we believe are high quality and have the
potential to grow steadily for long periods of time. In addition, we seek to
invest in these companies at reasonable prices. The Core Growth Fund is the
most conservative of the Wasatch Equity Funds. However, the Fund will experience
volatility and is best suited for long-term investors.
REVIEW OF THE YEAR
The Core Growth Fund gained 31.68% in the fiscal year ended September
30, 2003 compared to a gain of 36.50% for the Russell 2000 Index, a widely used
measure for the performance of small company stocks. While we underperformed
the Index over the past 12 months, the Fund's long-term track record is much
better than that of the Index. The Fund's average annual return for five years
was 19.86% while the Index gained 7.46%. Over 10 years, the Fund averaged 16.43%
annually compared to 8.28% for the Index.
We are not terribly concerned to be lagging the Index at the end of our
fiscal year particularly when we compare the fundamentals of companies that have
been driving up the Index in the last three months to the fundamentals of
companies held by the Fund.
Earlier in the year amid volatile market conditions, we took
advantage of price opportunities to sell some holdings and replace them with
companies that we believed were better quality. The Fund was well positioned
when stock prices began to rise in a market rally sparked by renewed optimism
for the economy and the winding down of the war with Iraq. The Fund was helped
by the rise in market valuations overall, but also by a return to stronger
earnings growth in the companies we held. We also added to the number of
holdings over the past 12 months, going from about 50 to 70, as we have added
new baskets of small positions in industries we find intriguing.
The Fund's most heavily weighted sectors--consumer discretionary,
financial services and health care--made significant contributions to
performance. Technology, while not heavily weighted in the Fund, was the third
biggest contributor to performance led by UTStarcom, Inc., a
telecommunications network equipment provider. With the exception of consumer
staples, every sector represented in the Fund made a positive contribution to
performance.
The Fund was significantly over-weighted in the consumer discretionary
sector compared to the Russell 2000 Index. Our holdings outperformed those in
the Index. The individual stock that contributed the most to performance was our
largest holding, Rent-A-Center, Inc., a rent-to-own store operator. Other
consumer discretionary holdings that made significant contributions included SCP
Pool Corp., O'Reilly
4 Annual Report
CORE GROWTH FUND-PORTFOLIO SUMMARY
Automotive, Inc., Sonic Automotive, Inc. and Group 1 Automotive, Inc.
The Fund was slightly overweighted in financial services compared to
the Index and our holdings outperformed. United Rentals, Inc., a mid to heavy
equipment rental company, was the biggest contributor to performance from this
sector.
Health care was significantly over weighted in the Fund compared to
the Index. Our health care sector underperformed primarily because our health
care service providers could not keep pace with the biotechnology-related
companies that drove the performance of this sector of the Index.
The Fund's cash position is slightly higher than a year ago, as the
market rally has given us attractive opportunities to take profits. We look to
carefully invest the cash in companies we believe offer the potential for better
returns.
OUTLOOK
While the Fund may continue to underperform the Russell 2000 Index in
the short term, we believe it is well positioned to produce the long-term
results we seek. It has been our experience that when stable companies
consistently produce strong earnings growth they have the potential to be
rewarding investments over time.
Thank you for your investment in the Wasatch Core Growth Fund.
AVERAGE ANNUAL TOTAL RETURNS*
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
WASATCH CORE GROWTH FUND(1) 31.68% 19.86% 16.43%
----- ----- -----
* (1) Please refer to Fund disclosures on page 22.
GROWTH OF A $10,000 INVESTMENT
Russell 2000 Index Wasatch Core Growth Fund
9/30/93 10000 10000
9/30/94 10262 10382
9/30/95 12663 14500
9/30/96 14326 16296
9/30/97 19081 22420
9/30/98 15452 18500
9/30/99 18399 23547
9/30/00 22703 32848
9/30/01 17888 40281
9/30/02 16224 34749
9/30/03 22146 45759
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 in the Index.
Annual Report 5
GLOBAL SCIENCE & TECHNOLOGY FUND-PORTFOLIO SUMMARY
SEPTEMBER 30, 2003
[PHOTO OF AJAY KRISHNAN]
AJAY KRISHNAN, CFA--CO-MANAGER WITH
KAREY BARKER, CFA
The Global Science & Technology Fund seeks long-term growth of capital
by investing primarily in technology companies in the United States and at least
two other countries. The Fund is designed for aggressive long-term investors
willing to accept greater risk for the potential of higher returns.
REVIEW OF THE YEAR
The Global Science & Technology Fund ended the fiscal year on September
30, 2003 with a gain of 68.34%, while the Russell 2000 Growth Index, a widely
used measure for the performance of growth-oriented small company stocks, gained
41.73%. The Russell 2000 Technology Index, the component of the Russell 2000
Index that tracks the performance of technology-related stocks, gained 90.52%
and the technology-laden Nasdaq Composite Index gained 53.15%. Since inception,
the Fund has gained an average of 3.34% per year compared to the Russell 2000
Growth Index, which lost an average of 4.84%, the Russell 2000 Technology Index,
which lost 17.31%, and the Nasdaq, which lost 12.56%.
Stock prices on world markets and in the United States, particularly in
the technology sector, have risen dramatically from depressed levels a year
ago. In the U.S., this rally has been fueled by improving economic news, the
official end of the war with Iraq and diminished fear of SARS.
We were able to accomplish two things early in the fiscal year that we
believe positioned the Fund to benefit from the rally. We invested in companies
that our analysis indicated to be of high quality and we took advantage of
opportunities to invest at relatively low prices. Overall, our holdings were
strong performers throughout the year. The Russell 2000 Technology Index
outperformed the Fund primarily because the gains of more speculative
non-profitable issues surpassed those of our holdings in the last three months
of the period.
In addition, trimming or selling holdings whose stock prices had
appreciated significantly captured profits but raised the Fund's cash level and
created a drag on performance compared to the Russell 2000 Technology Index.
The industries that made the biggest contributions to the Fund's
12-month return were computer services, software and systems led by strong
performance from Cognizant Technology Solutions Corp., semiconductors and
components led by O2Micro International Ltd., communications technology led by
UTStarcom, Inc. and commercial services led by Wireless Facilities, Inc.
Health care services was the Fund's worst performing industry. The
Fund's largest holding, Accredo Health, Inc., reported lower than expected
earnings growth as the company struggled with increased competition and the
integration of a large acquisition. We continue to regard the company's
long term prospects as favorable.
6 Annual Report
GLOBAL SCIENCE & TECHNOLOGY FUND-PORTFOLIO SUMMARY
OUTLOOK
The market rally has caused the stocks of many interesting companies to
become overvalued making investing more challenging than it was a year ago.
We are taking our time to carefully analyze the risk versus reward
potential of each prospective investment as we work to invest the Fund's cash.
We believe our hands-on, fundamental research process is well suited to
finding companies that are high quality at prices that have room to appreciate.
Our focus is to invest in the types of companies that we believe have the
potential to help you achieve your long-term investment objectives.
We appreciate your investment in the Global Science & Technology Fund.
AVERAGE ANNUAL TOTAL RETURNS*
1 YEAR 5 YEARS SINCE INCEPTION **
------ ------- ------------------
WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND(2) 68.34% N/A 3.34%
------ ------ ----
* (2) Please refer to Fund disclosures on page 22.
GROWTH OF A $10,000 INVESTMENT
Russell 2000 NASDAQ Russell 2000 Wasatch Global Science &
Growth Index Composite Index Technology Index Technology Fund
12/19/2000 10000 10000 10000 10000
9/30/2001 7510 5725 5098 8020
9/30/2002 6146 4494 3092 6510
9/30/2003 8710 6882 5891 10959
**Inception: December 19, 2000.
The Russell 2000 Growth Index measures the performance of those Russell 2000
Index companies with higher price-to-book ratios and higher forecasted growth
values. The Russell 2000 Index is an unmanaged total return index of the small-
est 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 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 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 in these indexes.
Annual Report 7
INTERNATIONAL GROWTH FUND-PORTFOLIO SUMMARY
SEPTEMBER 30, 2003
[PHOTO OF MIKE GERDING]
MIKE GERDING, CFA--LEAD MANAGER
The International Growth Fund seeks long-term growth of capital by
investing in foreign companies in at least three different developed countries.
The Fund is designed for aggressive long-term investors who can tolerate greater
risks and volatility.
REVIEW OF THE YEAR
The International Growth Fund gained 36.27% in the 12 months ended
September 30, 2003. Despite this strong showing, the Fund failed to keep pace
with the MSCI World Ex-U.S. Small-Cap Index, a widely used measure for the
performance of foreign small company stocks, which gained 41.53%.
World markets experienced a dramatic turnaround similar to what has
occurred in the U.S. Over the course of a year, markets around the world rose as
global economic news improved.
There were two primary reasons for the Fund's underperformance of the
Index. The first was being underweighted in the Japanese market. Our weighting
was less than half that of the Index despite increasing our Japanese holdings
significantly during the year. On September 30, Japan was the most heavily
represented country in the Fund. Our low exposure held back the Fund's
performance relative to the Index as Japan was one of the world's best
performing major markets over the past 12 months.
Holding too much cash in a rising market was the second reason for the
Fund's underperformance. The Fund's cash position was the result of trimming
holdings that had appreciated in value and our desire to invest in companies
that we believe have superior growth potential at rational prices. We believe
our long-term results will potentially be better for following our discipline
than if we had invested for the sake of using up cash.
The Fund is well diversified. As of September 30, we held about 80
companies in 22 countries. In addition to Japan, other large country weights
were Canada, the United Kingdom and Germany.
In many areas of the world our holdings have seen accelerating
revenue and earnings growth. They remain attractive investments as we believe
strong fundamentals will support higher stock prices. We are also finding
emerging markets in Asia and elsewhere to be great hunting grounds for growing
small companies.
Compared to the Index, the Fund was notably overweighted in health
care and consumer discretionary. Typically, we will be underweighted in the
financials, industrials and materials sectors because we generally find
companies with better growth potential in other sectors. It is worth noting that
every sector in the Fund contributed positively to performance.
Our health care holdings significantly outperformed led by Elekta AB, a
Swedish company that provides radiation treatment equipment, and Powder-Ject
Pharmaceuticals Plc, a United Kingdom biotechnology company.
The Fund's consumer discretionary sector also did better than that of
the
8 Annual Report
INTERNATIONAL GROWTH FUND-PORTFOLIO SUMMARY
Index. Our largest holding, Puma AG, a German shoe and apparel company, was the
biggest contributor to performance.
Many of our information technology holdings performed well throughout
the year. Tandberg ASA and Celarem Technology Inc. were the notable exceptions
and were the primary reason this sector of the Fund did not do as well as that
of the Index. These two investments have been sold.
Many of the world's currencies strengthened against the U.S. dollar
throughout the 12-month period. This benefited the Fund's holdings that were
denominated in those currencies.
OUTLOOK
We feel that the companies held by the Fund are among the best small
companies in the world. We are confident that our intensive research process
is well suited to identifying companies that have the potential to successfully
compete and expand their markets around the world. It has been our experience
that these types of companies have the potential to reward shareholders over
time.
We look forward to serving you as you work toward your long-term
investment objectives. Thank you for investing in the Wasatch International
Growth Fund.
AVERAGE ANNUAL TOTAL RETURNS*
1 YEAR 5 YEARS SINCE INCEPTION **
------ ------- ------------------
WASATCH INTERNATIONAL GROWTH FUND(3) 36.27% N/A 16.02%
----- --- -----
*(3) Please refer to Fund disclosures on page 22.
GROWTH OF A $10,000 INVESTMENT
MSCI World Ex-U.S. Wasatch International
Small-Cap Index Growth Fund
6/28/2002 10000 10000
6/30/2002 10146 10000
9/30/2002 8505 8850
12/31/2002 8530 9430
3/31/2003 8295 8610
6/30/2003 10370 10510
9/30/2003 12037 12060
** Inception: June 28, 2002.
The MSCI World Ex-U.S. Small-Cap Index is an unmanaged index that measures the
performance of stocks with market capitalizations between U.S. $200 million and
$800 million across 23 developed markets, excluding the United States. You
cannot invest in the Index.
Anuual Report 9
MICRO CAP FUND-PORTFOLIO SUMMARY
SEPTEMBER 30, 2003
[PHOTO OF ROBERT GARDINER]
ROBERT GARDINER, CFA--LEAD MANAGER
The Micro Cap Fund seeks long-term growth of capital through
investments in growing companies with market capitalizations of less than $1
billion at the time of purchase. The Fund is best suited for long-term investors
who can tolerate the greater risks and volatility that are inherent with
investments in micro cap stocks.
REVIEW OF THE YEAR
In the fiscal year ended September 30, 2003, the Micro Cap Fund
returned 50.28% compared to 36.50% for the Russell 2000 Index, a widely used
measure for the performance of small company stocks. Over the past five
years, the Fund has averaged 31.22% annually compared to the Index's 7.46%.
Since inception in 1995, the Fund has averaged 28.69% annually compared to the
Index's 8.26% average annual return over the same period.
The Fund benefited from our efforts to invest in high quality companies
at low prices early in the fiscal year. Stock prices rebounded from depressed
levels as economic news improved and the uncertainties of war and SARS lifted.
We tend to agree with concerns that market sentiment has swung from
being unreasonably pessimistic 12 months ago to being overly optimistic in the
last three months.
Companies that recently have driven the performance of the Russell 2000
Index generally are lower quality than companies we like to invest in. While our
insistence on quality kept us out of these companies, it also caused the Fund to
slightly lag the Index in the three months ended September 30.
On a related note, we ended the fiscal year with more cash than usual
as the result of trimming strong performing holdings and because it has become
harder to find high quality companies at reasonable prices. We expect to invest
the cash but we think it is wise to take our time to find companies that meet
our quality and valuation criteria.
Throughout the year, we drew upon the knowledge of our International
Team to help us find attractive growth companies at reasonable prices outside
the United States. As a result, we have increased the Fund's international
holdings to around 10%, including American Depositary Receipts (ADRs) and
foreign securities listed in the U.S.
The Fund's performance over the past 12 months was driven primarily by
three sectors--technology, consumer discretionary and health care, although
every sector in the Fund made a positive contribution to performance.
The comeback of technology stocks over the past 12 months illustrates
the dramatic shift in market sentiment. The Fund was overweighted in technology
compared to the Index. While the technology sector was the biggest contributor
to the Fund's performance our holdings slightly underperformed those of the
Index.
We were overweighted compared to the Index in the consumer
discretionary
10 Annual Report
MICRO CAP FUND-PORTFOLIO SUMMARY
sector and our holdings substantially outperformed led by a couple of business
services companies and the majority of our retailers, which continued to do
well.
Our average weighting in health care was nearly three times that of the
Index and contributed over 10% to the Fund's performance. However, the Fund's
health care holdings did not do as well as those in the Index. The biggest
detractor from the Fund's performance was ICU Medical, Inc., a maker of
disposable connectors for intravenous therapy. The biggest contributor was
American Healthways, Inc., a provider of disease management services.
OUTLOOK
While the Fund may continue to lag in the near future if stock prices
continue to run up, we believe this will be of little consequence over the
long-term.
We believe that long-term results will be most heavily influenced by
how successful we are at investing in high quality companies at reasonable
prices. We believe that paying strict attention to the quality and valuation of
the companies we invest in is the best way we can help you as you strive to
achieve your long-term investment goals.
We appreciate your investment in the Wasatch Micro Cap Fund.
AVERAGE ANNUAL TOTAL RETURNS *
1 YEAR 5 YEARS SINCE INCEPTION **
------ ------- ------------------
WASATCH MICRO CAP FUND(4) 50.28% 31.22% 28.69%
----- ----- -----
*(4) Please refer to Fund disclosures on page 22.
GROWTH OF A $10,000 INVESTMENT
Russell 2000 Index Wasatch Micro Cap Fund
6/19/95 10000 10000
9/30/95 11042 13600
9/30/96 12492 15750
9/30/97 16638 22771
9/30/98 13474 20779
9/30/99 16044 28619
9/30/00 19796 46900
9/30/01 15598 54556
9/30/02 14147 53788
9/30/03 19310 80832
** Inception: June 19, 1995.
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 in the Index.
Annual Report 11
MICRO CAP VALUE FUND-PORTFOLIO SUMMARY
SEPTEMBER 30, 2003
[PHOTO OF JOHN MALOOLY AND BRIAN BYTHROW]
JOHN MALOOLY, CFA AND BRIAN BYTHROW, CFA--
CO-MANAGERS WITH ROBERT GARDINER, CFA
The Micro Cap Value Fund seeks long-term growth of capital through
investments in companies with market capitalizations of less than $750 million
whose stocks are selling at a substantial discount to what we believe is the
company's underlying value. The Fund is designed for long-term investors who
have assessed their tolerance for risk and volatility.
REVIEW SINCE INCEPTION
The Micro Cap Value Fund gained 4.50% since inception on July 28, 2003
through September 30, 2003 compared to a gain of 3.16% for the Fund's benchmark,
the Russell 2000 Index, a widely used measure for the performance of small
company stocks. While this is too short a time period to be a meaningful
indicator of long-term performance, we are pleased to have gotten off to a
good start particularly in a rising market that made finding undervalued micro
cap companies a challenge.
On July 28, the Fund's first day of operation, we took in over $65
million in assets. On July 29, we closed the Fund to new investors and existing
shareholders to control the asset level.
The Micro Cap Value Fund's approach to investing applies Wasatch's
philosophy of using intensive fundamental research to understand the prospects
of individual companies and assess their investment potential. The
distinguishing feature of this Fund is that we are more sensitive to valuation
than the other Wasatch Equity Funds with the exception of the Small Cap Value
Fund. As of September 30, we had invested 65% of the Fund's assets.
The Fund was underweighted in all sectors compared to the Russell 2000
Index as we worked steadily throughout the period to invest the Fund's assets.
We have chosen the Russell 2000 Index rather than the Russell 2000
Value Index as a benchmark for the Fund because while we will focus on investing
in micro cap companies that we believe to be undervalued, we do not expect to
invest a significant portion of the Fund's portfolio in traditional value
sectors such as basic industries. Rather, we expect to focus on finding
undervalued growth stocks in sectors where the Wasatch Research Team has
traditionally invested--health care, technology and consumer discretionary. We
believe we can find undervalued companies in these sectors, as micro caps
traditionally have lower trading volume and/or lack coverage by Wall Street
analysts.
We have identified four general categories that describe the types of
companies we may find attractive. First, we expect to invest significant
assets in companies where new product cycles or growth opportunities are not
fully reflected in the stock price. Second, we look for companies with solid
balance sheets and strong growth prospects that have fallen out of favor due to
conditions in the macro environment. Third, we research growing micro cap
compa-
12 Annual Report
MICRO CAP VALUE FUND-PORTFOLIO SUMMARY
nies to determine whether they have positive attributes that could attract
institutional ownership--implying price appreciation once discovered. Fourth, we
expect to invest a small percentage of the Fund's assets in companies whose
stock prices have been unreasonably beaten down due to market events and low
trading volume.
It is interesting to note that we are finding good values on micro cap
companies overseas and expect investments in non-U.S. listed securities to be
close to the Fund's 15% limitation. In fact, three of the Fund's 20 top
contributors since inception were foreign securities.
OUTLOOK
The stock prices of small and micro cap companies have risen
considerably in 2003 making it more challenging to find undervalued micro cap
companies. Nevertheless, we believe our bottom-up investment discipline is equal
to this task. We are working hard to find micro cap companies with the potential
to be rewarding long-term investments.
We appreciate the trust you have shown by investing in this new Fund.
AVERAGE ANNUAL TOTAL RETURNS*
1 YEAR 5 YEARS SINCE INCEPTION**
------ ------- -----------------
WASATCH MICRO CAP VALUE FUND(4) N/A N/A 4.50%
--- --- ----
*(4) Please refer to Fund disclosures on page 22.
GROWTH OF A $10,000 INVESTMENT
Russell 2000 Index Wasatch Micro Cap Value Fund
7/28/2003 10000 10000
7/31/2003 10049 10000
8/31/2003 10510 10250
9/30/2003 10316 10450
**Inception: July 28, 2003. Return since inception is not annualized.
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 in the Index.
Annual Report 13
SMALL CAP GROWTH FUND-PORTFOLIO SUMMARY
SEPTEMBER 30, 2003
[PHOTO OF JEFF CARDON]
JEFF CARDON, CFA--LEAD MANAGER
The Small Cap Growth Fund is best suited for long-term investors who
can tolerate the greater risks and volatility that are inherent with investments
in small company stocks.
REVIEW OF THE YEAR
The Small Cap Growth Fund gained 36.15% in the 12 months ended
September 30. The Russell 2000 Index, a widely recognized measure for the
performance of small company stocks, gained 36.50%. Over the past five years,
the Fund gained an average of 20.72% annually while the Index gained 7.46%. Over
10 years, the Fund gained an average of 14.39% annually, while the Index gained
8.28%.
Twelve months ago, the stock market had fallen precipitously providing
many opportunities to invest in high quality companies at reasonable prices.
Over the course of the year, the Fund has been rewarded for holding such
companies as stock prices rose dramatically in virtually every sector.
The Fund's most heavily weighted sectors-technology, consumer
discretionary and health care-were the biggest contributors to performance.
At the beginning of our fiscal year we were overweight the technology
sector as investors were frightened away by a weakening economy and poor order
visibility. Today's environment is very different, as technology stocks have had
a phenomenal run. In truth, we are a little unnerved at the price movements in
non-profitable technology companies. As a result of this exuberance (we won't
call it irrational yet!), we are notably underweight in technology today.
We were overweight in the consumer discretionary sector and our stocks
performed well. A number of the Fund's retail holdings were strong performers.
The Fund's largest holding, O'Reilly Automotive, Inc., an auto parts retailer/
distributor, was the best contributor. Increasing our position in O'Reilly when
prices were weak earlier in the year paid off as the company's fundamentals
stayed strong and the stock rebounded. A couple of women's retailers and
dollar discount stores were also among the top performers.
The Fund benefited from a sizeable allocation to health care where we
continue to find attractive investments. The Fund's health care sector did not
perform as well as that of the Index. The performance of the Index's health
care sector was driven by unprofitable companies, an arena we generally avoid.
From among our health care holdings, Odyssey Healthcare, Inc., a hospice care
provider, was the best contributor to performance. On the negative side, per-
formance was hurt by a few health care companies that saw some weakness in
demand. Accredo Health, Inc., CTI Molecular Imaging, and ICU Medical, Inc. are
the most prominent examples. We believe all three companies are high quality and
have promising futures.
The Fund is usually underweight in financial services because we
typically
14 Annual Report
SMALL CAP GROWTH FUND-PORTFOLIO SUMMARY
find better growth potential in other sectors. Not only were we under-weight,
but our small holdings also underperformed.
OUTLOOK
As we look at the small stock universe, our biggest challenge will be
to find and invest in companies with attractive valuations. Alternatively, we
feel good about the quality of the companies we hold and we believe the economic
backdrop will be strong enough to support very good earnings growth.
During the last quarter, we began to see momentum investors
aggressively bid up stock prices. This means the Fund may see a period of
underperformance relative to the Russell 2000 Index because we have little
interest in investing in stocks we deem too expensive. Instead of chasing
performance, we are going to pursue our time tested discipline of buying great
companies at rational prices. Hopefully, these observations will give you
insight as you plan your financial future.
On a final note, during the quarter, the Small Cap Growth Fund closed
to existing shareholders. We know this may be frustrating, but we think it pre-
serves our potential to deliver strong long run performance.
We appreciate your business and will continue working hard to earn your
trust.
AVERAGE ANNUAL TOTAL RETURNS*
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
WASATCH SMALL CAP GROWTH FUND(1) 36.15% 20.72% 14.39%
----- ----- -----
*(1) Please refer to Fund disclosures on page 22.
GROWTH OF A $10,000 INVESTMENT
Russell 2000 Index Wasatch Small Cap Growth Fund
9/30/93 10000 10000
9/30/94 10262 10685
9/30/95 12663 14445
9/30/96 14326 14287
9/30/97 19081 18495
9/30/98 15452 14956
9/30/99 18399 22278
9/30/00 22703 33334
9/30/01 17888 30463
9/30/02 16224 28169
9/30/03 22146 38352
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 in the Index.
Annual Report 15
SMALL CAP VALUE FUND-PORTFOLIO SUMMARY
SEPTEMBER 30, 2003
[PHOTO OF JIM LARKINS AND JOHN MAZANEC]
JIM LARKINS, MBA AND JOHN MAZANEC, MBA--
CO-MANAGERS WITH SAM STEWART, PHD, CFA
The Small Cap Value Fund seeks long-term growth of capital through
investments in companies with market capitalizations of less than $2.5 billion
whose stocks are selling at a substantial discount to what we believe is the
company's underlying value. The Fund is designed for long-term investors who
have assessed their tolerance for risk and volatility.
REVIEW OF THE YEAR
In the 12 months ended September 30, 2003, the Small Cap Value Fund
gained 43.93%, while the Russell 2000 Value Index, a widely recognized measure
for the performance of value-oriented small company stocks, gained 31.66%.
While we are pleased with these results, we are more focused on the long-term.
The Fund's average annual total return for five years was 24.69% and was well
above the Index's return of 10.84% over the same period.
Over the past 12 months, the Fund's performance was driven primarily by
two factors. The first, for which we can take no credit, was that stock prices
generally appreciated as economic news improved and concerns such as the Iraq
war and SARS lessened. The second we believe was due to our diligent research to
uncover outstanding small companies whose stock prices were unreasonably beaten
down earlier in the year. The Fund benefited from these investments as their
stock prices rose to more fully reflect what we believed to be the value of the
underlying companies.
Performance in the fiscal year was broadbased with every sector repre-
sented in the Fund making a positive contribution. The biggest contributors were
consumer discretionary and financial services, the Fund's most heavily
weighted sectors.
The Fund's average weighting in the consumer discretionary sector was
over 30% compared to the Russell 2000 Value Index's average weighting of nearly
16%. Our holdings, led by a number of retailers, did much better than those in
the Index. Our best contributor in this sector was The Finish Line, Inc., an
athletic and outdoor shoe retailer. This sector also held the Fund's biggest
detractor, Bally Total Fitness Holding Corp., a health club operator.
We were underweighted in the financial services sector and our
holdings performed better than those of the Index. The biggest contributor to
the Fund's performance was Friedman, Billings, Ramsey Group, Inc., a mortgage
real estate investment trust (REIT) with an investment banking subsidiary. Other
income producing securities were also strong performers.
Technology stocks gained momentum throughout the year. With an average
weighting of nearly 7%, we were slightly under the Russell 2000 Value Index's
average weighting of about 8.5%. Our technology holdings significantly out-
performed those of the Index. Our semiconductor holdings drove the per-
16 Annual Report
SMALL CAP VALUE FUND-PORTFOLIO SUMMARY
formance of this sector.
Strong performance over the past year meant that many of the Fund's
holdings became fully valued. We trimmed or sold these positions and have added
to or taken new positions in companies that we believe remain undervalued but
have significant potential for price appreciation. In some cases, the stock
prices of holdings we trimmed continued to rise. While we may have missed some
gains, we felt it was prudent to control their position sizes. Our desire is to
maintain a well-diversified portfolio in keeping with our conservative view of
the market's near-term prospects.
OUTLOOK
We believe we may be entering a period where stock price gains may be
more difficult to achieve than they were over the past year, particularly if the
economic recovery loses steam or corporate earnings are weaker than expected.
Rather than become overly concerned with macro conditions, we remain
focused on finding and investing in the kinds of undervalued small companies
that we believe will help you achieve your long-term investment objectives.
Thank you for your investment in the Small Cap Value Fund.
AVERAGE ANNUAL TOTAL RETURNS*
1 YEAR 5 YEARS SINCE INCEPTION**
------ ------- -----------------
WASATCH SMALL CAP VALUE FUND(1) 43.93% 24.69% 18.81%
----- ----- -----
*(1) Please refer to Fund disclosures on page 22.
GROWTH OF A $10,000 INVESTMENT
Russell 2000 Value Index Wasatch Small Cap Value Fund
12/17/1997 10000 10000
9/30/1998 8767 9000
9/30/1999 9278 12150
9/30/2000 10703 18218
9/30/2001 11303 21505
9/30/2002 11138 18849
9/30/2003 14664 27128
**Inception: December 17, 1997.
The Russell 2000 Value Index measures the performance of those Russell 2000
Index companies with lower price-to-book ratios and lower forecasted growth
values. The Russell 2000 Index is an unmanaged total return index of the
smallest 2,000 companies in the Russell 3000 Index, as ranked by total market
capitalization. The Russell 2000 Index is widely regarded in the industry as
accurately capturing the universe of small company stocks.You cannot invest in
the Index.
Annual Report 17
ULTRA GROWTH FUND-PORTFOLIO SUMMARY
SEPTEMBER 30, 2003
[PHOTO OF KAREY BARKER]
KAREY BARKER, CFA--LEAD MANAGER
AJAY KRISHNAN, CFA--CO-MANAGER
The Ultra Growth Fund seeks to invest in rapidly growing companies in
fast growing sectors of the economy. It pursues an aggressive investment
strategy designed for long-term investors who can tolerate greater risks and
volatility.
REVIEW OF THE YEAR
Over the past 12 months, the Ultra Growth Fund gained 53.93% and did
much better than the 41.73% return of Russell 2000 Growth Index, a widely used
measure for the performance of growth-oriented small company stocks.
The Fund gained an average of 20.49% annually over five years com-
pared to the Russell 2000 Growth Index's gain of 2.75%. Over 10 years, the Fund
gained an average of 15.34% annually compared to the Russell 2000 Growth Index's
gain of 4.45%.
During the past 12 months a dramatic shift in market sentiment has
occurred. Early on, the looming war with Iraq, weak economic data and fear of
SARS caused the outlook for stocks to be bleak. As the war concluded, economic
news improved and the SARS scare faded, enthusiasm for stocks returned.
Technology stock prices rose from beaten down levels to levels approaching those
of the dot-com craze. The Fund was well positioned for this shift because we
invested in fast growing companies, particularly in the technology sector, at
relatively low prices earlier in the year.
In the last three months, however, we feel that stock prices may have
gotten unrealistically high. In keeping with our discipline of holding
rationally priced companies, we trimmed strong performers including many
technology holdings. This reduced our technology weighting from over 35% a year
ago to just over 25% at September 30.
Trimming caused us to miss some gains as stock prices continued to
rise. This increased the amount of cash we held and meant the Fund slightly
underperformed the Russell 2000 Growth Index in the latest three month period.
Over the past 12 months, the technology sector was the biggest
contributor to the Fund's performance. The Fund was significantly overweighted
in technology compared to the Index. Despite the strong performance of our
holdings, they fell behind toward the end of the period, as more speculative
non-profitable issues began to drive the performance of the Index's
technology sector.
The health care sector was the second best contributor to the Fund's
performance. Our health care weighting was nearly twice that of the Index. Our
holdings underperformed primarily due to weakness in our largest holding,
Accredo Health, Inc., a provider of services for individuals with chronic
diseases. While we view the company's long-term prospects as favorable, Accredo
struggled with increased competition and the integration of a large
acquisition.
The consumer discretionary sector was the third biggest contributor to
the Fund's performance. We were under-
18 Annual Report
ULTRA GROWTH FUND-PORTFOLIO SUMMARY
weighted in this sector compared to the Index and our holdings significantly
outperformed led by a strong showing from our retailers.
The Fund's less heavily weighted sectors, except for financial
services, made positive contributions to performance.
OUTLOOK
The Ultra Growth Fund may continue to underperform the Russell 2000
Growth Index in the near future if companies that do not meet our quality or
valuation criteria continue to drive the Index's performance. We are willing to
accept short-term underperformance as we seek to invest in companies with strong
earnings growth at rational prices. We believe these types of companies offer
the best potential for achieving long-term gains. We expect that, as a result of
pursuing our strategy of investing in fast growing companies, the Fund will
remain overweighted in the technology and health care sectors.
Thank you for your investment in the Ultra Growth Fund.
AVERAGE ANNUAL TOTAL RETURNS*
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
WASATCH ULTRA GROWTH FUND(1) 53.93% 20.49% 15.34%
----- ----- -----
*(1) Please refer to Fund disclosures on page 22.
GROWTH OF A $10,000 INVESTMENT
Russell 2500 Growth Index Russell 2000 Growth Index Wasatch Ultra Growth Fund
9/30/93 10000 10000 10000
9/30/94 10211 10086 10485
9/30/95 13293 12931 17746
9/30/96 15420 14561 17295
9/30/97 19414 17962 21056
9/30/98 14689 13501 16410
9/30/99 20543 17906 22951
9/30/00 29786 23218 33660
9/30/01 17013 13331 29993
9/30/02 14027 10910 27071
9/30/03 19841 15462 41671
The Russell 2000 Growth Index measures the performance of those Russell 2000
Index companies with higher price-to-book ratios and higher forecasted growth
values. The Russell 2000 Index is an unmanaged total return index of the small-
est 2,000 companies in the Russell 3000 Index, as ranked by total market
capitalization. The Russell 2000 Index is widely regarded in the industry as
accurately capturing the universe of small company stocks.
The Russell 2500 Growth Index measures the performance of those Russell 2500
Index companies with higher price-to- book ratios and higher forecasted growth
values.
You cannot invest in these indexes.
Annual Report 19
WASATCH-HOISINGTON U.S. TREASURY FUND-PORTFOLIO SUMMARY
SEPTEMBER 30, 2003
[PHOTO OF VAN R. HOISINGTON]
VAN R. HOISINGTON--LEAD MANAGER
The U.S. Treasury Fund seeks to provide a rate of return that exceeds
the rate of inflation over a business cycle by investing in U.S. Treasury
securities with an emphasis on both income and capital appreciation.
REVIEW OF THE YEAR
The Fund returned 2.17% in the 2003 fiscal year, below the 5.41% gain
of the Lehman Brothers Aggregate Index. The Fund's average annual return of
8.58% for the past two years was much better than the Aggregate Index's average
annual return of 6.99%.
The Fund returned an average of 10.00% over the last three years, out-
performing the Aggregate Index by an average of 1.06% per year. For the last 10
years, the Fund's average annual return was a handsome 7.97%, outpacing the
Aggregate Index's average annual return of 6.92%.
These positive results notwithstanding, the 2003 market for long term
Treasury securities (maturities longer than 20 years) did not run true to form.
In approximately 80% of the calendar years since the Treasury market was
decontrolled in the early 1950s, long Treasury bond yields have moved in the
same direction as the inflation rate.
Over the past 12 months, inflation declined--in some cases to
historically low levels--but bond yields rose slightly. The core personal
consumption expenditures deflator illustrates the decline in inflation as the
deflator registered a slim 1.3% year-over-year rise, matching the smallest
increase in four decades.The fall in the inflation rate reflected recession-
like labor and production markets.
In spite of lower inflation, on September 30 the long Treasury bond
yield closed at 4.9%, up slightly from 4.7% a year earlier. Thus, the mild rise
in bond yields meant that the market value of the Fund's portfolio declined
slightly. When the multi-year trend points to moderating inflation, our strategy
is to position the Fund on the long end of the Treasury curve to capture
capital gains possibilities and lock in attractive yields on coupons, but
counter trend market movements are frequent, as we experienced over the past 12
months.
OUTLOOK
The U.S. economy remains beset with structural, rather than cyclical
problems. The private sector is deeply in debt. All major measures of consumer
debt are worse now than at the end of 2002. Increased borrowing has coincided
with further depletion of pent-up demand for vehicles and homes. For healthy,
long-term growth to be established, debt needs to be repaid by both the
business and consumer sectors.
Unfortunately, debt repayment will divert funds from the spending
stream. This means that any benefits from "reflationary" monetary and fiscal
policies will be fleeting and modest. In such an environment, unemployment
will
20 Annual Report
WASATCH-HOISINGTON U.S. TREASURY FUND-PORTFOLIO SUMMARY
continue to move higher. Debt repayment, combined with the current excess
labor and capital resources, will continue to push the inflation rate down-
ward. This means there is a continuing risk that the present disinflationary
environment can turn into deflation.
Large amounts of excess plant capacity suggest that capital spending
will remain weak for a considerable number of years. Although consumer spending
will get a boost from larger than normal income tax refunds in the first quarter
of next year, this boost will be transitory. Foreign inroads into the U.S.
economy are likely to persist, thus curtailing job growth and income expansion.
With this headwind of debt repayment, the resultant slow growth in
the economy means that the persistent trend to lower inflation and interest
rates will be sustained. Accordingly, your Fund continues to be invested in
long-term Treasury bonds and zero coupon Treasuries. We believe this is the
appropriate stance as we continue to focus on achieving the Fund's objective of
providing income and capital appreciation to shareholders over the long-term.
AVERAGE ANNUAL TOTAL RETURNS*
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
WASATCH-HOISINGTON U.S. TREASURY FUND 2.17% 5.48% 7.97%
---- ---- ----
*Please refer to Fund disclosures on page 22.
GROWTH OF A $10,000 INVESTMENT
Lehman Brothers Aggregate Index Wasatch-Hoisington U.S. Treasury Fund
9/30/93 10000 10000
9/30/94 9678 10151
9/30/95 11038 11213
9/30/96 11579 11708
9/30/97 12704 13258
9/30/98 14166 16479
9/30/99 14114 14724
9/30/00 15101 16172
9/30/01 17057 18256
9/30/02 18523 21065
9/30/03 19526 21522
The Lehman Brothers Aggregate Index covers the U.S. investment grade fixed rate
bond market, including government and corporate securities, agency mortgage
pass-through securities, and asset-backed securities. To be included in the
index the security must meet the following criteria: must have at least one year
to final maturity, regardless of call features; must have at least $100 million
par amount outstanding; must be rated investment grade or better by Moody's
Investors Service, Standard & Poor's, or Fitch Investor's Service; must be fixed
rate, although it can carry a coupon that steps up or changes to a predetermined
schedule; must be dollar-denominated and must be nonconvertible. All corporate
and asset-backed securities must be registered with the SEC; and must be
publicly issued. You cannot invest in the Index.
Annual Report 21
FUND DISCLOSURES
*PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.You should realize that
the principal value and investment return of an investment will fluctuate so
that shares, when redeemed, may be worth more or less than the original cost.
The "Average Annual Total Returns" tables on the preceding pages do not reflect
the deduction of taxes that you would pay on fund distributions or the
redemption of fund shares. The Advisor has absorbed, currently or in the past,
certain fund expenses, without which total returns would have been lower.
(1) Investments in small cap funds can be more volatile and loss of principal
could be greater than investing in large cap or more diversified funds.
(2) Investments in concentrated funds can be more volatile and loss of principal
could be greater than investing in more diversified funds. Investing in
foreign securities entails special risks, such as currency fluctuations and
political uncertainties, which are described in more detail in the
prospectus.
(3) Investing in foreign securities entails special risks, such as currency
fluctuations and political uncertainties, which are described in more detail
in the prospectus. Investments in small cap funds can be more volatile and
loss of principal could be greater than investing in large cap or more
diversified funds.
(4) Investments in micro cap funds can be more volatile and loss of principal
could be greater than investing in large cap or more diversified funds.
Investing in foreign securities entails special risks, such as currency
fluctuations and political uncertainties, which are described in more detail
in the prospectus.
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.
22 Annual Report
(This page intentionally left blank.)
Annual Report 23
CORE GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
COMMON STOCKS 93.1%
AIR TRANSPORT 0.4%
157,900 Expeditors International of Washington, Inc. $ 5,433,339
-------------
BANKS--OUTSIDE NEW YORK CITY 4.1%
645,920 Commerce Bancorp, Inc. 30,946,027
304,625 Doral Financial Corp. 14,317,375
194,750 TCF Financial Corp. 9,338,263
-------------
54,601,665
-------------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 0.4%
151,825 Charles River Laboratories International, Inc.* 4,659,509
-------------
CHEMICALS 0.9%
201,140 Cabot Microelectronics Corp.* 11,211,544
-------------
COMMUNICATIONS TECHNOLOGY 1.1%
470,825 UTStarcom, Inc.* 14,976,943
-------------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 1.8%
73,300 CACI International, Inc., Class A* 3,140,905
173,274 Cognizant Technology Solutions Corp.* 6,319,303
281,825 Macrovision Corp.* 5,205,308
249,125 SRA International, Inc., Class A* 9,324,749
-------------
23,990,265
-------------
DRUGS AND PHARMACEUTICALS 0.6%
391,400 Inveresk Research Group, Inc.* 7,769,290
19,400 Priority Healthcare Corp.* 398,476
-------------
8,167,766
-------------
EDUCATION SERVICES 0.5%
159,275 Bright Horizons Family Solutions, Inc.* 6,363,036
-------------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 0.9%
387,060 Integrated Circuit Systems, Inc.* 11,627,282
-------------
ENTERTAINMENT 0.9%
611,535 Movie Gallery, Inc.* 12,016,663
-------------
FINANCE COMPANIES 2.1%
435,475 Accredited Home Lenders Holding Co.* 9,454,162
1,063,125 Saxon Capital, Inc.* 18,221,963
-------------
27,676,125
-------------
24 Annual Report
CORE GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
FINANCE--SMALL LOAN 2.7%
3,423,581 AmeriCredit Corp.*+++ $ 35,262,884
-------------
FINANCIAL--MISCELLANEOUS 2.6%
913,458 Fidelity National Financial, Inc. 27,458,547
126,700 Triad Guaranty, Inc.* 6,218,436
-------------
33,676,983
-------------
FOODS 1.0%
562,900 NBTY, Inc.* 13,143,715
-------------
HEALTH CARE FACILITIES 4.2%
202,400 Laboratory Corporation of America Holdings* 5,808,880
518,500 Pharmaceutical Product Development, Inc.* 12,438,815
653,050 Renal Care Group, Inc.* 22,301,657
552,565 Sunrise Senior Living, Inc.* 14,493,780
-------------
55,043,132
-------------
HEALTH CARE MANAGEMENT SERVICES 10.2%
710,525 AMERIGROUP Corp.* 31,710,731
1,534,995 First Health Group Corp.* 40,140,119
2,151,136 Orthodontic Centers of America, Inc.* 16,950,951
997,775 Pediatrix Medical Group, Inc.* 45,947,539
-------------
134,749,340
-------------
HEALTH CARE SERVICES 7.2%
692,350 Accredo Health, Inc.* 19,378,877
1,406,400 Apria Healthcare Group Inc.* 38,507,232
392,949 Express Scripts, Inc.* 24,028,831
345,100 Lincare Holdings Inc.* 12,647,915
-------------
94,562,855
-------------
HOME BUILDING 4.1%
579,900 D.R. Horton, Inc. 18,962,730
323,512 M.D.C. Holdings, Inc. 17,469,648
37,483 NVR, Inc.* 17,485,820
-------------
53,918,198
-------------
HOUSEHOLD FURNISHINGS 0.2%
109,100 Select Comfort Corp.* 2,891,150
-------------
Annual Report 25
CORE GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
INSURANCE--MULTI-LINE 2.5%
517,225 Brown & Brown, Inc. $ 15,920,186
538,550 Hilb Rogal & Hamilton Co. 16,716,592
-------------
32,636,778
-------------
INVESTMENT MANAGEMENT COMPANIES 1.3%
1,069,800 MCG Capital Corp. 16,699,578
-------------
LEISURE TIME 3.5%
1,666,230 SCP Pool Corp.* 46,354,533
-------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 1.2%
570,963 ICU Medical, Inc.* 15,535,903
-------------
MEDICAL SERVICES 0.5%
312,165 Covance, Inc.* 6,986,253
-------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 11.6%
1,140,925 American Financial Realty Trust 16,087,043
1,192,950 Annually Mortgage Management, Inc. 19,588,239
1,984,575 Anworth Mortgage Asset Corp.++ 28,339,731
584,800 Capital Automotive 17,842,248
423,875 IMPAC Mortgage Holdings, Inc. 6,862,536
590,775 iStar Financial Inc. 23,010,686
669,775 MFA Mortgage Investments, Inc. 6,376,258
119,175 Novastar Financial, Inc. 6,848,987
1,112,800 Thornburg Mortgage, Inc. 28,187,224
-------------
153,142,952
-------------
RENTAL AND LEASING SERVICES--COMMERCIAL 0.6%
498,325 United Rentals, Inc.* 8,018,049
-------------
RENTAL AND LEASING SERVICES--CONSUMER 6.8%
2,773,070 Rent-A-Center, Inc.* 89,570,161
-------------
26 Annual Report
CORE GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- ----------- --------------
RETAIL 14.0%
260,812 Christopher & Banks Corp. $ 6,222,974
337,745 Dollar Tree Stores, Inc.* 11,314,457
420,600 Global Imaging Systems, Inc.* 10,346,760
854,625 Group 1 Automotive, Inc.* 29,518,748
258,245 Men's Wearhouse, Inc. (The)* 6,623,984
279,875 Michaels Stores, Inc. 11,407,705
1,704,030 O'Reilly Automotive, Inc.* 62,657,183
1,512,045 Sonic Automotive, Inc. 36,379,803
13,076,000 Texwinca Holdings Ltd. 10,298,988
--------------
184,770,602
--------------
SERVICES--COMMERCIAL 4.8%
2,635,021 Copart, Inc.* 28,458,227
365,150 FTI Consulting, Inc.* 6,335,352
372,025 Waste Connections, Inc.* 13,054,357
661,020 West Corp.* 15,725,666
--------------
63,573,602
--------------
UTILITIES--TELECOMMUNICATIONS 0.4%
299,250 Nextel Communications, Inc., Class A* 5,892,233
--------------
TOTAL COMMON STOCKS (COST $1,052,128,504) 1,227,153,038
--------------
Annual Report 27
CORE GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
PRINCIPAL
AMOUNT VALUE
- ----------- --------------
SHORT-TERM INVESTMENTS 7.5%
REPURCHASE AGREEMENT 7.5%
$99,377,000 Repurchase Agreement dated 9/30/2003, 0.50%
due 10/1/2003 with State Street Bank and Trust
Co. collateralized by $81,140,000 of United
States Treasury Bonds 6.875% due 8/15/2025;
value: $101,373,070; proceeds: $99,378,380
(cost $99,377,000) $ 99,377,000
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $99,377,000) 99,377,000
--------------
TOTAL INVESTMENTS (COST $1,151,505,504) 100.6% 1,326,530,038
LIABILITIES LESS OTHER ASSETS (0.6)% (8,188,625)
--------------
NET ASSETS 100.0% $1,318,341,413
==============
NUMBER OF
CONTRACTS VALUE
- --------- --------------
CALL OPTIONS WRITTEN 0.0%
3,000 AmeriCredit Corp., expiring 10/18/03,
exercise price $10.00 (premium $457,965) $ 255,000
==============
*Non-income producing
++Affiliated company (see Note 9).
+++All or a portion of this security has been committed as collateral for open
short positions, written options or purchase commitments.
See notes to financial statements.
28 Annual Report
GLOBAL SCIENCE & TECHNOLOGY FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
COMMON AND PREFERRED STOCKS 79.5%
BIOTECHNOLOGY RESEARCH AND PRODUCTION 4.3%
5,000 Cephalon, Inc.* $ 229,600
9,200 Ciphergen Biosystems, Inc.* 113,620
12,625 Diversa Corp.* 97,844
67,300 Harvard Bioscience, Inc.* 499,366
6,450 Neurochem, Inc.* (Canada) 77,851
49,300 QIAGEN N.V.* (Netherlands) 523,566
12,250 Taro Pharmaceutical Industries* (Israel) 690,410
-------------
2,232,257
-------------
CASINOS AND GAMBLING 0.7%
14,250 Shuffle Master, Inc.* 387,315
-------------
CHEMICALS 3.6%
33,775 Cabot Microelectronics Corp.* 1,882,619
-------------
COMMERCIAL SERVICES AND SUPPLIES 1.1%
15,500 Icon Plc ADR* (Ireland) 587,140
-------------
COMMUNICATIONS TECHNOLOGY 5.7%
49,625 Remec, Inc.* 506,175
220,750 Sirenza Microdevices, Inc.* 889,623
47,725 UTStarcom, Inc.*+++ (China) 1,518,132
6,528 Xtera Communications, Inc.*+ 7,076
-------------
2,921,006
-------------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 11.7%
56,350 Cognizant Technology Solutions Corp.* 2,055,085
54,017 EPIQ Systems, Inc.* 916,128
10,000 Macrovision Corp.* 184,700
12,150 Manhattan Associates, Inc.* 314,564
77,220 Nassda Corp.* 607,721
39,250 OPNET Technologies, Inc.* 489,840
23,850 PDF Solutions, Inc.* 268,313
53,778 PEC Solutions, Inc.* 793,763
3,700 QLogic Corp.* 173,937
6,800 SRA International, Inc., Class A* 254,524
-------------
6,058,575
-------------
COMPUTER TECHNOLOGY 1.5%
60,300 Verisity Ltd.* (Israel) 753,750
-------------
Annual Report 29
GLOBAL SCIENCE & TECHNOLOGY FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
COMPUTERS AND PERIPHERALS 0.5%
10,600 Komplett ASA (Norway) $ 251,765
-------------
DRUGS AND PHARMACEUTICALS 3.7%
4,800 Able Laboratories, Inc.* 89,808
3,175 Angiotech Pharmaceuticals, Inc.* (Canada) 138,589
11,775 Atrix Laboratories, Inc.* 242,447
7,050 Axcan Pharma, Inc.* (Canada) 96,303
25,550 Connetics Corp.* 461,433
14,050 ILEX Oncology, Inc.* 233,370
6,400 Inveresk Research Group, Inc.* 128,107
7,000 Northwest Biotherapeutics, Inc.*+ 1,680
1,775 Priority Healthcare Corp.* 36,459
21,650 Shire Pharmaceuticals Group Plc ADR*
(United Kingdom) 478,682
-------------
1,906,878
-------------
ELECTRICAL AND ELECTRONICS 1.0%
18,475 Plexus Corp.* 287,102
6,100 Power Integrations, Inc.* 202,764
-------------
489,866
-------------
ELECTRONIC EQUIPMENT AND COMPONENTS 0.8%
28,525 Flextronics International Ltd.* (Singapore) 404,485
-------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 2.3%
14,800 BW Technologies Ltd.* (Canada) 246,511
350,000 Innovalues Precision Ltd. (Singapore) 301,532
369,000 Unisteel Technology Ltd. (Singapore) 264,562
31,000 Venture Corporation Ltd. (Singapore) 358,485
-------------
1,171,090
-------------
ELECTRONICS 2.0%
107,025 Sanmina-SCI Corp.* 1,038,143
-------------
ELECTRONICS--INSTRUMENTS, GAUGES AND METERS 0.3%
27,925 Intest Corp.* 157,218
-------------
ELECTRONICS--MEDICAL SYSTEMS 0.3%
12,500 Endocardial Solutions, Inc.* 62,500
4,575 Possis Medical, Inc.* 71,370
-------------
133,870
-------------
30 Annual Report
GLOBAL SCIENCE & TECHNOLOGY FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 8.0%
19,875 ASE Test Ltd.* (Singapore) $ 172,714
31,000 Genus, Inc.* 127,720
5,850 Integrated Circuit Systems, Inc.*+++ 175,734
126,175 LogicVision, Inc.* 415,116
51,500 Micrel, Inc.* 627,785
68,475 Monolithic System Technology, Inc.* 575,875
3,150 Nova Measuring Instruments Ltd.* (Israel) 14,332
102,300 O2Micro International Ltd.* (Cayman Islands) 1,478,235
47,350 PLX Technology, Inc.* 300,009
20,100 PSi Technologies Holdings, Inc. ADR* (Philippines) 33,567
42,750 SiRF Technology Holdings, Inc., Series H*+ 222,300
-------------
4,143,387
-------------
FOOD AND DRUG RETAILING 0.6%
5,000 Sugi Pharmacy Co. Ltd. (Japan) 293,313
-------------
HEALTH CARE EQUIPMENT AND SUPPLIES 0.5%
2,450 Straumann Holding AG (Switzerland) 255,884
-------------
HEALTH CARE FACILITIES 2.5%
23,350 American Healthways, Inc.* 980,467
12,200 Pharmaceutical Product Development, Inc.* 292,678
-------------
1,273,145
-------------
HEALTH CARE MANAGEMENT SERVICES 0.5%
13,600 Computer Programs & Systems, Inc.* 245,208
-------------
HEALTH CARE SERVICES 7.3%
119,518 Accredo Health, Inc.*+++ 3,345,309
14,225 Chronimed, Inc.* 129,874
4,975 Express Scripts, Inc.* 304,221
-------------
3,779,404
-------------
MACHINERY--SPECIALTY 0.3%
10,450 ASML Holding N.V.* (Netherlands) 137,209
-------------
Annual Report 31
GLOBAL SCIENCE & TECHNOLOGY FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 6.6%
15,755 American Medical Systems Holdings, Inc.* $ 341,883
8,900 Biosite, Inc.* 252,582
31,275 CTI Molecular Imaging, Inc.* 461,932
3,400 Cyberonics, Inc.* 104,924
49,600 ICU Medical, Inc.* 1,349,616
3,950 Medamicus, Inc.* 41,119
17,775 Molecular Devices Corp.* 309,640
12,925 Techne Corp.* 410,886
6,225 Thoratec Corp.* 105,763
-------------
3,378,345
-------------
MISCELLANEOUS MATERIALS AND COMMODITIES 2.2%
51,825 Symyx Technologies, Inc.* 1,116,311
-------------
MISCELLANEOUS TECHNOLOGY 0.4%
11,025 RADWARE Ltd.* (Israel) 200,104
-------------
PHARMACEUTICALS 1.0%
2,150 Actelion Ltd.* (Switzerland) 184,279
4,200 Dr Reddy's Laboratories Ltd. ADR (India) 98,490
117,000 United Drug Plc (Ireland) 265,783
-------------
548,552
-------------
PRODUCTION TECHNOLOGY EQUIPMENT 2.0%
23,850 August Technology Corp.* 339,624
7,475 Nanometrics, Inc.* 90,597
30,875 Rudolph Technologies, Inc.* 596,196
-------------
1,026,417
-------------
SCIENTIFIC EQUIPMENT AND SUPPLIERS 1.3%
27,425 Biacore International AB ADR (Sweden) 658,474
-------------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 2.9%
18,525 SEZ Holding AG* (Switzerland) 534,173
69,120 Taiwan Semiconductor Manufacturing Company
Ltd. ADR*(Taiwan) 748,569
48,572 United Microelectronics Corp. ADR* (Taiwan) 219,060
-------------
1,501,802
-------------
SERVICES--COMMERCIAL 2.9%
12,525 Kroll, Inc.* 232,965
72,750 Management Network Group, Inc. (The)* 181,875
91,726 Wireless Facilities, Inc.* 1,091,539
-------------
1,506,379
-------------
32 Annual Report
GLOBAL SCIENCE & TECHNOLOGY FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
TELECOMMUNICATIONS EQUIPMENT 0.2%
1,850 Vimpel-Communications ADR* (Russian Federation) $ 112,591
-------------
UTILITIES--TELECOMMUNICATIONS 0.8%
14,625 Nextel Communications, Inc., Class A* 287,966
15,300 Nextel Partners, Inc., Class A* 120,105
-------------
408,071
-------------
TOTAL COMMON AND
PREFERRED STOCKS (COST $38,011,700) 40,960,573
-------------
WARRANTS 0.0%
4,275 SiRF Technology Holdings, Inc.*+ --
-------------
TOTAL WARRANTS (COST $0) --
-------------
PRINCIPAL
AMOUNT VALUE
- ----------- -------------
U.S. GOVERNMENT OBLIGATIONS 1.0%
$ 503,000 U.S. Treasury Bond, 5.25%, 11/15/28+++ $ 521,116
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $500,801) 521,116
-------------
SHORT-TERM INVESTMENTS 19.8%
REPURCHASE AGREEMENT 19.8%
10,216,000 Repurchase Agreement dated 9/30/2003, 0.50%
due 10/1/2003 with State Street Bank and Trust
Co. collateralized by $8,380,000 of United States
Treasury Bonds 6.75% due 8/15/2026; value:
$10,422,625; proceeds: $10,216,142
(cost $10,216,000) 10,216,000
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $10,216,000) 10,216,000
-------------
TOTAL INVESTMENTS (COST $48,728,501) 100.3% 51,697,689
Annual Report 33
GLOBAL SCIENCE & TECHNOLOGY FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
PRINCIPAL
AMOUNT VALUE
- --------- -------------
LIABILITIES LESS OTHER ASSETS (0.3)% $ (180,621)
-------------
NET ASSETS 100.0% $ 51,517,068
=============
NUMBER
OF SHARES VALUE
- --------- -------------
SECURITIES SOLD SHORT
2,800 NetScreen Technologies, Inc.* $ 62,244
7,325 Semiconductor HOLDRs Trust 251,980
7,825 Nasdaq-100 Index Tracking Stock* 253,687
-------------
TOTAL SECURITIES SOLD SHORT (PROCEEDS $572,836) $ 567,911
=============
*Non-income producing
+Security purchased in a private placement transaction or under Rule 144A of the
Securities Act of 1933 (see Note 10).
+++All or a portion of this security has been committed as collateral for open
short positions, written options or purchase commitments.
ADR American Depositary Receipt
See notes to financial statements.
34 Annual Report
GLOBAL SCIENCE & TECHNOLOGY FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
At September 30, 2003, Wasatch Global Science & Technology Fund's investments,
excluding short-term investments, were in the following countries:
COUNTRY %
- ------------------ -----
Canada 1.3
Cayman Islands 3.6
China 3.7
India 0.2
Ireland 2.1
Israel 4.0
Japan 0.7
Netherlands 1.6
Norway 0.6
Philippines 0.1
Russian Federation 0.3
Singapore 3.6
Sweden 1.6
Switzerland 2.3
Taiwan 2.3
United Kingdom 1.2
United States 70.8
-----
TOTAL 100.0%
=====
Annual Report 35
INTERNATIONAL GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
COMMON STOCKS 89.3%
AIRLINES 2.1%
52,350 WestJet Airlines Ltd.* (Canada) $ 941,707
-------------
AUTOMOBILES 3.7%
10,300 Gulliver International Co. Ltd. (Japan) 632,865
16,700 USS Co. Ltd. (Japan) 1,033,592
-------------
1,666,457
-------------
BANKS 0.8%
16,780 HDFC Bank Ltd. ADR (India) 360,770
-------------
BANKS--OUTSIDE NEW YORK CITY 0.7%
7,050 Doral Financial Corp. (Puerto Rico) 331,350
-------------
BEVERAGES 1.7%
18,940 Baron de Ley* (Spain) 761,213
-------------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 2.4%
5,150 Neurochem, Inc.* (Canada) 62,161
40,000 QIAGEN N.V.* (Netherlands) 424,800
10,000 Taro Pharmaceuticals Industries Ltd.* (Israel) 563,600
-------------
1,050,561
-------------
BUILDING PRODUCTS 0.5%
11,095 Munters AB (Sweden) 240,527
-------------
COMMERCIAL SERVICES AND SUPPLIES 4.1%
13,000 Icon Plc ADR* (Ireland) 492,440
37,700 Park24 Co. Ltd. (Japan) 710,141
35,400 Techem AG* (Germany) 609,103
-------------
1,811,684
-------------
COMMUNICATIONS TECHNOLOGY 1.4%
20,250 UTStarcom, Inc.* (China) 644,153
-------------
COMPUTERS AND PERIPHERALS 2.0%
120,000 Advantech Co. Ltd. (Taiwan) 188,528
138,800 Gemplus International SA* (Luxembourg) 239,309
10,750 Komplett ASA (Norway) 255,328
6,000 Logitech International SA* (Switzerland) 186,634
-------------
869,799
-------------
36 Annual Report
INTERNATIONAL GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
CONSTRUCTION MATERIALS 0.4%
131,638 Aggregate Industries Plc (United Kingdom) $ 186,534
-------------
DIVERSIFIED FINANCIAL SERVICES 0.8%
15,500 AWD Holding AG (Germany) 348,495
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES 0.4%
30,500 Colt Telecom Group Plc ADR* (United Kingdom) 186,050
-------------
ELECTRICAL EQUIPMENT 2.1%
378,000 TechTronic Industries Co., Limited (Hong Kong) 922,451
-------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 3.5%
25,000 BW Technologies Ltd.* (Canada) 416,404
275,000 Unisteel Technology Ltd. (Singapore) 197,167
81,280 Venture Corporation Ltd. (Singapore) 939,925
-------------
1,553,496
-------------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 2.0%
44,500 ASE Test Ltd.* (Singapore) 386,705
19,400 ASM International N.V.* (Netherlands) 286,150
15,100 O2Micro International Ltd.* (Cayman Islands) 218,195
-------------
891,050
-------------
FINANCIAL--MISCELLANEOUS 1.6%
38,500 Home Capital Group Inc., Class B (Canada) 723,915
-------------
FOOD AND DRUG RETAILING 2.3%
32,200 Shoppers Drug Mart Corp.* (Canada) 642,403
6,300 Sugi Pharmacy Co. Ltd. (Japan) 369,574
-------------
1,011,977
-------------
FOOD PRODUCTS 1.5%
54,810 Coolbrands International, Inc.* (Canada) 646,351
-------------
HEALTH CARE EQUIPMENT AND SUPPLIES 5.1%
62,000 Elekta AB, Class B* (Sweden) 992,064
9,450 Straumann Holding AG (Switzerland) 986,983
15,000 Terumo Corp. (Japan) 289,949
-------------
2,268,996
-------------
HEALTH CARE PROVIDERS AND SERVICES 0.8%
17,800 MEDIDEP SA* (France) 378,434
-------------
Annual Report 37
INTERNATIONAL GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
HOTELS, RESTAURANTS AND LEISURE 0.9%
14,875 Fairmont Hotels & Resorts Inc. (Canada) $ 383,093
-------------
HOUSEHOLD DURABLES 3.4%
13,000 Citizen Electronics Company, Ltd. (Japan) 979,504
17,975 Dorel Industries Inc., Class B* (Canada) 519,217
-------------
1,498,721
-------------
HOUSEHOLD PRODUCTS 1.7%
22,520 KOSE Corp. (Japan) 743,361
-------------
INTERNET SOFTWARE AND SERVICES 0.9%
1,025,000 Accord Customer Care Solutions Ltd.* (Singapore) 400,043
-------------
LEISURE EQUIPMENT AND PRODUCTS 3.1%
111,400 Bloomsbury Publishing Plc (United Kingdom) 470,329
15,000 Hockey Co. Holdings, Inc. (The)* (Canada) 196,987
18,350 Zapf Creation AG (Germany) 705,222
-------------
1,372,538
-------------
MACHINERY 1.9%
9,200 Disco Corp. (Japan) 438,193
20,100 Singulus Technologies* (Germany) 410,708
-------------
848,901
-------------
MEDIA 4.2%
30,100 Alliance Atlantis Communications, Inc. Class B*
(Canada) 474,612
151,775 HIT Entertainment Plc (United Kingdom) 602,951
21,200 JC Decaux SA* (France) 298,092
122 SKY Perfect Communications, Inc.* (Japan) 147,733
6,100 TOEI ANIMATION Co., Ltd. (Japan) 339,238
-------------
1,862,626
-------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 0.4%
51,125 Trinity Biotech Plc ADR* (Ireland) 188,651
-------------
MULTILINE RETAIL 0.8%
160 Can Do Co. Ltd. (Japan) 353,052
-------------
OFFICE ELECTRONICS 1.1%
10,350 Neopost SA (France) 479,878
-------------
38 Annual Report
INTERNATIONAL GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
OIL AND GAS 3.1%
99,720 Cairn Energy Plc* (United Kingdom) $ 600,861
159,850 Soco International Plc* (United Kingdom) 786,480
-------------
1,387,341
-------------
PERSONAL PRODUCTS 0.9%
24,500 Mega Bloks, Inc.* (Canada) 418,052
-------------
PHARMACEUTICALS 7.4%
12,200 Actelion Ltd.* (Switzerland) 1,045,675
15,500 Angiotech Pharmaceuticals, Inc.* (Canada) 675,031
18,850 Dr. Reddy's Laboratories Ltd. ADR (India) 442,033
16,000 Patheon, Inc.* (Canada) 162,268
8,100 Stada Arzneimittel AG (Germany) 434,060
231,000 United Drug Plc (Ireland) 520,018
-------------
3,279,085
-------------
REAL ESTATE 0.9%
4,835 Unibail (Union du Credit-Bail Immobilier) (France) 380,196
-------------
SCIENTIFIC EQUIPMENT AND SUPPLIERS 0.9%
17,500 Biacore International AB ADR (Sweden) 420,175
-------------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 1.1%
17,195 SEZ Holding AG* (Switzerland) 495,822
-------------
SOFTWARE 1.7%
75,000 Autonomy Corp Plc* (United Kingdom) 260,550
65 Works Applications Co. Ltd.* (Japan) 482,756
-------------
743,306
-------------
SPECIALTY RETAIL 3.7%
5,640 Bijou Brigitte AG (Germany) 224,705
43,600 Carpetright Plc (United Kingdom) 570,354
12,905 Rodriguez Group (France) 838,128
-------------
1,633,187
-------------
TELECOMMUNICATIONS EQUIPMENT 0.5%
3,550 Vimpel-Communications ADR* (Russian Federation) 216,053
-------------
Annual Report 39
INTERNATIONAL GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
TEXTILES, APPAREL AND LUXURY GOODS 6.3%
272,500 Esprit Holdings Ltd. (Hong Kong) $ 828,604
2,483,000 Linmark Group Ltd. (Hong Kong) 833,566
9,000 Puma AG Rudolf Dassler Sport (Germany) 1,139,566
-------------
2,801,736
-------------
TRADING COMPANIES AND DISTRIBUTORS 0.5%
5,600 Medion AG (Germany) 219,523
-------------
UTILITIES--WATER 1.0%
425,000 Hyflux Ltd. (Singapore) 454,611
-------------
WIRELESS TELECOMMUNICATION SERVICES 3.0%
318,240 Carphone Warehouse Group Plc (United Kingdom) 624,195
14,250 Mobistar SA* (Belgium) 716,977
-------------
1,341,172
-------------
TOTAL COMMON STOCKS (COST $32,385,447) 39,717,093
-------------
RIGHTS 0.0%
PHARMACEUTICALS 0.0%
8,100 Stada Arzneimittel AG* (Germany) 18,117
-------------
TOTAL RIGHTS (COST $0) 18,117
-------------
PRINCIPAL
AMOUNT VALUE
- ---------- -------------
SHORT-TERM INVESTMENTS 12.2%
REPURCHASE AGREEMENT 12.2%
$5,430,000 Repurchase Agreement dated 9/30/2003, 0.50%
due 10/1/2003 with State Street Bank and Trust
Co. collateralized by $4,055,000 of United States
Treasury Bonds 7.625% due 11/15/2022; value:
$5,540,144; proceeds: $5,430,075
(cost $5,430,000) $ 5,430,000
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $5,430,000) 5,430,000
-------------
40 Annual Report
INTERNATIONAL GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
TOTAL INVESTMENTS (COST $37,815,447) 101.5% $ 45,165,210
LIABILITIES LESS OTHER ASSETS (1.5)% (683,341)
-------------
NET ASSETS 100.0% $ 44,481,869
=============
*Non-income producing
ADR American Depositary Receipt
See notes to financial statements.
At September 30, 2003, Wasatch International Growth Fund's investments,
excluding short-term investments, were in the following countries:
COUNTRY %
- ------------------ -----
Belgium 1.8
Canada 15.8
Cayman Islands 0.6
China 1.6
France 6.0
Germany 10.4
Hong Kong 6.5
India 2.0
Ireland 3.0
Israel 1.4
Japan 16.4
Luxembourg 0.6
Netherlands 1.8
Norway 0.6
Puerto Rico 0.8
Russian Federation 0.5
Singapore 6.0
Spain 1.9
Sweden 4.2
Switzerland 6.8
Taiwan 0.5
United Kingdom 10.8
-----
TOTAL 100.0%
=====
Annual Report 41
MICRO CAP FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
COMMON STOCKS 88.0%
AEROSPACE 0.4%
96,085 Allied Defense Group, Inc. (The)* $ 2,028,354
-------------
AUTO PARTS--AFTER MARKET 0.4%
94,000 Keystone Automotive Industries, Inc.* 2,039,800
-------------
BANKS 0.5%
92,000 Canadian Western Bank 2,383,684
-------------
BANKS--OUTSIDE NEW YORK CITY 1.6%
95,000 CommerceWest Bank*++ 1,311,000
172,912 Commercial Capital Bancorp, Inc.* 2,702,622
133,975 First State Bancorporation 3,967,000
21,200 Pacific Crest Capital, Inc. 450,055
-------------
8,430,677
-------------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 0.5%
400,000 Savient Pharmaceuticals, Inc.* 2,020,000
96,000 United-Guardian, Inc. 758,400
-------------
2,778,400
-------------
CHEMICALS 2.9%
275,500 Cabot Microelectronics Corp.* 15,356,370
-------------
COMMERCIAL INFORMATION SERVICES 1.2%
150,525 Encore Capital Group, Inc.* 1,761,143
372,200 SM&A* 4,284,022
-------------
6,045,165
-------------
COMMERCIAL SERVICES AND SUPPLIES 1.6%
217,900 Icon Plc ADR* 8,254,052
-------------
COMMUNICATIONS TECHNOLOGY 1.3%
543,425 FARGO Electronics, Inc.* 6,847,155
-------------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 2.8%
73,900 IMPAC Medical Systems, Inc.* 1,322,071
216,725 Moldflow Corp.* 2,035,048
755,744 Nassda Corp.* 5,947,705
75,625 Opnet Technologies, Inc.* 943,800
160,625 PEC Solutions, Inc.* 2,370,825
264,650 SYKES Enterprises, Inc.* 1,751,983
-------------
14,371,432
-------------
42 Annual Report
MICRO CAP FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
COMPUTER TECHNOLOGY 1.4%
270,350 Qualstar Corp.* $ 1,473,408
440,825 Verisity Ltd.* 5,510,312
-------------
6,983,720
-------------
COMPUTERS AND PERIPHERALS 0.4%
78,125 Komplett ASA 1,855,582
-------------
CONSTRUCTION 0.2%
111,375 Shaw Group, Inc. (The)* 1,170,551
-------------
CONSUMER PRODUCTS 0.6%
119,550 Yankee Candle Co., Inc.* 3,046,134
-------------
CONTAINERS AND PACKAGING--METAL AND GLASS 0.2%
47,475 Mobile Mini, Inc.* 915,793
-------------
COSMETICS 0.2%
102,125 CCA Industries, Inc. 781,256
-------------
DRUGS AND PHARMACEUTICALS 1.4%
89,025 Bradley Pharmaceuticals, Inc.* 2,425,931
209,150 Inveresk Research Group, Inc.* 4,151,628
186,350 Paladin Labs, Inc.* 724,238
-------------
7,301,797
-------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 1.2%
298,175 BW Technologies Ltd.* 4,966,456
2,000,000 Unisteel Technology Ltd. 1,433,941
-------------
6,400,397
-------------
ELECTRONICS 1.2%
249,050 NU Horizons Electronics Corp.* 2,169,226
219,200 Supertex, Inc.* 3,932,448
-------------
6,101,674
-------------
ELECTRONICS--INSTRUMENTS, GAUGES AND METERS 1.0%
615,575 Computer Access Technology Corp.* 2,597,727
444,975 inTest Corp.*++ 2,505,209
-------------
5,102,936
-------------
Annual Report 43
MICRO CAP FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
ELECTRONICS--MEDICAL SYSTEMS 1.9%
703,341 Endocardial Solutions, Inc.* $ 3,516,705
719,850 IRIDEX Corp.*++ 3,203,333
198,717 Possis Medical, Inc.* 3,099,985
-------------
9,820,023
-------------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 9.3%
364,500 Advanced Power Technology, Inc.* 3,251,340
435,450 Excel Technology, Inc.* 10,886,250
792,825 Genus, Inc.* 3,266,439
768,450 LogicVision, Inc.* 2,528,200
160,775 Micrel, Incorporated* 1,959,847
589,350 Monolithic System Technology, Inc.* 4,956,434
106,825 Nova Measuring Instruments Ltd.* 486,054
1,057,875 O2Micro International Ltd.* 15,286,294
567,250 PLX Technology, Inc.* 3,594,096
1,021,975 PSi Technologies Holdings, Inc. ADR*++ 1,706,698
-------------
47,921,652
-------------
FINANCE COMPANIES 1.2%
80,000 Saxon Capital, Inc.* 1,371,200
357,850 World Acceptance Corp.* 4,848,868
-------------
6,220,068
-------------
FINANCIAL DATA PROCESSING SERVICES AND SYSTEMS 0.1%
133,525 Atlantic Data Services, Inc.* 428,615
-------------
FINANCIAL--MISCELLANEOUS 2.2%
33,900 First Cash Financial Services, Inc.* 679,017
352,975 Home Capital Group Inc., Class B 6,636,980
169,650 Portfolio Recovery Associates, Inc.* 4,312,503
-------------
11,628,500
-------------
FOOD PRODUCTS 0.7%
300,000 Coolbrands International, Inc.* 3,537,773
-------------
HEALTH CARE FACILITIES 1.0%
126,375 American Healthways, Inc.* 5,306,486
-------------
44 Annual Report
MICRO CAP FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
HEALTH CARE MANAGEMENT SERVICES 9.0%
68,675 AMERIGROUP Corp.* $ 3,064,965
592,325 AmSurg Corp.* 19,540,802
99,800 Centene Corp.* 3,032,922
165,000 Computer Programs & Systems, Inc.* 2,974,950
435,406 CorVel Corp.* 15,478,683
494,239 VitalWorks Inc.* 2,594,755
-------------
46,687,077
-------------
HEALTH CARE SERVICES 4.5%
268,725 Accredo Health, Inc.* 7,521,613
825,000 Covalent Group, Inc.*++ 2,004,750
156,500 Molina Healthcare, Inc.* 4,342,875
315,725 Odyssey HealthCare, Inc.* 9,414,919
-------------
23,284,157
-------------
HOME BUILDING 0.5%
58,300 Meritage Corp.* 2,754,675
-------------
HOUSEHOLD EQUIPMENT AND PRODUCTS 0.1%
67,150 Napco Security Systems, Inc.* 585,347
-------------
HOUSEHOLD FURNISHINGS 0.2%
30,075 Hooker Furniture Corp. 1,051,723
-------------
JEWELRY, WATCHES AND GEMSTONES 0.4%
154,075 Friedman's, Inc., Class A 2,149,346
-------------
LEISURE TIME 1.2%
222,225 SCP Pool Corp.* 6,182,300
-------------
MACHINERY--OIL WELL EQUIPMENT AND SERVICES 0.5%
180,800 Gulf Island Fabrication, Inc.* 2,719,232
-------------
Annual Report 45
MICRO CAP FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 8.8%
146,700 American Medical Systems Holdings, Inc.* $ 3,183,390
109,950 Biosite Inc.* 3,120,381
182,300 CTI Molecular Imaging, Inc.* 2,692,571
95,250 Cyberonics* 2,939,415
233,075 Encision, Inc.*++ 839,070
200,000 Encision, Inc.*+ ++ 648,000
617,840 ICU Medical, Inc.* 16,811,425
60,000 Invivo Corp.* 941,400
97,950 Medamicus, Inc.* 1,024,557
399,925 Molecular Devices Corp.* 6,966,693
103,550 Trinity Biotech Plc ADR* 382,100
178,675 Young Innovations, Inc. 5,719,387
------------
45,268,389
------------
MEDICAL SERVICES 2.2%
100,000 America Service Group, Inc.* 2,100,000
62,750 Exactech, Inc.* 1,025,963
283,575 RehabCare Group, Inc.* 4,834,954
283,512 U.S. Physical Therapy, Inc.* 3,467,635
------------
11,428,552
------------
METALS FABRICATING 0.1%
25,975 Intermagnetics General Corp.* 580,801
------------
MISCELLANEOUS MATERIALS AND COMMODITIES 0.8%
194,025 Symyx Technologies* 4,179,299
------------
PRODUCTION TECHNOLOGY EQUIPMENT 1.7%
148,300 August Technology Corp.* 2,111,792
293,150 Nanometrics, Inc.* 3,552,978
162,900 Rudolph Technologies, Inc.* 3,145,599
------------
8,810,369
------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 0.7%
182,425 Anworth Mortgage Asset Corp. 2,605,029
132,350 MFA Mortgage Investments, Inc. 1,259,972
------------
3,865,001
------------
RENTAL AND LEASING SERVICES--CONSUMER 0.5%
404,400 Rainbow Rentals, Inc.*++ 2,584,116
------------
46 Annual Report
MICRO CAP FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
RETAIL 10.2%
107,125 AC Moore Arts & Crafts, Inc.* $ 2,386,745
1,037,850 Big 5 Sporting Goods Corp.* 15,858,348
105,475 Cato Corp. (The), Class A 2,127,431
148,107 Christopher & Banks Corp. 3,533,833
141,650 Global Imaging Systems, Inc.* 3,484,590
210,650 Guitar Center, Inc.* 6,774,504
166,162 Hibbett Sporting Goods, Inc.* 3,974,595
122,125 Lithia Motors, Inc., Class A 2,438,836
73,675 MarineMax, Inc.* 1,069,024
271,525 O'Reilly Automotive, Inc.* 9,983,974
41,900 School Specialty, Inc.* 1,181,999
------------
52,813,879
------------
SAVINGS AND LOANS 0.3%
25,900 Great Southern Bancorp, Inc. 1,008,028
18,200 Harbor Florida Bancshares, Inc. 485,212
------------
1,493,240
------------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 0.4%
75,240 SEZ Holding AG* 2,169,563
------------
SERVICES--COMMERCIAL 4.4%
127,750 AMN Healthcare Services, Inc.* 2,074,660
341,700 Charles River Associates, Inc.* 9,748,701
78,775 Management Network Group, Inc.* 196,938
382,650 Resources Connection, Inc.* 9,339,721
37,603 StarTek, Inc. 1,203,296
------------
22,563,316
------------
SHOES 1.5%
141,325 Finish Line, Class A* 3,716,848
282,975 Maxwell Shoe Co., Class A* 4,063,521
------------
7,780,369
------------
SPECIALTY RETAIL 0.7%
85,000 Bijou Brigitte AG 3,386,509
------------
Annual Report 47
MICRO CAP FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
TRUCKERS 1.9%
134,200 Knight Transportation, Inc.* $ 3,364,394
75,675 PAM Transportation Services* 1,552,851
426,600 USA Truck, Inc.* 4,995,486
-------------
9,912,731
-------------
TOTAL COMMON STOCKS (COST $320,462,984) 455,308,037
-------------
PRINCIPAL
AMOUNT VALUE
- ------------ -------------
SHORT-TERM INVESTMENTS 12.5%
REPURCHASE AGREEMENT 12.5%
$ 64,639,000 Repurchase Agreement dated 9/30/2003, 0.50%
due 10/1/2003 with State Street Bank and Trust
Co. collateralized by $45,140,000 of United States
Treasury Bonds from 8.875% to 9.00% due from
8/15/2017 to 11/15/2018; value: $65,939,784;
proceeds: $64,639,898 (cost $64,639,000) $ 64,639,000
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $64,639,000) 64,639,000
-------------
TOTAL INVESTMENTS (COST $385,101,984) 100.5% 519,947,037
LIABILITIES LESS OTHER ASSETS (0.5)% (2,767,889)
-------------
NET ASSETS 100.0% $ 517,179,148
=============
*Non-income producing
+Security purchased in a private placement transaction or under Rule 144A of the
Securities Act of 1933 (see Note 10).
++Affiliated company (see Note 9).
ADR American Depositary Receipt
See notes to financial statements.
48 Annual Report
MICRO CAP VALUE FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ----------
COMMON STOCKS 65.5%
AEROSPACE 0.8%
25,000 Allied Defense Group, Inc. (The)* $ 527,750
----------
AUTO PARTS--AFTER MARKET 0.9%
30,000 Keystone Automotive Industries, Inc.* 651,000
----------
BANKS 1.1%
30,000 Canadian Western Bank 777,288
----------
BANKS--OUTSIDE NEW YORK CITY 2.6%
37,500 Bridge Bank National Association* 375,750
45,000 Franklin Bank Corp.*+ 551,250
40,000 Wilshire State Bank* 928,000
----------
1,855,000
----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 2.4%
70,000 Harvard Bioscience, Inc.* 519,400
160,000 Savient Pharmaceuticals, Inc.* 808,000
50,000 United-Guardian, Inc. 395,000
----------
1,722,400
----------
COMMERCIAL INFORMATION SERVICES 1.4%
37,200 Encore Capital Group, Inc.* 435,240
50,000 SM&A* 575,500
----------
1,010,740
----------
COMMERCIAL SERVICES AND SUPPLIES 1.0%
19,575 Icon Plc ADR* 741,501
----------
COMMUNICATIONS TECHNOLOGY 0.9%
50,000 FARGO Electronics, Inc.* 630,000
----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 1.4%
83,142 Nassda Corp.* 654,328
50,000 TechTeam Global, Inc.* 305,500
----------
959,828
----------
COMPUTER TECHNOLOGY 0.5%
60,000 Qualstar Corp.* 327,000
----------
COMPUTERS AND PERIPHERALS 1.2%
35,000 Komplett ASA 831,301
----------
Annual Report 49
MICRO CAP VALUE FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -----------
CONSTRUCTION 1.1%
75,000 Shaw Group, Inc. (The)* $ 788,250
-----------
CONTAINERS AND PACKAGING--METAL AND GLASS 0.8%
30,000 Mobile Mini, Inc.* 578,700
-----------
COSMETICS 0.9%
84,000 CCA Industries, Inc. 642,600
-----------
DRUGS AND PHARMACEUTICALS 0.3%
60,000 Paladin Labs, Inc.* 233,187
-----------
ELECTRICAL EQUIPMENT AND COMPONENTS 0.1%
5,400 Image Sensing Systems, Inc.* 39,636
-----------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 4.0%
117,175 BW Technologies Ltd.* 1,951,688
1,200,000 Unisteel Technology Ltd. 860,364
-----------
2,812,052
-----------
ELECTRONICS 1.2%
40,000 Nu Horizons Electronics Corp.* 348,400
50,000 Richardson Electronics Ltd. 530,000
-----------
878,400
-----------
ELECTRONICS--INSTRUMENTS, GAUGES AND METERS 2.2%
120,000 Computer Access Technology Corp.* 506,400
123,550 Intest Corp.* 695,586
95,950 Precis, Inc.* 325,271
-----------
1,527,257
-----------
ELECTRONICS--MEDICAL SYSTEMS 1.4%
111,000 Endocardial Solutions, Inc.* 555,000
96,800 IRIDEX Corp.* 430,760
-----------
985,760
-----------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 5.3%
61,000 Advanced Power Technology, Inc.* 544,120
200,000 Genus, Inc.* 824,000
511,875 LogicVision, Inc.* 1,684,069
30,900 Peak International Ltd.* 168,096
80,000 PLX Technology, Inc.* 506,880
-----------
3,727,165
-----------
50 Annual Report
MICRO CAP VALUE FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -----------
FINANCE COMPANIES 2.0%
100,000 E-Loan, Inc.* $ 363,000
60,000 Saxon Capital, Inc.* 1,028,400
-----------
1,391,400
-----------
FINANCIAL--MISCELLANEOUS 2.0%
76,800 Home Capital Group, Inc., Class B 1,444,068
-----------
FOOD PRODUCTS 0.7%
40,000 Coolbrands International, Inc.* 471,703
-----------
HEALTH CARE FACILITIES 0.2%
74,150 Novamed Eyecare, Inc.* 147,559
-----------
HEALTH CARE MANAGEMENT SERVICES 1.6%
61,000 Computer Programs & Systems, Inc.* 1,099,830
-----------
HEALTH CARE SERVICES 1.3%
182,500 Covalent Group, Inc.* 443,475
30,000 Healthcare Services Group 495,000
-----------
938,475
-----------
HOME BUILDING 0.9%
16,110 Dominion Homes, Inc.* 414,510
20,000 Orleans Homebuilders, Inc.* 236,400
-----------
650,910
-----------
HOUSEHOLD EQUIPMENT AND PRODUCTS 0.2%
20,000 Napco Security Systems, Inc.* 174,340
-----------
HOUSEHOLD FURNISHINGS 1.2%
20,000 Chromcraft Revington, Inc.* 247,000
25,000 Craftmade International, Inc. 587,750
-----------
834,750
-----------
MACHINERY--INDUSTRIAL/SPECIALTY 0.8%
50,000 Petroleum Development Corp.* 599,000
-----------
MACHINERY--OIL WELL EQUIPMENT AND SERVICES 0.9%
40,000 Gulf Island Fabrication, Inc.* 601,600
-----------
Annual Report 51
MICRO CAP VALUE FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -----------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 7.7%
220,000 Bovie Medical Corp.* $ 737,000
21,400 Encision, Inc.* 77,040
133,334 Encision, Inc.*+ 432,002
85,000 Encore Medical Corp.* 578,085
38,700 ICU Medical, Inc.* 1,053,027
30,000 Invivo Corp.* 470,700
145,300 Medamicus, Inc.* 1,519,838
107,775 Medical Technology Systems, Inc.* 495,765
31,242 Zevex International, Inc.* 115,283
-----------
5,478,740
-----------
MEDICAL SERVICES 2.0%
50,000 America Service Group, Inc.* 1,050,000
30,000 U.S. Physical Therapy, Inc.* 366,930
-----------
1,416,930
-----------
MULTILINE RETAIL 0.6%
8,000 GiFi 444,079
-----------
PRODUCTION TECHNOLOGY EQUIPMENT 1.0%
60,000 Nanometrics, Inc.* 727,200
-----------
REAL ESTATE INVESTMENT TRUSTS (REIT) 0.8%
50,525 Hanover Capital Mortgage Holdings, Inc. 533,039
-----------
RENTAL AND LEASING SERVICES--CONSUMER 0.6%
67,100 Rainbow Rentals, Inc.* 428,769
-----------
RETAIL 3.6%
55,000 Big 5 Sporting Goods Corp.* 840,400
150,000 Danka Business Systems Plc ADR* 363,300
25,000 Mothers Work, Inc.* 758,750
50,000 Whitehall Jewellers, Inc.* 560,500
-----------
2,522,950
-----------
SERVICES--COMMERCIAL 3.1%
35,000 4Kids Entertainment, Inc.* 738,500
19,000 Charles River Associates, Inc.* 542,070
200,000 Management Network Group, Inc.* 500,000
30,000 Navigant International, Inc.* 420,300
-----------
2,200,870
-----------
52 Annual Report
MICRO CAP VALUE FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -----------
SPECIALTY RETAIL 1.2%
21,000 Bijou Brigitte AG $ 836,667
-----------
TRUCKERS 0.8%
50,000 USA Truck, Inc.* 585,500
-----------
UTILITIES--TELECOMMUNICATIONS 0.8%
40,000 Yak Communications USA, Inc.* 534,000
-----------
TOTAL COMMON STOCKS (COST $43,090,005) 46,309,194
-----------
PRINCIPAL
AMOUNT VALUE
- ------------ -------------
SHORT-TERM INVESTMENTS 35.6%
U.S. GOVERNMENT OBLIGATIONS 31.8%
$ 22,507,000 U.S. Treasury Bill, 0.76%, 10/2/03 $ 22,506,527
------------
REPURCHASE AGREEMENT 3.8%
2,663,000 Repurchase Agreement dated 9/30/2003, 0.50%
due 10/1/2003 with State Street Bank and Trust
Co. collateralized by $2,110,000 of United States
Treasury Bonds 7.25% due 8/15/2022; value:
$2,719,537; proceeds: $2,663,037 (cost $2,663,000) 2,663,000
------------
TOTAL SHORT-TERM INVESTMENTS (COST $25,169,527) 25,169,527
------------
TOTAL INVESTMENTS (COST $68,259,532) 101.1% 71,478,721
LIABILITIES LESS OTHER ASSETS (1.1)% (772,743)
------------
NET ASSETS 100.0% $ 70,705,978
============
*Non-income producing
+Security purchased in a private placement transaction or
under Rule 144A of the Securities Act of 1933 (see Note 10).
ADR American Depositary Receipt
See notes to financial statements.
Annual Report 53
SMALL CAP GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
COMMON AND PREFERRED STOCKS 91.3%
AIR TRANSPORT 0.7%
219,655 Expeditors International of Washington, Inc. $ 7,558,329
------------
AIRLINES 1.1%
719,500 WestJet Airlines Ltd.* 12,942,851
------------
BANKS--OUTSIDE NEW YORK CITY 2.1%
179,600 Doral Financial Corp. 8,441,200
288,600 Prosperity Bancshares, Inc. 6,150,066
195,975 TCF Financial Corp. 9,397,001
------------
23,988,267
------------
BEVERAGE--SOFT DRINKS 0.2%
122,950 Peet's Coffee & Tea, Inc.* 2,403,672
------------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 5.6%
379,125 Charles River Laboratories International, Inc.* 11,635,346
768,325 Myriad Genetics, Inc.* 8,728,172
1,137,825 QIAGEN N.V.* 12,083,702
317,800 SICOR, Inc.* 6,127,184
441,825 Taro Pharmaceutical Industries Ltd.* 24,901,257
------------
63,475,661
------------
CHEMICALS 2.5%
514,425 Cabot Microelectronics Corp.* 28,674,049
------------
COMMERCIAL SERVICES AND SUPPLIES 1.4%
431,975 Icon Plc ADR* 16,363,213
------------
COMMUNICATIONS TECHNOLOGY 1.8%
634,975 UTStarcom, Inc.* 20,198,555
------------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 6.6%
130,650 CACI International, Inc., Class A* 5,598,353
485,073 Cognizant Technology Solutions Corp.* 17,690,612
695,225 Macrovision Corp.* 12,840,805
475,750 Manhattan Associates, Inc.* 12,317,168
889,350 Nassda Corp.* 6,999,185
541,248 PEC Solutions, Inc.* 7,988,820
293,950 SRA International, Inc., Class A* 11,002,549
------------
74,437,492
------------
54 Annual Report
SMALL CAP GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
COMPUTER TECHNOLOGY 1.1%
967,600 Verisity Ltd.* $ 12,095,000
------------
CONSUMER PRODUCTS 1.3%
586,175 Yankee Candle Co., Inc.* 14,935,739
------------
DRUGS AND PHARMACEUTICALS 4.7%
868,275 ILEX Oncology, Inc.* 14,422,048
1,056,517 Inveresk Research Group, Inc.* 20,971,862
153,525 Medicis Pharmaceutical Corp., Class A* 8,996,565
419,380 Priority Healthcare Corp.* 8,614,065
------------
53,004,540
------------
EDUCATION SERVICES 0.3%
142,150 Renaissance Learning, Inc.* 3,354,740
------------
ELECTRONICS 1.0%
217,575 Flir Systems, Inc.* 5,574,271
297,925 Semtech Corp.* 5,499,696
------------
11,073,967
------------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 5.5%
335,225 Cree, Inc.* 6,208,367
404,905 Integrated Circuit Systems, Inc.* 12,163,346
1,603,775 Micrel, Inc.* 19,550,017
481,400 Monolithic System Technology, Inc.* 4,048,574
1,301,000 O2Micro International Ltd.* 18,799,450
402,480 SiRF Technology Holdings, Inc., Series H*+ 2,092,896
------------
62,862,650
------------
ENTERTAINMENT 1.0%
574,775 Movie Gallery, Inc.* 11,294,329
------------
FINANCIAL INFORMATION SERVICES 1.2%
295,875 FactSet Research Systems Inc. 13,122,056
------------
FINANCIAL--MISCELLANEOUS 0.1%
9,600 Chicago Mercantile Exchange Holdings, Inc. 660,576
------------
HEALTH CARE FACILITIES 3.0%
320,050 American Healthways, Inc.* 13,438,899
839,700 Pharmaceutical Product Development, Inc.* 20,144,403
------------
33,583,302
------------
Annual Report 55
SMALL CAP GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
HEALTH CARE MANAGEMENT SERVICES 6.2%
498,450 AMERIGROUP Corp.* $ 22,245,824
1,011,659 AmSurg Corp.*++ 33,374,630
623,250 Orthodontic Centers of America, Inc.* 4,911,210
207,875 Pediatrix Medical Group, Inc.* 9,572,644
------------
70,104,308
------------
HEALTH CARE SERVICES 5.1%
701,050 Accredo Health, Inc.* 19,622,389
236,550 Lincare Holdings Inc.* 8,669,558
999,543 Odyssey Healthcare, Inc.* 29,806,372
------------
58,098,319
------------
HOME BUILDING 3.0%
188,325 Meritage Corp.* 8,898,356
39,635 NVR, Inc.* 18,489,728
217,400 Toll Brothers, Inc.* 6,613,308
------------
34,001,392
------------
INSURANCE--MULTI-LINE 1.0%
195,975 Brown & Brown, Inc. 6,032,111
187,875 Hilb Rogal & Hamilton Co. 5,831,640
------------
11,863,751
------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 5.2%
272,176 American Medical Systems Holdings, Inc.* 5,906,219
908,825 CTI Molecular Imaging, Inc.* 13,423,345
578,115 ICU Medical, Inc.* 15,730,509
754,063 Techne Corp.* 23,971,663
------------
59,031,736
------------
MEDICAL SERVICES 0.3%
217,850 RehabCare Group, Inc.* 3,714,343
------------
MISCELLANEOUS MATERIALS AND COMMODITIES 0.8%
421,939 Symyx Technologies, Inc.* 9,088,566
------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 2.2%
348,650 American Financial Realty Trust 4,915,965
677,775 Capital Automotive 20,678,915
------------
25,594,880
------------
56 Annual Report
SMALL CAP GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- --------------
RENTAL AND LEASING SERVICES--CONSUMER 0.8%
268,812 Rent-A-Center, Inc.* $ 8,682,644
--------------
RETAIL 14.6%
318,314 99 Cents Only Stores* 10,294,274
605,425 Big 5 Sporting Goods Corp.* 9,250,894
592,873 Chico's FAS, Inc.* 18,165,629
776,275 Christopher & Banks Corp.* 18,521,922
1,188,294 Dollar Tree Stores, Inc.* 39,807,849
491,566 Hibbett Sporting Goods, Inc.* 11,758,259
1,577,122 O'Reilly Automotive, Inc.* 57,990,776
--------------
165,789,603
--------------
SAVINGS AND LOANS 0.6%
242,968 Harbor Florida Bancshares, Inc. 6,477,527
--------------
SERVICES--COMMERCIAL 6.3%
415,019 Charles River Associates Inc.* 11,840,492
610,650 Copart, Inc.* 6,595,020
167,550 CoStar Group, Inc.* 4,356,300
618,005 FTI Consulting, Inc.* 10,722,387
274,775 Kroll, Inc.* 5,110,815
566,755 Resources Connection, Inc.* 13,833,356
822,900 West Corp.* 19,576,791
--------------
72,035,161
--------------
TRANSPORTATION--MISCELLANEOUS 0.6%
190,725 C.H. Robinson Worldwide, Inc. 7,096,877
--------------
TRUCKERS 1.7%
786,862 Knight Transportation, Inc.* 19,726,630
--------------
UTILITIES--CABLE TV AND RADIO 0.6%
945,467 Mediacom Communications Corp.* 6,334,629
--------------
UTILITIES--TELECOMMUNICATIONS 1.1%
1,524,375 Nextel Partners, Inc., Class A* 11,966,344
--------------
TOTAL COMMON STOCKS (COST $866,662,886) 1,035,635,698
--------------
Annual Report 57
SMALL CAP GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ---------------
WARRANTS 0.0%
40,248 SiRF Technology Holdings, Inc.*+ $ --
----------
TOTAL WARRANTS (COST $0) --
----------
PRINCIPAL
AMOUNT VALUE
- ------------ ---------------
U.S. GOVERNMENT OBLIGATIONS 0.5%
$ 5,027,000 U.S. Treasury Bond, 5.25%, 11/15/28+++ $ 5,208,052
---------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $5,005,024) 5,208,052
---------------
SHORT-TERM INVESTMENTS 8.0%
REPURCHASE AGREEMENT 8.0%
$ 91,009,000 Repurchase Agreement dated 9/30/2003, 0.50%
due 10/1/2003 with State Street Bank and Trust
Co. collateralized by $66,665,000 of United States
Treasury Bonds 8.125% due 8/15/2019; value:
$92,831,013; proceeds: $91,010,264
(cost $91,009,000) 91,009,000
---------------
TOTAL SHORT-TERM INVESTMENTS (COST $91,009,000) 91,009,000
---------------
TOTAL INVESTMENTS (COST $962,676,910) 99.8% 1,131,852,750
OTHER ASSETS LESS LIABILITIES 0.2% 2,545,166
---------------
NET ASSETS 100.0% $ 1,134,397,916
===============
*Non-income producing
+Security purchased in a private placement transaction or under Rule 144A of the
Securities Act of 1933 (see Note 10).
++Affiliated company (see Note 9).
+++All or a portion of this security has been committed as collateral for open
short positions, written options or purchase commitments.
ADR American Depositary Receipt
See notes to financial statements.
58 Annual Report
SMALL CAP VALUE FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
COMMON STOCKS 94.7%
AEROSPACE 1.5%
849,521 HEICO Corp., Class A+++ $ 9,514,635
------------
AUTO AND TRUCK PARTS 0.1%
143,000 Supreme Industries, Inc., Class A* 815,100
------------
AUTO PARTS--AFTER MARKET 2.6%
465,375 Aftermarket Technology Corp.* 5,309,929
534,709 Keystone Automotive Industries, Inc.* 11,603,185
------------
16,913,114
------------
AUTOMOBILES 0.4%
77,150 America's Car Mart, Inc.* 2,310,642
------------
BANKS--OUTSIDE NEW YORK CITY 3.9%
511,388 Commercial Capital Bancorp, Inc.* 7,992,986
71,225 First Community Bancorp 2,385,325
140,250 First State Bancorporation 4,152,803
247,650 Nara Bancorp, Inc. 4,242,245
132,675 TCF Financial Corp. 6,361,766
------------
25,135,125
------------
COMMERCIAL INFORMATION SERVICES 1.0%
561,875 SM&A* 6,467,181
------------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 0.4%
164,650 SPSS, Inc.* 2,777,645
------------
CONSUMER PRODUCTS 1.2%
84,300 Jarden Corp.* 3,182,325
249,550 RC2 Corp.* 4,793,856
------------
7,976,181
------------
CONTAINERS AND PACKAGING--METAL AND GLASS 2.2%
730,437 Mobile Mini, Inc.*++ 14,090,130
------------
DRUGS AND PHARMACEUTICALS 1.0%
454,475 Chattem, Inc.* 6,308,113
------------
ELECTRONICS 2.2%
488,550 Nu Horizons Electronics Corp.* 4,255,270
560,925 Supertex, Inc.* 10,062,995
------------
14,318,265
------------
Annual Report 59
SMALL CAP VALUE FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 2.6%
202,675 Cypress Semiconductor Corp.* $ 3,583,294
224,100 Excel Technology, Inc.* 5,602,500
118,350 Integrated Device Technology, Inc.* 1,469,907
143,475 LSI Logic Corp.* 1,289,840
148,650 Micrel, Inc.* 1,812,044
536,025 Peak International Ltd.* 2,915,976
------------
16,673,561
------------
ENTERTAINMENT 1.2%
391,900 Movie Gallery, Inc.* 7,700,835
------------
FINANCE COMPANIES 5.3%
395,425 Accredited Home Lenders Holding Co.* 8,584,676
1,204,150 Saxon Capital, Inc.* 20,639,131
194,825 United PanAm Financial Corp.* 3,391,903
131,461 World Acceptance Corp.* 1,781,297
------------
34,397,007
------------
FINANCE--SMALL LOAN 1.1%
703,025 AmeriCredit Corp.* 7,241,157
------------
FINANCIAL--MISCELLANEOUS 0.7%
156,870 Fidelity National Financial, Inc. 4,715,512
------------
FOOD PRODUCTS 0.8%
443,525 Coolbrands International, Inc.* 5,230,302
------------
FOODS 2.5%
710,906 NBTY, Inc.* 16,599,655
------------
HEALTH CARE FACILITIES 1.1%
262,050 Sunrise Senior Living, Inc.* 6,873,571
------------
HEALTH CARE MANAGEMENT SERVICES 1.6%
229,900 Centene Corp.* 6,986,661
65,325 Pacificare Health Systems* 3,187,860
------------
10,174,521
------------
HEALTH CARE SERVICES 2.9%
480,625 Apria Healthcare Group Inc.* 13,159,513
203,100 Molina Healthcare, Inc.* 5,636,025
------------
18,795,538
------------
60 Annual Report
SMALL CAP VALUE FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
HOME BUILDING 3.7%
34,504 Beazer Homes USA, Inc.* $ 2,912,138
88,825 M.D.C. Holdings, Inc. 4,796,550
146,000 Meritage Corp.* 6,898,500
11,490 NVR, Inc.* 5,360,085
142,400 Toll Brothers, Inc.* 4,331,808
------------
24,299,081
------------
HOTEL/MOTEL 0.7%
306,725 Orient-Express Hotels Ltd., Class A* 4,784,910
------------
HOUSEHOLD FURNISHINGS 0.5%
90,775 Hooker Furniture Corp. 3,174,402
------------
INSURANCE--PROPERTY AND CASUALTY 0.6%
158,900 Direct General Corp.* 3,983,623
------------
INSURANCE--MULTI-LINE 0.9%
353,125 Hub International Ltd. 5,791,250
------------
INVESTMENT MANAGEMENT COMPANIES 1.6%
663,375 MCG Capital Corp. 10,355,284
------------
JEWELRY, WATCHES AND GEMSTONES 1.7%
808,605 Friedman's, Inc., Class A 11,280,040
------------
LEISURE TIME 2.2%
541,725 Action Performance Companies, Inc. 13,239,759
164,800 Bally Total Fitness Holding Corp.*+++ 1,425,520
------------
14,665,279
------------
MEDICAL SERVICES 1.7%
252,650 America Service Group, Inc.* 5,305,650
55,175 RehabCare Group, Inc.* 940,734
392,650 U.S. Physical Therapy, Inc.* 4,802,502
------------
11,048,886
------------
OIL--CRUDE PRODUCERS 0.8%
195,300 Plains Exploration & Production Co.* 2,435,391
223,800 Plains Resources, Inc.* 2,786,310
------------
5,221,701
------------
OIL--INTEGRATED INTERNATIONAL 1.5%
674,025 Core Laboratories N.V.* 9,470,051
------------
Annual Report 61
SMALL CAP VALUE FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
PRODUCTION TECHNOLOGY EQUIPMENT 0.5%
255,225 Nanometrics Inc.* $ 3,093,327
------------
REAL ESTATE 1.0%
158,725 LNR Property Corp. 6,499,789
------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 10.6%
713,000 American Financial Realty Trust 10,053,300
383,550 Anworth Mortgage Asset Corp. 5,477,094
75,025 Arbor Realty Trust, Inc.* **+ 5,645,631
394,775 Capital Automotive 12,044,585
396,625 Hanover Capital Mortgage Holdings, Inc. 4,184,394
103,175 Health Care Property Investors, Inc. 4,818,273
382,875 MFA Mortgage Investments, Inc. 3,644,970
282,750 Nationwide Health Properties, Inc. 4,945,297
360,250 Newcastle Investment Corp. 8,282,148
238,950 Redwood Trust, Inc. 10,131,480
------------
69,227,172
------------
RECREATIONAL VEHICLES AND BOATS 1.0%
67,700 Thor Industries, Inc. 3,657,154
67,000 Winnebago Industries, Inc. 2,986,860
------------
6,644,014
------------
RENTAL AND LEASING SERVICES--COMMERCIAL 1.3%
514,298 MicroFinancial Inc. 1,563,466
421,900 United Rentals, Inc.* 6,788,371
------------
8,351,837
------------
RENTAL AND LEASING SERVICES--CONSUMER 2.1%
259,750 Rainbow Rentals, Inc.* 1,659,802
373,963 Rent-A-Center, Inc.* 12,078,989
------------
13,738,791
------------
RETAIL 15.4%
660,125 Big 5 Sporting Goods Corp.* 10,086,710
431,650 Cato Corp. (The), Class A 8,706,380
107,752 Danka Business Systems Plc ADR* 260,975
243,450 Genesco Inc.* 3,909,807
682,200 Global Imaging Systems, Inc.* 16,782,120
250,075 Group 1 Automotive, Inc.* 8,637,590
662,075 Lithia Motors, Inc., Class A 13,221,638
Annual Report 62
SMALL CAP VALUE FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
RETAIL (CONTINUED)
484,800 MarineMax, Inc.* $ 7,034,448
196,650 O'Reilly Automotive, Inc.* 7,230,821
214,700 School Specialty, Inc.* 6,056,687
401,692 Sonic Automotive, Inc., Class A 9,664,710
805,568 Whitehall Jewellers, Inc.*++ 9,030,417
-------------
100,622,303
-------------
SAVINGS AND LOANS 0.5%
124,350 Washington Federal, Inc. 3,134,863
-------------
SECURITIES BROKERAGE AND SERVICES 2.0%
746,711 Friedman, Billings, Ramsey Group, Inc., Class A 12,880,765
-------------
SERVICES--COMMERCIAL 4.9%
418,075 Adminstaff, Inc.* 3,716,687
359,100 AMN Healthcare Services, Inc.* 5,831,784
218,026 Coinstar, Inc.* 2,932,450
81,300 Monro Muffler, Inc.* 2,406,480
666,110 Navigant International, Inc.* 9,332,201
235,925 RemedyTemp, Inc., Class A* 2,831,100
181,175 World Fuel Services Corp. 5,085,582
-------------
32,136,284
-------------
SHOES 1.1%
195,325 Casual Male Retail Group, Inc.* 1,443,452
153,300 Finish Line, Inc. (The), Class A* 4,031,790
140,625 Maxwell Shoe Co., Class A* 2,019,375
-------------
7,494,617
-------------
TRUCKERS 1.3%
315,487 Transport Corporation of America, Inc.* 1,927,625
472,250 USA Truck, Inc.*++ 5,530,048
38,375 Yellow Corp.* 1,146,645
-------------
8,604,318
-------------
UTILITIES--TELECOMMUNICATIONS 0.8%
653,975 Nextel Partners, Inc., Class A* 5,133,704
-------------
TOTAL COMMON STOCKS (COST $507,953,123) 616,664,081
-------------
Annual Report 63
SMALL CAP VALUE FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
PRINCIPAL
AMOUNT VALUE
- ------------ -------------
SHORT-TERM INVESTMENTS 5.4%
REPURCHASE AGREEMENT 5.4%
$ 35,351,000 Repurchase Agreement dated 9/30/2003, 0.50%
due 10/1/2003 with State Street Bank and Trust
Co. collateralized by $28,865,000 of United States
Treasury Bonds 6.875% due 8/15/2025; value:
$36,062,776; proceeds: $35,351,491
(cost $35,351,000) $ 35,351,000
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $35,351,000) 35,351,000
-------------
TOTAL INVESTMENTS (COST $543,304,123) 100.1% 652,015,081
LIABILITIES LESS OTHER ASSETS (0.1)% (754,226)
-------------
NET ASSETS 100.0% $ 651,260,855
=============
NUMBER
OF SHARES VALUE
- --------- -----------
SECURITIES SOLD SHORT
100,000 HEICO Corp. (proceeds $838,487) $ 1,360,000
===========
*Non-income producing
**Each unit consists of five shares of common stock and one warrant.
+Security purchased in a private placement transaction or under Rule 144A of the
Securities Act of 1933 (see Note 10).
++Affiliated company (see Note 9).
+++All or a portion of this security has been committed as collateral for open
short positions, written options or purchase commitments.
ADR American Depositary Receipt
See notes to financial statements.
64 Annual Report
ULTRA GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
COMMON AND PREFERRED STOCKS 89.7%
BANKS--OUTSIDE NEW YORK CITY 1.1%
64,825 Commerce Bancorp, Inc. $ 3,105,766
88,350 Commercial Capital Bancorp, Inc.* 1,380,910
29,575 Doral Financial Corp. 1,390,025
10,000 Wilshire State Bank* 232,000
------------
6,108,701
------------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 3.2%
59,050 Cephalon, Inc.* 2,711,576
149,700 Diversa Corp.* 1,160,175
70,850 Neurochem, Inc.* 855,159
369,350 QIAGEN N.V.* 3,922,497
150,380 Taro Pharmaceutical Industries Ltd.* 8,475,417
------------
17,124,824
------------
CASINOS AND GAMBLING 1.0%
206,000 Shuffle Master, Inc.* 5,599,080
------------
CHEMICALS 4.3%
412,200 Cabot Microelectronics Corp.* 22,976,028
------------
COMMERCIAL INFORMATION SERVICES 0.8%
286,525 Encore Capital Group, Inc.* 3,352,342
98,825 SM&A* 1,137,476
------------
4,489,818
------------
COMMUNICATIONS TECHNOLOGY 4.4%
266,975 Remec, Inc.* 2,723,145
1,188,275 Sirenza Microdevices, Inc.* 4,788,748
507,100 UTStarcom, Inc.* 16,130,851
91,388 Xtera Communications, Inc.*+ 99,065
------------
23,741,809
------------
Annual Report 65
ULTRA GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 11.3%
541,480 Cognizant Technology Solutions Corp.* $ 19,747,775
665,379 EPIQ Systems, Inc.* 11,284,828
138,650 Manhattan Associates, Inc.* 3,589,649
629,678 Nassda Corp.* 4,955,566
466,475 OPNET Technologies, Inc.* 5,821,608
259,725 PDF Solutions, Inc.* 2,921,906
604,705 PEC Solutions, Inc.* 8,925,446
24,000 QLogic Corp.* 1,128,240
73,000 SRA International, Inc., Class A* 2,732,390
------------
61,107,408
------------
COMPUTER TECHNOLOGY 1.4%
594,334 Verisity Ltd.* 7,429,175
------------
DRUGS AND PHARMACEUTICALS 3.9%
141,450 Atrix Laboratories, Inc.* 2,912,455
33,900 Angiotech Pharmaceuticals, Inc.* 1,479,735
149,167 Connetics Corp.* 2,693,956
85,875 ILEX Oncology, Inc.* 1,426,384
153,250 Inveresk Research Group, Inc.* 3,042,012
29,000 Northwest Biotherapeutics, Inc.*+ 6,960
60,375 Priority Healthcare Corp.* 1,240,103
360,577 Shire Pharmaceuticals Group Plc ADR* 7,972,357
------------
20,773,962
------------
EDUCATION SERVICES 1.2%
141,308 Career Education Corp.* 6,401,252
------------
ELECTRICAL AND ELECTRONICS 0.4%
136,900 Plexus Corp.* 2,127,426
------------
ELECTRICAL EQUIPMENT AND COMPONENTS 0.7%
281,925 Flextronics International Ltd.* 3,997,697
------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.4%
134,000 BW Technologies Ltd.* 2,231,928
------------
ELECTRONICS 0.8%
423,050 Sanmina-SCI Corp.* 4,103,585
------------
ELECTRONICS--MEDICAL SYSTEMS 0.4%
145,725 Possis Medical, Inc.* 2,273,310
------------
66 Annual Report
ULTRA GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 5.9%
75,925 Integrated Circuit Systems, Inc.* $ 2,280,787
292,075 LogicVision, Inc.* 960,926
561,700 Micrel, Inc.* 6,847,123
493,675 Monolithic System Technology, Inc.* 4,151,807
1,188,675 O2Micro International Ltd.* 17,176,354
124,000 SiRF Technology Holdings, Inc., Series H*+ 644,800
------------
32,061,797
------------
FINANCIAL--MISCELLANEOUS 0.5%
97,050 Portfolio Recovery Associates, Inc.* 2,467,011
------------
HEALTH CARE FACILITIES 4.5%
277,408 American Healthways, Inc.* 11,648,362
100,675 LifePoint Hospitals, Inc.* 2,421,234
104,775 Pharmaceutical Product Development, Inc.* 2,513,552
267,150 United Surgical Partners International, Inc.* 7,560,345
------------
24,143,493
------------
HEALTH CARE MANAGEMENT SERVICES 7.8%
380,611 AmSurg Corp.* 12,556,357
195,600 Centene Corp.* 5,944,284
516,375 Pediatrix Medical Group, Inc.* 23,779,069
------------
42,279,710
------------
HEALTH CARE SERVICES 14.4%
1,428,720 Accredo Health, Inc.* 39,989,873
96,875 Chronimed, Inc.* 884,469
183,625 Express Scripts, Inc.* 11,228,669
855,937 Odyssey Healthcare, Inc.* 25,524,041
------------
77,627,052
------------
HOUSEHOLD FURNISHINGS 0.3%
66,700 Select Comfort Corp.* 1,767,550
------------
INSURANCE--MULTI-LINE 0.7%
45,775 Hilb Rogal & Hamilton Co. 1,420,856
140,150 Hub International Ltd. 2,298,460
------------
3,719,316
------------
MACHINERY--SPECIALTY 0.3%
117,000 ASML Holding N.V.* 1,536,210
------------
Annual Report 67
ULTRA GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- ------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 3.7%
113,714 American Medical Systems Holdings, Inc.* $ 2,467,594
108,175 Biosite, Inc.* 3,070,006
382,825 CTI Molecular Imaging, Inc.* 5,654,325
46,700 Cyberonics, Inc.* 1,441,162
134,775 Molecular Devices Corp.* 2,347,781
123,000 Techne Corp.* 3,910,170
70,500 Thoratec Corp.* 1,197,795
------------
20,088,833
------------
MISCELLANEOUS MATERIALS AND COMMODITIES 2.2%
556,650 Symyx Technologies, Inc.* 11,990,241
------------
MISCELLANEOUS TECHNOLOGY 0.3%
74,375 RADWARE Ltd.* 1,349,906
------------
PRODUCTION TECHNOLOGY EQUIPMENT 0.9%
263,325 Rudolph Technologies, Inc.* 5,084,806
------------
RETAIL 4.4%
139,350 99 Cents Only Stores* 4,506,579
295,707 Christopher & Banks Corp.* 7,055,569
206,049 Dollar Tree Stores, Inc.* 6,902,641
135,975 HOT Topic, Inc.* 3,064,877
60,700 O'Reilly Automotive, Inc.* 2,231,939
------------
23,761,605
------------
SCIENTIFIC EQUIPMENT AND SUPPLIERS 1.3%
282,250 Biacore International AB ADR 6,776,823
------------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 0.1%
147,382 United Microelectronics Corp. ADR* 664,693
------------
68 Annual Report
ULTRA GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
NUMBER
OF SHARES VALUE
- --------- -------------
SERVICES--COMMERCIAL 6.5%
57,475 Advisory Board Co. (The)* $ 2,612,239
604,500 AMN Healthcare Services, Inc.* 9,817,080
54,525 Corporate Executive Board Co.* 2,559,949
44,000 IQ4HIRE, Inc.*+ 440
139,000 Kroll, Inc.* 2,585,400
767,744 Management Network Group, Inc. (The)* 1,919,360
88,200 Resources Connection, Inc.* 2,152,785
1,111,574 Wireless Facilities, Inc.* 13,227,731
-------------
34,874,984
-------------
UTILITIES--TELECOMMUNICATIONS 0.6%
387,100 Nextel Partners, Inc., Class A* 3,038,735
-------------
TOTAL COMMON AND
PREFERRED STOCKS (COST $413,366,985) 483,718,768
-------------
WARRANTS 0.0%
12,400 SiRF Technology Holdings, Inc.*+ $ --
-------------
TOTAL WARRANTS (COST $0) --
-------------
Annual Report 69
ULTRA GROWTH FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
PRINCIPAL
AMOUNT VALUE
- ------------ -------------
U.S. GOVERNMENT OBLIGATIONS 0.9%
$ 4,525,000 U.S. Treasury Bond, 5.25%, 11/15/28+++ $ 4,687,972
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $4,505,219) 4,687,972
-------------
SHORT-TERM INVESTMENTS 10.8%
REPURCHASE AGREEMENT 10.8%
58,185,000 Repurchase Agreement dated 9/30/2003, 0.50%
due 10/1/2003 with State Street Bank and Trust
Co. collateralized by $46,745,000 of United States
Treasury Bonds from 6.75% to 7.125% due from
2/15/2023 to 8/15/2026; value: $59,358,007;
proceeds: $58,185,808 (cost $58,185,000) 58,185,000
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $58,185,000) 58,185,000
-------------
TOTAL INVESTMENTS (COST $476,057,204) 101.4% 546,591,740
LIABILITIES LESS OTHER ASSETS (1.4)% (7,652,434)
-------------
NET ASSETS 100.0% $ 538,939,306
=============
*Non-income producing
+Security purchased in a private placement transaction or under Rule 144A of the
Securities Act of 1933 (see Note 10).
+++All or a portion of this security has been committed as collateral for open
short positions, written options or purchase commitments.
ADR American Depositary Receipt
See notes to financial statements.
70 Annual Report
U.S. TREASURY FUND-SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
PRINCIPAL
AMOUNT VALUE
- ------------ ------------
U.S. GOVERNMENT OBLIGATIONS 96.2%
$ 5,430,000 U.S. Treasury Bond, 7.50%, 11/15/24 $ 7,276,623
2,755,000 U.S. Treasury Bond, 6.875%, 8/15/25 3,460,969
1,750,000 U.S. Treasury Bond, 6.75%, 8/15/26 2,176,290
540,000 U.S. Treasury Bond, 6.50%, 11/15/26 652,957
3,170,000 U.S. Treasury Bond, 6.625%, 2/15/27 3,890,928
800,000 U.S. Treasury Bond, 6.375%, 8/15/27 954,656
4,300,000 U.S. Treasury Bond, 6.125%, 11/15/27 4,980,441
10,500,000 U.S. Treasury Bond, 5.25%, 11/15/28 10,878,168
6,050,000 U.S. Treasury Bond, 5.375%, 2/15/31 6,492,406
30,100,000 U.S. Treasury Strip, principal only, 11/15/21 11,623,416
10,100,000 U.S. Treasury Strip, principal only, 8/15/25 3,128,990
32,915,000 U.S. Treasury Strip, principal only, 11/15/27 9,039,084
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $59,381,375) 64,554,928
------------
SHORT-TERM INVESTMENTS 3.1%
REPURCHASE AGREEMENT 3.1%
2,078,000 Repurchase Agreement dated 9/30/2003, 0.50%
due 10/1/2003 with State Street Bank and Trust
Co. collateralized by $1,450,000 of United States
Treasury Bonds 8.75% due 8/15/2020; value:
$2,122,438; proceeds: $2,078,029
(cost $2,078,000) 2,078,000
------------
TOTAL SHORT-TERM INVESTMENTS (COST $2,078,000) 2,078,000
------------
TOTAL INVESTMENTS (COST $61,459,375) 99.3% 66,632,928
OTHER ASSETS LESS LIABILITIES 0.7% 500,892
------------
NET ASSETS 100.0% $ 67,133,820
============
See notes to financial statements.
Annual Report 71
WASATCH FUNDS-STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
CORE GLOBAL SCIENCE INTERNATIONAL
GROWTH & TECHNOLOGY GROWTH
FUND FUND FUND
- -------------------------------------------------------------- ---------------- ---------------- ----------------
ASSETS:
Investments, at cost
Nonaffiliated issuers $ 1,023,067,064 $ 38,512,501 $ 32,385,447
Affiliated issuers 29,061,440 -- --
Repurchase agreements 99,377,000 10,216,000 5,430,000
---------------- ---------------- ----------------
$ 1,151,505,504 $ 48,728,501 $ 37,815,447
================ ================ ================
Investments, at value
Nonaffiliated issuers $ 1,198,813,307 $ 41,481,689 $ 39,735,210
Affiliated issuers 28,339,731 -- --
Repurchase agreements 99,377,000 10,216,000 5,430,000
Cash 5,842 995 578
Foreign currency on deposit (cost of $0, $0 and $74,353,
respectively) -- -- 74,406
Receivable for investment securities sold 4,399,164 4,537,691 --
Receivable from broker for securities sold short -- 576,125 --
Capital shares receivable 839,792 269,941 219,416
Interest and dividends receivable 1,201,867 10,575 15,787
Unrealized appreciation on foreign currency contracts -- -- 2,685
Prepaid expenses and other assets 18,403 8,221 9,035
---------------- ---------------- ----------------
Total Assets 1,332,995,106 57,101,237 45,487,117
---------------- ---------------- ----------------
LIABILITIES:
Call options written, at value (premiums of $457,965, $0
and $0, respectively) 255,000 -- --
Securities sold short, at value (proceeds of $0, $572,836
and $0, respectively) -- 567,911 --
Payable for securities purchased 11,240,190 4,795,241 915,139
Capital shares payable 1,633,820 129,813 5,158
Payable to Advisor 1,111,669 49,608 52,831
Unrealized depreciation on foreign currency contracts -- -- 415
Accrued expenses 413,014 41,596 31,705
---------------- ---------------- ----------------
Total Liabilities 14,653,693 5,584,169 1,005,248
---------------- ---------------- ----------------
NET ASSETS $ 1,318,341,413 $ 51,517,068 $ 44,481,869
================ ================ ================
NET ASSETS CONSIST OF:
Capital stock $ 393,085 $ 48,010 $ 36,870
Paid-in capital in excess of par 1,228,280,777 50,616,759 38,600,936
Undistributed net investment loss -- (632) (2,271)
Undistributed net realized loss on investments and foreign
currency translations (85,561,585) (2,121,182) (1,502,967)
Net unrealized appreciation on investments and foreign
currency translations 175,229,136 2,974,113 7,349,301
---------------- ---------------- ----------------
Net Assets $ 1,318,341,413 $ 51,517,068 $ 44,481,869
================ ================ ================
CAPITAL STOCK, $.01 PAR VALUE:
Authorized 10,000,000,000 10,000,000,000 10,000,000,000
Issued and outstanding 39,308,535 4,801,013 3,686,985
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $ 33.54 $ 10.73 $ 12.06
================ ================ ================
See notes to financial statements.
Annual Report 72 & 73
WASATCH FUNDS-STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
MICRO MICRO CAP SMALL CAP
CAP VALUE GROWTH
FUND FUND FUND
- -------------------------------------------------------------- ---------------- ---------------- ----------------
ASSETS:
Investments, at cost
Nonaffiliated issuers $ 298,378,771 $ 65,596,532 $ 853,750,434
Affiliated issuers 22,084,213 -- 17,917,476
Repurchase agreements 64,639,000 2,663,000 91,009,000
---------------- ---------------- ----------------
$ 385,101,984 $ 68,259,532 $ 962,676,910
================ ================ ================
Investments, at value
Nonaffiliated issuers $ 440,505,861 $ 68,815,721 $ 1,007,469,120
Affiliated issuers 14,802,176 -- 33,374,630
Repurchase agreements 64,639,000 2,663,000 91,009,000
Cash 358,030 836,146 666
Receivable for investment securities sold 105,529 150,605 6,609,837
Capital shares receivable 7,354 -- 2,543,092
Interest and dividends receivable 51,986 2,537 258,835
Prepaid expenses and other assets 13,299 16,272 16,191
---------------- ---------------- ----------------
Total Assets 520,483,235 72,484,281 1,141,281,371
---------------- ---------------- ----------------
LIABILITIES:
Payable for securities purchased 2,025,259 1,591,597 4,573,524
Capital shares payable 253,176 45,950 976,953
Payable to Advisor 877,326 96,661 974,336
Accrued expenses 148,326 44,095 358,642
---------------- ---------------- ----------------
Total Liabilities 3,304,087 1,778,303 6,883,455
---------------- ---------------- ----------------
NET ASSETS $ 517,179,148 $ 70,705,978 $ 1,134,397,916
================ ================ ================
NET ASSETS CONSIST OF:
Capital stock $ 741,247 $ 337,657 $ 349,759
Paid-in capital in excess of par 340,120,581 67,171,029 962,708,793
Undistributed net investment loss -- (21,897) --
Undistributed net realized gain on investments and
foreign currency translations 41,472,267 -- 2,163,524
Net unrealized appreciation on investments and foreign
currency translations 134,845,053 3,219,189 169,175,840
---------------- ---------------- ----------------
Net Assets $ 517,179,148 $ 70,705,978 $ 1,134,397,916
================ ================ ================
CAPITAL STOCK, $.01 PAR VALUE:
Authorized 10,000,000,000 10,000,000,000 10,000,000,000
Issued and outstanding 74,124,707 33,765,664 34,975,903
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $ 6.98 $ 2.09 $ 32.43
================ ================ ================
See notes to financial statements.
Annual Report 74 & 75
WASATCH FUNDS-STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
SMALL CAP ULTRA U.S.
VALUE GROWTH TREASURY
FUND FUND FUND
- -------------------------------------------------------------- ---------------- ---------------- ----------------
ASSETS:
Investments, at cost
Nonaffiliated issuers $ 482,711,669 $ 417,872,204 $ 59,381,375
Affiliated issuers 25,241,454 -- --
Repurchase agreements 35,351,000 58,185,000 2,078,000
---------------- ---------------- ----------------
$ 543,304,123 $ 476,057,204 $ 61,459,375
================ ================ ================
Investments, at value
Nonaffiliated issuers $ 588,013,486 $ 488,406,740 $ 64,554,928
Affiliated issuers 28,650,595 -- --
Repurchase agreements 35,351,000 58,185,000 2,078,000
Cash 579 678 829
Receivable for investment securities sold 57,781,361 1,784,634 --
Receivable from broker for securities sold short 910,479 -- --
Capital shares receivable 376,517 121,651 61,519
Interest and dividends receivable 900,749 102,363 588,955
Prepaid expenses and other assets 19,333 14,717 10,039
---------------- ---------------- ----------------
Total Assets 712,004,099 548,615,783 67,294,270
---------------- ---------------- ----------------
LIABILITIES:
Securities sold short, at value (proceeds of $838,487, $0
and $0, respectively) 1,360,000 -- --
Payable for securities purchased 57,795,635 8,423,400 --
Capital shares payable 542,281 462,783 108,711
Payable to Advisor 823,124 584,714 11,204
Accrued expenses 222,204 205,580 40,535
---------------- ---------------- ----------------
Total Liabilities 60,743,244 9,676,477 160,450
---------------- ---------------- ----------------
NET ASSETS $ 651,260,855 $ 538,939,306 $ 67,133,820
================ ================ ================
NET ASSETS CONSIST OF:
Capital stock $ 1,410,919 $ 211,923 $ 49,059
Paid-in capital in excess of par 541,516,075 470,772,585 66,555,520
Undistributed net investment income -- -- 2,503,722
Undistributed net realized gain (loss) on investments and
foreign currency translations 144,416 (2,579,738) (7,148,034)
Net unrealized appreciation on investments and foreign
currency translations 108,189,445 70,534,536 5,173,553
---------------- ---------------- ----------------
Net Assets $ 651,260,855 $ 538,939,306 $ 67,133,820
================ ================ ================
CAPITAL STOCK, $.01 PAR VALUE:
Authorized 10,000,000,000 10,000,000,000 10,000,000,000
Issued and outstanding 141,091,873 21,192,307 4,905,941
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $ 4.62 $ 25.43 $ 13.68
================ ================ ================
See notes to financial statements.
Annual Report 76 & 77
WASATCH FUNDS-STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
CORE GLOBAL SCIENCE INTERNATIONAL
GROWTH & TECHNOLOGY GROWTH
FUND FUND FUND
- -------------------------------------------------------------- ---------------- ---------------- ----------------
INVESTMENT INCOME:
Interest $ 360,721 $ 20,790 $ 15,688
Dividends(1) 13,300,701 4,884 170,143
---------------- ---------------- ----------------
13,661,422 25,674 185,831
---------------- ---------------- ----------------
EXPENSES:
Investment advisory fee 11,125,512 491,000 335,475
Shareholder servicing fees 1,411,335 80,670 51,863
Fund administration and accounting fees 860,152 56,061 37,930
Reports to shareholders 243,860 17,101 10,447
Custody fees 51,703 6,823 32,212
Federal and state registration fees 63,853 18,168 19,516
Legal fees 79,777 4,695 2,678
Directors' fees 28,500 755 533
Audit fees 18,042 18,042 17,958
Other 51,643 3,209 5,050
---------------- ---------------- ----------------
Total expenses before reimbursement 13,934,377 696,524 513,662
Reimbursement of expenses by Advisor -- (56,945) (76,716)
Waiver of administration fees by Advisor (33,826) (975) (632)
Waiver of fees by Accounting Agent (10,538) (304) (197)
---------------- ---------------- ----------------
Net expenses 13,890,013 638,300 436,117
---------------- ---------------- ----------------
NET INVESTMENT LOSS (228,591) (612,626) (250,286)
---------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments+ (76,727,660) 82,567 (1,299,298)
Net realized gain on short positions -- 11,415 --
Change in unrealized appreciation (depreciation)
on investments and foreign currency translations 385,705,494 15,374,035 9,025,174
---------------- ---------------- ----------------
Net gain on investments 308,977,834 15,468,017 7,725,876
---------------- ---------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 308,749,243 $ 14,855,391 $ 7,475,590
================ ================ ================
(1) Net of $4,265, $2,731 and $20,097 in foreign withholding taxes,
respectively.
+ See Note 9 for information on affiliated issuers.
See notes to financial statements.
Annual Report 78 & 79
WASATCH FUNDS-STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
MICRO MICRO CAP SMALL CAP
CAP VALUE GROWTH
FUND FUND* FUND
- -------------------------------------------------------------- ---------------- ---------------- ----------------
INVESTMENT INCOME:
Interest $ 130,750 $ 36,669 $ 398,840
Dividends(1) 340,136 28,225 1,218,047
---------------- ---------------- ----------------
470,886 64,894 1,616,887
---------------- ---------------- ----------------
EXPENSES:
Investment advisory fee 8,189,431 242,914 9,031,886
Shareholder servicing fees 406,806 30,397 1,129,605
Fund administration and accounting fees 384,866 5,659 718,068
Reports to shareholders 66,832 7,978 221,382
Custody fees 41,716 1,188 64,496
Federal and state registration fees 39,498 21,151 59,977
Legal fees 28,648 12,500 62,206
Directors' fees 9,989 275 22,066
Audit fees 18,042 9,500 18,042
Other 18,144 527 39,398
---------------- ---------------- ----------------
Total expenses before reimbursement 9,203,972 332,089 11,367,126
Reimbursement of expenses by Advisor -- (28,446) --
Waiver of administration fees by Advisor (12,593) -- (28,005)
Waiver of fees by Accounting Agent (3,923) -- (8,724)
---------------- ---------------- ----------------
Net expenses 9,187,456 303,643 11,330,397
---------------- ---------------- ----------------
NET INVESTMENT LOSS (8,716,570) (238,749) (9,713,510)
---------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments+ 51,800,078 192,165 16,297,720
Change in unrealized appreciation (depreciation) on
investments and foreign currency translations 120,439,212 3,219,189 268,022,826
---------------- ---------------- ----------------
Net gain on investments 172,239,290 3,411,354 284,320,546
---------------- ---------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 163,522,720 $ 3,172,605 $ 274,607,036
================ ================ ================
*Inception date of the Fund was July 28, 2003.
(1)Net of $12,081, $5,459 and $10,080 in foreign withholding taxes,
respectively.
+See Note 9 for information on affiliated issuers.
See notes to financial statements.
Annual Report 80 & 81
WASATCH FUNDS-STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
SMALL CAP ULTRA U.S.
VALUE GROWTH TREASURY
FUND FUND FUND
- -------------------------------------------------------------- ---------------- ---------------- ----------------
INVESTMENT INCOME:
Interest $ 149,450 $ 223,151 $ 4,029,805
Dividends(1) 6,762,687 83,166 --
---------------- ---------------- ----------------
6,912,137 306,317 4,029,805
---------------- ---------------- ----------------
EXPENSES:
Investment advisory fee 7,660,092 5,146,266 371,961
Shareholder servicing fees 687,919 628,133 111,629
Fund administration and accounting fees 458,517 383,757 111,394
Reports to shareholders 155,964 165,182 16,025
Custody fees 35,229 27,062 6,020
Federal and state registration fees 49,252 57,164 25,671
Legal fees 36,477 31,750 7,042
Directors' fees 12,205 9,728 2,146
Audit fees 18,043 18,042 17,813
Other 22,472 18,645 5,308
---------------- ---------------- ----------------
Total expenses before reimbursement 9,136,170 6,485,729 675,009
Reimbursement of expenses by Advisor -- -- (114,198)
Waiver of administration fees by Advisor (16,068) (12,526) (2,193)
Waiver of fees by Accounting Agent (5,005) (3,902) (683)
---------------- ---------------- ----------------
Net expenses 9,115,097 6,469,301 557,935
---------------- ---------------- ----------------
NET INVESTMENT INCOME (LOSS) (2,202,960) (6,162,984) 3,471,870
---------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments+ 1,455,467 7,732,983 628,994
Net realized gain on options written 304,716 -- --
Net realized gain on short positions -- 113,726 --
Change in unrealized appreciation (depreciation) on
investments and foreign currency translations 189,122,055 161,519,635 (3,356,730)
---------------- ---------------- ----------------
Net gain (loss) on investments 190,882,238 169,366,344 (2,727,736)
---------------- ---------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 188,679,278 $ 163,203,360 $ 744,134
================ ================ ================
(1) Net of $7,945, $13,041 and $0 in foreign withholding taxes, respectively.
+See Note 9 for information on affiliated issuers.
See notes to financial statements.
Annual Report 82 & 83
WASATCH FUNDS-STATEMENTS OF CHANGES IN NET ASSETS
CORE GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ----------------------------------------- ------------------ ------------------
OPERATIONS:
Net investment loss $ (228,591) $ (247,355)
Net realized gain (loss) on investments (76,727,660) 9,783,089
Net realized gain on short positions -- --
Change in unrealized appreciation
(depreciation) on investments 385,705,494 (256,247,684)
------------------ ------------------
Net increase (decrease) in net assets
resulting from operations 308,749,243 (246,711,950)
DIVIDENDS PAID FROM:
Net realized gains -- (69,235,847)
------------------ ------------------
-- (69,235,847)
CAPITAL SHARE TRANSACTIONS:
Shares sold 294,903,790 869,576,985
Shares issued to holders in
reinvestment of dividends -- 65,814,411
Shares redeemed (348,335,931) (549,711,813)
Redemption fees 79,906 277,880
------------------ ------------------
Net increase (decrease) (53,352,235) 385,957,463
------------------ ------------------
TOTAL INCREASE IN NET ASSETS 255,397,008 70,009,666
NET ASSETS:
Beginning of period 1,062,944,405 992,934,739
------------------ ------------------
End of period $ 1,318,341,413 $ 1,062,944,405
================== ==================
Undistributed net investment
loss included in net assets at
end of period -- --
================== ==================
GLOBAL SCIENCE &
TECHNOLOGY FUND INTERNATIONAL GROWTH FUND
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 SEPTEMBER 30, 2003 SEPTEMBER 30, 2002*
- ----------------------------------------- ------------------ ------------------ ------------------ ------------------
OPERATIONS:
Net investment loss $ (612,626) $ (499,821) $ (250,286) $ (56,572)
Net realized gain (loss) on investments 82,567 (1,990,071) (1,299,298) (205,925)
Net realized gain on short positions 11,415 -- -- --
Change in unrealized appreciation
(depreciation) on investments 15,374,035 (8,949,752) 9,025,174 (1,675,873)
------------------ ------------------ ------------------ ------------------
Net increase (decrease) in net assets
resulting from operations 14,855,391 (11,439,644) 7,475,590 (1,938,370)
DIVIDENDS PAID FROM:
Net realized gains -- (250,799) -- --
------------------ ------------------ ------------------ ------------------
-- (250,799) -- --
CAPITAL SHARE TRANSACTIONS:
Shares sold 31,899,054 48,305,025 29,443,047 22,263,074
Shares issued to holders in
reinvestment of dividends -- 246,587 -- --
Shares redeemed (16,089,720) (26,786,154) (10,538,025) (2,256,827)
Redemption fees 41,099 87,841 13,571 19,799
------------------ ------------------ ------------------ ------------------
Net increase (decrease) 15,850,433 21,853,299 18,918,593 20,026,046
------------------ ------------------ ------------------ ------------------
TOTAL INCREASE IN NET ASSETS 30,705,824 10,162,856 26,394,183 18,087,676
NET ASSETS:
Beginning of period 20,811,244 10,648,388 18,087,686 10
------------------ ------------------ ------------------ ------------------
End of period $ 51,517,068 $ 20,811,244 $ 44,481,869 $ 18,087,686
================== ================== ================== ==================
Undistributed net investment
loss included in net assets at
end of period $ (632) -- $ (2,271) --
================== ================== ================== ==================
*Inception date of the Fund was June 28, 2002.
See notes to financial statements.
Annual Report 84 & 85
WASATCH FUNDS-STATEMENTS OF CHANGES IN NET ASSETS
MICRO CAP FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ----------------------------------------- ------------------ ------------------
OPERATIONS:
Net investment loss $ (8,716,570) $ (9,333,660)
Net realized gain (loss) on investments 51,800,078 40,208,415
Change in unrealized appreciation
(depreciation) on investments 120,439,212 (36,785,111)
------------------ ------------------
Net increase (decrease) in net assets
resulting from operations 163,522,720 (5,910,356)
DIVIDENDS PAID FROM:
Net realized gains (22,295,887) (35,303,570)
------------------ ------------------
(22,295,887) (35,303,570)
CAPITAL SHARE TRANSACTIONS:
Shares sold 97,787,052 110,625,684
Shares issued to holders in
reinvestment of dividends 21,092,296 33,474,821
Shares redeemed (70,506,908) (98,909,527)
Redemption fees 32,043 31,055
------------------ ------------------
Net increase 48,404,483 45,222,033
------------------ ------------------
TOTAL INCREASE IN NET ASSETS 189,631,316 4,008,107
NET ASSETS:
Beginning of period 327,547,832 323,539,725
------------------ ------------------
End of period $ 517,179,148 $ 327,547,832
================== ==================
Undistributed net investment
loss included in net assets at
end of period -- --
================== ==================
MICRO CAP VALUE FUND SMALL CAP GROWTH FUND
PERIOD ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003* SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ----------------------------------------- -------------------- ------------------ ------------------
OPERATIONS:
Net investment loss $ (238,749) $ (9,713,510) $ (10,771,290)
Net realized gain (loss) on investments 192,165 16,297,720 (4,423,588)
Change in unrealized appreciation
(depreciation) on investments 3,219,189 268,022,826 (101,070,863)
-------------------- ------------------ ------------------
Net increase (decrease) in net assets
resulting from operations 3,172,605 274,607,036 (116,265,741)
DIVIDENDS PAID FROM:
Net realized gains -- (34,010) (9,829,740)
-------------------- ------------------ ------------------
-- (34,010) (9,829,740)
CAPITAL SHARE TRANSACTIONS:
Shares sold 67,827,227 305,478,301 528,078,202
Shares issued to holders in
reinvestment of dividends -- 32,547 9,359,244
Shares redeemed (294,977) (181,150,831) (229,454,786)
Redemption fees 1,123 48,034 113,378
-------------------- ------------------ ------------------
Net increase 67,533,373 124,408,051 308,096,038
-------------------- ------------------ ------------------
TOTAL INCREASE IN NET ASSETS 70,705,978 398,981,077 182,000,557
NET ASSETS:
Beginning of period -- 735,416,839 553,416,282
-------------------- ------------------ ------------------
End of period $ 70,705,978 $ 1,134,397,916 $ 735,416,839
==================== ================== ==================
Undistributed net investment
loss included in net assets at
end of period $ (21,897) -- --
==================== ================== ==================
*Inception date of the Fund was July 28, 2003.
See notes to financial statements.
Annual Report 86 & 87
WASATCH FUNDS-STATEMENTS OF CHANGES IN NET ASSETS
SMALL CAP VALUE FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ----------------------------------------- ------------------ ------------------
OPERATIONS:
Net investment income (loss) $ (2,202,960) $ (2,663,791)
Net realized gain (loss) on investments 1,455,467 (1,360,956)
Net realized gain on options written 304,716 --
Net realized gain on short positions -- --
Change in unrealized appreciation
(depreciation) on investments 189,122,055 (78,709,569)
------------------ ------------------
Net increase (decrease) in net assets
resulting from operations 188,679,278 (82,734,316)
DIVIDENDS PAID FROM:
Net investment income -- --
Net realized gains -- (12,959,896)
------------------ ------------------
-- (12,959,896)
CAPITAL SHARE TRANSACTIONS:
Shares sold 192,079,847 305,503,553
Shares issued to holders in
reinvestment of dividends -- 12,179,592
Shares redeemed (157,672,444) (281,090,835)
Redemption fees 91,867 89,200
------------------ ------------------
Net increase (decrease) 34,499,270 36,681,510
------------------ ------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 223,178,548 (59,012,702)
NET ASSETS:
Beginning of period 428,082,307 487,095,009
------------------ ------------------
End of period $ 651,260,855 $ 428,082,307
================== ==================
Undistributed net investment
income included in net assets at
end of period -- --
================== ==================
ULTRA GROWTH FUND U.S. TREASURY FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ----------------------------------------- ------------------ ------------------ ------------------ ------------------
OPERATIONS:
Net investment income (loss) $ (6,162,984) $ (4,133,844) $ 3,471,870 $ 3,396,742
Net realized gain (loss) on investments 7,732,983 (2,784,246) 628,994 (404,110)
Net realized gain on options written -- -- -- --
Net realized gain on short positions 113,726 -- -- --
Change in unrealized appreciation
(depreciation) on investments 161,519,635 (81,358,019) (3,356,730) 6,246,564
------------------ ------------------ ------------------ ------------------
Net increase (decrease) in net assets
resulting from operations 163,203,360 (88,276,109) 744,134 9,239,196
DIVIDENDS PAID FROM:
Net investment income -- -- (3,484,505) (3,600,125)
Net realized gains -- (4,518,749) -- --
------------------ ------------------ ------------------ ------------------
-- (4,518,749) (3,484,505) (3,600,125)
CAPITAL SHARE TRANSACTIONS:
Shares sold 221,989,430 397,328,346 47,192,794 45,591,240
Shares issued to holders in
reinvestment of dividends -- 4,240,123 3,362,861 3,477,679
Shares redeemed (123,834,632) (117,780,106) (64,698,707) (37,089,979)
Redemption fees 177,068 313,641 138,699 65,965
------------------ ------------------ ------------------ ------------------
Net increase (decrease) 98,331,866 284,102,004 (14,004,353) 12,044,905
------------------ ------------------ ------------------ ------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 261,535,226 191,307,146 (16,744,724) 17,683,976
NET ASSETS:
Beginning of period 277,404,080 86,096,934 83,878,544 66,194,568
------------------ ------------------ ------------------ ------------------
End of period $ 538,939,306 $ 277,404,080 $ 67,133,820 $ 83,878,544
================== ================== ================== ==================
Undistributed net investment
income included in net assets at
end of period -- -- $ 2,503,722 $ 2,516,357
================== ================== ================== ==================
See notes to financial statements.
Annual Report 88 & 89
CORE GROWTH FUND-FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
NET ASSET VALUE, BEGINNING
OF PERIOD $ 25.46 $ 31.57 $ 28.08 $ 20.62 $ 17.00
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment loss (0.01) (0.01) (0.15) (0.18) (0.21)
Net realized and unrealized
gains (losses) on securities(1) 8.09 (3.96) 5.96 8.12 4.55
----------- ----------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 8.08 (3.97) 5.81 7.94 4.34
LESS DISTRIBUTIONS:
Distributions from
net realized gains -- (2.14) (2.32) (0.48) (0.72)
----------- ----------- --------- --------- ---------
TOTAL DISTRIBUTIONS -- (2.14) (2.32) (0.48) (0.72)
----------- ----------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $ 33.54 $ 25.46 $ 31.57 $ 28.08 $ 20.62
=========== =========== ========= ========= =========
TOTAL RETURN 31.68% (13.73)% 22.63% 39.50% 27.28%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $ 1,318,341 $ 1,062,944 $ 992,935 $ 290,705 $ 173,118
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.25% 1.29% 1.32% 1.38% 1.44%
Expenses, before waivers
and reimbursements 1.25% 1.29% 1.32% 1.38% 1.44%
Net investment loss,
net of waivers
and reimbursements (0.02)% (0.02)% (0.66)% (0.86)% (1.07)%
Net investment loss,
before waivers
and reimbursements (0.02)% (0.02)% (0.66)% (0.86)% (1.07)%
Portfolio turnover rate 47% 76% 51% 75% 79%
(1) For 2002 and 2001, includes $0.01 and $0.01 in redemption fees,
respectively (see Note 2).
See notes to financial statements.
90 Annual Report
GLOBAL SCIENCE & TECHNOLOGY FUND-FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30
2003 2002 2001(1)
---- ---- -------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.38 $ 8.02 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.13) (0.15) (0.07)
Net realized and unrealized gains
(losses) on securities+ 4.48 (1.31) (1.91)
-------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 4.35 (1.46) (1.98)
LESS DISTRIBUTIONS:
Distributions from net realized gains -- (0.18) --
-------- ---------- ----------
TOTAL DISTRIBUTIONS -- (0.18) --
-------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.73 $ 6.38 $ 8.02
======== ========== ==========
TOTAL RETURN(2) 68.34% (18.83)% (19.80)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 51,517 $ 20,811 $ 10,648
Ratio to average net assets of:
Expenses, net of waivers and reimbursements 1.95% 1.95% 1.95%(3)
Expenses, before waivers and reimbursements 2.13% 2.42% 3.58%(3)
Net investment loss, net of
waivers and reimbursements (1.87)% (1.90)% (1.50)%(3)
Net investment loss, before
waivers and reimbursements (2.05)% (2.37)% (3.13)%(3)
Portfolio turnover rate(2) 88% 95% 94%
+ For 2003, 2002 and 2001, includes $0.01, $0.03 and $0.02 in redemption fees,
respectively (see Note 2).
(1)Inception date of the Fund was December 19, 2000.
(2)Not annualized for periods less than a year.
(3)Annualized.
See notes to financial statements.
Annual Report 91
INTERNATIONAL GROWTH FUND-FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30
2003 2002(1)
---- -------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.85 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.07) (0.03)
Net realized and unrealized gains
(losses) on securities+ 3.28 (1.12)
-------- ----------
TOTAL FROM INVESTMENT OPERATIONS 3.21 (1.15)
LESS DISTRIBUTIONS:
Distributions from net realized gains -- --
-------- ----------
TOTAL DISTRIBUTIONS -- --
-------- ----------
NET ASSET VALUE, END OF PERIOD $ 12.06 $ 8.85
======== ==========
TOTAL RETURN(2) 36.27% (11.50)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 44,482 $ 18,088
Ratio to average net assets of:
Expenses, net of waivers and reimbursements 1.95% 1.95%(3)
Expenses, before waivers and reimbursements 2.30% 4.26%(3)
Net investment loss, net of
waivers and reimbursements (1.12)% (1.39)%(3)
Net investment loss, before
waivers and reimbursements (1.47)% (3.70)%(3)
Portfolio turnover rate(2) 62% 3%
+ For 2002, includes $0.01 in redemption fees (see Note 2).
(1)Inception date of the Fund was June 28, 2002.
(2)Not annualized for periods less than a year.
(3)Annualized.
See notes to financial statements.
92 Annual Report
MICRO CAP FUND-FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
NET ASSET VALUE, BEGINNING
OF PERIOD $ 5.01 $ 5.64 $ 6.53 $ 4.41 $ 3.59
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment loss (0.12) (0.14) (0.08) (0.09) (0.09)
Net realized and unrealized
gains on securities 2.43 0.11 0.74 2.63 1.27
-------- -------- ---------- ---------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 2.31 (0.03) 0.66 2.54 1.18
LESS DISTRIBUTIONS:
Distributions from
net realized gains (0.34) (0.60) (1.55) (0.42) (0.36)
-------- -------- ---------- ---------- ---------
TOTAL DISTRIBUTIONS (0.34) (0.60) (1.55) (0.42) (0.36)
-------- -------- ---------- ---------- ---------
NET ASSET VALUE,
END OF PERIOD $ 6.98 $ 5.01 $ 5.64 $ 6.53 $ 4.41
======== ======== ========== ========== =========
TOTAL RETURN 50.28% (1.41)% 16.32% 63.88% 37.73%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $517,179 $327,548 $ 323,540 $ 244,444 $ 144,875
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 2.24% 2.28% 2.32% 2.38% 2.46%
Expenses, before waivers
and reimbursements 2.24% 2.28% 2.32% 2.38% 2.46%
Net investment loss,
net of waivers and
reimbursements (2.13)% (2.21)% (1.76)% (1.76)% (2.22)%
Net investment loss,
before waivers and
reimbursements (2.13)% (2.21)% (1.76)% (1.76)% (2.22)%
Portfolio turnover rate 50% 62% 58% 69% 57%
See notes to financial statements.
Annual Report 93
MICRO CAP VALUE FUND-FINANCIAL HIGHLIGHTS
PERIOD ENDED SEPTEMBER 30
2003(1)
-------
NET ASSET VALUE, BEGINNING OF PERIOD $ 2.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.01)
Net realized and unrealized gains
on securities 0.10
----------
TOTAL FROM INVESTMENT OPERATIONS 0.09
LESS DISTRIBUTIONS:
Distributions from net realized gains --
----------
TOTAL DISTRIBUTIONS --
----------
NET ASSET VALUE, END OF PERIOD $ 2.09
==========
TOTAL RETURN(2) 4.50%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 70,706
Ratio to average net assets of:
Expenses, net of waivers and reimbursements(3) 2.50%
Expenses, before waivers and reimbursements(3) 2.73%
Net investment loss, net of
waivers and reimbursements(3) (1.97)%
Net investment loss, before
waivers and reimbursements(3) (2.20)%
Portfolio turnover rate(2) 4%
(1)Inception date of the Fund was July 28, 2003.
(2)Not annualized for periods less than a year.
(3)Annualized.
See notes to financial statements.
94 Annual Report
SMALL CAP GROWTH FUND-FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
NET ASSET VALUE, BEGINNING
OF PERIOD $ 23.83 $ 26.18 $ 34.89 $ 26.01 $ 20.79
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment loss (0.28) (0.35) (0.15) (0.23) (0.20)
Net realized and unrealized
gains (losses) on securities+ 8.88 (1.55) (2.71) 11.82 8.49
----------- ----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT
OPERATIONS 8.60 (1.90) (2.86) 11.59 8.29
LESS DISTRIBUTIONS:
Distributions from
net realized gains --(1) (0.45) (5.85) (2.71) (3.07)
----------- ----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS -- (0.45) (5.85) (2.71) (3.07)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE,
END OF PERIOD $ 32.43 $ 23.83 $ 26.18 $ 34.89 $ 26.01
=========== =========== =========== =========== ===========
TOTAL RETURN 36.15% (7.53)% (8.61)% 49.63% 48.96%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $ 1,134,398 $ 735,417 $ 553,416 $ 237,812 $ 145,915
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.25% 1.31% 1.36% 1.38% 1.44%
Expenses, before waivers
and reimbursements 1.25% 1.31% 1.36% 1.38% 1.44%
Net investment loss,
net of waivers and
reimbursements (1.08)% (1.25)% (0.83)% (0.84)% (0.79)%
Net investment loss,
before waivers and
reimbursements (1.08)% (1.25)% (0.83)% (0.84)% (0.79)%
Portfolio turnover rate 63% 51% 40% 72% 46%
+For 2001, includes $0.02 in redemption fees (see Note 2).
(1)Less than $0.005.
See notes to financial statements.
Annual Report 95
SMALL CAP VALUE FUND-FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
NET ASSET VALUE, BEGINNING
OF PERIOD $ 3.21 $ 3.76 $ 3.51 $ 2.43 $ 1.80
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment loss (0.02) (0.02) -- (0.02) (0.04)
Net realized and unrealized
gains (losses) on securities 1.43 (0.43) 0.56 1.19 0.67
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 1.41 (0.45) 0.56 1.17 0.63
LESS DISTRIBUTIONS:
Distributions from
net realized gains -- (0.10) (0.31) (0.09) --
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS -- (0.10) (0.31) (0.09) --
--------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $ 4.62 $ 3.21 $ 3.76 $ 3.51 $ 2.43
========= ========= ========= ========= =========
TOTAL RETURN 43.93% (12.35)% 18.04% 49.94% 35.00%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $ 651,261 $ 428,082 $ 487,095 $ 46,470 $ 16,770
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.78% 1.81% 1.92% 1.95% 1.95%
Expenses, before waivers
and reimbursements 1.78% 1.81% 1.92% 2.09% 2.18%
Net investment loss,
net of waivers
and reimbursements (0.43)% (0.44)% (0.31)% (1.02)% (1.54)%
Net investment loss,
before waivers
and reimbursements (0.43)% (0.44)% (0.31)% (1.16)% (1.77)%
Portfolio turnover rate 69% 69% 41% 67% 106%
See notes to financial statements.
96 Annual Report
ULTRA GROWTH FUND - FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
NET ASSET VALUE, BEGINNING
OF PERIOD $ 16.52 $ 19.15 $ 27.17 $ 20.02 $ 15.10
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment loss (0.29) (0.25) (0.21) (0.25) (0.34)
Net realized and unrealized
gains (losses) on securities+ 9.20 (1.46) (2.42) 8.87 6.00
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 8.91 (1.71) (2.63) 8.62 5.66
LESS DISTRIBUTIONS:
Distributions from
net realized gains -- (0.92) (5.39) (1.47) (0.74)
---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS -- (0.92) (5.39) (1.47) (0.74)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE,
END OF PERIOD $ 25.43 $ 16.52 $ 19.15 $ 27.17 $ 20.02
========== ========== ========== ========== ==========
TOTAL RETURN 53.93% (9.74)% (10.89)% 46.66% 39.86%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $ 538,939 $ 277,404 $ 86,097 $ 56,282 $ 41,205
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.57% 1.71% 1.75% 1.75% 1.75%
Expenses, before waivers
and reimbursements 1.57% 1.71% 1.79% 1.82% 1.78%
Net investment loss,
net of waivers and
reimbursements (1.50)% (1.67)% (1.39)% (1.19)% (1.49)%
Net investment loss,
before waivers and
reimbursements (1.50)% (1.67)% (1.43)% (1.26)% (1.52)%
Portfolio turnover rate 76% 78% 123% 135% 77%
+For 2003, 2002 and 2001, includes $0.01, $0.02 and $0.07 in redemption fees,
respectively (see Note 2).
See notes to financial statements.
Annual Report 97
U.S. TREASURY FUND - FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
NET ASSET VALUE, BEGINNING
OF PERIOD $ 14.04 $ 12.97 $ 12.00 $ 11.68 $ 13.42
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income 0.72 0.66 0.65 0.66 0.61
Net realized and unrealized
gains (losses) on securities+ (0.45) 1.18 0.88 0.39 (2.01)
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.27 1.84 1.53 1.05 (1.40)
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.63) (0.77) (0.56) (0.73) (0.28)
Distributions from
net realized gains -- -- -- -- (0.06)
---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.63) (0.77) (0.56) (0.73) (0.34)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE,
END OF PERIOD $ 13.68 $ 14.04 $ 12.97 $ 12.00 $ 11.68
========== ========== ========== ========== ==========
TOTAL RETURN 2.17% 15.38% 12.89% 9.84% (10.65)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $ 67,134 $ 83,879 $ 66,195 $ 58,198 $ 76,999
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.75% 0.75% 0.75% 0.75% 0.75%
Expenses, before waivers
and reimbursements 0.91% 0.98% 0.95% 0.97% 0.95%
Net investment income,
net of waivers and
reimbursements 4.67% 5.51% 5.34% 5.35% 4.96%
Net investment income,
before waivers and
reimbursements 4.51% 5.28% 5.14% 5.13% 4.76%
Portfolio turnover rate 37% 22% 41% 16% 39%
+For 2003, 2002 and 2001, includes $0.03, $0.01 and $0.01 in redemption fees,
respectively (see Note 2).
See notes to financial statements.
98 Annual Report
WASATCH FUNDS - NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
1. ORGANIZATION
Wasatch Funds, Inc. (the "Funds") is an open-end, registered management
investment company under the Investment Company Act of 1940. The Core Growth,
Global Science & Technology (formerly Global Technology), International Growth,
Micro Cap, Micro Cap Value, Small Cap Growth, Small Cap Value and Ultra Growth
Funds (collectively the "Equity Funds") are non-diversified portfolios and the
Wasatch-Hoisington U.S. Treasury ("U.S. Treasury") Fund is a diversified
portfolio of Wasatch Funds. Each of the Funds 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
accounting principles generally accepted in the United States of America. The
following is a summary of the more significant of such policies.
VALUATION OF SECURITIES-Securities are valued as of the close of the
New York Stock Exchange (generally 3:00 p.m. Central Time) on the valuation
date. Equity securities are valued at the latest quoted sales price or official
closing price taken from the primary market in which each security trades.
Securities for which there were no transactions are valued at the closing 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. Fair value is determined by a
designated Pricing Committee under the supervision of the Board of Directors,
in accordance with pricing procedures approved by the Board for restricted
securities, private placements and other illiquid securities, and other
securities for which market value quotations are not readily available or when
events or circumstances are identified that may affect the value of securities
between the closing of their principal market and the time the Funds' securities
are valued.
FOREIGN CURRENCY TRANSLATIONS-Values of investments denominated in
foreign currencies are converted into U.S. dollars using the current exchange
rate. Purchases and sales of investments and dividend income are translated into
U.S. dollars using the current exchange rate prevailing on the respective dates
of such transactions. 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. Foreign denominated assets may involve greater risks than
domestic transactions, including currency, political and economic, regulatory
and market risks.
INVESTMENT IN SECURITIES-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. Interest income is recorded on the accrual basis.
SHORT SALES-To a limited extent, the Equity Funds may make short sales
of securities. A short sale means a Fund
Annual Report 99
WASATCH FUNDS - NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
sells a security it does not own in anticipation of a decline in the stock's
price. The Fund must borrow the security to deliver to the buyer upon settlement
of the short sale. The Fund is then obligated to replace the borrowed security
by purchasing it at a later date. The Fund will experience a loss if the market
price of the security increases between the date of the short sale and the date
the security is replaced. All short sales must be fully collateralized. The
Funds designate collateral consisting of cash, U.S. government securities or
other liquid assets sufficient to collateralize the market value of short
positions.
OPTION TRANSACTIONS-The Equity Funds may buy and sell put and call
options, write covered put and call options on portfolio securities and write
over-the-counter options 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.
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 taxes has been made.
EXPENSES-The Funds are charged for expenses that are directly
attributable to them, such as advisory and custodian fees. Expenses that are not
directly attributable to a Fund are generally allocated among the Funds in
proportion to their respective net assets. Directors fees and expenses are paid
to the independent Directors of the Funds.
USE OF MANAGEMENT ESTIMATES-The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America 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.
REDEMPTION FEES-The Funds will deduct a fee of 2.00% from redemption
proceeds on shares of the Funds held two months or less. The redemption fee is
treated as additional paid-in capital.
3. DISTRIBUTIONS
Dividends from net investment income are declared and paid at least
annually. Distributions of net realized gains, if any, will be declared and paid
at least annually. The amount of dividends
100 Annual Report
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
and distributions from net investment income and net realized gains are deter-
mined in accordance with federal income tax regulations, which may differ from
generally accepted accounting principles. The Funds may utilize earnings and
profits distributed to share-holders on redemption of shares as part of the
dividends paid deduction.
To the extent these book and tax differences are permanent in nature,
such amounts are reclassified among paid-in capital in excess of par value,
undistributed net investment income and undistributed net realized gain
(loss) on investments. Accordingly, at September 30, 2003, reclassifications
were recorded to increase (decrease) paid-in capital in excess of par by
$(1,005,105), $(612,626), $(250,271), $962,483, $(24,687), $(831,042),
$(2,119,131), $0 and $0, increase undistributed net investment income by
$228,591, $611,994, $248,015, $8,716,570, $216,852, $9,713,510, $2,202,960,
$6,162,984 and $0 and increase (decrease) undistributed net realized gain (loss)
by $776,514, $632, $2,256, $(9,679,053), $(192,165), $(8,882,468), $(83,829),
$(6,162,984) and $0, for the Core Growth, Global Science & Technology,
International Growth, Micro Cap, Micro Cap Value, Small Cap Growth, Small Cap
Value, Ultra Growth and U.S. Treasury Funds, respectively.
4. CAPITAL STOCK
Transactions in shares of capital stock were as follows:
YEAR ENDED SEPTEMBER 30, 2003
CORE GLOBAL SCIENCE INTERNATIONAL MICRO
GROWTH & TECHNOLOGY GROWTH CAP
FUND FUND FUND FUND
---- ---- ---- ----
Shares sold 10,414,773 3,419,237 2,761,196 16,929,258
Dividends reinvested -- -- -- 4,859,976
Shares redeemed (12,861,353) (1,879,780) (1,118,048) (13,017,963)
---------- --------- --------- ----------
Net increase (decrease) (2,446,580) 1,539,457 1,643,148 8,771,271
========= ========= ========= ==========
MICRO SMALL SMALL ULTRA U.S.
CAP VALUE CAP GROWTH CAP VALUE GROWTH TREASURY
FUND* FUND FUND FUND FUND
---- ---- ---- ---- ----
Shares sold 33,909,091 10,711,482 53,599,577 10,725,440 3,512,714
Dividends reinvested -- 1,241 -- -- 259,080
Shares redeemed (143,427) (6,604,251) (46,012,597) (6,321,373) (4,839,225)
---------- ---------- ----------- ---------- ---------
Net increase (decrease) 33,765,664 4,108,472 7,586,980 4,404,067 (1,067,431)
========== ========== =========== ========== ==========
*Inception date of the Fund was July 28, 2003.
Annual Report 101
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
YEAR ENDED SEPTEMBER 30, 2002
CORE GLOBAL SCIENCE INTERNATIONAL MICRO
GROWTH & TECHNOLOGY GROWTH CAP
FUND FUND FUND* FUND
---- ---- ---- ----
Shares sold 25,736,941 4,717,678 2,287,064 18,440,759
Dividends reinvested 2,098,403 27,973 -- 6,140,099
Shares redeemed (17,535,543) (2,811,617) (243,227) (16,551,410)
----------- ---------- --------- -----------
Net increase 10,299,801 1,934,034 2,043,837 8,029,448
=========== ========== ========= ===========
SMALL SMALL ULTRA U.S.
CAP GROWTH CAP VALUE GROWTH TREASURY
FUND FUND FUND FUND
---- ---- ---- ----
Shares sold 17,362,623 72,717,440 17,913,935 3,532,936
Dividends reinvested 339,016 3,261,583 210,301 296,730
Shares redeemed (7,972,814) (72,187,448) (5,831,801) (2,959,772)
---------- ----------- ---------- ----------
Net increase 9,728,825 3,791,575 12,292,435 869,894
========== ========== ========== =========
*Inception date of the Fund was June 28, 2002.
5. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding U.S. government
and short-term securities, for the year ended September 30, 2003 are summarized
below:
CORE GLOBAL SCIENCE INTERNATIONAL MICRO
GROWTH & TECHNOLOGY GROWTH CAP
FUND FUND FUND FUND
---- ---- ---- ----
Purchases $ 492,196,057 $ 31,093,998 $ 29,728,043 $ 190,368,610
Sales $(616,175,811) $(25,476,825) $(12,171,076) $(234,666,397)
MICRO SMALL SMALL ULTRA
CAP VALUE CAP GROWTH CAP VALUE GROWTH
FUND* FUND FUND FUND
---- ---- ---- ----
Purchases $ 44,465,297 $ 569,550,199 $ 347,705,571 $ 322,672,475
Sales $ (1,567,231) $(523,519,734) $(334,261,859) $(281,807,535)
*Inception date of the Fund was July 28, 2003.
Purchases of U.S. Government securities in the Global Science &
Technology, Small Cap Growth and Ultra Growth Funds were $500,801, $5,005,024
and $4,505,219, respectively.
Purchases and sales of U.S. Government securities in the U.S. Treasury
Fund were $26,862,076 and $40,165,025, respectively.
102 Annual Report
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
6. OPTION CONTRACTS WRITTEN
The premium amount and the number of option contracts written during
the year ended September 30, 2003, were as follows:
PREMIUM NUMBER OF
AMOUNT CONTRACTS
------ ---------
CORE GROWTH FUND
Options outstanding at September 30, 2002 $ -- --
Options written 457,965 3,000
Options closed -- --
Options expired -- --
--------- ------
Options outstanding at September 30, 2003 $ 457,965 3,000
GLOBAL SCIENCE & TECHNOLOGY FUND
Options outstanding at September 30, 2002 $ -- --
Options written 41,648 310
Options closed (41,648) (310)
Options expired -- --
--------- ------
Options outstanding at September 30, 2003 $ -- --
SMALL CAP VALUE FUND
Options outstanding at September 30, 2002 $ -- --
Options written 310,354 2,445
Options closed (129,636) (895)
Options expired (180,718) (1,550)
--------- ------
Options outstanding at September 30, 2003 $ -- --
Annual Report 103
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
7. FEDERAL INCOME TAX INFORMATION
At September 30, 2003, the cost of securities, excluding written
options and securities sold short, on a tax basis and gross unrealized
appreciation and (depreciation) of investments for federal income tax purposes
were as follows:
CORE GLOBAL SCIENCE INTERNATIONAL
GROWTH & TECHNOLOGY GROWTH
FUND FUND FUND
--------------- --------------- --------------
Cost of Investments $ 1,152,822,315 $ 48,917,071 $ 37,815,606
=============== =============== ==============
Gross unrealized appreciation $ 289,345,652 $ 6,648,397 $ 7,764,383
Gross unrealized (depreciation) (115,637,929) (3,867,779) (414,779)
--------------- --------------- --------------
Net unrealized appreciation
on investments $ 173,707,723 $ 2,780,618 $ 7,349,604
=============== =============== ==============
MICRO MICRO CAP SMALL CAP
CAP VALUE GROWTH
FUND FUND FUND
------------- ------------- -------------
Cost of Investments $ 385,194,662 $ 68,259,532 $ 963,871,208
============= ============= =============
Gross unrealized appreciation $ 153,021,998 $ 4,167,495 $ 240,601,208
Gross unrealized (depreciation) (18,269,623) (948,306) (72,619,666)
------------- ------------- -------------
Net unrealized appreciation
on investments $ 134,752,375 $ 3,219,189 $ 167,981,542
============= ============= =============
SMALL CAP ULTRA U.S.
VALUE GROWTH TREASURY
FUND FUND FUND
-------------- -------------- --------------
Cost of Investments $ 543,159,707 $ 480,626,958 $ 61,459,375
============= ============= =============
Gross unrealized appreciation $ 138,185,818 $ 96,238,552 $ 5,323,844
Gross unrealized (depreciation) (29,330,444) (30,273,770) (150,291)
------------- ------------- -------------
Net unrealized appreciation
on investments $ 108,855,374 $ 65,964,782 $ 5,173,553
============= ============= =============
The difference between cost amounts for financial statement and federal
income tax purposes is due primarily to timing differences in recognizing
certain gains and losses in security transactions.
104 Annual Report
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
As of September 30, 2003, the components of accumulated earnings on a
tax basis were as follows:
CORE GLOBAL SCIENCE INTERNATIONAL
GROWTH & TECHNOLOGY GROWTH
FUND FUND FUND
------------- ------------- -------------
Undistributed ordinary income $ -- $ -- $ --
Undistributed long-term
capital gains -- -- --
------------- ------------- -------------
Accumulated earnings -- -- --
Accumulated capital and other losses (84,244,774) (1,932,612) (1,502,809)
Other undistributed ordinary losses -- (632) --
Net unrealized appreciation on
investments, securities sold short,
derivative and foreign currency
denominated assets and liabilities 173,912,325 2,785,543 7,346,872
------------- ------------- -------------
Total accumulated earnings $ 89,667,551 $ 852,299 $ 5,844,063
============= ============= =============
MICRO MICRO CAP SMALL CAP
CAP VALUE GROWTH
FUND FUND FUND
------------- ------------- -------------
Undistributed ordinary income $ 2,759,020 $ -- $ --
Undistributed long-term
capital gains 38,805,925 -- 5,914,927
------------- ------------- -------------
Accumulated earnings 41,564,945 -- 5,914,927
Accumulated capital and other losses -- -- (2,557,105)
Other undistributed ordinary losses -- (21,897) --
Net unrealized appreciation on
investments, securities sold short,
derivative and foreign currency
denominated assets and liabilities 134,752,375 3,219,189 167,981,542
------------- ------------- -------------
Total accumulated earnings $ 176,317,320 $ 3,197,292 $ 171,339,364
============= ============= =============
Annual Report 105
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
SMALL CAP ULTRA U.S.
VALUE GROWTH TREASURY
FUND FUND FUND
------------ ------------ ------------
Undistributed ordinary income $ -- $ 103,222 $ 2,503,722
Undistributed long-term
capital gains -- 3,599,548 --
------------ ------------ ------------
Accumulated earnings -- 3,702,770 2,503,722
Accumulated capital and other losses -- (1,712,754) (7,148,034)
Other undistributed ordinary losses -- -- --
Net unrealized appreciation on
investments, securities sold short,
derivative and foreign currency
denominated assets and liabilities 108,333,861 65,964,782 5,173,553
------------ ------------ ------------
Total accumulated earnings $108,333,861 $ 67,954,798 $ 529,241
============ ============ ============
As of September 30, 2003, the Core Growth, Global Science & Technology,
International Growth and U.S. Treasury Funds had federal income tax capital loss
carryforwards of $46,940,430, $546,501, $226,990 and $7,148,034, respectively.
Federal income tax capital loss carryforwards for the U.S. Treasury Fund expire
as follows: $1,997,575 in 2008, $4,318,964 in 2009 and $831,495 in 2010. The
entire federal income tax capital loss carryforward for the Core Growth, Global
Science & Technology and International Growth Funds expires in 2011. To the
extent future gains are offset by capital loss carryforwards, such gains will
not be distributed.
106 Annual Report
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
As of September 30, 2003, the Core Growth, Global Science & Technology,
International Growth, Small Cap Growth and Ultra Growth Funds had $37,304,344,
$1,386,111, $1,275,819, $2,557,104 and $1,712,753, respectively, of post-October
capital losses, which are deferred until 2004 for tax purposes. Also, the Global
Science & Technology Fund had $632 of post-October currency losses, which are
deferred until 2004 for tax purposes. Net capital losses incurred after October
31, and within the taxable year are deemed to arise on the first day of the
Fund's next taxable year.
The tax character of distributions paid during the fiscal year ended
September 30, 2003 and fiscal year ended September 30, 2002 was as follows:
CORE GROWTH GLOBAL SCIENCE
FUND & TECHNOLOGY FUND
----------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
------------- ------------- ------------- -------------
Ordinary income $ -- $ 17,852,286 $ -- $ 250,799
Net long-term capital gains -- 51,383,561 -- --
------------- ------------- ------------- -------------
Total $ -- $ 69,235,847 $ -- $ 250,799
============= ============= ============= =============
INTERNATIONAL GROWTH MICRO CAP
FUND FUND
----------------------------- ----------------------------
Year Ended Period Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
2003 2002* 2003 2002
------------- ------------- ------------- -------------
Ordinary income $ -- $ -- $ -- $ 1,484,719
Net long-term capital gains -- -- 22,295,887 33,818,851
------------- ------------- ------------- -------------
Total $ -- $ -- $ 22,295,887 $ 35,303,570
============= ============= ============= =============
MICRO CAP SMALL CAP SMALL CAP
VALUE FUND GROWTH FUND VALUE FUND
------------- ---------------------------- ----------------------------
Period Ended Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30, September 30,
2003** 2003 2002 2003 2002
------------- ------------- ------------- ------------- -------------
Ordinary income $ -- $ -- $ -- $ -- $ 5,990,110
Net long-term capital
gains -- 34,010 9,829,740 -- 6,969,786
------------- ------------- ------------- ------------- -------------
Total $ -- $ 34,010 $ 9,829,740 $ -- $ 12,959,896
============= ============= ============= ============= =============
* Inception date of the Fund was June 28, 2002.
** Inception date of the Fund was July 28, 2003.
Annual Report 107
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
ULTRA GROWTH U.S. TREASURY
FUND FUND
---------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
------------- ------------- ------------- -------------
Ordinary income $ -- $ -- $ 3,484,505 $ 3,600,125
Net long-term capital gains -- 4,518,749 -- --
------------- ------------- ------------- -------------
Total $ -- $ 4,518,749 $ 3,484,505 $ 3,600,125
============= ============= ============= =============
The Funds hereby designate approximately $23,192,789 and $39,924 as a
capital gain dividend for the Micro Cap and Small Cap Growth Funds,
respectively, for the purpose of the dividends paid deduction (unaudited).
For the fiscal year ended September 30, 2003 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. Complete information will
be reported in conjunction with your 2003 Form 1099-DIV (unaudited).
8. ADVISORY AND ADMINISTRATION FEES AND EXPENSE WAIVERS
ADVISOR FEES-As the Funds' investment advisor, the Advisor receives a
monthly fee calculated on average daily net assets. For the year ended September
30, 2003, management fees for the Core Growth, Global Science & Technology,
International Growth, Micro Cap, Micro Cap Value, Small Cap Growth, Small Cap
Value, Ultra Growth and U.S. Treasury Funds were 1.00%, 1.50%, 1.50%, 2.00%,
2.00%, 1.00%, 1.50%, 1.25% and 0.50% of the average daily net assets of each
Fund, respectively.
The Advisor has voluntarily agreed to limit the expenses of the Core
Growth, Global Science & Technology, International Growth, Micro Cap, Micro Cap
Value, Small Cap Growth, Small Cap Value, Ultra Growth and U.S. Treasury Funds
to 1.50%, 1.95%, 1.95%, 2.50%, 2.50%, 1.50%, 1.95%, 1.75% and 0.75% of average
daily net assets, respectively. For the year ended September 30, 2003, the
Advisor reimbursed $56,945 for the Global Science & Technology Fund, $76,716
for the International Growth Fund and $114,198 for the U.S. Treasury Fund. For
the period July 28, 2003 to September 30, 2003, the Advisor reimbursed $28,446
for the Micro Cap Value Fund.
ADMINISTRATION FEES--Effective June 1, 2003, the Funds entered into an
administration services agreement with the Advisor. Pursuant to this agreement,
the Funds pay the Advisor an administration fee at an annual rate of .425% of
the first $2.7 billion of the Funds' average daily net assets and then a
decreasing rate for average daily net assets exceeding that level. For the
period June 1 through September 30, 2003, the Core Growth, Global Science &
108 Annual Report
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
Technology, International Growth, Micro Cap, Micro Cap Value, Small Cap Growth,
Small Cap Value, Ultra Growth and U.S. Treasury Funds paid administration fees
to the Advisor of $110,606, $3,812, $2,690, $42,409, $4,160, $95,794, $54,050,
$45,058 and $5,375, respectively. The Advisor voluntarily waived administration
fees of $33,826, $975, $632, $12,593, $0, $28,005, $16,068, $12,526 and $2,193
for the Core Growth, Global Science & Technology, International Growth, Micro
Cap, Micro Cap Value, Small Cap Growth, Small Cap Value, Ultra Growth and U.S.
Treasury Funds, respectively.
OTHER EXPENSE WAIVERS--The Funds' custodian and accounting agent
voluntarily waived accounting fees of $10,538, $304, $197, $3,923, $0, $8,724,
$5,005, $3,902 and $683 for the Core Growth, Global Science & Technology,
International Growth, Micro Cap, Micro Cap Value, Small Cap Growth, Small Cap
Value, Ultra Growth and U.S. Treasury Funds, respectively.
9. TRANSACTIONS WITH AFFILIATES
The following is an analysis of transactions for the year ended
September 30, 2003 in the Core Growth, Micro Cap, Small Cap Growth, Small Cap
Value and Ultra Growth Funds with "affiliated companies" as defined by the
Investment Company Act of 1940:
Annual Report 109
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
CORE GROWTH FUND
AMOUNT OF AMOUNT OF
DIVIDENDS GAIN (LOSS)
CREDITED TO REALIZED ON
SHARE ACTIVITY INCOME SALE OF SHARES
------------------------------------------- FOR THE FOR THE
BALANCE BALANCE YEAR ENDED YEAR ENDED
SECURITY NAME 9/30/02 PURCHASES SALES 9/30/03 9/30/03 9/30/03
- ---------------------- --------- --------- --------- ---------- ----------- -------------
AmeriCredit Corp. 5,325,531 1,799,550 3,701,500 3,423,581* -- $ (13,290,017)
Anworth Mortgage
Asset Corp. -- 1,984,575 -- 1,984,575 $ 548,134 --
Metris
Companies Inc. 5,419,312 -- 5,419,312 --* $ 28,191 $ (60,629,751)
Orthodontic Centers
of America, Inc. 3,214,756 296,750 1,360,370 2,151,136* -- $ (10,174,905)
Pediatrix Medical
Group Inc. 1,683,500 27,550 713,275 997,775* -- $ 7,009,433
Rent-A-Center, Inc.(1) 4,649,250 91,000 1,967,180 2,773,070* -- $ 30,832,387
SCP Pool Corp.(2) 1,909,480 -- 243,250 1,666,230* -- $ 5,322,646
Sonic
Automotive, Inc. 1,812,570 228,900 529,425 1,512,045* $ 151,205 $ 5,813,272
United Rentals, Inc. 4,805,725 -- 4,307,400 498,325* -- $ (28,164,740)
*No longer affiliated as of September 30, 2003.
(1) Adjusted for 5-for-2 split on September 2, 2003.
(2) Adjusted for 3-for-2 split on September 15, 2003.
MICRO CAP FUND
AMOUNT OF AMOUNT OF
DIVIDENDS GAIN (LOSS)
CREDITED TO REALIZED ON
SHARE ACTIVITY INCOME SALE OF SHARES
------------------------------------------- FOR THE FOR THE
BALANCE BALANCE YEAR ENDED YEAR ENDED
SECURITY NAME 9/30/02 PURCHASES SALES 9/30/03 9/30/03 9/30/03
- ---------------------- --------- --------- --------- ---------- ----------- --------------
CommerceWest Bank -- 95,000 -- 95,000 -- --
CorVel Corp. 513,838 35,600 114,032 435,406* -- $ 1,659,982
Covalent Group, Inc. -- 825,000 -- 825,000 -- --
Encision, Inc. 40,075 193,000 -- 233,075 -- --
Encision, Inc. -- 200,000 -- 200,000 -- --
InTest Corp. 433,050 11,925 -- 444,975 -- --
IRIDEX Corp. 715,150 14,700 10,000 719,850 -- $ (72,855)
Nanometrics Inc. 912,675 5,000 624,525 293,150* -- $ (3,494,901)
PSi Technologies
Holdings, Inc.
ADR 1,021,975 -- -- 1,021,975 -- --
Rainbow
Rentals, Inc. 390,000 14,400 -- 404,400 -- --
* No longer affiliated as of September 30, 2003.
110 Annual Report
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
SMALL CAP GROWTH FUND
AMOUNT OF AMOUNT OF
DIVIDENDS GAIN (LOSS)
CREDITED TO REALIZED ON
SHARE ACTIVITY INCOME SALE OF SHARES
------------------------------------------- FOR THE FOR THE
BALANCE BALANCE YEAR ENDED YEAR ENDED
SECURITY NAME 9/30/02 PURCHASES SALES 9/30/03 9/30/03 9/30/03
- ---------------------- --------- --------- --------- ---------- ----------- -------------
AmSurg Corp. 955,575 66,859 10,775 1,011,659 -- $ (11,374)
SMALL CAP VALUE FUND
AMOUNT OF AMOUNT OF
DIVIDENDS GAIN (LOSS)
CREDITED TO REALIZED ON
SHARE ACTIVITY INCOME SALE OF SHARES
------------------------------------------- FOR THE FOR THE
BALANCE BALANCE YEAR ENDED YEAR ENDED
SECURITY NAME 9/30/02 PURCHASES SALES 9/30/03 9/30/03 9/30/03
- ---------------------- --------- --------- --------- ---------- ----------- --------------
Friedman's, Inc.,
Class A 1,120,470 28,950 340,815 808,605* $ 81,745 $ 1,486,803
Maxwell Shoe
Co., Class A 768,000 -- 627,375 140,625* -- $ 1,918,368
MicroFinancial Inc. 1,051,900 116,900 654,502 514,298* $ 52,595 $ (6,025,175)
Mobile Mini, Inc. 792,850 118,725 181,138 730,437 -- $ (138,683)
Nara Bancorp, Inc.(1) 644,400 -- 396,750 247,650* $ 70,955 $ 1,519,725
PCD Inc. 316,964 -- 316,964 --* -- $ (2,003,772)
Peak International Ltd. 729,400 -- 193,375 536,025* -- $ (198,977)
USA Truck, Inc. 317,375 159,900 5,025 472,250 -- $ (12,889)
Whitehall
Jewellers, Inc. 607,393 198,175 -- 805,568 -- --
*No longer affiliated as of September 30, 2003.
(1) Adjusted for 2-for-1 split on March 18, 2003.
Annual Report 111
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
ULTRA GROWTH FUND
AMOUNT OF AMOUNT OF
DIVIDENDS GAIN (LOSS)
CREDITED TO REALIZED ON
SHARE ACTIVITY INCOME SALE OF SHARES
------------------------------------------- FOR THE FOR THE
BALANCE BALANCE YEAR ENDED YEAR ENDED
SECURITY NAME 9/30/02 PURCHASES SALES 9/30/03 9/30/03 9/30/03
- --------------------------------------------------------------------------------------------------
Wireless Facilities,
Inc. 2,682,944 -- 1,571,370 1,111,574* -- $ 2,504,947
*No longer affiliated as of September 30, 2003.
10. RESTRICTED SECURITIES
The Funds may own investments that were purchased through private
placement transactions (or under Rule 144A as noted) and cannot be sold without
prior registration under the Securities Act of 1933 or may be limited due to
certain restrictions. The costs of registering such securities are paid by the
issuer. At September 30, 2003, the Funds held restricted preferred stocks (or
common stocks or warrants as noted) as follows:
VALUE AS
ACQUISITION ACQUISITION FAIR % OF
DATE COST VALUE NET ASSETS
----------------------------------------------
GLOBAL SCIENCE & TECHNOLOGY FUND
Northwest
Biotherapeutics, Inc.(1) 6/13/01 $ 35,000 $ 1,680 --
SiRF Technology
Holdings, Inc., Series H 12/20/01 $ 277,875 222,300 0.43%
SiRF Technology Holdings, Inc.(2) 1/11/02 -- -- --
Xtera Communications, Inc. 9/3/03 $ 7,076 7,076 0.01%
----------------
$231,056 0.44%
- -----------------------------------------------------------------------------------
MICRO CAP FUND
Encision, Inc.(1) 7/30/03 $ 600,000 $648,000 0.13%
- -----------------------------------------------------------------------------------
MICRO CAP VALUE FUND
Franklin Bank Corp.(3) 9/24/03 $ 551,250 $551,250 0.78%
Encision, Inc.(1) 7/30/03 $ 400,002 432,002 0.61%
-------- ------
$983,252 1.39%
(1) Common stock.
(2) Warrants.
(3) Common stock. Rule 144A Security.
112 Annual Report
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
VALUE AS
ACQUISITION ACQUISITION FAIR % OF
DATE COST VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
SiRF Technology
Holdings, Inc., Series H 12/20/01 $ 2,616,120 $2,092,896 0.18%
SiRF Technology Holdings, Inc. (2) 1/11/02 -- -- --
---------- -------
$2,092,896 0.18%
- --------------------------------------------------------------------------------------
SMALL CAP VALUE FUND
Arbor Realty Trust, Inc.(3) 6/26/03 $ 5,626,875 5,645,631 0.87%
- --------------------------------------------------------------------------------------
ULTRA GROWTH FUND
IQ4Hire, Inc. 9/7/00 $ 110,000 $ 440 --
Northwest Biotherapeutics, Inc.(1) 6/13/01 $ 145,000 6,960 --
SiRF Technology
Holdings, Inc., Series H 12/20/01 $ 806,000 644,800 0.12%
SiRF Technology Holdings, Inc. (2) 1/11/02 -- -- --
Xtera Communications, Inc. 9/3/03 $ 99,065 99,065 0.02%
---------- -------
$ 751,265 0.14%
(1) Common stock.
(2) Warrants.
(3) Common stock. Rule 144A Security.
11. SUBSEQUENT EVENT--DISTRIBUTION TO SHAREHOLDERS
The Funds declared a capital gains distribution in the Micro Cap, Small
Cap Growth and Ultra Growth Funds which was paid on October 10, 2003, to
shareholders of record on October 9, 2003, in the amount of $0.561786, $0.168445
and $0.175098 per share, respectively.
12. PURCHASE COMMITMENTS
The Global Science & Technology, Small Cap Growth and Ultra Growth
Funds have entered into subscription agreements to acquire limited partnership
interests in Montagu Newhall Global Partners II, L.P. in the amounts of
$500,000, $5,000,000 and $4,500,000, respectively. U.S. Government securities
held by the Funds have been designated to meet these purchase commitments.
Annual Report 113
WASATCH FUNDS-REPORT OF INDEPENDENT AUDITORS
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 the Wasatch Core Growth Fund,
Wasatch Global Science & Technology Fund, Wasatch International Growth Fund,
Wasatch Micro Cap Fund, Wasatch Micro Cap Value Fund, Wasatch Small Cap Growth
Fund, Wasatch Small Cap Value Fund, Wasatch Ultra Growth Fund and the
Wasatch-Hoisington U.S. Treasury Fund (hereafter referred to as the "Funds") at
September 30, 2003, and the results of each of their operations for the year
then ended, the changes in each of their net assets and their financial
highlights for each of the two years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which 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, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights of the Funds as of September 30, 2001 and for the periods then ended
and prior were audited by other independent accountants whose report dated
October 17, 2001 expressed an unqualified opinion on those financial statements.
PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
October 30, 2003
114 Annual Report
(This page intentionally left blank.)
Annual Report 115
WASATCH FUNDS-DIRECTORS AND OFFICERS
SEPTEMBER 30, 2003
NAME, ADDRESS, POSITION(S) HELD TERM OF OFFICE AND
AND AGE WITH FUND LENGTH OF TIME SERVED
- -------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS:
JAMES U. JENSEN, J.D., MBA Director Indefinite
NPS Pharmaceuticals, Inc. Served as Director
420 Chipeta Way since 1986
Salt Lake City, UT 84108
Age: 59
WILLIAM R. SWINYARD, PH.D. Director Indefinite
Marriott School of Management Served as Director
624 Tanner Building since 1986
Brigham Young University
Provo, UT 84602
Age: 63
JONATHAN F. ZESCHIN, CFPt(TM) Director Indefinite
1777 S. Harrison Street Served as Director
Skydeck since June 2002
Denver, CO 80210
Age: 50
- -------------------------------------------------------------------------------------
INTERESTED DIRECTORS*:
SAMUEL S. STEWART, JR., PH.D., CFA President, Chairman Indefinite
150 Social Hall Avenue of the Board and Served as President,
4th Floor Director Chairman of the
Salt Lake City, UT 84111 Board and Director
Age: 61 since 1986
JEFF S. CARDON, CFA Vice President Indefinite
150 Social Hall Avenue and Director Served as Vice
4th Floor President and Director
Salt Lake City, UT 84111 since 1986
Age: 46
- -------------------------------------------------------------------------------------
OFFICER:
VENICE F. EDWARDS, CFA Secretary/Treasurer Indefinite
150 Social Hall Avenue Served as
4th Floor Secretary/Treasurer
Salt Lake City, UT 84111 since 1996
Age: 53
- -------------------------------------------------------------------------------------
116 Annual Report
WASATCH FUNDS-DIRECTORS AND OFFICERS
SEPTEMBER 30, 2003
NUMBER OF PORTFOLIOS IN
PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN OTHER DIRECTORSHIPS
DURING PAST 5 YEARS BY DIRECTOR HELD BY DIRECTOR
- -------------------------------------------------------------------------------------------------------
Vice President, Corporate Development 9 Private companies and
and Legal Affairs, and Secretary, NPS foundations only.
Pharmaceuticals, Inc. since 1991.
Professor of Business Management and 9 None
Holder of the Fred G. Meyer Chair of
Marketing, Brigham Young University
since 1978.
President and Founder of ESSENTIAL 9 Board of Trustees
Advisers, Inc., a wealth management and ICON Funds
investment advisory firm; prior to founding
ESSENTIAL was Managing Partner at JZ Partners
LLC, a business consulting firm; President of
Founders Asset Management from 1995 - 1998.
- -------------------------------------------------------------------------------------------------------
Chairman of the Board and Director 9 None
of Research for Wasatch Advisors, Inc.
(the "Advisor") since 1975; Professor of Finance
at the University of Utah from 1975 - 2000.
President and Treasurer for the Advisor 9 None
since 1999; Director of the Advisor
since 1985; Security Analyst for
the Advisor since 1980.
- -------------------------------------------------------------------------------------------------------
Director of Compliance for the Advisor N/A None
since 1995 and Secretary of the Advisor since
1999; Portfolio Manager for the Advisor from
1983 - 1995.
- -------------------------------------------------------------------------------------------------------
* INTERESTED DIRECTORS SERVE AS DIRECTORS AND OFFICERS OF WASATCH ADVISORS, INC.
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.
Annual Report 117
GUIDE TO UNDERSTANDING FINANCIAL STATEMENTS
Wasatch Funds provides reports to shareholders twice a year. The Annual
Report is for the Funds' fiscal year which ends September 30. The Semi-Annual
Report is for the six months ending March 31. 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.
SCHEDULE OF 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."
STATEMENTS OF ASSETS AND 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, 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
is the amount of net investment income earned by 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
118 Annual Report
GUIDE TO UNDERSTANDING FINANCIAL STATEMENTS
(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. How many of those shares are owned by
shareholders is indicated as ISSUED AND OUTSTANDING.
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 NAV 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
NAVs are calculated. Information about how the NAV is affected by a Fund's
operation can be found under "Financial Highlights" on page 120.
STATEMENTS OF 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 is the net gain or loss on
securities a Fund has sold. CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS is the change in value of securities a Fund continues to hold.
NET GAIN (LOSS) ON INVESTMENTS is the result of changes in market value
of securities a Fund has sold and securities it continues to hold.
STATEMENTS OF CHANGES IN NET ASSETS
NET ASSETS are a Fund's remaining assets after taking into
consideration any liabilities. STATEMENTS OF CHANGES IN NET ASSETS show the
increase or decrease in a Fund's net assets during the reporting period.
Investment operations, 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 a Fund has
sold as well as the change in appreciation or depreciation in the value of
investments a Fund continues to hold.
DIVIDENDS are distributed by Wasatch Funds to shareholders when Fund
investments have earned income in
Annual Report 119
GUIDE TO UNDERSTANDING FINANCIAL STATEMENTS
excess of net expenses or when capital gains in excess of capital losses are
realized from the sale of securities. Most shareholders choose to reinvest
their dividends and capital gain distributions. Each Fund is required by
Internal Revenue Service (IRS) 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 pages 118 to 119. 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 NAV 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 NAV on the payable day of the distribution. A FUND'S TOTAL
RETURN CANNOT BE COMPUTED DIRECTLY FROM THE FINANCIAL HIGHLIGHTS.
SUPPLEMENTAL DATA AND RATIOS are provided to help you better understand
your investment. NET ASSETS, END OF PERIOD, are the net assets of a Fund on the
reporting date. RATIO TO AVERAGE NET ASSETS OF: EXPENSES shows the total of a
Fund's operating expenses divided by its average net assets for the stated
period before and after waivers and reimbursements by the Advisor. RATIO TO
AVERAGE NET ASSETS OF: NET INVESTMENT INCOME shows a Fund's net investment
income (loss) divided by its average net assets for the stated period before and
after waivers and reimbursements by the Advisor. 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.
120 Annual Report
NOTES
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Annual Report 121
BACK COVER:
Wasatch(TM) Funds
P.O. Box 2172
Milwaukee, WI 53201-2172
www.wasatchfunds.com
800.551.1700
ITEM 2: CODE OF ETHICS
(a) Wasatch Funds, Inc. (the "Company") has adopted a Code of Ethics that
applies to the Company's principal executive officer and principal
financial officer.
(c) There have been no amendments to the Company's Code of Ethics during
the reporting period for Form N-CSR.
(d) There have been no waivers granted by the Company to individuals
covered by the Company's Code of Ethics during the reporting period for
Form N-CSR.
(f) A copy of the Company'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 Wasatch Funds, Inc. (the "Company")
has determined that the Company has one member serving on the
Company'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) The name of the audit committee financial expert is Jonathan
Zeschin. Mr. Zeschin has been 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.
Not required.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers
have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-3(c) under the Investment Company Act of 1940,
as amended (the "1940 Act") (17 CFR 270.30a-3(c)) are effective, as of
a date within 90 days of the filing date of this Form N-CSR based on
their evaluation of these controls and procedures required by Rule
30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b)
or 15d-15(b) under the Exchange Act (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
half-year that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 10. 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.
(b) The certifications required by Rule 30a-2(b) of the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WASATCH FUNDS, INC.
By: /s/ Samuel S. Stewart, Jr.
--------------------------
Samuel S. Stewart, Jr.
President (principal executive officer) of Wasatch Funds, Inc.
Date: November 26, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Samuel S. Stewart, Jr.
--------------------------
Samuel S. Stewart, Jr.
President (principal executive officer) of Wasatch Funds, Inc.
Date: November 26, 2003
By: /s/ Venice F. Edwards
--------------------------
Venice F. Edwards
Secretary/Treasurer (principal financial and accounting officer)
of Wasatch Funds, Inc.
Date: November 26, 2003