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. Eric F. Fess, Esq.
Wasatch Funds, Inc. Chapman & Cutler, LLP
150 Social Hall Avenue, 4th Floor 111 West Monroe Street
Salt Lake City, Utah 84111 Chicago, IL 60603
Registrant's telephone number, including area code: (801) 553-0777
Date of fiscal year end: September 30
Date of reporting period: March 31, 2005
ITEM 1: REPORT OF SHAREHOLDER
SEMI-ANNUAL REPORT
MARCH 31, 2005
[PICTURE]
[WASATCH FUNDS LOGO]
CORE GROWTH FUND - GLOBAL SCIENCE & TECHNOLOGY FUND - HERITAGE GROWTH FUND
INTERNATIONAL GROWTH FUND - INTERNATIONAL OPPORTUNITIES FUND - MICRO CAP FUND
MICRO CAP VALUE FUND - SMALL CAP GROWTH FUND - SMALL CAP VALUE FUND
ULTRA GROWTH FUND - WASATCH - HOISINGTON U.S. TREASURY FUND
Cover Painting: "Zion-Virgin River"
by Vaughn S. Fairbanks
801.256.0386
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
HERITAGE GROWTH FUND ...................................................... 8
Management Discussion .................................................... 8
Portfolio Summary ........................................................ 9
INTERNATIONAL GROWTH FUND ................................................. 10
Management Discussion .................................................... 10
Portfolio Summary ........................................................ 11
INTERNATIONAL OPPORTUNITIES FUND .......................................... 12
Management Discussion .................................................... 12
Portfolio Summary ........................................................ 13
MICRO CAP FUND ............................................................ 14
Management Discussion .................................................... 14
Portfolio Summary ........................................................ 15
MICRO CAP VALUE FUND ...................................................... 16
Management Discussion .................................................... 16
Portfolio Summary ........................................................ 17
SMALL CAP GROWTH FUND ..................................................... 18
Management Discussion .................................................... 18
Portfolio Summary ........................................................ 19
SMALL CAP VALUE FUND....................................................... 20
Management Discussion .................................................... 20
Portfolio Summary ........................................................ 21
ULTRA GROWTH FUND.......................................................... 22
Management Discussion .................................................... 22
Portfolio Summary ........................................................ 23
WASATCH-HOISINGTON U.S. TREASURY FUND...................................... 24
Management Discussion .................................................... 24
Portfolio Summary ........................................................ 25
OPERATING EXPENSES......................................................... 26
SCHEDULE OF INVESTMENTS.................................................... 28
STATEMENTS OF ASSETS AND LIABILITIES ...................................... 56
STATEMENTS OF OPERATIONS .................................................. 58
STATEMENTS OF CHANGES IN NET ASSETS........................................ 60
FINANCIAL HIGHLIGHTS....................................................... 65
NOTES TO FINANCIAL STATEMENTS ............................................. 71
DIRECTORS AND OFFICERS .................................................... 80
SUPPLEMENTAL INFORMATION .................................................. 81
Proxy Voting Policies, Procedures and Record ............................. 81
Quarterly Portfolio Holdings Disclosure on Form N-Q ...................... 81
Board Deliberations Regarding Approval of Advisory Contracts ............. 81
SERVICE PROVIDERS ......................................................... 85
GUIDE TO UNDERSTANDING FINANCIAL STATEMENTS ............................... 86
CONTACT WASATCH ........................................................... 87
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
President of Wasatch Funds
FELLOW SHAREHOLDERS:
All things considered, I'm feeling fine.
A year ago the economy was gaining momentum, but there was high anxiety
over the lack of jobs being created. You couldn't pick up the New York Times,
turn on CNBC or CNN, or talk to your neighbor without encountering a discussion
about the "jobless recovery."
When positive job reports eventually emerged, the naysayers promptly
changed their tune. Forget jobs! Jobs are yesterday's news! Inflation is the
enemy!
Half a dozen rate hikes later, midway through 2005, the economy continues
to grow apace. And, though you might suspect otherwise, long-term interest rates
(10-years out) are flat, which means the smart money is not losing sleep over
the threat of inflation. Asked to explain this seeming contradiction, the
estimable Alan Greenspan, Chairman of the Federal Reserve, offered this candid
assessment:
"It's a conundrum," Mr. Greenspan replied.
If Alan Greenspan doesn't know the answer to that question -- why the
long-term prospects for inflation are practically non-existent despite the run
up in short-term rates -- then I'm fairly confident that I don't know this
either. That said, after three decades in the investment business, I'm willing
to venture an educated guess:
We live in a global economy. Your golf clubs are made in China, your TV in
Korea, your shoes in Brazil, your jeans in Indonesia. When you dial in to get
help with your online Internet account, you are probably conversing with a
computer technician in Bombay. While the prevailing wage rate for U.S. workers
is around $20 per hour, the same job is being done in China, Indonesia, India
and Mexico (and a lot of other places) for a whole lot less. All of this has a
decidedly deflationary effect on the economy.
Hence, just as long as we can continue to get access to these goods and
services at bargain basement costs -- expedited by easier access to trade and
the kind of communication technology that makes Beijing as accessible as Salt
Lake City -- there will be downward pressure on prices. Even a dramatic rise in
the price of oil during the past year hasn't been enough to put a damper on the
economy's expansion.
So, I'm feeling reasonably bullish about our nation's prospects. We have
moderate growth and moderate prices. We had a very healthy fourth quarter in
2004. And while we've had a slow first quarter in 2005, as I've said time and
again, one quarter doesn't amount to much in the investment business when you
are in it for the long haul.
If the economy is so healthy, you might ask, then why did the market take
such a tumble in the first quarter?
The fact is (and history testifies to this fact) that the stock market is
often fickle. Even when most economic metrics are encouraging, the market can
take a momentary nosedive. Relax. Learn to accept it. It's often short-lived.
Remember: It's the long-term view that makes sense -- and money
(hopefully).
WASATCH FUNDS
So how have we done over the past six months? OK, I'd say.
Like the rest of the mutual fund world, we had a strong fourth quarter
propelled by a postelection tide in the market that seemed to lift all stocks.
In my opinion, an investor who finished the year with a double digit return
ought to be a happy investor indeed. And most of our funds did, though not all.
While the first quarter of 2005 was a rough one in the markets overall
(only our U.S. Treasury Fund finished in positive territory), we derive some
satisfaction from knowing that most of our funds beat their benchmarks. That's a
fancy way of saying that we probably lost less money for our shareholders than
most of our competitors.
Still, despite mostly positive performance in one quarter followed by
negative performance the next, nothing really changes for us in terms of how we
manage each fund. No matter what the markets, or our funds, are doing in the
short term, we still look at investing the same way: can the companies we own
consistently grow their earnings for the next three to five years? If the answer
to that question is yes, then what happens from quarter to quarter doesn't
matter as much.
2
MARCH 31, 2005
The most important thing we've learned in almost 30 years of doing this is
that we can't predict what the market will do in the short run with any
certainty, but we can find companies whose earnings are growing at a healthy
clip. If earnings are growing, then we believe long-term performance will take
care of itself.
With that in mind, how are our funds positioned for long-term success? I
think most of our portfolio managers would answer that question the same way.
They'd say that earnings growth in their funds is pretty strong, a little slower
than last year, but better than we had forecasted (we rarely use Wall Street's
earnings estimates). They'd also say that values in general are higher than
they'd like, but the beating the market took in the first quarter means that
it's easier to find stocks we like and that we think are attractively valued.
And for a Wasatch portfolio manager, that last point is what it's all
about: Buying quality companies with strong earnings growth potential at
reasonable prices.
Sincerely,
/s/ Samuel S. Stewart, Jr.
- ---------------------------------------
Samuel S. Stewart, Jr.
President of Wasatch Funds
3
CORE GROWTH FUND -- MANAGEMENT DISCUSSION MARCH 31, 2005
[PHOTO OF JB TAYLOR]
JB TAYLOR
PORTFOLIO MANAGER
[PHOTO OF PAUL LAMBERT]
PAUL LAMBERT
PORTFOLIO MANAGER
SIX MONTH REVIEW
The Wasatch Core Growth Fund returned 11.91% in the six months ended March
31, 2005. The Fund's return was higher than the 8.00% return posted by the
Russell 2000 Index, a widely used benchmark for the performance of small company
stocks. Performance was broad-based during the period, as the Fund and the Index
generated positive returns in every sector in which we were invested.
The Fund's health care sector, continuing an upward trend that began
following last November's election, made a significant contribution to our
outperformance relative to the Russell 2000 Index. Pacificare Health Systems, a
managed care provider, was the top contributor in this sector. Pacificare posted
solid earnings results for the fourth quarter and 2004. Subsequent to the end of
the period, the company reported a Medicare rate increase that positions the
company well for future growth. The announcement that one of our companies, the
specialty retail pharmaceutical services provider Accredo Health, would be
acquired at a significant premium, also helped drive results. Our investment in
AMERIGROUP, a health care provider, also did well. The company reported
double-digit 2004 earnings growth largely as a result of adding members and
keeping down expenses, themes we look for in health care services companies.
In the producer durables sector, all of the Fund's investments were in
homebuilding companies. Although our weighting in this sector was nearly
identical to the Index, the performance of these companies helped us outperform
the Index's producer durables sector. This underscores how important
fundamental, company-by-company research is to Wasatch's investment process. We
believe we have been successful in this sector because we have identified
several companies whose management skills have differentiated them from the rest
of the industry.
The Fund's consumer discretionary stocks were up nicely. Our overweighting
helped us pull ahead of the Index sector benchmark. O'Reilly Automotive, a
provider of aftermarket automobile parts, was our top performer during the
period, reflecting the company's consistently strong earnings. Over the past two
quarters, Copart, a company that is in the salvaged vehicle auction business,
has alternately led and lagged in the Fund. Copart did well over the six months,
although recent profit taking in the stock has created some price volatility.
SCP Pool, a wholesale distributor of swimming pool supplies, equipment and
related leisure products, reported strong growth and was a contributor to our
outperformance in this sector.
Financial services stocks put in a relatively weak showing during the
period. Our overweighting amplified our underperformance of the benchmark in
this sector. In a sharp reversal from the fourth quarter of 2004, financials
lagged during much of the first quarter of 2005 mostly as a result of rising
fears over short-term interest rates. Our biggest detractor in this sector and
from the Fund's return overall was Doral Financial, one of the largest mortgage
finance companies operating in Puerto Rico. Doral's weak stock price was mostly
due to concerns relating to accounting for complex non-cash earnings
transactions. Doral has several attributes that we like to see in a company:
high inside ownership, dominant market position and an ability to influence
pricing. However, following a recent meeting with management, we are
re-evaluating our investment in Doral. Partly offsetting these results, we had
good returns from two of our India-based banks -- HDFC Bank and UTI Bank. India
boasts one the world's fastest growing consumer classes and in our view, banks
should profit handsomely from this trend.
A substantial portion of the return generated by the Russell 2000 Index
was attributable to the energy and materials and processing sectors. Generally
speaking, we have had virtually no exposure to these commodity-related
industries for some time. To be sure, we have missed not having exposure to a
couple of the best performing sectors over the last year. However, as bottom-up
investors as compared to sector-driven investors, we are diligently trying to
find businesses that have sustainable earnings growth that is not dependent on
the direction of commodity prices.
OUTLOOK
The business prospects of the Fund's companies look good and valuations
seem reasonable. Earnings growth, while slowing somewhat, is still within a
comfortable range. As of March 31, the earnings growth for our holdings exceeded
our expectations. While we are cautious that earnings growth in the short term
might moderate, in our opinion, the Fund seems well positioned for growth. We
are also reducing the number of holdings, to concentrate more on the investments
that we believe have the best potential to help you achieve the long-term
investment results you seek.
Thank you for the opportunity to manage your assets.
4
CORE GROWTH FUND -- PORTFOLIO SUMMARY MARCH 31, 2005
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
WASATCH CORE GROWTH FUND 6.94% 17.49% 17.61%
Russell 2000 Index 5.41% 4.01% 10.43%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT
WWW.WASATCHFUNDS.COM OR CALL 800.551.1700. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. THE ADVISOR HAS ABSORBED, CURRENTLY OR IN THE PAST, CERTAIN
FUND EXPENSES, WITHOUT WHICH TOTAL RETURNS WOULD HAVE BEEN LOWER.
Investments in 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
- ------ ------- ---------
ACF AMERICREDIT CORP. 4.26%
Subprime automobile lender.
ORLY O'REILLY AUTOMOTIVE, INC. 4.05%
Automotive parts retailer/distributor.
CPRT COPART, INC. 3.14%
Vehicle salvage services.
MDC M.D.C. HOLDINGS, INC. 2.91%
Homebuilder.
FNF FIDELITY NATIONAL FINANCIAL, INC. 2.72%
Title insurance.
CBH COMMERCE BANCORP, INC. 2.72%
Commercial banking, corporate trust and
insurance brokerage services.
DRL DORAL FINANCIAL CORP. 2.46%
Puerto Rican bank.
NTY NBTY,INC. 2.34%
Nutritional supplements.
NSM NATIONAL SEMICONDUCTOR CORP. 2.32%
Analog semiconductors.
DLTR DOLLAR TREE STORES, INC. 2.30%
Dollar discount stores.
* 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]
<Table>
FINANCIAL SERVICES 30.1%
CONSUMER DISCRETIONARY 23.9%
HEALTH CARE 14.8%
TECHNOLOGY 9.2%
PRODUCER DURABLES 9.0%
FINANCIALS 8.4%
CONSUMER STAPLES 3.0%
INFORMATION TECHNOLOGY 1.0%
AUTOS & TRANSPORTATION 0.6%
</Table>
**Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
[LINE GRAPH]
DATE WASATCH CORE GROWTH FUND RUSSELL 2000 INDEX
- ---------- ------------------------ ------------------
3/31/1995 10,000 10,000
3/31/1996 13,905 12,905
3/31/1997 14,648 13,564
3/31/1998 20,915 19,263
3/31/1999 18,182 16,131
3/31/2000 22,614 22,147
3/31/2001 31,818 18,753
3/31/2002 44,772 21,375
3/31/2003 28,982 15,611
3/31/2004 47,337 25,576
3/31/2005 50,621 26,960
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, 2005
[PHOTO OF AJAY KRISHNAN]
AJAY KRISHNAN, CFA
PORTFOLIO MANAGER
SIX MONTH REVIEW
For the six months ended March 31,2005, the Wasatch Global Science &
Technology Fund gained 10.84% and outperformed its benchmarks. In the same
period, the Lipper Science & Technology Index (Lipper Index) gained 6.19%, the
Russell 2000 Technology Index gained 2.78% and the Nasdaq Composite Index gained
5.73%.
Over the past six months, we have increased our global holdings as we
found better investment opportunities at more attractive prices outside of the
United States. As of March 31, we were well diversified globally and this
contributed to our outperformance of the Lipper Index during the period. The
Fund had nearly 25% more of its assets invested in companies outside of the U.S.
than the Lipper Index.
It is worth noting that our country and sector weightings are a byproduct
of our company-by-company research and investments rather than an allocation
strategy.
Over the last six months, electronic technology contributed the most to
the Fund's return. Despite having over 45% assets invested in electronic
technology, the Fund was still underweight compared to the Lipper Index, which
had over 50%. We outperformed the Lipper Index in this sector due to the better
performance of our holdings. The Fund's top contributor in electronic technology
was Tessera Technologies, a developer of semiconductor packaging technology.
Tessera's stock price rose dramatically after the company overcame a challenge
to its intellectual property rights. QLogic, a developer of semiconductors and
systems for storage networking, and PLX Technology, a maker of semiconductors to
accelerate and manage data transfer, were also strong performers. inTest, Micrel
and Sipex were notable detractors. Weakness in the semiconductor market was the
main reason for the stock price decline of inTest. Micrel struggled due to
sluggish demand and weak Asian end markets for handsets. A management change at
Sipex caused its stock price to decline.
Health services was also a strong performing area for the Fund. With a
nearly 5% weighting in health services, the Fund outperformed the Lipper Index,
which had less than 1% in this area. The driver of our outperformance in health
services and the biggest contributor to the Fund's performance overall was
Accredo Health, a company that specializes in distributing pharmaceuticals and
providing services for individuals with chronic diseases. In February, the
company announced that it had received an offer from Medco Health Solutions to
be acquired. This announcement sent Accredo's stock price dramatically higher
and we reduced our position to capture profits and limit the potential downside.
We feel the acquisition offer confirmed our assessment of the company's quality
and intrinsic value and rewarded our decision to hang on through a period of
substantial stock price volatility.
The Fund's weighting in technology services was roughly one third that of
the Lipper Index. Our holdings were concentrated in information technology
services companies, while the Lipper Index had a heavy weighting in packaged
software companies. The Fund's technology services holdings performed better
than those in the Lipper Index, but our significant underweighting meant that
the contribution of technology services was about the same to the Fund as to the
Lipper Index. Cognizant Technology Solutions, an outsource provider of
professional technology services, was the largest contributor in technology
services. Two packaged software companies, Verisity and Nassda, announced that
they had received acquisition offers and the subsequent stock price appreciation
provided a significant boost to the Fund's performance.
Two medical specialties companies -- Cyberonics and Biacore -- drove the
Fund's outperformance in health technology where we were significantly
overweighted compared to the Lipper Index. Cyberonics' stock price was up
dramatically on news that the U.S. Food & Drug Administration (FDA) had reversed
an earlier decision and released a letter stating that it considered a
neuro-stimulation device for treating depression to be approvable. Biacore, a
Swedish maker of tools for life science research, benefited from restructuring
and the announcement of a new product for protein interaction analysis.
The shares of EPIX Pharmaceuticals, a manufacturer of imaging contrast
agents, lost nearly two-thirds their value after the FDA requested additional
clinical studies on a new product. The stock price of Abaxis weakened as the
company realigned its sales force. General weakness in biotechnology stock
prices caused Ista Pharmaceuticals and Angiotech Pharmaceuticals to detract from
the Fund's performance. Ista also announced a secondary offering that
contributed to its stock price weakness.
The Fund's biggest detractor was Kintera, a company that provides software
to help non-profit organizations increase donations. The company met
expectations, but management created some confusion when communicating their
accounting for several acquisitions. We feel we have a good understanding of the
business and remain confident in our investment.
OUTLOOK
Globally, our research has turned up many interesting science and
technology companies that have world wide reach often in spite of their smaller
size. We expect to continue increasing the Fund's weighting in companies outside
of the U.S., as our recent research trips have shown that conditions for
investing remain favorable in many countries around the world.
While science and technology stocks will always be affected by global
economic conditions and the strength or weakness of business and consumer
spending, we believe that science and technology companies will continue to be
important drivers of global economic growth.
Staying true to our investment discipline and taking care not to overpay
for stocks are ways we believe we can help you to achieve your long-term
investment objectives.
We appreciate your investment in the Wasatch Global Science & Technology
Fund.
6
GLOBAL SCIENCE & TECHNOLOGY FUND -- PORTFOLIO SUMMARY MARCH 31, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 12/19/00
------- ------- ---------------
WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND -6.41% N/A 3.27%
Lipper Science & Technology Index -5.51% N/A -14.56%
Russell 2000 Technology Index -15.48% N/A -13.02%
Nasdaq Composite Index 0.82% N/A -5.74%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT
WWW.WASATCHFUNDS.COM OR CALL 800.551.1700. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. THE ADVISOR HAS ABSORBED, CURRENTLY OR IN THE PAST, CERTAIN
FUND EXPENSES, WITHOUT WHICH TOTAL RETURNS WOULD HAVE BEEN LOWER.
Investments in 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
- ------ ------- ---------
OIIM 02MICRO INTERNATIONAL LTD. 3.54%
(Cayman Islands) Semiconductors to
increase power efficiency.
NXTP NEXTEL PARTNERS, INC., CLASS A 2.41%
Wireless service provider.
PLXT PLX TECHNOLOGY, INC. 2.26%
Semiconductors to accelerate and manage
data transfer.
CYBX CYBERONICS, INC. 2.17%
Implantable medical devices.
NSM NATIONAL SEMICONDUCTOR CORP. 2.12%
Analog semiconductors.
SRX SRA INTERNATIONAL, INC., CLASS A 2.09%
Information technology services for
government agencies.
HDFCIN HOUSING DEVELOPMENT FINANCE
CORP. LTD. (India) Mortgage lender. 2.07%
MCRL MICREL, INC. Analog semiconductors 2.06%
for cell phones and laptops.
QLGC QLOGIC CORP. 1.99%
Semiconductors for storage networking.
CTSH COGNIZANT TECHNOLOGY SOLUTIONS 1.94%
CORP., CLASS A
Professional technology 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]
<Table>
TECHNOLOGY 38.6%
HEALTH CARE 22.8%
INFORMATION TECHNOLOGY 14.2%
INDUSTRIALS 6.8%
PRODUCER DURABLES 5.8%
FINANCIALS 3.7%
CONSUMER DISCRETIONARY 3.1%
UTILITIES 2.4%
MATERIALS & PROCESSING 1.4%
OTHER 1.2%
</Table>
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
[LINE GRAPH]
WASATCH GLOBAL SCIENCE &
DATE TECHNOLOGY FUND LIPPER SCIENCE AND TECHNOLOGY INDEX RUSSELL 2000 TECHNOLOGY INDEX NASDAQ COMPOSITE INDEX
12/19/2000 10,000 10,000 10,000 10,000
3/31/2001 7,990 6,403 6,990 7,018
3/31/2002 11,020 5,585 6,739 7,061
3/31/2003 7,439 3,516 3,789 5,155
3/31/2004 12,265 5,391 6,509 7,701
3/31/2005 11,479 5,094 5,502 7,764
+ INCEPTION: DECEMBER 19, 2000. THE LIPPER SCIENCE & TECHNOLOGY INDEX is a
composite of mutual funds that invest in science and technology companies and
have investment objectives similar to those of the Fund. THE RUSSELL 2000
TECHNOLOGY INDEX is a capitalization-weighted index of companies that serve
the electronics and computer industries or that manufacture products based on
the latest applied science. The Russell 2000 Index is an unmanaged total
return index of the smallest 2,000 companies in the Russell 3000 Index, as
ranked by total market capitalization. The Russell 2000 Index is widely
regarded in the industry as accurately capturing the universe of small company
stocks. THE NASDAQ COMPOSITE INDEX is unmanaged and measures all Nasdaq
domestic and non-U.S. based common stocks listed on The Nasdaq Stock Market.
The Index is market-value weighted. This means each company's security affects
the Index in proportion to its market value. The market value, the last sale
price multiplied by total shares outstanding, is calculated throughout the
trading day, and is related to the total value of the Index. Due to their
number and size, technology stocks tend to dominate the direction of the
Index. YOU CANNOT INVEST IN THESE INDEXES.
7
HERITAGE GROWTH FUND -- MANAGEMENT DISCUSSION MARCH 31, 2005
[PHOTO OF CHRIS BOWEN] [PHOTO OF RYAN SNOW]
CHRIS BOWEN RYAN SNOW
PORTFOLIO MANAGER PORTFOLIO MANAGER
SIX MONTH REVIEW
The Wasatch Heritage Growth Fund posted a return of 9.36% in the six
months ended March 31, 2005. The Fund's return fell behind the Russell Midcap
Growth Index, which added 12.04% and the Russell Midcap Index, which gained
13.37%. We have added the Russell 1000 Growth Index as a benchmark for the Fund.
We feel it is a more relevant benchmark than the S&P 500(R) Index, which we plan
to drop. The Fund performed better than the Russell 1000 Growth Index, which
gained 4.71%. The S&P 500 Index gained 6.89% in the six-month period.
A large drop in a single company's stock price was responsible for the
majority of the underperformance during the period. Doral Financial, one of
Puerto Rico's largest mortgage finance companies, was by far the biggest
detractor from the Fund's overall return. We believe this was primarily due to
uncertainty created by the company's accounting for complex non-cash earnings
transactions and, to a lesser extent, interest rate fears. We are looking
closely at Doral's accounting for non-cash earnings.
The Fund's health care holdings made the largest positive contribution to
the return during the period. The Fund and the Russell Midcap Growth Index (the
"Index") had a nearly identical weight in this sector, so stock selection was
primarily responsible for our outperformance versus the Index in this sector.
Our managed care companies added the most to the Fund's return in this sector,
following an upward trend-line since last November's presidential election.
Before then, many health care stocks had an overhanging cloud of uncertainty
regarding the federal government's impact on this sector. Top performers among
the Fund's holding during the past six months were Pacificare Health Systems, a
managed care provider; Wellpoint, a health benefits company; and Health
Management Associates, an owner and operator of general acute care and
psychiatric hospitals.
Homebuilding companies dominate our holdings in the producer durables
sector. We were overweight versus the Index, and our holdings performed better
than those in the benchmark. NVR and Lennar were the Fund's top contributors in
this sector. NVR, which operates two business segments along the mid-Atlantic
corridor, homebuilding and mortgage lending, was also the Fund's best-performing
stock during the period. NVR reported strong per-share earnings growth for the
fourth quarter and full year 2004. Profits came primarily from an uptick in
building activity. Lennar, a 30-year veteran homebuilder, also had solid 2004
earnings growth and continued to execute well on its business plan.
As a group, the stock prices of our consumer discretionary holdings were
up less than those in the Index. The Fund's underweighting was the main reason
we underperformed the Index in this sector. Stock price weakness in a few of the
retail companies the Fund held also contributed to the underperformance. We
believe the weakness reflected the market's wariness over a financially strapped
consumer, an anxiousness we think is a bit overblown. Among our detractors were
Amazon.com, the online retailer, and Puma, the sports footwear company. We took
advantage of stock price weakness to add to the Fund's weightings in Best Buy, a
retailer of consumer electronics and home-office products, and Bed Bath &
Beyond, a "big box" retailer of domestics merchandise.
We generally strive to invest in companies whose earnings are not heavily
dependent on the direction of the U.S. economy. This approach bore fruit during
the period, as some of our larger weights in this sector--AutoZone, an auto
parts and accessories retailer, Esprit, a mostly European fashion chain, and
Chico's, a retailer of upscale women's apparel -- added value.
The Fund's technology holdings pulled ahead of those in the Index during
the six-month period. However, because the Fund was weighted at approximately
half the benchmark weight, our tech stocks had less of an effect on our overall
return. Over the past year, we have focused on buying what we believed were high
quality technology stocks at favorable prices, largely in the analog
semiconductor space. Two of the biggest contributors to the Fund's performance
in this sector were National Semiconductor, a supplier of analog and
mixed-signal products, and QLogic, a provider of networking storage. We are
encouraged by both companies' continuing efforts to drive margin growth from
higher value products, which is a key investment theme we look for within this
sector.
The Fund had no holdings in the materials and processing and consumer
staples sectors and only a couple of holdings in the energy sector. Our lack of
exposure to these sectors detracted from the Fund's performance versus the
Index.
OUTLOOK
The earnings growth of our companies has been strong and our projections
suggest that this trend is likely to continue. We are very comfortable with our
companies' fundamentals, and remain committed to our investment strategy of
using bottom-up research to uncover what we believe are great companies at
reasonable valuations.
Valuation risk remains our biggest concern, but we have long believed that
the most costly companies are those with poor business models and uncertain
earnings prospects. By remaining disciplined and by not chasing growth for
growth's sake, we believe we can invest in high quality companies at attractive
prices -- the fuel we use in the Fund's growth engine.
We appreciate the opportunity to manage your assets.
8
HERITAGE GROWTH FUND -- PORTFOLIO SUMMARY MARCH 31, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 6/18/04*
------ ------- --------
WASATCH HERITAGE GROWTH FUND N/A N/A 7.83%
Russell Midcap Growth Index N/A N/A 9.39%
Russell 1000 Growth Index N/A N/A -0.19%
Russell Midcap Index N/A N/A 15.02%
S&P 500* Index N/A N/A 5.75%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT
WWW.WASATCHFUNDS.COM OR CALL 800.551.1700. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. THE ADVISOR HAS ABSORBED, CURRENTLY OR IN THE PAST, CERTAIN
FUND EXPENSES, WITHOUT WHICH TOTAL RETURNS WOULD HAVE BEEN LOWER.
Equity investing involves risks, including potential loss of the principal
amount invested. Being non-diversified, the Fund can invest a larger portion of
its assets in the stocks of a limited number of companies than a diversified
fund. Non-diversification increases the risk of loss to the Fund if the values
of these securities decline.
*Returns less than a year are not annualized.
TOP 10 EQUITY HOLDINGS**
TICKER COMPANY % OF FUND
- ------ ------- ---------
APOL APOLLO GROUP, INC., CLASS A 3.68%
Higher education For working adults.
TEVA TEVA PHARMACEUTICAL INDUSTRIES
LTD. ADR 3.00%
Pharmaceuticals.
DRL DORAL FINANCIAL CORP. 2.97%
Puerto Rican bank.
NFB NORTH FORK BANCORPORATION, INC. 2.86%
Regional bank.
CBH COMMERCE BANCORP, INC. 2.68%
Commercial banking, Corporate trust and
Insurance brokerage services.
AZO AUTOZONE, INC. 2.48%
Discount auto parts retailer.
BBBY BED BATH & BEYOND, INC. 2.36%
Household goods retailer.
WLP WELLPOINT, INC. 2.28%
Health maintenance organization.
NVR NVR, INC. 2.23%
Homebuilder.
NXTP NEXTEL PARTNERS, INC., CLASS A 2.20%
Wireless service provider.
** 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]
<Table>
CONSUMER DISCRETIONARY 24.2%
FINANCIAL SERVICES 18.5%
HEALTH CARE 17.5%
TECHNOLOGY 13.8%
PRODUCER DURABLES 11.5%
FINANCIALS 4.0%
UTILITIES 3.2%
AUTOS & TRANSPORTATION 2.7%
OTHER 2.6%
ENERGY 2.0%
</Table>
+ Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
[LINE GRAPH]
DATE WASATCH HERITAGE GROWTH FUND RUSSELL MIDCAP GROWTH INDEX RUSSELL 1000 GROWTH INDEX RUSSELL MIDCAP INDEX S&P 500 INDEX
6/18/2004++ 10,000 10,000 10,000 10,000 10,000
6/30/2004 10,030 10,206 10,057 10,232 10,083
7/31/2004 9,470 9,530 9,489 9,784 9,749
8/31/2004 9,450 9,412 9,442 9,827 9,788
9/30/2004 9,860 9,764 9,532 10,146 9,894
10/31/2004 9,940 10,095 9,680 10,425 10,045
11/30/2004 10,500 10,616 10,013 11,061 10,452
12/31/2004 11,143 11,125 10,406 11,532 10,808
1/31/2005 10,913 10,827 10,059 11,246 10,544
2/28/2005 11,133 11,101 10,166 11,593 10,766
3/31/2005 10,783 10,939 9,981 11,502 10,575
++ INCEPTION: JUNE 18, 2004. THE RUSSELL MIDCAP GROWTH INDEX measures the
performance of those Russell Midcap Index companies with higher price-to-book
ratios and higher forecasted growth values. The stocks in the Russell Midcap
Growth Index are also members of the Russell 1000 Growth Index. THE RUSSELL
1000 GROWTH INDEX measures the performance of those Russell 1000 Index
companies with higher price-to-book ratios and higher forecasted growth
values. THE RUSSELL MIDCAP INDEX is an unmanaged total return index of the
800 smallest companies in the Russell 1000 Index, as ranked by total market
capitalization. THE S&P 500 INDEX includes 500 of the United States, largest
stocks from a broad variety of industries. The Index is unmanaged but is a
commonly used measure of common stock total return performance. YOU CANNOT
INVEST DIRECTLY IN THESE INDEXES.
9
INTERNATIONAL GROWTH FUND -- MANAGEMENT DISCUSSION MARCH 31, 2005
[PHOTO OF MIKE GERDING]
MIKE GERDING, CFA
PORTFOLIO MANAGER
SIX MONTH REVIEW
In the six months ended March 31, 2005, the Wasatch International Growth
Fund was up 12.53%. Despite these positive results, the Fund underperformed the
MSCI World Ex-U.S.A. Small Cap Index, which gained 22.06%.
As of March 31, we owned 89 companies in 21 countries. The weighted
average market capitalization of the Fund was $1.31 billion, while the median
market cap was $630 million.
The Fund's country and sector weightings result from our search for
companies that meet our growth and quality criteria rather than an allocation
strategy.
Japan continued to be our largest country weight and we increased our
weighting during the period to almost 18%. However, we were still under the
Index weight of nearly 28% and our underweighting was a source of our
underperformance. Although the Japanese economy has improved, lingering
problems have made it a challenge to find companies in Japan that meet our
growth criteria. The best performing Japanese company we held was En-Japan, a
Japanese Internet employment company. En-Japan's business has grown due to
increased employment activity.
As of March 31, we were overweight in emerging markets compared to the
Index. India, our largest weight at over 5%, contributed positively to the
Fund's performance versus the Index. Many companies in emerging markets are
growing rapidly and their stocks trade at attractive multiples, even when we
consider the added volatility in these markets.
The Fund was overweight in the consumer discretionary sector and performed
in line with the Index. Pantaloon, an Indian retailer, and Bijou Brigitte, a
German retailer of costume jewelry, were significant contributors.
Our overweighting in health care meant that this sector contributed more
to the Fund's performance even though the prices of our stocks were a little
weaker than those in the Index. The Fund benefited from the strong performance
of Orpea, one of our larger positions. Orpea is meeting a critical need for
nursing home beds in France and has grown due to strong demand for nursing home
services. Angiotech Pharmaceuticals, a Canadian company that develops
Pharmaceuticals for use with medical devices, was a detractor due to general
weakness in biotechnology stocks.
Three sectors -- industrials, consumer staples and financials -- held back
performance relative to the Index.
In the industrials sector, our underweighting and the stock price decline
of Accord Customer Care Solutions were the main reasons we underperformed in
this sector. Accord is a Singapore-based provider of maintenance and warranty
work for the mobile phone industry that has struggled.
Our weighting in the consumer staples sector was about half that of the
Index. Two holdings -- Sugi Pharmacy and Wumart Stores -- suffered stock price
declines that caused this sector to detract slightly from the Fund's
performance. Conversely, the Index's consumer staples sector made a significant
contribution to its performance.
In the financials sector, the Fund was underweighted and underperformed
the Index. Doral Financial, one of Puerto Rico's leading banks and mortgage
lenders, was the biggest detractor. Doral's stock price declined largely as the
result of investors becoming concerned about the company's accounting for
complex non-cash earnings transactions. We have reduced our position and are
closely monitoring Doral.
The stock price of Home Capital Group, a Canadian mortgage lender,
appreciated during the period due to strong demand for mortgages in Canada.
Another solid contributor was AWD, a German financial services company that is
benefiting from changes in Germany's pension system.
Our lack of holdings in the materials sector hurt us over the last six
months as commodity prices have risen. It has been difficult to find growth
stocks that meet our criteria, as companies in this sector tend to be slow
growing and dependent on commodity pricing.
The dollar's weakness helped the Fund's performance in the last six
months. We expect the dollar to rise slightly over the course of 2005, but do
not expect to see a significant change in currencies during the year. We believe
that the dollar has long-term structural problems which weigh on it, but the
relative strength of the U.S. economy and the widening interest rate
differential will likely support the dollar this year. As a result, we expect
the impact of the dollar's strength or weakness on the Fund to be minimal.
OUTLOOK
Rising oil prices and higher interest rates are likely to slow the U.S.
economy in the second half of 2005 and keep job growth sub-par. We think U.S.
consumer spending will slow as a result of these factors. This is important to
us because many Asian businesses could be negatively impacted if spending by
U.S. consumers slows down.
After visits by our team to Japan in early 2005, we feel more encouraged
by the progress of the Japanese economy. Despite long-standing concerns, it
appears that economic growth, consumer spending and job growth are better than
the figures seemed to indicate and may be pointing to more sustainable economic
growth.
We expect Continental Europe to continue to lag economically throughout
the year. As we discussed in our last report, we think that structural problems
will continue to dampen the economic growth of countries in this region. Despite
this expectation, we remain optimistic about the European companies we hold.
They are either companies in industries like health care that are not
economically sensitive, or they are unique companies in fast growing niches.
Often, these niches are growing because of structural changes happening in
Europe. We believe that companies like AWD and Orpea, mentioned above, have the
potential to succeed regardless of economic conditions.
We continue to work hard to build a portfolio of small, rapidly growing
companies that we believe are among the best in the world.
We appreciate your investment in the Wasatch International Growth Fund.
10
INTERNATIONAL GROWTH FUND -- PORTFOLIO SUMMARY MARCH 31, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 6/28/02
------ ------- ---------------
WASATCH INTERNATIONAL GROWTH FUND 12.15% N/A 20.04%
MSCI World Ex-U.S.A. Small Cap Index 20.74% N/A 25.19%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT
WWW.WASATCHFUNDS.COM OR CALL 800.551.1700. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. THE ADVISOR HAS ABSORBED, CURRENTLY OR IN THE PAST, CERTAIN
FUND EXPENSES, WITHOUT WHICH TOTAL RETURNS WOULD HAVE BEEN LOWER.
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
- ------ ------- ----------
AWD GR AWD HOLDING AG 2.58%
(Germany) Financial services.
4666 JP PARK24 CO. LTD. (Japan) 2.29%
Parking lot operator.
EKTAB SS ELEKTA AB, CLASS B 2.19%
(Sweden) Radiology equipment.
UDG ID UNITED DRUG PLC 2.14%
(Ireland) Pharmaceuticals.
ORP FP ORPEA (France) 2.13%
Nursing homes.
SIA LN SOCO INTERNATIONAL PLC 2.08%
(United Kingdom) Oil and gas developer.
HDFCB IN HDFC BANK LTD. 2.02%
(India) Consumer bank.
STMN SW STRAUMANN HOLDING AG 1.97%
(Switzerland) Dental implants.
CPW LN CARPHONE WAREHOUSE GROUP 1.93%
plc (United Kingdom)
Cell phones and telecom services retailer.
4849 JP EN- JAPAN, INC. 1.89%
(Japan) Internet employment agency.
* 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]
<Table>
CONSUMER DISCRETIONARY 24.9%
HEALTH CARE 19.5%
INFORMATION TECHNOLOGY 15.4%
INDUSTRIALS 15.1%
FINANCIALS 10.5%
CONSUMER STAPLES 7.1%
ENERGY 4.3%
TELECOMMUNICATION SERVICES 1.8%
UTILITIES 1.4%
</Table>
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
[LINE GRAPH]
DATE WASATCH INTERNATIONAL GROWTH FUND MSCI WORLD EX-U.S.A. SMALL CAP INDEX
6/28/2002+ 10,000 10,000
3/31/2003 8,610 8,295
3/31/2004 14,760 15,403
3/31/2005 16,554 18,597
+ INCEPTION: JUNE 28, 2002. THE MSCI WORLD EX-U.S.A. SMALL CAP INDEX is an
unmanaged index that measures the performance of stocks with market
capitalizations between U.S. $200 million and $1.5 billion across 22 developed
markets, excluding the United States. YOU CANNOT INVEST IN THE INDEX.
11
INTERNATIONAL OPPORTUNITIES FUND -- MANAGEMENT DISCUSSION MARCH 31, 2005
The Wasatch International Opportunities Fund is managed by a team of
Wasatch portfolio managers.
REVIEW SINCE INCEPTION
Since inception on January 27, 2005 through March 31, 2005, the Wasatch
International Opportunities Fund was down 1.50%, while the MSCI World Ex-U.S.A.
Small Cap Index was up 4.13%. As of March 31, we had invested about 70% of the
Fund's assets. January typically is a strong month for international small cap
stocks and this year was no different. Starting in February, we have proceeded
somewhat cautiously as many of the stocks we had targeted moved up significantly
in January. Over the next few months, we look forward to finding more
opportunities to invest.
During the Fund's first year of operation, we expect to focus our efforts
on building a solid foundation. We are optimistic about our prospects for
success on this front because we have found an abundance of international
companies at our market capitalization level that we feel have outstanding
investment potential. In addition, these stocks often trade at attractive
multiples because their growth prospects and positive investment characteristics
are not being fully recognized by other investors.
From the perspective of Fund performance, however, we think this could be
a difficult year given the investment backdrop. The MSCI World Ex-U.S.A. Small
Cap Index posted returns of over 60% in 2003 and nearly 30% in 2004. Two years
of strong performance by the Index has created a high hurdle for returns in
2005. In addition, rising interest rates in the U.S. increases the perception
of the risks of investing abroad and will likely increase the volatility of
global markets.
Since the beginning of the year, our team has made trips to Scandinavia,
Japan and Europe. A senior analyst on the Fund resided in Paris for two months
meeting the management teams of many companies in France, Switzerland, Germany
and elsewhere in Europe. We believe these in- country visits help create a
strong framework for comparing European companies with those in other parts of
the world. There is no question that finding growing companies is more
challenging in Continental Europe where the economic growth has not been
supportive. However, we cannot underestimate the return potential of companies
that are restructuring, improving their margins and adapting through cost
reduction to difficult conditions, especially if those companies are small,
nimble and underfollowed by market analysts.
We spent two weeks in Japan where we saw many small companies, some of
which were added to the Fund. One exciting development we noted was the budding
turnaround in the Japanese real estate market. After suffering through 14 years
of declining property values, the Japanese real estate market seems to have
bottomed out. In Japan, unlike major metropolitan areas in the U.S., it is
cheaper to buy than to rent, which makes Japanese properties attractive
investments. The Fund has invested in a number of property-related stocks
including Japanese real estate investment trusts (J-REITs). We feel the
emergence of J-REITs, a relatively new way to invest in Japanese properties, is
positive for the property market and we expect them to become increasingly
attractive to investors.
In the energy sector, the Fund holds small exploration and production
companies and service companies in Canada, Norway and Australia. We have found
that small energy companies can offer attractive growth prospects when
experienced management teams use the latest technology to increase the
production of older oil fields and develop fields in contiguous areas.
Governments, particularly those that rely on North Sea oil fields where
production has been decreasing, are recognizing the value of these small
companies. Major oil companies typically view these types of fields as of
diminishing significance to their operations.
A unique area of investment for the Fund is in listed stock exchanges. We
own shares in the New Zealand Stock Exchange, Osaka Securities Exchange and Oslo
Stock Exchange. In our opinion, these exchanges are high quality businesses that
are returning cash to shareholders. In general, we think listed stock
exchanges are exceptional businesses where their growth is driven by the broad
growth in capital market instruments offered by them including bonds, equities
and interest rate derivatives. In talking to the management teams of these
exchanges we also learned of their interest in listing more smaller companies.
We see many opportunities in foreign markets to invest in companies with
attractive long-term growth prospects. A couple of examples are RaySearch, a
Swedish software company that optimizes dosage for radiology treatment, and
Unisteel, a Singapore manufacturer of fasteners for hard disk drives that is
benefiting from the growth in consumer electronics like the iPod.
OUTLOOK
We expect the Wasatch International Opportunities Fund to differ from
other international funds in that we are focused on investing in micro cap
companies (market capitalizations of less than $1 billion in U.S. dollars). In
addition, the small asset size of the Fund allows us to take meaningful
positions in small and micro cap companies.
Another way the Fund will differ from the MSCI World Ex-U.S.A. Small Cap
Index and other comparable mutual funds is that we expect to own more stocks in
the markets of Asia and the Pacific Rim. Our 'map of the world,' developed
through extensive research, indicates that there are attractive investment
opportunities in markets such as Korea, Taiwan, Hong Kong and Singapore.
As stated earlier, we expect this year to be one of striving to build a
strong foundation for the Fund. We are excited about the opportunities we are
seeing from the world's growing small and micro cap companies. We are working
hard to invest in those companies that we believe offer the best potential for
the long-term growth of your assets.
Thank you for the trust you have placed in Wasatch by investing in the
International Opportunities Fund.
12
INTERNATIONAL OPPORTUNITIES FUND -- PORTFOLIO SUMMARY MARCH 31, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 1/27/05*
------ ------- ---------------
WASATCH INTERNATIONAL OPPORTUNITIES FUND N/A N/A -1.50%
MSCI World EX-U.S.A. Small Cap Index N/A N/A 4.13%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT
WWW.WASATCHFUNDS.COM OR CALL 800.551.1700. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. THE ADVISOR HAS ABSORBED, CURRENTLY OR IN THE PAST, CERTAIN
FUND EXPENSES, WITHOUT WHICH TOTAL RETURNS WOULD HAVE BEEN LOWER.
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.
*Returns less than a year are not annualized.
TOP 10 EQUITY HOLDINGS**
TICKER COMPANY % OF FUND
- ------- --------------------------------------- ---------
ACTA NO ACTA HOLDINGS ASA 1.59%
(Norway) Financial advisory services.
RAYB SS RAYSEARCH LABORATORIES 1.49%
(Sweden) Dosage software for radiology.
NZX NZ NEW ZEALAND EXCHANGE LTD. 1.35%
(New Zealand) Securities exchange.
RLS SP RAFFLES EDUCATION CORP. LTD. 1.29%
(Singapore) For-profit education.
6432 JP TAKEUCHI MANUFACTURING CO. 1.26%
LTD. (Japan)
Construction machinery manufacturer.
SES CN SAXON ENERGY SERVICES, INC. 1.03%
(Canada) Oil and gas developer.
ISR GR ISRA VISION SYSTEMS AG 1.03%
(Germany) Robotics software.
4065 JP KIBUN FOOD CHEMIFA CO. LTD. 1.00%
(Japan) Soymilk products.
PSI CN PASON SYSTEMS, INC. (Canada) 0.99%
Oil field measurement equipment.
BMY LN BLOOMSBURY PUBLISHING PLC 0.98%
(United Kingdom) Publishing company.
** 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]
INDUSTRIALS 26.3%
CONSUMER DISCRETIONARY 15.7%
INFORMATION TECHNOLOGY 14.8%
FINANCIALS 11.7%
CONSUMER STAPLES 8.5%
ENERGY 8.3%
HEALTH CARE 7.7%
MATERIALS 6.0%
TECHNOLOGY 1.0%
+ Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
[LINE GRAPH]
DATE WASATCH INTERNATIONAL OPPORTUNITIES FUND MSCI WORLD EX-U.S.A. SMALL CAP INDEX
- --------- ---------------------------------------- ------------------------------------
1/27/2005++ 10,000 10,000
1/31/2005 10,000 10,154
2/28/2005 10,100 10,585
3/31/2005 9,850 10,413
++ INCEPTION: JANUARY 27,2005. THE MSCI WORLD EX-U.S.A. SMALL CAP INDEX is an
unmanaged Index that measures the performance of stocks with market
capitalizations between U.S. $200 million and $1.5 billion across 22
developed markets, excluding the United States. YOU CANNOT INVEST IN THE
INDEX.
13
MICRO CAP FUND -- MANAGEMENT DISCUSSION MARCH 31, 2005
[PHOTO OF ROBERT GARDINER]
ROBERT GARDINER, CFA
PORTFOLIO MANAGER
[PHOTO OF DANIEL CHACE]
DANIEL CHACE, CFA
PORTFOLIO MANAGER
SIX MONTH REVIEW
The Wasatch Micro Cap Fund had a return of 12.90% for the six months ended
March 31,2005. The Russell 2000 Index, widely used to gauge the performance of
small company stocks, returned 8.00% over the same period.
Positive contributions from holdings in many sectors helped the Fund
outperform the Russell 2000 Index. Overall, good stock selection was the primary
reason we outperformed. It is also worth noting that several international
stocks added significantly to the Fund's return during the period.
The retail and business services stocks that comprise the majority of the
Fund's holdings in the consumer discretionary sector did well as most companies
met our earnings expectations. Our overweighting and the substantially better
performance of our holdings helped this sector contribute far more to the Fund's
performance than to the Index's. Good results were evenly spread, including
Bijou Brigitte, a European retailer of inexpensive jewelry. Other notable
contributions came from AMN Healthcare, a temporary health care staffing
company, and from Guitar Center, a chain of music stores. AMN's strong
fundamentals reflected the company's pricing power in an industry suffering from
a dearth of qualified medical personnel, particularly travel nurses. Guitar
Center has demonstrated effectiveness at marketing to hobbyists and
professionals.
The Fund' weighting in the financial services sector was less than half
the Index sector weight. Due to a combination of this lower weighting and the
solid performance of our holdings, the financial services sector contributed
more to the Fund's return than it did to the Index's. Home Capital Group, a
Canadian mortgage lender, was the standout performer. However, faced with a
strong headwind of rising interest rates, the near-term prospects of these
stocks are uncertain. We believe that our companies are fairly well insulated
against interest rate risk, but we cannot predict how discriminating investors
will be in the face of generally rising rates.
In the technology sector, good stock selection and a sub- stantial
overweighting meant this sector contributed more to the performance of the Fund
than it did to that of the Index. Over the past year, we have focused on buying
what we believed were high quality technology stocks at favorable prices. The
stock price of Tessera Technologies rose in expectation of continued growth
after the chip-packaging company settled a licensing dispute. The stock price of
PLX Technology, a developer of semiconductor devices, rose in anticipation of a
successful product launch. Biacore, a Swedish manufacturer of scientific
instruments, has projected a profitable 2005. In addition, the software designer
Verisity agreed to be acquired at a premium. All four stocks added to our
results.
Producer durables stocks also made a positive contribution to the Fund's
results. We were slightly underweight in this sector compared to the Russell
2000 Index but the Fund's holdings significantly outperformed. This under-
scores how important fundamental, company-by-company research is to Wasatch's
investment process. We believe we have been successful in this sector because we
have identified several companies whose management skills add value in an
industry in which an average company grows roughly at the rate of the overall
economy. Our one notable detractor was inTest, a manufacturer of docking
hardware used by semiconductor manufacturers. inTest's stock price was down in
response to the company's slower order growth.
Similar to the technology sector, the Fund's health care sector was more
than double the Index weight and, on an aggregate basis, our health care stocks
were up more than those in the Index. Cyberonics, a medical device company, did
well after the U.S. Food & Drug Administration reversed its prior stance and
issued a letter stating that it considered Cyberonics' device to treat
depression to be approvable. As a result, the company's stock price gain added
significantly to the Fund's performance. The announcement that specialty drug
distributor Accredo Health would be acquired also had a big positive effect.
AmSurg, an owner of ambulatory surgery centers, also helped, although the
company's management lowered guidance on 2005 earnings late in the period and
this has deflated the stock somewhat.
There were also a couple of notable misses in health care. The share price
of Odyssey HealthCare, a provider of hospice care, continued to struggle. We
reduced our stake in the company when it appeared that a Justice Department
investigation into the company's government reimbursement claims could slow
patient referrals from hospitals and physicians. Abaxis, which has an
innovative point-of-care device for blood testing, lost momentum as its business
struggled.
A substantial portion of the return generated by the Russell 2000 Index
was attributable to the energy and materials and processing sectors. Generally
speaking, we have had little exposure to these commodity-related industries for
some time. The Fund's lack of exposure to these strong- performing sectors has
been a drag on performance over the past year. We are diligently trying to find
businesses in these areas that have sustainable earnings growth and are not
dependent on the direction of commodity prices.
OUTLOOK
We follow a disciplined strategy that seeks to invest in high quality
growth companies at reasonable valuations. Keeping that strategy in mind, and
given the correction in micro cap stock prices subsequent to the end of the
period, valuations look more interesting for many of the companies we
typically like to own. We continue to turn over all stones to identify
attractive companies in which to invest.
We would like to thank you for the opportunity to manage your assets.
14
MICRO CAP FUND -- PORTFOLIO SUMMARY MARCH 31, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 6/19/95
------ ------ ---------------
WASATCH MICRO CAP FUND 4.45% 20.89% 26.58%
Russell 2000 Index 5.41% 4.01% 9.71%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT
WWW.WASATCHFUNDS.COM OR CALL 800.551.1700. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. THE ADVISOR HAS ABSORBED, CURRENTLY OR IN THE PAST, CERTAIN
FUND EXPENSES, WITHOUT WHICH TOTAL RETURNS WOULD HAVE BEEN LOWER.
Investments in micro cap funds can be more volatile and loss of principal could
be greater than investing in large cap or more diversified funds. Investing in
foreign securities entails special risks, such as currency fluctuations and
political uncertainties, which are described in more detail in the prospectus.
TOP 10 EQUITY HOLDINGS*
TICKER COMPANY % OF FUND
- ------ -------------------------------------------- ---------
AMSG AMSURG CORP. 4.18%
Outpatient surgery centers.
BGFV BIG 5 SPORTING GOODS CORP. 2.89%
Sporting goods retailer.
AHS AMN HEALTHCARE SERVICES, INC. 2.77%
Health care staffing.
OIIM 02MICRO INTERNATIONAL LTD. 2.10%
Semiconductors to increase power efficiency.
GTRC GUITAR CENTER, INC. 1.95%
Music stores.
PLXT PLX TECHNOLOGY, INC. 1.95%
Semiconductors to accelerate and manage
data transfer.
ICLR ICON PLC ADR Clinical research services 1.94%
for the global pharmaceutical industry.
USAK USA TRUCK, INC. 1.93%
Trucking company.
CYBX CYBERONICS, INC. 1.82%
Implantable medical devices.
USPH U.S. PHYSICAL THERAPY,INC. 1.69%
Physical therapists.
* Portfolio holdings are subject to change at any time. References to
specific securities should not be construed as recommendations by the
Finds or their Advisor.
SECTOR BREAKDOWN**
[PIE CHART]
HEALTH CARE 24.7%
CONSUMER DISCRETIONARY 24.5%
TECHNOLOGY 18.4%
FINANCIAL SERVICES 8.2%
INFORMATION TECHNOLOGY 6.2%
PRODUCER DURABLES 6.1%
AUTOS & TRANSPORTATION 4.2%
INDUSTRIALS 2.7%
OTHER 2.6%
FINANCIALS 2.4%
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
[LINE GRAPH]
DATE WASATCH MICRO CAP FUND RUSSELL 2000 INDEX
6/19/1995+ 10,000 10,000
3/31/1996 14,850 11,857
3/31/1997 15,021 12,463
3/31/1998 25,583 17,699
3/31/1999 23,687 14,821
3/31/2000 38,856 20,349
3/31/2001 47,700 17,230
3/31/2002 72,254 19,639
3/31/2003 58,250 14,343
3/31/2004 96,066 23,499
3/31/2005 100,342 24,771
+ 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.
15
MICRO CAP VALUE FUND -- MANAGEMENT DISCUSSION MARCH 31,2005
[PHOTO OF JOHN MALOOLY]
JOHN MALOOLY, CFA
PORTFOLIO MANAGER
[PHOTO OF BRIAN BYTHROW]
BRIAN BYTHROW, CFA
PORTFOLIO MANAGER
SIX MONTH REVIEW
The Wasatch Micro Cap Value Fund had a return of 10.61% for the six months
ended March 31,2005. The Fund's return was higher than that of the Russell 2000
Index, which was up 8.00%.
Our consumer discretionary stocks contributed the most to the Fund's
return. The Fund was weighted below the Russell 2000 Index, but our selection of
retail stocks pulled ahead of those comprising the sector benchmark. Three of
our top performers in this sector were international companies: Bijou
Brigitte, a European retailer of inexpensive jewelry and accessories;
Allen-Vanguard, a Canadian company that develops anti-terrorism products, and
easyhome, Canada's largest rent-to-own retailer. Bijou's solid earnings
reflected good business execution. Allen-Vanguard completed a merger in the
period that added to its stock value. With easyhome, Wasatch's investment team
leveraged its knowledge of the U.S. rent-to-own market with an international
company.
The financial services sector also was a big contributor. Our smaller
niche lending and regional banking stocks generally did well, which helped us
to outperform the Index despite our underweighting in this sector. Notable
contributors included Home Capital Group, a Canadian home mortgage lender
whose business continues to benefit from heavy loan demand, and Nicholas
Financial, a consumer auto finance company.
Despite the Fund's generally good returns from this sector overall, some
of our financial stocks lagged later in the period. Weakness was mostly confined
to a handful of companies that suffered from what we believe was concern over
rising short-term interest rates. Detractors included Encore Capital Group, a
purchaser and manager of charged-off consumer receivable portfolios, and
Wilshire Bancorp, a regional ethnic bank. We remain positive on both companies'
long-term prospects.
Our holdings in the health care sector, in which the Fund was overweight
compared to the Index, contributed to our outperformance. Medical technology
companies led the pack, including Cyberonics, whose stock price was up sharply
on the news that the U.S. Food & Drug Administration, reversing an earlier
decision, announced that it would consider approving a device developed by the
company to treat depression. Other significant contributions came from Computer
Programs & Systems, a health care information systems company, and NuVasive, a
company that makes devices used to treat spine disorders. Both companies'
share prices were up as a result of strong fourth quarter and full-year 2004
earnings growth.
Partially detracting from these results were Ista Pharmaceuticals, a
developer of products used to treat serious eye conditions, and Discovery
Partners International, a provider of technology used in drug discovery efforts.
Ista reported losses in the fourth quarter and 2004, which was partly due to
higher business expenses and slower than expected new product approvals. We
believe Discovery Partners' shares dropped due to concerns over the company's
reliance on a single customer. In addition, we reduced our stake in Odyssey
Healthcare, a hospice care provider, when it appeared that a Justice Department
investigation into the company's reimbursement claims could slow its growth.
The Fund had a relative small weighting in energy stocks. Although our
energy stocks were up more, we did not outperform the Index in this sector due
to our underweighting. The largest contributor in this sector was Energy
Partners, an oil and natural gas exploration and production company that has
located potentially substantial undersea oil and gas reserves in the Gulf of
Mexico. Harvest Natural Resources detracted from performance as its stock price
dropped in response to a decision by the Venezuelan government that could affect
the company's operations.
Our underweight technology stocks added modestly to the Fund's returns and
our holdings advanced slightly faster than the comparable sector in the Russell
2000 Index. Over the past year we have focused on buying what we believed were
high quality technology stocks at favorable prices. This effort was rewarded by
our investment in PLX Technology, a supplier of high-performance hardware and
software design tools. Another top contributor was Isra Vision Systems AG, a
company that provides machine vision systems used in contact lens
manufacturing.
The Fund had no holdings in the utilities sector and only a small weight
in the materials and processing sector. Being underweighted in these areas held
back the Fund's performance relative to the Index. Although the Fund missed
out on the performance of two of the Index's better performing sectors, we are
not too distressed when we consider that few companies in these sectors meet our
selection criteria.
The Fund's international holdings, which are widely spread among the
sectors included in the Fund, once again performed well. In fact, nine of the
Fund's 25 top-performing companies as of March 31 were located outside the U.S.
OUTLOOK
Although high valuations are our biggest concern, in general we think
small companies have the potential to post higher growth than large companies.
Our approach seeks to identify companies with superior operating margins
relative to the average company comprising the Russell 2000 Index, and then to
invest in only those few companies that have what we believe are great business
models and franchises. We have trimmed some of our more expensive stocks, while
looking for opportunities that we think may have better upside potential. By
remaining disciplined and patient, we believe our shareholders will be rewarded
as opportunities arise to invest at favorable prices over the course of the
year.
We appreciate the opportunity to manage your assets.
16
MICRO CAP VALUE FUND -- PORTFOLIO SUMMARY MARCH 31, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 7/28/03
------ ------- ---------------
WASATCH MICRO CAP VALUE FUND 4.51% N/A 23.39%
Russell 2000 Index 5.41% N/A 18.15%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT
WWW.WASATCHFUNDS.COM OR CALL 800.551.1700. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. THE ADVISOR HAS ABSORBED, CURRENTLY OR IN THE PAST, CERTAIN
FUND EXPENSES, WITHOUT WHICH TOTAL RETURNS WOULD HAVE BEEN LOWER.
Investments in micro cap funds can be more volatile and loss of principal could
be greater than investing in large cap or more diversified funds. Investing in
foreign securities entails special risks, such as currency fluctuations and
political uncertainties, which are described in more detail in the prospectus.
TOP 10 EQUITY HOLDINGS*
TICKER COMPANY % OF FUND
- ------- ---------------------------------------- ---------
PLXT PLX TECHNOLOGY, INC. 2.48%
Semiconductors to accelerate and
manage data transfer.
APTI ADVANCED POWER TECHNOLOGY, INC. 2.33%
High performance power semiconductors.
NPTH ENPATH MEDICAL, INC. 2.12%
Advanced vascular delivery products.
EH CN EASYHOME LTD.(Canada) 2.07%
Rent-to-own retailer.
BIJ GR BIJOU BRIGITTE AG (Germany) 2.05%
Costume jewelry retailer.
NUVA NUVASIVE, INC. 2.04%
Medical devices for spine surgery.
LGVN LOGICVISION, INC. 1.92%
Embedded test technology for complex
semiconductors.
VRS CN ALLEN- VANGUARD CORP.(Canada) 1.71%
Containment and disposal of explosives.
EZM CN EUROZINC MINING CORP.(Canada) 1.67%
Copper mines.
COB/SV/ COOLBRANDS INTERNATIONAL, INC. 1.67%
ACN (Canada) Frozen desserts manufacturer/
distributor.
* 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 BREAK DOWN**
[PIE CHART]
HEALTH CARE 24.3%
FINANCIAL SERVICES 17.1%
CONSUMER DISCRETIONARY 13.4%
TECHNOLOGY 9.2%
INDUSTRIALS 9.0%
PRODUCER DURABLES 8.2%
OTHER 7.3%
AUTOS & TRANSPORTATION 4.4%
ENERGY 3.8%
INFORMATION TECHNOLOGY 3.3%
** Excludes short-term investments,if any.
GROWTH OF A $10,000 INVESTMENT
[LINE GRAPH]
DATE WASATCH MICRO CAP VALUE FUND RUSSELL 2000 INDEX
7/28/2003+ 10,000 10,000
9/30/2003 10,450 10,316
12/31/2003 12,059 11,814
3/31/2004 13,610 12,553
6/30/2004 13,460 12,613
9/30/2004 12,860 12,252
12/31/2004 14,621 13,979
3/31/2005 14,224 13,233
+ 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.
17
SMALL CAP GROWTH FUND -- MANAGEMENT DISCUSSION MARCH 31, 2005
[PHOTO OF JEFF CARDON]
JEFF CARDON, CFA
PORTFOLIO MANAGER
SIX MONTH REVIEW
The Wasatch Small Cap Growth Fund had a return of 12.43% in the six months
ended March 31, 2005. The Fund's return was higher than the 8.00% return posted
by the Russell 2000 Index, a widely used benchmark for the performance of small
company stocks.
Our bottom-up investment strategy, which pays attention to captured earn-
ings growth, aided our results. Average annual earnings growth reported during
the fourth quarter of 2004 for companies held by the Fund was strong at an
estimated 24%. We have been enjoying a two-year period of above-average growth,
fueled by strong revenue growth and margin expansion. Looking out, we expect
continued strong growth but believe further margin expansion will be harder to
achieve. In other words, we still see strong earnings growth but more in line
with revenue growth, which we project in the high teens. We think that a
disciplined investment strategy aimed at capturing this growth should result in
favorable returns.
Health care stocks made the largest contribution to our outperformance
relative to the Index. The announcement that Accredo Health would be acquired
added to portfolio returns in this sector. In addition, many of our top health
care holdings enjoyed strong fundamentals, including AMERIGROUP, AmSurg, and
American Healthways. These good results were partially offset by Odyssey
HealthCare, a hospice care provider, and by Medicis Pharmaceutical, which makes
dermatological products. Odyssey has suffered from increased regulatory scrutiny
and slowing demand, while Medicis announced a merger agreement that precipitated
a stock price decline.
In the consumer discretionary sector, our retail stocks also added to
performance. Strength was well distributed across many of the retail businesses
we owned, including O'Reilly Automotive, an automotive parts retailer/distribu-
tor; Carter's, a children's apparel retailer; Hibbett Sporting Goods, a sporting
goods chain; and Chico's, an upscale women's clothing retailer. In selecting
retail companies we seek to invest in companies that, in general, we believe can
grow earnings regardless of the economic backdrop.
Our homebuilding stocks helped us outperform the producer durables sector
of the Index despite our underweighting in this sector. Clearly, the Fund has
benefited from a strong housing market in the U.S. as well as from investing
in what we think are some of the best run and most dynamic companies in the
housing industry. Our portfolio management style is more prone to take profits
in stocks that have enjoyed such huge run-ups in price. While we have been
taking profits in our housing stocks, we have been less aggressive in our
selling because these stocks are still priced at reasonable valuations.
The Fund's weighting in financial services was about half that of the
Index. While our holdings fared slightly better than those in the Index, the
Fund underperformed the Index in this sector due to our underweighting. The Fund
benefited from holding HDFC Bank, a consumer bank in India, and Calamos Asset
Management, a closely held investment management firm. On the other hand,
Doral Financial, one of the largest mortgage finance companies in Puerto Rico,
hurt our returns. Doral's weak stock price was partly attributable to interest
rate fears but mostly due to accounting issues relating to complex non-cash
earnings transactions. While we continue to like the company as a long-term
opportunity, these accounting issues have created enough uncertainty to prevent
us from adding to our position. Doral represented less than 0.50% of the Fund's
assets as of March 31, 2005.
Technology stocks continued to struggle. Over the past year, we have
focused on buying what we believed were high quality technology stocks at
favorable prices. Our disciplined approach helped us outperform the Index in the
technology sector. Two of the biggest contributors were Tessera Technologies,
a semiconductor packaging company, and Cognizant Technology Solutions, a
provider of information technology services. Tessera has enjoyed rapidly expand-
ing earnings, a rarity in today's weak market for technology products. Tessera
also settled an intellectual property lawsuit. Cognizant did well as more
businesses turn to offshore outsourcing as a way to improve productivity. The
acquisition of Verisity, a software company, also added value. Two technology
holdings were notable detractors from performance -- Kintera, a provider of
software solutions for non-profit organizations, and Micrel, a maker of analog
semiconductors. While the stock prices of these companies were weak, we remain
positive on their long-term prospects.
The Fund had no holdings in the energy sector and few holdings in the
consumer staples and materials and processing sectors. These sectors were
among the largest contributors to the performance of the Index due to the
recent run-up in oil and other commodity prices. We have a hard time finding
companies in these sectors that have identifiable competitive barriers to
entry. We believe that in the long run we are better off investing in companies
that offer longterm growth opportunities with defensible barriers.
OUTLOOK
In the past six months, Fund performance benefited from the overall strong
earnings growth of our portfolio companies. This good performance was a result
of good stock selection in spite of a market that was more focused on com-
modity-oriented industries. If these commodity-oriented industries begin to
weaken, we believe the Fund will enjoy a performance tailwind instead of the
headwind we have been fighting recently.
Price-to-earnings (P/E) ratios have been at the higher end of their
long-term range, but recent market weakness has created a more favorable
valuation environment. Our investment strategy is geared to investing in what we
believe are high quality companies at rational prices, so we view the recent
decline in the market as an investment opportunity.
Thank you for the opportunity to manage your assets. We take our fiduciary
responsibilities seriously and appreciate the trust you have placed in Wasatch.
18
SMALL CAP GROWTH FUND -- PORTFOLIO SUMMARY MARCH 31,2005
AVERAGE ANNUAL TOTAL RETURNS
1YEAR 5 YEARS 10 YEARS
----- ------- --------
WASATCH SMALL CAP GROWTH FUND 8.78% 10.66% 14.97%
---- ----- -----
Russell 2000 Index 5.41% 4.01% 10.43%
---- ----- -----
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT
WWW.WASATCHFUNDS.COM OR CALL 800.551.1700. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. THE ADVISOR HAS ABSORBED, CURRENTLY OR IN THE PAST, CERTAIN
FUND EXPENSES, WITHOUT WHICH TOTAL RETURNS WOULD HAVE BEEN LOWER.
Investments in 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. 4.08%
Automotive parts retailer/distributor.
AMSG AMSURG CORP. 3.03%
Outpatient surgery centers.
TECH TECHNE CORP. 2.62%
Complex, disposable research kits for biotech.
KNX KNIGHT TRANSPORTATION,INC. 2.59%
Long haul trucking and logistic services.
NXTP NEXTEL PARTNERS, INC.,CLASS A 2.21%
Wireless service provider.
AMHC AMERICAN HEALTHWAYS, INC. 2.00%
Disease management services.
GTRC GUITAR CENTER, INC. 1.99%
Music stores.
CARS CAPITAL AUTOMOTIVE 1.99%
Specialized reit.
YCC YANKEE CANDLE CO.,INC. 1.96%
Scented candle manufacturer.
MTH MERITAGE HOMES CORP. 1.90%
Homebuilder.
* 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 28.2%
HEALTH CARE 25.5%
TECHNOLOGY 18.1%
FINANCIAL SERVICES 11.4%
PRODUCER DURABLES 4.4%
AUTOS & TRANPORTATION 2.8%
FINANCIALS 2.7%
OTHER 2.6%
UTILITIES 2.4%
INFORMATION TECHNOLOGY 1.9%
** Excludes short-term investments, any.
GROWTH OF A $10,000 INVESTMENT
[LINE GRAPH]
DATE WASATCH SMALL CAP GROWTH FUND RUSSELL 2000 INDEX
- --------- ----------------------------- ------------------
3/31/1995 10,000 10,000
3/31/1996 12,591 12,905
3/31/1997 11,939 13,564
3/31/1998 17,084 19,263
3/31/1999 16,201 16,131
3/31/2000 24,322 22,147
3/31/2001 24,936 18,753
3/31/2002 33,347 21,375
3/31/2003 25,057 15,611
3/31/2004 37,100 25,576
3/31/2005 40,358 26,960
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.
19
SMALL CAP VALUE FUND -- MANAGEMENT DISCUSSION MARCH 31, 2005
[PHOTO OF JIM LARKINS]
JIM LARKINS, MBA PORTFOLIO MANAGER
[PHOTO OF JOHN MAZANEC]
JOHN MAZANEC, MBA PORTFOLIO MANAGER
SIX MONTH REVIEW
The Wasatch Small Cap Value Fund gained 9.99% in the six months ended
March 31,2005 and outperformed the Russell 2000 Value Index, which gained 8.70%.
Contributions from our holdings in the consumer discretionary, producer
durables, and autos and transportation sectors drove the Fund's outperformance
of the Index.
Since the beginning of 2005, the U.S. equity markets have experienced
widespread weakness as surging energy prices, rising short-term interest rates
and better than expected economic growth raised the specter of inflation. While
we are pleased with the Fund's performance, these factors plus fairly rich
valuation multiples for many sectors of the equity market have caused us to
become more cautious in our outlook.
Consumer discretionary was the Fund's top contributor and second largest
sector weight. Global Imaging Systems, a company that sells and services
office-imaging equipment, was the best contributor in this sector. We sold
Casual Male, a big and tall men's clothing retailer. While we initially liked
the company's turnaround story, ongoing research indicated that Casual Male's
concept may be difficult to execute and that earnings power was not high enough
to make the stock attractive even at depressed levels.
In the producer durables sector, the Fund benefited from investments in
homebuilders -- Meritage Homes, NVR, Toll Brothers and Hovnanian Enterprises. We
feel our homebuilders have solid businesses and the potential to sustain growth
over the long-term as they take market share from smaller, independent builders,
gain economies of scale and are disciplined in managing their balance sheets.
The Fund was slightly underweighted in the producer durables sector but the
substantially better performance of our holdings allowed us to outperform the
Index in this sector.
The Fund's autos and transportation sector was overweighted compared to
the Index and our holdings were up significantly more than those in the Index.
Trucking companies, in general, have benefited as demand has outpaced supply. We
feel we have invested in solid operators at attractive prices and these
companies contributed to the Fund's return. Aftermarket auto parts suppliers,
Aftermarket Technology and Keystone Automotive Industries, also contributed.
Our financial services holdings were not up as much as those in the Index
and we underperformed in this sector due to our significant overweighting. In
general, financial services stocks have performed poorly since the start of
2005. Several factors appeared to be responsible including concern over higher
interest rates, reduced net interest margin due to a relatively flat yield
curve, and lower profits for some companies due to increased competition. While
we recognized these concerns, we were attracted to many of our holdings due to
their valuation, ability to perform well in a reasonable environment where
interest rates do not increase or decrease drastically in a short time, and
potential for long-term growth and greater profits. Nevertheless, Saxon Capital,
Redwood Trust and Commercial Capital Bancorp suffered stock price declines as
investors attempted to estimate the impact of these factors.
The Fund's biggest detractor was Doral Financial, the dominant home
mortgage lender in Puerto Rico. Doral's stock price declined on concerns about
how the company accounts for complex non-cash earnings transactions. We are
re-evaluating this investment.
We have been repositioning in financial services by decreasing our weight
in subprime lenders and putting more assets into prime lenders. To that end, we
sold New Century Financial and Friedman, Billings, Ramsey.
Although our holdings in the materials and processing sector were up
considerably more than those in the Index, our underweighting meant that the
contribution from this sector was less than that of the Index. Mobile Mini, a
company that refurbishes shipping containers and leases them as storage units,
was the top contributor to the Fund's performance. The company's stock price has
appreciated as the return on assets and investment has improved.
We were still underweight in the energy sector relative to the Index
despite increasing our weighting in the period. Our underweighting and the
weaker performance of our holdings caused us to underperform the Index in this
sector. Harvest Natural Resources was the Fund's biggest detractor in this
sector due to an adverse decision by the Venezuelan government. We believe the
company's current stock price reflects this risk but we are monitoring the
situation.
We continue working to find companies in the materials and processing and
energy sectors that meet our investment criteria. The primary challenge is to
find investments at prices that provide suitable downside protection if
commodity and energy prices fall from their high recent levels.
The utilities sector made a solid contribution to the Index's performance.
Our lack of holdings in this sector held back the Fund's performance relative to
the Index.
OUTLOOK
The U.S. economy appears to be on a moderate growth path and gradually
rising interest rates should help to control inflation. However, growth may be
hampered by rising energy prices or deteriorating economic indicators.
For value investors, stock price appreciation is a double-edged sword. The
overall strong performance of value-oriented small company stocks in the last
two years has made it more challenging to find undervalued small companies. We
continue to be diligent in our research and feel that our investment discipline
will bear fruit if we are patient and insist upon investing in companies that
offer both quality and value.
We appreciate your investment in the Wasatch Small Cap Value Fund.
20
SMALL CAP VALUE FUND -- PORTFOLIO SUMMARY MARCH 31, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 12/17/97
------ ------- ---------------
WASATCH SMALL CAP VALUE FUND 3.62% 17.45% 19.09%
Russell 2000 Value Index 9.79% 15.42% 9.99%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT
WWW.WASATCHFUNDS.COM OR CALL 800.551.1700. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. THE ADVISOR HAS ABSORBED, CURRENTLY OR IN THE PAST, CERTAIN
FUND EXPENSES, WITHOUT WHICH TOTAL RETURNS WOULD HAVE BEEN LOWER.
Investments in 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
- ------ ------- ---------
ACF AMERICREDIT CORP. 3.72%
Subprime automobile lender.
RWT REDWOOD TRUST, INC. 2.75%
Jumbo ARM mortgage REIT.
SAX SAXON CAPITAL, INC. 2.70%
Subprime mortgage REIT.
NTY NBTY, INC. 2.24%
Nutritional supplements manufacturer/retailer.
LAD LITHIA MOTORS, INC., CLASS A 2.18%
Auto retailer.
KEYS KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
Aftermarket auto replacement parts. 2.10%
ATAC AFTERMARKET TECHNOLOGY CORP.
Aftermarket auto replacement parts. 2.02%
CCBI COMMERCIAL CAPITAL BANCORP, INC. 1.97%
Regional bank specializing in multifamily residential loans.
HOV HOVNANIAN ENTERPRISES, INC.,
CLASS A Homebuilder. 1.90%
HBG HUB INTERNATIONAL LTD.
Insurance broker. 1.81%
* 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 38.3%
CONSUMER DISCRETIONARY 21.2%
AUTOS & TRANSPORTATION 9.2%
TECHNOLOGY 7.1%
PRODUCER DURABLES 6.7%
FINANCIALS 5.8%
OTHER 3.6%
ENERGY 3.2%
MATERIALS & PROCESSING 2.6%
CONSUMER STAPLES 2.3%
**Excludes short-term investments, if any.
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
3/31/1998 11,650 11,076
3/31/1999 9,750 8,636
3/31/2000 15,986 9,780
3/31/2001 19,331 11,683
3/31/2002 27,539 14,457
3/31/2003 19,260 11,092
3/31/2004 34,479 18,244
3/31/2005 35,727 20,030
+ 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.
21
ULTRA GROWTH FUND -- MANAGEMENT DISCUSSION MARCH 31, 2005
[PHOTO OF KAREY BARKER]
KAREY BARKER, CFA
PORTFOLIO MANAGER
[PHOTO OF AJAY KRISHNAN]
AJAY KRISHNAN, CFA
PORTFOLIO MANAGER
SIX MONTH REVIEW
The Wasatch Ultra Growth Fund gained 9.85% in the past six months and
outperformed the Russell 2000 Growth Index, which gained 7.23% but slightly
underperformed the Russell 2500 Growth Index, which gained 9.94%. The Fund's
substantially heavier weightings in the health care and technology sectors and
the better performance of our holdings in these sectors were the primary reasons
we outperformed the Russell 2000 Growth Index (the "Index").
Health care was the Fund's biggest contributor during the period led by
Accredo Health, our largest holding and top contributor overall. Accredo, a
company that provides services for individuals with chronic diseases, announced
in February that it had received an offer to be acquired by Medco Health
Solutions. This announcement sent Accredo's stock price dramatically higher. We
reduced our position to capture profits and control position size. After the
roller coaster ride we have endured with Accredo's stock price over the past two
years, this was a nice validation of our confidence in the quality and intrinsic
value of this company.
We sold Odyssey Healthcare, a hospice care provider, when it appeared that
a Justice Department investigation into the company's government reimbursement
claims could slow patient referrals from hospitals and physicians. We were also
concerned that higher legal costs could limit Odyssey's ability to meet our
long-term earnings growth expectations. Nevertheless, Odyssey was the Fund's
largest detractor.
Last summer, weak stock prices in the technology sector presented some
opportunities to initiate or increase positions in what we felt were high
quality, fast growing semiconductor companies. This proved to be a good move as
a number of these investments made solid contributions and helped us outperform
this sector of the Index. Our best performing technology stock was Tessera
Technologies, a company that licenses a patented, proprietary method for
packaging components on semiconductor chips. Tessera's stock price rose as the
company won settlement of an intellectual property lawsuit. Three technology
holdings were significant detractors -- Kintera, a provider of software
solutions for non-profit organizations, Micrel, a maker of analog semiconductors
for cell phones and laptops, and Lionbridge Technologies, an information
technology services outsourcer.
In the consumer discretionary sector, we took new positions in a couple of
companies that provide education for working adults. We also found opportunities
to invest in a few attractively valued fast growing retailers. Nevertheless, we
remained underweight in this sector compared to the Index. Our consumer
discretionary holdings contributed to the Fund's performance led by The Advisory
Board Co., O'Reilly Automotive and AMN Healthcare Services. Our underweighting
meant that we underperformed the Index in this sector.
Over the past six months, we have increased our weighting in the financial
services sector where we have historically been underweight compared to the
Index. At the end of the period the Fund was slightly overweight. We moved into
this sector because we were able to find rationally valued companies that met
our growth criteria at a time when we felt that companies of comparable quality
in other sectors were overvalued. While we believe our financial services
holdings are attractive long-term investments, their stock prices generally
declined during the period primarily in response to rising interest rates. The
financial services sector detracted from the Fund's performance but contributed
slightly to the Index's performance. Doral Financial, a Puerto Rican bank and
home mortgage lender, was the Fund's biggest detractor in this sector. Doral's
stock price decline was primarily due to accounting issues related to complex
non-cash earnings transactions. We are reviewing our position in the company. On
the positive side, the Fund benefited from investments in AmeriCredit, a
sub-prime automobile lender, and HDFC Bank, a consumer bank in India.
Two sectors, where we typically have had little exposure due to their
dependence on commodity pricing, made solid contributions to the Index's
performance. We had no holdings in the energy sector, which continued to benefit
from rising oil and gas prices. We had few holdings in the materials and
processing sector. Our technology-related holdings in this sector did not keep
pace with companies in this sector of the Index whose results were driven by the
increasing strength of commodity prices.
OUTLOOK
We expect the health care and technology sectors to continue to be
principal drivers of economic growth in the United States. We remain comfortable
with the Fund's heavy weightings in these sectors and with the overall quality
of the health care and technology companies we hold.
While there is some concern over inflation, the U.S. economy appears to be
on a moderate growth path. However, unpredictable energy prices or contradictory
economic indicators may have a dampening effect on growth. In the market, we are
seeing a few more opportunities to invest in what we believe are fast-growing
companies at rational prices, though we remain somewhat concerned about
valuations. We continue to monitor the companies held in the Fund and buy, sell
or adjust position sizes based on valuation, our ongoing research and the
confidence we have in the ability of individual companies to achieve high growth
rates. We believe the best way we can help you achieve your long-term investment
objectives is to adhere to our discipline of investing in fast growing companies
at rational prices.
We appreciate your investment in the Wasatch Ultra Growth Fund.
22
ULTRA GROWTH FUND -- PORTFOLIO SUMMARY MARCH 31, 2005
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
WASATCH ULTRA GROWTH FUND -6.51% 9.87% 13.12%
Russell 2000 Growth Index -0.87% -6.60% 5.80%
Russell 2500 Growth Index 3.91% -5.87% 8.29%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT
WWW.WASATCHFUNDS.COM OR CALL 800.551.1700. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. THE ADVISOR HAS ABSORBED, CURRENTLY OR IN THE PAST, CERTAIN
FUND EXPENSES, WITHOUT WHICH TOTAL RETURNS WOULD HAVE BEEN LOWER.
Investments in 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
- ------ ------- ---------
NSM NATIONAL SEMICONDUCTOR
Corp. Analog semiconductors. 4.05%
USPI UNITED SURGICAL PARTNERS INT'L., INC.
Short-stay surgical centers. 4.00%
AMSG AMSURG CORP.
Outpatient surgery centers. 3.14%
SRX SRA INTERNATIONAL, INC. CLASS A
Information technology services for government agencies. 3.03%
ACS AFFILIATED COMPUTER SERVICES, INC., CLASS A
Outsource provider of business and information
technology services. 3.00%
PDX PEDIATRIX MEDICAL GROUP, INC.
National network of neonatalogists. 2.69%
MCHP MICROCHIP TECHNOLOGY, INC.
Proprietary chip manufacturer. 2.57%
ABCO THE ADVISORY BOARD CO.
Health care business consulting. 2.55%
ACF AMERICREDIT CORP.
Subprime automobile lender. 2.51%
OIIM O2MICRO INTERNATIONAL LTD.
Semiconductors to increase power efficiency. 2.43%
*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]
<Table>
TECHNOLOGY 31.4%
HEALTH CARE 27.7%
CONSUMER DISCRETIONARY 17.3%
FINANCIAL SERVICES 9.8%
FINANCIALS 4.0%
INFORMATION TECHNOLOGY 3.5%
PRODUCER DURABLES 3.2%
UTILITIES 1.9%
MATERIALS & PROCESSING 0.9%
OTHER 0.3%
</Table>
**Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
[LINE GRAPH]
DATE WASATCH ULTRA GROWTH FUND RUSSELL 2000 GROWTH INDEX RUSSELL 2500 GROWTH INDEX
- --------- ------------------------- ------------------------- -------------------------
3/31/1995 10,000 10,000 10,000
3/31/1996 13,815 13,137 13,175
3/31/1997 12,049 12,372 13,035
3/31/1998 15,778 17,466 18,072
3/31/1999 16,221 15,538 16,587
3/31/2000 21,434 24,713 30,012
3/31/2001 21,081 14,875 17,515
3/31/2002 30,693 15,611 18,925
3/31/2003 23,084 10,674 13,385
3/31/2004 36,699 17,415 21,345
3/31/2005 34,312 17,567 22,180
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.
23
U.S. TREASURY FUND -- MANAGEMENT DISCUSSION MARCH 31, 2005
[PHOTO OF VAN R. HOISINGTON]
VAN R. HOISINGTON
PORTFOLIO MANAGER
SIX MONTH REVIEW
For the past six months, the Wasatch-Hoisington U.S. Treasury Fund
returned 4.27%, well above the 0.47% increase in the Lehman Brothers Aggregate
Bond Index.
The Federal Reserve Board (Fed) raised the overnight lending rate by 0.25%
four times in the last six months. As a result, yields on two, five, and 10 year
Treasury notes increased during the period. Yields on the long end of the
Treasury market (bonds with maturities longer than 20 years) declined to 4.76%
as of March 31, 2005 from 4.89% on September 30, 2004. Market rates on long zero
coupon Treasury bonds fell even more.
The key question is why long-dated Treasury bonds like those held by the
Fund outperformed shorter-dated Treasury notes and bills when the economy was
seemingly growing above trend and key measures of inflation were rising.
One explanation may be that sponsors of defined benefit pension plans
recognized that sound pension fund management requires greater matching of
liabilities and assets. This would tend to increase the demand for long-dated
Treasuries, thereby boosting their price. Over time, this push for matching
assets and liabilities could have a material effect on the Treasury bond market.
A more compelling argument may be that while coincidental indicators of
economic activity, like gross domestic product (GDP), were doing well, several
leading indicators were faltering. Real GDP increased 3.8% in the fourth
quarter, and nearly the same in the first quarter of 2005. However, such
measures only tell us where the economy was, not where it is headed. Leading
economic indicators suggest that growth will weaken considerably.
Noticeable in the mix of anticipatory indicators has been significant
weakness in the monetary sector. The money supply as measured by M2* has slumped
to a mere 1.9% annualized growth rate in the first three months of 2005. M2 is a
component of the Leading Economic Index (LEI) developed by the Conference Board.
In 2004, M2 grew by 4.5%, the slowest increase in nine years and far below the
6.7% long-term trend rate of increase. M3* a broader measure of monetary growth,
also rose by the smallest percent in nine years in 2004, and likewise moderated
to a slim 2.7% annualized pace in the first three months of 2005.
An additional broad monetary indicator is the shape of the yield curve,
which is measured by the differential between the 10 year Treasury yield and the
more short-term focused Federal funds rate -- another LEI component. As short
rates have risen, the shape of the yield curve has flattened dramatically. This
reduces the profit potential for banks and other financial intermediaries and
depresses monetary and credit growth. Also, a rise in short-term rates and a
decline in long-term rates usually indicates that bond investors expect economic
activity and/or inflation to slow.
In addition to key monetary leading indicators, numerous non-monetary
leading indicators have retreated significantly from their cyclical highs in
2004. These include average weekly hours in manufacturing, real manufacturer's
new orders for consumer goods and materials, vendor performance, real
manufacturer's orders for non-defense capital goods, and consumer expectations.
OUTLOOK
Four considerations suggest that economic activity will slow as 2005
progresses. This will serve to moderate inflation, which in turn should continue
to support the trend in lower long-term yields and the Fund's positioning in
long-dated and long zero coupon Treasury bonds.
First, as just discussed, key monetary and non-monetary leading indicators
are deteriorating.
Second, consumer outlays are showing signs of slowing, particularly for
big-ticket items such as motor vehicles. Slower spending should be expected
since in February average weekly earnings, adjusted for inflation, dropped 0.8%
below the level of a year ago. Real weekly earnings registered year-over-year
declines in nine of the last 10 months.
Further, the surge in consumer fuel expenditures relative to wage and
salary income is almost comparable to the jump during the oil shock of the early
1970s. In January and February, fuel expenditures comprised 8.1% of income, up
2.0% from the low reached earlier in the decade. This is a considerable "tax" on
the American consumer.
Third, economic growth in major industrialized foreign countries continues
to lag, indicating that the rest of the world will be a drag on domestic
activity. Japan remains mired in deflation, with renewed signs of softness in
labor markets and consumer spending. Last month, Germany's unemployment rate
reached the highest level since 1933, while France's was at a five year high.
Key measures of European business and consumer confidence have recently fallen
to the lowest levels in the past couple of years. Two factors causing this
increasingly synchronized global slowdown are record oil prices and tighter Fed
and other central bank policies. These factors are negatives for all world
economies.
Fourth, the U.S. economy continues to suffer from serious, deep-seated
structural imbalances. These problems include high consumer debt and low
savings. The saving rate fell to 1.4% last year, the lowest level since 1933, as
ratios of private sector and total U.S. debt surged to record highs in the
fourth quarter of last year. Additionally, the ever-present shift in high income
manufacturing to lower cost labor markets around the globe blunts the positive
economic impact of new startups and entrepreneurial activity.
Reflecting these considerations, the Fund is invested in long and long
zero coupon Treasury bonds. We believe this investment posture is appropriate
for providing you with income and capital appreciation over the long term.
We appreciate your investment in the Wasatch-Hoisington U.S. Treasury
Fund.
* M2 money supply consists of currency and checking accounts, consumer-type time
and savings accounts and equivalent near monies, while M3 money supply
consists of M2 plus business-type time deposits and less liquid near monies.
Both M2 and M3 exclude monies and near monies owned by the Treasury,
depository institutions and foreign banks and official institutions and IRA
and Keogh balances owned by consumers.
24
U.S. TREASURY FUND -- PORTFOLIO SUMMARY MARCH 31, 2005
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
WASATCH-HOISINGTON U.S. TREASURY FUND 5.42% 8.66% 8.39%
Lehman Bros. Aggregate Bond Index 1.15% 7.14% 7.14%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
TO OBTAIN THE MOST RECENT MONTH-END PERFORMANCE, PLEASE VISIT
WWW.WASATCHFUNDS.COM OR CALL 800.551.1700. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. THE ADVISOR HAS ABSORBED, CURRENTLY OR IN THE PAST, CERTAIN
FUND EXPENSES, WITHOUT WHICH TOTAL RETURNS WOULD HAVE BEEN LOWER.
TOP 10 HOLDINGS*
MATURITY % OF
HOLDING DATE FUND
- --------------------------------- -------- ------
US.TREASURY STRIP, PRINCIPAL ONLY 11/15/27 33.01%
US.TREASURY BOND, 7.50% 11/15/24 13.53%
US.TREASURY STRIP, PRINCIPAL ONLY 11/15/21 11.69%
US.TREASURY BOND, 6.125% 11/15/27 7.23%
US.TREASURY BOND, 5.50% 8/15/28 7.13%
US.TREASURY BOND, 6.875% 8/15/25 6.48%
US.TREASURY STRIP, PRINCIPAL ONLY 8/15/25 5.52%
US.TREASURY BOND, 6.75% 8/15/26 4.09%
US.TREASURY BOND, 6.375% 8/15/27 4.05%
US.TREASURY BOND, 6.625% 2/15/27 3.40%
* 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]
<Table>
TREASURY NOTES & BONDS 97.0%
SHORT-TERM INVESTMENTS 3.0%
</Table>
GROWTH OF A $10,000 INVESTMENT
[LINE GRAPH]
DATE WASATCH-HOISINGTON U.S. TREASURY FUND LEHMAN BROS. AGGREGATE BOND INDEX
- --------- ------------------------------------- ---------------------------------
3/31/1995 10,000 10,000
3/31/1996 10,748 11,079
3/31/1997 11,077 11,623
3/31/1998 13,515 13,016
3/31/1999 14,395 13,861
3/31/2000 14,769 14,120
3/31/2001 16,416 15,889
3/31/2002 16,358 16,739
3/31/2003 19,825 18,695
3/31/2004 21,226 19,706
3/31/2005 22,376 19,932
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.
25
WASATCH FUNDS -- OPERATING EXPENSES
EXPENSE EXAMPLE
As a shareholder of Wasatch Funds, you incur two types of costs: (1)
transaction costs, including redemption fees and (2) ongoing costs, including
management fees and other fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in a Wasatch Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000.00 invested at the
beginning of the period and held for the entire six month period ended March 31,
2005.
ACTUAL EXPENSES
The first line of the table below provides information about actual
account values and actual expenses, based upon the actual total return of the
fund during the most recent six month period ended March 31. You may use the
information in this line, together with the amount you invested, to estimate the
expenses you paid over the period. Simply divide your account value by $1,000.00
(for example, an $8,600.00 account value divided by $1,000.00 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
In addition, the Funds charge a $15.00 IRA distribution fee, a $12.50 IRA
annual maintenance fee and a $10.00 fee for redemptions paid by wire. To the
extent these fees apply to your account, your expenses paid during the period
would be higher and your ending account value would be lower than the amounts
shown in the table below.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on a fund's actual expense ratio
and an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in a Wasatch Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of other funds.
In addition, the Funds charge a $15.00 IRA distribution fee, a $12.50 IRA
annual maintenance fee and a $10.00 fee for redemptions paid by wire. To the
extent these fees apply to your account, your expenses paid during the period
would be higher and your ending account value would be lower than the amounts
shown in the table below. If another fund's fees differ from those listed above,
your expenses paid and your ending account value could be higher or lower than
those of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
redemption fees. Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
26
MARCH 31, 2005 (UNAUDITED)
ACCOUNT VALUE
---------------------------------- EXPENSES EXPENSE
BEGINNING OF PERIOD END OF PERIOD PAID RATIO
OCTOBER 1, 2004 MARCH 31, 2005 DURING PERIOD* DURING PERIOD*
- ----------------------------------------------------------------------------------------------------------------------------
CORE GROWTH FUND
Actual return $1,000.00 $1,119.10 $ 6.34 1.20%
Hypothetical return before expenses $1,000.00 $1,018.95 $ 6.04 1.20%
GLOBAL SCIENCE & TECHNOLOGY FUND
Actual return $1,000.00 $1,108.40 $10.25 1.95%
Hypothetical return before expenses $1,000.00 $1,015.21 $ 9.80 1.95%
HERITAGE GROWTH FUND
Actual return $1,000.00 $1,093.60 $ 4.96 0.95%
Hypothetical return before expenses $1,000.00 $1,020.19 $ 4.78 0.95%
INTERNATIONAL GROWTH FUND
Actual return $1,000.00 $1,125.30 $ 9.59 1.81%
Hypothetical return before expenses $1,000.00 $1,015.91 $ 9.10 1.81%
INTERNATIONAL OPPORTUNITIES FUND(1)
Actual return $1,000.00 $ 985.00 $ 3.92 2.25%
Hypothetical return before expenses $1,000.00 $1,004.82 $ 3.95 2.25%
MICRO CAP FUND
Actual return $1,000.00 $1,129.00 $11.57 2.18%
Hypothetical return before expenses $1,000.00 $1,014.06 $10.95 2.18%
MICRO CAP VALUE FUND
Actual return $1,000.00 $1,106.10 $11.81 2.25%
Hypothetical return before expenses $1,000.00 $1,013.71 $11.30 2.25%
SMALL CAP GROWTH FUND
Actual return $1,000.00 $1,124.30 $ 6.25 1.18%
Hypothetical return before expenses $1,000.00 $1,019.05 $ 5.94 1.18%
SMALL CAP VALUE FUND
Actual return $1,000.00 $1,099.90 $ 8.95 1.71%
Hypothetical return before expenses $1,000.00 $1,016.40 $ 8.60 1.71%
ULTRA GROWTH FUND
Actual return $1,000.00 $1,098.50 $ 7.85 1.50%
Hypothetical return before expenses $1,000.00 $1,017.45 $ 7.54 1.50%
U.S. TREASURY FUND
Actual return $1,000.00 $1,042.70 $ 3.82 0.75%
Hypothetical return before expenses $1,000.00 $1,021.19 $ 3.78 0.75%
- ----------
*Expenses paid during the period are equal to the Fund's annualized expense
ratio as indicated, multiplied by the average account value over the period,
multiplied by the number of days in the most recent fiscal half-year (182)
divided by the number of days in the fiscal year (365), except for the
International Opportunities Fund which had 64 days in the most recent fiscal
period due to its inception date of January 27, 2005.
(1)Fund inception date was January 27, 2005.
27
CORE GROWTH FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE
- --------- ------------
COMMON STOCKS 94.3%
AUTO PARTS -- AFTER MARKET 0.6%
580,125 Aftermarket Technology Corp. $ 9,572,062
------------
BANKS 10.0%
1,375,640 Commerce Bancorp, Inc. 44,667,031
1,846,075 Doral Financial Corp. 40,410,582
272,525 First Community Bancorp 12,072,857
2,109,675 HDFC Bank Ltd. 26,292,434
5,285,562 UTI Bank Ltd. 29,296,320
995,341 W Holding Co., Inc. 10,023,084
------------
162,762,308
------------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 1.0%
356,459 Charles River Laboratories
International, Inc.* 16,767,831
------------
COMMERCIAL SERVICES AND SUPPLIES 6.0%
2,186,146 Copart, Inc.* 51,505,600
724,262 Waste Connections, Inc.* 25,168,104
750,225 WCA Waste Corp.* 7,352,205
461,195 West Corp.* 14,758,240
------------
98,784,149
------------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 4.0%
471,275 CACI International, Inc., Class A* 26,028,518
320,925 QLogic Corp.* 12,997,463
432,600 SRA International, Inc., Class A* 26,064,150
------------
65,090,131
------------
CONSUMER PRODUCTS 0.5%
306,300 Helen of Troy Ltd.* 8,386,494
------------
DIVERSIFIED FINANCIAL SERVICES 2.4%
1,411,175 Housing Development Finance Corp. Ltd. 23,479,729
1,396,975 U.S.I. Holdings Corp.* 16,456,365
------------
39,936,094
------------
ELECTRONICS 0.8%
702,025 Semtech Corp.* 12,545,187
------------
ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 4.9%
879,699 AMIS Holdings, Inc.* 9,931,802
3,135,479 ASE Test Ltd.* 15,928,233
852,875 Integrated Circuit Systems, Inc.* 16,306,970
1,851,425 National Semiconductor Corp. 38,157,869
------------
80,324,874
------------
FINANCE COMPANIES 1.3%
373,675 Accredited Home Lenders Holding Co.* 13,538,246
400,575 United PanAm Financial Corp.* 8,167,724
------------
21,705,970
------------
FINANCE -- SMALL LOAN 4.3%
2,984,456 AmeriCredit Corp.* 69,955,649
------------
FINANCIAL DATA PROCESSING SERVICES AND SYSTEMS 1.4%
658,000 Fair Isaac Corp. 22,661,520
------------
FINANCIAL -- MISCELLANEOUS 5.5%
490,100 Brown & Brown, Inc. 22,588,709
1,357,081 Fidelity National Financial, Inc. 44,702,248
693,750 First American Corp. 22,852,125
------------
90,143,082
------------
FOOD AND DRUG RETAILING 0.5%
250,000 Shoppers Drug Mart Corp. 8,340,566
------------
FOODS 2.3%
1,531,250 NBTY, Inc.* $ 38,419,063
------------
HEALTH CARE FACILITIES 4.2%
635,275 Pharmaceutical Product Development, Inc.* 30,779,074
473,525 Renal Care Group, Inc.* 17,965,539
193,740 Sunrise Senior Living, Inc.* 9,415,764
224,450 United Surgical Partners
International, Inc.* 10,273,076
------------
68,433,453
------------
HEALTH CARE MANAGEMENT SERVICES 4.6%
736,100 AMERIGROUP Corp.* 26,911,816
410,325 Pacificare Health Systems* 23,355,699
366,475 Pediatrix Medical Group, Inc.* 25,136,520
------------
75,404,035
------------
HEALTH CARE SERVICES 2.1%
289,574 Express Scripts, Inc.* 25,247,957
209,375 Lincare Holdings, Inc.* 9,260,656
------------
34,508,613
------------
HOME BUILDING 8.5%
1,199,333 D.R. Horton, Inc. 35,068,497
505,850 Hovnanian Enterprises, Inc., Class A* 25,798,350
685,435 M.D.C. Holdings, Inc. 47,740,548
40,373 NVR, Inc.* 31,692,805
------------
140,300,200
------------
INVESTMENT MANAGEMENT COMPANIES 0.5%
600 Brantley Mezzanine Finance, LLC* ** *** + 60,000
537,875 MCG Capital Corp. 8,275,207
------------
8,335,207
------------
LEISURE TIME 1.7%
854,520 SCP Pool Corp. 27,225,007
------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 2.0%
446,063 ICU Medical, Inc.* 15,835,236
1,576,975 PSS World Medical, Inc.* 17,930,206
------------
33,765,442
------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 9.2%
1,307,850 Anworth Mortgage Asset Corp. 12,489,968
761,625 Bimini Mortgage Management, Inc.,
Class A 10,548,506
154,525 ECC Capital Corp.* 927,150
550,300 Fieldstone Investment Corp.*** + 7,830,549
1,307,750 HomeBanc Corp. 11,560,510
858,400 MortgageIT Holdings, Inc. 13,691,480
667,825 Provident Senior Living Trust*** + 10,785,374
685,825 Redwood Trust, Inc. 35,100,523
1,542,000 Saxon Capital, Inc. 26,522,400
753,475 Thornburg Mortgage, Inc. 21,127,439
------------
150,583,899
------------
RENTAL AND LEASING SERVICES -- CONSUMER 2.2%
1,301,220 Rent-A-Center, Inc.* 35,536,318
------------
RESTAURANTS 0.5%
336,750 Ruby Tuesday, Inc. 8,179,658
------------
28
MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- --------- -------------
RETAIL 11.1%
1,316,245 Dollar Tree Stores, Inc.* $ 37,815,719
625,425 Global Imaging Systems, Inc.* 22,177,571
463,950 Group 1 Automotive, Inc.* 12,201,885
311,275 Lithia Motors, Inc., Class A 7,971,753
535,275 Michaels Stores, Inc. 19,430,482
1,342,955 O'Reilly Automotive, Inc.* 66,516,561
737,695 Sonic Automotive, Inc. 16,753,053
-------------
182,867,024
-------------
SAVINGS AND LOANS 1.6%
1,336,423 Commercial Capital Bancorp, Inc. 27,196,208
-------------
TEXTILES, APPAREL AND LUXURY GOODS 0.6%
262,225 Carter's, Inc.* 10,423,444
-------------
TOTAL COMMON STOCKS
(COST $1,203,954,600) 1,548,153,488
-------------
PRINCIPAL
AMOUNT VALUE
- ----------- --------------
CORPORATE BONDS 0.2%
INVESTMENT MANAGEMENT COMPANIES 0.2%
$ 3,000,000 BRANTLEY MEZZANINE FINANCE,
LLC, 10.00%, 9/21/09*** + $ 2,944,985
--------------
TOTAL CORPORATE BONDS
(cost $2,944,985) 2,944,985
--------------
SHORT-TERM INVESTMENTS 5.1%
REPURCHASE AGREEMENT 5.1%
82,676,000 Repurchase Agreement dated 3/31/05,
1.85% due 4/1/05 with State Street Bank
and Trust Co. collateralized by $62,295,000
of United States Treasury Bonds 7.50% due
11/15/24; value: $84,336,217; repurchase
proceeds: $82,680,249 (cost $82,676,000) 82,676,000
1,825,000 Repurchase Agreement dated 3/31/05,
1.85% due 4/1/05 with State Street Bank
and Trust Co. col1ateralized by $1,870,000
of United States Treasury Notes 2.50% due
5/31/06; value: $1,862,988; repurchase
proceeds: $1,825,094 (cost $1,825,000) 1,825,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $84,501,000) 84,501,000
--------------
TOTAL INVESTMENTS
(cost $1,291,400,585) 99.6% 1,635,599,473
OTHER ASSETS LESS LIABILITIES 0.4% 6,255,311
--------------
NET ASSETS 100.0% $1,641,854,784
==============
*Non-income producing.
**Common units.
***Security was fair valued under procedures adopted by the Board of Directors
(see Note 2).
+Security purchased in a private placement transaction or under Rule 144A of
the Securities Act of 1933 (see Note 8).
See notes to financial statements.
29
GLOBAL SCIENCE & TECHNOLOGY FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE
- --------- -----------
COMMON STOCKS 98.8%
AEROSPACE 1.2%
26,000 MTC Technologies, Inc.* $ 845,000
-----------
AUTO COMPONENTS 0.5%
21,000 Sundaram Clayton Ltd. (India) 336,615
-----------
BANKS 1.3%
71,225 HDFC Bank Ltd. (India) 887,662
-----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 1.2%
17,275 Isolagen, Inc.* 108,660
33,375 Neurochem, Inc.* (Canada) 397,496
29,175 QIAGEN N.V.* (Netherlands) 348,350
-----------
854,506
-----------
BUILDING PRODUCTS 0.7%
43,175 IVRCL Infrastructure and Projects Ltd. (India) 468,479
-----------
CASINOS AND GAMBLING 0.3%
6,187 Shuffle Master, Inc.* 179,175
-----------
CHEMICALS 0.5%
11,350 Cabot Microelectronics Corp.* 356,163
-----------
COMMERCIAL INFORMATION SERVICES 0.4%
21,200 Fastclick, Inc.* 254,400
-----------
COMMERCIAL SERVICES AND SUPPLIES 3.2%
279,500 Allen-Vanguard Corp.* (Canada) 1,062,782
4,350 CoStar Group, Inc.* 160,298
30,775 lAC/InterActiveCorp* 685,359
41,101 Wireless Facilities, Inc.* 256,881
-----------
2,165,320
-----------
COMMUNICATIONS TECHNOLOGY 1.4%
19,250 QUALCOMM, Inc. 705,513
22,405 UTStarcom, Inc.* (China) 245,335
-----------
950,848
-----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 13.5%
6,550 CACI International, Inc., Class A* 361,757
28,650 Cognizant Technology Solutions Corp., Class A* 1,323,630
54,017 EPIQ Systems, Inc.* 701,141
21,025 Infosys Technologies Ltd. (India) 1,084,494
32,500 Kanbay International, Inc.* 664,950
22,750 Kintera, Inc.* 120,575
105,100 Kintera, Inc. PIPE* *** + 534,749
20,475 Manhattan Associates, Inc.* 417,076
24,400 Open Solutions, Inc.* 483,852
32,550 Opnet Technologies, Inc.* 272,118
36,375 PDF Solutions, Inc.* 509,250
33,525 QLogic Corp.* 1,357,762
23,650 SRA International, Inc., Class A* 1,424,912
-----------
9,256,266
-----------
COMPUTER TECHNOLOGY 1.5%
50,250 Dot Hill Systems Corp.* 298,988
39,925 Trident Microsystems, Inc.* 705,874
-----------
1,004,862
-----------
DIVERSIFIED FINANCIAL SERVICES 2.2%
4,250 Crisil Ltd. (India) $ 66,061
84,825 Housing Development Finance Corp. Ltd. (India) 1,411,354
-----------
1,477,415
-----------
DRUGS AND PHARMACEUTICALS 4.8%
23,000 Acusphere, Inc.* 124,430
21,400 Angiotech Pharmaceuticals, Inc.* (Canada) 328,490
8,750 Connetics Corp.* 221,287
14,589 Docpharma N.V.* (Belgium) 529,630
56,525 ISTA Pharmaceuticals, Inc.* 558,467
14,950 NeoPharm, Inc.* 116,161
7,000 Northwest Biotherapeutics, Inc.* 1,785
12,250 Taro Pharmaceuticals Industries Ltd.* (Israel) 386,610
14,500 Teva Pharmaceutical Industries Ltd. ADR (Israel) 449,500
120,318 United Drug plc (Ireland) 544,434
-----------
3,260,794
-----------
ELECTRICAL AND ELECTRONICS 2.6%
36,250 Multi-Fineline Electronix, Inc.* 639,813
36,250 Power Integrations, Inc.* 757,263
34,575 TTM Technologies, Inc.* 361,654
-----------
1,758,730
-----------
ELECTRICAL EQUIPMENT 1.2%
776,300 Unisteel Technology Ltd. (Singapore) 818,197
-----------
ELECTRICAL EQUIPMENT AND COMPONENTS 0.2%
10,700 Cohu, Inc. 170,665
-----------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 3.0%
4,525 Funkwerk AG (Germany) 208,216
1,016,000 Innovalues Precision Ltd. (Singapore) 301,557
360,000 MFS Technology Ltd. (Singapore) 160,276
3,475 Samsung Electronics Co., Ltd. GDR (Korea) 860,062
61,000 Venture Corp. Ltd. (Singapore) 491,429
-----------
2,021,540
-----------
ELECTRONICS 1.9%
29,375 CyberOptics Corp.* 366,600
60,525 Nu Horizons Electronics Corp.* 432,754
9,125 Semtech Corp.* 163,064
17,925 Supertex, Inc.* 328,207
-----------
1,290,625
-----------
ELECTRONICS -- MEDICAL SYSTEMS 1.2%
20,350 EPIX Pharmaceuticals, Inc.* 142,450
15,025 Intuitive Surgical, Inc.* 683,187
-----------
825,637
-----------
30
MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- --------- -----------
ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 21.3%
84,125 Advanced Power Technology, Inc.* $ 597,288
84,609 Aixtron AG ADR* (Germany) 351,973
18,725 Altera Corp.* 370,381
159,250 ASE Test Ltd.* (Taiwan) 808,990
13,225 DSP Group, Inc.* 340,676
48,275 Integrated Circuit Systems, Inc.* 923,018
19,325 Leadis Technology, Inc.* 115,564
152,425 Micrel, Inc.* 1,405,358
70,325 National Semiconductor Corp. 1,449,398
234,975 O2Micro International Ltd.* (Cayman Islands) 2,417,893
147,050 PLX Technology, Inc.* 1,544,025
4,550 SigmaTel, Inc.* 170,306
32,100 Silicon Laboratories, Inc.* 953,691
50,275 SIPEX Corp.* 116,638
133,950 SiRF Technology Holdings, Inc.* 1,494,882
30,375 Tessera Technologies, Inc.* 1,313,111
4,950 Xilinx, Inc. 144,689
-----------
14,517,881
-----------
ELECTRONICS -- TECHNOLOGY 0.5%
40,750 EFJ, Inc.* 335,372
-----------
FOOD AND DRUG RETAILING 0.9%
23,600 Sugi Pharmacy Co. Ltd. (Japan) 615,288
-----------
HEALTH CARE EQUIPMENT AND SUPPLIES 3.0%
43,200 Biacore International AB (Sweden) 986,692
64,550 MacroPore Biosurgery, Inc.* (Germany) 174,917
3,975 Straumann Holding AG (Switzerland) 860,627
-----------
2,022,236
-----------
HEALTH CARE FACILITIES 0.8%
11,200 American Healthways, Inc.* 369,824
4,075 Pharmaceutical Product Development, Inc.* 197,434
-----------
567,258
-----------
HEALTH CARE MANAGEMENT SERVICES 0.5%
13,600 Computer Programs & Systems, Inc. 381,888
-----------
HEALTH CARE PROVIDERS AND SERVICES 0.8%
15,500 Icon plc ADR* (Ireland) 581,560
-----------
HEALTH CARE SERVICES 1.1%
16,668 Accredo Health, Inc.* 740,226
-----------
INTERNET SOFTWARE AND SERVICES 0.5%
230,625 Opera Software ASA* (Norway) 335,230
-----------
MACHINERY 3.3%
34,000 Bharat Forge Ltd. (India) 1 ,073,293
2,000,000 MMI Holdings Ltd. (Singapore) 405,839
23,850 Pason Systems, Inc. (Canada) 746,206
-----------
2,225,338
-----------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 10.3%
84,200 Abaxis, Inc.* $ 745,170
33,550 Cyberonics, Inc.* 1,481,904
144,125 Enpath Medical, Inc.* 1,170,295
27,050 ICU Medical, Inc.* 960,275
16,125 Kyphon, Inc.* 405,866
74,800 NuVasive, Inc.* 966,416
11,775 Shamir Optical Industry Ltd.* (Israel) 181,924
20,800 Techne Corp.* 835,744
22,600 VNUS Medical Technologies, Inc.* 261,708
-----------
7,009,302
-----------
MISCELLANEOUS MATERIALS AND COMMODITIES 0.9%
27,150 Symyx Technologies, Inc.* 598,657
-----------
PRODUCTION TECHNOLOGY EQUIPMENT 4.2%
19,950 ADE Corp.* 442,890
14,300 August Technology Corp.* 167,596
165,530 inTEST Corp.* 688,605
96,100 Intevac, Inc.* 906,223
24,325 Nanometrics, Inc.* 286,305
33,325 Nova Measuring Instruments Ltd.* (Israel) 99,308
19,850 Rudolph Technologies, Inc.* 298,941
-----------
2,889,868
-----------
REAL ESTATE 0.2%
58,550 Mahindra Gesco Developers Ltd.* (India) 164,173
-----------
SECURITIES AND BROKERAGE SERVICES 0.2%
7,475 optionsXpress, Inc.* 121,020
-----------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 3.4%
5,750 austriamicrosystems AG* (Austria) 208,130
55,525 CSR plc* (United Kingdom) 342,780
46,250 PSi Technologies Holdings, Inc. ADR* (Philippines) 51,800
18,525 SEZ Holding AG* (Switzerland) 517,229
142,464 Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan) 1,208,095
-----------
2,328,034
-----------
SOFTWARE 1.1%
22,600 Hexaware Technologies (India) 378,745
45,275 Ninetowns Digital World Trade Holdings Ltd. ADR* (China) 410,644
-----------
789,389
-----------
TELECOMMUNICATIONS EQUIPMENT 0.2%
5,875 Applied Signal Technology, Inc.* 134,537
-----------
TEXTILES, APPAREL AND LUXURY GOODS 0.4%
31,700 Bombay Dyeing and Manufacturing Company Ltd. (India) 247,677
-----------
UTILITIES -- TELECOMMUNICATIONS 2.4%
74,800 Nextel Partners, Inc., Class A* 1,642,608
-----------
TOTAL COMMON STOCKS (cost $64,945,816) 67,430,441
-----------
31
GLOBAL SCIENCE & TECHNOLOGY FUND -- SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- -------- ---------
PREFERRED STOCKS 0.2%
COMMUNICATIONS TECHNOLOGY 0.0%
6,528 Xtera Communications, Inc.,
Series A- 1 Pfd.*** + $ 7,076
---------
DRUGS AND PHARMACEUTICALS 0.2%
283,018 Point Biomedical Corp., Series F Pfd.* *** + 150,000
---------
TOTAL PREFERRED STOCKS
(cost $157,076) 157,076
---------
LIMITED PARTNERSHIP INTEREST 0.0%
OTHER 0.0%
Montagu Newhall Global
Partners II-B, L.P.* *** + 35,654
---------
TOTAL LIMITED PARTNERSHIP
Interest (cost $47,144) 35,654
---------
WARRANTS 0.0%
DRUGS AND PHARMACEUTICALS 0.0%
4,600 Acusphere, Inc.* *** + --
84,905 Point Biomedical Corp.* *** + --
---------
ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 0.0%
4,275 SiRF Technology Holdings, Inc.* *** + 19,922
---------
TOTAL WARRANTS (COST $0) 19,922
---------
PRINCIPAL
AMOUNT VALUE
- --------- ------------
SHORT-TERM INVESTMENTS 0.9%
REPURCHASE AGREEMENT 0.9%
$594,000 Repurchase Agreement dated 3/31/05, 1.85% due
4/1/05 with State Street Bank and Trust Co.
collateralized by $450,000 of United States
Treasury Bonds 7.50% due 11/15/24; value:
$609,219; repurchase proceeds: $594,031+++
(cost $594,000) $ 594,000
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $594,000) 594,000
------------
TOTAL INVESTMENTS
(cost $65,744,036) 99.9% 68,237,093
OTHER ASSETS LESS LIABILITIES 0.1% 41,319
------------
NET ASSETS 100.0% $ 68,278,412
============
*Non-income producing.
***Security was fair valued under procedures adopted by the Board of Directors
(see Note 2).
+ Security purchased in a private placement transaction or under Rule 144A of
the Securities Act of 1933 (see Note 8).
+++All or a portion of this security has been designated as collateral for
purchase commitments.
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
PIPE Private Investment in a Public Equity.
See notes to financial statements.
At March 31,2005, Wasatch Global Science & Technology Fund's investments,
excluding short-term investments, were in the following countries:
COUNTRY %
- -------------- -----
Austria 0.3
Belgium 0.8
Canada 3.7
Cayman Islands 3.6
China 1.0
Germany 1.1
India 9.0
Ireland 1.7
Israel 1.6
Japan 0.9
Korea 1.3
Netherlands 0.5
Norway 0.5
Philippines 0.1
Singapore 3.2
Sweden 1.5
Switzerland 2.0
Taiwan 3.0
United Kingdom 0.5
United States 63.7
-----
TOTAL 100.0%
=====
32
HERITAGE GROWTH FUND -- SCHEDULE OF INVESTMENTS MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- ------- ------------
COMMON STOCKS 92.6%
AIR TRANSPORT 0.6%
72,025 JetBlue Airways Corp.* $ 1,371,356
------------
BANKS 10.2%
198,550 Commerce Bancorp, Inc. 6,446,918
325,275 Doral Financial Corp. 7,120,270
98,325 New York Community Bancorp, Inc. 1,785,582
247,325 North Fork Bancorporation, Inc. 6,860,795
85,225 TCF Financial Corp. 2,313,859
------------
24,527,424
------------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 1.2%
59,350 Charles River Laboratories International, Inc.* 2,791,824
------------
COMMERCIAL SERVICES AND SUPPLIES 1.7%
22,375 Corporate Executive Board Co. 1,430,881
16,300 eBay, Inc.* 607,338
93,825 IAC/InterActiveCorp* 2,089,483
------------
4,127,702
------------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 6.0%
89,800 Affiliated Computer Services, Inc., Class A* 4,780,952
55,000 Infosys Technologies Ltd. 2,836,965
16,425 Infosys Technologies Ltd. ADR 1,211,015
30,850 NAVTEQ Corp.* 1,337,348
107,675 QLogic Corp.* 4,360,837
------------
14,527,117
------------
DIVERSIFIED FINANCIALS SERVICES 1.3%
39,250 Countrywide Financial Corp. 1,274,055
111,000 Housing Development Finance Corp. Ltd. 1,846,865
------------
3,120,920
------------
DRUGS AND PHARMACEUTICALS 3.4%
29,100 Forest Laboratories, Inc.* 1,075,245
232,450 Teva Pharmaceutical Industries Ltd. ADR 7,205,950
------------
8,281,195
------------
EDUCATION SERVICES 4.3%
119,325 Apollo Group, Inc., Class A* 8,837,210
91,000 Corinthian Colleges, Inc.* 1,430,520
------------
10,267,730
------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.6%
6,000 Samsung Electronics Co. Ltd. GDR 1,485,000
------------
ELECTRONICS 0.5%
30,100 Amphenol Corp., Class A 1,114,904
------------
ELECTRONICS -- MEDICAL SYSTEMS 0.5%
25,500 Medtronic, Inc. 1,299,225
------------
ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 6.2%
127,575 Linear Technology Corp. 4,887,398
106,725 Maxim Integrated Products, Inc. 4,361,851
59,350 Microchip Technology, Inc. 1,543,694
201,725 National Semiconductor Corp. 4,157,552
------------
14,950,495
------------
ENERGY -- MISCELLANEOUS 0.7%
73,500 Chesapeake Energy Corp. 1,612,590
------------
FINANCE COMPANIES 0.6%
18,000 Capital One Financial Corp. 1,345,860
------------
FINANCE -- SMALL LOAN 1.4%
143,250 AmeriCredit Corp.* $ 3,357,780
------------
FINANCIAL DATA PROCESSING SERVICES AND SYSTEMS 1.1%
66,450 Fiserv, Inc.* 2,644,710
------------
FINANCIAL INFORMATION SERVICES 0.6%
16,375 Moody's Corp. 1,324,082
------------
FINANCIAL -- MISCELLANEOUS 1.5%
57,750 Brown & Brown, Inc. 2,661,698
31,750 Fidelity National Financial, Inc. 1,045,845
------------
3,707,543
------------
HEALTH CARE EQUIPMENT AND SUPPLIES 1.1%
12,725 Straumann Holding AG 2,755,088
------------
HEALTH CARE FACILITIES 3.0%
160,275 Health Management Associates, Inc., Class A 4,196,000
28,125 Quest Diagnostics, Inc. 2,956,781
------------
7,152,781
------------
HEALTH CARE MANAGEMENT SERVICES 4.9%
113,675 Caremark Rx, Inc.* 4,521,992
31,000 Pacificare Health Systems* 1,764,520
43,675 WellPoint, Inc.* 5,474,661
------------
11,761,173
------------
HEALTH CARE SERVICES 0.9%
23,675 Express Scripts, Inc.* 2,064,223
------------
HOME BUILDING 9.4%
165,733 D.R. Horton, Inc. 4,846,033
56,900 Hovnanian Enterprises, Inc., Class A* 2,901,900
73,275 Lennar Corp., Class A 4,153,227
29,475 M.D.C. Holdings, Inc. 2,052,934
6,825 NVR, Inc.* 5,357,625
44,425 Pulte Homes, Inc. 3,271,012
------------
22,582,731
------------
INSURANCE 1.8%
115,225 Willis Group Holdings Ltd. 4,248,346
------------
INVESTMENT MANAGEMENT COMPANIES 0.2%
12,463 SEI Investments Co. 450,662
------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 1.2%
39,350 St. Jude Medical, Inc.* 1,416,600
17,850 Zimmer Holdings, Inc.* 1,388,909
------------
2,805,509
------------
OIL AND GAS 1.1%
53,500 Ultra Petroleum Corp.* 2,717,800
------------
PRODUCTION TECHNOLOGY EQUIPMENT 1.2%
65,550 KLA-Tencor Corp.* 3,015,955
------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 2.6%
77,350 iStar Financial, Inc. 3,185,273
32,250 New Century Financial Corp. 1,509,945
92,050 Provident Senior Living Trust*** + 1,486,608
------------
6,181,826
------------
RECREATIONAL VEHICLES AND BOATS 1.9%
81,000 Harley-Davidson, Inc. 4,678,560
------------
33
HERITAGE GROWTH FUND -- SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- ------- ------------
RETAIL 14.8%
74,825 Amazon.com, Inc.* $ 2,564,253
69,400 AutoZone, Inc.* 5,947,580
155,225 Bed Bath & Beyond, Inc.* 5,671,921
79,975 Best Buy Co., Inc. 4,319,450
40,250 CDW Corp. 2,281,370
62,500 Chico's FAS, Inc.* 1,766,250
124,825 Dollar Tree Stores, Inc.* 3,586,222
668,000 Esprit Holdings Ltd. 4,560,765
48,000 Home Depot, Inc. 1,835,520
31,500 Lowe's Companies, Inc. 1,798,335
49,200 TJX Companies, Inc. 1,211,796
------------
35,543,462
------------
SAVINGS AND LOANS 1.4%
57,275 Golden West Financial Corp. 3,465,137
------------
TEXTILES, APPAREL AND LUXURY GOODS 0.8%
31,900 Coach, Inc.* 1,806,497
------------
TEXTILES, APPAREL AND PRODUCTS 0.9%
9,000 Puma AG Rudolf Dassler Sport 2,253,623
------------
UTILITIES -- TELECOMMUNICATIONS 3.0%
66,325 Nextel Communications, Inc., Class A* 1,884,957
240,800 Nextel Partners, Inc., Class A* 5,287,968
------------
7,172,925
------------
TOTAL COMMON STOCKS (cost $213,189,875) 222,513,755
------------
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
SHORT-TERM INVESTMENTS 7.5%
REPURCHASE AGREEMENT 7.5%
$18,009,000 Repurchase Agreement dated 3/31/05,
1.85% due 4/1/05 with State Street Bank
and Trust Co. collateralized by $13,550,000
of United States Treasury Bonds 7.625% due
2/15/25; value: $18,369,383; repurchase
proceeds: $18,009,925 (cost $18,009,000) $ 18,009,000
-------------
TOTAL SHORT-TERM INVESTMENTS (cost $18,009,000) 18,009,000
-------------
TOTAL INVESTMENTS (cost $231,198,875) 100.1% 240,522,755
LIABILITIES LESS OTHER ASSETS (0.1) % (180,113)
-------------
NET ASSETS 100.0% $ 240,342,642
=============
- ----------
*Non-income producing.
***Security was fair valued under procedures adopted by the Board of Directors
(see Note 2).
+Security purchased in a private placement transaction or under Rule 144A of
the Securities Act of 1933 (see Note 8).
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
See notes 1 to financial statements.
34
INTERNATIONAL GROWTH FUND -- SCHEDULE OF INVESTMENTS MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS 92.3%
AIRLINES 2.1%
119,300 Gol Linhas Aereas Inteligentes S.A. ADR* (Brazil) $ 2,998,009
233,675 WestJet Airlines Ltd.* (Canada) 3,022,950
------------
6,020,959
------------
AUTO COMPONENTS 0.6%
915,000 Clarion Co. Ltd.* (Japan) 1,775,290
------------
BANKS 3.0%
129,400 Doral Financial Corp. (Puerto Rico) 2,832,566
456,100 HDFC Bank Ltd. (India) 5,684,278
------------
8,516,844
------------
BEVERAGES 0.8%
90,300 Kibun Food Chemifa Co. Ltd. (Japan) 2,114,202
------------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 3.3%
28,610 Actelion Ltd.* (Switzerland) 2,893,885
775,000 Ark Therapeutics Group plc*
(United Kingdom) 1,602,119
94,000 Neurochem, Inc.* (Canada) 1,119,540
312,625 QIAGEN N.V.* (Netherlands) 3,732,743
------------
9,348,287
------------
COMMERCIAL SERVICES AND SUPPLIES 8.4%
18,000 Acadomia Group (France) 933,516
8,486,900 Accord Customer Care Solutions Ltd.* (Singapore) 1,413,712
154,950 Allen-Vanguard Corp.* (Canada) 589,188
476,700 Bloomsbury Publishing plc (United Kingdom) 3,010,373
1,450 En-Japan, Inc. (Japan) 5,329,042
3,375,000 Linmark Group Ltd. (Hong Kong) 1,287,367
345,200 Park24 Co. Ltd. (Japan) 6,439,998
107,125 Techem AG* (Germany) 4,680,689
------------
23,683,885
------------
COMPUTERS AND PERIPHERALS 1.2%
53,900 Logitech International S.A.* (Switzerland) 3,277,931
354,537 TPV Technology Ltd. (Hong Kong) 219,331
------------
3,497,262
------------
DIVERSIFIED FINANCIAL SERVICES 5.5%
165,000 AWD Holding AG (Germany) 7,273,642
190,550 Home Capital Group, Inc., Class B (Canada) 5,305,000
1,284,000 Nissin Co Ltd. (Japan) 2,994,263
------------
15,572,905
------------
DIVERSIFIED TELECOMMUNICATION SERVICES 1.5%
40,000 Option N.V.* (Belgium) 1,312,627
1,300,250 Zyxel Communications Corp. (Taiwan) 2,868,259
------------
4,180,886
------------
DRUGS AND PHARMACEUTICALS 6.3%
291,575 Angiotech Pharmaceuticals, Inc.* (Canada) 4,495,039
4,050 Fuji Pharmaceutical Co. Ltd. (Japan) 65,356
96,600 Sawai Pharmaceutical Co. Ltd. (Japan) 2,874,437
2,870,000 SkyePharma plc* (United Kingdom) 2,925,868
120,000 Sun Pharmaceutical Industries Ltd.* (India) 1,295,351
1,330,662 United Drug plc (Ireland) 6,021,189
------------
17,677,240
------------
ELECTRIC UTILITIES 1.3%
152,150 Red Electrica de Espana (Spain) 3,767,857
------------
ELECTRICAL EQUIPMENT 2.0%
5,715 SAIA-Burgess Electronics AG (Switzerland) $ 3,196,100
2,406,700 Unisteel Technology Ltd. (Singapore) 2,536,591
------------
5,732,691
------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 1.6%
60,350 Funkwerk AG (Germany) 2,776,977
4,013,000 MFS Technology Ltd. (Singapore) 1,786,635
------------
4,563,612
------------
FOOD AND DRUG RETAILING 3.0%
769,775 Convenience Retail Asia Ltd. (Hong Kong) 266,483
8,100 NIHON CHOUZAI Co., Inc. (Japan) 321,869
89,500 Shoppers Drug Mart Corp. (Canada) 2,985,923
59,600 Sugi Pharmacy Co. Ltd. (Japan) 1,553,864
2,096,325 Wumart Stores, Inc. (China) 3,440,410
------------
8,568,549
------------
HEALTH CARE EQUIPMENT AND SUPPLIES 5.0%
171,250 Elekta AB, Class B* (Sweden) 6,175,841
460,000 LMA International N.V.* (Singapore) 250,772
1,058,000 Moulin International Holdings Ltd. (Hong Kong) 752,870
15,275 Nakanishi, Inc. (Japan) 1,228,212
25,625 Straumann Holding AG (Switzerland) 5,548,067
------------
13,955,762
------------
HEALTH CARE PROVIDERS AND SERVICES 3.5%
102,475 Icon plc ADR* (Ireland) 3,844,862
145,625 Orpea* (France) 6,015,487
------------
9,860,349
------------
HOTELS, RESTAURANTS AND LEISURE 1.6%
97,675 Fairmont Hotels & Resorts, Inc. (Canada) 3,232,823
393,984 Hotel Leelaventure Ltd. (India) 1,379,440
------------
4,612,263
------------
HOUSEHOLD DURABLES 4.3%
59,700 Citizen Electronics Co. Ltd. (Japan) 2,918,036
200,000 Desarrolladora Homex, S.A. de C.V. ADR* (Mexico) 4,916,000
2,419,950 HTL International Holdings Ltd. (Singapore) 1,715,029
1,210,675 Techtronic Industries Company Ltd. (Hong Kong) 2,669,916
------------
12,218,981
------------
HOUSEHOLD PRODUCTS 1.0%
99,700 Milbon Co. Ltd. (Japan) 2,873,681
------------
INFORMATION TECHNOLOGY CONSULTING AND SERVICES 3.2%
249,915 Indra Sistemas, S.A. (Spain) 4,484,536
128,000 Intec, Inc. (Japan) 1,240,539
1,425 NIWS Co. Ltd. (Japan) 2,166,643
725 NIWS Co. Ltd. Bonus Shares* (Japan) 1,102,327
------------
8,994,045
------------
INTERNET AND CATALOG RETAIL 2.5%
1,777,390 Carphone Warehouse Group plc
(United Kingdom) 5,435,967
99,675 Submarino SA GDR* (Brazil) 1,600,920
------------
7,036,887
------------
LEISURE EQUIPMENT AND PRODUCTS 2.6%
270,675 Mega Bloks, Inc.* (Canada) 4,295,896
49,055 Rodriguez Group (France) 2,919,342
------------
7,215,238
------------
35
INTERNATIONAL GROWTH FUND -- SCHEDULE OF INVESTMENTS (CONTINUED)
SHARES VALUE
- ---------------------------------------------------------------------------------
MACHINERY 1.0%
57,908 Bharat Forge Ltd. (India) $ 1,828,007
25,000 Takeuchi Manufacturing Co. Ltd. (Japan) 1,028,404
-----------
2,856,411
-----------
MEDIA 2.2%
124,300 Alliance Atlantis Communications, Inc., Class B* (Canada) 3,079,372
61,575 JC Decaux S.A.* (France) 1,681,326
1,775,000 Sanctuary Group plc (United Kingdom) 1,382,297
-----------
6,142,995
OFFICE ELECTRONICS 1.5% -----------
49,050 Neopost S.A. (France) 4,248,196
-----------
OIL AND GAS 3.9%
238,520 Cairn Energy plc* (United Kingdom) 5,237,012
664,000 Soco International plc* (United Kingdom) 5,847,884
-----------
11,084,896
-----------
PERSONAL PRODUCTS 1.0%
10,200,000 Peace Mark Holdings Ltd. (Hong Kong) 2,713,688
-----------
REAL ESTATE 1.1%
7,600,000 Far East Consortium International Ltd. (Hong Kong) 3,215,653
-----------
RETAIL 7.5%
26,840 Bijou Brigitte AG (Germany) 4,436,922
4,423,400 Bonjour Holdings Ltd. (Hong Kong) 2,211,884
567,000 Esprit Holdings Ltd. (Hong Kong) 3,871,188
30,270 Gulliver International Co. Ltd. (Japan) 4,080,047
1,262,150 Pumpkin Patch Ltd. (New Zealand) 2,953,371
45,730 USS Co. Ltd. (Japan) 3,540,497
-----------
21,093,909
-----------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 3.8%
79,800 ASM International N.V.* (Netherlands) 1,313,508
445,175 CSR plc* (United Kingdom) 2,748,258
65,425 Disco Corp. (Japan) 2,807,285
105,750 O2Micro International Ltd.* (Cayman Islands) 1,088,168
92,595 SEZ Holding AG* (Switzerland) 2,585,307
-----------
10,542,526
-----------
SOFTWARE 0.9%
50,000 Hexaware Technologies (India) 837,932
172,625 Ninetowns Digital World Trade Holdings Ltd. ADR* (China) 1,565,709
-----------
2,403,641
-----------
TEXTILES, APPAREL AND LUXURY GOODS 0.8%
221,289 Ted Baker plc* (United Kingdom) 2,124,368
-----------
TEXTILES, APPAREL AND PRODUCTS 3.1%
206,000 Pantaloon Retail India Ltd. (India) 3,634,365
20,300 Puma AG Rudolf Dassler Sport (Germany) 5,083,172
-----------
8,717,537
-----------
WIRELESS TELECOMMUNICATIONS SERVICES 1.2%
782,000 Virgin Mobile Holdings plc* (United Kingdom) 3,262,707
-----------
TOTAL COMMON STOCKS (COST $207,429,774) 260,194,202
-----------
WARRANTS 0.0%
MACHINERY 0.0%
1,379 Bharat Forge Ltd.* (India) $ 8,337
-----------
TOTAL WARRANTS (COST $0) 8,337
-----------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 10.8%
REPURCHASE AGREEMENT 10.8%
$30,402,000 Repurchase Agreement dated 3/31/05, 1.85% due 4/1/05 with State Street
Bank and Trust Co. collateralized by $31,405,000 of United States
Treasury Notes 3.625% due 7/15/06; value: $31,012,438; repurchase
proceeds: $30,403,562 (cost $30,402,000) $ 30,402,000
------------
TOTAL SHORT-TERM INVESTMENTS (COST $30,402,000) 30,402,000
------------
TOTAL INVESTMENTS (COST $237,831,774) 103.1% 290,604,539
LIABILITIES LESS OTHER ASSETS (3.1)% (8,745,200)
------------
NET ASSETS 100.0% $281,859,339
============
*Non-income producing.
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
See notes to financial statements.
36
MARCH 31, 2005 (UNAUDITED)
At March 31, 2005, Wasatch International Growth Fund's investments, excluding
short-term investments, were in the following countries:
COUNTRY %
- ---------------------------------------------------------------------------
Belgium 0.5
Brazil 1.8
Canada 10.8
Cayman Islands 0.4
China 1.9
France 6.1
Germany 9.3
Hong Kong 6.6
India 5.6
Ireland 3.8
Japan 17.9
Mexico 1.9
Netherlands 1.9
New Zealand 1.1
Puerto Rico 1.1
Singapore 3.0
Spain 3.2
Sweden 2.4
Switzerland 6.7
Taiwan 1.1
United Kingdom 12.9
-----
TOTAL 100.0%
=====
37
INTERNATIONAL OPPORTUNITIES FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS 68.2%
AUTO COMPONENTS 1.2%
58,750 ARB Corp. Ltd. (Australia) $ 174,945
6,000 Yutaka Giken Co. Ltd. (Japan) 134,322
---------
309,267
---------
AUTOMOBILES 0.7%
38,775 European Motor Holdings plc* (United Kingdom) 174,956
---------
BANKS 0.7%
8,450 Kas Bank NA (Netherlands) 186,140
---------
BEVERAGES 1.0%
11,325 Kibun Food Chemifa Co. Ltd. (Japan) 265,153
---------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 0.7%
53,600 Ark Therapeutics Group plc* (United Kingdom) 110,805
6,800 Neurochem, Inc.* (Canada) 80,988
---------
191,793
---------
BUILDING PRODUCTS 1.1%
24,900 Fleetwood Corp. Ltd. (Australia) 160,042
8,300 Kitagawa Industries Co. Ltd. (Japan) 147,101
---------
307,143
---------
CHEMICALS 0.2%
5,000 MARKTEC Corp. (Japan) 47,106
---------
COMMERCIAL SERVICES AND SUPPLIES 7.0%
3,275 Acadomia Group (France) 169,848
353,000 Accord Customer Care Solutions Ltd.* (Singapore) 58,801
55,175 Allen-Vanguard Corp.* (Canada) 209,800
41,075 Bloomsbury Publishing plc (United Kingdom) 259,390
21,875 Carter & Carter Group plc* (United Kingdom) 116,666
171,500 Environmental Management Solutions, Inc.* (Canada) 85,059
446,000 Linmark Group Ltd. (Hong Kong) 170,123
6,425 MegaStudy Co. Ltd.* (Korea) 209,421
50 OUTSOURCING, Inc. (Japan) 61,564
849,000 Raffles Education Corp. Ltd. (Singapore) 341,986
29,525 Semcon AB* (Sweden) 189,571
---------
1,872,229
---------
CONSTRUCTION AND ENGINEERING 0.1%
26,635 Lycopodium Ltd.* (Australia) 35,021
---------
CONSTRUCTION MATERIALS 0.5%
500 Getaz Romang Holding SA (Switzerland) 135,946
---------
DIVERSIFIED FINANCIAL SERVICES 4.7%
238,600 Acta Holdings ASA* (Norway) 421,302
46,175 Credit Corp. Group Ltd. (Australia) 121,071
53,450 New Zealand Exchange Ltd.* (New Zealand) 356,527
65 Osaka Securities Exchange Co. (Japan) 248,589
2,025 Oslo Bors ASA*** (Norway) 90,986
---------
1,238,475
---------
DRUGS AND PHARMACEUTICALS 1.3%
2,875 Meda AB (Sweden) 132,144
1,150 Meda AB Subscribed Shares* (Sweden) 52,288
4,100 Sawai Pharmaceutical Co. Ltd. (Japan) 122,000
10 Sosei Co. Ltd.* (Japan) 51,770
---------
358,202
---------
ELECTRICAL EQUIPMENT 2.1%
7,100 Chiyoda Integre Co. Ltd. (Japan) $ 146,033
5,400 Optoelectronics Co. Ltd. (Japan) 186,372
6,200 Phoenix Electric Co. Ltd. (Japan) 103,232
116,000 Unisteel Technology Ltd. (Singapore) 122,261
---------
557,898
---------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 5.8%
200,000 Chroma ATE, Inc. (Taiwan) 187,266
2,150 Core Logic, Inc. (Korea) 69,867
4,500 Enplas Corp. (Japan) 118,791
4,025 Funkwerk AG (Germany) 185,209
11,000 Horiba Ltd. (Japan) 203,675
265,000 MFS Technology Ltd. (Singapore) 117,981
60,100 TRL Electronics plc* (United Kingdom) 250,185
252,000 Varitronix International Ltd. (Hong Kong) 258,483
66,650 zed.i solutions, Inc.* (Canada) 138,837
---------
1,530,294
---------
ELECTRONICS -- SEMICONDUCTORS/ COMPONENTS 0.5%
24,725 ASE Test Ltd.* (Taiwan) 125,603
---------
FOOD AND DRUG RETAILING 2.3%
328,000 Convenience Retail Asia Ltd. (Hong Kong) 113,548
3,400 Daikokutenbussan Company Ltd. (Japan) 107,831
5,900 Green Cross Coa Co. Ltd. (Japan) 203,629
4,500 NIHON CHOUZAI Co., Inc. (Japan) 178,816
---------
603,824
---------
FOOD PRODUCTS 0.8%
28,125 CoolBrands International, Inc.* (Canada) 208,075
---------
HEALTH CARE EQUIPMENT AND SUPPLIES 3.2%
11,500 Fujirebio, Inc. (Japan) 180,752
40,000 LMA International N.V.* (Singapore) 21,806
2,900 MANI, Inc. (Japan) 122,541
1,600 Nakanishi, Inc. (Japan) 128,651
42,750 RaySearch Laboratories* (Sweden) 394,495
---------
848,245
---------
HOUSEHOLD DURABLES 1.7%
5,225 Beter Bed Holding NV (Netherlands) 129,935
6,200 Joint Corp. (Japan) 154,993
6,400 Nihon Eslead Corp. (Japan) 164,171
---------
449,099
---------
HOUSEHOLD PRODUCTS 0.5%
5,000 Suruga Co. Ltd. (Japan) 120,563
---------
INSURANCE 1.1%
64,542 OAMPS Ltd. (Australia) 169,728
310,000 Pacific Century Insurance Holdings
Ltd. (Hong Kong) 128,184
---------
297,912
---------
INTERNET SOFTWARE AND SERVICES 0.5%
83,000 Opera Software ASA* (Norway) 120,646
---------
LEISURE EQUIPMENT AND PRODUCTS 0.8%
1,775 CTS Eventim* (Germany) 62,367
5,400 KABE Husvagnar AB (Sweden) 141,283
---------
203,650
---------
38
MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- ------------------------------------------------------------------------------
MACHINERY 5.1%
21,000 Asahi Diamond Industrial Co. (Japan) $ 126,934
41,000 Awea Mechantronic Co. Ltd. (Taiwan) 72,485
47,000 BASSO INDUSTRY Corp. (Taiwan) 120,088
225,000 First Engineering Ltd. (Singapore) 170,362
798,000 MMI Holdings Ltd. (Singapore) 161,930
8,400 Pason Systems, Inc. (Canada) 262,814
8,100 Takeuchi Manufacturing Co. Ltd. (Japan) 333,203
32,075 Titan Europe plc (United Kingdom) 109,301
----------
1,357,117
----------
MARINE 0.8%
339,000 Ezra Holdings Ltd. (Singapore) 223,824
----------
MEDIA 0.5%
10,100 Arbeit-Times Co. Ltd. (Japan) 122,287
----------
METALS AND MINING 3.5%
71,325 Agincourt Resources Ltd.* (Australia) 103,161
38,375 Avocet Mining plc* (United Kingdom) 63,030
325,500 CBH Resources Ltd. (Australia) 67,975
73,175 Consolidated Minerals Ltd. (Australia) 209,410
95,975 Equigold NL (Australia) 92,047
21,200 Jubilee Mines NL (Australia) 88,545
579,000 Midas Holdings Ltd. (Singapore) 96,447
80,250 Mincor Resources NL (Australia) 44,690
15,525 Shore Gold, Inc.* (Canada) 72,251
46,475 Troy Resources NL (Australia) 97,773
----------
935,329
----------
OIL AND GAS 5.6%
86,325 ARC Energy Ltd.* (Australia) 118,847
15,750 Blackrock Ventures, Inc.* (Canada) 137,483
75,225 Bow Valley Energy Ltd.* (Canada) 141,776
23,800 Det Norske Oljeselskap ASA (Norway) 160,593
77,450 Dragon Oil plc* (Ireland) 130,134
44,125 JKX Oil and Gas plc (United Kingdom) 116,208
17,225 Melrose Resources plc* (United Kingdom) 95,118
68,750 Saxon Energy Services, Inc.* (Canada) 272,784
12,550 Soco International plc* (United Kingdom) 110,529
18,900 Sondex plc (United Kingdom) 78,677
87,925 Tap Oil Ltd.* (Australia) 138,051
----------
1,500,200
----------
PERSONAL PRODUCTS 1.2%
6,800 HABA Laboratories, Inc. (Japan) 187,752
540,000 Peace Mark Holdings Ltd. (Hong Kong) 143,666
----------
331,418
----------
REAL ESTATE 1.5%
125 Apamanshop Network Co. Ltd. (Japan) 104,473
25 CRESCENDO Investment Corp.* (Japan) 133,156
16,500 Takara Leben Co. Ltd. (Japan) 149,293
----------
386,922
----------
RETAIL 4.9%
520 CASSINA IXC. Ltd. (Japan) 146,486
11,200 Jeans Mate Corp. (Japan) 135,501
11,950 New Wave Group AB, Class B (Sweden) 223,083
567,000 Pertama Holdings Ltd. (Singapore) 94,449
100,271 Pumpkin Patch Ltd. (New Zealand) 234,629
3,300 Tamron Co. Ltd. (Japan) 125,591
52,325 Topps Tiles plc (United Kingdom) 184,974
15 Village Vanguard Co. Ltd.* (Japan) 146,915
----------
1,291,628
----------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 1.9%
5,125 austriamicrosystems AG* (Austria) $ 185,507
122,000 Holtek Semiconductor, Inc. (Taiwan) 144,436
1,850 Mtekvision Co. Ltd. (Korea) 54,744
16,000 New Japan Radio Co., Ltd. (Japan) 128,352
----------
513,039
----------
SOFTWARE 2.6%
11,200 Isra Vision Systems AG* (Germany) 271,549
16,000 Lectra (France) 103,931
9,100 Profdoc ASA* (Norway) 127,684
83,000 SpringSoft, Inc. (Taiwan) 180,985
----------
684,149
----------
TEXTILES, APPAREL AND LUXURY GOODS 0.5%
12,900 Ted Baker plc* (United Kingdom) 123,840
----------
TRANSPORTATION INFRASTRUCTURE 1.4%
5,300 Alps Logistics Co. Ltd. (Japan) 128,539
143,000 Goodpack Ltd. (Singapore) 108,274
5,700 Trancom Co. Ltd. (Japan) 124,416
----------
361,229
----------
WHOLESALERS 0.2%
30,100 Commercial Solutions, Inc.* (Canada) 62,203
----------
TOTAL COMMON STOCKS (COST $18,426,312) 18,080,425
----------
RIGHTS 0.0%
TRANSPORTATION INFRASTRUCTURE 0.0%
17,875 Goodpack Ltd.* (Singapore) 2,220
----------
TOTAL RIGHTS (COST $0) 2,220
----------
39
INTERNATIONAL OPPORTUNITIES FUND -- SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 2005 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 8.6%
REPURCHASE AGREEMENT 8.6%
$2,268,000 Repurchase Agreement dated 3/31/05, 1.85% due 4/1/05 with State Street
Bank and Trust Co. collateralized by $1,710,000 of United States
Treasury Bonds 7.625% due 2/15/25; value: $2,318,203; repurchase
proceeds: $2,268,117 (cost $2,268,000) $ 2,268,000
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $2,268,000) 2,268,000
-----------
TOTAL INVESTMENTS (COST $20,694,312) 76.8% 20,350,645
OTHER ASSETS LESS LIABILITIES 23.2% 6,151,228
-----------
NET ASSETS 100.0% $26,501,873
===========
*Non-income producing.
***Security was fair valued under procedures adopted by the Board of
Directors (see Note 2).
See notes to financial statements.
At March 31, 2005, Wasatch International Opportunities Fund's investments,
excluding short-term investments, were in the following countries:
COUNTRY %
- ---------------------------------------------------------------------------
Australia 9.0
Austria 1.0
Canada 9.2
France 1.5
Germany 2.9
Hong Kong 4.5
Ireland 0.7
Japan 29.3
Korea 1.8
Netherlands 1.7
New Zealand 3.3
Norway 5.1
Singapore 8.4
Sweden 6.3
Switzerland 0.8
Taiwan 4.6
United Kingdom 9.9
-----
TOTAL 100.0%
=====
40
MICRO CAP FUND -- SCHEDULE OF INVESTMENTS MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS 93.8%
AEROSPACE 0.8%
131,650 MTC Technologies, Inc.* $ 4,278,625
-----------
AUTO PARTS -- AFTER MARKET 1.2%
196,575 Aftermarket Technology Corp.* 3,243,488
139,700 Keystone Automotive Industries, Inc.* 3,235,452
-----------
6,478,940
-----------
BANKS 3.1%
81,000 Bank of the Ozarks, Inc. 2,571,750
122,550 Canadian Western Bank 2,593,329
190,550 Franklin Bank Corp.* 3,286,987
225,125 Placer Sierra Bancshares 5,171,121
32,825 Preferred Bank/Los Angeles, CA 1,309,718
127,100 Wilshire Bancorp, Inc. 1,657,384
-----------
16,590,289
-----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 0.2%
390,875 Discovery Partners International, Inc.* 1,250,800
-----------
CHEMICALS 0.5%
87,825 Cabot Microelectronics Corp.* 2,755,948
-----------
COMMERCIAL SERVICES AND SUPPLIES 9.1%
58,925 Acadomia Group 3,055,967
1,149,400 Allen-Vanguard Corp.* 4,370,523
941,835 AMN Healthcare Services, Inc.* 14,984,595
61,775 Charles River Associates, Inc.* 3,048,596
105,375 Keith Cos., Inc.* 1,822,987
137,075 Monro Muffler, Inc.* 3,537,906
229,175 Providence Service Corp.* 5,329,419
9,565,600 Raffles Education Corp. Ltd. 3,853,125
114,450 Resources Connection, Inc.* 2,395,438
857,000 SM&A* 7,078,820
-----------
49,477,376
-----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 4.7%
190,325 EPIQ Systems, Inc.* 2,470,418
208,865 Kintera, Inc.* 1,106,985
144,050 Kintera, Inc. PIPE* *** + 732,926
208,625 Open Solutions, Inc.* 4,137,034
343,275 Opnet Technologies, Inc.* 2,869,779
338,200 PEC Solutions, Inc.* 4,254,556
403,725 Pinnacle Systems, Inc.* 2,256,823
68,307 Retalix Ltd.* 1,622,291
479,925 Verisity Ltd.* 5,725,505
-----------
25,176,317
-----------
COMPUTER TECHNOLOGY 1.3%
394,275 FARGO Electronics, Inc.* 5,784,014
294,950 Qualstar Corp.* 1,185,699
-----------
6,969,713
-----------
CONSUMER PRODUCTS 0.5%
98,775 Helen of Troy Ltd.* 2,704,459
-----------
DIVERSIFIED FINANCIAL SERVICES 2.6%
2,525,300 Acta Holdings ASA* 4,458,988
179,000 Home Capital Group, Inc., Class B 4,983,443
404,936 U.S.I. Holdings Corp.* 4,770,146
-----------
14,212,577
-----------
DRUGS AND PHARMACEUTICALS 1.3%
101,038 Docpharma N.V.* $ 3,668,021
282,800 ISTA Pharmaceuticals, Inc.* 2,794,064
53,675 Salix Pharmaceuticals Ltd.* 885,101
-----------
7,347,186
-----------
ELECTRICAL AND ELECTRONICS 1.0%
111,525 Power Integrations, Inc.* 2,329,757
275,350 TTM Technologies, Inc.* 2,880,161
-----------
5,209,918
-----------
ELECTRICAL EQUIPMENT 0.5%
2,824,400 Unisteel Technology Ltd. 2,976,834
-----------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.6%
7,780,225 MFS Technology Ltd. 3,463,847
-----------
ELECTRONICS 1.3%
520,425 Nu Horizons Electronics Corp.* 3,721,039
168,125 Supertex, Inc.* 3,078,369
-----------
6,799,408
-----------
ELECTRONICS -- MEDICAL SYSTEMS 1.1%
374,100 EPIX Pharmaceuticals, Inc.* 2,618,700
650,575 IRIDEX Corp.* ++ 3,227,503
-----------
5,846,203
-----------
ELECTRONICS -- SEMICONDUCTORS/ COMPONENTS 11.6%
745,450 Advanced Power Technology, Inc.* ++ 5,292,695
453,025 ASE Test Ltd.* 2,301,367
224,550 Excel Technology, Inc.* 5,519,439
112,200 Integrated Circuit Systems, Inc.* 2,145,264
940,975 Micrel, Inc.* 8,675,790
1,103,650 O2Micro International Ltd.* 11,356,558
601,276 Pericom Semiconductor Corp.* 5,152,935
1,003,300 PLX Technology, Inc.* 10,534,650
260,750 SiRF Technology Holdings, Inc.* 2,909,970
208,700 Tessera Technologies, Inc.* 9,022,101
-----------
62,910,769
-----------
ELECTRONICS -- TECHNOLOGY 0.5%
301,350 EFJ, Inc.* 2,480,110
-----------
FINANCE COMPANIES 1.0%
268,130 United PanAm Financial Corp.* 5,467,171
-----------
FINANCE -- SMALL LOAN 0.4%
138,697 Encore Capital Group, Inc.* 2,018,041
-----------
FINANCIAL INFORMATION SERVICES 0.2%
66,175 Huron Consulting Group, Inc.* 1,370,484
-----------
FINANCIAL -- MISCELLANEOUS 1.0%
111,200 First Cash Financial Services, Inc.* 2,354,104
89,950 Portfolio Recovery Associates, Inc.* 3,060,999
-----------
5,415,103
-----------
FOOD AND DRUG RETAILING 0.4%
5,937,875 Convenience Retail Asia Ltd. 2,055,589
-----------
HEALTH CARE EQUIPMENT AND SUPPLIES 1.3%
287,500 Biacore International AB 6,566,526
883,000 LMA International N.V.* 481,374
-----------
7,047,900
-----------
HEALTH CARE FACILITIES 1.7%
196,625 American Healthways, Inc.* 6,492,558
469,125 Capital Senior Living Corp.* 2,631,791
-----------
9,124,349
-----------
41
MICRO CAP FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE
- ------------------------------------------------------------------------------
HEALTH CARE MANAGEMENT SERVICES 7.5%
65,150 AMERIGROUP Corp.* $ 2,381,884
893,225 AmSurg Corp.* 22,598,593
85,350 Centene Corp.* 2,559,646
165,000 Computer Programs & Systems, Inc. 4,633,200
276,931 CorVel Corp.* 5,904,169
53,300 Molina Healthcare, Inc.* 2,456,597
------------
40,534,089
------------
HEALTH CARE PROVIDERS AND SERVICES 1.9%
279,500 Icon plc ADR* 10,486,840
------------
HEALTH CARE SERVICES 0.1%
19,145 DrugMax, Inc.* 61,647
------------
HOME BUILDING 1.2%
112,275 Meritage Homes Corp.* 6,615,243
------------
HOUSEHOLD DURABLES 0.3%
78,125 easyhome Ltd. 1,365,856
------------
HOUSEHOLD FURNISHINGS 0.7%
121,625 Kirkland's, Inc.* 1,345,173
125,200 Select Comfort Corp.* 2,559,088
------------
3,904,261
------------
INSURANCE 0.4%
243,625 KMG America Corp.* 2,375,344
------------
MACHINERY 0.5%
12,501,650 MMI Holdings Ltd. 2,536,830
175 Pason Systems, Inc. 5,475
------------
2,542,305
------------
MACHINERY -- OIL WELL EQUIPMENT AND SERVICES 0.8%
191,100 Gulf Island Fabrication, Inc. 4,483,206
------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 6.9%
425,275 Abaxis, Inc.* 3,763,684
222,950 Cyberonics, Inc.* 9,847,701
375,125 Encision, Inc.* ++ 1,031,594
436,825 Enpath Medical, Inc.* ++ 3,547,019
164,390 ICU Medical, Inc.* 5,835,845
379,225 NuVasive, Inc.* 4,899,587
91,275 Shamir Optical Industry Ltd.* 1,410,199
335,200 Thoratec Corp.* 4,096,144
231,850 VNUS Medical Technologies, Inc.* 2,684,823
------------
37,116,596
------------
MEDICAL SERVICES 1.8%
92,200 Stratagene Corp.* 814,126
652,862 U.S. Physical Therapy, Inc.* ++ 9,127,011
------------
9,941,137
------------
MISCELLANEOUS MATERIALS AND COMMODITIES 0.4%
99,600 Symyx Technologies, Inc.* 2,196,180
------------
OIL AND GAS 0.3%
428,425 Saxon Energy Services, Inc.* 1,699,888
------------
PRODUCTION TECHNOLOGY EQUIPMENT 4.0%
130,075 ADE Corp.* $ 2,887,665
182,250 August Technology Corp.* 2,135,970
191,900 Entegris, Inc.* 1,897,891
528,550 inTEST Corp.* ++ 2,198,768
658,575 Intevac, Inc.* 6,210,362
610,500 LogicVision, Inc.* 1,630,035
152,100 Nanometrics, Inc.* 1,790,217
303,175 Nova Measuring Instruments Ltd.* 903,462
115,425 Rudolph Technologies, Inc.* 1,738,301
------------
21,392,671
------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 0.6%
88,950 Bimini Mortgage Management, Inc., Class A 1,231,958
117,200 Saxon Capital, Inc. 2,015,840
------------
3,247,798
------------
RECREATIONAL VEHICLES AND BOATS 0.5%
255,875 National R.V. Holdings, Inc.* 2,599,690
------------
RETAIL 12.7%
93,825 AC Moore Arts & Crafts, Inc.* 2,501,375
633,375 Big 5 Sporting Goods Corp. 15,644,362
54,475 Bijou Brigitte AG 9,005,265
140,400 Cost Plus, Inc.* 3,773,952
47,773 GiFi 2,601,482
133,850 Global Imaging Systems, Inc.* 4,746,321
192,525 Guitar Center, Inc.* 10,556,146
164,993 Hibbett Sporting Goods, Inc.* 4,956,390
224,225 Lithia Motors, Inc., Class A 5,742,402
73,100 O'Reilly Automotive, Inc.* 3,620,643
822,898 Pumpkin Patch Ltd. 1,925,542
96,950 School Specialty, Inc.* 3,796,562
------------
68,870,442
------------
SAVINGS AND LOANS 0.7%
173,782 Commercial Capital Bancorp, Inc. 3,536,464
------------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 1.0%
381,400 CSR plc* 2,354,548
954,220 PSi Technologies Holdings, Inc. ADR* ++ 1,068,726
79,178 SEZ Holding AG* 2,210,696
------------
5,633,970
------------
SHOES 0.6%
120,200 Kenneth Cole Productions, Inc., Class A 3,502,628
------------
TRUCKERS 2.3%
75,675 PAM Transportation Services* 1,301,610
62,400 Transport Corporation of America, Inc.* 550,368
455,500 USA Truck, Inc.* 10,453,725
------------
12,305,703
------------
WHOLESALERS 0.7%
167,500 Beacon Roofing Supply, Inc.* 3,665,737
------------
TOTAL COMMON STOCKS (COST $398,440,174) 507,505,651
------------
42
MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- -------------------------------------------------------------------------------
PREFERRED STOCKS 0.7%
DRUGS AND PHARMACEUTICALS 0.2%
1,886,792 Point Biomedical Corp., Series F Pfd.* *** + $ 1,000,000
-----------
HEALTH CARE SERVICES 0.5%
3,200 DrugMax, Inc. Convertible Ptd. PIPE, Series A*** + 2,960,919
-----------
TOTAL PREFERRED STOCKS (COST $4,200,000) 3,960,919
-----------
WARRANTS 0.0%
DRUGS AND PHARMACEUTICALS 0.0%
566,037 Point Biomedical Corp.* *** + --
-----------
HEALTH CARE SERVICES 0.0%
259,459 DrugMax, Inc.* *** + --
-----------
TOTAL WARRANTS (COST $0) --
-----------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 5.4%
REPURCHASE AGREEMENT 5.4%
$29,343,000 Repurchase Agreement dated 3/31/05, 1.85% due 4/1/05 with State Street
Bank and Trust Co. collateralized by $22,110,000 of United States
Treasury Bonds 7.50% due 11/15/24; value: $29,932,960; repurchase
proceeds: $29,344,508 (cost $29,343,000) $ 29,343,000
------------
TOTAL SHORT-TERM INVESTMENTS (COST $29,343,000) 29,343,000
------------
TOTAL INVESTMENTS (COST $431,983,174) 99.9% 540,809,570
OTHER ASSETS LESS LIABILITIES 0.1% 55,181
------------
NET ASSETS 100.0% $540,864,751
------------
*Non-income producing.
***Security was fair valued under procedures adopted by the Board of
Directors (see Note 2).
+Security purchased in a private placement transaction or under Rule
144A of the Securities Act of 1933 (see Note 8).
++Affiliated company (see Note 7).
ADR American Depositary Receipt.
PIPE Private Investment in a Public Equity.
See notes to financial statements.
43
MICRO CAP VALUE FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE
- ------- ------------------------------------------------------- ---------
COMMON STOCKS 93.6%
AUTO PARTS -- AFTER MARKET 1.5%
50,000 Aftermarket Technology Corp.* $ 825,000
90,000 IMPCO Technologies, Inc.* 483,750
---------
1,308,750
---------
BANKS 8.3%
50,000 CommerceWest Bank* 700,000
22,000 Dearborn Bancorp, Inc.* 583,000
75,000 First State Financial Corp.* 900,750
40,000 Franklin Bank Corp.* 690,000
25,000 MetroCorp Bancshares, Inc. 563,000
46,200 OptimumBank Holdings, Inc.* 471,702
30,000 Placer Sierra Bancshares 689,100
16,700 Preferred Bank/Los Angeles, CA 666,330
49,800 Security Business Bank of San Diego* 747,000
100,000 Wilshire Bancorp, Inc. 1,304,000
---------
7,314,882
---------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 2.0%
203,200 Discovery Partners International, Inc.* 650,240
30,000 Isolagen, Inc.* 188,700
38,625 Neurochem, Inc.* (Canada) 460,024
68,000 United-Guardian, Inc. 509,320
---------
1,808,284
---------
BUILDING PRODUCTS 1.1%
350,000 CFM Corp.* (Canada) 405,042
50,000 IVRCL Infrastructure and Projects Ltd. (India) 542,535
---------
947,577
---------
COMMERCIAL INFORMATION SERVICES 0.8%
56,800 Fastclick, Inc.* 681,600
---------
COMMERCIAL SERVICES AND SUPPLIES 6.4%
18,000 Acadomia Group (France) 933,516
769,250 ACE Security Laminates Corp.* (Canada) 286,144
400,000 Allen-Vanguard Corp.* (Canada) 1,520,975
60,000 AMN Healthcare Services, Inc.* 954,600
824,500 Environmental Management Solutions, Inc.* (Canada) 408,927
35,000 Monro Muffler, Inc.* 903,350
80,000 SM&A* 660,800
---------
5,668,312
---------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 1.0%
106,375 Opnet Technologies, Inc.* 889,295
---------
COMPUTER TECHNOLOGY 0.2%
50,000 Qualstar Corp.* 201,000
---------
CONSTRUCTION AND ENGINEERING 0.1%
99,865 Lycopodium Ltd.* (Australia) 131,309
---------
DISTRIBUTORS 0.9%
400,000 Commercial Solutions, Inc.* (Canada) 826,617
---------
DIVERSIFIED FINANCIAL SERVICES 0.9%
30,000 Home Capital Group, Inc., Class B (Canada) 835,214
---------
DRUGS AND PHARMACEUTICALS 3.2%
43,000 Acusphere, Inc.* $ 232,630
12,000 Docpharma N.V.* (Belgium) 435,640
122,700 ISTA Pharmaceuticals, Inc.* 1,212,276
33,500 Ligand Pharmaceuticals, Inc., Class B* 191,955
22,500 NeoPharm, Inc.* 174,825
20,000 Taro Pharmaceuticals Industries
Ltd.* (Israel) 631,200
---------
2,878,526
---------
ELECTRICAL EQUIPMENT 0.9%
800,000 Unisteel Technology Ltd. (Singapore) 843,176
---------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.9%
800,000 Jurong Technologies Industrial Corp.
Ltd. (Singapore) 765,643
---------
ELECTRONICS 0.3%
20,000 CyberOptics Corp.* 249,600
---------
ELECTRONICS -- MEDICAL SYSTEMS 1.3%
25,000 EPIX Pharmaceuticals, Inc.* 175,000
204,900 IRIDEX Corp.* 1,016,509
---------
1,191,509
---------
ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 6.5%
291,035 Advanced Power Technology, Inc.* 2,066,348
185,793 Aixtron AG ADR* (Germany) 772,899
45,000 Leadis Technology, Inc.* 269,100
50,000 Pericom Semiconductor Corp.* 428,500
210,000 PLX Technology, Inc.* 2,205,000
---------
5,741,847
---------
ELECTRONICS -- TECHNOLOGY 0.7%
49,000 EFJ, Inc.* 403,270
100,000 Iteris, Inc.* 244,000
---------
647,270
---------
FINANCE COMPANIES 2.5%
25,400 Dollar Financial Corp.* 301,752
55,000 Nicholas Financial, Inc. 990,000
45,000 United PanAm Financial Corp.* 917,550
---------
2,209,302
---------
FINANCE -- SMALL LOAN 0.7%
40,000 Encore Capital Group, Inc.* 582,000
---------
FINANCIAL INFORMATION SERVICES 0.3%
10,950 Huron Consulting Group, Inc.* 226,774
---------
FINANCIAL -- MISCELLANEOUS 2.2%
50,000 First Cash Financial Services, Inc.* 1,058,500
169,300 Life Partners Holding, Inc. 929,457
---------
1,987,957
---------
FOOD PRODUCTS 1.7%
200,000 CoolBrands International, Inc.* (Canada) 1,479,645
---------
FOODS 0.3%
100,000 Geopharma, Inc.* 305,000
---------
HEALTH CARE EQUIPMENT AND SUPPLIES 0.6%
149,000 LMA International N.V.* (Singapore) 81,228
175,000 MacroPore Biosurgery, Inc.* (Germany) 474,213
---------
555,441
---------
HEALTH CARE FACILITIES 0.6%
100,000 Capital Senior Living Corp.* 561,000
---------
44
MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- --------- ----------------------------------------------------- -----------
HEALTH CARE MANAGEMENT SERVICES 1.9%
39,500 Computer Programs & Systems, Inc. $ 1,109,160
25,000 IMPAC Medical Systems, Inc.* 594,500
-----------
1,703,660
-----------
HEALTH CARE SERVICES 0.7%
4,786 DrugMax, Inc.* 15,411
25,000 Healthcare Services Group 606,250
-----------
621,661
-----------
HOME BUILDING 1.2%
60,000 Orleans Homebuilders, Inc. 1,103,400
-----------
HOUSEHOLD DURABLES 2.7%
105,000 easyhome Ltd. (Canada) 1,835,710
800,000 HTL International Holdings Ltd. (Singapore) 566,963
-----------
2,402,673
-----------
INSURANCE 0.8%
19,800 American Safety Insurance Holdings Ltd.* (Bermuda) 295,020
39,875 KMG America Corp.* 388,781
-----------
683,801
-----------
MACHINERY 2.2%
300,000 Awea Mechantronic Co. Ltd. (Taiwan) 530,375
850,000 First Engineering Ltd.(Singapore) 643,588
25,000 Pason Systems, Inc. (Canada) 782,187
-----------
1,956,150
-----------
MARINE 1.0%
1,320,000 Ezra Holdings Ltd. (Singapore) 871,525
-----------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 11.3%
21,818 AngioDynamics, Inc.* 399,269
400,000 Bioject Medical Technologies, Inc.* 536,000
31,408 Cyberonics, Inc.* 1,387,291
164,734 Encision, Inc.* 453,019
231,575 Enpath Medical, Inc.* 1,880,389
21,750 ICU Medical, Inc.* 772,125
220,000 MTS Medication Technologies, Inc.* 1,375,000
67,000 North American Scientific, Inc.* 245,220
140,400 NuVasive, Inc.* 1,813,968
15,400 Shamir Optical Industry Ltd.* (Israel) 237,930
80,000 VNUS Medical Technologies, Inc.* 926,400
-----------
10,026,611
-----------
MEDICAL SERVICES 0.2%
15,225 Stratagene Corp.* 134,437
-----------
METALS AND MINING 2.2%
500,000 Equigold NL (Australia) 479,539
2,000,000 EuroZinc Mining Corp.* (Canada) 1,487,911
-----------
1,967,450
-----------
MULTI SECTOR COMPANIES 0.8%
35,000 GenCorp, Inc. 700,000
-----------
OIL AND GAS 3.5%
50,000 Energy Partners Ltd.* 1,298,500
45,000 Harvest Natural Resources, Inc.* 535,050
53,330 Saxon Energy Services, Inc.* (Canada) 211,601
166,670 Saxon Energy Services, Inc. PIPE* ***+
(Canada) 627,309
25,000 Toreador Resources Corp.* 453,750
-----------
3,126,210
-----------
PRODUCTION TECHNOLOGY EQUIPMENT 6.4%
25,000 August Technology Corp.* $ 293,000
273,335 inTEST Corp.* 1,137,074
101,575 Intevac, Inc.* 957,852
639,000 LogicVision, Inc.* 1,706,130
90,000 Nanometrics, Inc.* 1,059,300
165,550 Nova Measuring Instruments Ltd.* (Israel) 493,339
-----------
5,646,695
-----------
REAL ESTATE INVESTMENT TRUSTS (REIT) 0.4%
36,250 Medical Properties Trust, Inc.*** + 371,563
-----------
RECREATIONAL VEHICLES AND BOATS 0.3%
30,000 National R.V. Holdings, Inc.* 304,800
-----------
RESTAURANTS 0.3%
250,000 Steakhouse Partners, Inc.* ++ 262,500
-----------
RETAIL 3.9%
30,000 Big 5 Sporting Goods Corp. 741,000
11,000 Bijou Brigitte AG (Germany) 1,818,410
1,796,600 Bonjour Holdings Ltd. (Hong Kong) 898,375
-----------
3,457,785
-----------
SAVINGS AND LOANS 1.2%
86,375 BFC Financial Corp., Class A* 816,244
22,500 Pacific Premier Bancorp, Inc.* 247,500
-----------
1,063,744
-----------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 0.6%
388,000 Holtek Semiconductor, Inc. (Taiwan) 459,354
57,525 PSi Technologies Holdings, Inc.
ADR* (Phnippines) 64,428
-----------
523,782
-----------
SOFTWARE 1.1%
35,000 Isra Vision Systems AG* (Germany) 848,591
17,225 Ninetowns Digital World Trade Holdings
Ltd. ADR* (China) 156,231
-----------
1,004,822
-----------
TELECOMMUNICATIONS EQUIPMENT 0.7%
104,167 WPCS International, Inc.* 619,794
-----------
TEXTILES, APPAREL AND LUXURY GOODS 0.5%
70,000 Phoenix Footwear Group, Inc.* 479,500
-----------
TRANSPORTATION -- MISCELLANEOUS 0.7%
419,650 Autolnfo, Inc.* 226,611
20,000 SCS Transportation, Inc.* 371,800
-----------
598,411
-----------
TRUCKERS 2.4%
70,000 Transport Corporation of 617,400
America, Inc.*
40,000 USA Truck, Inc.* 918,000
40,000 Vitran Corp., Inc.* (Canada) 594,000
-----------
2,129,400
-----------
WHOLESALERS 0.7%
27,250 Beacon Roofing Supply, Inc.* 596,366
-----------
TOTAL COMMON STOCKS
(cost $72,665,079) 83,194,270
-----------
45
MICRO CAP VALUE FUND -- SCHEDULE OF INVESTMENTS
(CONTINUED) MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- --------- ----------------------------------------------------- ----------
PREFERRED STOCKS 1.1%
DRUGS AND PHARMACEUTICALS 0.2%
377,358 Point Biomedical Corp., Series FPfd.* *** + $ 200,000
-----------
HEALTH CARE SERVICES 0.9%
800 DrugMax, Inc. Convertible Pfd. PIPE,
Series A*** + 740,230
-----------
TOTAL PREFERRED STOCKS (COST $1,000,000) 940,230
-----------
WARRANTS 0.1%
COMMERCIAL SERVICES AND SUPPLIES 0.0%
384,625 ACE Security Laminates Corp.* *** + (Canada) --
-----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 0.0%
200,000 CORVU CORP.* *** + --
-----------
DRUGS AND PHARMACEUTICALS 0.0%
8,600 Acusphere, Inc.* ***+ --
113,207 Point Biomedical Corp.* *** + --
-----------
--
-----------
HEALTH CARE SERVICES 0.0%
64,864 DrugMax, Inc.* *** + --
-----------
OIL AND GAS 0.1%
83,335 Saxon Energy Services, Inc.* *** + (Canada) 68,612
-----------
TELECOMMUNICATIONS Equipment 0.0%
104,167 WPCS International, Inc.* *** + --
-----------
TOTAL WARRANTS (COST $0) 68,612
-----------
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------- ----------
SHORT-TERM INVESTMENTS 4.2%
Repurchase Agreement 4.2%
$3,776,000 Repurchase Agreement dated 3/31/05, 1.85% due 4/1/05
with State Street Bank and Trust Co. collateralized
by $3,905,000 of Federal National Mortgage
Association MTN 3.00% due 7/16/13; value: $3,856,188;
repurchase proceeds: $3,776,194+++ (cost $3,776,000) $ 3,776,000
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $3,776,000) 3,776,000
-----------
TOTAL INVESTMENTS (COST $77,441,079) 99.0% 87,979,112
OTHER ASSETS LESS LIABILITIES 1.0% 893,450
-----------
NET ASSETS 100.0% $88,872,562
===========
SHARES VALUE
- ------ ------------------------------------------------------- -----------
SECURITIES SOLD SHORT
15,000 724 Solutions, Inc.* (Canada) $ 223,950
16,700 Ceramic Protection Corp.* (Canada) 307,150
10,000 Deckers Outdoor Corp.* 357,400
10,000 Headwaters, Inc.* 328,200
-----------
TOTAL SECURITIES SOLD SHORT (PROCEEDS $1,247,777) $1,216,700
===========
*Non-income producing.
***Security was fair valued under procedures adopted by the Board of
Directors (see Note 2).
+ Security purchased in a private placement transaction or under
Rule 144A of the Securities Act of 1933 (see Note 9).
++ Affiliated company (see Note 8).
+++ All or a portion of this security has been designated as collateral
for open short positions.
ADR American Depositary Receipt.
MTN Medium Term Note.
PIPE Private Investment in a Public Equity.
See notes to financial statements.
At March 31,2005, Wasatch Micro Cap Value Fund's investments, excluding
securities sold short and short-term investments, were in the following
countries:
COUNTRY %
- --------------------------------------------------- -----
Australia 0.7
Belgium 0.5
Bermuda 0.3
Canada 14.0
China 0.2
France 1.1
Germany 4.7
Hong Kong 1.1
India 0.6
Israel 1.6
Philippines 0.1
Singapore 4.5
Taiwan 1.2
United States 69.4
-----
TOTAL 100.0%
=====
46
SMALL CAP GROWTH FUND -- SCHEDULE OF INVESTMENTS MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- --------- ----------------------------------------------------- -----------
COMMON STOCKS 93.4%
AIRLINES 0.9%
889,650 WestJet Airlines Ltd.* $11,509,008
-----------
BANKS 3.9%
331,450 Bank of the Ozarks, Inc. 10,523,538
218,425 Doral Financial Corp. 4,781,323
207,425 First Community Bancorp 9,188,927
394,400 HDFC Bank Ltd. ADR 16,576,632
326,675 Prosperity Bancshares, Inc. 8,653,621
-----------
49,724,041
-----------
BEVERAGE -- SOFT DRINKS 0.2%
122,950 Peet's Coffee & Tea, Inc.* 3,030,718
-----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 2.8%
262,200 Charles River Laboratories International, Inc.* 12,333,888
326,325 Encysive Pharmaceuticals, Inc.* 3,335,042
358,075 Myriad Genetics, Inc.* 6,584,999
347,200 Neurochem, Inc.* 4,135,152
753,400 QIAGEN N.V.* 8,995,596
-----------
35,384,677
-----------
CHEMICALS 0.6%
253,550 Cabot Microelectronics Corp.* 7,956,399
-----------
COMMERCIAL INFORMATION SERVICES 0.7%
436,425 LECG Corp.* 8,553,930
-----------
COMMERCIAL SERVICES AND SUPPLIES 6.4%
208,194 Charles River Associates, Inc.* 10,274,374
859,700 Copart, Inc.* 20,254,532
96,100 Corporate Executive Board Co. 6,145,595
74,675 CoStar Group, Inc.* 2,751,774
290,325 Jackson Hewitt Tax Service, Inc. 6,073,599
221,525 Regis Corp. 9,067,018
523,910 Resources Connection, Inc.* 10,965,436
518,350 West Corp.* 16,587,200
-----------
82,119,528
-----------
COMMUNICATIONS TECHNOLOGY 0.8%
198,525 j2 Global Communications, Inc.* 6,811,393
280,325 UTStarcom, Inc.* 3,069,559
-----------
9,880,952
-----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 6.9%
435,146 Cognizant Technology Solutions Corp., Class A* 20,103,745
14,200 Kanbay International, Inc.* 290,532
755,450 Kintera, Inc. PIPE* *** + 3,843,730
248,000 Macrovision Corp.* 5,651,920
276,825 Manhattan Associates, Inc.* 5,638,925
690,700 Nassda Corp.* 4,600,062
149,150 NAVTEQ Corp.* 6,465,652
299,325 Open Solutions, Inc.* 5,935,615
138,642 Retalix Ltd.* 3,292,747
307,300 SRA International, Inc., Class A* 18,514,825
157,125 Verint Systems, Inc.* 5,489,948
756,875 Verisity Ltd.* 9,029,519
-----------
88,857,220
-----------
CONSUMER ELECTRONICS 0.4%
271,825 Digital Theater Systems, Inc.* 4,922,751
-----------
CONSUMER PRODUCTS 2.0%
794,325 Yankee Candle Co., Inc.* 25,180,102
-----------
DIVERSIFIED FINANCIAL SERVICES 0.8%
253,820 AWD Holding AG $11,189,066
-----------
DRUGS AND PHARMACEUTICALS 2.7%
304,975 Ligand Pharmaceuticals, Inc., Class B* 1,747,507
113,050 Medicines Company (The)* 2,561,713
375,875 Medicis Pharmaceutical Corp., Class A 11,268,732
267,075 NeoPharm, Inc.* 2,075,173
303,200 Salix Pharmaceuticals Ltd.* 4,999,768
305,900 Taro Pharmaceuticals Industries Ltd.* 9,654,204
-----------
32,307,097
-----------
EDUCATION SERVICES 0.8%
90,375 Strayer Education, Inc. 10,241,295
-----------
ELECTRICAL AND ELECTRONICS 1.3%
774,000 Power Integrations, Inc.* 16,168,860
-----------
ELECTRONICS 1.3%
106,416 Flir Systems, Inc.* 3,224,405
785,450 Semtech Corp.* 14,035,991
-----------
17,260,396
-----------
ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 6.9%
981,675 AMIS Holdings, Inc.* 11,083,111
1,029,305 Integrated Circuit Systems, Inc.* 19,680,312
1,832,775 Micrel, Inc.* 16,898,185
607,525 PLX Technology, Inc.* 6,379,012
284,725 Silicon Laboratories, Inc.* 8,459,180
509,905 SiRF Technology Holdings, Inc.* 5,690,540
475,325 Tessera Technologies, Inc.* 20,548,300
-----------
88,738,640
-----------
FINANCIAL INFORMATION SERVICES 1.6%
638,600 Factset Research Systems, Inc. 21,080,186
-----------
FINANCIAL -- MISCELLANEOUS 1.6%
455,350 Brown & Brown, Inc. 20,987,081
-----------
HEALTH CARE FACILITIES 4.2%
775,700 American Healthways, Inc.* 25,613,614
258,150 Pharmaceutical Product Development, Inc.* 12,507,368
350,925 United Surgical Partners International, Inc.* 16,061,837
-----------
54,182,819
-----------
HEALTH CARE MANAGEMENT SERVICES 5.6%
636,625 AMERIGROUP Corp.* 23,275,010
1,535,263 AmSurg Corp.* ++ 38,842,154
143,325 Pediatrix Medical Group, Inc.* 9,830,662
-----------
71,947,826
-----------
HEALTH CARE PROVIDERS AND SERVICES 1.4%
478,725 Icon pic ADR* 17,961,762
-----------
HEALTH CARE SERVICES 1.1%
312,325 Accredo Health, Inc.* 13,870,353
-----------
47
SMALL CAP GROWTH FUND -- SCHEDULE OF INVESTMENTS (CONTINUED)
SHARES VALUE
- --------- ----------------------------------------------------- -----------
HOME BUILDING 3.7%
414,500 Meritage Homes Corp.* $ 24,422,340
16,440 NVR, Inc.* 12,905,400
131,100 Ton Brothers, Inc.* 10,337,235
-------------
47,664,975
-------------
HOUSEHOLD DURABLES 0.4%
200,550 Desarrolladora Homex, S.A. de C.V. ADR* 4,929,519
-------------
HOUSEHOLD FURNISHINGS 0.8%
506,975 Select Comfort Corp.* 10,362,569
-------------
INSURANCE 0.5%
300,475 Direct General Corp. 6,171,756
-------------
INVESTMENT MANAGEMENT COMPANIES 0.6%
297,397 Calamos Asset Management, Inc., Class A 8,005,927
-------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 5.4%
723,087 Abaxis, Inc.* 6,399,320
310,915 ICU Medical, Inc.* 11,037,483
101,475 Kinetic Concepts, Inc.* 6,052,984
103,675 ResMed, Inc.* 5,847,270
837,213 Techne Corp.* 33,639,218
249,875 Wright Medical Group, Inc.* 5,997,000
-------------
68,973,275
-------------
MEDICAL SERVICES 0.6%
281,925 PRA International* 7,592,240
-------------
MISCELLANEOUS MATERIALS AND COMMODITIES 0.3%
171,464 Symyx Technologies, Inc.* 3,780,781
-------------
PRODUCTION TECHNOLOGY EQUIPMENT 0.5%
392,025 Rudolph Technologies, Inc.* 5,903,896
-------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 3.0%
771,100 Capital Automotive 25,538,832
258,700 Redwood Trust, Inc. 13,240,266
-------------
38,779,098
-------------
RESTAURANTS 0.1%
30,800 Texas Roadhouse, Inc., Class A* 864,864
-------------
RETAIL 14.3%
220,806 99 Cents Only Stores* 2,908,015
509,100 Big 5 Sporting Goods Corp. 12,574,770
200,825 Blue Nile, Inc.* 5,552,811
705,371 Chico's FAS, Inc.* 19,933,784
366,075 Cost Plus, Inc.* 9,840,096
698,094 Dollar Tree Stores, Inc.* 20,056,241
466,475 Guitar Center, Inc.* 25,576,824
485,961 Hibbett Sporting Goods, Inc.* 14,598,268
114,156 Jos. A. Bank Clothiers, Inc.* 3,344,771
1,057,047 O'Reilly Automotive, Inc.* 52,355,538
594,425 Tuesday Morning Corp.* 17,161,050
-------------
183,902,168
-------------
SAVINGS AND LOANS 0.6%
242,968 Harbor Florida Bancshares, Inc. 8,285,209
-------------
SECURITIES AND BROKERAGE SERVICES 0.4%
319,700 optionsXpress, Inc.* 5,175,943
-------------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 1.5%
894,975 CSR pic* $ 5,525,069
1,323,650 O2Micro International Ltd.* 13,620,358
-------------
19,145,427
-------------
TEXTILES, APPAREL AND LUXURY GOODS 1.0%
328,500 Carter's, Inc.* 13,057,875
-------------
TRUCKERS 2.6%
1,345,468 Knight Transportation, Inc. 33,192,696
-------------
UTILITIES -- TELECOMMUNICATIONS 2.2%
1,293,250 Nextel Partners, Inc., Class A* 28,399,770
-------------
TOTAL COMMON STOCKS (COST $873,379,550) 1,197,242,695
-------------
PREFERRED STOCKS 0.3%
DRUGS AND PHARMACEUTICALS 0.1%
3,773,584 Point Biomedical Corp., Series F Pfd.* *** + 2,000,000
-------------
ELECTRONICS -- MEDICAL SYSTEMS 0.1%
1,620,220 Zonare Medical Systems, Inc.,Series
E Pfd.* *** + 1,500,000
-------------
HEALTH CARE MANAGEMENT SERVICES 0.1%
516,161 Elder Health, Inc., Series G Pfd.* *** + 571,428
-------------
TOTAL PREFERRED STOCKS (COST $4,071,428) 4,071,428
-------------
LIMITED PARTNERSHIP INTEREST 0.0%
OTHER 0.0%
Montagu Newhall Global Partners
II-B, L.P.* *** + 356,544
-------------
TOTAL LIMITED PARTNERSHIP INTEREST (COST $471,435) 356,544
-------------
WARRANTS 0.0%
DRUGS AND PHARMACEUTICALS 0.0%
1,132,075 Point Biomedical Corp.* *** + --
-------------
ELECTRONICS -- MEDICAL SYSTEMS 0.0%
243,033 Zonare Medical Systems, Inc.* *** + --
-------------
ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 0.0%
40,248 SiRF Technology Holdings, Inc.* *** + 187,555
-------------
TOTAL WARRANTS (COST $0) 187,555
-------------
48
MARCH 31, 2005 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- ------------ ----------------------------------------------- --------------
SHORT-TERM INVESTMENTS 6.4%
REPURCHASE AGREEMENT 6.4%
$81,504,000 Repurchase Agreement dated 3/31/05, 1.85%
due 4/1/05 with State Street Bank and Trust Co.
collateralized by $71,015,000 of United States
Treasury Bonds 6.25% due 8/15/23; value:
$83,138,823; repurchase proceeds:
$81,508,188 +++ (cost $81,504,000) $ 81,504,000
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $81,504,000) 81,504,000
--------------
TOTAL INVESTMENTS (COST $959,426,413) 100.1% 1,283,362,222
LIABILITIES LESS OTHER ASSETS (0.1)% (826,722)
--------------
NET ASSETS 100.0% $1,282,535,500
==============
*Non-income producing.
***Security was fair valued under procedures adopted by the Board of Directors
(see Note 2).
+ Security purchased in a private placement transaction or under Rule 144A of
the Securities Act of 1933 (see Note 8).
++ Affiliated company (see Note 7).
+++ All or a portion of this security has been designated as collateral for
purchase commitments.
ADR American Depositary Receipt.
PIPE Private Investment in a Public Equity.
See notes to financial statements.
49
SMALL CAP VALUE FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE
- --------- ------------------------------------------------------- -----------
COMMON STOCKS 98.3%
AEROSPACE 0.6%
276,268 HEICO Corp., Class A +++ $ 4,384,373
-----------
AUTO PARTS -- AFTER MARKET 4.1%
899,789 Aftermarket Technology Corp.* 14,846,519
666,759 Keystone Automotive Industries, Inc.* 15,442,138
-----------
30,288,657
-----------
BANKS 4.4%
405,808 Doral Financial Corp. 8,883,137
628,350 Franklin Bank Corp.* 10,839,037
255,775 Placer Sierra Bancshares 5,875,152
1,238,722 UTI Bank Ltd. 6,865,873
-----------
32,463,199
-----------
BUILDING -- MISCELLANEOUS 1.0%
205,250 Drew Industries, Inc.* 7,727,663
-----------
COMMERCIAL INFORMATION SERVICES 0.7%
1,002,911 Integrated Alarm Services Group, Inc.* 5,014,555
-----------
COMMERCIAL SERVICES AND SUPPLIES 7.0%
568,025 Administaff, Inc. 8,293,165
565,350 Allen-Vanguard Corp.* 2,149,709
769,577 AMN Healthcare Services, Inc.* 12,243,970
240,000 Macquarie Infrastructure Company Trust* 6,720,000
275,189 Monro Muffler, Inc.* 7,102,628
280,300 PHH Corp.* 6,130,161
149,125 RemedyTemp, Inc., Class A* 1,468,881
622,950 SM&A* 5,145,567
65,700 World Fuel Services Corp. 2,069,550
-----------
51,323,631
-----------
COMPUTER SERVICES SOFTWARE
AND SYSTEMS 0.9%
411,300 Concord Communications, Inc.* 4,162,356
150,775 SPSS, Inc.* 2,621,977
-----------
6,784,333
-----------
CONSUMER PRODUCTS 1.1%
140,075 Helen of Troy Ltd.* 3,835,254
89,050 Jarden Corp.* 4,085,614
-----------
7,920,868
-----------
CONTAINERS AND PACKAGING --
METAL AND GLASS 1.5%
273,862 Mobile Mini, Inc.* 11,066,763
-----------
DIVERSIFIED FINANCIAL SERVICES 4.1%
164,575 Eurocastle Investment Ltd. 3,894,178
349,350 Housing Development Finance Corp. Ltd. 5,812,634
688,437 Hub International Ltd. 13,286,834
630,625 U.S.I. Holdings Corp.* 7,428,762
-----------
30,422,408
-----------
ELECTRICAL AND ELECTRONICS 1.9%
409,625 Multi-Fineline Electronix, Inc.* 7,229,881
621,425 TTM Technologies, Inc.* 6,500,106
-----------
13,729,987
-----------
ELECTRONICS 1.7%
510,884 Nu Horizons Electronics Corp.* 3,652,821
494,400 Supertex, Inc.* 9,052,464
-----------
12,705,285
-----------
ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 3.0%
656,025 ASE Test Ltd.* $ 3,332,607
246,575 Excel Technology, Inc.* 6,060,813
432,700 Micrel, Inc.* 3,989,494
838,275 Pericom Semiconductor Corp.* 7,184,017
533,325 SIPEX Corp.* 1,237,314
-----------
21,804,245
-----------
FINANCE COMPANIES 3.4%
337,950 Accredited Home Lenders Holding Co.* 12,243,928
189,775 Dollar Financial Corp.* 2,254,527
493,500 United PanAm Financial Corp.* 10,062,465
20,111 World Acceptance Corp.* 513,233
-----------
25,074,153
-----------
FINANCE -- SMALL LOAN 3.7%
1,167,400 AmeriCredit Corp.* +++ 27,363,856
-----------
FINANCIAL -- MISCELLANEOUS 1.4%
314,979 Fidelity National Financial, Inc. 10,375,408
-----------
FOODS 2.2%
656,391 NBTY, Inc.* 16,468,850
-----------
HEALTH CARE FACILITIES 0.5%
624,925 Capital Senior Living Corp.* 3,505,829
-----------
HOME BUILDING 5.6%
273,275 Hovnanian Enterprises, Inc., Class A* 13,937,025
160,897 M.D.C. Holdings, Inc. 11,206,476
54,625 Meritage Homes Corp.* 3,218,505
3,860 NVR, Inc.* 3,030,100
123,500 Toll Brothers, Inc.* 9,737,975
-----------
41,130,081
-----------
HOTELS, RESTAURANTS AND LEISURE 0.8%
234,900 Orient-Express Hotels Ltd., Class A 6,130,890
-----------
HOUSEHOLD FURNISHINGS 1.1%
417,562 Kirkland's, Inc.* 4,618,236
174,075 Select Comfort Corp.* 3,558,093
-----------
8,176,329
-----------
INSURANCE 3.0%
589,050 Direct General Corp. 12,099,087
695,575 KMG America Corp.* 6,781,856
131,000 Scottish Re Group Ltd. 2,950,120
-----------
21,831,063
-----------
INVESTMENT MANAGEMENT COMPANIES 3.6%
424,150 Apollo Investment Corp. 7,117,237
408,400 Ares Capital Corp. 6,697,760
400 Brantley Mezzanine Finance, LLC* ** *** + 40,000
335,275 MCG Capital Corp. 5,158,206
137,500 NGP Capital Resources Co. 2,211,000
350,200 Technology Investment Capital Corp. 5,235,490
-----------
26,459,693
-----------
MEDICAL SERVICES 1.1%
556,350 U.S. Physical Therapy, Inc.* 7,777,773
-----------
OIL AND GAS 3.2%
343,000 Harvest Natural Resources, Inc.* 4,078,270
253,100 Plains Exploration & Production Co.* 8,833,190
111,425 Saxon Energy Services, Inc.* 442,108
390,150 Toreador Resources Corp.* 7,081,222
56,575 Ultra Petroleum Corp.* 2,874,010
-----------
23,308,800
-----------
PRODUCTION TECHNOLOGY EQUIPMENT 0.4%
255,900 Nanometrics, Inc.* 3,011,943
-----------
50
MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- --------- ----------------------------------------------------- -------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 16.3%
470,775 Arbor Realty Trust, Inc. $ 11,651,681
215,300 Bimini Mortgage Management, Inc., Class A 2,981,905
300,000 Crystal River Capital, Inc.* *** + 7,500,000
61,050 ECC Capital Corp.* 366,300
1,310,800 HomeBanc Corp. 11,587,472
402,025 JER Investors Trust, Inc.* *** + 6,030,375
360,000 KKR Financial Corp.* *** + 3,780,000
325,500 Medical Properties Trust, Inc.*** + 3,336,375
408,325 MortgageIT Holdings, Inc. 6,512,784
256,025 Newcastle Investment Corp. 7,578,340
747,850 NorthStar Realty Finance Corp.* 7,239,188
697,950 Provident Senior Living Trust*** + 11,271,893
395,675 Redwood Trust, Inc. 20,250,646
1,153,050 Saxon Capital, Inc. 19,832,460
-------------
119,919,419
-------------
RECREATIONAL VEHICLES AND BOATS 0.4%
282,875 National R.V. Holdings, Inc.* 2,874,010
-------------
RENTAL AND LEASING SERVICES -- COMMERCIAL 1.2%
278,240 McGrath RentCorp 6,505,251
564,373 MicroFinancial, Inc.* 2,624,335
-------------
9,129,586
-------------
RENTAL AND LEASING SERVICES -- CONSUMER 1.1%
300,387 Rent-A-Center, Inc.* 8,203,569
-------------
RETAIL 8.7%
89,275 America's Car-Mart, Inc.* 3,129,981
193,261 Big 5 Sporting Goods Corp. 4,773,547
136,675 Dollar Tree Stores, Inc.* 3,926,673
351,800 Global Imaging Systems, Inc.* 12,474,828
181,052 Group 1 Automotive, Inc.* 4,761,668
624,800 Lithia Motors, Inc., Class A 16,001,128
119,175 School Specialty, Inc.* 4,666,893
395,867 Sonic Automotive, Inc. 8,990,139
721,643 Whitehall Jewellers, Inc.* + 5,123,665
-------------
63,848,522
-------------
SAVINGS AND LOANS 2.0%
709,819 Commercial Capital Bancorp, Inc. 14,444,817
-------------
TRANSPORTATION -- MISCELLANEOUS 0.7%
271,350 Sea Containers Ltd., Class A 4,954,851
-------------
TRUCKERS 5.0%
847,700 Quality Distribution, Inc.* 9,197,545
296,775 Swift Transportation Co., Inc.* 6,570,599
392,442 Transport Corporation of America, Inc.* + 3,461,338
403,675 USA Truck, Inc.* 9,264,341
555,225 Vitran Corp., Inc.* 8,245,091
-------------
36,738,914
-------------
UTILITIES -- CABLE TV AND RADIO 0.2%
492,450 Knology, Inc.* 1,167,107
-------------
WHOLESALERS 0.7%
235,775 Beacon Roofing Supply, Inc.* 5,159,936
-------------
TOTAL COMMON STOCKS
(COST $593,554,523) 722,691,366
-------------
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------ ------------
CORPORATE BONDS 0.3%
INVESTMENT MANAGEMENT COMPANIES 0.3%
$2,000,000 BRANTLEY MEZZANINE FINANCE,
LLC, 10.00%, 9/21/09*** + $ 1,963,323
------------
TOTAL CORPORATE BONDS
(COST $1,963,323) 1,963,323
------------
SHORT-TERM INVESTMENTS 1.5%
REPURCHASE AGREEMENT 1.5%
4,331,000 Repurchase Agreement dated 3/31/05, 1.85% due 4/1/05
with State Street Bank and Trust Co. collateralized
by $3,450,000 of United States Treasury Bonds 7.50%
due 11/15/16; value: $4,417,797; repurchase proceeds:
$4,331,223 (cost $4,331,000) 4,331,000
6,657,000 Repurchase Agreement dated 3/31/05, 1.85% due 4/1/05
with State Street Bank and Trust Co. collateralized
by $5,020,000 of United States Treasury Bonds 7.50%
due 11/15/24; value: $6,796,176; repurchase proceeds:
$6,657,342 (cost $6,657,000) 6,657,000
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $10,988,000) 10,988,000
------------
TOTAL INVESTMENTS
(COST $606,505,846) 100.1% 735,642,689
LIABILITIES LESS OTHER ASSETS (0.1)% (404,536)
------------
NET ASSETS 100.0% $735,238,153
============
SHARES VALUE
- --------- ------------------------------------------------------ ------------
SECURITIES SOLD SHORT
40,300 HEICO Corp. (proceeds $326,420) $ 810,030
============
*Non-income producing.
**Common units.
***Security was fair valued under procedures adopted by the Board of Directors
(see Note 2).
+ Security purchased in a private placement transaction or under Rule 144A of
the Securities Act of 1933 (see Note 8).
++ Affiliated company (see Note 7).
+++ All or a portion of this security has been designated as collateral
for open short positions.
See notes to financial statements.
51
ULTRA GROWTH FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE
- ------- --------------------------------------------------------- -----------
COMMON STOCKS 96.5%
AEROSPACE 1.5%
175,550 MTC Technologies, Inc.* $ 5,705,375
-----------
AUTO PARTS -- AFTER MARKET 0.2%
173,900 IMPCO Technologies, Inc.* 934,712
-----------
BANKS 3.3%
205,962 Doral Financial Corp. 4,508,508
149,150 HDFC Bank Ltd. ADR 6,268,775
134,459 W Holding Co., Inc. 1,354,002
50,600 Wilshire Bancorp, Inc. 659,824
-----------
12,791,109
-----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 1.6%
57,375 Celgene Corp.* 1,953,619
88,675 Encysive Pharmaceuticals, Inc.* 906,259
160,525 Isolagen, Inc.* 1,009,702
198,875 Neurochem, Inc.* 2,368,601
82,675 Xcyte Therapies, Inc.* 101,690
-----------
6,339,871
-----------
CHEMICALS 0.5%
57,875 Cabot Microelectronics Corp.* 1,816,117
-----------
COMMERCIAL INFORMATION SERVICES 0.8%
168,175 LECG Corp.* 3,296,230
-----------
COMMERCIAL SERVICES AND SUPPLIES 8.0%
225,150 Advisory Board Co. (The)* 9,839,055
253,305 AMN Healthcare Services, Inc.* 4,030,083
121,050 Corporate Executive Board Co. 7,741,147
54,900 CoStar Group, Inc.* 2,023,065
40,800 Jackson Hewitt Tax Service, Inc. 853,536
41,425 Navigant Consulting, Inc.* 1,128,003
16,500 Resources Connection, Inc.* 345,345
278,475 SM&A* 2,300,203
426,724 Wireless Facilities, Inc.* 2,667,025
-----------
30,927,462
-----------
COMMUNICATIONS TECHNOLOGY 0.8%
26,225 j2 Global Communications, Inc.* 899,780
189,600 UTStarcom, Inc.* 2,076,120
-----------
2,975,900
-----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 15.0%
217,100 Affiliated Computer Services, Inc., Class A* 11,558,404
52,325 CACI International, Inc., Class A* 2,889,910
130,035 Cognizant Technology Solutions Corp., Class A* 6,007,617
313,704 EPIQ Systems, Inc.* 4,071,878
43,000 Kanbay International, Inc.* 879,780
747,171 Kintera, Inc.* 3,960,006
102,525 Kintera, Inc. PIPE* *** + 521,647
588,225 Lionbridge Technologies, Inc.* 3,347,000
34,950 Manhattan Associates, Inc.* 711,932
289,053 Nassda Corp.* 1,925,093
96,125 Open Solutions, Inc.* 1,906,159
120,100 Opnet Technologies, Inc.* 1,004,036
149,900 PDF Solutions, Inc.* 2,098,600
193,409 SRA International, Inc., Class A* 11,652,892
456,334 Verisity Ltd.* 5,444,065
-----------
57,979,019
-----------
DIVERSIFIED FINANCIAL SERVICES 0.7%
23,000 AWD Holding AG $ 1,013,902
100,150 Hub International Ltd. 1,932,895
-----------
2,946,797
-----------
DRUGS AND PHARMACEUTICALS 1.6%
44,800 Angiotech Pharmaceuticals, Inc.* 687,680
147,775 NeoPharm, Inc.* 1,148,212
89,325 Salix Pharmaceuticals Ltd.* 1,472,969
98,890 Taro Pharmaceuticals Industries Ltd.* 3,120,968
-----------
6,429,829
-----------
EDUCATION SERVICES 2.0%
350,300 Corinthian Colleges, Inc.* 5,506,716
17,950 Strayer Education, Inc. 2,034,094
-----------
7,540,810
-----------
ELECTRICAL AND ELECTRONICS 1.6%
263,150 Cherokee International Corp.* 1,839,418
208,573 Power Integrations, Inc.* 4,357,090
-----------
6,196,508
-----------
ELECTRONICS 0.7%
147,300 Semtech Corp.* 2,632,251
-----------
ELECTRONICS -- MEDICAL SYSTEMS 0.5%
120,300 EPIX Pharmaceuticals, Inc.* 842,100
20,950 Intuitive Surgical, Inc.* 952,597
-----------
1,794,697
-----------
ELECTRONICS -- SEMICONDUCTORS/ COMPONENTS 15.2%
153,425 ASE Test Ltd.* 779,399
79,450 Integrated Circuit Systems, Inc.* 1,519,084
57,325 Marvell Techology Group Ltd.* 2,197,841
887,825 Micrel, Inc.* 8,185,747
381,125 Microchip Technology, Inc. 9,913,061
756,475 National Semiconductor Corp. 15,590,950
908,600 O2Micro International Ltd.* 9,349,494
83,775 Silicon Laboratories, Inc.* 2,488,955
200,050 Sirenza Microdevices, Inc.* 634,158
222,650 SiRF Technology Holdings, Inc.* 2,484,774
130,425 STATS ChipPAC Ltd. ADR* 862,109
108,450 Tessera Technologies, Inc.* 4,688,294
-----------
58,693,866
-----------
FINANCE COMPANIES 0.2%
19,775 Accredited Home Lenders Holding Co.* 716,448
-----------
FINANCE -- SMALL LOAN 3.0%
411,865 AmeriCredit Corp.* 9,654,116
125,125 Encore Capital Group, Inc.* 1,820,569
-----------
11,474,685
-----------
FINANCIAL DATA PROCESSING SERVICES AND SYSTEMS 0.9%
78,100 iPayment, Inc.* 3,295,820
-----------
FINANCIAL INFORMATION SERVICES 0.4%
68,390 Huron Consulting Group, Inc.* 1,416,357
-----------
FINANCIAL -- MISCELLANEOUS 1.7%
4,990 Chicago Mercantile Exchange Holdings, Inc. 968,210
180,964 First Cash Financial Services, Inc.* 3,831,008
48,600 Portfolio Recovery Associates, Inc.* 1,653,858
-----------
6,453,076
-----------
52
MARCH 31, 2005 (UNAUDITED)
SHARES VALUE
- --------- ------------------------------------------------------- -----------
HEALTH CARE EQUIPMENT AND SUPPLIES 0.5%
92,025 Biacore International AB $ 2,101,859
-----------
HEALTH CARE FACILITIES 5.5%
171,041 American Healthways, Inc.* 5,647,774
336,631 United Surgical Partners International, Inc.* 15,407,601
-----------
21,055,375
-----------
HEALTH CARE MANAGEMENT SERVICES 6.4%
477,629 AmSurg Corp.* 12,084,014
67,025 Centene Corp.* 2,010,080
151,250 Pediatrix Medical Group, Inc.* 10,374,237
-----------
24,468,331
-----------
HEALTH CARE PROVIDERS AND SERVICES 1.1%
114,925 Icon pic ADR* 4,311,986
-----------
HEALTH CARE SERVICES 3.1%
162,580 Accredo Health, Inc.*+ ++ 7,220,178
52,000 Express Scripts, Inc.* 4,533,880
-----------
11,754,058
-----------
HOME BUILDING 1.0%
25,875 M.D.C. Holdings, Inc. 1,802,194
2,510 NVR, Inc.* 1,970,350
-----------
3,772,544
-----------
HOUSEHOLD FURNISHINGS 0.5%
94,950 Select Comfort Corp.* 1,940,778
-----------
INSURANCE 1.1%
202,983 Direct General Corp. 4,169,271
-----------
INTERNET AND CATALOG RETAIL 0.5%
118,400 Submarino SA* 1,901,670
-----------
INVESTMENT MANAGEMENT COMPANIES 0.7%
102,301 Calamos Asset Management, Inc., Class A 2,753,943
-----------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 6.1%
65,660 Abaxis, Inc.* 581,091
184,350 Align Technology, Inc.* 1,150,344
16,350 Biosite, Inc.* 850,690
37,550 FoxHollow Technologies, Inc.* 1,058,910
156,150 Kinetic Concepts, Inc.* 9,314,348
189,450 NuVasive, Inc.* 2,447,694
32,725 SurModics, Inc.* 1,044,255
110,775 Techne Corp.* 4,450,939
110,925 Wright Medical Group, Inc.* 2,662,200
-----------
23,560,471
-----------
MISCELLANEOUS MATERIALS AND COMMODITIES 0.4%
70,775 Symyx Technologies, Inc.* 1,560,589
-----------
PRODUCTION TECHNOLOGY EQUIPMENT 0.6%
164,875 Rudolph Technologies, Inc.* 2,483,017
-----------
RETAIL 5.1%
71,625 Blue Nile, Inc.* $ 1,980,431
153,575 Cost Plus, Inc.* 4,128,096
129,474 Dollar Tree Stores, Inc.* 3,719,788
42,225 Guitar Center, Inc.* 2,315,197
81,450 O'Reilly Automotive, Inc.* 4,034,219
118,050 Pacific Sunwear of California, Inc.* 3,303,039
-----------
19,480,770
-----------
SAVINGS AND LOANS 1.6%
294,000 Commercial Capital Bancorp, Inc. 5,982,900
-----------
SECURITIES AND BROKERAGE SERVICES 0.0%
2,275 optionsXpress, Inc.* 36,832
-----------
SOFTWARE 0.3%
61,675 Hexaware Technologies 1,033,589
-----------
UTILITIES -- TELECOMMUNICATIONS 1.8%
322,978 Nextel Partners, Inc., Class A* 7,092,597
-----------
TOTAL COMMON STOCKS (COST $332,792,764) 371,817,519
-----------
PREFERRED STOCKS 1.2%
COMMERCIAL SERVICES AND SUPPLIES 0.0%
44,000 IQ4HIRE, Inc., Pfd.* *** + $ 440
-----------
COMMUNICATIONS TECHNOLOGY 0.0%
91,388 Xtera Communications, Inc., Series
A- 1 Pfd.* *** + 99,064
-----------
DRUGS AND PHARMACEUTICALS 0.4%
2,830,188 Point Biomedical Corp., Series F
Pfd.* *** + 1,500,000
-----------
ELECTRONICS -- MEDICAL SYSTEMS 0.7%
206,044 NXStage Medical, Inc., Series F Pfd.* *** + 1,500,000
1,080,146 Zonare Medical Systems, Inc.,
Series E Pfd.* *** + 999,999
-----------
2,499,999
-----------
HEALTH CARE MANAGEMENT
SERVICES 0.1%
516,161 Elder Health, Inc., Series G Pfd.* *** + 571,428
-----------
TOTAL PREFERRED STOCKS (COST $4,781,493) 4,670,931
-----------
LIMITED PARTNERSHIP INTEREST 0.1%
OTHER 0.1%
Montagu Newhall Global Partners
II-B, L.P.* *** + $ 320,889
-----------
TOTAL LIMITED PARTNERSHIP
INTEREST (COST $424,292) 320,889
-----------
53
ULTRA GROWTH FUND -- SCHEDULE OF INVESTMENTS
(CONTINUED) MARCH 31, 2005(UNAUDITED)
SHARES VALUE
- --------- ------------------------------------------------------ ------------
WARRANTS 0.0%
DRUGS AND PHARMACEUTICALS 0.0%
849,056 Point Biomedical Corp.* *** + $ --
------------
ELECTRONICS -- MEDICAL SYSTEMS 0.0%
162,021 Zonare Medical Systems, Inc.* *** + --
------------
ELECTRONICS -- SEMICONDUCTORS/COMPONENTS 0.0%
12,400 SiRF Technology Holdings, Inc.* *** + 57,784
------------
TOTAL WARRANTS (COST $0) 57,784
------------
TOTAL INVESTMENTS (COST $337,998,549) 97.8% 376,867,123
OTHER ASSETS LESS LIABILITIES 2.2% 8,386,408
------------
NET ASSETS 100.0% $385,253,531
============
SECURITIES SOLD SHORT
29,425 Headwaters, Inc.* $ 965,728
85,650 InPhonic, Inc.* 1,945,540
------------
TOTAL SECURITIES SOLD SHORT (PROCEEDS $3,022,091) $ 2,911,268
============
*Non-income producing.
***Security was fair valued under procedures adopted by the Board of Directors
(see Note 2).
+ Security purchased in a private placement transaction or under Rule 144A of
the Securities Act of 1933 (see Note 8).
+++ All or a portion of this security has been designated as collateral for open
short positions or purchase commitments.
ADR American Depositary Receipt.
PIPE Private Investment in a Public Equity.
See notes to financial statements.
54
U.S. TREASURY FUND -- Schedule of Investments MARCH 31, 2005 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- ------------ ---------------------------------------------------- -----------
U.S. GOVERNMENT OBLIGATIONS 96.19%
$ 3,500,000 U.S. Treasury Bond, 5.50%, 8/15/28 $ 3,802,148
3,300,000 U.S. Treasury Bond, 6.125%, 11/15/27 3,857,004
1,800,000 U.S. Treasury Bond, 6.375%, 8/15/27 2,162,601
1,470,000 U.S. Treasury Bond, 6.625%, 2/15/27 1,811,316
1,750,000 U.S. Treasury Bond, 6.75%, 8/15/26 2,179,228
2,755,000 U.S. Treasury Bond, 6.875%, 8/15/25 3,457,417
5,430,000 U.S. Treasury Bond, 7.50%, 11/15/24 7,214,689
14,216,000 U.S. Treasury Strip, principal only, 11/15/21 6,235,337
8,100,000 U.S. Treasury Strip, principal only, 8/15/25 2,944,131
53,700,000 U.S. Treasury Strip, principal only, 11/15/27 17,609,089
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $46,957,383) 51,272,960
-----------
SHORT-TERM INVESTMENTS 2.9%
REPURCHASE AGREEMENT 2.9%
1,556,000 Repurchase Agreement dated 3/31/05, 1.85% due
4/1/05 with State Street Bank and Trust Co.
collateralized by $1,235,000 of United States
Treasury Bonds 7.25% due 8/15/22; value: $1,588,210;
repurchase proceeds: $1,556,080 (cost $1,556,000) 1,556,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,556,000) 1,556,000
-----------
TOTAL INVESTMENTS (COST $48,513,383) 99.0% 52,828,960
-----------
OTHER ASSETS LESS LIABILITIES 1.0% 511,836
-----------
NET ASSETS 100.0% $53,340,796
-----------
See notes to financial statements.
55
WASATCH FUNDS -- STATEMENTS OF ASSETS AND LIABILITIES
CORE GLOBAL SCIENCE HERITAGE
GROWTH & TECHNOLOGY GROWTH INTERNATIONAL
FUND FUND FUND GROWTH FUND
---------------- ---------------- ---------------- ----------------
ASSETS:
Investments, at cost
Unaffiliated issuers $ 1,206,899,585 $ 65,150,036 $ 213,189,875 $ 207,429,774
Affiliated issuers+ -- -- -- --
Repurchase agreements 84,501,000 594,000 18,009,000 30,402,000
---------------- ---------------- ---------------- ----------------
$ 1,291,400,585 $ 65,744,036 $ 231,198,875 $ 237,831,774
================ ================ ================ ================
Investments, at market value
Unaffiliated issuers $ 1,551,098,473 $ 67,643,093 $ 222,513,755 $ 260,202,539
Affiliated issuers+ -- -- -- --
Repurchase agreements 84,501,000 594,000 18,009,000 30,402,000
---------------- ---------------- ---------------- ----------------
1,635,599,473 68,237,093 240,522,755 290,604,539
Cash 326,989 750 428 34
Foreign currency on deposit (cost of $0, $3,381,
$9,207, $0, $6,723,386, $0, $0, $0, $0, $0,
and $0, respectively) -- 3,380 9,207 --
Receivable for investment securities sold 8,396,161 553,935 867,551 1,640,373
Receivable from broker for securities sold short -- -- -- --
Capital shares receivable 878,856 61,932 449,929 343,367
Interest and dividends receivable 2,208,935 13,822 117,016 336,416
Prepaid expenses and other assets 20,259 13,306 18,103 22,378
Unrealized appreciation on foreign currency
contracts -- -- 54 37,672
---------------- ---------------- ---------------- ----------------
Total Assets 1,647,430,673 68,884,218 241,985,043 292,984,779
---------------- ---------------- ---------------- ----------------
LIABILITIES:
Securities sold short, at value (proceeds of $0,
$0, $0, $0, $0, $0, $1,247,777, $0, $326,420,
$3,022,091, and $0, respectively) -- -- -- --
Bank overdraft -- -- -- --
Bank overdraft of foreign currency (cost of $0,
$0, $0, $5,358,571, $0, $275,295, $15,547, $0,
$0, $0, and $0, respectively) -- -- -- 5,387,050*
Payable for securities purchased 1,379,347 338,164 1,335,121 4,798,117
Payable to broker for short sale cover -- -- -- --
Capital shares payable 1,021,567 18,590 40,437 160,858
Accrued investment advisory fees 1,426,296 89,893 144,063 235,388
Accrued fund administration fees 47,261 1,898 7,655 8,801
Accrued expenses and other liabilities 651,587 81,868 71,686 172,317
Payable to investment advisor -- -- -- --
Other payables 1,049,831 75,393 43,439 360,998
Unrealized depreciation on foreign currency
contracts -- -- -- 1,911
---------------- ---------------- ---------------- ----------------
Total Liabilities 5,575,889 605,806 1,642,401 11,125,440
---------------- ---------------- ---------------- ----------------
NET ASSETS $ 1,641,854,784 $ 68,278,412 $ 240,342,642 $ 281,859,339
================ ================ ================ ================
NET ASSETS CONSIST OF:
Capital stock $ 396,109 $ 60,712 $ 222,873 $ 170,620
Paid-in capital in excess of par 1,241,433,127 66,729,669 226,063,622 231,851,001
Undistributed net investment income (loss) 13,477,906 (640,388) 406,902 (1,047,669)
Undistributed net realized gain (loss) on
investments and foreign currency translations 43,398,394 (301,679) 4,368,830 (1,535,885)
Net unrealized appreciation (depreciation) on
investments and foreign currency translations 343,149,248 2,430,098 9,280,415 52,421,272
---------------- ---------------- ---------------- ----------------
Net Assets $ 1,641,854,784 $ 68,278,412 $ 240,342,642 $ 281,859,339
================ ================ ================ ================
CAPITAL STOCK, $.01 PAR VALUE:
Authorized 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000
Issued and outstanding 39,610,895 6,071,249 22,287,331 17,062,030
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING
PRICE PER SHARE $ 41.45 $ 11.25 $ 10.78 $ 16.52
================ ================ ================ ================
+See Note 7 for information on affiliated issuers.
*See Note 6.
See notes to financial statements.
56
MARCH 31, 2005 (UNAUDITED)
INTERNATIONAL MICRO SMALL CAP SMALL CAP ULTRA U.S.
OPPORTUNITIES CAP MICRO CAP GROWTH VALUE GROWTH TREASURY
FUND FUND VALUE FUND FUND FUND FUND FUND
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 18,426,312 $ 371,279,426 $ 73,002,579 $ 859,599,670 $ 586,023,431 $ 337,998,549 $ 46,957,383
-- 31,360,748 662,500 18,322,743 9,494,415 -- --
2,268,000 29,343,000 3,776,000 81,504,000 10,988,000 -- 1,556,000
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 20,694,312 $ 431,983,174 $ 77,441,079 $ 959,426,413 $ 606,505,846 $ 337,998,549 $ 48,513,383
=============== =============== =============== =============== =============== =============== ===============
$ 18,082,645 $ 485,973,254 $ 83,940,612 $ 1,163,016,068 $ 716,069,686 $ 376,867,123 $ 51,272,960
-- 25,493,316 262,500 38,842,154 8,585,003 -- --
2,268,000 29,343,000 3,776,000 81,504,000 10,988,000 -- 1,556,000
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
20,350,645 540,809,570 87,979,112 1,283,362,222 735,642,689 376,867,123 52,828,960
783 144 314 15 190,558 -- 637
6,627,982 -- -- -- -- -- --
-- 2,560,077 2,127,813 3,598,801 2,834,540 17,724,510 --
-- -- 1,085,058 -- -- 1,793,343 --
1,210 57,550 -- 920,420 104,165 36,933 253,749
32,661 101,712 20,130 254,734 1,151,726 30,438 319,229
53,019 10,564 6,965 16,982 18,088 12,762 12,782
17 246 62 -- -- -- --
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
27,066,317 543,539,863 91,219,454 1,288,153,174 739,941,766 396,465,109 53,415,357
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
-- -- 1,216,700 -- 810,030 2,911,268 --
-- -- -- -- -- 4,056,116 --
-- 275,317 15,586 -- -- -- --
451,040 1,140,493 732,657 2,031,082 1,914,548 3,323,970 --
-- -- -- -- 113,631 -- --
9,857 127,614 159,197 1,937,106 538,116 235,230 5,906
26,125 926,909 147,667 1,120,254 963,598 422,210 17,366
1,388 15,247 2,550 37,588 20,317 10,495 1,587
30,015 189,532 64,795 491,644 343,373 252,289 49,702
46,019 -- -- -- -- -- --
-- -- 7,524 -- -- -- --
-- -- 216 -- -- -- --
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
564,444 2,675,112 2,346,892 5,617,674 4,703,613 11,211,578 74,561
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 26,501,873 $ 540,864,751 $ 88,872,562 $ 1,282,535,500 $ 735,238,153 $ 385,253,531 $ 53,340,796
=============== =============== =============== =============== =============== =============== ===============
$ 134,568 $ 799,768 $ 354,761 $ 333,963 $ 1,407,140 $ 151,671 $ 38,811
26,821,314 372,383,679 70,999,830 891,963,341 534,784,987 317,519,726 54,188,170
(24,488) (4,577,370) (662,784) (4,213,719) 5,825,679 (2,847,339) 512,146
10,937 63,433,803 7,618,443 70,516,106 64,567,113 31,450,065 (5,713,908)
(440,458) 108,824,871 10,562,312 323,935,809 128,653,234 38,979,408 4,315,577
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 26,501,873 $ 540,864,751 $ 88,872,562 $ 1,282,535,500 $ 735,238,153 $ 385,253,531 $ 53,340,796
=============== =============== =============== =============== =============== =============== ===============
10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000
13,456,770 79,976,849 35,476,111 33,396,285 140,713,995 15,167,072 3,881,074
$ 1.97 $ 6.76 $ 2.51 $ 38.40 $ 5.23 $ 25.40 $ 13.74
=============== =============== =============== =============== =============== =============== ===============
57
WASATCH FUNDS -- STATEMENTS OF OPERATIONS
CORE GLOBAL SCIENCE HERITAGE
GROWTH & TECHNOLOGY GROWTH INTERNATIONAL
FUND FUND FUND GROWTH FUND
------------- ------------- ------------- -------------
INVESTMENT INCOME:
Interest $ 430,663 $ 19,854 $ 141,033 $ 172,507
Dividends(1)
Unaffiliated issuers 27,538,025 38,688 1,137,786 1,026,037
Affiliated issuers+ 1,122,569 -- -- --
------------- ------------- ------------- -------------
Total investment income 29,091,257 58,542 1,278,819 1,198,544
------------- ------------- ------------- -------------
EXPENSES:
Investment advisory fees 8,155,452 537,593 673,208 1,858,047
Shareholder servicing fees 863,189 85,750 122,061 185,182
Fund administration fees 270,553 11,820 32,846 41,840
Fund accounting fees 93,559 8,411 14,360 20,085
Reports to shareholders 121,162 16,061 17,552 29,945
Custody fees 127,813 12,805 18,946 72,663
Federal and state registration fees 17,327 9,142 16,908 14,977
Legal fees 43,578 2,046 4,175 5,814
Directors' fees 13,866 644 1,149 1,656
Audit fees 9,410 9,625 11,088 9,406
Other 39,452 3,384 4,174 5,592
------------- ------------- ------------- -------------
Total expenses before reimbursement 9,755,361 697,281 916,467 2,245,207
Reimbursement of expenses by Advisor -- -- (2,827) --
------------- ------------- ------------- -------------
Net Expenses 9,755,361 697,281 913,640 2,245,207
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) 19,335,896 (638,739) 365,179 (1,046,663)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments and foreign
currency translations
Unaffiliated issuers 67,930,139 1,654,048 4,482,965 (1,657,022)
Affiliated issuers+ (39,955) -- -- --
Net increase from payment by affiliates -- -- -- 130,391
Net realized loss on short positions -- -- -- --
Change in unrealized appreciation (depreciation) on
investments and foreign currency translations 89,497,164 6,274,958 8,603,901 28,595,706
------------- ------------- ------------- -------------
Net gain (loss) on investments 157,387,348 7,929,006 13,086,866 27,069,075
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 176,723,244 $ 7,290,267 $ 13,452,045 $ 26,022,412
============= ============= ============= =============
*Fund inception date was January 27, 2005.
(1)Net of $44,612, $2,198, $13,509, $105,031, $2,765, $18,039, $5,282, $7,863,
$28,548, $8,592 and $0 in foreign withholding taxes, respectively.
+See Note 7 for information on affiliated issuers.
See notes to financial statements.
58
FOR THE SIX MONTHS OR PERIOD ENDED MARCH 31, 2005 (UNAUDITED)
INTERNATIONAL MICRO MICRO CAP SMALL CAP SMALL CAP ULTRA U.S.
OPPORTUNITIES CAP VALUE GROWTH VALUE GROWTH TREASURY
FUND* FUND FUND FUND FUND FUND FUND
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 27,080 $ 168,248 $ 29,982 $ 529,897 $ 123,988 $ 77,875 $ 1,199,413
46,539 1,131,156 327,907 2,835,517 12,194,077 226,387 --
-- -- -- -- 60,721 -- --
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
73,619 1,299,404 357,889 3,365,414 12,378,786 304,262 1,199,413
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
87,206 5,392,886 891,837 6,414,935 5,738,357 2,626,520 121,596
6,941 242,767 72,955 629,361 455,004 294,518 55,197
2,124 89,328 14,771 213,253 125,923 68,970 8,181
2,852 35,642 10,712 73,518 45,943 26,905 3,682
2,066 32,153 10,514 121,963 78,690 66,825 6,201
17,334 28,991 13,662 22,747 35,724 15,711 594
7,040 10,145 7,974 14,355 14,110 10,059 9,240
4,383 14,802 3,331 35,232 21,276 13,176 1,359
79 4,835 760 11,289 6,748 4,243 444
4,206 9,409 9,227 9,410 9,524 9,625 9,315
213 15,816 3,710 33,070 21,808 15,049 1,410
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
134,444 5,876,774 1,039,453 7,579,133 6,553,107 3,151,601 217,219
(36,337) -- (36,136) -- -- -- (34,825)
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
98,107 5,876,774 1,003,317 7,579,133 6,553,107 3,151,601 182,394
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
(24,488) (4,577,370) (645,428) (4,213,719) 5,825,679 (2,847,339) 1,017,019
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
10,937 66,104,106 7,615,402 71,384,083 65,057,277 38,863,868 1,216,445
-- (803,731) 17,868 -- (22,399) -- --
-- -- -- -- -- -- --
-- -- -- -- (45,511) (268,699) --
(440,458) 4,052,310 1,727,309 79,577,622 1,228,604 5,189,556 (390,480)
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
(429,521) 69,352,685 9,360,579 150,961,705 66,217,971 43,784,725 825,965
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ (454,009) $ 64,775,315 $ 8,715,151 $ 146,747,986 $ 72,043,650 $ 40,937,386 $ 1,842,984
=============== =============== =============== =============== =============== =============== ===============
59
WASATCH FUNDS -- STATEMENTS OF CHANGES IN NET ASSETS
CORE GROWTH GLOBAL SCIENCE & TECHNOLOGY
FUND FUND
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
MARCH 31, 2005 SEPTEMBER 30, MARCH 31, 2005 SEPTEMBER 30,
(UNAUDITED) 2004 (UNAUDITED) 2004
--------------- --------------- --------------- ---------------
OPERATIONS:
Net investment income (loss) $ 19,335,896 $ 4,998,432 $ (638,739) $ (1,253,238)
Net realized gain (loss) on investments and
foreign currency translations 67,890,184 111,394,756 1,654,048 263,985
Net realized loss on short positions -- -- -- (96,963)
Change in unrealized appreciation (depreciation)
on investments and foreign currency translations 89,497,164 78,422,948 6,274,958 (6,818,973)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting from
operations 176,723,244 194,816,136 7,290,267 (7,905,189)
DIVIDENDS PAID FROM:
Net investment income (8,590,232) (849,650) -- --
Net realized gains (51,489,127) -- -- --
--------------- --------------- --------------- ---------------
(60,079,359) (849,650) -- --
CAPITAL SHARE TRANSACTIONS:
Shares sold 109,222,785 214,099,994 10,652,906 52,986,102
Shares issued to holders in reinvestment of dividends 57,346,243 794,356 -- --
Shares redeemed (138,330,739) (230,240,862) (18,968,921) (27,341,053)
Redemption fees 3,742 7,481 2,870 44,362
--------------- --------------- --------------- ---------------
Net increase (decrease) 28,242,031 (15,339,031) (8,313,145) 25,689,411
--------------- --------------- --------------- ---------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 144,885,916 178,627,455 (1,022,878) 17,784,222
NET ASSETS:
Beginning of period 1,496,968,868 1,318,341,413 69,301,290 51,517,068
--------------- --------------- --------------- ---------------
End of period $ 1,641,854,784 $ 1,496,968,868 $ 68,278,412 $ 69,301,290
=============== =============== =============== ===============
Undistributed net investment income (loss) included
in net assets at end of period $ 13,477,906 $ 2,732,242 $ (640,388) $ (1,649)
=============== =============== =============== ===============
CAPITAL SHARE TRANSACTIONS -- SHARES:
Shares sold 2,632,901 5,660,062 957,253 4,456,739
Shares issued to holders in reinvestment of dividends 1,434,966 21,847 -- --
Shares redeemed (3,344,935) (6,102,481) (1,713,290) (2,430,466)
--------------- --------------- --------------- ---------------
Net increase (decrease) in shares outstanding 722,932 (420,572) (756,037) 2,026,273
=============== =============== =============== ===============
(1)Fund inception date was June 18, 2004.
(2)Fund inception date was January 27, 2005.
See notes to financial statements.
60
MARCH 31, 2005
HERITAGE GROWTH INTERNATIONAL GROWTH INTERNATIONAL
FUND FUND OPPORTUNITIES
SIX MONTHS SIX MONTHS FUND
ENDED PERIOD ENDED ENDED YEAR ENDED PERIOD ENDED
MARCH 31, 2005 SEPTEMBER 30, MARCH 31, 2005 SEPTEMBER 30, MARCH 31, 2005
(UNAUDITED) 2004(1) (UNAUDITED) 2004 (UNAUDITED)(2)
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 365,179 $ (1,836) $ (1,046,663) $ (1,461,714) $ (24,488)
4,482,965 (70,009) (1,526,631) 1,885,610 10,937
-- -- -- -- --
8,603,901 676,514 28,595,706 16,476,265 (440,458)
- ---------------- ---------------- ---------------- ---------------- ----------------
13,452,045 604,669 26,022,412 16,900,161 (454,009)
-- -- -- -- --
(45,181) -- (411,692) -- --
- ---------------- ---------------- ---------------- ---------------- ----------------
(45,181) -- (411,692) -- --
110,696,179 130,882,450 77,902,298 161,710,415 27,027,439
43,090 -- 396,621 -- --
(11,953,760) (3,387,411) (19,055,249) (26,165,271) (71,613)
14,724 35,837 14,999 62,776 56
- ---------------- ---------------- ---------------- ---------------- ----------------
98,800,233 127,530,876 59,258,669 135,607,920 26,955,882
- ---------------- ---------------- ---------------- ---------------- ----------------
112,207,097 128,135,545 84,869,389 152,508,081 26,501,873
128,135,545 -- 196,989,950 44,481,869 --
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 240,342,642 $ 128,135,545 $ 281,859,339 $ 196,989,950 $ 26,501,873
================ ================ ================ ================ ================
$ 406,902 $ 41,723 $ (1,047,669) $ (1,006) $ (24,488)
================ ================ ================ ================ ================
10,407,765 13,356,843 4,808,842 11,557,271 13,492,719
3,931 -- 26,871 -- --
(1,123,246) (357,962) (1,167,347) (1,850,592) (35,949)
- ---------------- ---------------- ---------------- ---------------- ----------------
9,288,450 12,998,881 3,668,366 9,706,679 13,456,770
================ ================ ================ ================ ================
61
WASATCH FUNDS -- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MICRO CAP MICRO CAP VALUE
FUND FUND
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
MARCH 31, 2005 SEPTEMBER 30, MARCH 31, 2005 SEPTEMBER 30,
(UNAUDITED) 2004 (UNAUDITED) 2004
--------------- --------------- --------------- ---------------
OPERATIONS:
Net investment income (loss) $ (4,577,370) $ (10,804,110) $ (645,428) $ (1,496,670)
Net realized gain on investments and foreign currency
translations 65,300,375 93,321,055 7,633,270 11,829,205
Net realized gain (loss) on short positions -- -- -- 33,575
Change in unrealized appreciation (depreciation)
on investments and foreign currency translations 4,052,310 (30,072,492) 1,727,309 5,615,814
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting from
operations 64,775,315 52,444,453 8,715,151 15,981,924
DIVIDENDS PAID FROM:
Net realized gains (77,564,156) (43,612,165) (9,882,992) (59,072)
--------------- --------------- --------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 5,903,796 21,906,796 1,704,219 3,673,219
Shares issued to holders in reinvestment of dividends 73,644,335 41,226,753 9,621,240 57,934
Shares redeemed (44,185,522) (70,859,439) (6,120,371) (5,524,778)
Redemption fees 257 5,180 13 97
--------------- --------------- --------------- ---------------
Net increase (decrease) 35,362,866 (7,720,710) 5,205,101 (1,793,528)
--------------- --------------- --------------- ---------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 22,574,025 1,111,578 4,037,260 14,129,324
NET ASSETS:
Beginning of period 518,290,726 517,179,148 84,835,302 70,705,978
--------------- --------------- --------------- ---------------
End of period $ 540,864,751 $ 518,290,726 $ 88,872,562 $ 84,835,302
=============== =============== =============== ===============
Undistributed net investment income (loss) included
in net assets at end of period $ (4,577,370) $ -- $ (662,784) $ (17,356)
=============== =============== =============== ===============
CAPITAL SHARE TRANSACTIONS -- SHARES:
Shares sold 917,820 3,065,146 686,399 1,412,827
Shares issued to holders in reinvestment of dividends 12,243,690 6,190,303 4,257,186 24,548
Shares redeemed (6,694,836) (9,869,981) (2,477,357) (2,193,156)
--------------- --------------- --------------- ---------------
Net increase (decrease) in shares outstanding 6,466,674 (614,532) 2,466,228 (755,781)
=============== =============== =============== ===============
See notes to financial statements.
62
MARCH 31, 2005
SMALL CAP GROWTH SMALL CAP VALUE ULTRA GROWTH
FUND FUND FUND
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
MARCH 31, 2005 SEPTEMBER 30, MARCH 31, 2005 SEPTEMBER 30, MARCH 31, 2005 SEPTEMBER 30,
(UNAUDITED) 2004 (UNAUDITED) 2004 (UNAUDITED) 2004
- --------------- --------------- --------------- --------------- --------------- ---------------
$ (4,213,719) $ (11,238,907) $ 5,825,679 $ (1,954,232) $ (2,847,339) $ (7,484,979)
71,384,083 29,266,940 65,034,878 111,770,036 38,863,868 29,431,438
-- -- (45,511) (526,153) (268,699) --
79,577,622 75,182,347 1,228,604 19,235,185 5,189,556 (36,744,684)
- --------------- --------------- --------------- --------------- --------------- ---------------
146,747,986 93,210,380 72,043,650 128,524,836 40,937,386 (14,798,225)
(26,343,235) (5,914,707) (103,737,575) (221,337) (16,837,407) (5,447,072)
- --------------- --------------- --------------- --------------- --------------- ---------------
90,744,526 189,892,968 26,662,596 77,278,907 15,377,584 58,791,862
25,361,848 5,653,646 99,650,145 210,971 16,008,572 5,113,842
(145,683,280) (225,544,787) (93,647,381) (122,799,314) (97,245,981) (155,598,165)
5,383 6,856 464 11,336 665 11,164
- --------------- --------------- --------------- --------------- --------------- ---------------
(29,571,523) (29,991,317) 32,665,824 (45,298,100) (65,859,160) (91,681,297)
- --------------- --------------- --------------- --------------- --------------- ---------------
90,833,228 57,304,356 971,899 83,005,399 (41,759,181) (111,926,594)
1,191,702,272 1,134,397,916 734,266,254 651,260,855 427,012,712 538,939,306
- --------------- --------------- --------------- --------------- --------------- ---------------
$ 1,282,535,500 $ 1,191,702,272 $ 735,238,153 $ 734,266,254 $ 385,253,531 $ 427,012,712
=============== =============== =============== =============== =============== ===============
$ (4,213,719) $ -- $ 5,825,679 $ -- $ (2,847,339) $ --
=============== =============== =============== =============== =============== ===============
2,398,130 5,360,289 5,090,591 14,270,988 605,829 2,140,610
752,593 166,382 20,978,978 40,494 667,812 191,012
(3,863,240) (6,393,772) (17,982,765) (22,776,164) (3,844,257) (5,786,241)
- --------------- --------------- --------------- --------------- --------------- ---------------
(712,517) (867,101) 8,086,804 (8,464,682) (2,570,616) (3,454,619)
=============== =============== =============== =============== =============== ===============
63
WASATCH FUNDS -- STATEMENTS OF CHANGES IN
NET ASSETS (CONTINUED) MARCH 31, 2005
U.S. TREASURY
FUND
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, 2005 SEPTEMBER 30,
(UNAUDITED) 2004
--------------- ---------------
OPERATIONS:
Net investment income $ 1,017,019 $ 2,277,215
Net realized gain on investments 1,216,445 217,681
Change in unrealized appreciation (depreciation) on
investments (390,480) (467,496)
--------------- ---------------
Net increase in net assets resulting from operations 1,842,984 2,027,400
DIVIDENDS PAID FROM:
Net investment income (2,078,313) (3,207,497)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 13,093,907 13,425,517
Shares issued to holders in reinvestment of dividends 2,022,708 3,120,826
Shares redeemed (6,637,952) (37,444,987)
Redemption fees 9,428 32,955
--------------- ---------------
Net increase (decrease) 8,488,091 (20,865,689)
--------------- ---------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 8,252,762 (22,045,786)
NET ASSETS:
Beginning of period 45,088,034 67,133,820
--------------- ---------------
End of period $ 53,340,796 $ 45,088,034
=============== ===============
Undistributed net investment income included in
net assets at end of period $ 512,146 $ 1,573,440
=============== ===============
CAPITAL SHARE TRANSACTIONS -- SHARES:
Shares sold 941,129 1,013,525
Shares issued to holders in reinvestment of dividends 150,611 239,879
Shares redeemed (485,159) (2,884,852)
--------------- ---------------
Net increase (decrease) in shares outstanding 606,581 (1,631,448)
=============== ===============
See notes to financial statements.
64
WASATCH FUNDS -- FINANCIAL HIGHLIGHTS MARCH 31,2005
SIX MONTHS
ENDED
MARCH 31
CORE GROWTH FUND (UNAUDITED) YEAR ENDED SEPTEMBER 30
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 38.49 $ 33.54 $ 25.46 $ 31.57 $ 28.08 $ 20.62
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.49 0.13 (0.01) (0.01) (0.15) (0.18)
Net realized and unrealized gain
(loss) on investments 4.01 4.84 8.09 (3.97) 5.95 8.12
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 4.50 4.97 8.08 (3.98) 5.80 7.94
REDEMPTION FEES (see Note 2) --(1) --(1) --(1) 0.01 0.01 --
LESS DISTRIBUTIONS:
Dividends from net investment income (0.22) (0.02) -- -- -- --
Distributions from net realized gains (1.32) -- -- (2.14) (2.32) (0.48)
---------- ---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (1.54) (0.02) -- (2.14) (2.32) (0.48)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 41.45 $ 38.49 $ 33.54 $ 25.46 $ 31.57 $ 28.08
========== ========== ========== ========== ========== ==========
TOTAL RETURN(2) 11.91% 14.80% 31.68% (13.73)% 22.63% 39.50%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $1,641,855 $1,496,969 $1,318,341 $1,062,944 $ 992,935 $ 290,705
Ratio of expenses to average net assets(3) 1.20% 1.21% 1.25% 1.29% 1.32% 1.38%
Ratio of net investment income (loss) to
average net assets(3) 2.37% 0.34% (0.02)% (0.02)% (0.66)% (0.86)%
Portfolio turnover rate(2) 18% 47% 47% 76% 51% 75%
SIX MONTHS
ENDED
MARCH 31
GLOBAL SCIENCE & TECHNOLOGY FUND (UNAUDITED) YEAR OR PERIOD ENDED SEPTEMBER 30
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001(4)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $ 10.73 $ 6.38 $ 8.02 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.11) (0.18) (0.13) (0.15) (0.07)
Net realized and unrealized gain (loss) on
investments 1.21 (0.41) 4.47 (1.34) (1.93)
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 1.10 (0.59) 4.34 (1.49) (2.00)
REDEMPTION FEES (see Note 2) --(1) 0.01 0.01 0.03 0.02
LESS DISTRIBUTIONS:
Distributions from net realized gains -- -- -- (0.18) --
---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS -- -- -- (0.18) --
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 11.25 $ 10.15 $ 10.73 $ 6.38 $ 8.02
========== ========== ========== ========== ==========
TOTAL RETURN(2) 10.84% (5.49)% 68.34% (18.83)% (19.80)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 68,278 $ 69,301 $ 51,517 $ 20,811 $ 10,648
Ratio of expenses to average net assets:
Net of waivers and reimbursements(3) 1.95% 1.95% 1.95% 1.95% 1.95%
Before waivers and reimbursements(3) 1.95% 1.97% 2.13% 2.42% 3.58%
Ratio of net investment loss to average net assets:
Net of waivers and reimbursements(3) (1.78)% (1.66)% (1.87)% (1.90)% (1.50)%
Before waivers and reimbursements(3) (1.78)% (1.68)% (2.05)% (2.37)% (3.13)%
Portfolio turnover rate(2) 37% 55% 88% 95% 94%
(1) Represents amounts less than $.005 per share.
(2) Not annualized for periods less than one year.
(3) Annualized.
(4) Fund inception date was December 19, 2000.
See notes to financial statements.
65
WASATCH FUNDS -- FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED
MARCH 31 PERIOD ENDED
HERITAGE GROWTH FUND (UNAUDITED) SEPTEMBER 30
(for a share outstanding throughout each period) 2005 2004(1)
- --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.86 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.02 --(2)
Net realized and unrealized gain (loss)
on investments 0.90 (0.14)
----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.92 (0.14)
REDEMPTION FEES (see Note 2) --(2) --(2)
LESS DISTRIBUTIONS:
Dividends from net investment income --(2) --
Distributions from net realized gains --(2) --
----------- -----------
TOTAL DISTRIBUTIONS --(2) --
----------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.78 $ 9.86
=========== ===========
TOTAL RETURN(3) 9.36% (1.40)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 240,343 $ 128,136
Ratio of expenses to average net assets:
Net of waivers and reimbursements(4) 0.95% 0.95%
Before waivers and reimbursements(4) 0.95% 1.26%
Ratio of net investment income (loss) to
average net assets:
Net of waivers and reimbursements(4) 0.38% (0.01)%
Before waivers and reimbursements(4) 0.38% (0.32)%
Portfolio turnover rate(3) 17% 5%
SIX MONTHS
ENDED
MARCH 31
INTERNATIONAL GROWTH FUND (UNAUDITED) YEAR OR PERIOD ENDED SEPTEMBER 30
(for a share outstanding throughout each period) 2005 2004 2003 2002(5)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.71 $ 12.06 $ 8.85 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.06) (0.11) (0.07) (0.03)
Net realized and unrealized gain (loss) on
investments 1.89 2.76 3.28 (1.13)
Net increase from payment by affiliate 0.01 -- -- --
----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 1.84 2.65 3.21 (1.16)
REDEMPTION FEES (see Note 2) --(2) --(2) --(2) 0.01
LESS DISTRIBUTIONS:
Distributions from net realized gains (0.03) -- -- --
----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS (0.03) -- -- --
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 16.52 $ 14.71 $ 12.06 $ 8.85
=========== =========== =========== ===========
TOTAL RETURN(3)(6) 12.53% 21.97% 36.27% (11.50)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 281,859 $ 196,990 $ 44,482 $ 18,008
Ratio of expenses to average net assets:
Net of waivers and reimbursements(4) 1.81% 1.92% 1.95% 1.95%
Before waivers and reimbursements(4) 1.81% 1.92% 2.30% 4.26%
Ratio of net investment loss to average net
assets:
Net of waivers and reimbursements(4) (0.84)% (1.06)% (1.12)% (1.39)%
Before waivers and reimbursements(4) (0.84)% (1.06)% (1.47)% (3.70)%
Portfolio turnover rate(3) 16% 31% 62% 3%
(1)Fund inception date was June 18, 2004.
(2) Represents amounts less than $.005 per share.
(3) Not annualized for periods less than one year.
(4) Annualized.
(5) Fund inception date was June 28, 2002.
(6) ln 2005, 0.06% of the Fund's total return consisted of a voluntary
reimbursement by the advisor for a realized investment loss. Excluding this
item, the total return would have been 12.47%.
See notes to financial statements.
66
MARCH 31, 2005
SIX MONTHS
ENDED
MARCH 31
INTERNATIONAL OPPORTUNITIES FUND (UNAUDITED)
(for a share outstanding throughout the period) 2005(1)
- -------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 2.00
LOSS FROM INVESTMENT OPERATIONS:
Net investment loss --(2)
Net realized and unrealized loss on investments (0.03)
----------
TOTAL FROM INVESTMENT OPERATIONS (0.03)
REDEMPTION FEES (see Note 2) --(2)
LESS DISTRIBUTIONS:
Dividends from net investment income --
Distributions from net realized gains --
----------
TOTAL DISTRIBUTIONS --
----------
NET ASSET VALUE, END OF PERIOD $ 1.97
==========
TOTAL RETURN(3) (1.50)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 26,502
Ratio of expenses to average net assets:
Net of waivers and reimbursements(4) 2.25%
Before waivers and reimbursements(4) 3.08%
Ratio of net investment loss to average net assets:
Net of waivers and reimbursements(4) (0.56)%
Before waivers and reimbursements(4) (1.39)%
Portfolio turnover rate(3) 0%
SIX MONTHS
ENDED
MICRO CAP FUND MARCH 31
(for a share outstanding throughout each (UNAUDITED) YEAR ENDED SEPTEMBER 30
period) 2005 2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.05 $ 6.98 $ 5.01 $ 5.64 $ 6.53 $ 4.41
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.06) (0.15) (0.12) (0.14) (0.08) (0.09)
Net realized and unrealized gain on
investments 0.83 0.81 2.43 0.11 0.74 2.63
----------- ----------- ----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.77 0.66 2.31 (0.03) 0.66 2.54
REDEMPTION FEES (see Note 2) --(2) --(2) --(2) --(2) --(2) --
LESS DISTRIBUTIONS:
Distributions from net realized gains (1.06) (0.59) (0.34) (0.60) (1.55) (0.42)
----------- ----------- ----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS (1.06) (0.59) (0.34) (0.60) (1.55) (0.42)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 6.76 $ 7.05 $ 6.98 $ 5.01 $ 5.64 $ 6.53
=========== =========== =========== =========== =========== ===========
TOTAL RETURN(3) 12.90% 9.96% 50.28% (1.41)% 16.32% 63.88%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 540,865 $ 518,291 $ 517,179 $ 327,548 $ 323,540 $ 244,444
Ratio of expenses to average net assets(4) 2.18% 2.19% 2.24% 2.28% 2.32% 2.38%
Ratio of net investment loss to average
net assets(4) (1.70)% (1.95)% (2.13)% (2.21)% (1.76)% (1.76)%
Portfolio turnover rate(3) 23% 56% 50% 62% 58% 69%
(1) Fund inception date was January 27, 2005.
(2) Represents amounts less than $.005 per share.
(3) Not annualized for periods less than one year.
(4) Annualized.
See notes to financial statements.
67
WASATCH FUNDS -- FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED
MARCH 31 YEAR OR PERIOD ENDED
MICRO CAP VALUE FUND (UNAUDITED) SEPTEMBER 30
(for a share outstanding throughout each period) 2005 2004 2003(1)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 2.57 $ 2.09 $ 2.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.02) (0.05) (0.01)
Net realized and unrealized gain on investments 0.26 0.53 0.10
----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.24 0.48 0.09
REDEMPTION FEES (see Note 2) --(2) --(2) --(2)
LESS DISTRIBUTIONS:
Distributions from net realized gains (0.30) --(2) --
----------- ----------- -----------
TOTAL DISTRIBUTIONS (0.30) -- --
----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 2.51 $ 2.57 $ 2.09
=========== =========== ===========
TOTAL RETURN(3) 10.61% 23.06% 4.50%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 88,873 $ 84,835 $ 70,706
Ratio of expenses to average net assets:
Net of waivers and reimbursements(4) 2.25% 2.27%(5) 2.50%
Before waivers and reimbursements(4) 2.33% 2.38% 2.73%
Ratio of net investment loss to average net assets:
Net of waivers and reimbursements(4) (1.45)% (1.76)% (1.97)%
Before waivers and reimbursements(4) (1.53)% (1.87)% (2.20)%
Portfolio turnover rate(3) 49% 101% 4%
SIX MONTHS
ENDED
MARCH 31
SMALL CAP GROWTH FUND (UNAUDITED) YEAR ENDED SEPTEMBER 30
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 34.94 $ 32.43 $ 23.83 $ 26.18 $ 34.89 $ 26.01
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.13) (0.33) (0.28) (0.35) (0.15) (0.23)
Net realized and unrealized gain (loss) on
investments 4.36 3.01 8.88 (1.55) (2.73) 11.82
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 4.23 2.68 8.60 (1.90) (2.88) 11.59
REDEMPTION FEES (see Note 2) --(2) --(2) --(2) --(2) 0.02 --
LESS DISTRIBUTIONS:
Distributions from net realized gains (0.77) (0.17) --(2) (0.45) (5.85) (2.71)
---------- ---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.77) (0.17) -- (0.45) (5.85) (2.71)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 38.40 $ 34.94 $ 32.43 $ 23.83 $ 26.18 $ 34.89
========== ========== ========== ========== ========== ==========
TOTAL RETURN(3) 12.43% 8.27% 36.15% (7.53)% (8.61)% 49.63%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $1,282,536 $1,191,702 $1,134,398 $ 735,417 $ 553,416 $ 237,812
Ratio of expenses to average net assets(4) 1.18% 1.20% 1.25% 1.31% 1.36% 1.38%
Ratio of net investment loss to average net
assets(4) (0.66)% (0.91)% (1.08)% (1.25)% (0.83)% (0.84)%
Portfolio turnover rate(3) 11% 41% 63% 51% 40% 72%
(1) Fund inception date was July 28, 2003.
(2) Represents amounts less than $.005 per share.
(3) Not annualized for periods less than a year.
(4) Annualized.
(5) On February 1, 2004, the Advisor reduced the contractual expense limitation
from 2.50% to 2.25%. As a result, the effective expense ratio net of waivers and
reimbursements for the period ended September 30, 2004 was 2.27%.
See notes to financial statements.
68
MARCH 31, 2005
SIX MONTHS
ENDED
MARCH 31
SMALL CAP VALUE FUND (UNAUDITED) YEAR ENDED SEPTEMBER 30
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.54 $ 4.62 $ 3.21 $ 3.76 $ 3.51 $ 2.43
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.04 (0.01) (0.02) (0.02) -- (0.02)
Net realized and unrealized gain (loss) on
investments 0.43 0.93 1.43 (0.43) 0.56 1.19
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.47 0.92 1.41 (0.45) 0.56 1.17
REDEMPTION FEES (see Note 2) --(1) --(1) --(1) --(1) --(1) --
LESS DISTRIBUTIONS:
Distributions from net realized gains (0.78) --(1) -- (0.10) (0.31) (0.09)
---------- ---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.78) -- -- (0.10) (0.31) (0.09)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 5.23 $ 5.54 $ 4.62 $ 3.21 $ 3.76 $ 3.51
========== ========== ========== ========== ========== ==========
TOTAL RETURN(2) 9.99% 19.73% 43.93% (12.35)% 18.04% 49.94%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 735,238 $ 734,266 $ 651,261 $ 428,082 $ 487,095 $ 46,470
Ratio of expenses to average net assets:
Net of waivers and reimbursements(3) 1.71% 1.73% 1.78% 1.81% 1.92% 1.95%
Before waivers and reimbursements(3) 1.71% 1.73% 1.78% 1.81% 1.92% 2.09%
Ratio of net investment income (loss) to
average net assets:
Net of waivers and reimbursements(3) 1.52% (0.26)% (0.43)% (0.44)% (0.31)% (1.02)%
Before waivers and reimbursements(3) 1.52% (0.26)% (0.43)% (0.44)% (0.31)% (1.16)%
Portfolio turnover rate(2) 24% 56% 69% 69% 41% 67%
SIX MONTHS
ENDED
MARCH 31
ULTRA GROWTH FUND (UNAUDITED) YEAR ENDED SEPTEMBER 30
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.07 $ 25.43 $ 16.52 $ 19.15 $ 27.17 $ 20.02
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.19) (0.42) (0.29) (0.25) (0.21) (0.25)
Net realized and unrealized gain (loss) on
investments 2.49 (0.68) 9.19 (1.48) (2.49) 8.87
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 2.30 (1.10) 8.90 (1.73) (2.70) 8.62
REDEMPTION FEES (see Note 2) --(1) --(1) 0.01 0.02 0.07 --
LESS DISTRIBUTIONS:
Distributions from net realized gains (0.97) (0.26) -- (0.92) (5.39) (1.47)
---------- ---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.97) (0.26) -- (0.92) (5.39) (1.47)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 25.40 $ 24.07 $ 25.43 $ 16.52 $ 19.15 $ 27.17
========== ========== ========== ========== ========== ==========
TOTAL RETURN(2) 9.85% (4.44)% 53.93% (9.74)% (10.89)% 46.66%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 385,254 $ 427,013 $ 538,939 $ 277,404 $ 86,097 $ 56,282
Ratio of expenses to average net assets:
Net of waivers and reimbursements(3) 1.50% 1.50% 1.57% 1.71% 1.75% 1.75%
Before waivers and reimbursements(3) 1.50% 1.50% 1.57% 1.71% 1.79% 1.82%
Ratio of net investment loss to average net
assets:
Net of waivers and reimbursements(3) (1.36)% (1.39)% (1.50)% (1.67)% (1.39)% (1.19)%
Before waivers and reimbursements(3) (1.36)% (1.39)% (1.50)% (1.67)% (1.43)% (1.26)%
Portfolio turnover rate(2) 33% 67% 76% 78% 123% 135%
(1) Represents amounts less than $.005 per share.
(2) Not annualized for periods less than one year.
(3) Annualized.
See notes to financial statements.
69
WASATCH FUNDS -- FINANCIAL HIGHLIGHTS MARCH 31, 2005
SIX MONTHS
ENDED
MARCH 31
U.S. TREASURY FUND (UNAUDITED) YEAR ENDED SEPTEMBER 30
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.77 $ 13.68 $ 14.04 $ 12.97 $ 12.00 $ 11.68
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.25 0.70 0.72 0.66 0.65 0.66
Net realized and unrealized gain (loss) on
investments 0.32 0.11 (0.48) 1.17 0.87 0.39
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.57 0.81 0.24 1.83 1.52 1.05
REDEMPTION FEES (see Note 2) --(1) 0.01 0.03 0.01 0.01 --
LESS DISTRIBUTIONS:
Distributions from net investment income (0.60) (0.73) (0.63) (0.77) (0.56) (0.73)
---------- ---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.60) (0.73) (0.63) (0.77) (0.56) (0.73)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 13.74 $ 13.77 $ 13.68 $ 14.04 $ 12.97 $ 12.00
========== ========== ========== ========== ========== ==========
TOTAL RETURN(2) 4.27% 6.27% 2.17% 15.38% 12.89% 9.84%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $ 53,341 $ 45,088 $ 67,134 $ 83,879 $ 66,195 $ 58,198
Ratio of expenses to average net assets:
Net of waivers and reimbursements(3) 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Before waivers and reimbursements(3) 0.89% 0.94% 0.91% 0.98% 0.95% 0.97%
Ratio of net investment income to average net
assets:
Net of waivers and reimbursements(3) 4.18% 4.50% 4.67% 5.51% 5.34% 5.35%
Before waivers and reimbursements(3) 4.04% 4.31% 4.51% 5.28% 5.14% 5.13%
Portfolio turnover rate(2) 22% 4% 37% 22% 41% 16%
(1) Represents amounts less than $.005 per share.
(2) Not annualized for periods less than one year.
(3) Annualized.
See notes to financial statements.
70
WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS MARCH 31,2005 (UNAUDITED)
1. ORGANIZATION
Wasatch Funds, Inc. is a Minnesota corporation registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company and consists of 11 series or "funds" (each a "Fund" and collectively the
"Funds"). The Core Growth, Global Science & Technology, Heritage Growth,
International Growth, International Opportunities, Micro Cap, Micro Cap Value,
Small Cap Growth, Small Cap Value and Ultra Growth Funds (collectively the
"Equity Funds") are non-diversified funds and the Wasatch-Hoisington U.S.
Treasury Fund ("U.S. Treasury Fund") is a diversified fund. Each Fund maintains
its own investment objective. The Funds have entered into an investment advisory
agreement with Wasatch Advisors, Inc. (the "Advisor") as investment advisor.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in conformity with United
States of America generally accepted accounting principles ("GAAP"). The
following is a summary of the more significant of such policies which were
followed consistently during the period.
VALUATION OF SECURITIES -- Securities are valued as of the close of the
New York Stock Exchange (generally 4:00 p.m. Eastern Time) on the valuation
date. Equity securities are valued using a commercial pricing service at the
latest quoted sales price or official closing price taken from the primary
market in which each security trades. Securities traded in the over-the-counter
market and listed 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. Restricted
securities, private placements, other illiquid securities and other securities
for which market value quotations are not readily available are valued at fair
value as determined by a designated Pricing Committee, comprised of personnel of
the Advisor, under the supervision of the Board of Directors, in accordance with
pricing procedures approved by the Board of Directors. Fair value is defined as
the amount the owner of a security might reasonably expect to receive upon a
current sale. For each applicable investment that is fair valued, the Pricing
Committee considers, to the extent applicable, various factors including, but
not limited to, the financial condition of the company or limited partnership,
operating results, prices paid in follow-on rounds, comparable companies in the
public market, the nature and duration of the restrictions for holding the
securities, and other relevant factors.
Additionally, a Fund's investments will be valued at fair value by the
Pricing Committee if the Advisor determines that an event impacting the value of
an investment occurred between the closing time of a security's primary exchange
or market (for example, a foreign exchange or market) and the time the Fund's
share price is calculated. Significant events include, but are not limited to
the following: significant fluctuations in domestic markets, foreign markets or
foreign currencies; occurrences not directly tied to the securities markets such
as natural disasters, armed conflicts or significant governmental actions; and
major announcements affecting a single issuer or an entire market or market
sector. In responding to a significant event, the Pricing Committee would
determine the fair value of affected securities considering factors including,
but not limited to: index options and futures traded subsequent to the close;
ADRs, GDRs or other related receipts; currency spot or forward markets that
trade after pricing of the foreign exchange; other derivative securities traded
after the close such as WEBs and SPDRs; and alternative market quotes on the
affected securities.
As of March 31, 2005, the aggregate amount of fair valued securities as a
percentage of net assets of the Funds was as follows:
Core Growth Fund 1.32%
Global Science & Technology Fund 1.09%
Heritage Growth Fund 0.62%
International Growth Fund -
International Opportunities Fund 0.34%
Micro Cap Fund 0.87%
Micro Cap Value Fund 2.27%
Small Cap Growth Fund 0.66%
Small Cap Value Fund 4.61%
Ultra Growth Fund 1.45%
U.S. Treasury Fund -
FOREIGN CURRENCY TRANSLATIONS -- Values of investments denominated in
foreign currencies are converted into U.S. dollars using the current exchange
rate. Purchases and sales of investments and dividend income are translated into
U.S. dollars using the current exchange rate prevailing on the transaction date.
The effect of changes in foreign exchange rates on realized and unrealized
security gains or losses is reflected as a component of such gains or losses.
Transactions in foreign denominated assets may involve greater risks than
domestic transactions, including currency, political, economic, regulatory and
market risks. The Funds do not hold foreign currency balances routinely. Foreign
currencies may be held to the extent related open security purchases failed to
settle timely.
At March 31, 2005, the foreign currencies held by the Funds were as
follows:
MARKET
VALUE
COST OF OF
CURRENCY CURRENCY
----------- ------------
GLOBAL SCIENCE & TECHNOLOGY FUND
Singapore Dollar $ 3,381 $ 3,380
----------- ------------
HERITAGE GROWTH FUND
Euro $ 9,207 $ 9,207
----------- ------------
INTERNATIONAL GROWTH FUND
Canadian Dollar $(4,946,918) $ (4,974,520)
Euro 20,766 20,766
Hong Kong Dollar 57,635 57,635
Japanese Yen (522,690) (523,557)
Singapore Dollar 32,636 32,626
----------- ------------
$(5,358,571) $ (5,387,050)
=========== ============
(Continued next page.)
71
WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARKET
COST OF VALUE OF
CURRENCY CURRENCY
----------- -----------
INTERNATIONAL OPPORTUNITIES FUND
Canadian Dollar $ 547,653 $ 561,917
Euro 3,468,311 3,401,553
Japanese Yen 1,293,918 1,268,276
Taiwan Dollar 2,251 2,205
Great British Pound 1,408,764 1,391,543
Singapore Dollar 2,489 2,488
----------- -----------
$ 6,723,386 $ 6,627,982
=========== ===========
MICRO CAP FUND
Canadian Dollar $ (348,364) $ (348,364)
Singapore Dollar 73,069 73,047
----------- -----------
$ (275,295) $ (275,317)
=========== ===========
MICRO CAP VALUE FUND
Canadian Dollar $ (16,976) $ (16,975)
Euro (99) (99)
Taiwan Dollar 1,528 1,488
----------- -----------
$ (15,547) $ (15,586)
=========== ===========
INVESTMENT IN SECURITIES AND RELATED INVESTMENT INCOME -- Security
transactions are accounted for on the trade date. Gains or losses on securities
sold are determined on the identified cost basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date except that
certain dividends from foreign securities may be recorded after the ex-dividend
date based on when the Fund is informed of the dividend. Interest income and
estimated expenses are accrued daily. Bond discount and premium are amortized
using the interest method. To the extent dividends received from Real Estate
Investment Trust securities include return of capital distributions, such
distributions are recorded as 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 enter into short
sales whereby a fund sells a security it generally does not own (the security is
borrowed), in anticipation of a decline in the security's price. The initial
amount of a short sale is recorded as a liability which is marked to market
daily. Fluctuations in the value of the short liability are recorded as
unrealized gains or losses. If a fund shorts a security when also holding a long
position in the security (a "short against the box"), as the security price
declines, the short position increases in value, offsetting the long position's
decrease in value. The opposite effect occurs if the security price rises. A
fund realizes a gain or loss upon closing of the short sale (returning the
security to the counterparty by way of purchase or delivery of a long position
owned). The Funds are liable to the buyer for any dividends payable on
securities while those securities are in a short position. These dividends are
an expense of the Funds. The Funds designate collateral consisting of cash, U.S.
government securities or other liquid assets sufficient to collateralize the
market value of short positions.
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. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option, or the cost of
a security for a purchased put or call option is adjusted by the amount of
premium received or paid.
REPURCHASE AGREEMENTS -- The Funds may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, a fund takes possession of an
underlying debt obligation subject to an obligation of the seller to repurchase,
and the fund to resell, the obligation at an agreed-upon price and time. The
market value of the collateral must be equal at all times to the total amount of
the repurchase obligations, including interest. Generally, in the event of
counterparty default, the fund has the right to use the collateral to offset
losses incurred.
FEDERAL INCOME TAXES -- It is the Funds' policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all taxable income to shareholders.
Accordingly, no provision for federal income or excise taxes has been made.
EXPENSES -- The Funds contract for various services mostly on a collective
basis. Most expenses are directly attributable to each Fund and therefore are
charged accordingly. Expenses that are not directly attributable to one or more
Funds are allocated among applicable Funds on an equitable and consistent basis
considering such things as the nature and type of expense and the relative net
assets of the Funds.
USE OF MANAGEMENT ESTIMATES -- The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported changes in net assets during the reporting
period. Actual results could differ from those estimates.
GUARANTEES AND INDEMNIFICATIONS -- In the normal course of business, the
Funds enter into contracts that contain a variety of representations and
warranties which provide general indemnifications. The maximum exposure under
these arrangements is unknown, as this would involve future claims that may be
made against the Funds and/or its affiliates that have not yet occurred. Based
on experience, however, the risk of loss is expected to be remote.
REDEMPTION FEES -- The Funds deduct a fee of 2.00% from redemption
proceeds on shares of the Funds held two months or less. Redemption fees
retained by the Funds are credited to additional paid-in capital.
72
MARCH 31, 2005 (UNAUDITED)
3. DISTRIBUTIONS
Dividends from net investment income and net realized gains, if any, are
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 GAAP. The Funds may
utilize earnings and profits distributed to shareholders on redemption of shares
as part of the dividend-paid deduction (tax equalization).
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 (loss) and undistributed net realized gain
(loss) on investments.
4. PURCHASES AND SALES OF SECURITIES
Cost of investment securities purchased and proceeds from sales of
investment securities, excluding U.S. government and short-term securities for
the period ended March 31, 2005 are summarized below:
GLOBAL
CORE SCIENCE & HERITAGE INTERNATIONAL INTERNATIONAL
GROWTH TECHNOLOGY GROWTH GROWTH OPPORTUNITIES
FUND FUND FUND FUND FUND(1)
------------- ------------ ------------ ------------- -------------
PURCHASES $ 280,889,959 $ 25,472,885 $127,065,519 $ 88,861,620 $ 18,352,472
SALES (360,650,539) (30,773,666) (29,302,101) (35,677,424) -
MICRO MICRO CAP SMALL CAP SMALL CAP ULTRA
CAP VALUE GROWTH VALUE GROWTH
FUND FUND FUND FUND FUND
------------- ------------ ------------ ------------- -------------
PURCHASES $ 120,134,733 $ 41,102,209 $137,602,483 $ 183,212,144 $ 132,709,158
SALES (186,456,008) (45,582,242) 262,961,213) (253,869,370) (208,011,583)
(1)Inception date of the Fund was January 27, 2005.
Purchases and sales of U.S. Government securities in the U.S. Treasury
Fund were $16,204,294 and $(10,257,629), respectively.
73
WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FEDERAL INCOME TAX INFORMATION
As of March 31, 2005, the cost and unrealized appreciation (depreciation)
of securities, excluding securities sold short, on a tax basis were as follows:
GLOBAL
CORE SCIENCE & HERITAGE INTERNATIONAL INTERNATIONAL
GROWTH TECHNOLOGY GROWTH GROWTH OPPORTUNITIES
FUND FUND FUND FUND FUND
-------------- ----------- ------------- ------------- -------------
Cost $1,291,400,585 $65,907,826 $ 231,243,560 $ 237,976,667 $ 20,694,312
============== =========== ============= ============= =============
Gross appreciation $ 391,233,583 $10,396,968 $ 18,667,893 $ 62,233,518 $ 619,641
Gross (depreciation) (47,034,695) (8,067,701) (9,388,698) (9,605,646) (963,308)
-------------- ----------- ------------- ------------- -------------
Net appreciation (depreciation) $ 344,198,888 $ 2,329,267 $ 9,279,195 $ 52,627,872 $ (343,667)
============== =========== ============= ============= =============
MICRO MICRO CAP SMALL CAP SMALL CAP ULTRA U.S.
CAP VALUE GROWTH VALUE GROWTH TREASURY
FUND FUND FUND FUND FUND FUND
-------------- ----------- ------------- ------------- ------------- -------------
Cost $ 432,109,051 $77,452,408 $ 960,860,908 $ 606,927,339 $ 339,446,946 $ 48,513,383
============== =========== ============= ============= ============= =============
Gross appreciation $ 139,081,337 $16,292,153 $ 377,914,988 $ 156,140,141 $ 65,065,918 $ 4,351,912
Gross (depreciation) (30,380,818) (5,765,449) (55,413,674) (27,424,791) (27,645,741) (36,335)
-------------- ----------- ------------- ------------- ------------- -------------
Net appreciation $ 108,700,519 $10,526,704 $ 322,501,314 $ 128,715,350 $ 37,420,177 $ 4,315,577
============== =========== ============= ============= ============= =============
The difference between cost amounts for financial statement and federal
income tax purposes is due primarily to timing differences in recognizing
certain securities gains and losses.
The components of accumulated earnings on a tax basis as of September 30,
2004 were as follows:
GLOBAL
CORE SCIENCE & HERITAGE INTERNATIONAL MICRO
GROWTH TECHNOLOGY GROWTH GROWTH CAP
FUND FUND FUND FUND FUND
-------------- ----------- ------------- ------------- -------------
Undistributed ordinary income $ 2,732,242 $ - $ 45,178 $ - $ 3,216,219
Undistributed capital gains 27,136,357 - - 411,691 72,570,944
-------------- ----------- ------------- ------------- -------------
Accumulated earnings 29,868,599 - 45,178 411,691 75,787,163
Accumulated capital and other losses - (1,805,704) (36,826) - -
Other undistributed ordinary losses - (1,649) (3,455) (1,006) -
Net unrealized appreciation* 253,513,064 (3,994,883) 644,386 23,816,313 104,682,982
-------------- ----------- ------------- ------------- -------------
Total accumulated earnings $ 283,381,663 $(5,802,236) $ 649,283 $ 24,226,998 $ 180,470,145
============== =========== ============= ============= =============
MICRO CAP SMALL CAP SMALL CAP ULTRA U.S.
VALUE GROWTH VALUE GROWTH TREASURY
FUND FUND FUND FUND FUND
-------------- ------------ ------------- ------------- -------------
Undistributed ordinary income $ 8,935,866 $ - $ 25,398,110 $ - $ 1,573,440
Undistributed capital gains 947,139 26,343,219 78,329,221 10,889,272 -
-------------- ------------ ------------- ------------- -------------
Accumulated earnings 9,883,005 26,343,219 103,727,331 10,889,272 1,573,440
Accumulated capital and other losses - - - - (6,930,353)
Other undistributed ordinary losses (17,356) - - - -
Net unrealized appreciation* 8,820,163 243,490,226 127,012,620 32,592,883 4,706,057
-------------- ------------ ------------- ------------- -------------
Total accumulated earnings $ 18,685,812 $269,833,445 $ 230,739,951 $ 43,482,155 $ (650,856)
============== ============ ============= ============= =============
(1)Inception date of the Fund was January 27, 2005.
*On investments, securities sold short, derivative and foreign currency
denominated assets and liabilities.
74
MARCH 31, 2005 (UNAUDITED)
Capital loss carryforwards are available through the date specified below
to offset future realized net capital gains. To the extent allowable by law,
future gains are offset by capital loss carryforwards and will not be
distributed.
SEPTEMBER 30 2008 2009 2010 2011 2012
------------ ---- ---- ---- ---- ----
GLOBAL SCIENCE & TECHNOLOGY FUND $ - $ - $ - $ 546,501 $ 1,001,036
U.S. TREASURY FUND 1,779,894 4,318,964 831,495 - -
As of September 30, 2005, the Global Science & Technology Fund and the
Heritage Growth Fund had $258,168 and $36,826, respectively, of post-October
capital losses, which are deferred until the tax year ended September 30, 2005.
The International Growth Fund had $1,005 of post-October currency losses, which
are deferred until the tax year ended September 30, 2005. Net capital losses
incurred after October 31 and within the taxable year are deemed to arise on the
first day of the following tax year.
The tax character of distributions paid during the period ended March 31, 2005
were as follows:
GLOBAL
CORE SCIENCE & HERITAGE INTERNATIONAL INTERNATIONAL
GROWTH TECHNOLOGY GROWTH GROWTH OPPORTUNITIES
2005 FUND FUND FUND FUND FUND(1)
---- ----------- ---------- -------- ------------- -------------
Ordinary income $ 9,428,971 $ - $ 45,181 $ - $ -
Capital gain 50,650,388 - - 411,692 -
----------- ---------- -------- ------------- -------------
Total $60,079,359 $ - $ 45,181 $ 411,692 $ -
=========== ========== ======== ============= =============
MICRO MICRO CAP SMALL CAP SMALL CAP ULTRA U.S.
CAP VALUE GROWTH VALUE GROWTH TREASURY
2005 FUND FUND FUND FUND FUND FUND
---- ----------- ---------- ------------ ------------ ----------- -----------
Ordinary income $ 3,229,671 $8,935,853 $ - $ 25,400,609 $ 4,512,885 $ 2,078,313
Capital gain 74,334,485 947,139 26,343,235 78,336,966 12,324,522 -
----------- ---------- ------------ ------------ ----------- -----------
Total $77,564,156 $9,882,992 $ 26,343,235 $103,737,575 $16,837,407 $2,078,313
=========== ========== ============ ============ =========== ===========
The tax character of distributions paid during the year or period ended
September 30, 2004 were as follows:
GLOBAL
CORE SCIENCE & HERITAGE INTERNATIONAL MICRO
GROWTH TECHNOLOGY GROWTH GROWTH CAP
2004 FUND FUND FUND(2) FUND FUND
---- -------- ---------- -------- ------------- -----------
Ordinary income $849,650 $ - $ - $ - $ 2,759,023
Capital gain - - - - 40,853,142
-------- ---------- -------- ------------- -----------
Total $849,650 $ - $ - $ - $43,612,165
======== ========== ======== ============= ===========
MICRO CAP SMALL CAP SMALL CAP ULTRA U.S.
VALUE GROWTH VALUE GROWTH TREASURY
2004 FUND FUND FUND FUND FUND
---- --------- ---------- --------- ----------- ----------
Ordinary income $ 59,072 $ - $ - $ 103,222 $3,207,497
Capital gain - 5,914,707 221,337 5,343,850 -
--------- ---------- --------- ----------- ----------
Total $ 59,072 $5,914,707 $ 221,337 $ 5,447,072 $3,207,497
========= ========== ========= =========== ==========
(1) Inception date of the Fund was January 27, 2005.
(2) Inception date of the Fund was June 18, 2004.
The tax character of distributions paid may differ from that shown in the
Statements of Changes in Net Assets due to short-term gains being treated as
ordinary income for tax purposes.
75
WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTIONS
INVESTMENT ADVISORY FEES -- As the Fund's investment advisor, the Advisor
receives a monthly fee calculated on average daily net assets. The Advisor has
contractually agreed to waive its fees and/or reimburse a Fund should a Fund's
operating expenses exceed a specified annual limitation through at least January
31, 2007. Investment advisory fees and fees waived, if any, for the period ended
March 31, 2005 are disclosed in the Statements of Operations. Investment
advisory fee and expense limitation annual rates are shown below.
GLOBAL
CORE SCIENCE & HERITAGE INTERNATIONAL INTERNATIONAL
GROWTH TECHNOLOGY GROWTH GROWTH OPPORTUNITIES
FUND FUND FUND FUND FUND
------ ---------- -------- ------------- -------------
Advisory Fee 1.00% 1.50% 0.70% 1.50% 2.00%
Expense Limitation 1.50% 1.95% 0.95% 1.95% 2.25%
MICRO MICRO CAP SMALL CAP SMALL CAP ULTRA U.S.
CAP VALUE GROWTH VALUE GROWTH TREASURY
FUND FUND FUND FUND FUND FUND
------ ---------- --------- --------- ------ --------
Advisory Fee 2.00% 2.00% 1.00% 1.50% 1.25% 0.50%
Expense Limitation 2.50% 2.25% 1.50% 1.95% 1.75% 0.75%
FUND ADMINISTRATION FEES -- As the Funds' Administrator, the Advisor
provides or arranges certain fund administration services to the Funds and
receives a monthly fee at the annual rate of .0425% of the first $3.3 billion of
the Funds' total average daily net assets and then a decreasing rate for average
daily net assets above that level. Fund administration fees for the period ended
March 31, 2005 are disclosed in the Statements of Operations.
ORGANIZATIONAL COSTS -- A newly formed Fund can incur organizational costs
that may include such expenses as state registration fees, legal and printing.
The Advisor typically pays these costs and is reimbursed by the Fund later. As
of March 31, 2005, the International Opportunities Fund's Statement of Assets
and Liabilities reflects a payable to the Advisor for organizational costs of
$46,019.
PAYMENTS BY AFFILIATE -- The Advisor reimbursed the Wasatch International
Growth Fund during the period for realized losses resulting from a currency
trading error. The amount of the reimbursement was $130,391 or $0.076 per share
based upon the shares outstanding as of March 31, 2005. The currency trading
error resulted in a net foreign currency overdraft of $5,387,050 at March
31, 2005.
The Funds are aware that trades have occurred in the past which may have
been in violation of the Funds' cross-trading policies, and relevant trading
records are being reviewed to assess the impact, if any, of such trades on the
Funds. The Advisor will take appropriate steps to address the matter and has
enhanced its cross trading procedures.
76
MARCH 31, 2005 (UNAUDITED)
7. TRANSACTIONS WITH AFFILIATES
The following Funds conducted transactions during the six months ended
March 31, 2005 with "affiliated companies" as defined by the Investment Company
Act of 1940:
AMOUNT OF
GAIN
AMOUNT OF (LOSS)
DIVIDENDS REALIZED ON
CREDITED TO SALE OF
SHARE ACTIVITY INCOME FOR SHARES
------------------------------------------------------ THE FOR THE
BALANCE BALANCE SIX MONTHS SIX MONTHS
9/30/04 PURCHASES SALES 3/31/05 ENDED 3/31/05 ENDED 3/31/05
--------- --------- --------- --------- ------------- -------------
CORE GROWTH FUND
Bimini Mortgage Management, Inc.,
Class A 1,251,075 - 489,450 761,625* $ 1,122,569 $ (39,955)
WCA Waste Corp. 432,000 318,225 - 750,225* -
------------- -------------
$ 1,122,569 $ (39,955)
MICRO CAP FUND
Advanced Power Technology, Inc. 654,250 91,200 - 745,450 $ - $ -
Allen - Vanguard Corp. 1,243,575 - 94,175 1,149,400* - 135,676
Covalent Group, Inc. 948,500 - 948,500 -* - (181,195)
Encision, Inc. 375,125 - - 375,125 - -
Enpath Medical, Inc. 310,200 126,625 - 436,825 - -
inTEST Corp. 509,075 19,475 - 528,550 - -
IRIDEX Corp. 551,300 104,275 5,000 650,575 - 14,747
PSi Technologies Holdings, Inc. ADR 1,001,445 - 47,225 954,220 - 772,959)
U.S. Physical Therapy, Inc. 492,012 160,850 - 652,862 - -
------------- -------------
$ - $ (803,731)
MICRO CAP VALUE FUND
Security Business Bank of San Diego 53,000 - 3,200 49,800* $ - $ 17,868
Steakhouse Partners, Inc. 250,000 - - 250,000 - -
------------- -------------
$ - $ 17,868
SMALL CAP GROWTH FUND
AmSurg Corp. 1,535,263 - - 1,535,263 $ - $ -
SMALL CAP VALUE FUND
Falcon Financial Investment Trust 1,011,725 - 1,011,725 -* $ 60,721 $ (659,303)
Supertex, Inc. 672,225 - 177,825 494,400* - 317,925
Transport Corporation of America, Inc. 315,642 76,800 - 392,442 - -
USA Truck, Inc. 472,250 - 68,575 403,675* - 990,566
Whitehall Jewellers, Inc. 845,568 - 123,925 721,643 - (671,587)
------------- -------------
$ 60,721 $ (22,399)
(*)No longer affiliated as of March 31, 2005.
ADR American Depositary Receipt
77
WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. RESTRICTED SECURITIES
The Funds may own investments that were purchased through private
placement transactions or under Rule 144A under the Securities Act of 1933 (the
"Securities Act") and cannot be sold without prior registration under the
Securities Act or may be limited due to certain restrictions. These securities
are generally deemed to be illiquid and are valued at fair value as determined
by a designated Pricing Committee, comprised of personnel of the Advisor, under
the supervision of the Board of Directors, in accordance with pricing procedures
approved by the Board of Directors. If and when such securities are registered,
the costs of registering such securities are paid by the issuer. At March 31,
2005, the Funds held the following restricted securities:
SECURITY ACQUISITION ACQUISITION FAIR VALUE AS %
TYPE DATE COST VALUE OF NET ASSETS
--------------- ------------------ ----------- ----------- -------------
CORE GROWTH FUND
Brantley Mezzanine Finance, LLC Common Units 9/21/04 $ 60,000 $ 60,000 -
Brantley Mezzanine Finance,
LLC, 10.00%, 9/21/09 Corporate Bond 9/21/04 2,940,000 2,944,985 0.18%
Fieldstone Investment Corp. Common Stock 11/10/03 8,254,500 7,830,549 0.48%
Provident Senior Living Trust Common Stock 7/26/04 - 12/21/04 10,189,391 10,785,374 0.66%
----------- ----------- ----
$21,443,891 $21,620,908 1.32%
GLOBAL SCIENCE & TECHNOLOGY FUND
Acusphere, Inc. Warrants 7/29/04 - 10/20/04 $ - $ - -
Kintera, Inc. PIPE Common Stock 7/12/04 840,800 534,749 0.78%
Montagu Newhall Global Partners
II-B, L.P. LP Interest 10/10/03 - 3/10/04 47,144 35,654 0.05%
Point Biomedical Corp. Warrants 2/16/05 - - -
Point Biomedical Corp., Series F Preferred Stock 2/16/05 150,000 150,000 0.22%
SiRF Technology Holdings, Inc. Warrants 1/11/02 - 19,922 0.03%
Xtera Communications, Inc., Series
A-1 Preferred Stock 9/3/03 7,076 7,076 0.01%
----------- ----------- ----
$ 1,045,020 $ 747,401 1.09%
HERITAGE GROWTH FUND
Provident Senior Living Trust Common Stock 7/26/04 - 12/21/04 $ 1,400,228 $ 1,486,608 0.62%
MICRO CAP FUND
DrugMax, Inc. Warrants 12/1/04 $ - $ - -
DrugMax, Inc. PIPE, Convertible
Series A Preferred Stock 12/1/04 3,200,000 2,960,919 0.55%
Kintera, Inc. PIPE Common Stock 7/12/04 1,152,400 732,926 0.14%
Point Biomedical Corp. Warrants 2/16/05 - - -
Point Biomedical Corp., Series F Preferred Stock 2/16/05 1,000,000 1,000,000 0.18%
----------- ----------- ----
$ 5,352,400 $ 4,693,845 0.87%
MICRO CAP VALUE FUND
ACE Security Laminates Corp. Warrants 11/23/04 $ - $ - -
Acusphere, Inc. Warrants 7/29/04 - 10/20/04 - - -
CorVu Corp. Warrants 11/17/03 - - -
DrugMax, Inc. Warrants 12/1/04 - - -
DrugMax, Inc. PIPE, Convertible
Series A Preferred Stock 12/1/04 800,000 740,230 0.83%
Medical Properties Trust, Inc. Common Stock 3/31/04 362,500 371,563 0.42%
Point Biomedical Corp. Warrants 2/16/05 - - -
Point Biomedical Corp., Series F Preferred Stock 2/16/05 200,000 200,000 0.23%
Saxon Energy Services, Inc. Warrants 12/22/04 - 68,612 0.08%
Saxon Energy Services, Inc. PIPE Common Stock 12/22/04 403,429 627,309 0.71%
WPCS International, Inc. Warrants 11/16/04 - - -
----------- ----------- ----
$ 1,765,929 $ 2,007,714 2.27%
78
MARCH 31, 2005 (UNAUDITED)
SECURITY ACQUISITION ACQUISITION FAIR VALUE AS %
TYPE DATE COST VALUE OF NET ASSETS
--------------- ------------------ ----------- ----------- -------------
SMALL CAP GROWTH FUND
Elder Health, Inc., Series G Preferred Stock 11/1/04 $ 571,428 $ 571,428 0.04%
Kintera, Inc. PIPE Common Stock 7/12/04 6,043,600 3,843,730 0.30%
Montagu Newhall Global Partners
II-B, L.P. LP Interest 10/10/03 - 3/10/04 471,435 356,544 0.03%
Point Biomedical Corp. Warrants 2/16/05 - - -
Point Biomedical Corp., Series F Preferred Stock 2/16/05 2,000,000 2,000,000 0.16%
SiRF Technology Holdings, Inc. Warrants 1/11/02 - 187,555 0.01%
Zonare Medical Systems, Inc. Warrants 6/30/04 - - -
Zonare Medical Systems, Inc.,
Series E Preferred Stock 6/30/04 1,500,000 1,500,000 0.12%
----------- ----------- ----
$10,586,463 $ 8,459,257 0.66%
SMALL CAP VALUE FUND
Brantley Mezzanine Finance, LLC Common Units 9/21/04 $ 40,000 $ 40,000 0.01%
Brantley Mezzanine Finance,
LLC, 10.00%, 9/21/09 Corporate Bond 9/21/04 1,960,000 1,963,323 0.27%
Crystal River Capital, Inc. Common Stock 3/9/05 7,500,000 7,500,000 1.02%
JER Investors Trust, Inc. Common Stock 5/27/04 - 12/9/04 6,033,919 6,030,375 0.82%
KKR Financial Corp. Common Stock 8/5/04 3,600,000 3,780,000 0.51%
Medical Properties Trust, Inc. Common Stock 3/31/04 3,255,000 3,336,375 0.45%
Provident Senior Living Trust Common Stock 7/26/04 - 12/21/04 10,550,756 11,271,893 1.53%
----------- ----------- ----
$32,939,675 $33,921,966 4.61%
ULTRA GROWTH FUND
Elder Health, Inc., Series G Preferred Stock 11/1/04 $ 571,428 $ 571,428 0.15%
IQ4HIRE, Inc. Preferred Stock 9/7/00 110,000 440 -
Kintera, Inc. PIPE Common Stock 7/12/04 820,200 521,647 0.14%
Montagu Newhall Global Partners
II-B, L.P. LP Interest 10/10/03 - 3/10/04 424,292 320,889 0.08%
NXStage Medical, Inc., Series F Preferred Stock 8/18/04 1,500,000 1,500,000 0.39%
Point Biomedical Corp. Warrants 2/16/05 - - -
Point Biomedical Corp., Series F Preferred Stock 2/16/05 1,500,000 1,500,000 0.39%
SiRF Technology Holdings, Inc. Warrants 1/11/02 - 57,784 0.01%
Xtera Communications, Inc., Series
A-1 Preferred Stock 9/3/03 99,065 99,064 0.03%
Zonare Medical Systems, Inc. Warrants 6/30/04 - - -
Zonare Medical Systems, Inc.,
Series E Preferred Stock 6/30/04 1,000,000 999,999 0.26%
----------- ----------- ----
$ 6,024,985 $ 5,571,251 1.45%
PIPE Private Investment in a Public Equity
LP Limited Partnership Interest
9. PURCHASE COMMITMENTS
In September 2003, the Global Science & Technology, Small Cap Growth and
Ultra Growth Funds entered into subscription agreements to acquire limited
partnership interests in Montagu Newhall Global Partners II-B, L.P. The
remaining commitment amounts at March 31, 2005 were $450,000, $4,500,000 and
$4,050,000, respectively. Securities held by the Funds have been designated to
meet these purchase commitments.
In November 2004, the Small Cap Growth and Ultra Growth Funds entered into
subscription agreements to acquire shares of Elder Health, Inc., Series G Pfd.
The remaining commitment amounts at March 31, 2005 were $428,572 per Fund.
Securities held by the Funds have been designated to meet these purchase
commitments.
79
WASATCH FUNDS -- DIRECTORS AND OFFICERS MARCH 31, 2005 (UNAUDITED)
NUMBER OF
PORTFOLIOS
TERM OF IN COMPLEX
POSITION(S) OFFICE AND OVERSEEN
NAME, ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) BY OTHER DIRECTORSHIPS
AND AGE FUND TIME SERVED DURING PAST 5 YEARS DIRECTOR HELD BY DIRECTOR
- ------------------------ ----------- ------------ ----------------------------- ---------- ---------------------
INDEPENDENT DIRECTORS:
D. JAMES CROFT, PH.D. Director Indefinite Consultant since 2004 and 11 None
12030 Sunrise Valley Served as Founder & Executive Director,
Drive Director Mortgage Asset Research
Suite 200 since 2005 Institute from 1990 to 2004.
Reston, VA 20191
Age: 63
JAMES U. JENSEN, J.D., Director Indefinite Co-founder and Chairman of 11 Private companies and
MBA and Served as the Board of Rapidmapper, foundations only
44 North Wolcott Chairman of Chairman of Inc. (a company pursuing
Salt Lake City, the Board the Board computer and measurement
UT 84103 since 2004 technology and products)
Age: 59 and Director since 2004; Consultant
since 1986 on corporate growth and
technology transfer since
2004; Vice President,
Corporate Development, Legal
Affairs and General Counsel
and Secretary, NPS
Pharmaceuticals, Inc. 1991 -
2004.
WILLIAM R. SWINYARD, Director Indefinite Professor of Business 11 None
PH.D. and Served as Management and Holder of the
Marriott School of Chairman Chairman Fred G. Meyer Chair of
Management of the of the Audit Marketing, Brigham Young
624 Tanner Building Audit Committee University since 1978.
Brigham Young Committee since 2004
University and Director
Provo, UT 84602 since 1986
Age: 64
INTERESTED DIRECTOR:
SAMUEL S. STEWART, President Indefinite Chairman of the Board for 11 None
JR., PH.D., CFA* and Served as Wasatch Advisors, Inc. (the
150 Social Hall Avenue Director President "Advisor") since 1975;
4th Floor and Director Director of Research from
Salt Lake City, UT since 1986 1975 - 2004; Chairman of the
84111 Board for the Funds from 1986
Age: 62 - 2004; Professor of Finance
at the University of Utah
from 1975 - 2000.
OFFICERS:
JEFF S. CARDON, CFA Vice Indefinite President and Treasurer of N/A N/A
150 Social Hall Avenue President Served as the Advisor since 1999;
4th Floor Vice Director Emeritus of the
Salt Lake City, UT President Funds since November
84111 since 1986 2004; Director of the Funds
Age: 47 from 1986 to 2004: Director of
the Advisor since 1985;
Security Analyst for the
Advisor since 1980.
VENICE F. EDWARDS, CFA Vice Indefinite Chief Compliance Officer for N/A N/A
150 Social Hall Avenue President Served as the Advisor since 2004;
4th Floor and Treasurer Director of Compliance for
Salt Lake City, UT Treasurer since 1996 the Advisor from 1995 - 2004
84111 and Vice and Secretary of the Advisor
Age: 54 President since 1999; Portfolio Manager
since for the Advisor from 1983 -
September 1995.
2004
ANGELA M. PALMER Chief Indefinite Chief Compliance Officer for N/A N/A
150 Social Hall Avenue Compliance Served as the Funds since 2004;
4th Floor Officer/ Chief Director of Compliance for
Salt Lake City, UT Secretary/ Compliance the Advisor since 2004 and
84111 Assistant Officer/ Vice President of the Advisor
Age: 33 Treasurer Secretary/ since November 2004; Senior
Assistant Compliance Administrator for
Treasurer the Advisor from 2003 - 2004;
since Administration Services
September Manager at UMB Fund Services,
2004 Inc. ("UMB") from 1999 -
2003; Senior Financial
Analyst at UMB from 1998-
1999.
- ---------------
* Mr. Stewart is an Interested Director because he serves as director and
officer of the Advisor.
Additional information about the Funds' directors is provided in the
Statement of Additional Information and is available without charge, upon
request, by calling 800.551.1700.
80
WASATCH FUNDS -- SUPPLEMENTAL INFORMATION MARCH 31, 2005 (UNAUDITED)
PROXY VOTING POLICIES, PROCEDURES AND RECORD
A description of the policies and procedures that Wasatch Advisors uses to
vote proxies related to the Funds' portfolio securities is set forth in the
Funds' Statement of Additional Information which is available without charge,
upon request, on the Funds' web site at www.wasatchfunds.com or by calling
800.551.1700 and on the Securities and Exchange Commission's (SEC) web site at
www.sec.gov.
Wasatch Funds' proxy voting record is available on the Funds' web site at
www.wasatchfunds.com and the SEC's web site at www.sec.gov no later than August
31 for the prior 12 months ending June 30.
QUARTERLY PORTFOLIO HOLDINGS DISCLOSURE ON FORM N-Q
The Funds file their complete schedules of investments with the SEC for their
first and third fiscal quarters of each fiscal year, commencing with the quarter
ended December 31, 2004, on Form N-Q. The Funds' Form N-Q is available on the
SEC's web site at www.sec.gov, and may be viewed at the SEC's Public Reference
Room in Washington, D.C. (information on the operation of the Public Reference
Room may be obtained by calling 800.SEC.0330).
BOARD DELIBERATIONS REGARDING APPROVAL OF ADVISORY CONTRACTS
GENERAL BACKGROUND
Wasatch Advisors, Inc. (the "Advisor") has entered into an Advisory and
Service Contract (the "Advisory Contract") with each Fund. Under the Advisory
Contract, the Advisor is responsible for managing the investment and
reinvestment of the assets of each Fund in accordance with its investment
objective, policies and limitations, and to administer each Fund to the extent
requested by and subject to the supervision of the Board of Directors of Wasatch
Funds, Inc. (the "Company").
Hoisington Investment Management Company ("Hoisington") is the sub-advisor to
the Wasatch-Hoisington U.S. Treasury Fund (the "U.S. Treasury Fund"). Pursuant
to a Sub-Advisory Agreement entered into between the Advisor and Hoisington (the
"Sub-Advisory Agreement"), Hoisington directs the investment and reinvestment of
the assets of the U.S. Treasury Fund, including the placement of purchase and
sale orders on behalf of such Fund. (Unless the context otherwise requires, the
"Advisory Contract" and the "Sub-Advisory Agreement" are collectively referred
to as the "Advisory Contracts.")
Detailed information on the Advisory Contracts, including the level of fees
payable thereunder and the extent to which the Advisor has contractually limited
Fund expenses through January 31, 2007, is set forth in footnote number six to
the Funds' Financial Statements for the period ended March 31, 2005 and in the
Prospectus and Statement of Additional Information for the Funds dated January
31, 2005.
APPROVAL PROCESS
The Board of Directors of the Company unanimously approved the Advisory
Contracts at an "in person" meeting held March 30, 2005 (the "Meeting").
The Directors are legally required to review and reapprove the Advisory
Contracts once a year and they consider a wide variety of materials and
information throughout each year about each Fund, including, for example, the
Fund's investment performance, adherence to stated investment objectives and
strategies, assets under management, expenses, sales and redemptions, regulatory
compliance and management. The Directors periodically meet with the Advisor's
portfolio managers, and review and evaluate their professional experience,
credentials and qualifications. This information supplements the materials the
Board received in preparation for the Meeting described below.
To support its deliberations at the Meeting, the "disinterested" (i.e.,
independent) Directors, requested and received from the Advisor relevant
information that the Directors used:
1. To evaluate the quality of investment advice, including:
- An analysis of the performance of each Fund relative to its stated
objectives;
- A comparison of each Fund's performance to relevant market indexes and to
similar funds;
- A determination of the quality of the Advisor's and Hoisington's
investment personnel.
2. To compare the advisory fees paid by the Funds to the fees paid by other
comparable mutual funds to their advisors; to compare the advisory fees paid
to the Advisor by other types of clients; and to compare the sub-advisory
fees paid by the Advisor to Hoisington with fees that Hoisington assesses to
other types of clients.
3. To evaluate the advisory fees in light of additional services provided by the
Advisor (over "pure" investment advisory services), and Fund related expenses
borne by the Advisor.
4. To compare total Fund expenses as a percentage of Fund assets to the expense
ratios of similar funds, and the extent, if any, to which the Advisor agreed
to limit expenses.
5. To investigate whether economies of scale exist for an individual Fund and
for the Funds collectively, and if so, whether and to what extent they are or
should be reflected in the advisory fees paid by the Funds.
6. To consider the profits of the Advisor from managing the Funds.
7. To consider other sources of revenue to the Advisor from its relationship to
the Funds and other "fall out" or other benefits it may receive. These
include "soft dollar" benefits such as research services as a result of
brokerage generated by the Funds and the extent to which the Funds have
shared in these benefits.
8. To consider the manner in which Fund portfolio transactions are effected,
including portfolio turnover and commission rates (including soft dollars).
9. To consider whether the Advisor and Hoisington have any material
regulatory/compliance problems (such as with the SEC, NASD, or IRS), and the
results of any regulatory
81
WASATCH FUNDS -- SUPPLEMENTAL INFORMATION
inspections, especially those that might affect the Fund or its shareholders.
This included information on the number and types of complaints that the
Advisor has received from shareholders or others in connection with the sale
of securities or the management or operation of the Funds.
Directors noted that information on certain of such topics was supplied at
previous meetings. At a telephonic meeting held on March 21, 2005, the
independent Directors with Fund counsel and a representative of the Advisor
discussed the materials provided, outstanding issues or other concerns and the
independent Directors requested, and later received, certain additional
materials in preparation for the Meeting.
At the Meeting, the independent Directors discussed issues pertaining to
the proposed reapproval of the Advisory Contracts with representatives of the
Advisor and with Fund counsel. After reviewing the written materials and the
discussions with the Advisor, the independent Directors met privately to
evaluate the Advisory Contracts. In reaching their determinations relating to
the re-approval of the Advisory Contracts, in respect of each Fund, the
Directors considered all factors they believed relevant. As outlined in more
detail below, the Directors considered, among other things, the following
factors: (a) the nature, extent and quality of the services to be provided by
the investment advisor; (b) the investment performance of the Fund; (c) the
costs of the services to be provided and profits to be realized by the advisor
and its affiliates from the relationship with the Fund; (d) the extent to which
economies of scale may be realized as the Funds grow; and (e) whether fee levels
reflect any such economies of scale.
1. THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY THE ADVISOR AND
HOISINGTON.
The Directors considered the types of services provided under the Advisory
Contracts, and considered narrative and statistical information regarding the
Fund's performance record. This information included a comparison of such
performance to the performance of unaffiliated comparable funds and recognized
benchmarks. The Directors further considered the capabilities, personnel and
other resources of the Advisor and Hoisington. In considering services, the
Directors reviewed the organizational structure of the Advisor and the
responsibilities of the various departments, including the Advisor's research
department and its research personnel. The Directors reviewed the Advisor's
approach to research and its application to the Advisor's investment decisions.
With respect to Hoisington, the Directors reviewed, among other things,
information regarding Hoisington's organization, including its management
services, investment strategies, and the experience of the portfolio manager of
the U.S. Treasury Fund.
In addition to advisory services, the Directors considered the quality of
any administrative or non-advisory services provided. With respect to the
Advisor, the Directors noted that the Advisor administers the affairs of the
Company and each Fund to the extent requested by and subject to the supervision
of the Company's Board of Directors. The Directors noted that the Advisor
provides the Company and each Fund with such administrative and other services
(exclusive of, and in addition to, any such services provided by any others
retained by the Company on behalf of the Funds) and executive and other
personnel as are necessary for the operation of the Company and the Funds. In
providing such services, the Directors noted the Advisor's role in coordinating
the activities of these other service providers. The Directors noted that the
current Advisory Contract calls for the Advisor to pay all of the compensation
of the officers of the Company and further noted that all officers are employees
of the Advisor. The Directors further noted that the Advisory Contract calls for
the Advisor to pay for the Company's office space and facilities. With respect
to Hoisington, the Directors noted that the Sub-Advisory Agreement with
Hoisington was a "pure" advisory agreement, and Hoisington was not expected to
supply other significant services to the Company or the U.S. Treasury Fund.
In evaluating the services, the Directors also considered the Advisor's
and Hoisington's relevant policies and procedures for assuring compliance with
applicable laws and regulations in light of the new SEC regulations governing
compliance programs. The Directors noted, for example, that the Advisor and
Hoisington have recently enhanced their compliance programs in light of the new
regulatory requirements. The Directors also considered the Advisor's
capabilities to monitor the sub-advisor's performance as well as compliance
policies and procedures. Based on their review, the Directors concluded that,
overall, they were satisfied with the nature, extent and quality of services
provided (and expected to be provided) to the Company and to each of the Funds
under the Advisory Contracts.
2. THE INVESTMENT PERFORMANCE OF THE FUNDS, THE ADVISOR AND HOISINGTON.
In connection with every in-person quarterly Board of Directors meeting,
the Directors receive extensive information on the performance results of each
of the Funds. This includes, for example, performance information on all of the
Funds for the previous quarter, and previous one-, three-, five- and 10-year
periods, or since inception. Such performance information includes information
on absolute total return, performance versus the appropriate benchmark(s), and
performance versus peer groups compiled by an independent third party.
In connection with the March, 2005 contract renewal process, Directors
also reviewed information on the performance and expenses of the Funds as
compared to unaffiliated comparable funds prepared by an independent third
party.
In evaluating each Fund's investment performance, the Directors evaluated
the degree to which each Fund is managed in accordance with its stated
objectives. Based upon their review, the Directors believe that the Advisor
endeavors to manage each Fund in a manner that is consistent with its stated
objective and style. Similarly, the Directors believe Hoisington attempts to
manage the U.S. Treasury Fund in a manner consistent with its stated investment
objective
82
MARCH 31, 2005 (UNAUDITED)
and style. The Directors also understand that market conditions and specific
investment decisions may adversely affect a Fund's investment performance in
absolute and relative terms over various periods of time, and therefore the
analysis of each Fund's performance included an analysis over various periods of
time. In evaluating a Fund's performance, the Directors gave greater weight to
long-term rather than short-term performance.
The Directors considered the Fund's ranking against other funds with
similar investment objectives compiled by an independent third party for the
periods applicable to the respective Fund's existence. The Directors gave
greater weight to the respective Fund's ranking over longer periods of time.
Considering all of the information described herein, the Directors concluded
that they were satisfied with the performance, over time, of the Funds, except
as noted below.
The International Growth Fund: With respect to the International Growth
Fund, the Directors concluded that, although such Fund's relative investment
performance since inception (June 28, 2002) had compared unfavorably to
comparable funds and indexes, the Directors retained confidence in the Advisor's
capabilities to manage the Fund.
The International Opportunities Fund: With respect to the International
Opportunities Fund, the Directors concluded that since the Fund did not commence
business until January 27, 2005, no meaningful investment performance
information was available in March, 2005.
In addition, in reviewing the rankings of the Ultra Growth Fund to its
peer group over time, the Directors noted that the Fund's prospectus states that
"in seeking to achieve the Fund's investment objective the Advisor may take
larger positions in a few companies that the Advisor believes have outstanding
investment potential." Accordingly, the Directors recognized that this approach
can lead to greater volatility which can affect relative investment performance.
Based upon their review, however, the Directors concluded that the Fund's
investment performance over time has been satisfactory.
3. THE COSTS OF SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED BY THE
ADVISOR AND HOISINGTON FROM THEIR RELATIONSHIP WITH THE FUNDS.
MANAGEMENT FEES AND OTHER EXPENSES
In evaluating the management fees and expenses, the Directors considered
each Fund's management fees, the sub-advisory fee arrangement with respect to
the U.S. Treasury Fund and each Fund's expected expense ratios in absolute terms
as well as compared with the fees and expenses of funds with similar objectives.
In reviewing fees, the Directors considered the expense limitation agreement of
the Advisor. The Directors also reviewed and considered certain financial
information of the Advisor and Hoisington as well as the fees the respective
advisor assessed for other clients. In addition to the expense information
received during the year, in preparation for the meetings on March 21 and March
30, 2005, the Directors requested and evaluated a report prepared by an
independent third party containing comparisons of each Fund's investment
advisory fees (both before and after fee waivers, if any), administrative,
transfer agency, custodial, fund accounting, non-management, Rule 12b-1 and
total expenses, with industry peers independently selected by such third party
as well as a sub-set thereof (the "Peer Group").
In their review of this "Peer Group" report, Directors noted that the
funds included in the Peer Group had various service and expense structures. For
example, some had Rule 12b - 1 Plan expenses, which the Funds do not have. The
Funds pay separate administrative and Fund accounting fees while other funds in
the Peer Group do not pay such fees.
Based upon the information provided, the Directors noted that several of
the Funds have advisory fees and/or total expense ratios below or near the
median including the Core Growth, Heritage Growth, U.S. Treasury and Small Cap
Growth Funds. The remaining Funds have advisory fees and total expense ratios
higher than the median, including the International Opportunities, Micro Cap and
Micro Cap Value Funds which the Directors noted have advisory fees and total
expense ratios that are higher than those paid by most mutual funds.
In considering the Funds with higher than median advisory fees, the
Directors noted such Funds generally have had superior long-term performance or
do not have a reasonably long-term track record. The Directors recognize that
the Advisor has committed to providing each Fund with high quality investment
advice, and has also agreed to explore with the Board ways in which Fund expense
ratios can be maintained in line with risk adjusted performance over time. The
Directors further concluded that the advisory fees and expense ratios of the
Funds are not unreasonable.
FEES CHARGED TO OTHER ADVISORY CLIENTS OF THE ADVISOR
The Directors received and evaluated information on the level of advisory
fees charged by the Advisor for non-mutual fund institutional clients and for
"high net worth" separate accounts. The advisory fees charged by the Advisor to
such institutional clients and separate accounts are lower than those charged
the comparable Funds. The Advisor has stated, however, that in many cases the
Funds have greater flexibility to invest in foreign and restricted private
securities than comparable private accounts. The Directors noted that many
additional services are provided (and costs are incurred) by the Advisor in
managing the Funds compared to its private accounts. For example, the Advisor
provides the Company (and each Fund) with office facilities, Fund officers and
various administrative, compliance and other services and assumes the attendant
costs and exposure to liability. The Advisor also coordinates the provision of
services to the Company and the Funds by non-affiliated service providers
(administrators, custodians, accountants, auditors, attorneys and others) and
coordinates all board and committee functions, regulatory filings and all other
aspects of the Funds' operations. These services are generally
83
WASATCH FUNDS -- SUPPLEMENTAL INFORMATION
not provided to private, non-Fund clients. The Directors have observed that the
nature and extent of these ancillary duties and responsibilities have increased
significantly recently (with the passage of the Sarbanes-Oxley Act of 2002, the
USA PATRIOT Act, and similar legislation, and numerous related new SEC
regulations). In general, the Directors believe that the nature and number of
services provided to the Company and the Funds merit higher fees than those paid
by private, non - Fund clients. With respect to Hoisington, the Directors also
reviewed the fee schedule Hoisington assesses its other clients which reflected
that the sub-advisory fee is relatively low in comparison.
PROFITABILITY TO THE ADVISOR AND HOISINGTON
At the request of the Directors, the Advisor provided information
concerning profitability of the Advisor's activities for the year ended December
31, 2004. The information considered by the Directors included operating profit
margin information for the Advisor's mutual fund business as a whole, as well as
its profitability data for each Fund. The Directors reviewed with
representatives of the Advisor assumptions and methods of allocation used by it
in preparing Fund-specific profitability data. The Advisor stated its belief
that the methods of allocation used were reasonable, but it noted that there are
limitations inherent in allocating costs to multiple advisory products served by
an organization such as the Advisor where each of the advisory products draws
on, and benefits from, the research and other resources of the organization. The
Advisor noted that the Advisor is privately held, and is taxed as a Subchapter S
corporation; thus certain expenses had to be "attributed" and/or estimated.
The Directors recognized that it is difficult to make comparisons of
profitability from mutual fund management contracts because comparative
information is not generally publicly available and is affected by numerous
factors, including the structure of the particular advisor, the types of funds
it manages, its business mix, numerous assumptions regarding allocations and the
advisor's capital structure and cost of capital. In considering profitability
information, the Directors considered the effect of fall-out benefits on the
Advisor's expenses. The Directors focused on profitability of the Advisor's
relationships with the Funds before taxes and marketing (including "supermarket"
fees) expenses. The Directors recognized that the Advisor should be entitled to
earn a reasonable level of profits for the services it provides to each Fund
and, based on their review, concluded that they were satisfied that the
Advisor's level of profitability from its relationship with each Fund was not
excessive.
The Directors requested information concerning the profitability of
Hoisington in providing sub-advisory services to the U.S. Treasury Fund. The
Directors were advised by Hoisington that the fees which it receives for
sub-advisory services to the U.S. Treasury Fund represent only a very small
percentage of its total revenues, and that it could not provide a meaningful
estimate of its profitability in providing sub-advisory services to the U.S.
Treasury Fund. The Directors were advised that there were no other relationships
between the Advisor and Hoisington other than such sub-advisory relationship,
and further that the Sub-Advisory Agreement between the Advisor and Hoisington
was negotiated on an "arm's length" basis. The Directors were also supplied
information indicating that the fee charged by Hoisington in connection with
serving as the sub-advisor to the U.S. Treasury Fund is relatively low, compared
to its other clients.
"FALL-OUT" BENEFITS
The Directors considered that the Advisor benefits from soft dollar
arrangements whereby it receives brokerage and research services from brokers
that execute the Funds' purchases and sales of securities. The Directors
received and reviewed information concerning the Advisor's soft dollar
arrangements, which included a description of the Advisor's policies with
respect to allocating Fund brokerage for brokerage and research services,
Fund-by-Fund data on the percentage of soft dollar commissions, and other
information on soft dollars, including a list of firms providing third-party
research to the Advisor and information on such services. The Directors
recognized that the Advisor's profitability would be somewhat lower if it did
not receive research services for soft dollars. In considering other fallout
benefits, the Directors reviewed compensation the Advisor received pursuant to
its administration agreement with the Funds.
4. & 5. THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUNDS
GROW, AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE.
The Directors noted that the advisory fee schedules for the Funds do not
contain breakpoints that reduce the fee rate on assets above specified levels.
The Directors recognized that breakpoints may be one way for the benefits of any
economies of scale to be shared with investors. The Directors noted that most of
the Funds invest in small and micro cap securities, and that traditionally, the
Advisor has periodically closed certain equity Funds to control asset levels.
For example, as of March 30, 2005, seven of the 11 Funds were closed to both new
investors and existing Fund shareholders. The Directors also are aware of the
position of the Advisor that it closes Funds at lower levels of assets under
management than many funds investing in small and micro cap securities.
The Directors recognized the position taken by the Advisor that, to the
extent economies of scale exist, current levels of advisory fees reflect such
economies of scale in light of the limited profit potential due to maintaining
limited asset sizes as well as the costs associated with its research-personnel
intensive process. The Directors also are cognizant of the Advisor's position
that its advisory fees provide it with the incentive to continue to close Funds
investing in small and micro-cap stocks at an appropriate size.
The Directors further noted that the advisory agreements for many funds do
not have breakpoints at all, or if breakpoints exist, they may be at asset
levels significantly greater than those of the individual Fund.
84
MARCH 31, 2005 (UNAUDITED)
Having taken these factors into account, the Directors concluded that the
absence of breakpoints in the Funds' advisory fee schedules was acceptable under
each Fund's current circumstances.
APPROVAL
The Board based its decision to approve the Advisory Contracts on the
totality of circumstances and relevant factors, and with a view to past and
future long-term considerations. The Directors did not identify any single
factor discussed above as all important and controlling. The Directors concluded
that the Advisor's and Hoisington's fees are not unreasonable in light of the
services provided to the respective Fund and that the Advisory Contract with the
Advisor and the Sub - Advisory Agreement with Hoisington be approved.
SERVICE PROVIDERS
INVESTMENT ADVISOR
WASATCH ADVISORS, INC.
150 Social Hall Avenue, 4th Floor
Salt Lake City, UT 84111
SUB-ADVISOR FOR THE U.S. TREASURY FUND
HOISINGTON INVESTMENT MANAGEMENT CO.
1250 Capital of Texas Highway South
Building 3, #600
Austin, TX 78746
ADMINISTRATOR
WASATCH ADVISORS, INC.
150 Social Hall Avenue, 4th Floor
Salt Lake City, UT 84111
SUB-ADMINISTRATOR AND FUND ACCOUNTANT
STATE STREET BANK AND TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
DISTRIBUTOR
ALPS DISTRIBUTORS, INC.
1625 Broadway, Suite 2200
Denver, CO 80202
TRANSFER AGENT
UMB FUND SERVICES, INC.
803 West Michigan Street, Suite A
Milwaukee, WI 53233 - 2301
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
LEGAL COUNSEL TO WASATCH FUNDS
CHAPMAN & CUTLER, LLP
111 West Monroe Street
Chicago, IL 60603
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PRICEWATERHOUSECOOPERS LLP
1055 Broadway, 10th Floor
Kansas City, MO 64105
85
WASATCH FUNDS -- GUIDE TO UNDERSTANDING FINANCIAL STATEMENTS
Wasatch Funds provides reports to shareholders twice a year. The annual
report is for the Funds' fiscal year which ends September 30. The semi-annual
report is for the six months or period ending March 31. These reports provide
shareholders with important information that will help them evaluate the
management and performance of their investments. It is the desire of Wasatch
Funds to help shareholders stay in tune with their investments. If you have any
questions about the information in this report, a shareholder services
representative will be happy to assist you when you call 800.551.1700.
SCHEDULE OF INVESTMENTS
The holdings of each Wasatch Fund are detailed in the "Schedule of
Investments." This section provides a snapshot of the securities each Fund was
invested in on the last day of the reporting period. The Wasatch Equity Funds
invest primarily in COMMON STOCKS of companies which are grouped together by
industry. The Wasatch-Hoisington U.S. Treasury Fund invests primarily in U.S.
Treasury securities. The Equity Funds will typically have only minor holdings in
Short-Term Investments. At times the Funds may take temporary defensive
positions by increasing cash or holdings in SHORT-TERM INVESTMENTS. Please see
the prospectus under "Other Investment Strategies and Their Risks."
STATEMENTS OF ASSETS AND LIABILITIES
These financial statements show the ASSETS and LIABILITIES of a Fund on
the last day of the reporting period. A Fund's ASSETS include the value of
securities owned, amounts receivable for purchases of Fund shares (capital
shares receivable), securities sold, interest and dividends, prepaid expenses
and other assets. LIABILITIES are amounts owed for shareholder redemptions
(capital shares payable), securities purchased, investment advisory fees and
other expenses. Totaling up the assets and subtracting the liabilities results
in a Fund's NET ASSETS.
NET ASSETS consist of capital stock, paid-in capital in excess of par,
undistributed net investment income or loss, undistributed net realized gain or
loss on investments and net unrealized appreciation or depreciation on
investments. CAPITAL STOCK is stock authorized by a company's charter and having
par value, stated value or no par value. Par value is set by the company issuing
the shares and has no relation to Net Asset Value. The par value of one share of
each Wasatch Fund is $.01. PAID-IN CAPITAL IN EXCESS OF PAR is capital received
from shareholders in exchange for Fund shares that exceeds the par value of the
shares. For example, if you bought one share of a Fund for $10, $.01 would show
as "Capital stock" on the books of the Fund, and $9.99 would be accounted for
under "Paid-in capital in excess of par." UNDISTRIBUTED NET INVESTMENT INCOME OR
LOSS is the amount of net investment income or loss of a Fund since inception
that has not been paid to shareholders as a dividend. UNDISTRIBUTED NET REALIZED
GAIN (LOSS) ON INVESTMENTS is the amount of net realized gains or losses
generated by a Fund since inception that have not been distributed to
shareholders in the form of a capital gain distribution. A gain or loss is
realized when a security is sold by a Fund. NET UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS is the change in value from the purchase price of
securities a Fund continues to hold.
The number of shares a Fund is authorized to sell can be found under
CAPITAL STOCK, $.01 par value. ISSUED AND OUTSTANDING indicates the number of
shares owned by shareholders.
NET ASSET VALUE (NAV), REDEMPTION PRICE AND OFFERING PRICE PER SHARE shows
the value of one outstanding share of a Fund on the date of the report. A Fund's
share price (NAV) is calculated by dividing the value of all securities and
other assets owned by a Fund, less the liabilities charged to that Fund, by the
number of Fund shares outstanding. The share price is calculated at the close of
business of the New York Stock Exchange on each day the Exchange is open for
trading. Please see Wasatch Funds' prospectus for more information about how
share prices are calculated. Information about how the share price is affected
by a Fund's operation can be found under "Financial Highlights" on page 87.
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 AND FOREIGN CURRENCY TRANSLATIONS
is the net gain or loss on securities a Fund has sold. CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) ON INVESTMENTS AND FOREIGN CURRENCY TRANSLATIONS is
the change in value of securities a Fund continues to hold.
NET GAIN (LOSS) ON INVESTMENTS is the result of changes in market value of
securities a Fund has sold and securities it continues to hold.
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
86
MARCH 31, 2005 (UNAUDITED)
OPERATIONS. It includes investment income or loss, net realized gain or loss on
investments and foreign currency translations a Fund has sold as well as the
change in appreciation or depreciation in the value of investments a Fund
continues to hold.
DIVIDENDS are distributed by Wasatch Funds to shareholders when Fund
investments have earned income in excess of net expenses or when capital gains
in excess of capital losses are realized from the sale of securities. Most
shareholders choose to reinvest their dividends and capital gain distributions.
Each Fund is required by Internal Revenue Code regulations to distribute
substantially all of its net investment income and capital gains to shareholders
in order to retain its status as a "regulated investment company."
CAPITAL SHARE TRANSACTIONS are any transactions involving shares of a Fund,
including the selling of Fund shares, shares issued by a Fund to shareholders
for the reinvestment of dividends, and share redemptions.
FINANCIAL HIGHLIGHTS
The FINANCIAL HIGHLIGHTS contain important historical operating
information that you may find useful in making decisions or understanding the
performance of your investment.
NET ASSET VALUE (NAV) is defined under "Statements of Assets and
Liabilities" on page 86. The difference between the Net asset value, beginning
of period and the Net asset value, end of period in the Financial Highlights is
the change in value of a Fund's shares over the reporting period, but not its
total return.
INCOME (LOSS) FROM INVESTMENT OPERATIONS shows how the share price was
affected by a Fund's operations on a per share basis. NET INVESTMENT INCOME
(LOSS) is the per share amount of dividends and interest income earned on
securities held by a Fund, less the Fund's expenses. NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON SECURITIES is the per share increase or decrease in the value
of securities a Fund holds or has sold during the reporting period. Gains or
(losses) are realized when securities are sold. Gains or (losses) are unrealized
when securities increase or decrease in value but are not sold.
DISTRIBUTIONS are the per share amount that a Fund paid to shareholders
from net investment income and net realized gains.
TOTAL RETURN is the percentage increase or decrease in the value of an
investment over a stated period of time. A total return percentage includes both
changes in unrealized and realized gains and income. For the purposes of
calculating total return, it is assumed that dividends and distributions are
reinvested at the share price on the ex-dividend day of the distribution. A
FUND'S TOTAL RETURN CANNOT BE COMPUTED DIRECTLY FROM THE FINANCIAL HIGHLIGHTS.
SUPPLEMENTAL DATA AND RATIOS are provided to help you better understand
your investment. NET ASSETS, END OF PERIOD, are the net assets of a Fund on the
reporting date. RATIO TO AVERAGE NET ASSETS OF: EXPENSES shows the total of a
Fund's operating expenses divided by its average net assets for the stated
period before and after waivers and reimbursements by the Advisor, if any. RATIO
TO AVERAGE NET ASSETS OF: NET INVESTMENT INCOME shows a Fund's net investment
income (loss) divided by its average net assets for the stated period before and
after waivers and reimbursements by the Advisor, if any. PORTFOLIO TURNOVER RATE
measures a Fund's buying and selling activity during the reporting period. It is
computed by dividing total purchases or sales, whichever is less, by the average
monthly market value of a Fund's portfolio securities. This calculation does not
include securities with a maturity date of less than 12 months.
CONTACT WASATCH
TELEPHONE
800.551.1700
M - F, 7:00 a.m. to 7:00 p.m. CT
Automated Line, 24 Hours
U.S. MAIL
WASATCH FUNDS
P.O. Box 2172
Milwaukee, WI 53201 - 2172
OVERNIGHT MAIL
WASATCH FUNDS
803 West Michigan Street, Suite A
Milwaukee, WI 53233-2301
ONLINE
WWW. WASATCHFUNDS. COM
shareholderservice@wasatchfunds.com
87
[WASATCH FUNDS LOGO]
www.wasatchfunds.com
800.551.1700
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.
Schedule of Investments is included as a part of the report to shareholders
filed under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board of Directors has not adopted procedures by which shareholders may
recommend nominees to the Board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive and principal financial officers
have concluded that the Registrant's disclosure controls and procedures
(as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c)) are effective, as of a
date within 90 days of the filing date of this Form N-CSR based on their
evaluation of these controls and procedures required by Rule 30a-3(b)
under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b)
under the Securities Exchange Act of 1934 (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the Registrant's second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) 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 27, 2005
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 27, 2005
By: /s/ Venice F. Edwards
-----------------------
Venice F. Edwards
Vice President/Treasurer (principal financial and accounting officer)
of Wasatch Funds, Inc.
Date: May 27, 2005