WASATCH FUNDS - Curian Clearing

WASATCH FUNDS — Supplemental Information (continued)
With respect to the Global Opportunities Fund, although
such Fund underperformed its Benchmark in the one-year
period and the median of its Lipper Peer Group in the oneand
two-year periods, such Fund outperformed the median
of its Lipper Peer Group and its Benchmark in the three-,
four- and five-year periods.
With respect to the U.S. Treasury Fund, although such
Fund underperformed its Benchmark in the two-year
period, it outperformed its Benchmark in the one-, three-,
four- and five-year periods and outperformed the performance
of the median of its Lipper Peer Universe over the one-,
three-, four-, five- and 10-year periods.
With respect to the International Opportunities Fund, the
Board considered that such Fund outperformed, matched or
provided generally comparable performance to that of its
Benchmark and median of its Lipper Peer Group for the
one-, two-, three-, four- and five-year periods.
With respect to the Long/Short Fund, the Board considered
that such Fund outperformed the performance of the
median of its Lipper Peer Group and Benchmark for all periods:
the one-, two-, three-, four-, five- and 10-year periods.
With respect to the Small Cap Value Fund, such Fund
outperformed its Benchmark and the median of its Lipper
Peer Group for the one-, two-, three-, four-, and five-year
periods and provided generally comparable performance to
its Benchmark and the median of its Lipper Peer Group for
the 10-year period.
With respect to the Strategic Income Fund, the Board
recognized that the Fund outperformed its Benchmark and
the median of its Lipper Peer Group for the one-, two-,
three-, four- and five-year periods.
With respect to the Emerging Markets Select Fund, the
Independent Trustees noted that the Emerging Markets
Select Fund was new with only a one-year performance history
available thereby limiting the ability to make a meaningful
assessment of performance. Nevertheless, the
Independent Trustees noted that the Emerging Markets
Select Fund outperformed the median of its Lipper Peer
Group and Benchmark for the one-year period.
The Independent Trustees also noted that the following
Funds have experienced periods of challenged performance,
including the Large Cap Value Fund, the Ultra Growth
Fund, the Micro Cap Fund and the Heritage Growth Fund.
With respect to the Large Cap Value Fund, the Board
noted that except for the 10-year period, the Fund underperformed
the median of its Lipper Peer Group and
Benchmark for the shorter periods. The Board, however,
recognized the steps taken by the Advisor to address performance
issues, including the change in the portfolio
manager of this Fund in 2013. With respect to the Ultra
Growth Fund, the Board recognized that while the Fund has
experienced periods of mixed results during its history, the
Board recognized that the Fund outperformed its Benchmark
and the median for its Lipper Peer Group in the recent
one-year period. The Board further noted that the Fund’s
portfolio management team also was recently adjusted in
2013 bringing the Fund under the management of a single
portfolio manager. The Board recognized that the portfolio
managers of the Large Cap Value Fund and the Ultra
Growth Fund would require time to manage their respective
Fund before results from the foregoing changes would be
fully reflected.
With respect to the Micro Cap Fund, the Board recognized
that the Fund has underperformed its Benchmark and
the Lipper Peer Group for the various periods ended
August 31, 2014 but recognized, as noted above, that the
Lipper Peer Group may not adequately reflect the investment
strategies and investable universe of the Fund. The
Board also noted that despite the comparative data, the
Fund provided favorable absolute performance for the
three-year period ended September 30, 2014 and was the top
performing domestic growth fund at Wasatch during that
period. Nevertheless, the Board continues to review with
management the investment process and investment
philosophy of the Fund.
With respect to the Heritage Growth Fund, although the
underperformed its Benchmark over the various periods
ended August 31, 2014, the Fund provided generally comparable
performance to the median of its Lipper Peer Group
over the one-, four- and five-year periods. The Board continues
to monitor this Fund closely and discuss with the
Advisor any steps that may be initiated if necessary to
address performance issues. With respect to the Heritage
Growth Fund and any Fund for which the Board has identified
performance concerns, the Board monitors such Funds
closely until performance improves, discusses with the Advisor
the reasons for such results, and considers any efforts
proposed or implemented to improve performance.
C. FEES, EXPENSES AND PROFITABILITY
1. Fees and Expenses
The Independent Trustees considered the fees of the
Advisor and Sub-Advisors and the rationale in setting the
level of fees. In their evaluation of fees and expenses, the
Independent Trustees reviewed the Advisor’s management
fees and expense ratios for each Fund in absolute terms as well
as with comparisons of fees and expenses of funds with similar
objectives. In this regard, the Independent Trustees
reviewed and considered, among other things, comparisons of
each respective Fund’s contractual and net management fees,
total expenses (including and excluding 12b-1/non-12b-1
service fees), and non-management expenses (such as transfer
agency, custodian, administrative and accounting fees) with
those of unaffiliated funds in its Lipper Peer Group, subject to
the following. With respect to the Micro Cap Funds, the
Independent Trustees recognized certain limitations with the
Lipper Peer Group as described above and therefore also
reviewed comparisons of each such Fund’s management fee
and net expense ratio with those of a custom peer group provided
by the Advisor. In reviewing fees, the Independent
Trustees also reviewed any expense limitation agreement with
the Advisor on behalf of the respective Fund and the amounts
the Advisor has reimbursed to the applicable Fund for the last
three fiscal years (if any). The Independent Trustees also considered
a Fund’s fees in light of the performance of the Fund.
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