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: March 31, 2004 ITEM 1: REPORT OF SHAREHOLDER. WASATCH FUNDS, INC. P.O. BOX 2172 MILWAUKEE, WI 53201-2172 WWW.WASATCHFUNDS.COM 800.551.1700 TABLE OF CONTENTS LETTER TO SHAREHOLDERS .................................................... 2 CORE GROWTH FUND .......................................................... 4 Management Discussion ................................................. 4 Portfolio Summary ..................................................... 5 GLOBAL SCIENCE & TECHNOLOGY FUND .......................................... 6 Management Discussion ................................................. 6 Portfolio Summary ..................................................... 7 INTERNATIONAL GROWTH FUND ................................................. 8 Management Discussion ................................................. 8 Portfolio Summary ..................................................... 9 MICRO CAP FUND ............................................................ 10 Management Discussion ................................................. 10 Portfolio Summary ..................................................... 11 MICRO CAP VALUE FUND ...................................................... 12 Management Discussion ................................................. 12 Portfolio Summary ..................................................... 13 SMALL CAP GROWTH FUND ..................................................... 14 Management Discussion ................................................. 14 Portfolio Summary ..................................................... 15 SMALL CAP VALUE FUND ...................................................... 16 Management Discussion ................................................. 16 Portfolio Summary ..................................................... 17 ULTRA GROWTH FUND ......................................................... 18 Management Discussion ................................................. 18 Portfolio Summary ..................................................... 19 WASATCH-HOISINGTON U.S. TREASURY FUND ..................................... 20 Management Discussion ................................................. 20 Portfolio Summary ..................................................... 21 PORTFOLIO OF INVESTMENTS .................................................. 22 STATEMENTS OF ASSETS AND LIABILITIES ...................................... 62 STATEMENTS OF OPERATIONS .................................................. 66 STATEMENTS OF CHANGES IN NET ASSETS ....................................... 70 FINANCIAL HIGHLIGHTS ...................................................... 74 NOTES TO FINANCIAL STATEMENTS ............................................. 83 DIRECTORS AND OFFICERS .................................................... 91 PROXY VOTING POLICIES AND PROCEDURES ...................................... 91 GUIDE TO UNDERSTANDING FINANCIAL STATEMENTS ............................... 92 HOW TO CONTACT WASATCH .................................................... 93 This material must be accompanied or preceded by a prospectus. Please read the prospectus carefully before you invest. Wasatch Funds are distributed by ALPS Distributors, Inc. 1 LETTER TO SHAREHOLDERS [PHOTO OF SAMUEL S. STEWART Jr.] Samuel S. Stewart, Jr., PhD, CFA Chairman of Wasatch Funds FELLOW SHAREHOLDERS: The challenge in writing this letter to you was to be appropriately cautious without being overly negative. The last thing I want to do is throw cold water on the exceptional returns small cap investors garnered last year. But maybe tempering expectations with a dose of reality is not a bad thing. The magnitude of returns in the small cap market last year was unusual, especially since data supporting the strength of the economic recovery were mixed. Given the dramatic performance of small company stocks in 2003, it is hard to imagine that the small cap market will clear that high hurdle in 2004. What we witnessed last year may have been an enthusiastic overreaction to positive economic news following 2002, a bleak year for stocks and the economy. In 2003, the behavior of the stock and bond markets sent conflicting messages. Stock prices were unusually strong, a typical sign of a robust economic recovery. On the other hand, the Federal Reserve Board (Fed) did not begin raising interest rates to combat inflation as it usually does during an economic recovery. The Fed's stance seemed to indicate that inflation was not heating up and that the economy would recover at a slow pace. How these seemingly opposing views will resolve themselves in 2004 is hard to say. Tax cut stimulus, low interest rates and increased productivity bode well for the economy in 2004. Still, the outlook is clouded by unanswered questions including: When and by how much will the Fed raise interest rates? Will companies step up hiring or will this be a truly jobless recovery? Will the rising cost of fuel hinder economic growth? Were corporate profits being driven mostly by cost-cutting? What happens to profits when companies have wrung out all the efficiencies? Will Middle East tensions flare or cool? What will be the impact of this year's presidential race? While the economy is growing, this growth is not as strong as some would like. Stock prices indicate to us that many companies are a little overvalued. Slower than expected economic growth could cause stocks to trade up or down in a narrow range, posting neither significant losses nor substantial gains. If there is one thing I have learned in over 40 years of investing, it is that things tend to sort themselves out over time. No matter what the economy does in 2004, I believe there will be opportunities in the stock market for investors who are willing to dig deep to understand the companies they own. The Wasatch research team has been on the road a lot lately. In these unsettled times, we believe it is even more important to get out and kick the tires of current and prospective investments. The knowledge we gain during our company visits cannot be found in a report or by studying the big picture. It is a sense of the energy and enthusiasm that people around the world are pouring into the businesses they are building. This is the reason we are not overly negative. It is the source of our optimism despite the many challenges that exist in the global and U.S. economies. WASATCH FUNDS Small company stocks as measured by the performance of the Russell 2000 Index had a record-breaking year in 2003. The Russell 2000 Index posted its best ever calendar year performance with a return of 47.25% as of December 31, 2003. The companies that drove the performance of the Russell 2000 Index were primarily those with market capitalizations less than $500 million. Many of these companies were also characterized by lack of profits, low return on equity and stock prices less than $5. These types of companies generally did not meet the quality standards of our equity Funds. For this reason, Wasatch Funds did not fully participate in the gains of the small cap market, despite producing strong positive returns over the past six months. In general, for the six months ended March 31, 2004, earnings growth for the companies we held was strong and was supported by solid fundamentals such as rising profits and healthy balance sheets. These are among the qualities we prize in long-term investments. For information about the performance and outlook of the Wasatch-Hoisington U.S. Treasury Fund, please see the management discussion and portfolio summary on pages 20 and 21. 2 MARCH 31, 2004 OUTLOOK Although the Funds produced significant gains over the past six months, on the whole, we feel that their portfolios of investments are not overvalued and still offer upside potential. We will continue to be disciplined in our search for individual companies that meet our strict investment standards. In this quest, we hope that our time-tested process of intensive fundamental research that includes visiting companies and meeting with their management teams serves us well. Our efforts are completely focused on investing in companies that we believe have the potential to increase your capital over the long-term. WORTH NOTING We are excited to announce the upcoming launch of the Wasatch Heritage Growth Fund on June 18, 2004. We called the Fund "Heritage Growth" because it will follow Wasatch's diligent approach to growth investing. The Fund will focus on investing in growing companies with market capitalizations between $3 billion and $20 billion. Many of these companies are ones we invested in when they were small. We believe they are still outstanding investments; they simply outgrew the market capitalization parameters of our existing Funds. As with all Wasatch Funds, the Heritage Growth Fund is designed for long-term investors. Please visit our web site at www.wasatchfunds.com or call 800.551.1700 for a prospectus containing more information about the Wasatch Heritage Growth Fund. You should consider the investment objectives, risks, charges and expenses carefully before investing. We are grateful for the opportunity to serve your investment needs and look forward to strengthening our relationship with you in the future. We will continue to follow a disciplined course for investing your assets, as we believe this is the best way we can help you achieve your long-term investment objectives. Sincerely, /s/ Samuel S. Stewart, Jr. - ---------------------------- Samuel S. Stewart, Jr. Chairman of the Board 3 CORE GROWTH FUND -- MANAGEMENT DISCUSSION MARCH 31, 2004 [PHOTO OF SAMUEL S. STEWART, JR.] [PHOTO OF JB TAYLOR] SAMUEL S. STEWART, JR., PHD, CFA JB TAYLOR PORTFOLIO MANAGER PORTFOLIO MANAGER SIX MONTH REVIEW The Wasatch Core Growth Fund gained 20.14% in the six months ended March 31, 2004. The Fund's return was slightly less than the 21.69% six month return of the Russell 2000 Index, a widely used benchmark for the performance of small company stocks. Our philosophy is that earnings growth drives stock prices. We believe that long-term performance will take care of itself if we successfully invest in companies that consistently produce the earnings growth we seek. We are pleased to report that in the six-month period the average annual earnings growth of the Fund's holdings was above our 15% target. Overall, we feel that the companies we hold are poised to continue this solid growth. Few holdings failed to meet our growth expectations. Being careful not to pay too much for stocks is also an important part of our discipline. We use the Fund's trailing 12-month price-to-earnings (P/E) ratio, the price of a stock divided by its earnings per share, to help us measure whether the portfolio is over or undervalued. At the end of the period, the trailing P/E was 18.5, giving the portfolio a favorable P/E to growth rate ratio of about 1. Over the six-month period, the biggest contributor to the Fund's performance was the financial services sector. We were overweighted in this sector compared to the Russell 2000 Index and our holdings outperformed those of the Index. A top contributor to the Fund's performance was AmeriCredit Corp., a subprime automobile lender. AmeriCredit was one of the Fund's worst performers a year ago as it encountered a more difficult macro-environment, and continued to grow faster than its balance sheet would support. The company's management moved aggressively to restructure, strengthen the balance sheet, cut costs and improve operations. These bold maneuvers and the improving economy helped AmeriCredit get back on track. Fidelity National Financial, Inc. was also a significant contributor to our performance. The company has broadened its business model from a focus on title insurance to include providing processing services to banks, a move we believe will be well received by the market. Fidelity National now handles mortgage processing for nine of the 10 biggest banks in the U.S. We feel the company's more diversified business model gives it outstanding long-term growth potential. The consumer discretionary sector was the second biggest contributor to the Fund's six-month return. In this sector, we slightly outperformed the Russell 2000 Index due to our significant overweighting. Our consumer discretionary holdings were not up nearly as much as the Index's holdings in this sector. The biggest contributor to the Fund's performance was Copart, Inc., a provider of vehicle salvage services. Copart's stock has risen from depressed levels as the company emerged from a cyclical downturn and changed to doing business entirely via the Internet. We expect earnings growth to improve dramatically. SCP Pool Corp. was another strong performer in the consumer discretionary sector. The company continues to execute well on its plan to dominate the pool supply industry. The company is growing by taking market share, adding new product categories and acquiring smaller distributors. The biggest detractor in the consumer discretionary sector was Christopher & Banks, a women's apparel retailer. We sold our holding as we became less convinced of the uniqueness of the company's products and market positioning. Health care was the third largest contributor to performance led by Pediatrix Medical Group Inc., a national network of neonatalogists. Our substantial overweighting in this sector helped performance versus the Russell 2000 Index. Overall, our health care holdings did not perform quite as well as those in the Index. First Health Group Corp. and Lincare Holdings Inc. were the notable detractors from the Fund's performance. Materials and processing was the worst performing sector in the Fund and the biggest contributor to the Fund's under-performance of the Index. Our only holding in this sector, Cabot Microelectronics Corp., a supplier of chemicals to the semiconductor industry, suffered stock price weakness amid concerns over increased competition. We remain positive on Cabot's franchise in supplying to the semiconductor industry and continue to be bullish on the company's long-term prospects. As is typical, the Fund was significantly underweighted in technology compared to the Russell 2000 Index. Our holdings were down slightly, while companies in the Index, particularly those in industries where we had no holdings, were up significantly. Our focus on more stable service oriented technology companies hurt performance relative to the Index, as the more economically sensitive equipment and semiconductor companies posted the largest gains. OUTLOOK It has been our experience that in times of economic uncertainty, investors gravitate toward companies with solid earnings growth and strong fundamentals. They also tend to pay more attention to value. We believe the Core Growth Fund holds stable companies with the potential to consistently produce the earnings growth we seek. We also believe that we have not overpaid for growth. We believe the quality and value of the Core Growth Fund's portfolio of companies has the potential to help you as you work toward achieving your long-term investment goals. Thank you for the opportunity to invest your assets. 4 CORE GROWTH FUND -- PORTFOLIO SUMMARY MARCH 31, 2004 AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 5 YEARS 10 YEARS - ------------------------------------------------------------------------------ WASATCH CORE GROWTH FUND 63.33% 21.09% 18.79% - ------------------------------------------------------------------------------ Russell 2000 Index 63.83% 9.66% 10.44% - ------------------------------------------------------------------------------ PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. YOU SHOULD REALIZE THAT PRINCIPAL VALUE AND INVESTMENT RETURN WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE TABLE ABOVE DOES 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. TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE CALL 800.551.1700 OR VISIT WWW.WASATCHFUNDS.COM. Investments in small cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. TOP 10 EQUITY HOLDINGS* TICKER COMPANY % OF FUND - -------------------------------------------------------------------------- RCII RENT-A-CENTER, INC. 6% Rent-to-own store operator. ORLY O'REILLY AUTOMOTIVE, INC. 4% Automotive parts retailer/distributor. FNF FIDELITY NATIONAL FINANCIAL, INC. 4% Services for real estate professionals. CPRT COPART, INC. 3% Vehicle salvage services. ACF AMERICREDIT CORP. 3% Subprime automobile lender. PDX PEDIATRIX MEDICAL GROUP, INC. 3% National network of neonatalogists. CBH COMMERCE BANCORP, INC. 3% Commercial banking, corporate trust and insurance brokerage services. POOL SCP POOL CORP. 3% Swimming pool supply distributor. AGP AMERIGROUP CORP. 2% Health care services to Medicaid recipients. AHG APRIA HEALTHCARE GROUP, INC. 2% Home health care services. *Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. SECTOR BREAKDOWN** [PIE CHART] FINANCIAL SERVICES 34.0% CONSUMER DISCRETIONARY 29.0% HEALTH CARE 21.7% PRODUCER DURABLES 5.7% TECHNOLOGY 4.2% CONSUMER STAPLES 1.6% FINANCIALS 1.5% UTILITIES 1.0% MATERIALS & PROCESSING 0.9% AUTO & TRANSPORTATION 0.4% **Excludes short-term investments. GROWTH OF A $10,000 INVESTMENT [LINE GRAPH] Date Wasatch Core Growth Fund Russell 2000 Index 03/31/1994 10,000 10,000 03/31/1995 11,819 10,552 03/31/1996 16,434 13,617 03/31/1997 17,312 14,312 03/31/1998 24,720 20,326 03/31/1999 21,489 17,022 03/31/2000 26,727 23,370 03/31/2001 37,605 19,788 03/31/2002 52,915 22,555 03/31/2003 34,254 16,473 03/31/2004 55,948 26,988 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. 5 GLOBAL SCIENCE & TECHNOLOGY FUND -- MANAGEMENT DISCUSSION MARCH 31, 2004 [PHOTO OF AJAY KRISHNAN] AJAY KRISHNAN, CFA PORTFOLIO MANAGER SIX MONTH REVIEW In the six months ended March 31, 2004, the Global Science & Technology Fund gained 11.92% compared to a gain of 10.49% for the Russell 2000 Technology Index, the component of the Russell 2000 Index that tracks the performance of technology-related stocks, and a gain of 11.90% for the technology-laden Nasdaq Composite Index. We added the Lipper Science & Technology Index as a benchmark for the Fund. Going forward, we plan to drop the Russell 2000 Growth Index. We believe the Lipper Science & Technology Index is a better benchmark. It is a composite of mutual funds that invest in science and technology companies and have investment objectives similar to the Fund. In the past six months, the Lipper Science & Technology Index outperformed the Fund with a gain of 13.46%. The stocks of very small technology and biotechnology companies did extremely well in 2003 and January 2004. This was true of markets around the world as well as markets in the United States. Investors bought more speculative stocks indicating their optimistic expectations for the recovery of global economies. Stock picking was the biggest driver of the Fund's performance in the six months ended March 31, 2004. The majority of companies held by the Fund made a positive contribution to performance. Despite the rise in stock prices, we believe the value of most of the Fund's holdings remains rational. The Fund's largest holding and the best contributor was Accredo Health, Inc., a provider of drug distribution and other services for individuals with chronic diseases. Accredo recently signed a new partnership agreement and has benefited from several new distribution contracts for recently approved drugs. The Fund's health services sector was overweighted compared to the Lipper Science & Technology Index. Our holdings led by Accredo outperformed those of the Index. The most heavily weighted sector in the Fund was electronic technology. Despite having over 30% of assets invested in this sector, we were underweighted compared to the hefty 52% weighting of electronic technology in the Lipper Science & Technology Index. This sector was the biggest contributor to the Fund's performance led by Monolithic System Technology, Inc., a designer of RAM-based memory architecture, and O2Micro International Ltd., a maker of semiconductors that increase power efficiency in electronic devices. However, our substantial underweighting meant this sector was the biggest contributor to the Fund's underperformance versus the Index. The health technology sector was the second biggest contributor to the Fund's performance. We were significantly overweighted in this sector compared to the Lipper Science & Technology Index and that helped our performance relative to the Index. Our health technology holdings were not up as much as those in the Index. One of the biggest detractors was Cyberonics, a developer of implantable medical devices. Shifting expectations over approval of its implantable device for treatment of depression caused Cyberonics' stock price to decline. In the health technology sector, the strength of our biotechnology holdings was offset by the weakness of our generic pharmaceuticals holdings. Cabot Microelectronics Corp., a supplier of chemicals to the semiconductor industry, was primarily responsible for the Fund's loss in the process industries sector. Cabot's stock price declined on news of changes in senior management, lowered earnings estimates and concern over the market position of the company's leading edge technology. We are closely monitoring our position in Cabot. We had fewer than 10% of assets invested in the technology services sector while this sector made up over 27% of the Lipper Science & Technology Index. Our technology services holdings made a positive contribution to performance, but our significant underweighting held back performance relative to the Index. Over the past six months, initial public offerings (IPOs) and mergers and acquisitions have increased. We invested on the IPO of Kintera, Inc., a provider of software services to non-profit organizations. Kintera was one of the Fund's best performers in the period. When Monolithic System Technology, Inc. announced that it would be acquired by Synopsys, Inc., we reduced our position and captured a profit that made a significant contribution to performance. The Fund was overweighted in the commercial services sector compared to the Lipper Science & Technology Index and our holdings underperformed those of the Index. The underperformance can mostly be attributed to Wireless Facilities, Inc., a provider of services to the telecommunications industry. The company's stock price came under pressure due to a distribution of shares to venture capital investors that were subsequently sold in the market. We remain confident in the company's fundamentals and long-term growth prospects. OUTLOOK We feel that going into this new period the Fund's positioning is in keeping with our efforts to increase shareholders' capital over the long-term. We believe the valuation of our companies makes sense in light of their underlying fundamentals and long-term growth prospects. Barring any unforeseen events or economic setbacks, we expect earnings growth, particularly of the Fund's largest holdings, to be strong over the next several years. Our health care holdings have the potential to benefit from increased spending on health care as the result of an aging global population. However, the positive effect we expect from increased corporate spending for information technology may be dampened if interest rates rise. Despite the uncertainties that exist, we believe our intensive quantitative and qualitative research will lead us to companies that have the potential to help us achieve the long-term results we seek. Thank you for investing in the Wasatch Global Science & Technology Fund. 6 GLOBAL SCIENCE & TECHNOLOGY FUND -- PORTFOLIO SUMMARY MARCH 31, 2004 AVERAGE ANNUAL TOTAL RETURNS SINCE INCEPTION 1 YEAR 5 YEARS 12/19/00 - ---------------------------------------------------------------------------------------------------------- WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND 64.88% N/A 6.41% - ---------------------------------------------------------------------------------------------------------- Lipper Science & Technology Index 53.35% N/A -17.14% - ---------------------------------------------------------------------------------------------------------- Russell 2000 Technology Index 71.82% N/A -12.25% - ---------------------------------------------------------------------------------------------------------- Nasdaq Composite Index 49.38% N/A -7.65% - ---------------------------------------------------------------------------------------------------------- Russell 2000 Growth Index 63.17% N/A 1.09% - ---------------------------------------------------------------------------------------------------------- PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. YOU SHOULD REALIZE THAT PRINCIPAL VALUE AND INVESTMENT RETURN WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE TABLE ABOVE DOES 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. TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE CALL 800.551.1700 OR VISIT WWW.WASATCHFUNDS.COM. Investments in concentrated funds can be more volatile and loss of principal could be greater than investing in more diversified funds. Investing in foreign securities entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. TOP 10 EQUITY HOLDINGS* TICKER COMPANY % OF FUND - -------------------------------------------------------------------------- ACDO ACCREDO HEALTH, INC. 6% Services for individuals with chronic diseases. WFII WIRELESS FACILITIES, INC. 5% Telecommunications industry services. UTSI UTSTARCOM, INC. (China) 4% Telecommunications network equipment. CCMP CABOT MICROELECTRONICS CORP. 3% Chemicals to the semiconductor industry. OIIM O2MICRO INTERNATIONAL LTD. 3% (Cayman Islands) Semiconductors to increase power efficiency. CSGP COSTAR GROUP, INC. 2% Information services for commercial real estate. PLXT PLX TECHNOLOGY, INC. Semiconductors 2% to accelerate and manage data transfer. TSM TAIWAN SEMICONDUCTOR MANUFACTURING CO. LTD. ADR (Taiwan) 2% Semiconductor contract manufacturer. CECO CAREER EDUCATION CORP. 2% Schools for post-secondary education. ANPI ANGIOTECH PHARMACEUTICALS, INC. 2% (Canada) Medical device enhancement pharmaceuticals. *Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. SECTOR BREAKDOWN** [PIE CHART] TECHNOLOGY 38.8% HEALTH CARE 27.4% CONSUMER DISCRETIONARY 12.0% INFORMATION TECHNOLOGY 6.6% PRODUCER DURABLES 5.6% MATERIALS & PROCESSING 4.8% UTILITIES 2.3% ENERGY 1.2% TREASURY NOTES & BONDS 0.7% OTHER 0.6% **Excludes short-term investments. GROWTH OF A $10,000 INVESTMENT [LINE GRAPH] Wasatch Global Science Lipper Science Russell 2000 Russell 2000 Date & Technology Fund & Technology Index Nasdaq Composite Index Technology Index Growth Index 12/19/2000 10,000 10,000 10,000 10,000 10,000 03/31/2001 7,990 6,403 7,018 6,990 8,851 03/31/2002 11,020 5,585 7,061 6,739 9,289 03/31/2003 7,439 3,516 5,155 3,789 6,351 03/31/2004 12,265 5,391 7,701 6,509 10,363 +INCEPTION: DECEMBER 19, 2000. THE LIPPER SCIENCE & TECHNOLOGY INDEX is a composite of mutual funds that invest in science and technology companies and have investment objectives similar to those of the Fund. THE RUSSELL 2000 TECHNOLOGY INDEX is a capitalization-weighted index of companies that serve the electronics and computer industries or that manufacture products based on the latest applied science. THE NASDAQ COMPOSITE INDEX is unmanaged and measures all Nasdaq domestic and non-U.S. based common stocks listed on The Nasdaq Stock Market. The Index is market-value weighted. This means each company's security affects the Index in proportion to its market value. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Due to their number and size, technology stocks tend to dominate the direction of the Index. THE RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged total return index of the smallest 2,000 companies in the Russell 3000 Index, as ranked by total market capitalization. The Russell 2000 Index is widely regarded in the industry as accurately capturing the universe of small company stocks. YOU CANNOT INVEST IN THESE INDEXES. 7 INTERNATIONAL GROWTH FUND -- MANAGEMENT DISCUSSION MARCH 31, 2004 [PHOTO OF MIKE GERDING] MIKE GERDING, CFA PORTFOLIO MANAGER SIX MONTH REVIEW In the six months ended March 31, 2004, the International Growth Fund gained 22.39% and the MSCI World Ex-U.S. Small-Cap Index, a widely used measure for the performance of foreign small company stocks, gained 27.96%. A quick overview of the macro environment shows economic growth around the globe is accelerating and interest rates are near all time lows. In local currency terms, earnings growth for companies has been strong and was better than we expected. The U.S. dollar's fall versus most currencies provided an added boost to performance. Optimism over the prospects for improving global economies sparked a round of enthusiastic buying of stocks that did not meet our quality standards. Part of the Fund's underperformance versus the Index over the past six months was that we were not invested in the low quality companies that were among the Index's best performers. As of March 31, the Fund was well diversified holding about 88 companies in 20 countries. The Fund's largest country weights were Japan, Canada, United Kingdom, Germany and Hong Kong. The Fund was also well diversified across sectors. Our most heavily weighted sectors were consumer discretionary, health care and information technology. Every sector made a positive contribution to the Fund's six-month return. Earnings growth for our holdings was strong and, despite the rise in stock prices, we still feel comfortable with the Fund's overall valuation parameters. Nearly 19% of the Fund's assets were invested in Japan, up from just under 15% on September 30, and we continue working to find growing small Japanese companies. Japanese holdings made the biggest contribution to the six-month return of the Fund and the MSCI World Ex-U.S. Small-Cap Index. Our underweighting in Japan hurt performance relative to the Index. Japan's economy is the strongest it has been in 10 years and was the world's best performing developed market in the last six months. One of our best performers in the period was Park24 Co. Ltd., a Japanese parking lot operator. Parking spaces are at a premium in large Japanese cities. Park24 developed a unique technology that allows the company to collect payment for individual parking spaces in a lot or on the street. We think Park24 has an outstanding growth opportunity by increasing the number of parking spaces it controls. Another one of our best performing Japanese companies and also one of our largest holdings was USS Co. Ltd., a used car auction house. On the downside, En-Japan, Inc., a Japanese Internet employment company, was one of our worst performers. Our underweighting versus the Index in the United Kingdom held back performance relative to the Index. However, the biggest contributor to the Fund's performance in the last six months was Cairn Energy Plc, an oil and gas company based in Edinburgh, Scotland that develops projects primarily in India and Bangladesh. Cairn's stock rose significantly on news of important discoveries made by the company. The oil and gas industry is not usually considered a growth industry but we have been able to find a couple of interesting small oil and gas businesses. We are also invested in Soco International Plc, a United Kingdom company that develops properties in Vietnam and Mongolia. We have held Cairn and Soco a long time and know their managements well. We feel their competitive advantage comes from their ability to operate in difficult environments, use of new technology and political skill. Canada was the third biggest contributor to the Fund's performance. One of our best performers was Home Capital Group, Inc., a fast growing Canadian mortgage lender that provides residential mortgages to populations, such as immigrants and the self-employed, that are not well served by major banks. Australia was a significant contributor to the Index's performance. We did not have any holdings in Australia. Three sectors -- materials, industrials and financials--were the biggest contributors to the Fund's underperformance of the Index. The underperformance of these sectors was primarily the result of our dramatic underweighting. Our largest sector weighting was consumer discretionary. We were overweighted in this sector compared to the Index, though our holdings underperformed those in the Index. Strong performance by Puma AG Rudolf Dassler Sport, a German shoe and apparel company, was offset by poor performance from Zapf Creation AG, a German doll manufacturer, and Rodriguez Group, a French yacht builder. The health care sector made a positive contribution to the Fund's performance. Compared to the Index, we were overweighted but our holdings underperformed. Patheon, Inc., a Canadian contract pharmaceutical manufacturer, was the notable detractor in the Fund's health care sector. Our best performing health care company was Straumann Holding AG, a Swiss manufacturer of dental implants. Our information technology holdings did not do as well as those in the Index, but our overweighting in this sector helped performance relative to the Index. We sold two positions that detracted from the Fund's performance. They were ACG AG, a German semiconductor-trading house, and Komplett ASA, a Norwegian computer retailer. OUTLOOK For the rest of 2004, we expect the Japanese economy to continue to improve. Europe is likely to remain the world's laggard, with expected economic growth about half that expected in the U.S. We continue to be positive about the prospects for emerging markets in Asia and elsewhere. Our primary concern for the balance of this year is that strong economic recoveries around the world may lead to sharply higher interest rates, although the odds of this occurring are low. We believe thorough, in-depth research and a commitment to pay reasonable prices for stocks will help us build a portfolio of growing small companies from around the world that has the potential to help you in your efforts to achieve long-term investment goals. Thank you for investing in the Wasatch International Growth Fund. 8 INTERNATIONAL GROWTH FUND -- PORTFOLIO SUMMARY MARCH 31, 2004 AVERAGE ANNUAL TOTAL RETURNS SINCE INCEPTION 1 YEAR 5 YEARS 6/28/02 - ---------------------------------------------------------------------------------------------------------------- WASATCH INTERNATIONAL GROWTH FUND 71.43% N/A 24.77% - ---------------------------------------------------------------------------------------------------------------- MSCI World Ex-U.S. Small-Cap Index 85.69% N/A 27.79% - ---------------------------------------------------------------------------------------------------------------- PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. YOU SHOULD REALIZE THAT PRINCIPAL VALUE AND INVESTMENT RETURN WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE TABLE ABOVE DOES 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. TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE CALL 800.551.1700 OR VISIT WWW.WASATCHFUNDS.COM. Investing in foreign securities entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. Investments in small cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. TOP 10 EQUITY HOLDINGS* TICKER COMPANY % OF FUND - -------------------------------------------------------------------------- PUM GR PUMA AG RUDOLF DASSLER SPORT (Germany) 3% Shoe and apparel manufacturer. 4732 JP USS CO. LTD. (Japan) Used car auctions. 3% STMN SW STRAUMANN HOLDING AG 2% (Switzerland) Dental implants. 4666 JP PARK24 CO. LTD. (Japan) 2% Parking lot operator. 6892 JP CITIZEN ELECTRONICS CO. LTD. 2% (Japan) Maker of LED lights CNE LN CAIRN ENERGY PLC 2% (United Kingdom) Oil and gas developer. VMS SP VENTURE CORP. LTD. (Singapore) 2% Electronics contract manufacturer. HCG/B CN HOME CAPITAL GROUP, INC., CLASS B (Canada) Mortgage lender. 2% 330 HK ESPRIT HOLDINGS LTD. (Hong Kong) 2% Apparel manufacturer/retailer. CPW LN CARPHONE WAREHOUSE GROUP PLC (United Kingdom) 2% Cell phones and telecom services retailer. *Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. SECTOR BREAKDOWN** [PIE CHART] CONSUMER DISCRETIONARY 27.4% HEALTH CARE 18.7% INFORMATION TECHNOLOGY 14.8% INDUSTRIALS 11.6% OTHER 7.0% CONSUMER STAPLES 6.2% TECHNOLOGY 4.3% ENERGY 3.8% FINANCIAL SERVICES 3.2% UTILITIES 3.0% **Excludes short-term investments. GROWTH OF A $10,000 INVESTMENT [LINE GRAPH] Date Wasatch International Growth Fund MSCI World Ex.-U.S. Small-Cap Index 06/28/2002 10,000 10,000 06/30/2002 10,000 10,146 09/30/2002 8,850 8,505 12/31/2002 9,430 8,530 03/31/2003 8,610 8,295 06/30/2003 10,510 10,370 09/30/2003 12,060 12,037 12/31/2003 13,670 13,802 03/31/2004 14,760 15,403 +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. 9 MICRO CAP FUND -- MANAGEMENT DISCUSSION MARCH 31, 2004 [PHOTO OF ROBERT GARDINER] [PHOTO OF DANIEL CHACE] ROBERT GARDINER, CFA DANIEL CHACE, CFA PORTFOLIO MANAGER PORTFOLIO MANAGER SIX MONTH REVIEW In the six months ended March 31, 2004, the Wasatch Micro Cap Fund gained 18.85% compared to a gain of 21.69% for the Russell 2000 Index, a widely used measure for the performance of small company stocks. Although many of the best performing companies in the Russell 2000 Index fell within micro cap range, we considered them to be largely speculative investments. We avoid investing in these types of companies because we are attracted to well-managed, profitable companies that have the potential to reward shareholders by increasing earnings per share. Over the past six months, the small cap market's top performers generally lacked the characteristics we prize. Financial services was the most heavily weighted sector in the Russell 2000 Index. It was also one of the biggest contributors to the Index's performance. The financial services sector made a positive contribution to the Fund's performance but our underweighting in this sector hurt performance relative to the Index. A big contributor to our performance was Home Capital Group, Inc., a fast growing Canadian mortgage lender that provides residential mortgages to populations, such as immigrants and the self-employed, that are not well served by major banks. The materials and processing sector was the second biggest contributor to the Fund's underperformance of the Index. This sector made a significant positive contribution to the Index's performance but detracted from our performance. Our underweighting in this sector also contributed to our underperformance. Cabot Microelectronics Corp., a supplier of chemicals to the semiconductor industry, was primarily responsible for the Fund's loss in this sector. Cabot's stock price declined on news of changes in senior management, lowered earnings estimates and concern over the market position of its leading edge technology. The Fund's best performing sector was consumer discretionary. We were overweighted in this sector compared to the Index and our holdings significantly outperformed. The Fund's largest holding at March 31 was also our biggest contributor. The stock price of Big 5 Sporting Goods Corp., a sporting goods retailer, rose as the economy improved and the company consistently increased sales and decreased debt. The second biggest contributor to the Fund's performance was the technology sector. We were slightly overweighted in this sector versus the Russell 2000 Index and our holdings significantly outperformed led by O2Micro International Ltd., a maker of semiconductors that increase power efficiency in electronic devices, and Monolithic System Technology, Inc., a designer of RAM-based memory architecture. O2Micro did well in the last three months of 2003 but suffered a stock price decline in the first quarter of 2004 when the company announced that earnings growth would be below expectations for the period. This did not affect our long-term view of O2Micro and we increased our position at low prices. Monolithic's stock price rose significantly on news that it would be acquired by Synopsys, Inc. and we sold the stock to capture the price gain. The Fund's technology sector also held one of the biggest detractors from our performance. Verisity Ltd., a developer of tools for electronic design automation (EDA), suffered stock price weakness due to sluggish spending on EDA software. We remain positive on Verisity's long-term growth prospects. Our dramatic overweighting in the health care sector helped the Fund's performance relative to the Russell 2000 Index. Health care made a positive contribution to the Fund's performance but our holdings underperformed those of the Index. Two holdings were notable detractors. Odyssey HealthCare Inc., a hospice care provider, suffered a stock price decline due to lowered earnings estimates and challenges facing the company during its rapid growth. The stock price of Cyberonics, a developer of implantable medical devices, declined due to shifting expectations over approval of its implantable device for treatment of depression. In addition to Monolithic, we sold two other holdings whose stock prices rose significantly after the companies announced that they would be acquired. These were Rainbow Rentals, Inc., a rent-to-own store operator, and Maxwell Shoe Co., a designer of footwear for women and children. These sales contributed to the Fund's performance. In the last six months, as the economic outlook improved we saw a marked increase in initial public offerings (IPOs). We participated in six IPOs in the first quarter of 2004 and continue to hold four of them in the Fund. Throughout the six-month period we found many opportunities to invest in quality companies at attractive prices. In addition, we took advantage of opportunities to sell some holdings. We feel these purchases and sales have upgraded the overall quality and value of the portfolio. During the first quarter, 22 new names were added to the Fund and 23 positions were sold. Our purchases allowed us to reduce the Fund's cash position from the high level of six months ago. OUTLOOK We cannot say what challenges the economy or other circumstances may present to businesses over the next year and in the future. We can say that the Micro Cap Fund holds a portfolio of companies that have been carefully researched, and we believe have outstanding long-term growth prospects. Additionally, we believe their stocks are trading at reasonable prices. In our opinion, this gives the Fund a favorable profile for reward potential balanced against the risks of investing. We continue to monitor the companies we hold and look for new investments that we believe have the potential to aid your efforts to achieve long-term investment objectives. Thank you for investing in the Micro Cap Fund. 10 MICRO CAP FUND -- PORTFOLIO SUMMARY MARCH 31, 2004 AVERAGE ANNUAL TOTAL RETURNS SINCE INCEPTION 1 YEAR 5 YEARS 6/19/95 - ------------------------------------------------------------------------------------------------ WASATCH MICRO CAP FUND 64.92% 32.32% 29.38% - ------------------------------------------------------------------------------------------------ Russell 2000 Index 63.83% 9.66% 10.21% - ------------------------------------------------------------------------------------------------ PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. YOU SHOULD REALIZE THAT PRINCIPAL VALUE AND INVESTMENT RETURN WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE TABLE ABOVE DOES 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. TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE CALL 800.551.1700 OR VISIT WWW.WASATCHFUNDS.COM. Investments in micro cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. Investing in foreign securities entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. TOP 10 EQUITY HOLDINGS* TICKER COMPANY % OF FUND - -------------------------------------------------------------------------- BGFV BIG 5 SPORTING GOODS CORP. 4% Sporting goods retailer. AMSG AMSURG CORP. 3% Outpatient surgery centers. ICUI ICU MEDICAL, INC. 3% Disposable connectors for intravenous therapy. OIIM O2MICRO INTERNATIONAL LTD. 3% Semiconductors to increase power efficiency. RECN RESOURCES CONNECTION, INC. 3% Outsourcing of professional business services. CCMP CABOT MICROELECTRONICS CORP. 2% Chemicals to the semiconductor industry. XLTC EXCEL TECHNOLOGY, INC. 2% Laser systems and electro-optical components. PLXT PLX TECHNOLOGY, INC. 2% Semiconductors to accelerate and manage data transfer. ODSY ODYSSEY HEALTHCARE, INC. 2% Hospice care provider. AHS AMN HEALTHCARE SERVICES, INC. 2% Health care staffing. *Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. SECTOR BREAKDOWN** [PIE CHART] HEALTH CARE 31.0% CONSUMER DISCRETIONARY 25.6% TECHNOLOGY 20.0% FINANCIAL SERVICES 9.9% PRODUCER DURABLES 5.2% MATERIALS & PROCESSING 3.7% AUTO & TRANSPORTATION 3.0% INFORMATION TECHNOLOGY 0.9% ENERGY 0.6% UTILITIES 0.1% **Excludes short-term investments. GROWTH OF A $10,000 INVESTMENT [LINE GRAPH] Date Wasatch Micro Cap Fund Russell 2000 Index 06/19/1995 10,000 10,000 03/31/1996 14,850 11,857 03/31/1997 15,021 12,463 03/31/1998 25,583 17,699 03/31/1999 23,687 14,821 03/31/2000 38,856 20,349 03/31/2001 47,700 17,230 03/31/2002 72,254 19,639 03/31/2003 58,250 14,343 03/31/2004 96,066 23,499 +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. 11 MICRO CAP VALUE FUND -- MANAGEMENT DISCUSSION MARCH 31, 2004 [PHOTO OF ROBERT GARDINER] [PHOTO OF JOHN MALOOLY] [PHOTO OF BRIAN BYTHROW] ROBERT GARDINER, CFA JOHN MALOOLY, CFA BRIAN BYTHROW, CFA PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER SIX MONTH REVIEW The Micro Cap Value Fund gained 30.24% in the six months ended March 31, 2004. The Fund's return was better than the 21.69% gain of the Russell 2000 Index, a widely used measure for the performance of small company stocks. The stocks of small and micro cap companies were the market's best performers over the past year as investors were attracted to this segment of the market. Many companies held by the Fund performed even better in the six month period as they were discovered by investors and enjoyed strong stock price appreciation. While we are pleased with the Fund's performance, our outlook has become more cautious. We believe that investor's willingness to take risks may have peaked. Over much of the last year, investors were willing to take risks by investing in the smallest companies with little regard for profitability or earnings growth. The sentiment favoring these types of investments faded in February and March. Additionally, while underlying businesses and end markets improved over the last year, stock price appreciation outstripped this progress. Investors' expectations for continued earnings growth increases are high. They are scrutinizing earnings more closely and are likely to sell companies that do not measure up. This may cause them to gravitate toward better quality companies with more predictable earnings. In the last six months, the Fund's performance was driven by our stock selection as many of our holdings gained a following among investors and benefited from stock price appreciation. The Fund's strong performance relative to the Index was in spite of being underweighted in many sectors and while holding substantial cash. None of our holdings significantly detracted from performance. Throughout the six-month period and since the Fund's inception in July, we bought and sold quite a few stocks as we sought to invest the Fund's assets and capture profits from companies that had reached our price targets. Health care was the biggest contributor to the Fund's performance. We were overweighted in health care compared to the Russell 2000 Index and our holdings outperformed those of the Index. Medical Technology Systems, Inc., a pill packaging company with high recurring revenues, made the largest contribution to our performance. Enpath Medical, Inc., a manufacturer of advanced vascular delivery products, also made a strong contribution. On the downside, Cyberonics, a developer of implantable medical devices, suffered a stock price decline. Our financial services holdings dramatically outperformed those in the Index. Two holdings were especially noteworthy. Home Capital Group, Inc. is a fast growing Canadian mortgage lender that provides residential mortgages to populations, such as immigrants and the self-employed, that are not well served by major banks. Wilshire State Bank is a regional bank that serves Korean and Hispanic populations and is enjoying a period of strong earnings growth. Technology was also a big contributor to the Fund's performance. We were slightly overweighted in this sector and our holdings significantly outperformed those of the Index. Monolithic System Technology, Inc., a designer of RAM-based memory architecture, was the biggest contributor in this sector. Monolithic's stock price rose significantly on news that it would be acquired at a premium by Synopsys, Inc., and we sold our position to capture a profit. The Fund also benefited from the strong performance of our holdings in the consumer discretionary sector. Most of our retail and business services companies had solid returns in the period. Big 5 Sporting Goods Corp., a sporting goods retailer, was the best contributor to performance from this sector. Big 5's stock price appreciated as the economy improved and the company consistently increased sales and decreased debt. We sold Rainbow Rentals, Inc., a rent-to-own store operator, at a profit after the company announced that it would be acquired at a premium price. Two of the Fund's worst performers were Mothers Work, Inc., a maternity wear retailer, and Whitehall Jewellers, Inc., a fine jewelry retailer. We sold Mothers Work but continue to hold White-hall Jewellers because we think it is a good value. The materials and processing sector was the biggest detractor from the Fund's performance relative to the Index. Our holdings were down slightly while those of the Index were up significantly. Micro cap companies in other countries are often better values than similar U.S. companies. We have found significant opportunities with the help of Wasatch's international team. Examples are Home Capital Group mentioned earlier, BW Technologies Ltd., a Canadian maker of handheld gas detectors for commercial use, and CoolBrands International, Inc., a Canadian ice cream manufacturer that makes Weight-watchers and Atkins frozen treats. We believe the company's acquisition of the Whole Fruit, Godiva and Dreamery brands and a portion of Nestle's distribution network from the Nestle and Dreyer's merger gives CoolBrands outstanding long-term growth potential. OUTLOOK As of March 31, the Fund's cash position was higher than we would like. Ideally, we want the Fund to be fully invested. This has been a challenge in the current environment as the good values of last year are not as plentiful and as our outlook has become more cautious. We are choosing to be patient and invest the cash in companies we like at lower prices. We believe our hands-on research process will help us identify undervalued micro cap companies with the potential to make a positive contribution to your efforts to achieve long-term investment objectives. We appreciate your investment in the Wasatch Micro Cap Value Fund. 12 MICRO CAP VALUE FUND -- PORTFOLIO SUMMARY MARCH 31, 2004 AVERAGE ANNUAL TOTAL RETURNS SINCE INCEPTION 1 YEAR 5 YEARS 7/28/03(1) - ---------------------------------------------------------------------------------------------------------- WASATCH MICRO CAP VALUE FUND N/A N/A 36.10% - ---------------------------------------------------------------------------------------------------------- Russell 2000 Index N/A N/A 25.53% - ---------------------------------------------------------------------------------------------------------- PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. YOU SHOULD REALIZE THAT PRINCIPAL VALUE AND INVESTMENT RETURN WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE TABLE ABOVE DOES 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. TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE CALL 800.551.1700 OR VISIT WWW.WASATCHFUNDS.COM. 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. (1)Returns less than a year are not annualized. TOP 10 EQUITY HOLDINGS* TICKER COMPANY % OF FUND - -------------------------------------------------------------------------- BWT CN BW TECHNOLOGIES LTD. (Canada) 3% Handheld gas detectors for commercial use. NPTH ENPATH MEDICAL, INC. 3% Advanced vascular delivery products. LGVN LOGICVISION, INC. 3% Embedded test technology for complex semiconductors. WSBK WILSHIRE STATE BANK 2% Regional bank. MPP MEDICAL TECHNOLOGY SYSTEMS, INC. 2% Pill packaging company. PLXT PLX TECHNOLOGY, INC. 2% Semiconductors to accelerate and manage data transfer. HCG/B CN HOME CAPITAL GROUP, INC., CLASS B (Canada) Mortgage lender. 2% SAXN SAXON CAPITAL, INC. 2% Subprime mortgage lender. XMP GR MACROPORE BIOSURGERY, INC. 2% Bioresorbable polymer implants. ICUI ICU MEDICAL, INC. 2% Disposable connectors for intravenous therapy. *Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. SECTOR BREAKDOWN** [PIE CHART] HEALTH CARE 25.3% FINANCIAL SERVICES 20.4% TECHNOLOGY 19.1% CONSUMER DISCRETIONARY 15.7% PRODUCER DURABLES 9.8% OTHER 3.1% INDUSTRIALS 2.1% AUTO & TRANSPORTATION 2.0% INFORMATION TECHNOLOGY 1.3% ENERGY 1.2% **Excludes short-term investments. GROWTH OF A $10,000 INVESTMENT [LINE GRAPH] Date Wasatch Micro Cap Value Fund Russell 2000 Index 07/28/2003 10,000 10,000 07/31/2003 10,000 10,049 08/31/2003 10,250 10,510 09/30/2003 10,450 10,316 10/31/2003 11,250 11,182 11/30/2003 11,700 11,579 12/31/2003 12,059 11,814 01/31/2004 13,010 12,327 02/29/2004 13,410 12,437 03/31/2004 13,610 12,553 +INCEPTION: JULY 28, 2003. THE RUSSELL 2000 INDEX is an unmanaged total return index of the smallest 2,000 companies in the Russell 3000 Index, as ranked by total market capitalization. The Russell 2000 Index is widely regarded in the industry as accurately capturing the universe of small company stocks. YOU CANNOT INVEST IN THE INDEX. 13 SMALL CAP GROWTH FUND -- MANAGEMENT DISCUSSION MARCH 31, 2004 [PHOTO OF JEFF CARDON] Jeff Cardon, CFA Portfolio Manager SIX MONTH REVIEW The Wasatch Small Cap Growth Fund gained 11.90% in the six months ended March 31, 2004. Despite generating a positive return, the Fund under-performed the Russell 2000 Index, a widely used measure for the performance of small company stocks, which gained 21.69%. The Fund's underperformance of the Russell 2000 Index over the past six months was a little surprising to us given that the majority of companies held by the Fund produced strong earnings growth throughout the year. During the past four quarters, the earnings growth of the Fund's holdings was over 21%, while the Russell 2000 Index's weighted median earnings growth was 14.6%. At March 31, the price-to-earnings (P/E) ratio, which is the price of a stock divided by its earnings per share, of our portfolio was 27. While our P/E is a little high compared to history, it is lower than the Russell 2000 Index's P/E of 32. In addition, lower interest rates and higher than normal earnings growth should support a slightly higher P/E ratio. It is worth noting that lower quality stocks drove the performance of the Russell 2000 Index over the past year. In fact, the Index's best performers included the smallest companies with market capitalizations of less than $500 million, companies with no profits and companies with stock prices of less than $5. We typically do not invest in these types of companies because they do not meet our standards for quality or growth. Over the past six months, the biggest contributors to the Fund's underperformance of the Index were the financial services, materials and processing, and producer durables sectors. Our underweighting in these sectors held back performance relative to the Russell 2000 Index. However, the financial services and producer durables sectors made a positive contribution to the Fund's performance. The materials and processing sector detracted from the Fund's performance but made a positive contribution to the Index's performance. Cabot Microelectronics Corp., a supplier of chemicals to the semiconductor industry, was primarily responsible for the Fund's loss in this sector. Cabot suffered a stock price decline due to changes in senior management, lowered earnings estimates and concern over the market position of the company's next generation technology. We believe Cabot has an exciting future delivering technology solutions to the semiconductor industry. Our health care holdings made the biggest contribution to the Fund's performance led by Inveresk Research Group, Inc., a contract research organization that provides pre-clinical and clinical services to pharmaceutical and biotechnology clients. We were dramatically overweighted in health care compared to the Index. Despite their positive contribution to the Fund's performance, our holdings underperformed those of the Index. Our biggest detractor was Odyssey HealthCare, Inc., a hospice care provider. The company's stock price has been quite volatile due to worries about Medicare reimbursement and a reduction in growth expectations in 2004. We still believe Odyssey is a high quality health care provider with an exciting future. The Fund was also overweighted compared to the Index in the consumer discretionary sector. This sector made the second biggest contribution to the Fund's performance. While our holdings produced a positive return, they were not up as much as those in the Index. One of the Fund's best performers was Resources Connection, Inc., an outsource provider of professional business services. The company has benefited from increasing demand for business consulting, particularly from publicly traded companies that must comply with the Sarbanes-Oxley Act. Another strong performer was Chico's FAS, Inc., a women's apparel retailer that has done well throughout the economic downturn. Chico's strong performance was somewhat offset by the decline suffered by Christopher & Banks Corp., which also sells women's clothing. We have sold our position in Christopher & Banks due to rapid deceleration in customer demand. A year ago we had an overweight position in technology. During the past 12 months we have decreased our weighting so it is nearly equal to that of the Index. Our holdings made a positive contribution to performance but were not up as much as those in the Index. Integrated Circuit Systems, Inc., a maker of timing devices for electronic systems, and Verisity Ltd., a developer of tools for electronic design automation, suffered stock price declines that hurt the performance of the Fund's technology sector. We remain positive on the long-term growth prospects of these companies. Over the past few months we have seen an increase in initial public offerings and mergers and acquisitions. The Fund benefited from several holdings that are in the process of being acquired. We sold our position in Monolithic System Technology, Inc., a designer of RAM-based memory architecture, when they announced they were being taken over by Synopsys, Inc. SICOR was taken over during the period by Teva Pharmaceuticals, and ILEX Oncology, Inc. is in discussions to be acquired by Genzyme Corp. OUTLOOK The Small Cap Growth Fund's investment philosophy is to invest in high quality growth companies. Over the past 10 years, we have had a great run of performance, but in the last six months we faced a period of weaker performance relative to the small cap market. We are committed to working as hard as we can to deliver the kind of performance you expect of us. We think the best thing we can do to meet your expectations is to continue to pursue our long run strategy of finding and investing in great growth companies. Thank you for investing in the Wasatch Small Cap Growth Fund. We look forward to helping you meet your financial goals and appreciate the trust you have put in Wasatch. 14 SMALL CAP GROWTH FUND -- PORTFOLIO SUMMARY MARCH 31, 2004 AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 5 YEARS 10 YEARS - --------------------------------------------------------------------------- WASATCH SMALL CAP GROWTH FUND 48.06% 18.02% 15.44% - --------------------------------------------------------------------------- Russell 2000 Index 63.83% 9.66% 10.44% - --------------------------------------------------------------------------- PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. YOU SHOULD REALIZE THAT PRINCIPAL VALUE AND INVESTMENT RETURN WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE TABLE ABOVE DOES 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. TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE CALL 800.551.1700 OR VISIT WWW.WASATCHFUNDS.COM. Investments in small cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. TOP 10 EQUITY HOLDINGS* TICKER COMPANY % OF FUND - --------------------------------------------------- ORLY O'REILLY AUTOMOTIVE, INC. 5% Automotive parts retailer/distributor. TECH TECHNE CORP. 3% Complex, disposable research kits for biotech. AMSG AMSURG CORP. 3% Outpatient surgery centers. CCMP CABOT MICROELECTRONICS CORP. 3% Chemicals to the semiconductor industry. KNGT KNIGHT TRANSPORTATION, INC. 2% Long haul trucking and logistic services. ACDO ACCREDO HEALTH, INC. 2% Services for individuals with chronic diseases. YCC YANKEE CANDLE CO., INC. 2% Scented candle manufacturer. TARO TARO PHARMACEUTICALS INDUSTRIES 2% LTD. Topical corticosteroids and antifungal creams. DLTR DOLLAR TREE STORES, INC. 2% Dollar discount store operator. IRGI INVERESK RESEARCH GROUP, INC. 2% Drug development research services. *Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. SECTOR BREAKDOWN** [PIE CHART] HEALTH CARE 32.0% CONSUMER DISCRETIONARY 27.5% TECHNOLOGY 16.6% FINANCIAL SERVICES 8.2% AUTO & TRANSPORTATION 4.4% MATERIALS & PROCESSING 3.7% PRODUCER DURABLES 3.6% UTILITIES 2.3% INDUSTRIALS 1.0% OTHER 0.7% **Excludes short-term investments. GROWTH OF A $10,000 INVESTMENT [LINE GRAPH] Date Wasatch Small Cap Growth Fund Russell 2000 Index 03/31/1994 10,000 10,000 03/31/1995 11,325 10,552 03/31/1996 14,260 13,617 03/31/1997 13,521 14,312 03/31/1998 19,347 20,326 03/31/1999 18,348 17,022 03/31/2000 27,545 23,370 03/31/2001 28,240 19,788 03/31/2002 37,766 22,555 03/31/2003 28,378 16,473 03/31/2004 42,016 26,988 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. 15 SMALL CAP VALUE FUND -- MANAGEMENT DISCUSSION MARCH 31, 2004 [PHOTO OF JIM LARKINS] Jim Larkins, MBA Portfolio Manager [PHOTO OF JOHN MAZANEC] John Mazanec, MBA Portfolio Manager SIX MONTH REVIEW The Small Cap Value Fund gained 27.09% in the six months ended March 31, 2004 and outperformed the Russell 2000 Value Index, a widely used measure for the performance of value-oriented small company stocks, which gained 24.42%. We are pleased with the Fund's results over the past six months but would caution that these returns are unusual given how rapidly stock prices reflected optimistic expectations for the economic recovery. While we are not negative on the prospects for the economy and do not foresee any impending disasters, we do not see an environment that can sustain gains of this magnitude. In February and March, investors seemed to take a more realistic view of the value of certain small companies. They abandoned speculative investments in very small, profitless companies and stock prices generally declined before finishing the period on a strong note. In the last three months of 2003, the Small Cap Value Fund's performance was slightly weaker than that of the Index. However, our performance was significantly stronger than that of the Index in the first three months of 2004 when very small, fundamentally weak companies suffered a sell off and undervalued companies with solid fundamentals like those in which the Fund invests saw their stock prices rise. The Fund's performance over the past six months was broad based but also benefited from careful stock picking, particularly in the financial services sector. This sector was by far the biggest contributor to the Fund's performance. Overall, our financial services holdings dramatically outperformed those of the Russell 2000 Value Index. Four out of our top five contributors were financial services companies. Real estate investment trusts (REITs) and mortgage lenders did especially well. We were gratified to be rewarded for our years of research into these types of businesses. The Fund's biggest contributor was Saxon Capital, Inc., a subprime mortgage lender, which is converting to a REIT structure. We think this is a sound strategic move as it will significantly improve Saxon's earnings stability and provide a dividend to shareholders. Also among the Fund's top contributors were Friedman, Billings, Ramsey Group, Inc., a mortgage REIT with an investment banking subsidiary, Commercial Capital Bancorp, Inc., a regional bank focused on multi-family lending, and Accredited Home Lenders Holding Co., a subprime mortgage lender similar to Saxon. The consumer discretionary sector was the next biggest contributor to the Fund's performance. We were overweight in this sector compared to the Russell 2000 Value Index. However, despite their positive contribution to the Fund's performance, our holdings did not do as well as those of the Index. The biggest detractors in this sector were two jewelry retailers, Whitehall Jewellers, Inc. and Friedman's, Inc., and Action Performance Companies, Inc., a producer of motor-sports collectibles and consumer products. The stock price of Action Performance declined due to inventory and production issues. We are closely monitoring the company's progress toward resolving these issues. We have sold Friedman's but remain positive on the long-term outlook for Whitehall. Two of the Fund's retail holdings performed well. As consumers became more optimistic about the economy, business picked up at Big 5 Sporting Goods Corp., a sporting goods retailer, and MarineMax, Inc. a boating retailer. We have been taking profits by reducing our positions in these names. In the consumer staples sector, the Fund's weighting was nearly equal to that of the Russell 2000 Value Index. The Fund outperformed the Index on the strength of NBTY, Inc., a distributor of nutritional supplements. NBTY recently acquired Rexall gaining a strong position in the wholesale market along with prominent shelf space. We think NBTY has growth potential as competitors are struggling and vitamin consumption is increasing with the aging of the American population. The Fund was overweight in the health care sector compared to the Index. Our holdings outperformed those of the Index led by Chattem, Inc., a maker of health-related consumer products. We invested in Chattem as a "fallen angel," which we define as a company with a history of solid growth that has "hit a bump in the road." Chattem's bump was increased competition and legal issues involving a dieting product. We felt the company's good cash flow and stable products merited trying to understand the risks and potential rewards of investing. Since we initiated a position, the company has benefited from developing new products, resolving legal issues and restructuring debt. The materials and processing sector was the biggest detractor to the Fund's performance versus the Index due to our underweight position and the underperformance of our holdings. The stock that detracted the most was Mobile Mini, Inc., a company that leases portable offices and storage containers. Mobile Mini struggled due to the slow recovery of the commercial construction market and cost overruns for refurbished containers. OUTLOOK While it may be quite some time before we see returns similar to those achieved over the past six months, we are confident that we will find many opportunities to invest in undervalued small companies. We think our knowledge of the small cap market puts us in a good position to recognize companies that have stumbled due to short-term issues. With careful research we think we can identify fallen angels that have the potential to be rewarding long-term investments. We look forward to working with you as you strive to achieve your long-term investment objectives. Thank you for investing in the Wasatch Small Cap Value Fund. 16 SMALL CAP VALUE FUND -- PORTFOLIO SUMMARY MARCH 31, 2004 AVERAGE ANNUAL TOTAL RETURNS SINCE INCEPTION 1 YEAR 5 YEARS 12/17/97 - -------------------------------------------------------------------------------- WASATCH SMALL CAP VALUE FUND 79.02% 28.74% 21.75% - -------------------------------------------------------------------------------- Russell 2000 Value Index 64.48% 16.14% 10.03% - -------------------------------------------------------------------------------- PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. YOU SHOULD REALIZE THAT PRINCIPAL VALUE AND INVESTMENT RETURN WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE TABLE ABOVE DOES 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. TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE CALL 800.551.1700 OR VISIT WWW.WASATCHFUNDS.COM. Investments in small cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. TOP 10 EQUITY HOLDINGS* TICKER COMPANY % OF FUND - --------------------------------------------------------------- SAXN SAXON CAPITAL, INC. 3% Subprime mortgage lender. NTY NBTY, INC. 3% Nutritional supplements manufacturer/retailer. GISX GLOBAL IMAGING SYSTEMS, INC. 2% Office imaging equipment sales and service. NCT NEWCASTLE INVESTMENT CORP. 2% Real estate REIT. HBG HUB INTERNATIONAL LTD. 2% Insurance brokerage services. LAD LITHIA MOTORS, INC., CLASS A 2% Automotive franchiser/retailer. MINI MOBILE MINI, INC. 2% Leases portable office and storage units. KEYS KEYSTONE AUTOMOTIVE INDUSTRIES, INC. 2% Aftermarket auto replacement parts. ACF AMERICREDIT CORP. 2% Subprime automobile lender. CMRG CASUAL MALE RETAIL GROUP, INC. 2% Big and tall clothing retailer. *Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. SECTOR BREAKDOWN** [PIE CHART] FINANCIAL SERVICES 36.6% CONSUMER DISCRETIONARY 30.5% HEALTH CARE 7.3% PRODUCER DURABLES 6.4% AUTO & TRANSPORTATION 5.5% TECHNOLOGY 3.9% MATERIALS & PROCESSING 3.0% CONSUMER STAPLES 2.8% OTHER 2.5% ENERGY 1.5% **Excludes short-term investments. GROWTH OF A $10,000 INVESTMENT [LINE GRAPH] Date Wasatch Small Cap Value Fund Russell 2000 Value Index 12/17/1997 10,000 10,000 03/31/1998 11,650 11,076 03/31/1999 9,750 8,636 03/31/2000 15,986 9,780 03/31/2001 19,331 11,683 03/31/2002 27,539 14,457 03/31/2003 19,260 11,092 03/31/2004 34,479 18,244 +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. 17 ULTRA GROWTH FUND -- MANAGEMENT DISCUSSION MARCH 31, 2004 [PHOTO OF KAREY BARKER] Karey Barker, CFA Portfolio Manager [PHOTO OF AJAY KRISHNAN] Ajay Krishnan, CFA Portfolio Manager SIX MONTH REVIEW The Ultra Growth Fund gained 12.28% in the six months ended March 31, 2004. Over the same period, the Russell 2000 Growth Index, a widely used measure for the performance of growth-oriented small company stocks, gained 18.97%. Despite the Fund's positive returns over the past six months, it underperformed the Russell 2000 Growth Index. In late 2003, we moved to a more conservative stance by reducing our exposure to technology and increasing our exposure to health care. The best performing companies in the Russell 2000 Growth Index we considered to be speculative issues. The Fund was not invested in these types of companies because they lack earnings and the quality characteristics we demand. In the last six months, the consumer discretionary, materials and processing, producer durables and financial services sectors were the biggest contributors to the Fund's underperformance versus the Russell 2000 Growth Index. As is typical, the Fund was underweighted in most of these sectors and overweighted in the health care and technology sectors. Our consumer discretionary sector made a positive contribution to performance, but was the biggest detractor to performance versus the Index. We were underweighted in this sector and our holdings underperformed. Christopher & Banks Corp., a women's apparel retailer, was the biggest detractor in this sector. We sold our position over concerns about declining sales. Wireless Facilities, Inc., a provider of services to the telecommunications industry, suffered a stock price decline. The company's fundamentals support our positive long-term growth outlook and we have been adding to our position at attractive prices. On the positive side, Career Education Corp., an operator of schools for post-secondary education, made a strong contribution to performance. The materials and processing sector was the second biggest contributor to the Fund's underperformance of the Index. We were slightly overweighted and, while this sector made a positive contribution to the Index's performance, it detracted from the Fund's performance. Cabot Microelectronics Corp., a supplier of chemicals to the semiconductor industry, was primarily responsible for our underperformance. Cabot's stock price declined on news of changes in senior management, lowered earnings estimates and concern over the market position of the company's leading edge technology. We will be closely monitoring our position in Cabot. The Fund was substantially overweighted in health care compared to the Index. This sector was the biggest positive contributor to the Fund's performance. Overall, our health care holdings were not as strong as those in the Index, but a couple of large holdings did well. Our largest holding, Accredo Health, Inc., a provider of drug distribution and other services for individuals with chronic diseases, made the best contribution to performance. Accredo signed a new partnership agreement and has benefited from several new distribution contracts for recently approved drugs. We have been selling some shares to keep our position at a reasonable size. Odyssey HealthCare, Inc. was the biggest detractor to the Fund's performance. The hospice care provider's stock price declined due to lowered earnings estimates and concerns over future Medicare reimbursement. Technology was the second biggest contributor to our performance. Usually, we are substantially overweighted in technology compared to the Russell 2000 Growth Index. Over the past six months, however, we were only slightly overweighted as we had reduced our holdings due to the rise in technology stock prices during 2003. Overall, our technology holdings did not do as well as those in the Index. Verisity Ltd., a developer of tools for electronic design automation (EDA), hurt performance as the company suffered a stock price decline due to sluggish spending on EDA software. We remain positive on Verisity's long-term growth prospects. UTStarcom, Inc., a provider of communications equipment to operators of telecommunications networks primarily in China, fell victim to concerns regarding China's economy, the company's current wireless business and their ability to compete in the next generation of wireless technologies. We believe UTStarcom is well positioned in its current markets and is actively developing new technology to compete in upcoming years. The company's stock appears inexpensive compared to its long-term growth potential and we have been using the price weakness to increase our position. Initial public offerings (IPOs) and mergers and acquisitions increased over the past six months. We invested on the IPO of Kintera, Inc., a provider of software services to nonprofit organizations. Shortly thereafter, we were rewarded as Kintera was a big contributor to performance in the period. We sold Monolithic System Technology, Inc., a designer of RAM-based memory architecture, at a nice profit when the company announced its pending acquisition by Synopsys, Inc. The Fund also profited by selling ILEX Oncology, Inc. when they announced plans to be acquired by Genzyme Corp. OUTLOOK Although technology stock prices are still above historical norms, they seem more rational to us since their decline in February and March. The earnings growth of technology companies is also improving. We continue to see interesting opportunities in health care at reasonable prices. We think there will be opportunities for stock pickers who are willing to work hard to understand companies. We believe Wasatch has such a team of stock pickers. We continually strive to invest in fast growing companies that we believe have the potential to help you as you work toward your long-term investment objectives. We appreciate your investment in the Wasatch Ultra Growth Fund. 18 ULTRA GROWTH FUND -- PORTFOLIO SUMMARY MARCH 31, 2004 AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 5 YEARS 10 YEARS - --------------------------------------------------------------------------- WASATCH ULTRA GROWTH FUND 58.98% 17.74% 17.05% - --------------------------------------------------------------------------- Russell 2000 Growth Index 63.17% 2.31% 6.45% - --------------------------------------------------------------------------- Russell 2500 Growth Index 59.47% 5.17% 8.94% - --------------------------------------------------------------------------- PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. YOU SHOULD REALIZE THAT PRINCIPAL VALUE AND INVESTMENT RETURN WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE TABLE ABOVE DOES 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. TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE CALL 800.551.1700 OR VISIT WWW.WASATCHFUNDS.COM. Investments in small cap funds can be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. TOP 10 EQUITY HOLDINGS* TICKER COMPANY % OF FUND - --------------------------------------------------------------------- ACDO ACCREDO HEALTH, INC. 9% Services for individuals with chronic diseases. CECO CAREER EDUCATION CORP. 5% Schools for post-secondary education. UTSI UTSTARCOM, INC. 4% Telecommunications network equipment. WFII WIRELESS FACILITIES, INC. 4% Telecommunications industry services. CCMP CABOT MICROELECTRONICS CORP. 3% Chemicals to the semiconductor industry. USPI UNITED SURGICAL PARTNERS INTERNATIONAL, LTD. 3% Short-stay surgical centers. OIIM O2MICRO INTERNATIONAL LTD. 3% Semiconductors to increase power efficiency. ODSY ODYSSEY HEALTHCARE, INC. 3% Hospice care provider. AMHC AMERICAN HEALTHWAYS, INC. 3% Disease management services. AMSG AMSURG CORP. 2% Outpatient surgery centers. *Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. SECTOR BREAKDOWN** [PIE CHART] HEALTH CARE 35.9% TECHNOLOGY 24.3% CONSUMER DISCRETIONARY 23.2% FINANCIAL SERVICES 6.0% MATERIALS & PROCESSING 5.1% UTILITIES 2.1% PRODUCER DURABLES 1.9% TREASURY NOTES & BONDS 0.9% AUTO & TRANSPORTATION 0.5% OTHER 0.1% **Excludes short-term investments. GROWTH OF A $10,000 INVESTMENT [LINE GRAPH] Date Wasatch Ultra Growth Fund Russell 2000 Growth Index Russell 2500 Growth Index 03/31/1994 10,000 10,000 10,000 03/31/1995 13,149 10,729 11,031 03/31/1996 18,166 14,095 14,533 03/31/1997 15,843 13,275 14,379 03/31/1998 20,747 18,740 19,935 03/31/1999 21,330 16,671 18,297 03/31/2000 28,185 26,515 33,106 03/31/2001 27,721 15,959 19,321 03/31/2002 40,360 16,749 20,876 03/31/2003 30,355 11,452 14,765 03/31/2004 48,258 18,685 23,545 THE RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged total return index of the smallest 2,000 companies in the Russell 3000 Index, as ranked by total market capitalization. The Russell 2000 Index is widely regarded in the industry as accurately capturing the universe of small company stocks. THE RUSSELL 2500 GROWTH INDEX measures the performance of those Russell 2500 Index companies with higher price-to-book ratios and higher forecasted growth values. YOU CANNOT INVEST IN THESE INDEXES. 19 U.S. TREASURY FUND -- MANAGEMENT DISCUSSION MARCH 31, 2004 [PHOTO OF VAN R. HOISINGTON] Van R. Hoisington Portfolio Manager SIX MONTH REVIEW In the six months ended March 31, 2004, the Fund returned 5.11%, substantially outpacing the Lehman Brothers Aggregate Bond Index, which returned 2.98%. The Fund's return was achieved utilizing the highest quality debt instrument -- U.S. Treasury securities. The key to the Fund's performance was that we invested in long dated Treasury securities (maturities longer than 20 years) to take advantage of the decline in inflation that has occurred. Our discipline calls for us to invest in long dated Treasury bonds when the multi-year trend in inflation is downward. When the multi-year trend in inflation moves upward, we would expect to position the Fund in Treasury bills and/or other short dated Treasury securities (maturities less than five years). The following economic statistics support our view that the multi-year trend is one of declining inflation. The core personal consumption expenditures deflator, the most widely preferred measure of inflation, rose just 1.1% over the past 12 months, down 0.4% from a year earlier and virtually the smallest increase since 1955. At the same time, the core consumer price index increased just 1.2%, 0.5% lower than a year ago and about the slowest pace since 1966. Not surprisingly, on March 31, 2004 the 30-year Treasury bond yield was 4.77%, versus 4.81% at the end of September, and well down from the 4.88% yield at the end of March 2003. The drop in long Treasury yields meant that bond values appreciated and contributed to the Fund's return over the past six months. OUTLOOK Although 59 of 60 economists in a Wall Street Journal poll expect interest rates to be higher at the end of 2004, we believe that interest rates will remain low and work irregularly lower over the next several years. Eight considerations support this view. First, a large amount of the economy's resources are unused and considerable time will be needed to put these resources to work. Capacity utilization is a depressed 76% in the U.S., and similar unused capacity is evident around the globe. In the U.S., 8.35 million people are officially unemployed, but the degree of unemployment and underemployment is even greater. There are 514,000 workers so discouraged with job opportunities that they have quit looking for work, the highest number since 1994. Another 4.7 million people are working part time because full time work is not available. Unemployment rates of 9% to 10% in Europe, and higher elsewhere, suggest unutilized resources around the world are high as well. Second, debt levels are so high that any increase in interest rates would knock the economy back on its heels and delay the time needed to put to work the substantial idle plant and labor capacity. In fact, total private debt was a near record $1.63 for each dollar of gross domestic product (GDP) in the final quarter of 2003. Total debt of the U.S. economy reached a record $3.04 for every dollar of GDP, exceeding the previous high of $3 set in 1933 -- a seven-decade record. Rising interest rates would make this debt burden difficult to repay. Third, increasing market interest rates would constrict money growth when it is already depressed. Money, as measured by M2 money supply -- overnight repurchase agreements issued by commercial banks, overnight Eurodollars, savings accounts, time deposits under $100,000 and money market mutual fund shares -- expanded only 4.3% in the last 12 months, close to a seven-year low. Simultaneously, the monetary base grew 4.8% over the past year -- the slowest since the recession year of 2001. Fourth, monetary policy needs to take up the slack from diminishing fiscal stimulus. The Federal deficit, as a percent of GDP, fell slightly to 4% in the final quarter of 2003. By year-end 2004, the deficit will have shrunk to around 3% to 3.5% of GDP. The reduced fiscal stimulus will bear directly on household budgets. Since the start of 2001, real wage and salary income was up by less than 1%, but real after tax personal income moved ahead 9.8% as a result of the tax cuts. However, no further tax cuts are scheduled for 2004 or 2005. The reduced fiscal stimulus will affect the corporate sector as well because substantial corporate tax cuts expire this year. Fifth, raising interest rates would reinforce the negative effects of higher energy prices. In the latest month, consumer fuel expenditures were about 7.9% of wage and salary income, up 1.8% from the low reached in 2001. The increase in the energy share of the consumer budget over this span was similar to the jump that preceded the start of the 2000 recession. Such fuel increases typically serve to depress economic activity. Since rising fuel prices preceded each of the last four recessions, increasing interest rates combined with the current jump in energy prices would be difficult for the economy to absorb. Sixth, the motor vehicle market is becoming saturated, and with few exceptions the demand for housing is all but nonexistent. Even though sales incentives increased nearly $1,000 per motor vehicle, sales fell by nearly 12% annually in the first quarter of 2004. Any rise in market interest rates would undermine vehicle and home sales. Seventh, an increase in market interest rates would push the dollar higher, reinforcing the rise that has already occurred this year. This would work against any reduction in the trade deficit. Finally, rising rates would put downward pressure on the already low inflation rate. For these reasons, we continue to have the Fund invested in long-dated U.S. Treasury securities. We feel this is the appropriate position for the Fund as we strive to help you in your efforts to achieve long-term investment objectives. Thank you for investing in the Wasatch-Hoisington U.S. Treasury Fund. 20 U.S. TREASURY FUND -- PORTFOLIO SUMMARY MARCH 31, 2004 AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 5 YEARS 10 YEARS - ------------------------------------------------------------------------------ WASATCH-HOISINGTON U.S. TREASURY FUND 7.07% 8.08% 8.41% - ------------------------------------------------------------------------------ Lehman Bros. Aggregate Bond Index 5.40% 7.29% 7.54% - ------------------------------------------------------------------------------ PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. YOU SHOULD REALIZE THAT PRINCIPAL VALUE AND INVESTMENT RETURN WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE TABLE ABOVE DOES 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. TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE CALL 800.551.1700 OR VISIT WWW.WASATCHFUNDS.COM. TOP 10 HOLDINGS* MATURITY % OF HOLDING DATE FUND - -------------------------------------------------------------- U.S. TREASURY STRIP, PRINCIPAL ONLY 11/15/21 23% U.S. TREASURY BOND, 7.50% 11/15/24 14% U.S. TREASURY STRIP, PRINCIPAL ONLY 11/15/27 13% U.S. TREASURY BOND, 5.375% 2/15/31 10% U.S. TREASURY BOND, 6.125% 11/15/27 10% U.S. TREASURY BOND, 6.875% 8/15/25 7% U.S. TREASURY STRIP, PRINCIPAL ONLY 8/15/25 6% U.S. TREASURY BOND, 6.75% 8/15/26 4% U.S. TREASURY BOND, 5.50% 8/15/28 4% U.S. TREASURY BOND, 6.625% 2/15/27 4% *Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. INVESTMENTS & CASH [PIE CHART] TREASURY NOTES & BONDS 97.9% SHORT-TERM INVESTMENTS 2.1% GROWTH OF A $10,000 INVESTMENT [LINE GRAPH] Date Wasatch-Hoisington U.S. Treasury Fund Lehman Bothers Aggregate Bond Index 03/31/1994 10,000 10,000 03/31/1995 10,562 10,499 03/31/1996 11,352 11,631 03/31/1997 11,700 12,203 03/31/1998 14,275 13,665 03/31/1999 15,204 14,552 03/31/2000 15,599 14,825 03/31/2001 17,339 16,682 03/31/2002 17,277 17,574 03/31/2003 20,939 19,628 03/31/2004 22,419 20,689 THE LEHMAN BROTHERS AGGREGATE BOND INDEX covers the U.S. investment grade fixed rate bond market, including government and corporate securities, agency mortgage pass-through securities, and asset-backed securities. To be included in the index the security must meet the following criteria: must have at least one year to final maturity, regardless of call features; must have at least $100 million par amount outstanding; must be rated investment grade or better by Moody's Investors Service, Standard & Poor's, or Fitch Investor's Service; must be fixed rate, although it can carry a coupon that steps up or changes to a predetermined schedule; must be dollar-denominated and must be nonconvertible. All corporate and asset-backed securities must be registered with the SEC; and must be publicly issued. YOU CANNOT INVEST IN THE INDEX. 21 CORE GROWTH FUND -- PORTFOLIO OF INVESTMENTS SHARES VALUE - -------------------------------------------------------------------------------------------- COMMON STOCKS 97.7% AIR TRANSPORT 0.4% 157,900 Expeditors International of Washington, Inc. $ 6,235,471 ----------- BANKS 1.0% 910,850 HDFC Bank Ltd. 7,949,714 2,355,925 UTI Bank Ltd. 7,975,363 ----------- 15,925,077 ----------- BANKS -- OUTSIDE NEW YORK CITY 5.1% 607,370 Commerce Bancorp, Inc. 40,013,535 879,425 Doral Financial Corp. 30,955,760 194,750 TCF Financial Corp. 9,945,883 ----------- 80,915,178 ----------- CHEMICALS 0.9% 338,565 Cabot Microelectronics Corp.* 14,300,986 ----------- COMMUNICATIONS TECHNOLOGY 1.5% 846,625 UTStarcom, Inc.* 24,348,935 ----------- COMPUTER SERVICES SOFTWARE AND SYSTEMS 1.5% 183,375 CACI International, Inc., Class A* 7,885,125 91,349 Cognizant Technology Solutions Corp.* 4,133,542 334,375 SRA International, Inc., Class A* 12,351,813 ----------- 24,370,480 ----------- DIVERSIFIED FINANCIAL SERVICES 1.3% 829,550 U.S.I. Holdings Corp.* 12,269,044 514,750 Housing Development Finance Corporation Ltd. 7,648,223 ----------- 19,917,267 ----------- EDUCATION SERVICES 0.5% 159,275 Bright Horizons Family Solutions, Inc.* 7,511,409 ----------- ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 1.0% 632,200 Integrated Circuit Systems, Inc.* 15,823,966 ----------- ENTERTAINMENT 0.9% 767,085 Movie Gallery, Inc. 15,027,195 ----------- FINANCE COMPANIES 2.7% 425,050 Accredited Home Lenders Holding Co.* 16,746,970 942,725 Saxon Capital, Inc.* 26,782,817 ----------- 43,529,787 ----------- FINANCE -- SMALL LOAN 3.0% 2,760,781 AmeriCredit Corp.* 47,016,100 ----------- FINANCIAL -- MISCELLANEOUS 5.4% 517,225 Brown & Brown, Inc. 20,047,641 1,484,356 Fidelity National Financial, Inc. 58,780,498 126,700 Triad Guaranty, Inc.* 6,683,425 ----------- 85,511,564 ----------- FINANCIAL DATA PROCESSING SERVICES AND SYSTEMS 0.6% 274,000 Fair Isaac Corp. 9,885,920 ----------- FOOD AND DRUG RETAILING 0.4% 250,000 Shoppers Drug Mart Corp.* 5,960,681 ----------- 22 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - -------------------------------------------------------------------------------------------- FOODS 1.2% 489,775 NBTY, Inc.* $ 18,209,834 ------------ HEALTH CARE FACILITIES 4.3% 202,400 Laboratory Corporation of America Holdings* 7,944,200 725,900 Pharmaceutical Product Development, Inc.* 21,624,561 483,100 Renal Care Group, Inc.* 22,106,656 270,390 Sunrise Senior Living, Inc.* 9,693,482 224,450 United Surgical Partners International, Inc.* 7,617,833 ------------ 68,986,732 ------------ HEALTH CARE MANAGEMENT SERVICES 7.3% 791,700 AMERIGROUP Corp.* 36,180,690 1,372,220 First Health Group Corp.* 29,996,729 994,761 Orthodontic Centers Of America, Inc.* 7,858,612 651,925 Pediatrix Medical Group, Inc.* 41,071,275 ------------ 115,107,306 ------------ HEALTH CARE SERVICES 6.9% 692,350 Accredo Health, Inc.* 26,378,535 1,132,950 Apria Healthcare Group, Inc.* 33,920,523 338,249 Express Scripts, Inc.* 25,229,993 562,575 Inveresk Research Group, Inc.* 15,988,381 249,000 Lincare Holdings Inc.* 7,823,580 ------------ 109,341,012 ------------ HOME BUILDING 5.6% 928,550 D.R. Horton, Inc. 32,898,527 461,233 M.D.C. Holdings, Inc. 32,470,817 49,493 NVR, Inc.* 22,766,780 ------------ 88,136,124 ------------ HOUSEHOLD FURNISHINGS 0.2% 109,100 Select Comfort Corp.* 3,010,069 ------------ INVESTMENT MANAGEMENT COMPANIES 2.0% 1,069,800 MCG Capital Corp. 21,599,262 319,175 SEI Investments Company 10,532,775 ------------ 32,132,037 ------------ LEISURE TIME 2.5% 1,068,080 SCP Pool Corp.* 39,796,661 ------------ MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 2.1% 571,713 ICU Medical, Inc.* 17,362,924 95,450 Kinetic Concepts, Inc.* 4,280,933 999,450 PSS World Medical, Inc.* 11,183,845 ------------ 32,827,702 ------------ MEDICAL SERVICES 0.6% 273,615 Covance, Inc.* 9,423,301 ------------ 23 CORE GROWTH FUND -- PORTFOLIO OF INVESTMENTS (CONTINUED) SHARES VALUE - --------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REIT) 13.1% 36,675 American Financial Realty Trust*** + $ 609,208 808,850 American Financial Realty Trust 13,710,008 608,525 Annaly Mortgage Management, Inc. 11,896,664 1,693,925 Anworth Mortgage Asset Corp. 23,647,193 1,251,075 Bimini Mortgage Management, Inc.*** +++ 18,766,125 485,425 Capital Automotive 17,140,357 883,025 Fieldstone Investment Corp.* *** + 16,998,231 694,925 Friedman, Billings, Ramsey Group, Inc., Class A 18,756,026 569,975 iStar Financial, Inc. 24,109,942 602,700 MFA Mortgage Investments, Inc. 6,087,270 261,050 Novastar Financial, Inc. 17,216,247 88,150 Redwood Trust, Inc. 5,480,286 1,057,050 Thornburg Mortgage, Inc. 32,874,255 -------------- 207,291,812 -------------- RENTAL AND LEASING SERVICES -- CONSUMER 6.1% 2,951,895 Rent-A-Center, Inc.* 97,383,016 -------------- RETAIL 12.4% 806,595 Dollar Tree Stores, Inc.* 24,915,720 420,600 Global Imaging Systems, Inc.* 13,972,332 914,625 Group 1 Automotive, Inc.* 33,109,425 321,820 Men's Wearhouse, Inc. (The)* 8,550,757 447,425 Michaels Stores, Inc. 21,753,804 1,681,980 O'Reilly Automotive, Inc.* 67,346,479 669,695 Sonic Automotive, Inc. 16,775,860 13,076,000 Texwinca Holdings Ltd. 10,067,690 -------------- 196,492,067 -------------- SAVINGS AND LOANS 0.5% 358,066 Commercial Capital Bancorp, Inc.* 8,206,873 -------------- SERVICES -- COMMERCIAL 5.7% 2,304,671 Copart, Inc.* 50,080,501 594,175 Waste Connections, Inc.* 23,648,165 661,020 West Corp.* 16,459,398 -------------- 90,188,064 -------------- UTILITIES -- TELECOMMUNICATIONS 1.0% 1,189,525 Nextel Partners, Inc., Class A* 15,059,386 -------------- TOTAL COMMON STOCKS (COST $1,157,570,948) 1,547,872,012 -------------- 24 MARCH 31, 2004 (UNAUDITED) PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS 2.2% REPURCHASE AGREEMENT 2.2% $34,129,000 Repurchase Agreement dated 3/31/04, 0.50% due 4/1/04 with State Street Bank and Trust Co. collateralized by $32,495,000 of United States Treasury Bonds 5.25% due 11/15/28; value: $34,812,608; repurchase proceeds: $34,129,474 (cost $ 34,129,000) $ 34,129,000 --------------- TOTAL SHORT-TERM INVESTMENTS (COST $ 34,129,000) 34,129,000 --------------- TOTAL INVESTMENTS (COST $1,191,699,948) 99.9% 1,582,001,012 OTHER ASSETS LESS LIABILITIES 0.1% 1,444,885 --------------- NET ASSETS 100.0% $ 1,583,445,897 =============== *Non-income producing. ***Security was fair valued under procedures adopted by the Board of Directors. +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). See notes to financial statements. 25 GLOBAL SCIENCE & TECHNOLOGY FUND -- PORTFOLIO OF INVESTMENTS SHARES VALUE - ----------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS 94.0% BIOTECHNOLOGY RESEARCH AND PRODUCTION 2.3% 9,200 Ciphergen Biosystems, Inc.* $ 76,636 2,675 Corgentech, Inc.* 50,290 80,725 ISTA Pharmaceuticals, Inc.* 1,038,931 19,425 Neurochem, Inc.* (Canada) 415,501 29,175 QIAGEN N.V.* (Netherlands) 384,235 ---------- 1,965,593 ---------- CASINOS AND GAMBLING 0.5% 9,050 Shuffle Master, Inc.* 420,734 ---------- CHEMICALS 3.0% 60,575 Cabot Microelectronics Corp.* 2,558,688 ---------- COMMUNICATIONS EQUIPMENT 0.4% 10,725 Funkwerk AG (Germany) 344,472 ---------- COMMUNICATIONS TECHNOLOGY 4.7% 28,800 CIENA Corp.* 143,136 48,250 JDS Uniphase Corp.* 196,378 58,275 Remec, Inc.* 442,890 114,355 UTStarcom, Inc.* (China) 3,288,850 6,528 Xtera Communications, Inc.* *** + 7,076 ---------- 4,078,330 ---------- COMPUTER SERVICES SOFTWARE AND SYSTEMS 10.9% 28,050 Cognizant Technology Solutions Corp.* 1,269,262 29,575 Concord Communications, Inc.* 426,176 54,017 EPIQ Systems, Inc.* 884,798 85,800 iPass, Inc.* 937,794 81,950 Kintera, Inc.* 1,366,107 67,200 LivePerson, Inc.* 356,160 10,000 Macrovision Corp.* 186,800 20,475 Manhattan Associates, Inc.* 569,205 77,220 Nassda Corp.* 535,907 32,550 Opnet Technologies, Inc.* 485,321 36,375 PDF Solutions, Inc.* 418,676 25,425 QLogic Corp.* 839,279 13,975 SRA International, Inc., Class A* 516,237 60,300 Verisity Ltd.* (Israel) 558,378 ---------- 9,350,100 ---------- COMPUTER TECHNOLOGY 0.2% 15,750 Dot Hill Systems Corp.* 157,815 ---------- DRUGS AND PHARMACEUTICALS 5.0% 25,400 Able Laboratories, Inc.* 496,062 64,950 Angiotech Pharmaceuticals, Inc.* (Canada) 1,585,429 11,775 Atrix Laboratories, Inc.* 300,263 37,125 Connetics Corp.* 823,061 14,050 ILEX Oncology, Inc.* 336,076 7,000 Northwest Biotherapeutics, Inc.* 917 12,250 Taro Pharmaceutical Industries Ltd.* (Israel) 710,377 ---------- 4,252,185 ---------- EDUCATION SERVICES 2.0% 30,125 Career Education Corp.* 1,706,280 ---------- 26 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - ------------------------------------------------------------------------------------ ELECTRICAL AND ELECTRONICS 0.6% 18,475 Plexus Corp.* $ 328,670 6,100 Power Integrations, Inc.* 178,913 ----------- 507,583 ----------- ELECTRICAL EQUIPMENT AND COMPONENTS 2.9% 41,575 BW Technologies Ltd.* (Canada) 880,699 10,300 Cherokee International Corp.* 148,320 10,175 Flextronics International Ltd.* (Singapore) 175,213 1,505,000 Unisteel Technology Ltd. (Singapore) 1,303,458 ----------- 2,507,690 ----------- ELECTRONIC EQUIPMENT AND INSTRUMENTS 2.9% 1,165,000 Innovalues Precision Ltd. (Singapore) 1,029,865 2,000 Samsung Electronics Co., Ltd. (Korea) 495,000 124,350 Vanguard Response Systems, Inc. PIPE* *** + (Canada) 293,696 61,000 Venture Corp. Ltd. (Singapore) 703,201 ----------- 2,521,762 ----------- ELECTRONICS 0.6% 46,450 Sanmina-SCI Corp.* 511,415 ----------- ELECTRONICS -- INSTRUMENTS, GAUGES AND METERS 1.1% 186,500 Computer Access Technology Corp.* 904,525 ----------- ELECTRONICS -- MEDICAL SYSTEMS 1.4% 39,075 CTI Molecular Imaging, Inc.* 570,104 57,425 Endocardial Solutions, Inc.* 498,449 4,550 EPIX Medical, Inc.* 94,413 ----------- 1,162,966 ----------- ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 12.8% 84,125 Advanced Power Technology, Inc.* 770,585 7,850 Altera Corp.* 160,533 22,075 AMIS Holdings, Inc.* 358,277 19,875 ASE Test Ltd.* (Taiwan) 218,625 34,850 Cree, Inc.* 777,155 31,775 Integrated Circuit Systems, Inc.* 795,328 25,600 Micrel, Inc.* 341,760 64,475 Monolithic System Technology, Inc.* 863,320 143,250 O2Micro International Ltd.* (Cayman Islands) 2,468,198 30,500 OmniVision Technologies, Inc.* 832,955 169,875 PLX Technology, Inc.* 1,829,554 8,900 PMC-Sierra, Inc.* 151,033 20,100 PSi Technologies Holdings, Inc. ADR* (Philippines) 98,691 198,250 Sirenza Microdevices, Inc.* 880,230 42,750 SiRF Technology Holdings, Inc., Series H* *** + 277,875 4,950 Xilinx, Inc.* 188,100 ----------- 11,012,219 ----------- ELECTRONICS -- TECHNOLOGY 0.4% 77,350 EFJ, Inc.* 359,677 ----------- FINANCIAL -- MISCELLANEOUS 0.1% 7,300 Encore Capital Group, Inc.* 121,253 ----------- FOOD AND DRUG RETAILING 0.5% 5,000 Sugi Pharmacy Co. Ltd. Bonus Shares* (Japan) 201,851 5,000 Sugi Pharmacy Co. Ltd. (Japan) 205,207 ----------- 407,058 ----------- 27 GLOBAL SCIENCE & TECHNOLOGY FUND -- PORTFOLIO OF INVESTMENTS (CONTINUED) SHARES VALUE - ------------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT AND SUPPLIES 1.0% 5,125 Straumann Holding AG (Switzerland) $ 886,517 ---------- HEALTH CARE FACILITIES 1.9% 46,700 American Healthways, Inc.* 1,140,414 16,900 Pharmaceutical Product Development, Inc.* 503,451 ---------- 1,643,865 ---------- HEALTH CARE MANAGEMENT SERVICES 0.3% 13,600 Computer Programs & Systems, Inc. 258,400 ---------- HEALTH CARE SERVICES 6.6% 130,443 Accredo Health, Inc.* 4,969,878 15,500 Icon Plc ADR* (Ireland) 547,615 6,400 Inveresk Research Group, Inc.* 181,888 ---------- 5,699,381 ---------- IT CONSULTING AND SERVICE 0.9% 6,525 Infosys Technologies Ltd. (India) 743,286 ---------- MACHINERY -- SPECIALTY 0.2% 10,450 ASML Holding N.V.* (Netherlands) 191,549 ---------- MEDIA 0.6% 408,500 Astro All Asia Networks Plc* (United Kingdom) 531,050 ---------- MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 6.3% 14,900 Biosite, Inc.* 476,353 48,725 Cyberonics, Inc.* 1,167,451 92,425 Enpath Medical, Inc.* 1,293,950 49,600 ICU Medical, Inc.* 1,506,352 17,775 Molecular Devices Corp.* 334,881 12,925 Techne Corp.* 527,469 6,225 Thoratec Corp.* 77,750 ---------- 5,384,206 ---------- MISCELLANEOUS MATERIALS AND COMMODITIES 1.6% 46,550 Symyx Technologies, Inc.* 1,333,192 ---------- MISCELLANEOUS TECHNOLOGY 0.3% 11,025 RADWARE Ltd.* (Israel) 292,824 ---------- PHARMACEUTICALS 1.2% 12,025 Docpharma N.V.* (Belgium) 452,078 8,700 Dr. Reddy's Laboratories Ltd. ADR (India) 208,365 118,497 United Drug Plc (Ireland) 368,930 ---------- 1,029,373 ---------- PRODUCTION TECHNOLOGY EQUIPMENT 6.1% 17,850 August Technology Corp.* 267,750 165,900 Genus, Inc.* 627,102 62,850 InTEST Corp.* 367,672 35,750 Intevac, Inc.* 368,225 275,075 LogicVision, Inc.* 1,152,564 3,150 Nova Measuring Instruments Ltd.* (Israel) 18,837 39,850 Rudolph Technologies, Inc.* 746,391 18,525 SEZ Holding AG* (Switzerland) 649,666 57,500 Tessera Technologies, Inc.* 1,052,250 ---------- 5,250,457 ---------- 28 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - -------------------------------------------------------------------------------- RETAIL 1.1% 43,000 Pason Systems, Inc. (Canada) $ 966,587 ----------- SCIENTIFIC EQUIPMENT AND SUPPLIERS 1.1% 43,200 Biacore International AB ADR* (Sweden) 972,000 ----------- SEMICONDUCTOR EQUIPMENT AND PRODUCTS 2.0% 165,720 Taiwan Semiconductor Manufacturing Co. Ltd. ADR* (Taiwan) 1,730,117 ----------- SERVICES -- COMMERCIAL 8.3% 56,725 CoStar Group, Inc.* 2,092,585 21,300 Kroll, Inc.* 571,905 154,900 Management Network Group, Inc.* 587,071 352,601 Wireless Facilities, Inc.* 3,882,137 ----------- 7,133,698 ----------- TELECOMMUNICATIONS EQUIPMENT 0.2% 1,850 Vimpel-Communications ADR* (Russia) 192,382 ----------- UTILITIES -- TELECOMMUNICATIONS 2.0% 39,900 Nextel Communications, Inc., Class A* 986,727 57,400 Nextel Partners, Inc., Class A* 726,684 ----------- 1,713,411 ----------- TOTAL COMMON AND PREFERRED STOCKS (COST $ 73,023,394) 80,802,640 ----------- LIMITED PARTNERSHIP INTEREST 0.1% OTHER 0.1% Montagu Newhall Global Partners II-B, L.P.* *** + 50,000 ----------- TOTAL LIMITED PARTNERSHIP INTEREST (COST $ 50,000) 50,000 ----------- RIGHTS 0.0% PRODUCTION TECHNOLOGY EQUIPMENT 0.0% 18,525 SEZ Holding AG* *** + (Switzerland) -- ----------- TOTAL RIGHTS (COST $ 0) -- ----------- WARRANTS 0.0% ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.0% 62,175 Vanguard Response Systems, Inc.* *** + (Canada) -- ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 0.0% 4,275 SiRF Technology Holdings, Inc.* *** + -- ----------- TOTAL WARRANTS (COST $0) -- ----------- 29 GLOBAL SCIENCE & TECHNOLOGY FUND -- PORTFOLIO OF INVESTMENTS (CONTINUED) PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS 0.6% $ 503,000 U.S. Treasury Bond, 5.25%, 11/15/28+++ $ 531,058 ------------ TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $ 500,823) 531,058 ------------ SHORT-TERM INVESTMENTS 2.8% REPURCHASE AGREEMENT 2.8% 2,430,000 Repurchase Agreement dated 3/31/04, 0.50% due 4/1/04 with State Street Bank and Trust Co. collateralized by $ 2,315,000 of United States Treasury Bonds 5.25% due 11/15/28; value: $2,480,110; repurchase proceeds: $2,430,034 (cost $ 2,430,000) 2,430,000 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $ 2,430,000) 2,430,000 ------------ TOTAL INVESTMENTS (COST $76,004,217) 97.5% 83,813,698 ------------ OTHER ASSETS LESS LIABILITIES 2.5% 2,148,724 ------------ NET ASSETS 100.0% $ 85,962,422 ============ *Non-income producing. ***Security was fair valued under procedures adopted by the Board of Directors. +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 designated as collateral for open short positions, written options or purchase commitments. ADR American Depositary Receipt. See notes to financial statements. 30 MARCH 31, 2004 (UNAUDITED) At March 31, 2004, Wasatch Global Science & Technology Fund's investments, excluding short-term investments, were in the following countries: COUNTRY % - ------------------------------------------------ Belgium 0.6 Canada 5.1 Cayman Islands 3.0 China 4.0 Germany 0.4 India 1.2 Ireland 1.1 Israel 1.9 Japan 0.5 Korea 0.6 Netherlands 0.7 Philippines 0.1 Russia 0.2 Singapore 3.9 Sweden 1.2 Switzerland 1.9 Taiwan 2.4 United Kingdom 0.7 United States 70.5 ----- TOTAL 100.0% ===== 31 INTERNATIONAL GROWTH FUND -- PORTFOLIO OF INVESTMENTS SHARES VALUE - -------------------------------------------------------------------------- COMMON STOCKS 92.4% AIRLINES 1.7% 125,400 WestJet Airlines Ltd.* (Canada) $ 2,508,287 ----------- BANKS 0.8% 146,100 HDFC Bank Ltd. (India) 1,275,131 ----------- BANKS -- OUTSIDE NEW YORK CITY 1.1% 45,700 Doral Financial Corp. (Puerto Rico) 1,608,640 3,475 Equitable Group, Inc.* (Canada) 61,379 ----------- 1,670,019 ----------- BEVERAGES 0.8% 27,140 Baron de Ley* (Spain) 1,188,986 ----------- BIOTECHNOLOGY 3.2% 16,010 Actelion Ltd.* (Switzerland) 1,732,451 102,400 Angiotech Pharmaceuticals, Inc.* (Canada) 2,496,895 250,000 Ark Therapeutics Group Plc* (United Kingdom) 587,695 ----------- 4,817,041 ----------- BIOTECHNOLOGY RESEARCH AND PRODUCTION 1.4% 28,400 Neurochem, Inc.* (Canada) 607,476 118,425 QIAGEN N.V.* (Netherlands) 1,559,657 ----------- 2,167,133 ----------- COMMERCIAL SERVICES AND SUPPLIES 7.0% 3,070,000 Accord Customer Care Solutions Ltd.* (Singapore) 1,586,160 2,000,000 Asiatravel.com Holdings Ltd. (Singapore) 657,030 475 En-Japan, Inc. (Japan) 1,316,345 6,163,000 Linmark Group Ltd. (Hong Kong) 2,372,559 104,600 Park24 Co. Ltd. (Japan) 3,350,089 64,825 Techem AG* (Germany) 1,380,084 ----------- 10,662,267 ----------- COMMUNICATIONS EQUIPMENT 0.7% 33,675 Funkwerk AG (Germany) 1,081,595 ----------- COMMUNICATIONS TECHNOLOGY 1.3% 67,890 UTStarcom, Inc.* (China) 1,952,516 ----------- COMPUTERS AND PERIPHERALS 1.9% 23,400 Logitech International SA* (Switzerland) 1,061,830 3,022,000 TPV Technology Ltd. (Hong Kong) 1,822,619 ----------- 2,884,449 ----------- DIVERSIFIED FINANCIALS 0.9% 41,000 AWD Holding AG (Germany) 1,345,623 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.0% 124,600 Colt Telecom Group Plc ADR* (United Kingdom) 859,740 295,000 Zyxel Communications Corp. (Taiwan) 626,707 ----------- 1,486,447 ----------- DRUGS AND PHARMACEUTICALS 1.0% 24,825 Taro Pharmaceutical Industries Ltd.* (Israel) 1,439,602 ----------- ELECTRIC UTILITIES 1.1% 100,000 Red Electrica de Espana (Spain) 1,692,074 ----------- 32 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - ------------------------------------------------------------------------------ ELECTRICAL EQUIPMENT 1.0% 3,250 SAIA-Burgess Electronics AG (Switzerland) $ 1,478,615 ----------- ELECTRICAL EQUIPMENT AND COMPONENTS 1.6% 42,500 BW Technologies Ltd.* (Canada) 900,293 1,781,700 Unisteel Technology Ltd. (Singapore) 1,543,104 ----------- 2,443,397 ----------- ELECTRONIC EQUIPMENT AND INSTRUMENTS 2.8% 505,000 Advantech Co. Ltd. (Taiwan) 1,011,533 103,300 Vanguard Response Systems, Inc. PIPE* *** + (Canada) 243,979 257,280 Venture Corp. Ltd. (Singapore) 2,965,897 ----------- 4,221,409 ----------- ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 1.6% 98,400 ASE Test Ltd.* (Taiwan) 1,082,400 74,750 O2Micro International Ltd.* (Cayman Islands) 1,287,942 ----------- 2,370,342 ----------- FINANCIAL -- MISCELLANEOUS 1.9% 150,050 Home Capital Group, Inc., Class B (Canada) 2,858,422 ----------- FOOD AND DRUG RETAILING 3.2% 90,500 Shoppers Drug Mart Corp.* (Canada) 2,157,767 17,300 Sugi Pharmacy Co. Ltd. (Japan) 710,016 17,300 Sugi Pharmacy Co. Ltd. Bonus Shares* (Japan) 698,403 879,000 Wumart Stores, Inc.* (China) 1,319,710 ----------- 4,885,896 ----------- HEALTH CARE EQUIPMENT AND SUPPLIES 4.4% 127,750 Elekta AB, Class B* (Sweden) 2,405,583 19,925 Straumann Holding AG (Switzerland) 3,446,606 211,125 Trinity Biotech Plc ADR* (Ireland) 802,275 ----------- 6,654,464 ----------- HEALTH CARE PROVIDERS AND SERVICES 1.9% 430 EPS Co., Ltd. (Japan) 1,434,914 62,225 MEDIDEP SA* (France) 1,393,648 ----------- 2,828,562 ----------- HEALTH CARE SERVICES 1.1% 47,475 Icon Plc ADR* (Ireland) 1,677,292 ----------- HOTELS, RESTAURANTS AND LEISURE 1.0% 60,675 Fairmont Hotels & Resorts, Inc. (Canada) 1,527,567 ----------- HOUSEHOLD DURABLES 3.6% 52,200 Citizen Electronics Co. Ltd. (Japan) 3,228,556 697,000 TechTronic Industries Co. Ltd. (Hong Kong) 2,249,440 ----------- 5,477,996 ----------- IT CONSULTING AND SERVICE 2.4% 149,415 Indra Sistemas, S.A. (Spain) 1,952,700 310 Works Applications Co. Ltd.* (Japan) 1,679,532 ----------- 3,632,232 ----------- 33 INTERNATIONAL GROWTH FUND -- PORTFOLIO OF INVESTMENTS (CONTINUED) SHARES VALUE - ----------------------------------------------------------------------------------- LEISURE EQUIPMENT AND PRODUCTS 3.5% 327,200 Bloomsbury Publishing Plc (United Kingdom) $ 1,574,547 85,000 Mega Bloks, Inc.* (Canada) 1,292,147 33,055 Rodriguez Group (France) 1,829,266 24,350 Zapf Creation AG (Germany) 590,313 ----------- 5,286,273 ----------- MACHINERY 1.1% 79,650 Singulus Technologies* (Germany) 1,690,798 ----------- MEDIA 3.9% 87,300 Alliance Atlantis Communications, Inc., Class B* (Canada) 1,656,395 281,375 HIT Entertainment Plc (United Kingdom) 1,595,264 61,575 JC Decaux SA* (France) 1,378,332 892 SKY Perfect Communications, Inc.* (Japan) 1,342,897 ----------- 5,972,888 ----------- MULTILINE RETAIL 1.2% 715 Can Do Co. Ltd. (Japan) 1,837,465 ----------- OFFICE ELECTRONICS 2.3% 34,050 Neopost SA (France) 1,836,142 240 TELEWAVE, Inc. (Japan) 1,716,834 ----------- 3,552,976 ----------- OIL AND GAS 3.5% 191,520 Cairn Energy Plc* (United Kingdom) 3,100,349 380,200 Soco International Plc* (United Kingdom) 2,253,694 ----------- 5,354,043 ----------- PERSONAL PRODUCTS 0.9% 52,700 Milbon Co. Ltd. (Japan) 1,377,068 ----------- PHARMACEUTICALS 4.9% 40,550 Dr. Reddy's Laboratories Ltd. ADR (India) 971,172 98,500 Patheon, Inc.* (Canada) 838,378 45,600 Sawai Pharmaceutical Co. Ltd (Japan) 1,635,365 800,000 SkyePharma Plc* (United Kingdom) 866,562 26,675 Stada Arzneimittel AG (Germany) 1,358,022 586,837 United Drug Plc (Ireland) 1,827,068 ----------- 7,496,567 ----------- PRODUCTION TECHNOLOGY EQUIPMENT 0.8% 36,095 SEZ Holding AG* (Switzerland) 1,265,841 ----------- REAL ESTATE 0.9% 12,335 Unibail (Union du Credit-Bail Immobilier) (France) 1,291,012 ----------- RETAIL 1.4% 25,640 Bijou Brigitte AG (Germany) 1,306,277 12,400 GiFi (France) 869,788 ----------- 2,176,065 ----------- SCIENTIFIC EQUIPMENT AND SUPPLIES 0.3% 22,827 Biacore International AB ADR* (Sweden) 513,607 ----------- SEMICONDUCTOR EQUIPMENT AND PRODUCTS 2.5% 54,400 ASM International NV* (Netherlands) 1,202,240 100,000 CSR Plc* (United Kingdom) 436,969 41,600 Disco Corp. (Japan) 2,213,933 ----------- 3,853,142 ----------- 34 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - ------------------------------------------------------------------------- SOFTWARE 1.0% 302,350 Autonomy Corp. Plc* (United Kingdom) $ 1,475,869 ----------- SPECIALTY RETAIL 8.3% 76,600 Carpetright Plc (United Kingdom) 1,419,374 935,315 Carphone Warehouse Group Plc (United Kingdom) 2,543,618 965,025 Convenience Retail Asia Ltd. (Hong Kong) 321,970 625,000 Esprit Holdings Ltd. (Hong Kong) 2,614,576 19,150 Gulliver International Co. Ltd. (Japan) 1,808,769 45,730 USS Co. Ltd. (Japan) 3,797,495 ----------- 12,505,802 ----------- TELECOMMUNICATIONS EQUIPMENT 0.6% 8,900 Vimpel-Communications ADR* (Russia) 925,511 ----------- TEXTILES, APPAREL AND LUXURY GOODS 2.7% 18,450 Puma AG Rudolf Dassler Sport (Germany) 4,070,928 ----------- WATER UTILITIES 1.0% 1,757,750 Hyflux Ltd. (Singapore) 1,585,356 ----------- WIRELESS TELECOMMUNICATION SERVICES 1.2% 28,260 Mobistar SA* (Belgium) 1,857,078 ----------- TOTAL COMMON STOCKS (COST $ 116,315,202) 140,315,653 ----------- RIGHTS 0.0% PRODUCTION TECHNOLOGY EQUIPMENT 0.0% 36,095 SEZ Holding AG* *** + (Switzerland) -- ----------- TOTAL RIGHTS (COST $ 0) -- ----------- WARRANTS 0.0% ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.0% 51,650 Vanguard Response Systems, Inc.* *** + (Canada) -- TOTAL WARRANTS (COST $0) -- ----------- 35 INTERNATIONAL GROWTH FUND -- PORTFOLIO OF MARCH 31, 2004 (UNAUDITED) INVESTMENTS (CONTINUED) PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS 8.1% REPURCHASE AGREEMENT 8.1% $ 12,259,000 Repurchase Agreement dated 3/31/04, 0.50% due 4/1/04 with State Street Bank and Trust Co. collateralized by $ 11,675,000 of United States Treasury Bonds 5.25% due 11/15/28; value: $12,507,684; repurchase proceeds: $12,259,170 (cost $ 12,259,000) $ 12,259,000 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $ 12,259,000) 12,259,000 ------------- TOTAL INVESTMENTS (COST $128,574,202) 100.5% 152,574,653 LIABILITIES LESS OTHER ASSETS (0.5)% (822,594) ------------- NET ASSETS 100.0% $ 151,752,059 ============= *Non-income producing. ***Security was fair valued under procedures adopted by the Board of Directors. +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. At March 31, 2004, Wasatch International Growth Fund's investments, excluding short-term investments, were in the following countries: COUNTRY % - ------------------------------------------------- Belgium 1.3 Canada 12.2 Cayman Islands 0.9 China 2.3 France 6.1 Germany 9.1 Hong Kong 6.7 India 1.6 Ireland 3.1 Israel 1.0 Japan 20.1 Netherlands 2.0 Puerto Rico 1.1 Russia 0.7 Singapore 6.0 Spain 3.5 Sweden 2.1 Switzerland 6.4 Taiwan 1.9 United Kingdom 11.9 ----- TOTAL 100.0% ===== 36 MICRO CAP FUND -- PORTFOLIO OF INVESTMENTS MARCH 31, 2004 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------- COMMON STOCKS 99.5% AEROSPACE 0.3% 59,125 MTC Technologies, Inc.* $ 1,484,629 ----------- AUTO PARTS -- AFTER MARKET 1.2% 196,575 Aftermarket Technology Corp.* 2,887,687 215,000 IMPCO Technologies, Inc. PIPE* *** + 1,141,392 111,200 IMPCO Technologies, Inc.* 590,338 94,000 Keystone Automotive Industries, Inc.* 2,571,840 ----------- 7,191,257 ----------- BANKS -- NEW YORK CITY 0.3% 69,475 Signature Bank* 1,452,028 ----------- BANKS -- OUTSIDE NEW YORK CITY 1.6% 56,900 Bancorp Bank (The)* 1,024,200 92,000 Canadian Western Bank 2,982,893 13,875 Equitable Group, Inc.* 245,074 79,000 First State Bancorporation 2,437,940 150,900 Franklin Bank Corp.* 2,805,231 ----------- 9,495,338 ----------- BIOTECHNOLOGY RESEARCH AND PRODUCTION 0.8% 281,800 ISTA Pharmaceuticals, Inc.* 3,626,766 94,400 United-Guardian, Inc. 722,160 ----------- 4,348,926 ----------- CHEMICALS 2.4% 334,675 Cabot Microelectronics Corp.* 14,136,672 ----------- COMPUTER SERVICES SOFTWARE AND SYSTEMS 3.3% 49,600 EPIQ Systems, Inc.* 812,448 424,650 iPass, Inc.* 4,641,424 242,925 Kintera, Inc.* 4,049,560 755,744 Nassda Corp.* 5,244,863 440,825 Verisity Ltd.* 4,082,040 ----------- 18,830,335 ----------- COMPUTER TECHNOLOGY 1.3% 543,425 FARGO Electronics, Inc.* 6,140,702 294,950 Qualstar Corp.* 1,722,508 ----------- 7,863,210 ----------- CONSUMER PRODUCTS 1.0% 128,975 CoolBrands International, Inc.* 2,246,633 119,550 Yankee Candle Co., Inc.* 3,297,189 ----------- 5,543,822 ----------- COSMETICS 0.1% 102,125 CCA Industries, Inc. 822,106 ----------- DIVERSIFIED FINANCIAL SERVICES 1.1% 318,225 Rewards Network, Inc.* 3,182,250 202,000 U.S.I. Holdings Corp.* 2,987,580 ----------- 6,169,830 ----------- EDUCATION SERVICES 0.2% 43,725 Concorde Career College, Inc.* 1,049,400 ----------- 37 MICRO CAP FUND -- PORTFOLIO OF INVESTMENTS (CONTINUED) SHARES VALUE - ---------------------------------------------------------------------------- ELECTRICAL EQUIPMENT AND COMPONENTS 1.6% 298,175 BW Technologies Ltd.* $ 6,316,352 34,225 Cohu, Inc. 638,296 2,462,000 Unisteel Technology Ltd. 2,132,302 ----------- 9,086,950 ----------- ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.9% 4,297,750 MFS Technology Ltd. 3,054,786 829,050 Vanguard Response Systems, Inc. PIPE* *** + 1,958,091 ----------- 5,012,877 ----------- ELECTRONICS 1.3% 353,550 NU Horizons Electronics Corp.* 3,719,346 219,200 Supertex, Inc.* 3,656,256 ----------- 7,375,602 ----------- ELECTRONICS -- INSTRUMENTS, GAUGES AND METERS 1.1% 1,335,620 Computer Access Technology Corp.* 6,477,757 ----------- ELECTRONICS -- MEDICAL SYSTEMS 3.3% 182,300 CTI Molecular Imaging, Inc.* 2,659,757 451,291 Endocardial Solutions, Inc.* 3,917,206 90,300 EPIX Medical, Inc.* 1,873,725 649,025 IRIDEX Corp.* 5,185,710 198,717 Possis Medical, Inc.* 5,589,909 ----------- 19,226,307 ----------- ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 10.0% 583,550 Advanced Power Technology, Inc.*++ 5,345,318 411,025 Excel Technology, Inc.* 12,926,736 283,975 Micrel, Inc.* 3,791,066 1,072,450 O2Micro International Ltd.* 18,478,314 1,147,400 PLX Technology, Inc.* 12,357,498 1,001,445 PSi Technologies Holdings, Inc. ADR* 4,917,095 ----------- 57,816,027 ----------- ELECTRONICS -- TECHNOLOGY 0.6% 782,275 EFJ, Inc.* 3,637,579 ----------- FINANCE COMPANIES 1.9% 131,200 Saxon Capital, Inc.* 3,727,392 204,775 United PanAm Financial Corp.* 3,274,352 219,450 World Acceptance Corp.* 4,281,470 ----------- 11,283,214 ----------- FINANCIAL -- MISCELLANEOUS 3.8% 95,475 Asset Acceptance Capital Corp.* 1,775,835 283,500 Encore Capital Group, Inc.* 4,708,935 33,900 First Cash Financial Services, Inc.* 1,140,057 566,000 Home Capital Group Inc., Class B 10,782,185 123,050 Portfolio Recovery Associates, Inc.* 3,314,967 ----------- 21,721,979 ----------- HEALTH CARE FACILITIES 1.6% 252,750 American Healthways, Inc.* 6,172,155 469,125 Capital Senior Living Corp.* 2,903,884 ----------- 9,076,039 ----------- 38 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------- HEALTH CARE MANAGEMENT SERVICES 9.2% 81,300 America Service Group, Inc.* $ 2,788,590 81,825 AMERIGROUP Corp.* 3,739,403 835,725 AmSurg Corp.* 18,979,315 114,575 Centene Corp.* 3,504,849 165,000 Computer Programs & Systems, Inc. 3,135,000 303,106 CorVel Corp.* 10,972,437 126,150 IMPAC Medical Systems, Inc.* 2,838,375 176,300 Molina Healthcare, Inc.* 5,169,116 494,239 VitalWorks, Inc.* 1,853,396 ----------- 52,980,481 ----------- HEALTH CARE SERVICES 6.5% 185,850 Accredo Health, Inc.* 7,080,885 948,500 Covalent Group, Inc.*++ 3,234,385 258,225 Icon Plc ADR* 9,123,089 209,150 Inveresk Research Group, Inc.* 5,944,043 644,725 Odyssey HealthCare, Inc.* 12,153,066 ----------- 37,535,468 ----------- HOME BUILDING 0.7% 58,300 Meritage Corp.* 4,328,775 ----------- HOUSEHOLD FURNISHINGS 0.5% 132,900 Hooker Furniture Corp. 3,088,596 ----------- LEISURE TIME 1.5% 205,300 Action Performance Companies, Inc. 3,134,931 147,350 SCP Pool Corp.* 5,490,261 ----------- 8,625,192 ----------- MACHINERY -- OIL WELL EQUIPMENT AND SERVICES 0.6% 180,800 Gulf Island Fabrication, Inc. 3,677,472 ----------- MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 8.4% 129,300 American Medical Systems Holdings, Inc.* 3,426,450 129,350 Biosite, Inc.* 4,135,319 234,150 Cyberonics, Inc.* 5,610,234 407,075 Encision, Inc.*++ 1,624,229 97,950 Enpath Medical, Inc.* 1,371,300 62,750 Exactech, Inc.* 1,154,600 619,165 ICU Medical, Inc.* 18,804,041 399,925 Molecular Devices Corp.* 7,534,587 135,550 Young Innovations, Inc. 4,756,450 ----------- 48,417,210 ----------- MEDICAL SERVICES 0.7% 302,312 U.S. Physical Therapy, Inc.* 4,171,905 ----------- METALS FABRICATING 0.3% 61,175 Intermagnetics General Corp.* 1,621,138 ----------- MISCELLANEOUS MATERIALS AND COMMODITIES 1.0% 194,025 Symyx Technologies, Inc.* 5,556,876 ----------- PHARMACEUTICALS 0.5% 80,925 Docpharma N.V.* 3,042,361 ----------- 39 MICRO CAP FUND -- PORTFOLIO OF INVESTMENTS (CONTINUED) SHARES VALUE - ----------------------------------------------------------------------- PRODUCTION TECHNOLOGY EQUIPMENT 3.9% 140,775 August Technology Corp.* $ 2,111,625 627,200 Genus, Inc.* 2,370,816 489,575 inTEST Corp.*++ 2,864,014 782,400 LogicVision, Inc.* 3,278,256 199,750 Nanometrics, Inc.* 3,058,172 105,425 Nova Measuring Instruments Ltd.* 630,441 239,100 Rudolph Technologies, Inc.* 4,478,343 42,853 SEZ Holding AG* 1,502,842 123,475 Tessera Technologies, Inc.* 2,259,593 ----------- 22,554,102 ----------- REAL ESTATE INVESTMENT TRUSTS (REIT) 0.6% 174,075 Fieldstone Investment Corp.* *** + 3,350,944 ----------- RECREATIONAL VEHICLES AND BOATS 0.2% 88,725 National R.V. Holdings, Inc.* 1,401,855 ----------- RENTAL AND LEASING SERVICES -- CONSUMER 0.4% 11,725 Easyhome Ltd.* 109,446 147,150 Rainbow Rentals, Inc.* 2,324,970 ----------- 2,434,416 ----------- RETAIL 13.2% 99,125 AC Moore Arts & Crafts, Inc.* 2,676,375 936,725 Big 5 Sporting Goods Corp.* 23,652,306 106,975 Bijou Brigitte AG 5,450,036 105,475 Cato Corp. (The), Class A 2,117,938 45,600 GiFi 3,198,574 141,650 Global Imaging Systems, Inc.* 4,705,613 233,525 Guitar Center, Inc.* 8,673,119 166,162 Hibbett Sporting Goods, Inc.* 6,337,419 122,125 Lithia Motors, Inc., Class A 3,376,756 73,675 MarineMax, Inc.* 1,957,545 271,525 O'Reilly Automotive, Inc.* 10,871,861 96,950 School Specialty, Inc.* 3,448,512 ----------- 76,466,054 ----------- SAVINGS AND LOANS 0.6% 131,182 Commercial Capital Bancorp, Inc.* 3,006,691 18,200 Harbor Florida Bancshares, Inc. 526,708 ----------- 3,533,399 ----------- SCIENTIFIC EQUIPMENT AND SUPPLIERS 0.9% 241,073 Biacore International AB ADR* 5,424,143 ----------- SERVICES -- COMMERCIAL 8.3% 640,985 AMN Healthcare Services, Inc.* 11,762,075 315,000 Charles River Associates, Inc.* 10,327,590 163,575 Management Network Group, Inc.* 619,949 122,700 Providence Service Corp.* 2,186,514 321,100 Resources Connection, Inc.* 14,166,611 818,725 SM&A* 9,014,162 ----------- 48,076,901 ----------- SPECIALTY RETAIL 0.2% 3,591,175 Convenience Retail Asia Ltd. 1,198,157 ----------- 40 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - ------------------------------------------------------------------- TRUCKERS 1.5% 134,200 Knight Transportation, Inc.* $ 3,218,116 75,675 PAM Transportation Services* 1,309,177 426,600 USA Truck, Inc.* 4,120,956 ------------ 8,648,249 ------------ UTILITIES -- CABLE TV AND RADIO 0.1% 116,950 Knology, Inc.* 805,785 ------------ TOTAL COMMON STOCKS (COST $ 391,517,281) 576,041,363 ------------ RIGHTS 0.0% PRODUCTION TECHNOLOGY EQUIPMENT 0.0% 42,853 SEZ Holding AG* *** + -- ------------ TOTAL RIGHTS (COST $ 0) -- ------------ WARRANTS 0.0% ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.0% 414,525 Vanguard Response Systems, Inc.* *** + -- ------------ TOTAL WARRANTS (COST $ 0) -- ------------ PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS 0.5% REPURCHASE AGREEMENT 0.5% $ 2,697,000 Repurchase Agreement dated 3/31/04, 0.50% due 4/1/04 with State Street Bank and Trust Co. collateralized by $ 2,570,000 of United States Treasury Bonds 5.25% due 11/15/28; value: $2,753,298; repurchase proceeds: $2,697,037 (cost $ 2,697,000) $ 2,697,000 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $ 2,697,000) 2,697,000 ------------- TOTAL INVESTMENTS (COST $394,214,281) 100.0% 578,738,363 OTHER ASSETS LESS LIABILITIES 0% 72,311 ------------- NET ASSETS 100.0% $ 578,810,674 ============= *Non-income producing. ***Security was fair valued under procedures adopted by the Board of Directors. + 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. 41 MICRO CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS SHARES VALUE - ------------------------------------------------------------------- COMMON STOCKS 89.4% AEROSPACE AND DEFENSE 0.8% 300,000 Magellan Aerospace Corp.* (Canada) $ 761,230 --------- AIRLINES 1.1% 80,000 Transat A.T., Inc.* (Canada) 960,110 --------- AUTO PARTS -- AFTER MARKET 0.8% 132,775 IMPCO Technologies, Inc.* 704,876 --------- BANKS -- OUTSIDE NEW YORK CITY 5.9% 25,000 CoBiz, Inc. 510,750 40,000 CommerceWest Bank* 760,000 2,200 Equitable Group, Inc.* (Canada) 38,858 39,500 Franklin Bank Corp.* 734,305 60,500 Franklin Bank Corp.* *** + 1,102,201 92,250 Wilshire State Bank* 2,210,292 --------- 5,356,406 --------- BIOTECHNOLOGY RESEARCH AND PRODUCTION 2.1% 107,700 ISTA Pharmaceuticals, Inc.* 1,386,099 74,100 United-Guardian, Inc. 566,865 --------- 1,952,964 --------- COMMERCIAL SERVICES AND SUPPLIES 0.6% 12,000 Acadomia Group* (France) 543,433 --------- COMPUTER SERVICES SOFTWARE AND SYSTEMS 4.4% 100,000 BakBone Software* (Canada) 270,000 30,000 Concord Communications, Inc.* 432,300 666,667 CorVu Corp. PIPE* *** + 619,400 96,825 iPass, Inc.* 1,058,297 80,000 Komplett ASA (Norway) 869,045 113,142 Nassda Corp.* 785,205 --------- 4,034,247 --------- COMPUTER TECHNOLOGY 1.0% 50,000 FARGO Electronics, Inc.* 565,000 60,000 Qualstar Corp.* 350,400 --------- 915,400 --------- CONSUMER PRODUCTS 0.6% 30,000 CoolBrands International, Inc.* (Canada) 522,574 --------- COSMETICS 0.7% 84,000 CCA Industries, Inc. 676,200 --------- DIVERSIFIED FINANCIAL SERVICES 0.7% 60,000 Rewards Network, Inc.* 600,000 --------- EDUCATION SERVICES 1.5% 25,000 Concorde Career College, Inc.* 600,000 93,025 Princeton Review, Inc. (The)* 803,736 --------- 1,403,736 --------- ELECTRICAL EQUIPMENT AND COMPONENTS 4.5% 145,000 BW Technologies Ltd.* (Canada) 3,071,589 1,200,000 Unisteel Technology Ltd. (Singapore) 1,039,302 --------- 4,110,891 --------- 42 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - -------------------------------------------------------------------------- ELECTRONIC EQUIPMENT AND INSTRUMENTS 1.0% 350,000 Vanguard Response Systems, Inc.* (Canada) $ 949,442 --------- ELECTRONICS 0.7% 60,000 Nu Horizons Electronics Corp.* 631,200 --------- ELECTRONICS -- INSTRUMENTS, GAUGES AND METERS 1.3% 257,000 Computer Access Technology Corp.* 1,246,450 --------- ELECTRONICS -- MEDICAL SYSTEMS 3.0% 150,000 Endocardial Solutions, Inc.* 1,302,000 180,600 IRIDEX Corp.* 1,442,994 --------- 2,744,994 --------- ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 5.9% 158,850 Advanced Power Technology, Inc.* 1,455,066 15,000 Excel Technology, Inc.* 471,750 106,700 Peak International Ltd.* (Bermuda) 746,900 40,000 Pericom Semiconductor Corp.* 459,200 170,950 PLX Technology, Inc.* 1,841,132 50,000 White Electronic Designs Corp.* 382,500 --------- 5,356,548 --------- ELECTRONICS -- TECHNOLOGY 1.1% 94,750 EFJ, Inc.* 440,588 130,000 Iteris Holdings, Inc.* 520,000 --------- 960,588 --------- FINANCE COMPANIES 2.5% 60,000 Saxon Capital, Inc.* 1,704,600 34,675 United PanAm Financial Corp.* 554,453 --------- 2,259,053 --------- FINANCIAL -- MISCELLANEOUS 3.9% 50,000 Encore Capital Group, Inc.* 830,500 30,000 First Cash Financial Services, Inc.* 1,008,900 90,000 Home Capital Group Inc., Class B (Canada) 1,714,482 --------- 3,553,882 --------- HEALTH CARE FACILITIES 0.5% 70,150 Capital Senior Living Corp.* 434,229 --------- HEALTH CARE MANAGEMENT SERVICES 1.8% 20,000 America Service Group, Inc.* 686,000 50,000 Computer Programs & Systems, Inc. 950,000 --------- 1,636,000 --------- HEALTH CARE SERVICES 2.5% 350,000 Covalent Group, Inc.* 1,193,500 67,500 Healthcare Services Group 1,110,375 --------- 2,303,875 --------- HOUSEHOLD FURNISHINGS 0.7% 40,000 Chromcraft Revington, Inc.* 596,000 --------- HOUSEHOLD PRODUCTS 0.7% 900,000 HTL International Holdings Ltd. (Singapore) 639,709 --------- INSURANCE -- PROPERTY AND CASUALTY 0.8% 50,000 American Safety Insurance Holdings Ltd.* (Bermuda) 728,000 --------- 43 MICRO CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS (CONTINUED) SHARES VALUE - --------- ---------- INVESTMENT MANAGEMENT COMPANIES 0.8% 50,000 Technology Investment Capital Corp. $ 729,500 ----------- MACHINERY -- OIL WELL EQUIPMENT AND SERVICES 0.9% 40,000 Gulf Island Fabrication, Inc. 813,600 ----------- MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 12.7% 20,000 Biosite, Inc.* 639,400 30,000 Bovie Medical Corp.* 87,000 55,200 Cyberonics, Inc.* 1,322,592 149,734 Encision, Inc.* 597,439 206,600 Enpath Medical, Inc.* 2,892,400 52,175 ICU Medical, Inc.* 1,584,554 404,690 MacroPore Biosurgery, Inc.* 1,618,537 154,300 Medical Technology Systems, Inc.* 1,921,035 250,000 Patient Infosystems, Inc. PIPE* *** + 482,775 178,200 Pro-Dex, Inc.* 479,358 ----------- 11,625,090 ----------- METAL MINING 0.9% 2,000,000 EuroZinc Mining Corp. PIPE* *** + (Canada) 858,481 ----------- MISCELLANEOUS MATERIALS AND COMMODITIES 0.5% 100,000 Sterling Construction Company, Inc.* 463,000 ----------- PRODUCTION TECHNOLOGY EQUIPMENT 6.5% 297,300 Genus, Inc.* 1,123,794 186,925 inTEST Corp.* 1,093,511 575,000 LogicVision, Inc.* 2,409,250 27,000 Nanometrics, Inc.* 413,370 7,300 Nova Measuring Instruments Ltd.* (Israel) 43,654 47,225 Rudolph Technologies, Inc.* 884,524 ----------- 5,968,103 ----------- REAL ESTATE INVESTMENT TRUSTS (REIT) 2.9% 71,600 Bimini Mortgage Management, Inc.*** + 1,074,000 20,375 Capital Lease Funding, Inc.* 261,208 48,425 Fieldstone Investment Corp.* *** + 932,181 36,250 Medical Properties Trust, Inc.* *** + 362,500 ----------- 2,629,889 ----------- RECREATIONAL VEHICLES AND BOATS 0.5% 29,650 National R.V. Holdings, Inc.* 468,470 ----------- RENTAL AND LEASING SERVICES -- CONSUMER 0.6% 17,325 Easyhome Ltd.* (Canada) 161,718 24,875 Rainbow Rentals, Inc.* 393,025 ----------- 554,743 ----------- RETAIL 5.1% 50,000 Big 5 Sporting Goods Corp.* 1,262,500 25,000 Bijou Brigitte AG (Germany) 1,273,671 50,000 Casual Male Retail Group, Inc.* 517,000 14,000 GiFi (France) 982,018 5,500 Pason Systems, Inc. (Canada) 123,633 50,000 Whitehall Jewellers, Inc.* 457,000 ----------- 4,615,822 ----------- SAVINGS AND LOANS 0.9% 60,000 Pacific Premier Bancorp, Inc.* 803,940 ----------- 44 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - --------- ---------- SERVICES -- COMMERCIAL 4.6% 25,000 4Kids Entertainment, Inc.* $ 559,250 30,000 AMN Healthcare Services, Inc.* 550,500 15,000 Charles River Associates, Inc.* 491,790 155,000 Management Network Group, Inc.* 587,450 35,000 Monro Muffler, Inc.* 874,650 100,000 SM&A* 1,101,000 ----------- 4,164,640 ----------- SOFTWARE 0.1% 85,000 ACD Systems International, Inc.* (Canada) 110,756 ----------- TELECOMMUNICATIONS EQUIPMENT 0.4% 70,000 Airspan Networks, Inc.* 408,800 ----------- TRUCKERS 0.5% 50,000 USA Truck, Inc.* 483,000 ----------- UTILITIES -- TELECOMMUNICATIONS 0.4% 35,000 Yak Communications USA, Inc.* 374,850 ----------- TOTAL COMMON STOCKS (COST $ 65,027,462) 81,654,721 ----------- CONTRACTS VALUE - --------- ----------- PUT OPTIONS PURCHASED 0.0% 10,000 iShares Russell 2000 Growth Index Fund expiring 4/17/04, exercise price $ 60.00 $ 5,500 ----------- TOTAL PUT OPTIONS PURCHASED (PREMIUM $24,750) 5,500 ----------- SHARES VALUE - --------- ----------- WARRANTS 0.1% COMPUTER SERVICES SOFTWARE AND SYSTEMS 0.0% 200,000 CorVu Corp.* *** + $ -- ----------- METAL MINING 0.1% 1,000,000 EuroZinc Mining Corp.* *** + (Canada) 83,079 ----------- TOTAL WARRANTS (COST $0) 83,079 ----------- 45 MICRO CAP VALUE FUND -- PORTFOLIO OF MARCH 31, 2004 (UNAUDITED) INVESTMENTS (CONTINUED) PRINCIPAL AMOUNT VALUE - ---------------- ------------- SHORT-TERM INVESTMENTS 11.7% REPURCHASE AGREEMENT 11.7% $10,660,000 Repurchase Agreement dated 3/31/04, 0.50% due 4/1/04 with State Street Bank and Trust Co. collateralized by $10,150,000 of United States Treasury Bonds 5.25% due 11/15/28; value: $10,873,918; repurchase proceeds: $10,660,148+++ (cost $10,660,000) $ 10,660,000 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $10,660,000) 10,660,000 ------------- TOTAL INVESTMENTS (COST $75,712,212) 101.2% 92,403,300 LIABILITIES LESS OTHER ASSETS (1.2)% (1,109,899) ------------- NET ASSETS 100.0% $ 91,293,401 ============= Share Value ----- ------------- SECURITIES SOLD SHORT 30,000 iShares Russell 2000 Growth Index Fund (proceeds $1,853,779) $ 1,875,000 ============= *Non-income producing. ***Security was fair valued under procedures adopted by the Board of Directors. +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. See notes to financial statements. At March 31, 2004, Wasatch Micro Cap Value Fund's investments, excluding securities sold short and short-term investments, were in the following countries: COUNTRY % - ------- ----- Bermuda 1.8 Canada 11.8 France 1.9 Germany 1.5 Israel 0.1 Norway 1.1 Singapore 2.0 United States 79.8 ----- TOTAL 100.0% ===== 46 SMALL CAP GROWTH FUND -- PORTFOLIO OF INVESTMENTS MARCH 31, 2004 (UNAUDITED) SHARES VALUE - ------- ----------- COMMON AND PREFERRED STOCKS 96.0% AIR TRANSPORT 0.7% 219,655 Expeditors International of Washington, Inc. $ 8,674,176 ----------- AIRLINES 0.9% 593,100 WestJet Airlines Ltd.* 11,863,356 ----------- BANKS -- OUTSIDE NEW YORK CITY 2.1% 269,400 Doral Financial Corp. 9,482,880 288,600 Prosperity Bancshares, Inc. 6,799,416 195,975 TCF Financial Corp. 10,008,443 ----------- 26,290,739 ----------- BEVERAGE -- SOFT DRINKS 0.2% 122,950 Peet's Coffee & Tea, Inc.* 2,618,835 ----------- BIOTECHNOLOGY RESEARCH AND PRODUCTION 3.1% 330,125 Charles River Laboratories International, Inc.* 14,145,856 56,900 Corgentech, Inc.* 1,069,720 884,375 Myriad Genetics, Inc.* 14,344,562 8,500 Neurochem, Inc.* 181,815 753,400 QIAGEN N.V.* 9,922,278 ----------- 39,664,231 ----------- CHEMICALS 2.6% 783,075 Cabot Microelectronics Corp.* 33,077,088 ----------- COMMUNICATIONS TECHNOLOGY 0.8% 367,800 UTStarcom, Inc.* 10,577,928 ----------- COMPUTER SERVICES SOFTWARE AND SYSTEMS 6.9% 189,650 CACI International, Inc., Class A* 8,154,950 263,373 Cognizant Technology Solutions Corp.* 11,917,628 876,000 iPass, Inc.* 9,574,680 315,675 Macrovision Corp.* 5,896,809 395,125 Manhattan Associates, Inc.* 10,984,475 889,350 Nassda Corp.* 6,172,089 365,773 PEC Solutions, Inc.* 4,835,519 327,375 SRA International, Inc., Class A* 12,093,233 272,900 Verint Systems, Inc.* 8,432,610 967,600 Verisity Ltd.* 8,959,976 ----------- 87,021,969 ----------- CONSUMER PRODUCTS 2.1% 984,875 Yankee Candle Co., Inc.* 27,162,852 ----------- DRUGS AND PHARMACEUTICALS 5.5% 719,598 ILEX Oncology, Inc.* 17,212,784 350,675 Medicis Pharmaceutical Corp., Class A 14,027,000 102,525 NeoPharm, Inc.* 1,923,369 287,355 Priority Healthcare Corp.* 6,117,788 106,600 Medicines Company (The)* 3,433,586 461,925 Taro Pharmaceutical Industries Ltd.* 26,787,031 ----------- 69,501,558 ----------- EDUCATION SERVICES 0.3% 142,150 Renaissance Learning, Inc. 3,745,653 ----------- 47 SMALL CAP GROWTH FUND -- PORTFOLIO OF INVESTMENTS (CONTINUED) SHARES VALUE - --------- ----------- ELECTRONICS 1.4% 292,233 Flir Systems, Inc.* $11,139,922 293,575 Semtech Corp.* 6,702,317 ----------- 17,842,239 ----------- ELECTRONICS -- MEDICAL SYSTEMS 0.9% 781,275 CTI Molecular Imaging, Inc.* 11,398,802 ----------- ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 5.7% 273,850 Cree, Inc.* 6,106,855 855,830 Integrated Circuit Systems, Inc.* 21,421,425 1,446,300 Micrel, Inc.* 19,308,105 1,315,525 O2Micro International Ltd.* 22,666,496 402,480 SiRF Technology Holdings, Inc., Series H* *** + 2,616,120 ----------- 72,119,001 ----------- ELECTRONICS -- TECHNOLOGY 0.5% 260,200 Digital Theater Systems, Inc.* 6,668,926 ----------- ENTERTAINMENT 0.9% 574,775 Movie Gallery, Inc. 11,259,842 ----------- FINANCIAL INFORMATION SERVICES 1.1% 337,900 Factset Research Systems, Inc. 14,381,024 ----------- FINANCIAL -- MISCELLANEOUS 1.4% 455,350 Brown & Brown, Inc. 17,649,366 ----------- HEALTH CARE FACILITIES 3.3% 794,575 American Healthways, Inc.* 19,403,521 425,400 Pharmaceutical Product Development, Inc.* 12,672,666 288,725 United Surgical Partners International, Inc.* 9,799,327 ----------- 41,875,514 ----------- HEALTH CARE MANAGEMENT SERVICES 5.7% 534,400 AMERIGROUP Corp.* 24,422,080 1,517,488 AmSurg Corp.* ++ 34,462,164 207,875 Pediatrix Medical Group, Inc.* 13,096,125 ----------- 71,980,369 ----------- HEALTH CARE SERVICES 7.1% 728,050 Accredo Health, Inc.* 27,738,705 476,050 Icon Plc ADR* 16,818,847 891,017 Inveresk Research Group, Inc.* 25,322,703 1,096,518 Odyssey HealthCare, Inc.* 20,669,364 ----------- 90,549,619 ----------- HOME BUILDING 3.5% 218,600 Meritage Corp.* 16,231,050 39,635 NVR, Inc.* 18,232,100 217,400 Toll Brothers, Inc.* 9,876,482 ----------- 44,339,632 ----------- INSURANCE -- MULTI-LINE 0.5% 165,875 Hilb Rogal & Hamilton Co. 6,319,838 ----------- 48 MARCH 31, 2004 (UNAUDITED) SHARES VALUE --------- ------------ MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 5.2% 220,551 American Medical Systems Holdings, Inc.* $ 5,844,601 191,250 Cyberonics, Inc.* 4,582,350 557,265 ICU Medical, Inc.* 16,924,138 81,725 Kinetic Concepts, Inc.* 3,665,366 857,113 Techne Corp.* 34,978,782 ------------ 65,995,237 ------------ MISCELLANEOUS MATERIALS AND COMMODITIES 1.0% 421,939 Symyx Technologies, Inc.* 12,084,333 ------------ PRODUCTION TECHNOLOGY EQUIPMENT 0.7% 507,725 Tessera Technologies, Inc.* 9,291,367 ------------ REAL ESTATE INVESTMENT TRUSTS (REIT) 2.3% 348,650 American Financial Realty Trust 5,909,617 649,425 Capital Automotive 22,931,197 ------------ 28,840,814 ------------ RENTAL AND LEASING SERVICES -- CONSUMER 0.7% 268,812 Rent-A-Center, Inc.* 8,868,108 ------------ RETAIL 13.5% 278,914 99 Cents Only Stores* 6,811,080 605,425 Big 5 Sporting Goods Corp.* 15,286,982 450,598 Chico's FAS, Inc.* 20,907,747 848,644 Dollar Tree Stores, Inc.* 26,214,613 377,800 Fred's, Inc. 9,169,206 388,116 Hibbett Sporting Goods, Inc.* 14,802,744 91,325 Jos. A. Bank Clothiers, Inc.* 3,287,700 1,582,372 O'Reilly Automotive, Inc.* 63,358,175 318,300 Tuesday Morning Corp.* 10,968,618 ------------ 170,806,865 ------------ SAVINGS AND LOANS 0.6% 242,968 Harbor Florida Bancshares, Inc. 7,031,494 ------------ SERVICES -- COMMERCIAL 8.6% 285,275 AMN Healthcare Services, Inc.* 5,234,796 409,369 Charles River Associates, Inc.* 13,421,572 951,550 Copart, Inc.* 20,677,181 234,200 CoStar Group, Inc.* 8,639,638 362,800 Kroll, Inc.* 9,741,180 273,050 LECG Corp.* 5,310,823 558,705 Resources Connection, Inc.* 24,649,506 869,100 West Corp.* 21,640,590 ------------ 109,315,286 ------------ TEXTILES -- APPAREL MANUFACTURERS 0.4% 156,125 Carter's, Inc.* 4,463,614 ------------ TRANSPORTATION -- MISCELLANEOUS 0.6% 190,725 C.H. Robinson Worldwide, Inc. 7,915,088 ------------ TRUCKERS 3.0% 1,236,962 Knight Transportation, Inc.* 29,662,349 464,500 Swift Transportation Co., Inc.* 7,975,465 ------------ 37,637,814 ------------ 49 SMALL CAP GROWTH FUND -- PORTFOLIO OF INVESTMENTS (CONTINUED) SHARES VALUE - --------- --------------- UTILITIES -- CABLE TV AND RADIO 0.7% 263,675 Knology, Inc.* $ 1,816,721 833,818 Mediacom Communications Corp.* 6,687,220 --------------- 8,503,941 --------------- UTILITIES -- TELECOMMUNICATIONS 1.5% 1,524,375 Nextel Partners, Inc., Class A* 19,298,587 --------------- TOTAL COMMON AND PREFERRED STOCKS (COST $922,760,889) 1,216,635,105 --------------- LIMITED PARTNERSHIP INTEREST 0.0% OTHER 0.0% Montagu Newhall Global Partners II-B, L.P.* *** + 500,000 --------------- TOTAL LIMITED PARTNERSHIP INTEREST (COST $500,000) 500,000 --------------- WARRANTS 0.0% ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 0.0% 40,248 SiRF Technology Holdings, Inc.* *** + -- TOTAL WARRANTS (COST $0) -- --------------- 50 MARCH 31, 2004 (UNAUDITED) PRINCIPAL AMOUNT VALUE - ---------------- --------------- U.S. GOVERNMENT OBLIGATIONS 0.4% $ 5,027,000 U.S. Treasury Bond, 5.25%, 11/15/28+++ $ 5,307,411 --------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $5,005,240) 5,307,411 --------------- SHORT-TERM INVESTMENTS 3.9% REPURCHASE AGREEMENT 3.9% 49,108,000 Repurchase Agreement dated 3/31/04, 0.50% due 4/1/04 with State Street Bank and Trust Co. collateralized by $46,760,000 of United States Treasury Bonds 5.25% due 11/15/28; value: $50,095,017; repurchase proceeds: $49,108,682 (cost $49,108,000) 49,108,000 --------------- TOTAL SHORT-TERM INVESTMENTS (COST $49,108,000) 49,108,000 --------------- TOTAL INVESTMENTS (COST $977,374,129) 100.3% 1,271,550,516 LIABILITIES LESS OTHER ASSETS (0.3)% (4,292,150) --------------- NET ASSETS 100.0% $ 1,267,258,366 =============== *Non-income producing. ***Security was fair valued under procedures adopted by the Board of Directors. +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 designated as collateral for open short positions, written options or purchase commitments. ADR American Depositary Receipt. See notes to financial statements. 51 SMALL CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS SHARES VALUE - --------- ----------- COMMON STOCKS 96.0% AEROSPACE 1.0% 684,918 HEICO Corp., Class A+++ $ 8,431,341 ----------- AUTO AND TRUCK PARTS 0.1% 76,250 Supreme Industries, Inc., Class A 527,650 ----------- AUTO PARTS -- AFTER MARKET 3.3% 848,139 Aftermarket Technology Corp.* 12,459,162 534,709 Keystone Automotive Industries, Inc.* 14,629,638 ----------- 27,088,800 ----------- BANKS 0.5% 1,238,722 UTI Bank Limited 4,193,367 ----------- BANKS -- OUTSIDE NEW YORK CITY 3.8% 242,425 Doral Financial Corp. 8,533,360 50,005 First State Bancorporation 1,543,154 429,650 Franklin Bank Corp.* 7,987,194 193,350 Nara Bancorp, Inc. 5,727,027 132,675 TCF Financial Corp. 6,775,712 ----------- 30,566,447 ----------- COMMERCIAL INFORMATION SERVICES 0.3% 223,975 Integrated Alarm Services Group, Inc.* 2,130,002 ----------- COMPUTER SERVICES SOFTWARE AND SYSTEMS 0.3% 150,775 SPSS, Inc.* 2,759,183 ----------- CONSUMER PRODUCTS 1.7% 227,800 CoolBrands International, Inc.* 3,968,079 167,775 Jarden Corp.* 5,957,690 145,175 RC2 Corp.* 3,992,312 ----------- 13,918,081 ----------- CONTAINERS AND PACKAGING -- METAL AND GLASS 1.8% 850,062 Mobile Mini, Inc.* ++ 14,706,073 ----------- DIVERSIFIED FINANCIALS 1.2% 272,850 Housing Development Finance Corp. Ltd. 4,054,041 599,750 Rewards Network, Inc.* 5,997,500 ----------- 10,051,541 ----------- DRUGS AND PHARMACEUTICALS 1.0% 323,553 Chattem, Inc.* 8,386,494 ----------- ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.1% 376,900 Vanguard Response Systems, Inc. PIPE* *** + 890,181 ----------- ELECTRONICS 1.8% 488,550 Nu Horizons Electronics Corp.* 5,139,546 560,925 Supertex, Inc.* 9,356,229 ----------- 14,495,775 ----------- ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 1.6% 207,700 Excel Technology, Inc.* 6,532,165 143,475 LSI Logic Corp.* 1,340,057 343,275 Peak International Ltd.* 2,402,925 267,750 Pericom Semiconductor Corp.* 3,073,770 ----------- 13,348,917 ----------- 52 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - ------- ----------- ENTERTAINMENT 1.3% 518,000 Movie Gallery, Inc. $10,147,620 ----------- FINANCE COMPANIES 5.6% 287,325 Accredited Home Lenders Holding Co.* 11,320,605 826,800 Saxon Capital, Inc.* 23,489,388 493,500 United PanAm Financial Corp.* 7,891,065 131,461 World Acceptance Corp.* 2,564,804 ----------- 45,265,862 ----------- FINANCE -- SMALL LOAN 1.7% 828,400 AmeriCredit Corp.* +++ 14,107,652 ----------- FINANCIAL -- MISCELLANEOUS 1.5% 314,979 Fidelity National Financial, Inc. 12,473,168 ----------- FOODS 2.7% 593,306 NBTY, Inc.* 22,059,117 ----------- HEALTH CARE FACILITIES 0.5% 624,925 Capital Senior Living Corp.* 3,868,286 ----------- HEALTH CARE MANAGEMENT SERVICES 2.8% 119,365 America Service Group, Inc.* 4,094,220 206,950 Centene Corp.* 6,330,600 201,675 Molina Healthcare, Inc.* 5,913,111 172,925 Pacificare Health Systems* 6,839,184 ----------- 23,177,115 ----------- HEALTH CARE SERVICES 1.0% 262,625 Apria Healthcare Group, Inc.* 7,862,992 ----------- HOME BUILDING 4.5% 34,504 Beazer Homes USA, Inc. 3,654,319 100,292 M.D.C. Holdings, Inc. 7,060,592 146,000 Meritage Corp.* 10,840,500 18,500 NVR, Inc.* 8,510,000 142,400 Toll Brothers, Inc.* 6,469,232 ----------- 36,534,643 ----------- HOTEL/MOTEL 0.9% 422,525 Orient-Express Hotels Ltd., Class A 7,558,972 ----------- HOUSEHOLD FURNISHINGS 0.4% 148,450 Hooker Furniture Corp. 3,449,978 ----------- INSURANCE -- LIFE 0.5% 183,600 Scottish Re Group Ltd. 4,441,284 ----------- INSURANCE -- MULTI-LINE 1.9% 843,875 Hub International Ltd. 15,485,106 ----------- INSURANCE -- PROPERTY AND CASUALTY 1.3% 300,875 Direct General Corp. 10,891,675 ----------- INVESTMENT MANAGEMENT COMPANIES 1.8% 564,400 MCG Capital Corp. 11,395,236 229,825 Technology Investment Capital Corp. 3,353,147 ----------- 14,748,383 ----------- 53 SMALL CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS (CONTINUED) SHARES VALUE - ------- ------------- LEISURE TIME 1.3% 606,375 Action Performance Companies, Inc. $ 9,259,346 164,800 Bally Total Fitness Holding Corp.* +++ 965,728 ------------- 10,225,074 ------------- MACHINERY -- OIL WELL EQUIPMENT AND SERVICES 1.0% 372,450 Core Laboratories N.V.* 7,895,940 ------------- MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 1.0% 352,600 Sola International, Inc.* 8,197,950 ------------- MEDICAL SERVICES 0.7% 392,650 U.S. Physical Therapy, Inc.* 5,418,570 ------------- OIL -- CRUDE PRODUCERS 0.4% 195,300 Plains Exploration & Production Co.* 3,640,392 ------------- PRODUCTION TECHNOLOGY EQUIPMENT 0.6% 320,550 Nanometrics Inc.* 4,907,621 ------------- REAL ESTATE 1.0% 158,725 LNR Property Corp. 8,496,549 ------------- REAL ESTATE INVESTMENT TRUSTS (REIT) 14.6% 595,450 American Financial Realty Trust*** + 9,891,020 264,675 American Home Mortgage Investment Corp. 7,622,640 281,100 Anworth Mortgage Asset Corp. 3,924,156 75,025 Arbor Realty Trust, Inc.** *** + 6,833,277 642,325 Bimini Mortgage Management, Inc.*** + ++ 9,634,875 235,775 Capital Automotive 8,325,215 179,350 Capital Lease Funding, Inc.* 2,299,267 397,325 Falcon Financial Investment Trust* 3,691,149 443,050 Fieldstone Investment Corp.* *** + 8,528,713 437,336 Friedman, Billings, Ramsey Group, Inc., Class A 11,803,699 141,775 Hanover Capital Mortgage Holdings, Inc. 2,204,601 407,875 Luminent Mortgage Capital, Inc. 5,771,431 325,500 Medical Properties Trust, Inc.* *** + 3,255,000 474,200 MFA Mortgage Investments, Inc. 4,789,420 494,800 Newcastle Investment Corp. 16,674,760 216,875 Redwood Trust, Inc. 13,483,119 ------------- 118,732,342 ------------- RECREATIONAL VEHICLES AND BOATS 0.5% 123,725 National R.V. Holdings, Inc.* 1,954,855 65,750 Thor Industries, Inc. 1,766,045 ------------- 3,720,900 ------------- RENTAL AND LEASING SERVICES -- COMMERCIAL 0.2% 480,398 MicroFinancial, Inc.* 1,513,254 ------------- RENTAL AND LEASING SERVICES -- CONSUMER 1.7% 94,425 Rainbow Rentals, Inc.* 1,491,915 373,962 Rent-A-Center, Inc.* 12,337,006 ------------- 13,828,921 ------------- RESTAURANTS 0.7% 329,350 O'Charley's, Inc.* 6,010,638 ------------- 54 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - --------- ------------ RETAIL 14.4% 507,750 Big 5 Sporting Goods Corp.* $ 12,820,687 1,358,700 Casual Male Retail Group, Inc.* 14,048,958 431,650 Cato Corp. (The), Class A 8,667,532 532,375 Global Imaging Systems, Inc.* 17,685,498 250,075 Group 1 Automotive, Inc.* 9,052,715 538,375 Lithia Motors, Inc., Class A 14,886,069 207,700 MarineMax, Inc.* 5,518,589 167,675 O'Reilly Automotive, Inc.* 6,713,707 292,500 School Specialty, Inc.* 10,404,225 416,442 Sonic Automotive, Inc. 10,431,872 805,568 Whitehall Jewellers, Inc.* ++ 7,362,891 ------------ 117,592,743 ------------ SAVINGS AND LOANS 1.6% 552,457 Commercial Capital Bancorp, Inc.* 12,662,314 ------------ SERVICES -- COMMERCIAL 6.7% 284,050 Administaff, Inc.* 4,950,991 689,027 AMN Healthcare Services, Inc.* 12,643,645 218,026 Coinstar, Inc.* 3,460,073 191,087 Monro Muffler, Inc.* 4,775,264 701,960 Navigant International, Inc.* 12,635,280 194,650 RemedyTemp, Inc., Class A* 2,579,112 606,650 SM&A* 6,679,217 181,175 World Fuel Services Corp. 6,654,558 ------------ 54,378,140 ------------ TRUCKERS 1.4% 315,487 Transport Corporation of America, Inc.* 2,239,958 472,250 USA Truck, Inc.* ++ 4,561,935 317,650 Vitran Corp., Inc.* 4,605,925 ------------ 11,407,818 ------------ UTILITIES -- TELECOMMUNICATIONS 1.3% 828,500 Nextel Partners, Inc., Class A* 10,488,810 ------------ TOTAL COMMON STOCKS (COST $556,443,781) 782,683,681 ------------ WARRANTS 0.0% ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.0% 188,450 Vanguard Response Systems, Inc.* *** + -- ------------ TOTAL WARRANTS (COST $0) -- ------------ 55 SMALL CAP VALUE FUND -- PORTFOLIO OF MARCH 31, 2004 (UNAUDITED) INVESTMENTS (CONTINUED) PRINCIPAL AMOUNT VALUE - ---------------- --------------- SHORT-TERM INVESTMENTS 3.9% REPURCHASE AGREEMENT 3.9% $31,470,000 Repurchase Agreement dated 3/31/04, 0.50% due 4/1/04 with State Street Bank and Trust Co. collateralized by $23,925,000 of United States Treasury Bonds 7.50% due 11/15/16; value: $32,103,067; repurchase proceeds: $31,470,437 (cost $31,470,000) $ 31,470,000 --------------- TOTAL SHORT-TERM INVESTMENTS (COST $31,470,000) 31,470,000 --------------- TOTAL INVESTMENTS (COST $587,913,781) 99.9% 814,153,681 OTHER ASSETS LESS LIABILITIES 0.1% 917,985 --------------- NET ASSETS 100.0% $ 815,071,666 =============== SHARES VALUE ------ --------------- SECURITIES SOLD SHORT 100,000 HEICO Corp. (proceeds $778,691) $ 1,569,000 =============== *Non-income producing. **Each unit consists of five shares of common stock and one warrant. ***Security was fair valued under procedures adopted by the Board of Directors. +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 designated as collateral for open short positions, written options or purchase commitments. See notes to financial statements. 56 ULTRA GROWTH FUND -- PORTFOLIO OF INVESTMENTS MARCH 31, 2004 (UNAUDITED) SHARES VALUE - ------- ----------- COMMON AND PREFERRED STOCKS 97.3% AUTO PARTS -- AFTER MARKET 0.2% 230,000 IMPCO Technologies, Inc. PIPE* *** + $ 1,221,024 ----------- AUTO PARTS -- ORIGINAL EQUIPMENT 0.3% 188,000 Quantum Fuel Systems Technologies Worldwide, Inc.* 1,490,840 ----------- BANKS -- OUTSIDE NEW YORK CITY 2.2% 64,825 Commerce Bancorp, Inc. 4,270,671 146,787 Doral Financial Corp. 5,166,902 112,700 Wilshire State Bank* 2,700,269 ----------- 12,137,842 ----------- BIOTECHNOLOGY RESEARCH AND PRODUCTION 0.5% 18,800 Corgentech, Inc.* 353,440 76,400 Neurochem, Inc.* 1,634,196 82,675 Xcyte Therapies, Inc.* 619,236 ----------- 2,606,872 ----------- CASINOS AND GAMBLING 0.2% 29,850 Shuffle Master, Inc.* 1,387,727 ----------- CHEMICALS 3.5% 459,150 Cabot Microelectronics Corp.* 19,394,496 ----------- COMMUNICATIONS TECHNOLOGY 4.8% 410,325 Remec, Inc.* 3,118,470 828,775 UTStarcom, Inc.* 23,835,569 91,388 Xtera Communications, Inc.* *** + 99,065 ----------- 27,053,104 ----------- COMPUTER SERVICES SOFTWARE AND SYSTEMS 10.7% 229,080 Cognizant Technology Solutions Corp.* 10,365,870 115,720 Concord Communications, Inc.* 1,667,525 582,754 EPIQ Systems, Inc.* 9,545,511 180,150 iPass, Inc.* 1,969,039 616,446 Kintera, Inc.* 10,276,155 202,425 Manhattan Associates, Inc.* 5,627,415 629,678 Nassda Corp.* 4,369,965 174,100 Opnet Technologies, Inc.* 2,595,831 220,100 PDF Solutions, Inc.* 2,533,351 81,885 PEC Solutions, Inc.* 1,082,520 136,459 SRA International, Inc., Class A* 5,040,795 594,334 Verisity Ltd.* 5,503,533 ----------- 60,577,510 ----------- DRUGS AND PHARMACEUTICALS 2.5% 67,800 Angiotech Pharmaceuticals, Inc.* 1,654,998 73,250 Atrix Laboratories, Inc.* 1,867,875 61,392 Connetics Corp.* 1,361,061 49,600 NeoPharm, Inc.* 930,496 29,000 Northwest Biotherapeutics, Inc.* 3,799 141,100 Taro Pharmaceutical Industries Ltd.* 8,182,389 ----------- 14,000,618 ----------- EDUCATION SERVICES 6.2% 507,308 Career Education Corp.* 28,733,925 143,250 Corinthian Colleges, Inc.* 4,735,845 171,550 Princeton Review, Inc. (The)* 1,482,192 ----------- 34,951,962 ----------- 57 ULTRA GROWTH FUND -- PORTFOLIO OF INVESTMENTS (CONTINUED) SHARES VALUE - --------- ----------- ELECTRICAL AND ELECTRONICS 0.2% 74,525 Plexus Corp.* $ 1,325,800 ----------- ELECTRICAL EQUIPMENT AND COMPONENTS 0.9% 134,000 BW Technologies Ltd.* 2,838,572 35,650 Cherokee International Corp.* 513,360 99,375 Flextronics International Ltd.* 1,711,237 ----------- 5,063,169 ----------- ELECTRONICS 0.4% 54,850 Flir Systems, Inc.* 2,090,882 ----------- ELECTRONICS -- MEDICAL SYSTEMS 0.5% 144,075 EPIX Medical, Inc.* 2,989,556 ----------- ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 5.8% 64,200 Cree, Inc.* 1,431,660 118,675 Integrated Circuit Systems, Inc.* 2,970,435 284,725 Micrel, Inc.* 3,801,079 1,073,900 O2Micro International Ltd.* 18,503,297 1,188,275 Sirenza Microdevices, Inc.* 5,275,941 124,000 SiRF Technology Holdings, Inc., Series H* *** + 806,000 ----------- 32,788,412 ----------- FINANCIAL DATA PROCESSING SERVICES AND SYSTEMS 1.1% 29,125 Affiliated Computer Services, Inc.* 1,511,588 137,675 iPayment Holdings, Inc.* 4,579,070 ----------- 6,090,658 ----------- FINANCIAL -- MISCELLANEOUS 1.3% 293,950 Encore Capital Group, Inc.* 4,882,509 97,050 Portfolio Recovery Associates, Inc.* 2,614,527 ----------- 7,497,036 ----------- HEALTH CARE FACILITIES 6.7% 593,116 American Healthways, Inc.* 14,483,893 144,600 Pharmaceutical Product Development, Inc.* 4,307,634 562,475 United Surgical Partners International, Inc.* 19,090,401 ----------- 37,881,928 ----------- HEALTH CARE MANAGEMENT SERVICES 5.3% 524,754 AmSurg Corp.* 11,917,163 195,600 Centene Corp.* 5,983,404 184,625 Pediatrix Medical Group, Inc.* 11,631,375 ----------- 29,531,942 ----------- HEALTH CARE SERVICES 16.0% 1,374,470 Accredo Health, Inc.* 52,367,307 152,025 Express Scripts, Inc.* 11,339,544 105,975 Icon Plc ADR* 3,744,097 153,250 Inveresk Research Group, Inc.* 4,355,365 950,287 Odyssey HealthCare, Inc.* 17,912,910 ----------- 89,719,223 ----------- HOUSEHOLD FURNISHINGS 1.0% 201,450 Select Comfort Corp.* 5,558,006 ----------- INSURANCE -- MULTI-LINE 0.5% 140,150 Hub International Ltd. 2,571,753 ----------- 58 MARCH 31, 2004 (UNAUDITED) SHARES VALUE - --------- ----------- INSURANCE--PROPERTY AND CASUALTY 0.2% 29,350 Direct General Corp. $ 1,062,470 ----------- MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 2.4% 108,175 Biosite, Inc.* 3,458,355 124,450 Cyberonics, Inc.* 2,981,822 38,750 Kinetic Concepts, Inc.* 1,737,937 134,775 Molecular Devices Corp.* 2,539,161 70,675 Techne Corp.* 2,884,247 ----------- 13,601,522 ----------- MISCELLANEOUS MATERIALS AND COMMODITIES 1.5% 299,200 Symyx Technologies, Inc.* 8,569,088 ----------- PRODUCTION TECHNOLOGY EQUIPMENT 1.7% 292,075 LogicVision, Inc.* 1,223,794 308,000 Rudolph Technologies, Inc.* 5,768,840 149,625 Tessera Technologies, Inc.* 2,738,138 ----------- 9,730,772 ----------- RETAIL 4.0% 139,350 99 Cents Only Stores* 3,402,927 283,174 Dollar Tree Stores, Inc.* 8,747,245 43,900 Jos. A. Bank Clothiers, Inc.* 1,580,400 211,000 O'Reilly Automotive, Inc.* 8,448,440 ----------- 22,179,012 ----------- SAVINGS AND LOANS 0.7% 178,700 Commercial Capital Bancorp, Inc.* 4,095,804 ----------- SCIENTIFIC EQUIPMENT AND SUPPLIERS 1.1% 283,575 Biacore International AB ADR* 6,380,438 ----------- SERVICES--COMMERCIAL 12.9% 226,025 Advisory Board Co. (The)* 8,261,214 523,030 AMN Healthcare Services, Inc.* 9,597,601 65,900 Corporate Executive Board Co. 3,097,300 260,325 CoStar Group, Inc.* 9,603,389 44,000 IQ4HIRE, Inc.* *** + 440 221,650 Kroll, Inc.* 5,951,303 268,175 LECG Corp.* 5,216,004 896,569 Management Network Group, Inc.* 3,397,996 88,200 Resources Connection, Inc.* 3,891,296 339,750 SM&A* 3,740,647 1,790,049 Wireless Facilities, Inc.* 19,708,439 ----------- 72,465,629 ----------- UTILITIES--TELECOMMUNICATIONS 2.0% 554,625 Nextel Partners, Inc., Class A* 7,021,552 527,219 Primus Telecommunications Group, Inc.* 4,433,912 ----------- 11,455,464 ----------- TOTAL COMMON AND PREFERRED STOCKS (COST $448,983,801) 547,470,559 ----------- 59 ULTRA GROWTH FUND -- PORTFOLIO OF MARCH 31, 2004 (UNAUDITED) INVESTMENTS (CONTINUED) SHARES VALUE - ------- ------------- LIMITED PARTNERSHIP INTEREST 0.1% OTHER 0.1% Montagu Newhall Global Partners II-B, L.P.* *** + $ 450,000 ------------- TOTAL LIMITED PARTNERSHIP INTEREST (COST $450,000) 450,000 ------------- WARRANTS 0.0% ELECTRONICS--SEMICONDUCTORS/COMPONENTS 0.0% 12,400 SiRF Technology Holdings, Inc.* *** + -- ------------- TOTAL WARRANTS (COST $0) -- ------------- PRINCIPAL AMOUNT VALUE - ---------------- ------------- U.S. GOVERNMENT OBLIGATIONS 0.8% $ 4,525,000 U.S. Treasury Bond, 5.25%, 11/15/28+++ $ 4,777,409 ------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $4,505,413) 4,777,409 ------------- SHORT-TERM INVESTMENTS 0.4% REPURCHASE AGREEMENT 0.4% 2,320,000 Repurchase Agreement dated 3/31/04, 0.50% due 4/1/04 with State Street Bank and Trust Co. collateralized by $2,210,000 of United States Treasury Bonds 5.25% due 11/15/28; value: $2,367,622; repurchase proceeds: $2,320,032 (cost $2,320,000) 2,320,000 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $2,320,000) 2,320,000 ------------- TOTAL INVESTMENTS (COST $456,259,214) 98.6% 555,017,968 OTHER ASSETS LESS LIABILITIES 1.4% 7,834,667 ------------- NET ASSETS 100.0% $ 562,852,635 ============= *Non-income producing. ***Security was fair valued under procedures adopted by the Board of Directors. +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 designated as collateral for open short positions, written options or purchase commitments. ADR American Depositary Receipt. See notes to financial statements. 60 U.S. TREASURY FUND -- PORTFOLIO OF INVESTMENTS MARCH 31, 2004 (UNAUDITED) PRINCIPAL AMOUNT VALUE - ---------------- ----------- U.S. GOVERNMENT OBLIGATIONS 97.9% $ 5,050,000 U.S. Treasury Bond, 5.375%, 2/15/31 $ 5,504,500 2,000,000 U.S. Treasury Bond, 5.50%, 8/15/28 2,181,484 4,300,000 U.S. Treasury Bond, 6.125%, 11/15/27 5,072,994 800,000 U.S. Treasury Bond, 6.375%, 8/15/27 971,500 540,000 U.S. Treasury Bond, 6.50%, 11/15/26 664,326 1,470,000 U.S. Treasury Bond, 6.625%, 2/15/27 1,834,916 1,750,000 U.S. Treasury Bond, 6.75%, 8/15/26 2,212,656 2,755,000 U.S. Treasury Bond, 6.875%, 8/15/25 3,519,405 5,430,000 U.S. Treasury Bond, 7.50%, 11/15/24 7,382,465 30,100,000 U.S. Treasury Strip, principal only, 11/15/21 12,370,829 22,915,000 U.S. Treasury Strip, principal only, 11/15/27 6,752,570 10,100,000 U.S. Treasury Strip, principal only, 8/15/25 3,350,574 ----------- TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $45,878,005) 51,818,219 ----------- SHORT-TERM INVESTMENTS 1.7% REPURCHASE AGREEMENT 1.7% 905,000 Repurchase Agreement dated 3/31/04, 0.50% due 4/1/04 with State Street Bank and Trust Co. collateralized by $865,000 of United States Treasury Bonds 5.25% due 11/15/28; value: $926,694; repurchase proceeds: $905,013 (cost $905,000) 905,000 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $905,000) 905,000 ----------- TOTAL INVESTMENTS (COST $46,783,005) 99.6% 52,723,219 OTHER ASSETS LESS LIABILITIES 0.4% 229,378 ----------- NET ASSETS 100.0% $52,952,597 =========== See notes to financial statements. 61 WASATCH FUNDS -- STATEMENTS OF ASSETS AND LIABILITIES CORE GROWTH FUND --------------- ASSETS: Investments, at cost Nonaffiliated issuers $ 1,138,804,823 Affiliated issuers 18,766,125 Repurchase agreements 34,129,000 --------------- $ 1,191,699,948 =============== Investments, at market value Nonaffiliated issuers $ 1,529,105,887 Affiliated issuers 18,766,125 Repurchase agreements 34,129,000 Cash 1,040,308 Foreign currency on deposit (cost of $0, $0, $466,227, $185,388 and $86,100, respectively) -- Receivable for investment securities sold 2,789,732 Receivable from broker for securities sold short -- Capital shares receivable 1,010,196 Interest and dividends receivable 1,520,767 Unrealized appreciation on foreign currency contracts -- Prepaid expenses and other assets 25,608 --------------- Total Assets 1,588,387,623 --------------- LIABILITIES: Securities sold short, at value (proceeds of $0, $0, $0, $0 and $1,853,779, respectively) -- Payable for securities purchased 2,275,058 Capital shares payable 841,439 Accrued advisory fee 1,322,432 Accrued administration fee 42,043 Unrealized depreciation on foreign currency contracts -- Accrued expenses 460,754 --------------- Total Liabilities 4,941,726 --------------- NET ASSETS $ 1,583,445,897 =============== NET ASSETS CONSIST OF: Capital stock $ 393,213 Paid-in capital in excess of par 1,228,837,056 Undistributed net investment income (loss) 701,894 Undistributed net realized gain (loss) on investments and foreign currency translations (36,787,330) Net unrealized appreciation on investments and foreign currency translations 390,301,064 --------------- Net Assets $ 1,583,445,897 =============== CAPITAL STOCK, $.01 PAR VALUE: Authorized 10,000,000,000 Issued and outstanding 39,321,291 NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $ 40.27 =============== See notes to financial statements. 62 MARCH 31, 2004 (UNAUDITED) GLOBAL SCIENCE INTERNATIONAL MICRO MICRO CAP & TECHNOLOGY GROWTH CAP VALUE FUND FUND FUND FUND - --------------- --------------- --------------- --------------- $ 73,574,217 $ 116,315,202 $ 365,373,462 $ 65,052,212 -- -- 26,143,819 -- 2,430,000 12,259,000 2,697,000 10,660,000 - --------------- --------------- --------------- --------------- $ 76,004,217 $ 128,574,202 $ 394,214,281 $ 75,712,212 =============== =============== =============== =============== $ 81,383,698 $ 140,315,653 $ 546,392,855 $ 81,743,300 -- -- 29,648,508 -- 2,430,000 12,259,000 2,697,000 10,660,000 838 562 31 873 -- 470,346 185,021 86,381 2,595,604 727,213 6,253,931 798,084 -- -- -- 2,735,673 90,461 574,623 40,085 -- 10,492 65,612 20,683 44,970 -- 1,472 -- 588 13,599 14,051 14,145 9,256 - --------------- --------------- --------------- --------------- 86,524,692 154,428,532 585,252,259 96,079,125 - --------------- --------------- --------------- --------------- -- -- -- 1,875,000 379,583 2,381,042 5,251,490 2,751,951 18,142 44,159 50,746 -- 104,729 181,982 970,477 104,151 2,311 3,855 15,446 2,438 -- 715 -- 708 57,505 64,720 153,426 51,476 - --------------- --------------- --------------- --------------- 562,270 2,676,473 6,441,585 4,785,724 - --------------- --------------- --------------- --------------- $ 85,962,422 $ 151,752,059 $ 578,810,674 $ 91,293,401 =============== =============== =============== =============== $ 71,504 $ 102,833 $ 759,411 $ 336,138 79,314,482 128,403,795 349,837,478 66,778,845 (683,308) (768,460) (5,693,472) (830,376) (549,753) 13,277 49,386,391 8,338,667 7,809,497 24,000,614 184,520,866 16,670,127 - --------------- --------------- --------------- --------------- $ 85,962,422 $ 151,752,059 $ 578,810,674 $ 91,293,401 =============== =============== =============== =============== 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 7,150,366 10,283,334 75,941,069 33,613,774 $ 12.02 $ 14.76 $ 7.62 $ 2.72 =============== =============== =============== =============== 63 WASATCH FUNDS -- STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) SMALL CAP GROWTH FUND --------------- ASSETS: Investments, at cost Nonaffiliated issuers $ 910,348,653 Affiliated issuers 17,917,476 Repurchase agreements 49,108,000 --------------- $ 977,374,129 =============== Investments, at market value Nonaffiliated issuers $ 1,187,980,352 Affiliated issuers 34,462,164 Repurchase agreements 49,108,000 Cash 1,973,904 Receivable for investment securities sold -- Receivable from broker for securities sold short -- Capital shares receivable 577,717 Interest and dividends receivable 241,410 Unrealized appreciation on foreign currency contracts -- Prepaid expenses and other assets 21,022 --------------- Total Assets 1,274,364,569 --------------- LIABILITIES: Securities sold short, at value (proceeds of $0, $778,691, $0 and $0, respectively) -- Payable for securities purchased 4,651,329 Capital shares payable 973,367 Accrued advisory fee 1,068,260 Accrued administration fee 33,978 Accrued expenses 379,269 --------------- Total Liabilities 7,106,203 --------------- NET ASSETS $ 1,267,258,366 =============== NET ASSETS CONSIST OF: Capital stock $ 350,913 Paid-in capital in excess of par 966,686,890 Undistributed net investment income (loss) (5,692,685) Undistributed net realized gain (loss) on investments and foreign currency translations 11,736,861 Net unrealized appreciation on investments and foreign currency translations 294,176,387 --------------- Net Assets $ 1,267,258,366 =============== CAPITAL STOCK, $.01 PAR VALUE: Authorized 10,000,000,000 Issued and outstanding 35,091,309 NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $ 36.11 =============== See notes to financial statements. 64 MARCH 31, 2004 (UNAUDITED) SMALL CAP ULTRA U.S. VALUE GROWTH TREASURY FUND FUND FUND - --------------- --------------- --------------- $ 519,089,930 $ 453,939,214 $ 45,878,005 37,353,851 -- -- 31,470,000 2,320,000 905,000 - --------------- --------------- --------------- $ 587,913,781 $ 456,259,214 $ 46,783,005 =============== =============== =============== $ 746,417,907 $ 552,697,968 $ 51,818,219 36,265,774 -- -- 31,470,000 2,320,000 905,000 225,751 248 452 11,974,911 9,441,260 -- 902,436 -- -- 249,031 118,915 35,761 880,792 102,409 373,387 600 -- -- 31,384 17,622 13,255 - --------------- --------------- --------------- 828,418,586 564,698,422 53,146,074 - --------------- --------------- --------------- 1,569,000 -- -- 10,061,008 458,170 -- 398,802 532,676 129,384 1,022,097 598,612 15,625 21,664 15,253 1,410 274,349 241,076 47,058 - --------------- --------------- --------------- 13,346,920 1,845,787 193,477 - --------------- --------------- --------------- $ 815,071,666 $ 562,852,635 $ 52,952,597 =============== =============== =============== $ 1,389,577 $ 199,038 $ 38,887 530,481,528 434,019,928 53,484,201 (840,719) (4,176,755) 553,652 58,595,369 34,051,670 (7,064,357) 225,445,911 98,758,754 5,940,214 - --------------- --------------- --------------- $ 815,071,666 $ 562,852,635 $ 52,952,597 =============== =============== =============== 10,000,000,000 10,000,000,000 10,000,000,000 138,957,683 19,903,843 3,888,677 $ 5.87 $ 28.28 $ 13.62 =============== =============== =============== 65 WASATCH FUNDS -- STATEMENTS OF OPERATIONS CORE GROWTH FUND ------------- INVESTMENT INCOME: Interest $ 171,426 Dividends(1)+ 10,319,970 ------------- 10,491,396 ------------- EXPENSES: Investment advisory fee 7,351,024 Shareholder servicing fees 950,824 Fund administration and accounting fees 318,703 Reports to shareholders 135,058 Legal fees 56,003 Custody fees 55,640 Federal and state registration fees 22,034 Directors' fees 12,481 Audit fees 10,476 Other 27,609 ------------- Total expenses before reimbursement 8,939,852 Reimbursement of expenses by Advisor -- ------------- Net expenses 8,939,852 ------------- NET INVESTMENT INCOME (LOSS) 1,551,544 ------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on investments + 48,774,255 Net realized loss on short posit ion -- Change in unrealized appreciation (depreciation) on investments and foreign currency translations 215,071,928 ------------- Net gain on investments 263,846,183 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 265,397,727 ============= (1) Net of $14,973, $32, $10,555, $8,586 and $2,730 in foreign withholding taxes, respectively. (+) See Note 9 for information on affiliated issuers. See notes to financial statements. 66 FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) GLOBAL SCIENCE INTERNATIONAL MICRO MICRO CAP & TECHNOLOGY GROWTH CAP VALUE FUND FUND FUND FUND - -------------- ------------- ------------ ----------- $ 36,983 $ 24,740 $ 90,172 $ 34,060 8,260 180,439 416,437 104,334 ------------ ------------- ------------ ----------- 45,243 205,179 506,609 138,394 ------------ ------------- ------------ ----------- 559,938 750,212 5,649,338 824,877 104,552 115,612 304,232 78,960 21,518 26,283 128,320 22,827 11,177 5,756 40,095 10,138 2,448 2,307 20,925 24,937 8,596 42,145 18,422 17,830 11,504 16,962 12,684 10,994 450 377 4,904 647 10,476 10,529 10,476 12,405 1,218 1,185 10,685 1,421 ------------ ------------- ------------ ----------- 731,877 971,368 6,200,081 1,005,036 (3,958) -- -- (58,163) ------------ ------------- ------------ ----------- 727,919 971,368 6,200,081 946,873 ------------ ------------- ------------ ----------- (682,676) (766,189) (5,693,472) (808,479) ------------ ------------- ------------ ----------- 1,668,392 1,516,244 51,526,287 8,410,438 (96,963) -- -- (12,699) 4,835,384 16,651,313 49,675,813 13,450,938 ------------ ------------- ------------ ----------- 6,406,813 18,167,557 101,202,100 21,848,677 ------------ ------------- ------------ ----------- $ 5,724,137 $ 17,401,368 $ 95,508,628 $21,040,198 ============ ============= ============ =========== 67 WASATCH FUNDS -- STATEMENTS OF OPERATIONS (CONTINUED) SMALL CAP GROWTH FUND ------------ INVESTMENT INCOME: Interest $ 335,390 Dividends(1)+ 1,607,689 ------------ 1,943,079 ------------ EXPENSES: Investment advisory fee 6,323,290 Shareholder servicing fees 765,049 Fund administration and accounting fees 275,685 Reports to shareholders 132,501 Legal fees 52,024 Custody fees 23,989 Federal and state registration fees 18,439 Directors' fees 10,795 Audit fees 10,477 Other 23,515 ------------ Total expenses before reimbursement 7,635,764 Reimbursement of expenses by Advisor -- ------------ Net expenses 7,635,764 ------------ NET INVESTMENT INCOME (LOSS) (5,692,685) ------------ REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on investments+ 15,488,068 Net realized loss on short positions -- Change in unrealized appreciation (depreciation) on investments and foreign currency translations 125,000,547 ------------ Net gain on investments 140,488,615 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $134,795,930 ============ (1) Net of $6,466, $4,162, $3,345 and $0 in foreign withholding taxes, respectively. (+) See Note 9 for information on affiliated issuers. See notes to financial statements. 68 FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) SMALL CAP ULTRA U.S. VALUE GROWTH TREASURY FUND FUND FUND - ---------------------------------------------------------------------------- $ 51,935 $ 183,598 $1,469,656 5,611,871 82,935 -- - ------------ ----------- ---------- 5,663,806 266,533 1,469,656 - ------------ ----------- ---------- 5,610,864 3,691,460 141,486 525,470 451,955 77,134 165,659 131,869 14,263 98,170 90,266 10,645 29,012 23,608 4,650 25,144 13,690 2,385 20,108 13,658 9,013 6,179 5,117 686 10,476 10,476 10,179 13,443 11,189 1,725 - ------------ ----------- ---------- 6,504,525 4,443,288 272,166 -- -- (59,937) - ------------ ----------- ---------- 6,504,525 4,443,288 212,229 - ------------ ----------- ---------- (840,719) (4,176,755) 1,257,427 - ------------ ----------- ---------- 58,697,430 42,078,480 83,677 (25,139) -- -- 117,256,466 28,224,218 766,661 - ------------ ----------- ---------- 175,928,757 70,302,698 850,338 - ------------ ----------- ---------- $175,088,038 $66,125,943 $2,107,765 ============ =========== ========== 69 WASATCH FUNDS -- STATEMENTS OF CHANGES IN NET ASSETS CORE GROWTH FUND GLOBAL SCIENCE & TECHNOLOGY FUND SIX MONTHS ENDED SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 (UNAUDITED) SEPTEMBER 30, 2003 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS: Net investment income (loss) $ 1,551,544 $ (228,591) $ (682,676) $ (612,626) Net realized gain (loss) on investments 48,774,255 (76,727,660) 1,668,392 82,567 Net realized gain (loss) on short positions -- -- (96,963) 11,415 Change in unrealized appreciation (depreciation) on investments and foreign currency translations 215,071,928 385,705,494 4,835,384 15,374,035 --------------- --------------- --------------- --------------- Net increase in net assets resulting from operations 265,397,727 308,749,243 5,724,137 14,855,391 DIVIDENDS PAID FROM: Net investment income (849,650) -- -- -- Net realized gains -- -- -- -- --------------- ---------------- --------------- --------------- (849,650) -- -- -- CAPITAL SHARE TRANSACTIONS: Shares sold 121,048,328 294,903,790 40,798,595 31,899,054 Shares issued to holders in reinvestment of dividends 794,356 -- -- -- Shares redeemed (121,292,763) (348,335,931) (12,110,889) (16,089,720) Redemption fees 6,486 79,906 33,511 41,099 --------------- --------------- --------------- --------------- Net increase (decrease) 556,407 (53,352,235) 28,721,217 15,850,433 --------------- --------------- --------------- --------------- TOTAL INCREASE IN NET ASSETS 265,104,484 255,397,008 34,445,354 30,705,824 NET ASSETS: Beginning of period 1,318,341,413 1,062,944,405 51,517,068 20,811,244 --------------- --------------- --------------- --------------- End of period $ 1,583,445,897 $ 1,318,341,413 $ 85,962,422 $ 51,517,068 =============== =============== =============== =============== Undistributed net investment income (loss) included in net assets at end of period $ 701,894 -- $ (683,308) $ (632) =============== =============== =============== =============== *Inception date of the Fund was July 28, 2003. See notes to financial statements. 70 MARCH 31, 2004 (UNAUDITED) INTERNATIONAL GROWTH FUND MICRO CAP FUND MICRO CAP VALUE FUND SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED MARCH 31, 2004 YEAR ENDED MARCH 31, 2004 PERIOD ENDED (UNAUDITED) SEPTEMBER 30, 2003 (UNAUDITED) SEPTEMBER 30, 2003 (UNAUDITED) SEPTEMBER 30, 2003* - ------------------------------------------------------------------------------------------------------------------------------------ $ (766,189) $ (250,286) $ (5,693,472) $ (8,716,570) $ (808,479) $ (238,749) 1,516,244 (1,299,298) 51,526,287 51,800,078 8,410,438 192,165 -- -- -- -- (12,699) -- 16,651,313 9,025,174 49,675,813 120,439,212 13,450,938 3,219,189 ------------- ------------- ------------- ------------- ------------- ------------- 17,401,368 7,475,590 95,508,628 163,522,720 21,040,198 3,172,605 -- -- -- -- -- -- -- -- (43,612,163) (22,295,887) (59,072) -- ------------- ------------- ------------- ------------- ------------- ------------- -- -- (43,612,163) (22,295,887) (59,072) -- 97,181,728 29,443,047 8,893,900 97,787,052 1,085,642 67,827,227 -- -- 41,226,751 21,092,296 57,934 -- (7,340,859) (10,538,025) (40,388,145) (70,506,908) (1,537,361) (294,977) 27,953 13,571 2,555 32,043 82 1,123 ------------- ------------- ------------- ------------- ------------- ------------- 89,868,822 18,918,593 9,735,061 48,404,483 (393,703) 67,533,373 ------------- ------------- ------------- ------------- ------------- ------------- 107,270,190 26,394,183 61,631,526 189,631,316 20,587,423 70,705,978 44,481,869 18,087,686 517,179,148 327,547,832 70,705,978 -- ------------- ------------- ------------- ------------- ------------- ------------- $ 151,752,059 $ 44,481,869 $ 578,810,674 $ 517,179,148 $ 91,293,401 $ 70,705,978 ============= ============= ============= ============= ============= ============= $ (768,460) $ (2,271) $ (5,693,472) -- $ (830,376) $ (21,897) ============= ============= ============= ============= ============= ============= 71 WASATCH FUNDS -- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) SMALL CAP GROWTH FUND SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 (UNAUDITED) SEPTEMBER 30, 2003 - ------------------------------------------------------------------------------------------------ OPERATIONS: Net investment income (loss) $ (5,692,685) $ (9,713,510) Net realized gain on investments 15,488,068 16,297,720 Net realized gain on options written -- -- Net realized gain (loss) on short positions -- -- Change in unrealized appreciation (depreciation) on investments and foreign currency translations 125,000,547 268,022,826 --------------- --------------- Net increase in net assets resulting from operations 134,795,930 274,607,036 DIVIDENDS PAID FROM: Net investment income -- -- Net realized gains (5,914,731) (34,010) --------------- --------------- (5,914,731) (34,010) CAPITAL SHARE TRANSACTIONS: Shares sold 115,997,018 305,478,301 Shares issued to holders in reinvestment of dividends 5,653,645 32,547 Shares redeemed (117,674,852) (181,150,831) Redemption fees 3,440 48,034 --------------- --------------- Net increase (decrease) 3,979,251 124,408,051 --------------- --------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 132,860,450 398,981,077 NET ASSETS: Beginning of period 1,134,397,916 735,416,839 --------------- --------------- End of period $ 1,267,258,366 $ 1,134,397,916 =============== =============== Undistributed net investment income (loss) included in net assets at end of period $ (5,692,685) -- =============== =============== See notes to financial statements. 72 MARCH 31, 2004 (UNAUDITED) SMALL CAP VALUE FUND ULTRA GROWTH FUND U.S. TREASURY FUND SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED MARCH 31, 2004 YEAR ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 (UNAUDITED) SEPTEMBER 30, 2003 (UNAUDITED) SEPTEMBER 30, 2003 - ------------------------------------------------------------------------------------------------------------------------------------ $ (840,719) $ (2,202,960) $ (4,176,755) $ (6,162,984) $ 1,257,427 $ 3,471,870 58,697,430 1,455,467 42,078,480 7,732,983 83,677 628,994 -- 304,716 -- -- -- -- (25,139) -- -- 113,726 -- -- 117,256,466 189,122,055 28,224,218 161,519,635 766,661 (3,356,730) - ------------- ------------- ------------- ------------- ------------- ------------- 175,088,038 188,679,278 66,125,943 163,203,360 2,107,765 744,134 -- -- -- -- (3,207,497) (3,484,505) (221,338) -- (5,447,072) -- -- -- - ------------- ------------- ------------- ------------- ------------- ------------- (221,338) -- (5,447,072) -- (3,207,497) (3,484,505) 51,079,343 192,079,847 39,286,749 221,989,430 8,171,010 47,192,794 210,972 -- 5,113,841 -- 3,120,826 3,362,861 (62,353,689) (157,672,444) (81,171,031) (123,834,632) (24,379,950) (64,698,707) 7,485 91,867 4,899 177,068 6,623 138,699 - ------------- ------------- ------------- ------------- ------------- ------------- (11,055,889) 34,499,270 (36,765,542) 98,331,866 (13,081,491) (14,004,353) - ------------- ------------- ------------- ------------- ------------- ------------- 163,810,811 223,178,548 23,913,329 261,535,226 (14,181,223) (16,744,724) 651,260,855 428,082,307 538,939,306 277,404,080 67,133,820 83,878,544 - ------------- ------------- ------------- ------------- ------------- ------------- $ 815,071,666 $ 651,260,855 $ 562,852,635 $ 538,939,306 $ 52,952,597 $ 67,133,820 ============= ============= ============= ============= ============= ============= $ (840,719) -- $ (4,176,755) -- $ 553,652 $ 2,503,722 ============= ============= ============= ============= ============= ============= 73 CORE GROWTH FUND -- FINANCIAL HIGHLIGHTS MARCH 31, 2004 (UNAUDITED) SIX MONTHS ENDED YEAR ENDED MARCH 31 (UNAUDITED) SEPTEMBER 30 2004 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 33.54 $ 25.46 $ 31.57 $ 28.08 $ 20.62 $ 17.00 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.04 (0.01) (0.01) (0.15) (0.18) (0.21) Net realized and unrealized gains (losses) on securities+ 6.71 8.09 (3.96) 5.96 8.12 4.55 ----------- ----------- ---------- ---------- --------- ---------- TOTAL FROM INVESTMENT OPERATIONS 6.75 8.08 (3.97) 5.81 7.94 4.34 LESS DISTRIBUTIONS: Dividends from net investment income (0.02) -- -- -- -- -- Distributions from net realized gains -- -- (2.14) (2.32) (0.48) (0.72) ----------- ----------- ---------- ---------- --------- ---------- TOTAL DISTRIBUTIONS (0.02) -- (2.14) (2.32) (0.48) (0.72) ----------- ----------- ---------- ---------- --------- ---------- NET ASSET VALUE, END OF PERIOD $ 40.27 $ 33.54 $ 25.46 $ 31.57 $ 28.08 $ 20.62 =========== =========== ========== ========== ========= ========== TOTAL RETURN(1) 20.14% 31.68% (13.73)% 22.63% 39.50% 27.28% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) $ 1,583,446 $ 1,318,341 $1,062,944 $ 992,935 $ 290,705 $ 173,118 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.22%(2) 1.25% 1.29% 1.32% 1.38% 1.44% Expenses, before waivers and reimbursements 1.22%(2) 1.25% 1.29% 1.32% 1.38% 1.44% Net investment income (loss), net of waivers and reimbursements 0.21%(2) (0.02)% (0.02)% (0.66)% (0.86)% (1.07)% Net investment income (loss), before waivers and reimbursements 0.21%(2) (0.02)% (0.02)% (0.66)% (0.86)% (1.07)% Portfolio turnover rate(1) 19% 47% 76% 51% 75% 79% + For 2002 and 2001, includes $0.01 and $0.01 in redemption fees, respectively (see Note 2). (1) Not annualized for periods less than a year. (2) Annualized. See notes to financial statements. 74 GLOBAL SCIENCE & TECHNOLOGY FUND -- MARCH 31,2004 (UNAUDITED) FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEAR ENDED MARCH 31 (UNAUDITED) SEPTEMBER 30 2004 2003 2002 2001(1) - -------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.73 $ 6.38 $ 8.02 $ 10.00 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss (0.10) (0.13) (0.15) (0.07) Net realized and unrealized gains (losses) on securities+ 1.39 4.48 (1.31) (1.91) ------------- -------- -------- ---------- TOTAL FROM INVESTMENT OPERATIONS 1.29 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 $ 12.02 $ 10.73 $ 6.38 $ 8.02 ============= ======== ======== ========== TOTAL RETURN(2) 11.92% 68.34% (18.83)% (19.80)% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) $ 85,962 $ 51,517 $ 20,811 $ 10,648 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.95%(3) 1.95% 1.95% 1.95%(3) Expenses, before waivers and reimbursements 1.96%(3) 2.13% 2.42% 3.58%(3) Net investment loss, net of waivers and reimbursements (1.83)%(3) (1.87)% (1.90)% (1.50)%(3) Net investment loss, before waivers and reimbursements (1.84)%(3) (2.05)% (2.37)% (3.13)%(3) Portfolio turnover rate(2) 22% 88% 95% 94% + For 2004, 2003, 2002 and 2001, includes $0.01, $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. 75 INTERNATIONAL GROWTH FUND -- FINANCIAL HIGHLIGHTS MARCH 31, 2004 (UNAUDITED) SIX MONTHS ENDED YEAR ENDED MARCH 31 (UNAUDITED) SEPTEMBER 30 2004 2003 2002(1) - ---------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 12.06 $ 8.85 $ 10.00 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss (0.07) (0.07) (0.03) Net realized and unrealized gains (losses) on securities+ 2.77 3.28 (1.12) -------------- ------------- ------------- TOTAL FROM INVESTMENT OPERATIONS 2.70 3.21 (1.15) LESS DISTRIBUTIONS: Distributions from net realized gains -- -- -- -------------- ------------- ------------- TOTAL DISTRIBUTIONS -- -- -- -------------- ------------- ------------- NET ASSET VALUE, END OF PERIOD $ 14.76 $ 12.06 $ 8.85 ============== ============= ============= TOTAL RETURN(2) 22.39% 36.27% (11.50)% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) $ 151,752 $ 44,482 $ 18,088 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.94%(3) 1.95% 1.95%(3) Expenses, before waivers and reimbursements 1.94%(3) 2.30% 4.26%(3) Net investment loss, net of waivers and reimbursements (1.53)%(3) (1.12)% (1.39)%(3) Net investment loss, before waivers and reimbursements (1.53)%(3) (1.47)% (3.70)%(3) Portfolio turnover rate(2) 15% 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. 76 MICRO CAP FUND -- FINANCIAL HIGHLIGHTS MARCH 31, 2004 (UNAUDITED) SIX MONTHS ENDED YEAR ENDED MARCH 31 (UNAUDITED) SEPTEMBER 30 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 6.98 $ 5.01 $ 5.64 $ 6.53 $ 4.41 $ 3.59 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss (0.07) (0.12) (0.14) (0.08) (0.09) (0.09) Net realized and unrealized gains on securities 1.30 2.43 0.11 0.74 2.63 1.27 ------------ --------- --------- -------- --------- -------- TOTAL FROM INVESTMENT OPERATIONS 1.23 2.31 (0.03) 0.66 2.54 1.18 LESS DISTRIBUTIONS: Distributions from net realized gains (0.59) (0.34) (0.60) (1.55) (0.42) (0.36) ------------ --------- --------- -------- --------- -------- TOTAL DISTRIBUTIONS (0.59) (0.34) (0.60) (1.55) (0.42) (0.36) ------------ --------- --------- -------- --------- -------- NET ASSET VALUE, END OF PERIOD $ 7.62 $ 6.98 $ 5.01 $ 5.64 $ 6.53 $ 4.41 ============ ========= ========= ======== ========= ======== TOTAL RETURN(1) 18.85% 50.28% (1.41)% 16.32% 63.88% 37.73% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) $ 578,811 $ 517,179 $ 327,548 $323,540 $ 244,444 $144,875 Ratio to average net assets of: Expenses, net of waivers and reimbursements 2.19%(2) 2.24% 2.28% 2.32% 2.38% 2.46% Expenses, before waivers and reimbursements 2.19%(2) 2.24% 2.28% 2.32% 2.38% 2.46% Net investment loss, net of waivers and reimbursements (2.02)%(2) (2.13)% (2.21)% (1.76)% (1.76)% (2.22)% Net investment loss, before waivers and reimbursements (2.02)%(2) (2.13)% (2.21)% (1.76)% (1.76)% (2.22)% Portfolio turnover rate(1) 28% 50% 62% 58% 69% 57% (1)Not annualized for periods less than a year. (2)Annualized. See notes to financial statements. 77 MICRO CAP VALUE FUND -- FINANCIAL HIGHLIGHTS MARCH 31, 2004 (UNAUDITED) SIX MONTHS ENDED PERIOD ENDED MARCH 31 (UNAUDITED) SEPTEMBER 30 2004 2003(1) - -------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 2.09 $ 2.00 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss (0.02) (0.01) Net realized and unrealized gains on securities 0.65 0.10 ------------- ------------ TOTAL FROM INVESTMENT OPERATIONS 0.63 0.09 LESS DISTRIBUTIONS: Distributions from net realized gains --(2) -- ------------- ------------ TOTAL DISTRIBUTIONS -- -- ------------- ------------ NET ASSET VALUE, END OF PERIOD $ 2.72 $ 2.09 ============= ============ TOTAL RETURN(3) 30.24% 4.50% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) $ 91,293 $ 70,706 Ratio to average net assets of: Expenses, net of waivers and reimbursements(4) (5) 2.30% 2.50% Expenses, before waivers and reimbursements(4) 2.44% 2.73% Net investment loss, net of waivers and reimbursements(4) (1.96)% (1.97)% Net investment loss, before waivers and reimbursements(4) (2.10)% (2.20)% Portfolio turnover rate(3) 56% 4% (1) Inception date of the Fund was July 28, 2003. (2) Less than $0.005. (3) Not annualized for periods less than a year. (4) Annualized. (5) Prior to February 1, 2004, the Advisor had agreed to limit the total expenses of the Fund to 2.50% of average daily net assets. Beginning February 1, 2004, the Advisor has agreed to limit the total expenses to 2.25% of average daily net assets. As a result, the effective expense ratio net of waivers and reimbursements for the six months ended March 31, 2004 was 2.30%. See notes to financial statements. 78 SMALL CAP GROWTH FUND -- FINANCIAL HIGHLIGHTS MARCH 31, 2004 (UNAUDITED) SIX MONTHS ENDED YEAR ENDED MARCH 31 (UNAUDITED) SEPTEMBER 30 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 32.43 $ 23.83 $ 26.18 $ 34.89 $ 26.01 $ 20.79 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss (0.16) (0.28) (0.35) (0.15) (0.23) (0.20) Net realized and unrealized gains (losses) on securities+ 4.01 8.88 (1.55) (2.71) 11.82 8.49 ---------- ---------- -------- -------- --------- -------- TOTAL FROM INVESTMENT OPERATIONS 3.85 8.60 (1.90) (2.86) 11.59 8.29 LESS DISTRIBUTIONS: Distributions from net realized gains (0.17) --(1) (0.45) (5.85) (2.71) (3.07) ---------- ---------- -------- -------- --------- -------- TOTAL DISTRIBUTIONS (0.17) -- (0.45) (5.85) (2.71) (3.07) ---------- ---------- -------- -------- --------- -------- NET ASSET VALUE, END OF PERIOD $ 36.11 $ 32.43 $ 23.83 $ 26.18 $ 34.89 $ 26.01 ========== ========== ======== ======== ========= ======== TOTAL RETURN(2) 11.90% 36.15% (7.53)% (8.61)% 49.63% 48.96% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) $1,267,258 $1,134,398 $735,417 $553,416 $ 237,812 $145,915 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.21%(3) 1.25% 1.31% 1.36% 1.38% 1.44% Expenses, before waivers and reimbursements 1.21%(3) 1.25% 1.31% 1.36% 1.38% 1.44% Net investment loss, net of waivers and reimbursements (0.90)%(3) (1.08)% (1.25)% (0.83)% (0.84)% (0.79)% Net investment loss, before waivers and reimbursements (0.90)%(3) (1.08)% (1.25)% (0.83)% (0.84)% (0.79)% Portfolio turnover rate(2) 16% 63% 51% 40% 72% 46% + For 2001, includes $0.02 in redemption fees (see Note 2). (1) Less than $0.005. (2) Not annualized for periods less than a year. (3) Annualized. See notes to financial statements. 79 SMALL CAP VALUE FUND -- FINANCIAL HIGHLIGHTS MARCH 31, 2004 (UNAUDITED) SIX MONTHS ENDED YEAR ENDED MARCH 31 (UNAUDITED) SEPTEMBER 30 2004 2003 2002 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 4.62 $ 3.21 $ 3.76 $ 3.51 $ 2.43 $ 1.80 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss (0.01) (0.02) (0.02) -- (0.02) (0.04) Net realized and unrealized gains (losses) on securities 1.26 1.43 (0.43) 0.56 1.19 0.67 -------- ---------- -------- -------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS 1.25 1.41 (0.45) 0.56 1.17 0.63 LESS DISTRIBUTIONS: Distributions from net realized gains --(1) -- (0.10) (0.31) (0.09) -- -------- ---------- -------- -------- ------- ------- TOTAL DISTRIBUTIONS -- -- (0.10) (0.31) (0.09) -- -------- ---------- -------- -------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 5.87 $ 4.62 $ 3.21 $ 3.76 $ 3.51 $ 2.43 ======== ========== ======== ======== ======= ======= TOTAL RETURN(2) 27.09% 43.93% (12.35)% 18.04% 49.94% 35.00% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) $815,072 $ 651,261 $428,082 $487,095 $46,470 $16,770 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.74%(3) 1.78% 1.81% 1.92% 1.95% 1.95% Expenses, before waivers and reimbursements 1.74%(3) 1.78% 1.81% 1.92% 2.09% 2.18% Net investment loss, net of waivers and reimbursements (0.22)%(3) (0.43)% (0.44)% (0.31)% (1.02)% (1.54)% Net investment loss, before waivers and reimbursements (0.22)%(3) (0.43)% (0.44)% (0.31)% (1.16)% (1.77)% Portfolio turnover rate(2) 27% 69% 69% 41% 67% 106% (1) Less than $0.005. (2) Not annualized for periods less than a year. (3) Annualized. See notes to financial statements. 80 ULTRA GROWTH FUND -- FINANCIAL HIGHLIGHTS MARCH 31, 2004 (UNAUDITED) SIX MONTHS ENDED YEAR ENDED MARCH 31 (UNAUDITED) SEPTEMBER 30 2004 2003 2002 2001 2000 1999 --------- -------- --------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 25.43 $ 16.52 $ 19.15 $ 27.17 $ 20.02 $ 15.10 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss (0.21) (0.29) (0.25) (0.21) (0.25) (0.34) Net realized and unrealized gains (losses) on securities+ 3.32 9.20 (1.46) (2.42) 8.87 6.00 -------- -------- -------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS 3.11 8.91 (1.71) (2.63) 8.62 5.66 LESS DISTRIBUTIONS: Distributions from net realized gains (0.26) -- (0.92) (5.39) (1.47) (0.74) -------- -------- -------- ------- ------- ------- TOTAL DISTRIBUTIONS (0.26) -- (0.92) (5.39) (1.47) (0.74) -------- -------- -------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 28.28 $ 25.43 $ 16.52 $ 19.15 $ 27.17 $ 20.02 ======== ======== ======== ======= ======= ======= TOTAL RETURN(1) 12.28% 53.93% (9.74)% (10.89)% 46.66% 39.86% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) $562,853 $538,939 $277,404 $86,097 $56,282 $41,205 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.50%(2) 1.57% 1.71% 1.75% 1.75% 1.75% Expenses, before waivers and reimbursements 1.50%(2) 1.57% 1.71% 1.79% 1.82% 1.78% Net investment loss, net of waivers and reimbursements (1.41)%(2) (1.50)% (1.67)% (1.39)% (1.19)% (1.49)% Net investment loss, before waivers and reimbursements (1.41)%(2) (1.50)% (1.67)% (1.43)% (1.26)% (1.52)% Portfolio turnover rate(1) 34% 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). (1)Not annualized for periods less than a year. (2)Annualized. See notes to financial statements. 81 U.S. TREASURY FUND -- FINANCIAL HIGHLIGHTS MARCH 31, 2004 (UNAUDITED) SIX MONTHS ENDED YEAR ENDED MARCH 31 (UNAUDITED) SEPTEMBER 30 2004 2003 2002 2001 2000 1999 --------- -------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 13.68 $ 14.04 $ 12.97 $ 12.00 $ 11.68 $ 13.42 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.36 0.72 0.66 0.65 0.66 0.61 Net realized and unrealized gains (losses) on securities+ 0.31 (0.45) 1.18 0.88 0.39 (2.01) ------- ------- ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS 0.67 0.27 1.84 1.53 1.05 (1.40) LESS DISTRIBUTIONS: Dividends from net investment income (0.73) (0.63) (0.77) (0.56) (0.73) (0.28) Distributions from net realized gains -- -- -- -- -- (0.06) ------- ------- ------- ------- ------- ------- TOTAL DISTRIBUTIONS (0.73) (0.63) (0.77) (0.56) (0.73) (0.34) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 13.62 $ 13.68 $ 14.04 $ 12.97 $ 12.00 $ 11.68 ======= ======= ======= ======= ======= ======= TOTAL RETURN(1) 5.11% 2.17% 15.38% 12.89% 9.84% (10.65)% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) $52,953 $67,134 $83,879 $66,195 $58,198 $76,999 Ratio to average net assets of: Expenses, net of waivers and reimbursements 0.75%(2) 0.75% 0.75% 0.75% 0.75% 0.75% Expenses, before waivers and reimbursements 0.96%(2) 0.91% 0.98% 0.95% 0.97% 0.95% Net investment income, net of waivers and reimbursements 4.44%(2) 4.67% 5.51% 5.34% 5.35% 4.96% Net investment income, before waivers and reimbursements 4.23%(2) 4.51% 5.28% 5.14% 5.13% 4.76% Portfolio turnover rate(1) 4% 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). (1)Not annualized for periods less than a year. (2)Annualized. See notes to financial statements. 82 WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS MARCH 31, 2004 (UNAUDITED) 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, 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 4:00 p.m. Eastern 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, other illiquid securities and other securities for which market value quotations are not readily available. Fair value is defined as the amount the owner of a security might reasonably expect to receive upon a current sale. For each applicable investment that is fair valued, the Pricing Committee considers, to the extent applicable, various factors including, but not limited to, the financial condition of the company or limited partnership, operating results, prices paid in follow-on rounds, comparable companies in the public market, the nature and duration of the restrictions for holding the securities, and other relevant factors. Additionally, a Fund's investments will be valued at fair value by the Pricing Committee if the Advisor determines that an event impacting the value of an investment occurred between the closing time of a security's primary market or exchange (for example, a foreign exchange or market) and the time the Fund's share price is calculated. Significant events include, but are not limited to the following: significant fluctuations in domestic markets, foreign markets or foreign currencies; occurrences not directly tied to the securities markets such as natural disasters, armed conflicts or significant governmental actions; and major announcements affecting a single issuer or an entire market or market sector. In responding to a significant event, the Pricing Committee would determine the fair value of affected securities considering factors including, but not limited to: index options and futures traded subsequent to the close; ADRs, GDRs or other related receipts; currency spot or forward markets that trade after pricing of foreign exchange; other derivative securities traded after the close such as WEBs and SPDRs; and alternative market quotes on the affected securities. 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. Transactions in foreign denominated assets may involve greater risks than domestic transactions, including currency, political, 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 except that certain dividends from foreign securities may be recorded after the ex-dividend date based on when the Fund is informed of the dividend. Interest income and estimated expenses are accrued daily. Bond discount and premium are amortized using the interest method. To the extent dividends received from REIT securities include return of capital distributions, such distributions are recorded as a reduction in cost basis. Returns of capital in excess of cost basis, if any, are recorded as capital gains. SHORT SALES - To a limited extent, the Equity Funds may make short sales of securities. A short sale means a Fund 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, including over-the-counter options, on portfolio securities where the completion of the obligation is dependent upon the credit standing of another party. The risk in writing a call option is that a Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that a Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that a Fund pays a premium whether or not the option is exercised. A Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily and unrealized appreciation or depreciation is recorded. A Fund will realize a gain or loss upon expiration or closing of the option transaction. 83 WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED) When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. REPURCHASE AGREEMENTS -- The Funds may enter into repurchase agreements with recognized financial institutions and in all instances hold underlying securities as collateral with a value at least equal to the total repurchase price such financial institutions have agreed to pay. 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. 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 and distributions from net investment income and net realized gains are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. The Funds may utilize earnings and profits distributed to shareholders on redemption of shares as part of the dividend-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. 4.CAPITAL STOCK Transactions in shares of capital stock were as follows: SIX MONTHS ENDED MARCH 31, 2004 CORE GLOBAL SCIENCE INTERNATIONAL GROWTH & TECHNOLOGY GROWTH FUND FUND FUND ---- ---- ---- Shares sold 3,230,533 3,362,182 7,124,797 Dividends reinvested 21,847 -- -- Shares redeemed (3,239,624) (1,012,829) (528,448) --------- --------- --------- Net increase 12,756 2,349,353 6,596,349 ========= ========= ========= SIX MONTHS ENDED MARCH 31, 2004 MICRO MICRO SMALL CAP CAP VALUE CAP GROWTH FUND FUND FUND ---- ---- ---- Shares sold 1,240,744 432,483 3,244,253 Dividends reinvested 6,190,303 24,548 166,382 Shares redeemed (5,614,685) (608,921) (3,295,229) ---------- -------- ---------- Net increase (decrease) 1,816,362 (151,890) 115,406 ========== ======== ========== SIX MONTHS ENDED MARCH 31, 2004 SMALL ULTRA U.S. CAP VALUE GROWTH TREASURY FUND FUND FUND ---- ---- ---- Shares sold 9,555,911 1,389,746 606,127 Dividends reinvested 40,494 191,012 239,879 Shares redeemed (11,730,595) (2,869,222) (1,863,270) ----------- ---------- ---------- Net decrease (2,134,190) (1,288,464) (1,017,264) =========== ========== ========== YEAR ENDED SEPTEMBER 30, 2003 CORE GLOBAL SCIENCE INTERNATIONAL GROWTH & TECHNOLOGY GROWTH FUND FUND FUND ---- ---- ---- Shares sold 10,414,773 3,419,237 2,761,196 Dividends reinvested -- -- -- Shares redeemed (12,861,353) (1,879,780) (1,118,048) ----------- ---------- ---------- Net increase (decrease) (2,446,580) 1,539,457 1,643,148 =========== ========== ========== YEAR ENDED SEPTEMBER 30, 2003 MICRO MICRO SMALL CAP CAP VALUE CAP GROWTH FUND FUND* FUND ---- ----- ---- Shares sold 16,929,258 33,909,091 10,711,482 Dividends reinvested 4,859,976 -- 1,241 Shares redeemed (13,017,963) (143,427) (6,604,251) ----------- ---------- ---------- Net increase 8,771,271 33,765,664 4,108,472 =========== ========== ========== *Inception date of the Fund was July 28, 2003. YEAR ENDED SEPTEMBER 30, 2003 SMALL ULTRA U.S. CAP VALUE GROWTH TREASURY FUND FUND FUND ---- ---- ---- Shares sold 53,599,577 10,725,440 3,512,714 Dividends reinvested -- -- 259,080 Shares redeemed (46,012,597) (6,321,373) (4,839,225) ----------- ---------- ---------- Net increase (decrease) 7,586,980 4,404,067 (1,067,431) =========== ========== ========== 5.PURCHASES AND SALES OF SECURITIES Purchases and sales of investment securities, excluding U.S. government and short-term securities, for the six months ended March 31, 2004 are summarized below: 84 MARCH 31, 2004 (UNAUDITED) CORE GLOBAL SCIENCE INTERNATIONAL GROWTH & TECHNOLOGY GROWTH FUND FUND FUND ---- ---- ---- Purchases $ 329,274,773 $ 48,039,077 $ 95,705,013 Sales $(271,338,554) $(14,645,775) $(13,293,659) MICRO MICRO SMALL CAP CAP VALUE CAP GROWTH FUND FUND FUND ---- ---- ---- Purchases $ 165,668,855 $ 51,648,785 $ 230,037,766 Sales $(146,087,490) $(38,119,667) $(188,792,715) SMALL ULTRA CAP VALUE GROWTH FUND FUND ---- ---- Purchases $ 194,308,521 $ 189,185,521 Sales $(204,515,292) $(195,051,907) Purchases and sales of U.S. Government securities in the U.S. Treasury Fund were $2,222,578 and $16,399,714, respectively. 6.OPTIONS CONTRACTS WRITTEN The premium amount and the number of options contracts written during the six months ended March 31, 2004, were as follows: PREMIUM NUMBER OF AMOUNT CONTRACTS ------ --------- CORE GROWTH FUND Options outstanding at September 30, 2003 $ 457,965 3,000 Options written 446,379 2,000 Options closed -- -- Options exercised (904,344) (5,000) Options expired -- -- --------- ------ Options outstanding at March 31, 2004 $ -- -- ========= ====== 7.FEDERAL INCOME TAX INFORMATION At March 31, 2004, the cost of securities, excluding securities sold short, on a tax basis and gross unrealized appreciation and (depreciation) on investments for federal income tax purposes were as follows: CORE GLOBAL SCIENCE INTERNATIONAL GROWTH & TECHNOLOGY GROWTH FUND FUND FUND ---- ---- ---- Cost of Investments $1,191,840,443 $76,272,936 $128,647,079 ============== =========== ============ Gross unrealized appreciation 441,461,617 13,287,353 26,866,227 Gross unrealized (depreciation) (51,301,048) (5,746,591) (2,938,653) -------------- ----------- ------------ Net unrealized appreciation on investments $ 390,160,569 $ 7,540,762 $ 23,927,574 ============== =========== ============ MICRO MICRO SMALL CAP CAP VALUE CAP GROWTH FUND FUND FUND ---- ---- ---- Cost of Investments $394,466,430 $75,722,703 $978,167,621 ============ =========== ============ Gross unrealized appreciation 200,233,136 18,115,371 335,551,345 Gross unrealized (depreciation) (15,961,203) (1,434,774) (42,168,450) ------------ ----------- ------------ Net unrealized appreciation on investments $184,271,933 $16,680,597 $293,382,895 ============ =========== ============ SMALL ULTRA U.S. CAP VALUE GROWTH TREASURY FUND FUND FUND ---- ---- ---- Cost of Investments $588,350,278 $457,899,952 $46,783,005 ============ ============ =========== Gross unrealized appreciation 245,893,780 117,655,669 5,981,213 Gross unrealized (depreciation) (20,090,377) (20,537,653) (40,999) ------------ ------------ ----------- Net unrealized appreciation on investments $225,803,403 $ 97,118,016 $ 5,940,214 ============ ============ =========== 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. 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 ============ =========== =========== 85 WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 ============ ========== ============ 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 ============ =========== =========== For the year ended September 30, 2003, the Core Growth, Global Science & Technology, International Growth and U.S. Treasury Funds had federal income tax capital loss carry forwards of $46,940,430, $546,501, $226,990 and $7,148,034, respectively. Federal income tax capital loss carry forwards 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 carry forward for the Core Growth, Global Science & Technology and International Growth Funds expires in 2011. To the extent future gains are offset by capital loss carry forwards, such gains will not be distributed. 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 six months ended March 31, 2004 and fiscal year ended September 30, 2003 were as follows: CORE GROWTH FUND ----------------------------------------- Six Months Ended Year Ended March 31, 2004 September 30, 2003 -------------- ------------------ Ordinary income $ 849,650 $ -- Net long-term capital gains -- -- ----------- ------ Total $ 849,650 $ -- =========== ====== GLOBAL SCIENCE & TECHNOLOGY FUND ----------------------------------------- Six Months Ended Year Ended March 31, 2004 September 30, 2003 -------------- ------------------ Ordinary income $ -- $ -- Net long-term capital gains -- -- ------- ------ Total $ -- $ -- ======= ====== INTERNATIONAL GROWTH FUND ----------------------------------------- Six Months Ended Year Ended March 31, 2004 September 30, 2003 -------------- ------------------ Ordinary income $ -- $ -- Net long-term capital gains -- -- ------- ------ Total $ -- $ -- ======= ====== MICRO CAP FUND ------------------------------------------ Six Months Ended Year Ended March 31, 2004 September 30, 2003 -------------- ------------------ Ordinary income $ 2,759,021 $ -- Net long-term capital gains 40,853,142 22,295,887 ------------ -------------- Total $ 43,612,163 $ 22,295,887 ============ ============== 86 MARCH 31, 2004 (UNAUDITED) MICRO CAP VALUE FUND ------------------------------------------ Six Months Ended Period Ended March 31, 2004 September 30, 2003* -------------- ------------------- Ordinary income $ 59,072 $ -- Net long-term capital gains -- -- -------- ------ Total $ 59,072 $ -- ======== ====== *Inception date of the Fund was July 28, 2003. SMALL CAP GROWTH FUND ------------------------------------------ Six Months Ended Year Ended March 31, 2004 September 30, 2003 ---------------- ------------------ Ordinary income $ -- $ -- Net long-term capital gains 5,914,731 34,010 -------------- ----------- Total $ 5,914,731 $ 34,010 ============== =========== SMALL CAP VALUE FUND ------------------------------------ Six Months Ended Year Ended March 31, 2004 September 30, 2003 ---------------- ------------------ Ordinary income $ -- $ -- Net long-term capital gains 221,338 -- ---------- ----- Total $ 221,338 $ -- ========== ===== ULTRA GROWTH FUND --------------------------------------- Six Months Ended Year Ended March 31, 2004 September 30, 2003 ---------------- ------------------ Ordinary income $ 103,222 $ -- Net long-term capital gains 5,343,850 -- ------------- ------ Total $ 5,447,072 $ -- ============= ====== U.S. TREASURY FUND ----------------------------------------- Six Months Ended Year Ended March 31, 2004 September 30, 2003 ---------------- ------------------ Ordinary income $ 3,207,497 $ 3,484,505 Net long-term capital gains -- -- ----------- ----------- Total $ 3,207,497 $ 3,484,505 =========== =========== 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 six months ended March 31, 2004, 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 contractually agreed to limit until January 31, 2005 total expenses of the Core Growth, Global Science & Technology, International Growth, Micro Cap, Small Cap Growth, Small Cap Value, Ultra Growth and U.S. Treasury Funds to 1.50%, 1.95%, 1.95%, 2.50%, 1.50%, 1.95%, 1.75%, and 0.75% of average daily net assets, respectively, and will pay all expenses excluding interest, taxes and extraordinary expenses, in excess of such limitation. Effective February 1, 2004, the Advisor contractually agreed to limit the Micro Cap Value Fund's total expenses to 2.25% of average daily net assets through January 31, 2005. Prior to February 1, 2004, the Advisor had agreed to limit the total expenses of the Micro Cap Value Fund to 2.50% of average daily net assets. For the six months ended March 31, 2004, the Advisor reimbursed $3,958 for the Global Science & Technology Fund, $58,163 for the Micro Cap Value Fund and $59,937 for the U.S. Treasury Fund. ADMINISTRATION FEES -- The Funds have 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 .0425% 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 six months ended March 31, 2004, 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 paid administration fees to the Advisor of $239,831, $11,407, $16,563, $91,920, $13,963, $205,990, $121,322, $95,918 and $9,356, respectively. 9.TRANSACTIONS WITH AFFILIATES The following is an analysis of transactions for the six months ended March 31, 2004 in the Core Growth, Micro Cap, Small Cap Growth and Small Cap Value Funds with "affiliated companies" as defined by the Investment Company Act of 1940: 87 WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED) CORE GROWTH FUND Amount of Amount of Gain (Loss) Dividends Realized Credited on Sale Share Activity to Income for of Shares for ------------------------------------------------------- the six the six Balance Balance months ended months ended Security Name 9/30/03 Purchases Sales 3/31/04 3/31/04 3/31/04 - ------------- ------- --------- ----- ------- ------- ------- Anworth Mortgage Asset Corp. 1,984,575 -- 290,650 1,693,925* $1,309,820 $(4,514) Bimini Mortgage Management, Inc. -- 1,251,075 -- 1,251,075 $ 487,919 -- *No longer affiliated as of March 31, 2004. MICRO CAP FUND Amount of Amount of Gain (Loss) Dividends Realized Credited on Sale Share Activity to Income for of Shares for ------------------------------------------------------ the six the six Balance Balance months ended months ended Security Name 9/30/03 Purchases Sales 3/31/04 3/31/04 3/31/04 - ------------- ------- --------- ----- ------- ------- ------- Advanced Power Technology, Inc. 364,500 219,050 -- 583,550 -- -- CommerceWest Bank 95,000 -- 95,000 --* -- $ 327,679 Computer Access Technology Corp. 615,575 720,045 -- 1,335,620 -- -- Covalent Group, Inc. 825,000 123,500 -- 948,500 -- -- Encision, Inc. 433,075 -- 26,000 407,075 -- $ 592 inTEST Corp. 444,975 44,600 -- 489,575 -- -- IRIDEX Corp. 719,850 -- 70,825 649,025 -- $ (225,752) PSi Technologies Holdings, Inc. ADR 1,021,975 -- 20,530 1,001,445 -- $ (349,063) Rainbow Rentals, Inc. 404,400 -- 257,250 147,150* -- $1,401,582 *No longer affiliated as of March 31, 2004. SMALL CAP GROWTH FUND Amount of Amount of Gain (Loss) Dividends Realized Credited on Sale Share Activity to Income for of Shares for ----------------------------------------------------- the six the six Balance Balance months ended months ended Security Name 9/30/03 Purchases Sales 3/31/04 3/31/04 3/31/04 - ------------- ------- --------- ----- ------- ------- ------- AmSurg Corp.(1) 1,517,488 -- -- 1,517,488 -- -- (1)Adjusted for 3-for-2 split on March 25, 2004. SMALL CAP VALUE FUND Amount of Amount of Gain (Loss) Dividends Realized Credited on Sale Share Activity to Income for of Shares for -------------------------------------------------------- the six the six Balance Balance months ended months ended Security Name 9/30/03 Purchases Sales 3/31/04 3/31/04 3/31/04 - ------------- ------- --------- ----- ------- ------- ------- Bimini Mortgage Management, Inc. -- 642,325 -- 642,325 $250,507 -- Mobile Mini, Inc. 730,437 119,625 -- 850,062 -- -- USA Truck, Inc. 472,250 -- -- 472,250 -- -- Whitehall Jewellers, Inc. 805,568 -- -- 805,568 -- -- 88 March 31, 2004 (UNAUDITED) 10. RESTRICTED SECURITIES The Funds may own investments that were purchased through private placement transactions (or under Rule 144A) and cannot be sold without prior registration under the Securities Act of 1933 or may be limited due to certain restrictions. If and when such securities are registered, the costs of registering such securities are paid by the issuer. At March 31, 2004, the Funds held restricted common stocks, unless otherwise noted, as follows: ACQUISITION ACQUISITION FAIR VALUE AS % DATE COST VALUE OF NET ASSETS ------------------- ----------- ------------- ------------- CORE GROWTH FUND American Financial Realty Trust(1) 12/30/02 - 1/29/03 $ 447,435 $ 609,208 0.04% Bimini Mortgage Management, Inc.(1) 12/15/03 - 1/29/04 $18,766,125 18,766,125 1.19% Fieldstone Investment Corp.(1) 11/10/03 - 11/11/03 $13,355,388 16,998,231 1.07% ------------- ---- $ 36,373,564 2.30% GLOBAL SCIENCE & TECHNOLOGY FUND Montagu Newhall Global Partners II-B, L.P.(4) 10/10/03 - 3/10/04 $ 50,000 $ 50,000 0.06% SEZ Holding AG(3) 3/31/04 -- -- -- SiRF Technology Holdings, Inc., Series H(2) 12/20/01 $ 277,875 277,875 0.32% SiRF Technology Holdings, Inc.(3) 1/11/02 -- -- -- Vanguard Response Systems, Inc. PIPE(5) 3/5/04 $ 282,957 293,696 0.34% Vanguard Response Systems, Inc.(3) 3/5/04 -- -- -- Xtera Communications, Inc.(2) 9/3/03 $ 7,076 7,076 0.01% ------------- ---- $ 628,647 0.73% INTERNATIONAL GROWTH FUND SEZ Holding AG(3) 3/31/04 -- $ -- -- Vanguard Response Systems, Inc. PIPE(5) 3/5/04 $ 235,058 243,979 0.16% Vanguard Response Systems, Inc.(3) 3/5/04 -- -- -- ------------- ---- $ 243,979 0.16% MICRO CAP FUND Fieldstone Investment Corp.(1) 11/10/03 - 11/11/03 $ 2,632,803 3,350,944 0.58% IMPCO Technologies, Inc. PIPE(5) 12/17/03 $ 1,376,000 1,141,392 0.19% SEZ Holding AG(3) 3/31/04 -- -- -- Vanguard Response Systems, Inc. PIPE(5) 3/5/04 $ 1,886,491 1,958,091 0.34% Vanguard Response Systems, Inc.(3) 3/5/04 -- -- -- ------------- ---- $ 6,450,427 1.11% MICRO CAP VALUE FUND Bimini Mortgage Management, Inc.(1) 12/15/03 - 1/29/04 $ 1,074,000 $ 1,074,000 1.18% CorVu Corp. PIPE(5) 11/17/03 $ 500,000 619,400 0.68% CorVu Corp.(3) 11/17/03 -- -- -- EuroZinc Mining Corp. PIPE(5) 2/26/04 $ 602,864 858,481 0.94% EuroZinc Mining Corp.(3) 2/26/04 -- 83,079 0.09% Fieldstone Investment Corp.(1) 11/10/03 - 11/11/03 $ 732,436 932,181 1.02% 89 WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS March 31, 2004 (UNAUDITED) (CONTINUED) ACQUISITION ACQUISITION FAIR VALUE AS % DATE COST VALUE OF NET ASSETS ------------------- ----------- ------------- ------------- MICRO CAP VALUE FUND (CONTINUED) Franklin Bank Corp.(1) 9/24/03 - 10/20/03 $ 742,675 $ 1,102,201 1.20% Medical Properties Trust, Inc.(1) 3/31/04 $ 362,500 362,500 0.40% Patient Infosystems, Inc. PIPE(5) 2/24/04 $ 500,000 482,775 0.53% ------------- ---- $ 5,514,617 6.04% SMALL CAP GROWTH FUND Montagu Newhall Global Partners II-B, L.P.(4) 10/10/03 - 3/10/04 $ 500,000 $ 500,000 0.04% SiRF Technology Holdings, Inc., Series H(2) 12/20/01 $ 2,616,120 2,616,120 0.21% SiRF Technology Holdings, Inc.(3) 1/11/02 -- -- -- ------------- ---- $ 3,116,120 0.25% SMALL CAP VALUE FUND American Financial Realty Trust(1) 9/4/02 - 12/6/02 $ 6,095,965 $ 9,891,020 1.21% Arbor Realty Trust, Inc.(3) 6/26/03 $ 5,626,875 6,833,277 0.84% Bimini Mortgage Management, Inc.(1) 12/15/03 - 1/29/04 $ 9,634,875 9,634,875 1.18% Fieldstone Investment Corp.(1) 11/10/03 - 11/11/03 $ 6,700,984 8,528,713 1.05% Medical Properties Trust, Inc.(1) 3/31/04 $ 3,255,000 3,255,000 0.40% Vanguard Response Systems, Inc. PIPE(5) 3/5/04 $ 857,630 890,181 0.11% Vanguard Response Systems, Inc.(3) 3/5/04 -- -- -- ------------- ---- $ 39,033,066 4.79% ULTRA GROWTH FUND IMPCO Technologies, Inc. PIPE(5) 12/17/03 $ 1,472,000 $ 1,221,024 0.22% IQ4Hire, Inc.(2) 9/7/00 $ 110,000 440 -- Montagu Newhall Global Partners II-B, L.P.(4) 10/10/03 - 3/10/04 $ 450,000 450,000 0.08% SiRF Technology Holdings, Inc., Series H(2) 12/20/01 $ 806,000 806,000 0.14% SiRF Technology Holdings, Inc.(3) 1/11/02 -- -- -- Xtera Communications, Inc.(2) 9/3/03 $ 99,065 99,065 0.02% ------------- ---- $ 2,576,529 0.46% (1) Common stock. Rule 144A Security. (2) Preferred Stock. (3) Rights/Warrants/Units. (4) Limited Partnership Interests. (5) Private Investment in a Public Equity. 11. PURCHASE COMMITMENTS In September 2003, the Global Science & Technology, Small Cap Growth and Ultra Growth Funds entered into subscription agreements to acquire limited partnership interests in Montagu Newhall Global Partners II, L.P. The remaining commitment amounts at March 31, 2004 are $450,000, $4,500,000 and $4,050,000, respectively. Securities held by the Funds have been designated to meet these purchase commitments. 90 WASATCH FUNDS -- DIRECTORS AND OFFICERS March 31, 2004 NAME, ADDRESS, POSITION(S) HELD TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) AND AGE WITH FUND LENGTH OF TIME SERVED DURING PAST 5 YEARS - ------------------------------------ ---------------- --------------------- ------------------------------------- INDEPENDENT DIRECTORS: JAMES U. JENSEN, J.D., MBA Director Indefinite Vice President, Corporate Development NPS Pharmaceuticals, Inc. Served as Director and Legal Affairs, and Secretary, NPS 420 Chipeta Way since 1986 Pharmaceuticals, Inc. since 1991. Salt Lake City, UT 84108 Age: 59 WILLIAM R. SWINYARD, PH.D. Director Indefinite Professor of Business Management and Marriott School of Management Served as Director Holder of the Fred G. Meyer Chair of 624 Tanner Building since 1986 Marketing, Brigham Young University Brigham Young University since 1978. Provo, UT 84602 Age: 63 JONATHAN F. ZESCHIN, CFP(TM) Director Indefinite President and Founder of ESSENTIAL 1777 S. Harrison Street Served as Director Advisers, Inc., a wealth management Skydeck since June 2002 and investment advisory firm; prior Denver, CO 80210 to founding ESSENTIAL was Managing Age: 50 Partner at JZ Partners LLC, a business consulting firm; President of Founders Asset Management from 1995 - 1998. INTERESTED DIRECTORS*: SAMUEL S. STEWART, JR., PH.D., CFA President, Indefinite Chairman of the Board and Director 150 Social Hall Avenue Chairman of Served as President, of Research for Wasatch Advisors, Inc. 4th Floor the Board and Chairman of the (the "Advisor") since 1975; Professor Salt Lake City, UT 84111 Director Board and Director of Finance at the University of Utah Age: 61 since 1986 from 1975 - 2000. JEFF S. CARDON, CFA Vice President Indefinite President and Treasurer for the 150 Social Hall Avenue and Director Served as Vice Advisor since 1999; Director of the 4th Floor President and Advisor since 1985; Security Analyst Salt Lake City, UT 84111 Director since for the Advisor since 1980. Age: 46 1986 OFFICER: VENICE F. EDWARDS, CFA Secretary/ Indefinite Director of Compliance for the 150 Social Hall Avenue Treasurer Served as Advisor since 1995 and Secretary of 4th Floor Secretary/Treasurer the Advisor since 1999; Portfolio Salt Lake City, UT 84111 since 1996 Manager for the Advisor Age: 54 from 1983 - 1995. NUMBER OF PORTFOLIOS IN COMPLEX NAME, ADDRESS, POSITION(S) HELD OVERSEEN BY OTHER DIRECTORSHIPS AND AGE WITH FUND DIRECTOR HELD BY DIRECTOR - ------------------------------------ ---------------- -------------------- ------------------- INDEPENDENT DIRECTORS: JAMES U. JENSEN, J.D., MBA Director 9 Private companies and NPS Pharmaceuticals, Inc. foundations only 420 Chipeta Way Salt Lake City, UT 84108 Age: 59 WILLIAM R. SWINYARD, PH.D. Director 9 None Marriott School of Management 624 Tanner Building Brigham Young University Provo, UT 84602 Age: 63 JONATHAN F. ZESCHIN, CFP(TM) Director 9 Board of Trustees 1777 S. Harrison Street ICON Funds Skydeck Denver, CO 80210 Age: 50 INTERESTED DIRECTORS*: SAMUEL S. STEWART, JR., PH.D., CFA President, 9 None 150 Social Hall Avenue Chairman of 4th Floor the Board and Salt Lake City, UT 84111 Director Age: 61 JEFF S. CARDON, CFA Vice President 9 None 150 Social Hall Avenue and Director 4th Floor Salt Lake City, UT 84111 Age: 46 OFFICER: VENICE F. EDWARDS, CFA Secretary/ N/A None 150 Social Hall Avenue Treasurer 4th Floor Salt Lake City, UT 84111 Age: 54 *INTERESTED DIRECTORS SERVE AS DIRECTORS AND OFFICERS OF WASATCH ADVISORS, INC. PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that Wasatch uses to vote proxies related to the Funds' portfolio securities is set forth in the Funds' Statement of Additional Information which is available without charge, upon request, by calling 800.551.1700 or on the Funds' web site at WWW.WASATCHFUNDS.COM and on the SEC's web site at WWW.SEC.GOV. Wasatch Funds' proxy voting record will be available on the Funds' web site at WWW.WASATCHFUNDS.COM and the SEC's web site at WWW.SEC.GOV no later than August 31 for the prior 12 months ending June 30. 91 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. PORTFOLIO OF INVESTMENTS The holdings of each Wasatch Fund are detailed in the "Portfolio 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 (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 93. 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 92 MARCH 31, 2004 the change in appreciation or depreciation in the value of investments a Fund continues to hold. DIVIDENDS are distributed by Wasatch Funds to shareholders when Fund investments have earned income in excess of net expenses or when capital gains in excess of capital losses are realized from the sale of securities. Most shareholders choose to reinvest their dividends and capital gain distributions. Each Fund is required by Internal Revenue 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 page 92. The difference between the Net asset value, beginning of period and the Net asset value, end of period in the Financial Highlights is the change in value of a Fund's shares over the reporting period, but not its total return. INCOME (LOSS) FROM INVESTMENT OPERATIONS shows how the 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. HOW TO CONTACT WASATCH ONLINE WWW.WASATCHFUNDS.COM EMAIL SHAREHOLDERSERVICE@WASATCHFUNDS.COM Our email correspondence department responds to emails Monday through Friday, from 8:00 a.m. to 4:00 p.m. Central Time (CT). TELEPHONE 800.551.1700 Shareholder Services Representatives are available Monday through Friday, from 7:00 a.m. to 7:00 p.m. Central Time (CT). Our automated teleresponse service is available 24 hours a day. U.S. MAIL WASATCH FUNDS P.O. Box 2172 Milwaukee, WI 53201-2172 OVERNIGHT DELIVERY WASATCH FUNDS 803 West Michigan Street, Suite A Milwaukee, WI 53233-2301 93 ITEM 2: CODE OF ETHICS. Not required. ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT. Not required. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not required. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Not required. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of this Form N-CSR based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 as amended (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 last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Not required. (a)(2) The certifications required by Rule 30a-2 of the 1940 Act are attached hereto. (a)(3) Not applicable. (b) The certifications required by Rule 30a-2(b) of the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WASATCH FUNDS, INC. By: /s/ Samuel S. Stewart, Jr. -------------------------- Samuel S. Stewart, Jr. President (principal executive officer) of Wasatch Funds, Inc. Date: May 28, 2004 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: May 28, 2004 By: /s/ Venice F. Edwards ------------------------------- Venice F. Edwards Secretary/Treasurer (principal financial and accounting officer) of Wasatch Funds, Inc. Date: May 28, 2004