WASATCH FUNDS INC, 485APOS, 2000-11-28

WASATCH FUNDS INC
485APOS, 2000-11-28

Previous: BURNHAM PACIFIC PROPERTIES INC, DEF 14A, 2000-11-28

Next: WASATCH FUNDS INC, 485APOS, EX-99.I, 2000-11-28

<PAGE> 1

As filed with the Securities and Exchange Commission on November __, 2000
Securities Act Registration No. 33-10451
Investment Company Act Registration No. 811-4920

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Post-Effective Amendment No. 21 X

and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 23 X
(Check appropriate box or boxes)

WASATCH FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)

150 SOCIAL HALL AVENUE
4TH FLOOR
SALT LAKE CITY, UTAH 84111
(Address of Principal Executive Offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 708-7228

SAMUEL S. STEWART, JR. Copy to:
Wasatch Funds, Inc. Michael J. Radmer, Esq.
10 Social Hall Avenue, 4th Floor Dorsey & Whitney LLP
Salt Lake City, Utah 84101 220 South Sixth Street
(Name and Address of Agent for Service) Minneapolis, Minnesota 55402-1498

It is proposed that this filing will become effective:

( ) immediately upon filing pursuant to paragraph (b)

( ) on (date) pursuant to paragraph (b)

( ) 60 days after filing pursuant to paragraph (a)(1)

( X ) on January 31, 2001 pursuant to paragraph (a)(1)

( ) 75 days after filing pursuant to paragraph (a)(ii)

( ) on (date) pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

( ) this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.

<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY OF OBJECTIVES, STRATEGIES AND RISKS................................................2
Wasatch Micro Cap Fund...................................................................2
Wasatch Small Cap Value Fund.............................................................4
Wasatch Small Cap Growth Fund............................................................6
Wasatch Core Growth Fund.................................................................8
Wasatch Ultra Growth 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..................................................................17
Wasatch Small Cap Value Fund............................................................18
Wasatch Small Cap Growth Fund...........................................................18
Wasatch Core Growth Fund................................................................19
Wasatch Ultra Growth 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...............................................................26
Management Fees and Expense Limitations.................................................26
Research Team, Lead Managers, Co-Managers...............................................27
Additional Service Providers............................................................28
SHAREHOLDER'S GUIDE.......................................................................29
To Open a New Account...................................................................29
Individual Retirement Accounts..........................................................30
To Purchase Shares......................................................................31
Automatic Investment Plan...............................................................32
To Exchange Shares......................................................................34
To Redeem Shares........................................................................35
Signature Guarantee.....................................................................38
How Fund Shares are Priced..............................................................38
SHAREHOLDER SERVICES AND ACCOUNT POLICIES.................................................39
Shareholder Reports.....................................................................39
Account Statements......................................................................40
Telephone Transactions..................................................................40
Registration Changes....................................................................41
Address Changes.........................................................................41
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES...........................................42
FINANCIAL HIGHLIGHTS......................................................................43
GUIDE TO UNDERSTANDING FUND PERFORMANCE...................................................50
GLOSSARY OF INVESTING TERMS...............................................................51
OTHER IMPORTANT INFORMATION...............................................................55
</TABLE>

Not part of the Prospectus

<PAGE> 3

WASATCH FUNDS, INC.

150 SOCIAL HALL AVENUE

SALT LAKE CITY, UTAH 84111

1 (800) 551-1700

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

WASATCH MICRO CAP FUND

WASATCH SMALL CAP VALUE FUND

WASATCH SMALL CAP GROWTH FUND

WASATCH CORE GROWTH FUND

WASATCH ULTRA GROWTH FUND

WASATCH-HOISINGTON U.S. TREASURY FUND

JANUARY 31, 2001

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 51 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 web site at
WWW.WASATCHFUNDS.COM.

Prospectus 1

<PAGE> 4

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 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. Due to market
conditions or cash outflows, the Fund may reopen from time to time to take in
additional assets that the Advisor believes will help maintain the Fund at an
optimal size for investing in micro cap companies. To find out if the Fund is
open, please call a Shareholder Services Representative at 1 (800) 551-1700 or
visit our web site at WWW.WASATCHFUNDS.COM.

OBJECTIVE

LONG TERM GROWTH OF CAPITAL. INCOME IS A SECONDARY OBJECTIVE, BUT ONLY WHEN
CONSISTENT WITH 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 $500 million at the time of initial purchase.

We use "bottom-up" fundamental analysis to identify individual companies
that we believe have superior growth prospects. Analysis includes studying a
company's financial statements, making onsite visits and meeting with top
management to evaluate such factors as potential for: increasing earnings per
share; gaining market share; expanding operating margins; sustainable
competitive advantage; and capitalizing on favorable long term trends. Within
the Fund's portfolio we seek to create a blend of "core" companies that we
believe have the potential to grow steadily over long periods of time at faster
rates than average large companies, and "high growth" companies that we
believe have the potential to grow faster and more aggressively than core
companies.

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 investments in high growth companies may be subject to greater
stock price fluctuations than the Fund's investments in core companies.

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.

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.

2 Prospectus

<PAGE> 5

MICRO CAP FUND

[BAR GRAPH]

1996 1997 1998 1999 2000
------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
13.66 35.32 18.98 32.86
</TABLE>

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

<TABLE>
<S> <C>
Best--6/30/97 27.56%
Worst--9/30/98 -21.10%
</TABLE>

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 12/31/00)

SINCE INCEPTION
1 YEAR 5 YEAR (6/19/95)
-------------------------------------------------------------------
<S> <C> <C> <C>
Wasatch Micro Cap Fund 00.00% 00.00% 00.00%
Russell 2000 Index 00.00% 00.00% 00.00%
</TABLE>

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 in the Russell 3000 Index, as ranked by total market capitalization.
The Russell 2000 is widely regarded in the industry to accurately capture the
universe of small company stocks.

Prospectus 3

<PAGE> 6

WASATCH SMALL CAP VALUE FUND

OBJECTIVE

LONG TERM GROWTH OF CAPITAL. INCOME IS A SECONDARY OBJECTIVE, BUT ONLY WHEN
CONSISTENT WITH LONG TERM GROWTH OF CAPITAL.

STRATEGY

VALUE INVESTING IN SMALL COMPANIES.

The Fund invests primarily in the common stocks of companies with market
capitalizations of less than $1.5 billion at the time of initial purchase.

We use a "bottom-up" process of fundamental analysis to look for individual
companies that we believe are temporarily undervalued, but have significant
potential for stock price appreciation.

Attributes we look for in small 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 new products or
services that may increase revenue growth and 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.

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 the stocks of large 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 small cap value
stocks.

4 Prospectus

<PAGE> 7

SMALL CAP VALUE FUND(*)

[BAR GRAPH]

1998 1999 2000
------ ------ ------
<S> <C> <C>
8.46 28.09

</TABLE>

The chart above is intended to provide you with an indication of the risks of
investing in the Small Cap Value 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.

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

SMALL CAP VALUE FUND-BEST AND WORST QUARTERLY RETURNS(*)

<TABLE>

<S> <C>
Best--6/30/99 26.67%
Worst--9/30/98 -20.00%
</TABLE>

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 12/31/00)(*)

SINCE INCEPTION
1 YEAR (12/17/97)
--------------------------------------------------------------------------------
<S> <C> <C>
Wasatch Small Cap Value Fund 00.00% 00.00%
Russell 2000 Value Index 00.00% 00.00%
</TABLE>

(*)Prior to January 31, 2000 the Fund invested primarily in companies with
market capitalizations of less than $300 million at the time of purchase.

The Russell 2000 Value Index is an unmanaged total return index that measures
the performance of those Russell 2000 companies with lower price-to-book ratios
and lower forecasted growth values.

Prospectus 5

<PAGE> 8

WASATCH SMALL CAP GROWTH FUND

OBJECTIVE

LONG TERM GROWTH OF CAPITAL. INCOME IS A SECONDARY OBJECTIVE, BUT ONLY WHEN
CONSISTENT WITH 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 $1.5 billion at the time of initial purchase.

Within the Fund's portfolio we seek to create a blend of "core" companies
that we believe have the potential to grow steadily over long periods of time at
faster rates than average large companies, and "high growth" companies that we
believe have the potential to grow faster and more aggressively than core
companies.

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 investments in high growth companies may be subject to greater
stock price fluctuations than the Fund's investments in core companies.

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.

Prospectus 6

<PAGE> 9

SMALL CAP GROWTH FUND

[BAR GRAPH]

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50.40 4.73 22.49 5.50 28.12 5.20 19.23 11.17 40.87
</TABLE>

The chart above is intended to provide you with an indication of the risks of
investing in the Small Cap 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.

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

SMALL CAP GROWTH FUND--BEST AND WORST QUARTERLY RETURNS

<TABLE>
<S> <C>
Best--12/31/98 31.55%
Worst--9/30/98 -23.76%
</TABLE>

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 12/31/00)

1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Wasatch Small Cap Growth Fund 00.00% 00.00% 00.00%
Russell 2000 Index 00.00% 00.00% 00.00%
</TABLE>

Prospectus 7

<PAGE> 10

WASATCH CORE GROWTH FUND

OBJECTIVE

LONG TERM GROWTH OF CAPITAL. INCOME IS A SECONDARY OBJECTIVE, BUT ONLY WHEN
CONSISTENT WITH LONG TERM GROWTH OF CAPITAL.

STRATEGY

INVEST IN GROWING COMPANIES AT REASONABLE PRICES.

The Fund invests primarily in the common stocks of growing companies. These
companies are usually small to mid-size with market capitalizations of less than
$5 billion at the time of initial purchase.

We use a process of "bottom-up" fundamental analysis to look for individual
companies that we believe are stable and have the potential to grow steadily for
long periods of time.

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 reasonable
relative to our projection of a company's five year earnings growth rate.

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 Core 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.

8 Prospectus

<PAGE> 11

CORE GROWTH FUND

[BAR GRAPH]

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
40.83 4.72 11.12 2.68 40.42 16.54 27.55 1.56 19.35
</TABLE>

The chart above is intended to provide you with an indication of the risks of
investing in the Core 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.

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

CORE GROWTH FUND--BEST AND WORST QUARTERLY RETURNS

<TABLE>
<S> <C>
Best-3/31/91 25.80%
Worst-9/30/98 -23.39%
</TABLE>

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 12/31/00)

1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Wasatch Core Growth Fund 00.00% 00.00% 00.00%
Russell 2000 Index 00.00% 00.00% 00.00%
</TABLE>

Prospectus 9

<PAGE> 12

WASATCH ULTRA GROWTH FUND

OBJECTIVE

LONG TERM GROWTH OF CAPITAL. INCOME IS A SECONDARY OBJECTIVE, BUT ONLY WHEN
CONSISTENT WITH LONG TERM GROWTH OF CAPITAL.

STRATEGY

INVEST IN HIGH GROWTH COMPANIES.

The Fund invests primarily in the common stocks of rapidly growing companies
in fast growing sectors of the economy. These companies are usually small to
mid-size with market capitalizations of less than $5 billion at the time of
initial purchase.

We use a process of "bottom-up" fundamental analysis to look for individual
companies that we believe have superior growth prospects. Analysis includes
studying a company's financial statements, making onsite visits and meeting with
top management to evaluate such factors as potential for: rapid growth of sales
and/or earnings; market leadership; expanding operating margins; and benefiting
from favorable trends.

In seeking to achieve the Fund's objective we may take larger positions in a
few 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 may invest in small and mid-size companies. These 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.

High growth companies may have high price-to-earnings ratios (P/Es) and
their stock prices are more volatile than the prices of other common stocks.

The Fund may invest in companies that could be broadly categorized as being
in the technology and health care sectors. In general, technology companies tend
to be extremely competitive. 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 may be more sensitive to the price movements of a single stock or
small group of stocks because it may take larger positions in a few companies
and focus on fast growing sectors.

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 rapidly growing small and mid-size companies.

10 Prospectus

<PAGE> 13

ULTRA GROWTH FUND

[BAR GRAPH]

1993 1994 1995 1996 1997 1998 1999 2000
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-2.97 8.11 58.77 3.57 -0.51 24.81 17.46
</TABLE>

The chart above is intended to provide you with an indication of the risks of
investing in the Ultra 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.

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

ULTRA GROWTH FUND--BEST AND WORST QUARTERLY RETURNS

<TABLE>

<S> <C>
Best--12/31/98 38.11%
Worst--9/30/98 -18.42%
</TABLE>

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 12/31/00)

SINCE INCEPTION
1 YEAR 5 YEARS (8/16/92)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Wasatch Ultra Growth Fund 00.00% 00.00% 00.00%
Russell 2000 Index 00.00% 00.00% 00.00%
</TABLE>

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
Fund's performance can differ substantially from that of its benchmark because
the Fund may take larger positions in a few companies and may focus on certain
sectors.

Prospectus 11

<PAGE> 14

WASATCH-HOISINGTON U.S. TREASURY FUND

OBJECTIVE

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.

STRATEGY

THE FUND TYPICALLY 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 multi-year trends in national and
international economic conditions and interest rates, changes in inflationary
pressures, and the value of 30-year Treasury bonds relative to inflation.

The Fund seeks to invest in long term U.S. Treasury bonds (maturities longer
than 20 years) when the Sub-Advisor determines that economic conditions suggest
lower inflation and the multi-year trend is toward decreasing interest rates.
The Fund seeks to invest in U.S. Treasury bills or notes (maturities less than
five years) when the Sub-Advisor determines that economic conditions suggest
rising inflation and the multi-year trend is toward increasing 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 25 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.

The Fund may invest in zero coupon treasury securities (U.S. Treasury
Strips). These 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.

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.

12 Prospectus

<PAGE> 15

U.S. TREASURY FUND

[BAR GRAPH}
<TABLE>
<CAPTION>

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
13.66 4.72 4.00 1.59 11.49 7.82 15.74 14.63 -12.36
</TABLE>

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

<TABLE>
<S> <C>
Best--3/31/00 10.19%
Worst--3/31/99 -5.88%
</TABLE>

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 12/31/00)

1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Fund 00.00% 00.00% 00.00%
Lehman Bros. Aggregate Index 00.00% 00.00% 00.00%
</TABLE>

The table above allows you to compare the Fund's performance to that of a bond
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 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.

Prospectus 13

<PAGE> 16

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 (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

ALL WASATCH FUNDS
------------------------------------------------------------------------------------------
<S> <C>
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 (on shares held less than two months) 2.00%
Wire Redemption Fee $7.50 each
Annual IRA Maintenance Fee(1) $12.50 per account
IRA Distribution Fee(2) $15.00 each
Exchange Fee None
Maximum Account Fee None
</TABLE>

(1) Wasatch Funds IRAs of $10,000 or more are exempt. Fee is capped at $25.00
per Social Security Number, per account type.
(2) Includes rollovers, direct transfers and recharacterizations. Excludes
systematic withdrawal plans.

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

SMALL CAP SMALL CAP CORE ULTRA
MICRO CAP VALUE GROWTH GROWTH GROWTH U.S.TREASURY
FUND FUND FUND FUND FUND FUND
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MANAGEMENT FEES 2.00% 1.50% 1.00% 1.00% 1.25% 0.50%
DISTRIBUTION
(12B-1) FEES None None None None None None
OTHER EXPENSES(1) 0.38% 0.59% 0.38% 0.38% 0.57% 0.47%
TOTAL ANNUAL FUND
OPERATING EXPENSES(1) 2.38% 2.09% 1.38% 1.38% 1.82% 1.97%
</TABLE>

(1) Other Expenses and Total Annual Fund Operating Expenses are based on Fund
expenses before any expense reimbursements by the Advisor. The Advisor
voluntarily reimburses the Funds for expenses that exceed certain limits.
See "Management Fees and Expense Limitations" on page 26. Taking into
account expense reimbursements, Management Fees and Total Annual Fund
Operating Expenses for the fiscal year ended September 30, 2000 were: 1.36%
and 1.95% for the Small Cap Value Fund; 1.18% and 1.75% for the Ultra Growth
Fund; and 0.28% and 0.75% for the U.S. Treasury Fund, respectively. The
Advisor has voluntarily agreed to limit Total Annual Fund Operating Expenses
to these levels until at least September 30, 2001. There were no
reimbursements for the Micro Cap, Small Cap Growth or Core Growth Funds.

14 Prospectus

<PAGE> 17

EXAMPLE

This Example is intended to help you compare the cost of investing in each
Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. 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
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Micro Cap Fund $241 $742 $1,270 $2,716
Small Cap Value Fund $212 $655 $1,124 $2,421
Small Cap Growth Fund $140 $437 $755 $1,657
Core Growth Fund $140 $437 $755 $1,657
Ultra Growth Fund $185 $573 $985 $2,137
U.S. Treasury Fund $99 $309 $536 $1,190
</TABLE>

The above example does not reflect any voluntary reimbursements by the Advisor.

Prospectus 15
<PAGE> 18
MORE ABOUT THE WASATCH EQUITY FUNDS

The Wasatch Equity Funds are the MicroCap, SmallCap Value, SmallCap
Growth,Core Growth and Ultra Growth 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 primary 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 (SAI) for a discussion of these strategies, 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 primary 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, making on site visits and meeting with top management.

CASH POSITION

If the research team is unable to locate attractive investment
opportunities, or when we consider market conditions to be unfavorable for
profitable investing, a Fund may temporarily increase its cash position or
invest a larger portion of its assets in money market instruments. In other
words, the Funds do not always stay fully invested in stocks. In extreme
circumstances, the Funds may invest up to 100% of their assets in cash or money
market instruments.

When a Fund increases its position in cash or money market instruments, 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. A Fund may not
achieve its investment objectives when invested in cash.

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

OTHER INVESTMENT STRATEGIES

To a limited extent, each Equity Fund may invest in illiquid securities such
as private placements.

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 Lead or
Co-Managers believe such changes are desirable. Portfolio turnover rates are
generally not a factor in making decisions to buy or sell securities.

To a lesser extent, a Fund may purchase securities in anticipation of
relatively short term price gains. Increased

16 Prospectus

<PAGE> 19

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

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 capitalizations of less than $500 million at the time of
initial 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 high growth companies. Each type of investment plays a
special role that is intended to support the Fund's primary investment
objective.

CORE COMPANIES

We believe core companies are stable and have the potential for consistent
growth and the ability to sustain growth over the long term.

CHARACTERISTICS WE LOOK FOR IN CORE COMPANIES:

- the potential to grow steadily at a faster rate than that of an average
large company

- a sustainable competitive advantage

- stable demand for products or services

- the ability to capitalize on favorable long term trends

HIGH GROWTH COMPANIES

We believe high growth companies have the potential for rapid stock price
appreciation that can enhance the Fund's returns. Investments in high growth
companies are inherently more risky than investments in core companies and
their stock prices are more volatile, but we think the potential rewards are
greater.

CHARACTERISTICS WE LOOK FOR IN HIGH GROWTH COMPANIES:

- the potential to grow faster and more aggressively than core companies

- market leadership or the potential to become a market leader

- proprietary products

- sound financial controls

CHARACTERISTICS WE LOOK FOR IN CORE AND HIGH GROWTH COMPANIES:

- experienced top management with a substantial stake in the company's future

- high return on capital

- low use of debt

Prospectus 17

<PAGE> 20

WASATCH SMALL CAP VALUE FUND

CO-MANAGERS: Jim Larkins, MBA, Robert Gardiner, CFA and Samuel S.
Stewart, Jr., PhD, CFA

INVESTMENT OBJECTIVE

The primary investment objective of the Small 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 small
companies (market capitalizations of less than $1.5 billion at the time of
initial purchase)

- look for companies whose stocks, in our opinion, are temporarily under valued
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:

- introduces exciting new products or services

- resolves short term issues that increase earnings growth

- gets positive attention from Wall Street analysts

CHARACTERISTICS WE LOOK FOR IN VALUE INVESTMENTS MAY INCLUDE:

- low stock valuations in the form of a low price-to-earnings ratio (P/E)

- 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 revenue growth and market share

WASATCH SMALL CAP GROWTH FUND

LEAD MANAGER: Jeff Cardon, CFA

INVESTMENT OBJECTIVE

The primary investment objective of the Small Cap 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 small
companies (market capitalizations of less than $1.5 billion at the time of
initial purchase)

- focus on companies that we believe have superior growth potential

- purchase stocks at prices that we believe are rational 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

18 Prospectus
<PAGE> 21

them core and high growth companies. Each type of investment plays a special
role that is intended to support the Fund's primary investment objective.

CORE COMPANIES

We believe core companies are stable and have the potential for consistent
growth and the ability to sustain growth over the long term.

CHARACTERISTICS WE LOOK FOR IN CORE COMPANIES:

- the potential to grow steadily at a faster rate than that of an average
large company

- a sustainable competitive advantage

- stable demand for products or services

- the ability to capitalize on favorable long term trends

HIGH GROWTH COMPANIES

CHARACTERISTICS WE LOOK FOR IN HIGH GROWTH COMPANIES:

- the potential to grow faster and more aggressively than core companies

- market leadership or the potential to become a market leader

- proprietary products

- sound financial controls

CHARACTERISTICS WE LOOK FOR IN CORE AND HIGH GROWTH COMPANIES:

- experienced top management with a substantial stake in the company's future

- high return on capital

- low use of debt

WASATCH CORE GROWTH FUND

LEAD MANAGER: Samuel S. Stewart, Jr.,
PhD, CFA
CO-MANAGER: JB Taylor

INVESTMENT OBJECTIVE

The primary investment objective of the Core 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 consider 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

- typically invest in small and mid-size companies with market capitalizations
of less than $5 billion at the time of initial purchase

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

CHARACTERISTICS WE LOOK FOR IN CORE COMPANIES:

- the potential to grow steadily at a faster rate than that of an average
large company

Prospectus 19
<PAGE> 22

- a sustainable competitive advantage

- stable demand for products or services

- the ability 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 ULTRA GROWTH FUND

LEAD MANAGER: Karey Barker, CFA
CO-MANAGER: Ajay Krishnan, CFA

INVESTMENT OBJECTIVE

The primary investment objective of the Ultra 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
companies that we believe have the potential for high growth based on such
measures as increasing sales and/or earnings, market leadership, expanding
operating margins and benefiting from favorable trends

- typically focus on companies in what we consider to be the fastest growing
sectors of the economy

- typically invest in companies with market capitalizations of less than $5
billion at the time of initial purchase

- attempt to achieve the Fund's primary objective by taking larger positions in
a few companies that we believe have outstanding investment potential

BUYING STOCKS

We believe high growth companies have above average 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 HIGH GROWTH COMPANIES:

- the potential to increase earnings and/or sales at a rate that is
significantly faster than the average large company

- market leadership or the potential to become a market leader

- proprietary products

- sound financial controls

- experienced top management with a substantial stake in the company's future

- high return on capital

- strong internal cash flow

- low use of debt

PRINCIPAL RISKS OF INVESTING IN THE WASATCH EQUITY FUNDS

The following discussion is intended 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.

MARKET RISK

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

20 Prospectus
<PAGE> 23

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 spread between the bid and asked prices of small company stocks may be
wider than the spread 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 indexes such as the Dow Jones Industrial
Average or the S&P 500(R) Index.

MICRO CAP COMPANIES

Each of the Equity Funds may invest in micro cap companies. The Micro Cap
Fund invests primarily in these companies. We define micro cap companies as
those with market capitalizations of less than $500 million. Micro cap companies
may be more sensitive to, and share prices may be more affected by, the risks
for small companies mentioned above.

EARLY STAGE COMPANIES

The Equity Funds may invest in companies that are in the early stages of
development. These companies are subject to the risks listed above for small
companies. In addition, they may not be profitable now and there is no guarantee
that they will become profitable or be able to obtain necessary financing. They
may rely on untested business plans. They may not be successful in developing
markets for their products and services. They may remain an insignificant part
of their industry. They may be illiquid or they may not be publicly traded.
Investments in early stage companies tend to be more volatile and somewhat more
speculative than investments in more established companies.

RISKS OF GROWTH STOCKS

The Wasatch Equity Funds (except the Small Cap Value Fund) invest in "growth
stocks." These "growth stocks" typically trade at higher price-to-earnings
ratios (P/Es) 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 Advisor's assessment of a company's earnings growth prospects is wrong, or
if the Advisor'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.

Prospectus 21

<PAGE> 24

RISKS OF VALUE STOCKS

The Small Cap Value Fund invests in "value stocks." These stocks appear to
the Advisor to be temporarily undervalued. Value stocks can remain under valued
for years. There is a risk that a value stock may never reach what the Advisor
believes is its full value, or it may even decline in value.

HIGH GROWTH COMPANIES

The Ultra Growth Fund focuses on high growth companies. The Micro Cap and
Small Cap Growth Funds invest a significant portion of their assets in the
stocks of high growth companies.

We define high growth companies as those that are increasing earnings at a
rate that is significantly faster than the average company. Companies growing
this aggressively often have high price-to-earnings ratios (P/Es) and are
considered more risky because the challenge to meet growth expectations is
greater. The stock prices of high growth companies are more volatile than the
prices of other common stocks.

SECTOR WEIGHTINGS

The Ultra Growth Fund does not limit its investments to specific sectors.
Although the Fund's approach to investing is to analyze the growth prospects of
individual companies, we typically find the growth we seek in companies in what
we believe are the fastest growing sectors of the economy.

Funds that invest a large percentage of assets in a few sectors are more
vulnerable to the price movements of a single security or small group of
securities in a sector than funds that diversify their investments among a broad
range of sectors.

TECHNOLOGY COMPANIES

Each of the Equity Funds may invest in companies that could be broadly
classified as being in the technology sector. These investments may include
companies in the fields of computer software, computer systems and components,
semiconductors and telecommunications.

In general, these companies operate in an extremely competitive environment
where rapid new developments could have a dramatic impact on a company's
earnings growth potential. In addition, many of these 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. 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 companies that could be broadly
classified as being in the health care sector. These investments may include
health care providers, health care service companies, and pharmaceutical and
medical products companies.

NON-DIVERSIFICATION RISK

Each Equity Fund is non-diversified. The Ultra Growth Fund, in particular,
may invest a large percentage of its

22 Prospectus

<PAGE> 25

assets in a few 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.

RISKS OF OTHER INVESTMENT STRATEGIES

ILLIQUID SECURITIES

The Equity Funds may invest up to 15% of their net assets in illiquid
securities, including "restricted" securities and private placements for which
there is no public market value. The fair value of these securities will be
determined by a designated Pricing Committee under the supervision of the Board
of Directors in accordance with Board approved Pricing Procedures. Given the
inherent uncertainties of determining fair market value, there can be no
assurance that the value we place on a security will be appropriate in terms of
how the security may be ultimately valued on the public market. These securities
may never be publicly traded and the Equity Funds may not be able to easily
liquidate their position in these securities.

The Equity Funds also may invest in securities that are less liquid than the
securities of large established companies. These less liquid securities may
include the securities of smaller U.S. companies, convertible securities,
foreign securities and emerging markets securities. The Equity Funds may
experience a loss if they are unable to sell a security at a time and price that
would be most beneficial.

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 Information (SAI) for a discussion of these strategies,
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 for 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:

- typically invest at least 90% of the Fund's total assets in U.S. Treasury
securities and in repurchase agreements collateralized by such securities.

- adjust the average maturity and effective duration of the Fund's portfolio
based on the Sub-Advisor's assessment

Prospectus 23

<PAGE> 26

of multi-year trends in national and international economic conditions and
interest rates, changes in inflationary pressures, and the value of 30-year
Treasury bonds relative to inflation.

- invest in long term U.S. Treasury bonds (maturities longer than 20 years),
including zero coupon Treasury securities, when the Sub-Advisor determines
that economic conditions suggest lower inflation and the multi-year trend is
toward decreasing interest rates.

- invest in U.S. Treasury bills or notes (maturities less than five years) when
the Sub-Advisor determines that economic conditions suggest rising inflation
and the multi-year trend is toward increasing 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 intended 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.

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

When interest rates rise, the value of the Fund's portfolio securities and
its net

24 Prospectus

<PAGE> 27

asset value generally will decline. The values of fixed-rate debt securities
with maturities longer than 20 years (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 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 RATES DOWN = BOND PRICES UP = INVESTMENT VALUE GOES UP $

If the Sub-Advisor forecasts that interest rates will decrease, the average
maturity of the portfolio can be extended 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

Prospectus 25

<PAGE> 28

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 (Advisor) for Wasatch Funds is Wasatch Advisors, Inc.
The Advisor and Wasatch Funds are located at 150 Social Hall Avenue, Salt Lake
City, Utah 84111. The Advisor has been in the investment advisory business since
1975. As of October 31, 2000, the Advisor had approximately $1.8 billion in
assets under management.

The Advisor is responsible for investing Wasatch Funds' assets, placing
orders to buy and sell securities and negotiating brokerage commissions on
portfolio transactions. In addition, the Advisor provides certain administrative
services and manages the Funds' business affairs.

MANAGEMENT FEES AND EXPENSE LIMITATIONS

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

The Advisor has voluntarily agreed to limit the expenses of each Fund at
least through September 30, 2001, 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 Small Cap Value Fund; 1.50% for the Small Cap Growth Fund; 1.50%
for the Core Growth Fund; 1.75% for the Ultra Growth Fund; and 0.75% for the
U.S. Treasury Fund. The Advisor will pay all expenses excluding interest, taxes
and extraordinary expenses in excess of such limitations. The Advisor may
rescind these voluntary limitations on expenses any time after September 30,
2001.

ADVISORY FEE AS
A PERCENTAGE OF AVERAGE
WASATCH FUND DAILY NET ASSETS
------------ -----------------------
<S> <C>
Micro Cap Fund 2.00%
Small Cap Value Fund 1.36%
Small Cap Growth Fund 1.00%
Core Growth Fund 1.00%
Ultra Growth Fund 1.18%
U.S. Treasury Fund(*) 0.28%

</TABLE>

(*)The U.S. Treasury Fund is managed by a Sub-Advisor. Under a sub-advisory
agreement between the Advisor and the Sub-Advisor, the Advisor has agreed to pay
the Sub-Advisor a management fee.

26 Prospectus

<PAGE> 29

RESEARCH TEAM

Prior to 1995 the Wasatch Equity Funds were managed by the Wasatch Research
Team, a team of analysts. In 1995 the team approach was modified and Lead or
Co-Managers were named for each of Wasatch's Equity Funds. Currently, the
Wasatch Research Team consists of four Lead Managers, three Co-Managers and
seven securities analysts. The Lead and Co-Managers are responsible for making
investment decisions for their respective Funds in accordance with each Fund's
primary investment objective and strategies. The Wasatch Research Team is
responsible for analyzing securities and making investment recommendations. The
Sub-Advisor, under the supervision of the Advisor, is responsible for making
investment decisions for the U.S. Treasury Fund.

LEAD MANAGERS

SAMUEL S. STEWART, JR., PHD, CFA, has served as President and Chairman of
the Board of Wasatch Funds since 1986 and Chairman of the Board of the Advisor
since 1975. Dr. Stewart is Lead Manager of the Wasatch Core Growth Fund. In
addition, he is Co-Manager of the Wasatch Small Cap Value Fund. 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 also
served as a professor of finance at the University of Utah.

JEFF CARDON, CFA, is Vice President and Director of Wasatch Funds and
President and Director of the Advisor. He is Lead Manager of the Wasatch Small
Cap Growth Fund. Mr. Cardon joined the Wasatch Research Team 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 the Advisor and Lead Manager of the
Wasatch Ultra Growth Fund. Ms. Barker joined the Wasatch Research Team as a
securities analyst in 1989. She is a Chartered Financial Analyst and holds a
Bachelor of Arts degree in French and Bachelor of Science degree in finance from
the University of Utah.

ROBERT GARDINER, CFA, is a Director of the Advisor and Lead Manager of the
Wasatch Micro Cap Fund since 1995. In addition, he is Co-Manager of the Wasatch
Small Cap Value Fund. Mr. Gardiner joined the Wasatch Research Team as a
securities analyst in 1987. He is a Chartered Financial Analyst. Mr. Gardiner is
a graduate of the University of Utah where he earned a Bachelor of Arts degree
in physics with a minor in French and a Bachelor of Science degree in
mathematics with a minor in chemistry.

CO-MANAGERS

AJAY KRISHNAN, CFA, is Co-Manager of the Wasatch Ultra Growth Fund. Mr.
Krishnan joined the Wasatch Research Team as a securities analyst in 1994. He is
a Chartered Financial Analyst and holds a Master's degree in business from Utah
State University and a Bachelor of Science degree in physics with a minor in
mathematics from Bombay University.

JIM LARKINS, MBA, is Co-Manager of the Wasatch Small Cap Value Fund. Mr.
Larkins joined the Wasatch Research Team as a securities analyst in 1995. He
holds a Master's degree in business and a Bachelor of Arts degree in economics
from Brigham Young University.

JB TAYLOR is Co-Manager of the Wasatch Core Growth Fund. Mr. Taylor

Prospectus 27

<PAGE> 30

joined the Wasatch Research Team as a securities analyst in 1996. He holds a
Bachelor of Science degree in industrial engineering from Stanford University.

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, 2000, HIMCO
provided investment advice to 38 separately managed accounts and had
approximately $3.9 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.
803 West Michigan Street, Suite A
Milwaukee, WI 53233-2301

TRANSFER AGENT
Sunstone Financial Group, Inc.
803 West Michigan Street, Suite A
Milwaukee, WI 53233-2301

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

28 Prospectus
<PAGE> 31

INVESTMENT MINIMUMS

<TABLE>

<S> <C>
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

</TABLE>

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 ONLINE

We offer a number of services on our web site at www.wasatchfunds.com. From
any computer with Internet access you can:

- Download a current prospectus, new account application and other documents.

- Open certain types of new accounts and make online transactions. For more
information see "Online Transactions" on page 39.

- Review current account information, check the past year's account history and
make address changes or corrections when you fill out the appropriate
online form and submit it electronically to Wasatch Funds.

- Sign up to receive quarterly statements, confirmations, annual and semi-annual
reports and prospectuses via e-mail by filling out the online consent form.

- Review each Fund's daily Net Asset Value (NAV) and performance.

- Check the Top 10 Holdings for each Fund as of the most recent calendar quarter
end.

- E-mail us your questions and comments.

TO OPEN A NEW ACCOUNT

- Read the prospectus carefully.

- To find out if the Micro Cap Fund is open to new investors, please call a
Shareholder Services Representative at 1(800) 551-1700 or visit our web site
at www.wasatchfunds.com.

- 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 or by
visiting our web site at www.wasatchfunds.com.

- Certain types of new accounts may be opened online. For more information see
"To Purchase Shares Online" on page 32.

- New accounts are subject to acceptance by Wasatch Funds.

Prospectus 29
<PAGE> 32

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
803 WEST MICHIGAN STREET, SUITE A
MILWAUKEE, WI 53233-2301

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 a new account application 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 Survivorship) 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. Accounts for corporations, partnerships, trusts
or other entities may not be opened online.

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 Information 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
Social Security Number, per account type.

IRA accounts may not be opened online. However, additions to existing IRA
accounts may be made online.

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

30 Prospectus
<PAGE> 33

IRA without paying penalties, especially for first time home purchases and
expenses for higher education.

ROTH IRA. Roth IRAs differ 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 59 1/2, 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 income exceeds
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 the Transfer Agent has received your request in
good order.

- Purchase requests should be sent to:
WASATCH FUNDS
P.O. BOX 2172
MILWAUKEE,WI 53201-2172

- Purchase requests sent to Wasatch Funds' headquarters in Salt Lake City will
be forwarded to the Transfer Agent in Milwaukee, but the effective date of the
purchase will be delayed until the request is received in good order by the
Transfer Agent.

- Checks must be made payable to Wasatch Funds and must meet minimum purchase
requirements (see Investment Minimums on page 29).

- 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/Insufficient Funds Policy" on page 41 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 there-
after, 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.

- Keep in mind that redeeming shares held less than two months will trigger the
redemption fee. For more information see "Redemption Fee" on page 36.

- 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

Prospectus 31
<PAGE> 34

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
42 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 ONLINE

You can purchase shares online at our web site at www.wasatchfunds.com.

- Online purchases must meet the minimum investment requirements.

- You may add to existing accounts in amounts of $100 or more.

- To open a new account online, please download a current prospectus and read it
carefully before you invest.

- Complete the appropriate online application and submit it electronically to
Wasatch Funds.

- When Wasatch Funds receives your online application, the amount you would like
to invest will be drawn from your bank. You will receive a reference number
for your transaction when you submit your application. A verification of your
request will also be sent to your e-mail address and we will mail a
transaction confirmation to you when we have processed your online
application. (Also see "To Open a New Account" on page 29 and"How Fund Shares
are Priced" on page 38.)

- The price of your shares will be determined the next time the Net Asset Value
(NAV) is calculated after the Transfer Agent has received your request in good
order.

- See "Returned Check/Insufficient Funds Policy" on page 41 for the Funds'
policy regarding electronic transfers returned unpaid.

- Individual Retirement Accounts (IRAs) may not be opened online. However, you
may make online purchases of additional shares for existing Wasatch Funds
IRAs.

- Accounts for third parties, trusts, corporations, partnerships and other
entities may not be opened online and are not eligble for online transactions.

TO PURCHASE SHARES BY BANK-WIRE

You can purchase shares by wiring money from your bank account to your
Wasatch Funds account.

WIRING INSTRUCTIONS:

UMB 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)

To establish a new account by bank-wire please contact a Shareholder
Services Representative at 1 (800) 551-1700 for instructions.

AUTOMATIC INVESTMENT PLAN (AIP)

- You can choose to make automatic

32 Prospectus
<PAGE> 35

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 in an established Fund account by
completing and returning an Automatic Investment Plan application, available
from Wasatch Funds.

- It takes15 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 account with 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 31.)

- The Micro Cap Fund closed to new investors on March 31, 2000.

- Micro Cap Fund shareholders as of the March 31, 2000 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 March 31, 2000 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 to
take in additional assets that the Advisor believes will help maintain the
Fund at an optimal size for investing in micro cap companies.

- 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 offered by the Funds, such as 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

Prospectus 33

<PAGE> 36

questions about, that account must be made through your investment professional.

- The Advisor 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
Advisor 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.

- Keep in mind that exchanging shares held less than two months will trigger the
redemption fee. For more information see "Redemption Fee" on page 36.

- The price of shares being exchanged or purchased will be determined the next
time the NAV is calculated after the Transfer Agent has received your exchange
request in good order. For more information see "How Fund Shares are Priced"
on page 38.

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

- Exchanges can also be made online at our web site www.wasatchfunds.com.

- Accounts are automatically eligible for the telephone exchange option, unless
you specify otherwise.

WRITTEN EXCHANGE REQUESTS

- See "Instructions for Written Requests" on page 37.

TELEPHONE EXCHANGE REQUESTS

- Call 1 (800) 551-1700 to exchange shares (if you have telephone privileges).

- Accounts are automatically eligible for the telephone exchange option, unless
you specify otherwise.

- 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, overnight express delivery or online at our web site
www.wasatchfunds.com.

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.

34 Prospectus

<PAGE> 37

- 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.

- There is a redemption fee for exchanging Wasatch Funds shares held less than
two months. For more information see "Redemption Fee" on page 36.

- 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.

- 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 Transfer Agent receives 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 38.

- 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 corporation,
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 the Transfer Agent has received your request in good
order. For more information see "How Fund Shares are Priced" on page 38.

- Redemption requests should be sent to:

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

- Redemption requests sent to Wasatch Funds' headquarters in Salt Lake City will
be forwarded to the Transfer

Prospectus 35
<PAGE> 38
Agent in Milwaukee, but the effective date of the redemption will be
delayed until the request is received in good order by the Transfer Agent.

- 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.

- 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.

REDEMPTION FEE

- Wasatch Funds will deduct a fee of 2.00% from redemption proceeds on Fund
shares held less than two months.

- This redemption fee is paid directly to the Fund and is designed to offset
brokerage commissions, market impact and other costs associated with
fluctuations in Fund asset levels and cash flow caused by short term
shareholder trading.

- If you bought shares on different days, the shares you held longest will be
redeemed first for purposes of determining whether the redemption fee
applies.

- The redemption fee does not apply to shares that were acquired through
reinvestment of distributions.

- 401(k) plans are exempt from the redemption fee.

WRITTEN REDEMPTION REQUESTS

- See "Instructions for Written Requests" on page 37.

- A signature guarantee is required for redemptions over $50,000. See "How to
Obtain a Signature Guarantee" on page 38.

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).

- Accounts are automatically eligible for the telephone redemption option,
unless you specify otherwise.

- 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,
overnight express delivery or online.

ONLINE REDEMPTION REQUESTS

- You may redeem shares in your Wasatch Funds account(s) in amounts of $500
up to $50,000 online at WWW.WASATCHFUNDS.COM.

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.

36 Prospectus
<PAGE> 39

- 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 Transfer Agent receives
your request in good order.

- Redemption proceeds can be sent by wire or electronic funds transfer to
your pre authorized bank account.

- There is a $7.50 fee for wire redemptions which will be deducted from
your proceeds.

- Wasatch Funds will deduct a fee of 2.00% from redemption proceeds on Fund
shares held less than two months. 401(k) plans are exempt from the
redemption fee. For more information see "Redemption Fee" on page 36.

- 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
daytime 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

Prospectus 37

<PAGE> 40

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.

- To add telephone privileges.

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

- The Funds' share prices change daily, so the price of your shares will be
determined the next time the NAV is calculated after the Transfer Agent
receives 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 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.

Prospectus 38
<PAGE> 41

- 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.

- Securities for which there were no transactions are valued at the closing
bid price.

- The Funds may hold portfolio securities that trade on weekends or other
days when the Funds do not price their shares. Therefore, the value of the
Funds' shares may change on days when shareholders will not be able to
purchase or redeem shares.

- Debt securities (other than short-term instruments) are valued at prices
furnished by a pricing service, subject to review and possible revision by
the Advisor.

- Short-term securities are valued at either original cost or amortized cost,
both of which approximate current market value.

- Restricted securities, private placements and other illiquid securities for
which market value quotations are not readily available are valued at fair
market value as determined by a designated Pricing Committee under the
supervision of the Board of Directors and in accordance with Board-
approved Pricing Procedures.

SHAREHOLDER SERVICES AND
ACCOUNT POLICIES

WASATCH FUNDS AUTOMATED
TELERESPONSE SERVICE

- Call 1 (800) 551-1700 and follow the instructions.

- Available 24 hours a day.

ONLINE TRANSACTIONS

The following transactions can be made online at Wasatch Funds' web site at
WWW.WASATCHFUNDS.COM, by filling out the appropriate online form and submitting
it electronically to Wasatch Funds:

- Add to your existing account in amounts of $100 or more. (Also see "To
Purchase Shares Online" on page 32.)

- Exchange shares from one Wasatch Funds account into another in amounts of
$500 or more. Exchange shares to open a new account. (Also see "To Exchange
Shares" on page 34.)

- Redeem shares in your Wasatch Funds account(s) in amounts of $500 up to
$50,000. (Also see "To Redeem Shares" on page 35.) The following accounts
may be opened online and are eligible for online transactions: individual,
joint and Uniform Gift to Minor (UGMA) or Uniform Transfer to Minor (UTMA).

- When Wasatch Funds receives your new account application electronically,
the amount you would like to invest will be drawn from your bank. You will
receive a reference number for your transaction when you submit your
application. A verification of your request will also be sent to your
e-mail address and we will mail a transaction confirmation to you when we
have processed your online application. (Also see "To Open a New Account"
on page 29 and "How Fund Shares are Priced" on page 38.)

- Individual Retirement Accounts (IRAs) may not be opened online. However,
you may make online purchases of additional shares for existing Wasatch
Funds IRAs.

- Accounts for third parties, trusts, corporations, partnerships and other
entities may not be opened online and are not eligible for online
transactions.

SHAREHOLDER REPORTS

Reports are mailed twice a year. You may elect to receive annual and
semi-annual reports and prospectuses via

Prospectus 39
<PAGE> 42

e-mail by filling out the online consent form on Wasatch Funds' web site at
WWW.WASATCHFUNDS.COM.

Annual reports are dated September 30th, 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 31st and help keep shareholders up-to-date on the Funds'
performance and portfolio holdings. Financial statements in the semi-annual
report 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 or you may
download them from our web site at WWW.WASATCHFUNDS.COM.

ACCOUNT STATEMENTS

Account statements will be mailed quarterly. You may elect to receive
quarterly statements via e-mail by filling out the online consent form on the
Funds' web site at WWW.WASATCHFUNDS.COM. Wasatch 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 31st. 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

40 Propectus
<PAGE> 43

case of emergency, temporarily suspend telephone transactions and other share-
holder services.

RETURNED CHECK/INSUFFICIENT
FUNDS POLICY

The Funds reserve the right to cancel a purchase if a check or electronic
transfer 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.

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, visit our web
site at WWW.WASATCHFUNDS.COM 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.

Prospectus 41
<PAGE> 44

DIVIDENDS, CAPITAL GAIN
DISTRIBUTIONS AND TAXES

In addition to any increase in the value of shares which a Fund may
achieve, you 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 you have made a request 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 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 you held your shares. The Equity Funds expect
that, as a result of their objectives and strategies, distributions will consist
primarily of capital gains.

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, is subject to taxation.

Gain or loss upon the sale of shares of the Fund will be treated as capital
gain or loss, provided that (as is usually the case) the shares represented a
capital asset in the hands of the shareholder. The gain or loss will be
considered long term if the shareholder has held the shares for more than one
year. The gain or loss on shares held for one year or less will be considered
short term and is taxed at the same rates as ordinary income.

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, you will be 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.

42 Prospectus
<PAGE> 45

FINANCIAL HIGHLIGHTS

The Financial Highlights beginning on page 44, 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 Funds' financial
statements, are included in the annual report which is available upon request.

For a copy of Wasatch Funds' current Annual Report, please call 1 (800)
551-1700, download it from our web site at www.wasatchfunds.com 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 pre-
sented in the Financial Highlights tables which begin on page 44. 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
interest income earned (lost) 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 (losses) are realized when securities are
sold. Gains (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 you would have earned (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
payable day of the distribution. A FUND'S TOTAL RETURN CANNOT BE COMPUTED
DIRECTLY FROM THE FINANCIAL HIGHLIGHTS TABLES.

RATIO TO AVERAGE NET ASSETS OF: EXPENSES shows the total of a Fund's
operating expenses divided by its average net assets for the stated period
before and after waivers and reimbursements.

RATIO TO AVERAGE NET ASSETS OF: Net investment income shows a Fund's net
investment income (loss) divided by its average net assets for the stated period
before and after waivers and reimbursements.

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.

43 Prospectus
<PAGE> 46

MICRO CAP FUND--FINANCIAL HIGHLIGHTS
Year ended September 30

2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 4.41 $ 3.59 $ 4.29 $ 3.15 $ 2.72

INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.09) (0.09) (0.10) (0.04) (0.03)
Net realized and unrealized
gains (losses) on securities 2.63 1.27 (0.27) 1.36 0.46
----------- ----------- ----------- ----------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 2.54 1.18 (0.37) 1.32 0.43

LESS DISTRIBUTIONS:
Distributions from
capital gains (0.42) (0.36) (0.33) (0.18) --
----------- ----------- ----------- ----------- ----------
TOTAL DISTRIBUTIONS (0.42) (0.36) (0.33) (0.18) --
----------- ----------- ----------- ----------- ----------

NET ASSET VALUE,
END OF PERIOD $ 6.53 $ 4.41 $ 3.59 $ 4.29 $ 3.15
=========== =========== =========== =========== ==========

TOTAL RETURN 63.88% 37.73% (8.75)% 44.58% 15.81%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $ 244,444 $ 144,875 $ 117,533 $ 157,907 $ 94,004
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 2.38% 2.46% 2.50% 2.50% 2.50%
Expenses, before waivers
and reimbursements 2.38% 2.46% 2.51% 2.58% 2.67%
Net investment income
(loss), net of waivers
and reimbursements (1.76)% (2.22)% (2.28)% (1.64)% (1.53)%
Net investment income
(loss), before waivers
and reimbursements (1.76)% (2.22)% (2.29)% (1.72)% (1.70)%
Portfolio turnover rate 69% 57% 81% 99% 84%
</TABLE>

44 Prospectus
<PAGE> 47

SMALL CAP VALUE FUND--FINANCIAL HIGHLIGHTS
Year ended September 30

2000 1999 1998(1)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 2.43 $ 1.80 $ 2.00

INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.02) (0.04) (0.01)
Net realized and unrealized
gains (losses) on securities 1.19 0.67 (0.19)
---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 1.17 0.63 (0.20)

LESS DISTRIBUTIONS:
Distributions from
capital gains (0.09) -- --
---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.09) -- --
---------- ---------- ----------

NET ASSET VALUE,
END OF PERIOD $ 3.51 $ 2.43 $ 1.80
========== ========== ==========

TOTAL RETURN 49.94% 35.00% (10.00)%(2)

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $ 46,470 $ 16,770 $ 14,306
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.95% 1.95% 1.95%(3)
Expenses, before waivers
and reimbursements 2.09% 2.18% 2.52%(3)
Net investment income
(loss), net of waivers
and reimbursements (1.02)% (1.54)% (1.02)%(3)
Net investment income
(loss), before waivers
and reimbursements (1.16)% (1.77)% (1.59)%(3)
Portfolio turnover rate 67% 106% 114%
</TABLE>

(1) Inception date of the Fund was December 17, 1997.
(2) Not annualized for periods less than a year.
(3) Annualized.

45 Prospectus
<PAGE> 48

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

2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 26.01 $ 20.79 $ 29.73 $ 24.17 $ 25.00

INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.23) (0.20) (0.17) (0.12) (0.18)
Net realized and unrealized
gains (losses) on securities 11.82 8.49 (5.08) 6.90 (0.11)
----------- ----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT
OPERATIONS 11.59 8.29 (5.25) 6.78 (0.29)

LESS DISTRIBUTIONS:
Distributions from
capital gains (2.71) (3.07) (3.69) (1.22) (0.54)
----------- ----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS (2.71) (3.07) (3.69) (1.22) (0.54)
----------- ----------- ----------- ----------- -----------

NET ASSET VALUE,
END OF PERIOD $ 34.89 $ 26.01 $ 20.79 $ 29.73 $ 24.17
=========== =========== =========== =========== ===========

TOTAL RETURN 49.63% 48.96% (19.13)% 29.45% (1.09)%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $ 237,812 $ 145,915 $ 123,723 $ 188,965 $ 253,319
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.38% 1.44% 1.48% 1.50% 1.50%
Expenses, before waivers
and reimbursements 1.38% 1.44% 1.48% 1.54% 1.50%
Net investment income
(loss), net of waivers
and reimbursements (0.84)% (0.79)% (0.60)% (0.39)% (0.65)%
Net investment income
(loss), before waivers
and reimbursements (0.84)% (0.79)% (0.60)% (0.43)% (0.65)%
Portfolio turnover rate 72% 46% 56% 48% 73%
</TABLE>

46 Prospectus
<PAGE> 49

CORE GROWTH FUND--FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30

INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.18) (0.21) (0.09) 0.08 0.07
Net realized and unrealized
gains (losses) on securities 8.12 4.55 (3.60) 6.07 1.87
----------- ----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT
OPERATIONS 7.94 4.34 (3.69) 6.15 1.94

LESS DISTRIBUTIONS:
Dividends from
net investment income -- -- (0.03) (0.07) (0.05)
Distributions from
capital gains (0.48) (0.72) (1.62) (1.31) (0.29)
----------- ----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS (0.48) (0.72) (1.65) (1.38) (0.34)
----------- ----------- ----------- ----------- -----------

NET ASSET VALUE,
END OF PERIOD $ 28.08 $ 20.62 $ 17.00 $ 22.34 $ 17.57
=========== =========== =========== =========== ===========

TOTAL RETURN 39.50% 27.28% (17.49)% 37.58% 12.39%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $ 290,705 $ 173,118 $ 153,148 $ 135,437 $ 104,237
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.38% 1.44% 1.44% 1.50% 1.50%
Expenses, before waivers
and reimbursements 1.38% 1.44% 1.44% 1.50% 1.51%
Net investment income
(loss), net of waivers
and reimbursements (0.86)% (1.07)% (0.50)% 0.44% 0.40%
Net investment income
(loss), before waivers
and reimbursements (0.86)% (1.07)% (0.50)% 0.44% 0.39%
Portfolio turnover rate 75% 79% 63% 81% 62%
</TABLE>

Prospectus 47

<PAGE> 50

ULTRA GROWTH FUND--FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30

2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 20.02 $ 15.10 $ 21.85 $ 17.95 $ 18.61

INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.25) (0.34) (0.31) (0.35) (0.26)
Net realized and unrealized
gains (losses) on securities 8.87 6.00 (4.44) 4.25 (0.21)
---------- ---------- ---------- ---------- -----------
TOTAL FROM INVESTMENT
OPERATIONS 8.62 5.66 (4.75) 3.90 (0.47)

LESS DISTRIBUTIONS:
Distributions from
capital gains (1.47) (0.74) (2.00) -- (0.19)
---------- ---------- ---------- ---------- -----------
TOTAL DISTRIBUTIONS (1.47) (0.74) (2.00) -- (0.19)
---------- ---------- ---------- ---------- -----------

NET ASSET VALUE,
END OF PERIOD $ 27.17 $ 20.02 $ 15.10 $ 21.85 $ 17.95
========== ========== ========== ========== ===========

TOTAL RETURN 46.66% 39.86% (22.07)% 21.75% (2.54)%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $ 56,282 $ 41,205 $ 43,553 $ 77,243 $ 128,490
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 1.82% 1.78% 1.90% 1.89% 1.81%
Net investment income
(loss), net of waivers
and reimbursements (1.19)% (1.49)% (1.54)% (1.48)% (1.27)%
Net investment income
(loss), before waivers
and reimbursements (1.26)% (1.52)% (1.69)% (1.62)% (1.33)%
Portfolio turnover rate 135% 77% 91% 103% 121%
</TABLE>

48 Prospectus
<PAGE> 51

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

2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 11.68 $ 13.42 $ 11.32 $ 10.21 $ 10.50

INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.66 0.61 0.27 0.61 0.44
Net realized and unrealized
gains (losses) on securities 0.39 (2.01) 2.39 0.73 0.01
---------- ---------- ---------- ---------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 1.05 (1.40) 2.66 1.34 0.45

LESS DISTRIBUTIONS:
Dividends from
net investment income (0.73) (0.28) (0.56) (0.23) (0.74)
Distributions from
capital gains -- (0.06) -- -- --
---------- ---------- ---------- ---------- ---------
TOTAL DISTRIBUTIONS (0.73) (0.34) (0.56) (0.23) (0.74)
---------- ---------- ---------- ---------- ---------

NET ASSET VALUE,
END OF PERIOD $ 12.00 $ 11.68 $ 13.42 $ 11.32 $ 10.21
========== ========== ========== ========== =========

TOTAL RETURN 9.84% (10.65)% 24.30% 13.23% 4.42%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(in thousands) $ 58,198 $ 76,999 $ 67,856 $ 11,205 $ 7,427
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.75% 0.75% 0.75% 0.75% 0.93%
Expenses, before waivers
and reimbursements 0.97% 0.95% 0.95% 1.22% 1.67%
Net investment income,
net of waivers and
reimbursements 5.35% 4.96% 5.06% 5.97% 5.21%
Net investment income,
before waivers and
reimbursements 5.13% 4.76% 4.86% 5.50% 4.47%
Portfolio turnover rate 16% 39% 5% 19% 30%
</TABLE>

Prospectus 49

<PAGE> 52

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 or bond market indexes. 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
indexes 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 44 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 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.

S&P 500(R) INDEX. 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

50 Propectus
<PAGE> 53

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.

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, Wasatch Small Cap Growth, Wasatch Core
Growth and Wasatch Ultra Growth Funds.

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 Small
Cap Value Fund.

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. This is the benchmark 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

Prospectus 51

<PAGE> 54

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
municipal 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

<PAGE> 55

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 company.
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 auto-
matically 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 RATIO (P/E) 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

Prospectus 53

<PAGE> 56

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. Bills are generally issued with maturities of one year
or less. Notes are generally issued with maturities of 10 years down to one
year. Bonds are generally issued with maturities of greater than 10 years.
Currently, bonds are issued with maturities of about 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. Strips may respond to a greater degree to fluctuations in interest
rates than do non-zero coupon securities.

54 Prospectus
<PAGE> 57

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 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 to the Public Reference Section
of the Commission, Washington, D.C. 20549-0102. Information about the Funds can
be reviewed and copied at the Commission's Public Reference Room in Washington,
D.C. or by electronic request at the following e-mail address:
[email protected].

Call the Commission at (202) 942-8090 for information.

Investment Company Act File Number:
811-4920

Prospectus 55

<PAGE> 58

STATEMENT OF ADDITIONAL INFORMATION

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

January 31, 2001

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, Small Cap Value Fund, Small Cap Growth Fund, Core Growth Fund, Ultra
Growth 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,
2001. Capitalized terms used herein and not defined have the same meanings as
those used in the Prospectus.

The following financial statements are incorporated by reference to the Annual
Report, dated September 30, 2000 of Wasatch Funds, Inc. (File No. 811-4920) as
filed with the Securities and Exchange Commission on November 15, 2000.

1. Schedules of Investments as of September 30, 2000
2. Statements of Assets and Liabilities as of September 30, 2000
3. Statements of Operations for Year Ended September 30, 2000
4. Statements of Changes in Net Assets for the Years Ended September
30, 2000 and 1999
5. Financial Highlights
6. Notes to Financial Statements
7. Report of Independent Public Accountants

Shareholders may obtain a copy of the Annual Report, without charge, by calling
1 (800) 551-1700 or by downloading it from Wasatch Funds' web site at
www.wasatchfunds.com.

<PAGE> 59

TABLE OF CONTENTS

General Information and History........................................ 3
Investment Objectives and Strategies................................... 3
Strategies and Risks................................................... 5
Description of Corporate Bond Ratings.................................. 8
Fund Restrictions and Policies......................................... 13
Management of the Company.............................................. 15
Control Persons and Principal Holders of Securities.................... 17
Investment Advisory and Other Services................................. 18
Brokerage Allocation and Other Practices............................... 20
Capital Stock and Other Securities..................................... 22
Purchase, Redemption and Pricing of Securities Being Offered........... 23
Tax Status............................................................. 24
Calculation of Performance Data........................................ 25
Financial Statements................................................... 26

2
<PAGE> 60

GENERAL INFORMATION AND HISTORY

Wasatch Funds, Inc. ("Wasatch Funds" or the "Company") was incorporated under
Utah law on November 18, 1986 and reincorporated as a Minnesota Corporation in
January 1998. The Small Cap Growth Fund, Core Growth Fund and Wasatch-Hoisington
U.S. Treasury Fund commenced operations on December 6, 1986, the Ultra Growth
Fund on August 16, 1992, the Micro Cap Fund on June 19, 1995 and the Small Cap
Value Fund 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, Small Cap
Value Fund, Small Cap Growth Fund, Core Growth Fund and Ultra Growth Fund are
each non-diversified funds. The Wasatch-Hoisington U.S. Treasury Fund is a
diversified fund.

While the equity Funds are "non-diversified", which means that they are
permitted to invest their assets in a more limited number of issuers than other
investment companies, the equity Funds intend to diversify their assets to the
extent necessary to qualify for tax treatment as a regulated investment company
under the Internal Revenue Code of 1986, as amended ("Code"). To so qualify (i)
not more than 25% of the total value of the equity Funds' assets may be invested
in securities of any one issuer (other than U.S. government securities and the
securities of other regulated investment companies) or of any two or more
issuers controlled by the equity Funds, which, pursuant to the regulations under
the Code, may be deemed to be engaged in the same, similar, or related trades or
businesses, and (ii) with respect to 50% of the total value of the equity Funds'
assets (a) not more than 5% of its total assets may be invested in the
securities of any one issuer (other than U.S. government securities and the
securities of other regulated investment companies) and (b) the equity Funds may
not own more than 10% of the outstanding voting securities of any one issuer
(other than U.S. government securities and the securities of other regulated
investment companies).

WASATCH MICRO CAP FUND. The Micro Cap Fund is currently closed to new investors
effective March 31, 2000. Due to market conditions or cash outflows, the Fund
may reopen from time to time to take in additional assets that the Advisor
believes will help maintain the Fund at an optimal size for investing in micro
cap companies To find out if the Fund is open, please call a Shareholder
Services Representative at 1 (800) 551-1700. The Micro Cap 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 the common stock of companies with market capitalizations
of less than $500 million at the time of initial purchase. Its strategy is to
invest in the smallest companies that the Advisor believes possess superior
growth potential, and are reasonably priced relative to the Advisor's projection
of the company's five year earnings growth rate. The Fund targets two types of
investments, core and high growth companies. The Advisor believes core companies
are stable and have the potential for consistent growth and the ability to
sustain growth over the long term. Characteristics the Advisor looks for in core
companies may include: the potential to grow steadily at a faster rate than that
of an average large company; a sustainable competitive advantage; and the
ability to capitalize on favorable long term trends. The Advisor believes high
growth companies have the potential for rapid stock price appreciation that can
enhance the Fund's returns. Investments in high growth companies are inherently
more risky than investments in core companies and their stock prices are more
volatile, but the Advisor believes the potential rewards are greater.
Characteristics the Advisor looks for in high growth companies may include: the
potential to grow faster and more aggressively than core companies; market
leadership or the potential to become a market leader; proprietary products; and
sound financial controls. Characteristics the Advisor looks for in core and high
growth companies may include: experienced top management with a substantial
stake in the

3
<PAGE> 61

company's future; high return on capital; and low use of debt. The Fund is best
suited for long term investors who can tolerate the greater risks and volatility
that are inherent with investment in micro cap stocks.

WASATCH SMALL CAP VALUE FUND. The Small Cap Value 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. The Fund will normally
invest at least 65% of its total assets in the common stock of companies with
market capitalizations of less than $1.5 billion at the time of initial
purchase. Its strategy is to invest in companies whose stocks the Advisor
believes are temporarily undervalued but have significant potential for
appreciation. Characteristics the Advisor looks for in value investments may
include: low stock valuations in the form of a low price-to-earnings 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 revenue
growth or market share. The Fund is best suited for long term investors who can
tolerate the greater risks and volatility that are inherent with investments in
small cap value stocks.

WASATCH SMALL CAP GROWTH FUND. The Small Cap 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 objective, the Fund will normally invest at least 65% of its total
assets in the common stock of companies with market capitalizations of less than
$1.5 billion at the time of initial purchase. Its strategy is to invest in
companies that the Advisor believes possess superior growth potential, and are
rationally priced relative to the Advisor's projection of the company's five
year earnings growth rate. The Fund targets two types of investments, core and
high growth holdings. The Advisor believes core companies are stable and have
the potential for consistent growth and the ability to sustain growth over the
long term. Characteristics the Advisor looks for in core companies may include:
the potential to grow steadily at a faster rate than that of an average large
company; a sustainable competitive advantage; and the ability to capitalize on
favorable long term trends. The Advisor believes high growth companies have the
potential for rapid stock price appreciation that can enhance the Fund's
returns. Investments in high growth companies are inherently more risky than
investments in core companies and their stock prices are more volatile, but the
Advisor believes the potential rewards are greater. Characteristics the Advisor
looks for in high growth companies may include: the potential to grow faster and
more aggressively than core companies; market leadership or the potential to
become a market leader; proprietary products; and sound financial controls.
Characteristics the Advisor looks for in core and high growth companies may
include: experienced top management with a substantial stake in the company's
future; high return on capital; and low use of debt. 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.

WASATCH CORE GROWTH FUND. The Core 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
objective, the Fund will normally invest at least 65% of its total assets in the
common stock of growing companies. Its strategy is to invest in the core
companies that the Advisor considers to be high quality, stable and
well-established with the potential to grow steadily for long periods of time.
The Fund will typically invest in small and mid-size companies with market
capitalizations of less than $5 billion at the time of initial purchase. The
Fund will strive to purchase stocks at prices the Advisor believes are
reasonable relative to the Advisor's projection of a company's five year
earnings growth rate. Characteristics the Advisor looks for in core companies
may include: the potential to grow steadily at a faster rate than that of an
average large company; a sustainable competitive advantage; the ability to
capitalize on favorable long term trends; experienced top management with a
substantial stake in the company's future; high return on capital; and low use
of debt. The Core Growth Fund is the most conservative equity fund offered by
Wasatch Funds. The Advisor seeks to limit volatility by investing in companies
that are believed to be stable and have the potential for consistent long term
growth. Nevertheless, the Fund will experience volatility and is best suited for
long term investors.

4
<PAGE> 62

WASATCH ULTRA GROWTH FUND. The Ultra 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
objective, the Fund will normally invest at least 65% of its total assets in the
common stock of companies the Advisor believes have the potential for high
growth based on such measures as increasing sales and/or earnings, market
leadership, expanding operating margins and benefiting from favorable trends.
Its strategy is to focus on companies in what the Advisor considers to be the
fastest growing sectors of the economy. The Fund will typically invest in
companies with market capitalizations of less than $5 billion at the time of
initial purchase. In attempting to achieve the Fund's primary investment
objective, it may take larger positions in a few companies that the Advisor
believes have outstanding investment potential. Characteristics the Advisor
looks for in high growth companies may include: the potential to increase
earnings and/or sales at a rate that is significantly faster than the average
large company; market leadership or the potential to become a market leader;
proprietary products; sound financial controls; experienced top management with
a substantial stake in the company's future; high return on capital; strong
internal cash flow; and low use of debt. Due to its aggressive investment
strategy, the Fund is best suited for long term investors who can tolerate the
greater risks and volatility that are inherent with investments in rapidly
growing small and mid-size companies.

WASATCH-HOISINGTON U.S. TREASURY FUND. The U.S. Treasury Fund's investment
objective is to provide a real 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 typically 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. The average maturity and
effective duration of the Fund's portfolio will be adjusted based on the
Sub-Advisor's assessment of multi-year trends in national and international
economic conditions and interest rates, changes in inflationary pressures, and
the value of 30-year Treasury bonds relative to inflation. The Fund will
typically invest in long term U.S. Treasury bonds (maturities longer than 20
years), including zero coupon Treasury securities, when the Sub-Advisor
determines that economic conditions suggest lower inflation and the multi-year
trend is toward decreasing interest rates. The Fund will typically invest in
U.S. Treasury bills or notes (maturities less than five years) when the
Sub-Advisor determines that economic conditions suggest rising inflation and the
multi-year trend is toward increasing 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. The turnover rate of the
Fund's portfolio 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, increase 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.

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, Small Cap Value, Small Cap Growth, Core
Growth and Ultra Growth 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

5
<PAGE> 63

Receipts, are not subject to this 15% limitation.) Investments in foreign
countries involve certain risks which are not typically associated with U.S.
investments.

ADDITIONAL RISKS OF FOREIGN SECURITIES.

FOREIGN SECURITIES MARKETS. Trading volume on foreign country and, in
particular, emerging market stock exchanges is substantially less than that on
the New York Stock Exchange. Further, securities of some foreign and in
particular emerging market companies are less liquid and more volatile than
securities of comparable U.S. companies. Fixed commissions on foreign exchanges
are generally higher than negotiated commissions on U.S. exchanges. The Funds
endeavor to achieve the most favorable net results on its portfolio transactions
and may be able to purchase the securities in which the Funds may invest on
other stock exchanges where commissions are negotiable. Foreign stock exchanges,
brokers and listed companies are generally subject to less government
supervision and regulation than in the United States. The customary settlement
time for foreign securities may be longer than the five day customary settlement
time for U.S. securities.

Companies in foreign countries are not generally subject to uniform accounting,
auditing and financial reporting standards, practices and disclosure
requirements comparable to those applicable to U.S. companies. Consequently,
there may be less publicly available information about a foreign company than
about a U.S. company. 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.

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.

FOREIGN TAX RISK. The Funds' income from foreign issuers may be subject
to non-U.S. withholding taxes. The Funds may also be subject to taxes on trading
profits or on transfers of securities in some countries. To the extent foreign
income taxes are paid by the Funds, shareholders may be entitled to a credit or
deduction for U.S. tax purposes.

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

EMERGING COUNTRY AND EMERGING SECURITIES MARKETS. The Funds may invest
in securities in emerging markets. Investing in securities in countries with
emerging securities markets may entail greater risks

6
<PAGE> 64

than investing in securities in countries with more mature securities markets.
These risks may include (i) less social, political and economic stability; (ii)
small current size of markets for such securities and low or nonexistent trading
volume, which result in lack of liquidity and greater price volatility; (iii)
certain national policies which may restrict the Funds' investment
opportunities, including restrictions on investments in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation; and (v) the
absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property.

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, Small Cap Value, Small Cap Growth, Core
Growth and Ultra Growth Funds (individually an "Equity Fund" and collectively
the "Equity 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 Advisor 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

7
<PAGE> 65

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.

ILLIQUID SECURITIES. Under SEC rules, an investment in a security is generally
deemed to be "illiquid" if it cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which such security
is valued by the Funds.

The Board of Directors has authorized the Advisor to make liquidity
determinations with respect to certain securities, including Rule 144A
securities. A foreign security that may be freely traded on or through the
facilities of an offshore exchange or other established offshore securities
market is not deemed to be an illiquid security.

The Funds may invest up to 15% of their net assets in illiquid securities
including "restricted" securities and private placements for which there is no
public market value. These securities will be valued by the Advisor, under the
supervision of the Board of Directors, using measures the Advisor believes to be
appropriate. Given the inherent uncertainties of estimating fair market value,
there can be no assurance that the value we place on a security will be
appropriate in terms of how the security may be ultimately valued on the public
market. These securities may never be publicly traded and the Funds may not be
able to easily liquidate its position in these securities.

If illiquid securities exceed 15% of a Fund's net assets after the time of
purchase, the Fund will take steps to reduce in an orderly fashion its holdings
of illiquid securities. Because illiquid securities may not be readily
marketable, the Advisor may not be able to dispose of them in a timely manner.
As a result, the Fund may be forced to hold illiquid securities while their
price depreciates. Depreciation in the price of illiquid securities may cause
the net asset value of the Fund to decline.

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 Advisor 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.

8
<PAGE> 66
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.

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

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

9
<PAGE> 67

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. The index used to measure inflation is
the non-seasonally adjusted U.S. City Average All Items Consumer Price Index for
All Urban Consumers ("CPIU").

The value of the principal is adjusted for inflation, and every six months the
security pays interest, which is 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 is 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, is
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 is 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 receives this additional amount. The
final interest payment, however, is 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

10
<PAGE> 68

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 are held and transferred in either of two
book-entry systems: the commercial book-entry system (TRADES) and TREASURY
DIRECT. The securities are maintained and transferred at their original par
amount, i.e., not their inflation-adjusted value. STRIPS components are
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.

11
<PAGE> 69

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 Advisor 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' Advisor 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.

12
<PAGE> 70

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, Small Cap Value, Small Cap Growth, Core Growth, Ultra
Growth and Wasatch-Hoisington U.S. Treasury Funds are set forth in the current
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, Small Cap Value Fund, Small Cap Growth Fund, Core Growth
Fund, Ultra Growth 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 indexes, bond indexes or interest rate
indexes) 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.

13
<PAGE> 71

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 restrictions and may be changed
by the Company's Board of Directors without shareholder vote.

The Micro Cap Fund, Small Cap Value Fund, Small Cap Growth Fund, Core Growth
Fund, Ultra Growth 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 Small Cap Value
Fund may invest up to 10% of its net assets in "Special Situations."

14
<PAGE> 72

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 and serve until their
successors are elected and qualified.

Dr. Samuel S. Stewart, Jr., is President and Chairman of the Board of Wasatch
Funds and Chairman of the Board of Wasatch Advisors. Dr. Stewart is the only
owner of more than 25% of Wasatch Advisors and is thus deemed to control the
Advisor. 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.

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

President and Chairman of the Board of the Company; Chairman of
the Board and Director of Research for the Advisor since 1975;
Professor of Finance at the University of Utah since 1975. Age
58.

*Roy S. Jespersen, MBA - Vice President and Director

Vice President and Director of the Company; Vice President,
Director of Client Services and Marketing for the Advisor since
1983. Age 57.

*Venice F. Edwards, CFA - Secretary/Treasurer

Secretary/Treasurer of the Company; Compliance Officer for the
Advisor since 1995; Portfolio Advisor for the Advisor since
1983. Age 50.

*Jeff S. Cardon, CFA - Executive Vice President and Director

Vice President and Director of the Company; President since 1999
and Director of the Advisor since 1985; Security Analyst for the
Advisor since 1980. Age 43.

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

15
<PAGE> 73

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 56.

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 60.

* 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 a retainer of $8,000 per year for services rendered and a
fee of $500 for each meeting attended. 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, 2000
(exclusive of out-of-pocket expenses reimbursed).

COMPENSATION TABLE

Aggregate Total Compensation From
Name of Person, Position Compensation Company Paid to Directors
From
Company
<S> <C> <C>
Samuel S. Stewart, Jr. $ 0 $ 0
President and Chairman of
the Board

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

Venice Edwards $ 0 $ 0
Secretary/Treasurer

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

James U. Jensen $10,500 $10,500

</TABLE>

16
<PAGE> 74

<TABLE>

<S> <C> <C>
Director

William R. Swinyard $10,500 $10,500
Director
</TABLE>

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of October 31, 2000, 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 SMALL CAP GROWTH FUND

Charles Schwab & Co., Inc.*, 101 Montgomery Street, San Francisco, CA
94104-4122, 21%; National Financial Services Corp.*, 200 Liberty Street, One
World Financial Center, New York, NY 10008-3908, 8%.

SERIES B - WASATCH CORE GROWTH FUND

Charles Schwab & Co., Inc.*, 101 Montgomery Street, San Francisco, CA
94104-4122, 43%; National Financial Services Corp.*, 200 Liberty Street, One
World Financial Center, New York, NY 10008-3908, 15%; Salomon Smith Barney,
Inc., 388 Greenwich Street, New York, NY 10013-2375, 7%.

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

SERIES D - WASATCH ULTRA GROWTH FUND

Charles Schwab & Co., Inc.*, 101 Montgomery Street, San Francisco, CA
94104-4122, 19%; National Financial Services Corp.*, 200 Liberty Street, One
World Financial Center, New York, NY 10008-3908, 18%.

SERIES E - WASATCH MICRO CAP FUND

SERIES G - WASATCH SMALL CAP VALUE FUND

Charles Schwab & Co., Inc.*, 101 Montgomery Street, San Francisco, CA
94104-4122, 27%; National Financial Services Corp.*, 200 Liberty Street, One
World Financial Center, New York, NY 10008-3908, 19%; BHC Securities, Inc., One
Commerce Square, 2005 Market Street, Philadelphia, PA 19103, 7%; Two R
Management Ltd., 3187 North Foothill Drive, Provo, UT 84604, 6%.

As of October 31, 2000 the directors and officers as a group owned less than 1%
of the outstanding shares of each Fund except the Wasatch _____ Fund and Wasatch
_________Fund, of which the directors and officers owned ____% and ____%
respectively.

*Shareholders of record, not beneficial owners.

17
<PAGE> 75

CODE OF ETHICS. Rule 17j-1 under the Investment Company Act is designed to
prevent abuses that could occur as a result of conflicts of interest arising out
of personal trading by persons involved with or with access to information about
a fund's investment activities. The Funds and the Advisor have adopted a
detailed Code of Ethics regarding personal investing by their personnel pursuant
to Rule 17j-1 under the Investment Company Act. The Code of Ethics requires
personnel who are "access persons" of any Fund within the meaning of Rule 17j-1
to comply with the Code of Ethics adopted pursuant to Rule 17j-1, subject to
sanctions by the Advisor in the event of non-compliance.

The Code of Ethics places certain restrictions on the trading activities of its
access persons. Access Persons are required to pre-clear by memo approved by the
Advisor's Investment Committee each personal transaction in a non-exempt
security. The pre-clearance process is designed to prevent transactions that
conflict with the Funds' interests. Access Persons are also required to report
their non-exempt personal securities transactions on a quarterly basis.

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 Advisor, 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 $1.8 billion as of October 31, 2000.

The principal executive officers and directors of the Advisor are Samuel S.
Stewart, Jr., Ph.D., Chairman of the Board; Jeff S. Cardon, President and
Director; Roy S. Jespersen, Vice President and Director; Venice F. Edwards,
Secretary; Karey Barker, Director; and Robert Gardiner, Director. Dr. Samuel S.
Stewart, Jr. is the only owner of the Advisor who owns more than 25% of the
Advisor's outstanding equity and is deemed to control the Advisor.

Under an Advisory and Service Contract, the Small Cap Growth and Core Growth
Funds pay the Advisor a monthly fee computed on average daily net assets of each
Fund at the annual rate of 1.0%, the Small Cap Value Fund pays the Advisor at
the annual rate of 1.5%, the Micro Cap Fund pays the Advisor at the annual rate
of 2.0%, and the Ultra Growth Fund pays the Advisor at an annual rate of 1.25%.
The Wasatch-Hoisington U.S. Treasury Fund pays the Advisor 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 Advisor provides an investment program for, and carries out the investment
policy and manages the portfolio assets of, each Fund. The Advisor 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 Advisor 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,

18
<PAGE> 76

registrars and stock transfer agents; certain expenses incurred by employees of
the Advisor; and extraordinary and non-recurring expenses.

The Advisor has voluntarily agreed to limit until September 30, 2001 Small Cap
Growth Fund and Core Growth Fund expenses to 1.50%, Micro Cap Fund expenses to
2.50%, Ultra Growth Fund expenses to 1.75%, Small 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
Advisor 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, 2000, 1999 and 1998, the Advisor
accrued the following management fees and waived a portion of its management
fees in the following:

2000 1999 1998

<S> <C> <C> <C>
Micro Cap Fund
Gross Management Fees $3,726,198 $2,804,083 $2,777,499
Waived Management Fees 0 0 10,302

Small Cap Value Fund
Gross Management Fees $ 398,392 $ 238,650 $ 168,330
Waived Management Fees 37,035 36,671 63,716

Small Cap Growth Fund
Gross Management Fees $1,884,121 $1,401,362 $1,691,806
Waived Management Fees 0 0 0

Core Growth Fund
Gross Management Fees $2,163,030 $1,649,180 $1,652,942
Waived Management Fees 0 0 0

Ultra Growth Fund
Gross Management Fees $ 551,021 $ 579,749 $ 716,723
Waived Management Fees 31,782 13,038 85,203

Wasatch-Hoisington U.S. Treasury Fund
Gross Management Fees $ 294,028 $ 435,364 $ 108,334
Waived Management Fees 130,331 170,043 43,480
</TABLE>

GENERAL INFORMATION

ADMINISTRATOR AND TRANSFER AGENT. Pursuant to Administration and Fund Accounting
Agreements (the "Administration Agreements"), Sunstone Financial Group, Inc.
("Sunstone"), 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301,
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

19
<PAGE> 77

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 value of each Fund
computed daily and payable monthly, at the annual rate of twenty one-hundredths
of one percent (0.20%) for the Wasatch Small Cap Growth Fund, Wasatch Core
Growth Fund, and Wasatch Small Cap Value Fund, nineteen one-hundredths of one
percent (0.19%) for the Ultra Growth Fund (until March 1, 2001) and eighteen
one-hundredths of one percent (0.18%) for the Wasatch-Hoisington U.S. Treasury
Fund (until March 1, 2001) 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 ($50,000); Small Cap Value Fund ($50,000), Small
Cap Growth Fund ($50,000); Core Growth Fund ($50,000); Ultra Growth Fund
($50,000); and Wasatch-Hoisington U.S. Treasury Fund ($50,000).

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 0.75
basis points on combined net assets up to $500,000,000, plus 0.50 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 PUBLIC ACCOUNTANTS. Arthur Andersen LLP, 100 East Wisconsin Avenue,
Suite 1900, Milwaukee, WI 53202-4107 are the Company's independent 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 Advisor is responsible for selecting the broker or dealer to execute
transactions for the Wasatch Equity Funds (Micro Cap, Small Cap Value, Small Cap
Growth, Core Growth and Ultra Growth Funds), and for negotiating and determining
any commission rates to be paid for such transactions. The Advisor has no
affiliated broker-dealer. The Advisor 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
Advisor 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
Advisor in the exercise of its investment decision-making responsibilities. The
Company's Board of Directors has authorized the Advisor to pay a broker who

20
<PAGE> 78

provides research services commissions that are competitive but that are higher
than the lowest available rate that another broker might have charged, if the
Advisor 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 Advisor 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 Advisor may consider sales of shares
of the Company as a factor in the selection of dealers to execute portfolio
transactions for the Company.

The Advisor 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 Advisor in servicing all of its accounts; not
all of such services may be used by the Advisor in connection with the Company.
In the opinion of the Advisor, the benefits from research services to each of
the accounts (including the Company) managed by the Advisor 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 Advisor, such costs to the Company will not
be disproportionate to the benefits received by the Company on a continuing
basis.

The Advisor'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 Advisor.

During the years ended September 30, 2000, 1999 and 1998, the Company paid the
following brokerage commissions on agency transactions

2000 1999 1998

<S> <C> <C> <C>
Micro Cap Fund $121,599 $ 99,355 $173,701
Small Cap Value Fund $ 74,047 $ 54,708 $ 97,166
Small Cap Growth Fund $131,608 $105,010 $191,834
Core Growth Fund $294,755 $386,944 $383,599
Ultra Growth Fund $ 60,213 $ 37,868 $ 91,381
Wasatch-Hoisington U.S. Treasury Fund $ 0 $ 0 $ 0
</TABLE>

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, 2000, the Funds directed brokerage
transactions to brokers for research services provided. The amount of such
transactions and related commissions are as follows:

21
<PAGE> 79

2000
Research Research Commissions
Commission
Transactions

<S> <C> <C>
Micro Cap Fund $42,711,677 $ 99,121
Small Cap Value Fund $15,329,688 $ 53,635
Small Cap Growth Fund $54,049,417 $ 79,755
Core Growth Fund $74,942,348 $ 154,876
Ultra Growth Fund $41,339,743 $ 47,617
Wasatch-Hoisington U.S. Treasury Fund $ 0 $ 0
</TABLE>

CAPITAL STOCK AND OTHER SECURITIES

Wasatch Funds was incorporated under Utah law on November 18, 1986, and
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 - Small Cap Growth Fund
Series B Common - Core Growth Fund
Series C Common - Wasatch-Hoisington U.S. Treasury Fund
Series D Common - Ultra Growth Fund
Series E Common - Micro Cap Fund
Series F Common - Global Technology Fund
Series G Common - Small 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 and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, are specifically allocated to such Fund. They constitute the
underlying assets of each Fund, are required to be segregated on the books of
account, and are to be charged with the expenses of such Fund. Any general
expenses of the Company not readily identifiable as belonging to a particular
Fund will be allocated on the basis of each Fund's relative net assets during
the fiscal year.

Each share of a 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, 2000 was as follows:

22
<PAGE> 80

Micro Cap Small Cap Value Small Cap Core Growth Ultra Growth Wasatch-Hoisington
Fund Fund Growth Fund Fund Fund U.S. Treasury Fund
<S> <C> <C> <C> <C> <C> <C>
Net Assets divided by $244,444,480 $ 46,470,433 $237,811,882 $290,705,337 $ 56,281,823 $ 58,198,086
Shares Outstanding 37,443,974 13,243,741 6,816,598 10,352,471 2,071,293 4,848,236
equals
Net Asset Value Per Share $ 6.53 $ 3.51 $ 34.89 $ 28.08 $ 27.17 $ 12.00
(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.

The Funds will deduct a fee of 2.00% from redemption proceeds on Fund shares
held less than two months. This redemption fee is paid directly to the Funds and
is designed to offset brokerage commissions, market impact and other costs
associated with fluctuations in Fund asset levels and cash flow caused by short
term shareholder trading. If a shareholder bought shares on different days, the
shares held longest will be redeemed first for purposes of determining whether
the redemption fee applies. The redemption fee does not apply to shares that
were acquired through reinvestment of dividends nor does it apply to 401(k)
plans.

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

23
<PAGE> 81

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 a Fund from domestic corporations.

Any dividend or capital gain distribution paid shortly after a purchase of
shares of a 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 a 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.

A 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 a 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 a Fund.

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

24
<PAGE> 82

redemption price at maturity" of the obligation and its "issue price," as those
terms are defined in the Code. Similarly, if a Fund acquires an already issued
zero coupon bond from another holder, the bond will have original issue discount
in a Fund's hands, equal to the difference between the "adjusted issue price" of
the bond at the time a 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, a 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

25
<PAGE> 83

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.

(AS OF 9/30/00) AVERAGE ANNUAL TOTAL RETURNS

--------------------------- ------------------------- ------------------------- -----------------------------
1 Year 5 Years 10 Years (or since
inception)
--------------------------- ------------------------- ------------------------- -----------------------------
<S> <C> <C> <C>
Micro Cap Fund 63.88% 28.09% 33.99%
(Inception: 6/19/95)
--------------------------- ------------------------- ------------------------- -----------------------------
Small Cap Value Fund 49.94% N/A 24.02%
(Inception: 12/17/97)
--------------------------- ------------------------- ------------------------- -----------------------------
Small Cap Growth Fund 49.63% 18.20% 22.21%
--------------------------- ------------------------- ------------------------- -----------------------------
Core Growth Fund 39.50% 17.77% 19.51%
--------------------------- ------------------------- ------------------------- -----------------------------
Ultra Growth Fund 46.66% 13.66% 16.82%
(Inception: 8/16/92)
--------------------------- ------------------------- ------------------------- -----------------------------
U.S. Treasury Fund 9.84% 7.60% 8.01%
--------------------------- ------------------------- ------------------------- -----------------------------
</TABLE>

FINANCIAL STATEMENTS

The Funds' financial statements and notes thereto appearing in the September 30,
2000 Annual Report and the report thereon of Arthur Andersen LLP, independent
public accountants, appearing therein, are incorporated by

26
<PAGE> 84

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, 803 West
Michigan Street, Suite A, Milwaukee, Wisconsin 53233-2301 or you may download a
copy of the Annual Report form Wasatch Funds' web site at www.wasatchfunds.com.

27
<PAGE> 85
PART C

OTHER INFORMATION

ITEM 23 EXHIBITS
a. Articles of Incorporation of Wasatch Funds, Inc. dated
November 3, 1997(5)
b-1 Bylaws of Wasatch Funds, Inc. dated November 3, 1997 (5)
b-2. Bylaws of Wasatch Funds, Inc. dated September 25, 2000(7)
c. None
d-1. Advisory and Service Contract dated January 27, 1998(5)
d-2. Expense Reimbursement Agreement date January 16, 1997(5)
e. None
f. None
g-1. Custodian Agreement between Wasatch Funds, Inc. and UMB Bank,
n.a. dated February 16, 1996(2)
g-2. Amendment to Custodian Agreement between Wasatch Funds, Inc.
and UMB Bank, n.a. dated July 14, 1996(2)
g-3. Amendment to Custodian Agreement between Wasatch Funds, Inc.
and UMB Bank, n.a. dated December 12, 1997(3)
h-1. Administration and Fund Accounting Agreement between Wasatch
Funds, Inc. and Sunstone Financial Group, Inc. dated December
8, 1995(1)
h-2. Amendment to Administration and Fund Accounting Agreement
between Wasatch Funds, Inc. and Sunstone Financial Group, Inc.
dated October 1, 1996(2)
h-3. Amendment to Administration and Fund Accounting Agreement
between Wasatch Funds, Inc. and Sunstone Financial Group, Inc.
dated December 5, 1997(3)
h-4. Administration and Fund Accounting Agreement between Wasatch
Funds, Inc. and Sunstone Financial Group, Inc., dated March 1,
2000.(6)
h-5. Transfer Agent Agreement between Wasatch Funds, Inc. and
Sunstone Financial Group, Inc. dated January 1, 1997(3)
h-5. Amendment to Transfer Agent Agreement between Wasatch Funds,
Inc. and Sunstone Investor Services, LLC. dated December 17,
1997(3)
h-6. Transfer Agent Agreement between Wasatch Funds, Inc. and
Sunstone Financial Group, Inc. dated March 1, 2000(6)
i. Opinion of Counsel(8)
j. Consent of Arthur Andersen LLP(8)
k. None
l. None
m. None
n. None.
p. Code of Ethics of Wasatch Advisors, Inc., and Wasatch Funds,
Inc.(7)

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

(1) Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 7 to the
Company's Registration Statement on Form N-1A.

(2) Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 14 to the
Company's Registration Statement on Form N-1A.

2
<PAGE> 86

(3) Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 16 to the
Company's Registration Statement on Form N-1A.

(4) Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 17 to the
Company's Registration Statement on Form N-1A.

(5) Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 18 to the
Company's Registration Statement on Form N-1A.

(6) Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 19 to the
Company's Registration Statement on Form N-1A.

(7) Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 20 to the
Company's Registration Statement on Form N-1A.

(8) Filed herewith.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Registrant is controlled by its Board of Directors. Registrant neither controls
any person or is under common control with any other person.

ITEM 25. INDEMNIFICATION

The Registrant's Articles of Incorporation provide that the Registrant shall
indemnify such persons for such expenses and liabilities, in such manner, under
such circumstances, and to the full extent as permitted by Section 302A.521 of
the Minnesota Statutes, as now enacted or hereafter amended; provided, however,
that no such indemnification may be made if it would be in violation of Section
17(h) of the Investment Company Act of 1940, as now enacted or hereafter
amended.

Section 302A.521 of the Minnesota Statutes, as now enacted, provides that a
corporation shall indemnify a person made or threatened to be made a party to a
proceeding by reason of the former or present official capacity of the person
against judgments, penalties, fines, settlements and reasonable expenses,
including attorneys fees and disbursements, incurred by the person in connection
with the proceeding if, with respect to the acts or omissions of the person
complained of in the proceeding, the person has not been indemnified by another
organization for the same judgments, penalties, fines, settlements, and
reasonable expenses incurred by the person in connection with the proceeding
with respect to the same acts or omissions; acted in good faith, received no
improper personal benefit, and the Minnesota Statutes dealing with directors
conflicts of interest, if applicable, have been satisfied; in the case of a
criminal proceeding, had no reasonable cause to believe that the conduct was
unlawful; and reasonably believed that the conduct was in the best interests of
the corporation or, in certain circumstances, reasonably believed that the
conduct was not opposed to the best interests of the corporation.

Indemnification shall only be made when (1) a final decision on the merits by a
court or other body before whom the proceeding was brought that the person to be
indemnified ("indemnitee") was not liable by

<PAGE> 87

reason of disabling conduct or, (2) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the indemnitee
was not liable by reason of disabling conduct, by (a) the vote of a majority of
a quorum of directors who are neither "interested persons" of the company as
defined in Section 2(a)(19) of the 1940 Act nor parties to the proceeding
("disinterested, non-party directors"), or (b) an independent legal counsel in a
written opinion.

Insofar as the conditional advancing of indemnification monies for actions based
upon the Investment Company Act of 1940 may be concerned, such payments will be
made only on the following conditions: (1) the indemnitee shall provide a
security for his undertaking, (2) the investment company shall be insured
against losses arising by reason of any lawful advances, or (3) a majority of a
quorum of the disinterested, non-party directors of the investment company, or
an independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR

As of August 31, 2000, Wasatch Advisors, Inc. (the "Manager" of the Registrant)
acted as the investment advisor for employee benefit plans, other tax-free plans
including individual retirement accounts, Keoghs, endowments and foundations,
and taxable accounts in addition to the six series of Wasatch Funds, Inc. The
total assets under management were approximately $1.6 billion (including the
Funds) as of August 31, 2000.

Certain information regarding each officer and director of the Manager including
each business, profession, vocation or employment of a substantial nature in
which each such person is or has been engaged at any time during the past two
fiscal years is set forth below.

Other Substantial
Position Business, Profession,
Name with Manager Vocation or Employment
---- ------------ ----------------------
<S> <C> <C>
Samuel S. Stewart, Jr., Ph.D. President, Chairman of the Board, Professor of Finance,
Director and Director of Research University of Utah

Roy S. Jespersen Vice President, Director, and --
Portfolio Manager

Jeff S. Cardon Vice President, Director, and --
Securities Analyst
</TABLE>

<S> <C> <C>
Mark E. Bailey Vice President, Director, and Portfolio --
Manager

Jeff H. Collings Secretary, Treasurer --

Karolyn Barker Director and Research Analyst --

Robert Gardiner Director and Research Analyst --
</TABLE>

ITEM 27. PRINCIPAL UNDERWRITERS

None

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

1. Wasatch Advisors, Inc., 150 Social Hall Avenue, Salt Lake City, Utah
84111 (records relating to its function as investment advisor).
2. UMB Bank, n.a., 928 Grand Avenue, Kansas City, MO 64141 (records
relating to its function as custodian.
3. Sunstone Financial Group, Inc. 803 West Michigan Street, Suite A,
Milwaukee, WI 53233 (records relating to its function as administrator
and fund accounting servicing agent).
4. Sunstone Financial Group, Inc. 803 West Michigan Street, Suite A,
Milwaukee, WI 53233 (records relating to its function as transfer agent
and shareholder servicing agent).

ITEM 29. MANAGEMENT SERVICES

Other than as set forth under the caption "Management of the Company" in the
Prospectus constituting Part A of the Registration Statement and under the
captions "Management of the Fund" and "Investment Advisory and Other Services"
in the Statement of Additional Information constituting Part B of the
Registration Statement, Registrant is not a party to any management-related
service contract.

ITEM 32. UNDERTAKINGS

None.

<PAGE> 89

SIGNATURES

Pursuant to the requirement of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this
Amended Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Salt Lake City, and the State of Utah on
the 22 day of November 2000.

WASATCH FUNDS, INC.

By /s/ Samuel S. Stewart, Jr.
------------------------------
Samuel S. Stewart, Jr., Ph.D.,
President

Pursuant to the requirements of the Securities Act of 1933, this Amended
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

Signature Title Date

/s/ Samuel S. Stewart, Jr. President and Director November 22, 2000
------------------------------- (principal executive
Samuel S. Stewart, Jr., Ph.D. officer)

/s/ Venice Edwards Secretary and Treasurer November 21, 2000
------------------------------- (principal financial and
Venice Edwards accounting officer)

/s/ Roy S. Jespersen Vice President and Director November 21, 2000
-------------------------------
Roy S. Jespersen

/s/ Jeff S. Cardon Vice President and Director November 21, 2000
-------------------------------
Jeff S. Cardon

Director
-------------------------------
James U. Jensen, Esquire

Director
-------------------------------
William R. Swinyard