WASATCH FUNDS - Curian Clearing

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<strong>WASATCH</strong> EMERGING INDIA FUND (WAINX) — Management Discussion MARCH 31, 2015 (UNAUDITED) The Wasatch Emerging India Fund is managed by a team of Wasatch portfolio managers led by Ajay Krishnan. Ajay Krishnan, CFA Lead Portfolio Manager OVERVIEW In the first quarter of 2015, the Wasatch Emerging India Fund gained 5.76%. The Fund narrowly outpaced its benchmark, the MSCI India Investable Market Index, which rose 5.52%. India continued to benefit from lower oil prices. Because the country imports about 80% of its oil, Brent crude’s decline of 48% over the past year has brought down India’s current-account deficit and rate of inflation. Those developments, in turn, helped shore up the currency and boosted inflows of foreign capital. The improved backdrop enabled the Reserve Bank of India to cut interest rates twice during the first quarter to stimulate economic growth. While falling energy and commodity prices have lowered production costs and boosted the profits of Indian companies, top-line growth has been uninspiring. In the first quarter, the consumer-staples sector was the Fund’s largest source of outperformance, as our companies benefited from margin expansion and persistent demand for their products. Our lack of investments in energy companies also helped the Fund by avoiding direct exposure to what proved to be the worst-performing sector of the Index. DETAILS OF THE QUARTER Our two strongest contributors to Fund performance for the quarter were Lupin Ltd. and Natco Pharma Ltd. Both companies manufacture branded and generic pharmaceuticals and market them in India and other countries. Lupin is experiencing strong demand for its generic formulations and continues to execute well. The company also is benefiting from its excellent record with the U.S. Food and Drug Administration (FDA) and its significant number of new drugs completing registration and entering production. Natco’s pipeline is impressive as well. The company has 34 applications for new drugs filed with the FDA and 22 more pending. It plans to launch its generic form of the multiplesclerosis drug Copaxone later this year. Shares of Natco rose sharply in the first quarter on news it had won approval to market a generic version of Gilead’s new Hepatitis C drug, Sovaldi, in India and 90 other countries. HCL Technologies Ltd. was our third-largest contributor. HCL is an information-technology (IT) company that provides infrastructure-management services in India, the U.S. and other countries. It has been especially successful at winning contracts that have come up for rebidding. Net income at the company jumped 28.0% in its most-recently reported quarter on 13.4% sales growth versus the same period a year ago. On a three-year horizon, we expect continued strong demand for its services to make HCL an ongoing holding in the Fund. Our greatest detractor from performance for the quarter was India’s largest non-banking finance company, Mahindra & Mahindra Financial Services Ltd. Through its network of branches, Mahindra finances purchases of tractors, utility vehicles, cars and homes, primarily in rural India. Although sales rose 11.3% year-over-year in the company’s mostrecently reported quarter, earnings declined as weakness in southern India and a below-average monsoon season led to an uptick in non-performing loans. We view this as a temporary setback inherent in the uneven nature of the company’s business and continue to own the stock in the Fund. Two other weak stocks in the Fund were La Opala RG Ltd. and TD Power Systems Ltd. Opala makes tableware, including opalware dinner sets and crystal. The company’s share price declined on investor concerns that top-line growth may be slowing. We think these fears are overdone, however, and remain optimistic about Opala’s long-term prospects. TD Power manufactures and sells electric-power generators in India and internationally. Despite a 23.1% increase in sales, the company posted a small loss in its most-recently reported quarter compared to a small gain in the year-ago period. We believe this is a high-quality company positioned to make further inroads into European and Japanese markets, while also benefiting from planned upgrades to India’s railroad system and other infrastructure. OUTLOOK Even though the Indian government expects gross domestic product (GDP) to have increased 7.4% during the fiscal year ended March 31, pockets of weakness and lackluster sales growth have raised investor concerns. On the plus side, public finances have improved significantly, with the fiscal deficit over the same period projected to come in at 4.1% of GDP, the lowest in seven years. With recent auctions of coal licenses and mobile-telephone airwaves having added billions of dollars to government coffers, we believe the Modi government is likely to deliver on its ambitious plans for improving India’s roads, ports and power plants. Streamlining India’s bureaucracy may prove more difficult, especially given its contentious political culture and decentralized system of government. Even so, such reforms are crucial for economic development. The maze of regulations, taxes and fees imposed by the country’s 29 states have dropped India to 142 out of 189 countries on the World Bank’s latest Ease of Doing Business Index. In areas such as contract enforcement and construction permits, India ranks even lower. One initiative in which the government is making significant headway involves using biometric-enhanced ID cards to reduce fraud in its welfare system and provide benefits more efficiently to hundreds of millions of poor people. Other encouraging signs include progress on a proposed national sales tax. Known as the “goods-andservices tax,” the measure would transform India into a single market for the first time and pave the way for further expansions in commerce and manufacturing. Thank you for the opportunity to manage your assets. Current and future holdings are subject to risk. 6
<strong>WASATCH</strong> EMERGING INDIA FUND (WAINX) — Portfolio Summary MARCH 31, 2015 (UNAUDITED) AVERAGE ANNUAL TOTAL RETURNS SINCE INCEPTION SIX MONTHS* 1YEAR 5YEARS 4/26/11 Emerging India 14.35% 43.20% N/A 12.26% MSCI India IMI 5.93% 24.14% N/A 1.12% Data shows past performance, which is not indicative of future performance. Current performance may be lower or higher than the performance quoted. To obtain the most recent month-end performance data available, please visit www.WasatchFunds.com. The Advisor may absorb certain Fund expenses, without which total return would have been lower. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. As of the January 31, 2015 prospectus, the Total Annual Fund Operating Expenses for the Wasatch Emerging India Fund are 2.57%. The Net Expenses are 1.95%. The expense ratio shown elsewhere in this report may be different. Net Expenses are based on Fund expenses, net of waivers and reimbursements. See the prospectus for additional information regarding Fund expenses. Wasatch Funds will deduct a 2.00% redemption proceeds fee on Fund shares held 60 days or less. Performance data does not reflect the deduction of fees, including sales charges, or the taxes you would pay on fund distributions or the redemption of fund shares. Fees and taxes, if reflected, would reduce the performance quoted. Wasatch does not charge any sales fees. For more complete information including charges, risks and expenses, read the prospectus carefully. Investing in small cap funds will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. Investing in foreign securities, especially in emerging markets, entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. *Not annualized. % of Net Company Assets Cognizant Technology Solutions Corp., Class A 3.2% Natco Pharma Ltd. (India) 3.2% HCL Technologies Ltd. (India) 3.0% Glenmark Pharmaceuticals Ltd. (India) 2.9% MakeMyTrip Ltd. (India) 2.6% TOP 10 EQUITY HOLDINGS** % of Net Company Assets Marksans Pharma Ltd. (India) 2.6% Axis Bank Ltd. (India) 2.6% Repco Home Finance Ltd. (India) 2.5% Lupin Ltd. (India) 2.5% Bajaj Finance Ltd. (India) 2.2% **As of March 31, 2015, there were 84 holdings in the Fund. Foreign currency contracts, written options and repurchase agreements, if any, are not included in the number of holdings. Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor. Current and future holdings are subject to risk. SECTOR BREAKDOWN † Financials 27.3% Health Care 16.3% Industrials 13.2% Consumer Discretionary 11.6% Information Technology 10.5% Consumer Staples 10.3% Materials 9.6% Telecommunication Services 2.2% Utilities 0.7% Other Assets & Liabilities -1.7% † Excludes securities sold short and options written, if any. $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 Wasatch Emerging India Fund MSCI India IMI GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT $15,755 $10,448 4/26/11 ‡ ’12 ’13 ’14 ’15 Years Ended March 31 Past performance does not predict future performance. The graph above does not reflect the deduction of fees, sales charges, or taxes that you would payon fund distributions or the redemption of fund shares. Wasatch does not charge any sales fees. ‡ Inception: April 26, 2011. The MSCI India IMI (Investable Market Index) is designed to measure the performance of the large-, mid- and small-cap segments of the Indian market. The Index covers approximately 99% of the free-float adjusted market capitalization of the Indian equity universe. You cannot invest directly in this or any index. 7
Page 1: 2015 SEMI-ANNUAL REPORT AND QUARTER
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Page 23 and 24: WASATCH INTERNATIONAL GROWTH FUND (
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Page 27 and 28: WASATCH LARGE CAP VALUE FUND (FMIEX
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Page 33 and 34: WASATCH MICRO CAP VALUE FUND (WAMVX
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Page 41 and 42: WASATCH ULTRA GROWTH FUND (WAMCX)
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WASATCH FRONTIER EMERGING SMALL COU
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WASATCH INTERNATIONAL OPPORTUNITIES
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WASATCH LARGE CAP VALUE FUND (FMIEX
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WASATCH SMALL CAP GROWTH FUND (WAAE
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WASATCH SMALL CAP VALUE FUND (WMCVX
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WASATCH ULTRA GROWTH FUND (WAMCX)
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WASATCH WORLD INNOVATORS FUND (WAGT
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MARCH 31, 2015 (UNAUDITED) EMERGING
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FOR THE SIX MONTHS ENDED MARCH 31,
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WASATCH FUNDS — Notes to Financia
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MARCH 31, 2015 (UNAUDITED) The Fund
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MARCH 31, 2015 (UNAUDITED) 16. FAIR
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WASATCH FUNDS — Supplemental Info
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5 www.WasatchFunds.com 800.551.1700
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