WASATCH ADVISORS FUNDS INC, 497, 1999-02-05

WASATCH ADVISORS FUNDS INC
497, 1999-02-05

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TABLE OF CONTENTS
- -----------------
SUMMARY OF OBJECTIVES, STRATEGIES AND RISKS................................. 2
Wasatch Micro-Cap Fund ................................................... 2
Wasatch Micro-Cap Value Fund ............................................. 4
Wasatch Aggressive Equity Fund ........................................... 6
Wasatch Growth Fund ...................................................... 8
Wasatch Mid-Cap Fund .................................................... 10
Wasatch-Hoisington U.S. Treasury Fund ................................... 12
FEES AND EXPENSES OF WASATCH FUNDS......................................... 14
MORE ABOUT THE WASATCH EQUITY FUNDS........................................ 16
Wasatch Micro-Cap Fund .................................................. 16
Wasatch Micro-Cap Value Fund ............................................ 17
Wasatch Aggressive Equity Fund .......................................... 18
Wasatch Growth Fund ..................................................... 19
Wasatch Mid-Cap Fund .................................................... 20
PRINCIPAL RISKS OF INVESTING IN THE WASATCH EQUITY FUNDS................... 20
MORE ABOUT THE WASATCH-HOISINGTON U.S. TREASURY FUND....................... 23
PRINCIPAL RISKS OF INVESTING IN THE WASATCH-HOISINGTON U.S. TREASURY FUND.. 24
MANAGEMENT OF WASATCH FUNDS................................................ 25
Management Fees and Expense Limitations ................................. 25
Lead Managers ........................................................... 26
Additional Service Providers ............................................ 27
SHAREHOLDER'S GUIDE........................................................ 28
To Open a New Account ................................................... 28
Retirement Accounts ..................................................... 29
To Purchase Shares ...................................................... 30
Automatic Investment Plan ............................................... 31
Who Can Purchase Shares in the Micro-Cap Fund ........................... 31
To Exchange Shares ...................................................... 32
To Redeem Shares ........................................................ 33
Signature Guarantee ..................................................... 35
How Fund Shares are Priced .............................................. 36
SHAREHOLDER SERVICES AND ACCOUNT POLICIES.................................. 36
Shareholder Reports ..................................................... 37
Account Statements ...................................................... 37
Telephone Transactions .................................................. 37
Registration Changes .................................................... 38
Address Changes ......................................................... 38
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES............................ 39
FINANCIAL HIGHLIGHTS........................................................41
GUIDE TO UNDERSTANDING FUND PERFORMANCE.................................... 48
GLOSSARY OF INVESTING TERMS................................................ 50
OTHER IMPORTANT INFORMATION................................................ 53

- ---- Not part of the Prospectus

<LOGO>

WASATCH FUNDS, INC.

150 Social Hall Avenue
Salt Lake City, UT 84111
1 (800) 551-1700

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WASATCH MICRO-CAP FUND

WASATCH MICRO-CAP VALUE FUND

WASATCH AGGRESSIVE EQUITY FUND

WASATCH GROWTH FUND

WASATCH MID-CAP FUND

WASATCH-HOISINGTON U.S. TREASURY FUND

JANUARY 31, 1999

AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS
NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY STATEMENT TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE
OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
IN SUCH STATE OR OTHER JURISDICTION.
This prospectus is designed to provide you with important information about
the no-load mutual funds offered by Wasatch Funds. Before you invest, please
read the prospectus carefully, paying particular attention to the risks
involved. Keep the prospectus for future reference.
An investment in any of the Funds is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
To aid your understanding we have provided a glossary that can be found on
page 50 of this prospectus. Words that are italicized within the text of the
prospectus are defined in the glossary.
If you have any questions about information contained in this prospectus
please call a Shareholder Services Representative at 1 (800) 551-1700. They are
available to assist you from 7:00 a.m. to 7:00 p.m. Central Time. You can also
e-mail your questions or comments via the Wasatch Funds website at
WWW.WASATCHFUNDS.COM.

SUMMARY OF OBJECTIVES, STRATEGIES AND RISKS
- -------------------------------------------
The information below summarizes the objectives, principal investment
strategies and primary risks of investing in the Funds. It also provides you
with information on how the Funds have performed and on Fund expenses. For more
information, please see "Principal Risks of Investing in the Wasatch Equity
Funds" on page 20 and "Principal Risks of Investing in the Wasatch-Hoisington
U.S. Treasury Fund" on page 24.
As with all mutual funds or investments, it is possible to lose money by
investing in the Funds.

WASATCH MICRO-CAP FUND
- ----------------------

The Micro-Cap Fund is currently closed to new investors.

OBJECTIVE
LONG-TERM GROWTH OF CAPITAL.

STRATEGY
GROWTH INVESTING IN VERY SMALL COMPANIES.
The Fund invests primarily in the common stocks of companies with market
capitalizations of less than $300 million at the time of purchase. We look for
companies that we believe have superior growth potential. In addition, we seek
to create a blend of stable "Core" companies and fast growing "Momentum"
companies. Core companies are well established and have the potential, in our
opinion, to grow at least 15% annually. Momentum companies are growing
aggressively, often in excess of 25% annually.

The Fund is non-diversified. This means it can invest a larger portion of its
assets in the stocks of a limited number of companies than a diversified fund.
Non-diversification increases the risk of loss to the Fund if the values of
these securities decline.

RISKS
As with all funds that invest in common stocks, the Fund is subject to market
risk. This is the risk that stock prices may decline significantly over short or
extended periods of time.
Micro-cap companies may lack the financial resources, product diversification
and competitive strengths of larger companies. The stocks of micro-cap companies
may not trade as readily as the stocks of large or even small companies and
their prices may fluctuate more widely.
The Fund's Momentum holdings can boost the Fund's performance, but they may
be subject to greater price fluctuations than the Fund's Core holdings.

WHO SHOULD INVEST
The Fund is best-suited for long-term investors who can tolerate the greater
risks and volatility that are inherent with investments in micro-cap stocks.

MICRO-CAP FUND

1996 13.7
1997 35.3
1998 19.0

The chart above is intended to provide you with an indication of the risks of
investing in the Micro-Cap Fund by showing changes in the Fund's performance
from year to year. The Fund's past performance is not necessarily an indication
of how the Fund will perform in the future.

- --------------------------------------------------------------------------------

MICRO-CAP FUND-BEST AND WORST QUARTERLY RETURNS
Best-6/30/97 27.6%
Worst-9/30/98 -21.1%

The above table is designed to help you evaluate your risk tolerance by showing
the Fund's best and worst quarterly performance for the years shown in the bar
chart above.

AVERAGE ANNUAL TOTAL RETURNS-(AS OF 12/31/98)
SINCE INCEPTION
1 YEAR (6/19/95)
- --------------------------------------------------------------------------------
Wasatch Micro-Cap Fund 19.0% 30.8%
Russell 2000 Index -2.6% 13.5%

The table above allows you to compare the Fund's performance to that of a market
index and gives you an idea of how the Fund has performed over time. Of course,
past performance is not necessarily indicative of future results.

The Russell 2000 Index is an unmanaged total return index of the smallest 2,000
companies which represent approximately 11% of the total market capitalization
of the Russell 3000 Index. As of June 30, 1998, the median market capitalization
of companies in the Russell 2000 was approximately $500 million. The Russell
2000 is widely used in the industry to measure the performance of small company
stocks.

WASATCH MICRO-CAP VALUE FUND
- ----------------------------

We intend to close the Micro-Cap Value Fund to new investors when it reaches
approximately $200 million in assets. We reserve the right to reconsider closing
to new investors. When the Fund closes we may choose to reopen it, although we
have no present intention to do so.

OBJECTIVE
LONG-TERM GROWTH OF CAPITAL

STRATEGY
VALUE INVESTING IN VERY SMALL COMPANIES.
The Fund invests primarily in the common stocks of companies with market
capitalizations of less than $300 million at the time of purchase. We look for
companies we believe to be temporarily undervalued with significant potential
for stock price appreciation.
Attributes we look for in micro-cap value companies include competent top
management with a substantial stake in the future of the company, a history of
profitable growth, the potential to improve earnings growth, and upcoming or
recently introduced products or services that may increase market share.

RISKS
As with all funds that invest in common stocks, the Fund is subject to market
risk. This is the risk that stock prices may decline significantly over short or
extended periods of time.
Micro-cap companies may lack the financial resources, product diversification
and competitive strengths of larger companies. The stocks of micro-cap companies
may not trade as readily as the stocks of large or even small companies and
their prices may fluctuate more widely.

WHO SHOULD INVEST
The Fund is best-suited for long-term investors who can tolerate the greater
risks and volatility that are inherent with investments in micro-cap value
stocks.

MICRO-CAP VALUE FUND

1998 8.5

The chart above will become more meaningful as an indication of the risks of
investing in the Micro-Cap Value Fund when the Fund has been in operation for a
few more years. Please see the "Average Annual Total Returns" table below to get
an idea of how the Fund has performed relative to a measure of market
performance. The Fund's past performance is not necessarily an indication of how
the Fund will perform in the future.

- --------------------------------------------------------------------------------

MICRO-CAP VALUE FUND-BEST AND WORST QUARTERLY RETURNS
Best-12/31/98 21.1%
Worst-9/30/98 -20.0%

The above table is designed to help you evaluate your risk tolerance by showing
the Fund's best and worst quarterly performance for the years shown in the bar
chart above.

AVERAGE ANNUAL TOTAL RETURNS-(AS OF 12/31/98)
SINCE INCEPTION
1 YEAR (12/17/97)
- --------------------------------------------------------------------------------
Wasatch Micro-Cap Value Fund 8.5% 8.7%
Russell 2000 Value Index -6.5% -4.2%

The table above allows you to compare the Fund's past performance to that of a
market index and gives you an idea of how the Fund has performed over time. Of
course, past performance is not necessarily indicative of future results.

The Russell 2000 Value Index measures the performance of Russell 2000 companies
with lower price-to-book ratios and lower forecasted growth rates. The Russell
2000 measures the performance of the 2,000 smallest companies which represent
approximately 11% of the total market capitalization of the Russell 3000 Index.
The median market capitalization for companies in the Russell 2000 was
approximately $500 million as of June 30, 1998. The Russell 2000 is widely used
in the industry to measure the performance of small company stocks.

WASATCH AGGRESSIVE EQUITY FUND
- ------------------------------
We intend to close the Aggressive Equity Fund to new investors when it
reaches approximately $300 million in assets.
We reserve the right to reconsider closing to new investors. When the Fund
closes we may choose to reopen it, although we have no present intention to do
so.

OBJECTIVE
LONG-TERM GROWTH OF CAPITAL.

STRATEGY
GROWTH INVESTING IN SMALL COMPANIES.
The Fund invests primarily in the common stocks of companies with market
capitalizations of less than $1 billion at the time of purchase. We look for
companies that we believe have superior growth potential. In addition, we seek
to create a blend of stable "Core" companies and fast growing "Momentum"
companies. Core companies are well established and have the potential, in our
opinion, to grow at least 15% annually. Momentum companies are growing
aggressively, often in excess of 25% annually.

RISKS
As with all funds that invest in common stocks, the Fund is subject to market
risk. This is the risk that stock prices may decline significantly over short or
extended periods of time.
Small companies may lack the financial resources, product diversification and
competitive strengths of larger companies. The stocks of small companies may not
trade as readily as large company stocks and their prices may fluctuate more
widely.
The Fund's Momentum holdings can boost the Fund's performance, but they may
be subject to greater price fluctuations than the Fund's Core holdings.

WHO SHOULD INVEST
The Fund is best-suited for long-term investors who can tolerate the greater
risks and volatility that are inherent with investments in small company stocks.

AGGRESSIVE EQUITY FUND

1989 32.0
1990 7.9
1991 50.4
1992 4.7
1993 22.5
1994 5.5
1995 28.1
1996 5.2
1997 19.2
1998 11.2

The chart above is intended to provide you with an indication of the risks of
investing in the Aggressive Equity Fund by showing changes in the Fund's
performance from year to year. The Fund's past performance is not necessarily an
indication of how the Fund will perform in the future.

- --------------------------------------------------------------------------------

AGGRESSIVE EQUITY FUND-BEST AND WORST QUARTERLY RETURNS
Best-12/31/98 31.6%
Worst-9/30/90 -25.5%

The above table is designed to help you evaluate your risk tolerance by showing
the Fund's best and worst quarterly performance for the years shown in the bar
chart above.

AVERAGE ANNUAL TOTAL RETURNS-(AS OF 12/31/98)
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Wasatch Aggressive
Equity Fund 11.2% 13.5% 17.9%
S&P 500 Index 28.6% 24.1% 19.2%
Russell 2000 Index -2.3% 11.9% 12.9%

The table above allows you to compare the Fund's performance to that of two
market indices and gives you an idea of how the Fund has performed over time. Of
course, past performance is not necessarily indicative of future results.

The S&P 500 Index is an unmanaged, commonly used measure of common stock total
return performance. The S&P 500 includes 500 of the nation's largest stocks from
a broad variety of industries.

WASATCH GROWTH FUND
- -------------------

OBJECTIVE
LONG-TERM GROWTH OF CAPITAL.

STRATEGY
GROWTH AT A REASONABLE PRICE.
The Fund invests primarily in the common stocks of growth companies. We
invest in companies that we believe are stable and have the potential to grow
steadily for long periods of time. It has been our experience that companies
offering the best growth prospects tend to be smaller.
Desirable attributes for companies in which the Fund invests include
experienced top management, a sustainable competitive advantage, stable demand
for products and services and the ability to capitalize on favorable long-term
trends.
The Fund seeks to purchase stocks at prices we believe are undervalued
relative to our projection of a company's five year earnings growth rate.
The Fund is non-diversified. This means it can invest a larger portion of its
assets in the stocks of a limited number of companies than a diversified fund.
Non-diversification increases the risk of loss to the Fund if the values of
these securities decline.

RISKS
As with all funds that invest in common stocks, the Fund is subject to market
risk. This is the risk that stock prices may decline significantly over short or
extended periods of time.
The growth the Fund seeks will often be found in smaller companies. Small
companies may lack the financial resources, product diversification and
competitive strengths of larger companies. The stocks of small companies may not
trade as readily as large company stocks and their prices may fluctuate more
widely.

WHO SHOULD INVEST
The Growth Fund is our most conservative equity fund. We seek to limit
volatility by investing in companies that we believe are stable and have the
potential for consistent long-term growth. Nevertheless, the Fund will
experience volatility and is best-suited for long-term investors.

GROWTH FUND

1989 24.8
1990 10.4
1991 40.8
1992 4.7
1993 11.1
1994 2.7
1995 40.4
1996 16.5
1997 27.6
1998 1.6

The chart above is intended to provide you with an indication of the risks of
investing in the Growth Fund by showing changes in the Fund's performance from
year to year. The Fund's past performance is not necessarily an indication of
how the Fund will perform in the future.

- --------------------------------------------------------------------------------

GROWTH FUND-BEST AND WORST QUARTERLY RETURNS
Best-3/31/91 25.8%
Worst-9/30/98 -23.4%

The above table is designed to help you evaluate your risk tolerance by showing
the Fund's best and worst quarterly performance for the years shown in the bar
chart above.

AVERAGE ANNUAL TOTAL RETURNS-(AS OF 12/31/98)
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Wasatch Growth Fund 1.6% 16.8% 17.3%
S&P 500 Index 28.6% 24.1% 19.2%
Lipper Growth Funds Index 25.7% 19.8% 17.2%

The S&P 500 Index is an unmanaged, commonly used measure of common stock total
return performance. The S&P 500 includes 500 of the nation's largest stocks from
a broad variety of industries.

We chose the Lipper Growth Funds Index because we believe it is a good
representation of the Fund's peer group. The Lipper Growth Funds Index includes
the largest 30 funds which, by prospectus or portfolio practice, normally invest
in companies whose long-term earnings are expected to grow significantly faster
than the earnings of companies represented in the major unmanaged stock indices.

WASATCH MID-CAP FUND
- --------------------

OBJECTIVE
LONG-TERM GROWTH OF CAPITAL.

STRATEGY
MOMENTUM GROWTH.
The Fund invests primarily in the common stocks of rapidly growing companies
that have market capitalizations of between $300 million and $5 billion at the
time of purchase. While we do not limit investments to certain industries or
sectors, we focus on the fastest growing sectors. Currently, these are
technology and health care. In seeking to achieve the Fund's objective we often
take large positions in companies that we believe have outstanding investment
potential.

RISKS
As with all funds that invest in common stocks, the Fund is subject to market
risk. This is the risk that stock prices may decline significantly over short or
extended periods of time.
The Fund invests in the stocks of rapidly growing "Momentum" companies in the
small to mid-size range. Small and mid-size companies may lack the financial
resources, product diversification and competitive strengths of larger
companies. The stocks of small and mid-size companies may not trade as readily
as the stocks of large companies and their share prices may fluctuate more
widely.
We believe Momentum companies offer the potential for above average returns;
however, their stock prices are more volatile than the prices of other common
stocks.
The Fund currently has heavy weightings in the technology and health care
sectors. Technology is an extremely competitive industry where rapid new
developments could have dramatic impact on a company's earnings growth
potential. In addition, many technology companies are sensitive to global and
domestic economic conditions and, for some companies, earnings growth may be
tied to product cycles within their specific industries.
Many health care companies are subject to government regulations and rely on
government programs such as Medicare for reimbursement. In addition, the rise of
managed care has put pricing pressure on many health care providers. Certain
companies, such as pharmaceutical companies, rely on government agencies for
approval of their products and services.
The Fund's strategy of often taking large positions in a few companies and
focusing on fast growing sectors makes it more sensitive to the price movements
of a single stock or small group of stocks.

WHO SHOULD INVEST
The Fund pursues an aggressive investment strategy designed for long-term
investors who can tolerate the greater risks and volatility that are inherent
with investments in fast growing small and mid-size companies.

MID-CAP FUND

1993 -3.0
1994 8.1
1995 58.8
1996 3.6
1997 -0.5
1998 24.8

The chart above is intended to provide you with an indication of the risks of
investing in the Mid-Cap Fund by showing changes in the Fund's performance from
year to year. The Fund's past performance is not necessarily an indication of
how the Fund will perform in the future.

- --------------------------------------------------------------------------------

MID-CAP FUND-BEST AND WORST QUARTERLY RETURNS
Best-12/31/98 38.1%
Worst-9/30/98 -18.4%

The above table is designed to help you evaluate your risk tolerance by showing
the Fund's best and worst quarterly performance for the years shown in the bar
chart above.

AVERAGE ANNUAL TOTAL RETURNS-(AS OF 12/31/98)
SINCE INCEPTION
1 YEAR 5 YEARS (8/16/92)
- --------------------------------------------------------------------------------
Wasatch Mid-Cap Fund 24.8% 17.2% 14.6%
S&P 500 Index 28.6% 24.1% 21.0%
S&P MidCap 400 Index 19.1% 18.8% 18.9%

The table above allows you to compare the Fund's past performance to that of two
market indices and gives you an idea of how the Fund has performed over time. Of
course, past performance is not necessarily indicative of future results. The
Fund's heavy weightings in certain industry sectors mean its performance can
differ substantially from that of its benchmarks-the S&P 500 Index and the S&P
MidCap 400 Index.

The S&P 500 Index is an unmanaged, commonly used measure of common stock total
return performance. The S&P 500 includes 500 of the nation's largest stocks from
a broad variety of industries.

The S&P MidCap 400 Index is an unmanaged capitalization weighted total return
index that measures the performance of the mid-range sector of the U.S. stock
market where the median market capitalization is approximately $1.6 billion.

WASATCH-HOISINGTON U.S. TREASURY FUND
- -------------------------------------

OBJECTIVE
TO PROVIDE A RATE OF RETURN THAT EXCEEDS THE RATE OF INFLATION OVER A
BUSINESS CYCLE (FROM THE START OF AN ECONOMIC RECESSION THROUGH RECOVERY AND
EXPANSION AND BACK TO RECESSION) BY INVESTING IN U.S. TREASURY SECURITIES WITH
AN EMPHASIS ON BOTH INCOME AND CAPITAL APPRECIATION.

STRATEGY
THE FUND INVESTS AT LEAST 90% OF ITS TOTAL ASSETS IN U.S. TREASURY SECURITIES
OR IN REPURCHASE AGREEMENTS COLLATERALIZED BY U.S. TREASURY SECURITIES.
The Fund's Sub-Advisor adjusts the average maturity of the Fund's investments
based on its assessment of national and international economic and interest rate
trends, changes in inflationary pressures, and the value of 30-year Treasury
bonds relative to inflation.
The Fund invests in 30-year U.S. Treasury bonds during periods of low
inflation and declining interest rates. The Fund invests in U.S. Treasury bills
or notes (maturities less than five years) when the Sub-Advisor has determined
that economic conditions point to rising inflation and the multi-year trend is
toward higher interest rates.

Over the course of a business cycle, the weighted average maturity of the
Fund will range from less than a year to a maximum of 30 years. The Fund's
effective duration is expected to vary from less than a year to a maximum of 25
years. Please refer to page 24 for a definition of effective duration.

RISKS
Fixed-rate debt securities such as U.S. Treasury securities are sensitive to
changes in market interest rates. If interest rates rise, the value of the
Fund's investments and its net asset value generally will decline. When the Fund
is invested in longer weighted average maturities it will be more sensitive to
changes in market interest rates and may be subject to greater volatility.
When the Fund invests in repurchase agreements, it will be subject to the risk
that the original seller might default on its obligation to repurchase the
securities.
U.S. Treasury securities are direct obligations of the U.S. government, and
therefore are subject to minimal credit risk (the risk that the issuer of a debt
security will fail to make payments on the security when due). However, because
the Fund is subject to certain other risks including those mentioned above, it
is possible to lose money by investing in the Fund.

WHO SHOULD INVEST
The Fund is best suited for long-term investors who can tolerate wide share
price fluctuations.

U.S. TREASURY FUND

1989 14.7
1990 10.5
1991 13.7
1992 4.7
1993 4.0
1994 1.6
1995 11.5
1996 7.8
1997 15.7
1998 14.6

The chart above is intended to provide you with an indication of the risks of
investing in the Wasatch-Hoisington U.S. Treasury Fund by showing changes in the
Fund's performance from year to year. The Fund's past performance is not
necessarily an indication of how the Fund will perform in the future.

- --------------------------------------------------------------------------------

U.S. TREASURY FUND-BEST AND WORST QUARTERLY RETURNS
Best-6/30/89 8.9%
Worst-3/31/97 -3.9%

The above table is designed to help you evaluate your risk tolerance by showing
the Fund's best and worst quarterly performance for the years shown in the bar
chart above.

AVERAGE ANNUAL TOTAL RETURNS-(AS OF 12/31/98)
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Treasury Fund 14.6% 10.1% 9.8%
Lehman Bros. Gov't/Corp.
Bond Index 9.5% 7.3% 9.4%
Lehman Bros. Aggregate Index 8.7% 7.3% 9.3%

The table above allows you to compare the Fund's performance to that of two
representative indices and gives you an idea of how the Fund has performed over
time. Of course, past performance is not necessarily indicative of future
results.

The Lehman Brothers Government/Corporate Bond Index is an unmanaged market value
weighted index measuring both principal price changes of, and income provided
by, the underlying universe of securities that comprise the Index. Securities
included in the Index must meet the following criteria: fixed as opposed to
variable rate; not less than one year to maturity; minimum outstanding principal
value of $50 million; and minimum quality rating of BBB by Standard & Poor's or
Baa by Moody's.

The Lehman Brothers Aggregate Index covers the U.S. investment grade fixed rate
bond market, including government and corporate securities, agency mortgage
pass-through securities, and asset-backed securities. To be included in the
index the security must meet the following criteria: must have at least one year
to final maturity, regardless of call features; must have at least $100 million
par amount outstanding; must be rated investment grade or better by Moody's
Investors Service, Standard & Poor's, or Fitch Investor's Service; must be fixed
rate, although it can carry a coupon that steps up or changes to a predetermined
schedule; must be dollar-denominated and nonconvertible. All corporate and
asset-backed securities must be registered with the SEC and must be publicly
issued.

FEES AND EXPENSES OF WASATCH FUNDS
- ----------------------------------
The following table describes the fees and expenses that you may pay if you
buy and hold shares of the Funds.

SHAREHOLDER FEES<F1> (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
ALL WASATCH FUNDS
- -------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
and other Distributions None
Redemption Fee None
Wire Redemption Fee $7.50
Exchange Fee None
Maximum Account Fee None

<F1> The no-load Wasatch Funds do not impose any sales charges (loads) or other
fees, except the wire redemption fee, to buy, sell or exchange shares.

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM A FUND'S ASSETS)

MICRO-CAP MICRO-CAP AGGRESSIVE GROWTH MID-CAP U.S. TREASURY
FUND VALUE FUND EQUITY FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
MANAGEMENT FEES 2.00% 1.50% 1.00% 1.00% 1.25% 0.50%
DISTRIBUTION
(12B-1) FEES<F1> None None None None None None
OTHER EXPENSES<F2> 0.51% 1.02% 0.48% 0.44% 0.65% 0.45%
TOTAL ANNUAL
FUND OPERATING
EXPENSES<F2> 2.51% 2.52% 1.48% 1.44% 1.90% 0.95%

</TABLE>

<F1> 12b-1 fees are charged by some mutual fund companies to help cover
advertising and other distribution expenses. Wasatch Funds has chosen not
to charge shareholders these fees.
<F2> Other Expenses and Total Annual Fund Operating Expenses are based on Fund
expenses before any expense reimbursements by the Manager. The Manager
voluntarily reimburses the Funds for expenses that exceed certain limits.
See "Management Fees and Expense Limitations" on page 25. Taking into
account expense reimbursements, Management Fees and Total Annual Fund
Operating Expenses for the fiscal year ended September 30, 1998 were: 1.99%
and 2.50% for the Micro-Cap Fund; 0.93% and 1.95% for the Micro-Cap Value
Fund; 1.10% and 1.75% for the Mid-Cap Fund; and 0.30% and 0.75% for the
U.S. Treasury Fund, respectively. Wasatch has voluntarily agreed to limit
Total Annual Fund Operating Expenses to these levels until at least
September 30, 1999. There were no reimbursements for the Aggressive Equity
Fund or the Growth Fund.

EXAMPLE
- --------
The table below is intended to help you compare the cost of investing in a
Wasatch Fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 in a Fund for the time periods indicated, that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. The figures shown would be the same whether you sold your
shares at the end of a period or kept them. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS

Micro-Cap Fund $254 $782 $1,335 $2,846
Micro-Cap Value Fund $255 $785 $1,340 $2,856
Aggressive Equity Fund $151 $468 $808 $1,768
Growth Fund $147 $456 $787 $1,724
Mid-Cap Fund $193 $597 $1,026 $2,222
U.S. Treasury Fund $97 $303 $525 $1,166

MORE ABOUT THE WASATCH EQUITY FUNDS
- ------------------------------------

The Wasatch Equity Funds are the Micro-Cap, Micro-Cap Value, Aggressive
Equity, Growth and Mid-Cap funds. More information about the investment
objectives, principal investment strategies and principal risks of these Funds
is provided below. A Fund's principal investment strategies are those that we
believe are most likely to be important in trying to achieve the Fund's
investment objective. You should note that each Fund may also employ strategies
and invest in securities that are not described below. Please see the Statement
of Additional Information for a discussion of these strategies and securities,
and their risks.

SELECTION OF INVESTMENTS
Stocks for the Wasatch Equity Funds are recommended by an experienced in-
house research team. Each Fund has a Lead Manager who ensures that investments
are compatible with the Fund's investment objective and strategies.
The Wasatch research team picks stocks using a "bottom-up" process of
fundamental securities analysis. This means the team seeks to identify
individual companies with outstanding investment potential. The research process
includes prescreening potential investments using databases and industry
contacts, analyzing annual reports and financial statements, and visiting
companies to meet with top management.
The Funds intend to be fully invested in stocks; however, this may not always
be possible. For example, if the research team is unable to find desirable
equity investments, a Fund may increase its cash position or invest a larger
portion of its assets in money market instruments. Under adverse market
conditions, a Fund could invest some or all of its assets in cash and money
market securities.
When a Fund increases its position in cash or money market securities, it may
not participate in stock market advances or declines to the same extent that it
would if the Fund remained more fully invested in stocks.

SELLING STOCKS
WE ARE LIKELY TO SELL A STOCK WHEN:
- - the rationale we used to buy the stock is no longer valid
- - the stock becomes overpriced
- - we believe another stock has better investment potential

PORTFOLIO TURNOVER
Each Fund generally intends to purchase securities for long-term investment
rather than short-term gains. However, short-term transactions may result from
liquidity needs, securities having reached a price or yield objective, or by
reason of economic or other developments not foreseen at the time of the initial
investment decision. Changes are made in a Fund's portfolio whenever the
research team believes such changes are desirable. Portfolio turnover rates are
generally not a factor in making decisions to buy or sell securities.
To a limited extent, a Fund may purchase securities in anticipation of
relatively short-term price gains. Increased portfolio turnover may result in
higher costs for brokerage commissions, dealer mark-ups and other transaction
costs and may also result in taxable capital gains.

WASATCH MICRO-CAP FUND
- -----------------------
The Micro-Cap Fund is currently closed to new investors.

LEAD MANAGER: Robert Gardiner, CFA

INVESTMENT OBJECTIVE
The primary investment objective of the Micro-Cap Fund is long-term growth of
capital. We also seek income as a secondary objective, but only when consistent
with long-term growth of capital. Currently, we do not expect the Fund's
investments to generate substantial income.

PRINCIPAL INVESTMENT STRATEGIES
UNDER NORMAL MARKET CONDITIONS, WE WILL:
- - invest at least 65% of the Fund's total assets in the common stocks of micro-
cap companies (market capitalization less than $300 million at the time of
purchase)
- - focus on the smallest companies that we believe have superior growth
potential
- - purchase stocks at prices that we believe are reasonable relative to our
projection of a company's five year earnings growth rate

BUYING STOCKS
We invest the Fund's assets in a blend of two types of micro-cap companies.
We call them Core and Momentum holdings. Each type of investment plays a special
role that is intended to support the Fund's investment objective.

CORE HOLDINGS

Core holdings are companies that we believe are stable and have the potential
for consistent growth and the ability to sustain growth over the long-term.

MOMENTUM HOLDINGS

Momentum holdings are fast growing companies that we believe have the potential
for rapid stock price appreciation that can enhance the Fund's returns. These
stocks are inherently more risky than Core holdings and their prices are more
volatile, but we think the potential rewards are greater.

CHARACTERISTICS WE LOOK FOR IN CORE AND MOMENTUM COMPANIES:
- - experienced top management with a substantial stake in the company's future
- - high return on capital
- - low use of debt

WASATCH MICRO-CAP VALUE FUND
- -----------------------------
We intend to close the Micro-Cap Value Fund to new investors when it reaches
approximately $200 million in assets. We reserve the right to reconsider closing
to new investors. When the Fund closes we may choose to reopen it, although we
have no present intention to do so.

CO-MANAGERS: Robert Gardiner, CFA & Jeff Cardon, CFA

INVESTMENT OBJECTIVE
The primary investment objective of the Micro-Cap Value Fund is long-term growth
of capital. We also seek income as a secondary objective, but only when
consistent with long-term growth of capital. Currently, we do not expect the
Fund's investments to generate substantial income.

PRINCIPAL INVESTMENT STRATEGIES
UNDER NORMAL MARKET CONDITIONS, WE WILL:
- - invest at least 65% of the Fund's total assets in the common stocks of micro-
cap companies (market capitalization less than $300 million at the time of
purchase).
- - look for companies whose stocks, in our opinion, are temporarily undervalued
but have significant potential for appreciation.

BUYING STOCKS
We typically focus on companies that we believe have low valuations or
depressed stock prices. The Wasatch research team analyzes companies to
determine if they have positive characteristics that could lead to stock price
increases.

STOCK PRICES OFTEN INCREASE WHEN A COMPANY:
- - gets positive attention from Wall Street analysts
- - resolves short-term issues that increase earnings growth
- - introduces exciting new products or services

CHARACTERISTICS WE LOOK FOR IN VALUE INVESTMENTS MAY INCLUDE:
- - low stock valuations in the form of a low price-to-earnings (P/E) ratio
- - low market capitalization-to-revenue ratio
- - potential for improved earnings growth
- - competent top management with a substantial stake in the future of the company
- - history of profitable growth
- - products or services that may increase market share

WASATCH AGGRESSIVE EQUITY FUND
- -------------------------------
We intend to close the Aggressive Equity Fund to new investors when it
reaches approximately $300 million in assets. We reserve the right to reconsider
closing to new investors. When the Fund closes we may choose to reopen it,
although we have no present intention to do so.

LEAD MANAGER: Jeff Cardon, CFA

INVESTMENT OBJECTIVE
The primary investment objective of the Aggressive Equity Fund is long-term
growth of capital. We also seek income as a secondary objective, but only when
consistent with long-term growth of capital. Currently, we do not expect the
Fund's investments to generate substantial income.

PRINCIPAL INVESTMENT STRATEGIES UNDER NORMAL MARKET CONDITIONS, WE WILL:
- - invest at least 65% of the Fund's total assets in the common stocks of small
companies (market capitalization less than $1 billion at the time of
purchase)
- - focus on companies that we believe have superior growth potential
- - purchase stocks at prices that we believe are reasonable relative to our
projection of a company's five year earnings growth rate

BUYING STOCKS
We invest the Fund's assets in a blend of two types of small companies. We
call them Core and Momentum holdings. Each type of investment plays a special
role that is intended to support the Fund's investment objective.

CORE HOLDINGS

Core holdings are companies that we believe are stable and have the potential
for consistent growth and the ability to sustain growth over the long-term.

MOMENTUM HOLDINGS

Momentum holdings are fast growing companies that we believe have the
potential for rapid stock price appreciation that can enhance the Fund's
returns. These stocks are inherently more risky than Core holdings and their
prices are more volatile, but we think the potential rewards are greater.

CHARACTERISTICS WE LOOK FOR IN CORE AND MOMENTUM COMPANIES:
- - experienced top management with a substantial stake in the company's future
- - high return on capital
- - low use of debt

WASATCH GROWTH FUND
- --------------------

LEAD MANAGER: Samuel S. Stewart, Jr., PhD, CFA

INVESTMENT OBJECTIVE
The primary investment objective of the Growth Fund is long-term growth of
capital. We also seek income as a secondary objective, but only when consistent
with long-term growth of capital. Currently, we do not expect the Fund's
investments to generate substantial income.

PRINCIPAL INVESTMENT STRATEGIES UNDER NORMAL MARKET CONDITIONS, WE WILL:
- - invest at least 65% of the Fund's total assets in the common stocks of
growing companies
- - focus on companies that we believe to be high quality
- - look for companies that are stable and well-established and appear to have
the potential to grow steadily for long periods of time
- - purchase stocks at prices that we believe are reasonable relative to our
projection of a company's five year earnings growth rate

BUYING STOCKS
We typically look for stable companies that we call Core holdings. These are
companies that we believe have the potential for consistent growth and the
ability to sustain growth over the long-term.

CHARACTERISTICS WE LOOK FOR IN CORE COMPANIES:
- - the ability, in our opinion, to increase earnings a minimum of 15% annually
for at least the next five years
- - a sustainable competitive advantage
- - stable demand for products or services
- - the ability, in our opinion, to capitalize on favorable long-term trends
- - experienced top management with a substantial stake in the company's future
- - high return on capital
- - low use of debt

WASATCH MID-CAP FUND
- ---------------------

LEAD MANAGER: Karey Barker, CFA

INVESTMENT OBJECTIVE
The primary investment objective of the Mid-Cap Fund is long-term growth of
capital. We also seek income as a secondary objective, but only when consistent
with long-term growth of capital. Currently, we do not expect the Fund's
investments to generate substantial income.

PRINCIPAL INVESTMENT STRATEGIES UNDER NORMAL MARKET CONDITIONS, WE WILL:
- - invest at least 65% of the Fund's total assets in the common stocks of
companies that range from small to mid-size (market capitalizations between
$300 million and $5 billion at the time of purchase)
- - focus on rapidly growing companies that are increasing earnings in excess of
25% annually
- - focus on the fastest growing sectors, which currently are technology and
health care
- - attempt to achieve the Fund's objective by taking large positions in
companies that we believe have outstanding investment potential

BUYING STOCKS
We call the fast growing companies in the Mid-Cap Fund's portfolio Momentum
holdings. We believe they have the potential for rapid stock price appreciation.
These stocks are inherently more risky than most common stocks, and their prices
are more volatile, but we think the potential rewards are greater.

CHARACTERISTICS WE LOOK FOR IN MOMENTUM COMPANIES:
- - the ability, in our opinion, to increase earnings more than 25% per year
- - the potential to become leaders in their markets
- - proprietary products
- - strong financial controls
- - experienced top management with a substantial stake in the company's future
- - high return on capital
- - low use of debt

PRINCIPAL RISKS OF INVESTING IN THE WASATCH EQUITY FUNDS
The following discussion is to help you better understand the risks
associated with the Wasatch Equity Funds' principal investment strategies. It is
designed to make you aware of factors that have the potential to adversely
affect a Fund's net asset value and its total return. Please read this section
carefully.

YEAR 2000
Like other mutual funds and financial and business organizations around the
world, the Funds could be adversely affected if the computer systems used by
Wasatch Funds, the Manager, Sunstone Financial Group, Inc., UMB Bank, n.a. and
other service providers and entities with computer systems that are linked to
Wasatch Funds' records do not properly process and calculate date-related
information and data from and after January 1, 2000. The Funds and the Manager
are taking steps that they believe are reasonably designed to address year 2000
issues with respect to the computer systems they use and to obtain satisfactory
assurance that comparable steps are being taken by each of the Funds' other
major service providers. However, there can be no assurance that these steps
will be sufficient to avoid any adverse impact on the Funds. In addition, the
prices of securities in which the Funds invest could be adversely affected by
year 2000 problems experienced by the issuers of those securities.

COMMON STOCKS
The Wasatch Equity Funds invest in common stocks.
Stock prices may decline significantly over short or extended periods of time.
Price changes may affect the market as a whole, or only growth or value stocks,
or a particular company, industry, or sector of the market.

COMPANY RISK
The Wasatch Equity Funds invest in individual stocks. Individual stocks can
perform differently than the overall market. This may be a result of specific
factors such as changes in corporate profitability due to the success or failure
of specific products or management strategies, or it may be due to changes in
investor perceptions regarding a company.

SMALL COMPANIES
Each of the Equity Funds invests in the common stocks of small companies.
Small companies may lack the management experience, financial resources,
product diversification and competitive strengths of larger companies. In
addition, the frequency and volume of trading in their stocks may be
substantially less than that typical of larger companies. Therefore, the prices
of small company stocks may be subject to wider and more erratic fluctuations.
The spreads between the bid and asked prices of small company stocks may be
wider than the spreads for more actively traded securities. As a result, if a
small company stock is sold shortly after purchase, a loss may be incurred by an
Equity Fund solely due to the size of the bid-asked spread. Large sales of small
company stocks may require selling them at a discount from quoted prices and/or
making a series of small sales over a period of time.
Small company stocks are often traded over-the-counter and may not have the
trading volume typical of stocks traded on a national securities exchange. The
values of their shares may move independently of the values of shares of large
companies or of general stock market indices such as the Dow Jones Industrial
Average or the Standard & Poor's 500 Stock Index.

MICRO-CAP COMPANIES
Each of the Equity Funds may invest in micro-cap companies. The Micro-Cap and
Micro-Cap Value funds invest primarily in these companies.
We define micro-cap companies as those with market capitalizations of less
than $300 million. Micro-cap companies may be more sensitive to, and share
prices may be more affected by, the risks for small companies mentioned above.

RISKS OF GROWTH STOCKS
The Wasatch Equity Funds (except the Micro-Cap Value Fund) invest in "growth
stocks." These "growth stocks" typically trade at higher price-to-earnings (P/E)
ratios than other stocks. Therefore, their prices may be more sensitive to
changes in current or expected earnings than the prices of other stocks. If the
Manager's assessment of a company's earnings growth prospects is wrong, or if
the Manager's judgment about how other investors will value a company's earnings
growth is wrong, then the company's stock may fail to achieve the expected price
appreciation.

RISKS OF VALUE STOCKS
The Micro-Cap Value Fund invests in "value stocks." These stocks appear to the
Manager to be "temporarily undervalued." "Value stocks" can remain undervalued
for years. There is a risk that a value stock may never reach what the Manager
believes is its full value, or it may even decline in value.

MOMENTUM COMPANIES
The Mid-Cap Fund focuses on Momentum companies. The Micro-Cap and Aggressive
Equity funds invest a significant portion of their assets in the stocks of
Momentum companies.
We define Momentum companies as those with annual earnings growth of 25% or
more at the time of investment. Companies growing this aggressively are
considered more risky because the challenge to meet growth expectations is
greater. We believe Momentum companies offer the potential for above average
returns; however, their stock prices are more volatile.

HEAVY SECTOR OR INDUSTRY WEIGHTINGS
Although the Mid-Cap Fund does not limit its investments to certain
industries or sectors, it will generally focus its investments on the fastest
growing sectors. Funds that invest a large percentage of assets in a few sectors
or industries are more vulnerable to the price movements of a single security or
small group of securities than funds that diversify their investments among a
broad range of sectors and industries.

TECHNOLOGY COMPANIES
Each of the Equity Funds may invest in technology companies. Currently, the
Mid-Cap Fund has a heavy weighting in technology.
Technology is an extremely competitive industry where rapid new developments
could have dramatic impact on a company's earnings growth potential. In
addition, many technology companies are sensitive to global and domestic
economic conditions and, for some comanies, earnings growth may be tied to
product cycles within their specific industries. If technology continues to
advance at an accelerated rate and the number of companies and product offerings
continues to expand, these companies could become increasingly sensitive to
short product cycles and aggressive pricing.

HEALTH CARE COMPANIES
Each of the Equity Funds may invest in health care companies. Currently, the
Mid-Cap Fund has a heavy weighting in health care.
This industry includes companies that develop, produce or distribute products
or services connected with health care or medicine. Many health care companies
are subject to government regulations and rely on government programs such as
Medicare for reimbursement. In addition, the rise of managed care has put
pricing pressure on many health care providers. Certain companies, such as
pharmaceutical companies, rely on government agencies for approval of their
products and services. Many products and services in the health care industry
may become rapidly obsolete due to technological and scientific advances.

NON-DIVERSIFICATION RISK
Each Equity Fund is non-diversified. The Mid-Cap Fund, in particular, invests
a large percentage of its assets in individual companies.
Being non-diversified means a Fund can invest a larger portion of its assets
in the stocks of a limited number of companies than a diversified fund. Funds
that invest in the stocks of a few companies have more exposure to the price
movements of a single security or small group of securities than funds that
diversify their investments among many companies.

MORE ABOUT THE WASATCH-HOISINGTON U.S. TREASURY FUND
- -----------------------------------------------------
More information about the investment objective, principal investment
strategies and principal risks of the Wasatch-Hoisington U.S. Treasury Fund is
provided below. The Fund's principal investment strategies are those that the
Sub-Advisor believes are most likely to be important in trying to achieve the
Fund's investment objective. You should note that the Fund may also employ
strategies and invest in securities that are not described below. Please see the
Statement of Additional Informa tion for a discussion of these strategies and
securities, and their risks.

SUB-ADVISOR: Hoisington Investment Management Company

Hoisington Investment Management Company is responsible for managing the
Fund's assets and placing orders to buy and sell securities on behalf of the
Fund.

LEAD MANAGER: Van Robert Hoisington

INVESTMENT OBJECTIVE
The investment objective of the Wasatch-Hoisington U.S. Treasury Fund is to
provide a rate of return that exceeds the rate of inflation over a business
cycle by investing in U.S. Treasury securities with an emphasis on both income
and capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES
IN PURSUIT OF THE FUND'S INVESTMENT OBJECTIVE, THE SUB-ADVISOR WILL:
- - invest at least 90% of the Fund's total assets in a diversified portfolio of
U.S. Treasury securities and in repurchase agreements collateralized by such
securities.
- - adjust the average maturity and effective duration of the Fund's portfolio
from time to time based on the Sub-Advisor's assessment of national and
international economic and interest rate trends, changes in inflationary
pressures, and the value of 30-year Treasury bonds relative to inflation.
- - invest in 30-year U.S. Treasury bonds, including zero coupon Treasury
securities, during periods of low inflation and declining interest rates.
- - invest in U.S. Treasury bills or notes (maturities less than five years) when
economic conditions point to rising inflation and the multi-year trend is
toward higher interest rates.

OVER THE COURSE OF A BUSINESS CYCLE, UNDER NORMAL MARKET CONDITIONS:
- - the effective duration of the Fund's holdings is expected to vary from less
than a year to a maximum of 25 years.
- - the maturity of the Fund's holdings will range from less than a year to a
maximum of 30 years.
- - when the Fund is invested in longer weighted average maturities it will be
more sensitive to changes in market interest rates and its share price may be
subject to greater volatility.

PORTFOLIO TURNOVER
- - the portfolio turnover rate will vary substantially from year to year
- - during some periods, turnover will be well below 50%
- - at other times, turnover could exceed 200% annually. At these times,
increased portfolio turnover may result in higher brokerage commissions,
dealer mark-ups and other transaction costs and may also result in taxable
capital gains.
- - portfolio adjustments may require the sale of securities prior to their
maturity date. The goal of these transactions will be to increase income
and/or change the duration of the overall portfolio.

PRINCIPAL RISKS OF INVESTING IN THE WASATCH-HOISINGTON U.S. TREASURY FUND
- --------------------------------------------------------------------------
The following discussion is to help you better understand the risks
associated with the Wasatch-Hoisington U.S. Treasury Fund's principal investment
strategies. It is designed to make you aware of factors that have the potential
to adversely affect the Fund's net asset value and its total return. Please read
this section carefully.

YEAR 2000
Please refer to page 20.

CREDIT RISK
Credit risk is the risk that the issuer of a debt security will fail to make
payments on the security when due. The Sub-Advisor seeks to limit credit risk by
investing primarily in U.S. Treasury securities and in repurchase agreements
collateralized by such securities. Unlike corporate bonds or government agency
securities, all treasury securities are direct obligations of the U.S.
government and vary only in maturity and coupon. Treasury securities are viewed
as carrying minimal credit risk.

INTEREST RATE RISK
Interest rate risk is the risk that the value of a fixed-rate debt security
will change due to changes in market interest rates. Even though some interest-
bearing securities offer a stable stream of income, their prices will fluctuate
with changes in interest rates.

INTEREST BOND INVESTMENT
RATES = PRICES = VALUE
UP DOWN GOES DOWN
$

When interest rates rise, the value of the Fund's portfolio securities and
its net asset value generally will decline. The values of fixed-rate debt
securities with longer maturities (30-year U.S. Treasury bonds) are more
sensitive to changes in market interest rates than the values of securities with
shorter maturities (U.S. Treasury bills or notes). If the Fund is invested in
longer-term U.S. Treasury bonds or zero coupon U.S. Treasury securities, the net
asset value of the Fund should be expected to have greater volatility in periods
of changing market interest rates.

$
INTEREST BOND INVESTMENT
RATES = PRICES = VALUE
DOWN UP GOES DOWN

If the Sub-Advisor forecasts that interest rates will decrease, the average
maturity of the portfolio can be extended out to 30 years. If interest rates are
expected to increase, the Sub-Advisor may determine that a defensive policy is
more appropriate, and may reduce the average maturity of the Fund's portfolio to
less than one year.

INCOME RISK
Income risk is the potential for a decline in the Fund's income due to
falling interest rates.

EFFECTIVE DURATION
Effective duration is an estimate of the interest rate risk (price
volatility) of a security, i.e., how much the value of the security is expected
to change with a given change in interest rates. For example, if the interest
rate increased 1% on a bond with an effective duration of five years, the price
of the bond would decline 5%. Similarly, if the interest rate increased 1% on a
bond with an effective duration of 15 years, the price of the bond would decline
15%. At a yield of 7%, the effective duration of a 30-year U.S. Treasury bond is
about 13 years. The effective duration of a 30-year U.S. zero coupon bond is 30
years. If the interest rate increased 1%, the value of a 30-year zero coupon
bond would decline 30%. Similarly, if the interest rate decreased 1%, the value
of a 30-year zero coupon bond would increase 30%.
It is important to understand that, while a valuable measure, effective
duration is based on certain assumptions and has several limitations. It is most
useful as a measure of interest rate risk when interest rate changes are small,
rapid and occur equally across all the different points of the yield curve.

RISKS OF INVESTING IN ZERO COUPON TREASURY SECURITIES
Zero coupon treasury securities (U.S. Treasury Strips) are debt obligations
which do not entitle the holder to periodic interest payments prior to maturity.
They are traded at a discount from their face amounts. The discount of zero
coupon treasury securities varies primarily depending on the time remaining
until maturity and prevailing levels of interest rates. Zero coupon securities
can be sold prior to their due date in the secondary market at the then-
prevailing market value. The market prices of zero coupon securities are
generally more volatile than the market prices of securities of comparable
quality and similar maturity that pay interest periodically. Zero coupon
securities are more sensitive to fluctuations in interest rates than non-zero
coupon securities.

RISKS OF REPURCHASE AGREEMENTS
A repurchase agreement involves the purchase of treasury securities with the
condition that after a stated period of time, the original seller (a member of
the Federal Reserve System or a recognized securities dealer) will buy back the
same securities (collateral) at a predetermined price or yield. The main risk of
a repurchase agreement is that the original seller might default on its
obligation to repurchase the securities. If the seller defaults, the Fund will
seek to recover its investment by selling the collateral and could encounter
restrictions, costs or delays. The Fund will suffer a loss if it sells the
collateral for less than the repurchase price.

- --------------------------------------------------------------------------------

MANAGEMENT OF WASATCH FUNDS
- ----------------------------

The investment advisor (Manager) for Wasatch Funds is Wasatch Advisors, Inc.
Wasatch Advisors and Wasatch Funds are located at 150 Social Hall Avenue, Salt
Lake City, Utah 84111. Wasatch Advisors has been in the investment advisory
business since 1975. As of October 31, 1998 the firm had approximately $922
million in assets under management.
The Manager is responsible for investing Wasatch Funds' assets, placing
orders to buy and sell securities and negotiating brokerage commissions on
portfolio transactions. In addition, the Manager provides certain administrative
services and manages the Funds' business affairs.

MANAGEMENT FEES AND EXPENSE LIMITATIONS
- ----------------------------------------
Each Fund pays Wasatch Advisors a monthly management fee that is a percentage
of the Funds' average daily net assets. More detailed information about Wasatch
Advisors' investment advisory and service contracts with Wasatch Funds and
Wasatch Advisors' contract with the Sub-Advisor can be found in the Statement of
Additional Information. During their most recent fiscal year, the Funds paid
the following management fees to Wasatch Advisors. (See chart below.)

- --------------------------------------------------------------------------------

ADVISORY FEE AS
A PERCENTAGE OF AVERAGE
WASATCH FUND DAILY NET ASSETS
- --------------------------------------------------------------------------------
Micro-Cap Fund 1.99%
Micro-Cap Value Fund 0.93%
Aggressive Equity Fund 1.00%
Growth Fund 1.00%
Mid-Cap Fund 1.10%
U.S. Treasury Fund* 0.30%

<F1>The U.S. Treasury Fund is managed by a Sub-Advisor. Under a sub-advisory
agreement between the Manager and the Sub-Advisor, the Manager has agreed to pay
the Sub-Advisor a management fee.

- --------------------------------------------------------------------------------

The Manager has voluntarily agreed to limit the expenses of each Fund at
least through September 30, 1999, to a certain percentage of average net assets
computed on a daily basis. Expense limits are: 2.50% for the Micro-Cap Fund;
1.95% for the Micro-Cap Value Fund; 1.50% for the Aggressive Equity Fund; 1.50%
for the Growth Fund; 1.75% for the Mid-Cap Fund; and 0.75% for the U.S. Treasury
Fund. The Manager will pay all expenses excluding interest, taxes and
extraordinary expenses in excess of such limitations. The Manager may rescind
these voluntary limitations on expenses any time after September 30, 1999.
LEAD MANAGERS
- --------------

The following Lead Managers are senior members of the Wasatch research team,
which consists of 12 securities analysts who are responsible for making
investment decisions for the Wasatch Equity Funds. The Sub-Advisor, under the
supervision of Wasatch Advisors, is responsible for making investment decisions
for the U.S. Treasury Fund.
SAMUEL S. STEWART, JR., PHD, CFA, is President and Chairman of the Board of
Wasatch Funds and Wasatch Advisors. Dr. Stewart has served as President of
Wasatch Advisors since 1975. Dr. Stewart serves as Lead Manager of the Wasatch
Growth Fund. He served as Lead Manager of the Wasatch Aggres sive Equity Fund
from 1986 through January 1997. He earned a Bachelor of Science in Business
Administration degree from Northwestern University. He went on to earn a Master
of Business Administration and a Doctorate in Finance from Stanford University.
Since 1975, Dr. Stewart has been a professor of Finance at the University of
Utah.
JEFF CARDON, CFA, is Executive Vice President and Director of Wasatch Funds
and Wasatch Advisors. He serves as Lead Manager of the Wasatch Aggressive Equity
Fund and as Co-Manager, with Robert Gardiner, of the Wasatch Micro-Cap Value
Fund. From 1986 through January 1997, he served as Lead Manager of the Wasatch
Growth Fund. Mr. Cardon joined Wasatch Advisors as a securities analyst in 1980.
He is a Chartered Financial Analyst and holds a Bachelor of Science degree in
Finance from the University of Utah.
KAREY BARKER, CFA, is a Director of Wasatch Advisors and has served as Lead
Manager of the Wasatch Mid-Cap Fund since 1994. Ms. Barker joined Wasatch
Advisors as a securities analyst in 1989. She is a Chartered Financial Analyst
and holds Bachelor of Arts and Bachelor of Science degrees from the University
of Utah.
ROBERT GARDINER, CFA, is a Director of Wasatch Advisors and has served as
Lead Manager of the Wasatch Micro-Cap Fund since 1995. In addition, he is Co-
Manager, with Jeff Cardon, of the Wasatch Micro-Cap Value Fund. Mr. Gardiner
joined Wasatch Advisors as a securities analyst in 1987. He is a Chartered
Financial Analyst and holds Bachelor of Arts and Bachelor of Science degrees
from the University of Utah.

ABOUT THE SUB-ADVISOR FOR THE WASATCH-HOISINGTON U.S. TREASURY FUND
Hoisington Investment Management Company (HIMCO) is a registered investment
advisor that has been in business since 1980. The firm agreed to become the sub-
advisor to the Wasatch-Hoisington U.S. Treasury Fund in 1996. HIMCO has offices
at 1250 Capital of Texas Highway South, Building 3, #600, Austin, Texas 78746-
6464.
HIMCO provides investment management services for individuals, pension and
profit-sharing plans, trusts and estates, charitable organizations and
corporations, and other business entities. As of September 30, 1998, HIMCO
provided investment advice to 43 separately managed accounts and had
approximately $3.7 billion in assets under management. HIMCO provides investment
management for fixed income securities, including U.S. government securities.
VAN ROBERT HOISINGTON has been Lead Manager of the Wasatch-Hoisington U.S.
Treasury Fund since 1996. In addition, he has served as President and Senior
Investment Officer of HIMCO since he founded the firm in 1980. Mr. Hoisington
received a Bachelor of Arts degree from the University of Kansas and a Master's
degree in business from Fort Hays Kansas University.

ADDITIONAL
SERVICE PROVIDERS
- ------------------

ADMINISTRATOR
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, WI 53202-5712

TRANSFER AGENT
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 315
Milwaukee, WI 53202-5712

CUSTODIAN
UMB Bank, n.a.
1010 Grand Boulevard
Kansas City, MO 64106-2008

LEGAL COUNSEL
Michael J. Radmer
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402-1498

INDEPENDENT AUDITORS
Arthur Andersen LLP
100 East Wisconsin Ave., Suite 1900
Milwaukee, WI 53202-4107

- --------------------------------------------------------------------------------

INVESTMENT MINIMUMS
To open a new account with an Automatic Investment Plan............. $1,000
Subsequent Automatic Investments
Monthly............................................................ $50
Quarterly......................................................... $100
For a new account without the Automatic Investment Plan............. $2,000
Subsequent Investments ............................................. $100
Individual Retirement Account (IRA)................................. $1,000

SHAREHOLDER'S GUIDE
- --------------------
This section provides information about how to invest in the Funds and the
different types of accounts and services available through Wasatch Funds.

TO REACH WASATCH FUNDS BY PHONE
If you have any questions about Wasatch Funds, the prospectus or opening a
new account, please call one of our Shareholder Services Representatives at
1 (800) 551-1700. They are available to assist you Monday through Friday, 7:00
a.m. to 7:00 p.m. Central Time.

TO REACH WASATCH FUNDS ON-LINE
We offer a number of services on our website at WWW.WASATCHFUNDS.COM. From
any computer with internet access you can:
- - Download a current prospectus, new account application and other documents.
- - Review each Fund's daily Net Asset Value (NAV) and performance.
- - Check out each Fund's Top 10 Holdings as of the most recent calendar quarter
end.
- - E-mail us your questions and comments.
The following services are available when you register and receive a Personal
Identification Number (PIN) from Wasatch Funds. You can:
- - Review current account information.
- - Check the past year's account history.
- - Make address changes or corrections.

TO OPEN A NEW ACCOUNT
- - Read the prospectus carefully.
- - Complete and sign the new account application included with the prospectus.
- - See chart above for investment minimums.
- - Be sure to provide your Social Security or Taxpayer Identification Number on
the new account application.
- - New account applications are also available directly from Wasatch Funds by
calling a Shareholder Services Representative at 1 (800) 551-1700.
- - New accounts are subject to acceptance by Wasatch Funds.
- - Wasatch Funds are only available to U.S. residents.
Make your check payable to Wasatch Funds and send it along with your
completed application to:

WASATCH FUNDS
P.O. BOX 2172
MILWAUKEE, WI 53201-2172

To send your check and application by express or certified mail:

WASATCH FUNDS
207 EAST BUFFALO STREET, SUITE 315
MILWAUKEE, WI 53202-5712

OPENING NEW ACCOUNTS BY WIRE
Please call a Shareholder Services Representative at 1 (800) 551-1700 for
special instructions.

TYPES OF ACCOUNT OWNERSHIP
By completing the new account application included with this prospectus you
can establish one of three types of accounts:
INDIVIDUAL OR JOINT OWNERSHIP. Individual accounts are owned by one person.
Joint accounts are owned by two or more people and are JTWROS (Joint Tenants
with Right of Survivor ship) unless otherwise specified.
GIFT TO MINOR. This is a custodial account managed for the benefit of a
minor. To open this type of account you must provide the minor's Social Security
Number along with your own on the new account application.
CORPORATION, PARTNERSHIP, TRUST OR OTHER ENTITY. You must provide the name of
the entity and the Taxpayer Identification Number. The new account application
must be signed by an authorized officer of a corporation or other entity or a
trustee. To open a corporate account, a corporate resolution must be provided
with the application. Certain account privileges require additional
documentation. Please call a Shareholder Services Representative at 1 (800) 551-
1700 for more information.

INDIVIDUAL RETIREMENT ACCOUNTS
If you are eligible, you may set up your Wasatch Funds account under a tax-
sheltered retirement plan. To request a Wasatch Funds IRA Informa tion Kit and
application, please call 1 (800) 551-1700 or write to:

WASATCH FUNDS
P.O. BOX 2172
MILWAUKEE, WI 53201-2172.

The Funds' minimum initial investment for an IRA is $1,000. There is no
charge to set up an IRA account, but there is an annual maintenance fee of
$12.50 per account for accounts under $10,000, with a maximum charge of $25 per
shareholder.
The following is a short description of common types of IRA accounts offered
by Wasatch Funds. Please refer to the Disclosure Statement and Custodial
Agreement found in the IRA Information Kit for more detailed information on
these retirement plans.
TRADITIONAL IRA. Anyone under age 70 1/2 who earns compensation can contribute
to a traditional IRA. You can also fund an IRA for your non-wage earning spouse.
The key benefits:
- - Depending on your income and whether you participate in a company retirement
plan, all or part of your contribution may be tax-deductible.
- - Taxes on your earnings and on any deductible contributions aren't imposed
until you begin making withdrawals. That gives your earnings the potential to
grow faster than in taxable accounts.
- - Current tax law has also made it easier to withdraw from a traditional IRA
without paying penalties, especially for first-time home purchases and
expenses for higher education. ROTH IRA. Roth IRAs are different from
traditional IRAs in several important ways:
- - Contributions are never tax deductible.
- - Earnings on amounts held in the account can be withdrawn tax-free if the
assets remain in the IRA for at least five years and the IRA holder is at
least 591/2, or meets other conditions, at the time of the withdrawal.
- - Contributions can be withdrawn anytime, without tax or penalty.
Roth IRAs are also available for non-wage earning spouses. The ability to
make a contribution to a Roth IRA is phased out for individuals whose incomes
exceed specific limits.
SIMPLE IRA. Individuals may establish SIMPLE IRAs through a qualifying
employer.
SECTION 403(B)(7) PLAN. This plan is designed to allow employees of certain
educational, non-profit, hospital and charitable organizations to invest for
retirement.
Please call a Shareholder Services Representative at 1 (800) 551-1700 to ask
about other retirement plans.

TO PURCHASE SHARES
The price of your shares will be determined the next time the Net Asset Value
(NAV) is calculated after Wasatch Funds has received your request in good order.
- - Checks must be made payable to Wasatch Funds and must meet minimum purchase
requirements (see Investment Minimums on page 28).
- - There are no sales charges to purchase shares.
- - Purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
- - You may add to established Wasatch Funds accounts by making investments of
$100 or more.
- - Cash, credit cards, third party checks and credit card checks will not be
accepted.
- - See "Returned Check Policy" on page 37 for the Funds' policy regarding checks
returned for insufficient funds.
- - The Funds reserve the right to reject any specific purchase request.
- - Telephone orders will only be accepted via electronic funds transfer from the
Automated Clearing House (ACH), corporate accounts and broker-dealers who
have been previously approved by the Funds.
- - If a purchase is made by check, and a redemption is requested shortly
thereafter, payment may be delayed for up to seven business days to ensure
that the check has cleared.
- - Shares should be purchased by wire if you intend to redeem them shortly after
purchase. For more information contact a Shareholder Services Representative
at 1 (800) 551-1700.
- - Selling or exchanging shares is considered a taxable event by the Internal
Revenue Service. When you make these transactions you could realize a taxable
capital gain or loss.You may want to consult your tax or other financial
advisor for information about possible tax consequences prior to making one
of these transactions. When you hold mutual fund shares any dividends or
distributions you receive are taxable. Please see "Taxes" on page 39 for more
information about the taxation of dividends and distributions.

- --------------------------------------------------------------------------------
IMPORTANT!
-----------
THE FUNDS ARE REQUIRED TO WITHHOLD AND REMIT TO THE U.S. TREASURY 31% OF
DIVIDEND PAYMENTS, CAPITAL GAIN DISTRIBUTIONS AND REDEMPTION PROCEEDS FOR ANY
ACCOUNT ON WHICH THE OWNER PROVIDES AN INCORRECT TAXPAYER IDENTIFICATION NUMBER.
APPLICATIONS WITHOUT A TAXPAYER IDENTIFICATION NUMBER WILL NOT BE ACCEPTED AND
WILL BE RETURNED ALONG WITH THE PURCHASE CHECK.
- --------------------------------------------------------------------------------

TO PURCHASE ADDITIONAL SHARES BY MAIL
Send your remittance to one of the addresses listed previously. Include the
detachable form from your most recent statement. If you do not have the form,
include a note stating the name of the account and the account number.

TO PURCHASE SHARES BY BANK-WIRE
You can purchase shares by wiring money from your bank account to your
Wasatch Funds account.

WIRING INSTRUCTIONS:
MB Bank, n.a.
A.B.A. Number 101000695
For credit to Wasatch Funds

Account Number 987-060-9800
For further credit to:
(shareholder account number)
(name or account registration)
(Social Security or Tax Identification Number)
(identify which Fund to purchase)

AUTOMATIC INVESTMENT PLAN (AIP)
- - You can choose to make automatic investments for as little as $50 monthly or
$100 quarterly.
- - Selecting this option when you open a new Fund account lowers the minimum
initial investment to $1,000.
- - You may elect to have your automatic investments made on the 5th and/or the
20th day of each month. If these dates fall on a weekend or holiday,
purchases will be made on the next business day.
- - You can begin investing automatically on an established Fund account by
completing and returning an Automatic Investment Plan application, available
from Wasatch Funds.
- - It takes 10 business days after the receipt of your application for the plan
to begin.
- - Send an unsigned, voided check or deposit slip along with your application.
- - Your financial institution must be a member of the Automated Clearing House.
- - The bank or financial institution you designate can then begin debiting a
preauthorized amount from your account on a specified date that will be used
to purchase shares for your Fund account.
- - No service fee is currently charged by the Funds for participating in the AIP.
- - A $20 service fee will be imposed if your automatic investment withdrawal is
returned unpaid for any reason.
- - If you redeem an AIP to a zero balance, the plan will be discontinued.

WHO CAN PURCHASE SHARES IN THE MICRO-CAP FUND
(Also see "To Purchase Shares" on page 30.)
- - The Micro-Cap Fund closed to new investors on January 31, 1999.
- - Micro-Cap Fund shareholders as of the January 31, 1999 closing date and
certain others may continue to add to their respective accounts through the
reinvestment of dividends and cash distributions on any shares owned and
through the purchase of additional shares.
- - Micro-Cap Fund shareholders as of January 31, 1999 may also open and add to
Fund accounts that use the same Social Security Number as the accounts
existing as of the closing date. (For example, accounts where the shareholder
is the owner, a joint owner or a custodian for a minor child.)
- - Financial planners whose clients beneficially own Micro-Cap Fund accounts may
continue to purchase Fund shares.
- - Directors of the Funds and employees, affiliates and directors of Wasatch
Advisors, Inc. may continue to open new accounts.
- - The Micro-Cap Fund may resume sales to new investors at some future date, but
has no present intention to do so.
- - Participants in certain 401(k) plans may open new accounts and purchase
Micro-Cap Fund shares.

PURCHASING SHARES THROUGH OTHER INSTITUTIONS
- - You may buy or sell shares of the Funds through an investment professional,
including a broker who may charge you a transaction fee for this service.
- - If you want to purchase shares through another institution or service
provider, you should read their materials carefully for any fees that may
apply.
- - Certain features of the Funds, such as the minimum initial investment or
subsequent investment amounts, may be modified or may not be available
through other institutions.
- - Once you have established an account through an investment professional, any
subsequent transactions for, or questions about, that account must be made
through your investment professional.
- - The Manager or the Funds may enter into agreements with various brokerage or
other firms pursuant to which such firms provide administrative services with
respect to customers who are beneficial owners of shares of the Funds. The
Manager or the Funds may compensate such firms in amounts based on assets of
customers invested in the Funds.

TO EXCHANGE SHARES
- - Shares of any Wasatch Fund may be exchanged for shares of any other Wasatch
Fund or the Northern U.S. Government Money Market Fund ("Money Market Fund")
on any day the New York Stock Exchange (the "Exchange") is open for business.

- - Exchanges for shares in closed funds may only be made by shareholders with
existing accounts in those funds.

- - You may open a new account or purchase additional shares by making an
exchange from an existing Fund account.
- - New accounts opened by exchange will have the same registration as existing
accounts and are subject to the minimum initial investment requirements.
- - Additional exchanges may be made for $500 or more.

- - The price of shares being exchanged or pur chased will be determined the next
time the NAV is calculated after Wasatch Funds has received your exchange
request in good order. (For more information see "How Fund Shares are Priced"
on page 36.)

- - Exchanges can be made by calling a Shareholder Services Representative at
1 (800) 551-1700 (if you have telephone privileges).

WRITTEN EXCHANGE REQUESTS
- - See "Instructions for Written Requests" on page 35.

TELEPHONE EXCHANGE REQUESTS
- - Call 1 (800) 551-1700 to exchange shares (if you have telephone privileges).
- - The Funds do not accept exchange requests made via FAX.

- --------------------------------------------------------------------------------
ALL ACCOUNTS ARE AUTOMATICALLY ELIGIBLE FOR THE TELEPHONE EXCHANGE OPTION. IF
YOUR ACCOUNT WAS OPENED PRIOR TO JANUARY 31, 1997 AND YOU DID NOT SELECT THE
TELEPHONE EXCHANGE OPTION AT THAT TIME, CALL 1 (800) 551-1700 FOR THE NECESSARY
FORM AND INSTRUCTIONS.
- --------------------------------------------------------------------------------

- - It may be difficult to reach the Funds during periods of unusual market
activity. If you are unable to contact the Funds by telephone, you may also
exchange shares by mail or overnight express delivery.

EXCHANGES BETWEEN WASATCH FUNDS AND THE NORTHERN U.S. GOVERNMENT MONEY MARKET
FUND
- - You may exchange all or a portion of your investment from the Money Market
Fund to Wasatch Funds, or from Wasatch Funds to the Money Market Fund.
- - Before authorizing any investment in shares of the Money Market Fund you must
obtain a copy of the Northern U.S. Government Money Market Fund prospectus,
available from Wasatch Funds. Please read it carefully before investing.
- - Exchanges are subject to the minimum purchase and redemption amounts set
forth in this prospectus.
- - You may make automatic monthly investments in Wasatch Funds by redeeming
shares from your Money Market Fund account.
- - To utilize this option please call Wasatch Funds at 1 (800) 551-1700 for an
application form.
- - There is no fee for this service.
- - These transactions must meet the Funds' minimum purchase requirements.
- - Only shareholders of existing Micro-Cap Fund accounts may redeem Money Market
Fund shares to purchase additional shares of the Micro-Cap Fund.
- - Any changes to the automatic exchange must be made 10 business days prior to
the transaction.

- - Exchange requests will be effective the day the Funds receive them in good
order by 3:00 p.m. Central Time, or market close on days the Funds calculate
the NAV, unless it is a bank holiday. Requests made on bank holidays will be
processed the following business day. This applies to the Fund being redeemed
and the Fund being purchased. (For more information see "How Fund Shares are
Priced" on page 36.)

- - You will begin accruing income from the Money Market Fund the day following
the exchange.
- - Dividends earned in the Money Market Fund are payable at the end of the
month, not at the time of an exchange.

OTHER INFORMATION ABOUT EXCHANGES
- - You may make four exchanges out of each Fund during a calendar year
(excluding automatic monthly exchanges).
- - Exchange requests may be subject to other limitations, including those
relating to frequency, that Wasatch Funds may establish to ensure that
exchanges do not disadvantage shareholders or the Funds.
- - Shareholders will be notified at least 60 days in advance of any changes in
limitations and may obtain the terms of the limitations by writing to:
Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172.
- - Exchanging shares is considered a taxable event by the Internal Revenue
Service. You could realize a taxable capital gain or loss when you exchange
shares. You may want to consult a tax or other financial advisor before
deciding to make an exchange.
- - Additional documentation and signature guarantees may be required for
exchange requests if shares are registered in the name of a partnership or
fiduciary. Contact Wasatch Funds for more information.

TO REDEEM SHARES
- - You may request that the Funds redeem all or a portion of your shares.

- - The share price of your transaction will be determined the next time the NAV
is calculated after Wasatch Funds has received your request in good order.
(For more information see "How Fund Shares are Priced" on page 36.)

- - If shares are held in certificate form you must return the certificates
before or with your redemption request.
- - Additional documentation and signature guarantees may be required for
redemption requests from corporations, executors, administrators,
trustees and guardians. Please call Wasatch Funds at 1 (800) 551-1700 for
additional information.
- - There is no charge for redemption requests submitted directly to the Funds.
- - The Funds reserve the right to reject any redemption request if it believes
it is advisable to do so.
- - If the account is worth less than the amount requested, the entire value of
the account will be redeemed.
- - Dividends earned in the Money Market Fund are payable at the end of the
month, not at the time of a redemption.
- - The Funds reserve the right to redeem in kind.

- - Redeeming shares is considered a taxable event by the Internal Revenue
Service. When you redeem shares you could realize a taxable capital gain or
loss. You may want to consult your tax or other financial advisor prior to
redeeming shares.

WRITTEN REDEMPTION REQUESTS
- - See "Instructions for Written Requests" on page 35.
- - A signature guarantee is required for redemptions over $50,000.

TELEPHONE REDEMPTION REQUESTS
- - You may redeem shares in your account in amounts of $500 up to $50,000, by
calling 1 (800) 551-1700 (if you have telephone privileges).
- - Redemption requests for over $50,000 must be made in writing. (A signature
guarantee is required.)
- - The Funds do not accept redemption requests made via FAX.
- - Reaching the Funds by telephone during periods of unusual market activity may
be difficult. If this is the case, you may redeem shares by mail or overnight
express delivery.

SYSTEMATIC WITHDRAWAL PLAN
- - You may arrange to make monthly, quarterly or annual redemptions of $50 or
more.
- - Your Fund account balance must be at least $5,000 at the time you begin
participation in the plan.
- - You may choose either the 5th or the 20th of the month to have systematic
withdrawals distributed to you. If the day falls on a weekend or legal
holiday, the distribution will be made on the next business day.
- - A Systematic Withdrawal Plan application is available from the Funds by
calling 1 (800) 551-1700.
- - Any changes made to your distribution information must be made in writing and
signed by each account holder.
- - There is no charge to shareholders for using this plan.
- - You may terminate the Systematic Withdrawal Plan at any time without charge
or penalty.
- - The Funds may terminate or modify the plan after 60 days' written notice to
shareholders.
- - Changes in banking information require a signature guaranteed letter of
instruction.

PLEASE NOTE!
Systematic redemptions, like any sale of shares, may result in a capital gain
or loss for federal income tax purposes. Purchases of additional shares
concurrent with withdrawals may have adverse tax consequences for shareholders.
Your account may be depleted if the amount withdrawn under the plan exceeds the
dividends credited to your account.

PAYMENT OF REDEMPTION PROCEEDS
- - Payment will be mailed within seven days after the Funds receive your request
in good order.
- - Redemption proceeds can be sent by wire or electronic funds transfer to your
preauthorized bank account.
- - There is a $7.50 fee for wire redemptions which will be deducted from your
proceeds.
- - Payment may be delayed for up to seven business days on redemption requests
for recent purchases made by check in order to ensure that the check has
cleared.

SUSPENSION OF REDEMPTIONS
- - The right to redeem Fund shares will be suspended for any period during which
the Exchange is closed because of financial conditions or any other
extraordinary reason.
- - The right to redeem may be suspended for any period during which (a) trading
on the Exchange is restricted pursuant to rules and regulations of the
Securities and Exchange Commission (SEC), (b) the SEC has by order permitted
such suspension, or (c) an emergency, as defined by
the rules and regulations of the SEC, exists making it impracticable for the
Funds to dispose of portfolio securities or fairly determine the Net Asset
Value.

INSTRUCTIONS FOR WRITTEN REQUESTS
- - You can redeem or exchange shares by writing to Wasatch Funds.
- - Your request should be sent to:

WASATCH FUNDS
P.O. BOX 2172
MILWAUKEE, WI 53201-2172

- - Please include:
Your name
The Fund(s) name
Your account number(s)
The dollar amount or number of shares to be redeemed or exchanged
Your telephone number
Signature(s) of all registered account owners. Be sure to sign your request
exactly as your account is registered.
Signature guarantee, if required.

SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE
- - INDIVIDUAL OR JOINT OWNER. Written instructions must be signed by each
shareholder exactly as the names appear on the account registration.
- - GIFT TO MINOR. Written instructions must be signed by the Custodian exactly
as the name appears on the account registration.
- - CORPORATION, PARTNERSHIP, TRUST OR OTHER ENTITY. Written instructions must be
signed by the person(s) authorized to act on the account. Additional
documentation may be required. Call 1 (800) 551-1700 for information.
- - INDIVIDUAL RETIREMENT ACCOUNTS. Written instructions must be signed by the
account owner. Please see the Wasatch Funds IRA Information Kit for more
detailed information, or call a Shareholder Services Representative at
1 (800) 551-1700.

SIGNATURE GUARANTEE
A signature guarantee assures that a signature is genuine. It is intended to
protect shareholders and the Funds against fraudulent transactions by
unauthorized persons.
Signature guarantees are required by Wasatch Funds in the following cases:
- - To change your designated bank account or bank address.
- - To request a redemption in excess of $50,000 (must be made in writing).
- - To request a wire transfer of redemption proceeds to a person other than the
registered shareholder(s).
- - Requests for redemption proceeds to be mailed to an address other than the
address of record.
- - Certain transactions on accounts involving executors, administrators,
trustees or guardians.
- - Redemptions made within 30 days of an address change.
- - To change the registered account holders.

THE FUNDS RESERVE THE RIGHT TO REQUIRE A SIGNATURE GUARANTEE UNDER OTHER
CIRCUMSTANCES OR TO REJECT OR DELAY A REDEMPTION ON CERTAIN LEGAL GROUNDS. FOR
MORE INFORMATION ABOUT SIGNATURE GUARANTEES, PLEASE CALL 1 (800) 551-1700.

HOW TO OBTAIN A SIGNATURE GUARANTEE
You may obtain a signature guarantee from a commercial bank or trust company
in the United States, a brokerage firm that is a member of the National
Association of Securities Dealers, Inc. or an eligible guarantor institution
such as a credit union or savings association. Call your financial institution
to see if they have the ability to guarantee a signature.
A SIGNATURE GUARANTEE MAY NOT BE PROVIDED BY A NOTARY PUBLIC.

HOW FUND SHARES ARE PRICED
- - You may purchase, redeem or exchange shares at Net Asset Value without paying
a sales charge.
- - The Funds' share prices change daily, so the price of your shares will be
determined the next time the NAV is calculated after the Funds receive your
request in good order.
- - A Fund's share price, or Net Asset Value (NAV), is calculated by dividing the
value of all securities and other assets owned by the Fund, less the
liabilities charged to that Fund, by the number of the Fund's shares
outstanding.
- - The NAV is calculated each day the New York Stock Exchange is open for
trading. The NAV is determined as of the close of trading (generally 3:00
p.m. Central Time) or, if different, the close of the Exchange.
- - Shares of the Funds will not be priced on holidays the Exchange observes,
including New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
- - Securities traded on a recognized stock exchange are valued at the last sale
price on the exchange on which the securities are primarily traded or at the
last sale price on the national securities market.
- - Exchange-traded securities for which there were no transactions are valued at
the current bid prices.
- - Securities traded only on over-the-counter markets are valued at closing
over-the-counter bid prices.
- - Debt securities (other than short-term instruments) are valued at prices
furnished by a pricing service, subject to review and possible revision by
the Manager.
- - Short-term securities are valued at either original cost or amortized cost,
both of which approximate current market value.
- - Restricted securities, securities for which market value quotations are not
readily available, and other assets are valued at fair value by the Manager
under the supervision of the Board of Directors.

SHAREHOLDER SERVICES AND ACCOUNT POLICIES
- -----------------------------------------

WASATCH FUNDS AUTOMATED TELERESPONSE SERVICE
- - Call 1 (800) 551-1700 and follow the instructions.
- - Available 24 hours a day.

SHAREHOLDER REPORTS
Reports are mailed twice a year. Annual reports are dated September 30, which
is the close of the Funds' fiscal year. The annual report contains important
information about the Funds, including portfolio holdings and audited financial
statements. Semi-annual reports are dated March 31 and help keep shareholders
up-to-date on the Funds' performance and portfolio holdings. Financial
statements in the semi-annual reports are unaudited.
To reduce the volume of mail received by shareholders, as well as Fund
expenses, only one copy of most financial reports will be mailed to accounts
listed under the same Social Security Number. Additional copies of shareholder
reports are available by calling the Funds at 1 (800) 551-1700.

ACCOUNT STATEMENTS
You will receive account statements quarterly. The Funds will send you a
confirmation statement after every transaction that affects your account balance
or your account registration. If you invest through the Automatic Investment
Plan, you will receive confirmation of your purchases quarterly. Information
regarding the tax status of income dividends and capital gain distributions will
be mailed to shareholders on or before January 31. Account tax information will
also be sent to the Internal Revenue Service.

SHARE CERTIFICATES
The Funds stopped issuing share certificates on February 1, 1996. Instead,
shares purchased are automatically credited to an account maintained for you on
the books of the Funds. You will receive a statement showing the details of each
transaction.

INVOLUNTARY REDEMPTION
The Funds reserve the right to redeem the shares held in any account if the
Net Asset Value of the shares falls below $500 unless the account is an
Automatic Investment Plan. Your account will not be closed if the drop is due to
share price fluctuations.
Shareholders will be given at least 60 days' written notice before
involuntary redemptions are made. Shareholders can prevent involuntary
redemptions by restoring the account to the minimum investment amount during the
60 days.

TELEPHONE TRANSACTIONS
You may initiate transactions by telephone. The Funds and their agents will
not be responsible for any losses resulting from unauthorized transactions
providing reasonable procedures to prevent fraudulent transactions have been
followed.
The Funds and their agents have implemented procedures designed to reasonably
assure that telephone instructions are genuine. These procedures include
requesting verification of various pieces of personal information, recording
telephone transactions, confirming transactions in writing and restricting
transmittal of redemption proceeds to preauthorized destinations. Other
procedures may be implemented from time to time.
During periods of substantial economic or market change, it may be difficult
to contact the Funds by telephone. If you are unable to contact the Funds by
telephone, please consider sending written instructions.

TEMPORARY SUSPENSION OF SERVICES
The Funds or their agents may, in case of emergency, temporarily suspend
telephone transactions and other shareholder services.

RETURNED CHECK POLICY
The Funds reserve the right to cancel a purchase if a check does not clear
your bank. The Funds will charge your account a $20 service fee and you will be
responsible for any losses or fees imposed by your bank and any losses that may
be incurred by the Funds as a result of the canceled purchase. If you are
already a shareholder in the Funds, the Funds may redeem shares in your
account(s) to cover losses due to fluctuations in share price.

UNACCEPTABLE ACCOUNT REGISTRATIONS
The Funds will not accept accounts with addresses outside the United States.

REGISTRATION CHANGES
To change the name on an account, the shares are generally transferred
to a new account. Legal documentation and a signature guarantee are required.
For more information, call 1 (800) 551-1700.

ADDRESS CHANGES
To change the address on your account, call 1 (800) 551-1700 or send a
written request signed by all account owners. Include the name of your Fund(s),
the account number(s), the name(s) on the account and both the old and new
addresses. Certain options, including redemptions, may be suspended for 30 days
following an address change unless a signature guarantee is provided.

DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
- -----------------------------------------------
In addition to any increase in the value of shares which a Fund may achieve,
shareholders may receive dividends and capital gain distributions from the Fund.

DIVIDENDS
Dividends from stocks and interest earned from other investments are the
Funds' main sources of ordinary income. Substantially all of the Funds' income,
less expenses, is distributed at least annually as dividends to shareholders.

CAPITAL GAINS
When the Funds sell portfolio securities they may realize a capital gain or
loss, depending on whether the security is sold for more or less than its
adjusted cost basis. Net realized capital gains, if any, will be distributed at
least annually.

REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Dividends and capital gain distributions from a Fund are automatically
applied to purchase additional shares of the Fund at the Net Asset Value per
share on the payable date unless the shareholder has requested in writing to the
Transfer Agent that payment be made in cash. This option may be changed at any
time by written request to the Transfer Agent. The election is effective for
distributions with a record date on or after the date the Transfer Agent
receives notice of the election.

TAXES
Dividends paid from the Funds' net investment income and net short-term
capital gains will be taxable to share holders as ordinary income, whether paid
in cash or in additional shares.
Distributions paid from the Funds' long-term capital gains and designated as
capital gain distributions generally are taxable as long-term capital gains,
regardless of the length of time shareholders held their shares.
Dividends or capital gain distributions paid shortly after a purchase of
shares by an investor prior to the record date will have the effect of reducing
the per share Net Asset Value by the amount of the dividends or distributions.
All or a portion of such dividends or distributions, although in effect a return
of capital, are subject to taxation.
The Funds are required to withhold and remit to the U.S. Treasury 31% of
dividend payments, capital gain distributions, and redemption proceeds for any
account for which withholding is required.

WHEN YOU WILL RECEIVE TAX INFORMATION
After the end of each calendar year, shareholders are sent information on
redemptions, dividends and long-term capital gain distributions for tax
purposes, including information as to the portion taxable as ordinary income and
the portion taxable as long-term capital gains.

(This page intentionally left blank.)

FINANCIAL HIGHLIGHTS
- --------------------
The Financial Highlights beginning on page 42, are intended to help you
understand the financial performance of each Wasatch Fund for the past five
years or since inception if a Fund has been in operation less than five years.
This information has been audited by the firm of Arthur Andersen LLP,
independent public accountants, whose report, along with the Fund's financial
statements, are included in the annual report which is available upon request.
For a copy of Wasatch Funds' 1998 Annual Report, please call 1 (800) 551-1700
or write to Wasatch Funds at P.O. Box 2172, Milwaukee, WI 53201-2172.

FINANCIAL HIGHLIGHTS GUIDE
This section is designed to help you better understand the information
presented in the Financial Highlights tables which begin on page 42. The tables
contain important historical operating information that you may find useful in
making investment decisions or understanding your investment's performance.

NET ASSET VALUE (NAV) is the value of a single share of a Fund. It is
computed by adding the value of all of a Fund's investments and other assets,
subtracting any liabilities and dividing the result by the number of shares
outstanding. The difference between the Net asset value, beginning of period and
the Net asset value, end of period in the Financial Highlights tables is the
change in value of a Fund's shares over the fiscal period, but not its total
return.
NET INVESTMENT INCOME (LOSS) is the per share amount of dividends and in
terest income earned on securities held by a Fund, less the Fund's expenses.
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON SECURITIES is the per share
increase or decrease in value of the securities a Fund holds and has sold during
the reporting period. Gains or (losses) are realized when securities are sold.
Gains or (losses) are unrealized when securities increase or decrease in value
but are not sold.
DIVIDENDS FROM NET INVESTMENT INCOME is the per share amount that a Fund paid
from net investment income.
DISTRIBUTIONS are the per share amount that a Fund paid to shareholders from
net investment income and net realized gains.
TOTAL RETURN represents the rate a shareholder would have earned (or lost) on an
investment in a Fund. For the purposes of calculating total return, it is
assumed that dividends and distributions are reinvested at the NAV on the day of
the distribution. A FUND'S TOTAL RETURN CAN NOT BE COMPUTED DIRECTLY FROM THE
FINANCIAL HIGHLIGHTS TABLES.
RATIO OF EXPENSES TO AVERAGE NET ASSETS is the total of a Fund's operating
expenses divided by its average net assets for the stated period.
RATIO OF NET INCOME (LOSS) TO AVERAGE NET ASSETS is a Fund's net investment
income divided by its average net assets for the stated period.
PORTFOLIO TURNOVER RATE is a measure of the annual amount of a Fund's buying
and selling activity. It is computed by dividing total purchases or sales,
whichever is less, by the average monthly market value of a Fund's portfolio
securities. This calculation does not include securities held by any Fund with a
maturity date of less than 12 months.

MICRO-CAP FUND-FINANCIAL HIGHLIGHTS
- -----------------------------------
YEAR ENDED SEPTEMBER 30

JUNE 19,
1995<F1>
THROUGH
SEPTEMBER 30,
1998 1997 1996 1995
- --------------------------------------------------------------------------------

NET ASSET VALUE, BEGINNING
OF PERIOD $4.29 $3.15 $2.72 $2.00

INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (0.10) (0.04) (0.03) -
Net realized and unrealized
gains (losses) on securities (0.27) 1.36 0.46 0.72
-------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS (0.37) 1.32 0.43 0.72

LESS DISTRIBUTIONS:
Distributions from
capital gains (0.33) (0.18) - -
-------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.33) (0.18) - -
-------- -------- -------- --------

NET ASSET VALUE,
END OF PERIOD $3.59 $4.29 $3.15 $2.72
======== ======== ======== ========

TOTAL RETURN<F2> (8.75)% 44.58% 15.81% 36.00%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $117,533 $157,907 $94,004 $25,368
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 2.50% 2.50% 2.50% 2.50%<F3>
Expenses, before waivers
and reimbursements 2.51% 2.58% 2.67% 3.40%<F3>
Net investment income
(loss), net of waivers
and reimbursements (2.28)% (1.64)% (1.53)% (0.76)%<F3>
Net investment income
(loss), before waivers
and reimbursements (2.29)% (1.72)% (1.70)% (1.66)%<F3>
Portfolio turnover rate 81% 99% 84% 0%

<F1> Commencement of operations.
<F2> Not annualized for periods less than a year.
<F3> Annualized.

MICRO-CAP VALUE FUND-FINANCIAL HIGHLIGHTS
- -----------------------------------------

DECEMBER 17, 1997<F1> THROUGH
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------

NET ASSET VALUE, BEGINNING
OF PERIOD $2.00

INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (0.01)
Net realized and unrealized
gains (losses) on securities (0.19)
--------
TOTAL FROM INVESTMENT
OPERATIONS (0.20)

LESS DISTRIBUTIONS:
Distributions from
capital gains -
--------
TOTAL DISTRIBUTIONS -
--------

NET ASSET VALUE,
END OF PERIOD $1.80
========

TOTAL RETURN<F2> (10.00)%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $14,306
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.95%<F3>
Expenses, before waivers
and reimbursements 2.52%<F3>
Net investment income
(loss), net of waivers
and reimbursements (1.02)%<F3>
Net investment income
(loss), before waivers
and reimbursements (1.59)%<F3>
Portfolio turnover rate 114%

<F1> Commencement of operations.
<F2> Not annualized for periods less than a year.
<F3> Annualized.

AGGRESSIVE EQUITY FUND-FINANCIAL HIGHLIGHTS
- -------------------------------------------
YEAR ENDED SEPTEMBER 30

1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>

NET ASSET VALUE, BEGINNING
OF PERIOD $29.73 $24.17 $25.00 $19.96 $19.75

INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (0.17) (0.12) (0.18) (0.04) (0.02)
Net realized and unrealized
gains (losses) on securities (5.08) 6.90 (0.11) 6.59 1.33
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS (5.25) 6.78 (0.29) 6.55 1.31

LESS DISTRIBUTIONS:
Distributions from
capital gains (3.69) (1.22) (0.54) (1.51) (1.10)
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (3.69) (1.22) (0.54) (1.51) (1.10)
-------- -------- -------- -------- --------

NET ASSET VALUE,
END OF PERIOD $20.79 $29.73 $24.17 $25.00 $19.96
======== ======== ======== ======== ========

TOTAL RETURN (19.13)% 29.45% (1.09)% 35.19% 6.85%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $123,723 $188,965 $253,319 $305,311 $46,369
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.48% 1.50% 1.50% 1.47% 1.50%
Expenses, before waivers
and reimbursements 1.48% 1.54% 1.50% 1.47% 1.52%
Net investment income
(loss), net of waivers
and reimbursements (0.60)% (0.39)% (0.65)% (0.37)% (0.67)%
Net investment income
(loss), before waivers
and reimbursements (0.60)% (0.43)% (0.65)% (0.37)% (0.69)%
Portfolio turnover rate 56% 48% 73% 29% 64%

</TABLE>

GROWTH FUND-FINANCIAL HIGHLIGHTS
- ---------------------------------
YEAR ENDED SEPTEMBER 30

NET ASSET VALUE, BEGINNING
OF PERIOD $22.34 $17.57 $15.97 $15.30 $15.68

INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (0.09) 0.08 0.07 0.02 (0.14)
Net realized and unrealized
gains (losses) on securities (3.60) 6.07 1.87 4.59 0.71
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS (3.69) 6.15 1.94 4.61 0.57

LESS DISTRIBUTIONS:
Dividends from
net investment income (0.03) (0.07) (0.05) - -
Distributions from
capital gains (1.62) (1.31) (0.29) (3.94) (0.95)
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (1.65) (1.38) (0.34) (3.94) (0.95)
-------- -------- -------- -------- --------

NET ASSET VALUE,
END OF PERIOD $17.00 $22.34 $17.57 $15.97 $15.30
======== ======== ======== ======== ========

TOTAL RETURN (17.49)% 37.58% 12.39% 39.76% 3.75%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $153,148 $135,437 $104,237 $53,533 $11,219
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.44% 1.50% 1.50% 1.50% 1.50%
Expenses, before waivers
and reimbursements 1.44% 1.50% 1.51% 1.58% 1.64%
Net investment income
(loss), net of waivers
and reimbursements (0.50)% 0.44% 0.40% 0.29% (0.51)%
Net investment income
(loss), before waivers
and reimbursements (0.50)% 0.44% 0.39% 0.21% (0.64)%
Portfolio turnover rate 63% 81% 62% 88% 163%

</TABLE>

MID-CAP FUND-FINANCIAL HIGHLIGHTS
- ----------------------------------
YEAR ENDED SEPTEMBER 30

1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>

NET ASSET VALUE, BEGINNING
OF PERIOD $21.85 $17.95 $18.61 $11.02 $10.51

INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (0.31) (0.35) (0.26) (0.02) (0.27)
Net realized and unrealized
gains (losses) on securities (4.44) 4.25 (0.21) 7.64 0.78
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS (4.75) 3.90 (0.47) 7.62 0.51

LESS DISTRIBUTIONS:
Distributions from
capital gains (2.00) - (0.19) (0.03) -
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (2.00) - (0.19) (0.03) -
-------- -------- -------- -------- --------

NET ASSET VALUE,
END OF PERIOD $15.10 $21.85 $17.95 $18.61 $11.02
======== ======== ======== ======== ========

TOTAL RETURN (22.07)% 21.75% (2.54)% 69.24% 4.85%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $43,553 $77,243 $128,490 $98,605 $1,091
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.75% 1.75% 1.75% 1.75% 1.75%
Expenses, before waivers
and reimbursements 1.90% 1.89% 1.81% 1.94% 3.33%
Net investment income
(loss), net of waivers
and reimbursements (1.54)% (1.48)% (1.27)% (0.71)% (1.19)%
Net investment income
(loss), before waivers
and reimbursements (1.69)% (1.62)% (1.33)% (0.90)% (2.76)%
Portfolio turnover rate 91% 103% 121% 46% 213%

</TABLE>

U.S. TREASURY FUND-FINANCIAL HIGHLIGHTS
- ----------------------------------------
YEAR ENDED SEPTEMBER 30

1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>

NET ASSET VALUE, BEGINNING
OF PERIOD $11.32 $10.21 $10.50 $10.09 $10.42

INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income 0.27 0.61 0.44 0.56 0.55
Net realized and unrealized
gains (losses) on securities 2.39 0.73 0.01 0.44 (0.40)
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS 2.66 1.34 0.45 1.00 0.15

LESS DISTRIBUTIONS:
Dividends from
net investment income (0.56) (0.23) (0.74) (0.59) (0.46)
Distributions from
capital gains - - - - (0.02)
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.56) (0.23) (0.74) (0.59) (0.48)
-------- -------- -------- -------- --------

NET ASSET VALUE,
END OF PERIOD $13.42 $11.32 $10.21 $10.50 $10.09
======== ======== ======== ======== ========
TOTAL RETURN 24.30% 13.23% 4.42% 10.46% 1.51%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $67,856 $11,205 $7,427 $4,035 $3,250
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.75% 0.75% 0.93% 1.00% 1.00%
Expenses, before waivers
and reimbursements 0.95% 1.22% 1.67% 1.59% 1.39%
Net investment income
(loss), net of waivers
and reimbursements 5.06% 5.97% 5.21% 5.88% 5.15%
Net investment income
(loss), before waivers
and reimbursements 4.86% 5.50% 4.47% 5.29% 4.76%
Portfolio turnover rate 5% 19% 30% 43% 45%

</TABLE>

GUIDE TO UNDERSTANDING FUND PERFORMANCE
As a mutual fund investor you will frequently see terms that are used to
describe fund performance. In addition, many discussions are based on
comparisons of one fund's performance to that of other mutual funds or
recognized stock market indices. These discussions may appear in reports to
shareholders, newsletters, advertisements and media articles. This section is
designed to help you understand common terms and familiarize you with indices
that may be used to compare the Funds' performance.

PERFORMANCE QUOTATIONS REPRESENT A FUND'S PAST PERFORMANCE AND ARE NOT
INDICATIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN A FUND WILL FLUCTUATE SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.

CUMULATIVE TOTAL RETURN represents the actual rate of return on an investment
for a specified period. The "Financial Highlights" tables beginning on page 42
show total return for single fiscal periods. Cumulative total return is
generally quoted for more than one year (usually the life of the Fund). A
cumulative total return does not show interim fluctuations in the value of an
investment and assumes reinvestment of all dividends and distributions.
AVERAGE ANNUAL TOTAL RETURN reflects the average annual percentage change in
the value of an investment in a Fund over a specified period. It is calculated
by taking the cumulative total return for the stated period and determining what
constant annual return would have produced the same cumulative return. Average
annual returns for more than one year tend to smooth out variations in a Fund's
return and are not the same as actual annual results.
YIELD shows the rate of income a Fund earns on its investments as a
percentage of the Fund's share price. It is calculated by dividing a Fund's net
investment income for a 30-day period by the average number of shares entitled
to receive dividends and dividing the result by the Fund's NAV per share at the
end of the 30-day period. Yield does not include changes in NAV.
Yields are calculated according to standardized SEC formulas and may not
equal the income on an investor's account. Yield is usually quoted on an
annualized basis. An annualized yield represents the amount you would earn if
you remained in a Fund for a year and that Fund continued to have the same yield
for the entire year.
DOW JONES INDUSTRIAL AVERAGE ("THE DOW") is probably the most well known
index. The Dow was developed in 1884 and is the oldest market index in the
United States. Currently, the Dow contains 30 stocks that in the opinion of Dow
Jones' Wall Street Journal editors, are the industrial giants of Wall Street.
When the Dow goes up, conventional wisdom suggests that investors are seeking
the certainty associated with large, well-established companies, especially
those that pay dividends. Typically, therefore, the more large, dividend-paying
stocks a fund owns, the better it will perform when the Dow rises. The stocks of
small and mid-size companies may perform differently than the Dow.
STANDARD & POOR'S 500 INDEX (S&P 500). While the Dow is better known, many
professionals consider the S&P 500 to be a more accurate measure of general
stock market activity. The Index includes 500 of the nation's largest stocks
from a broad variety of industries. It represents about 80% of the total market
value of all stocks on the New York Stock Exchange. The performance of the S&P
500 is dominated by the fortunes of its largest stocks. Funds that invest
heavily in the stocks of small and mid-size companies may not always have
performance that is in line with the S&P 500. This is one of the benchmarks for
the Wasatch Aggressive Equity, Wasatch Growth and Wasatch Mid-Cap funds.
STANDARD & POOR'S MIDCAP 400 INDEX (S&P 400) is designed to track significant
mid-size companies. According to Standard & Poor's, the vast majority of the
stocks in the Index have market capitalizations (or total market value) of
between $200 million and $3 billion. The S&P 400 was first published in 1991 and
was designed to be a more accurate benchmark for mutual funds that invest in
small to mid-sized companies. This is one of the benchmarks for the Wasatch Mid-
Cap Fund.
NASDAQ COMPOSITE INDEX keeps tabs on the stocks of 3,500 or so small and mid-
size companies that trade only on the computerized over-the-counter (OTC)
system. Due to their number and size, technology stocks tend to dominate the
direction of the Index. Funds that invest heavily in technology stocks often
reflect the performance of the Nasdaq.
RUSSELL 2000 INDEX represents the smallest two-thirds of the largest 3,000
publicly traded companies domiciled in the United States. This index is a
popular measure of the performance of small company stocks. This is the
benchmark for the Wasatch Micro-Cap Fund and one of the benchmarks for the
Wasatch Aggressive Equity Fund.
RUSSELL 2000 VALUE INDEX is an unmanaged total return index that measures the
performance of those Russell 2000 companies with lower price-to-book ratios and
lower forecasted growth rates. This is the benchmark for the Wasatch Micro-Cap
Value Fund.
LIPPER GROWTH FUNDS INDEX includes the largest 30 funds which, by prospectus
or portfolio practice, normally invest in companies whose long-term earnings are
expected to grow significantly faster than the earnings of stocks represented in
the major unmanaged stock indices. This is one of the benchmarks for the Wasatch
Growth Fund.
LIPPER MICRO-CAP FUNDS INDEX includes the largest 30 funds which, by
prospectus or portfolio practice, normally invest in companies with market
capitalizations of less than $300 million at the time of purchase.
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is an unmanaged market value
weighted index measuring both principal price changes of, and income provided
by, the underlying universe of securities that comprise the Index. Securities
included in the Index must meet the following criteria: fixed as opposed to
variable rate; not less than one year to maturity; minimum outstanding principal
value of $50 million; and minimum quality rating of BBB by Standard & Poor's or
Baa by Moody's. This is one of the benchmarks for the Wasatch-Hoisington U.S.
Treasury Fund.
LEHMAN BROTHERS AGGREGATE INDEX covers the U.S. investment grade fixed rate
bond market, including govern ment and corporate securities, agency mortgage
pass-through securities, and asset-backed securities. To be included in the
index the security must meet the following criteria: must have at least one year
to final maturity, regardless of call features; must have at least $100 million
par amount outstanding; must be rated investment grade or better by Moody's
Investors Service, Standard & Poor's, or Fitch Investor's Service; must be fixed
rate, although it can carry a coupon that steps up or changes to a predetermined
schedule; must be dollar-denominated and nonconvertible. All corporate and
asset-backed securities must be registered with the SEC and must be publicly
issued. This is one of the bench marks for the Wasatch-Hoisington U.S.
Treasury Fund.

GLOSSARY OF INVESTING TERMS
- ----------------------------

This glossary provides definitions of terms as they pertain to investments
made by the Funds. It also provides more detailed descriptions of some of the
types of securities and other instruments in which the Funds may invest to the
extent permitted by their investment objectives and policies. The Funds are not
limited by this discussion and may invest in any other types of instruments not
precluded by the policies discussed elsewhere in this prospectus or in the SAI.
BONDS are debt securities issued by a company, municipality, government or
government agency. The issuer of a bond is required to pay the holder the amount
of the loan (or par value) at a specified maturity and to make scheduled
interest payments.
BUSINESS CYCLE is a term commonly used to describe fluctuations in total
economic activity. It refers to the period of time it takes the economy to shift
from a peak in business activity to a trough and back to a peak. (In other
words, it refers to the start of a recession through recovery and expansion and
back to recession.) The average post-war business cycle (measured from the end
of one recession to the start of the next recession) has been about 48 months,
ranging from 12 to 94 months. Interest rates generally follow this cycle, being
at relatively high levels near the beginning of a recession and falling during
the recession and the early part of the business recovery. Generally, interest
rates begin to rise toward the end of a business expansion, again peaking near
the start of the next recession.
CERTIFICATES OF DEPOSIT are issued by a bank and usually pay interest.
Maturities range from a few weeks to several years. Interest rates are set by
competitive forces in the marketplace.
COMMERCIAL PAPER is a short-term debt obligation with a maturity ranging from
2 to 270 days and is issued by banks, corporations and other borrowers to
investors with temporarily idle cash. The Funds may purchase commercial paper
issued under Section 4(2) of the Securities Act of 1933.
COMMON STOCK represents units of ownership (shares) in a public corporation.
Owners of shares of common stock usually have the right to vote on the selection
of directors and other important matters as well as to receive dividends on
their holdings.
CONVERTIBLE SECURITIES are preferred stocks or bonds that pay a fixed
dividend or interest payment and are convertible into common stock at a
specified price or conversion ratio within a specified period of time. By
investing in convertible securities, a fund seeks the opportunity, through the
conversion feature, to participate in a portion of the capital appreciation of
the common stock into which the securities are convertible, while earning higher
current income than is available from the common stock. (Also see Investment
Grade Debt Securities.)
DEPOSITARY RECEIPTS are receipts for shares of a foreign-based corporation
that entitle the holder to dividends and capital gains on the underlying
security. Receipts include those issued by domestic banks (American Depositary
Receipts), foreign banks (Global or European Depositary Receipts) and broker-
dealers (depositary shares.)
EARNINGS GROWTH is a measure of a company's profitability. Earnings per share
is the portion of the company's profits allocated to each outstanding share of
common stock. Over the long-term, earnings growth is an important factor in
stock price appreciation.
EFFECTIVE DURATION estimates the interest rate risk (price volatility) of a
security, i.e., how much the value of the security is expected to change with a
given change in interest rates. The longer a security's effective duration, the
more sensitive its price is to changes in interest rates.
EURODOLLARS are U.S. currency held in banks outside the United States, mainly
in Europe, and are commonly used for settling international transactions. Some
securities are issued in Eurodollars-that is, with a promise to pay interest in
dollars deposited in foreign bank accounts.
FIXED INCOME SECURITIES are securities that pay a specified rate of return.
The term generally includes short- and long-term government, corporate and muni
cipal obligations that pay a specified rate of interest or coupons for a
specified period of time and preferred stock, which pays fixed dividends. Coupon
and dividend rates may be fixed for the life of the issue or, in the case of
adjustable and floating rate securities, for a shorter period.
GOVERNMENT SECURITIES are securities issued by U.S. government agencies.
Although these securities have high credit ratings, they are not considered
government obligations and therefore are not directly backed by the full faith
and credit of the government as are U.S. Treasury securities.
INVESTMENT GRADE DEBT SECURITIES are debt obligations rated within the four
highest rating categories by Moody's Investors Service, Inc., Standard & Poor's
Rating Service, or other nationally recognized rating agencies. They may also be
unrated obligations that are comparable in quality to investment grade debt
securities. Obligations rated in the lowest of the top four ratings, though
considered investment grade, are deemed to have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead to
a lower rated security's weakened capacity to make principal and interest
payments. Subsequent to its purchase by a Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. Such an event will be considered in determining whether
the Fund should continue to hold the security. Securities are expected to be
sold promptly if they become non-investment grade and exceed 5% of a Fund's net
assets.
LIQUIDITY means that a particular stock has enough shares outstanding to
allow large transactions without a substantial drop in price. Large company
stocks typically have more liquidity than small company stocks.
MARKET CAPITALIZATION is used to measure the size and value of a com-pany. It
is calculated by multiplying the number of a company's outstanding shares by the
current market price of a share.
MASTER DEMAND NOTES are demand instruments without a fixed maturity that bear
interest at rates which are fixed to known lending rates and are automatically
adjusted when such lending rates change.
MONEY MARKET INSTRUMENTS are short-term debt instruments such as negotiable
certificates of deposit (CDs), Eurodollars, commercial paper, banker's
acceptances, Treasury bills, and discount notes of the Federal Home Loan Bank,
Federal National Mortgage Association, and Federal Farm Credit System, among
others. These instruments have low risk and liquidity in common.
PREFERRED STOCK generally pays dividends at a specified rate and takes
precedence over common stock in the payment of dividends and in the event a
company must liquidate its assets. Preferred stock generally does not carry
voting rights.
PRICE-TO-EARNINGS (P/E) RATIO is the price of a stock divided by its earnings
per share. The P/E ratio may either use the reported earnings from the latest
year (trailing P/E) or may use an analyst's forecast of next year's earnings
(forward P/E). The price-to-earnings ratio, also known as the multiple, gives
investors an idea of how much they are paying for a company's earning power. The
higher the P/E, the more investors pay, and therefore the more earnings growth
they expect.
REPURCHASE AGREEMENTS involve the purchase of a security with the condition
that after a stated period of time the original seller (a member bank of the
Federal Reserve System or a recognized securities dealer) will buy back the same
security at a predetermined price or yield.
U.S. GOVERNMENT SECURITIES include direct obligations of the U.S. government
that are supported by its full faith and credit. TREASURY BILLS have initial
maturities of less than one year, TREASURY NOTES have initial maturities of one
to 10 years and TREASURY BONDS may be issued with any maturity but generally
have maturities of at least 10 years. U.S. government securities also include
indirect obligations of the U.S. government that are issued by federal agencies
and government-sponsored entities. Unlike Treasury securities, agency securities
generally are not backed by the full faith and credit of the U.S. government.
Some agency securities are supported by the right of the issuer to borrow from
the Treasury; others are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations; and others are supported only
by the credit of the sponsoring agency.
U.S. TREASURY SECURITIES are direct obligations of the United States Treasury
such as bonds, notes and bills. Treasury bills are issued on a discount rate
basis and have a maturity of one year or less. Longer-dated Treasury securities
are issued with interest paid semi-annually to holders. Notes are generally
issued in maturities of 10 years and shorter, and bonds are currently issued
with a maturity of 30 years.
U.S. TREASURY STRIPS, or zero coupon Treasury securities are debt obligations
which do not entitle the holder to periodic interest payments prior to maturity
and are traded at a discount from their face amounts. The discount of U.S.
Treasury Strips varies primarily depending on the time remaining until maturity
and prevailing levels of interest rates. Strips can be sold prior to their due
date in the secondary market at the then-prevailing market value. The market
prices of Strips are generally more volatile than the market prices of
securities of comparable quality and similar maturity that pay interest
periodically and may respond to a greater degree of fluctuations in interest
rates than do such non-zero coupon securities.

OTHER IMPORTANT INFORMATION
- ----------------------------

The following documents contain important information about Wasatch Funds and
are available free of charge.

STATEMENT OF ADDITIONAL INFORMATION (SAI)
- -----------------------------------------

The SAI supplements the information provided in this prospectus. It has been
filed with the Securities and Exchange Commission (SEC). The SAI is legally part
of this prospectus and is incorporated into it by reference.

ANNUAL/SEMI-ANNUAL REPORTS
- ---------------------------
Additional information about the Funds' investments is available in the
Funds' annual and semi-annual reports to shareholders. In the Funds' annual
report you will find a discussion of the market conditions and investment
strategies that significantly affected each Fund's performance during its last
fiscal year.
To request a free copy of the Funds' SAI or annual or semi-annual reports, or
to obtain other information please call a Shareholder Services Representative
at:

1 (800) 551-1700
Monday - Friday 7:00 a.m. to
7:00 p.m. Central Time
or you can write to:

WASATCH FUNDS
P.O. BOX 2172
MILWAUKEE, WI 53201-2172

The SAI and other information is available from Wasatch Funds via e-mail or
on our web site at WWW.WASATCHFUNDS.COM.

You can go to the SEC's World Wide Web site (http://www.sec.gov) to view
reports and other information that Wasatch Funds has filed electronically with
the SEC. Copies of this information may be obtained for the cost of duplicating
by writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009. Information about Wasatch Funds also can be reviewed and copied at
the Commission's Public Reference Room in Washington, D.C. Call the Commission
at 1 (800) SEC-0330 for information.

Investment Company Act File Number:
811-4920

XXXXX

STATEMENT OF ADDITIONAL INFORMATION

WASATCH FUNDS, INC.
150 Social Hall Avenue
Salt Lake City, UT 84111

January 31, 1999

WASATCH FUNDS, INC. ("Wasatch Funds" or the "Company") is an open-end management
investment company issuing shares of Common Stock in seven separate series or
"Funds," six of which are publicly offered and are described herein: Micro-Cap
Fund, Micro-Cap Value Fund, Aggressive Equity Fund, Growth Fund, Mid-Cap Fund
and Wasatch-Hoisington U.S. Treasury Fund.

This Statement of Additional Information is not a Prospectus but contains
information in addition to, and more detailed than, that set forth in the
Prospectus and should be read in conjunction with the Prospectus. A Prospectus
may be obtained without charge by calling 1 (800) 551-1700 or writing to Wasatch
Funds at P.O. Box 2172, Milwaukee, Wisconsin 53202-2172. The Statement of
Additional Information and the related Prospectus are both dated January 31,
1999. Capitalized terms used herein and not defined have the same meanings as
those used in the Prospectus.

TABLE OF CONTENTS

General Information and History......................................2
Investment Objectives and Strategies.................................2
Strategies and Risks.................................................3
Description of Corporate Bond Ratings................................5
Fund Restrictions and Policies......................................10
Management of the Company...........................................12
Control Persons and Principal Holders of Securities.................14
Investment Advisory and Other Services..............................15
Brokerage Allocation and Other Practices............................17
Capital Stock and Other Securities..................................19
Purchase, Redemption and Pricing of Securities Being Offered........20
Tax Status..........................................................20
Calculation of Performance Data.....................................22
Financial Statements................................................23

GENERAL INFORMATION AND HISTORY

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 Aggressive Equity Fund, Growth Fund and Wasatch-Hoisington
U.S. Treasury Fund commenced operations on December 6, 1986, the Mid-Cap Fund on
August 16, 1992, the Micro-Cap Fund on June 19, 1995, and the Micro-Cap Value
Fund commenced operations on December 17, 1997.

INVESTMENT OBJECTIVES AND STRATEGIES

Wasatch Funds is an open-end management investment company currently offering
six separate Funds which are described herein. The Micro-Cap Fund, Micro-Cap
Value Fund, Aggressive Equity Fund, Growth Fund and Mid- Cap Fund are each non-
diversified funds. The Wasatch-Hoisington U.S. Treasury Fund is a diversified
fund.

WASATCH MICRO-CAP FUND. The Micro-Cap Fund is currently closed to new
investors. The Micro-Cap Fund seeks long-term growth of capital. Income is a
secondary objective to be sought only when consistent with the primary
objective. In pursuit of its investment objective, the Fund will normally
invest at least 65% of its total assets in common stocks of companies with
market capitalizations of less than $300 million at the time of initial
purchase. The Fund is designed for long-term investors. Its strategy is to
invest in the smallest companies that the Manager believes possess superior
growth potential, and are reasonably priced relative to the Manager's projection
of the company's five-year earnings growth rate. The Fund targets two types of
investments, core and momentum holdings. Core holdings are companies the
Manager believes have the potential to grow at around 15% annually. Core
holdings are selected for characteristics that may give the Fund a solid
foundation. Momentum holdings are companies growing aggressively, often in
excess of 25% annually. These companies can boost the Fund's performance, but
may be subject to greater stock price fluctuations than core holdings. While
the Manager believes investments in the smallest companies present exceptional
opportunities for capital appreciation, stock prices of such companies may
fluctuate widely. Investors should assess their tolerance for short-term price
volatility before investing in this Fund.

WASATCH MICRO-CAP VALUE FUND. It is presently intended that the Micro-Cap Value
Fund will close to new investors when it reaches approximately $200 million in
assets. The Micro-Cap Value Fund reserves the right to reconsider closing the
Fund to new investors, and once closed, may choose to reopen the Fund although
it has no present intention to do so. The Micro-Cap Value Fund seeks long-term
growth of capital. Income is a secondary objective to be sought only when
consistent with the primary objective. The Fund will normally invest at least
65% of its total assets in the common stock of companies with a market
capitalization of less than $300 million at the time of initial purchase. It
seeks to invest in the stocks of companies the Manager believes are temporarily
undervalued due to short-term factors, companies that have declined in value and
no longer command an investor following and viable businesses that have not yet
become popular.

WASATCH AGGRESSIVE EQUITY FUND. It is presently intended that the Aggressive
Equity Fund will close to new investors when it reaches approximately $300
million in assets. The Aggressive Equity Fund's primary investment objective is
long-term growth of capital. Income is a secondary objective to be sought only
when consistent with the primary objective. In pursuit of its investment
objective, the Fund will normally invest at least 65% of its total assets in
common stocks of small companies (market capitalization less than $1 billion at
the time of purchase). Its strategy is to invest in companies that the Manager
believes possess superior growth potential, and are reasonably priced relative
to the Manager's projection of the company's five-year earnings growth rate.
The Fund targets two types of investments, core and momentum holdings. Core
holdings are companies that are well established and have the potential to grow
at least 15% annually and can anchor the portfolio with steady growth over long
periods of time. Momentum holdings are companies growing aggressively, often in
excess of 25% annually. These companies can boost the Fund's performance, but
may be subject to greater stock price fluctuations than core holdings.
Investments in small companies make this Fund susceptible to greater short-term
price fluctuations. It is best suited for patient, long-term investors.

WASATCH GROWTH FUND. The Growth Fund's primary investment objective is long-
term growth of capital. Income is a secondary objective to be sought only when
consistent with the primary objective. In pursuit of its investment objectives,
the Fund will normally invest at least 65% of its total assets in the common
stocks of growth companies. The Fund is designed for long-term investors.
However, it takes a more conservative approach to investing than is typical of
many funds in this category. Its strategy is to invest in companies the Manager
believes are stable and well established and have the potential to grow steadily
for long periods of time. Growth may come from market positioning that takes
advantage of favorable demographics, increasing demand for products and
services, lack of competition in the marketplace and other factors. The Manager
seeks to purchase stocks at reasonable prices relative to the Manager's
projection of a company's five-year earnings growth rate.

WASATCH MID-CAP FUND. The Mid-Cap Fund seeks long-term growth of capital.
Income is a secondary objective to be sought only when consistent with the
primary objective. In pursuit of its investment objective the Fund will
normally invest at least 65% of its total assets in the common stocks of
companies that have market capitalizations between $300 million and $5 billion
at the time of initial purchase. The Mid-Cap Fund seeks to invest in rapidly
growing companies and will typically take large positions in companies the
Manager believes have outstanding potential. The Fund does not limit its
investments to certain sectors or industries. However, it will generally focus
on the fastest growing sectors. The Manager believes that companies growing
earnings in excess of 25% annually present opportunities for investors to get
higher long-run returns. The Fund is designed for long-term investors seeking
higher growth of capital, who are comfortable with the greater degree of risk
this aggressive strategy entails.

WASATCH-HOISINGTON U.S. TREASURY FUND. The U.S. Treasury Fund's investment
objective is to provide a real rate of return (i.e. a rate of return that
exceeds the rate of inflation) over a business cycle by investing in U.S.
Treasury securities with an emphasis on both income and capital appreciation.
In pursuit of its objective, the Fund will invest at least 90% of its total
assets in U.S. Treasury securities and in repurchase agreements collateralized
by such securities. The remainder of the Fund's portfolio can also be invested
in high-quality money market instruments, cash equivalents and cash, which in
the opinion of the Sub-Advisor present only minimal credit risks.

STRATEGIES AND RISKS

Each of the Funds' principal investment strategies and the risks associated with
those strategies are described in the Prospectus. The following section
describes investment strategies, and the associated risks, that may be used by
the Funds, but are not principal strategies.

FOREIGN SECURITIES. The Micro-Cap, Micro-Cap Value, Aggressive Equity, Growth,
and Mid-Cap Funds may invest up to 15% of their total assets at the time of
purchase in foreign securities. (Securities of foreign issuers which are
publicly traded in the United States, either directly or through American
Depositary Receipts, are not subject to this 15% limitation.) Investments in
foreign countries involve certain risks which are not typically associated with
U.S. investments. There may be less publicly available information about
foreign companies comparable to reports and ratings published about U.S.
companies. Foreign companies are not generally subject to uniform accounting,
auditing, and financial reporting standards and requirements comparable to those
applicable to U.S. companies. There also may be less government supervision and
regulation of foreign stock exchanges, brokers and listed companies than in the
United States.

Foreign stock markets and securities may have substantially less volume than the
New York Stock Exchange, and securities of comparable U.S. companies. Brokerage
commissions and other transaction costs on foreign securities exchanges
generally are higher than in the United States.

ADDITIONAL RISKS OF FOREIGN SECURITIES.

CURRENCY RISK. The value of the assets of a Fund as measured in U.S. dollars
may be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations. A change in the value of any foreign
currency relative to the U.S. dollar may cause a corresponding change in the
dollar value of a Fund's assets that are denominated or traded in that country.
In addition, a Fund may incur costs in connection with conversion between
various currencies.

POLITICAL AND ECONOMIC RISK. Foreign investments may be subject to
heightened political and economic risks, particularly in underdeveloped or
developing countries which may have relatively unstable governments and
economies based on only a few industries. In some countries, there is the risk
that the government could seize or nationalize companies, could impose
additional withholding taxes on dividends or interest income payable on
securities, impose exchange controls or adopt other restrictions that could
affect a Fund's investment.

REGULATORY RISK. Foreign companies not publicly traded in the U.S. are not
subject to the regulatory requirements of U.S. companies. There may be less
publicly available information about such companies. Foreign companies are not
subject to uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies.

MARKET RISK. Foreign securities markets, particularly those of
underdeveloped or developing countries, may be less liquid and more volatile
than domestic markets. Certain markets may require payment for securities
before delivery and delays may be encountered in settling securities
transactions. In some foreign markets, there may not be protection against
failure by other parties to complete transactions. There may be limited legal
recourse against an issuer in the event of a default on a debt instrument.

TRANSACTION COSTS. Transaction costs of buying and selling foreign
securities, including brokerage, tax and custody, are generally higher than
those involved in domestic transactions.

MONEY MARKET INSTRUMENTS. Each Fund may invest in a variety of money market
instruments for pending investments, to meet anticipated redemption requests
and/or to retain the flexibility to respond promptly to changes in market and
economic conditions. Commercial paper represents short-term unsecured
promissory notes issued in bearer form by banks or bank holding companies,
corporations and finance companies. Certificates of deposit are generally
negotiable certificates issued against funds deposited in a commercial bank for
a definite period of time and earning a specified return. Bankers' acceptances
are negotiable drafts or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument on maturity. Fixed time deposits are bank obligations payable
at a stated maturity date and bearing interest at a fixed rate. Fixed time
deposits may be withdrawn on demand by the investor, but may be subject to early
withdrawal penalties that vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits. Bank notes and bankers'
acceptances rank junior to deposit liabilities of the bank and pari passu with
other senior, unsecured obligations of the bank. Bank notes are classified as
"other borrowings" on a bank's balance sheet, while deposit notes and
certificates of deposit are classified as deposits. Bank notes are not insured
by the Federal Deposit Insurance Corporation or any other insurer. Deposit
notes are insured by the Federal Deposit Insurance Corporation only to the
extent of $100,000 per depositor per bank.

CONVERTIBLE SECURITIES. The Micro-Cap, Micro-Cap Value, Aggressive Equity,
Growth and Mid-Cap Funds may invest in convertible securities. Convertible
securities entitle the holder to receive interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible securities mature or are
redeemed, converted or exchanged. Prior to conversion, convertible securities
have characteristics similar to ordinary debt securities or preferred stocks in
that they normally provide a stable stream of income with generally higher
yields than those of common stock of the same or similar issuers. Convertible
securities rank senior to common stock in a corporation's capital structure and
therefore generally entail less risk of loss of principal than the corporation's
common stock.

In selecting convertible securities for the Funds, the Manager will consider
among other factors, its evaluation of the creditworthiness of the issuers of
the securities; the interest or dividend income generated by the securities; the
potential for capital appreciation of the securities and the underlying common
stocks; the prices of the securities relative to other comparable securities and
to the underlying common stocks; whether the securities are entitled to the
benefits of sinking funds or other protective conditions; diversification of a
Fund's portfolio as to issuers; and whether the securities are rated by a rating
agency and, if so, the ratings assigned.

The value of convertible securities is a function of their investment value
(determined by yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and
their conversion value (their worth, at market value, if converted into the
underlying common stock). The investment value of convertible securities is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline, and by the
credit standing of the issuer and other factors. The conversion value of
convertible securities is determined by the market price of the underlying
common stock. If the conversion value is low relative to the investment value,
the price of the convertible securities is governed principally by their
investment value. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
securities will be increasingly influenced by their conversion value. In
addition, convertible securities generally sell at a premium over their
conversion value determined by the extent to which investors place value on the
right to acquire the underlying common stock while holding fixed income
securities.

Capital appreciation for a Fund may result from an improvement in the credit
standing of an issuer whose securities are held in the Fund or from a general
lowering of interest rates, or a combination of both. Conversely, a reduction
in the credit standing of an issuer whose securities are held by a Fund or a
general increase in interest rates may be expected to result in capital
depreciation to the Fund.

CREDIT RISK. Credit risk is the risk that the issuer of a debt security will
fail to make payments on the security when due.

DESCRIPTION OF CORPORATE BOND RATINGS. Each Equity Fund may invest in corporate
bonds that are rated, at the time of purchase, in the four highest categories by
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Service
("S&P") or other nationally recognized rating agencies or unrated securities
deemed by the Manager to be of comparable quality. The following list describes
the various ratings of corporate bonds:

Description of corporate bond ratings of Moody's:

Aaa-Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt-edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa-Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A-Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa-Bonds rated Baa are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such Bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Description of corporate bond ratings of S&P:

AAA-This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA-Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.

A-Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.

INTEREST RATE RISK. Interest rate risk is the risk that the value of a fixed-
rate debt security will decline due to changes in market interest rates. Even
though some interest-bearing securities are investments which offer a stable
stream of income at relatively high current yield, the prices of such securities
are affected by changes in interest rates and are therefore subject to market
price fluctuations. The value of fixed income securities varies inversely with
changes in market interest rates. When interest rates rise, the value of a
Fund's portfolio securities, and therefore its net asset value per share,
generally will decline. In general, the value of fixed-rate debt securities
with longer maturities is more sensitive to changes in market interest rates
than the value of such securities with shorter maturities. Thus, if the Fund is
invested in securities with longer weighted average maturities, the net asset
value of a Fund should be expected to have greater volatility in periods of
changing market interest rates.

UNITED STATES GOVERNMENT SECURITIES. To the extent consistent with their
respective investment objectives, the Funds may invest in a variety of U.S.
Treasury obligations consisting of bills, notes and bonds, which principally
differ only in their interest rates, maturities and time of issuance. The Funds
may also invest in other securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities. Obligations of certain agencies and
instrumentalities, such as the Government National Mortgage Association
("GNMA"), are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of the Federal National Mortgage Association ("FNMA"), are supported by
the discretionary authority of the U.S. government to purchase the agency's
obligations; still others, such as those of the Student Loan Marketing
Association ("SLMA"), are supported only by the credit of the instrumentalities.
No assurance can be given that the U.S. government would provide financial
support to its agencies or instrumentalities if it is not obligated to do so by
law. Obligations of the International Bank for Reconstruction and Development
(also known as the World Bank) are supported by subscribed, but unpaid,
commitments of its member countries. There is no assurance that these
commitments will be undertaken or complied with in the future.

Securities guaranteed as to principal and interest by the U.S. government, its
agencies or instrumentalities are deemed to include: (a) securities for which
the payment of principal and interest is backed by an irrevocable letter of
credit issued by the U.S. government or an agency or instrumentality thereof;
and (b) participations in loans made to foreign governments or their agencies
that are so guaranteed. The secondary market for certain of these
participations is limited. Such participations will therefore be regarded as
illiquid. No assurance can be given that the U.S. government would provide
financial support to its agencies or instrumentalities if it is not obligated to
do so by law.

U.S. TREASURY INFLATION-PROTECTION SECURITIES (TIPS). Inflation-protection
securities are a relatively new type of marketable book-entry security issued by
the United States Department of Treasury ("Treasury") with a nominal return
linked to the inflation rate in prices. Inflation-protection securities will be
auctioned and issued on a quarterly basis on the 15th of January, April, July,
and October, beginning on January 15, 1997. Initially, they will be issued as
10-year notes, with other maturities added thereafter. The index used to
measure inflation will be the non-seasonally adjusted U.S. City Average All
Items Consumer Price Index for All Urban Consumers ("CPIU").

The value of the principal will be adjusted for inflation, and every six months
the security will pay interest, which will be an amount equal to a fixed
percentage of the inflation-adjusted value of the principal. The final payment
of principal of the security will not be less than the original par amount of
the security at issuance.

The principal of the inflation-protection security will be indexed to the non-
seasonally adjusted CPIU. To calculate the inflation-adjusted principal value
for a particular valuation date, the value of the principal at issuance is
multiplied by the index ratio applicable to that valuation date. The index
ratio for any date is the ratio of the reference Consumer Price Index ("CPI")
applicable to such date to the reference CPI applicable to the original issue
date. Semi-annual coupon interest is determined by multiplying the inflation-
adjusted principal amount by one-half of the stated rate of interest on each
interest payment date.

Inflation-adjusted principal or the original par amount, whichever is larger,
will be paid on the maturity date as specified in the applicable offering
announcement. If at maturity the inflation-adjusted principal is less than the
original principal value of the security, an additional amount will be paid at
maturity so that the additional amount plus the inflation-adjusted principal
equals the original principal amount. Some inflation-protection securities may
be stripped into principal and interest components. In the case of a stripped
security, the holder of the stripped principal component would receive this
additional amount. The final interest payment, however, will be based on the
final inflation-adjusted principal value, not the original par amount.

The reference CPI for the first day of any calendar month is the CPIU for the
third preceding calendar month. (For example, the reference CPI for December 1
is the CPIU reported for September of the same year, which is released in
October.) The reference CPI for any other day of the month is calculated by a
linear interpolation between the reference CPI applicable to the first day of
the month and the reference CPI applicable to the first day of the following
month.

Any revisions the Bureau of Labor Statistics (or successor agency) makes to any
CPIU number that has been previously released will not be used in calculations
of the value of outstanding inflation-protection securities. In the case that
the CPIU for a particular month is not reported by the last day of the following
month, the Treasury will announce an index number based on the last year-over-
year CPIU inflation rate available. Any calculations of the Treasury's payment
obligations on the inflation-protection security that need that month's CPIU
number will be based on the index number that the Treasury has announced. If
the CPIU is rebased to a different year, the Treasury will continue to use the
CPIU series based on the base reference period in effect when the security was
first issued as long as that series continues to be published. If the CPIU is
discontinued during the period the inflation-protection security is outstanding,
the Treasury will, in consultation with the Bureau of Labor Statistics (or
successor agency), determine an appropriate substitute index and methodology for
linking the discontinued series with the new price index series. Determinations
of the Secretary of the Treasury in this regard are final.

Inflation-protection securities will be held and transferred in either of two
book-entry systems: the commercial book-entry system (TRADES) and TREASURY
DIRECT. The securities will be maintained and transferred at their original par
amount, i.e., not their inflation-adjusted value. STRIPS components will be
maintained and transferred in TRADES at their value based on their original par
amount of the fully constituted security.

U.S. TREASURY STRIPS. Zero coupon Treasury securities (U.S. Treasury STRIPS)
are debt obligations which do not entitle the holder to periodic interest
payments prior to maturity and are traded at a discount from their face amounts.
The discount of zero coupon Treasury securities varies primarily depending on
the time remaining until maturity and prevailing levels of interest rates. Zero
coupon securities can be sold prior to their due date in the secondary market at
the then-prevailing market value. The market prices of zero coupon securities
are generally more volatile than the market prices of securities of comparable
quality and similar maturity that pay interest periodically and may respond to a
greater degree to fluctuations in interest rates than do non-zero coupon
securities.

STRIPPED OBLIGATIONS. The Funds may purchase Treasury receipts and other
"stripped" securities that evidence ownership in either the future interest
payments or the future principal payments on U.S. Government obligations. These
participations, which may be issued by the U.S. Government (or a U.S. Government
agency or instrumentality) or by private issuers such as banks and other
institutions, are issued at a discount to their "face value," and may include
stripped mortgage-backed securities ("SMBS"). Stripped securities, particularly
SMBS, may exhibit greater price volatility than ordinary debt securities because
of the manner in which their principal and interest are returned to investors.

SMBS are usually structured with two or more classes that receive different
proportions of the interest and principal distributions from a pool of mortgage-
backed obligations. A common type of SMBS will have one class receiving all of
the interest, while the other class receives all of the principal. However, in
some cases, one class will receive some of the interest and most of the
principal while the other class will receive most of the interest and the
remainder of the principal. If the underlying obligations experience greater
than anticipated prepayments of principal the Fund may fail to fully recoup its
initial investment. The market value of the class consisting entirely of
principal payments can be extremely volatile in response to changes in interest
rates. The yields on a class of SMBS that receives all or most of the interest
are generally higher than prevailing market yields on other mortgage-backed
obligations because their cash flow patterns are also volatile and there is a
greater risk that the initial investment will not be fully recouped.

SMBS issued by the U.S. Government (or a U.S. Government agency or
instrumentality) may be considered liquid under guidelines established by the
Board of Directors if they can be disposed of promptly in the ordinary course of
business at a value reasonably close to that used in the calculation of the
Fund's per share net asset value.

Within the past several years, the Treasury Department has facilitated transfers
of ownership of zero coupon securities by accounting separately for the
beneficial ownership of particular interest coupon and principal payments on
Treasury securities through the Federal Reserve book-entry record-keeping
system. The Federal Reserve program was established by the Treasury Department
and is known as "STRIPS" or "Separate Trading of Registered Interest and
Principal of Securities." The Fund may purchase securities registered in the
STRIPS program. Under the STRIPS program, the Fund will be able to have
beneficial ownership of zero coupon securities recorded directly in the book-
entry record-keeping system in lieu of having to hold certificates or other
evidences of ownership of the underlying U.S. Treasury securities.

In addition, the Funds may acquire U.S. Government obligations and their
unmatured interest coupons that have been separated ("stripped") by their
holder, typically a custodian bank or investment brokerage firm. Having
separated the interest coupons from the underlying principal of the U.S.
Government obligations, the holder will resell the stripped securities in
custodial receipt programs with a number of different names, including "Treasury
Income Growth Receipts" ("TIGRs") and "Certificate of Accrual on Treasury
Securities" ("CATS"). The stripped coupons are sold separately from the
underlying principal, which is usually sold at a deep discount because the buyer
receives only the right to receive a future fixed payment on the security and
does not receive any rights to periodic interest (cash) payments. The
underlying U.S. Treasury bonds and notes themselves are held in book-entry form
at the Federal Reserve Bank or, in the case of bearer securities (i.e.,
unregistered securities which are ostensibly owned by the bearer or holder), in
trust on behalf of the owners. Counsel to the underwriters of these
certificates or other evidences of ownership of U.S. Treasury securities have
stated that, in their opinion, purchasers of the stripped securities most likely
will be deemed the beneficial holders of the underlying U.S. Government
obligations for Federal tax purposes. The Manager is unaware of any binding
legislative, judicial or administrative authority on this issue.

REPURCHASE AGREEMENTS. Each Fund may agree to purchase portfolio securities
from financial institutions subject to the seller's agreement to repurchase them
at a mutually agreed upon date and price ("repurchase agreements"). Although
the securities subject to a repurchase agreement may bear maturities exceeding
one year, settlement for the repurchase agreement will never be more than one
year after a Fund's acquisition of the securities and normally will be within a
shorter period of time. Securities subject to repurchase agreements are held
either by the Funds' custodian or subcustodian (if any), or in the Federal
Reserve/Treasury Book-Entry System. The seller under a repurchase agreement
will be required to maintain the value of the securities subject to the
agreement in an amount exceeding the repurchase price (including accrued
interest). Repurchase agreements may be considered loans to the seller,
collateralized by the underlying securities. The risk to a Fund is limited to
the ability of the seller to pay the agreed upon sum on the repurchase date; in
the event of default, the repurchase agreement provides that a Fund is entitled
to sell the underlying collateral. If the value of the collateral declines
after the agreement is entered into, however, and if the seller defaults under a
repurchase agreement when the value of the underlying collateral is less than
the repurchase price, a Fund could incur a loss of both principal and interest.
The Funds' Manager and the Sub-Advisor for the Wasatch-Hoisington U.S. Treasury
Fund, monitor the value of the collateral at the time the action is entered into
and at all times during the term of the repurchase agreement. This is done in
an effort to determine that the value of the collateral always equals or exceeds
the agreed upon repurchase price to be paid to the Fund. If the seller were to
be subject to a federal bankruptcy proceeding, the ability of a Fund to
liquidate the collateral could be delayed or impaired because of certain
provisions of the bankruptcy laws.

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Funds may lend their portfolio securities to brokers, dealers
and financial institutions, provided that outstanding loans do not exceed in the
aggregate 33-1/3% of the value of a Fund's total assets and provided that such
loans are callable at any time by a Fund and are at all times secured by cash or
equivalent collateral that is at least equal to the market value, determined
daily, of the loaned securities. The advantage of such loans is that a Fund
continues to receive interest and dividends of the loaned securities, while at
the same time earning interest either directly from the borrower or on the
collateral which will be invested in short-term obligations.

A loan may be terminated by the borrower on one business day's notice or by a
Fund at any time. If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates, and the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. As with any extensions of credit,
there are risks of delay in recovery and in some cases loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy pursuant to procedures approved by the Board of Directors. On
termination of the loan, the borrower is required to return the securities to a
Fund and any gain or loss in the market price during the loan would be borne by
a Fund.

Since voting or consent rights which accompany loaned securities pass to the
borrower, a Fund will follow the policy of calling the loan, in whole or in part
as may be appropriate, to permit the exercise of such rights if the matters
involved would have a material effect on a Fund's investment in the securities
which are the subject of the loan. A Fund will pay reasonable finders,
administrative and custodial fees in connection with a loan of its securities or
may share the interest earned on collateral with the borrower.

CALCULATION OF PORTFOLIO TURNOVER RATE. The portfolio turnover rate for the
Funds is calculated by dividing the lesser of purchases or sales of portfolio
investments for the reporting period by the monthly average value of the
portfolio investments owned during the reporting period. The calculation
excludes all securities, including options, whose maturities or expiration dates
at the time of acquisition are one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may be
affected by cash requirements for redemption of shares. The Funds are not
restricted by policy with regard to portfolio turnover and will make changes in
their investment portfolios from time to time as business and economic
conditions as well as market prices may dictate. The current portfolio turnover
rates for the Micro-Cap, Micro-Cap Value, Aggressive Equity, Growth, Mid-Cap and
Wasatch-Hoisington U.S. Treasury funds are set forth in the Prospectus.

FUND RESTRICTIONS AND POLICIES

The Company has adopted the following restrictions and policies relating to the
investment of assets of the Funds and their activities. These are fundamental
policies and may not be changed without the approval of the holders of a
majority of the outstanding voting shares of each Fund affected (which for this
purpose and under the Investment Company Act of 1940 means the lesser of (i) 67%
of the shares represented at a meeting at which more than 50% of the outstanding
shares are represented or (ii) more than 50% of the outstanding shares). A
change in policy affecting only one Fund may be effected with the approval of a
majority of the outstanding shares of such Fund.

The Micro-Cap Fund, Micro-Cap Value Fund, Aggressive Equity Fund, Growth Fund,
Mid-Cap Fund and Wasatch-Hoisington U.S. Treasury Fund may not:

1. Purchase or sell real estate, provided that the Funds may invest in
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein. Each of the
Funds has no current intention to invest in securities of this nature.

2. Purchase or sell physical commodities (including, by way of example and not
by way of limitation, grains, oilseeds, livestock, meat, food, fiber,
metals, petroleum, petroleum-based products or natural gas) or futures or
options contracts with respect to physical commodities. This restriction
shall not restrict the Funds from purchasing or selling any financial
contracts or instruments which may be deemed commodities (including, by way
of example and not by way of limitation, options, futures, and options on
futures with respect, in each case, to interest rates, currencies, stock
indices, bond indices or interest rate indices) or any security which is
collateralized or otherwise backed by physical commodities.

3. Purchase any security on margin, except that the Funds may obtain such
short-term credit as may be necessary for the clearance of transactions.

4. Make short sales of securities.

5. Make loans to other persons, except that they may lend portfolio securities
representing up to one-third of the value of their total assets. (The
Funds, however, may purchase and hold debt instruments and enter into
repurchase agreements in accordance with their investment objectives and
policies.)

6. Issue any senior securities (as defined in the 1940 Act) other than as set
forth in restriction number 7 below.

7. Borrow money, except for temporary purposes. The amount of such borrowing
may not exceed 10% of each Fund's total assets. The Funds will not borrow
money for leverage purposes. For the purpose of this restriction, the use
of options and futures transactions shall not be deemed the borrowing of
money. (As a non-fundamental policy, no Fund will make additional
investments while its borrowing exceeds 5% of total assets.)

8. Underwrite securities of other issuers except insofar as the Funds may be
deemed an underwriter under the Securities Act of 1933 in selling portfolio
securities.

9. Invest more than 25% of its total assets (taken at market value at the time
of each investment) in the securities of issuers in any particular
industry.

In addition, the Wasatch-Hoisington U.S. Treasury Fund may not:

a. As to 75% of the Fund's total assets, invest in the securities of any one
issuer (other than the United States Government or government agencies or
instrumentalities) if immediately after and as a result of such investment,
the value of the holdings of the Fund in the securities of such issuer
exceeds 5% of the Fund's total assets, taken at market value.

b. As to 75% of the Fund's total assets, invest in the securities of any one
issuer (other than the United States Government or government agencies or
instrumentalities) if immediately after and as a result of such investment,
the Fund owns more than 10% of the outstanding voting securities, or more
than 10% of any class of securities of such issuer.

The following restrictions are non-fundamental and may be changed by the
Company's Board of Directors without shareholder vote.

The Micro-Cap Fund, Micro-Cap Value Fund, Aggressive Equity Fund, Growth Fund,
Mid-Cap Fund and Wasatch-Hoisington U. S. Treasury Fund will not:

1. Make investments for the purpose of exercising control or management.

2. Invest more than 5% of its net assets in other investment companies.

3. Invest more than 15% of its net assets in all forms of illiquid
investments, as determined pursuant to applicable Securities and Exchange
Commission rules and interpretations.

4. Purchase or sell interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of issuers
which invest in or sponsor such programs.

5. Invest more than 5% of its total assets (taken at market value at the time
of each investment) in "Special Situations," i.e., companies in the process
of reorganization or buy-out, except the Micro-Cap Value Fund may invest up
to 10% of its net assets in "Special Situations".

6. Invest more than 10% of its net assets in the securities of new issuers,
who with predecessors have operating records of three (3) years or less.

Any investment restriction or limitation, fundamental or otherwise, appearing in
the Prospectus or Statement of Additional Information, which involves a maximum
percentage of securities or assets shall not be considered to be violated unless
an excess over the percentage occurs immediately after an acquisition of
securities or utilization of assets, and such excess results therefrom.

MANAGEMENT OF THE COMPANY

The business affairs of Wasatch Funds are supervised by its Board of Directors.
The Board consists of five directors who are elected each year and serve for
one-year terms and/or until their successors are elected and qualified.

Dr. Samuel S. Stewart, Jr., is President and Chairman of the Board of Wasatch
Funds and Wasatch Advisors. Dr. Stewart is the only owner of more than 25% of
Wasatch Advisors and is thus deemed to control the Manager. All interested
directors of Wasatch Funds are also officers and directors of Wasatch Advisors.

The directors and executive officers of the Funds and their principal
occupations for at least the last five years are set forth below. Unless
otherwise noted, the address of each executive officer and director is 150
Social Hall Avenue, Salt Lake City, Utah 84111. Wasatch Advisors, Inc. retains
proprietary rights to the Company name.

<F1> Samuel S. Stewart, Jr., Ph.D., CFA - President and Chairman of the
Board

President and Chairman of the Board of the Company; President, Chairman of the
Board and Director of Research for the Manager since 1975; Professor of Finance
at the University of Utah since 1975. Age 56.

<F1> Roy S. Jespersen, MBA - Vice President and Director

Vice President and Director of the Company; Vice President, Director and
Portfolio Manager for the Manager since 1983. Age 55.

<F1> Venice F. Edwards, CFA - Secretary/Treasurer

Secretary/Treasurer of the Company; Compliance Officer for the Manager since
1995; Portfolio Manager for the Manager since 1983. Age 48.

<F1> Jeff S. Cardon, CFA -Executive Vice President and Director

Executive Vice President and Director of the Company; Executive Vice President
since 1988; Vice President and Director of the Manager since 1985; Security
Analyst for the Manager since 1980. Age 41.

James U. Jensen - Director
NPS Pharmaceuticals, Inc.
420 Chipeta Way
Salt Lake City, Utah 84108

Director of the Company; Vice President of Corporate Development and Legal
Affairs, NPS Pharmaceuticals, Inc.; previously Chairman and a partner at
Woodbury, Jensen, Kesler & Swinton, P.C. from 1986 to 1991. Age 54.

William R. Swinyard - Director
Management Office
680 Tanner Building
Brigham Young University
Provo, Utah 84602

Director of the Company; Professor of Business Management, Brigham Young
University since 1985; Vice President for Struman and Associates, Inc., a
management consulting firm since 1983. Age 58.

<F1> Interested person, as defined in the Investment Company Act of
1940, of the Company.

The Board of Directors has appointed the officers of the Company to be
responsible for the overall management and day-to-day operations of the
Company's business affairs between board meetings.

The Funds' standard method of compensating Directors is to pay each
disinterested Director an annual fee of $10,000 for services rendered, including
attending meetings of the Board of Directors. The disinterested Directors
received additional compensation for attending a special meeting of the Board of
Directors in November 1997, as well as the shareholder meeting in January 1998.
In May 1998, the disinterested Directors' meeting fee increased $100 per
meeting. The Funds also may reimburse its disinterested Directors for travel
expenses incurred in order to attend meetings of the Board of Directors.
Officers serve in that capacity without compensation from the Company. The
table below sets forth the compensation paid to the Company's Directors and
Officers during the fiscal year ended September 30, 1998 (exclusive of out-of-
pocket expenses reimbursed).

COMPENSATION TABLE

Aggregate Total Compensation
Name of Person Compensation From Company
Position From Company Paid to Directors
- -------------- ------------ ------------------

Samuel S. Stewart, Jr.
President and Chairman
of the Board $0 $0

Roy S. Jespersen,
Vice President and Director $0 $0

Venice Edwards
Secretary/Treasurer $0 $0

Jeff S. Cardon,
Vice President and Director $0 $0

James U. Jensen
Director $10,600 $10,600

William R. Swinyard
Director $10,600 $10,600

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of October 31, 1998, the Funds were aware that the following persons or
entities owned a controlling interest (ownership of greater than 25%) or owned
of record 5% or more of the outstanding shares of each of the Funds.
Shareholders with a controlling interest could effect the outcome of proxy
voting or the direction of management of the Company.

SERIES A - WASATCH AGGRESSIVE EQUITY FUND

Charles Schwab & Co., Inc. <F1>, 101 Montgomery Street, San Francisco, CA 94104
17%; National Financial Services Corp.<F1>, 200 Liberty Street, One World
Financial Center, New York, NY 10008-3908, 9%.

SERIES B - WASATCH GROWTH FUND

Charles Schwab & Co., Inc. <F1>, 101 Montgomery Street, San Francisco, CA 94104,
34%; National Financial Services Corp.<F1>, 200 Liberty Street, One World
Financial Center, New York, NY 10008-3908, 13%; Salomon Smith Barney, Inc.,
388 Greenwich Street, New York, NY 10013, 20%.

SERIES C - WASATCH-HOISINGTON U.S. TREASURY FUND

Charles Schwab & Co., Inc. <F1>, 101 Montgomery Street, San Francisco, CA 94104,
34%; National Financial Services, Corp.<F1>, 200 Liberty Street, One World
Financial Center, New York, NY 10008-3908, 20%; Retirement Systems, Inc., 100
Plaza One Mailstop 3048, Jersey City, NJ 07311, 16%.

SERIES D - WASATCH MID-CAP FUND

Charles Schwab & Co., Inc. <F1>, 101 Montgomery Street, San Francisco, CA 94104,
26%; National Financial Services Corp.<F1>, 200 Liberty Street, One World
Financial Center, New York, NY 10008-3908, 12%.

SERIES E - WASATCH MICRO-CAP FUND

Charles Schwab & Co., Inc. <F1>, 101 Montgomery Street, San Francisco, CA 94104,
29%; National Financial Services Corp.<F1>, 200 Liberty Street, One World
Financial Center, New York, NY 10008-3908, 12%.

SERIES G - WASATCH MICRO-CAP VALUE FUND

Charles Schwab & Co., Inc. <F1>, 101 Montgomery Street, San Francisco, CA 94104,
19%; National Financial Services Corp.<F1>, 200 Liberty Street, One World
Financial Center, New York, NY 10008-3908, 12%; Two R Management Ltd.,
3187 North Foothill Drive, Provo, UT 84604, 10%.

As of October 31, 1998 the directors and officers as a group owned less than 1%
of the outstanding shares of each Fund except the Wasatch Micro-Cap Value Fund,
of which the directors and officers owned 2.38%.

<F1> Shareholders of record, not beneficial owners.

INVESTMENT ADVISORY AND OTHER SERVICES

As described above and in the Prospectus, Wasatch Advisors, Inc. is responsible
for making investment decisions and providing services for Wasatch Funds under
an advisory and service contract. The Manager, organized in September 1975, has
been in the business of investment management since November 1975, and currently
has total assets under management including the assets of the Funds of
approximately $922 million as of October 31, 1998.

The principal executive officers and directors of the Manager are Samuel S.
Stewart, Jr., Ph.D., President and Chairman of the Board; Jeff S. Cardon,
Executive Vice President and Director; Roy S. Jespersen, Vice President and
Director; Mark E. Bailey, Vice President and Director; Jeff H. Collings,
Secretary/Treasurer; Karey Barker, Director; Robert Gardiner, Director and Jack
R. Thompson, Director. Dr. Samuel S. Stewart, Jr. is the only owner of the
Manager who owns more than 25% of the Manager's outstanding equity and is deemed
to control the Manager.

Under an Advisory and Service Contract, the Aggressive Equity and Growth funds
pay the Manager a monthly fee computed on average daily net assets of each Fund
at the annual rate of 1.0%, the Micro-Cap Value Fund pays the Manager at the
annual rate of 1.5%, the Micro-Cap Fund pays the Manager at the annual rate of
2.0%, and the Mid-Cap Fund pays the Manager at an annual rate of 1.25%. The
Wasatch-Hoisington U.S. Treasury Fund pays the Manager a monthly fee computed on
average daily net assets of the Fund at the annual rate of 0.50%. These fees
are higher than those paid by some investment companies. The management fees
are computed and accrued daily and are payable monthly.

The Manager provides an investment program for, and carries out the investment
policy and manages the portfolio assets of, each Fund. The Manager is
authorized, subject to the control of the Board of Directors of the Company, to
determine the selection, quantity and time to buy or sell securities for each
Fund. In addition to providing investment services, the Manager pays for office
space and facilities for the Company.

The Funds pay all of their own expenses, including, without limitation; the cost
of preparing and printing registration statements required under the Securities
Act of 1933 and the 1940 Act and any amendments thereto; the expense of
registering shares with the SEC and in the various states; costs of typesetting,
printing and mailing the Prospectus, Statement of Additional Information and
reports to shareholders; reports to government authorities and proxy statements;
fees paid to directors who are not interested persons (as defined in the 1940
Act); interest charges; taxes; legal expenses; association membership dues;
auditing services; administrative services; insurance premiums; fees and
expenses of the Custodian of the Funds' assets; printing and mailing expenses;
charges and expenses of dividend disbursing agents, accounting services agents,
registrars and stock transfer agents; certain expenses incurred by employees of
the Manager; and extraordinary and non-recurring expenses.

The Manager has voluntarily agreed to limit until September 30, 1999 Aggressive
Equity Fund and Growth Fund expenses to 1.50%, Micro-Cap Fund expenses to 2.50%,
Mid-Cap Fund expenses to 1.75%, Micro-Cap Value Fund expenses to 1.95%, and
Wasatch-Hoisington U.S. Treasury Fund expenses to 0.75% of average net assets
calculated on a daily basis and will pay all expenses excluding interest, taxes
and extraordinary expenses, in excess of such limitation. The Manager may
rescind these limitations on expenses at any time and in the event of rescission
the terms of the Advisory and Service Contract would govern.

For the fiscal years ended September 30, 1998, 1997, and 1996, the Manager
accrued the following management fees and waived a portion of its management
fees in the following amounts (the Micro-Cap Value Fund commenced operations on
December 17, 1997):

1998 1997 1996
----- ----- -----
Micro-Cap Fund
Gross Management Fees $2,777,499 $1,060,550 $1,861,206
Waived Management Fees 10,302 123,680 90,368

Micro-Cap Value Fund
Gross Management Fees $168,330 $1,774,510 $1,313,728
Waived Management Fees 63,716 68,760 113,106

Aggressive Equity Fund
Gross Management Fees $1,691,806 $1,934,279 $2,861,337
Waived Management Fees 0 81,327 0

Growth Fund
Gross Management Fees $1,652,942 $954,694 $839,865
Waived Management Fees 0 0 10,572

Mid-Cap Fund
Gross Management Fees $716,723 $1,060,550 $1,861,206
Waived Management Fees 85,203 123,680 90,368

Wasatch-Hoisington U.S. Treasury
Fund
Gross Management Fees $108,334 $50,068 $27,810
Waived Management Fees 43,480 47,278 41,168

GENERAL INFORMATION

ADMINISTRATOR AND TRANSFER AGENT. Pursuant to Administration and Fund
Accounting Agreements (the "Administration Agreements"), Sunstone Financial
Group, Inc. ("Sunstone"), 207 East Buffalo Street, Suite 400, Milwaukee, WI
53202-5712, calculates daily net asset values of each Fund, oversees the Funds'
Custodian, prepares and files all federal and state tax returns and required tax
filings (other than those required to be made by the Funds' Custodian), oversees
the Funds' insurance relationships, participates in the preparation of the
Funds' registration statement, proxy statements and reports, prepares compliance
filings pursuant to state securities laws, compiles data for and prepares
notices to the Securities and Exchange Commission, prepares financial statements
for the annual and semi-annual reports to the Securities and Exchange Commission
and current investors, monitors the Funds' expense accounts, monitors the Funds'
status as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), monitors compliance with the
Funds' investment policies and restrictions and generally assists in the Funds'
administrative operations. As Administrator, Sunstone, at its own expense, and
without reimbursement from the Funds, furnishes office space and all necessary
office facilities, equipment, supplies and clerical and executive personnel for
performing the services required to be performed by it under the Administration
Agreements. For the foregoing, Sunstone receives a fee on the combined value of
the Funds computed daily and payable monthly, at the annual rate of twenty-eight
one-hundredths of one percent (0.28%) on the first $50 million of the average
daily net assets, and decreasing as assets reach certain levels, subject to the
following minimum fees: Micro-Cap Fund ($17,500); Micro-Cap Value Fund
($25,000), Aggressive Equity Fund ($75,000); Growth Fund ($40,000); Mid-Cap Fund
($75,000); and Wasatch-Hoisington U.S. Treasury Fund ($4,000).

Sunstone also acts as the Funds' Transfer Agent. As Transfer Agent, Sunstone
keeps records of the shareholder accounts and transactions. Each Fund pays
Sunstone a Transfer Agent fee based on the number of shareholder accounts,
subject to a minimum annual fee.

CUSTODIAN. UMB Bank, n.a. serves as the Funds' Custodian. The Custodian is
responsible for, among other things, safeguarding and controlling the Company's
cash and securities. The Funds pay a monthly fee at the annual rate of .75
basis points on combined net assets up to $500,000,000, plus .50 basis points on
the combined net assets in excess of $500,000,000.

The Company, on behalf of each of the Funds, has also entered into service
agreements with various brokerage firms pursuant to which the brokers provide
certain administrative services with respect to their customers who are
beneficial owners of shares of the Funds. Pursuant to these service agreements,
the Funds compensate the brokers for the administrative services provided which
compensation is based on the aggregate assets of their customers that are
invested in the Funds.

LEGAL COUNSEL. Michael J. Radmer, Dorsey & Whitney LLP, 220 South Sixth Street,
Minneapolis, Minnesota 55402-1498, acts as legal counsel to the Company and
reviews certain legal matters for the Company in connection with the shares
offered by the Prospectus.

INDEPENDENT AUDITORS. Arthur Andersen LLP, 100 East Wisconsin Avenue, Suite
1900, Milwaukee, WI 53202-4107 are the Company's independent Certified Public
Accountants. In this capacity the firm is responsible for auditing the
financial statements of the Company and reporting thereon.

BROKERAGE ALLOCATION AND OTHER PRACTICES
The Manager is responsible for selecting the broker or dealer to execute
transactions for the Wasatch Equity Funds (Micro-Cap, Micro-Cap Value,
Aggressive Equity, Growth and Mid-Cap funds), and for negotiating and
determining any commission rates to be paid for such transactions. The Manager
has no affiliated broker-dealer. The Manager will use its best efforts to have
transactions executed at prices that are advantageous to the Equity Funds and at
commission rates that are reasonable in relation to the benefits received. The
Manager may consider a number of factors when selecting a broker or dealer to
effect a transaction, including its financial strength and stability, its
reputation and access to the markets for the security being traded, the
efficiency with which the transaction will be effected, and the value of
research products and services that a broker lawfully may provide to assist the
Manager in the exercise of its investment decision-making responsibilities. The
Company's Board of Directors has authorized the Manager to pay a broker who
provides research services commissions that are competitive but that are higher
than the lowest available rate that another broker might have charged, if the
Manager determines in good faith that the commissions are reasonable in relation
to the value of the brokerage and research services provided. Payment of higher
commissions in exchange for research services will be made in compliance with
the provisions of Section 28 (e) of the Securities Exchange Act of 1934 and
other applicable state and federal laws.

Research products and services provided to the Manager by broker-dealers may
include proprietary research, written or oral, computer equipment or terminals,
software and databases which provide access to data and analysis of market data,
statistical information and securities data, analysis and pricing.

Consistent with both the Conduct Rules of the National Association of Securities
Dealers, Inc. and such other policies as the Board of Directors may determine,
and subject to seeking best execution, the Manager may consider sales of shares
of the Company as a factor in the selection of dealers to execute portfolio
transactions for the Company.

The Manager places portfolio transactions for other advisory accounts. Research
services furnished by firms through which the Company effects its securities
transactions may be used by the Manager in servicing all of its accounts; not
all of such services may be used by the Manager in connection with the Company.
In the opinion of the Manager, the benefits from research services to each of
the accounts (including the Company) managed by the Manager cannot be measured
separately. Because the volume and nature of the trading activities of the
accounts are not uniform, the amount of commissions in excess of the lowest
available rate paid by each account for brokerage and research services will
vary. However, in the opinion of the Manager, such costs to the Company will
not be disproportionate to the benefits received by the Company on a continuing
basis.

The Manager's brokerage practices are monitored on at least an annual basis by
the Board of Directors including the disinterested persons (as defined in the
Investment Company Act of 1940) of the Manager.

During the years ended September 30, 1998, 1997 and 1996, the Company paid the
following brokerage commissions on agency transactions (the Micro-Cap Value Fund
commenced operations on December 17, 1997):

1998 1997 1996
----- ----- -----

Micro-Cap Fund $173,701 $102,691 $35,506
Micro-Cap Value Fund $97,166 $0 $0
Aggressive Equity Fund $191,834 $181,019 $280,635
Growth Fund $383,599 $136,424 $99,242
Mid-Cap Fund $91,381 $139,068 $145,703
Wasatch-Hoisington U.S.
Treasury Fund $0 $0 $700

There are no commission or stated markups on principal transactions of the
Company. The purchases are executed at the ask price net and the sales are
executed at the bid price net. The changes in the brokerage commissions in the
three years noted are the result of changes in the turnover rates of the Funds
and their sizes.

During the fiscal year ended September 30, 1998, the Funds directed brokerage
transactions to brokers for research services provided. The amount of such
transactions and related commissions are as follows:

1998
Research
Commission
Transactions Commissions
------------- ------------

Micro-Cap Fund $53,268,316 $167,913
Micro-Cap Value Fund $22,338,923 $94,015
Aggressive Equity Fund $74,155,836 $165,975
Growth Fund $104,670,232 $332,794
Mid-Cap Fund $39,216,107 $85,486
Wasatch-Hoisington U.S.
Treasury Fund $0 $0

CAPITAL STOCK AND OTHER SECURITIES

Wasatch Funds 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 1940 Act.

The Company is authorized to issue shares in separate series, or "Funds." Seven
such Funds have been established:

Series A Common - Aggressive Equity Fund
Series B Common - Growth Fund
Series C Common - Wasatch-Hoisington U.S. Treasury Fund
Series D Common - Mid-Cap Fund
Series E Common - Micro-Cap Fund
Series F Common - World Wide Fund
Series G Common - Micro-Cap Value Fund

The Board of Directors is authorized to create new Funds in addition to those
already existing without the approval of the shareholders of the Company. All
shares of each respective Fund have equal voting rights; each share is entitled
to one vote per share (with proportionate voting for fractional shares). Only
shareholders of a Fund are entitled to vote on matters concerning that Fund.

The assets received by the Company upon the sale of shares of each Fund an all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, are specifically allocated to such Fund. They constitute the
underlying assets of each Fund, are required to be segregated on the books of
account, and are to be charged with the expenses of such Fund. Any general
expenses of the Company not readily identifiable as belonging to a particular
Fund will be allocated on the basis of each Fund's relative net assets during
the fiscal year.

Each share of a Fund has equal dividend, distribution, liquidation and voting
rights with other shares of that Fund. Each issued and outstanding share is
entitled to participate equally in dividends and distributions declared by the
Fund and upon liquidation or dissolution of the series in the net assets
remaining after satisfaction of outstanding liabilities.

The shares of each Fund, when issued, will be fully paid and non-assessable,
have no preference, preemptive, conversion, or exchange or similar rights, and
will be freely transferable.

To illustrate the method of computing the offering price of Company shares, the
offering price per share on September 30, 1998 was as follows (the Micro-Cap
Value Fund commenced operations on December 17, 1997):

Micro-Cap Aggressive U.S.
Micro-Cap Value Equity Growth Mid-Cap Treasury
Fund Fund Fund Fund Fund Fund
-------- -------- -------- -------- -------- --------
<C> <C> <C> C> <C> <C>

Net Assets divided by $117,533,044 $14,305,776 $123,723,078 $153,147,810 $43,553,375 $67,856,373
Shares Outstanding 32,737,374 7,925,899 5,950,304 9,009,491 2,883,972 5,057,444
equals
Net Asset Value Per Share $3.59 $1.80 $20.79 $17.00 $15.10 $13.42
(Offering & Redemption Price)

</TABLE>

SHAREHOLDER MEETINGS. Reincorporating the Funds in Minnesota means that the
Funds are no longer required to hold annual meetings of shareholders as they
were under Utah law. Minnesota bylaws provide for addressing important issues
at specially scheduled shareholder meetings.

Wasatch Funds is always happy to meet with shareholders. We communicate
important information about the Funds through Annual and Semi-Annual Reports,
newsletters, special mailings and other events throughout the year.

PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED

The procedures to be followed in the purchase and redemption of shares as well
as the method of determining the net asset value are fully disclosed in the
Prospectus. As indicated in the Prospectus, the net asset value is calculated
each day the New York Stock Exchange is open for trading. The New York Stock
Exchange is closed on the following national holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.

Investors may exchange their shares of a Fund for the Northern U.S. Government
Money Market Fund as provided in the Prospectus. Sunstone, in its capacity as
Transfer Agent for the Funds, receives a service fee from the U.S. Government
Money Market Fund at the annual rate of 0.25% of 1% of the average daily net
asset value of the shares exchanged from the Funds into the U.S. Government
Money Market Fund.

The Funds have filed a notification of election under Rule 18f-1 of the
Investment Company Act committing itself to pay in cash all requests for
redemption by any shareholder of record, limited in amount with respect to each
shareholder of record during any 90-day period to the lesser of:

(1) $250,000 or

(2) 1% of the net asset value of each Fund at the beginning of such
election period.

The Funds intend to also pay redemption proceeds in excess of such lesser amount
in cash, but reserve the right to pay such excess amount in kind, if it is
deemed in the best interest of the Funds to do so. In making a redemption in
kind, the Funds reserve the right to make a selection from each portfolio
holding of a number of shares which will reflect the portfolio makeup and the
value will approximate as closely as possible the value of the Funds' shares
being redeemed; any shortfall will be made up in cash. Investors receiving an
in kind distribution are advised that they will likely incur a brokerage charge
on the sale of such securities through a broker. The values of portfolio
securities distributed in kind will be the values used for the purpose of
calculating the per share net asset value used in valuing the Funds' shares
tendered for redemption.

TAX STATUS

Reference is made to "Dividends, Capital Gain Distributions and Taxes" in the
Prospectus.

Each Fund will be treated as a separate entity for Federal income tax purposes.
Each Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying, each Fund will not be subject to Federal income taxes to the
extent that it distributes its net investment income and realized net capital
gains.

For Federal income tax purposes, distributions paid from net investment income
and from any realized net short-term capital gain are taxable to shareholders as
ordinary income, whether received in cash or in additional shares. Dividends
are taxable as ordinary income, whereas capital gain distributions are taxable
as long-term capital gains. The 70% dividends-received deduction for
corporations will apply only to the proportionate share of the dividend
attributable to dividends received by the Fund from domestic corporations.

Any dividend or capital gain distribution paid shortly after a purchase of
shares of the Fund will have the effect of reducing the per share net asset
value of such shares by the amount of the dividend or distribution.
Furthermore, even if the net asset value of the shares of the Fund immediately
after a dividend or distribution is less than the cost of such shares to the
investor, the dividend or distribution will be taxable to the investor.

Redemption of shares will generally result in a capital gain or loss for income
tax purposes. Such capital gain or loss will be long-term or short-term,
depending upon the holding period. However, if a loss is realized on shares
held for six months or less, and the investor received a capital gain
distribution during that period, then such loss is treated as a long-term
capital loss to the extent of the capital gain distribution received. Investors
may also be subject to state and local taxes.

The Fund is required to withhold federal income tax at a rate of 31% ("backup
withholding") from dividend payments and redemption and exchange proceeds if an
investor fails to furnish the Fund with his Social Security Number or other Tax
Identification Number or fails to certify under penalty of perjury that such
number is correct or that he is not subject to backup withholding due to the
underreporting of income. The certification form is included as part of the
share purchase application and should be completed when the account is opened.

Under the Code, each Fund will be subject to a 4% excise tax on a portion of its
undistributed income if it fails to meet certain distribution requirements by
the end of the calendar year. Each Fund intends to make distributions in a
timely manner and accordingly does not expect to be subject to the excise tax.

Under the Code, any dividend declared by a regulated investment company in
October, November or December of any calendar year and payable to shareholders
of record on a specified date in such month shall be deemed to have been
received by each shareholder on such date, and to have been paid by such company
on such date if such dividend is actually paid by the company before February 1
of the following calendar year.

This section is not intended to be a full discussion of present or proposed
federal income tax laws and the effect of such laws on an investor. Investors
are urged to consult with their respective tax advisors for a complete review of
the tax ramifications of an investment in the Fund.

TAXES AND DISTRIBUTIONS ON ZERO COUPON BONDS AND U.S. TREASURY INFLATION
PROTECTION SECURITIES (TIPS). If a Fund invests in zero coupon bonds upon their
issuance, such obligations will have original issue discount in the hands of the
Fund. Generally, the original issue discount equals the difference between the
"stated redemption price at maturity" of the obligation and its "issue price,"
as those terms are defined in the Code. Similarly, if the Fund acquires an
already issued zero coupon bond from another holder, the bond will have original
issue discount in the Fund's hands, equal to the difference between the
"adjusted issue price" of the bond at the time the Fund acquires it (that is,
the original issue price of the bond plus the amount of original issue discount
accrued to date) and its stated price at maturity. In each case, the Fund is
required to accrue as ordinary interest income a portion of the original issue
discount even though it receives no cash currently as interest payment on the
obligation.

If a Fund invests in TIPS, it will be required to treat as original issue
discount any increase in the principal amount of the securities that occurs
during the course of its taxable year. If a Fund purchases such inflation
protection securities that are issued in stripped form either as stripped bonds
or coupons, it will be treated as if it had purchased a newly issued debt
instrument having original issue discount.

Because each Fund is required to distribute substantially all of its net
investment income (including accrued original issue discount), a Fund investing
in either zero coupon bonds or TIPS may be required to distribute to
shareholders an amount greater than the total cash income it actually receives.
Accordingly, in order to make the required distributions, a Fund may be required
to borrow or liquidate securities.

CALCULATION OF PERFORMANCE DATA

The Funds may occasionally advertise performance data such as total return or
yield. To facilitate the comparability of these statistics from one mutual fund
to another, the Securities and Exchange Commission has developed guidelines for
the calculation of these statistics. The Funds will calculate their performance
data in accordance with these guidelines. The total return for a mutual fund
represents the average annual compounded rate of return over a specified period
of time that would equate the initial amount invested to the value of the
investment at the end of the period of time. This is done by dividing the
ending redeemable value of a hypothetical $1,000 initial payment by $1,000 and
raising the quotient to a power equal to one divided by the number of years (or
fractional portion thereof) covered by the computation and subtracting one from
the result. This calculation can be expressed as follows:

ERV 1/n
T=[(------)-1]
P

Where: T= average annual total return.

ERV= ending redeemable value at the end of the period covered
by the computation of a hypothetical $1,000 payment made
at the beginning of the period.

P= hypothetical initial payment of $1,000.

n= period covered by the computation, expressed in terms of
years.

The Funds compute their aggregate total returns by determining the
aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:

ERV
T=[(------)-1]
P

The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value is determined
by assuming complete redemption of the hypothetical investment and the deduction
of all nonrecurring charges at the end of the period covered by the
computations.

A yield quotation is based upon a 30-day period and is computed by dividing
the net investment income per share earned during a 30-day (or one month) period
by the net asset value per share on the last day of the period and annualizing
the result on a semi-annual basis by adding one to the quotient, raising the sum
to the power of six, subtracting one from the result and then doubling the
difference. A Fund's net investment income per share earned during the period
is based on the average daily number of shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements.

This calculation can be expressed as follows:

a-b
Yield=2[(----+1)6 -1]
cd

Where: a= dividends and interest earned during the period.

b= expenses accrued for the period (net of reimbursements).

c= the average daily number of Units outstanding during the
period that were entitled to receive dividends.

d= net asset value per share on the last day of the period.

FINANCIAL STATEMENTS

The Funds' financial statements and notes thereto appearing in the September 30,
1998 Annual Report and the report thereon of Arthur Andersen LLP, independent
certified public accountants, appearing therein, are incorporated by reference
in this Statement of Additional Information. The Funds will furnish, without
charge, a copy of such Annual Report upon request. Requests may be made by
calling the Funds at 1 (800) 551-1700, or writing to Wasatch Funds, 207 East
Buffalo Street, Suite 315, Milwaukee, Wisconsin 53202-5712.