CORRESP 1 b52874wfcorresp.txt WASATCH FUNDS, INC. State Street Corp. Legal Services Department PO Box 5049 Boston, MA 02206-5049 VIA EDGAR December 20, 2004 Ms. Patricia P. Williams Securities and Exchange Commission Investment Company Division 450 Fifth Street, N.W. Washington, DC 20549 Re: Wasatch Funds, Inc. ("Registrant") File Nos. 033-10451, 811-04920 Dear Ms. Williams: This letter responds to the comments on Post-Effective Amendment No. 32 to the Registrant's registration statement on Form N-1A on behalf of the Wasatch International Opportunities Fund (the "Fund") that were provided to me by telephone on Monday, November 29, 2004. Registrant acknowledges the Securities and Exchange Commission's ("SEC") press release, dated June 24, 2004 ("Press Release"), in which the SEC announced that, in connection with any filing upon which comments are provided to the registrant by the SEC staff, the staff would require a written representation from the registrant to the effect that the comment process would not be used as a defense by the registrant in any securities related litigation brought against it. In accordance with the position announced in the Press Release, and on behalf of the Registrant, Registrant acknowledges that it is responsible for the adequacy and accuracy of the disclosures in its filings with the SEC and that it may not assert SEC staff comments as a defense in any proceeding initiated by the SEC or any person under the federal securities laws of the United States. Registrant further acknowledges that SEC staff comments or changes to disclosures in response to SEC staff comments in a filing reviewed by the SEC staff do not foreclose the SEC from taking any action with respect to such filing. 1. SEC COMMENT: Please confirm that the Fund will send a potential shareholder a copy of both the Prospectus for the Fund as well as the Prospectus for the Northern U.S. Government Money Market Fund. Please move the subscription offering language with respect to the subscription period after the "Investment Objectives, Principal Strategies and Principal Risks of the Fund." RESPONSE: A copy of both the Prospectus for the Fund and the Prospectus for the Northern U.S. Government Money Market Fund will be sent to potential shareholders during the subscription offering and will be posted on the Funds' web site. The subscription offering language will become a supplement to the Prospectus. 2. SEC COMMENT: Under the section "Investment Objectives, Principal Strategies and Principal Risks of the Fund" in the Prospectus, please move the language explaining the closing of the Fund after the risk return summary. RESPONSE: The change will be made as requested. 3. SEC COMMENT: Under the section "Investment Objectives, Principal Strategies and Principal Risks of the Fund" on page 2 of the Prospectus, please explain the term "early stage companies." RESPONSE: The word "early stage companies" will be italicized and the following language will be added to the Glossary of Investing Terms on page 32 of the Prospectus: "EARLY STAGE COMPANIES are in the developmental stage, have a limited operating history, and are focused on building their businesses. An early stage company may not be currently profitable and may be pursuing financing, technology development, additional management team members and appropriate facilities." 4. SEC COMMENT: Under the section entitled "Investment Objectives, Principal Strategies and Principal Risks of the Fund" on page 2 of the Prospectus, please move the section "Closing or Reopening of the Fund" after the Fees and Expenses of the Fund. RESPONSE: The change will be made as requested. 5. SEC COMMENT: Under the section "Fees and Expenses of the Fund" on page 4 of the Prospectus, please change the order in the Shareholder Fees table to be consistent with Item 3 of Form N-1A. RESPONSE: The table will be amended to read as follows: Shareholder Fees (paid directly from your investment) 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 two months or less) 2.00% Exchange Fee None Maximum Account Fee None ANNUAL IRA MAINTENANCE FEE (1) $12.50 PER ACCOUNT IRA DISTRIBUTION FEE (2) $15.00 EACH OUTGOING WIRE TRANSFER FEE $10.00 EACH
6. SEC COMMENT: Under the section "Management of Wasatch Funds - Research Team" on page 14 of the Prospectus, please clarify who manages the Fund. Pursuant to Instruction 2 of Item 5(a)(2) of Form N-1A, a committee, team or other group of persons associated with an investment adviser of the Fund ("Adviser Group") is jointly and primarily responsible for the day-to-day management of the Fund's portfolio, provide disclosure to the effect that the Fund's investments are managed by the Adviser Group; the names of the members of the Adviser Group need not be provided. RESPONSE: The section "Management of Wasatch Funds - Research Team" on page 14 of the Prospectus will be amended to read as follows: WASATCH INTERNATIONAL OPPORTUNITIES FUND RESEARCH TEAM The Wasatch International Opportunities Fund is managed using a team approach. RESEARCH TEAM The Wasatch research team consists of a Director of Research, 14 portfolio managers and 10 securities analysts. The portfolio managers are responsible for making investment decisions for their respective Wasatch Funds in accordance with each Fund's investment objective and strategies. For the International Opportunities Fund, certain members of the research team shown below are responsible for making investment decisions for the Fund. The research team is responsible for analyzing securities and making investment recommendations. DIRECTOR OF RESEARCH Samuel S. Stewart, Jr., PhD, CFA has served as President of Wasatch Funds since 1986, Chairman of the Board from 1986-2004 and Chairman of the Board of the Advisor since 1975. 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. From 1975 through 2000, Dr. Stewart served as a professor of finance at the University of Utah. PORTFOLIO MANAGERS ROGER D. EDGLEY, CFA joined the Advisor in 2002. He has 12 years of international experience focused on investing in growing small and mid-size companies using a process of bottom-up, fundamental analysis similar to the style employed by the Advisor. Mr. Edgley is a native of the United Kingdom. Prior to joining the Advisor, Mr. Edgley was a principal, director of international research and portfolio manager for Liberty Wanger Asset Management in Chicago, which manages the Acorn Funds. He was a co-manager of the Acorn Foreign Forty Fund. Liberty Financial acquired Wanger Asset Management in 2000. Mr. Edgley joined Wanger Asset Management as an equities analyst in 1994 to cover the firm's Asia (ex-Japan) portfolio that included the markets of Hong Kong, Singapore, Malaysia, Taiwan, Indonesia, Thailand and Korea. Prior to this, he was a financial analyst based in Hong Kong. Mr. Edgley is a Chartered Financial Analyst. He earned a Bachelor of Science with honors in psychology from the University of Hertfordshire, a Master of Arts in philosophy from the University of Sussex and a Master of Science in social psychology with statistics from the London School of Economics. JEFF CARDON, CFA is Vice President of Wasatch Funds and President, Treasurer and a Director of the Advisor. He is the portfolio manager of the Wasatch Small Cap Growth Fund. Mr. Cardon joined the Advisor 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 Vice President and Director of the Advisor. In addition, she is a portfolio manager of the Wasatch Ultra Growth Fund. Ms. Barker joined the Advisor in 1989. She is a Chartered Financial Analyst and holds a Bachelor of Science degree in finance and a Bachelor of Arts degree in French from the University of Utah. ROBERT GARDINER, CFA is a Vice President and Director of the Advisor. In addition, he is a portfolio manager of the Wasatch Micro Cap and Wasatch Micro Cap Value Funds. Mr. Gardiner joined the Advisor 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. CHRISTOPHER D. BOWEN is a portfolio manager of the Wasatch Heritage Growth Fund. He joined the Advisor in 2001. Prior to joining the Advisor, Mr. Bowen earned a Master in Business Administration from the University of Maryland. From 1996 to 1999, he worked in Washington, D.C. as an analyst with the Financial Institutions Regulatory Group of the law firm Skadden, Arps, Slate, Meagher & Flom LLP. He received a Bachelor of Arts degree in economics from St. Mary's College of Maryland where he graduated Summa Cum Laude. BRIAN BYTHROW, CFA is a portfolio manager of the Wasatch Micro Cap Value Fund. He joined the Advisor in 2003. Since 1998 and prior to joining the Advisor, Mr. Bythrow was the portfolio manager for the Monogram Special Equity Fund. Mr. Bythrow is a Chartered Financial Analyst. He earned a Master of Business Administration from California State University in Sacramento, California and a Bachelor of Science degree in social sciences from the United States Air Force Academy. DANIEL CHACE, CFA is a portfolio manager of the Wasatch Micro Cap Fund. He joined the Advisor in 2002. Prior to joining the Advisor, Mr. Chace earned a Master in Business Administration from Harvard Business School. Before entering business school in 2000, he worked in New York City as an equities analyst following Latin American financial institutions at J.P. Morgan Securities Inc. From 1999 to 2000, he was lead Latin American financial institutions analyst at SG Cowen Securities MICHAEL W. GERDING, CFA is the portfolio manager of the Wasatch International Growth Fund. He joined the Advisor in 2002. Prior to joining the Advisor, Mr. Gerding was a vice president and portfolio manager with Denver Investment Advisors (DIA). He joined DIA in 1999. Mr. Gerding was a senior vice president and portfolio manager for Founders Asset Management in Denver. He joined Founders in 1990. From 1985 until joining Founders, Mr. Gerding was a portfolio manager and research analyst with NCNB Texas. He is a Chartered Financial Analyst. Mr. Gerding earned a Bachelor of Business Administration in finance and a Master of Business Administration from Texas Christian University. AJAY KRISHNAN, CFA is the portfolio manager of the Wasatch Global Science & Technology Fund and a portfolio manager of the Wasatch Ultra Growth Fund. He joined the Advisor 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 is a portfolio manager of the Wasatch Small Cap Value Fund. He joined the Advisor in 1995. He holds a Master's degree in business and a Bachelor of Arts degree in economics from Brigham Young University. JOHN MALOOLY, CFA is a portfolio manager of the Wasatch Micro Cap Value Fund. He joined the Advisor in 1997 from UMB Fund Services, Inc. (formerly Sunstone Financial Group), the transfer agent for Wasatch Funds. Mr. Malooly is a Chartered Financial Analyst. He holds a Bachelor of Science in Business Administration from Marquette University. JOHN MAZANEC is a portfolio manager of the Wasatch Small Cap Value Fund. He joined the Advisor in 2001. Mr. Mazanec was an equity research analyst with Huntington Partners in Chicago, Illinois from 1996 until he joined the Advisor. He holds a Master's degree in business from Harvard University Graduate School of Business Administration and a Bachelor of Arts degree in economics from DePauw University. RYAN SNOW is a portfolio manager of the Wasatch Heritage Growth Fund. He joined the Advisor in 2000. Mr. Snow worked for Fidelity Investments from 1999 until he joined the Advisor. He holds a Bachelor of Science degree in finance from the University of Utah. JB TAYLOR is a portfolio manager of the Wasatch Core Growth Fund. He joined the Advisor in 1996. Mr. Taylor holds a Bachelor of Science degree in industrial engineering from Stanford University. 7. SEC COMMENT: Under the section "Account Policies - Policies to Prevent Market Timing" on page 20 of the Prospectus, please revise the section to comply with Item 6(e) of Form N-1A. Please see SEC Release No. 33-8408. RESPONSE: The section will be amended to read as follows: "Short-term trading" or "market timing" involves frequent purchases and redemptions of fund shares and may present risks for long-term shareholders of a fund including, among other things, dilution in the value of fund shares held by long-term shareholders, interference in the efficient management of the fund's portfolio, increased brokerage and administrative costs and forcing the fund to hold excess levels of cash. Another form of market timing is called time zone arbitrage. This occurs when shareholders of funds that primarily invest in securities that are listed on foreign exchanges take advantage of time zone differences between the close of foreign markets on which the Fund's securities trade and the close of the U.S. markets, which is when the Fund's share prices are calculated. Wasatch Funds are intended as long-term investments. Therefore, the Fund's Board of Directors has adopted policies and procedures designed to prohibit short-term trading, excessive exchanges and other market timing activities. Steps the Fund will take include periodically reviewing individual shareholder trading activity to identify shareholders who are making excessive transactions or otherwise trading the Fund inappropriately. In addition, the Fund generally charges a 2.00% redemption fee on Fund shares held two months or less. (See "Redemption Fee" on page 22 for additional details.) The Advisor reserves the right to revise or terminate the exchange privilege, limit the amount of any exchange, or reject an exchange, at any time, for any reason. The Fund cannot always know about or reasonably detect excessive trading by shareholders who purchase shares of the Fund through financial intermediaries. Intermediaries generally maintain omnibus accounts with the Fund, which do not allow access to individual shareholders' account information. With respect to trades that occur through omnibus accounts at intermediaries, the Fund has requested assurance that intermediaries have policies to prevent market timing." 8. SEC COMMENT: Under the section "Account Policies - Exchanging Shares" on page 25 of the Prospectus, the first bullet point reads "Fund shares may be exchanged on days the New York Stock Exchange is open for business." and the second bullet point reads "Fund shares may be exchanged for money market fund shares on days banks are open for business." Under the section "Account Policies - Exchanges between Wasatch Funds and the Northern U.S. Government Money Market Fund" on page 25 of the Prospectus, the sixth bullet point reads "Exchange requests will be effective the day the transfer agent receives them in good order by 4:00 p.m. Eastern Time, or market close on days the Fund's shares are priced, 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." Please clarify the difference between bank holidays and New York Stock Exchange holidays and revise language as appropriate. RESPONSE: The first bullet point under the section "Account Policies - Exchanging Shares" on page 25 will be revised to read as follows: "Fund shares may be exchanged for shares of other Wasatch Funds on days the New York Stock Exchange is open for business." The second bullet point will be revised to read as follows: "Fund shares may be exchanged for money market fund shares on days the New York Stock Exchange is open for business, unless it is a bank holiday. Bank holidays include Columbus Day and Veteran's Day. Bank holiday schedules are subject to change without notice." Under the section "Account Policies - Exchanges between Wasatch Funds and the Northern U.S. Government Money Market Fund" on page 25 of the Prospectus, the following will be added to the sixth bullet point: "Bank holidays include Columbus Day and Veteran's Day. Bank holiday schedules are subject to change without notice." 9. SEC COMMENT: Under the section "Investment Objectives and Strategies" in the Statement of Additional Information, the Fund states that its investment objective can be changed without shareholder approval. Please add this disclosure to the Prospectus. RESPONSE: The change will be made as requested. Please call me at (617) 662-3968 if you have any further questions. Very truly yours, /s/ Julie Tedesco ----------------- Julie Tedesco Vice President and Senior Counsel cc: A. Palmer F. Hayes