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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-09253
Wells Fargo Funds Trust
(Exact name of registrant as specified in charter)
525 Market St., San Francisco, CA 94105
(Address of principal executive offices) (Zip code)
Catherine Kennedy
Wells Fargo Funds Management, LLC
525 Market St., San Francisco, CA 94105
(Name and address of agent for service)
Registrant’s telephone number, including area code: 800-222-8222
Date of fiscal year end: March 31
Registrant is making a filing for 7 of its series:
Wells Fargo Intrinsic Small Cap Value Fund, Wells Fargo Disciplined Small Cap Fund, Wells Fargo Special Small Cap Value Fund, Wells Fargo Fundamental Small Cap Growth Fund, Wells Fargo Precious Metals Fund, Wells Fargo Specialized Technology Fund, and Wells Fargo Utility and Telecommunications Fund.
Date of reporting period: March 31, 2020
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ITEM 1. REPORT TO STOCKHOLDERS
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Wells Fargo
Intrinsic Small Cap Value Fund
Beginning on January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, paper copies of the Wells Fargo Funds’ annual and semi-annual shareholder reports issued after this date will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-222-8222 or by enrolling at wellsfargo.com/advantagedelivery.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call 1-800-222-8222. Your election to receive reports in paper will apply to all Wells Fargo Funds held in your account with your financial intermediary or, if you are a direct investor, to all Wells Fargo Funds that you hold.
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The views expressed and any forward-looking statements are as of March 31, 2020, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Asset Management. Discussions of individual securities, or the markets generally, or any Wells Fargo Fund are not intended as individual recommendations. Future events or results may vary significantly from those expressed in any forward-looking statements. The views expressed are subject to change at any time in response to changing circumstances in the market. Wells Fargo Asset Management and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
Wells Fargo Intrinsic Small Cap Value Fund | 1
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Letter to shareholders (unaudited)
| 1 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value-weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index. |
| 2 | The Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. 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 as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. You cannot invest directly in an index. |
| 3 | The MSCI Emerging Markets (EM) Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure equity market performance of emerging markets. You cannot invest directly in an index. |
| 4 | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. You cannot invest directly in an index. |
| 5 | The Bloomberg Barclays Global Aggregate ex-USD Index is an unmanaged index that provides a broad-based measure of the global investment-grade fixed-income markets excluding the U.S. dollar-denominated debt market. You cannot invest directly in an index. |
| 6 | The Bloomberg Barclays Municipal Bond Index is an unmanaged index composed of long-term tax-exempt bonds with a minimum credit rating of Baa. You cannot invest directly in an index. |
| 7 | The ICE BofA U.S. High Yield Index is a market-capitalization-weighted index of domestic and Yankee high-yield bonds. The index tracks the performance of high-yield securities traded in the U.S. bond market. You cannot invest directly in an index. Copyright 2020. ICE Data Indices, LLC. All rights reserved. |
2 | Wells Fargo Intrinsic Small Cap Value Fund
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Letter to shareholders (unaudited)
Wells Fargo Intrinsic Small Cap Value Fund | 3
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Letter to shareholders (unaudited)
4 | Wells Fargo Intrinsic Small Cap Value Fund
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Performance highlights (unaudited)
Investment objective
The Fund seeks long-term capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Christopher G. Miller, CFA®‡
Theran Motl, CFA®‡†
Average annual total returns (%) as of March 31, 2020
| Including sales charge | Excluding sales charge | Expense ratios1 (%) | ||||||||||||||||||||||||||||||||
| Inception date | 1 year | 5 year | 10 year | 1 year | 5 year | 10 year | Gross | Net2 | ||||||||||||||||||||||||||
| Class A (WFSMX) | 3-31-2008 | -34.26 | -4.64 | 3.82 | -30.24 | -3.50 | 4.44 | 1.54 | 1.35 | |||||||||||||||||||||||||
| Class C (WSCDX) | 3-31-2008 | -31.76 | -4.22 | 3.66 | -30.76 | -4.22 | 3.66 | 2.29 | 2.10 | |||||||||||||||||||||||||
| Administrator Class (WFSDX) | 4-8-2005 | – | – | – | -30.15 | -3.36 | 4.64 | 1.46 | 1.20 | |||||||||||||||||||||||||
| Institutional Class (WFSSX) | 4-8-2005 | – | – | – | -30.00 | -3.17 | 4.85 | 1.21 | 1.00 | |||||||||||||||||||||||||
| Russell 2000® Value Index3 | – | – | – | – | -29.64 | -2.42 | 4.79 | – | – | |||||||||||||||||||||||||
| Russell 2000® Index4 | – | – | – | – | -23.99 | -0.25 | 6.90 | – | – | |||||||||||||||||||||||||
Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes that a shareholder may pay on an investment in a fund. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance shown without sales charges would be lower if sales charges were reflected. Current performance may be lower or higher than the performance data quoted, which assumes the reinvestment of dividends and capital gains. Current month-end performance is available on the Fund’s website, wfam.com
Index returns do not include transaction costs associated with buying and selling securities, any mutual fund fees or expenses, or any taxes. It is not possible to invest directly in an index.
For Class A shares, the maximum front-end sales charge is 5.75%. For Class C shares, the maximum contingent deferred sales charge is 1.00%. Performance including a contingent deferred sales charge assumes the sales charge for the corresponding time period. Administrator Class and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Smaller-company stocks tend to be more volatile and less liquid than those of larger companies. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Intrinsic Small Cap Value Fund
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Performance highlights (unaudited)
| Growth of $10,000 investment as of March 31, 20205 |
|
|
| † | Mr. Motl became a portfolio manager of the Fund on February 1, 2020. |
| ‡ | CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute. |
| 1 | Reflects the expense ratios as stated in the most recent prospectuses. The expense ratios shown are subject to change and may differ from the annualized expense ratios shown in the financial highlights of this report. |
| 2 | The manager has contractually committed through July 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 1.35% for Class A, 2.10% for Class C, 1.20% for Administrator Class, and 1.00% for Institutional Class. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses (if any), and extraordinary expenses are excluded from the expense cap. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Without this cap, the Fund’s returns would have been lower. The expense ratio paid by an investor is the net expense ratio (the total annual fund operating expenses after fee waivers) as stated in the prospectuses. |
| 3 | The Russell 2000® Value Index measures the performance of those Russell 2000 companies with lower price/book ratios and lower forecasted growth values. You cannot invest directly in an index. |
| 4 | The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000® Index. You cannot invest directly in an index. |
| 5 | The chart compares the performance of Class A shares for the most recent ten years with the Russell 2000® Value Index and the Russell 2000® Index. The chart assumes a hypothetical investment of $10,000 in Class A shares and reflects all operating expenses and assumes the maximum initial sales charge of 5.75%. |
| 6 | The ten largest holdings, excluding cash, cash equivalents and any money market funds, are calculated based on the value of the investments divided by total net assets of the Fund. Holdings are subject to change and may have changed since the date specified. |
| 7 | Amounts are calculated based on the total long-term investments of the Fund. These amounts are subject to change and may have changed since the date specified. |
Wells Fargo Intrinsic Small Cap Value Fund | 7
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Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
| ∎ | The Fund underperformed its benchmark, the Russell 2000® Value Index, for the 12-month period that ended March 31, 2020. |
| ∎ | Underexposure to utilities and stock selection in the financials and information technology (IT) sectors were the largest detractors from performance relative to the benchmark. |
| ∎ | Stock selection in the health care and materials sectors and an underexposure to energy were the largest contributors to relative performance. |
The longest bull market in history ended during the period.
The small-cap value segment of the U.S. stock market, represented by the benchmark Russell 2000® Value Index, moved sharply during the reporting period. The benchmark rose during the first three and a half quarters of the period, hitting new all-time highs multiple times. Then, beginning on February 21, 2020, the index began to decline sharply, ending the longest bull market in U.S. history and entering bear-market territory in record time.
As the stock market declined, volatility rose to new highs and spiked above levels not seen since the financial crisis in late 2008. Across the U.S. stock market spectrum, smaller-capitalization and value-tilted stocks declined more than their larger-capitalization and growth-oriented counterparts. All sectors in the benchmark Russell 2000® Value Index declined during the period—energy and consumer discretionary declined the most, while IT and utilities declined the least.
The U.S. equity market rose to new heights during the period as the U.S. Federal Reserve (Fed) turned dovish in early 2019 and reduced rates multiple times after that. Lower corporate taxes, less regulation, share buybacks, capital spending, and high-profile merger and acquisition activity fueled optimism in U.S. businesses. Trade deals with our largest trading partners progressed, including the ratification of the U.S.-Mexico-Canada Agreement and negotiation of the Phase One deal with China. Consumers were key to this growth and were backed up by a strong labor market. The U.S. economy reached the longest expansion in history, but an aging economic cycle and slowing corporate earnings growth remained concerns.
This rapidly changed following the emergence of the coronavirus as a global pandemic, largely shutting down the international economy while racking up a death toll of 40,000 by the end of the period. The U.S. government responded rapidly with monetary and fiscal stimulus. The Fed quickly reduced rates to near zero, and the legislature approved three stimulus bills. The Phase III bill, also known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, represents the largest stimulus bill in U.S. history at $2.2 trillion. A flight to safety pushed the 10-year U.S. Treasury yield to fall below the 1% level to an all-time low of 0.318%. Crude-oil prices declined to $20 per barrel after Russia and the Organization of the Petroleum Exporting Countries failed to reach an agreement on production and demand faded as a result of the global economic slowdown. Economic activity slowed down from the impact of the spectrum of social distancing recommendations for everyone to the more stringent shelter-in-place rules in some cities.
detractors in this group. Within the IT sector, holdings in IT services and electronic distributors underperformed their peers. We exited our position in Conduent Incorporated, a business process services company that helps clients drive operational efficiencies and revenue growth. A lack of exposure to utilities, the second-best performing sector in the benchmark with a decline of less than 7%, hurt relative performance.
Please see footnotes on page 7.
8 | Wells Fargo Intrinsic Small Cap Value Fund
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Performance highlights (unaudited)
peers. In the materials sector, holdings in the metals, packaging, and chemicals industries were relative contributors to performance. Royal Gold, Incorporated, and Reliance Steel & Aluminum Company were two holdings in the metals industry that outperformed their peers. Our private market valuation (PMV) process led us to reduce energy holdings over the past year, and we continued to decrease our energy sector exposure during the final quarter of the period. Even though a couple of exploration and production companies in the energy sector were among the largest detractors, the overall change in sector positioning was a relative contributor to performance.
Our focus is constant: to add value by investing in attractively priced holdings.
Throughout all of the market and economic events that occurred during the reporting period, we continued to seek well-positioned companies—those with good business models, strong management teams, and healthy cash flows—trading at attractive discounts to their PMVs. The PMV represents the expected price an investor would pay for the entire company as a stand-alone private entity. We seek to buy stocks at a discount to their estimated PMV and sell them as they reach the upper limits of their PMV range. Our disciplined, bottom-up investment process leads us to be overweight or underweight certain sectors. This positioning changes over time based on macroeconomic and industry-specific factors. During the reporting period, our process led us to be overweight the industrials and health care sectors while being underweight the financials, utilities, and energy sectors.
The economic impact of the global coronavirus pandemic will likely consume the equity markets in the near future. Once the number of infections have peaked, patient recovery is on the rise, and deaths are on the decline, the country can start to open up again and the economy can get back in motion. The U.S. will likely go into a recession, but it is too early to know how deep the economic damage will be, how soon it can begin to recover, and whether the extraordinary responses to date will be effective. However, this economic downturn is different than anything else in recent history, and there is the possibility that things could get back to normal sooner than expected.
Please see footnotes on page 7.
Wells Fargo Intrinsic Small Cap Value Fund | 9
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As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and contingent deferred sales charges (if any) on redemptions and (2) ongoing costs, including management fees, distribution (12b-1) and/or shareholder servicing fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period from October 1, 2019 to March 31, 2020.
Actual expenses
The “Actual” line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Actual” line under the heading entitled “Expenses paid during period” for your applicable class of shares to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The “Hypothetical” line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and contingent deferred sales charges. Therefore, the “Hypothetical” line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning account value 10-1-2019 |
Ending account value 3-31-2020 |
Expenses paid during the period¹ |
Annualized net expense ratio |
|||||||||||||
| Class A |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 688.05 | $ | 5.53 | 1.31 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,018.45 | $ | 6.61 | 1.31 | % | ||||||||
| Class C |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 685.54 | $ | 8.85 | 2.10 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,014.50 | $ | 10.58 | 2.10 | % | ||||||||
| Administrator Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 688.24 | $ | 5.06 | 1.20 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,019.00 | $ | 6.06 | 1.20 | % | ||||||||
| Institutional Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 689.18 | $ | 4.22 | 1.00 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,020.00 | $ | 5.05 | 1.00 | % | ||||||||
| 1 | Expenses paid is equal to the annualized net expense ratio of each class multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year (to reflect the one-half-year period). |
10 | Wells Fargo Intrinsic Small Cap Value Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Common Stocks: 98.45% |
| |||||||||||||||
| Communication Services: 0.34% |
| |||||||||||||||
| Interactive Media & Services: 0.34% | ||||||||||||||||
| Eventbrite Incorporated Class A † |
18,122 | $ | 132,287 | |||||||||||||
|
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| Consumer Discretionary: 7.41% |
| |||||||||||||||
| Auto Components: 2.44% | ||||||||||||||||
| Dana Incorporated |
47,214 | 368,741 | ||||||||||||||
| Gentherm Incorporated † |
18,669 | 586,207 | ||||||||||||||
| 954,948 | ||||||||||||||||
|
|
|
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| Diversified Consumer Services: 0.32% | ||||||||||||||||
| Houghton Mifflin Harcourt Company † |
67,232 | 126,396 | ||||||||||||||
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| Hotels, Restaurants & Leisure: 1.25% | ||||||||||||||||
| Jack in the Box Incorporated |
11,902 | 417,165 | ||||||||||||||
| Playa Hotels & Resorts NV † |
39,497 | 69,120 | ||||||||||||||
| 486,285 | ||||||||||||||||
|
|
|
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| Internet & Direct Marketing Retail: 0.91% | ||||||||||||||||
| Groupon Incorporated † |
214,410 | 210,165 | ||||||||||||||
| Revolve Group Incorporated † |
16,620 | 143,597 | ||||||||||||||
| 353,762 | ||||||||||||||||
|
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|
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| Specialty Retail: 1.49% | ||||||||||||||||
| National Vision Holdings Incorporated † |
23,285 | 452,195 | ||||||||||||||
| Urban Outfitters Incorporated † |
9,233 | 131,478 | ||||||||||||||
| 583,673 | ||||||||||||||||
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| Textiles, Apparel & Luxury Goods: 1.00% | ||||||||||||||||
| Carter’s Incorporated |
5,940 | 390,436 | ||||||||||||||
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| Consumer Staples: 5.30% |
| |||||||||||||||
| Food Products: 5.30% | ||||||||||||||||
| Nomad Foods Limited † |
47,504 | 881,674 | ||||||||||||||
| Simply Good Foods Company † |
13,549 | 260,954 | ||||||||||||||
| TreeHouse Foods Incorporated † |
20,981 | 926,311 | ||||||||||||||
| 2,068,939 | ||||||||||||||||
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| Financials: 20.33% |
| |||||||||||||||
| Banks: 11.99% | ||||||||||||||||
| Ameris Bancorp |
24,383 | 579,340 | ||||||||||||||
| Pinnacle Financial Partners Incorporated |
15,250 | 572,485 | ||||||||||||||
| Renasant Corporation |
17,294 | 377,701 | ||||||||||||||
| Sterling Bancorp |
53,777 | 561,970 | ||||||||||||||
| United Community Bank |
25,934 | 474,852 | ||||||||||||||
| Veritex Holdings Incorporated |
26,549 | 370,890 | ||||||||||||||
| Webster Financial Corporation |
26,220 | 600,438 | ||||||||||||||
| Wintrust Financial Corporation |
16,752 | 550,471 | ||||||||||||||
| Zions Bancorporation |
22,184 | 593,644 | ||||||||||||||
| 4,681,791 | ||||||||||||||||
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|
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The accompanying notes are an integral part of these financial statements.
Wells Fargo Intrinsic Small Cap Value Fund | 11
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Insurance: 6.54% |
| |||||||||||||||
| Axis Capital Holdings Limited |
10,991 | $ | 424,802 | |||||||||||||
| CNO Financial Group Incorporated |
63,532 | 787,161 | ||||||||||||||
| First American Financial Corporation |
9,992 | 423,761 | ||||||||||||||
| National General Holdings Corporation |
42,953 | 710,872 | ||||||||||||||
| Reinsurance Group of America Incorporated |
2,452 | 206,311 | ||||||||||||||
| 2,552,907 | ||||||||||||||||
|
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| Thrifts & Mortgage Finance: 1.80% | ||||||||||||||||
| Essent Group Limited |
26,772 | 705,174 | ||||||||||||||
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| Health Care: 12.69% |
| |||||||||||||||
| Health Care Equipment & Supplies: 7.29% | ||||||||||||||||
| AngioDynamics Incorporated † |
63,699 | 664,381 | ||||||||||||||
| Haemonetics Corporation † |
4,304 | 428,937 | ||||||||||||||
| Integer Holdings Corporation † |
12,836 | 806,871 | ||||||||||||||
| Mesa Laboratories Incorporated |
831 | 187,881 | ||||||||||||||
| STERIS plc |
5,435 | 760,737 | ||||||||||||||
| 2,848,807 | ||||||||||||||||
|
|
|
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| Life Sciences Tools & Services: 5.40% | ||||||||||||||||
| Bio-Rad Laboratories Incorporated Class A † |
4,173 | 1,462,887 | ||||||||||||||
| Bruker Corporation |
18,008 | 645,767 | ||||||||||||||
| 2,108,654 | ||||||||||||||||
|
|
|
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| Industrials: 19.10% |
| |||||||||||||||
| Aerospace & Defense: 1.16% | ||||||||||||||||
| Hexcel Corporation |
12,124 | 450,892 | ||||||||||||||
|
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|
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| Building Products: 2.45% | ||||||||||||||||
| Masonite International Corporation † |
20,199 | 958,443 | ||||||||||||||
|
|
|
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| Commercial Services & Supplies: 2.62% | ||||||||||||||||
| Interface Incorporated |
53,387 | 403,606 | ||||||||||||||
| Stericycle Incorporated † |
12,773 | 620,512 | ||||||||||||||
| 1,024,118 | ||||||||||||||||
|
|
|
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| Electrical Equipment: 1.31% | ||||||||||||||||
| Atkore International Incorporated † |
24,282 | 511,622 | ||||||||||||||
|
|
|
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| Machinery: 5.27% | ||||||||||||||||
| Altra Industrial Motion Corporation |
24,092 | 421,369 | ||||||||||||||
| ITT Incorporated |
14,611 | 662,755 | ||||||||||||||
| SPX Corporation † |
29,895 | 975,773 | ||||||||||||||
| 2,059,897 | ||||||||||||||||
|
|
|
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| Professional Services: 1.24% | ||||||||||||||||
| ASGN Incorporated † |
13,671 | 482,860 | ||||||||||||||
|
|
|
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| Road & Rail: 2.62% | ||||||||||||||||
| Ryder System Incorporated |
19,033 | 503,233 | ||||||||||||||
| Saia Incorporated † |
7,069 | 519,854 | ||||||||||||||
| 1,023,087 | ||||||||||||||||
|
|
|
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The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Intrinsic Small Cap Value Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Trading Companies & Distributors: 2.43% | ||||||||||||||||
| Air Lease Corporation |
22,853 | $ | 505,965 | |||||||||||||
| Herc Holdings Incorporated † |
21,646 | 442,877 | ||||||||||||||
| 948,842 | ||||||||||||||||
|
|
|
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| Information Technology: 12.41% |
| |||||||||||||||
| Communications Equipment: 1.27% | ||||||||||||||||
| Infinera Corporation † |
93,368 | 494,850 | ||||||||||||||
|
|
|
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| Electronic Equipment, Instruments & Components: 5.72% | ||||||||||||||||
| Avnet Incorporated |
20,637 | 517,989 | ||||||||||||||
| Littelfuse Incorporated |
3,563 | 475,375 | ||||||||||||||
| SYNNEX Corporation |
7,990 | 584,069 | ||||||||||||||
| Zebra Technologies Corporation Class A † |
3,583 | 657,839 | ||||||||||||||
| 2,235,272 | ||||||||||||||||
|
|
|
|||||||||||||||
| IT Services: 1.29% | ||||||||||||||||
| EVO Payments Incorporated Class A † |
23,353 | 357,301 | ||||||||||||||
| WEX Incorporated † |
1,411 | 147,520 | ||||||||||||||
| 504,821 | ||||||||||||||||
|
|
|
|||||||||||||||
| Semiconductors & Semiconductor Equipment: 1.89% | ||||||||||||||||
| Brooks Automation Incorporated |
24,199 | 738,070 | ||||||||||||||
|
|
|
|||||||||||||||
| Software: 2.24% | ||||||||||||||||
| Medallia Incorporated † |
6,479 | 129,839 | ||||||||||||||
| Mimecast Limited † |
21,112 | 745,254 | ||||||||||||||
| 875,093 | ||||||||||||||||
|
|
|
|||||||||||||||
| Materials: 6.78% |
| |||||||||||||||
| Chemicals: 1.45% | ||||||||||||||||
| Westlake Chemical Corporation |
14,854 | 566,977 | ||||||||||||||
|
|
|
|||||||||||||||
| Containers & Packaging: 1.92% | ||||||||||||||||
| Silgan Holdings Incorporated |
25,870 | 750,747 | ||||||||||||||
|
|
|
|||||||||||||||
| Metals & Mining: 3.41% | ||||||||||||||||
| Reliance Steel & Aluminum Company |
8,303 | 727,260 | ||||||||||||||
| Royal Gold Incorporated |
6,895 | 604,760 | ||||||||||||||
| 1,332,020 | ||||||||||||||||
|
|
|
|||||||||||||||
| Real Estate: 14.09% |
| |||||||||||||||
| Equity REITs: 14.09% | ||||||||||||||||
| CoreSite Realty Corporation |
11,006 | 1,275,595 | ||||||||||||||
| Cousins Properties Incorporated |
26,629 | 779,431 | ||||||||||||||
| Four Corners Property Trust Incorporated |
45,763 | 856,226 | ||||||||||||||
| Healthcare Realty Trust Incorporated |
31,413 | 877,365 | ||||||||||||||
| Hudson Pacific Properties Incorporated |
17,652 | 447,655 | ||||||||||||||
| Retail Opportunity Investment Corporation |
56,947 | 472,091 | ||||||||||||||
| STAG Industrial Incorporated |
35,289 | 794,708 | ||||||||||||||
| 5,503,071 | ||||||||||||||||
|
|
|
|||||||||||||||
| Total Common Stocks (Cost $47,530,645) |
|
38,454,741 | ||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Intrinsic Small Cap Value Fund | 13
Table of Contents
Portfolio of investments—March 31, 2020
| Yield | Shares | Value | ||||||||||||||
| Short-Term Investments: 1.62% |
| |||||||||||||||
| Investment Companies: 1.62% | ||||||||||||||||
| Wells Fargo Government Money Market Fund Select Class (l)(u) |
0.35 | % | 632,764 | $ | 632,764 | |||||||||||
|
|
|
|||||||||||||||
| Total Short-Term Investments (Cost $632,764) |
|
632,764 | ||||||||||||||
|
|
|
|||||||||||||||
| Total investments in securities (Cost $48,163,409) | 100.07 | % | 39,087,505 | |||||
| Other assets and liabilities, net |
(0.07 | ) | (27,479 | ) | ||||
|
|
|
|
|
|||||
| Total net assets | 100.00 | % | $ | 39,060,026 | ||||
|
|
|
|
|
|||||
| † | Non-income-earning security |
| (l) | The issuer of the security is an affiliated person of the Fund as defined in the Investment Company Act of 1940. |
| (u) | The rate represents the 7-day annualized yield at period end. |
Abbreviations:
| REIT | Real estate investment trust |
Investments in Affiliates
An affiliated investment is an investment in which the Fund owns at least 5% of the outstanding voting shares of the issuer or as a result of other relationships, such as the Fund and the issuer having the same investment manager. Transactions with issuers that were either affiliated persons of the Fund at the beginning of the period or the end of the period were as follows:
| Shares, beginning of period |
Shares purchased |
Shares sold |
Shares, end of period |
Net realized gains (losses) |
Net change in unrealized gains (losses) |
Income from affiliated securities |
Value, end of |
% of net assets |
||||||||||||||||||||||||||||
| Short-Term Investments | ||||||||||||||||||||||||||||||||||||
| Investment Companies |
||||||||||||||||||||||||||||||||||||
| Securities Lending Cash Investments LLC * |
0 | 12,165,928 | (12,165,928 | ) | 0 | $ | 71 | $ | 0 | $ | 6,423 | # | $ | 0 | ||||||||||||||||||||||
| Wells Fargo Government Money Market Fund Select Class |
2,859,333 | 18,436,038 | (20,662,607 | ) | 632,764 | 0 | 0 | 30,404 | 632,764 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $ | 71 | $ | 0 | $ | 36,827 | $ | 632,764 | 1.62 | % | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| * | No longer held at the end of the period. |
| # | Amount shown represents income before fees and rebates. |
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Intrinsic Small Cap Value Fund
Table of Contents
Statement of assets and liabilities—March 31, 2020
| Assets |
||||
| Investments in unaffiliated securities, at value (cost $47,530,645) |
$ | 38,454,741 | ||
| Investments in affiliated securities, at value (cost $632,764) |
632,764 | |||
| Receivable for investments sold |
37,931 | |||
| Receivable for Fund shares sold |
1,587 | |||
| Receivable for dividends |
60,979 | |||
| Receivable for securities lending income, net |
2,077 | |||
| Prepaid expenses and other assets |
16,501 | |||
|
|
|
|||
| Total assets |
39,206,580 | |||
|
|
|
|||
| Liabilities |
||||
| Payable for investments purchased |
39,005 | |||
| Payable for Fund shares redeemed |
31,756 | |||
| Management fee payable |
17,269 | |||
| Administration fees payable |
6,835 | |||
| Distribution fee payable |
132 | |||
| Shareholder report expenses payable |
12,345 | |||
| Professional fees payable |
26,900 | |||
| Trustees’ fees and expenses payable |
3,733 | |||
| Accrued expenses and other liabilities |
8,579 | |||
|
|
|
|||
| Total liabilities |
146,554 | |||
|
|
|
|||
| Total net assets |
$ | 39,060,026 | ||
|
|
|
|||
| Net assets consist of |
||||
| Paid-in capital |
$ | 48,345,158 | ||
| Total distributable loss |
(9,285,132 | ) | ||
|
|
|
|||
| Total net assets |
$ | 39,060,026 | ||
|
|
|
|||
| Computation of net asset value and offering price per share |
||||
| Net assets – Class A |
$ | 27,115,112 | ||
| Shares outstanding – Class A1 |
1,371,658 | |||
| Net asset value per share – Class A |
$19.77 | |||
| Maximum offering price per share – Class A2 |
$20.98 | |||
| Net assets – Class C |
$ | 189,713 | ||
| Shares outstanding – Class C1 |
10,524 | |||
| Net asset value per share – Class C |
$18.03 | |||
| Net assets – Administrator Class |
$ | 449,979 | ||
| Shares outstanding – Administrator Class1 |
22,241 | |||
| Net asset value per share – Administrator Class |
$20.23 | |||
| Net assets – Institutional Class |
$ | 11,305,222 | ||
| Shares outstanding – Institutional Class1 |
549,343 | |||
| Net asset value per share – Institutional Class |
$20.58 | |||
| 1 | The Fund has an unlimited number of authorized shares. |
| 2 | Maximum offering price is computed as 100/94.25 of net asset value. On investments of $50,000 or more, the offering price is reduced. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Intrinsic Small Cap Value Fund | 15
Table of Contents
Statement of operations—year ended March 31, 2020
| Investment income |
||||
| Dividends |
$ | 820,708 | ||
| Income from affiliated securities |
45,001 | |||
|
|
|
|||
| Total investment income |
865,709 | |||
|
|
|
|||
| Expenses |
||||
| Management fee |
532,560 | |||
| Administration fees |
| |||
| Class A |
88,367 | |||
| Class C |
784 | |||
| Administrator Class |
1,409 | |||
| Institutional Class |
24,852 | |||
| Shareholder servicing fees |
| |||
| Class A |
105,199 | |||
| Class C |
934 | |||
| Administrator Class |
2,710 | |||
| Distribution fee |
| |||
| Class C |
2,799 | |||
| Custody and accounting fees |
12,273 | |||
| Professional fees |
39,048 | |||
| Registration fees |
67,571 | |||
| Shareholder report expenses |
31,220 | |||
| Trustees’ fees and expenses |
20,673 | |||
| Other fees and expenses |
9,345 | |||
|
|
|
|||
| Total expenses |
939,744 | |||
| Less: Fee waivers and/or expense reimbursements |
| |||
| Fund-level |
(152,189 | ) | ||
| Class A |
(10,215 | ) | ||
| Administrator Class |
(785 | ) | ||
| Institutional Class |
(4,681 | ) | ||
|
|
|
|||
| Net expenses |
771,874 | |||
|
|
|
|||
| Net investment income |
93,835 | |||
|
|
|
|||
| Realized and unrealized gains (losses) on investments |
||||
| Net realized gains on |
| |||
| Unaffiliated securities |
184,335 | |||
| Affiliated securities |
71 | |||
|
|
|
|||
| Net realized gains on investments |
184,406 | |||
| Net change in unrealized gains (losses) on investments |
(16,937,972 | ) | ||
|
|
|
|||
| Net realized and unrealized gains (losses) on investments |
(16,753,566 | ) | ||
|
|
|
|||
| Net decrease in net assets resulting from operations |
$ | (16,659,731 | ) | |
|
|
|
|||
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Intrinsic Small Cap Value Fund
Table of Contents
Statement of changes in net assets
| Year ended March 31, 2020 |
Year ended March 31, 2019 |
|||||||||||||||
| Operations |
|
|||||||||||||||
| Net investment income |
$ | 93,835 | $ | 2,078 | ||||||||||||
| Net realized gains on investments |
184,406 | 4,077,462 | ||||||||||||||
| Net change in unrealized gains (losses) on investments |
(16,937,972 | ) | (6,626,742 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Net decrease in net assets resulting from operations |
(16,659,731 | ) | (2,547,202 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Distributions to shareholders from net investment income and net realized gains |
||||||||||||||||
| Class A |
(2,809,650 | ) | 0 | |||||||||||||
| Class C |
(23,865 | ) | 0 | |||||||||||||
| Administrator Class |
(69,935 | ) | 0 | |||||||||||||
| Institutional Class |
(1,153,479 | ) | 0 | |||||||||||||
|
|
|
|||||||||||||||
| Total distributions to shareholders |
(4,056,929 | ) | 0 | |||||||||||||
|
|
|
|||||||||||||||
| Capital share transactions |
Shares | Shares | ||||||||||||||
| Proceeds from shares sold |
| |||||||||||||||
| Class A |
34,452 | 998,637 | 32,828 | 1,010,693 | ||||||||||||
| Class C |
1,060 | 29,122 | 1,268 | 37,710 | ||||||||||||
| Administrator Class |
18,871 | 596,345 | 13,111 | 411,209 | ||||||||||||
| Institutional Class |
25,429 | 745,734 | 40,538 | 1,300,358 | ||||||||||||
|
|
|
|||||||||||||||
| 2,369,838 | 2,759,970 | |||||||||||||||
|
|
|
|||||||||||||||
| Reinvestment of distributions |
| |||||||||||||||
| Class A |
88,486 | 2,713,873 | 0 | 0 | ||||||||||||
| Class C |
780 | 21,882 | 0 | 0 | ||||||||||||
| Administrator Class |
2,048 | 64,270 | 0 | 0 | ||||||||||||
| Institutional Class |
15,704 | 500,987 | 0 | 0 | ||||||||||||
|
|
|
|||||||||||||||
| 3,301,012 | 0 | |||||||||||||||
|
|
|
|||||||||||||||
| Payment for shares redeemed |
| |||||||||||||||
| Class A |
(205,793 | ) | (6,016,656 | ) | (199,126 | ) | (6,242,566 | ) | ||||||||
| Class C |
(10,118 | ) | (284,633 | ) | (11,127 | ) | (325,796 | ) | ||||||||
| Administrator Class |
(36,385 | ) | (1,131,472 | ) | (17,407 | ) | (542,222 | ) | ||||||||
| Institutional Class |
(174,691 | ) | (5,578,624 | ) | (221,373 | ) | (7,195,900 | ) | ||||||||
|
|
|
|||||||||||||||
| (13,011,385 | ) | (14,306,484 | ) | |||||||||||||
|
|
|
|||||||||||||||
| Net decrease in net assets resulting from capital share transactions |
(7,340,535 | ) | (11,546,514 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Total decrease in net assets |
(28,057,195 | ) | (14,093,716 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Net assets |
||||||||||||||||
| Beginning of period |
67,117,221 | 81,210,937 | ||||||||||||||
|
|
|
|||||||||||||||
| End of period |
$ | 39,060,026 | $ | 67,117,221 | ||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Intrinsic Small Cap Value Fund | 17
Table of Contents
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$30.27 | $31.46 | $28.92 | $23.49 | $25.50 | |||||||||||||||
| Net investment income (loss) |
0.02 | 1 | (0.04 | )1 | (0.08 | )1 | (0.15 | )1 | 0.22 | 1 | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(8.43 | ) | (1.15 | ) | 2.62 | 5.71 | (2.09 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(8.41 | ) | (1.19 | ) | 2.54 | 5.56 | (1.87 | ) | ||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
0.00 | 0.00 | 0.00 | (0.13 | ) | (0.14 | ) | |||||||||||||
| Net realized gains |
(2.09 | ) | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(2.09 | ) | 0.00 | 0.00 | (0.13 | ) | (0.14 | ) | ||||||||||||
| Net asset value, end of period |
$19.77 | $30.27 | $31.46 | $28.92 | $23.49 | |||||||||||||||
| Total return2 |
(30.24 | )% | (3.78 | )% | 8.78 | % | 23.68 | % | (7.36 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.60 | % | 1.54 | % | 1.54 | % | 1.48 | % | 1.47 | % | ||||||||||
| Net expenses |
1.33 | % | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | ||||||||||
| Net investment income (loss) |
0.05 | % | (0.11 | )% | (0.26 | )% | (0.57 | )% | 0.95 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
41 | % | 34 | % | 27 | % | 142 | % | 66 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$27,115 | $44,028 | $50,993 | $52,817 | $49,898 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Intrinsic Small Cap Value Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$27.98 | $29.30 | $27.14 | $22.11 | $24.04 | |||||||||||||||
| Net investment loss |
(0.20 | )1 | (0.25 | )1 | (0.28 | )1 | (0.39 | )1 | (0.00 | )1,2 | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(7.66 | ) | (1.07 | ) | 2.44 | 5.42 | (1.93 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(7.86 | ) | (1.32 | ) | 2.16 | 5.03 | (1.93 | ) | ||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net realized gains |
(2.09 | ) | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
| Net asset value, end of period |
$18.03 | $27.98 | $29.30 | $27.14 | $22.11 | |||||||||||||||
| Total return3 |
(30.76 | )% | (4.51 | )% | 7.96 | % | 22.75 | % | (8.03 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
2.34 | % | 2.29 | % | 2.29 | % | 2.22 | % | 2.22 | % | ||||||||||
| Net expenses |
2.10 | % | 2.10 | % | 2.10 | % | 2.10 | % | 2.12 | % | ||||||||||
| Net investment loss |
(0.73 | )% | (0.85 | )% | (1.02 | )% | (1.52 | )% | (0.00 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
41 | % | 34 | % | 27 | % | 142 | % | 66 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$190 | $526 | $840 | $989 | $285 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Amount is more than $(0.005). |
| 3 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Intrinsic Small Cap Value Fund | 19
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$30.89 | $32.06 | $29.43 | $23.89 | $25.95 | |||||||||||||||
| Net investment income (loss) |
0.05 | 1 | 0.01 | 1 | (0.03 | )1 | (0.10 | )1 | 0.22 | 1 | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(8.62 | ) | (1.18 | ) | 2.66 | 5.80 | (2.08 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(8.57 | ) | (1.17 | ) | 2.63 | 5.70 | (1.86 | ) | ||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
0.00 | 0.00 | 0.00 | (0.16 | ) | (0.20 | ) | |||||||||||||
| Net realized gains |
(2.09 | ) | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(2.09 | ) | 0.00 | 0.00 | (0.16 | ) | (0.20 | ) | ||||||||||||
| Net asset value, end of period |
$20.23 | $30.89 | $32.06 | $29.43 | $23.89 | |||||||||||||||
| Total return |
(30.15 | )% | (3.65 | )% | 8.94 | % | 23.86 | % | (7.17 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.51 | % | 1.46 | % | 1.46 | % | 1.40 | % | 1.37 | % | ||||||||||
| Net expenses |
1.20 | % | 1.20 | % | 1.20 | % | 1.20 | % | 1.20 | % | ||||||||||
| Net investment income (loss) |
0.17 | % | 0.05 | % | (0.10 | )% | (0.38 | )% | 0.91 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
41 | % | 34 | % | 27 | % | 142 | % | 66 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$450 | $1,165 | $1,347 | $4,355 | $4,893 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Intrinsic Small Cap Value Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$31.33 | $32.45 | $29.73 | $24.13 | $26.22 | |||||||||||||||
| Net investment income (loss) |
0.12 | 1 | 0.08 | 1 | 0.03 | 1 | (0.07 | )1 | 0.33 | |||||||||||
| Net realized and unrealized gains (losses) on investments |
(8.78 | ) | (1.20 | ) | 2.69 | 5.89 | (2.17 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(8.66 | ) | (1.12 | ) | 2.72 | 5.82 | (1.84 | ) | ||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.00 | )2 | 0.00 | 0.00 | (0.22 | ) | (0.25 | ) | ||||||||||||
| Net realized gains |
(2.09 | ) | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(2.09 | ) | 0.00 | 0.00 | (0.22 | ) | (0.25 | ) | ||||||||||||
| Net asset value, end of period |
$20.58 | $31.33 | $32.45 | $29.73 | $24.13 | |||||||||||||||
| Total return |
(30.00 | )% | (3.45 | )% | 9.15 | % | 24.14 | % | (7.02 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.27 | % | 1.21 | % | 1.21 | % | 1.15 | % | 1.12 | % | ||||||||||
| Net expenses |
1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | ||||||||||
| Net investment income (loss) |
0.38 | % | 0.24 | % | 0.08 | % | (0.26 | )% | 1.10 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
41 | % | 34 | % | 27 | % | 142 | % | 66 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$11,305 | $21,398 | $28,032 | $59,991 | $71,072 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Amount is less than $0.005. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Intrinsic Small Cap Value Fund | 21
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1. ORGANIZATION
Wells Fargo Funds Trust (the “Trust”), a Delaware statutory trust organized on March 10, 1999, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As an investment company, the Trust follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. These financial statements report on the Wells Fargo Intrinsic Small Cap Value Fund (the “Fund”) which is a diversified series of the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund, are in conformity with U.S. generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Securities valuation
All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern Time), although the Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the primary exchange or market that day, the prior day’s price will be deemed “stale” and a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
Investments in registered open-end investment companies are valued at net asset value. Interests in non-registered investment vehicles that are redeemable at net asset value are fair valued at net asset value when available.
Investments which are not valued using any of the methods discussed above are valued at their fair value, as determined in good faith by the Board of Trustees of the Fund. The Board of Trustees has established a Valuation Committee comprised of the Trustees and has delegated to it the authority to take any actions regarding the valuation of portfolio securities that the Valuation Committee deems necessary or appropriate, including determining the fair value of portfolio securities, unless the determination has been delegated to the Wells Fargo Asset Management Pricing Committee at Wells Fargo Funds Management, LLC (“Funds Management”). The Board of Trustees retains the authority to make or ratify any valuation decisions or approve any changes to the Valuation Procedures as it deems appropriate. On a quarterly basis, the Board of Trustees receives reports on any valuation actions taken by the Valuation Committee or the Wells Fargo Asset Management Pricing Committee which may include items for ratification.
Securities lending
The Fund may lend its securities from time to time in order to earn additional income in the form of fees or interest on securities received as collateral or the investment of any cash received as collateral. When securities are on loan, the Fund receives interest or dividends on those securities. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). Investments in Securities Lending Fund are valued at the evaluated bid price provided by an independent pricing service. Income earned from investment in the Securities Lending Fund (net of fees and rebates), if any, is included in income from affiliated securities on the Statement of Operations.
In a securities lending transaction, the net asset value of the Fund is affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. The Fund has the right under the lending agreement to recover the securities from the borrower on demand. In the event of default or bankruptcy by the borrower, the Fund may be prevented from recovering the loaned securities or gaining access to the collateral or may experience delays or costs in doing so. In such an event, the terms of the agreement allow the unaffiliated securities lending agent to use the collateral to purchase replacement securities on behalf of the Fund or pay the Fund the market value of the loaned securities. The Fund bears the risk of loss with respect to depreciation of its investment of the cash collateral.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date.
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Notes to financial statements
Distributions to shareholders
Distributions to shareholders from net investment income and any net realized gains are recorded on the ex-dividend date and paid at least annually. Such distributions are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles. Dividend sources are estimated at the time of declaration. The tax character of distributions is determined as of the Fund’s fiscal year end. Therefore, a portion of the Fund’s distributions made prior to the Fund’s fiscal year end may be categorized as a tax return of capital at year end.
Federal and other taxes
The Fund intends to continue to qualify as a regulated investment company by distributing substantially all of its investment company taxable income and any net realized capital gains (after reduction for capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes was required.
The Fund’s income and federal excise tax returns and all financial records supporting those returns for the prior three fiscal years are subject to examination by the federal and Delaware revenue authorities. Management has analyzed the Fund’s tax positions taken on federal, state, and foreign tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability.
As of March 31, 2020, the aggregate cost of all investments for federal income tax purposes was $48,453,117 and the unrealized gains (losses) consisted of:
| Gross unrealized gains |
$ | 4,200,187 | ||
| Gross unrealized losses |
(13,565,799 | ) | ||
| Net unrealized losses |
$ | (9,365,612 | ) | |
As of March 31, 2020, capital loss carryforwards in the amount of $13,505 was available to offset future net realized capital gains.
Class allocations
The separate classes of shares offered by the Fund differ principally in applicable sales charges, distribution, shareholder servicing, and administration fees. Class specific expenses are charged directly to that share class. Investment income, common fund-level expenses, and realized and unrealized gains (losses) on investments are allocated daily to each class of shares based on the relative proportion of net assets of each class.
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to significant unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
| ∎ | Level 1 – quoted prices in active markets for identical securities |
| ∎ | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, use of amortized cost, etc.) |
| ∎ | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The inputs or methodologies used for valuing investments in securities are not necessarily an indication of the risk associated with investing in those securities.
Wells Fargo Intrinsic Small Cap Value Fund | 23
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Notes to financial statements
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of March 31, 2020:
| Quoted prices (Level 1) |
Other significant observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
Total | |||||||||||||
| Assets |
||||||||||||||||
| Investments in: |
||||||||||||||||
| Common stocks |
||||||||||||||||
| Communication services |
$ | 132,287 | $ | 0 | $ | 0 | $ | 132,287 | ||||||||
| Consumer discretionary |
2,895,500 | 0 | 0 | 2,895,500 | ||||||||||||
| Consumer staples |
2,068,939 | 0 | 0 | 2,068,939 | ||||||||||||
| Financials |
7,939,872 | 0 | 0 | 7,939,872 | ||||||||||||
| Health care |
4,957,461 | 0 | 0 | 4,957,461 | ||||||||||||
| Industrials |
7,459,761 | 0 | 0 | 7,459,761 | ||||||||||||
| Information technology |
4,848,106 | 0 | 0 | 4,848,106 | ||||||||||||
| Materials |
2,649,744 | 0 | 0 | 2,649,744 | ||||||||||||
| Real estate |
5,503,071 | 0 | 0 | 5,503,071 | ||||||||||||
| Short-term investments |
||||||||||||||||
| Investment companies |
632,764 | 0 | 0 | 632,764 | ||||||||||||
| Total assets |
$ | 39,087,505 | $ | 0 | $ | 0 | $ | 39,087,505 | ||||||||
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
For the year ended March 31, 2020, the Fund did not have any transfers into/out of Level 3.
4. TRANSACTIONS WITH AFFILIATES
Management fee
Funds Management, an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”), is the manager of the Fund and provides advisory and fund-level administrative services under an investment management agreement. Under the investment management agreement, Funds Management is responsible for, among other services, implementing the investment objectives and strategies of the Fund, supervising the subadviser and providing fund-level administrative services in connection with the Fund’s operations. As compensation for its services under the investment management agreement, Funds Management is entitled to receive a management fee at the following annual rate based on the Fund’s average daily net assets:
| Average daily net assets | Management fee | |||
| First $500 million |
0.850 | % | ||
| Next $500 million |
0.825 | |||
| Next $1 billion |
0.800 | |||
| Next $1 billion |
0.775 | |||
| Next $1 billion |
0.750 | |||
| Next $1 billion |
0.730 | |||
| Next $5 billion |
0.720 | |||
| Over $10 billion |
0.710 | |||
For the year ended March 31, 2020, the management fee was equivalent to an annual rate of 0.85% of the Fund’s average daily net assets.
Funds Management has retained the services of a subadviser to provide daily portfolio management to the Fund. The fee for subadvisory services is borne by Funds Management. Wells Capital Management Incorporated (“WellsCap”), an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo, is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.55% and declining to 0.40% as the average daily net assets of the Fund increase.
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Notes to financial statements
Administration fees
Under a class-level administration agreement, Funds Management provides class-level administrative services to the Fund, which includes paying fees and expenses for services provided by the transfer agent, sub-transfer agents, omnibus account servicers and record-keepers. As compensation for its services under the class-level administration agreement, Funds Management receives an annual fee which is calculated based on the average daily net assets of each class as follows:
| Class level administration fee |
||||
| Class A, Class C |
0.21 | % | ||
| Administrator Class, Institutional Class |
0.13 | |||
Waivers and/or expense reimbursements
Funds Management has contractually waived and/or reimbursed management and administration fees to the extent necessary to maintain certain net operating expense ratios for the Fund. When each class of the Fund has exceeded its expense cap, Funds Management has waived fees and/or reimbursed expenses from fund-level expenses on a proportionate basis and then from class specific expenses. When only certain classes exceed their expense caps, waivers and/or reimbursements are applied against class specific expenses before fund-level expenses. Funds Management has committed through July 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 1.35% for Class A shares, 2.10% for Class C shares, 1.20% for Administrator Class shares, and 1.00% for Institutional Class shares. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees.
Distribution fee
The Trust has adopted a Distribution Plan for Class C shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. A distribution fee is charged to Class C shares and paid to Wells Fargo Funds Distributor, LLC (“Funds Distributor”), the principal underwriter, at an annual rate of 0.75% of the average daily net assets of Class C shares.
In addition, Funds Distributor is entitled to receive the front-end sales charge from the purchase of Class A shares and a contingent deferred sales charge on the redemption of certain Class A shares. Funds Distributor is also entitled to receive the contingent deferred sales charges from redemptions of Class C shares. For the year ended March 31, 2020, Funds Distributor received $248 from the sale of Class A shares. No contingent deferred sales charges were incurred by Class A and Class C shares for the year ended March 31, 2020.
Shareholder servicing fees
The Trust has entered into contracts with one or more shareholder servicing agents, whereby Class A, Class C, and Administrator Class of the Fund is charged a fee at an annual rate of 0.25% of the average daily net assets of each respective class. A portion of these total shareholder servicing fees were paid to affiliates of Wells Fargo.
Interfund transactions
The Fund may purchase or sell portfolio investment securities to certain other Wells Fargo affiliates pursuant to Rule 17a-7 under the 1940 Act and under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which do not incur broker commissions, are effected at current market prices.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the year ended March 31, 2020 were $24,883,751 and $33,968,452, respectively.
6. SECURITIES LENDING TRANSACTIONS
The Fund lends its securities through an unaffiliated securities lending agent and receives collateral in the form of cash or securities with a value at least equal to the value of the securities on loan. The value of the loaned securities is determined at the close of each business day and any increases or decreases in the required collateral are exchanged between the Fund and the counterparty on the next business day. Cash collateral received is invested in the Securities Lending Fund which seeks to provide a positive return compared to the daily Fed Funds Open Rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments and is exempt from registration under Section 3(c)(7) of the 1940 Act. Securities Lending Fund is managed by Funds Management and is subadvised by WellsCap. Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser.
Wells Fargo Intrinsic Small Cap Value Fund | 25
Table of Contents
Notes to financial statements
In the event of counterparty default or the failure of a borrower to return a loaned security, the Fund has the right to use the collateral to offset any losses incurred. As of March 31, 2020, the Fund did not have any securities on loan.
7. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $280,000,000 revolving credit agreement whereby the Fund is permitted to use bank borrowings for temporary or emergency purposes, such as to fund shareholder redemption requests. Interest under the credit agreement is charged to the Fund based on a borrowing rate equal to the higher of the Federal Funds rate in effect on that day plus 1.25% or the overnight LIBOR rate in effect on that day plus 1.25%. In addition, an annual commitment fee equal to 0.25% of the unused balance is allocated to each participating fund.
For the year ended March 31, 2020, there were no borrowings by the Fund under the agreement.
8. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid during the years ended March 31, 2020 and March 31, 2019 were as follows:
| Year ended March 31 | ||||||||
| 2020 | 2019 | |||||||
| Ordinary income |
$ | 920,762 | $ | 0 | ||||
| Long-term capital gain |
3,136,167 | 0 | ||||||
As of March 31, 2020, the components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary |
Unrealized losses |
Capital loss carryforward | ||
| $93,985 | $(9,365,612) | $(13,505) | ||
9. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
10. NEW ACCOUNTING PRONOUNCEMENT
In August 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 updates the disclosure requirements for fair value measurements by modifying or removing certain disclosures and adding certain new disclosures. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Management has adopted the removal and modification of disclosures early, as permitted, and will adopt the additional new disclosures at the effective date.
11. CORONAVIRUS (COVID-19) PANDEMIC
On March 11, 2020, the World Health Organization announced that it had made the assessment that coronavirus disease 2019 (“COVID-19”) is a pandemic. The impacts of COVID-19 are adversely affecting the entire global economy, individual companies and investment products, and the market in general. There is significant uncertainty around the extent and duration of business disruptions related to COVID-19 and the impacts may be short term or may last for an extended period of time. The risk of further spreading of COVID-19 has led to significant uncertainty and volatility in the financial markets. The value of the Fund and the securities in which the Fund invests have generally been adversely affected by impacts caused by COVID-19.
26 | Wells Fargo Intrinsic Small Cap Value Fund
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Report of independent registered public accounting firm
TO THE SHAREHOLDERS OF THE FUND AND BOARD OF TRUSTEES WELLS FARGO FUNDS TRUST:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Wells Fargo Intrinsic Small Cap Value Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of March 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of March 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of March 31, 2020, by correspondence with the custodian, transfer agent, and brokers, or by other appropriate auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have not been able to determine the specific year that we began serving as the auditor of one or more Wells Fargo Funds investment companies; however we are aware that we have served as the auditor of one or more Wells Fargo Funds investment companies since at least 1955.
Boston, Massachusetts
May 28, 2020
Wells Fargo Intrinsic Small Cap Value Fund | 27
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TAX INFORMATION
For corporate shareholders, pursuant to Section 854 of the Internal Revenue Code, 65.58% of ordinary income dividends qualify for the corporate dividends-received deduction for the fiscal year ended March 31, 2020.
Pursuant to Section 852 of the Internal Revenue Code, $3,136,167 was designated as a 20% rate gain distribution for the fiscal year ended March 31, 2020.
Pursuant to Section 854 of the Internal Revenue Code, $640,577 of income dividends paid during the fiscal year ended March 31, 2020 has been designated as qualified dividend income (QDI).
For the fiscal year ended March 31, 2020, $77 has been designated as interest-related dividends for nonresident alien shareholders pursuant to Section 871 of the Internal Revenue Code
For the fiscal year ended March 31, 2020, $918,656 has been designated as short-term capital gain dividends for nonresident alien shareholders pursuant to Section 871 of the Internal Revenue Code.
PROXY VOTING INFORMATION
A description of the policies and procedures used to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-222-8222, visiting our website at wfam.com, or visiting the SEC website at sec.gov. Information regarding how the proxies related to portfolio securities were voted during the most recent 12-month period ended June 30 is available on the website at wfam.com or by visiting the SEC website at sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. Shareholders may view the filed Form N-PORT by visiting the SEC website at sec.gov.
28 | Wells Fargo Intrinsic Small Cap Value Fund
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Other information (unaudited)
BOARD OF TRUSTEES AND OFFICERS
Each of the Trustees and Officers1 listed in the table below acts in identical capacities for each fund in the Wells Fargo family of funds, which consists of 147 mutual funds comprising the Wells Fargo Funds Trust, Wells Fargo Variable Trust, Wells Fargo Master Trust and four closed-end funds (collectively the “Fund Complex”). This table should be read in conjunction with the Prospectus and the Statement of Additional Information2. The mailing address of each Trustee and Officer is 525 Market Street, 12th Floor, San Francisco, CA 94105. Each Trustee and Officer serves an indefinite term, however, each Trustee serves such term until reaching the mandatory retirement age established by the Trustees.
Independent Trustees
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| William R. Ebsworth (Born 1957) |
Trustee, since 2015 | Retired. From 1984 to 2013, equities analyst, portfolio manager, research director and chief investment officer at Fidelity Management and Research Company in Boston, Tokyo, and Hong Kong, and retired in 2013 as Chief Investment Officer of Fidelity Strategic Advisers, Inc. where he led a team of investment professionals managing client assets. Prior thereto, Board member of Hong Kong Securities Clearing Co., Hong Kong Options Clearing Corp., the Thailand International Fund, Ltd., Fidelity Investments Life Insurance Company, and Empire Fidelity Investments Life Insurance Company. Audit Committee Chair and Investment Committee Chair of the Vincent Memorial Hospital Endowment (non-profit organization). Mr. Ebsworth is a CFA® charterholder. | N/A | |||
| Jane A. Freeman (Born 1953) |
Trustee, since 2015; Chair Liaison, since 2018 | Retired. From 2012 to 2014 and 1999 to 2008, Chief Financial Officer of Scientific Learning Corporation. From 2008 to 2012, Ms. Freeman provided consulting services related to strategic business projects. Prior to 1999, Portfolio Manager at Rockefeller & Co. and Scudder, Stevens & Clark. Board member of the Harding Loevner Funds from 1996 to 2014, serving as both Lead Independent Director and chair of the Audit Committee. Board member of the Russell Exchange Traded Funds Trust from 2011 to 2012 and the chair of the Audit Committee. Ms. Freeman is a Board Member of The Ruth Bancroft Garden (non-profit organization). She is also an inactive Chartered Financial Analyst. | N/A | |||
| Isaiah Harris, Jr. (Born 1952) |
Trustee, since 2009; Audit Committee Chairman, since 2019 | Retired. Chairman of the Board of CIGNA Corporation since 2009, and Director since 2005. From 2003 to 2011, Director of Deluxe Corporation. Prior thereto, President and CEO of BellSouth Advertising and Publishing Corp. from 2005 to 2007, President and CEO of BellSouth Enterprises from 2004 to 2005 and President of BellSouth Consumer Services from 2000 to 2003. Emeritus member of the Iowa State University Foundation Board of Governors. Emeritus Member of the Advisory Board of Iowa State University School of Business. Advisory Board Member, Palm Harbor Academy (private school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
| Judith M. Johnson (Born 1949) |
Trustee, since 2008; Audit Committee Chairman, from 2009 to 2018 | Retired. Prior thereto, Chief Executive Officer and Chief Investment Officer of Minneapolis Employees Retirement Fund from 1996 to 2008. Ms. Johnson is an attorney, certified public accountant and a certified managerial accountant. | N/A | |||
Wells Fargo Intrinsic Small Cap Value Fund | 29
Table of Contents
Other information (unaudited)
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| David F. Larcker (Born 1950) |
Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | N/A | |||
| Olivia S. Mitchell (Born 1953) |
Trustee, since 2006; Nominating and Governance Committee Chair, since 2018 | International Foundation of Employee Benefit Plans Professor, Wharton School of the University of Pennsylvania since 1993. Director of Wharton’s Pension Research Council and Boettner Center on Pensions & Retirement Research, and Research Associate at the National Bureau of Economic Research. Previously, Cornell University Professor from 1978 to 1993. | N/A | |||
| Timothy J. Penny (Born 1951) |
Trustee, since 1996; Chairman, since 2018 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | N/A | |||
| James G. Polisson (Born 1959) |
Trustee, since 2018 | Retired. Chief Marketing Officer, Source (ETF) UK Services, Ltd, from 2015 to 2017. From 2012 to 2015, Principal of The Polisson Group, LLC, a management consulting, corporate advisory and principal investing company. Chief Executive Officer and Managing Director at Russell Investments, Global Exchange Traded Funds from 2010 to 2012. Managing Director of Barclays Global Investors from 1998 to 2010 and Global Chief Marketing Officer for iShares and Barclays Global Investors from 2000 to 2010. Trustee of the San Francisco Mechanics’ Institute, a non-profit organization, from 2013 to 2015. Board member of the Russell Exchange Traded Fund Trust from 2011 to 2012. Director of Barclays Global Investors Holdings Deutschland GmbH from 2006 to 2009. Mr. Polisson is an attorney and has a retired status with the Massachusetts and District of Columbia Bar Associations. | N/A | |||
| Pamela Wheelock3 (Born 1959) |
Trustee, since January 2020; previously Trustee from January 2018 to July 2019 | Board member of the Destination Medical Center Economic Development Agency, Rochester, Minnesota since 2019. Acting Commissioner, Minnesota Department of Human Services, July 2019 through September 2019. Human Services Manager (part-time), Minnesota Department of Human Services, October 2019 through December 2019. Chief Operating Officer, Twin Cities Habitat for Humanity from 2017 to 2019. Vice President of University Services, University of Minnesota from 2012 to 2016. Prior thereto, on the Board of Directors, Governance Committee and Finance Committee for the Minnesota Philanthropy Partners (Saint Paul Foundation) from 2012 to 2018, Interim Chief Executive Officer of Blue Cross Blue Shield of Minnesota from 2011 to 2012, Chairman of the Board from 2009 to 2012 and Board Director from 2003 to 2015. Vice President, Leadership and Community Engagement, Bush Foundation, Saint Paul, Minnesota (a private foundation) from 2009 to 2011. Executive Vice President and Chief Financial Officer, Minnesota Sports and Entertainment from 2004 to 2009 and Senior Vice President from 2002 to 2004. Executive Vice President of the Minnesota Wild Foundation from 2004 to 2008. Commissioner of Finance, State of Minnesota, from 1999 to 2002. Currently Board Chair of the Minnesota Wild Foundation since 2010. | N/A | |||
| * | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
30 | Wells Fargo Intrinsic Small Cap Value Fund
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Other information (unaudited)
Officers
| Name and year of birth |
Position held and length of service |
Principal occupations during past five years or longer | ||
| Andrew Owen (Born 1960) |
President, since 2017 | Executive Vice President of Wells Fargo & Company and Head of Affiliated Managers, Wells Fargo Asset Management, since 2014. In addition, Mr. Owen is currently President, Chief Executive Officer and Director of Wells Fargo Funds Management, LLC since 2017. Prior thereto, Executive Vice President responsible for marketing, investments and product development for Wells Fargo Funds Management, LLC, from 2009 to 2014. | ||
| Nancy Wiser1 (Born 1967) |
Treasurer, since 2012 | Executive Vice President of Wells Fargo Funds Management, LLC since 2011. Chief Operating Officer and Chief Compliance Officer at LightBox Capital Management LLC, from 2008 to 2011. | ||
| Michelle Rhee (Born 1966) |
Chief Legal Officer, since 2019 | Secretary of Wells Fargo Funds Management, LLC, Chief Legal Counsel of Wells Fargo Asset Management and Assistant General Counsel of Wells Fargo Bank, N.A. since 2018. Associate General Counsel and Managing Director of Bank of America Corporation from 2004 to 2018. | ||
| Catherine Kennedy (Born 1969) |
Secretary, since 2019 | Vice President of Wells Fargo Funds Management, LLC and Senior Counsel of the Wells Fargo Legal Department since 2010. Vice President and Senior Counsel of Evergreen Investment Management Company, LLC from 1998 to 2010. | ||
| Michael H. Whitaker (Born 1967) |
Chief Compliance Officer, since 2016 | Chief Compliance Officer of Wells Fargo Asset Management since 2016. Senior Vice President and Chief Compliance Officer for Fidelity Investments from 2007 to 2016. | ||
| David Berardi (Born 1975) |
Assistant Treasurer, since 2009 | Vice President of Wells Fargo Funds Management, LLC since 2009. Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010. Manager of Fund Reporting and Control for Evergreen Investment Management Company, LLC from 2004 to 2010. | ||
| Jeremy DePalma1 (Born 1974) |
Assistant Treasurer, since 2009 | Senior Vice President of Wells Fargo Funds Management, LLC since 2009. Senior Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010 and head of the Fund Reporting and Control Team within Fund Administration from 2005 to 2010. | ||
| 1 | Nancy Wiser acts as Treasurer of 65 funds in the Fund Complex. Jeremy DePalma acts as Treasurer of 82 funds and Assistant Treasurer of 65 funds in the Fund Complex. |
| 2 | The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request, by calling 1-800-222-8222 or by visiting the website at wfam.com. |
| 3 | Pamela Wheelock was re-appointed to the Board effective January 1, 2020. |
Wells Fargo Intrinsic Small Cap Value Fund | 31
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Effective on or about May 1, 2020, if you purchase Fund shares through a Janney Montgomery Scott LLC (“Janney”) brokerage account, you will be eligible for the following load waivers (front-end sales charge waivers and contingent deferred sales charge (“CDSC”), or back-end sales charge, waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or SAI.
| Front-end sales charge* waivers on Class A shares available at Janney |
| Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family). |
| Shares purchased by employees and registered representatives of Janney or its affiliates and their family members as designated by Janney. |
| Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within ninety (90) days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e., right of reinstatement). |
| Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans. |
| Shares acquired through a right of reinstatement. |
| Class C shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund pursuant to Janney’s policies and procedures. |
| CDSC waivers on Class A and Class C shares available at Janney |
| Shares sold upon the death or disability of the shareholder. |
| Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
| Shares purchased in connection with a return of excess contributions from an IRA account. |
| Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulations. |
| Shares sold to pay Janney fees but only if the transaction is initiated by Janney. |
| Shares acquired through a right of reinstatement. |
| Shares exchanged into the same share class of a different fund. |
| Front-end sales charge* discounts available at Janney; breakpoints, rights of accumulation and/or letters of intent |
| Breakpoints as described in the Fund’s Prospectus. |
| Rights of accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Janney. Eligible fund family assets not held at Janney may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
| Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Janney Montgomery Scott may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
| * | Also referred to as an “initial sales charge.” |
32 | Wells Fargo Intrinsic Small Cap Value Fund
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Effective on or after May 1, 2020, clients of Edward Jones (also referred to as “shareholders”) purchasing Fund shares on the Edward Jones commission and fee-based platforms are eligible only for the following sales charge discounts (also referred to as “breakpoints”) and waivers, which can differ from breakpoints and waivers described elsewhere in this Prospectus or SAI or through another broker-dealer. In all instances, it is the shareholder’s responsibility to inform Edward Jones at the time of purchase of any relationship, holdings of Wells Fargo Funds or other facts qualifying the purchaser for breakpoints or waivers. Edward Jones can ask for documentation of such circumstance.
| Breakpoints available at Edward Jones |
| Rights of Accumulation (ROA) |
| The applicable sales charge on a purchase of Class A shares is determined by taking into account all share classes (except any money market funds and retirement plan share classes) of Wells Fargo Funds held by the shareholder or in an account grouped by Edward Jones with other accounts for the purpose of providing certain pricing considerations (“pricing groups”). This includes all share classes held on the Edward Jones platform and/or held on another platform. The inclusion of eligible fund family assets in the rights of accumulation calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. |
| ROA is determined by calculating the higher of cost or market value (current shares x NAV). |
| Letter of Intent (LOI) |
| Through a LOI, shareholders can receive the sales charge and breakpoint discounts for purchases shareholders intend to makeover a 13-month period from the date Edward Jones receives the LOI. The LOI is determined by calculating the higher of cost or market value of qualifying holdings at LOI initiation in combination with the value that the shareholder intends to buy over a 13-month period to calculate the front-end sales charge and any breakpoint discounts. Each purchase the shareholder makes during that 13-month period will receive the sales charge and breakpoint discount that applies to the total amount. The inclusion of eligible fund family assets in the LOI calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. Purchases made before the LOI is received by Edward Jones are not covered under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if LOI is not met. |
| Sales charges are waived for the following shareholders and in the following situations at Edward Jones: |
| ● Associates of Edward Jones and its affiliates and their family members who are in the same pricing group (as determined by Edward Jones under its policies and procedures) as the associate. This waiver will continue for the remainder of the associate’s life if the associate retires from Edward Jones in good-standing. |
| ● Shares purchased in an Edward Jones fee-based program. |
| ● Shares purchased through reinvestment of capital gains distributions and dividend reinvestment. |
| ● Shares purchased from the proceeds of redeemed shares of the same fund family so long as the following conditions are met: 1) the proceeds are from the sale of shares within 60 days of the purchase, and 2) the sale and purchase are made in the same share class and the same account or the purchase is made in an individual retirement account with proceeds from liquidations in anon-retirement account. |
| ● Shares exchanged into Class A shares from another share class so long as the exchange is into the same fund and was initiated at the discretion of Edward Jones. Edward Jones is responsible for any remaining CDSC due to the fund company, if applicable. Any future purchases are subject to the applicable sales charge as disclosed in the prospectus. |
| ● Exchanges from Class C shares to Class A shares of the same fund, generally, in the 84th month following the anniversary of the purchase date or earlier at the discretion of Edward Jones. |
| If the shareholder purchases shares that are subject to a CDSC and those shares are redeemed before the CDSC is
expired, the shareholder is responsible to pay the CDSC except in the following conditions available at Edward Jones: |
| ● The death or disability of the shareholder. |
| ● Systematic withdrawals with up to 10% per year of the account value. |
| ● Return of excess contributions from an Individual Retirement Account (IRA). |
| ● Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulation. |
| ● Shares sold to pay Edward Jones fees or costs in such cases where the transaction is initiated by Edward Jones. |
| ● Shares exchanged in an Edward Jones fee-based program. |
| ● Shares acquired through NAV reinstatement. |
Wells Fargo Intrinsic Small Cap Value Fund | 33
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Appendix II (unaudited)
| Other Important Information for accounts at Edward Jones: |
| Minimum Purchase Amounts ● $250 initial purchase minimum ● $50 subsequent purchase minimum |
|
Minimum Balances Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy: ● A fee-based account held on an Edward Jones platform ● A 529 account held on an Edward Jones platform ● An account with an active systematic investment plan or letter of intent (LOI) |
|
Changing Share Classes At any time it deems necessary, Edward Jones has the authority to exchange at NAV a shareholder’s holdings in a fund to Class A shares. |
34 | Wells Fargo Intrinsic Small Cap Value Fund
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 219967
Kansas City, MO 64121-9967
Website: wfam.com
Individual investors: 1-800-222-8222
Retail investment professionals: 1-888-877-9275
Institutional investment professionals: 1-866-765-0778
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. If this report is used for promotional purposes, distribution of the report must be accompanied or preceded by a current prospectus. Before investing, please consider the investment objectives, risks, charges, and expenses of the investment. For a current prospectus and, if available, a summary prospectus, containing this information, call 1-800-222-8222 or visit the Fund’s website at wfam.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is the trade name for certain investment advisory/management firms owned by Wells Fargo & Company. These firms include but are not limited to Wells Capital Management Incorporated and Wells Fargo Funds Management, LLC. Certain products managed by WFAM entities are distributed by Wells Fargo Funds Distributor, LLC (a broker-dealer and Member FINRA).
This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
Table of Contents
Wells Fargo Disciplined Small Cap Fund
Beginning on January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, paper copies of the Wells Fargo Funds’ annual and semi-annual shareholder reports issued after this date will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-222-8222 or by enrolling at wellsfargo.com/advantagedelivery.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call 1-800-222-8222. Your election to receive reports in paper will apply to all Wells Fargo Funds held in your account with your financial intermediary or, if you are a direct investor, to all Wells Fargo Funds that you hold.
Table of Contents
The views expressed and any forward-looking statements are as of March 31, 2020, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Asset Management. Discussions of individual securities, or the markets generally, or any Wells Fargo Fund are not intended as individual recommendations. Future events or results may vary significantly from those expressed in any forward-looking statements. The views expressed are subject to change at any time in response to changing circumstances in the market. Wells Fargo Asset Management and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
Wells Fargo Disciplined Small Cap Fund | 1
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Letter to shareholders (unaudited)
| 1 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value-weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index. |
| 2 | The Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. 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 as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. You cannot invest directly in an index. |
| 3 | The MSCI Emerging Markets (EM) Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure equity market performance of emerging markets. You cannot invest directly in an index. |
| 4 | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. You cannot invest directly in an index. |
| 5 | The Bloomberg Barclays Global Aggregate ex-USD Index is an unmanaged index that provides a broad-based measure of the global investment-grade fixed-income markets excluding the U.S. dollar-denominated debt market. You cannot invest directly in an index. |
| 6 | The Bloomberg Barclays Municipal Bond Index is an unmanaged index composed of long-term tax-exempt bonds with a minimum credit rating of Baa. You cannot invest directly in an index. |
| 7 | The ICE BofA U.S. High Yield Index is a market-capitalization-weighted index of domestic and Yankee high-yield bonds. The index tracks the performance of high-yield securities traded in the U.S. bond market. You cannot invest directly in an index. Copyright 2020. ICE Data Indices, LLC. All rights reserved. |
2 | Wells Fargo Disciplined Small Cap Fund
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Letter to shareholders (unaudited)
Wells Fargo Disciplined Small Cap Fund | 3
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Letter to shareholders (unaudited)
4 | Wells Fargo Disciplined Small Cap Fund
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Performance highlights (unaudited)
Investment objective
The Fund seeks long-term capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Justin P. Carr, CFA®‡
Robert M. Wicentowski, CFA®‡
Average annual total returns (%) as of March 31, 2020
| Including sales charge | Excluding sales charge | Expense ratios1 (%) | ||||||||||||||||||||||||||||||||
| Inception date | 1 year | 5 year | 10 year | 1 year | 5 year | 10 year | Gross | Net2 | ||||||||||||||||||||||||||
| Class A (WDSAX)3 | 7-31-2018 | -30.88 | -4.00 | 4.47 | -26.67 | -2.86 | 5.09 | 1.14 | 0.96 | |||||||||||||||||||||||||
| Class R6 (WSCJX)4 | 10-31-2016 | – | – | – | -27.03 | -2.74 | 5.17 | 0.71 | 0.53 | |||||||||||||||||||||||||
| Administrator Class (NVSOX) | 8-1-1993 | – | – | – | -26.99 | -2.97 | 5.04 | 1.06 | 0.88 | |||||||||||||||||||||||||
| Institutional Class (WSCOX)5 | 10-31-2014 | – | – | – | -26.80 | -2.72 | 5.18 | 0.81 | 0.63 | |||||||||||||||||||||||||
| Russell 2000® Index6 | – | – | – | – | -23.99 | -0.25 | 6.90 | – | – | |||||||||||||||||||||||||
Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes that a shareholder may pay on an investment in a fund. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance shown without sales charges would be lower if sales charges were reflected. Current performance may be lower or higher than the performance data quoted, which assumes the reinvestment of dividends and capital gains. Current month-end performance is available on the Fund’s website, wfam.com
Index returns do not include transaction costs associated with buying and selling securities, any mutual fund fees or expenses, or any taxes. It is not possible to invest directly in an index.
For Class A shares, the maximum front-end sales charge is 5.75%. Performance including a contingent deferred sales charge assumes the sales charge for the corresponding time period. Class R6, Administrator Class, and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Smaller-company stocks tend to be more volatile and less liquid than those of larger companies. The use of derivatives may reduce returns and/or increase volatility. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Disciplined Small Cap Fund
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Performance highlights (unaudited)
| Growth of $10,000 investment as of March 31, 20207 |
|
|
| ‡ | CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute. |
| 1 | Reflects the expense ratios as stated in the most recent prospectuses, which include the impact of 0.03% in acquired fund fees and expenses. The expense ratios shown are subject to change and may differ from the annualized expense ratios shown in the financial highlights of this report, which do not include acquired fund fees and expenses. |
| 2 | The manager has contractually committed through July 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 0.93% for Class A, 0.50% for Class R6, 0.85% for Administrator Class, and 0.60% for Institutional Class. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses (if any), and extraordinary expenses are excluded from the expense cap. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Without this cap, the Fund’s returns would have been lower. The expense ratio paid by an investor is the net expense ratio (the total annual fund operating expenses after fee waivers) as stated in the prospectuses. |
| 3 | Historical performance shown for the Class A shares prior to their inception reflects the performance of the Administrator Class shares, and is adjusted to reflect the higher expenses and sales charges of the Class A shares. |
| 4 | Historical performance shown for the Class R6 shares prior to their inception reflects the performance of the Institutional Class shares, and includes the higher expenses applicable to Institutional Class shares. If these expenses had been included, returns for the Class R6 would be higher. |
| 5 | Historical performance shown for the Institutional Class shares prior to their inception reflects the performance of the Administrator Class shares, and includes the higher expenses applicable to Administrator Class shares. If these expenses had been included, returns for the Institutional Class shares would be higher. |
| 6 | The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000® Index. You cannot invest directly in an index. |
| 7 | The chart compares the performance of Class A shares since inception with the Russell 2000® Index. The chart assumes a hypothetical investment of $10,000 in Class A shares and reflects all operating expenses and assumes the maximum initial sales charge of 5.75%. |
| 8 | The ten largest holdings, excluding cash, cash equivalents and any money market funds, are calculated based on the value of the investments divided by total net assets of the Fund. Holdings are subject to change and may have changed since the date specified. |
| 9 | Amounts are calculated based on the total long-term investments of the Fund. These amounts are subject to change and may have changed since the date specified. |
Wells Fargo Disciplined Small Cap Fund | 7
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Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
| ∎ | The Fund underperformed its benchmark, the Russell 2000® Index, for the 12-month period that ended March 31, 2020. |
| ∎ | Negative stock selection occurred most significantly within the information technology (IT), industrials, and health care sectors. |
| ∎ | The Fund benefited from positive stock selection in the energy and real estate sectors. |
A strong economy and tax bill stimulus sent U.S. stocks climbing higher.
Investors entered 2020 with high expectations, bolstered by steady U.S. economic growth, accommodative monetary policy, and a reduction in global trade tensions. U.S. equity markets reached records highs in February and initially appeared resilient in the face of growing concerns about China’s coronavirus outbreak. Once the outbreak spiraled into a pandemic, equity markets rapidly entered bear territory as volatility and fear escalated across the world. The drastic public health measures enacted to mitigate the coronavirus brought economic activity to a standstill. As most of the world’s economies entered quarantine, virtually every domestic and international measure of consumer spending, manufacturing, trade, sentiment, and business activity collapsed. In response to the growing crisis, the U.S. Federal Reserve unleashed an arsenal of monetary policy tools to ensure the continued liquidity of financial markets. The U.S. Congress responded with the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, the largest economic stimulus bill in modern history.
Changes to the Fund’s portfolio during the period were minimal.
Investor concerns about the duration of the economic expansion and slowing economic growth caused crowding into a narrow segment of the market that has persisted. There has been a preference for growth, even at high valuations, and quality. Value, however, has drastically underperformed. Falling interest rates and low factor diversification have been reasons for concern; indeed, fundamental factors have been loading on macroeconomic risks more so than at any time in the past 20 years. While fundamental factors largely have been ineffective, making this a challenging period in the Fund’s history, our past experience demonstrates that fundamentally weighted strategies that invest in relatively inexpensive companies with improving fundamentals reward long-term investors. We continue to build portfolios that adhere to this philosophy while recognizing that pervasive macroeconomic risks require an elevated emphasis on risk controls, particularly as they relate to interest rates, oil, and credit risk as of late.
weakness in oil and gas spending. The company has roughly 50% exposure to upstream companies, with the balance in industrials. Overall, Teladoc Health, Incorporated, a name we didn’t own, rallied strongly following the news of the pandemic and the need to seek medical attention through phone and video consultations.
Please see footnotes on page 7.
8 | Wells Fargo Disciplined Small Cap Fund
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Performance highlights (unaudited)
We are actively monitoring our holdings with exposure to travel and leisure, interest rate risk, supply-chain risks, and weak consumer spending. We do not have an edge in predicting the length and severity of the outbreak, so we are not making any aggressive tactical bets. We continue to monitor the balance sheet strength and liquidity characteristics of our holdings to increase our confidence that they will be able to weather this crisis. We are looking for opportunities to increase exposure to secular growth companies should their ranks improve to meet our buy discipline.
The devastating impact of the pandemic could dissipate as daily coronavirus infections peak, new therapies prove successful, and quarantines are gradually lifted. Although the initial collapse in economic activity will likely be stunning, the subsequent rise in world economic growth could also be unprecedented. The path to recovery, however, is likely to be uneven and painful. As we monitor the macroeconomic environment, we will continue to diligently focus on company fundamentals and disciplined portfolio risk management.
Please see footnotes on page 7.
Wells Fargo Disciplined Small Cap Fund | 9
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As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and contingent deferred sales charges (if any) on redemptions and (2) ongoing costs, including management fees, distribution (12b-1) and/or shareholder servicing fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period from October 1, 2019 to March 31, 2020.
Actual expenses
The “Actual” line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Actual” line under the heading entitled “Expenses paid during period” for your applicable class of shares to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The “Hypothetical” line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and contingent deferred sales charges. Therefore, the “Hypothetical” line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning account value 10-1-2019 |
Ending account value 3-31-2020 |
Expenses paid during the period¹ |
Annualized net expense ratio |
|||||||||||||
| Class A |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 731.60 | $ | 4.03 | 0.93 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,020.35 | $ | 4.70 | 0.93 | % | ||||||||
| Class R6 |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 730.55 | $ | 2.16 | 0.50 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,022.50 | $ | 2.53 | 0.50 | % | ||||||||
| Administrator Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 731.85 | $ | 3.68 | 0.85 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,020.75 | $ | 4.29 | 0.85 | % | ||||||||
| Institutional Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 732.84 | $ | 2.60 | 0.60 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,022.00 | $ | 3.03 | 0.60 | % | ||||||||
| 1 | Expenses paid is equal to the annualized net expense ratio of each class multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year (to reflect the one-half-year period). |
10 | Wells Fargo Disciplined Small Cap Fund
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Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Common Stocks: 97.32% | ||||||||||||||||
| Communication Services: 1.52% |
||||||||||||||||
| Interactive Media & Services: 0.86% | ||||||||||||||||
| QuinStreet Incorporated † |
7,669 | $ | 61,735 | |||||||||||||
| The Meet Group Incorporated †« |
17,213 | 101,040 | ||||||||||||||
| 162,775 | ||||||||||||||||
|
|
|
|||||||||||||||
| Media: 0.62% | ||||||||||||||||
| Gray Television Incorporated † |
4,217 | 45,291 | ||||||||||||||
| Nexstar Media Group Incorporated Class A |
1,238 | 71,470 | ||||||||||||||
| 116,761 | ||||||||||||||||
|
|
|
|||||||||||||||
| Wireless Telecommunication Services: 0.04% | ||||||||||||||||
| Boingo Wireless Incorporated † |
706 | 7,491 | ||||||||||||||
|
|
|
|||||||||||||||
| Consumer Discretionary: 8.79% |
||||||||||||||||
| Auto Components: 0.64% | ||||||||||||||||
| Cooper Tire & Rubber Company |
2,400 | 39,120 | ||||||||||||||
| Modine Manufacturing Company † |
4,178 | 13,579 | ||||||||||||||
| Standard Motor Products Incorporated |
1,657 | 68,881 | ||||||||||||||
| 121,580 | ||||||||||||||||
|
|
|
|||||||||||||||
| Diversified Consumer Services: 1.45% | ||||||||||||||||
| Grand Canyon Education Incorporated † |
766 | 58,434 | ||||||||||||||
| K12 Incorporated † |
2,631 | 49,621 | ||||||||||||||
| Perdoceo Education Corporation † |
7,717 | 83,266 | ||||||||||||||
| Strategic Education Incorporated |
589 | 82,319 | ||||||||||||||
| 273,640 | ||||||||||||||||
|
|
|
|||||||||||||||
| Hotels, Restaurants & Leisure: 1.35% | ||||||||||||||||
| Bloomin’ Brands Incorporated |
3,847 | 27,468 | ||||||||||||||
| Brinker International Incorporated |
1,852 | 22,243 | ||||||||||||||
| Churchill Downs Incorporated |
180 | 18,531 | ||||||||||||||
| Dave & Buster’s Entertainment Incorporated |
674 | 8,816 | ||||||||||||||
| Marriott Vacations Worldwide Corporation |
871 | 48,410 | ||||||||||||||
| Penn National Gaming Incorporated † |
5,253 | 66,450 | ||||||||||||||
| Ruth’s Chris Steak House Incorporated |
2,692 | 17,983 | ||||||||||||||
| Shake Shack Incorporated Class A † |
357 | 13,473 | ||||||||||||||
| The Cheesecake Factory Incorporated |
1,866 | 31,871 | ||||||||||||||
| 255,245 | ||||||||||||||||
|
|
|
|||||||||||||||
| Household Durables: 2.35% | ||||||||||||||||
| Helen of Troy Limited † |
1,144 | 164,763 | ||||||||||||||
| Installed Building Products † |
586 | 23,364 | ||||||||||||||
| KB Home Incorporated |
2,205 | 39,911 | ||||||||||||||
| La-Z-Boy Incorporated |
956 | 19,646 | ||||||||||||||
| Taylor Morrison Home Corporation † |
4,324 | 47,564 | ||||||||||||||
| TopBuild Corporation † |
487 | 34,889 | ||||||||||||||
| Universal Electronics Incorporated † |
2,940 | 112,808 | ||||||||||||||
| 442,945 | ||||||||||||||||
|
|
|
|||||||||||||||
| Internet & Direct Marketing Retail: 0.66% | ||||||||||||||||
| Stamps.com Incorporated † |
731 | 95,088 | ||||||||||||||
| Stitch Fix Incorporated Class A †« |
2,279 | 28,943 | ||||||||||||||
| 124,031 | ||||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Disciplined Small Cap Fund | 11
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Specialty Retail: 0.98% | ||||||||||||||||
| American Eagle Outfitters Incorporated |
2,749 | $ | 21,855 | |||||||||||||
| Asbury Automotive Group Incorporated † |
855 | 47,222 | ||||||||||||||
| Caleres Incorporated |
1,384 | 7,197 | ||||||||||||||
| Children’s Place Retail Stores Incorporated |
533 | 10,425 | ||||||||||||||
| Designer Brands Incorporated Class A |
2,470 | 12,301 | ||||||||||||||
| Hibbett Sports Incorporated † |
2,743 | 29,995 | ||||||||||||||
| Rent-A-Center Incorporated |
940 | 13,292 | ||||||||||||||
| Tilly’s Incorporated Class A |
4,816 | 19,890 | ||||||||||||||
| Zumiez Incorporated † |
1,342 | 23,243 | ||||||||||||||
| 185,420 | ||||||||||||||||
|
|
|
|||||||||||||||
| Textiles, Apparel & Luxury Goods: 1.36% | ||||||||||||||||
| Deckers Outdoor Corporation † |
712 | 95,408 | ||||||||||||||
| G-III Apparel Group Limited † |
865 | 6,661 | ||||||||||||||
| Skechers USA Incorporated Class A † |
2,597 | 61,653 | ||||||||||||||
| Steven Madden Limited |
4,003 | 92,990 | ||||||||||||||
| 256,712 | ||||||||||||||||
|
|
|
|||||||||||||||
| Consumer Staples: 3.11% |
||||||||||||||||
| Beverages: 0.44% | ||||||||||||||||
| Boston Beer Company Incorporated Class A † |
225 | 82,701 | ||||||||||||||
|
|
|
|||||||||||||||
| Food & Staples Retailing: 0.55% | ||||||||||||||||
| Performance Food Group Company † |
4,169 | 103,058 | ||||||||||||||
|
|
|
|||||||||||||||
| Food Products: 1.30% | ||||||||||||||||
| Fresh Del Monte Produce Incorporated |
2,104 | 58,091 | ||||||||||||||
| John B. Sanfilippo & Son Incorporated |
858 | 76,705 | ||||||||||||||
| Sanderson Farms Incorporated |
402 | 49,575 | ||||||||||||||
| The Simply Good Foods Company † |
3,184 | 61,324 | ||||||||||||||
| 245,695 | ||||||||||||||||
|
|
|
|||||||||||||||
| Personal Products: 0.70% | ||||||||||||||||
| Medifast Incorporated |
761 | 47,563 | ||||||||||||||
| USANA Health Sciences Incorporated † |
1,473 | 85,080 | ||||||||||||||
| 132,643 | ||||||||||||||||
|
|
|
|||||||||||||||
| Tobacco: 0.12% | ||||||||||||||||
| Turning Point Brands Incorporated |
1,103 | 23,284 | ||||||||||||||
|
|
|
|||||||||||||||
| Energy: 2.40% |
||||||||||||||||
| Energy Equipment & Services: 0.29% | ||||||||||||||||
| Helix Energy Solutions Group Incorporated † |
5,834 | 9,568 | ||||||||||||||
| Matrix Service Company † |
3,622 | 34,300 | ||||||||||||||
| ProPetro Holding Corporation † |
4,221 | 10,553 | ||||||||||||||
| 54,421 | ||||||||||||||||
|
|
|
|||||||||||||||
| Oil, Gas & Consumable Fuels: 2.11% | ||||||||||||||||
| Ardmore Shipping Corporation |
8,628 | 45,297 | ||||||||||||||
| Bonanza Creek Energy Incorporated † |
767 | 8,629 | ||||||||||||||
| Delek US Holdings Incorporated |
662 | 10,433 | ||||||||||||||
| DHT Holdings Incorporated |
19,501 | 149,573 | ||||||||||||||
| Par Pacific Holdings Incorporated † |
2,334 | 16,571 | ||||||||||||||
| Renewable Energy Group Incorporated † |
2,132 | 43,770 | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Disciplined Small Cap Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Oil, Gas & Consumable Fuels (continued) | ||||||||||||||||
| Scorpio Tankers Incorporated |
2,475 | $ | 47,322 | |||||||||||||
| W&T Offshore Incorporated † |
8,432 | 14,334 | ||||||||||||||
| World Fuel Services Corporation |
2,525 | 63,580 | ||||||||||||||
| 399,509 | ||||||||||||||||
|
|
|
|||||||||||||||
| Financials: 15.58% |
||||||||||||||||
| Banks: 8.08% | ||||||||||||||||
| BancFirst Corporation |
1,780 | 59,399 | ||||||||||||||
| BancorpSouth Bank |
1,202 | 22,742 | ||||||||||||||
| Bank of N.T. Butterfield & Son Limited |
2,915 | 49,642 | ||||||||||||||
| Brookline Bancorp Incorporated |
7,665 | 86,461 | ||||||||||||||
| CenterState Bank Incorporated |
3,225 | 55,567 | ||||||||||||||
| Central Pacific Financial Company |
1,759 | 27,968 | ||||||||||||||
| CNB Financial Corporation |
3,170 | 59,818 | ||||||||||||||
| Customers Bancorp Incorporated † |
3,714 | 40,594 | ||||||||||||||
| Enterprise Financial Service |
1,724 | 48,117 | ||||||||||||||
| First Bancorp of North Carolina |
3,090 | 71,317 | ||||||||||||||
| First Financial Corporation |
2,101 | 70,846 | ||||||||||||||
| First Interstate BancSystem Class A |
2,830 | 81,617 | ||||||||||||||
| First Merchants Corporation |
1,705 | 45,165 | ||||||||||||||
| Great Southern Bancorp Incorporated |
1,987 | 80,275 | ||||||||||||||
| Hancock Holding Company |
2,980 | 58,170 | ||||||||||||||
| Heritage Commerce Corporation |
3,699 | 28,371 | ||||||||||||||
| Home BancShares Incorporated |
2,003 | 24,016 | ||||||||||||||
| Independent Bank Corporation |
3,292 | 42,368 | ||||||||||||||
| Mercantile Bank Corporation |
2,678 | 56,693 | ||||||||||||||
| NBT Bancorp Incorporated |
1,898 | 61,476 | ||||||||||||||
| OFG Bancorp |
4,591 | 51,327 | ||||||||||||||
| Peoples Bancorp Incorporated |
3,652 | 80,892 | ||||||||||||||
| Preferred Bank (Los Angeles) |
1,091 | 36,898 | ||||||||||||||
| Sandy Spring Bancorp Incorporated |
1,211 | 27,417 | ||||||||||||||
| Simmons First National Corporation Class A |
2,118 | 38,971 | ||||||||||||||
| Sterling Bancorp |
3,934 | 41,110 | ||||||||||||||
| The Bancorp Incorporated † |
8,024 | 48,706 | ||||||||||||||
| TriCo Bancshares |
2,304 | 68,705 | ||||||||||||||
| Umpqua Holdings Corporation |
3,110 | 33,899 | ||||||||||||||
| WesBanco Incorporated |
1,104 | 26,165 | ||||||||||||||
| 1,524,712 | ||||||||||||||||
|
|
|
|||||||||||||||
| Capital Markets: 2.03% | ||||||||||||||||
| BGC Partners Incorporated Class A |
8,813 | 22,209 | ||||||||||||||
| Blucora Incorporated † |
1,841 | 22,184 | ||||||||||||||
| Evercore Partners Incorporated Class A |
723 | 33,301 | ||||||||||||||
| Federated Investors Incorporated Class B |
2,569 | 48,939 | ||||||||||||||
| Houlihan Lokey Incorporated |
2,572 | 134,053 | ||||||||||||||
| Stifel Financial Corporation |
2,947 | 121,652 | ||||||||||||||
| 382,338 | ||||||||||||||||
|
|
|
|||||||||||||||
| Consumer Finance: 0.77% | ||||||||||||||||
| Enova International Incorporated † |
7,334 | 106,270 | ||||||||||||||
| Regional Management Corporation † |
2,895 | 39,546 | ||||||||||||||
| 145,816 | ||||||||||||||||
|
|
|
|||||||||||||||
| Diversified Financial Services: 0.20% | ||||||||||||||||
| FGL Holdings |
3,780 | 37,044 | ||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Disciplined Small Cap Fund | 13
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Insurance: 2.29% | ||||||||||||||||
| American Equity Investment Life Holding Company |
3,314 | $ | 62,303 | |||||||||||||
| Benefytt Technologies Incorporated †« |
3,083 | 69,028 | ||||||||||||||
| Kemper Corporation |
1,373 | 102,110 | ||||||||||||||
| National General Holdings Corporation |
6,758 | 111,845 | ||||||||||||||
| Selective Insurance Group Incorporated |
1,232 | 61,230 | ||||||||||||||
| Universal Insurance Holdings Company |
1,478 | 26,486 | ||||||||||||||
| 433,002 | ||||||||||||||||
|
|
|
|||||||||||||||
| Thrifts & Mortgage Finance: 2.21% | ||||||||||||||||
| Essent Group Limited |
3,328 | 87,660 | ||||||||||||||
| First Defiance Financial Corporation |
3,886 | 57,280 | ||||||||||||||
| MGIC Investment Corporation |
7,757 | 49,257 | ||||||||||||||
| NMI Holdings Incorporated Class A † |
4,351 | 50,515 | ||||||||||||||
| OP Bancorp |
4,096 | 30,556 | ||||||||||||||
| Radian Group Incorporated |
8,715 | 112,859 | ||||||||||||||
| Walker & Dunlop Incorporated |
730 | 29,397 | ||||||||||||||
| 417,524 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care: 20.67% |
||||||||||||||||
| Biotechnology: 8.66% | ||||||||||||||||
| ACADIA Pharmaceuticals Incorporated † |
2,373 | 100,259 | ||||||||||||||
| Agenus Incorporated † |
6,774 | 16,596 | ||||||||||||||
| Amicus Therapeutics Incorporated † |
9,902 | 91,494 | ||||||||||||||
| Arena Pharmaceuticals Incorporated † |
1,652 | 69,384 | ||||||||||||||
| Arrowhead Pharmaceuticals Incorporated † |
1,304 | 37,516 | ||||||||||||||
| Blueprint Medicines Corporation † |
1,001 | 58,538 | ||||||||||||||
| CareDx Incorporated † |
3,828 | 83,565 | ||||||||||||||
| Castle Biosciences Incorporated † |
1,418 | 42,271 | ||||||||||||||
| Concert Pharmaceuticals Incorporated † |
5,285 | 46,719 | ||||||||||||||
| Eagle Pharmaceuticals Incorporated † |
1,156 | 53,176 | ||||||||||||||
| Emergent BioSolutions Incorporated † |
443 | 25,632 | ||||||||||||||
| Exact Sciences Corporation † |
763 | 44,254 | ||||||||||||||
| Exelixis Incorporated † |
3,641 | 62,698 | ||||||||||||||
| Fibrogen Incorporated † |
2,728 | 94,798 | ||||||||||||||
| GlycoMimetics Incorporated † |
11,732 | 26,749 | ||||||||||||||
| Gossamer Bio Incorporated † |
3,364 | 34,145 | ||||||||||||||
| Halozyme Therapeutics Incorporated † |
4,131 | 74,317 | ||||||||||||||
| Heron Therapeutics Incorporated † |
3,548 | 41,654 | ||||||||||||||
| Insmed Incorporated † |
726 | 11,638 | ||||||||||||||
| Intellia Therapeutics Incorporated †« |
2,816 | 34,440 | ||||||||||||||
| Intercept Pharmaceuticals Incorporated † |
660 | 41,554 | ||||||||||||||
| Jounce Therapeutics Incorporated † |
3,869 | 18,378 | ||||||||||||||
| Ligand Pharmaceuticals Incorporated † |
523 | 38,033 | ||||||||||||||
| Molecular Templates Incorporated † |
4,204 | 55,871 | ||||||||||||||
| Pfenex Incorporated † |
8,863 | 78,172 | ||||||||||||||
| REGENXBIO Incorporated † |
1,373 | 44,458 | ||||||||||||||
| Rigel Pharmaceuticals Incorporated † |
36,696 | 57,246 | ||||||||||||||
| Rocket Pharmaceuticals Incorporated † |
1,791 | 24,984 | ||||||||||||||
| Sangamo Therapeutics Incorporated † |
8,478 | 54,005 | ||||||||||||||
| Ultragenyx Pharmaceutical Incorporated † |
1,069 | 47,496 | ||||||||||||||
| Vanda Pharmaceuticals Incorporated † |
2,189 | 22,678 | ||||||||||||||
| Vericel Corporation † |
4,484 | 41,118 | ||||||||||||||
| Voyager Therapeutics Incorporated † |
6,712 | 61,415 | ||||||||||||||
| 1,635,251 | ||||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Disciplined Small Cap Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Health Care Equipment & Supplies: 4.37% | ||||||||||||||||
| Apyx Medical Corporation † |
7,091 | $ | 25,457 | |||||||||||||
| CONMED Corporation |
1,215 | 69,583 | ||||||||||||||
| Globus Medical Incorporated Class A † |
2,234 | 95,012 | ||||||||||||||
| Haemonetics Corporation † |
1,050 | 104,643 | ||||||||||||||
| Invacare Corporation |
3,426 | 25,455 | ||||||||||||||
| iRhythm Technologies Incorporated † |
617 | 50,193 | ||||||||||||||
| Novocure Limited † |
1,896 | 127,677 | ||||||||||||||
| Orthofix Medical Incorporated † |
1,014 | 28,402 | ||||||||||||||
| Seaspine Holdings Corporation † |
4,514 | 36,879 | ||||||||||||||
| STAAR Surgical Company † |
2,249 | 72,553 | ||||||||||||||
| Tactile Systems Technology Class I † |
2,372 | 95,260 | ||||||||||||||
| Zynex Incorporated † |
8,558 | 94,737 | ||||||||||||||
| 825,851 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care Providers & Services: 2.69% | ||||||||||||||||
| Amedisys Incorporated † |
1,078 | 197,856 | ||||||||||||||
| BioTelemetry Incorporated † |
1,724 | 66,391 | ||||||||||||||
| Centene Corporation † |
831 | 49,370 | ||||||||||||||
| R1 RCM Incorporated † |
12,190 | 110,807 | ||||||||||||||
| The Ensign Group Incorporated |
2,220 | 83,494 | ||||||||||||||
| 507,918 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care Technology: 1.09% | ||||||||||||||||
| HMS Holdings Corporation † |
1,974 | 49,883 | ||||||||||||||
| Livongo Health Incorporated † |
3,163 | 90,240 | ||||||||||||||
| Omnicell Incorporated † |
996 | 65,318 | ||||||||||||||
| 205,441 | ||||||||||||||||
|
|
|
|||||||||||||||
| Life Sciences Tools & Services: 1.51% | ||||||||||||||||
| Medpace Holdings Incorporated † |
1,608 | 117,995 | ||||||||||||||
| PRA Health Sciences Incorporated † |
814 | 67,595 | ||||||||||||||
| Repligen Corporation † |
1,028 | 99,243 | ||||||||||||||
| 284,833 | ||||||||||||||||
|
|
|
|||||||||||||||
| Pharmaceuticals: 2.35% | ||||||||||||||||
| ANI Pharmaceuticals Incorporated † |
304 | 12,385 | ||||||||||||||
| BioDelivery Sciences International Incorporated † |
16,035 | 60,773 | ||||||||||||||
| Catalent Incorporated † |
2,070 | 107,537 | ||||||||||||||
| Cormedix Incorporated †« |
3,983 | 14,299 | ||||||||||||||
| Horizon Therapeutics plc † |
3,853 | 114,126 | ||||||||||||||
| Pacira Pharmaceuticals Incorporated † |
2,920 | 97,908 | ||||||||||||||
| Recro Pharma Incorporated |
1,753 | 14,322 | ||||||||||||||
| Supernus Pharmaceuticals Incorporated † |
1,227 | 22,074 | ||||||||||||||
| 443,424 | ||||||||||||||||
|
|
|
|||||||||||||||
| Industrials: 14.81% |
||||||||||||||||
| Aerospace & Defense: 0.77% | ||||||||||||||||
| AAR Corporation |
2,419 | 42,961 | ||||||||||||||
| Ducommun Incorporated † |
1,182 | 29,373 | ||||||||||||||
| Moog Incorporated Class A |
1,432 | 72,359 | ||||||||||||||
| 144,693 | ||||||||||||||||
|
|
|
|||||||||||||||
| Airlines: 0.46% | ||||||||||||||||
| SkyWest Incorporated |
3,305 | 86,558 | ||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Disciplined Small Cap Fund | 15
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Building Products: 1.71% | ||||||||||||||||
| Builders FirstSource Incorporated † |
6,196 | $ | 75,777 | |||||||||||||
| CSW Industrials Incorporated |
1,602 | 103,890 | ||||||||||||||
| Griffon Corporation |
6,105 | 77,228 | ||||||||||||||
| Simpson Manufacturing Company Incorporated |
1,062 | 65,823 | ||||||||||||||
| 322,718 | ||||||||||||||||
|
|
|
|||||||||||||||
| Commercial Services & Supplies: 1.97% | ||||||||||||||||
| Ennis Incorporated |
3,673 | 68,979 | ||||||||||||||
| Knoll Incorporated |
4,320 | 44,582 | ||||||||||||||
| McGrath RentCorp |
2,330 | 122,045 | ||||||||||||||
| Tetra Tech Incorporated |
976 | 68,925 | ||||||||||||||
| UniFirst Corporation |
292 | 44,118 | ||||||||||||||
| Viad Corporation |
1,078 | 22,886 | ||||||||||||||
| 371,535 | ||||||||||||||||
|
|
|
|||||||||||||||
| Construction & Engineering: 2.76% | ||||||||||||||||
| Comfort Systems Incorporated |
1,466 | 53,582 | ||||||||||||||
| EMCOR Group Incorporated |
2,532 | 155,262 | ||||||||||||||
| Great Lakes Dredge & Dock Company † |
8,110 | 67,313 | ||||||||||||||
| MasTec Incorporated † |
3,295 | 107,845 | ||||||||||||||
| MYR Group Incorporated † |
2,506 | 65,632 | ||||||||||||||
| Northwest Pipe Company † |
1,636 | 36,401 | ||||||||||||||
| Sterling Construction Company Incorporated † |
3,798 | 36,081 | ||||||||||||||
| 522,116 | ||||||||||||||||
|
|
|
|||||||||||||||
| Electrical Equipment: 1.74% | ||||||||||||||||
| Atkore International Incorporated † |
4,103 | 86,450 | ||||||||||||||
| AZZ Incorporated |
1,399 | 39,340 | ||||||||||||||
| Encore Wire Corporation |
2,402 | 100,860 | ||||||||||||||
| EnerSys |
645 | 31,940 | ||||||||||||||
| Generac Holdings Incorporated † |
623 | 58,045 | ||||||||||||||
| Plug Power Incorporated † |
3,319 | 11,749 | ||||||||||||||
| 328,384 | ||||||||||||||||
|
|
|
|||||||||||||||
| Machinery: 1.98% | ||||||||||||||||
| Alamo Group Incorporated |
726 | 64,454 | ||||||||||||||
| EnPro Industries Incorporated |
713 | 28,221 | ||||||||||||||
| Federal Signal Corporation |
4,215 | 114,985 | ||||||||||||||
| Hillenbrand Incorporated |
5,057 | 96,639 | ||||||||||||||
| Meritor Incorporated † |
2,270 | 30,078 | ||||||||||||||
| Park Ohio Holdings Corporation |
2,088 | 39,547 | ||||||||||||||
| 373,924 | ||||||||||||||||
|
|
|
|||||||||||||||
| Marine: 0.20% | ||||||||||||||||
| Costamare Incorporated |
8,495 | 38,397 | ||||||||||||||
|
|
|
|||||||||||||||
| Professional Services: 1.81% | ||||||||||||||||
| Barrett Business Services Incorporated |
1,024 | 40,591 | ||||||||||||||
| CBIZ Incorporated † |
2,497 | 52,237 | ||||||||||||||
| CRA International Incorporated |
731 | 24,423 | ||||||||||||||
| FTI Consulting Incorporated † |
896 | 107,314 | ||||||||||||||
| Insperity Incorporated |
975 | 36,368 | ||||||||||||||
| TriNet Group Incorporated † |
2,142 | 80,668 | ||||||||||||||
| 341,601 | ||||||||||||||||
|
|
|
|||||||||||||||
| Road & Rail: 0.12% | ||||||||||||||||
| Universal Truckload Services |
1,715 | 22,467 | ||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Disciplined Small Cap Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Trading Companies & Distributors: 1.29% | ||||||||||||||||
| Applied Industrial Technologies Incorporated |
1,268 | $ | 57,973 | |||||||||||||
| DXP Enterprises Incorporated † |
3,541 | 43,413 | ||||||||||||||
| H&E Equipment Services Incorporated |
2,949 | 43,291 | ||||||||||||||
| Rush Enterprises Incorporated |
3,084 | 98,441 | ||||||||||||||
| 243,118 | ||||||||||||||||
|
|
|
|||||||||||||||
| Information Technology: 15.14% |
||||||||||||||||
| Communications Equipment: 1.04% | ||||||||||||||||
| Ciena Corporation † |
3,147 | 125,282 | ||||||||||||||
| Digi International Incorporated † |
5,912 | 56,400 | ||||||||||||||
| Extreme Networks Incorporated † |
4,677 | 14,452 | ||||||||||||||
| 196,134 | ||||||||||||||||
|
|
|
|||||||||||||||
| Electronic Equipment, Instruments & Components: 3.26% | ||||||||||||||||
| ePlus Incorporated † |
490 | 30,684 | ||||||||||||||
| Fabrinet † |
1,469 | 80,149 | ||||||||||||||
| Insight Enterprises Incorporated † |
2,646 | 111,476 | ||||||||||||||
| Methode Electronics Incorporated |
2,819 | 74,506 | ||||||||||||||
| Napco Security Technologies Incorporated † |
619 | 9,390 | ||||||||||||||
| OSI Systems Incorporated † |
1,019 | 70,229 | ||||||||||||||
| Plexus Corporation † |
955 | 52,105 | ||||||||||||||
| Sanmina Corporation † |
4,331 | 118,150 | ||||||||||||||
| SYNNEX Corporation |
945 | 69,080 | ||||||||||||||
| 615,769 | ||||||||||||||||
|
|
|
|||||||||||||||
| IT Services: 3.73% | ||||||||||||||||
| CACI International Incorporated Class A † |
461 | 97,340 | ||||||||||||||
| Cardtronics Incorporated Class A † |
3,378 | 70,668 | ||||||||||||||
| EPAM Systems Incorporated † |
519 | 96,358 | ||||||||||||||
| Evertec Incorporated |
5,100 | 115,923 | ||||||||||||||
| ExlService Holdings Incorporated † |
915 | 47,607 | ||||||||||||||
| KBR Incorporated |
3,920 | 81,066 | ||||||||||||||
| Perficient Incorporated † |
3,468 | 93,948 | ||||||||||||||
| Science Applications International Corporation |
1,366 | 101,945 | ||||||||||||||
| 704,855 | ||||||||||||||||
|
|
|
|||||||||||||||
| Semiconductors & Semiconductor Equipment: 3.22% | ||||||||||||||||
| Cirrus Logic Incorporated † |
736 | 48,304 | ||||||||||||||
| Diodes Incorporated † |
739 | 30,029 | ||||||||||||||
| Enphase Energy Incorporated † |
2,638 | 85,181 | ||||||||||||||
| Entegris Incorporated |
507 | 22,698 | ||||||||||||||
| FormFactor Incorporated † |
4,452 | 89,441 | ||||||||||||||
| Ichor Holdings Limited † |
1,536 | 29,430 | ||||||||||||||
| Inphi Corporation † |
570 | 45,127 | ||||||||||||||
| MKS Instruments Incorporated |
480 | 39,096 | ||||||||||||||
| Silicon Laboratories Incorporated † |
823 | 70,292 | ||||||||||||||
| Ultra Clean Holdings Incorporated † |
4,741 | 65,426 | ||||||||||||||
| Xperi Corporation |
5,936 | 82,570 | ||||||||||||||
| 607,594 | ||||||||||||||||
|
|
|
|||||||||||||||
| Software: 3.89% | ||||||||||||||||
| A10 Networks Incorporated † |
21,112 | 131,106 | ||||||||||||||
| ACI Worldwide Incorporated † |
3,391 | 81,893 | ||||||||||||||
| j2 Global Incorporated |
2,147 | 160,703 | ||||||||||||||
| LivePerson Incorporated † |
631 | 14,355 | ||||||||||||||
| Qualys Incorporated † |
405 | 35,231 | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Disciplined Small Cap Fund | 17
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Software (continued) | ||||||||||||||||
| Rapid7 Incorporated † |
645 | $ | 27,948 | |||||||||||||
| SPS Commerce Incorporated † |
2,894 | 134,600 | ||||||||||||||
| TeleNav Incorporated † |
9,383 | 40,535 | ||||||||||||||
| Upland Software Incorporated † |
365 | 9,789 | ||||||||||||||
| Verint Systems Incorporated † |
1,782 | 76,626 | ||||||||||||||
| Workiva Incorporated † |
633 | 20,465 | ||||||||||||||
| 733,251 | ||||||||||||||||
|
|
|
|||||||||||||||
| Materials: 2.69% |
||||||||||||||||
| Chemicals: 0.95% | ||||||||||||||||
| Innospec Incorporated |
1,851 | 128,626 | ||||||||||||||
| Kooper Holdings Incorporated † |
4,114 | 50,890 | ||||||||||||||
| 179,516 | ||||||||||||||||
|
|
|
|||||||||||||||
| Containers & Packaging: 0.51% | ||||||||||||||||
| Berry Global Group Incorporated † |
1,368 | 46,115 | ||||||||||||||
| UFP Technologies Incorporated † |
1,328 | 50,584 | ||||||||||||||
| 96,699 | ||||||||||||||||
|
|
|
|||||||||||||||
| Metals & Mining: 0.76% | ||||||||||||||||
| Commercial Metals Company |
3,226 | 50,939 | ||||||||||||||
| Materion Corporation |
1,928 | 67,499 | ||||||||||||||
| Suncoke Energy Incorporated |
6,415 | 24,698 | ||||||||||||||
| 143,136 | ||||||||||||||||
|
|
|
|||||||||||||||
| Paper & Forest Products: 0.47% | ||||||||||||||||
| Boise Cascade Company |
1,887 | 44,873 | ||||||||||||||
| Verso Corporation Class A † |
3,823 | 43,123 | ||||||||||||||
| 87,996 | ||||||||||||||||
|
|
|
|||||||||||||||
| Real Estate: 7.97% |
||||||||||||||||
| Equity REITs: 7.29% | ||||||||||||||||
| Armada Hoffler Properties Incorporated |
6,565 | 70,246 | ||||||||||||||
| Ashford Hospitality Trust Incorporated |
14,840 | 10,970 | ||||||||||||||
| Catchmark Timber Trust Incorporated Class A |
8,603 | 62,114 | ||||||||||||||
| CoreCivic Incorporated |
1,243 | 13,884 | ||||||||||||||
| CyrusOne Incorporated |
2,059 | 127,143 | ||||||||||||||
| Digital Realty Trust Incorporated |
631 | 87,652 | ||||||||||||||
| Easterly Government Properties Incorporated |
5,451 | 134,313 | ||||||||||||||
| First Industrial Realty Trust Incorporated |
3,213 | 106,768 | ||||||||||||||
| Global Medical REIT Incorporated |
9,042 | 91,505 | ||||||||||||||
| Global Net Lease Incorporated |
3,916 | 52,357 | ||||||||||||||
| Hannon Armstrong Sustainable Infrastructure Capital Incorporated |
2,142 | 43,718 | ||||||||||||||
| Industrial Logistics Properties Trust |
3,694 | 64,793 | ||||||||||||||
| New Senior Investment Group Incorporated |
8,094 | 20,721 | ||||||||||||||
| NexPoint Residential Trust Incorporated |
3,124 | 78,756 | ||||||||||||||
| Piedmont Office Realty Trust Incorporated Class A |
6,989 | 123,426 | ||||||||||||||
| Preferred Apartment Communities Incorporated Class A |
3,045 | 21,863 | ||||||||||||||
| Ryman Hospitality Properties Incorporated |
2,291 | 82,132 | ||||||||||||||
| STAG Industrial Incorporated |
4,787 | 107,803 | ||||||||||||||
| UMH Properties Incorporated |
3,003 | 32,613 | ||||||||||||||
| Xenia Hotels & Resorts Incorporated |
4,126 | 42,498 | ||||||||||||||
| 1,375,275 | ||||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Disciplined Small Cap Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Real Estate Management & Development: 0.68% | ||||||||||||||||
| Kennedy Wilson Holdings Incorporated |
4,844 | $ | 65,006 | |||||||||||||
| Newmark Group Incorporated Class A |
15,120 | 64,260 | ||||||||||||||
| 129,266 | ||||||||||||||||
|
|
|
|||||||||||||||
| Utilities: 4.64% |
||||||||||||||||
| Electric Utilities: 1.69% | ||||||||||||||||
| El Paso Electric Company |
744 | 50,562 | ||||||||||||||
| IDACORP Incorporated |
948 | 83,225 | ||||||||||||||
| Portland General Electric Company |
3,440 | 164,914 | ||||||||||||||
| Spark Energy Incorporated Class A |
3,312 | 20,766 | ||||||||||||||
| 319,467 | ||||||||||||||||
|
|
|
|||||||||||||||
| Gas Utilities: 0.71% | ||||||||||||||||
| Southwest Gas Holdings Incorporated |
1,931 | 134,320 | ||||||||||||||
|
|
|
|||||||||||||||
| Independent Power & Renewable Electricity Producers: 1.01% | ||||||||||||||||
| Clearway Energy Incorporated Class A |
6,780 | 116,413 | ||||||||||||||
| Terraform Power Incorporated Class A |
4,700 | 74,119 | ||||||||||||||
| 190,532 | ||||||||||||||||
|
|
|
|||||||||||||||
| Multi-Utilities: 0.89% | ||||||||||||||||
| Black Hills Corporation |
1,049 | 67,167 | ||||||||||||||
| Northwestern Corporation |
1,683 | 100,694 | ||||||||||||||
| 167,861 | ||||||||||||||||
|
|
|
|||||||||||||||
| Water Utilities: 0.34% | ||||||||||||||||
| Consolidated Water Company |
3,893 | 63,845 | ||||||||||||||
|
|
|
|||||||||||||||
| Total Common Stocks (Cost $24,528,804) |
18,372,092 | |||||||||||||||
|
|
|
|||||||||||||||
| Yield | ||||||||||||||||
| Short-Term Investments: 3.70% | ||||||||||||||||
| Investment Companies: 3.36% | ||||||||||||||||
| Securities Lending Cash Investments LLC (l)(r)(u) |
2.11 | % | 240,516 | 240,539 | ||||||||||||
| Wells Fargo Government Money Market Fund Select Class (l)(u) |
0.35 | 392,852 | 392,852 | |||||||||||||
| 633,391 | ||||||||||||||||
|
|
|
|||||||||||||||
| Maturity date |
Principal | |||||||||||||||
| U.S. Treasury Securities: 0.34% | ||||||||||||||||
| U.S. Treasury Bill (z)# |
(0.05 | ) | 9-17-2020 | $ | 15,000 | 14,994 | ||||||||||
| U.S. Treasury Bill (z)# |
0.75 | 4-2-2020 | 50,000 | 50,000 | ||||||||||||
| 64,994 | ||||||||||||||||
|
|
|
|||||||||||||||
| Total Short-Term Investments (Cost $698,391) |
698,385 | |||||||||||||||
|
|
|
|||||||||||||||
| Total investments in securities (Cost $25,227,195) | 101.02 | % | 19,070,477 | |||||
| Other assets and liabilities, net |
(1.02 | ) | (191,818 | ) | ||||
|
|
|
|
|
|||||
| Total net assets | 100.00 | % | $ | 18,878,659 | ||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Disciplined Small Cap Fund | 19
Table of Contents
Portfolio of investments—March 31, 2020
| † | Non-income-earning security |
| « | All or a portion of this security is on loan. |
| (l) | The issuer of the security is an affiliated person of the Fund as defined in the Investment Company Act of 1940. |
| (r) | The investment is a non-registered investment company purchased with cash collateral received from securities on loan. |
| (u) | The rate represents the 7-day annualized yield at period end. |
| (z) | Zero coupon security. The rate represents the current yield to maturity. |
| # | All or a portion of this security is segregated as collateral for investments in derivative instruments. |
Abbreviations:
| REIT | Real estate investment trust |
Futures Contracts
| Description | Number of contracts |
Expiration date |
Notional cost |
Notional value |
Unrealized gains |
Unrealized losses |
||||||||||||||||||
| Long |
||||||||||||||||||||||||
| Russell 2000 E-Mini Index |
6 | 6-19-2020 | $ | 304,393 | $ | 344,280 | $ | 39,887 | $ | 0 | ||||||||||||||
Investments in Affiliates
An affiliated investment is an investment in which the Fund owns at least 5% of the outstanding voting shares of the issuer or as a result of other relationships, such as the Fund and the issuer having the same investment manager. Transactions with issuers that were either affiliated persons of the Fund at the beginning of the period or the end of the period were as follows:
| Shares, beginning of period |
Shares purchased |
Shares sold |
Shares, end of period |
Net realized gains (losses) |
Net change in unrealized (losses) |
Income from affiliated securities |
Value, end of period |
% of net assets |
||||||||||||||||||||||||||||
| Short-Term Investments | ||||||||||||||||||||||||||||||||||||
| Investment Companies |
||||||||||||||||||||||||||||||||||||
| Securities Lending Cash Investments LLC |
533,068 | 13,624,828 | (13,917,380 | ) | 240,516 | $ | 7 | $ | 2 | $ | 16,002 | # | $ | 240,539 | ||||||||||||||||||||||
| Wells Fargo Government Money Market Fund Select Class |
849,992 | 24,813,316 | (25,270,456 | ) | 392,852 | 0 | 0 | 15,544 | 392,852 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $ | 7 | $ | 2 | $ | 31,546 | $ | 633,391 | 3.36 | % | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| # | Amount shown represents income before fees and rebates. |
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Disciplined Small Cap Fund
Table of Contents
Statement of assets and liabilities—March 31, 2020
| Assets |
||||
| Investments in unaffiliated securities (including $231,479 of securities loaned), at value (cost $24,593,806) |
$ | 18,437,086 | ||
| Investments in affiliated securities, at value (cost $633,389) |
633,391 | |||
| Due from broker |
36,695 | |||
| Receivable for Fund shares sold |
38,389 | |||
| Receivable for dividends |
20,911 | |||
| Receivable for securities lending income, net |
1,111 | |||
| Receivable from manager |
8,827 | |||
| Prepaid expenses and other assets |
38,784 | |||
|
|
|
|||
| Total assets |
19,215,194 | |||
|
|
|
|||
| Liabilities |
||||
| Payable upon receipt of securities loaned |
239,239 | |||
| Payable for Fund shares redeemed |
19,698 | |||
| Payable for daily variation margin on open futures contracts |
2,040 | |||
| Overdraft due to custodian bank |
35,774 | |||
| Administration fees payable |
2,240 | |||
| Professional fees payable |
27,740 | |||
| Trustees’ fees and expenses payable |
3,721 | |||
| Accrued expenses and other liabilities |
6,083 | |||
|
|
|
|||
| Total liabilities |
336,535 | |||
|
|
|
|||
| Total net assets |
$ | 18,878,659 | ||
|
|
|
|||
| Net assets consist of |
||||
| Paid-in capital |
$ | 29,595,775 | ||
| Total distributable loss |
(10,717,116 | ) | ||
|
|
|
|||
| Total net assets |
$ | 18,878,659 | ||
|
|
|
|||
| Computation of net asset value and offering price per share |
||||
| Net assets – Class A |
$ | 101,551 | ||
| Shares outstanding – Class A1 |
16,585 | |||
| Net asset value per share – Class A |
$6.12 | |||
| Maximum offering price per share – Class A2 |
$6.49 | |||
| Net assets – Class R6 |
$ | 141,474 | ||
| Shares outstanding – Class R61 |
23,009 | |||
| Net asset value per share – Class R6 |
$6.15 | |||
| Net assets – Administrator Class |
$ | 17,049,389 | ||
| Shares outstanding – Administrator Class1 |
2,795,267 | |||
| Net asset value per share – Administrator Class |
$6.10 | |||
| Net assets – Institutional Class |
$ | 1,586,245 | ||
| Shares outstanding – Institutional Class1 |
260,237 | |||
| Net asset value per share – Institutional Class |
$6.10 | |||
| 1 | The Fund has an unlimited number of authorized shares. |
| 2 | Maximum offering price is computed as 100/94.25 of net asset value. On investments of $50,000 or more, the offering price is reduced. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Disciplined Small Cap Fund | 21
Table of Contents
Statement of operations—year ended March 31, 2020
| Investment income |
||||
| Dividends (net of foreign withholding taxes of $129) |
$ | 575,509 | ||
| Securities lending income from affiliates, net |
59,628 | |||
| Income from affiliated securities |
15,544 | |||
| Interest |
2,283 | |||
|
|
|
|||
| Total investment income |
652,964 | |||
|
|
|
|||
| Expenses |
||||
| Management fee |
273,857 | |||
| Administration fees |
||||
| Class A |
197 | |||
| Class R6 |
1,935 | |||
| Administrator Class |
48,363 | |||
| Institutional Class |
14,332 | |||
| Shareholder servicing fees |
||||
| Class A |
234 | |||
| Administrator Class |
93,004 | |||
| Custody and accounting fees |
26,160 | |||
| Professional fees |
41,730 | |||
| Registration fees |
62,166 | |||
| Shareholder report expenses |
32,367 | |||
| Trustees’ fees and expenses |
20,678 | |||
| Interest expense |
2,102 | |||
| Other fees and expenses |
11,666 | |||
|
|
|
|||
| Total expenses |
628,791 | |||
| Less: Fee waivers and/or expense reimbursements |
||||
| Fund-level |
(186,831 | ) | ||
| Class A |
(117 | ) | ||
| Class R6 |
(1,935 | ) | ||
| Administrator Class |
(22,854 | ) | ||
|
|
|
|||
| Net expenses |
417,054 | |||
|
|
|
|||
| Net investment income |
235,910 | |||
|
|
|
|||
| Realized and unrealized gains (losses) on investments |
||||
| Net realized gains (losses) on |
||||
| Unaffiliated securities |
(1,823,183 | ) | ||
| Affiliated securities |
7 | |||
| Futures contracts |
(215,838 | ) | ||
|
|
|
|||
| Net realized losses on investments |
(2,039,014 | ) | ||
|
|
|
|||
| Net change in unrealized gains (losses) on |
||||
| Unaffiliated securities |
(3,268,004 | ) | ||
| Affiliated securities |
2 | |||
| Futures contracts |
43,811 | |||
|
|
|
|||
| Net change in unrealized gains (losses) on investments |
(3,224,191 | ) | ||
|
|
|
|||
| Net realized and unrealized gains (losses) on investments |
(5,263,205 | ) | ||
|
|
|
|||
| Net decrease in net assets resulting from operations |
$ | (5,027,295 | ) | |
|
|
|
|||
The accompanying notes are an integral part of these financial statements.
22 | Wells Fargo Disciplined Small Cap Fund
Table of Contents
Statement of changes in net assets
| Year ended March 31, 2020 |
Year ended March 31, 2019 |
|||||||||||||||
| Operations |
||||||||||||||||
| Net investment income |
$ | 235,910 | $ | 401,383 | ||||||||||||
| Net realized gains (losses) on investments |
(2,039,014 | ) | 28,609,817 | |||||||||||||
| Net change in unrealized gains (losses) on investments |
(3,224,191 | ) | (38,978,818 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Net decrease in net assets resulting from operations |
(5,027,295 | ) | (9,967,618 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Distributions to shareholders from net investment income and net realized gains |
||||||||||||||||
| Class A |
(554 | ) | (23,529 | )1 | ||||||||||||
| Class R6 |
(81,474 | ) | (4,570,209 | ) | ||||||||||||
| Administrator Class |
(181,213 | ) | (37,650,733 | ) | ||||||||||||
| Institutional Class |
(43,675 | ) | (22,694,010 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Total distributions to shareholders |
(306,916 | ) | (64,938,481 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Capital share transactions |
Shares | Shares | ||||||||||||||
| Proceeds from shares sold |
||||||||||||||||
| Class A |
27,557 | 215,498 | 2,960 | 1 | 51,409 | 1 | ||||||||||
| Class R6 |
863,028 | 7,504,615 | 220,833 | 4,395,129 | ||||||||||||
| Administrator Class |
270,851 | 2,220,286 | 348,961 | 5,660,352 | ||||||||||||
| Institutional Class |
114,826 | 975,446 | 657,651 | 12,223,841 | ||||||||||||
|
|
|
|||||||||||||||
| 10,915,845 | 22,330,731 | |||||||||||||||
|
|
|
|||||||||||||||
| Reinvestment of distributions |
||||||||||||||||
| Class A |
55 | 503 | 1,361 | 1 | 10,912 | 1 | ||||||||||
| Class R6 |
8,871 | 81,355 | 523,136 | 4,271,599 | ||||||||||||
| Administrator Class |
18,976 | 171,926 | 4,686,419 | 37,625,033 | ||||||||||||
| Institutional Class |
3,482 | 31,516 | 2,679,230 | 21,773,661 | ||||||||||||
|
|
|
|||||||||||||||
| 285,300 | 63,681,205 | |||||||||||||||
|
|
|
|||||||||||||||
| Payment for shares redeemed |
||||||||||||||||
| Class A |
(15,141 | ) | (120,195 | ) | (207 | )1 | (1,692 | )1 | ||||||||
| Class R6 |
(1,320,920 | ) | (11,737,903 | ) | (1,326,785 | ) | (24,323,015 | ) | ||||||||
| Administrator Class |
(3,435,590 | ) | (29,722,535 | ) | (3,156,760 | ) | (42,530,327 | ) | ||||||||
| Institutional Class |
(2,882,808 | ) | (25,024,602 | ) | (3,311,260 | ) | (47,808,217 | ) | ||||||||
|
|
|
|||||||||||||||
| (66,605,235 | ) | (114,663,251 | ) | |||||||||||||
|
|
|
|||||||||||||||
| Net decrease in net assets resulting from capital share transactions |
(55,404,090 | ) | (28,651,315 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Total decrease in net assets |
(60,738,301 | ) | (103,557,414 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Net assets |
||||||||||||||||
| Beginning of period |
79,616,960 | 183,174,374 | ||||||||||||||
|
|
|
|||||||||||||||
| End of period |
$ | 18,878,659 | $ | 79,616,960 | ||||||||||||
|
|
|
|||||||||||||||
| 1 | For the period from July 1, 2018 (commencement of operations) to March 31, 2019 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Disciplined Small Cap Fund | 23
Table of Contents
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||
| CLASS A | 2020 | 20191 | ||||||
| Net asset value, beginning of period |
$8.39 | $23.70 | ||||||
| Net investment income (loss) |
(0.00 | )2,3 | 0.02 | |||||
| Net realized and unrealized gains (losses) on investments |
(2.22 | ) | (3.37 | ) | ||||
|
|
|
|
|
|||||
| Total from investment operations |
(2.22 | ) | (3.35 | ) | ||||
| Distributions to shareholders from |
||||||||
| Net investment income |
(0.05 | ) | (0.04 | ) | ||||
| Net realized gains |
0.00 | (11.92 | ) | |||||
|
|
|
|
|
|||||
| Total distributions to shareholders |
(0.05 | ) | (11.96 | ) | ||||
| Net asset value, end of period |
$6.12 | $8.39 | ||||||
| Total return4 |
(26.67 | )% | (11.52 | )% | ||||
| Ratios to average net assets (annualized) |
||||||||
| Gross expenses |
1.40 | % | 1.14 | % | ||||
| Net expenses |
0.93 | % | 0.92 | % | ||||
| Net investment income (loss) |
(0.05 | )% | 0.16 | % | ||||
| Supplemental data |
||||||||
| Portfolio turnover rate |
67 | % | 176 | % | ||||
| Net assets, end of period (000s omitted) |
$102 | $34 | ||||||
| 1 | For the period from July 1, 2018 (commencement of class operations) to March 31, 2019 |
| 2 | Calculated based upon average shares outstanding |
| 3 | Amount is more than $(0.005). |
| 4 | Total return calculations do not include any sales charges. Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
24 | Wells Fargo Disciplined Small Cap Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||
| CLASS R6 | 2020 | 2019 | 2018 | 20171 | ||||||||||||
| Net asset value, beginning of period |
$8.50 | $22.63 | $23.82 | $22.43 | ||||||||||||
| Net investment income |
0.08 | 2 | 0.06 | 0.07 | 0.14 | |||||||||||
| Net realized and unrealized gains (losses) on investments |
(2.35 | ) | (2.19 | ) | 2.08 | 3.32 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total from investment operations |
(2.27 | ) | (2.13 | ) | 2.15 | 3.46 | ||||||||||
| Distributions to shareholders from |
||||||||||||||||
| Net investment income |
(0.08 | ) | (0.08 | ) | (0.06 | ) | (0.14 | ) | ||||||||
| Net realized gains |
0.00 | (11.92 | ) | (3.28 | ) | (1.93 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(0.08 | ) | (12.00 | ) | (3.34 | ) | (2.07 | ) | ||||||||
| Net asset value, end of period |
$6.15 | $8.50 | $22.63 | $23.82 | ||||||||||||
| Total return3 |
(27.03 | )% | (6.75 | )% | 8.95 | % | 15.63 | % | ||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||
| Gross expenses |
0.89 | % | 0.82 | % | 1.06 | % | 0.92 | % | ||||||||
| Net expenses |
0.50 | % | 0.64 | % | 0.85 | % | 0.85 | % | ||||||||
| Net investment income |
0.95 | % | 0.48 | % | 0.14 | % | 0.67 | % | ||||||||
| Supplemental data |
||||||||||||||||
| Portfolio turnover rate |
67 | % | 176 | % | 48 | % | 73 | % | ||||||||
| Net assets, end of period (000s omitted) |
$141 | $4,014 | $23,871 | $1,626 | ||||||||||||
| 1 | For the period from October 31, 2016 (commencement of class operations) to March 31, 2017 |
| 2 | Calculated based upon average shares outstanding |
| 3 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Disciplined Small Cap Fund | 25
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$8.40 | $22.53 | $23.79 | $21.15 | $25.19 | |||||||||||||||
| Net investment income |
0.02 | 1 | 0.03 | 1 | 0.06 | 0.08 | 1 | 0.06 | ||||||||||||
| Net realized and unrealized gains (losses) on investments |
(2.27 | ) | (2.21 | ) | 2.00 | 4.56 | (1.24 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(2.25 | ) | (2.18 | ) | 2.06 | 4.64 | (1.18 | ) | ||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.05 | ) | (0.03 | ) | (0.04 | ) | (0.07 | ) | (0.02 | ) | ||||||||||
| Net realized gains |
0.00 | (11.92 | ) | (3.28 | ) | (1.93 | ) | (2.84 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(0.05 | ) | (11.95 | ) | (3.32 | ) | (2.00 | ) | (2.86 | ) | ||||||||||
| Net asset value, end of period |
$6.10 | $8.40 | $22.53 | $23.79 | $21.15 | |||||||||||||||
| Total return |
(26.99 | )% | (7.01 | )% | 8.52 | % | 22.13 | % | (4.39 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.25 | % | 1.13 | % | 1.30 | % | 1.28 | % | 1.29 | % | ||||||||||
| Net expenses |
0.85 | % | 0.95 | % | 1.20 | % | 1.20 | % | 1.20 | % | ||||||||||
| Net investment income |
0.27 | % | 0.16 | % | 0.12 | % | 0.36 | % | 0.25 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
67 | % | 176 | % | 48 | % | 73 | % | 59 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$17,049 | $49,911 | $91,506 | $231,039 | $264,560 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
26 | Wells Fargo Disciplined Small Cap Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$8.48 | $22.61 | $23.82 | $21.18 | $25.22 | |||||||||||||||
| Net investment income |
0.06 | 1 | 0.07 | 1 | 0.09 | 0.09 | 0.16 | 1 | ||||||||||||
| Net realized and unrealized gains (losses) on investments |
(2.28 | ) | (2.22 | ) | 2.03 | 4.61 | (1.28 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(2.22 | ) | (2.15 | ) | 2.12 | 4.70 | (1.12 | ) | ||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.16 | ) | (0.06 | ) | (0.05 | ) | (0.13 | ) | (0.08 | ) | ||||||||||
| Net realized gains |
0.00 | (11.92 | ) | (3.28 | ) | (1.93 | ) | (2.84 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(0.16 | ) | (11.98 | ) | (3.33 | ) | (2.06 | ) | (2.92 | ) | ||||||||||
| Net asset value, end of period |
$6.10 | $8.48 | $22.61 | $23.82 | $21.18 | |||||||||||||||
| Total return |
(26.80 | )% | (6.79 | )% | 8.81 | % | 22.43 | % | (4.12 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
0.94 | % | 0.89 | % | 1.07 | % | 1.03 | % | 1.05 | % | ||||||||||
| Net expenses |
0.60 | % | 0.71 | % | 0.95 | % | 0.95 | % | 0.95 | % | ||||||||||
| Net investment income |
0.69 | % | 0.41 | % | 0.37 | % | 0.56 | % | 0.71 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
67 | % | 176 | % | 48 | % | 73 | % | 59 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$1,586 | $25,658 | $67,798 | $54,375 | $263 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Disciplined Small Cap Fund | 27
Table of Contents
1. ORGANIZATION
Wells Fargo Funds Trust (the “Trust”), a Delaware statutory trust organized on March 10, 1999, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As an investment company, the Trust follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. These financial statements report on the Wells Fargo Disciplined Small Cap Fund (the “Fund”) which is a diversified series of the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund, are in conformity with U.S. generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Securities valuation
All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern Time), although the Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities and futures contracts that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the principal exchange or market that day, a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
Debt securities are valued at the evaluated bid price provided by an independent pricing service (e.g. taking into account various factors, including yields, maturities, or credit ratings) or, if a reliable price is not available, the quoted bid price from an independent broker-dealer.
The values of securities denominated in foreign currencies are translated into U.S. dollars at rates provided by an independent foreign currency pricing source at a time each business day specified by the Wells Fargo Asset Management Pricing Committee at Wells Fargo Funds Management, LLC (“Funds Management”).
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore may not fully reflect trading or events that occur after the close of the principal exchange in which the foreign securities are traded, but before the close of the New York Stock Exchange. If such trading or events are expected to materially affect the value of such securities, then fair value pricing procedures approved by the Board of Trustees of the Fund are applied. These procedures take into account multiple factors including movements in U.S. securities markets after foreign exchanges close. Foreign securities that are fair valued under these procedures are categorized as Level 2 and the application of these procedures may result in transfers between Level 1 and Level 2. Depending on market activity, such fair valuations may be frequent. Such fair value pricing may result in net asset values that are higher or lower than net asset values based on the last reported sales price or latest quoted bid price. On March 31, 2020, such fair value pricing was not used in pricing foreign securities.
Investments in registered open-end investment companies are valued at net asset value. Interests in non-registered investment companies that are redeemable at net asset value are fair valued normally at net asset value.
Investments which are not valued using any of the methods discussed above are valued at their fair value, as determined in good faith by the Board of Trustees. The Board of Trustees has established a Valuation Committee comprised of the Trustees and has delegated to it the authority to take any actions regarding the valuation of portfolio securities that the Valuation Committee deems necessary or appropriate, including determining the fair value of portfolio securities, unless the determination has been delegated to the Wells Fargo Asset Management Pricing Committee. The Board of Trustees retains the authority to make or ratify any valuation decisions or approve any changes to the Valuation Procedures as it deems appropriate. On a quarterly basis, the Board of Trustees receives reports on any valuation actions taken by the Valuation Committee or the Wells Fargo Asset Management Pricing Committee which may include items for ratification.
Foreign currency translation
The accounting records of the Fund are maintained in U.S. dollars. The values of other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at rates provided by an independent foreign currency pricing source at a time each business day specified by the Wells Fargo Asset Management Pricing Committee. Purchases and sales of securities, and income and expenses are converted at the rate of exchange on the respective dates of such transactions. Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded
28 | Wells Fargo Disciplined Small Cap Fund
Table of Contents
Notes to financial statements
and the U.S. dollar equivalent of the amounts actually paid or received. Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities other than investments in securities resulting from changes in exchange rates. The changes in net assets arising from changes in exchange rates of securities and the changes in net assets resulting from changes in market prices of securities are not separately presented. Such changes are included in net realized and unrealized gains or losses from investments.
Securities lending
The Fund may lend its securities from time to time in order to earn additional income in the form of fees or interest on securities received as collateral or the investment of any cash received as collateral. When securities are on loan, the Fund receives interest or dividends on those securities. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). Investments in Securities Lending Fund are valued at the evaluated bid price provided by an independent pricing service. Income earned from investment in the Securities Lending Fund, if any, is included in securities lending income from affiliates (net of fees and rebates) on the Statement of Operations.
In a securities lending transaction, the net asset value of the Fund is affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. The Fund has the right under the lending agreement to recover the securities from the borrower on demand. In the event of default or bankruptcy by the borrower, the Fund may be prevented from recovering the loaned securities or gaining access to the collateral or may experience delays or costs in doing so. In such an event, the terms of the agreement allow the unaffiliated securities lending agent to use the collateral to purchase replacement securities on behalf of the Fund or pay the Fund the market value of the loaned securities. The Fund bears the risk of loss with respect to depreciation of its investment of the cash collateral.
Futures contracts
Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific amount of a commodity, financial instrument or currency at a specified price and on a specified date. The Fund may buy and sell futures contracts in order to gain exposure to, or protect against, changes in security values and is subject to equity price risk. The primary risks associated with the use of futures contracts are the imperfect correlation between changes in market values of securities held by the Fund and the prices of futures contracts, and the possibility of an illiquid market. Futures contracts are generally entered into on a regulated futures exchange and cleared through a clearinghouse associated with the exchange. With futures contracts, there is minimal counterparty risk to the Fund since futures contracts are exchange traded and the exchange’s clearinghouse, as the counterparty to all exchange traded futures, guarantees the futures contracts against default.
Upon entering into a futures contracts, the Fund is required to deposit either cash or securities (initial margin) with the broker in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are paid to or from the broker each day equal to the daily changes in the contract value. Such payments are recorded as unrealized gains or losses and, if any, shown as variation margin receivable (payable) in the Statement of Assets and Liabilities. Should the Fund fail to make requested variation margin payments, the broker can gain access to the initial margin to satisfy the Fund’s payment obligations. When the contracts are closed, a realized gain or loss is recorded in the Statement of Operations.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date. Dividend income is recorded net of foreign taxes withheld where recovery of such taxes is not assured.
Interest income is accrued daily and bond discounts are accreted and premiums are amortized daily. To the extent debt obligations are placed on non-accrual status, any related interest income may be reduced by writing off interest receivables when the collection of all or a portion of interest has been determined to be doubtful based on consistently applied procedures and the fair value has decreased. If the issuer subsequently resumes interest payments or when the collectability of interest is reasonably assured, the debt obligation is removed from non-accrual status.
Distributions to shareholders
Distributions to shareholders from net investment income and any net realized gains are recorded on the ex-dividend date and paid at least annually. Such distributions are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles. Dividend sources are estimated at the time of declaration. The tax character of distributions is determined as of the Fund’s fiscal year end. Therefore, a portion of the Fund’s distributions made prior to the Fund’s fiscal year end may be categorized as a tax return of capital at year end.
Wells Fargo Disciplined Small Cap Fund | 29
Table of Contents
Notes to financial statements
Federal and other taxes
The Fund intends to continue to qualify as a regulated investment company by distributing substantially all of its investment company taxable income and any net realized capital gains (after reduction for capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes was required.
The Fund’s income and federal excise tax returns and all financial records supporting those returns for the prior three fiscal years are subject to examination by the federal and Delaware revenue authorities. Management has analyzed the Fund’s tax positions taken on federal, state, and foreign tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability.
As of March 31, 2020, the aggregate cost of all investments for federal income tax purposes was $26,153,716 and the unrealized gains (losses) consisted of:
| Gross unrealized gains |
$ | 752,657 | ||
| Gross unrealized losses |
(7,796,009 | ) | ||
| Net unrealized losses |
$ | (7,043,352 | ) | |
As of March 31, 2020, the Fund had capital loss carryforwards which consist of $3,683,644 in short-term capital losses.
Class allocations
The separate classes of shares offered by the Fund differ principally in applicable sales charges, shareholder servicing, and administration fees. Class specific expenses are charged directly to that share class. Investment income, common fund-level expenses, and realized and unrealized gains (losses) on investments are allocated daily to each class of shares based on the relative proportion of net assets of each class.
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
| ∎ | Level 1 – quoted prices in active markets for identical securities |
| ∎ | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) |
| ∎ | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The inputs or methodologies used for valuing investments in securities are not necessarily an indication of the risk associated with investing in those securities.
30 | Wells Fargo Disciplined Small Cap Fund
Table of Contents
Notes to financial statements
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of March 31, 2020:
|
Quoted prices (Level 1) |
Other significant observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
Total | |||||||||||||
| Assets |
||||||||||||||||
| Investments in: |
||||||||||||||||
| Common stocks |
||||||||||||||||
| Communication services |
$ | 287,027 | $ | 0 | $ | 0 | $ | 287,027 | ||||||||
| Consumer discrepancy |
1,659,573 | 0 | 0 | 1,659,573 | ||||||||||||
| Consumer staples |
587,381 | 0 | 0 | 587,381 | ||||||||||||
| Energy |
453,930 | 0 | 0 | 453,930 | ||||||||||||
| Financials |
2,940,436 | 0 | 0 | 2,940,436 | ||||||||||||
| Health care |
3,902,718 | 0 | 0 | 3,902,718 | ||||||||||||
| Industrials |
2,795,511 | 0 | 0 | 2,795,511 | ||||||||||||
| Information technology |
2,857,603 | 0 | 0 | 2,857,603 | ||||||||||||
| Materials |
507,347 | 0 | 0 | 507,347 | ||||||||||||
| Real estate |
1,504,541 | 0 | 0 | 1,504,541 | ||||||||||||
| Utilities |
876,025 | 0 | 0 | 876,025 | ||||||||||||
| Short-term investments |
||||||||||||||||
| Investment companies |
633,391 | 0 | 0 | 633,391 | ||||||||||||
| U.S. Treasury securities |
64,994 | 0 | 0 | 64,994 | ||||||||||||
| 19,070,477 | 19,070,477 | |||||||||||||||
| Futures contracts |
39,887 | 0 | 0 | 39,887 | ||||||||||||
| Total assets |
$ | 19,110,364 | $ | 0 | $ | 0 | $ | 19,110,364 | ||||||||
Futures contracts are reported at their cumulative unrealized gains (losses) at measurement date as reported in the table following the Portfolio of Investments. For futures contracts, the current day’s variation margin is reported on the Statement of Assets and Liabilities. All other assets and liabilities are reported at their market value at measurement date.
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
For the year ended March 31, 2020, the Fund did not have any transfers into/out of Level 3.
4. TRANSACTIONS WITH AFFILIATES
Management fee
Funds Management, an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”), is the manager of the Fund and provides advisory and fund-level administrative services under an investment management agreement. Under the investment management agreement, Funds Management is responsible for, among other services, implementing the investment objectives and strategies of the Fund, supervising the subadviser and providing fund-level administrative services in connection with the Fund’s operations. As compensation for its services under the investment management agreement, Funds Management is entitled to receive a management fee at the following annual rate based on the Fund’s average daily net assets:
| Average daily net assets | Management fee | |||
| First $1 billion |
0.500 | % | ||
| Next $4 billion |
0.475 | |||
| Next $5 billion |
0.440 | |||
| Over $10 billion |
0.430 | |||
For the year ended March 31, 2020, the management fee was equivalent to an annual rate of 0.50% of the Fund’s average daily net assets.
Funds Management has retained the services of a subadviser to provide daily portfolio management to the Fund. The fee for subadvisory services is borne by Funds Management. Wells Capital Management Incorporated (“WellsCap”), an affiliate of Funds
Wells Fargo Disciplined Small Cap Fund | 31
Table of Contents
Notes to financial statements
Management and an indirect wholly owned subsidiary of Wells Fargo, is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.35% and declining to 0.25% as the average daily net assets of the Fund increase.
Administration fees
Under a class-level administration agreement, Funds Management provides class-level administrative services to the Fund, which includes paying fees and expenses for services provided by the transfer agent, sub-transfer agents, omnibus account servicers and record-keepers. As compensation for its services under the class-level administration agreement, Funds Management receives an annual fee which is calculated based on the average daily net assets of each class as follows:
| Class-level administration fee |
||||
| Class A |
0.21 | % | ||
| Class R6 |
0.03 | |||
| Administrator Class, Institutional Class |
0.13 | |||
Waivers and/or expense reimbursements
Funds Management has contractually waived and/or reimbursed management and administration fees to the extent necessary to maintain certain net operating expense ratios for the Fund. When each class of the Fund has exceeded its expense cap, Funds Management has waived fees and/or reimbursed expenses from fund-level expenses on a proportionate basis and then from class specific expenses. When only certain classes exceed their expense caps, waivers and/or reimbursements are applied against class specific expenses before fund-level expenses. Funds Management has committed through July 31, 2020 to waive fees and/ or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.93% for Class A shares, 0.50% for Class R6 shares, 0.85% for Administrator Class shares, and 0.60% for Institutional Class shares. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees.
Sales charges
Wells Fargo Funds Distributor, LLC (“Funds Distributor’), the principal underwriter, is entitled to receive the front-end sales charge from the purchase of Class A shares and a contingent deferred sales charge on the redemption of certain Class A shares. Funds Distributor did not receive any front-end or contingent deferred sales charges from Class A shares for the year ended March 31, 2020.
Shareholder servicing fees
The Trust has entered into contracts with one or more shareholder servicing agents, whereby Class A and Administrator Class of the Fund are charged a fee at an annual rate of 0.25% of the average daily net assets of each respective class. A portion of these total shareholder servicing fees were paid to affiliates of Wells Fargo.
Interfund transactions
The Fund may purchase or sell portfolio investment securities to certain other Wells Fargo affiliates pursuant to Rule 17a-7 under the 1940 Act and under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which do not incur broker commissions, are effected at current market prices.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the year ended March 31, 2020 were $35,722,194 and $90,473,632, respectively.
6. SECURITIES LENDING TRANSACTIONS
The Fund lends its securities through an unaffiliated securities lending agent and receives collateral in the form of cash or securities with a value at least equal to the value of the securities on loan. The value of the loaned securities is determined at the close of each business day and any increases or decreases in the required collateral are exchanged between the Fund and the counterparty on the next business day. Cash collateral received is invested in the Securities Lending Fund which seeks to provide a positive return compared to the daily Fed Funds Open Rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments and is exempt from registration under Section 3(c)(7) of the 1940 Act. Securities Lending Fund is managed by Funds Management and is subadvised by WellsCap. Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser.
32 | Wells Fargo Disciplined Small Cap Fund
Table of Contents
Notes to financial statements
In the event of counterparty default or the failure of a borrower to return a loaned security, the Fund has the right to use the collateral to offset any losses incurred. As of March 31, 2020, the Fund had securities lending transactions with the following counterparties which are subject to offset:
| Counterparty | Value of securities on loan |
Collateral received1 |
Net amount | |||||||||
| Bank of America Securities Inc. |
$ | 65,580 | $ | (65,580 | ) | $ | 0 | |||||
| Barclays Capital Inc. |
43,548 | (43,548 | ) | 0 | ||||||||
| BNP Paribas Securities Corp. |
95,681 | (95,681 | ) | 0 | ||||||||
| Deutsche Bank Securities Inc. |
26,670 | (26,670 | ) | 0 | ||||||||
| 1 | Collateral received within this table is limited to the collateral for the net transaction with the counterparty. |
7. DERIVATIVE TRANSACTIONS
During the year ended March 31, 2020, the Fund entered into futures contracts for economic hedging purposes. The Fund had an average notional amount of $765,202 in long futures contracts during the year ended March 31, 2020.
The fair value, realized gains or losses and change in unrealized gains or losses, if any, on derivative instruments are reflected in the corresponding financial statement captions.
8. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $280,000,000 revolving credit agreement whereby the Fund is permitted to use bank borrowings for temporary or emergency purposes, such as to fund shareholder redemption requests. Interest under the credit agreement is charged to the Fund based on a borrowing rate equal to the higher of the Federal Funds rate in effect on that day plus 1.25% or the overnight LIBOR rate in effect on that day plus 1.25%. In addition, an annual commitment fee equal to 0.25% of the unused balance is allocated to each participating fund.
During the year ended March 31, 2020, the Fund had average borrowings outstanding of $68,693 at an average interest rate of 3.06% and paid interest in the amount of $2,102.
9. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid during the years ended March 31, 2020 and March 31, 2019 were as follows:
| Year ended March 31 | ||||||||
| 2020 | 2019 | |||||||
| Ordinary income |
$ | 306,916 | $ | 1,060,055 | ||||
| Long-term capital gain |
0 | 63,878,426 | ||||||
As of March 31, 2020, the components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income |
Unrealized losses |
Capital loss carryforward | ||
| $9,880 | $(7,043,352) | $(3,683,644) | ||
10. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
Wells Fargo Disciplined Small Cap Fund | 33
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Notes to financial statements
11. NEW ACCOUNTING PRONOUNCEMENT
In August 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 updates the disclosure requirements for fair value measurements by modifying or removing certain disclosures and adding certain new disclosures. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Management has adopted the removal and modification of disclosures early, as permitted, and will adopt the additional new disclosures at the effective date.
12. CORONAVIRUS (COVID-19) PANDEMIC
On March 11, 2020, the World Health Organization announced that it had made the assessment that coronavirus disease 2019 (“COVID-19”) is a pandemic. The impacts of COVID-19 are adversely affecting the entire global economy, individual companies and investment products, and the market in general. There is significant uncertainty around the extent and duration of business disruptions related to COVID-19 and the impacts may be short term or may last for an extended period of time. The risk of further spreading of COVID-19 has led to significant uncertainty and volatility in the financial markets. The value of the Fund and the securities in which the Fund invests have generally been adversely affected by impacts caused by COVID-19.
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Report of independent registered public accounting firm
TO THE SHAREHOLDERS OF THE FUND AND BOARD OF TRUSTEES WELLS FARGO FUNDS TRUST:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Wells Fargo Disciplined Small Cap Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of March 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years or periods in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of March 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of March 31, 2020, by correspondence with the custodian, transfer agent, and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have not been able to determine the specific year that we began serving as the auditor of one or more Wells Fargo Funds investment companies; however we are aware that we have served as the auditor of one or more Wells Fargo Funds investment companies since at least 1955.
Boston, Massachusetts
May 28, 2020
Wells Fargo Disciplined Small Cap Fund | 35
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TAX INFORMATION
For corporate shareholders, pursuant to Section 854 of the Internal Revenue Code, 100% of ordinary income dividends qualify for the corporate dividends-received deduction for the fiscal year ended March 31, 2020.
Pursuant to Section 854 of the Internal Revenue Code, $306,916 of income dividends paid during the fiscal year ended March 31, 2020 has been designated as qualified dividend income (QDI).
For the fiscal year ended March 31, 2020, $10,113 has been designated as interest-related dividends for nonresident alien shareholders pursuant to Section 871 of the Internal Revenue Code.
PROXY VOTING INFORMATION
A description of the policies and procedures used to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-222-8222, visiting our website at wfam.com, or visiting the SEC website at sec.gov. Information regarding how the proxies related to portfolio securities were voted during the most recent 12-month period ended June 30 is available on the website at wfam.com or by visiting the SEC website at sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. Shareholders may view the filed Form N-PORT by visiting the SEC website at sec.gov.
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Other information (unaudited)
BOARD OF TRUSTEES AND OFFICERS
Each of the Trustees and Officers1 listed in the table below acts in identical capacities for each fund in the Wells Fargo family of funds, which consists of 147 mutual funds comprising the Wells Fargo Funds Trust, Wells Fargo Variable Trust, Wells Fargo Master Trust and four closed-end funds (collectively the “Fund Complex”). This table should be read in conjunction with the Prospectus and the Statement of Additional Information2. The mailing address of each Trustee and Officer is 525 Market Street, 12th Floor, San Francisco, CA 94105. Each Trustee and Officer serves an indefinite term, however, each Trustee serves such term until reaching the mandatory retirement age established by the Trustees.
Independent Trustees
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| William R. Ebsworth (Born 1957) |
Trustee, since 2015 | Retired. From 1984 to 2013, equities analyst, portfolio manager, research director and chief investment officer at Fidelity Management and Research Company in Boston, Tokyo, and Hong Kong, and retired in 2013 as Chief Investment Officer of Fidelity Strategic Advisers, Inc. where he led a team of investment professionals managing client assets. Prior thereto, Board member of Hong Kong Securities Clearing Co., Hong Kong Options Clearing Corp., the Thailand International Fund, Ltd., Fidelity Investments Life Insurance Company, and Empire Fidelity Investments Life Insurance Company. Audit Committee Chair and Investment Committee Chair of the Vincent Memorial Hospital Endowment (non-profit organization). Mr. Ebsworth is a CFA® charterholder. | N/A | |||
| Jane A. Freeman (Born 1953) |
Trustee, since 2015; Chair Liaison, since 2018 | Retired. From 2012 to 2014 and 1999 to 2008, Chief Financial Officer of Scientific Learning Corporation. From 2008 to 2012, Ms. Freeman provided consulting services related to strategic business projects. Prior to 1999, Portfolio Manager at Rockefeller & Co. and Scudder, Stevens & Clark. Board member of the Harding Loevner Funds from 1996 to 2014, serving as both Lead Independent Director and chair of the Audit Committee. Board member of the Russell Exchange Traded Funds Trust from 2011 to 2012 and the chair of the Audit Committee. Ms. Freeman is a Board Member of The Ruth Bancroft Garden (non-profit organization). She is also an inactive Chartered Financial Analyst. | N/A | |||
| Isaiah Harris, Jr. (Born 1952) |
Trustee, since 2009; Audit Committee Chairman, since 2019 | Retired. Chairman of the Board of CIGNA Corporation since 2009, and Director since 2005. From 2003 to 2011, Director of Deluxe Corporation. Prior thereto, President and CEO of BellSouth Advertising and Publishing Corp. from 2005 to 2007, President and CEO of BellSouth Enterprises from 2004 to 2005 and President of BellSouth Consumer Services from 2000 to 2003. Emeritus member of the Iowa State University Foundation Board of Governors. Emeritus Member of the Advisory Board of Iowa State University School of Business. Advisory Board Member, Palm Harbor Academy (private school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
| Judith M. Johnson (Born 1949) |
Trustee, since 2008; Audit Committee Chairman, from 2009 to 2018 | Retired. Prior thereto, Chief Executive Officer and Chief Investment Officer of Minneapolis Employees Retirement Fund from 1996 to 2008. Ms. Johnson is an attorney, certified public accountant and a certified managerial accountant. | N/A | |||
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Other information (unaudited)
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| David F. Larcker (Born 1950) |
Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | N/A | |||
| Olivia S. Mitchell (Born 1953) |
Trustee, since 2006; Nominating and Governance Committee Chair, since 2018 | International Foundation of Employee Benefit Plans Professor, Wharton School of the University of Pennsylvania since 1993. Director of Wharton’s Pension Research Council and Boettner Center on Pensions & Retirement Research, and Research Associate at the National Bureau of Economic Research. Previously, Cornell University Professor from 1978 to 1993. | N/A | |||
| Timothy J. Penny (Born 1951) |
Trustee, since 1996; Chairman, since 2018 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | N/A | |||
| James G. Polisson (Born 1959) |
Trustee, since 2018 | Retired. Chief Marketing Officer, Source (ETF) UK Services, Ltd, from 2015 to 2017. From 2012 to 2015, Principal of The Polisson Group, LLC, a management consulting, corporate advisory and principal investing company. Chief Executive Officer and Managing Director at Russell Investments, Global Exchange Traded Funds from 2010 to 2012. Managing Director of Barclays Global Investors from 1998 to 2010 and Global Chief Marketing Officer for iShares and Barclays Global Investors from 2000 to 2010. Trustee of the San Francisco Mechanics’ Institute, a non-profit organization, from 2013 to 2015. Board member of the Russell Exchange Traded Fund Trust from 2011 to 2012. Director of Barclays Global Investors Holdings Deutschland GmbH from 2006 to 2009. Mr. Polisson is an attorney and has a retired status with the Massachusetts and District of Columbia Bar Associations. | N/A | |||
| Pamela Wheelock3 (Born 1959) |
Trustee, since January 2020; previously Trustee from January 2018 to July 2019 | Board member of the Destination Medical Center Economic Development Agency, Rochester, Minnesota since 2019. Acting Commissioner, Minnesota Department of Human Services, July 2019 through September 2019. Human Services Manager (part-time), Minnesota Department of Human Services, October 2019 through December 2019. Chief Operating Officer, Twin Cities Habitat for Humanity from 2017 to 2019. Vice President of University Services, University of Minnesota from 2012 to 2016. Prior thereto, on the Board of Directors, Governance Committee and Finance Committee for the Minnesota Philanthropy Partners (Saint Paul Foundation) from 2012 to 2018, Interim Chief Executive Officer of Blue Cross Blue Shield of Minnesota from 2011 to 2012, Chairman of the Board from 2009 to 2012 and Board Director from 2003 to 2015. Vice President, Leadership and Community Engagement, Bush Foundation, Saint Paul, Minnesota (a private foundation) from 2009 to 2011. Executive Vice President and Chief Financial Officer, Minnesota Sports and Entertainment from 2004 to 2009 and Senior Vice President from 2002 to 2004. Executive Vice President of the Minnesota Wild Foundation from 2004 to 2008. Commissioner of Finance, State of Minnesota, from 1999 to 2002. Currently Board Chair of the Minnesota Wild Foundation since 2010. | N/A | |||
| * | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
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Other information (unaudited)
Officers
| Name and year of birth |
Position held and length of service |
Principal occupations during past five years or longer | ||
| Andrew Owen (Born 1960) |
President, since 2017 | Executive Vice President of Wells Fargo & Company and Head of Affiliated Managers, Wells Fargo Asset Management, since 2014. In addition, Mr. Owen is currently President, Chief Executive Officer and Director of Wells Fargo Funds Management, LLC since 2017. Prior thereto, Executive Vice President responsible for marketing, investments and product development for Wells Fargo Funds Management, LLC, from 2009 to 2014. | ||
| Nancy Wiser1 (Born 1967) |
Treasurer, since 2012 | Executive Vice President of Wells Fargo Funds Management, LLC since 2011. Chief Operating Officer and Chief Compliance Officer at LightBox Capital Management LLC, from 2008 to 2011. | ||
| Michelle Rhee (Born 1966) |
Chief Legal Officer, since 2019 | Secretary of Wells Fargo Funds Management, LLC, Chief Legal Counsel of Wells Fargo Asset Management and Assistant General Counsel of Wells Fargo Bank, N.A. since 2018. Associate General Counsel and Managing Director of Bank of America Corporation from 2004 to 2018. | ||
| Catherine Kennedy (Born 1969) |
Secretary, since 2019 | Vice President of Wells Fargo Funds Management, LLC and Senior Counsel of the Wells Fargo Legal Department since 2010. Vice President and Senior Counsel of Evergreen Investment Management Company, LLC from 1998 to 2010. | ||
| Michael H. Whitaker (Born 1967) |
Chief Compliance Officer, since 2016 | Chief Compliance Officer of Wells Fargo Asset Management since 2016. Senior Vice President and Chief Compliance Officer for Fidelity Investments from 2007 to 2016. | ||
| David Berardi (Born 1975) |
Assistant Treasurer, since 2009 | Vice President of Wells Fargo Funds Management, LLC since 2009. Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010. Manager of Fund Reporting and Control for Evergreen Investment Management Company, LLC from 2004 to 2010. | ||
| Jeremy DePalma1 (Born 1974) |
Assistant Treasurer, since 2009 | Senior Vice President of Wells Fargo Funds Management, LLC since 2009. Senior Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010 and head of the Fund Reporting and Control Team within Fund Administration from 2005 to 2010. | ||
| 1 | Nancy Wiser acts as Treasurer of 65 funds in the Fund Complex. Jeremy DePalma acts as Treasurer of 82 funds and Assistant Treasurer of 65 funds in the Fund Complex. |
| 2 | The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request, by calling 1-800-222-8222 or by visiting the website at wfam.com. |
| 3 | Pamela Wheelock was re-appointed to the Board effective January 1, 2020. |
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Effective on or about May 1, 2020, if you purchase Fund shares through a Janney Montgomery Scott LLC (“Janney”) brokerage account, you will be eligible for the following load waivers (front-end sales charge waivers and contingent deferred sales charge (“CDSC”), or back-end sales charge, waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or SAI.
| Front-end sales charge* waivers on Class A shares available at Janney |
| Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family). |
| Shares purchased by employees and registered representatives of Janney or its affiliates and their family members as designated by Janney. |
| Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within ninety (90) days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e., right of reinstatement). |
| Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans. |
| Shares acquired through a right of reinstatement. |
| Class C shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund pursuant to Janney’s policies and procedures. |
| CDSC waivers on Class A and Class C shares available at Janney |
| Shares sold upon the death or disability of the shareholder. |
| Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
| Shares purchased in connection with a return of excess contributions from an IRA account. |
| Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulations. |
| Shares sold to pay Janney fees but only if the transaction is initiated by Janney. |
| Shares acquired through a right of reinstatement. |
| Shares exchanged into the same share class of a different fund. |
| Front-end sales charge* discounts available at Janney; breakpoints, rights of accumulation and/or letters of intent |
| Breakpoints as described in the Fund’s Prospectus. |
| Rights of accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Janney. Eligible fund family assets not held at Janney may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
| Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Janney Montgomery Scott may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
| * | Also referred to as an “initial sales charge.” |
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Effective on or after May 1, 2020, clients of Edward Jones (also referred to as “shareholders”) purchasing Fund shares on the Edward Jones commission and fee-based platforms are eligible only for the following sales charge discounts (also referred to as “breakpoints”) and waivers, which can differ from breakpoints and waivers described elsewhere in this Prospectus or SAI or through another broker-dealer. In all instances, it is the shareholder’s responsibility to inform Edward Jones at the time of purchase of any relationship, holdings of Wells Fargo Funds or other facts qualifying the purchaser for breakpoints or waivers. Edward Jones can ask for documentation of such circumstance.
| Breakpoints available at Edward Jones |
| Rights of Accumulation (ROA) |
| The applicable sales charge on a purchase of Class A shares is determined by taking into account all share classes (except any money market funds and retirement plan share classes) of Wells Fargo Funds held by the shareholder or in an account grouped by Edward Jones with other accounts for the purpose of providing certain pricing considerations (“pricing groups”). This includes all share classes held on the Edward Jones platform and/or held on another platform. The inclusion of eligible fund family assets in the rights of accumulation calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. |
| ROA is determined by calculating the higher of cost or market value (current shares x NAV). |
| Letter of Intent (LOI) |
| Through a LOI, shareholders can receive the sales charge and breakpoint discounts for purchases shareholders intend to makeover a 13-month period from the date Edward Jones receives the LOI. The LOI is determined by calculating the higher of cost or market value of qualifying holdings at LOI initiation in combination with the value that the shareholder intends to buy over a 13-month period to calculate the front-end sales charge and any breakpoint discounts. Each purchase the shareholder makes during that 13-month period will receive the sales charge and breakpoint discount that applies to the total amount. The inclusion of eligible fund family assets in the LOI calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. Purchases made before the LOI is received by Edward Jones are not covered under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if LOI is not met. |
| Sales charges are waived for the following shareholders and in the following situations at Edward Jones: |
| ● Associates of Edward Jones and its affiliates and their family members who are in the same pricing group (as determined by Edward Jones under its policies and procedures) as the associate. This waiver will continue for the remainder of the associate’s life if the associate retires from Edward Jones in good-standing. |
| ● Shares purchased in an Edward Jones fee-based program. |
| ● Shares purchased through reinvestment of capital gains distributions and dividend reinvestment. |
| ● Shares purchased from the proceeds of redeemed shares of the same fund family so long as the following conditions are met: 1)the proceeds are from the sale of shares within 60 days of the purchase, and 2) the sale and purchase are made in the same share class and the same account or the purchase is made in an individual retirement account with proceeds from liquidations in anon-retirement account. |
| ● Shares exchanged into Class A shares from another share class so long as the exchange is into the same fund and was initiated at the discretion of Edward Jones. Edward Jones is responsible for any remaining CDSC due to the fund company, if applicable. Any future purchases are subject to the applicable sales charge as disclosed in the prospectus. |
| ● Exchanges from Class C shares to Class A shares of the same fund, generally, in the 84th month following the anniversary of the purchase date or earlier at the discretion of Edward Jones. |
| If the shareholder purchases shares that are subject to a CDSC and those shares are redeemed before the CDSC is
expired, the shareholder is responsible to pay the CDSC except in the following conditions available at Edward Jones: |
| ● The death or disability of the shareholder. |
| ● Systematic withdrawals with up to 10% per year of the account value. |
| ● Return of excess contributions from an Individual Retirement Account (IRA). |
| ● Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulation. |
| ● Shares sold to pay Edward Jones fees or costs in such cases where the transaction is initiated by Edward Jones. |
| ● Shares exchanged in an Edward Jones fee-based program. |
| ● Shares acquired through NAV reinstatement. |
Wells Fargo Disciplined Small Cap Fund | 41
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Appendix II (unaudited)
| Other Important Information for accounts at Edward Jones: |
| Minimum Purchase Amounts ● $250 initial purchase minimum ● $50 subsequent purchase minimum |
|
Minimum Balances Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy: ● A fee-based account held on an Edward Jones platform ● A 529 account held on an Edward Jones platform ● An account with an active systematic investment plan or letter of intent (LOI) |
|
Changing Share Classes At any time it deems necessary, Edward Jones has the authority to exchange at NAV a shareholder’s holdings in a fund to Class A shares. |
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 219967
Kansas City, MO 64121-9967
Website: wfam.com
Individual investors: 1-800-222-8222
Retail investment professionals: 1-888-877-9275
Institutional investment professionals: 1-866-765-0778
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. If this report is used for promotional purposes, distribution of the report must be accompanied or preceded by a current prospectus. Before investing, please consider the investment objectives, risks, charges, and expenses of the investment. For a current prospectus and, if available, a summary prospectus, containing this information, call 1-800-222-8222 or visit the Fund’s website at wfam.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is the trade name for certain investment advisory/management firms owned by Wells Fargo & Company. These firms include but are not limited to Wells Capital Management Incorporated and Wells Fargo Funds Management, LLC. Certain products managed by WFAM entities are distributed by Wells Fargo Funds Distributor, LLC (a broker-dealer and Member FINRA).
This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
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Wells Fargo
Special Small Cap Value Fund
Beginning on January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, paper copies of the Wells Fargo Funds’ annual and semi-annual shareholder reports issued after this date will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-222-8222 or by enrolling at wellsfargo.com/advantagedelivery.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call 1-800-222-8222. Your election to receive reports in paper will apply to all Wells Fargo Funds held in your account with your financial intermediary or, if you are a direct investor, to all Wells Fargo Funds that you hold.
Table of Contents
The views expressed and any forward-looking statements are as of March 31, 2020, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Asset Management. Discussions of individual securities, or the markets generally, or any Wells Fargo Fund are not intended as individual recommendations. Future events or results may vary significantly from those expressed in any forward-looking statements. The views expressed are subject to change at any time in response to changing circumstances in the market. Wells Fargo Asset Management and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
Wells Fargo Special Small Cap Value Fund | 1
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Letter to shareholders (unaudited)
| 1 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value-weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index. |
| 2 | The Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. 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 as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. You cannot invest directly in an index. |
| 3 | The MSCI Emerging Markets (EM) Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure equity market performance of emerging markets. You cannot invest directly in an index. |
| 4 | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. You cannot invest directly in an index. |
| 5 | The Bloomberg Barclays Global Aggregate ex-USD Index is an unmanaged index that provides a broad-based measure of the global investment-grade fixed-income markets excluding the U.S. dollar-denominated debt market. You cannot invest directly in an index. |
| 6 | The Bloomberg Barclays Municipal Bond Index is an unmanaged index composed of long-term tax-exempt bonds with a minimum credit rating of Baa. You cannot invest directly in an index. |
| 7 | The ICE BofA U.S. High Yield Index is a market-capitalization-weighted index of domestic and Yankee high-yield bonds. The index tracks the performance of high-yield securities traded in the U.S. bond market. You cannot invest directly in an index. Copyright 2020. ICE Data Indices, LLC. All rights reserved. |
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Letter to shareholders (unaudited)
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Performance highlights (unaudited)
The Fund is currently closed to most new investors.1
Investment objective
The Fund seeks long-term capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Brian Martin, CFA®‡†
James M. Tringas, CFA®‡
Bryant VanCronkhite, CFA®‡, CPA
Average annual total returns (%) as of March 31, 20202
| Including sales charge | Excluding sales charge | Expense ratios3 (%) | ||||||||||||||||||||||||||||||||
| Inception date | 1 year | 5 year | 10 year | 1 year | 5 year | 10 year | Gross | Net4 | ||||||||||||||||||||||||||
| Class A (ESPAX) | 5-7-1993 | -29.40 | -1.93 | 5.75 | -25.08 | -0.76 | 6.38 | 1.30 | 1.30 | |||||||||||||||||||||||||
| Class C (ESPCX) | 12-12-2000 | -26.65 | -1.50 | 5.59 | -25.65 | -1.50 | 5.59 | 2.05 | 2.05 | |||||||||||||||||||||||||
| Class R (ESPHX)5 | 9-30-2015 | – | – | – | -25.29 | -0.99 | 6.10 | 1.55 | 1.55 | |||||||||||||||||||||||||
| Class R6 (ESPRX)6 | 10-31-2014 | – | – | – | -24.78 | -0.33 | 6.81 | 0.87 | 0.87 | |||||||||||||||||||||||||
| Administrator Class (ESPIX) | 7-23-1996 | – | – | – | -25.03 | -0.65 | 6.57 | 1.22 | 1.21 | |||||||||||||||||||||||||
| Institutional Class (ESPNX)7 | 7-30-2010 | – | – | – | -24.85 | -0.39 | 6.78 | 0.97 | 0.95 | |||||||||||||||||||||||||
| Russell 2000® Value Index8 | – | – | – | – | -29.64 | -2.42 | 4.79 | – | – | |||||||||||||||||||||||||
Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes that a shareholder may pay on an investment in a fund. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance shown without sales charges would be lower if sales charges were reflected. Current performance may be lower or higher than the performance data quoted, which assumes the reinvestment of dividends and capital gains. Current month-end performance is available on the Fund’s website, wfam.com.
Index returns do not include transaction costs associated with buying and selling securities, any mutual fund fees or expenses, or any taxes. It is not possible to invest directly in an index.
For Class A shares, the maximum front-end sales charge is 5.75%. For Class C shares, the maximum contingent deferred sales charge is 1.00%. Performance including a contingent deferred sales charge assumes the sales charge for the corresponding time period. Class R, Class R6, Administrator Class, and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Smaller-company stocks tend to be more volatile and less liquid than those of larger companies. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Special Small Cap Value Fund
Table of Contents
Performance highlights (unaudited)
| Growth of $10,000 investment as of March 31, 20209 |
|
|
| ‡ | CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute. |
| † | Mr. Martin became a portfolio manager of the Fund on April 15, 2020. |
| 1 | Please see the Fund’s current Statement of Additional Information for further details. |
| 2 | Historical performance prior to July 19, 2010, is based on the performance of the Fund’s predecessor, Evergreen Special Values Fund. |
| 3 | Reflects the expense ratios as stated in the most recent prospectuses, which include the impact of 0.01% in acquired fund fees and expenses. The expense ratios shown are subject to change and may differ from the annualized expense ratios shown in the financial highlights of this report, which do not include acquired fund fees and expenses. |
| 4 | The manager has contractually committed through July 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 1.31% for Class A, 2.06% for Class C, 1.56% for Class R, 0.89% for Class R6, 1.20% for Administrator Class, and 0.94% for Institutional Class. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses (if any), and extraordinary expenses are excluded from the expense cap. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Without this cap, the Fund’s returns would have been lower. The expense ratio paid by an investor is the net expense ratio (the total annual fund operating expenses after fee waivers) as stated in the prospectuses. |
| 5 | Historical performance shown for the Class R shares prior to their inception reflects the performance of the Institutional Class shares adjusted to reflect the higher expenses applicable to the Class R shares. |
| 6 | Historical performance shown for the Class R6 shares prior to their inception reflects the performance of the Institutional Class shares, and includes the higher expenses applicable to the Institutional Class shares. If these expenses had not been included, returns for the Class R6 shares would be higher. |
| 7 | Historical performance shown for the Institutional Class shares prior to their inception reflects the performance of the Administrator Class shares, and includes the higher expenses applicable to the Administrator Class shares. If these expenses had not been included, returns for the Institutional Class shares would be higher. |
| 8 | The Russell 2000® Value Index measures the performance of those Russell 2000 companies with lower price/book ratios and lower forecasted growth values. You cannot invest directly in an index. |
| 9 | The chart compares the performance of Class A shares for the most recent ten years with the Russell 2000® Value Index. The chart assumes a hypothetical investment of $10,000 in Class A shares and reflects all operating expenses and assumes the maximum initial sales charge of 5.75%. |
| 10 | The ten largest holdings, excluding cash, cash equivalents and any money market funds, are calculated based on the value of the investments divided by total net assets of the Fund. Holdings are subject to change and may have changed since the date specified. |
| 11 | Amounts are calculated based on the total long-term investments of the Fund. These amounts are subject to change and may have changed since the date specified. |
Wells Fargo Special Small Cap Value Fund | 7
Table of Contents
Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
| ∎ | The Fund outperformed its benchmark, the Russell 2000® Value Index, for the 12-month period that ended March 31, 2020. |
| ∎ | Stock selection in the industrials and materials sectors and an overweight to the consumer staples sector contributed to relative performance. |
| ∎ | Stock selection in the financials and energy sectors and an underweight to the utilities sector detracted from relative performance. |
Equity markets saw significant volatility over the final six weeks of the period.
Over the 12-month reporting period, equity markets saw significant volatility, with the Russell 2000® Value Index returning –29.64%. After trading in a fairly tight trading range for the first 10 months of the period, small-cap value stocks moved sharply lower over the final six weeks of the period with the outbreak of the coronavirus pandemic. As the virus caused the U.S. economy to come to a screeching halt, stocks tumbled dramatically and numerous fiscal and monetary stimulus policies were put in place to try to stabilize the economy.
Recent market volatility strengthens our belief that it is always prudent to protect downside risks. Our bottom-up process is designed to seek companies that can control their own destiny via clear competitive advantages, strong and sustainable free cash flows, and flexible balance sheets that can be used to grow shareholder value regardless of the macro environment.
The Fund increased its overweight to the materials and consumer staples spaces and reduced its weight in energy and consumer discretionary stocks over the period as we adjusted individual positions as long-term reward/risk levels changed. We continue to emphasize companies that can control their destiny by using their balance sheet to protect capital during periods of volatility and also be offensive when their competitors are forced to be defensive.
metal food can manufacturer in the U.S. Over the past several years, Silgan has deployed its strong balance sheet to expand beyond metal cans into the higher-growth closures and plastics businesses. Given the defensive nature of its business and a surge in demand, the stock outperformed. We continue to believe Silgan offers attractive risk-adjusted reward.
Detractors from performance included stock selection in the financials and energy sectors.
In the financials sector, Two Harbors Investment Corporation is a mortgage real estate investment trust that manages and invests in agency and non-agency mortgage-backed securities as well as other financial assets. The stock underperformed during the coronavirus pandemic as the non-agency market had liquidity pressures and potential losses from forbearance requirements placed on mortgage servicers as the Coronavirus Aid, Relief, and Economic Security (CARES) Act weighed on the stock. We continue to monitor developments in the mortgage market and will size the position accordingly.
Patterson-UTI Energy, Incorporated, is a leading land-based drilling and pressure pumping services company that underperformed as oil prices collapsed in the final six weeks of the quarter. The portfolio continues to underweight the energy sector, but we believe Patterson-UTI is one of a few oil-field services companies that has the balance sheet strength and the cash flow characteristics to weather the storm and gain market share through the downturn.
Please see footnotes on page 7.
8 | Wells Fargo Special Small Cap Value Fund
Table of Contents
Performance highlights (unaudited)
Please see footnotes on page 7.
Wells Fargo Special Small Cap Value Fund | 9
Table of Contents
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and contingent deferred sales charges (if any) on redemptions and (2) ongoing costs, including management fees, distribution (12b-1) and/or shareholder servicing fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period from October 1, 2019 to March 31, 2020.
Actual expenses
The “Actual” line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Actual” line under the heading entitled “Expenses paid during period” for your applicable class of shares to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The “Hypothetical” line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and contingent deferred sales charges. Therefore, the “Hypothetical” line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning account value 10-1-2019 |
Ending account value 3-31-2020 |
Expenses paid during the period¹ |
Annualized net expense ratio |
|||||||||||||
| Class A |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 718.63 | $ | 5.46 | 1.27 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,018.65 | $ | 6.41 | 1.27 | % | ||||||||
| Class C |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 716.10 | $ | 8.67 | 2.02 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,014.90 | $ | 10.18 | 2.02 | % | ||||||||
| Class R |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 717.72 | $ | 6.53 | 1.52 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,017.40 | $ | 7.67 | 1.52 | % | ||||||||
| Class R6 |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 720.12 | $ | 3.61 | 0.84 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,020.80 | $ | 4.24 | 0.84 | % | ||||||||
| Administrator Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 718.82 | $ | 5.11 | 1.19 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,019.05 | $ | 6.01 | 1.19 | % | ||||||||
| Institutional Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 719.89 | $ | 4.04 | 0.94 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,020.30 | $ | 4.75 | 0.94 | % | ||||||||
| 1 | Expenses paid is equal to the annualized net expense ratio of each class multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year (to reflect the one-half-year period). |
10 | Wells Fargo Special Small Cap Value Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Common Stocks: 93.75% |
| |||||||||||||||
| Communication Services: 0.24% |
| |||||||||||||||
| Media: 0.24% | ||||||||||||||||
| A.H. Belo Corporation Class A (l) |
2,012,189 | $ | 3,460,965 | |||||||||||||
| Gannett Company Incorporated |
1,741,177 | 2,576,942 | ||||||||||||||
| 6,037,907 | ||||||||||||||||
|
|
|
|||||||||||||||
| Consumer Discretionary: 5.94% |
| |||||||||||||||
| Diversified Consumer Services: 0.48% | ||||||||||||||||
| Franchise Group Incorporated « |
297,943 | 2,598,063 | ||||||||||||||
| ServiceMaster Global Holdings Incorporated † |
356,100 | 9,614,700 | ||||||||||||||
| 12,212,763 | ||||||||||||||||
|
|
|
|||||||||||||||
| Hotels, Restaurants & Leisure: 2.67% | ||||||||||||||||
| Denny’s Corporation (l)† |
3,769,726 | 28,951,496 | ||||||||||||||
| Dine Brands Global Incorporated (l) |
959,802 | 27,527,121 | ||||||||||||||
| Jack in the Box Incorporated |
326,800 | 11,454,340 | ||||||||||||||
| 67,932,957 | ||||||||||||||||
|
|
|
|||||||||||||||
| Household Durables: 1.87% | ||||||||||||||||
| Helen of Troy Limited † |
330,700 | 47,630,721 | ||||||||||||||
|
|
|
|||||||||||||||
| Specialty Retail: 0.19% | ||||||||||||||||
| American Eagle Outfitters Incorporated |
623,600 | 4,957,620 | ||||||||||||||
|
|
|
|||||||||||||||
| Textiles, Apparel & Luxury Goods: 0.73% | ||||||||||||||||
| Delta Apparel Incorporated (l)† |
559,902 | 5,828,580 | ||||||||||||||
| Steven Madden Limited |
552,400 | 12,832,252 | ||||||||||||||
| 18,660,832 | ||||||||||||||||
|
|
|
|||||||||||||||
| Consumer Staples: 12.70% |
| |||||||||||||||
| Beverages: 0.84% | ||||||||||||||||
| Primo Water Corporation |
2,347,700 | 21,270,162 | ||||||||||||||
|
|
|
|||||||||||||||
| Food & Staples Retailing: 1.64% | ||||||||||||||||
| BJ’s Wholesale Club Holdings Incorporated † |
1,644,581 | 41,887,478 | ||||||||||||||
|
|
|
|||||||||||||||
| Food Products: 6.85% | ||||||||||||||||
| Hostess Brands Incorporated † |
2,221,723 | 23,683,567 | ||||||||||||||
| J & J Snack Foods Corporation |
350,757 | 42,441,597 | ||||||||||||||
| Lancaster Colony Corporation |
31,100 | 4,498,304 | ||||||||||||||
| Nomad Foods Limited † |
3,860,447 | 71,649,894 | ||||||||||||||
| Tootsie Roll Industries Incorporated « |
152,998 | 5,501,821 | ||||||||||||||
| TreeHouse Foods Incorporated † |
609,085 | 26,891,103 | ||||||||||||||
| 174,666,286 | ||||||||||||||||
|
|
|
|||||||||||||||
| Household Products: 2.91% | ||||||||||||||||
| Central Garden & Pet Company (l)† |
799,422 | 21,984,105 | ||||||||||||||
| Central Garden & Pet Company Class A † |
876,933 | 22,423,177 | ||||||||||||||
| Reynolds Consumer Products Incorporated |
239,700 | 6,992,049 | ||||||||||||||
| Spectrum Brands Holdings Incorporated |
624,575 | 22,715,793 | ||||||||||||||
| 74,115,124 | ||||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Special Small Cap Value Fund | 11
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Personal Products: 0.46% | ||||||||||||||||
| Edgewell Personal Care Company † |
484,800 | $ | 11,673,984 | |||||||||||||
|
|
|
|||||||||||||||
| Energy: 0.84% |
| |||||||||||||||
| Energy Equipment & Services: 0.39% | ||||||||||||||||
| Forum Energy Technologies Incorporated † |
3,414,891 | 605,460 | ||||||||||||||
| Oil States International Incorporated † |
718,799 | 1,459,162 | ||||||||||||||
| Patterson-UTI Energy Incorporated |
3,073,610 | 7,222,984 | ||||||||||||||
| Tetra Technologies Incorporated † |
2,233,522 | 714,727 | ||||||||||||||
| 10,002,333 | ||||||||||||||||
|
|
|
|||||||||||||||
| Oil, Gas & Consumable Fuels: 0.45% | ||||||||||||||||
| Berry Petroleum Corporation |
1,559,885 | 3,759,323 | ||||||||||||||
| Callon Petroleum Company † |
1,787,100 | 979,152 | ||||||||||||||
| Magnolia Oil & Gas Corporation † |
1,410,900 | 5,643,600 | ||||||||||||||
| QEP Resources Incorporated |
2,924,500 | 978,245 | ||||||||||||||
| 11,360,320 | ||||||||||||||||
|
|
|
|||||||||||||||
| Financials: 20.52% |
| |||||||||||||||
| Banks: 11.02% | ||||||||||||||||
| Associated Banc Corporation |
2,024,352 | 25,891,462 | ||||||||||||||
| CVB Financial Corporation |
1,190,790 | 23,875,340 | ||||||||||||||
| First Citizens BancShares Corporation Class A |
142,250 | 47,350,758 | ||||||||||||||
| First Hawaiian Incorporated |
2,131,290 | 35,230,224 | ||||||||||||||
| Hancock Holding Company |
1,170,445 | 22,847,086 | ||||||||||||||
| IBERIABANK Corporation |
457,051 | 16,526,964 | ||||||||||||||
| Renasant Corporation |
1,277,435 | 27,899,180 | ||||||||||||||
| South State Corporation |
438,061 | 25,727,323 | ||||||||||||||
| UMB Financial Corporation |
1,198,326 | 55,578,360 | ||||||||||||||
| 280,926,697 | ||||||||||||||||
|
|
|
|||||||||||||||
| Capital Markets: 1.96% | ||||||||||||||||
| Apollo Investment Corporation |
1,525,686 | 10,298,381 | ||||||||||||||
| Artisan Partners Asset Management Incorporated Class A |
786,509 | 16,902,078 | ||||||||||||||
| Glassbridge Enterprises Incorporated (l)†(a) |
1,527 | 76,365 | ||||||||||||||
| New Mountain Finance Corporation |
2,161,081 | 14,695,351 | ||||||||||||||
| Westwood Holdings Group Incorporated |
436,883 | 7,999,328 | ||||||||||||||
| 49,971,503 | ||||||||||||||||
|
|
|
|||||||||||||||
| Insurance: 6.34% | ||||||||||||||||
| CNO Financial Group Incorporated |
983,500 | 12,185,565 | ||||||||||||||
| Enstar Group Limited † |
199,571 | 31,741,768 | ||||||||||||||
| National Western Life Group Class A |
27,400 | 4,712,800 | ||||||||||||||
| ProAssurance Corporation |
1,109,347 | 27,733,675 | ||||||||||||||
| Stewart Information Services Corporation |
900,875 | 24,026,336 | ||||||||||||||
| The Hanover Insurance Group Incorporated |
405,291 | 36,711,259 | ||||||||||||||
| White Mountains Insurance Group Limited |
26,765 | 24,356,150 | ||||||||||||||
| 161,467,553 | ||||||||||||||||
|
|
|
|||||||||||||||
| Mortgage REITs: 1.20% | ||||||||||||||||
| Apollo Commercial Real Estate Finance Incorporated |
1,707,915 | 12,672,729 | ||||||||||||||
| Invesco Mortgage Capital Incorporated |
870,480 | 2,968,337 | ||||||||||||||
| New York Mortgage Trust Incorporated |
2,499,881 | 3,874,816 | ||||||||||||||
| Two Harbors Investment Corporation |
2,911,657 | 11,093,413 | ||||||||||||||
| 30,609,295 | ||||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Special Small Cap Value Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Health Care: 2.39% |
| |||||||||||||||
| Health Care Equipment & Supplies: 0.47% | ||||||||||||||||
| Avanos Medical Incorporated † |
386,400 | $ | 10,405,752 | |||||||||||||
| Natus Medical Incorporated † |
72,000 | 1,665,360 | ||||||||||||||
| 12,071,112 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care Providers & Services: 0.73% | ||||||||||||||||
| Hanger Incorporated † |
299,613 | 4,667,971 | ||||||||||||||
| Premier Incorporated Class A † |
424,900 | 13,902,728 | ||||||||||||||
| 18,570,699 | ||||||||||||||||
|
|
|
|||||||||||||||
| Pharmaceuticals: 1.19% | ||||||||||||||||
| Prestige Consumer Healthcare Incorporated † |
824,800 | 30,253,664 | ||||||||||||||
|
|
|
|||||||||||||||
| Industrials: 20.15% |
| |||||||||||||||
| Aerospace & Defense: 0.94% | ||||||||||||||||
| Parsons Corporation † |
747,298 | 23,883,644 | ||||||||||||||
|
|
|
|||||||||||||||
| Building Products: 4.59% | ||||||||||||||||
| CSW Industrials Incorporated (l) |
817,669 | 53,025,835 | ||||||||||||||
| Griffon Corporation |
782,485 | 9,898,435 | ||||||||||||||
| Quanex Building Products Corporation (l) |
1,753,827 | 17,678,576 | ||||||||||||||
| Simpson Manufacturing Company Incorporated |
587,189 | 36,393,974 | ||||||||||||||
| 116,996,820 | ||||||||||||||||
|
|
|
|||||||||||||||
| Commercial Services & Supplies: 3.31% | ||||||||||||||||
| ACCO Brands Corporation |
1,637,261 | 8,268,168 | ||||||||||||||
| Deluxe Corporation |
736,031 | 19,085,284 | ||||||||||||||
| Ennis Incorporated |
1,116,593 | 20,969,617 | ||||||||||||||
| Healthcare Services Group Incorporated |
842,500 | 20,144,175 | ||||||||||||||
| Viad Corporation |
754,190 | 16,011,454 | ||||||||||||||
| 84,478,698 | ||||||||||||||||
|
|
|
|||||||||||||||
| Electrical Equipment: 1.50% | ||||||||||||||||
| APi Group Corporation †144A |
1,905,100 | 13,335,700 | ||||||||||||||
| Atkore International Incorporated † |
1,186,154 | 24,992,265 | ||||||||||||||
| 38,327,965 | ||||||||||||||||
|
|
|
|||||||||||||||
| Machinery: 8.81% | ||||||||||||||||
| Alamo Group Incorporated |
209,900 | 18,634,922 | ||||||||||||||
| Douglas Dynamics Incorporated |
821,467 | 29,170,293 | ||||||||||||||
| Franklin Electric Company Incorporated |
1,293,382 | 60,957,094 | ||||||||||||||
| Harsco Corporation Harsco Corp † |
980,000 | 6,830,600 | ||||||||||||||
| Kadant Incorporated |
313,172 | 23,378,290 | ||||||||||||||
| Mayville Engineering Company Incorporated † |
548,375 | 3,361,539 | ||||||||||||||
| Mueller Industries Incorporated |
2,546,458 | 60,962,205 | ||||||||||||||
| NN Incorporated |
779,465 | 1,348,474 | ||||||||||||||
| Trimas Corporation † |
861,000 | 19,889,100 | ||||||||||||||
| 224,532,517 | ||||||||||||||||
|
|
|
|||||||||||||||
| Professional Services: 1.00% | ||||||||||||||||
| Korn Ferry International |
1,042,442 | 25,352,189 | ||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Special Small Cap Value Fund | 13
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Information Technology: 8.18% |
| |||||||||||||||
| Communications Equipment: 0.56% | ||||||||||||||||
| NETGEAR Incorporated † |
630,422 | $ | 14,398,838 | |||||||||||||
|
|
|
|||||||||||||||
| Electronic Equipment, Instruments & Components: 2.68% | ||||||||||||||||
| Badger Meter Incorporated |
252,815 | 13,550,884 | ||||||||||||||
| Belden Incorporated |
365,168 | 13,175,261 | ||||||||||||||
| Littelfuse Incorporated |
41,300 | 5,510,246 | ||||||||||||||
| Novanta Incorporated † |
315,174 | 25,176,099 | ||||||||||||||
| Rogers Corporation † |
94,500 | 8,922,690 | ||||||||||||||
| Tech Data Corporation † |
14,100 | 1,844,985 | ||||||||||||||
| 68,180,165 | ||||||||||||||||
|
|
|
|||||||||||||||
| IT Services: 1.32% | ||||||||||||||||
| MAXIMUS Incorporated |
377,100 | 21,947,220 | ||||||||||||||
| Sykes Enterprises Incorporated † |
433,400 | 11,753,808 | ||||||||||||||
| 33,701,028 | ||||||||||||||||
|
|
|
|||||||||||||||
| Semiconductors & Semiconductor Equipment: 2.22% | ||||||||||||||||
| Brooks Automation Incorporated |
805,806 | 24,577,083 | ||||||||||||||
| Cabot Microelectronics Corporation |
203,713 | 23,251,802 | ||||||||||||||
| DSP Group Incorporated † |
658,648 | 8,825,883 | ||||||||||||||
| 56,654,768 | ||||||||||||||||
|
|
|
|||||||||||||||
| Software: 1.40% | ||||||||||||||||
| ACI Worldwide Incorporated † |
491,702 | 11,874,603 | ||||||||||||||
| BlackBerry Limited Ǡ |
2,506,300 | 10,351,019 | ||||||||||||||
| Verint Systems Incorporated † |
312,700 | 13,446,100 | ||||||||||||||
| 35,671,722 | ||||||||||||||||
|
|
|
|||||||||||||||
| Materials: 15.50% | ||||||||||||||||
| Chemicals: 6.51% | ||||||||||||||||
| Element Solutions Incorporated † |
1,362,992 | 11,394,613 | ||||||||||||||
| Ferro Corporation † |
555,000 | 5,194,800 | ||||||||||||||
| Huntsman Corporation |
712,600 | 10,282,818 | ||||||||||||||
| Innospec Incorporated |
986,575 | 68,557,097 | ||||||||||||||
| PolyOne Corporation |
2,580,506 | 48,952,199 | ||||||||||||||
| PQ Group Holdings Incorporated † |
1,022,527 | 11,145,544 | ||||||||||||||
| Sensient Technologies Corporation |
239,653 | 10,427,302 | ||||||||||||||
| 165,954,373 | ||||||||||||||||
|
|
|
|||||||||||||||
| Construction Materials: 2.69% | ||||||||||||||||
| Eagle Materials Incorporated |
1,174,107 | 68,591,331 | ||||||||||||||
|
|
|
|||||||||||||||
| Containers & Packaging: 2.45% | ||||||||||||||||
| Myers Industries Incorporated |
668,000 | 7,181,000 | ||||||||||||||
| Silgan Holdings Incorporated |
1,908,290 | 55,378,576 | ||||||||||||||
| 62,559,576 | ||||||||||||||||
|
|
|
|||||||||||||||
| Metals & Mining: 0.80% | ||||||||||||||||
| Alcoa Corporation † |
808,300 | 4,979,128 | ||||||||||||||
| Compass Minerals International Incorporated |
400,300 | 15,399,541 | ||||||||||||||
| 20,378,669 | ||||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Special Small Cap Value Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Paper & Forest Products: 3.05% | ||||||||||||||||
| Neenah Incorporated (l) |
1,133,975 | $ | 48,908,342 | |||||||||||||
| Schweitzer-Mauduit International Incorporated |
1,036,492 | 28,835,207 | ||||||||||||||
| 77,743,549 | ||||||||||||||||
|
|
|
|||||||||||||||
| Real Estate: 2.20% |
| |||||||||||||||
| Equity REITs: 2.20% | ||||||||||||||||
| Acadia Realty Trust |
1,161,267 | 14,388,098 | ||||||||||||||
| Pebblebrook Hotel Trust |
1,198,524 | 13,051,926 | ||||||||||||||
| Washington REIT |
1,202,362 | 28,700,381 | ||||||||||||||
| 56,140,405 | ||||||||||||||||
|
|
|
|||||||||||||||
| Utilities: 5.09% |
| |||||||||||||||
| Electric Utilities: 5.09% | ||||||||||||||||
| ALLETE Incorporated |
286,400 | 17,378,752 | ||||||||||||||
| Hawaiian Electric Industries Incorporated |
1,383,092 | 59,542,111 | ||||||||||||||
| IDACORP Incorporated |
602,300 | 52,875,917 | ||||||||||||||
| 129,796,780 | ||||||||||||||||
|
|
|
|||||||||||||||
| Total Common Stocks (Cost $3,112,023,420) |
|
2,389,622,047 | ||||||||||||||
|
|
|
|||||||||||||||
| Exchange-Traded Funds: 0.54% | ||||||||||||||||
| iShares Russell 2000 Index ETF |
121,000 | 13,849,660 | ||||||||||||||
|
|
|
|||||||||||||||
| Total Exchange-Traded Funds (Cost $15,866,210) |
|
13,849,660 | ||||||||||||||
|
|
|
|||||||||||||||
| Dividend yield | ||||||||||||||||
| Preferred Stocks: 0.12% | ||||||||||||||||
| Industrials: 0.12% |
| |||||||||||||||
| Industrial Conglomerates: 0.12% | ||||||||||||||||
| Steel Partners Holdings LP |
8.86 | % | 180,098 | 3,049,059 | ||||||||||||
|
|
|
|||||||||||||||
| Total Preferred Stocks (Cost $2,516,534) |
|
3,049,059 | ||||||||||||||
|
|
|
|||||||||||||||
| Yield | ||||||||||||||||
| Short-Term Investments: 2.88% | ||||||||||||||||
| Investment Companies: 2.88% | ||||||||||||||||
| Securities Lending Cash Investments LLC (l)(r)(u) |
2.11 | 6,657,214 | 6,657,880 | |||||||||||||
| Wells Fargo Government Money Market Fund Select Class (l)(u) |
0.35 | 66,773,903 | 66,773,903 | |||||||||||||
| Total Short-Term Investments (Cost $73,431,514) |
|
73,431,783 | ||||||||||||||
|
|
|
|||||||||||||||
| Total investments in securities (Cost $3,203,837,678) | 97.29 | % | 2,479,952,549 | |||||
| Other assets and liabilities, net |
2.71 | 68,953,244 | ||||||
|
|
|
|
|
|||||
| Total net assets | 100.00 | % | $ | 2,548,905,793 | ||||
|
|
|
|
|
|||||
| (l) | The issuer of the security is an affiliated person of the Fund as defined in the Investment Company Act of 1940. |
| « | All or a portion of this security is on loan. |
| † | Non-income-earning security |
| (a) | The security is fair valued in accordance with procedures approved by the Board of Trustees. |
| 144A | The security may be resold in transactions exempt from registration, normally to qualified institutional buyers, pursuant to Rule 144A under the Securities Act of 1933. |
| (r) | The investment is a non-registered investment company purchased with cash collateral received from securities on loan. |
| (u) | The rate represents the 7-day annualized yield at period end. |
Abbreviations:
| REIT | Real estate investment trust |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Special Small Cap Value Fund | 15
Table of Contents
Portfolio of investments—March 31, 2020
Investments in Affiliates
An affiliated investment is an investment in which the Fund owns at least 5% of the outstanding voting shares of the issuer or as a result of other relationships, such as the Fund and the issuer having the same investment manager. Transactions with issuers that were either affiliated persons of the Fund at the beginning of the period or the end of the period were as follows:
| Shares, beginning of period |
Shares purchased |
Shares sold |
Shares, end of period |
Net realized gains (losses) |
Net change in unrealized gains (losses) |
Income from affiliated securities |
Value, end of period |
% of net assets |
||||||||||||||||||||||||||||
| Common Stocks |
||||||||||||||||||||||||||||||||||||
| Communication Services |
||||||||||||||||||||||||||||||||||||
| Media |
||||||||||||||||||||||||||||||||||||
| A.H. Belo Corporation Class A |
1,658,289 | 353,900 | 0 | 2,012,189 | $ | 0 | $ | (3,825,819 | ) | $ | 579,100 | $ | 3,460,965 | |||||||||||||||||||||||
| Consumer Discretionary |
||||||||||||||||||||||||||||||||||||
| Hotels, Restaurants & Leisure |
||||||||||||||||||||||||||||||||||||
| Denny’s Corporation † |
3,316,971 | 889,655 | (436,900 | ) | 3,769,726 | 1,285,394 | (41,385,993 | ) | 0 | 28,951,496 | ||||||||||||||||||||||||||
| Dine Brands Global Incorporated |
713,300 | 517,775 | (271,273 | ) | 959,802 | (12,333,494 | ) | (31,815,728 | ) | 2,271,964 | 27,527,121 | |||||||||||||||||||||||||
| Textiles, Apparel & Luxury Goods |
||||||||||||||||||||||||||||||||||||
| Delta Apparel Incorporated † |
519,692 | 59,310 | (19,100 | ) | 559,902 | 99,878 | (6,559,399 | ) | 0 | 5,828,580 | ||||||||||||||||||||||||||
| Consumer Staples |
||||||||||||||||||||||||||||||||||||
| Household Products |
||||||||||||||||||||||||||||||||||||
| Central Garden & Pet Company † |
743,522 | 90,300 | (34,400 | ) | 799,422 | (579,357 | ) | 2,045,814 | 0 | 21,984,105 | ||||||||||||||||||||||||||
| Financials |
||||||||||||||||||||||||||||||||||||
| Capital Markets |
||||||||||||||||||||||||||||||||||||
| Glassbridge Enterprises Incorporated † |
305,421 | 1,528 | (305,422 | ) | 1,527 | (2,967 | ) | 18,255 | 0 | 76,365 | ||||||||||||||||||||||||||
| Industrials |
||||||||||||||||||||||||||||||||||||
| Building Products |
||||||||||||||||||||||||||||||||||||
| CSW Industrials Incorporated |
759,969 | 105,700 | (48,000 | ) | 817,669 | 598,919 | 5,809,502 | 437,397 | 53,025,835 | |||||||||||||||||||||||||||
| Quanex Building Products Corporation |
1,179,133 | 655,494 | (80,800 | ) | 1,753,827 | (32,434 | ) | (15,738,525 | ) | 424,497 | 17,678,576 | |||||||||||||||||||||||||
| Materials |
||||||||||||||||||||||||||||||||||||
| Paper and Forest Products |
||||||||||||||||||||||||||||||||||||
| Neenah Incorporated |
877,121 | 256,854 | 0 | 1,133,975 | 0 | (24,126,246 | ) | 1,896,009 | 48,908,342 | |||||||||||||||||||||||||||
| 207,441,385 | 8.14 | % | ||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||
| Short-Term Investments |
||||||||||||||||||||||||||||||||||||
| Investment Companies |
||||||||||||||||||||||||||||||||||||
| Securities Lending Cash Investments LLC |
57,964,218 | 371,348,377 | (422,655,381 | ) | 6,657,214 | (985 | ) | 269 | 685,745 | # | 6,657,880 | |||||||||||||||||||||||||
| Wells Fargo Government Money Market Fund Select Class |
128,767,336 | 1,012,029,075 | (1,074,022,508 | ) | 66,773,903 | 0 | 0 | 3,205,981 | 66,773,903 | |||||||||||||||||||||||||||
| 73,431,783 | 2.88 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $ | (10,965,046 | ) | $ | (115,577,870 | ) | $ | 9,500,693 | $ | 280,873,168 | 11.02 | % | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| † | Non-income-earning security |
| # | Amount shown represents income before fees and rebates. |
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Special Small Cap Value Fund
Table of Contents
Statement of assets and liabilities—March 31, 2020
| Assets |
||||
| Investments in unaffiliated securities (including $6,772,387 of securities loaned), at value (cost $2,818,928,993) |
$ | 2,199,079,381 | ||
| Investments in affiliated securities, at value (cost $384,908,685) |
280,873,168 | |||
| Cash |
45,050,000 | |||
| Cash due from Broker |
13,049,952 | |||
| Receivable for investments sold |
9,167,397 | |||
| Receivable for Fund shares sold |
18,226,381 | |||
| Receivable for dividends |
5,282,747 | |||
| Receivable for securities lending income, net |
10,379 | |||
| Prepaid expenses and other assets |
102,026 | |||
|
|
|
|||
| Total assets |
2,570,841,431 | |||
|
|
|
|||
| Liabilities |
||||
| Payable upon receipt of securities loaned |
6,653,550 | |||
| Payable for investments purchased |
7,220,176 | |||
| Payable for Fund shares redeemed |
5,887,303 | |||
| Management fee payable |
1,841,703 | |||
| Administration fees payable |
277,799 | |||
| Distribution fees payable |
9,193 | |||
| Trustees’ fees and expenses payable |
3,811 | |||
| Accrued expenses and other liabilities |
42,103 | |||
|
|
|
|||
| Total liabilities |
21,935,638 | |||
|
|
|
|||
| Total net assets |
$ | 2,548,905,793 | ||
|
|
|
|||
| Net assets consist of |
||||
| Paid-in capital |
$ | 3,330,537,362 | ||
| Total distributable loss |
(781,631,569 | ) | ||
|
|
|
|||
| Total net assets |
$ | 2,548,905,793 | ||
|
|
|
|||
| Computation of net asset value and offering price per share |
||||
| Net assets – Class A |
$ | 381,057,737 | ||
| Shares outstanding – Class A1 |
16,289,138 | |||
| Net asset value per share – Class A |
$23.39 | |||
| Maximum offering price per share – Class A2 |
$24.82 | |||
| Net assets – Class C |
$ | 11,419,397 | ||
| Shares outstanding – Class C1 |
544,021 | |||
| Net asset value per share – Class C |
$20.99 | |||
| Net assets – Class R |
$ | 5,208,809 | ||
| Shares outstanding – Class R1 |
219,462 | |||
| Net asset value per share – Class R |
$23.73 | |||
| Net assets – Class R6 |
$ | 580,535,488 | ||
| Shares outstanding – Class R61 |
24,189,973 | |||
| Net asset value per share – Class R6 |
$24.00 | |||
| Net assets – Administrator Class |
$ | 105,286,141 | ||
| Shares outstanding – Administrator Class1 |
4,387,497 | |||
| Net asset value per share – Administrator Class |
$24.00 | |||
| Net assets – Institutional Class |
$ | 1,465,398,221 | ||
| Shares outstanding – Institutional Class1 |
61,042,484 | |||
| Net asset value per share – Institutional Class |
$24.01 | |||
| 1 | The Fund has an unlimited number of authorized shares. |
| 2 | Maximum offering price is computed as 100/94.25 of net asset value. On investments of $50,000 or more, the offering price is reduced. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Special Small Cap Value Fund | 17
Table of Contents
Statement of operations—year ended March 31, 2020
| Investment income |
||||
| Dividends (net of foreign withholding taxes of $77,746) |
$ | 55,285,579 | ||
| Income from affiliated securities |
8,995,478 | |||
| Interest |
45,902 | |||
|
|
|
|||
| Total investment income |
64,326,959 | |||
|
|
|
|||
| Expenses |
||||
| Management fee |
25,795,263 | |||
| Administration fees |
||||
| Class A |
1,110,148 | |||
| Class C |
42,321 | |||
| Class R |
14,735 | |||
| Class R6 |
192,993 | |||
| Administrator Class |
200,187 | |||
| Institutional Class |
2,433,726 | |||
| Shareholder servicing fees |
||||
| Class A |
1,321,588 | |||
| Class C |
50,382 | |||
| Class R |
17,542 | |||
| Administrator Class |
384,967 | |||
| Distribution fees |
||||
| Class C |
151,045 | |||
| Class R |
17,517 | |||
| Custody and accounting fees |
91,369 | |||
| Professional fees |
49,211 | |||
| Registration fees |
146,509 | |||
| Shareholder report expenses |
92,948 | |||
| Trustees’ fees and expenses |
20,771 | |||
| Other fees and expenses |
55,111 | |||
|
|
|
|||
| Total expenses |
32,188,333 | |||
| Less: Fee waivers and/or expense reimbursements |
||||
| Class A |
(1,601 | ) | ||
| Class C |
(22 | ) | ||
| Class R |
(6 | ) | ||
| Administrator Class |
(3,076 | ) | ||
| Institutional Class |
(95,105 | ) | ||
|
|
|
|||
| Net expenses |
32,088,523 | |||
|
|
|
|||
| Net investment income |
32,238,436 | |||
|
|
|
|||
| Realized and unrealized gains (losses) on investments |
||||
| Net realized gains (losses) on |
||||
| Unaffiliated securities |
(19,206,360 | ) | ||
| Affiliated securities |
(10,965,046 | ) | ||
| Futures contracts |
(101,433 | ) | ||
| Written options |
2,250,416 | |||
|
|
|
|||
| Net realized losses on investments |
(28,022,423 | ) | ||
|
|
|
|||
| Net change in unrealized gains (losses) on |
||||
| Unaffiliated securities |
(749,440,758 | ) | ||
| Affiiliated securities |
(115,577,870 | ) | ||
|
|
|
|||
| Net change in unrealized gains (losses) on investments |
(865,018,628 | ) | ||
|
|
|
|||
| Net realized and unrealized gains (losses) on investments |
(893,041,051 | ) | ||
|
|
|
|||
| Net decrease in net assets resulting from operations |
$ | (860,802,615 | ) | |
|
|
|
|||
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Special Small Cap Value Fund
Table of Contents
Statement of changes in net assets
| Year ended March 31, 2020 |
Year ended March 31, 2019 |
|||||||||||||||
| Operations |
||||||||||||||||
| Net investment income |
$ | 32,238,436 | $ | 23,686,389 | ||||||||||||
| Net realized gains (losses) on investments |
(28,022,423 | ) | 70,868,512 | |||||||||||||
| Net change in unrealized gains (losses) on investments |
(865,018,628 | ) | (132,481,283 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Net decrease in net assets resulting from operations |
(860,802,615 | ) | (37,926,382 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Distributions to shareholders from net investment income and net realized gains |
||||||||||||||||
| Class A |
(9,432,361 | ) | (34,950,655 | ) | ||||||||||||
| Class C |
(189,721 | ) | (3,190,299 | ) | ||||||||||||
| Class R |
(105,231 | ) | (404,926 | ) | ||||||||||||
| Class R6 |
(14,944,792 | ) | (29,776,704 | ) | ||||||||||||
| Administrator Class |
(2,900,116 | ) | (10,505,173 | ) | ||||||||||||
| Institutional Class |
(42,284,810 | ) | (92,413,835 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Total distributions to shareholders |
(69,857,031 | ) | (171,241,592 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Capital share transactions |
Shares | Shares | ||||||||||||||
| Proceeds from shares sold |
||||||||||||||||
| Class A |
3,993,891 | 126,764,233 | 4,399,455 | 147,434,144 | ||||||||||||
| Class C |
14,309 | 410,897 | 176,335 | 5,606,048 | ||||||||||||
| Class R |
105,504 | 3,331,686 | 108,771 | 3,732,400 | ||||||||||||
| Class R6 |
12,282,599 | 409,146,441 | 10,731,533 | 369,575,214 | ||||||||||||
| Administrator Class |
950,962 | 30,825,292 | 1,731,106 | 60,553,466 | ||||||||||||
| Institutional Class |
37,766,400 | 1,218,872,323 | 25,518,350 | 892,397,775 | ||||||||||||
|
|
|
|||||||||||||||
| 1,789,350,872 | 1,479,299,047 | |||||||||||||||
|
|
|
|||||||||||||||
| Reinvestment of distributions |
||||||||||||||||
| Class A |
245,514 | 8,523,533 | 1,076,242 | 31,879,046 | ||||||||||||
| Class C |
5,647 | 174,030 | 114,907 | 3,053,065 | ||||||||||||
| Class R |
2,978 | 104,729 | 13,400 | 402,776 | ||||||||||||
| Class R6 |
363,920 | 12,981,573 | 757,094 | 23,032,048 | ||||||||||||
| Administrator Class |
80,270 | 2,859,904 | 339,786 | 10,323,048 | ||||||||||||
| Institutional Class |
941,495 | 33,591,380 | 2,401,764 | 73,095,306 | ||||||||||||
|
|
|
|||||||||||||||
| 58,235,149 | 141,785,289 | |||||||||||||||
|
|
|
|||||||||||||||
| Payment for shares redeemed |
||||||||||||||||
| Class A |
(4,543,391 | ) | (146,758,224 | ) | (4,558,516 | ) | (151,304,840 | ) | ||||||||
| Class C |
(329,922 | ) | (9,451,149 | ) | (1,140,298 | ) | (33,300,231 | ) | ||||||||
| Class R |
(95,708 | ) | (3,223,069 | ) | (48,026 | ) | (1,606,676 | ) | ||||||||
| Class R6 |
(4,383,465 | ) | (144,270,795 | ) | (2,789,106 | ) | (93,680,041 | ) | ||||||||
| Administrator Class |
(1,570,212 | ) | (51,008,335 | ) | (3,674,115 | ) | (131,798,914 | ) | ||||||||
| Institutional Class |
(19,400,901 | ) | (608,738,214 | ) | (20,110,486 | ) | (683,366,611 | ) | ||||||||
|
|
|
|||||||||||||||
| (963,449,786 | ) | (1,095,057,313 | ) | |||||||||||||
|
|
|
|||||||||||||||
| Net increase in net assets resulting from capital share transactions |
884,136,235 | 526,027,023 | ||||||||||||||
|
|
|
|||||||||||||||
| Total increase (decrease) in net assets |
(46,523,411 | ) | 316,859,049 | |||||||||||||
|
|
|
|||||||||||||||
| Net assets |
||||||||||||||||
| Beginning of period |
2,595,429,204 | 2,278,570,155 | ||||||||||||||
|
|
|
|||||||||||||||
| End of period |
$ | 2,548,905,793 | $ | 2,595,429,204 | ||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Special Small Cap Value Fund | 19
Table of Contents
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$31.74 | $34.42 | $33.15 | $27.40 | $29.27 | |||||||||||||||
| Net investment income |
0.24 | 0.22 | 0.24 | 0.35 | 1 | 0.20 | ||||||||||||||
| Net realized and unrealized gains (losses) on investments |
(8.00 | ) | (0.69 | ) | 2.89 | 6.15 | (1.46 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(7.76 | ) | (0.47 | ) | 3.13 | 6.50 | (1.26 | ) | ||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.28 | ) | (0.15 | ) | (0.32 | ) | (0.18 | ) | (0.19 | ) | ||||||||||
| Net realized gains |
(0.31 | ) | (2.06 | ) | (1.54 | ) | (0.57 | ) | (0.42 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(0.59 | ) | (2.21 | ) | (1.86 | ) | (0.75 | ) | (0.61 | ) | ||||||||||
| Net asset value, end of period |
$23.39 | $31.74 | $34.42 | $33.15 | $27.40 | |||||||||||||||
| Total return2 |
(25.08 | )% | (0.87 | )% | 9.42 | % | 23.69 | % | (4.21 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.27 | % | 1.29 | % | 1.31 | % | 1.32 | % | 1.36 | % | ||||||||||
| Net expenses |
1.27 | % | 1.29 | % | 1.31 | % | 1.32 | % | 1.34 | % | ||||||||||
| Net investment income |
0.71 | % | 0.67 | % | 0.66 | % | 1.14 | % | 0.73 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
39 | % | 32 | % | 41 | % | 51 | % | 46 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$381,058 | $526,656 | $539,499 | $575,269 | $417,161 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Special Small Cap Value Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$28.49 | $31.21 | $30.19 | $25.05 | $26.81 | |||||||||||||||
| Net investment income (loss) |
(0.01 | )1 | (0.05 | )1 | (0.03 | )1 | 0.12 | 1 | (0.03 | ) | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(7.18 | ) | (0.61 | ) | 2.64 | 5.59 | (1.31 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(7.19 | ) | (0.66 | ) | 2.61 | 5.71 | (1.34 | ) | ||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
0.00 | 0.00 | (0.05 | ) | 0.00 | 0.00 | ||||||||||||||
| Net realized gains |
(0.31 | ) | (2.06 | ) | (1.54 | ) | (0.57 | ) | (0.42 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(0.31 | ) | (2.06 | ) | (1.59 | ) | (0.57 | ) | (0.42 | ) | ||||||||||
| Net asset value, end of period |
$20.99 | $28.49 | $31.21 | $30.19 | $25.05 | |||||||||||||||
| Total return2 |
(25.65 | )% | (1.63 | )% | 8.60 | % | 22.75 | % | (4.93 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
2.02 | % | 2.04 | % | 2.06 | % | 2.07 | % | 2.11 | % | ||||||||||
| Net expenses |
2.02 | % | 2.04 | % | 2.06 | % | 2.07 | % | 2.09 | % | ||||||||||
| Net investment income (loss) |
(0.04 | )% | (0.13 | )% | (0.10 | )% | 0.42 | % | (0.02 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
39 | % | 32 | % | 41 | % | 51 | % | 46 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$11,419 | $24,334 | $53,145 | $60,309 | $40,512 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Special Small Cap Value Fund | 21
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS R | 2020 | 2019 | 2018 | 2017 | 20161 | |||||||||||||||
| Net asset value, beginning of period |
$32.20 | $34.94 | $33.73 | $27.97 | $26.72 | |||||||||||||||
| Net investment income |
0.16 | 0.18 | 0.17 | 0.63 | 2 | 0.08 | 2 | |||||||||||||
| Net realized and unrealized gains (losses) on investments |
(8.12 | ) | (0.74 | ) | 2.92 | 5.94 | 1.87 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(7.96 | ) | (0.56 | ) | 3.09 | 6.57 | 1.95 | |||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.20 | ) | (0.12 | ) | (0.34 | ) | (0.24 | ) | (0.28 | ) | ||||||||||
| Net realized gains |
(0.31 | ) | (2.06 | ) | (1.54 | ) | (0.57 | ) | (0.42 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(0.51 | ) | (2.18 | ) | (1.88 | ) | (0.81 | ) | (0.70 | ) | ||||||||||
| Net asset value, end of period |
$23.73 | $32.20 | $34.94 | $33.73 | $27.97 | |||||||||||||||
| Total return3 |
(25.29 | )% | (1.11 | )% | 9.13 | % | 23.47 | % | 7.40 | % | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.52 | % | 1.55 | % | 1.57 | % | 1.56 | % | 1.59 | % | ||||||||||
| Net expenses |
1.52 | % | 1.55 | % | 1.56 | % | 1.56 | % | 1.58 | % | ||||||||||
| Net investment income |
0.46 | % | 0.47 | % | 0.43 | % | 1.86 | % | 0.56 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
39 | % | 32 | % | 41 | % | 51 | % | 46 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$5,209 | $6,656 | $4,631 | $785 | $27 | |||||||||||||||
| 1 | For the period from September 30, 2015 (commencement of class operations) to March 31, 2016. |
| 2 | Calculated based upon average shares outstanding |
| 3 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
22 | Wells Fargo Special Small Cap Value Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS R6 | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$32.55 | $35.25 | $33.93 | $28.01 | $29.91 | |||||||||||||||
| Net investment income |
0.37 | 0.38 | 0.38 | 1 | 0.61 | 1 | 0.39 | |||||||||||||
| Net realized and unrealized gains (losses) on investments |
(8.17 | ) | (0.72 | ) | 2.97 | 6.18 | (1.54 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(7.80 | ) | (0.34 | ) | 3.35 | 6.79 | (1.15 | ) | ||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.44 | ) | (0.30 | ) | (0.49 | ) | (0.30 | ) | (0.33 | ) | ||||||||||
| Net realized gains |
(0.31 | ) | (2.06 | ) | (1.54 | ) | (0.57 | ) | (0.42 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(0.75 | ) | (2.36 | ) | (2.03 | ) | (0.87 | ) | (0.75 | ) | ||||||||||
| Net asset value, end of period |
$24.00 | $32.55 | $35.25 | $33.93 | $28.01 | |||||||||||||||
| Total return |
(24.78 | )% | (0.42 | )% | 9.85 | % | 24.22 | % | (3.74 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
0.84 | % | 0.86 | % | 0.88 | % | 0.89 | % | 0.93 | % | ||||||||||
| Net expenses |
0.84 | % | 0.86 | % | 0.88 | % | 0.89 | % | 0.89 | % | ||||||||||
| Net investment income |
1.12 | % | 1.16 | % | 1.10 | % | 1.87 | % | 1.56 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
39 | % | 32 | % | 41 | % | 51 | % | 46 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$580,535 | $518,377 | $254,801 | $176,362 | $36,344 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Special Small Cap Value Fund | 23
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$32.55 | $35.22 | $33.90 | $28.02 | $29.94 | |||||||||||||||
| Net investment income |
0.26 | 1 | 0.27 | 1 | 0.27 | 1 | 0.44 | 1 | 0.26 | 1 | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(8.18 | ) | (0.71 | ) | 2.97 | 6.24 | (1.49 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(7.92 | ) | (0.44 | ) | 3.24 | 6.68 | (1.23 | ) | ||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.32 | ) | (0.17 | ) | (0.38 | ) | (0.23 | ) | (0.27 | ) | ||||||||||
| Net realized gains |
(0.31 | ) | (2.06 | ) | (1.54 | ) | (0.57 | ) | (0.42 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(0.63 | ) | (2.23 | ) | (1.92 | ) | (0.80 | ) | (0.69 | ) | ||||||||||
| Net asset value, end of period |
$24.00 | $32.55 | $35.22 | $33.90 | $28.02 | |||||||||||||||
| Total return |
(25.03 | )% | (0.77 | )% | 9.52 | % | 23.82 | % | (4.01 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.19 | % | 1.21 | % | 1.23 | % | 1.24 | % | 1.26 | % | ||||||||||
| Net expenses |
1.19 | % | 1.20 | % | 1.20 | % | 1.20 | % | 1.17 | % | ||||||||||
| Net investment income |
0.79 | % | 0.74 | % | 0.76 | % | 1.36 | % | 0.95 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
39 | % | 32 | % | 41 | % | 51 | % | 46 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$105,286 | $160,369 | $229,992 | $199,262 | $95,030 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
24 | Wells Fargo Special Small Cap Value Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$32.56 | $35.27 | $33.94 | $28.03 | $29.93 | |||||||||||||||
| Net investment income |
0.31 | 0.33 | 0.33 | 0.60 | 1 | 0.30 | ||||||||||||||
| Net realized and unrealized gains (losses) on investments |
(8.14 | ) | (0.70 | ) | 3.01 | 6.17 | (1.46 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(7.83 | ) | (0.37 | ) | 3.34 | 6.77 | (1.16 | ) | ||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.41 | ) | (0.28 | ) | (0.47 | ) | (0.29 | ) | (0.32 | ) | ||||||||||
| Net realized gains |
(0.31 | ) | (2.06 | ) | (1.54 | ) | (0.57 | ) | (0.42 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(0.72 | ) | (2.34 | ) | (2.01 | ) | (0.86 | ) | (0.74 | ) | ||||||||||
| Net asset value, end of period |
$24.01 | $32.56 | $35.27 | $33.94 | $28.03 | |||||||||||||||
| Total return |
(24.85 | )% | (0.53 | )% | 9.82 | % | 24.13 | % | (3.79 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
0.94 | % | 0.96 | % | 0.98 | % | 0.99 | % | 1.01 | % | ||||||||||
| Net expenses |
0.94 | % | 0.94 | % | 0.94 | % | 0.94 | % | 0.94 | % | ||||||||||
| Net investment income |
1.07 | % | 1.04 | % | 1.02 | % | 1.86 | % | 1.17 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
39 | % | 32 | % | 41 | % | 51 | % | 46 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$1,465,398 | $1,359,038 | $1,196,501 | $921,732 | $256,190 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Special Small Cap Value Fund | 25
Table of Contents
1. ORGANIZATION
Wells Fargo Funds Trust (the “Trust”), a Delaware statutory trust organized on March 10, 1999, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As an investment company, the Trust follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. These financial statements report on the Wells Fargo Special Small Cap Value Fund (the “Fund”) which is a diversified series of the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund, are in conformity with U.S. generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Securities valuation
All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern Time), although the Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities, options and futures contracts that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the principal exchange or market that day, a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
Investments in registered open-end investment companies are valued at net asset value. Interests in non-registered investment companies that are redeemable at net asset value are fair valued normally at net asset value.
Investments which are not valued using any of the methods discussed above are valued at their fair value, as determined in good faith by the Board of Trustees of the Fund. The Board of Trustees has established a Valuation Committee comprised of the Trustees and has delegated to it the authority to take any actions regarding the valuation of portfolio securities that the Valuation Committee deems necessary or appropriate, including determining the fair value of portfolio securities, unless the determination has been delegated to the Wells Fargo Asset Management Pricing Committee at Wells Fargo Funds Management, LLC (“Funds Management”). The Board of Trustees retains the authority to make or ratify any valuation decisions or approve any changes to the Valuation Procedures as it deems appropriate. On a quarterly basis, the Board of Trustees receives reports on any valuation actions taken by the Valuation Committee or the Wells Fargo Asset Management Pricing Committee which may include items for ratification.
Securities lending
The Fund may lend its securities from time to time in order to earn additional income in the form of fees or interest on securities received as collateral or the investment of any cash received as collateral. When securities are on loan, the Fund receives interest or dividends on those securities. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). Investments in Securities Lending Fund are valued at the evaluated bid price provided by an independent pricing service. Income earned from investment in the Securities Lending Fund (net of fees and rebates), if any, is included in income from affiliated securities on the Statement of Operations.
In a securities lending transaction, the net asset value of the Fund is affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. The Fund has the right under the lending agreement to recover the securities from the borrower on demand. In the event of default or bankruptcy by the borrower, the Fund may be prevented from recovering the loaned securities or gaining access to the collateral or may experience delays or costs in doing so. In such an event, the terms of the agreement allow the unaffiliated securities lending agent to use the collateral to purchase replacement securities on behalf of the Fund or pay the Fund the market value of the loaned securities. The Fund bears the risk of loss with respect to depreciation of its investment of the cash collateral.
Futures contracts
Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific amount of a commodity, financial instrument or currency at a specified price and on a specified date. The Fund may buy and sell futures contracts in order to gain exposure to, or protect against, changes in security values and is subject to equity price risk. The primary risks associated with the use of futures contracts are the imperfect correlation between changes in market values of securities held by the Fund and the prices of futures contracts, and the possibility of an illiquid market. Futures contracts are generally entered into on a regulated
26 | Wells Fargo Special Small Cap Value Fund
Table of Contents
Notes to financial statements
futures exchange and cleared through a clearinghouse associated with the exchange. With futures contracts, there is minimal counterparty risk to the Fund since futures contracts are exchange traded and the exchange’s clearinghouse, as the counterparty to all exchange traded futures, guarantees the futures contracts against default.
Upon entering into a futures contracts, the Fund is required to deposit either cash or securities (initial margin) with the broker in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are paid to or from the broker each day equal to the daily changes in the contract value. Such payments are recorded as unrealized gains or losses and, if any, shown as variation margin receivable (payable) in the Statement of Assets and Liabilities. Should the Fund fail to make requested variation margin payments, the broker can gain access to the initial margin to satisfy the Fund’s payment obligations. When the contracts are closed, a realized gain or loss is recorded in the Statement of Operations.
Options
The Fund may write covered call options or secured put options on individual securities and/or indexes. When the Fund writes an option, an amount equal to the premium received is recorded as a liability and is subsequently adjusted to the current market value of the written option. Premiums received from written options that expire unexercised are recognized as realized gains on the expiration date. For exercised options, the difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is treated as a realized gain or loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in calculating the realized gain or loss on the sale. If a put option is exercised, the premium reduces the cost of the security purchased. The Fund, as a writer of an option, bears the market risk of an unfavorable change in the price of the security and/or index underlying the written option.
The Fund may also purchase call or put options. Premiums paid are included in the Statement of Assets and Liabilities as investments, the values of which are subsequently adjusted based on the current market values of the options. Premiums paid for purchased options that expire are recognized as realized losses on the expiration date. Premiums paid for purchased options that are exercised or closed are added to the amount paid or offset against the proceeds received for the underlying security to determine the realized gain or loss. The risk of loss associated with purchased options is limited to the premium paid.
Options traded on an exchange are regulated and terms of the options are standardized. The Fund is subject to equity price risk. Purchased options traded over-the-counter expose the Fund to counterparty risk in the event the counterparty does not perform. This risk can be mitigated by having a master netting arrangement between the Fund and the counterparty and by having the counterparty post collateral to cover the Fund’s exposure to the counterparty.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date. Dividend income is recorded net of foreign taxes withheld where recovery of such taxes is not assured.
Income dividends and capital gain distributions from investment companies are recorded on the ex-dividend date. Capital gain distributions from investment companies are treated as realized gains.
Distributions to shareholders
Distributions to shareholders from net investment income and any net realized gains are recorded on the ex-dividend date and paid at least annually. Such distributions are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles. Dividend sources are estimated at the time of declaration. The tax character of distributions is determined as of the Fund’s fiscal year end. Therefore, a portion of the Fund’s distributions made prior to the Fund’s fiscal year end may be categorized as a tax return of capital at year end.
Federal and other taxes
The Fund intends to continue to qualify as a regulated investment company by distributing substantially all of its investment company taxable income and any net realized capital gains (after reduction for capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes was required.
The Fund’s income and federal excise tax returns and all financial records supporting those returns for the prior three fiscal years are subject to examination by the federal and Delaware revenue authorities. Management has analyzed the Fund’s tax positions taken on federal, state, and foreign tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability.
Wells Fargo Special Small Cap Value Fund | 27
Table of Contents
Notes to financial statements
As of March 31, 2020, the aggregate cost of all investments for federal income tax purposes was $3,246,499,924 and the unrealized gains (losses) consisted of:
| Gross unrealized gains |
$ | 191,923,012 | ||
| Gross unrealized losses |
(958,470,387 | ) | ||
| Net unrealized losses |
$ | (766,547,375 | ) | |
As of March 31, 2020, the Fund had current year net deferred post-October capital losses consisting of $18,930,438 in short-term losses which will be recognized on the first day of the following fiscal year.
Class allocations
The separate classes of shares offered by the Fund differ principally in applicable sales charges, distribution, shareholder servicing, and administration fees. Class specific expenses are charged directly to that share class. Investment income, common fund-level expenses, and realized and unrealized gains (losses) on investments are allocated daily to each class of shares based on the relative proportion of net assets of each class.
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
| ∎ | Level 1 – quoted prices in active markets for identical securities |
| ∎ | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) |
| ∎ | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The inputs or methodologies used for valuing investments in securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of March 31, 2020:
| Quoted prices (Level 1) |
Other significant observable inputs (Level 2) |
Significant (Level 3) |
Total | |||||||||||||
| Assets |
||||||||||||||||
| Investments in: |
||||||||||||||||
| Common stocks |
||||||||||||||||
| Communication services |
$ | 6,037,907 | $ | 0 | $ | 0 | $ | 6,037,907 | ||||||||
| Consumer discretionary |
151,394,893 | 0 | 0 | 151,394,893 | ||||||||||||
| Consumer staples |
323,613,034 | 0 | 0 | 323,613,034 | ||||||||||||
| Energy |
21,362,653 | 0 | 0 | 21,362,653 | ||||||||||||
| Financials |
522,898,683 | 76,365 | 0 | 522,975,048 | ||||||||||||
| Health care |
60,895,475 | 0 | 0 | 60,895,475 | ||||||||||||
| Industrials |
513,571,833 | 0 | 0 | 513,571,833 | ||||||||||||
| Information technology |
208,606,521 | 0 | 0 | 208,606,521 | ||||||||||||
| Materials |
395,227,498 | 0 | 0 | 395,227,498 | ||||||||||||
| Real estate |
56,140,405 | 0 | 0 | 56,140,405 | ||||||||||||
| Utilities |
129,796,780 | 0 | 0 | 129,796,780 | ||||||||||||
| Exchange-traded funds |
13,849,660 | 0 | 0 | 13,849,660 | ||||||||||||
| Preferred stocks |
||||||||||||||||
| Industrials |
3,049,059 | 0 | 0 | 3,049,059 | ||||||||||||
| Short-term investments |
||||||||||||||||
| Investment companies |
73,431,783 | 0 | 0 | 73,431,783 | ||||||||||||
| Total assets |
$ | 2,479,876,184 | $ | 76,365 | $ | 0 | $ | 2,479,952,549 | ||||||||
28 | Wells Fargo Special Small Cap Value Fund
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Notes to financial statements
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
For the year ended March 31, 2020, the Fund did not have any transfers into/out of Level 3.
4. TRANSACTIONS WITH AFFILIATES
Management fee
Funds Management, an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”), is the manager of the Fund and provides advisory and fund-level administrative services under an investment management agreement. Under the investment management agreement, Funds Management is responsible for, among other services, implementing the investment objectives and strategies of the Fund, supervising the subadviser and providing fund-level administrative services in connection with the Fund’s operations. As compensation for its services under the investment management agreement, Funds Management is entitled to receive a management fee at the following annual rate based on the Fund’s average daily net assets:
| Average daily net assets | Management fee | |||
| First $500 million |
0.850 | % | ||
| Next $500 million |
0.825 | |||
| Next $1 billion |
0.800 | |||
| Next $1 billion |
0.775 | |||
| Next $1 billion |
0.750 | |||
| Next $1 billion |
0.730 | |||
| Next $5 billion |
0.720 | |||
| Over $10 billion |
0.710 | |||
For the year ended March 31, 2020, the management fee was equivalent to an annual rate of 0.80% of the Fund’s average daily net assets.
Funds Management has retained the services of a subadviser to provide daily portfolio management to the Fund. The fee for subadvisory services is borne by Funds Management. Wells Capital Management Incorporated (“WellsCap”), an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo, is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.55% and declining to 0.40% as the average daily net assets of the Fund increase.
Administration fees
Under a class-level administration agreement, Funds Management provides class-level administrative services to the Fund, which includes paying fees and expenses for services provided by the transfer agent, sub-transfer agents, omnibus account servicers and record-keepers. As compensation for its services under the class-level administration agreement, Funds Management receives an annual fee which is calculated based on the average daily net assets of each class as follows:
| Class-level administration fee |
||||
| Class A, Class C, Class R |
0.21 | % | ||
| Class R6 |
0.03 | |||
| Administrator Class, Institutional Class |
0.13 | |||
Waivers and/or expense reimbursements
Funds Management has contractually waived and/or reimbursed management and administration fees to the extent necessary to maintain certain net operating expense ratios for the Fund. When each class of the Fund has exceeded its expense cap, Funds Management has waived fees and/or reimbursed expenses from fund-level expenses on a proportionate basis and then from class specific expenses. When only certain classes exceed their expense caps, waivers and/or reimbursements are applied against class specific expenses before fund-level expenses. Funds Management has committed through July 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 1.31% for Class A shares, 2.06% for Class C shares, 1.56% for Class R shares, 0.89% for Class R6 shares, 1.20% for Administrator Class shares, and 0.94% for Institutional Class shares. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees.
Wells Fargo Special Small Cap Value Fund | 29
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Notes to financial statements
Distribution fees
The Trust has adopted a distribution plan for Class C and Class R shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. Distribution fees are charged to Class C and Class R shares and paid to Wells Fargo Funds Distributor, LLC (“Funds Distributor”), the principal underwriter, at an annual rate of 0.75% of the average daily net assets of Class C shares and 0.25% of the average daily net assets of Class R shares.
In addition, Funds Distributor is entitled to receive the front-end sales charge from the purchase of Class A shares and a contingent deferred sales charge on the redemption of certain Class A shares. Funds Distributor is also entitled to receive the contingent deferred sales charges from redemptions of Class C shares. For the year ended March 31, 2020, Funds Distributor received $4,180 from the sale of Class A shares and $756 and $115 in contingent deferred sales charges from redemptions of Class A and Class C shares, respectively.
Shareholder servicing fees
The Trust has entered into contracts with one or more shareholder servicing agents, whereby Class A, Class C, Class R, and Administrator Class of the Fund are charged a fee at an annual rate of 0.25% of the average daily net assets of each respective class. A portion of these total shareholder servicing fees were paid to affiliates of Wells Fargo.
Interfund transactions
The Fund may purchase or sell portfolio investment securities to certain other Wells Fargo affiliates pursuant to Rule 17a-7 under the 1940 Act and under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which do not incur broker commissions, are effected at current market prices.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the year ended March 31, 2020 were $2,024,116,983 and $1,178,822,136, respectively.
6. SECURITIES LENDING TRANSACTIONS
The Fund lends its securities through an unaffiliated securities lending agent and receives collateral in the form of cash or securities with a value at least equal to the value of the securities on loan. The value of the loaned securities is determined at the close of each business day and any increases or decreases in the required collateral are exchanged between the Fund and the counterparty on the next business day. Cash collateral received is invested in the Securities Lending Fund which seeks to provide a positive return compared to the daily Fed Funds Open Rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments and is exempt from registration under Section 3(c)(7) of the 1940 Act. Securities Lending Fund is managed by Funds Management and is subadvised by WellsCap. Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser.
In the event of counterparty default or the failure of a borrower to return a loaned security, the Fund has the right to use the collateral to offset any losses incurred. As of March 31, 2020, the Fund had securities lending transactions with the following counterparties which are subject to offset:
| Counterparty | Value of securities on |
Collateral received1 |
Net amount | |||||||||
| Barclays Capital Inc. |
$ | 578,956 | $ | (578,956 | ) | $ | 0 | |||||
| Morgan Stanley & Co. LLC |
291,248 | (291,248 | ) | 0 | ||||||||
| SG Americas Securities LLC |
5,902,183 | (5,783,346 | ) | 118,837 | ||||||||
| 1 | Collateral received within this table is limited to the collateral for the net transaction with the counterparty. |
30 | Wells Fargo Special Small Cap Value Fund
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Notes to financial statements
7. DERIVATIVE TRANSACTIONS
During the year ended March 31, 2020, the Fund entered into futures contracts to gain market exposure and had an average notional amount of $8,493,268 in long futures contracts.
During the year ended March 31, 2020, the Fund entered into written options for hedging purposes and had an average of 168 written option contracts.
The fair value, realized gains or losses and change in unrealized gains or losses, if any, on derivative instruments are reflected in the corresponding financial statement captions.
8. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $280,000,000 revolving credit agreement whereby the Fund is permitted to use bank borrowings for temporary or emergency purposes, such as to fund shareholder redemption requests. Interest under the credit agreement is charged to the Fund based on a borrowing rate equal to the higher of the Federal Funds rate in effect on that day plus 1.25% or the overnight LIBOR rate in effect on that day plus 1.25%. In addition, an annual commitment fee equal to 0.25% of the unused balance is allocated to each participating fund.
For the year ended March 31, 2020, there were no borrowings by the Fund under the agreement.
9. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid during the years ended March 31, 2020 and March 31, 2019 were as follows:
| Year ended March 31 | ||||||||
| 2020 | 2019 | |||||||
| Ordinary income |
$ | 45,960,918 | $ | 30,852,484 | ||||
| Long-term capital gain |
23,896,113 | 140,389,108 | ||||||
As of March 31, 2020, the components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income |
Undistributed long-term gain |
Unrealized losses |
Post-October capital losses deferred | |||
| $2,628,384 | $1,246,023 | $(766,547,375) | $(18,930,438) | |||
10. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
11. NEW ACCOUNTING PRONOUNCEMENT
In August 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 updates the disclosure requirements for fair value measurements by modifying or removing certain disclosures and adding certain new disclosures. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Management has adopted the removal and modification of disclosures early, as permitted, and will adopt the additional new disclosures at the effective date.
Wells Fargo Special Small Cap Value Fund | 31
Table of Contents
Notes to financial statements
12. CORONAVIRUS (COVID-19) PANDEMIC
On March 11, 2020, the World Health Organization announced that it had made the assessment that coronavirus disease 2019 (“COVID-19”) is a pandemic. The impacts of COVID-19 are adversely affecting the entire global economy, individual companies and investment products, and the market in general. There is significant uncertainty around the extent and duration of business disruptions related to COVID-19 and the impacts may be short term or may last for an extended period of time. The risk of further spreading of COVID-19 has led to significant uncertainty and volatility in the financial markets. The value of the Fund and the securities in which the Fund invests have generally been adversely affected by impacts caused by COVID-19.
32 | Wells Fargo Special Small Cap Value Fund
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Report of independent registered public accounting firm
TO THE SHAREHOLDERS OF THE FUND AND BOARD OF TRUSTEES WELLS FARGO FUNDS TRUST:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Wells Fargo Special Small Cap Value Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of March 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years or periods in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of March 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of March 31, 2020, by correspondence with the custodian, transfer agent, and brokers, or by other appropriate auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have not been able to determine the specific year that we began serving as the auditor of one or more Wells Fargo Funds investment companies; however we are aware that we have served as the auditor of one or more Wells Fargo Funds investment companies since at least 1955.
Boston, Massachusetts
May 28, 2020
Wells Fargo Special Small Cap Value Fund | 33
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TAX INFORMATION
For corporate shareholders, pursuant to Section 854 of the Internal Revenue Code, 100% of ordinary income dividends qualify for the corporate dividends-received deduction for the fiscal year ended March 31, 2020.
Pursuant to Section 852 of the Internal Revenue Code, $23,896,113 was designated as a 20% rate gain distribution for the fiscal year ended March 31, 2020.
Pursuant to Section 854 of the Internal Revenue Code, $45,960,918 of income dividends paid during the fiscal year ended March 31, 2020 has been designated as qualified dividend income (QDI).
For the fiscal year ended March 31, 2020, $2,075,952 has been designated as interest-related dividends for nonresident alien shareholders pursuant to Section 871 of the Internal Revenue Code.
PROXY VOTING INFORMATION
A description of the policies and procedures used to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-222-8222, visiting our website at wfam.com, or visiting the SEC website at sec.gov. Information regarding how the proxies related to portfolio securities were voted during the most recent 12-month period ended June 30 is available on the website at wfam.com or by visiting the SEC website at sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. Shareholders may view the filed Form N-PORT by visiting the SEC website at sec.gov.
34 | Wells Fargo Special Small Cap Value Fund
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Other information (unaudited)
BOARD OF TRUSTEES AND OFFICERS
Each of the Trustees and Officers1 listed in the table below acts in identical capacities for each fund in the Wells Fargo family of funds, which consists of 147 mutual funds comprising the Wells Fargo Funds Trust, Wells Fargo Variable Trust, Wells Fargo Master Trust and four closed-end funds (collectively the “Fund Complex”). This table should be read in conjunction with the Prospectus and the Statement of Additional Information2. The mailing address of each Trustee and Officer is 525 Market Street, 12th Floor, San Francisco, CA 94105. Each Trustee and Officer serves an indefinite term, however, each Trustee serves such term until reaching the mandatory retirement age established by the Trustees.
Independent Trustees
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| William R. Ebsworth (Born 1957) |
Trustee, since 2015 | Retired. From 1984 to 2013, equities analyst, portfolio manager, research director and chief investment officer at Fidelity Management and Research Company in Boston, Tokyo, and Hong Kong, and retired in 2013 as Chief Investment Officer of Fidelity Strategic Advisers, Inc. where he led a team of investment professionals managing client assets. Prior thereto, Board member of Hong Kong Securities Clearing Co., Hong Kong Options Clearing Corp., the Thailand International Fund, Ltd., Fidelity Investments Life Insurance Company, and Empire Fidelity Investments Life Insurance Company. Audit Committee Chair and Investment Committee Chair of the Vincent Memorial Hospital Endowment (non-profit organization). Mr. Ebsworth is a CFA® charterholder. | N/A | |||
| Jane A. Freeman (Born 1953) |
Trustee, since 2015; Chair Liaison, since 2018 | Retired. From 2012 to 2014 and 1999 to 2008, Chief Financial Officer of Scientific Learning Corporation. From 2008 to 2012, Ms. Freeman provided consulting services related to strategic business projects. Prior to 1999, Portfolio Manager at Rockefeller & Co. and Scudder, Stevens & Clark. Board member of the Harding Loevner Funds from 1996 to 2014, serving as both Lead Independent Director and chair of the Audit Committee. Board member of the Russell Exchange Traded Funds Trust from 2011 to 2012 and the chair of the Audit Committee. Ms. Freeman is a Board Member of The Ruth Bancroft Garden (non-profit organization). She is also an inactive Chartered Financial Analyst. | N/A | |||
| Isaiah Harris, Jr. (Born 1952) |
Trustee, since 2009; Audit Committee Chairman, since 2019 | Retired. Chairman of the Board of CIGNA Corporation since 2009, and Director since 2005. From 2003 to 2011, Director of Deluxe Corporation. Prior thereto, President and CEO of BellSouth Advertising and Publishing Corp. from 2005 to 2007, President and CEO of BellSouth Enterprises from 2004 to 2005 and President of BellSouth Consumer Services from 2000 to 2003. Emeritus member of the Iowa State University Foundation Board of Governors. Emeritus Member of the Advisory Board of Iowa State University School of Business. Advisory Board Member, Palm Harbor Academy (private school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
| Judith M. Johnson (Born 1949) |
Trustee, since 2008; Audit Committee Chairman, from 2009 to 2018 | Retired. Prior thereto, Chief Executive Officer and Chief Investment Officer of Minneapolis Employees Retirement Fund from 1996 to 2008. Ms. Johnson is an attorney, certified public accountant and a certified managerial accountant. | N/A | |||
Wells Fargo Special Small Cap Value Fund | 35
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Other information (unaudited)
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| David F. Larcker (Born 1950) |
Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | N/A | |||
| Olivia S. Mitchell (Born 1953) |
Trustee, since 2006; Nominating and Governance Committee Chair, since 2018 | International Foundation of Employee Benefit Plans Professor, Wharton School of the University of Pennsylvania since 1993. Director of Wharton’s Pension Research Council and Boettner Center on Pensions & Retirement Research, and Research Associate at the National Bureau of Economic Research. Previously, Cornell University Professor from 1978 to 1993. | N/A | |||
| Timothy J. Penny (Born 1951) |
Trustee, since 1996; Chairman, since 2018 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | N/A | |||
| James G. Polisson (Born 1959) |
Trustee, since 2018 | Retired. Chief Marketing Officer, Source (ETF) UK Services, Ltd, from 2015 to 2017. From 2012 to 2015, Principal of The Polisson Group, LLC, a management consulting, corporate advisory and principal investing company. Chief Executive Officer and Managing Director at Russell Investments, Global Exchange Traded Funds from 2010 to 2012. Managing Director of Barclays Global Investors from 1998 to 2010 and Global Chief Marketing Officer for iShares and Barclays Global Investors from 2000 to 2010. Trustee of the San Francisco Mechanics’ Institute, a non-profit organization, from 2013 to 2015. Board member of the Russell Exchange Traded Fund Trust from 2011 to 2012. Director of Barclays Global Investors Holdings Deutschland GmbH from 2006 to 2009. Mr. Polisson is an attorney and has a retired status with the Massachusetts and District of Columbia Bar Associations. | N/A | |||
| Pamela Wheelock3 (Born 1959) |
Trustee, since January 2020; previously Trustee from January 2018 to July 2019 | Board member of the Destination Medical Center Economic Development Agency, Rochester, Minnesota since 2019. Acting Commissioner, Minnesota Department of Human Services, July 2019 through September 2019. Human Services Manager (part-time), Minnesota Department of Human Services, October 2019 through December 2019. Chief Operating Officer, Twin Cities Habitat for Humanity from 2017 to 2019. Vice President of University Services, University of Minnesota from 2012 to 2016. Prior thereto, on the Board of Directors, Governance Committee and Finance Committee for the Minnesota Philanthropy Partners (Saint Paul Foundation) from 2012 to 2018, Interim Chief Executive Officer of Blue Cross Blue Shield of Minnesota from 2011 to 2012, Chairman of the Board from 2009 to 2012 and Board Director from 2003 to 2015. Vice President, Leadership and Community Engagement, Bush Foundation, Saint Paul, Minnesota (a private foundation) from 2009 to 2011. Executive Vice President and Chief Financial Officer, Minnesota Sports and Entertainment from 2004 to 2009 and Senior Vice President from 2002 to 2004. Executive Vice President of the Minnesota Wild Foundation from 2004 to 2008. Commissioner of Finance, State of Minnesota, from 1999 to 2002. Currently Board Chair of the Minnesota Wild Foundation since 2010. | N/A | |||
| * | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
36 | Wells Fargo Special Small Cap Value Fund
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Other information (unaudited)
Officers
| Name and year of birth |
Position held and length of service |
Principal occupations during past five years or longer | ||
| Andrew Owen (Born 1960) |
President, since 2017 | Executive Vice President of Wells Fargo & Company and Head of Affiliated Managers, Wells Fargo Asset Management, since 2014. In addition, Mr. Owen is currently President, Chief Executive Officer and Director of Wells Fargo Funds Management, LLC since 2017. Prior thereto, Executive Vice President responsible for marketing, investments and product development for Wells Fargo Funds Management, LLC, from 2009 to 2014. | ||
| Nancy Wiser1 (Born 1967) |
Treasurer, since 2012 | Executive Vice President of Wells Fargo Funds Management, LLC since 2011. Chief Operating Officer and Chief Compliance Officer at LightBox Capital Management LLC, from 2008 to 2011. | ||
| Michelle Rhee (Born 1966) |
Chief Legal Officer, since 2019 | Secretary of Wells Fargo Funds Management, LLC, Chief Legal Counsel of Wells Fargo Asset Management and Assistant General Counsel of Wells Fargo Bank, N.A. since 2018. Associate General Counsel and Managing Director of Bank of America Corporation from 2004 to 2018. | ||
| Catherine Kennedy (Born 1969) |
Secretary, since 2019 | Vice President of Wells Fargo Funds Management, LLC and Senior Counsel of the Wells Fargo Legal Department since 2010. Vice President and Senior Counsel of Evergreen Investment Management Company, LLC from 1998 to 2010. | ||
| Michael H. Whitaker (Born 1967) |
Chief Compliance Officer, since 2016 | Chief Compliance Officer of Wells Fargo Asset Management since 2016. Senior Vice President and Chief Compliance Officer for Fidelity Investments from 2007 to 2016. | ||
| David Berardi (Born 1975) |
Assistant Treasurer, since 2009 | Vice President of Wells Fargo Funds Management, LLC since 2009. Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010. Manager of Fund Reporting and Control for Evergreen Investment Management Company, LLC from 2004 to 2010. | ||
| Jeremy DePalma1 (Born 1974) |
Assistant Treasurer, since 2009 | Senior Vice President of Wells Fargo Funds Management, LLC since 2009. Senior Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010 and head of the Fund Reporting and Control Team within Fund Administration from 2005 to 2010. | ||
| 1 | Nancy Wiser acts as Treasurer of 65 funds in the Fund Complex. Jeremy DePalma acts as Treasurer of 82 funds and Assistant Treasurer of 65 funds in the Fund Complex. |
| 2 | The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request, by calling 1-800-222-8222 or by visiting the website at wfam.com. |
| 3 | Pamela Wheelock was re-appointed to the Board effective January 1, 2020. |
Wells Fargo Special Small Cap Value Fund | 37
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Effective on or about May 1, 2020, if you purchase Fund shares through a Janney Montgomery Scott LLC (“Janney”) brokerage account, you will be eligible for the following load waivers (front-end sales charge waivers and contingent deferred sales charge (“CDSC”), or back-end sales charge, waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or SAI.
| Front-end sales charge* waivers on Class A shares available at Janney |
| Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family). |
| Shares purchased by employees and registered representatives of Janney or its affiliates and their family members as designated by Janney. |
| Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within ninety (90) days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e., right of reinstatement). |
| Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans. |
| Shares acquired through a right of reinstatement. |
| Class C shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund pursuant to Janney’s policies and procedures. |
| CDSC waivers on Class A and Class C shares available at Janney |
| Shares sold upon the death or disability of the shareholder. |
| Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
| Shares purchased in connection with a return of excess contributions from an IRA account. |
| Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulations. |
| Shares sold to pay Janney fees but only if the transaction is initiated by Janney. |
| Shares acquired through a right of reinstatement. |
| Shares exchanged into the same share class of a different fund. |
| Front-end sales charge* discounts available at Janney; breakpoints, rights of accumulation and/or letters of intent |
| Breakpoints as described in the Fund’s Prospectus. |
| Rights of accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Janney. Eligible fund family assets not held at Janney may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
| Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Janney Montgomery Scott may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
| * | Also referred to as an “initial sales charge.” |
38 | Wells Fargo Special Small Cap Value Fund
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Effective on or after May 1, 2020, clients of Edward Jones (also referred to as “shareholders”) purchasing Fund shares on the Edward Jones commission and fee-based platforms are eligible only for the following sales charge discounts (also referred to as “breakpoints”) and waivers, which can differ from breakpoints and waivers described elsewhere in this Prospectus or SAI or through another broker-dealer. In all instances, it is the shareholder’s responsibility to inform Edward Jones at the time of purchase of any relationship, holdings of Wells Fargo Funds or other facts qualifying the purchaser for breakpoints or waivers. Edward Jones can ask for documentation of such circumstance.
| Breakpoints available at Edward Jones |
| Rights of Accumulation (ROA) |
| The applicable sales charge on a purchase of Class A shares is determined by taking into account all share classes (except any money market funds and retirement plan share classes) of Wells Fargo Funds held by the shareholder or in an account grouped by Edward Jones with other accounts for the purpose of providing certain pricing considerations (“pricing groups”). This includes all share classes held on the Edward Jones platform and/or held on another platform. The inclusion of eligible fund family assets in the rights of accumulation calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. |
| ROA is determined by calculating the higher of cost or market value (current shares x NAV). |
| Letter of Intent (LOI) |
| Through a LOI, shareholders can receive the sales charge and breakpoint discounts for purchases shareholders intend to makeover a 13-month period from the date Edward Jones receives the LOI. The LOI is determined by calculating the higher of cost or market value of qualifying holdings at LOI initiation in combination with the value that the shareholder intends to buy over a 13-month period to calculate the front-end sales charge and any breakpoint discounts. Each purchase the shareholder makes during that 13-month period will receive the sales charge and breakpoint discount that applies to the total amount. The inclusion of eligible fund family assets in the LOI calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. Purchases made before the LOI is received by Edward Jones are not covered under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if LOI is not met. |
| Sales charges are waived for the following shareholders and in the following situations at Edward Jones: |
| ● Associates of Edward Jones and its affiliates and their family members who are in the same pricing group (as determined by Edward Jones under its policies and procedures) as the associate. This waiver will continue for the remainder of the associate’s life if the associate retires from Edward Jones in good-standing. |
| ● Shares purchased in an Edward Jones fee-based program. |
| ● Shares purchased through reinvestment of capital gains distributions and dividend reinvestment. |
| ● Shares purchased from the proceeds of redeemed shares of the same fund family so long as the following conditions are met: 1) the proceeds are from the sale of shares within 60 days of the purchase, and 2) the sale and purchase are made in the same share class and the same account or the purchase is made in an individual retirement account with proceeds from liquidations in anon-retirement account. |
| ● Shares exchanged into Class A shares from another share class so long as the exchange is into the same fund and was initiated at the discretion of Edward Jones. Edward Jones is responsible for any remaining CDSC due to the fund company, if applicable. Any future purchases are subject to the applicable sales charge as disclosed in the prospectus. |
| ● Exchanges from Class C shares to Class A shares of the same fund, generally, in the 84th month following the anniversary of the purchase date or earlier at the discretion of Edward Jones. |
| If the shareholder purchases shares that are subject to a CDSC and those shares are redeemed before the CDSC is
expired, the shareholder is responsible to pay the CDSC except in the following conditions available at Edward Jones: |
| ● The death or disability of the shareholder. |
| ● Systematic withdrawals with up to 10% per year of the account value. |
| ● Return of excess contributions from an Individual Retirement Account (IRA). |
| ● Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulation. |
| ● Shares sold to pay Edward Jones fees or costs in such cases where the transaction is initiated by Edward Jones. |
| ● Shares exchanged in an Edward Jones fee-based program. |
| ● Shares acquired through NAV reinstatement. |
Wells Fargo Special Small Cap Value Fund | 39
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Appendix II (unaudited)
| Other Important Information for accounts at Edward Jones: |
| Minimum Purchase Amounts ● $250 initial purchase minimum ● $50 subsequent purchase minimum |
|
Minimum Balances Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy: ● A fee-based account held on an Edward Jones platform ● A 529 account held on an Edward Jones platform ● An account with an active systematic investment plan or letter of intent (LOI) |
|
Changing Share Classes At any time it deems necessary, Edward Jones has the authority to exchange at NAV a shareholder’s holdings in a fund to Class A shares. |
40 | Wells Fargo Special Small Cap Value Fund
Table of Contents
For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 219967
Kansas City, MO 64121-9967
Website: wfam.com
Individual investors: 1-800-222-8222
Retail investment professionals: 1-888-877-9275
Institutional investment professionals: 1-866-765-0778
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. If this report is used for promotional purposes, distribution of the report must be accompanied or preceded by a current prospectus. Before investing, please consider the investment objectives, risks, charges, and expenses of the investment. For a current prospectus and, if available, a summary prospectus, containing this information, call 1-800-222-8222 or visit the Fund’s website at wfam.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is the trade name for certain investment advisory/management firms owned by Wells Fargo & Company. These firms include but are not limited to Wells Capital Management Incorporated and Wells Fargo Funds Management, LLC. Certain products managed by WFAM entities are distributed by Wells Fargo Funds Distributor, LLC (a broker-dealer and Member FINRA).
This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
Table of Contents
Wells Fargo
Fundamental Small Cap Growth Fund
(formerly, Wells Fargo Traditional Small Cap Growth Fund)
Beginning on January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, paper copies of the Wells Fargo Funds’ annual and semi-annual shareholder reports issued after this date will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-222-8222 or by enrolling at wellsfargo.com/advantagedelivery.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call 1-800-222-8222. Your election to receive reports in paper will apply to all Wells Fargo Funds held in your account with your financial intermediary or, if you are a direct investor, to all Wells Fargo Funds that you hold.
Table of Contents
The views expressed and any forward-looking statements are as of March 31, 2020, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Asset Management. Discussions of individual securities, or the markets generally, or any Wells Fargo Fund are not intended as individual recommendations. Future events or results may vary significantly from those expressed in any forward-looking statements. The views expressed are subject to change at any time in response to changing circumstances in the market. Wells Fargo Asset Management and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
Wells Fargo Fundamental Small Cap Growth Fund | 1
Table of Contents
Letter to shareholders (unaudited)
| 1 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value-weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index. |
| 2 | The Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. 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 as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. You cannot invest directly in an index. |
| 3 | The MSCI Emerging Markets (EM) Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure equity market performance of emerging markets. You cannot invest directly in an index. |
| 4 | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. You cannot invest directly in an index. |
| 5 | The Bloomberg Barclays Global Aggregate ex-USD Index is an unmanaged index that provides a broad-based measure of the global investment-grade fixed-income markets excluding the U.S. dollar-denominated debt market. You cannot invest directly in an index. |
| 6 | The Bloomberg Barclays Municipal Bond Index is an unmanaged index composed of long-term tax-exempt bonds with a minimum credit rating of Baa. You cannot invest directly in an index. |
| 7 | The ICE BofA U.S. High Yield Index is a market-capitalization-weighted index of domestic and Yankee high-yield bonds. The index tracks the performance of high-yield securities traded in the U.S. bond market. You cannot invest directly in an index. Copyright 2020. ICE Data Indices, LLC. All rights reserved. |
2 | Wells Fargo Fundamental Small Cap Growth Fund
Table of Contents
Letter to shareholders (unaudited)
Wells Fargo Fundamental Small Cap Growth Fund | 3
Table of Contents
Letter to shareholders (unaudited)
4 | Wells Fargo Fundamental Small Cap Growth Fund
Table of Contents
This page is intentionally left blank.
Table of Contents
Performance highlights (unaudited)
Investment objective
The Fund seeks long-term capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Michael T. Smith, CFA®‡
Christopher J. Warner, CFA®‡
Average annual total returns (%) as of March 31, 20201
| Including sales charge | Excluding sales charge | Expense ratios2 (%) | ||||||||||||||||||||||||||||||||
| Inception date | 1 year | 5 year | 10 year | 1 year | 5 year | 10 year | Gross | Net3 | ||||||||||||||||||||||||||
| Class A (EGWAX) | 6-5-1995 | -16.60 | 3.54 | 8.67 | -11.52 | 4.77 | 9.31 | 1.52 | 1.24 | |||||||||||||||||||||||||
| Class C (EGWCX)4 | 7-30-2010 | -13.30 | 3.98 | 8.50 | -12.30 | 3.98 | 8.50 | 2.27 | 1.99 | |||||||||||||||||||||||||
| Administrator Class (EGWDX)5 | 7-30-2010 | – | – | – | -11.52 | 4.92 | 9.47 | 1.44 | 1.16 | |||||||||||||||||||||||||
| Institutional Class (EGRYX) | 11-19-1997 | – | – | – | -11.29 | 5.11 | 9.68 | 1.19 | 0.91 | |||||||||||||||||||||||||
| Russell 2000® Growth Index6 | – | – | – | – | -18.58 | 1.70 | 8.89 | – | – | |||||||||||||||||||||||||
Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes that a shareholder may pay on an investment in a fund. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance shown without sales charges would be lower if sales charges were reflected. Current performance may be lower or higher than the performance data quoted, which assumes the reinvestment of dividends and capital gains. Current month-end performance is available on the Fund’s website, wfam.com.
Index returns do not include transaction costs associated with buying and selling securities, any mutual fund fees or expenses, or any taxes. It is not possible to invest directly in an index.
For Class A shares, the maximum front-end sales charge is 5.75%. For Class C shares, the maximum contingent deferred sales charge is 1.00%. Performance including a contingent deferred sales charge assumes the sales charge for the corresponding time period. Administrator Class and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Smaller-company stocks tend to be more volatile and less liquid than those of larger companies. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Fundamental Small Cap Growth Fund
Table of Contents
Performance highlights (unaudited)
| Growth of $10,000 investment as of March 31, 20207 |
|
|
| ‡ | CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute. |
| 1 | Historical performance prior to July 19, 2010, is based on the performance of the Fund’s predecessor, Evergreen Growth Fund. |
| 2 | Reflects the expense ratios as stated in the most recent prospectuses, which include the impact of 0.01% in acquired fund fees and expenses. The expense ratios shown are subject to change and may differ from the annualized expense ratios shown in the financial highlights of this report, which do not include acquired fund fees and expenses. |
| 3 | The manager has contractually committed through July 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 1.23% for Class A, 1.98% for Class C, 1.15% for Administrator Class, and 0.90% for Institutional Class. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses (if any), and extraordinary expenses are excluded from the expense cap. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Without this cap, the Fund’s returns would have been lower. The expense ratio paid by an investor is the net expense ratio (the total annual fund operating expenses after fee waivers) as stated in the prospectuses. |
| 4 | Historical performance shown for the Class C shares prior to their inception reflects the performance of the Class A shares and has been adjusted to reflect the higher expenses applicable to the Class C shares. |
| 5 | Historical performance shown for the Administrator Class shares prior to their inception reflects the performance of the Institutional Class shares and has been adjusted to reflect the higher expenses applicable to the Administrator Class shares. |
| 6 | The Russell 2000® Growth Index measures the performance of those Russell 2000 companies with higher price/book ratios and higher forecasted growth values. You cannot invest directly in an index. |
| 7 | The chart compares the performance of Class A shares for the most recent ten years with the Russell 2000® Growth Index. The chart assumes a hypothetical investment of $10,000 in Class A shares and reflects all operating expenses and assumes the maximum initial sales charge of 5.75%. |
| 8 | The ten largest holdings, excluding cash, cash equivalents and any money market funds, are calculated based on the value of the investments divided by total net assets of the Fund. Holdings are subject to change and may have changed since the date specified. |
| 9 | Amounts are calculated based on the total long-term investments of the Fund. These amounts are subject to change and may have changed since the date specified. |
| * | This security was no longer held at the end of the reporting period. |
Wells Fargo Fundamental Small Cap Growth Fund | 7
Table of Contents
Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
| ∎ | The Fund outperformed its benchmark, the Russell 2000® Growth Index, for the 12-month period that ended March 31, 2020. |
| ∎ | Security selection within the industrials and information technology (IT) sectors contributed to the Fund’s performance. |
| ∎ | Select holdings within the communication services and materials sectors weighed on performance. |
The coronavirus quickly ended the market’s ascent.
For much of the past year, U.S. stocks marched higher, with some benchmarks reaching all-time highs in early 2020. However, the arrival of the coronavirus pandemic and early signs of a U.S. recession came at unimaginable speed. In order to contain the spread of the virus, millions of nonessential businesses were quickly ordered to close, which led to an explosion of joblessness. The previous peak for initial jobless claims came in 1982 at 695,000. For the week ending March 28, 6.6 million people filed for unemployment insurance. The government quickly responded with the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act. On the monetary side, the U.S. Federal Reserve (Fed) backstopped vast swaths of capital markets. These actions stabilized markets and furthermore, the CARES Act and various measures by the Fed gave an important signal to investors: the federal government stood ready to act swiftly and with enormous firepower to combat the recession.
Within the IT sector, Globant S.A. is an IT outsourcing company that develops emerging technologies and software solutions for large corporations. Globant satisfies an acute shortage of software developer talent with a deep pool of highly skilled labor. Globant’s focus on expanding market share within its top clients drove strong sales growth and profitability, which propelled the shares higher.
Please see footnotes on page 7.
8 | Wells Fargo Fundamental Small Cap Growth Fund
Table of Contents
Performance highlights (unaudited)
Within the materials sector, shares of Ingevity Corporation underperformed. Ingevity is a manufacturer of specialty chemicals and performance materials. Its performance chemicals segment sells into a wide range of global industrial end markets. Those end markets experienced cyclical weakness as the economy weakened, which hurt demand for its performance chemicals. Financial results missed expectations, causing shares to underperform during the period.
The coronavirus has changed the market landscape, but our process remains the same.
We have high confidence in our existing portfolio holdings. Although we did not predict the volatility storm that arrived, we were well positioned for it. Throughout recent years, we have emphasized “core” growth businesses with an ability to grow in diverse economic environments. We had been mindful of crowded areas where risk/rewards were unattractive and avoided highly cyclical industries. By focusing on companies on the “right side of change,” we believe many of our holdings have inherent advantages that will be attractive as markets adjust to a post-coronavirus environment. Digitally enabled businesses with disruptive technologies...companies with financial strength and free cash flow...adaptive management teams that focus on being indispensable to their customers...these are traits we always look for.
We believe the coronavirus crisis will accelerate changes that were already underway. Many of the disruptive growth themes represented in our portfolio will likely see expanding opportunities. Industries such as streaming media, e-commerce, video games, and cloud software are already experiencing rising demand. Therefore, major changes in portfolio positioning are not required. Rather, we believe a sharp focus on bottom-up research edge will generate strong future performance.
Wells Fargo Fundamental Small Cap Growth Fund | 9
Table of Contents
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and contingent deferred sales charges (if any) on redemptions and (2) ongoing costs, including management fees, distribution (12b-1) and/or shareholder servicing fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period from October 1, 2019 to March 31, 2020.
Actual expenses
The “Actual” line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Actual” line under the heading entitled “Expenses paid during period” for your applicable class of shares to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The “Hypothetical” line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and contingent deferred sales charges. Therefore, the “Hypothetical” line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning account value 10-1-2019 |
Ending account value 3-31-2020 |
Expenses paid during the period¹ |
Annualized net expense ratio |
|||||||||||||
| Class A |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 874.29 | $ | 5.76 | 1.23 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,018.85 | $ | 6.21 | 1.23 | % | ||||||||
| Class C |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 870.26 | $ | 9.26 | 1.98 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,015.10 | $ | 9.97 | 1.98 | % | ||||||||
| Administrator Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 874.56 | $ | 5.39 | 1.15 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,019.25 | $ | 5.81 | 1.15 | % | ||||||||
| Institutional Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 875.05 | $ | 4.22 | 0.90 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,020.50 | $ | 4.55 | 0.90 | % | ||||||||
| 1 | Expenses paid is equal to the annualized net expense ratio of each class multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year (to reflect the one-half-year period). |
10 | Wells Fargo Fundamental Small Cap Growth Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Common Stocks: 97.72% | ||||||||||||||||
| Communication Services: 1.51% |
||||||||||||||||
| Entertainment: 1.51% | ||||||||||||||||
| CD Projekt SA |
15,636 | $ | 1,129,543 | |||||||||||||
|
|
|
|||||||||||||||
| Consumer Discretionary: 5.72% |
| |||||||||||||||
| Auto Components: 1.02% | ||||||||||||||||
| Stoneridge Incorporated † |
45,537 | 762,745 | ||||||||||||||
|
|
|
|||||||||||||||
| Diversified Consumer Services: 1.37% | ||||||||||||||||
| Chegg Incorporated † |
28,813 | 1,030,929 | ||||||||||||||
|
|
|
|||||||||||||||
| Household Durables: 0.47% | ||||||||||||||||
| Purple Innovation Incorporated † |
61,438 | 348,968 | ||||||||||||||
|
|
|
|||||||||||||||
| Internet & Direct Marketing Retail: 0.88% | ||||||||||||||||
| Etsy Incorporated † |
17,229 | 662,283 | ||||||||||||||
|
|
|
|||||||||||||||
| Leisure Products: 0.99% | ||||||||||||||||
| Games Workshop Group plc |
13,948 | 740,940 | ||||||||||||||
|
|
|
|||||||||||||||
| Specialty Retail: 0.99% | ||||||||||||||||
| Five Below Incorporated † |
10,590 | 745,324 | ||||||||||||||
|
|
|
|||||||||||||||
| Energy: 0.69% |
||||||||||||||||
| Oil, Gas & Consumable Fuels: 0.69% | ||||||||||||||||
| Texas Pacific Land Trust « |
1,356 | 515,294 | ||||||||||||||
|
|
|
|||||||||||||||
| Financials: 1.84% |
||||||||||||||||
| Consumer Finance: 0.50% | ||||||||||||||||
| SLM Corporation |
52,501 | 377,482 | ||||||||||||||
|
|
|
|||||||||||||||
| Insurance: 1.34% | ||||||||||||||||
| Goosehead Insurance Incorporated Class A |
22,420 | 1,000,605 | ||||||||||||||
|
|
|
|||||||||||||||
| Health Care: 28.45% |
||||||||||||||||
| Biotechnology: 11.07% | ||||||||||||||||
| Black Diamond Therapeutics † |
10,305 | 257,110 | ||||||||||||||
| CareDx Incorporated † |
26,044 | 568,541 | ||||||||||||||
| Chemocentryx Incorporated † |
10,844 | 435,712 | ||||||||||||||
| Coherus Biosciences Incorporated † |
41,321 | 670,227 | ||||||||||||||
| CRISPR Therapeutics AG † |
8,132 | 344,878 | ||||||||||||||
| Deciphera Pharmaceuticals Incorporated † |
10,837 | 446,159 | ||||||||||||||
| Halozyme Therapeutics Incorporated † |
39,937 | 718,467 | ||||||||||||||
| Immunomedics Incorporated † |
43,750 | 589,750 | ||||||||||||||
| Natera Incorporated † |
29,462 | 879,735 | ||||||||||||||
| Turning Point Therapeutics Incorporated † |
12,012 | 536,456 | ||||||||||||||
| Twist Bioscience Corporation † |
20,967 | 641,171 | ||||||||||||||
| Veracyte Incorporated † |
42,370 | 1,030,015 | ||||||||||||||
| Zai Lab Limited ADR † |
14,033 | 722,419 | ||||||||||||||
| Zymeworks Incorporated † |
12,863 | 456,251 | ||||||||||||||
| 8,296,891 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care Equipment & Supplies: 10.08% | ||||||||||||||||
| Axonics Modulation Technologies Incorporated †« |
23,369 | 593,806 | ||||||||||||||
| BioLife Solutions Incorporated †« |
35,299 | 335,341 | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Fundamental Small Cap Growth Fund | 11
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Health Care Equipment & Supplies (continued) | ||||||||||||||||
| Haemonetics Corporation † |
15,516 | $ | 1,546,325 | |||||||||||||
| ICU Medical Incorporated † |
5,852 | 1,180,758 | ||||||||||||||
| iRhythm Technologies Incorporated † |
16,809 | 1,367,412 | ||||||||||||||
| Novocure Limited † |
5,189 | 349,427 | ||||||||||||||
| Orthopediatrics Corporation † |
26,474 | 1,049,429 | ||||||||||||||
| Shockwave Medical Incorporated † |
22,343 | 741,341 | ||||||||||||||
| Silk Road Medical Incorporated † |
12,372 | 389,471 | ||||||||||||||
| 7,553,310 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care Providers & Services: 4.40% | ||||||||||||||||
| Amedisys Incorporated † |
8,779 | 1,611,298 | ||||||||||||||
| HealthEquity Incorporated † |
24,094 | 1,218,915 | ||||||||||||||
| Progyny Incorporated †« |
22,184 | 470,079 | ||||||||||||||
| 3,300,292 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care Technology: 2.90% | ||||||||||||||||
| Inspire Medical Systems Incorporated † |
13,459 | 811,309 | ||||||||||||||
| Phreesia Incorporated † |
27,935 | 587,473 | ||||||||||||||
| Simulations Plus Incorporated « |
22,095 | 771,557 | ||||||||||||||
| 2,170,339 | ||||||||||||||||
|
|
|
|||||||||||||||
| Industrials: 24.02% |
||||||||||||||||
| Aerospace & Defense: 4.42% | ||||||||||||||||
| Axon Enterprise Incorporated † |
17,080 | 1,208,752 | ||||||||||||||
| Kratos Defense & Security Solutions Incorporated † |
40,831 | 565,101 | ||||||||||||||
| Mercury Computer Systems Incorporated † |
21,531 | 1,536,022 | ||||||||||||||
| 3,309,875 | ||||||||||||||||
|
|
|
|||||||||||||||
| Building Products: 3.23% | ||||||||||||||||
| Advanced Drainage Systems Incorporated |
39,426 | 1,160,701 | ||||||||||||||
| Trex Company Incorporated † |
15,701 | 1,258,278 | ||||||||||||||
| 2,418,979 | ||||||||||||||||
|
|
|
|||||||||||||||
| Commercial Services & Supplies: 7.36% | ||||||||||||||||
| Casella Waste Systems Incorporated Class A † |
51,413 | 2,008,192 | ||||||||||||||
| IAA Incorporated † |
25,954 | 777,582 | ||||||||||||||
| MSA Safety Incorporated |
12,451 | 1,260,041 | ||||||||||||||
| Tetra Tech Incorporated |
20,779 | 1,467,413 | ||||||||||||||
| 5,513,228 | ||||||||||||||||
|
|
|
|||||||||||||||
| Construction & Engineering: 2.79% | ||||||||||||||||
| Construction Partners Incorporated Class A † |
75,574 | 1,276,445 | ||||||||||||||
| WillScot Corporation † |
80,301 | 813,449 | ||||||||||||||
| 2,089,894 | ||||||||||||||||
|
|
|
|||||||||||||||
| Electrical Equipment: 0.61% | ||||||||||||||||
| Allied Motion Technologies Incorporated |
19,478 | 461,629 | ||||||||||||||
|
|
|
|||||||||||||||
| Professional Services: 2.73% | ||||||||||||||||
| Clarivate Analytics plc † |
72,439 | 1,503,109 | ||||||||||||||
| ICF International Incorporated |
7,962 | 546,989 | ||||||||||||||
| 2,050,098 | ||||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Fundamental Small Cap Growth Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Road & Rail: 0.90% | ||||||||||||||||
| Saia Incorporated † |
9,165 | $ | 673,994 | |||||||||||||
|
|
|
|||||||||||||||
| Trading Companies & Distributors: 1.98% | ||||||||||||||||
| SiteOne Landscape Supply Incorporated † |
20,130 | 1,481,971 | ||||||||||||||
|
|
|
|||||||||||||||
| Information Technology: 29.78% |
||||||||||||||||
| Electronic Equipment, Instruments & Components: 3.56% | ||||||||||||||||
| Littelfuse Incorporated |
5,515 | 735,811 | ||||||||||||||
| Novanta Incorporated † |
18,182 | 1,452,378 | ||||||||||||||
| Par Technology Corporation †« |
37,285 | 479,485 | ||||||||||||||
| 2,667,674 | ||||||||||||||||
|
|
|
|||||||||||||||
| IT Services: 7.57% | ||||||||||||||||
| EPAM Systems Incorporated † |
6,169 | 1,145,337 | ||||||||||||||
| Euronet Worldwide Incorporated † |
9,173 | 786,310 | ||||||||||||||
| Keywords Studios plc |
62,628 | 1,108,618 | ||||||||||||||
| MongoDB Incorporated † |
5,965 | 814,461 | ||||||||||||||
| WEX Incorporated † |
6,919 | 723,381 | ||||||||||||||
| WNS Holdings Limited ADR † |
25,482 | 1,095,216 | ||||||||||||||
| 5,673,323 | ||||||||||||||||
|
|
|
|||||||||||||||
| Semiconductors & Semiconductor Equipment: 3.52% | ||||||||||||||||
| Lattice Semiconductor Corporation † |
62,682 | 1,116,993 | ||||||||||||||
| MKS Instruments Incorporated |
12,036 | 980,332 | ||||||||||||||
| Universal Display Corporation |
4,115 | 542,275 | ||||||||||||||
| 2,639,600 | ||||||||||||||||
|
|
|
|||||||||||||||
| Software: 13.98% | ||||||||||||||||
| Avalara Incorporated † |
16,217 | 1,209,785 | ||||||||||||||
| Blue Prism Group plc † |
37,835 | 525,234 | ||||||||||||||
| Elastic NV † |
14,078 | 785,693 | ||||||||||||||
| Envestnet Incorporated † |
25,499 | 1,371,336 | ||||||||||||||
| Everbridge Incorporated † |
11,282 | 1,199,954 | ||||||||||||||
| Five9 Incorporated † |
22,529 | 1,722,567 | ||||||||||||||
| Globant SA † |
12,613 | 1,108,430 | ||||||||||||||
| LivePerson Incorporated † |
30,420 | 692,055 | ||||||||||||||
| Model N Incorporated † |
49,414 | 1,097,485 | ||||||||||||||
| Workiva Incorporated † |
23,541 | 761,081 | ||||||||||||||
| 10,473,620 | ||||||||||||||||
|
|
|
|||||||||||||||
| Technology Hardware, Storage & Peripherals: 1.15% | ||||||||||||||||
| NCR Corporation † |
48,722 | 862,379 | ||||||||||||||
|
|
|
|||||||||||||||
| Materials: 1.65% |
||||||||||||||||
| Chemicals: 0.72% | ||||||||||||||||
| Ingevity Corporation † |
15,399 | 542,045 | ||||||||||||||
|
|
|
|||||||||||||||
| Metals & Mining: 0.93% | ||||||||||||||||
| Sandstorm Gold Limited † |
138,397 | 693,369 | ||||||||||||||
|
|
|
|||||||||||||||
| Real Estate: 4.06% |
||||||||||||||||
| Equity REITs: 4.06% | ||||||||||||||||
| Innovative Industrial Properties Incorporated « |
9,664 | 733,788 | ||||||||||||||
| QTS Realty Trust Incorporated Class A |
29,871 | 1,732,817 | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Fundamental Small Cap Growth Fund | 13
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Equity REITs (continued) | ||||||||||||||||
| Rexford Industrial Realty Incorporated |
|
14,121 | $ | 579,102 | ||||||||||||
| 3,045,707 | ||||||||||||||||
|
|
|
|||||||||||||||
| Total Common Stocks (Cost $70,925,133) |
|
73,232,330 | ||||||||||||||
|
|
|
|||||||||||||||
| Yield | ||||||||||||||||
| Short-Term Investments: 7.17% | ||||||||||||||||
| Investment Companies: 7.17% | ||||||||||||||||
| Securities Lending Cash Investments LLC (l)(r)(u) |
2.11 | % | 3,269,679 | 3,270,006 | ||||||||||||
| Wells Fargo Government Money Market Fund Select Class (l)(u) |
0.35 | 2,099,810 | 2,099,810 | |||||||||||||
| Total Short-Term Investments (Cost $5,369,816) |
5,369,816 | |||||||||||||||
|
|
|
|||||||||||||||
| Total investments in securities (Cost $76,294,949) | 104.89 | % | 78,602,146 | |||||
| Other assets and liabilities, net |
(4.89 | ) | (3,661,807 | ) | ||||
|
|
|
|
|
|||||
| Total net assets | 100.00 | % | $ | 74,940,339 | ||||
|
|
|
|
|
|||||
| † | Non-income-earning security |
| « | All or a portion of this security is on loan. |
| (l) | The issuer of the security is an affiliated person of the Fund as defined in the Investment Company Act of 1940. |
| (r) | The investment is a non-registered investment company purchased with cash collateral received from securities on loan. |
| (u) | The rate represents the 7-day annualized yield at period end. |
Abbreviations:
| ADR | American depositary receipt |
| REIT | Real estate investment trust |
Investments in Affiliates
An affiliated investment is an investment in which the Fund owns at least 5% of the outstanding voting shares of the issuer or as a result of other relationships, such as the Fund and the issuer having the same investment manager. Transactions with issuers that were either affiliated persons of the Fund at the beginning of the period or the end of the period were as follows:
| Shares, beginning of period |
Shares purchased |
Shares sold |
Shares, end of period |
Net realized gains (losses) |
Net unrealized gains (losses) |
Income from affiliated securities |
Value, end of |
% of net assets |
||||||||||||||||||||||||||||
| Short-Term Investments | ||||||||||||||||||||||||||||||||||||
| Investment Companies |
||||||||||||||||||||||||||||||||||||
| Securities Lending Cash Investments LLC |
6,840,260 | 63,082,822 | (66,653,403 | ) | 3,269,679 | $ | 147 | $ | 0 | $ | 166,152 | # | $ | 3,270,006 | ||||||||||||||||||||||
| Wells Fargo Government Money Market Fund Select Class |
2,404,400 | 35,734,452 | (36,039,042 | ) | 2,099,810 | 0 | 0 | 53,920 | 2,099,810 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $ | 147 | $ | 0 | $ | 220,072 | $ | 5,369,816 | 7.17 | % | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| # | Amount shown represents income before fees and rebates. |
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Fundamental Small Cap Growth Fund
Table of Contents
Statement of assets and liabilities—March 31, 2020
| Assets |
||||
| Investments in unaffiliated securities (including $3,140,816 of securities loaned), at value (cost $70,925,133) |
$ | 73,232,330 | ||
| Investments in affiliated securities, at value (cost $5,369,816) |
5,369,816 | |||
| Foreign currency, at value (cost $319) |
317 | |||
| Receivable for investments sold |
1,216,542 | |||
| Receivable for Fund shares sold |
21,608 | |||
| Receivable for dividends |
26,835 | |||
| Receivable for securities lending income, net |
5,784 | |||
| Prepaid expenses and other assets |
26,300 | |||
|
|
|
|||
| Total assets |
79,899,532 | |||
|
|
|
|||
| Liabilities |
||||
| Payable upon receipt of securities loaned |
3,268,182 | |||
| Payable for investments purchased |
1,562,573 | |||
| Payable for Fund shares redeemed |
11,771 | |||
| Management fee payable |
34,769 | |||
| Administration fees payable |
13,462 | |||
| Distribution fee payable |
287 | |||
| Trustees’ fees and expenses payable |
3,861 | |||
| Accrued expenses and other liabilities |
64,288 | |||
|
|
|
|||
| Total liabilities |
4,959,193 | |||
|
|
|
|||
| Total net assets |
$ | 74,940,339 | ||
|
|
|
|||
| Net assets consist of |
||||
| Paid-in capital |
$ | 72,269,254 | ||
| Total distributable earnings |
2,671,085 | |||
|
|
|
|||
| Total net assets |
$ | 74,940,339 | ||
|
|
|
|||
| Computation of net asset value and offering price per share |
||||
| Net assets – Class A |
$ | 66,472,077 | ||
| Shares outstanding – Class A1 |
6,045,426 | |||
| Net asset value per share – Class A |
$11.00 | |||
| Maximum offering price per share – Class A2 |
$11.67 | |||
| Net assets – Class C |
$ | 395,016 | ||
| Shares outstanding – Class C1 |
42,057 | |||
| Net asset value per share – Class C |
$9.39 | |||
| Net assets – Administrator Class |
$ | 93,219 | ||
| Shares outstanding – Administrator Class1 |
7,222 | |||
| Net asset value per share – Administrator Class |
$12.91 | |||
| Net assets – Institutional Class |
$ | 7,980,027 | ||
| Shares outstanding – Institutional Class1 |
595,763 | |||
| Net asset value per share – Institutional Class |
$13.39 | |||
| 1 | The Fund has an unlimited number of authorized shares. |
| 2 | Maximum offering price is computed as 100/94.25 of net asset value. On investments of $50,000 or more, the offering price is reduced. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Fundamental Small Cap Growth Fund | 15
Table of Contents
Statement of operations—year ended March 31, 2020
| Investment income |
||||
| Dividends (net of foreign withholding taxes of $984) |
$ | 291,668 | ||
| Securities lending income from affiliates, net |
123,975 | |||
| Income from affiliated securities |
53,920 | |||
|
|
|
|||
| Total investment income |
469,563 | |||
|
|
|
|||
| Expenses |
||||
| Management fee |
813,466 | |||
| Administration fees |
||||
| Class A |
179,063 | |||
| Class C |
968 | |||
| Administrator Class |
149 | |||
| Institutional Class |
12,816 | |||
| Shareholder servicing fees |
||||
| Class A |
213,171 | |||
| Class C |
1,152 | |||
| Administrator Class |
287 | |||
| Distribution fee |
||||
| Class C |
3,418 | |||
| Custody and accounting fees |
14,837 | |||
| Professional fees |
45,977 | |||
| Registration fees |
67,136 | |||
| Shareholder report expenses |
40,818 | |||
| Trustees’ fees and expenses |
20,771 | |||
| Other fees and expenses |
11,533 | |||
|
|
|
|||
| Total expenses |
1,425,562 | |||
| Less: Fee waivers and/or expense reimbursements |
||||
| Fund-level |
(271,048 | ) | ||
| Class A |
(6,870 | ) | ||
| Administrator Class |
(9 | ) | ||
| Institutional Class |
(736 | ) | ||
|
|
|
|||
| Net expenses |
1,146,899 | |||
|
|
|
|||
| Net investment loss |
(677,336 | ) | ||
|
|
|
|||
| Realized and unrealized gains (losses) on investments |
||||
| Net realized gains on |
| |||
| Unaffiliated securities |
4,662,154 | |||
| Affiliated securities |
147 | |||
|
|
|
|||
| Net realized gains on investments |
4,662,301 | |||
| Net change in unrealized gains (losses) on investments |
(13,268,383 | ) | ||
|
|
|
|||
| Net realized and unrealized gains (losses) on investments |
(8,606,082 | ) | ||
|
|
|
|||
| Net decrease in net assets resulting from operations |
$ | (9,283,418 | ) | |
|
|
|
|||
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Fundamental Small Cap Growth Fund
Table of Contents
Statement of changes in net assets
| Year ended March 31, 2020 |
Year ended March 31, 2019 |
|||||||||||||||
| Operations |
|
|||||||||||||||
| Net investment loss |
$ | (677,336 | ) | $ | (686,522 | ) | ||||||||||
| Net realized gains on investments |
4,662,301 | 22,170,499 | ||||||||||||||
| Net change in unrealized gains (losses) on investments |
(13,268,383 | ) | (6,083,970 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
(9,283,418 | ) | 15,400,007 | |||||||||||||
|
|
|
|||||||||||||||
| Distributions to shareholders from net investment income and net realized gains |
||||||||||||||||
| Class A |
(5,407,235 | ) | (20,884,975 | ) | ||||||||||||
| Class C |
(40,489 | ) | (93,417 | ) | ||||||||||||
| Administrator Class |
(5,538 | ) | (53,408 | ) | ||||||||||||
| Institutional Class |
(511,148 | ) | (2,160,122 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Total distributions to shareholders |
(5,964,410 | ) | (23,191,922 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Capital share transactions |
Shares | Shares | ||||||||||||||
| Proceeds from shares sold |
||||||||||||||||
| Class A |
172,227 | 2,351,366 | 264,201 | 3,988,191 | ||||||||||||
| Class C |
29,980 | 352,632 | 11,256 | 157,108 | ||||||||||||
| Administrator Class |
3,192 | 48,485 | 8,969 | 158,898 | ||||||||||||
| Institutional Class |
182,070 | 3,063,503 | 202,779 | 3,570,799 | ||||||||||||
|
|
|
|||||||||||||||
| 5,815,986 | 7,874,996 | |||||||||||||||
|
|
|
|||||||||||||||
| Reinvestment of distributions |
| |||||||||||||||
| Class A |
395,603 | 5,293,176 | 1,770,518 | 20,467,178 | ||||||||||||
| Class C |
3,263 | 37,357 | 8,060 | 81,241 | ||||||||||||
| Administrator Class |
236 | 3,704 | 3,408 | 45,808 | ||||||||||||
| Institutional Class |
26,458 | 430,729 | 129,330 | 1,792,511 | ||||||||||||
|
|
|
|||||||||||||||
| 5,764,966 | 22,386,738 | |||||||||||||||
|
|
|
|||||||||||||||
| Payment for shares redeemed |
| |||||||||||||||
| Class A |
(998,017 | ) | (13,561,347 | ) | (1,090,350 | ) | (16,060,877 | ) | ||||||||
| Class C |
(21,365 | ) | (235,126 | ) | (8,765 | ) | (106,912 | ) | ||||||||
| Administrator Class |
(2,944 | ) | (46,329 | ) | (13,374 | ) | (189,489 | ) | ||||||||
| Institutional Class |
(220,852 | ) | (3,703,000 | ) | (230,424 | ) | (3,981,806 | ) | ||||||||
|
|
|
|||||||||||||||
| (17,545,802 | ) | (20,339,084 | ) | |||||||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets resulting from capital share transactions |
(5,964,850 | ) | 9,922,650 | |||||||||||||
|
|
|
|||||||||||||||
| Total increase (decrease) in net assets |
(21,212,678 | ) | 2,130,735 | |||||||||||||
|
|
|
|||||||||||||||
| Net assets |
||||||||||||||||
| Beginning of period |
96,153,017 | 94,022,282 | ||||||||||||||
|
|
|
|||||||||||||||
| End of period |
$ | 74,940,339 | $ | 96,153,017 | ||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Fundamental Small Cap Growth Fund | 17
Table of Contents
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$13.28 | $15.32 | $14.08 | $12.05 | $18.04 | |||||||||||||||
| Net investment loss |
(0.10 | )1 | (0.11 | )1 | (0.12 | )1 | (0.10 | )1 | (0.12 | )1 | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(1.27 | ) | 2.17 | 2.35 | 2.51 | (2.13 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(1.37 | ) | 2.06 | 2.23 | 2.41 | (2.25 | ) | |||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net realized gains |
(0.91 | ) | (4.10 | ) | (0.99 | ) | (0.38 | ) | (3.74 | ) | ||||||||||
| Net asset value, end of period |
$11.00 | $13.28 | $15.32 | $14.08 | $12.05 | |||||||||||||||
| Total return2 |
(11.52 | )% | 17.46 | % | 16.08 | % | 20.10 | % | (12.86 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.52 | % | 1.51 | % | 1.52 | % | 1.51 | % | 1.50 | % | ||||||||||
| Net expenses |
1.23 | % | 1.23 | % | 1.33 | % | 1.33 | % | 1.33 | % | ||||||||||
| Net investment loss |
(0.74 | )% | (0.74 | )% | (0.79 | )% | (0.77 | )% | (0.74 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
63 | % | 155 | % | 44 | % | 113 | % | 123 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$66,472 | $86,006 | $84,738 | $82,734 | $84,139 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Fundamental Small Cap Growth Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$11.55 | $13.94 | $12.99 | $11.22 | $17.21 | |||||||||||||||
| Net investment loss |
(0.18 | )1 | (0.20 | )1 | (0.21 | )1 | (0.18 | )1 | (0.18 | )1 | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(1.07 | ) | 1.91 | 2.15 | 2.33 | (2.07 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(1.25 | ) | 1.71 | 1.94 | 2.15 | (2.25 | ) | |||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net realized gains |
(0.91 | ) | (4.10 | ) | (0.99 | ) | (0.38 | ) | (3.74 | ) | ||||||||||
| Net asset value, end of period |
$9.39 | $11.55 | $13.94 | $12.99 | $11.22 | |||||||||||||||
| Total return2 |
(12.30 | )% | 16.69 | % | 15.17 | % | 19.26 | % | (13.55 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
2.26 | % | 2.26 | % | 2.27 | % | 2.26 | % | 2.25 | % | ||||||||||
| Net expenses |
1.98 | % | 1.98 | % | 2.08 | % | 2.08 | % | 2.08 | % | ||||||||||
| Net investment loss |
(1.49 | )% | (1.48 | )% | (1.54 | )% | (1.52 | )% | (1.49 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
63 | % | 155 | % | 44 | % | 113 | % | 123 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$395 | $349 | $274 | $225 | $162 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Fundamental Small Cap Growth Fund | 19
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$15.43 | $17.14 | $15.63 | $13.29 | $19.44 | |||||||||||||||
| Net investment loss |
(0.11 | )1 | (0.11 | )1 | (0.11 | )1 | (0.09 | )1 | (0.10 | )1 | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(1.50 | ) | 2.50 | 2.61 | 2.81 | (2.31 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(1.61 | ) | 2.39 | 2.50 | 2.72 | (2.41 | ) | |||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net realized gains |
(0.91 | ) | (4.10 | ) | (0.99 | ) | (0.38 | ) | (3.74 | ) | ||||||||||
| Net asset value, end of period |
$12.91 | $15.43 | $17.14 | $15.63 | $13.29 | |||||||||||||||
| Total return |
(11.52 | )% | 17.59 | % | 16.21 | % | 20.56 | % | (12.76 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.44 | % | 1.43 | % | 1.44 | % | 1.43 | % | 1.39 | % | ||||||||||
| Net expenses |
1.15 | % | 1.15 | % | 1.20 | % | 1.20 | % | 1.20 | % | ||||||||||
| Net investment loss |
(0.66 | )% | (0.62 | )% | (0.66 | )% | (0.64 | )% | (0.61 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
63 | % | 155 | % | 44 | % | 113 | % | 123 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$93 | $104 | $133 | $174 | $2,413 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Fundamental Small Cap Growth Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$15.94 | $17.53 | $15.94 | $13.54 | $19.69 | |||||||||||||||
| Net investment loss |
(0.07 | )1 | (0.07 | )1 | (0.08 | )1 | (0.06 | )1 | (0.07 | )1 | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(1.57 | ) | 2.58 | 2.66 | 2.84 | (2.34 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(1.64 | ) | 2.51 | 2.58 | 2.78 | (2.41 | ) | |||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net realized gains |
(0.91 | ) | (4.10 | ) | (0.99 | ) | (0.38 | ) | (3.74 | ) | ||||||||||
| Net asset value, end of period |
$13.39 | $15.94 | $17.53 | $15.94 | $13.54 | |||||||||||||||
| Total return |
(11.29 | )% | 17.85 | % | 16.40 | % | 20.62 | % | (12.58 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.19 | % | 1.18 | % | 1.19 | % | 1.18 | % | 1.14 | % | ||||||||||
| Net expenses |
0.90 | % | 0.90 | % | 0.98 | % | 0.98 | % | 0.98 | % | ||||||||||
| Net investment loss |
(0.41 | )% | (0.41 | )% | (0.44 | )% | (0.43 | )% | (0.39 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
63 | % | 155 | % | 44 | % | 113 | % | 123 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$7,980 | $9,695 | $8,878 | $8,001 | $8,980 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Fundamental Small Cap Growth Fund | 21
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1. ORGANIZATION
Wells Fargo Funds Trust (the “Trust”), a Delaware statutory trust organized on March 10, 1999, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As an investment company, the Trust follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. These financial statements report on the Wells Fargo Fundamental Small Cap Growth Fund (formerly, Wells Fargo Traditional Small Cap Growth Fund) (the “Fund”) which is a diversified series of the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund, are in conformity with U.S. generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Securities valuation
All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern Time), although the Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the principal exchange or market that day, a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
The values of securities denominated in foreign currencies are translated into U.S. dollars at rates provided by an independent foreign currency pricing source at a time each business day specified by the Wells Fargo Asset Management Pricing Committee at Wells Fargo Funds Management, LLC (“Funds Management”).
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore may not fully reflect trading or events that occur after the close of the principal exchange in which the foreign securities are traded, but before the close of the New York Stock Exchange. If such trading or events are expected to materially affect the value of such securities, then fair value pricing procedures approved by the Board of Trustees of the Fund are applied. These procedures take into account multiple factors including movements in U.S. securities markets after foreign exchanges close. Foreign securities that are fair valued under these procedures are categorized as Level 2 and the application of these procedures may result in transfers between Level 1 and Level 2. Depending on market activity, such fair valuations may be frequent. Such fair value pricing may result in net asset values that are higher or lower than net asset values based on the last reported sales price or latest quoted bid price. On March 31, 2020, such fair value pricing was used in pricing certain foreign securities.
Investments in registered open-end investment companies are valued at net asset value. Interests in non-registered investment companies that are redeemable at net asset value are fair valued normally at net asset value.
Investments which are not valued using any of the methods discussed above are valued at their fair value, as determined in good faith by the Board of Trustees. The Board of Trustees has established a Valuation Committee comprised of the Trustees and has delegated to it the authority to take any actions regarding the valuation of portfolio securities that the Valuation Committee deems necessary or appropriate, including determining the fair value of portfolio securities, unless the determination has been delegated to the Wells Fargo Asset Management Pricing Committee. The Board of Trustees retains the authority to make or ratify any valuation decisions or approve any changes to the Valuation Procedures as it deems appropriate. On a quarterly basis, the Board of Trustees receives reports on any valuation actions taken by the Valuation Committee or the Wells Fargo Asset Management Pricing Committee which may include items for ratification.
Foreign currency translation
The accounting records of the Fund are maintained in U.S. dollars. The values of other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at rates provided by an independent foreign currency pricing source at a time each business day specified by the Wells Fargo Asset Management Pricing Committee. Purchases and sales of securities, and income and expenses are converted at the rate of exchange on the respective dates of such transactions. Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded and the U.S. dollar equivalent of the amounts actually paid or received. Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities other than investments in securities
22 | Wells Fargo Fundamental Small Cap Growth Fund
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Notes to financial statements
resulting from changes in exchange rates. The changes in net assets arising from changes in exchange rates of securities and the changes in net assets resulting from changes in market prices of securities are not separately presented. Such changes are included in net realized and unrealized gains or losses from investments.
Securities lending
The Fund may lend its securities from time to time in order to earn additional income in the form of fees or interest on securities received as collateral or the investment of any cash received as collateral. When securities are on loan, the Fund receives interest or dividends on those securities. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). Investments in Securities Lending Fund are valued at the evaluated bid price provided by an independent pricing service. Income earned from investment in the Securities Lending Fund, if any, is included in securities lending income from affiliates (net of fees and rebates) on the Statement of Operations.
In a securities lending transaction, the net asset value of the Fund is affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. The Fund has the right under the lending agreement to recover the securities from the borrower on demand. In the event of default or bankruptcy by the borrower, the Fund may be prevented from recovering the loaned securities or gaining access to the collateral or may experience delays or costs in doing so. In such an event, the terms of the agreement allow the unaffiliated securities lending agent to use the collateral to purchase replacement securities on behalf of the Fund or pay the Fund the market value of the loaned securities. The Fund bears the risk of loss with respect to depreciation of its investment of the cash collateral.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date, except for certain dividends from foreign securities, which are recorded as soon as the custodian verifies the ex-dividend date. Dividend income from foreign securities is recorded net of foreign taxes withheld where recovery of such taxes is not assured.
Distributions to shareholders
Distributions to shareholders from net investment income and any net realized gains are recorded on the ex-dividend date and paid at least annually. Such distributions are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles. Dividend sources are estimated at the time of declaration. The tax character of distributions is determined as of the Fund’s fiscal year end. Therefore, a portion of the Fund’s distributions made prior to the Fund’s fiscal year end may be categorized as a tax return of capital at year end.
Federal and other taxes
The Fund intends to continue to qualify as a regulated investment company by distributing substantially all of its investment company taxable income and any net realized capital gains (after reduction for capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes was required.
The Fund’s income and federal excise tax returns and all financial records supporting those returns for the prior three fiscal years are subject to examination by the federal and Delaware revenue authorities. Management has analyzed the Fund’s tax positions taken on federal, state, and foreign tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability.
As of March 31, 2020, the aggregate cost of all investments for federal income tax purposes was $76,599,786 and the unrealized gains (losses) consisted of:
| Gross unrealized gains |
$ | 11,124,603 | ||
| Gross unrealized losses |
(9,122,243 | ) | ||
| Net unrealized gains |
$ | 2,002,360 | ||
Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under federal income tax regulations. U.S. generally accepted accounting principles require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The primary permanent difference
Wells Fargo Fundamental Small Cap Growth Fund | 23
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Notes to financial statements
causing such reclassification is due to net operating losses. At March 31, 2020, as a result of permanent book-to-tax differences, the following reclassification adjustments were made on the Statement of Assets and Liabilities:
| Paid-in capital | Total distributable earnings | |
| $(466,425) | $466,425 | |
As of March 31, 2020, the Fund had a qualified late-year ordinary loss of $221,448 which will be recognized on the first day of the following fiscal year.
Class allocations
The separate classes of shares offered by the Fund differ principally in applicable sales charges, distribution, shareholder servicing, and administration fees. Class specific expenses are charged directly to that share class. Investment income, common fund-level expenses, and realized and unrealized gains (losses) on investments are allocated daily to each class of shares based on the relative proportion of net assets of each class.
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
| ∎ | Level 1 – quoted prices in active markets for identical securities |
| ∎ | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) |
| ∎ | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The inputs or methodologies used for valuing investments in securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of March 31, 2020:
| Quoted prices (Level 1) |
Other significant observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
Total | |||||||||||||
| Assets |
||||||||||||||||
| Investments in: |
||||||||||||||||
| Common stocks |
||||||||||||||||
| Communication services |
$ | 1,129,543 | $ | 0 | $ | 0 | $ | 1,129,543 | ||||||||
| Consumer discretionary |
3,550,249 | 740,940 | 0 | 4,291,189 | ||||||||||||
| Energy |
515,294 | 0 | 0 | 515,294 | ||||||||||||
| Financials |
1,378,087 | 0 | 0 | 1,378,087 | ||||||||||||
| Health care |
21,320,832 | 0 | 0 | 21,320,832 | ||||||||||||
| Industrials |
17,999,668 | 0 | 0 | 17,999,668 | ||||||||||||
| Information technology |
20,682,744 | 1,633,852 | 0 | 22,316,596 | ||||||||||||
| Materials |
1,235,414 | 0 | 0 | 1,235,414 | ||||||||||||
| Real estate |
3,045,707 | 0 | 0 | 3,045,707 | ||||||||||||
| Short-term investments |
||||||||||||||||
| Investment companies |
5,369,816 | 0 | 0 | 5,369,816 | ||||||||||||
| Total assets |
$ | 76,227,354 | $ | 2,374,792 | $ | 0 | $ | 78,602,146 | ||||||||
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
For the year ended March 31, 2020, the Fund did not have any transfers into/out of Level 3.
24 | Wells Fargo Fundamental Small Cap Growth Fund
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Notes to financial statements
4. TRANSACTIONS WITH AFFILIATES
Management fee
Funds Management, an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”), is the manager of the Fund and provides advisory and fund-level administrative services under an investment management agreement. Under the investment management agreement, Funds Management is responsible for, among other services, implementing the investment objectives and strategies of the Fund, supervising the subadviser and providing fund-level administrative services in connection with the Fund’s operations. As compensation for its services under the investment management agreement, Funds Management is entitled to receive a management fee at the following annual rate based on the Fund’s average daily net assets:
| Average daily net assets | Management fee | |||||
| First $500 million |
0.850 | % | ||||
| Next $500 million |
0.825 | |||||
| Next $1 billion |
0.800 | |||||
| Next $1 billion |
0.775 | |||||
| Next $1 billion |
0.750 | |||||
| Next $1 billion |
0.730 | |||||
| Next $5 billion |
0.720 | |||||
| Over $10 billion |
0.710 | |||||
For the year ended March 31, 2020, the management fee was equivalent to an annual rate of 0.85% of the Fund’s average daily net assets.
Funds Management has retained the services of a subadviser to provide daily portfolio management to the Fund. The fee for subadvisory services is borne by Funds Management. Wells Capital Management Incorporated (“WellsCap”), an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo, is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.55% and declining to 0.40% as the average daily net assets of the Fund increase.
Administration fees
Under a class-level administration agreement, Funds Management provides class-level administrative services to the Fund, which includes paying fees and expenses for services provided by the transfer agent, sub-transfer agents, omnibus account servicers and record-keepers. As compensation for its services under the class-level administration agreement, Funds Management receives an annual fee which is calculated based on the average daily net assets of each class as follows:
| Class-level administration fee | ||
| Class A, Class C |
0.21% | |
| Administrator Class, Institutional Class |
0.13 | |
Waivers and/or expense reimbursements
Funds Management has contractually waived and/or reimbursed management and administration fees to the extent necessary to maintain certain net operating expense ratios for the Fund. When each class of the Fund has exceeded its expense cap, Funds Management has waived fees and/or reimbursed expenses from fund-level expenses on a proportionate basis and then from class specific expenses. When only certain classes exceed their expense caps, waivers and/or reimbursements are applied against class specific expenses before fund-level expenses. Funds Management has committed through July 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 1.23% for Class A shares, 1.98% for Class C shares, 1.15% for Administrator Class shares, and 0.90% for Institutional Class shares. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees.
Wells Fargo Fundamental Small Cap Growth Fund | 25
Table of Contents
Notes to financial statements
Distribution fee
The Trust has adopted a distribution plan for Class C shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. A distribution fee is charged to Class C shares and paid to Wells Fargo Funds Distributor, LLC (“Funds Distributor”), the principal underwriter, at an annual rate of 0.75% of the average daily net assets of Class C shares.
In addition, Funds Distributor is entitled to receive the front-end sales charge from the purchase of Class A shares and a contingent deferred sales charge on the redemption of certain Class A shares. Funds Distributor is also entitled to receive the contingent deferred sales charges from redemptions of Class C shares. For the year ended March 31, 2020, Funds Distributor received $1,212 from the sale of Class A shares. No contingent deferred sales charges were incurred by Class A and Class C shares for the year ended March 31, 2020.
Shareholder servicing fees
The Trust has entered into contracts with one or more shareholder servicing agents, whereby Class A, Class C, and Administrator Class of the Fund are charged a fee at an annual rate of 0.25% of the average daily net assets of each respective class. A portion of these total shareholder servicing fees were paid to affiliates of Wells Fargo.
Interfund transactions
The Fund may purchase or sell portfolio investment securities to certain other Wells Fargo affiliates pursuant to Rule 17a-7 under the 1940 Act and under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which do not incur broker commissions, are effected at current market prices.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the year ended March 31, 2020 were $ 57,979,678 and $ 68,732,823, respectively.
6. SECURITIES LENDING TRANSACTIONS
The Fund lends its securities through an unaffiliated securities lending agent and receives collateral in the form of cash or securities with a value at least equal to the value of the securities on loan. The value of the loaned securities is determined at the close of each business day and any increases or decreases in the required collateral are exchanged between the Fund and the counterparty on the next business day. Cash collateral received is invested in the Securities Lending Fund which seeks to provide a positive return compared to the daily Fed Funds Open Rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments and is exempt from registration under Section 3(c)(7) of the 1940 Act. Securities Lending Fund is managed by Funds Management and is subadvised by WellsCap. Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser.
In the event of counterparty default or the failure of a borrower to return a loaned security, the Fund has the right to use the collateral to offset any losses incurred. As of March 31, 2020, the Fund had securities lending transactions with the following counterparties which are subject to offset:
| Counterparty | Value of securities on loan |
Collateral received1 |
Net amount |
|||||||||
| Bank of America Securities Inc. |
$ | 1,032,972 | $ | (1,032,972 | ) | $ | 0 | |||||
| Barclays Capital Inc. |
1,173,587 | |
(1,173,587 |
) |
0 | |||||||
| BNP Paribas Securities Corp. |
349,200 | (349,200 | ) | 0 | ||||||||
| Deutsche Bank Securities Inc. |
453,679 | (453,679 | ) | 0 | ||||||||
| Morgan Stanley & Co. LLC |
131,378 | (131,378 | ) | 0 | ||||||||
| 1 | Collateral received within this table is limited to the collateral for the net transaction with the counterparty. |
7. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $280,000,000 revolving credit agreement whereby the Fund is permitted to use bank borrowings for temporary or emergency purposes, such as to fund shareholder redemption requests. Interest under the credit agreement is charged to the Fund based on a borrowing rate equal to the higher of the Federal Funds rate in effect on that day plus 1.25% or the overnight LIBOR rate in effect on that day plus 1.25%. In addition, an annual commitment fee equal to 0.25% of the unused balance is allocated to each participating fund.
26 | Wells Fargo Fundamental Small Cap Growth Fund
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Notes to financial statements
For the year ended March 31, 2020, there were no borrowings by the Fund under the agreement
8. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid during the years ended March 31, 2020 and March 31, 2019 were as follows:
| Year ended March 31 | ||||||||
| 2020 | 2019 | |||||||
| Ordinary income |
$ | 1,713,085 | $ | 2,828,951 | ||||
| Long-term capital gain |
4,251,325 | 20,362,971 | ||||||
As of March 31, 2020, the components of distributable earnings on a tax basis were as follows:
| Undistributed long-term gain |
Unrealized gains |
Late-year ordinary losses deferred | ||
| $899,734 | $2,002,342 | $(221,448) | ||
9. CONCENTRATION RISK
Concentration risks result from exposure to a limited number of sectors. As of the end of the period, the Fund invests a concentration of its portfolio in the health care and information technology sectors. A fund that invests a substantial portion of its assets in any sector may be more affected by changes in that sector than would be a fund whose investments are not heavily weighted in any sector.
10. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
11. NEW ACCOUNTING PRONOUNCEMENT
In August 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 updates the disclosure requirements for fair value measurements by modifying or removing certain disclosures and adding certain new disclosures. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Management has adopted the removal and modification of disclosures early, as permitted, and will adopt the additional new disclosures at the effective date.
12. CORONAVIRUS (COVID-19) PANDEMIC
On March 11, 2020, the World Health Organization announced that it had made the assessment that coronavirus disease 2019 (“COVID-19”) is a pandemic. The impacts of COVID-19 are adversely affecting the entire global economy, individual companies and investment products, and the market in general. There is significant uncertainty around the extent and duration of business disruptions related to COVID-19 and the impacts may be short term or may last for an extended period of time. The risk of further spreading of COVID-19 has led to significant uncertainty and volatility in the financial markets. The value of the Fund and the securities in which the Fund invests have generally been adversely affected by impacts caused by COVID-19.
Wells Fargo Fundamental Small Cap Growth Fund | 27
Table of Contents
Report of independent registered public accounting firm
TO THE SHAREHOLDERS OF THE FUND AND BOARD OF TRUSTEES WELLS FARGO FUNDS TRUST:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Wells Fargo Fundamental Small Cap Growth Fund (formerly, Wells Fargo Traditional Small Cap Growth Fund) (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of March 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of March 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of March 31, 2020, by correspondence with the custodian, transfer agent, and brokers, or by other appropriate auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have not been able to determine the specific year that we began serving as the auditor of one or more Wells Fargo Funds investment companies; however we are aware that we have served as the auditor of one or more Wells Fargo Funds investment companies since at least 1955.
Boston, Massachusetts
May 28, 2020
28 | Wells Fargo Fundamental Small Cap Growth Fund
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TAX INFORMATION
For corporate shareholders, pursuant to Section 854 of the Internal Revenue Code, 2.35% of ordinary income dividends qualify for the corporate dividends-received deduction for the fiscal year ended March 31, 2020.
Pursuant to Section 852 of the Internal Revenue Code, $4,251,325 was designated as a 20% rate gain distribution for the fiscal year ended March 31, 2020.
Pursuant to Section 854 of the Internal Revenue Code, $52,420 of income dividends paid during the fiscal year ended March 31, 2020 has been designated as qualified dividend income (QDI).
For the fiscal year ended March 31, 2020, $1,713,085 has been designated as short-term capital gain dividends for nonresident alien shareholders pursuant to Section 871 of the Internal Revenue Code.
PROXY VOTING INFORMATION
A description of the policies and procedures used to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-222-8222, visiting our website at wfam.com, or visiting the SEC website at sec.gov. Information regarding how the proxies related to portfolio securities were voted during the most recent 12-month period ended June 30 is available on the website at wfam.com or by visiting the SEC website at sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. Shareholders may view the filed Form N-PORT by visiting the SEC website at sec.gov.
Wells Fargo Fundamental Small Cap Growth Fund | 29
Table of Contents
Other information (unaudited)
BOARD OF TRUSTEES AND OFFICERS
Each of the Trustees and Officers1 listed in the table below acts in identical capacities for each fund in the Wells Fargo family of funds, which consists of 147 mutual funds comprising the Wells Fargo Funds Trust, Wells Fargo Variable Trust, Wells Fargo Master Trust and four closed-end funds (collectively the “Fund Complex”). This table should be read in conjunction with the Prospectus and the Statement of Additional Information2. The mailing address of each Trustee and Officer is 525 Market Street, 12th Floor, San Francisco, CA 94105. Each Trustee and Officer serves an indefinite term, however, each Trustee serves such term until reaching the mandatory retirement age established by the Trustees.
Independent Trustees
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| William R. Ebsworth (Born 1957) | Trustee, since 2015 | Retired. From 1984 to 2013, equities analyst, portfolio manager, research director and chief investment officer at Fidelity Management and Research Company in Boston, Tokyo, and Hong Kong, and retired in 2013 as Chief Investment Officer of Fidelity Strategic Advisers, Inc. where he led a team of investment professionals managing client assets. Prior thereto, Board member of Hong Kong Securities Clearing Co., Hong Kong Options Clearing Corp., the Thailand International Fund, Ltd., Fidelity Investments Life Insurance Company, and Empire Fidelity Investments Life Insurance Company. Audit Committee Chair and Investment Committee Chair of the Vincent Memorial Hospital Endowment (non-profit organization). Mr. Ebsworth is a CFA® charterholder. | N/A | |||
| Jane A. Freeman (Born 1953) | Trustee, since 2015; Chair Liaison, since 2018 |
Retired. From 2012 to 2014 and 1999 to 2008, Chief Financial Officer of Scientific Learning Corporation. From 2008 to 2012, Ms. Freeman provided consulting services related to strategic business projects. Prior to 1999, Portfolio Manager at Rockefeller & Co. and Scudder, Stevens & Clark. Board member of the Harding Loevner Funds from 1996 to 2014, serving as both Lead Independent Director and chair of the Audit Committee. Board member of the Russell Exchange Traded Funds Trust from 2011 to 2012 and the chair of the Audit Committee. Ms. Freeman is a Board Member of The Ruth Bancroft Garden (non-profit organization). She is also an inactive Chartered Financial Analyst. | N/A | |||
| Isaiah Harris, Jr. (Born 1952) | Trustee, since 2009; Audit Committee Chairman, since 2019 |
Retired. Chairman of the Board of CIGNA Corporation since 2009, and Director since 2005. From 2003 to 2011, Director of Deluxe Corporation. Prior thereto, President and CEO of BellSouth Advertising and Publishing Corp. from 2005 to 2007, President and CEO of BellSouth Enterprises from 2004 to 2005 and President of BellSouth Consumer Services from 2000 to 2003. Emeritus member of the Iowa State University Foundation Board of Governors. Emeritus Member of the Advisory Board of Iowa State University School of Business. Advisory Board Member, Palm Harbor Academy (private school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
| Judith M. Johnson (Born 1949) | Trustee, since 2008; Audit Committee Chairman, from 2009 to 2018 | Retired. Prior thereto, Chief Executive Officer and Chief Investment Officer of Minneapolis Employees Retirement Fund from 1996 to 2008. Ms. Johnson is an attorney, certified public accountant and a certified managerial accountant. | N/A | |||
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Other information (unaudited)
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | N/A | |||
| Olivia S. Mitchell (Born 1953) | Trustee, since 2006; Nominating and Governance Committee Chair, since 2018 | International Foundation of Employee Benefit Plans Professor, Wharton School of the University of Pennsylvania since 1993. Director of Wharton’s Pension Research Council and Boettner Center on Pensions & Retirement Research, and Research Associate at the National Bureau of Economic Research. Previously, Cornell University Professor from 1978 to 1993. | N/A | |||
| Timothy J. Penny (Born 1951) | Trustee, since 1996; Chairman, since 2018 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | N/A | |||
| James G. Polisson (Born 1959) | Trustee, since 2018 | Retired. Chief Marketing Officer, Source (ETF) UK Services, Ltd, from 2015 to 2017. From 2012 to 2015, Principal of The Polisson Group, LLC, a management consulting, corporate advisory and principal investing company. Chief Executive Officer and Managing Director at Russell Investments, Global Exchange Traded Funds from 2010 to 2012. Managing Director of Barclays Global Investors from 1998 to 2010 and Global Chief Marketing Officer for iShares and Barclays Global Investors from 2000 to 2010. Trustee of the San Francisco Mechanics’ Institute, a non-profit organization, from 2013 to 2015. Board member of the Russell Exchange Traded Fund Trust from 2011 to 2012. Director of Barclays Global Investors Holdings Deutschland GmbH from 2006 to 2009. Mr. Polisson is an attorney and has a retired status with the Massachusetts and District of Columbia Bar Associations. | N/A | |||
| Pamela Wheelock3 (Born 1959) | Trustee, since January 2020; previously Trustee from January 2018 to July 2019 | Board member of the Destination Medical Center Economic Development Agency, Rochester, Minnesota since 2019. Acting Commissioner, Minnesota Department of Human Services, July 2019 through September 2019. Human Services Manager (part-time), Minnesota Department of Human Services, October 2019 through December 2019. Chief Operating Officer, Twin Cities Habitat for Humanity from 2017 to 2019. Vice President of University Services, University of Minnesota from 2012 to 2016. Prior thereto, on the Board of Directors, Governance Committee and Finance Committee for the Minnesota Philanthropy Partners (Saint Paul Foundation) from 2012 to 2018, Interim Chief Executive Officer of Blue Cross Blue Shield of Minnesota from 2011 to 2012, Chairman of the Board from 2009 to 2012 and Board Director from 2003 to 2015. Vice President, Leadership and Community Engagement, Bush Foundation, Saint Paul, Minnesota (a private foundation) from 2009 to 2011. Executive Vice President and Chief Financial Officer, Minnesota Sports and Entertainment from 2004 to 2009 and Senior Vice President from 2002 to 2004. Executive Vice President of the Minnesota Wild Foundation from 2004 to 2008. Commissioner of Finance, State of Minnesota, from 1999 to 2002. Currently Board Chair of the Minnesota Wild Foundation since 2010. | N/A | |||
| * | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
Wells Fargo Fundamental Small Cap Growth Fund | 31
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Other information (unaudited)
Officers
| Name and year of birth |
Position held and length of service |
Principal occupations during past five years or longer | ||
| Andrew Owen (Born 1960) | President, since 2017 | Executive Vice President of Wells Fargo & Company and Head of Affiliated Managers, Wells Fargo Asset Management, since 2014. In addition, Mr. Owen is currently President, Chief Executive Officer and Director of Wells Fargo Funds Management, LLC since 2017. Prior thereto, Executive Vice President responsible for marketing, investments and product development for Wells Fargo Funds Management, LLC, from 2009 to 2014. | ||
| Nancy Wiser1 (Born 1967) | Treasurer, since 2012 | Executive Vice President of Wells Fargo Funds Management, LLC since 2011. Chief Operating Officer and Chief Compliance Officer at LightBox Capital Management LLC, from 2008 to 2011. | ||
| Michelle Rhee (Born 1966) | Chief Legal Officer, since 2019 | Secretary of Wells Fargo Funds Management, LLC, Chief Legal Counsel of Wells Fargo Asset Management and Assistant General Counsel of Wells Fargo Bank, N.A. since 2018. Associate General Counsel and Managing Director of Bank of America Corporation from 2004 to 2018. | ||
| Catherine Kennedy (Born 1969) | Secretary, since 2019 | Vice President of Wells Fargo Funds Management, LLC and Senior Counsel of the Wells Fargo Legal Department since 2010. Vice President and Senior Counsel of Evergreen Investment Management Company, LLC from 1998 to 2010. | ||
| Michael H. Whitaker (Born 1967) | Chief Compliance Officer, since 2016 | Chief Compliance Officer of Wells Fargo Asset Management since 2016. Senior Vice President and Chief Compliance Officer for Fidelity Investments from 2007 to 2016. | ||
| David Berardi (Born 1975) | Assistant Treasurer, since 2009 | Vice President of Wells Fargo Funds Management, LLC since 2009. Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010. Manager of Fund Reporting and Control for Evergreen Investment Management Company, LLC from 2004 to 2010. | ||
| Jeremy DePalma1 (Born 1974) | Assistant Treasurer, since 2009 | Senior Vice President of Wells Fargo Funds Management, LLC since 2009. Senior Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010 and head of the Fund Reporting and Control Team within Fund Administration from 2005 to 2010. | ||
| 1 | Nancy Wiser acts as Treasurer of 65 funds in the Fund Complex. Jeremy DePalma acts as Treasurer of 82 funds and Assistant Treasurer of 65 funds in the Fund Complex. |
| 2 | The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request, by calling 1-800-222-8222 or by visiting the website at wfam.com. |
| 3 | Pamela Wheelock was re-appointed to the Board effective January 1, 2020. |
32 | Wells Fargo Fundamental Small Cap Growth Fund
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Effective on or about May 1, 2020, if you purchase Fund shares through a Janney Montgomery Scott LLC (“Janney”) brokerage account, you will be eligible for the following load waivers (front-end sales charge waivers and contingent deferred sales charge (“CDSC”), or back-end sales charge, waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or SAI.
| Front-end sales charge* waivers on Class A shares available at Janney |
| Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family). |
| Shares purchased by employees and registered representatives of Janney or its affiliates and their family members as designated by Janney. |
| Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within ninety (90) days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e., right of reinstatement). |
| Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans. |
| Shares acquired through a right of reinstatement. |
| Class C shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund pursuant to Janney’s policies and procedures.
|
| CDSC waivers on Class A and Class C shares available at Janney |
| Shares sold upon the death or disability of the shareholder. |
| Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
| Shares purchased in connection with a return of excess contributions from an IRA account. |
| Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulations. |
| Shares sold to pay Janney fees but only if the transaction is initiated by Janney. |
| Shares acquired through a right of reinstatement. |
| Shares exchanged into the same share class of a different fund.
|
| Front-end sales charge* discounts available at Janney; breakpoints, rights of accumulation and/or letters of intent |
| Breakpoints as described in the Fund’s Prospectus. |
| Rights of accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Janney. Eligible fund family assets not held at Janney may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
| Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Janney Montgomery Scott may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
| * | Also referred to as an “initial sales charge.” |
Wells Fargo Fundamental Small Cap Growth Fund | 33
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Effective on or after May 1, 2020, clients of Edward Jones (also referred to as “shareholders”) purchasing Fund shares on the Edward Jones commission and fee-based platforms are eligible only for the following sales charge discounts (also referred to as “breakpoints”) and waivers, which can differ from breakpoints and waivers described elsewhere in this Prospectus or SAI or through another broker-dealer. In all instances, it is the shareholder’s responsibility to inform Edward Jones at the time of purchase of any relationship, holdings of Wells Fargo Funds or other facts qualifying the purchaser for breakpoints or waivers. Edward Jones can ask for documentation of such circumstance.
| Breakpoints available at Edward Jones |
| Rights of Accumulation (ROA) |
| The applicable sales charge on a purchase of Class A shares is determined by taking into account all share classes (except any money market funds and retirement plan share classes) of Wells Fargo Funds held by the shareholder or in an account grouped by Edward Jones with other accounts for the purpose of providing certain pricing considerations (“pricing groups”). This includes all share classes held on the Edward Jones platform and/or held on another platform. The inclusion of eligible fund family assets in the rights of accumulation calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. |
| ROA is determined by calculating the higher of cost or market value (current shares x NAV). |
| Letter of Intent (LOI) |
| Through a LOI, shareholders can receive the sales charge and breakpoint discounts for purchases shareholders intend to makeover a 13-month period from the date Edward Jones receives the LOI. The LOI is determined by calculating the higher of cost or market value of qualifying holdings at LOI initiation in combination with the value that the shareholder intends to buy over a 13-month period to calculate the front-end sales charge and any breakpoint discounts. Each purchase the shareholder makes during that 13-month period will receive the sales charge and breakpoint discount that applies to the total amount. The inclusion of eligible fund family assets in the LOI calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. Purchases made before the LOI is received by Edward Jones are not covered under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if LOI is not met. |
| Sales charges are waived for the following shareholders and in the following situations at Edward Jones: |
| ● Associates of Edward Jones and its affiliates and their family members who are in the same pricing group (as determined by Edward Jones under its policies and procedures) as the associate. This waiver will continue for the remainder of the associate’s life if the associate retires from Edward Jones in good-standing. |
| ● Shares purchased in an Edward Jones fee-based program. |
| ● Shares purchased through reinvestment of capital gains distributions and dividend reinvestment. |
| ● Shares purchased from the proceeds of redeemed shares of the same fund family so long as the following conditions are met: 1) the proceeds are from the sale of shares within 60 days of the purchase, and 2) the sale and purchase are made in the same share class and the same account or the purchase is made in an individual retirement account with proceeds from liquidations in anon-retirement account. |
| ● Shares exchanged into Class A shares from another share class so long as the exchange is into the same fund and was initiated at the discretion of Edward Jones. Edward Jones is responsible for any remaining CDSC due to the fund company, if applicable. Any future purchases are subject to the applicable sales charge as disclosed in the prospectus. |
| ● Exchanges from Class C shares to Class A shares of the same fund, generally, in the 84th month following the anniversary of the purchase date or earlier at the discretion of Edward Jones. |
| If the shareholder purchases shares that are subject to a CDSC and those shares are redeemed before the CDSC is
expired, the shareholder is responsible to pay the CDSC except in the following conditions available at Edward Jones: |
| ● The death or disability of the shareholder. |
| ● Systematic withdrawals with up to 10% per year of the account value. |
| ● Return of excess contributions from an Individual Retirement Account (IRA). |
| ● Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulation. |
| ● Shares sold to pay Edward Jones fees or costs in such cases where the transaction is initiated by Edward Jones. |
| ● Shares exchanged in an Edward Jones fee-based program. |
| ● Shares acquired through NAV reinstatement. |
34 | Wells Fargo Fundamental Small Cap Growth Fund
Table of Contents
Appendix II (unaudited)
| Other Important Information for accounts at Edward Jones: |
| Minimum Purchase Amounts ● $250 initial purchase minimum ● $50 subsequent purchase minimum |
|
Minimum Balances Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy: ● A fee-based account held on an Edward Jones platform ● A 529 account held on an Edward Jones platform ● An account with an active systematic investment plan or letter of intent (LOI) |
|
Changing Share Classes At any time it deems necessary, Edward Jones has the authority to exchange at NAV a shareholder’s holdings in a fund to Class A shares. |
Wells Fargo Fundamental Small Cap Growth Fund | 35
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 219967
Kansas City, MO 64121-9967
Website: wfam.com
Individual investors: 1-800-222-8222
Retail investment professionals: 1-888-877-9275
Institutional investment professionals: 1-866-765-0778
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. If this report is used for promotional purposes, distribution of the report must be accompanied or preceded by a current prospectus. Before investing, please consider the investment objectives, risks, charges, and expenses of the investment. For a current prospectus and, if available, a summary prospectus, containing this information, call 1-800-222-8222 or visit the Fund’s website at wfam.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is the trade name for certain investment advisory/management firms owned by Wells Fargo & Company. These firms include but are not limited to Wells Capital Management Incorporated and Wells Fargo Funds Management, LLC. Certain products managed by WFAM entities are distributed by Wells Fargo Funds Distributor, LLC (a broker-dealer and Member FINRA).
This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.
Table of Contents
Wells Fargo Precious Metals Fund
Beginning on January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, paper copies of the Wells Fargo Funds’ annual and semi-annual shareholder reports issued after this date will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-222-8222 or by enrolling at wellsfargo.com/advantagedelivery.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call 1-800-222-8222. Your election to receive reports in paper will apply to all Wells Fargo Funds held in your account with your financial intermediary or, if you are a direct investor, to all Wells Fargo Funds that you hold.
Table of Contents
The views expressed and any forward-looking statements are as of March 31, 2020, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Asset Management. Discussions of individual securities, or the markets generally, or any Wells Fargo Fund are not intended as individual recommendations. Future events or results may vary significantly from those expressed in any forward-looking statements. The views expressed are subject to change at any time in response to changing circumstances in the market. Wells Fargo Asset Management and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
Wells Fargo Precious Metals Fund | 1
Table of Contents
Letter to shareholders (unaudited)
| 1 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value-weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index. |
| 2 | The Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. 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 as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. You cannot invest directly in an index. |
| 3 | The MSCI Emerging Markets (EM) Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure equity market performance of emerging markets. You cannot invest directly in an index. |
| 4 | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. You cannot invest directly in an index. |
| 5 | The Bloomberg Barclays Global Aggregate ex-USD Index is an unmanaged index that provides a broad-based measure of the global investment-grade fixed-income markets excluding the U.S. dollar-denominated debt market. You cannot invest directly in an index. |
| 6 | The Bloomberg Barclays Municipal Bond Index is an unmanaged index composed of long-term tax-exempt bonds with a minimum credit rating of Baa. You cannot invest directly in an index. |
| 7 | The ICE BofA U.S. High Yield Index is a market-capitalization-weighted index of domestic and Yankee high-yield bonds. The index tracks the performance of high-yield securities traded in the U.S. bond market. You cannot invest directly in an index. Copyright 2020. ICE Data Indices, LLC. All rights reserved. |
2 | Wells Fargo Precious Metals Fund
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Letter to shareholders (unaudited)
Wells Fargo Precious Metals Fund | 3
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Letter to shareholders (unaudited)
4 | Wells Fargo Precious Metals Fund
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Performance highlights (unaudited)
Investment objective
The Fund seeks long-term capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Michael Bradshaw, CFA®‡
Oleg Makhorine
Average annual total returns (%) as of March 31, 20201
| Including sales charge | Excluding sales charge | Expense ratios2 (%) | ||||||||||||||||||||||||||||||||
| Inception date | 1 year | 5 year | 10 year | 1 year | 5 year | 10 year | Gross | Net3 | ||||||||||||||||||||||||||
| Class A (EKWAX) | 1-20-1998 | -1.86 | 3.35 | -5.32 | 4.13 | 4.58 | -4.76 | 1.22 | 1.09 | |||||||||||||||||||||||||
| Class C (EKWCX) | 1-29-1998 | 2.31 | 3.80 | -5.47 | 3.31 | 3.80 | -5.47 | 1.97 | 1.84 | |||||||||||||||||||||||||
| Administrator Class (EKWDX)4 | 7-30-2010 | – | – | – | 4.24 | 4.72 | -4.62 | 1.14 | 0.95 | |||||||||||||||||||||||||
| Institutional Class (EKWYX) | 2-29-2000 | – | – | – | 4.43 | 4.88 | -4.46 | 0.89 | 0.79 | |||||||||||||||||||||||||
| FTSE Gold Mines Index5 | – | – | – | – | 12.06 | 8.49 | -4.82 | – | – | |||||||||||||||||||||||||
| S&P 500 Index6 | – | – | – | – | -6.98 | 6.73 | 10.53 | – | – | |||||||||||||||||||||||||
Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes that a shareholder may pay on an investment in a fund. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance shown without sales charges would be lower if sales charges were reflected. Current performance may be lower or higher than the performance data quoted, which assumes the reinvestment of dividends and capital gains. Current month-end performance is available on the Fund’s website, wfam.com.
While the S&P 500 Index is comprised of U.S. equity securities of companies diversified across ten sectors, the Fund’s holdings are concentrated primarily in precious metals related stocks. Therefore, the performance of the S&P 500 Index is displayed only to show how the concentrated Fund performed compared with a diversified selection of U.S. equity securities.
Index returns do not include transaction costs associated with buying and selling securities, any mutual fund fees or expenses, or any taxes. It is not possible to invest directly in an index.
For Class A shares, the maximum front-end sales charge is 5.75%. For Class C shares, the maximum contingent deferred sales charge is 1.00%. Performance including a contingent deferred sales charge assumes the sales charge for the corresponding time period. Administrator Class and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Bond values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. Changes in market conditions and government policies may lead to periods of heightened volatility in the bond market and reduced liquidity for certain bonds held by the Fund. In general, when interest rates rise, bond values fall and investors may lose principal value. Interest rate changes and their impact on the Fund and its share price can be sudden and unpredictable. Funds that concentrate their investments in limited sectors, much as gold-related investments, are more vulnerable to adverse market, economic, regulatory, political, or other developments affecting those sectors. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). The Fund is exposed to foreign investment risk, geographic risk, non-diversification risk, smaller-company securities risk, and subsidiary risk. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Precious Metals Fund
Table of Contents
Performance highlights (unaudited)
| Growth of $10,000 investment as of March 31, 20207 |
|
|
| ‡ | CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute. |
| 1 | Historical performance prior to July 19, 2010, is based on the performance of the Fund’s predecessor, Evergreen Precious Metals Fund. |
| 2 | Reflects the expense ratios as stated in the most recent prospectuses. The expense ratios shown are subject to change and may differ from the annualized expense ratios shown in the financial highlights of this report. |
| 3 | The manager has contractually committed through July 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 1.09% for Class A, 1.84% for Class C, 0.95% for Administrator Class, and 0.79% for Institutional Class. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses (if any), and extraordinary expenses are excluded from the expense cap. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Without this cap, the Fund’s returns would have been lower. The expense ratio paid by an investor is the net expense ratio (the total annual fund operating expenses after fee waivers) as stated in the prospectuses. |
| 4 | Historical performance shown for the Administrator Class shares prior to their inception reflects the performance of the Institutional Class shares and has been adjusted to reflect the higher expenses applicable to the Administrator Class shares. |
| 5 | FTSE Gold Mines Index is an unmanaged, open-ended index designed to reflect the performance of the worldwide market in the shares of companies whose principal activity is the mining of gold. You cannot invest directly in an index. |
| 6 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index. |
| 7 | The chart compares the performance of Class A shares for the most recent ten years with the FTSE Gold Mines Index and the S&P 500 Index. The chart assumes a hypothetical investment of $10,000 in Class A shares and reflects all operating expenses and assumes the maximum initial sales charge of 5.75%. |
| 8 | The ten largest holdings, excluding cash, cash equivalents and any money market funds, are calculated based on the value of the investments divided by total net assets of the Fund. Holdings are subject to change and may have changed since the date specified. |
| 9 | Amounts are calculated based on the total long-term investments of the Fund. These amounts are subject to change and may have changed since the date specified. |
| * | This security was no longer held at the end of the reporting period. |
Wells Fargo Precious Metals Fund | 7
Table of Contents
Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
| ∎ | The Fund underperformed its benchmark, the FTSE Gold Mines Index, for the 12-month period that ended March 31, 2020. |
| ∎ | The Fund’s overweights to Fresnillo plc* and Torex Gold Resources Incorporated detracted from results during the period. Underweights to AngloGold Ashanti Limited, Barrick Gold Corporation, and Newmont Goldcorp Corporation also detracted from results. |
| ∎ | The Fund’s positions in Continental Gold Incorporated* and Franco-Nevada Corporation aided results, as did its overweight to Detour Gold Corporation*. An underweight to Newcrest Mining Limited also helped results. |
| ∎ | The price of gold rose more than 20% during the 12-month period, and the share prices of precious metals stocks underperformed the gold price. |
Gold prices rose during the reporting period.
The price of gold rose 14% during the first two quarters of the reporting period. Slowing global growth and declining inflation brought on by the U.S.-China trade war caused the U.S. Federal Reserve (Fed) to lower interest rates twice during the first half of the period. As a result, bond yields fell and the gold price rose. During the second half of the period, gold prices rose more than 7%. The gold price was propelled higher during the fall and winter months by a weakening global economy made worse by the coronavirus pandemic. The economic weakness caused stock and commodity markets along with bond yields to drop.
Purchases and sales of gold exchange-traded funds (ETFs) have an impact on gold prices. Purchases of gold ETFs rose during the first half of the period, boosting the price of gold. During the second half of the period, gold-backed ETF purchases accelerated as growing economic uncertainty caused the stock market and bond yields to fall and physical demand for gold to rise.
Detour Gold’s share price almost doubled during the period. The company benefited from successfully implementing a new operating plan at its Detour Lake Mine and its subsequent takeover by Kirkland Lake Gold Limited. Continental Gold was one of the Fund’s best contributors, as it was the subject of a takeover offer from Zijin Mining Group Company Limited. Franco-Nevada was another key contributor, rising on news that the commissioning of the Cobre Panama Mine was ahead of schedule, benefiting its investment in the asset.
Please see footnotes on page 7.
8 | Wells Fargo Precious Metals Fund
Table of Contents
Performance highlights (unaudited)
Please see footnotes on page 7.
Wells Fargo Precious Metals Fund | 9
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As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and contingent deferred sales charges (if any) on redemptions and (2) ongoing costs, including management fees, distribution (12b-1) and/or shareholder servicing fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period from October 1, 2019 to March 31, 2020.
Actual expenses
The “Actual” line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Actual” line under the heading entitled “Expenses paid during period” for your applicable class of shares to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The “Hypothetical” line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and contingent deferred sales charges. Therefore, the “Hypothetical” line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning account value 10-1-2019 |
Ending account value 3-31-2020 |
Consolidated expenses paid during the period¹ |
Annualized net expense ratio |
|||||||||||||
| Class A |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 875.86 | $ | 5.11 | 1.09 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,019.55 | $ | 5.50 | 1.09 | % | ||||||||
| Class C |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 872.53 | $ | 8.61 | 1.84 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,015.80 | $ | 9.27 | 1.84 | % | ||||||||
| Administrator Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 876.52 | $ | 4.46 | 0.95 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,020.25 | $ | 4.80 | 0.95 | % | ||||||||
| Institutional Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 877.30 | $ | 3.71 | 0.79 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,021.05 | $ | 3.99 | 0.79 | % | ||||||||
| 1 | Consolidated expenses paid is equal to the annualized net expense ratio of each class multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year (to reflect the one-half-year period). |
10 | Wells Fargo Precious Metals Fund
Table of Contents
Consolidated portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Common Stocks: 92.10% |
| |||||||||||||||
| Australia: 11.49% | ||||||||||||||||
| Evolution Mining Limited (Materials, Metals & Mining) |
2,700,000 | $ | 6,310,270 | |||||||||||||
| Newcrest Mining Limited (Materials, Metals & Mining) |
802,294 | 11,017,680 | ||||||||||||||
| Northern Star Resources Limited (Materials, Metals & Mining) |
1,747,222 | 11,318,481 | ||||||||||||||
| Saracen Mineral Holdings Limited (Materials, Metals & Mining) † |
1,300,000 | 2,923,311 | ||||||||||||||
| 31,569,742 | ||||||||||||||||
|
|
|
|||||||||||||||
| Canada: 59.51% | ||||||||||||||||
| Agnico-Eagle Mines Limited (Materials, Metals & Mining) |
148,164 | 5,895,446 | ||||||||||||||
| Agnico-Eagle Mines Limited-Legend Shares (Materials, Metals & Mining) |
35,000 | 1,392,650 | ||||||||||||||
| Agnico-Eagle Mines Limited-U.S. Exchange Traded Shares (Materials, Metals & Mining) |
125,370 | 5,004,822 | ||||||||||||||
| Alacer Gold Corporation (Materials, Metals & Mining) † |
1,300,000 | 4,193,846 | ||||||||||||||
| Alamos Gold Incorporated Class A (Materials, Metals & Mining) |
1,313,980 | 6,601,179 | ||||||||||||||
| B2Gold Corporation (Materials, Metals & Mining) |
3,600,000 | 10,897,463 | ||||||||||||||
| Barrick Gold Corporation (Materials, Metals & Mining) |
1,651,723 | 30,259,565 | ||||||||||||||
| Centerra Gold Incorporated (Materials, Metals & Mining) † |
250,000 | 1,486,890 | ||||||||||||||
| Centerra Gold Incorporated-Legend Shares (Materials, Metals & Mining) 144A |
250,000 | 1,486,890 | ||||||||||||||
| Endeavour Mining Corporation (Materials, Metals & Mining) † |
375,000 | 5,332,019 | ||||||||||||||
| Franco-Nevada Corporation (Materials, Metals & Mining) |
10,000 | 999,147 | ||||||||||||||
| Franco-Nevada Corporation-Legend Shares (Materials, Metals & Mining) 144A |
130,948 | 13,083,634 | ||||||||||||||
| Kinross Gold Corporation (Materials, Metals & Mining) † |
3,200,553 | 12,849,516 | ||||||||||||||
| Kirkland Lake Gold Limited (Materials, Metals & Mining) |
644,094 | 18,970,864 | ||||||||||||||
| Lundin Gold Incorporated (Materials, Metals & Mining) † |
500,000 | 2,781,923 | ||||||||||||||
| MAG Silver Corporation (Materials, Metals & Mining) † |
670,000 | 5,170,326 | ||||||||||||||
| MAG Silver Corporation-Legend Shares (Materials, Metals & Mining) |
100,000 | 771,690 | ||||||||||||||
| Orla Mining Limited (Materials, Metals & Mining) † |
400,000 | 568,464 | ||||||||||||||
| Pan American Silver Corporation (Materials, Metals & Mining) |
350,000 | 5,015,500 | ||||||||||||||
| SilverCrest Metals Inc Common Stock (Materials, Metals & Mining) † |
300,000 | 1,571,094 | ||||||||||||||
| SSR Mining Incorporated (Materials, Metals & Mining) † |
475,000 | 5,405,500 | ||||||||||||||
| Torex Gold Resources Incorporated (Materials, Metals & Mining) † |
200,000 | 1,937,043 | ||||||||||||||
| Torex Gold Resources Incorporated-Legend Shares (Materials, Metals & Mining) 144A |
185,000 | 1,791,764 | ||||||||||||||
| Torex Gold Resources Incorporated-Legend Shares (Materials, Metals & Mining) |
266,250 | 2,578,688 | ||||||||||||||
| Wheaton Precious Metals Corporation (Materials, Metals & Mining) |
12,950 | 356,394 | ||||||||||||||
| Wheaton Precious Metals Corporation-U.S. Exchange Traded Shares (Materials, Metals & Mining) |
500,000 | 13,765,000 | ||||||||||||||
| Yamana Gold Incorporated (Materials, Metals & Mining) |
1,200,000 | 3,334,044 | ||||||||||||||
| 163,501,361 | ||||||||||||||||
|
|
|
|||||||||||||||
| South Africa: 5.32% | ||||||||||||||||
| AngloGold Ashanti Limited ADR (Materials, Metals & Mining) |
450,591 | 7,493,327 | ||||||||||||||
| Gold Fields Limited ADR (Materials, Metals & Mining) |
1,500,000 | 7,125,000 | ||||||||||||||
| 14,618,327 | ||||||||||||||||
|
|
|
|||||||||||||||
| United States: 15.78% | ||||||||||||||||
| Newmont Goldcorp Corporation (Materials, Metals & Mining) |
671,802 | 30,419,195 | ||||||||||||||
| Newmont Goldcorp Corporation - Toronto Exchange Traded Shares (Materials, Metals & Mining) |
131,348 | 5,876,267 | ||||||||||||||
| Royal Gold Incorporated (Materials, Metals & Mining) |
80,436 | 7,055,042 | ||||||||||||||
| 43,350,504 | ||||||||||||||||
|
|
|
|||||||||||||||
| Total Common Stocks (Cost $184,996,153) |
|
253,039,934 | ||||||||||||||
|
|
|
|||||||||||||||
| Troy ounces | ||||||||||||||||
| Commodities: 4.41% | ||||||||||||||||
| Gold Bullion ** |
4,248 | 12,127,254 | ||||||||||||||
| Total Commodities (Cost $4,532,552) |
|
12,127,254 | ||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Precious Metals Fund | 11
Table of Contents
Consolidated portfolio of investments—March 31, 2020
| Yield | Shares | Value | ||||||||||||||
| Short-Term Investments: 3.11% | ||||||||||||||||
| Investment Companies: 3.11% | ||||||||||||||||
| Wells Fargo Government Money Market Fund Select Class (l)(u) |
0.35 | % | 8,534,060 | $ | 8,534,060 | |||||||||||
|
|
|
|||||||||||||||
| Total Short-Term Investments (Cost $8,534,060) |
8,534,060 | |||||||||||||||
|
|
|
|||||||||||||||
| Total investments in securities (Cost $198,062,765) | 99.62 | % | 273,701,248 | |||||
| Other assets and liabilities, net |
0.38 | 1,053,248 | ||||||
|
|
|
|
|
|||||
| Total net assets | 100.00 | % | $ | 274,754,496 | ||||
|
|
|
|
|
|||||
| † | Non-income-earning security |
| 144A | The security may be resold in transactions exempt from registration, normally to qualified institutional buyers, pursuant to Rule 144A under the Securities Act of 1933. |
| ** | Represents an investment held in Special Investments (Cayman) SPC, the consolidated entity. |
| (l) | The issuer of the security is an affiliated person of the Fund as defined in the Investment Company Act of 1940. |
| (u) | The rate represents the 7-day annualized yield at period end. |
Investments in Affiliates
An affiliated investment is an investment in which the Fund owns at least 5% of the outstanding voting shares of the issuer or as a result of other relationships, such as the Fund and the issuer having the same investment manager. Transactions with issuers that were either affiliated persons of the Fund at the beginning of the period or the end of the period were as follows:
| Shares, beginning of period |
Shares purchased |
Shares sold |
Shares, end of period |
Net realized gains (losses) |
Net change in unrealized gains (losses) |
Income from affiliated securities |
Value, end of period |
% of net assets |
||||||||||||||||||||||||||||
| Short-Term Investments | ||||||||||||||||||||||||||||||||||||
| Investment Companies |
||||||||||||||||||||||||||||||||||||
| Wells Fargo Government Money Market Fund Select Class |
3,331,397 | 108,041,459 | (102,838,796 | ) | 8,534,060 | $ | 0 | $ | 0 | $ | 85,426 | $ | 8,534,060 | 3.11 | % | |||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Precious Metals Fund
Table of Contents
Consolidated statement of assets and liabilities—March 31, 2020
| Assets |
||||
| Investments in unaffiliated securities, at value (cost $184,996,153) |
$ | 253,039,934 | ||
| Investments in commodities, at value (cost $4,532,552) |
12,127,254 | |||
| Investments in affiliated securities, at value (cost $8,534,060) |
8,534,060 | |||
| Cash |
13,174 | |||
| Foreign currency, at value (cost $546,565) |
545,447 | |||
| Receivable for Fund shares sold |
1,227,453 | |||
| Receivable for dividends |
308,640 | |||
| Prepaid expenses and other assets |
42,258 | |||
|
|
|
|||
| Total assets |
275,838,220 | |||
|
|
|
|||
| Liabilities |
||||
| Payable for Fund shares redeemed |
645,559 | |||
| Management fee payable |
138,098 | |||
| Administration fees payable |
44,720 | |||
| Distribution fee payable |
8,109 | |||
| Trustees’ fees and expenses payable |
3,845 | |||
| Accrued expenses and other liabilities |
243,393 | |||
|
|
|
|||
| Total liabilities |
1,083,724 | |||
|
|
|
|||
| Total net assets |
$ | 274,754,496 | ||
|
|
|
|||
| Net assets consist of |
||||
| Paid-in capital |
$ | 378,499,837 | ||
| Total distributable loss |
(103,745,341 | ) | ||
|
|
|
|||
| Total net assets |
$ | 274,754,496 | ||
|
|
|
|||
| Computation of net asset value and offering price per share |
||||
| Net assets – Class A |
$ | 147,019,956 | ||
| Shares outstanding – Class A1 |
4,164,627 | |||
| Net asset value per share – Class A |
$35.30 | |||
| Maximum offering price per share – Class A2 |
$37.45 | |||
| Net assets – Class C |
$ | 11,834,085 | ||
| Shares outstanding – Class C1 |
383,296 | |||
| Net asset value per share – Class C |
$30.87 | |||
| Net assets – Administrator Class |
$ | 7,993,851 | ||
| Shares outstanding – Administrator Class1 |
224,142 | |||
| Net asset value per share – Administrator Class |
$35.66 | |||
| Net assets – Institutional Class |
$ | 107,906,604 | ||
| Shares outstanding – Institutional Class1 |
3,000,847 | |||
| Net asset value per share – Institutional Class |
$35.96 | |||
| 1 | The Fund has an unlimited number of authorized shares. |
| 2 | Maximum offering price is computed as 100/94.25 of net asset value. On investments of $50,000 or more, the offering price is reduced. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Precious Metals Fund | 13
Table of Contents
Consolidated statement of operations—year ended March 31, 2020
| Investment income |
||||
| Dividends (net of foreign withholding taxes of $226,743) |
$ | 3,089,899 | ||
| Income from affiliated securities |
85,426 | |||
|
|
|
|||
| Total investment income |
3,175,325 | |||
|
|
|
|||
| Expenses |
||||
| Management fee |
2,042,319 | |||
| Administration fees |
| |||
| Class A |
369,557 | |||
| Class C |
31,875 | |||
| Administrator Class |
11,842 | |||
| Institutional Class |
148,116 | |||
| Shareholder servicing fees |
| |||
| Class A |
439,948 | |||
| Class C |
37,947 | |||
| Administrator Class |
22,773 | |||
| Distribution fee |
| |||
| Class C |
113,728 | |||
| Custody and accounting fees |
42,395 | |||
| Professional fees |
58,287 | |||
| Registration fees |
75,545 | |||
| Shareholder report expenses |
65,302 | |||
| Trustees’ fees and expenses |
20,771 | |||
| Transfer agent fees |
9,967 | |||
| Other fees and expenses |
20,491 | |||
|
|
|
|||
| Total expenses |
3,510,863 | |||
| Less: Fee waivers and/or expense reimbursements |
| |||
| Fund-level |
(257,353 | ) | ||
| Class A |
(61,361 | ) | ||
| Class C |
(4,497 | ) | ||
| Administrator Class |
(8,218 | ) | ||
|
|
|
|||
| Net expenses |
3,179,434 | |||
|
|
|
|||
| Net investment loss |
(4,109 | ) | ||
|
|
|
|||
| Realized and unrealized gains (losses) on investments |
||||
| Net realized gains (losses) on |
| |||
| Unaffiliated securities |
18,416,695 | |||
| Commodities |
1,334,863 | |||
|
|
|
|||
| Net realized gains on investments |
19,751,558 | |||
|
|
|
|||
| Net change in unrealized gains (losses) on |
| |||
| Unaffiliated securities |
(12,525,393 | ) | ||
| Commodities |
844,177 | |||
|
|
|
|||
| Net change in unrealized gains (losses) on investments |
(11,681,216 | ) | ||
|
|
|
|||
| Net realized and unrealized gains (losses) on investments |
8,070,342 | |||
|
|
|
|||
| Net increase in net assets resulting from operations |
$ | 8,066,233 | ||
|
|
|
|||
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Precious Metals Fund
Table of Contents
Consolidated statement of changes in net assets
| Year ended March 31, 2020 |
Year ended March 31, 2019 |
|||||||||||||||
| Operations |
||||||||||||||||
| Net investment loss |
$ | (4,109 | ) | $ | (214,605 | ) | ||||||||||
| Net realized gains (losses) on investments |
19,751,558 | (7,313,853 | ) | |||||||||||||
| Net change in unrealized gains (losses) on investments |
(11,681,216 | ) | 14,726,301 | |||||||||||||
|
|
|
|||||||||||||||
| Net increase in net assets resulting from operations |
8,066,233 | 7,197,843 | ||||||||||||||
|
|
|
|||||||||||||||
| Distributions to shareholder from net investment income and net realized gains |
||||||||||||||||
| Class A |
(201,509 | ) | 0 | |||||||||||||
| Administrator Class |
(21,782 | ) | 0 | |||||||||||||
| Institutional Class |
(467,271 | ) | 0 | |||||||||||||
|
|
|
|||||||||||||||
| Total distributions to shareholders |
(690,562 | ) | 0 | |||||||||||||
|
|
|
|||||||||||||||
| Capital share transactions |
Shares | Shares | ||||||||||||||
| Proceeds from shares sold |
||||||||||||||||
| Class A |
1,235,822 | 50,200,605 | 1,198,292 | 37,973,472 | ||||||||||||
| Class C |
74,680 | 2,659,850 | 42,566 | 1,175,460 | ||||||||||||
| Administrator Class |
38,004 | 1,577,864 | 22,524 | 739,042 | ||||||||||||
| Institutional Class |
1,902,844 | 79,061,772 | 1,646,466 | 53,786,635 | ||||||||||||
|
|
|
|||||||||||||||
| 133,500,091 | 93,674,609 | |||||||||||||||
|
|
|
|||||||||||||||
| Reinvestment of distributions |
||||||||||||||||
| Class A |
4,658 | 188,894 | 0 | 0 | ||||||||||||
| Administrator Class |
518 | 21,226 | 0 | 0 | ||||||||||||
| Institutional Class |
8,995 | 371,239 | 0 | 0 | ||||||||||||
|
|
|
|||||||||||||||
| 581,359 | 0 | |||||||||||||||
|
|
|
|||||||||||||||
| Payment for shares redeemed |
||||||||||||||||
| Class A |
(1,873,744 | ) | (73,583,351 | ) | (1,822,759 | ) | (56,867,045 | ) | ||||||||
| Class C |
(190,365 | ) | (6,607,315 | ) | (678,903 | ) | (19,431,951 | ) | ||||||||
| Administrator Class |
(50,212 | ) | (1,989,528 | ) | (63,191 | ) | (2,054,168 | ) | ||||||||
| Institutional Class |
(1,671,738 | ) | (65,806,860 | ) | (1,367,558 | ) | (43,913,813 | ) | ||||||||
|
|
|
|||||||||||||||
| (147,987,054 | ) | (122,266,977 | ) | |||||||||||||
|
|
|
|||||||||||||||
| Net decrease in net assets resulting from capital share transactions |
(13,905,604 | ) | (28,592,368 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Total decrease in net assets |
(6,529,933 | ) | (21,394,525 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Net assets |
||||||||||||||||
| Beginning of period |
281,284,429 | 302,678,954 | ||||||||||||||
|
|
|
|||||||||||||||
| End of period |
$ | 274,754,496 | $ | 281,284,429 | ||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Precious Metals Fund | 15
Table of Contents
Consolidated financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$33.94 | $32.80 | $35.99 | $32.73 | $28.99 | |||||||||||||||
| Net investment loss |
(0.03 | )1 | (0.03 | )1 | (0.11 | )1 | (0.22 | )1 | (0.05 | ) | ||||||||||
| Net realized and unrealized gains (losses) on investments |
1.44 | 1.17 | (2.60 | ) | 3.85 | 3.79 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
1.41 | 1.14 | (2.71 | ) | 3.63 | 3.74 | ||||||||||||||
| Distributions to shareholder from net investment income |
(0.05 | ) | 0.00 | (0.48 | ) | (0.37 | ) | 0.00 | ||||||||||||
| Net asset value, end of period |
$35.30 | $33.94 | $32.80 | $35.99 | $32.73 | |||||||||||||||
| Total return2 |
4.13 | % | 3.48 | % | (7.56 | )% | 11.24 | % | 12.90 | % | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.20 | % | 1.22 | % | 1.21 | % | 1.20 | % | 1.23 | % | ||||||||||
| Net expenses |
1.09 | % | 1.09 | % | 1.04 | % | 1.09 | % | 1.10 | % | ||||||||||
| Net investment loss |
(0.08 | )% | (0.11 | )% | (0.32 | )% | (0.57 | )% | (0.24 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate3 |
25 | % | 19 | % | 27 | % | 21 | % | 18 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$147,020 | $162,860 | $177,859 | $242,423 | $236,310 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Total return calculations do not include any sales charges. |
| 3 | Portfolio turnover rate includes the purchases and sales transactions of its wholly-owned subsidiary. |
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Precious Metals Fund
Table of Contents
Consolidated financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$29.88 | $29.09 | $32.07 | $29.10 | $25.97 | |||||||||||||||
| Net investment loss |
(0.29 | )1 | (0.24 | )1 | (0.33 | )1 | (0.46 | )1 | (0.24 | )1 | ||||||||||
| Net realized and unrealized gains (losses) on investments |
1.28 | 1.03 | (2.30 | ) | 3.49 | 3.37 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
0.99 | 0.79 | (2.63 | ) | 3.03 | 3.13 | ||||||||||||||
| Distributions to shareholder from net investment income |
0.00 | 0.00 | (0.35 | ) | (0.06 | ) | 0.00 | |||||||||||||
| Net asset value, end of period |
$30.87 | $29.88 | $29.09 | $32.07 | $29.10 | |||||||||||||||
| Total return2 |
3.31 | % | 2.72 | % | (8.24 | )% | 10.42 | % | 12.05 | % | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.95 | % | 1.97 | % | 1.96 | % | 1.95 | % | 1.99 | % | ||||||||||
| Net expenses |
1.84 | % | 1.84 | % | 1.79 | % | 1.84 | % | 1.85 | % | ||||||||||
| Net investment loss |
(0.83 | )% | (0.88 | )% | (1.07 | )% | (1.32 | )% | (0.99 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate3 |
25 | % | 19 | % | 27 | % | 21 | % | 18 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$11,834 | $14,908 | $33,022 | $48,710 | $52,648 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Total return calculations do not include any sales charges. |
| 3 | Portfolio turnover rate includes the purchases and sales transactions of its wholly-owned subsidiary. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Precious Metals Fund | 17
Table of Contents
Consolidated financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$34.29 | $33.09 | $36.27 | $32.98 | $29.17 | |||||||||||||||
| Net investment income (loss) |
0.02 | 1 | 0.01 | 1 | (0.09 | )1 | (0.17 | )1 | (0.03 | )1 | ||||||||||
| Net realized and unrealized gains (losses) on investments |
1.45 | 1.19 | (2.59 | ) | 3.87 | 3.84 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
1.47 | 1.20 | (2.68 | ) | 3.70 | 3.81 | ||||||||||||||
| Distributions to shareholder from net investment income |
(0.10 | ) | 0.00 | (0.50 | ) | (0.41 | ) | 0.00 | ||||||||||||
| Net asset value, end of period |
$35.66 | $34.29 | $33.09 | $36.27 | $32.98 | |||||||||||||||
| Total return |
4.24 | % | 3.63 | % | (7.40 | )% | 11.37 | % | 13.06 | % | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.12 | % | 1.14 | % | 1.15 | % | 1.12 | % | 1.13 | % | ||||||||||
| Net expenses |
0.95 | % | 0.95 | % | 0.91 | % | 0.95 | % | 0.96 | % | ||||||||||
| Net investment income (loss) |
0.06 | % | 0.04 | % | (0.25 | )% | (0.44 | )% | (0.10 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate2 |
25 | % | 19 | % | 27 | % | 21 | % | 18 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$7,994 | $8,086 | $9,148 | $15,325 | $16,114 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Portfolio turnover rate includes the purchases and sales transactions of its wholly-owned subsidiary. |
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Precious Metals Fund
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Consolidated financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$34.57 | $33.30 | $36.47 | $33.21 | $29.33 | |||||||||||||||
| Net investment income (loss) |
0.09 | 1 | 0.04 | 0.02 | (0.09 | )1 | 0.02 | 1 | ||||||||||||
| Net realized and unrealized gains (losses) on investments |
1.46 | 1.23 | (2.67 | ) | 3.85 | 3.86 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
1.55 | 1.27 | (2.65 | ) | 3.76 | 3.88 | ||||||||||||||
| Distributions to shareholders from net investment income |
(0.16 | ) | 0.00 | (0.52 | ) | (0.50 | ) | 0.00 | ||||||||||||
| Net asset value, end of period |
$35.96 | $34.57 | $33.30 | $36.47 | $33.21 | |||||||||||||||
| Total return |
4.43 | % | 3.81 | % | (7.27 | )% | 11.49 | % | 13.23 | % | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
0.87 | % | 0.89 | % | 0.88 | % | 0.88 | % | 0.88 | % | ||||||||||
| Net expenses |
0.79 | % | 0.79 | % | 0.73 | % | 0.79 | % | 0.80 | % | ||||||||||
| Net investment income (loss) |
0.22 | % | 0.21 | % | 0.01 | % | (0.24 | )% | 0.06 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate2 |
25 | % | 19 | % | 27 | % | 21 | % | 18 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$107,907 | $95,431 | $82,650 | $89,680 | $60,156 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Portfolio turnover rate includes the purchases and sales transactions of its wholly-owned subsidiary. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Precious Metals Fund | 19
Table of Contents
Notes to consolidated financial statements
1. ORGANIZATION
Wells Fargo Funds Trust (the “Trust”), a Delaware statutory trust organized on March 10, 1999, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As an investment company, the Trust follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. These financial statements report on the Wells Fargo Precious Metals Fund (the “Fund”) which is a non-diversified series of the Trust.
2. INVESTMENT IN SUBSIDIARY
The Fund invests in precious metals and minerals through Special Investments (Cayman) SPC (the “Subsidiary”), a wholly-owned subsidiary incorporated on May 3, 2005 under the laws of the Cayman Islands as an exempted segregated portfolio company with limited liability. As of March 31, 2020, the Subsidiary held $12,127,254 in gold bullion representing 100.35% of its net assets. The Fund is the sole shareholder of the Subsidiary. As of March 31, 2020, the Fund held $12,085,293 in the Subsidiary, representing 4.40% of the Fund’s net assets prior to consolidation.
The consolidated financial statements of the Fund include the financial results of the Subsidiary. The Consolidated Portfolio of Investments includes positions of the Fund and the Subsidiary and the consolidated financial statements include the accounts of the Fund and the Subsidiary. Accordingly, all interfund balances and transactions between the Fund and the Subsidiary have been eliminated in consolidation.
3. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund, are in conformity with U.S. generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Securities valuation
All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern Time), although the Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the principal exchange or market that day, a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
Investments in commodities are valued at their last traded price.
The values of securities denominated in foreign currencies are translated into U.S. dollars at rates provided by an independent foreign currency pricing source at a time each business day specified by the Wells Fargo Asset Management Pricing Committee at Wells Fargo Funds Management, LLC (“Funds Management”).
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore may not fully reflect trading or events that occur after the close of the principal exchange in which the foreign securities are traded, but before the close of the New York Stock Exchange. If such trading or events are expected to materially affect the value of such securities, then fair value pricing procedures approved by the Board of Trustees of the Fund are applied. These procedures take into account multiple factors including movements in U.S. securities markets after foreign exchanges close. Foreign securities that are fair valued under these procedures are categorized as Level 2 and the application of these procedures may result in transfers between Level 1 and Level 2. Depending on market activity, such fair valuations may be frequent. Such fair value pricing may result in net asset values that are higher or lower than net asset values based on the last reported sales price or latest quoted bid price. On March 31, 2020, such fair value pricing was used in pricing certain foreign securities.
Investments in registered open-end investment companies are valued at net asset value.
Investments which are not valued using any of the methods discussed above are valued at their fair value, as determined in good faith by the Board of Trustees. The Board of Trustees has established a Valuation Committee comprised of the Trustees and has delegated to it the authority to take any actions regarding the valuation of portfolio securities that the Valuation Committee deems necessary or appropriate, including determining the fair value of portfolio securities, unless the determination has been delegated to the Wells Fargo Asset Management Pricing Committee. The Board of Trustees retains the authority to make or ratify any valuation decisions or approve any changes to the Valuation Procedures as it deems appropriate. On a quarterly basis, the Board of Trustees receives reports on any valuation actions taken by the Valuation Committee or the Wells Fargo Asset Management Pricing Committee which may include items for ratification.
20 | Wells Fargo Precious Metals Fund
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Notes to consolidated financial statements
Foreign currency translation
The accounting records of the Fund are maintained in U.S. dollars. The values of other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at rates provided by an independent foreign currency pricing source at a time each business day specified by the Wells Fargo Asset Management Pricing Committee. Purchases and sales of securities, and income and expenses are converted at the rate of exchange on the respective dates of such transactions. Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded and the U.S. dollar equivalent of the amounts actually paid or received. Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities other than investments in securities resulting from changes in exchange rates. The changes in net assets arising from changes in exchange rates of securities and the changes in net assets resulting from changes in market prices of securities are not separately presented. Such changes are included in net realized and unrealized gains or losses from investments.
Security transactions and income recognition
Securities transactions and commodities are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date, except for certain dividends from foreign securities, which are recorded as soon as the custodian verifies the ex-dividend date. Dividend income from foreign securities is recorded net of foreign taxes withheld where recovery of such taxes is not assured.
Distributions to shareholders
Distributions to shareholders from net investment income and any net realized gains are recorded on the ex-dividend date and paid at least annually. Such distributions are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles. Dividend sources are estimated at the time of declaration. The tax character of distributions is determined as of the Fund’s fiscal year end. Therefore, a portion of the Fund’s distributions made prior to the Fund’s fiscal year end may be categorized as a tax return of capital at year end.
Federal and other taxes
The Fund intends to continue to qualify as a regulated investment company by distributing substantially all of its investment company taxable income and any net realized capital gains (after reduction for capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes was required.
The Subsidiary is classified as a controlled foreign corporation under Subchapter N of the Internal Revenue Code. Therefore, the Fund is required to increase its taxable income by its share of the Subsidiary’s income. Net investment losses of the Subsidiary cannot be deducted by the Fund in the current period nor carried forward to offset taxable income in future periods.
The Fund’s income and federal excise tax returns and all financial records supporting those returns for the prior three fiscal years are subject to examination by the federal and Delaware revenue authorities. Management has analyzed the Fund’s tax positions taken on federal, state, and foreign tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability.
As of March 31, 2020, the aggregate cost of all investments for federal income tax purposes was $206,241,921 and the unrealized gains (losses) consisted of:
| Gross unrealized gains |
$ | 78,646,977 | ||
| Gross unrealized losses |
(11,187,650 | ) | ||
| Net unrealized gains |
$ | 67,459,327 | ||
As of March 31, 2020, the Fund had capital loss carryforwards which consist of $29,600,089 in short-term capital losses and $143,020,683 in long-term capital losses.
Class allocations
The separate classes of shares offered by the Fund differ principally in applicable sales charges, distribution, shareholder servicing, and administration fees. Class specific expenses are charged directly to that share class. Investment income, common fund-level expenses, and realized and unrealized gains (losses) on investments are allocated daily to each class of shares based on the relative proportion of net assets of each class.
Wells Fargo Precious Metals Fund | 21
Table of Contents
Notes to consolidated financial statements
4. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
| ∎ | Level 1 – quoted prices in active markets for identical securities |
| ∎ | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) |
| ∎ | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The inputs or methodologies used for valuing investments in securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of March 31, 2020:
| Quoted prices (Level 1) |
Other significant observable inputs (Level 2) |
Significant (Level 3) |
Total | |||||||||||||
| Assets |
||||||||||||||||
| Investments in: |
||||||||||||||||
| Common stocks |
||||||||||||||||
| Australia |
$ | 0 | $ | 31,569,742 | $ | 0 | $ | 31,569,742 | ||||||||
| Canada |
142,396,045 | 21,105,316 | 0 | 163,501,361 | ||||||||||||
| South Africa |
14,618,327 | 0 | 0 | 14,618,327 | ||||||||||||
| United States |
43,350,504 | 0 | 0 | 43,350,504 | ||||||||||||
| Commodities |
12,127,254 | 0 | 0 | 12,127,254 | ||||||||||||
| Short-term investments |
||||||||||||||||
| Investment companies |
8,534,060 | 0 | 0 | 8,534,060 | ||||||||||||
| Total assets |
$ | 221,026,190 | $ | 52,675,058 | $ | 0 | $ | 273,701,248 | ||||||||
Additional sector, industry or geographic detail is included in the Consolidated Portfolio of Investments.
For the year ended March 31, 2020, the Fund did not have any transfers into/out of Level 3.
5. TRANSACTIONS WITH AFFILIATES
Management fee
Funds Management, an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”), is the manager of the Fund and provides advisory and fund-level administrative services under an investment management agreement. Under the investment management agreement, Funds Management is responsible for, among other services, implementing the investment objectives and strategies of the Fund, supervising the subadviser and providing fund-level administrative services in connection with the Fund’s operations. As compensation for its services under the investment management agreement, Funds Management is entitled to receive a management fee at the following annual rate based on the Fund’s average daily net assets:
| Average daily net assets | Management fee | |||
| First $500 million |
0.650 | % | ||
| Next $500 million |
0.600 | |||
| Next $1 billion |
0.550 | |||
| Next $2 billion |
0.525 | |||
| Next $1 billion |
0.500 | |||
| Next $5 billion |
0.490 | |||
| Over $10 billion |
0.480 | |||
22 | Wells Fargo Precious Metals Fund
Table of Contents
Notes to consolidated financial statements
For the year ended March 31, 2020, the management fee was equivalent to an annual rate of 0.65% of the Fund’s average daily net assets.
The Subsidiary has entered into a separate advisory contract with Funds Management to manage the investment and reinvestment of its assets in conformity with its investment objectives and restrictions. Under this agreement, the Subsidiary does not pay Funds Management a fee for its services.
Funds Management has retained the services of a subadviser to provide daily portfolio management to the Fund. The fee for subadvisory services is borne by Funds Management. Wells Capital Management Incorporated, an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo, is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.40% and declining to 0.30% as the average daily net assets of the Fund increase.
Administration fees
Under a class-level administration agreement, Funds Management provides class-level administrative services to the Fund, which includes paying fees and expenses for services provided by the transfer agent, sub-transfer agents, omnibus account servicers and record-keepers. As compensation for its services under the class-level administration agreement, Funds Management receives an annual fee which is calculated based on the average daily net assets of each class as follows:
| Class-level administration fee |
||||
| Class A, Class C |
0.21 | % | ||
| Administrator Class, Institutional Class |
0.13 | |||
Waivers and/or expense reimbursements
Funds Management has contractually waived and/or reimbursed management and administration fees to the extent necessary to maintain certain net operating expense ratios for the Fund. When each class of the Fund has exceeded its expense cap, Funds Management has waived fees and/or reimbursed expenses from fund-level expenses on a proportionate basis and then from class specific expenses. When only certain classes exceed their expense caps, waivers and/or reimbursements are applied against class specific expenses before fund-level expenses. Funds Management has committed through July 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 1.09% for Class A shares, 1.84% for Class C shares, 0.95% for Administrator Class shares, and 0.79% for Institutional Class shares. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees.
Distribution fee
The Trust has adopted a distribution plan for Class C shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. A distribution fee is charged to Class C shares and paid to Wells Fargo Funds Distributor, LLC (“Funds Distributor”), the principal underwriter, at an annual rate of 0.75% of the average daily net assets of Class C shares.
In addition, Funds Distributor is entitled to receive the front-end sales charge from the purchase of Class A shares and a contingent deferred sales charge on the redemption of certain Class A shares. Funds Distributor is also entitled to receive the contingent deferred sales charges from redemptions of Class C shares. For the year ended March 31, 2020, Funds Distributor received $12,465 from the sale of Class A shares. No contingent deferred sales charges were incurred by Class A and Class C shares for the year ended March 31, 2020.
Shareholder servicing fees
The Trust has entered into contracts with one or more shareholder servicing agents, whereby Class A, Class C, and Administrator Class of the Fund are charged a fee at an annual rate of 0.25% of the average daily net assets of each respective class. A portion of these total shareholder servicing fees were paid to affiliates of Wells Fargo.
Interfund transactions
The Fund may purchase or sell portfolio investment securities to certain other Wells Fargo affiliates pursuant to Rule 17a-7 under the 1940 Act and under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which do not incur broker commissions, are effected at current market prices.
Wells Fargo Precious Metals Fund | 23
Table of Contents
Notes to consolidated financial statements
6. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the year ended March 31, 2020 were $74,843,220 and $91,949,997, respectively. These amounts include purchase and sales transactions of the Subsidiary.
7. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $280,000,000 revolving credit agreement whereby the Fund is permitted to use bank borrowings for temporary or emergency purposes, such as to fund shareholder redemption requests. Interest under the credit agreement is charged to the Fund based on a borrowing rate equal to the higher of the Federal Funds rate in effect on that day plus 1.25% or the overnight LIBOR rate in effect on that day plus 1.25%. In addition, an annual commitment fee equal to 0.25% of the unused balance is allocated to each participating fund.
For the year ended March 31, 2020, there were no borrowings by the Fund under the agreement.
8. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid for the year ended March 31, 2020 was $690,562 of ordinary income. For the year ended March 31, 2019, the Fund did not pay any distributions to shareholders.
As of March 31, 2020, the components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income |
Unrealized gains |
Capital loss carryforward | ||
| $1,437,786 | $67,447,584 | $(172,620,772) | ||
9. CONCENTRATION RISKS
Concentration risks result from exposure to a limited number of sectors or geographic regions. As of the end of the period, the Fund concentrated its portfolio in investments related to precious metals and minerals with a geographic emphasis in Canada. A fund that invests a substantial portion of its assets in any sector or geographic region may be more affected by changes in that sector or geographic region than would be a fund whose investments are not heavily weighted in any sector or geographic region.
10. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
11. NEW ACCOUNTING PRONOUNCEMENT
In August 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 updates the disclosure requirements for fair value measurements by modifying or removing certain disclosures and adding certain new disclosures. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Management has adopted the removal and modification of disclosures early, as permitted, and will adopt the additional new disclosures at the effective date.
12. CORONAVIRUS (COVID-19) PANDEMIC
On March 11, 2020, the World Health Organization announced that it had made the assessment that coronavirus disease 2019 (“COVID-19”) is a pandemic. The impacts of COVID-19 are adversely affecting the entire global economy, individual companies and investment products, and the market in general. There is significant uncertainty around the extent and duration of business disruptions related to COVID-19 and the impacts may be short term or may last for an extended period of time. The risk of further spreading of COVID-19 has led to significant uncertainty and volatility in the financial markets. The value of the Fund and the securities in which the Fund invests have generally been adversely affected by impacts caused by COVID-19.
24 | Wells Fargo Precious Metals Fund
Table of Contents
Report of independent registered public accounting firm
TO THE SHAREHOLDERS OF THE FUND AND BOARD OF TRUSTEES WELLS FARGO FUNDS TRUST:
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities of Wells Fargo Precious Metals Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the consolidated portfolio of investments, as of March 31, 2020, the related consolidated statement of operations for the year then ended, the consolidated statements of changes in net assets for each of the years in the two-year period then ended, and the related consolidated notes (collectively, the consolidated financial statements) and the consolidated financial highlights for each of the years in the five-year period then ended. In our opinion, the consolidated financial statements and consolidated financial highlights present fairly, in all material respects, the consolidated financial position of the Fund as of March 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of March 31, 2020, by correspondence with the custodian and transfer agent. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and consolidated financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have not been able to determine the specific year that we began serving as the auditor of one or more Wells Fargo Funds investment companies; however we are aware that we have served as the auditor of one or more Wells Fargo Funds investment companies since at least 1955.
Boston, Massachusetts
May 28, 2020
Wells Fargo Precious Metals Fund | 25
Table of Contents
TAX INFORMATION
For corporate shareholders, pursuant to Section 854 of the Internal Revenue Code, 61.55% of ordinary income dividends qualify for the corporate dividends-received deduction for the fiscal year ended March 31, 2020.
Pursuant to Section 854 of the Internal Revenue Code, $690,562 of income dividends paid during the fiscal year ended March 31, 2020 has been designated as qualified dividend income (QDI).
For the fiscal year ended March 31, 2020, $15,952 has been designated as interest-related dividends for nonresident alien shareholders pursuant to Section 871 of the Internal Revenue Code.
Pursuant to Section 853 of the Internal Revenue Code, the Fund expects to designate amounts as foreign taxes paid for the fiscal year ended March 31, 2020. Additional details will be available in the semiannual report.
PROXY VOTING INFORMATION
A description of the policies and procedures used to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-222-8222, visiting our website at wfam.com, or visiting the SEC website at sec.gov. Information regarding how the proxies related to portfolio securities were voted during the most recent 12-month period ended June 30 is available on the website at wfam.com or by visiting the SEC website at sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. Shareholders may view the filed Form N-PORT by visiting the SEC website at sec.gov.
26 | Wells Fargo Precious Metals Fund
Table of Contents
Other information (unaudited)
BOARD OF TRUSTEES AND OFFICERS
Each of the Trustees and Officers1 listed in the table below acts in identical capacities for each fund in the Wells Fargo family of funds, which consists of 147 mutual funds comprising the Wells Fargo Funds Trust, Wells Fargo Variable Trust, Wells Fargo Master Trust and four closed-end funds (collectively the “Fund Complex”). This table should be read in conjunction with the Prospectus and the Statement of Additional Information2. The mailing address of each Trustee and Officer is 525 Market Street, 12th Floor, San Francisco, CA 94105. Each Trustee and Officer serves an indefinite term, however, each Trustee serves such term until reaching the mandatory retirement age established by the Trustees.
Independent Trustees
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| William R. Ebsworth (Born 1957) | Trustee, since 2015 |
Retired. From 1984 to 2013, equities analyst, portfolio manager, research director and chief investment officer at Fidelity Management and Research Company in Boston, Tokyo, and Hong Kong, and retired in 2013 as Chief Investment Officer of Fidelity Strategic Advisers, Inc. where he led a team of investment professionals managing client assets. Prior thereto, Board member of Hong Kong Securities Clearing Co., Hong Kong Options Clearing Corp., the Thailand International Fund, Ltd., Fidelity Investments Life Insurance Company, and Empire Fidelity Investments Life Insurance Company. Audit Committee Chair and Investment Committee Chair of the Vincent Memorial Hospital Endowment (non-profit organization). Mr. Ebsworth is a CFA® charterholder. | N/A | |||
| Jane A. Freeman (Born 1953) | Trustee, since 2015; Chair Liaison, since 2018 |
Retired. From 2012 to 2014 and 1999 to 2008, Chief Financial Officer of Scientific Learning Corporation. From 2008 to 2012, Ms. Freeman provided consulting services related to strategic business projects. Prior to 1999, Portfolio Manager at Rockefeller & Co. and Scudder, Stevens & Clark. Board member of the Harding Loevner Funds from 1996 to 2014, serving as both Lead Independent Director and chair of the Audit Committee. Board member of the Russell Exchange Traded Funds Trust from 2011 to 2012 and the chair of the Audit Committee. Ms. Freeman is a Board Member of The Ruth Bancroft Garden (non-profit organization). She is also an inactive Chartered Financial Analyst. | N/A | |||
| Isaiah Harris, Jr. (Born 1952) | Trustee, since 2009; Audit Committee Chairman, since 2019 |
Retired. Chairman of the Board of CIGNA Corporation since 2009, and Director since 2005. From 2003 to 2011, Director of Deluxe Corporation. Prior thereto, President and CEO of BellSouth Advertising and Publishing Corp. from 2005 to 2007, President and CEO of BellSouth Enterprises from 2004 to 2005 and President of BellSouth Consumer Services from 2000 to 2003. Emeritus member of the Iowa State University Foundation Board of Governors. Emeritus Member of the Advisory Board of Iowa State University School of Business. Advisory Board Member, Palm Harbor Academy (private school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
| Judith M. Johnson (Born 1949) | Trustee, since 2008; Audit Committee Chairman, from 2009 to 2018 |
Retired. Prior thereto, Chief Executive Officer and Chief Investment Officer of Minneapolis Employees Retirement Fund from 1996 to 2008. Ms. Johnson is an attorney, certified public accountant and a certified managerial accountant. | N/A | |||
Wells Fargo Precious Metals Fund | 27
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Other information (unaudited)
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| David F. Larcker (Born 1950) | Trustee, since 2009 |
James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | N/A | |||
| Olivia S. Mitchell (Born 1953) | Trustee, since 2006; Nominating and Governance Committee Chair, since 2018 |
International Foundation of Employee Benefit Plans Professor, Wharton School of the University of Pennsylvania since 1993. Director of Wharton’s Pension Research Council and Boettner Center on Pensions & Retirement Research, and Research Associate at the National Bureau of Economic Research. Previously, Cornell University Professor from 1978 to 1993. | N/A | |||
| Timothy J. Penny (Born 1951) | Trustee, since 1996; Chairman, since 2018 |
President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | N/A | |||
| James G. Polisson (Born 1959) | Trustee, since 2018 |
Retired. Chief Marketing Officer, Source (ETF) UK Services, Ltd, from 2015 to 2017. From 2012 to 2015, Principal of The Polisson Group, LLC, a management consulting, corporate advisory and principal investing company. Chief Executive Officer and Managing Director at Russell Investments, Global Exchange Traded Funds from 2010 to 2012. Managing Director of Barclays Global Investors from 1998 to 2010 and Global Chief Marketing Officer for iShares and Barclays Global Investors from 2000 to 2010. Trustee of the San Francisco Mechanics’ Institute, a non-profit organization, from 2013 to 2015. Board member of the Russell Exchange Traded Fund Trust from 2011 to 2012. Director of Barclays Global Investors Holdings Deutschland GmbH from 2006 to 2009. Mr. Polisson is an attorney and has a retired status with the Massachusetts and District of Columbia Bar Associations. | N/A | |||
| Pamela Wheelock3 (Born 1959) | Trustee, since January 2020; previously Trustee from January 2018 to July 2019 |
Board member of the Destination Medical Center Economic Development Agency, Rochester, Minnesota since 2019. Acting Commissioner, Minnesota Department of Human Services, July 2019 through September 2019. Human Services Manager (part-time), Minnesota Department of Human Services, October 2019 through December 2019. Chief Operating Officer, Twin Cities Habitat for Humanity from 2017 to 2019. Vice President of University Services, University of Minnesota from 2012 to 2016. Prior thereto, on the Board of Directors, Governance Committee and Finance Committee for the Minnesota Philanthropy Partners (Saint Paul Foundation) from 2012 to 2018, Interim Chief Executive Officer of Blue Cross Blue Shield of Minnesota from 2011 to 2012, Chairman of the Board from 2009 to 2012 and Board Director from 2003 to 2015. Vice President, Leadership and Community Engagement, Bush Foundation, Saint Paul, Minnesota (a private foundation) from 2009 to 2011. Executive Vice President and Chief Financial Officer, Minnesota Sports and Entertainment from 2004 to 2009 and Senior Vice President from 2002 to 2004. Executive Vice President of the Minnesota Wild Foundation from 2004 to 2008. Commissioner of Finance, State of Minnesota, from 1999 to 2002. Currently Board Chair of the Minnesota Wild Foundation since 2010. | N/A | |||
| * | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
28 | Wells Fargo Precious Metals Fund
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Other information (unaudited)
Officers
| Name and year of birth |
Position held and length of service |
Principal occupations during past five years or longer | ||
| Andrew Owen (Born 1960) | President, since 2017 |
Executive Vice President of Wells Fargo & Company and Head of Affiliated Managers, Wells Fargo Asset Management, since 2014. In addition, Mr. Owen is currently President, Chief Executive Officer and Director of Wells Fargo Funds Management, LLC since 2017. Prior thereto, Executive Vice President responsible for marketing, investments and product development for Wells Fargo Funds Management, LLC, from 2009 to 2014. | ||
| Nancy Wiser1 (Born 1967) | Treasurer, since 2012 |
Executive Vice President of Wells Fargo Funds Management, LLC since 2011. Chief Operating Officer and Chief Compliance Officer at LightBox Capital Management LLC, from 2008 to 2011. | ||
| Michelle Rhee (Born 1966) | Chief Legal Officer, since 2019 |
Secretary of Wells Fargo Funds Management, LLC, Chief Legal Counsel of Wells Fargo Asset Management and Assistant General Counsel of Wells Fargo Bank, N.A. since 2018. Associate General Counsel and Managing Director of Bank of America Corporation from 2004 to 2018. | ||
| Catherine Kennedy (Born 1969) | Secretary, since 2019 |
Vice President of Wells Fargo Funds Management, LLC and Senior Counsel of the Wells Fargo Legal Department since 2010. Vice President and Senior Counsel of Evergreen Investment Management Company, LLC from 1998 to 2010. | ||
| Michael H. Whitaker (Born 1967) | Chief Compliance Officer, since 2016 |
Chief Compliance Officer of Wells Fargo Asset Management since 2016. Senior Vice President and Chief Compliance Officer for Fidelity Investments from 2007 to 2016. | ||
| David Berardi (Born 1975) | Assistant Treasurer, since 2009 |
Vice President of Wells Fargo Funds Management, LLC since 2009. Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010. Manager of Fund Reporting and Control for Evergreen Investment Management Company, LLC from 2004 to 2010. | ||
| Jeremy DePalma1 (Born 1974) | Assistant Treasurer, since 2009 |
Senior Vice President of Wells Fargo Funds Management, LLC since 2009. Senior Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010 and head of the Fund Reporting and Control Team within Fund Administration from 2005 to 2010. | ||
| 1 | Nancy Wiser acts as Treasurer of 65 funds in the Fund Complex. Jeremy DePalma acts as Treasurer of 82 funds and Assistant Treasurer of 65 funds in the Fund Complex. |
| 2 | The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request, by calling 1-800-222-8222 or by visiting the website at wfam.com. |
| 3 | Pamela Wheelock was re-appointed to the Board effective January 1, 2020. |
Wells Fargo Precious Metals Fund | 29
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Effective on or about May 1, 2020, if you purchase Fund shares through a Janney Montgomery Scott LLC (“Janney”) brokerage account, you will be eligible for the following load waivers (front-end sales charge waivers and contingent deferred sales charge (“CDSC”), or back-end sales charge, waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or SAI.
| Front-end sales charge* waivers on Class A shares available at Janney |
| Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family). |
| Shares purchased by employees and registered representatives of Janney or its affiliates and their family members as designated by Janney. |
| Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within ninety (90) days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e., right of reinstatement). |
| Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans. |
| Shares acquired through a right of reinstatement. |
| Class C shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund pursuant to Janney’s policies and procedures. |
| CDSC waivers on Class A and Class C shares available at Janney |
| Shares sold upon the death or disability of the shareholder. |
| Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
| Shares purchased in connection with a return of excess contributions from an IRA account. |
| Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulations. |
| Shares sold to pay Janney fees but only if the transaction is initiated by Janney. |
| Shares acquired through a right of reinstatement. |
| Shares exchanged into the same share class of a different fund. |
| Front-end sales charge* discounts available at Janney; breakpoints, rights of accumulation and/or letters of intent |
| Breakpoints as described in the Fund’s Prospectus. |
| Rights of accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Janney. Eligible fund family assets not held at Janney may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
| Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Janney Montgomery Scott may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
| * | Also referred to as an “initial sales charge.” |
30 | Wells Fargo Precious Metals Fund
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Effective on or after May 1, 2020, clients of Edward Jones (also referred to as “shareholders”) purchasing Fund shares on the Edward Jones commission and fee-based platforms are eligible only for the following sales charge discounts (also referred to as “breakpoints”) and waivers, which can differ from breakpoints and waivers described elsewhere in this Prospectus or SAI or through another broker-dealer. In all instances, it is the shareholder’s responsibility to inform Edward Jones at the time of purchase of any relationship, holdings of Wells Fargo Funds or other facts qualifying the purchaser for breakpoints or waivers. Edward Jones can ask for documentation of such circumstance.
| Breakpoints available at Edward Jones |
| Rights of Accumulation (ROA) |
| The applicable sales charge on a purchase of Class A shares is determined by taking into account all share classes (except any money market funds and retirement plan share classes) of Wells Fargo Funds held by the shareholder or in an account grouped by Edward Jones with other accounts for the purpose of providing certain pricing considerations (“pricing groups”). This includes all share classes held on the Edward Jones platform and/or held on another platform. The inclusion of eligible fund family assets in the rights of accumulation calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. |
| ROA is determined by calculating the higher of cost or market value (current shares x NAV). |
| Letter of Intent (LOI) |
| Through a LOI, shareholders can receive the sales charge and breakpoint discounts for purchases shareholders intend to makeover a 13-month period from the date Edward Jones receives the LOI. The LOI is determined by calculating the higher of cost or market value of qualifying holdings at LOI initiation in combination with the value that the shareholder intends to buy over a 13-month period to calculate the front-end sales charge and any breakpoint discounts. Each purchase the shareholder makes during that 13-month period will receive the sales charge and breakpoint discount that applies to the total amount. The inclusion of eligible fund family assets in the LOI calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. Purchases made before the LOI is received by Edward Jones are not covered under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if LOI is not met. |
| Sales charges are waived for the following shareholders and in the following situations at Edward Jones: |
| ● Associates of Edward Jones and its affiliates and their family members who are in the same pricing group (as determined by Edward Jones under its policies and procedures) as the associate. This waiver will continue for the remainder of the associate’s life if the associate retires from Edward Jones in good-standing. |
| ● Shares purchased in an Edward Jones fee-based program. |
| ● Shares purchased through reinvestment of capital gains distributions and dividend reinvestment. |
| ● Shares purchased from the proceeds of redeemed shares of the same fund family so long as the following conditions are met: 1) the proceeds are from the sale of shares within 60 days of the purchase, and 2) the sale and purchase are made in the same share class and the same account or the purchase is made in an individual retirement account with proceeds from liquidations in anon-retirement account. |
| ● Shares exchanged into Class A shares from another share class so long as the exchange is into the same fund and was initiated at the discretion of Edward Jones. Edward Jones is responsible for any remaining CDSC due to the fund company, if applicable. Any future purchases are subject to the applicable sales charge as disclosed in the prospectus. |
| ● Exchanges from Class C shares to Class A shares of the same fund, generally, in the 84th month following the anniversary of the purchase date or earlier at the discretion of Edward Jones. |
| If the shareholder purchases shares that are subject to a CDSC and those shares are redeemed before the CDSC is
expired, the shareholder is responsible to pay the CDSC except in the following conditions available at Edward Jones: |
| ● The death or disability of the shareholder. |
| ● Systematic withdrawals with up to 10% per year of the account value. |
| ● Return of excess contributions from an Individual Retirement Account (IRA). |
| ● Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulation. |
| ● Shares sold to pay Edward Jones fees or costs in such cases where the transaction is initiated by Edward Jones. |
| ● Shares exchanged in an Edward Jones fee-based program. |
| ● Shares acquired through NAV reinstatement. |
Wells Fargo Precious Metals Fund | 31
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| Other Important Information for accounts at Edward Jones: |
| Minimum Purchase Amounts ● $250 initial purchase minimum ● $50 subsequent purchase minimum |
|
Minimum Balances Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy: ● A fee-based account held on an Edward Jones platform ● A 529 account held on an Edward Jones platform ● An account with an active systematic investment plan or letter of intent (LOI) |
|
Changing Share Classes At any time it deems necessary, Edward Jones has the authority to exchange at NAV a shareholder’s holdings in a fund to Class A shares. |
32 | Wells Fargo Precious Metals Fund
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 219967
Kansas City, MO 64121-9967
Website: wfam.com
Individual investors: 1-800-222-8222
Retail investment professionals: 1-888-877-9275
Institutional investment professionals: 1-866-765-0778
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. If this report is used for promotional purposes, distribution of the report must be accompanied or preceded by a current prospectus. Before investing, please consider the investment objectives, risks, charges, and expenses of the investment. For a current prospectus and, if available, a summary prospectus, containing this information, call 1-800-222-8222 or visit the Fund’s website at wfam.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is the trade name for certain investment advisory/management firms owned by Wells Fargo & Company. These firms include but are not limited to Wells Capital Management Incorporated and Wells Fargo Funds Management, LLC. Certain products managed by WFAM entities are distributed by Wells Fargo Funds Distributor, LLC (a broker-dealer and Member FINRA).
This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
Table of Contents
Wells Fargo
Specialized Technology Fund
Beginning on January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, paper copies of the Wells Fargo Funds’ annual and semi-annual shareholder reports issued after this date will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-222-8222 or by enrolling at wellsfargo.com/advantagedelivery.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call 1-800-222-8222. Your election to receive reports in paper will apply to all Wells Fargo Funds held in your account with your financial intermediary or, if you are a direct investor, to all Wells Fargo Funds that you hold.
Table of Contents
The views expressed and any forward-looking statements are as of March 31, 2020, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Asset Management. Discussions of individual securities, or the markets generally, or any Wells Fargo Fund are not intended as individual recommendations. Future events or results may vary significantly from those expressed in any forward-looking statements. The views expressed are subject to change at any time in response to changing circumstances in the market. Wells Fargo Asset Management and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
Wells Fargo Specialized Technology Fund | 1
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Letter to shareholders (unaudited)
| 1 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value-weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index. |
| 2 | The Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. 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 as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. You cannot invest directly in an index. |
| 3 | The MSCI Emerging Markets (EM) Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure equity market performance of emerging markets. You cannot invest directly in an index. |
| 4 | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. You cannot invest directly in an index. |
| 5 | The Bloomberg Barclays Global Aggregate ex-USD Index is an unmanaged index that provides a broad-based measure of the global investment-grade fixed-income markets excluding the U.S. dollar-denominated debt market. You cannot invest directly in an index. |
| 6 | The Bloomberg Barclays Municipal Bond Index is an unmanaged index composed of long-term tax-exempt bonds with a minimum credit rating of Baa. You cannot invest directly in an index. |
| 7 | The ICE BofA U.S. High Yield Index is a market-capitalization-weighted index of domestic and Yankee high-yield bonds. The index tracks the performance of high-yield securities traded in the U.S. bond market. You cannot invest directly in an index. Copyright 2020. ICE Data Indices, LLC. All rights reserved. |
2 | Wells Fargo Specialized Technology Fund
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Letter to shareholders (unaudited)
Wells Fargo Specialized Technology Fund | 3
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Letter to shareholders (unaudited)
4 | Wells Fargo Specialized Technology Fund
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Performance highlights (unaudited)
Investment objective
The Fund seeks long-term capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Allianz Global Investors U.S. LLC
Portfolio managers
Huachen Chen, CFA®‡
Walter C. Price, Jr., CFA®‡
Michael A. Seidenberg
Average annual total returns (%) as of March 31, 2020
| Including sales charge | Excluding sales charge | Expense ratios1 (%) | ||||||||||||||||||||||||||||||||
| Inception date | 1 year | 5 year | 10 year | 1 year | 5 year | 10 year | Gross | Net2 | ||||||||||||||||||||||||||
| Class A (WFSTX) | 9-18-2000 | -6.96 | 13.03 | 14.35 | -1.31 | 14.38 | 15.02 | 1.41 | 1.39 | |||||||||||||||||||||||||
| Class C (WFTCX) | 9-18-2000 | -3.15 | 13.52 | 14.16 | -2.15 | 13.52 | 14.16 | 2.16 | 2.14 | |||||||||||||||||||||||||
| Administrator Class (WFTDX)3 | 7-30-2010 | – | – | – | -1.36 | * | 14.48 | 15.18 | 1.33 | 1.29 | ||||||||||||||||||||||||
| Institutional Class (WFTIX)4 | 10-31-2016 | – | – | – | -1.05 | 14.66 | 15.27 | 1.08 | 1.04 | |||||||||||||||||||||||||
| S&P North American Technology Index5 | – | – | – | – | 3.77 | 16.76 | 15.69 | – | – | |||||||||||||||||||||||||
| S&P 500 Index6 | – | – | – | – | -6.98 | 6.73 | 10.53 | – | – | |||||||||||||||||||||||||
| * | Total return differs from the return in the Financial Highlights in this report. The total return presented is calculated based on the NAV at which the shareholder transactions were processed. The NAV and total return presented in the Financial Highlights reflects certain adjustments made to the net assets of the Fund that are necessary under U.S. generally accepted accounting principles. |
Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes that a shareholder may pay on an investment in a fund. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance shown without sales charges would be lower if sales charges were reflected. Current performance may be lower or higher than the performance data quoted, which assumes the reinvestment of dividends and capital gains. Current month-end performance is available on the Fund’s website, wfam.com.
While the S&P 500 Index is comprised of U.S. equity securities of companies diversified across ten sectors, the Fund’s holdings are concentrated primarily in technology related stocks. Therefore, the performance of the S&P 500 Index is displayed only to show how the concentrated Fund performed compared with a diversified selection of U.S. equity securities.
Index returns do not include transaction costs associated with buying and selling securities, any mutual fund fees or expenses, or any taxes. It is not possible to invest directly in an index.
For Class A shares, the maximum front-end sales charge is 5.75%. For Class C shares, the maximum contingent deferred sales charge is 1.00%. Performance including a contingent deferred sales charge assumes the sales charge for the corresponding time period. Administrator Class and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Funds that concentrate their investments in limited sectors, such as information technology, are more vulnerable to adverse market, economic, regulatory, political, or other developments affecting those sectors. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). The Fund is exposed to convertible securities risk, foreign investment risk, non-diversification risk, and smaller-company securities risk. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Specialized Technology Fund
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Performance highlights (unaudited)
| Growth of $10,000 investment as of March 31, 20207 |
|
|
| ‡ | CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute. |
| 1 | Reflects the expense ratios as stated in the most recent prospectuses, which include the impact of 0.01% in acquired fund fees and expenses. The expense ratios shown are subject to change and may differ from the annualized expense ratios shown in the financial highlights of this report, which do not include acquired fund fees and expenses. |
| 2 | The manager has contractually committed through July 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 1.38% for Class A, 2.13% for Class C, 1.28% for Administrator Class, and 1.03% for Institutional Class. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses (if any), and extraordinary expenses are excluded from the expense cap. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Without this cap, the Fund’s returns would have been lower. The expense ratio paid by an investor is the net expense ratio (the total annual fund operating expenses after fee waivers) as stated in the prospectuses. |
| 3 | Historical performance shown for the Administrator Class shares prior to their inception reflects the performance of the Class A shares, and includes the higher expenses applicable to the Class A shares. If these expenses had not been included, returns for the Administrator Class shares would be higher. |
| 4 | Historical performance shown for the Institutional Class shares prior to their inception reflects the performance of the Administrator Class shares, and is not adjusted to reflect the Institutional Class expenses. If these expenses had been included, returns for the Institutional Class shares would be higher. |
| 5 | The S&P North American Technology Index is a modified market-capitalization-weighted index of select technology stocks. You cannot invest directly in an index. |
| 6 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index. |
| 7 | The chart compares the performance of Class A shares for the most recent ten years with the S&P North American Technology Index and the S&P 500 Index. The chart assumes a hypothetical investment of $10,000 in Class A shares and reflects all operating expenses and assumes the maximum initial sales charge of 5.75%. |
| 8 | The ten largest holdings, excluding cash, cash equivalents and any money market funds, are calculated based on the value of the investments divided by total net assets of the Fund. Holdings are subject to change and may have changed since the date specified. |
| 9 | Amounts are calculated based on the total long-term investments of the Fund. These amounts are subject to change and may have changed since the date specified. |
| ** | This security was no longer held at the end of the reporting period. |
Wells Fargo Specialized Technology Fund | 7
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Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
| ∎ | The Fund underperformed its benchmark, the S&P North American Technology Index, for the 12-month period that ended March 31, 2020. |
| ∎ | The primary drivers for the Fund’s relative performance included our underweights to large benchmark positions and our exposure to companies that were hurt by slower demand for technology hardware. |
| ∎ | The Fund’s overweights to some high-growth software companies providing services such as cloud, communications, and cyber security contributed to relative returns. |
Information technology continues to be a rich source of investment returns.
Information technology (IT) companies continued to demonstrate strong earnings growth and delivered stronger stock returns relative to the broad market. The period included sharp market rotations in the second half of 2019 and much higher market volatility amid the coronavirus crisis in early 2020. While there is elevated economic uncertainty ahead, businesses and consumers continue to turn to innovative technologies to improve productivity and reduce costs.
We believe one of the most attractive qualities of the IT sector is the regular emergence of new and disruptive trends. Many of these new technologies could expand the influence of technology into other areas of the economy as well as draw value from predecessor technologies within the sector. Our primary goal continues to be to identify these major trends ahead of the crowd and invest in the emerging leaders.
Over the 12-month period, we increased our exposure to select software companies that provide cloud services, cyber security solutions, remote work access services, etc. We also added to some semiconductor companies positioned to benefit from increased demand for PC and data center servers. Conversely, we reduced exposure to some companies where we expect negative earnings surprises, including companies with exposure to advertising and retail spending. We also reduced exposure to some semiconductor/hardware stocks with significant supply chain disruptions.
Over the course of the year, as we saw higher volatility and a rapidly changing economic landscape, we repositioned some holdings and reallocated proceeds to areas we believe had more attractive risk/reward characteristics. The largest contributors to the Fund’s realized gains included stocks that have been significant outperformers in recent years, including Google, Square, and ServiceNow. We continue to hold positions in these stocks, but in our view, the near-term risks associated with the economic changes warranted smaller exposure.
Our underweight to Apple Incorporated was a key detractor.
Our underweight position in Apple Incorporated, one of the largest holdings in the benchmark, was a top detractor from relative performance. The company’s strength was driven by better-than-expected growth in its services business segment. Higher-than-expected profitability supported a robust return of capital via a cash dividend and stock repurchases. While the iPhone product cycle remains uncertain, the consistent growth in the services segment is helping the company reaccelerate revenue growth. The Fund’s weighting in Apple continues to be significantly below that of the benchmark.
Twilio Incorporated was also a top detractor. The company provides a cloud-based platform that enables developers to build, scale, and operate real-time communications. At the end of October, Twilio reported strong core growth metrics, but a customer billing error caused the company to reset its revenue projections lower for the rest of the year. While the revision is disappointing, we believe the company is extending its lead in the communications platform-as-a-service market driven by differentiated solutions and strong developer relationships.
Other top detractors from relative returns included overweights to DXC Technology Company and NetApp, Incorporated, and an underweight to Microsoft Corporation.
Overweights to RingCentral, Incorporated, and Okta, Incorporated, were the largest contributors.
RingCentral provides cloud-based unified communications services that connect multiple users over multiple devices. The company’s solution replaces legacy business communication systems and offers advantages such as minimal upfront investment, rapid deployment, increased functionality, and ease of management. RingCentral has the largest scale among its cloud-based competitors, and we believe it is well positioned to achieve attractive growth in the mobile workforce era.
Okta has a compelling opportunity to disrupt the large market for identity and access management. With many applications and over 5,000 customers, Okta is beginning to see a network effect developing. We maintain our positive view of the company given its growing market opportunity, strong execution, and new product launches.
Other top contributors to relative returns included overweights to Advanced Micro Devices, Incorporated, and Atlassian Corporation PLC, as well as an underweight to Cisco Systems, Incorporated**.
Please see footnotes on page 7.
8 | Wells Fargo Specialized Technology Fund
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Performance highlights (unaudited)
We retain an optimistic outlook for the IT sector and for the Fund.
In our view, the IT sector continues to benefit from strong tailwinds, which should continue to drive attractive long-term appreciation. There is no question in our minds that the present events around the coronavirus crisis will spur the use of technology and change how we work in the future. Although it is too soon to predict the ultimate economic impact of the coronavirus outbreak, we do believe some industries within the technology sector are negatively affected while others likely will benefit. Companies exposed to travel, live events, off-line retail, and autos have seen a large negative impact on revenue and earnings. Additionally, supply chain disruptions have exposed vulnerabilities with having one geographic center for production, and we expect to see increased investment in diversification of production after this crisis.
In many cases, existing trends have been turbocharged. These include trends associated with the digital transformation, such as cloud, software as a service, artificial intelligence, cyber security, and automation. As companies adjust budgets due to supply and/or demand disruptions and reevaluate longer-term operational infrastructure, the need to reduce costs and improve efficiency should accelerate the move to less expensive, more productive solutions. We believe the global digital transformation will continue to progress due to numerous cost and productivity benefits relative to traditional technologies.
Please see footnotes on page 7.
Wells Fargo Specialized Technology Fund | 9
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As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and contingent deferred sales charges (if any) on redemptions and (2) ongoing costs, including management fees, distribution (12b-1) and/or shareholder servicing fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period from October 1, 2019 to March 31, 2020.
Actual expenses
The “Actual” line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Actual” line under the heading entitled “Expenses paid during period” for your applicable class of shares to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The “Hypothetical” line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and contingent deferred sales charges. Therefore, the “Hypothetical” line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning account value 10-1-2019 |
Ending account value 3-31-2020 |
Expenses paid during the period¹ |
Annualized net expense ratio |
|||||||||||||
| Class A |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 1,015.84 | $ | 6.80 | 1.35 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,018.25 | $ | 6.81 | 1.35 | % | ||||||||
| Class C |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 1,011.57 | $ | 10.71 | 2.13 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,014.35 | $ | 10.73 | 2.13 | % | ||||||||
| Administrator Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 1,015.45 | $ | 6.45 | 1.28 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,018.60 | $ | 6.46 | 1.28 | % | ||||||||
| Institutional Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 1,016.94 | $ | 5.19 | 1.03 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,019.85 | $ | 5.20 | 1.03 | % | ||||||||
| 1 | Expenses paid is equal to the annualized net expense ratio of each class multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year (to reflect the one-half-year period). |
10 | Wells Fargo Specialized Technology Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Common Stocks: 92.25% |
| |||||||||||||||
| Communication Services: 9.29% |
| |||||||||||||||
| Entertainment: 6.44% | ||||||||||||||||
| Activision Blizzard Incorporated |
66,030 | $ | 3,927,464 | |||||||||||||
| Electronic Arts Incorporated † |
12,700 | 1,272,159 | ||||||||||||||
| NetEase Incorporated ADR |
10,740 | 3,447,110 | ||||||||||||||
| Netflix Incorporated † |
23,205 | 8,713,478 | ||||||||||||||
| Take-Two Interactive Software Incorporated † |
53,325 | 6,324,878 | ||||||||||||||
| Zynga Incorporated Class A † |
431,260 | 2,954,131 | ||||||||||||||
| 26,639,220 | ||||||||||||||||
|
|
|
|||||||||||||||
| Interactive Media & Services: 2.85% | ||||||||||||||||
| Alphabet Incorporated Class C † |
6,320 | 7,348,959 | ||||||||||||||
| Facebook Incorporated Class A † |
12,505 | 2,085,834 | ||||||||||||||
| Tencent Holdings Limited ADR |
47,510 | 2,332,266 | ||||||||||||||
| 11,767,059 | ||||||||||||||||
|
|
|
|||||||||||||||
| Consumer Discretionary: 12.30% |
| |||||||||||||||
| Automobiles: 0.48% | ||||||||||||||||
| Tesla Motors Incorporated † |
3,800 | 1,991,200 | ||||||||||||||
|
|
|
|||||||||||||||
| Diversified Consumer Services: 0.53% | ||||||||||||||||
| TAL Education Group ADR † |
41,290 | 2,199,105 | ||||||||||||||
|
|
|
|||||||||||||||
| Internet & Direct Marketing Retail: 11.29% | ||||||||||||||||
| Alibaba Group Holding Limited ADR † |
17,305 | 3,365,476 | ||||||||||||||
| Amazon.com Incorporated † |
19,945 | 38,887,165 | ||||||||||||||
| GrubHub Incorporated † |
2,905 | 118,321 | ||||||||||||||
| JD.com Incorporated ADR † |
105,295 | 4,264,448 | ||||||||||||||
| 46,635,410 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care: 1.06% |
| |||||||||||||||
| Health Care Technology: 1.06% | ||||||||||||||||
| Veeva Systems Incorporated Class A † |
27,980 | 4,375,233 | ||||||||||||||
|
|
|
|||||||||||||||
| Industrials: 0.11% |
| |||||||||||||||
| Electrical Equipment: 0.11% | ||||||||||||||||
| Bloom Energy Corporation Class A †« |
85,375 | 446,511 | ||||||||||||||
|
|
|
|||||||||||||||
| Information Technology: 69.27% |
| |||||||||||||||
| Communications Equipment: 0.28% | ||||||||||||||||
| Telefonaktiebolaget LM Ericsson ADR |
101,425 | 820,528 | ||||||||||||||
| Viavi Solutions Incorporated † |
30,475 | 341,625 | ||||||||||||||
| 1,162,153 | ||||||||||||||||
|
|
|
|||||||||||||||
| Electronic Equipment, Instruments & Components: 0.56% | ||||||||||||||||
| Cognex Corporation |
19,540 | 824,979 | ||||||||||||||
| Flex Limited † |
83,590 | 700,066 | ||||||||||||||
| IPG Photonics Corporation † |
3,640 | 401,419 | ||||||||||||||
| Samsung SDI Company Limited |
2,070 | 403,009 | ||||||||||||||
| 2,329,473 | ||||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Specialized Technology Fund | 11
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| IT Services: 13.06% | ||||||||||||||||
| Akamai Technologies Incorporated † |
45,170 | $ | 4,132,603 | |||||||||||||
| DXC Technology Company |
40,585 | 529,634 | ||||||||||||||
| EPAM Systems Incorporated † |
11,170 | 2,073,822 | ||||||||||||||
| Fidelity National Information Services Incorporated |
37,636 | 4,578,043 | ||||||||||||||
| Fiserv Incorporated † |
57,815 | 5,491,847 | ||||||||||||||
| Global Payments Incorporated |
25,544 | 3,684,211 | ||||||||||||||
| MasterCard Incorporated Class A |
4,320 | 1,043,539 | ||||||||||||||
| MongoDB Incorporated † |
69,385 | 9,473,828 | ||||||||||||||
| Okta Incorporated † |
111,260 | 13,602,648 | ||||||||||||||
| PayPal Holdings Incorporated † |
15,385 | 1,472,960 | ||||||||||||||
| Shopify Incorporated Class A † |
1,345 | 560,771 | ||||||||||||||
| Square Incorporated Class A † |
17,785 | 931,578 | ||||||||||||||
| Twilio Incorporated Class A † |
50,770 | 4,543,407 | ||||||||||||||
| Visa Incorporated Class A |
11,555 | 1,861,742 | ||||||||||||||
| 53,980,633 | ||||||||||||||||
|
|
|
|||||||||||||||
| Semiconductors & Semiconductor Equipment: 13.40% | ||||||||||||||||
| Advanced Micro Devices Incorporated † |
212,930 | 9,684,056 | ||||||||||||||
| ASML Holding NV |
10,020 | 2,621,633 | ||||||||||||||
| Cree Incorporated † |
35,035 | 1,242,341 | ||||||||||||||
| Intel Corporation |
30,945 | 1,674,743 | ||||||||||||||
| KLA-Tencor Corporation |
5,900 | 848,066 | ||||||||||||||
| Lam Research Corporation |
34,305 | 8,233,200 | ||||||||||||||
| Micron Technology Incorporated † |
234,260 | 9,852,976 | ||||||||||||||
| NVIDIA Corporation |
46,975 | 12,382,610 | ||||||||||||||
| QUALCOMM Incorporated |
25,680 | 1,737,252 | ||||||||||||||
| STMicroelectronics NV NY Shares |
133,065 | 2,843,599 | ||||||||||||||
| Taiwan Semiconductor Manufacturing Company Limited ADR |
72,915 | 3,484,608 | ||||||||||||||
| Teradyne Incorporated |
14,705 | 796,570 | ||||||||||||||
| 55,401,654 | ||||||||||||||||
|
|
|
|||||||||||||||
| Software: 33.87% | ||||||||||||||||
| Alteryx Incorporated Class A † |
98,705 | 9,393,755 | ||||||||||||||
| Atlassian Corporation plc Class A † |
103,655 | 14,227,685 | ||||||||||||||
| Autodesk Incorporated † |
10,330 | 1,612,513 | ||||||||||||||
| Citrix Systems Incorporated |
7,070 | 1,000,759 | ||||||||||||||
| Coupa Software Incorporated † |
8,430 | 1,177,924 | ||||||||||||||
| Crowdstrike Holdings Incorporated Class A † |
207,315 | 11,543,299 | ||||||||||||||
| Datadog Incorporated Class A † |
655 | 23,567 | ||||||||||||||
| DocuSign Incorporated † |
14,515 | 1,341,186 | ||||||||||||||
| Dynatrace Incorporated † |
5,195 | 123,849 | ||||||||||||||
| Fortinet Incorporated † |
55,515 | 5,616,453 | ||||||||||||||
| Microsoft Corporation |
217,600 | 34,317,694 | ||||||||||||||
| Paycom Software Incorporated † |
82,320 | 16,629,463 | ||||||||||||||
| Proofpoint Incorporated † |
22,030 | 2,260,058 | ||||||||||||||
| RingCentral Incorporated Class A † |
90,815 | 19,244,607 | ||||||||||||||
| Slack Technologies Incorporated Class A † |
141,880 | 3,808,059 | ||||||||||||||
| Smartsheet Incorporated Class A † |
19,090 | 792,426 | ||||||||||||||
| Splunk Incorporated † |
38,890 | 4,909,085 | ||||||||||||||
| Workday Incorporated Class A † |
7,780 | 1,013,112 | ||||||||||||||
| Zendesk Incorporated † |
16,435 | 1,052,004 | ||||||||||||||
| Zscaler Incorporated † |
163,245 | 9,935,091 | ||||||||||||||
| 140,022,589 | ||||||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Specialized Technology Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Technology Hardware, Storage & Peripherals: 8.10% | ||||||||||||||||
| Apple Incorporated |
78,895 | $ | 20,062,210 | |||||||||||||
| NetApp Incorporated |
43,000 | 1,792,670 | ||||||||||||||
| Pure Storage Incorporated Class A † |
214,375 | 2,636,813 | ||||||||||||||
| Samsung Electronics Company Limited |
230,633 | 8,967,354 | ||||||||||||||
| 33,459,047 | ||||||||||||||||
|
|
|
|||||||||||||||
| Real Estate: 0.22% |
| |||||||||||||||
| Equity REITs: 0.22% | ||||||||||||||||
| Equinix Incorporated |
|
1,445 | 902,504 | |||||||||||||
|
|
|
|||||||||||||||
| Total Common Stocks (Cost $277,512,401) |
|
381,311,791 | ||||||||||||||
|
|
|
|||||||||||||||
| Exchange-Traded Funds: 0.96% | ||||||||||||||||
| VanEck Vectors Semiconductor ETF |
|
34,003 | 3,983,111 | |||||||||||||
|
|
|
|||||||||||||||
| Total Exchange-Traded Funds (Cost $3,524,999) |
|
3,983,111 | ||||||||||||||
|
|
|
|||||||||||||||
| Yield | ||||||||||||||||
| Short-Term Investments: 4.52% |
| |||||||||||||||
| Investment Companies: 4.52% | ||||||||||||||||
| Securities Lending Cash Investments LLC (l)(r)(u) |
2.11 | % | 53,589 | 53,595 | ||||||||||||
| Wells Fargo Government Money Market Fund Select Class (l)(u) |
0.35 | 18,610,094 | 18,610,094 | |||||||||||||
| Total Short-Term Investments (Cost $18,663,683) |
|
18,663,689 | ||||||||||||||
|
|
|
|||||||||||||||
| Total investments in securities (Cost $299,701,083) | 97.73 | % | 403,958,591 | |||||
| Other assets and liabilities, net |
2.27 | 9,402,647 | ||||||
|
|
|
|
|
|||||
| Total net assets | 100.00 | % | $ | 413,361,238 | ||||
|
|
|
|
|
|||||
| † | Non-income-earning security |
| « | All or a portion of this security is on loan. |
| (l) | The issuer of the security is an affiliated person of the Fund as defined in the Investment Company Act of 1940. |
| (r) | The investment is a non-registered investment company purchased with cash collateral received from securities on loan. |
| (u) | The rate represents the 7-day annualized yield at period end. |
Abbreviations:
| ADR | American depositary receipt |
| REIT | Real estate investment trust |
Investments in Affiliates
An affiliated investment is an investment in which the Fund owns at least 5% of the outstanding voting shares of the issuer or as a result of other relationships, such as the Fund and the issuer having the same investment manager. Transactions with issuers that were either affiliated persons of the Fund at the beginning of the period or the end of the period were as follows:
| Shares, beginning of period |
Shares purchased |
Shares sold |
Shares, end of period |
Net realized gains (losses) |
Net change in unrealized gains (losses) |
Income from affiliated securities |
Value, end of period |
% of net assets |
||||||||||||||||||||||||||||
| Short-Term Investments | ||||||||||||||||||||||||||||||||||||
| Investment Companies |
||||||||||||||||||||||||||||||||||||
| Securities Lending Cash Investments LLC |
20,473,818 | 295,611,253 | (316,031,482 | ) | 53,589 | $ | 2,907 | $ | 6 | $ | 356,061 | # | $ | 53,595 | ||||||||||||||||||||||
| Wells Fargo Government Money Market Fund Select Class |
18,717,955 | 270,190,090 | (270,297,951 | ) | 18,610,094 | 0 | 0 | 444,098 | 18,610,094 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $ | 2,907 | $ | 6 | $ | 800,159 | $ | 18,663,689 | 4.52 | % | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| # | Amount shown represents income before fees and rebates. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Specialized Technology Fund | 13
Table of Contents
Statement of assets and liabilities—March 31, 2020
| Assets |
||||
| Investments in unaffiliated securities (including $49,685 of securities loaned), at value (cost $281,037,400) |
$ | 385,294,902 | ||
| Investments in affiliated securities, at value (cost $18,663,683) |
18,663,689 | |||
| Receivable for investments sold |
9,762,150 | |||
| Receivable for Fund shares sold |
273,313 | |||
| Receivable for dividends |
149,461 | |||
| Receivable for securities lending income, net |
6,573 | |||
| Prepaid expenses and other assets |
18,009 | |||
|
|
|
|||
| Total assets |
414,168,097 | |||
|
|
|
|||
| Liabilities |
||||
| Payable upon receipt of securities loaned |
50,625 | |||
| Payable for Fund shares redeemed |
197,865 | |||
| Management fee payable |
305,836 | |||
| Administration fees payable |
70,870 | |||
| Distribution fee payable |
5,472 | |||
| Shareholder servicing fees payable |
79,014 | |||
| Trustees’ fees and expenses payable |
3,781 | |||
| Accrued expenses and other liabilities |
93,396 | |||
|
|
|
|||
| Total liabilities |
806,859 | |||
|
|
|
|||
| Total net assets |
$ | 413,361,238 | ||
|
|
|
|||
| Net assets consist of |
||||
| Paid-in capital |
$ | 240,773,895 | ||
| Total distributable earnings |
172,587,343 | |||
|
|
|
|||
| Total net assets |
$ | 413,361,238 | ||
|
|
|
|||
| Computation of net asset value and offering price per share |
||||
| Net assets – Class A |
$ | 344,949,077 | ||
| Shares outstanding – Class A1 |
28,564,164 | |||
| Net asset value per share – Class A |
$12.08 | |||
| Maximum offering price per share – Class A2 |
$12.82 | |||
| Net assets – Class C |
$8,035,259 | |||
| Shares outstanding – Class C1 |
913,219 | |||
| Net asset value per share – Class C |
$8.80 | |||
| Net assets – Administrator Class |
$11,872,898 | |||
| Shares outstanding – Administrator Class 1 |
957,854 | |||
| Net asset value per share – Administrator Class |
$12.40 | |||
| Net assets – Institutional Class |
$48,504,004 | |||
| Shares outstanding – Institutional Class1 |
3,876,935 | |||
| Net asset value per share – Institutional Class |
$12.51 | |||
| 1 | The Fund has an unlimited number of authorized shares. |
| 2 | Maximum offering price is computed as 100/94.25 of net asset value. On investments of $50,000 or more, the offering price is reduced. |
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Specialized Technology Fund
Table of Contents
Statement of operations—year ended March 31, 2020
| Investment income |
||||
| Dividends (net of foreign withholding taxes of $43,819) |
$ | 2,128,383 | ||
| Income from affiliated securities |
563,754 | |||
|
|
|
|||
| Total investment income |
2,692,137 | |||
|
|
|
|||
| Expenses |
||||
| Management fee |
4,215,502 | |||
| Administration fees |
||||
| Class A |
826,549 | |||
| Class C |
21,798 | |||
| Administrator Class |
23,602 | |||
| Institutional Class |
73,997 | |||
| Shareholder servicing fees |
||||
| Class A |
983,987 | |||
| Class C |
25,949 | |||
| Administrator Class |
45,389 | |||
| Distribution fee |
||||
| Class C |
77,817 | |||
| Custody and accounting fees |
46,738 | |||
| Professional fees |
41,215 | |||
| Registration fees |
75,673 | |||
| Shareholder report expenses |
58,925 | |||
| Trustees’ fees and expenses |
20,666 | |||
| Other fees and expenses |
18,045 | |||
|
|
|
|||
| Total expenses |
6,555,852 | |||
| Less: Fee waivers and/or expense reimbursements |
||||
| Fund-level |
(65,851 | ) | ||
| Class A |
(60,084 | ) | ||
| Administrator Class |
(3,724 | ) | ||
| Institutional Class |
(11,818 | ) | ||
|
|
|
|||
| Net expenses |
6,414,375 | |||
|
|
|
|||
| Net investment loss |
(3,722,238 | ) | ||
|
|
|
|||
| Realized and unrealized gains (losses) on investments |
||||
| Net realized gains on |
||||
| Unaffiliated securities |
74,059,757 | |||
| Affiliated securities |
2,907 | |||
|
|
|
|||
| Net realized gains on investments |
74,062,664 | |||
|
|
|
|||
| Net change in unrealized gains (losses) on |
| |||
| Unaffiliated securities |
(74,517,001 | ) | ||
| Affiliated securities |
6 | |||
|
|
|
|||
| Net change in unrealized gains (losses) on investments |
(74,516,995 | ) | ||
|
|
|
|||
| Net realized and unrealized gains (losses) on investments |
(454,331 | ) | ||
|
|
|
|||
| Net decrease in net assets resulting from operations |
$ | (4,176,569 | ) | |
|
|
|
|||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Specialized Technology Fund | 15
Table of Contents
Statement of changes in net assets
| Year ended March 31, 2020 |
Year ended March 31, 2019 |
|||||||||||||||
| Operations |
||||||||||||||||
| Net investment loss |
$ | (3,722,238 | ) | $ | (3,499,634 | ) | ||||||||||
| Net realized gains on investments |
74,062,664 | 35,766,720 | ||||||||||||||
| Net change in unrealized gains (losses) on investments |
(74,516,995 | ) | 32,208,814 | |||||||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
(4,176,569 | ) | 64,475,900 | |||||||||||||
|
|
|
|||||||||||||||
| Distributions to shareholders from net investment income and net realized gains |
||||||||||||||||
| Class A |
(31,171,888 | ) | (67,273,231 | ) | ||||||||||||
| Class C |
(1,047,506 | ) | (3,624,112 | ) | ||||||||||||
| Administrator Class |
(1,113,358 | ) | (4,975,885 | ) | ||||||||||||
| Institutional Class |
(4,318,998 | ) | (7,475,902 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Total distributions to shareholders |
(37,651,750 | ) | (83,349,130 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Capital share transactions |
Shares | Shares | ||||||||||||||
| Proceeds from shares sold |
||||||||||||||||
| Class A |
1,724,961 | 23,395,221 | 4,113,717 | 60,597,284 | ||||||||||||
| Class C |
171,525 | 1,707,541 | 268,796 | 3,062,171 | ||||||||||||
| Administrator Class |
266,990 | 3,760,903 | 1,538,764 | 23,150,690 | ||||||||||||
| Institutional Class |
1,773,569 | 24,663,966 | 2,894,403 | 42,700,368 | ||||||||||||
|
|
|
|||||||||||||||
| 53,527,631 | 129,510,513 | |||||||||||||||
|
|
|
|||||||||||||||
| Reinvestment of distributions |
||||||||||||||||
| Class A |
2,378,590 | 30,303,237 | 5,657,801 | 65,404,176 | ||||||||||||
| Class C |
107,421 | 999,020 | 398,400 | 3,489,984 | ||||||||||||
| Administrator Class |
84,495 | 1,104,349 | 419,248 | 4,955,513 | ||||||||||||
| Institutional Class |
323,832 | 4,268,105 | 620,076 | 7,372,701 | ||||||||||||
|
|
|
|||||||||||||||
| 36,674,711 | 81,222,374 | |||||||||||||||
|
|
|
|||||||||||||||
| Payment for shares redeemed |
||||||||||||||||
| Class A |
(5,688,194 | ) | (76,162,836 | ) | (4,727,403 | ) | (66,144,891 | ) | ||||||||
| Class C |
(517,350 | ) | (5,055,114 | ) | (914,962 | ) | (9,401,210 | ) | ||||||||
| Administrator Class |
(1,040,848 | ) | (14,045,822 | ) | (1,645,125 | ) | (21,244,618 | ) | ||||||||
| Institutional Class |
(1,951,266 | ) | (27,057,139 | ) | (1,697,391 | ) | (23,893,325 | ) | ||||||||
|
|
|
|||||||||||||||
| (122,320,911 | ) | (120,684,044 | ) | |||||||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets resulting from capital share transactions |
(32,118,569 | ) | 90,048,843 | |||||||||||||
|
|
|
|||||||||||||||
| Total increase (decrease) in net assets |
(73,946,888 | ) | 71,175,613 | |||||||||||||
|
|
|
|||||||||||||||
| Net assets |
||||||||||||||||
| Beginning of period |
487,308,126 | 416,132,513 | ||||||||||||||
|
|
|
|||||||||||||||
| End of period |
$ | 413,361,238 | $ | 487,308,126 | ||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Specialized Technology Fund
Table of Contents
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$13.33 | $14.08 | $10.95 | $9.39 | $10.74 | |||||||||||||||
| Net investment loss |
(0.11 | ) | (0.11 | ) | (0.10 | )1 | (0.03 | )1 | (0.06 | ) | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(0.01 | ) | 2.06 | 4.20 | 2.17 | 0.02 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(0.12 | ) | 1.95 | 4.10 | 2.14 | (0.04 | ) | |||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net realized gains |
(1.13 | ) | (2.70 | ) | (0.97 | ) | (0.58 | ) | (1.31 | ) | ||||||||||
| Net asset value, end of period |
$12.08 | $13.33 | $14.08 | $10.95 | $9.39 | |||||||||||||||
| Total return2 |
(1.31 | )% | 16.80 | % | 38.41 | % | 23.55 | % | (0.66 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.39 | % | 1.40 | % | 1.41 | % | 1.44 | % | 1.45 | % | ||||||||||
| Net expenses |
1.37 | % | 1.39 | % | 1.41 | % | 1.44 | % | 1.45 | % | ||||||||||
| Net investment loss |
(0.80 | )% | (0.77 | )% | (0.75 | )% | (0.28 | )% | (0.53 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
149 | % | 107 | % | 109 | % | 131 | % | 153 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$344,949 | $401,990 | $353,552 | $266,329 | $267,811 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Specialized Technology Fund | 17
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$10.09 | $11.38 | $9.06 | $7.92 | $9.33 | |||||||||||||||
| Net investment loss |
(0.16 | )1 | (0.17 | )1 | (0.16 | ) | (0.09 | )1 | (0.12 | )1 | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(0.00 | )2 | 1.58 | 3.45 | 1.81 | 0.02 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(0.16 | ) | 1.41 | 3.29 | 1.72 | (0.10 | ) | |||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net realized gains |
(1.13 | ) | (2.70 | ) | (0.97 | ) | (0.58 | ) | (1.31 | ) | ||||||||||
| Net asset value, end of period |
$8.80 | $10.09 | $11.38 | $9.06 | $7.92 | |||||||||||||||
| Total return3 |
(2.15 | )% | 16.01 | % | 37.45 | % | 22.59 | % | (1.45 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
2.14 | % | 2.15 | % | 2.16 | % | 2.19 | % | 2.20 | % | ||||||||||
| Net expenses |
2.13 | % | 2.14 | % | 2.16 | % | 2.19 | % | 2.20 | % | ||||||||||
| Net investment loss |
(1.57 | )% | (1.52 | )% | (1.49 | )% | (1.03 | )% | (1.34 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
149 | % | 107 | % | 109 | % | 131 | % | 153 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$8,035 | $11,615 | $15,932 | $12,827 | $13,797 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Amount is more than $(0.005). |
| 3 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Specialized Technology Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$13.65 | $14.34 | $11.12 | $9.52 | $10.86 | |||||||||||||||
| Net investment loss |
(0.10 | )1 | (0.09 | )1 | (0.09 | )1 | (0.02 | ) | (0.05 | ) | ||||||||||
| Net realized and unrealized gains (losses) on investments |
(0.02 | ) | 2.10 | 4.28 | 2.20 | 0.02 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(0.12 | ) | 2.01 | 4.19 | 2.18 | (0.03 | ) | |||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net realized gains |
(1.13 | ) | (2.70 | ) | (0.97 | ) | (0.58 | ) | (1.31 | ) | ||||||||||
| Net asset value, end of period |
$12.40 | $13.65 | $14.34 | $11.12 | $9.52 | |||||||||||||||
| Total return |
(1.28 | )% | 17.02 | % | 38.55 | % | 23.65 | % | (0.56 | )% | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.31 | % | 1.32 | % | 1.33 | % | 1.36 | % | 1.35 | % | ||||||||||
| Net expenses |
1.28 | % | 1.29 | % | 1.32 | % | 1.33 | % | 1.33 | % | ||||||||||
| Net investment loss |
(0.71 | )% | (0.65 | )% | (0.66 | )% | (0.17 | )% | (0.48 | )% | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
149 | % | 107 | % | 109 | % | 131 | % | 153 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$11,873 | $22,480 | $19,140 | $39,833 | $32,373 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Specialized Technology Fund | 19
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||
| INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 20171 | ||||||||||||
| Net asset value, beginning of period |
$13.73 | $14.37 | $11.12 | $10.42 | ||||||||||||
| Net investment income (loss) |
(0.07 | ) | (0.07 | ) | (0.05 | ) | 0.01 | 2 | ||||||||
| Net realized and unrealized gains (losses) on investments |
(0.02 | ) | 2.13 | 4.27 | 1.27 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total from investment operations |
(0.09 | ) | 2.06 | 4.22 | 1.28 | |||||||||||
| Distributions to shareholders from |
||||||||||||||||
| Net realized gains |
(1.13 | ) | (2.70 | ) | (0.97 | ) | (0.58 | ) | ||||||||
| Net asset value, end of period |
$12.51 | $13.73 | $14.37 | $11.12 | ||||||||||||
| Total return3 |
(1.05 | )% | 17.25 | % | 38.91 | % | 12.97 | % | ||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||
| Gross expenses |
1.06 | % | 1.07 | % | 1.08 | % | 1.11 | % | ||||||||
| Net expenses |
1.03 | % | 1.04 | % | 1.07 | % | 1.08 | % | ||||||||
| Net investment income (loss) |
(0.47 | )% | (0.42 | )% | (0.40 | )% | 0.17 | % | ||||||||
| Supplemental data |
||||||||||||||||
| Portfolio turnover rate |
149 | % | 107 | % | 109 | % | 131 | % | ||||||||
| Net assets, end of period (000s omitted) |
$48,504 | $51,223 | $27,509 | $19,869 | ||||||||||||
| 1 | For the period from October 31, 2016 (commencement of class operations) to March 31, 2017 |
| 2 | Calculated based upon average shares outstanding |
| 3 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Specialized Technology Fund
Table of Contents
1. ORGANIZATION
Wells Fargo Funds Trust (the “Trust”), a Delaware statutory trust organized on March 10, 1999, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As an investment company, the Trust follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. These financial statements report on the Wells Fargo Specialized Technology Fund (the “Fund”) which is a non-diversified series of the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund, are in conformity with U.S. generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Securities valuation
All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern Time), although the Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the principal exchange or market that day, a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
The values of securities denominated in foreign currencies are translated into U.S. dollars at rates provided by an independent foreign currency pricing source at a time each business day specified by the Wells Fargo Asset Management Pricing Committee at Wells Fargo Funds Management, LLC (“Funds Management”).
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore may not fully reflect trading or events that occur after the close of the principal exchange in which the foreign securities are traded, but before the close of the New York Stock Exchange. If such trading or events are expected to materially affect the value of such securities, then fair value pricing procedures approved by the Board of Trustees of the Fund are applied. These procedures take into account multiple factors including movements in U.S. securities markets after foreign exchanges close. Foreign securities that are fair valued under these procedures are categorized as Level 2 and the application of these procedures may result in transfers between Level 1 and Level 2. Depending on market activity, such fair valuations may be frequent. Such fair value pricing may result in net asset values that are higher or lower than net asset values based on the last reported sales price or latest quoted bid price. On March 31, 2020, such fair value pricing was used in pricing certain foreign securities.
Investments in registered open-end investment companies are valued at net asset value. Interests in non-registered investment companies that are redeemable at net asset value are fair valued normally at net asset value.
Investments which are not valued using any of the methods discussed above are valued at their fair value, as determined in good faith by the Board of Trustees. The Board of Trustees has established a Valuation Committee comprised of the Trustees and has delegated to it the authority to take any actions regarding the valuation of portfolio securities that the Valuation Committee deems necessary or appropriate, including determining the fair value of portfolio securities, unless the determination has been delegated to the Wells Fargo Asset Management Pricing Committee. The Board of Trustees retains the authority to make or ratify any valuation decisions or approve any changes to the Valuation Procedures as it deems appropriate. On a quarterly basis, the Board of Trustees receives reports on any valuation actions taken by the Valuation Committee or the Wells Fargo Asset Management Pricing Committee which may include items for ratification.
Foreign currency translation
The accounting records of the Fund are maintained in U.S. dollars. The values of other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at rates provided by an independent foreign currency pricing source at a time each business day specified by the Wells Fargo Asset Management Pricing Committee. Purchases and sales of securities, and income and expenses are converted at the rate of exchange on the respective dates of such transactions. Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded and the U.S. dollar equivalent of the amounts actually paid or received. Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities other than investments in securities
Wells Fargo Specialized Technology Fund | 21
Table of Contents
Notes to financial statements
resulting from changes in exchange rates. The changes in net assets arising from changes in exchange rates of securities and the changes in net assets resulting from changes in market prices of securities are not separately presented. Such changes are included in net realized and unrealized gains or losses from investments.
Securities lending
The Fund may lend its securities from time to time in order to earn additional income in the form of fees or interest on securities received as collateral or the investment of any cash received as collateral. When securities are on loan, the Fund receives interest or dividends on those securities. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). Investments in Securities Lending Fund are valued at the evaluated bid price provided by an independent pricing service. Income earned from investment in the Securities Lending Fund (net of fees and rebates), if any, is included in income from affiliated securities on the Statement of Operations.
In a securities lending transaction, the net asset value of the Fund is affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. The Fund has the right under the lending agreement to recover the securities from the borrower on demand. In the event of default or bankruptcy by the borrower, the Fund may be prevented from recovering the loaned securities or gaining access to the collateral or may experience delays or costs in doing so. In such an event, the terms of the agreement allow the unaffiliated securities lending agent to use the collateral to purchase replacement securities on behalf of the Fund or pay the Fund the market value of the loaned securities. The Fund bears the risk of loss with respect to depreciation of its investment of the cash collateral.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date, except for certain dividends from foreign securities, which are recorded as soon as the custodian verifies the ex-dividend date. Dividend income from foreign securities is recorded net of foreign taxes withheld where recovery of such taxes is not assured.
Income dividends and capital gain distributions from investment companies are recorded on the ex-dividend date. Capital gain distributions from investment companies are treated as realized gains.
Distributions to shareholders
Distributions to shareholders from net investment income and any net realized gains are recorded on the ex-dividend date and paid at least annually. Such distributions are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles. Dividend sources are estimated at the time of declaration. The tax character of distributions is determined as of the Fund’s fiscal year end. Therefore, a portion of the Fund’s distributions made prior to the Fund’s fiscal year end may be categorized as a tax return of capital at year end.
Federal and other taxes
The Fund intends to continue to qualify as a regulated investment company by distributing substantially all of its investment company taxable income and any net realized capital gains (after reduction for capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes was required.
The Fund’s income and federal excise tax returns and all financial records supporting those returns for the prior three fiscal years are subject to examination by the federal and Delaware revenue authorities. Management has analyzed the Fund’s tax positions taken on federal, state, and foreign tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability.
As of March 31, 2020, the aggregate cost of all investments for federal income tax purposes was $311,821,972 and the unrealized gains (losses) consisted of:
| Gross unrealized gains |
$ | 98,039,175 | ||
| Gross unrealized losses |
(5,902,556 | ) | ||
| Net unrealized gains |
$ | 92,136,619 | ||
Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under federal income tax regulations. U.S. generally accepted accounting principles require that certain components of net assets be adjusted to reflect permanent differences between financial and tax
22 | Wells Fargo Specialized Technology Fund
Table of Contents
Notes to financial statements
reporting. These reclassifications have no effect on net assets or net asset values per share. The primary permanent difference causing such reclassification is due to net operating losses. At March 31, 2020, as a result of permanent book-to-tax differences, the following reclassification adjustments were made on the Statement of Assets and Liabilities:
| Paid-in capital | Total distributable earnings | |
| $(2,672,773) | $2,672,773 | |
As of March 31, 2020, the Fund had a qualified late-year ordinary loss of $1,932,818 which will be recognized on the first day of the following fiscal year.
Class allocations
The separate classes of shares offered by the Fund differ principally in applicable sales charges, distribution, shareholder servicing, and administration fees. Class specific expenses are charged directly to that share class. Investment income, common fund-level expenses, and realized and unrealized gains (losses) on investments are allocated daily to each class of shares based on the relative proportion of net assets of each class.
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
| ∎ | Level 1 – quoted prices in active markets for identical securities |
| ∎ | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) |
| ∎ | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The inputs or methodologies used for valuing investments in securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of March 31, 2020:
| Quoted prices (Level 1) |
Other significant observable inputs (Level 2) |
Significant (Level 3) |
Total | |||||||||||||
| Assets |
||||||||||||||||
| Investments in: |
||||||||||||||||
| Common stocks |
||||||||||||||||
| Communication services |
$ | 38,406,279 | $ | 0 | $ | 0 | $ | 38,406,279 | ||||||||
| Consumer discretionary |
50,825,715 | 0 | 0 | 50,825,715 | ||||||||||||
| Health care |
4,375,233 | 0 | 0 | 4,375,233 | ||||||||||||
| Industrials |
446,511 | 0 | 0 | 446,511 | ||||||||||||
| Information technology |
276,985,186 | 9,370,363 | 0 | 286,355,549 | ||||||||||||
| Real estate |
902,504 | 0 | 0 | 902,504 | ||||||||||||
| Exchange-traded funds |
3,983,111 | 0 | 0 | 3,983,111 | ||||||||||||
| Short-term investments |
||||||||||||||||
| Investment companies |
18,663,689 | 0 | 0 | 18,663,689 | ||||||||||||
| Total assets |
$ | 394,588,228 | $ | 9,370,363 | $ | 0 | $ | 403,958,591 | ||||||||
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
For the year ended March 31, 2020, the Fund did not have any transfers into/out of Level 3.
4. TRANSACTIONS WITH AFFILIATES AND OTHER EXPENSES
Management fee
Funds Management, an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”), is the manager of the Fund and provides advisory and fund-level administrative services under an investment management agreement. Under the investment
Wells Fargo Specialized Technology Fund | 23
Table of Contents
Notes to financial statements
management agreement, Funds Management is responsible for, among other services, implementing the investment objectives and strategies of the Fund, supervising the subadviser and providing fund-level administrative services in connection with the Fund’s operations. As compensation for its services under the investment management agreement, Funds Management is entitled to receive a management fee at the following annual rate based on the Fund’s average daily net assets:
| Average daily net assets | Management fee | |||
| First $500 million |
0.880 | % | ||
| Next $500 million |
0.875 | |||
| Next $1 billion |
0.850 | |||
| Next $2 billion |
0.825 | |||
| Next $1 billion |
0.800 | |||
| Next $5 billion |
0.790 | |||
| Over $10 billion |
0.780 | |||
For the year ended March 31, 2020, the management fee was equivalent to an annual rate of 0.88% of the Fund’s average daily net assets.
Funds Management has retained the services of a subadviser to provide daily portfolio management to the Fund. The fee for subadvisory services is borne by Funds Management. Allianz Global Investors U.S. LLC, which is not an affiliate of Funds Management, is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.80% and declining to 0.55% as the average daily net assets of the Fund increase.
Administration fees
Under a class-level administration agreement, Funds Management provides class-level administrative services to the Fund, which includes paying fees and expenses for services provided by the transfer agent, sub-transfer agents, omnibus account servicers and record-keepers. As compensation for its services under the class-level administration agreement, Funds Management receives an annual fee which is calculated based on the average daily net assets of each class as follows:
| Class-level administration fee |
||||
| Class A, Class C |
0.21 | % | ||
| Administrator Class, Institutional Class |
0.13 | |||
Waivers and/or expense reimbursements
Funds Management has contractually waived and/or reimbursed management and administration fees to the extent necessary to maintain certain net operating expense ratios for the Fund. When each class of the Fund has exceeded its expense cap, Funds Management has waived fees and/or reimbursed expenses from fund-level expenses on a proportionate basis and then from class specific expenses. When only certain classes exceed their expense caps, waivers and/or reimbursements are applied against class specific expenses before fund-level expenses. Funds Management has committed through July 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 1.38% for Class A shares, 2.13% for Class C shares, 1.28% for Administrator Class shares, and 1.03% for Institutional Class shares. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees.
Distribution fee
The Trust has adopted a distribution plan for Class C shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. A distribution fee is charged to Class C shares and paid to Wells Fargo Funds Distributor, LLC (“Funds Distributor”), the principal underwriter, at an annual rate of 0.75% of the average daily net assets of Class C shares.
In addition, Funds Distributor is entitled to receive the front-end sales charge from the purchase of Class A shares and a contingent deferred sales charge on the redemption of certain Class A shares. Funds Distributor is also entitled to receive the contingent deferred sales charges from redemptions of Class C shares. For the year ended March 31, 2020, Funds Distributor received $11,102 from the sale of Class A shares and $24 in contingent deferred sales charges from redemptions of Class C shares. No contingent deferred sales charges were incurred by Class A shares for the year ended March 31, 2020.
24 | Wells Fargo Specialized Technology Fund
Table of Contents
Notes to financial statements
Shareholder servicing fees
The Trust has entered into contracts with one or more shareholder servicing agents, whereby Class A, Class C, and Administrator Class of the Fund are charged a fee at an annual rate of 0.25% of the average daily net assets of each respective class. A portion of these total shareholder servicing fees were paid to affiliates of Wells Fargo.
Interfund transactions
The Fund may purchase or sell portfolio investment securities to certain other Wells Fargo affiliates pursuant to Rule 17a-7 under the 1940 Act and under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which do not incur broker commissions, are effected at current market prices.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the year ended March 31, 2020 were $674,040,894 and $759,205,386, respectively.
6. SECURITIES LENDING TRANSACTIONS
The Fund lends its securities through an unaffiliated securities lending agent and receives collateral in the form of cash or securities with a value at least equal to the value of the securities on loan. The value of the loaned securities is determined at the close of each business day and any increases or decreases in the required collateral are exchanged between the Fund and the counterparty on the next business day. Cash collateral received is invested in the Securities Lending Fund which seeks to provide a positive return compared to the daily Fed Funds Open Rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments and is exempt from registration under Section 3(c)(7) of the 1940 Act. Securities Lending Fund is managed by Funds Management and is subadvised by Wells Capital Management Incorporated (“WellsCap”), an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo. Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser.
In the event of counterparty default or the failure of a borrower to return a loaned security, the Fund has the right to use the collateral to offset any losses incurred. As of March 31, 2020, the Fund had securities lending transactions with the following counterparties which are subject to offset:
| Counterparty | Value of securities on loan |
Collateral received1 |
Net amount | |||||
| National Financial Services LLC |
$49,685 | $(49,685) | $ | 0 | ||||
| 1 | Collateral received within this table is limited to the collateral for the net transaction with the counterparty. |
7. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $280,000,000 revolving credit agreement whereby the Fund is permitted to use bank borrowings for temporary or emergency purposes, such as to fund shareholder redemption requests. Interest under the credit agreement is charged to the Fund based on a borrowing rate equal to the higher of the Federal Funds rate in effect on that day plus 1.25% or the overnight LIBOR rate in effect on that day plus 1.25%. In addition, an annual commitment fee equal to 0.25% of the unused balance is allocated to each participating fund.
For the year ended March 31, 2020, there were no borrowings by the Fund under the agreement.
8. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid during the years ended March 31, 2020 and March 31, 2019 were as follows:
| Year ended March 31 | ||||||||
| 2020 | 2019 | |||||||
| Ordinary income |
$ | 0 | $ | 30,325,807 | ||||
| Long-term capital gain |
37,651,750 | 53,023,323 | ||||||
Wells Fargo Specialized Technology Fund | 25
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Notes to financial statements
As of March 31, 2020, the components of distributable earnings on a tax basis were as follows:
| Undistributed long-term gain |
Unrealized gains |
Late-year ordinary losses deferred | ||
| $82,386,260 | $92,133,901 | $(1,932,818) | ||
9. CONCENTRATION RISK
The Fund invests a substantial portion of its assets in technology companies and, therefore, would be more affected by changes in the technology sector than would be a fund whose investments are not heavily weighted in the sector.
10. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
11. NEW ACCOUNTING PRONOUNCEMENT
In August 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 updates the disclosure requirements for fair value measurements by modifying or removing certain disclosures and adding certain new disclosures. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Management has adopted the removal and modification of disclosures early, as permitted, and will adopt the additional new disclosures at the effective date.
12. CORONAVIRUS (COVID-19) PANDEMIC
On March 11, 2020, the World Health Organization announced that it had made the assessment that coronavirus disease 2019 (“COVID-19”) is a pandemic. The impacts of COVID-19 are adversely affecting the entire global economy, individual companies and investment products, and the market in general. There is significant uncertainty around the extent and duration of business disruptions related to COVID-19 and the impacts may be short term or may last for an extended period of time. The risk of further spreading of COVID-19 has led to significant uncertainty and volatility in the financial markets. The value of the Fund and the securities in which the Fund invests have generally been adversely affected by impacts caused by COVID-19.
26 | Wells Fargo Specialized Technology Fund
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Report of independent registered public accounting firm
TO THE SHAREHOLDERS OF THE FUND AND BOARD OF TRUSTEES WELLS FARGO FUNDS TRUST:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Wells Fargo Specialized Technology Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of March 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years or periods in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of March 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of March 31, 2020, by correspondence with the custodian and transfer agent. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have not been able to determine the specific year that we began serving as the auditor of one or more Wells Fargo Funds investment companies; however we are aware that we have served as the auditor of one or more Wells Fargo Funds investment companies since at least 1955.
Boston, Massachusetts
May 28, 2020
Wells Fargo Specialized Technology Fund | 27
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TAX INFORMATION
Pursuant to Section 852 of the Internal Revenue Code, $37,651,750 was designated as a 20% rate gain distribution for the fiscal year ended March 31, 2020.
PROXY VOTING INFORMATION
A description of the policies and procedures used to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-222-8222, visiting our website at wfam.com, or visiting the SEC website at sec.gov. Information regarding how the proxies related to portfolio securities were voted during the most recent 12-month period ended June 30 is available on the website at wfam.com or by visiting the SEC website at sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. Shareholders may view the filed Form N-PORT by visiting the SEC website at sec.gov.
28 | Wells Fargo Specialized Technology Fund
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Other information (unaudited)
BOARD OF TRUSTEES AND OFFICERS
Each of the Trustees and Officers1 listed in the table below acts in identical capacities for each fund in the Wells Fargo family of funds, which consists of 147 mutual funds comprising the Wells Fargo Funds Trust, Wells Fargo Variable Trust, Wells Fargo Master Trust and four closed-end funds (collectively the “Fund Complex”). This table should be read in conjunction with the Prospectus and the Statement of Additional Information2. The mailing address of each Trustee and Officer is 525 Market Street, 12th Floor, San Francisco, CA 94105. Each Trustee and Officer serves an indefinite term, however, each Trustee serves such term until reaching the mandatory retirement age established by the Trustees.
Independent Trustees
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| William R. Ebsworth (Born 1957) | Trustee, since 2015 | Retired. From 1984 to 2013, equities analyst, portfolio manager, research director and chief investment officer at Fidelity Management and Research Company in Boston, Tokyo, and Hong Kong, and retired in 2013 as Chief Investment Officer of Fidelity Strategic Advisers, Inc. where he led a team of investment professionals managing client assets. Prior thereto, Board member of Hong Kong Securities Clearing Co., Hong Kong Options Clearing Corp., the Thailand International Fund, Ltd., Fidelity Investments Life Insurance Company, and Empire Fidelity Investments Life Insurance Company. Audit Committee Chair and Investment Committee Chair of the Vincent Memorial Hospital Endowment (non-profit organization). Mr. Ebsworth is a CFA® charterholder. | N/A | |||
| Jane A. Freeman (Born 1953) | Trustee, since 2015; Chair Liaison, since 2018 | Retired. From 2012 to 2014 and 1999 to 2008, Chief Financial Officer of Scientific Learning Corporation. From 2008 to 2012, Ms. Freeman provided consulting services related to strategic business projects. Prior to 1999, Portfolio Manager at Rockefeller & Co. and Scudder, Stevens & Clark. Board member of the Harding Loevner Funds from 1996 to 2014, serving as both Lead Independent Director and chair of the Audit Committee. Board member of the Russell Exchange Traded Funds Trust from 2011 to 2012 and the chair of the Audit Committee. Ms. Freeman is a Board Member of The Ruth Bancroft Garden (non-profit organization). She is also an inactive Chartered Financial Analyst. | N/A | |||
| Isaiah Harris, Jr. (Born 1952) | Trustee, since 2009; Audit Committee Chairman, since 2019 | Retired. Chairman of the Board of CIGNA Corporation since 2009, and Director since 2005. From 2003 to 2011, Director of Deluxe Corporation. Prior thereto, President and CEO of BellSouth Advertising and Publishing Corp. from 2005 to 2007, President and CEO of BellSouth Enterprises from 2004 to 2005 and President of BellSouth Consumer Services from 2000 to 2003. Emeritus member of the Iowa State University Foundation Board of Governors. Emeritus Member of the Advisory Board of Iowa State University School of Business. Advisory Board Member, Palm Harbor Academy (private school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
| Judith M. Johnson (Born 1949) | Trustee, since 2008; Audit Committee Chairman, from 2009 to 2018 | Retired. Prior thereto, Chief Executive Officer and Chief Investment Officer of Minneapolis Employees Retirement Fund from 1996 to 2008. Ms. Johnson is an attorney, certified public accountant and a certified managerial accountant. | N/A | |||
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Other information (unaudited)
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | N/A | |||
| Olivia S. Mitchell (Born 1953) | Trustee, since 2006; Nominating and Governance Committee Chair, since 2018 | International Foundation of Employee Benefit Plans Professor, Wharton School of the University of Pennsylvania since 1993. Director of Wharton’s Pension Research Council and Boettner Center on Pensions & Retirement Research, and Research Associate at the National Bureau of Economic Research. Previously, Cornell University Professor from 1978 to 1993. | N/A | |||
| Timothy J. Penny (Born 1951) | Trustee, since 1996; Chairman, since 2018 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | N/A | |||
| James G. Polisson (Born 1959) | Trustee, since 2018 | Retired. Chief Marketing Officer, Source (ETF) UK Services, Ltd, from 2015 to 2017. From 2012 to 2015, Principal of The Polisson Group, LLC, a management consulting, corporate advisory and principal investing company. Chief Executive Officer and Managing Director at Russell Investments, Global Exchange Traded Funds from 2010 to 2012. Managing Director of Barclays Global Investors from 1998 to 2010 and Global Chief Marketing Officer for iShares and Barclays Global Investors from 2000 to 2010. Trustee of the San Francisco Mechanics’ Institute, a non-profit organization, from 2013 to 2015. Board member of the Russell Exchange Traded Fund Trust from 2011 to 2012. Director of Barclays Global Investors Holdings Deutschland GmbH from 2006 to 2009. Mr. Polisson is an attorney and has a retired status with the Massachusetts and District of Columbia Bar Associations. | N/A | |||
| Pamela Wheelock3 (Born 1959) | Trustee, since January 2020; previously Trustee from January 2018 to July 2019 | Board member of the Destination Medical Center Economic Development Agency, Rochester, Minnesota since 2019. Acting Commissioner, Minnesota Department of Human Services, July 2019 through September 2019. Human Services Manager (part-time), Minnesota Department of Human Services, October 2019 through December 2019. Chief Operating Officer, Twin Cities Habitat for Humanity from 2017 to 2019. Vice President of University Services, University of Minnesota from 2012 to 2016. Prior thereto, on the Board of Directors, Governance Committee and Finance Committee for the Minnesota Philanthropy Partners (Saint Paul Foundation) from 2012 to 2018, Interim Chief Executive Officer of Blue Cross Blue Shield of Minnesota from 2011 to 2012, Chairman of the Board from 2009 to 2012 and Board Director from 2003 to 2015. Vice President, Leadership and Community Engagement, Bush Foundation, Saint Paul, Minnesota (a private foundation) from 2009 to 2011. Executive Vice President and Chief Financial Officer, Minnesota Sports and Entertainment from 2004 to 2009 and Senior Vice President from 2002 to 2004. Executive Vice President of the Minnesota Wild Foundation from 2004 to 2008. Commissioner of Finance, State of Minnesota, from 1999 to 2002. Currently Board Chair of the Minnesota Wild Foundation since 2010. | N/A | |||
| * | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
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Other information (unaudited)
Officers
| Name and year of birth |
Position held and length of service |
Principal occupations during past five years or longer | ||
| Andrew Owen (Born 1960) |
President, since 2017 | Executive Vice President of Wells Fargo & Company and Head of Affiliated Managers, Wells Fargo Asset Management, since 2014. In addition, Mr. Owen is currently President, Chief Executive Officer and Director of Wells Fargo Funds Management, LLC since 2017. Prior thereto, Executive Vice President responsible for marketing, investments and product development for Wells Fargo Funds Management, LLC, from 2009 to 2014. | ||
| Nancy Wiser1 (Born 1967) | Treasurer, since 2012 | Executive Vice President of Wells Fargo Funds Management, LLC since 2011. Chief Operating Officer and Chief Compliance Officer at LightBox Capital Management LLC, from 2008 to 2011. | ||
| Michelle Rhee (Born 1966) | Chief Legal Officer, since 2019 | Secretary of Wells Fargo Funds Management, LLC, Chief Legal Counsel of Wells Fargo Asset Management and Assistant General Counsel of Wells Fargo Bank, N.A. since 2018. Associate General Counsel and Managing Director of Bank of America Corporation from 2004 to 2018. | ||
| Catherine Kennedy (Born 1969) | Secretary, since 2019 | Vice President of Wells Fargo Funds Management, LLC and Senior Counsel of the Wells Fargo Legal Department since 2010. Vice President and Senior Counsel of Evergreen Investment Management Company, LLC from 1998 to 2010. | ||
| Michael H. Whitaker (Born 1967) | Chief Compliance Officer, since 2016 | Chief Compliance Officer of Wells Fargo Asset Management since 2016. Senior Vice President and Chief Compliance Officer for Fidelity Investments from 2007 to 2016. | ||
| David Berardi (Born 1975) | Assistant Treasurer, since 2009 | Vice President of Wells Fargo Funds Management, LLC since 2009. Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010. Manager of Fund Reporting and Control for Evergreen Investment Management Company, LLC from 2004 to 2010. | ||
| Jeremy DePalma1 (Born 1974) | Assistant Treasurer, since 2009 | Senior Vice President of Wells Fargo Funds Management, LLC since 2009. Senior Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010 and head of the Fund Reporting and Control Team within Fund Administration from 2005 to 2010. | ||
| 1 | Nancy Wiser acts as Treasurer of 65 funds in the Fund Complex. Jeremy DePalma acts as Treasurer of 82 funds and Assistant Treasurer of 65 funds in the Fund Complex. |
| 2 | The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request, by calling 1-800-222-8222 or by visiting the website at wfam.com. |
| 3 | Pamela Wheelock was re-appointed to the Board effective January 1, 2020. |
Wells Fargo Specialized Technology Fund | 31
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Effective on or about May 1, 2020, if you purchase Fund shares through a Janney Montgomery Scott LLC (“Janney”) brokerage account, you will be eligible for the following load waivers (front-end sales charge waivers and contingent deferred sales charge (“CDSC”), or back-end sales charge, waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or SAI.
| Front-end sales charge* waivers on Class A shares available at Janney |
| Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family). |
| Shares purchased by employees and registered representatives of Janney or its affiliates and their family members as designated by Janney. |
| Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within ninety (90) days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e., right of reinstatement). |
| Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans. |
| Shares acquired through a right of reinstatement. |
| Class C shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund pursuant to Janney’s policies and procedures. |
| CDSC waivers on Class A and Class C shares available at Janney |
| Shares sold upon the death or disability of the shareholder. |
| Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
| Shares purchased in connection with a return of excess contributions from an IRA account. |
| Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulations. |
| Shares sold to pay Janney fees but only if the transaction is initiated by Janney. |
| Shares acquired through a right of reinstatement. |
| Shares exchanged into the same share class of a different fund. |
| Front-end sales charge* discounts available at Janney; breakpoints, rights of accumulation and/or letters of intent |
| Breakpoints as described in the Fund’s Prospectus. |
| Rights of accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Janney. Eligible fund family assets not held at Janney may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
| Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Janney Montgomery Scott may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
| * | Also referred to as an “initial sales charge.” |
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Effective on or after May 1, 2020, clients of Edward Jones (also referred to as “shareholders”) purchasing Fund shares on the Edward Jones commission and fee-based platforms are eligible only for the following sales charge discounts (also referred to as “breakpoints”) and waivers, which can differ from breakpoints and waivers described elsewhere in this Prospectus or SAI or through another broker-dealer. In all instances, it is the shareholder’s responsibility to inform Edward Jones at the time of purchase of any relationship, holdings of Wells Fargo Funds or other facts qualifying the purchaser for breakpoints or waivers. Edward Jones can ask for documentation of such circumstance.
| Breakpoints available at Edward Jones |
| Rights of Accumulation (ROA) |
| The applicable sales charge on a purchase of Class A shares is determined by taking into account all share classes (except any money market funds and retirement plan share classes) of Wells Fargo Funds held by the shareholder or in an account grouped by Edward Jones with other accounts for the purpose of providing certain pricing considerations (“pricing groups”). This includes all share classes held on the Edward Jones platform and/or held on another platform. The inclusion of eligible fund family assets in the rights of accumulation calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. |
| ROA is determined by calculating the higher of cost or market value (current shares x NAV). |
| Letter of Intent (LOI) |
| Through a LOI, shareholders can receive the sales charge and breakpoint discounts for purchases shareholders intend to makeover a 13-month period from the date Edward Jones receives the LOI. The LOI is determined by calculating the higher of cost or market value of qualifying holdings at LOI initiation in combination with the value that the shareholder intends to buy over a 13-month period to calculate the front-end sales charge and any breakpoint discounts. Each purchase the shareholder makes during that 13-month period will receive the sales charge and breakpoint discount that applies to the total amount. The inclusion of eligible fund family assets in the LOI calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. Purchases made before the LOI is received by Edward Jones are not covered under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if LOI is not met. |
| Sales charges are waived for the following shareholders and in the following situations at Edward Jones: |
| ● Associates of Edward Jones and its affiliates and their family members who are in the same pricing group (as determined by Edward Jones under its policies and procedures) as the associate. This waiver will continue for the remainder of the associate’s life if the associate retires from Edward Jones in good-standing. |
| ● Shares purchased in an Edward Jones fee-based program. |
| ● Shares purchased through reinvestment of capital gains distributions and dividend reinvestment. |
| ● Shares purchased from the proceeds of redeemed shares of the same fund family so long as the following conditions are met: 1)the proceeds are from the sale of shares within 60 days of the purchase, and 2) the sale and purchase are made in the same share class and the same account or the purchase is made in an individual retirement account with proceeds from liquidations in anon-retirement account. |
| ● Shares exchanged into Class A shares from another share class so long as the exchange is into the same fund and was initiated at the discretion of Edward Jones. Edward Jones is responsible for any remaining CDSC due to the fund company, if applicable. Any future purchases are subject to the applicable sales charge as disclosed in the prospectus. |
| ● Exchanges from Class C shares to Class A shares of the same fund, generally, in the 84th month following the anniversary of the purchase date or earlier at the discretion of Edward Jones. |
| If the shareholder purchases shares that are subject to a CDSC and those shares are redeemed before the CDSC is
expired, the shareholder is responsible to pay the CDSC except in the following conditions available at Edward Jones: |
| ● The death or disability of the shareholder. |
| ● Systematic withdrawals with up to 10% per year of the account value. |
| ● Return of excess contributions from an Individual Retirement Account (IRA). |
| ● Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulation. |
| ● Shares sold to pay Edward Jones fees or costs in such cases where the transaction is initiated by Edward Jones. |
| ● Shares exchanged in an Edward Jones fee-based program. |
| ● Shares acquired through NAV reinstatement. |
Wells Fargo Specialized Technology Fund | 33
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Appendix II (unaudited)
| Other Important Information for accounts at Edward Jones: |
| Minimum Purchase Amounts ● $250 initial purchase minimum ● $50 subsequent purchase minimum |
|
Minimum Balances Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy: ● A fee-based account held on an Edward Jones platform ● A 529 account held on an Edward Jones platform ● An account with an active systematic investment plan or letter of intent (LOI) |
|
Changing Share Classes At any time it deems necessary, Edward Jones has the authority to exchange at NAV a shareholder’s holdings in a fund to Class A shares. |
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 219967
Kansas City, MO 64121-9967
Website: wfam.com
Individual investors: 1-800-222-8222
Retail investment professionals: 1-888-877-9275
Institutional investment professionals: 1-866-765-0778
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. If this report is used for promotional purposes, distribution of the report must be accompanied or preceded by a current prospectus. Before investing, please consider the investment objectives, risks, charges, and expenses of the investment. For a current prospectus and, if available, a summary prospectus, containing this information, call 1-800-222-8222 or visit the Fund’s website at wfam.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is the trade name for certain investment advisory/management firms owned by Wells Fargo & Company. These firms include but are not limited to Wells Capital Management Incorporated and Wells Fargo Funds Management, LLC. Certain products managed by WFAM entities are distributed by Wells Fargo Funds Distributor, LLC (a broker-dealer and Member FINRA).
This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
Table of Contents
Wells Fargo
Utility and Telecommunications Fund
Beginning on January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, paper copies of the Wells Fargo Funds’ annual and semi-annual shareholder reports issued after this date will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-222-8222 or by enrolling at wellsfargo.com/advantagedelivery.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call 1-800-222-8222. Your election to receive reports in paper will apply to all Wells Fargo Funds held in your account with your financial intermediary or, if you are a direct investor, to all Wells Fargo Funds that you hold.
Table of Contents
The views expressed and any forward-looking statements are as of March 31, 2020, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Asset Management. Discussions of individual securities, or the markets generally, or any Wells Fargo Fund are not intended as individual recommendations. Future events or results may vary significantly from those expressed in any forward-looking statements. The views expressed are subject to change at any time in response to changing circumstances in the market. Wells Fargo Asset Management and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
Wells Fargo Utility and Telecommunications Fund | 1
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Letter to shareholders (unaudited)
| 1 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value-weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index. |
| 2 | The Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. 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 as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. You cannot invest directly in an index. |
| 3 | The MSCI Emerging Markets (EM) Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure equity market performance of emerging markets. You cannot invest directly in an index. |
| 4 | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. You cannot invest directly in an index. |
| 5 | The Bloomberg Barclays Global Aggregate ex-USD Index is an unmanaged index that provides a broad-based measure of the global investment-grade fixed-income markets excluding the U.S. dollar-denominated debt market. You cannot invest directly in an index. |
| 6 | The Bloomberg Barclays Municipal Bond Index is an unmanaged index composed of long-term tax-exempt bonds with a minimum credit rating of Baa. You cannot invest directly in an index. |
| 7 | The ICE BofA U.S. High Yield Index is a market-capitalization-weighted index of domestic and Yankee high-yield bonds. The index tracks the performance of high-yield securities traded in the U.S. bond market. You cannot invest directly in an index. Copyright 2020. ICE Data Indices, LLC. All rights reserved. |
2 | Wells Fargo Utility and Telecommunications Fund
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Letter to shareholders (unaudited)
Wells Fargo Utility and Telecommunications Fund | 3
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Letter to shareholders (unaudited)
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Performance highlights (unaudited)
Investment objective
The Fund seeks total return, consisting of current income and capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser†
Wells Capital Management Incorporated
Portfolio managers*
Kent Newcomb, CFA®‡
Jack Spudich, CFA®‡
Average annual total returns (%) as of March 31, 20201
| Including sales charge | Excluding sales charge | Expense ratios2 (%) | ||||||||||||||||||||||||||||||||
| Inception date | 1 year | 5 year | 10 year | 1 year | 5 year | 10 year | Gross | Net3 | ||||||||||||||||||||||||||
| Class A (EVUAX) | 1-4-1994 | -5.71 | 5.89 | 8.91 | 0.04 | 7.15 | 9.56 | 1.19 | 1.05 | |||||||||||||||||||||||||
| Class C (EVUCX) | 9-2-1994 | -1.73 | 6.34 | 8.74 | -0.73 | 6.34 | 8.74 | 1.94 | 1.80 | |||||||||||||||||||||||||
| Administrator Class (EVUDX)4 | 7-30-2010 | – | – | – | 0.20 | 7.34 | 9.76 | 1.11 | 0.92 | |||||||||||||||||||||||||
| Institutional Class (EVUYX) | 2-28-1994 | – | – | – | 0.38 | ** | 7.53 | 9.93 | 0.86 | 0.72 | ||||||||||||||||||||||||
| S&P 500 Utilities Index5 | – | – | – | – | -1.40 | 8.28 | 10.59 | – | – | |||||||||||||||||||||||||
| S&P 500 Index6 | – | – | – | – | -6.98 | 6.73 | 10.53 | – | – | |||||||||||||||||||||||||
| ** | Total return differs from the return in the Financial Highlights in this report. The total return presented is calculated based on the NAV at which the shareholder transactions were processed. The NAV and total return presented in the Financial Highlights reflects certain adjustments made to the net assets of the Fund that are necessary under U.S. generally accepted accounting principles. |
Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes that a shareholder may pay on an investment in a fund. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance shown without sales charges would be lower if sales charges were reflected. Current performance may be lower or higher than the performance data quoted, which assumes the reinvestment of dividends and capital gains. Current month-end performance is available on the Fund’s website, wfam.com.
While the S&P 500 Index is comprised of U.S. equity securities of companies diversified across ten sectors, the Fund’s holdings are concentrated primarily in utilities and telecommunication services stocks. Therefore, the performance of the S&P 500 Index is displayed only to show how the concentrated Fund performed compared with a diversified selection of U.S. equity securities.
Index returns do not include transaction costs associated with buying and selling securities, any mutual fund fees or expenses, or any taxes. It is not possible to invest directly in an index.
For Class A shares, the maximum front-end sales charge is 5.75%. For Class C shares, the maximum contingent deferred sales charge is 1.00%. Performance including a contingent deferred sales charge assumes the sales charge for the corresponding time period. Administrator Class and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Bond values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. Changes in market conditions and government policies may lead to periods of heightened volatility in the bond market and reduced liquidity for certain bonds held by the Fund. In general, when interest rates rise, bond values fall and investors may lose principal value. Interest rate changes and their impact on the Fund and its share price can be sudden and unpredictable. The use of derivatives may reduce returns and/or increase volatility. Funds that concentrate their investments in limited sectors, such as utilities and telecommunication services, are more vulnerable to adverse market, economic, regulatory, political, or other developments affecting those sectors. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). The Fund is exposed to convertible securities risk, foreign investment risk, high-yield securities risk, smaller-company securities risk, and non-diversification risk. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Utility and Telecommunications Fund
Table of Contents
Performance highlights (unaudited)
| Growth of $10,000 investment as of March 31, 20207 |
|
|
| † | Wells Capital Management Incorporated became the subadviser of the Fund on October 15, 2019. |
| * | Mr. Newcomb and Mr. Spudich became portfolio managers of the Fund on October 15, 2019. |
| ‡ | CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute. |
| 1 | Historical performance prior to July 19, 2010, is based on the performance of the Fund’s predecessor, Evergreen Utility and Telecommunications Fund. |
| 2 | Reflects the expense ratios as stated in the most recent prospectuses. The expense ratios shown are subject to change and may differ from the annualized expense ratios shown in the financial highlights of this report. |
| 3 | The manager has contractually committed through July 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 1.05% for Class A, 1.80% for Class C, 0.92% for Administrator Class, and 0.72% for Institutional Class. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses (if any), and extraordinary expenses are excluded from the expense cap. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Without this cap, the Fund’s returns would have been lower. The expense ratio paid by an investor is the net expense ratio (the total annual fund operating expenses after fee waivers) as stated in the prospectuses. |
| 4 | Historical performance shown for the Administrator Class shares prior to their inception reflects the performance of the Institutional Class shares and has been adjusted to reflect the higher expenses applicable to the Administrator Class shares. |
| 5 | The S&P 500 Utilities Index is a market-value-weighted index that measures the performance of all stocks within the utilities sector of the S&P 500 Index. You cannot invest directly in an index. |
| 6 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value-weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index. |
| 7 | The chart compares the performance of Class A shares for the most recent ten years with the S&P 500 Utilities Index and the S&P 500 Index. The chart assumes a hypothetical investment of $10,000 in Class A shares and reflects all operating expenses and assumes the maximum initial sales charge of 5.75%. |
| 8 | The ten largest holdings, excluding cash, cash equivalents and any money market funds, are calculated based on the value of the investments divided by total net assets of the Fund. Holdings are subject to change and may have changed since the date specified. |
| 9 | Amounts are calculated based on the total long-term investments of the Fund. These amounts are subject to change and may have changed since the date specified. |
| ** | This security was no longer held at the end of the reporting period. |
Wells Fargo Utility and Telecommunications Fund | 7
Table of Contents
Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
| ∎ | The Fund outperformed its benchmark, the S&P 500 Utilities Index, for the 12-month period that ended March 31, 2020. |
| ∎ | The Fund benefited from, among other things, strength in several electric utility stocks, a multi-utility, a water utility, a telecommunication services company, and two payment services companies. |
| ∎ | An electric utility, a multi-utility, an energy company, and a telecommunication services company were among the holdings that detracted from performance. |
Earlier gains were erased in late February and March by coronavirus-related concerns.
For most of the fiscal year that ended March 31, 2020, the U.S. economy experienced solid growth, with real gross domestic product increasing at an annualized rate of 2.3% through the latest reporting date. Through 2019 into early 2020, equity markets generally reflected signs of stabilizing growth, a more accommodative U.S. Federal Reserve, and confidence that trade disputes and other geopolitical concerns were not spiraling out of control. From the beginning of the fiscal year through the market peak in February 2020, utilities delivered returns of roughly 24%, as measured by the S&P 500 Utilities Index.
Beginning in mid-February, the coronavirus caused government entities at various levels to institute shelter-in-place orders, travel restrictions, advisories, and other measures to restrict movement and commerce, and equity markets in general pulled back sharply. Utility stocks ended the fiscal year with a negative total return of approximately 2%.
Contributors included Eversource Energy and CMS Energy Corporation.
Contributors to performance relative to the S&P 500 Utilities Index included Eversource Energy; American Water Works Company, Incorporated; CMS Energy Corporation; Visa Incorporated; and MasterCard Incorporated. The Fund benefited from underweight positions, relative to their weights in the S&P 500 Utilities Index, in Exelon Corporation; CenterPoint Energy, Incorporated; and Duke Energy Corporation as they underperformed the benchmark return.
Detractors included PNM Resources, Incorporated, and The Williams Companies, Incorporated.
Detractors among the Fund’s equity investments relative to the S&P 500 Utilities Index included PNM Resources, Incorporated; The Williams Companies, Incorporated**; and Comcast Corporation. NextEra Energy, Incorporated, and The Southern Company posted positive absolute performance, but they detracted from returns relative to the benchmark due to lower average weights in the portfolio compared with their benchmark weights.
The Fund reduced positions in several telecommunications and payment services firms.
During the fiscal year, the Fund sold its foreign holdings, a preferred stock position, a financial stock, and its energy sector holdings. It reduced or eliminated positions in several telecommunication services stocks and reduced positions in several payment services companies. The Fund adjusted the weighting of a number of benchmark utility stocks and added several other stocks that are included in the benchmark. Late in the fiscal year, the Fund added small positions in a number of non-utility companies that the Fund managers believe have potential to deliver long-term dividend growth.
Our outlook for telecommunication companies is mixed.
The emergence of the coronavirus early in 2020 has created a brand of uncertainty new to most, possibly all, market participants. At the time of this writing, the likely path and breadth of the virus outbreak are unknown, as is the length and scope of the economic impact. The portfolio managers believe that utility stocks are less exposed to the economic effects of the virus than many segments of the economy and stock market. An increase in residential demand, as consumers shelter in place, may provide some offset to potentially lower industrial and commercial demand. Regulated utilities in some cases will have recourse through higher rates to offset the impact of lower volumes. They also generally have ready access to capital to carry them past short-term economic hurdles. Telecommunication services companies also provide essential services that will remain in demand, although contracting economic conditions would also affect facets of their business.
Looking past the current environment, the fundamentals of regulated utilities appear strong, and recent price weakness has incorporated much that is known about existing risks, in our opinion. These utilities have abundant opportunities to invest in their core businesses at returns we view as attractive. While the U.S. retains adequate power-generation capacity, regulatory mandates are requiring utilities to increase renewable energy sources and reduce the country’s historical reliance on fossil fuels.
Please see footnotes on page 7.
8 | Wells Fargo Utility and Telecommunications Fund
Table of Contents
Performance highlights (unaudited)
A continued low interest rate environment likely should help support the prices of utilities stocks as income-seeking investors potentially gravitate to their relatively generous and growing dividends.
Our outlook for telecommunication companies generally is mixed, with the legacy local-exchange telephone business in secular decline, cable TV under pressure, and wireless approaching saturation (but steady). However, emerging opportunities in 5G technology likely provide avenues for continued long-term growth for select companies.
Please see footnotes on page 7.
Wells Fargo Utility and Telecommunications Fund | 9
Table of Contents
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and contingent deferred sales charges (if any) on redemptions and (2) ongoing costs, including management fees, distribution (12b-1) and/or shareholder servicing fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period from October 1, 2019 to March 31, 2020.
Actual expenses
The “Actual” line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Actual” line under the heading entitled “Expenses paid during period” for your applicable class of shares to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The “Hypothetical” line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and contingent deferred sales charges. Therefore, the “Hypothetical” line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning account value 10-1-2019 |
Ending account value 3-31-2020 |
Expenses paid during the period¹ |
Annualized net expense ratio |
|||||||||||||
| Class A |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 899.95 | $ | 4.94 | 1.04 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,019.80 | $ | 5.25 | 1.04 | % | ||||||||
| Class C |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 896.24 | $ | 8.53 | 1.80 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,016.00 | $ | 9.07 | 1.80 | % | ||||||||
| Administrator Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 900.29 | $ | 4.37 | 0.92 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,020.40 | $ | 4.65 | 0.92 | % | ||||||||
| Institutional Class |
||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 901.37 | $ | 3.42 | 0.72 | % | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,021.40 | $ | 3.64 | 0.72 | % | ||||||||
| 1 | Expenses paid is equal to the annualized net expense ratio of each class multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year (to reflect the one-half-year period). |
10 | Wells Fargo Utility and Telecommunications Fund
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Common Stocks: 97.45% | ||||||||||||||||
| Communication Services: 12.22% |
||||||||||||||||
| Diversified Telecommunication Services: 4.85% | ||||||||||||||||
| AT&T Incorporated |
110,920 | $ | 3,233,318 | |||||||||||||
| Verizon Communications Incorporated |
281,120 | 15,104,578 | ||||||||||||||
| 18,337,896 | ||||||||||||||||
|
|
|
|||||||||||||||
| Media: 4.10% | ||||||||||||||||
| Comcast Corporation Class A |
450,200 | 15,477,876 | ||||||||||||||
|
|
|
|||||||||||||||
| Wireless Telecommunication Services: 3.27% | ||||||||||||||||
| Shenandoah Telecommunications Company |
250,810 | 12,352,393 | ||||||||||||||
|
|
|
|||||||||||||||
| Consumer Discretionary: 0.46% |
||||||||||||||||
| Specialty Retail: 0.46% | ||||||||||||||||
| Home Depot Incorporated |
9,418 | 1,758,435 | ||||||||||||||
|
|
|
|||||||||||||||
| Consumer Staples: 0.49% |
||||||||||||||||
| Food & Staples Retailing: 0.49% | ||||||||||||||||
| Walmart Incorporated |
16,335 | 1,855,983 | ||||||||||||||
|
|
|
|||||||||||||||
| Energy: 0.51% |
||||||||||||||||
| Oil, Gas & Consumable Fuels: 0.51% | ||||||||||||||||
| Phillips 66 |
35,880 | 1,924,962 | ||||||||||||||
|
|
|
|||||||||||||||
| Financials: 0.49% |
||||||||||||||||
| Banks: 0.49% | ||||||||||||||||
| JPMorgan Chase & Company |
20,461 | 1,842,104 | ||||||||||||||
|
|
|
|||||||||||||||
| Health Care: 1.03% |
||||||||||||||||
| Biotechnology: 0.51% | ||||||||||||||||
| Amgen Incorporated |
9,458 | 1,917,420 | ||||||||||||||
|
|
|
|||||||||||||||
| Health Care Providers & Services: 0.52% | ||||||||||||||||
| UnitedHealth Group Incorporated |
7,915 | 1,973,843 | ||||||||||||||
|
|
|
|||||||||||||||
| Information Technology: 10.65% |
||||||||||||||||
| Communications Equipment: 3.04% | ||||||||||||||||
| Cisco Systems Incorporated |
291,996 | 11,478,363 | ||||||||||||||
|
|
|
|||||||||||||||
| IT Services: 7.61% | ||||||||||||||||
| MasterCard Incorporated Class A |
35,630 | 8,606,783 | ||||||||||||||
| Visa Incorporated Class A |
125,000 | 20,140,000 | ||||||||||||||
| 28,746,783 | ||||||||||||||||
|
|
|
|||||||||||||||
| Real Estate: 0.52% |
||||||||||||||||
| Equity REITs: 0.52% | ||||||||||||||||
| American Tower Corporation |
8,961 | 1,951,258 | ||||||||||||||
|
|
|
|||||||||||||||
| Utilities: 71.08% |
||||||||||||||||
| Electric Utilities: 41.85% | ||||||||||||||||
| Alliant Energy Corporation |
271,976 | 13,133,721 | ||||||||||||||
| American Electric Power Company Incorporated |
207,758 | 16,616,485 | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Utility and Telecommunications Fund | 11
Table of Contents
Portfolio of investments—March 31, 2020
| Shares | Value | |||||||||||||||
| Electric Utilities (continued) | ||||||||||||||||
| Duke Energy Corporation |
134,571 | $ | 10,884,101 | |||||||||||||
| Edison International |
77,358 | 4,238,445 | ||||||||||||||
| Entergy Corporation |
75,950 | 7,137,022 | ||||||||||||||
| Eversource Energy |
292,607 | 22,884,792 | ||||||||||||||
| Exelon Corporation |
298,694 | 10,994,926 | ||||||||||||||
| NextEra Energy Incorporated |
156,288 | 37,606,019 | ||||||||||||||
| Pinnacle West Capital Corporation |
25,623 | 1,941,967 | ||||||||||||||
| PNM Resources Incorporated |
296,027 | 11,249,026 | ||||||||||||||
| The Southern Company |
197,857 | 10,711,978 | ||||||||||||||
| Xcel Energy Incorporated |
177,798 | 10,721,219 | ||||||||||||||
| 158,119,701 | ||||||||||||||||
|
|
|
|||||||||||||||
| Gas Utilities: 1.50% | ||||||||||||||||
| Atmos Energy Corporation |
57,041 | 5,660,178 | ||||||||||||||
|
|
|
|||||||||||||||
| Multi-Utilities: 23.09% | ||||||||||||||||
| Ameren Corporation |
81,627 | 5,944,894 | ||||||||||||||
| CenterPoint Energy Incorporated |
93,050 | 1,437,623 | ||||||||||||||
| CMS Energy Corporation |
266,915 | 15,681,256 | ||||||||||||||
| Consolidated Edison Incorporated |
73,908 | 5,764,824 | ||||||||||||||
| Dominion Energy Incorporated |
237,235 | 17,125,995 | ||||||||||||||
| DTE Energy Company |
66,601 | 6,325,097 | ||||||||||||||
| Public Service Enterprise Group Incorporated |
200,000 | 8,982,000 | ||||||||||||||
| Sempra Energy |
145,950 | 16,490,891 | ||||||||||||||
| WEC Energy Group Incorporated |
107,691 | 9,490,808 | ||||||||||||||
| 87,243,388 | ||||||||||||||||
|
|
|
|||||||||||||||
| Water Utilities: 4.64% | ||||||||||||||||
| American Water Works Company Incorporated |
146,614 | 17,529,170 | ||||||||||||||
|
|
|
|||||||||||||||
| Total Common Stocks (Cost $232,929,420) |
368,169,753 | |||||||||||||||
|
|
|
|||||||||||||||
| Yield | ||||||||||||||||
| Short-Term Investments: 2.54% | ||||||||||||||||
| Investment Companies: 2.54% | ||||||||||||||||
| Wells Fargo Government Money Market Fund Select Class (l)(u) |
0.35 | % | 9,586,236 | 9,586,236 | ||||||||||||
|
|
|
|||||||||||||||
| Total Short-Term Investments (Cost $9,586,236) |
9,586,236 | |||||||||||||||
|
|
|
|||||||||||||||
| Total investments in securities (Cost $242,515,656) | 99.99 | % | 377,755,989 | |||||
| Other assets and liabilities, net |
0.01 | 54,562 | ||||||
|
|
|
|
|
|||||
| Total net assets | 100.00 | % | $ | 377,810,551 | ||||
|
|
|
|
|
|||||
| (l) | The issuer of the security is an affiliated person of the Fund as defined in the Investment Company Act of 1940. |
| (u) | The rate represents the 7-day annualized yield at period end. |
Abbreviation:
| REIT | Real estate investment trust |
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Utility and Telecommunications Fund
Table of Contents
Portfolio of investments—March 31, 2020
Investments in Affiliates
An affiliated investment is an investment in which the Fund owns at least 5% of the outstanding voting shares of the issuer or as a result of other relationships, such as the Fund and the issuer having the same investment manager. Transactions with issuers that were either affiliated persons of the Fund at the beginning of the period or the end of the period were as follows:
| Shares, beginning of period |
Shares purchased |
Shares sold |
Shares, end of period |
Net realized gains (losses) |
Net change in unrealized gains (losses) |
Income from affiliated securities |
Value, end of period |
% of net assets |
||||||||||||||||||||||||||||
| Short-Term Investments | ||||||||||||||||||||||||||||||||||||
| Investment Companies |
||||||||||||||||||||||||||||||||||||
| Securities Lending Cash Investments LLC * |
137,186 | 45,446 | (182,632 | ) | 0 | $ | 0 | $ | 0 | $ | 23 | # | $ | 0 | ||||||||||||||||||||||
| Wells Fargo Government Money Market Fund Select Class |
10,518,041 | 90,478,486 | (91,410,291 | ) | 9,586,236 | 0 | 0 | 180,252 | 9,586,236 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $ | 0 | $ | 0 | $ | 180,275 | $ | 9,586,236 | 2.54 | % | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| * | No longer held at the end of the period. |
| # | Amount shown represents income before fees and rebates. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Utility and Telecommunications Fund | 13
Table of Contents
Statement of assets and liabilities—March 31, 2020
| Assets |
||||
| Investments in unaffiliated securities, at value (cost $232,929,420) |
$ | 368,169,753 | ||
| Investments in affiliated securities, at value (cost $9,586,236) |
9,586,236 | |||
| Receivable for Fund shares sold |
513,751 | |||
| Receivable for dividends |
471,156 | |||
| Prepaid expenses and other assets |
10,930 | |||
|
|
|
|||
| Total assets |
378,751,826 | |||
|
|
|
|||
| Liabilities |
||||
| Payable for Fund shares redeemed |
505,570 | |||
| Management fee payable |
174,700 | |||
| Shareholder servicing fees payable |
73,269 | |||
| Administration fees payable |
66,507 | |||
| Distribution fee payable |
6,951 | |||
| Trustees’ fees and expenses payable |
3,803 | |||
| Accrued expenses and other liabilities |
110,475 | |||
|
|
|
|||
| Total liabilities |
941,275 | |||
|
|
|
|||
| Total net assets |
$ | 377,810,551 | ||
|
|
|
|||
| Net assets consist of |
||||
| Paid-in capital |
$ | 194,651,360 | ||
| Total distributable earnings |
183,159,191 | |||
|
|
|
|||
| Total net assets |
$ | 377,810,551 | ||
|
|
|
|||
| Computation of net asset value and offering price per share |
||||
| Net assets – Class A |
$ | 319,199,725 | ||
| Shares outstanding – Class A1 |
15,811,313 | |||
| Net asset value per share – Class A |
$20.19 | |||
| Maximum offering price per share – Class A2 |
$21.42 | |||
| Net assets – Class C |
$ | 10,274,055 | ||
| Shares outstanding – Class C1 |
507,244 | |||
| Net asset value per share – Class C |
$20.25 | |||
| Net assets – Administrator Class |
$ | 2,448,503 | ||
| Shares outstanding – Administrator Class1 |
121,083 | |||
| Net asset value per share – Administrator Class |
$20.22 | |||
| Net assets – Institutional Class |
$ | 45,888,268 | ||
| Shares outstanding – Institutional Class1 |
2,274,216 | |||
| Net asset value per share – Institutional Class |
$20.18 | |||
| 1 | The Fund has an unlimited number of authorized shares. |
| 2 | Maximum offering price is computed as 100/94.25 of net asset value. On investments of $50,000 or more, the offering price is reduced. |
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Utility and Telecommunications Fund
Table of Contents
Statement of operations—year ended March 31, 2020
| Investment income |
||||
| Dividends (net of foreign withholding taxes of $17,086) |
$ | 10,485,325 | ||
| Income from affiliated securities |
180,334 | |||
|
|
|
|||
| Total investment income |
10,665,659 | |||
|
|
|
|||
| Expenses |
||||
| Management fee |
2,764,839 | |||
| Administration fees |
||||
| Class A |
754,203 | |||
| Class C |
33,387 | |||
| Administrator Class |
4,596 | |||
| Institutional Class |
60,816 | |||
| Shareholder servicing fees |
||||
| Class A |
897,859 | |||
| Class C |
39,746 | |||
| Administrator Class |
8,839 | |||
| Distribution fee |
||||
| Class C |
119,092 | |||
| Custody and accounting fees |
26,726 | |||
| Professional fees |
65,378 | |||
| Registration fees |
72,872 | |||
| Shareholder report expenses |
61,867 | |||
| Trustees’ fees and expenses |
20,771 | |||
| Other fees and expenses |
19,086 | |||
|
|
|
|||
| Total expenses |
4,950,077 | |||
| Less: Fee waivers and/or expense reimbursements |
||||
| Fund-level |
(279,447 | ) | ||
| Class A |
(68,980 | ) | ||
| Administrator Class |
(3,126 | ) | ||
| Institutional Class |
(12,164 | ) | ||
|
|
|
|||
| Net expenses |
4,586,360 | |||
|
|
|
|||
| Net investment income |
6,079,299 | |||
|
|
|
|||
| Realized and unrealized gains (losses) on investments |
||||
| Net realized gains on investments |
107,932,321 | |||
| Net change in unrealized gains (losses) on investments |
(112,272,968 | ) | ||
|
|
|
|||
| Net realized and unrealized gains (losses) on investments |
(4,340,647 | ) | ||
|
|
|
|||
| Net increase in net assets resulting from operations |
$ | 1,738,652 | ||
|
|
|
|||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Utility and Telecommunications Fund | 15
Table of Contents
Statement of changes in net assets
| Year ended March 31, 2020 |
Year ended March 31, 2019 |
|||||||||||||||
| Operations |
||||||||||||||||
| Net investment income |
$ | 6,079,299 | $ | 5,337,642 | ||||||||||||
| Net realized gains on investments |
107,932,321 | 14,071,102 | ||||||||||||||
| Net change in unrealized gains (losses) on investments |
(112,272,968 | ) | 48,138,280 | |||||||||||||
|
|
|
|||||||||||||||
| Net increase in net assets resulting from operations |
1,738,652 | 67,547,024 | ||||||||||||||
|
|
|
|||||||||||||||
| Distributions to shareholders from net investment income and net realized gains |
||||||||||||||||
| Class A |
(59,011,968 | ) | (5,340,753 | ) | ||||||||||||
| Class C |
(2,071,360 | ) | (367,071 | ) | ||||||||||||
| Administrator Class |
(410,715 | ) | (93,347 | ) | ||||||||||||
| Institutional Class |
(7,898,292 | ) | (753,499 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Total distributions to shareholders |
(69,392,335 | ) | (6,554,670 | ) | ||||||||||||
|
|
|
|||||||||||||||
| Capital share transactions |
Shares | Shares | ||||||||||||||
| Proceeds from shares sold |
||||||||||||||||
| Class A |
1,235,048 | 30,602,718 | 1,320,405 | 29,507,498 | ||||||||||||
| Class C |
93,556 | 2,314,593 | 54,882 | 1,186,781 | ||||||||||||
| Administrator Class |
71,896 | 1,729,978 | 45,614 | 1,005,325 | ||||||||||||
| Institutional Class |
1,042,340 | 25,254,377 | 635,353 | 13,820,300 | ||||||||||||
|
|
|
|||||||||||||||
| 59,901,666 | 45,519,904 | |||||||||||||||
|
|
|
|||||||||||||||
| Reinvestment of distributions |
||||||||||||||||
| Class A |
2,496,180 | 55,793,949 | 229,766 | 5,021,772 | ||||||||||||
| Class C |
87,166 | 1,946,331 | 16,325 | 353,472 | ||||||||||||
| Administrator Class |
17,987 | 404,412 | 4,234 | 92,538 | ||||||||||||
| Institutional Class |
348,289 | 7,791,650 | 33,858 | 740,651 | ||||||||||||
|
|
|
|||||||||||||||
| 65,936,342 | 6,208,433 | |||||||||||||||
|
|
|
|||||||||||||||
| Payment for shares redeemed |
||||||||||||||||
| Class A |
(1,981,491 | ) | (47,385,438 | ) | (1,517,053 | ) | (32,912,173 | ) | ||||||||
| Class C |
(488,785 | ) | (12,192,401 | ) | (1,294,523 | ) | (28,777,618 | ) | ||||||||
| Administrator Class |
(188,987 | ) | (4,741,722 | ) | (59,230 | ) | (1,267,063 | ) | ||||||||
| Institutional Class |
(883,133 | ) | (21,243,556 | ) | (445,017 | ) | (9,601,338 | ) | ||||||||
|
|
|
|||||||||||||||
| (85,563,117 | ) | (72,558,192 | ) | |||||||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets resulting from capital share transactions |
40,274,891 | (20,829,855 | ) | |||||||||||||
|
|
|
|||||||||||||||
| Total increase (decrease) in net assets |
(27,378,792 | ) | 40,162,499 | |||||||||||||
|
|
|
|||||||||||||||
| Net assets |
||||||||||||||||
| Beginning of period |
405,189,343 | 365,026,844 | ||||||||||||||
|
|
|
|||||||||||||||
| End of period |
$ | 377,810,551 | $ | 405,189,343 | ||||||||||||
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Utility and Telecommunications Fund
Table of Contents
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$24.03 | $20.46 | $20.01 | $18.70 | $18.23 | |||||||||||||||
| Net investment income |
0.34 | 0.32 | 0.34 | 0.35 | 0.31 | |||||||||||||||
| Net realized and unrealized gains (losses) on investments |
0.02 | 3.65 | 0.47 | 1.30 | 0.45 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
0.36 | 3.97 | 0.81 | 1.65 | 0.76 | |||||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.34 | ) | (0.34 | ) | (0.36 | ) | (0.34 | ) | (0.29 | ) | ||||||||||
| Net realized gains |
(3.86 | ) | (0.06 | ) | 0.00 | 0.00 | 0.00 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(4.20 | ) | (0.40 | ) | (0.36 | ) | (0.34 | ) | (0.29 | ) | ||||||||||
| Net asset value, end of period |
$20.19 | $24.03 | $20.46 | $20.01 | $18.70 | |||||||||||||||
| Total return1 |
0.04 | % | 19.59 | % | 4.00 | % | 8.87 | % | 4.30 | % | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.17 | % | 1.19 | % | 1.17 | % | 1.18 | % | 1.20 | % | ||||||||||
| Net expenses |
1.09 | % | 1.14 | % | 1.14 | % | 1.14 | % | 1.14 | % | ||||||||||
| Net investment income |
1.42 | % | 1.47 | % | 1.60 | % | 1.79 | % | 1.73 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
49 | % | 10 | % | 7 | % | 22 | % | 15 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$319,200 | $337,848 | $287,047 | $308,152 | $315,238 | |||||||||||||||
| 1 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Utility and Telecommunications Fund | 17
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$24.06 | $20.47 | $20.01 | $18.70 | $18.25 | |||||||||||||||
| Net investment income |
0.16 | 1 | 0.16 | 1 | 0.13 | 0.16 | 0.17 | 1 | ||||||||||||
| Net realized and unrealized gains (losses) on investments |
0.01 | 3.63 | 0.52 | 1.34 | 0.45 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
0.17 | 3.79 | 0.65 | 1.50 | 0.62 | |||||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.12 | ) | (0.14 | ) | (0.19 | ) | (0.19 | ) | (0.17 | ) | ||||||||||
| Net realized gains |
(3.86 | ) | (0.06 | ) | 0.00 | 0.00 | 0.00 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(3.98 | ) | (0.20 | ) | (0.19 | ) | (0.19 | ) | (0.17 | ) | ||||||||||
| Net asset value, end of period |
$20.25 | $24.06 | $20.47 | $20.01 | $18.70 | |||||||||||||||
| Total return2 |
(0.73 | )% | 18.65 | % | 3.24 | % | 8.04 | % | 3.49 | % | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.92 | % | 1.94 | % | 1.92 | % | 1.93 | % | 1.95 | % | ||||||||||
| Net expenses |
1.86 | % | 1.89 | % | 1.89 | % | 1.89 | % | 1.89 | % | ||||||||||
| Net investment income |
0.63 | % | 0.74 | % | 0.85 | % | 1.02 | % | 0.99 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
49 | % | 10 | % | 7 | % | 22 | % | 15 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$10,274 | $19,618 | $41,729 | $51,123 | $57,431 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
| 2 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Utility and Telecommunications Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$24.05 | $20.48 | $20.03 | $18.72 | $18.25 | |||||||||||||||
| Net investment income |
0.36 | 0.36 | 0.37 | 0.38 | 0.34 | |||||||||||||||
| Net realized and unrealized gains (losses) on investments |
0.04 | 3.65 | 0.48 | 1.30 | 0.45 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
0.40 | 4.01 | 0.85 | 1.68 | 0.79 | |||||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.37 | ) | (0.38 | ) | (0.40 | ) | (0.37 | ) | (0.32 | ) | ||||||||||
| Net realized gains |
(3.86 | ) | (0.06 | ) | 0.00 | 0.00 | 0.00 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(4.23 | ) | (0.44 | ) | (0.40 | ) | (0.37 | ) | (0.32 | ) | ||||||||||
| Net asset value, end of period |
$20.22 | $24.05 | $20.48 | $20.03 | $18.72 | |||||||||||||||
| Total return |
0.20 | % | 19.80 | % | 4.21 | % | 9.04 | % | 4.49 | % | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
1.09 | % | 1.11 | % | 1.09 | % | 1.10 | % | 1.09 | % | ||||||||||
| Net expenses |
0.94 | % | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | % | ||||||||||
| Net investment income |
1.49 | % | 1.66 | % | 1.80 | % | 1.93 | % | 1.93 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
49 | % | 10 | % | 7 | % | 22 | % | 15 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$2,449 | $5,296 | $4,702 | $5,168 | $6,740 | |||||||||||||||
The accompanying notes are an integral part of these financial statements.
Wells Fargo Utility and Telecommunications Fund | 19
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
| Year ended March 31 | ||||||||||||||||||||
| INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
| Net asset value, beginning of period |
$24.01 | $20.45 | $20.00 | $18.69 | $18.23 | |||||||||||||||
| Net investment income |
0.44 | 0.41 | 0.41 | 0.42 | 0.36 | 1 | ||||||||||||||
| Net realized and unrealized gains (losses) on investments |
0.01 | 3.62 | 0.47 | 1.30 | 0.45 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
0.45 | 4.03 | 0.88 | 1.72 | 0.81 | |||||||||||||||
| Distributions to shareholders from |
||||||||||||||||||||
| Net investment income |
(0.42 | ) | (0.41 | ) | (0.43 | ) | (0.41 | ) | (0.35 | ) | ||||||||||
| Net realized gains |
(3.86 | ) | (0.06 | ) | 0.00 | 0.00 | 0.00 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(4.28 | ) | (0.47 | ) | (0.43 | ) | (0.41 | ) | (0.35 | ) | ||||||||||
| Net asset value, end of period |
$20.18 | $24.01 | $20.45 | $20.00 | $18.69 | |||||||||||||||
| Total return |
0.42 | % | 20.03 | % | 4.38 | % | 9.26 | % | 4.63 | % | ||||||||||
| Ratios to average net assets (annualized) |
||||||||||||||||||||
| Gross expenses |
0.84 | % | 0.86 | % | 0.84 | % | 0.85 | % | 0.84 | % | ||||||||||
| Net expenses |
0.75 | % | 0.78 | % | 0.78 | % | 0.78 | % | 0.78 | % | ||||||||||
| Net investment income |
1.76 | % | 1.83 | % | 1.95 | % | 2.18 | % | 2.03 | % | ||||||||||
| Supplemental data |
||||||||||||||||||||
| Portfolio turnover rate |
49 | % | 10 | % | 7 | % | 22 | % | 15 | % | ||||||||||
| Net assets, end of period (000s omitted) |
$45,888 | $42,427 | $31,548 | $24,575 | $15,295 | |||||||||||||||
| 1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Utility and Telecommunications Fund
Table of Contents
1. ORGANIZATION
Wells Fargo Funds Trust (the “Trust”), a Delaware statutory trust organized on March 10, 1999, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As an investment company, the Trust follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. These financial statements report on the Wells Fargo Utility and Telecommunications Fund (the “Fund”) which is a non-diversified series of the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund, are in conformity with U.S. generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Securities valuation
All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern Time), although the Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the principal exchange or market that day, a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
The values of securities denominated in foreign currencies are translated into U.S. dollars at rates provided by an independent foreign currency pricing source at a time each business day specified by the Wells Fargo Asset Management Pricing Committee at Wells Fargo Funds Management, LLC (“Funds Management”).
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore may not fully reflect trading or events that occur after the close of the principal exchange in which the foreign securities are traded, but before the close of the New York Stock Exchange. If such trading or events are expected to materially affect the value of such securities, then fair value pricing procedures approved by the Board of Trustees of the Fund are applied. These procedures take into account multiple factors including movements in U.S. securities markets after foreign exchanges close. Foreign securities that are fair valued under these procedures are categorized as Level 2 and the application of these procedures may result in transfers between Level 1 and Level 2. Depending on market activity, such fair valuations may be frequent. Such fair value pricing may result in net asset values that are higher or lower than net asset values based on the last reported sales price or latest quoted bid price. On March 31, 2020, such fair value pricing was not used in pricing foreign securities.
Investments in registered open-end investment companies are valued at net asset value. Interests in non-registered investment companies that are redeemable at net asset value are fair valued normally at net asset value.
Investments which are not valued using any of the methods discussed above are valued at their fair value, as determined in good faith by the Board of Trustees. The Board of Trustees has established a Valuation Committee comprised of the Trustees and has delegated to it the authority to take any actions regarding the valuation of portfolio securities that the Valuation Committee deems necessary or appropriate, including determining the fair value of portfolio securities, unless the determination has been delegated to the Wells Fargo Asset Management Pricing Committee. The Board of Trustees retains the authority to make or ratify any valuation decisions or approve any changes to the Valuation Procedures as it deems appropriate. On a quarterly basis, the Board of Trustees receives reports on any valuation actions taken by the Valuation Committee or the Wells Fargo Asset Management Pricing Committee which may include items for ratification.
Foreign currency translation
The accounting records of the Fund are maintained in U.S. dollars. The values of other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at rates provided by an independent foreign currency pricing source at a time each business day specified by the Wells Fargo Asset Management Pricing Committee. Purchases and sales of securities, and income and expenses are converted at the rate of exchange on the respective dates of such transactions. Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded and the U.S. dollar equivalent of the amounts actually paid or received. Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities other than investments in securities resulting from changes in exchange rates. The changes in net assets arising from changes in exchange rates of securities and the changes in net assets resulting from changes in market prices of securities are not separately presented. Such changes are included in net realized and unrealized gains or losses from investments.
Wells Fargo Utility and Telecommunications Fund | 21
Table of Contents
Notes to financial statements
Securities lending
The Fund may lend its securities from time to time in order to earn additional income in the form of fees or interest on securities received as collateral or the investment of any cash received as collateral. When securities are on loan, the Fund receives interest or dividends on those securities. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). Investments in Securities Lending Fund are valued at the evaluated bid price provided by an independent pricing service. Income earned from investment in the Securities Lending Fund (net of fees and rebates), if any, is included in income from affiliated securities on the Statement of Operations.
In a securities lending transaction, the net asset value of the Fund will be affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. The Fund has the right under the lending agreement to recover the securities from the borrower on demand. In the event of default or bankruptcy by the borrower, the Fund may be prevented from recovering the loaned securities or gaining access to the collateral or may experience delays or costs in doing so. In such an event, the terms of the agreement allow the unaffiliated securities lending agent to use the collateral to purchase replacement securities on behalf of the Fund or pay the Fund the market value of the loaned securities. The Fund will bear the risk of loss with respect to depreciation of its investment of the cash collateral.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date, except for certain dividends from foreign securities, which are recorded as soon as the custodian verifies the ex-dividend date. Dividend income from foreign securities is recorded net of foreign taxes withheld where recovery of such taxes is not assured.
Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date and paid from net investment income quarterly and any net realized gains are paid at least annually. Such distributions are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles. Dividend sources are estimated at the time of declaration. The tax character of distributions is determined as of the Fund’s fiscal year end. Therefore, a portion of the Fund’s distributions made prior to the Fund’s fiscal year end may be categorized as a tax return of capital at year end.
Federal and other taxes
The Fund intends to continue to qualify as a regulated investment company by distributing substantially all of its investment company taxable income and any net realized capital gains (after reduction for capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes was required.
The Fund’s income and federal excise tax returns and all financial records supporting those returns for the prior three fiscal years are subject to examination by the federal and Delaware revenue authorities. Management has analyzed the Fund’s tax positions taken on federal, state, and foreign tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability.
As of March 31, 2020, the aggregate cost of all investments for federal income tax purposes was $242,538,370 and the unrealized gains (losses) consisted of:
| Gross unrealized gains |
$ | 152,469,050 | ||
| Gross unrealized losses |
(17,251,431 | ) | ||
| Net unrealized gains |
$ | 135,217,619 | ||
Class allocations
The separate classes of shares offered by the Fund differ principally in applicable sales charges, distribution, shareholder servicing, and administration fees. Class specific expenses are charged directly to that share class. Investment income, common fund-level expenses, and realized and unrealized gains (losses) on investments are allocated daily to each class of shares based on the relative proportion of net assets of each class.
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority
22 | Wells Fargo Utility and Telecommunications Fund
Table of Contents
Notes to financial statements
to unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
| ∎ | Level 1 – quoted prices in active markets for identical securities |
| ∎ | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) |
| ∎ | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The inputs or methodologies used for valuing investments in securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of March 31, 2020:
| Quoted prices (Level 1) |
Other significant observable inputs (Level 2) |
Significant (Level 3) |
Total | |||||||||||||
| Assets |
||||||||||||||||
| Investments in: |
||||||||||||||||
| Common stocks |
||||||||||||||||
| Communication services |
$ | 46,168,165 | $ | 0 | $ | 0 | $ | 46,168,165 | ||||||||
| Consumer discretionary |
1,758,435 | 0 | 0 | 1,758,435 | ||||||||||||
| Consumer staples |
1,855,983 | 0 | 0 | 1,855,983 | ||||||||||||
| Energy |
1,924,962 | 0 | 0 | 1,924,962 | ||||||||||||
| Financials |
1,842,104 | 0 | 0 | 1,842,104 | ||||||||||||
| Health care |
3,891,263 | 0 | 0 | 3,891,263 | ||||||||||||
| Information technology |
40,225,146 | 0 | 0 | 40,225,146 | ||||||||||||
| Real estate |
1,951,258 | 0 | 0 | 1,951,258 | ||||||||||||
| Utilities |
268,552,437 | 0 | 0 | 268,552,437 | ||||||||||||
| Short-term investments |
||||||||||||||||
| Investment companies |
9,586,236 | 0 | 0 | 9,586,236 | ||||||||||||
| Total assets |
$ | 377,755,989 | $ | 0 | $ | 0 | $ | 377,755,989 | ||||||||
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
For the year ended March 31, 2020, the Fund did not have any transfers into/out of Level 3.
4. TRANSACTIONS WITH AFFILIATES AND OTHER EXPENSES
Management fee
Funds Management, an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”), is the manager of the Fund and provides advisory and fund-level administrative services under an investment management agreement. Under the investment management agreement, Funds Management is responsible for, among other services, implementing the investment objectives and strategies of the Fund, supervising the subadviser and providing fund-level administrative services in connection with the Fund’s operations. As compensation for its services under the investment management agreement, Funds Management is entitled to receive a management fee at the following annual rate based on the Fund’s average daily net assets:
| Average daily net assets | Management fee | |||
| First $500 million |
0.650 | % | ||
| Next $500 million |
0.600 | |||
| Next $1 billion |
0.550 | |||
| Next $2 billion |
0.525 | |||
| Next $1 billion |
0.500 | |||
| Next $5 billion |
0.490 | |||
| Over $10 billion |
0.480 | |||
Wells Fargo Utility and Telecommunications Fund | 23
Table of Contents
Notes to financial statements
For the year ended March 31, 2020, the management fee was equivalent to an annual rate of 0.65% of the Fund’s average daily net assets.
Funds Management has retained the services of a subadviser to provide daily portfolio management to the Fund. The fee for subadvisory services is borne by Funds Management. Wells Capital Management Incorporated (“WellsCap”), an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo, is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.30% and declining to 0.20% as the average daily net assets of the Fund increase. Prior to October 15, 2019, Crow Point Partners, LLC, which was not an affiliate of Funds Management, was the subadviser to the Fund and received an annual fee which started at 0.20% and declined to 0.10% as the average daily net assets of the Fund increased.
Administration fees
Under a class-level administration agreement, Funds Management provides class-level administrative services to the Fund, which includes paying fees and expenses for services provided by the transfer agent, sub-transfer agents, omnibus account servicers and record-keepers. As compensation for its services under the class-level administration agreement, Funds Management receives an annual fee which is calculated based on the average daily net assets of each class as follows:
| Class-level administration fee |
||||
| Class A, Class C |
0.21 | % | ||
| Administrator Class, Institutional Class |
0.13 | |||
Waivers and/or expense reimbursements
Funds Management has contractually waived and/or reimbursed management and administration fees to the extent necessary to maintain certain net operating expense ratios for the Fund. When each class of the Fund has exceeded its expense cap, Funds Management has waived fees and/or reimbursed expenses from fund-level expenses on a proportionate basis and then from class specific expenses. When only certain classes exceed their expense caps, waivers and/or reimbursements are applied against class specific expenses before fund-level expenses. Funds Management has committed through July 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 1.05% for Class A shares, 1.80% for Class C shares, 0.92% for Administrator Class shares, and 0.72% for Institutional Class shares. Prior to or after the commitment expiration date, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees.
Prior to October 15, 2019, the Fund’s expenses were capped at 1.14% for Class A shares, 1.89% for Class C shares, 0.95% for Administrator Class shares, and 0.78% for Institutional Class shares.
Distribution fee
The Trust has adopted a distribution plan for Class C shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. A distribution fee is charged to Class C shares and paid to Wells Fargo Funds Distributor, LLC (“Funds Distributor”), the principal underwriter, at an annual rate of 0.75% of the average daily net assets of Class C shares.
In addition, Funds Distributor is entitled to receive the front-end sales charge from the purchase of Class A shares and a contingent deferred sales charge on the redemption of certain Class A shares. Funds Distributor is also entitled to receive the contingent deferred sales charges from redemptions of Class C shares. For the year ended March 31, 2020, Funds Distributor received $45,605 from the sale of Class A shares. No contingent deferred sales charges were incurred by Class A and Class C shares for the year ended March 31, 2020.
Shareholder servicing fees
The Trust has entered into contracts with one or more shareholder servicing agents, whereby Class A, Class C, and Administrator Class of the Fund are charged a fee at an annual rate of 0.25% of the average daily net assets of each respective class. A portion of these total shareholder servicing fees were paid to affiliates of Wells Fargo.
Interfund transactions
The Fund may purchase or sell portfolio investment securities to certain other Wells Fargo affiliates pursuant to Rule 17a-7 under the 1940 Act and under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which do not incur broker commissions, are effected at current market prices. Pursuant to these procedures, the Fund had $18,210,033 and $16,780,780 in interfund purchases and sales, respectively, during the year ended March 31, 2020.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the year ended March 31, 2020 were $201,603,988 and $223,768,292, respectively.
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Notes to financial statements
6. SECURITIES LENDING TRANSACTIONS
The Fund lends its securities through an unaffiliated securities lending agent and receives collateral in the form of cash or securities with a value at least equal to the value of the securities on loan. The value of the loaned securities is determined at the close of each business day and any increases or decreases in the required collateral are exchanged between the Fund and the counterparty on the next business day. Cash collateral received is invested in the Securities Lending Fund which seeks to provide a positive return compared to the daily Fed Funds Open Rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments and is exempt from registration under Section 3(c)(7) of the 1940 Act. Securities Lending Fund is managed by Funds Management and is subadvised by WellsCap. Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser.
In the event of counterparty default or the failure of a borrower to return a loaned security, the Fund has the right to use the collateral to offset any losses incurred. As of March 31, 2020, the Fund did not have any securities on loan.
7. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $280,000,000 revolving credit agreement whereby the Fund is permitted to use bank borrowings for temporary or emergency purposes, such as to fund shareholder redemption requests. Interest under the credit agreement is charged to the Fund based on a borrowing rate equal to the higher of the Federal Funds rate in effect on that day plus 1.25% or the overnight LIBOR rate in effect on that day plus 1.25%. In addition, an annual commitment fee equal to 0.25% of the unused balance is allocated to each participating fund.
For the year ended March 31, 2020, there were no borrowings by the Fund under the agreement.
8. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid during the years ended March 31, 2020 and March 31, 2019 were as follows:
| Year ended March 31 | ||||||||
| 2020 | 2019 | |||||||
| Ordinary income |
$ | 6,071,815 | $ | 5,554,488 | ||||
| Long-term capital gain |
63,320,520 | 1,000,182 | ||||||
As of March 31, 2020, the components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income |
Undistributed long-term gain |
Unrealized gains | ||
| $540,914 | $47,406,760 | $135,217,619 | ||
9. CONCENTRATION RISK
The Fund invests a substantial portion of its assets in utility and telecommunications companies and, therefore, may be more affected by changes in the utility and telecommunications sectors than would be a fund whose investments are not heavily weighted in any sector.
10. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
11. NEW ACCOUNTING PRONOUNCEMENT
In August 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 updates the disclosure requirements for fair value measurements by modifying or removing certain disclosures and adding certain new disclosures. The amendments are
Wells Fargo Utility and Telecommunications Fund | 25
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Notes to financial statements
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Management has adopted the removal and modification of disclosures early, as permitted, and will adopt the additional new disclosures at the effective date.
12. CORONAVIRUS (COVID-19) PANDEMIC
On March 11, 2020, the World Health Organization announced that it had made the assessment that coronavirus disease 2019 (“COVID-19”) is a pandemic. The impacts of COVID-19 are adversely affecting the entire global economy, individual companies and investment products, and the market in general. There is significant uncertainty around the extent and duration of business disruptions related to COVID-19 and the impacts may be short term or may last for an extended period of time. The risk of further spreading of COVID-19 has led to significant uncertainty and volatility in the financial markets. The value of the Fund and the securities in which the Fund invests have generally been adversely affected by impacts caused by COVID-19.
26 | Wells Fargo Utility and Telecommunications Fund
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Report of independent registered public accounting firm
TO THE SHAREHOLDERS OF THE FUND AND BOARD OF TRUSTEES WELLS FARGO FUNDS TRUST:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Wells Fargo Utility and Telecommunications Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of March 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of March 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of March 31, 2020, by correspondence with the custodian and transfer agent. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have not been able to determine the specific year that we began serving as the auditor of one or more Wells Fargo Funds investment companies; however we are aware that we have served as the auditor of one or more Wells Fargo Funds investment companies since at least 1955.
Boston, Massachusetts
May 28, 2020
Wells Fargo Utility and Telecommunications Fund | 27
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TAX INFORMATION
For corporate shareholders, pursuant to Section 854 of the Internal Revenue Code, 100% of ordinary income dividends qualify for the corporate dividends-received deduction for the fiscal year ended March 31, 2020.
Pursuant to Section 852 of the Internal Revenue Code, $63,320,520 was designated as a 20% rate gain distribution for the fiscal year ended March 31, 2020.
Pursuant to Section 854 of the Internal Revenue Code, $6,071,815 of income dividends paid during the fiscal year ended March 31, 2020 has been designated as qualified dividend income (QDI).
For the fiscal year ended March 31, 2020, $101,128 has been designated as interest-related dividends for nonresident alien shareholders pursuant to Section 871 of the Internal Revenue Code.
PROXY VOTING INFORMATION
A description of the policies and procedures used to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-222-8222, visiting our website at wfam.com, or visiting the SEC website at sec.gov. Information regarding how the proxies related to portfolio securities were voted during the most recent 12-month period ended June 30 is available on the website at wfam.com or by visiting the SEC website at sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. Shareholders may view the filed Form N-PORT by visiting the SEC website at sec.gov.
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Other information (unaudited)
BOARD OF TRUSTEES AND OFFICERS
Each of the Trustees and Officers1 listed in the table below acts in identical capacities for each fund in the Wells Fargo family of funds, which consists of 147 mutual funds comprising the Wells Fargo Funds Trust, Wells Fargo Variable Trust, Wells Fargo Master Trust and four closed-end funds (collectively the “Fund Complex”). This table should be read in conjunction with the Prospectus and the Statement of Additional Information2. The mailing address of each Trustee and Officer is 525 Market Street, 12th Floor, San Francisco, CA 94105. Each Trustee and Officer serves an indefinite term, however, each Trustee serves such term until reaching the mandatory retirement age established by the Trustees.
Independent Trustees
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| William R. Ebsworth (Born 1957) | Trustee, since 2015 | Retired. From 1984 to 2013, equities analyst, portfolio manager, research director and chief investment officer at Fidelity Management and Research Company in Boston, Tokyo, and Hong Kong, and retired in 2013 as Chief Investment Officer of Fidelity Strategic Advisers, Inc. where he led a team of investment professionals managing client assets. Prior thereto, Board member of Hong Kong Securities Clearing Co., Hong Kong Options Clearing Corp., the Thailand International Fund, Ltd., Fidelity Investments Life Insurance Company, and Empire Fidelity Investments Life Insurance Company. Audit Committee Chair and Investment Committee Chair of the Vincent Memorial Hospital Endowment (non-profit organization). Mr. Ebsworth is a CFA® charterholder. | N/A | |||
| Jane A. Freeman (Born 1953) | Trustee, since 2015; Chair Liaison, since 2018 |
Retired. From 2012 to 2014 and 1999 to 2008, Chief Financial Officer of Scientific Learning Corporation. From 2008 to 2012, Ms. Freeman provided consulting services related to strategic business projects. Prior to 1999, Portfolio Manager at Rockefeller & Co. and Scudder, Stevens & Clark. Board member of the Harding Loevner Funds from 1996 to 2014, serving as both Lead Independent Director and chair of the Audit Committee. Board member of the Russell Exchange Traded Funds Trust from 2011 to 2012 and the chair of the Audit Committee. Ms. Freeman is a Board Member of The Ruth Bancroft Garden (non-profit organization). She is also an inactive Chartered Financial Analyst. | N/A | |||
| Isaiah Harris, Jr. (Born 1952) | Trustee, since 2009; Audit Committee Chairman, since 2019 |
Retired. Chairman of the Board of CIGNA Corporation since 2009, and Director since 2005. From 2003 to 2011, Director of Deluxe Corporation. Prior thereto, President and CEO of BellSouth Advertising and Publishing Corp. from 2005 to 2007, President and CEO of BellSouth Enterprises from 2004 to 2005 and President of BellSouth Consumer Services from 2000 to 2003. Emeritus member of the Iowa State University Foundation Board of Governors. Emeritus Member of the Advisory Board of Iowa State University School of Business. Advisory Board Member, Palm Harbor Academy (private school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
| Judith M. Johnson (Born 1949) | Trustee, since 2008; Audit Committee Chairman, from 2009 to 2018 |
Retired. Prior thereto, Chief Executive Officer and Chief Investment Officer of Minneapolis Employees Retirement Fund from 1996 to 2008. Ms. Johnson is an attorney, certified public accountant and a certified managerial accountant. | N/A | |||
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Other information (unaudited)
| Name and year of birth |
Position held and length of service* |
Principal occupations during past five years or longer | Current other public company or investment company directorships | |||
| David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | N/A | |||
| Olivia S. Mitchell (Born 1953) | Trustee, since 2006; Nominating and Governance Committee Chair, since 2018 | International Foundation of Employee Benefit Plans Professor, Wharton School of the University of Pennsylvania since 1993. Director of Wharton’s Pension Research Council and Boettner Center on Pensions & Retirement Research, and Research Associate at the National Bureau of Economic Research. Previously, Cornell University Professor from 1978 to 1993. | N/A | |||
| Timothy J. Penny (Born 1951) | Trustee, since 1996; Chairman, since 2018 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | N/A | |||
| James G. Polisson (Born 1959) | Trustee, since 2018 | Retired. Chief Marketing Officer, Source (ETF) UK Services, Ltd, from 2015 to 2017. From 2012 to 2015, Principal of The Polisson Group, LLC, a management consulting, corporate advisory and principal investing company. Chief Executive Officer and Managing Director at Russell Investments, Global Exchange Traded Funds from 2010 to 2012. Managing Director of Barclays Global Investors from 1998 to 2010 and Global Chief Marketing Officer for iShares and Barclays Global Investors from 2000 to 2010. Trustee of the San Francisco Mechanics’ Institute, a non-profit organization, from 2013 to 2015. Board member of the Russell Exchange Traded Fund Trust from 2011 to 2012. Director of Barclays Global Investors Holdings Deutschland GmbH from 2006 to 2009. Mr. Polisson is an attorney and has a retired status with the Massachusetts and District of Columbia Bar Associations. | N/A | |||
| Pamela Wheelock3 (Born 1959) | Trustee, since January 2020; previously Trustee from January 2018 to July 2019 | Board member of the Destination Medical Center Economic Development Agency, Rochester, Minnesota since 2019. Acting Commissioner, Minnesota Department of Human Services, July 2019 through September 2019. Human Services Manager (part-time), Minnesota Department of Human Services, October 2019 through December 2019. Chief Operating Officer, Twin Cities Habitat for Humanity from 2017 to 2019. Vice President of University Services, University of Minnesota from 2012 to 2016. Prior thereto, on the Board of Directors, Governance Committee and Finance Committee for the Minnesota Philanthropy Partners (Saint Paul Foundation) from 2012 to 2018, Interim Chief Executive Officer of Blue Cross Blue Shield of Minnesota from 2011 to 2012, Chairman of the Board from 2009 to 2012 and Board Director from 2003 to 2015. Vice President, Leadership and Community Engagement, Bush Foundation, Saint Paul, Minnesota (a private foundation) from 2009 to 2011. Executive Vice President and Chief Financial Officer, Minnesota Sports and Entertainment from 2004 to 2009 and Senior Vice President from 2002 to 2004. Executive Vice President of the Minnesota Wild Foundation from 2004 to 2008. Commissioner of Finance, State of Minnesota, from 1999 to 2002. Currently Board Chair of the Minnesota Wild Foundation since 2010. | N/A | |||
| * | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
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Other information (unaudited)
Officers
| Name and year of birth |
Position held and length of service |
Principal occupations during past five years or longer | ||
| Andrew Owen (Born 1960) | President, since 2017 | Executive Vice President of Wells Fargo & Company and Head of Affiliated Managers, Wells Fargo Asset Management, since 2014. In addition, Mr. Owen is currently President, Chief Executive Officer and Director of Wells Fargo Funds Management, LLC since 2017. Prior thereto, Executive Vice President responsible for marketing, investments and product development for Wells Fargo Funds Management, LLC, from 2009 to 2014. | ||
| Nancy Wiser1 (Born 1967) | Treasurer, since 2012 | Executive Vice President of Wells Fargo Funds Management, LLC since 2011. Chief Operating Officer and Chief Compliance Officer at LightBox Capital Management LLC, from 2008 to 2011. | ||
| Michelle Rhee (Born 1966) | Chief Legal Officer, since 2019 | Secretary of Wells Fargo Funds Management, LLC, Chief Legal Counsel of Wells Fargo Asset Management and Assistant General Counsel of Wells Fargo Bank, N.A. since 2018. Associate General Counsel and Managing Director of Bank of America Corporation from 2004 to 2018. | ||
| Catherine Kennedy (Born 1969) | Secretary, since 2019 | Vice President of Wells Fargo Funds Management, LLC and Senior Counsel of the Wells Fargo Legal Department since 2010. Vice President and Senior Counsel of Evergreen Investment Management Company, LLC from 1998 to 2010. | ||
| Michael H. Whitaker (Born 1967) | Chief Compliance Officer, since 2016 | Chief Compliance Officer of Wells Fargo Asset Management since 2016. Senior Vice President and Chief Compliance Officer for Fidelity Investments from 2007 to 2016. | ||
| David Berardi (Born 1975) | Assistant Treasurer, since 2009 | Vice President of Wells Fargo Funds Management, LLC since 2009. Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010. Manager of Fund Reporting and Control for Evergreen Investment Management Company, LLC from 2004 to 2010. | ||
| Jeremy DePalma1 (Born 1974) | Assistant Treasurer, since 2009 | Senior Vice President of Wells Fargo Funds Management, LLC since 2009. Senior Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010 and head of the Fund Reporting and Control Team within Fund Administration from 2005 to 2010. | ||
| 1 | Nancy Wiser acts as Treasurer of 65 funds in the Fund Complex. Jeremy DePalma acts as Treasurer of 82 funds and Assistant Treasurer of 65 funds in the Fund Complex. |
| 2 | The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request, by calling 1-800-222-8222 or by visiting the website at wfam.com. |
| 3 | Pamela Wheelock was re-appointed to the Board effective January 1, 2020. |
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Effective on or about May 1, 2020, if you purchase Fund shares through a Janney Montgomery Scott LLC (“Janney”) brokerage account, you will be eligible for the following load waivers (front-end sales charge waivers and contingent deferred sales charge (“CDSC”), or back-end sales charge, waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or SAI.
| Front-end sales charge* waivers on Class A shares available at Janney |
| Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family). |
| Shares purchased by employees and registered representatives of Janney or its affiliates and their family members as designated by Janney. |
| Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within ninety (90) days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e., right of reinstatement). |
| Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans. |
| Shares acquired through a right of reinstatement. |
| Class C shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund pursuant to Janney’s policies and procedures. |
| CDSC waivers on Class A and Class C shares available at Janney |
| Shares sold upon the death or disability of the shareholder. |
| Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
| Shares purchased in connection with a return of excess contributions from an IRA account. |
| Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulations. |
| Shares sold to pay Janney fees but only if the transaction is initiated by Janney. |
| Shares acquired through a right of reinstatement. |
| Shares exchanged into the same share class of a different fund. |
| Front-end sales charge* discounts available at Janney; breakpoints, rights of accumulation and/or letters of intent |
| Breakpoints as described in the Fund’s Prospectus. |
| Rights of accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Janney. Eligible fund family assets not held at Janney may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
| Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Janney Montgomery Scott may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
| * | Also referred to as an “initial sales charge.” |
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Effective on or after May 1, 2020, clients of Edward Jones (also referred to as “shareholders”) purchasing Fund shares on the Edward Jones commission and fee-based platforms are eligible only for the following sales charge discounts (also referred to as “breakpoints”) and waivers, which can differ from breakpoints and waivers described elsewhere in this Prospectus or SAI or through another broker-dealer. In all instances, it is the shareholder’s responsibility to inform Edward Jones at the time of purchase of any relationship, holdings of Wells Fargo Funds or other facts qualifying the purchaser for breakpoints or waivers. Edward Jones can ask for documentation of such circumstance.
| Breakpoints available at Edward Jones |
| Rights of Accumulation (ROA) |
| The applicable sales charge on a purchase of Class A shares is determined by taking into account all share classes (except any money market funds and retirement plan share classes) of Wells Fargo Funds held by the shareholder or in an account grouped by Edward Jones with other accounts for the purpose of providing certain pricing considerations (“pricing groups”). This includes all share classes held on the Edward Jones platform and/or held on another platform. The inclusion of eligible fund family assets in the rights of accumulation calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. |
| ROA is determined by calculating the higher of cost or market value (current shares x NAV). |
| Letter of Intent (LOI) |
| Through a LOI, shareholders can receive the sales charge and breakpoint discounts for purchases shareholders intend to makeover a 13-month period from the date Edward Jones receives the LOI. The LOI is determined by calculating the higher of cost or market value of qualifying holdings at LOI initiation in combination with the value that the shareholder intends to buy over a 13-month period to calculate the front-end sales charge and any breakpoint discounts. Each purchase the shareholder makes during that 13-month period will receive the sales charge and breakpoint discount that applies to the total amount. The inclusion of eligible fund family assets in the LOI calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. Purchases made before the LOI is received by Edward Jones are not covered under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if LOI is not met. |
| Sales charges are waived for the following shareholders and in the following situations at Edward Jones: |
| ● Associates of Edward Jones and its affiliates and their family members who are in the same pricing group (as determined by Edward Jones under its policies and procedures) as the associate. This waiver will continue for the remainder of the associate’s life if the associate retires from Edward Jones in good-standing. |
| ● Shares purchased in an Edward Jones fee-based program. |
| ● Shares purchased through reinvestment of capital gains distributions and dividend reinvestment. |
| ● Shares purchased from the proceeds of redeemed shares of the same fund family so long as the following conditions are met: 1)the proceeds are from the sale of shares within 60 days of the purchase, and 2) the sale and purchase are made in the same share class and the same account or the purchase is made in an individual retirement account with proceeds from liquidations in anon-retirement account. |
| ● Shares exchanged into Class A shares from another share class so long as the exchange is into the same fund and was initiated at the discretion of Edward Jones. Edward Jones is responsible for any remaining CDSC due to the fund company, if applicable. Any future purchases are subject to the applicable sales charge as disclosed in the prospectus. |
| ● Exchanges from Class C shares to Class A shares of the same fund, generally, in the 84th month following the anniversary of the purchase date or earlier at the discretion of Edward Jones. |
| If the shareholder purchases shares that are subject to a CDSC and those shares are redeemed before the CDSC is
expired, the shareholder is responsible to pay the CDSC except in the following conditions available at Edward Jones: |
| ● The death or disability of the shareholder. |
| ● Systematic withdrawals with up to 10% per year of the account value. |
| ● Return of excess contributions from an Individual Retirement Account (IRA). |
| ● Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulation. |
| ● Shares sold to pay Edward Jones fees or costs in such cases where the transaction is initiated by Edward Jones. |
| ● Shares exchanged in an Edward Jones fee-based program. |
| ● Shares acquired through NAV reinstatement. |
Wells Fargo Utility and Telecommunications Fund | 33
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Appendix II (unaudited)
| Other Important Information for accounts at Edward Jones: |
| Minimum Purchase Amounts ● $250 initial purchase minimum ● $50 subsequent purchase minimum |
|
Minimum Balances Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy: ● A fee-based account held on an Edward Jones platform ● A 529 account held on an Edward Jones platform ● An account with an active systematic investment plan or letter of intent (LOI) |
|
Changing Share Classes At any time it deems necessary, Edward Jones has the authority to exchange at NAV a shareholder’s holdings in a fund to Class A shares. |
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 219967
Kansas City, MO 64121-9967
Website: wfam.com
Individual investors: 1-800-222-8222
Retail investment professionals: 1-888-877-9275
Institutional investment professionals: 1-866-765-0778
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. If this report is used for promotional purposes, distribution of the report must be accompanied or preceded by a current prospectus. Before investing, please consider the investment objectives, risks, charges, and expenses of the investment. For a current prospectus and, if available, a summary prospectus, containing this information, call 1-800-222-8222 or visit the Fund’s website at wfam.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is the trade name for certain investment advisory/management firms owned by Wells Fargo & Company. These firms include but are not limited to Wells Capital Management Incorporated and Wells Fargo Funds Management, LLC. Certain products managed by WFAM entities are distributed by Wells Fargo Funds Distributor, LLC (a broker-dealer and Member FINRA).
This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.
INVESTMENT PRODUCTS: NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE
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ITEM 2. CODE OF ETHICS
(a) As of the end of the period covered by the report, Wells Fargo Funds Trust has adopted a code of ethics that applies to its President and Treasurer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
(c) During the period covered by this report, there were no amendments to the provisions of the code of ethics adopted in Item 2(a) above.
(d) During the period covered by this report, there were no implicit or explicit waivers to the provisions of the code of ethics adopted in Item 2(a) above.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of Wells Fargo Funds Trust has determined that Judith Johnson is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mrs. Johnson is independent for purposes of Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a), (b), (c), (d) The following table presents aggregate fees billed in each of the last two fiscal years for services rendered
to the Registrant by the Registrant’s principal accountant. These fees were billed to the registrant and were approved by
the Registrant’s audit committee.
| Fiscal year ended March 31, 2020 |
Fiscal year ended March 31, 2019 |
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| Audit fees |
$ | 230,650 | $ | 229,080 | ||||
| Audit-related fees |
— | — | ||||||
| Tax fees (1) |
32,250 | 31,725 | ||||||
| All other fees |
— | — | ||||||
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|
|
|
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| $ | 262,900 | $ | 260,805 | |||||
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| (1) | Tax fees consist of fees for tax compliance, tax advice, tax planning and excise tax. |
(e) The Chairman of the Audit Committees is authorized to pre-approve: (1) audit services for the mutual funds of Wells Fargo Funds Trust; (2) non-audit tax or compliance consulting or training services provided to the Funds by the independent auditors (“Auditors”) if the fees for any particular engagement are not anticipated to exceed $50,000; and (3) non-audit tax or compliance consulting or training services provided by the Auditors to a Fund’s investment adviser and its controlling entities (where pre-approval is required because the engagement relates directly to the operations and financial reporting of the Fund) if the fee to the Auditors for any particular engagement is not anticipated to exceed $50,000. For any such pre-approval sought from the Chairman, Management shall prepare a brief description of the proposed services.
If the Chairman approves of such service, he or she shall sign the statement prepared by Management.
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Such written statement shall be presented to the full Committees at their next regularly scheduled meetings.
(f) Not applicable
(g) Not applicable
(h) Not applicable
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. INVESTMENTS
A Portfolio of Investments for each series of Wells Fargo Funds Trust is included as part of the report to shareholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s Board of Trustees that have been implemented since the registrant’s last provided disclosure in response to the requirements of this Item.
ITEM 11. CONTROLS AND PROCEDURES
(a) The President and Treasurer have concluded that the Wells Fargo Funds Trust disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) provide reasonable assurances that material information relating to the registrant is made known to them by the appropriate persons based on their evaluation of these controls and procedures as of a date within 90 days of the filing of this report.
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(b) There were no significant changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the most recent fiscal half-year of the period covered by this report that materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
ITEM 12. DISCLOSURES OF SECURITIES LENDING ACTIVITES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 13. EXHIBITS
(a)(1) Code of Ethics.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Wells Fargo Funds Trust | ||
| By: | /s/ Andrew Owen | |
| Andrew Owen | ||
| President | ||
| Date: | May 28, 2020 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
| Wells Fargo Funds Trust | ||
| By: | /s/ Andrew Owen | |
| Andrew Owen | ||
| President | ||
| Date: | May 28, 2020 | |
| By: | /s/Nancy Wiser | |
| Nancy Wiser | ||
| Treasurer | ||
| Date: | May 28, 2020 | |