TABLE OF CONTENTS
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LETTER FROM THE INVESTMENT ADVISOR....................................... 1
Wasatch Equity Funds .................................................. 2
Wasatch-Hoisington U.S. Treasury Fund ................................. 2
MICRO-CAP FUND PORTFOLIO SUMMARY......................................... 4
Review of the Year .................................................... 4
Average Annual Total Returns & Growth of a $10,000 Investment ......... 5
Ten Largest Holdings, Asset Allocation & Sector Breakdown ............. 6
MICRO-CAP VALUE FUND PORTFOLIO SUMMARY................................... 7
Review of the Year .................................................... 7
Average Annual Total Returns & Growth of a $10,000 Investment ......... 8
Ten Largest Holdings, Asset Allocation & Sector Breakdown ............. 9
AGGRESSIVE EQUITY FUND PORTFOLIO SUMMARY................................ 10
Review of the Year ................................................... 10
Average Annual Total Returns & Growth of a $10,000 Investment ........ 11
Ten Largest Holdings, Asset Allocation & Sector Breakdown ............ 12
GROWTH FUND PORTFOLIO SUMMARY........................................... 13
Review of the Year ................................................... 13
Average Annual Total Returns & Growth of a $10,000 Investment ........ 14
Ten Largest Holdings, Asset Allocation & Sector Breakdown ............ 15
MID-CAP FUND PORTFOLIO SUMMARY.......................................... 16
Review of the Year ................................................... 16
Average Annual Total Returns & Growth of a $10,000 Investment ........ 17
Ten Largest Holdings, Asset Allocation & Sector Breakdown ............ 18
WASATCH-HOISINGTON U.S. TREASURY FUND PORTFOLIO SUMMARY................. 19
Review of the Year ................................................... 19
Average Annual Total Returns & Growth of a $10,000 Investment ........ 20
Holdings/Maturity Date & Asset Allocation ............................ 21
SCHEDULE OF INVESTMENTS................................................. 22
STATEMENTS OF ASSETS AND LIABILITIES.................................... 40
STATEMENTS OF OPERATIONS................................................ 42
STATEMENTS OF CHANGES IN NET ASSETS..................................... 44
FINANCIAL HIGHLIGHTS.................................................... 48
NOTES TO FINANCIAL STATEMENTS........................................... 54
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS................................ 59
GUIDE TO UNDERSTANDING FINANCIAL STATEMENTS............................. 60
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(logo)
WASATCH FUNDS, INC.
150 Social Hall Avenue
Salt Lake City, UT 84111
1 (800) 551-1700
LETTER FROM THE INVESTMENT ADVISOR
SEPTEMBER 30, 1998
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DEAR SHAREHOLDERS:
- ------------------
The year ended September 30, 1998 was a turbulent time for stock market
investors. From a record high of 9,338 on July 17th, the Dow Jones Industrial
Average declined nearly 16% to 7,842 on September 30th. The Dow was not alone in
its retreat. During this same time period the S&P 500 Index fell nearly 14%, the
Nasdaq Composite Index nearly 16%, and the Russell 2000 Index, a widely
recognized barometer for the performance of small company stocks, plummeted over
21%, creating one of the steepest declines in market history.
We believe that beneath all this turmoil there is some great news for small
company stock investors and particularly those invested in Wasatch Funds. Small
company stocks are cheaper today (relative to large company stocks) than they
have been in the last 25 years. The earnings growth of small companies remains
solidly stronger than that of large companies. With small company stock prices
at historical lows and company fundamentals sound, we believe that an
environment is being created that could lead to a major change in market
leadership. History has taught us that small company stocks outperform large
company stocks in cycles. Over the last several years large company stocks have
outperformed. We believe this is about to change.
At Wasatch, we think small company stocks like those we invest in should be
part of every long-term investment portfolio. Over the long-run they have
produced higher returns than other asset classes such as large company stocks,
bonds or money market instruments. We believe this is because over the long-term
earnings growth drives stock prices. Small companies can increase their
earnings-per-share faster and for longer periods than large companies. However,
investing in small companies involves more risk and their prices are more
volatile. Deciding how much of your portfolio should be invested in small
company stocks needs to be based on your goals, time horizon and risk tolerance.
While the past 12 months have been hard on the Wasatch Equity Funds,
shareholders of the Wasatch-Hoisington U.S. Treasury Fund enjoyed an exceptional
one year return of 24.3%. The Fund's investments in 30-year Treasury
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bonds benefited from declining interest rates and a stable, though slowing,
economy.
WASATCH EQUITY FUNDS
- --------------------
Small company stocks continued to underperform large company stocks this
year. When small company stocks underperformed in the past, investors have had a
hard time believing they would ever bounce back. While we cannot attempt to
predict the future, we can point to two recent examples where underperformance
was followed by a sudden turnaround in small company stock prices that resulted
in periods of significant outperformance.
From a low point in December 1978 to a high in June 1982, the average returns
of the Russell 2000 Index exceeded those of the S&P 500 Index by 8% annually. In
December 1990, the outlook was bleak for small company stocks, but that turned
out to be the end of the underperformance. From then until March 1993, the
Russell 2000 outperformed the S&P 500 again by an average annual rate of 8%.
We feel strongly that in the current market environment investors have been
running to two extremes. The first is the willingness to pay premium prices for
large company stocks even in the face of slowing earnings growth. We think
liquidity needs have overridden the fact that earnings growth drives stock
prices in the long-term. The second is the abandonment of small company stocks.
Investors in this risk averse, liquidity driven market have favored large
company stocks to the exclusion of other asset classes. We believe that when
fundamentals such as earnings growth and stock price begin to matter to these
investors, they will once again find small company stocks desirable and this
will be the catalyst for the next round of outperformance.
EQUITY FUNDS OUTLOOK
- --------------------
The global economic scene is still uncertain and its ultimate effect on the
U.S. economy remains to be seen. Global problems are the biggest threat to
domestic corporate profits, but we believe much of the potential economic
slowdown is already reflected in the prices of small company stocks. We believe
there is huge upside opportunity for small company investors once the fear
dissipates and investors begin to look ahead to the long-run outlook in the
U.S., which is positive, though always cyclical.
Current economic stability is reflected in the continued strong earnings
growth prospects of the small and mid-size companies in which the Wasatch Equity
Funds invest. Most of these companies do business primarily in the U.S. and have
little exposure to Asia or other parts of the world that have economic
difficulties.
Looking ahead, we believe the Wasatch Equity Funds are well-positioned for
small company stock prices to bounce back. Although they will always be subject
to wide fluctuations, we are confident that the Equity Funds have the potential
to contribute to your long-term wealth building efforts.
WASATCH-HOISINGTON U.S. TREASURY FUND
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The U.S. Treasury Fund seeks to provide a rate of return that exceeds the
rate of inflation over a business cycle by investing in U.S. Treasury
securities. The Fund invests in long-term Treasury bonds when the inflation rate
is declining to capture the capital gains opportunities afforded by these
securities. Contrarily, when the inflation rate is rising the assets are
switched into Treasury bills to avoid capital losses. We
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believe this approach will enhance the return to shareholders over a full
business cycle. A business cycle is measured from the start of an economic
recession through recovery and expansion and back to recession.
The past 12 months have been exceptional for the U.S. Treasury Fund. The Fund
returned 24.3% for the year ended September 30, 1998. This exemplary performance
has begun to receive attention from the investment community. The Fund was
awarded an "A," or top rating for the last one, three and five years based on
the data of Lipper Analytical Services, Inc., as published in the Wall Street
Journal, and has a five star rating with Morningstar. Lead Manager, Van R.
Hoisington, is profiled in the November 1998 issue of Smart Money magazine (page
66). In addition, the assets of the Fund have grown substantially, along with
the number of shareholders. From the end of March to the end of September,
assets jumped more than 3.5 times, from $18.5 million to a record $67.9 million.
Over the same time period the number of shareholders with active accounts
increased by nearly 25%.
U.S. TREASURY FUND OUTLOOK
- --------------------------
We believe the Fund's investments in long-term U.S. Treasury securities are
appropriate for the current economic environment of declining inflation and
interest rates. If conditions change and the trend appears to move toward higher
inflation and interest rates, we may invest the Fund's assets in U.S. Treasury
bills, or other short-dated Treasury securities.
The Fund is best-suited for long-term investors. Share prices may be subject
to wide fluctuations because of the sensitivity of 30-year Treasury bonds to
changes in interest rates.
WORTH NOTING
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The Aggressive Equity and Micro-Cap Funds temporarily reopened to new
investors on September 21, 1998. We intend to keep assets manageable and expect
to close the Aggressive Equity Fund when it reaches approximately $300 million
in assets. We intend to close the Micro-Cap Fund when it reaches approximately
$150 million in assets.
For an in-depth discussion of the performance of individual Wasatch Funds for
the year ended September 30, 1998, please see the portfolio summaries beginning
on page 4.
The current Prospectus contains more information about each Fund's objectives
and investment strategy. If you have any questions or comments regarding this
report or your investments, please call us at 1 (800) 551-1700.
Investing is inherently a bumpy road. Keeping in mind your long-term financial
goals, assessing your tolerance for volatility and creating an asset allocation
mix that you feel comfortable with can help you adhere to your chosen investment
course.
Wasatch is committed to long-term investing. We believe the Funds we offer
have the potential to make a positive contribution to your efforts to achieve
long-term financial objectives. We look forward to serving your investment needs
in the coming years. Thank you for your investment in Wasatch Funds.
Sincerely,
/s/Samuel S. Stewart, Jr.
Samuel S. Stewart, Jr.
Chairman of the Board
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WASATCH MICRO-CAP FUND-PORTFOLIO SUMMARY
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SEPTEMBER 30, 1998
(PHOTO)
ROBERT GARDINER, CFA-LEAD MANAGER
The Micro-Cap Fund invests the majority of its assets in companies with
market capitalizations of less than $200 million at the time of initial
purchase. We believe investments in these relatively tiny companies give the
Fund the potential for above average returns because they can increase earnings
faster and sustain earnings growth longer than larger companies. Liquidity
issues and wide stock price fluctuations typical of tiny companies make the
Micro-Cap Fund most suitable for long-term investors.
REVIEW OF THE YEAR
- ------------------
The Micro-Cap Fund reopened to new investors on September 21, 1998. We are
committed to keeping the asset size manageable and expect to close the Fund to
new investors when it once again reaches $150 million in assets.
As a result of investors' uncertainty about the global economic situation,
the stock prices of small- and micro-cap companies have been caught in a
downdraft for most of 1998. For the 12 months ended September 30, 1998, the
Micro-Cap Fund was down 8.8%. For the same period, the Russell 2000 Index, a
popular measure of the performance of small company stocks, was down
substantially more at 19%.
We attribute the Fund's outperformance of the Russell 2000 to the strong
earnings growth of companies that were handpicked by the Wasatch research team.
These companies were individually selected for solid growth potential of at
least three to five years using a bottom-up process of fundamental analysis.
One of the Fund's strategies is to attempt to invest before a company is
discovered by Wall Street analysts. The stock prices of three of the Fund's
largest holdings rose considerably when they were "discovered" and began
receiving favorable coverage. For the 12 months ended September 30, 1998, First
Cash, Inc., was up 47.6%; USANA, Inc., was up 20%; and Natural Alternatives
International, Inc. was up 55.6%.
Late in 1997 the Fund's technology holdings suffered when investors became
concerned over the economic downturn in Asia. Two companies, PCD Inc. and
Micrel, Inc., had their stock prices cut in half. PCD makes connectors for the
semiconductor, aerospace and industrial markets. The company's short-term
earnings outlook was affected when many customers delayed restocking their
inventories. Micrel, a maker of analog semiconductors for cellular phones and
laptop computers, reported strong earnings growth throughout the year. We
believe the long-term outlook is positive for both of these companies.
Throughout the year we used dips in
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WASATCH MICRO-CAP FUND-PORTFOLIO SUMMARY
- ----------------------------------------
the market to invest in high-quality companies at prices that were cheap by
historical standards. In addition, we put extra effort into making sure the
companies we invested in were growing well.
We believe that the micro-cap companies held by the Fund are capable of
delivering the growth we seek even in a more difficult economic environment.
OUTLOOK
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Looking ahead, we expect the average earnings growth to remain strong at 20%
or better.
No matter what the current market or economic environment may be, we will
strive to invest the Fund's assets in undiscovered micro-cap companies that, in
our opinion, have outstanding growth potential and are reasonably priced. We
believe this investment approach has the potential to help bring you closer to
attaining your long-term financial goals.
We believe the future is promising for the Micro-Cap Fund.
AVERAGE ANNUAL TOTAL RETURNS
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1 YEAR 5 YEARS SINCE INCEPTION<F1>
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WASATCH MICRO-CAP FUND -8.8% N/A 24.9%
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Past performance is not indicative of future results.
GROWTH OF A $10,000 INVESTMENT
------------------------------
Wasatch Micro-Cap Russell 2000
Fund Index
- ----------------------------------------------
6/19/95<F1> $10,000 $10,000
9/30/95 $13,600 $11,042
9/30/96 $15,750 $12,353
9/30/97 $22,771 $16,638
9/30/98 $20,779 $13,474
<F1> Inception: June 19, 1995.
The Russell 2000 Index is an unmanaged total return index of the smallest 2,000
companies in the Russell 3000 Index, as ranked by total market capitalization.
The Russell 2000 is widely regarded in the industry to accurately capture the
universe of small company stocks.
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WASATCH MICRO-CAP FUND-PORTFOLIO SUMMARY
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TEN LARGEST HOLDINGS
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1. TECHNE CORP. 5%
Disposable products for clinical
research labs and hospitals.
2. ICU MEDICAL, INC. 5%
Disposable connectors for
intravenous therapy.
3. FIRST CASH, INC. 5%
Pawnshop operator.
4. MICREL, INC. 5%
Analog semiconductors for cellular
phones and laptop computers.
5. SUPERTEX, INC. 4%
Semiconductor component
manufacturer.
6. NATIONAL DENTEX CORP. 4%
Dental laboratories.
7. USANA, INC. 4%
Direct sales of vitamins and
nutritional products.
8. MARKS BROS. JEWELERS, INC. 4%
Fine jewelry retailer.
9. MICROCHIP TECHNOLOGY, INC. 3%
Proprietary chip manufacturer.
10. CORVEL CORP. 3%
Case management and cost
containment services for workers'
compensation.
ASSET ALLOCATION
----------------
Common Stock 99.8%
Cash 0.2%
SECTOR BREAKDOWN
----------------
Health Care 26.4%
Personal 20.0%
Technology 18.7%
Business 16.2%
Retail 11.5%
Other 4.5%
Transportation 2.5%
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WASATCH MICRO-CAP VALUE FUND-PORTFOLIO SUMMARY
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SEPTEMBER 30, 1998
(PHOTO)
ROBERT GARDINER, JEFF CARDON-CO-MANAGERS
The Micro-Cap Value Fund is the newest member of the Wasatch family. The
Fund's investment objective is long-term growth of capital. The Micro-Cap Value
Fund seeks to achieve its objective through investments in companies with market
capitalizations of less than $300 million whose stocks are selling at a
substantial discount to the com pany's underlying value. The Fund is designed
for long-term investors who have assessed their tolerance for risk and
volatility. Wasatch intends to close the Fund when it reaches $200 million in
assets.
REVIEW SINCE INCEPTION
- ----------------------
From the Micro-Cap Value Fund's inception on December 17, 1997 to September
30, 1998, the Fund was down 10%. Over the same period the Russell 2000 Value
Index, a widely recognized barometer for the performance of value-oriented small
company stocks, was down 12%.
We believe the Fund's performance can largely be attributed to indiscriminate
price declines that affected the majority of small- and micro-cap stocks. We
believe price declines suffered by the Fund's holdings do not reflect negatively
on their potential for future price appreciation. For most companies, the
positive fundamentals on which we based our investment decisions are still
intact.
In its first year of operation the Fund had no trouble finding what we
believe are great values in micro-cap stocks.
The prevailing market conditions presented us with the unusual opportunity to
invest in many high-quality growth companies at "value" prices. The only thing
that had fallen was their stock price. Ordinarily, the stocks of growth
companies like RemedyTemp, Inc., a temporary staffing company, and Synopsys,
Inc., a maker of software for electronic design automation, would be too
expensive for the Micro-Cap Value Fund. These companies are currently reporting
strong earnings growth and we believe they have solid long-term earnings growth
prospects. At today's prices we believe these investments give the Fund
outstanding upside potential.
The Fund typically invests in growth companies that we call "fallen angels."
The earnings of these companies have temporarily gotten off track, but we expect
them to grow well in the future. World Accept ance Corp., a finance firm that
makes small loans to consumers, appears to have controlled a credit delinquency
problem. K&G Mens Center, Inc., a men's clothing retailer, was hurt by unusually
hot weather in the south, and they are working to resolve problems in a new
market. In the past year, stocks like these were practically given away.
Many of the Fund's holdings are undiscovered by Wall Street analysts.
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WASATCH MICRO-CAP VALUE FUND-PORTFOLIO SUMMARY
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Two excellent examples are ICU Medical, Inc. and SCP Pool Corpora tion.
ICUMedical's disposable connectors for intravenous therapy are becoming widely
used by health care professionals because they are designed to prevent
accidental needle sticks. SCP Pool, a swimming pool supply distributor, has
excellent opportunities to acquire independently-owned pool supply businesses.
We expect the stock prices of both these companies to appreciate once their
outstanding earnings growth potential is "discovered."
OUTLOOK
- -------
It is impossible to predict when the prices of small- and micro-cap stocks
will bounce back. Instead, we will continue to pursue the Fund's strategy of
investing in the stocks of undiscovered, undervalued companies that we believe
have significant potential for price appreciation.
We appreciate the confidence you have shown by investing in the Wasatch
Micro-Cap Value Fund in its first year.
AVERAGE ANNUAL TOTAL RETURNS
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1 YEAR 5 YEARS SINCE INCEPTION<F1>
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WASATCH MICRO-CAP VALUE FUND N/A N/A -10.0%
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Past performance is not indicative of future results.
GROWTH OF A $10,000 INVESTMENT
------------------------------
Wasatch Micro-Cap Russell 2000
Value Fund Value Index
- -----------------------------------------------
12/17/97 $10,000 $10,000
9/30/98 $9,000 $8,767
<F1>Inception: December 17, 1997.
The Russell 2000 Value Index is an unmanaged total return index that measures
the performance of those Russell 2000 companies with lower price-to-book ratios
and lower forecasted growth values.
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WASATCH MICRO-CAP VALUE FUND-PORTFOLIO SUMMARY
TEN LARGEST HOLDINGS
- --------------------
1. ICU MEDICAL, INC. 5%
Disposable connectors for
intravenous therapy.
2. FIRST CASH, INC. 5%
Pawnshop operator.
3. SUPERTEX, INC. 4%
Semiconductor component
manufacturer.
4. WORLD ACCEPTANCE CORP. 4%
Consumer lending.
5. MARKS BROS. JEWELERS, INC. 4%
Fine jewelry retailer.
6. NATIONAL DENTEX CORP. 3%
Dental laboratories.
7. SCP POOL CORPORATION 3%
Swimming pool supply distributor.
8. REMEDYTEMP, INC. 3%
Temporary staffing services.
9. RAINBOW RENTALS, INC. 2%
Rent-to-own store operator.
10. DAISYTEK INTERNATIONAL CORP. 2%
Office and computer supplies
distributor.
ASSET ALLOCATION
----------------
Common Stock 95.5%
Cash 4.5%
SECTOR BREAKDOWN
----------------
Personal 20.1%
Business 18.0%
Health Care 13.7%
Technology 11.9%
Retail 9.7%
Other 5.9%
Financial Services 5.6%
Transportation 5.4%
Builders/Materials 5.2%
Annual Report -----
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WASATCH AGGRESSIVE EQUITY FUND-PORTFOLIO SUMMARY
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SEPTEMBER 30, 1998
(PHOTO)
JEFF CARDON-LEAD MANAGER
The Aggressive Equity Fund invests in growing small companies. Investing in
this segment of the market has historically achieved higher returns for
investors but requires patience and a long time horizon because small company
stock prices are subject to wide fluctuations.
REVIEW OF THE YEAR
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The Aggressive Equity Fund reopened to new investors on September 21, 1998.
We are committed to keeping the asset size manageable and intend to close the
Fund to new investors when it reaches $300 million in assets.
Over the past 12 months stock prices trended sharply downward as investors
reacted to news of deteriorating global economic conditions. The Russell 2000
Index, a popular measure of the performance of small company stocks, and the
Aggressive Equity Fund were down 19% for the year ended September 30, 1998.
The stock prices of many companies held by the Fund have fallen to levels that
we believe do not accurately reflect the short- or long-run prospects of the
companies.
In general, the stock prices of companies that do business primarily in the
U.S. have fared better than those that do some business overseas.
Our research and discussions with corporate executives indicates that
business has been strong at the majority of companies in which the Fund invests.
For example, the potential economic slowdown did not affect O'Reilly
Automotive's earnings growth or its move into the Texas market. The stock price
of this automotive parts retailer/distributor rose 59% this year.
We have had very few disappointing earnings reports. One came from Microchip
Technology, Inc., a proprietary chip manufacturer. Late in 1997, the company
missed its earnings expectations and suffered a substantial stock price decline
when the economic situation in Asia caused a slowdown in demand for the
company's products. In 1998, the company's earnings have gotten back on track.
Other technology holdings experienced price declines despite reporting strong
earnings growth.
The average earnings growth for companies held by the Fund is currently
expected to be around 15% to 20%, far outpacing the projected earnings growth
for large companies.
One third of the companies held by the Fund have announced stock repurchase
programs. Among them are some of the Fund's largest holdings including Techne
Corp., National Health Investors, Inc., Microchip Technology, Inc., Synopsys,
Inc., General Nutrition Cos., Inc., RemedyTemp, Inc., and StaffMark, Inc.
These announcements send several powerful messages from management.
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WASATCH AGGRESSIVE EQUITY FUND-PORTFOLIO SUMMARY
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First, that their business outlook is positive. Second, that they believe their
stock is undervalued. And third, that they have the financial strength to buy
back their stock.
OUTLOOK
- -------
The Aggressive Equity Fund remains committed to investing in high-quality
small companies. We believe the Fund's investments have ample potential to
produce the earnings growth we seek. In addition, we are thrilled by the chance
to invest at exceptional prices. Given the outstanding long-run opportunity we
perceive in many small companies, we believe it is a great time to be invested
in small company stocks.
The economy will continue to be a major influence on large and small company
stock prices. We believe the Aggressive Equity Fund is favorably positioned for
stock price appreciation once small company stocks emerge from this period of
underperformance.
Thank you for your confidence in the Aggressive Equity Fund.
AVERAGE ANNUAL TOTAL RETURNS
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1 YEAR 5 YEARS 10 YEARS
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WASATCH AGGRESSIVE EQUITY FUND -19.1% 8.4% 13.7%
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Past performance is not indicative of future results.
GROWTH OF A $10,000 INVESTMENT
------------------------------
Wasatch Aggressive Russell 2000 S&P 500
Equity Fund Index Composite
- --------------------------------------------------------------
9/30/88 $10,000 $10,000 $10,000
9/30/89 $12,109 $12,149 $13,301
9/30/90 $10,834 $8,850 $12,071
9/30/91 $18,209 $12,841 $15,833
9/30/92 $17,789 $13,988 $17,583
9/30/93 $24,145 $18,626 $19,869
9/30/94 $25,800 $19,124 $20,601
9/30/95 $34,878 $23,593 $26,729
9/30/96 $34,496 $26,693 $32,164
9/30/97 $44,656 $35,552 $45,173
9/30/98 $36,112 $28,791 $49,259
The Russell 2000 Index is an unmanaged total return index of the smallest 2,000
companies in the Russell 3000 Index, as ranked by total market capitalization.
The Russell 2000 is widely regarded in the industry to accurately capture the
universe of small company stocks.
The S&P 500 Composite is an unmanaged but commonly used measure of common stock
total return performance.
Annual Report -----
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WASATCH AGGRESSIVE EQUITY FUND-PORTFOLIO SUMMARY
- ------------------------------------------------
TEN LARGEST HOLDINGS
- --------------------
1. TECHNE CORP. 5%
Disposable products for clinical
research labs and hospitals.
2. O'REILLY AUTOMOTIVE, INC. 5%
Automotive parts retailer/distributor.
3. NATIONAL HEALTH
INVESTORS, INC. 5%
Nursing home REIT.
4. MICROCHIP TECHNOLOGY, INC. 4%
Proprietary chip manufacturer.
5. SYNOPSYS, INC. 4%
Software solutions for electronic
design automation.
6. MICREL, INC. 4%
Analog semiconductors for cellular
phones and laptop computers.
7. DAISYTEK INTERNATIONAL CORP. 4%
Office and computer supplies
distributor.
8. NATIONAL DENTEX CORP. 4%
Dental laboratories.
9. CURATIVE HEALTH SERVICES, INC. 3%
Wound treatment services and
products.
10. F.Y.I. INC. 3%
Document management services.
ASSET ALLOCATION
----------------
Common Stock 93.7%
Cash 6.3%
SECTOR BREAKDOWN
----------------
Health Care 19.5%
Business 18.4%
Technology 18.0%
Retail 14.5%
Personal 10.4%
Real Estate 5.9%
Transportation 3.9%
Other 3.1%
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WASATCH GROWTH FUND-PORTFOLIO SUMMARY
- -------------------------------------
SEPTEMBER 30, 1998
(PHOTO)
SAMUEL S. STEWART, JR., PHD, CFA-
LEAD MANAGER
The Wasatch Growth Fund seeks to invest in growing companies that we believe
are stable and that have a history of consistent earnings growth. In addition,
we seek to invest in these companies at reasonable prices. The Growth Fund is
the most conservative of all the Wasatch Equity Funds. However, because the Fund
may invest in smaller companies we believe it is best-suited for long-term
investors.
REVIEW OF THE YEAR
- ------------------
Stock prices have been anything but stable this year. Small company stocks
suffered significant declines as investors found the liquid stocks of large
companies more desirable. Investors have overlooked earnings growth which we
believe is still the most important long-term driver of stock prices. In the
coming year, the average earnings growth of large companies is expected to be
negative. By comparison, the 10% to 15% earnings growth expected for small
companies is far superior.
The past 12 months have been a tough environment for small company stocks.
For the year ended September 30, 1998 the Growth Fund was down 17.5%. The
Russell 2000 Index, a widely recognized barometer for the performance of small
company stocks, was down 19%.
In typical fashion, the Fund had few technology holdings. This helped
performance during the year because many technology companies, particularly
those that do business overseas, were hard hit by price declines.
Throughout the year we made numerous checks with the managements of companies
held by the Fund to determine if stock price declines were due to problems at
the companies. The response in almost every case was that "business has never
been better." The Fund's largest holding, Renters Choice, Inc., an operator of
rent-to-own stores, made an acquisition that tripled the number of its stores.
The Fund's third largest holding, O'Reilly Auto motive, also made an acquisition
that nearly doubled its automotive parts stores. As of September 30, 1998,
O'Reilly's stock price was up 59%.
Aside from a few companies that reported disappointing earnings, we believe
the majority have the potential to meet our long-term earnings growth
expectations. Friedman's, Inc., experienced unusually high turnover at the
executive level this year. In addition, the jewelry retailer missed earnings
expectations in the last quarter because a recent advertising campaign failed to
bring increased revenues.
Our immediate focus is to weed out companies with earnings that have fallen
below our expectations and to increase our position in companies
Annual Report -----
<PAGE>
WASATCH GROWTH FUND-PORTFOLIO SUMMARY
- -------------------------------------
with better earnings growth prospects. In light of the overall strength and
stability of companies held by the Fund, the drop in prices has produced some
EXCEPTIONALLY GOOD VALUES.
OUTLOOK
- -------
The uncertain economic environment will continue to affect small and large
company stock prices in the near term. To keep the Growth Fund well-positioned
for a rebound in small company stock prices we continue to focus on investing in
"America's Best Growth Companies." These are companies that we believe possess
an identifiable, sustainable competitive advantage, are underfollowed,
undervalued, well-managed and have the potential to double in size within five
years.
Today, the bargain prices of small company stocks provide an added advantage
that we believe will prove beneficial to long-term shareholders.
Thank you for investing in the Wasatch Growth Fund.
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------
1 YEAR 5 YEARS 10 YEARS
- ----------------------------------------------------------------
WASATCH GROWTH FUND -17.5% 13.1% 14.5%
- ----------------------------------------------------------------
Past performance is not indicative of future results.
GROWTH OF A $10,000 INVESTMENT
------------------------------
Wasatch Growth Lipper Growth S&P 500
Fund Funds Index Composite
- --------------------------------------------------------------
9/30/88 $10,000 $10,000 $10,000
9/30/89 $12,160 $13,059 $13,301
9/30/90 $11,575 $11,241 $12,071
9/30/91 $17,582 $15,342 $15,833
9/30/92 $16,948 $16,521 $17,583
9/30/93 $20,942 $19,680 $19,869
9/30/94 $21,727 $20,031 $20,601
9/30/95 $30,367 $25,646 $26,729
9/30/96 $34,127 $29,167 $32,164
9/30/97 $46,952 $39,265 $45,173
9/30/98 $38,742 $40,471 $49,259
The Lipper Growth Funds Index includes the largest 30 funds which, by prospectus
or portfolio practice, normally invest in companies whose long-term earnings are
expected to grow significantly faster than the earnings of the stocks
represented in the major unmanaged stock indices.
The S&P 500 Composite is an unmanaged but commonly used measure of common stock
total return performance.
- ----- Annual Report
<PAGE>
WASATCH GROWTH FUND-PORTFOLIO SUMMARY
- -------------------------------------
TEN LARGEST HOLDINGS
- --------------------
1. RENTERS CHOICE, INC. 6%
Operates rent-to-own stores.
2. GENERAL NUTRITION COS., INC. 6%
Vitamins, health care and
sports nutrition products.
3. O'REILLY AUTOMOTIVE, INC. 4%
Automotive parts retailer/distributor.
4. MARKS BROS. JEWELERS, INC. 4%
Fine jewelry retailer.
5. WORLD ACCEPTANCE CORP. 4%
Consumer lending.
6. CONCENTRA MANAGED
CARE, INC. 4%
Cost containment services for
auto injury and workers'
compensation claims.
7. WASHINGTON FEDERAL, INC. 3%
Regional banking services.
8. FRIEDMAN'S INC. 3%
Fine jewelry retailer.
9. SCP POOL CORPORATION 3%
Swimming pool supply distributor.
10. TECHNE CORP. 3%
Disposable products for clinical
research labs and hospitals.
ASSET ALLOCATION
----------------
Common Stock 90.8%
Cash 9.2%
SECTOR BREAKDOWN
----------------
Retail 20.5%
Health Care 13.7%
Personal 13.7%
Business 13.3%
Financial Services 11.2%
Technology 6.1%
Other 5.0%
Builders/Supplies 3.8%
Transportation 3.5%
Annual Report -----
<PAGE>
WASATCH MID-CAP FUND-PORTFOLIO SUMMARY
- --------------------------------------
SEPTEMBER 30, 1998
(PHOTO)
KAREY BARKER, CFA-LEAD MANAGER
The Mid-Cap Fund is the most aggressive Fund in the Wasatch Funds family. The
Fund seeks to invest in companies with the highest growth rates. It has
relatively few holdings which tend to be concentrated in the most dynamic
industries. It is best-suited for investors who plan to hold the Fund for at
least five years.
REVIEW OF THE YEAR
- ------------------
In a market environment that saw prices decline across the board, the stocks
of small and mid-size technology companies were particularly hard hit. For the
year ended September 30, 1998, the Mid-Cap Fund was down 22.1%. For the same
period, the Russell 2000 Index, a popular measure of the performance of small
company stocks, was down 19%.
Over the past 12 months our search for fast growing companies led us to
increase the Fund's weight in health care. Companies in this industry typically
do business in the U.S. This year they have had better success at achieving high
growth rates than the Fund's technology holdings because they were less affected
by economic troubles overseas.
The Fund's technology holdings experienced extreme volatility throughout the
fiscal year. Some do business in Asia and have been affected by that region's
economic difficulties. Semiconductors, in particular, have experienced a
slowdown in demand. Several companies that sell big ticket items had trouble
closing sales as customers became cautious due to news of a possible economic
recession. Others suffered stock price declines in spite of strong earnings
growth and a positive outlook.
Earnings growth expectations for many companies are being revised to reflect
a more challenging economic environment. While we still expect companies held by
the Fund to meet our minimum target of 25%, expectations have come down from a
year ago when we expected over 30%.
OUTLOOK
- -------
Stock prices will continue to fluctuate widely as the global economic
situation unfolds. We are firm believers that over the long-term earnings growth
drives stock prices. The Mid-Cap Fund invests in companies capable of the
highest growth rates because we expect these investments to produce above
average long-term returns.
Taking the long view, we do not foresee any slowdown in global demand for
technology and we expect to continue investing significant assets in fast
growing technology companies. The Fund is also likely to maintain a heavy
weighting in health care because we believe fast
- ----- Annual Report
<PAGE>
WASATCH MID-CAP FUND-PORTFOLIO SUMMARY
- --------------------------------------
growth can be achieved by companies finding better ways to improve the quality,
cost efficiency and delivery of health care to U.S. consumers.
We believe companies held by the Fund have outstanding business opportunities
that will carry them beyond today's stock market volatility. We feel the Fund's
investments have the potential to produce returns that will benefit shareholders
as they strive to achieve their long-term financial objectives.
Thank you for investing in the Wasatch Mid-Cap Fund.
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------
1 YEAR 5 YEARS SINCE INCEPTION<F1>
- ---------------------------------------------------------------------------
WASATCH MID-CAP FUND -22.1% 10.4% 9.3%
- ---------------------------------------------------------------------------
Past performance is not indicative of future results.
GROWTH OF A $10,000 INVESTMENT
------------------------------
Wasatch Mid-Cap S&P MidCap S&P 500
Fund 400 Index Composite
- --------------------------------------------------------------
8/16/92 $10,000 $10,000 $10,000
9/30/92 $9,930 $10,000 $9,910
9/30/93 $10,511 $12,404 $11,199
9/30/94 $11,021 $12,603 $11,612
9/30/95 $18,653 $15,850 $15,066
9/30/96 $18,179 $18,069 $18,129
9/30/97 $22,132 $25,135 $25,461
9/30/98 $17,248 $23,550 $27,764
<F1>Inception: August 16, 1992.
The S&P MidCap 400 Index is an unmanaged capitalization weighted total return
index that measures the performance of the mid-range sector of the U.S. stock
market where the median market capitalization is approximately $700 million.
The S&P 500 Composite is an unmanaged but commonly used measure of common stock
total return performance.
Annual Report -----
<PAGE>
WASATCH MID-CAP FUND-PORTFOLIO SUMMARY
- --------------------------------------
TEN LARGEST HOLDINGS
- --------------------
1. CURATIVE HEALTH
SERVICES, INC. 10%
Wound treatment services and
products.
2. PEDIATRIX MEDICAL GROUP INC. 9%
Practice management for pediatrics
physicians.
3. SYNOPSYS, INC. 7%
Software solutions for electronic
design automation.
4. O'REILLY AUTOMOTIVE, INC. 7%
Automotive parts retailer/distributor.
5. KENDLE INTERNATIONAL, INC. 5%
Clinical research and drug
development service provider.
6. THE METZLER GROUP, INC. 5%
Consulting services to energy and
utility businesses.
7. ASPEN TECHNOLOGIES, INC. 4%
Chemical engineering software.
8. MICREL, INC. 4%
Analog semiconductors for cellular
phones and laptop computers.
9. SANMINA CORP. 3%
Electronic components manufacturer.
10. MICROCHIP TECHNOLOGY, INC. 3%
Proprietary chip manufacturer.
ASSET ALLOCATION
----------------
Common Stock 86.2%
Cash 13.8%
SECTOR BREAKDOWN
----------------
Health Care 37.1%
Technology 27.2%
Business Services 11.5%
Retail 8.2%
Other 2.2%
- ----- Annual Report
<PAGE>
WASATCH-HOISINGTON U.S. TREASURY FUND-PORTFOLIO SUMMARY
- -------------------------------------------------------
SEPTEMBER 30, 1998
(PHOTO)
VAN R. HOISINGTON-LEAD MANAGER
The U.S. Treasury Fund seeks to provide a rate of return that exceeds the
rate of inflation over a business cycle by investing in U.S. Treasury
securities.
REVIEW OF THE YEAR
- ------------------
For the third consecutive year the Fund produced outstanding results. For the
year ended September 30, 1998, the total return leaped to 24.3%, far outpacing
the Lehman Brothers Government/Corporate Bond Index return of 12.8% and the
Lehman Brothers Aggregate Index return of 11.5%. For the past five years, the
Fund returned 10.5% annually, compared with 7.2% for both the Lehman Indices.
With all measures of inflation declining significantly, we continued to fully
invest the Fund's assets in long-dated Treasury securities. Bond yields fell
sharply over the past 12 months following the downward direction of inflation.
The 30-year Treasury bond yield dropped to 4.98% on September 30, far below the
6.4% yield of a year earlier. This yield decline translated into price
appreciation of long-dated Treasuries and created the Fund's outstanding return.
The path to lower bond yields over the past year was uneven. Some bond market
investors expected yields to rise because they felt the low unemployment rate
suggested an imminent rise in wages and inflation. These concerns proved
unfounded as rising excess capacity and deteriorating economic conditions
overseas more than offset any inflationary tendencies that might have stemmed
from the low unemployment rate.
You will note on the "Growth of a $10,000 Investment" chart on the next page
that we have added the Lehman Brothers Aggregate Index. We feel this index is
more representative of the entire bond market. Going forward it will replace the
Lehman Brothers Government/Corporate Bond Index.
OUTLOOK
- -------
The current 30-year Treasury bond recently traded below 5%, the lowest yield
in over 31 years. What is important for both borrowers and investors, however,
is the real rate, which remains quite high by historical standards.
The high real yield rewards investors and gives them the incentive to remain
positioned in long-term Treasury bonds. On the negative side, the high real rate
penalizes borrowing, which is essential for any expanding economy.
While we still believe that declining inflation, or price stability, is the
most likely path for the U.S., we place the risk of deflation at a substantial
40%. Already, prices of all consumer goods and all major categories of
commodities have registered deflation of different degrees.
Annual Report -----
<PAGE>
WASATCH-HOISINGTON U.S. TREASURY FUND-PORTFOLIO SUMMARY
- -------------------------------------------------------
The investment surprise for bond holders next year may be that bond yields
could continue to decline to levels unimagined by the modern day investor. For
other investors, the risk may be an extended downturn in the economy.
We believe current economic conditions are favorable for investors in long-
term U.S. Treasury bonds. In this environment we expect the Fund's investments
to continue to have the potential for above average returns. If the economic
situation changes and inflation and rising interest rates seem likely we may
invest the Fund's assets in U.S. Treasury bills in an effort to protect
shareholders' capital.
We appreciate your confidence and investment in the U.S. Treasury Fund.
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------
1 YEAR 5 YEARS 10 YEARS
- -------------------------------------------------------------------
WASATCH-HOISINGTON
U.S. TREASURY FUND 24.3% 10.5% 10.0%
- -------------------------------------------------------------------
Past performance is not indicative of future results.
GROWTH OF A $10,000 INVESTMENT
------------------------------
Wasatch-Hoisington Lehman Bros. Lehman Bros.
U.S. Treasury Aggregate Gov't./Corp.
Fund Index Bond Index
- ---------------------------------------------------------------
9/30/88 $10,000 $10,000 $10,000
9/30/89 $11,250 $11,126 $11,132
9/30/90 $11,798 $11,968 $11,883
9/30/91 $14,009 $13,882 $13,768
9/30/92 $15,191 $15,624 $15,590
9/30/93 $15,768 $17,183 $17,364
9/30/94 $16,006 $16,629 $16,645
9/30/95 $17,681 $18,967 $19,033
9/30/96 $18,462 $19,896 $19,891
9/30/97 $20,905 $21,829 $21,798
9/30/98 $25,985 $24,342 $24,597
The Lehman Brothers Aggregate Index covers the U.S. investment grade fixed rate
bond market, including government and corporate securities, agency mortgage
pass-through securities, and asset-backed securities. To be included in the
index the security must meet the following criteria: must have at least one year
to final maturity, regardless of call features; must have at least $100 million
par amount outstanding; must be rated investment grade or better by Moody's
Investors Service, Standard & Poor's, or Fitch Investor's Service; must be fixed
rate, although it can carry a coupon that steps up or changes to a predetermined
schedule; must be dollar-denominated and nonconvertible. All corporate and
asset-backed securities must be registered with the SEC; must be publicly
issued.
The Lehman Brothers Government/Corporate Bond Index is an unmanaged market value
weighted index measuring both principal price changes of, and income provided
by, the underlying universe of securities that comprise the Index. Securities
included in the Index must meet the following criteria: fixed as opposed to
variable rate; not less than one year to maturity; minimum outstanding principal
value of $50 million; and minimum quality rating of BBB by Standard & Poor's or
Baa by Moody's.
- ----- Annual Report
<PAGE>
WASATCH-HOISINGTON U.S. TREASURY FUND-PORTFOLIO SUMMARY
- -------------------------------------------------------
HOLDINGS/MATURITY DATE
- ----------------------
1. U.S. TREASURY BOND 31%
11/15/2024
2. U.S. TREASURY BOND 15%
11/15/2026
3. U.S. TREASURY BOND 15%
8/15/2025
4. U.S. TREASURY BOND 11%
8/15/2027
5. U.S. TREASURY STRIP 7%
8/15/2025
6. U.S. TREASURY BOND 6%
2/15/2027
7. U.S. TREASURY BOND 5%
8/15/2023
8. U.S. TREASURY BOND 4%
2/15/2026
9. U.S. TREASURY STRIP 3%
11/15/2021
10. U.S. TREASURY BOND 1%
8/15/2026
ASSET ALLOCATION
----------------
U.S. Treasury Bonds 97.8%
Cash 2.2%
Annual Report -----
<PAGE>
MICRO-CAP FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
COMMON STOCKS 99.8%
-------------------
BUILDERS & BUILDING SUPPLIES 0.5%
47,691 Building Materials Holding Corp.<F1> $ 625,944
-----------
BUSINESS PRODUCTS 2.5%
131,000 Daisytek International Corp.<F1> 2,947,500
-----------
BUSINESS SERVICES 13.7%
84,500 A Consulting Team, Inc. (The)<F1> 802,750
116,600 Altron, Inc.<F1> 1,472,075
16,000 DA Consulting Group, Inc.<F1> 244,000
24,000 Data Processing Resources Corp.<F1> 702,000
132,000 F.Y.I. Inc.<F1> 3,234,000
25,000 Master Graphics, Inc.<F1> 125,000
268,750 National Dentex Corp.<F1> 4,837,500
81,000 RemedyTemp, Inc.<F1> 1,721,250
8,000 RWD Technologies, Inc.<F1> 180,000
169,000 SCP Pool Corporation<F1> 2,197,000
30,500 StaffMark, Inc.<F1> 556,625
-----------
16,072,200
-----------
COMPUTER SOFTWARE 4.0%
26,000 Business Objects S.A. Sponsored ADR<F1> 325,000
60,000 Deltek Systems, Inc.<F1> 1,106,250
12,000 Phoenix Technologies Ltd.<F1> 67,500
97,800 Synopsys, Inc.<F1> 3,257,963
-----------
4,756,713
-----------
COMPUTER SYSTEMS & COMPONENTS 1.5%
63,000 Active Voice Corp.<F1> 437,062
10,000 Atlantic Data Services, Inc.<F1> 150,000
23,000 MMC Networks, Inc.<F1> 376,625
29,200 Pinnacle Systems, Inc.<F1> 759,200
-----------
1,722,887
-----------
ELECTRONICS 2.4%
222,000 PCD Inc.<F1> 2,775,000
-----------
FINANCIAL SERVICES 1.5%
310,000 World Acceptance Corp.<F1> 1,743,750
-----------
- ----- Annual Report
<PAGE>
MICRO-CAP FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
HEALTH CARE PRODUCTS 15.1%
415,000 ICU Medical, Inc.<F1> $ 5,861,875
27,200 Kendle International, Inc.<F1> 890,800
61,000 Medco Research, Inc.<F1> 1,322,938
69,800 Merit Medical Systems, Inc.<F1> 418,800
87,400 Minntech Corp. 830,300
4,500 Molecular Devices Corporation<F1> 77,062
437,417 Techne Corp.<F1> 6,397,224
137,000 Young Innovations, Inc.<F1> 1,918,000
-----------
17,716,999
-----------
HEALTH CARE PROVIDERS 5.0%
281,770 AmSurg Corp., Class A<F1> 1,937,169
253,500 AmSurg Corp., Class B<F1> 1,552,687
74,125 Curative Health Services, Inc.<F1> 2,270,078
12,000 U.S. Physical Therapy, Inc.<F1> 111,000
-----------
5,870,934
-----------
HEALTH CARE SERVICES 6.3%
103,000 CorVel Corp.<F1> 3,991,250
15,200 CryoLife, Inc.<F1> 239,400
19,000 First Commonwealth, Inc.<F1> 220,875
16,000 IMPATH Inc.<F1> 476,000
164,000 Laboratory Specialists of America, Inc.<F1> 645,750
34,400 Medstone International, Inc.<F1> 227,900
24,000 Superior Consultant Holdings Corp.<F1> 1,044,000
100,000 V.I. Technologies, Inc.<F1> 525,000
-----------
7,370,175
-----------
PERSONAL PRODUCTS 12.7%
188,900 Day Runner, Inc.<F1> 3,683,550
23,000 Maxwell Shoe Company Inc.<F1> 273,125
25,000 Natrol, Inc.<F1> 221,875
158,100 Natural Alternatives International, Inc.<F1> 1,936,725
6,125 Nu Skin Asia Pacific, Inc., Class A<F1> 67,375
183,800 Signature Eyewear, Inc.<F1> 896,025
209,200 Travis Boats & Motors, Inc.<F1> 3,242,600
358,200 USANA, Inc.<F1> 4,567,050
-----------
14,888,325
-----------
Annual Report -----
<PAGE>
MICRO-CAP FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
PERSONAL SERVICES 7.3%
48,500 Ambassadors International, Inc.<F1> $ 873,000
479,000 First Cash, Inc.<F1> 5,568,375
156,000 Rainbow Rentals, Inc.<F1> 1,482,000
23,800 Rent-Way, Inc.<F1> 586,075
60,500 U.S. Pawn, Inc.<F1> 124,781
-----------
8,634,231
-----------
RETAIL 11.5%
35,500 American Coin Merchandising, Inc.<F1> 465,938
136,500 Hibbett Sporting Goods, Inc.<F1> 3,421,031
229,825 K&G Men's Center, Inc.<F1> 1,493,862
65,400 MarineMax, Inc.<F1> 604,950
324,445 Marks Bros. Jewelers, Inc.<F1> 4,339,452
88,850 O'Reilly Automotive, Inc.<F1> 3,220,813
-----------
13,546,046
-----------
SEMICONDUCTORS 13.2%
76,850 American Xtal Technology, Inc.<F1> 634,013
201,189 Micrel, Inc.<F1> 5,331,509
182,700 Microchip Technology, Inc.<F1> 3,996,562
49,000 SDL, Inc.<F1> 612,500
478,000 Supertex, Inc.<F1> 4,959,250
-----------
15,533,834
-----------
TELECOMMUNICATIONS 0.1%
16,500 Vari-L Company, Inc.<F1> 111,375
-----------
TRANSPORTATION 2.5%
33,000 Covenant Transport, Inc.<F1> 375,375
27,000 Smithway Motor Xpress Corp.<F1> 209,250
45,000 Transport Corp. of America, Inc.<F1> 540,000
161,500 USA Truck, Inc.<F1> 1,816,875
-----------
2,941,500
-----------
TOTAL COMMON STOCKS (COST $113,746,170) 117,257,413
-----------
- ----- Annual Report
<PAGE>
MICRO-CAP FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------
SEPTEMBER 30, 1998
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 0.4%
---------------------------
(Variable Rate Demand Deposits)
$497,746 UMB Bank Money Market Fiduciary, 3.99% $ 497,746
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $497,746) 497,746
-----------
TOTAL INVESTMENTS (COST $114,243,916) 100.2% 117,755,159
LIABILITIES, LESS CASH AND OTHER ASSETS (0.2)% (222,115)
-----------
NET ASSETS 100.0% $117,533,044
===========
<F1>Non-income producing
See notes to financial statements.
Annual Report -----
<PAGE>
MICRO-CAP VALUE FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
COMMON STOCKS 95.5%
-------------------
BASIC MATERIALS 2.9%
46,980 Arrow-Magnolia International, Inc.<F1> $ 220,219
10,800 Encore Wire Corporation<F1> 99,900
5,400 Modtech, Inc.<F1> 94,500
-----------
414,619
-----------
BUILDERS & BUILDING SUPPLIES 2.3%
14,000 Building Materials Holding Corp.<F1> 183,750
3,500 Crossman Communities, Inc.<F1> 70,438
6,500 Drew Industries Incorporated 79,625
-----------
333,813
-----------
BUSINESS PRODUCTS 3.4%
15,400 Daisytek International Corp.<F1> 346,500
7,500 Optek Technology, Inc.<F1> 133,125
-----------
479,625
-----------
BUSINESS SERVICES 14.6%
21,500 Altron, Inc.<F1> 271,437
43,000 American Bank Note Holographics, Inc.<F1> 338,625
72,200 Carnegie Group, Inc.<F1> 189,525
4,400 Deswell Industries, Inc.<F1> 42,350
23,400 National Dentex Corp.<F1> 421,200
17,800 RemedyTemp, Inc.<F1> 378,250
32,000 SCP Pool Corporation<F1> 416,000
2,000 StaffMark, Inc.<F1> 36,500
-----------
2,093,887
-----------
COMPUTER SOFTWARE 2.5%
5,000 Synopsys, Inc.<F1> 166,563
20,000 Tecnomatix Technologies Ltd.<F1> 187,500
-----------
354,063
-----------
COMPUTER SYSTEMS & COMPONENTS 1.7%
11,150 Active Voice Corp.<F1> 77,353
10,000 C.P. Clare Corp.<F1> 61,250
16,400 Percon Incorporated<F1> 104,550
-----------
243,153
-----------
ELECTRONICS 1.9%
22,000 PCD Inc.<F1> 275,000
-----------
Annual Report -----
<PAGE>
MICRO-CAP VALUE FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
ENERGY 1.9%
3,500 CARBO Ceramics Inc. $ 79,625
11,000 Gulf Island Fabrication, Inc.<F1> 187,000
-----------
266,625
-----------
FINANCIAL SERVICES 5.6%
4,535 Northrim Bank 65,191
8,950 PVF Capital Corp.<F1> 104,044
2,800 RTW, Inc.<F1> 14,175
18,000 United PanAm Financial Corp.<F1> 101,250
92,500 World Acceptance Corp.<F1> 520,312
-----------
804,972
-----------
HEALTH CARE PRODUCTS 7.5%
5,000 Del Global Technologies Corp.<F1> 36,875
55,300 ICU Medical, Inc.<F1> 781,112
7,500 Minntech Corp. 71,250
13,000 Young Innovations, Inc.<F1> 182,000
-----------
1,071,237
-----------
HEALTH CARE SERVICES 6.2%
8,200 CorVel Corp.<F1> 317,750
12,500 First Commonwealth, Inc.<F1> 145,312
62,100 Laboratory Specialists of America, Inc.<F1> 244,519
26,500 Medstone International, Inc.<F1> 175,562
-----------
883,143
-----------
PERSONAL PRODUCTS 12.0%
8,200 Day Runner, Inc.<F1> 159,900
10,900 Natural Alternatives International, Inc.<F1> 133,525
11,000 Nu Skin Asia Pacific, Inc., Class A<F1> 121,000
26,500 Racing Champions Corporation<F1> 293,156
68,300 Signature Eyewear, Inc.<F1> 332,962
5,000 Supreme International Corporation<F1> 57,500
31,000 THT Inc.<F1> 95,906
7,000 Travis Boats & Motors, Inc.<F1> 108,500
19,900 USANA, Inc.<F1> 253,725
24,800 Utah Medical Products, Inc.<F1> 159,650
-----------
1,715,824
-----------
Annual Report -----
<PAGE>
MICRO-CAP VALUE FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
PERSONAL SERVICES 8.1%
59,500 First Cash, Inc.<F1> $ 691,687
37,400 Rainbow Rentals, Inc.<F1> 355,300
54,000 U.S. Pawn, Inc.<F1> 111,375
-----------
1,158,362
-----------
REAL ESTATE 2.0%
4,800 National Health Investors, Inc. REIT 148,800
15,400 Sunstone Hotel Investors, Inc. REIT 139,563
-----------
288,363
-----------
RETAIL 9.7%
14,000 Carr-Gottstein Foods Co.<F1> 160,125
12,000 General Nutrition Cos., Inc.<F1> 129,750
32,162 K&G Men's Center, Inc.<F1> 209,053
32,000 MarineMax, Inc.<F1> 296,000
38,400 Marks Bros. Jewelers, Inc.<F1> 513,600
8,350 O'Charley's Inc.<F1> 84,544
-----------
1,393,072
-----------
SEMICONDUCTORS 7.7%
16,500 Align-Rite International, Inc.<F1> 171,188
4,200 Cohu, Inc.<F1> 69,300
6,500 Microchip Technology, Inc.<F1> 142,188
8,400 Microsemi Corporation<F1> 67,200
5,000 Semtech Corporation<F1> 93,125
53,700 Supertex, Inc.<F1> 557,137
-----------
1,100,138
-----------
TELECOMMUNICATIONS 0.1%
2,000 Vari-L Company, Inc.<F1> 13,500
-----------
TRANSPORTATION 5.4%
13,100 AirNet Systems, Inc.<F1> 216,969
19,000 American Aircarriers Support, Incorporated<F1> 116,375
7,000 Covenant Transport, Inc.<F1> 79,625
5,000 Kaynar Technologies Inc.<F1> 67,500
23,800 Smithway Motor Xpress Corp.<F1> 184,450
10,000 USA Truck, Inc.<F1> 112,500
-----------
777,419
-----------
TOTAL COMMON STOCKS (COST $16,114,310) 13,666,815
-----------
- ----- Annual Report
<PAGE>
MICRO-CAP VALUE FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------------
SEPTEMBER 30, 1998
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 5.3%
---------------------------
(Variable Rate Demand Deposits)
$754,421 UMB Bank Money Market Fiduciary, 3.99% $ 754,421
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $754,421) 754,421
-----------
TOTAL INVESTMENTS (COST $16,868,731) 100.8% 14,421,236
LIABILITIES, LESS CASH AND OTHER ASSETS (0.8)% (115,460)
-----------
NET ASSETS 100.0% $14,305,776
===========
<F1>Non-income producing
See notes to financial statements.
Annual Report -----
<PAGE>
AGGRESSIVE EQUITY FUND-SCHEDULE OF INVESTMENTS
- ----------------------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
COMMON STOCKS 93.7%
-------------------
BUSINESS PRODUCTS 3.6%
199,300 Daisytek International Corp.<F1> $ 4,484,250
-----------
BUSINESS SERVICES 14.8%
238,200 Altron, Inc.<F1> 3,007,275
112,000 American Bank Note Holographics, Inc.<F1> 882,000
41,400 Data Processing Resources Corp.<F1> 1,210,950
161,100 F.Y.I. Inc.<F1> 3,946,950
248,600 National Dentex Corp.<F1> 4,474,800
32,500 QRS Corporation 1,035,937
116,100 RemedyTemp, Inc.<F1> 2,467,125
67,600 StaffMark, Inc.<F1> 1,233,700
-----------
18,258,737
-----------
COMPUTER SOFTWARE 6.9%
74,000 Aspen Technologies, Inc.<F1> 1,979,500
107,750 Deltek Systems, Inc.<F1> 1,986,640
137,250 Synopsys, Inc.<F1> 4,572,141
-----------
8,538,281
-----------
COMPUTER SYSTEMS & COMPONENTS 1.2%
29,600 Eltron International, Inc.<F1> 884,300
16,300 Zebra Technologies Corporation 546,050
-----------
1,430,350
-----------
ELECTRONICS 0.8%
80,000 PCD Inc.<F1> 1,000,000
-----------
HEALTH CARE PRODUCTS 8.0%
201,500 ICU Medical, Inc.<F1> 2,846,187
32,100 Serologicals Corp.<F1> 806,513
426,644 Techne Corp.<F1> 6,239,669
-----------
9,892,369
-----------
HEALTH CARE PROVIDERS 7.1%
237,500 AmSurg Corp., Class A<F1> 1,632,813
60,300 AmSurg Corp., Class B<F1> 369,338
138,700 Curative Health Services, Inc.<F1> 4,247,687
56,300 Pediatrix Medical Group Inc.<F1> 2,526,463
-----------
8,776,301
-----------
- ----- Annual Report
<PAGE>
AGGRESSIVE EQUITY FUND-SCHEDULE OF INVESTMENTS
- ----------------------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
HEALTH CARE SERVICES 4.4%
16,300 CryoLife, Inc.<F1> $ 256,725
47,150 Express Scripts, Inc., Class A<F1> 3,878,087
46,000 IMPATH Inc.<F1> 1,368,500
-----------
5,503,312
-----------
PERSONAL PRODUCTS 6.3%
121,600 Nu Skin Asia Pacific, Inc., Class A<F1> 1,337,600
213,250 Travis Boats & Motors, Inc.<F1> 3,305,375
241,600 USANA, Inc.<F1> 3,080,400
22,600 Weider Nutrition International, Inc. 131,363
-----------
7,854,738
-----------
PERSONAL SERVICES 4.1%
53,000 First Cash, Inc.<F1> 616,125
75,000 Home Choice Holdings, Inc. 979,687
7,800 Loewen Group, Inc. 115,050
70,000 Renters Choice, Inc.<F1> 1,855,000
60,300 Rent-Way, Inc.<F1> 1,484,888
-----------
5,050,750
-----------
REAL ESTATE 5.9%
184,450 National Health Investors, Inc. REIT 5,717,950
175,750 Sunstone Hotel Investors, Inc. REIT 1,592,734
-----------
7,310,684
-----------
RETAIL 14.5%
271,400 General Nutrition Cos., Inc.<F1> 2,934,512
52,500 Hibbett Sporting Goods, Inc.<F1> 1,315,781
218,825 K&G Men's Center, Inc.<F1> 1,422,362
83,450 MarineMax, Inc.<F1> 771,913
273,600 Marks Bros. Jewelers, Inc.<F1> 3,659,400
26,000 Nautica Enterprises, Inc.<F1> 485,875
115,975 O'Charley's Inc.<F1> 1,174,247
168,700 O'Reilly Automotive, Inc.<F1> 6,115,375
-----------
17,879,465
-----------
SEMICONDUCTORS 9.9%
168,125 American Xtal Technology, Inc.<F1> 1,387,031
174,400 Micrel, Inc.<F1> 4,621,600
229,225 Microchip Technology, Inc.<F1> 5,014,297
101,250 SDL, Inc.<F1> 1,265,625
-----------
12,288,553
-----------
Annual Report -----
<PAGE>
AGGRESSIVE EQUITY FUND-SCHEDULE OF INVESTMENTS
- ----------------------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
TELECOMMUNICATIONS 2.3%
88,250 Powertel, Inc.<F1> $ 1,196,891
56,090 United States Cellular Corp.<F1> 1,672,183
-----------
2,869,074
-----------
TRANSPORTATION 3.9%
66,850 Covenant Transport, Inc.<F1> 760,419
82,600 Expeditors International of Washington, Inc. 2,292,150
106,600 Knight Transportation, Inc.<F1> 1,798,875
-----------
4,851,444
-----------
TOTAL COMMON STOCKS (COST $106,846,498) 115,988,308
-----------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 6.4%
---------------------------
(Variable Rate Demand Deposits)
$7,800,288 UMB Bank Money Market Fiduciary, 3.99% $ 7,800,288
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $7,800,288) 7,800,288
-----------
TOTAL INVESTMENTS (COST $114,646,786) 100.1% 123,788,596
LIABILITIES, LESS CASH AND OTHER ASSETS (0.1)% (65,518)
-----------
NET ASSETS 100.0% $123,723,078
===========
<F1>Non-income producing
See notes to financial statements.
- ----- Annual Report
<PAGE>
GROWTH FUND-SCHEDULE OF INVESTMENTS
- -----------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
COMMON STOCKS 90.8%
-------------------
BUILDERS & BUILDING SUPPLIES 3.8%
325,723 Building Materials Holding Corp.<F1> $ 4,275,114
70,000 Copart, Inc.<F1> 1,557,500
-----------
5,832,614
-----------
BUSINESS PRODUCTS 3.9%
118,000 Daisytek International Corp.<F1> 2,655,000
108,400 Optek Technology, Inc.<F1> 1,924,100
45,000 Pentair, Inc. 1,451,250
-----------
6,030,350
-----------
BUSINESS SERVICES 9.4%
15,000 Altron, Inc.<F1> 189,375
115,000 American Bank Note Holographics, Inc.<F1> 905,625
77,000 F.Y.I. Inc.<F1> 1,886,500
187,000 National Dentex Corp.<F1> 3,366,000
157,400 RemedyTemp, Inc.<F1> 3,344,750
366,650 SCP Pool Corporation<F1> 4,766,450
-----------
14,458,700
-----------
COMPUTER SOFTWARE 1.6%
75,000 Synopsys, Inc.<F1> 2,498,437
-----------
COMPUTER SYSTEMS & COMPONENTS 2.0%
104,350 Eltron International, Inc.<F1> 3,117,456
-----------
FINANCIAL SERVICES 11.2%
172,300 AmeriCredit Corp.<F1> 4,199,812
5,000 Franklin Savings Assn.<F1> 1
274,600 RTW, Inc.<F1> 1,390,163
212,510 Washington Federal, Inc. 5,312,750
1,119,486 World Acceptance Corp.<F1> 6,297,109
-----------
17,199,835
-----------
HEALTH CARE PRODUCTS 4.2%
131,600 ICU Medical, Inc.<F1> 1,858,850
316,050 Techne Corp.<F1> 4,622,231
-----------
6,481,081
-----------
Annual Report -----
<PAGE>
GROWTH FUND-SCHEDULE OF INVESTMENTS
- -----------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
HEALTH CARE PROVIDERS 1.9%
69,500 Integrated Health Services, Inc. $ 1,168,469
7,700 Pediatrix Medical Group Inc.<F1> 345,537
761,900 Physicians Resource Group, Inc.<F1> 1,428,562
-----------
2,942,568
-----------
HEALTH CARE SERVICES 7.6%
144,500 American HomePatient, Inc.<F1> 270,938
717,500 Concentra Managed Care, Inc.<F1> 5,740,000
182,300 First Health Group Corp.<F1> 4,420,775
598,681 Home Health Corp. of America, Inc.<F1> 785,769
80,000 Vencor, Inc. 320,000
-----------
11,537,482
-----------
PERSONAL PRODUCTS 4.4%
85,600 Day Runner, Inc.<F1> 1,669,200
191,200 Natural Alternatives International, Inc.<F1> 2,342,200
245,600 Nu Skin Asia Pacific, Inc., Class A<F1> 2,701,600
-----------
6,713,000
-----------
PERSONAL SERVICES 9.3%
29,400 Ambassadors International, Inc.<F1> 529,200
340,700 First Cash, Inc.<F1> 3,960,638
365,700 Renters Choice, Inc.<F1> 9,691,050
-----------
14,180,888
-----------
REAL ESTATE 2.8%
473,700 Sunstone Hotel Investors, Inc. REIT 4,292,906
-----------
RETAIL 20.5%
107,700 American Coin Merchandising, Inc.<F1> 1,413,562
737,075 Friedman's Inc.<F1> 4,790,987
834,800 General Nutrition Cos., Inc.<F1> 9,026,275
114,100 Home Centers (DIY) Ltd.<F1> 1,740,025
474,800 Marks Bros. Jewelers, Inc.<F1> 6,350,450
180,500 O'Reilly Automotive, Inc.<F1> 6,543,125
98,900 PJ America Inc.<F1> 1,520,588
-----------
31,385,012
-----------
SEMICONDUCTORS 2.5%
117,600 Microchip Technology, Inc.<F1> 2,572,500
123,000 Supertex, Inc.<F1> 1,276,125
-----------
3,848,625
-----------
- ----- Annual Report
<PAGE>
GROWTH FUND-SCHEDULE OF INVESTMENTS
- -----------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
TELECOMMUNICATIONS 2.2%
7,854 Century Telephone Enterprises, Inc. $ 371,101
42,400 Telecomunicacoes Brasileiras S.A.-Telebras 2,986,550
-----------
3,357,651
-----------
TRANSPORTATION 3.5%
191,400 AirNet Systems, Inc.<F1> 3,170,063
176,200 USA Truck, Inc.<F1> 1,982,250
-----------
5,152,313
-----------
TOTAL COMMON STOCKS (COST $154,684,115) 139,028,918
-----------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
WARRANTS 0.0%
-------------
$1 Cherokee, Inc. Series C $ 1
-----------
TOTAL WARRANTS (COST $6) 1
-----------
SHORT-TERM INVESTMENTS 6.7%
---------------------------
(Variable Rate Demand Deposits)
10,331,719 UMB Bank Money Market Fiduciary, 3.99% 10,331,719
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $10,331,719) 10,331,719
-----------
TOTAL INVESTMENTS (COST $165,015,840) 97.5% 149,360,638
CASH AND OTHER ASSETS, LESS LIABILITIES 2.5% 3,787,172
-----------
NET ASSETS 100.0% $153,147,810
===========
<F1>Non-income producing
See notes to financial statements.
Annual Report -----
<PAGE>
MID-CAP FUND-SCHEDULE OF INVESTMENTS
- ------------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
COMMON STOCKS 86.2%
-------------------
BUSINESS SERVICES 11.5%
47,000 F.Y.I. Inc.<F1> $ 1,151,500
2,700 International Integration Incorporated<F1> 42,187
29,500 International Manufacturing Systems, Inc.<F1> 132,750
57,840 Metzler Group, Inc. (The)<F1> 1,981,020
53,900 Sanmina Corp.<F1> 1,515,938
22,000 Vestcom International, Inc.<F1> 203,500
-----------
5,026,895
-----------
COMPUTER SOFTWARE 17.4%
72,150 Aspen Technologies, Inc.<F1> 1,930,012
21,050 Made2Manage Systems, Inc. 182,872
6,500 MAPICS, Inc.<F1> 143,406
33,300 Parametric Technology Corp.<F1> 335,081
24,250 Phoenix Technologies Ltd.<F1> 136,406
84,050 Smallworldwide plc<F1> 924,550
97,160 Synopsys, Inc.<F1> 3,236,643
72,575 Tecnomatix Technologies Ltd.<F1> 680,391
-----------
7,569,361
-----------
COMPUTER SYSTEMS & COMPONENTS 0.6%
13,800 MMC Networks, Inc.<F1> 225,975
-----------
HEALTH CARE PRODUCTS 8.7%
55,200 Incyte Pharmaceuticals, Inc.<F1> 1,173,000
65,700 Kendle International, Inc.<F1> 2,151,675
33,200 Techne Corp.<F1> 485,550
-----------
3,810,225
-----------
HEALTH CARE PROVIDERS 21.8%
123,000 AmSurg Corp., Class A<F1> 845,625
55,900 AmSurg Corp., Class B<F1> 342,387
148,400 Curative Health Services, Inc.<F1> 4,544,750
83,500 Pediatrix Medical Group Inc.<F1> 3,747,063
-----------
9,479,825
-----------
- ----- Annual Report
<PAGE>
MID-CAP FUND-SCHEDULE OF INVESTMENTS
- ------------------------------------
SEPTEMBER 30, 1998
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
HEALTH CARE SERVICES 6.6%
18,500 Envoy Corporation<F1> $ 404,688
14,025 Express Scripts, Inc., Class A<F1> 1,153,556
24,800 IMPATH Inc.<F1> 737,800
17,500 MedQuist Inc.<F1> 553,438
-----------
2,849,482
-----------
PERSONAL PRODUCTS 0.8%
23,700 Rexall Sundown, Inc.<F1> 365,868
-----------
RETAIL 8.2%
18,700 Hibbett Sporting Goods, Inc.<F1> 468,669
20,200 K&G Men's Center, Inc.<F1> 131,300
82,200 O'Reilly Automotive, Inc.<F1> 2,979,750
-----------
3,579,719
-----------
SEMICONDUCTORS 9.2%
49,700 American Xtal Technology, Inc.<F1> 410,025
12,600 ASM Lithography Holding N.V.<F1> 197,663
67,800 Micrel, Inc.<F1> 1,796,700
55,500 Microchip Technology, Inc.<F1> 1,214,063
14,200 Photronics, Inc.<F1> 181,050
15,300 SDL, Inc.<F1> 191,250
-----------
3,990,751
-----------
TELECOMMUNICATIONS 0.3%
18,675 REMEC, Inc.<F1> 148,816
-----------
OTHER 1.1%
48,500 Children's Comprehensive Services, Inc.<F1> 478,937
-----------
TOTAL COMMON STOCKS (COST $37,878,990) 37,525,854
-----------
Annual Report -----
<PAGE>
MID-CAP FUND-SCHEDULE OF INVESTMENTS
- ------------------------------------
SEPTEMBER 30, 1998
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
WARRANTS 0.0%
-------------
$ 4,202 CDnow, Inc.<F1> $ 0
-----------
TOTAL WARRANTS (COST $0) 0
-----------
SHORT-TERM INVESTMENTS 14.2%
----------------------------
(Variable Rate Demand Deposits)
6,204,549 UMB Bank Money Market Fiduciary, 3.99% 6,204,549
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $6,204,549) 6,204,549
-----------
TOTAL INVESTMENTS (COST $44,083,539) 100.4% 43,730,403
LIABILITIES, LESS CASH AND OTHER ASSETS (0.4)% (177,028)
-----------
NET ASSETS 100.0% $43,553,375
===========
<F1>Non-income producing
See notes to financial statements.
- ----- Annual Report
<PAGE>
U.S. TREASURY FUND-SCHEDULE OF INVESTMENTS
- ------------------------------------------
SEPTEMBER 30, 1998
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS 97.8%
---------------------------------
$7,100,000 U.S. Treasury Bond Strip, 11/15/21 $ 2,061,698
19,100,000 U.S. Treasury Bond Strip, 8/15/25 4,622,391
3,000,000 U.S. Treasury Bond, 6.25%, 8/15/23 3,434,670
15,780,000 U.S. Treasury Bond, 7.50%, 11/15/24 20,922,386
8,105,000 U.S. Treasury Bond, 6.875%, 8/15/25 10,052,794
2,500,000 U.S. Treasury Bond, 6.00%, 2/15/26 2,792,425
750,000 U.S. Treasury Bond, 6.75%, 8/15/26 919,568
8,590,000 U.S. Treasury Bond, 6.50%, 11/15/26 10,238,851
3,170,000 U.S. Treasury Bond, 6.625%, 2/15/27 3,844,798
6,055,000 U.S. Treasury Bond, 6.375%, 8/15/27 7,138,663
331,000 U.S. Treasury Bond, 5.50%, 8/15/28 357,923
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $61,117,355) 66,386,167
-----------
SHORT-TERM INVESTMENTS 0.9%
---------------------------
(Variable Rate Demand Deposits)
618,983 UMB Bank Money Market Fiduciary, 3.99% 618,983
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $618,983) 618,983
-----------
TOTAL INVESTMENTS (COST $61,796,338) 98.7% 67,005,150
CASH AND OTHER ASSETS, LESS LIABILITIES 1.3% 851,223
-----------
NET ASSETS 100.0% $67,856,373
===========
See notes to financial statements.
Annual Report -----
<PAGE>
WASATCH FUNDS-STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
MICRO-CAP AGGRESSIVE U.S.
MICRO-CAP VALUE EQUITY GROWTH MID-CAP TREASURY
FUND FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at market value
Nonaffiliated issuers (cost
$99,241,888, $16,868,731,
$106,326,333, $140,672,028,
$44,083,539 and $61,796,338,
respectively) $ 99,934,722 $ 14,421,236 $116,008,421 $130,160,135 $43,730,403 $67,005,150
Affiliated issuers (cost $15,002,028,
$0, $8,320,453, $24,343,812, $0
and $0, respectively) 17,820,437 - 7,780,175 19,200,503 - -
Receivable for investment
securities sold 272,806 24,179 953,869 4,005,518 105,918 -
Interest and dividends receivable 4,911 5,235 158,048 31,154 9,018 862,277
Capital shares sold receivable - - - 14,706 - -
Prepaid expenses and other assets 12,598 6,261 10,860 15,851 8,624 7,386
Receivable from advisor 5,208 - - - - 1,399
------------- ------------- ------------- ------------- ------------- -------------
Total Assets 118,050,681 14,456,911 124,911,373 153,427,867 43,853,963 67,876,212
------------- ------------- ------------- ------------- ------------- -------------
LIABILITIES:
Payable for securities purchased 393,296 126,715 1,077,088 170,667 250,353 -
Accrued investment advisory fee 64,195 6,441 33,629 41,544 15,394 9,981
Accrued expenses 60,146 17,979 77,578 67,846 34,841 9,858
------------- ------------- ------------- ------------- ------------- -------------
Total Liabilities 517,637 151,135 1,188,295 280,057 300,588 19,839
------------- ------------- ------------- ------------- ------------- -------------
NET ASSETS $117,533,044 $14,305,776 $123,723,078 $153,147,810 $43,553,375 $67,856,373
============= ============= ============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital stock 327,374 79,259 59,503 90,095 28,840 50,574
Paid-in capital in excess of par 100,124,584 17,414,699 95,157,072 162,339,886 41,572,831 61,667,417
Undistributed net investment income - - 5,203 10,524 - 930,246
Undistributed net realized gain (loss)
on investments 13,569,843 (740,687) 19,359,490 6,362,507 2,304,840 (676)
Net unrealized appreciation
(depreciation) on investments 3,511,243 (2,447,495) 9,141,810 (15,655,202) (353,136) 5,208,812
------------- ------------- ------------- ------------- ------------- -------------
Net Assets $ 117,533,044 $ 14,305,776 $123,723,078 $153,147,810 $43,553,375 $67,856,373
============= ============= ============= ============= ============= =============
CAPITAL STOCK, $.01 PAR VALUE:
Authorized 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000
Issued and outstanding 32,737,374 7,925,899 5,950,304 9,009,491 2,883,972 5,057,444
NET ASSET VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $3.59 $1.80 $20.79 $17.00 $15.10 $13.42
====== ====== ====== ====== ====== ======
</TABLE>
See notes to financial statements.
Annual Report -----
<PAGE>
WASATCH FUNDS-STATEMENTS OF OPERATIONS
- --------------------------------------
FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
MICRO-CAP AGGRESSIVE U.S.
MICRO-CAP VALUE EQUITY GROWTH MID-CAP TREASURY
FUND FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 248,387 $ 33,552 226,617 $ 517,596 $ 100,330 $1,259,422
Dividends 51,750 70,760 1,268,002 1,035,943 20,946 -
------------- ------------- ------------- ------------- ------------- -------------
300,137 104,312 1,494,619 1,553,539 121,276 1,259,422
------------- ------------- ------------- ------------- ------------- -------------
EXPENSES:
Investment advisory fee 2,777,499 168,330 1,691,806 1,652,942 716,723 108,334
Shareholder servicing fees 310,267 43,391 378,098 279,510 173,975 33,529
Fund administration and accounting fees 205,047 19,726 249,791 244,057 84,658 31,997
Reports to shareholders 85,498 4,320 82,482 101,827 43,178 9,063
Federal and state registration fees 35,949 17,450 27,222 34,234 23,012 13,123
Custody fees 21,114 16,866 19,392 19,585 23,657 2,059
Legal fees 16,940 5,354 20,749 17,682 7,514 1,496
Audit fees 10,605 3,557 12,205 11,954 6,112 3,696
Directors' fees 5,264 298 6,779 5,790 2,472 554
Other 13,993 3,140 18,509 18,070 7,314 2,130
------------- ------------- ------------- ------------- ------------- -------------
Total expenses before waiver 3,482,176 282,432 2,507,033 2,385,651 1,088,615 205,981
Waiver of fees by advisor (10,302) (63,716) - - (85,203) (43,480)
------------- ------------- ------------- ------------- ------------- -------------
Net expenses 3,471,874 218,716 2,507,033 2,385,651 1,003,412 162,501
------------- ------------- ------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) (3,171,737) (114,404) (1,012,414) (832,112) (882,136) 1,096,921
------------- ------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments
Nonaffiliated 17,884,401 (740,687) 22,089,983 12,906,466 5,994,474 43,377
Affiliated 249,121 - 62,123 (4,493,659) - -
------------- ------------- ------------- ------------- ------------- -------------
18,133,522 (740,687) 22,152,106 8,412,807 5,994,474 43,377
Change in unrealized appreciation/
depreciation on investments (27,231,381) (2,447,495) (50,889,169) (41,295,055) (19,174,751) 4,676,270
------------- ------------- ------------- ------------- ------------- -------------
Net gain (loss) on investments (9,097,859) (3,188,182) (28,737,063) (32,882,248) (13,180,277) 4,719,647
------------- ------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(12,269,596) $(3,302,586) $(29,749,477) $(33,714,360) $(14,062,413) $5,816,568
============= ============= ============= ============= ============= =============
</TABLE>
See notes to financial statements.
<F1>Inception date of Fund was December 17, 1997.
- ----- Annual Report
<PAGE>
WASATCH FUNDS-STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------
FOR THE YEAR ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
MICRO-CAP
VALUE FUND
DECEMBER 17, 1997
MICRO-CAP FUND THROUGH AGGRESSIVE EQUITY FUND
1998 1997 SEPTEMBER 30, 1998 1998 1997
-------------------------------------------------------------------------
<C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (3,171,737) $(1,458,430) $(114,404) $(1,012,414) $(757,045)
Net realized gain (loss) on
investments 18,133,522 13,149,891 (740,687) 22,152,106 31,513,784
Change in unrealized appreciation/
depreciation on investments (27,231,381) 24,309,512 (2,447,495) (50,889,169) 16,058,451
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations (12,269,596) 36,000,973 (3,302,586) (29,749,477) 46,815,190
DIVIDENDS PAID FROM:
Net investment income - - - - -
Net realized gains (9,713,791) (4,659,756) - (22,723,111) (10,767,566)
------------- ------------- ------------- ------------- -------------
(9,713,791) (4,659,756) - (22,723,111) (10,767,566)
CAPITAL SHARE TRANSACTIONS:
Shares sold 57,814,317 91,645,382 32,497,796 9,579,918 16,269,246
Shares issued to holders in
reinvestment of dividends 9,626,752 4,568,891 - 21,364,566 10,048,278
------------- ------------- ------------- ------------- -------------
67,441,069 96,214,273 32,497,796 30,944,484 26,317,524
Shares redeemed (85,832,088) (63,651,794) (14,889,434) (43,713,903) (126,719,050)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) (18,391,019) 32,562,479 17,608,362 (12,769,419) (100,401,526)
------------- ------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (40,374,406) 63,903,696 14,305,776 (65,242,007) (64,353,902)
NET ASSETS:
Beginning of period 157,907,450 94,003,754 - 188,965,085 253,318,987
------------- ------------- ------------- ------------- -------------
End of period $117,533,044 $157,907,450 $14,305,776 $123,723,078 $188,965,085
============= ============= ============= ============= =============
Undistributed net investment income
included in net assets at end of
period - - - $5,203 $64,216
============= ============= ============= ============= =============
</TABLE>
See notes to financial statements.
- ----- Annual Report
<PAGE>
WASATCH FUNDS-STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------
FOR THE YEAR ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
GROWTH FUND MID-CAP FUND U.S. TREASURY FUND
1998 1997 1998 1997 1998 1997
---------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (832,112) $ 419,935 $ (882,136) $(1,254,417) $ 1,096,921 $ 597,921
Net realized gain on
investments 8,412,807 14,521,194 5,994,474 15,258,686 43,377 22,912
Change in unrealized appreciation/
depreciation on investments (41,295,055) 16,863,575 (19,174,751) 1,592,547 4,676,270 560,378
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations (33,714,360) 31,804,704 (14,062,413) 15,596,816 5,816,568 1,181,211
DIVIDENDS PAID FROM:
Net investment income (192,244) (342,214) - - (640,620) (194,393)
Net realized gains (10,839,657) (6,352,213) (6,627,299) (15,375) - -
------------ ------------ ------------ ------------ ------------ ------------
(11,031,901) (6,694,427) (6,627,299) (15,375) (640,620) (194,393)
CAPITAL SHARE TRANSACTIONS:
Shares sold 124,006,384 68,453,640 29,634,796 31,875,753 63,988,746 7,961,845
Shares issued to holders in
reinvestment of dividends 10,904,028 6,494,354 6,518,196 15,089 635,951 191,694
------------ ------------ ------------ ------------ ------------ ------------
134,910,412 74,947,994 36,152,992 31,890,842 64,624,697 8,153,539
Shares redeemed (72,453,532) (68,857,722) (49,152,641) (98,719,877) (13,149,317) (5,362,196)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) 62,456,880 6,090,272 (12,999,649) (66,829,035) 51,475,380 2,791,343
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 17,710,619 31,200,549 (33,689,361) (51,247,594) 56,651,328 3,778,161
NET ASSETS:
Beginning of period 135,437,191 104,236,642 77,242,736 128,490,330 11,205,045 7,426,884
------------ ------------ ------------ ------------ ------------ ------------
End of period $153,147,810 $135,437,191 $43,553,375 $77,242,736 $67,856,373 $11,205,045
============ ============ ============ ============ ============ ============
Undistributed net investment income
included in net assets at end of
period $10,524 $159,222 - - $930,246 $473,945
============ ============ ============ ============ ============ ============
See notes to financial statements.
</TABLE>
- ----- Annual Report
<PAGE>
MICRO-CAP FUND-FINANCIAL HIGHLIGHTS
- ------------------------------------
YEAR ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
JUNE 19, 1995<F1> THROUGH
1998 1997 1996 SEPTEMBER 30, 1995
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $4.29 $3.15 $2.72 $2.00
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (0.10) (0.04) (0.03) -
Net realized and unrealized
gains (losses) on securities (0.27) 1.36 0.46 0.72
--------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS (0.37) 1.32 0.43 0.72
LESS DISTRIBUTIONS:
Distributions from
capital gains (0.33) (0.18) - -
--------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.33) (0.18) - -
--------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $3.59 $4.29 $3.15 $2.72
========= ========= ========= =========
TOTAL RETURN<F2> (8.75)% 44.58% 15.81% 36.00%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $117,533 $157,907 $94,004 $25,368
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 2.50% 2.50% 2.50% 2.50%<F3>
Expenses, before waivers
and reimbursements 2.51% 2.58% 2.67% 3.40%<F3>
Net investment income
(loss), net of waivers
and reimbursements (2.28)% (1.64)% (1.53)% (0.76)% <F3>
Net investment income
(loss), before waivers
and reimbursements (2.29)% (1.72)% (1.70)% (1.66)% <F3>
Portfolio turnover rate 81% 99% 84% 0%
</TABLE>
<F1> Commencement of operations.
<F2> Not annualized for periods less than a year.
<F3> Annualized.
See notes to financial statements.
- ----- Annual Report
<PAGE>
MICRO-CAP VALUE FUND-FINANCIAL HIGHLIGHTS
- ------------------------------------------
DECEMBER 17, 1997<F1> THROUGH
SEPTEMBER 30, 1998
- --------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $2.00
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (0.01)
Net realized and unrealized
gains (losses) on securities (0.19)
---------
TOTAL FROM INVESTMENT
OPERATIONS (0.20)
LESS DISTRIBUTIONS:
Distributions from
capital gains -
---------
TOTAL DISTRIBUTIONS -
---------
NET ASSET VALUE,
END OF PERIOD $1.80
=========
TOTAL RETURN<F2> (10.00)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $14,306
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.95%<F3>
Expenses, before waivers
and reimbursements 2.52%<F3>
Net investment income
(loss), net of waivers
and reimbursements (1.02)% <F3>
Net investment income
(loss), before waivers
and reimbursements (1.59)%<F3>
Portfolio turnover rate 114%
<F1> Commencement of operations.
<F2> Not annualized for periods less than a year.
<F3> Annualized.
See notes to financial statements.
Annual Report -----
<PAGE>
AGGRESSIVE EQUITY FUND-FINANCIAL HIGHLIGHTS
- --------------------------------------------
YEAR ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $29.73 $24.17 $25.00 $19.96 $19.75
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (0.17) (0.12) (0.18) (0.04) (0.02)
Net realized and unrealized
gains (losses) on securities (5.08) 6.90 (0.11) 6.59 1.33
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS (5.25) 6.78 (0.29) 6.55 1.31
LESS DISTRIBUTIONS:
Distributions from
capital gains (3.69) (1.22) (0.54) (1.51) (1.10)
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (3.69) (1.22) (0.54) (1.51) (1.10)
--------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $20.79 $29.73 $24.17 $25.00 $19.96
========= ========= ========= ========= =========
TOTAL RETURN (19.13)% 29.45% (1.09)% 35.19% 6.85%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $123,723 $188,965 $253,319 $305,311 $46,369
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.48% 1.50% 1.50% 1.47% 1.50%
Expenses, before waivers
and reimbursements 1.48% 1.54% 1.50% 1.47% 1.52%
Net investment income
(loss), net of waivers
and reimbursements (0.60)% (0.39)% (0.65)% (0.37)% (0.67)%
Net investment income
(loss), before waivers
and reimbursements (0.60)% (0.43)% (0.65)% (0.37)% (0.69)%
Portfolio turnover rate 56% 48% 73% 29% 64%
</TABLE>
See notes to financial statements.
- ----- Annual Report
<PAGE>
GROWTH FUND-FINANCIAL HIGHLIGHTS
- --------------------------------
YEAR ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $22.34 $17.57 $15.97 $15.30 $15.68
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (0.09) 0.08 0.07 0.02 (0.14)
Net realized and unrealized
gains (losses) on securities (3.60) 6.07 1.87 4.59 0.71
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS (3.69) 6.15 1.94 4.61 0.57
LESS DISTRIBUTIONS:
Dividends from
net investment income (0.03) (0.07) (0.05) - -
Distributions from
capital gains (1.62) (1.31) (0.29) (3.94) (0.95)
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (1.65) (1.38) (0.34) (3.94) (0.95)
--------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $17.00 $22.34 $17.57 $15.97 $15.30
========= ========= ========= ========= =========
TOTAL RETURN (17.49)% 37.58% 12.39% 39.76% 3.75%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $153,148 $135,437 $104,237 $53,533 $11,219
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.44% 1.50% 1.50% 1.50% 1.50%
Expenses, before waivers
and reimbursements 1.44% 1.50% 1.51% 1.58% 1.64%
Net investment income
(loss), net of waivers
and reimbursements (0.50)% 0.44% 0.40% 0.29% (0.51)%
Net investment income
(loss), before waivers
and reimbursements (0.50)% 0.44% 0.39% 0.21% (0.64)%
Portfolio turnover rate 63% 81% 62% 88% 163%
</TABLE>
See notes to financial statements.
Annual Report -----
<PAGE>
MID-CAP FUND-FINANCIAL HIGHLIGHTS
- ----------------------------------
YEAR ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $21.85 $17.95 $18.61 $11.02 $10.51
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (0.31) (0.35) (0.26) (0.02) (0.27)
Net realized and unrealized
gains (losses) on securities (4.44) 4.25 (0.21) 7.64 0.78
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS (4.75) 3.90 (0.47) 7.62 0.51
LESS DISTRIBUTIONS:
Distributions from
capital gains (2.00) - (0.19) (0.03) -
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (2.00) - (0.19) (0.03) -
--------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $15.10 $21.85 $17.95 $18.61 $11.02
========= ========= ========= ========= =========
TOTAL RETURN (22.07)% 21.75% (2.54)% 69.24% 4.85%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $43,553 $77,243 $128,490 $98,605 $1,091
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.75% 1.75% 1.75% 1.75% 1.75%
Expenses, before waivers
and reimbursements 1.90% 1.89% 1.81% 1.94% 3.33%
Net investment income
(loss), net of waivers
and reimbursements (1.54)% (1.48)% (1.27)% (0.71)% (1.19)%
Net investment income
(loss), before waivers
and reimbursements (1.69)% (1.62)% (1.33)% (0.90)% (2.76)%
Portfolio turnover rate 91% 103% 121% 46% 213%
</TABLE>
See notes to financial statements.
- ----- Annual Report
<PAGE>
U.S. TREASURY FUND-FINANCIAL HIGHLIGHTS
- ----------------------------------------
YEAR ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.32 $10.21 $10.50 $10.09 $10.42
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income 0.27 0.61 0.44 0.56 0.55
Net realized and unrealized
gains (losses) on securities 2.39 0.73 0.01 0.44 (0.40)
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 2.66 1.34 0.45 1.00 0.15
LESS DISTRIBUTIONS:
Dividends from
net investment income (0.56) (0.23) (0.74) (0.59) (0.46)
Distributions from
capital gains - - - - (0.02)
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.56) (0.23) (0.74) (0.59) (0.48)
--------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $13.42 $11.32 $10.21 $10.50 $10.09
========= ========= ========= ========= =========
TOTAL RETURN 24.30% 13.23% 4.42% 10.46% 1.51%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $67,856 $11,205 $7,427 $4,035 $3,250
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.75% 0.75% 0.93% 1.00% 1.00%
Expenses, before waivers
and reimbursements 0.95% 1.22% 1.67% 1.59% 1.39%
Net investment income
(loss), net of waivers
and reimbursements 5.06% 5.97% 5.21% 5.88% 5.15%
Net investment income
(loss), before waivers
and reimbursements 4.86% 5.50% 4.47% 5.29% 4.76%
Portfolio turnover rate 5% 19% 30% 43% 45%
</TABLE>
See notes to financial statements.
Annual Report -----
<PAGE>
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------
SEPTEMBER 30, 1998
1. ORGANIZATION
- ----------------
Wasatch Funds, Inc. ("Wasatch Funds" or the "Company") was incorporated under
Utah law on November 18, 1986, and was reincorporated as a Minnesota corporation
in January 1998. The Company is an open-end, registered management investment
company under the Investment Company Act of 1940. The Micro-Cap, Micro-Cap
Value, Aggressive Equity, Growth and Mid-Cap Funds are non-diversified
portfolios and the Wasatch-Hoisington U.S. Treasury ("U.S. Treasury") Fund is a
diversified portfolio of Wasatch Funds. 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, the Micro-Cap
Fund commenced operations on June 19, 1995, and the Micro-Cap Value Fund
commenced operations on December 17, 1997. The Micro-Cap, Micro-Cap Value,
Aggressive Equity, Growth, Mid-Cap and U.S. Treasury Funds (the "Funds") have
entered into an investment advisory agreement with Wasatch Advisors, Inc. (the
"Manager") as investment advisor.
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.
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.
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.
FEDERAL INCOME TAXES-It is the Funds' policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all taxable income to shareholders.
EXPENSES-The Funds are charged for expenses that are directly attributable to
them, such as advisory and custodian fees. Expenses that are not directly
attributable to a portfolio are allocated among the portfolios in proportion to
their respective net assets.
USE OF MANAGEMENT ESTIMATES-The preparation of financial statements in
conformity with generally accepted accounting principles requires that
- ----- Annual Report
<PAGE>
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------
SEPTEMBER 30, 1998
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 and paid 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 among paid-in capital in excess of par value,
undistributed net investment income and undistributed net realized gain (loss)
on investments. The Funds also utilize earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid deduction
for income tax purposes. Accordingly, at September 30, 1998, reclassifications
were recorded to increase undistributed net invest ment income by $3,171,737,
$114,404, $953,401, $875,658 and $882,136 and decrease undistributed net
realized gain on investments by $5,912,843, $0, $5,299,045, $3,333,110 and
$3,025,343 and increase/(decrease) paid-in capital in excess of par by
$2,741,106, $(114,404), $4,345,644, $2,457,452 and $2,143,207, for the Micro-
Cap, Micro-Cap Value, Aggressive Equity, Growth and Mid-Cap Funds, respectively.
- ------------------------------------------------------------------------------
4. CAPITAL STOCK
- -----------------
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1998
MICRO-CAP AGGRESSIVE U.S.
MICRO-CAP VALUE EQUITY GROWTH MID-CAP TREASURY
FUND FUND<F1> FUND FUND FUND FUND
---------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Shares sold 13,775,008 14,525,643 366,524 5,843,066 1,650,493 5,095,678
Dividends
reinvested 2,630,260 - 904,895 557,466 416,232 54,823
Shares redeemed (20,505,248) (6,599,744) (1,677,752) (3,453,876) (2,717,728) (1,082,970)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) (4,099,980) 7,925,899 (406,333) 2,946,656) (651,003) 4,067,531
============ ============ ============ ============ ============ ============
</TABLE>
<F1>Inception date of Fund was December 17, 1997.
Annual Report -----
<PAGE>
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1997
AGGRESSIVE U.S.
MICRO-CAP EQUITY GROWTH MID-CAP TREASURY
FUND FUND FUND FUND FUND
-------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Shares sold 24,988,962 661,672 3,579,929 1,705,312 747,986
Dividends
reinvested 1,548,777 430,518 385,650 817 18,067
Shares redeemed (19,517,552) (5,215,254) (3,836,178) (5,329,545) (503,742)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) 7,020,187 (4,123,064) 129,401 (3,623,416) 262,311
============ ============ ============ ============ ============
</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, 1998 are summarized
below:
<TABLE>
<CAPTION>
MICRO-CAP AGGRESSIVE U.S.
MICRO-CAP VALUE EQUITY GROWTH MID-CAP TREASURY
FUND FUND<F1> FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
Purchases $106,211,972 $33,016,804 $88,273,260 $138,868,801 $51,164,685 -
Sales 108,932,600 16,161,807 127,918,615 97,022,145 71,106,407 -
</TABLE>
<F1>Inception date of Fund was December 17, 1997.
- ------------------------------------------------------------------------------
The only purchases and sales of U.S. government securities occurred in the
U.S. Treasury Fund and were $51,689,220 and $979,614, 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 U.S. Treasury Fund's
basis in investments is the same for income tax and financial reporting
purposes. The Micro-Cap, Micro-Cap Value, Aggressive Equity, Growth and Mid-Cap
Funds' tax basis in their investments is $114,544,481, $16,893,519,
$115,817,229, $165,718,288 and $44,266,098, respectively. At September 30, 1998,
the U.S. Treasury Fund had an accumulated net realized capital loss carryover of
$675 expiring in 2003. At September 30, 1998, the Micro-Cap Value Fund had a
deferred Post-October capital loss of $731,560. To the extent the U.S. Treasury
and Micro-Cap Value Funds realize future net capital gains, taxable
distributions to shareholders will be offset by any unused capital loss
carryover or Post-October loss deferral. For the year ended September 30, 1998,
0.2%, 100.0%, 25.8% and 0.8% of dividends from taxable income, including short-
term capital gains, for the Micro-Cap, Aggressive Equity, Growth and Mid-Cap
Funds, respectively, qualify for the dividends received deduction available to
corporate shareholders.
The Funds hereby designate approximately $9,174,076, $21,007,703, $7,251,558
and $3,173,631 as a capital gain dividend for the Micro-Cap, Aggressive Equity,
Growth and Mid-Cap Funds, respectively, for the purpose of the dividends paid
deduction.
- ----- Annual Report
<PAGE>
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------
SEPTEMBER 30, 1998
As of September 30, 1998, gross unrealized appreciation and (depreciation) for
federal income tax purposes were as follows:
<TABLE>
<CAPTION>
MICRO-CAP AGGRESSIVE U.S.
MICRO-CAP VALUE EQUITY GROWTH MID-CAP TREASURY
FUND FUND<F1> FUND FUND FUND FUND
---------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Unrealized
appreciation $17,249,142 $575,521 $22,636,334 $17,052,943 $6,080,554 $5,208,812
Unrealized
depreciation (14,038,464) (3,047,804) (14,664,967) (33,410,593) (6,616,249) -
------------ ------------ ------------ ------------ ------------ ------------
Net unrealized
appreciation
(depreciation) $3,210,678 $(2,472,283) $7,971,367 $(16,357,650) $(535,695) $5,208,812
============ ============ ============ ============ ============ ============
</TABLE>
<F1>Inception date of Fund was December 17, 1997.
- ------------------------------------------------------------------------------
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 year ended
September 30, 1998, management fees for the Micro-Cap, Micro-Cap Value,
Aggressive Equity, Growth, Mid-Cap and U.S. Treasury Funds were 2.0%, 1.5%,
1.0%, 1.0%, 1.25% and 0.5% of the daily net assets of each portfolio,
respectively. The Manager has voluntarily agreed to limit the expenses of the
Micro-Cap, Micro-Cap Value, Aggressive Equity, Growth, Mid-Cap and U.S. Treasury
Funds to 2.50%, 1.95%, 1.50%, 1.50%, 1.75% and 0.75% of average net assets
computed on a daily basis, respectively. For the year ended September 30, 1998,
the Manager reimbursed $10,302 for the Micro-Cap Fund, $63,716 for the Micro-Cap
Value Fund, $85,203 for the Mid-Cap Fund and $43,480 for the U.S. Treasury Fund.
- ------------------------------------------------------------------------------
7. TRANSACTIONS WITH AFFILIATES
- --------------------------------
The following is an analysis of transactions for the year ended September 30,
1998 in the Micro-Cap, Aggressive Equity and Growth Funds with "affiliated
companies" as defined by the Investment Company Act of 1940:
Annual Report -----
<PAGE>
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------
SEPTEMBER 30, 1998
MICRO-CAP FUND
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF GAIN
DIVIDENDS REALIZED
SHARE ACTIVITY CREDITED ON SALE
----------------------------------------------------- TO INCOME OF SHARES
BALANCE BALANCE IN FISCAL IN FISCAL
SECURITY NAME 9/30/97 PURCHASES SALES 9/30/98 1998 1998
- --------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
AmSurg Corp., Class B - 253,500 - 253,500 - -
First Cash, Inc. 520,000 16,000 57,000 479,000 - $218,394
ICU Medical, Inc. 143,400 271,600 - 415,000 - -
National Dentex Corp. 268,850 14,900 15,000 268,750 - 30,727
Travis Boats & Motors, Inc. 208,200 1,000 - 209,200<F1> - -
</TABLE>
<F1> NO LONGER AN AFFILIATED COMPANY AS OF SEPTEMBER 30, 1998.
- ------------------------------------------------------------------------------
AGGRESSIVE EQUITY FUND
<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 9/30/97 PURCHASES SALES 9/30/98 1998 1998
- --------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
National Dentex Corp. 291,300 2,300 45,000 248,600 - $128,638
Travis Boats & Motors, Inc. 87,750 146,700 21,200 213,250 - (66,515)
</TABLE>
- ------------------------------------------------------------------------------
GROWTH FUND
<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 9/30/97 PURCHASES SALES 9/30/98 1998 1998
- --------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
First Cash, Inc. 300,000 142,200 101,500 340,700 - $ 362,462
Friedman's, Inc. 291,400 506,700 61,025 737,075 - (218,525)
Home Health Corp. of America, Inc. 475,606 648,075 525,000 598,681 - (4,637,596)
National Dentex Corp. 187,000 - - 187,000 - -
World Acceptance Corp. 291,486 828,000 - 1,119,486 - -
</TABLE>
- ----- Annual Report
<PAGE>
WASATCH FUNDS-REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------------
The Shareholders and
Board of Directors of
Wasatch Funds, Inc.:
We have audited the accompanying statements of assets and liabilities of Wasatch
Funds, Inc. (a Minnesota corporation, which includes the Wasatch Micro-Cap Fund,
Wasatch Micro-Cap Value Fund, Wasatch Aggressive Equity Fund, Wasatch Growth
Fund, Wasatch Mid-Cap Fund and Wasatch-Hoisington U.S. Treasury Fund), including
the schedules of investments, as of September 30, 1998, 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, except for the
Wasatch Micro-Cap Value Fund which is for the period from inception on December
17, 1997 to September 30, 1998, and the financial highlights for each of the
periods indicated therein. 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.
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, 1998, 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 Funds, Inc. as of September 30, 1998, 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, except for the Wasatch Micro-Cap Value Fund which is
for the period from inception on December 17, 1997 to September 30, 1998, and
the financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
/s/Arthur Andersen LLP
Arthur Andersen LLP
Milwaukee, Wisconsin
October 26, 1998
Annual Report -----
<PAGE>
GUIDE TO UNDERSTANDING FINANCIAL STATEMENTS
- --------------------------------------------
Wasatch Funds provides reports to shareholders twice a year. The Annual
Report is for the Funds' fiscal year which ends September 30th. The Semi-Annual
Report is for the six months ending March 31st. These reports provide
shareholders with important information that will help them evaluate the
management and performance of their investment. It is the desire of Wasatch
Funds to help shareholders stay in tune with their investments. If you have any
questions about the information in this report, a Shareholder Services
Representative will be happy to assist you when you call 1 (800) 551-1700.
SCHEDULE OF INVESTMENTS
- ------------------------
The holdings of each Wasatch Fund are detailed in the "Schedule of
Investments." This section provides a snapshot of the securities each Fund was
invested in on the last day of the reporting period. The Wasatch Equity Funds
invest primarily in COMMON STOCKS of companies which are categorized under a
variety of industries and will typically have only minor holdings in SHORT-TERM
INVESTMENTS. The Wasatch-Hoisington U.S. Treasury Fund invests primarily in U.S.
Treasury securities.
STATEMENTS OF ASSETS
AND LIABILITIES
- ----------------
These financial statements show the ASSETS and LIABILITIES of a Fund on the
last day of the reporting period. A Fund's ASSETS include the value of
securities owned, amounts receivable for shareholder subscriptions (purchases of
Fund shares), securities sold, interest and dividends, prepaid expenses and
reimbursements by the Advisor. LIABILITIES are amounts owed for shareholder
redemptions, securities purchased, investment advisory fees and other expenses.
Totaling up the assets and subtracting the liabilities results in a Fund's NET
ASSETS.
NET ASSETS consist of capital stock, paid-in capital in excess of par,
undistributed net investment income, undistributed net realized gain or loss on
investments and net unrealized appreciation or depreciation on investments.
CAPITAL STOCK is stock authorized by a company's charter and having par value,
stated value or no par value. Par value is set by the company issuing the shares
and has no relation to Net Asset Value. The par value of one share of each
Wasatch Fund is $.001. PAID-IN CAPITAL IN EXCESS OF PAR is capital received from
shareholders in exchange for Fund shares that exceeds the par value of the
shares. For example, if you bought one share of a Fund for $10, $.001 would show
as "Capital stock" on the books of the Fund, and $9.999 would be accounted for
under "Paid-in capital in excess of par." UNDISTRIBUTED NET INVESTMENT INCOME is
the amount of net investment income earned by a Fund since inception that has
not been paid to shareholders as a dividend. UNDISTRIBUTED NET REALIZED GAIN
(LOSS) ON INVESTMENTS is the amount of net realized gains or losses generated by
a Fund since inception that have not been distributed to shareholders in the
form of a capital gains distribution. A gain or loss is realized when a security
is sold by a Fund. NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS is
the change in value from the purchase price of securities a Fund continues to
hold.
The number of shares a Fund is AUTHORIZED to sell can be found under CAPITAL
STOCK, $.001 PAR VALUE. How many of those shares are owned by
- ----- Annual Report
<PAGE>
GUIDE TO UNDERSTANDING FINANCIAL STATEMENTS
- --------------------------------------------
shareholders is indicated as ISSUED AND OUTSTANDING.
NET ASSET VALUE (NAV) shows the value of one outstanding share of a Fund on
the date of the report. A Fund's share price (NAV) is calculated by dividing the
value of all securities and other assets owned by a Fund, less the liabilities
charged to that Fund, by the number of Fund shares outstanding. The NAV is
calculated at the close of business of the New York Stock Exchange on each day
the Exchange is open for trading. Please see the current Wasatch Funds
Prospectus for more information about how NAVs are calculated. Information about
how the NAV is affected by a Fund's operation can be found in this section under
"Financial Highlights" on page 62.
STATEMENTS OF OPERATIONS
- -------------------------
STATEMENTS OF OPERATIONS show investment income and expenses for each Fund as
well as realized gains or losses from securities sold and the change in
unrealized appreciation or depreciation in the value of a Fund's current
holdings for a specific period of time.
INVESTMENT INCOME shows INTEREST and DIVIDENDS earned from interest-bearing
and dividend-paying securities in a Fund's portfolio.
EXPENSES show the various fees and expenses paid out of a Fund's assets such
as the fee paid to Wasatch Advisors, the Funds' investment advisor. Additional
fees include shareholder servicing, fund administration and accounting, custody
of fund assets, federal and state registration, legal counsel, auditing and
directors' fees. The Funds also bear the cost of printing and mailing
statements, prospectuses, annual reports and semi-annual reports to
shareholders.
NET INVESTMENT INCOME (LOSS) is the amount of dividends and interest income
earned on securities held by a Fund, less the Fund's expenses.
NET REALIZED GAIN (LOSS) ON INVESTMENTS is the net gain or loss on securities
a Fund has sold. CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON INVESTMENTS
is the change in value of securities a Fund continues to hold.
NET GAIN (LOSS) ON INVESTMENTS is the result of changes in market value
of securities sold and securities held by a Fund.
STATEMENTS OF CHANGES
IN NET ASSETS
- --------------
NET ASSETS are a Fund's remaining assets after taking into consideration any
liabilities. STATEMENTS OF CHANGES IN NET ASSETS show the increase or decrease
in a Fund's net assets during the reporting period. Investment operations,
dividends and capital share transactions affect a Fund's net assets. OPERATIONS
is a summary of the STATEMENTS OF OPERATIONS. It includes investment income or
loss, net realized gain or loss on a Fund's investments as well as the change in
unrealized appreciation or depreciation in the value of a Fund's investments.
DIVIDENDS are distributed by Wasatch Funds to shareholders when Fund
investments have earned income in excess of net expenses or when capital gains
in excess of capital losses are realized from the sale of securities. Most
shareholders choose to reinvest their dividends and capital gains distributions.
Each Fund is required by Internal Revenue Service (IRS) regulations to
distribute substantially all of its net investment income and capital gains to
Annual Report -----
<PAGE>
GUIDE TO UNDERSTANDING FINANCIAL STATEMENTS
- --------------------------------------------
shareholders in order to retain its status as a "regulated investment company."
CAPITAL SHARE TRANSACTIONS are any transactions involving shares of a Fund,
including the selling of Fund shares, shares issued by a Fund to shareholders
for the reinvestment of dividends and share redemptions.
FINANCIAL HIGHLIGHTS
- ---------------------
The FINANCIAL HIGHLIGHTS tables contain important historical operating
information that you may find useful in making decisions or understanding the
performance of your Wasatch Funds investment.
NET ASSET VALUE (NAV) is defined in this section under "Statements of Assets
and Liabilities" on page 61. The difference between the Net asset value,
beginning of period and the Net asset value, end of period in the Financial
Highlights tables is the change in value of a Fund's shares over the reporting
period, but not its total return.
INCOME (LOSS) FROM INVESTMENT OPERATIONS shows how the NAV was affected by a
Fund's operations on a per share basis. NET INVESTMENT INCOME (LOSS) is the per
share amount of dividends and interest income earned on securities held by a
Fund, less the Fund's expenses. NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
SECURITIES is the per share increase or decrease in value of the securities a
Fund holds and has sold during the reporting period. Gains or (losses) are
realized when securities are sold. Gains or (losses) are unrealized when
securities increase or decrease in value but are not sold.
DISTRIBUTIONS are the per share amount that a Fund paid to shareholders from
net investment income and net realized gains.
TOTAL RETURN is the percentage increase or decrease in the value of an
investment over a stated period of time. A total return percentage includes both
changes in unrealized and realized gains and income. For the purposes of
calculating total return, it is assumed that dividends and distributions are
reinvested at the NAV on the day of the distribution. A FUND'S TOTAL RETURN
CANNOT BE COMPUTED DIRECTLY FROM THE FINANCIAL HIGHLIGHTS TABLES.
SUPPLEMENTAL DATA AND RATIOS are provided to help you better understand your
investment. NET ASSETS, END OF PERIOD, are the net assets of a Fund on the
reporting date. RATIO OF EXPENSES TO AVERAGE NET ASSETS is the total of a Fund's
operating expenses divided by its average net assets for the stated period.
RATIO OF NET INCOME (LOSS) TO AVERAGE NET ASSETS is a Fund's net investment
income (loss) divided by its average net assets for the stated period. PORTFOLIO
TURNOVER RATE is a measure of the annual amount of a Fund's buying and selling
activity. It is computed by dividing total purchases or sales, whichever is
less, by the average monthly market value of a Fund's portfolio securities. This
calculation does not include securities held by any Fund with a maturity date of
less than 12 months.
- ----- Annual Report
<PAGE>
NOTES
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Annual Report -----
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Annual Report -----
<PAGE>
