THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS OF THE
WASATCH FUNDS. IT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS
UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS FOR THE FUNDS. THE
PROSPECTUS GIVES DETAILS ABOUT CHARGES, INVESTMENT OBJECTIVES, RISKS AND
OPERATING POLICIES OF THE FUNDS. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE
INVESTING.
WASATCH FUNDS
68 South Main Street
Salt Lake City, Utah 84101
1 (800) 551-1700
LETTER FROM THE INVESTMENT ADVISOR
MARCH 31, 1997
Dear Shareholder:
OVERVIEW
For the first time since 1994 stock and bond funds were both down, on average,
for the first quarter. Diversified stock funds lost nearly two percent. The
average small-cap growth fund lost 12.5 percent. Performing worst of all among
small and aggressive growth funds were the so-called momentum funds. In several
cases they lost over 20 percent in the first quarter. Stocks in the Wasatch
Funds did better. We think there's a reason and many market experts agree. The
earnings growth of large companies that has driven this market over the last two
years is beginning to slow down, while the earnings growth rates of companies
Wasatch has invested in, on average, are rising. Even though earnings have been
rising, the stock prices of small- and mid-size companies have remained
relatively flat. The current valuations of small- and mid-size companies look
extremely attractive to us. By comparison, large company stocks have gotten
expensive to buy while at the same time the companies' earnings growth has
slowed. Smaller companies, on the other hand, are reporting higher profits while
their stock prices remain relatively cheap. Sooner or later investors will see
that small companies have better prospects and their stocks can be bought for a
bargain. We don't know when this will happen, but when it does the stock prices
of small companies will begin to rise.
We are pleased to report that over the last several months we have successfully
accomplished our objectives of investing in companies with exceptional earnings
growth prospects and buying stocks at reasonable prices. These objectives are
central to our investment philosophy which states that, "over the long run,
earnings growth drives stock prices." In the short term we strongly encourage
our shareholders to maintain the discipline and patience required to
successfully invest in small- and mid-size companies. We believe that this is
not the time to change investment strategies.
As you are probably aware, the Wasatch Funds use a team approach to investment
decision-making. This quarter, in an effort to ensure greater responsibility for
decisions made on behalf of individual funds, we strengthened the lead manager
role and realigned the managers of the Aggressive Equity and Growth Funds.
Beginning February 1, 1997, Sam Stewart took over lead manager responsibilities
for the Growth Fund and Jeff Cardon became lead manager for the Aggressive
Equity Fund. The switch was made because we felt Sam Stewart's investment style
was more suited to the Growth Fund's investment objectives, while Jeff Cardon's
style was a better fit for the Aggressive Equity Fund. The Funds will continue
to be managed by the same Wasatch team. We believe our team approach will be
strengthened by having lead managers who are more accountable and have greater
decision-making power.
Decisions to buy U.S. Treasury securities for the Wasatch-Hoisington U.S.
Treasury Fund are based on top-down economic analysis by the Fund's sub-adviser,
Hoisington Investment Management Company. This type of analysis is well-suited
to bond investing, but is very different from the bottom-up, securities analysis
Wasatch uses to decide which stocks to buy. The Fund's lead manager, Van R.
Hoisington and his team, which includes Dr. Lacy Hunt, assess national and
international interest rate trends, changes in inflationary pressures and the
value of long treasury bonds relative to inflation. Hoisington believes today's
economic environment of low inflation and continued stability are favorable
conditions for investing in long-term U.S. Treasury bonds. Currently, the Fund
remains invested in U.S. Treasury bonds of maximum maturities. Hoisington
believes the Fund is an excellent choice for investors who are sufficiently
patient to deal with short-term volatility in bond yields.
ANNUALIZED
1ST -----------------
INDEX QUARTER 1 YEAR 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
S&P 500 Index 2.7% 19.8% 16.4% 13.4%
S&P MidCap 400 Index (1.5)% 10.6% 13.7% 13.6%
Russell 2000 Index (5.2)% 5.1% 12.8% 9.4%
Nasdaq Composite Index (5.4)% 10.9% 15.1% 11.0%
Lipper Growth Funds Index (0.3)% 12.0% 13.4% 11.6%
Lehman Bros. Gov't./Corp. Bond Index (0.9)% 4.5% 7.3% 8.1%
ANNUALIZED
---------------------------------
1ST SINCE
WASATCH FUNDS QUARTER 1 YEAR 5 Years 10 YEARS COMMENCEMENT<F1>
- -------------------------------------------------------------------------------
Mid-Cap (15.8)% (12.8)% - - 10.9%
Micro-Cap (6.6)% 1.2% - - 25.6%
Aggressive Equity (7.0)% (5.3)% 10.3% 11.0% 12.6%
Growth (1.4)% 5.2% 13.5% 12.4% 13.0%
U.S. Treasury (3.9)% 3.1% 5.4% 7.6% 7.5%
<F1> Commencement of operations for the Aggressive Equity, Growth and U.S.
Treasury Funds is December 6, 1986; for the Mid-Cap Fund, August 16, 1992;
and for the Micro-Cap Fund, June 19, 1995.
The above past performance is not predictive of future results. The
investment return and principal value of the Funds will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
LOOKING AHEAD
Large companies have recently lost some of their luster as previously robust
stock price momentum has shown signs of slowing. While we do not expect small-
and mid-size company stocks to bounce back on top over night, we do believe the
die has been cast for these stocks to return to favor. The smaller companies
Wasatch has invested in have a lot going for them-outstanding earnings growth
potential, plenty of room for stock price increases and a world full of likely
investors who may be thinking that now smaller company stocks look more
interesting than large company stocks.
We believe recent declines in stock prices are not related to economic concerns.
It is likely that falling stock prices have more to do with anticipated reports
of weaker earnings by a few large companies and investors' legitimate fears that
stock prices have risen too high in some sectors of the market. From an economic
standpoint the investment climate remains healthy. Inflation has been moderate
and global and domestic economies have continued to expand. We believe the
Federal Reserve Board's slight increase in interest rates is a short-term move
to restrain monetary conditions which will ultimately cause inflation to recede
further. Wasatch believes today's economic conditions are favorable for
investing in small- and mid-size companies. Current market conditions have
presented the Wasatch investment team with many opportunities to buy reasonably-
priced stock in companies we believe to be "America's Best Growth Companies."*
The Wasatch team is optimistic about the outlook for small- and mid-size company
stocks. We are confident we have invested in companies that have the potential
to contribute positively to the performance of the Wasatch equity funds. We are
excited by the long-term prospects of the Wasatch-Hoisington U.S. Treasury Fund,
and believe it is well-positioned to take advantage of favorable economic
conditions.
We enjoy serving the investment needs of our shareholders. While we cannot
predict what the market holds in store, we can promise that we will remain
disciplined in the application of our investment strategies so that our
shareholders will have the potential to benefit from the Wasatch team's
investments in small- and mid-size companies.
*These are companies we believe possess an identifiable, sustainable competitive
advantage, are underfollowed, undervalued, well-managed and have sufficient
"headroom" in their markets to double their size in five years.
WASATCH MID-CAP FUND
The investment environment continues to be challenging for the Wasatch Mid-Cap
Fund, which is our most aggressive Fund, and other funds that invest in rapidly
growing companies. Many aggressive growth-style funds are down more than 20
percent for the quarter. These funds, including the Mid-Cap Fund, have struggled
to regain momentum since the market declined early last summer.
Early in 1996, the Mid-Cap Fund's performance was hampered by several companies
that reported disappointing earnings. Beginning late last year, the companies we
were invested in reported strong earnings growth that is in line with our
expectations. In the first quarter, the earnings growth rate for the portfolio
as a whole was approximately 33 percent. This is well above the Fund's
aggressive goal of investing in companies that are capable of 25 percent annual
earnings growth. We feel good about the Fund's position even though first
quarter returns were down. We attribute this to the generally depressed stock
prices of small- and mid-size companies in the overall market, rather than to
companies that fell short of our expectations. In addition, a large percentage
of the Fund's holdings are in smaller, fast growing technology companies which
have been particularly hard hit by stock price declines.
Even though this market environment has not been ideal for the Fund, it has
presented opportunities for Wasatch to invest in some excellent companies at
attractive prices. We have followed some of these companies for a long time
waiting for the price-to-earnings (P/E) ratio to decline to a level that fairly
reflects the earnings growth potential. Now we are finding that the stock prices
of many of these companies have dropped to within our range. Wasatch is excited
because we believe we have taken the opportunity to upgrade the overall quality
and expected earnings growth rate of the Mid-Cap Fund's portfolio without paying
higher prices. We feel confident that the stocks held in the Fund have plenty of
room to appreciate and will begin moving up when investors once again turn their
attention and assets to investments in high-growth small- and mid-size
companies.
OUTLOOK
Wasatch cannot predict whether stock prices will go up or down in the coming
quarter. What we have seen is that over time the Fund's total return performance
can be dramatic when we buy rapidly growing companies at reasonable prices and
those companies meet our earnings expectations while we own them. In recent
quarters we have captured a high growth rate and our companies, on average, have
met our expectations. While we have not been immediately rewarded in this market
environment, we continue to project high earnings growth for the Mid-Cap Fund's
portfolio. We believe the Fund is well-positioned to benefit when the stock
prices of fast growing small- and mid-size companies begin to appreciate.
We will continue to do our best to meet the Fund's investment objectives and
serve the needs of our shareholders. We believe that in order to take full
advantage of investments in aggressive growth funds like the Wasatch Mid-Cap
Fund, shareholders should foster patience and discipline as well as maintain
focus on their own long-term investment objectives.
FIVE LARGEST STOCK HOLDINGS - AS OF MARCH 31, 1997
COMPANY INDUSTRY % OF NET ASSETS
-------------------------------------------------------------------------
Express Scripts, Inc., Class A Health Care Services 9.8%
OEA, Inc. Transportation 9.8%
Tecnomatix Technologies Ltd. Computer Software 5.8%
Phoenix Technologies Ltd. Computer Software 5.2%
Micrel, Inc. Semiconductors 5.2%
WASATCH MICRO-CAP FUND
It is frustrating for the Wasatch team and Micro-Cap Fund shareholders alike
when the Fund's returns are down as they were in the first quarter. It is even
more frustrating when we know the Fund has invested in small companies with
earnings growth prospects that can knock the socks off most large companies, and
yet no one notices. At least not on Wall Street. For the past several years, the
majority of stock market investors have favored large companies and the trend
has been to invest in large-cap stocks. The stocks of small companies have been
largely ignored and were left out of the latest market rally. We believe this is
just the most recent case of some sectors of the market being driven higher by
the emotions of investors. Eventually, however, we believe fundamentals will
make a difference and long-term returns will reflect the wisdom of our
philosophy that "earnings growth drives stock prices."
This quarter, companies the Micro-Cap Fund has invested in are meeting or
beating our expectations for earnings growth. The current price-to-earnings
(P/E) ratio for companies held in the Fund averages 25, while the projected
earnings growth rate for the rest of 1997 is more than 25 percent. This is an
indication that the Fund is well-positioned for the future.
Stock prices for Micro-Cap* companies are extremely attractive right now. It is
an exciting time to invest in the stocks of these relatively tiny companies. We
have been able to buy the stocks of some high-quality companies that were
previously too expensive. We have spent the quarter repositioning the Fund and
have sold some of our "good" companies to make way for the "great" companies
we have had the opportunity to buy. With our bottom-up research process we
keep our finger on the pulse of the micro-cap world so we know the companies
we would like to own stock in and the prices we are willing to pay. Buying
stocks of high-quality companies at reasonable prices is one way we seek to
help shareholders get the most from their investments in the Fund. We think
the Fund is in an excellent position to benefit when investors begin to
take notice of the outstanding earnings growth potential of small companies.
*THE WASATCH MICRO-CAP FUND GENERALLY INVESTS IN COMPANIES THAT HAVE MARKET
CAPITALIZATIONS OF LESS THAN $150 MILLION AT THE TIME OF INITIAL PURCHASE.
OUTLOOK
It has been a long time since we have had so many opportunities to invest in
companies we believe have exceptional earnings growth prospects. A year ago when
stock prices were higher the challenge was to invest in companies that were
unlikely to let us down. This year, with the stock prices of small companies at
lower levels, we are faced with the dilemma of deciding which "great" company
we should invest in. There is a lot more room for small company stock prices to
appreciate. With every passing day we become more excited about the outlook for
the Micro-Cap Fund. We believe Micro-Cap Fund shareholders have plenty of
reasons to be optimistic about the Fund's future.
FIVE LARGEST STOCK HOLDINGS - AS OF MARCH 31, 1997
COMPANY INDUSTRY % OF NET ASSETS
-------------------------------------------------------------------------
National Dentex Corp. Business Services 6.8%
Sunstone Hotel Investors,
Inc. REIT Real Estate 5.8%
Day Runner, Inc. Personal Products 5.2%
Varsity Spirit Corp. Personal Products 4.4%
Fine Host Corp. Retail 4.2%
WASATCH AGGRESSIVE EQUITY FUND
Returns for the Wasatch Aggressive Equity Fund, like most other funds that
invest in small companies, were down in the first quarter. Since mid-1996 small
company stock prices have continued to weaken in an investing environment that
has been dominated by large company stocks. The stock prices of large companies
have risen to levels we believe are not sustainable given their earnings growth
outlook. In contrast, the stock prices of small companies, as a whole, have been
pushed down and yet they continue to report robust earnings growth. The high-
quality small companies the Aggressive Equity Fund has invested in have
excellent fundamentals and outstanding earnings growth prospects. At some point
we expect these attributes to be rewarded by stock price increases.
We believe a key indicator of how well a stock will perform over the long run is
the company's ability to produce growth in earnings per share. The companies
Wasatch has invested in for the Aggressive Equity Fund have average earnings
growth rates of around 25 percent. With the price-to-earnings (P/E) ratio at 17
times year-end earnings there is plenty of room for stock prices to appreciate.
By comparison, projected earnings growth rates for the S&P 500 Index are around
7 percent and the P/E ratio is at 17.
This quarter, we used price weakness in the small-cap sector to our advantage.
We bought the stocks of some exceptional companies that we have wanted to own
but previously felt were too expensive. Buying the stocks of high-quality
companies at reasonable prices helps us position the Fund to do well in the
future.
OUTLOOK
In the short run, small company stock prices may continue to lag. We do not
think the superior earnings growth potential of small companies can be denied
forever. In fact, we think the groundwork is being laid for a prolonged period
of small-cap outperformance. It is worth noting that we believe the recent case
of small-cap underperformance is an anomaly. Small company stocks have
historically outperformed large company stocks. We are confident that the
Aggressive Equity Fund is well-positioned for the time when small company stocks
return to favor.
We encourage Aggressive Equity Fund shareholders to compare the unusually
attractive stock prices and outstanding earnings growth potential of small
companies with the high prices and much lower earnings growth prospects of large
companies. When they do, we think they will agree that small-cap growth
investing should play an important role in a smart investment strategy-now and
in the future.
FIVE LARGEST STOCK HOLDINGS - AS OF MARCH 31, 1997
COMPANY INDUSTRY % OF NET ASSETS
-------------------------------------------------------------------------
National Health Investors,
Inc. REIT Real Estate 9.3%
OEA, Inc. Transportation 5.3%
General Nutrition Cos., Inc. Retail 5.2%
O'Reilly Automotive, Inc. Retail 4.3%
Express Scripts, Inc. Class A Health Care Services 4.1%
WASATCH GROWTH FUND
The Wasatch Growth Fund is the most conservative and stable of all the Wasatch
equity funds. It is designed to consistently capture the earnings growth of
companies that have the potential to grow steadily and more predictably than
some of the fast-growing companies held in other Wasatch Funds. That is why the
Growth Fund is typically less affected by price declines but may not see the
dramatic price increases of more aggressive funds. During the volatile market
conditions of the past six months the Fund behaved as we expected. The Growth
Fund finished a tough first quarter slightly down, but right in line with its
peers in the Lipper Growth Funds Index.
Since mid-1996 the investing environment has been challenging for funds, like
the Growth Fund, that invest in small- and mid-size companies. Large company
stocks have received most of the attention and consequently the assets of
investors seeking to capitalize on the short-term price momentum of large
companies. We believe the earnings growth rates of large companies are not
sustainable over the long run and neither are the current return levels for
large company stocks.
OUTLOOK
In the short term we cannot predict whether stock prices will move up or down.
Through our years of experience we have found that over the long run, earnings
growth drives stock prices. Wasatch invests in small- to mid-size companies
because we believe those companies have the best prospects for long-term
earnings growth. We are wholeheartedly pursuing the Growth Fund's strategy of
investing in stable companies that have the potential to meet our minimum annual
earnings growth target of 15 percent and we insist on paying reasonable prices
for stocks. Overall, we are extremely pleased with the excellent fundamentals
and growth prospects of companies held by the Fund. We are excited by recent
opportunities to buy the stocks of outstanding companies at attractive prices.
Investments in companies that have the potential to consistently deliver
earnings growth and stocks with room for price increases put the Fund in a
favorable position to meet its investment objectives. We feel confident that the
future of investing in small- and mid-size companies is bright. The Growth Fund
will continue to apply its conservative investment style to find stable
companies capable of predictable earnings growth. These are the types of
investments that typically reward the Fund's faithful long-term shareholders.
FIVE LARGEST STOCK HOLDINGS - AS OF MARCH 31, 1997
COMPANY INDUSTRY % OF NET ASSETS
-------------------------------------------------------------------------
National Health Investors,
Inc. REIT Real Estate 10.2%
O'Reilly Automotive, Inc. Retail 7.8%
Sunstone Hotel Investors,
Inc. REIT Real Estate 6.9%
General Nutrition Cos., Inc. Retail 6.7%
Renter's Choice, Inc. Personal Services 4.8%
WASATCH-HOISINGTON U.S. TREASURY FUND
The maturity structure of the Wasatch-Hoisington U.S. Treasury Fund's portfolio
is determined by assessing the current and future prospects of the United
States' economy. Bond yields are heavily influenced by economic factors. In-
depth economic analysis helps lead manager, Van R. Hoisington, and his team make
sound investment decisions on behalf of the Fund. We hope the following
discussion of the manager's most recent findings on the condition of the economy
will provide shareholders with useful information about the correlation between
the Fund's investments and economic factors.
Fund performance in the first quarter was affected by the Federal Reserve
Board's (Fed) decision to increase the federal funds rate. The increase of 0.25
percentage point to 5.5 percent in late March was in "light of persisting
strength of demand, which is progressively increasing the risk of inflationary
imbalances developing within the economy." The rationale behind the Fed's
decision is the notion that there is a trade-off between the unemployment rate
and the inflation rate: as the unemployment rate goes down, the inflation rate
heads higher and vice versa. Over U.S. history this unemployment theory of
inflation can only be observed in the limited 10-year period from 1960 to 1969.
But even then this was because money and credit growth were exploding as the
Vietnam war budget deficits were being funded by the creation of new money and
credit, rather than by raising taxes or increasing private saving. In the 1960s,
wages did not rise BEFORE, but AFTER the policymakers ran large budget deficits
financed by newly created money and credit.
Since 1970, the trade-off between unemployment and inflation has not prevailed.
There are as many times of high unemployment and high inflation (stagflation) as
there are times, like now, of low unemployment and low inflation (prosperity).
Part of the reason this trade-off has not occurred is that the U.S. is no longer
an island economy. There are many pools of labor outside the U.S. Another reason
is that the deficit and monetary conditions that bred the inflation and
unemployment trade-off in the 1960s do not exist today. The budget deficit has
declined as this expansion has matured, and relative to Gross Domestic Product
(GDP), is currently about 1.2 percent-the smallest deficit in 23 years. Finally,
inflation is too much money and credit chasing too few goods. The U.S. has an
abundance of goods and services and constricted money and credit. This means
that inflation will continue to head lower. The broadest debt aggregates were
already decelerating before the Fed raised interest rates, largely due to rising
delinquencies on consumer loans.
In raising the federal funds rate, the Fed said that inflation had not
accelerated. Indeed, the current business expansion is in its sixth year, yet
the inflation is not only at the low of this entire cycle, but at the lowest
pace since the mid-1960s. All major measures of inflation moved lower during the
first quarter. Inflation in the pipeline of future costs also fell. Producer
prices actually DEFLATED thus far in 1997. Another excellent, forward-looking
measure of inflation-the value of the dollar-provides encouraging news that
inflation will continue heading lower. Also, all three major commodity indices
registered declines.
OUTLOOK
Inflation is the ultimate determinant of long-term bond yields. The trend toward
lower inflation will eventually create a favorable bond market environment. In
the first quarter investor psychology, fueled and supported by warnings from the
Fed, turned negative on concerns that inflation, although declining, was poised
to head higher. The fundamentals, however, strongly suggest that inflation will
continue to decrease and will, over time, further enhance the already high real
value of long-term U.S. Treasuries. This should prove to be good news for
shareholders of the Wasatch-Hoisington U.S. Treasury Fund.
WRAPPING UP
We are as excited about the outlook for the Wasatch Funds as we have ever been.
According to their own investment parameters, each of the Wasatch equity funds
is invested in the stocks of companies with excellent fundamentals and
outstanding growth prospects. The outlook appears even brighter because we have
taken advantage of current opportunities to buy the stocks of high-quality
companies at reasonable prices. The Wasatch equity funds are well prepared for a
turnaround in small- and mid-size company stock prices. We think investors will
eventually take note of the superior earnings growth potential of small- and
mid-size companies and will begin to shift their assets from large company
stocks to smaller company stocks. Although we cannot say when this shift will
occur, we can say that, today, we are ready.
Our advice to shareholders of our equity funds, based on 22 years of experience,
is to stay invested. Investing in the stock market provides many opportunities
for increasing wealth over the long run, but requires patience and discipline to
ride out short-term stock price fluctuations.
Shareholders of the Wasatch-Hoisington U.S. Treasury Fund are also encouraged to
look past short-term volatility in the bond market and remain focused on the
Fund's long-term investment objective which is to provide a rate of return that
exceeds the rate of inflation over a business cycle. We believe economic
conditions in the U.S. are such that the outlook for long-term Treasury bonds
continues to be favorable.
The trust you have shown by investing in the Wasatch Funds' family of no-load
mutual funds is a responsibility we take seriously. We continually strive to
achieve each Fund's investment objectives so that we might help you reach your
long-term financial goals. We are here to serve you. If you have any questions
or if we can assist you with your investment needs, please call us at 1 (800)
551-1700. We appreciate your investments in the Wasatch Funds.
Sincerely,
Samuel S. Stewart, Jr.
Chairman of the Board
RESULTS OF THE SHAREHOLDER MEETING
The annual meeting of the shareholders of the Funds was held on January 31,
1997. Directors elected by the shareholders at the meeting were as follows:
Samuel S. Stewart, Jr., Roy S. Jespersen, Jeffrey S. Cardon, James U. Jensen and
William R. Swinyard.
The matters voted on by the shareholders of record as of December 13, 1996 and
the results of the shareholders' vote at the January 31, 1997 meeting were as
follows:
A. Election of Directors
FOR WITHHELD
--- --------
Samuel S. Stewart, Jr.
Mid-Cap Fund 2,599,158 121,594
Micro-Cap Fund 12,812,948 256,194
Aggressive Equity Fund 4,389,044 164,745
Growth Fund 2,651,490 72,090
U.S. Treasury Fund 556,027 2,620
Roy S. Jespersen
Mid-Cap Fund 2,599,450 121,302
Micro-Cap Fund 12,811,340 257,802
Aggressive Equity Fund 4,440,195 113,593
Growth Fund 2,654,249 69,331
U.S. Treasury Fund 556,027 2,620
Jeffrey S. Cardon
Mid-Cap Fund 2,601,976 118,776
Micro-Cap Fund 12,797,905 271,236
Aggressive Equity Fund 4,440,496 113,292
Growth Fund 2,657,641 65,939
U.S. Treasury Fund 556,027 2,620
James U. Jensen
Mid-Cap Fund 2,607,268 113,484
Micro-Cap Fund 12,822,437 246,704
Aggressive Equity Fund 4,394,369 159,419
Growth Fund 2,657,709 65,871
U.S. Treasury Fund 556,027 2,620
A. Election of Directors (cont'd.)
FOR WITHHELD
--- --------
William R. Swinyard
Mid-Cap Fund 2,605,911 114,842
Micro-Cap Fund 12,814,192 254,950
Aggressive Equity Fund 4,443,535 110,253
Growth Fund 2,656,467 67,114
U.S. Treasury Fund 556,027 2,620
B. Ratification of the selection of Arthur Andersen LLP as independent
auditors for the Funds
FOR AGAINST ABSTAIN
--- ------- -------
Mid-Cap Fund 2,613,227 41,622 65,904
Micro-Cap Fund 12,702,298 131,495 235,349
Aggressive Equity Fund 4,410,984 57,517 85,287
Growth Fund 2,648,702 32,646 42,233
U.S. Treasury Fund 556,045 1,584 1,018
MID-CAP FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS 100.4%
BUSINESS SERVICES 4.5%
51,000 F.Y.I., Inc.<F2> $ 1,051,875
41,250 Sanmina Corp.<F2> 1,845,938
-----------
2,897,813
-----------
COMMUNICATIONS PRODUCTS 0.8%
60,000 Madge Networks, N.V.<F2> 521,250
-----------
COMPUTER SOFTWARE 22.6%
72,950 Aspen Technologies, Inc.<F2> 1,987,888
109,350 Legato Systems, Inc.<F2> 1,831,613
72,500 Mercury Interactive Corp.<F2> 706,875
221,450 Phoenix Technologies Ltd.<F2> 3,349,430
112,000 Synopsys, Inc.<F2> 2,800,000
180,075 Tecnomatix Technologies Ltd.<F2> 3,736,556
-----------
14,412,362
-----------
COMPUTER SYSTEMS & COMPONENTS 7.6%
135,500 American Power Conversion Corp.<F2> 2,930,187
42,900 Parametric Technology Corp.<F2> 1,935,863
-----------
4,866,050
-----------
FINANCIAL SERVICES 3.1%
71,000 Credit Acceptance Corp.<F2> 1,260,250
20,900 Green Tree Financial Corp. 705,375
-----------
1,965,625
-----------
HEALTH CARE PRODUCTS 1.2%
8,000 HBO & Company 380,000
22,000 HCIC, Inc.<F2> 368,500
-----------
748,500
-----------
HEALTH CARE SERVICES 16.7%
174,825 Express Scripts, Inc., Class A<F2> 6,249,994
43,000 Gulf South Medical Supply, Inc.<F2> 833,125
106,475 Home Health Corp. of America<F2> 1,051,440
MID-CAP FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
--------- -----
HEALTH CARE SERVICES 16.7% (CONT'D.)
2,500 National Surgery Centers, Inc.<F2> $ 72,500
188,700 Physicians Resource Group, Inc.<F2> 2,500,275
-----------
10,707,334
-----------
PERSONAL PRODUCTS 4.5%
42,500 CUC International, Inc.<F2> 956,250
81,000 Nu Skin Asia Pacific, Inc., Class A<F2> 1,954,125
-----------
2,910,375
-----------
PERSONAL SERVICES 5.0%
46,000 Loewen Group, Inc. 1,466,250
154,775 Seattle Filmworks, Inc.<F2> 1,702,525
-----------
3,168,775
-----------
REAL ESTATE 2.4%
33,000 Redwood Trust, Inc. REIT 1,526,250
-----------
RETAIL 4.2%
73,750 O'Reilly Automotive, Inc.<F2> 2,710,313
-----------
SEMICONDUCTORS 10.2%
37,300 Anadigics, Inc.<F2> 1,007,100
4,000 ASM Lithography Holding NV<F2> 300,000
21,000 CFM Technologies, Inc.<F2> 622,125
114,100 Micrel, Inc.<F2> 3,308,900
8,000 PRI Automation, Inc.<F2> 382,000
34,000 SDL, Inc.<F2> 582,250
10,500 Speedfam International, Inc.<F2> 346,500
-----------
6,548,875
-----------
TELECOMMUNICATIONS 5.0%
98,850 REMEC, Inc.<F2> 2,125,275
42,170 United States Cellular Corp.<F2> 1,048,979
-----------
3,174,254
-----------
MID-CAP FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
--------- -----
TRANSPORTATION 12.6%
75,300 Expeditors International of Washington, Inc. $ 1,807,200
149,500 OEA, Inc.<F2> 6,241,625
-----------
8,048,825
-----------
Total Common Stocks
(cost $65,845,282) 64,206,601
-----------
Total Investments 100.4%
(cost $65,845,282) 64,206,601
Liabilities, less Cash
and Other Assets (0.4)% (255,834)
-----------
NET ASSETS 100.0% $63,950,767
===========
<F2> Non-income producing
See notes to financial statements.
MICRO-CAP FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
-------- -----
COMMON STOCKS 98.4%
BUSINESS PRODUCTS 5.1%
120,991 BMC West Corp.<F3> $ 1,391,396
377,200 Thompson PBE, Inc.<F3> 1,980,300
-----------
3,371,696
-----------
BUSINESS SERVICES 20.9%
93,875 Barrett Business Services, Inc.<F3> 1,361,188
14,000 Complete Business Solutions, Inc.<F3> 136,500
54,500 Data Processing Resources CP<F3> 1,021,875
127,000 F.Y.I., Inc.<F3> 2,619,375
52,000 Lason Holdings, Inc.<F3> 1,040,000
261,950 National Dentex Corp.<F3> 4,485,893
17,000 On Assignment, Inc.<F3> 429,250
20,000 Ontrack Data International<F3> 300,000
25,000 RemedyTemp, Inc.<F3> 387,500
132,000 SOS Staffing Services, Inc.<F3> 1,468,500
45,000 Staffmark, Inc.<F3> 590,625
-----------
13,840,706
-----------
COMPUTER SOFTWARE 2.8%
74,400 Deltek Systems, Inc.<F3> 660,300
10,000 Peerless Group, Inc.<F3> 55,000
27,200 Phoenix Technologies Ltd.<F3> 411,400
89,300 Restrac, Inc.<F3> 256,738
22,500 Tecnomatix Technologies Ltd.<F3> 466,875
-----------
1,850,313
-----------
COMPUTER SYSTEMS & COMPONENTS 2.3%
30,850 Active Voice Corp.<F3> 316,212
89,200 Pinnacle Systems, Inc.<F3> 1,215,350
-----------
1,531,562
-----------
ELECTRONICS 0.6%
25,000 PCD, Inc.<F3> 400,000
-----------
MICRO-CAP FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
-------- -----
HEALTH CARE PRODUCTS 10.0%
35,000 Anesta Corp.<F3> $ 603,750
84,500 CN Biosciences, Inc.<F3> 1,214,687
70,400 ICU Medical, Inc.<F3> 607,200
159,100 Molecular Devices Corp.<F3> 2,207,513
87,550 Techne Corp.<F3> 2,024,594
-----------
6,657,744
-----------
HEALTH CARE SERVICES 7.9%
54,300 Corvel Corp.<F3> 1,357,500
188,700 Home Health Corp. of America<F3> 1,863,413
56,400 Sullivan Dental 824,850
65,500 Superior Consultant Holdings Corp.<F3> 1,162,625
-----------
5,208,388
-----------
PERSONAL PRODUCTS 14.3%
37,000 Cutter & Buck, Inc.<F3> 564,250
135,000 Day Runner, Inc.<F3> 3,425,624
227,100 Natural Alternatives International, Inc.<F3> 1,845,188
104,900 Successories, Inc.<F3> 701,519
192,299 Varsity Spirit Corp. 2,932,560
-----------
9,469,141
-----------
PERSONAL SERVICES 5.1%
216,200 Ambassadors International, Inc.<F3> 1,972,825
5,400 First Cash, Inc.<F3> 31,050
7,000 Rent-Way, Inc.<F3> 70,875
120,700 Seattle Filmworks, Inc.<F3> 1,327,700
-----------
3,402,450
-----------
REAL ESTATE 5.8%
293,400 Sunstone Hotel Investors, Inc. REIT 3,850,875
-----------
RETAIL 13.0%
29,800 Buckle, Inc. (The)<F3> 797,150
120,700 Fine Host Corp.<F3> 2,836,450
80,800 Friedman's, Inc.<F3> 1,282,700
19,291 Harold's Stores, Inc.<F3> 236,315
MICRO-CAP FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
--------- -----
RETAIL 13.0% (CONT'D.)
78,600 K & G Men's Center, Inc.<F3> $ 2,102,550
35,800 Marks Bros. Jewelers, Inc.<F3> 420,650
25,500 O'Reilly Automotive, Inc.<F3> 937,125
-----------
8,612,940
-----------
SEMICONDUCTORS 4.9%
27,500 CFM Technologies, Inc.<F3> 814,687
84,250 Micrel, Inc.<F3> 2,443,250
-----------
3,257,937
-----------
TELECOMMUNICATIONS 3.6%
54,000 NACT Telecommunications, Inc.<F3> 317,250
69,918 REMEC, Inc.<F3> 1,503,237
56,000 Rural Cellular Corp., Class A<F3> 588,000
-----------
2,408,487
-----------
TRANSPORTATION 2.1%
10,000 Transport Corp. of America, Inc.<F3> 133,125
150,500 USA Truck, Inc.<F3> 1,241,626
-----------
1,374,751
-----------
Total Common Stocks
(cost $65,788,852) 65,236,990
-----------
PRINCIPAL
AMOUNT
--------
SHORT-TERM INVESTMENTS 1.9%
(Variable Rate)
$1,266,557 UMB Bank Money Market Fiduciary 1,233,812
-----------
Total Short-Term Investments
(cost $1,233,812) 1,233,812
-----------
Total Investments 100.3%
(cost $67,022,664) 66,470,802
MICRO-CAP FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
VALUE
-----
Liabilities, less Cash
and Other Assets (0.3)% $ (199,148)
-----------
NET ASSETS 100.0% $66,271,654
===========
<F3> Non-income producing
See notes to financial statements.
AGGRESSIVE EQUITY FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS 97.1%
BUSINESS PRODUCTS 4.1%
173,750 American Business Information, Inc.<F4> $ 3,388,125
45,078 BMC West Corp.<F4> 518,397
540,950 Thompson PBE, Inc.<F4> 2,839,988
-----------
6,746,510
-----------
BUSINESS SERVICES 11.0%
59,400 Alternative Resources Corp.<F4> 898,424
100,000 Altron, Inc.<F4> 1,687,500
139,100 Barrett Business Services, Inc.<F4> 2,016,950
91,400 Data Processing Resources CP<F4> 1,713,750
185,500 F.Y.I., Inc.<F4> 3,825,938
55,975 Lason Holdings, Inc.<F4> 1,119,500
291,300 National Dentex Corp.<F4> 4,988,513
44,300 Sanmina Corp.<F4> 1,982,425
-----------
18,233,000
-----------
COMMUNICATIONS PRODUCTS 0.4%
78,100 Madge Networks, N.V.<F4> 678,494
-----------
COMPUTER PRODUCTS 0.8%
119,900 Interlink Computer Sciences, Inc.<F4> 1,273,937
-----------
COMPUTER SOFTWARE 7.3%
53,400 Aspen Technologies, Inc.<F4> 1,455,150
180,600 Deltek Systems, Inc.<F4> 1,602,825
72,700 Legato Systems, Inc.<F4> 1,217,725
121,000 Phoenix Technologies Ltd.<F4> 1,830,125
120,050 Synopsys, Inc.<F4> 3,001,250
146,400 Tecnomatix Technologies Ltd.<F4> 3,037,800
-----------
12,144,875
-----------
COMPUTER SYSTEMS & COMPONENTS 2.3%
108,400 Active Voice Corp.<F4> 1,111,100
71,000 American Power Conversion Corp.<F4> 1,535,375
AGGRESSIVE EQUITY FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
--------- -----
COMPUTER SYSTEMS & COMPONENTS 2.3% (CONT'D.)
24,300 Littelfuse, Inc.<F4> $ 1,123,875
-----------
3,770,350
-----------
HEALTH CARE PRODUCTS 3.8%
159,400 Molecular Devices Corp.<F4> 2,211,675
174,900 Techne Corp.<F4> 4,044,563
-----------
6,256,238
-----------
HEALTH CARE SERVICES 8.2%
189,050 Express Scripts, Inc., Class A<F4> 6,758,537
175,500 Gulf South Medical Supply, Inc.<F4> 3,400,313
7,250 HealthCor Holdings, Inc.<F4> 55,281
165,700 Home Health Corp. of America<F4> 1,636,288
61,400 National Surgery Centers, Inc.<F4> 1,780,600
-----------
13,631,019
-----------
PERSONAL PRODUCTS 4.6%
186,200 Franklin Quest Co.<F4> 3,933,475
58,300 Nu Skin Asia Pacific, Inc., Class A<F4> 1,406,488
148,049 Varsity Spirit Corp. 2,257,747
-----------
7,597,710
-----------
PERSONAL SERVICES 3.4%
34,500 Fortress Group, Inc. 194,063
53,500 Loewen Group, Inc. 1,705,313
70,000 Mail Boxes, Etc.<F4> 1,456,874
15,800 Renters Choice, Inc.<F4> 227,125
180,902 Seattle Filmworks, Inc.<F4> 1,989,922
-----------
5,573,297
-----------
REAL ESTATE 14.6%
415,500 National Health Investors, Inc. REIT 15,425,438
163,525 Oasis Residential, Inc. REIT 3,679,313
43,950 Redwood Trust, Inc. REIT 2,032,687
232,650 Sunstone Hotel Investors, Inc. REIT 3,053,531
-----------
24,190,969
-----------
AGGRESSIVE EQUITY FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
--------- -----
RETAIL 16.5%
66,850 Buckle, Inc. (The)<F4> $ 1,788,237
130,000 Fine Host Corp.<F4> 3,055,000
132,000 Friedman's, Inc.<F4> 2,095,500
425,500 General Nutrition Cos., Inc.<F4> 8,616,375
63,150 K & G Men's Center, Inc.<F4> 1,689,263
87,900 Marks Bros. Jewelers, Inc.<F4> 1,032,825
194,650 O'Reilly Automotive, Inc.<F4> 7,153,387
42,350 St. John Knits, Inc. 1,831,638
-----------
27,262,225
-----------
SEMICONDUCTORS 5.2%
136,100 Micrel, Inc.<F4> 3,946,900
50,100 Microchip Technology, Inc.<F4> 1,503,000
52,600 Photronics, Inc.<F4> 1,545,125
93,500 SDL, Inc.<F4> 1,601,187
-----------
8,596,212
-----------
TELECOMMUNICATIONS 4.7%
10,190 Century Telephone Enterprises 300,590
185,150 Intercel, Inc.<F4> 1,851,500
142,000 REMEC, Inc.<F4> 3,053,000
100,590 United States Cellular Corp.<F4> 2,502,176
-----------
7,707,266
-----------
TRANSPORTATION 9.1%
261,900 Expeditors International of Washington, Inc. 6,285,600
209,900 OEA, Inc. 8,763,323
-----------
15,048,923
-----------
OTHER 1.1%
72,300 Cinar Films, Inc., Class B Sub VTG<F4> 1,771,350
-----------
Total Common Stocks
(cost $141,483,687) 160,482,375
-----------
AGGRESSIVE EQUITY FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
--------- -----
PREFERRED STOCK 0.0%
12,500 Digitran Systems, Inc.<F4> $ 1
-----------
Total Preferred Stock
(cost $95,729) 1
-----------
PRINCIPAL
AMOUNT
---------
CONVERTIBLE BONDS 2.3%
$1,304,000 National HealthCare L.P., 6.00%, 7/1/00 3,833,760
-----------
Total Convertible Bonds
(cost $2,503,680) 3,833,760
-----------
SHORT-TERM INVESTMENTS 0.9%
(Variable Rate)
1,794,899 UMB Bank Money Market Fiduciary 1,422,214
-----------
Total Short-Term Investments
(cost $1,422,214) 1,422,214
-----------
Total Investments 100.3%
(cost $145,505,310) 165,738,350
Liabilities, less Cash
and Other Assets (0.3)% (447,323)
-----------
NET ASSETS 100.0% $165,291,027
===========
<F4> Non-income producing
See notes to financial statements.
GROWTH FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS 94.8%
BUSINESS PRODUCTS 7.8%
89,000 Altron, Inc.<F5> $1,501,874
61,375 American Business Information, Inc.<F5> 1,196,813
201,823 BMC West Corp.<F5> 2,320,965
230,000 Thompson PBE, Inc.<F5> 1,207,500
-----------
6,227,152
-----------
BUSINESS SERVICES 3.5%
160,900 National Dentex Corp.<F5> 2,755,412
-----------
FINANCIAL SERVICES 5.5%
5,000 Franklin Savings Assn.<F5> 1
147,737 Washington Federal, Inc. 3,361,016
180,986 World Acceptance Corp.<F5> 1,018,046
-----------
4,379,063
-----------
HEALTH CARE PRODUCTS 1.9%
64,750 Techne Corp.<F5> 1,497,344
-----------
HEALTH CARE SERVICES 9.8%
102,925 Corvel Corp.<F5> 2,573,125
91,100 Express Scripts, Inc., Class A<F5> 3,256,825
206,506 Home Health Corp. of America<F5> 2,039,247
-----------
7,869,197
-----------
PERSONAL PRODUCTS 8.8%
42,400 Day Runner, Inc.<F5> 1,075,900
165,900 Franklin Quest Co.<F5> 3,504,638
160,200 Varsity Spirit Corp. 2,443,050
-----------
7,023,588
-----------
PERSONAL SERVICES 7.0%
63,500 Ambassadors International, Inc.<F5> 579,438
56,000 Mail Boxes, Etc.<F5> 1,165,500
269,100 Renters Choice, Inc.<F5> 3,868,312
-----------
5,613,250
-----------
GROWTH FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
NUMBER
OF SHARES VALUE
--------- -----
REAL ESTATE 18.4%
220,200 National Health Investors, Inc. REIT $ 8,174,925
22,000 Redwood Trust, Inc. REIT 1,017,500
420,800 Sunstone Hotel Investors, Inc. REIT 5,523,000
-----------
14,715,425
-----------
RETAIL 20.0%
29,373 Buckle, Inc. (The)<F5> 785,727
212,200 Friedman's, Inc.<F5> 3,368,675
266,200 General Nutrition Cos., Inc.<F5> 5,390,550
18,500 Marks Bros. Jewelers, Inc. 217,375
170,150 O'Reilly Automotive, Inc.<F5> 6,253,013
-----------
16,015,340
-----------
TELECOMMUNICATIONS 5.9%
80,138 Century Telephone Enterprises 2,364,056
62,200 Telephone and Data Systems, Inc. 2,386,925
-----------
4,750,981
-----------
TRANSPORTATION 6.2%
77,575 Expeditors International of Washington, Inc. 1,861,800
74,500 OEA, Inc. 3,110,375
-----------
4,972,175
-----------
Total Common Stocks
(cost $71,895,870) 75,818,927
-----------
GROWTH FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
--------- -----
CONVERTIBLE BONDS 3.4%
$ 917,000 National HealthCare L.P., 6.00%, 7/1/00 $ 2,695,979
-----------
Total Convertible Bonds
(cost $1,772,594) 2,695,979
-----------
WARRANTS 0.0%
1 Cherokee, Inc., Series C 1
-----------
Total Warrants
(cost $6) 1
-----------
SHORT-TERM INVESTMENTS 2.6%
(VARIABLE RATE)
2,071,180 UMB Bank Money Market Fiduciary 2,071,180
-----------
Total Short-Term Investments
(cost $2,071,180) 2,071,180
-----------
Total Investments 100.8%
(cost $75,739,650) 80,586,087
Liabilities, less Cash
and Other Assets (0.8)% (632,339)
-----------
NET ASSETS 100.0% $79,953,748
===========
<F5> Non-income producing
See notes to financial statements.
WASATCH-HOISINGTON U.S. TREASURY FUND SCHEDULE OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
--------- -----
U.S. GOVERNMENT OBLIGATIONS 95.9%
$3,750,000 U.S. Treasury Bond,
6.25%, 8/15/23 $ 3,327,375
1,800,000 U.S. Treasury Bond,
7.50%, 11/15/24 1,864,134
1,905,000 U.S. Treasury Bond,
6.875%, 8/15/25 1,832,553
2,050,000 U.S. Treasury Bond,
6.00%, 2/15/26 1,756,829
750,000 U.S. Treasury Bond,
6.75%, 8/15/26 711,525
1,055,000 U.S. Treasury Bond,
6.625%, 2/15/27 994,316
-----------
Total U.S. Government Obligations
(cost $10,846,332) 10,486,732
-----------
SHORT-TERM INVESTMENTS 2.7%
(Variable Rate)
292,603 UMB Bank Money Market Fiduciary 292,603
-----------
Total Short-Term Investments
(cost $292,603) 292,603
-----------
Total Investments 98.6%
(cost $11,138,935) 10,779,335
Cash and Other Assets,
less Liabilities 1.4% 151,916
-----------
NET ASSETS 100.0% $10,931,251
===========
See notes to financial statements.
This page intentionally left blank
WASATCH FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1997 (UNAUDITED)
MID-CAP MICRO-CAP
FUND FUND
- -------------------------------------------------------------------------------
ASSETS:
Investments, at market value
Nonaffiliated issuers (cost
$65,845,282, $67,022,664,
$132,582,956, $67,596,462 and
$11,138,935, respectively) $64,206,601 $66,470,802
Affiliated issuers (cost $0, $0,
$12,922,354, $8,143,188 and $0,
respectively) - -
Receivable for investment
securities sold 563,419 461,850
Receivable for fund shares sold - -
Interest and dividends receivable 21,544 5,082
Prepaid expenses and other assets 36,092 24,676
Receivable from adviser 7,424 3,063
----------- -----------
Total Assets 64,835,080 66,965,473
----------- -----------
LIABILITIES:
Payable for securities purchased 272,813 593,682
Payable to custodian 483,721 -
Accrued investment advisory fee 24,948 40,733
Accrued expenses 102,831 59,404
----------- -----------
Total Liabilities 884,313 693,819
----------- -----------
NET ASSETS $63,950,767 $66,271,654
=========== ===========
NET ASSETS CONSIST OF:
Capital stock $ 4,011 $ 23,414
Paid-in-capital in excess of par 61,580,743 63,799,213
Undistributed net investment income - -
Undistributed net realized
gain (loss) on investments 4,004,694 3,000,889
Net unrealized appreciation
(depreciation) on investments (1,638,681) (551,862)
----------- -----------
Net Assets $63,950,767 $66,271,654
=========== ===========
CAPITAL STOCK, $.001 PAR VALUE:
Authorized 100,000,000 100,000,000
Issued and outstanding 4,011,151 23,414,088
NET ASSET VALUE, REDEMPTION
PRICE AND OFFERING PRICE
PER SHARE $15.94 $2.83
====== ======
AGGRESSIVE U.S.
EQUITY GROWTH TREASURY
FUND FUND FUND
- -------------------------------------------------------------------------------
ASSETS:
Investments, at market value
Nonaffiliated issuers (cost
$65,845,282, $67,022,664,
$132,582,956, $67,596,462 and
$11,138,935, respectively) $155,652,103 $74,180,125 $10,779,335
Affiliated issuers (cost $0, $0,
$12,922,354, $8,143,188 and
$0, respectively) 10,086,247 6,405,962 -
Receivable for investment
securities sold 930,442 9,050 -
Receivable for fund shares sold - 9,154 -
Interest and dividends receivable 360,951 211,960 128,401
Prepaid expenses and other assets 64,446 65,835 21,930
Receivable from adviser 7,760 1,017 3,952
----------- ----------- -----------
Total Assets 167,101,949 80,883,103 10,933,618
----------- ----------- -----------
LIABILITIES:
Payable for securities purchased 1,605,134 857,666 -
Payable to custodian - - -
Accrued investment advisory fee 50,961 25,184 1,671
Accrued expenses 154,827 46,505 696
----------- ----------- -----------
Total Liabilities 1,810,922 929,355 2,367
----------- ----------- -----------
NET ASSETS $165,291,027 $79,953,748 $10,931,251
=========== =========== ===========
NET ASSETS CONSIST OF:
Capital stock $ 7,445 $ 4,718 $ 1,084
Paid-in-capital in excess
of par 130,738,643 69,726,683 11,207,731
Undistributed net investment income 17,897 135,227 149,001
Undistributed net realized
gain (loss) on investments 14,294,002 5,240,683 (66,965)
Net unrealized appreciation
(depreciation) on investments 20,233,040 4,846,437 (359,600)
----------- ----------- -----------
Net Assets $165,291,027 $79,953,748 $10,931,251
=========== ========== ==========
CAPITAL STOCK, $.001 PAR VALUE:
Authorized 100,000,000 100,000,000 100,000,000
Issued and outstanding 7,445,614 4,717,961 1,084,296
NET ASSET VALUE, REDEMPTION
PRICE AND OFFERING PRICE
PER SHARE $22.20 $16.95 $10.08
====== ====== ======
See notes to financial statements.
WASATCH FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
MID-CAP MICRO-CAP
FUND FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 13,198 $ 66,312
Dividends 89,589 224,664
----------- -----------
102,787 290,976
----------- -----------
EXPENSES:
Investment advisory fees 605,310 805,308
Shareholder servicing fees 194,203 154,179
Fund administration and accounting fees 72,798 60,550
Reports to shareholders 26,690 20,339
Federal and state registration fees 21,107 13,045
Custody fees 20,489 6,277
Legal fees 7,073 5,360
Audit fees 4,032 3,503
Directors' fees 1,456 1,069
Pricing fees 655 928
Other 3,752 2,344
----------- -----------
Total expenses before reimbursement 957,565 1,072,902
Reimbursement of expenses by adviser (110,130) (66,266)
----------- -----------
Net expenses 847,435 1,006,636
----------- -----------
NET INVESTMENT INCOME (LOSS) (744,648) (715,660)
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments 12,790,604 4,345,055
Change in unrealized
appreciation/depreciation
on investments (18,867,749) (6,984,974)
----------- -----------
Net gain (loss) on investments (6,077,145) (2,639,919)
----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS $(6,821,793) $(3,355,579)
=========== ===========
AGGRESSIVE U.S.
EQUITY GROWTH TREASURY
FUND FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 100,079 $ 169,153 $307,387
Dividends 1,049,783 868,117 -
----------- ----------- -----------
1,149,862 1,037,270 307,387
----------- ----------- -----------
EXPENSES:
Investment advisory fees 1,058,494 456,794 22,940
Shareholder servicing fees 326,104 111,402 7,961
Fund administration and accounting fees 159,160 68,700 6,904
Reports to shareholders 53,135 22,512 3,128
Federal and state registration fees 18,045 14,115 5,889
Custody fees 24,331 6,158 572
Legal fees 14,154 7,148 1,801
Audit fees 7,007 4,000 1,554
Directors' fees 2,908 1,203 93
Pricing fees 1,438 837 291
Other 7,611 2,752 544
----------- ----------- -----------
Total expenses before reimbursement 1,672,387 695,621 51,677
Reimbursement of expenses by adviser (84,645) (10,430) (17,268)
----------- ----------- -----------
Net expenses 1,587,742 685,191 34,409
----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) (437,880) 352,079 272,978
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments 20,212,948 7,683,233 -
Change in unrealized
appreciation/depreciation
on investments (23,739,488) (3,929,841) (331,764)
----------- ----------- -----------
Net gain (loss) on investments (3,526,540) 3,753,392 (331,764)
----------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS $ (3,964,420) $4,105,471 $ (58,786)
=========== =========== ===========
See notes to financial statements.
WASATCH FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
MID-CAP FUND
SIX MONTHS ENDED
MARCH 31, 1997 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (744,648) $ (1,893,457)
Net realized gain (loss) on
investments 12,790,604 (6,760,269)
Change in unrealized appreciation/
depreciation on investments (18,867,749) 5,203,852
------------ ------------
Net increase (decrease) in net
assets resulting from operations (6,821,793) (3,449,874)
------------ ------------
DIVIDENDS PAID FROM:
Net investment income - -
Net realized gains (15,376) (1,324,019)
------------ ------------
(15,376) (1,324,019)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 7,897,682 182,179,742
Shares issued to holders in
reinvestment of dividends 22 1,239,102
------------ ------------
7,897,704 183,418,844
Shares redeemed (65,600,098) (148,760,098)
------------ ------------
Net increase (decrease) (57,702,394) 34,658,746
------------ ------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS (64,539,563) 29,884,853
NET ASSETS:
Beginning of period 128,490,330 98,605,477
------------ ------------
End of period $ 63,950,767 $128,490,330
============ ============
Undistributed net investment income
included in net assets at end of
period $ - $ -
============ ============
<TABLE>
<CAPTION>
MICRO-CAP FUND AGGRESSIVE EQUITY FUND
SIX MONTHS ENDED SIX MONTHS ENDED
MARCH 31, 1997 YEAR ENDED MARCH 31, 1997 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1996 (UNAUDITED) SEPTEMBER 30, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (715,660) $ (1,003,558) $ (437,880) $ (1,849,271)
Net realized gain (loss) on
investments 4,345,055 5,035,561 20,212,948 10,202,825
Change in unrealized appreciation/
depreciation on investments (6,984,974) 4,725,256 (23,739,488) (13,631,797)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations (3,355,579) 8,757,259 (3,964,420) (5,278,243)
------------- ------------- ------------- -------------
DIVIDENDS PAID FROM:
Net investment income - - - -
Net realized gains (4,659,756) - (10,767,752) (6,568,893)
------------- ------------- ------------- -------------
(4,659,756) - (10,767,752) (6,568,893)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 16,346,790 98,979,879 20,794,695 67,968,096
Shares issued to holders in
reinvestment of dividends 12,806 - 9,338 6,096,326
------------- ------------- ------------- -------------
16,359,596 98,979,879 20,804,033 74,064,422
Shares redeemed (36,076,361) (39,101,525) (94,099,821) (114,209,328)
------------- ------------- ------------- -------------
Net increase (decrease) (19,716,765) 59,878,354 (73,295,788) (40,144,906)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS (27,732,100) 68,635,613 (88,027,960) (51,992,042)
NET ASSETS:
Beginning of period 94,003,754 25,368,141 253,318,987 305,311,029
------------- ------------- ------------- -------------
End of period $66,271,654 $94,003,754 $165,291,027 $253,318,987
============= ============= ============= =============
Undistributed net investment income
included in net assets at end of
period $ - $ - $ 17,897 $ -
============= ============= ============= =============
</TABLE>
See notes to financial statements.
WASATCH FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
GROWTH FUND
SIX MONTHS ENDED
MARCH 31, 1997 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1996
- -------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 352,079 $ 339,182
Net realized gain (loss) on
investments 7,683,233 4,300,860
Change in unrealized appreciation/
depreciation on investments (3,929,841) 2,666,547
----------- ------------
Net increase (decrease) in net assets
resulting from operations 4,105,471 7,306,589
----------- ------------
DIVIDENDS PAID FROM:
Net investment income (342,212) (190,396)
Net realized gains (6,352,177) (1,105,143)
----------- ------------
(6,694,389) (1,295,539)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 27,596,339 97,935,584
Shares issued to holders in
reinvestment of dividends 31,050 1,219,162
----------- ------------
27,627,389 99,154,746
Shares redeemed (49,321,365) (54,462,619)
----------- ------------
Net increase (decrease) (21,693,976) 44,692,127
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (24,282,894) 50,703,177
NET ASSETS:
Beginning of period 104,236,642 53,533,465
----------- ------------
End of period $ 79,953,748 $104,236,642
=========== ============
Undistributed net investment income
included in net assets at end of
period $ 135,227 $ 204,038
=========== ============
U.S. TREASURY FUND
SIX MONTHS ENDED
MARCH 31, 1997 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1996
- -------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 272,978 $ 290,023
Net realized gain (loss) on
investments - 19,162
Change in unrealized appreciation/
depreciation on investments (331,764) (67,058)
----------- ------------
Net increase (decrease) in net assets
resulting from operations (58,786) 242,127
----------- ------------
DIVIDENDS PAID FROM:
Net investment income (194,394) (371,160)
Net realized gains - -
----------- ------------
(194,394) (371,160)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 5,407,474 5,609,929
Shares issued to holders in
reinvestment of dividends 1,334 359,319
----------- ------------
5,408,808 5,969,248
Shares redeemed (1,651,261) (2,448,554)
----------- ------------
Net increase (decrease) 3,757,547 3,520,694
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,504,367 3,391,661
NET ASSETS:
Beginning of period 7,426,884 4,035,223
----------- ------------
End of period $10,931,251 $7,426,884
=========== ============
Undistributed net investment income
included in net assets at end of
period $ 149,001 $ 70,417
=========== ============
See notes to financial statements.
WASATCH FUNDS
FINANCIAL HIGHLIGHTS
MID-CAP FUND
SIX MONTHS ENDED
MARCH 31, 1997 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1996 1995 1994
- -------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $17.95 $18.61 $11.02 $10.51
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (loss) (0.19) (0.26) (0.02) (0.27)
Net realized and unrealized
gains (losses) on securities (1.82) (0.21) 7.64 0.78
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS (2.01) (0.47) 7.62 0.51
LESS DISTRIBUTIONS:
Distributions from capital gains - (0.19) (0.03) -
------- ------- ------- -------
TOTAL DISTRIBUTIONS - (0.19) (0.03) -
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $15.94 $17.95 $18.61 $11.02
====== ====== ====== ======
TOTAL RETURN<F2> (11.18)% (2.54)% 69.24% 4.85%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $63,951 $128,490 $98,605 $1,091
Ratio of expenses to average
net assets<F3> 1.75% 1.75% 1.75% 1.75%
Ratio of net income (loss)
to average net assets<F3> (1.54)% (1.27)% (0.71)% (1.19)%
Portfolio turnover rate 40% 121% 46% 213%
Average commission rate paid
on portfolio investment
transactions<F4> $0.05 $0.05 N/A N/A
MID-CAP FUND
AUGUST 16,
1992 <F1><F2>
YEAR ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1993 1992
- -------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.93 $10.00
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (loss) (0.07) -
Net realized and unrealized
gains (losses) on securities 0.65 (0.07)
------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.58 (0.07)
LESS DISTRIBUTIONS:
Distributions from capital gains - -
------ ------
TOTAL DISTRIBUTIONS - -
------ ------
NET ASSET VALUE, END OF PERIOD $10.51 $ 9.93
====== ======
TOTAL RETURN<F2> 5.85% (0.70)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $2,451 $148
Ratio of expenses to average
net assets<F3> 1.74% 1.56%
Ratio of net income (loss) to average
net assets<F3> (0.86)% (0.38)%
Portfolio turnover rate 113% 40%
Average commission rate paid on portfolio
investment transactions<F4> N/A N/A
<F1> Commencement of operations.
<F2> Not annualized for periods less than a year.
<F3> Net of reimbursements by adviser. Absent reimbursement of expenses by
adviser, the ratio of expenses to average net assets would be 1.98%,
1.81%, 1.94%, 3.33%, 2.69% and 7.65%, respectively, and the ratio of net
income (loss) to average net assets would be (1.77)%, (1.33)%, (0.90)%,
(2.76)%, (1.81)% and (6.47)%, respectively.
<F4> Disclosure required by the Securities and Exchange Commission beginning
1996.
See notes to financial statements.
WASATCH FUNDS
FINANCIAL HIGHLIGHTS
MICRO-CAP FUND
SIX MONTHS JUNE 19,
ENDED YEAR 1995<F1>
MARCH 31, ENDED THROUGH
1997 SEPT. 30, SEPT. 30,
(UNAUDITED) 1996 1995
- -------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $3.15 $2.72 $2.00
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (loss) (0.03) (0.03) -
Net realized and unrealized
gains (losses) on securities (0.11) 0.46 0.72
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.14) 0.43 0.72
LESS DISTRIBUTIONS:
Dividends from net investment
income - - -
Distributions from capital gains (0.18) - -
------ ------ ------
TOTAL DISTRIBUTIONS (0.18) - -
------ ------ ------
NET ASSET VALUE, END OF PERIOD $2.83 $3.15 $2.72
===== ===== =====
TOTAL RETURN<F2> (4.63)% 15.81% 36.00%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $66,272 $94,004 $25,368
Ratio of expenses to average
net assets<F3> 2.50% 2.50% 2.50%
Ratio of net income (loss)
to average
net assets<F3> (1.78)% (1.53)% (0.76)%
Portfolio turnover rate 39% 84% 0%
Average commission rate paid
on portfolio investment
transactions<F4> $0.05 $0.04 N/A
<F1> Commencement of operations.
<F2> Not annualized for periods less than a year.
<F3> Net of reimbursements by adviser. Absent reimbursement of expenses by
adviser, the ratio of expenses to average net assets would be 2.67%,
2.67% and 3.40%, respectively, and the ratio of net income (loss) to
average net assets would be (1.94)%, (1.70)% and (1.66)%, respectively.
<F4> Disclosure required by the Securities and Exchange Commission beginning
1996.
See notes to financial statements.
This page intentionally left blank
<TABLE>
WASATCH FUNDS
FINANCIAL HIGHLIGHTS
<CAPTION>
AGGRESSIVE EQUITY FUND
SIX MONTHS ENDED
MARCH 31, 1997 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $24.17 $25.00 $19.96 $19.75
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (loss) (0.06) (0.18) (0.04) (0.02)
Net realized and unrealized
gains (losses) on securities (0.69) (0.11) 6.59 1.33
-------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS (0.75) (0.29) 6.55 1.31
LESS DISTRIBUTIONS:
Dividends from net investment income - - - -
Distributions from capital gains (1.22) (0.54) (1.51) (1.10)
-------- -------- -------- --------
TOTAL DISTRIBUTIONS (1.22) (0.54) (1.51) (1.10)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $22.20 $24.17 $25.00 $19.96
======== ======== ======== ========
TOTAL RETURN<F1> (3.44)% (1.09)% 35.19% 6.85%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $165,291 $253,319 $305,311 $46,369
Ratio of expenses to average net assets<F2> 1.50% 1.50% 1.47% 1.50%
Ratio of net income (loss) to average
net assets<F2> (0.41)% (0.65)% (0.37)% (0.67)%
Portfolio turnover rate 26% 73% 29% 64%
Average commission rate paid on portfolio
investment transactions<F3> $0.05 $0.05 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE EQUITY FUND
YEAR ENDED SEPTEMBER 30,
1993 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $15.23 $16.42 $ 9.77 $10.92 $ 9.07 $11.76
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (loss) (0.09) (0.03) (0.04) 0.01 (0.01) 0.03
Net realized and unrealized
gains (losses) on securities 5.4 (0.26) 6.69 (1.16) 1.91 (1.66)
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 5.31 (0.29) 6.65 (1.15) 1.90 (1.63)
LESS DISTRIBUTIONS:
Dividends from net investment income - - - - (0.05) (0.01)
Distributions from capital gains (0.79) (0.90) - - - (1.05)
------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.79) (0.90) - - (0.05) (1.06)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $19.75 $15.23 $16.42 $ 9.77 $10.92 $ 9.07
======= ======= ======= ======= ======= =======
TOTAL RETURN<F1> 35.73% (2.30)% 68.07% (10.53)% 21.09% (13.17)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $23,293 $12,542 $7,588 $2,767 $1,191 $833
Ratio of expenses to average net assets<F2> 1.50% 1.51% 1.51% 1.56% 1.50% 1.50%
Ratio of net income (loss) to average
net assets<F2> (0.77)% (0.41)% (0.36)% 0.08% (0.12)% 0.30%
Portfolio turnover rate 70% 32% 41% 74% 82% 71%
Average commission rate paid on portfolio
investment transactions<F3> N/A N/A N/A N/A N/A N/A
<FN>
<F1> Not annualized for periods less than a year.
<F2> Net of reimbursements by adviser. Absent reimbursement of expenses by adviser, except for the years ended September 30, 1996
and 1995 where there were no reimbursements, the ratio of expenses to average net assets for the six months ending March 31,
1997 and the years ending September 30, 1994 through September 30, 1988 would be 1.58%, 1.52%, 1.64%, 1.69%, 1.67%, 1.75%,
1.91% and 2.30% respectively, and the ratio of net income (loss) to average net assets would be (0.49)%, (0.69)%, (0.92)%,
(0.59)%, (0.52)%, (0.27)%, (0.55)% and (0.22)%, respectively.
<F3> Disclosure required by the Securities and Exchange Commission beginning 1996.
See notes to financial statements.
</TABLE>
<TABLE>
WASATCH FUNDS
FINANCIAL HIGHLIGHTS
<CAPTION>
GROWTH FUND
SIX MONTHS ENDED
MARCH 31, 1997 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $17.57 $15.97 $15.30 $15.68
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (loss) 0.08 0.07 0.02 (0.14)
Net realized and unrealized
gains (losses) on securities 0.68 1.87 4.59 0.71
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.76 1.94 4.61 0.57
LESS DISTRIBUTIONS:
Dividends from net investment income (0.07) (0.05) - -
Distributions from capital gains (1.31) (0.29) (3.94) (0.95)
------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.38) (0.34) (3.94) (0.95)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $16.95 $17.57 $15.97 $15.30
====== ====== ====== ======
TOTAL RETURN<F1> 4.22% 12.39% 39.76% 3.75%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $79,954 $104,237 $53,533 $11,219
Ratio of expenses to average net assets<F2> 1.50% 1.50% 1.50% 1.50%
Ratio of net income (loss) to average
net assets<F2> 0.77% 0.40% 0.29% (0.51)%
Portfolio turnover rate 30% 62% 88% 163%
Average commission rate paid on portfolio
investment transactions<F3> $0.05 $0.05 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
GROWTH FUND
YEAR ENDED SEPTEMBER 30,
1993 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $13.64 $15.01 $10.73 $11.39 $ 9.48 $11.47
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (loss) (0.08) (0.02) 0.08 0.10 0.13 0.10
Net realized and unrealized
gains (losses) on securities 3.21 (0.45) 5.16 (0.65) 1.89 (1.67)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 3.13 (0.47) 5.24 (0.55) 2.02 (1.57)
LESS DISTRIBUTIONS:
Dividends from net investment income - (0.04) (0.16) (0.11) (0.11) (0.02)
Distributions from capital gains (1.09) (0.86) (0.80) - - (0.40)
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.09) (0.90) (0.96) (0.11) (0.11) (0.42)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.68 $13.64 $15.01 $10.73 $11.39 $ 9.48
====== ====== ====== ====== ====== ======
TOTAL RETURN<F1> 23.57% (3.61)% 51.90% (4.82)% 21.60% (13.39)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $17,619 $14,243 $11,651 $4,574 $3,378 $2,605
Ratio of expenses to average net assets<F2> 1.50% 1.49% 1.51% 1.87% 1.50% 1.50%
Ratio of net income (loss) to average
net assets<F2> (0.55)% 0.15% 0.51% 1.45% 1.37% 1.21%
Portfolio turnover rate 104% 40% 37% 69% 63% 88%
Average commission rate paid on portfolio
investment transactions<F3> N/A N/A N/A N/A N/A N/A
<FN>
<F1> Not annualized for periods less than a year.
<F2> Net of reimbursements by adviser. Absent reimbursement of expenses by adviser, the ratio of expenses to average net assets
would be 1.52%, 1.51%, 1.58%, 1.64%, 1.67%, 1.66%, 2.02%, 1.89% and 1.91%, respectively, and the ratio of net income (loss)
to average net assets would be 0.75%, 0.39%, 0.21%, (0.64)%, (0.66)%, (0.03)%, 0.36%, 1.29%, 0.96% and 0.80%, respectively.
<F3> Disclosure required by the Securities and Exchange Commission beginning 1996.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
WASATCH FUNDS
FINANCIAL HIGHLIGHTS
U.S. TREASURY FUND
SIX MONTHS ENDED
MARCH 31, 1997 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.21 $10.50 $10.09 $10.42
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (loss) 0.27 0.44 0.56 0.55
Net realized and unrealized
gains (losses) on securities (0.17) 0.01 0.44 (0.40)
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.45 1.00 0.15
LESS DISTRIBUTIONS:
Dividends from net investment income (0.23) (0.74) (0.59) (0.46)
Distributions from capital gains - - - (0.02)
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.23) (0.74) (0.59) (0.48)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.08 $10.21 $10.50 $10.09
====== ====== ====== ======
TOTAL RETURN<F1> 0.83% 4.42% 10.46% 1.51%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $10,931 $7,427 $4,035 $3,250
Ratio of expenses to average net assets<F2> 0.75% 0.93% 1.00% 1.00%
Ratio of net income (loss) to average
net assets<F2> 5.95% 5.21% 5.88% 5.15%
Portfolio turnover rate 0% 30% 43% 45%
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY FUND
YEAR ENDED SEPTEMBER 30,
1993 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.17 $11.14 $10.13 $10.61 $10.64 $10.19
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (loss) 0.55 (0.03) 0.58 0.69 1.25 0.81
Net realized and unrealized
gains (losses) on securities (0.17) 0.94 1.24 (0.19) (0.06) 0.25
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.38 0.91 1.82 0.50 1.19 1.06
LESS DISTRIBUTIONS:
Dividends from net investment income (0.53) (0.56) (0.81) (0.69) (1.22) (0.61)
Distributions from capital gains (0.60) (0.32) - (0.29) - -
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.13) (0.88) (0.81) (0.98) (1.22) (0.61)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.42 $11.17 $11.14 $10.13 $10.61 $10.64
====== ====== ====== ====== ====== ======
TOTAL RETURN<F1> 3.80% 8.44% 18.74% 4.87% 12.50% 10.84%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $3,748 $5,234 $3,540 $1,771 $1,119 $816
Ratio of expenses to average net assets<F2> 1.00% 1.00% 1.01% 1.32% 0.99% 0.95%
Ratio of net income (loss) to average
net assets<F2> 4.60% 4.90% 6.79% 10.00% 8.25% 8.47%
Portfolio turnover rate 46% 95% 66% 71% 29% 30%
<FN>
<F1> Not annualized for periods less than a year.
<F2> Net of reimbursements by adviser. Absent reimbursement of expenses by adviser, the ratio of expenses to average net assets
would be 1.13%, 1.67%, 1.59%, 1.39%, 1.35%, 1.20%, 1.20%, 1.57%, 1.42% and 1.35% respectively, and the ratio of net income
(loss) to average net assets would be 5.57%, 4.47%, 5.29%, 4.76%, 4.24%, 4.71%, 6.59%, 9.75%, 7.82% and 8.06%, respectively.
See notes to financial statements.
</TABLE>
WASATCH FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 (UNAUDITED)
1. ORGANIZATION
Wasatch Funds, Inc., formerly 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 Mid-Cap, Micro-Cap and Aggressive Equity Funds are non-
diversified portfolios and the Growth and Wasatch-Hoisington U.S. Treasury
("U.S. Treasury") Funds are diversified portfolios of Wasatch Funds, Inc. The
Aggressive Equity Fund, Growth Fund and Wasatch-Hoisington U.S. Treasury 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 Mid-Cap, Micro-Cap, Aggressive Equity, Growth, and Wasatch-Hoisington U.S.
Treasury Funds (the "Funds") have entered into an investment advisory
agreement with Wasatch Advisors, Inc. (the "Manager") as investment adviser.
Wasatch 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 (U.S. Treasury
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.
WASATCH FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 (UNAUDITED)
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.
E) USE OF MANAGEMENT ESTIMATES-The preparation of financial statements in
conformity with generally accepted accounting principles requires that
Management make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. The reported amounts of
revenues and expenses during the reporting period may also be affected by the
estimates and assumptions management is required to make. Actual results may
differ from those estimates.
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
March 31, 1997, reclassifications were recorded to increase (decrease)
undistributed net investment income by $744,648, $715,660, $455,777 and
($78,678) and increase (decrease) undistributed net realized gain on investments
by ($744,648), ($715,660), ($455,777) and $78,678; for the Mid-Cap, Micro-Cap,
Aggressive Equity and Growth Funds, respectively.
<TABLE>
4. CAPITAL STOCK
Transactions in shares of capital stock were as follows:
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1997
AGGRESSIVE U.S.
MID-CAP MICRO-CAP EQUITY GROWTH TREASURY
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Shares sold 432,805 5,386,396 877,597 1,601,932 514,610
Dividends
reinvested 1 4,341 400 1,844 126
Shares redeemed (3,580,046) (11,793,816) (3,912,084) (2,819,249) (158,042)
----------- ------------ ----------- ----------- ---------
Net increase (decrease) (3,147,240) (6,403,079) (3,034,087) (1,215,473) 356,694
=========== ============ =========== =========== =========
</TABLE>
<TABLE>
WASATCH FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 (UNAUDITED)
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996
AGGRESSIVE U.S.
MID-CAP MICRO-CAP EQUITY GROWTH TREASURY
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Shares sold 10,158,198 33,670,987 2,799,772 5,814,862 547,955
Dividends
reinvested 68,459 - 257,555 76,725 35,305
Shares redeemed (8,365,863) (13,187,618) (4,789,910) (3,309,665) (239,816)
----------- ------------ ----------- ----------- ---------
Net increase (decrease) 1,860,794 20,483,369 (1,732,583) 2,581,922 343,444
=========== ============ =========== =========== =========
</TABLE>
<TABLE>
5. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding U.S. government and
short-term securities, for the six months ended March 31, 1997 are summarized below:
<CAPTION>
AGGRESSIVE U.S.
MID-CAP MICRO-CAP EQUITY GROWTH TREASURY
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Purchases $37,871,487 $30,252,012 $53,556,532 $25,654,600 -
Sales 92,878,709 47,334,642 128,633,374 48,108,860 -
</TABLE>
<TABLE>
The only purchases and sales of U.S. government securities occurred in the U.S. Treasury Fund and were $3,759,822 and $0,
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 Mid-Cap and U.S. Treasury Funds' basis in investments is the same for income tax and financial
reporting purposes. The Micro-Cap, Aggressive Equity and Growth Funds' tax basis in their investments is $67,299,816, $146,246,039
and $76,009,468, respectively. At September 30, 1996, the U.S. Treasury Fund had an accumulated net realized capital loss carryover
of $31,182 and $35,783 expiring in 2002 and 2003, respectively. To the extent the U.S. Treasury Fund realizes future net capital
gains, taxable distributions to its shareholders will be offset by any unused capital loss carryover.
WASATCH FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 (UNAUDITED)
As of March 31, 1997, gross unrealized appreciation and (depreciation) for federal income tax purposes were as follows:
<CAPTION>
AGGRESSIVE U.S.
MID-CAP MICRO-CAP EQUITY GROWTH TREASURY
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Unrealized
appreciation $ 7,788,470 $8,583,872 $31,893,341 $10,269,335 -
Unrealized
depreciation (9,427,151) (9,412,886) (12,401,030) (5,692,716) $(359,600)
----------- ------------ ----------- ----------- ---------
Net unrealized
appreciation
(depreciation) $(1,638,681) $ (829,014) $19,492,311 $ 4,576,619 $(359,600)
=========== ============ =========== =========== =========
</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. For the six months ended
March 31, 1997, management fees for the Mid-Cap, Micro-Cap, Aggressive Equity,
Growth and U.S. Treasury Funds were 1.25%, 2.0%, 1.0%, 1.0% 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 1.75%
of the net assets of the Mid-Cap Fund, 2.5% of the net assets of the Micro-Cap
Fund, 1.5% of the net assets of the Aggressive Equity and Growth Funds and 0.75%
of the net assets of the U.S. Treasury Fund computed on a daily basis. For the
six months ended March 31, 1997, the Manager reimbursed $110,130 for the Mid-Cap
Fund, $66,266 for the Micro-Cap Fund, $84,645 for the Aggressive Equity Fund,
$10,430 for the Growth Fund and $17,268 for the U.S. Treasury Fund.
WASATCH FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 (UNAUDITED)
7. TRANSACTIONS WITH AFFILIATES
The following is an analysis of transactions for the six months ended March
31, 1997 in the Aggressive Equity and Growth Funds with "affiliated companies"
as defined by the Investment Company Act of 1940:
<TABLE>
AGGRESSIVE EQUITY FUND
<CAPTION>
AMOUNT OF
AMOUNT OF GAIN (LOSS)
DIVIDENDS REALIZED ON
CREDITED TO SALE OF
SHARE ACTIVITY INCOME FOR THE SHARES FOR THE
--------------------------------------------------- SIX MONTHS SIX MONTHS
BALANCE BALANCE ENDED ENDED
SECURITY NAME 9/30/96 PURCHASES SALES 3/31/97 3/31/97 3/31/97
- -------------- ------- ---------- ----- -------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
National Dentex
Corp. 228,000 63,300 - 291,300 - -
Thompson PBE, Inc. 660,950 - 120,000 540,950 - $(1,000,913)
Varsity Spirit Corp. 194,824 - 46,775 148,049 $17,586 6,114
</TABLE>
<TABLE>
GROWTH FUND
<CAPTION>
AMOUNT OF
AMOUNT OF GAIN (LOSS)
DIVIDENDS REALIZED ON
CREDITED TO SALE OF
SHARE ACTIVITY INCOME FOR THE SHARES FOR THE
--------------------------------------------------- SIX MONTHS SIX MONTHS
BALANCE BALANCE ENDED ENDED
SECURITY NAME 9/30/96 PURCHASES SALES 3/31/97 3/31/97 3/31/97
- -------------- ------- ---------- ----- -------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
National Dentex
Corp. 126,700 34,200 - 160,900 - -
Thompson PBE, Inc. 240,000 - 10,000 230,000 - $(38,750)
Varsity Spirit Corp. 110,200 50,000 - 160,200 $10,469 -
</TABLE>
