<PAGE> 1
As filed with the Securities and Exchange Commission on December 1, 1995.
Securities Act Registration No. 33-10451
Investment Company Act Registration No. 811-4920
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 12 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 14 /X/
(Check appropriate box or boxes)
WASATCH ADVISORS FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
68 SOUTH MAIN STREET
SUITE 400
SALT LAKE CITY, UTAH 84101
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 708-7228
SAMUEL S. STEWART, JR. Copy to:
Wasatch Funds, Inc. Michael J. Radmer, Esq.
68 South Main Street, Suite 400 Dorsey & Whitney, P.L.L.P.
Salt Lake City, Utah 84101 220 South Sixth Street
(Name and Address of Agent for Service) Minneapolis, Minnesota 55402-1498
An indefinite number of shares of each Series of Wasatch Funds, Inc.
has been registered under the Securities Act of 1933 in accordance with the
provisions of Rule 24f-2 under the Investment Company Act of 1940. The
Registrant's Rule 24f-2 Notice for the fiscal year ended September 30, 1995 was
filed on November 6, 1995.
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b)
( ) pursuant to paragraph (b)
(X) 60 days after filing pursuant to paragraph (a)(i)
( ) on (date) pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
( ) this Post-Effective Amendment designates a new
effective date for a previously filed Post-Effective
Amendment.
- -------------------------------------------------------------------------------
Page 1 of ___ pages; the Exhibit Index appears at page ____ of the sequential
numbering system.
<PAGE> 2
WASATCH ADVISORS FUNDS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and the
Statement of Additional Information of the responses to the Items of Parts A
and B of Form N-1A).
<TABLE>
<CAPTION>
Caption or Subheading in Prospectus
Item No. on Form N-1A or Statement of Additional Information
--------------------- --------------------------------------
PART A -- INFORMATION REQUIRED IN PROSPECTUS
<S> <C>
1. Cover Page Cover Page
2. Synopsis Annual Fund Expenses
3. Financial Highlights Financial Highlights
4. General Description of Registrant Management of the Company; Investment
Objectives, Policies and Risks
5. Management of the Fund Management of the Company
6. Capital Stock and Other Securities Organization of the Company; Net Asset Value and
Days of Operations; Dividends, Capital Gain
Distributions and Taxes
7. Purchase of Securities Being Offered Purchase of Shares; Exchange Privilege
8. Redemption or Repurchase Redemption of Shares
9. Legal Proceedings *
<CAPTION>
PART B -- INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information and History
13. Investment Objectives and Policies Investment Objective and Policies
14. Management of the Fund Management of the Company; Control Persons and
Principal Holders of Securities
15. Control Persons and Principal Holders of Control Persons and Principal Holders of Securities
Securities
16. Investment Advisory and Other Services Investment Advisory and Other Services
17. Brokerage Allocation and Other Policies Brokerage Allocation and Other Policies
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
18. Capital Stock and Other Securities Capital Stock and Other Securities
19. Purchase, Redemption and Pricing of Purchase, Redemption and Pricing of
Securities Being Offered Securities Being Offered
20. Tax Status Tax Status
21. Underwriters *
22. Calculations of Yield Quotations *
of Money Market Funds
23. Financial Statements Financial Statements
</TABLE>
- --------------------------
* Answer negative or inapplicable.
** Complete answer to the Item is contained in the Prospectus.
<PAGE> 4
PROSPECTUS
January 31, 1996
WASATCH FUNDS, INC. (the "Company" or "Wasatch Funds") is a no-load mutual fund
consisting of five separate series (the "Funds") which offer a variety of
investment opportunities.
WASATCH AGGRESSIVE EQUITY FUND seeks long-term growth of capital through
investments in common stock of companies believed by the Fund manager, Wasatch
Advisors, Inc. (the "Manager"), to possess superior growth potential. Income
is a secondary objective to be sought only when consistent with the primary
objective. The major distinction between Wasatch Growth Fund and Wasatch
Aggressive Equity Fund is that the Aggressive Equity Fund is a non-diversified
fund and thus can be more heavily weighted in fewer stocks and is subject to
greater risk than the Growth Fund, which is a diversified fund. The Aggressive
Equity Fund is currently closed to new investors.
WASATCH MICRO-CAP FUND, a non-diversified fund, seeks long-term growth of
capital. The Fund seeks this objective by investing primarily in common stock
of small capitalization companies believed by the Manager to possess superior
growth potential. The major distinction between the Wasatch Micro-Cap Fund and
the Wasatch Aggressive Equity Fund is that the Micro-Cap Fund will normally
invest primarily in common stocks of companies with market capitalization of
less than $150 million at the time of the initial purchase. It is presently
intended that the Micro-Cap Fund will close to new investors when it reaches
$100 million in assets.
WASATCH GROWTH FUND seeks long-term growth of capital through investments in a
diversified portfolio of common stock of companies believed by the Manager to
possess superior growth potential. Income is a secondary objective to be
sought only when consistent with the primary objective. The Fund seeks
investments in companies that may have the potential to become much larger and
grow at more consistent, but slower rate than the companies typically in the
Wasatch Aggressive Equity Fund, the Wasatch Mid-Cap Fund and the Wasatch
Micro-Cap Fund.
WASATCH MID-CAP FUND, a non-diversified fund, seeks long-term growth of capital
through investments in common stock of mid-sized companies believed by the
Manager to possess superior growth potential. Income is a secondary objective
to be sought only when consistent with the primary objective. The companies in
this portfolio are expected by the Manager to grow their earnings at higher
rates than the companies in the Wasatch Aggressive Equity Fund, the Wasatch
Growth Fund, or the Wasatch Micro-Cap Fund. These anticipated higher growth
rates may cause the Wasatch Mid-Cap to be more volatile than the other Wasatch
Funds.
WASATCH INCOME FUND seeks to receive current income at low risk by investing in
fixed income securities. The secondary objective is appreciation of capital.
This Prospectus sets forth concisely the information about the Company that a
prospective investor ought to know prior to investing. Investors are advised
to read this Prospectus and retain it for future reference.
Additional information about the Company has been filed with the Securities and
Exchange Commission in a Statement of Additional Information dated January 31,
1996 and is available without charge upon request from the Company. The
Statement of Additional Information is hereby incorporated by reference into
this Prospectus.
1
<PAGE> 5
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
2
<PAGE> 6
TABLE OF CONTENTS
Annual Fund Expenses.................................................
Financial Highlights.................................................
Performance Data.....................................................
Investment Objectives, Policies and Risks............................
Aggressive Equity Fund.........................................
Micro-Cap Fund.................................................
Growth Fund....................................................
Mid-Cap Fund...................................................
Income Fund....................................................
Portfolio Turnover...................................................
Management of the Company............................................
Advisory and Other Agreements..................................
Expenses.......................................................
Organization of the Company..........................................
Purchase of Shares...................................................
Initial Investment.............................................
Subsequent Investments.........................................
General Information............................................
Automatic Investment Plan......................................
Retirement Plans.....................................................
Exchange Privilege...................................................
Redemption of Shares.................................................
Systematic Withdrawal Plan.....................................
Net Asset Value and Days of Operation................................
Shareholder Reports..................................................
Dividends, Capital Gains Distributions and Taxes.....................
Dividends......................................................
Capital Gains..................................................
Taxes..........................................................
Additional Information...............................................
3
<PAGE> 7
ANNUAL FUND EXPENSES
The Funds are 100% no-load; there are no fees to purchase shares, nor any
ongoing marketing ("12b-1") expenses. Lower expenses benefit shareholders by
increasing the Funds' investment return.
<TABLE>
<CAPTION>
Aggressive Micro-
Equity Cap Growth Mid-Cap Income
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases none none none none none
Sales Load Imposed on Reinvested Dividends none none none none none
Deferred Sales Load none none none none none
Redemption Fees(1) 0.75% 0.75% 0.75% 0.75% none
Exchange Fees none none none none none
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<S> <C> <C> <C> <C> <C>
Management Fees 1.00%(2) 2.00%(2) 1.00%(2) 1.25%(2) 0.50%
12b-1 Fees none none none none none
Other Expenses (after reimbursements)(3) 0.47% 0.50% 0.50% 0.50% 0.50%
----- ----- ----- ----- -----
Total Fund Operating Expenses (after
reimbursements) 1.47% 2.50% 1.50% 1.75% 1.00%
===== ===== ===== ===== =====
</TABLE>
(1) A redemption fee equal to 0.75% of the net asset value of the shares
redeemed will be imposed by each Fund (other than the Income Fund) on all
shares purchased on or after February 1, 1995 and held for less than
ninety (90) days. The custodian also charges a $7.50 fee for each wire
redemption.
(2) Such annual rates are higher than the rates paid by most registered
investment companies.
(3) The Annual Fund Operating Expense information represents actual expenses
(after reimbursement) for the fiscal year ending September 30, 1995 for
all Funds. The Manager has voluntarily agreed to limit the total
expenses of the Aggressive Equity and Growth Funds to 1.50%, the
Micro-Cap Fund to 2.50%, the Mid-Cap Fund to 1.75% and the Income Fund to
1.00% of each respective Fund's average net assets computed on a daily
basis. If the expense reimbursements were eliminated, Other Expenses and
Total Fund Operating Expenses for the fiscal year ended September 30,
1995 would have been 1.40% and 3.40% for the Micro-Cap Fund, 0.58% and
1.58% for the Growth Fund, 0.69% and 1.94% for the Mid-Cap Fund, and 1.09%
and 1.59% for the Income Fund, respectively. There were no reimbursements
for the Aggressive Equity Fund.
Example
You would pay the following expenses on a
$1,000 investment, assuming (i) 5% annual
return and (ii) redemption at the end of
each time period:
<TABLE>
<CAPTION>
Aggressive Micro-Cap Growth Mid-Cap Income
Equity Fund Fund Fund Fund Fund
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
1 year $ 15 $ 26 $ 15 $ 18 $ 10
3 years 47 79 47 59 32
5 years 81 136 82 98 55
10 years 178 289 179 212 122
</TABLE>
The purpose of the tables is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in shares of the Funds. For additional
information, see "Management of the Company," below.
The information contained in the tables should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown.
FINANCIAL HIGHLIGHTS
The following information for an Aggressive Equity Fund, Growth Fund, Mid-Cap
Fund and Income Fund share outstanding for the years ended September 30, 1993,
1994 and 1995 and for a Micro-Cap Fund share outstanding for the period June
19, 1995 through September 30, 1995 has been audited by Arthur Andersen LLP,
independent accountants, whose report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with
the financial statements appearing in the Funds' 1995 Annual Report to
Shareholders and included in the Statement of Additional Information.
Information in the Financial Highlights for the year ended September 30, 1992
and all prior periods were audited by other independent accountants.
4
<PAGE> 8
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
FINANCIAL HIGHLIGHTS
Micro-Cap
Aggressive Equity Fund Fund
Dec. 6, June 19,
1986<F13> 1995<F13>
through through
Year ended September 30, Year ended September 30, Sept.30, Sept.30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1995
----- ----- ----- ----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $19.96 $19.75 $15.23 $16.42 $ 9.77 $10.92 $ 9.07 $11.76 $10.00 $2.00
Income (loss) from investment
operations:
Net investment (loss) income (0.04) (0.02) (0.09) (0.03) (0.04) 0.01 (0.01) 0.03 0.02 -
Net realized and unrealized
gains (losses) on securities 6.59 1.33 5.40 (0.26) 6.69 (1.16) 1.91 (1.66) 1.74 0.72
------ ------ ----- ------ ------ ------ ------ ------- ----- -----
Total from investment
operations 6.55 1.31 5.31 (0.29) 6.65 (1.15) 1.90 (1.63) 1.76 0.72
Less distributions:
Dividends from net investment
income - - - - - - (0.05) (0.01) - -
Distributions from net realized
gains (1.51) (1.10) (0.79) (0.90) - - - (1.05) - -
------ ------ ------ ------ ----- ------ ------ ------ ------- ------
Total distributions (1.51) (1.10) (0.79) (0.90) - - (0.05) (1.06) - -
------ ------ ------ ------ ----- ------ ------ ------ ------- ------
Net asset value, end of period $25.00 $19.96 $19.75 $15.23 $16.42 $ 9.77 $10.92 $ 9.07 $11.76 $2.72
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Total return <F14> 35.19% 6.85% 35.73% (2.30)% 68.07% (10.53)% 21.09% (13.17)% 17.60% 36.00%
</TABLE>
Supplemental data and ratios:
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets, end of period
(in thousands) $305,311 $46,369 $23,293 $12,542 $7,588 $2,767 $1,191 $833 $1,266 $25,368
Ratio of expenses to average
net assets <F14> <F15> 1.47% 1.50% 1.50% 1.51% 1.51% 1.56% 1.50% 1.50% 1.26% 2.50%
Ratio of net (loss) income to
average net assets <F15> (0.37)% (0.67)% (0.77)% (0.41)% (0.36)% 0.08% (0.12)% 0.30% 0.16% (0.76)%
Portfolio turnover rate 29% 64% 70% 32% 41% 74% 82% 71% 58% 0%
</TABLE>
<F13> Commencement of operations.
<F14> Not annualized for periods less than a year.
<F15> Net of reimbursements by advisor. Absent reimbursement of expenses
by advisor, except for the year ended September 30, 1995 where there were
no reimbursements, the ratio of expenses to average net assets for the
Aggressive Equity Fund would be 1.52%,1.64%, 1.69%, 1.67%, 1.75%, 1.91%,
2.03% and 1.36%, respectively, and the ratio of net income (loss) to
average net assets would be (.69)%, (.92)%, (.59)%, (.52)%, (.27)%,
(.55)%, (.22)% and .06%, respectively. The ratio of expenses to average
net assets for the Micro-Cap Fund would be 3.40% and the ratio of net
loss to average net assets would be (1.66)%.
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
FINANCIAL HIGHLIGHTS
Growth Fund
Dec. 6,
1986<F16>
through
Year ended September 30, Year ended September 30, Sept.30,
1995 1994 1993 1992 1991 1990 1989 1988 1987
----- ----- ----- ----- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $15.30 $15.68 $13.64 $15.01 $10.73 $11.39 $ 9.48 $11.47 $10.00
Income (loss) from investment
operations:
Net investment income (loss) 0.02 (0.14) (0.08) (0.02) 0.08 0.10 0.13 0.10 0.01
Net realized and unrealized
gains (losses) on securities 4.59 0.71 3.21 (0.45) 5.16 (0.65) 1.89 (1.67) 1.46
------ ------- ------- ------- ------- ------- ------ ------ ----
Total from investment operations 4.61 0.57 3.13 (0.47) 5.24 (0.55) 2.02 (1.57) 1.47
Less distributions:
Dividends from net investment
income - - - (0.04) (0.16) (0.11) (0.11) (0.02) -
Distributions from net realized
gains (3.94) (0.95) (1.09) (0.86) (0.80) - - (0.40) -
------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (3.94) (0.95) (1.09) (0.90) (0.96) (0.11) (0.11) (0.42) -
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $15.97 $15.30 $15.68 $13.64 $15.01 $10.73 $11.39 $ 9.48 $11.47
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return <F17> 39.76% 3.75% 23.57% (3.61)% 51.90% (4.82)% 21.60% (13.39)% 14.70%
Supplemental data and ratios:
Net assets, end of period
(in thousands) $53,533 $11,219 $17,619 $14,243 $11,651 $4,574 $3,378 $2,605 $2,699
Ratio of expenses to average
net assets <F17><F18> 1.50% 1.50% 1.50% 1.49% 1.51% 1.87% 1.50% 1.50% 1.25%
Ratio of net income (loss) to
average net assets <F18> 0.29% (0.51)% (0.55)% 0.15% 0.51% 1.45% 1.37% 1.21% 0.18%
Portfolio turnover rate 88% 163% 104% 40% 37% 69% 63% 88% 50%
</TABLE>
<F16> Commencement of operations.
<F17> Not annualized for the period ended September 30, 1987.
<F18> Net of reimbursements by advisor. Absent reimbursement of expenses
by advisor, the ratio of expenses to average net assets would be 1.58%,
1.64%, 1.61%, 1.67%, 1.66%, 2.02%, 1.89%, 1.91% and 1.37%, respectively,
and the ratio of net income (loss) to average net assets would be 0.21%,
(.64)%, (.66)%, (.03)%, .36%, 1.29%, .96%, .80% and .06%, respectively.
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
FINANCIAL HIGHLIGHTS
Mid-Cap Fund
Year Aug. 16,
Year ended ended 1992<F19>
September 30, Sept.30, through
1995 1994 1993 Sept.30,
1992
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $11.02 $10.51 $9.93 $10.00
Income from investment operations:
Net investment loss (0.02) (0.27) (0.07) -
Net realized and unrealized
gains (losses) on securities 7.64 0.78 0.65 (0.07)
------ ------ ------ -------
Total from investment operations 7.62 0.51 0.58 (0.07)
Less distributions:
Dividends from net investment
income - - - -
Distributions from net realized
gains (0.03) - - -
------ ------ ------ -------
Total distributions (0.03) - - -
------ ------ ------ -------
Net asset value, end of period $18.61 $11.02 $10.51 $9.93
====== ====== ====== =======
Total return <F20> 69.24% 4.85% 5.85% (0.70)%
Supplemental data and ratios:
Net assets, end of period
(in thousands) $98,605 $1,091 $2,451 $148
Ratio of expenses to average
net assets <F20> <F21> 1.75% 1.75% 1.74% 1.56%
Ratio of net loss to
average net assets <F21> (0.71)% (1.19)% (0.86)% (0.38)%
Portfolio turnover rate 46% 213% 113% 40%
</TABLE>
<F19> Commencement of operations.
<F20> Not annualized for the period ended September 30, 1992.
<F21> Net of reimbursements by advisor. Absent reimbursement of expenses by
advisor, the ratio of expenses to average net assets would be 1.94%,
3.33%, 2.69% and 7.65%, respectively, and the ratio of net loss to
average net assets would be (0.90)%, (2.76)%, (1.81)% and (6.47)%,
respectively.
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
FINANCIAL HIGHLIGHTS
Income Fund
Dec. 6,
1986<F22>
through
Year ended September 30, Year ended September 30, Sept.30,
1995 1994 1993 1992 1991 1990 1989 1988 1987
----- ----- ----- ----- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.09 $10.42 $11.17 $11.14 $10.13 $10.61 $10.64 $10.19 $10.00
Income from investment operations:
Net investment income (loss) 0.56 0.55 0.55 (0.03) 0.58 0.69 1.25 0.81 0.39
Net realized and unrealized
gains (losses) on securities 0.44 (0.40) (0.17) 0.94 1.24 (0.19) (0.06) 0.25 (0.20)
------ ------ ------ ------ ------ ------ ------ ------ -------
Total from investment operations 1.00 0.15 0.38 0.91 1.82 0.50 1.19 1.06 0.19
Less distributions:
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends from net investment
income (0.59) (0.46) (0.53) (0.56) (0.81) (0.69) (1.22) (0.61) -
Distributions from net realized
gains - (0.02) (0.60) (0.32) - (0.29) - - -
------ ------- ------- ------- ------ ------ ------- ------ ------
Total distributions (0.59) (0.48) (1.13) (0.88) (0.81) (0.98) (1.22) (0.61) -
------ ------- ------- ------- ------ ------ ------- ------ ------
Net asset value, end of period $10.50 $10.09 $10.42 $11.17 $11.14 $10.13 $10.61 $10.64 $10.19
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return <F23> 10.46% 1.51% 3.80% 8.44% 18.74% 4.87% 12.50% 10.84% 1.90%
Supplemental data and ratios:
Net assets, end of period
(in thousands) $4,035 $3,250 $3,748 $5,234 $3,540 $1,771 $1,119 $816 $504
Ratio of expenses to average
net assets <F23><F24> 1.00% 1.00% 1.00% 1.00% 1.01% 1.32% 0.99% 0.95% 0.94%
Ratio of net income to
average net assets <F24> 5.88% 5.15% 4.60% 4.90% 6.79% 10.00% 8.25% 8.47% 5.97%
Portfolio turnover rate 43% 45% 46% 95% 66% 71% 29% 30% --
</TABLE>
<F22> Commencement of operations.
<F23> Not annualized for the period ended September 30, 1987.
<F24> Net of reimbursements by advisor. Absent reimbursement
of expenses by advisor, the ratio of expenses to average net assets
would be 1.59%, 1.39%, 1.35%, 1.20%, 1.20%, 1.57%, 1.42%, 1.35% and
1.20%, respectively, and the ratio of net income to average net
assets would be 5.29%, 4.76%, 4.24%, 4.71%, 6.59%, 9.75%, 7.82%,
8.06% and 5.70%, respectively.
<PAGE> 11
PERFORMANCE DATA
From time to time, total return and yield data for a Fund may be quoted in
advertisements or in communications to shareholders. A Fund's total return
will be calculated on an average annual (compound) total return basis, and may
also be calculated on a cumulative total return basis, for various periods from
the date it commences operations. Average annual total return reflects the
average annual percentage change in value of an investment in a Fund over the
measuring period. Cumulative total return reflects the total percentage change
in value over the measuring period. Both methods of calculating total return
assume that dividends and capital gain distributions made by a Fund during the
period are reinvested in Fund shares.
Yield is computed based on the net income of a Fund during a 30-day (or
one-month) period, which will be identified in connection with the particular
yield quotation. More specifically, the yield is computed by dividing a Fund's
net income per share during a 30-day (or one-month) period by the net asset
value per share on the last day of the period and annualizing the result on a
semi-annual basis.
The total return and yield of a Fund may be compared to those of other mutual
funds including those with similar investment objectives and to stock, bond and
other relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual
funds. For example, the total return and yield of a Fund's shares may be
compared to data prepared by Lipper Analytical Services, Inc. In addition, the
total return of a Fund may be compared to the S&P 500 Stock Index, the Nasdaq
Composite Index, an index of unmanaged groups of common stocks of domestic
companies that are quoted on the National Association of Securities Dealers
Quotation System, the Dow Jones Industrial Average, a recognized unmanaged
index of common stocks of 30 industrial companies listed on the New York Stock
Exchange (the "Exchange") and the Consumer Price Index. Total return and yield
data as reported in national publications such as Money Magazine, Forbes,
Barron's, The Wall Street Journal and The New York Times, or in publications of
a local or regional nature, may also be used in comparing the performance of a
Fund.
Performance quotations of a Fund represent the Fund's past performance, and
should not be considered as representative of future results. The investment
return and principal value of an investment in a Fund will fluctuate so an
investor's shares, when redeemed, may be worth more or less than their original
cost. The methods used to compute a Fund's total return and yield are
described in more detail in the Statement of Additional Information.
The Funds' total returns (including fees and other expenses) for specified
periods ended September 30, 1995, were as follows:
12
<PAGE> 12
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
One Three Five Since
Year Years Years Inception(1)
---- ----- ----- ---------
<S> <C> <C> <C> <C>
Aggressive Equity 35.2% 25.2% 26.3% 15.5%
Micro-Cap - - - 36.0%(2)
Growth 39.8% 21.5% 21.3% 13.3%
Mid-Cap 69.2% 23.4% - 22.1%
Income 10.5% 5.2% 8.4% 8.2%
</TABLE>
1 Inception date for all Funds except the Mid-Cap and Micro-Cap Funds is
December 6, 1986; the Mid-Cap Fund's inception date was August 16, 1992;
the Micro-Cap Fund's inception date was June 19, 1995.
2 Not annualized.
The Funds charged no sales loads, redemption fees, or other similar fees as of
September 30, 1995. Accordingly, both purchase price and redemption price
equal net asset value per share, and no adjustments are made in either yield or
total return performance calculations to reflect nonrecurring charges.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Investment Objectives presented below cannot be changed without shareholder
approval. Since all investments are subject to inherent market risks there is
no assurance these objectives will be achieved. The Investment Policies and
Techniques employed in pursuit of the Funds' objectives may be changed without
shareholder approval.
AGGRESSIVE EQUITY FUND
Currently, the Aggressive Equity Fund is closed to new investors. The Fund's
current shareholders and certain others may continue to add to an existing
account or open new accounts. (See "Purchase of Shares.") The Fund may resume
sales to new investors at some future date, but it has no present intention to
do so.
Investment Objective
The primary investment objective of the Aggressive Equity Fund is long-term
growth of capital through investments in common stock of companies believed by
the Manager to possess superior growth potential. Income is a secondary
objective to be sought only when consistent with the primary objective. The
"Flagship" of the Wasatch Fund Family, this portfolio seeks to invest in
companies believed by the Manager to be rapidly growing, to be smaller but have
the potential to become much larger. The major distinction between the Growth
Fund and the Aggressive Equity Fund is that the Aggressive Equity Fund is a
non-diversified fund and thus can be more heavily weighted in fewer stocks than
the Growth Fund, which is a diversified fund.
Investment Policies and Techniques
The Aggressive Equity Fund will normally invest at least 65% of its total
assets in common stocks of growth companies which are believed by the Manager
to have significantly better prospects than most
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companies for long-term capital appreciation based on historical and projected
rates of earnings growth or on development of new products and services.
The Fund may also invest in investment grade convertible securities (preferred
stocks and bonds which may have either attached warrants or a conversion
privilege into common stocks). At times, when economic conditions or general
levels of common stock prices are such that the Manager deems it prudent to
adopt a temporary defensive position by reducing or curtailing investments in
common stocks, a larger proportion than usual of the Fund's assets may be
invested in preferred stocks, government securities, investment grade debt
securities, or money market instruments including, but not limited to, Treasury
Bills, certificates of deposit, eurodollars, repurchase agreements, commercial
paper and master demand notes (which are demand instruments without a fixed
maturity bearing interest at rates which are fixed to known lending rates and
automatically adjusted when such lending rates change) and cash. Debt
obligations acquired will be investment grade at the time of purchase, that is,
obligations rated within the four highest rating categories by Moody's
Investors Service, Inc. ("Moody's") (Baa or higher), Standard & Poor's
Corporation ("S&P") (BBB or higher), or other nationally recognized rating
agencies or obligations unrated but deemed by the Manager to be comparable in
quality to instruments that are so rated. Obligations rated in the lowest of
the top four ratings, though considered investment grade, are considered to
have speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher rated securities.
Subsequent to its purchase by the Fund, a rated security may cease to be rated
or its rating may be reduced below the minimum rating required for purchase by
the Fund. The Manager will consider such an event in determining whether the
Fund should continue to hold the security. The Manager expects, however, to
sell promptly any securities that are non-investment grade as a result of these
events that exceed 5% of the Fund's net assets. See the Statement of
Additional Information for a description of applicable debt ratings.
The Fund may invest a substantial portion of its assets in small capitalization
companies. While small capitalization companies generally have potential for
rapid growth, they often involve higher risks because they lack the management
experience, financial resources, product diversification and competitive
strengths of larger companies. In addition, in many instances, the frequency
and volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies may be subject to
wider price fluctuations. The spreads between the bid and asked prices of the
securities of these companies are typically larger than the spreads for more
actively traded securities. As a result, the Fund could incur a loss if it
determined to sell such a security shortly after its acquisition. When making
large sales, the Fund may have to sell portfolio holdings at discount from
quoted prices or may have to make a series of small sales over an extended
period of time due to the trading volume of smaller company securities. The
values of the shares of small capitalization companies may move independently
of the values of larger capitalization companies or of general stock market
indices such as the Dow Jones Industrial Average and the Standard & Poor's 500
Stock Index.
The Fund may invest up to 15% of its total assets at the time of purchase in
foreign securities. (Securities of foreign issuers which are publicly traded
in the United States, either directly or through American Depository Receipts,
are not subject to this 15% limitation.) Foreign investments may be subject to
special risks, including those resulting from fluctuation in currency exchange
rates, revaluation of currencies, future political and economic developments,
the possible imposition of additional withholding taxes on dividend or interest
income payable on the securities, the seizure or nationalization of companies,
or establishment of exchange controls or adoption of other restrictions which
might adversely affect the investment. Foreign companies not publicly traded in
the U.S. are not subject to the regulatory requirements of U.S. companies and,
as such, there may be less publicly available information about such companies.
Moreover, foreign companies are not subject
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to uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies. Because of
these and other factors, securities of foreign companies acquired by the Funds
may be subject to greater fluctuation than securities of domestic companies.
The Fund may also invest up to 5% of its total assets at the time of purchase
in "Special Situations," which the Manager defines as companies in the process
of reorganization or buy-out. Such companies may have limited financial
resources, or may be dependent upon a small management group and their
securities may be subject to more abrupt or erratic market movements.
The Aggressive Equity Fund is a non-diversified investment company. This means
that the Fund is not restricted by the provisions of the Investment Company Act
of 1940 with respect to the diversification of its investments. As a matter of
fundamental policy which may not be changed without shareholder vote, however,
as to 50% of the Fund's total assets, the Fund will not purchase additional
securities of individual companies in which the Fund has invested 5% of the
Fund's total assets or has acquired more than 10% of the outstanding voting
securities of such company, measured at the time of each such investment.
Because the Fund's "non-diversified status" permits the investment of a greater
portion of the Fund's assets in the securities of individual companies than
would be permissible under a "diversified status," the Fund's "non-diversified
status" is considered to subject the Fund to a greater degree of risk.
MICRO-CAP FUND
It is presently intended that the Micro-Cap Fund will close to new investors
when it reaches $100 million in assets. At that time, the Fund will determine
whether to permit continued investments by existing shareholders or others.
The Fund reserves the right to reconsider closing the Fund at any time and may
close the Fund but resume sales at a later date.
Investment Objective
The primary investment objective of the Micro-Cap Fund is long-term growth of
capital. The Fund seeks this objective by investing primarily in common stocks
of small companies believed by the Manager to possess growth potential. Income
is a secondary objective to be sought only when consistent with the primary
objective. The Micro-Cap Fund is a non-diversified fund, and consequently may
be more heavily weighted in fewer stocks, and thus may be subject to greater
risk. In addition, while the Manager believes that smaller companies can
provide greater growth potential than larger, more mature firms, investing in
the securities of small companies may involve greater risks and portfolio price
volatility. See "Aggressive Equity Fund - Investment Policies and Techniques"
for a description of the special considerations and risks associated with
investments in small capitalization companies.
Investment Policies and Techniques
The Micro-Cap Fund will invest under normal market conditions at least 65% of
its total assets in common stocks of companies with market capitalizations that
are less than $150 million at the time of the initial purchase.
The Fund may also invest in investment grade convertible securities (preferred
stocks and bonds which may have either attached warrants or a conversion
privilege into common stocks). At times, when economic conditions or general
levels of common stock prices are such that the Manager deems it prudent to
adopt a temporary defensive position by reducing or curtailing investments in
common stocks, a larger proportion than usual of the Fund's assets may be
invested in preferred stocks, government securities, investment grade debt
securities, or money market instruments including, but not limited to, Treasury
Bills, certificates of deposit, eurodollars, repurchase agreements, commercial
paper and master
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<PAGE> 15
demand notes rated in the top categories by a nationally recognized statistical
rating organization or unrated but deemed by the Manager to be of comparable
quality (which master demand notes are demand instruments without a fixed
maturity bearing interest at rates which are fixed to known lending rates and
automatically adjusted when such lending rates change) and cash.
The Fund may invest up to 15% of its total assets at the time of purchase in
foreign securities and may also invest up to 5% of its total assets at the time
of purchase in "Special Situations." See "Aggressive Equity Fund - Investment
Policies and Techniques" for a description of investment grade debt securities
and the Manager's intention with respect to securities whose ratings are
downgraded, and the definition and risks associated with investments in foreign
securities and "Special Situations."
The Micro-Cap Fund is a non-diversified investment company. This means that
the Fund is not restricted by the provisions of the Investment Company Act of
1940 with respect to the diversification of its investments. As a matter of
fundamental policy which may not be changed without shareholder vote, however,
as to 50% of the Fund's total assets, the Fund will not purchase additional
securities of individual companies in which the Fund has invested 5% of the
Fund's total assets or has acquired more than 10% of the outstanding voting
securities of such company, measured at the time of each such investment.
Because the Fund's "non-diversified status" permits the investment of a greater
portion of the Fund's assets in the securities of individual companies than
would be permissible under a "diversified status," the Fund's "non-diversified
status" is considered to subject the Fund to a greater degree of risk.
GROWTH FUND
Investment Objective
The primary investment objective of the Growth Fund is long-term growth of
capital through investments in a diversified portfolio of common stock of
companies believed by the Manager to possess superior growth potential. The
Fund seeks investments in companies that may have the potential to become much
larger and grow at a more consistent, but slower rate than the companies
typically in the Wasatch Aggressive Equity Fund, the Wasatch Mid-Cap Fund and
the Wasatch Micro-Cap Fund. Income is a secondary objective to be sought only
when consistent with the primary objective. The Growth Fund is designed for
the more conservative equity investor. As a further measure of conservatism,
when the market conditions warrant, the Fund will hold more cash or other fixed
income investments than the Wasatch Aggressive Equity Fund, the Wasatch Mid-Cap
Fund and the Wasatch Micro-Cap Fund.
Investment Policies and Techniques
The Growth Fund will normally invest at least 65% of its total assets in common
stocks of growth companies which are believed by the Manager to have
significantly better prospects than most companies for long-term capital
appreciation based on historical and projected rates of earnings growth or on
development of new products and services.
The Fund may also invest in investment grade convertible securities (preferred
stocks and bonds which may have either attached warrants or a conversion
privilege into common stocks). At times, when economic conditions or general
levels of common stock prices are such that the Manager deems it prudent to
adopt a temporary defensive position by reducing or curtailing investments in
common stocks, a larger proportion than usual of the Fund's assets may be
invested in preferred stocks, government securities, investment grade debt
securities, or money market instruments including, but not limited to, Treasury
Bills, certificates of deposit, eurodollars, repurchase agreements, commercial
paper and master
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<PAGE> 16
demand notes (which are demand instruments without a fixed maturity bearing
interest at rates which are fixed to known lending rates and automatically
adjusted when such lending rates change) and cash. The Fund may invest up to
15% of its total assets at the time of purchase in foreign securities and may
also invest up to 5% of its total assets at the time of purchase in "Special
Situations." See "Aggressive Equity Fund - Investment Policies and Techniques"
for a description of investment grade securities and the Manager's intention
with respect to securities whose ratings are downgraded, and the definition and
risks associated with investments in foreign securities and "Special
Situations." A portion of the Fund's assets may be invested in the securities
of small companies. See "Aggressive Equity Fund - Investment Policies and
Techniques" for a description of the special considerations and risks
associated with investments in small capitalization companies.
Although the Fund is a diversified investment company, 25% of the total asset
value of the Fund is not subject to the diversification policy. Because this
policy permits the investment of more than 5% of the Fund's total assets at the
time of purchase in a single security, the Fund is subject to a greater degree
of risk.
MID-CAP FUND
Investment Objective
The primary investment objective of the Mid-Cap Fund is long-term growth of
capital through investments in a portfolio of common stock of mid-sized
companies believed by the Manager to possess superior growth potential based on
historical and projected rates of earnings growth or on development of new
products and services. Income is a secondary objective to be sought only when
consistent with the primary objective. The Mid-Cap Fund seeks investments in
companies which the Manager believes may grow generally at a rate of earnings
growth higher than the companies in the portfolios of the Wasatch Aggressive
Equity Fund, the Wasatch Growth Fund and the Wasatch Micro-Cap Fund and,
therefore, may experience greater short-term price volatility. These
anticipated higher growth rates may cause the Wasatch Mid-Cap Fund to be more
volatile than the other Wasatch Funds and therefore, investors should consider
an investment in the Mid-Cap Fund to be subject to more risk and greater
volatility than the other Wasatch Funds.
Investment Policies and Techniques
The Mid-Cap Fund will invest at least 65% of its total assets in common stock
of companies whose market capitalization is between $300 million and $5 billion
at the time of purchase, which are believed by the Manager to have
significantly better prospects than most companies for long-term capital
appreciation based on historical and projected rates of earnings growth or on
development of new products and services.
The Fund may also invest in investment grade convertible securities (preferred
stocks and bonds which may have either attached warrants or a conversion
privilege into common stocks). The Fund may invest in preferred stocks,
government securities, investment grade debt securities or money market
instruments including, but not limited to, Treasury Bills, certificates of
deposit, eurodollars, repurchase agreements, commercial paper and master demand
notes (which are demand instruments without a fixed maturity bearing interest
at rates which are fixed to known lending rates and automatically adjusted when
such lending rates change) and cash. At times, when economic conditions or
general levels of common stock prices are such that the Manager deems it
prudent to adopt a temporary defensive position by reducing or curtailing
investments in common stocks, a larger proportion than usual of the Fund's
assets may be invested in preferred stocks, government securities, investment
grade debt securities, or money market instruments (as described above) and
cash. The Fund may invest up to 15% of its total assets at the time
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<PAGE> 17
of purchase in foreign securities and may also invest up to 5% of its total
assets at the time of purchase in "Special Situations." See "Aggressive Equity
Fund - Investment Policies and Techniques" for a description of investment
grade securities and the Manager's intention with respect to securities whose
ratings are downgraded, and the definition and risks associated with
investments in foreign securities and "Special Situations." It should be noted
that companies in which the Fund may invest may have limited product lines,
markets, or financial resources, or may be dependent upon a small management
group, and their securities may be subject to more abrupt or erratic market
movements than larger, more established companies, both because their
securities typically are traded in lower volume and because the issuers
typically are subject to a greater degree to changes in their earnings and
prospects. See "Aggressive Equity Fund - Investment Policies and Techniques"
for an additional discussion of risks associated with investments in companies
with smaller market capitalizations.
The Mid-Cap Fund is a non-diversified investment company. This means that the
Fund is not restricted by the provisions of the Investment Company Act of 1940
with respect to the diversification of its investments. As a matter of
fundamental policy which may not be changed without shareholder vote, however,
as to 75% of the Fund's total assets, the Fund will not purchase additional
securities of any one individual company if immediately after and as a result
of such investment the Fund owns more than 10% of any class of securities of
such company. In addition, though not a fundamental policy, as to 50% of the
Fund's total assets, the Fund will not purchase additional securities of any
one individual company if immediately after and as a result of such investment
more than 5% of the Fund's total assets would be invested in the securities of
such company, or the Fund owns more than 10% of the outstanding voting
securities of such company. Because the Fund's "non-diversified status"
permits the investment of a greater portion of the Fund's assets in the
securities of individual companies than would be permissible under a
"diversified status," the Fund's "non-diversified status" is considered to
subject the Fund to a greater degree of risk.
INCOME FUND
Investment Objective
The Income Fund's primary investment objective is to receive current income at
low risk by investing in fixed income securities. The secondary objective is
capital appreciation. The Manager may adjust the average maturity of the
Fund's portfolio from time to time, depending on its assessment of the relative
yields available on securities of different maturities and its assessment of
future interest rate patterns. The Fund is not limited as to the maturities of
its portfolio investments, and to the extent consistent with its investment
objective, may take full advantage of the entire range of maturities offered.
However, under normal market conditions, the Fund anticipates it will maintain
a dollar weighted average portfolio maturity of three years or less. The Fund
can invest in investment grade fixed income securities, including securities of
the United States government and its agencies, corporate bonds and notes,
convertible securities, preferred stocks, short-term securities, money market
instruments and cash.
Investment Policies and Techniques
The Income Fund seeks to achieve its investment objectives by investing in
investment grade fixed income securities, including securities of the United
States government and its agencies and instrumentalities, corporate bonds and
notes, convertible securities, preferred stocks, short-term securities, money
market instruments and cash. See "Aggressive Equity Fund - Investment Policies
and Techniques" for a description of investment grade securities and the
Manager's intention with respect to securities where ratings are downgraded.
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<PAGE> 18
Securities issued or guaranteed by the U.S. government or its agencies include
a variety of Treasury securities which differ in their interest rates,
maturities and times of issuance. Some obligations issued or guaranteed by
U.S. government agencies and instrumentalities, such as Government National
Mortgage Association pass-through certificates, are supported by the full faith
and credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Bank, by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
While the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it always will do so since it is not so obligated by law.
Even though some interest-bearing securities are investments which offer a
stable stream of income at relatively high current yields, the prices of such
securities are affected by changes in interest rates and are therefore subject
to market price fluctuations. The value of fixed income securities varies
inversely with changes in market interest rates. When interest rates rise, the
value of the Fund's portfolio securities, and therefore its net asset value per
share, generally will decline.
Government National Mortgage Association (GNMA) pass-through certificates may
be less effective than other types of U.S. government securities as a means of
locking in attractive long-term interest rates due to the need to reinvest
prepayments of principal generally and the possibility of significant
unscheduled prepayments resulting from declines in mortgage interest rates.
GNMA certificates may also have less potential for capital appreciation than
other investments of comparable maturities due to the likelihood of increased
prepayments of mortgages as interest rates decline, while having comparable
risk of decline in value during periods of rising rates.
To the extent they are purchased at par or at a discount, GNMA certificates
offer a high degree of safety of principal investment because of the GNMA
guarantee. If the Fund buys GNMA certificates or other government
mortgage-backed securities at a premium, however, mortgage foreclosures and
unscheduled principal prepayments may result in some loss of the Fund's
principal investment to the extent of the premium paid.
The values of fixed income securities also may be affected by changes in the
credit rating or financial condition of the issuing entities.
Not only does the Manager seek to limit risk by investing in investment grade
securities but also by adjusting the maturity of the portfolio. The Fund is
not limited as to the maturities of its portfolio investments and may take full
advantage of the entire range of maturities offered. The Manager may adjust
the average maturity of the Fund's portfolio from time to time, depending on
its assessment of the relative yields available on securities of different
maturities and its assessment of future interest rate patterns. The rate of
turnover in the Fund will depend on interest rate volatility. During periods of
high interest rate volatility, it is likely that the Fund will experience a
high rate of turnover. If the Manager forecasts that interest rates will not
increase substantially, turnover is lower and the average maturity of the
portfolio may exceed ten years. If the Manager forecasts a substantial
increase in interest rates, a temporary defensive policy may be more
appropriate, and the Manager may deem it prudent to reduce the average maturity
of the portfolio to less than one year. As a general matter, instruments
having a longer remaining maturity tend to fluctuate more in market value than
instruments having a shorter maturity for a given change in yield.
Consequently, the Fund's net asset value will tend to fluctuate more at times
when the average maturity of its portfolio is longer. While such portfolio
adjustments may
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require the sale of securities prior to their maturity date, the goal of such
transactions will be either to increase income and/or to limit risk rather than
to obtain trading profits.
Although the Income Fund is a diversified investment company, 25% of the total
asset value of the Fund is not subject to the diversification policy. Because
this policy permits the investment of more than 5% of the Fund's total assets
at the time of purchase in a single security, the Fund is subject to a greater
degree of risk.
PORTFOLIO TURNOVER
The portfolio turnover rate for a Fund is calculated by dividing the lesser of
purchases or sales by such Fund of investment securities for the particular
fiscal year by the monthly average value of investment securities owned by the
Fund during the same fiscal year. "Investment securities" for the purposes of
this calculation do not include securities with a maturity date less than
twelve months from the date of investment.
The rate of portfolio turnover will not be a limiting factor when the Manager
deems changes in the Aggressive Equity, Micro-Cap, Growth, Income and Mid-Cap
Funds' portfolios appropriate in view of each Fund's investment objectives. As
a result, while the Funds will not purchase or sell securities solely to
achieve short-term trading profits, the Funds may sell portfolio securities
without regard to the length of time they have been held if continuing to hold
them is no longer consistent with the Funds' investment objectives. High
turnover (over 100%) in any year will result in the payment by the Funds of
above-average amounts of transaction-related charges and could result in the
payment by shareholders of above-average amounts of taxes on realized
investment gains.
Although a Fund cannot accurately predict its annual portfolio turnover rate,
the Manager expects that, under normal circumstances, the annual portfolio
turnover rate of the Micro-Cap Fund will not exceed 100%, but may be as high as
150%. The current portfolio rates for the Aggressive Equity, Micro-Cap,
Growth, Mid-Cap and Income Funds are set forth in the Prospectus. These rates
should not be considered as limiting factors.
MANAGEMENT OF THE COMPANY
Wasatch Funds is a management investment company incorporated in Utah on
November 18, 1986 and presently consists of five separate Funds. The Growth
Fund and the Income Fund are each open-end diversified management investment
companies, and the Aggressive Equity Fund, Micro-Cap Fund and the Mid-Cap Fund
are open-end non-diversified management investment companies. The Manager,
Wasatch Advisors, Inc., retains proprietary rights to the Company's name.
The business and affairs of Wasatch Funds are subject to the supervision of its
Board of Directors. The Board consists of five directors who are elected each
year and serve for one-year terms and/or until their successors are elected and
qualified.
The Manager determines the investment of the Funds' assets, provides certain
administrative services and manages the Funds' business and affairs. The
Manager has been in the investment advisory business since 1975 and currently
has assets under management of approximately $500 million. Dr. Samuel S.
Stewart, Jr. is President and a Director of the Funds and also Chairman of the
Board and President of the
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<PAGE> 20
Manager. Dr. Stewart is the only owner of the Manager who owns more than 25%
of the Manager and is thus deemed to control the Manager. All interested
directors of the Company are also officers and/or directors of the Manager.
Samuel Stewart Jr., Ph.D., is the portfolio manager of the Income Fund and as
such is responsible for the day-to-day management of the Income Fund's
portfolio. Dr. Stewart is the President of the Manager and has served in such
capacity since 1975 when he founded the Manager. Dr. Stewart also serves as
lead manager for the portfolio of the Aggressive Equity Fund and serves as
Co-Manager with Jeff Cardon on the Growth Fund, Co-Manager with Karolyn
Barker on the Mid-Cap Fund, and Co-Manager with Robert Gardiner on the
Micro-Cap Fund. While the portfolios of the Micro-Cap Fund, Growth Fund and
Mid-Cap Fund are co-managed, a committee comprised of Dr. Stewart, Jeff Cardon,
Karolyn Barker, Robert Gardiner, Mark Bailey and Roy Jespersen, all of who are
chartered financial analysts except Mr. Jespersen who has an MBA, also makes
recommendations to the Funds. Mr. Cardon joined the Manager in 1980 and serves
as vice-president and senior research analyst. Ms. Barker and Mr. Gardiner
have served as research analysts for the Manager since 1989 and 1990,
respectively. Mr. Bailey and Mr. Jespersen joined the Manager in 1981 and
1983, respectively, and serve as vice-presidents.
The Manager has offices at 68 South Main Street, Salt Lake City, Utah 84101,
which also houses the offices of Wasatch Funds.
ADVISORY AND OTHER AGREEMENTS
The Company retains the Manager to manage the investment of its assets and to
place orders for the purchases and sales of its portfolio securities. Under
investment advisory and service contracts, the Aggressive Equity and Growth
Funds pay the Manager a monthly fee computed on average daily net assets of
each Fund at the annual rate of 1.0%. The Mid-Cap Fund pays the Manager at the
annual rate of 1.25%. The Micro-Cap Fund pays the Manager at the annual rate
of 2.0%. Such annual rates are higher than the rates paid by most registered
investment companies. The Income Fund pays the Manager a monthly fee computed
on average daily net assets of the Fund at the annual rate of 1/2 of 1.0%.
The Manager is responsible for the placement of orders for the purchase and
sale of portfolio securities for the Fund and the negotiation of brokerage
commissions on such transactions. Brokerage firms are selected on the basis of
their professional capability for the type of transaction and the value and
quality of execution services rendered on a continuing basis. The Manager is
authorized to place portfolio transactions with brokerage firms participating
in the distribution of shares of the Funds if it reasonably believes that the
quality of the execution and the commission are comparable to that available
from other qualified brokerage firms. The Manager is authorized to pay higher
commissions to brokerage firms that provide it with investment and research
information than to firms which do not provide such services if the Manager
determines that such commissions are reasonable in relation to the overall
services provided. The information received may be used by the Manager in
managing the assets of other advisory accounts as well as in the management of
the assets of the Funds.
Pursuant to Administration and Fund Accounting Agreements (the "Administration
Agreements"), Sunstone Financial Group, Inc. (the "Administrator"), 207 East
Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202, calculates daily net
asset values of each Fund, oversees the Funds' custodian and Transfer Agent,
prepares and files all federal and state tax returns and required tax filings
(other than those required to be made by the Funds' custodian or the Transfer
Agent), oversees the Funds' insurance
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<PAGE> 21
relationships, participates in the preparation of the Funds' registration
statement, proxy statements and reports, prepares compliance filings pursuant
to state securities laws, compiles data for and prepares notices to the
Securities and Exchange Commission, prepares financial statements for the
annual and semi-annual reports to the Securities and Exchange Commission and
current investors, monitors the Funds' expense accounts, monitors the Funds'
status as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), monitors compliance with the
Funds' investment policies and restrictions and generally assists in the Funds'
administrative operations. The Administrator, at its own expense and without
reimbursement from the Funds, furnishes office space and all necessary office
facilities, equipment, supplies and clerical and executive personnel for
performing the services required to be performed by it under the Administration
Agreements. For the foregoing, the Administrator receives a fee on the
combined value of the Funds, computed daily and payable monthly, at the annual
rate of twenty-eight one-hundredths of one percent (0.28%) on the first $50
million of the average daily net assets, eighteen one-hundredths of one percent
(0.18%) on the next $50 million of the average daily net assets and thirteen
one-hundredths of one percent (0.13%) on the average daily net assets in excess
of $100 million, subject to the following minimum fees: Aggressive Equity Fund
($75,000); Mid-Cap Fund ($75,000); Growth Fund ($40,000); Micro-Cap Fund
($17,500); and Income Fund ($4,000).
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As of February 19, 1996, Sunstone Financial Group, Inc. will act as transfer
agent for the Funds (the "Transfer Agent"). Until that time, Firstar Trust
Company acts as transfer agent. __________________ acts as custodian of the
assets of the Funds. The Company, on behalf of each of the Funds, has also
entered into service agreements with various brokerage firms pursuant to which
the brokers provide certain administrative services with respect to their
customers who are beneficial owners of shares of the Funds. Pursuant to these
service agreements, the Funds compensate the brokers for the administrative
services provided which compensation is based on the aggregate assets of their
customers that are invested in the Funds.
EXPENSES
The Funds pay all of their own expenses, including, without limitation, the
cost of preparing and printing their registration statements required under the
Securities Act of 1933 and the Investment Company Act of 1940 and any
amendments thereto, the expense of registering their shares with the Securities
and Exchange Commission and in the various states, the printing and
distribution costs of prospectuses mailed to existing investors, reports to
investors, reports to government authorities and proxy statements, fees paid to
Directors who are not interested persons (as defined in the Investment Company
Act of 1940), interest charges, taxes, legal expenses, association membership
dues, auditing services, insurance premiums, brokerage commissions and expenses
in connection with Fund transactions, fees and expenses of the custodian of the
Funds' assets, printing and mailing expenses, charges and expenses of dividend
disbursing agents, accounting services agents, registrars and stock transfer
agents, travel expenses, salaries and related compensation of all non-officer
employees, and extraordinary and nonrecurring expenses.
The advisory and service contracts provide that the Manager shall reimburse the
Funds if Fund expenses excluding interest, taxes, extraordinary expenses,
brokerage commissions and transactions costs exceed those set forth in any
statutory or regulatory formula prescribed by any state in which Fund shares
are registered at such time. The Manager has voluntarily agreed to limit the
expenses of the Micro-Cap Fund to 2.50%, the expenses of the Aggressive Equity
and Growth Funds to 1.50%, the expenses of the Mid-Cap Fund to 1.75% and the
expenses of the Income Fund to 1.0% of average net assets computed on a daily
basis and will pay all expenses excluding interest, taxes, extraordinary
expenses, brokerage commissions and transactions costs in excess of such
limitations. For the year ended September 30, 1995, the Manager reimbursed the
Aggressive Equity Fund $0; the Growth Fund $16,636; the Mid-Cap Fund $35,750;
the Income Fund $19,946; and the Micro-Cap Fund $23,438, respectively. The
Manager may rescind these voluntary limitations on expenses at any time.
ORGANIZATION OF THE COMPANY
The Company is comprised of five separate series, each of which consists of a
separate portfolio or fund which issues a separate class of shares. The Board
of Directors is authorized to create new funds in addition to those already
existing without the approval of the shareholders of the Company. All shares
have equal voting rights; each share is entitled to one vote per share (with
proportionate voting for fractional shares), except that only shares of the
respective series are entitled to vote on matters concerning only that series.
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The assets received by the Company upon the sale of shares of each Fund and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, are specifically allocated to such Fund. They constitute the
underlying assets of each Fund, are required to be segregated on the books of
account, and are to be charged with the expenses of such Fund. Any general
expenses of the Company not readily identifiable as belonging to a particular
Fund will be allocated on the basis of each Fund's relative net assets during
the fiscal year.
Each share of a series of the Company has equal dividend, distribution,
liquidation and voting rights with other shares of that series. Each issued
and outstanding share of a series is entitled to one vote and to participate
equally in dividends and distributions declared by the Fund out of that series
and upon liquidation or dissolution of the series in the net assets remaining
after satisfaction of outstanding liabilities.
The shares of each Fund, when issued, will be fully paid and non-assessable,
have no preference, preemptive, conversion, exchange or similar rights, and
will be freely transferable.
PURCHASE OF SHARES
Shares of the Funds are sold on a continuous basis at the net asset value next
determined after receipt of a new account application by the Funds' Transfer
Agent. The Board of Directors of the Funds has established $2,000 as the
minimum initial purchase and $100 as the minimum for any subsequent purchase.
The minimum purchase requirements do not apply to reinvested dividends or
investments pursuant to an Automatic Investment Plan or Individual Retirement
Account.
INITIAL INVESTMENT (MINIMUM $2,000)
New account applications may be obtained from the Funds. Completed
applications should be mailed directly to: Wasatch Funds, 207 East Buffalo
Street, Suite 400, Milwaukee, Wisconsin 53202. All applications must be
accompanied by payment in the form of a check made payable to Wasatch Funds.
All purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks. No cash will be accepted. The Transfer Agent will charge a $15 fee
against an investor's account for any payment check returned to the custodian
for insufficient funds. The investor will also be responsible for any losses
suffered by the Funds as a result. When a purchase is made by check and a
redemption is made shortly thereafter, the Transfer Agent may delay the mailing
of a redemption check until it is satisfied that the check has cleared. (It
will normally take up to 3 days to clear local personal or corporate checks and
up to 7 days to clear other personal and corporate checks.)
To avoid redemption delays, purchases may be made by direct wire transfers.
The establishment of a new account by wire transfer should be preceded by a
telephone call to the Transfer Agent at 1-800-551-1700. The investor will be
asked to provide his or her name, address, social security or tax identification
number, the name of the Fund, the amount of his or her investment and the name
and address of the bank that will be wiring the investment. The Transfer Agent
will inform the investor of his or her assigned investor account number at
that time. Funds should be wired through the Federal Reserve System as follows:
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<PAGE> 24
__________________________________
ABA Number ______________________
Trust Funds, Account Number __________
For further credit to Wasatch Funds
(investor account number)
(name or account registration)
After wiring funds, the investor will receive in the mail from the Transfer
Agent a new account application. Upon receipt, the investor must complete
the application and return it to the Transfer Agent.
Inquiries concerning the Funds or the new account application may be
directed to the Transfer Agent. For telephone assistance, call 1-800-551-1700.
SUBSEQUENT INVESTMENTS (MINIMUM $100)
Additions to an investor's account may be made by mail or by wire ($100
minimum). When adding to an account by mail, the investor should send to the
Transfer Agent his or her remittance, together with the detachable form sent
with the most recent statement from the Transfer Agent. If this form is
unavailable, the investor should send a note giving the full name of the
account and the account number. For additional investments made by wire
transfer, the investor should use the aforementioned wiring instructions.
The investor should notify the Transfer Agent at 1-800-551-1700 prior to
wiring funds. The required minimum investments are waived in the case of
reinvestment of dividends and distributions and may be waived for plans
involving automatic periodic investments.
GENERAL INFORMATION
All applications to purchase Fund shares are subject to acceptance by the Funds
and are not binding until so accepted. The Funds do not, except as indicated
in the following sentence, accept telephone orders for the purchase of shares,
and reserve the right to reject applications in whole or in part. The Funds
may accept telephone orders from broker/dealers who have been previously
approved by the Funds. It is the responsibility of such broker/dealers
promptly to forward purchase or redemption orders to the Funds. Although there
is no sales charge levied directly by the Funds, broker/dealers may charge the
investor a transaction-based fee or other fee for their services. Such charges
may vary among broker/dealers but in all cases will be retained by the
broker/dealer and not remitted to the Funds or the Manager.
In order to relieve the investor of responsibility for safekeeping and delivery
of stock certificates, as a matter of practice the Funds do not issue
certificates unless the investor requests a certificate each time a purchase is
made. Instead, shares purchased are automatically credited to an account
maintained for the investor on the books of the Funds by the Transfer Agent.
The investor will receive a statement showing the details of each transaction.
The Funds reserve the right to charge a fee for the issuance of certificates.
The Aggressive Equity Fund is currently closed to new investors. Shareholders
of the Aggressive Equity Fund as of the July 15, 1995 closing date may continue
to add to an account through the reinvestment of dividends and cash
distributions on any Aggressive Equity Fund shares owned and through the
purchase of additional Aggressive Equity Fund shares. Shareholders of the
Aggressive Equity Fund as of the July 15, 1995 closing date may also open and
add to additional Aggressive Equity Fund accounts that use the
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<PAGE> 25
same social security number as the account existing as of July 15, 1995 such as
accounts where the shareholder is the owner, a joint owner or a custodian for a
minor child. Shares of the Fund may continue to be purchased through financial
planners whose clients beneficially own in the aggregate existing Aggressive
Equity Fund accounts in excess of $1 million as of July 15, 1995.
Additionally, Directors of the Fund and employees and directors of the Fund's
Manager may continue to open new Fund accounts. The Fund may resume sales to
new investors at some future date, but it has no present intention to do so.
AUTOMATIC INVESTMENT PLAN
The Funds offer an Automatic Investment Plan whereby an investor may
automatically make purchases of shares of the Funds on a regular, convenient
basis ($50 minimum per transaction monthly/$100 quarterly). Under the
Automatic Investment Plan, an investor's designated bank or other financial
institution debits a preauthorized amount on the investor's account each month
and applies the amount to the purchase of Fund shares. The Automatic
Investment Plan must be implemented with a financial institution that is a
member of the Automated Clearing House ("ACH"). No service fee is currently
charged by the Funds for participating in the Automatic Investment Plan. A $15
fee will be imposed by the Transfer Agent if sufficient funds are not available
in the investor's account at the time of the automatic transaction.
Applications to establish the Automatic Investment Plan are available from the
Funds. A $1,000 minimum initial investment must be met before the Automatic
Investment Plan may be established.
RETIREMENT PLANS
IRA Plan
Individuals who receive compensation or earned income, even if they are active
participants in a qualified retirement plan (or certain similar retirement
plans), may establish their own tax-sheltered Individual Retirement Account
("IRA"). The Funds offer a prototype IRA plan which may be adopted by
individuals. There is currently no charge for establishing an account,
although there is an annual maintenance fee. A $1,000 minimum initial
investment ($250 for a spousal IRA) is required.
Earnings on amounts held in an IRA are not taxed until withdrawn. However, the
amount of deduction, if any, allowed for IRA contributions is limited for
individuals who are active participants in an employer-maintained retirement
plan and whose incomes exceed specific limits.
A description of applicable service fees and certain limitations on
contributions and withdrawals, as well as an application form, are available
from the Funds upon request. The IRA kit contains a disclosure statement which
the Internal Revenue Service requires to be furnished to individuals who are
considering adopting the IRA. Premature withdrawals from an IRA will result in
adverse tax consequences. Consultation with a competent financial and tax
adviser is recommended.
Section 403(b)(7) Plan
The Funds also offer a tax-sheltered custodial account designed to qualify
under Section 403(b)(7) of the Internal Revenue Code which is available for use
by employees of certain educational, non-profit, hospital and charitable
organizations.
A complete description of the Plans, as well as a description of the various
applicable service fees, are available from the Funds upon request.
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EXCHANGE PRIVILEGE
All or part of Fund shares owned by an investor may be exchanged for shares of
another of the Funds, provided that such other shares may legally be sold in
the state of the investor's residence. Exchanges for shares in the Aggressive
Equity Fund may only be made by shareholders with an existing Aggressive Equity
account. Investors are also permitted to exchange Fund shares for shares of
the Northern Money Market Fund. The Northern Money Market Fund is described in
a separate prospectus available from the Funds. Investors may subsequently
exchange such shares and shares purchased with reinvested dividends for shares
of the Funds. Use of the exchange privilege is subject to the minimum purchase
and redemption amounts set forth in the prospectus for the Northern Money
Market Fund, and is available only if shares of the Northern Money Market Fund
are registered for sale in the state of residence of the investor. Investors
are advised to read the Northern Money Market Fund prospectus carefully before
authorizing any investment in shares of such fund. Note: Effective February
19, 1996 the money market exchange privilege utilizes the Northern Money Market
Fund rather than the Portico Money Market Fund. Exchanges from a Wasatch Fund
to the Portico Money Market Fund or from the Portico Money Market Fund to a
Wasatch Fund, may not be made directly after that date. In order to move your
investment among the Portico Money Market Fund and the Wasatch Funds, you must
follow the redemption and purchase procedures described in the respective
prospectuses.
Exchange requests are subject to a $500 minimum. Exchange requests may be
subject to other limitations, including those relating to frequency, that may
be established from time to time to ensure that the exchanges do not
disadvantage the Funds or their investors. Investors will be notified at least
60 days in advance of any changes in such limitations and may obtain the terms
of any such limitation by writing to: Wasatch Funds, 68 South Main Street, Salt
Lake City, UT 84101. The Funds currently limit exchanges to four per year.
The Transfer Agent may charge a $5.00 fee for each telephone exchange, which
will be deducted from the investor's account from which the funds are being
withdrawn prior to effecting the exchange. There is no fee for a written
exchange request. The responsibility of the Funds and their Transfer Agent for
the authenticity of telephone exchange transactions may be limited as described
under "Redemption of Shares." Exchanges into the Aggressive Equity Fund from
other Wasatch Advisors Funds or from the Northern Money Market Fund are
permitted only for shareholders with an existing Aggressive Equity Fund
account.
The Funds also allow investors to make regular automatic monthly investments in
an existing account in the Aggressive Equity Fund, Micro-Cap Fund, Growth Fund,
Mid-Cap Fund or Income Fund by redemption of shares from their Northern Money
Market Fund. There is no fee charged for this service. These transactions
must meet the minimum purchase amounts described. Any changes to the automatic
exchange must be made prior to the end of the preceding month to be effective
in the current month. Please call the Funds at 1-800-551-1700 for an
application form.
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<PAGE> 27
An exchange involves a redemption of all or a portion of the shares in a Fund
and the investment of the redemption proceeds in shares of another of the Funds
or the Northern Money Market Fund. The redemption will be made at the per
share net asset value of the shares to be redeemed next determined after the
exchange request is received as described above. The shares to be acquired
will be purchased at the per share net asset value of those shares next
determined coincident with or after the time of redemption. For federal income
tax purposes, an exchange of shares is a taxable event and, accordingly, the
investor may realize a capital gain or loss. Before making an exchange
request, the investor should consult a tax or other financial adviser to
determine the tax consequences of a particular exchange.
REDEMPTION OF SHARES
Investors may request redemption of part or all of their shares in a respective
Fund whenever they wish. For most redemption requests, an investor need only
deliver to the Transfer Agent a written, unconditional request to redeem his or
her shares at net asset value. A request for redemption must be signed
exactly as the shares are registered, including the signature of each joint
owner, and must specify the Fund and either the number of shares or the dollar
amount of shares that are to be redeemed. If stock certificates have been
issued, the investor must also deliver the certificate or certificates in
transferable form, duly endorsed or accompanied by a separate stock power. In
certain situations, such as where corporations, executors, administrators,
trustees and guardians are involved, additional documentation and signature
guarantees may be required. Redemptions are effected only by the Transfer
Agent. In case of any questions concerning the nature of such additional
requirements, the Transfer Agent should be contacted in advance.
Redemption requests may be submitted directly to the Transfer Agent at no
cost to the investor. They may also be submitted through broker/dealers, in
which case a service fee may be charged by such broker/dealer. If a redemption
request is not sent directly to the Transfer Agent, it will be forwarded to the
Transfer Agent, and the effective date of redemption will be delayed until the
request is received by the Transfer Agent. THUS, TO AVOID DELAY, PLEASE SUBMIT
REDEMPTION REQUESTS DIRECTLY TO THE TRANSFER AGENT.
Except in certain situations, such as where corporations, executors,
administrators, trustees and guardians are involved, signatures need not be
guaranteed unless (a) the redemption request exceeds $25,000, or (b) the
proceeds of the redemption are requested to be sent by wire transfer, to a
person other than the registered holder or holders of the shares to be
redeemed, or to be mailed to other than the address of record. In such cases,
each signature on any stock certificate, stock power or redemption request must
be guaranteed by a commercial bank or trust company in the United States, a
member firm of the Exchange or other eligible guarantor institution.
The redemption price per share is the next determined net asset value per Fund
share after receipt by the Transfer Agent of the written request containing the
information set forth above, accompanied by all required documentation. The
amount received will depend on the market value of the investments in the
Fund's portfolio at the time of determination of net asset value and may be
more or less than the cost of the shares redeemed. A check in payment for
shares redeemed will be mailed to the holder typically within one or two days,
but no later than the seventh day after receipt of the redemption request in
proper form and of all required documentation (except as indicated below for
certain redemptions of shares purchased by check).
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<PAGE> 28
Investors may redeem Fund shares by telephone. To redeem shares by telephone,
an investor must check the appropriate box on the share purchase application.
Once this feature has been requested, shares may be redeemed by phoning the
Transfer Agent at 1-800-551-1700 and giving the Fund name, account number and
either the number of shares or the dollar amount to be redeemed. Proceeds
redeemed by telephone will be mailed or wired only to an investor's address or
bank of record as shown on the records of the Transfer Agent. Telephone
redemptions must be in amounts of $1,000 or more, not exceeding $25,000. This
maximum amount may be waived for broker/dealers.
Payment of the redemption proceeds for Fund shares redeemed by telephone where
an investor requests wire payment will normally be made in federal funds on the
next business day. As stated above, the Transfer Agent will wire redemption
proceeds only to the bank and account designated on the share purchase
application or in written instructions subsequently received by the Transfer
Agent, and only if the bank is a commercial bank located within the United
States. The Transfer Agent currently charges a $7.50 fee for each payment made
by wire of redemption proceeds, which fee will be deducted from the investor's
account. Shareholders with an account balance of $_______ or more in the
Wasatch Funds may not be subject to fees such as wire fees or annual IRA
maintenance fees. Shareholders should contact the Funds at 1-800-551-1700 for
information about the Funds' Premier Service Group.
In order to arrange for telephone redemptions after a Fund account has been
opened or to change the bank, account or address designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent. The
request must be signed by each registered holder of the account with the
signatures guaranteed by a commercial bank or trust company in the United
States, a member firm of the Exchange or other eligible guarantor institution.
Further documentation may be requested from corporations, executors,
administrators, trustees and guardians.
The Funds reserve the right to refuse a telephone redemption if it is believed
advisable to do so. Procedures for redeeming Fund shares by telephone may be
modified or terminated by the Funds at any time. In an effort to prevent
unauthorized or fraudulent redemption or exchange requests by telephone, the
Funds and the Transfer Agent have implemented procedures designed to reasonably
assure that telephone instructions are genuine. These procedures include
requesting verification of various pieces of personal information, recording
telephone transactions, confirming transactions in writing and restricting
transmittal of redemption proceeds to pre-authorized designations. Other
procedures may be implemented from time to time. If reasonable procedures are
not implemented, the Funds and/or the Transfer Agent may be liable for any loss
due to unauthorized or fraudulent transactions. In all other cases, the
shareholder is liable for any loss for unauthorized transactions. Investors
should be aware that during periods of substantial economic or market change,
telephone or wire redemptions may be difficult to implement. If an investor is
unable to contact the Transfer Agent by telephone, shares may also be redeemed
by delivering the redemption request to the Transfer Agent by mail as described
above.
When redemption is requested shortly after shares have been purchased by
personal check, the redemption proceeds will be delayed until the Funds can
verify that the check has cleared. (It will normally take up to 3 days to
clear local personal or corporate checks and up to 7 days to clear other
personal and corporate checks.) Investors may not use wire transfer to a
predesignated account until the shares being redeemed have been issued for at
least 15 days. To reduce such delay, the Funds recommend that all purchases be
made by wire.
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To relieve the Funds of the cost of maintaining uneconomical accounts, the
Funds reserve the right to redeem the shares held in any account if, at the
time of any redemption of shares in the account, the net asset value of the
remaining shares in the account falls below $500. Before such involuntary
redemption would occur, the investor would be given at least 60 days' written
notice and, during that period, the investor could make an additional
investment to restore the account to at least the minimum amount, in which case
there would be no such redemption. Involuntary redemptions will not be made
because the value of shares in an account falls below the minimum amount solely
because of a decline in a Fund's net asset value. Any such involuntary
redemption would be at net asset value.
The right to redeem Fund shares will be suspended for any period during which
the Exchange is closed because of financial conditions or any other
extraordinary reason and may be suspended for any period during which (a)
trading on the Exchange is restricted pursuant to rules and regulations of the
Securities and Exchange Commission, (b) the Securities and Exchange Commission
has by order permitted such suspension or (c) an emergency, as defined by rules
and regulations of the Securities and Exchange Commission, exists as a result
of which it is not reasonably practicable for the Funds to dispose of portfolio
securities or fairly to determine the net asset value.
REDEMPTION FEE
Investment in the Funds is intended to be long-term. Short-term trading may
disrupt a Fund's investment program and create additional transaction costs.
For these reasons, the Funds (other than the Income Fund) assess a redemption
fee equal to .75% of the net asset value of the shares redeemed, including
exchanges, of Fund shares held for less than 90 days. The Funds will impose
the redemption fee for shares purchased on or after February 1, 1996; shares
owned as of January 31, 1996 are exempt from the fee. The redemption fees will
be paid to the respective Funds to offset transaction costs.
The Funds will use the "first in, first out" (FIFO) method to determine the
90-day holding period. Using this method, the date of the redemption or
exchange will be compared with the earliest purchase date of shares held in the
Fund. If this period is less than 90 days, the redemption fee will be
assessed.
SYSTEMATIC WITHDRAWAL PLAN
As another convenience for its shareholders, the Funds offer a Systematic
Withdrawal Plan whereby investors may request that a check drawn in a
predetermined amount be sent to them each month. An investor's account must
own shares in a Fund worth at least $10,000 in order to start a Systematic
Withdrawal Plan with respect to such Fund, and the minimum amount that may be
withdrawn monthly under the plan is $50. Currently there is no separate charge
to an investor for this plan. The Systematic Withdrawal Plan may be terminated
at any time without charge or penalty, and the Funds reserve the right to
terminate or modify the Systematic Withdrawal Plan upon 60 days' written notice
to each investor prior to the modification or termination taking effect.
Withdrawals involve redemption of Fund shares and may result in a gain or loss
for federal income tax purposes. Purchases of additional shares concurrent
with withdrawals may be disadvantageous to investors because of certain tax
consequences. If the amount withdrawn under the Systematic Withdrawal Plan
exceeds the dividends credited to an investor's account, the account may
ultimately be depleted. An application for participation in the Systematic
Withdrawal Plan can be obtained from the Funds.
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NET ASSET VALUE AND DAYS OF OPERATION
The net asset value of each Fund for purposes of pricing purchase and
redemption orders is determined as of the close of regular trading hours
(currently 4:00 p.m. Eastern Time) on the Exchange, on each day the Exchange is
open for trading. As a result, shares of the Funds will not be priced on the
days which the Exchange observes: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Net asset value per share is calculated by dividing the value of all securities
and other assets owned by each Fund, less the liabilities charged to that Fund,
by the number of the Fund's outstanding shares.
Securities which are traded on a recognized stock exchange are valued at the
last sale price on the securities exchange on which such securities are
primarily traded or at the last sale price on the national securities market.
Exchange-traded securities for which there were no transactions are valued at
the current bid prices. Securities traded on only over-the-counter markets are
valued on the basis of closing over-the-counter bid prices. Short-term
securities are valued at either original cost or amortized cost, both of which
approximate current market value. Restricted securities, securities for which
market quotations are not readily available, and other assets are valued at
fair value by the Manager under the supervision of the Board of Directors.
SHAREHOLDER REPORTS
Investors will be provided with a report showing the Funds' portfolios and
other information at least semi-annually; and annually, after the close of the
Funds' fiscal year, which ends September 30, with a report containing audited
financial statements. An individual account statement will be sent to the
investor by the Transfer Agent after each purchase, including reinvestment of
dividends, or redemption of Fund shares. Each investor will also receive an
annual statement after the end of the calendar year listing all transactions in
shares of the Funds during such year.
Investors who have questions about their account(s), have general questions
about the Funds or desire additional information, should call the Transfer
Agent at 1-800-551-1700.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
In addition to any increase in the value of shares which a Fund may achieve,
shareholders may receive two kinds of return from the Fund: dividends and
capital gains distributions.
DIVIDENDS
Dividends from stocks and interest earned from other investments are the Funds'
main source of ordinary income. Substantially all of the income, less
expenses, of the Wasatch Aggressive Equity Fund, Wasatch Micro-Cap Fund,
Wasatch Growth Fund and Wasatch Mid-Cap Fund is distributed annually as
dividends to shareholders. The Wasatch Income Fund distributes all of the
income less expenses as dividends monthly.
CAPITAL GAINS
Net realized capital gains represent the total profit from sales of securities,
minus total losses from sales of securities, including any losses carried
forward from prior years. Any net realized capital gains resulting from the
operations of the Funds will be distributed annually.
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Dividends and capital gains distributions from a Fund are automatically applied
to purchase additional shares of the Fund at the net asset value per share on
the payable date unless the shareholder has requested in writing to the
Transfer Agent that payment be made in cash. This option may be changed at any
time by written request to the Transfer Agent; the change will be effective on
the record date of the distribution following receipt of the request.
TAXES
The Funds intend to qualify annually for and elect tax treatment applicable to
a "regulated investment company" under Subchapter M of the Code. Because each
Fund intends to distribute substantially all of its net investment income and
capital gains to shareholders, it is not expected that the Funds will be
required to pay any federal income taxes. Should a Fund fail to distribute the
amount required by the Tax Reform Act of 1986, as amended, during any calendar
year, the Fund would be required to pay a 4%, nondeductible excise tax on the
amount of the underdistribution. Shareholders will normally have to pay
federal income taxes and any state and local income taxes on the dividends and
distributions they receive from a Fund. Shareholders not subject to tax on
their income will not be required to pay tax on amounts distributed to them.
Shareholders are advised to consult their own tax advisers with respect to
these matters.
At the end of each calendar year, shareholders are sent full information on
dividends and long-term capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income and the portion
taxable as long-term capital gains.
The Funds are required to withhold and remit to the U.S. Treasury 31% of
dividend payments, capital gains distributions, and redemption proceeds for any
account on which the owner provides an incorrect taxpayer identification number
or no number on a new account.
ADDITIONAL INFORMATION
Directors
Samuel S. Stewart, Jr., Ph.D., Chairman of the Board
Jeff S. Cardon
James U. Jensen
Roy S. Jespersen
William R. Swinyard
Investment Adviser
Wasatch Advisors, Inc.
68 South Main Street
Salt Lake City, UT 84101
Administrator and Transfer Agent (effective February 19, 1996)
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, WI 53202
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Custodian
____________________________
____________________________
____________________________
Legal Counsel
Michael J. Radmer
Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, MN 55402-1498
Independent Auditors
Arthur Andersen LLP
777 East Wisconsin Avenue
Milwaukee, WI 53202
WASATCH FUNDS
68 South Main Street
Salt Lake City, UT 84101
To Open an Account or Request Information, or For Account Balances and Investor
Services
1-800-551-1700
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STATEMENT OF ADDITIONAL INFORMATION
WASATCH FUNDS, INC.
68 South Main, Suite 400
Salt Lake City, UT 84101
January 31, 1996
WASATCH FUNDS, INC. (the "Company") is an open-end management investment
company issuing shares of Common Stock in separate series or "Funds". The
Company includes five Funds: The Growth Fund and Income Fund are each
diversified funds; The Aggressive Equity, Micro-Cap and Mid-Cap Funds are each
non-diversified funds. Each of the Funds has its own investment objective
designed to meet different investment goals.
This Statement of Additional Information is not a Prospectus but contains
information in addition to and more detailed than that set forth in the
Prospectus and should be read in conjunction with the Prospectus. A Prospectus
may be obtained without charge by calling or writing Wasatch Funds, Inc. at 68
South Main Street, Salt Lake City, Utah 84101 at (801) 533-0778. The
Statement of Additional Information and the related Prospectus are both dated
January 31, 1996. Capitalized terms used herein and not defined have the same
meanings as used in the Prospectus.
TABLE OF CONTENTS
General Information and History . . . . . . . . . . . . . . . . . . 2
Investment Objectives and Policies . . . . . . . . . . . . . . . . 2
Description of Corporate Bond Ratings . . . . . . . . . . . . . . . 3
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . 4
Management of the Company . . . . . . . . . . . . . . . . . . . . . 6
Control Persons and Principal Holders of Securities . . . . . . . . 7
Investment Advisory and Other Services . . . . . . . . . . . . . . 8
Brokerage Allocation and Other Practices . . . . . . . . . . . . . 10
Capital Stock and Other Securities . . . . . . . . . . . . . . . . 11
Purchase, Redemption and Pricing of Securities Being Offered . . . 12
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Calculation of Performance Data . . . . . . . . . . . . . . . . . . 13
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 14
1
<PAGE> 34
GENERAL INFORMATION AND HISTORY
Wasatch Funds, Inc. (the "Company") was incorporated under Utah law on November
18, 1986. It is an open-end management investment company composed of five
separate Funds. The Growth Fund and Income Fund are each diversified funds;
the Aggressive Equity Fund, the Micro-Cap Fund and Mid-Cap Fund are each
non-diversified funds. The Growth Fund, Income Fund and Aggressive Equity Fund
commenced operations on December 6, 1986, the Mid-Cap Fund on August 16, 1992,
and the Micro-Cap Fund on June 19, 1995.
INVESTMENT OBJECTIVES AND POLICIES
Wasatch Funds, Inc. is a no-load mutual fund consisting of five separate series
(the "Funds"), each of which has its own investment objective designed to meet
different investment goals.
The Wasatch Aggressive Equity Fund is designed for the investor looking for
long-term growth of capital through investments in a non-diversified portfolio
of companies believed by the Manager to be rapidly growing. The "Flagship" of
the Wasatch Fund Family, this portfolio seeks to invest in smaller companies
which the Manager believes to have the potential to become much larger. These
companies are believed by the Manager to possess certain attributes which will
enable them to double in size within five years.
The Wasatch Micro-Cap Fund seeks long-term growth of capital. The Fund seeks
this objective by investing primarily in small capitalization companies
believed by the Manager to possess superior growth potential. The major
distinction between the Wasatch Aggressive Equity Fund and the Wasatch
Micro-Cap Fund is that the Micro-Cap Fund will normally invest primarily in
common stocks of companies with market capitalizations less than $150 million
at the time of initial purchase.
The Wasatch Growth Fund is designed for the more conservative equity investor
looking for long-term growth of capital through investments in a diversified
portfolio of companies which the Manager believes to be relatively stable and
offer superior growth prospects. The Manager seeks companies with the
potential to become much larger and grow at a more consistent, but slower rate
than the companies in the Wasatch Aggressive Equity Fund and the Wasatch
Mid-Cap Fund. As a further measure of conservatism, when the market conditions
warrant, the Fund will hold more cash or other fixed income investments than
the Wasatch Aggressive Equity Fund and the Wasatch Mid-Cap Fund.
The Wasatch Mid-Cap Fund seeks long-term growth of capital through investments
in small- to mid-sized companies believed by the Manager to have exceptional
growth potential. The companies in this portfolio are expected by the Manager
to grow their earnings at even higher rates than the companies in the Wasatch
Aggressive Equity Fund, the Wasatch Growth Fund or the Wasatch Mid-Cap Fund.
These anticipated higher growth rates may cause the Wasatch Mid-Cap Fund to be
more volatile than the other Wasatch Advisors Funds.
The Wasatch Income Fund's primary investment objective is to receive current
income at relatively lower risk by investing in fixed income securities. The
secondary objective is capital appreciation. The Manager may adjust the
average maturity of the Fund's portfolio from time to time, depending on its
assessment of the relative yields available on securities of different
maturities and its assessment of future interest rate patterns. The Fund is
not limited as to maturities of its portfolio investments, and to the extent
consistent with its investment objective, may take full advantage of the entire
range of maturities offered. However, under normal market conditions, the Fund
anticipates it will maintain a dollar weighted average portfolio maturity of
three years or less.
2
<PAGE> 35
Reference is made to "INVESTMENT OBJECTIVES, POLICIES AND RISKS" in the
Prospectus for a more complete discussion of the investment objectives,
policies and associated risks of the Company.
DESCRIPTION OF CORPORATE BOND RATINGS
Each Fund may invest in corporate bonds that are rated, at the time of
purchase, in the four highest categories by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Corporation ("S&P") or other nationally
recognized rating agencies or unrated securities deemed by the Manager to be of
comparable quality. The following list describes the various ratings of
corporate bonds:
Description of corporate bond ratings of Moody's:
Aaa-Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa-Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A-Bonds rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa-Bonds rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such Bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Description of corporate bond ratings of S&P:
AAA-This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA-Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A-Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than in higher rated categories.
3
<PAGE> 36
INVESTMENT RESTRICTIONS
The Company has adopted the following restrictions and policies relating to the
investment of assets of the Funds and their activities. These are fundamental
policies and may not be changed without the approval of the holders of a
majority of the outstanding voting shares of each Fund affected (which for this
purpose and under the Investment Company Act of 1940 means the lesser of (i)
67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares). A change in policy affecting only one Fund may be effected with the
approval of a majority of the outstanding shares of such Fund.
The Aggressive Equity Fund and the Micro-Cap Fund may not:
1. As to 50% of the Fund's total assets, invest in individual companies
in which the Fund has invested 5% of the Fund's total assets or has
acquired more than 10% of the outstanding voting securities of such
company, measured at the time of each such investment.
The Mid-Cap Fund may not:
1. As to 75% of the Fund's total assets, invest in the securities of any
one issuer (other than the United States Government or government
agencies or instrumentalities) if immediately after and as a result of
such investment, the Fund owns more than 10% of any class of
securities of such issuer.
The Growth and Income Funds may not:
1. As to 75% of the Fund's total assets, invest in the securities of any
one issuer (other than the United States Government or government
agencies or instrumentalities) if immediately after and as a result of
such investment the value of the holdings of the Fund in the
securities of such issuer exceeds 5% of the Fund's total assets, taken
at market value.
2. As to 75% of the Fund's total assets, invest in the securities of any
one issuer (other than the United States Government or government
agencies or instrumentalities) if immediately after and as a result of
such investment, the Fund owns more than 10% of the outstanding voting
securities, or more than 10% of any class of securities, of such
issuer.
Each of the Aggressive Equity, Micro-Cap, Growth, Mid-Cap and Income Funds may
not:
1. Make investments for the purpose of exercising control or management.
2. Invest more than 10% of its total assets in other investment
companies, or invest more than 5% of its assets in a single
investment company, or hold more than 3% of the total outstanding
voting stock of an acquired investment company. Investments in other
investment companies will be limited to Money Market Funds for the
purpose of investing idle cash balances.
3. Purchase or sell real estate, provided that the Funds may invest in
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein. Each of
the Funds has no current intention to invest in securities of this
nature.
4. Purchase or sell commodities or commodity contracts.
4
<PAGE> 37
5. Purchase any security on margin, except that the Fund may obtain such
short-term credit as may be necessary for the clearance of
transactions.
6. Make short sales of securities.
7. Invest in securities which cannot be readily sold because of legal or
contractual restrictions including repurchase agreements which mature
in more than 7 days or which are not otherwise readily marketable if,
regarding all such securities, more than 5% of its total assets, or
10% of the net asset value of the Fund, taken at market value, would
be invested in such securities. Each of the Funds has no current
intention to invest in securities of this nature.
8. Make loans to other persons. (The Funds however may purchase and hold
debt instruments and enter into repurchase agreements in accordance
with their investment objectives and policies, as in the opinion of
the fund manager, these investments do not constitute the making of
loans.)
9. Issue senior securities, borrow money or pledge its assets except that
the Fund may borrow from a bank as a temporary measure for
extraordinary or emergency purposes or to meet redemptions in amounts
not exceeding 5% (taken at the market value) of its total assets and
pledge its assets to secure such borrowing. Each of the Funds has no
current intention to borrow as a temporary measure as allowed under
the above exception.
10. Underwrite securities of other issuers except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities.
11. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof.
12. Purchase or sell interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of
issuers which invest or sponsor such programs.
13. Invest more than 25% of its total assets (taken at market value at the
time of each investment) in the securities of issuers in any
particular industry.
14. Invest more than 5% of its total assets (taken at market value at the
time of each investment) in warrants of which no more than 2% will be
invested in non-listed issues that have warrants.
15. Invest more than 5% of its total assets (taken at market value at the
time of each investment) in the securities of new issuers, who with
predecessors have operating records of three (3) years or less.
16. Invest more than 5% of its total assets (taken at market value at the
time of each investment) in "Special Situations", i.e., companies in
the process of reorganization or buy-out.
Any investment restriction or limitation, fundamental or otherwise, appearing
in the Prospectus or Statement of Additional Information, which involves a
maximum percentage of securities or assets shall not be considered to be
violated unless an excess over the percentage occurs immediately after an
acquisition of securities or utilization of assets, and such excess results
therefrom.
In addition, the Funds have made certain undertakings to a state securities
commission which are not deemed fundamental. These include not investing in
real estate mortgages, real estate limited partnerships, and oil, gas or other
mineral leases.
5
<PAGE> 38
Although a Fund cannot accurately predict its annual portfolio turnover rate,
the Manager expects that, under normal circumstances, the annual portfolio
turnover rate of the Micro-Cap Fund will not exceed 100%, but may be as high as
150%. The current portfolio turnover rates for the Aggressive Equity, Growth,
Income and Mid-Cap Funds are set forth in the prospectus.
MANAGEMENT OF THE COMPANY
The Directors and executive officers of the Fund and their principal
occupations for at least the last five years are set forth below. Unless
otherwise noted, the address of each executive officer and Director is 68 South
Main, Salt Lake City, Utah 84101.
*Samuel S. Stewart, Jr., Ph.D., CFA - President and Director
President and Director of the Company; Chairman of the Board and
Director of Research for the Adviser since 1975; Professor of
Finance at the University of Utah since 1974.
*Roy S. Jespersen, MBA - Vice President and Director
Vice President and Director of the Company; Vice President and
Portfolio Manager for the Adviser since 1983.
*Heidi Preuss - Secretary/Treasurer
Controller and Administration Manager for the Manager since
December 1990; previously, a Ph.D. candidate in Accounting at the
University of Alberta, Canada.
*Jeff S. Cardon, CFA - Director
Director of the Company; Vice President and Director of the
Adviser since 1985; Security Analyst for the Adviser since 1980.
James U. Jensen - Director
NPS Pharmaceuticals, Inc.
420 Chipeta Way
Salt Lake City, Utah 84108
Director of the Company; Vice President of Corporate Development
and Legal Affairs, NPS Pharmaceutical; previously Chairman and a
partner at Woodbury, Jensen, Kesler & Swinton, P.C. from 1986
to 1991.
William R. Swinyard - Director
Management Office
660 Tanner Building
Brigham Young University
Provo, Utah 84602
Director of the Company; Professor of Business Management, Brigham
Young University since 1985; Vice President for Struman and
Associates, Inc., a management consulting firm since 1983.
* Interested person, as defined in the Investment Company Act of 1940,
of the Company.
6
<PAGE> 39
The Board of Directors has appointed the officers of the Company to be
responsible for the overall management and day to day operations of the
Company's business affairs between board meetings.
The Funds' standard method of compensating directors is to pay each
disinterested director an annual fee of $3,600 for services rendered, including
attending meetings of the Board of Directors. The annual fee for directors is
increased to $6,000 for the fiscal year ending September 30, 1996. The Funds
also may reimburse its disinterested directors for travel expenses incurred in
order to attend meetings of the Board of Directors. Officers serve in that
capacity without compensation from the Company. The table below sets forth the
compensation paid to the Company's directors and officers during the fiscal
year ended September 30, 1995 (exclusive of out-of-pocket expenses reimbursed).
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Estimated Annual Total Compensation
Compensation Benefits Accrued As Benefits Upon From Company Paid
Name of Person, Position From Company Part of Fund Expenses Retirement to Directors
<S> <C> <C> <C> <C>
Samuel S. Stewart, President $0 None N/A $0
and Director
Roy S. Jespersen, Vice $0 None N/A $0
President and Director
Heidi Preuss $0 None N/A $0
Secretary/Treasurer
Jeff S. Cardon $0 None N/A $0
Director
James U. Jensen $3,600 None N/A $3,600
Director
William R. Swinyard $3,600 None N/A $3,600
Director
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of October 31, 1995, the Funds were aware that the following persons or
entities owned a controlling interest (ownership of greater than 25%) or owned
of record 5% or more of the outstanding shares of each of the Funds.
Shareholders with a controlling interest could effect the outcome of proxy
voting or the direction of management of the Company.
SERIES A - WASATCH AGGRESSIVE EQUITY FUND
Charles Schwab & Co., Inc.*, 101 Montgomery Street, San Francisco, CA, 94104,
31%; National Financial Services Corp.*, 200 Liberty Street, One World
Financial Center, New York, NY, 10281-1003, 11%.
7
<PAGE> 40
SERIES B - WASATCH GROWTH FUND
Charles Schwab & Co., Inc.*, 101 Montgomery Street, San Francisco, CA, 94104,
45%; National Financial Services Corp.*, 200 Liberty Street, One World
Financial Center, New York, NY, 10281-1003, 14%;
SERIES C - WASATCH INCOME FUND
Charles Schwab & Co., Inc.*, 101 Montgomery Street, San Francisco, CA, 94104,
22%; Firstar Trust Co., Custodian for Ray R. Christensen IRA Rollover, 175 S.
West Temple, #510, Salt Lake City, Utah, 84101, 15%; Firstar Trust Co.,
Custodian for Dr. Jaime Mosquera IRA, 800 Pralle Lane, St. Charles, Missouri,
63303, 7%.
SERIES D - WASATCH MID-CAP FUND
Charles Schwab & Co., Inc.*, 101 Montgomery Street, San Francisco, CA, 94104,
45%; National Financial Services Corp.*, 200 Liberty Street, One World
Financial Center, New York, NY, 10281-1003, 19%.
SERIES E - WASATCH MICRO-CAP FUND
Charles Schwab & Co., Inc.*, 101 Montgomery Street, San Francisco, CA, 94104,
33%; National Financial Services Corp.*, 200 Liberty Street, One World
Financial Center, New York, NY, 10281-1003, 14%.
As of October 31, 1995 the directors and officers as a group owned ___% of the
outstanding shares of the Growth Fund, ___% of the outstanding shares of the
Mid-Cap Fund, ___% of the outstanding shares of the Micro-Cap Fund, and less
than 1% of the outstanding shares of the Aggressive Equity and Income Funds.
* Shareholders of record, not beneficial owners.
INVESTMENT ADVISORY AND OTHER SERVICES
As described in the Prospectus, Wasatch Advisors, Inc. is the Company's manager
and investment advisor, providing services under the advisory and service
contracts. The Manager was organized in September 1975, has been in the
business of investment management since November 1975, and currently has total
assets under management including the assets of the Funds, of approximately
$500 million.
The principal executive officers and directors of the Manager are Samuel S.
Stewart, Jr., Ph.D., President and Director; Roy S. Jespersen, Vice President
and Director; Mark E. Bailey, Vice President; Jeff S. Cardon, Vice President
and Director; and Luana Buhler, Secretary. Dr. Samuel S. Stewart is the only
owner of the Manager who owns more than 25% of the Manager's outstanding equity
and is deemed to control the Manager.
Under Advisory and Service Contracts, the Aggressive Equity and Growth Funds
pay the Manager a monthly fee computed on average daily net assets of each Fund
at the annual rate of 1.0%, the Micro-Cap Fund pays the Manager at the annual
rate of 2.0%, and the Mid-Cap Fund pays the Manager at an annual rate of 1.25%.
These fees are higher than those paid by other investment companies. The
Income Fund pays the Manager a monthly fee computed on average daily net assets
of the Fund at the annual rate of 0.50%. The management fees are computed and
accrued daily and are payable monthly.
The Manager provides an investment program for, and carries out the investment
policy and manages the portfolio assets of, each Fund. The Manager is
authorized, subject to the control of the Board of Directors of
8
<PAGE> 41
the Company, to determine the selection, quantities and time to buy or sell
securities for each Fund. In addition to providing investment services, the
Manager pays for office space and facilities for the Company. Among other
expenses, the Funds pay taxes (if any), brokerage commissions on portfolio
transactions, expenses of issuance and redemption of shares, charges of
custodians and dividend disbursing agents, proxy material and costs of printing
and engraving stock certificates, auditing and legal expenses, certain expenses
of registering and qualifying shares for sale, fees of directors who are not
"interested persons" of the Manager, costs of typesetting, printing and mailing
the Prospectus, Statement of Additional Information and periodic reports to
existing shareholders, and any other charges or fees not specifically
enumerated.
The Advisory and Service Contract provides that the Manager shall reimburse
each Fund for expenses in excess of the most restrictive expense limitation
required by state regulation. At the current time, the lowest applicable
expense limitation is 2 1/2% of the first $30 million of the average net
assets, 2% of the next $70 million of the average net assets, and 1 1/2% of the
remaining net assets of the investment company.
The Manager has voluntarily agreed to limit the Aggressive Equity Fund and the
Growth Fund expenses to 1.5%, the Micro-Cap Fund expenses to 2.50%, the Mid-Cap
Fund expenses to 1.75% and the Income Fund expenses to 1% of average net assets
calculated on a daily basis and will pay all expenses excluding interest,
taxes, extraordinary expenses, brokerage commissions and transactions costs in
excess of such limitation. The Manager may rescind these limitations on
expenses at any time and in the event of rescission the terms of the Advisory
and Service Contract would govern.
For the fiscal years ended September 30, 1995, 1994, and 1993, the Manager
accrued the following management fees and waived a portion of its management
fees in the following amounts (the Micro-Cap Fund commenced operations on June
19, 1995):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Aggressive Equity Fund
Gross Management Fees $1,446,523 $349,837 $174,390
Waived Management Fees 0 7,283 25,959
Growth Fund
Gross Management Fees $195,697 $140,933 $161,673
Waived Management Fees 16,636 19,106 17,804
Income Fund
Gross Management Fees $16,871 $17,515 $22,512
Waived Management Fees 19,946 13,802 15,999
Mid-Cap Fund
Gross Management Fees $237,215 $18,382 $22,733
Waived Management Fees 35,750 23,141 17,299
Micro-Cap Fund
Gross Management Fees $52,691 -- --
Waived Management Fees 23,438 -- --
</TABLE>
9
<PAGE> 42
GENERAL INFORMATION
Custodian and Transfer Agent
____________________ serves as the Funds' Custodian. The Custodian is
responsible for, among other things, safeguarding and controlling the Company's
cash and securities. Each Fund pays __________________ a Custodian fee based on
the market value of assets, subject to a ______ per Fund minimum annual
fee. Sunstone Financial Group, Inc., 207 East Buffalo Street, Suite 400,
Milwaukee, Wisconsin 53201, is the Company's Transfer Agent. The Transfer Agent
keeps records of all shareholder accounts and transactions. Each Fund pays
Sunstone Financial Group, Inc. a Transfer Agent fee based on the number of
shareholder accounts subject to a minimum annual fee.
Counsel
Michael J. Radmer, Dorsey & Whitney, P.L.L.P., 220 South Sixth Street,
Minneapolis, Minnesota 55402-1498, acts as legal counsel to the Company and
reviews certain legal matters for the Company in connection with the shares
offered by the Prospectus.
Independent Auditors
Arthur Andersen LLP, 777 East Wisconsin Avenue, Milwaukee, WI 53202 are the
Company's independent Certified Public Accountants. In this capacity the firm
is responsible for auditing the financial statements of the Company and
reporting thereon.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Manager is responsible for decisions to buy and sell securities for the
Company and for the placement of its portfolio business and the negotiation of
the commissions paid on such transactions. It is the policy of the Manager to
seek the best security price available with respect to each transaction. Except
to the extent that the Company may pay higher brokerage commissions for
brokerage and research services (as described below) on a portion of its
transactions executed on securities exchanges, the Manager seeks the best
security price at the most favorable commission rate. In selecting dealers and
in negotiating commissions, the Manager considers the firm's reliability, the
quality of its execution services on a continuing basis and its financial
condition. When more than one firm are believed to meet these criteria,
preference may be given to firms which also provide research services to the
Company or the Manager.
Pursuant to provisions of the investment advisory agreements, the Company's
Board of Directors has authorized the Manager to cause the Company to incur
brokerage commissions in an amount higher than the lowest available rate in
return for the opinion that the continued receipt of supplemental investment
research services from dealers is essential to its provision of high quality
portfolio management services to the Company. The Manager undertakes that such
higher commissions will not be paid by the Company unless (a) the Manager
determines in good faith that the amount is reasonable in relation to the
services in terms of the particular transaction or in terms of the Manager's
overall responsibilities with respect to the accounts as to which it exercises
investment discretion, (b) such payment is made in compliance with the
provisions of Section 28(e) of the Securities and Exchange Act of 1934 and
other applicable state and federal laws, and (c) in the opinion of the Manager
the total commissions paid by the Company are reasonable in relation to the
expected benefits to the Company over the long term. The investment advisory
fees paid by the Funds under the investment advisory agreements are not reduced
as a result of the Manager's receipt of research services.
Consistent with both the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and such policies as the Board of Directors may
determine, and subject to seeking best execution, the Manager may
10
<PAGE> 43
consider sales of shares of the Company as a factor in the selection of dealers
to execute portfolio transactions for the Company.
The Manager places portfolio transactions for other advisory accounts.
Research services furnished by firms through which the Company effects its
securities transactions may be used by the Manager in servicing all of its
accounts; not all of such services may be used by the Manager in connection
with the Company. In the opinion of the Manager, the benefits from research
services to each of the accounts (including the Company) managed by the Manager
cannot be measured separately. Because the volume and nature of the trading
activities of the accounts are not uniform, the amount of commissions in excess
of the lowest available rate paid by each account for brokerage and research
services will vary. However, in the opinion of the Manager, such costs to the
Company will not be disproportionate to the benefits received by the Company on
a continuing basis.
The Manager's brokerage practices are monitored on at least an annual basis by
the Board of Directors including the disinterested persons (as defined in the
Investment Company Act of 1940) of the Manager.
During the years ended September 30, 1995, 1994 and 1993, the Company paid the
following brokerage commissions:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Aggressive Equity Fund $232,209 $101,516 $55,067
Micro-Cap Fund 15,947 -- --
Growth Fund 65,361 74,171 49,115
Income Fund 774 436 475
Mid-Cap Fund 31,846 16,241 10,639
</TABLE>
The changes in brokerage commissions are partially the result of changes in the
turnover rates of the Funds and changes in the amount of assets under
management. There are no stated markups on the principal transactions of the
Company. The purchases are executed at the ask price net and the sales are
executed at the bid price net.
CAPITAL STOCK AND OTHER SECURITIES
The Company is authorized to issue shares in separate series, or "Funds." Five
such Funds have been established:
Series A Common - Aggressive Equity Fund
Series B Common - Growth Fund
Series C Common - Income Fund
Series D Common - Mid-Cap Fund
Series E Common - Micro-Cap Fund
See "Organization of the Company" in the Prospectus, for a discussion of the
relative rights and characteristics of the shares.
11
<PAGE> 44
To illustrate the method of computing the offering price of Company shares, the
offering price per share on September 30, 1995 was as follows:
<TABLE>
<CAPTION>
Aggressive Micro-Cap Growth Mid-Cap Income
Equity Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Net Assets $305,311,029 $25,368,141 $53,533,465 $98,605,477 $4,035,223
divided by
Shares Outstanding 12,212,284 9,333,798 3,351,512 5,297,597 384,158
equals
Net Asset Value Per Share $25.00 $2.72 $15.97 $18.61 $10.50
(Offering & Redemption Price)
</TABLE>
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
The procedures to be followed in the purchase and redemption of shares as well
as the method of determining the net asset value are fully disclosed in the
Prospectus. As indicated in the Prospectus, the net asset value is calculated
each day the New York Stock Exchange is open for trading. The New York Stock
Exchange is closed on the following national holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
Investors may exchange their shares of a Fund for shares of the Northern Money
Market Fund as provided in the prospectus. Sunstone, in its capacity as
transfer agent for the Funds, receives a service fee from the Northern Money
Market Fund at the annual rate of 0.25 of 1% of the average daily net asset
value of the shares exchanged from the Funds into the Northern Money Market
Fund.
TAX STATUS
Reference is made to "Dividends, Capital Gain Distributions and Taxes" in the
Prospectus.
Each Fund will be treated as a separate entity for Federal income tax purposes
since The Tax Reform Act of 1986 requires that all portfolios of a series fund
be treated as separate taxpayers. Each Fund intends to qualify each year as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). By so qualifying, each Fund will not be subject to
Federal income taxes to the extent that it distributes its net investment
income and realized net capital gains.
For Federal income tax purposes, distributions paid from net investment income
and from any realized net short-term capital gain are taxable to shareholders
as ordinary income, whether received in cash or in additional shares.
Dividends are taxable as ordinary income, whereas capital gain distributions
are taxable as long-term capital gains. The 70% dividends-received deduction
for corporations will apply only to the proportionate share of the dividend
attributable to dividends received by the Fund from domestic corporations.
Any dividend or capital gain distribution paid shortly after a purchase of
shares of the Fund will have the effect of reducing the per share net asset
value of such shares by the amount of the dividend or distribution.
Furthermore, even if the net asset value of the shares of the Fund immediately
after a dividend or distribution is less than the cost of such shares to the
investor, the dividend or distribution will be taxable to the investor.
Redemption of shares will generally result in a capital gain or loss for income
tax purposes. Such capital gain or loss will be long-term or short-term,
depending upon the holding period. However, if a loss is realized on shares
held for six months or less, and the investor received a capital gain
distribution during that period, then
12
<PAGE> 45
such loss is treated as a long-term capital loss to the extent of the capital
gain distribution received. Investors may also be subject to state and local
taxes.
The Fund is required to withhold federal income tax at a rate of 31% ("backup
withholding") from dividend payments and redemption and exchange proceeds if an
investor fails to furnish the Fund with his social security number or other tax
identification number or fails to certify under penalty of perjury that such
number is correct or that he is not subject to backup withholding due to the
underreporting of income. The certification form is included as part of the
share purchase application and should be completed when the account is opened.
Under the Code, each fund will be subject to a 4% excise tax on a portion of
its undistributed income if it fails to meet certain distribution requirements
by the end of the calendar year. Each fund intends to make distributions in a
timely manner and accordingly does not expect to be subject to the excise tax.
Under the Code, any dividend declared by a regulated investment company in
December of any calendar year and payable to shareholders of record on a
specified date in such month shall be deemed to have been received by each
shareholder on such date, and to have been paid by such company on such date if
such dividend is actually paid by the company before February 1 of the
following calendar year. The Company intends to pay all dividends during the
month of December so that they will not be impacted by this rule.
This section is not intended to be a full discussion of present or proposed
federal income tax laws and the effect of such laws on an investor. Investors
are urged to consult with their respective tax advisers for a complete review
of the tax ramifications of an investment in the Fund.
CALCULATION OF PERFORMANCE DATA
The Funds may occasionally advertise performance data such as total return or
yield. To facilitate the comparability of these statistics from one mutual
fund to another, the Securities and Exchange Commission has developed
guidelines for the calculation of these statistics. The Funds will calculate
their performance data in accordance with these guidelines. The total return
for a mutual fund represents the average annual compounded rate of return over
a specified period of time that would equate the initial amount invested to the
value of the investment at the end of the period of time. This is done by
dividing the ending redeemable value of a hypothetical $1,000 initial payment
by $1,000 and raising the quotient to a power equal to one divided by the
number of years (or fractional portion thereof) covered by the computation and
subtracting one from the result. This calculation can be expressed as follows:
ERV 1/n
T=[(------)-1]
P
Where: T= average annual total return.
ERV= ending redeemable value at the end of
the period covered by the computation of
a hypothetical $1,000 payment made at
the beginning of the period.
P= hypothetical initial payment of $1,000.
n= period covered by the computation,
expressed in terms of years.
13
<PAGE> 46
The Funds compute their aggregate total returns by determining the
aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
ERV
T=[(------)-1]
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period. The ending redeemable value is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all nonrecurring charges at the end of the period covered by
the computations.
A yield quotation is based upon a 30 day period and is computed by
dividing the net investment income per share earned during a 30-day (or
one-month) period by the net asset value per share on the last day of the
period and annualizing the result on a semiannual basis by adding one to the
quotient, raising the sum to the power of six, subtracting one from the result
and then doubling the difference. A Fund's net investment income per share
earned during the period is based on the average daily number of shares
outstanding during the period entitled to receive dividends and includes
dividends and interest earned during the period minus expenses accrued for the
period, net of reimbursements.
This calculation can be expressed as follows:
a-b 6
Yield=2[(----+1) - 1]
cd
Where: a= dividends and interest earned during the
period.
b= expenses accrued for the period (net of
reimbursements).
c= the average daily number of Units
outstanding during the period that were
entitled to receive dividends.
d= net asset value per share on the last day
of the period.
FINANCIAL STATEMENTS
The following information from the Annual Report for the Company for the year
ended September 30, 1995 is attached hereto:
(a) Schedule of Investments
(b) Statements of Assets and Liabilities
(c) Statements of Operations
(d) Statements of Changes in Net Assets
(e) Financial Highlights
(f) Notes to Financial Statements
(g) Independent Auditor's Report
14
<PAGE> 47
<TABLE>
<CAPTION>
Aggressive Equity Fund Schedule of Investments
SEPTEMBER 30, 1995
Number
of Shares Value
-------- ------
<S> <C> <C>
COMMON STOCKS 96.92%
Business Products 6.44%
157,750 American Business Information, Inc.<F3> $ 3,194,438
316,812 BMC West Corp. <F3> 4,435,368
244,600 International Imaging Materials, Inc. <F3> 5,931,550
565,625 Merfin Hygienic Products Ltd. <F3> 2,634,441
157,120 Mity-Lite, Inc. <F3> 1,355,160
59,500 Wabash National Corp. 2,104,812
----------
19,655,769
----------
Business Services 3.38%
205,625 Barrett Business Services, Inc. <F3> 3,135,780
178,200 National Dentex Corp. <F3> 3,118,500
146,200 RTW, Inc. <F3> 4,057,050
----------
10,311,330
----------
Communications Products 8.17%
278,500 Hummingbird Communications Ltd. <F3> 10,374,125
374,900 Madge, N.V. <F3> 11,996,800
46,750 Stratacom, Inc. <F3> 2,582,938
----------
24,953,863
----------
Communications Services 2.24%
115,650 CMG Information Services, Inc. <F3> 3,296,025
98,700 Data Transmission Network Corp. <F3> 3,528,525
----------
6,824,550
----------
Computer Software 7.00%
181,500 Aspen Technologies, Inc. <F3> 5,445,000
391,100 Phoenix Technologies Ltd. <F3> 4,937,637
71,500 Softkey International, Inc. <F3> 3,163,875
84,950 Synopsys, Inc. <F3> 2,612,213
205,500 Touchstone Software Corp. <F3> 2,209,125
77,500 Wonderware Corp. <F3> 3,012,813
----------
21,380,663
----------
Computer Systems & Components 2.14%
100,800 Active Voice Corp. <F3> 2,860,200
70,950 Digitran Systems, Inc. <F3> 1
40,000 Drexler Technology Corp. <F3> <F4> 391,000
106,485 Pinnacle Systems, Inc. <F3> 3,274,413
----------
6,525,614
----------
Electronics 1.41%
183,000 Cincinnati Microwave, Inc. <F3> $ 2,767,875
35,000 Kent Electronics Corp. <F3> 1,535,625
-----------
4,303,500
-----------
Financial Services 2.93%
128,862 Washington Federal, Inc. 3,060,472
414,250 World Acceptance Corp. <F3> 5,903,062
-----------
8,963,534
-----------
Health Care Products 6.79%
203,150 Bio-Plexus, Inc. <F3> 2,488,587
45,600 Corvel Corp. <F3> 1,436,400
188,375 Epitope, Inc. <F3> 2,637,250
562,416 Interpore International<F3> 2,741,778
398,104 Nature's Sunshine Products, Inc. 8,957,340
130,500 Techne Corp. <F3> 2,463,188
-----------
20,724,543
-----------
Health Care Services 6.48%
247,575 Express Scripts, Inc., Class A<F3> 10,893,300
177,425 Phamis, Inc. <F3> 4,857,009
203,575 REN Corp. - USA<F3> 4,046,053
-----------
19,796,362
-----------
Personal Products 4.24%
238,600 Duracraft Corp. <F3> 10,766,825
121,162 Varsity Spirit Corp. 2,180,916
-----------
12,947,741
-----------
Personal Services 7.16%
212,350 Barefoot, Inc. 2,787,094
492,200 Children's Discovery Centers of America, Inc. <F3> 5,783,350
118,300 Equity Corp. International<F3> 2,927,925
251,275 Loewen Group, Inc. 10,365,094
-----------
21,863,463
-----------
Real Estate 5.11%
410,100 National Health Investors, Inc. REIT 12,405,525
330,550 Sunstone Hotel Investors, Inc. REIT 3,181,544
-----------
15,587,069
-----------
Retail 12.97%
142,350 Buckle, Inc. (The) <F3> $ 2,455,538
137,800 Doubletree Corp. <F3> 3,066,050
153,036 Eateries, Inc. <F3> 439,979
182,100 Friedman's, Inc. <F3> 3,960,675
521,390 Heilig-Meyers Co. 12,122,318
82,665 Medicine Shoppe International, Inc. 3,657,926
280,850 O'Reilly Automotive, Inc. <F3> 8,495,712
110,775 St. John Knits, Inc. 5,400,281
-----------
39,598,479
-----------
Semiconductors 3.24%
63,300 Integrated Process Equipment Corp. <F3> 2,520,131
181,500 Lattice Semiconductor Corp. <F3> 7,373,438
-----------
9,893,569
-----------
Telecommunications 12.66%
487,389 Century Telephone Enterprises 14,804,456
304,150 Intercel, Inc. <F3> 6,235,075
307,390 United States Cellular Corp. <F3> 11,219,735
198,650 WorldCom, Inc. <F3> 6,381,631
-----------
38,640,897
-----------
Transportation 2.66%
107,250 Arrow Transportation Co. <F3> 268,125
247,650 Expeditors International of Washington, Inc. 6,686,550
72,000 M.S. Carriers, Inc. <F3> 1,152,000
-----------
8,106,675
-----------
Other 1.90%
171,450 FLIR Systems, Inc. <F3> 2,100,263
89,550 Interline Resources Corp. <F3> 402,975
101,150 OEA, Inc. 3,312,662
-----------
5,815,900
-----------
Total Common Stocks
(cost $238,193,468) 295,893,521
-----------
PREFERRED STOCK 0.00%
12,500 Digitran Systems, Inc. <F3> $ 1
----
Total Preferred Stock
(cost $95,729) 1
----
<CAPTION>
Principal
Amount
- ------------
<S> <C> <C>
DEMAND NOTES 2.18%
(variable rate)
$1,025,321 Lilly (Eli) & Co. 1,025,321
5,000 Pitney-Bowes, Inc. 5,000
684,000 Sara Lee Corp. 684,000
150,000 Southwestern Bell Telephone Co. 150,000
</TABLE>
<PAGE> 48
<TABLE>
<S> <C> <C>
4,782,187 Warner-Lambert Co. 4,782,187
------------
Total Demand Notes
(cost $6,646,508) 6,646,508
------------
Total Investments 99.10%
(cost $244,935,705) 302,540,030
Cash and Other Assets,
less Liabilities 0.90% 2,770,999
------------
NET ASSETS 100.00% $305,311,029
============
</TABLE>
<F3> Non-income Producing
<F4>Restricted security - See Note 7.
See notes to financial statements.
<TABLE>
<CAPTION>
Micro-Cap Fund Schedule of Investments
SEPTEMBER 30, 1995
Number
of Shares Value
---------- -----
<S> <C> <C>
COMMON STOCKS 81.96%
Business Products 8.08%
27,600 BMC West Corp.<F5> $ 386,400
28,600 International Imaging Materials, Inc. <F5> 693,550
103,000 Merfin Hygienic Products Ltd. <F5> 479,730
41,895 Mity-Lite, Inc. <F5> 361,344
7,500 Thompson PBE, Inc. <F5> 128,438
----------
2,049,462
----------
Business Services 11.00%
24,675 Barrett Business Services, Inc. <F5> 376,294
83,950 National Dentex Corp. <F5> 1,469,125
11,500 On Assignment, Inc. <F5> 291,813
23,600 RTW, Inc. <F5> 654,900
----------
2,792,132
----------
Communications Products 2.80%
19,100 Hummingbird Communications Ltd. <F5> 711,475
----------
Communications Services 3.14%
1,950 CMG Information Services, Inc. <F5> 55,575
20,700 Data Transmission Network Corp. <F5> 740,025
----------
795,600
----------
Computer Software 6.99%
7,900 Aspen Technologies, Inc. <F5> 237,000
1,500 Desktop Data, Inc. <F5> 52,125
2,000 Discreet Logic, Inc. <F5> 110,000
500 Legato Systems, Inc. <F5> 13,250
60,000 Phoenix Technologies Ltd. <F5> 757,500
5,000 Premenos Technology Corp. <F5> 162,500
40,900 Touchstone Software Corp. <F5> 439,675
----------
1,772,050
----------
Computer Systems & Components 3.43%
17,750 Active Voice Corp. <F5> 503,656
8,400 Adaptive Solutions, Inc. <F5> 59,850
10,000 Pinnacle Systems, Inc. <F5> 307,500
----------
871,006
----------
Electronics 2.21%
16,500 Cyberoptics Corp. <F5> $ 561,000
----------
Financial Services 0.30%
5,325 World Acceptance Corp. <F5> 75,881
----------
Health Care Equipment 2.12%
16,000 Corvel Corp. <F5> 504,000
5,000 Infrasonics, Inc. <F5> 34,688
----------
538,688
----------
Health Care Products 8.65%
13,000 Bio-Plexus, Inc. <F5> 159,250
13,500 Interpore International <F5> 65,813
52,760 Nature's Sunshine Products, Inc. 1,187,100
41,500 Techne Corp. <F5> 783,312
----------
2,195,475
----------
Health Care Services 5.85%
39,000 Imnet Systems, Inc. <F5> 1,004,250
17,500 Phamis, Inc. <F5> 479,062
----------
1,483,312
----------
Personal Products 6.35%
21,200 Duracraft Corp. <F5> 956,650
36,387 Varsity Spirit Corp. 654,966
----------
1,611,616
----------
Personal Services 6.89%
3,500 Advantage Cos., Inc. <F5> 60,375
20,000 Ambassadors International<F5> 225,000
26,900 Children's Discovery Centers of America, Inc. <F5> 316,075
30,100 Equity Corp. International<F5> 744,975
18,200 Seattle Filmworks, Inc. <F5> 400,400
----------
1,746,825
----------
Real Estate 4.76%
125,400 Sunstone Hotel Investors, Inc. REIT 1,206,975
----------
Retail 7.50%
14,000 Buckle, Inc. (The) <F5> 241,500
5,000 Eateries, Inc. <F5> 14,375
28,700 Friedman's, Inc. <F5> 624,225
19,900 O'Reilly Automotive, Inc. <F5> $ 601,975
23,000 Quality Dining, Inc. <F5> 419,750
----------
1,901,825
----------
Semiconductors 0.22%
2,000 Ontrak Systems, Inc. <F5> 55,250
----------
Telecommunications 0.89%
11,000 Intercel, Inc. <F5> 225,500
----------
Other 0.78%
16,100 FLIR Systems, Inc. <F5> 197,225
----------
Total Common Stocks
(cost $19,083,441) 20,791,297
----------
<CAPTION>
Principal
Amount
- -------------
<S> <C> <C>
DEMAND NOTES 25.18%
(variable rate)
$ 537,000 General Mills, Inc. 537,000
715,095 Lilly (Eli) & Co. 715,095
1,127,259 Pitney-Bowes, Inc. 1,127,259
1,134,790 Sara Lee Corp. 1,134,790
1,064,618 Southwestern Bell Telephone Co. 1,064,618
986,305 Warner-Lambert Co. 986,305
821,778 Wisconsin Electric Power Co. 821,778
----------
</TABLE>
<PAGE> 49
<TABLE>
<S> <C> <C>
Total Demand Notes
(cost $6,386,845) 6,386,845
----------
Total Investments 107.14%
(cost $25,470,286) $27,178,142
Liabilities, less
Cash and Other Assets (7.14)% (1,810,001)
------------
NET ASSETS 100.00% $25,368,141
============
</TABLE>
<F5> Non-income Producing
See notes to financial statements.
<TABLE>
<CAPTION>
Growth Fund Schedule of Investments
SEPTEMBER 30, 1995
Number
of Shares Value
- ------------- --------
<S> <C> <C>
COMMON STOCKS 86.04%
Business Products 6.85%
80,875 American Business Information, Inc. <F6> $1,637,718
80,600 BMC West Corp. <F6> 1,128,400
37,100 International Imaging Materials, Inc.<F6> 899,675
----------
3,665,793
----------
Business Services 8.04%
31,900 Corvel Corp. <F6> 1,004,850
47,625 Kent Electronics Corp. <F6> 2,089,547
69,200 National Dentex Corp. <F6> 1,211,000
----------
4,305,397
----------
Computer Software 1.00%
17,800 Aspen Technologies, Inc. <F6> 534,000
----------
Computer Systems & Components 0.00%
18,100 Digitran Systems, Inc. <F6> 1
----------
Financial Services 8.36%
5,000 Franklin Savings Assn. <F6> 1
19,825 Green Tree Financial Corp. 1,209,325
75,125 Mercury Finance Co. 1,831,170
21,990 Washington Federal, Inc. 522,262
63,900 World Acceptance Corp. <F6> 910,575
----------
4,473,333
----------
Health Care Equipment 0.55%
12,850 Haemonetics Corp. <F6> 295,550
----------
Health Care Products 6.25%
84,180 Nature's Sunshine Products, Inc. 1,894,050
77,000 Techne Corp. <F6> 1,453,375
----------
3,347,425
----------
Health Care Services 2.58%
31,400 Express Scripts, Inc., Class A <F6> 1,381,600
----------
Personal Products 1.52%
45,300 Varsity Spirit Corp. 815,400
----------
Personal Services 10.04%
74,500 Barefoot, Inc. $ 977,812
94,500 Children's Discovery Centers of America, Inc. <F6> 1,110,375
61,200 Equity Corp. International <F6> 1,514,700
25,300 Loewen Group, Inc. 1,043,625
33,125 Seattle Filmworks, Inc. <F6> 728,750
----------
5,375,262
----------
Real Estate 13.33%
103,000 National Health Investors, Inc. REIT 3,115,750
103,700 Oasis Residential, Inc. 2,333,250
175,400 Sunstone Hotel Investors, Inc. REIT 1,688,225
----------
7,137,225
----------
Retail 15.28%
53,800 Buckle, Inc. (The) <F6> 928,050
25,300 Doubletree Corp. <F6> 562,925
63,300 Friedman's, Inc. <F6> 1,376,775
68,000 Heilig-Meyers Co. 1,581,000
28,400 Medicine Shoppe International, Inc. 1,256,700
49,850 O'Reilly Automotive, Inc. <F6> 1,507,962
19,900 St. John Knits, Inc. 970,125
----------
8,183,537
----------
Telecommunications 8.56%
92,938 Century Telephone Enterprises 2,822,977
54,700 WorldCom, Inc. <F6> 1,757,238
----------
4,580,215
----------
Transportation 3.68%
39,700 Expeditors International of Washington, Inc. 1,071,900
56,000 M.S. Carriers, Inc. <F6> 896,000
----------
1,967,900
----------
Total Common Stocks
(cost $39,952,902) 46,062,638
----------
WARRANTS 0.00%
1 Cherokee, Inc., Series C $ 1
-----
Total Warrants
(cost $6) 1
-----
<CAPTION>
Principal
Amount
- ------------
<S> <C> <C>
DEMAND NOTES 15.89%
(variable rate)
$ 930,814 General Mills, Inc. 930,814
1,576,025 Pitney-Bowes, Inc. 1,576,025
2,391,445 Sara Lee Corp. 2,391,445
1,831,269 Southwestern Bell Telephone Co. 1,831,269
1,774,056 Wisconsin Electric Power Co. 1,774,056
----------
Total Demand Notes
(cost $8,503,609) 8,503,609
----------
Total Investments 101.93%
(cost $48,456,517) 54,566,248
Liabilities, less
Cash and Other Assets (1.93)% (1,032,783)
------------
NET ASSETS 100.00% $53,533,465
============
</TABLE>
<F6> Non-income Producing
See notes to financial statements.
<PAGE> 50
<TABLE>
<CAPTION>
Mid-Cap Fund Schedule of Investments
September 30, 1995
Number of
Shares Value
- --------- --------
<S> <C> <C>
COMMON STOCKS 86.20%
Business Products 0.92%
25,600 Wabash National Corp. $ 905,600
----------
Business Services 2.83%
7,500 Barrett Business Services, Inc. <F7> 114,375
96,300 RTW, Inc. <F7> 2,672,325
----------
2,786,700
----------
Communications Products 15.32%
204,700 Hummingbird Communications Ltd. <F7> 7,625,075
211,750 Madge, N.V. <F7> 6,776,000
12,700 Stratacom, Inc. <F7> 701,675
----------
15,102,750
----------
Computer Software 14.08%
68,100 Aspen Technologies, Inc. <F7> 2,043,000
50,600 Parametric Technology Corp. <F7> 3,111,900
300,450 Phoenix Technologies Ltd. <F7> 3,793,181
15,000 Premenos Technology Corp. <F7> 487,500
49,900 Softkey International, Inc. <F7> 2,208,075
24,200 Synopsys, Inc. <F7> 744,150
139,000 Touchstone Software Corp. <F7> 1,494,250
----------
13,882,056
----------
Computer Systems & Components 5.79%
74,600 Active Voice Corp. <F7> 2,116,775
124,500 Adaptive Solutions, Inc. <F7> 887,063
85,000 Drexler Technology Corp. <F7><F8> 830,875
61,000 Pinnacle Systems, Inc. <F7> 1,875,750
----------
5,710,463
----------
Electronics 7.07%
245,675 Cincinnati Microwave, Inc. <F7> 3,715,834
74,200 Kent Electronics Corp. <F7> 3,255,525
----------
6,971,359
----------
Health Care Products 0.75%
33,000 Nature's Sunshine Products, Inc. 742,500
----------
Health Care Services 13.42%
131,825 Express Scripts, Inc., Class A <F7> $ 5,800,300
20,000 HBO & Company 1,250,000
165,700 Imnet Systems, Inc. <F7> 4,266,775
69,800 Phamis, Inc. <F7> 1,910,775
-----------
13,227,850
-----------
Personal Products 4.72%
103,150 Duracraft Corp. <F7> 4,654,644
-----------
Personal Services 2.04%
171,600 Children's Discovery Centers of
America, Inc. <F7> 2,016,300
-----------
Retail 4.26%
30,000 Doubletree Corp. <F7> 667,500
109,000 Friedman's, Inc. <F7> 2,370,750
3,000 O'Reilly Automotive, Inc. <F7> 90,750
58,500 Quality Dining, Inc. <F7> 1,067,625
-----------
4,196,625
-----------
Semiconductors 4.65%
36,500 Integrated Process Equipment Corp. <F7> 1,453,156
77,200 Lattice Semiconductor Corp. <F7> 3,136,250
-----------
4,589,406
-----------
Telecommunications 8.74%
70,200 Intercel, Inc. <F7> 1,439,100
70,100 United States Cellular Corp. <F7> 2,558,650
143,900 WorldCom, Inc. <F7> 4,622,788
-----------
8,620,538
-----------
Other 1.61%
129,900 FLIR Systems, Inc. <F7> 1,591,275
-----------
Total Common Stocks
(cost $72,972,850) 84,998,066
-----------
<CAPTION>
Principal
Amount
---------- COMMERCIAL PAPER 8.11%
<S> <C> <C>
$1,000,000 G.E. Capital Corp., 5.73%, 10/3/95 $ 1,000,000
1,000,000 Norwest Financial, Inc., 5.77%, 10/5/95 1,000,000
2,000,000 Norwest Financial, Inc., 5.77%, 10/12/95 2,000,000
3,000,000 Prudential Funding Corp., 5.70%, 10/3/95 3,000,000
1,000,000 Prudential Funding Corp., 5.76%, 10/4/95 1,000,000
-----------
Total Commercial Paper
(cost $8,000,000) 8,000,000
-----------
DEMAND NOTES 9.61%
(variable rate)
1,490,487 General Mills, Inc. 1,490,487
950,793 Lilly (Eli) & Co. 950,793
1,717,559 Pitney-Bowes, Inc. 1,717,559
1,907,922 Sara Lee Corp. 1,907,922
1,628,501 Southwestern Bell Telephone Co. 1,628,501
1,781,050 Wisconsin Electric Power Co. 1,781,050
----------
Total Demand Notes
(cost $9,476,313) 9,476,313
----------
Total Investments 103.92%
(cost $90,449,163) 102,474,379
Liabilities, less
Cash and Other Assets (3.92)% (3,868,902)
-----------
NET ASSETS 100.00% $98,605,477
============
</TABLE>
<F7> Non-income Producing
<F8> Restricted security - See Note 7.
See notes to financial statements.
<TABLE>
<CAPTION>
Income Fund Schedule of Investments
September 30, 1995
Principal Amount Value
- ---------------- -------
<S> <C> <C>
CORPORATE BONDS 0.65%
$ 25,000 Illinois Bell Telephone Co.,
8.50%, 4/22/26 $ 26,125
--------
Total Corporate Bonds
(cost $26,231) 26,125
--------
U.S. GOVERNMENT AGENCY 9.94%
</TABLE>
<PAGE> 51
<TABLE>
<S> <C> <C>
400,000 Student Loan Marketing Assn.,
8.80%, 11/15/04 400,952
--------
Total U.S. Government Agency
(cost $400,000) 400,952
--------
U.S. GOVERNMENT OBLIGATIONS 64.17%
2,200,000 U.S. Treasury Bill,
5.57%, 2/8/96 2,156,843
350,000 U.S. Treasury Note,
9.375%, 2/15/06 432,506
---------
Total U.S. Government Obligations
(cost $2,550,973) 2,589,349
---------
DEMAND NOTES 24.53%
(variable rate)
40,000 General Mills, Inc. 40,000
142,176 Lilly (Eli) & Co. 142,176
86,460 Pitney-Bowes, Inc. 86,460
227,292 Sara Lee Corp. 227,292
194,421 Southwestern Bell Telephone Co. 194,421
123,739 Warner-Lambert Co. 123,739
175,880 Wisconsin Electric Power Co. 175,880
---------
Total Demand Notes
(cost $989,968) 989,968
---------
Total Investments 99.29%
(cost $3,967,172) $4,006,394
Cash and Other Assets,
less Liabilities 0.71% 28,829
----------
NET ASSETS 100.00% $4,035,223
==========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
Aggressive
Equity Micro-Cap Growth Mid-Cap Income
Fund Fund Fund Fund Fund
------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments, at market value
Nonaffiliated issuers (cost
$230,242,019, $25,470,286,
$48,456,517,$90,449,163,
and $3,967,172, respectively) $289,541,242 $27,178,142 $54,566,248 $102,474,379 $4,006,394
Affiliated issuers (cost $14,693,686,
$0, $0, $0 and $0, respectively) 12,998,788 - - - -
Cash 328,900 - 400,000 - -
Receivable for investment
securities sold 2,414,999 - - 266,390 -
Interest and dividends receivable 289,918 21,029 101,582 38,654 22,226
Prepaid expenses 29,447 7,248 8,323 10,036 7,322
Receivable from adviser - 3,943 3,384 18,342 6,022
------------ ----------- ----------- ------------ -----------
Total Assets 305,603,294 27,210,362 55,079,537 102,807,801 4,041,964
------------ ----------- ----------- ------------ -----------
Liabilities:
Payable for securities purchased - 1,812,541 1,500,342 4,113,174 -
Accrued investment advisory fee 84,436 12,811 14,143 32,194 553
Accrued expenses 207,829 16,869 31,587 56,956 6,188
------------ ----------- ----------- ------------ -----------
Total Liabilities 292,265 1,842,221 1,546,072 4,202,324 6,741
------------ ----------- ----------- ------------ -----------
Net Assets: $305,311,029 $25,368,141 $53,533,465 $ 98,605,477 $ 4,035,223
============ =========== =========== ============ ===========
Net Assets Consist of:
Capital stock $ 12,212 $ 9,334 $ 3,352 $ 5,298 $ 384
Paid-in-capital in excess of par 246,407,438 23,651,704 46,729,891 86,322,202 3,930,190
Undistributed net investment income - - 57,262 - 151,554
Undistributed net realized gain (loss)
on investments 1,287,054 (753) 633,229 252,761 (86,127)
Net unrealized appreciation
on investment securities 57,604,325 1,707,856 6,109,731 12,025,216 39,222
------------ ----------- ----------- ------------ -----------
Net Assets $305,311,029 $25,368,141 $53,533,465 $ 98,605,477 $ 4,035,223
============ =========== =========== ============ ===========
Capital Stock, $.001 par value:
Authorized 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000
Issued and outstanding 12,212,284 9,333,798 3,351,512 5,297,597 384,158
NET ASSET VALUE, REDEMPTION
PRICE AND OFFERING PRICE
PER SHARE: $25.00 $2.72 $15.97 $18.61 $10.50
====== ===== ====== ====== ======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
Aggressive
Equity Micro-Cap Growth Mid-Cap Income
Fund Fund<F9> Fund Fund Fund
------------- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest $ 852,827 $ 43,923 $133,660 $193,915 $232,459
Dividends 739,138<F10> 1,995 217,185<F11> 2,897 -
--------- -------- -------- -------- --------
1,591,965 45,918 350,845 196,812 232,459
--------- -------- -------- -------- --------
Expenses:
Investment advisory fees 1,446,523 52,691 195,697 237,215 16,871
Shareholder servicing 257,546 6,749 25,567 35,184 9,753
Fund administration and
accounting fees 151,167 6,742 21,824 15,449 4,359
Federal and state registration fees 122,623 17,589 31,340 51,638 15,027
Custody fees 54,837 675 12,575 11,907 1,052
Reports to shareholders 54,112 873 6,812 6,470 1,229
Audit fees 10,430 2,992 7,762 5,371 2,268
Legal fees 10,006 295 4,232 1,367 1,011
Other 7,684 249 2,265 1,062 1,232
Directors' fees 3,755 120 799 1,026 399
Pricing 2,525 370 1,346 1,196 516
--------- ------- -------- -------- --------
Total expenses before
reimbursement 2,121,208 89,345 310,219 367,885 53,717
Reimbursement of expenses
by advisor - (23,438) (16,636) (35,750) (19,946)
---------- --------- --------- ---------- ---------
Net expenses 2,121,208 65,907 293,583 332,135 33,771
---------- --------- --------- ---------- ---------
Net Investment (Loss) Income: (529,243) (19,989) 57,262 (135,323) 198,688
---------- --------- --------- ---------- ---------
Realized and unrealized gain:
Net realized gain (loss) on investments 2,696,275 (753) 736,267 417,714 (35,783)
Change in unrealized appreciation
on investments 54,953,184 1,707,856 6,268,326 12,017,873 167,864
----------- ---------- ---------- ----------- ---------
Net gain on investments 57,649,459 1,707,103 7,004,593 12,435,587 132,081
----------- ---------- ---------- ----------- ---------
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C> <C> <C> <C>
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS: $57,120,216 $1,687,114 $7,061,855 $12,300,264 $330,769
=========== ========== ========== =========== ========
</TABLE>
<F9> Commenced operations on June 19, 1995.
<F10> Net of $2,322 in foreign withholding taxes.
<F11> Net of $265 in foreign withholding taxes.
See notes to financial statements.
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
STATEMENTS OF CHANGES IN NET ASSETS
Aggressive Equity Fund Micro-Cap Fund Growth Fund
Year ended Year ended June 19, 1995<F12> Year ended Year ended
Sept.30, 1995 Sept.30, 1994 to Sept.30, 1995 Sept.30, 1995 Sept.30, 1994
------------- ------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income $ (529,243) $ (235,772) $ (19,989) $ 57,262 $ (71,126)
Net realized gain (loss) on investments 2,696,275 4,156,773 (753) 736,267 2,977,656
Change in unrealized appreciation/
depreciation on investments 54,953,184 (1,534,286) 1,707,856 6,268,326 (2,699,070)
----------- ----------- ---------- ----------- -----------
Net increase in net assets resulting
from operations 57,120,216 2,386,715 1,687,114 7,061,855 207,460
----------- ----------- ---------- ----------- -----------
DIVIDENDS PAID FROM:
Net investment income - - - - -
Net realized gains (4,403,597) (1,539,930) - (2,878,781) (952,468)
----------- ----------- ---------- ----------- -----------
(4,403,597) (1,539,930) - (2,878,781) (952,468)
----------- ----------- ---------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold 246,050,188 25,582,930 24,358,929 40,273,774 1,301,424
Shares issued to holders in
reinvestment of dividends 4,262,844 1,502,281 - 2,805,588 947,918
------------ ----------- ---------- ----------- ------------
250,313,032 27,085,211 24,358,929 43,079,362 2,249,342
Shares redeemed (44,087,768) (4,856,212) (677,902) (4,947,865) (7,904,118)
------------ ----------- ----------- ----------- ------------
Net increase (decrease) 206,225,264 22,228,999 23,681,027 38,131,497 (5,654,776)
------------ ----------- ----------- ----------- ------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS: 258,941,883 23,075,784 25,368,141 42,314,571 (6,399,784)
NET ASSETS:
Beginning of period 46,369,146 23,293,362 - 11,218,894 17,618,678
------------ ----------- ----------- ------------ ------------
End of period $305,311,029 $46,369,146 $25,368,141 $53,533,465 $11,218,894
============ =========== =========== ============ ============
Undistributed net investment
income included in net assets
at end of period - - - $ 57,262 -
============ =========== =========== =========== ============
</TABLE>
<F12> Commencement of operations.
See notes to financial statements.
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
STATEMENTS OF CHANGES IN NET ASSETS
Mid-Cap Fund Income Fund
Year ended Year ended Year ended Year ended
September 30, 1995 September 30, 1994 September 30, 1995 September 30, 1994
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income $ (135,323) $ (17,402) $ 198,688 $ 180,533
Net realized gain (loss) on investments 417,714 127,191 (35,783) (50,344)
Change in unrealized appreciation/
depreciation on investments 12,017,873 (107,833) 167,864 (76,066)
----------- ----------- ---------- ----------
Net increase in net assets resulting
from operations 12,300,264 1,956 330,769 54,123
----------- ----------- ---------- ----------
DIVIDENDS PAID FROM:
Net investment income - - (183,919) (163,631)
Net realized gains (2,697) - - (7,011)
----------- ----------- ---------- ----------
(2,697) - (183,919) (170,642)
----------- ----------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Shares sold 93,354,746 161,009 1,362,975 283,296
Shares issued to holders in
reinvestment of dividends 2,678 - 179,666 167,058
----------- ----------- ---------- ----------
93,357,424 161,009 1,542,641 450,354
Shares redeemed (8,140,574) (1,523,064) (904,145) (832,134)
----------- ----------- ---------- ----------
Net increase (decrease) 85,216,850 (1,362,055) 638,496 (381,780)
----------- ----------- ---------- ----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS: 97,514,417 (1,360,099) 785,346 (498,299)
NET ASSETS:
Beginning of period 1,091,060 2,451,159 3,249,877 3,748,176
----------- ----------- ----------- ----------
End of period $98,605,477 $1,091,060 $4,035,223 $3,249,877
=========== =========== =========== ==========
Undistributed net investment
income included in net assets
at end of period - - $ 151,554 $ 136,785
=========== =========== =========== ==========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
FINANCIAL HIGHLIGHTS
Micro-Cap
Aggressive Equity Fund Fund
Dec. 6, June 19,
1986<F13> 1995<F13>
through through
Year ended September 30, Year ended September 30, Sept.30, Sept.30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1995
----- ----- ----- ----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $19.96 $19.75 $15.23 $16.42 $ 9.77 $10.92 $ 9.07 $11.76 $10.00 $2.00
Income (loss) from investment
operations:
Net investment (loss) income (0.04) (0.02) (0.09) (0.03) (0.04) 0.01 (0.01) 0.03 0.02 -
Net realized and unrealized
gains (losses) on securities 6.59 1.33 5.40 (0.26) 6.69 (1.16) 1.91 (1.66) 1.74 0.72
------ ------ ----- ------ ------ ------ ------ ------- ----- -----
Total from investment
operations 6.55 1.31 5.31 (0.29) 6.65 (1.15) 1.90 (1.63) 1.76 0.72
Less distributions:
Dividends from net investment
income - - - - - - (0.05) (0.01) - -
Distributions from net realized
gains (1.51) (1.10) (0.79) (0.90) - - - (1.05) - -
------ ------ ------ ------ ----- ------ ------ ------ ------- ------
Total distributions (1.51) (1.10) (0.79) (0.90) - - (0.05) (1.06) - -
------ ------ ------ ------ ----- ------ ------ ------ ------- ------
Net asset value, end of period $25.00 $19.96 $19.75 $15.23 $16.42 $ 9.77 $10.92 $ 9.07 $11.76 $2.72
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Total return <F14> 35.19% 6.85% 35.73% (2.30)% 68.07% (10.53)% 21.09% (13.17)% 17.60% 36.00%
</TABLE>
Supplemental data and ratios:
<PAGE> 53
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets, end of period
(in thousands) $305,311 $46,369 $23,293 $12,542 $7,588 $2,767 $1,191 $833 $1,266 $25,368
Ratio of expenses to average
net assets <F14> <F15> 1.47% 1.50% 1.50% 1.51% 1.51% 1.56% 1.50% 1.50% 1.26% 2.50%
Ratio of net (loss) income to
average net assets <F15> (0.37)% (0.67)% (0.77)% (0.41)% (0.36)% 0.08% (0.12)% 0.30% 0.16% (0.76)%
Portfolio turnover rate 29% 64% 70% 32% 41% 74% 82% 71% 58% 0%
</TABLE>
<F13> Commencement of operations.
<F14> Not annualized for periods less than a year.
<F15> Net of reimbursements by advisor. Absent reimbursement of expenses
by advisor, except for the year ended September 30, 1995 where there were
no reimbursements, the ratio of expenses to average net assets for the
Aggressive Equity Fund would be 1.52%,1.64%, 1.69%, 1.67%, 1.75%, 1.91%,
2.03% and 1.36%, respectively, and the ratio of net income (loss) to
average net assets would be (.69)%, (.92)%, (.59)%, (.52)%, (.27)%,
(.55)%, (.22)% and .06%, respectively. The ratio of expenses to average
net assets for the Micro-Cap Fund would be 3.40% and the ratio of net
loss to average net assets would be (1.66)%.
See notes to financial statements.
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
FINANCIAL HIGHLIGHTS
Growth Fund
Dec. 6,
1986<F16>
through
Year ended September 30, Year ended September 30, Sept.30,
1995 1994 1993 1992 1991 1990 1989 1988 1987
----- ----- ----- ----- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $15.30 $15.68 $13.64 $15.01 $10.73 $11.39 $ 9.48 $11.47 $10.00
Income (loss) from investment
operations:
Net investment income (loss) 0.02 (0.14) (0.08) (0.02) 0.08 0.10 0.13 0.10 0.01
Net realized and unrealized
gains (losses) on securities 4.59 0.71 3.21 (0.45) 5.16 (0.65) 1.89 (1.67) 1.46
------ ------- ------- ------- ------- ------- ------ ------ ----
Total from investment operations 4.61 0.57 3.13 (0.47) 5.24 (0.55) 2.02 (1.57) 1.47
Less distributions:
Dividends from net investment
income - - - (0.04) (0.16) (0.11) (0.11) (0.02) -
Distributions from net realized
gains (3.94) (0.95) (1.09) (0.86) (0.80) - - (0.40) -
------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (3.94) (0.95) (1.09) (0.90) (0.96) (0.11) (0.11) (0.42) -
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $15.97 $15.30 $15.68 $13.64 $15.01 $10.73 $11.39 $ 9.48 $11.47
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return <F17> 39.76% 3.75% 23.57% (3.61)% 51.90% (4.82)% 21.60% (13.39)% 14.70%
Supplemental data and ratios:
Net assets, end of period
(in thousands) $53,533 $11,219 $17,619 $14,243 $11,651 $4,574 $3,378 $2,605 $2,699
Ratio of expenses to average
net assets <F17><F18> 1.50% 1.50% 1.50% 1.49% 1.51% 1.87% 1.50% 1.50% 1.25%
Ratio of net income (loss) to
average net assets <F18> 0.29% (0.51)% (0.55)% 0.15% 0.51% 1.45% 1.37% 1.21% 0.18%
Portfolio turnover rate 88% 163% 104% 40% 37% 69% 63% 88% 50%
</TABLE>
<F16> Commencement of operations.
<F17> Not annualized for the period ended September 30, 1987.
<F18> Net of reimbursements by advisor. Absent reimbursement of expenses
by advisor, the ratio of expenses to average net assets would be 1.58%,
1.64%, 1.61%, 1.67%, 1.66%, 2.02%, 1.89%, 1.91% and 1.37%, respectively,
and the ratio of net income (loss) to average net assets would be 0.21%,
(.64)%, (.66)%, (.03)%, .36%, 1.29%, .96%, .80% and .06%, respectively.
See notes to financial statements.
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
FINANCIAL HIGHLIGHTS
Mid-Cap Fund
Year Aug. 16,
Year ended ended 1992<F19>
September 30, Sept.30, through
1995 1994 1993 Sept.30,
1992
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $11.02 $10.51 $9.93 $10.00
Income from investment operations:
Net investment loss (0.02) (0.27) (0.07) -
Net realized and unrealized
gains (losses) on securities 7.64 0.78 0.65 (0.07)
------ ------ ------ -------
Total from investment operations 7.62 0.51 0.58 (0.07)
Less distributions:
Dividends from net investment
income - - - -
Distributions from net realized
gains (0.03) - - -
------ ------ ------ -------
Total distributions (0.03) - - -
------ ------ ------ -------
Net asset value, end of period $18.61 $11.02 $10.51 $9.93
====== ====== ====== =======
Total return <F20> 69.24% 4.85% 5.85% (0.70)%
Supplemental data and ratios:
Net assets, end of period
(in thousands) $98,605 $1,091 $2,451 $148
Ratio of expenses to average
net assets <F20> <F21> 1.75% 1.75% 1.74% 1.56%
Ratio of net loss to
average net assets <F21> (0.71)% (1.19)% (0.86)% (0.38)%
Portfolio turnover rate 46% 213% 113% 40%
</TABLE>
<F19> Commencement of operations.
<F20> Not annualized for the period ended September 30, 1992.
<F21> Net of reimbursements by advisor. Absent reimbursement of expenses by
advisor, the ratio of expenses to average net assets would be 1.94%,
3.33%, 2.69% and 7.65%, respectively, and the ratio of net loss to
average net assets would be (0.90)%, (2.76)%, (1.81)% and (6.47)%,
respectively.
See notes to financial statements.
<TABLE>
<CAPTION>
Wasatch Advisors Funds, Inc.
FINANCIAL HIGHLIGHTS
Income Fund
Dec. 6,
1986<F22>
through
Year ended September 30, Year ended September 30, Sept.30,
1995 1994 1993 1992 1991 1990 1989 1988 1987
----- ----- ----- ----- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.09 $10.42 $11.17 $11.14 $10.13 $10.61 $10.64 $10.19 $10.00
Income from investment operations:
Net investment income (loss) 0.56 0.55 0.55 (0.03) 0.58 0.69 1.25 0.81 0.39
Net realized and unrealized
gains (losses) on securities 0.44 (0.40) (0.17) 0.94 1.24 (0.19) (0.06) 0.25 (0.20)
------ ------ ------ ------ ------ ------ ------ ------ -------
Total from investment operations 1.00 0.15 0.38 0.91 1.82 0.50 1.19 1.06 0.19
Less distributions:
</TABLE>
<PAGE> 54
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends from net investment
income (0.59) (0.46) (0.53) (0.56) (0.81) (0.69) (1.22) (0.61) -
Distributions from net realized
gains - (0.02) (0.60) (0.32) - (0.29) - - -
------ ------- ------- ------- ------ ------ ------- ------ ------
Total distributions (0.59) (0.48) (1.13) (0.88) (0.81) (0.98) (1.22) (0.61) -
------ ------- ------- ------- ------ ------ ------- ------ ------
Net asset value, end of period $10.50 $10.09 $10.42 $11.17 $11.14 $10.13 $10.61 $10.64 $10.19
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return <F23> 10.46% 1.51% 3.80% 8.44% 18.74% 4.87% 12.50% 10.84% 1.90%
Supplemental data and ratios:
Net assets, end of period
(in thousands) $4,035 $3,250 $3,748 $5,234 $3,540 $1,771 $1,119 $816 $504
Ratio of expenses to average
net assets <F23><F24> 1.00% 1.00% 1.00% 1.00% 1.01% 1.32% 0.99% 0.95% 0.94%
Ratio of net income to
average net assets <F24> 5.88% 5.15% 4.60% 4.90% 6.79% 10.00% 8.25% 8.47% 5.97%
Portfolio turnover rate 43% 45% 46% 95% 66% 71% 29% 30%
</TABLE>
<F22> Commencement of operations.
<F23> Not annualized for the period ended September 30, 1987.
<F24> Net of reimbursements by advisor. Absent reimbursement
of expenses by advisor, the ratio of expenses to average net assets
would be 1.59%, 1.39%, 1.35%, 1.20%, 1.20%, 1.57%, 1.42%, 1.35% and
1.20%, respectively, and the ratio of net income to average net
assets would be 5.29%, 4.76%, 4.24%, 4.71%, 6.59%, 9.75%, 7.82%,
8.06% and 5.70%, respectively.
See notes to financial statements.
Wasatch Advisors Funds, Inc.
Notes to Financial Statements
September 30, 1995
1. ORGANIZATION
Wasatch Advisors Funds, Inc. was incorporated on November 18, 1986 under the
laws of the State of Utah and is registered under the Investment Company Act of
1940 as an open-end management investment company. The Aggressive Equity,
Micro-Cap and Mid-Cap Funds are nondiversified portfolios and the Growth and
Income Funds are diversified portfolios of Wasatch Advisors Funds, Inc. The
Aggressive Equity Fund, Growth Fund and Income Fund commenced operations on
December 6, 1986. The Mid-Cap Fund commenced operations on August 16, 1992 and
the Micro-Cap Fund commenced operations on June 19, 1995. The Aggressive
Equity, Micro-Cap, Growth, Mid-Cap and Income Funds (the "Funds") have entered
into an investment advisory agreement with Wasatch Advisors, Inc. (the
"Manager") as investment advisor.
Wasatch Advisors Funds, Inc. is authorized to issue 100,000,000 shares of
Series A common stock (Aggressive Equity Fund), 100,000,000 shares of Series B
common stock (Growth Fund), 100,000,000 shares of Series C common stock (Income
Fund), 100,000,000 shares of Series D common stock (Mid-Cap Fund) and
100,000,000 shares of Series E common stock (Micro-Cap Fund) all with a par
value of $.001 per share.
2. SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Funds conform to generally
accepted accounting principles. The following is a summary of the more
significant of such policies.
a) Valuation of Securities - Securities listed or admitted for trading
privileges on the New York Stock Exchange or the American Stock Exchange are
valued at the closing price on the exchange on which the security is traded.
Securities traded in the over-the-counter market are valued at the last sales
price or, if no sales occurred on the valuation date, at the last available bid
price in the over-the-counter market or on the basis of yield equivalents as
obtained from one or more dealers that make markets in these securities.
Short-term securities are valued at either original cost or amortized cost,
both of which approximate current market value. Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Directors
of the Funds.
b) Investment in Securities - Security transactions are accounted for on the
trade date plus one. Gain or loss from sale of investment securities is
computed on the identified cost basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income is recorded
on the accrual basis.
c) 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 of their taxable income to their
shareholders.
d) Expenses - The Funds are charged for those expenses that are directly
attributable to it, such as advisory and custodian fees. Expenses that are not
directly attributable to a portfolio are allocated among the portfolios in
proportion to their respective net assets.
3. DISTRIBUTIONS
Dividends from net investment income are declared and paid annually.
Distributions of net realized gains, if any, will be declared at least
annually. The amount of dividends and distributions from net investment income
and net realized capital gains are determined in accordance with Federal income
tax regulations, which may differ from generally accepted accounting principles.
To the extent these book and tax differences are permanent in nature, such
amounts are reclassified to paid-in capital in excess of par value.
Accordingly, at September 30, 1995, reclassifications were recorded to
increase undistributed net investment income by $529,243, $19,989 and $135,323;
decrease undistributed net realized gain on investments by $529,243, $0 and
$132,626; and decrease paid-in-capital in excess of par by $0, $19,989 and
$2,697 for the Aggressive Equity, Micro-Cap and Mid-Cap Funds, respectively.
4. CAPITAL STOCK
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Period ended September 30, 1995
Aggressive
Equity Micro-Cap Growth Mid-Cap Income
Fund Fund Fund Fund Fund
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Shares sold 11,583,792 9,592,412 2,724,508 5,698,649 132,150
Shares issued to
holders in
reinvestment of
dividends 223,654 - 241,652 230 18,774
Shares redeemed (1,917,750) (258,614) (347,867) (500,319) (88,885)
---------- ---------- --------- ---------- ---------
Net increase 9,889,696 9,333,798 2,618,293 5,198,560 62,039
========== ========== ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
Year ended September 30, 1994
Aggressive
Equity Growth Mid-Cap Income
Fund Fund Fund Fund
---------- ------- -------- --------
<S> <C> <C> <C> <C>
Shares sold 1,316,335 87,202 15,602 27,888
Shares issued to
holders in
reinvestment of
dividends 78,530 63,279 - 16,722
Shares redeemed (251,438) (540,948) (149,784) (82,343)
---------- ---------- --------- ---------
Net increase
(decrease) 1,143,427 (390,467) (134,182) (37,733)
========== ========== ========= =========
</TABLE>
5. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding U.S. Government and
short-term securities, for the year ended September 30, 1995 are summarized
below:
<TABLE>
<CAPTION>
Aggressive
Equity Micro-Cap Growth Mid-Cap Income
Fund Fund Fund Fund Fund
------------ ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Purchases $232,262,765 $19,083,441 $46,016,178 $80,209,884 -
Sales 38,064,053 - 16,089,804 8,592,923 -
</TABLE>
The only purchases and sales of U.S. Government securities occurred in the
Income Fund and were $679,258 and $3,080,014, respectively. Net gain or loss
on securities sold is determined on the identified cost basis which is the same
as that used for federal income tax reporting. The Micro-Cap and Income Funds'
basis in investments is the same for income tax and financial reporting
<PAGE> 55
purposes. The Aggressive Equity, Growth and Mid-Cap Funds' tax basis in their
investments is $244,852,951, $48,664,140 and $90,474,099, respectively. At
September 30, 1995 the Income Fund had an accumulated net realized capital loss
carryover of $50,344 and $35,783 expiring in 2002 and 2003, respectively. To
the extent the Mid-Cap Fund realized future net capital gains, taxable
distributions to its shareholders will be offset by any unused capital loss
carryover. For the year ended September 30, 1995, 41%, 24% and 1% of dividends
paid from taxable income for the Aggressive Equity Fund, Growth Fund and
Mid-Cap Fund, respectively, qualify for the dividends received deduction
available to corporate shareholders.
As of September 30, 1995, gross unrealized appreciation and depreciation for
federal income tax purposes were as follows:
<TABLE>
<CAPTION>
Aggressive
Equity Micro-Cap Growth Mid-Cap Income
Fund Fund Fund Fund Fund
----------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Unrealized
appreciation $65,691,860 $2,125,007 $6,922,249 $14,115,272 $40,262
Unrealized
depreciation (8,191,531) (417,151) (1,020,141) (2,114,992) (1,040)
----------- ---------- ----------- ----------- --------
Net unrealized
appreciation $57,500,329 $1,707,856 $5,902,108 $12,000,280 $39,222
=========== ========== ========== =========== ========
</TABLE>
6. INVESTMENT ADVISORY
The investment policies of the Funds and the management of the Funds'
portfolios are administered by the Manager. The Manager paid for the Funds'
office space, facilities and certain business equipment in addition to those
provided by the Funds' custodian, administrator and transfer agent. The
Manager also compensates all officers and directors of the Funds, provided such
persons are also employees of the Manager or its affiliates. During the year
ended September 30, 1995, management fees for the Aggressive Equity Fund,
Micro-Cap Fund, Growth Fund, Mid-Cap Fund and Income Fund were 1.0%, 2.0%,
1.0%, 1.25% and 0.5% of the daily net assets of each portfolio, respectively.
The Manager voluntarily agreed to reimburse its management fee to the extent
that total expenses exceeded 1.5% of the net assets of the Aggressive Equity
Fund, 2.5% of the net assets of the Micro-Cap Fund, 1.5% of the net assets of
the Growth Fund, 1.75% of the net assets of the Mid-Cap Fund, and 1.0% of the
net assets of the Income Fund computed on a daily basis. For the year ended
September 30, 1995, the Manager reimbursed $23,438 for the Micro-Cap Fund,
$16,636 for the Growth Fund, $35,750 for the Mid-Cap Fund and $19,946 for the
Income Fund.
7. RESTRICTED SECURITIES
Each Fund may invest up to 5% of its total assets or 10% of its net assets in
securities which cannot be readily sold because of legal or contractual
restrictions. At the end of the fiscal year, the Aggressive Equity and Mid-Cap
Funds held the securities of Drexler Technology Corp. (DRXR), a restricted
security, valued at 0.1% and 0.8% of total Fund assets, respectively.
Registration of these securities is currently pending. The security is
currently valued at a discount to market.
The following table summarizes Wasatch Advisors Funds' holdings in DRXR:
<TABLE>
<CAPTION>
Fund Acquisition Date Value Cost
---- ---------------- ----- ------
<S> <C> <C> <C>
Aggressive Equity Fund 12/27/94 $391,000 $160,000
Mid-Cap Fund 12/27/94 97,750 40,000
Mid-Cap Fund 6/30/95 733,125 300,000
</TABLE>
8. TRANSACTIONS WITH AFFILIATES
Following is an analysis of fiscal 1995 transactions in the Aggressive Equity
Fund with "affiliated companies" as defined by the Investment Company Act of
1940:
<TABLE>
<CAPTION>
Amount of
Amount of Gain (Loss)
Dividends Realized
Share Activity Credited on Sale
----------------------------------- to Income of Shares
Balance Balance in Fiscal in Fiscal
Security Name 9/30/94 Purchases Sales 9/30/95 1995 1995
- ------------- ------- --------- ----- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Children's
Discovery
Centers of
America, Inc. - 492,200 - 492,200 - -
Interpore
International 44,500 517,916 - 562,416 - -
Mity-Lite, Inc. 55,650 101,470 - 157,120 - -
National Dentex
Corp. - 178,200 - 178,200 - -
</TABLE>
Wasatch Advisors Funds, Inc.
Report of Independent Public Accountants
The Shareholders and Board of Directors of
Wasatch Advisors Funds, Inc.:
We have audited the accompanying statements of assets and liabilities of
Wasatch Advisors Funds, Inc. (a Utah corporation, which includes the Wasatch
Aggressive Equity Fund, Wasatch Micro-Cap Fund, Wasatch Growth Fund, Wasatch
Mid-Cap Fund and Wasatch Income Fund), including the schedules of investments,
as of September 30, 1995, and the related statements of operations for the year
then ended, statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the three years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits. The financial highlights for the year ended September 30, 1992
and all prior years presented were audited by other auditors whose report dated
November 18, 1992 expressed an unqualified opinion on the financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995, by correspondence with the custodians and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Wasatch Advisors Funds, Inc. as of September 30, 1995, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each
of the three years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
November 10, 1995
<PAGE> 56
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements
The following audited financial statements for the fiscal year
ended September 30, 1995 are included in Parts A and B:
1. Independent Auditors Report
2. Statement of Assets and Liabilities
3. Statements of Operations
4. Schedule of Investments
5. Statements of Changes in Net Assets
6. Financial Highlights
7. Notes to Financial Statements
b. Exhibits:
1a. Articles of Incorporation(1) - Updated September 1988(2)
1b. Articles of Correction(3)
1c. Articles of Restatement of Articles of Incorporation(3)
1d. Articles of Amendment of Articles of Incorporation(9)
2a. Bylaws of Registrant(1) - Updated January 1988(2), September
1988(2) and August 1991(4)
2b. Bylaws of Registrant - Updated March 1993(3)
2c. Bylaws of Registrant - Updated May 1995(8)
3. None
4. Specimen(6)
5. Advisory Service Contract between Wasatch Advisors Funds,
Inc. and Wasatch Advisors, Inc.(5)
5a. Corporate Resolution - Appendix to the Investment Advisory
Agreements(4)
5b. Advisory Service Contract between Wasatch Micro-Cap Fund and
Wasatch Advisors, Inc.(8)
6. None
7. None
8. Custodian Agreement between Wasatch Mid-Cap Fund and First
Security Bank of Utah, N.A.(5)
8a. Custodian Agreement between Firstar Trust Company and
Wasatch Advisors Funds, Inc.(8)
9. Shareholder Servicing Agent Agreement between Wasatch
Advisors Funds, Inc. and Firstar Trust Company(6)
9a. Administration Agreement between Wasatch Advisors Funds,
Inc. and Sunstone Financial Group, Inc.(6)
9b. Transfer Agent Agreement between Wasatch Micro-Cap Fund and
Firstar Trust Company(8)
9c. Administration Agreement between Wasatch Micro-Cap Fund and
Sunstone Financial Group, Inc.(8)
<PAGE> 57
9d. Services Agreement between Wasatch Advisors Funds, Inc. and
Fidelity Brokerage Services, Inc.(8)
9e. Operating Agreement between Wasatch Advisors Funds, Inc. and
Charles Schwab & Co., Inc.(8)
10. Opinion of Counsel(7)
11. Consent of Arthur Andersen LLP(9)
12. None
13. None
14. None
15. None
16. Schedule of Computation of Performance Quotation -
Aggressive Equity Fund(9)
16a. Schedule of Computation of Performance Quotation - Growth
Fund(9)
16b. Schedule of Computation of Performance Quotation - Income
Fund(9)
16c. Schedule of Computation of Performance Quotation - Mid-Cap
Fund(9)
16d. Schedule of Computation of Performance Quotation - Micro-Cap
Fund(9)
17. Financial Data Schedules(9)
18. None
_________________________
(1) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Pre-Effective Amendment No. 2 to
the Company's Registration Statement on Form N-1A.
(2) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to Exhibit 1 to Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form N-1A.
(3) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 8 to
the Company's Registration Statement on Form N-1A.
(4) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 5 to
the Company's Registration Statement on Form N-1A.
(5) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 6 to
the Company's Registration Statement on Form N-1A.
(6) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 7 to
the Company's Registration Statement on Form N-1A.
(7) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the Company's Rule 24f-2 Notice filed on November 6, 1995.
(8) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 11.
(9) Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is controlled by its Board of Directors. Registrant neither
controls any person or is under common control with any other person.
<PAGE> 58
ITEM 26. NUMBERS OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Title of Class
-------------- Number of Record
Common Stock, par Holders
value $0.001 per share as of September 30, 1995
<S> <C>
Series A - Aggressive Equity Fund 17,708
Series B - Growth Fund 1,644
Series C - Income Fund 188
Series D - Mid-Cap Fund 4,034
Series E - Micro-Cap Fund 2,927
</TABLE>
ITEM 27. INDEMNIFICATION
Officers and directors of the corporation are indemnified to the full extent
permitted by Utah Corporation Law. However, Article XIII of Registrant's
Articles of Incorporation and Article IX of Registrant's Bylaws preclude the
indemnification of any director or officer for any liability arising by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
Indemnification shall only be made when (1) a final decision on the merits by a
court or other body before whom the proceeding was brought that the person to
be indemnified ("indemnitee") was not liable by reason of disabling conduct or,
(2) in the absence of such a decision, a reasonable determination, based upon a
review of the facts, that the indemnitee was not liable by reason of disabling
conduct, by (a) the vote of a majority of a quorum of directors who are neither
"interested persons" of the company as defined in section 2(a)(19) of the 1940
Act nor parties to the proceeding ("disinterested, non-party directors"), or
(b) an independent legal counsel in a written opinion.
Insofar as the conditional advancing of indemnification monies for actions
based upon the Investment Company Act of 1940 may be concerned, such payments
will be made only on the following conditions: (1) the indemnitee shall
provide a security for his undertaking, (2) the investment company shall be
insured against losses arising by reason of any lawful advances, or (3) a
majority of a quorum of the disinterested, non-party directors of the
investment company, or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE> 59
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
As of September 30, 1995, Wasatch Advisors, Inc. (the "Manager" of the
Registrant) acted as the investment advisor for employee benefit plans, other
tax free plans including individual retirement accounts, Keoghs, endowments and
foundation, and taxable accounts in addition to the five series of Wasatch
Advisors Funds, Inc. The total assets under management were approximately $300
million (including the Funds) as of that date.
Certain information regarding each officer and director of the Manager
including each business, profession, vocation or employment of a substantial
nature in which each such person is or has been engaged at any time during the
past two fiscal years is set forth below.
<TABLE>
<CAPTION>
Other Substantial
Position Business, Profession,
Name with Manager Vocation or Employment
---- ------------ ----------------------
<S> <C> <C>
Samuel S. Stewart, Jr., Ph.D. President, Chairman of the Board, Professor of Finance,
and Director of Research University of Utah
Roy S. Jespersen Vice President, Director, and - -
Portfolio Manager
Jeff S. Cardon Vice President, Director, and - -
Securities Analyst
Mark E. Bailey Vice President, Director, and - -
Portfolio Manager
Luana Buhler Secretary, Equities Trader - -
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS
None
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
1. Wasatch Advisors, Inc., 68 South Main Street, Salt Lake City, Utah
84101 (records relating to its function as investment advisor).
2. Sunstone Financial Group, Inc., 207 East Buffalo Street, Suite
400, Milwaukee, Wisconsin 53202 (records relating to its function
as administrator, fund accountant, transfer agent and shareholder
servicing agent).
ITEM 31. MANAGEMENT SERVICES
Other than as set forth under the caption "Management of the Company" in the
Prospectus constituting Part A of the Registration Statement and under the
captions "Management of the Fund" and "Investment Advisory and Other Services"
in the Statement of Additional Information constituting Part B of the
Registration Statement, Registrant is not a party to any management-related
service contract.
<PAGE> 60
ITEM 32. UNDERTAKINGS
The Company undertakes to furnish each person to whom a current prospectus is
delivered with a copy of the Company's latest annual report to shareholders,
upon request and without charge.
<PAGE> 61
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this
Amended Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Salt Lake City, and the State of Utah
on the 29th day of November, 1995.
WASATCH FUNDS, INC.
By: /s/ Samuel S. Stewart, Jr.
---------------------------------
Samuel S. Stewart, Jr., Ph.D.,
President
Pursuant to the requirements of the Securities Act of 1933, this Amended
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Samuel S. Stewart, Jr. President and Director Nov. 27, 1995
-------------------------- (principal executive
Samuel S. Stewart, Jr., Ph.D. officer)
/s/ Heidi Preuss Secretary and Treasurer Nov. 27, 1995
---------------- (principal financial and
Heidi Preuss accounting officer)
/s/ Roy S. Jespersen Vice President and Director Nov. 27, 1995
--------------------
Roy S. Jespersen
/s/ Jeff S. Cardon Vice President and Director Nov. 27, 1995
------------------
Jeff S. Cardon
- ---------------------------------- Director
James U. Jensen, Esquire
- ---------------------------------- Director
William R. Swinyard
</TABLE>
<PAGE> 62
EXHIBIT INDEX
a. Financial Statements
The following audited financial statements for the fiscal year
ended September 30, 1995 are included in Parts A and B:
1. Independent Auditors Report
1a. Articles of Incorporation(1) - Updated September 1988(2)
1b. Articles of Correction(3)
1c. Articles of Restatement of Articles of Incorporation(3)
1d. Articles of Amendment of Articles of Incorporation(9)
2a. Bylaws of Registrant(1) - Updated January 1988(2), September
1988(2) and August 1991(4)
2b. Bylaws of Registrant - Updated March 1993(3)
2c. Bylaws of Registrant - Updated May 1995(8)
3. None
4. Specimen(6)
5. Advisory Service Contract between Wasatch Advisors Funds,
Inc. and Wasatch Advisors, Inc.(5)
5a. Corporate Resolution - Appendix to the Investment Advisory
Agreements(4)
5b. Advisory Service Contract between Wasatch Micro-Cap Fund and
Wasatch Advisors, Inc.(8)
6. None
7. None
8. Custodian Agreement between Wasatch Mid-Cap Fund and First
Security Bank of Utah, N.A.(5)
8a. Custodian Agreement between Firstar Trust Company and
Wasatch Advisors Funds, Inc.(8)
9. Shareholder Servicing Agent Agreement between Wasatch
Advisors Funds, Inc. and Firstar Trust Company(6)
9a. Administration Agreement between Wasatch Advisors Funds,
Inc. and Sunstone Financial Group, Inc.(6)
9b. Transfer Agent Agreement between Wasatch Micro-Cap Fund and
Firstar Trust Company(8)
9c. Administration Agreement between Wasatch Micro-Cap Fund and
Sunstone Financial Group, Inc.(8)
9d. Services Agreement between Wasatch Advisors Funds, Inc. and
Fidelity Brokerage Services, Inc.(8)
9e. Operating Agreement between Wasatch Advisors Funds, Inc. and
Charles Schwab & Co., Inc.(8)
10. Opinion of Counsel(7)
11. Consent of Arthur Andersen LLP(9)
12. None
13. None
14. None
15. None
16. Schedule of Computation of Performance Quotation -
Aggressive Equity Fund(9)
16a. Schedule of Computation of Performance Quotation - Growth
Fund(9)
16b. Schedule of Computation of Performance Quotation - Income
Fund(9)
16c. Schedule of Computation of Performance Quotation - Mid-Cap
Fund(9)
16d. Schedule of Computation of Performance Quotation - Micro-Cap
Fund(9)
17. Financial Data Schedules(9)
18. None
<PAGE> 63
_________________________
(1) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Pre-Effective Amendment No. 2 to
the Company's Registration Statement on Form N-1A.
(2) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to Exhibit 1 to Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form N-1A.
(3) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 8 to
the Company's Registration Statement on Form N-1A.
(4) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 5 to
the Company's Registration Statement on Form N-1A.
(5) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 6 to
the Company's Registration Statement on Form N-1A.
(6) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 7 to
the Company's Registration Statement on Form N-1A.
(7) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the Company's Rule 24f-2 Notice filed on November 6, 1995.
(8) Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 11
(9) Filed herewith.
<PAGE> 1
EXHIBIT 1d
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
WASATCH ADVISORS FUNDS, INC.
1. The name of this Corporation is Wasatch Advisors Funds, Inc.
2. Paragraph (a) of Article IV of the Articles of Incorporation of
this Corporation, as previously filed with the Utah Division of Corporations
and Commercial Code on April 21, 1993 is amended to read as follows:
ARTICLE IV
a. The Corporation is authorized to issue a total of one
billion shares of Common Stock, with a par value of $.001 per share. Five
hundred million of these shares have been authorized by the Board of Directors
to be issued in five separate series: one hundred million shares designated as
Series A Common Stock of Wasatch Aggressive Equity Fund, one hundred million
shares designated as Series B Common Stock of Wasatch Growth Fund, one hundred
million shares designated as Series C Common Stock of Wasatch Income Fund, one
hundred million shares designated as Series D Common Stock of Wasatch Mid-Cap
Fund and one hundred million shares designated as Series E Common Stock of
Wasatch Micro-Cap Fund. There are no restrictions on the transfer of shares.
3. The foregoing amendment to the Articles of Incorporation was
adopted on December 9, 1994, in accordance with the requirements of Sections
16-10a-1001 and 16-10a-1006 of the Utah Revised Business Corporation Act.
4. The foregoing amendment to the Articles of Incorporation has been
adopted by the Corporation's Board of Directors without shareholder action,
inasmuch as shareholder approval is not required for adoption of the amendment
pursuant to Sections 16-10a-601, 16-10a-602 and 16-10a-1002 of the Utah Revised
Business Corporation Act and the Corporation's Articles of Incorporation.
IN WITNESS WHEREOF, these Articles of Amendment of the Articles of
Incorporation are hereby executed, effective as of this 20 day of
April, 1995.
WASATCH ADVISORS FUNDS, INC.
_______________________________________
Samuel S. Stewart, Jr.
President
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report,
and to all references to our firm, included in or made a part of this
Form N-1A registration statement for the Wasatch Advisors Funds, Inc.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
November 29, 1995
<PAGE> 1
Exhibit 16
WASATCH AGGRESSIVE EQUITY FUND
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
FOR THE ONE YEAR PERIOD ENDED SEPTEMBER 30, 1995
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
Total return = 35.2%
35.2% = (35,615/26,345) -1
FOR THE THREE YEAR PERIOD ENDED SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
Cumulative total return = 96.1%
96.1% = (35,615/18,165) -1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
Total return = 25.2%
1/3
25.2% = (35,615/18,165) -1
FOR THE FIVE YEAR PERIOD ENDED SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
Cumulative total return = 221.9%
221.9% = (35,615/11,063) -1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
Total return = 26.3%
1/5
26.3% = (35,615/11,063) -1
FOR THE PERIOD FROM DECEMBER 6, 1986 (COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
OF $10,000
Cumulative total return = 256.2%
256.2% = (35,615/10,000) -1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
OF $10,000
Total return = 15.5%
1/8.8
15.5% = (35,615/10,000) -1
<PAGE> 1
EXHIBIT 16a
WASATCH GROWTH FUND
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
FOR THE ONE YEAR PERIOD ENDED SEPTEMBER 30, 1995
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
Total return = 39.8%
39.8% = (30,167/21,584) -1
FOR THE THREE YEAR PERIOD ENDED SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
Cumulative total return = 79.2%
79.2% = (30,167/16,836) -1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
Total return = 21.5%
1/3
21.5% = (30,167/16,836) -1
FOR THE FIVE YEAR PERIOD ENDED SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
Cumulative total return = 162.4%
162.4% = (30,167/11,498) -1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
Total return = 21.3%
1/5
21.3% = (30,167/11,498) -1
FOR THE PERIOD FROM DECEMBER 6, 1986 (COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
OF $10,000
Cumulative total return = 201.7%
201.7% = (30,167/10,000) -1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
OF $10,000
Total return = 13.3%
1/8.8
13.3% = (30,167/10,000) -1
<PAGE> 1
EXHIBIT 16b
WASATCH INCOME FUND
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
FOR THE ONE YEAR PERIOD ENDED SEPTEMBER 30, 1995
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
Total return = 10.5%
10.5% = (19,970/18,078) -1
FOR THE THREE YEAR PERIOD ENDED SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
Cumulative total return = 16.4%
16.4% = (19,970/17,158) -1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
Total return = 5.2%
1/3
5.2% = (19,970/17,158) -1
FOR THE FIVE YEAR PERIOD ENDED SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
Cumulative total return = 49.9%
49.9% = (19,970/13,325) -1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
Total return = 8.4%
1/5
8.4% = (19,970/13,325) -1
FOR THE PERIOD FROM DECEMBER 6, 1986 (COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
OF $10,000
Cumulative total return = 99.7%
99.7% = (19,970/10,000) -1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
OF $10,000
Total return = 8.2%
1/8.8
8.2% = (19,970/10,000) -1
<PAGE> 1
Exhibit 16c
WASATCH MID-CAP FUND
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
FOR THE ONE YEAR PERIOD ENDED SEPTEMBER 30, 1995
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
Total return = 69.2%
69.2% = (18,653/11,021) -1
FOR THE THREE YEAR PERIOD ENDED SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
Cumulative total return = 87.8%
87.8% = (18,653/9930) -1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
Total return = 23.4%
1/3
23.4% = (18,653/9930) -1
FOR THE PERIOD FROM AUGUST 16, 1992 (COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
OF $10,000
Cumulative total return = 86.5%
86.5% = (18,653/10,000) -1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
OF $10,000
Total return = 22.1%
1/3.1
22.1% = (18,653/10,000) -1
<PAGE> 1
Exhibit 16d
WASATCH MICRO-CAP FUND
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
FOR ONE YEAR PERIOD
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) -1
FOR THE PERIOD FROM JUNE 19, 1995 (COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30, 1995
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
OF $10,000
Cumulative total return = 36.0%
36.0% = (13,600/10,000)
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) -1
of $10,000
<TABLE> <S> <C>
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<NAME> WASATCH ADVISORS FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> WASATCH AGGRESSIVE EQUITY
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<TOTAL-ASSETS> 305,603,294
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<OTHER-ITEMS-LIABILITIES> 292,265
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<DIVIDEND-INCOME> 739,138
<INTEREST-INCOME> 852,827
<OTHER-INCOME> 0
<EXPENSES-NET> 2,121,208
<NET-INVESTMENT-INCOME> (529,243)
<REALIZED-GAINS-CURRENT> 2,696,275
<APPREC-INCREASE-CURRENT> 54,953,184
<NET-CHANGE-FROM-OPS> 57,120,216
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<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 4,403,597
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<NUMBER-OF-SHARES-SOLD> 11,583,792
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<NET-CHANGE-IN-ASSETS> 258,941,883
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<ACCUMULATED-GAINS-PRIOR> 829,613
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,446,523
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,121,208
<AVERAGE-NET-ASSETS> 144,621,869
<PER-SHARE-NAV-BEGIN> 19.96
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> 6.59
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.51)
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<PER-SHARE-NAV-END> 25.00
<EXPENSE-RATIO> 1.47
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
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<ARTICLE> 6
<CIK> 0000806633
<NAME> WASATCH ADVISORS FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> WASATCH GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 48,456,517
<INVESTMENTS-AT-VALUE> 54,566,248
<RECEIVABLES> 104,966
<ASSETS-OTHER> 408,323
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55,079,537
<PAYABLE-FOR-SECURITIES> 1,500,342
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,730
<TOTAL-LIABILITIES> 1,546,072
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,729,891
<SHARES-COMMON-STOCK> 3,351,512
<SHARES-COMMON-PRIOR> 733,219
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 633,229
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,109,731
<NET-ASSETS> 53,533,465
<DIVIDEND-INCOME> 217,185
<INTEREST-INCOME> 133,660
<OTHER-INCOME> 0
<EXPENSES-NET> 293,583
<NET-INVESTMENT-INCOME> 57,262
<REALIZED-GAINS-CURRENT> 736,267
<APPREC-INCREASE-CURRENT> 6,268,326
<NET-CHANGE-FROM-OPS> 7,061,855
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 2,878,781
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,724,508
<NUMBER-OF-SHARES-REDEEMED> 347,867
<SHARES-REINVESTED> 241,652
<NET-CHANGE-IN-ASSETS> 42,314,571
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 461,614
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 195,697
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 310,219
<AVERAGE-NET-ASSETS> 19,586,728
<PER-SHARE-NAV-BEGIN> 15.30
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 4.59
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (3.94)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.97
<EXPENSE-RATIO> 1.5
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806633
<NAME> WASATCH ADVISORS FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> WASATCH INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 3,967,172
<INVESTMENTS-AT-VALUE> 4,006,394
<RECEIVABLES> 28,248
<ASSETS-OTHER> 7,322
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,041,964
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,741
<TOTAL-LIABILITIES> 6,741
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,930,190
<SHARES-COMMON-STOCK> 384,158
<SHARES-COMMON-PRIOR> 322,119
<ACCUMULATED-NII-CURRENT> 151,554
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (86,127)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 39,222
<NET-ASSETS> 4,035,223
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 232,459
<OTHER-INCOME> 0
<EXPENSES-NET> 33,771
<NET-INVESTMENT-INCOME> 198,688
<REALIZED-GAINS-CURRENT> (35,783)
<APPREC-INCREASE-CURRENT> 167,864
<NET-CHANGE-FROM-OPS> 330,769
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 183,919
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 132,150
<NUMBER-OF-SHARES-REDEEMED> 88,885
<SHARES-REINVESTED> 18,774
<NET-CHANGE-IN-ASSETS> 785,346
<ACCUMULATED-NII-PRIOR> 50,583
<ACCUMULATED-GAINS-PRIOR> 130,200
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 16,871
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 53,717
<AVERAGE-NET-ASSETS> 3,378,733
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> .56
<PER-SHARE-GAIN-APPREC> .44
<PER-SHARE-DIVIDEND> (.59)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.50
<EXPENSE-RATIO> 1.0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806633
<NAME> WASATCH ADVISORS FUNDS, INC.
<SERIES>
<NUMBER> 4
<NAME> WASATCH MIDCAP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 90,449,163
<INVESTMENTS-AT-VALUE> 102,474,379
<RECEIVABLES> 323,386
<ASSETS-OTHER> 10,036
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<PAYABLE-FOR-SECURITIES> 4,113,174
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 89,150
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 86,322,202
<SHARES-COMMON-STOCK> 5,297,597
<SHARES-COMMON-PRIOR> 99,037
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 252,761
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,025,216
<NET-ASSETS> 98,605,477
<DIVIDEND-INCOME> 2,897
<INTEREST-INCOME> 193,915
<OTHER-INCOME> 0
<EXPENSES-NET> 332,135
<NET-INVESTMENT-INCOME> (135,323)
<REALIZED-GAINS-CURRENT> 417,714
<APPREC-INCREASE-CURRENT> 12,017,873
<NET-CHANGE-FROM-OPS> 12,300,264
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 2,697
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,698,649
<NUMBER-OF-SHARES-REDEEMED> 500,319
<SHARES-REINVESTED> 230
<NET-CHANGE-IN-ASSETS> 97,514,417
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 58,117
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 237,215
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 367,885
<AVERAGE-NET-ASSETS> 19,005,905
<PER-SHARE-NAV-BEGIN> 11.02
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 7.64
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.03)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.61
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806633
<NAME> WASATCH ADVISORS FUNDS, INC.
<SERIES>
<NUMBER> 5
<NAME> WASATCH MICROCAP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 25,470,286
<INVESTMENTS-AT-VALUE> 27,178,142
<RECEIVABLES> 24,972
<ASSETS-OTHER> 7,248
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,210,362
<PAYABLE-FOR-SECURITIES> 1,812,541
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,680
<TOTAL-LIABILITIES> 1,842,221
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,651,704
<SHARES-COMMON-STOCK> 9,333,798
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (753)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,707,856
<NET-ASSETS> 25,368,141
<DIVIDEND-INCOME> 1,995
<INTEREST-INCOME> 43,923
<OTHER-INCOME> 0
<EXPENSES-NET> 65,907
<NET-INVESTMENT-INCOME> (19,989)
<REALIZED-GAINS-CURRENT> (753)
<APPREC-INCREASE-CURRENT> 1,707,856
<NET-CHANGE-FROM-OPS> 1,687,114
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,592,412
<NUMBER-OF-SHARES-REDEEMED> 258,614
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 25,368,141
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 52,691
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 89,345
<AVERAGE-NET-ASSETS> 9,381,804
<PER-SHARE-NAV-BEGIN> 2.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> .72
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 2.72
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
