TABLE OF CONTENTS
- -----------------
LETTER FROM THE INVESTMENT ADVISOR............................................1
MID-CAP FUND PORTFOLIO SUMMARY................................................4
Six Month Review.............................................................4
Outlook......................................................................5
Average Annual Total Returns & Ten Largest Holdings..........................5
MICRO-CAP FUND PORTFOLIO SUMMARY..............................................6
Six Month Review.............................................................6
Outlook......................................................................7
Average Annual Total Returns & Ten Largest Holdings..........................7
AGGRESSIVE EQUITY FUND PORTFOLIO SUMMARY......................................8
Six Month Review.............................................................8
Outlook......................................................................9
Average Annual Total Returns & Ten Largest Holdings..........................9
MICRO-CAP VALUE FUND PORTFOLIO SUMMARY.......................................10
First Quarter Review........................................................10
Outlook.....................................................................11
Average Annual Total Returns & Ten Largest Holdings.........................11
GROWTH FUND PORTFOLIO SUMMARY................................................12
Six Month Review............................................................12
Outlook.....................................................................13
Average Annual Total Returns & Ten Largest Holdings.........................13
WASATCH-HOISINGTON U.S. TREASURY FUND PORTFOLIO SUMMARY......................14
Six Month Review............................................................14
Outlook.....................................................................14
Average Annual Total Returns & Holdings/Maturity Date.......................15
SCHEDULE OF INVESTMENTS......................................................16
STATEMENTS OF ASSETS AND LIABILITIES.........................................36
STATEMENTS OF OPERATIONS.....................................................38
STATEMENTS OF CHANGES IN NET ASSETS..........................................40
FINANCIAL HIGHLIGHTS.........................................................44
NOTES TO FINANCIAL STATEMENTS................................................56
RESULTS OF THE SHAREHOLDER MEETING...........................................61
Semi-Annual Report ----------
(LOGO)
WASATCH FUNDS, INC.
68 South Main Street
Salt Lake City, UT 84101
1 (800) 551-1700
LETTER FROM THE INVESTMENT ADVISOR
MARCH 31, 1998
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DEAR SHAREHOLDERS:
- ------------------
As many Wasatch Funds shareholders have seen, a year can make a big
difference. You've heard the old saying, "When the going gets tough, the tough
get going." As long-term stock market investors we have a slightly different
take-we say, "When the going gets tough, the tough stay put." Last year at this
time when both stock and bond funds were down we encouraged shareholders to hold
onto their investments and remain focused on their long-term goals. Those who
did have seen their Wasatch Funds investments appreciate in value.
WASATCH EQUITY FUNDS
- --------------------
On the surface the outlook for 1997 appeared dismal for investors in the
stocks of small and mid-size companies. As long time investors in this area, we
saw positive signs that led us to believe 1997 would be a better year for the
stocks of smaller companies and the Wasatch equity funds. In their favor,
smaller companies had superior earnings growth prospects and their stock prices
were as attractive as at any time in history. Throughout the year the returns of
small company stocks continued to be overshadowed by large company stocks and
the stock market reacted to a number of influences. In spite of volatility, the
Wasatch equity funds benefited from the research team's carefully chosen
investments in companies with outstanding earnings growth potential and because
the team took advantage of numerous opportunities to buy stocks at reasonable
prices.
One of the highlights of the past six months was opening the Wasatch Micro-Cap
Value Fund on December 17, 1997. The new Fund seeks long-term growth of capital
through investments in companies whose stocks are selling at a substantial
discount to the company's underlying value. Within the universe of micro-cap
companies, we are finding many exciting value-oriented investment opportunities.
We feel the Fund is off to a great start with a return of 16.5% since inception.
Please see page 10 for commentary about the Micro-Cap Value Fund.
We are pleased to announce that coverage of the Wasatch Growth Fund has been
picked up by Morningstar, Inc., an organization that tracks the performance of
mutual funds. The Fund was also honored by being placed on Schwab's Mutual Fund
Select List.(TM) The Growth Fund was placed on the List by outperforming similar
funds in the Small-Cap Blend category. Funds were judged on criteria developed
by Schwab's Mutual Fund Research Group to evaluate five year returns relative to
risk using performance data provided by Morningstar, Inc.
The Wasatch Micro-Cap Fund produced an outstanding return of 70.3% for the
year ended March 31, 1998. The Fund was ranked in the top 5% for one year total
return in 1997 from among 227 small-cap growth funds tracked by Morningstar.
GENERAL OUTLOOK
- ---------------
The Wasatch equity funds are off to a strong start in 1998. We can't predict
how the stock market will behave this year or whether it will continue its
remarkable upward march. We are optimistic about the prospects of the equity
funds because of the excellent opportunities we perceive for investing in high-
quality small and mid-size companies.
WASATCH FIXED INCOME FUND
- -------------------------
Like the stock market, the bond market also had its ups and downs in 1997.
Early in the year bond prices were affected by worries that inflation might heat
up and the Federal Reserve Board would raise interest rates. Later in the year
there was concern over how the Asian economic crisis might affect the U.S.
economy. With its investments in 30-year Treasury Bonds, the Wasatch-Hoisington
U.S. Treasury Fund was sensitive to the bond market's fluctuations. Despite
volatility, the Fund posted strong performance for the year and in the first
quarter of 1998.
For its one year total return performance in 1997, the Wasatch-Hoisington U.S.
Treasury Fund was ranked in the top 5 from among 45 long-term government bond
funds tracked by Morningstar.
GENERAL OUTLOOK
- ---------------
We believe the multi-year trend in inflation will continue to move downward.
As such, we expect the Fund to remain invested in 30-year U.S. Treasury Bonds.
If conditions change and it appears the trend over several years is toward
higher inflation, the Manager may choose to invest the Fund entirely in short-
term investments. Share prices will continue to be affected by volatility in the
bond market, but for patient long-term investors we believe the Wasatch-
Hoisington U.S. Treasury Fund has the potential for above average bond fund
returns.
ADDITIONAL INFORMATION
- ----------------------
Shareholder service is a high ranking priority at Wasatch. We constantly
strive to provide shareholders with useful investment tools and information.
Recently, we implemented two new
programs.
Changes in the tax laws have made possible an exciting option for retirement
investing. Beginning with the 1998 tax year, Wasatch began offering the Roth
IRA. In brief, the new IRA allows shareholders to invest after-tax dollars with
the benefit that increases in investment value can accumulate tax-free and may
be withdrawn tax-free after age 59-1/2 or for certain qualified uses. For more
information on the Roth IRA, please call a Shareholder Services Representative
at 1 (800) 551-1700.
The new Wasatch Funds website at WWW.WASATCHFUNDS.COM, provides shareholders
with daily fund prices, the current Wasatch Funds Prospectus and New Account
Application, commentary from Fund managers, information on Wasatch Funds
Services and much more. We are in the process of developing additional features
that will allow shareholders to keep information about their Wasatch Funds
investments at their fingertips.
We appreciate your investments in Wasatch Funds. If you have any questions or
comments regarding this report or your investments please call us at
1 (800) 551-1700.
For an in-depth discussion of the performance of individual Wasatch Funds,
please see the portfolio summaries beginning on page 4 of this report.
Refer to the current Prospectus for more information about each Fund's
objectives and investment process.
Long-term investing in the stock market is never going to be a smooth ride.
Setting realistic goals and holding fast to your strategy for realizing them
will help you weather the market's ups and downs.
We want to wish you the best as you strive to reach your financial goals and
we look forward to serving your investment needs in the years ahead.
Sincerely,
/s/Samuel S. Stewart, Jr.
Samuel S. Stewart, Jr.
Chairman of the Board
Semi-Annual Report ----------
WASATCH MID-CAP FUND-PORTFOLIO SUMMARY
- --------------------------------------
MARCH 31, 1998
(PHOTO)
KAREY BARKER, CFA-LEAD MANAGER
The Mid-Cap Fund seeks potentially high returns through investments in rapidly
growing companies with market capitalizations of between $300 million and $5
billion. When compared to other Wasatch Funds, the Mid-Cap is the most
aggressive. It is best-suited for investors who plan to hold the Fund for at
least five years.
SIX MONTH REVIEW
- ----------------
The Fund's shift toward heavier weightings in fast growing health care
companies proved to be timely. Over the past six months, financial crises in
Asia meant technology stocks were prone to extreme volatility.
The Fund struggled in the last three months of 1997, but ended the first
quarter of 1998 up 10.8%. This return was right in line with the 11% return of
the Standard & Poor's MidCap 400 (S&P 400) benchmark.
For the past six months, the best news was earnings growth. On average,
companies held by the Fund increased earnings in excess of 30% annually.
Health care holdings made significant contributions to performance throughout
the six months ended March 31, 1998. The largest holding, Pediatrix Medical
Group, Inc., provides practice management services for pediatricians allied with
hospital neonatology units. The company continues to grow through acquiring
physicians' practices and through excellent execution. Other strong performers
were: Express Scripts, Inc., a pharmacy benefits manager; Medical Manager Corp.,
a physician practice management systems provider; and Kendle International,
Inc., a clinical research and drug development service provider.
One health care holding failed to meet our expectations. Home Health Corp. of
America was sold due to concerns over the company's ability to execute its
business plan.
Although their stock prices have been batted about by Asia-related market
turmoil, Aspen Technologies, Inc., a chemical engineering software developer;
Micrel, Inc., a maker of analog semiconductors for cellular phones and laptop
computers; and Parametric Technology Co., a design automation software
developer, ended the past six months on a strong note.
Proprietary chip manufacturer, Microchip Technology, Inc., admitted weakness
in the first quarter due to Asia. We believe the company's long-term business
prospects are still intact and have chosen to hold the stock.
National Surgery Centers, Inc. was sold during the first quarter to lock in
profits from stock price appreciation. OEA, Inc., Fine Host Corp., and Hadco
Corp. were sold due to fundamental business concerns.
The past six months have provided opportunities to invest in high-quality
companies at prices that we believe are reasonable given the high growth rates.
We continually refine the portfolio and feel good about the way it is currently
situated.
OUTLOOK
- -------
We are optimistic about the Fund's prospects for 1998 and beyond. Higher
weightings in fast growing health care companies provide upside potential
without a lot of international market risk. Technology holdings will continue to
dominate the Fund's portfolio, although we expect them to remain vulnerable to
ongoing fallout from Asia.
In the short term, we cannot say what the market holds for investors. We can
assure shareholders that the Fund will remain focused on investing in the
fastest growing companies. We believe this strategy offers the potential for
above average returns to patient, long-term investors who are willing to
tolerate volatility en route to achieving their financial objectives.
Thank you for your investment in the Wasatch Mid-Cap Fund.
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AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------
1 YEAR 5 YEARS SINCE INCEPTION<F1>
- ----------------------------------------------------------------------
WASATCH MID-CAP FUND 31.0% 15.1% 14.2%
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<F1>Inception: August 16, 1992. Past performance is not indicative of
future results.
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
- --------------------
1. PEDIATRIX MEDICAL GROUP, INC. 9%
Practice management for
pediatrics physicians.
2. SYNOPSYS, INC. 7%
Software solutions for
electronic design automation.
3. ASPEN TECHNOLOGIES, INC. 6%
Chemical engineering software.
4. CURATIVE HEALTH SERVICES, INC. 5%
Wound treatment services and products.
5. MICREL, INC. 4%
Analog semiconductors for cellular
phones and laptop computers.
6. MICROCHIP TECHNOLOGY, INC. 4%
Proprietary chip manufacturer.
7. O'REILLY AUTOMOTIVE, INC. 4%
Automotive parts retailer/distributor.
8. KENDLE INTERNATIONAL, INC. 4%
Clinical research and drug
development service provider.
9. F.Y.I. INCORPORATED 4%
Document management services.
10.SANMINA CORPORATION 4%
Electronic components manufacturer.
Semi-Annual Report ----------
WASATCH MICRO-CAP FUND-PORTFOLIO SUMMARY
- ----------------------------------------
MARCH 31, 1998
(PHOTO)
ROBERT GARDINER, CFA-LEAD MANAGER
The Micro-Cap Fund invests in companies with market capitalizations of less
than $200 million at the time of initial purchase. We believe investments in
relatively tiny companies have the potential for above average returns because
these companies typically increase earnings faster and for a longer time than
larger companies. The Fund's share prices may be subject to wide fluctuations
which means it is best suited for long-term investors.
SIX MONTH REVIEW
- ----------------
The Fund's one year return of 70.3% as of March 31, 1998 marked a year of
strong performance, despite the fact that in the overall market small company
stocks were overshadowed by large company stocks. Morningstar, Inc., an
organization that tracks mutual funds, ranked the Micro-Cap Fund's one year
total return performance in the top 5% of all small-cap growth funds for 1997.
Returns have been driven mainly by strong earnings growth from companies held
by the Fund. On average, companies in which the Fund invested produced annual
earnings growth of approximately 30%. We believe large company stock prices in
1997 were driven primarily by investor demand rather than strong earnings
growth. Average earnings for large companies increased only 13.5% in 1997 and
are expected to increase less than 10% in 1998. We believe the higher earnings
growth expected for small companies makes them more attractive investments.
The Fund's largest holding, Micrel, Inc., a maker of analog semiconductors for
cellular phones and laptop computers, continues to be one of the strongest
performers. We invested in Micrel when it had a market capitalization of $130
million. Today the company has grown to an $800 million market cap and continues
to enjoy robust earnings growth.
Companies that sell, manufacture or distribute nutritional products did well
for the six months ended March 31, 1998. The stock price of Natural Alternatives
International, Inc., a manufacturer of vitamin and nutritional supplements, rose
156%. USANA, Inc., a nutritional products manufacturer
and distributor, saw its stock price increase 31%.
Temporary staffing companies have been a big part of the Fund's success over
the last year. Notable contributions came from RemedyTemp and On Assignment.
Toward the end of 1997, the Fund sold SOS Staffing Services and StaffMark to
lock in profits from stocks that had doubled in price.
Part of the Fund's investment discipline is to sell stocks when prices have
risen beyond where they can be supported by earnings growth. Selling stocks with
high price-to-earnings ratios (the price of a stock divided by its earnings per
share) and investing in high-quality companies whose stocks are reasonably
priced are ways we strive to favorably position the Fund. In the first quarter
we sold The Buckle, Inc. and Complete Business Solutions to lock in profits from
stock price appreciation.
In the last six months there have been very few disappointments among the
Fund's holdings. However, economic events in Asia affected several technology
companies which reported weaker than expected earnings.
OUTLOOK
- -------
Our expectations for earnings growth and the price we're paying for that
growth are comparable to last year. We believe the Fund is starting 1998 with an
outlook similar to 1997's, and we expect small company stocks to do better this
year. Our overall market outlook is somewhat more cautious because we believe
stocks in certain segments are overpriced.
Even if market conditions become more difficult, the Fund appears
well-positioned. We believe it has outstanding potential to help long-term
shareholders achieve their financial goals.
Thank you for your investment in the Wasatch Micro-Cap Fund.
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AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------
1 YEAR 5 YEARS SINCE INCEPTION<F1>
- ----------------------------------------------------------------------
WASATCH MICRO-CAP FUND 70.3% -- 40.1%
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<F1> Inception: June 19, 1995. Past performance is not indicative of
future results.
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
- --------------------
1. MICREL, INC. 5%
Analog semiconductors for cellular
phones and laptop computers.
2. NATIONAL DENTEX CORP. 5%
Dental laboratories.
3. TECHNE CORP. 5%
Disposable products for clinical
research labs and hospitals.
4. USANA, INC. 4%
Nutritional products distributed
through network marketing.
5. TRAVIS BOATS & MOTORS, INC. 4%
Recreational boats, motors and
marine accessories retailer.
6. MARKS BROS. JEWELERS, INC. 4%
Fine jewelry retailer.
7. K&G MEN'S CENTER, INC. 3%
Men's discount clothing retailer.
8. DAY RUNNER, INC. 3%
Personal organizers, planners
and accessories.
9. ICU MEDICAL, INC. 3%
Disposable connectors for
intravenous therapy.
10.FIRST CASH, INC. 3%
Pawnshop operator.
Semi-Annual Report ----------
WASATCH AGGRESSIVE EQUITY FUND_PORTFOLIO SUMMARY
- ------------------------------------------------
MARCH 31, 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.
SIX MONTH REVIEW
- ----------------
The Fund's one year return of 43.1% as of March 31, 1998 exceeded the Russell
2000 benchmark by 1.1%. Although these returns are exceptional by historic
standards, the returns of small company stocks continued to be outpaced by those
of large company stocks. Over the past few years, large company stocks have
enjoyed the bulk of new money flowing into the stock market.
As always, we pursue our discipline of investing in high-quality small
companies at reasonable prices. Average annual earnings growth for companies
held by the Fund was 20% in 1997. We believe the growth prospects are just as
good in 1998, and look especially attractive when compared to the single digit
growth expected for large companies. Since we have taken care to pay fair prices
for the stocks of fast growing small companies, earnings growth can be the
primary driver of stock prices.
We believe this is a much more reliable way to make money in the stock market
than to depend on investor demand.
Strong six month performance came from: Express Scripts, Inc., a pharmacy
benefits manager; Travis Boats & Motors,Inc., a recreational boats, motors and
marine accessories retailer; and Daisytek International Corporation, a wholesale
distributor of computer-related supplies and accessories.
Several newer additions did well in the first quarter including: RemedyTemp, a
temporary staffing company; USANA, Inc., a manufacturer and distributor of
nutritional products; and Hibbett Sporting Goods, Inc., a sporting goods store
operator.
Increasing the Fund's position in two jewelry retailers, Friedman's Inc. and
Marks Bros. Jewelers, Inc., earlier in the year proved to be a good move as
prices rebounded sharply in the first quarter.
Gulf South Medical Supply, Inc., previously one of the Fund's largest
holdings, was acquired by PSS World Medical, Inc. during the first quarter.
The Buckle, Inc., Molecular Devices Corporation, and Complete Business
Solutions, were sold to lock in profits from stock price increases.
Microchip Technology, Inc., a proprietary chip manufacturer, reported weaker
than expected earnings due to economic conditions in Asia. We have increased the
Fund's position at lower prices because we believe the company's long-run
business prospects are unusually attractive.
American Business Information, Inc., Fine Host Corp., Home Health Corp. of
America, OEA, Inc., and Seattle FilmWorks, Inc. were sold due to fundamental
business concerns.
OUTLOOK
- -------
Since the Fund's inception in 1986 we have pursued a long-term strategy of
investing in growing small companies at reasonable prices. We expect the
earnings growth of companies held by the Fund to drive stock prices up from
current levels. To-date we have been able to create a portfolio of high-quality
small company stocks and own them at reasonable prices. If the market continues
to advance strongly our biggest challenge will be to find reasonably priced
stocks. We believe that the Aggressive Equity Fund's strategy can be an asset to
long-term shareholders striving to reach their financial goals.
Thank you for your investment in the Wasatch Aggressive Equity Fund.
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AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------
1 YEAR 5 YEARS 10 YEARS
- -----------------------------------------------------------
WASATCH AGGRESSIVE
EQUITY FUND 43.1% 17.5% 16.6%
- -----------------------------------------------------------
Past performance is not indicative of future results.
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
- --------------------
1. NATIONAL HEALTH
INVESTORS, INC. 8%
Nursing home REIT.
2. MICREL, INC. 5%
Analog semiconductors for cellular
phones and laptop computers.
3. GENERAL NUTRITION COS., INC. 5%
Vitamins, health care and
sports nutrition products.
4. TECHNE CORP. 5%
Disposable products for clinical
research labs and hospitals.
5. MICROCHIP TECHNOLOGY, INC. 4%
Proprietary chip manufacturer.
6. NATIONAL DENTEX CORP. 4%
Dental laboratories.
7. O'REILLY AUTOMOTIVE, INC. 3%
Automotive parts retailer/distributor.
8. TRAVIS BOATS & MOTORS, INC. 3%
Recreational boats, motors and
marine accessories retailer.
9. EXPEDITORS INT'L OF
WASHINGTON, INC. 3%
International air and ocean
freight forwarder.
10.MARKS BROS. JEWELERS, INC. 3%
Fine jewelry retailer.
Semi-Annual Report ----------
WASATCH MICRO-CAP VALUE FUND-PORTFOLIO SUMMARY
- ----------------------------------------------
MARCH 31, 1998
(PHOTO)
ROBERT GARDINER, JEFF CARDON-CO-MANAGERS
The Micro-Cap Value Fund is the newest member of the Wasatch family. Its
investment objective is long-term growth of capital. The 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
company'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.
FIRST QUARTER REVIEW
- --------------------
With a return of 16.5% since its inception on December 17, 1997 we feel the
Fund is off to a great start. First quarter returns exceeded those of the
Russell 2000 Value benchmark by 7.6%. We have identified three main areas in
which to find attractive value investments.
The first is in companies we have dubbed "fallen angels." They typically have
a history of solid earnings growth with a positive outlook for continued growth.
A company becomes a "fallen angel" when its stock price declines due to some
short-term glitch in earnings growth. We seek to invest at low prices and
benefit from rising prices as earnings get back on track. A good example of a
fallen angel is the Fund's largest holding, Friedman's, Inc., a jewelry
retailer. We purchased the stock when it had been beaten down over worries about
customer debt levels. Friedman's stock price rose 49% in the first quarter.
Solid performance from other fallen angels came from IntelliQuest Information
Group, Inc., a marketing research organization, and Racing Champions Corp., a
manufacturer and distributor of collectible, accurately detailed die-cast model
racing cars.
We call the second area "undiscovered gems." These are companies increasing
earnings at a faster pace than typical large companies. Stock prices are low
because the company's potential has not yet been discovered by Wall Street
analysts. An example is Daisytek International, a distributor of computer-
related supplies and accessories. Increased investor interest and solid earnings
growth resulted in a stock price increase of 40%.
The third area is where classic value investors typically tread. As we look
for investments in our growth-oriented funds, slower growing industries do not
interest us. When seeking stocks for the Micro-Cap Value Fund, we find
attractive investments within slower growing industries. We are able to purchase
the stocks at prices well below what we would expect to pay for growth stocks.
Investment opportunities can come from companies on the verge of announcing new
products or services, or from industries entering a period of faster growth.
Strong performance from companies in industries in which Wasatch typically does
not invest came from: Farr Company, a filtration equipment manufacturer; Schuff
Steel Company, a steel construction services provider; and Supreme International
Corp., a men's and boy's sportswear designer and importer.
Another difference from Wasatch's growth-oriented equity funds is the amount
of takeover activity. CORCOM, Inc., Midwest Federal Financial Corp. and Sbarro,
Inc. were acquired during the quarter.
OUTLOOK
- -------
Looking ahead, we are excited about the Fund's prospects. With the stock
market continuing to reach new highs, we believe value investing is a
particularly attractive strategy. We believe that taking advantage of low stock
prices to invest in companies with sound business opportunities can offer some
shelter in the event of a stock market decline.
Thank you for your investment in the Wasatch Micro-Cap Value Fund.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------
1 YEAR 5 YEARS SINCE INCEPTION<F1>
- ----------------------------------------------------------------------
WASATCH MICRO-CAP
VALUE FUND -- -- 16.5%
- ----------------------------------------------------------------------
<F1>Inception: December 17, 1997. Past performance is not indicative of
future results.
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
- --------------------
1. FRIEDMAN'S INC. 3%
Fine jewelry retailer.
2. SIGNATURE EYEWEAR, INC. 3%
Fashion eyewear.
3. WORLD ACCEPTANCE CORP. 3%
Consumer lending.
4. MARKS BROS. JEWELERS, INC. 2%
Fine jewelry retailer.
5. SUPERTEX, INC. 2%
Semiconductor component
manufacturer.
6. CARNEGIE GROUP, INC. 2%
Software development and systems
integration services and consulting.
7. FIRST CASH, INC. 2%
Pawnshop operator.
8. SMITHWAY MOTOR XPRESS CORP. 2%
Flatbed truckload freight carrier.
9. ARROW-MAGNOLIA INT'L., INC. 2%
Specialty chemical products
manufacturer and distributor.
10.ICU MEDICAL, INC. 2%
Disposable connectors for
intravenous therapy.
Semi-Annual Report ----------
WASATCH GROWTH FUND-PORTFOLIO SUMMARY
MARCH 31, 1998
(PHOTO)
SAMUEL S. STEWART, JR., PHD, CFA-
LEAD MANAGER
The Growth Fund seeks to invest in companies that have the potential to
produce steady earnings growth. We look for companies that are growing two to
three times faster than average large companies. Sustained growth can come from
companies that have stable demand for products and services or that take
advantage of demographic trends. We consider the Fund to be the most
conservative of the Wasatch equity funds. It is designed for investors seeking
long-term growth of capital.
SIX MONTH REVIEW
- ----------------
In the last six months the Fund returned 8.3%. Its one year return as of March
31, 1998 stood at 42.8%. Over the past six months, the bulk of companies held by
the Fund produced solid earnings growth which acted as the main catalyst for
stock price appreciation.
Throughout 1997 we more than doubled our position in Renter's Choice, Inc.,
making it the Fund's largest holding, and a top performer in the first quarter.
Renter's Choice operates and acquires rent-to-own stores. This is a profitable
business and we think the management of Renter's Choice is the best among the
rent-to-own operators. Renter's Choice provides a means for people unable to get
credit through other sources to rent and eventually own household items like a
television, stereo system, or washer and dryer.
Several of the Fund's largest holdings, General Nutrition Companies, Inc.,
Marks Bros. Jewelers, Inc. and O'Reilly Automotive, Inc., came through with
notable six month returns.
Three companies rebounded strongly from earlier price weaknesses to have
significant impact on the first quarter returns. Friedman's Inc., a fine jewelry
retailer, overcame concerns about customer debt levels. Friedman's is increasing
earnings through strong sales at individual stores and by opening new stores.
The network marketing structure of Nu Skin Asia Pacific, a personal care and
nutrition products manufacturer, has been particularly successful in Asia. The
company has continued to grow at a steady pace through existing and new markets
despite the region's economic troubles. We were able to buy more stock at
attractive prices in World Acceptance Corp., a provider of short-term consumer
loans. We believe the improving credit quality of short-term borrowers and
World's ability to acquire other lenders gives the company excellent long-run
growth prospects.
We were disappointed by Home Health Corp. of America. We are selling the stock
because we have lost confidence in the company's ability to beat Medicare cost
caps and meet our expectations for earnings growth in the face of shifting
government regulations.
We are pleased to announce that Morningstar, Inc., a provider of information
about mutual funds, recently began covering the Growth Fund.
It is also worth noting that the Fund has been included on Schwab's Mutual
Fund Select List.(TM) The Growth Fund was placed on the List by outperforming
similar funds in the Small-Cap Blend category. Funds were judged on criteria
developed by Schwab's Mutual Fund Research Group to evaluate five year returns
relative to risk using performance data provided by Morningstar, Inc.
OUTLOOK
- -------
We continue to pursue the Fund's long-term strategy of investing in stable
companies at reasonable prices. We believe this strategy gives shareholders the
potential to benefit from rising stock prices. Just as importantly, we believe
it affords them some protection from falling stock prices. Positioning the Fund
with high-quality companies and maintaining stock prices at sensible levels
helps Growth Fund shareholders weather the market's ups and downs.
Thank you for your investment in the Wasatch Growth Fund.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------
1 YEAR 5 YEARS 10 YEARS
- -----------------------------------------------------------
WASATCH GROWTH FUND 42.8% 21.7% 17.7%
- -----------------------------------------------------------
Past performance is not indicative of future results.
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
- --------------------
1. RENTER'S CHOICE, INC. 5%
Operates rent-to-own stores.
2. NATIONAL HEALTH INVESTORS, INC. 5%
Nursing home REIT.
3. O'REILLY AUTOMOTIVE, INC. 5%
Automotive parts
retailer/distributor.
4. MARKS BROS. JEWELERS, INC. 4%
Fine jewelry retailer.
5. FRIEDMAN'S INC. 4%
Fine jewelry retailer.
6. SUNSTONE HOTEL INVESTORS, INC. 3%
Hotel REIT.
7. WORLD ACCEPTANCE CORP. 3%
Consumer lending.
8. GENERAL NUTRITION COS., INC. 3%
Vitamins, health care and
sports nutrition products.
9. WASHINGTON FEDERAL, INC. 3%
Regional banking services.
10.FRANKLIN COVEY CO. 3%
Time management and personal
productivity through sales in day
planners and seminars.
Semi-Annual Report ----------
WASATCH-HOISINGTON U.S. TREASURY FUND-PORTFOLIO SUMMARY
- -------------------------------------------------------
MARCH 31, 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. The
Fund's 10 year average annual return of 9% has consistently beaten inflation.
SIX MONTH REVIEW
- ----------------
The Fund had excellent results again. In the past six and 12 month intervals,
the Fund returned 8.6% and 22%, respectively, substantially outpacing the Lehman
Bros. Gov't./Corp. Bond Index returns of 4.8% and 12%, respectively.
Morningstar, Inc. ranked the Fund's one year total return in the top five for
1997 from among the 45 long-term government bond funds they track.
The key to this superior performance was the continued execution of the Fund's
investment strategy. When the inflation rate declines on a multi-year basis, the
Manager invests the Fund's assets in long-term Treasury Bonds in order to
capture capital gains opportunities. When the inflation rate increases over
several years, the Manager invests the assets in Treasury Bills. The year-over-
year increase in the Consumer Price Index (CPI) decelerated from 2.8% in March
1997 to just 1.4% this March. Not surprisingly, on March 31st, the 30-year
Treasury Bond yield was 5.9%, versus 6.4% at the end of September and was well
down from 7.1% at the end of March 1997.
OUTLOOK
- -------
Some believe that interest rates may head upward over the near term. They
argue that monetary policy should be tightened in order to cool down the
economy. They cite record home sales, high consumer confidence, record stock
prices and concern that the low unemployment rate will fuel increased wages and
higher inflation.
While there is a risk that the Federal Reserve Board (Fed) will raise the
federal funds rate, the multi-year trend in inflation remains downward.
Disinflation-the restrained growth of money and credit in the face of an
abundance of goods and services-should persist. Growth in total nonfinancial
sector debt has been slower in the 1990s than for any other decade since the
government began collecting this data in the 1950s. Excluding money market
mutual funds and currency, M2 money stock growth remains subdued. The Fed's job
of controlling money and credit growth continues to be facilitated by fiscal
policy. The budget deficit will be in surplus for the first time since 1969 and
relative to Gross Domestic Product (GDP), the surplus will be the largest since
1956.
An ample supply of goods and services from domestic production will be
augmented by large supplies of internationally produced goods and services. The
trade weighted dollar recently appreciated to the highest level in 11 years.
Domestic demand in the six largest economies outside the U.S.-Japan, Germany,
the United Kingdom, France, Italy and Canada-decelerated to just 1% in the
latest four quarters. The Japanese economy contracted sharply in the first
quarter. The economy of the United Kingdom, the strongest of these six in 1997,
has slowed abruptly after five interest rate increases in 1997 and on April 1st,
Germany was dealt a large increase in its national sales tax. Economic
conditions in the Pacific Rim (Asia plus Australia and New Zealand) are quite
depressed. In the past three months, key economic indicators have fallen at
annual rates of between 10% and 70%. Even China experienced a 16% decline in
industrial output. Substantial excess capacity exists in most foreign economies,
indicating that deflationary pockets still persist.
Staying with the trend toward lower inflation, rather than reacting to
movements in volatile short-term factors should, over time, produce excellent
returns for patient long-term shareholders.
Thank you for your investment in the Wasatch-Hoisington U.S. Treasury Fund.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------
1 YEAR 5 YEARS 10 YEARS
- -----------------------------------------------------------
WASATCH-HOISINGTON U.S.
TREASURY FUND 22.0% 7.9% 9.0%
- -----------------------------------------------------------
Past performance is not indicative of future results.
- --------------------------------------------------------------------------------
HOLDINGS/MATURITY DATE
- ----------------------
1. U.S. TREASURY BOND 17%
8/15/2023
2. U.S. TREASURY BOND 16%
8/15/2027
3. U.S. TREASURY BOND 16%
11/15/2026
4. U.S. TREASURY BOND 15%
8/15/2025
5. U.S. TREASURY BOND 14%
2/15/2027
6. U.S. TREASURY BOND 8%
11/15/2024
7. U.S. TREASURY BOND 6%
2/15/2026
8. U.S. TREASURY BOND 4%
8/15/2026
Semi-Annual Report ----------
MID-CAP FUND-SCHEDULE OF INVESTMENTS
- ------------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS 94.6%
-------------------
BUSINESS SERVICES 11.1%
22,200 Command Systems, Inc.<F1> $ 316,350
77,000 F.Y.I. Inc.<F1> 2,107,875
29,500 International Manufacturing Systems, Inc.<F1> 239,687
72,200 LECG, Inc.<F1> 884,450
29,650 Sanmina Corp.<F1> 2,073,647
22,000 Vestcom International, Inc.<F1> 229,625
51,000 WavePhore, Inc.<F1> 535,500
------------
6,387,134
------------
Semi-Annual Report ----------
COMPUTER SOFTWARE 25.5%
21,700 Ansoft Corporation<F1> 305,156
88,150 Aspen Technologies, Inc.<F1> 3,636,188
10,500 Nice-Systems Ltd.<F1> 483,000
60,200 Parametric Technology Corp.<F1> 2,005,413
75,550 Phoenix Technologies Ltd.<F1> 906,600
83,750 Smallworldwide plc<F1> 1,633,125
116,060 Synopsys, Inc.<F1> 3,800,965
50,875 Tecnomatix Technologies Ltd.<F1> 1,914,172
------------
14,684,619
------------
COMPUTER SYSTEMS & COMPONENTS 0.4%
14,500 Power-One, Inc.<F1> 246,500
------------
HEALTH CARE PRODUCTS 11.7%
35,300 Incyte Pharmaceuticals, Inc.<F1> 1,650,275
96,000 Kendle International, Inc.<F1> 2,232,000
49,100 Medical Manager Corp.<F1> 1,423,900
8,500 Shire Pharmaceutical Group PLC 182,219
111,100 Simione Central Holdings, Inc.<F1> 1,263,762
------------
6,752,156
------------
HEALTH CARE SERVICES 18.9%
6,000 Amsurg Corp., Class B<F1> 54,000
80,700 Curative Health Services, Inc. 2,688,319
7,400 Envoy Corporation<F1> 318,200
22,025 Express Scripts, Inc., Class A<F1> 1,867,307
9,300 IMPATH Inc.<F1> 355,725
5,000 MedQuist Inc.<F1> 184,063
54,000 National Research Corporation<F1> 475,875
106,700 Pediatrix Medical Group Inc.<F1> 4,961,550
------------
10,905,039
------------
MID-CAP FUND-SCHEDULE OF INVESTMENTS
- ------------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
PERSONAL PRODUCTS 2.7%
61,050 Nu Skin Asia Pacific, Inc., Class A<F1> $ 1,572,037
------------
RETAIL 6.9%
20,700 CDnow, Inc.<F1> 496,800
12,500 Hibbett Sporting Goods, Inc.<F1> 346,875
82,200 O'Reilly Automotive, Inc.<F1> 2,265,638
18,000 St. John Knits, Inc. 850,500
------------
3,959,813
------------
SEMICONDUCTORS 10.6%
6,300 ASM Lithography Holding N.V.<F1> 582,356
13,500 Asyst Technologies, Inc.<F1> 313,875
62,400 Micrel, Inc.<F1> 2,367,300
108,000 Microchip Technology, Inc.<F1> 2,268,000
13,800 Teradyne, Inc.<F1> 552,862
------------
6,084,393
------------
TELECOMMUNICATIONS 3.2%
63,975 REMEC, Inc.<F1> 1,835,283
------------
TRANSPORTATION 3.0%
23,000 AirNet Systems, Inc.<F1> 667,000
18,300 Expeditors International of Washington, Inc. 784,613
15,200 OEA, Inc. 276,450
------------
1,728,063
------------
OTHER 0.6%
16,500 Children's Comprehensive Services, Inc.<F1> 313,500
------------
TOTAL COMMON STOCKS (COST $44,489,198) 54,468,537
------------
Semi-Annual Report ----------
MID-CAP FUND-SCHEDULE OF INVESTMENTS
- ------------------------------------
MARCH 31, 1998 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
WARRANTS 0.0%
-------------
$ 4,202 CDnow, Inc.<F1> $ 40,672
------------
TOTAL WARRANTS (COST $0) 40,672
------------
SHORT-TERM INVESTMENT 4.2%
--------------------------
(Variable Rate Demand Deposits)
2,402,976 UMB Bank Money Market Fiduciary, 4.54% 2,402,976
------------
TOTAL SHORT-TERM INVESTMENT (COST $2,402,976) 2,402,976
------------
TOTAL INVESTMENTS (COST $46,892,174) 98.8% 56,912,185
CASH AND OTHER ASSETS, LESS LIABILITIES 1.2% 674,147
------------
NET ASSETS 100.0% $ 57,586,332
============
<F1> Non-income producing
See notes to financial statements.
MICRO-CAP FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS 97.0%
-------------------
BASIC MATERIALS 0.0%
10,000 Arrow-Magnolia International, Inc.<F1> $ 62,500
------------
BUILDERS & BUILDING SUPPLIES 1.0%
104,691 Building Materials Holding Corp.<F1> 1,426,415
------------
BUSINESS PRODUCTS 2.2%
135,000 Daisytek International Corp.<F1> 3,290,625
5,000 Goddard Industries, Inc.<F1> 11,875
------------
3,302,500
------------
BUSINESS SERVICES 14.8%
82,500 A Consulting Team, Inc. (The)<F1> 969,375
107,600 Altron Inc.<F1> 1,640,900
163,000 Carnegie Group, Inc.<F1> 585,781
10,000 Colorado MEDtech, Inc. 100,000
29,000 Data Processing Resources Corp.<F1> 900,813
122,000 F.Y.I. Inc.<F1> 3,339,750
47,500 International Manufacturing Systems, Inc.<F1> 385,938
9,500 Lamalie Associates, Inc.<F1> 211,375
80,000 LECG, Inc.<F1> 980,000
267,750 National Dentex Corp.<F1> 6,760,688
45,200 On Assignment, Inc.<F1> 1,339,050
95,000 RemedyTemp, Inc.<F1> 3,075,625
66,000 SCP Pool Corporation<F1> 1,485,000
33,200 Solomon-Page Group Ltd. (The)<F1> 115,163
------------
21,889,458
------------
COMPUTER SOFTWARE 3.8%
25,000 Datastream Systems, Inc.<F1> 553,125
87,000 Deltek Systems, Inc.<F1> 1,544,250
79,800 Synopsys, Inc.<F1> 2,613,450
22,300 Tecnomatix Technologies Ltd.<F1> 839,037
------------
5,549,862
------------
COMPUTER SYSTEMS & COMPONENTS 3.9%
74,650 Active Voice Corp.<F1> 979,781
50,000 C.P. Clare Corp.<F1> 693,750
10,000 Optek Technology, Inc.<F1> 256,250
57,700 Pinnacle Systems, Inc.<F1> 2,185,388
83,000 Power-One, Inc.<F1> 1,411,000
19,500 Zoom Telephonics, Inc.<F1> 170,625
------------
5,696,794
------------
Semi-Annual Report ----------
MICRO-CAP FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
ELECTRONICS 2.5%
163,000 PCD, Inc.<F1> $ 3,667,500
------------
ENERGY 0.2%
20,000 UNIFAB International, Inc.<F1> 350,000
------------
FINANCIAL SERVICES 0.5%
5,900 Mountbatten, Inc.<F1> 78,912
100,000 World Acceptance Corp.<F1> 662,500
------------
741,412
------------
HEALTH CARE PRODUCTS 9.8%
21,500 CN Biosciences, Inc.<F1> 559,000
283,600 ICU Medical, Inc.<F1> 4,289,450
27,200 Kendle International, Inc.<F1> 632,400
85,000 Medco Research, Inc.<F1> 1,434,375
87,400 Minntech Corp. 1,097,963
345,728 Techne Corp.<F1> 6,698,480
33,000 Young Innovations, Inc.<F1> 511,500
------------
15,223,168
------------
HEALTH CARE SERVICES 8.0%
30,000 American Healthcorp, Inc.<F1> 292,500
57,770 Amsurg Corp., Class A<F1> 512,709
136,000 Amsurg Corp., Class B<F1> 1,224,000
26,000 Castle Dental Centers, Inc.<F1> 299,000
104,000 CorVel Corp.<F1> 4,134,000
20,000 First Commonwealth, Inc.<F1> 302,500
134,000 Laboratory Specialists of America, Inc.<F1> 644,875
77,500 MedCath Inc.<F1> 1,407,109
18,000 Medstone International, Inc.<F1> 177,750
62,500 National Research Corporation<F1> 550,781
48,500 Superior Consultant Holdings Corp.<F1> 1,739,937
------------
11,285,161
------------
PERSONAL PRODUCTS 16.1%
6,000 1-800 CONTACTS, Inc. 119,250
196,000 Day Runner, Inc.<F1> 4,361,000
32,000 Market America, Inc.<F1> 174,000
163,100 Natural Alternatives International, Inc.<F1> 3,282,387
90,000 Nu Skin Asia Pacific, Inc., Class A<F1> 2,317,500
245,100 Signature Eyewear, Inc.<F1> 2,496,956
209,200 Travis Boats & Motors, Inc.<F1> 5,569,950
200,100 USANA, Inc.<F1> 5,577,788
------------
23,898,831
------------
Micro-Cap Fund-Schedule of Investments
- --------------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
PERSONAL SERVICES 8.3%
131,000 Ambassadors International, Inc.<F1> $ 3,455,125
1,000 CorporateFamily Solutions, Inc. 26,625
515,000 First Cash, Inc.<F1> 4,184,375
169,000 Rent-Way, Inc.<F1> 4,013,750
40,750 Seattle FilmWorks, Inc.<F1> 371,844
60,500 U.S. Pawn, Inc.<F1> 219,312
------------
12,271,031
------------
REAL ESTATE 0.9%
85,000 Sunstone Hotel Investors, Inc. REIT 1,360,000
------------
RETAIL 11.1%
42,500 American Coin Merchandising, Inc.<F1> 850,000
78,500 Friedman's Inc.<F1> 1,594,531
20,000 Garden Fresh Restaurant Corp.<F1> 373,750
87,900 Hibbett Sporting Goods, Inc.<F1> 2,439,225
216,725 K&G Men's Center, Inc.<F1> 4,469,953
265,445 Marks Bros. Jewelers, Inc.<F1> 5,259,129
24,000 O'Charley's Inc.<F1> 510,000
25,000 Paper Warehouse, Inc.<F1> 143,750
41,000 PJ America Inc.<F1> 738,000
------------
16,378,338
------------
SEMICONDUCTORS 9.9%
63,700 Aetrium Inc.<F1> 923,650
199,189 Micrel, Inc.<F1> 7,556,733
192,500 Microchip Technology, Inc.<F1> 4,042,500
27,500 SDL, Inc.<F1> 653,125
130,400 Supertex, Inc.<F1> 1,450,700
------------
14,626,708
------------
TRANSPORTATION 4.0%
40,000 Covenant Transport, Inc.<F1> 876,250
16,250 Jevic Transportation, Inc.<F1> 243,750
18,000 Motor Cargo Industries, Inc.<F1> 202,500
24,000 Smithway Motor Xpress Corp.<F1> 357,000
50,500 Transport Corp. of America, Inc.<F1> 864,812
229,500 USA Truck, Inc.<F1> 3,442,500
------------
5,986,812
------------
TOTAL COMMON STOCKS (COST $109,426,475) 143,716,490
------------
Semi-Annual Report ----------
MICRO-CAP FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------
MARCH 31, 1998 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
SHORT-TERM INVESTMENT 1.0%
--------------------------
(Variable Rate Demand Deposits)
$1,495,792 UMB Bank Money Market Fiduciary, 4.54% $1,495,792
------------
TOTAL SHORT-TERM INVESTMENT (COST $1,495,792) 1,495,792
------------
TOTAL INVESTMENTS (COST $110,922,267) 98.0% 145,212,282
CASH AND OTHER ASSETS, LESS LIABILITIES 2.0% 2,925,145
------------
NET ASSETS 100.0% $148,137,427
============
<F1> Non-income producing
See notes to financial statements.
AGGRESSIVE EQUITY FUND-SCHEDULE OF INVESTMENTS
- ----------------------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS 93.4%
-------------------
BUSINESS PRODUCTS 2.9%
217,300 Daisytek International Corp.<F1> $ 5,296,687
------------
BUSINESS SERVICES 15.9%
120,700 Alternative Resources Corp.<F1> 2,542,244
234,700 Altron Inc.<F1> 3,579,175
67,400 Data Processing Resources Corp.<F1> 2,093,613
175,600 F.Y.I. Inc.<F1> 4,807,050
49,475 Lason Holdings, Inc.<F1> 1,867,681
291,300 National Dentex Corp.<F1> 7,355,325
137,100 RemedyTemp, Inc.<F1> 4,438,612
30,150 Sanmina Corp.<F1> 2,108,616
------------
28,792,316
------------
COMPUTER SOFTWARE 5.2%
64,700 Aspen Technologies, Inc.<F1> 2,668,875
140,800 Deltek Systems, Inc.<F1> 2,499,200
127,850 Synopsys, Inc.<F1> 4,187,088
------------
9,355,163
------------
COMPUTER SYSTEMS & COMPONENTS 0.7%
53,300 Eltron International, Inc.<F1> 1,305,850
------------
HEALTH CARE PRODUCTS 6.7%
30,000 CN Biosciences, Inc.<F1> 780,000
97,400 Serologicals Corp.<F1> 2,751,550
441,300 Techne Corp.<F1> 8,550,188
------------
12,081,738
------------
HEALTH CARE SERVICES 4.4%
57,150 Express Scripts, Inc., Class A<F1> 4,845,248
124,600 National Surgery Centers, Inc.<F1> 3,185,087
------------
8,030,335
------------
PERSONAL PRODUCTS 6.8%
154,700 Nu Skin Asia Pacific, Inc., Class A<F1> 3,983,525
221,050 Travis Boats & Motors, Inc.<F1> 5,885,456
37,600 USANA, Inc.<F1> 1,048,100
84,250 Weider Nutrition International, Inc. 1,305,875
------------
12,222,956
------------
Semi-Annual Report ----------
AGGRESSIVE EQUITY FUND-SCHEDULE OF INVESTMENTS
- ----------------------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
PERSONAL SERVICES 4.0%
60,500 Loewen Group, Inc. $1,527,625
132,000 Renter's Choice, Inc.<F1> 3,234,000
107,000 Rent-Way, Inc.<F1> 2,541,250
------------
7,302,875
------------
REAL ESTATE 10.3%
349,700 National Health Investors, Inc. REIT 13,944,288
82,075 Oasis Residential, Inc. REIT 1,821,039
175,750 Sunstone Hotel Investors, Inc. REIT 2,812,000
------------
18,577,327
------------
RETAIL 19.1%
209,850 Friedman's Inc.<F1> 4,262,578
223,200 General Nutrition Cos., Inc.<F1> 8,872,200
75,000 Hibbett Sporting Goods, Inc.<F1> 2,081,250
171,825 K&G Men's Center, Inc.<F1> 3,543,891
273,600 Marks Bros. Jewelers, Inc.<F1> 5,420,700
96,650 O'Charley's Inc.<F1> 2,053,812
222,700 O'Reilly Automotive, Inc.<F1> 6,138,169
46,350 St. John Knits, Inc. 2,190,038
------------
34,562,638
------------
SEMICONDUCTORS 9.9%
236,800 Micrel, Inc.<F1> 8,983,600
360,625 Microchip Technology, Inc.<F1> 7,573,125
53,750 SDL, Inc.<F1> 1,276,563
------------
17,833,288
------------
TELECOMMUNICATIONS 3.3%
95,750 Powertel, Inc.<F1> 2,067,602
66,850 REMEC, Inc.<F1> 1,917,759
56,090 United States Cellular Corp.<F1> 1,903,554
------------
5,888,915
------------
TRANSPORTATION 4.2%
64,200 AirNet Systems, Inc.<F1> 1,861,800
131,700 Expeditors International of Washington, Inc. 5,646,637
9,405 OEA, Inc. 171,053
------------
7,679,490
------------
TOTAL COMMON STOCKS (COST $115,693,183) 168,929,578
------------
AGGRESSIVE EQUITY FUND-SCHEDULE OF INVESTMENTS
- ----------------------------------------------
MARCH 31, 1998 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
SHORT-TERM INVESTMENT 6.7%
--------------------------
(Variable Rate Demand Deposits)
$12,085,714 UMB Bank Money Market Fiduciary, 4.54% $ 12,085,714
------------
TOTAL SHORT-TERM INVESTMENT (COST $12,085,714) 12,085,714
------------
TOTAL INVESTMENTS (COST $127,778,897) 100.1% 181,015,292
LIABILITIES, LESS CASH AND OTHER ASSETS (0.1)% (166,873)
------------
NET ASSETS 100.0% $180,848,419
============
<F1> Non-income producing
See notes to financial statements.
Semi-Annual Report ----------
MICRO-CAP VALUE FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS 91.4%
-------------------
BASIC MATERIALS 3.9%
44,900 Arrow-Magnolia International, Inc.<F1> $ 280,625
7,000 Republic Group Incorporated 142,625
5,500 Encore Wire Corporation<F1> 178,062
------------
601,312
------------
BUILDERS & BUILDING SUPPLIES 4.4%
17,500 Building Materials Holding Corp.<F1> 238,437
4,680 Cavalier Homes, Inc. 53,527
4,900 Crossman Communities, Inc.<F1> 145,469
1,600 Drew Industries Incorporated 20,200
4,300 Kevco, Inc.<F1> 80,088
7,700 M/I Schottenstein Homes, Inc. 168,438
2,000 Modtech, Inc.<F1> 41,125
7,500 Robertson-Ceco Corporation<F1> 82,031
6,500 Schuff Steel Company<F1> 92,625
------------
921,940
------------
BUSINESS PRODUCTS 6.1%
5,500 Cameron Ashley Building Products, Inc.<F1> 100,719
6,200 Daisytek International Corp.<F1> 151,125
9,000 Farr Company<F1> 173,250
2,500 Goddard Industries, Inc.<F1> 5,938
23,900 Mesa Laboratories, Inc.<F1> 138,919
9,400 Quipp, Inc.<F1> 144,525
------------
714,476
------------
BUSINESS SERVICES 7.0%
11,000 Altron Inc.<F1> 167,750
92,100 Carnegie Group, Inc.<F1> 330,984
8,500 Elamex, S.A. de C.V.<F1> 63,750
5,000 IntelliQuest Information Group, Inc. 56,875
5,100 National Dentex Corp.<F1> 128,775
3,800 RemedyTemp, Inc.<F1> 123,025
15,000 Sigma Circuits, Inc.<F1> 130,312
25,000 Solomon-Page Group Ltd. (The)<F1> 86,719
------------
1,088,190
------------
COMPUTER SOFTWARE 0.9%
7,000 Remedy Corporation<F1> 137,375
------------
MICRO-CAP VALUE FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
COMPUTER SYSTEMS & COMPONENTS 9.5%
15,500 Active Voice Corp.<F1> $ 203,437
6,000 BMC Industries, Inc. 116,625
9,700 C.P. Clare Corp.<F1> 134,587
4,500 Cherry Corporation, Class A<F1> 81,000
7,300 CORCOM, Inc.<F1> 90,337
11,000 Eltron International, Inc.<F1> 269,500
6,400 Optek Technology, Inc.<F1> 164,000
12,000 Percon, Inc.<F1> 133,125
14,000 TransAct Technologies, Inc.<F1> 129,500
9,600 Trident International, Inc.<F1> 147,600
------------
1,469,711
------------
ENERGY 3.0%
9,500 Dawson Geophysical Company<F1> 150,813
8,300 Prima Energy Corporation<F1> 149,400
9,200 UNIFAB International, Inc.<F1> 161,000
------------
461,213
------------
FINANCIAL SERVICES 8.5%
10,000 Centris Group, Inc. (The) 122,500
4,500 Community Bank System, Inc. 153,000
5,600 Home Port Bancorp, Inc. 148,400
2,835 Northrim Bank 38,981
6,700 People's Bancshares, Inc. 167,500
5,900 PVF Capital Corp.<F1> 141,600
7,400 RTW, Inc.<F1> 59,200
2,700 Union Bankshares Ltd.<F1> 77,625
61,500 World Acceptance Corp.<F1> 407,437
------------
1,316,243
------------
HEALTH CARE PRODUCTS 2.6%
6,500 Biochem International Inc.<F1> 40,625
18,300 ICU Medical, Inc.<F1> 276,788
5,500 Young Innovations, Inc.<F1> 85,250
------------
402,663
------------
HEALTH CARE SERVICES 4.1%
6,300 CorVel Corp.<F1> 250,425
11,000 First Commonwealth, Inc.<F1> 166,375
31,000 Laboratory Specialists of America, Inc.<F1> 149,187
8,000 Medstone International, Inc.<F1> 79,000
------------
644,987
------------
Semi-Annual Report ----------
MICRO-CAP VALUE FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
PERSONAL PRODUCTS 8.7%
18,000 Conso Products Company<F1> $ 151,875
3,600 Day Runner, Inc.<F1> 80,100
1,400 Decorator Industries, Inc. 14,700
5,000 Market America, Inc.<F1> 27,188
5,700 Natural Alternatives International, Inc.<F1> 114,712
4,000 Nu Skin Asia Pacific, Inc., ClassA<F1> 103,000
12,600 Racing Champions Corporation<F1> 136,238
44,800 Signature Eyewear, Inc.<F1> 456,400
29,500 THT Inc.<F1> 105,094
5,500 USANA, Inc.<F1> 153,312
------------
1,342,619
------------
PERSONAL SERVICES 3.0%
38,500 First Cash, Inc.<F1> 312,813
43,000 U.S. Pawn, Inc.<F1> 155,875
------------
468,688
------------
REAL ESTATE 4.5%
9,500 Commercial Net Lease Realty, Inc. REIT 167,438
5,000 Excel Realty Trust, Inc. REIT 178,125
900 Redwood Trust, Inc. REIT 21,150
10,900 Sunstone Hotel Investors, Inc. REIT 174,400
11,500 Winston Hotels, Inc. REIT 152,375
------------
693,488
------------
RETAIL 12.3%
49,500 Filene's Basement Corp.<F1> 266,062
24,700 Friedman's Inc.<F1> 501,719
19,400 Marks Bros. Jewelers, Inc.<F1> 384,363
7,900 O'Charley's Inc.<F1> 167,875
17,900 Ryan's Family Steak Houses, Inc.<F1> 162,219
12,800 Sport-Haley, Inc.<F1> 128,000
11,800 Supreme International Corporation<F1> 147,500
10,200 Syms Corp.<F1> 144,075
------------
1,901,813
------------
MICRO-CAP VALUE FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
SEMICONDUCTORS 4.8%
10,800 Aehr Test Systems<F1> $ 64,800
2,000 Aetrium Inc.<F1> 29,000
1,800 Cohu, Inc. 68,400
7,000 Microchip Technology, Inc.<F1> 147,000
6,500 Microsemi Corporation<F1> 107,250
30,000 Supertex, Inc.<F1> 333,750
------------
750,200
------------
Telecommunications 0.6%
5,200 Rural Cellular Corporation<F1> 88,400
------------
TRANSPORTATION 6.0%
9,000 Air Transport Holding Company, Inc. 121,500
1,400 Federal Screw Works 79,800
6,000 Motor Cargo Industries, Inc.<F1> 67,500
9,600 OEA, Inc. 174,600
20,800 Smithway Motor Xpress Corp.<F1> 309,400
10,800 USA Truck, Inc.<F1> 162,000
2,900 Westerbeke Corporation<F1> 10,150
------------
924,950
------------
UTILITIES 1.5%
5,900 CTG Resources, Inc. 151,556
2,300 TNP Enterprises, Inc. 76,044
------------
227,600
------------
TOTAL COMMON STOCKS (COST $13,097,440) 14,155,868
------------
Semi-Annual Report ----------
MICRO-CAP VALUE FUND-SCHEDULE OF INVESTMENTS
- --------------------------------------------
MARCH 31, 1998 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
SHORT-TERM INVESTMENT 7.9%
--------------------------
(Variable Rate Demand Deposits)
$1,226,467 UMB Bank Money Market Fiduciary, 4.54% $ 1,226,467
------------
TOTAL SHORT-TERM INVESTMENT (COST $1,226,467) 1,226,467
------------
TOTAL INVESTMENTS (COST $14,323,907) 99.3% 15,382,335
CASH AND OTHER ASSETS, LESS LIABILITIES 0.7% 106,546
------------
NET ASSETS 100.0% $ 15,488,881
============
<F1> Non-income producing
See notes to financial statements.
GROWTH FUND-SCHEDULE OF INVESTMENTS
- -----------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS 88.8%
-------------------
BUILDERS & BUILDING SUPPLIES 2.1%
273,123 Building Materials Holding Corp.<F1> $ 3,721,301
------------
BUSINESS SERVICES 8.7%
223,800 Altron Inc.<F1> 3,412,950
58,300 American Business Information, Inc., Class A<F1> 765,188
187,000 National Dentex Corp.<F1> 4,721,750
97,900 RemedyTemp, Inc.<F1> 3,169,513
151,700 SCP Pool Corporation<F1> 3,413,250
------------
15,482,651
------------
COMPUTER SOFTWARE 2.6%
140,700 Synopsys, Inc.<F1> 4,607,925
------------
COMPUTER SYSTEMS & COMPONENTS 1.7%
122,850 Eltron International, Inc.<F1> 3,009,825
------------
FINANCIAL SERVICES 8.0%
60,500 AmeriCredit Corp.<F1> 1,663,750
5,000 Franklin Savings Assn.<F1> 1
156,200 RTW, Inc.<F1> 1,249,600
184,510 Washington Federal, Inc. 5,120,152
919,386 World Acceptance Corp.<F1> 6,090,931
------------
14,124,434
------------
HEALTH CARE PRODUCTS 3.7%
67,700 Amgen, Inc.<F1> 4,121,237
129,500 Techne Corp.<F1> 2,509,063
------------
6,630,300
------------
HEALTH CARE SERVICES 9.3%
120,425 CorVel Corp.<F1> 4,786,894
89,000 First Health Group Corp.<F1> 4,828,250
682,381 Home Health Corp. of America, Inc.<F1> 1,897,872
51,000 Integrated Health Services, Inc. 2,004,937
60,000 National Surgery Centers, Inc.<F1> 1,533,750
22,000 Pediatrix Medical Group Inc.<F1> 1,023,000
93,500 Physicians Resource Group, Inc.<F1> 344,781
------------
16,419,484
------------
Semi-Annual Report ----------
GROWTH FUND-SCHEDULE OF INVESTMENTS
- -----------------------------------
MARCH 31, 1998 (UNAUDITED)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
PERSONAL PRODUCTS 8.6%
74,600 Day Runner, Inc.<F1> $ 1,659,850
208,900 Franklin Covey Co.<F1> 5,078,881
187,700 Natural Alternatives International, Inc.<F1> 3,777,463
181,100 Nu Skin Asia Pacific, Inc., Class A<F1> 4,663,325
------------
15,179,519
------------
PERSONAL SERVICES 8.1%
82,900 Ambassadors International, Inc.<F1> 2,186,487
424,200 First Cash, Inc.<F1> 3,446,625
354,700 Renter's Choice, Inc.<F1> 8,690,150
------------
14,323,262
------------
REAL ESTATE 8.2%
211,200 National Health Investors, Inc. REIT 8,421,600
381,800 Sunstone Hotel Investors, Inc. REIT 6,108,800
------------
14,530,400
------------
RETAIL 20.5%
32,000 American Coin Merchandising, Inc.<F1> 640,000
351,975 Friedman's Inc.<F1> 7,149,492
132,200 General Nutrition Cos., Inc.<F1> 5,254,950
250,300 Hollywood Entertainment Corp.<F1> 3,504,200
148,600 Home Centers (DIY) Ltd.<F1> 1,894,650
396,600 Marks Bros. Jewelers, Inc.<F1> 7,857,637
303,400 O'Reilly Automotive, Inc.<F1> 8,362,463
98,900 PJ America Inc.<F1> 1,780,200
------------
36,443,592
------------
SEMICONDUCTORS 0.4%
36,500 Microchip Technology, Inc.<F1> 766,500
------------
TELECOMMUNICATIONS 3.4%
67,436 Century Telephone Enterprises, Inc. 4,122,025
15,000 Telecomunicacoes Brasileiras S.A.-Telebras 1,947,188
------------
6,069,213
------------
TRANSPORTATION 3.5%
122,400 AirNet Systems, Inc.<F1> 3,549,600
176,200 USA Truck, Inc.<F1> 2,643,000
------------
6,192,600
------------
TOTAL COMMON STOCKS (COST $122,426,727) 157,501,006
------------
GROWTH FUND-SCHEDULE OF INVESTMENTS
- -----------------------------------
MARCH 31, 1998 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
WARRANTS 0.0%
-------------
$ 1 Cherokee, Inc. Series C $ 1
------------
TOTAL WARRANTS (COST $6) 1
------------
SHORT-TERM INVESTMENT 10.7%
---------------------------
(Variable Rate Demand Deposits)
19,018,006 UMB Bank Money Market Fiduciary, 4.54% 19,018,006
------------
TOTAL SHORT-TERM INVESTMENT (COST $19,018,006) 19,018,006
------------
TOTAL INVESTMENTS (COST $141,444,739) 99.5% 176,519,013
CASH AND OTHER ASSETS, LESS LIABILITIES 0.5% 856,817
------------
NET ASSETS 100.0% $177,375,830
============
<F1> Non-income producing
See notes to financial statements.
Semi-Annual Report ----------
U.S. TREASURY FUND-SCHEDULE OF INVESTMENTS
- ------------------------------------------
MARCH 31, 1998 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS 96.2%
---------------------------------
$3,000,000 U.S. Treasury Bond, 6.25%, 8/15/23 $ 3,090,960
1,300,000 U.S. Treasury Bond, 7.50%, 11/15/24 1,554,709
2,405,000 U.S. Treasury Bond, 6.875%, 8/15/25 2,680,950
1,100,000 U.S. Treasury Bond, 6.00%, 2/15/26 1,099,219
750,000 U.S. Treasury Bond, 6.75%, 8/15/26 825,683
2,735,000 U.S. Treasury Bond, 6.50%, 11/15/26 2,918,956
2,420,000 U.S. Treasury Bond, 6.625%, 2/15/27 2,624,611
2,830,000 U.S. Treasury Bond, 6.375%, 8/15/27 2,989,923
------------
TOTAL U.S. GOVERNMENT Obligations
(COST $16,687,340) 17,785,011
------------
SHORT-TERM INVESTMENT 5.0%
--------------------------
(Variable Rate Demand Deposits)
931,599 UMB Bank Money Market Fiduciary, 4.54% 931,599
------------
TOTAL SHORT-TERM INVESTMENT (COST $931,599) 931,599
------------
TOTAL INVESTMENTS (COST $17,618,939) 101.2% 18,716,610
LIABILITIES, LESS CASH AND OTHER ASSETS (1.2)% (222,067)
------------
NET ASSETS 100.0% $ 18,494,543
============
See notes to financial statements.
This page intentionally left blank.
WASATCH FUNDS-STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
AGGRESSIVE MICRO-CAP U.S.
MID-CAP MICRO-CAP EQUITY VALUE GROWTH TREASURY
FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at market value
Nonaffiliated issuers (cost $46,892,174,
$102,775,230, $118,281,354,
$14,323,907, $129,476,093
and $17,618,939, respectively) $56,912,185 $134,267,219 $167,774,511 $15,382,335 $166,452,766 $18,716,610
Affiliated issuers (cost $0,
$8,147,037, $9,497,543, $0,
$11,968,646 and $0, respectively) - 10,945,063 13,240,781 - 10,066,247 -
Receivable for investment securities sold 2,355,131 3,829,130 984,831 174,434 3,417,771 -
Interest and dividends receivable 9,828 20,272 291,176 12,376 205,101 207,140
Prepaid expenses and other assets 19,455 33,871 26,397 653 91,649 8,355
Receivable from advisor 10,512 13,698 - 9,327 - 2,295
------------ ------------ ------------ ------------ ------------ ------------
Total Assets 59,307,111 149,109,253 182,317,696 15,579,125 180,233,534 18,934,400
------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES:
Payable for investment
securities purchased 1,656,981 824,268 1,298,511 65,880 2,778,526 434,690
Accrued investment advisory fee 17,725 73,567 70,804 5,788 43,586 2,273
Accrued expenses 46,073 73,991 99,962 18,576 35,592 2,894
------------ ------------ ------------ ------------ ------------ ------------
Total Liabilities 1,720,779 971,826 1,469,277 90,244 2,857,704 439,857
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS $ 57,586,332 $148,137,427 $180,848,419 $15,488,881 $177,375,830 $18,494,543
============ ============ ============ ============ ============ ============
NET ASSETS CONSIST OF:
Capital stock 31,109 334,998 65,829 66,358 79,486 15,763
Paid-in capital in excess of par 45,613,660 103,289,843 111,063,989 14,300,219 139,238,494 17,160,838
Undistributed net investment income - - 38,854 - 10,524 222,030
Undistributed net realized gain (loss)
on investments 1,921,552 10,222,571 16,443,352 63,876 2,973,052 (1,759)
Net unrealized appreciation
on investments 10,020,011 34,290,015 53,236,395 1,058,428 35,074,274 1,097,671
------------ ------------ ------------ ------------ ------------ ------------
Net Assets $57,586,332 $148,137,427 $180,848,419 $15,488,881 $177,375,830 $18,494,543
============ ============ ============ ============ ============ ============
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 3,110,851 33,499,843 6,582,945 6,635,790 7,948,607 1,576,322
NET ASSET VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $ 18.51 $ 4.42 $ 27.47 $ 2.33 $ 22.32 $ 11.73
============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
WASATCH FUNDS-STATEMENTS OF OPERATIONS
- ---------------------------------------
FOR THE SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
AGGRESSIVE MICRO-CAP U.S.
MID-CAP MICRO-CAP EQUITY VALUE GROWTH TREASURY
FUND FUND FUND FUND<F1> FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 54,641 $ 167,096 $ 105,745 $ 14,589 $ 204,654 $ 443,589
Dividends 19,215 26,455 755,309 13,012 509,353 -
------------ ------------ ------------ ------------ ------------ ------------
73,856 193,551 861,054 27,601 714,007 443,589
------------ ------------ ------------ ------------ ------------ ------------
EXPENSES:
Investment advisory fee 400,287 1,355,504 888,199 33,075 754,390 36,590
Shareholder servicing fees 115,060 179,217 225,945 8,556 125,745 11,417
Fund administration and accounting fees 47,436 100,391 131,566 7,192 111,741 10,839
Reports to shareholders 23,966 43,058 38,502 2,881 40,299 3,948
Federal and state registration fees 15,200 13,104 19,222 12,594 18,200 7,790
Custody fees 9,627 11,645 9,810 3,172 8,692 640
Legal fees 5,350 11,982 13,829 5,799 11,696 874
Audit fees 3,735 6,612 7,780 878 6,728 1,602
Directors' fees 1,054 2,090 2,670 125 2,024 172
Other 2,988 4,587 5,221 1,281 3,747 764
------------ ------------ ------------ ------------ ------------ ------------
Total expenses before reimbursement 624,703 1,728,190 1,342,744 75,553 1,083,262 74,636
Reimbursement of expenses by advisor (64,301) (34,892) (11,751) (32,369) _ (19,752)
------------ ------------ ------------ ------------ ------------ ------------
Net expenses 560,402 1,693,298 1,330,993 43,184 1,083,262 54,884
NET INVESTMENT INCOME (LOSS) (486,546) (1,499,747) (469,939) (15,583) (369,255) 388,705
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments 4,729,050 13,114,260 18,389,173 79,459 4,558,982 42,294
Change in unrealized appreciation/
depreciation on investments (8,801,604) 3,547,391 (6,794,584) 1,058,428 9,434,421 565,129
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments (4,072,554) 16,661,651 11,594,589 1,137,887 13,993,403 607,423
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(4,559,100) $15,161,904 $11,124,650 $1,122,304 $13,624,148 $996,128
============ ============ ============ ============ ============ ============
<F1> Inception date of Fund was December 17, 1997.
</TABLE>
See notes to financial statements.
WASATCH FUNDS-STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------
<TABLE>
<CAPTION>
MID-CAP FUND MICRO-CAP FUND AGGRESSIVE EQUITY FUND
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, 1998 SEPTEMBER 30, MARCH 31, 1998 SEPTEMBER 30, MARCH 31, 1998 SEPTEMBER 30,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (486,546) $(1,254,417) $(1,499,747) $(1,458,430) $ (469,939) $ (757,045)
Net realized gain on
investments 4,729,050 15,258,686 13,114,260 13,149,891 18,389,173 31,513,784
Change in unrealized appreciation/
depreciation on investments (8,801,604) 1,592,547 3,547,391 24,309,512 (6,794,584) 16,058,451
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations (4,559,100) 15,596,816 15,161,904 36,000,973 11,124,650 46,815,190
DIVIDENDS PAID FROM:
Net realized gains (6,627,300) (15,375) (9,713,791) (4,659,756) (22,723,111) (10,767,566)
------------ ------------ ------------ ------------ ------------ ------------
(6,627,300) (15,375) (9,713,791) (4,659,756) (22,723,111) (10,767,566)
CAPITAL SHARE TRANSACTIONS:
Shares sold 14,452,368 31,875,753 34,530,925 91,645,382 4,913,052 16,269,246
Shares issued to holders in
reinvestment of dividends 6,518,196 15,089 9,627,076 4,568,891 21,364,851 10,048,278
------------ ------------ ------------ ------------ ------------ ------------
20,970,564 31,890,842 44,158,001 96,214,273 26,277,903 26,317,524
Shares redeemed (29,440,568) (98,719,877) (59,376,137) (63,651,794) (22,796,108) (126,719,050)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) (8,470,004) (66,829,035) (15,218,136) 32,562,479 3,481,795 (100,401,526)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (19,656,404) (51,247,594) (9,770,023) 63,903,696 (8,116,666) (64,353,902)
NET ASSETS:
Beginning of period 77,242,736 128,490,330 157,907,450 94,003,754 188,965,085 253,318,987
End of period $57,586,332 $ 77,242,736 $148,137,427 $157,907,450 $180,848,419 $188,965,085
============ ============ ============ ============ ============ ============
Undistributed net investment income
included in net assets at end of
period - - - - - $64,216
============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
WASATCH FUNDS-STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------
<TABLE>
<CAPTION>
MICRO-CAP VALUE FUND GROWTH FUND U.S. TREASURY
DECEMBER 17, 1997 SIX MONTHS YEAR SIX MONTHS YEAR
THROUGH ENDED ENDED ENDED ENDED
MARCH 31, 1998 MARCH 31, 1998 SEPTEMBER 30, MARCH 31, 1998 SEPTEMBER 30,
(UNAUDITED) (UNAUDITED) 1997 (UNAUDITED) 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (15,583) $ (369,255) $ 419,935 $ 388,705 $ 597,921
Net realized gain on
investments 79,459 4,558,982 14,521,194 42,294 22,912
Change in unrealized appreciation/
depreciation on investments 1,058,428 9,434,421 16,863,575 565,129 560,378
------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 1,122,304 13,624,148 31,804,704 996,128 1,181,211
DIVIDENDS PAID FROM:
Net investment income - (192,317) (342,214) (640,620) (194,393)
Net realized gains - (10,838,073) (6,352,213) - -
------------ ------------ ------------ ------------ ------------
- (11,030,390) (6,694,427) (640,620) (194,393)
CAPITAL SHARE TRANSACTIONS:
Shares sold 16,108,065 67,021,239 68,453,640 10,816,599 7,961,845
Shares issued to holders in
reinvestment of dividends - 10,904,029 6,494,354 635,951 191,694
------------ ------------ ------------ ------------ ------------
16,108,065 77,925,268 74,947,994 11,452,550 8,153,539
Shares redeemed (1,741,488) (38,580,387) (68,857,722) (4,518,560) (5,362,196)
------------ ------------ ------------ ------------ ------------
Net increase 14,366,577 39,344,881 6,090,272 6,933,990 2,791,343
------------ ------------ ------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS 15,488,881 41,938,639 31,200,549 7,289,498 3,778,161
NET ASSETS:
Beginning of period - 135,437,191 104,236,642 11,205,045 7,426,884
------------ ------------ ------------ ------------ ------------
End of period $ 15,488,881 $177,375,830 $135,437,191 $ 18,494,543 $ 11,205,045
============ ============ ============ ============ ============
Undistributed net investment income
included in net assets at end of
period - - $159,222 $222,030 $473,945
============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
MID-CAP FUND-FINANCIAL HIGHLIGHTS MID-CAP FUND-FINANCIAL HIGHLIGHTS
- ---------------------------------- ----------------------------------
Six months ended March 31, 1998 (Unaudited) Year ended September 30
1998 1997 1996 1995 1994 1993
- --------------------------------------------------------- -----------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.85 $17.95 $18.61 $11.02 $10.51 $9.93
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.16) (0.35) (0.26) (0.02) (0.27) (0.07)
Net realized and unrealized gains (losses)
on securities (1.18) 4.25 (0.21) 7.64 0.78 0.65
------------ ------------ ------------ ------------ ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS (1.34) 3.90 (0.47) 7.62 0.51 0.58
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 $18.51 $21.85 $17.95 $18.61 $11.02 $10.51
=========== =========== =========== =========== =========== ===========
TOTAL RETURN<F1> (4.47)% 21.75% (2.54)% 69.24% 4.85% $5.85
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $57,586 $77,243 $128,490 $98,605 $1,091 $2,451
Ratio of expenses to average net assets<F2> 1.75% 1.75% 1.75% 1.75% 1.75% 1.74%
Ratio of net income (loss) to average
net assets<F2> (1.52)% (1.48)% (1.27)% (0.71)% (1.19)% (0.86)%
Portfolio turnover rate 52% 103% 121% 46% 213% 113%
Average commission rate paid on
portfolio investment transactions<F3> $0.06 $0.05 $0.05 N/A N/A N/A
<F1> Not annualized for periods less than a year.
<F2> Net of reimbursements by advisor. Absent reimbursement of expenses by advisor, the ratio of expenses to average net assets
would be 1.95%, 1.89%, 1.81%, 1.94%, 3.33% and 2.69%, respectively, and the ratio of net income (loss) to average net assets
would be (1.72)%, (1.62)%, (1.33)%, (0.90)%, (2.76)% and (1.81)%, respectively.
<F3> Disclosure required by the Securities and Exchange Commission beginning 1996.
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
MICRO-CAP-FINANCIAL HIGHLIGHTS MICRO-CAP FUND-FINANCIAL HIGHLIGHTS
- ------------------------------ ------------------------------------
Six months ended March 31, 1998 (Unaudited) Year ended September 30
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) (0.05) (0.04) (0.03) -
Net realized and unrealized gains (losses)
on securities 0.51 1.36 0.46 0.72
----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.46 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 $4.42 $4.29 $3.15 $2.72
=========== =========== =========== ===========
TOTAL RETURN<F2> 12.35% 44.58% 15.81% 36.00%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $148,137 $157,907 $94,004 $25,368
Ratio of expenses to average net assets<F3> 2.50% 2.50% 2.50% 2.50%
Ratio of net income (loss) to average
net assets<F3> (2.21)% (1.64)% (1.53)% (0.76)%
Portfolio turnover rate 47% 99% 84% 0%
Average commission rate paid on
portfolio investment transactions<F4> $0.06 $0.05 $0.04 N/A
<F1> Commencement of operations.
<F2> Not annualized for periods less than a year.
<F3> Net of reimbursements by advisor. Absent reimbursement of expenses by advisor, the ratio of expenses to average net assets
would be 2.55%, 2.58%, 2.67%, and 3.40%, respectively, and the ratio of net income (loss) to average net assets would be
(2.26)%, (1.72)%, (1.70)%, and (1.66)%, respectively.
<F4> Disclosure required by the Securities and Exchange Commission beginning 1996.
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
AGGRESSIVE EQUITY FUND-FINANCIAL HIGHLIGHTS AGGRESSIVE EQUITY FUND-FINANCIAL HIGHLIGHTS
- ------------------------------------------- -------------------------------------------
Six months ended March 31, 1998 (Unaudited) Year ended September 30
1998 1997 1996 1995 1994 1993
- --------------------------------------------------------- -----------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $29.73 $24.17 $25.00 $19.96 $19.75 $15.23
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.07) (0.12) (0.18) (0.04) (0.02) (0.09)
Net realized and unrealized gains (losses)
on securities 1.50 6.90 (0.11) 6.59 1.33 5.40
------------ ------------ ------------ ------------ ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS 1.43 6.78 (0.29) 6.55 1.31 5.31
LESS DISTRIBUTIONS:
Distributions from capital gains (3.69) (1.22) (0.54) (1.51) (1.10) (0.79)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS (3.69) (1.22) (0.54) (1.51) (1.10) (0.79)
------------ ------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $27.47 $29.73 $24.17 $25.00 $19.96 $19.75
=========== =========== =========== =========== =========== ===========
TOTAL RETURN<F1> 6.85% 29.45% (1.09)% 35.19% 6.85% 35.73%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $180.848 $188.965 $253,319 $305,311 $46,369 $23,293
Ratio of expenses to average net assets<F2> 1.50% 1.50% 1.50% 1.47% 1.50% 1.50%
Ratio of net income (loss) to average
net assets<F2> (0.53)% (0.39)% (0.65)% (0.37)% (0.67)% (0.77)%
Portfolio turnover rate 24% 48% 73% 29% 64% 70%
Average commission rate paid on
portfolio investment transactions<F3> $0.06 $0.05 $0.05 N/A N/A N/A
<F1> Not annualized for periods less than a year.
<F2> Net of reimbursements by advisor. Absent reimbursement of expenses by advisor, except for the years ended September 30, 1996
and 1995 where there were no reimbursements, the ratio of expenses to average net assets for the six months ended March 31,
1998 and the years ended September 30, 1997, September 30, 1994 and September 30, 1993 would be 1.51%, 1.54%, 1.52% and
1.64%, respectively, and the ratio of net income (loss) to average net assets would be (0.54)%, (0.43)%, (0.69)% and (0.92)%,
respectively.
<F3> Disclosure required by the Securities and Exchange Commission beginning 1996.
</TABLE>
See notes to financial statements.
MICRO-CAP VALUE FUND-FINANCIAL HIGHLIGHTS
- ------------------------------------------
DECEMBER 17, 1997<F1> THROUGH MARCH 31, 1998 (UNAUDITED)
1998
- ------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $2.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) -
Net realized and unrealized gains (losses)
on securities 0.33
--------
TOTAL FROM INVESTMENT OPERATIONS 0.33
LESS DISTRIBUTIONS:
Distributions from capital gains -
-------
TOTAL DISTRIBUTIONS -
-------
NET ASSET VALUE, END OF PERIOD $2.33
=======
TOTAL RETURN<F2> 16.50%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $15,489
Ratio of expenses to average net assets<F3> 1.95%
Ratio of net income (loss) to average
net assets<F3> (0.70)%
Portfolio turnover rate 17%
Average commission rate paid on
portfolio investment transactions $0.06
<F1> Commencement of operations.
<F2> Not annualized for periods less than a year.
<F3> Net of reimbursements by advisor. Absent reimbursement of expenses by
advisor, the ratio of expenses to average net assets would be 3.42%, and
the ratio of net income (loss) to average net assets would be (2.17)%.
See notes to financial statements.
This page intentionally left blank.
<TABLE>
<CAPTION>
GROWTH FUND-FINANCIAL HIGHLIGHTS GROWTH FUND-FINANCIAL HIGHLIGHTS
- -------------------------------------------- ----------------------------------
Six months ended March 31, 1998 (Unaudited) Year ended September 30
1998 1997 1996 1995 1994 1993
- --------------------------------------------------------- -----------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $22.34 $17.57 $15.97 $15.30 $15.68 $13.64
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.05) 0.08 0.07 0.02 (0.14) (0.08)
Net realized and unrealized gains (losses)
on securities 1.68 6.07 1.87 4.59 0.71 3.21
------------ ------------ ------------ ------------ ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS 1.63 6.15 1.94 4.61 0.57 3.13
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) (1.09)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS (1.65) (1.38) (0.34) (3.94) (0.95) (1.09)
NET ASSET VALUE, END OF PERIOD $22.32 $22.34 $17.57 $15.97 $15.30 $15.68
============ ============ ============ ============ ============ ============
TOTAL RETURN<F1> 8.34% 37.58% 12.39% 39.76% 3.75% 23.57%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $177,376 $135,437 $104,237 $53,533 $11,219 $17,619
Ratio of expenses to average net assets<F2> 1.44% 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of net income (loss) to average
net assets<F2> (0.49)% 0.44% 0.40% 0.29% (0.51)% (0.55)%
Portfolio turnover rate 28% 81% 62% 88% 163% 104%
Average commission rate paid on
portfolio investment transactions<F3> $0.05 $0.05 $0.05 N/A N/A N/A
<F1> Not annualized for periods less than a year.
<F2> Net of reimbursements by advisor. Absent reimbursement of expenses by advisor, except for the six months ended March 31, 1998
and the year ended September 30, 1997 where there were no reimbursements, the ratio of expenses to average net assets would be
1.51%, 1.58%, 1.64% and 1.61%, respectively, and the ratio of net income (loss) to average net assets would be 0.39%, 0.21%,
(0.61)% and (0.66)%, respectively.
<F3> Disclosure required by the Securities and Exchange Commission beginning 1996.
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
U.S. TREASURY FUND-FINANCIAL HIGHLIGHTS TREASURY FUND-FINANCIAL HIGHLIGHTS
- -------------------------------------------- ----------------------------------
Six months ended March 31, 1998 (Unaudited) Year ended September 30
1998 1997 1996 1995 1994 1993
- --------------------------------------------------------- -----------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.32 $10.21 $10.50 $10.09 $10.42 $11.17
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.22 0.61 0.44 0.56 0.55 0.55
Net realized and unrealized gains (losses)
on securities 0.75 0.73 0.01 0.44 (0.40) (0.17)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS 0.97 1.34 0.45 1.00 0.15 0.38
LESS DISTRIBUTIONS:
Dividends from net investment income (0.56) (0.23) (0.74) (0.59) (0.46) (0.53)
Distributions from capital gains - - - - (0.02) (0.60)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS (0.56) (0.23) (0.74) (0.59) (0.48) (1.13)
NET ASSET VALUE, END OF PERIOD $11.73 $11.32 $10.21 $10.50 $10.09 $10.42
============ ============ ============ ============ ============ ============
TOTAL RETURN<F1> 8.64% 13.23% 4.42% 10.46% 1.51% 3.80%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $18,495 $11,205 $7,427 $4,035 $3,250 $3,748
Ratio of expenses to average net assets<F2> 0.75% 0.75% 0.93% 1.00% 1.00% 1.00%
Ratio of net income (loss) to average
net assets<F2> 5.31% 5.97% 5.21% 5.88% 5.15% 4.60%
Portfolio turnover rate 6% 19% 30% 43% 45% 46%
<F1> Not annualized for periods less than a year.
<F2> Net of reimbursements by advisor. Absent reimbursement of expenses by advisor, the ratio of expenses to average net assets
would be 1.02%, 1.22%, 1.67%, 1.59%, 1.39% and 1.35%, respectively, and the ratio of net income (loss) to average net assets
would be 5.04%, 5.50%, 4.47%, 5.29%, 4.76% and 4.24%, respectively.
</TABLE>
See notes to financial statements.
WASATCH FUNDS-_NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------
MARCH 31, 1998 (UNAUDITED)
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 Mid-Cap, Micro-Cap,
Aggressive Equity, Micro-Cap Value and Growth 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 Mid-Cap, Micro-Cap, Aggressive
Equity, Micro-Cap Value, Growth 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
Management make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. The reported amounts of
revenues and expenses during the reporting period may also be affected by the
estimates and assumptions Management is required to make. Actual results may
differ from those estimates.
3. DISTRIBUTIONS
- -----------------
Dividends from net investment income are declared and paid annually.
Distributions of net realized gains, if any, will be declared at least annually.
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
To the extent these book and tax differences are permanent in nature, such
amounts are reclassified among paid-in capital in excess of par value,
undistributed net investment income and undistributed net realized gain (loss)
on investments. Accordingly, at March 31, 1998, reclassifications were recorded
to increase undistributed net investment income by $486,546, $1,499,747,
$444,577, $15,583 and $412,874 and decrease undistributed net realized gain on
investments by $2,143,206, $4,240,853, $4,452,250, $15,583 and $2,870,342 and
increase paid-in capital in excess of par by $1,656,660, $2,741,106, $4,007,673,
$0 and $2,457,450, for the Mid-Cap, Micro-Cap, Aggressive Equity, Micro-Cap
Value and Growth Funds, respectively.
- --------------------------------------------------------------------------------
4. CAPITAL STOCK
- -----------------
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1998
AGGRESSIVE MICRO-CAP U.S.
MID-CAP MICRO-CAP EQUITY VALUE GROWTH TREASURY
FUND FUND FUND FUND<F1> FUND FUND
-----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Shares sold 776,736 8,411,388 180,880 7,401,364 3,134,637 917,122
Dividends reinvested 416,232 2,630,260 904,907 _ 557,466 54,823
Shares redeemed (1,617,092) (14,379,159) (859,479) (765,574) (1,806,331) (385,536)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) (424,124) (3,337,511) 226,308 6,635,790 1,885,772 586,409
=========== =========== =========== =========== =========== ===========
<F1>Inception date of Fund was December 17, 1997.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1997
AGGRESSIVE U.S.
MID-CAP MICRO-CAP EQUITY GROWTH TREASURY
FUND FUND FUND FUND FUND
-------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Shares sold 1,705,312 24,988,962 661,672 3,579,929 747,986
Dividends
reinvested 817 1,548,777 430,518 385,650 18,067
Shares redeemed (5,329,545) (19,517,552) (5,215,254) (3,836,178) (503,742)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) (3,623,416) 7,020,187 (4,123,064) 129,401 262,311
=========== =========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
5. PURCHASES AND SALES OF SECURITIES
- -------------------------------------
<TABLE>
<CAPTION>
Purchases and sales of investment securities, excluding U.S. government and short-term securities, for the six months ended March
31, 1998 are summarized below:
AGGRESSIVE MICRO-CAP U.S.
MID-CAP MICRO-CAP EQUITY VALUE GROWTH TREASURY
FUND FUND FUND FUND<F1> FUND FUND
---------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Purchases $32,831,551 $61,118,003 $41,182,775 $14,321,477 $54,139,906 _
Sales 44,897,641 63,195,313 68,218,512 1,303,496 40,696,792 _
<F1>Inception date of Fund was December 17, 1997.
</TABLE>
- --------------------------------------------------------------------------------
The only purchases and sales of U.S. government securities occurred in the
U.S. Treasury Fund and were $7,121,648 and $860,008, 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 Mid-Cap, Micro-Cap, Aggressive Equity, Micro-Cap Value, and Growth
Funds' tax basis in their investments is $47,122,700, $111,236,964,
$128,342,055, $14,340,809 and $142,392,970, respectively. At September 30, 1997,
the U.S. Treasury Fund had an accumulated net realized capital loss carryover of
$8,270 and $35,783 expiring in 2002 and 2003, respectively. To the extent the
U.S. Treasury Fund realizes future net capital gains, taxable distributions to
its shareholders will be offset by any unused capital loss carryover.
As of March 31, 1998, gross unrealized appreciation and (depreciation) for
federal income tax purposes were as follows:
<TABLE>
<CAPTION>
AGGRESSIVE MICRO-CAP U.S.
MID-CAP MICRO-CAP EQUITY VALUE GROWTH TREASURY
FUND FUND FUND FUND<F1> FUND FUND
--------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Unrealized
appreciation $12,260,335 $37,847,244 $57,290,408 $1,372,735 $41,002,642 $1,169,583
Unrealized
depreciation (2,470,850) (3,871,926) (4,617,171) (331,209) (6,876,599) (71,912)
------------ ------------ ------------ ------------ ------------ ------------
Net unrealized
appreciation
(depreciation) $9,789,485 $33,975,318 $52,673,237 $1,041,526 $34,126,043 $1,097,671
=========== =========== =========== =========== =========== ===========
<F1>Inception date of Fund was December 17, 1997.
</TABLE>
- --------------------------------------------------------------------------------
6. INVESTMENT ADVISORY
- -----------------------
The investment policies of the Funds and the management of the Funds'
portfolios are administered by the Manager. The Manager paid for the Funds'
office space, facilities and certain business equipment in addition to those
provided by the Funds' custodian, administrator and transfer agent. The Manager
also compensates all officers and directors of the Funds, provided such persons
are also employees of the Manager or its affiliates. For the six months ended
March 31, 1998, management fees for the Mid-Cap, Micro-Cap, Aggressive Equity,
Micro-Cap Value, Growth and U.S. Treasury Funds were 1.25%, 2.0%, 1.0%, 1.5%,
1.0% and 0.5% of the daily net assets of each portfolio, respectively. The
Manager has voluntarily agreed to limit the expenses of the Mid-Cap, Micro-Cap,
Aggressive Equity, Micro-Cap Value, Growth and U.S. Treasury Funds to 1.75%,
2.50%, 1.50%, 1.95%, 1.50% and 0.75% of average net assets computed on a daily
basis, respectively. For the six months ended March 31, 1998, the Manager
reimbursed $64,301 for the Mid-Cap Fund, $34,892 for the Micro-Cap Fund, $11,751
for the Aggressive Equity Fund, $32,369 for the Micro-Cap Value Fund and $19,752
for the U.S. Treasury Fund.
- --------------------------------------------------------------------------------
7. TRANSACTIONS WITH AFFILIATES
- --------------------------------
The following is an analysis of transactions for the six months ended March
31, 1998 in the Micro-Cap, Aggressive Equity and Growth Funds with "affiliated
companies" as defined by the Investment Company Act of 1940:
WASATCH FUNDS-NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MICRO-CAP FUND
AMOUNT OF AMOUNT OF
DIVIDENDS GAIN (LOSS)
CREDITED TO REALIZED ON
SHARE ACTIVITY INCOME SALE OF SHARES
- ----------------------------------------------------------------------------- FOR THE SIX FOR THE SIX
BALANCE BALANCE MOS. ENDED MOS. ENDED
SECURITY NAME 9/30/97 PURCHASES SALES 3/31/98 3/31/98 3/31/98
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
First Cash, Inc. 520,000 10,000 15,000 515,000 _ $122,821
National Dentex
Corp. 268,850 13,900 15,000 267,750 _ 376,862
Travis Boats
& Motors, Inc. 208,200 1,000 _ 209,200* _ _
*NO LONGER AN AFFILIATED COMPANY AS OF MARCH 31, 1998.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE EQUITY FUND
AMOUNT OF AMOUNT OF
DIVIDENDS GAIN (LOSS)
CREDITED TO REALIZED ON
SHARE ACTIVITY INCOME SALE OF SHARES
- ----------------------------------------------------------------------------- FOR THE SIX FOR THE SIX
BALANCE BALANCE MOS. ENDED MOS. ENDED
SECURITY NAME 9/30/97 PURCHASES SALES 3/31/98 3/31/98 3/31/98
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
National Dentex
Corp. 291,300 _ _ 291,300 _ _
Travis Boats
& Motors, Inc. 87,750 133,300 _ 221,050 _ _
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROWTH FUND
AMOUNT OF AMOUNT OF
DIVIDENDS GAIN (LOSS)
CREDITED TO REALIZED ON
SHARE ACTIVITY INCOME SALE OF SHARES
- ----------------------------------------------------------------------------- FOR THE SIX FOR THE SIX
BALANCE BALANCE MOS. ENDED MOS. ENDED
SECURITY NAME 9/30/97 PURCHASES SALES 3/31/98 3/31/98 3/31/98
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
First Cash, Inc. 300,000 124,200 _ 424,200 _ _
Home Health Corp.
of America, Inc. 475,606 434,775 228,000 682,381 _ $(2,068,860)
National Dentex
Corp. 187,000 _ _ 187,000 _ _
Thompson PBE, Inc. 707,600 20,800 728,400 _ _ 243,668
- -------------------------------------------------------------------------------------------------------------
</TABLE>
RESULTS OF THE SHAREHOLDER MEETING
- -----------------------------------
The annual meeting of the shareholders of the Funds was held on January 16,
1998. Directors elected by the shareholders at the time of the meeting were as
follows: Samuel S. Stewart, Jr., Roy S. Jespersen, Jeffrey S. Cardon, James U.
Jensen and William R. Swinyard.
The Funds listed below each issue are those entitled to vote on that issue.
The matters voted on by the shareholders of record as of November 10, 1997 and
the results of the vote at the shareholder meetings held January 16 and 23, 1998
were as follows:
FOR WITHHELD
- ------------------------------------------------------------------
1. ELECTION OF DIRECTORS
SAMUEL S. STEWART, JR.
Mid-Cap Fund 1,982,375 77,560
Micro-Cap Fund 20,196,614 378,020
Aggressive Equity Fund 3,783,362 104,115
Growth Fund 4,855,142 102,066
U.S. Treasury Fund 793,378 27,182
ROY S. JESPERSEN
Mid-Cap Fund 1,982,051 77,883
Micro-Cap Fund 20,192,284 382,350
Aggressive Equity Fund 3,783,225 104,252
Growth Fund 4,855,003 102,205
U.S. Treasury Fund 794,152 26,408
JEFFREY S. CARDON
Mid-Cap Fund 1,982,727 77,208
Micro-Cap Fund 20,189,041 385,593
Aggressive Equity Fund 3,781,398 106,079
Growth Fund 4,851,034 106,174
U.S. Treasury Fund 794,251 26,309
JAMES U. JENSEN
Mid-Cap Fund 1,984,634 75,301
Micro-Cap Fund 20,200,382 374,252
Aggressive Equity Fund 3,781,096 106,381
Growth Fund 4,851,879 105,329
U.S. Treasury Fund 793,623 26,937
WILLIAM R. SWINYARD
Mid-Cap Fund 1,983,518 76,416
Micro-Cap Fund 19,965,233 609,400
Aggressive Equity Fund 3,782,028 105,450
Growth Fund 4,855,213 101,995
U.S. Treasury Fund 794,251 26,309
RESULTS OF THE SHAREHOLDER MEETING
- -----------------------------------
FOR AGAINST ABSTAIN
- ------------------------------------------------------------------------------
2. RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS
INDEPENDENT AUDITORS FOR THE FUNDS.
Mid-Cap Fund 1,981,637 25,092 53,205
Micro-Cap Fund 19,882,745 265,675 426,215
Aggressive Equity Fund 3,748,567 35,495 103,415
Growth Fund 4,830,816 41,349 85,043
U.S. Treasury Fund 795,876 5,806 18,877
3. APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION.
Mid-Cap Fund 1,709,741 99,418 77,035
Micro-Cap Fund 16,758,335 958,438 691,047
Aggressive Equity Fund 3,303,193 200,445 179,160
Growth Fund 3,285,410 196,022 352,801
U.S. Treasury Fund 745,413 17,892 27,851
4. PROPOSAL TO CHANGE THE CLASSIFICATION OF THE GROWTH FUND FROM A DIVERSIFIED
INVESTMENT COMPANY TO A NON-DIVERSIFIED INVESTMENT COMPANY.
Growth Fund 2,954,270 306,859 349,105
5. PROPOSAL TO ELIMINATE INVESTMENT RESTRICTIONS WHICH ARE INCONSISTENT WITH THE
CURRENT STATUS OF THE FUNDS AS "NON-DIVERSIFIED."
Mid-Cap Fund 1,606,172 106,786 58,260
Micro-Cap Fund 16,272,708 787,485 626,321
Aggressive Equity Fund 3,164,865 256,831 167,534
6. PROPOSAL TO CONVERT THE FUNDAMENTAL POLICY REGARDING INVESTING FOR THE
PURPOSE OF EXERCISING CONTROL OR MANAGEMENT TO A NON-FUNDAMENTAL POLICY.
Mid-Cap Fund 1,590,514 105,612 75,092
Micro-Cap Fund 15,728,428 931,394 1,026,691
Aggressive Equity Fund 3,117,619 290,615 180,996
Growth Fund 3,048,289 201,480 360,467
U.S. Treasury Fund 687,476 78,864 21,821
7. PROPOSAL TO REMOVE THE RESTRICTIONS ON INVESTING IN OTHER INVESTMENT
COMPANIES WHICH ARE MORE RESTRICTIVE THAN THE INVESTMENT COMPANY
ACT OF 1940.
Mid-Cap Fund 1,578,874 123,716 68,628
Micro-Cap Fund 16,029,208 925,475 731,831
Aggressive Equity Fund 3,104,603 314,265 170,362
Growth Fund 3,032,619 220,873 356,743
U.S. Treasury Fund 744,969 15,685 27,507
FOR AGAINST ABSTAIN
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8. PROPOSAL TO MODIFY A FUNDAMENTAL INVESTMENT RESTRICTION REGARDING C
OMMODITIES.
Mid-Cap Fund 1,542,307 156,829 72,082
Micro-Cap Fund 15,397,121 1,571,838 717,555
Aggressive Equity Fund 2,879,593 539,337 170,300
Growth Fund 2,965,922 296,904 347,409
U.S. Treasury Fund 671,967 89,638 26,556
9. PROPOSAL TO ELIMINATE A FUNDAMENTAL INVESTMENT RESTRICTION ON INVESTING
IN ILLIQUID SECURITIES AND ADOPT A NON-FUNDAMENTAL POLICY WHICH CONFORMS
TO SEC POLICIES.
Mid-Cap Fund 1,570,229 135,311 65,678
Micro-Cap Fund 15,616,175 1,355,262 715,077
Aggressive Equity Fund 3,144,211 275,720 169,299
Growth Fund 2,931,356 326,351 352,527
U.S. Treasury Fund 668,833 96,615 22,713
10.PROPOSAL TO ALLOW THE FUNDS TO LEND PORTFOLIO SECURITIES.
Mid-Cap Fund 1,523,680 171,217 76,321
Micro-Cap Fund 15,262,432 1,692,644 731,439
Aggressive Equity Fund 3,039,792 384,174 165,264
Growth Fund 2,961,520 305,513 343,202
11.PROPOSAL TO CONFORM THE FUNDAMENTAL POLICIES REGARDING SENIOR SECURITIES,
BORROWING MONEY AND PLEDGING ASSETS TO THOSE OF THE WASATCH MICRO-CAP VALUE
FUND.
Mid-Cap Fund 1,576,338 118,255 76,625
Micro-Cap Fund 15,755,809 1,117,776 812,928
Aggressive Equity Fund 3,202,603 203,092 183,536
Growth Fund 2,987,391 262,068 360,775
U.S. Treasury Fund 739,803 17,965 30,393
12.PROPOSAL TO ELIMINATE FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING
PUT AND CALL OPTIONS.
Mid-Cap Fund 1,531,497 167,264 72,456
Micro-Cap Fund 15,598,328 1,391,350 696,837
Aggressive Equity Fund 3,081,416 339,937 167,878
Growth Fund 2,878,581 357,299 374,355
U.S. Treasury Fund 658,825 107,212 22,124
FOR AGAINST ABSTAIN
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13.PROPOSAL TO CONVERT THE FUNDAMENTAL POLICY REGARDING INVESTING IN OIL,
GAS, OR OTHER MINERAL INTERESTS TO A NON-FUNDAMENTAL INVESTMENT POLICY.
Mid-Cap Fund 1,550,189 151,136 69,893
Micro-Cap Fund 15,635,104 1,294,651 756,759
Aggressive Equity Fund 3,060,814 356,426 171,990
Growth Fund 2,934,242 337,806 338,187
U.S. Treasury Fund 666,278 97,750 24,133
14.PROPOSAL TO ELIMINATE A FUNDAMENTAL RESTRICTION LIMITING INVESTING
IN WARRANTS.
Mid-Cap Fund 1,551,087 154,235 65,896
Micro-Cap Fund 15,474,859 1,463,000 748,655
Aggressive Equity Fund 3,040,224 369,734 179,273
Growth Fund 2,893,124 345,519 371,592
U.S. Treasury Fund 743,477 19,582 25,102
15.PROPOSAL TO ELIMINATE A FUNDAMENTAL RESTRICTION LIMITING INVESTING
IN "NEW" ISSUERS.
Mid-Cap Fund 1,592,275 119,502 59,442
Micro-Cap Fund 16,097,533 910,763 678,217
Aggressive Equity Fund 3,125,967 298,802 164,461
Growth Fund 3,002,985 259,528 347,722
U.S. Treasury Fund 742,302 23,443 22,416
16.PROPOSAL TO CONVERT THE FUNDAMENTAL POLICY REGARDING INVESTING
IN "SPECIAL SITUATIONS" TO A NON-FUNDAMENTAL INVESTMENT POLICY.
Mid-Cap Fund 1,574,960 128,576 67,683
Micro-Cap Fund 16,007,742 950,890 727,882
Aggressive Equity Fund 3,097,000 324,286 167,945
Growth Fund 2,979,117 277,316 353,802
U.S. Treasury Fund 670,395 91,440 26,326
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