Table of Contents
Table of Contents
| TABLE OF CONTENTS | ||
|
| ||
|
| ||
| 2 | ||||
| 7 | ||||
| 12 | ||||
| 17 | ||||
| 22 | ||||
| 27 | ||||
| 32 | ||||
| 37 | ||||
| 42 | ||||
| 47 | ||||
| 52 | ||||
| 57 | ||||
| 62 | ||||
| 67 | ||||
| 72 | ||||
| 77 | ||||
| 83 | ||||
| 88 | ||||
| 93 | ||||
| 98 | ||||
| 102 | ||||
| 106 | ||||
| 111 | ||||
| 113 | ||||
| 121 | ||||
| 124 | ||||
| 133 | ||||
1
Table of Contents
| WASATCH CORE GROWTH FUND — Summary | ||
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s primary investment objective is long-term growth of capital. Income is 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.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.00% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.21% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
1.21% |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.50% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Core Growth Fund — Investor Class |
$ | 123 | $ | 384 | $ | 665 | $ | 1,465 | ||||||||
2
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 16% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in smaller growing companies at reasonable prices.
Under normal market conditions, we will invest at least 65% of the Fund’s net assets in the equity securities of growing companies. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds). These companies are usually small to mid-size with market capitalizations of less than $5 billion at the time of purchase.
The Fund may invest up to 20% of its total assets at the time of purchase in securities issued by foreign companies in developed or emerging markets. Securities issued by companies incorporated outside the United States whose securities are publicly traded in the United States are not defined as foreign companies and are not subject to this limitation.
We focus on companies that we consider to be high quality. 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. Our analysis may include studying a company’s financial statements, building proprietary financial models, visiting company facilities, and meeting with executive management, suppliers and customers.
The Fund seeks to purchase stocks at prices we believe are reasonable relative to our projection of a company’s long term earnings growth rate. The secondary objective of income is achieved when fast growing portfolio companies pay dividends, generated by cash flow, typically after achieving growth targets.
The Fund may invest a large percentage of its assets in a few sectors, including industrials, financials, consumer discretionary, information technology and health care.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Smaller Company Stock Risk. Small and mid cap stocks may be very sensitive to changing economic conditions and market downturns. In particular, the issuers of small company stocks have more narrow markets for their products and services, fewer product lines, and more limited managerial and financial resources than larger issuers. The stocks of small companies may therefore be more volatile and the ability to sell these stocks at a desirable time or price may be more limited.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
3
Table of Contents
| WASATCH CORE GROWTH FUND — Summary | ||
|
| ||
|
| ||
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
4
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index and an additional index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH CORE GROWTH FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
29.50% | |||
| Worst — 12/31/08 |
-27.03% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
5 Years | 10 Years | |||||||||
| Wasatch Core Growth Fund — Investor Class |
||||||||||||
| Return before taxes |
30.18% | 24.23% | 8.91% | |||||||||
| Return after taxes on distributions |
29.76% | 24.14% | 8.10% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
17.43% | 20.04% | 7.22% | |||||||||
| Russell 2000® Index (reflects no deductions for fees, expenses or taxes) |
38.82% | 20.08% | 9.07% | |||||||||
| Russell 2000® Growth Index (reflects no deductions for fees, expenses or taxes) |
43.30% | 22.58% | 9.41% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
5
Table of Contents
| WASATCH CORE GROWTH FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Managers
| JB Taylor Lead Portfolio Manager Since 2000 |
Paul Lambert Portfolio Manager Since 2005 |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$100 | |||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
6
Table of Contents
| WASATCH EMERGING INDIA FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is long-term appreciation of capital.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.50% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
1.49% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
2.99% | |
| Expense Reimbursement |
(1.04)% | |
|
| ||
| Total Annual Fund Operating Expenses After Expense Reimbursement |
1.95% | |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.95% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained the same. The example reflects contractual fee waivers and reimbursements through January 31, 2015. 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 | |||||||||||||
| Emerging India Fund — Investor Class |
$ | 198 | $ | 826 | $ | 1,480 | $ | 3,235 | ||||||||
7
Table of Contents
| WASATCH EMERGING INDIA FUND — Summary | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 40% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in companies tied economically to India.
Under normal market conditions, we will invest at least 80% of the Fund’s assets in the equity securities of companies tied economically to India. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds).
We will generally consider qualifying investments to be in companies that are listed on an Indian exchange, that have at least 50% of their assets in India, or that derive at least 50% of their revenues or profits from goods produced or sold, investments made, or services performed in India.
The Fund is expected to invest across market capitalization levels, ranging from small capitalization stocks to larger capitalization stocks. However, we expect the Fund to invest a significant portion of its assets in small to mid-size companies with market capitalizations of less than $5 billion at the time of purchase.
We use a process of quantitative screening followed by “bottom up” fundamental analysis to identify individual companies that we believe have above average revenue and earnings growth potential.
The Fund may invest a large percentage of its assets in a few sectors, including financials, consumer discretionary, industrials, consumer staples, materials, health care and information technology.
We may also invest in initial public offerings (IPOs).
The Fund is non-diversified, meaning that it can concentrate investments in a more limited number of issuers than a diversified fund.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Indian Market Risk. Government actions, bureaucratic obstacles and inconsistent economic and tax reform within the Indian government have had a significant effect on the economy and could adversely affect market conditions, deter economic growth and reduce the profitability of private enterprises. Global factors and foreign actions may inhibit the flow of foreign capital on which India is dependent to sustain its growth. Large portions of many Indian companies remain in the hands of their founders (including members of their families). Family-controlled companies may have weaker and less transparent corporate governance, which increases the potential for loss and unequal treatment of investors. India experiences many of the market risks associated with developing economies, including relatively low levels of liquidity, which may result in extreme volatility in the prices of Indian securities. Religious, cultural and military disputes persist in India, and between India and Pakistan (as well as sectarian groups within each country). The threat of aggression in the region could hinder development of the Indian economy, and escalating tensions could impact the broader region, including China.
Because the Fund concentrates its investments in a single region of the world, the value of the Fund’s shares may be affected by events that adversely affect India and may fluctuate more than the value of a less concentrated fund’s shares.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries (such as India) include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
8
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
Small Company Stock Risk. Small cap stocks may be very sensitive to changing economic conditions and market downturns. In particular, the issuers of small company stocks often have more narrow markets for their products and services, fewer product lines, and more limited managerial and financial resources than larger issuers. The stocks of small companies may therefore be more volatile and the ability to sell these stocks at a desirable time or price may be more limited.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Initial Public Offerings (IPOs) Risk. IPOs involve a higher degree of risk because companies involved in IPOs generally have limited operating histories and their prospects for future profitability are uncertain. Prices of IPOs may also be unstable due to the absence of a prior public market, the small number of shares available for trading and limited investor information.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Staples Sector Risk. The consumer staples sector may be affected by marketing campaigns, changes in consumer demands, government regulations and changes in commodity prices.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
Materials Sector Risk. Changes in world events, political, environmental and economic conditions, energy conservation, environmental policies, commodity price volatility, changes in exchange rates, imposition of import controls, increased competition, depletion of resources and labor relations may adversely affect the companies engaged in the production and distribution of materials.
Non-Diversification Risk. The Fund can invest a larger portion of its assets in the stocks of a limited number of companies than a diversified fund, which means it may 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.
9
Table of Contents
| WASATCH EMERGING INDIA FUND — Summary | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over the last calendar year and since inception. Past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the calendar years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH EMERGING INDIA FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 3/31/12 |
21.43% | |||
| Worst — 6/30/12 |
-6.95% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year | Since Inception (4/26/11) |
||||||||
| Wasatch Emerging India Fund — Investor Class |
||||||||||
| Return before taxes |
-1.46% | 0.91% | ||||||||
| Return after taxes on distributions |
-1.46% | 0.85% | ||||||||
| Return after taxes on distributions and sale of Fund shares |
-0.82% | 0.70% | ||||||||
| MSCI India Investable Market Index* (reflects no deductions for fees, expenses or taxes) |
-5.32% | -9.02% | ||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
*Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI.
10
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Manager
| Ajay Krishnan, CFA Lead Portfolio Manager Since Inception |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
11
Table of Contents
| WASATCH EMERGING MARKETS SELECT FUND — Summary | ||
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is long-term growth of capital.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.25% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
1.15% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
2.40% | |
| Expense Reimbursement |
(0.71)% | |
|
| ||
| Total Annual Fund Operating Expenses After Expense Reimbursement |
1.69% | |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.69% of average daily net assets (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses in excess of such limitations) until at least January 31, 2015. The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the Fund’s operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained the same. The example reflects contractual fee waivers and reimbursements through January 31, 2015. 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 | |||||||||||||
| Emerging Markets Select Fund — Investor Class Shares |
$ | 172 | $ | 681 | $ | 1,216 | $ | 2,682 | ||||||||
12
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal period, the Fund’s portfolio turnover rate was 43% of the average value of its portfolio, on an annualized basis.
PRINCIPAL STRATEGIES
The Fund invests primarily in companies of all market capitalizations that are tied economically to emerging market countries.
Under normal market conditions, we will invest at least 80% of the Fund’s assets in the equity securities of companies that are tied economically to emerging market countries. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds).
Emerging market countries are those currently included in the Morgan Stanley Capital International (MSCI) Emerging Markets Index. We will generally consider qualifying investments to be in companies that are listed on an exchange in an emerging market country, that have at least 50% of their assets in an emerging market country, or that derive at least 50% of their revenues or profits from goods produced or sold, investments made, or services performed in an emerging market country.
We travel extensively outside the U.S. to visit companies and expect to meet with senior management. We use a process of quantitative screening followed by “bottom up” fundamental analysis with the goal of owning the highest quality growth companies tied economically to emerging market countries. Our analysis may include studying a company’s financial statements, visiting company facilities, and meeting with executive management, suppliers and customers.
We do not use allocation models to restrict the Fund’s investments to certain regions, countries or industries.
The Fund may invest a large percentage of its assets in a few sectors, including consumer staples, consumer discretionary, financials, health care, industrials and materials and in convertible securities.
The Fund may invest in initial public offerings (IPOs) and early stage companies.
The Fund is non-diversified, meaning that it can concentrate investments in a more limited number of issuers than a diversified fund. Under normal market conditions, the Fund will generally invest in 30 to 50 companies. However, we may invest in fewer or more companies when we believe that doing so will help our efforts to achieve the Fund’s investment objective.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Small Company Stock Risk. Small cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have narrow markets for their products or services, fewer product lines, and more limited managerial and financial resources than larger issuers. The stocks of small cap companies may therefore be more volatile and the ability to sell these stocks at a desirable time or price may be more limited.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Convertible Securities Risk. Generally, convertible securities offer lower interest or dividend yields than non-convertible securities of similar quality and have less potential for gains or capital appreciation in a rising stock market than other equity securities. They tend to be more volatile than other fixed income securities, and the markets for convertible securities may be less liquid than the markets for common stocks or bonds. The value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. An issuer may have the right to buy back certain convertible securities at a time and price that would be unfavorable to the Fund.
13
Table of Contents
| WASATCH EMERGING MARKETS SELECT FUND — Summary | ||
|
| ||
|
| ||
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Staples Sector Risk. The consumer staples sector may be affected by marketing campaigns, changes in consumer demands, government regulations and changes in commodity prices.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Materials Sector Risk. Changes in world events, political, environmental and economic conditions, energy conservation, environmental policies, commodity price volatility, changes in exchange rates, imposition of import controls, increased competition, depletion of resources and labor relations may adversely affect the companies engaged in the production and distribution of materials.
Initial Public Offerings (IPOs) Risk. IPOs involve a higher degree of risk because companies involved in IPOs generally have limited operating histories and their prospects for future profitability are uncertain. Prices of IPOs may also be unstable due to the absence of a prior public market, the small number of shares available for trading and limited investor information.
Early Stage Companies Risk. Early stage companies may never obtain necessary financing, may rely on untested business plans, may not be successful in developing markets for their products or services, and may remain an insignificant part of their industry, and as such may never be profitable. Stocks of early stage companies may be illiquid, privately traded, and more volatile and speculative than the securities of larger companies.
Non-Diversification Risk. Because the Fund is non-diversified and generally invests in 30 to 50 companies, the Fund will have more exposure to the price movements of a single security or a small group of securities than funds that diversify their investments among many companies. The Fund’s total return and net asset value could fluctuate more than if a greater number of securities were held.
14
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over the last calendar year and since inception. Past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing the Fund’s performance, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the calendar year shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH EMERGING MARKETS SELECT FUND — INVESTOR CLASS
Calendar Year Total Return
Best and Worst Quarterly Returns
| Best — 12/31/13 |
3.00% | |||
| Worst — 6/30/13 |
-6.54% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
Since Inception (12/13/12) |
||||||||
| Wasatch Emerging Markets Select Fund — Investor Class |
||||||||||
| Return before taxes |
-3.27% | -1.46% | ||||||||
| Return after taxes on distributions |
-3.19% | -1.38% | ||||||||
| Return after taxes on distributions and sale of Fund shares |
-1.74% | -1.02% | ||||||||
| MSCI Emerging Markets Index* (reflects no deductions for fees, expenses or taxes) |
-2.60% | -1.17% | ||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
*Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI.
15
Table of Contents
| WASATCH EMERGING MARKETS SELECT FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Managers
| Ajay Krishnan, CFA Lead Portfolio Manager Since Inception |
Roger Edgley, CFA Portfolio Manager Since Inception |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
16
Table of Contents
| WASATCH EMERGING MARKETS SMALL CAP FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is long-term growth of capital.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.75% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.31% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
2.06% | |
| Expense Reimbursement |
(0.11)% | |
|
| ||
| Total Annual Fund Operating Expenses After Expense Reimbursement |
1.95% | |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.95% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Emerging Markets Small Cap Fund — Investor Class |
$ | 198 | $ | 635 | $ | 1,098 | $ | 2,381 | ||||||||
17
Table of Contents
| WASATCH EMERGING MARKETS SMALL CAP FUND — Summary | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 41% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in small companies tied economically to emerging markets.
Under normal market conditions, we will invest at least 80% of the Fund’s assets in the equity securities of companies with market capitalizations of less than $3 billion that are tied economically to emerging market countries. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds). The Fund considers a company to be a small-capitalization company if its market capitalization, at the time of purchase, is less than the larger of $3 billion or the market capitalization of the largest company in the Morgan Stanley Capital International (MSCI) Emerging Markets Small Cap Index during the most recent 12 month period.
Emerging market countries are those currently included in the Morgan Stanley Capital International (MSCI) Emerging Markets Index. We will generally consider qualifying investments to be in companies that are listed on an exchange in an emerging market country, that have at least 50% of their assets in an emerging market country, or that derive at least 50% of their revenues or profits from goods produced or sold, investments made, or services performed in an emerging market country.
We travel extensively outside of the U.S. to visit companies and expect to meet with senior management. We use a process of quantitative screening followed by “bottom up” fundamental analysis to identify individual companies that we believe have above average revenue and earnings growth potential.
We do not use allocation models to restrict the Fund’s investments to certain regions, countries or industries.
The Fund may invest a large percentage of its assets in a few sectors, including consumer discretionary, financials, industrials, consumer staples, materials and health care.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Small Company Stock Risk. Small cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have more narrow markets for their products or services, fewer product lines, and more limited managerial and financial resources than larger issuers. The stocks of small cap companies may therefore be more volatile and the ability to sell stocks at a desirable time or price may be more limited.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Staples Sector Risk. The consumer staples sector may be affected by marketing campaigns, changes in consumer demands, government regulations and changes in commodity prices.
18
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Materials Sector Risk. Changes in world events, political, environmental and economic conditions, energy conservation, environmental policies, commodity price volatility, changes in exchange rates, imposition of import controls, increased competition, depletion of resources and labor relations may adversely affect the companies engaged in the production and distribution of materials.
19
Table of Contents
| WASATCH EMERGING MARKETS SMALL CAP FUND — Summary | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index and an additional index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH EMERGING MARKETS SMALL CAP FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
56.10% | |||
| Worst — 12/31/08 |
-32.16% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year | 5 Years |
Since Inception (10/1/07) |
|||||||||
| Wasatch Emerging Markets Small Cap Fund — Investor Class |
||||||||||||
| Return before taxes |
-3.60% | 26.63% | 5.19% | |||||||||
| Return after taxes on distributions |
-4.10% | 26.44% | 5.04% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
-1.63% | 22.14% | 4.06% | |||||||||
| MSCI Emerging Markets Small Cap Index* (reflects no deductions for fees, expenses or taxes) |
1.04% | 19.58% | 0.12% | |||||||||
| MSCI Emerging Markets Index* (reflects no deductions for fees, expenses or taxes) |
-2.60% | 14.79% | -0.58% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
*Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI.
20
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Managers
| Roger Edgley, CFA Lead Portfolio Manager Since 2007 |
Laura Geritz, CFA Portfolio Manager Since 2009 |
Andrey Kutuzov, CFA Associate Portfolio Manager Since January 31, 2014 |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$100 | |||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI, 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
21
Table of Contents
| WASATCH FRONTIER EMERGING SMALL COUNTRIES FUND — Summary | ||
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is long-term growth of capital.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.75% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.68% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
2.43% | |
| Expense Reimbursement |
(0.18)% | |
|
| ||
| Total Annual Fund Operating Expenses After Expense Reimbursement |
2.25% | |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 2.25% of average daily net assets (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses) until at least January 31, 2015. The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Frontier Emerging Small Countries Fund — Investor Class |
$ | 228 | $ | 740 | $ | 1,279 | $ | 2,752 | ||||||||
22
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 13% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in the equity securities of companies of all market capitalizations that are tied economically to frontier markets and small emerging market countries.
Under normal market conditions, we will invest at least 80% of the Fund’s assets in the equity securities of companies that are tied economically to frontier markets and small emerging market countries. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds).
“Frontier markets” include any country that is outside the Morgan Stanley Capital International (MSCI) All Country World Index, and also any country that is currently included in the Russell Frontier Index, the S&P Frontier Broad Market Index (BMI), the MSCI Frontier Markets Index, or similar market indices, or that, in our opinion, has similar characteristics regardless of its inclusion in an index.
“Emerging markets” include those countries currently considered to be developing as per their inclusion in the MSCI Emerging Markets Index. We consider a “small emerging market country” to be any country that individually constitutes not more than 7% of the MSCI Emerging Markets Index or the S&P Emerging BMI.
We will generally consider qualifying investments to be in companies that are listed on an exchange in a frontier market or small emerging market country, that are legally domiciled in a frontier market or small emerging market country, that have at least 50% of their assets in a frontier market or small emerging market country, or that derive at least 50% of their revenues or profits from goods produced or sold, investments made, or services provided in a frontier market or small emerging market country. The Fund will not be required to sell a security because the market to which it is economically tied is no longer what we consider to be a frontier market or a small emerging market country.
In general, frontier markets and small emerging market countries, with the exception of the oil-producing Persian Gulf States, tend to have relatively low gross national product per capita compared to the larger traditionally-recognized emerging markets and the world’s major developed economies. Frontier and small emerging market countries include the least developed markets even by emerging market standards. We believe frontier markets and small emerging market countries offer investment opportunities that arise from long-term trends in demographics, deregulation, offshore outsourcing and improving corporate governance.
The Fund may invest in the equity securities of companies of any size, although we expect a significant portion of the Fund’s assets to be invested in the companies with market capitalizations of under US$3 billion at the time of purchase.
We travel extensively outside the U.S. to visit companies and expect to meet with senior management. We use a process of quantitative screening followed by “bottom up” fundamental analysis with the goal of owning the highest quality growth companies tied economically to frontier markets and small emerging market countries.
We do not use allocation models to restrict the Fund’s investments to certain regions, countries or industries.
The Fund may invest a large percentage of its assets in a few sectors, including consumer staples, consumer discretionary, financials and industrials.
We may also invest in initial public offerings (IPOs).
The Fund is non-diversified, meaning that it can concentrate investments in a more limited number of issuers than a diversified fund.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
23
Table of Contents
| WASATCH FRONTIER EMERGING SMALL COUNTRIES FUND — Summary | ||
|
| ||
|
| ||
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Frontier Markets Risk. In addition to the risks of investing in foreign securities and emerging markets, frontier market securities involve unique risks, such as exposure to economies less diverse and mature than those of the U.S. or more established foreign markets. Economic or political instability may cause larger price changes in frontier market securities than in securities of issuers based in more developed foreign countries, including securities of issuers in larger emerging markets. Frontier markets generally receive less investor attention than developed markets or larger emerging markets. These risks can result in the potential for extreme price volatility and illiquidity.
Small Company Stock Risk. Small cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have more narrow markets for their products and services, fewer product lines and more limited managerial and financial resources than larger issuers. The stocks of small cap companies may therefore be more volatile and the ability to sell these stocks at a desirable time or price may be more limited.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Initial Public Offerings (IPOs) Risk. IPOs involve a higher degree of risk because companies involved in IPOs generally have limited operating histories and their prospects for future profitability are uncertain. Prices of IPOs may also be unstable due to the absence of a prior public market, the small number of shares available for trading and limited investor information.
Liquidity Risk. From time to time, the trading market for a particular security or type of security in which the Fund invests may become less liquid or even illiquid. Reduced liquidity will have an adverse impact on the Fund’s ability to sell such securities when necessary to meet the Fund’s liquidity needs or in response to a specific economic event. Market quotations for such securities may be volatile.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Staples Sector Risk. The consumer staples sector may be affected by marketing campaigns, changes in consumer demands, government regulations and changes in commodity prices.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Non-Diversification Risk. The Fund can invest a larger portion of its assets in the stocks of a limited number of companies than a diversified fund, which means it may 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.
24
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over the last calendar year and since inception. Past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing the Fund’s performance, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the calendar year shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index and an additional index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH FRONTIER EMERGING SMALL COUNTRIES FUND — INVESTOR CLASS
Calendar Year Total Return
Best and Worst Quarterly Returns
| Best — 3/31/13 |
8.33% | |||
| Worst — 6/30/13 |
1.75% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
Since Inception (1/31/12) |
||||||||
| Wasatch Frontier Emerging Small Countries Fund — Institutional Class |
||||||||||
| Return before taxes |
18.00% | 26.08% | ||||||||
| Return after taxes on distributions |
18.14% | 26.14% | ||||||||
| Return after taxes on distributions and sale of Fund shares |
10.42% | 20.46% | ||||||||
| MSCI Frontier Emerging Markets Index* (reflects no deductions for fees, expenses or taxes) |
4.28% | 10.13% | ||||||||
| MSCI Frontier Markets Index* (reflects no deductions for fees, expenses or taxes) |
25.89% | 17.75% | ||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
*Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI.
25
Table of Contents
| WASATCH FRONTIER EMERGING SMALL COUNTRIES FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Manager
Laura Geritz, CFA
Lead Portfolio Manager
Since Inception
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS SHARES | |
| New Accounts |
$2,000 | |
| New Accounts with an Automatic Investment Plan |
$1,000 | |
| Individual Retirement Accounts (IRAs) |
$2,000 | |
| Coverdell Education Savings Accounts |
$1,000 | |
| SUBSEQUENT PURCHASES | INVESTOR CLASS SHARES | |
| Regular Accounts and IRAs |
$ 100 | |
| Automatic Investment Plan |
$50 per month or $100 per quarter | |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange (NYSE) is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Share class (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
26
Table of Contents
| WASATCH GLOBAL OPPORTUNITIES FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is long-term growth of capital.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.50% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.30% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
1.80% | |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.95% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Global Opportunities Fund — Investor Class |
$ | 183 | $ | 567 | $ | 975 | $ | 2,116 | ||||||||
27
Table of Contents
| WASATCH GLOBAL OPPORTUNITIES FUND — Summary | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 43% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in small and micro cap foreign and domestic companies.
Under normal market conditions, we will invest the Fund’s assets in equity securities of foreign and domestic companies with market capitalizations of less than US$5 billion at the time of purchase. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds). The Fund may invest a significant portion of its total assets (up to 35% under normal market conditions) in securities of companies with market capitalizations greater than US$5 billion at the time of purchase when the companies meet our investment criteria. The Fund may also invest a significant portion of its total assets in micro cap companies with market capitalizations below US$1 billion (up to 90% under normal market conditions).
The Fund will typically invest in securities issued by companies domiciled in at least three countries, including the United States. The Fund may invest a significant portion of its total assets in companies domiciled in foreign countries (up to 80% under normal market conditions). Securities issued by foreign companies incorporated outside the United States whose securities are publicly traded in the United States are not defined as “foreign companies” and are not subject to this limitation.
The Fund may invest a significant amount of its total assets (5% to 50% under normal market conditions) at the time of purchase in securities issued by companies domiciled in emerging markets. Emerging market countries are those currently included in the Morgan Stanley Capital International (MSCI) EFM (Emerging + Frontier Markets) Index. These companies typically are located in the Asia-Pacific region, Eastern Europe, the Middle East, Central and South America, and Africa.
We use a process of quantitative screening followed by “bottom up” fundamental analysis to identify individual companies that we believe are the World’s Best Growth Companies.® We travel extensively to visit companies and expect to meet with senior management.
We may also invest in growth companies that we believe have had a temporary setback and therefore have appealing valuation relative to their long-term growth potential.
At times, we may invest in early stage companies with limited or no earnings history if we believe they have outstanding long-term growth potential. We may also invest in initial public offerings (IPOs).
We do not use allocation models to restrict the Fund’s investments to certain regions, countries or industries. We may significantly shift Fund assets between asset classes, sectors, and geographic regions based on where we believe the best growth opportunities and valuations currently exist. The Fund may invest a large percentage of its assets in a few regions or sectors, including industrials, information technology, consumer discretionary, consumer staples, health care, financials, and energy.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Region Risk. Social, political and economic conditions and changes in regulatory, tax, or economic policy in a country or region could significantly affect the market in that country or region. In addition, global economies and financial markets are becoming increasingly interconnected, which increases the possibility that conditions in one country or region might adversely impact the issuers of securities in a different country or region. From time to time, a small number of companies and industries may represent a large portion of the market in a particular country or region, and these companies and industries can be sensitive to adverse social, political, economic, or regulatory developments.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging and Frontier Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging and frontier market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
28
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
Micro Cap and Small Company Stock Risk. Micro cap and small company stocks may be very sensitive to changing economic conditions and market downturns because the issuers have more narrow markets for their products and services, fewer product lines, and more limited managerial and financial resources than larger issuers. The stocks of small and micro cap companies may therefore be more volatile and the ability to sell these stocks at a desirable time or price may be more limited.
Early Stage Companies Risk. Early stage companies may never obtain necessary financing, may rely on untested business plans, may not be successful in developing markets for their products or services, and may remain an insignificant part of their industry, and as such may never be profitable. Stocks of early stage companies may be illiquid, privately traded, and more volatile and speculative than the securities of larger companies.
Initial Public Offerings (IPOs) Risk. IPOs involve a higher degree of risk because companies involved in IPOs generally have limited operating histories and their prospects for future profitability are uncertain. Prices of IPOs may also be unstable due to the absence of a prior public market, the small number of shares available for trading and limited investor information.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Value Investing Risk. A value investing strategy attempts to identify strong companies with stocks selling at a discount from their perceived true worth, and is subject to the risk that the stocks’ intrinsic values may never be fully recognized or realized by the market, their prices may go down, or that stocks judged to be undervalued may actually be appropriately priced.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Staples Sector Risk. The consumer staples sector may be affected by marketing campaigns, changes in consumer demands, government regulations and changes in commodity prices.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Energy Sector Risk. The value of energy companies is particularly vulnerable to developments in the energy sector, fluctuations in price and supply of energy fuels, energy conservation, supply of and demand for specific energy-related products or services, and tax policy and other government regulation.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
29
Table of Contents
| WASATCH GLOBAL OPPORTUNITIES FUND — Summary | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH GLOBAL OPPORTUNITIES FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
32.73% | |||
| Worst — 9/30/11 |
-18.94% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
|
Since Inception (11/17/08) |
|||||||||
| Wasatch Global Opportunities Fund — Investor Class |
||||||||||||
| Return before taxes |
25.27% | 23.90% | 25.91% | |||||||||
| Return after taxes on distributions |
22.26% | 22.15% | 24.17% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
16.75% | 19.83% | 21.63% | |||||||||
| MSCI All Country (AC) World Small Cap Index* (reflects no deductions for fees, expenses or taxes) |
28.66% | 20.72% | 21.92% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
*Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI.
30
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Managers
| JB Taylor Lead Portfolio Manager Since 2011 |
Ajay Krishnan, CFA Lead Portfolio Manager Since 2012 |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$100 | |||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
31
Table of Contents
| WASATCH HERITAGE GROWTH FUND — Summary | ||
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s primary investment objective is long-term growth of capital. Income is 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.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
0.70% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.29% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
0.99% | |
| Expense Reimbursement |
(0.04)% | |
|
| ||
| Total Annual Fund Operating Expenses After Expense Reimbursement |
0.95% | |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 0.95% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Heritage Growth Fund — Investor Class |
$ | 97 | $ | 311 | $ | 543 | $ | 1,209 | ||||||||
32
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 19% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in growing mid cap companies at reasonable prices.
Under normal market conditions, the Fund will invest in the equity securities of growing companies with market capitalizations of between $2.5 billion and $15 billion at the time of purchase. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds).
The Fund may invest up to 20% of its total assets at the time of purchase in securities issued by foreign companies in developed or emerging markets. Securities issued by companies incorporated outside the United States whose securities are publicly traded in the United States are not defined as foreign companies and are not subject to this limitation.
We focus on companies that we consider to be high quality, and 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. Our analysis may include studying a company’s financial statements, building proprietary financial models, visiting company facilities, and meeting with executive management, suppliers and customers. The secondary objective of income is achieved when fast growing portfolio companies pay dividends, generated by cash flow, typically after achieving growth targets.
The Fund seeks to purchase stocks at prices we believe are reasonable relative to our projection of a company’s long term earnings growth rate.
The Fund may invest a large percentage of its assets in a few sectors, including information technology, industrials, consumer discretionary, financials, health care and energy.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Small Company Stock Risk. Small cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers have more narrow markets for their products or services, fewer product lines, and more limited managerial and financial resources than larger issuers. The stocks of small cap companies may therefore be more volatile and the ability to sell these stocks at a desirable time or price may be more limited.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
33
Table of Contents
| WASATCH HERITAGE GROWTH FUND — Summary | ||
|
| ||
|
| ||
Energy Sector Risk. The value of energy companies is particularly vulnerable to developments in the energy sector, fluctuations in price and supply of energy fuels, energy conservation, supply of and demand for specific energy-related products or services, and tax policy and other government regulation.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
34
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index and an additional index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH HERITAGE GROWTH FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
17.91% | |||
| Worst — 12/31/08 |
-23.31% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
5 Years |
Since Inception (6/18/04) |
|||||||||
| Wasatch Heritage Growth Fund — Investor Class |
||||||||||||
| Return before taxes |
31.80% | 20.80% | 7.87% | |||||||||
| Return after taxes on distributions |
31.06% | 20.38% | 7.37% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
18.60% | 17.08% | 6.38% | |||||||||
| Russell Midcap® Growth Index (reflects no deductions for fees, expenses or taxes) |
35.74% | 23.37% | 9.84% | |||||||||
| S&P 500 Index (reflects no deductions for fees, expenses or taxes) |
32.39% | 17.94% | 7.49% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
35
Table of Contents
| WASATCH HERITAGE GROWTH FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Managers
| Chris Bowen Lead Portfolio Manager Since 2004 |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
36
Table of Contents
| WASATCH INTERNATIONAL GROWTH FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is long-term growth of capital.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.25% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.24% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
1.49% | |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.75% of average daily net assets until at least January 31, 2015 (excluding interest, interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| International Growth Fund — Investor Class |
$ | 152 | $ | 471 | $ | 813 | $ | 1,779 | ||||||||
37
Table of Contents
| WASATCH INTERNATIONAL GROWTH FUND — Summary | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 44% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in foreign growth companies.
Under normal market conditions, we will invest the Fund’s assets in the equity securities of foreign companies with market capitalizations of less than US$5 billion at the time of purchase. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds). Under normal market conditions, the Fund will invest in at least five of the countries included in the Morgan Stanley Capital International (MSCI) All Country (AC) World Ex-U.S.A. Small Cap Index.
The Fund may invest a significant amount of its total assets (5% to 70% under normal market conditions) at the time of purchase in securities issued by companies domiciled in emerging markets. Emerging market countries are those currently included in the MSCI EFM (Emerging + Frontier Markets) Index. These companies typically are located in the Asia-Pacific region, Eastern Europe, the Middle East, Central and South America, and Africa.
We travel extensively outside of the U.S. to visit companies and expect to meet with senior management. We use a process of quantitative screening followed by “bottom up” fundamental analysis to identify individual companies that we believe have above average revenue and earnings growth potential. We may invest in early stage companies if we believe they have outstanding long-term growth potential.
We do not use allocation models to restrict the Fund’s investments to certain regions, countries or industries.
The Fund may invest a large percentage of its assets in a few sectors, including consumer discretionary, financials, industrials, information technology, consumer staples, health care and energy.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging and Frontier Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging and frontier market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Small Company Stock Risk. Small cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers have more narrow markets for their products and services, fewer product lines, and more limited managerial and financial resources than larger issuers. The stocks of small cap companies may therefore be more volatile and the ability to sell these stocks at a desirable time or price may be more limited.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Early Stage Companies Risk. Early stage companies may never obtain necessary financing, may rely on untested business plans, may not be successful in developing markets for their products or services, and may remain an insignificant part of their industry, and as such may never be profitable. Stocks of early stage companies may be illiquid, privately traded, and more volatile and speculative than the securities of larger companies.
38
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Staples Sector Risk. The consumer staples sector may be affected by marketing campaigns, changes in consumer demands, government regulations and changes in commodity prices.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Energy Sector Risk. The value of energy companies is particularly vulnerable to developments in the energy sector, fluctuations in price and supply of energy fuels, energy conservation, supply of and demand for specific energy-related products or services, and tax policy and other government regulation.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
39
Table of Contents
| WASATCH INTERNATIONAL GROWTH FUND — Summary | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index and an additional index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH INTERNATIONAL GROWTH FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns*
| Best — 6/30/09 |
41.88% | |||
| Worst — 9/30/08 |
-28.61% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
5 Years |
10 Years |
|||||||||
| Wasatch International Growth Fund — Investor Class |
||||||||||||
| Return before taxes |
26.42% | 26.68% | 11.78% | |||||||||
| Return after taxes on distributions |
25.69% | 26.52% | 11.09% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
15.55% | 22.19% | 9.79% | |||||||||
| MSCI AC World Ex-U.S.A. Small Cap Index** (reflects no deductions for fees, expenses or taxes) |
19.73% | 18.73% | 10.09% | |||||||||
| MSCI World Ex-U.S.A. Small Cap Index** (reflects no deductions for fees, expenses or taxes) |
25.55% | 18.45% | 9.24% | |||||||||
*Prior to January 31, 2007, the Fund primarily invested in companies with market capitalizations of less than US$2 billion at the time of purchase.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
**Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI.
40
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Manager
| Roger Edgley, CFA Lead Portfolio Manager Since 2006 |
Linda Lasater, CFA Associate Portfolio Manager Since January 31, 2014 |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$100 | |||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
41
Table of Contents
| WASATCH INTERNATIONAL OPPORTUNITIES FUND — Summary | ||
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is long-term growth of capital.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.95% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.47% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
2.42% | |
| Expense Reimbursement |
(0.17)% | |
|
| ||
| Total Annual Fund Operating Expenses After Expense Reimbursement |
2.25% | |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 2.25% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| International Opportunities Fund — Investor Class |
$ | 228 | $ | 738 | $ | 1,275 | $ | 2,743 | ||||||||
42
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 49% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in foreign micro cap companies.
Under normal market conditions, we will invest the Fund’s assets in equity securities of foreign companies with market capitalizations of less than US$1 billion at the time of purchase. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds). Under normal market conditions, the Fund will invest in at least five of the countries included in the Morgan Stanley Capital International (MSCI) All Country (AC) World Ex-U.S.A. Small Cap Index.
The Fund may invest a significant amount of its total assets (20% to 70% under normal market conditions) at the time of purchase in securities issued by companies domiciled in emerging markets. Emerging market countries are those currently included in the MSCI EFM (Emerging + Frontier Markets) Index. These companies typically are located in the Asia-Pacific region, Eastern Europe, the Middle East, Central and South America, and Africa.
We travel extensively outside of the U.S. to visit companies and expect to meet with senior management. We use a process of quantitative screening followed by “bottom up” fundamental analysis to identify individual companies that we believe have above average revenue and earnings growth potential. We may invest in early stage companies if we believe they have outstanding long-term growth potential.
We do not use allocation models to restrict the Fund’s investments to certain regions, countries or industries.
The Fund may invest a large percentage of its assets in a few sectors, including industrials, consumer discretionary, information technology, materials, consumer staples.
The Fund may also invest in initial public offerings (IPOs).
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging and Frontier Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging and frontier market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Micro Cap Company Stock Risk. Micro cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have narrow markets, fewer product lines for these products and services, and limited managerial and financial resources. The stocks of micro cap companies may therefore be more volatile and the ability to sell these stocks at a desirable time or price may be more limited.
Early Stage Companies Risk. Early stage companies may never obtain necessary financing, may rely on untested business plans, may not be successful in developing markets for their products or services, and may remain an insignificant part of their industry, and as such may never be profitable. Stocks of early stage companies may be illiquid, privately traded, and more volatile and speculative than the securities of larger companies.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector , the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
43
Table of Contents
| WASATCH INTERNATIONAL OPPORTUNITIES FUND — Summary | ||
|
| ||
|
| ||
Consumer Staples Sector Risk. The consumer staples sector may be affected by marketing campaigns, changes in consumer demands, government regulations and changes in commodity prices.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
Materials Sector Risk. Changes in world events, political, environmental and economic conditions, energy conservation, environmental policies, commodity price volatility, changes in exchange rates, imposition of import controls, increased competition, depletion of resources and labor relations may adversely affect the companies engaged in the production and distribution of materials.
Initial Public Offerings (IPOs) Risk. IPOs involve a higher degree of risk because companies involved in IPOs generally have limited operating histories and their prospects for future profitability are uncertain. Prices of IPOs may also be unstable due to the absence of a prior public market, the small number of shares available for trading and limited investor information.
44
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index and an additional index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH INTERNATIONAL OPPORTUNITIES FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
44.35% | |||
| Worst — 9/30/08 |
-27.60% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year | 5 Years | Since Inception (1/27/05) |
|||||||||
| Wasatch International Opportunities Fund — Investor Class |
||||||||||||
| Return before taxes |
19.33% | 23.86% | 10.29% | |||||||||
| Return after taxes on distributions |
17.69% | 22.89% | 9.12% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
12.26% | 19.74% | 8.38% | |||||||||
| MSCI AC World Ex-U.S.A. Small Cap Index* (reflects no deductions for fees, expenses or taxes) |
19.73% | 18.73% | 8.14% | |||||||||
| MSCI World Ex-U.S.A. Small Cap Index* (reflects no deductions for fees, expenses or taxes) |
25.55% | 18.45% | 7.13% | |||||||||
After tax-returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
*Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI.
45
Table of Contents
| WASATCH INTERNATIONAL OPPORTUNITIES FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Managers
| Roger Edgley, CFA Lead Portfolio Manager Since 2005 |
Laura Geritz, CFA Portfolio Manager Since May 24, 2011 |
Jared Whatcott, CFA Associate Portfolio Manager Since January 31, 2014 |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$2,000 | |||
| New Accounts with an Automatic Investment Plan |
$1,000 | |||
| Individual Retirement Accounts (IRAs) |
$2,000 | |||
| Coverdell Education Savings Accounts |
$1,000 | |||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ 100 | |||
| Automatic Investment Plan |
|
$ 50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
46
Table of Contents
| WASATCH LARGE CAP VALUE FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
INVESTMENT OBJECTIVES
The Fund’s investment objectives are to seek capital appreciation and income.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
0.90% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.26% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
1.16% | |
| Expense Reimbursement |
(0.06)% | |
|
| ||
| Total Annual Fund Operating Expenses After Expense Reimbursement |
1.10% | |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.10% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Large Cap Value Fund — Investor Class |
$ | 112 | $ | 363 | $ | 633 | $ | 1,404 | ||||||||
47
Table of Contents
| WASATCH LARGE CAP VALUE FUND — Summary | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 47% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in equity securities.
Under normal market conditions, we will invest at least 80% of the Fund’s net assets in equity securities of companies with market capitalizations of over $5 billion at the time of purchase. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds).
To achieve the Fund’s investment objectives, the Fund typically invests in the securities of companies that we believe will pay above average dividends or interest, but which remain appropriately valued based on our valuation analysis.
When evaluating a potential investment for the Fund, we employ a comprehensive valuation analysis intended to establish a range for fair valuation or intrinsic company value, with a particular emphasis on company fundamentals. The initial valuation review may include:
| • | Calculating and reviewing standard ratios, such as price-to-sales, price-to-book, price-to-earnings, and price/earnings-to-growth. |
| • | Modified discounted cash flow models with sensitivity analysis for changes to revenue growth rates, operating margins, outstanding share counts, earnings multiples, and tangible book value. |
| • | Changing sector and company specific outlooks due to subjective factors, including globalization of capital, labor and process knowledge, as well as increasing information and price transparency. |
The Fund may invest a large percentage of its assets in a few sectors, including energy, financials, information technology, consumer discretionary, consumer staples, health care and industrials.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Value Investing Risk. A value investing strategy attempts to identify strong companies with stocks which are selling at a discount from their perceived true worth. It is subject to the risk that the stocks’ intrinsic values may never be fully recognized or realized by the market, their prices may go down, or that stocks judged to be undervalued may actually be appropriately priced.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Staples Sector Risk. The consumer staples sector may be affected by marketing campaigns, changes in consumer demands, government regulations and changes in commodity prices.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Energy Sector Risk. The value of energy companies is particularly vulnerable to developments in the energy sector, fluctuations in price and supply of energy fuels, energy conservation, supply of and demand for specific energy-related products or services, and tax policy and other government regulation.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
48
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
49
Table of Contents
| WASATCH LARGE CAP VALUE FUND — Summary | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The Fund commenced operations on December 15, 2008 upon the reorganization of the 1st Source Monogram Income Equity Fund, the Fund’s predecessor fund (the “Predecessor Fund”), into the Fund. With the reorganization, the Fund assumed the financial and performance history of the Predecessor Fund. The following tables provide an indication of the historical risk of an investment in the Fund (and Predecessor Fund for periods prior to December 15, 2008). The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance for the years shown in the bar chart. The average annual total returns table allows you to compare the Fund’s (and Predecessor Fund’s for periods prior to December 15, 2008) performance over the time periods indicated to that of a broad-based market index. Past performance, before and after taxes, is not necessarily an indication of how the Investor Class of the Fund will perform in the future. In addition, the Predecessor Fund was advised by a different investment advisor and subject to different expenses, which may have produced different investment results. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH LARGE CAP VALUE FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
14.66% | |||
| Worst — 12/31/08 |
-19.38% |
| Average Annual Total Returns — (as of 12/31/13) |
1 Year |
5 Years |
10 Years |
|||||||||
| Wasatch Large Cap Value Fund — Investor Class |
||||||||||||
| Return before taxes |
25.78% | 13.05% | 8.23% | |||||||||
| Return after taxes on distributions |
16.35% | 11.01% | 6.54% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
22.30% | 10.43% | 6.58% | |||||||||
| Russell 1000® Value Index (reflects no deductions for fees, expenses or taxes) |
32.53% | 16.67% | 7.58% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
50
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Managers
| David Powers, CFA Lead Portfolio Manager Since August 2013 |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
51
Table of Contents
| WASATCH LONG/SHORT FUND — Summary | ||
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is capital appreciation.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.10% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.18% | |
| Dividend Expense on Short Sales/Interest Expense1 |
0.23% | |
|
| ||
| Total Annual Fund Operating Expenses |
1.51% | |
| 1 | Dividends on short sales are the dividends paid to the lenders of borrowed securities. The expenses related to dividends on short sales are estimated and will vary depending on whether the securities the Fund sells short pay dividends and on the amount of any such dividends. Expenses also include borrowing costs paid to the broker in connection with borrowing the security to be sold short. The rate paid by brokers varies by security. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Long/Short Fund — Investor Class |
$ | 154 | $ | 478 | $ | 824 | $ | 1,801 | ||||||||
52
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 47% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in equity securities by maintaining long equity positions and short equity positions.
We seek to achieve higher risk-adjusted returns with lower volatility compared to the equity markets in general (as represented by the S&P 500 Index). Under normal market conditions, we will invest the Fund’s assets in the equity securities of companies with market capitalizations of at least $100 million at the time of purchase that we have identified as being undervalued (long equity positions) and we will sell short those securities (short equity positions) that we have identified as being overvalued. The equity securities in which the Fund invests include common stocks, preferred stocks, securities convertible into or exchangeable for common stocks, warrants and any rights to purchase common stocks and other securities with equity characteristics.
The Fund may at any time have either a net long exposure or a net short exposure to the equity markets and the Fund will not be managed to maintain either net long or net short market exposure.
The Fund may invest in early stage companies and initial public offerings (IPOs).
We believe that the best opportunities to make both short and long equity investments are when the market’s perception of the values of individual companies (measured by the stock price) differs widely from our assessment of the intrinsic values of such companies. When evaluating a potential long or short investment for the Fund, we employ a comprehensive valuation analysis intended to establish a range for fair valuation or intrinsic company value, with a particular emphasis on company fundamentals. We believe opportunities to buy stocks or sell stocks short arise due to a variety of market inefficiencies, including:
| • | Changes in market participant psychology and circumstances. |
| • | Imperfect information. |
| • | Forecasts and projections by Wall Street analysts and company representatives that differ from experienced reality. |
When evaluating long investments, we typically look for stocks that are appropriately valued or undervalued based on our analysis.
When evaluating a short investment, we typically look for signs of current overvaluation. For example, we look for stocks that we believe:
| • | Have earnings that appear to be reflected in the current price. |
| • | Are likely to fall short of market expectations. |
| • | Are in industries that exhibit weakness. |
| • | Have poor management. |
| • | Are likely to suffer an event affecting long-term earnings. |
The Fund may invest in fixed income securities of any maturity consisting of corporate notes, bonds and debentures, including those that are rated less than investment grade at the time of purchase.
The Fund is non-diversified meaning that it can concentrate investments in a more limited number of issuers than a diversified fund.
The Fund may invest a large percentage of its assets in a few sectors, including information technology, financials, energy, consumer discretionary, materials and industrials.
The Fund is expected to have a high portfolio turnover rate.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Market Direction Risk. Since the Fund has both a “long” and a “short” portfolio, an investment in the Fund will involve market risks associated with different investment decisions than those made for a typical “long only” stock fund. The Fund’s results will suffer both when there is a general stock market advance and the Fund holds significant “short” equity positions, or when there is a general stock market decline and the Fund holds significant “long” equity positions.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Short Sales Risk. The Fund can make short sales of securities, which means it may experience a loss if the market price of the security increases between the date of the short sale and the date the security is replaced. Short sales may reduce the Fund’s returns or increase volatility.
Small Company Stock Risk. Small cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have narrow markets for their products or services, fewer product lines, and more limited managerial and
53
Table of Contents
| WASATCH LONG/SHORT FUND — Summary | ||
|
| ||
|
| ||
financial resources than larger issuers, the stocks of small cap companies may therefore be more volatile and the ability to sell these stocks at a desirable time or price may be more limited.
Early Stage Companies Risk. Early stage companies may never obtain necessary financing, may rely on untested business plans, may not be successful in developing markets for their products or services, and may remain an insignificant part of their industry, and as such may never be profitable. Stocks of early stage companies may be illiquid, privately traded, and more volatile and speculative than the securities of larger companies.
Initial Public Offerings (IPOs) Risk. IPOs involve a higher degree of risk because companies involved in IPOs generally have limited operating histories and their prospects for future profitability are uncertain. Prices of IPOs may also be unstable due to the absence of a prior public market, the small number of shares available for trading and limited investor information.
Non-Diversification Risk. The Fund can invest a larger portion of its assets in the stocks of a limited number of companies than a diversified fund, which means it may 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.
Value Investing Risk. A value investing strategy attempts to identify strong companies with stocks which are selling at a discount from their perceived true worth. It is subject to the risk that the stocks’ intrinsic values may never be fully recognized or realized by the market, their prices may go down, or that stocks judged to be undervalued may actually be appropriately priced.
Interest Rate Risk. Interest rate risk is the risk that a debt security’s value will decline 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.
Credit Risk. Credit risk is the risk that the issuer of a debt security will fail to repay principal and interest on the security when due. Credit risk is affected by the issuer’s credit status, and is generally higher for non-investment grade securities.
Non-Investment Grade Securities Risk. Non-investment grade securities (also known as “high yield” or “junk bonds”), those rated below investment grade by the primary rating agencies (e.g., below BB/Ba by S&P/Moody’s), tend to have more volatile prices and increased price sensitivity to changing interest rates and adverse economic and business developments than investment grade securities. In addition, compared to investments in investment grade securities, investments in non-investment grade securities are subject to greater risk of loss due to default or decline in credit quality. There is a greater likelihood that adverse economic or company-specific events will make the issuer unable to make interest and/or principal payments, and more susceptible to negative market sentiment, leading to depressed prices and decreased liquidity.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Energy Sector Risk. The value of energy companies is particularly vulnerable to developments in the energy sector, fluctuations in price and supply of energy fuels, energy conservation, supply of and demand for specific energy-related products or services, and tax policy and other government regulation.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
Portfolio Turnover Rate. The Fund’s portfolio turnover rate is expected to exceed 200%. This type of Fund has a high portfolio turnover that necessarily results in greater transaction costs and causes more short-term capital gains (or losses) to be realized. Distributions to shareholders of short-term capital gains are taxed as ordinary income under federal income tax laws.
54
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The Fund commenced operations on December 15, 2008, upon the reorganization of the 1st Source Monogram Long/Short Fund, the Fund’s predecessor fund (the “Predecessor Fund”), into the Fund. With the reorganization, the Fund assumed the financial and performance history of the Predecessor Fund. The following tables provide an indication of the historical risk of an investment in the Fund (and Predecessor Fund for periods prior to December 15, 2008). The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance for the years shown in the bar chart. The average annual total returns table allows you to compare the Fund’s (and Predecessor Fund’s for periods prior to December 15, 2008) performance over the time periods indicated to the primary benchmark (the S&P 500 Index), which reflects the effects of general stock market risk, and to a secondary benchmark (the Citigroup U.S. Domestic 3-Month U.S. Treasury Bills Index), which reflects short-term interest rates and is usually free from the risk of principal fluctuation. Past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. In addition, the Predecessor Fund was advised by a different investment advisor and subject to different expenses, which may have produced different investment results. The portfolio managers of the Fund, however, were also the portfolio managers of the Predecessor Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH LONG/SHORT FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
16.00% | |||
| Worst — 12/31/08 |
-15.94% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year | 5 Years | 10 Years | |||||||||||
| Wasatch Long/Short Fund — Investor Class |
||||||||||||||
| Return before taxes |
18.97% | 13.36% | 6.82% | |||||||||||
| Return after taxes on distributions |
18.36% | 13.24% | 6.03% | |||||||||||
| Return after taxes on distributions and sale of Fund shares |
11.22% | 10.73% | 5.15% | |||||||||||
| S&P 500 Index (reflects no deductions for fees, expenses or taxes) |
32.39% | 17.94% | 7.41% | |||||||||||
| Citigroup U.S. Domestic 3-Month U.S. Treasury Bills Index (reflects no deductions for fees, expenses or taxes) |
0.05% | 0.10% | 1.59% | |||||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
55
Table of Contents
| WASATCH LONG/SHORT FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Managers
| Michael Shinnick Lead Portfolio Manager Since 2008 |
Ralph Shive, CFA Portfolio Manager Since 2008 |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$100 | |||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
56
Table of Contents
| WASATCH MICRO CAP FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is long-term growth of capital. Income is an objective only when consistent with long-term growth of capital. Currently, we do not expect the Fund’s investments to generate substantial income.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee1 |
1.75% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.18% | |
|
| ||
| Total Annual Fund Operating Expenses2 |
1.93% | |
| 1 | Effective January 31, 2014, the management fee was reduced from 1.95% to 1.75%. The management fee and total annual operating expenses have been restated to reflect the current management fee. |
| 2 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.95% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Micro Cap Fund — Investor Class |
$ | 196 | $ | 606 | $ | 1,042 | $ | 2,254 | ||||||||
57
Table of Contents
| WASATCH MICRO CAP FUND — Summary | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 17% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in growing micro cap companies.
Under normal market conditions, we will invest at least 80% of the Fund’s net assets in the equity securities of micro cap companies with market capitalizations of less than $1 billion at the time of purchase. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds).
The Fund may invest up to 30% of its total assets at the time of purchase in securities issued by foreign companies in developed or emerging markets. Securities issued by companies incorporated outside the United States whose securities are publicly traded in the United States are not defined as foreign companies and are not subject to this limitation.
We focus on companies that we consider to be high quality, and we use a process of “bottom up” fundamental analysis to look for individual companies that we believe have superior growth potential. Our analysis may include studying a company’s financial statements, building proprietary financial models, visiting company facilities, and meeting with executive management, suppliers and customers.
The Fund seeks to purchase stocks at prices we believe are reasonable relative to our projection of a company’s long term earnings growth rate. The secondary objective of income is achieved when fast growing portfolio companies pay dividends, generated by cash flow, typically after achieving growth targets.
The Fund may invest a large percentage of its assets in a few sectors, including information technology, health care, industrials, financials and consumer discretionary.
The Fund may invest in initial public offerings (IPOs).
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Micro Cap Company Stock Risk. Micro cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have narrow markets for their products or services, fewer product lines, and more limited managerial and financial resources than larger issuers. The stocks of micro cap companies may therefore be more volatile and the ability, to sell these stocks at a desirable time or price may be more limited.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
58
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
Initial Public Offerings (IPOs) Risk. IPOs involve a higher degree of risk because companies involved in IPOs generally have limited operating histories and their prospects for future profitability are uncertain. Prices of IPOs may also be unstable due to the absence of a prior public market, the small number of shares available for trading and limited investor information.
59
Table of Contents
| WASATCH MICRO CAP FUND — Summary | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH MICRO CAP FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
27.00% | |||
| Worst — 12/31/08 |
-31.16% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
5 Years | 10 Years | |||||||||
| Wasatch Micro Cap Fund — Investor Class |
||||||||||||
| Return before taxes |
44.70% | 23.20% | 7.98% | |||||||||
| Return after taxes on distributions |
44.70% | 23.20% | 6.90% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
25.30% | 19.14% | 6.48% | |||||||||
| Russell Microcap® Index (reflects no deductions for fees, |
45.62% | 21.05% | 6.99% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
60
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Manager
Dan Chace, CFA
Lead Portfolio Manager
Since 2004
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
61
Table of Contents
| WASATCH MICRO CAP VALUE FUND — Summary | ||
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is long-term growth of capital.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee1 |
1.75% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.30% | |
|
| ||
| Total Annual Fund Operating Expenses2 |
2.05% | |
| Expense Reimbursement |
(0.10)% | |
|
| ||
| Total Annual Fund Operating Expenses After Expense Reimbursement |
1.95% | |
| 1 | Effective January 31, 2014, the management fee was reduced from 1.95% to 1.75%. The management fee and total annual operating expenses have been restated to reflect the current management fee. |
| 2 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.95% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Micro Cap Value Fund — Investor Class |
$ | 198 | $ | 633 | $ | 1,094 | $ | 2,372 | ||||||||
62
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 66% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in micro cap companies.
Under normal market conditions, we will invest at least 80% of the Fund’s net assets in the equity securities of micro cap companies with market capitalizations of less than $1 billion at the time of purchase. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds).
The Fund may invest up to 30% of its total assets at the time of purchase in securities issued by foreign companies in developed or emerging markets. Securities issued by companies incorporated outside the United States whose securities are publicly traded in the United States are not defined as foreign companies and are not subject to this limitation.
The Fund may invest in initial public offerings (IPOs).
While the Fund primarily invests in value companies, it may also invest in growth companies if the Advisor believes that current valuation is at a sufficient discount to the projected long term earnings growth rate.
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. Our analysis may include studying a company’s financial statements, visiting company facilities, and meeting with executive management, suppliers and customers.
We typically look for companies that we believe fall into one of these three categories at the time of purchase:
| • | Undiscovered Gems — Companies with good growth potential which have yet to be broadly discovered by Wall Street analysts, thus leaving them attractively undervalued relative to their expected growth. |
| • | Fallen Angels — High quality growth companies that have experienced a temporary setback and therefore have appealing valuations relative to their long term growth potential. |
| • | Value Momentum — Valuation is inexpensive relative to history, but catalyst for future growth has been identified. |
The Fund may invest a large percentage of its assets in a few sectors, including financials, information technology, consumer discretionary, consumer staples, industrials and health care.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Micro Cap Company Stock Risk. Micro cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have narrow markets for their products or services, fewer product lines, and more limited managerial and financial resources than larger issuers. The stocks of micro cap companies may therefore be more volatile and the ability, sell them at a desirable time or price may be more limited.
Value Investing Risk. A value investing strategy attempts to identify strong companies with stocks selling at a discount from their perceived true worth. It is subject to the risk that the stocks’ intrinsic value may never be fully recognized or realized by the market, their prices may go down, or that stocks judged to be undervalued may actually be appropriately priced.
Initial Public Offerings (IPOs) Risk. IPOs involve a higher degree of risk because companies involved in IPOs generally have limited operating histories and their prospects for future profitability are uncertain. Prices of IPOs may also be unstable due to the absence of a prior public market, the small number of shares available for trading and limited investor information.
63
Table of Contents
| WASATCH MICRO CAP VALUE FUND — Summary | ||
|
| ||
|
| ||
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Staples Sector Risk. The consumer staples sector may be affected by marketing campaigns, changes in consumer demands, government regulations and changes in commodity prices.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
64
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH MICRO CAP VALUE FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
40.00% | |||
| Worst — 12/31/08 |
-26.67% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year | 5 Years |
10 Years |
|||||||||
| Wasatch Micro Cap Value Fund — Investor Class |
||||||||||||
| Return before taxes |
43.23% | 26.24% | 11.93% | |||||||||
| Return after taxes on distributions |
37.76% | 24.86% | 9.95% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
28.39% | 21.78% | 9.39% | |||||||||
| Russell Microcap® Index (reflects no deductions for fees, |
45.62% | 21.05% | 6.99% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
65
Table of Contents
| WASATCH MICRO CAP VALUE FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Manager
Brian Bythrow, CFA
Lead Portfolio Manager
Since 2003
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$100 | |||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
66
Table of Contents
| WASATCH SMALL CAP GROWTH FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s primary investment objective is long-term growth of capital. Income is 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.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.00% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.23% | |
| Acquired Fund Fees and Expenses |
0.01% | |
|
| ||
| Total Annual Fund Operating Expenses1,2 |
1.24% | |
| 1 | The Total Annual Fund Operating Expenses may not equal the expense ratio stated in the Fund’s most recent Annual Report and Financial Highlights, which reflects the operating expenses of the Fund and does not include Acquired Fund Fees and Expenses. |
| 2 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.50% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). Acquired Fund Fees and Expenses are not included in the expense limitation. The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Small Cap Growth Fund — Investor Class |
$ | 126 | $ | 393 | $ | 680 | $ | 1,500 | ||||||||
67
Table of Contents
| WASATCH SMALL CAP GROWTH FUND — Summary | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 10% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in small growth companies.
Under normal market conditions, we will invest at least 80% of the Fund’s net assets in the equity securities of small-capitalization companies. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds). The Fund considers a company to be a small-capitalization company if its market capitalization, at the time of purchase, is less than the larger of $3 billion or the market capitalization of the largest company in the Russell 2000 Index as of its most recent reconstitution date.
The Fund may invest up to 20% of its total assets at the time of purchase in securities issued by foreign companies in developed or emerging markets. Securities issued by companies incorporated outside the United States whose securities are publicly traded in the United States are not defined as foreign companies and are not subject to this limitation.
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. The secondary objective of income is achieved when fast growing portfolio companies pay dividends, generated by cash flow, typically after achieving growth targets.
We use a “bottom up” process of fundamental analysis to look for individual companies that we believe have superior growth prospects. Our analysis may include studying a company’s financial statements, building proprietary financial models, visiting company facilities, and meeting with executive management, suppliers and customers.
The Fund may invest a large percentage of its assets in a few sectors, including information technology, industrials, consumer discretionary, health care and energy.
The Fund may invest in initial public offerings (IPOs).
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Small Company Stock Risk. Small cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have narrow markets for their products and services, fewer product lines, and limited managerial and financial resources. The stocks of small cap companies may therefore be more volatile and the ability to sell these stocks at a desirable time or price may be more limited.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
68
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Energy Sector Risk. The value of energy companies is particularly vulnerable to developments in the energy sector, fluctuations in price and supply of energy fuels, energy conservation, supply of and demand for specific energy-related products or services, and tax policy and other government regulation.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
Initial Public Offerings (IPOs) Risk. IPOs involve a higher degree of risk because companies involved in IPOs generally have limited operating histories and their prospects for future profitability are uncertain. Prices of IPOs may also be unstable due to the absence of a prior public market, the small number of shares available for trading and limited investor information.
69
Table of Contents
| WASATCH SMALL CAP GROWTH FUND — Summary | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index and an additional index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH SMALL CAP GROWTH FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
25.04% | |||
| Worst — 12/31/08 |
-22.04% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year | 5 Years |
10 Years | |||||||||
| Wasatch Small Cap Growth Fund — Investor Class |
||||||||||||
| Return before taxes |
31.17% | 24.07% | 9.15% | |||||||||
| Return after taxes on distributions |
30.20% | 23.48% | 8.35% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
18.44% | 19.99% | 7.54% | |||||||||
| Russell 2000® Growth Index (reflects no deductions for fees, expenses or taxes) |
43.30% | 22.58% | 9.41% | |||||||||
| Russell 2000® Index (reflects no deductions for fees, expenses or taxes) |
38.82% | 20.08% | 9.07% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
70
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Managers
| Jeff Cardon, CFA Lead Portfolio Manager Since 1986 |
JB Taylor Portfolio Manager Since 2013 |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
71
Table of Contents
| WASATCH SMALL CAP VALUE FUND — Summary | ||
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is long-term growth of capital. Income is 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.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.00% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.27% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
1.27% | |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.50% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Small Cap Value Fund — Investor Class |
$ | 129 | $ | 402 | $ | 696 | $ | 1,532 | ||||||||
72
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 40% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in small companies.
Under normal market conditions, we will invest at least 80% of the Fund’s net assets in the equity securities of small-capitalization companies. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds). The Fund considers a company to be a small-capitalization company if its market capitalization, at the time of purchase, is less than the larger of $3 billion or the market capitalization of the largest company in the Russell 2000 Index as of its most recent reconstitution date.
The Fund may invest up to 20% of its total assets at the time of purchase in securities issued by foreign companies in developed or emerging markets. Securities issued by companies incorporated outside the United States whose securities are publicly traded in the United States are not defined as foreign companies and are not subject to this limitation.
The Fund may also invest in growth companies if the Advisor believes that current valuation is at a sufficient discount to the projected long-term earnings growth rate. The secondary objective of income is achieved when fast growing portfolio companies pay dividends, generated by cash flow, typically after achieving growth targets.
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. Our analysis may include studying a company’s financial statements, visiting company facilities, and meeting with executive management, suppliers and customers.
We typically look for companies that we believe fall into one of these three categories at the time of purchase:
| • | Undiscovered Gems — Companies with good growth potential which have yet to be broadly discovered by Wall Street analysts, thus leaving them attractively undervalued relative to their expected growth. |
| • | Fallen Angels — High quality growth companies that have experienced a temporary setback and therefore have appealing valuations relative to their long term growth potential. |
| • | Quality Value — Quality companies with earnings potential that is not fully reflected in their stock prices. |
The Fund may invest a large percentage of its assets in a few sectors, including industrials, information technology, financials, consumer discretionary, health care and energy.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Small Company Stock Risk. Small cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have narrow markets for their products and services, fewer product lines, and more limited managerial and financial resources. The stocks of small companies may therefore be more volatile and the ability to sell them at a desirable time or price may be more limited.
Value Investing Risk. A value investing strategy attempts to identify strong companies with stocks selling at a discount from their perceived true worth. It is subject to the risk that the stocks’ intrinsic values may never be fully recognized or realized by the market, their prices may go down, or that stocks judged to be undervalued may actually be appropriately priced.
73
Table of Contents
| WASATCH SMALL CAP VALUE FUND — Summary | ||
|
| ||
|
| ||
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Energy Sector Risk. The value of energy companies is particularly vulnerable to developments in the energy sector, fluctuations in price and supply of energy fuels, energy conservation, supply of and demand for specific energy-related products or services, and tax policy and other government regulation.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
74
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index and an additional index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH SMALL CAP VALUE FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
33.91% | |||
| Worst — 12/31/08 |
-34.04% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
5 Years | 10 Years | |||||||||
| Wasatch Small Cap Value Fund — Investor Class |
||||||||||||
| Return before taxes |
37.81% | 24.39% | 8.24% | |||||||||
| Return after taxes on distributions |
37.81% | 24.39% | 6.82% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
21.40% | 20.19% | 6.48% | |||||||||
| Russell
2000® Value
Index (reflects no deductions for fees, expenses |
34.52% | 17.64% | 8.61% | |||||||||
| Russell 2000® Index (reflects no deductions for fees, expenses or taxes) |
38.82% | 20.08% | 9.07% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
75
Table of Contents
| WASATCH SMALL CAP VALUE FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Manager
Jim Larkins
Lead Portfolio Manager
Since 1999
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
76
Table of Contents
| WASATCH STRATEGIC INCOME FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s primary investment objective is to capture current income. A secondary objective is long-term growth of capital.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
0.70% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.36% | |
| Acquired Fund Fees and Expenses |
0.04% | |
|
| ||
| Total Annual Fund Operating Expenses1,2 |
1.10% | |
| Expense Reimbursement |
(0.11)% | |
|
| ||
| Total Annual Fund Operating Expenses After Expense Reimbursement |
0.99% | |
| 1 | The Total Annual Fund Operating Expenses may not equal the expense ratio stated in the Fund’s most recent Annual Report and Financial Highlights, which reflects the operating expenses of the Fund and does not include Acquired Fund Fees and Expenses. |
| 2 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 0.95% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs, and extraordinary expenses). Acquired Fund Fees and Expenses are not included in the expense limitation. The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Strategic Income Fund — Investor Class |
$ | 101 | $ | 339 | $ | 596 | $ | 1,330 | ||||||||
77
Table of Contents
| WASATCH STRATEGIC INCOME FUND — Summary | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 54% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in income-producing securities.
Under normal market conditions, we will invest the Fund’s assets in income-producing domestic and foreign securities, including equity securities and fixed income securities of companies of all market capitalizations. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds). The Fund is not managed as a balanced portfolio. At times, one type of security may make up a substantial portion of the Fund, while other types may have minimal or no representation.
The Fund may invest its assets in securities issued by foreign companies in developed countries without limit. To a lesser extent, the Fund may invest in foreign companies in emerging markets. Securities issued by companies incorporated outside the United States whose securities are publicly traded in the United States are not defined as foreign companies.
In our search for investments, we maintain the flexibility to invest in companies from a variety of industries. The Fund, however, does have a concentration in the financials sector — meaning that at least 25% of the Fund’s total assets will be invested in securities of issuers in the group of industries in the financials sector. For both domestic and foreign securities, we define the group of industries comprising the financials sector to include, among others, Banks (Commercial Banks, Thrifts and Mortgage Finance), Diversified Financial Companies (Diversified Financial Services, Consumer Finance, Capital Markets), Finance Companies, Financial Data Processing Services and Systems, Finance Companies (Small Loan), Financial Information Services, Insurance Companies (Life, Multi-Line, Property-Casualty), Investment Management Companies, Real Estate Companies (Real Estate Investment Trusts [REITs], Real Estate Management and Development Companies), Rental and Leasing Services (Commercial), Savings and Loans, and Securities Brokerage and Services.
The Fund may invest a large percentage of its assets in a few sectors, including financials, information technology, consumer staples, energy and industrials.
The Fund may invest in exchange-traded funds (ETFs).
The Fund may make short sales of securities, and may also use derivatives such as put and call options and futures contracts for hedging and non-hedging purposes. The Fund may write put and call options subject to applicable law and SEC guidelines.
In the selection of equity securities, we use “bottom up” fundamental analysis to identify individual companies with attractive, sustainable dividend yields or the potential for dividend growth. In certain situations, the Fund may acquire non-income producing securities if we believe the company has the potential to pay dividends in the future. Our analysis may include studying a company’s financial statements, building proprietary financial models, visiting company facilities, and meeting with executive management, suppliers and customers.
Characteristics we consider when investing in equity securities generally include:
| • | Attractive, sustainable dividend yields or the potential for dividend growth. |
| • | Experienced top management. |
| • | Sustainable competitive advantage. |
| • | Stable demand for products and services. |
| • | Ability to capitalize on favorable long-term trends. |
The Fund’s investments in fixed income securities may include domestic and foreign corporate bonds with a variety of maturities (e.g., long-term, intermediate or short-term) and credit qualities (e.g., investment grade or non-investment grade). At certain times the Fund may emphasize one particular maturity or credit quality. The Fund may invest in non-investment grade securities without limitation. The Fund may also invest in U.S. Treasury securities and the debt obligations of foreign governments.
Characteristics we consider when investing in fixed income securities generally include:
| • | Rates of current income. |
| • | Credit quality of the issuer. |
| • | Maturity, duration and other characteristics of the obligation. |
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
78
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Smaller Company Stock Risk. Small and mid cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have narrow markets for their products or services, fewer product lines, and more limited managerial and financial resources, than larger issuers. The stocks of small and mid cap companies may therefore be more volatile and the ability to sell those stocks at a desirable time or price may be more limited.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it will have increased exposure to the price movements of those sectors.
Consumer Staples Sector Risk. The consumer staples sector may be affected by marketing campaigns, changes in consumer demands, government regulations and changes in commodity prices.
Energy Sector Risk. The value of energy companies is particularly vulnerable to developments in the energy sector, fluctuations in price and supply of energy fuels, energy conservation, supply of and demand for specific energy-related products or services, and tax policy and other government regulation.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
Derivatives Risk. The Fund may suffer a loss from its use of put and call options and futures contracts, which are forms of derivatives. Derivatives can amplify a gain or loss, potentially earning or losing substantially more money than the actual cost of the derivative instrument, with the potential for unlimited losses on certain instruments. Derivatives may be difficult to value, may become illiquid, and may affect the timing and character of taxes payable by shareholders.
Short Sales Risk. The Fund can make short sales of securities, which means it may experience a loss if the market price of the security increases between the date of the short sale and the date the security is replaced. Short sales may reduce a Fund’s returns or increase volatility.
Investment Companies Risk. The Fund may invest in the shares of other investment companies, including foreign and domestic registered and unregistered open-end funds, closed-end funds, and unit investment trusts and exchange-traded funds noted below. Investing in another investment company subjects the Fund to the same risks associated with investing in the securities held by the applicable investment company and the investment strategies employed by such funds (such as the use of leverage). In addition, the benefit of investing in another investment company is largely dependent on the skill of the investment advisor of the underlying company and whether the associated fees and costs involved with investing in such company are offset by the potential gains. As a shareholder in an investment company, a fund will bear its ratable share of that investment company’s expenses including advisory and administrative fees. Shareholders would therefore be subject to duplicative expenses to the extent that the Fund invests in other investment companies.
Exchange-Traded Funds (ETFs) Risk. ETFs are investment companies that are bought and sold on a securities exchange. Shares of ETFs are redeemable only in larger aggregations of a specified number of shares and generally on an in-kind basis. When the Fund invests in an ETF, it will bear additional expenses based on its pro rata share of the ETF’s operating expenses. In addition, the Fund will incur brokerage costs when purchasing and selling shares of ETFs. The risk of owning an ETF generally reflects the risks of the underlying securities held by the ETF and investment strategies employed by such ETF (such as the use of leverage). The market price may also fluctuate due to the supply and demand of the ETF’s shares on the exchange upon which its shares are traded. Lack of liquidity in an ETF could result in the ETF being more volatile than the underlying portfolio of securities. In addition, because of ETF expenses, compared to owning the underlying securities directly, it may be more costly to own an ETF.
79
Table of Contents
| WASATCH STRATEGIC INCOME FUND — Summary | ||
|
| ||
|
| ||
REIT Risk. Investments in real estate investment trusts (REITs) subject the Fund to risks associated with the direct ownership of real estate. The value of REIT securities can be affected by changes in real estate values and rental income, property taxes, interest rates, tax and regulatory requirements and the management skill and creditworthiness of the issuer. In addition, the value of a REIT can depend on the structure and cash flow generated by the REIT and REITs may not have diversified holdings. Because REITs are pooled investment vehicles that have expenses of their own, the Fund will indirectly bear its proportionate share of those expenses.
Credit Risk. Credit risk is the risk that the issuer of a debt security will fail to repay principal and interest on the security when due. Credit risk is affected by the issuer’s credit status, and is generally higher for non-investment grade securities.
Interest Rate Risk. Interest rate risk is the risk that a debt security’s value will decline 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.
Non-Investment Grade Securities Risk. Non-investment grade securities (also known as “high yield” or “junk bonds”), those rated below investment grade by the primary rating agencies (e.g., below BB/Ba by S&P/Moody’s) tend to have more volatile prices and increased price sensitivity to changing interest rates and adverse economic and business developments than investment grade securities. In addition, compared to investments in investment grade securities, investments in non-investment grade securities are subject to greater risk of loss due to default or decline in credit quality. There is a greater likelihood that adverse economic or company-specific events will make the issuer unable to make interest and/or principal payments, and more susceptible to negative market sentiment, leading to depressed prices and decreased liquidity.
80
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index and an additional index composed of securities similar to those held by the Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH STRATEGIC INCOME FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
21.21% | |||
| Worst — 12/31/08 |
-28.22% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year | 5 Years | Since Inception (2/1/06) |
|||||||||
| Wasatch Strategic Income Fund — Investor Class |
||||||||||||
| Return before taxes |
33.25% | 21.15% | 7.78% | |||||||||
| Return after taxes on distributions |
31.47% | 19.96% | 5.99% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
19.47% | 16.88% | 5.42% | |||||||||
| S&P 500 Index (reflects no deductions for fees, expenses or taxes) |
32.39% | 17.94% | 7.02% | |||||||||
| Barclays Capital U.S. Aggregate Bond Index (reflects no deductions for fees, expenses or taxes) |
-2.02% | 4.44% | 4.89% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
81
Table of Contents
| WASATCH STRATEGIC INCOME FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Manager
Samuel S. Stewart, Jr., PhD, CFA
Lead Portfolio Manager
Since 2006
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
82
Table of Contents
| WASATCH ULTRA GROWTH FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s primary investment objective is long-term growth of capital. Income is 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.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.00% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.29% | |
| Acquired Fund Fees and Expenses |
0.12% | |
|
| ||
| Total Annual Fund Operating Expenses1,2 |
1.41% | |
| 1 | The Total Annual Fund Operating Expenses may not equal the expense ratio stated in the Fund’s most recent Annual Report and Financial Highlights, which reflects the operating expenses of the Fund and does not include Acquired Fund Fees and Expenses. |
| 2 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.50% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). Acquired Fund Fees and Expenses are not included in the expense limitation. The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Ultra Growth Fund — Investor Class |
$ | 144 | $ | 447 | $ | 772 | $ | 1,691 | ||||||||
83
Table of Contents
| WASATCH ULTRA GROWTH FUND — Summary | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 25% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in smaller high growth companies.
Under normal market conditions, we will invest the Fund’s assets in the equity securities of companies which we consider to be rapidly growing. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds). These companies are usually small to mid-size with market capitalizations of less than $5 billion at the time of purchase.
The Fund may invest up to 30% of its total assets at the time of purchase in securities issued by foreign companies in developed or emerging markets. Securities issued by companies incorporated outside the United States whose securities are publicly traded in the United States are not defined as foreign companies and are not subject to this limitation.
We use a process of “bottom up” fundamental analysis to look for individual companies that we believe have above average potential for rapid earnings growth and stock price appreciation. Our analysis may include studying a company’s financial statements, visiting company facilities, and meeting with executive management, suppliers and customers.
The Fund may invest a large percentage of its assets in a few sectors, including information technology, financials, health care, consumer discretionary and industrials.
The Fund may invest in initial public offerings (IPOs).
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Small Company Stock Risk. Small cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have narrow markets for their products or services, fewer product lines, and more limited managerial and financial resources than larger issuers. The stocks of small cap companies may therefore be more volatile and the ability, to sell these stocks at a desirable time or price may be more limited.
Growth Stock Risk. Growth stock prices may be more sensitive to changes in current or expected earnings than the prices of other stocks, and they may fall or not appreciate in step with the broader securities markets.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Financials Sector Risk. The financials sector is subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.
84
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Information Technology Sector Risk. Stocks of information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
Initial Public Offerings (IPOs) Risk. IPOs involve a higher degree of risk because companies involved in IPOs generally have limited operating histories and their prospects for future profitability are uncertain. Prices of IPOs may also be unstable due to the absence of a prior public market, the small number of shares available for trading and limited investor information.
85
Table of Contents
| WASATCH ULTRA GROWTH FUND — Summary | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH ULTRA GROWTH FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
28.60% | |||
| Worst — 12/31/08 |
-31.56% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
5 Years | 10 Years | |||||||||
| Wasatch Ultra Growth Fund — Investor Class |
||||||||||||
| Return before taxes |
35.67% | 24.90% | 5.58% | |||||||||
| Return after taxes on distributions |
33.68% | 23.82% | 4.40% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
21.81% | 20.79% | 4.48% | |||||||||
| Russell 2000® Growth Index (reflects no deductions for fees, expenses or taxes) |
43.30% | 22.58% | 9.41% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
86
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Managers
| John Malooly, CFA Lead Portfolio Manager Since 2012 |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
87
Table of Contents
| WASATCH WORLD INNOVATORS FUND — Summary | ||
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is long-term growth of capital.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
1.50% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.29% | |
| Acquired Fund Fees and Expenses |
0.01% | |
|
| ||
| Total Annual Fund Operating Expenses1,2 |
1.80% | |
| 1 | The Total Annual Fund Operating Expenses may not equal the expense ratio stated in the Fund’s most recent Annual Report and Financial Highlights, which reflects the operating expenses of the Fund and does not include Acquired Fund Fees and Expenses. |
| 2 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 1.95% of average daily net assets until at least January 31, 2015 (excluding interest, dividend expense on short sales/interest expense, taxes, brokerage commissions, other investment related costs and extraordinary expenses). Acquired Fund Fees and Expenses are not included in the expense limitation. The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| World Innovators Fund — Investor Class |
$ | 183 | $ | 567 | $ | 975 | $ | 2,116 | ||||||||
88
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 84% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests primarily in domestic and foreign growth companies that we believe are innovators in their respective sectors or industries.
Modern innovative companies have global business models that are less dependent upon their place of domicile, the location of their headquarters, or the exchange on which their stocks are listed. Under normal market conditions the Fund will typically be invested in at least three developed countries, including the U.S. The Fund may invest in securities issued by companies domiciled in emerging and frontier markets without limitation.
Under normal market conditions, we expect a significant portion of the Fund’s assets will be invested in equity securities of companies that have significant non-U.S. economic risk exposure. Equity securities include common stock, preferred stock and securities convertible into common stock, warrants and rights, and other securities with equity characteristics (which include any instrument tied to a specific security or basket of securities, such as equity-linked derivatives and notes, certain options on common stock, and exchange traded funds). We will consider a company to have significant non-U.S. economic risk exposure if, at the time of purchase, it has at least 50% of its assets outside the U.S., or if at least 50% of its revenues or profits are from goods produced or sold, investments made, or services performed outside the U.S.
We will use a process of “bottom up” fundamental analysis to invest in companies of any size. However, because innovative companies are rapidly evolving, we expect to invest a significant portion of the Fund’s assets in early stage companies and small to mid-size companies with market capitalizations of less than U.S. $5 billion at the time of purchase.
We have defined two broad categories that we believe are critical to identifying companies with outstanding investment potential. The first is companies that possess valuable intellectual property. The second is companies that are innovators in their respective sectors or industries.
The Fund may invest a large percentage of its assets in a few sectors, including information technology, health care, consumer discretionary, consumer staples and financials.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
Foreign Securities Risk. Foreign securities are generally more volatile and less liquid than U.S. securities. Further, foreign securities may be subject to additional risks not associated with investments in U.S. securities due to differences in the economic and political environment, the amount of available public information, the degree of market regulation, and financial reporting, accounting and auditing standards, and, in the case of foreign currency-denominated securities, fluctuations in currency exchange rates.
Emerging Markets Risk. In addition to the risks of investing in foreign securities in general, the risks of investing in the securities of companies domiciled in emerging market countries include increased political or social instability, economies based on only a few industries, unstable currencies, runaway inflation, highly volatile securities markets, unpredictable shifts in policies relating to foreign investments, lack of protection for investors against parties that fail to complete transactions, and the potential for government seizure of assets or nationalization of companies.
Small Company Stock Risk. Small cap stocks may be very sensitive to changing economic conditions and market downturns because the issuers often have narrow markets, fewer product lines, and limited managerial and financial resources, resulting in volatile stock prices and a limited ability to sell them at a desirable time or price.
Technology and Science Stock Risk. Stocks of science and information technology companies may be volatile because issuers are sensitive to rapid obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Information technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market. Science companies may be affected by the same risks as technology companies.
Sector Weightings Risk. To the extent the Fund emphasizes, from time to time, investments in a particular sector, the Fund will be subject to a greater degree to the risks particular to that sector, including the sectors described below. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect all the securities in a single sector. If the Fund invests in a few sectors, it may have increased exposure to the price movements of those sectors.
Financials Sector Risk. Industries in the financial sector, such as banks, insurance companies, broker-dealers and real estate investment trusts, may be sensitive to changes in interest rates and general economic activity and are generally subject to extensive government regulation.
89
Table of Contents
| WASATCH WORLD INNOVATORS FUND — Summary | ||
|
| ||
|
| ||
Consumer Staples Sector Risk. The consumer staples sector may be affected by marketing campaigns, changes in consumer demands, government regulations and changes in commodity prices.
Health Care Sector Risk. Health care companies are strongly affected by worldwide scientific or technological developments. Their products may rapidly become obsolete. Many health care companies are also subject to significant government regulation and may be affected by changes in government policies.
Industrials Sector Risk. Industries in the industrials sector, such as companies engaged in the production, distribution or service of products or equipment for manufacturing, agriculture, forestry, mining and construction, can be significantly affected by general economic trends, including such factors as employment and economic growth, interest rate changes, changes in consumer spending, legislative and government regulation and spending, import controls, commodity prices, and worldwide competition.
Consumer Discretionary Sector Risk. Industries in the consumer discretionary sector, such as consumer durables, hotels, restaurants, media, retailing and automobiles, may be significantly impacted by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Early Stage Companies Risk. Early stage companies may never obtain necessary financing, may rely on untested business plans, may not be successful in developing markets for their products or services, and may remain an insignificant part of their industry, and as such may never be profitable. Stocks of early stage companies may be illiquid, privately traded, and more volatile and speculative than the securities of larger companies.
90
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based market index. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com. Effective April 1, 2011, the Wasatch World Innovators Fund changed its name from the Wasatch Global Science & Technology Fund and changed its principal strategies and primary comparison benchmark index. The bar chart, best and worst quarterly returns and average annual total return table include performance prior to these changes.
WASATCH WORLD INNOVATORS FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 6/30/09 |
27.41% | |||
| Worst — 12/31/08 |
-30.07% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
5 Years | 10 Years | |||||||||
| Wasatch World Innovators Fund — Investor Class |
||||||||||||
| Return before taxes |
33.70% | 28.02% | 9.07% | |||||||||
| Return after taxes on distributions |
32.16% | 27.71% | 8.62% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
20.34% | 23.36% | 7.39% | |||||||||
| MSCI All Country (AC) World Investable Markets Index (IMI)* (reflects no deductions for fees, expenses or taxes) |
23.55% | 15.62% | 7.60% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
*Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI.
91
Table of Contents
| WASATCH WORLD INNOVATORS FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Portfolio Managers
| Samuel S. Stewart, Jr., PhD, CFA Lead Portfolio Manager Since 2008 |
Josh Stewart Portfolio Manager Since 2012 |
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
92
Table of Contents
| WASATCH-1ST SOURCE INCOME FUND — Summary | JANUARY 31, 2014 | |
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective is to seek current income consistent with the preservation of capital.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
0.55% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.16% | |
| Acquired Fund Fees and Expenses |
0.02% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
0.73% | |
| 1 | The Total Annual Fund Operating Expenses may not equal the expense ratio stated in the Fund’s most recent Annual Report and Financial Highlights, which reflects the operating expenses of the Fund and does not include Acquired Fund Fees and Expenses. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that the operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| Wasatch-1st Source Income Fund — Investor Class |
$ | 75 | $ | 234 | $ | 407 | $ | 908 | ||||||||
93
Table of Contents
| WASATCH-1ST SOURCE INCOME FUND — Summary | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 35% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund normally invests at least 65% of its total assets in debt securities of all types, including corporate bonds, U.S. government bonds, and variable and floating rate securities.
Consistent with the Wasatch-1st Source Income Fund’s (Income Fund) investment objective, 1st Source Corporation Investment Advisors, Inc. (1st Source), the Fund’s Sub-Advisor, expects the Fund to:
| • | Invest substantially all, but in no event less than 65%, of the Fund’s total assets at the time of purchase in debt securities. |
| • | Invest in fixed income securities consisting of bonds, fixed income preferred stocks, debentures, notes, zero-coupon securities, mortgage-related and other asset-backed securities, state, municipal or industrial revenue bonds, obligations issued or guaranteed by agencies or instrumentalities of the U.S. government, debt securities convertible into or exchangeable for common stocks, foreign debt securities, income participation loans, guaranteed investment contracts, first mortgage loans and participation certificates in pools of mortgages issued or guaranteed by agencies or instrumentalities of the U.S. government. |
| • | Typically invest in debt securities rated at the time of purchase within the four highest rating categories assigned by one or more nationally recognized statistical rating organizations (NRSROs) or, if unrated, those which 1st Source deems to be of comparable quality. The Fund may also invest up to 10% of its total assets in non-investment grade debt securities. |
The Fund may engage in repurchase transactions, credit default swaps, forward contracts, and may also engage in futures transactions solely for hedging purposes and invest in options on futures. The Fund may also invest in other investment companies.
The Fund may purchase securities on a when-issued or delayed delivery basis, in which a security’s price and yield are fixed on a specific date, but payment and delivery are scheduled for a future date beyond the standard settlement period.
It is anticipated that the Fund will have an average maturity of 3 1/2 years to 5 years and a duration of 2 1/2 years to 4 1/2 years.
PRINCIPAL RISKS
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Interest Rate Risk. Interest rate risk is the risk that a debt security’s value will decline 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.
Credit Risk. Credit risk is the risk that the issuer of a debt security will fail to repay principal and interest on the security when due. Credit risk is affected by the issuer’s credit status, and is generally higher for non-investment grade securities.
Income Risk. Income risk is the potential for a decline in the Fund’s income due to falling interest rates.
Non-Investment Grade Securities Risk. Non-investment grade securities (also known as “high yield” or “junk bonds”), those rated below investment grade by the primary rating agencies (e.g., below BB/Ba by S&P/Moody’s), tend to have more volatile prices and increased price sensitivity to changing interest rates and adverse economic and business developments than investment grade securities. In addition, compared to investment grade securities, non-investment grade securities are subject to greater risk of loss due to default or decline in credit quality. There is a greater likelihood that adverse economic or company-specific events will make the issuer unable to make interest and/or principal payments, and will make the issuer more susceptible to negative market sentiment, leading these securities to experience depressed prices and decreased liquidity.
Convertible Securities Risk. The Fund may invest in convertible securities. Convertible securities are preferred stocks or debt obligations that are convertible into common stock. Generally, convertible securities offer lower interest or dividend yields than non-convertible securities of similar quality, and have less potential for gains or capital appreciation in a rising stock market than other equity securities. They tend to be more volatile than other fixed income securities, and the markets for convertible securities may be less liquid than the markets for common stocks or bonds. Convertible securities have both equity and fixed income risk characteristics. Like all fixed income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. The market value of convertible securities tends to decline as interest rates increase. If, however, the market price of the common stock underlying a convertible security approaches or exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. In such a case, a convertible security may lose much or all of its value if the value of the underlying common stock then falls below the conversion price of the security. As the market price of the underlying common stock declines, the convertible security tends to trade increasingly based on its fixed income characteristics, and thus, may not necessarily decline in price as much as the underlying common stock. Additionally, an issuer may have the right to buy back a convertible security at a time and price that is unfavorable to the Fund.
94
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
Ratings Agency Risk. Credit quality in the high yield securities market can change suddenly and unexpectedly, and even recently issued credit ratings may not fully reflect the actual risks posed by a particular high yield security. For these reasons, it is generally the policy of 1st Source not to rely exclusively on ratings issued by established NRSROs, but to supplement such ratings with its own independent and ongoing review of credit quality. The achievement of the Fund’s investment objective by investments in such securities may be more dependent on 1st Source’s credit analysis than is the case for higher quality bonds. Should the rating of a portfolio security be downgraded, 1st Source will determine whether it is in the best interests of the Fund to retain or dispose of such security.
Repurchase Agreements Risk. The main risk of a repurchase agreement is that the original seller might default on its obligation to repurchase the securities. If the seller defaults, the Fund will seek to recover its investment by selling the collateral and could encounter restrictions, costs or delays. The Fund will suffer a loss if it sells the collateral for less than the repurchase price.
When-Issued Securities Risk. The Fund may purchase securities on a “when-issued” basis (i.e., for delivery beyond the normal settlement date at a stated price and yield). When the Fund engages in “when-issued” transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in the Fund’s incurring a loss or missing the opportunity to obtain a price considered to be advantageous. The Fund will engage in “when-issued” delivery transactions only for the purpose of acquiring portfolio securities consistent with the Fund’s investment objective and strategies and not for investment leverage.
Investment Companies Risk. The Fund may invest in shares of other investment companies, including foreign and domestic registered and unregistered open-end funds, closed-end funds, unit investment trusts and exchange traded funds. Investing in another investment company subjects the Fund to the same risks associated with investing in the securities held by the applicable investment company and the investment strategies employed by such funds (such as the use of leverage). In addition, the benefit of investing in another investment company is largely dependent on the skill of the investment advisor of the underlying company and whether the associated fees and costs involved with investing in such company are offset by the potential gains. As a shareholder in an investment company, the Fund will bear its ratable share of that investment company’s expenses including advisory and administrative fees. Shareholders would therefore be subject to duplicative expenses to the extent that the Fund invests in other investment companies.
Derivatives Risk. The Fund may suffer a loss from its use of put and call options and futures contracts, which are forms of derivatives. Derivatives can amplify a gain or loss, potentially earning or losing substantially more money than the actual cost of the derivative instrument, with the potential for unlimited losses on certain instruments. Derivatives may be difficult to value, may become illiquid, and may affect the timing and character of taxes payable by shareholders.
Credit Default Swaps Risk. The Fund may enter into credit default swaps, interest rate swaps and currency swaps. Swap agreements will tend to shift a Fund’s investment exposure from one type of investment to another. Depending on how they are used, swap agreements may increase or decrease the overall volatility of the Fund’s portfolio and its share price and yield. Swaps are subject to counterparty risk. The Fund bears the loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. For this reason, the Fund will enter into swap agreements only with counterparties that meet certain standards of creditworthiness.
Stock Market Risk. The Fund’s investments may decline in value due to movements in the overall stock market.
Stock Selection Risk. The Fund’s investments may decline in value even when the overall stock market is not in a general decline.
95
Table of Contents
| WASATCH-1ST SOURCE INCOME FUND — Summary | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The Fund commenced operations on December 15, 2008 upon the reorganization of the 1st Source Monogram Income Fund, the Fund’s predecessor fund (the “Predecessor Fund”), into the Fund. With the reorganization, the Fund assumed the financial and performance history of the Predecessor Fund. The following tables provide an indication of the historical risk of an investment in the Fund (and Predecessor Fund for periods prior to December 15, 2008). The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance for the years shown in bar chart. The average annual total returns table allows you to compare the Fund’s (and Predecessor Fund’s for periods prior to December 15, 2008) performance over the time periods indicated to that of a broad-based bond market index. Past performance, before and after taxes, is not necessarily an indication of how the Investor Class of the Fund will perform in the future. In addition, the Predecessor Fund was advised by a different investment advisor and subject to different expenses, which may have produced different investment results. The portfolio manager of the Fund, however, was also the portfolio manager of the Predecessor Fund. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH-1ST SOURCE INCOME FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 9/30/06 |
2.85% | |||
| Worst — 6/30/04 |
-2.20% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
5 Years | 10 Years | |||||||||
| Wasatch-1st Source Income Fund — Investor Class |
||||||||||||
| Return before taxes |
-1.49% | 3.04% | 3.09% | |||||||||
| Return after taxes on distributions |
-2.18% | 2.19% | 1.93% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
-0.84% | 2.05% | 1.96% | |||||||||
| Barclays Capital U.S. Intermediate Government/Credit Bond Index (reflects no deductions for fees, expenses or taxes) |
-0.86% | 3.96% | 4.09% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
96
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Investment Sub-Advisor
1st Source Corporation Investment Advisors, Inc.
Portfolio Manager
Paul Gifford, CFA
Lead Portfolio Manager
Since 2008
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
TAX INFORMATION
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
97
Table of Contents
| WASATCH-HOISINGTON U.S. TREASURY FUND — Summary | ||
|
| ||
|
| ||
INVESTMENT OBJECTIVE
The Fund’s investment objective 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.
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that you may pay if you buy, sell or hold Investor Class shares of the Fund.
| SHAREHOLDER FEES (fees paid directly from your investment) | Investor Class Shares | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) |
None | |
| Redemption Fee (as a % of amount redeemed on shares held 60 days or less) |
2.00% | |
| Exchange Fee |
None | |
| Maximum Account Fee |
None | |
| ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | Investor Class Shares | |
| Management Fee |
0.50% | |
| Distribution/Service (12b-1) Fee |
None | |
| Other Expenses |
0.21% | |
|
| ||
| Total Annual Fund Operating Expenses1 |
0.71% | |
| 1 | The Advisor has contractually agreed to reimburse the Investor Class shares of the Fund for Total Annual Fund Operating Expenses in excess of 0.75% of average daily net assets until at least January 31, 2015 (excluding interest, taxes, brokerage commissions, other investment related costs and extraordinary expenses). The Board of Trustees is the only party that can terminate the contractual limitation prior to the contract’s expiration. The Advisor can rescind the contractual limitation on expenses at any time after its expiration date. |
EXAMPLE
This example is intended to help you compare the cost of investing in the Investor Class of the Fund with the cost of investing in other mutual funds. The example assumes that you invested $10,000 in the Investor Class of the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods. The example also assumes that your investment had a 5% return each year and that operating expenses (as a percentage of net assets) of the Fund’s Investor Class remained 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 | |||||||||||||
| U.S. Treasury Fund — Investor Class |
$ | 73 | $ | 228 | $ | 396 | $ | 882 | ||||||||
98
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). Higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 34% of the average value of its portfolio.
PRINCIPAL STRATEGIES
In pursuit of the Fund’s investment objective, Hoisington Investment Management Company (HIMCO), the Fund’s 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 HIMCO’s assessment of multi-year trends in national and international economic conditions and interest rates, changes in inflationary pressures, and the value of long term U.S. Treasury bonds (maturities longer than 20 years) relative to inflation. |
| • | Invest in long-term U.S. Treasury bonds, including U.S. Treasury Strips (zero coupon Treasury securities), when HIMCO 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 HIMCO 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 Fund’s holdings will range in maturity from less than a year to a maximum of the longest maturity Treasury bonds available. |
| • | When the Fund is invested in securities with 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 Fund’s 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 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
All investments carry some degree of risk that will affect the value of the Fund, its investment performance and the price of its shares. As a result, you may lose money if you invest in the Fund. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
The Fund is subject to the following principal investment risks:
Credit Risk. Credit risk is the risk that the issuer of a debt security will fail to repay principal and interest on the security when due. HIMCO seeks to limit credit risk by investing primarily in U.S. Treasury securities backed by the full faith and credit of the U.S. government which are viewed as carrying minimal credit risk.
Interest Rate Risk. Interest rate risk is the risk that a debt security’s value will decline 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.
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 a measure of the responsiveness of a bond’s price to market interest rate changes. For example, if the interest rate increased 1%, a bond with an effective duration of five years would experience a decline in price of 5%. Similarly, if the interest rate increased 1%, the price of a bond with an effective duration of 15 years would decline 15%. At a yield of 5%, the effective duration of the longest maturity U.S. Treasury bond is about 15 years. The effective duration of the longest maturity U.S. zero coupon bond is 30 years. If the interest rate increased 1%, the value of the longest maturity zero coupon bond would decline 30%. Similarly, if the interest rate decreased 1%, the value of the longest maturity zero coupon bond would increase 30%.
Risks of Repurchase Agreements. The main risk of a repurchase agreement is that the original seller might default on its obligation to repurchase the securities. If the seller defaults, the Fund will seek to recover its investment by selling the collateral and could encounter restrictions, costs or delays. The Fund will suffer a loss if it sells the collateral for less than the repurchase price.
Risks of Zero Coupon Treasury Securities. The market prices of zero coupon securities, which do not entitle the holder to periodic interest payments, are generally more volatile than the market prices of securities of comparable quality and similar maturity that do pay interest periodically. Zero coupon securities are more sensitive to fluctuations in interest rates than non-zero coupon securities.
99
Table of Contents
| WASATCH-HOISINGTON U.S. TREASURY FUND — Summary | ||
|
| ||
|
| ||
HISTORICAL PERFORMANCE
The following tables provide information on how the Investor Class of the Fund has performed over time. The past performance, before and after taxes, of the Fund’s Investor Class is not necessarily an indication of how these shares will perform in the future. The bar chart below is intended to provide you with an indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year, as represented by the Investor Class of the Fund. The table below is designed to help you evaluate your risk tolerance by showing the best and worst quarterly performance of the Fund’s Investor Class for the years shown in the bar chart. The average annual total return table below allows you to compare the Fund’s performance over the time periods indicated to that of a broad-based bond market index. Performance information is updated regularly and is available on the Fund’s website www.WasatchFunds.com.
WASATCH-HOISINGTON U.S. TREASURY FUND — INVESTOR CLASS
Year by Year Total Returns
Best and Worst Quarterly Returns
| Best — 9/30/11 |
36.15% | |||
| Worst — 12/31/10 |
-11.47% |
| Average Annual Total Returns — (as of 12/31/13) | 1 Year |
5 Years | 10 Years | |||||||||
| Wasatch-Hoisington U.S. Treasury Fund — Investor Class |
||||||||||||
| Return before taxes |
-16.71% | 0.63% | 6.63% | |||||||||
| Return after taxes on distributions |
-17.68% | -0.97% | 5.10% | |||||||||
| Return after taxes on distributions and sale of Fund shares |
-9.42% | 0.31% | 4.91% | |||||||||
| Barclays Capital U.S. Aggregate Bond Index (reflects no deductions for fees, expenses or taxes) |
-2.02% | 4.44% | 4.55% | |||||||||
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
100
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
PORTFOLIO MANAGEMENT
Investment Advisor
Wasatch Advisors, Inc.
Investment Sub-Advisor
Hoisington Investment Management Company
Portfolio Manager
Van Hoisington
Lead Portfolio Manager
Since 1996
PURCHASE AND SALE OF FUND SHARES
| INVESTMENT MINIMUMS | INVESTOR CLASS | |||
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
| SUBSEQUENT PURCHASES | INVESTOR CLASS | |||
| Regular Accounts and IRAs |
$ | 100 | ||
| Automatic Investment Plan |
|
$50 per month and/or $100 per quarter |
| |
| • | You may purchase, redeem or exchange Fund shares on any day the New York Stock Exchange is open for business. |
| • | You may sell shares online at www.WasatchFunds.com, via email at shareholderservice@wasatchfunds.com or by calling 800.551.1700 if you did not decline the telephone redemption privilege when establishing your account. |
| • | You may write to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172 or via overnight delivery to: Wasatch Funds, 803 West Michigan Street, Suite A, Milwaukee, WI 53233-2301. The letter should include your name, Fund Name, Class of shares (i.e., Investor Class), account number, dollar amount of shares to be bought or sold, your daytime telephone number, signature(s) of account owners (sign exactly as the account is registered) and Medallion signature guarantee (if required). For IRA accounts, please obtain an IRA Distribution Form from www.WasatchFunds.com or by calling a shareholder services representative. |
| • | You may buy or sell shares of the Fund through banks or investment professionals, including brokers, and they may charge you a transaction fee for this service. |
The Fund intends to make distributions. You will generally have to pay federal income taxes, and any applicable state or local taxes, on the distributions you receive from the Fund as ordinary income or capital gains unless you are investing through a tax exempt account such as a qualified retirement plan. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Advisor or its affiliates may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary or your individual financial advisor to recommend the Fund over another investment. Ask your individual financial advisor or visit your financial intermediary’s website for more information.
101
Table of Contents
| WASATCH FUNDS — Additional Information About The Funds | ||
|
| ||
|
| ||
102
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
103
Table of Contents
| WASATCH FUNDS — Additional Information About The Funds | JANUARY 31, 2014 | |
|
| ||
|
| ||
104
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
105
Table of Contents
| WASATCH FUNDS — Management | ||
|
| ||
|
| ||
106
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
107
Table of Contents
| WASATCH FUNDS — Management | ||
|
| ||
|
| ||
108
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
109
Table of Contents
| WASATCH FUNDS — MANAGEMENT | JANUARY 31, 2014 | |
|
| ||
|
| ||
110
Table of Contents
| WASATCH FUNDS — Shareholder’s Guide | JANUARY 31, 2014 | |
|
| ||
|
| ||
INVESTMENT MINIMUMS — INVESTOR CLASS
| New Accounts |
$ | 2,000 | ||
| New Accounts with an Automatic Investment Plan |
$ | 1,000 | ||
| Individual Retirement Accounts (IRAs) |
$ | 2,000 | ||
| Coverdell Education Savings Accounts |
$ | 1,000 | ||
Make checks payable to Wasatch Funds
HOW TO CONTACT WASATCH
OPEN A NEW ACCOUNT
111
Table of Contents
| WASATCH FUNDS — Shareholder’s Guide | JANUARY 31, 2014 | |
|
| ||
|
| ||
PURCHASE SHARES FOR AN EXISTING ACCOUNT
SELL (REDEEM) SHARES
112
Table of Contents
| WASATCH FUNDS — Account Policies | JANUARY 31, 2014 | |
|
| ||
|
| ||
113
Table of Contents
| WASATCH FUNDS — Account Policies | ||
|
| ||
|
| ||
114
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
115
Table of Contents
| WASATCH FUNDS — Account Policies | ||
|
| ||
|
| ||
116
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
117
Table of Contents
| WASATCH FUNDS — Account Policies | ||
|
| ||
|
| ||
118
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
119
Table of Contents
| WASATCH FUNDS — Account Policies | JANUARY 31, 2014 | |
|
| ||
|
| ||
120
Table of Contents
| WASATCH FUNDS — Dividends, Capital Gain Distributions and Taxes | JANUARY 31, 2014 | |
|
| ||
|
| ||
121
Table of Contents
| WASATCH FUNDS — Dividends, Capital Gain Distributions and Taxes | ||
|
| ||
|
| ||
122
Table of Contents
| JANUARY 31, 2014 | ||
|
| ||
|
| ||
123
Table of Contents
| WASATCH FUNDS — Financial Highlights | ||
|
| ||
|
| ||
124
Table of Contents
(This page intentionally left blank.)
125
Table of Contents
| WASATCH FUNDS — Financial Highlights | ||
|
| ||
|
| ||
| Income (Loss) from Investment Operations |
Less Distributions | |||||||||||||||||||||||||||||||
| Net Asset Value Beginning of Period |
Net Investment Income (Loss) |
Net Realized and Unrealized Gains (Losses) on Investments |
Total from Investment Operations |
Redemption Fees |
Dividends from Net Investment Income |
Distributions from Net Realized Gains |
Total Distributions |
|||||||||||||||||||||||||
| Core Growth Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 41.41 | (0.12 | ) | 11.19 | 11.07 | 0.01 | — | — | — | ||||||||||||||||||||||
| Year ended 9/30/12 |
$ | 32.63 | (0.26 | ) | 9.04 | 8.78 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/11 |
$ | 29.95 | (0.19 | ) | 2.87 | 2.68 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/10 |
$ | 25.88 | 0.03 | 4.05 | 4.08 | — | 4 | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||||||
| Year ended 9/30/09 |
$ | 26.38 | — | 4 | (0.23 | ) | (0.23 | ) | — | 4 | (0.27 | ) | — | (0.27 | ) | |||||||||||||||||
| Emerging India Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 2.02 | (0.01 | ) | (0.23 | ) | (0.24 | ) | — | 4 | — | — | — | |||||||||||||||||||
| Year ended 9/30/12 |
$ | 1.83 | (0.01 | ) | 0.21 | 0.20 | — | 4 | (0.01 | ) | — | (0.01 | ) | |||||||||||||||||||
| Period ended 9/30/119 |
$ | 2.00 | — | 4 | (0.17 | ) | (0.17 | ) | — | 4 | — | — | — | |||||||||||||||||||
| Emerging Markets Select Fund |
|
|||||||||||||||||||||||||||||||
| Period ended 9/30/1313 |
$ | 10.00 | — | 4 | (0.44 | ) | (0.44 | ) | — | 4 | — | — | — | |||||||||||||||||||
| Emerging Markets Small Cap Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 2.66 | 0.01 | 0.01 | 0.02 | — | 4 | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||||||
| Year ended 9/30/12 |
$ | 2.16 | 0.01 | 0.49 | 0.50 | — | 4 | — | — | — | ||||||||||||||||||||||
| Year ended 9/30/11 |
$ | 2.37 | — | 4 | (0.21 | ) | (0.21 | ) | — | 4 | — | 4 | — | — | 4 | |||||||||||||||||
| Year ended 9/30/10 |
$ | 1.57 | 0.01 | 0.80 | 0.81 | — | 4 | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||||||
| Year ended 9/30/09 |
$ | 1.24 | — | 4 | 0.33 | 0.33 | — | 4 | — | 4 | — | — | 4 | |||||||||||||||||||
| Frontier Emerging Small Countries Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 2.41 | 0.01 | 0.55 | 0.56 | — | 4 | — | 4 | — | 4 | — | 4 | |||||||||||||||||||
| Period ended 9/30/128 |
$ | 2.00 | 0.01 | 0.40 | 0.41 | — | 4 | — | — | — | ||||||||||||||||||||||
| Global Opportunities Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 4.15 | (0.02 | ) | 0.93 | 0.91 | — | 4 | — | (0.48 | ) | (0.48 | ) | |||||||||||||||||||
| Year ended 9/30/12 |
$ | 3.68 | (0.03 | ) | 0.93 | 0.90 | — | 4 | — | (0.43 | ) | (0.43 | ) | |||||||||||||||||||
| Year ended 9/30/11 |
$ | 3.97 | (0.02 | ) | (0.13 | ) | (0.15 | ) | — | 4 | — | (0.14 | ) | (0.14 | ) | |||||||||||||||||
| Year ended 9/30/10 |
$ | 3.38 | (0.02 | ) | 0.70 | 0.68 | — | 4 | (0.01 | ) | (0.08 | ) | (0.09 | ) | ||||||||||||||||||
| Period ended 9/30/0912 |
$ | 2.00 | (0.01 | ) | 1.39 | 1.38 | — | 4 | — | — | — | |||||||||||||||||||||
| Heritage Growth Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 12.80 | 0.02 | 2.64 | 2.66 | — | 4 | (0.01 | ) | (0.54 | ) | (0.55 | ) | |||||||||||||||||||
| Year ended 9/30/12 |
$ | 10.83 | (0.03 | ) | 2.16 | 2.13 | — | 4 | (0.02 | ) | (0.14 | ) | (0.16 | ) | ||||||||||||||||||
| Year ended 9/30/11 |
$ | 10.70 | — | 4 | 0.22 | 0.22 | — | 4 | (0.09 | ) | — | (0.09 | ) | |||||||||||||||||||
| Year ended 9/30/10 |
$ | 9.28 | 0.09 | 1.39 | 1.48 | — | 4 | (0.06 | ) | — | (0.06 | ) | ||||||||||||||||||||
| Year ended 9/30/09 |
$ | 9.00 | 0.06 | 0.26 | 0.32 | — | 4 | (0.02 | ) | (0.02 | ) | (0.04 | ) | |||||||||||||||||||
| International Growth Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 22.44 | 0.07 | 6.32 | 6.39 | 0.01 | (0.08 | ) | — | (0.08 | ) | |||||||||||||||||||||
| Year ended 9/30/12 |
$ | 17.21 | 0.09 | 5.14 | 5.23 | — | 4 | — | — | — | ||||||||||||||||||||||
| Year ended 9/30/11 |
$ | 18.66 | — | 4 | (1.46 | ) | (1.46 | ) | 0.01 | — | — | — | ||||||||||||||||||||
| Year ended 9/30/10 |
$ | 13.91 | 0.02 | 4.73 | 4.75 | — | 4 | — | — | — | ||||||||||||||||||||||
| Year ended 9/30/09 |
$ | 11.83 | (0.13 | ) | 2.24 | 2.11 | — | 4 | (0.03 | ) | — | (0.03 | ) | |||||||||||||||||||
| International Opportunities Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 2.41 | (— | )4 | 0.53 | 0.53 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/12 |
$ | 2.24 | — | 4 | 0.44 | 0.44 | — | 4 | — | (0.27 | ) | (0.27 | ) | |||||||||||||||||||
| Year ended 9/30/11 |
$ | 2.57 | (0.01 | ) | (0.25 | ) | (0.26 | ) | — | 4 | — | (0.07 | ) | (0.07 | ) | |||||||||||||||||
| Year ended 9/30/10 |
$ | 1.97 | (0.01 | ) | 0.63 | 0.62 | — | 4 | (0.02 | ) | — | (0.02 | ) | |||||||||||||||||||
| Year ended 9/30/09 |
$ | 1.60 | 0.01 | 0.36 | 0.37 | — | 4 | — | 4 | — | — | 4 | ||||||||||||||||||||
| Large Cap Value Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 14.31 | 0.22 | 2.37 | 2.59 | — | 4 | (0.20 | ) | (0.13 | ) | (0.33 | ) | |||||||||||||||||||
| Year ended 9/30/12 |
$ | 11.85 | 0.20 | 2.46 | 2.66 | — | 4 | (0.20 | ) | — | (0.20 | ) | ||||||||||||||||||||
| Year ended 9/30/11 |
$ | 12.64 | 0.17 | (0.79 | ) | (0.62 | ) | — | 4 | (0.17 | ) | — | (0.17 | ) | ||||||||||||||||||
| Year ended 9/30/10 |
$ | 11.97 | 0.17 | 0.67 | 0.84 | — | 4 | (0.17 | ) | — | (0.17 | ) | ||||||||||||||||||||
| Year ended 9/30/09 |
$ | 12.93 | 0.20 | (0.96 | ) | (0.76 | ) | — | 4 | (0.20 | ) | — | (0.20 | ) | ||||||||||||||||||
See Notes to Financial Highlights
126
Table of Contents
| (for a share outstanding throughout each period) | ||
|
| ||
|
| ||
| Ratios to Average Net Assets | Supplemental Data | |||||||||||||||||||||||||||||
| Net Asset Value End of Period |
Total Return (%)1 | Expenses Net of Waivers and Reimbursements (%)2 |
Expenses Before Waivers and Reimbursements (%)2 |
Net Investment Income Net of Waivers and Reimbursements (%)2 |
Net Investment Income Before Waivers and Reimbursements (%)2 |
Net Assets End of Period (000’s) |
Portfolio Turnover Rate1 3 |
|||||||||||||||||||||||
| $ | 52.49 | 26.76 | 1.21 | 5 | 1.21 | 5 | (0.39 | ) | (0.39 | ) | $ | 924,304 | 16% | |||||||||||||||||
| $ | 41.41 | 26.91 | 1.23 | 5 | 1.23 | 5 | (0.70 | ) | (0.70 | ) | $ | 581,371 | 28% | |||||||||||||||||
| $ | 32.63 | 8.95 | 1.22 | 1.22 | (0.57 | ) | (0.57 | ) | $ | 433,294 | 27% | |||||||||||||||||||
| $ | 29.95 | 15.75 | 1.29 | 10 | 1.29 | 10 | 0.02 | 0.02 | $ | 418,642 | 19% | |||||||||||||||||||
| $ | 25.88 | (0.45 | ) | 1.34 | 1.34 | 0.24 | 0.24 | $ | 409,949 | 30% | ||||||||||||||||||||
| $ | 1.78 | (11.88 | ) | 1.95 | 5 | 2.99 | 5 | (0.99 | ) | (2.03 | ) | $ | 15,938 | 40% | ||||||||||||||||
| $ | 2.02 | 11.42 | 1.95 | 5 | 3.41 | 5 | (0.65 | ) | (2.11 | ) | $ | 13,658 | 17% | |||||||||||||||||
| $ | 1.83 | (8.50 | ) | 1.95 | 4.85 | (0.07 | ) | (2.97 | ) | $ | 10,580 | 2% | ||||||||||||||||||
| $ | 9.56 | (4.40 | ) | 1.69 | 5 | 2.40 | 5 | 0.04 | (0.67 | ) | $ | 29,374 | 43% | |||||||||||||||||
| $ | 2.67 | 0.85 | 1.95 | 5 | 2.06 | 5 | 0.21 | 0.09 | $ | 1,785,681 | 41% | |||||||||||||||||||
| $ | 2.66 | 23.15 | 1.95 | 5 | 2.13 | 5 | 0.29 | 0.11 | $ | 1,482,265 | 39% | |||||||||||||||||||
| $ | 2.16 | (8.85 | ) | 1.96 | 2.19 | 0.22 | (0.01 | ) | $ | 774,198 | 48% | |||||||||||||||||||
| $ | 2.37 | 51.69 | 2.06 | 11 | 2.39 | 11 | 0.82 | 0.49 | $ | 446,751 | 23% | |||||||||||||||||||
| $ | 1.57 | 26.80 | 2.10 | 3.03 | 0.12 | (0.81 | ) | $ | 50,489 | 78% | ||||||||||||||||||||
| $ | 2.97 | 22.88 | 2.25 | 5 | 2.43 | 5 | 0.81 | 0.63 | $ | 730,694 | 13% | |||||||||||||||||||
| $ | 2.41 | 20.50 | 2.25 | 5 | 3.64 | 5 | 1.31 | (0.08 | ) | $ | 33,045 | 5% | ||||||||||||||||||
| $ | 4.58 | 24.23 | 1.80 | 5 | 1.80 | 5 | (0.70 | ) | (0.70 | ) | $ | 220,460 | 43% | |||||||||||||||||
| $ | 4.15 | 26.69 | 1.84 | 5 | 1.84 | 5 | (0.61 | ) | (0.61 | ) | $ | 153,582 | 38% | |||||||||||||||||
| $ | 3.68 | (4.21 | ) | 1.94 | 1.94 | (0.41 | ) | (0.41 | ) | $ | 199,855 | 59% | ||||||||||||||||||
| $ | 3.97 | 20.41 | 2.25 | 11 | 2.33 | 11 | (0.73 | ) | (0.81 | ) | $ | 234,904 | 23% | |||||||||||||||||
| $ | 3.38 | 69.00 | 2.25 | 2.61 | (0.67 | ) | (1.03 | ) | $ | 117,385 | 22% | |||||||||||||||||||
| $ | 14.91 | 21.67 | 0.95 | 5 | 0.99 | 5 | 0.15 | 0.11 | $ | 120,871 | 19% | |||||||||||||||||||
| $ | 12.80 | 19.76 | 0.95 | 5 | 1.03 | 5 | (0.28 | ) | (0.37 | ) | $ | 111,952 | 26% | |||||||||||||||||
| $ | 10.83 | 2.01 | 0.95 | 1.04 | (0.02 | ) | (0.11 | ) | $ | 72,561 | 35% | |||||||||||||||||||
| $ | 10.70 | 16.06 | 0.96 | 10 | 1.11 | 10 | 0.81 | 0.66 | $ | 78,274 | 36% | |||||||||||||||||||
| $ | 9.28 | 3.74 | 0.95 | 1.21 | 0.74 | 0.48 | $ | 77,194 | 33% | |||||||||||||||||||||
| $ | 28.76 | 28.63 | 1.49 | 5 | 1.49 | 5 | 0.25 | 0.25 | $ | 1,326,931 | 44% | |||||||||||||||||||
| $ | 22.44 | 30.39 | 1.57 | 6 | 1.57 | 6 | 0.51 | 0.51 | $ | 434,824 | 44% | |||||||||||||||||||
| $ | 17.21 | (7.77 | ) | 1.66 | 1.66 | (0.01 | ) | (0.01 | ) | $ | 281,481 | 70% | ||||||||||||||||||
| $ | 18.66 | 34.15 | 1.86 | 11 | 1.86 | 11 | 0.10 | 0.10 | $ | 285,446 | 44% | |||||||||||||||||||
| $ | 13.91 | 18.03 | 1.94 | 1.94 | 0.03 | 0.03 | $ | 173,226 | 56% | |||||||||||||||||||||
| $ | 2.94 | 21.99 | 2.25 | 5 | 2.42 | 5 | (0.03 | ) | (0.20 | ) | $ | 278,216 | 49% | |||||||||||||||||
| $ | 2.41 | 22.33 | 2.25 | 5 | 2.48 | 5 | (0.16 | ) | (0.39 | ) | $ | 194,563 | 41% | |||||||||||||||||
| $ | 2.24 | (10.49 | ) | 2.25 | 2.55 | (0.58 | ) | (0.88 | ) | $ | 151,569 | 108% | ||||||||||||||||||
| $ | 2.57 | 31.71 | 2.26 | 10 | 2.62 | 10 | (0.60 | ) | (0.96 | ) | $ | 152,178 | 51% | |||||||||||||||||
| $ | 1.97 | 23.60 | 2.26 | 6 | 2.79 | 6 | (0.28 | ) | (0.81 | ) | $ | 93,856 | 69% | |||||||||||||||||
| $ | 16.57 | 18.40 | 1.10 | 5 | 1.16 | 5 | 1.27 | 1.21 | $ | 786,910 | 47% | |||||||||||||||||||
| $ | 14.31 | 22.50 | 1.10 | 5 | 1.15 | 5 | 1.42 | 1.37 | $ | 1,298,365 | 14% | |||||||||||||||||||
| $ | 11.85 | (5.08 | ) | 1.10 | 1.11 | 1.24 | 1.23 | $ | 1,546,471 | 26% | ||||||||||||||||||||
| $ | 12.64 | 7.07 | 1.11 | 10 | 1.14 | 10 | 1.36 | 1.33 | $ | 1,621,113 | 17% | |||||||||||||||||||
| $ | 11.97 | (5.63 | ) | 1.10 | 1.22 | 1.93 | 1.81 | $ | 1,385,508 | 16% | ||||||||||||||||||||
127
Table of Contents
| WASATCH FUNDS — Financial Highlights (continued) | ||
|
| ||
|
| ||
| Income (Loss) from Investment Operations |
Less Distributions | |||||||||||||||||||||||||||||||
| Net Asset Value Beginning of Period |
Net Investment Income (Loss) |
Net Realized and Unrealized Gains (Losses) on Investments |
Total from Investment Operations |
Redemption Fees |
Dividends from Net Investment Income |
Distributions from Net Realized Gains |
Total Distributions |
|||||||||||||||||||||||||
| Long/Short Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 13.66 | (0.04 | ) | 2.23 | 2.19 | — | 4 | — | (0.03 | ) | (0.03 | ) | |||||||||||||||||||
| Year ended 9/30/12 |
$ | 11.85 | (0.02 | ) | 1.83 | 1.81 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/11 |
$ | 11.74 | (0.04 | ) | 0.16 | 0.12 | — | 4 | (0.01 | ) | — | (0.01 | ) | |||||||||||||||||||
| Year ended 9/30/10 |
$ | 11.13 | (0.01 | ) | 0.62 | 0.61 | — | 4 | — | 4 | — | — | 4 | |||||||||||||||||||
| Year ended 9/30/09 |
$ | 10.81 | 0.02 | 0.50 | 0.52 | — | 4 | (0.05 | ) | (0.15 | ) | (0.20 | ) | |||||||||||||||||||
| Micro Cap Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 5.71 | (0.10 | ) | 1.81 | 1.71 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/12 |
$ | 4.40 | (0.09 | ) | 1.40 | 1.31 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/11 |
$ | 4.44 | (0.06 | ) | 0.02 | (0.04 | ) | — | 4 | — | — | — | ||||||||||||||||||||
| Year ended 9/30/10 |
$ | 3.89 | (0.05 | ) | 0.60 | 0.55 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/09 |
$ | 4.14 | (0.03 | ) | (0.21 | ) | (0.24 | ) | — | 4 | (0.01 | ) | — | (0.01 | ) | |||||||||||||||||
| Micro Cap Value Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 2.85 | (0.03 | ) | 0.91 | 0.88 | — | 4 | — | (0.28 | ) | (0.28 | ) | |||||||||||||||||||
| Year ended 9/30/12 |
$ | 2.24 | (0.04 | ) | 0.65 | 0.61 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/11 |
$ | 2.38 | (0.04 | ) | (0.10 | ) | (0.14 | ) | — | 4 | — | — | — | |||||||||||||||||||
| Year ended 9/30/10 |
$ | 2.11 | (0.02 | ) | 0.30 | 0.28 | — | 4 | (0.01 | ) | — | (0.01 | ) | |||||||||||||||||||
| Year ended 9/30/09 |
$ | 1.80 | (0.02 | ) | 0.33 | 0.31 | — | 4 | — | — | — | |||||||||||||||||||||
| Small Cap Growth Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 43.82 | (0.15 | ) | 10.53 | 10.38 | — | 4 | — | (2.89 | ) | (2.89 | ) | |||||||||||||||||||
| Year ended 9/30/12 |
$ | 35.37 | (0.29 | ) | 10.40 | 10.11 | — | 4 | — | (1.66 | ) | (1.66 | ) | |||||||||||||||||||
| Year ended 9/30/11 |
$ | 34.24 | (0.13 | ) | 1.26 | 1.13 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/10 |
$ | 28.59 | (0.22 | ) | 5.87 | 5.65 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/09 |
$ | 26.50 | (0.12 | ) | 2.27 | 2.15 | — | 4 | — | (0.06 | ) | (0.06 | ) | |||||||||||||||||||
| Small Cap Value Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 3.81 | (0.01 | ) | 1.32 | 1.31 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/12 |
$ | 3.12 | (0.03 | ) | 0.72 | 0.69 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/11 |
$ | 3.08 | (0.02 | ) | 0.06 | 0.04 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/10 |
$ | 2.75 | (0.01 | ) | 0.34 | 0.33 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/09 |
$ | 2.82 | (0.01 | ) | (0.06 | ) | (0.07 | ) | — | 4 | — | — | — | |||||||||||||||||||
| Strategic Income Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 9.30 | 0.33 | 1.78 | 2.11 | — | 4 | (0.33 | ) | — | (0.33 | ) | ||||||||||||||||||||
| Year ended 9/30/12 |
$ | 7.57 | 0.16 | 1.77 | 1.93 | — | 4 | (0.20 | ) | — | (0.20 | ) | ||||||||||||||||||||
| Year ended 9/30/11 |
$ | 7.51 | 0.25 | 0.06 | 0.31 | — | 4 | (0.25 | ) | — | (0.25 | ) | ||||||||||||||||||||
| Year ended 9/30/10 |
$ | 6.77 | 0.31 | 0.70 | 1.01 | — | 4 | (0.27 | ) | — | (0.27 | ) | ||||||||||||||||||||
| Year ended 9/30/09 |
$ | 7.62 | 0.29 | (0.85 | ) | (0.56 | ) | — | 4 | (0.29 | ) | — | (0.29 | ) | ||||||||||||||||||
| Ultra Growth Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 22.83 | (0.15 | ) | 4.96 | 4.81 | — | 4 | — | (3.07 | ) | (3.07 | ) | |||||||||||||||||||
| Year ended 9/30/12 |
$ | 20.11 | (0.08 | ) | 3.98 | 3.90 | — | 4 | — | (1.18 | ) | (1.18 | ) | |||||||||||||||||||
| Year ended 9/30/11 |
$ | 19.80 | (0.17 | ) | 0.48 | 0.31 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/10 |
$ | 15.66 | (0.15 | ) | 4.29 | 4.14 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/09 |
$ | 15.76 | (0.14 | ) | 0.04 | (0.10 | ) | — | 4 | — | — | — | ||||||||||||||||||||
| World Innovators Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 18.55 | (0.12 | ) | 4.72 | 4.60 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/12 |
$ | 14.71 | (0.12 | ) | 3.96 | 3.84 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/11 |
$ | 13.65 | (0.13 | ) | 1.19 | 1.06 | — | 4 | — | — | — | |||||||||||||||||||||
| Year ended 9/30/10 |
$ | 11.12 | (0.10 | ) | 2.65 | 2.55 | — | 4 | (0.02 | ) | — | (0.02 | ) | |||||||||||||||||||
| Year ended 9/30/09 |
$ | 10.31 | (0.12 | ) | 0.93 | 0.81 | — | 4 | — | — | — | |||||||||||||||||||||
See Notes to Financial Highlights
128
Table of Contents
| (for a share outstanding throughout each period) | ||
|
| ||
|
| ||
| Ratios to Average Net Assets |
Supplemental Data | |||||||||||||||||||||||||||||
| Net Asset Value End of Period |
Total Return (%)1 | Expenses Net of Waivers and Reimbursements (%)2 |
Expenses Before Waivers and Reimbursements (%)2 |
Net Investment Income Net of Waivers and Reimbursements (%)2 |
Net Investment Income Before Waivers and Reimbursements (%)2 |
Net Assets End of Period (000’s) |
Portfolio Turnover Rate1 3 |
|||||||||||||||||||||||
| $ | 15.82 | 16.09 | 1.51 | 7 | 1.51 | 7 | (0.22 | ) | (0.22 | ) | $ | 1,479,371 | 47% | |||||||||||||||||
| $ | 13.66 | 15.27 | 1.51 | 7 | 1.51 | 7 | (0.20 | ) | (0.20 | ) | $ | 1,537,220 | 71% | |||||||||||||||||
| $ | 11.85 | 0.98 | 1.63 | 7 | 1.63 | 7 | (0.44 | ) | (0.44 | ) | $ | 833,298 | 82% | |||||||||||||||||
| $ | 11.74 | 5.52 | 1.71 | 7 11 | 1.71 | 7 11 | 0.03 | 0.03 | $ | 300,255 | 60% | |||||||||||||||||||
| $ | 11.13 | 5.35 | 1.91 | 7 | 1.96 | 7 | 0.24 | 0.19 | $ | 146,127 | 167% | |||||||||||||||||||
| $ | 7.42 | 29.95 | 2.13 | 5 | 2.13 | 5 | (1.28 | ) | (1.28 | ) | $ | 323,175 | 17% | |||||||||||||||||
| $ | 5.71 | 29.77 | 2.14 | 5 | 2.14 | 5 | (1.50 | ) | (1.50 | ) | $ | 289,449 | 25% | |||||||||||||||||
| $ | 4.40 | (0.90 | ) | 2.14 | 2.14 | (1.05 | ) | (1.05 | ) | $ | 253,415 | 30% | ||||||||||||||||||
| $ | 4.44 | 14.14 | 2.18 | 5 | 2.18 | 5 | (1.10 | ) | (1.10 | ) | $ | 283,551 | 34% | |||||||||||||||||
| $ | 3.89 | (5.70 | ) | 2.24 | 2.24 | (0.96 | ) | (0.96 | ) | $ | 272,537 | 46% | ||||||||||||||||||
| $ | 3.45 | 33.92 | 2.25 | 5 | 2.25 | 5 | (0.92 | ) | (0.92 | ) | $ | 166,487 | 66% | |||||||||||||||||
| $ | 2.85 | 27.23 | 2.25 | 5 | 2.31 | 5 | (1.27 | ) | (1.33 | ) | $ | 138,299 | 78% | |||||||||||||||||
| $ | 2.24 | (5.88 | ) | 2.25 | 2.28 | (1.21 | ) | (1.24 | ) | $ | 142,795 | 94% | ||||||||||||||||||
| $ | 2.38 | 13.26 | 2.26 | 10 | 2.37 | 10 | (1.32 | ) | (1.43 | ) | $ | 185,587 | 88% | |||||||||||||||||
| $ | 2.11 | 17.22 | 2.26 | 7 | 2.46 | 7 | (1.36 | ) | (1.56 | ) | $ | 115,216 | 145% | |||||||||||||||||
| $ | 51.31 | 25.34 | 1.23 | 5 | 1.23 | 5 | (0.42 | ) | (0.42 | ) | $ | 2,487,031 | 10% | |||||||||||||||||
| $ | 43.82 | 29.41 | 1.24 | 5 | 1.24 | 5 | (0.73 | ) | (0.73 | ) | $ | 1,824,781 | 20% | |||||||||||||||||
| $ | 35.37 | 3.30 | 1.23 | 1.23 | (0.32 | ) | (0.32 | ) | $ | 1,297,982 | 23% | |||||||||||||||||||
| $ | 34.24 | 19.76 | 1.27 | 10 | 1.27 | 10 | (0.74 | ) | (0.74 | ) | $ | 1,110,087 | 17% | |||||||||||||||||
| $ | 28.59 | 8.20 | 1.29 | 1.29 | (0.60 | ) | (0.60 | ) | $ | 809,318 | 52% | |||||||||||||||||||
| $ | 5.12 | 34.38 | 1.26 | 5 | 1.27 | 5 | (0.21 | ) | (0.22 | ) | $ | 201,581 | 40% | |||||||||||||||||
| $ | 3.81 | 22.12 | 1.46 | 5 | 1.46 | 5 | (0.73 | ) | (0.73 | ) | $ | 166,330 | 55% | |||||||||||||||||
| $ | 3.12 | 1.30 | 1.78 | 1.78 | (0.65 | ) | (0.65 | ) | $ | 169,401 | 46% | |||||||||||||||||||
| $ | 3.08 | 12.00 | 1.85 | 10 | 1.85 | 10 | (0.23 | ) | (0.23 | ) | $ | 211,571 | 62% | |||||||||||||||||
| $ | 2.75 | (2.48 | ) | 1.92 | 1.92 | (0.33 | ) | (0.33 | ) | $ | 218,358 | 89% | ||||||||||||||||||
| $ | 11.08 | 23.01 | 0.95 | 5 | 1.06 | 5 | 3.16 | 3.05 | $ | 66,579 | 54% | |||||||||||||||||||
| $ | 9.30 | 25.61 | 0.95 | 5 | 1.14 | 5 | 1.74 | 1.55 | $ | 44,635 | 57% | |||||||||||||||||||
| $ | 7.57 | 3.94 | 0.95 | 1.21 | 2.99 | 2.73 | $ | 24,057 | 62% | |||||||||||||||||||||
| $ | 7.51 | 15.18 | 0.99 | 7 11 | 1.33 | 7 11 | 4.35 | 4.01 | $ | 19,517 | 73% | |||||||||||||||||||
| $ | 6.77 | (6.49 | ) | 1.05 | 7 | 1.71 | 7 | 4.93 | 4.27 | $ | 17,710 | 84% | ||||||||||||||||||
| $ | 24.57 | 24.52 | 1.29 | 5 | 1.29 | 5 | (0.64 | ) | (0.64 | ) | $ | 151,697 | 25% | |||||||||||||||||
| $ | 22.83 | 20.13 | 1.32 | 5 | 1.32 | 5 | (0.35 | ) | (0.35 | ) | $ | 143,259 | 43% | |||||||||||||||||
| $ | 20.11 | 1.57 | 1.42 | 1.42 | (0.51 | ) | (0.51 | ) | $ | 134,203 | 60% | |||||||||||||||||||
| $ | 19.80 | 26.44 | 1.68 | 10 | 1.68 | 10 | (1.14 | ) | (1.14 | ) | $ | 178,566 | 45% | |||||||||||||||||
| $ | 15.66 | (0.63 | ) | 1.75 | 1.77 | (1.12 | ) | (1.14 | ) | $ | 121,284 | 64% | ||||||||||||||||||
| $ | 23.15 | 24.80 | 1.77 | 5 | 1.79 | 5 | (0.84 | ) | (0.86 | ) | $ | 266,911 | 84% | |||||||||||||||||
| $ | 18.55 | 26.10 | 1.85 | 5 | 1.85 | 5 | (0.99 | ) | (0.99 | ) | $ | 167,934 | 66% | |||||||||||||||||
| $ | 14.71 | 7.77 | 1.95 | 1.95 | (0.84 | ) | (0.84 | ) | $ | 72,493 | 85% | |||||||||||||||||||
| $ | 13.65 | 22.91 | 1.96 | 10 | 2.05 | 10 | (0.74 | ) | (0.83 | ) | $ | 65,767 | 74% | |||||||||||||||||
| $ | 11.12 | 7.86 | 1.95 | 2.14 | (0.88 | ) | (1.07 | ) | $ | 59,540 | 41% | |||||||||||||||||||
129
Table of Contents
| WASATCH FUNDS — Financial Highlights (continued) | ||
|
| ||
|
| ||
| Income (Loss) from Investment Operations |
Less Distributions | |||||||||||||||||||||||||||||||
| Net Asset Value Beginning of Period |
Net Investment Income (Loss) |
Net Realized and Unrealized Gains (Losses) on Investments |
Total from Investment Operations |
Redemption |
Dividends from Net Investment Income |
Distributions from Net Realized Gains |
Total Distributions |
|||||||||||||||||||||||||
| Income Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 10.44 | 0.17 | (0.31 | ) | (0.14 | ) | — | (0.17 | ) | — | (0.17 | ) | |||||||||||||||||||
| Year ended 9/30/12 |
$ | 10.32 | 0.20 | 0.12 | 0.32 | — | 4 | (0.20 | ) | — | (0.20 | ) | ||||||||||||||||||||
| Year ended 9/30/11 |
$ | 10.34 | 0.25 | (0.02 | ) | 0.23 | — | 4 | (0.25 | ) | — | (0.25 | ) | |||||||||||||||||||
| Year ended 9/30/10 |
$ | 10.04 | 0.29 | 0.30 | 0.59 | — | 4 | (0.29 | ) | — | (0.29 | ) | ||||||||||||||||||||
| Year ended 9/30/09 |
$ | 9.59 | 0.33 | 0.46 | 0.79 | — | 4 | (0.34 | ) | — | (0.34 | ) | ||||||||||||||||||||
| U.S. Treasury Fund |
||||||||||||||||||||||||||||||||
| Year ended 9/30/13 |
$ | 18.75 | 0.44 | (3.08 | ) | (2.64 | ) | 0.01 | (0.44 | ) | (0.35 | ) | (0.79 | ) | ||||||||||||||||||
| Year ended 9/30/12 |
$ | 18.75 | 0.42 | 0.77 | 1.19 | 0.01 | (0.42 | ) | (0.78 | ) | (1.20 | ) | ||||||||||||||||||||
| Year ended 9/30/11 |
$ | 17.17 | 0.52 | 2.63 | 3.15 | 0.02 | (0.52 | ) | (1.07 | ) | (1.59 | ) | ||||||||||||||||||||
| Year ended 9/30/10 |
$ | 16.29 | 0.54 | 1.35 | 1.89 | 0.01 | (0.54 | ) | (0.48 | ) | (1.02 | ) | ||||||||||||||||||||
| Year ended 9/30/09 |
$ | 14.95 | 0.55 | 1.29 | 1.84 | 0.05 | (0.55 | ) | — | (0.55 | ) | |||||||||||||||||||||
See Notes to Financial Highlights
130
Table of Contents
| (for a share outstanding throughout each period) | ||
|
| ||
|
| ||
| Ratios to Average Net Assets |
Supplemental Data | |||||||||||||||||||||||||||
| Net Asset Value End of Period |
Total Return (%)1 | Expenses Net of Waivers and |
Expenses Before Waivers and |
Net Investment Income Net of Waivers and Reimbursements (%)2 |
Net Investment Income Before Waivers and Reimbursements (%)2 |
Net Assets End of Period (000’s) |
Portfolio Turnover Rate1 3 |
|||||||||||||||||||||
| $10.13 | (1.34 | ) | 0.71 | 0.71 | 1.67 | 1.67 | $ | 130,285 | 35% | |||||||||||||||||||
| $10.44 | 3.16 | 0.70 | 5 | 0.70 | 5 | 1.97 | 1.97 | $ | 139,186 | 48% | ||||||||||||||||||
| $10.32 | 2.26 | 0.71 | 0.71 | 2.42 | 2.42 | $ | 135,617 | 43% | ||||||||||||||||||||
| $10.34 | 5.95 | 0.72 | 11 | 0.73 | 11 | 2.87 | 2.86 | $ | 138,095 | 51% | ||||||||||||||||||
| $10.04 | 8.42 | 0.84 | 0.88 | 3.44 | 3.40 | $ | 114,496 | 28% | ||||||||||||||||||||
| $15.33 | (14.43 | ) | 0.71 | 5 | 0.71 | 5 | 2.46 | 2.46 | $ | 193,231 | 34% | |||||||||||||||||
| $18.75 | 6.66 | 0.72 | 5 | 0.72 | 5 | 2.33 | 2.33 | $ | 271,495 | 13% | ||||||||||||||||||
| $18.75 | 22.06 | 0.75 | 0.76 | 3.44 | 3.43 | $ | 187,368 | 44% | ||||||||||||||||||||
| $17.17 | 12.65 | 0.75 | 11 | 0.78 | 11 | 3.56 | 3.53 | $ | 200,855 | 49% | ||||||||||||||||||
| $16.29 | 12.49 | 0.75 | 0.79 | 3.34 | 3.30 | $ | 154,099 | 62% | ||||||||||||||||||||
131
Table of Contents
| WASATCH FUNDS — Notes to Financial Highlights | JANUARY 31, 2014 | |
|
| ||
|
| ||
| 1 | Not annualized for periods less than one year. |
| 2 | Annualized for periods less than one year. |
| 3 | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
| 4 | Represents amounts less than $.005 per share. |
| 5 | Includes interest expense of less than 0.01%. |
| 6 | Includes interest expenses of 0.01%. |
| 7 | Includes interest expense and dividend payments for securities sold short. The ratios excluding such expenses are listed below: |
| Expenses Net of Waivers and Reimbursements2 |
Expenses Before Waivers and Reimbursements2 | |||||||||
| Long/Short Fund |
||||||||||
| Year ended 9/30/13 |
1.28% | 1.28% | ||||||||
| Year ended 9/30/12 |
1.27% | 1.27% | ||||||||
| Year ended 9/30/11 |
1.30% | 1.30% | ||||||||
| Year ended 9/30/10 |
1.34% | 11 | 1.34% | 11 | ||||||
| Year ended 9/30/09 |
1.47% | 1.52% | ||||||||
| Micro Cap Value Fund |
||||||||||
| Year ended 9/30/09 |
2.25% | 2.45% | ||||||||
| Strategic Income Fund |
||||||||||
| Year ended 9/30/10 |
0.95% | 11 | 1.29% | 11 | ||||||
| Year ended 9/30/09 |
0.95% | 1.61% | ||||||||
| 8 | Fund inception date was January 31, 2012. |
| 9 | Fund inception date was April 26, 2011. |
| 10 | Includes extraordinary expenses of 0.01%. |
| 11 | Includes extraordinary expenses of less than 0.01%. |
| 12 | Fund inception date was November 17, 2008. |
| 13 | Fund inception date was December 13, 2012. |
132
Table of Contents
| WASATCH FUNDS — Privacy Policy | JANUARY 31, 2014 | |
|
| ||
|
| ||
133
Table of Contents
|
| ||
|
| ||