Wasatch Micro Cap Fund (WMICX) Quarterly Comments from Lead Portfolio Manager Ken Korngiebel, CFA and Portfolio Manager Dan Chace, CFA

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1 Wasatch Micro Cap Fund (WMICX) Quarterly Comments from Lead Portfolio Manager Ken Korngiebel, CFA and Portfolio Manager Dan Chace, CFA Open to all investors Average Annual Total Returns For Periods Ended September 30, 2018 Quarter* 1 Year 3 Years 5 Years 10 Years Micro Cap Fund 8.23% 38.04% 26.07% 15.28% 13.86% Russell Microcap Index** 0.83% 13.65% 16.41% 10.51% 10.82% *Returns less than one year are not annualized. Data show past performance, which is not indicative of future performance. Current performance may be lower or higher than the data quoted. To obtain the most recent month-end performance data available, please visit 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. Total Expense Ratio: 1.67% Total Annual Fund Operating Expenses include operating expenses, including the management fee, before any expense reimbursements by the Advisor. The Advisor has contractually agreed to limit certain expenses to 1.95% through at least 1/31/2019. 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 or taxes, which if reflected, would reduce the performance quoted. For more complete information including charges, risks and expenses, read the prospectus carefully. Investing in micro 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. An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus, containing this and other information, visit or call Please read the prospectus carefully before investing.

2 OVERVIEW The Wasatch Micro Cap Fund gained 8.23% in what was a positive third quarter for U.S. micro caps. The Fund surpassed its benchmark, the Russell Microcap Index, which rose 0.83%. Although economic growth appeared to moderate from the 4.2% pace logged during the second quarter, government data suggested the U.S. economy continued to expand at a healthy clip. Steady business conditions and subdued inflation favored the stocks of growth companies, which outperformed value stocks during the third quarter. With micro-cap companies remaining somewhat insulated from risks related to tariffs and global trade, the micro-cap growth investment style was an advantage for the Fund. Solid gains in the revenues and earnings of the companies we own drove returns across most areas of the Fund. This was especially true in health care, which was the largest source of outperformance relative to the benchmark. Our health-care stocks produced a combined return of over 25% for the quarter, significantly outpacing the health-care component of the Index. Other areas of substantial outperformance included information technology, consumer staples and industrials. Reflecting the weak environment for value stocks, energy and financials were the worstperforming sectors of the Index. However, our energy stocks fell less than those in the benchmark, and our financial companies also outperformed. In short, things went well during the third quarter, as our disciplined investment approach and hard work delivered favorable results for the Fund s shareholders. As the Fund s health-care and information-technology stocks extended recent gains, we trimmed position sizes in some holdings to limit exposure and reduce risk. We invested some of the sales proceeds in stocks of industrial companies. After an initial surge following the 2016 elections, industrials lagged as higher input costs squeezed profit margins and kept earnings gains in check. We think a number of industrial companies have become attractively valued relative to their growth prospects and are now betterpositioned to pass higher costs along to customers.

3 DETAILS OF THE QUARTER The strongest contributor to Fund performance for the quarter was Tandem Diabetes Care, Inc. (TNDM). The company offers insulin-delivery systems for people with diabetes. In August, Tandem launched its t:slim X2 Insulin Pump with Basal-IQ Technology, a predictive feature designed to reduce the frequency and duration of low-glucose events (hypoglycemia). The new system requires no finger sticks for calibration or diabetestreatment decisions. Encouraging financial results and improved forward guidance also helped to drive Tandem s stock price higher during the quarter. Freshpet, Inc. (FRPT) was another strong contributor. The company sells fresh, refrigerated meals and treats for dogs and cats in the U.S., Canada and the United Kingdom. Shares of Freshpet rose sharply in early August after the company reported better-than-expected net sales, which jumped 23% compared to the same quarter a year ago. Management raised its full-year guidance for 2018 as Freshpet s core dog household penetration increased at its fastest rate in more than three years. To meet growing demand for the company s products, Freshpet plans to expand its manufacturing facility in Pennsylvania. We reduced portfolio positions in Freshpet in response to the company s significantly higher valuation. Tabula Rasa HealthCare, Inc. (TRHC) also added to the Fund s return. The company develops software that enables health-care organizations to optimize medication regimens, improve patient outcomes, reduce hospitalizations, lower costs and manage risk. By seeking to predict and prevent adverse drug events before they occur, Tabula Rasa s Optimized Opioid Solution platform directly addresses the rising epidemic of accidental opioid overdoses. The company s stock jumped in early August after quarterly earnings and revenues topped Wall Street forecasts. While we remain positive on Tabula Rasa and expect its intellectual property to find additional applications, we used the stock s recent strength as an opportunity to trim our position and deploy the assets into more attractively valued companies. The greatest detractor from Fund performance for the quarter was USA Technologies, Inc. (USAT). The company provides payment technology for cashless and mobile transactions at vending machines, kiosks and other unattended locations. USA Technologies saw its stock price tumble after the company announced it would not file

4 its Annual Report on Form 10-K by the September 13th due date. Management said an investigation was underway into some of the company s contractual arrangements and financial-reporting controls. We continue to monitor the situation closely. Second-largest detractor nlight, Inc. (LASR) is a technology holding we added during its initial public offering earlier this year. The company makes high-performance lasers for industrial, aerospace and defense applications. Shares of nlight declined amid concerns that higher tariffs and a slowdown in China s economy may impact Chinese demand for the company s products. While we think these concerns are valid, we believe nlight s long-term prospects remain attractive. The company s lasers are rapidly replacing older, carbon-dioxide lasers for industrial cutting and welding, particularly in the production of automobiles. Another weak stock in the Fund was Chuy s Holdings, Inc. (CHUY). Based in Texas, the company operates more than 90 Tex-Mex restaurants across 19 states. Rising labor costs have weighed on the stock price of Chuy s as profit margins narrowed. Given what we consider the company s attractive long-term prospects, we purchased additional shares for the Fund. Small and micro-cap companies across the rest of the world were down for the quarter, as measured by the -1.51% loss of the MSCI ACWI (All Country World Index) ex USA Small Cap Index. However, most of the Fund s international holdings posted gains, among them were software companies CyberArk Software Ltd. (Israel) and Fortnox AB (Sweden). Years of international investing have taught us that innovative micro-cap companies exist all over the world, so Wasatch devotes considerable resources to find them. Both CyberArk and Fortnox have been benefiting from the same trends that have been such strong tailwinds for many of the Fund s U.S. technology holdings. CyberArk focuses on cybersecurity while Fortnox provides cloud-based accounting and invoice software to small businesses. (Current and future holdings are subject to risk.) OUTLOOK The wage pressures faced by Chuy s have become fairly common throughout the restaurant industry. In other parts of the economy as well, competition for workers is

5 beginning to push labor costs higher. With the price of crude oil at multi-year highs and tariffs adding to the cost of imported goods, the inflationary backdrop has become less auspicious for businesses and consumers. As long as inflation remains contained, we don t think it s likely to pose a threat to the U.S. economy. An unexpected acceleration in inflation would be more problematic. At the press conference following the September meeting of the Federal Open Market Committee (FOMC), Chairman Jerome Powell said he doesn t see inflation surprising to the upside. When researching and analyzing companies, we ll be keeping a close eye on wages and input costs for signs of inflationary pressures. Thank you for the opportunity to manage your assets. Sincerely, Ken Korngiebel and Dan Chace **The Russell Microcap Index is an unmanaged total return index of the smallest 1,000 securities in the small-cap Russell 2000 Index along with the next smallest 1,000 companies, based on a ranking of all U.S. equities by market capitalization. The Russell 2000 Index is an unmanaged total return index of the smallest 2,000 companies in the Russell 3000 Index. The Russell 2000 is widely used in the industry to measure the performance of small company stocks. You cannot invest directly in these or any indexes. The Wasatch Micro Cap Fund has been developed solely by Wasatch Advisors, Inc. The Wasatch Micro Cap Fund is not in any way connected to or sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the LSE Group ). FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the Russell Microcap Index vest in the relevant LSE Group company, which owns the Index. Russell is a trademark of the relevant LSE Group company and is used by any other LSE Group company under license. The Index is calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Wasatch Micro Cap Fund or the suitability of the Index for the purpose to which it is being put by Wasatch Advisors, Inc. CFA is a trademark owned by CFA Institute. The Wasatch Micro Cap Fund s investment objective is long-term growth of capital. Income is an objective only when consistent with long-term growth of capital. The cloud is the internet. Cloud-computing is a model for delivering information-technology services in which resources are retrieved from the internet through web-based tools and applications, rather than from a direct connection to a server.

6 The Federal Open Market Committee (FOMC), a component of the Federal Reserve System, is charged under United States law with overseeing the nation s open market operations. Open market operations are the means of implementing monetary policy by which a central bank controls the short-term interest rate and the supply of base money in an economy, and thus indirectly the total money supply. An initial public offering (IPO) is a company s first sale of stock to the public. The MSCI ACWI ex USA Small Cap Index is an unmanaged index and includes reinvestment of all dividends of issuers located in countries throughout the world representing developed and emerging markets, excluding securities of U.S. issuers. This index is a free float-adjusted market capitalization index designed to measure the performance of small capitalization securities. You cannot invest in this or any index. Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indexes. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an as is basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the MSCI Parties ) expressly disclaims all warranties (including, without limitation, any warranties or originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. ( Valuation is the process of determining the current worth of an asset or company. Micro Cap Fund Top 10 Holdings as of June 30, 2018 Percent of Security Name Net Assets Freshpet, Inc. 2.7% V-Mart Retail Ltd. (India) 2.6% USA Technologies, Inc. 2.2% Fiesta Restaurant Group, Inc. 1.9% Kadant, Inc. 1.8% Cambium Learning Group, Inc. 1.7% Tabula Rasa HealthCare, Inc. 1.7% People s Utah Bancorp 1.6% Tandem Diabetes Care, Inc. 1.6% Ensign Group, Inc. (The) 1.5% Total 19.2% Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Fund or its Advisor. Current and future holdings are subject to risk. WAS /30/2019