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: September 30, 2005
ITEM 1: REPORT TO SHAREHOLDERS.
(WASATCH FUNDS(TM) LOGO)
ANNUAL REPORT
SEPTEMBER 30, 2005
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
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 ...................................... 58
STATEMENTS OF OPERATIONS .................................................. 60
STATEMENTS OF CHANGES IN NET ASSETS ....................................... 62
FINANCIAL HIGHLIGHTS ...................................................... 67
NOTES TO FINANCIAL STATEMENTS ............................................. 73
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ................... 83
DIRECTORS AND OFFICERS .................................................... 84
SUPPLEMENTAL INFORMATION .................................................. 85
Proxy Voting Policies, Procedures and Record ........................... 85
Quarterly Portfolio Holdings Disclosure on Form N-Q .................... 85
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., PHD, CFA )
PRESIDENT OF WASATCH FUNDS
FELLOW SHAREHOLDERS:
I think the overall economy is in a good place.
Six months ago, I said that despite the quagmire in Iraq, the Federal
Reserve's relentless run of raising short-term rates, rising energy prices, fear
of runaway inflation and the hand-wringing about our "jobless" recovery, I still
felt pretty good about the economy.
Today, despite ongoing problems in Iraq, the Fed's propensity to continue
raising rates and the paranoia about inflation that always accompanies economic
concern, I still feel optimistic.
One of my preferred personal barometers of economic health is not terribly
scientific, but, nonetheless, usually pretty reliable: the number of "Help
Wanted" signs I see.
Whether I'm in Salt Lake or midtown Manhattan, I have the distinct feeling
that I've seen a steady increase in this sort of signage in the past year. On
the surface it's not unlike what we saw at the stock market's peak in 2000, only
today I suspect there is more substance than sizzle behind those employment
signs.
On top of that, notwithstanding the fact that the price of oil has
continued to climb, inflation seems to be trending down and long-term interest
rates have been largely unaffected. One commonly accepted economic theory is
that what really drives interest rates is the anticipation of inflation down the
road. Some intelligent people I know believe it's mainly inflation anxiety that
pushes long-term rates up.
But that's just not happening. We've had two additional bumps by the Fed
and those long-term rates refuse to budge. To me that suggests that a fair
number of pretty smart people have confidence in the prospects for the economy.
Could I be wrong? I've certainly been wrong before. Is there some economic
force out there getting ready to ruin my optimistic scenario?
If I had to guess what that negative factor might be, I suppose I'd lean on
the notion that the economy has a built-in lag. In the current scheme, that
would mean that the Fed's rate hikes will eventually push those long-term
interest rates up, which, eventually, will negatively influence investment
decisions and job creation. You could probably make the same "lag" argument as
it applies to the price of oil.
But, personally, I don't think it's true.
The one thing that does get my attention is all the talk about a housing
bubble, and even then I have my doubts. I would be more inclined to say that
there is a "lending bubble" sitting atop the housing market, that sooner or
later housing prices will recede because of all the low quality mortgage money
that has been shelled out.
If that lending bubble bursts, I think it's a virtual certainty that
housing prices will settle down. Then the question to ask is: if that happens,
could a housing slowdown precipitate credit problems which would create some
sort of self-reinforcing cycle?
I think history suggests this is not likely to happen. So I'm betting that
even if housing prices cool, the impact on the overall economy would not be
cataclysmic.
I should mention, too, that while the natural disasters that struck the
Gulf Coast wreaked havoc on a great many individuals, I believe their overall
economic impact will be a blip on the radar screen. That is not meant to
diminish the tragedy we all watched unfold on the news. It's just that in the
long run those hurricanes will not have an enduring impact on the economy.
So, yes, I'll take the current economic climate over lots of other economic
periods in the past.
WASATCH FUNDS
As for our performance over the past fiscal year, I think the numbers tell
the story: We are still roughly in the middle of the pack.
Most of you who've been with us for a while know that our best periods of
outperformance versus our benchmarks generally occur during bear markets, that
we may underperform in bull markets, and hang around the middle when the market
is in the middle of the road. And I would say this market has been middling
along for at least the past 18 months.
I don't want that to sound like I'm making excuses or satisfied with being
in the middle of the pack. But this is a tough market for a shop like ours to
find value in; stocks that are obviously good are expensive, and those that are
comparatively cheap are of low quality.
2
SEPTEMBER 30, 2005
That said, I believe we can do a lot better. After three decades in this
business, we are still capable of making occasional mistakes that, in hindsight,
have us shaking our heads. During the year, we've increased our analytical
capacity considerably at Wasatch, and, to my way of thinking, that kind of added
brainpower should cut down on our unforced errors. (An unforced error is a
tennis reference and can result from several outcomes, but it's always a lost
point that has little to do with the opponent. In tennis, unforced errors are a
ticket to failure.)
Everyday we try to get better at what we do on your behalf. Our only
advantage in this business is performance. If we don't deliver consistent
performance over the long run, I'd recommend you take your money elsewhere.
Really.
Now that I've gotten your attention, I want to say something that, in my
opinion, cannot be said too often: your expectations for investment returns are
still too high. The double-digit delivery of the '90s is--literally and
figuratively--a thing of the past.
Too many people I meet are still stuck in the 1990's mentality. They think
the market is going to produce 20% and 30% returns. I think they are dreaming,
and I tell them so.
I believe we are looking at a future featuring single-digit investment
returns. I think somebody doing really well in the years ahead might be able to
slip into the low double-digits occasionally. I tell you this because I believe
we are obliged to tell the truth to our shareholders about what lies ahead. It's
incumbent upon us to manage your expectations.
I've said it before and I intend to say it again and again: investing is a
long-term game. The likelihood is that you will make money over time by getting
a good single-digit return and enjoying the miracle of compounding. If you
average 8% a year, your money will double in nine years. Personally, I'll take
that anytime.
At the end of the day, we all have to be realistic about investment
returns. Patience pays in the investment world.
For our part, we need to do better during times like this. We need to be
disciplined and thorough in our stock-picking. We need to avoid mistakes.
So, you do your part, and, I promise that we'll work as hard as humanly
possible to do ours.
We appreciate your investment with Wasatch Funds.
Sincerely,
/s/ Samuel S. Stewart, Jr.
- -------------------------------------
Samuel S. Stewart, Jr.
President of Wasatch Funds
WASATCH-HOISINGTON U.S. TREASURY FUND
For information about the performance and outlook of the Fund, please see
the management discussion and portfolio summary on pages 24 and 25. The views
expressed in the management discussion are those of Hoisington Investment
Management Company, sub-advisor to the Fund, and may differ from the views of
Wasatch Advisors, investment advisor to Wasatch Funds.
INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONONIC TRENDS OR
THE FACTORS INFLUENCING THE FUNDS' HISTORICAL OR FUTURE PERFORMANCE REFLECTS THE
OPINIONS OF FUND MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS
SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT THE MARKET FORECASTS
DISCUSSED WILL BE REALIZED.
3
CORE GROWTH FUND -- MANAGEMENT DISCUSSION SEPTEMBER 30, 2005
(PHOTO OF JB TAYLOR)
PORTFOLIO MANAGER
(PHOTO OF PAUL LAMBERT)
PORTFOLIO MANAGER
REVIEW OF THE YEAR
The Wasatch Core Growth Fund returned 18.55% in the 12 months ended
September 30, 2005. The Fund's return was higher than the 17.95% return posted
by the Russell 2000 Index over the same period. As was the case with the Index,
every sector in which we were invested generated positive returns.
Our investments in health care companies made the largest contribution to
our outperformance relative to the Index. PacifiCare Health Systems, a managed
care provider, was a top contributor. In July, the company announced a merger
with United HealthCare that significantly boosted its valuation. Express
Scripts, a pharmacy benefit management company that reported positive earnings
growth and issued a favorable earnings outlook, also helped drive results. On
the other hand, AMERIGROUP, a health care provider, detracted from our return.
After posting solid earnings last year, the company recently lowered earnings
guidance causing its stock price to decline sharply. Currently, we view this as
a short-term issue for the company, and will continue to evaluate our position.
The Fund's consumer discretionary stocks, aided by our overweighting in the
sector, helped us outperform the Index sector benchmark. Our focus in this
sector has always been to invest in companies that we believe can grow through
an economic cycle. O'Reilly Automotive, a provider of after-market automobile
parts, was the top contributor in this sector and to the Fund's overall results.
Copart, a company that is in the salvaged vehicle auction business, and SCP
Pool, a wholesale distributor of swimming pool supplies and equipment, also
contributed to our outperformance in this sector. These results were partially
offset by Rent-A-Center and Dollar Tree Stores. Sales at both stores suffered as
the spike in consumer gas prices took its toll on their predominantly
lower-income customers.
Our focus on homebuilders produced positive results within the producer
durables sector. In particular, the performance of M.D.C. Holdings and NVR
helped us outperform the sector benchmark during the year. However, as market
fears grew over a potential slowdown in new home sales and rising mortgage
rates, investors decided to lock in their profits, which caused the stocks to
give back some of their earlier gains. Likewise, halfway into the calendar year
we reduced our weighting in some of our homebuilders. While this turned out to
be a prudent decision, we have not changed our long-term investment thesis about
homebuilders: we believe their competitive advantages will allow them to capture
a growing percentage of the market with good long-term earnings visibility
accompanied by solid balance sheets.
The Fund's largest sector weighting during the year was in financial
services stocks, which produced decent--if relatively lackluster--returns. While
our overweighting clearly amplified our underperformance of the benchmark in
this sector, our relatively poor showing was almost entirely attributable to our
investment in Doral Financial, a financial services company located in Puerto
Rico. A flattening yield curve put unforeseen pressure on the company's business
model and brought to light questions on earnings quality. We exited our position
in the company. Offsetting Doral's results were positive returns from Fidelity
National Financial, a provider of title insurance and real estate related
services, and UTI Bank, one of our investments based in India.
A substantial portion of the return generated by the Index was attributable
to the energy and materials and processing sectors. The Fund had almost no
exposure to these top-performing sectors, which created a headwind for us. As we
have discussed in previous reports, we typically do not own energy or materials
and processing companies because we believe their business models are generally
too dependent on volatile commodity pricing. To be sure, the absence of
investments in these areas has been a contrary force at times for the Fund. That
said, we continue to apply our research process to these sectors, and we have
identified a couple of interesting companies that we may consider adding to the
Fund if the right valuation opportunities emerge.
OUTLOOK
Today, the valuations of our portfolio companies are more attractive. The
market's downturn late in the year may offer opportunities to add to our
existing holdings and certain watch-list names that excite us. Average
year-over-year earnings growth for the Fund was tepid in the most recent
quarter, but was still better than we expected. While there are no guarantees,
we think there's a good chance it could move higher over the next 12 months. We
think this environment is especially conducive to Wasatch's fundamentally
driven, company-by-company stock selection process.
Thank you for investing in the Core Growth Fund.
4
CORE GROWTH FUND -- PORTFOLIO SUMMARY SEPTEMBER 30, 2005
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
WASATCH CORE GROWTH FUND 18.55% 13.65% 15.69%
Russell 2000 Index 17.95% 6.45% 9.37%
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
- ------ ------- ---------
CPRT COPART, INC. 3.44%
Vehicle salvage services.
ORLY O'REILLY AUTOMOTIVE, INC. 3.40%
Automotive parts
retailer/distributor.
ACF AMERICREDIT CORP. 3.37%
Subprime automobile lender.
FNF FIDELITY NATIONAL FINANCIAL, INC. 3.28%
Title insurance.
CBH COMMERCE BANCORP, INC. 3.22%
Commercial banking, corporate
trust and insurance brokerage
services.
MDC M.D.C. HOLDINGS, INC. 3.17%
Homebuilder.
FAF FIRST AMERICAN CORP. 3.13%
Title insurance and real estate
services.
PPDI PHARMACEUTICAL PRODUCT
DEVELOPMENT, INC. 2.14%
Drug development and discovery.
ESRX EXPRESS SCRIPTS, INC. 2.11%
Pharmacy benefits manager.
NVR NVR, INC. 2.10%
Homebuilder.
* As of September 30, 2005, the Fund had 29.36% invested in the Top 10 equity
holdings and there were 74 long-term holdings in the Fund. Portfolio
holdings are subject to change at any time. References to specific
securities should not be construed as recommendations by the Funds or their
Advisor.
SECTOR BREAKDOWN**
(PIE CHART)
FINANCIAL SERVICES 32.0%
CONSUMER DISCRETIONARY 24.0%
HEALTH CARE 12.3%
TECHNOLOGY 12.0%
PRODUCER DURABLES 9.4%
FINANCIALS 6.0%
CONSUMER STAPLES 1.9%
AUTOS & TRANSPORTATION 1.8%
MATERIALS & PROCESSING 0.6%
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
(PERFORMANCE GRAPH)
WASATCH CORE
DATE GROWTH FUND RUSSELL 2000 INDEX
---- ----------- ------------------
9/30/1995 10000 10000
9/30/1996 11239 11313
9/30/1997 15462 15068
9/30/1998 12758 12203
9/30/1999 16239 14530
9/30/2000 22653 17928
9/30/2001 27779 14126
9/30/2002 23964 12812
9/30/2003 31557 17489
9/30/2004 36226 20772
9/30/2005 42947 24500
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 SEPTEMBER 30, 2005
(PHOTO OF AJAY KRISHNAN, CFA)
PORTFOLIO MANAGER
REVIEW OF THE YEAR
The Wasatch Global Science & Technology Fund gained 27.88% in the year
ended September 30 and outperformed its benchmarks. Over the same period, the
Lipper Science & Technology Index (the "Lipper Index") gained 17.81%, the
Russell 2000 Technology Index gained 10.34% and the Nasdaq Composite Index
gained 14.19%.
During the year, we had more assets invested overseas than the Lipper
Index. The Fund's average weighting in U.S. companies was about 58%, while the
Lipper Index averaged over 89%. Outside of the U.S., the major source of the
Fund's outperformance of the Index was India. We trimmed some of our strong
performing positions in India to capture profits from these stocks. Many of our
non-U.S. investments were in smaller companies that we believe have outstanding
growth potential given their pipelines for new products, ability to penetrate
new markets and financial characteristics that support strong growth such as
significant free cash flow, high return on assets and high return in equity.
By economic sector, the principal drivers of our outperformance versus the
Lipper Index were electronic technology, health services and health technology.
While a few areas of the Fund were weak relative to the Lipper Index, none of
them detracted from the Fund's return.
Technology services made a substantial contribution to the Fund's
performance. Our holdings performed better than those in the Lipper Index but
our dramatic underweighting meant that technology services contributed less to
the Fund's performance than it did to the Index's.
Fund assets invested in electronic technology over the past 12 months
averaged about 45%. Despite this substantial weighting, we were underweighted
compared to the Lipper Index, which averaged about 51%. Within the sector, the
Fund's investments were concentrated in semiconductor companies. In the past six
months, business conditions improved and inventory concerns receded allowing
semiconductor stock prices to rise. The top contributor to the Fund's
performance overall was SiRF Technology Holdings, a developer of semiconductor
solutions used in global positioning system (GPS) applications. SiRF has
benefited from growing demand for GPS in wireless handheld and portable
computing devices and in automobiles. Other top contributors in the
semiconductor space included O2Micro, a developer of semiconductors to increase
power efficiency in electronic devices, and National Semiconductor, a maker of
analog semiconductors. O2Micro benefited by producing strong business results
and from a favorable ruling in an intellectual property dispute. National
Semiconductor posted solid earnings growth. In addition, the company's efforts
to restructure and focus on higher value analog products have been regarded
positively by investors.
The Fund's main detractors in electronic technology were inTest and Sipex.
The weak outlook for semiconductor capital equipment companies was primarily
responsible for the decline of inTest's stock price. We sold Sipex as the
company struggled with management issues and product missteps.
We have decreased the Fund's weighting in health care services since last
year at this time and focused more on investing in health technology. Accredo
Health was the best contributor in health care services as Medco Health
Solutions completed its acquisition of the company.
In health technology, the Fund's performance was helped by investments in
medical specialties, while our biotechnology holdings detracted from
performance. NuVasive, a developer of devices for spine surgery, has introduced
new products and produced strong earnings growth making it the Fund's top
contributor in health technology. Enpath Medical, a developer of advanced
vascular delivery products, produced disappointing results due to an inventory
adjustment by a major customer and delays with U.S. Food and Drug Administration
approval of a new product.
Within technology services, the Fund was more heavily weighted in
information technology services than the Lipper Index and our holdings performed
better than those in the Index. We garnered good results from India-based
information technology services providers Cognizant Technology and Infosys
Technologies. The Fund was significantly underweighted in packaged software and
Internet software/services compared to the Index. Ninetowns Digital World Trade
Holdings, a developer of software to enable companies and Chinese government
agencies to streamline the import/export process, and Kintera, a developer of
software to help non-profit organizations increase donations, produced
disappointing results. We added Opera Software, a Norwegian developer of
multi-platform web browsers that has benefited from growing demand for products
that enable wireless web connection.
Our investment in Nextel Partners was responsible for the Fund's
outperformance in communications. The stock price rose on news that the company
had entered into discussions to exercise its right to sell to Sprint Nextel.
OUTLOOK
Looking ahead, investor concerns that may weigh on stock prices include
inflation, the U.S. budget deficit, the scope of economic impact from natural
disasters, record high energy costs, and how these issues might affect consumer
sentiment. Our focus is to remain disciplined in our approach by thoroughly
researching the growth potential and valuation of prospective investments and
continually monitoring our existing investments.
We continue to look for opportunities around the globe. Science and
technology companies outside of the U.S. are not as richly valued as comparable
U.S. companies. We have found this to be especially true in Asia where we see
interesting opportunities in countries like Singapore, South Korea and Taiwan.
We believe that global investing in science and technology companies has the
potential to help you achieve your long-term investment objectives.
Thank you for investing in the Wasatch Global Science & Technology Fund.
6
GLOBAL SCIENCE & TECHNOLOGY FUND -- PORTFOLIO SUMMARY SEPTEMBER 30, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 12/19/00
------ ------- ---------------
WASATCH GLOBAL SCIENCE & TECHNOLOGY FUND 27.88% N/A 6.05%
Lipper Science & Technology Index 17.81% N/A -11.24%
Russell 2000 Technology Index 10.34% N/A -10.42%
Nasdaq Composite Index 14.19% N/A -3.61%
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 O2MICRO INTERNATIONAL LTD. 4.36%
(Cayman Islands) Semiconductors.
INFO IN INFOSYS TECHNOLOGIES LTD. 2.92%
(India) Business and information
technology consulting.
SLAB SILICON LABORATORIES, INC. 2.91%
Analog and mixed signal integrated
circuits.
CTSH COGNIZANT TECHNOLOGY SOLUTIONS
CORP., CLASS A 2.80%
Professional technology services.
KCI KINETIC CONCEPTS, INC. 1.92%
Devices for wound treatment.
NSM NATIONAL SEMICONDUCTOR CORP. 1.90%
Semiconductors.
SRX SRA INTERNATIONAL, INC., CLASS A 1.88%
Information technology services
for government agencies.
QLGC QLOGIC CORP. 1.87%
Semiconductors.
PLXT PLX TECHNOLOGY, INC. 1.77%
Semiconductors.
MCRL MICREL, INC. 1.62%
Semiconductors.
* As of September 30, 2005, the Fund had 23.95% invested in the Top 10 equity
holdings and there were 122 long-term holdings in the Fund. Portfolio
holdings are subject to change at any time. References to specific
securities should not be construed as recommendations by the Funds or their
Advisor.
SECTOR BREAKDOWN**
(PIE CHART)
TECHNOLOGY 45.1%
HEALTH CARE 20.2%
INFORMATION TECHNOLOGY 12.0%
INDUSTRIALS 6.5%
PRODUCER DURABLES 4.6%
FINANCIALS 3.5%
CONSUMER DISCRETIONARY 3.2%
OTHER 2.2%
TELECOMMUNICATION SERVICES 1.4%
MATERIALS & PROCESSING 1.3%
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
(PERFORMANCE GRAPH)
WASATCH GLOBAL
& SCIENCE LIPPER SCIENCE & NASDAQ COMPOSITE RUSSELL 2000
DATE TECHNOLOGY FUND TECHNOLOGY INDEX INDEX TECHNOLOGY INDEX
---- --------------- ------------------ ---------------- ----------------
12/19/2000+ 10,000 10,000 10,000 10,000
9/30/2001 8,020 4,537 5,725 5,098
9/30/2002 6,510 3,040 4,494 3,092
9/30/2003 10,959 4,752 6,882 5,891
9/30/2004 10,357 4,798 7,343 5,352
9/30/2005 13,245 5,652 8,385 5,906
+ 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 SEPTEMBER 30, 2005
(PHOTO OF CHRIS BOWEN)
PORTFOLIO MANAGER
(PHOTO OF RYAN SNOW)
PORTFOLIO MANAGER
REVIEW OF THE YEAR
The Wasatch Heritage Growth Fund had a return of 15.95% in the year ended
September 30, 2005. The Fund's return was below that of the Russell Midcap
Growth Index (the "Index"), which added 23.47%, and the Russell Midcap Index,
which gained 25.10%, but was better than the Russell 1000 Growth Index, which
gained 11.60%. In subsequent reports, we plan to drop the Russell Midcap Index
as a benchmark for the Fund.
A significant driver of the Fund's underperformance relative to the Index
was derived from sector allocation. In particular, limited exposure to two of
the best-performing sectors--energy and materials and processing--as well as
weak performance from our financial services sector.
The fundamentals of companies held by the Fund were very solid. The average
annual captured earnings growth reported by the Fund's holdings continued to be
in the high-teens. The Fund's portfolio continued to be reasonably valued with a
price-to-earnings ratio roughly in line with the growth rate. From the
perspective of future investment results, we are optimistic that if our
companies can continue to grow earnings and their valuations remain reasonable,
long-term performance should be positive.
In the energy sector, our holdings were up more than those in the Index but
our significant underweighting in the sector held back performance relative to
the Index. The Fund was also significantly underweighted in the materials and
processing sector. However, our holdings in this sector detracted from the
Fund's performance while those in the Index added to its performance. The
underperformance of these two sectors created a headwind that was a major
contributor to the Fund's underperformance of the Index. We have traditionally
avoided companies in these sectors because their business models are generally
dependent on volatile commodity prices and it can be difficult to find companies
capable of consistent, predictable growth. Even the best run companies in these
sectors can fall prey to a prolonged drop in the prices of their products--a
factor over which they have little control. We prefer to invest in companies
that can shape their destinies and do not rely so heavily on outside forces.
That said, we believe the current energy cycle may possess some attractive
underlying long-term growth characteristics. The current global economic
expansion is sustaining the growing worldwide demand for raw materials and may
be turning the energy sector into more of a fundamental growth driver. After
spending considerable time applying our disciplined stock research process to
the energy area, we have begun to invest in what we believe are attractive
long-term opportunities.
The Fund's financial services holdings detracted the most from the Fund's
performance relative to the Index. Rising short-term interest rates and a
flattening yield curve caused some of our companies to lower earnings estimates,
which in turn depressed their stock prices. A large drop in Doral Financial, a
diversified financial services company, was by far the biggest detractor from
the Fund's overall return. We believe the company's drop in valuation was partly
attributable to interest rate fears and partly to concerns over earnings quality
stemming from a change in the company's accounting procedures. We have
significantly reduced our weight in the stock and continue to monitor our
position closely.
On a more positive note, our holdings in the health care sector were up
during the year and ahead of the companies tracked by the Index. The Fund and
the Index had a nearly identical weight in this sector, so stock selection had
the largest effect on our outperformance. Our top contributors were WellPoint
and PacifiCare Health Systems, managed care providers. Both companies were
involved in mergers that boosted the value of their stocks. Partially offsetting
our positive results was our investment in AMERIGROUP, a managed care provider
that late in the year pre-announced a weak quarter and lowered earnings
guidance, cutting its stock value in half.
We were overweighted in homebuilding companies within the producer durables
sector, and our holdings performed better than those in the benchmark. NVR and
D.R. Horton were the Fund's top contributors in this sector. The stock prices of
some of our homebuilders declined in the last couple months of the Fund's fiscal
year, despite reporting strong earnings growth. Although there may be some risk
of cooling demand in housing that may affect public homebuilding companies in
the short run, we have not changed our investment thesis: we believe they can
succeed by growing market share, maintaining terrific long-term earnings
visibility, and leveraging their balance sheets. The solid performance of these
companies illustrates the importance that Wasatch places on looking through
market pessimism to invest in companies that may provide sustainable competitive
advantages over the long run.
OUTLOOK
The earnings growth of companies held by the Fund has been strong. In
addition, these companies seem to be valued in a range where they may be able to
generate good upside potential. We continue to work on concentrating the Fund's
assets in what we believe are high quality companies--both domestic and
international--that have solid growth prospects and are attractively valued. By
remaining focused on this strategy, we believe the Fund will have the potential
to help you achieve your long-term investment objectives.
We appreciate the opportunity to manage your assets.
8
HERITAGE GROWTH FUND -- PORTFOLIO SUMMARY SEPTEMBER 30, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 6/18/04
------ ------- ---------------
WASATCH HERITAGE GROWTH FUND 15.95% N/A 10.96%
Russell Midcap Growth Index 23.47% N/A 15.62%
Russell 1000 Growth Index 11.60% N/A 4.91%
Russell Midcap Index 25.10% N/A 20.34%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. WASATCH FUNDS WILL DEDUCT A FEE OF 2% FROM
REDEMPTION PROCEEDS ON FUND SHARES HELD TWO MONTHS OR LESS. PERFORMANCE DATA
DOES NOT REFLECT THE DEDUCTION OF THIS FEE WHICH, IF CHARGED, WOULD REDUCE THE
PERFORMANCE QUOTED. THE TABLE ABOVE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT
YOU WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
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 mid cap funds can be more volatile and loss of principal could be
greater than investing in large cap funds. Equity investing involves risks,
including potential loss of the principal amount invested. Being
non-diversified, the Fund can invest a larger portion of its assets in the
stocks of a limited number of companies than a diversified fund.
Non-diversification increases the risk of loss to the Fund if the values of
these securities decline.
TOP 10 EQUITY HOLDINGS*
TICKER COMPANY % OF FUND
- ------ ------- ---------
APOL APOLLO GROUP, INC., CLASS A 4.32%
Higher education for working
adults.
TEVA TEVA PHARMACEUTICAL INDUSTRIES
Ltd. ADR 3.70%
Pharmaceuticals.
CBH COMMERCE BANCORP, INC. 3.02%
Commercial banking, corporate
trust and insurance brokerage
services.
BBBY BED BATH & BEYOND, INC. 2.77%
Household goods retailer.
HDI HARLEY-DAVIDSON, INC. 2.54%
Motorcycles.
ACS AFFILIATED COMPUTER SERVICES, 2.42%
Inc., Class A
Outsource provider of
business and information
technology services.
WLP WELLPOINT, INC. 2.22%
Health maintenance organization.
CMX CAREMARK RX, INC. 2.20%
Pharmacy benefits manager.
QLGC QLOGIC CORP. 2.19%
Semiconductors.
NFB NORTH FORK BANCORPORATION, INC. 2.17%
Regional bank.
* As of September 30, 2005, the Fund had 27.55% invested in the Top 10 equity
holdings and there were 86 long-term holdings in the Fund. Portfolio
holdings are subject to change at any time. References to specific
securities should not be construed as recommendations by the Funds or their
Advisor.
SECTOR BREAKDOWN**
(PIE CHART)
CONSUMER DISCRETIONARY 23.5%
HEALTH CARE 21.2%
FINANCIAL SERVICES 19.3%
TECHNOLOGY 15.3%
PRODUCER DURABLES 10.0%
AUTOS & TRANSPORTATION 3.8%
ENERGY 3.7%
INFORMATION TECHNOLOGY 2.1%
FINANCIALS 1.1%
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
(PERFORMANCE GRAPH)
WASATCH HERITAGE RUSSELL MIDCAP RUSSELL MIDCAP RUSSELL 1000
DATE GROWTH FUND INDEX GROWTH INDEX GROWTH INDEX
---- ---------------- -------------- -------------- ------------
6/18/2004+ 10,000 10,000 10,000 10,000
6/30/2004 10,030 10,232 10,206 10,057
9/30/2004 9,860 10,146 9,764 9,532
12/31/2004 11,143 11,532 11,125 10,406
3/31/2005 10,783 11,502 10,939 9,981
6/30/2005 11,193 11,983 11,314 10,226
9/30/2005 11,433 12,693 12,055 10,637
+ 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. YOU CANNOT INVEST DIRECTLY IN THESE
INDEXES.
9
INTERNATIONAL GROWTH FUND -- MANAGEMENT DISCUSSION SEPTEMBER 30, 2005
(PHOTO OF MIKE GERDING, CFA)
PORTFOLIO MANAGER
REVIEW OF THE YEAR
The Wasatch International Growth Fund gained 26.02% in the 12 months ended
September 30, 2005. Most countries around the world posted strong performance
during the year as evidenced by the 36.58% gain of the MSCI World Ex-U.S.A.
Small Cap Index.
As of September 30, we owned 83 companies in 22 countries. The weighted
average market capitalization of the Fund's portfolio was approximately $1.5
billion, while the median market cap was about $804 million. Estimated earnings
growth for the next three years in the portfolio is about 19%, and we have been
paying on average about 18 times forward earnings for that growth.
The Fund benefited from notable outperformance of the Index in several
countries including France, Germany and Switzerland, where we were overweighted
compared to the Index. Our underweighting in Japan, Australia, Italy and the
United Kingdom contributed to our underperformance of the Index, as did our
overweighting and the weak performance of some holdings in Singapore and Canada.
We continue to see improving economic growth in Japan. We have been adding
to our weight in Japan as we have found companies that fit our criteria for
revenue and earnings growth that are selling at reasonable price-to-earnings
multiples. Japan was our largest country weight at nearly 20%.
Exposure to emerging markets benefited the Fund, as a number of the markets
were extremely strong, and traded at high price-to-earnings multiples relative
to where they have been historically. While we retain our positive long run view
of many of the world's developing markets, we took profits and trimmed some of
our emerging market positions. India contributed the most to the Fund's return
and was our largest emerging market weight at nearly 5%.
The Fund's largest sector weights continue to be those that we believe have
the strongest growth potential. As of September 30, these were consumer
discretionary, health care, and information technology. These sectors
contributed more to the Fund's performance than to the Index's. We were
underweighted in industrials and financials and did not own any companies in the
materials sector. Our lack of holdings in these areas hurt the Fund's relative
performance. Materials was an extremely strong area of the market, driven mostly
by the seemingly insatiable demand from China and India for all kinds of raw
materials.
The top contributors to the Fund's performance over the past 12 months
represented a variety of countries and industries. The Fund's best performer and
top contributor was Pantaloon, one of India's few organized retailers. The
company is successfully expanding before other international players are allowed
to enter the country. The performance of Orpea, a nursing home operator, was
driven by continued strong demand for nursing home beds in France. Two United
Kingdom-based oil and gas companies, Soco International and Cairn Energy,
benefited from recent discovery and development success. Both companies excel at
finding and developing new oil and gas fields in "frontier" areas such as
Vietnam, Mongolia and India. Continued job growth in Japan drove the performance
of en-Japan, an Internet employment agency. We also received good results from
Elekta, a Swedish manufacturer of radiology equipment, and Bijou Brigitte, a
costume jewelry retailer based in Germany. Home Capital, a Canadian alternative
mortgage lender, did well for the Fund as did HDFC Bank, a provider of consumer
loans and financial services that is now in over 280 cities throughout India.
Despite broad-based solid performance from among the Fund's holdings, there
were some notable detractors. We were disappointed in the performance of
Acadomia Groupe, a provider of educational services in France, and SkyePharma, a
United Kingdom specialty pharmaceutical and drug delivery company that suffered
disappointment associated with the development of a new drug as well as slower
than expected royalties on existing products. Angiotech Pharmaceuticals, a
Canadian company that developed the drug coating for Boston Scientific's highly
successful Taxus drug-coated stent has transitioned from concept to
profitability but the stock underperformed in recent months. Companies that
detracted from performance, no longer met our investment criteria and were sold
included Clarion, MFS Technology, Ninetowns Digital World Trade Holdings,
Sanctuary Group, Accord Customer Care Solutions and Doral Financial. Doral,
mentioned in our last report, was the Fund's biggest detractor for the 12-month
period.
OUTLOOK
The high price of oil is one of the major factors impacting economies
around the world. This might result in slowing down consumers during the winter
as they cope with high heating bills and gasoline prices. In Europe, where
consumers are already struggling with the sluggish economy and slow job growth,
this could have particularly negative impact.
Although Hurricane Katrina may cause foreign companies temporary
difficulties in the New Orleans port, a major hub for importers and exporters,
they are most vulnerable to Katrina's aftermath in their general exposure to the
U.S. economy. The U.S. continues to be the primary engine of world economic
growth, and to the extent the U.S. economy slows down, economies overseas will
be impacted. We are paying a great deal of attention to the exposure our
companies have to the U.S. economy.
Higher interest rates in the U.S. and many other parts of the world will
also likely slow the global economy through the end of 2005 and into 2006.
Conversely, higher interest rates in Japan will likely be viewed positively as a
sign of economic growth and the end of deflation.
We continue to focus on investing in what we believe are the best small
companies from around the world. We believe our disciplined process and
international scope will help us identify companies with the potential to help
you achieve your long-term investment objectives.
Thank you for investing in the Wasatch International Growth Fund.
10
INTERNATIONAL GROWTH FUND -- PORTFOLIO SUMMARY SEPTEMBER 30, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 6/28/02
------ ------- ---------------
WASATCH INTERNATIONAL GROWTH FUND 26.02% N/A 20.84%
MSCI World Ex-U.S.A. Small Cap Index 36.58% N/A 25.18%
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
- ------ ------- ---------
CNE LN CAIRN ENERGY PLC 2.59%
(United Kingdom) Oil and gas developer.
SIA LN SOCO INTERNATIONAL PLC 2.51%
(United Kingdom) Oil and gas developer.
ORP FP ORPEA (France) 2.51%
Nursing homes.
AWD GR AWD HOLDING AG 2.48%
(Germany) Financial services.
4666 JP PARK24 CO. LTD. (Japan) 2.21%
Parking lot operator.
HXM DESARROLLADORA HOMEX S.A.
de C.V.ADR 2.08%
(Mexico) Homebuilder.
STMN SW STRAUMANN HOLDING AG 2.07%
(Switzerland) Dental implants.
CPW LN CARPHONE WAREHOUSE GROUP 1.97%
PLC (United Kingdom)
Cell phones and telecom services
retailer.
EKTAB SS ELEKTA AB, CLASS B 1.97%
(Sweden) Radiology equipment.
4849 JP EN-JAPAN, INC. 1.87%
(Japan) Internet employment agency.
* As of September 30, 2005, the Fund had 22.26% invested in the Top 10 equity
holdings and there were 86 long-term holdings in the Fund. Portfolio
holdings are subject to change at any time. References to specific
securities should not be construed as recommendations by the Funds or their
Advisor.
SECTOR BREAKDOWN**
(PIE CHART)
CONSUMER DISCRETIONARY 23.8%
HEALTH CARE 22.5%
INFORMATION TECHNOLOGY 14.5%
INDUSTRIALS 11.9%
FINANCIALS 10.2%
CONSUMER STAPLES 7.0%
ENERGY 5.5%
TELECOMMUNICATION SERVICES 2.9%
UTILITIES 1.0%
TECHNOLOGY 0.7%
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
(PERFORMANCE GRAPH)
WASATCH INTERNATIONAL MSCI WORLD EX-U.S.A.
DATE GROWTH FUND SMALL CAP INDEX
---- -------------------- --------------------
6/28/2002+ 10,000 10,000
9/30/2002 8,850 8,505
9/30/2003 12,060 12,037
9/30/2004 14,710 15,236
9/30/2005 18,538 20,810
+ 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 SEPTEMBER 30, 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 September 30, 2005, the Wasatch
International Opportunities Fund gained 9.50%. Over same period the MSCI World
Ex-U.S.A. Small Cap Index gained 15.23%. Much of the Fund's shortfall in
performance relative to the Index can be attributed to not being fully invested
throughout the period and holding foreign currencies when the U.S. dollar was
strengthening. As of September 30, the Fund was over 90% invested and we
continue to make good progress toward being fully invested.
Our investments were broadly diversified among countries and sectors. The
countries contributing the most to performance were Norway, Sweden and Japan.
South Korea, New Zealand and France were the biggest detractors.
Throughout the year, we have been able to find small companies in many
markets around the world that are characterized by high return on assets and
high return on equity, have good growth prospects and are reasonably valued. We
have traveled to Europe, Asia, Australia, Canada and New Zealand spending
considerable time in face-to-face meetings with management teams.
Japan was the Fund's most heavily weighted country but we were still
underweighted versus the Index. Japan is increasingly attractive to us as
consumer sentiment seems to be improving, Prime Minister Koizumi appears to have
a strong mandate to overhaul the banking system, and a better outlook for land
prices makes property ownership more desirable.
In Japan, our largest position and top contributor was Takeuchi
Manufacturing, a manufacturer of mini excavation equipment that has been
enjoying strong global demand for its products. On the other hand, Arbeit-Times,
a Tokyo-based publisher of a free magazine containing job information, reported
disappointing earnings and detracted from performance. We have made a few
investments that we feel may benefit from a turnaround in the Japanese real
estate market. Among these, the best performer was Joint Corp., a residential
developer mainly of condominiums. Although Japan contributed significantly to
the Fund's performance, our Japanese holdings underperformed those in the Index.
In Norway and Sweden, all but one of our investments added value to the
Fund and made these countries the best contributors to performance. RaySearch
Laboratories, Det Norske Oljeselskap (DNO) and Acta Holdings were the leading
contributors. RaySearch, a Swedish developer of dosage optimization software for
radiology treatment, has been growing by licensing its software to radiology
equipment manufacturers. DNO is an oil exploration company that we feel is still
undervalued despite the strong move in its stock price related to a significant
discovery in Yemen. Acta Holdings is a network of financial advisors benefiting
from the trend among Norwegians to reallocate assets from bank deposits to other
investments.
Our investments in Australia were concentrated in natural resources
companies that have benefited from persistently high energy prices and China's
insatiable need for raw materials. Tap Oil, an oil and gas discovery and
production company with operations in Australia's Carnarvon Basin, was the best
performer from among our Australian holdings. Consolidated Minerals, a provider
of raw materials such as manganese and chromite used in the production of carbon
and stainless steel, also did well.
In South Korea, we have found some interesting small companies with the
balance sheet quality and growth characteristics we seek. Unfortunately, our
Korean stocks did not do as well as we expected them to primarily due to
weakness in Able C&C, a cosmetics company that announced disappointing numbers.
Although our holdings did not produce returns reflective of the health we see in
this market, we remain positive on their long-term growth prospects.
We also found growing small companies that we viewed as undervalued in
Singapore. As a group, our Singapore holdings contributed to the Fund's
performance. However, we underperformed the Index in this market largely due to
Accord Customer Care Solutions. Accord was investigated for fraudulent
accounting and we sold our position.
Performance was mixed for our Canadian holdings. A top contributor was Bow
Valley Energy. Bow uses technology to improve the production of mature oil
fields and has assets in Canada and the North Sea. We reduced our position in
Allen-Vanguard, a maker of anti-terrorism products. The company struggled as
bureaucratic red tape held up contract approvals. The business results of
CoolBrands, a Canadian distributor of brand name frozen treats, also suffered
due to a price war between two of its distribution customers.
Our best performer in the Hong Kong market was Ports Design, a fashion
retailer with a significant presence in China. We were attracted to Ports due to
its conservative management, healthy balance sheet, solid margins and strong
same store sales growth. On the other hand, Varitronix International, a
manufacturer of liquid crystal displays, fell short of expectations and was sold
as the company struggled with poor demand for its handset products and declining
momentum in other business lines.
Many retail companies in the United Kingdom were affected by a slowdown in
consumer spending. Among them were two Fund holdings--flooring retailer Topps
Tiles and fashion retailer Ted Baker.
OUTLOOK
The global economy may be entering a difficult period due to uncertainty
over inflation, concern over high energy prices and less than robust consumer
spending in many parts of the world. These conditions are likely to increase
volatility in the world's equity markets. Our focus will be to identify globally
competitive small companies. We believe these companies can potentially attract
investors because they are led by experienced management teams, have
consistently strong business results and are undervalued. We also continually
reassess the companies held by the Fund and will increase or decrease our
positions based on our confidence in their fundamentals and the opportunities we
see.
We appreciate your investment in the Wasatch International Opportunities
Fund.
12
INTERNATIONAL OPPORTUNITIES FUND -- PORTFOLIO SUMMARY SEPTEMBER 30, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 1/27/05*
------ ------- ---------------
WASATCH INTERNATIONAL OPPORTUNITIES FUND N/A N/A 9.50%
MSCI World Ex-U.S.A. Small Cap Index N/A N/A 15.23%
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
- ------ ------- ---------
RAY BSS RAYSEARCH LABORATORIES 3.17%
(Sweden) Dosage software for
radiology.
ACTA NO ACTA HOLDINGS ASA 2.25%
(Norway) Financial advisory
services.
589 HK PORTS DESIGN LTD. 2.16%
(Hong Kong) Fashion retailer.
6432 JP TAKEUCHI MANUFACTURING CO. 1.72%
LTD. (Japan) Construction
machinery manufacturer.
CSM AU CONSOLIDATED MINERALS LTD. 1.69%
(Australia) Raw materials for
the production of carbon and
stainless steel.
LMA SP LMA INTERNATIONAL N.V. 1.60%
(Singapore) Devices for
airway support during surgery.
RLS SP RAFFLES EDUCATION CORP. LTD. 1.47%
(Singapore) For-profit
education.
MMI SP MMI HOLDINGS LTD. 1.44%
(Singapore) Electro-mechanical
components and equipment.
4065 JP KIBUN FOOD CHEMIFA CO. LTD. 1.40%
(Japan) Soymilk products.
PSI CN PASON SYSTEMS, INC. (Canada) 1.39%
Oil field measurement
equipment.
** As of September 30, 2005, the Fund had 18.29% invested in the Top 10 equity
holdings and there were 135 long-term holdings in the Fund. Portfolio
holdings are subject to change at any time. References to specific
securities should not be construed as recommendations by the Funds or their
Advisor.
SECTOR BREAKDOWN+
(PIE CHART)
INDUSTRIALS 21.5%
CONSUMER DISCRETIONARY 19.3%
FINANCIALS 13.0%
INFORMATION TECHNOLOGY 11.4%
ENERGY 10.3%
HEALTH CARE 9.8%
MATERIALS 8.7%
CONSUMER STAPLES 5.5%
TECHNOLOGY 0.5%
+ Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
(PERFORMANCE GRAPH)
WASATCH INTERNATIONAL MSCI WORLD EX-U.S.A.
DATE OPPORTUNITIES FUND SMALL CAP INDEX
---- --------------------- --------------------
1/27/2005++ 10,000 10,000
1/31/2005 10,000 10,041
2/28/2005 10,100 10,468
3/31/2005 9,850 10,297
4/30/2005 9,750 10,007
5/31/2005 9,550 10,031
6/30/2005 9,850 10,297
7/31/2005 10,250 10,744
8/31/2005 10,700 11,074
9/30/2005 10,950 11,523
++ 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 SEPTEMBER 30, 2005
(PHOTO OF ROBERT GARDINER, CFA)
PORTFOLIO MANAGER
(PHOTO OF DANIEL CHACE, CFA)
PORTFOLIO MANAGER
REVIEW OF THE YEAR
The Wasatch Micro Cap Fund had a return of 26.42% for the 12 months ended
September 30, 2005. The Russell 2000 Index, widely used to gauge the performance
of small company stocks, returned 17.95% over the same period.
Most of the Fund's outperformance was attributable to superior stock
selection in the consumer discretionary, technology and health care sectors. Our
largest overweights were in these sectors, and they made the largest
contributions to our outperformance versus the Index.
Our international efforts also were fruitful. For the year, gains in our
international holdings outpaced those of our domestic holdings. These holdings
included American Depositary Receipts (ADRs--receipts issued by domestic banks
for shares of foreign-based corporations that trade on U.S. stock exchanges),
companies incorporated in other countries but whose shares trade on U.S. stock
exchanges, and foreign stocks. Four of the Fund's top 10 contributors were
international holdings. In total, non-U.S. holdings represented nearly 23% of
the portfolio as of September 30 and contributed to nearly 8% of our gross
return. Most of the performance came from technology and consumer investments in
Western Europe and Southeast Asia.
As mentioned above, a subset of our total international weighting was in
foreign company stocks listed on foreign exchanges. These stocks also performed
well for the Fund during the year. At year-end, roughly 15% of the Fund was
invested in foreign-listed stocks, which were up almost 37% for the year and
contributed over 5% of the Fund's gross return.
The consumer discretionary sector was very strong for us, both domestically
and internationally, and it contributed the most to our relative outperformance.
Bijou Brigitte (Germany), a fashion accessories company, was our top performer
in this group and for the Fund overall. Other top contributors included O'Reilly
Automotive, a specialty retailer of automotive aftermarket parts; and Guitar
Center, a chain of music stores.
Our positive results in the consumer discretionary sector were partially
offset by weakness in Acadomia Groupe (France), a provider of educational
services and domestic help, and Cost Plus, a retailer of casual home
furnishings. Although the outlook for consumer spending remains uncertain amid
higher energy prices and rising interest rates, we have been able to find
smaller retailers with strong growth prospects at reasonable valuations, so we
have maintained our overweighting in the sector.
Our technology holdings also added to our relative performance during the
year. We were overweighted in this sector and our selections greatly
outperformed the comparable sector of the Index. Two of our top contributors
were Fargo Electronics, a developer of printing systems for identification
cards, and O2Micro (Cayman Islands), a semiconductor manufacturer. These results
were partially offset by MFS Technology (Singapore), a provider of flexible
printed circuit boards, and Kintera, a provider of software and services for
non-profit organizations.
The Fund's overweighted health care holdings were up more than those
tracked by the Index. The Fund benefited the most from its investments in
AmSurg, an operator of ambulatory surgery centers, Icon (Ireland), a contract
researcher, Accredo Health, a service provider for individuals with chronic
diseases that was acquired during the year, and AMN Healthcare, a temporary
health care staffing company. We had a couple of detractors, as well: Odyssey
HealthCare, a hospice care provider, and EPIX Pharmaceuticals, a provider of
medical imaging technologies. We sold most of our position in Odyssey when we
became concerned about a Department of Justice investigation and certain
operational issues. EPIX shares declined in value as the company struggled to
get its lead product approved by the U.S. Food and Drug Administration.
We were underweighted in the financial services and energy sectors, which
helped and hurt our results, respectively. During the year, investors were
unsettled by rising interest rates, which made it a tough environment for
financial stocks. Our underweighting in finance services, coupled with our
stocks performing better than those in the Index, aided our performance.
On the other hand, our minimal exposure to energy provided the biggest drag
on relative performance. While energy companies, on average, only comprised over
5% of the Index during the year, the sector was up over 70%. Historically, we
have been underweighted in the energy sector due to the cyclicality of the
industry and business models that rarely meet our stock selection criteria.
Having no holdings in the utilities sector and being significantly
underweighted in the materials and processing sector meant the Fund missed most
of the performance these two sectors added to the Index.
OUTLOOK
Given that the reported earnings of our companies exceeded our expectations
across a broad range of sectors and industries, and that valuations appear to be
reasonable, we feel confident about the Fund's composition. Although we continue
to expect solid earnings growth for our companies over the long run, the
uncertain macroeconomic environment makes the near-term outlook a bit more
challenging. Against this backdrop, we are emphasizing what we believe are
high-quality companies at attractive valuations. We continue to seek companies
that we believe offer sustainable growth independent of what is happening in the
broader economy. We think is the best way to help you pursue your investment
objectives over the long run.
We would like to thank you for the opportunity to manage your assets.
14
MICRO CAP FUND -- PORTFOLIO SUMMARY SEPTEMBER 30, 2005
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
----- ------- --------
WASATCH MICRO CAP FUND 26.42% 19.09% 23.51%
Russell 2000 Index 17.95% 6.45% 9.37%
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. 3.37%
Outpatient surgery centers.
OIIM O2MICRO INTERNATIONAL LTD. 2.92%
(Cayman Islands) Semiconductors.
AHS AMN HEALTHCARE SERVICES, INC. 2.73%
Health care staffing.
BGFV BIG 5 SPORTING GOODS CORP. 2.46%
Sporting goods retailer.
ICLR ICON PLC ADR (IRELAND) 2.41%
Clinical research services for
the global pharmaceutical
industry.
USPH U.S. PHYSICAL THERAPY, INC. 1.98%
Physical therapy clinics.
BIJ GR BIJOU BRIGITTE AG (GERMANY) 1.86%
Costume jewelry retailer.
MCRL MICREL, INC. 1.76%
Semiconductors.
PLXT PLX TECHNOLOGY, INC. 1.56%
Semiconductors.
KEYS KEYSTONE AUTOMOTIVE
INDUSTRIES, INC. 1.53%
Auto replacement parts.
* As of September 30, 2005, the Fund had 22.58% invested in the Top 10 equity
holdings and there were 137 long-term holdings in the Fund. Portfolio
holdings are subject to change at any time. References to specific
securities should not be construed as recommendations by the Funds or their
Advisor.
SECTOR BREAKDOWN**
(PIE CHART)
HEALTH CARE 24.9%
CONSUMER DISCRETIONARY 24.7%
TECHNOLOGY 23.0%
FINANCIAL SERVICES 6.6%
PRODUCER DURABLES 5.0%
AUTOS & TRANSPORTATION 4.8%
INDUSTRIALS 3.9%
OTHER 3.6%
FINANCIALS 1.8%
ENERGY 1.7%
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
(PERFORMANCE GRAPH)
WASATCH MICRO
DATE CAP FUND RUSSELL 2000 INDEX
---- ------------- ------------------
9/30/1995 10000 10000
9/30/1996 11581 11313
9/30/1997 16743 15068
9/30/1998 15279 12203
9/30/1999 21044 14530
9/30/2000 34486 17928
9/30/2001 40115 14126
9/30/2002 39550 12812
9/30/2003 59435 17489
9/30/2004 65353 20772
9/30/2005 82621 24500
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 SEPTEMBER 30, 2005
(PHOTO OF JOHN MALOOLY, CFA)
PORTFOLIO MANAGER
(PHOTO OF BRIAN BYTHROW, CFA)
PORTFOLIO MANAGER
REVIEW OF THE YEAR
The Wasatch Micro Cap Value Fund returned 19.87% for the 12 months ended
September 30 and outperformed the Russell 2000 Index, which was up 17.95%.
We made two significant sector decisions that, when combined with solid
earnings growth from our portfolio companies, produced good results. Earlier
this year, we believed the U.S. consumer was going to be stretched by rising
energy prices and interest rate increases. As a result, we underweighted
holdings in the consumer discretionary and financial services sectors. Both
decisions added to the Fund's return and contributed to our outperformance of
the Index.
With only a 3% average weighting in U.S. consumer discretionary companies,
we concentrated our exposure outside the U.S. where we thought prospects were
better. Our top contributors included Bijou Brigitte (Germany), a retailer of
inexpensive fashion jewelry; easyhome (Canada), a retailer of rent-to-own
furniture and electronics; and Ports Design (Hong Kong), a high-end fashion
retailer. We believe all three stocks were undervalued, under-followed, and of
good quality when we bought them. We are looking for opportunities around the
world with similar characteristics. On the other hand, our investment in
Allen-Vanguard (Canada) detracted from performance. The company provides
products and services to combat terrorism, and has struggled due to delayed
approval for government contracts.
We think our financial sector holdings fared better than those tracked by
the Index because they were of better quality or offered superior values. We
avoided companies that had liability-sensitive balance sheets, such as banks
whose profits can erode when interest rates rise. Instead, we focused on firms
that owned variable-rate loans that can be more profitable in such environments.
We also sought out franchises whose customers are mostly indifferent to rising
rates, such as subprime auto lenders Nicholas Financial and United PanAm
Financial, and First Cash Financial Services, an operator of pawnshops in the
U.S. and Mexico. Our top contributor to this sector was Home Capital (Canada), a
specialty mortgage lender. The notable detractor in the Fund's financial
services sector was BFC Financial.
The Fund's performance in the health care sector was in line with that of
the Index but our overweighting meant this sector added more to the Fund's
performance than to the Index's. NuVasive, a company that markets a less
invasive spinal surgery product, helped our results. In addition, the Fund
benefited from E-Z-EM, a provider of products used in screening for
gastrointestinal disorders. E-Z-EM also owned a majority stake in AngioDynamics,
a company with a growing leg-vein treatment business. We believed E-Z-EM's
valuation would not fully reflect AngioDynamics' imbedded value until
AngioDynamics was spun off, which it was in late 2004. Both companies helped our
return and we subsequently sold AngioDynamics based on valuation. We currently
own one other company that treats peripheral artery disease, VNUS Medical
Technologies. We believe VNUS is not getting recognized for its franchise value,
although we are decidedly in the minority in this opinion.
A small number of our health care companies experienced product approval
delays with the U.S. Food and Drug Administration. ISTA Pharmaceuticals was a
major detractor, as the company's product pipeline slowed and competition
intensified sooner than expected. Drug research services company Discovery
Partners faced offshore pricing pressure and the market became concerned about a
large contract renewal; its shares shed some value.
We were underweighted in the energy sector, one of the Index's
best-performing sectors. Our energy companies performed better than the
benchmark. Pason Systems, a Canadian oil and natural gas producer, and Energy
Partners, a Gulf of Mexico exploration company, were top contributors.
The autos and transportation sector, in which the Fund was overweighted,
produced good returns this year. Although rising fuel costs can be a drag on
some industry sectors, we like trucking companies since they typically pass fuel
costs along to their customers.
Our producer durables stocks, which include homebuilders and semiconductor
capital equipment companies, struggled. Our public homebuilders lagged the
companies tracked by the Index, which we think was mostly attributable to
constraints imposed by their smaller size. As for semiconductor capital
equipment companies, we believe stock valuations are very attractive, and that
the industry is much closer to the bottom than the top of its cycle.
The Fund's biggest detractor in the 12-month period was CoolBrands
(Canada), a distributor of brand name frozen treats. We made the mistake of
buying shares when the company was caught in the middle of a pricing war between
two of its distribution customers. On a more positive note, IVRCL
Infrastructure, our first investment in India, has profited from a construction
boom currently underway in that country.
OUTLOOK
Concern over continued high energy prices and rising interest rates is
likely to cause increased short-term stock market volatility. With that in mind,
we are keeping our stock weights within moderate limits and trimming more
expensive names. With the Fund's cash level comfortably within the 5% to 7%
range, we intend to increase our holdings in financial services and consumer
discretionary stocks as opportunities emerge. As always, our focus is on
bottom-up stock selection. Consistent with our longstanding practice, we are
intent on finding solid growth companies or true value, and avoiding the middle
ground.
We appreciate the opportunity to manage your assets.
16
MICRO CAP VALUE FUND -- PORTFOLIO SUMMARY SEPTEMBER 30, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 7/28/03
------ ------- ---------------
WASATCH MICRO CAP VALUE FUND 19.87% N/A 21.98%
Russell 2000 Index 17.95% N/A 18.39%
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
- ------ ------- ---------
APTI ADVANCED POWER TECHNOLOGY, INC. 3.02%
Semiconductors.
BIJ GR BIJOU BRIGITTE AG (Germany) 2.49%
Costume jewelry retailer.
EPL ENERGY PARTNERS LTD. 2.14%
Oil and natural gas exploration
and production.
WIBC WILSHIRE BANCORP, INC. 2.11%
Regional bank.
NPTH ENPATH MEDICAL, INC. 2.11%
Advanced vascular delivery
products.
EH CN EASYHOME LTD. (Canada) 2.07%
Rent-to-own retailer.
IRIX IRIDEX CORP. 2.07%
Laser systems for ophthalmology.
EZM CN EUROZINC MINING CORP. (Canada) 1.78%
Mining for base metals.
PLXT PLX TECHNOLOGY, INC. 1.78%
Semiconductors.
PSI CN PASON SYSTEMS, INC. (Canada) 1.62%
Oil field measurement equipment.
* As of September 30, 2005, the Fund had 21.19% invested in the Top 10 equity
holdings and there were 121 long-term holdings in the Fund. Portfolio
holdings are subject to change at any time. References to specific
securities should not be construed as recommendations by the Funds or their
Advisor.
SECTOR BREAKDOWN**
(PIE CHART)
HEALTH CARE 20.5%
CONSUMER DISCRETIONARY 14.4%
TECHNOLOGY 14.0%
FINANCIAL SERVICES 11.5%
INDUSTRIALS 11.2%
PRODUCER DURABLES 7.6%
ENERGY 7.0%
OTHER 6.1%
AUTOS & TRANSPORTATION 5.2%
MATERIALS 2.5%
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
(PERFORMANCE GRAPH)
WASATCH MICRO
DATE 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
6/30/2005 14,054 13,804
9/30/2005 15,414 14,452
+ 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 SEPTEMBER 30, 2005
(PHOTO OF JEFF CARDON, CFA)
PORTFOLIO MANAGER
REVIEW OF THE YEAR
The Wasatch Small Cap Growth Fund returned 20.73% in the year ended
September 30 and outperformed the Russell 2000 Index, which returned 17.95%. We
are pleased but not ecstatic with this performance.
Our focus has always been on investing in high quality companies--firms
that we believe have high quality management teams that deliver superior growth.
However, during the last few years the markets have not rewarded these types of
companies. As you may recall, 2003 was a year in which low quality companies
with little or no earnings dominated stock market returns. In 2004, the market
was driven by energy and other commodity-oriented companies. We have typically
avoided these types of companies because we believe their business models are
untested or too dependent on volatile commodity prices.
During the first three quarters of our fiscal year, our emphasis on quality
began to get the recognition it deserved, as the markets moved away from
commodity-related stocks and toward companies with high quality growth
prospects--the kinds of companies the Fund invests in.
During the final fiscal quarter ended September 30, however, performance
relative to our benchmark suffered as two Gulf Coast hurricanes caused investors
to return to the commodity-driven sectors. A chain reaction occurred from this
development as investors worried about an indirect "energy tax" from higher gas
prices and a consumer confidence breakdown from the trauma of these events. As a
result, commodity-oriented stocks enjoyed returns of 25% or more, and
consumer-oriented stock prices declined. The Fund has almost no exposure to
commodity-oriented companies and considerable exposure to consumer-oriented
companies--this was a hurricane force headwind to be sure. The end result was
that the Fund entered the final quarter of our fiscal year with a 7.35% lead
over the Index, but exited the period with outperformance of just 2.78% for the
entire fiscal year.
So, despite the fact that several sector weightings hurt performance, we
were able to beat our benchmark. This implies that we achieved our
outperformance through good stock picking. We derived more than 75% of our
return from health care, consumer discretionary and technology investments,
while the Index generated just under 35% of its return from these sectors, a
statistic that supports our claim of good stock picking. Among our top
contributors were some of our heaviest portfolio weights such as O'Reilly
Automotive, Chico's, AmSurg, Techne, and Cognizant Technology Solutions. One
consumer company that struggled was Cost Plus, an importer of household goods
and furnishings.
The Fund's foreign holdings also contributed to our 12-month return. CSR,
an English company that designs and manufactures semiconductors for Bluetooth
wireless applications, and Bijou Brigitte, a German retailer of low-cost
jewelry, contributed to the Fund's performance. The biggest detractor among our
foreign holdings was UTStarcom, a position we sold.
We carefully track the earnings growth of our companies and each quarter
calculate the weighted average earnings per share growth of the aggregate
portfolio. During the last four quarters, earnings growth has been stellar,
running consistently at or above 20%. In fact, we have been enjoying this kind
of earnings growth for the last three years.
While our overall earnings growth has been excellent, in a typical year a
handful of companies will report disappointing earnings. Not unexpectedly, these
companies are among our worst stock market performers. We often view stock price
declines from earnings disappointments as opportunities to invest more capital
at attractive valuations. Less often, negative news changes our opinion
regarding the company's quality or the viability of its products or services in
the marketplace. Odyssey HealthCare, Doral Financial, and Kintera, are examples
of the latter. Odyssey, a hospice care provider, announced that growth could
slow due to an investigation into its reimbursement claims. Doral, a mortgage
finance company, suffered from lingering questions over its accounting practices
and we were unable to gain confidence in the reported numbers. Kintera, a
provider of software for non-profit organizations, was weak due to an inability
to gain revenue traction. We sold our positions in all three companies.
Finally, five portfolio companies were acquired during the year: Accredo
Health, CTI Molecular Imaging, Capital Automotive, Verisity, and Nassda. These
companies produced profits for the Fund, but the short-term performance boost
from these acquisitions was bittersweet since we now have to find new high
quality companies to replace them.
OUTLOOK
Wasatch defines quality companies as those that can deliver sustainable
earnings, have capable management teams who can execute on their business plans,
and can achieve higher-than-average returns on capital. We believe we have
invested in vibrant companies with the potential to grow earnings faster than
the overall economy. However, we are a bit more cautious about earnings growth
as we look ahead to 2006. The kind of margin expansion we have enjoyed the past
three years will be harder to achieve, and we have some concerns that rising
commodity prices will slow demand for goods and services. Instead of earnings
growth of 20% or more, we anticipate our portfolio companies to grow earnings in
the mid-to-high teens. We believe this will be much better growth than that of
the overall economy.
On a more positive note, valuations are beginning to look more attractive,
and we are quite enthused about the opportunity to invest in great companies at
excellent prices. We are confident that the Fund has the potential to perform
well if we can indeed capture the earnings growth we expect. If the market
continues to move down, we feel even more confident in our ability to make
investments that will perform well in future years.
We appreciate the opportunity to manage your assets and are working hard to
maintain your trust.
18
SMALL CAP GROWTH FUND -- PORTFOLIO SUMMARY SEPTEMBER 30, 2005
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
WASATCH SMALL CAP GROWTH FUND 20.73% 8.51% 13.25%
Russell 2000 Index 17.95% 6.45% 9.37%
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. 3.56%
Automotive parts
retailer/distributor.
AMSG AMSURG CORP. 3.00%
Outpatient surgery centers.
KNX KNIGHT TRANSPORTATION, INC. 2.64%
Long haul trucking and logistic
services.
TECH TECHNE CORP. 2.53%
Complex, disposable research kits
for biotech.
FDS FACTSET RESEARCH SYSTEMS, INC. 2.51%
Financial and economic
information for investment
managers.
GTRC GUITAR CENTER, INC. 2.51%
Music stores.
MTH MERITAGE HOMES CORP. 2.04%
Homebuilder.
ICLR ICON PLC ADR 1.71%
Clinical research services
for the global pharmaceutical
industry.
CPRT COPART, INC. 1.69%
Vehicle salvage services.
SRX SRA INTERNATIONAL, INC., CLASS A 1.56%
Information technology services
for government agencies.
* As of September 30, 2005, the Fund had 23.75% invested in the Top 10 equity
holdings and there were 124 long-term holdings in the Fund. Portfolio
holdings are subject to change at any time. References to specific
securities should not be construed as recommendations by the Funds or their
Advisor.
SECTOR BREAKDOWN**
(PIE CHART)
CONSUMER DISCRETIONARY 30.3%
HEALTH CARE 22.7%
TECHNOLOGY 20.6%
FINANCIAL SERVICES 11.3%
PRODUCER DURABLES 4.0%
AUTOS & TRANSPORTATION 3.3%
FINANCIALS 2.3%
MATERIALS & PROCESSING 2.0%
OTHER 2.0%
INDUSTRIALS 1.5%
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
(PERFORMANCE GRAPH)
WASATCH SMALL
DATE CAP GROWTH FUND RUSSELL 2000 INDEX
---- --------------- ------------------
9/30/1995 10,000 10,000
9/30/1996 9,891 11,313
9/30/1997 12,804 15,068
9/30/1998 10,354 12,203
9/30/1999 15,423 14,530
9/30/2000 23,076 17,928
9/30/2001 21,088 14,126
9/30/2002 19,500 12,812
9/30/2003 26,550 17,489
9/30/2004 28,747 20,772
9/30/2005 34,707 24,500
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 SEPTEMBER 30, 2005
(PHOTO OF JIM LARKINS, MBA)
PORTFOLIO MANAGER
(PHOTO OF JOHN MAZANEC, MBA)
PORTFOLIO MANAGER
REVIEW OF THE YEAR
The Wasatch Small Cap Value Fund gained 19.47% in the 12 months ended
September 30. Over the same period, the Russell 2000 Value Index, gained 17.75%.
Over the course of the year, the Fund's performance was broad-based across
the sectors in which we were invested. Many of the companies held by the Fund
were led by experienced management teams and made significant headway toward
achieving their business goals supported by favorable economic and business
conditions.
Assessing a company's management team is an important part of our
investment strategy. The management team is vital to a company's success in
improving earnings growth, turning around business results, or making investors
recognize intrinsic value. Looking back over the past 12 months, we noted that
our faith in the management teams of many of our long-term holdings was rewarded
as stock prices rose to more fully reflect the value we saw in these companies.
The Fund's outperformance of the Index was driven by strong results from
the consumer discretionary, producer durables, autos and transportation, and
health care sectors. Notable sectors where we underperformed the Index were in
financial services, where we were overweighted, and utilities, where we were
significantly underweighted.
The consumer discretionary sector contributed the most to the Fund's
performance. One of the best performers was Administaff, a provider of human
resource services to small and medium-sized businesses. Administaff's value
appreciated as management continued to make good progress toward turning around
its business results. Other solid performers included Lithia Motors, World Fuel
Services, and Global Imaging Systems. The Fund's biggest detractor in this
sector was Whitehall Jewellers, a mall-based jewelry retailer that faced intense
price competition from traditional and Internet jewelers. We sold Whitehall, as
we believe it will have a difficult time meeting its short-term financing needs.
Our investments in homebuilding companies did well this year. We sold some
of our homebuilders as we felt their stocks had become fully valued. We also
trimmed positions in other homebuilders to reflect our assessment of the risk
that housing demand and prices would contract.
Trucking and auto replacement parts companies drove the performance of the
Fund's autos and transportation sector. USA Truck was a top performer due to
what we felt was solid execution by management that resulted in increased
earnings. Auto replacement parts manufacturers, Aftermarket Technology and
Keystone Automotive Industries, also added value to the Fund as they continued
to grow their businesses. We sold Sea Containers and National R.V. Holdings when
they failed to meet our expectations.
Our best performers in the health care sector were PacifiCare Health
Systems and Capital Senior Living. Although we continue to look for investments
in this sector, the Fund is likely to remain underweight versus the Index as
many health care companies seem to be richly valued.
The Fund's gain in technology was driven by Supertex, a semiconductor
component manufacturer, and Multi-Fineline Electronix, a maker of flexible
circuit boards. Both companies posted good results and benefited from a
favorable business environment. The laggard for us in this sector was Sipex. We
were disappointed by a change in the company's management and we sold our
position.
Energy stocks were among the best performing issues in the Index. This was
the result of record high energy prices due to growing global consumption and
limited oil and gas reserves. Throughout the year, we sought to increase the
Fund's exposure to this strong performing sector by prudently investing in
companies that we believed were attractively valued. While the Fund held fewer
energy companies than the Index, our energy stocks were up more. Noteworthy
performers were Toreador Resources, Plains Exploration & Production, and Ultra
Petroleum. Our disappointment in Harvest Natural Resources led us to sell our
position.
Despite strong performance from materials and processing stocks, our
underweighting meant this sector contributed less to our return than to the
Index's. Nonetheless, Mobile Mini, a company that refurbishes shipping
containers and leases them as storage units, continued to improve its business
results and was a top contributor.
The Fund's gain in financial services, our most heavily weighted sector,
fell short of that of the Index. The shortfall was primarily concentrated in
four holdings--Commercial Capital Bancorp, Direct General, Doral Financial and
Saxon Capital. We remain optimistic about the long-term prospects of three of
these companies. However, we sold Doral Financial, a Puerto Rican bank, as we
were uncomfortable with the company's accounting methods. Weak results from some
companies camouflaged our more successful investments in auto finance,
commercial mortgage backed securities companies, and business development
companies.
OUTLOOK
While stock prices generally rose over the past 12 months, investors became
increasingly concerned over the health of the economy. Higher energy prices,
rising interest rates and flagging consumer confidence began taking a toll on
the economic recovery. As a result, stock prices have become more volatile
providing us with more interesting opportunities for value investing,
particularly in retail, financial services, producer durables and transportation
companies.
We will continue to pursue our discipline of investing in small companies
that we believe are undervalued but have characteristics that will allow them to
improve earnings growth, increase profit margins and attract positive attention
from investors. We believe our efforts have the potential to help you achieve
your long-term investment goals.
Thank you for investing in the Small Cap Value Fund.
20
SMALL CAP VALUE FUND -- PORTFOLIO SUMMARY SEPTEMBER 30, 2005
AVERAGE ANNUAL TOTAL RETURNS
SINCE INCEPTION
1 YEAR 5 YEARS 12/17/97
------ ------- ---------------
WASATCH SMALL CAP VALUE FUND 19.47% 16.33% 19.02%
Russell 2000 Value Index 17.75% 15.18% 10.45%
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
- ------ ------- ---------
KEYS KEYSTONE AUTOMOTIVE INDUSTRIES, INC. 2.81%
Auto collision replacement parts.
ACF AMERICREDIT CORP. 2.64%
Subprime automobile lender.
RWT REDWOOD TRUST, INC. 2.62%
Jumbo ARM mortgage REIT.
LAD LITHIA MOTORS, INC., CLASS A 2.46%
Auto retailer.
NTY NBTY, INC. 2.30%
Nutritional supplements
manufacturer/ retailer.
ATAC AFTERMARKET TECHNOLOGY CORP. 2.25%
Auto parts remanufacturer.
HBG HUB INTERNATIONAL LTD. 2.13%
Insurance broker.
TRGL TOREADOR RESOURCES CORP. 2.08%
Oil and gas developer.
CCBI COMMERCIAL CAPITAL BANCORP, INC. 2.06%
Regional bank specializing in
multifamily residential loans.
GISX GLOBAL IMAGING SYSTEMS, INC. 2.06%
Office imaging equipment sales and
service.
* As of September 30, 2005, the Fund had 23.41% invested in the Top 10 equity
holdings and there were 98 long-term holdings in the Fund. Portfolio
holdings are subject to change at any time. References to specific
securities should not be construed as recommendations by the Funds or their
Advisor.
SECTOR BREAKDOWN**
(PIE CHART)
FINANCIAL SERVICES 39.3%
CONSUMER DISCRETIONARY 16.7%
AUTOS & TRANSPORTATION 9.7%
ENERGY 7.7%
TECHNOLOGY 7.5%
PRODUCER DURABLES 5.0%
MATERIALS & PROCESSING 4.5%
FINANCIALS 3.9%
OTHER 3.1%
HEALTH CARE 2.6%
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
(PERFORMANCE GRAPH)
WASATCH SMALL
DATE CAP VALUE FUND RUSSELL 2000 VALUE INDEX
---- -------------- ------------------------
12/17/1997+ 10,000 10,000
9/30/1998 9,000 8,767
9/30/1999 12,150 9,278
9/30/2000 18,218 10,703
9/30/2001 21,505 11,303
9/30/2002 18,849 11,138
9/30/2003 27,128 14,664
9/30/2004 32,481 18,426
9/30/2005 38,807 21,697
+ 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 SEPTEMBER 30, 2005
(PHOTO OF KAREY BARKER, CFA)
PORTFOLIO MANAGER
(PHOTO OF AJAY KRISHNAN, CFA)
PORTFOLIO MANAGER
REVIEW OF THE YEAR
The Wasatch Ultra Growth Fund gained 21.00% in the 12 months ended September 30.
Over the same period, the Fund outperformed the Russell 2000, Growth Index,
which gained 17.97%. The Fund's performance was nearly identical to that of the
Russell 2500 Growth Index, which gained 21.01%. Both the Fund's absolute
performance and its outperformance of the Russell 2000 Growth Index (the
"Index") were driven by substantial contributions from health care and
technology, our most heavily weighted sectors.
We are pleased with our outperformance, especially in light of the strong
performance contributed to the Index by three commodity-oriented
sectors--energy, integrated oils and materials and processing. The Fund was not
invested in the energy or integrated oils sectors and it had few holdings in the
materials and processing sector. We are likely to remain underinvested in these
three sectors because we feel that the business results of companies in these
areas are too dependent on commodity prices. They also lack the characteristics
that are desirable to us such as a competitive advantage and the potential for
sustainable growth.
Historically, the Fund has been heavily weighted in health care and
technology. Our weighting in these sectors is a by-product of the bottom-up,
fundamental analysis we utilize to identify individual companies that we believe
have superior business models and growth opportunities.
The Fund's top contributor in health care was Accredo Health, whose
acquisition by Medco Health Solutions was completed in August. Medco's market
capitalization is larger than we typically like to hold in the Fund and we sold
our small, residual position. One of the Fund's largest positions, United
Surgical Partners, an operator of short-stay surgery centers, also added
meaningfully to performance as the company continued to report strong earnings
growth. Odyssey HealthCare, a position we sold earlier in the year, was the
biggest detractor in health care followed by AMERIGROUP and EPIX
Pharmaceuticals, a manufacturer of imaging contrast agents. AMERIGROUP, a
provider of health care services to Medicaid recipients, announced that results
would be well below expectations due to higher-than-expected medical costs. The
stock price of EPIX declined on concerns that the FDA might require another
clinical trial on a product that had already completed this process.
Many of the Fund's technology investments were in semiconductor companies
that performed well throughout most of the year. National Semiconductor and
O2Micro International led the way as both companies reported strong earnings
growth and were supported by a favorable business environment. In contrast,
disappointing results caused us to sell our positions in UTStarcom and Cherokee
International.
Two business services companies--The Advisory Board and Corporate Executive
Board--benefited from growing demand for the specialized consulting services
they provide and propelled the Fund's consumer discretionary sector to a solid
return. Automotive parts retailer O'Reilly Automotive also added to the Fund's
return. The results of these companies were offset by weakness among a few
retail holdings that struggled as their customers began to be impacted by higher
energy costs. Cost Plus, an importer of household goods and furnishings suffered
slowing sales that caused it to be the main detractor from the Fund's
performance in this sector.
Nextel Partners, one of two holdings in the Fund's utilities sector,
produced strong results throughout the year and made a nice contribution to
performance. Recently, the company entered into discussions to exercise its
right to sell to Sprint Nextel. We think this could be a significant business
distraction and chose to sell our position and redeploy our profit from Nextel
Partners in other investment ideas.
The level of merger and acquisition activity in the Fund was unusually high
throughout the year. While the Fund has often benefited from a short-term rise
in the stock prices of these acquisition targets, we have not been pleased to
see several of our best long-term ideas such as Accredo, Verisity and Nassda
leave the portfolio due to acquisitions.
The Fund's financial services and producer durables sectors produced weak
results relative to the Index. In producer durables this was primarily due to
being substantially underweighted. In financial services, the bulk of the
underperformance was in Doral Financial and Direct General. Both companies fell
short of our expectations and were sold. Partially offsetting these
disappointing results were strong contributions from HDFC Bank, a consumer bank
in India, and AmeriCredit, a subprime auto lender.
OUTLOOK
We expect the business environment for companies held by the Fund to remain
reasonably strong for the remainder of the year despite lingering concerns over
continuing interest rate hikes and the impact of high energy prices. In general,
company valuations in the Fund felt a little high but not irrational as of
September 30. We continue to buy, sell or adjust position sizes based on
valuation, our ongoing research and the confidence we have in individual
companies' ability to achieve high growth rates.
Our strategy is to invest in fast growing companies in dynamic industries.
Rising energy and commodity prices may drive up stock prices in the energy,
integrated oils and materials and processing sectors. Regardless, our efforts
are focused on investing in companies whose growth does not rely upon volatile
and difficult-to-predict commodity prices. We prefer companies with clear
competitive advantages that can exert some control over their growth by
introducing new products or services, or entering new markets. We expect to
remain heavily weighted in technology and health care where we continue to find
companies that we believe have the potential to help you achieve your long-term
investment objectives.
Thank you for investing in the Ultra Growth Fund.
22
ULTRA GROWTH FUND -- PORTFOLIO SUMMARY SEPTEMBER 30, 2005
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
WASATCH ULTRA GROWTH FUND 21.00% 7.44% 10.51%
Russell 2000 Growth Index 17.97% -2.54% 4.67%
Russell 2500 Growth Index 21.01% -2.08% 7.27%
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. 3.21%
Semiconductors.
SRX SRA INTERNATIONAL, INC., CLASS A 3.01%
Information technology services
for government agencies.
AMSG AMSURG CORP. 3.00%
Outpatient surgery centers.
MCHP MICROCHIP TECHNOLOGY, INC. 2.98%
Semiconductors.
USPI UNITED SURGICAL PARTNERS INT'L., 2.98%
INC. Short-stay surgical centers.
ACS AFFILIATED COMPUTER SERVICES, INC., 2.63%
CLASS A Outsource provider of
business and information technology
services.
KCI KINETIC CONCEPTS, INC. 2.57%
Devices for wound treatment.
OIIM O2MICRO INTERNATIONAL LTD. 2.54%
Semiconductors.
AMHC AMERICAN HEALTHWAYS, INC. 2.04%
Disease management services.
CTSH COGNIZANT TECHNOLOGY SOLUTIONS
CORP., CLASS A 1.98%
Professional technology services.
* As of September 30, 2005, the Fund had 26.94% invested in the Top 10 equity
holdings and there were 120 long-term holdings in the Fund. Portfolio
holdings are subject to change at any time. References to specific
securities should not be construed as recommendations by the Funds or their
Advisor.
SECTOR BREAKDOWN**
(PIE CHART)
TECHNOLOGY 36.2%
HEALTH CARE 26.8%
CONSUMER DISCRETIONARY 22.1%
FINANCIAL SERVICES 6.9%
PRODUCER DURABLES 3.8%
FINANCIALS 1.9%
AUTOS & TRANSPORTATION 1.1%
MATERIALS & PROCESSING 0.9%
INFORMATION TECHNOLOGY 0.2%
OTHER 0.1%
** Excludes short-term investments, if any.
GROWTH OF A $10,000 INVESTMENT
(PERFORMANCE GRAPH)
WASATCH ULTRA RUSSELL 2000 RUSSELL 2500
DATE GROWTH FUND GROWTH INDEX GROWTH INDEX
---- ------------- ------------ ------------
9/30/1995 10000 10000 10000
9/30/1996 9746 11261 11600
9/30/1997 11865 13891 14605
9/30/1998 9247 10441 11050
9/30/1999 12933 13848 15454
9/30/2000 18968 17956 22407
9/30/2001 16902 10309 12799
9/30/2002 15255 8437 10552
9/30/2003 23482 11957 14926
9/30/2004 22441 13383 16671
9/30/2005 27154 15787 20174
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 SEPTEMBER 30, 2005
(PHOTO OF VAN R. HOISINGTON)
PORTFOLIO MANAGER
REVIEW OF THE YEAR
The Fund's return of 11.41% in the 12 months ended September 30 was much
greater than the 2.80% of the Lehman Brother's Aggregate Bond Index.
On September 30, 2005, the long Treasury bond due in 2031 yielded 4.57%,
down from 4.89% a year earlier. As the bond yields declined throughout the year,
the market value of the Fund's portfolio rose. The Fund's holdings consisted of
long-dated U.S. Treasury securities (bonds with maturities longer than 20 years)
and zero coupon U.S. Treasury securities (Strips).* The zero coupon securities
held in the Fund registered the largest price appreciation.
In spite of a 2% jump in the Federal funds rate, bond yields dropped in the
last four quarters, as real gross domestic demand (GDD)--which is gross domestic
product (GDP) less net exports of goods and services--slowed to a 3.5% increase,
down sharply from the 5.1% peak reached at the end of the second quarter of
2004.
During the year, the price of crude oil and natural gas increased, pushing
up the Consumer Price Index (CPI) to 4.7%, from 3.4% in 2004. Yet, the more
stable gauges of inflation have been relatively even in 2005. The core CPI
decelerated to 2%, down from 2.2% in 2004. In the 12 months ended in August, the
core Personal Consumption Expenditures (PCE) Deflator** rose 2%, versus 2.2% in
2004, while the market-based core PCE inflation measure at 1.7% was identical to
that registered in 2004.
OUTLOOK
Four considerations point to a more subdued economic climate. First,
leading indicators portend a loss of momentum. In the 12 months ended in August
(a time frame virtually unaffected by the two Gulf Coast hurricanes), the
Leading Economic Index+ was up just 1.9%, compared to the 10% growth logged in
March 2004.
Second, substantial monetary discipline was in place even before the latest
round of Fed interest rate increases. In the past 12 months, M2++ grew just
3.9%, contrasted with the 4.5% expansion in 2004--a nine-year low.
Third, erosion in housing sector fundamentals, tighter credit standards and
inflated home prices point to a slowdown in housing--the primary motivator of
the economy over the past three years.
A housing slowdown would have far ranging consequences since rapidly
appreciating prices have permitted consumers to extract equity from their homes
for current expenditures. The Fed has calculated "a fourth to a third" of the
withdrawal of equity from homes has financed consumer spending. The practice of
taking equity out of the family home goes a long way toward explaining why the
personal saving rate in the U.S. is now negative.
Fourth, escalating energy bills will absorb more of the consumer's budget,
limiting funds for discretionary uses. In August, total consumer fuel
expenditures were 9.1% of total wage and salary income, a level not seen in 19
years.
Of concern for the bond market is the budget deficit, which could hit $450
billion in fiscal 2006 in nominal terms, versus $317 billion in 2005. The
shortfall might amount to 3.1% of GDP. In the final analysis, the manner of
financing determines the impact of excess government spending.
Budget imbalances can be funded by either an increase in the money supply
or by existing money balances. During the Vietnam War and the Nixon and Carter
presidencies, the deficits were large in nominal dollars by the standards of
that time, but small relative to GDP. They became inflationary when Fed policies
allowed them to be underwritten by a sharp increase in the money supply.
If Fed policy dictates that the 2006 deficit be financed from existing
money balances, short-term rates will climb higher since the bulk of the
Treasury financing will fall on that portion of the curve. Yield spreads between
short- and long-term bonds would continue to level out, and likely invert.
Raised short term borrowing costs, combined with such yield curve changes, would
transfer spending from the private sector to the public sector. The enlarged
budget deficit would do little to invigorate activity or escalate inflation.
In summary, we believe economic growth will slow over the next year as the
boost from hurricane reconstruction expenditures is offset by monetary
constriction, burdensome energy prices, softer housing and sliding consumer
income and balance sheet fundamentals.
Aided by global circumstances, the Fed has done an effective job of
containing rising energy prices. We believe the more subdued economic climate
likely in 2006, plus continued Fed resolve, indicate that core inflation will
move lower over the next year. With long term Treasury bond yields generally
determined by multi year patterns in inflation, Treasury bond yields should also
continue to move lower. This could prove favorable for the long-term U.S.
Treasury bonds held by the Fund.
Thank you for investing in the Wasatch-Hoisington U.S. Treasury Fund.
* Zero coupon Treasury bonds, also known as U.S. Treasury Strips, are debt
obligations that do not entitle the holder to periodic interest payments
prior to maturity and are traded at a discount from their face amounts. The
discount of U.S. Treasury Strips varies primarily depending on the time
remaining until maturity and prevailing levels of interest rates. Strips
can be sold prior to their due date in the secondary market at the
then-prevailing market value. The market prices of Strips are generally
more volatile than the market prices of securities of comparable quality
and similar maturity that pay interest periodically. Strips may respond to
a greater degree to fluctuations in interest rates than non-zero coupon
securities.
** Personal Consumption Expenditures (PCE) Deflator is part of the National
Income and Products Accounts developed by the Bureau of Economic Analysis
of the U.S. Commerce Department. The PCE Deflator is a variable weighted
index and is widely considered to be the most reliable of all the price
indexes.
+ Leading Economic Index was developed by the Conference Board and is
comprised of 10 components that lead changes in overall economic activity.
++ 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 SEPTEMBER 30, 2005
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
WASATCH-HOISINGTON U.S. TREASURY FUND 11.41% 9.52% 8.55%
Lehman Bros. Aggregate Bond Index 2.80% 6.62% 6.55%
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.
By investing in bonds, you are subject, but not limited to, the same interest
rate, inflation and credit risk associated with the underlying bonds owned by
the Fund. Return of principal is not guaranteed.
TOP 10 HOLDINGS*
MATURITY % OF
HOLDING DATE FUND
- ------- -------- -----
U.S. TREASURY STRIP, PRINCIPAL ONLY 11/15/27 30.77%
U.S. TREASURY STRIP, PRINCIPAL ONLY 11/15/21 9.84%
U.S. TREASURY BOND, 5.50% 8/15/28 9.25%
U.S. TREASURY BOND, 6.75% 8/15/26 8.77%
U.S. TREASURY BOND, 6.125% 11/15/27 8.47%
U.S. TREASURY BOND, 7.50% 11/15/24 8.13%
U.S. TREASURY BOND, 6.875% 8/15/25 7.42%
U.S. TREASURY BOND, 6.625% 2/15/27 6.61%
U.S. TREASURY BOND, 6.375% 8/15/27 6.45%
U.S. TREASURY STRIP, PRINCIPAL ONLY 8/15/25 3.88%
* As of September 30, 2005, the Fund had 99.59% invested in the Top 10 equity
holdings and there were 10 long-term holdings in the Fund. Portfolio
holdings are subject to change at any time. References to specific
securities should not be construed as recommendations by the Funds or their
Advisor.
INVESTMENTS & CASH
(PIE CHART)
TREASURY NOTES & BONDS 98.1%
SHORT-TERM INVESTMENTS 1.9%
GROWTH OF A $10,000 INVESTMENT
(PERFORMANCE GRAPH)
WASATCH-HOISINGTON LEHMAN BOTHERS
DATE U.S. TREASURY FUND AGGREGATE BOND INDEX
---- ------------------ --------------------
9/30/1995 10000 10000
9/30/1996 10442 10490
9/30/1997 11824 11509
9/30/1998 14696 12834
9/30/1999 13131 12787
9/30/2000 14422 13681
9/30/2001 16281 15453
9/30/2002 18786 16781
9/30/2003 19194 17689
9/30/2004 20397 18339
9/30/2005 22723 18852
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 September
30, 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 September 30. You may use the
information in this line, together with the amount you invested, to estimate the
expenses you paid over the period. Simply divide your account value by $1,000.00
(for example, an $8,600.00 account value divided by $1,000.00 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
In addition, the Funds charge a $15.00 IRA distribution fee, a $12.50 IRA
annual maintenance fee and a $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
SEPTEMBER 30, 2005
ACCOUNT VALUE
----------------------------------------
BEGINNING OF PERIOD END OF PERIOD EXPENSES PAID EXPENSE RATIO
APRIL 1, 2005 SEPTEMBER 30, 2005 DURING PERIOD* DURING PERIOD*
------------------- ------------------ -------------- --------------
CORE GROWTH FUND
Actual return $1,000.00 $1,059.30 $ 6.25 1.21%
Hypothetical return before expenses $1,000.00 $1,019.00 $ 6.12 1.21%
GLOBAL SCIENCE & TECHNOLOGY FUND
Actual return $1,000.00 $1,153.80 $10.53 1.95%
Hypothetical return before expenses $1,000.00 $1,015.29 $ 9.85 1.95%
HERITAGE GROWTH FUND
Actual return $1,000.00 $1,060.30 $ 4.91 0.95%
Hypothetical return before expenses $1,000.00 $1,020.31 $ 4.81 0.95%
INTERNATIONAL GROWTH FUND
Actual return $1,000.00 $1,119.90 $ 9.94 1.87%
Hypothetical return before expenses $1,000.00 $1,015.69 $ 9.45 1.87%
INTERNATIONAL OPPORTUNITIES FUND
Actual return $1,000.00 $1,111.70 $11.91 2.25%
Hypothetical return before expenses $1,000.00 $1,013.79 $11.36 2.25%
MICRO CAP FUND
Actual return $1,000.00 $1,119.80 $11.64 2.19%
Hypothetical return before expenses $1,000.00 $1,014.09 $11.06 2.19%
MICRO CAP VALUE FUND
Actual return $1,000.00 $1,083.70 $11.75 2.25%
Hypothetical return before expenses $1,000.00 $1,013.79 $11.36 2.25%
SMALL CAP GROWTH FUND
Actual return $1,000.00 $1,073.90 $ 6.19 1.19%
Hypothetical return before expenses $1,000.00 $1,019.10 $ 6.02 1.19%
SMALL CAP VALUE FUND
Actual return $1,000.00 $1,086.20 $ 9.00 1.72%
Hypothetical return before expenses $1,000.00 $1,016.44 $ 8.69 1.72%
ULTRA GROWTH FUND
Actual return $1,000.00 $1,101.60 $ 7.85 1.49%
Hypothetical return before expenses $1,000.00 $1,017.60 $ 7.54 1.49%
U.S. TREASURY FUND
Actual return $1,000.00 $1,068.40 $ 3.89 0.75%
Hypothetical return before expenses $1,000.00 $1,021.31 $ 3.80 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 (183) divided by the number of days in the fiscal year (365).
27
CORE GROWTH FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE
- ------ --------------
COMMON STOCKS 96.0%
AUTO PARTS--AFTER MARKET 0.6%
580,125 Aftermarket Technology Corp.* $ 10,668,499
------------
BANKS 9.7%
1,786,700 Commerce Bancorp, Inc. 54,833,823
456,775 First Community Bancorp 21,847,548
2,109,675 HDFC Bank Ltd. 33,007,328
1,258,025 UCBH Holding, Inc. 23,047,018
5,285,562 UTI Bank Ltd. 31,933,478
------------
164,669,195
------------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 0.9%
356,459 Charles River Laboratories
International, Inc.* 15,548,742
------------
COMMERCIAL SERVICES AND SUPPLIES 6.9%
2,457,261 Copart, Inc.* 58,654,820
280,650 Regis Corp. 10,614,183
724,262 Waste Connections, Inc.* 25,407,111
778,075 WCA Waste Corp.*++ 6,566,953
461,195 West Corp.* 17,244,081
------------
118,487,148
------------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 5.6%
569,675 CACI International, Inc., Class A* 34,522,305
797,550 QLogic Corp.* 27,276,210
943,845 SRA International, Inc., Class A* 33,487,621
------------
95,286,136
------------
CONSUMER PRODUCTS 0.4%
352,450 Helen of Troy Ltd.* 7,274,568
------------
DIVERSIFIED FINANCIAL SERVICES 2.5%
1,411,175 Housing Development Finance Corp. Ltd. 33,385,552
675,850 U.S.I. Holdings Corp.* 8,779,292
------------
42,164,844
------------
EDUCATION SERVICES 2.3%
626,610 Laureate Education, Inc.* 30,685,092
220,886 Universal Technical Institute, Inc.* 7,865,750
------------
38,550,842
------------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 6.0%
1,048,999 AMIS Holdings, Inc.* 12,441,128
2,754,228 ASE Test Ltd.* 17,269,009
800,774 Integrated Device Technology, Inc.* 8,600,313
1,085,510 National Semiconductor Corp. 28,548,913
308,775 SigmaTel, Inc.* 6,249,606
685,990 Silicon Laboratories, Inc.* 20,847,236
262,725 Tessera Technologies, Inc.* 7,858,105
------------
101,814,310
------------
ENGINEERING AND CONTRACTING SERVICES 0.5%
234,725 URS Corp.* 9,480,543
------------
FINANCE COMPANIES 1.6%
430,250 Accredited Home Lenders Holding Co.* 15,127,590
495,525 United PanAm Financial Corp.* 12,373,259
------------
27,500,849
------------
FINANCE--SMALL LOAN 3.4%
2,409,231 AmeriCredit Corp.* 57,508,344
------------
FINANCIAL INFORMATION SERVICES 0.8%
375,110 FactSet Research Systems, Inc. 13,218,876
------------
FINANCIAL--MISCELLANEOUS 8.0%
539,590 Brown & Brown, Inc. $ 26,812,227
1,256,506 Fidelity National Financial, Inc. 55,939,647
1,167,475 First American Corp. 53,318,583
------------
136,070,457
------------
FOODS 1.8%
1,315,300 NBTY, Inc.* 30,909,550
------------
HEALTH CARE FACILITIES 3.2%
635,275 Pharmaceutical Product Development, Inc. 36,534,665
142,940 Sunrise Senior Living, Inc.* 9,539,816
232,830 United Surgical Partners
International, Inc.* 9,105,981
------------
55,180,462
------------
HEALTH CARE MANAGEMENT SERVICES 2.8%
1,072,200 AMERIGROUP Corp.* 20,500,464
366,475 Pediatrix Medical Group, Inc.* 28,152,610
------------
48,653,074
------------
HEALTH CARE SERVICES 3.1%
579,148 Express Scripts, Inc.* 36,023,006
405,685 Lincare Holdings, Inc.* 16,653,369
------------
52,676,375
------------
HOME BUILDING 7.7%
501,633 D.R. Horton, Inc. 18,169,147
441,350 Hovnanian Enterprises, Inc., Class A* 22,597,120
685,435 M.D.C. Holdings, Inc. 54,073,967
40,373 NVR, Inc.* 35,728,086
------------
130,568,320
------------
INVESTMENT MANAGEMENT COMPANIES 1.0%
600 Brantley Mezzanine Finance,
LLC* ** ***+ 60,000
441,900 SEI Investments Co. 16,606,602
------------
16,666,602
------------
LEISURE TIME 2.8%
539,040 Life Time Fitness, Inc.* 17,863,786
854,520 SCP Pool Corp. 29,848,384
------------
47,712,170
------------
MACHINERY 1.4%
587,095 Engineered Support Systems, Inc. 24,094,379
------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 1.3%
15,661 ICU Medical, Inc.* 450,410
1,576,975 PSS World Medical, Inc.* 21,036,847
------------
21,487,257
------------
MEDICAL SERVICES 0.5%
302,380 PRA International* 9,165,138
------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 6.6%
1,705,275 Anworth Mortgage Asset Corp. 14,102,624
657,675 Bimini Mortgage Management, Inc., Class A 7,431,728
1,607,750 HomeBanc Corp. 12,411,830
858,400 MortgageIT Holdings, Inc. 12,206,447
685,825 Redwood Trust, Inc. 33,337,953
1,258,535 Saxon Capital, Inc. 14,913,640
753,475 Thornburg Mortgage, Inc. 18,882,084
------------
113,286,306
------------
28
SEPTEMBER 30, 2005
SHARES VALUE
- ------ --------------
RETAIL 10.6%
755,220 Dollar Tree Stores, Inc.* $ 16,350,513
824,905 Global Imaging Systems, Inc.* 28,088,015
311,275 Lithia Motors, Inc., Class A 9,020,750
647,970 Michaels Stores, Inc. 21,421,888
833,039 MSC Industrial Direct Co., Inc., Class A 27,631,904
2,056,170 O'Reilly Automotive, Inc.* 57,942,871
586,325 PETCO Animal Supplies, Inc.* 12,406,637
374,220 Sonic Automotive, Inc. 8,315,168
--------------
181,177,746
--------------
SAVINGS AND LOANS 2.9%
1,405,298 Commercial Capital Bancorp, Inc. 23,890,066
2,589,716 W Holding Co., Inc. 24,757,685
--------------
48,647,751
--------------
TRUCKERS 1.1%
782,174 Knight Transportation, Inc. 19,053,759
--------------
TOTAL COMMON STOCKS
(COST $1,264,182,849) 1,637,522,242
--------------
PRINCIPAL
AMOUNT VALUE
- --------- --------------
CORPORATE BONDS 0.2%
INVESTMENT MANAGEMENT COMPANIES 0.2%
$ 3,000,000 Brantley Mezzanine Finance, LLC, 10.00%,
9/21/09*** + $ 2,949,939
TOTAL CORPORATE BONDS (COST $2,949,939) 2,949,939
--------------
SHORT-TERM INVESTMENTS 4.4%
REPURCHASE AGREEMENT 4.4%
74,776,000 Repurchase Agreement dated 9/30/05, 2.85% due
10/3/05 with State Street Bank and Trust Co.
collateralized by $53,905,000 of United States
Treasury Bonds 9.25% due 2/15/16; value:
$76,275,575; repurchase proceeds: $74,793,759
(cost $74,776,000) 74,776,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(COST $74,776,000) 74,776,000
--------------
TOTAL INVESTMENTS
(COST $1,341,908,788) 100.6% 1,715,248,181
LIABILITIES LESS OTHER ASSETS (0.6)% (10,557,758)
--------------
NET ASSETS 100.0% $1,704,690,423
==============
* Non-income producing.
** Common units.
*** Security was fair valued under procedures adopted by the Board of
Directors. (see Note 2).
+ Security purchased in a private placement transaction or under Rule 144A of
the Securities Act of 1933 (see Note 9).
++ Affiliated company (see Note 8).
See notes to financial statements.
29
GLOBAL SCIENCE & TECHNOLOGY FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE
- ------ -----------
COMMON STOCKS 91.6%
AEROSPACE 1.1%
6,175 Argon ST, Inc.* $ 181,175
26,000 MTC Technologies, Inc.* 831,480
-----------
1,012,655
-----------
AUTO COMPONENTS 0.4%
21,000 Sundaram Clayton Ltd. (India) 397,803
-----------
BANKS 1.2%
71,225 HDFC Bank Ltd. (India) 1,114,364
-----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 1.5%
8,420 Celgene Corp.* 457,375
33,375 Neurochem, Inc.* (Canada) 425,531
33,900 QIAGEN N.V.* (Netherlands) 442,056
-----------
1,324,962
-----------
BUILDING PRODUCTS 0.5%
23,575 IVRCL Infrastructure and Projects
Ltd. (India) 438,105
-----------
CASINOS AND GAMBLING 0.7%
25,077 Shuffle Master, Inc.* 662,785
-----------
CHEMICALS 0.4%
11,350 Cabot Microelectronics Corp.* 333,463
-----------
COMMERCIAL SERVICES AND SUPPLIES 1.2%
200,800 Allen-Vanguard Corp.* (Canada) 271,492
17,325 CoStar Group, Inc.* 809,424
-----------
1,080,916
-----------
COMMUNICATIONS TECHNOLOGY 2.0%
64,575 Novatel Wireless, Inc.* 934,400
19,250 QUALCOMM, Inc. 861,438
-----------
1,795,838
-----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 13.7%
52,275 Akamai Technologies, Inc.* 833,786
6,550 CACI International, Inc., Class A* 396,930
53,660 Cognizant Technology Solutions Corp.,
Class A* 2,500,019
30,717 EPIQ Systems, Inc.* 670,245
46,105 Kanbay International, Inc.* 866,774
25,000 Merge Technologies, Inc.* 427,250
24,400 Open Solutions, Inc.* 532,408
98,900 Opnet Technologies, Inc.* 832,738
7,135 PDF Solutions, Inc.* 118,441
48,935 QLogic Corp.* 1,673,577
47,300 SRA International, Inc., Class A* 1,678,204
34,095 Unica Corp.* 374,363
25,255 Websense, Inc.* 1,293,309
-----------
12,198,044
-----------
COMPUTER TECHNOLOGY 0.5%
15,025 Trident Microsystems, Inc.* 477,945
-----------
COMPUTERS AND PERIPHERALS 0.3%
3,367,000 Anwell Technologies Ltd. (Singapore) 238,696
-----------
DIVERSIFIED FINANCIAL SERVICES 1.5%
40,115 Housing Development Finance Corp.
Ltd. (India) 949,040
253,285 Infrastructure Development Finance
Company Ltd.* (India) 408,645
-----------
1,357,685
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES 1.3%
7,100 Astra Microwave Products Ltd. (India) $ 404,399
13,515 Option N.V.* (Belgium) 740,897
-----------
1,145,296
-----------
DRUGS AND PHARMACEUTICALS 2.6%
21,400 Angiotech Pharmaceuticals, Inc.* (Canada) 300,028
106,625 ISTA Pharmaceuticals, Inc.* 707,990
12,250 Taro Pharmaceuticals Industries
Ltd.* (Israel) 315,192
14,500 Teva Pharmaceutical Industries Ltd.
ADR (Israel) 484,590
120,318 United Drug plc (Ireland) 483,119
-----------
2,290,919
-----------
ELECTRICAL AND ELECTRONICS 2.0%
15,845 Multi-Fineline Electronix, Inc.* 463,783
49,525 Power Integrations, Inc.* 1,077,169
34,575 TTM Technologies, Inc.* 247,211
-----------
1,788,163
-----------
ELECTRICAL EQUIPMENT 1.8%
608,000 Magnecomp International Ltd.
(Singapore) 314,291
1,183,300 Unisteel Technology Ltd. (Singapore) 1,272,290
-----------
1,586,581
-----------
ELECTRICAL EQUIPMENT AND COMPONENTS 0.4%
26,715 Color Kinetics, Inc.* 400,725
-----------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 2.5%
1,016,000 Innovalues Precision Ltd. (Singapore) 327,122
367,000 Jurong Technologies Industrial Corp.
Ltd. (Singapore) 446,636
360,000 MFS Technology Ltd. (Singapore) 128,670
64,625 Phoenix PDE Co. Ltd. (Korea) 338,143
2,275 Samsung Electronics Co.
Ltd. GDR (Korea) 647,238
43,000 Venture Corp. Ltd. (Singapore) 368,346
-----------
2,256,155
-----------
ELECTRONICS 1.3%
29,375 CyberOptics Corp.* 409,194
24,925 Nu Horizons Electronics Corp.* 180,457
17,925 Supertex, Inc.* 537,571
-----------
1,127,222
-----------
ELECTRONICS--MEDICAL SYSTEMS 1.2%
15,025 Intuitive Surgical, Inc.* 1,101,182
-----------
30
SEPTEMBER 30, 2005
SHARES VALUE
- ------ -----------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 21.5%
97,700 Advanced Power Technology, Inc.* $ 845,105
18,725 Altera Corp.* 357,835
114,150 ASE Test Ltd.* (Taiwan) 715,720
48,717 Integrated Device Technology, Inc.* 523,221
124,850 Leadis Technology, Inc.* 855,222
128,800 Micrel, Inc.* 1,446,424
30,510 Microchip Technology, Inc. 918,961
44,800 MIPS Technologies, Inc.* 305,984
64,575 National Semiconductor Corp. 1,698,322
33,325 Nova Measuring Instruments Ltd.* (Israel) 73,315
247,205 O2Micro International Ltd.*
(Cayman Islands) 3,891,007
189,545 PLX Technology, Inc.* 1,580,805
8,475 PortalPlayer, Inc.* 232,469
20,200 SigmaTel, Inc.* 408,848
85,450 Silicon Laboratories, Inc.* 2,596,826
47,993 SiRF Technology Holdings, Inc.* 1,446,029
43,250 Tessera Technologies, Inc.* 1,293,608
-----------
19,189,701
-----------
ELECTRONICS--TECHNOLOGY 0.5%
43,395 EFJ, Inc.* 446,535
-----------
FOOD AND DRUG RETAILING 1.0%
23,600 Sugi Pharmacy Co. Ltd. (Japan) 866,303
-----------
HEALTH CARE EQUIPMENT AND SUPPLIES 4.1%
14,800 Biacore International AB (Sweden) 396,813
63,925 Cytori Therapeutics, Inc.* (Germany) 328,921
1,911,270 LMA International N.V.* (Singapore) 869,426
64,005 RaySearch Laboratories AB* (Sweden) 1,398,444
2,590 Straumann Holding AG (Switzerland) 693,902
-----------
3,687,506
-----------
HEALTH CARE PROVIDERS AND SERVICES 0.9%
15,500 Icon plc ADR* (Ireland) 775,000
-----------
INTERNET AND CATALOG RETAIL 0.6%
20,000 Submarino S.A. GDR* *** (Brazil) 515,044
-----------
INTERNET SOFTWARE AND SERVICES 0.9%
230,625 Opera Software ASA* (Norway) 802,308
-----------
MACHINERY 3.8%
14,750 ADP Engineering Co. Ltd.* (Korea) 118,311
59,585 Bharat Forge Ltd. (India) 475,311
504,000 First Engineering Ltd. (Singapore) 390,052
3,767,890 MMI Holdings Ltd. (Singapore) 1,291,059
47,700 Pason Systems, Inc. (Canada) 1,116,505
-----------
3,391,238
-----------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 7.6%
106,950 Abaxis, Inc.* 1,395,698
27,675 Cyberonics, Inc.* 825,822
44,525 Endologix, Inc.* 226,187
144,125 Enpath Medical, Inc.* 1,138,588
696 ICU Medical, Inc.* 20,017
30,180 Kinetic Concepts, Inc.* 1,714,224
43,225 NuVasive, Inc.* 810,036
7,695 Techne Corp.* 438,461
22,600 VNUS Medical Technologies, Inc.* 235,492
-----------
6,804,525
-----------
MEDICAL SERVICES 0.5%
14,350 PRA International* 434,947
-----------
MISCELLANEOUS MATERIALS AND COMMODITIES 0.8%
26,625 Symyx Technologies, Inc.* $ 695,445
-----------
PRODUCTION TECHNOLOGY EQUIPMENT 2.3%
162,930 inTEST Corp.* 653,349
85,825 Intevac, Inc.* 884,856
24,325 Nanometrics, Inc.* 284,602
19,850 Rudolph Technologies, Inc.* 267,380
-----------
2,090,187
-----------
REAL ESTATE 0.4%
58,550 Mahindra Gesco Developers Ltd.* (India) 365,463
-----------
SECURITIES BROKERAGE AND SERVICES 0.2%
7,475 optionsXpress Holdings, Inc. 142,324
-----------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 3.5%
5,750 austriamicrosystems AG* (Austria) 266,342
55,525 CSR plc* (United Kingdom) 654,001
10,000 Micronas Semiconductor Holding
AG* (Switzerland) 427,273
26,940 PSi Technologies Holdings, Inc.
ADR* (Philippines) 26,671
18,525 SEZ Holding AG* (Switzerland) 458,026
656,000 Solomon Systech International
Ltd. (Hong Kong) 236,790
131,606 Taiwan Semiconductor Manufacturing Co.
Ltd. ADR (Taiwan) 1,081,798
-----------
3,150,901
-----------
SOFTWARE 3.5%
113,000 Hexaware Tech. Ltd. (India) 265,754
45,500 Infosys Technologies Ltd. (India) 2,606,065
3,000 NCsoft Corp.* (Korea) 246,957
-----------
3,118,776
-----------
TELECOMMUNICATIONS EQUIPMENT 0.3%
15,425 Applied Signal Technology, Inc. 294,309
-----------
TEXTILES, APPAREL AND LUXURY GOODS 0.3%
31,700 Bombay Dyeing and Manufacturing
Company Ltd. (India) 276,388
-----------
UTILITIES--TELECOMMUNICATIONS 0.8%
28,250 Nextel Partners, Inc., Class A* 709,075
-----------
TOTAL COMMON STOCKS
(COST $70,677,638) 81,885,479
-----------
31
GLOBAL SCIENCE & TECHNOLOGY FUND -- SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2005
(CONTINUED)
SHARES VALUE
- ------ --------
PREFERRED STOCKS 0.1%
COMMUNICATIONS TECHNOLOGY 0.0%
6,528 Xtera Communications, Inc.,
Series A-1 Pfd.* *** + $ 7,076
--------
DRUGS AND PHARMACEUTICALS 0.1%
283,018 Point Biomedical Corp.,
Series F Pfd.* *** + 120,000
--------
TOTAL PREFERRED STOCKS
(COST $157,076) 127,076
--------
LIMITED PARTNERSHIP INTEREST 0.1%
OTHER 0.1%
Montagu Newhall Global Partners II-B, L.P.* *** + 60,580
--------
TOTAL LIMITED PARTNERSHIP INTEREST
(COST $72,144) 60,580
--------
WARRANTS 0.0%
DRUGS AND PHARMACEUTICALS 0.0%
3,832 Acusphere, Inc. expiring 8/2/08* *** + --
768 Acusphere, Inc. expiring 10/20/08* *** + --
84,905 Point Biomedical Corp. expiring 2/16/12* *** + --
--------
TOTAL WARRANTS (COST $0) --
--------
PRINCIPAL
AMOUNT VALUE
- --------- -----------
SHORT-TERM INVESTMENTS 9.4%
REPURCHASE AGREEMENT 9.4%
$8,393,000 Repurchase Agreement dated 9/30/05, 2.85% due
10/3/05 with State Street Bank and Trust Co.
collateralized by $8,260,000 of United States
Treasury Notes 7.00% due 7/15/06; value:
$8,564,249; repurchase proceeds: $8,394,993+++
(cost $8,393,000) $ 8,393,000
TOTAL SHORT-TERM INVESTMENTS
(COST $8,393,000) 8,393,000
-----------
TOTAL INVESTMENTS
(COST $79,299,858) 101.2% 90,466,135
LIABILITIES LESS OTHER ASSETS (1.2)% (1,113,142)
-----------
NET ASSETS 100.0% $89,352,993
===========
* Non-income producing.
*** Security was fair valued under procedures adopted by the Board of
Directors. (see Note 2).
+ Security purchased in a private placement transaction or under Rule 144A of
the Securities Act of 1933 (see Note 9).
+++ All or a portion of this security has been designated as collateral for
purchase commitments.
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
See notes to financial statements.
At September 30, 2005, Wasatch Global Science & Technology Fund's investments,
excluding short-term investments, were in the following countries:
COUNTRY %
- ------- -----
Austria 0.3
Belgium 0.9
Brazil 0.6
Canada 2.6
Cayman Islands 4.7
Germany 0.4
Hong Kong 0.3
India 9.4
Ireland 1.5
Israel 1.1
Japan 1.1
Korea 1.6
Netherlands 0.5
Norway 1.0
Philippines 0.1
Singapore 6.9
Sweden 2.2
Switzerland 1.9
Taiwan 2.2
United Kingdom 0.8
United States 59.9
-----
TOTAL 100.0%
=====
32
HERITAGE GROWTH FUND -- SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2005
SHARES VALUE
- ------ -----------
COMMON STOCKS 94.2%
AIR TRANSPORT 0.4%
72,025 JetBlue Airways Corp.* $ 1,267,640
-----------
BANKS 8.3%
300,050 Commerce Bancorp, Inc. 9,208,535
164,150 Doral Financial Corp. 2,145,440
270,025 New York Community Bancorp, Inc. 4,428,410
259,325 North Fork Bancorporation, Inc. 6,612,788
111,975 TCF Financial Corp. 2,995,331
-----------
25,390,504
-----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 1.0%
72,375 Charles River Laboratories
International, Inc.* 3,156,998
-----------
COMMERCIAL SERVICES AND SUPPLIES 1.2%
26,075 eBay, Inc.* 1,074,290
65,237 Expedia, Inc.* 1,292,345
55,412 IAC/InterActiveCorp* 1,404,694
-----------
3,771,329
-----------
COMMUNICATIONS TECHNOLOGY 0.5%
19,750 L-3 Communications Holdings, Inc. 1,561,632
-----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 5.7%
135,050 Affiliated Computer Services, Inc., Class A* 7,373,730
34,500 Cognizant Technology Solutions Corp., Class A* 1,607,355
36,650 NAVTEQ Corp.* 1,830,668
195,175 QLogic Corp.* 6,674,985
-----------
17,486,738
-----------
DIVERSIFIED FINANCIAL SERVICES 1.9%
79,000 Countrywide Financial Corp. 2,605,420
135,000 Housing Development Finance Corp. Ltd. 3,193,828
-----------
5,799,248
-----------
DRUGS AND PHARMACEUTICALS 4.1%
31,600 Forest Laboratories, Inc.* 1,231,452
337,000 Teva Pharmaceutical Industries Ltd. ADR 11,262,540
-----------
12,493,992
-----------
EDUCATION SERVICES 5.1%
198,075 Apollo Group, Inc., Class A* 13,150,199
171,000 Corinthian Colleges, Inc.* 2,269,170
-----------
15,419,369
-----------
ELECTRONICS 1.6%
121,275 Amphenol Corp., Class A 4,892,234
-----------
ELECTRONICS--MEDICAL SYSTEMS 0.9%
18,900 Medtronic, Inc. 1,013,418
39,750 Varian Medical Systems, Inc.* 1,570,523
-----------
2,583,941
-----------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 6.5%
167,650 Linear Technology Corp. 6,301,964
40,200 Marvell Technology Group Ltd.* 1,853,622
118,300 Maxim Integrated Products, Inc. 5,045,495
90,300 Microchip Technology, Inc. 2,719,836
147,500 National Semiconductor Corp. 3,879,250
-----------
19,800,167
-----------
ENERGY--MISCELLANEOUS 0.9%
73,500 Chesapeake Energy Corp. 2,811,375
-----------
FINANCE COMPANIES 1.6%
59,250 Capital One Financial Corp. $ 4,711,560
-----------
FINANCE--SMALL LOAN 1.1%
139,250 AmeriCredit Corp.* 3,323,898
-----------
FINANCIAL DATA PROCESSING SERVICES AND
SYSTEMS 1.3%
86,550 Fiserv, Inc.* 3,970,048
-----------
FINANCIAL INFORMATION SERVICES 0.5%
30,075 Moody's Corp. 1,536,231
-----------
FINANCIAL--MISCELLANEOUS 2.0%
67,500 Brown & Brown, Inc. 3,354,075
31,750 Fidelity National Financial, Inc. 1,413,510
28,250 First American Corp. 1,290,178
-----------
6,057,763
-----------
HEALTH CARE EQUIPMENT AND SUPPLIES 1.1%
12,725 Straumann Holding AG 3,409,228
-----------
HEALTH CARE FACILITIES 2.4%
161,950 Health Management Associates, Inc., Class A 3,800,966
66,525 Quest Diagnostics, Inc. 3,362,174
-----------
7,163,140
-----------
HEALTH CARE MANAGEMENT SERVICES 5.9%
98,000 AMERIGROUP Corp.* 1,873,760
134,225 Caremark Rx, Inc.* 6,701,854
31,000 PacifiCare Health Systems* 2,473,180
89,000 WellPoint, Inc.* 6,747,980
-----------
17,796,774
-----------
HEALTH CARE SERVICES 1.2%
31,850 Express Scripts, Inc.* 1,981,070
36,925 Lincare Holdings, Inc.* 1,515,771
-----------
3,496,841
-----------
HOME BUILDING 8.1%
133,951 D.R. Horton, Inc. 4,851,705
61,775 Hovnanian Enterprises, Inc., Class A* 3,162,880
93,650 Lennar Corp., Class A 5,596,524
30,225 M.D.C. Holdings, Inc. 2,384,450
6,545 NVR, Inc.* 5,791,998
63,150 Pulte Homes, Inc. 2,710,398
-----------
24,497,955
-----------
INVESTMENT MANAGEMENT COMPANIES 0.8%
62,175 SEI Investments Co. 2,336,536
-----------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 3.5%
51,150 Biomet, Inc. 1,775,416
72,075 Kinetic Concepts, Inc.* 4,093,860
39,350 St. Jude Medical, Inc.* 1,841,580
44,575 Zimmer Holdings, Inc.* 3,070,772
-----------
10,781,628
-----------
OIL AND GAS 2.5%
78,875 CNX Gas Corp.* *** + 1,616,938
23,000 Plains Exploration & Production Co.* 984,860
89,750 Ultra Petroleum Corp.* 5,104,980
-----------
7,706,778
-----------
33
HERITAGE GROWTH FUND -- SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2005
SHARES VALUE
- ------ ------------
PRODUCTION TECHNOLOGY
EQUIPMENT 1.3%
83,800 KLA-Tencor Corp. $ 4,086,088
------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 0.3%
21,100 iStar Financial, Inc. 853,073
------------
RECREATIONAL VEHICLES AND BOATS 2.5%
159,575 Harley-Davidson, Inc. 7,729,813
------------
RETAIL 14.3%
54,675 Amazon.Com, Inc.* 2,476,778
48,925 AutoZone, Inc.* 4,073,006
209,875 Bed Bath & Beyond, Inc.* 8,432,777
57,912 Best Buy Co., Inc. 2,520,909
77,450 CDW Corp. 4,563,354
50,775 Chico's FAS, Inc.* 1,868,520
233,075 Dollar Tree Stores, Inc.* 5,046,074
788,500 Esprit Holdings Ltd. 5,895,631
109,000 Home Depot, Inc. 4,157,260
45,250 Lowe's Companies, Inc. 2,914,100
74,050 TJX Companies, Inc. 1,516,544
------------
43,464,953
------------
SAVINGS AND LOANS 1.5%
77,750 Golden West Financial Corp. 4,617,572
------------
SOFTWARE 2.0%
85,750 Infosys Technologies Ltd. 4,911,429
16,425 Infosys Technologies Ltd. ADR 1,220,049
------------
6,131,478
------------
TEXTILES, APPAREL AND LUXURY GOODS 1.6%
77,475 Coach, Inc.* 2,429,616
9,000 Puma AG Rudolf Dassler Sport 2,442,787
------------
4,872,403
------------
TRUCKERS 0.6%
102,000 J.B. Hunt Transport Services, Inc. 1,939,020
------------
TOTAL COMMON STOCKS
(COST $266,961,391) 286,917,947
------------
PRINCIPAL
AMOUNT VALUE
- --------- ------------
SHORT-TERM INVESTMENTS 6.3%
REPURCHASE AGREEMENT 6.3%
$19,245,000 Repurchase Agreement dated 9/30/05, 2.85% due
10/3/05 with State Street Bank and Trust Co.
collateralized by $13,815,000 of United States
Treasury Bonds 8.75% due 5/15/17; value:
$19,634,569; repurchase proceeds: $19,249,571
(cost $19,245,000) $ 19,245,000
------------
TOTAL SHORT-TERM INVESTMENTS (COST $19,245,000) 19,245,000
------------
TOTAL INVESTMENTS (COST $286,206,391) 100.5% 306,162,947
------------
LIABILITIES LESS OTHER ASSETS (0.5)% (1,492,849)
------------
NET ASSETS 100.0% $304,670,098
============
* 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).
ADR American Depositary Receipt.
See notes to financial statements.
34
INTERNATIONAL GROWTH FUND -- SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2005
SHARES VALUE
- ------ -----------
COMMON STOCKS 93.5%
AIRLINES 1.2%
124,300 Gol Linhas Aereas Inteligentes S.A. ADR (Brazil) $ 4,033,535
-----------
BANKS 2.7%
326,180 HDFC Bank Ltd. (India) 5,103,312
69,175 Musashino Bank Ltd. (Japan) 4,244,276
-----------
9,347,588
-----------
BEVERAGES 1.2%
158,080 Kibun Food Chemifa Co. Ltd. (Japan) 4,077,239
-----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 3.4%
35,660 Actelion Ltd.* (Switzerland) 3,843,593
775,000 Ark Therapeutics Group plc* (United Kingdom) 1,431,427
155,000 Neurochem, Inc.* (Canada) 1,976,250
332,375 QIAGEN N.V.* (Netherlands) 4,334,170
-----------
11,585,440
-----------
COMMERCIAL SERVICES AND SUPPLIES 6.4%
13,999 Acadomia Group (France) 470,219
613,730 Bloomsbury Publishing plc (United Kingdom) 3,598,177
1,486 En-Japan, Inc. (Japan) 6,318,116
350,200 Park24 Co. Ltd. (Japan) 7,475,661
87,805 Techem AG* (Germany) 3,789,576
-----------
21,651,749
-----------
COMPUTERS AND PERIPHERALS 1.6%
137,800 Logitech International S.A.* (Switzerland) 5,573,753
-----------
DIVERSIFIED FINANCIAL SERVICES 5.0%
218,500 AWD Holding AG (Germany) 8,384,772
146,850 Home Capital Group, Inc. (Canada) 4,742,400
1,496,350 Nissin Co Ltd. (Japan) 1,988,986
1,496,350 Nissin Co Ltd. Bonus Shares* (Japan) 1,988,986
-----------
17,105,144
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES 2.4%
82,265 Option N.V.* (Belgium) 4,509,796
1,714,845 Zyxel Communications Corp. (Taiwan) 3,565,542
-----------
8,075,338
-----------
DRUGS AND PHARMACEUTICALS 5.7%
336,575 Angiotech Pharmaceuticals, Inc.* (Canada) 4,692,688
59,125 Fuji Pharmaceutical Co. Ltd. (Japan) 565,227
116,850 Sawai Pharmaceutical Co. Ltd. (Japan) 4,155,581
2,870,000 SkyePharma plc* (United Kingdom) 2,074,814
120,000 Sun Pharmaceutical Industries Ltd. (India) 1,816,589
1,501,312 United Drug plc (Ireland) 6,028,293
-----------
19,333,192
-----------
ELECTRIC UTILITIES 1.0%
113,150 Red Electrica de Espana (Spain) 3,230,688
-----------
ELECTRICAL EQUIPMENT 0.8%
2,406,700 Unisteel Technology Ltd. (Singapore) 2,587,697
-----------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.5%
1,393,015 Jurong Technologies Industrial Corp. Ltd.
(Singapore) 1,695,286
-----------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 0.7%
16,910 ASM International N.V.* (Netherlands) $ 238,600
134,375 O2Micro International Ltd.* (Cayman Islands) 2,115,063
-----------
2,353,663
-----------
FOOD AND DRUG RETAILING 2.5%
52,870 Nihon Chouzai Co. Ltd. (Japan) 1,582,377
51,750 Sugi Pharmacy Co. Ltd. (Japan) 1,899,626
2,332,625 Wumart Stores, Inc. (China) 5,021,830
-----------
8,503,833
-----------
HEALTH CARE EQUIPMENT AND
SUPPLIES 5.3%
145,640 Elekta AB, Class B (Sweden) 6,664,544
3,673,235 LMA International N.V.* (Singapore) 1,670,934
2,016,000 Moulin International Holdings Ltd.*** (Hong Kong) 2,599
25,310 Nakanishi, Inc. (Japan) 2,637,944
26,155 Straumann Holding AG (Switzerland) 7,007,337
-----------
17,983,358
-----------
HEALTH CARE PROVIDERS AND SERVICES 6.1%
100,520 Eurofins Scientific* (France) 4,245,292
69,885 Generale de Sante (France) 2,528,035
109,325 Icon plc ADR* (Ireland) 5,466,250
144,015 Orpea*(France) 8,497,461
-----------
20,737,038
-----------
HOTELS, RESTAURANTS AND LEISURE 1.6%
97,675 Fairmont Hotels & Resorts, Inc. (Canada) 3,262,843
343,984 Hotel Leelaventure Ltd. (India) 2,031,263
-----------
5,294,106
-----------
HOUSEHOLD DURABLES 4.5%
229,200 Desarrolladora Homex S.A. de C.V. ADR* (Mexico) 7,038,732
2,419,950 HTL International Holdings Ltd.*** (Singapore) 1,844,234
55,240 Joint Corp. (Japan) 2,572,356
1,458,175 Techtronic Industries Company Ltd. (Hong Kong) 3,712,593
-----------
15,167,915
-----------
HOUSEHOLD PRODUCTS 1.2%
110,000 Milbon Co. Ltd. (Japan) 3,921,655
-----------
INFORMATION TECHNOLOGY CONSULTING
AND SERVICE 3.5%
249,915 Indra Sistemas S.A. (Spain) 5,483,175
229,500 Intec, Inc. (Japan) 2,553,592
3,250 NIWS Co. Ltd. (Japan) 3,890,845
-----------
11,927,612
-----------
INTERNET AND CATALOG RETAIL 2.9%
1,903,390 Carphone Warehouse Group plc (United Kingdom) 6,678,738
119,675 Submarino S.A. GDR* *** (Brazil) 3,081,894
-----------
9,760,632
-----------
LEISURE EQUIPMENT AND PRODUCTS 3.0%
288,375 Mega Bloks, Inc.* (Canada) 5,994,982
68,675 Rodriguez Group (France) 4,202,361
-----------
10,197,343
-----------
MACHINERY 1.1%
289,540 Bharat Forge Ltd. (India) 2,309,666
25,000 Takeuchi Manufacturing Co. Ltd. (Japan) 1,560,299
-----------
3,869,965
-----------
35
INTERNATIONAL GROWTH FUND--SCHEDULE OF INVESTMENTS (CONTINUED)
SHARES VALUE
- ------ ------------
MEDIA 1.3%
158,530 Alliance Atlantis Communications, Inc.,
Class B* (Canada) $ 4,382,374
------------
OFFICE ELECTRONICS 1.4%
49,050 Neopost S.A. (France) 4,755,764
------------
OIL AND GAS 5.1%
253,520 Cairn Energy plc* (United Kingdom) 8,766,038
645,575 Soco International plc* (United Kingdom) 8,514,553
------------
17,280,591
------------
PHARMACEUTICALS 0.5%
190,820 Sigma Co. Ltd. (Australia) 1,789,371
------------
REAL ESTATE 1.8%
5,509,502 Far East Consortium International Ltd.
(Hong Kong) 2,219,540
111,827 Foncia Groupe (France) 3,761,588
------------
5,981,128
------------
RETAIL 8.3%
26,840 Bijou Brigitte AG (Germany) 6,017,807
5,003,100 Bonjour Holdings Ltd. (Hong Kong) 1,725,296
567,000 Esprit Holdings Ltd. (Hong Kong) 4,239,471
30,270 Gulliver International Co. Ltd. (Japan) 3,197,535
15,554,365 Peace Mark Holdings Ltd. (Hong Kong) 3,970,252
74,000 Point, Inc. (Japan) 3,778,169
1,599,697 Pumpkin Patch Ltd. (New Zealand) 3,627,182
512,710 Truworths International Ltd. (South Africa) 1,634,552
------------
28,190,264
------------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 5.1%
498,400 CSR plc* (United Kingdom) 5,870,405
95,425 Disco Corp. (Japan) 3,964,841
61,000 Micronas Semiconductor Holding AG* (Switzerland) 2,606,374
112,165 SEZ Holding AG* (Switzerland) 2,773,251
5,620,220 Solomon Systech International Ltd. (Hong Kong) 2,028,673
------------
17,243,544
------------
SOFTWARE 0.3%
440,000 Hexaware Tech. Ltd. (India) 1,034,793
------------
TEXTILES, APPAREL AND LUXURY GOODS 4.0%
3,305,620 Li Ning Co. Ltd. (Hong Kong) 1,960,250
77,970 Pantaloon Retail India Ltd. (India) 3,345,994
21,900 Puma AG Rudolf Dassler Sport (Germany) 5,944,116
268,425 Ted Baker plc (United Kingdom) 2,281,306
------------
13,531,666
------------
WIRELESS TELECOMMUNICATION SERVICES 1.4%
901,900 Virgin Mobile Holdings plc (United Kingdom) 4,691,308
------------
TOTAL COMMON STOCKS
(COST $229,681,954) 316,894,572
------------
WARRANTS 0.0%
MACHINERY 0.0%
1,379 Bharat Forge Ltd.
expiring 9/30/06* *** (India) 17,345
------------
TOTAL WARRANTS (COST $0) 17,345
------------
PRINCIPAL
AMOUNT VALUE
- --------- -------------
SHORT-TERM INVESTMENTS 7.2%
REPURCHASE AGREEMENT 7.2%
$24,428,000 Repurchase Agreement dated 9/30/05, 2.85% due
10/3/05 with State Street Bank and Trust Co.
collateralized by $18,050,000 of United States
Treasury Bonds 8.125% due 8/15/19; value:
$24,920,281; repurchase proceeds: $24,433,802
(cost $24,428,000) $ 24,428,000
------------
TOTAL SHORT-TERM INVESTMENTS (COST $24,428,000) 24,428,000
------------
TOTAL INVESTMENTS (COST $254,109,954) 100.7% 341,339,917
LIABILITIES LESS OTHER ASSETS (0.7)% (2,547,756)
------------
NET ASSETS 100.0% $338,792,161
============
* Non-income producing.
*** Security was fair valued under procedures adopted by the
Board of Directors (see Note 2).
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
See notes to financial statements.
36
SEPTEMBER 30, 2005
At September 30, 2005, Wasatch International Growth Fund's investments,
excluding short-term investments, were in the following countries:
COUNTRY %
- ------- ------
Australia 0.6
Belgium 1.4
Brazil 2.3
Canada 7.9
Cayman Islands 0.7
China 1.6
France 9.0
Germany 7.6
Hong Kong 6.3
India 4.9
Ireland 3.6
Japan 19.7
Mexico 2.2
Netherlands 1.4
New Zealand 1.1
Singapore 2.5
South Africa 0.5
Spain 2.7
Sweden 2.1
Switzerland 6.9
Taiwan 1.1
United Kingdom 13.9
-----
TOTAL 100.0%
=====
37
INTERNATIONAL OPPORTUNITIES FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE
- ------ ----------
COMMON STOCKS 93.1%
AUTO COMPONENTS 1.7%
58,750 ARB Corp. Ltd. (Australia) $ 134,030
93,050 Super Cheap Auto Group Ltd. (Australia) 207,312
6,000 Yutaka Giken Co. Ltd. (Japan) 166,373
----------
507,715
----------
AUTOMOBILES 0.6%
38,775 European Motor Holdings plc
(United Kingdom) 188,017
----------
BANKS 0.6%
8,450 Kas Bank N.V. (Netherlands) 178,690
----------
BEVERAGES 1.4%
16,025 Kibun Food Chemifa Co. Ltd. (Japan) 413,321
----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 0.6%
53,600 Ark Therapeutics Group plc* (United Kingdom) 98,999
6,800 Neurochem, Inc.* (Canada) 86,700
----------
185,699
----------
BUILDING PRODUCTS 0.9%
24,900 Fleetwood Corp. Ltd. (Australia) 124,632
8,300 Kitagawa Industries Co. Ltd. (Japan) 131,368
----------
256,000
----------
CHEMICALS 0.6%
25 Japanese Pure Chemical Co. Ltd. (Japan) 162,412
----------
COMMERCIAL SERVICES AND SUPPLIES 5.8%
3,275 Acadomia Group (France) 110,006
55,175 Allen-Vanguard Corp.* (Canada) 74,599
54,000 Bloomsbury Publishing plc (United Kingdom) 316,591
21,875 Carter & Carter Group plc* (United Kingdom) 150,041
171,500 Environmental Management Solutions, Inc.*
(Canada) 63,508
7,950 MegaStudy Co. Ltd.* (Korea) 342,075
849,000 Raffles Education Corp. Ltd. (Singapore) 431,346
29,525 Semcon AB* (Sweden) 228,351
----------
1,716,517
----------
COMPUTERS AND PERIPHERALS 0.4%
1,743,000 Anwell Technologies Ltd. (Singapore) 123,566
----------
CONSTRUCTION AND ENGINEERING 0.5%
86,050 Lycopodium Ltd. (Australia) 147,726
----------
CONSTRUCTION MATERIALS 0.9%
650 Getaz Romang Holding S.A. (Switzerland) 274,715
----------
DISTRIBUTORS 0.8%
76,525 Commercial Solutions, Inc.* (Canada) 230,656
----------
DIVERSIFIED FINANCIAL SERVICES 8.4%
238,600 Acta Holdings ASA (Norway) 662,586
5,675 ADDENDA Capital, Inc. (Canada) 151,503
29,185 Caliber Global Investment Ltd.* (United Kingdom) 328,039
46,175 Credit Corp. Group Ltd. (Australia) 130,357
17,890 International Maritime Exchange ASA (Norway) 230,657
28,475 IOOF Holdings Ltd. (Australia) 157,734
53,450 New Zealand Exchange Ltd. (New Zealand) 270,554
65 Osaka Securities Exchange Co. (Japan) 321,567
4,150 Oslo Bors Holdings ASA (Norway)*** 205,793
----------
2,458,790
----------
DRUGS AND PHARMACEUTICALS 1.7%
20,125 Meda AB, Class A (Sweden) $ 347,618
4,100 Sawai Pharmaceutical Co. Ltd. (Japan) 145,810
----------
493,428
----------
ELECTRICAL EQUIPMENT 2.1%
218,000 Magnecomp International Ltd. (Singapore) 112,690
5,400 Optoelectronics Co., Ltd. (Japan) 150,686
6,200 Phoenix Electric Co. Ltd. (Japan) 80,229
257,000 Unisteel Technology Ltd. (Singapore) 276,328
----------
619,933
----------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 4.3%
204,021 Chroma ATE, Inc. (Taiwan) 176,445
3,725 Core Logic, Inc. (Korea) 139,219
4,500 Enplas Corp. (Japan) 122,799
11,000 Horiba Ltd. (Japan) 264,349
265,000 MFS Technology Ltd. (Singapore) 94,715
18,600 Phoenix PDE Co. Ltd. (Korea) 97,322
72,000 Syntech Information Co., Ltd. (Taiwan) 151,657
60,100 TRL Electronics plc* (United Kingdom) 219,890
----------
1,266,396
----------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 0.5%
24,725 ASE Test Ltd.* (Taiwan) 155,026
----------
FOOD AND DRUG RETAILING 2.0%
328,000 Convenience Retail Asia Ltd. (Hong Kong) 100,424
3,400 Daikokutenbussan Company Ltd. (Japan) 122,412
6,490 Green Cross Coa Co. Ltd. (Japan) 231,378
4,500 Nihon Chouzai Co., Ltd. (Japan) 134,683
----------
588,897
----------
FOOD PRODUCTS 0.2%
28,125 CoolBrands International, Inc.* (Canada) 59,341
----------
HEALTH CARE EQUIPMENT AND SUPPLIES 6.8%
1,037,335 LMA International N.V.* (Singapore) 471,878
2,900 MANI, Inc. (Japan) 160,572
11,500 Miraca Holdings, Inc. (Japan) 264,216
1,600 Nakanishi, Inc. (Japan) 166,761
42,750 RaySearch Laboratories AB* (Sweden) 934,044
----------
1,997,471
----------
HOTELS, RESTAURANTS AND LEISURE 0.6%
3,800 Saint Marc Co. Ltd. (Japan) 180,299
----------
HOUSEHOLD DURABLES 3.1%
5,225 Beter Bed Holding N.V. (Netherlands) 186,561
40,800 Homebuy Group plc, Class A* (United Kingdom) 107,911
182,000 HTL International Holdings Ltd.*** (Singapore) 138,701
6,200 Joint Corp. (Japan) 288,715
7,680 Nihon Eslead Corp. (Japan) 179,155
----------
901,043
----------
HOUSEHOLD PRODUCTS 0.5%
5,000 Suruga Co. Ltd. (Japan) 138,644
----------
INSURANCE 1.0%
80,678 OAMPS Ltd. (Australia) 190,827
310,000 Pacific Century Insurance Holdings Ltd.
(Hong Kong) 113,896
----------
304,723
----------
INTERNET SOFTWARE AND SERVICES 1.0%
83,000 Opera Software ASA* (Norway) 288,744
----------
38
SEPTEMBER 30, 2005
SHARES VALUE
- ------ -----------
LEISURE EQUIPMENT AND PRODUCTS 1.4%
1,775 CTS Eventim* (Germany) $ 82,156
19,175 KABE Husvagnar AB, Class B (Sweden) 342,331
-----------
424,487
-----------
MACHINERY 7.2%
11,350 ADP Engineering Co. Ltd.* (Korea) 91,039
21,000 Asahi Diamond Industrial Co. (Japan) 163,600
90,200 Awea Mechantronic Co. Ltd. (Taiwan) 126,933
47,940 BASSO Industry Corp. (Taiwan) 113,402
225,000 First Engineering Ltd. (Singapore) 174,130
1,239,625 MMI Holdings Ltd. (Singapore) 424,755
17,500 Pason Systems, Inc. (Canada) 409,620
8,100 Takeuchi Manufacturing Co. Ltd. (Japan) 505,537
32,075 Titan Europe plc (United Kingdom) 125,555
-----------
2,134,571
-----------
MARINE 1.1%
339,000 Ezra Holdings Ltd. (Singapore) 324,440
-----------
MEDIA 1.1%
15,700 Arbeit-Times Co. Ltd. (Japan) 111,116
51,910 Metal Bulletin plc (United Kingdom) 212,121
-----------
323,237
-----------
METALS AND MINING 6.8%
71,325 Agincourt Resources Ltd.* (Australia) 81,631
117,315 Avocet Mining plc* (United Kingdom) 212,027
1,498,950 CBH Resources Ltd. (Australia) 337,391
153,550 Consolidated Minerals Ltd. (Australia) 496,753
193,370 Independence Group NL (Australia) 236,066
66,700 Jubilee Mines NL (Australia) 389,834
80,250 Mincor Resources NL (Australia) 45,617
15,525 Shore Gold, Inc.* (Canada) 89,578
46,475 Troy Resources NL (Australia) 99,289
-----------
1,988,186
-----------
OIL AND GAS 9.6%
141,325 ARC Energy Ltd.* (Australia) 235,072
15,750 Blackrock Ventures, Inc.* (Canada) 140,383
75,225 Bow Valley Energy Ltd.* (Canada) 378,328
30,702 Det Norske Oljeselskap ASA (Norway) 193,471
77,450 Dragon Oil plc* (Ireland) 265,616
44,125 JKX Oil and Gas plc (United Kingdom) 166,499
17,225 Melrose Resources plc (United Kingdom) 129,840
11,000 PA Resources AB* (Sweden) 161,125
22,940 Revus Energy ASA* (Norway) 199,512
68,750 Saxon Energy Services, Inc.* (Canada) 321,488
12,550 Soco International plc* (United Kingdom) 165,523
40,750 Sondex plc (United Kingdom) 167,057
130,975 Tap Oil Ltd.* (Australia) 293,806
-----------
2,817,720
-----------
PERSONAL PRODUCTS 0.5%
6,800 HABA Laboratories, Inc. (Japan) 161,919
-----------
REAL ESTATE 2.6%
125 Apamanshop Network Co. Ltd. (Japan) 163,952
9 Century 21 Real Estate of Japan Ltd. (Japan) 152,905
45 Creed Corp. (Japan) 151,716
25 CRESCENDO Investment Corp. (Japan) 133,583
16,500 Takara Leben Co. Ltd. (Japan) 168,922
-----------
771,078
-----------
RETAIL 4.4%
11,200 Jeans Mate Corp. (Japan) $ 135,071
23,900 New Wave Group AB, Class B (Sweden) 204,871
540,000 Peace Mark Holdings Ltd. (Hong Kong) 137,835
567,000 Pertama Holdings Ltd. (Singapore) 118,914
100,271 Pumpkin Patch Ltd. (New Zealand) 227,356
6,600 Tamron Co. Ltd. (Japan) 90,343
52,715 Topps Tiles plc (United Kingdom) 159,874
15 Village Vanguard Co. Ltd.* (Japan) 207,306
-----------
1,281,570
-----------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 2.1%
5,125 austriamicrosystems AG* (Austria) 237,391
17 Chip One Stop, Inc.* (Japan) 47,738
128,095 Holtek Semiconductor, Inc. (Taiwan) 148,223
1,850 MtekVision Co. Ltd. (Korea) 61,696
16,000 New Japan Radio Co., Ltd. (Japan) 112,113
-----------
607,161
-----------
SOFTWARE 2.9%
487,000 DMX Technologies* (Singapore) 210,026
11,200 Isra Vision Systems AG* (Germany) 271,986
16,000 Lectra (France) 80,980
9,100 Profdoc ASA (Norway) 131,906
91,350 SpringSoft, Inc. (Taiwan) 153,601
-----------
848,499
-----------
TEXTILES, APPAREL AND LUXURY GOODS 4.8%
103,750 Mulberry Group plc* (United Kingdom) 288,126
561,470 Ports Design Ltd. (Hong Kong) 636,956
12,900 Ted Baker plc (United Kingdom) 109,635
8,600 United Arrows Ltd. (Japan) 386,849
-----------
1,421,566
-----------
TRANSPORTATION INFRASTRUCTURE 1.6%
238,000 Goodpack Ltd. (Singapore) 233,402
10,000 Trancom Co. Ltd. (Japan) 230,634
-----------
464,036
-----------
TOTAL COMMON STOCKS
(COST $24,063,197) 27,406,239
-----------
39
INTERNATIONAL OPPORTUNITIES FUND -- SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2005
(CONTINUED)
SHARES VALUE
- ------ -----------
WARRANTS 0.0%
METALS AND MINING 0.0%
23,994 Equigold NL expiring 5/31/07* (Australia) $ 5,309
-----------
TRANSPORTATION INFRASTRUCTURE 0.0%
17,875 GoodpackLtd. expiring 4/13/07* (Singapore) 6,336
-----------
TOTAL WARRANTS
(COST $646) 11,645
-----------
TOTAL INVESTMENTS
(COST $24,063,843) 93.1% 27,417,884
OTHER ASSETS LESS LIABILITIES 6.9% 2,022,109
-----------
NET ASSETS 100.0% $29,439,993
===========
* Non-income producing.
*** Security was fair valued under procedures adopted by the Board of Directors
(see Note 2).
See notes to financial statements.
At September 30, 2005, Wasatch International Opportunities Fund's investments,
excluding short-term investments, were in the following countries:
COUNTRY %
- ------- -----
Australia 12.1
Austria 0.9
Canada 7.3
France 0.7
Germany 1.3
Hong Kong 3.6
Ireland 1.0
Japan 24.6
Korea 2.7
Netherlands 1.3
New Zealand 1.8
Norway 7.0
Singapore 11.4
Sweden 8.1
Switzerland 1.0
Taiwan 3.7
United Kingdom 11.5
-----
TOTAL 100.0%
=====
40
MICRO CAP FUND -- SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2005
SHARES VALUE
- ------ -----------
COMMON STOCKS 95.9%
AEROSPACE 0.8%
149,750 MTC Technologies, Inc.* $ 4,789,005
-----------
AUTO PARTS--AFTER MARKET 2.2%
196,575 Aftermarket Technology Corp.* 3,615,014
308,050 Keystone Automotive Industries, Inc.* 8,874,921
-----------
12,489,935
-----------
BANKS 2.8%
105,360 Bank of the Ozarks, Inc. 3,617,009
190,550 Franklin Bank Corp.* 3,077,382
207,125 Placer Sierra Bancshares 5,689,724
240,200 Wilshire Bancorp, Inc. 3,675,060
-----------
16,059,175
-----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 0.2%
312,675 Discovery Partners International, Inc.* 1,006,813
-----------
CHEMICALS 0.4%
87,825 Cabot Microelectronics Corp.* 2,580,298
-----------
COMMERCIAL INFORMATION SERVICES 0.5%
89,550 Morningstar, Inc.* 2,865,600
-----------
COMMERCIAL SERVICES AND SUPPLIES 8.3%
57,035 Acadomia Group (France) 1,915,776
972,825 Allen-Vanguard Corp.* (Canada) 1,315,308
1,022,460 AMN Healthcare Services, Inc.* 15,817,456
60,125 CRA International, Inc.* 2,506,611
137,075 Monro Muffler, Inc. 3,600,960
236,950 Providence Service Corp. (The)* 7,248,300
10,570,500 Raffles Education Corp. Ltd. (Singapore) 5,370,491
98,050 Resources Connection, Inc.* 2,905,222
857,000 SM&A* 7,550,170
-----------
48,230,294
-----------
COMMUNICATIONS TECHNOLOGY 0.6%
450,325 Arbinet-thexchange, Inc.* 3,242,340
-----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 4.3%
106,135 Captiva Software Corp.* 1,906,185
190,325 EPIQ Systems, Inc.* 4,152,892
189,235 Kanbay International, Inc.* 3,557,618
352,915 Kintera, Inc.* 1,076,390
135,295 Open Solutions, Inc.* 2,952,137
764,020 Opnet Technologies, Inc.* 6,433,048
148,267 Retalix Ltd.* (Israel) 3,577,683
125,605 Unica Corp.* 1,379,143
-----------
25,035,096
-----------
COMPUTER TECHNOLOGY 0.8%
185,955 FARGO Electronics, Inc.* 3,248,634
294,950 Qualstar Corp.* 1,159,153
-----------
4,407,787
-----------
DISTRIBUTORS 0.5%
1,000,000 Commercial Solutions, Inc.* ++ (Canada) 3,014,123
-----------
DIVERSIFIED FINANCIAL SERVICES 3.1%
1,912,095 Acta Holdings ASA (Norway) 5,309,835
125,075 ADDENDA Capital, Inc. (Canada) 3,339,067
147,100 Home Capital Group, Inc. (Canada) 4,750,474
347,336 U.S.I. Holdings Corp.* 4,511,895
-----------
17,911,271
-----------
DRUGS AND PHARMACEUTICALS 1.4%
453,803 ISTA Pharmaceuticals, Inc.* $ 3,013,252
227,650 Salix Pharmaceuticals Ltd.* 4,837,562
-----------
7,850,814
-----------
EDUCATION SERVICES 0.5%
73,946 Universal Technical Institute, Inc.* 2,633,217
-----------
ELECTRICAL AND ELECTRONICS 0.9%
133,972 Power Integrations, Inc.* 2,913,891
351,650 TTM Technologies, Inc.* 2,514,298
-----------
5,428,189
-----------
ELECTRICAL EQUIPMENT 0.5%
2,824,400 Unisteel Technology Ltd. (Singapore) 3,036,810
-----------
ELECTRICAL EQUIPMENT AND COMPONENTS 0.5%
207,470 Color Kinetics, Inc.* 3,112,050
-----------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.4%
7,203,225 MFS Technology Ltd. (Singapore) 2,574,556
-----------
ELECTRONICS 1.3%
531,600 Nu Horizons Electronics Corp.* 3,848,784
120,790 Supertex, Inc.* 3,622,492
-----------
7,471,276
-----------
ELECTRONICS--MEDICAL SYSTEMS 1.2%
189,510 EPIX Pharmaceuticals, Inc.* 1,459,227
650,575 IRIDEX Corp.* ++ 5,718,554
-----------
7,177,781
-----------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 13.5%
835,495 Advanced Power Technology, Inc.* ++ 7,227,032
410,225 ASE Test Ltd.* (Taiwan) 2,572,111
288,125 Excel Technology, Inc.* 7,401,931
145,860 Integrated Device Technology, Inc.* 1,566,536
658,850 Leadis Technology, Inc.* 4,513,122
907,975 Micrel, Inc.* 10,196,559
303,175 Nova Measuring Instruments Ltd.* (Israel) 666,985
1,074,940 O2Micro International Ltd.*
(Cayman Islands) 16,919,556
726,976 Pericom Semiconductor Corp.* 6,426,468
1,082,975 PLX Technology, Inc.* 9,032,011
99,000 SigmaTel, Inc.* 2,003,760
55,675 Silicon Laboratories, Inc.* 1,691,963
79,035 SiRF Technology Holdings, Inc.* 2,381,325
187,135 Tessera Technologies, Inc.* 5,597,208
-----------
78,196,567
-----------
ELECTRONICS--TECHNOLOGY 0.8%
450,940 EFJ, Inc.* 4,640,173
-----------
ENGINEERING AND CONTRACTING SERVICES 0.8%
140,939 Stantec, Inc.* (Canada) 4,367,700
-----------
ENTERTAINMENT 0.2%
69,760 Outdoor Channel Holdings, Inc.* 1,029,658
-----------
FINANCE COMPANIES 1.2%
272,705 United PanAm Financial Corp.* 6,809,444
-----------
FINANCIAL--MISCELLANEOUS 0.5%
111,200 First Cash Financial Services, Inc.* 2,926,784
-----------
FOOD AND DRUG RETAILING 0.3%
4,887,010 Convenience Retail Asia Ltd. (Hong Kong) 1,496,261
-----------
41
MICRO CAP FUND -- SCHEDULE OF INVESTMENTS (CONTINUED)
SHARES VALUE
- ------ ------------
HEALTH CARE EQUIPMENT AND SUPPLIES 1.6%
131,350 Biacore International AB (Sweden) $ 3,521,720
12,248,460 LMA International N.V.* (Singapore) 5,571,758
------------
9,093,478
------------
HEALTH CARE FACILITIES 2.5%
122,525 American Healthways, Inc.* 5,195,060
469,125 Capital Senior Living Corp.* 3,917,194
353,227 LHC Group, Inc.* 5,457,357
------------
14,569,611
------------
HEALTH CARE MANAGEMENT SERVICES 4.7%
65,150 AMERIGROUP Corp.* 1,245,668
712,950 AmSurg Corp.* 19,506,312
276,431 CorVel Corp.* 6,623,287
------------
27,375,267
------------
HEALTH CARE PROVIDERS AND SERVICES 2.4%
279,500 Icon plc ADR* (Ireland) 13,975,000
------------
HEALTH CARE SERVICES 0.0%
114,182 DrugMax, Inc.* 208,953
------------
HOME BUILDING 0.8%
60,950 Meritage Homes Corp.* 4,672,427
------------
HOUSEHOLD DURABLES 0.3%
117,188 easyhome Ltd. (Canada) 1,624,801
------------
HOUSEHOLD FURNISHINGS 0.3%
100,650 Select Comfort Corp.* 2,010,987
------------
MACHINERY 2.3%
162,900 Gulf Island Fabrication, Inc. 4,683,375
16,124,525 MMI Holdings Ltd. (Singapore) 5,525,034
126,400 Pason Systems, Inc. (Canada) 2,958,622
------------
13,167,031
------------
MEDICAL AND DENTAL INSTRUMENTS
AND SUPPLIES 6.3%
578,275 Abaxis, Inc.* 7,546,489
219,470 Cryocor, Inc.* 1,415,581
141,250 Cyberonics, Inc.* 4,214,900
340,000 Encision, Inc.* ++ 1,111,800
306,750 Endologix, Inc.* 1,558,290
436,825 Enpath Medical, Inc.* ++ 3,450,917
6,033 ICU Medical, Inc.* 173,509
265,850 IntraLase Corp.* 3,910,654
243,640 NuVasive, Inc.* 4,565,814
290,025 Thoratec Corp.* 5,150,844
347,655 VNUS Medical Technologies, Inc.* 3,622,565
------------
36,721,363
------------
MEDICAL SERVICES 3.1%
97,825 PRA International* 2,965,076
363,235 Stratagene Corp.* 3,272,747
632,862 U.S. Physical Therapy, Inc.* ++ 11,492,774
------------
17,730,597
------------
MISCELLANEOUS MATERIALS AND COMMODITIES 0.3%
77,600 Symyx Technologies, Inc.* 2,026,912
------------
OIL AND GAS 0.9%
778,000 ARC Energy Ltd.* (Australia) 1,294,079
518,425 Saxon Energy Services, Inc.* (Canada) 2,424,257
572,000 Tap Oil Ltd.* (Australia) 1,283,122
------------
5,001,458
------------
PRODUCTION TECHNOLOGY EQUIPMENT 2.7%
279,525 Entegris, Inc.* $ 3,158,632
528,550 inTEST Corp.* ++ 2,119,486
342,900 Intevac, Inc.* 3,535,299
641,000 LogicVision, Inc.* 1,153,800
259,600 Mattson Technology, Inc.* 1,949,596
165,400 Nanometrics, Inc.* 1,935,180
128,100 Rudolph Technologies, Inc.* 1,725,507
------------
15,577,500
------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 0.4%
88,950 Bimini Mortgage Management, Inc., Class A 1,005,135
116,200 Saxon Capital, Inc. 1,376,970
------------
2,382,105
------------
RETAIL 11.2%
225,925 AC Moore Arts & Crafts, Inc.* 4,333,242
597,090 Big 5 Sporting Goods Corp. 14,246,567
48,075 Bijou Brigitte AG (Germany) 10,778,915
202,700 Cost Plus, Inc.* 3,679,005
138,150 Global Imaging Systems, Inc.* 4,704,008
28,581 Golf Galaxy, Inc.* 455,581
147,925 Guitar Center, Inc.* 8,166,939
189,852 Hibbett Sporting Goods, Inc.* 4,224,207
224,225 Lithia Motors, Inc., Class A 6,498,040
248,975 Monsoon plc* (United Kingdom) 1,810,895
1,351,948 Pumpkin Patch Ltd. (New Zealand) 3,065,431
60,950 School Specialty, Inc.* 2,973,141
------------
64,935,971
------------
SAVINGS AND LOANS 0.7%
249,282 Commercial Capital Bancorp, Inc. 4,237,794
------------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 1.2%
381,400 CSR plc* (United Kingdom) 4,492,320
554,420 PSi Technologies Holdings, Inc. ADR*
(Philippines) 548,876
79,178 SEZ Holding AG* (Switzerland) 1,957,656
------------
6,998,852
------------
SHOES 1.0%
206,275 Kenneth Cole Productions, Inc., Class A 5,629,245
------------
TEXTILES, APPAREL AND LUXURY GOODS 1.3%
6,519,880 Ports Design Ltd. (Hong Kong) 7,396,442
------------
TRUCKERS 2.5%
201,875 PAM Transportation Services* 3,262,300
162,490 Universal Truckload Services, Inc.* 3,019,064
207,345 USA Truck, Inc.* 5,245,829
175,800 Vitran Corp., Inc. (Canada) 2,851,476
------------
14,378,669
------------
WHOLESALERS 0.9%
167,500 Beacon Roofing Supply, Inc.* 5,472,225
------------
TOTAL COMMON STOCKS
(COST $424,251,387) 555,569,705
------------
42
SEPTEMBER 30, 2005
SHARES VALUE
- ------ ----------
PREFERRED STOCKS 0.5%
DRUGS AND PHARMACEUTICALS 0.1%
1,886,792 POINT Biomedical Corp., Series F Pfd.* *** + $ 800,000
----------
HEALTH CARE SERVICES 0.4%
3,200 DrugMax, Inc. Convertible Pfd. PIPE,
Series A*** + 2,429,197
----------
TOTAL PREFERRED STOCKS
(COST $4,200,000) 3,229,197
----------
WARRANTS 0.0%
DRUGS AND PHARMACEUTICALS 0.0%
566,037 Point Biomedical Corp. expiring 2/16/12* *** + --
----------
HEALTH CARE SERVICES 0.0%
259,459 DrugMax, Inc. expiring 11/30/09* *** + --
----------
TOTAL WARRANTS (COST $0) --
----------
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
SHORT-TERM INVESTMENTS 2.9%
REPURCHASE AGREEMENT 2.9%
$16,557,000 Repurchase Agreement dated 9/30/05,
2.85% due 10/3/05 with State Street Bank
and Trust Co. collateralized by $11,670,000
of United States Treasury Bonds 8.875% due
2/15/19; value: $16,892,325; repurchase
proceeds: $16,560,932 (cost $16,557,000) $ 16,557,000
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $16,557,000) 16,557,000
------------
TOTAL INVESTMENTS
(COST $445,008,387) 99.3% 575,355,902
------------
OTHER ASSETS LESS LIABILITIES 0.7% 3,887,964
------------
NET ASSETS 100.0% $579,243,866
============
* Non-income producing.
*** Security was fair valued under procedures adopted by the Board of Directors
(see Note 2).
+ Security purchased in a private placement transaction or under Rule 144A of
the Securities Act of 1933 (see Note 9).
++ Affiliated company (see Note 8).
ADR American Depositary Receipt.
PIPE Private Investment in a Public Equity.
See notes to financial statements.
At September 30, 2005, Wasatch Micro Cap Fund's investments, excluding
short-term investments, were in the following countries:
COUNTRY %
- ------- ----
Australia 0.5
Canada 4.8
Cayman Islands 3.0
France 0.3
Germany 1.9
Hong Kong 1.6
Ireland 2.5
Israel 0.8
New Zealand 0.5
Norway 0.9
Philippines 0.1
Singapore 4.0
Sweden 0.6
Switzerland 0.4
Taiwan 0.5
United Kingdom 1.1
United States 76.5
-----
TOTAL 100.0%
=====
43
MICRO CAP VALUE FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE
- ------ ----------
COMMON STOCKS 93.9%
AIR TRANSPORT 0.8%
60,000 Air Methods Corp.* $ 679,200
----------
AUTO PARTS--AFTER MARKET 1.4%
30,000 Aftermarket Technology Corp.* 551,700
110,000 IMPCO Technologies, Inc.* 660,000
----------
1,211,700
----------
BANKS 6.4%
23,000 CommerceWest Bank* 350,750
23,100 Dearborn Bancorp, Inc.* 593,670
45,000 First State Financial Corp. 638,550
30,000 Intervest Bancshares Corp.* 658,500
30,000 Placer Sierra Bancshares 824,100
40,000 Security Business Bank of San Diego* 672,000
120,000 Wilshire Bancorp, Inc. 1,836,000
----------
5,573,570
----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 0.5%
142,600 Discovery Partners International, Inc.* 459,172
----------
BUILDING PRODUCTS 2.2%
127,120 Fleetwood Corp. Ltd. (Australia) 636,271
70,000 IVRCL Infrastructure and Projects Ltd.
(India) 1,300,842
----------
1,937,113
----------
COMMERCIAL INFORMATION SERVICES 0.5%
14,075 Morningstar, Inc.* 450,400
----------
COMMERCIAL SERVICES AND SUPPLIES 4.1%
350,000 Allen-Vanguard Corp.* (Canada) 473,217
84,100 AMN Healthcare Services, Inc.* 1,301,027
400,000 Environmental Management
Solutions, Inc.* (Canada) 148,123
15,000 MegaStudy Co. Ltd.* (Korea) 645,424
11,000 Monro Muffler, Inc. 288,970
80,000 SM&A* 704,800
----------
3,561,561
----------
COMMUNICATIONS TECHNOLOGY 0.3%
40,000 Arbinet-thexchange, Inc.* 288,000
----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 2.1%
55,000 Interactive Intelligence, Inc.* 346,005
20,900 Merge Technologies, Inc.* 357,181
136,045 Opnet Technologies, Inc.* 1,145,499
----------
1,848,685
----------
COMPUTER TECHNOLOGY 0.1%
17,400 Qualstar Corp.* 68,382
----------
COMPUTERS AND PERIPHERALS 0.5%
5,500,000 Anwell Technologies Ltd. (Singapore) 389,910
----------
CONSTRUCTION 1.3%
60,000 Perini Corp.* 1,092,000
----------
CONSTRUCTION AND ENGINEERING 0.7%
335,610 Lycopodium Ltd.* (Australia) 576,158
----------
DISTRIBUTORS 1.4%
400,000 Commercial Solutions, Inc.* (Canada) 1,205,649
----------
DIVERSIFIED FINANCIAL SERVICES 2.5%
300,000 Acta Holdings ASA (Norway) $ 833,092
25,000 ADDENDA Capital, Inc. (Canada) 667,413
20,000 Home Capital Group, Inc. (Canada) 645,883
----------
2,146,388
----------
DRUGS AND PHARMACEUTICALS 2.4%
127,166 ISTA Pharmaceuticals, Inc.* 844,382
22,500 NeoPharm, Inc.* 279,000
20,000 Salix Pharmaceuticals Ltd.* 425,000
20,000 Taro Pharmaceuticals Industries Ltd.* (Israel) 514,600
----------
2,062,982
----------
ELECTRICAL AND ELECTRONICS 0.4%
22,500 LeCroy Corp.* 334,125
----------
ELECTRICAL EQUIPMENT 1.0%
800,000 Unisteel Technology Ltd. (Singapore) 860,164
----------
ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.8%
600,000 Jurong Technologies Industrial Corp. Ltd.
(Singapore) 730,194
----------
ELECTRONICS--MEDICAL SYSTEMS 2.3%
25,000 EPIX Pharmaceuticals, Inc.* 192,500
204,900 IRIDEX Corp.* 1,801,071
----------
1,993,571
----------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 8.8%
303,035 Advanced Power Technology, Inc.* 2,621,253
170,000 Leadis Technology, Inc.* 1,164,500
165,550 Nova Measuring Instruments Ltd.* (Israel) 364,210
80,000 Pericom Semiconductor Corp.* 707,200
185,625 PLX Technology, Inc.* 1,548,112
43,000 SigmaTel, Inc.* 870,320
11,525 Tessera Technologies, Inc.* 344,713
----------
7,620,308
----------
ELECTRONICS--TECHNOLOGY 1.0%
81,780 EFJ, Inc.* 841,516
----------
FINANCE COMPANIES 2.6%
70,000 Dollar Financial Corp.* 839,300
67,500 Nicholas Financial, Inc. 684,450
30,000 United PanAm Financial Corp.* 749,100
----------
2,272,850
----------
FINANCIAL--MISCELLANEOUS 1.5%
50,000 First Cash Financial Services, Inc.* 1,316,000
----------
FOODS 0.7%
100,000 GeoPharma, Inc.* 345,000
40,000 Poore Brothers, Inc.* 218,000
----------
563,000
----------
HEALTH CARE EQUIPMENT AND SUPPLIES 1.4%
149,700 Cytori Therapeutics, Inc.* (Germany) 770,269
1,000,000 LMA International N.V.* (Singapore) 454,895
----------
1,225,164
----------
HEALTH CARE FACILITIES 1.1%
70,000 Capital Senior Living Corp.* 584,500
24,625 LHC Group, Inc.* 380,456
----------
964,956
----------
44
SEPTEMBER 30, 2005
SHARES VALUE
- ------ -----------
HEALTH CARE MANAGEMENT SERVICES 0.5%
26,650 Birner Dental Management Services, Inc. $ 474,636
-----------
HEALTH CARE SERVICES 0.6%
28,545 DrugMax, Inc.* 52,237
25,000 Healthcare Services Group 481,250
-----------
533,487
-----------
HOME BUILDING 1.1%
40,000 Orleans Homebuilders, Inc. 985,600
-----------
HOUSEHOLD DURABLES 2.7%
130,000 easyhome Ltd. (Canada) 1,802,446
700,000 HTL International Holdings Ltd.*** (Singapore) 533,467
-----------
2,335,913
-----------
MACHINERY 3.8%
330,000 Awea Mechantronic Co. Ltd. (Taiwan) 464,390
850,000 First Engineering Ltd. (Singapore) 657,825
2,204,500 MMI Holdings Ltd. (Singapore) 755,367
60,000 Pason Systems, Inc. (Canada) 1,404,409
-----------
3,281,991
-----------
MARINE 0.8%
700,000 Ezra Holdings Ltd. (Singapore) 669,936
-----------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 9.1%
300,000 Bioject Medical Technologies, Inc.* 510,000
32,050 Conceptus, Inc.* 371,780
52,205 Cryocor, Inc.* 336,722
25,208 Cyberonics, Inc.* 752,207
149,734 Encision, Inc.* 489,630
45,250 Endologix, Inc.* 229,870
231,575 Enpath Medical, Inc.* 1,829,443
608 ICU Medical, Inc.* 17,486
228,900 MTS Medication Technologies, Inc.* 1,286,418
60,000 NuVasive, Inc.* 1,124,400
89,500 VNUS Medical Technologies, Inc.* 932,590
-----------
7,880,546
-----------
MEDICAL SERVICES 0.7%
64,925 Stratagene Corp.* 584,974
-----------
METALS AND MINING 2.3%
2,000,000 EuroZinc Mining Corp.* (Canada) 1,550,121
382,510 Independence Group NL (Australia) 466,968
-----------
2,017,089
-----------
OIL AND GAS 6.5%
59,600 Energy Partners Ltd.* 1,860,712
45,000 PA Resources AB* (Sweden) 659,149
240,000 Saxon Energy Services, Inc.* (Canada) 1,122,288
35,000 Toreador Resources Corp.* 1,239,000
25,000 Toreador Resources Corp. PIPE* *** + 802,164
-----------
5,683,313
-----------
POLLUTION CONTROL AND ENVIRONMENTAL SERVICES 0.8%
145,450 Synagro Technologies, Inc. 683,615
-----------
PRODUCTION TECHNOLOGY EQUIPMENT 5.3%
273,335 inTEST Corp.* 1,096,073
48,325 Intevac, Inc.* 498,231
639,000 LogicVision, Inc.* 1,150,200
120,700 Mattson Technology, Inc.* 906,457
85,000 Nanometrics, Inc.* 994,500
-----------
4,645,461
-----------
REAL ESTATE INVESTMENT TRUSTS (REIT) 0.4%
36,250 Medical Properties Trust, Inc.*** + $ 348,145
-----------
RESTAURANTS 0.2%
250,000 Steakhouse Partners, Inc.* 150,000
-----------
RETAIL 3.2%
25,000 Big 5 Sporting Goods 596,500
9,650 Corp. Bijou Brigitte AG (Germany) 2,163,630
-----------
2,760,130
-----------
SCIENTIFIC EQUIPMENT AND SUPPLIERS 0.6%
25,000 Optimal Group, Inc.* (Canada) 517,000
-----------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 0.0%
33,245 PSi Technologies Holdings, Inc. ADR*
(Philippines) 32,913
-----------
SHOES 0.4%
25,000 Bakers Footwear Group, Inc.* 375,000
-----------
SOFTWARE 0.8%
30,000 Isra Vision Systems AG* (Germany) 728,534
-----------
TEXTILES, APPAREL AND LUXURY GOODS 1.6%
1,222,290 Ports Design Ltd. (Hong Kong) 1,386,620
-----------
TRANSPORTATION--MISCELLANEOUS 0.2%
419,650 AutoInfo, Inc.* 180,450
-----------
TRUCKERS 2.5%
25,700 PAM Transportation Services* 415,312
25,000 Universal Truckload Services, Inc.* 464,500
20,000 USA Truck, Inc.* 506,000
50,000 Vitran Corp., Inc.* (Canada) 811,000
-----------
2,196,812
-----------
WHOLESALERS 1.0%
27,250 Beacon Roofing Supply, Inc.* 890,258
-----------
TOTAL COMMON STOCKS
(COST $65,782,586) 81,615,141
-----------
PREFERRED STOCKS 0.9%
377,358 DRUGS AND PHARMACEUTICALS 0.2%
Point Biomedical Corp., Series F Pfd.* *** + 160,000
-----------
800 HEALTH CARE SERVICES 0.7%
DrugMax, Inc. Convertible Pfd. PIPE, Series
A*** + 607,299
-----------
TOTAL PREFERRED STOCKS
(COST $1,000,000) 767,299
-----------
45
MICRO CAP VALUE FUND -- SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2005
SHARES VALUE
- ------ --------
WARRANTS 0.1%
COMMERCIAL SERVICES AND SUPPLIES 0.0%
384,625 ACE Security Laminates Corp.
expiring 5/23/06* *** + (Canada) $ --
--------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 0.0%
200,000 CorVu Corp. expiring 11/19/06* *** + --
--------
DRUGS AND PHARMACEUTICALS 0.0%
7,164 Acusphere, Inc. expiring 8/2/08* *** + --
1,436 Acusphere, Inc. expiring 10/20/08* *** + --
113,207 Point Biomedical Corp. expiring 2/16/12* *** + --
--------
--
--------
HEALTH CARE SERVICES 0.0%
64,864 DrugMax, Inc. expiring 11/30/09* *** + --
--------
METALS AND MINING 0.0%
125,000 Equigold NL expiring 5/31/07* (Australia) 27,659
--------
OIL AND GAS 0.1%
83,335 Saxon Energy Services, Inc.
expiring 6/22/06 * *** + (Canada) 120,567
--------
TELECOMMUNICATIONS EQUIPMENT 0.0%
104,167 WPCS International, Inc. expiring 11/16/09* *** + --
--------
TOTAL WARRANTS (COST $0) 148,226
--------
PRINCIPAL
AMOUNT VALUE
- --------- -----------
SHORT-TERM INVESTMENTS 4.3%
REPURCHASE AGREEMENT 4.3%
$3,703,000 Repurchase Agreement dated 9/30/05,
2.85% due 10/3/05 with State Street Bank and
Trust Co. collateralized by $2,740,000 of United
States Treasury Bonds 8.125% due 8/15/19; value:
$3,782,913; repurchase proceeds: $3,703,879
(cost $3,703,000) $ 3,703,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $3,703,000) 3,703,000
-----------
TOTAL INVESTMENTS
(COST $70,485,586) 99.2% 86,233,666
OTHER ASSETS LESS LIABILITIES 0.8% 669,764
-----------
NET ASSETS 100.0% $86,903,430
===========
NUMBER OF
CONTRACTS VALUE
- --------- --------
CALL OPTIONS WRITTEN
596 Energy Partners Ltd., expiring 10/22/05
exercise price $25 (premium $93,866) $381,440
350 Toreador Resources Corp., expiring
10/22/05, exercise price $35 (premium $86,621) 77,000
--------
458,440
--------
TOTAL CALL OPTIONS WRITTEN (PREMIUM $180,487) $458,440
--------
* 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).
ADR American Depositary Receipt.
PIPE Private Investment in a Public Equity.
See notes to financial statements.
At September 30, 2005, Wasatch Micro Cap Value Fund's investments, excluding
short-term investments and written options, were in the following countries:
COUNTRY %
- ------- ------
Australia 2.1
Canada 12.7
Germany 4.4
Hong Kong 1.7
India 1.6
Israel 1.1
Korea 0.8
Norway 1.0
Philippines 0.1
Singapore 6.1
Sweden 0.8
Taiwan 0.6
United States 67.0
-----
TOTAL 100.0%
=====
46
SMALL CAP GROWTH FUND -- SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2005
SHARES VALUE
- ------ ------------
COMMON STOCKS 92.4%
AEROSPACE 0.4%
180,325 Argon ST, Inc.* $ 5,290,736
------------
AIRLINES 0.5%
709,650 WestJet Airlines Ltd.* *** 7,083,055
------------
BANKS 4.9%
496,380 Bank of the Ozarks, Inc. 17,040,726
223,535 First Community Bancorp 10,691,679
381,780 HDFC Bank Ltd. ADR 19,547,136
316,225 Prosperity Bancshares, Inc. 9,565,806
529,575 UCBH Holding, Inc. 9,701,814
------------
66,547,161
------------
BEVERAGE--SOFT DRINKS 0.3%
119,020 Peet's Coffee & Tea, Inc.* 3,644,392
------------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 2.8%
253,810 Charles River Laboratories International, Inc.* 11,071,192
315,885 Encysive Pharmaceuticals, Inc.* 3,721,125
189,190 Myriad Genetics, Inc.* 4,135,693
430,265 Neurochem, Inc.* 5,485,879
1,059,595 QIAGEN N.V.* 13,817,119
------------
38,231,008
------------
BUILDING MATERIALS 0.3%
143,900 Trex Company, Inc.* 3,453,600
------------
CHEMICALS 0.5%
245,440 Cabot Microelectronics Corp.* 7,211,027
------------
COMMERCIAL INFORMATION SERVICES 0.6%
378,840 LECG Corp.* 8,713,320
------------
COMMERCIAL SERVICES AND SUPPLIES 6.7%
962,155 Copart, Inc.* 22,966,640
43,570 Corporate Executive Board Co. 3,397,589
72,285 CoStar Group, Inc.* 3,377,155
111,309 CRA International. Inc.* 4,640,472
219,975 Jackson Hewitt Tax Service, Inc. 5,259,602
469,280 Regis Corp. 17,748,170
507,140 Resources Connection, Inc.* 15,026,558
501,760 West Corp.* 18,760,806
------------
91,176,992
------------
COMMUNICATIONS TECHNOLOGY 1.1%
365,460 j2 Global Communications, Inc.* 14,771,893
------------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 7.6%
507,385 Akamai Technologies, Inc.* 8,092,791
421,216 Cognizant Technology Solutions Corp., Class A* 19,624,453
560,140 Kanbay International, Inc.* 10,530,632
471,610 Macrovision Corp.* 9,007,751
151,290 Manhattan Associates, Inc.* 3,509,928
144,380 NAVTEQ Corp.* 7,211,781
10,155 Open Solutions, Inc.* 221,582
338,081 Retalix Ltd.* 8,157,895
594,940 SRA International, Inc., Class A* 21,108,471
152,095 Verint Systems, Inc.* 6,226,769
175,375 Websense, Inc.* 8,980,954
------------
102,673,007
------------
CONSUMER ELECTRONICS 0.7%
582,900 DTS, Inc.* 9,816,036
------------
CONSUMER PRODUCTS 1.4%
768,905 Yankee Candle Co., Inc. $ 18,838,173
------------
DIVERSIFIED FINANCIAL SERVICES 0.7%
253,820 AWD Holding AG 9,740,150
------------
DRUGS AND PHARMACEUTICALS 2.5%
295,215 Ligand Pharmaceuticals, Inc., Class B* 2,992,447
363,845 Medicis Pharmaceutical Corp., Class A 11,846,793
226,950 NeoPharm, Inc.* 2,814,180
399,150 Salix Pharmaceuticals Ltd.* 8,481,938
296,110 Taro Pharmaceuticals Industries Ltd.* 7,618,910
------------
33,754,268
------------
EDUCATION SERVICES 1.9%
161,625 Strayer Education, Inc. 15,276,795
297,640 Universal Technical Institute, Inc.* 10,598,960
------------
25,875,755
------------
ELECTRICAL AND ELECTRONICS 1.2%
749,230 Power Integrations, Inc.* 16,295,752
------------
ELECTRONICS 0.8%
671,345 Semtech Corp.* 11,057,052
------------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 8.5%
1,040,365 AMIS Holdings, Inc.* 12,338,729
30,900 Hittite Microwave Corp.* 625,725
876,967 Integrated Device Technology, Inc.* 9,418,626
1,623,475 Micrel, Inc.* 18,231,624
1,260,940 O2Micro International Ltd.* 19,847,196
957,935 PLX Technology, Inc.* 7,989,178
348,355 SigmaTel, Inc.* 7,050,705
484,800 Silicon Laboratories, Inc.* 14,733,072
374,410 SiRF Technology Holdings, Inc.* 11,280,973
457,050 Tessera Technologies, Inc.* 13,670,365
------------
115,186,193
------------
ENGINEERING AND CONTRACTING SERVICES 0.7%
77,650 Stantec, Inc.* 2,406,373
191,620 URS Corp.* 7,739,532
------------
10,145,905
------------
ENTERTAINMENT 1.2%
575,480 Marvel Entertainment, Inc.* 10,283,827
362,880 Outdoor Channel Holdings, Inc.* 5,356,109
------------
15,639,936
------------
FINANCIAL INFORMATION SERVICES 2.5%
967,990 FactSet Research Systems, Inc. 34,111,968
------------
FINANCIAL--MISCELLANEOUS 1.5%
403,320 Brown & Brown, Inc. 20,040,971
------------
HEALTH CARE FACILITIES 3.2%
440,730 American Healthways, Inc.* 18,686,952
157,365 Pharmaceutical Product Development, Inc.* 9,050,061
401,617 United Surgical Partners International, Inc.* 15,707,241
------------
43,444,254
------------
HEALTH CARE MANAGEMENT SERVICES 4.7%
707,375 AMERIGROUP Corp.* 13,525,010
1,486,133 AmSurg Corp.* ++ 40,660,599
122,510 Pediatrix Medical Group, Inc.* 9,411,218
------------
63,596,827
------------
47
SMALL CAP GROWTH FUND -- SCHEDULE OF INVESTMENTS (CONTINUED)
SHARES VALUE
- ------ --------------
HEALTH CARE PROVIDERS AND SERVICES 1.7%
463,405 Icon plc ADR* $ 23,170,250
--------------
HOME BUILDING 3.1%
360,475 Meritage Homes Corp.* 27,634,013
11,329 NVR, Inc.* 10,025,599
85,010 Toll Brothers, Inc.* 3,797,397
--------------
41,457,009
--------------
HOUSEHOLD DURABLES 0.4%
194,130 Desarrolladora Homex S.A. de C.V. ADR* 5,961,732
--------------
HOUSEHOLD FURNISHINGS 0.3%
174,770 Select Comfort Corp.* 3,491,905
--------------
INSURANCE 0.3%
182,740 Direct General Corp. 3,605,460
--------------
INVESTMENT MANAGEMENT COMPANIES 0.5%
287,877 Calamos Asset Management, Inc., Class A 7,104,804
--------------
273,380 LEISURE TIME 0.7%
Life Time Fitness, Inc.* 9,059,813
--------------
MACHINERY 0.5%
271,000 Pason Systems, Inc. 6,343,248
--------------
MEDICAL AND DENTAL INSTRUMENTS AND
SUPPLIES 5.0%
699,947 Abaxis, Inc.* 9,134,308
13,880 ICU Medical, Inc.* 399,189
98,225 Kinetic Concepts, Inc.* 5,579,180
121,355 ResMed, Inc.* 9,665,926
603,183 Techne Corp.* 34,369,367
330,375 Wright Medical Group, Inc.* 8,153,655
--------------
67,301,625
--------------
MEDICAL SERVICES 0.6%
272,905 PRA International* 8,271,751
--------------
MISCELLANEOUS MATERIALS AND COMMODITIES 0.3%
165,974 Symyx Technologies, Inc.* 4,335,241
--------------
OIL AND GAS 0.5%
86,555 Toreador Resources Corp.* 3,064,047
135,000 Toreador Resources Corp. PIPE* *** + 4,331,686
--------------
7,395,733
--------------
PRODUCTION TECHNOLOGY EQUIPMENT 0.2%
232,020 Rudolph Technologies, Inc.* 3,125,309
--------------
REAL ESTATE INVESTMENT TRUSTS (REIT) 0.9%
263,878 Redwood Trust, Inc. 12,827,110
--------------
RECREATIONAL VEHICLES AND BOATS 0.4%
205,750 Winnebago Industries, Inc. 5,960,578
--------------
RESTAURANTS 0.8%
227,445 PF Chang's China Bistro, Inc.* 10,196,359
59,620 Texas Roadhouse, Inc., Class A* 888,338
--------------
11,084,697
--------------
RETAIL 14.0%
536,385 Big 5 Sporting Goods Corp. $ 12,798,146
60,500 Bijou Brigitte AG 13,564,729
207,150 Blue Nile, Inc.* 6,554,226
316,391 Chico's FAS, Inc.* 11,643,189
626,040 Cost Plus, Inc.* 11,362,626
72,900 Golf Galaxy, Inc.* 1,162,026
617,725 Guitar Center, Inc.* 34,104,597
793,682 Hibbett Sporting Goods, Inc.* 17,659,413
70,621 Jos. A. Bank Clothiers, Inc.* 3,052,240
580,025 Monsoon plc* 4,218,754
1,717,449 O'Reilly Automotive, Inc.* 48,397,713
295,315 Pacific Sunwear of California, Inc.* 6,331,554
411,430 PETCO Animal Supplies, Inc.* 8,705,859
390,590 Tuesday Morning Corp. 10,104,563
--------------
189,659,635
--------------
SAVINGS AND LOANS 0.5%
182,638 Harbor Florida Bancshares, Inc. 6,624,280
--------------
SECURITIES BROKERAGE AND SERVICES 0.8%
594,770 optionsXpress Holdings, Inc. 11,324,421
--------------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS 0.8%
894,975 CSR plc* 10,541,464
--------------
TRUCKERS 2.6%
1,472,408 Knight Transportation, Inc. 35,867,859
--------------
UTILITIES--TELECOMMUNICATIONS 0.3%
137,060 Nextel Partners, Inc., Class A* 3,440,206
--------------
TOTAL COMMON STOCKS
(COST $944,818,261) 1,254,293,561
--------------
PREFERRED STOCKS 0.6%
DRUGS AND PHARMACEUTICALS 0.1%
3,773,584 Point Biomedical Corp.,
Series F Pfd.* *** + 1,600,000
--------------
ELECTRONICS--MEDICAL SYSTEMS 0.2%
153,485 NXStage Medical, Inc., Series F-1 Pfd.* *** + 1,316,901
1,620,220 Zonare Medical Systems, Inc.,
Series E Pfd.* *** + 1,500,000
--------------
2,816,901
--------------
HEALTH CARE MANAGEMENT SERVICES 0.1%
516,161 Elder Health, Inc., Series G Pfd.* *** + 571,428
362,782 TargetRX, Inc., Series D Pfd.* *** + 769,098
--------------
1,340,526
--------------
MEDICAL SERVICES 0.2%
2,407,476 GeneOhm Sciences, Inc., Series C Pfd.* *** + 2,768,597
--------------
TOTAL PREFERRED STOCKS
(COST $8,726,494) 8,526,024
--------------
48
SEPTEMBER 30, 2005
SHARES VALUE
- ------ --------
LIMITED PARTNERSHIP INTEREST 0.1%
OTHER 0.1%
Montagu Newhall Global Partners II-B,
L.P.* *** + $605,804
--------
TOTAL LIMITED PARTNERSHIP INTEREST
(COST $721,435) 605,804
--------
WARRANTS 0.0%
DRUGS AND PHARMACEUTICALS 0.0%
1,132,075 Point Biomedical Corp. expiring 2/16/12* *** + --
--------
ELECTRONICS--MEDICAL SYSTEMS 0.0%
243,033 Zonare Medical Systems, Inc.
expiring 6/30/11* *** + --
--------
MEDICAL SERVICES 0.0%
361,121 GeneOhm Sciences, Inc.
expiring 4/20/10* *** + --
--------
TOTAL WARRANTS (COST $0) --
--------
PRINCIPAL
AMOUNT VALUE
- --------- --------------
SHORT-TERM INVESTMENTS 7.5%
REPURCHASE AGREEMENT 7.5%
$102,311,000 Repurchase Agreement dated 9/30/05,
2.85% due 10/3/05 with State Street Bank
and Trust Co. collateralized by $73,470,000
of United States Treasury Bonds at 8.75%
and 8.875% due 5/15/17 and 8/15/17;
value: $104,360,095; repurchase proceeds:
$102,335,299+++ (cost $102,311,000) $ 102,311,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(COST $102,311,000) 102,311,000
--------------
TOTAL INVESTMENTS
(COST $1,056,577,190) 100.6% 1,365,736,389
LIABILITIES LESS OTHER ASSETS (0.6)% (7,874,461)
--------------
NET ASSETS 100.0% $1,357,861,928
==============
* 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
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 97.0%
AEROSPACE 0.5%
209,318 HEICO Corp., Class A+++ $ 3,725,860
-----------
AUTO PARTS--AFTER MARKET 5.0%
899,789 Aftermarket Technology Corp.* 16,547,120
717,209 Keystone Automotive Industries, Inc.* 20,662,791
-----------
37,209,911
-----------
BANKS 3.4%
600,050 Franklin Bank Corp.* 9,690,808
281,975 Placer Sierra Bancshares 7,745,853
1,238,722 UTI Bank Ltd. 7,483,916
-----------
24,920,577
-----------
BUILDING MATERIALS 0.2%
33,525 NCI Building Systems, Inc.* 1,367,485
-----------
BUILDING--MISCELLANEOUS 1.8%
506,850 Drew Industries, Inc.* 13,081,798
-----------
COMMERCIAL INFORMATION SERVICES 0.5%
1,114,411 Integrated Alarm Services Group, Inc.* 4,179,041
-----------
COMMERCIAL SERVICES AND SUPPLIES 5.4%
103,560 Administaff, Inc. 4,115,474
798,627 AMN Healthcare Services, Inc.* 12,354,760
193,250 Macquarie Infrastructure Company Trust 5,449,650
275,189 Monro Muffler, Inc. 7,229,215
622,950 SM&A* 5,488,190
154,050 World Fuel Services Corp. 4,998,922
-----------
39,636,211
-----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 0.5%
150,775 SPSS, Inc.* 3,618,600
-----------
CONSUMER ELECTRONICS 0.0%
22,665 PLATO Learning, Inc.* 172,481
-----------
CONSUMER PRODUCTS 0.9%
310,278 Helen of Troy Ltd.* 6,404,138
-----------
CONTAINERS AND PACKAGING--METAL AND GLASS 1.9%
323,762 Mobile Mini, Inc.* 14,035,083
-----------
DIVERSIFIED FINANCIAL SERVICES 3.8%
724,300 Caliber Global Investment Ltd.* 8,141,132
164,575 Eurocastle Investment Ltd. 3,709,728
349,350 Housing Development Finance Corp. Ltd. 8,264,916
585,675 U.S.I. Holdings Corp.* 7,607,918
-----------
27,723,694
-----------
EDUCATION SERVICES 0.4%
228,800 Corinthian Colleges, Inc.* 3,036,176
-----------
ELECTRICAL AND ELECTRONICS 1.0%
1,015,770 TTM Technologies, Inc.* 7,262,756
-----------
ELECTRONICS 2.4%
510,884 Nu Horizons Electronics Corp.* 3,698,800
465,695 Supertex, Inc.* 13,966,193
-----------
17,664,993
-----------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 3.4%
656,025 ASE Test Ltd.* $ 4,113,277
246,575 Excel Technology, Inc.* 6,334,512
281,050 Leadis Technology, Inc.* 1,925,192
300,000 Micrel, Inc.* 3,369,000
1,026,575 Pericom Semiconductor Corp.* 9,074,923
-----------
24,816,904
-----------
FINANCE COMPANIES 3.5%
133,215 Accredited Home Lenders Holding Co.* 4,683,839
681,825 Dollar Financial Corp.* 8,175,082
512,725 United PanAm Financial Corp.* 12,802,743
-----------
25,661,664
-----------
FINANCE--SMALL LOAN 2.6%
813,565 AmeriCredit Corp.* +++ 19,419,797
-----------
FINANCIAL DATA PROCESSING SERVICES AND SYSTEMS
0.4%
434,560 Hypercom Corp.* 2,833,331
-----------
FINANCIAL--MISCELLANEOUS 1.8%
295,004 Fidelity National Financial, Inc. 13,133,578
-----------
FOODS 2.3%
720,421 NBTY, Inc.* 16,929,894
-----------
HEALTH CARE FACILITIES 1.2%
624,925 Capital Senior Living Corp.* 5,218,124
223,050 LHC Group, Inc.* 3,446,122
-----------
8,664,246
-----------
HOME BUILDING 3.5%
136,075 Hovnanian Enterprises, Inc., Class A* 6,967,040
160,897 M.D.C. Holdings, Inc. 12,693,164
138,600 Toll Brothers, Inc.* 6,191,262
-----------
25,851,466
-----------
HOTELS, RESTAURANTS AND LEISURE 0.8%
195,900 Orient-Express Hotels Ltd., Class A 5,567,478
-----------
HOUSEHOLD FURNISHINGS 0.0%
20,915 Kirkland's, Inc.* 159,163
-----------
INSURANCE 3.9%
528,975 Direct General Corp. 10,436,677
688,437 Hub International Ltd. 15,613,751
291,925 KMG America Corp.* 2,335,400
-----------
28,385,828
-----------
INVESTMENT MANAGEMENT COMPANIES 3.8%
331,275 Apollo Investment Corp. 6,559,245
408,400 Ares Capital Corp. 6,648,752
400 Brantley Mezzanine Finance, LLC* ** *** + 40,000
543,653 MCG Capital Corp. 9,171,426
350,200 Technology Investment Capital Corp. 5,529,658
-----------
27,949,081
-----------
MANUFACTURING 0.4%
140,380 Reddy Ice Holdings, Inc. 2,879,194
-----------
MEDICAL SERVICES 1.3%
541,025 U.S. Physical Therapy, Inc.* 9,825,014
-----------
METALS FABRICATING 0.5%
237,600 Encore Wire Corp.* 3,863,376
-----------
50
SEPTEMBER 30, 2005
SHARES VALUE
- ------ ------------
OIL AND GAS 8.0%
329,265 CNX Gas Corp.* *** + $ 6,749,933
262,240 Petrohawk Energy Corp.* 3,778,878
253,100 Plains Exploration & Production Co.* 10,837,742
2,833,875 Saxon Energy Services, Inc.* 13,251,758
432,525 Toreador Resources Corp.* 15,311,385
75,000 Toreador Resources Corp. PIPE* *** + 2,406,492
113,150 Ultra Petroleum Corp.* 6,435,972
------------
58,772,160
------------
PRODUCTION TECHNOLOGY EQUIPMENT 0.4%
255,900 Nanometrics, Inc.* 2,994,030
------------
REAL ESTATE INVESTMENT TRUSTS
(REIT) 14.8%
419,170 Anworth Mortgage Asset Corp. 3,466,536
254,800 Arbor Realty Trust, Inc. 7,159,880
475,000 CBRE Realty Financial, Inc.* *** + 7,125,000
300,000 Crystal River Capital, Inc.*** + 7,500,000
1,442,370 HomeBanc Corp. 11,135,096
146,950 JER Investors Trust, Inc. 2,653,917
402,025 JER Investors Trust, Inc.*** + 7,115,360
327,100 KKR Financial Corp. 7,274,704
525,500 Medical Properties Trust, Inc.*** + 5,046,902
286,675 Medical Properties Trust, Inc. 2,809,415
549,725 MortgageIT Holdings, Inc. 7,817,090
848,675 NorthStar Realty Finance Corp. 7,969,058
395,675 Redwood Trust, Inc. 19,233,762
1,023,550 Saxon Capital, Inc. 12,129,067
------------
108,435,787
------------
RENTAL AND LEASING SERVICES--COMMERCIAL 2.1%
475,950 McGrath RentCorp 13,483,663
564,373 MicroFinancial, Inc. 2,201,055
------------
15,684,718
------------
RETAIL 6.6%
308,297 America's Car-Mart, Inc.* 5,530,848
193,361 Big 5 Sporting Goods Corp. 4,613,594
444,675 Global Imaging Systems, Inc.* 15,141,184
624,800 Lithia Motors, Inc., Class A 18,106,704
243,887 Sonic Automotive, Inc. 5,419,169
------------
48,811,499
------------
SAVINGS AND LOANS 2.1%
892,194 Commercial Capital Bancorp, Inc. 15,167,298
------------
SHOES 0.6%
154,600 Kenneth Cole Productions, Inc., Class A 4,219,034
------------
TRUCKERS 4.0%
163,815 J.B. Hunt Transport Services, Inc. 3,114,123
847,700 Quality Distribution, Inc.* 6,773,123
392,442 Transport Corporation of America, Inc.* + 2,943,315
271,800 USA Truck, Inc.* 6,876,540
601,900 Vitran Corp., Inc. * 9,762,818
------------
29,469,919
------------
UTILITIES--CABLE TV AND RADIO 0.2%
492,450 Knology, Inc.* 1,295,144
------------
WHOLESALERS 1.1%
235,775 Beacon Roofing Supply, Inc.* 7,702,769
------------
TOTAL COMMON STOCKS
(COST $556,513,126) 712,531,176
------------
RIGHTS 0.0%
UTILITIES--CABLE TV AND RADIO 0.0%
492,450 Knology, Inc.* *** + $ 310,243
------------
TOTAL RIGHTS (COST $0) 310,243
------------
WARRANTS 0.0%
OIL AND GAS 0.0%
187,500 Saxon Energy Services, Inc.
expiring 4/7/06* ***+ --
------------
TOTAL WARRANTS (COST $0) --
------------
PRINCIPAL
AMOUNT VALUE
- --------- ------------
CORPORATE BONDS 0.3%
INVESTMENT MANAGEMENT COMPANIES 0.3%
$ 2,000,000 Brantley Mezzanine Finance, LLC,
10.00%, 9/21/09*** + $ 1,966,626
------------
TOTAL CORPORATE BONDS
(COST $1,966,626) 1,966,626
------------
SHORT-TERM INVESTMENTS 2.5%
REPURCHASE AGREEMENT 2.5%
18,224,000 Repurchase Agreement dated 9/30/05, 2.85% due
10/3/05 with State Street Bank and Trust Co.
collateralized by $12,845,000 of United States
Treasury Bonds 8.875% due 2/15/19; value:
$18,593,138; repurchase proceeds: $18,228,328
(cost $18,224,000) 18,224,000
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $18,224,000) 18,224,000
------------
TOTAL INVESTMENTS (COST $576,703,752) 99.8% 733,032,045
OTHER ASSETS LESS LIABILITIES 0.2% 1,809,963
------------
NET ASSETS 100.0% $734,842,008
============
51
SMALL CAP VALUE FUND -- SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2005
NUMBER OF
CONTRACTS VALUE
- --------- --------
CALL OPTIONS WRITTEN
500 Toreador Resources Corp., expiring
10/22/05, exercise price $35 (premium
$123,745) $110,000
========
SHARES VALUE
- ------ --------
SECURITIES SOLD SHORT
40,300 HEICO Corp. (proceeds $326,420) $934,960
========
* Non-income producing.
** Common units.
*** Security was fair valued under procedures adopted by the Board of Directors
(see Note 2).
+ Security purchased in a private placement transaction or under Rule 144A of
the Securities Act of 1933 (see Note 9).
++ Affiliated company (see Note 8).
+++ All or a portion of this security has been designated as collateral for
open short positions or written options.
PIPE Private Investment in a Public Equity.
See notes to financial statements.
52
ULTRA GROWTH FUND -- SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2005
SHARES VALUE
- ------ -----------
COMMON STOCKS 96.6%
AEROSPACE 2.1%
28,690 Argon ST, Inc.* $ 841,765
232,375 MTC Technologies, Inc.* 7,431,352
-----------
8,273,117
-----------
BANKS 2.0%
128,825 HDFC Bank Ltd. ADR 6,595,840
56,275 UCBH Holding, Inc. 1,030,958
-----------
7,626,798
-----------
BIOTECHNOLOGY RESEARCH AND PRODUCTION 2.5%
57,375 Celgene Corp.* 3,116,610
88,675 Encysive Pharmaceuticals, Inc.* 1,044,591
231,050 Neurochem, Inc.* 2,945,888
212,550 Orchid Cellmark, Inc.* 1,806,675
71,495 QIAGEN N.V.* 932,295
-----------
9,846,059
-----------
CHEMICALS 0.4%
57,875 Cabot Microelectronics Corp.* 1,700,367
-----------
COMMERCIAL INFORMATION SERVICES 1.4%
140,625 LECG Corp.* 3,234,375
73,175 Morningstar, Inc.* 2,341,600
-----------
5,575,975
-----------
COMMERCIAL SERVICES AND SUPPLIES 6.6%
76,805 Advisory Board Co. (The)* 3,996,932
227,805 AMN Healthcare Services, Inc.* 3,524,143
94,230 Corporate Executive Board Co. 7,348,055
124,305 CoStar Group, Inc.* 5,807,530
107,300 Navigant Consulting, Inc.* 2,055,868
16,500 Resources Connection, Inc.* 488,895
278,475 SM&A* 2,453,365
-----------
25,674,788
-----------
COMMUNICATIONS AND MEDIA 0.2%
42,155 JAMDAT Mobile, Inc.* 885,255
-----------
COMMUNICATIONS TECHNOLOGY 1.2%
76,050 Arbinet-thexchange, Inc.* 547,560
101,040 j2 Global Communications, Inc.* 4,084,037
-----------
4,631,597
-----------
COMPUTER SERVICES SOFTWARE AND SYSTEMS 18.9%
187,950 Affiliated Computer Services, Inc.,
Class A* 10,262,070
407,075 Akamai Technologies, Inc.* 6,492,846
60,450 CACI International, Inc., Class A* 3,663,270
165,385 Cognizant Technology Solutions Corp.,
Class A* 7,705,287
200,379 EPIQ Systems, Inc.* 4,372,270
110,225 Kanbay International, Inc.* 2,072,230
855,971 Kintera, Inc.* 2,610,711
560,690 Lionbridge Technologies, Inc.* 3,784,658
60,590 NAVTEQ Corp.* 3,026,470
66,000 NeuStar, Inc., Class A* 2,111,340
96,125 Open Solutions, Inc.* 2,097,448
218,985 Opnet Technologies, Inc.* 1,843,854
86,205 PDF Solutions, Inc.* 1,431,003
90,475 QLogic Corp.* 3,094,245
22,430 SI International, Inc.* 694,657
330,498 SRA International, Inc., Class A* 11,726,069
79,505 Unica Corp.* 872,965
111,675 Websense, Inc.* 5,718,877
-----------
73,580,270
-----------
DIVERSIFIED FINANCIAL SERVICES 0.2%
23,000 AWD Holding AG $ 882,608
-----------
DRUGS AND PHARMACEUTICALS 2.2%
125,610 ISTA Pharmaceuticals, Inc.* 834,050
72,090 NeoPharm, Inc.* 893,916
165,950 Salix Pharmaceuticals Ltd.* 3,526,438
129,440 Taro Pharmaceuticals Industries Ltd.* 3,330,491
-----------
8,584,895
-----------
EDUCATION SERVICES 3.7%
425,275 Corinthian Colleges, Inc.* 5,643,399
68,150 Laureate Education, Inc.* 3,337,306
36,550 Strayer Education, Inc. 3,454,706
59,175 Universal Technical Institute, Inc.* 2,107,222
-----------
14,542,633
-----------
ELECTRICAL AND ELECTRONICS 0.9%
159,823 Power Integrations, Inc.* 3,476,150
-----------
ELECTRONICS--MEDICAL SYSTEMS 1.0%
120,300 EPIX Pharmaceuticals, Inc.* 926,310
42,425 Intuitive Surgical, Inc.* 3,109,328
-----------
4,035,638
-----------
ELECTRONICS--SEMICONDUCTORS/COMPONENTS 14.7%
60,027 Integrated Device Technology, Inc.* 644,690
60,800 International Rectifier Corp.* 2,740,864
23,550 Marvell Technology Group Ltd.* 1,085,890
462,275 Micrel, Inc.* 5,191,348
385,630 Microchip Technology, Inc. 11,615,176
475,475 National Semiconductor Corp. 12,504,992
630,135 O2Micro International Ltd.* 9,918,325
94,020 SigmaTel, Inc.* 1,902,965
206,945 Silicon Laboratories, Inc.* 6,289,059
70,450 Sirenza Microdevices, Inc.* 228,962
64,928 SiRF Technology Holdings, Inc.* 1,956,281
112,050 Tessera Technologies, Inc.* 3,351,416
-----------
57,429,968
-----------
ENTERTAINMENT 1.7%
313,080 Marvel Entertainment, Inc.* 5,594,740
68,660 Outdoor Channel Holdings, Inc.* 1,013,421
-----------
6,608,161
-----------
FINANCE-- SMALL LOAN 1.9%
302,040 AmeriCredit Corp.* 7,209,695
-----------
FINANCIAL INFORMATION SERVICES 0.5%
59,750 FactSet Research Systems, Inc. 2,105,590
-----------
FINANCIAL--MISCELLANEOUS 1.4%
3,890 Chicago Mercantile Exchange
Holdings, Inc. 1,312,097
157,964 First Cash Financial Services, Inc.* 4,157,612
-----------
5,469,709
-----------
HEALTH CARE EQUIPMENT AND SUPPLIES 0.6%
92,025 Biacore International AB 2,467,349
-----------
HEALTH CARE FACILITIES 5.0%
187,291 American Healthways, Inc.* 7,941,139
296,776 United Surgical Partners
International, Inc.* 11,606,909
-----------
19,548,048
-----------
53
ULTRA GROWTH FUND -- SCHEDULE OF INVESTMENTS (CONTINUED)
SHARES VALUE
- ------ ------------
HEALTH CARE MANAGEMENT SERVICES 5.2%
145,425 AMERIGROUP Corp.* $ 2,780,526
427,629 AmSurg Corp.* +++ 11,699,929
48,525 Pediatrix Medical Group, Inc.* 3,727,691
51,225 WellCare Health Plans, Inc.* 1,897,886
------------
20,106,032
------------
HEALTH CARE PROVIDERS AND SERVICES 1.2%
93,075 Icon plc ADR* 4,653,750
------------
HEALTH CARE SERVICES 1.3%
82,900 Express Scripts, Inc.* 5,156,380
------------
HOME BUILDING 1.0%
21,875 M.D.C. Holdings, Inc. 1,725,719
2,510 NVR, Inc.* 2,221,224
------------
3,946,943
------------
INSURANCE 0.6%
100,150 Hub International Ltd. 2,271,402
------------
INTERNET AND CATALOG RETAIL 1.5%
225,925 Submarino S.A. GDR* *** 5,818,064
------------
INVESTMENT MANAGEMENT COMPANIES 0.5%
83,501 Calamos Asset Management, Inc., Class A 2,060,805
------------
LEISURE TIME 0.5%
54,050 Life Time Fitness, Inc.* 1,791,217
------------
MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 5.4%
78,865 Abaxis, Inc.* 1,029,188
16,350 Biosite, Inc.* 1,011,411
176,625 Kinetic Concepts, Inc.* 10,032,300
55,436 NuVasive, Inc.* 1,038,871
119,075 Stereotaxis, Inc.* 882,346
25,150 SurModics, Inc.* 973,053
40,475 Techne Corp.* 2,306,266
154,675 Wright Medical Group, Inc.* 3,817,379
------------
21,090,814
------------
MISCELLANEOUS MATERIALS AND COMMODITIES 0.5%
70,775 Symyx Technologies, Inc.* 1,848,643
------------
PHARMACEUTICALS 0.3%
102,245 Sigma Co. Ltd. 958,779
------------
PRODUCTION TECHNOLOGY
EQUIPMENT 0.6%
164,875 Rudolph Technologies, Inc.* 2,220,866
------------
RETAIL 6.0%
71,625 Blue Nile, Inc.* 2,266,215
158,525 Cost Plus, Inc.* 2,877,229
202,549 Dollar Tree Stores, Inc.* 4,385,186
68,125 Guitar Center, Inc.* 3,761,181
43,568 Hibbett Sporting Goods, Inc.* 969,377
77,115 Michaels Stores, Inc. 2,549,422
234,440 O'Reilly Automotive, Inc.* 6,606,519
------------
23,415,129
------------
SAVINGS AND LOANS 1.7%
262,225 Commercial Capital Bancorp, Inc. 4,457,825
208,409 W Holding Co., Inc. 1,992,390
------------
6,450,215
------------
SOFTWARE 0.2%
308,375 Hexaware Tech. Ltd. 725,237
------------
TRUCKERS 1.0%
Knight Transportation,
165,900 Inc. $ 4,041,324
------------
TOTAL COMMON STOCKS
(COST $319,504,793) 376,710,270
------------
PREFERRED STOCKS 1.9%
COMMUNICATIONS TECHNOLOGY 0.0%
91,388 Xtera Communications, Inc., Series A-1 Pfd.
* *** + 99,065
------------
CONSUMER PRODUCTS 0.2%
201,613 Ophthonix, Inc., Series C Pfd.* *** + 500,000
------------
DRUGS AND PHARMACEUTICALS 0.3%
2,830,188 Point Biomedical Corp., Series F Pfd.* *** + 1,200,000
------------
ELECTRONICS--MEDICAL SYSTEMS 0.7%
206,044 NXStage Medical, Inc., Series F Pfd.* *** + 1,767,858
1,080,146 Zonare Medical Systems, Inc., Series E Pfd.
* *** + 999,999
------------
2,767,857
------------
HEALTH CARE MANAGEMENT SERVICES 0.2%
516,161 Elder Health, Inc., Series G Pfd.* *** + 571,428
108,917 TargetRX, Inc., Series D Pfd.* *** + 230,904
------------
802,332
------------
MEDICAL AND DENTAL INSTRUMENTS AND
SUPPLIES 0.3%
243,902 TherOx, Inc., Series I Pfd.* *** + 999,998
------------
MEDICAL SERVICES 0.2%
GeneOhm Sciences, Inc.,
722,932 Series C Pfd.* *** + 831,372
------------
TOTAL PREFERRED STOCKS
(COST $7,232,767) 7,200,624
------------
LIMITED PARTNERSHIP INTEREST 0.1%
OTHER 0.1%
Montagu Newhall Global Partners II-B,
L.P.* *** + 545,223
------------
TOTAL LIMITED PARTNERSHIP
INTEREST (COST $649,292) 545,223
------------
54
September 30, 2005
SHARES VALUE
- ------ -----
WARRANTS 0.0%
DRUGS AND PHARMACEUTICALS 0.0%
849,056 Point Biomedical Corp. expiring
2/16/12* *** + $--
---
ELECTRONICS--MEDICAL SYSTEMS 0.0%
162,021 Zonare Medical Systems, Inc. expiring 6/30/11* *** + --
---
MEDICAL SERVICES 0.0%
108,439 GeneOhm Sciences, Inc.
expiring 4/20/10* *** + --
---
TOTAL WARRANTS (COST $0) --
---
PRINCIPAL
AMOUNT VALUE
- --------- ------------
SHORT-TERM INVESTMENTS 1.6%
REPURCHASE AGREEMENT 1.6%
$6,375,000 Repurchase Agreement dated 9/30/05, 2.85% due
10/3/05 with State Street Bank and Trust Co.
collateralized by $4,710,000 of United States
Treasury Bonds 8.125% due 8/15/19; value:
$6,502,744; repurchase proceeds: $6,376,514+++
(cost $6,375,000) $ 6,375,000
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $6,375,000) 6,375,000
------------
TOTAL INVESTMENTS (COST $333,761,852) 100.2% 390,831,117
LIABILITIES LESS OTHER ASSETS (0.2)% (936,787)
------------
NET ASSETS 100.0% $389,894,330
============
SHARES VALUE
- ------ ----------
SECURITIES SOLD SHORT
32,950 Headwaters, Inc. (proceeds $1,080,437) $1,232,330
----------
* Non-income producing.
*** Security was fair valued under procedures adopted by the
Board of Directors (see Note 2).
+ Security purchased in a private placement transaction or
under Rule 144A of the Securities Act of 1933 (see Note 9).
+++ All or a portion of this security has been designated as
collateral for open short positions or purchase commitments.
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
See notes to financial statements.
55
U.S. TREASURY FUND -- SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2005
PRINCIPAL
AMOUNT VALUE
- --------- -----------
U.S. GOVERNMENT OBLIGATIONS 99.6%
$ 6,800,000 U.S. Treasury Bond, 5.50%, 8/15/28 $ 7,640,439
5,800,000 U.S. Treasury Bond, 6.125%, 11/15/27 6,998,292
4,300,000 U.S. Treasury Bond, 6.375%, 8/15/27 5,328,642
4,300,000 U.S. Treasury Bond, 6.625%, 2/15/27 5,458,648
5,650,000 U.S. Treasury Bond, 6.75%, 8/15/26 7,241,492
4,755,000 U.S. Treasury Bond, 6.875%, 8/15/25 6,129,866
4,930,000 U.S. Treasury Bond, 7.50%, 11/15/24 6,714,428
17,216,000 U.S. Treasury Strip, principal only, 11/15/21 8,129,860
8,100,000 U.S. Treasury Strip, principal only, 8/15/25 3,206,085
70,700,000 U.S. Treasury Strip, principal only, 11/15/27 25,414,246
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $76,064,130) 82,261,998
-----------
SHORT-TERM INVESTMENTS 1.9%
REPURCHASE AGREEMENT 1.9%
1,593,000 Repurchase Agreement dated 9/30/05,
2.85% due 10/3/05 with State Street Bank
and Trust Co. collateralized by $1,180,000
of United States Treasury Bonds 8.125% due
8/15/19; value: $1,629,138; repurchase
proceeds: $1,593,378 (cost $1,593,000) 1,593,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $1,593,000) 1,593,000
-----------
TOTAL INVESTMENTS
(COST $77,657,130) 101.5% 83,854,998
LIABILITIES LESS OTHER ASSETS (1.5)% (1,256,436)
-----------
NET ASSETS 100.0% $82,598,562
===========
See notes to financial statements.
56
(This page intentionally left blank.)
57
WASATCH FUNDS -- STATEMENTS OF ASSETS AND LIABILITIES
GLOBAL SCIENCE
CORE GROWTH & TECHNOLOGY HERITAGE GROWTH INTERNATIONAL
FUND FUND FUND GROWTH FUND
--------------- --------------- --------------- ---------------
ASSETS:
Investments, at cost
Unaffiliated issuers $ 1,259,547,786 $ 70,906,858 $ 266,961,391 $ 229,681,954
Affiliated issuers* 7,585,002 -- -- --
Repurchase agreements 74,776,000 8,393,000 19,245,000 24,428,000
--------------- --------------- --------------- ---------------
$ 1,341,908,788 $ 79,299,858 $ 286,206,391 $ 254,109,954
=============== =============== =============== ===============
Investments, at market value
Unaffiliated issuers $ 1,633,905,228 $ 82,073,135 $ 286,917,947 $ 316,911,917
Affiliated issuers* 6,566,953 -- -- --
Repurchase agreements 74,776,000 8,393,000 19,245,000 24,428,000
--------------- --------------- --------------- ---------------
1,715,248,181 90,466,135 306,162,947 341,339,917
Cash 897 473,924 225 265
Foreign currency on deposit (cost of $0, $0, $0,
$189,828, $2,090,041, $0, $0, $0, $0, $0,
and $0, respectively) -- -- -- 190,494
Receivable for investment securities sold 189,228 1,882,653 1,504,098 3,159,218
Receivable from broker for securities sold short -- -- -- --
Capital shares receivable 568,577 238,877 352,124 1,331,401
Interest and dividends receivable 1,787,589 10,674 84,893 219,139
Receivable from affiliates** 113,441 962 42 309
Prepaid expenses and other assets 45,877 11,426 19,482 20,495
Unrealized appreciation on foreign currency contracts -- 100 -- --
--------------- --------------- --------------- ---------------
Total Assets 1,717,953,790 93,084,751 308,123,811 346,261,238
--------------- --------------- --------------- ---------------
LIABILITIES:
Call options written, at value (premiums of $0,
$0, $0, $0, $0, $0, $180,487, $0, $123,745,
$0, and $0, respectively) -- -- -- --
Securities sold short, at value (proceeds of $0,
$0, $0, $0, $0, $0, $0, $0, $326,420,
$1,080,437, and $0, respectively) -- -- -- --
Bank overdraft -- -- -- --
Bank overdraft of foreign currency (cost of $0,
$347,187, $0, $0, $0, $0, $290,926, $0, $0,
$0, and $0, respectively) -- 346,919 -- --
Payable for securities purchased 8,584,684 3,000,431 2,840,184 6,650,886
Capital shares payable 925,215 40,647 176,586 152,715
Accrued investment advisory fees 1,411,014 109,933 147,744 408,596
Accrued fund administration fees 67,257 3,248 11,435 12,550
Accrued expenses and other liabilities 544,880 66,675 119,354 165,390
Accrued deferred foreign capital gains taxes 1,730,317 163,248 158,410 71,800
Unrealized depreciation on foreign currency contracts -- 657 -- 7,140
--------------- --------------- --------------- ---------------
Total Liabilities 13,263,367 3,731,758 3,453,713 7,469,077
--------------- --------------- --------------- ---------------
NET ASSETS $ 1,704,690,423 $ 89,352,993 $ 304,670,098 $ 338,792,161
=============== =============== =============== ===============
NET ASSETS CONSIST of:
Capital stock $ 388,172 $ 68,850 $ 266,598 $ 183,163
Paid-in capital in excess of par 1,211,802,843 76,637,527 276,139,130 252,277,245
Undistributed net investment income (loss) 14,126,218 (41,845) 383,500 (511,543)
Undistributed net realized gain (loss) on
investments and foreign currency translations 106,764,114 1,684,718 8,083,047 (303,641)
Net unrealized appreciation on investments
and foreign currency translations 371,609,076 11,003,743 19,797,823 87,146,937
--------------- --------------- --------------- ---------------
Net Assets $ 1,704,690,423 $ 89,352,993 $ 304,670,098 $ 338,792,161
=============== =============== =============== ===============
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 38,817,161 6,885,046 26,659,799 18,316,296
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING
PRICE PER SHARE $ 43.92 $ 12.98 $ 11.43 $ 18.50
=============== =============== =============== ===============
* See Note 8 for information on affiliated issuers.
** See Note 7.
See notes to financial statements.
58
SEPTEMBER 30, 2005
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
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 24,063,843 $ 401,522,150 $ 66,782,586 $ 936,454,596 $ 555,949,593 $ 327,386,852 $ 76,064,130
-- 26,929,237 -- 17,811,594 2,530,159 -- --
-- 16,557,000 3,703,000 102,311,000 18,224,000 6,375,000 1,593,000
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 24,063,843 $ 445,008,387 $ 70,485,586 $ 1,056,577,190 $ 576,703,752 $ 333,761,852 $ 77,657,130
=============== =============== =============== =============== =============== =============== ===============
$ 27,417,884 $ 524,664,216 $ 82,530,666 $ 1,222,764,790 $ 711,864,730 $ 384,456,117 $ 82,261,998
-- 34,134,686 -- 40,660,599 2,943,315 -- --
-- 16,557,000 3,703,000 102,311,000 18,224,000 6,375,000 1,593,000
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
27,417,884 575,355,902 86,233,666 1,365,736,389 733,032,045 390,831,117 83,854,998
-- 387 584 693 680 348 807
1,990,369 -- -- -- -- -- --
150,215 7,801,993 758,726 3,193,035 6,828,606 -- --
-- -- 1,317,148 -- 935,803 1,141,193 --
1,550 23,567 200 801,716 195,222 120,475 382,573
65,733 144,367 45,595 345,199 1,000,863 19,817 483,591
-- 43,671 -- 36,988 37,975 21,246 --
8,859 21,949 12,450 39,995 34,549 20,750 12,535
249 1,147 165 -- -- -- --
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
29,634,859 583,392,983 88,368,534 1,370,154,015 742,065,743 392,154,946 84,734,504
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
-- -- 458,440 -- 110,000 -- --
-- -- -- -- 934,960 1,232,330 --
25,087 -- -- -- -- -- --
-- -- 291,834 -- -- -- --
97,098 2,855,517 386,118 10,300,447 4,466,478 67,095 --
3,137 160,651 67,746 440,992 480,259 389,709 2,063,230
26,780 955,439 132,927 1,120,479 908,356 401,454 24,200
1,115 22,550 3,355 53,032 28,703 15,183 3,022
41,649 154,960 57,551 377,137 244,761 154,845 45,490
-- -- 67,133 -- 50,218 -- --
-- -- -- -- -- -- --
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
194,866 4,149,117 1,465,104 12,292,087 7,223,735 2,260,616 2,135,942
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 29,439,993 $ 579,243,866 $ 86,903,430 $ 1,357,861,928 $ 734,842,008 $ 389,894,330 $ 82,598,562
=============== =============== =============== =============== =============== =============== ===============
$ 134,348 $ 764,660 $ 320,010 $ 329,314 $ 1,295,556 $ 139,347 $ 56,283
26,749,506 352,805,985 63,389,161 899,182,670 485,336,509 288,952,529 80,134,180
(321,540) -- (12,815) (446,570) 6,189,432 (375,543) 1,845,986
(376,739) 95,319,281 7,803,094 149,637,839 86,337,231 44,260,661 (5,635,755)
3,254,418 130,353,940 15,403,980 309,158,675 155,683,280 56,917,336 6,197,868
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 29,439,993 $ 579,243,866 $ 86,903,430 $ 1,357,861,928 $ 734,842,008 $ 389,894,330 $ 82,598,562
=============== =============== =============== =============== =============== =============== ===============
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
13,434,786 76,466,004 32,001,015 32,931,435 129,555,567 13,934,666 5,628,337
$ 2.19 $ 7.58 $ 2.72 $ 41.23 $ 5.67 $ 27.98 $ 14.68
=============== =============== =============== =============== =============== =============== ===============
59
WASATCH FUNDS -- STATEMENTS OF OPERATIONS
CORE GLOBAL SCIENCE HERITAGE INTERNATIONAL
GROWTH & TECHNOLOGY GROWTH GROWTH
FUND FUND FUND FUND
------------ -------------- ----------- -------------
INVESTMENT INCOME:
Interest $ 1,597,099 $ 75,868 $ 379,544 $ 426,122
Dividends(2)
Unaffiliated issuers 38,592,657 238,479 2,206,777 2,863,035
Affiliated issuers* 1,635,556 -- -- --
------------ ----------- ----------- -----------
Total investment income 41,825,312 314,347 2,586,321 3,289,157
------------ ----------- ----------- -----------
EXPENSES:
Investment advisory fees 16,688,421 1,095,983 1,609,370 4,114,205
Shareholder servicing fees 1,839,022 157,101 355,200 420,339
Fund administration fees 512,102 22,298 69,457 83,515
Fund accounting fees 191,847 28,344 38,041 55,999
Reports to shareholders 194,629 21,774 59,306 62,197
Custody fees 420,872 60,256 54,930 217,619
Federal and state registration fees 49,036 18,676 48,343 44,015
Legal fees 61,165 3,514 7,784 9,862
Directors' fees 39,066 1,745 4,412 5,720
Audit fees 20,147 20,147 20,320 20,147
Other 89,353 11,285 13,415 17,497
------------ ----------- ----------- -----------
Total expenses before reimbursement 20,105,660 1,441,123 2,280,578 5,051,115
Reimbursement of expenses by Advisor -- (16,553) (96,433) --
------------ ----------- ----------- -----------
Net Expenses 20,105,660 1,424,570 2,184,145 5,051,115
------------ ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) 21,719,652 (1,110,223) 402,176 (1,761,958)
------------ ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments and foreign
currency translations
Unaffiliated issuers 133,459,217 4,289,556 8,686,628 (521,314)
Affiliated issuers* (149,047) -- -- --
Net increase from payment by affiliates** 113,441 962 42 130,700
Net realized gain on options written -- -- -- --
Net realized gain (loss) on short positions -- (9,462) -- --
Net realized gain on the disposal of investments in
violation of an investment restriction** -- -- -- --
Realized foreign capital gains taxes -- (65,150) -- --
Change in unrealized appreciation (depreciation) on
investments and foreign currency translations 119,687,309 15,011,851 19,279,719 63,405,607
Deferred foreign capital gains taxes (1,730,317) (163,248) (158,410) (84,236)
------------ ----------- ----------- -----------
Net gain on investments 251,380,603 19,064,509 27,807,979 62,930,757
------------ ----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $273,100,255 $17,954,286 $28,210,155 $61,168,799
============ =========== =========== ===========
(1) Fund inception date was January 27, 2005.
(2) Net of $69,037, $16,958, $29,073, $303,752, $32,757, $150,934, $18,376,
$106,707, $56,506, $24,878 and $0 in foreign withholding taxes,
respectively.
* See Note 8 for information on affiliated issuers.
** See Note 7.
See notes to financial statements.
60
FOR THE YEAR OR PERIOD ENDED SEPTEMBER 30, 2005
INTERNATIONAL MICRO MICRO CAP SMALL CAP SMALL CAP ULTRA U.S.
OPPORTUNITIES CAP VALUE GROWTH VALUE GROWTH TREASURY
FUND(1) FUND FUND FUND FUND FUND FUND
- ------------- ------------ ----------- ------------ ------------ ----------- ----------
$ 41,079 $ 361,840 $ 84,874 $ 1,324,451 $ 366,630 $ 178,108 $2,790,340
327,331 2,949,900 638,765 5,985,773 19,439,586 590,994 --
-- -- -- -- 60,721 -- --
---------- ------------ ----------- ------------ ------------ ----------- ----------
368,410 3,311,740 723,639 7,310,224 19,866,937 769,102 2,790,340
---------- ------------ ----------- ------------ ------------ ----------- ----------
360,673 11,010,497 1,732,858 13,002,845 11,220,546 5,030,633 292,987
59,321 517,916 145,281 1,381,958 941,267 563,267 116,705
5,339 168,791 26,716 398,900 230,468 124,190 17,632
23,684 78,729 29,011 154,687 95,535 58,828 9,759
15,693 47,082 15,906 211,668 117,084 87,114 11,042
22,879 84,178 35,887 50,639 98,296 52,246 1,457
23,259 21,096 16,362 30,880 28,927 20,192 28,309
23,169 19,567 5,900 53,906 31,130 20,782 2,037
466 13,103 2,124 30,831 18,366 10,433 1,215
17,781 20,147 20,147 20,148 20,647 20,147 19,759
5,074 38,133 12,021 63,637 50,327 29,063 3,657
---------- ------------ ----------- ------------ ------------ ----------- ----------
557,338 12,019,239 2,042,213 15,400,099 12,852,593 6,016,895 504,559
(151,581) -- (93,246) -- -- -- (65,078)
---------- ------------ ----------- ------------ ------------ ----------- ----------
405,757 12,019,239 1,948,967 15,400,099 12,852,593 6,016,895 439,481
---------- ------------ ----------- ------------ ------------ ----------- ----------
(37,347) (8,707,499) (1,225,328) (8,089,875) 7,014,344 (5,247,793) 2,350,859
---------- ------------ ----------- ------------ ------------ ----------- ----------
(687,169) 115,410,812 9,789,839 178,313,267 98,995,569 59,076,338 1,294,598
-- (4,403,012) 49,527 698,431 (3,111,747) -- --
-- 43,671 3,016 36,988 37,975 21,246 --
-- -- 150,365 -- -- -- --
-- -- (82,718) -- (45,511) 765,582 --
-- -- -- 33,787 -- -- --
-- -- -- -- -- -- --
3,254,418 25,581,379 6,636,110 64,800,488 28,308,868 23,127,484 1,491,811
-- -- (67,133) -- (50,218) -- --
---------- ------------ ----------- ------------ ------------ ----------- ----------
2,567,249 136,632,850 16,479,006 243,882,961 124,134,936 82,990,650 2,786,409
---------- ------------ ----------- ------------ ------------ ----------- ----------
$2,529,902 $127,925,351 $15,253,678 $235,793,086 $131,149,280 $77,742,857 $5,137,268
========== ============ =========== ============ ============ =========== ==========
61
WASATCH FUNDS -- STATEMENTS OF CHANGES IN NET ASSETS
CORE GROWTH GLOBAL SCIENCE & TECHNOLOGY
FUND FUND
------------------------------- ---------------------------
YEAR OR PERIOD ENDED SEPTEMBER 30 2005 2004 2005 2004
- --------------------------------- -------------- -------------- ------------ ------------
OPERATIONS:
Net investment income (loss) $ 21,719,652 $ 4,998,432 $ (1,110,223) $ (1,253,238)
Net realized gain (loss) on investments and foreign
currency translations 133,310,170 111,394,756 4,224,406 263,985
Net increase from payment by affiliates* 113,441 -- 962 --
Net realized loss on short positions -- -- (9,462) (96,963)
Change in unrealized appreciation (depreciation) on
investments and foreign currency translations 117,956,992 78,422,948 14,848,603 (6,818,973)
-------------- -------------- ------------ ------------
Net increase (decrease) in net assets resulting
from operations 273,100,255 194,816,136 17,954,286 (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 218,428,841 214,099,994 29,530,068 52,986,102
Shares issued to holders in reinvestment of dividends 57,346,243 794,356 -- --
Shares redeemed (281,086,709) (230,240,862) (27,441,436) (27,341,053)
Redemption fees 12,284 7,481 8,785 44,362
-------------- -------------- ------------ ------------
Net increase (decrease) (5,299,341) (15,339,031) 2,097,417 25,689,411
-------------- -------------- ------------ ------------
TOTAL INCREASE IN NET ASSETS 207,721,555 178,627,455 20,051,703 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 $1,704,690,423 $1,496,968,868 $ 89,352,993 $ 69,301,290
============== ============== ============ ============
Undistributed net investment income (loss) included
in net assets at end of period $ 14,126,218 $ 2,732,242 $ (41,845) $ (1,649)
============== ============== ============ ============
CAPITAL SHARE TRANSACTIONS--SHARES:
Shares sold 5,156,215 5,660,062 2,491,304 4,456,739
Shares issued to holders in reinvestment of dividends 1,434,966 21,847 -- --
Shares redeemed (6,661,983) (6,102,481) (2,433,544) (2,430,466)
-------------- -------------- ------------ ------------
Net increase (decrease) in shares outstanding (70,802) (420,572) 57,760 2,026,273
============== ============== ============ ============
(1) Fund inception date was June 18, 2004.
(2) Fund inception date was January 27, 2005.
* See Note 7.
See notes to financial statements.
62
SEPTEMBER 30, 2005
INTERNATIONAL
OPPORTUNITIES
HERITAGE GROWTH FUND INTERNATIONAL GROWTH FUND FUND
- --------------------------- --------------------------- -------------
2005 2004(1) 2005 2004 2005(2)
- ------------ ------------ ------------ ------------ -------------
$ 402,176 $ (1,836) $ (1,761,958) $ (1,461,714) $ (37,347)
8,686,628 (70,009) (521,314) 1,885,610 (687,169)
42 -- 130,700 -- --
-- -- -- -- --
19,121,309 676,514 63,321,371 16,476,265 3,254,418
- ------------ ------------ ------------ ------------ -----------
28,210,155 604,669 61,168,799 16,900,161 2,529,902
-- -- -- -- --
(45,181) -- (411,692) -- --
- ------------ ------------ ------------ ------------ -----------
(45,181) -- (411,692) -- --
189,734,440 130,882,450 129,835,485 161,710,415 27,983,805
43,091 -- 396,621 -- --
(41,428,689) (3,387,411) (49,214,202) (26,165,271) (1,073,830)
20,737 35,837 27,200 62,776 116
- ------------ ------------ ------------ ------------ -----------
148,369,579 127,530,876 81,045,104 135,607,920 26,910,091
- ------------ ------------ ------------ ------------ -----------
176,534,553 128,135,545 141,802,211 152,508,081 29,439,993
128,135,545 -- 196,989,950 44,481,869 --
- ------------ ------------ ------------ ------------ -----------
$304,670,098 $128,135,545 $338,792,161 $196,989,950 $29,439,993
============ ============ ============ ============ ===========
$ 383,500 $ 41,723 $ (511,543) $ (1,006) $ (321,540)
============ ============ ============ ============ ===========
17,432,879 13,356,843 7,851,927 11,557,271 13,973,158
3,932 -- 26,871 -- --
(3,775,893) (357,962) (2,956,166) (1,850,592) (538,372)
- ------------ ------------ ------------ ------------ -----------
13,660,918 12,998,881 4,922,632 9,706,679 13,434,786
============ ============ ============ ============ ===========
63
WASATCH FUNDS -- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MICRO CAP MICRO CAP VALUE
FUND FUND
--------------------------- --------------------------
YEAR ENDED SEPTEMBER 30 2005 2004 2005 2004
- ----------------------- ------------ ------------ ------------ -----------
OPERATIONS:
Net investment income (loss) $ (8,707,499) $(10,804,110) $ (1,225,328) $(1,496,670)
Net realized gain on investments and foreign
currency translations 111,007,800 93,321,055 9,839,366 11,829,205
Net increase from payment by affiliates* 43,671 -- 3,016 --
Net realized gain on options written -- -- 150,365 --
Net realized gain (loss) on short positions -- -- (82,718) 33,575
Net realized gain on the disposal of investments in
violation of an investment restriction* -- -- -- --
Change in unrealized appreciation (depreciation) on
investments and foreign currency translations 25,581,379 (30,072,492) 6,568,977 5,615,814
------------ ------------ ------------ -----------
Net increase (decrease) in net assets resulting from operations 127,925,351 52,444,453 15,253,678 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 12,639,078 21,906,796 2,473,175 3,673,219
Shares issued to holders in reinvestment of dividends 73,644,336 41,226,753 9,621,240 57,934
Shares redeemed (75,691,802) (70,859,439) (15,397,013) (5,524,778)
Redemption fees 333 5,180 40 97
------------ ------------ ------------ -----------
Net increase (decrease) 10,591,945 (7,720,710) (3,302,558) (1,793,528)
------------ ------------ ------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 60,953,140 1,111,578 2,068,128 14,129,324
NET ASSETS:
Beginning of period 518,290,726 517,179,148 84,835,302 70,705,978
------------ ------------ ------------ -----------
End of period $579,243,866 $518,290,726 $ 86,903,430 $84,835,302
============ ============ ============ ===========
Undistributed net investment income (loss) included in
net assets at end of period $ -- $ -- $ (12,815) $ (17,356)
============ ============ ============ ===========
CAPITAL SHARE TRANSACTIONS--SHARES:
Shares sold 1,848,406 3,065,146 998,439 1,412,827
Shares issued to holders in reinvestment of dividends 12,243,690 6,190,303 4,257,186 24,548
Shares redeemed (11,136,267) (9,869,981) (6,264,493) (2,193,156)
------------ ------------ ------------ -----------
Net increase (decrease) in shares outstanding 2,955,829 (614,532) (1,008,868) (755,781)
============ ============ ============ ===========
* See Note 7.
See notes to financial statements.
64
SEPTEMBER 30, 2005
SMALL CAP GROWTH FUND SMALL CAP VALUE FUND ULTRA GROWTH FUND
- ------------------------------- ----------------------------- -----------------------------
2005 2004 2005 2004 2005 2004
- -------------- -------------- ------------- ------------- ------------- -------------
$ (8,089,875) $ (11,238,907) $ 7,014,344 $ (1,954,232) $ (5,247,793) $ (7,484,979)
179,011,698 29,266,940 95,883,822 111,770,036 59,076,338 29,431,438
36,988 -- 37,975 -- 21,246 --
-- -- -- -- -- --
-- -- (45,511) (526,153) 765,582 --
33,787 -- -- -- -- --
64,800,488 75,182,347 28,258,650 19,235,185 23,127,484 (36,744,684)
- -------------- -------------- ------------- ------------- ------------- -------------
235,793,086 93,210,380 131,149,280 128,524,836 77,742,857 (14,798,225)
(26,587,298) (5,914,707) (103,737,575) (221,337) (16,837,407) (5,447,072)
- -------------- -------------- ------------- ------------- ------------- -------------
204,118,853 189,892,968 45,035,086 77,278,907 31,883,939 58,791,862
25,598,301 5,653,646 99,650,145 210,971 16,008,572 5,113,842
(272,771,150) (225,544,787) (171,523,403) (122,799,314) (145,918,730) (155,598,165)
7,864 6,856 2,221 11,336 2,387 11,164
- -------------- -------------- ------------- ------------- ------------- -------------
(43,046,132) (29,991,317) (26,835,951) (45,298,100) (98,023,832) (91,681,297)
- -------------- -------------- ------------- ------------- ------------- -------------
166,159,656 57,304,356 575,754 83,005,399 (37,118,382) (111,926,594)
1,191,702,272 1,134,397,916 734,266,254 651,260,855 427,012,712 538,939,306
- -------------- -------------- ------------- ------------- ------------- -------------
$1,357,861,928 $1,191,702,272 $ 734,842,008 $ 734,266,254 $ 389,894,330 $ 427,012,712
============== ============== ============= ============= ============= =============
$ (446,570) $ -- $ 6,189,432 $ -- $ (375,543) $ --
============== ============== ============= ============= ============= =============
5,171,559 5,360,289 8,444,021 14,270,988 1,226,242 2,140,610
758,389 166,382 20,978,978 40,494 667,812 191,012
(7,107,315) (6,393,772) (32,494,623) (22,776,164) (5,697,076) (5,786,241)
- -------------- -------------- ------------- ------------- ------------- -------------
(1,177,367) (867,101) (3,071,624) (8,464,682) (3,803,022) (3,454,619)
============== ============== ============= ============= ============= =============
65
WASATCH FUNDS -- STATEMENTS OF CHANGES IN NET ASSETS SEPTEMBER 30, 2005
(CONTINUED)
U.S. TREASURY FUND
---------------------------
YEAR ENDED SEPTEMBER 30 2005 2004
- ----------------------- ------------ ------------
OPERATIONS: $ 2,350,859 $ 2,277,215
Net investment income Net realized gain on investments 1,294,598 217,681
Change in unrealized appreciation (depreciation) on
investments 1,491,811 (467,496)
------------ ------------
Net increase in net assets resulting from operations 5,137,268 2,027,400
DIVIDENDS PAID FROM:
Net investment income (2,078,313) (3,207,497)
Net realized gains -- --
------------ ------------
(2,078,313) (3,207,497)
CAPITAL SHARE TRANSACTIONS:
Shares sold 51,490,595 13,425,517
Shares issued to holders in reinvestment of dividends 2,022,708 3,120,826
Shares redeemed (19,099,451) (37,444,987)
Redemption fees 37,721 32,955
------------ ------------
Net increase (decrease) 34,451,573 (20,865,689)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 37,510,528 (22,045,786)
NET ASSETS:
Beginning of period 45,088,034 67,133,820
------------ ------------
End of period $ 82,598,562 $ 45,088,034
============ ============
Undistributed net investment income included in net
assets at end of period $ 1,845,986 $ 1,573,440
============ ============
CAPITAL SHARE TRANSACTIONS -- SHARES:
Shares sold 3,532,880 1,013,525
Shares issued to holders in reinvestment of dividends 150,611 239,879
Shares redeemed (1,329,647) (2,884,852)
------------ ------------
Net increase (decrease) in shares outstanding 2,353,844 (1,631,448)
============ ============
See notes to financial statements.
66
WASATCH FUNDS -- FINANCIAL HIGHLIGHTS SEPTEMBER 30, 2005
YEAR ENDED SEPTEMBER 30
CORE GROWTH FUND -------------------------------------------------------------------
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001
- ------------------------------------------------ ---------- ---------- ---------- ---------- --------
NET ASSET VALUE, BEGINNING OF PERIOD $ 38.49 $ 33.54 $ 25.46 $ 31.57 $ 28.08
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.56 0.13 (0.01) (0.01) (0.15)
Net realized and unrealized gains (losses)
on investments 6.41 4.84 8.09 (3.97) 5.95
Net increase from payment by affiliate --(1) -- -- -- --
---------- ---------- ---------- ---------- --------
TOTAL FROM INVESTMENT OPERATIONS 6.97 4.97 8.08 (3.98) 5.80
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)
---------- ---------- ---------- ---------- --------
TOTAL DISTRIBUTIONS (1.54) (0.02) -- (2.14) (2.32)
---------- ---------- ---------- ---------- --------
NET ASSET VALUE, END OF PERIOD $ 43.92 $ 38.49 $ 33.54 $ 25.46 $ 31.57
========== ========== ========== ========== ========
TOTAL RETURN(5) 18.58% 14.80% 31.68% (13.73)% 22.63%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $1,704,690 $1,496,969 $1,318,341 $1,062,944 $992,935
Ratio of expenses to average net assets 1.20% 1.21% 1.25% 1.29% 1.32%
Ratio of net investment income (loss) to
average net assets 1.30% 0.34% (0.02)% (0.02)% (0.66)%
Portfolio turnover rate 42% 47% 47% 76% 51%
YEAR OR PERIOD ENDED SEPTEMBER 30
GLOBAL SCIENCE & TECHNOLOGY FUND ----------------------------------------------------
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001(2)
- ------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $ 10.73 $ 6.38 $ 8.02 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.16) (0.18) (0.13) (0.15) (0.07)
Net realized and unrealized gains (losses)
on investments 2.99 (0.41) 4.47 (1.34) (1.93)
Net increase from payment by affiliate --(1) -- -- -- --
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.83 (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 $ 12.98 $ 10.15 $ 10.73 $ 6.38 $ 8.02
======= ======= ======= ======= =======
TOTAL RETURN(3 6) 27.88% (5.49)% 68.34% (18.83)% (19.80)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $89,353 $69,301 $51,517 $20,811 $10,648
Ratio of expenses to average net assets:
Net of waivers and reimbursements(4) 1.95% 1.95% 1.95% 1.95% 1.95%
Before waivers and reimbursements(4) 1.97% 1.97% 2.13% 2.42% 3.58%
Ratio of net investment loss to average net
assets:
Net of waivers and reimbursements(4) (1.52)% (1.66)% (1.87)% (1.90)% (1.50)%
Before waivers and reimbursements(4) (1.54)% (1.68)% (2.05)% (2.37)% (3.13)%
Portfolio turnover rate(3) 80% 55% 88% 95% 94%
(1) Represents amounts less than $.005 per share.
(2) Fund inception date was December 19, 2000.
(3) Not annualized for periods less than one year.
(4) Annualized.
(5) In 2005, 0.03% of the Fund's total return consisted of a voluntary
reimbursement by the Advisor for amounts relating to errors in applying the
Funds' cross-trading policies. Excluding this item, the total return would
have been 18.55%.
(6) In 2005, the Fund's total return included a voluntary reimbursement by the
Advisor for amounts relating to errors in applying the Funds' cross-trading
policies that had no impact on the total return.
See notes to financial statements.
67
WASATCH FUNDS -- FINANCIAL HIGHLIGHTS
YEAR OR PERIOD ENDED SEPTEMBER 30
HERITAGE GROWTH FUND ---------------------------------
(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 gains (losses) on investments 1.55 (0.14)
Net increase from payment by affiliate --(2) --
-------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.57 (0.14)
REDEMPTION FEES (see Note 2) --(2) --(2)
LESS DISTRIBUTIONS:
Distributions from net realized gains --(2) --
-------- --------
TOTAL DISTRIBUTIONS --(2) --
-------- --------
NET ASSET VALUE, END OF PERIOD $ 11.43 $ 9.86
======== ========
TOTAL RETURN (3 6) 15.95% (1.40)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $304,670 $128,136
Ratio of expenses to average net assets:
Net of waivers and reimbursements(4) 0.95% 0.95%
Before waivers and reimbursements(4) 0.99% 1.26%
Ratio of net investment income (loss) to
average net assets:
Net of waivers and reimbursements(4) 0.17% (0.01)%
Before waivers and reimbursements(4) 0.13% (0.32)%
Portfolio turnover rate(3) 36% 5%
YEAR OR PERIOD ENDED SEPTEMBER 30
INTERNATIONAL GROWTH FUND ---------------------------------------------
(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 (0.10) (0.11) (0.07) (0.03)
Net realized and unrealized gains (losses)
on investments 3.91 2.76 3.28 (1.13)
Net increase from payment by affiliate 0.01 -- -- --
-------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 3.82 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 $ 18.50 $ 14.71 $ 12.06 $ 8.85
======== ======== ======= =======
TOTAL RETURN(3 7) 26.02% 21.97% 36.27% (11.50)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $338,792 $196,990 $44,482 $18,008
Ratio of expenses to average net assets:
Net of waivers and reimbursements(4) 1.84% 1.92% 1.95% 1.95%
Before waivers and reimbursements(4) 1.84% 1.92% 2.30% 4.26%
Ratio of net investment loss to average net assets:
Net of waivers and reimbursements(4) (0.64)% (1.06)% (1.12)% (1.39)%
Before waivers and reimbursements(4) (0.64)% (1.06)% (1.47)% (3.70)%
Portfolio turnover rate(3) 32% 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) In 2005, the Fund's total return included a voluntary reimbursement by the
Advisor for amounts relating to errors in applying the Funds' cross-trading
policies that had no impact on the total return.
(7) In 2005, 0.07% of the Fund's total return consisted of a voluntary
reimbursement by the Advisor for a realized investment loss. Excluding this
item, the total return would have been 25.95%. The Fund's total return also
included, in 2005, a voluntary reimbursement by the Advisor for amounts
relating to errors in applying the Funds' cross-trading policies that had
no impact on the total return.
See notes to financial statements.
68
SEPTEMBER 30, 2005
PERIOD
ENDED
INTERNATIONAL OPPORTUNITIES FUND SEPTEMBER 30
(for a share outstanding throughout the period) 2005(1)
- ----------------------------------------------- ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 2.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss --(2)
Net realized and unrealized gains on investments 0.19
-------
TOTAL FROM INVESTMENT OPERATIONS 0.19
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 $ 2.19
=======
TOTAL RETURN(3) 9.50%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $29,440
Ratio of expenses to average net assets:
Net of waivers and reimbursements(4) 2.25%
Before waivers and reimbursements(4) 3.09%
Ratio of net investment income (loss) to
average net assets:
Net of waivers and reimbursements(4) (0.21)%
Before waivers and reimbursements(4) (1.05)%
Portfolio turnover rate(3) 12%
YEAR ENDED SEPTEMBER 30
MICRO CAP FUND -------------------------------------------------------
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001
- ------------------------------------------------ -------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.05 $ 6.98 $ 5.01 $ 5.64 $ 6.53
INCOME (LOSS) FROM INVESTMENT OPERATIONS: (0.11) (0.15) (0.12) (0.14) (0.08)
Net investment loss
Net realized and unrealized gains on investments 1.70 0.81 2.43 0.11 0.74
Net increase from payment by affiliate --(2) -- -- -- --
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.59 0.66 2.31 (0.03) 0.66
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)
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (1.06) (0.59) (0.34) (0.60) (1.55)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 7.58 $ 7.05 $ 6.98 $ 5.01 $ 5.64
======== ======== ======== ======== ========
TOTAL RETURN(5) 26.42% 9.96% 50.28% (1.41)% 16.32%
SUPPLEMENTAL DATA AND RATIOS: $579,244 $518,291 $517,179 $327,548 $323,540
Net assets, end of period (in thousands)
Ratio of expenses to average net assets 2.18% 2.19% 2.24% 2.28% 2.32%
Ratio of net investment loss to average net assets (1.58)% (1.95)% (2.13)% (2.21)% (1.76)%
Portfolio turnover rate 50% 56% 50% 62% 58%
(1) Fund inception date was January 27, 2005.
(2) Represents amounts less than $.005 per share.
(3) Not annualized for periods less than one year.
(4) Annualized.
(5) In 2005, the Fund's total return included a voluntary reimbursement by the
Advisor for amounts relating to errors in applying the Funds' cross-trading
policies that had no impact on the total return.
See notes to financial statements.
69
WASATCH FUNDS -- FINANCIAL HIGHLIGHTS
YEAR OR PERIOD ENDED SEPTEMBER 30
MICRO CAP VALUE FUND ----------------------------------
(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 (0.04) (0.05) (0.01)
Net realized and unrealized gains
on investments 0.49 0.53 0.10
Net increase from payment by affiliate --(2) -- --
------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.45 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 $ 2.72 $ 2.57 $ 2.09
======= ======= =======
TOTAL RETURN(3 5) 19.87% 23.06% 4.50%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $86,903 $84,835 $70,706
Ratio of expenses to average net assets:
Net of waivers and reimbursements(4 6) 2.25% 2.27% 2.50%
Before waivers and reimbursements(4) 2.36% 2.38% 2.73%
Ratio of net investment loss to average net assets:
Net of waivers and reimbursements(4) (1.41)% (1.76)% (1.97)%
Before waivers and reimbursements(4) (1.52)% (1.87)% (2.20)%
Portfolio turnover rate(3) 85% 101% 4%
YEAR ENDED SEPTEMBER 30
SMALL CAP GROWTH FUND ------------------------------------------------------------------
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001
- ------------------------------------------------ ---------- ---------- ---------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD $ 34.94 $ 32.43 $ 23.83 $ 26.18 $ 34.89
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.25) (0.33) (0.28) (0.35) (0.15)
Net realized and unrealized
gains (losses) on investments 7.32 3.01 8.88 (1.55) (2.73)
Net increase from payment by affiliate --(2) -- -- -- --
---------- ---------- ---------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 7.07 2.68 8.60 (1.90) (2.88)
REDEMPTION FEES (SEE NOTE 2) --(2) --(2) --(2) --(2) 0.02
LESS DISTRIBUTIONS:
Distributions from net realized gains (0.78) (0.17) --(2) (0.45) (5.85)
---------- ---------- ---------- -------- --------
TOTAL DISTRIBUTIONS (0.78) (0.17) -- (0.45) (5.85)
---------- ---------- ---------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 41.23 $ 34.94 $ 32.43 $ 23.83 $ 26.18
========== ========== ========== ======== ========
TOTAL RETURN(7) 20.73% 8.27% 36.15% (7.53)% (8.61)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $1,357,862 $1,191,702 $1,134,398 $735,417 $553,416
Ratio of expenses to average net assets 1.18% 1.20% 1.25% 1.31% 1.36%
Ratio of net investment loss to average
net assets (0.62)% (0.91)% (1.08)% (1.25)% (0.83)%
Portfolio turnover rate 36% 41% 63% 51% 40%
(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) In 2005, the Fund's total return included a voluntary reimbursement by the
Advisor for a realized investment loss that had no impact on the total
return.
(6) On February 1, 2004, the Advisor reduced the contractual expense limitation
from 2.50% to 2.25% through January 31, 2005. As a result, the effective
expense ratio net of waivers and reimbursements for the period ended
September 30, 2004 was 2.27%.
(7) In 2005, the Fund's total return included a voluntary reimbursement by the
Advisor for amounts relating to errors in applying the Funds' cross-trading
policies that had no impact on the total return. The effect of net realized
gains on the disposal of investments in violation of an investment
restriction on total return was less than .01%.
See notes to financial statements.
70
SEPTEMBER 30, 2005
YEAR ENDED SEPTEMBER 30
SMALL CAP VALUE FUND ------------------------------------------------------------
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001
- ------------------------------------------------ -------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.54 $ 4.62 $ 3.21 $ 3.76 $ 3.51
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.05 (0.01) (0.02) (0.02) --
Net realized and unrealized gains (losses)
on investments 0.86 0.93 1.43 (0.43) 0.56
Net increase from payment by affiliate --(1) -- -- -- --
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.91 0.92 1.41 (0.45) 0.56
REDEMPTION FEES (see Note 2) --(1) --(1) --(1) --(1) --(1)
LESS DISTRIBUTIONS:
Distributions from net realized gains (0.78) --(1) -- (0.10) (0.31)
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.78) -- -- (0.10) (0.31)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 5.67 $ 5.54 $ 4.62 $ 3.21 $ 3.76
======== ======== ======== ======== ========
TOTAL RETURN(2) 19.47% 19.73% 43.93% (12.35)% 18.04%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $734,842 $734,266 $651,261 $428,082 $487,095
Ratio of expenses to average net assets 1.72% 1.73% 1.78% 1.81% 1.92%
Ratio of net investment income (loss) to
average net assets 0.94% (0.26)% (0.43)% (0.44)% (0.31)%
Portfolio turnover rate 43% 56% 69% 69% 41%
YEAR ENDED SEPTEMBER 30
ULTRA GROWTH FUND --------------------------------------------------------
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001
- ------------------------------------------------ -------- -------- -------- -------- -------
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.07 $ 25.43 $ 16.52 $ 19.15 $ 27.17
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.38) (0.42) (0.29) (0.25) (0.21)
Net realized and unrealized gains (losses)
on investments 5.26 (0.68) 9.19 (1.48) (2.49)
Net increase from payment by affiliate --(1) -- -- -- --
-------- -------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 4.88 (1.10) 8.90 (1.73) (2.70)
REDEMPTION FEES (see Note 2) --(1) -- 0.01 0.02 0.07
LESS DISTRIBUTIONS:
Distributions from net realized gains (0.97) (0.26) -- (0.92) (5.39)
-------- -------- -------- -------- -------
TOTAL DISTRIBUTIONS (0.97) (0.26) -- (0.92) (5.39)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 27.98 $ 24.07 $ 25.43 $ 16.52 $ 19.15
======== ======== ======== ======== =======
TOTAL RETURN(2) 21.00% (4.44)% 53.93% (9.74)% (10.89)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $389,894 $427,013 $538,939 $277,404 $86,097
Ratio of expenses to average net assets:
Net of waivers and reimbursements 1.50% 1.50% 1.57% 1.71% 1.75%
Before waivers and reimbursements 1.50% 1.50% 1.57% 1.71% 1.79%
Ratio of net investment loss to average net assets:
Net of waivers and reimbursements (1.30)% (1.39)% (1.50)% (1.67)% (1.39)%
Before waivers and reimbursements (1.30)% (1.39)% (1.50)% (1.67)% (1.43)%
Portfolio turnover rate 65% 67% 76% 78% 123%
(1) Represents amounts less than $.005 per share.
(2) In 2005, the Fund's total return included a voluntary reimbursement by the
Advisor for amounts relating to errors in applying the Funds' cross-trading
policies that had no impact on the total return.
See notes to financial statements.
71
WASATCH FUNDS -- FINANCIAL HIGHLIGHTS SEPTEMBER 30, 2005
YEAR ENDED SEPTEMBER 30
U.S. TREASURY FUND -----------------------------------------------
(for a share outstanding throughout each period) 2005 2004 2003 2002 2001
- ------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.77 $ 13.68 $ 14.04 $ 12.97 $ 12.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.45 0.70 0.72 0.66 0.65
Net realized and unrealized gains (losses)
on investments 1.05 0.11 (0.48) 1.17 0.87
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.50 0.81 0.24 1.83 1.52
REDEMPTION FEES (see Note 2) 0.01 0.01 0.03 0.01 0.01
LESS DISTRIBUTIONS:
Dividends from net investment income (0.60) (0.73) (0.63) (0.77) (0.56)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.60) (0.73) (0.63) (0.77) (0.56)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 14.68 $ 13.77 $ 13.68 $ 14.04 $ 12.97
======= ======= ======= ======= =======
TOTAL RETURN 11.41% 6.27% 2.17% 15.38% 12.89%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $82,599 $45,088 $67,134 $83,879 $66,195
Ratio of expenses to average net assets:
Net of waivers and reimbursements 0.75% 0.75% 0.75% 0.75% 0.75%
Before waivers and reimbursements 0.86% 0.94% 0.91% 0.98% 0.95%
Ratio of net investment income to average net assets:
Net of waivers and reimbursements 4.01% 4.50% 4.67% 5.51% 5.34%
Before waivers and reimbursements 3.90% 4.31% 4.51% 5.28% 5.14%
Portfolio turnover rate 19% 4% 37% 22% 41%
See notes to financial statements.
72
WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2005
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 significant policies related to investments of the
Funds held at September 30, 2005.
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, with the oversight 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 market
or exchange (for example, a foreign exchange or market) and the time the Fund's
share price is calculated. Significant events include, but are not limited to
the following: significant fluctuations in domestic markets, foreign markets or
foreign currencies; occurrences not directly tied to the securities markets such
as natural disasters, armed conflicts or significant governmental actions; and
major announcements affecting a single issuer or an entire market or market
sector. In responding to a significant event, the Pricing Committee would
determine the fair value of affected securities considering factors including,
but not limited to: index options and futures traded subsequent to the close;
ADRs, GDRs or other related receipts; currency spot or forward markets that
trade after pricing of the foreign exchange; other derivative securities traded
after the close such as SPDRs and other exchange traded funds (ETFs); and
alternative market quotes on the affected securities. In addition, the Funds may
use a systematic fair valuation model provided by an independent third party in
certain circumstances to assist in adjusting the valuation of foreign
securities.
As of September 30, 2005, the aggregate amount of fair valued securities as
a percentage of net assets for the Funds was as follows:
Core Growth Fund 0.18%
Global Science & Technology Fund 0.79%
Heritage Growth Fund 0.53%
International Growth Fund 1.46%
International Opportunities Fund 1.17%
Micro Cap Fund 0.56%
Micro Cap Value Fund 2.96%
Small Cap Growth Fund 1.46%
Small Cap Value Fund 5.21%
Ultra Growth Fund 3.48%
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 September 30, 2005, the foreign currencies held by the Funds were as
follows (amounts in U.S. dollars):
COST MARKET VALUE
--------- ------------
GLOBAL SCIENCE & TECHNOLOGY FUND
Swiss Franc $(347,187) $(346,919)
INTERNATIONAL GROWTH FUND
Hong Kong Dollar $ 18,777 $ 18,782
Taiwan Dollar 52,532 52,581
Swedish Krona 118,519 119,131
--------- ---------
$ 189,828 $ 190,494
========= =========
(Continued next page.)
73
WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED)
COST MARKET VALUE
---------- ------------
INTERNATIONAL OPPORTUNITIES FUND
Australian Dollar $ 1,221 $ 1,225
Canadian Dollar 287,184 302,900
Euro 1,260,544 1,155,479
Hong Kong Dollar 400 400
Japanese Yen 537,126 526,853
Taiwan Dollar 3,566 3,512
---------- ----------
$2,090,041 $1,990,369
========== ==========
MICRO CAP VALUE FUND
Euro $ (290,926) $ (291,834)
INVESTMENT IN SECURITIES AND RELATED INVESTMENT INCOME -- Security
transactions are accounted for on the trade date. Gains or losses on securities
sold are determined on the identified cost basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date except that
certain dividends from foreign securities may be recorded after the ex-dividend
date based on when the Fund is informed of the dividend. Interest income and
estimated expenses are accrued daily. Bond discount and premium are amortized
using the interest method. To the extent dividends received from Real Estate
Investment Trust securities include return of capital distributions, such
distributions are recorded as income, and adjusted accordingly for tax purposes.
SHORT SALES -- To a limited extent, the Equity Funds may enter into short
sales whereby a fund sells a security it generally does not own (the security is
borrowed), in anticipation of a decline in the security's price. The initial
amount of a short sale is recorded as a liability which is marked to market
daily. Fluctuations in the value of the short liability are recorded as
unrealized gains or losses. If a fund shorts a security when also holding a long
position in the security (a "short against the box"), as the security 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.
OPTIONS TRANSACTIONS -- The Equity Funds may buy and sell put and call
options, write covered put and call options, including over-the-counter options,
on portfolio securities where the completion of the obligation is dependent upon
the credit standing of another party. The risk in writing a call option is that
a Fund gives up the opportunity for profit if the market price of the security
increases. The risk in writing a put option is that a Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that a Fund pays a premium whether or not the option is
exercised. A Fund also has the additional risk of not being able to enter into a
closing transaction if a liquid secondary market does not exist. Option
contracts are valued daily and unrealized appreciation or depreciation is
recorded. A Fund will realize a gain or loss upon expiration or closing of the
option transaction. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option, or the cost of
a security for a purchased put or call option is adjusted by the amount of
premium received or paid.
REPURCHASE AGREEMENTS -- The Funds may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, a fund takes possession of an
underlying debt obligation subject to an obligation of the seller to repurchase
and the fund to resell, the obligation at an agreed-upon price and time. The
market value of the collateral must be equal at all times to the total amount of
the repurchase 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.
74
SEPTEMBER 30, 2005
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 at the end of the fiscal year among paid-in capital in
excess of par value, undistributed net investment income (loss) and
undistributed net realized gain (loss) on investments.
The Small Cap Growth Fund paid a shareholder redemption substantially
in-kind as of April 14, 2005, at which date the market value of the securities
provided was $35,770,577 resulting in a realized gain of $10,774,189 for
financial reporting purposes. For federal income tax purposes, the Fund has not
recognized a realized gain on the disposition of the securities.
ACCORDINGLY, AT SEPTEMBER 30, 2005, RECLASSIFICATIONS WERE RECORDED AS
FOLLOWS:
GLOBAL
CORE SCIENCE & HERITAGE INTERNATIONAL INTERNATIONAL
GROWTH TECHNOLOGY GROWTH GROWTH OPPORTUNITIES
FUND FUND FUND FUND FUND
----------- ----------- --------- ------------- -------------
Increase (decrease) paid-in capital
in excess of par $ 3,903,151 $ (494,566) $ 549,887 $(1,347,648) $ (26,237)
Increase (decrease) undistributed
net investment income (1,735,444) 1,070,027 (60,399) 1,251,421 (284,193)
Increase (decrease) undistributed
net realized gain (loss) (2,167,707) (575,461) (489,488) 96,227 310,430
MICRO MICRO CAP SMALL CAP SMALL CAP ULTRA U.S.
CAP VALUE GROWTH VALUE GROWTH TREASURY
FUND FUND FUND FUND FUND FUND
------------ ----------- ------------ ----------- ----------- --------
Increase (decrease) paid-in capital
in excess of par $ 5,158,119 $ 862,239 $ 20,689,289 $ 9,941,713 $ 3,585,151 $--
Increase (decrease) undistributed
net investment income 8,707,499 1,229,869 7,643,305 (824,912) 4,872,250 --
Increase (decrease) undistributed
net realized gain (loss) (13,865,618) (2,092,108) (28,332,594) (9,116,801) (8,457,401) --
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 YEAR OR PERIOD ENDED SEPTEMBER 30, 2005 ARE SUMMARIZED BELOW:
CORE GLOBAL SCIENCE HERITAGE INTERNATIONAL
GROWTH & TECHNOLOGY GROWTH INTERNATIONAL OPPORTUNITIES
FUND FUND FUND GROWTH FUND FUND(1)
------------- -------------- ------------- ------------- -------------
PURCHASES $ 671,533,837 $ 55,994,331 $222,403,499 $154,132,190 $26,788,875
SALES (756,494,397) (58,186,210) (75,072,045) (79,910,692) (2,349,356)
MICRO CAP MICRO CAP SMALL CAP SMALL CAP ULTRA GROWTH
FUND VALUE FUND GROWTH FUND VALUE FUND FUND
------------- ------------- ------------- ------------- -------------
PURCHASES $ 264,046,751 $ 69,750,925 $ 444,446,738 $ 318,070,733 $ 255,555,498
SALES (344,500,571) (82,731,481) (587,364,691) (455,198,496) (350,608,041)
(1) Inception date of the Fund was January 27, 2005.
Purchases and proceeds from sales of U.S. Government securities in the U.S.
Treasury Fund were $45,254,110 and $(10,953,820), respectively.
75
WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. OPTIONS CONTRACTS WRITTEN
OPTIONS WRITTEN ACTIVITY DURING THE YEAR ENDED SEPTEMBER 30, 2005 WAS AS
FOLLOWS:
OPTIONS
OUTSTANDING OPTIONS
AT BEGINNING OUTSTANDING AT
OF YEAR WRITTEN CLOSED EXERCISED EXPIRED END OF YEAR
------------ -------- --------- --------- ------- --------------
MICRO CAP VALUE FUND
Premium $-- $355,527 $(174,410) $(630) $-- $180,487
Number of contracts -- 1,700 (750) (4) -- 946
SMALL CAP VALUE FUND
Premium $-- $123,745 $ -- $ -- $-- $123,745
Number of contracts -- 500 -- -- -- 500
6. FEDERAL INCOME TAX INFORMATION
The following information is presented on a federal income tax basis as of
or for the year or period ended September 30, 2005.
SECURITIES, EXCLUDING WRITTEN OPTIONS AND SECURITIES SOLD SHORT AS OF
SEPTEMBER 30, 2005:
GLOBAL
SCIENCE & INTERNATIONAL
CORE TECHNOLOGY HERITAGE INTERNATIONAL OPPORTUNITIES
GROWTH FUND FUND GROWTH FUND GROWTH FUND FUND(1)
-------------- ----------- ------------ ------------ -------------
Cost $1,341,908,788 $79,500,039 $286,264,504 $254,603,491 $24,088,550
============== =========== ============ ============ ===========
Gross appreciation $ 419,924,533 $14,713,142 $ 34,157,936 $ 94,441,212 $ 4,964,413
Gross (depreciation) (46,585,140) (3,747,046) (14,259,493) (7,704,786) (1,635,079)
-------------- ----------- ------------ ------------ -----------
Net appreciation $ 373,339,393 $10,966,096 $ 19,898,443 $ 86,736,426 $ 3,329,334
============== =========== ============ ============ ===========
U.S.
MICRO CAP SMALL CAP SMALL CAP ULTRA TREASURY
MICRO CAP FUND VALUE FUND GROWTH FUND VALUE FUND GROWTH FUND FUND
-------------- ----------- -------------- ------------ ------------ -----------
Cost $445,158,682 $70,496,077 $1,058,257,205 $578,330,027 $335,555,475 $77,657,130
============ =========== ============== ============ ============ ===========
Gross appreciation $156,725,806 $20,356,717 $ 354,979,169 $178,855,085 $ 74,319,831 $ 6,204,795
Gross (depreciation) (26,528,586) (4,619,128) (47,499,985) (24,153,067) (19,044,189) (6,927)
------------ ----------- -------------- ------------ ------------ -----------
Net appreciation $130,197,220 $15,737,589 $ 307,479,184 $154,702,018 $ 55,275,642 $ 6,197,868
============ =========== ============== ============ ============ ===========
(1) Inception date of the Fund was January 27, 2005.
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.
COMPONENTS OF ACCUMULATED EARNINGS:
GLOBAL
SCIENCE & HERITAGE INTERNATIONAL INTERNATIONAL
CORE TECHNOLOGY GROWTH GROWTH OPPORTUNITIES
GROWTH FUND FUND FUND FUND FUND(1)
------------ ----------- ----------- ------------- -------------
Undistributed ordinary income $ 15,814,387 $ -- $ 5,874,006 $ -- $ --
Undistributed capital gains 105,075,946 1,860,011 2,653,376 -- --
------------ ----------- ----------- ----------- ----------
Accumulated earnings 120,890,333 1,860,011 8,527,382 -- --
Accumulated capital and other losses -- -- -- (218,658) (376,739)
Other undistributed ordinary losses -- (10,891) (2,722) (103,296) (296,833)
Net unrealized appreciation* 371,609,076 10,797,496 19,739,710 86,653,707 3,229,711
------------ ----------- ----------- ----------- ----------
Total accumulated earnings $492,499,409 $12,646,616 $28,264,370 $86,331,753 $2,556,139
============ =========== =========== =========== ==========
(1) Inception date of the Fund was January 27, 2005.
* On investments, securities sold short, derivative and foreign currency
denominated assets and liabilities.
76
SEPTEMBER 30, 2005
U.S.
MICRO MICRO CAP SMALL CAP SMALL CAP ULTRA TREASURY
CAP FUND VALUE FUND GROWTH FUND VALUE FUND GROWTH FUND FUND
------------ ----------- ------------ ------------ ------------ -----------
Undistributed ordinary income $ 6,716,824 $ 2,113,359 $ 3,535,080 $ 16,160,916 $ -- $ 1,845,986
Undistributed capital gains 88,752,752 5,700,226 147,336,206 77,992,022 45,678,741 --
------------ ----------- ------------ ------------ ------------ -----------
Accumulated earnings 95,469,576 7,813,585 150,871,286 94,152,938 45,678,741 1,845,986
Accumulated capital and other losses -- -- -- -- -- (5,635,755)
Other undistributed ordinary losses -- (12,815) -- -- -- --
Net unrealized appreciation* 130,203,645 15,393,489 307,478,660 154,057,005 55,123,713 6,197,868
------------ ----------- ------------ ------------ ------------ -----------
Total accumulated earnings $225,673,221 $23,194,259 $458,349,946 $248,209,943 $100,802,454 $ 2,408,099
============ =========== ============ ============ ============ ===========
* On investments, securities sold short, derivative and foreign currency
denominated assets and liabilities.
CAPITAL LOSS CARRYFORWARDS EXPIRE SEPTEMBER 30:
2008 2009 2010 2011 2012 2013
-------- ---------- -------- ---- ---- --------
INTERNATIONAL GROWTH FUND $ -- $ -- $ -- $-- $-- $218,658
U.S. TREASURY FUND 485,296 4,318,964 831,495 -- -- --
Capital loss carryforwards are available through the date specified above
to offset future realized net capital gains. To the extent future gains are
offset by capital loss carryforwards, such gains will not be distributed.
POST-OCTOBER LOSSES THAT ARE DEFERRED UNTIL TAX YEAR ENDED SEPTEMBER
30, 2006:
The International Opportunities Fund had $376,739 of post-October capital
losses. The Global Science & Technology, International Growth and International
Opportunities Funds had $16,721, $103,296 and $263,927, respectively, of
post-October currency losses. Net capital losses incurred after October 31 and
within the taxable year are deemed to arise on the first day of the following
tax year.
TAX CHARACTER OF DISTRIBUTIONS PAID DURING THE YEAR OR PERIOD ENDED
SEPTEMBER 30:
GLOBAL
SCIENCE & HERITAGE INTERNATIONAL
CORE GROWTH TECHNOLOGY GROWTH INTERNATIONAL OPPORTUNITIES
2005 FUND FUND FUND(1) GROWTH FUND FUND(2)
---- ----------- ---------- -------- ------------- -------------
Ordinary income $ 9,428,971 $-- $45,181 $ -- $--
Capital gain 50,650,388 -- -- 411,692 --
----------- --- ------- -------- ---
Total $60,079,359 $-- $45,181 $411,692 $--
=========== === ======= ======== ===
U.S.
MICRO MICRO CAP SMALL CAP SMALL CAP ULTRA TREASURY
2005 CAP FUND VALUE FUND GROWTH FUND VALUE FUND GROWTH FUND FUND
---- ----------- ---------- ----------- ------------ ----------- ----------
Ordinary income $ 3,229,671 $8,935,853 $ -- $ 24,887,725 $ -- $2,078,313
Capital gain 74,334,485 947,139 26,587,298 78,849,850 16,837,407 --
----------- ---------- ----------- ------------ ----------- ----------
Total $77,564,156 $9,882,992 $26,587,298 $103,737,575 $16,837,407 $2,078,313
=========== ========== =========== ============ =========== ==========
GLOBAL
SCIENCE & HERITAGE
CORE GROWTH TECHNOLOGY GROWTH INTERNATIONAL MICRO CAP
2004 FUND FUND FUND(1) GROWTH FUND FUND
---- ----------- ---------- -------- ------------- -------------
Ordinary income $849,650 $-- $-- $-- $ 2,759,023
Capital gain -- -- -- -- 40,853,142
-------- --- --- --- -----------
Total $849,650 $-- $-- $-- $43,612,165
======== === === === ===========
(1) Inception date of the Fund was June 18, 2004.
(2) Inception date of the Fund was January 27, 2005.
77
WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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
======= ========== ======== ========== ==========
The tax character of distributions paid may differ from that shown in the
Statements of Changes in Net Assets due to short-term gains being treated as
ordinary income for tax purposes.
SUPPLEMENTAL TAX INFORMATION (UNAUDITED):
The Funds hereby designate $54,042,945, $171,102, $411,692, $78,989,862,
$1,565,358, $36,721,853, $86,960,861 and $21,933,137 as a capital gain dividend
paid during the year ended September 30, 2005 for the Core Growth, Heritage
Growth, International Growth, Micro Cap, Micro Cap Value, Small Cap Growth,
Small Cap Value and Ultra Growth Funds, respectively, for the purpose of the
dividends paid deduction.
For the fiscal year ended September 30, 2005, certain dividends paid by
each Fund may be subject to a maximum tax rate of 15%, as provided for by the
Jobs and Growth Tax Relief Reconciliation Act of 2003. To the extent dividends
are paid during calendar year 2005, complete information will be reported on
shareholder's 2005 Form 1099-DIV. The amount designated as qualified dividend
income for the year or period ended September 30, 2005, will be the highest
allowable amount permitted by law.
Corporate shareholders should note for the year ended September 30, 2005,
the percentage of the Funds' investment income (i.e., net investment income plus
short-term capital gains) that qualified for the corporate dividends received
deductions were as follows:
CORE HERITAGE MICRO MICRO CAP SMALL CAP
GROWTH GROWTH CAP VALUE VALUE
FUND FUND FUND FUND FUND
------ -------- ----- --------- ---------
Percentage 87.72% 100.00% 10.74% 0.89% 13.23%
7. RELATED PARTY TRANSACTIONS
INVESTMENT ADVISORY FEES--As the Fund's investment advisor, the Advisor
receives a monthly fee calculated on average daily net assets. The Advisor has
contractually agreed to waive its fees and/or reimburse a Fund should a Fund's
operating expenses exceed a specified annual limitation through at least January
31, 2007. Investment advisory fees and fees waived, if any, for the year or
period ended September 30, 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%
78
SEPTEMBER 30, 2005
FUND ADMINISTRATION FEES -- As of July 1, 2005, the Funds' Administrator
changed from Wasatch Advisors, Inc. to State Street Bank and Trust Company.
Prior to that date, the Advisor provided or arranged certain fund administration
services to the Funds and received 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.
The Advisor received fund administration fees of $410,209, $17,578,
$52,723, $65,127, $3,706, $134,902, $21,725, $319,363, $187,043, $101,368, and
$13,236, for Core Growth, Global Science & Technology, Heritage Growth,
International Growth, International Opportunities, Micro Cap, Micro Cap Value,
Small Cap Growth, Small Cap Value, Ultra Growth, and U.S. Treasury Funds,
respectively, for its services through June 30, 2005.
PAYMENTS BY AFFILIATE -- The Advisor reimbursed the International Growth
Fund during the current period for realized losses resulting from a currency
trading error. The amount of the reimbursement was $130,391 or $0.0076 per share
based upon the Fund's shares outstanding as of September 30, 2005.
The Advisor reimbursed the Micro Cap Value Fund during the period for
realized losses resulting from a trading error. The amount of the reimbursement
was $3,016 or less than $0.0001 per share based upon the Fund's shares
outstanding as of September 30, 2005.
Subsequent to the fiscal year end, the Advisor reimbursed the Core Growth,
Global Science & Technology, Heritage Growth, International Growth, Micro Cap,
Small Cap Growth, Small Cap Value and Ultra Growth Funds for amounts relating to
errors in applying the Funds' cross-trading policies. The amounts of
reimbursements, including interest, and the (per share amounts as of September
30, 2005) were $113,441 ($0.0029/share), $962 ($0.0001/share), $42 (less than
$0.0001/share), $309 (less than $0.0001/ share), $43,671 ($0.0006/share),
$36,988 ($0.0011/share), $37,975 ($0.0003/share), and $21,246 ($0.0015/share),
respectively.
INVESTMENT RESTRICTION -- The Small Cap Growth Fund, in violation of an
investment restriction, purchased a security whose market capitalization was not
less than $2.5 billion ("small companies"), while less than 80% of its net
assets were invested in small companies. The Fund subsequently sold the security
for a realized gain. This amount is reflected in Net realized gain on the
disposal of investments in violation of an investment restriction in the
Statements of Operations.
AFFILIATED INTERESTS -- An officer of the Funds owns approximately 18% of
the shares outstanding of the International Opportunities Fund as of September
30, 2005.
79
WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. TRANSACTIONS WITH AFFILIATES
If a Fund's holding represents ownership of 5% or more of the voting
securities of a company, the company is deemed to be an affiliate as defined by
the Investment Company Act of 1940. The following Funds conducted transactions
during the year ended September 30, 2005 with "affiliated companies" as so
defined:
SHARE ACTIVITY
--------------------------------------------- DIVIDENDS GAIN (LOSS)
BALANCE BALANCE CREDITED TO REALIZED ON
9/30/04 PURCHASES SALES 9/30/05 INCOME SALE OF SHARES
--------- --------- --------- --------- ----------- --------------
CORE GROWTH FUND
Bimini Mortgage Management, Inc.,
Class A 1,251,075 -- 593,400 657,675* $1,635,556 $ (149,047)
WCA Waste Corp. 432,000 346,075 -- 778,075 -- --
---------- -----------
$1,635,556 $ (149,047)
---------- -----------
MICRO CAP FUND
Advanced Power Technology, Inc. 654,250 181,245 -- 835,495 $ -- $ --
Allen-Vanguard Corp. 1,243,575 -- 270,750 972,825* -- 71,463
Commercial Solutions, Inc. -- 1,000,000 -- 1,000,000 -- --
Covalent Group, Inc. 948,500 -- 948,500 --* -- (181,194)
Encision, Inc. 375,125 -- 35,125 340,000 -- (10,542)
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 -- 447,025 554,420* -- (4,410,966)
U.S. Physical Therapy, Inc. 492,012 160,850 20,000 632,862 -- 113,480
---------- -----------
$ -- $(4,403,012)
---------- -----------
MICRO CAP VALUE FUND
Security Business Bank of San Diego 53,000 -- 13,000 40,000* $ -- $ 49,527
Steakhouse Partners, Inc. 250,000 -- -- 250,000* -- --
---------- -----------
$ -- $ 49,527
---------- -----------
SMALL CAP GROWTH FUND
AmSurg Corp. 1,535,263 -- 49,130 1,486,133 $ -- $ 698,431
---------- -----------
SMALL CAP VALUE FUND
Falcon Financial Investment Trust 1,011,725 -- 1,011,725 --* $ 60,721 $ (659,303)
Supertex, Inc. 672,225 81,125 287,655 465,695* -- 917,913
Transport Corporation of America, Inc. 315,642 76,800 -- 392,442 -- --
USA Truck, Inc. 472,250 -- 200,450 271,800* -- 3,461,260
Whitehall Jewellers, Inc. 845,568 -- 845,568 --* -- (6,831,617)
---------- -----------
$ 60,721 $(3,111,747)
* No longer affiliated as of September 30, 2005.
ADR American Depositary Receipt
80
SEPTEMBER 30, 2005
9. 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 September
30, 2005, the Funds held the following restricted securities:
VALUE AS
SECURITY ACQUISITION ACQUISITION FAIR % OF NET
TYPE DATE COST VALUE 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 2,949,939 0.18%
---------- ---------- ----
$3,000,000 $3,009,939 0.18%
GLOBAL SCIENCE & TECHNOLOGY FUND
Acusphere, Inc. Warrants 7/29/04 - 10/20/04 $ -- $ -- --
Montagu Newhall Global Partners II-B, L.P. LP Interest 10/10/03 - 4/18/05 72,144 60,580 0.07%
Point Biomedical Corp. Warrants 2/16/05 -- -- --
Point Biomedical Corp., Series F Preferred Stock 2/16/05 150,000 120,000 0.13%
Xtera Communications, Inc., Series A-1 Preferred Stock 9/3/03 7,076 7,076 0.01%
---------- ---------- ----
$ 229,220 $ 187,656 0.21%
HERITAGE GROWTH FUND
CNX Gas Corp. Common Stock 8/1/05 - 9/13/05 $1,305,386 $1,616,938 0.53%
MICRO CAP FUND
DrugMax, Inc. Warrants 12/1/04 $ -- $ -- --
DrugMax, Inc. PIPE, Convertible
Series A Preferred Stock 12/1/04 3,200,000 2,429,197 0.42%
Point Biomedical Corp. Warrants 2/16/05 -- -- --
Point Biomedical Corp., Series F Preferred Stock 2/16/05 1,000,000 800,000 0.14%
---------- ---------- ----
$4,200,000 $3,229,197 0.56%
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 12/1/04 800,000 607,299 0.70%
Medical Properties Trust, Inc. Common Stock 3/31/04 362,500 348,145 0.40%
Point Biomedical Corp. Warrants 2/16/05 -- -- --
Point Biomedical Corp., Series F Preferred Stock 2/16/05 200,000 160,000 0.18%
Saxon Energy Services, Inc. Warrants 12/22/04 -- 120,567 0.14%
Toreador Resources Corp. PIPE Common Stock 9/9/05 775,000 802,164 0.92%
WPCS International, Inc. Warrants 11/16/04 -- -- --
---------- ---------- ----
$2,137,500 $2,038,175 2.34%
81
WASATCH FUNDS -- NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2005
9. RESTRICTED SECURITIES (CONTINUED)
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%
GeneOhm Sciences, Inc. Warrants 4/21/05 -- -- --
GeneOhm Sciences, Inc., Series C Preferred Stock 4/21/05 2,768,597 2,768,597 0.20%
Montagu Newhall Global Partners II-B, L.P. LP Interest 10/10/03 - 4/18/05 721,435 605,804 0.04%
NXStage Medical, Inc., Series F-1 Preferred Stock 7/8/05 - 7/15/05 1,117,371 1,316,901 0.10%
Point Biomedical Corp. Warrants 2/16/05 -- -- --
Point Biomedical Corp., Series F Preferred Stock 2/16/05 2,000,000 1,600,000 0.12%
TargetRX, Inc., Series D Preferred Stock 4/8/05 769,098 769,098 0.06%
Toreador Resources Corp. PIPE Common Stock 9/9/05 4,185,000 4,331,686 0.32%
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 0.11%
----------- ----------- ----
$13,632,929 $13,463,514 0.99%
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 1,966,626 0.27%
CBRE Realty Financial, Inc. Common Stock 6/2/05 7,125,000 7,125,000 0.97%
CNX Gas Corp. Common Stock 8/1/05 - 9/13/05 5,325,321 6,749,933 0.92%
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 7,115,360 0.97%
Knology, Inc. Rights 9/16/05 492,450 310,243 0.04%
Medical Properties Trust, Inc. Common Stock 3/31/04 - 4/13/05 5,305,000 5,046,902 0.68%
Saxon Energy Services, Inc. Warrants 4/7/05 -- -- --
Toreador Resources Corp. PIPE Common Stock 9/9/05 2,325,000 2,406,492 0.33%
----------- ----------- ----
$36,106,690 $38,260,556 5.21%
ULTRA GROWTH FUND
Elder Health, Inc., Series G Preferred Stock 11/1/04 $ 571,428 $ 571,428 0.15%
GeneOhm Sciences, Inc. Warrants 4/21/05 -- -- --
GeneOhm Sciences, Inc., Series C Preferred Stock 4/21/05 831,372 831,372 0.21%
Montagu Newhall Global Partners II-B, L.P. LP Interest 10/10/03 - 4/18/05 649,292 545,223 0.14%
NXStage Medical, Inc., Series F Preferred Stock 8/18/04 1,500,000 1,767,858 0.45%
Ophthonix, Inc., Series C Preferred Stock 9/23/05 500,000 500,000 0.13%
Point Biomedical Corp. Warrants 2/16/05 -- -- --
Point Biomedical Corp., Series F Preferred Stock 2/16/05 1,500,000 1,200,000 0.31%
TargetRX, Inc., Series D Preferred Stock 4/8/05 230,904 230,904 0.06%
TherOx, Inc., Series I Preferred Stock 7/7/05 999,998 999,998 0.26%
Xtera Communications, Inc., Series A-1 Preferred Stock 9/3/03 99,065 99,065 0.02%
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%
----------- ----------- ----
$ 7,882,059 $ 7,745,847 1.99%
PIPE Private Investment in a Public Equity
LP Limited Partnership Interest
10. PURCHASE COMMITMENTS
In September 2003, the Global Science & Technology, Small Cap Growth and
Ultra Growth Funds entered into subscription agreements to acquire limited
partnership interests in Montagu Newhall Global Partners II-B, L.P. The
remaining commitment amounts at September 30, 2005 were $425,000, $4,250,000 and
$3,825,000, 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 September 30, 2005 were $428,572 per Fund.
Securities held by the Funds have been designated to meet these purchase
commitments.
82
WASATCH FUNDS -- REPORT OF INDEPENDENT REGISTERED PUBLIC SEPTEMBER 30, 2005
ACCOUNTING FIRM
To the Board of Directors
and Shareholders of
Wasatch Funds, Inc.:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Wasatch Core Growth Fund,
Wasatch Global Science & Technology Fund, Wasatch Heritage Growth Fund, Wasatch
International Growth Fund, Wasatch International Opportunities Fund, Wasatch
Micro Cap Fund, Wasatch Micro Cap Value Fund, Wasatch Small Cap Growth Fund,
Wasatch Small Cap Value Fund, Wasatch Ultra Growth Fund, and Wasatch-Hoisington
U.S. Treasury Fund (constituting Wasatch Funds, Inc., hereafter referred to as
the "Funds") at September 30, 2005, the results of each of their operations for
the year or period then ended and the changes in each of their net assets and
the financial highlights for each of the periods presented, except as noted
below, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 2005 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion. The financial highlights of the Funds as of
September 30, 2001 and for the period then ended were audited by other
independent accountants whose report dated October 17, 2001 expressed an
unqualified opinion on those financial statements.
PricewaterhouseCoopers LLP
Kansas City, MO
November 18, 2005
83
WASATCH FUNDS -- DIRECTORS AND OFFICERS SEPTEMBER 30, 2005
NUMBER OF
PORTFOLIOS
POSITION(S) TERM OF OFFICE AND IN COMPLEX OTHER
NAME, ADDRESS AND HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
AGE FUND SERVED DURING PAST 5 YEARS DIRECTOR HELD BY DIRECTOR
- ------------------ ----------- ------------------ ------------------------------ ----------- ----------------
INDEPENDENT
DIRECTORS:
D. JAMES CROFT, PH.D. Director Indefinite Served Consultant since 2004 and 11 None
12030 Sunrise Valley as Director since Founder & Executive Director,
Drive Suite 200 2005 Mortgage Asset Research
Reston, VA 20191 Institute from 1990 to 2004.
Age: 63
JAMES U. JENSEN, Director Indefinite Co-founder and Chairman of 11 Private
J.D., MBA and Served as the Board of Rapidmapper, companies
44 North Wolcott Chairman Chairman of the Inc. (a company pursuing and
Salt Lake City, UT of the Board since 2004 computer and measurement foundations
84103 Board and Director technology and products) only
Age: 61 since 1986 since 2004; Consultant 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. Director Indefinite Professor of Business 11 None
SWINYARD, PH.D. and Served as Management and Holder of
Marriott School of Chairman Chairman of the the Fred G. Meyer Chair of
Management of the Audit Committee Marketing, Brigham Young
624 Tanner Building Audit since 2004 and University since 1978.
Brigham Young Committee Director since
University Provo, 1986
UT 84602
Age: 65
INTERESTED DIRECTOR:
SAMUEL S. STEWART, President Indefinite Chairman of the Board for 11 None
JR., PH.D., CFA* 150 and Served as Wasatch Advisors, Inc. (the
150 Social Hall Avenue Director President and "Advisor") since 1975;
4th Floor Salt Lake Director since Director of Research from 1975
Salt Lake City, 1986 - 2004; Chairman of the Board
UT 84111 for the Funds from 1986 -
Age: 63 2004; Professor of Finance at
the University of Utah from
1975 - 2000.
OFFICERS:
JEFF S. CARDON, CFA Vice Indefinite President and Treasurer of the N/A N/A
150 Social President Served as Vice Advisor since 1999; Director
Hall Avenue President since of the Funds from 1986 to
4th Floor Salt Lake 1986 2004; Director of the Advisor
City, UT 84111 since 1985; Security Analyst
Age: 48 for the Advisor since 1980.
VENICE F. Vice Indefinite Chief Compliance Officer for N/A N/A
EDWARDS, CFA President Served as the Advisor since 2004;
150 Social Hall and Treasurer since Director of Compliance for
Avenue Treasurer 1996 and Vice the Advisor from 1995 - 2004
4th Floor Salt Lake President since and Secretary of the Advisor
City, UT 84111 September 2004 since 1999; Portfolio Manager
Age: 55 for the Advisor from 1983 -
1995.
ANGELA PALMER Chief Indefinite Chief Compliance Officer for N/A N/A
150 Social Hall Compliance Served as Chief the Funds since 2004; Director
Avenue Officer/ Compliance of Compliance for the Advisor
4th Floor Salt Lake Secretary/ Officer/ since 2004 and Vice President
City, UT 84111 Assistant Secretary/Assistant of the Advisor since November
Age: 33 Treasurer Treasurer since 2004; Senior Compliance
September 2004 Administrator for the Advisor
from 2003 - 2004;
Administration Services
Manager at UMB Fund Services,
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 or by visiting the Funds' web site at
WWW.WASATCHFUNDS.COM.
84
WASATCH FUNDS -- SUPPLEMENTAL INFORMATION SEPTEMBER 30, 2005
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 maybe obtained by calling 800.SEC.0330).
SERVICE PROVIDERS
INVESTMENT ADVISOR
Wasatch Advisors, Inc.
150 Social Hall Avenue, 4th Floor
Salt Lake City, UT 84111
SUB-ADVISOR FOR U.S. TREASURY FUND
Hoisington Investment Management Co.
1250 Capital of Texas Highway South
Building 3, #600
Austin, TX 78746
ADMINISTRATOR AND FUND ACCOUNTANT
State Street Bank and Trust Company
801 Pennsylvania Avenue
Kansas City, MO 64105
DISTRIBUTOR
ALPS Distributors, Inc.
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
SEPTEMBER 30, 2005
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
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
88
SEPTEMBER 30, 2005
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
89
WASATCH FUNDS SEPTEMBER 30, 2005
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
90
(WASATCH FUNDS (TM) LOGO)
WWW.WASATCHFUNDS.COM
800.551.1700
ITEM 2: CODE OF ETHICS.
(a) Wasatch Funds, Inc. (the "Registrant") has adopted a Code of Ethics that
applies to the Registrant's principal executive officer and principal
financial officer.
(b) No disclosures are required by this Item 2(b).
(c) There have been no amendments to the Registrant's Code of Ethics during the
reporting period for Form N-CSR.
(d) There have been no waivers granted by the Registrant to individuals covered
by the Registrant's Code of Ethics during the reporting period for Form
N-CSR.
(e) Not applicable.
(f) A copy of the Registrant's Code of Ethics is attached as an exhibit to this
Form N-CSR.
ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) The Board of Directors of the Registrant has determined that the
Registrant has one member serving on the Registrant's Audit Committee
that possesses the attributes identified in Instruction 2(b) of Item 3
to Form N-CSR to qualify as "audit committee financial expert."
(2) For the reporting period, the name of the audit committee financial
expert was James U. Jensen. Mr. Jensen was deemed to be "independent"
as that term is defined in Item 3(a)(2) of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees - The aggregate fees billed for professional services rendered by
the independent registered public accounting firm for the audit of the
Registrant's annual financial statements or services normally provided in
connection with statutory and regulatory filings or engagements for the last two
fiscal years ended September 30, 2005 and September 30, 2004 were $176,250 and
$131,788, respectively.
(b) Audit Related Fees -The Registrant was not billed any fees by the
independent registered public accounting firm for the fiscal year ended
September 30, 2004 for assurance and related services rendered by the
independent registered public accounting firm to the registrant that are
reasonably related to the performance of the audit of the Registrant's financial
statements and are not reported under paragraph (a) of this Item 4. The
Registrant was not billed any fees by the independent registered public
accounting firm for the fiscal year ended September 30, 2005 for assurance and
related services rendered by the independent registered public accounting firm
to the registrant that are reasonably related to the performance of the audit of
the Registrant's financial statements and are not reported under paragraph (a)
of this Item 4.
During the fiscal years ended September 30, 2005 and 2004, no fees for assurance
and related services that relate directly to the operations and financial
reporting of the Registrant were billed by the independent registered public
accounting firm to the Registrant's investment adviser or any other entity
controlling, controlled by, or under common control with the investment adviser
that provides ongoing services to the Registrant.
(c) Tax Fees - The aggregate fees billed for professional services rendered by
the independent registered public accounting firm to the Registrant for tax
compliance, tax advice, tax planning and tax return preparation for the for the
last two fiscal years ended September 30, 2005 and September 30, 2004 were
$49,722 and $39,000, respectively. These services consisted of the independent
registered public accounting firm reviewing the Registrant's excise tax returns,
distribution requirements and RIC tax returns, as well as consultations
regarding the tax consequences of specific investments.
During the fiscal years ended September 30, 2005 and 2004, no fees for tax
compliance, tax advice or tax planning services that relate directly to the
operations and financial reporting of the Registrant were billed by the
independent registered public accounting firm to the Registrant's investment
adviser or any other entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the Registrant.
(d) All Other Fees - There were no fees billed for the fiscal years ended
September 30, 2005 and September 30, 2004, respectively, for products and
services provided by the independent registered public accounting firm to the
Registrant, other than the services reported in paragraph (a) - (c) of this Item
4.
During the fiscal years ended September 30, 2005 and 2004, no fees for other
services that relate directly to the operations and financial reporting of the
Registrant were billed by the independent registered public accounting firm to
the Registrant's investment adviser or any other entity controlling, controlled
by, or under common control with the investment adviser that provides ongoing
services to the Registrant.
(e) Pre-Approval Policies and Procedures
(1) Pursuant to the registrant's Audit Committee Charter, the Audit Committee
shall evaluate the independence of the independent public accountants, including
evaluating whether the independent public accountants provide audit services or
consulting services to the Registrant or consulting services to the investment
adviser, and to receive the specific representations of the independent
registered public accounting firm as to their independence. Specifically, the
Audit Committee will be responsible for evaluating the provision of non-audit
services to the Registrant as required by Section 201 of the Sarbanes-Oxley Act,
any pre-approval requests submitted by the independent registered public
accounting firm as required by Section 202 of the Sarbanes-Oxley Act or as
otherwise required under Section 2-01 of Regulation S-X, and shall monitor the
conflict of interest requirements in Section 206 of the Sarbanes-Oxley Act, and
the prohibitions on improper influence on the conduct of audits in Section 303
of the Sarbanes-Oxley Act. The Audit Committee shall pre-approve any engagement
of the independent registered public accounting firm to provide any services
(other than prohibited non-audit services) including the fees and other
compensation to be paid to the independent registered public accounting firm.
The independent registered public accounting firm is authorized by the Audit
Committee to provide non-audit services to the extent allowable under the
Sarbanes-Oxley Act of 2002 for the Registrant provided that (i) the fees payable
with respect to such services do not exceed $5,000 in any calendar quarter and
(ii) such fees are ratified by the Audit Committee at its next meeting. The fees
payable with respect to non-audit services may be increased by the affirmative
vote of a majority of the members of the Audit Committee.
(2) There were no pre-approval requirements waived for the services provided to
the Registrant described in paragraphs (b)-(d) of Item 4 by the Audit Committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X (the "De
Minimis Rule"). There were no fees billed for services provided to the
investment adviser described in paragraphs (b)-(d) of Item 4 that were required
to be pre-approved by the Audit Committee as described in paragraph (e)(1) of
Item 4.
(f) No disclosures are required by this Item 4(f).
(g) The independent registered public accounting firm did not bill the
Registrant for any other non-audit services for the fiscal years ended September
30, 2005 and 2004 for the Registrant other than as disclosed above.
(h) No disclosures are required by this Item 4(h).
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments is included as a part of the report to shareholders
filed under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board of Directors has not adopted procedures by which shareholders may
recommend nominees to the Board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive and principal financial officers have
concluded that the Registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c)) are effective, as of a date
within 90 days of the filing date of this Form N-CSR based on their
evaluation of these controls and procedures required by Rule 30a-3(b) under
the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under
the Securities Exchange Act of 1934 (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the Registrant's second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics is attached hereto.
(a)(2) The certifications required by Rule 30a-2 of the 1940 Act are attached
hereto.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) of the 1940 Act and Section
906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WASATCH FUNDS, INC.
By: /s/ Samuel S. Stewart, Jr.
---------------------------------
Samuel S. Stewart, Jr.
President (principal executive
officer) of Wasatch Funds, Inc.
Date: November 29, 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: November 29, 2005
By: /s/ Venice F. Edwards
---------------------------------
Venice F. Edwards
Vice President/Treasurer
(principal financial and
accounting officer) of Wasatch
Funds, Inc.
Date: November 29, 2005
EXHIBIT 12(A)(1)
WASATCH FUNDS, INC.
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL OFFICERS
I. COVERED OFFICERS/PURPOSE OF THE CODE
This Code of Ethics (the "Code") shall apply to Wasatch Funds, Inc.'s (the
"Company") Principal Executive Officer and Principal Financial Officer (the
"Covered Officers," each of whom is named in Exhibit A attached hereto),
consistent with and in furtherance of their fiduciary duties, and for the
purpose of promoting:
- honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
- full, fair, accurate, timely and understandable disclosure in reports
and documents that the Company files with, or submits to, the
Securities and Exchange Commission ("SEC") and in other public
communications made by the Company;
- compliance with applicable laws and governmental rules and
regulations;
- the prompt internal reporting of violations of the Code to an
appropriate person or persons identified in the Code; and
- accountability for adherence to the Code.
Each Covered Officer should adhere to a high standard of business ethics
and should be sensitive to situations that may give rise to actual as well as
apparent conflicts of interest.
II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF
INTEREST
OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private
interest has the potential to interfere with the interests of, or his or her
service to, the Company. For example, a conflict of interest would arise if a
Covered Officer, or a member of his or her family, receives improper personal
benefits as a result of his or her position with the Company. Covered Officers
must avoid conduct that conflicts, or appears to conflict, with their duties to
the Company. All Covered Officers should conduct themselves such that any
reasonable observer would have no grounds for belief that a conflict of interest
has not been appropriately addressed and resolved. Covered Officers are not
permitted to self-deal or otherwise to use their positions with the Company to
further their own or any other related person's business opportunities.
This Code does not, and is not intended to, repeat or replace the programs
and procedures or codes of ethics of the Company's investment advisor.
Although typically not presenting an opportunity for improper personal
benefit, conflicts may arise from, or as a result of, the contractual
relationship between the Company and its investment advisor and administrator of
which the Covered Officers may be officers or employees. As a result, this Code
recognizes that the Covered Officers will, in the normal course of their duties
(whether formally for the Company, the investment advisor or the administrator),
be involved in establishing policies and implementing decisions that will have
different effects on the service providers and the Company. The participation of
the Covered Officers in such activities is inherent in the contractual
relationship between the Company and its service providers and is consistent
with the performance by the Covered Officers of their duties as officers of the
Company. Thus, if performed in conformity with the provisions of the Investment
Company Act of 1940, as amended ("Investment Company Act") and the Investment
Advisers Act of 1940, as amended, such activities will be deemed to have been
handled ethically.
The following list provides examples of conflicts of interest under the
Code, but Covered Officers should keep in mind that these examples are not
exhaustive. The overarching principle is that the personal interest of a Covered
Officer should be properly disclosed to the Company and resolved by persons who
do not have a personal interest.
* * * *
Each Covered Officer must not:
- use his or her personal influence or personal relationship improperly
to influence investment decisions or financial reporting by the
Company whereby the Covered Officer would benefit personally;
- cause the Company to take action, or fail to take action, for the
improper personal benefit of the Covered Officer; or
- retaliate against any other Covered Officer or any employee of the
Company or its affiliated persons for reports that are made in good
faith of actual or of potential violations by the Company or such
affiliated persons of applicable rules and regulations.
Each Covered Officer must discuss certain material conflict of interest
situations with the Company's Audit Committee. Examples of such situations
include:
- service as a director on the Board of a publicly traded company held
by a Wasatch Fund;
- accepting directly or indirectly investment opportunities, gifts or
other gratuities from individuals conducting or seeking to conduct
business with the Company or the Company's investment advisor.
However, Covered Officers may accept gifts from a single giver in
aggregate amounts not exceeding $100, and may attend
business meals, sporting events and other entertainment events at the
expense of a giver as long as the expense is reasonable and both the
giver(s) and the Covered Officer(s) are present;
- any direct or indirect ownership interest in, financial relationships
with, or any consulting or employment relationship with, any of the
Company's service providers; and
- a direct or indirect financial interest in commissions, transaction
charges or spreads paid by the Company for effecting portfolio
transactions or for selling or redeeming shares.
III. DISCLOSURE AND COMPLIANCE
- Each Covered Officer should familiarize himself or herself with the
disclosure requirements generally applicable to the Company.
- Each Covered Officer should not knowingly or negligently misrepresent,
or cause others to misrepresent, facts about the Company to others,
whether within or outside the Company, including to the Company's
Board, Audit Committee and independent auditors, and to governmental
regulators, self-regulators and self-regulatory organizations.
- Each Covered Officer should, to the extent appropriate within his or
her area of responsibility, consult with other officers and employees
of the Company and its service providers with the goal of promoting
full, fair, accurate, timely and understandable disclosure in the
reports and documents that the Company files with, or submits to, the
SEC and in other public communications made by the Company.
- It is the responsibility of each Covered Officer to promote and
encourage professional integrity in all aspects of the Company's
operations.
IV. REPORTING AND ACCOUNTABILITY
Each Covered Officer must:
- upon adoption of this Code (or thereafter as applicable, upon becoming
a Covered Officer), sign and return a report in the form of Exhibit B
to the person named in Exhibit A affirming that he or she has
received, read and understands the Code;
- annually sign and return a report in the form of Exhibit C to the
person named in Exhibit A affirming that he or she has complied with
the requirements of the Code; and
- notify the Company's Audit Committee promptly if he or she knows of
any violation of this Code. Failure to do so is itself a violation of
this Code.
The Company's Audit Committee is responsible for applying this Code to
specific situations in which questions are presented under it and has the
authority to interpret this Code in any particular situation including any
approvals or waivers sought by the Covered Officers.
The Audit Committee will follow these procedures in investigating and
enforcing this Code:
- The Audit Committee will take all appropriate actions to investigate
any potential violations reported to the Committee.
- If, after such investigation, the Audit Committee believes that no
violation has occurred, the Audit Committee is not required to take
any further action.
- Any matter that the Audit Committee believes is a violation of this
Code will be reported to the full Board.
- If the Board concurs that a violation has occurred, it will consider
appropriate action, which may include review of, and appropriate
modifications to, applicable policies and procedures; notification to
the appropriate personnel of the investment advisor, administrator or
its board; and possible dismissal of the Covered Officer as an officer
of the Company.
- The Audit Committee will be responsible for granting waivers of
provisions of this Code, as appropriate.
- Any changes to or waivers of this Code will, to the extent required,
be disclosed as provided by SEC rules.
V. OTHER POLICIES AND PROCEDURES
This Code shall be the sole code of ethics adopted by the Company for
purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms
applicable to registered investment companies thereunder. Insofar as other
policies or procedures of the Company or the Company's investment advisor govern
or purport to govern the behavior or activities of the Covered Officers who are
subject to this Code, they are superseded by this Code to the extent that they
overlap or conflict with the provisions of this Code. The Company's and the
investment advisor's code of ethics under Rule 17j-1 under the Investment
Company Act and the investment advisor's other policies and procedures are
separate requirements applying to the Covered Officers and others, and are not
part of this Code.
VI. AMENDMENTS
Any amendments to this Code, other than amendments to Exhibit A, must be
approved or ratified by a majority vote of the Board, including a majority of
independent directors.
VII. CONFIDENTIALITY
All reports and records prepared or maintained pursuant to this Code will
be considered confidential and shall be maintained and protected accordingly.
Except as otherwise required by law or this Code, such matters shall not be
disclosed to anyone other than the Company's Board or Audit Committee.
VIII. INTERNAL USE
The Code is intended solely for internal use by the Company and does not
constitute an admission, by or on behalf of Company, as to any fact,
circumstance or legal conclusion.
Date: August 27, 2003
EXHIBIT A
Persons Covered by this Code of Ethics:
Samuel S. Stewart, Jr. (Principal Executive Officer)
Venice F. Edwards (Principal Financial Officer)
Recipient of reports under Article IV
Angela M. Palmer (Director of Compliance, Wasatch Advisors, Inc.; and Chief
Compliance Officer, Secretary, Assistant Treasurer and Chairman of Disclosure
Committee, Wasatch Funds, Inc.)
Amended: September 1, 2004
EXHIBIT B
INITIAL CERTIFICATION FORM
This is to certify that I have read and understand the Code of Ethics
for Principal Executive and Senior Financial Officers of Wasatch Funds, Inc.,
dated _______________, and that I recognize that I am subject to the provisions
thereof and will comply with the policy and procedures stated therein.
Please sign your name here: _______________________________________________
Please print your name here: ______________________________________________
Please date here: _________________________________________________________
EXHIBIT C
ANNUAL CERTIFICATION FORM
This is to certify that I have read and understand the Code of Ethics
for Principal Executive and Senior Financial Officers of Wasatch Funds, Inc.
dated _______________, (the "Code") and that I recognize that I am subject to
the provisions thereof and will comply with the policy and procedures stated
therein.
This is to further certify that I have complied with the requirements
of the Code during the period of _____________ through ______________.
Please sign your name here: _______________________________________________
Please print your name here: ______________________________________________
Please date here: _________________________________________________________