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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: August 31
Registrant is making a filing for 9 of its series:
Wells Fargo Adjustable Rate Government Fund, Wells Fargo Conservative Income Fund, Wells Fargo Government Securities Fund, Wells Fargo High Yield Bond Fund, Wells Fargo Core Plus Bond Fund, Wells Fargo Short Duration Government Bond Fund, Wells Fargo Short-Term Bond Plus Fund, Wells Fargo Short-Term High Yield Bond Fund, and Wells Fargo Ultra Short-Term Income Fund.
Date of reporting period: August 31, 2020
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ITEM 1. REPORT TO STOCKHOLDERS
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Annual Report
August 31, 2020
Wells Fargo
Adjustable Rate Government 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 August 31, 2020, unless otherwise noted, and are those of the Fund’s portfolio 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 Adjustable Rate Government Fund | 1
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Letter to shareholders (unaudited)
Andrew Owen
President
Wells Fargo Funds
Dear Shareholder:
We are pleased to offer you this annual report for the Wells Fargo Adjustable Rate Government Fund for the 12-month period that ended August 31, 2020. Global stock markets saw earlier gains erased in March as governments around the world took unprecedented measures, attempting to stop the spread of the coronavirus at the expense of short-term economic output. However, markets rebounded from April on to offset much of the losses as central banks attempted to bolster capital markets and confidence.
For the 12-month period, equities had broadly positive total returns despite intense volatility in March. Non-U.S. developed market equities had the weakest performance and U.S. stocks performed strongly. Fixed-income securities were more modest though also generally positive. For the period, U.S. stocks, based on the S&P 500 Index,1 gained 21.94%. International stocks, as measured by the MSCI ACWI ex USA Index (Net),2 returned 8.31%, while the MSCI EM Index (Net)3 had somewhat stronger performance, with a 14.49% gain. For bond investors, the Bloomberg Barclays U.S. Aggregate Bond Index4 returned 6.47%, the Bloomberg Barclays Global Aggregate ex-USD Index5 gained a more modest 4.58%, and the Bloomberg Barclays Municipal Bond Index6 returned 3.24% while the ICE BofA U.S. High Yield Index7 returned 3.71%.
The fiscal year began with supportive central bank actions.
As the period began, several central banks had just cut interest rates in response to a global economic slowdown. Ongoing concerns regarding U.S.-China trade tensions and Brexit remained unresolved. The Federal Reserve (Fed) cut U.S. interest rates again in September. U.S. manufacturing data disappointed investors. The U.S. Congress announced it would pursue an impeachment investigation of President Trump. Meanwhile, the U.K. Brexit impasse showed no signs of resolution. Officials in China said that hitting the country’s economic growth goals for the year would be difficult considering the weight of tariffs and trade restrictions. Although the S&P 500 Index finished the third quarter with the best year-to-date returns in more than 20 years, concerns about future returns remained.
The fourth quarter started on a strong note, with U.S.-China trade tensions relaxing in October along with renewed optimism for a U.K. Brexit deal and positive macroeconomic data. The initial estimate of U.S. third-quarter gross domestic product (GDP) growth was a resilient 1.9% annualized rate, while the U.S. unemployment rate fell to a 50-year low of
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 and emerging 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 Adjustable Rate Government Fund
Table of Contents
Letter to shareholders (unaudited)
3.5% in September. However, despite strength among U.S. consumers, business confidence declined while manufacturing activity contracted. Concerned with a potential economic slowdown, the Fed lowered interest rates another quarter point in late October—its third rate cut in four months. This helped push the S&P 500 Index to an all-time high while emerging market equities rallied and global bonds declined overall, reflecting a broad pickup in risk appetite.
Equity markets continued to rally in November despite ongoing geopolitical risks. Hopes for a U.S.-China trade deal buoyed investor confidence. U.S. business sentiment improved slightly, and manufacturing and services activity picked up. While consumer confidence and purchasing managers’ activity rose in the eurozone, China reported weakening manufacturing and consumer data. Bond yields rose marginally, leading to slightly negative returns for global government and investment-grade corporate bonds.
Financial markets ended 2019 with a boost from the U.S. and China accord on a Phase One trade deal. That, along with the landslide win by the pro-Brexit U.K. Conservative Party in a national election and ongoing central bank support, gave investors greater confidence. U.S. economic indicators were generally positive, with the exception of manufacturing activity and business confidence. Consumer confidence was resilient, fed by a robust labor market, tame inflation, and lower interest rates, which boosted housing affordability and stimulated homebuyer activity. The impeachment of President Trump had little impact on markets. Meanwhile, slowing Chinese economic activity, partly attributable to the trade war, led to further government stimulus at year-end through lower reserve ratios, allowing banks to lend more money.
The year-end rally continued in early January 2020. However, capital market volatility picked up sharply in late January on concerns over the potential impact of the coronavirus on the global economy and stock markets. As sentiment began to sour, perceived safe havens did well in January. The U.S. dollar and Japanese yen both rose and government bonds outperformed equities. While the S&P 500 Index held its ground, emerging market equities tumbled, including those in Asia.
In February, the coronavirus became the major market focus. Fears of the virus’s impact on global growth led to expectations of increased global central bank monetary policy support. That led the 10-year U.S. Treasury yield to fall to an all-time low of 1.1%. Although equity markets initially shrugged off concerns about the outbreak, focusing instead on strong fourth-quarter earnings and improving business confidence in January, market sentiment turned sharply lower and the S&P 500 Index lost 8.2% for the month. Oil prices tumbled as Russia and the Organization of the Petroleum Exporting Countries compounded a major decline in oil demand with a brutal price war, partly aimed at dissuading further U.S. shale production, causing the price of West Texas Intermediate crude oil to plummet.
The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems. This abrupt stoppage of economic activity led to the sharp deceleration of global output, sending economies into a deep contraction. Central banks responded swiftly, slashing interest rates and expanding quantitative easing programs to restore liquidity and confidence to the markets. In the U.S., the Fed introduced several new lending programs, funding investment-grade bonds, money market mutual funds, and commercial paper while purchasing Treasuries, mortgage-backed securities, and overnight repurchase agreements. Meanwhile, stock markets tumbled quickly into a bear market, ending the longest bull stock market in U.S. history.
Markets rebounded strongly in April, fueled by unprecedented government and central bank stimulus measures. The U.S. economy contracted by an annualized 5.0% pace in the first quarter, with 30 million new unemployment insurance claims in six weeks. In the
“The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems.”
Wells Fargo Adjustable Rate Government Fund | 3
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Letter to shareholders (unaudited)
“The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July.”
eurozone, first-quarter real GDP shrank 3.8%, with the composite April Flash Purchasing Managers’ Index, a monthly survey of purchasing managers, falling to an all-time low of 13.5. The European Central Bank expanded its quantitative easing to include the purchase of additional government bonds of countries with the greatest virus-related need, including Italy and Spain. China’s first-quarter GDP fell by 6.8% year over year. However, retail sales, production, and investment showed signs of recovery. Extreme oil-price volatility continued as global supply far exceeded demand.
The global equity market rebound continued in May, with widespread strong monthly gains. Investors regained confidence on reports of early signs of success in human trials of a coronavirus vaccine. Growth stocks continued to outperform value stocks while returns on global government bonds were generally flat. In the U.S., a gap grew between the stock market rebound and devastating economic data points, including an April unemployment rate of 14.7%, the highest level since World War II. Purchasing managers’ indices reflected weakening activity in May in both the manufacturing and services sectors. U.S. corporate earnings reports indicated a 14% year-over-year contraction in earnings from the first quarter of 2019. However, high demand for technology, driven by remote activity, supported robust information technology sector earnings, which helped drive major technology stocks higher.
Financial markets posted widely positive returns in June despite ongoing economic weakness and high levels of uncertainty on the containment of the coronavirus and the timing of an effective vaccine. There were hopeful signs as economies reopened, with both U.S. and U.K. retail sales rebounding sharply in May. However, year over year, sales remained depressed. Vitally important to market sentiment was the ongoing commitment by central banks globally to do all they could to provide economic support through liquidity and low borrowing costs. U.S. economic activity was aided by one-time $1,200 stimulus checks and $600 bonus weekly unemployment benefits which expired at the end of July. However, unemployment remained historically high, easing somewhat from 14.7% in April to 11.1% in June. During June, numerous states reported increases of coronavirus cases. China’s economic recovery picked up momentum in June, though it remained far from a full recovery.
July was a broadly positive month for both global equities and fixed income. However, economic data and a resurgence of coronavirus cases pointed to the vulnerability of the global economy and the ongoing imperative to regain control of the pandemic. Second-quarter GDP shrank from the previous quarter by 9.5% and 12.1% in the U.S. and eurozone, respectively. In contrast, China reported a 3.2% year-over-year expansion in its second-quarter GDP. U.S. unemployment remained high despite adding 1.8 million jobs in July, with a double-digit jobless rate persisting. However, manufacturing activity grew in both the U.S. and eurozone. In Asia, while China’s manufacturing sector continued to expand, activity in Japan and South Korea contracted. In July, a rising concern was the rapid and broad reemergence of coronavirus infections.
The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July. U.S. stocks had strong monthly gains, led by the so-called FAANG stocks—Facebook, Apple, Amazon, Netflix, and Google (Alphabet)—which dominate these indices and continued to rally. U.S. stocks generally surpassed other broadly positive global equity performance while fixed-income market monthly returns were broadly flat. Generally stronger-than-expected second-quarter earnings boosted investor sentiment along with the Fed’s announcement of a policy shift that will likely lead to longer-term low interest rates and supportive monetary policy. The U.S. Flash Purchasing Managers’ Indices for both manufacturing and services beat expectations while U.S. housing market indicators were strong. In Europe, retail sales expanded and consumer confidence remained steady. China’s economy continued its fairly steady expansion. Overall, developed markets performed better than emerging market equities for the month of August as people took comfort in better-known equities in perceived safer markets.
4 | Wells Fargo Adjustable Rate Government Fund
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Letter to shareholders (unaudited)
Don’t let short-term uncertainty derail long-term investment goals.
Periods of investment uncertainty can present challenges, but experience has taught us that maintaining long-term investment goals can be an effective way to plan for the future. To help you create a sound strategy based on your personal goals and risk tolerance, Wells Fargo Funds offers more than 100 mutual funds spanning a wide range of asset classes and investment styles. Although diversification cannot guarantee an investment profit or prevent losses, we believe it can be an effective way to manage investment risk and potentially smooth out overall portfolio performance. We encourage investors to know their investments and to understand that appropriate levels of risk-taking may unlock opportunities.
Thank you for choosing to invest with Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Andrew Owen
President
Wells Fargo Funds
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For further information about your Fund, contact your investment professional, visit our website at wfam.com, or call us directly at 1-800-222-8222. |
Notice to Shareholders
At a meeting held on August 10-12, 2020, the Board of Trustees of the Fund approved the following changes:
∎ | A change to the Fund’s automatic conversion feature for Class C shares in order to shorten the required holding period from 10 to 8 years. As a result, on a monthly basis beginning November 5, 2020, Class C shares will convert automatically into Class A shares 8 years after the initial date of purchase or, if you acquired your Class C shares through an exchange or conversion from another share class, 8 years after the date you acquired your Class C shares. When Class C shares that you acquired through a purchase or exchange convert, any other Class C shares that you purchased with reinvested dividends and distributions also will convert into Class A shares on a pro rata basis. |
Please note that a shorter holding period may apply depending on your intermediary. Please see “Appendix A—Sales Charge Reductions and Waivers for Certain Intermediaries” in the Fund’s prospectus for further information.
∎ | Changes to the Class A sales charge schedule for the Fund, effective with every purchase made on or after September 21, 2020 |
NEW Class A Sales Charge Schedule effective September 21, 2020
Amount of Purchase | Front-end Sales Price | Front-end Sales Charge As % of Net Amount Invested | Commission Paid to Intermediary As % of Public Offering Price | |||||||||
Less than $100,000 | 2.00 | % | 2.04 | % | 1.75 | % | ||||||
$100,000 but less than $250,000 | 1.00 | % | 1.01 | % | 0.85 | % | ||||||
$250,000 and over | 0.00 | %1 | 0.00 | % | 0.40 | %2 |
1 | If you redeem Class A shares purchased at or above the $250,000 breakpoint level within twelve months from the date of purchase, you will pay a CDSC of 0.40% of the NAV of the shares on the date of original purchase. Certain exceptions apply (see “CDSC Waivers” in the Fund’s Prospectus). For redemptions of Class A shares of the Fund purchased prior to August 1, 2018, the CDSC terms that were in place at the time of purchase will continue to apply. |
2 | The commission paid to an intermediary on purchases above the $250,000 breakpoint level includes an advance by Wells Fargo Funds Distributor of the first year’s shareholder servicing fee. |
Wells Fargo Adjustable Rate Government Fund | 5
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Performance highlights (unaudited)
Investment objective
The Fund seeks current income consistent with capital preservation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Christopher Y. Kauffman, CFA®‡
Michal Stanczyk
Average annual total returns (%) as of August 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 (ESAAX) | 6-30-2000 | -0.74 | 0.57 | 0.81 | 1.25 | 0.98 | 1.02 | 0.87 | 0.74 | |||||||||||||||||||||||||
Class C (ESACX) | 6-30-2000 | -0.50 | 0.21 | 0.25 | 0.50 | 0.21 | 0.25 | 1.62 | 1.49 | |||||||||||||||||||||||||
Administrator Class (ESADX) | 7-30-2010 | – | – | – | 1.40 | 1.13 | 1.16 | 0.81 | 0.60 | |||||||||||||||||||||||||
Institutional Class (EKIZX) | 10-1-1991 | – | – | – | 1.54 | 1.27 | 1.29 | 0.54 | 0.46 | |||||||||||||||||||||||||
Bloomberg Barclays 6-Month Treasury Bill Index3 | – | – | – | – | 1.70 | 1.45 | 0.82 | – | – |
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 2.00%. 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.
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. Securities issued by U.S. government agencies or government-sponsored entities may not be guaranteed by the U.S. Treasury. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). The Fund is exposed to mortgage- and asset-backed securities risk. The U.S. government guarantee applies to certain underlying securities and not to shares of the Fund. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Adjustable Rate Government Fund
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Performance highlights (unaudited)
Growth of $10,000 investment as of August 31, 20204 |
‡ | 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 December 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 0.74% for Class A, 1.49% for Class C, 0.60% for Administrator Class, and 0.46% 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 caps. Prior to or after the commitment expiration date, the caps may be increased or the commitment to maintain the caps may be terminated only with the approval of the Board of Trustees. Without these caps, 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 Bloomberg Barclays 6-Month Treasury Bill Index tracks the performance and attributes of recently issued 6-Month U.S. Treasury bills. The index follows Bloomberg Barclays’ monthly rebalancing conventions. You cannot invest directly in an index. |
4 | The chart compares the performance of Class A shares for the most recent ten years with the performance of the Bloomberg Barclays 6-Month Treasury Bill 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 2.00%. |
5 | 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. |
6 | 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 Adjustable Rate Government Fund | 7
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Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
∎ | The Fund underperformed its benchmark, the Bloomberg Barclays 6-Month Treasury Bill Index, for the 12-month period that ended August 31, 2020. |
∎ | The Fund’s allocation to post-reset adjustable-rate mortgages (ARMs) was the primary detractor from performance during the period as spreads only partially retraced the widening the sector experienced in March 2020. Declining ARM prepayments driven by a steepening yield curve and interest income, however, mitigated the impact. |
∎ | The Fund’s allocation to certain collateralized mortgage obligations (CMOs) backed by Federal Housing Administration–insured reverse mortgages detracted from performance, as spreads in the sector widened modestly. |
∎ | During the period, the Fund continued to reduce its allocation to higher-dollar-price ARMs in favor of floating-rate CMOs to mitigate the negative impact of prepayments. The Fund also modestly increased its exposure to short-term, fixed-rate pools and CMOs, as well as floating-rate Federal Family Education Loan Program (FFELP) student loan asset-backed securities (ABS) and AAA-rated residential mortgage-backed securities. |
∎ | The Fund’s duration during the period increased slightly from 0.9 to 1.1 years. |
∎ | The Fund’s allocation to agency CMO floaters was a modest contributor to performance as the sector ended the period close to unchanged in spread. |
Ten largest holdings (%) as of August 31, 20205 | ||||
FNMA, 2.00%, 9-14-2050 | 1.50 | |||
FNMA, Series 2002-66 Class A3, 4.06%, 4-25-2042 | 1.42 | |||
FNMA, 3.00%, 9-14-2050 | 1.41 | |||
FHLMC, 2.63%, 6-1-2050 | 1.32 | |||
FHLMC, Series KF82 Class AL, 0.52%, 6-25-2030 | 1.22 | |||
FNMA, 2.41%, 8-1-2050 | 1.19 | |||
FNMA, Series 2004-W15 Class 3A, 3.98%, 6-25-2044 | 1.09 | |||
ECMC Group Student Loan Trust, Series 2018-2A Class A, 0.97%, 9-25-2068 | 1.09 | |||
GNMA, Series 2017-H11 Class FE, 1.18%, 5-20-2067 | 1.06 | |||
FNMA, Series 2019-41 Class F, 0.67%, 8-25-2059 | 1.04 |
The coronavirus made a significant impact.
After years of steady expansion, the U.S. economy received a traumatic shock in 2020 with the arrival of the coronavirus. Public reaction and government-ordered lockdowns resulted in a collapse in economic activity with the second quarter of 2020 recording a nearly 10% drop in gross domestic product. Unemployment swiftly soared to double digits. Most areas of consumption declined precipitously. Travel and leisure services bore the brunt of the disruption. Spurred by a negative demand shock, prices for many goods declined in March and April, pushing most inflation indicators substantially lower.
The Federal Reserve responded to the pandemic with a dramatic easing of monetary policy, setting overnight rate
targets to near zero as well as purchasing bonds for its own account. A host of credit support measures were put in place to improve the functioning of teetering financial markets. In their actions and rhetoric, the monetary authorities made it clear that an aggressive posture to support the economic and financial markets would be in place as long as needed.
Fiscal policy also responded swiftly to the pandemic in the form of relief payments to the general public as well as extended unemployment benefits. These measures more than offset the loss of income associated with unemployment increases and other wage losses for many people.
Economic activity probably bottomed in late April, and by the end of May, both consumption and employment were turning around. Substantial job gains occurred while claims for unemployment insurance began to subside. Prices generally stabilized, with oil rallying from distressed levels and core inflation measures rebounding from their crisis lows. Stock indices hit new all-time highs over the course of the summer, while Treasury yields remained extremely low. Credit spreads, which widened sharply in the March–April period, narrowed substantially in the ensuing few months.
Please see footnotes on page 7.
8 | Wells Fargo Adjustable Rate Government Fund
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Performance highlights (unaudited)
Portfolio composition as of August 31, 20206 |
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The Fund was predominantly invested in adjustable-rate residential mortgage securities.
The Fund remains defensively positioned with a significant out-of-benchmark allocation to ARMs and floating-rate CMOs that have frequent rate resets and are generally indexed to the 1-Year Treasury Constant Maturity Rate and the 12-month London Interbank Offered Rate (LIBOR). During the period, the Fund underperformed the benchmark due to wider spreads on post-reset ARMs following risk-off sentiment at the beginning of 2020. The Fund’s duration modestly increased from 0.9 to 1.1 years during the
reporting period. We continued to see value in seasoned ARMs that have already had their rates reset with favorable prepayment characteristics, as well as FFELP Student Loan ABS, which have lagged other higher-quality floating-rate sectors.
The outlook is for recovery and uncertainty.
The outlook holds considerable uncertainty, as the ultimate resolution of the coronavirus pandemic remains unknown. Consumer behavior is likely to have been altered by the crisis, though lower consumption in some areas, such as travel and leisure, could well be offset by higher spending on housing, in-home entertainment, and the like. The upcoming U.S. elections represent an additional source of uncertainty, with the potential for meaningful swings in tax, spending, and regulatory policies. Bearing in mind the higher-than-normal degree of uncertainty, we expect the present recovery to continue, albeit at a gradually declining pace, as pent-up demand is satisfied and lingering damage from the pandemic proves difficult to heal. We believe it could take a year or longer to make up for all of the shortfall.
Please see footnotes on page 7.
Wells Fargo Adjustable Rate Government 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 March 1, 2020 to August 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 3-1-2020 | Ending account value 8-31-2020 | Expenses paid during the period1 | Annualized net expense ratio | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 999.29 | $ | 3.72 | 0.74 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.42 | $ | 3.76 | 0.74 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 995.51 | $ | 7.47 | 1.49 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,017.65 | $ | 7.56 | 1.49 | % | ||||||||
Administrator Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 999.98 | $ | 3.02 | 0.60 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.12 | $ | 3.05 | 0.60 | % | ||||||||
Institutional Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,000.69 | $ | 2.31 | 0.46 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.82 | $ | 2.34 | 0.46 | % |
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 Adjustable Rate Government Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities: 83.78% | ||||||||||||||||
FDIC Series 2010-S2 Class 3A (1 Month LIBOR +0.70%) 144A± | 0.86 | % | 12-29-2045 | $ | 44,924 | $ | 44,940 | |||||||||
FHLMC (1 Year Treasury Constant Maturity +0.73%) ± | 1.64 | 4-1-2030 | 29,624 | 29,845 | ||||||||||||
FHLMC (11th District Cost of Funds +1.25%) ± | 1.99 | 2-1-2035 | 53,295 | 52,640 | ||||||||||||
FHLMC (11th District Cost of Funds +1.25%) ± | 2.13 | 1-1-2030 | 2,046 | 2,026 | ||||||||||||
FHLMC (11th District Cost of Funds +1.25%) ± | 2.13 | 1-1-2030 | 471 | 470 | ||||||||||||
FHLMC (11th District Cost of Funds +1.25%) ± | 2.13 | 7-1-2030 | 116,122 | 115,275 | ||||||||||||
FHLMC (11th District Cost of Funds +1.26%) ± | 2.14 | 10-1-2030 | 141 | 141 | ||||||||||||
FHLMC (6 Month LIBOR +1.42%) ± | 2.38 | 2-1-2037 | 3,391 | 3,501 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.22%) ± | 2.60 | 8-1-2033 | 62,334 | 62,130 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 2.60 | 11-1-2026 | 53,591 | 53,556 | ||||||||||||
FHLMC (6 Month LIBOR +1.73%) ± | 2.61 | 6-1-2024 | 4,429 | 4,449 | ||||||||||||
FHLMC (12 Month LIBOR +1.64%) ± | 2.63 | 6-1-2050 | 5,187,004 | 5,451,691 | ||||||||||||
FHLMC (12 Month LIBOR +1.75%) ± | 2.65 | 6-1-2033 | 370,138 | 372,644 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.35%) ± | 2.73 | 7-1-2038 | 152,692 | 152,372 | ||||||||||||
FHLMC (12 Month LIBOR +1.62%) ± | 2.73 | 7-1-2045 | 1,403,411 | 1,456,486 | ||||||||||||
FHLMC (11th District Cost of Funds +1.75%) ± | 2.73 | 3-1-2025 | 1,777 | 1,774 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 2.73 | 5-1-2032 | 35,354 | 35,346 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 2.75 | 11-1-2035 | 430,554 | 453,505 | ||||||||||||
FHLMC (12 Month LIBOR +1.77%) ± | 2.75 | 6-1-2035 | 451,175 | 453,756 | ||||||||||||
FHLMC (U.S. Treasury H15 Treasury Bill 6 Month Auction High Discount +1.94%) ± | 2.81 | 7-1-2024 | 19,381 | 19,154 | ||||||||||||
FHLMC (12 Month LIBOR +1.75%) ± | 2.90 | 5-1-2033 | 135,482 | 136,225 | ||||||||||||
FHLMC (12 Month LIBOR +1.77%) ± | 2.92 | 10-1-2035 | 466,573 | 469,796 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.47%) ± | 2.92 | 7-1-2034 | 371,328 | 374,508 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.47%) ± | 2.97 | 6-1-2035 | 172,145 | 172,187 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.00 | 5-1-2034 | 489,701 | 491,207 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.03%) ± | 3.06 | 12-1-2035 | 369,880 | 371,124 | ||||||||||||
FHLMC (12 Month LIBOR +1.77%) ± | 3.06 | 10-1-2036 | 297,038 | 312,655 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.09 | 9-1-2038 | 125,999 | 126,653 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.09 | 3-1-2036 | 373,691 | 377,426 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.48%) ± | 3.12 | 6-1-2030 | 202,560 | 203,027 | ||||||||||||
FHLMC (U.S. Treasury H15 Treasury Bill 6 Month Auction High Discount +1.75%) ± | 3.12 | 1-1-2023 | 10,119 | 10,159 | ||||||||||||
FHLMC (6 Month LIBOR +1.68%) ± | 3.15 | 1-1-2037 | 751,343 | 783,295 | ||||||||||||
FHLMC (6 Month LIBOR +1.69%) ± | 3.19 | 6-1-2037 | 275,596 | 277,374 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.34%) ± | 3.20 | 7-1-2034 | 267,150 | 268,178 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.43%) ± | 3.30 | 6-1-2025 | 38,818 | 38,693 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.24%) ± | 3.32 | 3-1-2035 | 429,646 | 453,243 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.24%) ± | 3.32 | 2-1-2036 | 358,720 | 362,918 | ||||||||||||
FHLMC (6 Month LIBOR +2.09%) ± | 3.33 | 6-1-2026 | 500,513 | 503,790 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.35 | 1-1-2034 | 479,311 | 484,276 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.05%) ± | 3.37 | 8-1-2033 | 851,984 | 867,560 | ||||||||||||
FHLMC (12 Month LIBOR +1.51%) ± | 3.38 | 2-1-2037 | 48,797 | 49,033 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.26%) ± | 3.38 | 2-1-2036 | 260,746 | 265,459 | ||||||||||||
FHLMC (11th District Cost of Funds +2.39%) ± | 3.39 | 6-1-2021 | 6,064 | 6,074 | ||||||||||||
FHLMC (12 Month LIBOR +1.87%) ± | 3.41 | 5-1-2035 | 60,186 | 60,845 | ||||||||||||
FHLMC (11th District Cost of Funds +1.25%) ± | 3.43 | 11-1-2030 | 19,642 | 19,970 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.17%) ± | 3.43 | 5-1-2037 | 48,081 | 48,303 | ||||||||||||
FHLMC (11th District Cost of Funds +2.36%) ± | 3.43 | 6-1-2029 | 17,267 | 17,427 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.46 | 8-1-2035 | 900,046 | 925,677 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.28%) ± | 3.47 | 4-1-2037 | 766,827 | 787,706 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.40%) ± | 3.47 | 7-1-2029 | 45,865 | 46,070 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.27%) ± | 3.47 | 5-1-2034 | 908,936 | 941,494 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +1.88%) ± | 3.48 | 5-1-2035 | 270,701 | 272,321 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.40%) ± | 3.50 | 11-1-2029 | 252,716 | 253,301 | ||||||||||||
FHLMC (12 Month LIBOR +1.78%) ± | 3.50 | 1-1-2040 | 2,758,017 | 2,873,991 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Adjustable Rate Government Fund | 11
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.26%) ± | 3.52 | % | 7-1-2035 | $ | 334,157 | $ | 352,567 | |||||||||
FHLMC (1 Year Treasury Constant Maturity +2.20%) ± | 3.54 | 11-1-2036 | 626,996 | 631,999 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.29%) ± | 3.54 | 9-1-2033 | 366,935 | 375,511 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.24%) ± | 3.54 | 9-1-2035 | 852,707 | 899,377 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.24%) ± | 3.54 | 2-1-2036 | 566,143 | 596,798 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.24%) ± | 3.54 | 5-1-2038 | 473,731 | 478,479 | ||||||||||||
FHLMC (12 Month LIBOR +1.82%) ± | 3.55 | 5-1-2039 | 371,160 | 374,472 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.57 | 6-1-2035 | 65,118 | 68,863 | ||||||||||||
FHLMC (12 Month LIBOR +1.75%) ± | 3.58 | 4-1-2035 | 134,659 | 141,877 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.48%) ± | 3.58 | 10-1-2025 | 34,928 | 34,907 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.10%) ± | 3.59 | 10-1-2037 | 708,319 | 742,535 | ||||||||||||
FHLMC (12 Month LIBOR +1.75%) ± | 3.59 | 9-1-2037 | 234,392 | 246,340 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.60 | 10-1-2034 | 393,626 | 413,617 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.61 | 10-1-2036 | 205,200 | 207,397 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.31%) ± | 3.61 | 3-1-2037 | 193,883 | 205,060 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.16%) ± | 3.62 | 6-1-2033 | 413,924 | 416,234 | ||||||||||||
FHLMC (12 Month LIBOR +1.77%) ± | 3.63 | 9-1-2037 | 286,194 | 301,031 | ||||||||||||
FHLMC (12 Month LIBOR +1.74%) ± | 3.64 | 12-1-2036 | 173,462 | 182,008 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.66 | 2-1-2036 | 578,564 | 585,882 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.35%) ± | 3.67 | 7-1-2027 | 320,719 | 322,315 | ||||||||||||
FHLMC (12 Month LIBOR +1.67%) ± | 3.67 | 8-1-2035 | 130,646 | 131,171 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.39%) ± | 3.67 | 6-1-2035 | 774,619 | 806,375 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.68 | 7-1-2036 | 166,840 | 168,270 | ||||||||||||
FHLMC (12 Month LIBOR +1.93%) ± | 3.69 | 4-1-2035 | 723,834 | 736,700 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.31%) ± | 3.69 | 9-1-2029 | 377,611 | 380,867 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.42%) ± | 3.69 | 9-1-2030 | 72,864 | 73,457 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.33%) ± | 3.69 | 10-1-2033 | 662,335 | 673,782 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.03%) ± | 3.69 | 1-1-2030 | 10,552 | 10,610 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.32%) ± | 3.70 | 7-1-2038 | 345,302 | 365,260 | ||||||||||||
FHLMC (12 Month LIBOR +1.87%) ± | 3.71 | 7-1-2038 | 1,067,775 | 1,125,625 | ||||||||||||
FHLMC (6 Month LIBOR +2.12%) ± | 3.71 | 5-1-2037 | 28,745 | 29,041 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.73 | 4-1-2034 | 172,127 | 173,392 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.73 | 4-1-2037 | 318,017 | 322,037 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.73 | 4-1-2034 | 170,950 | 171,721 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.73 | 4-1-2038 | 598,366 | 633,349 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +1.99%) ± | 3.74 | 11-1-2034 | 267,025 | 268,060 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.74 | 7-1-2034 | 80,072 | 84,381 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.36%) ± | 3.74 | 1-1-2028 | 1,469 | 1,475 | ||||||||||||
FHLMC (12 Month LIBOR +1.74%) ± | 3.74 | 5-1-2037 | 719,528 | 757,654 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.75 | 3-1-2034 | 568,605 | 571,166 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.75 | 5-1-2034 | 120,770 | 121,116 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.22%) ± | 3.76 | 4-1-2023 | 82,622 | 82,803 | ||||||||||||
FHLMC (12 Month LIBOR +1.73%) ± | 3.76 | 1-1-2035 | 372,252 | 374,818 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.76 | 3-1-2034 | 501,380 | 504,613 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.36%) ± | 3.77 | 9-1-2032 | 1,018,954 | 1,070,097 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.03%) ± | 3.77 | 3-1-2025 | 26,748 | 26,820 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.78 | 11-1-2036 | 539,949 | 544,634 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.26%) ± | 3.78 | 9-1-2038 | 390,520 | 393,742 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.24%) ± | 3.78 | 8-1-2027 | 4,033 | 4,071 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.35%) ± | 3.78 | 2-1-2036 | 65,634 | 69,465 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.17%) ± | 3.78 | 6-1-2036 | 564,667 | 595,054 | ||||||||||||
FHLMC (12 Month LIBOR +1.87%) ± | 3.79 | 4-1-2037 | 252,315 | 267,172 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.36%) ± | 3.79 | 1-1-2028 | 12,445 | 12,500 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.24%) ± | 3.79 | 3-1-2027 | 58,565 | 58,748 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.21%) ± | 3.81 | 1-1-2037 | 586,430 | 592,224 | ||||||||||||
FHLMC (5 Year Treasury Constant Maturity +2.44%) ± | 3.82 | 8-1-2027 | 27,785 | 28,029 |
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Adjustable Rate Government Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.37%) ± | 3.83 | % | 2-1-2031 | $ | 289,950 | $ | 293,475 | |||||||||
FHLMC (12 Month LIBOR +1.84%) ± | 3.83 | 4-1-2035 | 727,422 | 766,997 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.22%) ± | 3.83 | 1-1-2033 | 239,427 | 240,325 | ||||||||||||
FHLMC (3 Year Treasury Constant Maturity +2.44%) ± | 3.83 | 5-1-2032 | 101,121 | 101,541 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.31%) ± | 3.83 | 1-1-2036 | 333,128 | 352,841 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.24%) ± | 3.84 | 2-1-2034 | 384,567 | 387,909 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.33%) ± | 3.84 | 6-1-2035 | 257,681 | 259,459 | ||||||||||||
FHLMC (12 Month LIBOR +1.91%) ± | 3.85 | 3-1-2032 | 188,139 | 190,391 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.26%) ± | 3.85 | 8-1-2035 | 265,304 | 279,879 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.28%) ± | 3.85 | 2-1-2036 | 387,165 | 409,004 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.85 | 2-1-2034 | 791,198 | 805,277 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.86 | 2-1-2034 | 131,942 | 133,318 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.36%) ± | 3.86 | 4-1-2038 | 657,177 | 661,101 | ||||||||||||
FHLMC (12 Month LIBOR +1.86%) ± | 3.86 | 4-1-2037 | 381,737 | 404,392 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.24%) ± | 3.87 | 7-1-2037 | 304,696 | 322,140 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.47%) ± | 3.88 | 10-1-2030 | 937,502 | 980,036 | ||||||||||||
FHLMC (12 Month LIBOR +1.78%) ± | 3.88 | 11-1-2035 | 223,914 | 234,838 | ||||||||||||
FHLMC (12 Month LIBOR +1.86%) ± | 3.89 | 9-1-2036 | 474,711 | 501,343 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.90 | 2-1-2036 | 369,388 | 384,748 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.28%) ± | 3.91 | 2-1-2034 | 754,617 | 797,765 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.27%) ± | 3.91 | 7-1-2031 | 416,666 | 419,283 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.33%) ± | 3.91 | 9-1-2033 | 535,930 | 539,220 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.19%) ± | 3.92 | 8-1-2034 | 546,133 | 556,451 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.92 | 4-1-2036 | 314,382 | 323,697 | ||||||||||||
FHLMC (12 Month LIBOR +1.99%) ± | 3.93 | 7-1-2036 | 516,894 | 521,268 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.39%) ± | 3.94 | 1-1-2037 | 1,060,062 | 1,126,878 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.44%) ± | 3.94 | 4-1-2029 | 62,797 | 63,375 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.22%) ± | 3.95 | 12-1-2033 | 337,440 | 339,930 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.26%) ± | 3.95 | 11-1-2022 | 39,712 | 40,014 | ||||||||||||
FHLMC (12 Month Treasury Average +1.90%) ± | 3.97 | 5-1-2028 | 154,055 | 154,900 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.33%) ± | 3.97 | 7-1-2031 | 133,552 | 134,296 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.48%) ± | 3.98 | 2-1-2030 | 25,921 | 26,085 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.48%) ± | 3.98 | 6-1-2030 | 69,037 | 69,489 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.29%) ± | 3.98 | 11-1-2035 | 606,349 | 609,135 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.98 | 1-1-2037 | 70,790 | 74,901 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 4.00 | 12-1-2034 | 187,552 | 188,493 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.28%) ± | 4.00 | 1-1-2035 | 212,962 | 213,936 | ||||||||||||
FHLMC | 4.00 | 7-1-2029 | 2,320,997 | 2,464,469 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.34%) ± | 4.01 | 6-1-2035 | 589,144 | 612,043 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.48%) ± | 4.01 | 10-1-2024 | 50,801 | 50,986 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.27%) ± | 4.02 | 11-1-2029 | 34,532 | 34,666 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.29%) ± | 4.02 | 11-1-2027 | 285,684 | 286,834 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.38%) ± | 4.02 | 4-1-2034 | 323,265 | 324,667 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.36%) ± | 4.02 | 2-1-2035 | 546,599 | 549,849 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.29%) ± | 4.04 | 11-1-2029 | 52,769 | 53,051 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 4.08 | 5-1-2034 | 61,793 | 65,131 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.60%) ± | 4.10 | 6-1-2032 | 130,633 | 131,298 | ||||||||||||
FHLMC (12 Month LIBOR +1.98%) ± | 4.10 | 11-1-2032 | 99,970 | 100,232 | ||||||||||||
FHLMC (12 Month Treasury Average +2.46%) ± | 4.12 | 10-1-2029 | 81,763 | 82,136 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.22%) ± | 4.13 | 10-1-2033 | 385,655 | 389,916 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.28%) ± | 4.14 | 10-1-2036 | 173,096 | 174,880 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.66%) ± | 4.14 | 5-1-2028 | 110,487 | 110,737 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.22%) ± | 4.15 | 10-1-2033 | 590,669 | 619,697 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 4.17 | 9-1-2033 | 113,291 | 119,068 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.22%) ± | 4.17 | 10-1-2033 | 180,140 | 189,135 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.48%) ± | 4.18 | 6-1-2030 | 25,435 | 25,635 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Adjustable Rate Government Fund | 13
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.48%) ± | 4.19 | % | 12-1-2032 | $ | 68,472 | $ | 68,984 | |||||||||
FHLMC (3 Year Treasury Constant Maturity +2.27%) ± | 4.19 | 4-1-2032 | 74,743 | 75,122 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.27%) ± | 4.27 | 5-1-2025 | 46,848 | 47,043 | ||||||||||||
FHLMC (6 Month LIBOR +2.38%) ± | 4.27 | 2-1-2024 | 8,783 | 8,829 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.61%) ± | 4.27 | 9-1-2030 | 49,254 | 49,444 | ||||||||||||
FHLMC (2 Year Treasury Constant Maturity +2.44%) ± | 4.32 | 8-1-2029 | 16,707 | 16,807 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.52%) ± | 4.32 | 11-1-2029 | 77,513 | 78,335 | ||||||||||||
FHLMC (3 Year Treasury Constant Maturity +2.68%) ± | 4.38 | 6-1-2035 | 389,407 | 396,571 | ||||||||||||
FHLMC (12 Month Treasury Average +2.52%) ± | 4.39 | 6-1-2028 | 30,171 | 30,201 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.40%) ± | 4.40 | 9-1-2031 | 35,621 | 35,714 | ||||||||||||
FHLMC (3 Year Treasury Constant Maturity +2.44%) ± | 4.41 | 5-1-2031 | 88,999 | 89,195 | ||||||||||||
FHLMC (11th District Cost of Funds +2.29%) ± | 4.42 | 12-1-2025 | 4,519 | 4,503 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.55%) ± | 4.44 | 9-1-2029 | 73,502 | 73,386 | ||||||||||||
FHLMC (5 Year Treasury Constant Maturity +2.13%) ± | 4.51 | 8-1-2029 | 7,720 | 7,745 | ||||||||||||
FHLMC (11th District Cost of Funds +2.57%) ± | 4.69 | 12-1-2025 | 217,859 | 219,115 | ||||||||||||
FHLMC | 5.00 | 10-1-2022 | 3,175 | 3,348 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.32%) ± | 5.49 | 8-1-2024 | 138,596 | 139,363 | ||||||||||||
FHLMC (6 Month LIBOR +3.83%) ± | 5.71 | 11-1-2026 | 23,028 | 23,155 | ||||||||||||
FHLMC Series 1671 Class QA (11th District Cost of Funds +0.95%) ± | 1.71 | 2-15-2024 | 590,190 | 592,748 | ||||||||||||
FHLMC Series 1686 Class FE (11th District Cost of Funds +1.10%) ± | 1.86 | 2-15-2024 | 8,228 | 8,334 | ||||||||||||
FHLMC Series 1709 Class FA (10 Year Treasury Constant Maturity -0.85%) ± | 0.00 | 3-15-2024 | 151,498 | 148,863 | ||||||||||||
FHLMC Series 1730 Class FA (10 Year Treasury Constant Maturity -0.60%) ± | 0.12 | 5-15-2024 | 63,402 | 62,234 | ||||||||||||
FHLMC Series 20 Class F ±± | 2.46 | 7-1-2029 | 5,049 | 5,190 | ||||||||||||
FHLMC Series 2315 Class FW (1 Month LIBOR +0.55%) ± | 0.71 | 4-15-2027 | 50,097 | 50,232 | ||||||||||||
FHLMC Series 2391 Class EF (1 Month LIBOR +0.50%) ± | 0.66 | 6-15-2031 | 49,294 | 49,416 | ||||||||||||
FHLMC Series 2454 Class SL (1 Month LIBOR +8.00%) ±(c) | 7.84 | 3-15-2032 | 99,502 | 17,938 | ||||||||||||
FHLMC Series 2461 Class FI (1 Month LIBOR +0.50%) ± | 0.66 | 4-15-2028 | 66,245 | 66,363 | ||||||||||||
FHLMC Series 2464 Class FE (1 Month LIBOR +1.00%) ± | 1.16 | 3-15-2032 | 64,853 | 66,071 | ||||||||||||
FHLMC Series 2466 Class FV (1 Month LIBOR +0.55%) ± | 0.71 | 3-15-2032 | 128,493 | 129,039 | ||||||||||||
FHLMC Series 2538 Class F (1 Month LIBOR +0.60%) ± | 0.76 | 12-15-2032 | 276,168 | 279,189 | ||||||||||||
FHLMC Series 264 Class F1 (1 Month LIBOR +0.55%) ± | 0.71 | 7-15-2042 | 1,440,609 | 1,449,752 | ||||||||||||
FHLMC Series 2682 Class FK (1 Month LIBOR +1.47%) ± | 1.63 | 1-15-2033 | 2,730,239 | 2,831,081 | ||||||||||||
FHLMC Series 3140 Class GF (1 Month LIBOR +0.35%) ± | 0.51 | 3-15-2036 | 632,590 | 633,954 | ||||||||||||
FHLMC Series 3146 Series FP (1 Month LIBOR +0.35%) ± | 0.51 | 4-15-2036 | 645,290 | 646,696 | ||||||||||||
FHLMC Series 3149 Class FB (1 Month LIBOR +0.35%) ± | 0.51 | 5-15-2036 | 1,060,879 | 1,062,241 | ||||||||||||
FHLMC Series 319 Class F1 (1 Month LIBOR +0.45%) ± | 0.61 | 11-15-2043 | 1,973,420 | 1,950,587 | ||||||||||||
FHLMC Series 3240 Class FM (1 Month LIBOR +0.35%) ± | 0.51 | 11-15-2036 | 1,159,124 | 1,161,853 | ||||||||||||
FHLMC Series 3284 Class CF (1 Month LIBOR +0.37%) ± | 0.53 | 3-15-2037 | 801,809 | 804,642 | ||||||||||||
FHLMC Series 3286 Class FA (1 Month LIBOR +0.40%) ± | 0.56 | 3-15-2037 | 330,365 | 331,340 | ||||||||||||
FHLMC Series 3436 Class A ±± | 4.03 | 11-15-2036 | 380,207 | 390,849 | ||||||||||||
FHLMC Series 3753 Class FA (1 Month LIBOR +0.50%) ± | 0.66 | 11-15-2040 | 2,041,602 | 2,052,530 | ||||||||||||
FHLMC Series 3757 Class PF (1 Month LIBOR +0.50%) ± | 0.66 | 8-15-2040 | 709,744 | 712,382 | ||||||||||||
FHLMC Series 3822 Class FY (1 Month LIBOR +0.40%) ± | 0.56 | 2-15-2033 | 867,644 | 871,820 | ||||||||||||
FHLMC Series 3827 Class DF (1 Month LIBOR +0.45%) ± | 0.61 | 3-15-2041 | 784,400 | 789,526 | ||||||||||||
FHLMC Series 3997 Class FQ (1 Month LIBOR +0.50%) ± | 0.66 | 2-15-2042 | 870,806 | 875,578 | ||||||||||||
FHLMC Series 4013 Class QF (1 Month LIBOR +0.55%) ± | 0.71 | 3-15-2041 | 788,926 | 792,484 | ||||||||||||
FHLMC Series 4039 Class FA (1 Month LIBOR +0.50%) ± | 0.66 | 5-15-2042 | 1,576,640 | 1,587,111 | ||||||||||||
FHLMC Series 4095 Class FB (1 Month LIBOR +0.40%) ± | 0.56 | 4-15-2039 | 1,001,555 | 1,003,463 | ||||||||||||
FHLMC Series 4136 Class DF (1 Month LIBOR +0.30%) ± | 0.46 | 11-15-2042 | 926,172 | 923,088 | ||||||||||||
FHLMC Series 4248 Class FL (1 Month LIBOR +0.45%) ± | 0.61 | 5-15-2041 | 343,689 | 345,688 | ||||||||||||
FHLMC Series 4316 Class JF (1 Month LIBOR +0.40%) ± | 0.56 | 1-15-2044 | 1,703,095 | 1,702,735 | ||||||||||||
FHLMC Series 4515 Class FA (1 Month LIBOR +0.37%) ± | 0.54 | 8-15-2038 | 354,288 | 354,983 | ||||||||||||
FHLMC Series 4678 Class AF (1 Month LIBOR +0.40%) ± | 0.57 | 12-15-2042 | 1,800,126 | 1,803,628 | ||||||||||||
FHLMC Series 4691 Class FA (1 Month LIBOR +0.35%) ± | 0.51 | 6-15-2047 | 953,258 | 947,202 | ||||||||||||
FHLMC Series 4754 Class FM (1 Month LIBOR +0.30%) ± | 0.46 | 2-15-2048 | 3,652,023 | 3,651,736 | ||||||||||||
FHLMC Series 4821 Class FA (1 Month LIBOR +0.30%) ± | 0.46 | 7-15-2048 | 1,144,993 | 1,142,338 |
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Adjustable Rate Government Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FHLMC Series 4842 Class FA (1 Month LIBOR +0.35%) ± | 0.51 | % | 11-15-2048 | $ | 2,432,404 | $ | 2,434,555 | |||||||||
FHLMC Series 4921 Class FN (1 Month LIBOR +0.45%) ± | 0.62 | 10-25-2049 | 1,641,667 | 1,646,076 | ||||||||||||
FHLMC Series 4925 Class FY (1 Month LIBOR +0.45%) ± | 0.62 | 10-25-2049 | 922,696 | 924,889 | ||||||||||||
FHLMC Series 4933 Class FA (1 Month LIBOR +0.50%) ± | 0.67 | 12-25-2049 | 2,162,875 | 2,172,360 | ||||||||||||
FHLMC Series KF61 Class A (1 Month LIBOR +0.53%) ± | 0.68 | 3-25-2029 | 971,035 | 978,310 | ||||||||||||
FHLMC Series KF80 Class A (30 Day Average U.S. SOFR +0.51%) ± | 0.59 | 6-25-2030 | 4,000,000 | 4,001,223 | ||||||||||||
FHLMC Series KF82 Class AL (1 Month LIBOR +0.37%) ± | 0.52 | 6-25-2030 | 5,000,000 | 5,027,671 | ||||||||||||
FHLMC Series T-15 Class A6 (1 Month LIBOR +0.40%) ± | 0.58 | 11-25-2028 | 308,650 | 308,392 | ||||||||||||
FHLMC Series T-16 Class A (1 Month LIBOR +0.10%) ± | 0.52 | 6-25-2029 | 1,039,593 | 1,036,915 | ||||||||||||
FHLMC Series T-20 Class A7 (1 Month LIBOR +0.15%) ± | 0.47 | 12-25-2029 | 2,204,756 | 2,149,661 | ||||||||||||
FHLMC Series T-21 Class A (1 Month LIBOR +0.18%) ± | 0.53 | 10-25-2029 | 707,684 | 704,383 | ||||||||||||
FHLMC Series T-23 Class A (1 Month LIBOR +0.14%) ± | 0.45 | 5-25-2030 | 1,218,824 | 1,217,603 | ||||||||||||
FHLMC Series T-27 Class A (1 Month LIBOR +0.15%) ± | 0.47 | 10-25-2030 | 807,496 | 808,057 | ||||||||||||
FHLMC Series T-30 Class A7 (1 Month LIBOR +0.24%) ± | 0.42 | 12-25-2030 | 846,971 | 821,627 | ||||||||||||
FHLMC Series T-35 Class A (1 Month LIBOR +0.14%) ± | 0.45 | 9-25-2031 | 2,071,567 | 2,052,822 | ||||||||||||
FHLMC Series T-48 Class 2A ±± | 3.91 | 7-25-2033 | 1,568,639 | 1,648,291 | ||||||||||||
FHLMC Series T-54 Class 4A ±± | 3.92 | 2-25-2043 | 1,108,585 | 1,188,534 | ||||||||||||
FHLMC Series T-55 Class 1A1 | 6.50 | 3-25-2043 | 48,131 | 56,743 | ||||||||||||
FHLMC Series T-56 Class 3AF (1 Month LIBOR +1.00%) ± | 1.18 | 5-25-2043 | 998,310 | 1,022,509 | ||||||||||||
FHLMC Series T-62 Class 1A1 (12 Month Treasury Average +1.20%) ± | 2.37 | 10-25-2044 | 2,431,122 | 2,503,043 | ||||||||||||
FHLMC Series T-63 Class 1A1 (12 Month Treasury Average +1.20%) ± | 2.52 | 2-25-2045 | 2,133,922 | 2,169,339 | ||||||||||||
FHLMC Series T-66 Class 2A1 ±± | 3.81 | 1-25-2036 | 1,331,800 | 1,400,321 | ||||||||||||
FHLMC Series T-67 Class 1A1C ±± | 3.40 | 3-25-2036 | 3,103,138 | 3,240,370 | ||||||||||||
FHLMC Series T-67 Class 2A1C ±± | 3.50 | 3-25-2036 | 2,898,376 | 3,007,782 | ||||||||||||
FNMA (1 Month LIBOR +0.30%) ± | 0.46 | 12-1-2022 | 3,000,000 | 3,001,420 | ||||||||||||
FNMA (1 Month LIBOR +1.17%) ± | 1.30 | 5-1-2029 | 37,250 | 37,756 | ||||||||||||
FNMA (6 Month LIBOR +1.37%) ± | 1.87 | 1-1-2032 | 169,151 | 169,939 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 1.99 | 11-1-2023 | 8,497 | 8,458 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 2.00 | 1-1-2038 | 27,081 | 27,088 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 2.00 | 3-1-2021 | 5 | 5 | ||||||||||||
FNMA (6 Month LIBOR +1.38%) ± | 2.00 | 12-1-2031 | 16,628 | 16,676 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 2.01 | 4-1-2042 | 1,226,140 | 1,232,616 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 2.01 | 10-1-2044 | 714,770 | 711,813 | ||||||||||||
FNMA (11th District Cost of Funds +1.26%) ± | 2.02 | 1-1-2035 | 442,215 | 444,145 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.76%) ± | 2.13 | 8-1-2032 | 120,092 | 120,741 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 2.13 | 11-1-2024 | 377 | 375 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 2.13 | 3-1-2033 | 73,806 | 74,137 | ||||||||||||
FNMA (6 Month LIBOR +1.03%) ± | 2.15 | 2-1-2033 | 111,985 | 111,736 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 2.18 | 4-1-2021 | 3,049 | 3,049 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 2.22 | 9-1-2037 | 1,284,871 | 1,290,741 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.66%) ± | 2.24 | 7-1-2048 | 1,187,860 | 1,219,571 | ||||||||||||
FNMA (6 Month LIBOR +1.53%) ± | 2.25 | 1-1-2035 | 809,723 | 837,602 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.88%) ± | 2.26 | 8-1-2031 | 50,579 | 50,882 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.52%) ± | 2.36 | 8-1-2033 | 688,632 | 694,541 | ||||||||||||
FNMA (11th District Cost of Funds +1.78%) ± | 2.37 | 1-1-2036 | 174,368 | 175,005 | ||||||||||||
FNMA (6 Month LIBOR +1.18%) ± | 2.38 | 8-1-2033 | 148,167 | 149,104 | ||||||||||||
FNMA (12 Month LIBOR +1.62%) ± | 2.39 | 8-1-2050 | 4,000,000 | 4,195,598 | ||||||||||||
FNMA (12 Month LIBOR +1.60%) ± | 2.41 | 8-1-2050 | 4,689,074 | 4,903,999 | ||||||||||||
FNMA (6 Month LIBOR +1.00%) ± | 2.42 | 6-1-2021 | 1,952 | 1,966 | ||||||||||||
FNMA (11th District Cost of Funds +1.42%) ± | 2.46 | 4-1-2024 | 697,828 | 697,390 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.09%) ± | 2.46 | 8-1-2025 | 14,751 | 14,798 | ||||||||||||
FNMA (6 Month LIBOR +1.16%) ± | 2.50 | 8-1-2033 | 3,090 | 3,115 | ||||||||||||
FNMA (11th District Cost of Funds +1.81%) ± | 2.55 | 3-1-2033 | 199,303 | 199,976 | ||||||||||||
FNMA (11th District Cost of Funds +1.83%) ± | 2.57 | 10-1-2024 | 131 | 131 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.19%) ± | 2.57 | 8-1-2033 | 375,078 | 376,464 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.11%) ± | 2.57 | 7-1-2035 | 281,267 | 284,356 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Adjustable Rate Government Fund | 15
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA (12 Month LIBOR +1.60%) ± | 2.57 | % | 3-1-2046 | $ | 2,364,460 | $ | 2,442,976 | |||||||||
FNMA (12 Month LIBOR +1.62%) ± | 2.57 | 4-1-2050 | 2,482,935 | 2,613,110 | ||||||||||||
FNMA (11th District Cost of Funds +1.83%) ± | 2.58 | 1-1-2036 | 18,261 | 18,357 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 2.59 | 7-1-2033 | 29,329 | 30,495 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 2.59 | 7-1-2035 | 170,590 | 171,207 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 2.60 | 7-1-2035 | 340,058 | 354,233 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 2.60 | 7-1-2035 | 72,554 | 76,183 | ||||||||||||
FNMA (11th District Cost of Funds +1.87%) ± | 2.62 | 10-1-2027 | 225,394 | 228,441 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.29%) ± | 2.67 | 6-1-2037 | 259,491 | 260,114 | ||||||||||||
FNMA (6 Month LIBOR +1.55%) ± | 2.67 | 12-1-2022 | 2,277 | 2,287 | ||||||||||||
FNMA (12 Month LIBOR +1.67%) ± | 2.68 | 7-1-2035 | 744,493 | 779,422 | ||||||||||||
FNMA (12 Month LIBOR +1.91%) ± | 2.68 | 8-1-2034 | 1,042,588 | 1,096,974 | ||||||||||||
FNMA (12 Month LIBOR +1.72%) ± | 2.70 | 6-1-2035 | 89,096 | 93,140 | ||||||||||||
FNMA (12 Month LIBOR +1.80%) ± | 2.71 | 7-1-2033 | 485,672 | 509,068 | ||||||||||||
FNMA (12 Month Treasury Average +1.40%) ± | 2.72 | 12-1-2030 | 61,900 | 61,997 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.23%) ± | 2.73 | 1-1-2032 | 4,974 | 5,008 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.50%) ± | 2.73 | 8-1-2030 | 700,187 | 713,946 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.27%) ± | 2.73 | 6-1-2036 | 102,330 | 104,957 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.18%) ± | 2.74 | 6-1-2035 | 179,681 | 181,117 | ||||||||||||
FNMA (6 Month LIBOR +1.63%) ± | 2.75 | 1-1-2022 | 2,398 | 2,398 | ||||||||||||
FNMA (6 Month LIBOR +1.36%) ± | 2.76 | 10-1-2037 | 433,449 | 446,554 | ||||||||||||
FNMA (12 Month LIBOR +1.90%) ± | 2.78 | 5-1-2037 | 956,626 | 1,007,501 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.28%) ± | 2.78 | 4-1-2024 | 14,207 | 14,212 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.32%) ± | 2.79 | 10-1-2034 | 135,782 | 136,876 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.19%) ± | 2.79 | 7-1-2035 | 656,979 | 661,852 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.85%) ± | 2.79 | 4-1-2030 | 29,229 | 29,371 | ||||||||||||
FNMA (12 Month LIBOR +1.79%) ± | 2.80 | 6-1-2036 | 219,131 | 230,604 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.28%) ± | 2.80 | 9-1-2030 | 63,429 | 63,564 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 2.81 | 6-1-2035 | 336,782 | 354,942 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 2.82 | 8-1-2035 | 589,624 | 620,274 | ||||||||||||
FNMA (6 Month LIBOR +1.52%) ± | 2.83 | 11-1-2034 | 319,532 | 322,326 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.47%) ± | 2.84 | 9-1-2028 | 32,877 | 32,800 | ||||||||||||
FNMA (12 Month LIBOR +1.59%) ± | 2.85 | 6-1-2044 | 1,214,622 | 1,259,640 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.18%) ± | 2.85 | 1-1-2036 | 361,004 | 362,348 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 2.85 | 6-1-2033 | 241,879 | 243,596 | ||||||||||||
FNMA (6 Month LIBOR +1.74%) ± | 2.87 | 12-1-2024 | 36,495 | 36,563 | ||||||||||||
FNMA (U.S. Treasury H15 Treasury Bill 6 Month Auction High Discount +2.23%) ± | 2.87 | 7-1-2025 | 637 | 638 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.10%) ± | 2.88 | 9-1-2036 | 268,280 | 268,562 | ||||||||||||
FNMA (11th District Cost of Funds +1.70%) ± | 2.88 | 4-1-2030 | 753 | 751 | ||||||||||||
FNMA (11th District Cost of Funds +1.92%) ± | 2.89 | 9-1-2030 | 202,168 | 201,022 | ||||||||||||
FNMA (6 Month LIBOR +1.96%) ± | 2.90 | 1-1-2033 | 54,822 | 55,225 | ||||||||||||
FNMA (12 Month LIBOR +1.86%) ± | 2.92 | 6-1-2041 | 251,806 | 262,436 | ||||||||||||
FNMA (6 Month LIBOR +1.42%) ± | 2.95 | 12-1-2031 | 157,324 | 158,527 | ||||||||||||
FNMA (6 Month LIBOR +1.08%) ± | 2.95 | 9-1-2032 | 48,016 | 48,114 | ||||||||||||
FNMA (12 Month LIBOR +1.75%) ± | 2.95 | 7-1-2035 | 360,665 | 378,678 | ||||||||||||
FNMA (11th District Cost of Funds +1.82%) ± | 2.96 | 5-1-2028 | 32,294 | 32,437 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.23%) ± | 2.97 | 1-1-2035 | 290,059 | 305,524 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.13%) ± | 2.97 | 5-1-2034 | 346,397 | 348,038 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 2.99 | 6-1-2033 | 115,911 | 116,395 | ||||||||||||
FNMA (12 Month LIBOR +1.87%) ± | 3.00 | 5-1-2038 | 428,487 | 451,910 | ||||||||||||
FNMA (12 Month Treasury Average +1.25%) ± | 3.01 | 1-1-2021 | 62 | 62 | ||||||||||||
FNMA (11th District Cost of Funds +1.17%) ± | 3.01 | 10-1-2034 | 71,209 | 71,808 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.31%) ± | 3.01 | 4-1-2036 | 233,599 | 235,791 | ||||||||||||
FNMA (6 Month LIBOR +1.93%) ± | 3.05 | 6-1-2032 | 61,749 | 62,349 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.49%) ± | 3.06 | 7-1-2037 | 83,286 | 83,936 | ||||||||||||
FNMA (12 Month LIBOR +1.80%) ± | 3.07 | 5-1-2033 | 247,642 | 259,864 |
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Adjustable Rate Government Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 3.08 | % | 6-1-2035 | $ | 490,605 | $ | 517,756 | |||||||||
FNMA (1 Year Treasury Constant Maturity +1.58%) ± | 3.08 | 3-1-2034 | 248,419 | 250,044 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.24%) ± | 3.08 | 7-1-2028 | 80 | 80 | ||||||||||||
FNMA (6 Month LIBOR +1.55%) ± | 3.09 | 3-1-2034 | 163,180 | 165,179 | ||||||||||||
FNMA (12 Month LIBOR +1.56%) ± | 3.09 | 9-1-2036 | 212,626 | 214,894 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.10%) ± | 3.10 | 7-1-2035 | 77,624 | 77,848 | ||||||||||||
FNMA (6 Month LIBOR +1.74%) ± | 3.12 | 10-1-2024 | 27,123 | 27,278 | ||||||||||||
FNMA (12 Month LIBOR +1.74%) ± | 3.12 | 5-1-2032 | 146,124 | 147,493 | ||||||||||||
FNMA (12 Month Treasury Average +1.25%) ± | 3.13 | 1-1-2021 | 49 | 49 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 3.13 | 4-1-2034 | 669,469 | 686,580 | ||||||||||||
FNMA (12 Month LIBOR +1.72%) ± | 3.15 | 12-1-2033 | 642,655 | 672,955 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.24%) ± | 3.16 | 7-1-2037 | 243,638 | 257,235 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.67%) ± | 3.17 | 4-1-2033 | 78,575 | 79,257 | ||||||||||||
FNMA (12 Month Treasury Average +1.85%) ± | 3.18 | 10-1-2035 | 581,243 | 596,052 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.18%) ± | 3.20 | 9-1-2036 | 361,363 | 381,389 | ||||||||||||
FNMA (12 Month Treasury Average +1.88%) ± | 3.20 | 11-1-2035 | 535,117 | 537,638 | ||||||||||||
FNMA (12 Month Treasury Average +1.84%) ± | 3.20 | 11-1-2035 | 92,213 | 94,557 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.04%) ± | 3.21 | 6-1-2034 | 336,550 | 338,144 | ||||||||||||
FNMA (12 Month LIBOR +1.53%) ± | 3.22 | 9-1-2035 | 713,004 | 742,204 | ||||||||||||
FNMA (12 Month Treasury Average +1.91%) ± | 3.22 | 11-1-2035 | 22,046 | 22,684 | ||||||||||||
FNMA (6 Month LIBOR +2.02%) ± | 3.23 | 10-1-2024 | 27,296 | 27,696 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 3.24 | 5-1-2033 | 767,483 | 776,883 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.45%) ± | 3.24 | 7-1-2037 | 1,346,227 | 1,434,816 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.33%) ± | 3.25 | 12-1-2030 | 462,425 | 464,375 | ||||||||||||
FNMA (6 Month LIBOR +1.38%) ± | 3.25 | 8-1-2031 | 113,272 | 113,856 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.34%) ± | 3.25 | 9-1-2037 | 385,754 | 389,551 | ||||||||||||
FNMA (12 Month LIBOR +1.61%) ± | 3.25 | 1-1-2040 | 124,923 | 126,900 | ||||||||||||
FNMA (12 Month LIBOR +1.71%) ± | 3.26 | 3-1-2037 | 220,555 | 231,556 | ||||||||||||
FNMA (12 Month Treasury Average +1.94%) ± | 3.26 | 6-1-2035 | 411,678 | 423,920 | ||||||||||||
FNMA (12 Month Treasury Average +1.94%) ± | 3.29 | 7-1-2035 | 603,772 | 621,646 | ||||||||||||
FNMA (6 Month LIBOR +1.42%) ± | 3.29 | 9-1-2031 | 116,430 | 116,650 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.18%) ± | 3.31 | 1-1-2036 | 236,101 | 235,977 | ||||||||||||
FNMA (12 Month Treasury Average +1.99%) ± | 3.32 | 11-1-2035 | 590,977 | 594,715 | ||||||||||||
FNMA (12 Month Treasury Average +2.00%) ± | 3.32 | 10-1-2035 | 279,765 | 288,842 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.04%) ± | 3.32 | 9-1-2035 | 1,159,748 | 1,216,663 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.25%) ± | 3.33 | 12-1-2040 | 784,381 | 794,430 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.70%) ± | 3.33 | 2-1-2033 | 205,677 | 206,509 | ||||||||||||
FNMA (12 Month LIBOR +1.72%) ± | 3.33 | 7-1-2043 | 2,305,845 | 2,403,802 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.35%) ± | 3.34 | 6-1-2027 | 56,447 | 57,084 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 3.35 | 6-1-2027 | 60,672 | 60,846 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.03%) ± | 3.35 | 12-1-2033 | 426,050 | 428,991 | ||||||||||||
FNMA (12 Month LIBOR +1.69%) ± | 3.35 | 4-1-2034 | 398,579 | 417,326 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.13%) ± | 3.35 | 5-1-2034 | 363,494 | 364,839 | ||||||||||||
FNMA (6 Month LIBOR +2.48%) ± | 3.36 | 7-1-2033 | 31,668 | 31,711 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 3.36 | 11-1-2037 | 361,446 | 380,296 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.26%) ± | 3.36 | 1-1-2038 | 305,063 | 322,701 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.74%) ± | 3.37 | 1-1-2035 | 39,061 | 39,176 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.24%) ± | 3.37 | 1-1-2037 | 772,444 | 790,269 | ||||||||||||
FNMA (12 Month Treasury Average +2.05%) ± | 3.38 | 7-1-2035 | 384,799 | 397,893 | ||||||||||||
FNMA (12 Month LIBOR +1.65%) ± | 3.39 | 11-1-2038 | 187,105 | 195,751 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.89%) ± | 3.39 | 6-1-2032 | 52,453 | 52,455 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.11%) ± | 3.42 | 4-1-2040 | 90,894 | 95,165 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 3.43 | 11-1-2035 | 693,641 | 706,956 | ||||||||||||
FNMA (12 Month Treasury Average +2.07%) ± | 3.44 | 1-1-2035 | 261,304 | 262,610 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.82%) ± | 3.45 | 4-1-2038 | 361,063 | 362,880 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 3.45 | 2-1-2036 | 365,676 | 384,545 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Adjustable Rate Government Fund | 17
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA (12 Month LIBOR +1.72%) ± | 3.45 | % | 2-1-2038 | $ | 303,758 | $ | 318,677 | |||||||||
FNMA (12 Month LIBOR +1.68%) ± | 3.45 | 9-1-2038 | 451,907 | 473,413 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.50%) ± | 3.46 | 3-1-2027 | 60,231 | 60,754 | ||||||||||||
FNMA (12 Month LIBOR +1.82%) ± | 3.46 | 4-1-2035 | 661,124 | 694,399 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 3.48 | 12-1-2040 | 500,875 | 527,403 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.19%) ± | 3.49 | 6-1-2036 | 723,701 | 761,122 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.12%) ± | 3.49 | 8-1-2026 | 21,423 | 21,392 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.63%) ± | 3.50 | 11-1-2029 | 6,264 | 6,370 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.93%) ± | 3.50 | 7-1-2038 | 490,134 | 491,982 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.47%) ± | 3.51 | 9-1-2035 | 29,253 | 31,097 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.24%) ± | 3.51 | 12-1-2040 | 338,150 | 356,216 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 3.51 | 9-1-2035 | 255,564 | 258,277 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 3.51 | 10-1-2036 | 381,615 | 401,030 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.34%) ± | 3.51 | 3-1-2033 | 478,934 | 481,351 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.14%) ± | 3.51 | 10-1-2033 | 163,067 | 171,193 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.85%) ± | 3.52 | 9-1-2030 | 154,246 | 154,701 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 3.53 | 4-1-2038 | 497,562 | 501,817 | ||||||||||||
FNMA (12 Month LIBOR +1.69%) ± | 3.53 | 8-1-2036 | 361,862 | 379,027 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.14%) ± | 3.53 | 1-1-2037 | 495,043 | 521,197 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.24%) ± | 3.54 | 4-1-2033 | 302,713 | 308,385 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.13%) ± | 3.55 | 5-1-2033 | 311,766 | 313,063 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.18%) ± | 3.56 | 12-1-2040 | 163,283 | 171,578 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.19%) ± | 3.57 | 1-1-2033 | 1,034,227 | 1,059,818 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.03%) ± | 3.57 | 12-1-2032 | 378,799 | 379,899 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.14%) ± | 3.57 | 12-1-2034 | 245,944 | 252,175 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.38%) ± | 3.58 | 7-1-2027 | 63,961 | 64,496 | ||||||||||||
FNMA (12 Month Treasury Average +2.29%) ± | 3.58 | 8-1-2035 | 478,136 | 479,082 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.50%) ± | 3.58 | 10-1-2029 | 259,378 | 260,490 | ||||||||||||
FNMA (12 Month LIBOR +1.75%) ± | 3.58 | 4-1-2034 | 249,250 | 252,700 | ||||||||||||
FNMA (12 Month Treasury Average +2.27%) ± | 3.58 | 9-1-2036 | 226,991 | 229,459 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.15%) ± | 3.58 | 5-1-2035 | 318,914 | 335,197 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.85%) ± | 3.60 | 11-1-2027 | 5,228 | 5,245 | ||||||||||||
FNMA (5 Year Treasury Constant Maturity +1.90%) ± | 3.60 | 9-1-2031 | 169,578 | 170,079 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 3.60 | 9-1-2022 | 38,558 | 38,947 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.34%) ± | 3.60 | 1-1-2037 | 487,434 | 492,250 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.36%) ± | 3.61 | 1-1-2029 | 124,645 | 124,957 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.27%) ± | 3.61 | 10-1-2036 | 327,281 | 345,504 | ||||||||||||
FNMA (12 Month LIBOR +1.75%) ± | 3.61 | 5-1-2035 | 460,853 | 484,612 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.64%) ± | 3.62 | 7-1-2028 | 38,118 | 38,216 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.12%) ± | 3.62 | 3-1-2031 | 28,094 | 28,064 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.13%) ± | 3.63 | 5-1-2033 | 211,680 | 222,625 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 3.63 | 6-1-2036 | 427,565 | 429,916 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 3.63 | 5-1-2033 | 152,108 | 160,221 | ||||||||||||
FNMA (12 Month LIBOR +1.64%) ± | 3.64 | 12-1-2033 | 741,590 | 753,016 | ||||||||||||
FNMA (12 Month LIBOR +1.73%) ± | 3.64 | 6-1-2041 | 255,375 | 261,326 | ||||||||||||
FNMA (12 Month Treasury Average +2.33%) ± | 3.67 | 9-1-2036 | 254,046 | 254,870 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.15%) ± | 3.67 | 4-1-2033 | 723,655 | 728,149 | ||||||||||||
FNMA (12 Month Treasury Average +2.34%) ± | 3.67 | 5-1-2036 | 263,330 | 275,430 | ||||||||||||
FNMA (12 Month Treasury Average +2.35%) ± | 3.67 | 8-1-2040 | 364,252 | 365,107 | ||||||||||||
FNMA (12 Month LIBOR +1.75%) ± | 3.68 | 4-1-2033 | 323,944 | 325,551 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.26%) ± | 3.68 | 5-1-2036 | 928,579 | 965,557 | ||||||||||||
FNMA (6 Month LIBOR +2.25%) ± | 3.68 | 3-1-2034 | 633,049 | 645,328 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.18%) ± | 3.68 | 5-1-2035 | 91,046 | 96,162 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.41%) ± | 3.68 | 5-1-2027 | 42,769 | 42,873 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.19%) ± | 3.69 | 3-1-2035 | 393,438 | 395,151 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.17%) ± | 3.69 | 12-1-2034 | 769,926 | 782,864 |
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Adjustable Rate Government Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 3.71 | % | 5-1-2037 | $ | 532,276 | $ | 535,049 | |||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 3.72 | 4-1-2033 | 508,973 | 511,103 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.17%) ± | 3.73 | 12-1-2035 | 207,305 | 218,233 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.64%) ± | 3.73 | 10-1-2028 | 83,863 | 83,885 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 3.73 | 12-1-2036 | 258,477 | 272,607 | ||||||||||||
FNMA (12 Month LIBOR +1.75%) ± | 3.75 | 1-1-2035 | 314,024 | 330,343 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.25%) ± | 3.75 | 10-1-2029 | 14,729 | 14,794 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.26%) ± | 3.76 | 5-1-2035 | 386,440 | 389,155 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.09%) ± | 3.76 | 1-1-2036 | 81,104 | 82,644 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 3.76 | 2-1-2034 | 885,297 | 899,348 | ||||||||||||
FNMA (3 Year Treasury Constant Maturity +2.15%) ± | 3.77 | 10-1-2024 | 20,673 | 20,827 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.24%) ± | 3.77 | 5-1-2033 | 135,469 | 136,320 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.36%) ± | 3.77 | 11-1-2034 | 238,515 | 252,264 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.40%) ± | 3.78 | 7-1-2030 | 234,808 | 235,673 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 3.78 | 5-1-2036 | 409,501 | 431,741 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 3.78 | 9-1-2033 | 315,236 | 317,513 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 3.79 | 11-1-2038 | 214,756 | 216,308 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 3.79 | 7-1-2029 | 316,067 | 318,149 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.25%) ± | 3.79 | 10-1-2035 | 548,020 | 577,653 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.30%) ± | 3.80 | 1-1-2026 | 135,228 | 135,617 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 3.80 | 8-1-2026 | 146,834 | 147,437 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.18%) ± | 3.80 | 12-1-2024 | 17,252 | 17,340 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.18%) ± | 3.80 | 1-1-2035 | 40,014 | 40,298 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.29%) ± | 3.81 | 1-1-2031 | 254,516 | 255,632 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.31%) ± | 3.81 | 5-1-2035 | 500,240 | 531,362 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.26%) ± | 3.82 | 12-1-2032 | 330,799 | 332,644 | ||||||||||||
FNMA (6 Month LIBOR +2.63%) ± | 3.82 | 4-1-2033 | 209,047 | 210,059 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.32%) ± | 3.82 | 4-1-2028 | 72,406 | 72,719 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 3.85 | 8-1-2031 | 94,422 | 94,945 | ||||||||||||
FNMA (6 Month LIBOR +1.98%) ± | 3.85 | 9-1-2033 | 49,892 | 50,305 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.19%) ± | 3.85 | 2-1-2035 | 83,946 | 88,327 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.31%) ± | 3.85 | 2-1-2035 | 384,513 | 407,555 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.07%) ± | 3.86 | 11-1-2035 | 374,298 | 392,683 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.23%) ± | 3.87 | 5-1-2035 | 811,438 | 828,801 | ||||||||||||
FNMA (12 Month LIBOR +1.83%) ± | 3.88 | 1-1-2033 | 205,510 | 206,792 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 3.88 | 9-1-2035 | 98,161 | 99,249 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.39%) ± | 3.89 | 4-1-2038 | 214,544 | 215,952 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.46%) ± | 3.90 | 7-1-2028 | 279,605 | 281,044 | ||||||||||||
FNMA (12 Month LIBOR +1.65%) ± | 3.90 | 9-1-2037 | 537,741 | 538,831 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.28%) ± | 3.90 | 7-1-2024 | 5,939 | 5,980 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.28%) ± | 3.90 | 2-1-2037 | 348,182 | 349,756 | ||||||||||||
FNMA (12 Month LIBOR +1.67%) ± | 3.92 | 9-1-2034 | 589,651 | 591,283 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.17%) ± | 3.92 | 12-1-2039 | 165,507 | 165,644 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.13%) ± | 3.92 | 10-1-2035 | 103,743 | 105,354 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 3.93 | 1-1-2027 | 146,497 | 147,103 | ||||||||||||
FNMA (3 Year Treasury Constant Maturity +1.21%) ± | 3.95 | 3-1-2030 | 14,264 | 14,457 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.32%) ± | 3.95 | 6-1-2032 | 17,839 | 17,890 | ||||||||||||
FNMA (12 Month LIBOR +1.82%) ± | 3.95 | 12-1-2046 | 63,170 | 63,366 | ||||||||||||
FNMA (12 Month LIBOR +1.90%) ± | 3.98 | 10-1-2034 | 382,630 | 385,388 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.28%) ± | 4.00 | 4-1-2024 | 6,120 | 6,172 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.13%) ± | 4.01 | 10-1-2025 | 67,180 | 67,201 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.58%) ± | 4.02 | 3-1-2032 | 102,604 | 102,754 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.40%) ± | 4.03 | 6-1-2024 | 23,918 | 24,009 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.18%) ± | 4.03 | 9-1-2035 | 838,854 | 881,836 | ||||||||||||
FNMA (12 Month LIBOR +1.95%) ± | 4.04 | 9-1-2035 | 218,739 | 230,396 | ||||||||||||
FNMA (11th District Cost of Funds +1.83%) ± | 4.04 | 6-1-2034 | 90,866 | 91,785 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Adjustable Rate Government Fund | 19
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA (6 Month LIBOR +2.31%) ± | 4.06 | % | 4-1-2033 | $ | 171,696 | $ | 172,675 | |||||||||
FNMA (1 Year Treasury Constant Maturity +2.29%) ± | 4.06 | 5-1-2034 | 122,948 | 123,289 | ||||||||||||
FNMA | 4.06 | 7-1-2021 | 935,570 | 948,428 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.32%) ± | 4.07 | 5-1-2025 | 22,366 | 22,501 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.51%) ± | 4.07 | 8-1-2035 | 218,242 | 219,117 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.15%) ± | 4.09 | 2-1-2033 | 54,702 | 55,094 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.37%) ± | 4.10 | 9-1-2030 | 491,782 | 494,877 | ||||||||||||
FNMA (Federal Cost of Funds +2.00%) ± | 4.11 | 8-1-2029 | 29,630 | 29,891 | ||||||||||||
FNMA (11th District Cost of Funds +1.93%) ± | 4.12 | 12-1-2036 | 43,279 | 45,349 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.37%) ± | 4.12 | 7-1-2027 | 16,550 | 16,584 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.50%) ± | 4.13 | 6-1-2032 | 78,682 | 78,669 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.69%) ± | 4.13 | 5-1-2035 | 538,888 | 544,180 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.64%) ± | 4.14 | 3-1-2030 | 4,401 | 4,421 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.31%) ± | 4.15 | 12-1-2034 | 407,626 | 420,465 | ||||||||||||
FNMA | 4.16 | 7-1-2021 | 1,300,000 | 1,327,698 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 4.17 | 10-1-2034 | 129,882 | 130,151 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.50%) ± | 4.19 | 5-1-2035 | 431,752 | 456,456 | ||||||||||||
FNMA (6 Month LIBOR +2.75%) ± | 4.19 | 5-1-2033 | 779,810 | 798,735 | ||||||||||||
FNMA (5 Year Treasury Constant Maturity +2.42%) ± | 4.21 | 6-1-2028 | 19,919 | 20,168 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 4.22 | 6-1-2026 | 5,620 | 5,649 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.60%) ± | 4.22 | 2-1-2028 | 29,730 | 29,817 | ||||||||||||
FNMA (11th District Cost of Funds +1.88%) ± | 4.26 | 5-1-2034 | 108,074 | 109,291 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.50%) ± | 4.26 | 9-1-2030 | 367,107 | 368,549 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.52%) ± | 4.27 | 11-1-2024 | 16,809 | 16,886 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.28%) ± | 4.28 | 9-1-2026 | 15,908 | 15,848 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.29%) ± | 4.29 | 12-1-2030 | 18,238 | 18,182 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.41%) ± | 4.33 | 9-1-2033 | 393,941 | 395,616 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.33%) ± | 4.33 | 11-1-2024 | 30,458 | 30,814 | ||||||||||||
FNMA (3 Year Treasury Constant Maturity +2.47%) ± | 4.34 | 6-1-2024 | 8,522 | 8,591 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.87%) ± | 4.37 | 8-1-2030 | 69,548 | 69,120 | ||||||||||||
FNMA (3 Year Treasury Constant Maturity +2.14%) ± | 4.39 | 10-1-2025 | 4,661 | 4,701 | ||||||||||||
FNMA (6 Month LIBOR +2.67%) ± | 4.43 | 4-1-2024 | 83,741 | 84,380 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.60%) ± | 4.50 | 10-1-2025 | 5,761 | 5,777 | ||||||||||||
FNMA (Federal Cost of Funds +2.39%) ± | 4.51 | 2-1-2029 | 728,355 | 734,592 | ||||||||||||
FNMA (6 Month LIBOR +2.70%) ± | 4.55 | 1-1-2033 | 56,320 | 56,672 | ||||||||||||
FNMA (12 Month Treasury Average +2.48%) ± | 4.60 | 6-1-2040 | 620,077 | 623,531 | ||||||||||||
FNMA (3 Year Treasury Constant Maturity +2.15%) ± | 4.90 | 8-1-2031 | 30,200 | 30,391 | ||||||||||||
FNMA (6 Month LIBOR +3.47%) ± | 4.98 | 12-1-2032 | 134,708 | 135,514 | ||||||||||||
FNMA (6 Month LIBOR +3.57%) ± | 5.20 | 11-1-2031 | 7,677 | 7,655 | ||||||||||||
FNMA | 6.50 | 8-1-2028 | 38,949 | 39,384 | ||||||||||||
FNMA | 6.50 | 5-1-2031 | 82,314 | 94,108 | ||||||||||||
FNMA | 7.06 | 12-1-2024 | 17,201 | 17,281 | ||||||||||||
FNMA | 7.06 | 1-1-2027 | 18,260 | 18,320 | ||||||||||||
FNMA | 7.50 | 1-1-2031 | 34,321 | 37,490 | ||||||||||||
FNMA | 7.50 | 1-1-2033 | 100,757 | 111,513 | ||||||||||||
FNMA | 7.50 | 5-1-2033 | 92,615 | 103,103 | ||||||||||||
FNMA | 7.50 | 5-1-2033 | 98,692 | 108,541 | ||||||||||||
FNMA | 7.50 | 6-1-2033 | 20,306 | 20,511 | ||||||||||||
FNMA | 7.50 | 7-1-2033 | 33,198 | 33,703 | ||||||||||||
FNMA | 7.50 | 8-1-2033 | 47,567 | 49,501 | ||||||||||||
FNMA | 8.00 | 12-1-2026 | 25,557 | 26,747 | ||||||||||||
FNMA | 8.00 | 2-1-2030 | 146 | 147 | ||||||||||||
FNMA | 8.00 | 3-1-2030 | 162 | 166 | ||||||||||||
FNMA | 8.00 | 5-1-2033 | 43,394 | 44,754 | ||||||||||||
FNMA | 8.50 | 10-1-2026 | 125 | 125 | ||||||||||||
FNMA | 8.50 | 8-15-2024 | 16,007 | 16,205 |
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Adjustable Rate Government Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA | 10.00 | % | 1-20-2021 | $ | 44 | $ | 45 | |||||||||
FNMA Series 1992-39 Class FA (7 Year Treasury Constant Maturity +0.00%) ± | 0.47 | 3-25-2022 | 23,202 | 23,105 | ||||||||||||
FNMA Series 1992-45 Class F (7 Year Treasury Constant Maturity +0.00%) ± | 0.47 | 4-25-2022 | 4,186 | 4,165 | ||||||||||||
FNMA Series 1992-87 Class Z | 8.00 | 5-25-2022 | 2,553 | 2,655 | ||||||||||||
FNMA Series 1993-113 Class FA (10 Year Treasury Constant Maturity -0.65%) ± | 0.00 | 7-25-2023 | 21,473 | 21,449 | ||||||||||||
FNMA Series 1993-247 Class FM (11th District Cost of Funds +1.20%) ± | 1.88 | 12-25-2023 | 116,474 | 117,971 | ||||||||||||
FNMA Series 1994-14 Class F (11th District Cost of Funds +1.60%) ± | 2.28 | 10-25-2023 | 64,614 | 65,771 | ||||||||||||
FNMA Series 2001-50 Class BA | 7.00 | 10-25-2041 | 94,075 | 108,687 | ||||||||||||
FNMA Series 2001-63 Class FD (1 Month LIBOR +0.60%) ± | 0.75 | 12-18-2031 | 87,950 | 88,368 | ||||||||||||
FNMA Series 2001-81 Class F (1 Month LIBOR +0.55%) ± | 0.72 | 1-25-2032 | 37,549 | 37,704 | ||||||||||||
FNMA Series 2001-T08 Class A1 | 7.50 | 7-25-2041 | 88,244 | 105,946 | ||||||||||||
FNMA Series 2001-T10 Class A2 | 7.50 | 12-25-2041 | 1,473,960 | 1,711,523 | ||||||||||||
FNMA Series 2001-T12 Class A2 | 7.50 | 8-25-2041 | 120,646 | 145,238 | ||||||||||||
FNMA Series 2001-T12 Class A4 ±± | 4.32 | 8-25-2041 | 2,881,688 | 3,032,944 | ||||||||||||
FNMA Series 2001-W01 Class AV1 (1 Month LIBOR +0.24%) ± | 0.41 | 8-25-2031 | 39,649 | 38,683 | ||||||||||||
FNMA Series 2001-W03 Class A ±± | 5.89 | 9-25-2041 | 360,468 | 402,002 | ||||||||||||
FNMA Series 2002-05 Class FD (1 Month LIBOR +0.90%) ± | 1.07 | 2-25-2032 | 77,843 | 78,722 | ||||||||||||
FNMA Series 2002-33 Class A4 ±± | 5.37 | 11-25-2030 | 99,702 | 106,316 | ||||||||||||
FNMA Series 2002-59 Class F (1 Month LIBOR +0.40%) ± | 0.57 | 9-25-2032 | 203,774 | 203,677 | ||||||||||||
FNMA Series 2002-66 Class A3 ±± | 4.06 | 4-25-2042 | 5,611,012 | 5,867,164 | ||||||||||||
FNMA Series 2002-T12 Class A3 | 7.50 | 5-25-2042 | 1,042,708 | 1,258,963 | ||||||||||||
FNMA Series 2002-T12 Class A5 ±± | 4.59 | 10-25-2041 | 1,242,653 | 1,315,647 | ||||||||||||
FNMA Series 2002-T18 Class A5 ±± | 4.40 | 5-25-2042 | 2,452,377 | 2,668,645 | ||||||||||||
FNMA Series 2002-T19 Class A4 ±± | 4.32 | 3-25-2042 | 146,199 | 160,858 | ||||||||||||
FNMA Series 2002-W01 Class 3A ±± | 3.85 | 4-25-2042 | 725,875 | 761,644 | ||||||||||||
FNMA Series 2002-W04 Class A6 ±± | 4.01 | 5-25-2042 | 1,192,744 | 1,266,104 | ||||||||||||
FNMA Series 2003-07 Class A2 ±± | 3.87 | 5-25-2042 | 546,481 | 562,075 | ||||||||||||
FNMA Series 2003-63 Class A8 ±± | 3.74 | 1-25-2043 | 910,539 | 954,033 | ||||||||||||
FNMA Series 2003-W02 Class 1A3 | 7.50 | 7-25-2042 | 279,796 | 340,992 | ||||||||||||
FNMA Series 2003-W04 Class 5A ±± | 3.82 | 10-25-2042 | 719,874 | 750,449 | ||||||||||||
FNMA Series 2003-W08 Class 4A ±± | 4.04 | 11-25-2042 | 916,172 | 980,608 | ||||||||||||
FNMA Series 2003-W09 Class A (1 Month LIBOR +0.12%) ± | 0.41 | 6-25-2033 | 1,335,701 | 1,312,487 | ||||||||||||
FNMA Series 2003-W10 Class 2A ±± | 3.77 | 6-25-2043 | 1,793,405 | 1,889,100 | ||||||||||||
FNMA Series 2003-W18 Class 2A ±± | 3.95 | 6-25-2043 | 2,541,187 | 2,683,011 | ||||||||||||
FNMA Series 2004-17 Class FT (1 Month LIBOR +0.40%) ± | 0.57 | 4-25-2034 | 725,218 | 725,738 | ||||||||||||
FNMA Series 2004-T03 Class 1A3 | 7.00 | 2-25-2044 | 343,787 | 414,021 | ||||||||||||
FNMA Series 2004-T03 Class 2A ±± | 3.91 | 8-25-2043 | 963,917 | 1,006,519 | ||||||||||||
FNMA Series 2004-T1 Class 2A ±± | 3.55 | 8-25-2043 | 1,199,425 | 1,278,408 | ||||||||||||
FNMA Series 2004-W01 Class 2A2 | 7.00 | 12-25-2033 | 181,023 | 215,289 | ||||||||||||
FNMA Series 2004-W01 Class 3A ±± | 4.04 | 1-25-2043 | 53,791 | 57,512 | ||||||||||||
FNMA Series 2004-W02 Class 5A | 7.50 | 3-25-2044 | 74,867 | 87,879 | ||||||||||||
FNMA Series 2004-W12 Class 2A ±± | 3.97 | 6-25-2044 | 2,639,243 | 2,806,637 | ||||||||||||
FNMA Series 2004-W15 Class 3A ±± | 3.98 | 6-25-2044 | 4,257,988 | 4,501,059 | ||||||||||||
FNMA Series 2005-W03 Class 3A ±± | 3.77 | 4-25-2045 | 797,920 | 869,015 | ||||||||||||
FNMA Series 2006-112 Class LF (1 Month LIBOR +0.55%) ± | 0.72 | 11-25-2036 | 1,239,670 | 1,250,677 | ||||||||||||
FNMA Series 2006-15 Class FW (1 Month LIBOR +0.30%) ± | 0.47 | 1-25-2036 | 5,104 | 5,105 | ||||||||||||
FNMA Series 2006-16 Class FA (1 Month LIBOR +0.30%) ± | 0.47 | 3-25-2036 | 737,548 | 737,847 | ||||||||||||
FNMA Series 2006-44 Class FY (1 Month LIBOR +0.57%) ± | 0.74 | 6-25-2036 | 951,100 | 961,235 | ||||||||||||
FNMA Series 2006-W01 Class 3A ±± | 3.59 | 10-25-2045 | 3,196,047 | 3,339,184 | ||||||||||||
FNMA Series 2007-95 Class A2 (1 Month LIBOR +0.25%) ± | 0.42 | 8-27-2036 | 219,594 | 212,753 | ||||||||||||
FNMA Series 2008-67 Class FG (1 Month LIBOR +1.00%) ± | 1.17 | 7-25-2038 | 989,963 | 1,018,572 | ||||||||||||
FNMA Series 2009-11 Class FU (1 Month LIBOR +1.00%) ± | 1.17 | 3-25-2049 | 1,369,589 | 1,381,714 | ||||||||||||
FNMA Series 2010-54 Class AF (1 Month LIBOR +0.56%) ± | 0.73 | 4-25-2037 | 372,022 | 375,732 | ||||||||||||
FNMA Series 2011-121 Class PF (1 Month LIBOR +0.35%) ± | 0.52 | 12-25-2041 | 402,422 | 403,053 | ||||||||||||
FNMA Series 2012-47 Class FW (1 Month LIBOR +1.70%) ± | 1.87 | 5-25-2027 | 241,313 | 248,305 | ||||||||||||
FNMA Series 2013-86 Class GA | 3.00 | 7-25-2030 | 3,382,446 | 3,435,571 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Adjustable Rate Government Fund | 21
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA Series 2014-49 Class AF (1 Month LIBOR +0.32%) ± | 0.49 | % | 8-25-2044 | $ | 213,261 | $ | 213,086 | |||||||||
FNMA Series 2016-40 Class AF (1 Month LIBOR +0.45%) ± | 0.62 | 7-25-2046 | 493,111 | 493,501 | ||||||||||||
FNMA Series 2016-58 Class FA (1 Month LIBOR +0.48%) ± | 0.65 | 8-25-2046 | 1,233,050 | 1,229,908 | ||||||||||||
FNMA Series 2016-62 Class AF (1 Month LIBOR +0.45%) ± | 0.62 | 9-25-2046 | 1,181,288 | 1,164,668 | ||||||||||||
FNMA Series 2016-87 Class AF (1 Month LIBOR +0.40%) ± | 0.57 | 11-25-2046 | 553,127 | 551,594 | ||||||||||||
FNMA Series 2017-M6 Class F (1 Month LIBOR +0.48%) ± | 0.65 | 4-25-2029 | 2,878,269 | 2,903,363 | ||||||||||||
FNMA Series 2018-47 Class PC | 3.50 | 9-25-2047 | 1,409,512 | 1,441,952 | ||||||||||||
FNMA Series 2019-25 Class FA (1 Month LIBOR +0.45%) ± | 0.62 | 6-25-2049 | 494,695 | 496,852 | ||||||||||||
FNMA Series 2019-41 Class F (1 Month LIBOR +0.50%) ± | 0.67 | 8-25-2059 | 4,249,712 | 4,273,096 | ||||||||||||
FNMA Series 2019-42 Class MF (1 Month LIBOR +0.40%) ± | 0.57 | 8-25-2059 | 3,610,106 | 3,596,045 | ||||||||||||
FNMA Series 2019-5 Class FE (1 Month LIBOR +0.45%) ± | 0.62 | 3-25-2049 | 912,749 | 918,970 | ||||||||||||
FNMA Series G92-20 Class FB (7 Year Treasury Constant Maturity +0.00%) ± | 0.47 | 4-25-2022 | 1,362 | 1,359 | ||||||||||||
FNMA Series G93-1 Class K | 6.68 | 1-25-2023 | 76,478 | 79,462 | ||||||||||||
FNMA %% | 2.00 | 9-14-2050 | 6,000,000 | 6,186,318 | ||||||||||||
FNMA %% | 3.00 | 9-14-2050 | 5,500,000 | 5,800,352 | ||||||||||||
GNMA | 6.45 | 4-20-2025 | 25,596 | 27,737 | ||||||||||||
GNMA | 6.45 | 9-20-2025 | 26,882 | 30,176 | ||||||||||||
GNMA | 6.50 | 6-20-2034 | 67,589 | 69,258 | ||||||||||||
GNMA | 6.50 | 8-20-2034 | 279,844 | 297,131 | ||||||||||||
GNMA | 6.75 | 2-15-2029 | 36,526 | 40,279 | ||||||||||||
GNMA | 9.00 | 9-20-2024 | 660 | 669 | ||||||||||||
GNMA | 9.00 | 11-20-2024 | 88 | 88 | ||||||||||||
GNMA | 9.00 | 1-20-2025 | 2,154 | 2,263 | ||||||||||||
GNMA | 9.00 | 2-20-2025 | 8,095 | 8,872 | ||||||||||||
GNMA Series 2008-65 Class FG (1 Month LIBOR +0.75%) ± | 0.91 | 8-20-2038 | 1,059,983 | 1,069,804 | ||||||||||||
GNMA Series 2008-68 Class FA (1 Month LIBOR +0.95%) ± | 1.11 | 8-20-2038 | 1,347,863 | 1,369,060 | ||||||||||||
GNMA Series 2009-50 Class FW (1 Month LIBOR +1.00%) ± | 1.16 | 7-20-2039 | 1,346,497 | 1,371,422 | ||||||||||||
GNMA Series 2009-52 Class FD (1 Month LIBOR +0.95%) ± | 1.11 | 7-16-2039 | 642,626 | 653,419 | ||||||||||||
GNMA Series 2010-25 Class FH (1 Month LIBOR +0.72%) ± | 0.88 | 2-16-2040 | 744,358 | 752,788 | ||||||||||||
GNMA Series 2011-H12 Class FA (1 Month LIBOR +0.49%) ± | 0.65 | 2-20-2061 | 1,554,053 | 1,554,647 | ||||||||||||
GNMA Series 2011-H17 Class FA (1 Month LIBOR +0.53%) ± | 0.69 | 6-20-2061 | 699,692 | 700,677 | ||||||||||||
GNMA Series 2014-H16 Class FL (1 Month LIBOR +0.47%) ± | 0.65 | 7-20-2064 | 1,163,065 | 1,161,620 | ||||||||||||
GNMA Series 2017-H11 Class FE (12 Month LIBOR +0.18%) ± | 1.18 | 5-20-2067 | 4,394,271 | 4,387,070 | ||||||||||||
GNMA Series 2018-120 Class FL (1 Month LIBOR +0.30%) ± | 0.46 | 9-20-2048 | 1,478,341 | 1,472,632 | ||||||||||||
International Development Finance Corporation | 2.12 | 3-20-2024 | 2,800,000 | 2,912,970 | ||||||||||||
National Credit Union Administration Guaranteed Notes Series 2010-R1 Class 1A (1 Month LIBOR +0.45%) ± | 0.60 | 10-7-2020 | 981,142 | 980,622 | ||||||||||||
Total Agency Securities (Cost $341,417,198) |
| 345,481,928 | ||||||||||||||
|
| |||||||||||||||
Asset-Backed Securities: 7.52% | ||||||||||||||||
Brazos Education Funding Series 2015-1 Class A (1 Month LIBOR +1.00%) 144A± | 1.18 | 10-25-2056 | 3,479,051 | 3,484,605 | ||||||||||||
ECMC Group Student Loan Trust Series 2018-1A Class A (1 Month LIBOR +0.75%) 144A± | 0.93 | 2-27-2068 | 1,369,473 | 1,343,404 | ||||||||||||
ECMC Group Student Loan Trust Series 2018-2A Class A (1 Month LIBOR +0.80%) 144A± | 0.97 | 9-25-2068 | 4,585,130 | 4,501,004 | ||||||||||||
EFS Volunteer LLC Series 2010-1 Class A2 (3 Month LIBOR +0.85%) 144A± | 1.09 | 10-25-2035 | 1,205,749 | 1,191,114 | ||||||||||||
Finance of America HECM Buyout Series 2020-HB2 Class A 144A±± | 1.71 | 7-25-2030 | 1,948,873 | 1,948,612 | ||||||||||||
MFRA Trust Series 2020-NQM1 Class A1 144A±± | 1.65 | 8-25-2049 | 2,500,000 | 2,499,972 | ||||||||||||
Navient Student Loan Trust Series 2017-3A Class A2 (1 Month LIBOR +0.60%) 144A± | 0.78 | 7-26-2066 | 3,746,714 | 3,736,369 | ||||||||||||
Navient Student Loan Trust Series 2018-3A Class A2 (1 Month LIBOR +0.42%) 144A± | 0.60 | 3-25-2067 | 2,953,263 | 2,943,513 | ||||||||||||
Nelnet Student Loan Trust Series 2019-7A Class A1 (1 Month LIBOR +0.50%) 144A± | 0.68 | 1-25-2068 | 1,244,113 | 1,240,320 | ||||||||||||
North Texas Higher Education Authority Incorporated Series 2011-1 Class A (3 Month LIBOR +1.10%) ± | 1.40 | 4-1-2040 | 3,775,205 | 3,789,022 |
The accompanying notes are an integral part of these financial statements.
22 | Wells Fargo Adjustable Rate Government Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Asset-Backed Securities (continued) | ||||||||||||||||
RAAC Series Series 2007-SP1 Class A3 (1 Month LIBOR +0.48%) ± | 0.66 | % | 3-25-2037 | $ | 1,055,918 | $ | 1,054,623 | |||||||||
SLM Student Loan Trust Series 2005-4 Class A3 (3 Month LIBOR +0.12%) ± | 0.36 | 1-25-2027 | 1,028,740 | 1,017,946 | ||||||||||||
Student Loan Consolidation Center Series 2011-1 Class A (1 Month LIBOR +1.22%) 144A± | 1.40 | 10-25-2027 | 511,041 | 513,101 | ||||||||||||
Towd Point Mortgage Trust Series 2017-5 Class A1 (1 Month LIBOR +0.60%) 144A± | 0.78 | 2-25-2057 | 1,769,918 | 1,764,434 | ||||||||||||
Total Asset-Backed Securities (Cost $30,972,363) |
| 31,028,039 | ||||||||||||||
|
| |||||||||||||||
Yield | Shares | |||||||||||||||
Short-Term Investments: 12.02% | ||||||||||||||||
Investment Companies: 12.02% |
| |||||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u)## | 0.06 | 49,544,301 | 49,544,301 | |||||||||||||
|
| |||||||||||||||
Total Short-Term Investments (Cost $49,544,301) |
| 49,544,301 | ||||||||||||||
|
|
Total investments in securities (Cost $421,933,862) | 103.32 | % | 426,054,268 | |||||
Other assets and liabilities, net | (3.32 | ) | (13,692,973 | ) | ||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 412,361,295 | ||||
|
|
|
|
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. |
± | Variable rate investment. The rate shown is the rate in effect at period end. |
±± | The coupon of the security is adjusted based on the principal and interest payments received from the underlying pool of mortgages as well as the credit quality and the actual prepayment speed of the underlying mortgages. |
(c) | Investment in an interest-only security entitles holders to receive only the interest payments on the underlying mortgages. The principal amount shown is the notional amount of the underlying mortgages. The rate represents the coupon rate. |
%% | The security is purchased on a when-issued basis. |
(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. |
## | All or a portion of this security is segregated for when-issued securities. |
Abbreviations:
FHLMC | Federal Home Loan Mortgage Corporation |
FNMA | Federal National Mortgage Association |
GNMA | Government National Mortgage Association |
LIBOR | London Interbank Offered Rate |
SOFR | Secured Overnight Financing Rate |
Futures Contracts
Description | Number of contracts | Expiration date | Notional cost | Notional value | Unrealized gains | Unrealized losses | ||||||||||||||||||
Long | ||||||||||||||||||||||||
10-Year U.S. Treasury Notes | 40 | 12-21-2020 | $ | 5,582,215 | $ | 5,570,000 | $ | 0 | $ | (12,215 | ) | |||||||||||||
Short | ||||||||||||||||||||||||
2-Year U.S. Treasury Notes | (95) | 12-31-2020 | (20,978,959 | ) | (20,989,805 | ) | 0 | (10,846 | ) | |||||||||||||||
5-Year U.S. Treasury Notes | (55) | 12-31-2020 | (6,918,403 | ) | (6,931,719 | ) | 0 | (13,316 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||||
$ | 0 | $ | (36,377 | ) | ||||||||||||||||||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Adjustable Rate Government Fund | 23
Table of Contents
Portfolio of investments—August 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:
Value, beginning of period | Purchases | Sales proceeds | Net realized gains (losses) | Net change in unrealized gains (losses) | Income from affiliated securities | Value, period | % of net assets | |||||||||||||||||||||||||
Short-Term Investments | ||||||||||||||||||||||||||||||||
Investment Companies | ||||||||||||||||||||||||||||||||
Wells Fargo Government Money Market Fund Select Class | $ | 10,631,386 | $ | 230,113,574 | $ | (191,200,659 | ) | $ | 0 | $ | 0 | $ | 123,038 | $ | 49,544,301 | 12.02 | % |
The accompanying notes are an integral part of these financial statements.
24 | Wells Fargo Adjustable Rate Government Fund
Table of Contents
Statement of assets and liabilities—August 31, 2020
Assets | ||||
Investments in unaffiliated securities, at value (cost $372,389,561) | $ | 376,509,967 | ||
Investments in affiliated securities, at value (cost $49,544,301) | 49,544,301 | |||
Segregated cash for futures contracts | 74,757 | |||
Principal paydown receivable | 1,553,911 | |||
Receivable for daily variation margin on open futures contracts | 4,102 | |||
Receivable for Fund shares sold | 335,771 | |||
Receivable for interest | 905,796 | |||
Prepaid expenses and other assets | 27,311 | |||
|
| |||
Total assets | 428,955,916 | |||
|
| |||
Liabilities | ||||
Payable for when-issued transactions | 11,971,698 | |||
Payable for investments purchased | 4,264,625 | |||
Payable for Fund shares redeemed | 98,326 | |||
Management fee payable | 96,232 | |||
Dividends payable | 55,568 | |||
Administration fees payable | 33,677 | |||
Distribution fee payable | 3,010 | |||
Accrued expenses and other liabilities | 71,485 | |||
|
| |||
Total liabilities | 16,594,621 | |||
|
| |||
Total net assets | $ | 412,361,295 | ||
|
| |||
Net assets consist of | ||||
Paid-in capital | $ | 408,668,184 | ||
Total distributable earnings | 3,693,111 | |||
|
| |||
Total net assets | $ | 412,361,295 | ||
|
| |||
Computation of net asset value and offering price per share | ||||
Net assets – Class A | $ | 111,537,776 | ||
Shares outstanding – Class A1 | 12,502,197 | |||
Net asset value per share – Class A | $8.92 | |||
Maximum offering price per share – Class A2 | $9.10 | |||
Net assets – Class C | $ | 4,702,353 | ||
Shares outstanding – Class C1 | 527,940 | |||
Net asset value per share – Class C | $8.91 | |||
Net assets – Administrator Class | $ | 8,076,453 | ||
Shares outstanding – Administrator Class1 | 905,120 | |||
Net asset value per share – Administrator Class | $8.92 | |||
Net assets – Institutional Class | $ | 288,044,713 | ||
Shares outstanding – Institutional Class1 | 32,287,933 | |||
Net asset value per share – Institutional Class | $8.92 |
1 | The Fund has an unlimited number of authorized shares. |
2 | Maximum offering price is computed as 100/98 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 Adjustable Rate Government Fund | 25
Table of Contents
Statement of operations—year ended August 31, 2020
Investment income | ||||
Interest | $ | 7,744,549 | ||
Income from affiliated securities | 123,038 | |||
|
| |||
Total investment income | 7,867,587 | |||
|
| |||
Expenses | ||||
Management fee | 1,055,253 | |||
Administration fees |
| |||
Class A | 177,888 | |||
Class C | 8,695 | |||
Administrator Class | 5,935 | |||
Institutional Class | 143,161 | |||
Shareholder servicing fees |
| |||
Class A | 277,424 | |||
Class C | 13,576 | |||
Administrator Class | 14,833 | |||
Distribution fee |
| |||
Class C | 40,657 | |||
Custody and accounting fees | 57,551 | |||
Professional fees | 71,121 | |||
Registration fees | 62,080 | |||
Shareholder report expenses | 54,750 | |||
Trustees’ fees and expenses | 21,326 | |||
Other fees and expenses | 80,545 | |||
|
| |||
Total expenses | 2,084,795 | |||
Less: Fee waivers and/or expense reimbursements |
| |||
Fund-level | (252,042 | ) | ||
Class A | (60,258 | ) | ||
Class C | (2,870 | ) | ||
Administrator Class | (7,611 | ) | ||
|
| |||
Net expenses | 1,762,014 | |||
|
| |||
Net investment income | 6,105,573 | |||
|
| |||
Realized and unrealized gains (losses) on investments | ||||
Net realized gains on |
| |||
Unaffiliated securities | 38,896 | |||
Futures contracts | 22,863 | |||
|
| |||
Net realized gains on investments | 61,759 | |||
|
| |||
Net change in unrealized gains (losses) on |
| |||
Unaffiliated securities | (1,755,938 | ) | ||
Futures contracts | (36,377 | ) | ||
|
| |||
Net change in unrealized gains (losses) on investments | (1,792,315 | ) | ||
|
| |||
Net realized and unrealized gains (losses) on investments | (1,730,556 | ) | ||
|
| |||
Net increase in net assets resulting from operations | $ | 4,375,017 | ||
|
|
The accompanying notes are an integral part of these financial statements.
26 | Wells Fargo Adjustable Rate Government Fund
Table of Contents
Statement of changes in net assets
Year ended August 31, 2020 | Year ended August 31, 2019 | |||||||||||||||
Operations |
| |||||||||||||||
Net investment income | $ | 6,105,573 | $ | 6,994,145 | ||||||||||||
Net realized gains on investments | 61,759 | 259,753 | ||||||||||||||
Net change in unrealized gains (losses) on investments | (1,792,315 | ) | 1,540,062 | |||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from operations | 4,375,017 | 8,793,960 | ||||||||||||||
|
| |||||||||||||||
Distributions to shareholders from net investment income and net realized gains | ||||||||||||||||
Class A | (2,146,645 | ) | (2,312,766 | ) | ||||||||||||
Class C | (64,201 | ) | (274,818 | ) | ||||||||||||
Administrator Class | (118,284 | ) | (143,314 | ) | ||||||||||||
Institutional Class | (3,818,289 | ) | (4,363,556 | ) | ||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | (6,147,419 | ) | (7,094,454 | ) | ||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold |
| |||||||||||||||
Class A | 2,808,277 | 25,108,322 | 4,140,943 | 37,018,425 | ||||||||||||
Class C | 241,187 | 2,157,808 | 112,522 | 1,004,070 | ||||||||||||
Administrator Class | 341,277 | 3,042,765 | 4,965 | 44,434 | ||||||||||||
Institutional Class | 20,269,482 | 180,910,886 | 3,237,102 | 28,915,014 | ||||||||||||
|
| |||||||||||||||
211,219,781 | 66,981,943 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions |
| |||||||||||||||
Class A | 207,797 | 1,859,418 | 220,140 | 1,968,661 | ||||||||||||
Class C | 6,361 | 56,841 | 29,271 | 261,252 | ||||||||||||
Administrator Class | 13,037 | 116,596 | 15,395 | 137,619 | ||||||||||||
Institutional Class | 374,832 | 3,351,646 | 384,451 | 3,436,900 | ||||||||||||
|
| |||||||||||||||
5,384,501 | 5,804,432 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed |
| |||||||||||||||
Class A | (3,727,766 | ) | (33,483,672 | ) | (2,790,788 | ) | (24,941,456 | ) | ||||||||
Class C | (454,968 | ) | (4,072,575 | ) | (4,524,371 | ) | (40,431,473 | ) | ||||||||
Administrator Class | (43,358 | ) | (388,738 | ) | (449,737 | ) | (4,015,219 | ) | ||||||||
Institutional Class | (5,966,182 | ) | (53,278,794 | ) | (12,338,837 | ) | (110,218,719 | ) | ||||||||
|
| |||||||||||||||
(91,223,779 | ) | (179,606,867 | ) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from capital share transactions | 125,380,503 | (106,820,492 | ) | |||||||||||||
|
| |||||||||||||||
Total increase (decrease) in net assets | 123,608,101 | (105,120,986 | ) | |||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 288,753,194 | 393,874,180 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 412,361,295 | $ | 288,753,194 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Adjustable Rate Government Fund | 27
Table of Contents
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.98 | $8.93 | $8.96 | $9.01 | $9.10 | |||||||||||||||
Net investment income | 0.17 | 0.18 | 1 | 0.10 | 0.06 | 0.04 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.06 | ) | 0.05 | (0.01 | ) | (0.04 | ) | (0.06 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.11 | 0.23 | 0.09 | 0.02 | (0.02 | ) | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.17 | ) | (0.18 | ) | (0.12 | ) | (0.07 | ) | (0.05 | ) | ||||||||||
Net realized gains | (0.00 | )2 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
Tax basis return of capital | 0.00 | 0.00 | 0.00 | 0.00 | (0.02 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.17 | ) | (0.18 | ) | (0.12 | ) | (0.07 | ) | (0.07 | ) | ||||||||||
Net asset value, end of period | $8.92 | $8.98 | $8.93 | $8.96 | $9.01 | |||||||||||||||
Total return3 | 1.25 | % | 2.64 | % | 0.98 | % | 0.23 | % | (0.19 | )% | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.88 | % | 0.88 | % | 0.83 | % | 0.80 | % | 0.78 | % | ||||||||||
Net expenses | 0.74 | % | 0.74 | % | 0.74 | % | 0.74 | % | 0.74 | % | ||||||||||
Net investment income | 1.92 | % | 2.04 | % | 1.28 | % | 0.72 | % | 0.56 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 9 | % | 5 | % | 3 | % | 2 | % | 13 | % | ||||||||||
Net assets, end of period (000s omitted) | $111,538 | $118,675 | $103,963 | $153,953 | $172,131 |
1 | Calculated based upon average shares outstanding |
2 | Amount is less than $0.005. |
3 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
28 | Wells Fargo Adjustable Rate Government Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.97 | $8.93 | $8.96 | $9.01 | $9.10 | |||||||||||||||
Net investment income (loss) | 0.10 | 1 | 0.10 | 1 | 0.05 | 1 | (0.00 | )1,2 | (0.02 | )1 | ||||||||||
Net realized and unrealized gains (losses) on investments | (0.06 | ) | 0.06 | (0.03 | ) | (0.05 | ) | (0.07 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.04 | 0.16 | 0.02 | (0.05 | ) | (0.09 | ) | |||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.10 | ) | (0.12 | ) | (0.05 | ) | (0.00 | )3 | (0.00 | )3 | ||||||||||
Net realized gains | (0.00 | )3 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
Tax basis return of capital | 0.00 | 0.00 | 0.00 | 0.00 | (0.00 | )3 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.10 | ) | (0.12 | ) | (0.05 | ) | (0.00 | )3 | (0.00 | )3 | ||||||||||
Net asset value, end of period | $8.91 | $8.97 | $8.93 | $8.96 | $9.01 | |||||||||||||||
Total return4 | 0.50 | % | 1.76 | % | 0.23 | % | (0.52 | )% | (0.94 | )% | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 1.63 | % | 1.62 | % | 1.55 | % | 1.55 | % | 1.53 | % | ||||||||||
Net expenses | 1.49 | % | 1.49 | % | 1.49 | % | 1.49 | % | 1.49 | % | ||||||||||
Net investment income (loss) | 1.17 | % | 1.13 | % | 0.54 | % | (0.04 | )% | (0.19 | )% | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 9 | % | 5 | % | 3 | % | 2 | % | 13 | % | ||||||||||
Net assets, end of period (000s omitted) | $4,702 | $6,594 | $45,693 | $60,766 | $97,452 |
1 | Calculated based upon average shares outstanding |
2 | Amount is more than $(0.005). |
3 | Amount is less than $0.005. |
4 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Adjustable Rate Government Fund | 29
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.98 | $8.93 | $8.96 | $9.01 | $9.10 | |||||||||||||||
Net investment income | 0.18 | 1 | 0.19 | 1 | 0.13 | 1 | 0.07 | 1 | 0.06 | |||||||||||
Net realized and unrealized gains (losses) on investments | (0.06 | ) | 0.06 | (0.03 | ) | (0.04 | ) | (0.06 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.12 | 0.25 | 0.10 | 0.03 | 0.00 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.18 | ) | (0.20 | ) | (0.13 | ) | (0.08 | ) | (0.07 | ) | ||||||||||
Net realized gains | (0.00 | )2 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
Tax basis return of capital | 0.00 | 0.00 | 0.00 | 0.00 | (0.02 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.18 | ) | (0.20 | ) | (0.13 | ) | (0.08 | ) | (0.09 | ) | ||||||||||
Net asset value, end of period | $8.92 | $8.98 | $8.93 | $8.96 | $9.01 | |||||||||||||||
Total return | 1.40 | % | 2.78 | % | 1.12 | % | 0.37 | % | (0.05 | )% | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.81 | % | 0.81 | % | 0.77 | % | 0.74 | % | 0.72 | % | ||||||||||
Net expenses | 0.60 | % | 0.60 | % | 0.60 | % | 0.60 | % | 0.60 | % | ||||||||||
Net investment income | 1.98 | % | 2.12 | % | 1.42 | % | 0.82 | % | 0.71 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 9 | % | 5 | % | 3 | % | 2 | % | 13 | % | ||||||||||
Net assets, end of period (000s omitted) | $8,076 | $5,337 | $9,140 | $18,805 | $61,658 |
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.
30 | Wells Fargo Adjustable Rate Government Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.98 | $8.93 | $8.96 | $9.01 | $9.10 | |||||||||||||||
Net investment income | 0.19 | 1 | 0.22 | 0.16 | 0.09 | 0.08 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.06 | ) | 0.04 | (0.05 | ) | (0.04 | ) | (0.07 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.13 | 0.26 | 0.11 | 0.05 | 0.01 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.19 | ) | (0.21 | ) | (0.14 | ) | (0.10 | ) | (0.07 | ) | ||||||||||
Net realized gains | (0.00 | )2 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
Tax basis return of capital | 0.00 | 0.00 | 0.00 | 0.00 | (0.03 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.19 | ) | (0.21 | ) | (0.14 | ) | (0.10 | ) | (0.10 | ) | ||||||||||
Net asset value, end of period | $8.92 | $8.98 | $8.93 | $8.96 | $9.01 | |||||||||||||||
Total return | 1.54 | % | 2.93 | % | 1.26 | % | 0.51 | % | 0.09 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.54 | % | 0.54 | % | 0.50 | % | 0.47 | % | 0.45 | % | ||||||||||
Net expenses | 0.46 | % | 0.46 | % | 0.46 | % | 0.46 | % | 0.45 | % | ||||||||||
Net investment income | 2.12 | % | 2.27 | % | 1.55 | % | 0.98 | % | 0.84 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 9 | % | 5 | % | 3 | % | 2 | % | 13 | % | ||||||||||
Net assets, end of period (000s omitted) | $288,045 | $158,147 | $235,078 | $397,529 | $702,617 |
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 Adjustable Rate Government Fund | 31
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 Adjustable Rate Government 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.
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.
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.
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 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.
When-issued transactions
The Fund may purchase securities on a forward commitment or when-issued basis. The Fund records a when-issued transaction on the trade date and will segregate assets in an amount at least equal in value to the Fund’s commitment to purchase when-issued securities. Securities purchased on a when-issued basis are marked-to-market daily and the Fund begins earning interest on the settlement date. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
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 interest rates and is subject to interest rate 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.
32 | Wells Fargo Adjustable Rate Government Fund
Table of Contents
Notes to financial statements
Mortgage dollar roll transactions
The Fund may engage in mortgage dollar roll transactions through TBA mortgage-backed securities issued by Government National Mortgage Association (GNMA), Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC). In a mortgage dollar roll transaction, the Fund sells a mortgage-backed security to a financial institution, such as a bank or broker-dealer and simultaneously agrees to repurchase a substantially similar security from the institution at a later date at an agreed upon price. The mortgage-backed securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different pre-payment histories. During the roll period, the Fund foregoes principal and interest paid on the securities. The Fund is compensated by the difference between the current sales price and the forward price for the future purchase as well as by the earnings on the cash proceeds of the initial sale. Mortgage dollar rolls may be renewed without physical delivery of the securities subject to the contract. The Fund accounts for TBA dollar roll transactions as purchases and sales which, as a result, may increase its portfolio turnover rate.
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.
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. Paydown gains and losses are included in interest income.
Distributions to shareholders
Distributions to shareholders from net investment income are declared daily and paid monthly. Distributions from net realized gains, if any, 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 August 31, 2020, the aggregate cost of all investments for federal income tax purposes was $422,154,711 and the unrealized gains (losses) consisted of:
Gross unrealized gains | $ | 4,769,193 | ||
Gross unrealized losses | (906,013 | ) | ||
Net unrealized gains | $ | 3,863,180 |
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. At August 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 | |
$(65,886) | $65,886 |
As of August 31, 2020, the Fund had capital loss carryforwards which consist of $35,267 in long-term capital losses.
Wells Fargo Adjustable Rate Government Fund | 33
Table of Contents
Notes to financial statements
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 August 31, 2020:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Agency securities | $ | 0 | $ | 345,481,928 | $ | 0 | $ | 345,481,928 | ||||||||
Asset-backed securities | 0 | 31,028,039 | 0 | 31,028,039 | ||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 49,544,301 | 0 | 0 | 49,544,301 | ||||||||||||
Total assets | $ | 49,544,301 | $ | 376,509,967 | $ | 0 | $ | 426,054,268 | ||||||||
Liabilities | ||||||||||||||||
Futures contracts | $ | 36,377 | $ | 0 | $ | 0 | $ | 36,377 | ||||||||
Total liabilities | $ | 36,377 | $ | 0 | $ | 0 | $ | 36,377 |
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
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.
For the year ended August 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
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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 | 0.350 | % | ||
Next $4 billion | 0.325 | |||
Next $3 billion | 0.290 | |||
Next $2 billion | 0.265 | |||
Over $10 billion | 0.255 |
For the year ended August 31, 2020, the management fee was equivalent to an annual rate of 0.35% 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, 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 0.20% and declining to 0.10% 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 | 0.16 | % | ||
Administrator Class | 0.10 | |||
Institutional Class | 0.08 |
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 December 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.74% for Class A shares, 1.49% for Class C shares, 0.60% for Administrator Class shares, and 0.46% 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 August 31, 2020, Funds Distributor received $1,229 from the sale of Class A shares and $390 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 August 31, 2020.
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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 short-term securities, for the year ended August 31, 2020 were as follows:
Purchases at cost | Sales proceeds | |||||
U.S. government | Non-U.S. government | U.S. government | Non-U.S. government | |||
$161,888,666 | $38,530,828 | $25,704,664 | $0 |
6. DERIVATIVE TRANSACTIONS
During the year ended August 31, 2020, the Fund entered into futures contracts for duration and curve management. The Fund had an average notional amount of $716,413 in long futures contracts and $3,488,041 in short futures contracts during the year ended August 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.
7. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $350,000,000 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 August 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 August 31, 2020 and August 31, 2019 were as follows:
Year ended August 31 | ||||||||
2020 | 2019 | |||||||
Ordinary income | $ | 6,122,808 | $ | 6,985,362 | ||||
Long-term capital gain | 24,611 | 109,092 |
As of August 31, 2020, the components of distributable earnings on a tax basis were as follows:
Unrealized gains | Capital loss carryforward | |
$3,863,180 | $(35,267) |
9. INDEMNIFICATION
Under the Fund’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 Fund. The Fund has entered into a separate agreement with each Trustee that converts indemnification rights currently existing under the Fund’s organizational documents into contractual rights that cannot be changed in the future without the consent of the Trustee. Additionally, in the normal course of
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Notes to financial statements
business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’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 on fair value measurements in Topic 820, Fair Value Measurements. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has adopted this guidance which did not have a material impact on the financial statements.
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.
Wells Fargo Adjustable Rate Government Fund | 37
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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 Adjustable Rate Government Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of August 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 August 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 August 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
October 28, 2020
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TAX INFORMATION
Pursuant to Section 852 of the Internal Revenue Code, $24,611 was designated as a 20% rate gain distribution for the fiscal year ended August 31, 2020.
For the fiscal year ended August 31, 2020, $6,151,575 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 142 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 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). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008 | 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 (Emeritus), 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 Wheelock (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. Interim President of the McKnight Foundation from January to September 2020. 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 the Treasurer of 77 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. |
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Other information (unaudited)
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Wells Fargo Adjustable Rate Government Fund
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Funds Trust (the “Trust”) must determine annually whether to approve the continuation of the Trust’s investment management and sub-advisory agreements. In this regard, at a Board meeting held on May 26, 2020 and May 28, 2020 (together, the “Meeting”), the Board, all the members of which have no direct or indirect interest in the investment management and sub-advisory agreements and are not “interested persons” of the Trust, as defined in the 1940 Act (the “Independent Trustees”), reviewed and approved for Wells Fargo Adjustable Rate Government Fund (the “Fund”): (i) an investment management agreement (the “Management Agreement”) with Wells Fargo Funds Management, LLC (“Funds Management”); and (ii) an investment sub-advisory agreement (the “Sub-Advisory Agreement”) with Wells Capital Management Incorporated (the “Sub-Adviser”), an affiliate of Funds Management. The Management Agreement and the Sub-Advisory Agreement are collectively referred to as the “Advisory Agreements.”
At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of Funds Management and the Sub-Adviser and the approval of the Advisory Agreements. Prior to the Meeting, including at a Board meeting held in April 2020, the Trustees conferred extensively among themselves and with representatives of Funds Management about these matters. Also, the Board has adopted a team-based approach, with each team consisting of a sub-set of Trustees, to assist the full Board in the discharge of its duties in reviewing investment performance and other matters throughout the year. The Independent Trustees were assisted in their evaluation of the Advisory Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately.
In providing information to the Board, Funds Management and the Sub-Adviser were guided by a detailed set of requests for information submitted to them by independent legal counsel on behalf of the Independent Trustees at the start of the Board’s annual contract renewal process earlier in 2020. In considering and approving the Advisory Agreements, the Trustees considered the information they believed relevant, including but not limited to the information discussed below. The Board considered not only the specific information presented in connection with the Meeting, but also the knowledge gained over time through interaction with Funds Management and the Sub-Adviser about various topics. In this regard, the Board reviewed reports of Funds Management at each of its quarterly meetings, which included, among other things, portfolio reviews and investment performance reports. In addition, the Board and the teams mentioned above confer with portfolio managers at various times throughout the year. The Board did not identify any particular information or consideration that was all-important or controlling, and each individual Trustee may have attributed different weights to various factors.
After its deliberations, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable. The Board considered the approval of the Advisory Agreements for the Fund as part of its consideration of agreements for funds across the complex, but its approvals were made on a fund-by-fund basis. The following summarizes a number of important, but not necessarily all, factors considered by the Board in support of its approvals.
Nature, extent and quality of services
The Board received and considered various information regarding the nature, extent and quality of services provided to the Fund by Funds Management and the Sub-Adviser under the Advisory Agreements. This information included a description of the investment advisory services and Fund-level administrative services covered by the Management Agreement, as well as, among other things, a summary of the background and experience of senior management of Wells Fargo Asset Management (“WFAM”), of which Funds Management and the Sub-Adviser are a part, and a summary of investments made in the business of WFAM. The Board also received a description of Funds Management’s and the Sub-Adviser’s business continuity plans and of their approaches to data privacy and cybersecurity, and related testing. The Board also received and reviewed information about Funds Management’s role as administrator of the Fund’s liquidity risk management program, Funds Management’s approach to risk management, and Funds Management’s intermediary and vendor oversight program.
The Board also considered the qualifications, background, tenure and responsibilities of each of the portfolio managers primarily responsible for the day-to-day portfolio management of the Fund. The Board evaluated the ability of Funds Management and the Sub-Adviser to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of Funds Management and the Sub-Adviser. In addition, the Board took into account the full range of services provided to the Fund by Funds Management and its affiliates.
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Other information (unaudited)
Fund investment performance and expenses
The Board considered the investment performance results for the Fund over various time periods ended December 31, 2019. The Board also considered more current results for various time periods ended March 31, 2020. The Board considered these results in comparison to the investment performance of funds in a universe that was determined by Broadridge Inc. (“Broadridge”) to be similar to the Fund (the “Universe”), and in comparison to the Fund’s benchmark index and to other comparative data. Broadridge is an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds in the performance Universe. The Board noted that the investment performance of the Fund (Class A) was higher than or in range of the average investment performance of the Universe for the one- and ten-year periods ended December 31, 2019, and lower than the average investment performance of the Universe for the three- and five-year periods ended December 31, 2019. The Board also noted that the investment performance of the Fund (Administrator Class) was higher than or in range of the average investment performance of the Universe for all periods ended March 31, 2020. The Board also noted that the investment performance of the Fund was higher than its benchmark index, the Bloomberg Barclays 6-Month Treasury Bill Index, for the one- and ten-year periods ended December 31, 2019, and lower than its benchmark index for the three- and five-year periods ended December 31, 2019. The Board also noted that the investment performance of the Fund was higher than its benchmark index, the Bloomberg Barclays 6-Month Treasury Bill Index, for the ten-year period ended March 31, 2020, and lower than its benchmark index for the one-, three- and five-year periods ended March 31, 2020.
The Board received information concerning, and discussed factors contributing to, the underperformance of the Fund relative to the Universe and benchmark for the periods identified above. The Board took note of the explanations for the relative underperformance during these periods, including with respect to the Fund’s investment strategies, structural biases and market factors that affected the Fund’s investment performance. The Board also took note of the Fund’s outperformance relative to the Universe and benchmark for certain of the time periods under review.
The Board also received and considered information regarding the Fund’s net operating expense ratios and their various components, including actual management fees, custodian and other non-management fees, and Rule 12b-1 and non-Rule 12b-1 shareholder service fees. The Board considered these ratios in comparison to the median ratios of funds in class-specific expense groups that were determined by Broadridge to be similar to the Fund (the “Groups”). The Board received a description of the methodology used by Broadridge to select the mutual funds in the expense Groups and an explanation of how funds comprising expense groups and their expense ratios may vary from year-to-year. Based on the Broadridge reports, the Board noted that the net operating expense ratios of the Fund were equal to or in range of the median net operating expense ratios of the expense Groups for each share class.
The Board took into account the Fund’s investment performance and expense information provided to it among the factors considered in deciding to re-approve the Advisory Agreements.
Investment management and sub-advisory fee rates
The Board reviewed and considered the contractual fee rates payable by the Fund to Funds Management under the Management Agreement, as well as the contractual fee rates payable by the Fund to Funds Management for class-level administrative services under a Class-Level Administration Agreement, which include, among other things, class-level transfer agency and sub-transfer agency costs (collectively, the “Management Rates”). The Board also reviewed and considered the contractual investment sub-advisory fee rates that are payable by Funds Management to the Sub-Adviser for investment sub-advisory services.
Among other information reviewed by the Board was a comparison of the Fund’s Management Rates with the average contractual investment management fee rates of funds in the expense Groups at a common asset level as well as transfer agency costs of the funds in the expense Groups. The Board noted that the Management Rates of the Fund were in range of the sum of these average rates for the Fund’s expense Groups for all share classes.
The Board also received and considered information about the portion of the total management fee that was retained by Funds Management after payment of the fee to the Sub-Adviser for sub-advisory services. In assessing the reasonableness of this amount, the Board received and evaluated information about the nature and extent of responsibilities retained and risks assumed by Funds Management and not delegated to or assumed by the Sub-Adviser, and about Funds Management’s on-going oversight services. Given the affiliation between Funds Management and the Sub-Adviser, the Board ascribed limited relevance to the allocation of fees between them.
The Board also received and considered information about the nature and extent of services offered and fee rates charged by Funds Management and the Sub-Adviser to other types of clients with investment strategies similar to those of the Fund. In this regard, the Board received information about the significantly greater scope of services, and compliance, reporting and
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Other information (unaudited)
other legal burdens and risks of managing proprietary mutual funds compared with those associated with managing assets of other types of clients, including third-party sub-advised fund clients and non-mutual fund clients such as institutional separate accounts.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board determined that the compensation payable to Funds Management under the Management Agreement and to the Sub-Adviser under the Sub-Advisory Agreement was reasonable.
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of both WFAM and Wells Fargo & Co. (“Wells Fargo”) from providing services to the fund family as a whole. The Board noted that the Sub-Adviser’s profitability information with respect to providing services to the Fund and other funds in the family was subsumed in the WFAM and Wells Fargo profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability, including a description of the methodology used to allocate certain expenses. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such as the size, type and age of fund.
Based on its review, the Board did not deem the profits reported by Funds Management, WFAM or Wells Fargo from services provided to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
The Board received and considered information about the potential for Funds Management to experience economies of scale in the provision of management services to the Fund, the difficulties of calculating economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. The Board noted the existence of breakpoints in the Fund’s management fee structure, which operate generally to reduce the Fund’s expense ratios as the Fund grows in size, and the size of the Fund in relation to such breakpoints. The Board considered that in addition to management fee breakpoints, Funds Management shares potential economies of scale from its management business in a variety of ways, including through fee waiver and expense reimbursement arrangements, services that benefit shareholders, competitive management fee rates set at the outset without regard to breakpoints, and investments in the business intended to enhance services available to shareholders.
The Board concluded that Funds Management’s arrangements with respect to the Fund, including contractual breakpoints, constituted a reasonable approach to sharing potential economies of scale with the Fund and its shareholders.
Other benefits to Funds Management and the Sub-Adviser
The Board received and considered information regarding potential “fall-out” or ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, as a result of their relationships with the Fund. Ancillary benefits could include, among others, benefits directly attributable to other relationships with the Fund and benefits potentially derived from an increase in Funds Management’s and the Sub-Adviser’s business as a result of their relationships with the Fund. The Board noted that various affiliates of Funds Management may receive distribution-related fees, shareholder servicing payments and sub-transfer agency fees in respect of shares sold or held through them and services provided.
The Board also reviewed information about soft dollar credits earned and utilized by the Sub-Adviser, fees earned by Funds Management and the Sub-Adviser from managing a private investment vehicle for the fund family’s securities lending collateral, and commissions earned by an affiliated broker from portfolio transactions.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board did not find that any ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, were unreasonable.
Conclusion
At the Meeting, after considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable.
Wells Fargo Adjustable Rate Government Fund | 45
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Other information (unaudited)
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Wells Fargo Funds Trust (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) on behalf of each of its series, including the Fund, which is reasonably designed to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) previously approved the designation of Wells Fargo Funds Management, LLC (“Funds Management”), the Fund’s investment manager, as the administrator of the Program, and Funds Management has established a Liquidity Risk Management Council composed of personnel from multiple departments within Funds Management and its affiliates to assist Funds Management in the implementation and on-going administration of the Program.
The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent the Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if the Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s “highly liquid investments” below its HLIM; and (6) periodic reporting to the Board.
At a meeting of the Board held on May 26 and 28, 2020, the Board received a written report (the “Report”) from Funds Management that addressed the operation of the Program and assessed its adequacy and effectiveness of implementation. The Report covered the initial period from December 1, 2018 through December 31, 2019 (the “Reporting Period”). No significant liquidity events impacting the Fund were noted in the Report. There were no material changes to the Program during the Reporting Period. The Report concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
46 | Wells Fargo Adjustable Rate Government Fund
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Effective June 1, 2020, shareholders purchasing Fund shares through an Oppenheimer & Co. Inc. (“Oppenheimer”) platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred or back-end, sales charge waivers) and discounts, which may differ from those disclosed in the Fund’s Prospectus or SAI.
Front-end Sales Load Waivers on Class A Shares available at Oppenheimer |
Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan. |
Shares purchased by or through a 529 Plan. |
Shares purchased through an Oppenheimer affiliated investment advisory program. |
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 from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 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 (known as Rights of Restatement). |
A shareholder in the Fund’s Class C shares will have their shares exchanged at net asset value to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the exchange is in line with the policies and procedures of Oppenheimer. |
Employees and registered representatives of Oppenheimer or its affiliates and their family members. |
Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in the Prospectus. |
CDSC Waivers on A and C Shares available at Oppenheimer |
Death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Prospectus. |
Return of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the Prospectus. |
Shares sold to pay Oppenheimer fees but only if the transaction is initiated by Oppenheimer. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Oppenheimer: Breakpoints, Rights of Accumulation & Letters of Intent |
Breakpoints as described in the 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 Oppenheimer. Eligible fund family assets not held at Oppenheimer may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
Wells Fargo Adjustable Rate Government Fund | 47
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Effective June 15, 2020, shareholders purchasing fund shares through a Robert W. Baird & Co. (“Baird”) platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or the SAI.
Front-end Sales Load Waivers on Class A Shares available at Baird |
Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing share of the same fund. |
Share purchase by employees and registers representatives of Baird or its affiliate and their family members as designated by Baird. |
Shares purchase from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as rights of reinstatement). |
A shareholder in the Funds Investor C Shares will have their share exchanged at net asset value to Investor A shares of the fund if the shares are no longer subject to CDSC and the exchange is in line with the policies and procedures of Baird. |
Employer-sponsored retirement plans or charitable accounts in a transactional brokerage account at Baird, including 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 or SAR-SEPs. |
CDSC Waivers on A and C Shares available at Baird |
Shares sold due to death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
Shares bought due to returns of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 72 as described in the Fund’s Prospectus. |
Shares sold to pay Baird fees but only if the transaction is initiated by Baird. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Baird: Breakpoint and/or Rights of Accumulation |
Breakpoints as described in the Prospectus. |
Rights of accumulations which entitles 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 Baird. Eligible fund family assets not held at Baird may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets. |
Letters of Intent (LOI) allow for breakpoint discounts based on anticipated purchases within a fund family through Baird, over a 13-month period of time. |
48 | Wells Fargo Adjustable Rate Government 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
© 2020 Wells Fargo & Company. All rights reserved
PAR-0920-00406 10-20
A215/AR215 08-20
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Annual Report
August 31, 2020
Wells Fargo Core Plus Bond 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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Reduce clutter. Save trees. |
Sign up for electronic delivery of prospectuses and shareholder reports at wellsfargo.com/ |
The views expressed and any forward-looking statements are as of August 31, 2020, unless otherwise noted, and are those of the Fund’s portfolio 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 Core Plus Bond Fund | 1
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Letter to shareholders (unaudited)
Andrew Owen
President
Wells Fargo Funds
Dear Shareholder:
We are pleased to offer you this annual report for the Wells Fargo Core Plus Bond Fund for the 12-month period that ended August 31, 2020. Global stock markets saw earlier gains erased in March as governments around the world took unprecedented measures, attempting to stop the spread of the coronavirus at the expense of short-term economic output. However, markets rebounded from April on to offset much of the losses as central banks attempted to bolster capital markets and confidence.
For the 12-month period, equities had broadly positive total returns despite intense volatility in March. Non-U.S. developed market equities had the weakest performance and U.S. stocks performed strongly. Fixed-income securities were more modest though also generally positive. For the period, U.S. stocks, based on the S&P 500 Index,1 gained 21.94%. International stocks, as measured by the MSCI ACWI ex USA Index (Net),2 returned 8.31%, while the MSCI EM Index (Net)3 had somewhat stronger performance, with a 14.49% gain. For bond investors, the Bloomberg Barclays U.S. Aggregate Bond Index4 returned 6.47%, the Bloomberg Barclays Global Aggregate ex-USD Index5 gained a more modest 4.58%, and the Bloomberg Barclays Municipal Bond Index6 returned 3.24% while the ICE BofA U.S. High Yield Index7 returned 3.71%.
The fiscal year began with supportive central bank actions.
As the period began, several central banks had just cut interest rates in response to a global economic slowdown. Ongoing concerns regarding U.S.-China trade tensions and Brexit remained unresolved. The Federal Reserve (Fed) cut U.S. interest rates again in September. U.S. manufacturing data disappointed investors. The U.S. Congress announced it would pursue an impeachment investigation of President Trump. Meanwhile, the U.K. Brexit impasse showed no signs of resolution. Officials in China said that hitting the country’s economic growth goals for the year would be difficult considering the weight of tariffs and trade restrictions. Although the S&P 500 Index finished the third quarter with the best year-to-date returns in more than 20 years, concerns about future returns remained.
The fourth quarter started on a strong note, with U.S.-China trade tensions relaxing in October along with renewed optimism for a U.K. Brexit deal and positive macroeconomic data. The initial estimate of U.S. third-quarter gross domestic product (GDP) growth was a resilient 1.9% annualized rate, while the U.S. unemployment rate fell to a 50-year low of
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 and emerging 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 Core Plus Bond Fund
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Letter to shareholders (unaudited)
3.5% in September. However, despite strength among U.S. consumers, business confidence declined while manufacturing activity contracted. Concerned with a potential economic slowdown, the Fed lowered interest rates another quarter point in late October—its third rate cut in four months. This helped push the S&P 500 Index to an all-time high while emerging market equities rallied and global bonds declined overall, reflecting a broad pickup in risk appetite.
Equity markets continued to rally in November despite ongoing geopolitical risks. Hopes for a U.S.-China trade deal buoyed investor confidence. U.S. business sentiment improved slightly, and manufacturing and services activity picked up. While consumer confidence and purchasing managers’ activity rose in the eurozone, China reported weakening manufacturing and consumer data. Bond yields rose marginally, leading to slightly negative returns for global government and investment-grade corporate bonds.
Financial markets ended 2019 with a boost from the U.S. and China accord on a Phase One trade deal. That, along with the landslide win by the pro-Brexit U.K. Conservative Party in a national election and ongoing central bank support, gave investors greater confidence. U.S. economic indicators were generally positive, with the exception of manufacturing activity and business confidence. Consumer confidence was resilient, fed by a robust labor market, tame inflation, and lower interest rates, which boosted housing affordability and stimulated homebuyer activity. The impeachment of President Trump had little impact on markets. Meanwhile, slowing Chinese economic activity, partly attributable to the trade war, led to further government stimulus at year-end through lower reserve ratios, allowing banks to lend more money.
The year-end rally continued in early January 2020. However, capital market volatility picked up sharply in late January on concerns over the potential impact of the coronavirus on the global economy and stock markets. As sentiment began to sour, perceived safe havens did well in January. The U.S. dollar and Japanese yen both rose and government bonds outperformed equities. While the S&P 500 Index held its ground, emerging market equities tumbled, including those in Asia.
In February, the coronavirus became the major market focus. Fears of the virus’s impact on global growth led to expectations of increased global central bank monetary policy support. That led the 10-year U.S. Treasury yield to fall to an all-time low of 1.1%. Although equity markets initially shrugged off concerns about the outbreak, focusing instead on strong fourth-quarter earnings and improving business confidence in January, market sentiment turned sharply lower and the S&P 500 Index lost 8.2% for the month. Oil prices tumbled as Russia and the Organization of the Petroleum Exporting Countries compounded a major decline in oil demand with a brutal price war, partly aimed at dissuading further U.S. shale production, causing the price of West Texas Intermediate crude oil to plummet.
The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems. This abrupt stoppage of economic activity led to the sharp deceleration of global output, sending economies into a deep contraction. Central banks responded swiftly, slashing interest rates and expanding quantitative easing programs to restore liquidity and confidence to the markets. In the U.S., the Fed introduced several new lending programs, funding investment-grade bonds, money market mutual funds, and commercial paper while purchasing Treasuries, mortgage-backed securities, and overnight repurchase agreements. Meanwhile, stock markets tumbled quickly into a bear market, ending the longest bull stock market in U.S. history.
Markets rebounded strongly in April, fueled by unprecedented government and central bank stimulus measures. The U.S. economy contracted by an annualized 5.0% pace in the first quarter, with 30 million new unemployment insurance claims in six weeks. In the
“The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems.”
Wells Fargo Core Plus Bond Fund | 3
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Letter to shareholders (unaudited)
“The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July.”
eurozone, first-quarter real GDP shrank 3.8%, with the composite April Flash Purchasing Managers’ Index, a monthly survey of purchasing managers, falling to an all-time low of 13.5. The European Central Bank expanded its quantitative easing to include the purchase of additional government bonds of countries with the greatest virus-related need, including Italy and Spain. China’s first-quarter GDP fell by 6.8% year over year. However, retail sales, production, and investment showed signs of recovery. Extreme oil-price volatility continued as global supply far exceeded demand.
The global equity market rebound continued in May, with widespread strong monthly gains. Investors regained confidence on reports of early signs of success in human trials of a coronavirus vaccine. Growth stocks continued to outperform value stocks while returns on global government bonds were generally flat. In the U.S., a gap grew between the stock market rebound and devastating economic data points, including an April unemployment rate of 14.7%, the highest level since World War II. Purchasing managers’ indices reflected weakening activity in May in both the manufacturing and services sectors. U.S. corporate earnings reports indicated a 14% year-over-year contraction in earnings from the first quarter of 2019. However, high demand for technology, driven by remote activity, supported robust information technology sector earnings, which helped drive major technology stocks higher.
Financial markets posted widely positive returns in June despite ongoing economic weakness and high levels of uncertainty on the containment of the coronavirus and the timing of an effective vaccine. There were hopeful signs as economies reopened, with both U.S. and U.K. retail sales rebounding sharply in May. However, year over year, sales remained depressed. Vitally important to market sentiment was the ongoing commitment by central banks globally to do all they could to provide economic support through liquidity and low borrowing costs. U.S. economic activity was aided by one-time $1,200 stimulus checks and $600 bonus weekly unemployment benefits which expired at the end of July. However, unemployment remained historically high, easing somewhat from 14.7% in April to 11.1% in June. During June, numerous states reported increases of coronavirus cases. China’s economic recovery picked up momentum in June, though it remained far from a full recovery.
July was a broadly positive month for both global equities and fixed income. However, economic data and a resurgence of coronavirus cases pointed to the vulnerability of the global economy and the ongoing imperative to regain control of the pandemic. Second-quarter GDP shrank from the previous quarter by 9.5% and 12.1% in the U.S. and eurozone, respectively. In contrast, China reported a 3.2% year-over-year expansion in its second-quarter GDP. U.S. unemployment remained high despite adding 1.8 million jobs in July, with a double-digit jobless rate persisting. However, manufacturing activity grew in both the U.S. and eurozone. In Asia, while China’s manufacturing sector continued to expand, activity in Japan and South Korea contracted. In July, a rising concern was the rapid and broad reemergence of coronavirus infections.
The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July. U.S. stocks had strong monthly gains, led by the so-called FAANG stocks—Facebook, Apple, Amazon, Netflix, and Google (Alphabet)—which dominate these indices and continued to rally. U.S. stocks generally surpassed other broadly positive global equity performance while fixed-income market monthly returns were broadly flat. Generally stronger-than-expected second-quarter earnings boosted investor sentiment along with the Fed’s announcement of a policy shift that will likely lead to longer-term low interest rates and supportive monetary policy. The U.S. Flash Purchasing Managers’ Indices for both manufacturing and services beat expectations while U.S. housing market indicators were strong. In Europe, retail sales expanded and consumer confidence remained steady. China’s economy continued its fairly steady expansion. Overall, developed markets performed better than emerging market equities for the month of August as people took comfort in better-known equities in perceived safer markets.
4 | Wells Fargo Core Plus Bond Fund
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Letter to shareholders (unaudited)
Don’t let short-term uncertainty derail long-term investment goals.
Periods of investment uncertainty can present challenges, but experience has taught us that maintaining long-term investment goals can be an effective way to plan for the future. To help you create a sound strategy based on your personal goals and risk tolerance, Wells Fargo Funds offers more than 100 mutual funds spanning a wide range of asset classes and investment styles. Although diversification cannot guarantee an investment profit or prevent losses, we believe it can be an effective way to manage investment risk and potentially smooth out overall portfolio performance. We encourage investors to know their investments and to understand that appropriate levels of risk-taking may unlock opportunities.
Thank you for choosing to invest with Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Andrew Owen
President
Wells Fargo Funds
|
For further information about your Fund, contact your investment professional, visit our website at wfam.com, or call us directly at 1-800-222-8222. |
Notice to Shareholders
At a meeting held on August 10-12, 2020, the Board of Trustees of the Fund approved a change to the Fund’s automatic conversion feature for Class C shares in order to shorten the required holding period from 10 to 8 years. As a result, on a monthly basis beginning November 5, 2020, Class C shares will convert automatically into Class A shares 8 years after the initial date of purchase or, if you acquired your Class C shares through an exchange or conversion from another share class, 8 years after the date you acquired your Class C shares. When Class C shares that you acquired through a purchase or exchange convert, any other Class C shares that you purchased with reinvested dividends and distributions also will convert into Class A shares on a pro rata basis.
Please note that a shorter holding period may apply depending on your intermediary. Please see “Appendix A—Sales Charge Reductions and Waivers for Certain Intermediaries” in the Fund’s prospectus for further information.
Wells Fargo Core Plus Bond Fund | 5
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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
Christopher Y. Kauffman, CFA®‡
Jay N. Mueller, CFA®‡
Janet S. Rilling, CFA®‡, CPA
Michael J. Schueller, CFA®‡
Noah M. Wise, CFA®‡
Average annual total returns (%) as of August 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 (STYAX) | 7-13-1998 | 3.80 | 4.59 | 4.05 | 8.72 | 5.56 | 4.53 | 0.91 | 0.74 | |||||||||||||||||||||||||
Class C (WFIPX) | 7-13-1998 | 6.85 | 4.76 | 3.74 | 7.85 | 4.76 | 3.74 | 1.66 | 1.49 | |||||||||||||||||||||||||
Class R6 (STYJX)3 | 10-31-2016 | – | – | – | 9.10 | 5.93 | 4.88 | 0.53 | 0.36 | |||||||||||||||||||||||||
Administrator Class (WIPDX) | 7-30-2010 | – | – | – | 8.85 | 5.68 | 4.66 | 0.85 | 0.63 | |||||||||||||||||||||||||
Institutional Class (WIPIX) | 7-18-2008 | – | – | – | 9.05 | 5.89 | 4.86 | 0.58 | 0.41 | |||||||||||||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond Index4 | – | – | – | – | 6.47 | 4.33 | 3.65 | – | – |
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 4.50%. 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 R6, Administrator Class, and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
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. Loans are subject to risks similar to those associated with other below-investment-grade bond investments, such as risk of greater volatility in value, credit risk (for example, risk of issuer default), and risk that the loan may become illiquid or difficult to price. The use of derivatives may reduce returns and/or increase volatility. 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, high-yield securities risk, and mortgage and asset-backed securities risk. High-yield securities have a greater risk of default and tend to be more volatile than higher rated debt securities. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Core Plus Bond Fund
Table of Contents
Performance highlights (unaudited)
Growth of $10,000 investment as of August 31, 20205 |
‡ | 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 December 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 0.73% for Class A, 1.48% for Class C, 0.35% for Class R6, 0.62% for Administrator Class, and 0.40% 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 caps. Prior to or after the commitment expiration date, the caps may be increased or the commitment to maintain the caps may be terminated only with the approval of the Board of Trustees. Without these caps, 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 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. |
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 chart compares the performance of Class A shares for the most recent ten years with the performance of the Bloomberg Barclays U.S. Aggregate Bond 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 4.50%. |
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 Core Plus Bond Fund | 7
Table of Contents
Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
∎ | The Fund outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, for the 12-month period that ended August 31, 2020. |
∎ | The Fund’s allocations to out-of-benchmark “plus” sectors meaningfully contributed to performance. |
∎ | Out-of-benchmark sector allocations, especially U.S. high yield, as well as emerging markets and European high yield and investment grade, contributed to performance. |
∎ | An overweight to corporates and structured products contributed, as did quality allocation, favoring BBB-rated credit. |
∎ | The Fund was mostly duration neutral over the period, but a steeper U.S. Treasury yield curve contributed to performance during the period. |
∎ | An allocation to developed non-U.S. government debt detracted slightly. |
Ten largest holdings (%) as of August 31, 20206 | ||||
U.S. Treasury Bond, 0.63%, 8-15-2030 | 3.57 | |||
Xtrackers USD High Yield Corporate Bond ETF | 2.97 | |||
U.S. Treasury Bond, 1.38%, 8-15-2050 | 1.76 | |||
SPDR Barclays High Yield Bond ETF | 1.74 | |||
U.S. Treasury Note, 0.38%, 4-30-2025 | 1.61 | |||
FNMA, 3.00%, 9-14-2050 | 1.17 | |||
U.S. Treasury Bond, 1.25%, 5-15-2050 | 0.95 | |||
VanEck Vectors JPMorgan Emerging Markets Local Currency Bond ETF | 0.87 | |||
FNMA, 2.50%, 9-14-2050 | 0.79 | |||
TVA, 5.88%, 4-1-2036 | 0.77 |
The coronavirus made a significant impact.
After years of steady expansion, the U.S. economy received a traumatic shock in 2020 with the arrival of the coronavirus. Public reaction and government-ordered lockdowns resulted in a collapse in economic activity, with the second quarter of 2020 recording a nearly 10% drop in GDP. Unemployment swiftly soared to double digits. Most areas of consumption declined precipitously. Travel and leisure services bore the brunt of the disruption. Spurred by a negative demand shock, prices for many goods declined during the March–April period, pushing most inflation indicators substantially lower.
The Federal Reserve responded to the pandemic with a dramatic easing of monetary policy, setting overnight rate targets to near zero, as well as purchasing bonds for its
own account. A host of credit support measures were put in place to improve the functioning of teetering financial markets. In their actions and rhetoric, the monetary authorities made it clear that an aggressive posture to support the economic and financial markets would be in place as long as needed.
Fiscal policy also responded swiftly to the pandemic in the form of relief payments to the general public as well as extended unemployment benefits. These measures more than offset the loss of income associated with unemployment increases and other wage losses for many people.
Economic activity probably bottomed in late April, and by the end of May, both consumption and employment were turning around. Substantial job gains occurred while claims for unemployment insurance began to subside. Prices generally stabilized, with oil rallying from distressed levels and core inflation measures rebounding from their crisis lows. Stock indices hit new all-time highs over the course of the summer, while Treasury yields remained extremely low. Credit spreads, which widened sharply in the March–April period, narrowed substantially in the ensuing few months.
Please see footnotes on page 7.
8 | Wells Fargo Core Plus Bond Fund
Table of Contents
Performance highlights (unaudited)
Portfolio composition as of August 31, 20207 |
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The Fund increased its overall allocation to out-of-benchmark plus sectors as the period wound down while decreasing allocations to structured products and global developed government debt.
During the period, the Fund increased holdings in U.S. high-yield bonds and emerging market debt. Most of the additions came during the volatility experienced at the beginning of 2020 following coronavirus-related market disruptions. The allocation to investment-grade credit decreased slightly while the Fund’s allocation to the securitized sector decreased after reaching a maximum weight of a little over 44% in February 2020. We came into 2020 near our cyclical low in plus sectors and took advantage of volatility in 2020. We added marginally to emerging markets and maintained overall exposure to
European high yield, European investment grade, and U.S. floating-rate high-yield loans. We continue to have an overweight bias to both U.S. high-yield and investment-grade credit and recently have preferred sectors less prone to continuing issues related to the coronavirus. Spreads recovered meaningfully at the end of the period, and we added credit opportunistically in the new issue investment-grade market, which has provided attractive entry points due to new issue concessions.
As the period came to a close, generally speaking, relative value has deteriorated in emerging market credit as sentiment improved and credit fundamentals continued to deteriorate. We continue to have an overweight allocation to U.S. credit due to somewhat attractive valuations and the positive technical backdrop that has been historically supportive of the asset class. The current overweight is more modest than when spreads were wider earlier in 2020. The lack of appetite for another widespread shutdown likely limits the degree of potential spread widening, and the market will likely look past deteriorating credit metrics and toward a recovery next year amid global policy support. U.S. high yield has rebounded aggressively following coronavirus-related market turmoil, and we continue to monitor allocations and avoid businesses more directly affected by the pandemic.
The outlook is for recovery amid uncertainty.
The outlook holds considerable uncertainty, as the ultimate resolution of the coronavirus pandemic remains unknown. Consumer behavior is likely to have been altered by the crisis, though lower consumption in some areas, such as travel and leisure, could well be offset by higher spending on housing, in-home entertainment, and the like. The upcoming U.S. elections present an additional source of uncertainty, with the potential for meaningful swings in tax, spending, and regulatory policies. Bearing in mind the higher-than-normal degree of uncertainty, we expect the present recovery to continue, albeit at a gradually declining pace, as pent-up demand is satisfied and lingering damage from the pandemic proves difficult to heal. We believe it could take a year or longer to make up for all of the shortfall.
We continue to consistently implement our time-tested process and philosophy to attempt to capitalize on market dislocations. The Fund was near its cyclical low for plus sector (outside the benchmark) exposure at the beginning of 2020, giving us ample flexibility to selectively add risk within the portfolio. In March and April 2020, we exploited market volatility through a number of tactical trades in sectors with significant dislocations. We added to our high-yield exposure early in the quarter, continuing to largely avoid exposure to credits most exposed to coronavirus-related business risks. Within emerging markets, we added modest exposure early in the quarter in longer-maturity and higher-quality Middle East credits that brought new issues at attractive discounts. We continue to see value in certain pockets of risk markets, despite the quick rebound in spreads following the large dislocation in March. Given the unknown pace of coronavirus-related economic disruptions, we continue to believe that security selection along with sector rotation will be the primary sources of future opportunities for the portfolio.
Please see footnotes on page 7.
Wells Fargo Core Plus Bond 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 March 1, 2020 to August 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 3-1-2020 | Ending account value 8-31-2020 | Expenses paid during the period1 | Annualized net expense ratio | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,056.30 | $ | 3.77 | 0.73 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.47 | $ | 3.71 | 0.73 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,051.72 | $ | 7.63 | 1.48 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,017.70 | $ | 7.51 | 1.48 | % | ||||||||
Class R6 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,058.24 | $ | 1.81 | 0.35 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,023.38 | $ | 1.78 | 0.35 | % | ||||||||
Administrator Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,057.01 | $ | 3.21 | 0.62 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.02 | $ | 3.15 | 0.62 | % | ||||||||
Institutional Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,058.00 | $ | 2.07 | 0.40 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,023.13 | $ | 2.03 | 0.40 | % |
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 Core Plus Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities: 12.41% | ||||||||||||||||
FHLB | 3.00 | % | 9-1-2034 | $ | 1,144,965 | $ | 1,201,267 | |||||||||
FHLMC | 4.00 | 5-1-2049 | 5,907,900 | 6,291,801 | ||||||||||||
FHLMC (12 Month LIBOR +1.33%) ± | 3.37 | 1-1-2036 | 10,546 | 10,909 | ||||||||||||
FHLMC | 3.50 | 12-1-2045 | 2,262,792 | 2,413,749 | ||||||||||||
FHLMC | 3.50 | 12-1-2045 | 861,308 | 924,949 | ||||||||||||
FHLMC | 4.00 | 6-1-2044 | 1,679,950 | 1,831,376 | ||||||||||||
FHLMC | 5.00 | 6-1-2036 | 174,379 | 200,898 | ||||||||||||
FHLMC | 5.00 | 8-1-2040 | 170,763 | 196,846 | ||||||||||||
FHLMC | 5.50 | 8-1-2038 | 41,937 | 48,516 | ||||||||||||
FHLMC | 5.50 | 12-1-2038 | 376,053 | 435,567 | ||||||||||||
FHLMC | 5.50 | 6-1-2040 | 571,003 | 653,631 | ||||||||||||
FHLMC | 6.75 | 9-15-2029 | 5,910,000 | 8,877,369 | ||||||||||||
FHLMC | 8.00 | 2-1-2030 | 159 | 187 | ||||||||||||
FHLMC Series 2015-SC01 Class 1A | 3.50 | 5-25-2045 | 480,328 | 490,711 | ||||||||||||
FHLMC Series 3774 Class AB | 3.50 | 12-15-2020 | 4,370 | 4,382 | ||||||||||||
FHLMC Series 4753 Class KB | 3.50 | 6-15-2042 | 1,612,362 | 1,640,034 | ||||||||||||
FHLMC Series K020 Class X1 ±±(c) | 1.49 | 5-25-2022 | 12,442,914 | 235,429 | ||||||||||||
FHLMC Series T-42 Class A5 | 7.50 | 2-25-2042 | 1,242,487 | 1,535,004 | ||||||||||||
FHLMC Series T-57 Class 2A1 ±± | 3.87 | 7-25-2043 | 36,030 | 38,340 | ||||||||||||
FHLMC Series T-59 Class 2A1 ±± | 3.73 | 10-25-2043 | 188,539 | 226,602 | ||||||||||||
FNMA | 3.50 | 3-1-2048 | 8,787,231 | 9,295,124 | ||||||||||||
FNMA (12 Month LIBOR +1.61%) ± | 2.46 | 5-1-2046 | 844,294 | 873,937 | ||||||||||||
FNMA %% | 2.50 | 9-14-2050 | 9,730,000 | 10,241,205 | ||||||||||||
FNMA (12 Month LIBOR +1.61%) ± | 2.53 | 3-1-2046 | 937,084 | 970,303 | ||||||||||||
FNMA | 3.00 | 11-1-2045 | 1,448,915 | 1,533,020 | ||||||||||||
FNMA | 3.00 | 12-1-2045 | 3,681,389 | 3,902,284 | ||||||||||||
FNMA | 3.00 | 12-1-2046 | 1,823,667 | 1,930,714 | ||||||||||||
FNMA %% | 3.00 | 9-14-2050 | 14,275,000 | 15,054,549 | ||||||||||||
FNMA | 3.02 | 2-1-2026 | 3,102,030 | 3,415,351 | ||||||||||||
FNMA | 3.27 | 7-1-2022 | 1,160,454 | 1,202,467 | ||||||||||||
FNMA (12 Month LIBOR +1.78%) ± | 3.40 | 8-1-2036 | 19,616 | 20,597 | ||||||||||||
FNMA | 3.48 | 3-1-2029 | 979,551 | 1,139,160 | ||||||||||||
FNMA | 3.50 | 10-1-2043 | 857,408 | 927,552 | ||||||||||||
FNMA | 3.50 | 4-1-2045 | 183,011 | 195,489 | ||||||||||||
FNMA | 3.50 | 8-1-2045 | 4,065,873 | 4,335,538 | ||||||||||||
FNMA | 3.62 | 3-1-2029 | 443,000 | 522,898 | ||||||||||||
FNMA | 3.63 | 3-1-2029 | 1,242,447 | 1,452,290 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.26%) ± | 3.69 | 8-1-2036 | 510,840 | 538,286 | ||||||||||||
FNMA | 3.77 | 3-1-2029 | 981,733 | 1,155,860 | ||||||||||||
FNMA | 3.77 | 3-1-2029 | 1,069,490 | 1,258,242 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.27%) ± | 3.90 | 1-1-2036 | 25,141 | 26,483 | ||||||||||||
FNMA | 3.95 | 9-1-2021 | 387,886 | 395,093 | ||||||||||||
FNMA (12 Month LIBOR +1.73%) ± | 3.98 | 9-1-2036 | 11,680 | 12,234 | ||||||||||||
FNMA | 4.00 | 2-1-2046 | 338,158 | 364,801 | ||||||||||||
FNMA | 4.00 | 4-1-2046 | 1,901,976 | 2,067,689 | ||||||||||||
FNMA | 4.00 | 6-1-2048 | 3,508,863 | 3,743,207 | ||||||||||||
FNMA | 4.00 | 2-1-2050 | 5,519,461 | 5,884,082 | ||||||||||||
FNMA | 4.50 | 11-1-2048 | 3,538,460 | 3,823,829 | ||||||||||||
FNMA | 5.00 | 1-1-2024 | 28,791 | 30,365 | ||||||||||||
FNMA | 5.00 | 2-1-2036 | 18,725 | 21,537 | ||||||||||||
FNMA | 5.00 | 6-1-2040 | 62,590 | 71,836 | ||||||||||||
FNMA | 5.00 | 8-1-2040 | 1,138,384 | 1,311,013 | ||||||||||||
FNMA | 5.50 | 11-1-2023 | 22,041 | 23,219 | ||||||||||||
FNMA | 5.50 | 8-1-2034 | 68,716 | 80,911 | ||||||||||||
FNMA | 5.50 | 2-1-2035 | 20,925 | 24,629 | ||||||||||||
FNMA | 5.50 | 8-1-2038 | 97,154 | 107,531 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Core Plus Bond Fund | 11
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA | 5.50 | % | 8-1-2038 | $ | 177,413 | $ | 196,518 | |||||||||
FNMA | 6.00 | 10-1-2037 | 398,287 | 466,379 | ||||||||||||
FNMA | 6.00 | 11-1-2037 | 25,402 | 29,986 | ||||||||||||
FNMA | 6.50 | 7-1-2036 | 18,864 | 21,949 | ||||||||||||
FNMA | 6.50 | 7-1-2036 | 7,541 | 8,936 | ||||||||||||
FNMA | 6.50 | 11-1-2036 | 3,620 | 4,129 | ||||||||||||
FNMA | 6.63 | 11-15-2030 | 5,015,000 | 7,692,627 | ||||||||||||
FNMA | 7.00 | 12-1-2022 | 48,480 | 49,503 | ||||||||||||
FNMA | 7.00 | 7-1-2036 | 5,574 | 5,858 | ||||||||||||
FNMA | 7.00 | 11-1-2037 | 3,168 | 3,644 | ||||||||||||
FNMA | 7.50 | 5-1-2038 | 1,860 | 1,884 | ||||||||||||
FNMA Series 2002-T12 Class A3 | 7.50 | 5-25-2042 | 5,320 | 6,423 | ||||||||||||
FNMA Series 2003-W08 Class 4A ±± | 4.04 | 11-25-2042 | 107,232 | 114,774 | ||||||||||||
FNMA Series 2003-W14 Class 2A ±± | 3.55 | 6-25-2045 | 70,532 | 75,246 | ||||||||||||
FNMA Series 2003-W14 Class 2A ±± | 4.22 | 1-25-2043 | 174,802 | 184,344 | ||||||||||||
FNMA Series 2004-W11 Class 1A3 | 7.00 | 5-25-2044 | 907,334 | 1,049,001 | ||||||||||||
FNMA Series 2004-W15 Class 1A3 | 7.00 | 8-25-2044 | 442,521 | 536,876 | ||||||||||||
GNMA | 3.00 | 11-20-2045 | 2,962,424 | 3,132,560 | ||||||||||||
GNMA %% | 3.00 | 9-21-2050 | 8,420,000 | 8,865,997 | ||||||||||||
GNMA | 3.50 | 9-20-2047 | 2,174,284 | 2,319,597 | ||||||||||||
GNMA | 3.50 | 12-20-2047 | 4,599,535 | 4,899,651 | ||||||||||||
GNMA | 4.00 | 12-20-2047 | 2,483,954 | 2,671,197 | ||||||||||||
GNMA | 4.50 | 8-20-2049 | 1,047,483 | 1,123,898 | ||||||||||||
GNMA | 5.00 | 7-20-2040 | 419,383 | 477,041 | ||||||||||||
GNMA | 7.50 | 12-15-2029 | 584 | 665 | ||||||||||||
GNMA Series 2008-22 Class XM ±±(c) | 1.11 | 2-16-2050 | 808,750 | 20,180 | ||||||||||||
International Development Finance Corporation | 2.12 | 3-20-2024 | 4,635,000 | 4,822,005 | ||||||||||||
STRIPS ¤ | 0.00 | 5-15-2044 | 9,270,000 | 6,385,464 | ||||||||||||
TVA | 5.88 | 4-1-2036 | 6,400,000 | 9,971,123 | ||||||||||||
Total Agency Securities (Cost $151,489,114) |
| 160,348,347 | ||||||||||||||
|
| |||||||||||||||
Asset-Backed Securities: 5.00% |
| |||||||||||||||
Ally Auto Receivables Trust Series 2019-1 Class A3 | 2.91 | 9-15-2023 | 4,945,000 | 5,054,612 | ||||||||||||
California Republic Auto Receivables Trust Series 2017-1 Class A4 | 2.28 | 6-15-2022 | 1,299,620 | 1,303,666 | ||||||||||||
Daimler Trucks Retail Trust Series 2018-1 Class A3 144A | 2.85 | 7-15-2021 | 89,501 | 89,578 | ||||||||||||
Daimler Trucks Retail Trust Series 2018-1 Class A4 144A | 3.03 | 11-15-2024 | 5,000,000 | 5,026,809 | ||||||||||||
Educational Services of America Series 2015-1 Class A (1 Month LIBOR +0.80%) 144A± | 0.98 | 10-25-2056 | 819,031 | 798,796 | ||||||||||||
Exeter Automobile Receivables Trust Series 2018-1A Class C1 144A | 3.03 | 1-17-2023 | 1,695,601 | 1,706,725 | ||||||||||||
Finance of America HECM Buyout Series 2020-HB2 Class A 144A±± | 1.71 | 7-25-2030 | 6,861,285 | 6,860,367 | ||||||||||||
Five Guys Funding LLC Series 17-1A Class A2 144A | 4.60 | 7-25-2047 | 1,597,925 | 1,608,298 | ||||||||||||
Flagship Credit Auto Trust Series 2019-4 Class A 144A | 2.17 | 6-17-2024 | 3,506,708 | 3,562,559 | ||||||||||||
GM Financial Consumer Automobile Receivables Trust Series 2017-2A Class A3 144A | 1.86 | 12-16-2021 | 741,727 | 743,156 | ||||||||||||
Hertz Vehicle Financing LLC Series 2015-3A Class A 144A | 2.67 | 9-25-2021 | 1,030,239 | 1,031,639 | ||||||||||||
Hertz Vehicle Financing LLC Series 2016-2A Class A2 144A | 2.95 | 3-25-2022 | 3,403,182 | 3,409,155 | ||||||||||||
Hertz Vehicle Financing LLC Series 2017-2A Class A 144A | 3.29 | 10-25-2023 | 1,310,431 | 1,310,499 | ||||||||||||
Hertz Vehicle Financing LLC Series 2018-1A Class A 144A | 3.29 | 2-25-2024 | 1,422,340 | 1,423,100 | ||||||||||||
Hertz Vehicle Financing LLC Series 2018-2A Class A 144A | 3.65 | 6-27-2022 | 940,076 | 939,317 | ||||||||||||
Hertz Vehicle Financing LLC Series 2019-1A Class A 144A | 3.71 | 3-25-2023 | 1,728,494 | 1,729,024 | ||||||||||||
MMAF Equipment Finance LLC Series 2017-AA Class A4 144A | 2.41 | 8-16-2024 | 1,975,000 | 2,007,168 | ||||||||||||
MMAF Equipment Finance LLC Series 2019-A Class A2 144A | 2.84 | 1-10-2022 | 917,445 | 924,854 | ||||||||||||
Oscar US Funding Trust Series 2016-2A Class A4 144A | 2.99 | 12-15-2023 | 2,369,844 | 2,383,299 | ||||||||||||
SLM Student Loan Trust Series 2004-1 Class A4 (3 Month LIBOR +0.26%) ± | 0.50 | 10-27-2025 | 959,094 | 950,711 | ||||||||||||
South Carolina Student Loan Corporation Series 2014-1 Class A1 (1 Month LIBOR +0.75%) ± | 0.91 | 5-1-2030 | 2,245,841 | 2,229,724 |
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Core Plus Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Asset-Backed Securities (continued) | ||||||||||||||||
Student Loan Consolidation Center Series 2011-1 Class A (1 Month LIBOR +1.22%) 144A± | 1.40 | % | 10-25-2027 | $ | 879,834 | $ | 883,380 | |||||||||
TCF Auto Receivables Owner Trust Series 2016-1A Class A4 144A | 2.03 | 2-15-2022 | 23,137 | 23,149 | ||||||||||||
Towd Point Asset Funding LLC Series 2019-HE1 Class A1 (1 Month LIBOR +0.90%) 144A± | 1.08 | 4-25-2048 | 2,048,452 | 2,033,604 | ||||||||||||
Towd Point Asset Trust Series 2018-SL1 Class A (1 Month LIBOR +0.60%) 144A± | 0.78 | 1-25-2046 | 2,053,128 | 2,015,791 | ||||||||||||
Toyota Auto Receivables Owner Trust Series 2017-D Class A4 | 2.12 | 2-15-2023 | 8,088,000 | 8,214,442 | ||||||||||||
Volvo Financial Equipment LLC Series 2018-AA Class A (1 Month LIBOR +0.52%) 144A± | 0.68 | 7-17-2023 | 2,590,000 | 2,581,901 | ||||||||||||
Westlake Automobile Receivables Trust Series 2019-1A Class A2A 144A | 3.06 | 5-16-2022 | 431,152 | 432,792 | ||||||||||||
Westlake Automobile Receivables Trust Series 2019-2A Class A2A 144A | 2.57 | 2-15-2023 | 3,022,006 | 3,045,035 | ||||||||||||
Wheels SPV LLC Series 2018-1A Class A2 144A | 3.06 | 4-20-2027 | 368,325 | 370,614 | ||||||||||||
Total Asset-Backed Securities (Cost $64,190,947) | 64,693,764 | |||||||||||||||
|
| |||||||||||||||
Corporate Bonds and Notes: 27.20% | ||||||||||||||||
Communication Services: 2.70% | ||||||||||||||||
Diversified Telecommunication Services: 0.18% | ||||||||||||||||
AT&T Incorporated | 4.75 | 5-15-2046 | 1,975,000 | 2,357,818 | ||||||||||||
|
| |||||||||||||||
Media: 1.78% | ||||||||||||||||
CCO Holdings LLC 144A | 4.50 | 8-15-2030 | 1,500,000 | 1,591,875 | ||||||||||||
Charter Communications Operating LLC | 6.48 | 10-23-2045 | 655,000 | 874,961 | ||||||||||||
Cinemark Incorporated | 5.13 | 12-15-2022 | 2,000,000 | 1,875,000 | ||||||||||||
Comcast Corporation | 4.70 | 10-15-2048 | 1,800,000 | 2,408,737 | ||||||||||||
Communications Finance Incorporated | 6.88 | 9-1-2027 | 75,000 | 77,625 | ||||||||||||
CSC Holdings LLC 144A | 5.75 | 1-15-2030 | 2,000,000 | 2,180,000 | ||||||||||||
Diamond Sports Group LLC 144A | 6.63 | 8-15-2027 | 2,040,000 | 1,147,500 | ||||||||||||
Discovery Incorporated | 5.30 | 5-15-2049 | 385,000 | 471,054 | ||||||||||||
Discovery Incorporated | 6.35 | 6-1-2040 | 1,550,000 | 2,077,379 | ||||||||||||
DISH Network Corporation | 3.38 | 8-15-2026 | 2,500,000 | 2,465,685 | ||||||||||||
Gray Television Incorporated 144A | 7.00 | 5-15-2027 | 2,000,000 | 2,170,000 | ||||||||||||
Nexstar Broadcasting Incorporated 144A | 5.63 | 7-15-2027 | 45,000 | 47,475 | ||||||||||||
Nielsen Finance LLC 144A | 5.00 | 4-15-2022 | 2,000,000 | 2,001,900 | ||||||||||||
Sirius XM Radio Incorporated 144A | 5.50 | 7-1-2029 | 2,000,000 | 2,196,560 | ||||||||||||
ViacomCBS Incorporated | 4.75 | 5-15-2025 | 1,200,000 | 1,385,237 | ||||||||||||
22,970,988 | ||||||||||||||||
|
| |||||||||||||||
Wireless Telecommunication Services: 0.74% | ||||||||||||||||
Crown Castle Towers LLC 144A | 3.22 | 5-15-2042 | 2,600,000 | 2,639,473 | ||||||||||||
SBA Tower Trust 144A | 3.72 | 4-9-2048 | 1,968,000 | 2,037,763 | ||||||||||||
Sprint Spectrum Company 144A | 4.74 | 9-20-2029 | 3,930,000 | 4,262,517 | ||||||||||||
Sprint Spectrum Company 144A | 5.15 | 9-20-2029 | 530,000 | 623,068 | ||||||||||||
9,562,821 | ||||||||||||||||
|
| |||||||||||||||
Consumer Discretionary: 2.40% |
| |||||||||||||||
Auto Components: 0.12% | ||||||||||||||||
Panther BF Aggregator 2 LP 144A | 6.25 | 5-15-2026 | 1,500,000 | 1,590,938 | ||||||||||||
�� |
|
| ||||||||||||||
Automobiles: 0.52% | ||||||||||||||||
Ford Motor Company | 9.00 | 4-22-2025 | 4,720,000 | 5,523,651 | ||||||||||||
General Motors Company | 5.95 | 4-1-2049 | 985,000 | 1,157,423 | ||||||||||||
6,681,074 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Core Plus Bond Fund | 13
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Hotels, Restaurants & Leisure: 0.50% | ||||||||||||||||
Darden Restaurants Incorporated | 3.85 | % | 5-1-2027 | $ | 2,005,000 | $ | 2,066,585 | |||||||||
Las Vegas Sands Corporation | 3.90 | 8-8-2029 | 3,000,000 | 3,030,972 | ||||||||||||
Royal Caribbean Cruises | 4.25 | 6-15-2023 | 1,150,000 | 1,396,410 | ||||||||||||
6,493,967 | ||||||||||||||||
|
| |||||||||||||||
Household Durables: 0.17% | ||||||||||||||||
KB Home Company | 4.80 | 11-15-2029 | 2,000,000 | 2,165,000 | ||||||||||||
|
| |||||||||||||||
Multiline Retail: 0.38% | ||||||||||||||||
Kohl’s Corporation | 9.50 | 5-15-2025 | 765,000 | 920,949 | ||||||||||||
Macy’s Retail Holdings Incorporated | 3.45 | 1-15-2021 | 3,940,000 | 3,920,300 | ||||||||||||
4,841,249 | ||||||||||||||||
|
| |||||||||||||||
Specialty Retail: 0.36% | ||||||||||||||||
Asbury Automotive Group Incorporated 144A | 4.50 | 3-1-2028 | 45,000 | 46,013 | ||||||||||||
Asbury Automotive Group Incorporated 144A | 4.75 | 3-1-2030 | 1,662,000 | 1,722,430 | ||||||||||||
Group 1 Automotive Incorporated 144A | 4.00 | 8-15-2028 | 400,000 | 399,088 | ||||||||||||
Lowe’s Companies Incorporated | 5.13 | 4-15-2050 | 1,105,000 | 1,522,572 | ||||||||||||
Michaels Stores Incorporated 144A« | 8.00 | 7-15-2027 | 1,000,000 | 1,010,000 | ||||||||||||
4,700,103 | ||||||||||||||||
|
| |||||||||||||||
Textiles, Apparel & Luxury Goods: 0.35% | ||||||||||||||||
Coach Incorporated | 4.25 | 4-1-2025 | 1,000,000 | 1,023,026 | ||||||||||||
Levi Strauss & Company | 5.00 | 5-1-2025 | 2,000,000 | 2,045,000 | ||||||||||||
Tapestry Incorporated | 4.13 | 7-15-2027 | 1,500,000 | 1,464,000 | ||||||||||||
4,532,026 | ||||||||||||||||
|
| |||||||||||||||
Consumer Staples: 0.74% |
| |||||||||||||||
Beverages: 0.17% | ||||||||||||||||
Anheuser-Busch InBev Worldwide Incorporated | 4.60 | 4-15-2048 | 1,810,000 | 2,152,943 | ||||||||||||
|
| |||||||||||||||
Food & Staples Retailing: 0.15% | ||||||||||||||||
Walgreens Boots Alliance | 4.10 | 4-15-2050 | 1,925,000 | 1,932,466 | ||||||||||||
|
| |||||||||||||||
Food Products: 0.12% | ||||||||||||||||
Kraft Heinz Foods Company 144A | 4.88 | 10-1-2049 | 1,430,000 | 1,569,572 | ||||||||||||
|
| |||||||||||||||
Tobacco: 0.30% | ||||||||||||||||
Altria Group Incorporated | 1.70 | 6-15-2025 | 2,000,000 | 2,504,245 | ||||||||||||
Altria Group Incorporated | 5.95 | 2-14-2049 | 590,000 | 797,314 | ||||||||||||
Reynolds American Incorporated | 7.00 | 8-4-2041 | 450,000 | 606,001 | ||||||||||||
3,907,560 | ||||||||||||||||
|
| |||||||||||||||
Energy: 4.15% |
| |||||||||||||||
Energy Equipment & Services: 0.23% | ||||||||||||||||
Diamond Offshore Drilling Incorporated † | 7.88 | 8-15-2025 | 1,250,000 | 125,000 | ||||||||||||
Hilcorp Energy Company 144A | 6.25 | 11-1-2028 | 1,900,000 | 1,786,000 | ||||||||||||
USA Compression Partners LP | 6.88 | 4-1-2026 | 1,000,000 | 1,030,000 | ||||||||||||
2,941,000 | ||||||||||||||||
|
| |||||||||||||||
Oil, Gas & Consumable Fuels: 3.92% | ||||||||||||||||
Antero Midstream Partners LP 144A | 5.75 | 1-15-2028 | 2,300,000 | 2,033,085 | ||||||||||||
Apache Corporation | 5.35 | 7-1-2049 | 2,250,000 | 2,170,103 |
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Core Plus Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||||||||
Archrock Partners LP 144A | 6.88 | % | 4-1-2027 | $ | 1,300,000 | $ | 1,339,000 | |||||||||
Baker Hughes Holdings LLC | 4.49 | 5-1-2030 | 785,000 | 918,941 | ||||||||||||
Boardwalk Pipelines LP | 3.40 | 2-15-2031 | 2,355,000 | 2,379,493 | ||||||||||||
Boardwalk Pipelines LP | 4.80 | 5-3-2029 | 1,620,000 | 1,789,294 | ||||||||||||
Buckeye Partners LP | 4.13 | 12-1-2027 | 1,300,000 | 1,300,000 | ||||||||||||
Cheniere Energy Partners LP | 4.50 | 10-1-2029 | 2,445,000 | 2,541,749 | ||||||||||||
Crestwood Midstream Partners LP 144A | 5.63 | 5-1-2027 | 2,300,000 | 2,110,250 | ||||||||||||
Denbury Resources Incorporated 144A† | 9.25 | 3-31-2022 | 1,250,000 | 625,000 | ||||||||||||
Energy Transfer Operating Partners LP | 6.13 | 12-15-2045 | 1,330,000 | 1,350,263 | ||||||||||||
EnLink Midstream Partners LP | 4.15 | 6-1-2025 | 1,000,000 | 891,220 | ||||||||||||
EnLink Midstream Partners LP | 5.45 | 6-1-2047 | 1,100,000 | 719,180 | ||||||||||||
Enviva Partners LP 144A | 6.50 | 1-15-2026 | 2,130,000 | 2,268,003 | ||||||||||||
EQT Corporation | 1.75 | 5-1-2026 | 1,750,000 | 2,238,997 | ||||||||||||
EQT Corporation | 3.90 | 10-1-2027 | 2,270,000 | 2,182,469 | ||||||||||||
Harvest Midstream I LP 144A | 7.50 | 9-1-2028 | 275,000 | 284,664 | ||||||||||||
Indigo Natural Resources LLC 144A | 6.88 | 2-15-2026 | 2,685,000 | 2,745,413 | ||||||||||||
Marathon Petroleum Corporation | 4.50 | 4-1-2048 | 3,295,000 | 3,515,698 | ||||||||||||
Murphy Oil Corporation | 5.88 | 12-1-2027 | 2,050,000 | 1,969,271 | ||||||||||||
Nabors Industries Incorporated « | 4.63 | 9-15-2021 | 198,000 | 160,255 | ||||||||||||
New Fortress Energy Incorporated 144A%% | 6.75 | 9-15-2025 | 235,000 | 237,982 | ||||||||||||
Oasis Petroleum Incorporated 144A | 6.25 | 5-1-2026 | 1,250,000 | 225,000 | ||||||||||||
Occidental Petroleum Corporation | 8.88 | 7-15-2030 | 2,100,000 | 2,373,000 | ||||||||||||
ONEOK Incorporated | 7.15 | 1-15-2051 | 2,070,000 | 2,491,543 | ||||||||||||
Plains All American Pipeline LP | 3.80 | 9-15-2030 | 3,215,000 | 3,233,501 | ||||||||||||
QEP Resources Incorporated | 5.38 | 10-1-2022 | 650,000 | 568,750 | ||||||||||||
Rockies Express Pipeline LLC 144A | 4.95 | 7-15-2029 | 1,975,000 | 1,982,406 | ||||||||||||
Sabine Pass Liquefaction LLC 144A | 4.50 | 5-15-2030 | 1,235,000 | 1,413,835 | ||||||||||||
Southern Star Central Corporation 144A | 5.13 | 7-15-2022 | 652,000 | 651,194 | ||||||||||||
Southwestern Energy Company | 7.75 | 10-1-2027 | 1,250,000 | 1,278,250 | ||||||||||||
Western Midstream Operating LP | 6.25 | 2-1-2050 | 225,000 | 225,320 | ||||||||||||
Whiting Petroleum Corporation † | 1.25 | 4-1-2020 | 2,000,000 | 460,000 | ||||||||||||
50,673,129 | ||||||||||||||||
|
| |||||||||||||||
Financials: 8.21% |
| |||||||||||||||
Banks: 1.97% | ||||||||||||||||
Bank of America Corporation (3 Month LIBOR +0.64%) ± | 2.02 | 2-13-2026 | 5,000,000 | 5,209,906 | ||||||||||||
Bank of America Corporation (U.S. SOFR +1.93%) ± | 2.68 | 6-19-2041 | 1,610,000 | 1,637,646 | ||||||||||||
Bank of America Corporation | 3.95 | 4-21-2025 | 1,170,000 | 1,316,113 | ||||||||||||
Bank of America Corporation (3 Month LIBOR +3.90%) ± | 6.10 | 12-29-2049 | 2,590,000 | 2,906,110 | ||||||||||||
Citigroup Incorporated (U.S. SOFR +1.15%) ± | 2.67 | 1-29-2031 | 5,250,000 | 5,590,065 | ||||||||||||
Citigroup Incorporated (3 Month LIBOR +4.52%) ± | 6.25 | 12-29-2049 | 1,030,000 | 1,169,050 | ||||||||||||
JPMorgan Chase & Company (3 Month LIBOR +3.25%) ± | 5.15 | 12-29-2049 | 3,625,000 | 3,669,567 | ||||||||||||
PNC Financial Services (3 Month LIBOR +3.30%) ± | 5.00 | 12-29-2049 | 565,000 | 601,725 | ||||||||||||
Santander Holdings USA Incorporated | 3.24 | 10-5-2026 | 1,125,000 | 1,196,416 | ||||||||||||
Truist Financial Corporation (5 Year Treasury Constant Maturity +4.61%) ±(s) | 4.95 | 9-1-2025 | 2,015,000 | 2,180,976 | ||||||||||||
25,477,574 | ||||||||||||||||
|
| |||||||||||||||
Capital Markets: 2.05% | ||||||||||||||||
Bank of NY Mellon Corporation (5 Year Treasury Constant Maturity +4.36%) ±(s) | 4.70 | 9-20-2025 | 3,100,000 | 3,366,600 | ||||||||||||
Blackstone Holdings Finance Company LLC 144A | 2.50 | 1-10-2030 | 5,500,000 | 5,898,111 | ||||||||||||
Blackstone Holdings Finance Company LLC 144A | 5.00 | 6-15-2044 | 1,015,000 | 1,300,227 | ||||||||||||
Charles Schwab Corporation (5 Year Treasury Constant Maturity +4.97%) ±(s) | 5.38 | 6-1-2025 | 3,905,000 | 4,285,738 | ||||||||||||
Goldman Sachs Group Incorporated (3 Month LIBOR +0.82%) ± | 2.88 | 10-31-2022 | 1,910,000 | 1,959,820 | ||||||||||||
Morgan Stanley | 3.70 | 10-23-2024 | 3,235,000 | 3,611,408 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Core Plus Bond Fund | 15
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Capital Markets (continued) | ||||||||||||||||
Morgan Stanley (U.S. SOFR +4.84%) ± | 5.60 | % | 3-24-2051 | $ | 2,660,000 | $ | 4,087,800 | |||||||||
S&P Global Incorporated | 1.25 | 8-15-2030 | 2,000,000 | 1,974,417 | ||||||||||||
26,484,121 | ||||||||||||||||
|
| |||||||||||||||
Consumer Finance: 1.83% | ||||||||||||||||
Aviation Capital Group LLC 144A | 5.50 | 12-15-2024 | 1,785,000 | 1,835,670 | ||||||||||||
ERAC USA Finance LLC 144A | 4.50 | 2-15-2045 | 1,695,000 | 1,895,911 | ||||||||||||
General Motors Financial Company Incorporated | 2.70 | 8-20-2027 | 6,210,000 | 6,200,442 | ||||||||||||
General Motors Financial Company Incorporated | 5.65 | 1-17-2029 | 730,000 | 857,564 | ||||||||||||
Harley Davidson Financial Services Company 144A | 3.35 | 6-8-2025 | 2,855,000 | 3,029,759 | ||||||||||||
Hyundai Capital America 144A | 2.65 | 2-10-2025 | 5,810,000 | 6,034,512 | ||||||||||||
Springleaf Finance Corporation | 7.13 | 3-15-2026 | 1,500,000 | 1,721,243 | ||||||||||||
Synchrony Financial | 2.85 | 7-25-2022 | 2,000,000 | 2,059,083 | ||||||||||||
23,634,184 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 0.37% | ||||||||||||||||
KKR Group Finance Company LLC 144A | 5.13 | 6-1-2044 | 1,960,000 | 2,423,043 | ||||||||||||
WEA Finance LLC 144A | 2.88 | 1-15-2027 | 2,390,000 | 2,377,835 | ||||||||||||
4,800,878 | ||||||||||||||||
|
| |||||||||||||||
Insurance: 1.79% | ||||||||||||||||
Athene Global Funding 144A | 2.95 | 11-12-2026 | 3,550,000 | 3,739,242 | ||||||||||||
Axis Specialty Finance LLC (5 Year Treasury Constant Maturity +3.19%) ± | 4.90 | 1-15-2040 | 5,105,000 | 5,007,685 | ||||||||||||
Brighthouse Financial Incorporated | 4.70 | 6-22-2047 | 1,955,000 | 1,877,377 | ||||||||||||
Genworth Mortgage Holdings LLC 144A | 6.50 | 8-15-2025 | 85,000 | 89,396 | ||||||||||||
Guardian Life Insurance Company 144A | 3.70 | 1-22-2070 | 1,500,000 | 1,611,823 | ||||||||||||
Guardian Life Insurance Company 144A | 4.85 | 1-24-2077 | 1,045,000 | 1,386,140 | ||||||||||||
Lincoln National Corporation | 4.38 | 6-15-2050 | 1,000,000 | 1,164,030 | ||||||||||||
National Life Global Insurance Company (3 Month LIBOR +3.31%) 144A± | 5.25 | 7-19-2068 | 1,668,000 | 1,772,610 | ||||||||||||
New York Life Insurance Company 144A | 3.75 | 5-15-2050 | 1,670,000 | 1,891,130 | ||||||||||||
PartnerRe Finance II Incorporated (3 Month LIBOR +2.33%) ± | 2.68 | 12-1-2066 | 1,345,000 | 998,109 | ||||||||||||
Transatlantic Holdings Incorporated | 8.00 | 11-30-2039 | 2,329,000 | 3,622,388 | ||||||||||||
23,159,930 | ||||||||||||||||
|
| |||||||||||||||
Thrifts & Mortgage Finance: 0.19% | ||||||||||||||||
Ladder Capital Finance Holdings LP 144A | 4.25 | 2-1-2027 | 525,000 | 481,688 | ||||||||||||
Ladder Capital Finance Holdings LP 144A | 5.25 | 10-1-2025 | 2,125,000 | 2,018,750 | ||||||||||||
2,500,438 | ||||||||||||||||
|
| |||||||||||||||
Health Care: 1.15% |
| |||||||||||||||
Biotechnology: 0.16% | ||||||||||||||||
AbbVie Incorporated 144A | 2.95 | 11-21-2026 | 1,825,000 | 2,007,190 | ||||||||||||
|
| |||||||||||||||
Health Care Providers & Services: 0.99% | ||||||||||||||||
CommonSpirit Health | 2.95 | 11-1-2022 | 1,250,000 | 1,302,504 | ||||||||||||
CommonSpirit Health AGM Insured | 3.82 | 10-1-2049 | 1,810,000 | 2,021,395 | ||||||||||||
CVS Health Corporation | 4.25 | 4-1-2050 | 1,310,000 | 1,552,937 | ||||||||||||
Dignity Health | 3.81 | 11-1-2024 | 2,000,000 | 2,135,528 | ||||||||||||
HCA Incorporated | 3.50 | 9-1-2030 | 2,000,000 | 2,097,455 | ||||||||||||
Highmark Incorporated 144A | 6.13 | 5-15-2041 | 710,000 | 902,340 | ||||||||||||
Magellan Health Incorporated | 4.90 | 9-22-2024 | 2,710,000 | 2,818,400 | ||||||||||||
12,830,559 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Core Plus Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Industrials: 3.19% |
| |||||||||||||||
Aerospace & Defense: 0.38% | ||||||||||||||||
The Boeing Company | 5.81 | % | 5-1-2050 | $ | 2,490,000 | $ | 2,974,579 | |||||||||
TransDigm Incorporated | 5.50 | 11-15-2027 | 2,000,000 | 1,952,400 | ||||||||||||
4,926,979 | ||||||||||||||||
|
| |||||||||||||||
Airlines: 1.12% | ||||||||||||||||
Alaska Airlines 144A | 4.80 | 2-15-2029 | 2,855,000 | 2,982,785 | ||||||||||||
Delta Air Lines Incorporated | 2.00 | 12-10-2029 | 3,725,000 | 3,613,730 | ||||||||||||
Delta Air Lines Incorporated | 7.38 | 1-15-2026 | 3,000,000 | 3,121,556 | ||||||||||||
Delta Airlines Pass-Through Certificates Series 2015-B | 4.25 | 1-30-2025 | 2,065,085 | 1,895,217 | ||||||||||||
JetBlue Airways Corporation | 4.00 | 5-15-2034 | 2,000,000 | 2,055,012 | ||||||||||||
Mileage Plus Holdings LLC 144A | 6.50 | 6-20-2027 | 750,000 | 781,875 | ||||||||||||
14,450,175 | ||||||||||||||||
|
| |||||||||||||||
Building Products: 0.17% | ||||||||||||||||
Builders Firstsource Incorporated 144A | 5.00 | 3-1-2030 | 2,000,000 | 2,135,000 | ||||||||||||
|
| |||||||||||||||
Commercial Services & Supplies: 0.27% | ||||||||||||||||
Covanta Holding Corporation | 6.00 | 1-1-2027 | 900,000 | 941,742 | ||||||||||||
KAR Auction Services Incorporated 144A | 5.13 | 6-1-2025 | 2,500,000 | 2,518,750 | ||||||||||||
3,460,492 | ||||||||||||||||
|
| |||||||||||||||
Construction & Engineering: 0.01% | ||||||||||||||||
Pike Corporation 144A | 5.50 | 9-1-2028 | 115,000 | 115,575 | ||||||||||||
|
| |||||||||||||||
Electrical Equipment: 0.01% | ||||||||||||||||
Sensata Technologies Incorporated 144A | 3.75 | 2-15-2031 | 180,000 | 179,550 | ||||||||||||
|
| |||||||||||||||
Industrial Conglomerates: 0.16% | ||||||||||||||||
General Electric Company | 4.35 | 5-1-2050 | 2,070,000 | 2,103,240 | ||||||||||||
|
| |||||||||||||||
Machinery: 0.35% | ||||||||||||||||
IDEX Corporation | 3.00 | 5-1-2030 | 4,135,000 | 4,529,729 | ||||||||||||
|
| |||||||||||||||
Trading Companies & Distributors: 0.24% | ||||||||||||||||
Fortress Transportation & Infrastructure Investors LLC 144A | 6.50 | 10-1-2025 | 1,500,000 | 1,455,000 | ||||||||||||
Fortress Transportation & Infrastructure Investors LLC 144A | 9.75 | 8-1-2027 | 110,000 | 117,290 | ||||||||||||
United Rentals North America Incorporated | 4.00 | 7-15-2030 | 1,500,000 | 1,567,500 | ||||||||||||
3,139,790 | ||||||||||||||||
|
| |||||||||||||||
Transportation Infrastructure: 0.48% | ||||||||||||||||
Toll Road Investors Partnership II LP 144A¤ | 0.00 | 2-15-2027 | 1,050,000 | 760,322 | ||||||||||||
Toll Road Investors Partnership II LP 144A¤ | 0.00 | 2-15-2026 | 5,630,000 | 4,662,237 | ||||||||||||
Toll Road Investors Partnership II LP 144A¤ | 0.00 | 2-15-2028 | 1,150,000 | 800,101 | ||||||||||||
6,222,660 | ||||||||||||||||
|
| |||||||||||||||
Information Technology: 1.12% |
| |||||||||||||||
Communications Equipment: 0.15% | ||||||||||||||||
CommScope Technologies Finance LLC 144A | 5.00 | 3-15-2027 | 2,000,000 | 1,985,000 | ||||||||||||
|
| |||||||||||||||
Electronic Equipment, Instruments & Components: 0.45% | ||||||||||||||||
Arrow Electronics Incorporated | 3.88 | 1-12-2028 | 1,000,000 | 1,093,361 | ||||||||||||
Corning Incorporated | 3.90 | 11-15-2049 | 2,500,000 | 2,867,358 | ||||||||||||
Jabil Incorporated | 3.00 | 1-15-2031 | 1,875,000 | 1,908,219 | ||||||||||||
5,868,938 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Core Plus Bond Fund | 17
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Software: 0.10% | ||||||||||||||||
Citrix Systems Incorporated | 3.30 | % | 3-1-2030 | $ | 1,225,000 | $ | 1,303,411 | |||||||||
|
| |||||||||||||||
Technology Hardware, Storage & Peripherals: 0.42% | ||||||||||||||||
Dell International LLC / EMC Corporation 144A | 6.20 | 7-15-2030 | 3,125,000 | 3,786,233 | ||||||||||||
Diamond 1 Finance Corporation 144A | 8.35 | 7-15-2046 | 1,175,000 | 1,585,018 | ||||||||||||
5,371,251 | ||||||||||||||||
|
| |||||||||||||||
Materials: 0.68% |
| |||||||||||||||
Containers & Packaging: 0.24% | ||||||||||||||||
Ardagh Packaging Finance plc 144A | 5.25 | 8-15-2027 | 2,000,000 | 2,080,760 | ||||||||||||
Flex Acquisition Company Incorporated 144A | 6.88 | 1-15-2025 | 1,000,000 | 1,019,300 | ||||||||||||
3,100,060 | ||||||||||||||||
|
| |||||||||||||||
Metals & Mining: 0.44% | ||||||||||||||||
Freeport-McMoRan Incorporated | 4.13 | 3-1-2028 | 2,000,000 | 2,090,200 | ||||||||||||
Freeport-McMoRan Incorporated | 4.25 | 3-1-2030 | 1,500,000 | 1,575,930 | ||||||||||||
Novelis Corporation 144A | 5.88 | 9-30-2026 | 2,000,000 | 2,089,600 | ||||||||||||
5,755,730 | ||||||||||||||||
|
| |||||||||||||||
Real Estate: 2.04% |
| |||||||||||||||
Equity REITs: 2.04% | ||||||||||||||||
Healthpeak Properties | 2.88 | 1-15-2031 | 4,160,000 | 4,437,991 | ||||||||||||
Kimco Realty Corporation | 1.90 | 3-1-2028 | 1,835,000 | 1,804,929 | ||||||||||||
Omega Healthcare Investors Incorporated | 4.50 | 1-15-2025 | 2,130,000 | 2,237,449 | ||||||||||||
Omega Healthcare Investors Incorporated | 5.25 | 1-15-2026 | 1,700,000 | 1,863,956 | ||||||||||||
Sabra Health Care LP / Sabra Capital Corporation | 4.80 | 6-1-2024 | 2,000,000 | 2,086,555 | ||||||||||||
Service Properties Trust Company | 3.95 | 1-15-2028 | 3,000,000 | 2,580,900 | ||||||||||||
Simon Property Group LP | 3.80 | 7-15-2050 | 2,880,000 | 2,975,553 | ||||||||||||
Tanger Properties LP | 3.75 | 12-1-2024 | 1,600,000 | 1,574,344 | ||||||||||||
The Geo Group Incorporated | 5.13 | 4-1-2023 | 2,000,000 | 1,650,000 | ||||||||||||
Welltower Incorporated | 4.25 | 4-1-2026 | 4,465,000 | 5,100,490 | ||||||||||||
26,312,167 | ||||||||||||||||
|
| |||||||||||||||
Utilities: 0.82% |
| |||||||||||||||
Electric Utilities: 0.30% | ||||||||||||||||
Basin Electric Power Cooperative 144A | 4.75 | 4-26-2047 | 1,315,000 | 1,542,445 | ||||||||||||
Edison International | 4.95 | 4-15-2025 | 1,000,000 | 1,099,911 | ||||||||||||
Oglethorpe Power Corporation | 5.05 | 10-1-2048 | 1,060,000 | 1,256,611 | ||||||||||||
3,898,967 | ||||||||||||||||
|
| |||||||||||||||
Independent Power & Renewable Electricity Producers: 0.17% | ||||||||||||||||
TerraForm Power Operating LLC 144A | 4.75 | 1-15-2030 | 2,000,000 | 2,140,000 | ||||||||||||
|
| |||||||||||||||
Multi-Utilities: 0.35% | ||||||||||||||||
Ameren Corporation | 3.50 | 1-15-2031 | 1,915,000 | 2,195,042 | ||||||||||||
Oglethorpe Power Corporation 144A | 3.75 | 8-1-2050 | 2,320,000 | 2,320,885 | ||||||||||||
4,515,927 | ||||||||||||||||
|
| |||||||||||||||
Total Corporate Bonds and Notes (Cost $327,487,084) |
| 351,482,169 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Core Plus Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Shares | Value | |||||||||||||||
Exchange-Traded Funds: 5.57% | ||||||||||||||||
SPDR Bloomberg Barclays High Yield Bond ETF | 212,071 | $ | 22,426,508 | |||||||||||||
VanEck Vectors J.P. Morgan EM Local Currency Bond ETF | 355,100 | 11,185,650 | ||||||||||||||
Xtrackers USD High Yield Corporate Bond ETF | 786,000 | 38,325,360 | ||||||||||||||
Total Exchange-Traded Funds (Cost $67,247,689) | 71,937,518 | |||||||||||||||
|
| |||||||||||||||
Interest rate | Maturity date | Principal | ||||||||||||||
Foreign Corporate Bonds and Notes: 3.84% | ||||||||||||||||
Communication Services: 0.44% |
| |||||||||||||||
Media: 0.44% | ||||||||||||||||
Tele Columbus AG 144A | 3.88 | % | 5-2-2025 | EUR | 2,320,000 | 2,692,160 | ||||||||||
Ziggo Bond Company BV 144A | 3.38 | 2-28-2030 | EUR | 2,500,000 | 2,927,712 | |||||||||||
5,619,872 | ||||||||||||||||
|
| |||||||||||||||
Consumer Discretionary: 0.33% |
| |||||||||||||||
Auto Components: 0.16% | ||||||||||||||||
HP Pelzer Holding GmbH 144A | 4.13 | 4-1-2024 | EUR | 2,480,000 | 2,086,453 | |||||||||||
|
| |||||||||||||||
Automobiles: 0.17% | ||||||||||||||||
Peugeot SA Company | 2.00 | 3-20-2025 | EUR | 1,800,000 | 2,195,901 | |||||||||||
|
| |||||||||||||||
Consumer Staples: 1.17% |
| |||||||||||||||
Food & Staples Retailing: 0.12% | ||||||||||||||||
Tasty Bondco 1 SA 144A | 6.25 | 5-15-2026 | EUR | 1,600,000 | 1,552,398 | |||||||||||
|
| |||||||||||||||
Food Products: 0.38% | ||||||||||||||||
Danone SA (5 Year EUR Swap +1.43%) ±(s) | 1.75 | 3-27-2023 | EUR | 2,600,000 | 3,125,224 | |||||||||||
Sigma Holdings Company BV 144A | 5.75 | 5-15-2026 | EUR | 1,500,000 | 1,786,982 | |||||||||||
4,912,206 | ||||||||||||||||
|
| |||||||||||||||
Household Products: 0.15% | ||||||||||||||||
Energizer Gamma Acquisition BV 144A | 4.63 | 7-15-2026 | EUR | 1,600,000 | 1,976,264 | |||||||||||
|
| |||||||||||||||
Tobacco: 0.52% | ||||||||||||||||
BAT International Finance plc | 2.25 | 1-16-2030 | EUR | 5,250,000 | 6,628,276 | |||||||||||
|
| |||||||||||||||
Energy: 0.59% |
| |||||||||||||||
Oil, Gas & Consumable Fuels: 0.59% | ||||||||||||||||
Eni SpA | 1.13 | 9-19-2028 | EUR | 3,200,000 | 4,005,349 | |||||||||||
Petroleos Mexicanos | 3.75 | 2-21-2024 | EUR | 1,000,000 | 1,137,575 | |||||||||||
Total SA (5 Year EUR Swap +3.78%) ± | 3.88 | 12-29-2049 | EUR | 2,000,000 | 2,505,782 | |||||||||||
7,648,706 | ||||||||||||||||
|
| |||||||||||||||
Financials: 0.46% |
| |||||||||||||||
Banks: 0.29% | ||||||||||||||||
Bankia SA (5 Year EUR Swap +5.82%) ±(s) | 6.00 | 7-18-2022 | EUR | 1,200,000 | 1,393,465 | |||||||||||
Caixa Geral de Depositos SA (5 Year EUR Swap +10.75%) ±(s) | 10.75 | 3-30-2022 | EUR | 1,800,000 | 2,348,871 | |||||||||||
3,742,336 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 0.17% | ||||||||||||||||
LKQ European Holdings BV Company 144A | 3.63 | 4-1-2026 | EUR | 1,800,000 | 2,202,053 | |||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Core Plus Bond Fund | 19
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Health Care: 0.27% |
| |||||||||||||||
Pharmaceuticals: 0.27% | ||||||||||||||||
Takeda Pharmaceutical Company Limited | 2.00 | % | 7-9-2040 | EUR | 2,750,000 | $ | 3,449,910 | |||||||||
|
| |||||||||||||||
Industrials: 0.30% | ||||||||||||||||
Commercial Services & Supplies: 0.10% | ||||||||||||||||
Paprec Holding SA 144A | 4.00 | 3-31-2025 | EUR | 1,200,000 | 1,343,464 | |||||||||||
|
| |||||||||||||||
Electrical Equipment: 0.12% | ||||||||||||||||
Gamma Bidco SpA 144A | 6.25 | 7-15-2025 | EUR | 1,300,000 | 1,543,598 | |||||||||||
|
| |||||||||||||||
Road & Rail: 0.08% | ||||||||||||||||
Europcar Groupe SA 144A | 4.13 | 11-15-2024 | EUR | 1,800,000 | 1,049,974 | |||||||||||
|
| |||||||||||||||
Real Estate: 0.28% | ||||||||||||||||
Real Estate Management & Development: 0.28% | ||||||||||||||||
Akelius Residential Property AB (EUR ICE Swap +3.49%) ± | 3.88 | 10-5-2078 | EUR | 2,500,000 | 3,049,756 | |||||||||||
ATF Netherlands BV | 1.50 | 7-15-2024 | EUR | 500,000 | 612,886 | |||||||||||
3,662,642 | ||||||||||||||||
|
| |||||||||||||||
Total Foreign Corporate Bonds and Notes (Cost $48,964,386) | 49,614,053 | |||||||||||||||
|
| |||||||||||||||
Foreign Government Bonds: 0.64% | ||||||||||||||||
Brazil | 10.00 | 1-1-2025 | BRL | 8,600,000 | 1,812,119 | |||||||||||
Brazil | 10.00 | 1-1-2029 | BRL | 8,000,000 | 1,731,664 | |||||||||||
Hungary | 1.00 | 11-26-2025 | HUF | 900,000,000 | 2,926,990 | |||||||||||
Poland | 1.25 | 10-25-2030 | PLN | 7,000,000 | 1,875,263 | |||||||||||
Total Foreign Government Bonds (Cost $9,637,976) | 8,346,036 | |||||||||||||||
|
| |||||||||||||||
Loans: 0.18% | ||||||||||||||||
Communication Services: 0.09% | ||||||||||||||||
Media: 0.09% | ||||||||||||||||
Ancestry.com Incorporated (1 Month LIBOR +3.75%) ± | 4.75 | 10-19-2023 | $ | 1,203,405 | 1,201,154 | |||||||||||
|
| |||||||||||||||
Health Care: 0.09% | ||||||||||||||||
Health Care Providers & Services: 0.09% | ||||||||||||||||
Surgery Center Holdings Incorporated (1 Month LIBOR +3.25%) ± | 4.25 | 9-3-2024 | 1,215,625 | 1,145,945 | ||||||||||||
|
| |||||||||||||||
Total Loans (Cost $2,421,639) | 2,347,099 | |||||||||||||||
|
| |||||||||||||||
Municipal Obligations: 1.34% | ||||||||||||||||
California: 0.28% | ||||||||||||||||
Airport Revenue: 0.16% | ||||||||||||||||
San Jose CA Series B (AGM Insured) | 6.60 | 3-1-2041 | 2,000,000 | 2,049,580 | ||||||||||||
|
| |||||||||||||||
Transportation Revenue: 0.12% | ||||||||||||||||
Alameda CA Corridor Transportation Authority CAB Refunding Bond Subordinated Series B (Ambac Insured) ¤ | 0.00 | 10-1-2028 | 2,115,000 | 1,640,352 | ||||||||||||
|
| |||||||||||||||
3,689,932 | ||||||||||||||||
|
| |||||||||||||||
Illinois: 0.59% | ||||||||||||||||
GO Revenue: 0.32% | ||||||||||||||||
Cook County Series B (BAM Insured) | 6.36 | 11-15-2033 | 1,745,000 | 2,394,838 |
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Core Plus Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
GO Revenue (continued) | ||||||||||||||||
Will County Lincoln-Way Community High School District #210 Unrefunded CAB (AGM Insured) ¤ | 0.00 | % | 1-1-2025 | $ | 1,820,000 | $ | 1,697,132 | |||||||||
4,091,970 | ||||||||||||||||
|
| |||||||||||||||
Tax Revenue: 0.27% | ||||||||||||||||
Chicago IL Transit Authority Taxable Pension Funding Series A | 6.90 | 12-1-2040 | 1,075,000 | 1,538,368 | ||||||||||||
Metropolitan Pier & Exposition Authority Illinois CAB McCormick Place Expansion Project Series 2010-B1 (AGM Insured) ¤ | 0.00 | 6-15-2026 | 1,975,000 | 1,763,517 | ||||||||||||
Metropolitan Pier & Exposition Authority Illinois CAB McCormick Place Expansion Project Series 2012-B ¤ | 0.00 | 12-15-2051 | 765,000 | 195,832 | ||||||||||||
3,497,717 | ||||||||||||||||
|
| |||||||||||||||
7,589,687 | ||||||||||||||||
|
| |||||||||||||||
Kansas: 0.05% | ||||||||||||||||
Health Revenue: 0.05% | ||||||||||||||||
Kansas Development Finance Authority Village Shalom Project Series 2018-B | 4.00 | 11-15-2025 | 650,000 | 638,287 | ||||||||||||
|
| |||||||||||||||
Maryland: 0.06% | ||||||||||||||||
Education Revenue: 0.06% | ||||||||||||||||
Maryland Health & HEFAR Green Street Academy Series B 144A | 6.75 | 7-1-2023 | 720,000 | 719,906 | ||||||||||||
|
| |||||||||||||||
Michigan: 0.10% | ||||||||||||||||
Miscellaneous Revenue: 0.10% | ||||||||||||||||
Michigan Finance Authority Local Government Loan Program Project Series E | 7.19 | 11-1-2022 | 1,235,000 | 1,315,040 | ||||||||||||
|
| |||||||||||||||
Pennsylvania: 0.26% | ||||||||||||||||
Health Revenue: 0.07% | ||||||||||||||||
Quakertown PA General Authority USDA Loan Anticipation Notes Series 2017-B | 3.80 | 7-1-2021 | 900,000 | 897,318 | ||||||||||||
|
| |||||||||||||||
Miscellaneous Revenue: 0.19% | ||||||||||||||||
Commonwealth of Pennsylvania Financing Authority Series A | 4.14 | 6-1-2038 | 1,995,000 | 2,426,080 | ||||||||||||
|
| |||||||||||||||
3,323,398 | ||||||||||||||||
|
| |||||||||||||||
Total Municipal Obligations (Cost $14,970,575) | 17,276,250 | |||||||||||||||
|
| |||||||||||||||
Non-Agency Mortgage-Backed Securities: 18.44% | ||||||||||||||||
Agate Bay Mortgage Loan Trust Series 2015-3 Class B3 144A±± | 3.62 | 4-25-2045 | 1,869,038 | 1,932,041 | ||||||||||||
ALM Loan Funding Series 2015-16A Class AAR2 (3 Month LIBOR +0.90%) 144A± | 1.18 | 7-15-2027 | 1,458,338 | 1,451,863 | ||||||||||||
American Money Management Corporation Series 2015-16A Class AR (3 Month LIBOR +1.26%) 144A± | 1.53 | 4-14-2029 | 3,000,000 | 2,989,257 | ||||||||||||
American Money Management Corporation Series 2016-19A Class AR (3 Month LIBOR +1.14%) 144A± | 1.42 | 10-16-2028 | 2,750,000 | 2,731,864 | ||||||||||||
Angel Oak Mortgage Trust I LLC Series 2017-2 Class A2 144A±± | 2.63 | 7-25-2047 | 1,377,094 | 1,383,227 | ||||||||||||
Angel Oak Mortgage Trust I LLC Series 2019-3 Class A1 144A±± | 2.93 | 5-25-2059 | 835,951 | 844,603 | ||||||||||||
Angel Oak Mortgage Trust I LLC Series 2019-4 Class A1 144A±± | 2.99 | 7-26-2049 | 7,021,451 | 7,111,309 | ||||||||||||
Angel Oak Mortgage Trust I LLC Series 2020-4 Class A1 144A±± | 1.47 | 6-25-2065 | 4,887,506 | 4,896,570 | ||||||||||||
Arbys Funding LLC Series 2020-1A Class A2 144A | 3.24 | 7-30-2050 | 6,700,000 | 6,874,267 | ||||||||||||
Banc of America Funding Corporation Series 2016-R1 Class A1 144A±± | 2.50 | 3-25-2040 | 370,450 | 370,342 | ||||||||||||
Benefit Street Partners CLO Limited Series 2014-IVA Class A1RR (3 Month LIBOR +1.25%) 144A± | 1.52 | 1-20-2029 | 1,000,000 | 998,509 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Core Plus Bond Fund | 21
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Non-Agency Mortgage-Backed Securities (continued) | ||||||||||||||||
Benefit Street Partners CLO Limited Series 2016-10A Class A1R (3 Month LIBOR +1.14%) 144A± | 1.42 | % | 1-15-2029 | $ | 3,500,000 | $ | 3,479,949 | |||||||||
BlueMountain CLO Limited Series 2012-2A Class AR2 (3 Month LIBOR +1.05%) 144A± | 1.30 | 11-20-2028 | 935,000 | 928,620 | ||||||||||||
BlueMountain CLO Limited Series 2013-1A Class A1R2 (3 Month LIBOR +1.23%) 144A± | 1.50 | 1-20-2029 | 1,906,052 | 1,901,378 | ||||||||||||
Bunker Hill Loan Depositary Trust Series 2019-3 Class A1 144A | 2.72 | 11-25-2059 | 3,286,987 | 3,348,788 | ||||||||||||
BX Trust Series 2019-OC11 Class A 144A | 3.20 | 12-9-2041 | 4,975,000 | 5,257,964 | ||||||||||||
Cascade Funding Mortgage Trust Series 2018- RM2 Class A 144A±± | 4.00 | 10-25-2068 | 500,070 | 519,290 | ||||||||||||
CD Commercial Mortgage Trust Series 2017-6 Class A5 | 3.46 | 11-13-2050 | 1,035,000 | 1,169,459 | ||||||||||||
CIFC Funding Limited Series 2012-2RA Class A1 (3 Month LIBOR +0.80%) 144A± | 1.07 | 1-20-2028 | 2,404,993 | 2,383,759 | ||||||||||||
Citigroup Commercial Mortgage Trust 2017-MDRA Class A 144A | 3.66 | 7-10-2030 | 2,000,000 | 2,024,932 | ||||||||||||
CNH Equipment Trust Series 2019-A Class A2 | 2.96 | 5-16-2022 | 1,196,996 | 1,200,680 | ||||||||||||
Colt Funding LLC Series 2018-3 Class A1 144A±± | 3.69 | 10-26-2048 | 1,552,975 | 1,554,368 | ||||||||||||
Colt Funding LLC Series 2019-1 Class A1 144A±± | 3.71 | 3-25-2049 | 1,143,546 | 1,157,590 | ||||||||||||
Commercial Mortgage Trust Series 2014-CR15 Class A2 | 2.93 | 2-10-2047 | 295,009 | 298,471 | ||||||||||||
Credit Suisse Mortgage Trust Series 2013 Class B4 144A±± | 3.41 | 4-25-2043 | 3,647,141 | 3,617,390 | ||||||||||||
Credit Suisse Mortgage Trust Series 2018 Class A1 144A±± | 4.13 | 7-25-2058 | 1,502,517 | 1,508,383 | ||||||||||||
Crown Point Limited Series 2015-3A Class A1AR (3 Month LIBOR +0.91%) 144A± | 1.19 | 12-31-2027 | 1,341,777 | 1,336,950 | ||||||||||||
Crown Point Limited Series 2018-6A Class A1 (3 Month LIBOR +1.17%) 144A± | 1.44 | 10-20-2028 | 3,438,237 | 3,423,109 | ||||||||||||
CSMLT Trust Series 2015-1 Class B4 144A±± | 3.85 | 5-25-2045 | 4,529,997 | 4,565,602 | ||||||||||||
DBWF Mortgage Trust Series 2018-GLKS (1 Month LIBOR +1.03%) 144A± | 1.19 | 12-19-2030 | 582,684 | 562,439 | ||||||||||||
Deephaven Residential Mortgage Series 2019-2A Class A1 144A±± | 3.56 | 4-25-2059 | 1,476,781 | 1,485,702 | ||||||||||||
Deephaven Residential Mortgage Series 2019-4A Class A1 144A±± | 2.79 | 10-25-2059 | 2,238,905 | 2,270,405 | ||||||||||||
Dryden Senior Loan Fund Series 2013-28A Class A2LR (3 Month LIBOR +1.65%) 144A± | 1.93 | 8-15-2030 | 4,000,000 | 3,963,280 | ||||||||||||
Financial Asset Securitization Incorporated Series 1997-NAM2 Class B2 † | 8.00 | 7-25-2027 | 16,004 | 871 | ||||||||||||
FWD Securitization Trust Series 2019-INV1 Class A3 144A±± | 3.11 | 6-25-2049 | 3,404,476 | 3,414,041 | ||||||||||||
GB Trust Series 2020-FlLIX (1 Month LIBOR +1.12%) 144A± | 1.29 | 8-15-2037 | 3,000,000 | 3,005,827 | ||||||||||||
GCAT Series 2019-NQM1 Class A1 144A | 2.99 | 2-25-2059 | 5,395,184 | 5,458,517 | ||||||||||||
GCAT Series 2019-NQM2 Class A1 144A | 2.86 | 9-25-2059 | 3,777,511 | 3,832,658 | ||||||||||||
GCAT Series 2019-RPl1 Class A1 144A±± | 2.65 | 10-25-2068 | 4,343,071 | 4,497,493 | ||||||||||||
Gilbert Park CLO Series 2017-1A Class B (3 Month LIBOR +1.60%) 144A± | 1.88 | 10-15-2030 | 3,000,000 | 2,960,388 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2019-GSA1 Class C ±± | 3.93 | 11-10-2052 | 500,000 | 455,853 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2019-PJ1 Class A6 144A±± | 4.00 | 8-25-2049 | 136,942 | 137,253 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2019-PJ2 Class A4 144A±± | 4.00 | 11-25-2049 | 2,045,472 | 2,091,309 | ||||||||||||
Homeward Opportunities Fund I Trust Series 2019-1 Class A1 144A±± | 3.45 | 1-25-2059 | 1,554,833 | 1,577,111 | ||||||||||||
Hospitality Mortgage Trust Series 2019 Class A (1 Month LIBOR +1.00%) 144A± | 1.16 | 11-15-2036 | 2,434,191 | 2,328,549 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2012-C8 Class ASB | 2.38 | 10-15-2045 | 1,801,989 | 1,831,479 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2013-B4 144A±± | 3.38 | 7-25-2043 | 3,616,907 | 3,268,509 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2019-MFP Class A (1 Month LIBOR +0.96%) 144A± | 1.12 | 7-15-2036 | 5,000,000 | 4,868,746 | ||||||||||||
JPMorgan Mortgage Trust Series 2014-2 Class B4 144A±± | 3.40 | 6-25-2029 | 1,215,000 | 1,201,199 | ||||||||||||
JPMorgan Mortgage Trust Series 2020-1 Class A15 144A±± | 3.50 | 6-25-2050 | 4,770,288 | 4,898,503 | ||||||||||||
KKR Financial Holdings LLC (3 Month LIBOR +1.34%) 144A± | 1.62 | 4-15-2029 | 3,150,000 | 3,144,201 | ||||||||||||
Lendmark Funding Trust Series 2018-1A Class A 144A | 3.81 | 12-21-2026 | 2,685,000 | 2,720,304 | ||||||||||||
Lendmark Funding Trust Series 2018-2A Class A 144A | 4.23 | 4-20-2027 | 600,000 | 606,247 | ||||||||||||
LoanCore Limited Series 2018-CRE1 Class A (1 Month LIBOR +1.13%) 144A± | 1.29 | 5-15-2028 | 2,683,415 | 2,668,458 | ||||||||||||
Mach One Trust Commercial Mortgage Backed Series 2004-1 Class X 144A±±(c) | 0.78 | 5-28-2040 | 50,048 | 0 |
The accompanying notes are an integral part of these financial statements.
22 | Wells Fargo Core Plus Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Non-Agency Mortgage-Backed Securities (continued) | ||||||||||||||||
Mello Warehouse Securitization Series 2019-1 Class A (1 Month LIBOR +0.80%) 144A± | 0.98 | % | 6-25-2052 | $ | 3,115,000 | $ | 3,117,128 | |||||||||
Metlife Securitization Trust 2019-1A Class A1A 144A±± | 3.75 | 4-25-2058 | 2,142,602 | 2,289,640 | ||||||||||||
MF1 Limited Class 2020-Fl3 Class A (1 Month LIBOR +2.05%) 144A± | 2.21 | 7-15-2035 | 3,700,000 | 3,714,483 | ||||||||||||
Mill City Mortgage Trust Series 2019 Class M2 144A±± | 3.25 | 7-25-2059 | 4,592,000 | 4,502,065 | ||||||||||||
Morgan Stanley Bank of America Merrill Lynch Trust Series 2016-C30 Class B ±± | 3.31 | 9-15-2049 | 610,000 | 611,260 | ||||||||||||
Morgan Stanley Capital I Series 2004-RR2 Class X 144A±±(c) | 0.35 | 10-28-2033 | 2,316 | 7 | ||||||||||||
New Residential Mortgage Loan Trust Series 2018-NQM1 Class A1 144A±± | 3.99 | 11-25-2048 | 1,669,246 | 1,711,191 | ||||||||||||
New Residential Mortgage Loan Trust Series 2019-RPL3 Class M1 144A±± | 3.25 | 7-25-2059 | 5,000,000 | 5,006,090 | ||||||||||||
Octagon Investment Partners Series 2017-1A Class B1 (3 Month LIBOR +1.70%) 144A± | 1.97 | 7-20-2030 | 1,000,000 | 987,929 | ||||||||||||
Ocwen Master Advance Receivables Trust Series 2020-T1 Class CT1 144A | 2.32 | 8-15-2052 | 1,400,000 | 1,402,428 | ||||||||||||
Ondeck Asset Securitization Trust LLC Series 2018-1A Class A 144A | 3.50 | 4-18-2022 | 1,258,644 | 1,251,623 | ||||||||||||
Onslow Bay Financial LLC Series 2020 Class A21 144A±± | 3.50 | 12-25-2049 | 3,425,207 | 3,514,066 | ||||||||||||
OZLM Funding Limited Series 2014-8A Class A2RR (3 Month LIBOR +1.80%) 144A± | 2.07 | 10-17-2029 | 5,400,000 | 5,322,029 | ||||||||||||
Palmer Square Loan Funding Limited Series 2019-2A Class A1 (3 Month LIBOR +0.97%) 144A± | 1.24 | 4-20-2027 | 2,308,832 | 2,298,265 | ||||||||||||
Residential Mortgage Loan Trust Series 2020-1 Class M1 144A±± | 3.24 | 2-25-2024 | 5,000,000 | 4,728,156 | ||||||||||||
Shellpoint Company Originator Trust Series 2016-1 Class B2 144A±± | 3.61 | 11-25-2046 | 5,983,148 | 6,200,970 | ||||||||||||
Sound Point CLO Limited Series 2013-2RA Class A1 (3 Month LIBOR +0.95%) 144A± | 1.23 | 4-15-2029 | 2,825,000 | 2,782,738 | ||||||||||||
Starwood Mortgage Residential Trust Series 2019-1 Class A1 144A±± | 2.94 | 6-25-2049 | 2,120,605 | 2,154,548 | ||||||||||||
Starwood Mortgage Residential Trust Series 2019-INV1 Class A1 144A±± | 2.61 | 9-27-2049 | 2,761,717 | 2,794,371 | ||||||||||||
TCW CLO 2017-1 Limited Series 2017-1A Class BR (3 Month LIBOR +1.55%) 144A± | 1.82 | 7-29-2029 | 5,545,000 | 5,474,201 | ||||||||||||
TCW CLO 2019-1 AMR Limited Series 2019-1A Class A (3 Month LIBOR +1.07%) 144A± | 1.35 | 2-15-2029 | 4,210,000 | 4,189,880 | ||||||||||||
Towd Point Mortgage Trust Series 2015-1 Class A3 144A±± | 3.25 | 10-25-2053 | 5,000,000 | 5,202,442 | ||||||||||||
Towd Point Mortgage Trust Series 2015-2 Class1M2 144A±± | 3.73 | 11-25-2060 | 4,530,000 | 4,762,799 | ||||||||||||
Towd Point Mortgage Trust Series 2015-4 Class A2 144A±± | 3.75 | 4-25-2055 | 2,675,000 | 2,780,755 | ||||||||||||
Towd Point Mortgage Trust Series 2017-4 Class A1 144A±± | 2.75 | 6-25-2057 | 2,084,863 | 2,173,804 | ||||||||||||
Towd Point Mortgage Trust Series 2019- MH1 Class A1 144A±± | 3.00 | 11-25-2058 | 1,661,657 | 1,695,248 | ||||||||||||
Towd Point Mortgage Trust Series 2019-4 Class M1 144A±± | 3.50 | 10-25-2059 | 4,000,000 | 4,275,056 | ||||||||||||
Towd Point Mortgage Trust Series 2019-SJ3 Class A1 144A±± | 3.00 | 11-25-2059 | 3,725,366 | 3,784,770 | ||||||||||||
UBS Commercial Mortgage Trust Series 2017-C5 Class A5 | 3.47 | 11-15-2050 | 1,140,000 | 1,269,441 | ||||||||||||
UBS Commercial Mortgage Trust Series 2018-NYCH Class A (1 Month LIBOR +0.85%) 144A± | 1.01 | 2-15-2032 | 2,930,000 | 2,825,347 | ||||||||||||
Venture Limited Series 2018 Class 35A 144A | 4.40 | 10-22-2031 | 2,000,000 | 2,006,884 | ||||||||||||
Verus Securitization Trust Series 2019-1 Class A1 144A±± | 3.40 | 12-25-2059 | 1,657,562 | 1,695,918 | ||||||||||||
Verus Securitization Trust Series 2019-2 Class A1 144A±± | 3.21 | 5-25-2059 | 3,023,307 | 3,083,071 | ||||||||||||
Voya CLO Limited Series 2015-2A Class AR (3 Month LIBOR +0.97%) 144A± | 1.23 | 7-23-2027 | 2,900,000 | 2,886,715 | ||||||||||||
West CLO Limited Series 2014-2A Class A1 (3 Month LIBOR +0.87%) 144A± | 1.14 | 1-16-2027 | 910,342 | 905,680 | ||||||||||||
Whitehorse Limited Series 2014-1A Class AR (3 Month LIBOR +0.90%) 144A± | 1.15 | 5-1-2026 | 438,233 | 437,536 | ||||||||||||
Total Non-Agency Mortgage-Backed Securities (Cost $237,545,386) |
| 238,348,410 | ||||||||||||||
|
| |||||||||||||||
U.S. Treasury Securities: 8.83% | ||||||||||||||||
TIPS | 1.38 | 2-15-2044 | 3,107,720 | 4,444,646 | ||||||||||||
U.S. Treasury Bond ¤ | 0.00 | 11-15-2027 | 1,795,000 | 1,717,294 | ||||||||||||
U.S. Treasury Bond | 0.63 | 8-15-2030 | 46,465,000 | 46,080,212 | ||||||||||||
U.S. Treasury Bond | 1.13 | 5-15-2040 | 6,130,000 | 6,017,936 | ||||||||||||
U.S. Treasury Bond | 1.25 | 5-15-2050 | 13,005,000 | 12,265,341 | ||||||||||||
U.S. Treasury Bond | 1.38 | 8-15-2050 | 23,395,000 | 22,780,881 | ||||||||||||
U.S. Treasury Note | 0.38 | 4-30-2025 | 20,685,000 | 20,798,929 | ||||||||||||
Total U.S. Treasury Securities (Cost $113,485,520) |
| 114,105,239 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Core Plus Bond Fund | 23
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Yankee Corporate Bonds and Notes: 8.48% |
| |||||||||||||||
Communication Services: 0.51% |
| |||||||||||||||
Diversified Telecommunication Services: 0.14% | ||||||||||||||||
Telefonica Emisiones SAU | 5.21 | % | 3-8-2047 | $ | 1,485,000 | $ | 1,804,974 | |||||||||
|
| |||||||||||||||
Interactive Media & Services: 0.27% | ||||||||||||||||
Tencent Holdings Limited 144A | 3.98 | 4-11-2029 | 3,000,000 | 3,453,072 | ||||||||||||
|
| |||||||||||||||
Wireless Telecommunication Services: 0.10% | ||||||||||||||||
Vodafone Group plc | 4.25 | 9-17-2050 | 1,170,000 | 1,358,212 | ||||||||||||
|
| |||||||||||||||
Consumer Discretionary: 0.13% |
| |||||||||||||||
Internet & Direct Marketing Retail: 0.13% | ||||||||||||||||
Prosus NV 144A | 4.03 | 8-3-2050 | 1,565,000 | 1,653,605 | ||||||||||||
|
| |||||||||||||||
Consumer Staples: 0.47% |
| |||||||||||||||
Beverages: 0.13% | ||||||||||||||||
Fomento Economico SA | 3.50 | 1-16-2050 | 1,580,000 | 1,685,382 | ||||||||||||
|
| |||||||||||||||
Tobacco: 0.34% | ||||||||||||||||
Imperial Brands Finance plc 144A | 3.50 | 7-26-2026 | 4,055,000 | 4,414,973 | ||||||||||||
|
| |||||||||||||||
Energy: 0.87% |
| |||||||||||||||
Oil, Gas & Consumable Fuels: 0.87% | ||||||||||||||||
Baytex Energy Corporation 144A | 5.63 | 6-1-2024 | 2,000,000 | 1,185,000 | ||||||||||||
BP Capital Markets plc (5 Year Treasury Constant Maturity +4.40%) ±(s) | 4.88 | 3-22-2030 | 4,950,000 | 5,406,390 | ||||||||||||
Comision Federal de Electricidad 144A | 4.75 | 2-23-2027 | 1,140,000 | 1,226,925 | ||||||||||||
EnCana Corporation | 6.50 | 2-1-2038 | 836,000 | 792,195 | ||||||||||||
Total Capital International SA | 2.99 | 6-29-2041 | 2,265,000 | 2,358,814 | ||||||||||||
Transocean Incorporated | 7.50 | 4-15-2031 | 1,250,000 | 250,000 | ||||||||||||
11,219,324 | ||||||||||||||||
|
| |||||||||||||||
Financials: 5.68% |
| |||||||||||||||
Banks: 3.43% | ||||||||||||||||
ABN AMRO Bank NV 144A | 4.75 | 7-28-2025 | 1,800,000 | 2,032,029 | ||||||||||||
Banco Bradesco 144A | 2.85 | 1-27-2023 | 3,205,000 | 3,259,132 | ||||||||||||
Banco De Bogota SA 144A | 6.25 | 5-12-2026 | 1,400,000 | 1,509,060 | ||||||||||||
Banco del Estado de Chile 144A | 2.70 | 1-9-2025 | 4,165,000 | 4,378,498 | ||||||||||||
Banco do Brasil SA 144A | 4.63 | 1-15-2025 | 1,615,000 | 1,712,708 | ||||||||||||
Banco Internacional del Peru 144A | 3.25 | 10-4-2026 | 1,600,000 | 1,664,016 | ||||||||||||
Banco Mercantil del Norte SA (5 Year Treasury Constant Maturity +4.97%) 144A±(s) | 6.75 | 9-27-2024 | 1,565,000 | 1,563,044 | ||||||||||||
Banco Safra SA 144A | 4.13 | 2-8-2023 | 1,695,000 | 1,743,748 | ||||||||||||
Banco Santander Mexico (5 Year Treasury Constant Maturity +3.00%) 144A± | 5.95 | 10-1-2028 | 1,700,000 | 1,790,950 | ||||||||||||
Banco Santander SA | 4.25 | 4-11-2027 | 1,600,000 | 1,807,120 | ||||||||||||
Banistmo SA 144A | 4.25 | 7-31-2027 | 4,570,000 | 4,650,432 | ||||||||||||
Banque Ouest Africaine de Developpement 144A | 5.00 | 7-27-2027 | 2,520,000 | 2,702,846 | ||||||||||||
BPCE SA 144A | 5.15 | 7-21-2024 | 1,725,000 | 1,939,047 | ||||||||||||
Danske Bank 144A | 5.38 | 1-12-2024 | 1,705,000 | 1,929,655 | ||||||||||||
Deutsche Bank AG (5 Year USD Swap +2.55%) ± | 4.88 | 12-1-2032 | 1,750,000 | 1,742,773 | ||||||||||||
Itau Unibanco Holding SA 144A | 3.25 | 1-24-2025 | 3,510,000 | 3,596,873 | ||||||||||||
Perrigo Finance plc | 4.90 | 12-15-2044 | 1,500,000 | 1,618,802 | ||||||||||||
Perrigo Finance Unlimited Company | 4.38 | 3-15-2026 | 1,365,000 | 1,533,146 | ||||||||||||
Unicredit SpA (5 Year Treasury Constant Maturity +4.75%) 144A± | 5.46 | 6-30-2035 | 3,000,000 | 3,102,798 | ||||||||||||
44,276,677 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
24 | Wells Fargo Core Plus Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Capital Markets: 0.40% | ||||||||||||||||
Credit Suisse Group AG (5 Year Treasury Constant Maturity +4.89%) 144A±(s) | 5.25 | % | 2-22-2027 | $ | 3,500,000 | $ | 3,565,625 | |||||||||
Credit Suisse Group Funding Limited (3 Month LIBOR +1.20%) 144A± | 3.00 | 12-14-2023 | 1,485,000 | 1,551,186 | ||||||||||||
5,116,811 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 0.97% | ||||||||||||||||
AerCap Ireland Limited | 2.88 | 8-14-2024 | 1,825,000 | 1,755,486 | ||||||||||||
Banco Nacional de Comercio Exterior SNC 144A | 4.38 | 10-14-2025 | 2,350,000 | 2,496,875 | ||||||||||||
Brookfield Finance Incorporated | 3.90 | 1-25-2028 | 2,475,000 | 2,800,412 | ||||||||||||
Corporacion Financiera de Desarrollo SA (3 Month LIBOR +5.61%) 144A± | 5.25 | 7-15-2029 | 1,185,000 | 1,262,025 | ||||||||||||
UBS Group Funding Switzerland AG 144A | 3.49 | 5-23-2023 | 1,165,000 | 1,221,845 | ||||||||||||
UBS Group Funding Switzerland AG (5 Year USD Swap +4.87%) ± | 7.00 | 12-29-2049 | 1,650,000 | 1,864,500 | ||||||||||||
WPP Finance Limited 2010 | 3.75 | 9-19-2024 | 1,054,000 | 1,156,019 | ||||||||||||
12,557,162 | ||||||||||||||||
|
| |||||||||||||||
Insurance: 0.67% | ||||||||||||||||
Fairfax Financial Holdings Limited | 4.85 | 4-17-2028 | 2,780,000 | 3,080,105 | ||||||||||||
Sompo International Holdings Limited | 7.00 | 7-15-2034 | 1,330,000 | 1,848,504 | ||||||||||||
Swiss Re Finance (Luxembourg) SA (5 Year Treasury Constant Maturity +3.58%) 144A± | 5.00 | 4-2-2049 | 1,600,000 | 1,827,898 | ||||||||||||
Validus Holdings Limited | 8.88 | 1-26-2040 | 1,210,000 | 1,969,386 | ||||||||||||
8,725,893 | ||||||||||||||||
|
| |||||||||||||||
Thrifts & Mortgage Finance: 0.21% | ||||||||||||||||
Nationwide Building Society (5 Year USD Swap +1.85%) 144A± | 4.13 | 10-18-2032 | 2,500,000 | 2,731,788 | ||||||||||||
|
| |||||||||||||||
Health Care: 0.21% |
| |||||||||||||||
Pharmaceuticals: 0.21% | ||||||||||||||||
Bausch Health Companies Incorporated 144A | 5.00 | 1-30-2028 | 2,000,000 | 1,970,000 | ||||||||||||
Teva Pharmaceutical Finance BV | 2.80 | 7-21-2023 | 800,000 | 771,600 | ||||||||||||
2,741,600 | ||||||||||||||||
|
| |||||||||||||||
Industrials: 0.04% |
| |||||||||||||||
Transportation Infrastructure: 0.04% | ||||||||||||||||
Mexico City Airport Trust 144A | 5.50 | 7-31-2047 | 570,000 | 493,620 | ||||||||||||
|
| |||||||||||||||
Utilities: 0.57% |
| |||||||||||||||
Electric Utilities: 0.57% | ||||||||||||||||
Enel Finance International SA 144A | 4.63 | 9-14-2025 | 3,635,000 | 4,210,428 | ||||||||||||
Western Power Distributions Holdings Limited 144A | 7.38 | 12-15-2028 | 2,265,000 | 3,105,979 | ||||||||||||
7,316,407 | ||||||||||||||||
|
| |||||||||||||||
Total Yankee Corporate Bonds and Notes (Cost $102,903,492) |
| 109,549,500 | ||||||||||||||
|
| |||||||||||||||
Yankee Government Bonds: 1.56% | ||||||||||||||||
Abu Dhabi 144A | 3.88 | 4-16-2050 | 2,600,000 | 3,164,476 | ||||||||||||
Bermuda 144A | 3.38 | 8-20-2050 | 1,455,000 | 1,522,658 | ||||||||||||
Bermuda 144A | 3.72 | 1-25-2027 | 410,000 | 450,180 | ||||||||||||
Mexico | 4.75 | 4-27-2032 | 3,615,000 | 4,137,368 | ||||||||||||
Provincia de Cordoba 144A | 7.13 | 6-10-2021 | 1,750,000 | 1,281,000 | ||||||||||||
Provincia de Santa Fe 144A | 7.00 | 3-23-2023 | 2,000,000 | 1,580,020 | ||||||||||||
Republic of Argentina † | 6.88 | 4-22-2021 | 1,280,000 | 616,320 | ||||||||||||
Republic of Argentina † | 6.88 | 1-11-2048 | 1,000,000 | 428,510 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Core Plus Bond Fund | 25
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Yankee Government Bonds (continued) | ||||||||||||||||
Republic of Argentina † | 7.50 | % | 4-22-2026 | $ | 1,350,000 | $ | 614,264 | |||||||||
Republic of Kenya 144A | 8.25 | 2-28-2048 | 750,000 | 753,750 | ||||||||||||
Republic of Paraguay 144A | 5.40 | 3-30-2050 | 1,000,000 | 1,259,010 | ||||||||||||
Republic of Senegal 144A | 6.25 | 5-23-2033 | 750,000 | 771,641 | ||||||||||||
Saudi Arabia 144A | 4.50 | 4-22-2060 | 1,870,000 | 2,326,953 | ||||||||||||
Ukraine 144A | 7.38 | 9-25-2032 | 1,200,000 | 1,214,851 | ||||||||||||
Total Yankee Government Bonds (Cost $20,669,653) |
| 20,121,001 | ||||||||||||||
|
| |||||||||||||||
Yield | Shares | |||||||||||||||
Short-Term Investments: 7.32% | ||||||||||||||||
Investment Companies: 7.32% | ||||||||||||||||
Securities Lending Cash Investments LLC (l)(r)(u) | 0.09 | 263,640 | 263,640 | |||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u)## | 0.06 | 94,304,438 | 94,304,438 | |||||||||||||
Total Short-Term Investments (Cost $94,568,078) |
| 94,568,078 | ||||||||||||||
|
|
Total investments in securities (Cost $1,255,581,539) | 100.81 | % | 1,302,737,464 | |||||
Other assets and liabilities, net | (0.81 | ) | (10,507,971 | ) | ||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 1,292,229,493 | ||||
|
|
|
|
± | Variable rate investment. The rate shown is the rate in effect at period end. |
±± | The coupon of the security is adjusted based on the principal and interest payments received from the underlying pool of mortgages as well as the credit quality and the actual prepayment speed of the underlying mortgages. |
(c) | Investment in an interest-only security entitles holders to receive only the interest payments on the underlying mortgages. The principal amount shown is the notional amount of the underlying mortgages. The rate represents the coupon rate. |
%% | The security is purchased on a when-issued basis. |
¤ | The security is issued in zero coupon form with no periodic interest payments. |
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. |
« | All or a portion of this security is on loan. |
† | Non-income-earning security |
(s) | Security is perpetual in nature and has no stated maturity date. The date shown reflects the next call date. |
(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. |
## | All or a portion of this security is segregated for when-issued securities. |
Abbreviations:
AGM | Assured Guaranty Municipal |
Ambac | Ambac Financial Group Incorporated |
BAM | Build America Mutual Assurance Company |
BRL | Brazilian real |
CAB | Capital appreciation bond |
EUR | Euro |
FHLB | Federal Home Loan Bank |
FHLMC | Federal Home Loan Mortgage Corporation |
FNMA | Federal National Mortgage Association |
GNMA | Government National Mortgage Association |
GO | General obligation |
HEFAR | Higher Education Facilities Authority Revenue |
HUF | Hungarian forint |
LIBOR | London Interbank Offered Rate |
PLN | Polish zloty |
SOFR | Secured Overnight Financing Rate |
TIPS | Treasury Inflation-Protected Securities |
TVA | Tennessee Valley Authority |
The accompanying notes are an integral part of these financial statements.
26 | Wells Fargo Core Plus Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Futures Contracts
Description | Number of contracts | Expiration date | Notional cost | Notional value | Unrealized gains | Unrealized losses | ||||||||||||||||||
Long | ||||||||||||||||||||||||
10-Year Canadian Treasury Bonds | 395 | 12-18-2020 | $ | 46,003,759 | $ | 45,709,587 | $ | 0 | $ | (294,172 | ) | |||||||||||||
U.S. Long Term Bonds | 111 | 12-21-2020 | 19,765,132 | 19,504,781 | 0 | (260,351 | ) | |||||||||||||||||
U.S. Ultra Bond | 118 | 12-21-2020 | 26,605,900 | 26,066,938 | 0 | (538,962 | ) | |||||||||||||||||
5-Year U.S. Treasury Notes | 628 | 12-31-2020 | 79,112,895 | 79,147,625 | 34,730 | 0 | ||||||||||||||||||
2-Year U.S. Treasury Notes | 1,479 | 12-31-2020 | 326,685,502 | 326,778,116 | 92,614 | 0 | ||||||||||||||||||
Short | ||||||||||||||||||||||||
Euro-BOBL Futures | (135) | 9-8-2020 | (21,658,364 | ) | (21,689,199 | ) | 0 | (30,835 | ) | |||||||||||||||
Euro-Bund Futures | (230) | 9-8-2020 | (48,112,046 | ) | (48,186,048 | ) | 0 | (74,002 | ) | |||||||||||||||
Euro-Schatz Futures | (67) | 9-8-2020 | (8,959,985 | ) | (8,956,099 | ) | 3,886 | 0 | ||||||||||||||||
10-Year Ultra Futures | (274) | 12-21-2020 | (43,655,806 | ) | (43,685,875 | ) | 0 | (30,069 | ) | |||||||||||||||
10-Year U.S. Treasury Notes | (6) | 12-21-2020 | (833,802 | ) | (835,500 | ) | 0 | (1,698 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||||
$ | 131,230 | $ | (1,230,089 | ) | ||||||||||||||||||||
|
|
|
|
Forward Foreign Currency Contracts
Currency to be received | Currency to be delivered | Counterparty | Settlement date | Unrealized gains | Unrealized losses | |||||||||
30,090,462 USD | 26,609,034 EUR | Citibank | 9-30-2020 | $ | 0 | $ | (1,683,506 | ) | ||||||
4,014,870 USD | 3,400,000 EUR | Citibank | 9-30-2020 | 0 | (45,086 | ) | ||||||||
5,660,993 USD | 5,000,000 EUR | Citibank | 9-30-2020 | 0 | (309,529 | ) | ||||||||
|
|
|
| |||||||||||
$ | 0 | $ | (2,038,121 | ) | ||||||||||
|
|
|
|
Centrally Cleared Credit Default Swaps
Reference index | Fixed rate received | Payment frequency | Maturity date | Notional amount | Value | Premiums paid | Unrealized gains | Unrealized losses | ||||||||||||||||||||||||
Sell protection | ||||||||||||||||||||||||||||||||
Markit iTraxx Europe Crossover | 5.00 | % | Quarterly | 12-20-2024 | EUR 4,000,000 | $ | 370,925 | $ | (44,748 | ) | $ | 415,673 | $ | 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:
Value, beginning of period | Purchases | Shares proceeds | 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 | 5,227,379 | 194,336,856 | (199,301,921 | ) | $ | 1,388 | $ | (62 | ) | $ | 138,799 | # | $ | 263,640 | ||||||||||||||||||
Wells Fargo Government Money Market Fund Select Class | 86,371,118 | 647,276,215 | (639,342,895 | ) | 0 | 0 | 526,177 | 94,304,438 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
$ | 1,388 | $ | (62 | ) | $ | 664,976 | $ | 94,568,078 | 7.32 | % | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
# | Amount shown represents income before fees and rebates. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Core Plus Bond Fund | 27
Table of Contents
Statement of assets and liabilities—August 31, 2020
Assets | ||||
Investments in unaffiliated securities (including $258,378 of securities loaned), at value (cost $1,161,013,461) | $ | 1,208,169,386 | ||
Investments in affiliated securities, at value (cost $94,568,078) | 94,568,078 | |||
Cash at broker segregated for centrally cleared swaps | 420,684 | |||
Cash at broker segregated for forward foreign currency contracts | 1,920,000 | |||
Cash at broker segregated for open futures contracts | 4,723,072 | |||
Due from broker | 546,854 | |||
Principal paydown receivable | 48 | |||
Receivable for Fund shares sold | 18,057,482 | |||
Receivable for interest | 7,565,176 | |||
Receivable for daily variation margin on centrally cleared swaps | 4,092 | |||
Receivable for daily variation margin on open futures contracts | 332,537 | |||
Receivable for securities lending income, net | 9,293 | �� | ||
Prepaid expenses and other assets | 292,694 | |||
|
| |||
Total assets | 1,336,609,396 | |||
|
| |||
Liabilities | ||||
Payable upon receipt of securities loaned | 260,600 | |||
Payable for when-issued transactions | 34,426,930 | |||
Payable for Fund shares redeemed | 6,583,334 | |||
Overdraft due to custodian bank | 546,854 | |||
Unrealized losses on forward foreign currency contracts | 2,038,121 | |||
Management fee payable | 303,614 | |||
Administration fees payable | 102,736 | |||
Distribution fee payable | 17,689 | |||
Trustees’ fees and expenses payable | 2,522 | |||
Accrued expenses and other liabilities | 97,503 | |||
|
| |||
Total liabilities | 44,379,903 | |||
|
| |||
Total net assets | $ | 1,292,229,493 | ||
|
| |||
Net assets consist of | ||||
Paid-in capital | $ | 1,197,608,337 | ||
Total distributable earnings | 94,621,156 | |||
|
| |||
Total net assets | $ | 1,292,229,493 | ||
|
| |||
Computation of net asset value and offering price per share | ||||
Net assets – Class A | $ | 264,365,887 | ||
Shares outstanding – Class A1 | 19,192,846 | |||
Net asset value per share – Class A | $13.77 | |||
Maximum offering price per share – Class A2 | $14.42 | |||
Net assets – Class C | $ | 28,342,015 | ||
Shares outstanding – Class C1 | 2,058,959 | |||
Net asset value per share – Class C | $13.77 | |||
Net assets – Class R6 | $ | 83,260,040 | ||
Shares outstanding – Class R61 | 6,035,760 | |||
Net asset value per share – Class R6 | $13.79 | |||
Net assets – Administrator Class | $ | 80,099,101 | ||
Shares outstanding – Administrator Class1 | 5,825,989 | |||
Net asset value per share – Administrator Class | $13.75 | |||
Net assets – Institutional Class | $ | 836,162,450 | ||
Shares outstanding – Institutional Class1 | 60,640,649 | |||
Net asset value per share – Institutional Class | $13.79 |
1 | The Fund has an unlimited number of authorized shares. |
2 | Maximum offering price is computed as 100/95.50 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.
28 | Wells Fargo Core Plus Bond Fund
Table of Contents
Statement of operations—year ended August 31, 2020
Investment income | ||||
Interest | $ | 33,275,023 | ||
Dividends | 1,657,628 | |||
Income from affiliated securities | 588,926 | |||
|
| |||
Total investment income | 35,521,577 | |||
|
| |||
Expenses | ||||
Management fee | 4,644,391 | |||
Administration fees |
| |||
Class A | 397,088 | |||
Class C | 35,152 | |||
Class R6 | 20,179 | |||
Administrator Class | 66,544 | |||
Institutional Class | 531,839 | |||
Shareholder servicing fees |
| |||
Class A | 619,717 | |||
Class C | 54,926 | |||
Administrator Class | 166,331 | |||
Distribution fee |
| |||
Class C | 164,776 | |||
Custody and accounting fees | 59,578 | |||
Professional fees | 70,687 | |||
Registration fees | 120,040 | |||
Shareholder report expenses | 72,168 | |||
Trustees’ fees and expenses | 21,326 | |||
Other fees and expenses | 18,700 | |||
|
| |||
Total expenses | 7,063,442 | |||
Less: Fee waivers and/or expense reimbursements |
| |||
Fund-level | (1,586,779 | ) | ||
Class A | (21,884 | ) | ||
Class C | (17 | ) | ||
Administrator Class | (32,615 | ) | ||
|
| |||
Net expenses | 5,422,147 | |||
|
| |||
Net investment income | 30,099,430 | |||
|
| |||
Realized and unrealized gains (losses) on investments | ||||
Net realized gains on |
| |||
Unaffiliated securities | 35,737,320 | |||
Affiliated securities | 1,388 | |||
Futures contracts | 10,173,090 | |||
Forward foreign currency contracts | 2,201,490 | |||
Credit default swap contracts | 147,511 | |||
|
| |||
Net realized gains on investments | 48,260,799 | |||
|
| |||
Net change in unrealized gains (losses) on |
| |||
Unaffiliated securities | 17,840,767 | |||
Affiliated securities | (62 | ) | ||
Futures contracts | (1,339,017 | ) | ||
Forward foreign currency contracts | (3,501,691 | ) | ||
Credit default swap contracts | 371,712 | |||
|
| |||
Net change in unrealized gains (losses) on investments | 13,371,709 | |||
|
| |||
Net realized and unrealized gains (losses) on investments | 61,632,508 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 91,731,938 | ||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Core Plus Bond Fund | 29
Table of Contents
Statement of changes in net assets
Year ended August 31, 2020 | Year ended August 31, 2019 | |||||||||||||||
Operations | ||||||||||||||||
Net investment income | $ | 30,099,430 | $ | 20,538,054 | ||||||||||||
Net realized gains on investments | 48,260,799 | 8,587,464 | ||||||||||||||
Net change in unrealized gains (losses) on investments | 13,371,709 | 37,270,326 | ||||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from operations | 91,731,938 | 66,395,844 | ||||||||||||||
|
| |||||||||||||||
Distributions to shareholders from net investment income and net realized gains | ||||||||||||||||
Class A | (8,171,769 | ) | (6,574,947 | ) | ||||||||||||
Class C | (549,882 | ) | (370,804 | ) | ||||||||||||
Class R6 | (2,452,657 | ) | (1,715,047 | ) | ||||||||||||
Administrator Class | (2,263,862 | ) | (771,693 | ) | ||||||||||||
Institutional Class | (23,463,205 | ) | (10,270,164 | ) | ||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | (36,901,375 | ) | (19,702,655 | ) | ||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold | ||||||||||||||||
Class A | 3,415,044 | 45,155,629 | 2,680,470 | 33,438,451 | ||||||||||||
Class C | 1,052,336 | 13,908,235 | 481,331 | 6,064,332 | ||||||||||||
Class R6 | 1,642,751 | 21,915,029 | 1,501,220 | 18,804,815 | ||||||||||||
Administrator Class | 2,516,024 | 33,041,254 | 3,315,239 | 42,606,846 | ||||||||||||
Institutional Class | 45,235,915 | 595,518,013 | 29,266,462 | 369,237,004 | ||||||||||||
|
| |||||||||||||||
709,538,160 | 470,151,448 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions | ||||||||||||||||
Class A | 579,700 | 7,576,693 | 489,790 | 6,110,716 | ||||||||||||
Class C | 37,616 | 492,207 | 27,365 | 340,533 | ||||||||||||
Class R6 | 151,605 | 1,988,286 | 108,554 | 1,359,721 | ||||||||||||
Administrator Class | 173,041 | 2,259,572 | 61,503 | 767,914 | ||||||||||||
Institutional Class | 1,533,691 | 20,105,074 | 744,184 | 9,339,392 | ||||||||||||
|
| |||||||||||||||
32,421,832 | 17,918,276 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed |
| |||||||||||||||
Class A | (3,579,677 | ) | (46,707,885 | ) | (3,117,801 | ) | (38,772,694 | ) | ||||||||
Class C | (420,883 | ) | (5,548,980 | ) | (794,733 | ) | (9,880,274 | ) | ||||||||
Class R6 | (526,084 | ) | (6,893,021 | ) | (518,426 | ) | (6,649,954 | ) | ||||||||
Administrator Class | (1,247,359 | ) | (16,107,146 | ) | (1,625,234 | ) | (20,018,219 | ) | ||||||||
Institutional Class | (26,157,510 | ) | (337,958,968 | ) | (11,506,592 | ) | (142,716,810 | ) | ||||||||
|
| |||||||||||||||
(413,216,000 | ) | (218,037,951 | ) | |||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from capital share transactions | 328,743,992 | 270,031,773 | ||||||||||||||
|
| |||||||||||||||
Total increase in net assets | 383,574,555 | 316,724,962 | ||||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 908,654,938 | 591,929,976 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 1,292,229,493 | $ | 908,654,938 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
30 | Wells Fargo Core Plus Bond Fund
Table of Contents
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $13.09 | $12.27 | $12.71 | $12.70 | $12.14 | |||||||||||||||
Net investment income | 0.34 | 0.37 | 0.34 | 0.36 | 1 | 0.33 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.77 | 0.80 | (0.45 | ) | (0.01 | ) | 0.60 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.11 | 1.17 | (0.11 | ) | 0.35 | 0.93 | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.36 | ) | (0.35 | ) | (0.33 | ) | (0.33 | ) | (0.33 | ) | ||||||||||
Net realized gains | (0.07 | ) | 0.00 | 0.00 | (0.01 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.43 | ) | (0.35 | ) | (0.33 | ) | (0.34 | ) | (0.37 | ) | ||||||||||
Net asset value, end of period | $13.77 | $13.09 | $12.27 | $12.71 | $12.70 | |||||||||||||||
Total return2 | 8.72 | % | 9.74 | % | (0.84 | )% | 2.78 | % | 7.78 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.88 | % | 0.91 | % | 0.92 | % | 0.93 | % | 0.93 | % | ||||||||||
Net expenses | 0.72 | % | 0.73 | % | 0.73 | % | 0.76 | % | 0.84 | % | ||||||||||
Net investment income | 2.60 | % | 2.99 | % | 2.63 | % | 2.88 | % | 2.76 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 130 | % | 89 | % | 148 | % | 199 | % | 288 | % | ||||||||||
Net assets, end of period (000s omitted) | $264,366 | $245,879 | $229,688 | $255,668 | $349,852 |
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 Core Plus Bond Fund | 31
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $13.09 | $12.26 | $12.71 | $12.70 | $12.14 | |||||||||||||||
Net investment income | 0.23 | 0.28 | 0.23 | 0.26 | 0.24 | 1 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.78 | 0.81 | (0.44 | ) | (0.01 | ) | 0.59 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.01 | 1.09 | (0.21 | ) | 0.25 | 0.83 | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.26 | ) | (0.26 | ) | (0.24 | ) | (0.23 | ) | (0.23 | ) | ||||||||||
Net realized gains | (0.07 | ) | 0.00 | 0.00 | (0.01 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.33 | ) | (0.26 | ) | (0.24 | ) | (0.24 | ) | (0.27 | ) | ||||||||||
Net asset value, end of period | $13.77 | $13.09 | $12.26 | $12.71 | $12.70 | |||||||||||||||
Total return2 | 7.85 | % | 8.91 | % | (1.66 | )% | 2.01 | % | 6.99 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 1.63 | % | 1.66 | % | 1.67 | % | 1.68 | % | 1.68 | % | ||||||||||
Net expenses | 1.48 | % | 1.48 | % | 1.48 | % | 1.51 | % | 1.59 | % | ||||||||||
Net investment income | 1.85 | % | 2.25 | % | 1.89 | % | 2.12 | % | 2.00 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 130 | % | 89 | % | 148 | % | 199 | % | 288 | % | ||||||||||
Net assets, end of period (000s omitted) | $28,342 | $18,195 | $20,550 | $19,036 | $21,216 |
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.
32 | Wells Fargo Core Plus Bond Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||
CLASS R6 | 2020 | 2019 | 2018 | 20171 | ||||||||||||
Net asset value, beginning of period | $13.11 | $12.28 | $12.73 | $12.59 | ||||||||||||
Net investment income | 0.39 | 2 | 0.41 | 0.39 | 0.33 | 2 | ||||||||||
Net realized and unrealized gains (losses) on investments | 0.77 | 0.82 | (0.46 | ) | 0.12 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | 1.16 | 1.23 | (0.07 | ) | 0.45 | |||||||||||
Distributions to shareholders from | ||||||||||||||||
Net investment income | (0.41 | ) | (0.40 | ) | (0.38 | ) | (0.30 | ) | ||||||||
Net realized gains | (0.07 | ) | 0.00 | 0.00 | (0.01 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions to shareholders | (0.48 | ) | (0.40 | ) | (0.38 | ) | (0.31 | ) | ||||||||
Net asset value, end of period | $13.79 | $13.11 | $12.28 | $12.73 | ||||||||||||
Total return3 | 9.10 | % | 10.14 | % | (0.55 | )% | 3.64 | % | ||||||||
Ratios to average net assets (annualized) | ||||||||||||||||
Gross expenses | 0.50 | % | 0.53 | % | 0.54 | % | 0.55 | % | ||||||||
Net expenses | 0.35 | % | 0.35 | % | 0.35 | % | 0.35 | % | ||||||||
Net investment income | 2.98 | % | 3.36 | % | 3.05 | % | 3.12 | % | ||||||||
Supplemental data | ||||||||||||||||
Portfolio turnover rate | 130 | % | 89 | % | 148 | % | 199 | % | ||||||||
Net assets, end of period (000s omitted) | $83,260 | $62,522 | $45,159 | $31,451 |
1 | For the period from October 31, 2016 (commencement of class operations) to August 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 Core Plus Bond Fund | 33
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $13.07 | $12.25 | $12.69 | $12.68 | $12.12 | |||||||||||||||
Net investment income | 0.35 | 0.38 | 0.35 | 0.37 | 0.34 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.77 | 0.81 | (0.44 | ) | (0.01 | ) | 0.60 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.12 | 1.19 | (0.09 | ) | 0.36 | 0.94 | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.37 | ) | (0.37 | ) | (0.35 | ) | (0.34 | ) | (0.34 | ) | ||||||||||
Net realized gains | (0.07 | ) | 0.00 | 0.00 | (0.01 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.44 | ) | (0.37 | ) | (0.35 | ) | (0.35 | ) | (0.38 | ) | ||||||||||
Net asset value, end of period | $13.75 | $13.07 | $12.25 | $12.69 | $12.68 | |||||||||||||||
Total return | 8.85 | % | 9.88 | % | (0.74 | )% | 2.90 | % | 7.92 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.82 | % | 0.85 | % | 0.86 | % | 0.87 | % | 0.87 | % | ||||||||||
Net expenses | 0.62 | % | 0.62 | % | 0.62 | % | 0.66 | % | 0.72 | % | ||||||||||
Net investment income | 2.71 | % | 3.07 | % | 2.74 | % | 2.97 | % | 2.84 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 130 | % | 89 | % | 148 | % | 199 | % | 288 | % | ||||||||||
Net assets, end of period (000s omitted) | $80,099 | $57,316 | $32,241 | $41,806 | $71,133 |
The accompanying notes are an integral part of these financial statements.
34 | Wells Fargo Core Plus Bond Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $13.11 | $12.28 | $12.72 | $12.71 | $12.15 | |||||||||||||||
Net investment income | 0.38 | 0.39 | 0.37 | 1 | 0.38 | 0.36 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.77 | 0.83 | (0.44 | ) | 0.01 | 0.60 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.15 | 1.22 | (0.07 | ) | 0.39 | 0.96 | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.40 | ) | (0.39 | ) | (0.37 | ) | (0.37 | ) | (0.36 | ) | ||||||||||
Net realized gains | (0.07 | ) | 0.00 | 0.00 | (0.01 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.47 | ) | (0.39 | ) | (0.37 | ) | (0.38 | ) | (0.40 | ) | ||||||||||
Net asset value, end of period | $13.79 | $13.11 | $12.28 | $12.72 | $12.71 | |||||||||||||||
Total return | 9.05 | % | 10.17 | % | (0.52 | )% | 3.10 | % | 8.05 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.55 | % | 0.58 | % | 0.59 | % | 0.60 | % | 0.60 | % | ||||||||||
Net expenses | 0.40 | % | 0.40 | % | 0.40 | % | 0.44 | % | 0.58 | % | ||||||||||
Net investment income | 2.92 | % | 3.29 | % | 3.00 | % | 3.17 | % | 3.04 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 130 | % | 89 | % | 148 | % | 199 | % | 288 | % | ||||||||||
Net assets, end of period (000s omitted) | $836,162 | $524,743 | $264,292 | $163,387 | $79,687 |
1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Core Plus Bond Fund | 35
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 Core Plus Bond 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.
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.
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.
Swap contracts are valued at the evaluated price provided by an independent pricing service or, if a reliable price is not available, the quoted bid price from an independent broker-dealer.
Forward foreign currency contracts are recorded at the forward rate 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”).
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.
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. 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.
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Forward foreign currency contracts
A forward foreign currency contract is an agreement between two parties to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund enters into forward foreign currency contracts to facilitate transactions in foreign-denominated securities and to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. Forward foreign currency contracts are recorded at the forward rate and marked-to-market daily. When the contracts are closed, realized gains and losses arising from such transactions are recorded as realized gains or losses on forward foreign currency contracts. The Fund is subject to foreign currency risk and may be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. The Fund’s maximum risk of loss from counterparty credit risk is the unrealized gains on the contracts. This risk may be mitigated if there is a master netting arrangement between the Fund and the counterparty.
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.
When-issued transactions
The Fund may purchase securities on a forward commitment or when-issued basis. The Fund records a when-issued transaction on the trade date and will segregate assets in an amount at least equal in value to the Fund’s commitment to purchase when-issued securities. Securities purchased on a when-issued basis are marked-to-market daily and the Fund begins earning interest on the settlement date. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
Loans
The Fund may invest in direct debt instruments which are interests in amounts owed to lenders by corporate or other borrowers. The loans pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. Investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. When the Fund purchases participations, it generally has no rights to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund assumes the credit risk of both the borrower and the lender that is selling the participation. When the Fund purchases assignments from lenders, it acquires direct rights against the borrower on the loan and may enforce compliance by the borrower with the terms of the loan agreement. Loans may include fully funded term loans or unfunded loan commitments, which are contractual obligations for future funding.
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 interest rates and is subject to interest rate 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
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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.
Swap contracts
Swap contracts are agreements between the Fund and a counterparty to exchange a series of cash flows over a specified period. Swap agreements are privately negotiated contracts between the Fund that are entered into as bilateral contracts in the OTC market (“OTC swaps”) or centrally cleared (“centrally cleared swaps”) with a central clearinghouse.
The Fund entered into centrally cleared swaps. In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the Fund’s counterparty on the swap agreement becomes the CCP. Upon entering into a centrally cleared swap, the Fund is required to deposit an initial margin with the broker in the form of cash or securities. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is shown as cash segregated for centrally cleared swaps in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). The variation margin is recorded as an unrealized gain (or loss) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statement of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Statement of Operations.
Credit default swaps
The Fund may enter into credit default swaps for hedging or speculative purposes to provide or receive a measure of protection against default on a referenced entity, obligation or index or a basket of single-name issuers or traded indexes. An index credit default swap references all the names in the index, and if a credit event is triggered, the credit event is settled based on that name’s weight in the index. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the protection seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring).
The Fund may enter into credit default swaps as either the seller of protection or the buyer of protection. If the Fund is the buyer of protection and a credit event occurs, the Fund will either receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. If the Fund is the seller of protection and a credit event occurs, the Fund will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.
As the seller of protection, the Fund is subject to investment exposure on the notional amount of the swap and has assumed the risk of default of the underlying security or index. As the buyer of protection, the Fund could be exposed to risks if the seller of the protection defaults on its obligation to perform, or if there are unfavorable changes in the fluctuation of interest rates.
By entering into credit default swap contracts, the Fund is exposed to credit risk. In addition, certain credit default swap contracts entered into by the Fund provide for conditions that result in events of default or termination that enable the counterparty to the agreement to cause an early termination of the transactions under those agreements.
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.
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.
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.
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Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date and paid from net investment income monthly 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 August 31, 2020, the aggregate cost of all investments for federal income tax purposes was $1,254,137,213 and the unrealized gains (losses) consisted of:
Gross unrealized gains | $ | 65,591,091 | ||
Gross unrealized losses | (19,712,147 | ) | ||
Net unrealized gains | $ | 45,878,944 |
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.
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The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of August 31, 2020:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Agency securities | $ | 0 | $ | 160,348,347 | $ | 0 | $ | 160,348,347 | ||||||||
Asset-backed securities | 0 | 64,693,764 | 0 | 64,693,764 | ||||||||||||
Corporate bonds and notes | 0 | 351,482,169 | 0 | 351,482,169 | ||||||||||||
Exchange-traded funds | 71,937,518 | 0 | 0 | 71,937,518 | ||||||||||||
Foreign corporate bonds and notes | 0 | 49,614,053 | 0 | 49,614,053 | ||||||||||||
Foreign government bonds | 0 | 8,346,036 | 0 | 8,346,036 | ||||||||||||
Loans | 0 | 2,347,099 | 0 | 2,347,099 | ||||||||||||
Municipal obligations | 0 | 17,276,250 | 0 | 17,276,250 | ||||||||||||
Non-agency mortgage-backed securities | 0 | 238,348,410 | 0 | 238,348,410 | ||||||||||||
U.S. Treasury securities | 114,105,239 | 0 | 0 | 114,105,239 | ||||||||||||
Yankee corporate bonds and notes | 0 | 109,549,500 | 0 | 109,549,500 | ||||||||||||
Yankee government bonds | 0 | 20,121,001 | 0 | 20,121,001 | ||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 94,568,078 | 0 | 0 | 94,568,078 | ||||||||||||
280,610,835 | 1,022,126,629 | 0 | 1,302,737,464 | |||||||||||||
Futures contracts | 131,230 | 0 | 0 | 131,230 | ||||||||||||
Credit default swap contracts | 0 | 415,673 | 0 | 415,673 | ||||||||||||
Total assets | $ | 280,742,065 | $ | 1,022,542,302 | $ | 0 | $ | 1,303,284,367 | ||||||||
Liabilities | ||||||||||||||||
Futures contracts | $ | 1,230,089 | $ | 0 | $ | 0 | $ | 1,230,089 | ||||||||
Forward foreign currency contracts | 0 | 2,038,121 | 0 | 2,038,121 | ||||||||||||
Total liabilities | $ | 1,230,089 | $ | 2,038,121 | $ | 0 | $ | 3,268,210 |
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
Futures contracts, forward foreign currency contracts and swap contracts are reported at their cumulative unrealized gains (losses) at measurement date as reported in the tables following the Portfolio of Investments. For futures contracts and centrally cleared swaps, 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.
For the year ended August 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
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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 | 0.450 | % | ||
Next $500 million | 0.425 | |||
Next $2 billion | 0.400 | |||
Next $2 billion | 0.375 | |||
Next $5 billion | 0.340 | |||
Over $10 billion | 0.320 |
For the year ended August 31, 2020, the management fee was equivalent to an annual rate of 0.43% 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 0.20% and declining to 0.10% 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 | 0.16 | % | ||
Class R6 | 0.03 | |||
Administrator Class | 0.10 | |||
Institutional Class | 0.08 |
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 December 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.73% for Class A shares, 1.48% for Class C shares, 0.35% for Class R6 shares, 0.62% for Administrator Class shares, and 0.40% 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 August 31, 2020, Funds Distributor received $18,339 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 August 31, 2020.
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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 short-term securities, for the year ended August 31, 2020 were as follows:
Purchases at cost | Sales proceeds | |||||
U.S. government | Non-U.S. government | U.S. government | Non-U.S. government | |||
$845,694,158 | $1,004,602,893 | $800,643,378 | $528,488,720 |
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 Federal 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 August 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 | |||||||||
BNP Paribas Securities Corporation | $ | 155,231 | $ | (155,231 | ) | $ | 0 | |||||
UBS Securities LLC | 103,147 | (103,147 | ) | 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 August 31, 2020, the Fund entered into futures contracts to speculate on interest rates and to help manage the duration of the portfolio. The Fund also entered into forward foreign currency contracts for economic hedging purposes and entered into credit default swap contracts to hedge risks and/or enhance total returns.
The volume of the Fund’s derivative activity during the year ended August 31, 2020 was as follows:
Futures contracts | ||||
Average notional balance on long futures | $ | 297,817,869 | ||
Average notional balance on short futures | 79,921,170 | |||
Forward foreign currency contracts | ||||
Average contract amounts to buy | 16,871,945 | |||
Average contract amounts to sell | 58,095,094 | |||
Credit default swap contracts | ||||
Average notional balance | 9,184,563 |
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The Fund’s credit default swap may contain provisions for early termination in the event the net assets of the Fund declines below specific levels identified by the counterparty. If these levels are triggered, the counterparty may terminate the transaction and seek payment or request full collateralization of the derivative transactions in net liability positions.
A summary of the location of derivative instruments on the financial statements by risk is outlined in the following tables.
The fair value of derivative instruments as of August 31, 2020 by risk type was as follows for the Fund:
Asset derivatives | Liability derivatives | |||||||||||
Statement of Assets and Liabilities location | Fair value | Statement of Assets and Liabilities location | Fair value | |||||||||
Interest rate risk | Unrealized gains on futures contracts | $ | 131,230 | * | Unrealized losses on futures contracts | $ | 1,230,089 | * | ||||
Foreign currency risk | Unrealized gains on forward foreign currency contracts | 0 | Unrealized losses on forward foreign currency contracts | 2,038,121 | ||||||||
Credit risk | Net unrealized gains on swap contracts | 415,673 | * | Net unrealized losses on swap contracts | 0 | * | ||||||
$ | 546,903 | $ | 3,268,210 |
* | Amount represents cumulative unrealized gains (losses) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin as of August 31, 2020 is reported separately on the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the year ended August 31, 2020 was as follows for the Fund:
Amount of realized gains (losses) on derivatives | ||||||||||||||||
Futures contracts | Forward foreign currency contracts | Swap contracts | Total | |||||||||||||
Interest rate risk | $ | 10,173,090 | $ | 0 | $ | 0 | $ | 10,173,090 | ||||||||
Foreign currency risk | 0 | 2,201,490 | 0 | 2,201,490 | ||||||||||||
Credit risk | 0 | 0 | 147,511 | 147,511 | ||||||||||||
$ | 10,173,090 | $ | 2,201,490 | $ | 147,511 | $ | 12,522,091 | |||||||||
Change in unrealized gains (losses) on derivatives | ||||||||||||||||
Futures contracts | Forward foreign currency contracts | Swap contracts | Total | |||||||||||||
Interest rate risk | $ | (1,339,017 | ) | $ | 0 | $ | 0 | $ | (1,339,017 | ) | ||||||
Foreign currency risk | 0 | (3,501,691 | ) | 0 | (3,501,691 | ) | ||||||||||
Credit risk | 0 | 0 | 371,712 | 371,712 | ||||||||||||
$ | (1,339,017 | ) | $ | (3,501,691 | ) | $ | 371,712 | $ | (4,468,996 | ) |
For certain types of derivative transactions, the Fund has entered into International Swaps and Derivatives Association, Inc. master agreements (“ISDA Master Agreements”) or similar agreements with approved counterparties. The ISDA Master Agreements or similar agreements may have requirements to deliver/deposit securities or cash to/with an exchange or broker-dealer as collateral and allows the Fund to offset, with each counterparty, certain derivative financial instrument’s assets and/or liabilities with collateral held or pledged. Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearinghouse for exchange traded derivatives while collateral terms are contract specific for over-the-counter traded derivatives. Cash collateral that has been pledged to cover obligations of the Fund under ISDA Master Agreements or similar agreements, if any, are reported separately in the Statement of Assets and Liabilities. Securities pledged as collateral, if any, are noted in the Portfolio of Investments. With respect to balance sheet offsetting, absent an event of default by the counterparty or a termination of the agreement, the reported amounts of financial assets and financial liabilities
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in the Statement of Assets and Liabilities are not offset across transactions between the Fund and the applicable counterparty. A reconciliation of the gross amounts on the Statement of Assets and Liabilities to the net amounts by counterparty, including any collateral exposure, is as follows:
Counterparty | Gross amounts of liabilities in the Statement of Assets and Liabilities | Amounts subject to netting agreements | Collateral pledged1 | Net amount of liabilities | ||||||||
Citibank | $2,038,121 | $0 | $ | (1,920,000 | ) | $ | 118,121 |
1 | Collateral pledged within this table is limited to the collateral for the net transaction with the counterparty. |
8. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $350,000,000 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 August 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 August 31, 2020 and August 31, 2019 were as follows:
Year ended August 31 | ||||||||
2020 | 2019 | |||||||
Ordinary income | $ | 33,116,191 | $ | 19,702,655 | ||||
Long-term capital gain | 3,785,184 | 0 |
As of August 31, 2020, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income | Undistributed long-term gain | Unrealized gains | ||
$31,684,940 | $17,074,232 | $45,878,944 |
10. INDEMNIFICATION
Under the Fund’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 Fund. The Fund has entered into a separate agreement with each Trustee that converts indemnification rights currently existing under the Fund’s organizational documents into contractual rights that cannot be changed in the future without the consent of the Trustee. Additionally, in the normal course of business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’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.
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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 Core Plus Bond Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of August 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 August 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 August 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
October 28, 2020
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TAX INFORMATION
Pursuant to Section 852 of the Internal Revenue Code, $3,785,184 was designated as a 20% rate gain distribution for the fiscal year ended August 31, 2020.
Pursuant to Section 854 of the Internal Revenue Code, $67,497 of income dividends paid during the fiscal year ended August 31, 2020 has been designated as qualified dividend income (QDI).
For the fiscal year ended August 31, 2020, $21,107,534 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 August 31, 2020, $1,848,792 has been designated as short-term capital gain dividends for nonresident alien shareholders pursuant to Section 871 of the Internal Revenue Code.
For the fiscal year ended August 31, 2020, 3.23% of the ordinary income distributed was derived from interest on U.S. government securities.
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 142 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 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). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008 | 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 (Emeritus), 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 Wheelock (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. Interim President of the McKnight Foundation from January to September 2020. 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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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 the Treasurer of 77 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. |
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BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Wells Fargo Core Plus Bond Fund
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Funds Trust (the “Trust”) must determine annually whether to approve the continuation of the Trust’s investment management and sub-advisory agreements. In this regard, at a Board meeting held on May 26, 2020 and May 28, 2020 (together, the “Meeting”), the Board, all the members of which have no direct or indirect interest in the investment management and sub-advisory agreements and are not “interested persons” of the Trust, as defined in the 1940 Act (the “Independent Trustees”), reviewed and approved for Wells Fargo Core Plus Bond Fund (the “Fund”): (i) an investment management agreement (the “Management Agreement”) with Wells Fargo Funds Management, LLC (“Funds Management”); and (ii) an investment sub-advisory agreement (the “Sub-Advisory Agreement”) with Wells Capital Management Incorporated (the “Sub-Adviser”), an affiliate of Funds Management. The Management Agreement and the Sub-Advisory Agreement are collectively referred to as the “Advisory Agreements.”
At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of Funds Management and the Sub-Adviser and the approval of the Advisory Agreements. Prior to the Meeting, including at a Board meeting held in April 2020, the Trustees conferred extensively among themselves and with representatives of Funds Management about these matters. Also, the Board has adopted a team-based approach, with each team consisting of a sub-set of Trustees, to assist the full Board in the discharge of its duties in reviewing investment performance and other matters throughout the year. The Independent Trustees were assisted in their evaluation of the Advisory Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately.
In providing information to the Board, Funds Management and the Sub-Adviser were guided by a detailed set of requests for information submitted to them by independent legal counsel on behalf of the Independent Trustees at the start of the Board’s annual contract renewal process earlier in 2020. In considering and approving the Advisory Agreements, the Trustees considered the information they believed relevant, including but not limited to the information discussed below. The Board considered not only the specific information presented in connection with the Meeting, but also the knowledge gained over time through interaction with Funds Management and the Sub-Adviser about various topics. In this regard, the Board reviewed reports of Funds Management at each of its quarterly meetings, which included, among other things, portfolio reviews and investment performance reports. In addition, the Board and the teams mentioned above confer with portfolio managers at various times throughout the year. The Board did not identify any particular information or consideration that was all-important or controlling, and each individual Trustee may have attributed different weights to various factors.
After its deliberations, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable. The Board considered the approval of the Advisory Agreements for the Fund as part of its consideration of agreements for funds across the complex, but its approvals were made on a fund-by-fund basis. The following summarizes a number of important, but not necessarily all, factors considered by the Board in support of its approvals.
Nature, extent and quality of services
The Board received and considered various information regarding the nature, extent and quality of services provided to the Fund by Funds Management and the Sub-Adviser under the Advisory Agreements. This information included a description of the investment advisory services and Fund-level administrative services covered by the Management Agreement, as well as, among other things, a summary of the background and experience of senior management of Wells Fargo Asset Management (“WFAM”), of which Funds Management and the Sub-Adviser are a part, and a summary of investments made in the business of WFAM. The Board also received a description of Funds Management’s and the Sub-Adviser’s business continuity plans and of their approaches to data privacy and cybersecurity, and related testing. The Board also received and reviewed information about Funds Management’s role as administrator of the Fund’s liquidity risk management program, Funds Management’s approach to risk management, and Funds Management’s intermediary and vendor oversight program.
The Board also considered the qualifications, background, tenure and responsibilities of each of the portfolio managers primarily responsible for the day-to-day portfolio management of the Fund. The Board evaluated the ability of Funds Management and the Sub-Adviser to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of Funds Management and the Sub-Adviser. In addition, the Board took into account the full range of services provided to the Fund by Funds Management and its affiliates.
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Other information (unaudited)
Fund investment performance and expenses
The Board considered the investment performance results for the Fund over various time periods ended December 31, 2019. The Board also considered more current results for various time periods ended March 31, 2020. The Board considered these results in comparison to the investment performance of funds in a universe that was determined by Broadridge Inc. (“Broadridge”) to be similar to the Fund (the “Universe”), and in comparison to the Fund’s benchmark index and to other comparative data. Broadridge is an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds in the performance Universe. The Board noted that the investment performance of the Fund (Class A) was higher than or in range of the average investment performance of the Universe for the one-, three-, five- and ten-year periods ended December 31, 2019. The Board also noted that the investment performance of the Fund (Administrator Class) was higher than the average investment performance of the Universe for all periods ended March 31, 2020. The Board also noted that the investment performance of the Fund was higher than its benchmark index, the Bloomberg Barclays U.S. Aggregate Bond Index, for all periods ended December 31, 2019. The Board also noted that the investment performance of the Fund was higher than its benchmark index, the Bloomberg Barclays U.S. Aggregate Bond Index, for the five- and ten-year periods ended March 31, 2020, and lower than its benchmark index for the one- and three-year periods ended March 31, 2020.
The Board also received and considered information regarding the Fund’s net operating expense ratios and their various components, including actual management fees, custodian and other non-management fees, and Rule 12b-1 and non-Rule 12b-1 shareholder service fees. The Board considered these ratios in comparison to the median ratios of funds in class-specific expense groups that were determined by Broadridge to be similar to the Fund (the “Groups”). The Board received a description of the methodology used by Broadridge to select the mutual funds in the expense Groups and an explanation of how funds comprising expense groups and their expense ratios may vary from year-to-year. Based on the Broadridge reports, the Board noted that the net operating expense ratios of the Fund were lower than the median net operating expense ratios of the expense Groups for each share class.
The Board took into account the Fund’s investment performance and expense information provided to it among the factors considered in deciding to re-approve the Advisory Agreements.
Investment management and sub-advisory fee rates
The Board reviewed and considered the contractual fee rates payable by the Fund to Funds Management under the Management Agreement, as well as the contractual fee rates payable by the Fund to Funds Management for class-level administrative services under a Class-Level Administration Agreement, which include, among other things, class-level transfer agency and sub-transfer agency costs (collectively, the “Management Rates”). The Board also reviewed and considered the contractual investment sub-advisory fee rates that are payable by Funds Management to the Sub-Adviser for investment sub-advisory services.
Among other information reviewed by the Board was a comparison of the Fund’s Management Rates with the average contractual investment management fee rates of funds in the expense Groups at a common asset level as well as transfer agency costs of the funds in the expense Groups. The Board noted that the Management Rates of the Fund were in range of the sum of these average rates for the Fund’s expense Groups for all share classes.
The Board also received and considered information about the portion of the total management fee that was retained by Funds Management after payment of the fee to the Sub-Adviser for sub-advisory services. In assessing the reasonableness of this amount, the Board received and evaluated information about the nature and extent of responsibilities retained and risks assumed by Funds Management and not delegated to or assumed by the Sub-Adviser, and about Funds Management’s on-going oversight services. Given the affiliation between Funds Management and the Sub-Adviser, the Board ascribed limited relevance to the allocation of fees between them.
The Board also received and considered information about the nature and extent of services offered and fee rates charged by Funds Management and the Sub-Adviser to other types of clients with investment strategies similar to those of the Fund. In this regard, the Board received information about the significantly greater scope of services, and compliance, reporting and other legal burdens and risks of managing proprietary mutual funds compared with those associated with managing assets of other types of clients, including third-party sub-advised fund clients and non-mutual fund clients such as institutional separate accounts.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board determined that the compensation payable to Funds Management under the Management Agreement and to the Sub-Adviser under the Sub-Advisory Agreement was reasonable.
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Other information (unaudited)
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of both WFAM and Wells Fargo & Co. (“Wells Fargo”) from providing services to the fund family as a whole. The Board noted that the Sub-Adviser’s profitability information with respect to providing services to the Fund and other funds in the family was subsumed in the WFAM and Wells Fargo profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability, including a description of the methodology used to allocate certain expenses. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such as the size, type and age of fund.
Based on its review, the Board did not deem the profits reported by Funds Management, WFAM or Wells Fargo from services provided to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
The Board received and considered information about the potential for Funds Management to experience economies of scale in the provision of management services to the Fund, the difficulties of calculating economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. The Board noted the existence of breakpoints in the Fund’s management fee structure, which operate generally to reduce the Fund’s expense ratios as the Fund grows in size, and the size of the Fund in relation to such breakpoints. The Board considered that in addition to management fee breakpoints, Funds Management shares potential economies of scale from its management business in a variety of ways, including through fee waiver and expense reimbursement arrangements, services that benefit shareholders, competitive management fee rates set at the outset without regard to breakpoints, and investments in the business intended to enhance services available to shareholders.
The Board concluded that Funds Management’s arrangements with respect to the Fund, including contractual breakpoints, constituted a reasonable approach to sharing potential economies of scale with the Fund and its shareholders.
Other benefits to Funds Management and the Sub-Adviser
The Board received and considered information regarding potential “fall-out” or ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, as a result of their relationships with the Fund. Ancillary benefits could include, among others, benefits directly attributable to other relationships with the Fund and benefits potentially derived from an increase in Funds Management’s and the Sub-Adviser’s business as a result of their relationships with the Fund. The Board noted that various affiliates of Funds Management may receive distribution-related fees, shareholder servicing payments and sub-transfer agency fees in respect of shares sold or held through them and services provided.
The Board also reviewed information about soft dollar credits earned and utilized by the Sub-Adviser, fees earned by Funds Management and the Sub-Adviser from managing a private investment vehicle for the fund family’s securities lending collateral, and commissions earned by an affiliated broker from portfolio transactions.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board did not find that any ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, were unreasonable.
Conclusion
At the Meeting, after considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable.
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Other information (unaudited)
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Wells Fargo Funds Trust (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) on behalf of each of its series, including the Fund, which is reasonably designed to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) previously approved the designation of Wells Fargo Funds Management, LLC (“Funds Management”), the Fund’s investment manager, as the administrator of the Program, and Funds Management has established a Liquidity Risk Management Council composed of personnel from multiple departments within Funds Management and its affiliates to assist Funds Management in the implementation and on-going administration of the Program.
The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent the Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if the Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s “highly liquid investments” below its HLIM; and (6) periodic reporting to the Board.
At a meeting of the Board held on May 26 and 28, 2020, the Board received a written report (the “Report”) from Funds Management that addressed the operation of the Program and assessed its adequacy and effectiveness of implementation. The Report covered the initial period from December 1, 2018 through December 31, 2019 (the “Reporting Period”). No significant liquidity events impacting the Fund were noted in the Report. There were no material changes to the Program during the Reporting Period. The Report concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
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Effective June 1, 2020, shareholders purchasing Fund shares through an Oppenheimer & Co. Inc. (“Oppenheimer”) platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred or back-end, sales charge waivers) and discounts, which may differ from those disclosed in the Fund’s Prospectus or SAI.
Front-end Sales Load Waivers on Class A Shares available at Oppenheimer |
Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan. |
Shares purchased by or through a 529 Plan. |
Shares purchased through an Oppenheimer affiliated investment advisory program. |
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 from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 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 (known as Rights of Restatement). |
A shareholder in the Fund’s Class C shares will have their shares exchanged at net asset value to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the exchange is in line with the policies and procedures of Oppenheimer. |
Employees and registered representatives of Oppenheimer or its affiliates and their family members. |
Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in the Prospectus. |
CDSC Waivers on A and C Shares available at Oppenheimer |
Death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Prospectus. |
Return of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the Prospectus. |
Shares sold to pay Oppenheimer fees but only if the transaction is initiated by Oppenheimer. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Oppenheimer: Breakpoints, Rights of Accumulation & Letters of Intent |
Breakpoints as described in the 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 Oppenheimer. Eligible fund family assets not held at Oppenheimer may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
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Effective June 15, 2020, shareholders purchasing fund shares through a Robert W. Baird & Co. (“Baird”) platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or the SAI.
Front-end Sales Load Waivers on Class A Shares available at Baird |
Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing share of the same fund. |
Share purchase by employees and registers representatives of Baird or its affiliate and their family members as designated by Baird. |
Shares purchase from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as rights of reinstatement). |
A shareholder in the Funds Investor C Shares will have their share exchanged at net asset value to Investor A shares of the fund if the shares are no longer subject to CDSC and the exchange is in line with the policies and procedures of Baird. |
Employer-sponsored retirement plans or charitable accounts in a transactional brokerage account at Baird, including 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 or SAR-SEPs. |
CDSC Waivers on A and C Shares available at Baird |
Shares sold due to death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
Shares bought due to returns of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 72 as described in the Fund’s Prospectus. |
Shares sold to pay Baird fees but only if the transaction is initiated by Baird. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Baird: Breakpoint and/or Rights of Accumulation |
Breakpoints as described in the Prospectus. |
Rights of accumulations which entitles 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 Baird. Eligible fund family assets not held at Baird may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets. |
Letters of Intent (LOI) allow for breakpoint discounts based on anticipated purchases within a fund family through Baird, over a 13-month period of time. |
Wells Fargo Core Plus Bond Fund | 55
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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:
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Website: wfam.com
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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
© 2020 Wells Fargo & Company. All rights reserved
PAR-0920-00412 10-20
A219/AR219 08-20
Table of Contents
Annual Report
August 31, 2020
Wells Fargo
Short Duration Government Bond 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 August 31, 2020, unless otherwise noted, and are those of the Fund’s portfolio 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 Short Duration Government Bond Fund | 1
Table of Contents
Letter to shareholders (unaudited)
Andrew Owen
President
Wells Fargo Funds
Dear Shareholder:
We are pleased to offer you this annual report for the Wells Fargo Short Duration Government Bond Fund for the 12-month period that ended August 31, 2020. Global stock markets saw earlier gains erased in March as governments around the world took unprecedented measures, attempting to stop the spread of the coronavirus at the expense of short-term economic output. However, markets rebounded from April on to offset much of the losses as central banks attempted to bolster capital markets and confidence.
For the 12-month period, equities had broadly positive total returns despite intense volatility in March. Non-U.S. developed market equities had the weakest performance and U.S. stocks performed strongly. Fixed-income securities were more modest though also generally positive. For the period, U.S. stocks, based on the S&P 500 Index,1 gained 21.94%. International stocks, as measured by the MSCI ACWI ex USA Index (Net),2 returned 8.31%, while the MSCI EM Index (Net)3 had somewhat stronger performance, with a 14.49% gain. For bond investors, the Bloomberg Barclays U.S. Aggregate Bond Index4 returned 6.47%, the Bloomberg Barclays Global Aggregate ex-USD Index5 gained a more modest 4.58%, and the Bloomberg Barclays Municipal Bond Index6 returned 3.24% while the ICE BofA U.S. High Yield Index7 returned 3.71%.
The fiscal year began with supportive central bank actions.
As the period began, several central banks had just cut interest rates in response to a global economic slowdown. Ongoing concerns regarding U.S.-China trade tensions and Brexit remained unresolved. The Federal Reserve (Fed) cut U.S. interest rates again in September. U.S. manufacturing data disappointed investors. The U.S. Congress announced it would pursue an impeachment investigation of President Trump. Meanwhile, the U.K. Brexit impasse showed no signs of resolution. Officials in China said that hitting the country’s economic growth goals for the year would be difficult considering the weight of tariffs and trade restrictions. Although the S&P 500 Index finished the third quarter with the best year-to-date returns in more than 20 years, concerns about future returns remained.
The fourth quarter started on a strong note, with U.S.-China trade tensions relaxing in October along with renewed optimism for a U.K. Brexit deal and positive macroeconomic data. The initial estimate of U.S. third-quarter gross domestic product (GDP) growth was a resilient 1.9% annualized rate, while the U.S. unemployment rate fell to a 50-year low of
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 and emerging 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 Short Duration Government Bond Fund
Table of Contents
Letter to shareholders (unaudited)
3.5% in September. However, despite strength among U.S. consumers, business confidence declined while manufacturing activity contracted. Concerned with a potential economic slowdown, the Fed lowered interest rates another quarter point in late October—its third rate cut in four months. This helped push the S&P 500 Index to an all-time high while emerging market equities rallied and global bonds declined overall, reflecting a broad pickup in risk appetite.
Equity markets continued to rally in November despite ongoing geopolitical risks. Hopes for a U.S.-China trade deal buoyed investor confidence. U.S. business sentiment improved slightly, and manufacturing and services activity picked up. While consumer confidence and purchasing managers’ activity rose in the eurozone, China reported weakening manufacturing and consumer data. Bond yields rose marginally, leading to slightly negative returns for global government and investment-grade corporate bonds.
Financial markets ended 2019 with a boost from the U.S. and China accord on a Phase One trade deal. That, along with the landslide win by the pro-Brexit U.K. Conservative Party in a national election and ongoing central bank support, gave investors greater confidence. U.S. economic indicators were generally positive, with the exception of manufacturing activity and business confidence. Consumer confidence was resilient, fed by a robust labor market, tame inflation, and lower interest rates, which boosted housing affordability and stimulated homebuyer activity. The impeachment of President Trump had little impact on markets. Meanwhile, slowing Chinese economic activity, partly attributable to the trade war, led to further government stimulus at year-end through lower reserve ratios, allowing banks to lend more money.
The year-end rally continued in early January 2020. However, capital market volatility picked up sharply in late January on concerns over the potential impact of the coronavirus on the global economy and stock markets. As sentiment began to sour, perceived safe havens did well in January. The U.S. dollar and Japanese yen both rose and government bonds outperformed equities. While the S&P 500 Index held its ground, emerging market equities tumbled, including those in Asia.
In February, the coronavirus became the major market focus. Fears of the virus’s impact on global growth led to expectations of increased global central bank monetary policy support. That led the 10-year U.S. Treasury yield to fall to an all-time low of 1.1%. Although equity markets initially shrugged off concerns about the outbreak, focusing instead on strong fourth-quarter earnings and improving business confidence in January, market sentiment turned sharply lower and the S&P 500 Index lost 8.2% for the month. Oil prices tumbled as Russia and the Organization of the Petroleum Exporting Countries compounded a major decline in oil demand with a brutal price war, partly aimed at dissuading further U.S. shale production, causing the price of West Texas Intermediate crude oil to plummet.
The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems. This abrupt stoppage of economic activity led to the sharp deceleration of global output, sending economies into a deep contraction. Central banks responded swiftly, slashing interest rates and expanding quantitative easing programs to restore liquidity and confidence to the markets. In the U.S., the Fed introduced several new lending programs, funding investment-grade bonds, money market mutual funds, and commercial paper while purchasing Treasuries, mortgage-backed securities, and overnight repurchase agreements. Meanwhile, stock markets tumbled quickly into a bear market, ending the longest bull stock market in U.S. history.
Markets rebounded strongly in April, fueled by unprecedented government and central bank stimulus measures. The U.S. economy contracted by an annualized 5.0% pace in the first quarter, with 30 million new unemployment insurance claims in six weeks. In the
“The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems.”
Wells Fargo Short Duration Government Bond Fund | 3
Table of Contents
Letter to shareholders (unaudited)
“The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July.”
eurozone, first-quarter real GDP shrank 3.8%, with the composite April Flash Purchasing Managers’ Index, a monthly survey of purchasing managers, falling to an all-time low of 13.5. The European Central Bank expanded its quantitative easing to include the purchase of additional government bonds of countries with the greatest virus-related need, including Italy and Spain. China’s first-quarter GDP fell by 6.8% year over year. However, retail sales, production, and investment showed signs of recovery. Extreme oil-price volatility continued as global supply far exceeded demand.
The global equity market rebound continued in May, with widespread strong monthly gains. Investors regained confidence on reports of early signs of success in human trials of a coronavirus vaccine. Growth stocks continued to outperform value stocks while returns on global government bonds were generally flat. In the U.S., a gap grew between the stock market rebound and devastating economic data points, including an April unemployment rate of 14.7%, the highest level since World War II. Purchasing managers’ indices reflected weakening activity in May in both the manufacturing and services sectors. U.S. corporate earnings reports indicated a 14% year-over-year contraction in earnings from the first quarter of 2019. However, high demand for technology, driven by remote activity, supported robust information technology sector earnings, which helped drive major technology stocks higher.
Financial markets posted widely positive returns in June despite ongoing economic weakness and high levels of uncertainty on the containment of the coronavirus and the timing of an effective vaccine. There were hopeful signs as economies reopened, with both U.S. and U.K. retail sales rebounding sharply in May. However, year over year, sales remained depressed. Vitally important to market sentiment was the ongoing commitment by central banks globally to do all they could to provide economic support through liquidity and low borrowing costs. U.S. economic activity was aided by one-time $1,200 stimulus checks and $600 bonus weekly unemployment benefits which expired at the end of July. However, unemployment remained historically high, easing somewhat from 14.7% in April to 11.1% in June. During June, numerous states reported increases of coronavirus cases. China’s economic recovery picked up momentum in June, though it remained far from a full recovery.
July was a broadly positive month for both global equities and fixed income. However, economic data and a resurgence of coronavirus cases pointed to the vulnerability of the global economy and the ongoing imperative to regain control of the pandemic. Second-quarter GDP shrank from the previous quarter by 9.5% and 12.1% in the U.S. and eurozone, respectively. In contrast, China reported a 3.2% year-over-year expansion in its second-quarter GDP. U.S. unemployment remained high despite adding 1.8 million jobs in July, with a double-digit jobless rate persisting. However, manufacturing activity grew in both the U.S. and eurozone. In Asia, while China’s manufacturing sector continued to expand, activity in Japan and South Korea contracted. In July, a rising concern was the rapid and broad reemergence of coronavirus infections.
The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July. U.S. stocks had strong monthly gains, led by the so-called FAANG stocks—Facebook, Apple, Amazon, Netflix, and Google (Alphabet)—which dominate these indices and continued to rally. U.S. stocks generally surpassed other broadly positive global equity performance while fixed-income market monthly returns were broadly flat. Generally stronger-than-expected second-quarter earnings boosted investor sentiment along with the Fed’s announcement of a policy shift that will likely lead to longer-term low interest rates and supportive monetary policy. The U.S. Flash Purchasing Managers’ Indices for both manufacturing and services beat expectations while U.S. housing market indicators were strong. In Europe, retail sales expanded and consumer confidence remained steady. China’s economy continued its fairly steady expansion. Overall, developed markets performed better than emerging market equities for the month of August as people took comfort in better-known equities in perceived safer markets.
4 | Wells Fargo Short Duration Government Bond Fund
Table of Contents
Letter to shareholders (unaudited)
Don’t let short-term uncertainty derail long-term investment goals.
Periods of investment uncertainty can present challenges, but experience has taught us that maintaining long-term investment goals can be an effective way to plan for the future. To help you create a sound strategy based on your personal goals and risk tolerance, Wells Fargo Funds offers more than 100 mutual funds spanning a wide range of asset classes and investment styles. Although diversification cannot guarantee an investment profit or prevent losses, we believe it can be an effective way to manage investment risk and potentially smooth out overall portfolio performance. We encourage investors to know their investments and to understand that appropriate levels of risk-taking may unlock opportunities.
Thank you for choosing to invest with Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Andrew Owen
President
Wells Fargo Funds
|
For further information about your Fund, contact your investment professional, visit our website at wfam.com, or call us directly at 1-800-222-8222. |
Notice to Shareholders
At a meeting held on August 10-12, 2020, the Board of Trustees of the Fund approved the following changes:
∎ | A change to the Fund’s automatic conversion feature for Class C shares in order to shorten the required holding period from 10 to 8 years. As a result, on a monthly basis beginning November 5, 2020, Class C shares will convert automatically into Class A shares 8 years after the initial date of purchase or, if you acquired your Class C shares through an exchange or conversion from another share class, 8 years after the date you acquired your Class C shares. When Class C shares that you acquired through a purchase or exchange convert, any other Class C shares that you purchased with reinvested dividends and distributions also will convert into Class A shares on a pro rata basis. |
Please note that a shorter holding period may apply depending on your intermediary. Please see “Appendix A—Sales Charge Reductions and Waivers for Certain Intermediaries” in the Fund’s prospectus for further information.
∎ | Changes to the Class A sales charge schedule for the Fund, effective with every purchase made on or after September 21, 2020 |
NEW Class A Sales Charge Schedule effective September 21, 2020
Amount of Purchase | Front-end Sales Charge As % of Public Offering Price | Front-end Sales Charge As % of Net Amount Invested | Commission Paid to Intermediary As % of Public Offering Price | |||||||||
Less than $100,000 | 2.00 | % | 2.04 | % | 1.75 | % | ||||||
$100,000 but less than $250,000 | 1.00 | % | 1.01 | % | 0.85 | % | ||||||
$250,000 and over | 0.00 | %1 | 0.00 | % | 0.40 | %2 |
1 | If you redeem Class A shares purchased at or above the $250,000 breakpoint level within twelve months from the date of purchase, you will pay a CDSC of 0.40% of the NAV of the shares on the date of original purchase. Certain exceptions apply (see “CDSC Waivers” in the Fund’s Prospectus). For redemptions of Class A shares of the Fund purchased prior to August 1, 2018, the CDSC terms that were in place at the time of purchase will continue to apply. |
2 | The commission paid to an intermediary on purchases above the $250,000 breakpoint level includes an advance by Wells Fargo Funds Distributor of the first year’s shareholder servicing fee. |
Wells Fargo Short Duration Government Bond Fund | 5
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Performance highlights (unaudited)
Investment objective
The Fund seeks to provide current income consistent with capital preservation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Maulik Bhansali, CFA®‡
Thomas O’Connor, CFA®‡
Jarad Vasquez
Average annual total returns (%) as of August 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 (MSDAX) | 3-11-1996 | 1.34 | 1.20 | 1.10 | 3.41 | 1.61 | 1.30 | 0.81 | 0.78 | |||||||||||||||||||||||||
Class C (MSDCX) | 5-31-2002 | 1.64 | 0.87 | 0.56 | 2.64 | 0.87 | 0.56 | 1.56 | 1.53 | |||||||||||||||||||||||||
Class R6 (MSDRX)3 | 11-30-2012 | – | – | – | 3.83 | 2.05 | 1.75 | 0.43 | 0.37 | |||||||||||||||||||||||||
Administrator Class (MNSGX) | 12-18-1992 | – | – | – | 3.60 | 1.81 | 1.51 | 0.75 | 0.60 | |||||||||||||||||||||||||
Institutional Class (WSGIX) | 4-8-2005 | – | – | – | 3.78 | 2.00 | 1.69 | 0.48 | 0.42 | |||||||||||||||||||||||||
Bloomberg Barclays U.S. 1-3 Year Government Bond Index4 | – | – | – | – | 3.48 | 1.88 | 1.32 | – | – |
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 2.00%. 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 R6, Administrator Class, and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
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. Securities issued by U.S. government agencies or government sponsored entities may not be guaranteed by the U.S. Treasury. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). The Fund is exposed to mortgage- and asset-backed securities risk. The U.S. government guarantee applies to certain underlying securities and not to shares of the Fund. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Short Duration Government Bond Fund
Table of Contents
Performance highlights (unaudited)
Growth of $10,000 investment as of August 31, 20205 |
‡ | 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 December 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 0.78% for Class A, 1.53% for Class C, 0.37% for Class R6, 0.60% for Administrator Class, and 0.42% 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 caps. Prior to or after the commitment expiration date, the caps may be increased or the commitment to maintain the caps may be terminated only with the approval of the Board of Trustees. Without these caps, 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 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. |
4 | The Bloomberg Barclays U.S. 1–3 Year Government Bond Index is composed of all publicly issued, nonconvertible domestic debt of the U.S. government and its agencies. The index also includes corporate debt guaranteed by the U.S. government. Only notes and bonds with a minimum maturity of one year up to a maximum maturity of 2.9 years are included. 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 performance of the Bloomberg Barclays U.S. 1–3 Year Government Bond 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 2.00%. |
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 | 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. |
8 | 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 Short Duration Government Bond Fund | 7
Table of Contents
Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
∎ | The Fund (Class A, excluding sales charge) underperformed its benchmark, the Bloomberg Barclays U.S. 1–3 Year Government Bond Index, for the 12-month period that ended August 31, 2020. |
∎ | The Fund has out-of-benchmark allocations to high-quality asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS), which detracted marginally from performance, while a small allocation to non-agency MBS added to performance. |
∎ | Positioning and security selection within agency mortgage-backed pass-through securities (MBS) added to performance as mortgage spreads tightened following the sharp sell-off in March. |
∎ | Security selection and positioning in adjustable-rate mortgages (ARMs) and collateralized mortgage obligations (CMOs) contributed nicely to performance. |
Ten largest holdings (%) as of August 31, 20206 | ||||
U.S. Treasury Note, 0.13%, 6-30-2022 | 5.26 | |||
U.S. Treasury Note , 2.38%, 3-15-2022 | 5.18 | |||
U.S. Treasury Note, 0.25%, 6-15-2023 | 3.54 | |||
U.S. Treasury Note, 0.13%, 7-15-2023 | 3.47 | |||
U.S. Treasury Note, 0.13%, 7-31-2022 | 3.31 | |||
FNMA, 2.50%, 11-12-2050 | 2.98 | |||
FNMA, 2.00%, 9-17-2035 | 2.92 | |||
FHLMC Series 4940 Class AG, 3.00%, 5-15-2040 | 2.82 | |||
FNMA Series 2019-33 Class MA, 3.50%, 7-25-2055 | 2.80 | |||
GNMA, 5.50%, 5-20-2049 | 2.62 |
The economy and markets were favorable.
Despite trade tensions presenting a clear overhang along with political uneasiness with China, such as its own tensions with Hong Kong, the U.S. economy coasted into calendar year-end with sub-trend growth while stocks and credit were performing well. Slowing manufacturing surveys amid ongoing uncertainties on trade, weak export performance, and the impact of the General Motors strike and Boeing’s production halt all loomed large.
As we moved into 2020, concerns around the broadening scope of the coronavirus outbreak began to simmer, adding to a high degree of uncertainty in the U.S. and global economies. The outbreak of the coronavirus intensified and
spread from mainland China into several other countries during February, first erupting in Italy and Iran before moving to the United States and elsewhere throughout the globe, sending shockwaves through financial markets.
While signs of economic strength were emerging early in the year, moves toward shutdowns of all but essential activity to contain the spread of the virus are having profound effects on world economies. Early indicators suggest unprecedented declines in economic activity coupled with a rapid rise of unemployment as companies furlough workers to mitigate the impact of lost revenue and to conserve liquidity. Consensus forecasts for second-quarter U.S. gross domestic product suggest a decline of 30% to 35% with the unemployment rate moving past 15%.
Quite understandably, the outset of the pandemic contributed to periods of extreme volatility in financial markets. U.S. fixed-income markets seized up in a dramatic rush for cash, on behalf of both corporate and investor participants, and prices plunged across the spectrum of our opportunity set amid violent technical moves. Policymakers responded swiftly, using the playbook from the 2008 financial crisis but with far more firepower and all in a period of a few weeks. The Federal Reserve (Fed) lowered rates to near zero and announced a broad array of liquidity support measures, such as buying sufficient Treasuries and agency mortgages to support smooth market functioning after high volatility and coordinating with the U.S. Department of the Treasury to provide lending power for purchases of asset-backed securities (ABS), commercial paper, money markets, small business loans, and investment-grade corporate issuance. Further, Congress provided $2 trillion of fiscal stimulus on a broad bipartisan basis to support workers and affected sectors, with additional packages likely forthcoming. Foreign countries are following with fiscal and monetary stimulus of their own, and there are early signs of stepped-up international coordination from the International Monetary Fund and G-20.
While there is hope for the stimulus measures to provide a bridge to eventual reopenings, rapidly improving U.S. economic data released late in the second quarter and in the third quarter reflected an economy beginning to restart. While we expect a continuing trend of encouraging economic signals, the financial markets are clearly looking beyond the current fundamentals.
Stocks and credit markets have responded to enormous stimulus measures driving record inflows into riskier assets, including credit strategies. At period-end, the S&P 500 Index7 was up more than 56% from its 52-week low on March 23 and credit funds were reporting an accelerating pace of inflows, fueling the incredibly strong technical conditions.
Please see footnotes on page 7.
8 | Wells Fargo Short Duration Government Bond Fund
Table of Contents
Performance highlights (unaudited)
Portfolio composition as of August 31, 20208 |
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Portfolio positioning continues to be driven by our bottom-up research and selection.
We ended August with approximately 13% of the portfolio in agency CMOs, 12% in high-quality ABS and CMBS, 36% in agency MBS, 6% in mortgage hybrid ARMs, 5% in non-agency MBS, 1% in high-quality corporate and covered bonds, and the remainder in U.S. Treasury and agency debt. We remain overweight the MBS, ABS, and CMBS sectors and underweight the agency and U.S. Treasury sectors. Throughout the month and driven by bottom-up security selection opportunities, we maintained an overweight to longer-duration risk and an underweight to two-year risk versus the benchmark.
Our nongovernment exposure declined modestly during the year. We increased our overweight to private student loans while reducing our exposure to rental car ABS. We also increased exposure slightly to non-agency residential MBS (non-qualified mortgages) during the year. Auto ABS positioning moved lower from sales of non-amortizing auto ABS and two-year prime auto on strong performance.
Our outlook is cautiously optimistic.
The U.S. and global economy continued to recover in August as consumers and businesses alike adjust to the new environment. Following a historic decline in activity with second-quarter U.S. gross domestic product (GDP) declining at an annualized rate of approximately 33% on health-related shutdowns, a fairly strong recovery is now unfolding for the third quarter, with GDP tracking up more than 25% annualized. Manufacturing surveys continue to indicate that a historic bounce-back in production is underway, with new orders strengthening in August, building on June and July. Services activity continues to rebound strongly, despite constraints of segments that haven’t reopened. While time to full recovery will likely be measured in months and quarters, some industries are now realizing the benefit of new or pent-up demand, especially as supply bottlenecks in some categories begin to abate. Sectors enjoying some surprising strength include housing, autos, home furnishings, technology services, and stay-at-home categories such as food, while areas of weakness remain transportation products, petroleum, dining, clothing, and entertainment. Bigger-ticket consumer items continue to be helped by strong savings rates, low interest rates, and ample credit availability, while federal stimulus checks and unemployment benefits have contributed to good consumer credit performance. Despite concerns of corporate layoffs, interest in hiring remains good, and more than one-third of lost jobs have now been restored. Corporations’ ample access to bank and capital markets, success in cost-cutting, and a rebound in new orders have effectively put aside concerns of integrity of the supply chain. On an international basis, China and several Asian markets appear to be recovering relatively quickly, with traditional emerging markets seeing signs of a recovery, albeit slower than some major markets, as imports are compressed until savings rates improve further.
As the economy recovers, monetary and fiscal policymakers remain determined to sustain a forceful policy response, shifting their objectives to focus on shortfall mitigating strategies over the coming months and years. Monetary policymakers seem keen to support near-zero interest rates and the flow of credit in order to promote a sustainable recovery. Measures of inflation, while now fairly strong for three consecutive months on a month-over-month basis, still remain far below year-over-year targets, and unemployment, while rebounding nicely, is still at recessionary levels. To that end, the Fed announced its long-anticipated review of monetary policy, which included a historic statement that it will seek to maximize broad and inclusive employment and target an average inflation rate of 2% over time, including pursuing an inflation rate above 2% following periods of inflation below the figure, which has been the case for many years. The updated strategy seeks to mitigate concerns that policy could be prone to persistent shortfall risks if performance over time is not taken into consideration. The practical effect will be that near-zero policy rates and asset purchases could continue until there’s evidence of inflation trending moderately above 2%. There could be implications for the shape of the yield curve, however, as a credible policy would solidify inflation expectations and lead to higher longer-dated yields. On the fiscal front, Congress continues to debate further fiscal stimulus in September, which would likely exceed $1 trillion. International actors continue to pursue use of policy space, bolstered by substantially improved dollar liquidity, supporting a historic recovery of local currencies and foreign exchange reserves.
A clear unknown, however, remains the course of the coronavirus both in the U.S. and globally. Following an acceleration of virus spread in June or July, it appears that growth rates of cases, while remaining high, have slowed as the public responded with
Please see footnotes on page 7.
Wells Fargo Short Duration Government Bond Fund | 9
Table of Contents
Performance highlights (unaudited)
additional distancing measures, some areas of flare-ups notwithstanding. Consensus on further reopening of sectors remains elusive. For example, several universities and public schools have delayed or reversed course on reopening plans while others are proceeding. On the other hand, prospects for a vaccine, more rapid testing, and treatments seemed to recently brighten with potential groundbreaking announcements by year-end.
Looking into the fall, which has historically been a volatile period, market participants will also be more closely scrutinizing the upcoming presidential election for policy implications, as well as longer-term structural shifts in the economy and society, such as inequality, that emerge from recent events. Macroeconomic concerns, while a lower priority than supporting the economy, could also be brought back on the table, if growth looks unbalanced or broad-based stimulus leads to asset price concerns absent greater policy targeting.
Consistent with our bottom-up process, we maintain a neutral duration. We seek to remain nimble and agile, and we stand ready to take advantage of security selection opportunities as they arise.
10 | Wells Fargo Short Duration Government Bond Fund
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 March 1, 2020 to August 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 3-1-2020 | Ending account value 8-31-2020 | Expenses paid during the period1 | Annualized net expense ratio | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.14 | $ | 3.95 | 0.78 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.22 | $ | 3.96 | 0.78 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,011.30 | $ | 7.74 | 1.53 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,017.44 | $ | 7.76 | 1.53 | % | ||||||||
Class R6 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.19 | $ | 1.88 | 0.37 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,023.28 | $ | 1.88 | 0.37 | % | ||||||||
Administrator Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.05 | $ | 3.04 | 0.60 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.12 | $ | 3.05 | 0.60 | % | ||||||||
Institutional Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.95 | $ | 2.13 | 0.42 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,023.03 | $ | 2.14 | 0.42 | % |
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). |
Wells Fargo Short Duration Government Bond Fund | 11
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities: 54.68% | ||||||||||||||||
FHLMC (12 Month LIBOR +1.65%) ± | 2.35 | % | 3-1-2043 | $ | 1,321,829 | $ | 1,366,553 | |||||||||
FHLMC | 2.50 | 11-1-2028 | 5,617,121 | 5,965,022 | ||||||||||||
FHLMC (12 Month LIBOR +1.76%) ± | 2.59 | 12-1-2042 | 1,930,313 | 1,996,318 | ||||||||||||
FHLMC (12 Month LIBOR +1.64%) ± | 2.87 | 7-1-2047 | 4,913,877 | 5,122,725 | ||||||||||||
FHLMC (12 Month LIBOR +1.84%) ± | 3.39 | 5-1-2042 | 1,356,699 | 1,423,931 | ||||||||||||
FHLMC | 3.50 | 3-1-2031 | 1,673,988 | 1,809,984 | ||||||||||||
FHLMC | 4.00 | 10-1-2033 | 584,396 | 657,653 | ||||||||||||
FHLMC | 4.00 | 1-1-2034 | 555,792 | 625,365 | ||||||||||||
FHLMC | 4.00 | 5-15-2039 | 701,968 | 713,168 | ||||||||||||
FHLMC | 4.00 | 7-1-2049 | 6,674,554 | 7,337,735 | ||||||||||||
FHLMC | 4.50 | 4-1-2031 | 1,184,832 | 1,304,436 | ||||||||||||
FHLMC | 4.50 | 11-1-2048 | 5,713,505 | 6,382,129 | ||||||||||||
FHLMC Multifamily Structured Pass-Through Certificates Series KI02 Class A (1 Month LIBOR +0.20%) ± | 0.35 | 2-25-2023 | 143,248 | 143,188 | ||||||||||||
FHLMC Series 3632 Class PK | 5.00 | 2-15-2040 | 3,003,574 | 3,365,828 | ||||||||||||
FHLMC Series 3653 Class AU | 4.00 | 4-15-2040 | 977,745 | 1,053,853 | ||||||||||||
FHLMC Series 3738 Class BP | 4.00 | 12-15-2038 | 443,998 | 448,674 | ||||||||||||
FHLMC Series 4239 Class AB | 4.00 | 12-15-2039 | 469,349 | 475,954 | ||||||||||||
FHLMC Series 4426 Class QC | 1.75 | 7-15-2037 | 4,774,285 | 4,941,255 | ||||||||||||
FHLMC Series 4788 Class GL | 4.50 | 7-15-2042 | 3,598,709 | 3,621,971 | ||||||||||||
FHLMC Series 4891 Class PA | 3.50 | 7-15-2048 | 2,241,403 | 2,350,052 | ||||||||||||
FHLMC Series 4940 Class AG | 3.00 | 5-15-2040 | 16,062,398 | 17,059,402 | ||||||||||||
FNMA %% | 2.00 | 9-17-2035 | 17,000,000 | 17,687,969 | ||||||||||||
FNMA %% | 2.00 | 11-17-2035 | 2,100,000 | 2,180,309 | ||||||||||||
FNMA (12 Month LIBOR +1.69%) ± | 2.43 | 11-1-2042 | 2,500,639 | 2,590,188 | ||||||||||||
FNMA (12 Month LIBOR +1.57%) ± | 2.47 | 9-1-2045 | 2,032,546 | 2,105,071 | ||||||||||||
FNMA %% | 2.50 | 10-14-2050 | 1,500,000 | 1,575,954 | ||||||||||||
FNMA %% | 2.50 | 11-12-2050 | 17,200,000 | 18,035,037 | ||||||||||||
FNMA (12 Month LIBOR +1.60%) ± | 2.53 | 10-1-2046 | 3,466,403 | 3,595,683 | ||||||||||||
FNMA (12 Month LIBOR +1.59%) ± | 2.67 | 1-1-2046 | 2,357,615 | 2,447,161 | ||||||||||||
FNMA (12 Month LIBOR +1.58%) ± | 2.68 | 2-1-2046 | 3,359,865 | 3,478,528 | ||||||||||||
FNMA (12 Month LIBOR +1.58%) ± | 2.76 | 6-1-2045 | 1,430,752 | 1,483,542 | ||||||||||||
FNMA (12 Month LIBOR +1.60%) ± | 2.88 | 7-1-2046 | 6,927,859 | 7,178,427 | ||||||||||||
FNMA | 3.00 | 4-1-2035 | 5,948,536 | 6,422,138 | ||||||||||||
FNMA | 3.50 | 6-1-2035 | 2,131,839 | 2,359,316 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.04%) ± | 3.96 | 3-1-2049 | 3,293,252 | 3,444,048 | ||||||||||||
FNMA | 4.00 | 4-1-2032 | 470,822 | 513,728 | ||||||||||||
FNMA | 4.00 | 10-1-2033 | 768,077 | 850,595 | ||||||||||||
FNMA | 4.00 | 2-1-2034 | 4,550,713 | 4,923,214 | ||||||||||||
FNMA | 4.00 | 7-1-2034 | 1,035,523 | 1,137,500 | ||||||||||||
FNMA | 4.50 | 6-1-2048 | 2,053,540 | 2,253,938 | ||||||||||||
FNMA | 4.50 | 7-1-2048 | 4,318,071 | 4,796,481 | ||||||||||||
FNMA | 4.50 | 10-1-2048 | 11,659,880 | 13,104,940 | ||||||||||||
FNMA | 4.50 | 3-1-2049 | 3,672,601 | 4,030,346 | ||||||||||||
FNMA | 4.50 | 11-1-2049 | 2,271,694 | 2,575,011 | ||||||||||||
FNMA | 5.00 | 10-1-2040 | 1,126,942 | 1,296,476 | ||||||||||||
FNMA | 5.00 | 5-1-2046 | 441,544 | 506,661 | ||||||||||||
FNMA | 5.00 | 8-1-2048 | 2,360,872 | 2,641,625 | ||||||||||||
FNMA | 5.00 | 1-1-2049 | 9,718,564 | 10,869,876 | ||||||||||||
FNMA | 5.00 | 1-1-2049 | 4,324,631 | 4,866,208 | ||||||||||||
FNMA | 5.00 | 2-1-2049 | 231,278 | 259,334 | ||||||||||||
FNMA | 5.00 | 3-1-2049 | 446,434 | 500,342 | ||||||||||||
FNMA | 5.00 | 3-1-2049 | 1,715,178 | 1,911,159 | ||||||||||||
FNMA | 5.00 | 8-1-2049 | 6,132,141 | 6,940,674 | ||||||||||||
FNMA | 5.00 | 11-1-2049 | 5,181,118 | 5,849,149 | ||||||||||||
FNMA | 5.00 | 12-1-2049 | 2,255,262 | 2,603,512 |
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Short Duration Government Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA | 5.50 | % | 6-1-2049 | $ | 6,060,385 | $ | 7,089,793 | |||||||||
FNMA Series 2009-20 Class DT | 4.50 | 4-25-2039 | 1,740,955 | 1,979,808 | ||||||||||||
FNMA Series 2011-14 Class GD | 4.00 | 4-25-2040 | 1,762,928 | 1,821,532 | ||||||||||||
FNMA Series 2013-103 Class H | 4.50 | 3-25-2038 | 1,163,075 | 1,182,441 | ||||||||||||
FNMA Series 2013-71 Class AC | 2.00 | 3-25-2038 | 1,317,079 | 1,323,748 | ||||||||||||
FNMA Series 2013-90 Class A | 4.00 | 11-25-2038 | 1,334,805 | 1,350,769 | ||||||||||||
FNMA Series 2015-57 Class AB | 3.00 | 8-25-2045 | 2,578,444 | 2,786,111 | ||||||||||||
FNMA Series 2019-33 Class MA | 3.50 | 7-25-2055 | 16,172,439 | 16,973,854 | ||||||||||||
GNMA | 4.00 | 9-20-2044 | 1,759,034 | 1,919,712 | ||||||||||||
GNMA | 4.00 | 12-20-2044 | 2,098,816 | 2,288,950 | ||||||||||||
GNMA | 4.00 | 1-20-2045 | 1,397,126 | 1,523,877 | ||||||||||||
GNMA | 4.00 | 4-20-2048 | 5,842,990 | 6,249,144 | ||||||||||||
GNMA | 4.50 | 3-20-2048 | 1,937,143 | 2,115,834 | ||||||||||||
GNMA | 4.50 | 6-20-2048 | 6,307,359 | 6,825,791 | ||||||||||||
GNMA | 4.50 | 6-20-2048 | 2,539,976 | 2,761,236 | ||||||||||||
GNMA | 4.50 | 8-20-2048 | 2,700,811 | 2,949,344 | ||||||||||||
GNMA | 4.50 | 10-20-2048 | 613,354 | 663,674 | ||||||||||||
GNMA | 4.50 | 2-20-2049 | 3,896,088 | 4,253,904 | ||||||||||||
GNMA | 4.50 | 4-20-2049 | 919,919 | 1,004,136 | ||||||||||||
GNMA | 5.00 | 10-15-2039 | 790,102 | 892,899 | ||||||||||||
GNMA | 5.00 | 3-20-2048 | 1,557,863 | 1,704,010 | ||||||||||||
GNMA | 5.00 | 6-20-2048 | 325,184 | 367,199 | ||||||||||||
GNMA | 5.00 | 6-20-2048 | 186,300 | 207,354 | ||||||||||||
GNMA | 5.00 | 7-20-2048 | 221,269 | 241,206 | ||||||||||||
GNMA | 5.00 | 9-20-2048 | 1,614,841 | 1,761,076 | ||||||||||||
GNMA | 5.00 | 3-20-2049 | 1,730,687 | 1,918,331 | ||||||||||||
GNMA | 5.00 | 3-20-2049 | 454,189 | 507,269 | ||||||||||||
GNMA | 5.00 | 4-20-2049 | 3,237,782 | 3,614,826 | ||||||||||||
GNMA | 5.00 | 5-20-2049 | 2,823,561 | 3,150,175 | ||||||||||||
GNMA | 5.50 | 1-20-2049 | 212,335 | 233,536 | ||||||||||||
GNMA | 5.50 | 5-20-2049 | 14,453,452 | 15,852,958 | ||||||||||||
GNMA Series 2011-137 Class WA ±± | 5.57 | 7-20-2040 | 2,279,223 | 2,686,278 | ||||||||||||
GNMA Series 2012-141 Class WD ±± | 4.96 | 7-20-2040 | 2,031,806 | 2,337,214 | ||||||||||||
GNMA Series 2017-99 Class DE | 2.50 | 7-20-2045 | 2,741,036 | 2,807,743 | ||||||||||||
GNMA Series 2018-154 Class WP | 3.50 | 11-20-2048 | 553,747 | 582,255 | ||||||||||||
GNMA Series 2018-36 Class KC | 3.00 | 2-20-2046 | 2,319,350 | 2,416,471 | ||||||||||||
GNMA Series 2019-132 Class NA | 3.50 | 9-20-2049 | 790,562 | 823,264 | ||||||||||||
GNMA Series 2020-11 Class ME | 2.50 | 2-20-2049 | 6,518,016 | 6,802,909 | ||||||||||||
Total Agency Securities (Cost $323,228,001) |
| 331,149,967 | ||||||||||||||
|
| |||||||||||||||
Asset-Backed Securities: 11.81% | ||||||||||||||||
Avis Budget Rental Car Funding LLC Series 2019-1A Class A 144A | 3.45 | 3-20-2023 | 5,965,000 | 6,089,732 | ||||||||||||
Ford Credit Auto Lease Trust Series 2020-B Class A4 | 0.69 | 10-15-2023 | 3,243,000 | 3,258,086 | ||||||||||||
Ford Credit Auto Owner Trust Series 2017-1 Class A 144A | 2.62 | 8-15-2028 | 4,380,000 | 4,510,432 | ||||||||||||
Ford Credit Auto Owner Trust Series 2018-2 Class A 144A | 3.47 | 1-15-2030 | 4,060,000 | 4,393,767 | ||||||||||||
GM Financial Consumer Automobile Receivables Trust Series 2020-2 Class A3 | 1.49 | 12-16-2024 | 1,413,000 | 1,445,309 | ||||||||||||
Navient Student Loan Trust Series 2019-GA Class A 144A | 2.40 | 10-15-2068 | 6,158,858 | 6,304,682 | ||||||||||||
Navient Student Loan Trust Series 2020-DA Class A 144A | 1.69 | 5-15-2069 | 10,897,666 | 11,018,380 | ||||||||||||
Nelnet Student Loan Trust Series 2004-4 Class A5 (3 Month LIBOR +0.16%) ± | 0.40 | 1-25-2037 | 3,315,877 | 3,203,129 | ||||||||||||
Nelnet Student Loan Trust Series 2012-1A Class A (1 Month LIBOR +0.80%) 144A ± | 0.98 | 12-27-2039 | 2,049,200 | 2,009,552 | ||||||||||||
Nelnet Student Loan Trust Series 2016-1A Class A (1 Month LIBOR +0.80%) 144A ± | 0.98 | 9-25-2065 | 4,732,783 | 4,681,743 | ||||||||||||
SLC Student Loan Trust Series 2010-1 Class A (3 Month LIBOR +0.88%) ± | 1.13 | 11-25-2042 | 994,187 | 991,001 | ||||||||||||
SLM Student Loan Trust Series 2005-6 Class A6 (3 Month LIBOR +0.14%) ± | 0.38 | 10-27-2031 | 2,253,640 | 2,213,662 | ||||||||||||
SLM Student Loan Trust Series 2012-3 Class A (1 Month LIBOR +0.65%) ± | 0.83 | 12-27-2038 | 4,987,875 | 4,907,321 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short Duration Government Bond Fund | 13
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Asset-Backed Securities (continued) | ||||||||||||||||
SMB Private Education Loan Trust Series 2015-A Class A2A 144A | 2.49 | % | 6-15-2027 | $ | 1,411,797 | $ | 1,426,099 | |||||||||
SMB Private Education Loan Trust Series 2015-C Class A2A 144A | 2.75 | 7-15-2027 | 1,514,459 | 1,536,588 | ||||||||||||
SMB Private Education Loan Trust Series 2016-B Class A2B (1 Month LIBOR +1.45%) 144A ± | 1.61 | 2-17-2032 | 1,550,825 | 1,550,941 | ||||||||||||
SMB Private Education Loan Trust Series 2020-BA Class A1A 144A | 1.29 | 7-15-2053 | 5,231,000 | 5,224,454 | ||||||||||||
SoFi Professional Loan Program LLC Series 2016-C Class A1 (1 Month LIBOR +1.10%) 144A ± | 1.28 | 10-27-2036 | 624,685 | 624,212 | ||||||||||||
SoFi Professional Loan Program LLC Series 2016-D Class A1 (1 Month LIBOR +0.95%) 144A ± | 1.13 | 1-25-2039 | 1,280,567 | 1,279,891 | ||||||||||||
SoFi Professional Loan Program LLC Series 2016-E Class A1 (1 Month LIBOR +0.85%) 144A ± | 1.03 | 7-25-2039 | 443,237 | 442,042 | ||||||||||||
SoFi Professional Loan Program LLC Series 2017-A Class A1 (1 Month LIBOR +0.70%) 144A ± | 0.88 | 3-26-2040 | 687,809 | 687,062 | ||||||||||||
SoFi Professional Loan Program LLC Series 2017-C Class A1 (1 Month LIBOR +0.60%) 144A ± | 0.78 | 7-25-2040 | 706,050 | 703,465 | ||||||||||||
SoFi Professional Loan Program LLC Series 2017-E Class A2B 144A | 2.72 | 11-26-2040 | 1,118,942 | 1,137,126 | ||||||||||||
SoFi Professional Loan Program LLC Series 2020-C Class AFX 144A | 1.95 | 2-15-2046 | 1,850,665 | 1,887,763 | ||||||||||||
Total Asset-Backed Securities (Cost $71,186,575) |
| 71,526,439 | ||||||||||||||
|
| |||||||||||||||
Non-Agency Mortgage-Backed Securities: 4.97% | ||||||||||||||||
Angel Oak Mortgage Trust Series 2019-2 Class A1 144A ±± | 3.63 | 3-25-2049 | 1,188,927 | 1,212,926 | ||||||||||||
Angel Oak Mortgage Trust Series 2020-5 Class A1 144A ±± | 1.37 | 5-25-2065 | 3,000,000 | 2,999,998 | ||||||||||||
Bunker Hill Loan Depositary Trust Series 2019-1 Class A1 144A | 3.61 | 10-26-2048 | 1,459,437 | 1,498,015 | ||||||||||||
Bunker Hill Loan Depositary Trust Series 2019-2 Class A1 144A | 2.88 | 7-25-2049 | 1,684,891 | 1,720,055 | ||||||||||||
Citigroup Commercial Mortgage Trust Series 2014-GC25 Class AAB | 3.37 | 10-10-2047 | 465,916 | 487,176 | ||||||||||||
Colt Funding LLC Series 2018-4 Class A1 144A ±± | 4.01 | 12-28-2048 | 641,299 | 650,160 | ||||||||||||
Colt Funding LLC Series 2019-1 Class A1 144A ±± | 3.71 | 3-25-2049 | 438,764 | 444,152 | ||||||||||||
Credit Suisse Mortgage Trust Series 2020-AFC1 Class A1 144A ±± | 2.24 | 2-25-2050 | 3,130,505 | 3,174,449 | ||||||||||||
DBUBS Mortgage Trust Series 2011-LC2A Class A1 144A | 3.53 | 7-10-2044 | 61,613 | 61,821 | ||||||||||||
GCAT Series 2019-NQM1 Class A1 144A | 2.99 | 2-25-2059 | 1,471,423 | 1,488,695 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2012-GCJ7 Class AAB | 2.94 | 5-10-2045 | 250,383 | 250,792 | ||||||||||||
New Residential Mortgage Loan Trust Series 2019-NQM2 Class A1 144A ±± | 3.60 | 4-25-2049 | 1,283,230 | 1,308,385 | ||||||||||||
Verus Securitization Trust Series 2018-2 Class A1 144A ±± | 3.68 | 6-1-2058 | 2,286,754 | 2,312,888 | ||||||||||||
Verus Securitization Trust Series 2019-1 Class A1 144A ±± | 3.84 | 2-25-2059 | 1,515,366 | 1,543,718 | ||||||||||||
Verus Securitization Trust Series 2019-2 Class A1 144A ±± | 2.91 | 7-25-2059 | 2,405,483 | 2,451,555 | ||||||||||||
Verus Securitization Trust Series 2019-2 Class A1 144A ±± | 3.21 | 5-25-2059 | 1,838,171 | 1,874,507 | ||||||||||||
Verus Securitization Trust Series 2019-3 Class A1 144A ±± | 2.69 | 11-25-2059 | 1,891,764 | 1,915,726 | ||||||||||||
Verus Securitization Trust Series 2019-4 Class A1 144A | 2.64 | 11-25-2059 | 1,556,532 | 1,590,698 | ||||||||||||
Verus Securitization Trust Series 2020-2 Class A1 144A ±± | 2.23 | 5-25-2060 | 3,093,071 | 3,110,848 | ||||||||||||
Total Non-Agency Mortgage-Backed Securities (Cost $29,695,197) |
| 30,096,564 | ||||||||||||||
|
| |||||||||||||||
U.S. Treasury Securities: 26.00% | ||||||||||||||||
U.S. Treasury Note | 2.38 | 3-15-2022 | 30,360,000 | 31,397,695 | ||||||||||||
U.S. Treasury Note | 0.13 | 5-31-2022 | 12,270,000 | 12,265,686 | ||||||||||||
U.S. Treasury Note | 0.13 | 6-30-2022 | 31,873,000 | 31,863,040 | ||||||||||||
U.S. Treasury Note | 0.13 | 7-31-2022 | 20,053,000 | 20,045,950 | ||||||||||||
U.S. Treasury Note | 0.13 | 8-31-2022 | 800,000 | 799,844 | ||||||||||||
U.S. Treasury Note | 0.13 | 7-15-2023 | 21,007,000 | 20,993,871 | ||||||||||||
U.S. Treasury Note | 0.13 | 8-15-2023 | 8,762,000 | 8,755,155 | ||||||||||||
U.S. Treasury Note | 0.25 | 6-15-2023 | 21,387,000 | 21,448,822 | ||||||||||||
U.S. Treasury Note | 0.38 | 3-31-2022 | 776,000 | 778,789 | ||||||||||||
U.S. Treasury Note | 2.13 | 5-15-2022 | 8,830,000 | 9,126,978 | ||||||||||||
Total U.S. Treasury Securities (Cost $157,398,198) |
| 157,475,830 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Short Duration Government Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Yankee Corporate Bonds and Notes: 0.53% |
| |||||||||||||||
Financials: 0.53% |
| |||||||||||||||
Banks: 0.53% | ||||||||||||||||
HSBC Bank Canada 144A | 0.95 | % | 5-14-2023 | $ | 3,198,000 | $ | 3,236,578 | |||||||||
|
| |||||||||||||||
Total Yankee Corporate Bonds and Notes (Cost $3,194,944) |
| 3,236,578 | ||||||||||||||
|
| |||||||||||||||
Yield | Shares | |||||||||||||||
Short-Term Investments: 8.46% | ||||||||||||||||
Investment Companies: 8.46% | ||||||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u)## | 0.06 | 51,203,298 | 51,203,298 | |||||||||||||
|
| |||||||||||||||
Total Short-Term Investments (Cost $51,203,298) |
| 51,203,298 | ||||||||||||||
|
|
Total investments in securities (Cost $635,906,213) | 106.45 | % | 644,688,676 | |||||
Other assets and liabilities, net | (6.45 | ) | (39,047,881 | ) | ||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 605,640,795 | ||||
|
|
|
|
± | Variable rate investment. The rate shown is the rate in effect at period end. |
%% | The security is purchased on a when-issued basis. |
±± | The coupon of the security is adjusted based on the principal and interest payments received from the underlying pool of mortgages as well as the credit quality and the actual prepayment speed of the underlying mortgages. |
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. |
(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. |
## | All or a portion of this security is segregated for when-issued securities. |
Abbreviations:
FHLMC | Federal Home Loan Mortgage Corporation |
FNMA | Federal National Mortgage Association |
GNMA | Government National Mortgage Association |
LIBOR | London Interbank Offered Rate |
Futures Contracts
Description | Number of contracts | Expiration date | Notional cost | Notional value | Unrealized gains | Unrealized losses | ||||||||||||||||||
Long | ||||||||||||||||||||||||
2-Year U.S. Treasury Notes | 653 | 12-31-2020 | $ | 144,212,210 | $ | 144,277,289 | $ | 65,079 | $ | 0 | ||||||||||||||
Short | ||||||||||||||||||||||||
10-Year Ultra Futures | (56) | 12-21-2020 | (8,890,325 | ) | (8,928,500 | ) | 0 | (38,175 | ) | |||||||||||||||
5-Year U.S. Treasury Notes | (376) | 12-31-2020 | (47,307,723 | ) | (47,387,750 | ) | 0 | (80,027 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||||
$ | 65,079 | $ | (118,202 | ) | ||||||||||||||||||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short Duration Government Bond Fund | 15
Table of Contents
Portfolio of investments—August 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:
Value, beginning of period | Purchases | Sales proceeds | 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 | $ | 7,563,717 | $ | 639,211,834 | $ | (595,572,253 | ) | $ | 0 | $ | 0 | $ | 134,611 | $ | 51,203,298 | 8.46 | % |
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Short Duration Government Bond Fund
Table of Contents
Statement of assets and liabilities—August 31, 2020
Assets | ||||
Investments in unaffiliated securities, at value (cost $584,702,915) | $ | 593,485,378 | ||
Investments in affiliated securities, at value (cost $51,203,298) | 51,203,298 | |||
Cash segregated for futures contracts | 692,749 | |||
Receivable for investments sold | 22,396,819 | |||
Principal paydown receivable | 350,925 | |||
Receivable for Fund shares sold | 1,821,940 | |||
Receivable for interest | 1,499,440 | |||
Prepaid expenses and other assets | 31,792 | |||
|
| |||
Total assets | 671,482,341 | |||
|
| |||
Liabilities | ||||
Payable for when-issued transactions | 61,754,298 | |||
Payable for investments purchased | 3,003,509 | |||
Payable for Fund shares redeemed | 704,964 | |||
Payable for daily variation margin on open futures contracts | 43,515 | |||
Management fee payable | 147,737 | |||
Dividends payable | 53,503 | |||
Administration fees payable | 43,058 | |||
Distribution fee payable | 5,553 | |||
Trustees’ fees and expenses payable | 3,375 | |||
Accrued expenses and other liabilities | 82,034 | |||
|
| |||
Total liabilities | 65,841,546 | |||
|
| |||
Total net assets | $ | 605,640,795 | ||
|
| |||
Net assets consist of | ||||
Paid-in capital | $ | 672,162,981 | ||
Total distributable loss | (66,522,186 | ) | ||
|
| |||
Total net assets | $ | 605,640,795 | ||
|
| |||
Computation of net asset value and offering price per share | ||||
Net assets – Class A | $ | 60,424,569 | ||
Shares outstanding – Class A1 | 6,133,872 | |||
Net asset value per share – Class A | $9.85 | |||
Maximum offering price per share – Class A2 | $10.05 | |||
Net assets – Class C | $ | 8,868,172 | ||
Shares outstanding – Class C1 | 898,869 | |||
Net asset value per share – Class C | $9.87 | |||
Net assets – Class R6 | $ | 48,371,083 | ||
Shares outstanding – Class R61 | 4,892,411 | |||
Net asset value per share – Class R6 | $9.89 | |||
Net assets – Administrator Class | $ | 36,262,045 | ||
Shares outstanding – Administrator Class1 | 3,674,042 | |||
Net asset value per share – Administrator Class | $9.87 | |||
Net assets – Institutional Class | $ | 451,714,926 | ||
Shares outstanding – Institutional Class1 | 45,781,386 | |||
Net asset value per share – Institutional Class | $9.87 |
1 | The Fund has an unlimited number of authorized shares. |
2 | Maximum offering price is computed as 100/98 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 Short Duration Government Bond Fund | 17
Table of Contents
Statement of operations—year ended August 31, 2020
Investment income | ||||
Interest | $ | 12,046,830 | ||
Income from affiliated securities | 134,611 | |||
|
| |||
Total investment income | 12,181,441 | |||
|
| |||
Expenses | ||||
Management fee | 1,996,329 | |||
Administration fees | ||||
Class A | 53,033 | |||
Class C | 13,846 | |||
Class R6 | 12,172 | |||
Administrator Class | 37,214 | |||
Institutional Class | 360,634 | |||
Shareholder servicing fees | ||||
Class A | 82,823 | |||
Class C | 21,620 | |||
Administrator Class | 92,904 | |||
Distribution fee | ||||
Class C | 64,796 | |||
Custody and accounting fees | 60,040 | |||
Professional fees | 53,700 | |||
Registration fees | 78,804 | |||
Shareholder report expenses | 65,487 | |||
Trustees’ fees and expenses | 21,326 | |||
Other fees and expenses | 20,029 | |||
|
| |||
Total expenses | 3,034,757 | |||
Less: Fee waivers and/or expense reimbursements | ||||
Fund-level | (177,325 | ) | ||
Class A | (440 | ) | ||
Class R6 | (12,172 | ) | ||
Administrator Class | (45,931 | ) | ||
Institutional Class | (142,544 | ) | ||
|
| |||
Net expenses | 2,656,345 | |||
|
| |||
Net investment income | 9,525,096 | |||
|
| |||
Realized and unrealized gains (losses) on investments | ||||
Net realized gains on | ||||
Unaffiliated securities | 6,515,108 | |||
Futures contracts | 598,689 | |||
|
| |||
Net realized gains on investments | 7,113,797 | |||
|
| |||
Net change in unrealized gains (losses) on | ||||
Unaffiliated securities | 4,016,136 | |||
Futures contracts | (62,698 | ) | ||
|
| |||
Net change in unrealized gains (losses) on investments | 3,953,438 | |||
|
| |||
Net realized and unrealized gains (losses) on investments | 11,067,235 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 20,592,331 | ||
|
|
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Short Duration Government Bond Fund
Table of Contents
Statement of changes in net assets
Year ended August 31, 2020 | Year ended August 31, 2019 | |||||||||||||||
Operations | ||||||||||||||||
Net investment income | $ | 9,525,096 | $ | 14,884,157 | ||||||||||||
Net realized gains on investments | 7,113,797 | 50,123 | ||||||||||||||
Net change in unrealized gains (losses) on investments | 3,953,438 | 9,018,055 | ||||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from operations | 20,592,331 | 23,952,335 | ||||||||||||||
|
| |||||||||||||||
Distributions to shareholders from net investment income and net realized gains | ||||||||||||||||
Class A | (688,464 | ) | (753,979 | ) | ||||||||||||
Class C | (119,451 | ) | (226,983 | ) | ||||||||||||
Class R6 | (1,028,202 | ) | (1,078,024 | ) | ||||||||||||
Administrator Class | (861,324 | ) | (1,529,339 | ) | ||||||||||||
Institutional Class | (11,227,856 | ) | (12,903,892 | ) | ||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | (13,925,297 | ) | (16,492,217 | ) | ||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold | ||||||||||||||||
Class A | 4,032,194 | 39,684,604 | 617,334 | 5,934,764 | ||||||||||||
Class C | 431,607 | 4,241,099 | 106,035 | 1,018,014 | ||||||||||||
Class R6 | 2,648,245 | 26,044,046 | 2,188,387 | 21,183,601 | ||||||||||||
Administrator Class | 455,653 | 4,477,225 | 238,230 | 2,291,607 | ||||||||||||
Institutional Class | 28,565,351 | 280,049,109 | 10,430,140 | 100,435,708 | ||||||||||||
|
| |||||||||||||||
354,496,083 | 130,863,694 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions | ||||||||||||||||
Class A | 67,536 | 660,795 | 74,715 | 719,348 | ||||||||||||
Class C | 11,326 | 110,884 | 21,609 | 208,280 | ||||||||||||
Class R6 | 90,769 | 891,016 | 93,340 | 902,462 | ||||||||||||
Administrator Class | 87,219 | 854,491 | 157,806 | 1,521,378 | ||||||||||||
Institutional Class | 1,100,654 | 10,779,244 | 1,279,269 | 12,338,544 | ||||||||||||
|
| |||||||||||||||
13,296,430 | 15,690,012 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed | ||||||||||||||||
Class A | (1,008,887 | ) | (9,840,463 | ) | (829,358 | ) | (7,984,256 | ) | ||||||||
Class C | (572,969 | ) | (5,611,877 | ) | (667,791 | ) | (6,437,263 | ) | ||||||||
Class R6 | (2,144,187 | ) | (20,987,705 | ) | (1,664,571 | ) | (16,097,185 | ) | ||||||||
Administrator Class | (848,865 | ) | (8,326,143 | ) | (3,899,844 | ) | (37,590,853 | ) | ||||||||
Institutional Class | (29,552,849 | ) | (289,715,629 | ) | (17,338,426 | ) | (166,712,595 | ) | ||||||||
|
| |||||||||||||||
(334,481,817 | ) | (234,822,152 | ) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from capital share transactions | 33,310,696 | (88,268,446 | ) | |||||||||||||
|
| |||||||||||||||
Total increase (decrease) in net assets | 39,977,730 | (80,808,328 | ) | |||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 565,663,065 | 646,471,393 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 605,640,795 | $ | 565,663,065 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short Duration Government Bond Fund | 19
Table of Contents
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $9.73 | $9.60 | $9.85 | $9.96 | $10.02 | |||||||||||||||
Net investment income | 0.15 | 0.21 | 0.14 | 0.07 | 0.07 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.18 | 0.16 | (0.20 | ) | (0.03 | ) | 0.02 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.33 | 0.37 | (0.06 | ) | 0.04 | 0.09 | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.21 | ) | (0.24 | ) | (0.19 | ) | (0.15 | ) | (0.15 | ) | ||||||||||
Net asset value, end of period | $9.85 | $9.73 | $9.60 | $9.85 | $9.96 | |||||||||||||||
Total return1 | 3.41 | % | 3.92 | % | (0.56 | )% | 0.45 | % | 0.90 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.81 | % | 0.81 | % | 0.80 | % | 0.79 | % | 0.78 | % | ||||||||||
Net expenses | 0.78 | % | 0.78 | % | 0.78 | % | 0.78 | % | 0.78 | % | ||||||||||
Net investment income | 1.32 | % | 2.22 | % | 1.36 | % | 0.79 | % | 0.70 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 395 | % | 635 | % | 331 | % | 348 | % | 284 | % | ||||||||||
Net assets, end of period (000s omitted) | $60,425 | $29,618 | $30,538 | $51,890 | $57,976 |
1 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Short Duration Government Bond Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $9.75 | $9.62 | $9.87 | $9.98 | $10.03 | |||||||||||||||
Net investment income (loss) | 0.07 | 0.14 | 1 | 0.06 | 1 | 0.00 | 1,2 | (0.01 | ) | |||||||||||
Net realized and unrealized gains (losses) on investments | 0.18 | 0.16 | (0.19 | ) | (0.03 | ) | 0.03 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.25 | 0.30 | (0.13 | ) | (0.03 | ) | 0.02 | |||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.13 | ) | (0.17 | ) | (0.12 | ) | (0.08 | ) | (0.07 | ) | ||||||||||
Net asset value, end of period | $9.87 | $9.75 | $9.62 | $9.87 | $9.98 | |||||||||||||||
Total return3 | 2.64 | % | 3.14 | % | (1.30 | )% | (0.30 | )% | 0.25 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 1.56 | % | 1.56 | % | 1.55 | % | 1.54 | % | 1.53 | % | ||||||||||
Net expenses | 1.53 | % | 1.53 | % | 1.53 | % | 1.53 | % | 1.53 | % | ||||||||||
Net investment income (loss) | 0.61 | % | 1.49 | % | 0.62 | % | 0.04 | % | (0.05 | )% | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 395 | % | 635 | % | 331 | % | 348 | % | 284 | % | ||||||||||
Net assets, end of period (000s omitted) | $8,868 | $10,032 | $15,093 | $20,026 | $27,454 |
1 | Calculated based upon average shares outstanding |
2 | Amount is less 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 Short Duration Government Bond Fund | 21
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS R6 | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $9.77 | $9.64 | $9.89 | $9.99 | $10.05 | |||||||||||||||
Net investment income | 0.19 | 0.25 | 1 | 0.16 | 1 | 0.12 | 1 | 0.12 | ||||||||||||
Net realized and unrealized gains (losses) on investments | 0.18 | 0.16 | (0.17 | ) | (0.02 | ) | 0.01 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.37 | 0.41 | (0.01 | ) | 0.10 | 0.13 | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.25 | ) | (0.28 | ) | (0.24 | ) | (0.20 | ) | (0.19 | ) | ||||||||||
Net asset value, end of period | $9.89 | $9.77 | $9.64 | $9.89 | $9.99 | |||||||||||||||
Total return | 3.83 | % | 4.34 | % | (0.14 | )% | 0.96 | % | 1.32 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.43 | % | 0.43 | % | 0.42 | % | 0.41 | % | 0.40 | % | ||||||||||
Net expenses | 0.37 | % | 0.37 | % | 0.37 | % | 0.37 | % | 0.37 | % | ||||||||||
Net investment income | 1.77 | % | 2.62 | % | 1.64 | % | 1.19 | % | 1.11 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 395 | % | 635 | % | 331 | % | 348 | % | 284 | % | ||||||||||
Net assets, end of period (000s omitted) | $48,371 | $41,987 | $35,472 | $172,106 | $233,993 |
1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
22 | Wells Fargo Short Duration Government Bond Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $9.75 | $9.62 | $9.87 | $9.98 | $10.03 | |||||||||||||||
Net investment income | 0.16 | 1 | 0.23 | 1 | 0.15 | 1 | 0.08 | 0.08 | ||||||||||||
Net realized and unrealized gains (losses) on investments | 0.19 | 0.16 | (0.19 | ) | (0.02 | ) | 0.04 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.35 | 0.39 | (0.04 | ) | 0.06 | 0.12 | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.23 | ) | (0.26 | ) | (0.21 | ) | (0.17 | ) | (0.17 | ) | ||||||||||
Net asset value, end of period | $9.87 | $9.75 | $9.62 | $9.87 | $9.98 | |||||||||||||||
Total return | 3.60 | % | 4.10 | % | (0.37 | )% | 0.63 | % | 1.18 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.75 | % | 0.75 | % | 0.74 | % | 0.73 | % | 0.72 | % | ||||||||||
Net expenses | 0.60 | % | 0.60 | % | 0.60 | % | 0.60 | % | 0.60 | % | ||||||||||
Net investment income | 1.54 | % | 2.41 | % | 1.56 | % | 0.96 | % | 0.87 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 395 | % | 635 | % | 331 | % | 348 | % | 284 | % | ||||||||||
Net assets, end of period (000s omitted) | $36,262 | $38,816 | $71,997 | $89,743 | $121,576 |
1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
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Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $9.75 | $9.62 | $9.87 | $9.98 | $10.03 | |||||||||||||||
Net investment income | 0.17 | 0.25 | 0.17 | 0.11 | 0.11 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.19 | 0.16 | (0.19 | ) | (0.03 | ) | 0.03 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.36 | 0.41 | (0.02 | ) | 0.08 | 0.14 | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.24 | ) | (0.28 | ) | (0.23 | ) | (0.19 | ) | (0.19 | ) | ||||||||||
Net asset value, end of period | $9.87 | $9.75 | $9.62 | $9.87 | $9.98 | |||||||||||||||
Total return | 3.78 | % | 4.29 | % | (0.20 | )% | 0.81 | % | 1.37 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.48 | % | 0.48 | % | 0.47 | % | 0.46 | % | 0.45 | % | ||||||||||
Net expenses | 0.42 | % | 0.42 | % | 0.42 | % | 0.42 | % | 0.42 | % | ||||||||||
Net investment income | 1.72 | % | 2.57 | % | 1.75 | % | 1.15 | % | 1.06 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 395 | % | 635 | % | 331 | % | 348 | % | 284 | % | ||||||||||
Net assets, end of period (000s omitted) | $451,715 | $445,211 | $493,372 | $579,690 | $664,047 |
The accompanying notes are an integral part of these financial statements.
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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 Short Duration Government Bond 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.
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.
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.
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 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.
When-issued transactions
The Fund may purchase securities on a forward commitment or when-issued basis. The Fund records a when-issued transaction on the trade date and will segregate assets in an amount at least equal in value to the Fund’s commitment to purchase when-issued securities. Securities purchased on a when-issued basis are marked-to-market daily and the Fund begins earning interest on the settlement date. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
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 interest rates and is subject to interest rate 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
Wells Fargo Short Duration Government Bond Fund | 25
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Notes to financial statements
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.
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 are declared daily and paid monthly. Distributions from net realized gains, if any, 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 August 31, 2020, the aggregate cost of all investments for federal income tax purposes was $635,961,110 and the unrealized gains (losses) consisted of:
Gross unrealized gains | $ | 9,365,730 | ||
Gross unrealized losses | (691,287 | ) | ||
Net unrealized gains | $ | 8,674,443 |
As of August 31, 2020, the Fund had capital loss carryforwards which consist of $39,018,647 in short-term capital losses and $36,448,663 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.
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) |
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Notes to financial statements
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 August 31, 2020:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Agency securities | $ | 0 | $ | 331,149,967 | $ | 0 | $ | 331,149,967 | ||||||||
Asset-backed securities | 0 | 71,526,439 | 0 | 71,526,439 | ||||||||||||
Non-agency mortgage-backed securities | 0 | 30,096,564 | 0 | 30,096,564 | ||||||||||||
U.S. Treasury securities | 157,475,830 | 0 | 0 | 157,475,830 | ||||||||||||
Yankee corporate bonds and notes | 0 | 3,236,578 | 0 | 3,236,578 | ||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 51,203,298 | 0 | 0 | 51,203,298 | ||||||||||||
208,679,128 | 436,009,548 | 0 | 644,688,676 | |||||||||||||
Futures contracts | 65,079 | 0 | 0 | 65,079 | ||||||||||||
Total assets | $ | 208,744,207 | $ | 436,009,548 | $ | 0 | $ | 644,753,755 | ||||||||
Liabilities | ||||||||||||||||
Futures contracts | $ | 118,202 | $ | 0 | $ | 0 | $ | 118,202 | ||||||||
Total liabilities | $ | 118,202 | $ | 0 | $ | 0 | $ | 118,202 |
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
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.
For the year ended August 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 | 0.350 | % | ||
Next $4 billion | 0.325 | |||
Next $3 billion | 0.290 | |||
Next $2 billion | 0.265 | |||
Over $10 billion | 0.255 |
For the year ended August 31, 2020, the management fee was equivalent to an annual rate of 0.35% of the Fund’s average daily net assets.
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Notes to financial statements
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 0.15% and declining to 0.05% 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 | 0.16 | % | ||
Class R6 | 0.03 | |||
Administrator Class | 0.10 | |||
Institutional Class | 0.08 |
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 December 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.78% for Class A shares, 1.53% for Class C shares, 0.37% for Class R6 shares, 0.60% for Administrator Class shares, and 0.42% 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 August 31, 2020, Funds Distributor received $1,190 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 August 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.
28 | Wells Fargo Short Duration Government Bond Fund
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Notes to financial statements
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the year ended August 31, 2020 were as follows:
Purchases at cost | Sales proceeds | |||||
U.S. government | Non-U.S. government | U.S. government | Non-U.S. government | |||
$2,243,039,004 | $115,955,517 | $2,175,213,517 | $85,156,760 |
6. DERIVATIVE TRANSACTIONS
During the year ended August 31, 2020, the Fund entered into futures contracts to speculate on interest rates and to help manage the duration of the portfolio. The Fund had an average notional amount of $192,042,982 in long futures contracts and $61,192,579 in short futures contracts during the year ended August 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.
7. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $350,000,000 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 August 31, 2020, there were no borrowings by the Fund under the agreement.
8. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid was $13,925,297 and $16,492,217 of ordinary income for the years ended August 31, 2020 and August 31, 2019, respectively.
As of August 31, 2020, the components of distributable loss on a tax basis were as follows:
Undistributed ordinary income | Unrealized gains | Capital loss carryforward | ||
$324,184 | $8,674,443 | $(75,467,310) |
9. INDEMNIFICATION
Under the Fund’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 Fund. The Fund has entered into a separate agreement with each Trustee that converts indemnification rights currently existing under the Fund’s organizational documents into contractual rights that cannot be changed in the future without the consent of the Trustee. Additionally, in the normal course of business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’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 on fair value measurements in Topic 820, Fair Value Measurements. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has adopted this guidance which did not have a material impact on the financial statements.
Wells Fargo Short Duration Government Bond Fund | 29
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Notes to financial statements
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.
30 | Wells Fargo Short Duration Government Bond 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 Short Duration Government Bond Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of August 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 August 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 August 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
October 28, 2020
Wells Fargo Short Duration Government Bond Fund | 31
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TAX INFORMATION
For the fiscal year ended August 31, 2020, $13,927,931 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 August 31, 2020, 7.69% of the ordinary income distributed was derived from interest on U.S. government securities.
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.
32 | Wells Fargo Short Duration Government Bond 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 142 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 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). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008 | 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 (Emeritus), 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 Wheelock (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. Interim President of the McKnight Foundation from January to September 2020. 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 the Treasurer of 77 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. |
Wells Fargo Short Duration Government Bond Fund | 35
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Other information (unaudited)
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Wells Fargo Short Duration Government Bond Fund
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Funds Trust (the “Trust”) must determine annually whether to approve the continuation of the Trust’s investment management and sub-advisory agreements. In this regard, at a Board meeting held on May 26, 2020 and May 28, 2020 (together, the “Meeting”), the Board, all the members of which have no direct or indirect interest in the investment management and sub-advisory agreements and are not “interested persons” of the Trust, as defined in the 1940 Act (the “Independent Trustees”), reviewed and approved for Wells Fargo Short Duration Government Bond Fund (the “Fund”): (i) an investment management agreement (the “Management Agreement”) with Wells Fargo Funds Management, LLC (“Funds Management”); and (ii) an investment sub-advisory agreement (the “Sub-Advisory Agreement”) with Wells Capital Management Incorporated (the “Sub-Adviser”), an affiliate of Funds Management. The Management Agreement and the Sub-Advisory Agreement are collectively referred to as the “Advisory Agreements.”
At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of Funds Management and the Sub-Adviser and the approval of the Advisory Agreements. Prior to the Meeting, including at a Board meeting held in April 2020, the Trustees conferred extensively among themselves and with representatives of Funds Management about these matters. Also, the Board has adopted a team-based approach, with each team consisting of a sub-set of Trustees, to assist the full Board in the discharge of its duties in reviewing investment performance and other matters throughout the year. The Independent Trustees were assisted in their evaluation of the Advisory Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately.
In providing information to the Board, Funds Management and the Sub-Adviser were guided by a detailed set of requests for information submitted to them by independent legal counsel on behalf of the Independent Trustees at the start of the Board’s annual contract renewal process earlier in 2020. In considering and approving the Advisory Agreements, the Trustees considered the information they believed relevant, including but not limited to the information discussed below. The Board considered not only the specific information presented in connection with the Meeting, but also the knowledge gained over time through interaction with Funds Management and the Sub-Adviser about various topics. In this regard, the Board reviewed reports of Funds Management at each of its quarterly meetings, which included, among other things, portfolio reviews and investment performance reports. In addition, the Board and the teams mentioned above confer with portfolio managers at various times throughout the year. The Board did not identify any particular information or consideration that was all-important or controlling, and each individual Trustee may have attributed different weights to various factors.
After its deliberations, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable. The Board considered the approval of the Advisory Agreements for the Fund as part of its consideration of agreements for funds across the complex, but its approvals were made on a fund-by-fund basis. The following summarizes a number of important, but not necessarily all, factors considered by the Board in support of its approvals.
Nature, extent and quality of services
The Board received and considered various information regarding the nature, extent and quality of services provided to the Fund by Funds Management and the Sub-Adviser under the Advisory Agreements. This information included a description of the investment advisory services and Fund-level administrative services covered by the Management Agreement, as well as, among other things, a summary of the background and experience of senior management of Wells Fargo Asset Management (“WFAM”), of which Funds Management and the Sub-Adviser are a part, and a summary of investments made in the business of WFAM. The Board also received a description of Funds Management’s and the Sub-Adviser’s business continuity plans and of their approaches to data privacy and cybersecurity, and related testing. The Board also received and reviewed information about Funds Management’s role as administrator of the Fund’s liquidity risk management program, Funds Management’s approach to risk management, and Funds Management’s intermediary and vendor oversight program.
The Board also considered the qualifications, background, tenure and responsibilities of each of the portfolio managers primarily responsible for the day-to-day portfolio management of the Fund. The Board evaluated the ability of Funds Management and the Sub-Adviser to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of Funds Management and the Sub-Adviser. In addition, the Board took into account the full range of services provided to the Fund by Funds Management and its affiliates.
36 | Wells Fargo Short Duration Government Bond Fund
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Other information (unaudited)
Fund investment performance and expenses
The Board considered the investment performance results for the Fund over various time periods ended December 31, 2019. The Board also considered more current results for various time periods ended March 31, 2020. The Board considered these results in comparison to the investment performance of funds in a universe that was determined by Broadridge Inc. (“Broadridge”) to be similar to the Fund (the “Universe”), and in comparison to the Fund’s benchmark index and to other comparative data. Broadridge is an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds in the performance Universe. The Board noted that the investment performance of the Fund (Administrator Class) was higher than the average investment performance of the Universe for the one-, three-, five- and ten-year periods ended December 31, 2019. The Board also noted that the investment performance of the Fund (Administrator Class) was higher than the average investment performance of the Universe for the all periods ended March 31, 2020. The Board also noted that the investment performance of the Fund was higher than or in range of its benchmark index, the Bloomberg Barclays 1-3 Year Government Index, for the one-, five- and ten-year periods ended December 31, 2019, and lower than its benchmark for the three-year period ended December 31, 2019. The Board also noted that the investment performance of the Fund was lower than its benchmark index, the Bloomberg Barclays 1-3 Year Government Index, for the one-, three- and five-year periods ended March 31, 2020, but higher than its benchmark for the ten-year period ended March 31, 2020.
The Board also received and considered information regarding the Fund’s net operating expense ratios and their various components, including actual management fees, custodian and other non-management fees, and Rule 12b-1 and non-Rule 12b-1 shareholder service fees. The Board considered these ratios in comparison to the median ratios of funds in class-specific expense groups that were determined by Broadridge to be similar to the Fund (the “Groups”). The Board received a description of the methodology used by Broadridge to select the mutual funds in the expense Groups and an explanation of how funds comprising expense groups and their expense ratios may vary from year-to-year. Based on the Broadridge reports, the Board noted that the net operating expense ratios of the Fund were equal to or lower than the median net operating expense ratios of the expense Groups for each share class.
The Board took into account the Fund’s investment performance and expense information provided to it among the factors considered in deciding to re-approve the Advisory Agreements.
Investment management and sub-advisory fee rates
The Board reviewed and considered the contractual fee rates payable by the Fund to Funds Management under the Management Agreement, as well as the contractual fee rates payable by the Fund to Funds Management for class-level administrative services under a Class-Level Administration Agreement, which include, among other things, class-level transfer agency and sub-transfer agency costs (collectively, the “Management Rates”). The Board also reviewed and considered the contractual investment sub-advisory fee rates that are payable by Funds Management to the Sub-Adviser for investment sub-advisory services.
Among other information reviewed by the Board was a comparison of the Fund’s Management Rates with the average contractual investment management fee rates of funds in the expense Groups at a common asset level as well as transfer agency costs of the funds in the expense Groups. The Board noted that the Management Rates of the Fund were equal to or lower than the sum of these average rates for the Fund’s expense Groups for all share classes.
The Board also received and considered information about the portion of the total management fee that was retained by Funds Management after payment of the fee to the Sub-Adviser for sub-advisory services. In assessing the reasonableness of this amount, the Board received and evaluated information about the nature and extent of responsibilities retained and risks assumed by Funds Management and not delegated to or assumed by the Sub-Adviser, and about Funds Management’s on-going oversight services. Given the affiliation between Funds Management and the Sub-Adviser, the Board ascribed limited relevance to the allocation of fees between them.
The Board also received and considered information about the nature and extent of services offered and fee rates charged by Funds Management and the Sub-Adviser to other types of clients with investment strategies similar to those of the Fund. In this regard, the Board received information about the significantly greater scope of services, and compliance, reporting and other legal burdens and risks of managing proprietary mutual funds compared with those associated with managing assets of other types of clients, including third-party sub-advised fund clients and non-mutual fund clients such as institutional separate accounts.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board determined that the compensation payable to Funds Management under the Management Agreement and to the Sub-Adviser under the Sub-Advisory Agreement was reasonable.
Wells Fargo Short Duration Government Bond Fund | 37
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Other information (unaudited)
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of both WFAM and Wells Fargo & Co. (“Wells Fargo”) from providing services to the fund family as a whole. The Board noted that the Sub-Adviser’s profitability information with respect to providing services to the Fund and other funds in the family was subsumed in the WFAM and Wells Fargo profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability, including a description of the methodology used to allocate certain expenses. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such as the size, type and age of fund.
Based on its review, the Board did not deem the profits reported by Funds Management, WFAM or Wells Fargo from services provided to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
The Board received and considered information about the potential for Funds Management to experience economies of scale in the provision of management services to the Fund, the difficulties of calculating economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. The Board noted the existence of breakpoints in the Fund’s management fee structure, which operate generally to reduce the Fund’s expense ratios as the Fund grows in size, and the size of the Fund in relation to such breakpoints. The Board considered that in addition to management fee breakpoints, Funds Management shares potential economies of scale from its management business in a variety of ways, including through fee waiver and expense reimbursement arrangements, services that benefit shareholders, competitive management fee rates set at the outset without regard to breakpoints, and investments in the business intended to enhance services available to shareholders.
The Board concluded that Funds Management’s arrangements with respect to the Fund, including contractual breakpoints, constituted a reasonable approach to sharing potential economies of scale with the Fund and its shareholders.
Other benefits to Funds Management and the Sub-Adviser
The Board received and considered information regarding potential “fall-out” or ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, as a result of their relationships with the Fund. Ancillary benefits could include, among others, benefits directly attributable to other relationships with the Fund and benefits potentially derived from an increase in Funds Management’s and the Sub-Adviser’s business as a result of their relationships with the Fund. The Board noted that various affiliates of Funds Management may receive distribution-related fees, shareholder servicing payments and sub-transfer agency fees in respect of shares sold or held through them and services provided.
The Board also reviewed information about soft dollar credits earned and utilized by the Sub-Adviser, fees earned by Funds Management and the Sub-Adviser from managing a private investment vehicle for the fund family’s securities lending collateral, and commissions earned by an affiliated broker from portfolio transactions.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board did not find that any ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, were unreasonable.
Conclusion
At the Meeting, after considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable.
38 | Wells Fargo Short Duration Government Bond Fund
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Other information (unaudited)
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Wells Fargo Funds Trust (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) on behalf of each of its series, including the Fund, which is reasonably designed to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) previously approved the designation of Wells Fargo Funds Management, LLC (“Funds Management”), the Fund’s investment manager, as the administrator of the Program, and Funds Management has established a Liquidity Risk Management Council composed of personnel from multiple departments within Funds Management and its affiliates to assist Funds Management in the implementation and on-going administration of the Program.
The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent the Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if the Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s “highly liquid investments” below its HLIM; and (6) periodic reporting to the Board.
At a meeting of the Board held on May 26 and 28, 2020, the Board received a written report (the “Report”) from Funds Management that addressed the operation of the Program and assessed its adequacy and effectiveness of implementation. The Report covered the initial period from December 1, 2018 through December 31, 2019 (the “Reporting Period”). No significant liquidity events impacting the Fund were noted in the Report. There were no material changes to the Program during the Reporting Period. The Report concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
Wells Fargo Short Duration Government Bond Fund | 39
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Effective June 1, 2020, shareholders purchasing Fund shares through an Oppenheimer & Co. Inc. (“Oppenheimer”) platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred or back-end, sales charge waivers) and discounts, which may differ from those disclosed in the Fund’s Prospectus or SAI.
Front-end sales load waivers on Class A shares available at Oppenheimer |
Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan. |
Shares purchased by or through a 529 Plan. |
Shares purchased through an Oppenheimer affiliated investment advisory program. |
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 from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 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 (known as Rights of Restatement). |
A shareholder in the Fund’s Class C shares will have their shares exchanged at net asset value to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the exchange is in line with the policies and procedures of Oppenheimer. |
Employees and registered representatives of Oppenheimer or its affiliates and their family members. |
Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in the Prospectus. |
CDSC waivers on A and C shares available at Oppenheimer |
Death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Prospectus. |
Return of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the Prospectus. |
Shares sold to pay Oppenheimer fees but only if the transaction is initiated by Oppenheimer. |
Shares acquired through a right of reinstatement. |
Front-end load discounts available at Oppenheimer: breakpoints, rights of accumulation & letters of intent |
Breakpoints as described in the 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 Oppenheimer. Eligible fund family assets not held at Oppenheimer may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
40 | Wells Fargo Short Duration Government Bond Fund
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Effective June 15, 2020, shareholders purchasing fund shares through a Robert W. Baird & Co. (“Baird”) platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or the SAI.
Front-end sales load waivers on Class A shares available at Baird |
Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing share of the same fund. |
Share purchase by employees and registers representatives of Baird or its affiliate and their family members as designated by Baird. |
Shares purchase from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as rights of reinstatement). |
A shareholder in the Funds Investor C Shares will have their share exchanged at net asset value to Investor A shares of the fund if the shares are no longer subject to CDSC and the exchange is in line with the policies and procedures of Baird. |
Employer-sponsored retirement plans or charitable accounts in a transactional brokerage account at Baird, including 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 or SAR-SEPs. |
CDSC waivers on A and C shares available at Baird |
Shares sold due to death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
Shares bought due to returns of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 72as described in the Fund’s Prospectus. |
Shares sold to pay Baird fees but only if the transaction is initiated by Baird. |
Shares acquired through a right of reinstatement. |
Front-end load discounts available at Baird: breakpoint and/or rights of accumulation |
Breakpoints as described in the Prospectus. |
Rights of accumulations which entitles 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 Baird. Eligible fund family assets not held at Baird may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets. |
Letters of Intent (LOI) allow for breakpoint discounts based on anticipated purchases within a fund family through Baird, over a13-month period of time. |
Wells Fargo Short Duration Government Bond Fund | 41
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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
© 2020 Wells Fargo & Company. All rights reserved
PAR-0920-00413 10-20
A220/AR220 08-20
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Annual Report
August 31, 2020
Wells Fargo
Government Securities 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 August 31, 2020, unless otherwise noted, and are those of the Fund’s portfolio 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 Government Securities Fund | 1
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Letter to shareholders (unaudited)
Andrew Owen
President
Wells Fargo Funds
Dear Shareholder:
We are pleased to offer you this annual report for the Wells Fargo Government Securities Fund for the 12-month period that ended August 31, 2020. Global stock markets saw earlier gains erased in March as governments around the world took unprecedented measures, attempting to stop the spread of the coronavirus at the expense of short-term economic output. However, markets rebounded from April on to offset much of the losses as central banks attempted to bolster capital markets and confidence.
For the 12-month period, equities had broadly positive total returns despite intense volatility in March. Non-U.S. developed market equities had the weakest performance and U.S. stocks performed strongly. Fixed-income securities were more modest though also generally positive. For the period, U.S. stocks, based on the S&P 500 Index,1 gained 21.94%. International stocks, as measured by the MSCI ACWI ex USA Index (Net),2 returned 8.31%, while the MSCI EM Index (Net)3 had somewhat stronger performance, with a 14.49% gain. For bond investors, the Bloomberg Barclays U.S. Aggregate Bond Index4 returned 6.47%, the Bloomberg Barclays Global Aggregate ex-USD Index5 gained a more modest 4.58%, and the Bloomberg Barclays Municipal Bond Index6 returned 3.24% while the ICE BofA U.S. High Yield Index7 returned 3.71%.
The fiscal year began with supportive central bank actions.
As the period began, several central banks had just cut interest rates in response to a global economic slowdown. Ongoing concerns regarding U.S.-China trade tensions and Brexit remained unresolved. The Federal Reserve (Fed) cut U.S. interest rates again in September. U.S. manufacturing data disappointed investors. The U.S. Congress announced it would pursue an impeachment investigation of President Trump. Meanwhile, the U.K. Brexit impasse showed no signs of resolution. Officials in China said that hitting the country’s economic growth goals for the year would be difficult considering the weight of tariffs and trade restrictions. Although the S&P 500 Index finished the third quarter with the best year-to-date returns in more than 20 years, concerns about future returns remained.
The fourth quarter started on a strong note, with U.S.-China trade tensions relaxing in October along with renewed optimism for a U.K. Brexit deal and positive macroeconomic data. The initial estimate of U.S. third-quarter gross domestic product (GDP) growth was a resilient 1.9% annualized rate, while the U.S. unemployment rate fell to a 50-year low of
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 and emerging 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 Government Securities Fund
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Letter to shareholders (unaudited)
3.5% in September. However, despite strength among U.S. consumers, business confidence declined while manufacturing activity contracted. Concerned with a potential economic slowdown, the Fed lowered interest rates another quarter point in late October—its third rate cut in four months. This helped push the S&P 500 Index to an all-time high while emerging market equities rallied and global bonds declined overall, reflecting a broad pickup in risk appetite.
Equity markets continued to rally in November despite ongoing geopolitical risks. Hopes for a U.S.-China trade deal buoyed investor confidence. U.S. business sentiment improved slightly, and manufacturing and services activity picked up. While consumer confidence and purchasing managers’ activity rose in the eurozone, China reported weakening manufacturing and consumer data. Bond yields rose marginally, leading to slightly negative returns for global government and investment-grade corporate bonds.
Financial markets ended 2019 with a boost from the U.S. and China accord on a Phase One trade deal. That, along with the landslide win by the pro-Brexit U.K. Conservative Party in a national election and ongoing central bank support, gave investors greater confidence. U.S. economic indicators were generally positive, with the exception of manufacturing activity and business confidence. Consumer confidence was resilient, fed by a robust labor market, tame inflation, and lower interest rates, which boosted housing affordability and stimulated homebuyer activity. The impeachment of President Trump had little impact on markets. Meanwhile, slowing Chinese economic activity, partly attributable to the trade war, led to further government stimulus at year-end through lower reserve ratios, allowing banks to lend more money.
The year-end rally continued in early January 2020. However, capital market volatility picked up sharply in late January on concerns over the potential impact of the coronavirus on the global economy and stock markets. As sentiment began to sour, perceived safe havens did well in January. The U.S. dollar and Japanese yen both rose and government bonds outperformed equities. While the S&P 500 Index held its ground, emerging market equities tumbled, including those in Asia.
In February, the coronavirus became the major market focus. Fears of the virus’s impact on global growth led to expectations of increased global central bank monetary policy support. That led the 10-year U.S. Treasury yield to fall to an all-time low of 1.1%. Although equity markets initially shrugged off concerns about the outbreak, focusing instead on strong fourth-quarter earnings and improving business confidence in January, market sentiment turned sharply lower and the S&P 500 Index lost 8.2% for the month. Oil prices tumbled as Russia and the Organization of the Petroleum Exporting Countries compounded a major decline in oil demand with a brutal price war, partly aimed at dissuading further U.S. shale production, causing the price of West Texas Intermediate crude oil to plummet.
The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems. This abrupt stoppage of economic activity led to the sharp deceleration of global output, sending economies into a deep contraction. Central banks responded swiftly, slashing interest rates and expanding quantitative easing programs to restore liquidity and confidence to the markets. In the U.S., the Fed introduced several new lending programs, funding investment-grade bonds, money market mutual funds, and commercial paper while purchasing Treasuries, mortgage-backed securities, and overnight repurchase agreements. Meanwhile, stock markets tumbled quickly into a bear market, ending the longest bull stock market in U.S. history.
Markets rebounded strongly in April, fueled by unprecedented government and central bank stimulus measures. The U.S. economy contracted by an annualized 5.0% pace in the first quarter, with 30 million new unemployment insurance claims in six weeks. In the
“The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems.”
Wells Fargo Government Securities Fund | 3
Table of Contents
Letter to shareholders (unaudited)
“The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July.”
eurozone, first-quarter real GDP shrank 3.8%, with the composite April Flash Purchasing Managers’ Index, a monthly survey of purchasing managers, falling to an all-time low of 13.5. The European Central Bank expanded its quantitative easing to include the purchase of additional government bonds of countries with the greatest virus-related need, including Italy and Spain. China’s first-quarter GDP fell by 6.8% year over year. However, retail sales, production, and investment showed signs of recovery. Extreme oil-price volatility continued as global supply far exceeded demand.
The global equity market rebound continued in May, with widespread strong monthly gains. Investors regained confidence on reports of early signs of success in human trials of a coronavirus vaccine. Growth stocks continued to outperform value stocks while returns on global government bonds were generally flat. In the U.S., a gap grew between the stock market rebound and devastating economic data points, including an April unemployment rate of 14.7%, the highest level since World War II. Purchasing managers’ indices reflected weakening activity in May in both the manufacturing and services sectors. U.S. corporate earnings reports indicated a 14% year-over-year contraction in earnings from the first quarter of 2019. However, high demand for technology, driven by remote activity, supported robust information technology sector earnings, which helped drive major technology stocks higher.
Financial markets posted widely positive returns in June despite ongoing economic weakness and high levels of uncertainty on the containment of the coronavirus and the timing of an effective vaccine. There were hopeful signs as economies reopened, with both U.S. and U.K. retail sales rebounding sharply in May. However, year over year, sales remained depressed. Vitally important to market sentiment was the ongoing commitment by central banks globally to do all they could to provide economic support through liquidity and low borrowing costs. U.S. economic activity was aided by one-time $1,200 stimulus checks and $600 bonus weekly unemployment benefits which expired at the end of July. However, unemployment remained historically high, easing somewhat from 14.7% in April to 11.1% in June. During June, numerous states reported increases of coronavirus cases. China’s economic recovery picked up momentum in June, though it remained far from a full recovery.
July was a broadly positive month for both global equities and fixed income. However, economic data and a resurgence of coronavirus cases pointed to the vulnerability of the global economy and the ongoing imperative to regain control of the pandemic. Second-quarter GDP shrank from the previous quarter by 9.5% and 12.1% in the U.S. and eurozone, respectively. In contrast, China reported a 3.2% year-over-year expansion in its second-quarter GDP. U.S. unemployment remained high despite adding 1.8 million jobs in July, with a double-digit jobless rate persisting. However, manufacturing activity grew in both the U.S. and eurozone. In Asia, while China’s manufacturing sector continued to expand, activity in Japan and South Korea contracted. In July, a rising concern was the rapid and broad reemergence of coronavirus infections.
The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July. U.S. stocks had strong monthly gains, led by the so-called FAANG stocks—Facebook, Apple, Amazon, Netflix, and Google (Alphabet)—which dominate these indices and continued to rally. U.S. stocks generally surpassed other broadly positive global equity performance while fixed-income market monthly returns were broadly flat. Generally stronger-than-expected second-quarter earnings boosted investor sentiment along with the Fed’s announcement of a policy shift that will likely lead to longer-term low interest rates and supportive monetary policy. The U.S. Flash Purchasing Managers’ Indices for both manufacturing and services beat expectations while U.S. housing market indicators were strong. In Europe, retail sales expanded and consumer confidence remained steady. China’s economy continued its fairly steady expansion. Overall, developed markets performed better than emerging market equities for the month of August as people took comfort in better-known equities in perceived safer markets.
4 | Wells Fargo Government Securities Fund
Table of Contents
Letter to shareholders (unaudited)
Don’t let short-term uncertainty derail long-term investment goals.
Periods of investment uncertainty can present challenges, but experience has taught us that maintaining long-term investment goals can be an effective way to plan for the future. To help you create a sound strategy based on your personal goals and risk tolerance, Wells Fargo Funds offers more than 100 mutual funds spanning a wide range of asset classes and investment styles. Although diversification cannot guarantee an investment profit or prevent losses, we believe it can be an effective way to manage investment risk and potentially smooth out overall portfolio performance. We encourage investors to know their investments and to understand that appropriate levels of risk-taking may unlock opportunities.
Thank you for choosing to invest with Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Andrew Owen
President
Wells Fargo Funds
|
For further information about your Fund, contact your investment professional, visit our website at wfam.com, or call us directly at 1-800-222-8222. |
Notice to Shareholders
At a meeting held on August 10-12, 2020, the Board of Trustees of the Fund approved a change to the Fund’s automatic conversion feature for Class C shares in order to shorten the required holding period from 10 to 8 years. As a result, on a monthly basis beginning November 5, 2020, Class C shares will convert automatically into Class A shares 8 years after the initial date of purchase or, if you acquired your Class C shares through an exchange or conversion from another share class, 8 years after the date you acquired your Class C shares. When Class C shares that you acquired through a purchase or exchange convert, any other Class C shares that you purchased with reinvested dividends and distributions also will convert into Class A shares on a pro rata basis.
Please note that a shorter holding period may apply depending on your intermediary. Please see “Appendix A—Sales Charge Reductions and Waivers for Certain Intermediaries” in the Fund’s prospectus for further information.
Wells Fargo Government Securities Fund | 5
Table of Contents
Performance highlights (unaudited)
Investment objective
The Fund seeks current income.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Christopher Y. Kauffman, CFA®‡
Jay N. Mueller, CFA®‡
Michal Stanczyk
Average annual total returns (%) as of August 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 (SGVDX) | 8-31-1999 | 0.30 | 2.14 | 2.14 | 5.02 | 3.08 | 2.61 | 0.91 | 0.85 | |||||||||||||||||||||||||
Class C (WGSCX) | 12-26-2002 | 3.24 | 2.31 | 1.85 | 4.24 | 2.31 | 1.85 | 1.66 | 1.60 | |||||||||||||||||||||||||
Administrator Class (WGSDX) | 4-8-2005 | – | – | – | 5.24 | * | 3.30 | 2.82 | 0.85 | 0.64 | ||||||||||||||||||||||||
Institutional Class (SGVIX) | 8-31-1999 | – | – | – | 5.41 | * | 3.46 | 2.99 | 0.58 | 0.48 | ||||||||||||||||||||||||
Bloomberg Barclays U.S. Aggregate ex Credit Index3 | – | – | – | – | 5.99 | 3.61 | 3.10 | – | – | |||||||||||||||||||||||||
Bloomberg Barclays Intermediate U.S. Government Bond Index4 | – | – | – | – | 5.44 | 2.90 | 2.34 | – | – |
* | 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.
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 4.50%. 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.
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. Securities issued by U.S. government agencies or government sponsored entities may not be guaranteed by the U.S. Treasury. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). The Fund is exposed to mortgage- and asset-backed securities risk. The U.S. government guarantee applies to certain underlying securities and not to shares of the Fund. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Government Securities Fund
Table of Contents
Performance highlights (unaudited)
Growth of $10,000 investment as of August 31, 20205 |
‡ | 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 December 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 0.85% for Class A, 1.60% for Class C, 0.64% for Administrator Class, and 0.48% 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 caps. Prior to or after the commitment expiration date, the caps may be increased or the commitment to maintain the caps may be terminated only with the approval of the Board of Trustees. Without these caps, 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 Bloomberg Barclays U.S. Aggregate ex Credit Index is composed of the Bloomberg Barclays U.S. Government Index and the Bloomberg Barclays U.S. Mortgage-Backed Securities Index and includes Treasury issues, agency issues, and mortgage-backed securities. You cannot invest directly in an index. |
4 | The Bloomberg Barclays Intermediate U.S. Government Bond Index is an unmanaged index composed of U.S. government securities with maturities in the one to 10-year range, including securities issued by the U.S. Treasury and U.S. government agencies. 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 performance of the Bloomberg Barclays U.S. Aggregate ex Credit Index and the Bloomberg Barclays Intermediate U.S. Government Bond 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 4.50%. |
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 Government Securities Fund | 7
Table of Contents
Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
∎ | The Fund underperformed its benchmark, the Bloomberg Barclays U.S. Aggregate ex Credit Index, for the 12-month period that ended August 31, 2020. |
∎ | The Fund’s overweight to securitized sectors, including non-agency commercial mortgage-backed securities (CMBS), collateralized mortgage obligations (CMOs), and asset-backed securities (ABS), detracted from performance over the period as spreads had not fully retraced widening that had occurred in March. |
∎ | An underweight to U.S. Treasuries detracted as rates rallied significantly in late March and early April. |
∎ | An overweight to mortgage-backed securities (MBS) during the final four months of 2019 contributed to performance, as the sector outperformed Treasuries. An overweight to MBS for most of 2020 detracted modestly from performance. |
∎ | MBS coupon positioning had mixed results, as an overweight to higher coupons contributed to performance during the latter part of 2019 and first quarter of 2020 but detracted in the second quarter. |
∎ | The Fund’s duration and yield curve positioning were tactical and contributed to performance. |
Ten largest holdings (%) as of August 31, 20206 | ||||
FNMA, 3.00%, 9-14-2050 | 4.06 | |||
U.S. Treasury Bond, 1.38%, 8-15-2050 | 3.53 | |||
FNMA, 2.50%, 9-14-2050 | 3.27 | |||
FNMA, 3.00%, 12-1-2045 | 2.39 | |||
Resolution Funding Corporation STRIPS, 0.00%, 2-15-2039 | 2.20 | |||
U.S. Treasury Bond, 3.75%, 11-15-2043 | 1.87 | |||
GNMA, 2.50%, 9-21-2050 | 1.80 | |||
FNMA, 6.63%, 11-15-2030 | 1.72 | |||
TVA, 4.63%, 9-15-2060 | 1.59 | |||
FNMA, 4.00%, 4-1-2046 | 1.54 |
The coronavirus made a significant impact.
After years of steady expansion, the U.S. economy received a traumatic shock in 2020 with the arrival of the coronavirus. Public reaction and government-ordered lockdowns resulted in a collapse in economic activity, with the second quarter of 2020 recording a nearly 10% drop in gross domestic product. Unemployment swiftly soared to double digits. Most areas of consumption declined precipitously. Travel and leisure services bore the brunt of the disruption. Spurred by a negative demand shock, prices for many goods declined in March and April, pushing most inflation indicators substantially lower.
The Federal Reserve responded to the pandemic with a dramatic easing of monetary policy, setting overnight rate targets to near zero, as well as purchasing bonds for its own account. A host of credit support measures were put in place to improve the functioning of teetering financial markets. In their actions and rhetoric, the monetary authorities made it clear that an aggressive posture to support the economic and financial markets would be in place as long as needed.
Fiscal policy also responded swiftly to the pandemic in the form of relief payments to the general public as well as extended unemployment benefits. These measures more than offset the loss of income associated with unemployment increases and other wage losses for many people.
Economic activity probably bottomed in late April, and by the end of May, both consumption and employment were turning around. Substantial job gains occurred while claims for unemployment insurance began to subside. Prices generally stabilized, with oil rallying from distressed levels and core inflation measures rebounding from their crisis lows. Stock indices hit new all-time highs over the course of the summer, while Treasury yields remained extremely low. Credit spreads, which widened sharply in the March–April period, narrowed substantially in the ensuing few months.
Please see footnotes on page 7.
8 | Wells Fargo Government Securities Fund
Table of Contents
Performance highlights (unaudited)
Portfolio composition as of August 31, 20207 |
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The Fund maintained its overweight allocation to securitized sectors.
Overall, the Fund’s securitized allocation remained steady over the period, with a meaningful overweight relative to the benchmark. During the period, we increased the Fund’s allocation to to-be-announced (TBA) MBS, which offer a forward-settlement feature, versus specified mortgage pools. This change was primarily the result of a more attractive yield advantage on TBA mortgages over specified pools.
Within the MBS sector, the Fund ended the period underweight versus the benchmark on a market value basis but overweight on a duration basis, with an emphasis on lower coupons. The Fund also maintained an underweight to Ginnie Mae bonds due to their rich valuations, deteriorating prepayment fundamentals, and poor supply/demand technicals.
During the period, the Fund maintained a material overweight to agency CMBS and agency CMOs in place of short- and intermediate-maturity Treasuries. The Fund also held government-guaranteed or government-sponsored agency bonds rather than Treasuries, picking up additional yield and benefiting from positive spread performance. The Fund increased its allocation to non-agency CMOs—in particular, those collateralized by nonqualifying mortgages, which are not eligible for sale to Fannie Mae and Freddie Mac. We believe certain securities within this sector look attractive due to their better prepayment characteristics and the additional spread offered versus agency CMOs.
The outlook is for recovery and uncertainty.
The outlook holds considerable uncertainty, as the ultimate resolution of the coronavirus pandemic remains unknown. Consumer behavior is likely to have been altered by the crisis, though lower consumption in some areas such as travel and leisure could well be offset by higher spending on housing, in-home entertainment, and the like. The upcoming U.S. elections represent an additional source of uncertainty, with the potential for meaningful swings in tax, spending, and regulatory policies. Bearing in mind the higher-than-normal degree of uncertainty, we expect the present recovery to continue, albeit at a gradually declining pace as pent-up demand is sated and lingering damage from the pandemic proves difficult to heal. We believe it could take a year or longer to make up for all of the shortfall.
Please see footnotes on page 7.
Wells Fargo Government Securities 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 March 1, 2020 to August 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 3-1-2020 | Ending account value 8-31-2020 | Expenses paid during the period1 | Annualized net expense ratio | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,023.07 | $ | 4.27 | 0.84 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.91 | $ | 4.27 | 0.84 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,019.18 | $ | 8.12 | 1.60 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,017.09 | $ | 8.11 | 1.60 | % | ||||||||
Administrator Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,023.22 | $ | 3.25 | 0.64 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.92 | $ | 3.25 | 0.64 | % | ||||||||
Institutional Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,024.04 | $ | 2.44 | 0.48 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.72 | $ | 2.44 | 0.48 | % |
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 Government Securities Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities: 76.91% |
| |||||||||||||||
FHLB | 5.63 | % | 3-14-2036 | $ | 6,020,000 | $ | 9,398,436 | |||||||||
FHLMC | 3.50 | 10-1-2049 | 8,109,677 | 8,545,440 | ||||||||||||
FHLMC | 4.00 | 5-1-2049 | 3,903,859 | 4,157,536 | ||||||||||||
FHLMC | 5.00 | 6-1-2026 | 814,673 | 859,613 | ||||||||||||
FHLMC ¤ | 0.00 | 3-15-2031 | 6,690,000 | 5,768,423 | ||||||||||||
FHLMC ¤ | 0.00 | 11-15-2038 | 1,575,000 | 1,127,155 | ||||||||||||
FHLMC | 2.62 | 12-25-2026 | 3,828,284 | 4,071,387 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 2.67 | 6-1-2032 | 18,784 | 18,887 | ||||||||||||
FHLMC | 2.75 | 3-25-2027 | 5,044,366 | 5,348,591 | ||||||||||||
FHLMC | 2.90 | 4-25-2026 | 5,794,908 | 6,164,275 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.40%) ± | 2.90 | 7-1-2029 | 23,029 | 23,066 | ||||||||||||
FHLMC (11th District Cost of Funds +1.25%) ± | 3.25 | 7-1-2032 | 274,892 | 279,098 | ||||||||||||
FHLMC (12 Month LIBOR +1.72%) ± | 3.49 | 7-1-2038 | 1,100,876 | 1,155,457 | ||||||||||||
FHLMC | 3.50 | 8-1-2045 | 3,609,817 | 3,849,969 | ||||||||||||
FHLMC | 3.50 | 11-1-2045 | 6,542,010 | 6,981,972 | ||||||||||||
FHLMC | 3.50 | 12-1-2045 | 4,592,567 | 4,898,951 | ||||||||||||
FHLMC | 3.50 | 12-1-2045 | 1,567,333 | 1,683,140 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.14%) ± | 3.62 | 10-1-2026 | 94,801 | 95,355 | ||||||||||||
FHLMC (3 Year Treasury Constant Maturity +2.21%) ± | 3.79 | 5-1-2026 | 20,393 | 20,702 | ||||||||||||
FHLMC | 4.00 | 6-1-2044 | 3,161,555 | 3,446,528 | ||||||||||||
FHLMC | 4.00 | 9-1-2049 | 958,183 | 1,020,450 | ||||||||||||
FHLMC (12 Month LIBOR +2.09%) ± | 4.09 | 1-1-2038 | 254,560 | 257,719 | ||||||||||||
FHLMC (12 Month LIBOR +1.91%) ± | 4.16 | 9-1-2031 | 2,946 | 2,947 | ||||||||||||
FHLMC (12 Month LIBOR +1.91%) ± | 4.16 | 9-1-2031 | 39,221 | 39,481 | ||||||||||||
FHLMC | 4.50 | 3-1-2042 | 226,770 | 250,234 | ||||||||||||
FHLMC | 4.50 | 9-1-2044 | 2,740,820 | 3,039,968 | ||||||||||||
FHLMC | 4.50 | 9-1-2049 | 9,599,164 | 10,368,576 | ||||||||||||
FHLMC | 5.00 | 8-1-2040 | 797,901 | 919,778 | ||||||||||||
FHLMC | 5.50 | 7-1-2035 | 2,409,649 | 2,821,162 | ||||||||||||
FHLMC | 5.50 | 12-1-2038 | 1,505,236 | 1,743,454 | ||||||||||||
FHLMC | 6.00 | 10-1-2032 | 20,554 | 24,234 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.13%) ± | 6.38 | 1-1-2026 | 42,090 | 42,056 | ||||||||||||
FHLMC | 6.50 | 4-1-2021 | 231 | 232 | ||||||||||||
FHLMC | 6.50 | 4-1-2022 | 12,446 | 13,876 | ||||||||||||
FHLMC | 6.50 | 9-1-2028 | 11,433 | 12,762 | ||||||||||||
FHLMC | 6.75 | 9-15-2029 | 5,360,000 | 8,051,220 | ||||||||||||
FHLMC | 7.00 | 12-1-2023 | 1,259 | 1,342 | ||||||||||||
FHLMC | 7.00 | 12-1-2026 | 274 | 299 | ||||||||||||
FHLMC | 7.00 | 4-1-2029 | 1,020 | 1,177 | ||||||||||||
FHLMC | 7.00 | 5-1-2029 | 5,878 | 6,890 | ||||||||||||
FHLMC | 7.00 | 4-1-2032 | 64,969 | 76,289 | ||||||||||||
FHLMC | 7.50 | 11-1-2031 | 81,711 | 91,113 | ||||||||||||
FHLMC | 7.50 | 4-1-2032 | 136,586 | 161,350 | ||||||||||||
FHLMC | 8.00 | 8-1-2023 | 3,954 | 4,051 | ||||||||||||
FHLMC | 8.00 | 6-1-2024 | 2,326 | 2,516 | ||||||||||||
FHLMC | 8.00 | 6-1-2024 | 1,960 | 1,969 | ||||||||||||
FHLMC | 8.00 | 6-1-2024 | 3,600 | 3,710 | ||||||||||||
FHLMC | 8.00 | 8-1-2026 | 10,209 | 11,642 | ||||||||||||
FHLMC | 8.00 | 11-1-2026 | 9,228 | 10,545 | ||||||||||||
FHLMC | 8.00 | 11-1-2028 | 4,831 | 5,284 | ||||||||||||
FHLMC | 8.50 | 12-1-2025 | 5,866 | 6,448 | ||||||||||||
FHLMC | 8.50 | 5-1-2026 | 846 | 872 | ||||||||||||
FHLMC | 8.50 | 8-1-2026 | 3,893 | 3,907 | ||||||||||||
FHLMC | 9.00 | 4-1-2021 | 12 | 12 | ||||||||||||
FHLMC | 9.00 | 8-1-2021 | 20 | 21 | ||||||||||||
FHLMC | 9.00 | 7-1-2022 | 10 | 10 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Government Securities Fund | 11
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FHLMC | 9.00 | % | 9-1-2024 | $ | 62 | $ | 63 | |||||||||
FHLMC | 9.50 | 11-1-2020 | 2 | 2 | ||||||||||||
FHLMC | 9.50 | 5-1-2021 | 21 | 21 | ||||||||||||
FHLMC | 9.50 | 9-17-2022 | 2,694 | 2,702 | ||||||||||||
FHLMC | 9.50 | 4-1-2025 | 9,767 | 9,887 | ||||||||||||
FHLMC | 10.00 | 8-17-2022 | 15 | 15 | ||||||||||||
FHLMC | 10.00 | 2-17-2025 | 1,275 | 1,268 | ||||||||||||
FHLMC Multifamily Structured Pass-through Series K075 Class A2 ±± | 3.65 | 2-25-2028 | 4,370,000 | 5,165,385 | ||||||||||||
FHLMC Multifamily Structured Pass-through Series T056 Class A4 | 6.00 | 5-25-2043 | 3,678,220 | 4,433,074 | ||||||||||||
FHLMC Series 2015-SC01 Class 1A | 3.50 | 5-25-2045 | 1,246,669 | 1,273,617 | ||||||||||||
FHLMC Series 2733 Class FB (1 Month LIBOR +0.60%) ± | 0.76 | 10-15-2033 | 342,945 | 346,852 | ||||||||||||
FHLMC Series 2882 Class TF (1 Month LIBOR +0.25%) ± | 0.41 | 10-15-2034 | 33,936 | 33,845 | ||||||||||||
FHLMC Series 3070 Class FT (1 Month LIBOR +0.35%) ± | 0.51 | 11-15-2035 | 701,278 | 704,188 | ||||||||||||
FHLMC Series 3614 Class QB | 4.00 | 12-15-2024 | 1,130,334 | 1,186,584 | ||||||||||||
FHLMC Series 3830 Class FD (1 Month LIBOR +0.36%) ± | 0.52 | 3-15-2041 | 335,199 | 336,807 | ||||||||||||
FHLMC Series 3906 Class EA | 3.00 | 5-15-2026 | 402,151 | 415,143 | ||||||||||||
FHLMC Series 4057 Class FN (1 Month LIBOR +0.35%) ± | 0.51 | 12-15-2041 | 342,877 | 343,909 | ||||||||||||
FHLMC Series 4068 Series FK (1 Month LIBOR +0.30%) ± | 0.46 | 6-15-2040 | 306,308 | 307,557 | ||||||||||||
FHLMC Series 4093 Class FB (1 Month LIBOR +0.35%) ± | 0.52 | 7-15-2039 | 1,035,472 | 1,036,744 | ||||||||||||
FHLMC Series 4159 Class AF (1 Month LIBOR +1.18%) ± | 1.34 | 12-15-2036 | 305,316 | 313,013 | ||||||||||||
FHLMC Series 4218 Class DF (1 Month LIBOR +0.25%) ± | 0.41 | 7-15-2042 | 496,529 | 495,017 | ||||||||||||
FHLMC Series 4409 Class MA | 3.00 | 1-15-2054 | 101,936 | 105,459 | ||||||||||||
FHLMC Series 4620 Series AF (1 Month LIBOR +0.44%) ± | 0.61 | 11-15-2042 | 3,284,879 | 3,303,533 | ||||||||||||
FHLMC Series K020 Class X1 ±±(c) | 1.49 | 5-25-2022 | 41,413,154 | 783,566 | ||||||||||||
FHLMC Series K032 Class A2 ±± | 3.31 | 5-25-2023 | 2,800,000 | 2,997,818 | ||||||||||||
FHLMC Series K039 Class A2 | 3.30 | 7-25-2024 | 325,000 | 356,328 | ||||||||||||
FHLMC Series K153 Class A3 ±± | 3.12 | 10-25-2031 | 160,000 | 185,997 | ||||||||||||
FHLMC Series KF15 Class A (1 Month LIBOR +0.67%) ± | 0.82 | 2-25-2023 | 188,632 | 188,235 | ||||||||||||
FHLMC Series KF80 Class A (30 Day Average U.S. SOFR +0.51%) ± | 0.59 | 6-25-2030 | 2,000,000 | 2,000,611 | ||||||||||||
FHLMC Series KJ14 Class A1 | 2.20 | 11-25-2023 | 1,311,449 | 1,357,649 | ||||||||||||
FHLMC Series M036 Class A | 4.16 | 12-15-2029 | 3,325,000 | 3,508,573 | ||||||||||||
FHLMC Series T-15 Class A6 (1 Month LIBOR +0.40%) ± | 0.58 | 11-25-2028 | 143,862 | 143,742 | ||||||||||||
FHLMC Series T-23 Class A (1 Month LIBOR +0.14%) ± | 0.45 | 5-25-2030 | 504,840 | 504,334 | ||||||||||||
FHLMC Series T-35 Class A (1 Month LIBOR +0.14%) ± | 0.45 | 9-25-2031 | 590,502 | 585,159 | ||||||||||||
FHLMC Series T-42 Class A6 | 9.50 | 2-25-2042 | 669,215 | 854,467 | ||||||||||||
FHLMC Series T-55 Class 2A1 ±± | 3.57 | 3-25-2043 | 338,155 | 347,362 | ||||||||||||
FHLMC Series T-57 Class 1A1 | 6.50 | 7-25-2043 | 872,806 | 1,088,197 | ||||||||||||
FHLMC Series T-57 Class 2A1 ±± | 3.87 | 7-25-2043 | 1,597,494 | 1,699,947 | ||||||||||||
FHLMC Series T-62 Class 1A1 (12 Month Treasury Average +1.20%) ± | 2.37 | 10-25-2044 | 816,203 | 840,349 | ||||||||||||
FHLMC Series T-67 Class 1A1C ±± | 3.40 | 3-25-2036 | 734,482 | 766,963 | ||||||||||||
FHLMC Series T-67 Class 2A1C ±± | 3.50 | 3-25-2036 | 1,123,843 | 1,166,266 | ||||||||||||
FNMA | 2.32 | 1-1-2026 | 6,291,843 | 6,715,468 | ||||||||||||
FNMA ¤ | 0.00 | 5-15-2030 | 7,700,000 | 6,814,025 | ||||||||||||
FNMA ¤ | 0.00 | 7-15-2037 | 7,035,000 | 5,205,198 | ||||||||||||
FNMA | 0.88 | 8-5-2030 | 9,650,000 | 9,512,126 | ||||||||||||
FNMA | 1.38 | 7-1-2030 | 4,232,112 | 4,359,194 | ||||||||||||
FNMA | 1.50 | 2-12-2025 | 6,670,000 | 7,000,267 | ||||||||||||
FNMA | 1.65 | 6-1-2030 | 1,449,740 | 1,525,860 | ||||||||||||
FNMA | 1.65 | 7-1-2030 | 2,447,861 | 2,576,270 | ||||||||||||
FNMA | 1.66 | 7-1-2032 | 4,241,715 | 4,423,329 | ||||||||||||
FNMA | 1.97 | 5-1-2030 | 4,555,030 | 4,885,367 | ||||||||||||
FNMA (11th District Cost of Funds +1.34%) ± | 2.11 | 5-1-2023 | 2,155 | 2,148 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 2.16 | 5-1-2036 | 824,739 | 813,951 | ||||||||||||
FNMA (12 Month LIBOR +1.62%) ± | 2.39 | 8-1-2050 | 2,187,848 | 2,294,833 | ||||||||||||
FNMA (12 Month LIBOR +1.61%) ± | 2.46 | 5-1-2046 | 3,162,732 | 3,273,773 | ||||||||||||
FNMA %% | 2.50 | 9-14-2050 | 22,770,000 | 23,966,314 |
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Government Securities Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 2.50 | % | 9-1-2027 | $ | 129,995 | $ | 130,711 | |||||||||
FNMA (1 Year Treasury Constant Maturity +2.26%) ± | 2.64 | 9-1-2031 | 102,395 | 102,292 | ||||||||||||
FNMA | 2.65 | 2-1-2032 | 2,990,097 | 3,341,974 | ||||||||||||
FNMA | 2.65 | 2-1-2032 | 2,325,631 | 2,599,313 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.30%) ± | 2.67 | 6-1-2034 | 267,818 | 268,134 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 2.72 | 6-1-2032 | 80,540 | 80,936 | ||||||||||||
FNMA | 2.75 | 9-1-2031 | 923,991 | 1,036,178 | ||||||||||||
FNMA | 2.85 | 6-1-2022 | 168,630 | 168,510 | ||||||||||||
FNMA | 2.86 | 7-1-2029 | 1,008,354 | 1,130,406 | ||||||||||||
FNMA | 3.00 | 5-1-2027 | 887,177 | 930,723 | ||||||||||||
FNMA | 3.00 | 6-1-2034 | 8,415,356 | 8,826,913 | ||||||||||||
FNMA | 3.00 | 4-1-2045 | 86,693 | 91,840 | ||||||||||||
FNMA | 3.00 | 11-1-2045 | 7,177,071 | 7,593,678 | ||||||||||||
FNMA | 3.00 | 12-1-2045 | 16,553,711 | 17,546,985 | ||||||||||||
FNMA | 3.00 | 12-1-2046 | 597,978 | 633,078 | ||||||||||||
FNMA %% | 3.00 | 9-14-2050 | 28,250,000 | 29,792,715 | ||||||||||||
FNMA | 3.02 | 2-1-2026 | 6,048,241 | 6,659,146 | ||||||||||||
FNMA ±± | 3.05 | 1-1-2024 | 24,626 | 24,617 | ||||||||||||
FNMA (11th District Cost of Funds +1.25%) ± | 3.22 | 5-1-2036 | 293,151 | 299,441 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 3.29 | 9-1-2031 | 26,710 | 26,794 | ||||||||||||
FNMA (12 Month LIBOR +1.63%) ± | 3.38 | 4-1-2032 | 57,104 | 57,240 | ||||||||||||
FNMA (12 Month LIBOR +1.78%) ± | 3.40 | 8-1-2036 | 512,847 | 538,495 | ||||||||||||
FNMA | 3.48 | 3-1-2029 | 910,983 | 1,059,419 | ||||||||||||
FNMA | 3.50 | 4-1-2034 | 9,453,368 | 10,021,568 | ||||||||||||
FNMA | 3.50 | 2-1-2043 | 40,796 | 44,274 | ||||||||||||
FNMA | 3.50 | 2-1-2045 | 1,411,787 | 1,521,897 | ||||||||||||
FNMA | 3.50 | 4-1-2045 | 3,664,562 | 3,914,422 | ||||||||||||
FNMA | 3.50 | 8-1-2045 | 462,913 | 493,615 | ||||||||||||
FNMA | 3.50 | 12-1-2045 | 1,613,925 | 1,720,923 | ||||||||||||
FNMA | 3.50 | 2-1-2046 | 1,654,449 | 1,763,526 | ||||||||||||
FNMA (12 Month LIBOR +1.54%) ± | 3.55 | 1-1-2043 | 145,984 | 151,128 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 3.57 | 12-1-2034 | 235,770 | 236,077 | ||||||||||||
FNMA | 3.63 | 3-1-2029 | 387,644 | 453,115 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.23%) ± | 3.76 | 12-1-2040 | 22,486 | 22,614 | ||||||||||||
FNMA | 3.77 | 3-1-2029 | 981,733 | 1,155,860 | ||||||||||||
FNMA | 3.86 | 3-1-2029 | 831,004 | 983,063 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.42%) ± | 3.88 | 10-1-2027 | 92,853 | 93,066 | ||||||||||||
FNMA (12 Month LIBOR +1.73%) ± | 3.98 | 9-1-2036 | 318,137 | 333,242 | ||||||||||||
FNMA | 4.00 | 4-1-2046 | 10,390,426 | 11,295,706 | ||||||||||||
FNMA | 4.00 | 3-1-2047 | 1,415,684 | 1,552,536 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 4.03 | 11-1-2031 | 103,008 | 103,275 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.31%) ± | 4.37 | 7-1-2026 | 59,121 | 59,281 | ||||||||||||
FNMA | 4.50 | 1-1-2026 | 39,264 | 41,184 | ||||||||||||
FNMA | 4.50 | 10-1-2046 | 276,617 | 301,928 | ||||||||||||
FNMA | 4.50 | 9-1-2049 | 3,288,030 | 3,551,549 | ||||||||||||
FNMA (6 Month LIBOR +3.13%) ± | 4.61 | 7-1-2033 | 131,119 | 131,400 | ||||||||||||
FNMA | 5.00 | 4-1-2023 | 52,648 | 55,514 | ||||||||||||
FNMA | 5.00 | 6-1-2023 | 180,070 | 189,899 | ||||||||||||
FNMA | 5.00 | 3-1-2034 | 335,897 | 385,981 | ||||||||||||
FNMA | 5.00 | 8-1-2040 | 4,336,505 | 4,994,109 | ||||||||||||
FNMA | 5.00 | 10-1-2040 | 559,581 | 644,818 | ||||||||||||
FNMA | 5.00 | 1-1-2042 | 379,822 | 436,426 | ||||||||||||
FNMA | 5.00 | 11-1-2048 | 909,773 | 997,166 | ||||||||||||
FNMA | 5.00 | 12-1-2048 | 992,030 | 1,087,270 | ||||||||||||
FNMA (6 Month LIBOR +2.86%) ± | 5.23 | 4-1-2033 | 10,909 | 10,947 | ||||||||||||
FNMA | 5.50 | 11-1-2023 | 32,639 | 34,383 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Government Securities Fund | 13
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA | 5.50 | % | 1-1-2025 | $ | 12,568 | $ | 13,057 | |||||||||
FNMA | 5.50 | 1-1-2025 | 60,415 | 62,574 | ||||||||||||
FNMA | 5.50 | 9-1-2033 | 1,517,270 | 1,786,933 | ||||||||||||
FNMA | 5.50 | 9-1-2033 | 571,352 | 671,227 | ||||||||||||
FNMA | 5.50 | 8-1-2035 | 435,059 | 508,231 | ||||||||||||
FNMA | 5.50 | 1-1-2037 | 412,786 | 482,905 | ||||||||||||
FNMA | 5.50 | 4-1-2040 | 1,094,619 | 1,285,828 | ||||||||||||
FNMA | 5.61 | 2-1-2021 | 246,962 | 246,725 | ||||||||||||
FNMA | 6.00 | 3-1-2024 | 35,714 | 39,759 | ||||||||||||
FNMA | 6.00 | 1-1-2028 | 619,308 | 690,636 | ||||||||||||
FNMA | 6.00 | 2-1-2035 | 885,355 | 980,558 | ||||||||||||
FNMA | 6.00 | 11-1-2037 | 327,869 | 387,036 | ||||||||||||
FNMA | 6.00 | 7-1-2038 | 112,094 | 132,141 | ||||||||||||
FNMA | 6.50 | 1-1-2024 | 5,380 | 5,996 | ||||||||||||
FNMA | 6.50 | 3-1-2028 | 10,943 | 11,944 | ||||||||||||
FNMA | 6.50 | 12-1-2029 | 142,395 | 159,221 | ||||||||||||
FNMA | 6.50 | 11-1-2031 | 30,637 | 34,147 | ||||||||||||
FNMA | 6.50 | 7-1-2036 | 287,227 | 334,198 | ||||||||||||
FNMA | 6.50 | 7-1-2036 | 209,898 | 248,754 | ||||||||||||
FNMA | 6.63 | 11-15-2030 | 8,220,000 | 12,608,852 | ||||||||||||
FNMA | 7.00 | 11-1-2026 | 3,542 | 3,828 | ||||||||||||
FNMA | 7.00 | 9-1-2031 | 1,763 | 1,768 | ||||||||||||
FNMA | 7.00 | 1-1-2032 | 1,892 | 2,181 | ||||||||||||
FNMA | 7.00 | 2-1-2032 | 61,804 | 72,970 | ||||||||||||
FNMA | 7.00 | 10-1-2032 | 143,792 | 171,935 | ||||||||||||
FNMA | 7.00 | 2-1-2034 | 1,751 | 2,058 | ||||||||||||
FNMA | 7.00 | 4-1-2034 | 91,706 | 108,042 | ||||||||||||
FNMA | 7.00 | 1-1-2036 | 6,010 | 6,558 | ||||||||||||
FNMA | 7.50 | 9-1-2031 | 61,208 | 74,042 | ||||||||||||
FNMA | 7.50 | 2-1-2032 | 24,905 | 29,487 | ||||||||||||
FNMA | 7.50 | 10-1-2037 | 620,905 | 745,709 | ||||||||||||
FNMA | 8.00 | 5-1-2027 | 22,917 | 23,174 | ||||||||||||
FNMA | 8.00 | 6-1-2028 | 2,808 | 3,068 | ||||||||||||
FNMA | 8.00 | 2-1-2030 | 26,658 | 27,084 | ||||||||||||
FNMA | 8.00 | 7-1-2031 | 692,000 | 796,747 | ||||||||||||
FNMA | 8.50 | 8-1-2024 | 3,545 | 3,559 | ||||||||||||
FNMA | 8.50 | 5-1-2026 | 65,384 | 71,699 | ||||||||||||
FNMA | 8.50 | 7-1-2026 | 15,900 | 16,415 | ||||||||||||
FNMA | 8.50 | 10-1-2026 | 43 | 43 | ||||||||||||
FNMA | 8.50 | 10-1-2026 | 1,008 | 1,011 | ||||||||||||
FNMA | 8.50 | 11-1-2026 | 22,454 | 22,726 | ||||||||||||
FNMA | 8.50 | 11-1-2026 | 4,840 | 4,951 | ||||||||||||
FNMA | 8.50 | 12-1-2026 | 88,162 | 98,801 | ||||||||||||
FNMA | 8.50 | 12-1-2026 | 11,493 | 12,776 | ||||||||||||
FNMA | 8.50 | 12-1-2026 | 212 | 213 | ||||||||||||
FNMA | 8.50 | 2-1-2027 | 142 | 159 | ||||||||||||
FNMA | 8.50 | 2-1-2027 | 4,720 | 4,740 | ||||||||||||
FNMA | 8.50 | 3-1-2027 | 628 | 669 | ||||||||||||
FNMA | 8.50 | 6-1-2027 | 46,172 | 47,773 | ||||||||||||
FNMA | 9.00 | 3-1-2021 | 446 | 449 | ||||||||||||
FNMA | 9.00 | 6-1-2021 | 9 | 10 | ||||||||||||
FNMA | 9.00 | 8-1-2021 | 15 | 16 | ||||||||||||
FNMA | 9.00 | 10-1-2021 | 121 | 122 | ||||||||||||
FNMA | 9.00 | 1-1-2025 | 10,950 | 11,948 | ||||||||||||
FNMA | 9.00 | 3-1-2025 | 1,434 | 1,439 | ||||||||||||
FNMA | 9.00 | 3-1-2025 | 595 | 597 |
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Government Securities Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA | 9.00 | % | 7-1-2028 | $ | 2,798 | $ | 2,826 | |||||||||
FNMA | 9.50 | 6-1-2022 | �� | 71 | 71 | |||||||||||
FNMA | 9.50 | 7-1-2028 | 4,181 | 4,196 | ||||||||||||
FNMA Series 1990-144 Class W | 9.50 | 12-25-2020 | 1,200 | 1,207 | ||||||||||||
FNMA Series 1991-85 Class Z | 8.00 | 6-25-2021 | 3,333 | 3,401 | ||||||||||||
FNMA Series 1992-45 Class Z | 8.00 | 4-25-2022 | 15,322 | 15,945 | ||||||||||||
FNMA Series 2000-T6 Class A2 | 9.50 | 11-25-2040 | 549,389 | 633,155 | ||||||||||||
FNMA Series 2001-T10 Class A3 | 9.50 | 12-25-2041 | 617,482 | 748,819 | ||||||||||||
FNMA Series 2001-T12 Class A3 | 9.50 | 8-25-2041 | 173,842 | 213,690 | ||||||||||||
FNMA Series 2002 Class 5F (1 Month LIBOR +0.35%) ± | 0.52 | 2-25-2032 | 355,727 | 355,324 | ||||||||||||
FNMA Series 2002-T1 Class A3 | 7.50 | 11-25-2031 | 265,860 | 325,568 | ||||||||||||
FNMA Series 2002-T12 Class A5 ±± | 4.59 | 10-25-2041 | 700,809 | 741,975 | ||||||||||||
FNMA Series 2002-T19 Class A1 | 6.50 | 7-25-2042 | 3,145,906 | 3,819,895 | ||||||||||||
FNMA Series 2002-T5 Class A1 (1 Month LIBOR +0.24%) ± | 0.42 | 5-25-2032 | 503,495 | 500,073 | ||||||||||||
FNMA Series 2002-T6 Class A1 | 6.50 | 7-25-2042 | 1,204,741 | 1,453,017 | ||||||||||||
FNMA Series 2002-W4 Class A4 | 6.25 | 5-25-2042 | 455,990 | 537,639 | ||||||||||||
FNMA Series 2003-T2 Class A1 (1 Month LIBOR +0.14%) ± | 0.47 | 3-25-2033 | 834,976 | 819,667 | ||||||||||||
FNMA Series 2003-W09 Class A (1 Month LIBOR +0.12%) ± | 0.41 | 6-25-2033 | 73,401 | 72,125 | ||||||||||||
FNMA Series 2003-W1 Class 1A1 ±± | 5.22 | 12-25-2042 | 600,750 | 665,845 | ||||||||||||
FNMA Series 2003-W11 Class A1 ±± | 4.07 | 6-25-2033 | 31,743 | 32,331 | ||||||||||||
FNMA Series 2003-W3 Class 1A4 ±± | 3.93 | 8-25-2042 | 1,864,470 | 1,982,689 | ||||||||||||
FNMA Series 2003-W5 Class A (1 Month LIBOR +0.11%) ± | 0.39 | 4-25-2033 | 232,949 | 227,959 | ||||||||||||
FNMA Series 2003-W6 Class 6A ±± | 3.92 | 8-25-2042 | 969,363 | 1,017,824 | ||||||||||||
FNMA Series 2003-W6 Class PT4 ±± | 8.43 | 10-25-2042 | 1,059,884 | 1,319,388 | ||||||||||||
FNMA Series 2003-W8 Class PT1 ±± | 9.04 | 12-25-2042 | 398,441 | 470,124 | ||||||||||||
FNMA Series 2004-T1 Class 1A2 | 6.50 | 1-25-2044 | 317,842 | 375,893 | ||||||||||||
FNMA Series 2004-W01 Class 2A2 | 7.00 | 12-25-2033 | 884,550 | 1,051,989 | ||||||||||||
FNMA Series 2004-W15 Class 1A3 | 7.00 | 8-25-2044 | 562,208 | 682,084 | ||||||||||||
FNMA Series 2005-71 Class DB | 4.50 | 8-25-2025 | 278,696 | 288,110 | ||||||||||||
FNMA Series 2006-50 Class BF (1 Month LIBOR +0.40%) ± | 0.57 | 6-25-2036 | 798,954 | 802,095 | ||||||||||||
FNMA Series 2007-101 Class A2 (1 Month LIBOR +0.25%) ± | 0.38 | 6-27-2036 | 74,259 | 73,099 | ||||||||||||
FNMA Series 2007-W10 Class 2A ±± | 6.29 | 8-25-2047 | 248,333 | 287,289 | ||||||||||||
FNMA Series 2008-17 Class DP | 4.75 | 2-25-2038 | 1,455,493 | 1,579,310 | ||||||||||||
FNMA Series 2010-112 Class IO (c) | 4.00 | 10-25-2025 | 3,368 | 10 | ||||||||||||
FNMA Series 2010-136 Class FA (1 Month LIBOR +0.50%) ± | 0.67 | 12-25-2040 | 995,363 | 1,003,489 | ||||||||||||
FNMA Series 2010-M6 Class A2 | 3.31 | 9-25-2020 | 95,532 | 95,669 | ||||||||||||
FNMA Series 2011-110 Class FE (1 Month LIBOR +0.40%) ± | 0.57 | 4-25-2041 | 188,918 | 187,460 | ||||||||||||
FNMA Series 2011-128 Class FK (1 Month LIBOR +0.35%) ± | 0.52 | 7-25-2041 | 311,749 | 311,873 | ||||||||||||
FNMA Series 2011-15 Class HI (c) | 5.50 | 3-25-2026 | 25,011 | 340 | ||||||||||||
FNMA Series 2013-114 Class LM | 4.00 | 3-25-2042 | 914,000 | 1,059,054 | ||||||||||||
FNMA Series 2013-17 Class PC | 2.00 | 3-25-2039 | 656,743 | 659,457 | ||||||||||||
FNMA Series 2014-17 Class FE (1 Month LIBOR +0.55%) ± | 0.72 | 4-25-2044 | 2,488,922 | 2,511,266 | ||||||||||||
FNMA Series 2014-20 Class TM ±± | 5.63 | 4-25-2044 | 758,860 | 889,330 | ||||||||||||
FNMA Series 2017-M2 Class A2 ±± | 2.90 | 2-25-2027 | 10,000,000 | 10,927,982 | ||||||||||||
FNMA Series 2017-M6 Class F (1 Month LIBOR +0.48%) ± | 0.65 | 4-25-2029 | 3,357,981 | 3,387,257 | ||||||||||||
FNMA Series 2018-M13 Class A2 ±± | 3.82 | 9-25-2030 | 460,000 | 560,275 | ||||||||||||
FNMA Series 2019-M5 Class A2 | 3.27 | 2-25-2029 | 5,200,000 | 5,951,086 | ||||||||||||
FNMA Series 265 Class 2 | 9.00 | 3-25-2024 | 30,615 | 33,546 | ||||||||||||
FNMA Series 4764 Class NK | 3.50 | 9-15-2043 | 2,608,491 | 2,665,311 | ||||||||||||
FNMA Series G92-30 Class Z | 7.00 | 6-25-2022 | 6,149 | 6,315 | ||||||||||||
FNMA Series G93-39 Class ZQ | 6.50 | 12-25-2023 | 505,775 | 538,559 | ||||||||||||
GNMA | 3.50 | 12-20-2049 | 7,331,690 | 7,708,988 | ||||||||||||
GNMA %% | 2.50 | 9-21-2050 | 12,500,000 | 13,174,312 | ||||||||||||
GNMA | 3.00 | 11-20-2045 | 7,577,224 | 8,012,395 | ||||||||||||
GNMA %% | 3.00 | 9-21-2050 | 7,125,000 | 7,502,402 | ||||||||||||
GNMA (1 Year Treasury Constant Maturity +1.50%) ± | 3.13 | 11-20-2020 | 1,110 | 1,111 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Government Securities Fund | 15
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
GNMA | 3.50 | % | 12-20-2047 | $ | 8,722,254 | $ | 9,291,374 | |||||||||
GNMA | 4.00 | 11-15-2024 | 780,717 | 826,631 | ||||||||||||
GNMA | 4.00 | 12-20-2047 | 5,929,985 | 6,376,995 | ||||||||||||
GNMA | 4.25 | 6-20-2036 | 340,649 | 369,103 | ||||||||||||
GNMA | 4.50 | 8-20-2049 | 1,648,340 | 1,768,589 | ||||||||||||
GNMA | 5.00 | 7-20-2040 | 822,773 | 935,890 | ||||||||||||
GNMA | 6.00 | 8-20-2034 | 81,517 | 91,677 | ||||||||||||
GNMA | 6.50 | 12-15-2025 | 5,724 | 6,312 | ||||||||||||
GNMA | 6.50 | 5-15-2029 | 519 | 572 | ||||||||||||
GNMA | 6.50 | 5-15-2031 | 656 | 723 | ||||||||||||
GNMA | 6.50 | 9-20-2033 | 40,431 | 47,351 | ||||||||||||
GNMA | 7.00 | 12-15-2022 | 5,100 | 5,263 | ||||||||||||
GNMA | 7.00 | 5-15-2026 | 1,248 | 1,350 | ||||||||||||
GNMA | 7.00 | 3-15-2028 | 10,548 | 10,679 | ||||||||||||
GNMA | 7.00 | 4-15-2031 | 783 | 799 | ||||||||||||
GNMA | 7.00 | 8-15-2031 | 17,467 | 18,303 | ||||||||||||
GNMA | 7.00 | 3-15-2032 | 13,142 | 13,470 | ||||||||||||
GNMA | 7.34 | 10-20-2021 | 5,244 | 5,292 | ||||||||||||
GNMA | 7.34 | 9-20-2022 | 2,930 | 2,940 | ||||||||||||
GNMA | 8.00 | 6-15-2023 | 1,790 | 1,890 | ||||||||||||
GNMA | 8.00 | 12-15-2023 | 91,034 | 97,284 | ||||||||||||
GNMA | 8.00 | 2-15-2024 | 395 | 424 | ||||||||||||
GNMA | 8.00 | 9-15-2024 | 1,929 | 1,958 | ||||||||||||
GNMA | 8.00 | 6-15-2025 | 38 | 38 | ||||||||||||
GNMA Series 2002-53 Class IO ±±(c) | 0.21 | 4-16-2042 | 196,907 | 2 | ||||||||||||
GNMA Series 2005-23 Class IO ±±(c) | 0.00 | 6-17-2045 | 1,638,035 | 167 | ||||||||||||
GNMA Series 2006-32 Class XM ±±(c) | 0.11 | 11-16-2045 | 4,069,892 | 9,589 | ||||||||||||
GNMA Series 2007-69 Class D ±± | 5.25 | 6-16-2041 | 254,036 | 263,888 | ||||||||||||
GNMA Series 2008-22 Class XM ±±(c) | 1.11 | 2-16-2050 | 11,065,101 | 276,103 | ||||||||||||
GNMA Series 2010-158 Class EI (c) | 4.00 | 12-16-2025 | 5,399,785 | 348,794 | ||||||||||||
GNMA Series 2012-12 Class HD | 2.00 | 5-20-2062 | 52,226 | 52,939 | ||||||||||||
GNMA Series 2019-H06 Class HI ±±(c) | 1.71 | 4-20-2069 | 6,257,593 | 319,362 | ||||||||||||
International Development Finance Corporation | 2.12 | 3-20-2024 | 5,770,000 | 6,002,798 | ||||||||||||
Overseas Private Investment Corporation ¤ | 0.00 | 1-17-2026 | 2,000,000 | 2,183,801 | ||||||||||||
Resolution Funding Corporation STRIPS ¤ | 0.00 | 1-15-2030 | 8,500,000 | 7,568,032 | ||||||||||||
Resolution Funding Corporation STRIPS ¤ | 0.00 | 4-15-2030 | 6,100,000 | 5,411,084 | ||||||||||||
Resolution Funding Corporation STRIPS ¤ | 0.00 | 2-15-2039 | 20,000,000 | 16,132,591 | ||||||||||||
TVA ¤ | 0.00 | 11-1-2025 | 7,400,000 | 7,135,184 | ||||||||||||
TVA | 2.88 | 2-1-2027 | 4,258,000 | 4,834,964 | ||||||||||||
TVA | 4.25 | 9-15-2065 | 2,600,000 | 3,842,317 | ||||||||||||
TVA | 4.63 | 9-15-2060 | 7,550,000 | 11,668,259 | ||||||||||||
TVA | 5.38 | 4-1-2056 | 5,000,000 | 8,568,383 | ||||||||||||
TVA | 5.88 | 4-1-2036 | 4,380,000 | 6,823,987 | ||||||||||||
Total Agency Securities (Cost $533,923,026) |
| 563,839,997 | ||||||||||||||
|
| |||||||||||||||
Asset-Backed Securities: 2.26% | ||||||||||||||||
American Tower Trust I 144A | 3.65 | 3-15-2048 | 4,000,000 | 4,302,312 | ||||||||||||
Finance of America HECM Buyout Series 2020-HB2 Class A 144A±± | 1.71 | 7-25-2030 | 4,246,398 | 4,245,830 | ||||||||||||
MMAF Equipment Finance LLC Series 2017-AA Class A4 144A | 2.41 | 8-16-2024 | 4,445,000 | 4,517,399 | ||||||||||||
Navient Student Loan Trust Series 2017-3A Class A2 (1 Month LIBOR +0.60%) 144A± | 0.78 | 7-26-2066 | 558,677 | 557,134 | ||||||||||||
Navient Student Loan Trust Series 2018-3A Class A2 (1 Month LIBOR +0.42%) 144A± | 0.60 | 3-25-2067 | 2,020,876 | 2,014,204 | ||||||||||||
Tesla Auto Lease Trust Series 2018-B Class A 144A | 3.71 | 8-20-2021 | 922,052 | 932,227 | ||||||||||||
Total Asset-Backed Securities (Cost $16,150,737) |
| 16,569,106 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Government Securities Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Municipal Obligations: 0.94% |
| |||||||||||||||
Texas: 0.94% |
| |||||||||||||||
Education Revenue: 0.18% | ||||||||||||||||
North Texas Higher Education Authority Incorporated Series 2011-1 Class A (3 Month LIBOR +1.10%) ± | 1.40 | % | 4-1-2040 | $ | 1,348,287 | $ | 1,353,222 | |||||||||
|
| |||||||||||||||
Miscellaneous Revenue: 0.76% | ||||||||||||||||
San Antonio TX Retama Development Corporation | 10.00 | 12-15-2020 | 5,405,000 | 5,554,773 | ||||||||||||
|
| |||||||||||||||
Total Municipal Obligations (Cost $6,822,217) |
| 6,907,995 | ||||||||||||||
|
| |||||||||||||||
Non-Agency Mortgage-Backed Securities: 8.65% | ||||||||||||||||
Angel Oak Mortgage Trust I LLC Series 2020-4 Class A1 144A±± | 1.47 | 6-25-2065 | 2,932,503 | 2,937,942 | ||||||||||||
Arroyo Mortgage Trust Series 2019-1 Class A1 144A±± | 3.81 | 1-25-2049 | 3,525,202 | 3,621,826 | ||||||||||||
Benchmark Mortgage Trust Series 2018-B1 Class A4 | 3.40 | 1-15-2051 | 305,000 | 338,539 | ||||||||||||
Bravo Residential Funding Trust Series 2020-RPL1 Class A1 144A±± | 2.50 | 5-26-2059 | 3,925,391 | 4,050,165 | ||||||||||||
BX Trust Series 2019-OC11 Class A 144A | 3.20 | 12-9-2041 | 3,030,000 | 3,202,338 | ||||||||||||
CD Commercial Mortgage Trust Series 2014-CR16 Class A3 | 3.78 | 4-10-2047 | 2,641,668 | 2,829,897 | ||||||||||||
CD Commercial Mortgage Trust Series 2017-6 Class A5 | 3.46 | 11-13-2050 | 2,340,000 | 2,643,994 | ||||||||||||
Deephaven Residential Mortgage Trust Seris 2018-1A Class A1 144A±± | 2.98 | 12-25-2057 | 1,341,224 | 1,346,726 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2013-G1 Class A2 144A±± | 3.56 | 4-10-2031 | 5,349,842 | 5,275,969 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2014-GC24 Class A4 | 3.67 | 9-10-2047 | 4,165,000 | 4,491,468 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2019-PJ1 Class A6 144A±± | 4.00 | 8-25-2049 | 132,914 | 133,216 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Corporation Series 2015-C28 Class A4 | 3.23 | 10-15-2048 | 5,000,000 | 5,409,998 | ||||||||||||
Mello Warehouse Securitization Series 2019-1 Class A (1 Month LIBOR +0.80%) 144A± | 0.98 | 6-25-2052 | 3,000,000 | 3,002,049 | ||||||||||||
Morgan Stanley Capital I Trust Series 2011-C2 Class A4 144A | 4.66 | 6-15-2044 | 4,638,127 | 4,749,008 | ||||||||||||
New Residential Mortgage Loan Nrzt 2020 Nqm2 A1 144A±± | 1.65 | 5-24-2060 | 1,970,414 | 1,971,479 | ||||||||||||
Ocwen Master Advance Receivable Series 2020-T1 Class AT1 144A | 1.28 | 8-15-2052 | 4,790,000 | 4,798,216 | ||||||||||||
Starwood Mortgage Residential Trust Series 2019-1 Class A1 144A±± | 2.94 | 6-25-2049 | 1,598,845 | 1,624,436 | ||||||||||||
Towd Point Mortgage Trust Series 2015-2 Class1M2 144A±± | 3.73 | 11-25-2060 | 2,780,000 | 2,922,866 | ||||||||||||
Towd Point Mortgage Trust Series 2019-SJ3 Class A1 144A±± | 3.00 | 11-25-2059 | 2,270,664 | 2,306,872 | ||||||||||||
UBS Commercial Mortgage Trust Series 2017-C5 Class A5 | 3.47 | 11-15-2050 | 2,581,000 | 2,874,059 | ||||||||||||
Vendee Mortgage Trust Series 1995-1 Class 4 ±± | 8.19 | 2-15-2025 | 97,528 | 108,518 | ||||||||||||
Vendee Mortgage Trust Series 1995-2C Class 3A | 8.79 | 6-15-2025 | 131,618 | 150,807 | ||||||||||||
Vendee Mortgage Trust Series 2011-1 Class DA | 3.75 | 2-15-2035 | 436,284 | 442,638 | ||||||||||||
Verus Securitization Trust Series 2019-2 Class A1 144A±± | 3.21 | 5-25-2059 | 2,116,315 | 2,158,150 | ||||||||||||
Total Non-Agency Mortgage-Backed Securities (Cost $62,014,948) |
| 63,391,176 | ||||||||||||||
|
| |||||||||||||||
U.S. Treasury Securities: 9.09% | ||||||||||||||||
TIPS | 1.38 | 2-15-2044 | 3,035,833 | 4,341,834 | ||||||||||||
U.S. Treasury Bond ## | 0.63 | 8-15-2030 | 5,350,000 | 5,305,695 | ||||||||||||
U.S. Treasury Bond | 1.13 | 5-15-2040 | 8,745,000 | 8,585,130 | ||||||||||||
U.S. Treasury Bond | 1.38 | 8-15-2050 | 26,555,000 | 25,857,931 | ||||||||||||
U.S. Treasury Bond | 3.75 | 11-15-2043 | 9,295,000 | 13,713,756 | ||||||||||||
U.S. Treasury Note | 0.38 | 4-30-2025 | 8,815,000 | 8,863,551 | ||||||||||||
Total U.S. Treasury Securities (Cost $62,301,475) |
| 66,667,897 | ||||||||||||||
|
| |||||||||||||||
Yankee Corporate Bonds and Notes: 0.35% |
| |||||||||||||||
Financials: 0.35% |
| |||||||||||||||
Banks: 0.35% | ||||||||||||||||
Inter-American Development Bank | 7.00 | 6-15-2025 | 2,000,000 | 2,601,070 | ||||||||||||
|
| |||||||||||||||
Total Yankee Corporate Bonds and Notes (Cost $2,319,371) |
| 2,601,070 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Government Securities Fund | 17
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Yankee Government Bonds: 1.42% |
| |||||||||||||||
State of Israel | 5.50 | % | 9-18-2033 | $ | 1,585,000 | $ | 2,356,762 | |||||||||
U.S. International Development Finance Corporation | 2.82 | 3-20-2024 | 7,605,000 | 8,019,332 | ||||||||||||
Total Yankee Government Bonds (Cost $10,142,212) |
| 10,376,094 | ||||||||||||||
|
| |||||||||||||||
Yield | Shares | |||||||||||||||
Short-Term Investments: 10.18% | ||||||||||||||||
Investment Companies: 10.18% |
| |||||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u)## | 0.06 | 74,603,629 | 74,603,629 | |||||||||||||
|
| |||||||||||||||
Total Short-Term Investments (Cost $74,603,629) |
| 74,603,629 | ||||||||||||||
|
|
Total investments in securities (Cost $768,277,615) | 109.80 | % | 804,956,964 | |||||
Other assets and liabilities, net | (9.80 | ) | (71,823,070 | ) | ||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 733,133,894 | ||||
|
|
|
|
¤ | The security is issued in zero coupon form with no periodic interest payments. |
± | Variable rate investment. The rate shown is the rate in effect at period end. |
±± | The coupon of the security is adjusted based on the principal and interest payments received from the underlying pool of mortgages as well as the credit quality and the actual prepayment speed of the underlying mortgages. |
(c) | Investment in an interest-only security entitles holders to receive only the interest payments on the underlying mortgages. The principal amount shown is the notional amount of the underlying mortgages. The rate represents the coupon rate. |
%% | The security is purchased on a when-issued basis. |
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. |
## | All or a portion of this security is segregated for when-issued securities. |
(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:
FHLB | Federal Home Loan Bank |
FHLMC | Federal Home Loan Mortgage Corporation |
FNMA | Federal National Mortgage Association |
GNMA | Government National Mortgage Association |
LIBOR | London Interbank Offered Rate |
SOFR | Secured Overnight Financing Rate |
STRIPS | Separate trading of registered interest and principal securities |
TIPS | Treasury Inflation-Protected Securities |
TVA | Tennessee Valley Authority |
Futures Contracts
Description | Number of contracts | Expiration date | Notional cost | Notional value | Unrealized gains | Unrealized losses | ||||||||||||||||||
Long | ||||||||||||||||||||||||
2-Year U.S. Treasury Notes | 369 | 12-31-2020 | $ | 81,502,779 | $ | 81,528,820 | $ | 26,041 | $ | 0 | ||||||||||||||
5-Year U.S. Treasury Notes | 389 | 12-31-2020 | 49,002,466 | 49,026,156 | 23,690 | 0 | ||||||||||||||||||
Short | ||||||||||||||||||||||||
10-Year U.S. Treasury Notes | (38) | 12-21-2020 | (5,280,749 | ) | (5,291,500 | ) | 0 | (10,751 | ) | |||||||||||||||
10-Year Ultra Futures | (239) | 12-21-2020 | (38,079,334 | ) | (38,105,563 | ) | 0 | (26,229 | ) | |||||||||||||||
U.S. Long Term Bonds | (170) | 12-21-2020 | (29,988,765 | ) | (29,872,188 | ) | 116,577 | 0 | ||||||||||||||||
U.S. Ultra Bond | (89) | 12-21-2020 | (19,821,810 | ) | (19,660,656 | ) | 161,154 | 0 | ||||||||||||||||
|
|
|
| |||||||||||||||||||||
$ | 327,462 | $ | (36,980 | ) | ||||||||||||||||||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Government Securities Fund
Table of Contents
Portfolio of investments—August 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 affiliates of the Fund at the beginning of the period or the end of the period were as follows:
Value, beginning of period | Purchases | Sales proceeds | 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 | $ | 21,461,781 | $ | 347,655,735 | $ | (294,513,887 | ) | $ | 0 | $ | 0 | $ | 195,218 | $ | 74,603,629 | 10.18 | % |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Government Securities Fund | 19
Table of Contents
Statement of assets and liabilities—August 31, 2020
Assets | ||||
Investments in unaffiliated securities, at value (cost $693,673,986) | $ | 730,353,335 | ||
Investments in affiliated securities, at value (cost $74,603,629) | 74,603,629 | |||
Segregated cash for futures contracts | 2,539,096 | |||
Principal paydown receivable | 37,742 | |||
Receivable for Fund shares sold | 1,303,118 | |||
Receivable for interest | 2,610,763 | |||
Prepaid expenses and other assets | 13,383 | |||
|
| |||
Total assets | 811,461,066 | |||
|
| |||
Liabilities | ||||
Payable for when-issued transactions | 74,489,978 | |||
Payable for Fund shares redeemed | 2,689,401 | |||
Payable for daily variation margin on open futures contracts | 509,167 | |||
Overdraft due to custodian bank | 713 | |||
Management fee payable | 224,918 | |||
Dividends payable | 146,813 | |||
Administration fees payable | 71,449 | |||
Distribution fee payable | 4,767 | |||
Trustees’ fees and expenses payable | 2,186 | |||
Accrued expenses and other liabilities | 187,780 | |||
|
| |||
Total liabilities | 78,327,172 | |||
|
| |||
Total net assets | $ | 733,133,894 | ||
|
| |||
Net assets consist of | ||||
Paid-in capital | $ | 715,292,828 | ||
Total distributable earnings | 17,841,066 | |||
|
| |||
Total net assets | $ | 733,133,894 | ||
|
| |||
Computation of net asset value and offering price per share | ||||
Net assets – Class A | $ | 276,310,200 | ||
Shares outstanding – Class A1 | 23,681,662 | |||
Net asset value per share – Class A | $11.67 | |||
Maximum offering price per share – Class A2 | $12.22 | |||
Net assets – Class C | $ | 7,559,754 | ||
Shares outstanding – Class C1 | 647,871 | |||
Net asset value per share – Class C | $11.67 | |||
Net assets – Administrator Class | $ | 120,180,896 | ||
Shares outstanding – Administrator Class1 | 10,304,497 | |||
Net asset value per share – Administrator Class | $11.66 | |||
Net assets – Institutional Class | $ | 329,083,044 | ||
Shares outstanding – Institutional Class1 | 28,215,764 | |||
Net asset value per share – Institutional Class | $11.66 |
1 | The Fund has an unlimited number of authorized shares. |
2 | Maximum offering price is computed as 100/95.50 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.
20 | Wells Fargo Government Securities Fund
Table of Contents
Statement of operations—year ended August 31, 2020
Investment income | ||||
Interest | $ | 15,104,515 | ||
Income from affiliated securities | 195,218 | |||
|
| |||
Total investment income | 15,299,733 | |||
|
| |||
Expenses | ||||
Management fee | 2,856,080 | |||
Administration fees |
| |||
Class A | 428,807 | |||
Class C | 16,718 | |||
Administrator Class | 111,820 | |||
Institutional Class | 201,996 | |||
Shareholder servicing fees |
| |||
Class A | 669,800 | |||
Class C | 26,107 | |||
Administrator Class | 278,902 | |||
Distribution fee |
| |||
Class C | 78,285 | |||
Custody and accounting fees | 62,316 | |||
Professional fees | 78,589 | |||
Registration fees | 63,812 | |||
Shareholder report expenses | 96,347 | |||
Trustees’ fees and expenses | 21,326 | |||
Other fees and expenses | 30,919 | |||
|
| |||
Total expenses | 5,021,824 | |||
Less: Fee waivers and/or expense reimbursements |
| |||
Fund-level | (383,576 | ) | ||
Class A | (14,792 | ) | ||
Class C | (26 | ) | ||
Administrator Class | (167,406 | ) | ||
Institutional Class | (98,253 | ) | ||
|
| |||
Net expenses | 4,357,771 | |||
|
| |||
Net investment income | 10,941,962 | |||
|
| |||
Realized and unrealized gains (losses) on investments | ||||
Net realized gains (losses) on |
| |||
Unaffiliated securities | 16,996,147 | |||
Futures contracts | (1,486,720 | ) | ||
|
| |||
Net realized gains on investments | 15,509,427 | |||
|
| |||
Net change in unrealized gains (losses) on |
| |||
Unaffiliated securities | 5,948,865 | |||
Futures contracts | (321,994 | ) | ||
|
| |||
Net change in unrealized gains (losses) on investments | 5,626,871 | |||
|
| |||
Net realized and unrealized gains (losses) on investments | 21,136,298 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 32,078,260 | ||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Government Securities Fund | 21
Table of Contents
Statement of changes in net assets
Year ended August 31, 2020 | Year ended August 31, 2019 | |||||||||||||||
Operations |
| |||||||||||||||
Net investment income | $ | 10,941,962 | $ | 15,143,454 | ||||||||||||
Net realized gains (losses) on investments | 15,509,427 | (1,925,071 | ) | |||||||||||||
Net change in unrealized gains (losses) on investments | 5,626,871 | 39,126,909 | ||||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from operations | 32,078,260 | 52,345,292 | ||||||||||||||
|
| |||||||||||||||
Distributions to shareholders from | ||||||||||||||||
Net investment income and net realized gains | ||||||||||||||||
Class A | (4,370,123 | ) | (6,313,196 | ) | ||||||||||||
Class C | (91,882 | ) | (195,136 | ) | ||||||||||||
Administrator Class | (2,040,552 | ) | (2,239,507 | ) | ||||||||||||
Institutional Class | (4,903,457 | ) | (7,084,150 | ) | ||||||||||||
Tax basis return of capital |
| |||||||||||||||
Class A | (332,033 | ) | 0 | |||||||||||||
Class C | (12,945 | ) | 0 | |||||||||||||
Administrator Class | (138,534 | ) | 0 | |||||||||||||
Institutional Class | (312,817 | ) | 0 | |||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | (12,202,343 | ) | (15,831,989 | ) | ||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold |
| |||||||||||||||
Class A | 4,977,612 | 57,271,993 | 2,998,141 | 32,247,697 | ||||||||||||
Class C | 431,622 | 4,971,124 | 130,403 | 1,399,972 | ||||||||||||
Administrator Class | 4,578,704 | 52,520,201 | 3,748,099 | 40,844,711 | ||||||||||||
Institutional Class | 18,855,445 | 217,274,023 | 10,629,768 | 114,197,617 | ||||||||||||
|
| |||||||||||||||
332,037,341 | 188,689,997 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions |
| |||||||||||||||
Class A | 367,990 | 4,202,063 | 514,113 | 5,557,375 | ||||||||||||
Class C | 3,761 | 42,977 | 6,968 | 75,010 | ||||||||||||
Administrator Class | 187,125 | 2,137,702 | 202,767 | 2,194,061 | ||||||||||||
Institutional Class | 333,117 | 3,815,534 | 527,779 | 5,677,579 | ||||||||||||
|
| |||||||||||||||
10,198,276 | 13,504,025 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed |
| |||||||||||||||
Class A | (5,711,802 | ) | (65,356,355 | ) | (6,931,745 | ) | (74,634,484 | ) | ||||||||
Class C | (762,500 | ) | (8,814,689 | ) | (618,596 | ) | (6,623,742 | ) | ||||||||
Administrator Class | (3,868,661 | ) | (44,337,143 | ) | (3,152,863 | ) | (33,929,729 | ) | ||||||||
Institutional Class | (9,584,688 | ) | (110,260,602 | ) | (21,756,178 | ) | (234,422,675 | ) | ||||||||
|
| |||||||||||||||
(228,768,789 | ) | (349,610,630 | ) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from capital share transactions | 113,466,828 | (147,416,608 | ) | |||||||||||||
|
| |||||||||||||||
Total increase (decrease) in net assets | 133,342,745 | (110,903,305 | ) | |||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 599,791,149 | 710,694,454 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 733,133,894 | $ | 599,791,149 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
22 | Wells Fargo Government Securities Fund
Table of Contents
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $11.31 | $10.65 | $11.01 | $11.51 | $11.22 | |||||||||||||||
Net investment income | 0.18 | 1 | 0.23 | 0.19 | 0.15 | 0.11 | 1 | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.38 | 0.68 | (0.35 | ) | (0.22 | ) | 0.34 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.56 | 0.91 | (0.16 | ) | (0.07 | ) | 0.45 | |||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.19 | ) | (0.25 | ) | (0.20 | ) | (0.16 | ) | (0.10 | ) | ||||||||||
Net realized gains | 0.00 | 0.00 | 0.00 | (0.27 | ) | (0.06 | ) | |||||||||||||
Tax basis return of capital | (0.01 | ) | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.20 | ) | (0.25 | ) | (0.20 | ) | (0.43 | ) | (0.16 | ) | ||||||||||
Net asset value, end of period | $11.67 | $11.31 | $10.65 | $11.01 | $11.51 | |||||||||||||||
Total return2 | 5.02 | % | 8.65 | % | (1.44 | )% | (0.52 | )% | 4.03 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.91 | % | 0.91 | % | 0.90 | % | 0.88 | % | 0.87 | % | ||||||||||
Net expenses | 0.84 | % | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | ||||||||||
Net investment income | 1.56 | % | 2.20 | % | 1.86 | % | 1.38 | % | 0.94 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 111 | % | 178 | % | 197 | % | 299 | % | 397 | % | ||||||||||
Net assets, end of period (000s omitted) | $276,310 | $271,986 | $292,550 | $394,645 | $483,112 |
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 Government Securities Fund | 23
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $11.31 | $10.65 | $11.01 | $11.51 | $11.21 | |||||||||||||||
Net investment income | 0.09 | 1 | 0.15 | 1 | 0.12 | 1 | 0.07 | 1 | 0.02 | 1 | ||||||||||
Net realized and unrealized gains (losses) on investments | 0.38 | 0.68 | (0.36 | ) | (0.23 | ) | 0.36 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.47 | 0.83 | (0.24 | ) | (0.16 | ) | 0.38 | |||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.10 | ) | (0.17 | ) | (0.12 | ) | (0.07 | ) | (0.02 | ) | ||||||||||
Net realized gains | 0.00 | 0.00 | 0.00 | (0.27 | ) | (0.06 | ) | |||||||||||||
Tax basis return of capital | (0.01 | ) | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.11 | ) | (0.17 | ) | (0.12 | ) | (0.34 | ) | (0.08 | ) | ||||||||||
Net asset value, end of period | $11.67 | $11.31 | $10.65 | $11.01 | $11.51 | |||||||||||||||
Total return2 | 4.24 | % | 7.84 | % | (2.18 | )% | (1.26 | )% | 3.25 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 1.66 | % | 1.66 | % | 1.65 | % | 1.61 | % | 1.62 | % | ||||||||||
Net expenses | 1.60 | % | 1.60 | % | 1.60 | % | 1.60 | % | 1.60 | % | ||||||||||
Net investment income | 0.81 | % | 1.44 | % | 1.12 | % | 0.63 | % | 0.16 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 111 | % | 178 | % | 197 | % | 299 | % | 397 | % | ||||||||||
Net assets, end of period (000s omitted) | $7,560 | $11,026 | $15,508 | $20,132 | $27,085 |
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.
24 | Wells Fargo Government Securities Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $11.31 | $10.65 | $11.01 | $11.51 | $11.21 | |||||||||||||||
Net investment income | 0.20 | 1 | 0.26 | 1 | 0.22 | 1 | 0.18 | 1 | 0.13 | |||||||||||
Net realized and unrealized gains (losses) on investments | 0.37 | 0.67 | (0.35 | ) | (0.23 | ) | 0.36 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.57 | 0.93 | (0.13 | ) | (0.05 | ) | 0.49 | |||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.21 | ) | (0.27 | ) | (0.23 | ) | (0.18 | ) | (0.13 | ) | ||||||||||
Net realized gains | 0.00 | 0.00 | 0.00 | (0.27 | ) | (0.06 | ) | |||||||||||||
Tax basis return of capital | (0.01 | ) | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.22 | ) | (0.27 | ) | (0.23 | ) | (0.45 | ) | (0.19 | ) | ||||||||||
Net asset value, end of period | $11.66 | $11.31 | $10.65 | $11.01 | $11.51 | |||||||||||||||
Total return | 5.15 | % | 8.88 | % | (1.23 | )% | (0.31 | )% | 4.34 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.85 | % | 0.85 | % | 0.84 | % | 0.82 | % | 0.81 | % | ||||||||||
Net expenses | 0.64 | % | 0.64 | % | 0.64 | % | 0.64 | % | 0.64 | % | ||||||||||
Net investment income | 1.75 | % | 2.42 | % | 2.07 | % | 1.60 | % | 1.13 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 111 | % | 178 | % | 197 | % | 299 | % | 397 | % | ||||||||||
Net assets, end of period (000s omitted) | $120,181 | $106,355 | $91,671 | $198,520 | $229,169 |
1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Government Securities Fund | 25
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $11.31 | $10.65 | $11.00 | $11.50 | $11.21 | |||||||||||||||
Net investment income | 0.21 | 1 | 0.27 | 1 | 0.24 | 1 | 0.19 | 1 | 0.15 | |||||||||||
Net realized and unrealized gains (losses) on investments | 0.38 | 0.68 | (0.35 | ) | (0.22 | ) | 0.35 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.59 | 0.95 | (0.11 | ) | (0.03 | ) | 0.50 | |||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.23 | ) | (0.29 | ) | (0.24 | ) | (0.20 | ) | (0.15 | ) | ||||||||||
Net realized gains | 0.00 | 0.00 | 0.00 | (0.27 | ) | (0.06 | ) | |||||||||||||
Tax basis return of capital | (0.01 | ) | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.24 | ) | (0.29 | ) | (0.24 | ) | (0.47 | ) | (0.21 | ) | ||||||||||
Net asset value, end of period | $11.66 | $11.31 | $10.65 | $11.00 | $11.50 | |||||||||||||||
Total return | 5.31 | % | 9.05 | % | (0.99 | )% | (0.15 | )% | 4.42 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.58 | % | 0.58 | % | 0.57 | % | 0.55 | % | 0.54 | % | ||||||||||
Net expenses | 0.48 | % | 0.48 | % | 0.48 | % | 0.48 | % | 0.48 | % | ||||||||||
Net investment income | 1.87 | % | 2.56 | % | 2.22 | % | 1.75 | % | 1.28 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 111 | % | 178 | % | 197 | % | 299 | % | 397 | % | ||||||||||
Net assets, end of period (000s omitted) | $329,083 | $210,424 | $310,966 | $416,834 | $487,113 |
1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
26 | Wells Fargo Government Securities 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 Government Securities 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.
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.
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.
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 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.
When-issued transactions
The Fund may purchase securities on a forward commitment or when-issued basis. The Fund records a when-issued transaction on the trade date and will segregate assets in an amount at least equal in value to the Fund’s commitment to purchase when-issued securities. Securities purchased on a when-issued basis are marked-to-market daily and the Fund begins earning interest on the settlement date. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
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 interest rates and is subject to interest rate 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.
Wells Fargo Government Securities Fund | 27
Table of Contents
Notes to financial statements
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.
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 are declared daily and paid monthly. Distributions from net realized gains, if any, 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 August 31, 2020, the aggregate cost of all investments for federal income tax purposes was $782,534,424 and the unrealized gains (losses) consisted of:
Gross unrealized gains | $ | 24,017,032 | ||
Gross unrealized losses | (1,304,010 | ) | ||
Net unrealized gains | $ | 22,713,022 |
As of August 31, 2020, the Fund had capital loss carryforwards which consist of $4,706,777 in short-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.
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.
28 | Wells Fargo Government Securities 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 August 31, 2020:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Agency securities | $ | 0 | $ | 563,839,997 | $ | 0 | $ | 563,839,997 | ||||||||
Asset-backed securities | 0 | 16,569,106 | 0 | 16,569,106 | ||||||||||||
Municipal obligations | 0 | 6,907,995 | 0 | 6,907,995 | ||||||||||||
Non-agency mortgage-backed securities | 0 | 63,391,176 | 0 | 63,391,176 | ||||||||||||
U.S. Treasury securities | 66,667,897 | 0 | 0 | 66,667,897 | ||||||||||||
Yankee corporate bonds and notes | 0 | 2,601,070 | 0 | 2,601,070 | ||||||||||||
Yankee government bonds | 0 | 10,376,094 | 0 | 10,376,094 | ||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 74,603,629 | 0 | 0 | 74,603,629 | ||||||||||||
141,271,526 | 663,685,438 | 0 | 804,956,964 | |||||||||||||
Futures contracts | 327,462 | 0 | 0 | 327,462 | ||||||||||||
Total assets | $ | 141,598,988 | $ | 663,685,438 | $ | 0 | $ | 805,284,426 | ||||||||
Liabilities | ||||||||||||||||
Futures contracts | $ | 36,980 | $ | 0 | $ | 0 | $ | 36,980 | ||||||||
Total liabilities | $ | 36,980 | $ | 0 | $ | 0 | $ | 36,980 |
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
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.
For the year ended August 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 | 0.450 | % | ||
Next $500 million | 0.425 | |||
Next $2 billion | 0.400 | |||
Next $2 billion | 0.375 | |||
Next $5 billion | 0.340 | |||
Over $10 billion | 0.320 |
For the year ended August 31, 2020, the management fee was equivalent to an annual rate of 0.44% of the Fund’s average daily net assets.
Wells Fargo Government Securities Fund | 29
Table of Contents
Notes to financial statements
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 0.20% and declining to 0.10% 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 | 0.16 | % | ||
Administrator Class | 0.10 | |||
Institutional Class | 0.08 |
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 December 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.85% for Class A shares, 1.60% for Class C shares, 0.64% for Administrator Class shares, and 0.48% 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 August 31, 2020, Funds Distributor received $5,108 from the sale of Class A shares and $13 in contingent deferred sales charges from redemptions of Class C shares. No contingent deferred sales charges were incurred from Class A shares for the year ended August 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 short-term securities, for the year ended August 31, 2020 were as follows:
Purchases at cost | Sales proceeds | |||||
U.S. government | Non-U.S. government | U.S. government | Non-U.S. government | |||
$783,103,930 | $135,471,430 | $603,583,909 | $99,018,918 |
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Notes to financial statements
6. DERIVATIVE TRANSACTIONS
During the year ended August 31, 2020, the Fund entered into futures contracts to manage duration and yield curve exposures. The Fund had an average notional amount of $125,218,294 in long futures contracts and $60,876,454 in short futures contracts during the year ended August 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.
7. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $350,000,000 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 August 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 August 31, 2020 and August 31, 2019 were as follows:
Year ended August 31 | ||||||||
2020 | 2019 | |||||||
Ordinary income | $ | 11,406,014 | $ | 15,831,989 | ||||
Tax basis return of capital | 796,329 | 0 |
As of August 31, 2020, the components of distributable earnings on a tax basis were as follows:
Unrealized gains | Capital loss carryforward | |
$22,713,022 | $(4,706,777) |
9. INDEMNIFICATION
Under the Fund’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 Fund. The Fund has entered into a separate agreement with each Trustee that converts indemnification rights currently existing under the Fund’s organizational documents into contractual rights that cannot be changed in the future without the consent of the Trustee. Additionally, in the normal course of business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’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 on fair value measurements in Topic 820, Fair Value Measurements. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has adopted this guidance which did not have a material impact on the financial statements.
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.
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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 Government Securities Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of August 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 August 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 August 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
October 28, 2020
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TAX INFORMATION
For the fiscal year ended August 31, 2020, $11,007,763 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 August 31, 2020, 7.97% of the ordinary income distributed was derived from interest on U.S. government securities.
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 142 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 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). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008 | 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 | |||
David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business (Emeritus), 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 |
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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 | |||
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 Wheelock (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. Interim President of the McKnight Foundation from January to September 2020. 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 the Treasurer of 77 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. |
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Other information (unaudited)
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Wells Fargo Government Securities Fund
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Funds Trust (the “Trust”) must determine annually whether to approve the continuation of the Trust’s investment management and sub-advisory agreements. In this regard, at a Board meeting held on May 26, 2020 and May 28, 2020 (together, the “Meeting”), the Board, all the members of which have no direct or indirect interest in the investment management and sub-advisory agreements and are not “interested persons” of the Trust, as defined in the 1940 Act (the “Independent Trustees”), reviewed and approved for Wells Fargo Government Securities Fund (the “Fund”): (i) an investment management agreement (the “Management Agreement”) with Wells Fargo Funds Management, LLC (“Funds Management”); and (ii) an investment sub-advisory agreement (the “Sub-Advisory Agreement”) with Wells Capital Management Incorporated (the “Sub-Adviser”), an affiliate of Funds Management. The Management Agreement and the Sub-Advisory Agreement are collectively referred to as the “Advisory Agreements.”
At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of Funds Management and the Sub-Adviser and the approval of the Advisory Agreements. Prior to the Meeting, including at a Board meeting held in April 2020, the Trustees conferred extensively among themselves and with representatives of Funds Management about these matters. Also, the Board has adopted a team-based approach, with each team consisting of a sub-set of Trustees, to assist the full Board in the discharge of its duties in reviewing investment performance and other matters throughout the year. The Independent Trustees were assisted in their evaluation of the Advisory Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately.
In providing information to the Board, Funds Management and the Sub-Adviser were guided by a detailed set of requests for information submitted to them by independent legal counsel on behalf of the Independent Trustees at the start of the Board’s annual contract renewal process earlier in 2020. In considering and approving the Advisory Agreements, the Trustees considered the information they believed relevant, including but not limited to the information discussed below. The Board considered not only the specific information presented in connection with the Meeting, but also the knowledge gained over time through interaction with Funds Management and the Sub-Adviser about various topics. In this regard, the Board reviewed reports of Funds Management at each of its quarterly meetings, which included, among other things, portfolio reviews and investment performance reports. In addition, the Board and the teams mentioned above confer with portfolio managers at various times throughout the year. The Board did not identify any particular information or consideration that was all-important or controlling, and each individual Trustee may have attributed different weights to various factors.
After its deliberations, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable. The Board considered the approval of the Advisory Agreements for the Fund as part of its consideration of agreements for funds across the complex, but its approvals were made on a fund-by-fund basis. The following summarizes a number of important, but not necessarily all, factors considered by the Board in support of its approvals.
Nature, extent and quality of services
The Board received and considered various information regarding the nature, extent and quality of services provided to the Fund by Funds Management and the Sub-Adviser under the Advisory Agreements. This information included a description of the investment advisory services and Fund-level administrative services covered by the Management Agreement, as well as, among other things, a summary of the background and experience of senior management of Wells Fargo Asset Management (“WFAM”), of which Funds Management and the Sub-Adviser are a part, and a summary of investments made in the business of WFAM. The Board also received a description of Funds Management’s and the Sub-Adviser’s business continuity plans and of their approaches to data privacy and cybersecurity, and related testing. The Board also received and reviewed information about Funds Management’s role as administrator of the Fund’s liquidity risk management program, Funds Management’s approach to risk management, and Funds Management’s intermediary and vendor oversight program.
The Board also considered the qualifications, background, tenure and responsibilities of each of the portfolio managers primarily responsible for the day-to-day portfolio management of the Fund. The Board evaluated the ability of Funds Management and the Sub-Adviser to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of Funds Management and the Sub-Adviser. In addition, the Board took into account the full range of services provided to the Fund by Funds Management and its affiliates.
Fund investment performance and expenses
The Board considered the investment performance results for the Fund over various time periods ended December 31, 2019. The Board also considered more current results for various time periods ended March 31, 2020. The Board considered these
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Other information (unaudited)
results in comparison to the investment performance of funds in a universe that was determined by Broadridge Inc. (“Broadridge”) to be similar to the Fund (the “Universe”), and in comparison to the Fund’s benchmark index and to other comparative data. Broadridge is an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds in the performance Universe. The Board noted that the investment performance of the Fund (Administrator Class) was higher than or in range of the average investment performance of the Universe for the one-, three-, five- and ten-year periods ended December 31, 2019. The Board also noted that the investment performance of the Fund (Administrator Class) was equal to or in range of the average investment performance of the Universe for the five- and ten-year periods ended March 31, 2020, and lower than the average investment performance of the Universe for the one- and three-year periods ended March 31, 2020. The Board also noted that the investment performance of the Fund was lower than its benchmark index, the Bloomberg Barclays U.S. Aggregate ex Credit Index, for all periods ended December 31, 2019. The Board also noted that the investment performance of the Fund was lower than its benchmark index, the Bloomberg Barclays U.S. Aggregate ex Credit Index, for all periods ended March 31, 2020.
The Board received information concerning, and discussed factors contributing to, the underperformance of the Fund relative to the benchmark for the periods identified above. The Board took note of the explanations for the relative underperformance during these periods, including with respect to market factors that affected the Fund’s investment performance. The Board also took note of the Fund’s outperformance relative to the Universe over several of the time periods under review.
The Board also received and considered information regarding the Fund’s net operating expense ratios and their various components, including actual management fees, custodian and other non-management fees, and Rule 12b-1 and non-Rule 12b-1 shareholder service fees. The Board considered these ratios in comparison to the median ratios of funds in class-specific expense groups that were determined by Broadridge to be similar to the Fund (the “Groups”). The Board received a description of the methodology used by Broadridge to select the mutual funds in the expense Groups and an explanation of how funds comprising expense groups and their expense ratios may vary from year-to-year. Based on the Broadridge reports, the Board noted that the net operating expense ratios of the Fund were lower than the median net operating expense ratios of the expense Groups for each share class.
The Board took into account the Fund’s investment performance and expense information provided to it among the factors considered in deciding to re-approve the Advisory Agreements.
Investment management and sub-advisory fee rates
The Board reviewed and considered the contractual fee rates payable by the Fund to Funds Management under the Management Agreement, as well as the contractual fee rates payable by the Fund to Funds Management for class-level administrative services under a Class-Level Administration Agreement, which include, among other things, class-level transfer agency and sub-transfer agency costs (collectively, the “Management Rates”). The Board also reviewed and considered the contractual investment sub-advisory fee rates that are payable by Funds Management to the Sub-Adviser for investment sub-advisory services.
Among other information reviewed by the Board was a comparison of the Fund’s Management Rates with the average contractual investment management fee rates of funds in the expense Groups at a common asset level as well as transfer agency costs of the funds in the expense Groups. The Board noted that the Management Rates of the Fund were lower than or equal to the sum of these average rates for the Fund’s expense Groups for all share classes.
The Board also received and considered information about the portion of the total management fee that was retained by Funds Management after payment of the fee to the Sub-Adviser for sub-advisory services. In assessing the reasonableness of this amount, the Board received and evaluated information about the nature and extent of responsibilities retained and risks assumed by Funds Management and not delegated to or assumed by the Sub-Adviser, and about Funds Management’s on-going oversight services. Given the affiliation between Funds Management and the Sub-Adviser, the Board ascribed limited relevance to the allocation of fees between them.
The Board also received and considered information about the nature and extent of services offered and fee rates charged by Funds Management and the Sub-Adviser to other types of clients with investment strategies similar to those of the Fund. In this regard, the Board received information about the significantly greater scope of services, and compliance, reporting and other legal burdens and risks of managing proprietary mutual funds compared with those associated with managing assets of other types of clients, including third-party sub-advised fund clients and non-mutual fund clients such as institutional separate accounts.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board determined that the compensation payable to Funds Management under the Management Agreement and to the Sub-Adviser under the Sub-Advisory Agreement was reasonable.
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Other information (unaudited)
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of both WFAM and Wells Fargo & Co. (“Wells Fargo”) from providing services to the fund family as a whole. The Board noted that the Sub-Adviser’s profitability information with respect to providing services to the Fund and other funds in the family was subsumed in the WFAM and Wells Fargo profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability, including a description of the methodology used to allocate certain expenses. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such as the size, type and age of fund.
Based on its review, the Board did not deem the profits reported by Funds Management, WFAM or Wells Fargo from services provided to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
The Board received and considered information about the potential for Funds Management to experience economies of scale in the provision of management services to the Fund, the difficulties of calculating economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. The Board noted the existence of breakpoints in the Fund’s management fee structure, which operate generally to reduce the Fund’s expense ratios as the Fund grows in size, and the size of the Fund in relation to such breakpoints. The Board considered that in addition to management fee breakpoints, Funds Management shares potential economies of scale from its management business in a variety of ways, including through fee waiver and expense reimbursement arrangements, services that benefit shareholders, competitive management fee rates set at the outset without regard to breakpoints, and investments in the business intended to enhance services available to shareholders.
The Board concluded that Funds Management’s arrangements with respect to the Fund, including contractual breakpoints, constituted a reasonable approach to sharing potential economies of scale with the Fund and its shareholders.
Other benefits to Funds Management and the Sub-Adviser
The Board received and considered information regarding potential “fall-out” or ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, as a result of their relationships with the Fund. Ancillary benefits could include, among others, benefits directly attributable to other relationships with the Fund and benefits potentially derived from an increase in Funds Management’s and the Sub-Adviser’s business as a result of their relationships with the Fund. The Board noted that various affiliates of Funds Management may receive distribution-related fees, shareholder servicing payments and sub-transfer agency fees in respect of shares sold or held through them and services provided.
The Board also reviewed information about soft dollar credits earned and utilized by the Sub-Adviser, fees earned by Funds Management and the Sub-Adviser from managing a private investment vehicle for the fund family’s securities lending collateral, and commissions earned by an affiliated broker from portfolio transactions.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board did not find that any ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, were unreasonable.
Conclusion
At the Meeting, after considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable.
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Other information (unaudited)
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Wells Fargo Funds Trust (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) on behalf of each of its series, including the Fund, which is reasonably designed to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) previously approved the designation of Wells Fargo Funds Management, LLC (“Funds Management”), the Fund’s investment manager, as the administrator of the Program, and Funds Management has established a Liquidity Risk Management Council composed of personnel from multiple departments within Funds Management and its affiliates to assist Funds Management in the implementation and on-going administration of the Program.
The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent the Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if the Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s “highly liquid investments” below its HLIM; and (6) periodic reporting to the Board.
At a meeting of the Board held on May 26 and 28, 2020, the Board received a written report (the “Report”) from Funds Management that addressed the operation of the Program and assessed its adequacy and effectiveness of implementation. The Report covered the initial period from December 1, 2018 through December 31, 2019 (the “Reporting Period”). No significant liquidity events impacting the Fund were noted in the Report. There were no material changes to the Program during the Reporting Period. The Report concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
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Effective June 1, 2020, shareholders purchasing Fund shares through an Oppenheimer & Co. Inc. (“Oppenheimer”) platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred or back-end, sales charge waivers) and discounts, which may differ from those disclosed in the Fund’s Prospectus or SAI.
Front-end Sales Load Waivers on Class A Shares available at Oppenheimer |
Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan. |
Shares purchased by or through a 529 Plan. |
Shares purchased through an Oppenheimer affiliated investment advisory program. |
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 from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 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 (known as Rights of Restatement). |
A shareholder in the Fund’s Class C shares will have their shares exchanged at net asset value to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the exchange is in line with the policies and procedures of Oppenheimer. |
Employees and registered representatives of Oppenheimer or its affiliates and their family members. |
Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in the Prospectus. |
CDSC Waivers on A and C Shares available at Oppenheimer |
Death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Prospectus. |
Return of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the Prospectus. |
Shares sold to pay Oppenheimer fees but only if the transaction is initiated by Oppenheimer. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Oppenheimer: Breakpoints, Rights of Accumulation & Letters of Intent |
Breakpoints as described in the 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 Oppenheimer. Eligible fund family assets not held at Oppenheimer may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
Wells Fargo Government Securities Fund | 41
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Effective June 15, 2020, shareholders purchasing fund shares through a Robert W. Baird & Co. (“Baird”) platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or the SAI.
Front-end Sales Load Waivers on Class A Shares available at Baird |
Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing share of the same fund. |
Share purchase by employees and registers representatives of Baird or its affiliate and their family members as designated by Baird. |
Shares purchase from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as rights of reinstatement). |
A shareholder in the Funds Investor C Shares will have their share exchanged at net asset value to Investor A shares of the fund if the shares are no longer subject to CDSC and the exchange is in line with the policies and procedures of Baird. |
Employer-sponsored retirement plans or charitable accounts in a transactional brokerage account at Baird, including 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 or SAR-SEPs. |
CDSC Waivers on A and C Shares available at Baird |
Shares sold due to death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
Shares bought due to returns of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 72 as described in the Fund’s Prospectus. |
Shares sold to pay Baird fees but only if the transaction is initiated by Baird. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Baird: Breakpoint and/or Rights of Accumulation |
Breakpoints as described in the Prospectus. |
Rights of accumulations which entitles 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 Baird. Eligible fund family assets not held at Baird may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets. |
Letters of Intent (LOI) allow for breakpoint discounts based on anticipated purchases within a fund family through Baird, over a 13-month period of time. |
42 | Wells Fargo Government Securities 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
© 2020 Wells Fargo & Company. All rights reserved
PAR-0920-00410 10-20
A216/AR216 08-20
Table of Contents
Annual Report
August 31, 2020
Wells Fargo Short-Term Bond Plus Fund
(formerly Wells Fargo Short-Term Bond 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 August 31, 2020, unless otherwise noted, and are those of the Fund’s portfolio 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 Short-Term Bond Plus Fund | 1
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Letter to shareholders (unaudited)
Andrew Owen
President
Wells Fargo Funds
Dear Shareholder:
We are pleased to offer you this annual report for the Wells Fargo Short-Term Bond Plus Fund for the 12-month period that ended August 31, 2020. Effective August 3, 2020, the Fund changed its name from the Wells Fargo Short-Term Bond Fund to the Wells Fargo Short-Term Bond Plus Fund.
Global stock markets saw earlier gains erased in March as governments around the world took unprecedented measures, attempting to stop the spread of the coronavirus at the expense of short-term economic output. However, markets rebounded from April on to offset much of the losses as central banks attempted to bolster capital markets and confidence.
For the 12-month period, equities had broadly positive total returns despite intense volatility in March. Non-U.S. developed market equities had the weakest performance and U.S. stocks performed strongly. Fixed-income securities were more modest though also generally positive. For the period, U.S. stocks, based on the S&P 500 Index,1 gained 21.94%. International stocks, as measured by the MSCI ACWI ex USA Index (Net),2 returned 8.31%, while the MSCI EM Index (Net)3 had somewhat stronger performance, with a 14.49% gain. For bond investors, the Bloomberg Barclays U.S. Aggregate Bond Index4 returned 6.47%, the Bloomberg Barclays Global Aggregate ex-USD Index5 gained a more modest 4.58%, and the Bloomberg Barclays Municipal Bond Index6 returned 3.24% while the ICE BofA U.S. High Yield Index7 returned 3.71%.
The fiscal year began with supportive central bank actions.
As the period began, several central banks had just cut interest rates in response to a global economic slowdown. Ongoing concerns regarding U.S.-China trade tensions and Brexit remained unresolved. The Federal Reserve (Fed) cut U.S. interest rates again in September. U.S. manufacturing data disappointed investors. The U.S. Congress announced it would pursue an impeachment investigation of President Trump. Meanwhile, the U.K. Brexit impasse showed no signs of resolution. Officials in China said that hitting the country’s economic growth goals for the year would be difficult considering the weight of tariffs and trade restrictions. Although the S&P 500 Index finished the third quarter with the best year-to-date returns in more than 20 years, concerns about future returns remained.
The fourth quarter started on a strong note, with U.S.-China trade tensions relaxing in October along with renewed optimism for a U.K. Brexit deal and positive macroeconomic data. The initial estimate of U.S. third-quarter gross domestic product (GDP) growth was a resilient 1.9% annualized rate, while the U.S. unemployment rate fell to a 50-year low of
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 and emerging 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 Short-Term Bond Plus Fund
Table of Contents
Letter to shareholders (unaudited)
3.5% in September. However, despite strength among U.S. consumers, business confidence declined while manufacturing activity contracted. Concerned with a potential economic slowdown, the Fed lowered interest rates another quarter point in late October—its third rate cut in four months. This helped push the S&P 500 Index to an all-time high while emerging market equities rallied and global bonds declined overall, reflecting a broad pickup in risk appetite.
Equity markets continued to rally in November despite ongoing geopolitical risks. Hopes for a U.S.-China trade deal buoyed investor confidence. U.S. business sentiment improved slightly, and manufacturing and services activity picked up. While consumer confidence and purchasing managers’ activity rose in the eurozone, China reported weakening manufacturing and consumer data. Bond yields rose marginally, leading to slightly negative returns for global government and investment-grade corporate bonds.
Financial markets ended 2019 with a boost from the U.S. and China accord on a Phase One trade deal. That, along with the landslide win by the pro-Brexit U.K. Conservative Party in a national election and ongoing central bank support, gave investors greater confidence. U.S. economic indicators were generally positive, with the exception of manufacturing activity and business confidence. Consumer confidence was resilient, fed by a robust labor market, tame inflation, and lower interest rates, which boosted housing affordability and stimulated homebuyer activity. The impeachment of President Trump had little impact on markets. Meanwhile, slowing Chinese economic activity, partly attributable to the trade war, led to further government stimulus at year-end through lower reserve ratios, allowing banks to lend more money.
The year-end rally continued in early January 2020. However, capital market volatility picked up sharply in late January on concerns over the potential impact of the coronavirus on the global economy and stock markets. As sentiment began to sour, perceived safe havens did well in January. The U.S. dollar and Japanese yen both rose and government bonds outperformed equities. While the S&P 500 Index held its ground, emerging market equities tumbled, including those in Asia.
In February, the coronavirus became the major market focus. Fears of the virus’s impact on global growth led to expectations of increased global central bank monetary policy support. That led the 10-year U.S. Treasury yield to fall to an all-time low of 1.1%. Although equity markets initially shrugged off concerns about the outbreak, focusing instead on strong fourth-quarter earnings and improving business confidence in January, market sentiment turned sharply lower and the S&P 500 Index lost 8.2% for the month. Oil prices tumbled as Russia and the Organization of the Petroleum Exporting Countries compounded a major decline in oil demand with a brutal price war, partly aimed at dissuading further U.S. shale production, causing the price of West Texas Intermediate crude oil to plummet.
The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems. This abrupt stoppage of economic activity led to the sharp deceleration of global output, sending economies into a deep contraction. Central banks responded swiftly, slashing interest rates and expanding quantitative easing programs to restore liquidity and confidence to the markets. In the U.S., the Fed introduced several new lending programs, funding investment-grade bonds, money market mutual funds, and commercial paper while purchasing Treasuries, mortgage-backed securities, and overnight repurchase agreements. Meanwhile, stock markets tumbled quickly into a bear market, ending the longest bull stock market in U.S. history.
Markets rebounded strongly in April, fueled by unprecedented government and central bank stimulus measures. The U.S. economy contracted by an annualized 5.0% pace in the first quarter, with 30 million new unemployment insurance claims in six weeks. In the
“The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems.”
Wells Fargo Short-Term Bond Plus Fund | 3
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Letter to shareholders (unaudited)
“The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July.”
eurozone, first-quarter real GDP shrank 3.8%, with the composite April Flash Purchasing Managers’ Index, a monthly survey of purchasing managers, falling to an all-time low of 13.5. The European Central Bank expanded its quantitative easing to include the purchase of additional government bonds of countries with the greatest virus-related need, including Italy and Spain. China’s first-quarter GDP fell by 6.8% year over year. However, retail sales, production, and investment showed signs of recovery. Extreme oil-price volatility continued as global supply far exceeded demand.
The global equity market rebound continued in May, with widespread strong monthly gains. Investors regained confidence on reports of early signs of success in human trials of a coronavirus vaccine. Growth stocks continued to outperform value stocks while returns on global government bonds were generally flat. In the U.S., a gap grew between the stock market rebound and devastating economic data points, including an April unemployment rate of 14.7%, the highest level since World War II. Purchasing managers’ indices reflected weakening activity in May in both the manufacturing and services sectors. U.S. corporate earnings reports indicated a 14% year-over-year contraction in earnings from the first quarter of 2019. However, high demand for technology, driven by remote activity, supported robust information technology sector earnings, which helped drive major technology stocks higher.
Financial markets posted widely positive returns in June despite ongoing economic weakness and high levels of uncertainty on the containment of the coronavirus and the timing of an effective vaccine. There were hopeful signs as economies reopened, with both U.S. and U.K. retail sales rebounding sharply in May. However, year over year, sales remained depressed. Vitally important to market sentiment was the ongoing commitment by central banks globally to do all they could to provide economic support through liquidity and low borrowing costs. U.S. economic activity was aided by one-time $1,200 stimulus checks and $600 bonus weekly unemployment benefits which expired at the end of July. However, unemployment remained historically high, easing somewhat from 14.7% in April to 11.1% in June. During June, numerous states reported increases of coronavirus cases. China’s economic recovery picked up momentum in June, though it remained far from a full recovery.
July was a broadly positive month for both global equities and fixed income. However, economic data and a resurgence of coronavirus cases pointed to the vulnerability of the global economy and the ongoing imperative to regain control of the pandemic. Second-quarter GDP shrank from the previous quarter by 9.5% and 12.1% in the U.S. and eurozone, respectively. In contrast, China reported a 3.2% year-over-year expansion in its second-quarter GDP. U.S. unemployment remained high despite adding 1.8 million jobs in July, with a double-digit jobless rate persisting. However, manufacturing activity grew in both the U.S. and eurozone. In Asia, while China’s manufacturing sector continued to expand, activity in Japan and South Korea contracted. In July, a rising concern was the rapid and broad reemergence of coronavirus infections.
The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July. U.S. stocks had strong monthly gains, led by the so-called FAANG stocks—Facebook, Apple, Amazon, Netflix, and Google (Alphabet)—which dominate these indices and continued to rally. U.S. stocks generally surpassed other broadly positive global equity performance while fixed-income market monthly returns were broadly flat. Generally stronger-than-expected second-quarter earnings boosted investor sentiment along with the Fed’s announcement of a policy shift that will likely lead to longer-term low interest rates and supportive monetary policy. The U.S. Flash Purchasing Managers’ Indices for both manufacturing and services beat expectations while U.S. housing market indicators were strong. In Europe, retail sales expanded and consumer confidence remained steady. China’s economy continued its fairly steady expansion. Overall, developed markets performed better than emerging market equities for the month of August as people took comfort in better-known equities in perceived safer markets.
4 | Wells Fargo Short-Term Bond Plus Fund
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Letter to shareholders (unaudited)
Don’t let short-term uncertainty derail long-term investment goals.
Periods of investment uncertainty can present challenges, but experience has taught us that maintaining long-term investment goals can be an effective way to plan for the future. To help you create a sound strategy based on your personal goals and risk tolerance, Wells Fargo Funds offers more than 100 mutual funds spanning a wide range of asset classes and investment styles. Although diversification cannot guarantee an investment profit or prevent losses, we believe it can be an effective way to manage investment risk and potentially smooth out overall portfolio performance. We encourage investors to know their investments and to understand that appropriate levels of risk-taking may unlock opportunities.
Thank you for choosing to invest with Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Andrew Owen
President
Wells Fargo Funds
|
For further information about your Fund, contact your investment professional, visit our website at wfam.com, or call us directly at 1-800-222-8222. |
Notice to Shareholders
At a meeting held on August 10-12, 2020, the Board of Trustees of the Fund approved the following changes:
∎ | A change to the Fund’s automatic conversion feature for Class C shares in order to shorten the required holding period from 10 to 8 years. As a result, on a monthly basis beginning November 5, 2020, Class C shares will convert automatically into Class A shares 8 years after the initial date of purchase or, if you acquired your Class C shares through an exchange or conversion from another share class, 8 years after the date you acquired your Class C shares. When Class C shares that you acquired through a purchase or exchange convert, any other Class C shares that you purchased with reinvested dividends and distributions also will convert into Class A shares on a pro rata basis. |
Please note that a shorter holding period may apply depending on your intermediary. Please see “Appendix A—Sales Charge Reductions and Waivers for Certain Intermediaries” in the Fund’s prospectus for further information.
∎ | Changes to the Class A sales charge schedule for the Fund, effective with every purchase made on or after September 21, 2020 |
NEW Class A Sales Charge Schedule effective September 21, 2020
Amount of Purchase | Front-end Sales Charge As % of Public Offering Price | Front-end Sales Charge As % of Net Amount Invested | Commission Paid to Intermediary As % of Public Offering Price | |||||||||
Less than $100,000 | 2.00 | % | 2.04 | % | 1.75 | % | ||||||
$ 100,000 but less than $250,000 | 1.00 | % | 1.01 | % | 0.85 | % | ||||||
$ 250,000 and over | 0.00 | %1 | 0.00 | % | 0.40 | %2 |
1 | If you redeem Class A shares purchased at or above the $250,000 breakpoint level within twelve months from the date of purchase, you will pay a CDSC of 0.40% of the NAV of the shares on the date of original purchase. Certain exceptions apply (see “CDSC Waivers” in the Fund’s Prospectus). For redemptions of Class A shares of the Fund purchased prior to August 1, 2018, the CDSC terms that were in place at the time of purchase will continue to apply. |
2 | The commission paid to an intermediary on purchases above the $250,000 breakpoint level includes an advance by Wells Fargo Funds Distributor of the first year’s shareholder servicing fee. |
Wells Fargo Short-Term Bond Plus Fund | 5
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Performance highlights (unaudited)
Investment objective
The Fund seeks current income consistent with capital preservation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Christopher Y. Kauffman, CFA®‡
Jay N. Mueller, CFA®‡
Janet S. Rilling, CFA®‡*, CPA
Michael J. Schueller, CFA®‡
Noah M. Wise, CFA®‡
Average annual total returns (%) as of August 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 (SSTVX) | 8-31-1999 | 2.87 | 2.15 | 1.84 | 4.96 | 2.56 | 2.05 | 0.82 | 0.72 | |||||||||||||||||||||||||
Class C (WFSHX) | 3-31-2008 | 3.10 | 1.78 | 1.27 | 4.10 | 1.78 | 1.27 | 1.57 | 1.47 | |||||||||||||||||||||||||
Class R6 (SSTYX)3 | 7-31-2018 | – | – | – | 5.28 | 2.82 | 2.32 | 0.44 | 0.40 | |||||||||||||||||||||||||
Institutional Class (SSHIX) | 8-31-1999 | – | – | – | 5.23 | 2.82 | 2.32 | 0.49 | 0.45 | |||||||||||||||||||||||||
Bloomberg Barclays U.S. 1-3 Year Government/Credit Bond Index4 | – | – | – | – | 3.66 | 2.15 | 1.59 | – | – |
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 2.00%. 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 R6 and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
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. Loans are subject to risks similar to those associated with other below-investment-grade bond investments, such as credit risk (for example, risk of issuer default), below investment- grade bond risk (for example, risk of greater volatility in value), and risk that the loan may become illiquid or difficult to price. The use of derivatives may reduce returns and/or increase volatility. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). Foreign investments are especially volatile and can rise or fall dramatically due to differences in the political and economic conditions of the host country. These risks are generally intensified in emerging markets. The Fund is exposed to high-yield securities risk and mortgage- and asset-backed securities risk. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Short-Term Bond Plus Fund
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Performance highlights (unaudited)
Growth of $10,000 investment as of August 31, 20205 |
‡ | CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute. |
* | Miss Rilling became a portfolio manager of the Fund on August 3, 2020. |
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 December 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 0.72% for Class A, 1.47% for Class C, 0.40% for Class R6, and 0.45% 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 caps. Prior to or after the commitment expiration date, the caps may be increased or the commitment to maintain the caps may be terminated only with the approval of the Board of Trustees. Without these caps, 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 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. |
4 | The Bloomberg Barclays U.S. 1-3 Year Government/Credit Bond Index is the one- to three-year component of the Bloomberg Barclays U.S. Government/Credit Bond Index that includes securities in the Government and Credit Indexes. The Government Index includes Treasuries (that is, public obligations of the U.S. Treasury that have remaining maturities of more than one year) and agencies (that is, publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government). The Credit Index includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements. 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 performance of the Bloomberg Barclays U.S. 1-3 Year Government/Credit Bond 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 2.00%. |
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. |
8 | The ratings indicated are from Standard & Poor’s, Moody’s Investors Service, and/or Fitch Ratings Ltd. Credit-quality ratings: Credit-quality ratings apply to underlying holdings of the fund and not the Fund itself. Standard & Poor’s rates the creditworthiness of bonds from AAA (highest) to D (lowest). Ratings from A to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories. Moody’s rates the creditworthiness of bonds from Aaa (highest) to C (lowest). Ratings Aa to B may be modified by the addition of a number 1 (highest) to 3 (lowest) to show relative standing within the ratings categories. Fitch rates the creditworthiness of bonds from AAA (highest) to D (lowest). |
9 | Duration is a measurement of the sensitivity of a bond’s price to changes in Treasury yields. A fund’s duration is the weighted average of duration of the bonds in the portfolio. Duration should be interpreted as the approximate change in a bond’s (or fund’s) price for a 100-basis-point change in Treasury yields. Duration is based on historical performance and does not represent future results. |
Wells Fargo Short-Term Bond Plus Fund | 7
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Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
∎ | The Fund outperformed its benchmark, the Bloomberg Barclays U.S. 1–3 Year Government/Credit Bond Index, for the 12-month period that ended August 31, 2020. |
∎ | An underweight to U.S. Treasuries and an overweight to corporate debt contributed. Overweights to both financials and industrials contributed, as did selection within both sectors. |
∎ | Duration positioning was mostly neutral while curve positioning contributed. |
∎ | An overweight to BB-rated securities contributed during the period, as did an underweight to AAA. |
∎ | An overweight to structured products detracted. While structured products posted positive returns, and returns exceeded like-duration U.S. Treasuries, they tended to underperform the benchmark, detracting slightly from performance. |
Ten largest holdings (%) as of August 31, 20206 | ||||
U.S. Treasury Note, 0.25%, 4-15-2023 | 3.68 | |||
Invesco BulletShares 2021 High Yield Corporate Bond ETF | 2.76 | |||
FNMA, 2.00%, 9-17-2035 | 1.44 | |||
Invesco BulletShares 2022 High Yield Corporate Bond ETF | 1.43 | |||
Chase Auto Credit Linked Notes Series 2020-1 Class B, 0.99%, 1-25-2028 | 1.24 | |||
Jackson National Life Global Company, 2.50%, 6-27-2022 | 1.12 | |||
Bank of America NA, 3.34%, 1-25-2023 | 0.90 | |||
National Securities Clearing Corporation, 1.50%, 4-23-2025 | 0.84 | |||
Banque Federative du Credit Mutuel SA, 2.13%, 11-21-2022 | 0.70 | |||
BP Capital Markets plc, 4.38%, 06-22-2025 | 0.68 |
The coronavirus made a significant impact.
After years of steady expansion, the U.S. economy received a traumatic shock in 2020 with the arrival of the coronavirus. Public reaction and government-ordered lockdowns resulted in a collapse in economic activity, with the second quarter of 2020 recording a nearly 10% drop in gross domestic product. Unemployment swiftly soared to double digits. Most areas of consumption declined precipitously. Travel and leisure services bore the brunt of the disruption. Spurred by a negative demand shock, prices for many goods declined in March and April, pushing most inflation indicators substantially lower.
The Federal Reserve responded to the pandemic with a dramatic easing of monetary policy, setting overnight rate targets to near zero, as well as purchasing bonds for its own account. A host of credit support measures were put in place to improve the functioning of teetering financial markets. In
their actions and rhetoric, the monetary authorities made it clear that an aggressive posture to support the economic and financial markets would be in place as long as needed.
Fiscal policy also responded swiftly to the pandemic in the form of relief payments to the general public as well as extended unemployment benefits. These measures more than offset the loss of income associated with unemployment increases and other wage losses for many people. Economic activity probably bottomed in late April, and by the end of May, both consumption and employment were turning around. Substantial job gains occurred while claims for unemployment insurance began to subside. Prices generally stabilized, with oil rallying from distressed levels and core inflation measures rebounding from their crisis lows. Stock indices hit new all-time highs over the course of the summer, while Treasury yields remained extremely low. Credit spreads, which widened sharply in the March–April period, narrowed substantially in the ensuing few months.
Please see footnotes on page 7.
8 | Wells Fargo Short-Term Bond Plus Fund
Table of Contents
Performance highlights (unaudited)
Portfolio composition as of August 31, 20207 |
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We continue to consistently implement our time-tested process and philosophy to capitalize on market dislocations.
The Fund’s largest commitment remains in short-term corporate bonds. During the period, we reduced the overweight to corporate debt and the Fund was near its cyclical low for high-yield and credit exposure coming into 2020, providing the flexibility to selectively add risk within the portfolio. In March and April 2020, we exploited market volatility through a number of tactical trades in sectors with significant dislocations. We added to U.S. high-yield bonds, focusing on short, BB-rated8, less-cyclical credits in sectors such as health care and telecommunications. We strategically added to new issue higher-quality investment-
grade credit issued at large discounts and we extended duration in credit. The Fund’s second-largest sector commitment was to securitized debt: asset-backed securities, residential mortgage-backed securities, commercial mortgage-backed securities, and collateralized mortgage and loan obligations. We continue to find value in owning structured product over Treasuries and agencies and maintain a material allocation to structured product within the Fund. We rotated into TBA exposure as the period ended given the asset class’ relative attractiveness over specified mortgage pools. Lastly, we added to short U.S. Treasury bills late in the period. These moves were phased in, and we continue to maintain liquidity and the flexibility to reallocate the portfolio as needed.
We generally maintained the Fund’s duration9 near the 1.5- to 2.0-year mark, in line with its benchmark. Our duration positioning remains focused on the short-term horizon and oscillates around a neutral position until we are confident in a trend reversal. Given the Federal Open Market Committee’s commitment to keeping rates anchored near zero, we will look to add a marginal amount of duration on market dislocations, as we did as the period came to a close.
The outlook is for recovery amid uncertainty.
The outlook holds considerable uncertainty, as the ultimate resolution of the coronavirus pandemic remains unknown. Consumer behavior is likely to have been altered by the crisis, though lower consumption in some areas such as travel and leisure could well be offset by higher spending on housing, in-home entertainment, and the like. The upcoming U.S. elections represent an additional source of uncertainty, with the potential for meaningful swings in tax, spending, and regulatory policies. Bearing in mind the higher-than-normal degree of uncertainty, we expect the present recovery to continue, albeit at a gradually declining pace as pent-up demand is satisfied and lingering damage from the pandemic proves difficult to heal. We believe it could take a year or longer to make up for all the shortfall.
Please see footnotes on page 7.
Wells Fargo Short-Term Bond Plus 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 March 1, 2020 to August 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 3-1-2020 | Ending account value 8-31-2020 | Expenses paid during the period1 | Annualized net expense ratio | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,031.13 | $ | 3.62 | 0.71 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.57 | $ | 3.61 | 0.71 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,026.42 | $ | 7.49 | 1.47 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,017.75 | $ | 7.46 | 1.47 | % | ||||||||
Class R6 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,032.64 | $ | 2.04 | 0.40 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,023.13 | $ | 2.03 | 0.40 | % | ||||||||
Institutional Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,032.36 | $ | 2.30 | 0.45 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.87 | $ | 2.29 | 0.45 | % |
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 Short-Term Bond Plus Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities: 4.04% |
| |||||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.40%) ± | 2.90 | % | 7-1-2029 | $ | 558 | $ | 559 | |||||||||
FHLMC | 3.50 | 10-15-2025 | 283,496 | 297,996 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.75 | 4-1-2032 | 32,361 | 32,532 | ||||||||||||
FHLMC (3 Year Treasury Constant Maturity +2.21%) ± | 3.79 | 5-1-2026 | 17,865 | 18,136 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.86 | 4-1-2038 | 148,723 | 157,041 | ||||||||||||
FHLMC | 4.00 | 5-1-2025 | 480,252 | 509,284 | ||||||||||||
FHLMC (12 Month LIBOR +1.91%) ± | 4.16 | 9-1-2031 | 2,209 | 2,210 | ||||||||||||
FHLMC | 6.00 | 10-1-2021 | 24,516 | 24,936 | ||||||||||||
FHLMC | 9.50 | 12-1-2022 | 259 | 261 | ||||||||||||
FHLMC Series 2597 Class AE | 5.50 | 4-15-2033 | 29,169 | 31,680 | ||||||||||||
FHLMC Series 2642 Class AR | 4.50 | 7-15-2023 | 107,492 | 111,212 | ||||||||||||
FHLMC Series 3609 Class LA | 4.00 | 12-15-2024 | 272 | 274 | ||||||||||||
FHLMC Series 3920 Class AB | 3.00 | 9-15-2025 | 31,556 | 31,603 | ||||||||||||
FHLMC Series KI01 Class A (1 Month LIBOR +0.16%) ± | 0.31 | 9-25-2022 | 12,951 | 12,950 | ||||||||||||
FHLMC Series QO04 Class AFL (12 Month Treasury Average +0.74%) ± | 1.91 | 5-25-2044 | 657,893 | 657,319 | ||||||||||||
FHLMC Series T-42 Class A6 | 9.50 | 2-25-2042 | 270,557 | 345,453 | ||||||||||||
FHLMC Series T-57 Class 2A1 ±± | 3.87 | 7-25-2043 | 62,151 | 66,137 | ||||||||||||
FHLMC Series T-59 Class 2A1 ±± | 3.73 | 10-25-2043 | 741,413 | 891,094 | ||||||||||||
FHMLC Series 4358 Class DA | 3.00 | 6-15-2040 | 1,314,476 | 1,346,318 | ||||||||||||
FNMA %% | 2.00 | 9-17-2035 | 6,400,000 | 6,659,000 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +1.27%) ± | 2.91 | 8-1-2034 | 146,731 | 147,307 | ||||||||||||
FNMA (12 Month LIBOR +1.82%) ± | 3.42 | 9-1-2040 | 460,946 | 482,903 | ||||||||||||
FNMA (12 Month Treasury Average +2.29%) ± | 3.62 | 10-1-2036 | 668,230 | 697,938 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.26%) ± | 3.69 | 8-1-2036 | 766,259 | 807,429 | ||||||||||||
FNMA (12 Month Treasury Average +2.44%) ± | 3.76 | 7-1-2036 | 555,109 | 582,897 | ||||||||||||
FNMA | 4.00 | 6-25-2026 | 308,422 | 333,580 | ||||||||||||
FNMA | 4.00 | 8-25-2037 | 209,661 | 218,589 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 4.03 | 11-1-2031 | 34,336 | 34,425 | ||||||||||||
FNMA | 5.50 | 3-1-2023 | 161,210 | 167,032 | ||||||||||||
FNMA | 6.00 | 4-1-2021 | 3,014 | 3,034 | ||||||||||||
FNMA | 6.00 | 3-1-2033 | 278,182 | 313,396 | ||||||||||||
FNMA | 6.50 | 8-1-2031 | 151,733 | 181,486 | ||||||||||||
FNMA | 8.00 | 9-1-2023 | 366 | 369 | ||||||||||||
FNMA | 9.00 | 11-1-2024 | 20,508 | 22,341 | ||||||||||||
FNMA Grantor Trust Series 2002-T12 Class A4 | 9.50 | 5-25-2042 | 440,585 | 527,405 | ||||||||||||
FNMA Series 2002-T1 Class A4 | 9.50 | 11-25-2031 | 24,687 | 30,525 | ||||||||||||
FNMA Series 2003-41 Class PE | 5.50 | 5-25-2023 | 103,775 | 108,434 | ||||||||||||
FNMA Series 2003-W11 Class A1 ±± | 4.07 | 6-25-2033 | 4,360 | 4,441 | ||||||||||||
FNMA Series 2003-W6 Class 6A ±± | 3.92 | 8-25-2042 | 453,742 | 476,426 | ||||||||||||
FNMA Series 2003-W6 Class PT4 ±± | 8.43 | 10-25-2042 | 48,233 | 60,042 | ||||||||||||
FNMA Series 2005-84 Class MB | 5.75 | 10-25-2035 | 231,381 | 260,060 | ||||||||||||
FNMA Series 2006-W1 Class 2AF2 (1 Month LIBOR +0.19%) ± | 0.37 | 2-25-2046 | 942,533 | 927,447 | ||||||||||||
FNMA Series 2008-53 Class CA | 5.00 | 7-25-2023 | 3 | 3 | ||||||||||||
FNMA Series 2010-37 Class A1 | 5.41 | 5-25-2035 | 999,208 | 1,051,826 | ||||||||||||
GNMA | 4.50 | 4-20-2035 | 58,334 | 62,930 | ||||||||||||
GNMA | 8.00 | 12-15-2023 | 6,993 | 7,473 | ||||||||||||
GNMA | 9.00 | 11-15-2024 | 479 | 480 | ||||||||||||
GNMA Series 2017-H13 Class FJ (1 Month LIBOR +0.20%) ± | 0.36 | 5-20-2067 | 2,579 | 2,578 | ||||||||||||
GNMA Series 2017-H16 Class FD (1 Month LIBOR +0.20%) ± | 0.36 | 8-20-2067 | 9,683 | 9,680 | ||||||||||||
Total Agency Securities (Cost $18,071,862) |
| 18,718,471 | ||||||||||||||
|
| |||||||||||||||
Asset-Backed Securities: 9.25% | ||||||||||||||||
California Republic Auto Receivables Trust Series 2017-1 Class A4 | 2.28 | 6-15-2022 | 821,853 | 824,412 | ||||||||||||
Chase Auto Credit Linked Notes Series 2020-1 Class B 144A%% | 0.99 | 1-25-2028 | 5,750,000 | 5,750,000 | ||||||||||||
Chesapeake Funding II LLC Series 2017-3A Class A1 144A | 1.91 | 8-15-2029 | 528,425 | 529,986 | ||||||||||||
CommonBond Student Loan Trust Series 2018-BGS Class A1 144A | 3.56 | 9-25-2045 | 2,076,982 | 2,150,982 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term Bond Plus Fund | 11
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Asset-Backed Securities (continued) | ||||||||||||||||
Drive Auto Receivables Trust Series 2018-3 Class C | 3.72 | % | 9-16-2024 | $ | 527,099 | $ | 531,792 | |||||||||
DT Auto Owner Trust Series 2017-2A Class D 144A | 3.89 | 1-15-2023 | 172,255 | 173,211 | ||||||||||||
Education Loan Asset-Backed Trust Series 2013-1 Class A1 (1 Month LIBOR +0.80%) 144A± | 0.98 | 6-25-2026 | 148,626 | 148,530 | ||||||||||||
Educational Services of America Incorporated Series 2015-2 Class A (1 Month LIBOR +1.00%) 144A± | 1.18 | 12-25-2056 | 751,918 | 744,392 | ||||||||||||
Finance of America HECM Buyout Series 2020-HB2 Class A 144A±± | 1.71 | 7-25-2030 | 2,579,128 | 2,578,783 | ||||||||||||
Flagship Credit Auto Trust Series 2018-2 Class A 144A | 2.97 | 10-17-2022 | 301,050 | 302,453 | ||||||||||||
GM Financial Securitized Term Trust Series 2018-4 Class C | 3.62 | 6-17-2024 | 300,000 | 318,217 | ||||||||||||
Hertz Vehicle Financing LLC Series 2015-3A Class B 144A | 3.71 | 9-25-2021 | 2,250,000 | 2,239,962 | ||||||||||||
Hertz Vehicle Financing LLC Series 2016-2A Class A2 144A | 2.95 | 3-25-2022 | 710,611 | 711,858 | ||||||||||||
Hertz Vehicle Financing LLC Series 2017-2A Class A 144A | 3.29 | 10-25-2023 | 522,084 | 522,111 | ||||||||||||
Hertz Vehicle Financing LLC Series 2018-1A Class A 144A | 3.29 | 2-25-2024 | 566,326 | 566,629 | ||||||||||||
Hertz Vehicle Financing LLC Series 2019-1A Class A 144A | 3.71 | 3-25-2023 | 1,191,344 | 1,191,710 | ||||||||||||
Hertz Vehicle Financing LLC Series 2019-1A Class B 144A | 4.10 | 3-25-2023 | 1,500,000 | 1,499,440 | ||||||||||||
Home Equity Asset Trust Series 2003-6 Class M1 (1 Month LIBOR +1.05%) ± | 1.23 | 2-25-2034 | 746,429 | 732,075 | ||||||||||||
Jimmy John’s Funding LLC Series 2017-1A Class A2I 144A | 3.61 | 7-30-2047 | 1,212,500 | 1,229,196 | ||||||||||||
MMAF Equipment Finance LLC Series 2019-A Class A2 144A | 2.84 | 1-10-2022 | 860,105 | 867,051 | ||||||||||||
Santander Drive Auto Receivables Trust Series 2017-1 Class D | 3.17 | 4-17-2023 | 2,186,303 | 2,208,105 | ||||||||||||
SLC Student Loan Trust Series 2006-2 Class A5 (3 Month LIBOR +0.10%) ± | 0.41 | 9-15-2026 | 453,235 | 453,019 | ||||||||||||
SLM Student Loan Trust Series 2011-2 Class A1 (1 Month LIBOR +0.60%) ± | 0.78 | 11-25-2027 | 129,501 | 129,325 | ||||||||||||
SLM Student Loan Trust Series 2012-3 Class A (1 Month LIBOR +0.65%) ± | 0.83 | 12-27-2038 | 1,651,321 | 1,624,652 | ||||||||||||
SLM Student Loan Trust Series 2013-1 Class A3 (1 Month LIBOR +0.55%) ± | 0.73 | 5-26-2055 | 836,475 | 823,380 | ||||||||||||
SLM Student Loan Trust Series 2014-A Class B 144A | 3.50 | 11-15-2044 | 2,500,000 | 2,538,478 | ||||||||||||
SoFi Professional Loan Program LLC Series 2016- A Class A1 (1 Month LIBOR +1.75%) 144A± | 1.93 | 8-25-2036 | 1,252,066 | 1,258,312 | ||||||||||||
Student Loan Consolidation Center Series 2011-1 Class A (1 Month LIBOR +1.22%) 144A± | 1.40 | 10-25-2027 | 881,414 | 884,967 | ||||||||||||
Tesla Auto Lease Trust Series 2018-B Class A 144A | 3.71 | 8-20-2021 | 536,268 | 542,186 | ||||||||||||
Towd Point Asset Funding LLC Series 2019-HE1 Class A1 (1 Month LIBOR +0.90%) 144A± | 1.08 | 4-25-2048 | 958,324 | 951,378 | ||||||||||||
Towd Point Asset Trust Series 2018-SL1 Class A (1 Month LIBOR +0.60%) 144A± | 0.78 | 1-25-2046 | 1,539,846 | 1,511,843 | ||||||||||||
Volvo Financial Equipment LLC Series 2018-AA Class A (1 Month LIBOR +0.52%) 144A± | 0.68 | 7-17-2023 | 2,240,000 | 2,232,995 | ||||||||||||
Westlake Automobile Receivables Trust Series 2019-2A Class A2A 144A | 2.57 | 2-15-2023 | 2,014,670 | 2,030,023 | ||||||||||||
Wheels SPV LLC Series 2018-1A Class A2 144A | 3.06 | 4-20-2027 | 316,530 | 318,496 | ||||||||||||
World Omni Automobile Lease Southeast Series 2019-A Class A4 | 3.01 | 7-15-2024 | 1,710,000 | 1,758,084 | ||||||||||||
Total Asset-Backed Securities (Cost $42,795,503) |
| 42,878,033 | ||||||||||||||
|
| |||||||||||||||
Corporate Bonds and Notes: 32.83% |
| |||||||||||||||
Communication Services: 1.79% |
| |||||||||||||||
Diversified Telecommunication Services: 0.84% | ||||||||||||||||
CyrusOne LP | 2.90 | 11-15-2024 | 630,000 | 673,810 | ||||||||||||
Level 3 Financing Incorporated | 5.13 | 5-1-2023 | 1,000,000 | 1,000,000 | ||||||||||||
T-Mobile USA Incorporated 144A | 3.50 | 4-15-2025 | 2,000,000 | 2,209,600 | ||||||||||||
3,883,410 | ||||||||||||||||
|
| |||||||||||||||
Media: 0.83% | ||||||||||||||||
Interpublic Group Companies | 3.75 | 2-15-2023 | 2,025,000 | 2,161,877 | ||||||||||||
NBCUniversal Enterprise Incorporated 144A | 5.25 | 12-31-2049 | 1,655,000 | 1,679,825 | ||||||||||||
3,841,702 | ||||||||||||||||
|
| |||||||||||||||
Wireless Telecommunication Services: 0.12% | ||||||||||||||||
Sprint Spectrum Company LLC 144A | 3.36 | 3-20-2023 | 550,000 | 556,435 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Short-Term Bond Plus Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Consumer Discretionary: 3.62% |
| |||||||||||||||
Automobiles: 1.50% | ||||||||||||||||
Ford Motor Company | 8.50 | % | 4-21-2023 | $ | 845,000 | $ | 934,067 | |||||||||
Ford Motor Company | 9.00 | 4-22-2025 | 1,730,000 | 2,024,558 | ||||||||||||
General Motors Company | 6.13 | 10-1-2025 | 2,150,000 | 2,523,068 | ||||||||||||
Volkswagen Group of America Company 144A | 3.35 | 5-13-2025 | 1,325,000 | 1,455,812 | ||||||||||||
6,937,505 | ||||||||||||||||
|
| |||||||||||||||
Household Durables: 0.80% | ||||||||||||||||
D.R. Horton Incorporated | 4.75 | 2-15-2023 | 2,000,000 | 2,158,847 | ||||||||||||
Lennar Corporation | 4.75 | 11-15-2022 | 251,000 | 263,550 | ||||||||||||
Lennar Corporation | 6.25 | 12-15-2021 | 1,250,000 | 1,294,625 | ||||||||||||
3,717,022 | ||||||||||||||||
|
| |||||||||||||||
Multiline Retail: 0.52% | ||||||||||||||||
Macy’s Retail Holdings Incorporated | 3.45 | 1-15-2021 | 2,405,000 | 2,392,975 | ||||||||||||
|
| |||||||||||||||
Specialty Retail: 0.28% | ||||||||||||||||
Group 1 Automotive Incorporated | 5.00 | 6-1-2022 | 1,300,000 | 1,300,000 | ||||||||||||
|
| |||||||||||||||
Textiles, Apparel & Luxury Goods: 0.52% | ||||||||||||||||
Ralph Lauren Corporation | 1.70 | 6-15-2022 | 1,380,000 | 1,407,286 | ||||||||||||
Tapestry Incorporated | 3.00 | 7-15-2022 | 1,005,000 | 1,010,698 | ||||||||||||
2,417,984 | ||||||||||||||||
|
| |||||||||||||||
Consumer Staples: 2.21% |
| |||||||||||||||
Food & Staples Retailing: 0.46% | ||||||||||||||||
Cargill Incorporated 144A | 1.38 | 7-23-2023 | 2,100,000 | 2,149,686 | ||||||||||||
|
| |||||||||||||||
Food Products: 0.46% | ||||||||||||||||
Land O’Lakes Incorporated 144A | 6.00 | 11-15-2022 | 2,000,000 | 2,130,000 | ||||||||||||
|
| |||||||||||||||
Tobacco: 1.29% | ||||||||||||||||
Altria Group Incorporated | 1.70 | 6-15-2025 | 1,515,000 | 1,896,966 | ||||||||||||
BAT Capital Corporation | 2.79 | 9-6-2024 | 2,350,000 | 2,498,215 | ||||||||||||
Philip Morris International Incorporated | 1.50 | 5-1-2025 | 1,535,000 | 1,588,072 | ||||||||||||
5,983,253 | ||||||||||||||||
|
| |||||||||||||||
Energy: 3.51% |
| |||||||||||||||
Oil, Gas & Consumable Fuels: 3.51% | ||||||||||||||||
Baker Hughes LLC | 2.77 | 12-15-2022 | 1,360,000 | 1,423,380 | ||||||||||||
Chevron Corporation | 1.55 | 5-11-2025 | 2,000,000 | 2,080,700 | ||||||||||||
Energy Transfer Partners LP | 5.20 | 2-1-2022 | 2,060,000 | 2,146,396 | ||||||||||||
EQT Corporation | 3.00 | 10-1-2022 | 1,155,000 | 1,141,983 | ||||||||||||
Marathon Petroleum Corporation | 4.70 | 5-1-2025 | 2,500,000 | 2,853,786 | ||||||||||||
Midwest Connector Capital Company 144A | 3.63 | 4-1-2022 | 680,000 | 684,725 | ||||||||||||
ONEOK Incorporated | 5.85 | 1-15-2026 | 1,885,000 | 2,172,472 | ||||||||||||
Phillips 66 Company | 3.85 | 4-9-2025 | 2,000,000 | 2,235,986 | ||||||||||||
Western Gas Partners LP | 5.38 | 6-1-2021 | 1,500,000 | 1,515,000 | ||||||||||||
16,254,428 | ||||||||||||||||
|
| |||||||||||||||
Financials: 12.45% |
| |||||||||||||||
Banks: 3.01% | ||||||||||||||||
Bank of America NA (3 Month LIBOR +0.65%) ± | 3.34 | 1-25-2023 | 4,000,000 | 4,164,516 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term Bond Plus Fund | 13
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Banks (continued) | ||||||||||||||||
Citibank NA (3 Month LIBOR +0.60%) ± | 2.84 | % | 5-20-2022 | $ | 2,000,000 | $ | 2,034,963 | |||||||||
Credit Suisse NY | 2.95 | 4-9-2025 | 2,250,000 | 2,471,667 | ||||||||||||
JPMorgan Chase & Company (U.S. SOFR +1.46%) ± | 1.51 | 6-1-2024 | 3,000,000 | 3,067,936 | ||||||||||||
JPMorgan Chase & Company (3 Month LIBOR +0.70%) ± | 3.21 | 4-1-2023 | 1,080,000 | 1,126,316 | ||||||||||||
Synchrony Bank | 3.65 | 5-24-2021 | 1,075,000 | 1,091,228 | ||||||||||||
13,956,626 | ||||||||||||||||
|
| |||||||||||||||
Capital Markets: 1.64% | ||||||||||||||||
Ameriprise Financial Services Incorporated | 3.00 | 4-2-2025 | 2,000,000 | 2,189,507 | ||||||||||||
Goldman Sachs Group Incorporated (3 Month LIBOR +0.82%) ± | 2.88 | 10-31-2022 | 2,900,000 | 2,975,643 | ||||||||||||
Morgan Stanley (U.S. SOFR +1.99%) ± | 2.19 | 4-28-2026 | 2,305,000 | 2,424,741 | ||||||||||||
7,589,891 | ||||||||||||||||
|
| |||||||||||||||
Consumer Finance: 3.64% | ||||||||||||||||
BMW US Capital LLC 144A | 3.90 | 4-9-2025 | 1,000,000 | 1,124,657 | ||||||||||||
Bunge Limited Finance Corporation | 1.63 | 8-17-2025 | 1,295,000 | 1,302,195 | ||||||||||||
Daimler Finance North America LLC 144A | 3.00 | 2-22-2021 | 2,850,000 | 2,883,523 | ||||||||||||
General Motors Financial Company Incorporated | 1.70 | 8-18-2023 | 1,000,000 | 1,005,924 | ||||||||||||
Harley Davidson Financial Services Company 144A | 3.35 | 6-8-2025 | 1,395,000 | 1,480,390 | ||||||||||||
Hyundai Capital America Company 144A | 2.38 | 2-10-2023 | 1,695,000 | 1,739,527 | ||||||||||||
Nissan Motor Acceptance Corporation 144A | 3.88 | 9-21-2023 | 2,030,000 | 2,116,679 | ||||||||||||
Toyota Motor Credit Corporation | 3.00 | 4-1-2025 | 2,000,000 | 2,200,331 | ||||||||||||
Volkswagen Group of America Finance LLC 144A | 2.70 | 9-26-2022 | 1,600,000 | 1,663,312 | ||||||||||||
Western Union Company | 2.85 | 1-10-2025 | 1,285,000 | 1,357,257 | ||||||||||||
16,873,795 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 1.17% | ||||||||||||||||
National Securities Clearing Corporation 144A | 1.50 | 4-23-2025 | 3,750,000 | 3,888,001 | ||||||||||||
WEA Finance LLC 144A | 3.25 | 10-5-2020 | 1,540,000 | 1,541,142 | ||||||||||||
5,429,143 | ||||||||||||||||
|
| |||||||||||||||
Insurance: 2.66% | ||||||||||||||||
American International Group Incorporated | 2.50 | 6-30-2025 | 2,045,000 | 2,186,742 | ||||||||||||
Athene Global Funding 144A | 2.50 | 1-14-2025 | 2,705,000 | 2,792,497 | ||||||||||||
Jackson National Life Global Company 144A | 2.50 | 6-27-2022 | 5,000,000 | 5,180,392 | ||||||||||||
OneBeacon US Holdings Incorporated | 4.60 | 11-9-2022 | 2,075,000 | 2,182,808 | ||||||||||||
12,342,439 | ||||||||||||||||
|
| |||||||||||||||
Mortgage REITs: 0.33% | ||||||||||||||||
Starwood Property Trust Incorporated | 5.00 | 12-15-2021 | 1,500,000 | 1,522,500 | ||||||||||||
|
| |||||||||||||||
Health Care: 0.85% |
| |||||||||||||||
Health Care Providers & Services: 0.85% | ||||||||||||||||
CVS Health Corporation | 2.63 | 8-15-2024 | 1,520,000 | 1,630,403 | ||||||||||||
Dignity Health | 3.13 | 11-1-2022 | 2,255,000 | 2,326,729 | ||||||||||||
3,957,132 | ||||||||||||||||
|
| |||||||||||||||
Industrials: 2.92% |
| |||||||||||||||
Aerospace & Defense: 1.20% | ||||||||||||||||
Spirit AeroSystems Incorporated (3 Month LIBOR +0.80%) ± | 1.11 | 6-15-2021 | 2,500,000 | 2,359,615 | ||||||||||||
The Boeing Company | 4.51 | 5-1-2023 | 2,000,000 | 2,112,106 | ||||||||||||
The Boeing Company | 4.88 | 5-1-2025 | 1,000,000 | 1,087,782 | ||||||||||||
5,559,503 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Short-Term Bond Plus Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Airlines: 0.22% | ||||||||||||||||
Delta Air Lines Incorporated | 3.40 | % | 4-19-2021 | $ | 1,000,000 | $ | 1,002,329 | |||||||||
|
| |||||||||||||||
Industrial Conglomerates: 0.52% | ||||||||||||||||
Roper Technologies Incorporated %% | 1.00 | 9-15-2025 | 2,400,000 | 2,415,270 | ||||||||||||
|
| |||||||||||||||
Machinery: 0.60% | ||||||||||||||||
CNH Industrial Capital LLC | 1.95 | 7-2-2023 | 2,750,000 | 2,792,432 | ||||||||||||
|
| |||||||||||||||
Professional Services: 0.23% | ||||||||||||||||
Equifax Incorporated | 2.60 | 12-15-2025 | 1,000,000 | 1,073,561 | ||||||||||||
|
| |||||||||||||||
Trading Companies & Distributors: 0.15% | ||||||||||||||||
Aircastle Limited 144A | 5.25 | 8-11-2025 | 700,000 | 683,008 | ||||||||||||
|
| |||||||||||||||
Information Technology: 0.96% |
| |||||||||||||||
Semiconductors & Semiconductor Equipment: 0.34% | ||||||||||||||||
Microchip Technology Incorporated 144A | 2.67 | 9-1-2023 | 1,525,000 | 1,578,496 | ||||||||||||
|
| |||||||||||||||
Technology Hardware, Storage & Peripherals: 0.62% | ||||||||||||||||
NetApp Incorporated | 1.88 | 6-22-2025 | 1,640,000 | 1,705,856 | ||||||||||||
The Dell International LLC / EMC Corporation 144A | 5.85 | 7-15-2025 | 1,000,000 | 1,173,111 | ||||||||||||
2,878,967 | ||||||||||||||||
|
| |||||||||||||||
Materials: 0.93% |
| |||||||||||||||
Chemicals: 0.48% | ||||||||||||||||
DuPont de Nemours Incorporated | 4.21 | 11-15-2023 | 2,010,000 | 2,220,669 | ||||||||||||
|
| |||||||||||||||
Paper & Forest Products: 0.45% | ||||||||||||||||
Georgia Pacific LLC 144A | 1.75 | 9-30-2025 | 2,000,000 | 2,090,542 | ||||||||||||
|
| |||||||||||||||
Real Estate: 2.16% |
| |||||||||||||||
Equity REITs: 2.16% | ||||||||||||||||
Omega Healthcare Investors Incorporated | 4.95 | 4-1-2024 | 2,210,000 | 2,366,477 | ||||||||||||
Sabra Health Care LP / Sabra Capital Corporation | 4.80 | 6-1-2024 | 2,500,000 | 2,608,193 | ||||||||||||
Service Properties Trust | 4.50 | 6-15-2023 | 1,500,000 | 1,485,000 | ||||||||||||
Tanger Properties LP | 3.88 | 12-1-2023 | 1,485,000 | 1,478,852 | ||||||||||||
Vornado Realty Trust | 3.50 | 1-15-2025 | 2,000,000 | 2,076,266 | ||||||||||||
10,014,788 | ||||||||||||||||
|
| |||||||||||||||
Utilities: 1.43% |
| |||||||||||||||
Electric Utilities: 0.67% | ||||||||||||||||
Edison International | 4.95 | 4-15-2025 | 1,000,000 | 1,099,911 | ||||||||||||
NV Energy Incorporated | 6.25 | 11-15-2020 | 2,000,000 | 2,024,260 | ||||||||||||
3,124,171 | ||||||||||||||||
|
| |||||||||||||||
Independent Power & Renewable Electricity Producers: 0.34% | ||||||||||||||||
TerraForm Power Operating LLC 144A | 4.25 | 1-31-2023 | 1,500,000 | 1,552,800 | ||||||||||||
|
| |||||||||||||||
Multi-Utilities: 0.42% | ||||||||||||||||
DTE Energy Company | 1.05 | 6-1-2025 | 500,000 | 502,494 | ||||||||||||
DTE Energy Company | 2.53 | 10-1-2024 | 1,360,000 | 1,448,567 | ||||||||||||
1,951,061 | ||||||||||||||||
|
| |||||||||||||||
Total Corporate Bonds and Notes (Cost $145,761,316) |
| 152,173,523 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term Bond Plus Fund | 15
Table of Contents
Portfolio of investments—August 31, 2020
Shares | Value | |||||||||||||||
Exchange-Traded Funds: 4.19% | ||||||||||||||||
Invesco BulletShares 2021 High Yield Corporate Bond ETF |
| 554,268 | $ | 12,798,041 | ||||||||||||
Invesco BulletShares 2022 High Yield Corporate Bond ETF |
| 288,000 | 6,615,360 | |||||||||||||
Total Exchange-Traded Funds (Cost $19,194,678) |
| 19,413,401 | ||||||||||||||
|
| |||||||||||||||
Interest rate | Maturity date | Principal | ||||||||||||||
Foreign Corporate Bonds and Notes: 0.13% |
| |||||||||||||||
Industrials: 0.13% | ||||||||||||||||
Electrical Equipment: 0.13% | ||||||||||||||||
Gamma Bidco SpA 144A | 6.25 | % | 7-15-2025 | EUR | 500,000 | 593,692 | ||||||||||
|
| |||||||||||||||
Total Foreign Corporate Bonds and Notes (Cost $590,075) |
| 593,692 | ||||||||||||||
|
| |||||||||||||||
Foreign Government Bonds: 0.26% | ||||||||||||||||
Hungary Government Bond | 1.50 | 8-23-2023 | HUF | 350,000,000 | 1,188,878 | |||||||||||
|
| |||||||||||||||
Total Foreign Government Bonds (Cost $1,175,191) |
| 1,188,878 | ||||||||||||||
|
| |||||||||||||||
Municipal Obligations: 1.54% |
| |||||||||||||||
Georgia: 0.23% |
| |||||||||||||||
Health Revenue: 0.23% | ||||||||||||||||
Georgia Medical Center Hospital Authority Taxable Refunding Bond | 4.88 | 8-1-2022 | $ | 1,000,000 | 1,068,810 | |||||||||||
|
| |||||||||||||||
Illinois: 0.13% |
| |||||||||||||||
Tax Revenue: 0.13% | ||||||||||||||||
Chicago IL Transit Authority Sales & Transfer Tax Receipts Bond Series B | 6.30 | 12-1-2021 | 600,000 | 622,644 | ||||||||||||
|
| |||||||||||||||
Indiana: 0.28% |
| |||||||||||||||
Education Revenue: 0.28% | ||||||||||||||||
Indiana Secondary Market for Education Loans Incorporated (1 Month LIBOR +0.80%) ± | 0.98 | 2-25-2044 | 1,278,640 | 1,275,878 | ||||||||||||
|
| |||||||||||||||
New Jersey: 0.43% |
| |||||||||||||||
Transportation Revenue: 0.43% | ||||||||||||||||
New Jersey Transportation Trust Fund Authority System Series B | 2.55 | 6-15-2023 | 2,000,000 | 2,017,960 | ||||||||||||
|
| |||||||||||||||
New York: 0.17% |
| |||||||||||||||
Transportation Revenue: 0.17% | ||||||||||||||||
New York Metropolitan Transportation Authority BAN | 4.00 | 2-1-2022 | 795,000 | 809,056 | ||||||||||||
|
| |||||||||||||||
Pennsylvania: 0.21% |
| |||||||||||||||
Miscellaneous Revenue: 0.21% | ||||||||||||||||
Philadelphia PA IDA Pension Funding Series B (Ambac Insured) ¤ | 0.00 | 4-15-2021 | 970,000 | 958,312 | ||||||||||||
|
| |||||||||||||||
Rhode Island: 0.09% |
| |||||||||||||||
Industrial Development Revenue: 0.09% |
| |||||||||||||||
Rhode Island EDA (AGM Insured) | 7.75 | 11-1-2020 | 400,000 | 403,328 | ||||||||||||
|
| |||||||||||||||
Total Municipal Obligations (Cost $7,031,153) |
| 7,155,988 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Short-Term Bond Plus Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Non-Agency Mortgage-Backed Securities: 25.02% | ||||||||||||||||
Angel Oak Mortgage Trust I LLC Series 2019-3 Class A1 144A±± | 2.93 | % | 5-25-2059 | $ | 604,231 | $ | 610,485 | |||||||||
Angel Oak Mortgage Trust I LLC Series 2020-4 Class A1 144A±± | 1.47 | 6-25-2065 | 1,955,002 | 1,958,628 | ||||||||||||
Bayview Opportunity Master Fund Trust Series 2017 Class RT5 144A±± | 3.50 | 5-28-2069 | 2,809,925 | 2,899,114 | ||||||||||||
Benefit Street Partners CLO Limited Series 2014-IVA Class A1RR (3 Month LIBOR +1.25%) 144A± | 1.52 | 1-20-2029 | 2,300,000 | 2,296,571 | ||||||||||||
BlueMountain CLO Limited Series 2012-2A Class AR2 (3 Month LIBOR | 1.30 | 11-20-2028 | 1,400,000 | 1,390,446 | ||||||||||||
Bunker Hill Loan Depositary Trust Series 2019-3 Class A1 144A | 2.72 | 11-25-2059 | 1,510,920 | 1,539,328 | ||||||||||||
Cascade Funding Mortgage Trust Series 2018- RM2 Class A 144A±± | 4.00 | 10-25-2068 | 429,194 | 445,690 | ||||||||||||
CCG Receivables Trust LLC Series 2018-1 Class A2 144A | 2.50 | 6-16-2025 | 271,620 | 272,685 | ||||||||||||
CD Commercial Mortgage Trust Series 2017-CD3 Class A1 | 1.97 | 2-10-2050 | 522,081 | 524,064 | ||||||||||||
CGDBB Commercial Mortgage Trust Series 2017-BIOC Class A (1 Month LIBOR +0.79%) 144A± | 0.95 | 7-15-2032 | 2,603,599 | 2,597,082 | ||||||||||||
Citigroup Commercial Mortgage Trust Series 2016-P5 Class A2 | 2.40 | 10-10-2049 | 128,000 | 128,437 | ||||||||||||
Citigroup Commercial Mortgage Trust Series 2017-MDRB Class A (1 Month LIBOR +1.10%) 144A± | 1.26 | 7-15-2030 | 805,175 | 767,077 | ||||||||||||
Citigroup Commercial Mortgage Trust Series 2019-LMC1 Class A3 144A±± | 3.03 | 7-25-2049 | 2,042,998 | 2,043,145 | ||||||||||||
Colt Funding LLC Series 2018-3 Class A1 144A±± | 3.69 | 10-26-2048 | 523,695 | 524,165 | ||||||||||||
Colt Funding LLC Series 2019-1 Class A1 144A±± | 3.71 | 3-25-2049 | 1,045,671 | 1,058,513 | ||||||||||||
Colt Funding LLC Series 2020-2 Class A1 144A±± | 1.85 | 3-25-2065 | 2,646,809 | 2,656,845 | ||||||||||||
Commercial Mortgage Trust Series 2012-CR1 Class ASB | 3.05 | 5-15-2045 | 1,002,499 | 1,015,945 | ||||||||||||
Commercial Mortgage Trust Series 2012-CR4 Class A | 3.25 | 10-15-2045 | 2,000,000 | 2,003,524 | ||||||||||||
Commercial Mortgage Trust Series 2014-CR14 Class B ±± | 4.77 | 2-10-2047 | 680,000 | 740,138 | ||||||||||||
Commercial Mortgage Trust Series 2014-LC17 Class A2 | 3.16 | 10-10-2047 | 6,200 | 6,196 | ||||||||||||
Commercial Mortgage Trust Series 2015-DC1 Class A3 | 3.22 | 2-10-2048 | 1,500,000 | 1,530,376 | ||||||||||||
ContiMortgage Home Equity Trust Series 1996-2 Class IO ±±(c) | 0.00 | 7-15-2027 | 547,184 | 8,261 | ||||||||||||
Countrywide Home Loans Mortgage Pass-Through Trust Series 2001-HYB1 Class 2A1 ±± | 3.60 | 6-19-2031 | 90,297 | 88,856 | ||||||||||||
Credit Suisse Mortgage Trust Series 2019-SKLZ Class A (1 Month LIBOR +1.25%) 144A± | 1.41 | 1-15-2034 | 1,400,000 | 1,350,553 | ||||||||||||
Credit Suisse Mortgage Trust Series 2020-AFC1 Class A3 144A±± | 2.51 | 2-25-2050 | 2,437,077 | 2,459,514 | ||||||||||||
Crown Point Limited Series 2018-6A Class A1 (3 Month LIBOR +1.17%) 144A± | 1.44 | 10-20-2028 | 2,308,530 | 2,298,373 | ||||||||||||
CSAIL Commercial Mortgage Trust Series 2016-C5 Class A4 | 3.49 | 11-15-2048 | 2,430,000 | 2,556,434 | ||||||||||||
CSAIL Commercial Mortgage Trust Series 2019-C15 Class A1 | 2.99 | 3-15-2052 | 341,259 | 347,600 | ||||||||||||
DBWF Mortgage Trust Series 2018-GLKS (1 Month LIBOR +1.03%) 144A± | 1.19 | 12-19-2030 | 550,000 | 530,891 | ||||||||||||
Deephaven Residential Mortgage Series 2018-2A Class A1 144A±± | 3.48 | 4-25-2058 | 2,045,642 | 2,078,917 | ||||||||||||
Deephaven Residential Mortgage Series 2019-4A Class A1 144A±± | 2.79 | 10-25-2059 | 1,044,334 | 1,059,027 | ||||||||||||
Deutsche Bank UBS Securities Mortgage Trust Series 2011-LC2A Class A4 144A | 4.54 | 7-10-2044 | 640,235 | 648,463 | ||||||||||||
EquiFirst Mortgage Loan Trust Series 2003-2 Class 3A3 (1 Month LIBOR +1.13%) ± | 1.29 | 9-25-2033 | 233,383 | 228,047 | ||||||||||||
FWD Securitization Trust Class 2020-INV1 Class A3 144A±± | 2.44 | 1-25-2050 | 2,543,737 | 2,527,462 | ||||||||||||
Galton Funding Mortgage Trust Series 2020-H1 Class A1 144A ±± | 2.31 | 1-25-2060 | 1,747,161 | 1,772,458 | ||||||||||||
GCAT Series 2019-NQM1 Class A1 144A | 2.99 | 2-25-2059 | 1,959,176 | 1,982,174 | ||||||||||||
GCAT Series 2019-NQM2 Class A1 144A | 2.86 | 9-25-2059 | 1,732,012 | 1,757,297 | ||||||||||||
Golden National Mortgage Loan Asset-Backed Certificates Series 1998-GN1 Class M2 | 1.00 | 2-25-2027 | 34,322 | 34,254 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2011-GC5 Class A3 | 3.82 | 8-10-2044 | 693,828 | 696,613 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2012-ALOH Class A 144A | 3.55 | 4-10-2034 | 2,414,000 | 2,434,268 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2013-G1 Class A2 144A ±± | 3.56 | 4-10-2031 | 530,140 | 522,820 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2014-GC22 Class A3 | 3.52 | 6-10-2047 | 2,934,697 | 2,966,645 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2016-GS3 Class A1 | 1.43 | 10-10-2049 | 296,367 | 296,393 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2019-PJ1 Class A6 144A ±± | 4.00 | 8-25-2049 | 102,371 | 102,604 | ||||||||||||
GSMPS Mortgage Loan Trust Series 1998-1 Class A 144A ±± | 8.00 | 9-19-2027 | 136,374 | 132,204 | ||||||||||||
Homeward Opportunities Fund I Trust Series 2019-1 Class A1 144A ±± | 3.45 | 1-25-2059 | 1,247,222 | 1,265,093 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term Bond Plus Fund | 17
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Non-Agency Mortgage-Backed Securities (continued) | ||||||||||||||||
Hospitality Mortgage Trust Series 2019 Class A (1 Month LIBOR +1.00%) 144A ± | 1.16 | % | 11-15-2036 | $ | 1,770,321 | $ | 1,693,490 | |||||||||
InTown Hotel Portfolio Trust Series 2018-STAY Class A (1 Month LIBOR | 0.86 | 1-15-2033 | 550,000 | 538,023 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2012-C8 Class A3 | 2.83 | 10-15-2045 | 2,272,322 | 2,340,425 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2013-LC11 Class A4 | 2.69 | 4-15-2046 | 1,608,504 | 1,666,336 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2018-PHH Class A (1 Month LIBOR +0.91%) 144A ± | 2.41 | 6-15-2035 | 566,915 | 533,390 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2019-MFP Class A (1 Month LIBOR +0.96%) 144A ± | 1.12 | 7-15-2036 | 2,500,000 | 2,434,373 | ||||||||||||
KKR Financial Holdings LLC (3 Month LIBOR +1.34%) 144A ± | 1.62 | 4-15-2029 | 2,250,000 | 2,245,858 | ||||||||||||
Lendmark Funding Trust Series 2018-1A Class A 144A | 3.81 | 12-21-2026 | 1,855,000 | 1,879,390 | ||||||||||||
Lendmark Funding Trust Series 2018-2A Class A 144A | 4.23 | 4-20-2027 | 160,000 | 161,666 | ||||||||||||
Lendmark Funding Trust Series 2019-2A Class A 144A | 2.78 | 4-20-2028 | 3,000,000 | 3,014,426 | ||||||||||||
LoanCore Limited Series 2018-CRE1 Class A (1 Month LIBOR +1.13%) 144A ± | 1.29 | 5-15-2028 | 1,788,944 | 1,778,972 | ||||||||||||
Marlette Funding Trust Series 2020-2A Class A 144A | 1.02 | 9-16-2030 | 2,000,000 | 2,002,935 | ||||||||||||
Master Mortgages Trust Series 2002-3 Class 4A1 ±± | 3.81 | 10-25-2032 | 1,002 | 978 | ||||||||||||
Mello Warehouse Securitization Series 2018-W1 Class A (1 Month LIBOR +0.85%) 144A ± | 1.03 | 11-25-2051 | 1,333,333 | 1,332,172 | ||||||||||||
Mello Warehouse Securitization Series 2019-1 Class A (1 Month LIBOR | 0.98 | 6-25-2052 | 2,240,000 | 2,241,530 | ||||||||||||
MF1 Limited Class 2020-Fl3 Class A (1 Month LIBOR +2.05%) 144A ± | 2.21 | 7-15-2035 | 1,395,000 | 1,400,461 | ||||||||||||
Morgan Stanley Capital I Trust Series 2016-C30 Class A1 | 1.39 | 9-15-2049 | 580,524 | 580,763 | ||||||||||||
New Residential Mortgage Loan Trust Series 2018-NQM1 Class A1 144A ±± | 3.99 | 11-25-2048 | 956,144 | 980,170 | ||||||||||||
New Residential Mortgage Loan Trust Series 2019-6A Class A1B 144A ±± | 3.50 | 9-25-2059 | 1,395,910 | 1,472,443 | ||||||||||||
Oaktree CLO Limited Series 15-1A Class A1R (3 Month LIBOR +0.87%) 144A ± | 1.14 | 10-20-2027 | 1,266,479 | 1,259,906 | ||||||||||||
Ocwen Master Advance Receivable Series 2020-T1 Class AT1 144A | 1.28 | 8-15-2052 | 2,930,000 | 2,935,026 | ||||||||||||
Ondeck Asset Securitization Trust LLC Series 2018-1A Class A 144A | 3.50 | 4-18-2022 | 581,684 | 578,439 | ||||||||||||
Palmer Square Loan Funding Limited Series 2018-4A Class A1 (3 Month LIBOR +0.90%) 144A ± | 1.18 | 11-15-2026 | 1,005,444 | 1,002,065 | ||||||||||||
ReadyCap Commercial Mortgage Trust Series 2019-5 Class A 144A | 3.78 | 2-25-2052 | 1,086,704 | 1,060,327 | ||||||||||||
Regatta II Funding LP Series 2013-2A Class A1R2 (3 Month LIBOR | 1.53 | 1-15-2029 | 2,925,000 | 2,917,392 | ||||||||||||
Salem Fields CLO Limited Series 2016-2A Class A (3 Month LIBOR | 1.39 | 10-25-2028 | 1,800,000 | 1,791,047 | ||||||||||||
Shackleton CLO Limited Series 2019-15A Class A (3 Month LIBOR | 1.53 | 1-15-2030 | 1,160,000 | 1,154,135 | ||||||||||||
Starwood Mortgage Residential Trust Series 2019-1 Class A1 144A ±± | 2.94 | 6-25-2049 | 1,183,877 | 1,202,827 | ||||||||||||
Starwood Mortgage Residential Trust Series 2020-1 Class A3 144A ±± | 2.56 | 2-25-2050 | 1,452,077 | 1,471,217 | ||||||||||||
TCW CLO 2017-1 Limited Series 2017-1A Class BR (3 Month LIBOR | 1.82 | 7-29-2029 | 2,255,000 | 2,226,208 | ||||||||||||
TCW CLO 2019-1 AMR Limited Series 2019-1A Class A (3 Month LIBOR | 1.35 | 2-15-2029 | 1,715,000 | 1,706,804 | ||||||||||||
Towd Point Mortgage Trust Series 2015-4 Class A2 144A ±± | 3.75 | 4-25-2055 | 1,245,000 | 1,294,220 | ||||||||||||
Towd Point Mortgage Trust Series 2017-1 Class A1 144A ±± | 2.75 | 10-25-2056 | 2,779,434 | 2,857,729 | ||||||||||||
Towd Point Mortgage Trust Series 2017-4 Class A1 144A ±± | 2.75 | 6-25-2057 | 971,943 | 1,013,407 | ||||||||||||
Towd Point Mortgage Trust Series 2019- MH1 Class A1 144A ±± | 3.00 | 11-25-2058 | 738,514 | 753,444 | ||||||||||||
Towd Point Mortgage Trust Series 2019-SJ3 Class A1 144A ±± | 3.00 | 11-25-2059 | 1,709,459 | 1,736,718 | ||||||||||||
UBS Commercial Mortgage Trust Series 2018-NYCH Class A (1 Month LIBOR +0.85%) 144A ± | 1.01 | 2-15-2032 | 1,680,000 | 1,619,994 | ||||||||||||
Vendee Mortgage Trust Series 2011-1 Class DA | 3.75 | 2-15-2035 | 370,933 | 376,335 | ||||||||||||
Verus Securitization Trust Series 2019-1 Class A1 144A ±± | 3.40 | 12-25-2059 | 1,400,842 | 1,433,258 |
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Short-Term Bond Plus Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Non-Agency Mortgage-Backed Securities (continued) | ||||||||||||||||
Wilshire Funding Corporation Series 1996-3 Class M2 ±± | 7.09 | % | 8-25-2032 | $ | 79,585 | $ | 81,588 | |||||||||
Wilshire Funding Corporation Series 1996-3 Class M3 ±± | 7.09 | 8-25-2032 | 70,661 | 67,855 | ||||||||||||
Wilshire Funding Corporation Series 1998-2 Class M1 (1 Week LIBOR +2.00%) ± | 2.09 | 12-28-2037 | 7,474 | 7,510 | ||||||||||||
Total Non-Agency Mortgage-Backed Securities (Cost $115,737,240) |
| 115,998,927 | ||||||||||||||
|
| |||||||||||||||
U.S. Treasury Securities: 4.14% | ||||||||||||||||
U.S. Treasury Note | 0.25 | 4-15-2023 | 17,000,000 | 17,045,820 | ||||||||||||
U.S. Treasury Note | 0.38 | 4-30-2025 | 2,125,000 | 2,136,704 | ||||||||||||
Total U.S. Treasury Securities (Cost $19,131,058) |
| 19,182,524 | ||||||||||||||
|
| |||||||||||||||
Yankee Corporate Bonds and Notes: 14.60% |
| |||||||||||||||
Communication Services: 0.53% |
| |||||||||||||||
Interactive Media & Services: 0.53% | ||||||||||||||||
Tencent Holdings Limited 144A | 3.28 | 4-11-2024 | 2,310,000 | 2,469,589 | ||||||||||||
|
| |||||||||||||||
Consumer Discretionary: 1.71% |
| |||||||||||||||
Auto Components: 0.55% | ||||||||||||||||
Toyota Industries Corporation 144A | 3.11 | 3-12-2022 | 2,460,000 | 2,538,793 | ||||||||||||
|
| |||||||||||||||
Automobiles: 0.58% | ||||||||||||||||
Conti-Gummi Finance BV | 1.13 | 9-25-2024 | 2,000,000 | 2,427,795 | ||||||||||||
Fiat Chrysler Automobiles NV | 5.25 | 4-15-2023 | 250,000 | 265,000 | ||||||||||||
2,692,795 | ||||||||||||||||
|
| |||||||||||||||
Household Durables: 0.58% | ||||||||||||||||
Panasonic Corporation 144A | 2.54 | 7-19-2022 | 2,600,000 | 2,682,699 | ||||||||||||
|
| |||||||||||||||
Energy: 1.55% |
| |||||||||||||||
Oil, Gas & Consumable Fuels: 1.55% | ||||||||||||||||
BP Capital Markets plc (5 Year Treasury Constant Maturity +4.04%) ±(s) | 4.38 | 6-22-2025 | 3,000,000 | 3,150,000 | ||||||||||||
Canadian National Resources | 2.05 | 7-15-2025 | 2,000,000 | 2,049,499 | ||||||||||||
Equinor ASA | 1.75 | 1-22-2026 | 1,880,000 | 1,969,284 | ||||||||||||
7,168,783 | ||||||||||||||||
|
| |||||||||||||||
Financials: 9.24% |
| |||||||||||||||
Banks: 7.82% | ||||||||||||||||
ANZ New Zealand International Company 144A | 1.90 | 2-13-2023 | 2,200,000 | 2,273,633 | ||||||||||||
Banco Bradesco 144A | 2.85 | 1-27-2023 | 745,000 | 757,583 | ||||||||||||
Banco de Bogota SA 144A | 5.38 | 2-19-2023 | 1,500,000 | 1,575,015 | ||||||||||||
Banco Internacional del Peru SAA Interbank 144A | 3.38 | 1-18-2023 | 1,305,000 | 1,347,413 | ||||||||||||
Banque Federative du Credit Mutuel SA 144A | 2.13 | 11-21-2022 | 3,135,000 | 3,242,361 | ||||||||||||
Central American Bank 144A | 2.00 | 5-6-2025 | 2,410,000 | 2,483,746 | ||||||||||||
Corporación Andina de Fomento | 2.13 | 9-27-2021 | 3,000,000 | 3,037,530 | ||||||||||||
Credicorp Limited 144A | 2.75 | 6-17-2025 | 3,000,000 | 3,063,750 | ||||||||||||
Danske Bank A/S 144A | 5.00 | 1-12-2022 | 1,405,000 | 1,481,097 | ||||||||||||
Global Bank Corporation 144A | 4.50 | 10-20-2021 | 470,000 | 482,291 | ||||||||||||
HSBC Holdings plc (U.S. SOFR +1.54%) ± | 1.65 | 4-18-2026 | 1,140,000 | 1,148,979 | ||||||||||||
Mitsubishi UFJ Financial Group Incorporated | 1.41 | 7-17-2025 | 2,000,000 | 2,034,838 | ||||||||||||
Mizuho Financial Group (3 Month LIBOR +0.98%) ± | 2.84 | 7-16-2025 | 1,000,000 | 1,068,299 | ||||||||||||
Nordea Bank AB 144A | 3.75 | 8-30-2023 | 2,000,000 | 2,165,410 | ||||||||||||
Royal Bank of Scotland Group plc (1 Year Treasury Constant Maturity +2.15%) ± | 2.36 | 5-22-2024 | 1,000,000 | 1,035,273 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term Bond Plus Fund | 19
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Banks (continued) | ||||||||||||||||
Santander UK Group Holdings plc (1 Year Treasury Constant Maturity +1.25%) ± | 1.53 | % | 8-21-2026 | $ | 2,000,000 | $ | 2,000,191 | |||||||||
Sumitomo Mitsui Financial Group (3 Month LIBOR +0.80%) ± | 1.07 | 10-16-2023 | 2,000,000 | 2,012,749 | ||||||||||||
Sumitomo Mitsui Financial Group | 2.70 | 7-16-2024 | 2,510,000 | 2,693,293 | ||||||||||||
UniCredit SpA 144A | 6.57 | 1-14-2022 | 2,220,000 | 2,360,119 | ||||||||||||
36,263,570 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 0.31% | ||||||||||||||||
NatWest Markets plc 144A | 2.38 | 5-21-2023 | 1,375,000 | 1,420,544 | ||||||||||||
|
| |||||||||||||||
Insurance: 0.60% | ||||||||||||||||
Sompo International Holdings Limited | 4.70 | 10-15-2022 | 2,628,000 | 2,784,813 | ||||||||||||
|
| |||||||||||||||
Thrifts & Mortgage Finance: 0.51% | ||||||||||||||||
Nationwide Building Society 144A | 1.00 | 8-28-2025 | 2,360,000 | 2,360,118 | ||||||||||||
|
| |||||||||||||||
Health Care: 0.13% | ||||||||||||||||
Pharmaceuticals: 0.13% | ||||||||||||||||
Perrigo Company plc | 4.00 | 11-15-2023 | 323,000 | 338,683 | ||||||||||||
Shire Acquisitions Investment Ireland Limited | 2.40 | 9-23-2021 | 267,000 | 272,369 | ||||||||||||
611,052 | ||||||||||||||||
|
| |||||||||||||||
Industrials: 0.39% |
| |||||||||||||||
Transportation Infrastructure: 0.39% | ||||||||||||||||
Asciano Finance Limited 144A | 4.63 | 9-23-2020 | 1,821,000 | 1,823,893 | ||||||||||||
|
| |||||||||||||||
Materials: 0.46% |
| |||||||||||||||
Chemicals: 0.46% | ||||||||||||||||
Syngenta Finance NV 144A | 4.44 | 4-24-2023 | 2,000,000 | 2,105,101 | ||||||||||||
|
| |||||||||||||||
Utilities: 0.59% |
| |||||||||||||||
Electric Utilities: 0.59% | ||||||||||||||||
Enel Finance International NV 144A | 4.25 | 9-14-2023 | 2,500,000 | 2,738,219 | ||||||||||||
|
| |||||||||||||||
Total Yankee Corporate Bonds and Notes (Cost $65,325,579) |
| 67,659,969 | ||||||||||||||
|
| |||||||||||||||
Yankee Government Bonds: 0.50% | ||||||||||||||||
United Mexican States | 3.90 | 4-27-2025 | 2,120,000 | 2,332,000 | ||||||||||||
|
| |||||||||||||||
Total Yankee Government Bonds (Cost $2,100,001) |
| 2,332,000 | ||||||||||||||
|
| |||||||||||||||
Yield | Shares | |||||||||||||||
Short-Term Investments: 5.66% |
| |||||||||||||||
Investment Companies: 4.19% | ||||||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u)## | 0.06 | 19,447,173 | 19,447,173 | |||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Short-Term Bond Plus Fund
Table of Contents
Portfolio of investments—August 31, 2020
Yield | Maturity date | Principal | Value | |||||||||||||
U.S. Treasury Securities: 1.47% |
| |||||||||||||||
U.S. Treasury Bill (z) | 0.15 | % | 10-22-2020 | $ | 6,800,000 | $ | 6,799,061 | |||||||||
|
| |||||||||||||||
Total Short-Term Investments (Cost $26,245,728) |
| 26,246,234 | ||||||||||||||
|
|
Total investments in securities (Cost $463,159,384) | 102.16 | % | 473,541,640 | |||||
Other assets and liabilities, net | (2.16 | ) | (10,013,080 | ) | ||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 463,528,560 | ||||
|
|
|
|
± | Variable rate investment. The rate shown is the rate in effect at period end. |
±± | The coupon of the security is adjusted based on the principal and interest payments received from the underlying pool of mortgages as well as the credit quality and the actual prepayment speed of the underlying mortgages. |
%% | The security is purchased on a when-issued basis. |
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. |
¤ | The security is issued in zero coupon form with no periodic interest payments. |
(c) | Investment in an interest-only security entitles holders to receive only the interest payments on the underlying mortgages. The principal amount shown is the notional amount of the underlying mortgages. The rate represents the coupon rate. |
(s) | Security is perpetual in nature and has no stated maturity date. The date shown reflects the next call date. |
(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. |
## | All or a portion of this security is segregated for when-issued securities. |
(z) | Zero coupon security. The rate represents the current yield to maturity. |
Abbreviations:
AGM | Assured Guaranty Municipal |
Ambac | Ambac Financial Group Incorporated |
BAN | Bond anticipation notes |
EDA | Economic Development Authority |
EUR | Euro |
FHLMC | Federal Home Loan Mortgage Corporation |
FNMA | Federal National Mortgage Association |
GNMA | Government National Mortgage Association |
GO | General obligation |
HUF | Hungarian forint |
IDA | Industrial Development Authority |
LIBOR | London Interbank Offered Rate |
SOFR | Secured Overnight Financing Rate |
Futures Contracts
Description | Number of contracts | Expiration date | Notional cost | Notional value | Unrealized gains | Unrealized losses | ||||||||||||||||||
Long | ||||||||||||||||||||||||
2-Year U.S. Treasury Notes | 613 | 12-31-2020 | $ | 135,396,216 | $ | 135,439,477 | $ | 43,261 | $ | 0 | ||||||||||||||
Short | ||||||||||||||||||||||||
Euro-BOBL Futures | (25) | 9-8-2020 | (4,026,023 | ) | (4,016,518 | ) | 9,505 | 0 | ||||||||||||||||
5-Year U.S. Treasury Notes | (402) | 12-31-2020 | (50,567,236 | ) | (50,664,563 | ) | 0 | (97,327 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||||
$ | 52,766 | $ | (97,327 | ) | ||||||||||||||||||||
|
|
|
|
Forward Foreign Currency Contracts
Currency to be received | Currency to be delivered | Counterparty | Settlement date | Unrealized gains | Unrealized losses | |||||||||
1,678,979 USD | 1,415,000 EUR | Morgan Stanley | 12-31-2020 | $ | 0 | $ | (14,097 | ) |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term Bond Plus Fund | 21
Table of Contents
Portfolio of investments—August 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:
Value, beginning of period | Purchases | Sales proceeds | 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 | $ | 1,285,463 | $ | 15,747,605 | $ | (17,033,028 | ) | $ | (40 | ) | $ | 0 | $ | 14,755 | # | $ | 0 | |||||||||||||||
Wells Fargo Government Money Market Fund Select Class | 9,958,213 | 332,036,294 | (322,547,334 | ) | 0 | 0 | 173,654 | 19,447,173 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
$ | (40 | ) | $ | 0 | $ | 188,409 | $ | 19,447,173 | 4.19 | % | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
* | 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.
22 | Wells Fargo Short-Term Bond Plus Fund
Table of Contents
Statement of assets and liabilities—August 31, 2020
Assets | ||||
Investments in unaffiliated securities, at value (cost $443,712,211) | $ | 454,094,467 | ||
Investments in affiliated securities, at value (cost $19,447,173) | 19,447,173 | |||
Cash | 1,582,641 | |||
Cash at broker segregated for futures contracts | 649,673 | |||
Receivable for investments sold | 3,401,207 | |||
Principal paydown receivable | 4,888 | |||
Receivable for Fund shares sold | 2,106,406 | |||
Receivable for dividend and interest | 2,151,757 | |||
Prepaid expenses and other assets | 49,597 | |||
|
| |||
Total assets | 483,487,809 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 1,582,641 | |||
Payable for when-issued transactions | 17,521,699 | |||
Payable for Fund shares redeemed | 574,439 | |||
Payable for daily variation margin on open futures contracts | 13,358 | |||
Unrealized losses on forward foreign currency contracts | 14,097 | |||
Management fee payable | 114,276 | |||
Dividends payable | 941 | |||
Administration fees payable | 41,340 | |||
Distribution fee payable | 3,551 | |||
Trustees’ fees and expenses payable | 3,446 | |||
Accrued expenses and other liabilities | 89,461 | |||
|
| |||
Total liabilities | 19,959,249 | |||
|
| |||
Total net assets | $ | 463,528,560 | ||
|
| |||
Net assets consist of | ||||
Paid-in capital | $ | 448,131,208 | ||
Total distributable earnings | 15,397,352 | |||
|
| |||
Total net assets | $ | 463,528,560 | ||
|
| |||
Computation of net asset value and offering price per share | ||||
Net assets – Class A | $ | 170,975,131 | ||
Shares outstanding – Class A1 | 18,816,843 | |||
Net asset value per share – Class A | $9.09 | |||
Maximum offering price per share – Class A2 | $9.28 | |||
Net assets – Class C | $ | 5,772,661 | ||
Shares outstanding – Class C1 | 636,200 | |||
Net asset value per share – Class C | $9.07 | |||
Net assets – Class R6 | $ | 35,301,242 | ||
Shares outstanding – Class R61 | 3,886,511 | |||
Net asset value per share – Class R6 | $9.08 | |||
Net assets – Institutional Class | $ | 251,479,526 | ||
Shares outstanding – Institutional Class1 | 27,661,025 | |||
Net asset value per share – Institutional Class | $9.09 |
1 | The Fund has an unlimited number of authorized shares. |
2 | Maximum offering price is computed as 100/98 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 Short-Term Bond Plus Fund | 23
Table of Contents
Statement of operations—year ended August 31, 2020
Investment income | ||||
Interest | $ | 11,979,561 | ||
Dividends | 266,613 | |||
Income from affiliated securities | 179,882 | |||
|
| |||
Total investment income | 12,426,056 | |||
|
| |||
Expenses | ||||
Management fee | 1,544,529 | |||
Administration fees | ||||
Class A | 259,100 | |||
Class C | 9,208 | |||
Class R6 | 9,066 | |||
Institutional Class | 194,704 | |||
Shareholder servicing fees |
| |||
Class A | 404,748 | |||
Class C | 14,357 | |||
Distribution fee |
| |||
Class C | 43,064 | |||
Custody and accounting fees | 38,921 | |||
Professional fees | 53,840 | |||
Registration fees | 68,496 | |||
Shareholder report expenses | 56,002 | |||
Trustees’ fees and expenses | 21,326 | |||
Other fees and expenses | 11,859 | |||
|
| |||
Total expenses | 2,729,220 | |||
Less: Fee waivers and/or expense reimbursements |
| |||
Fund-level | (162,497 | ) | ||
Class A | (105,131 | ) | ||
Class C | (3,315 | ) | ||
|
| |||
Net expenses | 2,458,277 | |||
|
| |||
Net investment income | 9,967,779 | |||
|
| |||
Realized and unrealized gains (losses) on investments | ||||
Net realized gains (losses) on |
| |||
Unaffiliated securities | 4,685,684 | |||
Affiliated securities | (40 | ) | ||
Futures contracts | 2,284,119 | |||
|
| |||
Net realized gains on investments | 6,969,763 | |||
|
| |||
Net change in unrealized gains (losses) on |
| |||
Unaffiliated securities | 4,991,689 | |||
Futures contracts | (275,715 | ) | ||
Forward foreign currency contracts | (14,097 | ) | ||
|
| |||
Net change in unrealized gains (losses) on investments | 4,701,877 | |||
|
| |||
Net realized and unrealized gains (losses) on investments | 11,671,640 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 21,639,419 | ||
|
|
The accompanying notes are an integral part of these financial statements.
24 | Wells Fargo Short-Term Bond Plus Fund
Table of Contents
Statement of changes in net assets
Year ended August 31, 2020 | Year ended August 31, 2019 | |||||||||||||||
Operations |
| |||||||||||||||
Net investment income | $ | 9,967,779 | $ | 10,469,332 | ||||||||||||
Net realized gains on investments | 6,969,763 | 988,172 | ||||||||||||||
Net change in unrealized gains (losses) on investments | 4,701,877 | 8,268,897 | ||||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from operations | 21,639,419 | 19,726,401 | ||||||||||||||
|
| |||||||||||||||
Distributions to shareholders from net investment income and net realized gains | ||||||||||||||||
Class A | (3,342,219 | ) | (3,992,982 | ) | ||||||||||||
Class C | (77,827 | ) | (120,972 | ) | ||||||||||||
Class R6 | (712,785 | ) | (713,351 | ) | ||||||||||||
Institutional Class | (5,649,805 | ) | (5,643,042 | ) | ||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | (9,782,636 | ) | (10,470,347 | ) | ||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold | ||||||||||||||||
Class A | 3,043,211 | 27,155,906 | 2,223,647 | 19,328,602 | ||||||||||||
Class C | 316,697 | 2,810,473 | 271,321 | 2,363,056 | ||||||||||||
Class R6 | 2,340,627 | 20,875,367 | 5,013,680 | 43,272,366 | ||||||||||||
Institutional Class | 18,043,261 | 160,187,200 | 10,058,620 | 87,525,507 | ||||||||||||
|
| |||||||||||||||
211,028,946 | 152,489,531 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions |
| |||||||||||||||
Class A | 355,241 | 3,151,367 | 431,307 | 3,760,725 | ||||||||||||
Class C | 8,099 | 71,752 | 11,990 | 104,366 | ||||||||||||
Class R6 | 392 | 3,471 | 421 | 3,677 | ||||||||||||
Institutional Class | 458,701 | 4,071,268 | 465,911 | 4,065,263 | ||||||||||||
|
| |||||||||||||||
7,297,858 | 7,934,031 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed |
| |||||||||||||||
Class A | (3,856,219 | ) | (34,055,224 | ) | (4,443,303 | ) | (38,566,762 | ) | ||||||||
Class C | (498,113 | ) | (4,403,080 | ) | (467,871 | ) | (4,067,578 | ) | ||||||||
Class R6 | (1,917,157 | ) | (16,957,171 | ) | (1,846,341 | ) | (16,085,357 | ) | ||||||||
Institutional Class | (16,460,491 | ) | (145,833,125 | ) | (11,098,501 | ) | (96,341,169 | ) | ||||||||
|
| |||||||||||||||
(201,248,600 | ) | (155,060,866 | ) | |||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from capital share transactions | 17,078,204 | 5,362,696 | ||||||||||||||
|
| |||||||||||||||
Total increase in net assets | 28,934,987 | 14,618,750 | ||||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 434,593,573 | 419,974,823 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 463,528,560 | $ | 434,593,573 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term Bond Plus Fund | 25
Table of Contents
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.84 | $8.65 | $8.77 | $8.78 | $8.77 | |||||||||||||||
Net investment income | 0.19 | 0.20 | 0.15 | 0.12 | 0.11 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.24 | 0.19 | (0.12 | ) | (0.01 | ) | 0.04 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.43 | 0.39 | 0.03 | 0.11 | 0.15 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.18 | ) | (0.20 | ) | (0.15 | ) | (0.12 | ) | (0.11 | ) | ||||||||||
Net realized gains | 0.00 | 0.00 | 0.00 | 0.00 | (0.03 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.18 | ) | (0.20 | ) | (0.15 | ) | (0.12 | ) | (0.14 | ) | ||||||||||
Net asset value, end of period | $9.09 | $8.84 | $8.65 | $8.77 | $8.78 | |||||||||||||||
Total return1 | 4.96 | % | 4.60 | % | 0.31 | % | 1.25 | % | 1.77 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.82 | % | 0.82 | % | 0.82 | % | 0.81 | % | 0.81 | % | ||||||||||
Net expenses | 0.71 | % | 0.72 | % | 0.72 | % | 0.72 | % | 0.72 | % | ||||||||||
Net investment income | 2.10 | % | 2.33 | % | 1.68 | % | 1.35 | % | 1.29 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 88 | % | 43 | % | 43 | % | 50 | % | 59 | % | ||||||||||
Net assets, end of period (000s omitted) | $170,975 | $170,345 | $182,179 | $225,797 | $278,802 |
1 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
26 | Wells Fargo Short-Term Bond Plus Fund
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Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.83 | $8.64 | $8.76 | $8.77 | $8.76 | |||||||||||||||
Net investment income | 0.12 | 0.14 | 0.08 | 0.05 | 0.05 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.24 | 0.19 | (0.12 | ) | (0.01 | ) | 0.04 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.36 | 0.33 | (0.04 | ) | 0.04 | 0.09 | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.12 | ) | (0.14 | ) | (0.08 | ) | (0.05 | ) | (0.05 | ) | ||||||||||
Net realized gains | 0.00 | 0.00 | 0.00 | 0.00 | (0.03 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.12 | ) | (0.14 | ) | (0.08 | ) | (0.05 | ) | (0.08 | ) | ||||||||||
Net asset value, end of period | $9.07 | $8.83 | $8.64 | $8.76 | $8.77 | |||||||||||||||
Total return1 | 4.10 | % | 3.82 | % | (0.44 | )% | 0.49 | % | 1.01 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 1.56 | % | 1.57 | % | 1.57 | % | 1.56 | % | 1.56 | % | ||||||||||
Net expenses | 1.47 | % | 1.47 | % | 1.47 | % | 1.47 | % | 1.47 | % | ||||||||||
Net investment income | 1.36 | % | 1.57 | % | 0.93 | % | 0.61 | % | 0.53 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 88 | % | 43 | % | 43 | % | 50 | % | 59 | % | ||||||||||
Net assets, end of period (000s omitted) | $5,773 | $7,146 | $8,588 | $11,361 | $14,204 |
1 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term Bond Plus Fund | 27
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||
CLASS R6 | 2020 | 2019 | 20181 | |||||||||
Net asset value, beginning of period | $8.83 | $8.66 | $8.64 | |||||||||
Net investment income | 0.21 | 0.23 | 0.02 | 2 | ||||||||
Net realized and unrealized gains (losses) on investments | 0.25 | 0.17 | 0.02 | |||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 0.46 | 0.40 | 0.04 | |||||||||
Distributions to shareholders from | ||||||||||||
Net investment income | (0.21 | ) | (0.23 | ) | (0.02 | ) | ||||||
Net asset value, end of period | $9.08 | $8.83 | $8.66 | |||||||||
Total return2 | 5.28 | % | 4.69 | % | 0.42 | % | ||||||
Ratios to average net assets (annualized) | ||||||||||||
Gross expenses | 0.44 | % | 0.44 | % | 0.44 | % | ||||||
Net expenses | 0.40 | % | 0.40 | % | 0.40 | % | ||||||
Net investment income | 2.41 | % | 2.71 | % | 2.24 | % | ||||||
Supplemental data | ||||||||||||
Portfolio turnover rate | 88 | % | 43 | % | 43 | % | ||||||
Net assets, end of period (000s omitted) | $35,301 | $30,585 | $2,553 |
1 | For the period from July 31, 2018 (commencement of class operations) to August 31, 2018 |
2 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
28 | Wells Fargo Short-Term Bond Plus Fund
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Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.84 | $8.65 | $8.78 | $8.79 | $8.77 | |||||||||||||||
Net investment income | 0.21 | 0.23 | 0.17 | 0.14 | 0.13 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.24 | 0.19 | (0.13 | ) | (0.01 | ) | 0.05 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.45 | 0.42 | 0.04 | 0.13 | 0.18 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.20 | ) | (0.23 | ) | (0.17 | ) | (0.14 | ) | (0.13 | ) | ||||||||||
Net realized gains | 0.00 | 0.00 | 0.00 | 0.00 | (0.03 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.20 | ) | (0.23 | ) | (0.17 | ) | (0.14 | ) | (0.16 | ) | ||||||||||
Net asset value, end of period | $9.09 | $8.84 | $8.65 | $8.78 | $8.79 | |||||||||||||||
Total return | 5.23 | % | 4.88 | % | 0.46 | % | 1.49 | % | 2.14 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.49 | % | 0.49 | % | 0.49 | % | 0.48 | % | 0.48 | % | ||||||||||
Net expenses | 0.45 | % | 0.45 | % | 0.46 | % | 0.48 | % | 0.48 | % | ||||||||||
Net investment income | 2.37 | % | 2.60 | % | 1.95 | % | 1.59 | % | 1.51 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 88 | % | 43 | % | 43 | % | 50 | % | 59 | % | ||||||||||
Net assets, end of period (000s omitted) | $251,480 | $226,517 | $226,655 | $230,549 | $252,961 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term Bond Plus Fund | 29
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 Short-Term Bond Plus Fund (formerly, Wells Fargo Short-Term Bond 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.
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.
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.
Forward foreign currency contracts are recorded at the forward rate 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”).
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.
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. 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.
30 | Wells Fargo Short-Term Bond Plus Fund
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Notes to financial statements
Forward foreign currency contracts
A forward foreign currency contract is an agreement between two parties to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund enters into forward foreign currency contracts to facilitate transactions in foreign-denominated securities and to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. Forward foreign currency contracts are recorded at the forward rate and marked-to-market daily. When the contracts are closed, realized gains and losses arising from such transactions are recorded as realized gains or losses on forward foreign currency contracts. The Fund is subject to foreign currency risk and may be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. The Fund’s maximum risk of loss from counterparty credit risk is the unrealized gains on the contracts. This risk may be mitigated if there is a master netting arrangement between the Fund and the counterparty.
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.
When-issued transactions
The Fund may purchase securities on a forward commitment or when-issued basis. The Fund records a when-issued transaction on the trade date and will segregate assets in an amount at least equal in value to the Fund’s commitment to purchase when-issued securities. Securities purchased on a when-issued basis are marked-to-market daily and the Fund begins earning interest on the settlement date. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
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 interest rates and is subject to interest rate 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.
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
Wells Fargo Short-Term Bond Plus Fund | 31
Table of Contents
Notes to financial statements
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.
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 are recorded on the ex-dividend date and paid from net investment income monthly 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 August 31, 2020, the aggregate cost of all investments for federal income tax purposes was $463,410,411 and the unrealized gains (losses) consisted of:
Gross unrealized gains | $ | 11,053,067 | ||
Gross unrealized losses | (980,323 | ) | ||
Net unrealized gains | $ | 10,072,744 |
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.
32 | Wells Fargo Short-Term Bond Plus Fund
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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 August 31, 2020:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Agency securities | $ | 0 | $ | 18,718,471 | $ | 0 | $ | 18,718,471 | ||||||||
Asset-backed securities | 0 | 42,878,033 | 0 | 42,878,033 | ||||||||||||
Corporate bonds and notes | 0 | 152,173,523 | 0 | 152,173,523 | ||||||||||||
Exchange-traded funds | 19,413,401 | 0 | 0 | 19,413,401 | ||||||||||||
Foreign corporate bonds and notes | 0 | 593,692 | 0 | 593,692 | ||||||||||||
Foreign government bonds | 0 | 1,188,878 | 0 | 1,188,878 | ||||||||||||
Municipal obligations | 0 | 7,155,988 | 0 | 7,155,988 | ||||||||||||
Non agency mortgaged-backed securities | 0 | 115,998,927 | 0 | 115,998,927 | ||||||||||||
U.S. Treasury securities | 19,182,524 | 0 | 0 | 19,182,524 | ||||||||||||
Yankee corporate bonds and notes | 0 | 67,659,969 | 0 | 67,659,969 | ||||||||||||
Yankee government bonds | 0 | 2,332,000 | 0 | 2,332,000 | ||||||||||||
Short-term investments | 0 | |||||||||||||||
Investment companies | 19,447,173 | 0 | 0 | 19,447,173 | ||||||||||||
U.S. Treasury securities | 6,799,061 | 0 | 0 | 6,799,061 | ||||||||||||
64,842,159 | 408,699,481 | 0 | 473,541,640 | |||||||||||||
Futures contracts | 52,766 | 0 | 0 | 52,766 | ||||||||||||
Total assets | $ | 64,894,925 | $ | 408,699,481 | $ | 0 | $ | 473,594,406 | ||||||||
Liabilities | ||||||||||||||||
Futures contracts | $ | 97,327 | $ | 0 | $ | 0 | $ | 97,327 | ||||||||
Forward foreign currency contracts | 0 | 14,097 | 0 | 14,097 | ||||||||||||
Total liabilities | $ | 97,327 | $ | 14,097 | $ | 0 | $ | 111,424 |
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
Futures contracts and forward foreign currency contracts are reported at their cumulative unrealized gains (losses) at measurement date as reported in the tables 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.
For the year ended August 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
Wells Fargo Short-Term Bond Plus Fund | 33
Table of Contents
Notes to financial statements
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 $1billion | 0.350 | % | ||
Next $4 billion | 0.325 | |||
Next $3 billion | 0.290 | |||
Next $2 billion | 0.265 | |||
Over $10 billion | 0.255 |
For the year ended August 31, 2020, the management fee was equivalent to an annual rate of 0.35% 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 0.15% and declining to 0.05% 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 | 0.16 | % | ||
Class R6 | 0.03 | |||
Institutional Class | 0.08 |
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 December 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.72% for Class A shares, 1.47% for Class C shares, 0.40% for Class R6 shares and 0.45% 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 August 31, 2020, Funds Distributor received $244 from the sale of Class A shares, and $82 and $26 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 and Class C 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.
34 | Wells Fargo Short-Term Bond Plus Fund
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Notes to financial statements
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 short-term securities, for the year ended August 31, 2020 were as follows:
Purchases at cost | Sales proceeds | |||||
U.S. government | Non-U.S. government | U.S. government | Non-U.S. government | |||
$47,710,963 | $440,213,148 | $25,622,206 | $353,287,387 |
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 Federal 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 August 31, 2020, the Fund did not have any securities on loan.
7. DERIVATIVE TRANSACTIONS
During the year ended August 31, 2020, the Fund entered into futures contracts to speculate on interest rates and to help manage the duration of the portfolio and entered into forward foreign currency contracts for economic hedging purposes.
The volume of the Fund’s derivative activity during the year ended August 31, 2020 was as follows:
Futures contracts | ||||
Average notional balance on long futures | $ | 184,750,719 | ||
Average notional balance on short futures | 50,106,975 | |||
Forward foreign currency contracts | ||||
Average contract amounts to sell | 27,524 |
A summary of the location of derivative instruments on the financial statements by primary risk exposure is outlined in the following tables.
The fair value of derivative instruments as of August 31, 2020 by risk type was as follows for the Fund:
Asset derivatives | Liability derivatives | |||||||||||
Statement of Assets and Liabilities location | Fair value | Statement of Assets and Liabilities location | Fair value | |||||||||
Interest rate risk | Unrealized gains on futures contracts | $ | 52,766 | * | Unrealized losses on futures contacts | $ | 97,327 | * | ||||
Foreign currency risk | Unrealized gains on forward currency contracts | 0 | Unrealized losses on forward foreign currency contracts | 14,097 | ||||||||
$ | 52,766 | $ | 111,424 |
* | Amount represents cumulative unrealized gains (losses) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin as of August 31, 2020 is reported separately on the Statement of Assets and Liabilities. |
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Notes to financial statements
For the year ended August 31, 2020, the effect of futures contracts on realized gains is reflected in the Statement of Operations. The effect of derivative instruments on the change in unrealized gains (losses) is as follows:
Futures contracts | Forward foreign currency contracts | Total | ||||||||||
Interest rate risk | $ | (275,715 | ) | $ | 0 | $ | (275,715 | ) | ||||
Foreign currency risk | 0 | (14,097 | ) | (14,097 | ) | |||||||
$ | (275,715 | ) | $ | (14,097 | ) | $ | (289,812 | ) |
For certain types of derivative transactions, the Fund has entered into International Swaps and Derivatives Association, Inc. master agreements (“ISDA Master Agreements”) or similar agreements with approved counterparties. The ISDA Master Agreements or similar agreements may have requirements to deliver/deposit securities or cash to/with an exchange or broker-dealer as collateral and allows the Fund to offset, with each counterparty, certain derivative financial instrument’s assets and/or liabilities with collateral held or pledged. Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearinghouse for exchange traded derivatives while collateral terms are contract specific for over-the-counter traded derivatives. Cash collateral that has been pledged to cover obligations of the Fund under ISDA Master Agreements or similar agreements, if any, are reported separately in the Statement of Assets and Liabilities. Securities pledged as collateral, if any, are noted in the Portfolio of Investments. With respect to balance sheet offsetting, absent an event of default by the counterparty or a termination of the agreement, the reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities are not offset across transactions between the Fund and the applicable counterparty. A reconciliation of the gross amounts on the Statement of Assets and Liabilities to the net amounts by counterparty, including any collateral exposure, for OTC derivatives is as follows:
Counterparty | Gross amounts of liabilities in the Statement of Assets and Liabilities | Amounts subject to netting agreements | Collateral pledged | Net amount of liabilities | ||||||||
Morgan Stanley | $14,097 | $0 | $ | 0 | $ | 14,097 |
8. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $350,000,000 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 August 31, 2020, there were no borrowings by the Fund under the agreement.
9. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid was $9,782,636 and $10,470,347 of ordinary income for the years ended August 31, 2020 and August 31, 2019, respectively.
As of August 31, 2020, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income | Undistributed long-term gain | Unrealized gains | ||
$4,581,371 | $744,178 | $10,072,744 |
10. INDEMNIFICATION
Under the Fund’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 Fund. The Fund has entered into a separate agreement with each Trustee that converts indemnification rights currently existing under the Fund’s organizational documents into contractual rights that cannot be changed in the future without the consent of the Trustee. Additionally, in the normal course of
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Notes to financial statements
business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’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 on fair value measurements in Topic 820, Fair Value Measurements. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has adopted this guidance which did not have a material impact on the 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.
Wells Fargo Short-Term Bond Plus Fund | 37
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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 Short-Term Bond Plus Fund (formerly, Wells Fargo Short-Term Bond Fund) (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of August 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 August 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 August 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
October 28, 2020
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TAX INFORMATION
For the fiscal year ended August 31, 2020, $7,602,478 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 142 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 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). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008 | 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 (Emeritus), 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 Wheelock (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. Interim President of the McKnight Foundation from January to September 2020. 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 the Treasurer of 77 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. |
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Other information (unaudited)
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Wells Fargo Short-Term Bond Plus Fund
(formerly, Wells Fargo Short-Term Bond Fund)
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Funds Trust (the “Trust”) must determine annually whether to approve the continuation of the Trust’s investment management and sub-advisory agreements. In this regard, at a Board meeting held on May 26, 2020 and May 28, 2020 (together, the “Meeting”), the Board, all the members of which have no direct or indirect interest in the investment management and sub-advisory agreements and are not “interested persons” of the Trust, as defined in the 1940 Act (the “Independent Trustees”), reviewed and approved for Wells Fargo Short-Term Bond Plus Fund (formerly, Wells Fargo Short-Term Bond Fund, the “Fund”): (i) an investment management agreement (the “Management Agreement”) with Wells Fargo Funds Management, LLC (“Funds Management”); and (ii) an investment sub-advisory agreement (the “Sub-Advisory Agreement”) with Wells Capital Management Incorporated (the “Sub-Adviser”), an affiliate of Funds Management. The Management Agreement and the Sub-Advisory Agreement are collectively referred to as the “Advisory Agreements.”
At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of Funds Management and the Sub-Adviser and the approval of the Advisory Agreements. Prior to the Meeting, including at a Board meeting held in April 2020, the Trustees conferred extensively among themselves and with representatives of Funds Management about these matters. Also, the Board has adopted a team-based approach, with each team consisting of a sub-set of Trustees, to assist the full Board in the discharge of its duties in reviewing investment performance and other matters throughout the year. The Independent Trustees were assisted in their evaluation of the Advisory Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately.
In providing information to the Board, Funds Management and the Sub-Adviser were guided by a detailed set of requests for information submitted to them by independent legal counsel on behalf of the Independent Trustees at the start of the Board’s annual contract renewal process earlier in 2020. In considering and approving the Advisory Agreements, the Trustees considered the information they believed relevant, including but not limited to the information discussed below. The Board considered not only the specific information presented in connection with the Meeting, but also the knowledge gained over time through interaction with Funds Management and the Sub-Adviser about various topics. In this regard, the Board reviewed reports of Funds Management at each of its quarterly meetings, which included, among other things, portfolio reviews and investment performance reports. In addition, the Board and the teams mentioned above confer with portfolio managers at various times throughout the year. The Board did not identify any particular information or consideration that was all-important or controlling, and each individual Trustee may have attributed different weights to various factors.
After its deliberations, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable. The Board considered the approval of the Advisory Agreements for the Fund as part of its consideration of agreements for funds across the complex, but its approvals were made on a fund-by-fund basis. The following summarizes a number of important, but not necessarily all, factors considered by the Board in support of its approvals.
Nature, extent and quality of services
The Board received and considered various information regarding the nature, extent and quality of services provided to the Fund by Funds Management and the Sub-Adviser under the Advisory Agreements. This information included a description of the investment advisory services and Fund-level administrative services covered by the Management Agreement, as well as, among other things, a summary of the background and experience of senior management of Wells Fargo Asset Management (“WFAM”), of which Funds Management and the Sub-Adviser are a part, and a summary of investments made in the business of WFAM. The Board also received a description of Funds Management’s and the Sub-Adviser’s business continuity plans and of their approaches to data privacy and cybersecurity, and related testing. The Board also received and reviewed information about Funds Management’s role as administrator of the Fund’s liquidity risk management program, Funds Management’s approach to risk management, and Funds Management’s intermediary and vendor oversight program.
The Board also considered the qualifications, background, tenure and responsibilities of each of the portfolio managers primarily responsible for the day-to-day portfolio management of the Fund. The Board evaluated the ability of Funds Management and the Sub-Adviser to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of Funds Management and the Sub-Adviser. In addition, the Board took into account the full range of services provided to the Fund by Funds Management and its affiliates.
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Other information (unaudited)
Fund investment performance and expenses
The Board considered the investment performance results for the Fund over various time periods ended December 31, 2019. The Board also considered more current results for various time periods ended March 31, 2020. The Board considered these results in comparison to the investment performance of funds in a universe that was determined by Broadridge Inc. (“Broadridge”) to be similar to the Fund (the “Universe”), and in comparison to the Fund’s benchmark index and to other comparative data. Broadridge is an independent provider of investment company data. The Board received a description of the
methodology used by Broadridge to select the mutual funds in the performance Universe. The Board noted that the investment performance of the Fund (Class A) was higher than or in range of the average investment performance of the Universe for the one-, three-, five- and ten-year periods ended December 31, 2019. The Board also noted that the investment performance of the Fund (Class A) was higher than the average investment performance of the Universe for all periods ended March 31, 2020. The Board also noted that the investment performance of the Fund was higher than its benchmark index, the Bloomberg Barclays U.S. 1-3 Year Government/Credit Bond Index, for all periods ended December 31, 2019. The Board also noted that the investment performance of the Fund was higher than its benchmark index the Bloomberg Barclays U.S. 1-3 Year Government/Credit Bond Index, for the ten-year period ended March 31, 2020, and lower than its benchmark index for the one-, three- and five-year periods ended March 31, 2020.
The Board received information concerning, and discussed factors contributing to, the underperformance of the Fund relative to the benchmark index for the periods identified above. The Board took note of the explanations for the relative underperformance during these periods, including with respect to investment decisions and market factors that affected the Fund’s investment performance. The Board also took note of the Fund’s outperformance relative to the Universe and benchmark index over several of the time periods under review.
The Board also received and considered information regarding the Fund’s net operating expense ratios and their various components, including actual management fees, custodian and other non-management fees, and Rule 12b-1 and non-Rule 12b-1 shareholder service fees. The Board considered these ratios in comparison to the median ratios of funds in class-specific expense groups that were determined by Broadridge to be similar to the Fund (the “Groups”). The Board received a description of the methodology used by Broadridge to select the mutual funds in the expense Groups and an explanation of how funds comprising expense groups and their expense ratios may vary from year-to-year. Based on the Broadridge reports, the Board noted that the net operating expense ratios of the Fund were lower than or equal to the median net operating expense ratios of the expense Groups for each share class.
The Board took into account the Fund’s investment performance and expense information provided to it among the factors considered in deciding to re-approve the Advisory Agreements.
Investment management and sub-advisory fee rates
The Board reviewed and considered the contractual fee rates payable by the Fund to Funds Management under the Management Agreement, as well as the contractual fee rates payable by the Fund to Funds Management for class-level administrative services under a Class-Level Administration Agreement, which include, among other things, class-level transfer agency and sub-transfer agency costs (collectively, the “Management Rates”). The Board also reviewed and considered the contractual investment sub-advisory fee rates that are payable by Funds Management to the Sub-Adviser for investment sub-advisory services.
Among other information reviewed by the Board was a comparison of the Fund’s Management Rates with the average contractual investment management fee rates of funds in the expense Groups at a common asset level as well as transfer agency costs of the funds in the expense Groups. The Board noted that the Management Rates of the Fund were lower than or equal to the sum of these average rates for the Fund’s expense Groups for all share classes.
The Board also received and considered information about the portion of the total management fee that was retained by Funds Management after payment of the fee to the Sub-Adviser for sub-advisory services. In assessing the reasonableness of this amount, the Board received and evaluated information about the nature and extent of responsibilities retained and risks assumed by Funds Management and not delegated to or assumed by the Sub-Adviser, and about Funds Management’s on-going oversight services. Given the affiliation between Funds Management and the Sub-Adviser, the Board ascribed limited relevance to the allocation of fees between them.
The Board also received and considered information about the nature and extent of services offered and fee rates charged by Funds Management and the Sub-Adviser to other types of clients with investment strategies similar to those of the Fund. In this regard, the Board received information about the significantly greater scope of services, and compliance, reporting and other legal burdens and risks of managing proprietary mutual funds compared with those associated with managing assets of other types of clients, including third-party sub-advised fund clients and non-mutual fund clients such as institutional separate accounts.
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Other information (unaudited)
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board determined that the compensation payable to Funds Management under the Management Agreement and to the Sub-Adviser under the Sub-Advisory Agreement was reasonable.
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of both WFAM and Wells Fargo & Co. (“Wells Fargo”) from providing services to the fund family as a whole. The Board noted that the Sub-Adviser’s profitability information with respect to providing services to the Fund and other funds in the family was subsumed in the WFAM and Wells Fargo profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability, including a description of the methodology used to allocate certain expenses. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such as the size, type and age of fund.
Based on its review, the Board did not deem the profits reported by Funds Management, WFAM or Wells Fargo from services provided to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
The Board received and considered information about the potential for Funds Management to experience economies of scale in the provision of management services to the Fund, the difficulties of calculating economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. The Board noted the existence of breakpoints in the Fund’s management fee structure, which operate generally to reduce the Fund’s expense ratios as the Fund grows in size, and the size of the Fund in relation to such breakpoints. The Board considered that in addition to management fee breakpoints, Funds Management shares potential economies of scale from its management business in a variety of ways, including through fee waiver and expense reimbursement arrangements, services that benefit shareholders, competitive management fee rates set at the outset without regard to breakpoints, and investments in the business intended to enhance services available to shareholders.
The Board concluded that Funds Management’s arrangements with respect to the Fund, including contractual breakpoints, constituted a reasonable approach to sharing potential economies of scale with the Fund and its shareholders.
Other benefits to Funds Management and the Sub-Adviser
The Board received and considered information regarding potential “fall-out” or ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, as a result of their relationships with the Fund. Ancillary benefits could include, among others, benefits directly attributable to other relationships with the Fund and benefits potentially derived from an increase in Funds Management’s and the Sub-Adviser’s business as a result of their relationships with the Fund. The Board noted that various affiliates of Funds Management may receive distribution-related fees, shareholder servicing payments and sub-transfer agency fees in respect of shares sold or held through them and services provided.
The Board also reviewed information about soft dollar credits earned and utilized by the Sub-Adviser, fees earned by Funds Management and the Sub-Adviser from managing a private investment vehicle for the fund family’s securities lending collateral, and commissions earned by an affiliated broker from portfolio transactions.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board did not find that any ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, were unreasonable.
Conclusion
At the Meeting, after considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable.
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Other information (unaudited)
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Wells Fargo Funds Trust (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) on behalf of each of its series, including the Fund, which is reasonably designed to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) previously approved the designation of Wells Fargo Funds Management, LLC (“Funds Management”), the Fund’s investment manager, as the administrator of the Program, and Funds Management has established a Liquidity Risk Management Council composed of personnel from multiple departments within Funds Management and its affiliates to assist Funds Management in the implementation and on-going administration of the Program.
The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent the Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if the Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s “highly liquid investments” below its HLIM; and (6) periodic reporting to the Board.
At a meeting of the Board held on May 26 and 28, 2020, the Board received a written report (the “Report”) from Funds Management that addressed the operation of the Program and assessed its adequacy and effectiveness of implementation. The Report covered the initial period from December 1, 2018 through December 31, 2019 (the “Reporting Period”). No significant liquidity events impacting the Fund were noted in the Report. There were no material changes to the Program during the Reporting Period. The Report concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
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Effective June 1, 2020, shareholders purchasing Fund shares through an Oppenheimer & Co. Inc. (“Oppenheimer”) platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred or back-end, sales charge waivers) and discounts, which may differ from those disclosed in the Fund’s Prospectus or SAI.
Front-end sales load waivers on Class A shares available at Oppenheimer |
Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan. |
Shares purchased by or through a 529 Plan. |
Shares purchased through an Oppenheimer affiliated investment advisory program. |
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 from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 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 (known as Rights of Restatement). |
A shareholder in the Fund’s Class C shares will have their shares exchanged at net asset value to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the exchange is in line with the policies and procedures of Oppenheimer. |
Employees and registered representatives of Oppenheimer or its affiliates and their family members. |
Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in the Prospectus. |
CDSC waivers on A and C shares available at Oppenheimer |
Death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Prospectus. |
Return of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the Prospectus. |
Shares sold to pay Oppenheimer fees but only if the transaction is initiated by Oppenheimer. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Oppenheimer: Breakpoints, Rights of Accumulation & Letters of Intent |
Breakpoints as described in the 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 Oppenheimer. Eligible fund family assets not held at Oppenheimer may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
Wells Fargo Short-Term Bond Plus Fund | 47
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Effective June 15, 2020, shareholders purchasing fund shares through a Robert W. Baird & Co. (“Baird”) platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or the SAI.
Front-end sales load waivers on Class A shares available at Baird |
Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing share of the same fund. |
Share purchase by employees and registers representatives of Baird or its affiliate and their family members as designated by Baird. |
Shares purchase from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as rights of reinstatement). |
A shareholder in the Funds Investor C Shares will have their share exchanged at net asset value to Investor A shares of the fund if the shares are no longer subject to CDSC and the exchange is in line with the policies and procedures of Baird. |
Employer-sponsored retirement plans or charitable accounts in a transactional brokerage account at Baird, including 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 or SAR-SEPs. |
CDSC waivers on A and C shares available at Baird |
Shares sold due to death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
Shares bought due to returns of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 72as described in the Fund’s Prospectus. |
Shares sold to pay Baird fees but only if the transaction is initiated by Baird. |
Shares acquired through a right of reinstatement. |
Front-end load discounts available at Baird: breakpoint and/or rights of accumulation |
Breakpoints as described in the Prospectus. |
Rights of accumulations which entitles 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 Baird. Eligible fund family assets not held at Baird may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets. |
Letters of Intent (LOI) allow for breakpoint discounts based on anticipated purchases within a fund family through Baird, over a13-month period of time. |
48 | Wells Fargo Short-Term Bond Plus 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
© 2020 Wells Fargo & Company. All rights reserved
PAR-0920-00414 10-20
A221/AR221 08-20
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Annual Report
August 31, 2020
Wells Fargo
Short-Term High Yield Bond 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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Reduce clutter. Save trees. |
Sign up for electronic delivery of prospectuses and shareholder reports at wellsfargo.com/advantagedelivery |
The views expressed and any forward-looking statements are as of August 31, 2020, unless otherwise noted, and are those of the Fund’s portfolio 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 Short-Term High Yield Bond Fund | 1
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Letter to shareholders (unaudited)
Andrew Owen
President
Wells Fargo Funds
Dear Shareholder:
We are pleased to offer you this annual report for the Wells Fargo Short-Term High Yield Bond Fund for the 12-month period that ended August 31, 2020. Global stock markets saw earlier gains erased in March as governments around the world took unprecedented measures, attempting to stop the spread of the coronavirus at the expense of short-term economic output. However, markets rebounded from April on to offset much of the losses as central banks attempted to bolster capital markets and confidence.
For the 12-month period, equities had broadly positive total returns despite intense volatility in March. Non-U.S. developed market equities had the weakest performance and U.S. stocks performed strongly. Fixed-income securities were more modest though also generally positive. For the period, U.S. stocks, based on the S&P 500 Index,1 gained 21.94%. International stocks, as measured by the MSCI ACWI ex USA Index (Net),2 returned 8.31%, while the MSCI EM Index (Net)3 had somewhat stronger performance, with a 14.49% gain. For bond investors, the Bloomberg Barclays U.S. Aggregate Bond Index4 returned 6.47%, the Bloomberg Barclays Global Aggregate ex-USD Index5 gained a more modest 4.58%, and the Bloomberg Barclays Municipal Bond Index6 returned 3.24% while the ICE BofA U.S. High Yield Index7 returned 3.71%.
The fiscal year began with supportive central bank actions.
As the period began, several central banks had just cut interest rates in response to a global economic slowdown. Ongoing concerns regarding U.S.-China trade tensions and Brexit remained unresolved. The Federal Reserve (Fed) cut U.S. interest rates again in September. U.S. manufacturing data disappointed investors. The U.S. Congress announced it would pursue an impeachment investigation of President Trump. Meanwhile, the U.K. Brexit impasse showed no signs of resolution. Officials in China said that hitting the country’s economic growth goals for the year would be difficult considering the weight of tariffs and trade restrictions. Although the S&P 500 Index finished the third quarter with the best year-to-date returns in more than 20 years, concerns about future returns remained.
The fourth quarter started on a strong note, with U.S.-China trade tensions relaxing in October along with renewed optimism for a U.K. Brexit deal and positive macroeconomic data. The initial estimate of U.S. third-quarter gross domestic product (GDP) growth was a resilient 1.9% annualized rate, while the U.S. unemployment rate fell to a 50-year low of
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 and emerging 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 Short-Term High Yield Bond Fund
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Letter to shareholders (unaudited)
3.5% in September. However, despite strength among U.S. consumers, business confidence declined while manufacturing activity contracted. Concerned with a potential economic slowdown, the Fed lowered interest rates another quarter point in late October—its third rate cut in four months. This helped push the S&P 500 Index to an all-time high while emerging market equities rallied and global bonds declined overall, reflecting a broad pickup in risk appetite.
Equity markets continued to rally in November despite ongoing geopolitical risks. Hopes for a U.S.-China trade deal buoyed investor confidence. U.S. business sentiment improved slightly, and manufacturing and services activity picked up. While consumer confidence and purchasing managers’ activity rose in the eurozone, China reported weakening manufacturing and consumer data. Bond yields rose marginally, leading to slightly negative returns for global government and investment-grade corporate bonds.
Financial markets ended 2019 with a boost from the U.S. and China accord on a Phase One trade deal. That, along with the landslide win by the pro-Brexit U.K. Conservative Party in a national election and ongoing central bank support, gave investors greater confidence. U.S. economic indicators were generally positive, with the exception of manufacturing activity and business confidence. Consumer confidence was resilient, fed by a robust labor market, tame inflation, and lower interest rates, which boosted housing affordability and stimulated homebuyer activity. The impeachment of President Trump had little impact on markets. Meanwhile, slowing Chinese economic activity, partly attributable to the trade war, led to further government stimulus at year-end through lower reserve ratios, allowing banks to lend more money.
The year-end rally continued in early January 2020. However, capital market volatility picked up sharply in late January on concerns over the potential impact of the coronavirus on the global economy and stock markets. As sentiment began to sour, perceived safe havens did well in January. The U.S. dollar and Japanese yen both rose and government bonds outperformed equities. While the S&P 500 Index held its ground, emerging market equities tumbled, including those in Asia.
In February, the coronavirus became the major market focus. Fears of the virus’s impact on global growth led to expectations of increased global central bank monetary policy support. That led the 10-year U.S. Treasury yield to fall to an all-time low of 1.1%. Although equity markets initially shrugged off concerns about the outbreak, focusing instead on strong fourth-quarter earnings and improving business confidence in January, market sentiment turned sharply lower and the S&P 500 Index lost 8.2% for the month. Oil prices tumbled as Russia and the Organization of the Petroleum Exporting Countries compounded a major decline in oil demand with a brutal price war, partly aimed at dissuading further U.S. shale production, causing the price of West Texas Intermediate crude oil to plummet.
The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems. This abrupt stoppage of economic activity led to the sharp deceleration of global output, sending economies into a deep contraction. Central banks responded swiftly, slashing interest rates and expanding quantitative easing programs to restore liquidity and confidence to the markets. In the U.S., the Fed introduced several new lending programs, funding investment-grade bonds, money market mutual funds, and commercial paper while purchasing Treasuries, mortgage-backed securities, and overnight repurchase agreements. Meanwhile, stock markets tumbled quickly into a bear market, ending the longest bull stock market in U.S. history.
Markets rebounded strongly in April, fueled by unprecedented government and central bank stimulus measures. The U.S. economy contracted by an annualized 5.0% pace in the first quarter, with 30 million new unemployment insurance claims in six weeks. In the
“The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems.”
Wells Fargo Short-Term High Yield Bond Fund | 3
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Letter to shareholders (unaudited)
“The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July.”
eurozone, first-quarter real GDP shrank 3.8%, with the composite April Flash Purchasing Managers’ Index, a monthly survey of purchasing managers, falling to an all-time low of 13.5. The European Central Bank expanded its quantitative easing to include the purchase of additional government bonds of countries with the greatest virus-related need, including Italy and Spain. China’s first-quarter GDP fell by 6.8% year over year. However, retail sales, production, and investment showed signs of recovery. Extreme oil-price volatility continued as global supply far exceeded demand.
The global equity market rebound continued in May, with widespread strong monthly gains. Investors regained confidence on reports of early signs of success in human trials of a coronavirus vaccine. Growth stocks continued to outperform value stocks while returns on global government bonds were generally flat. In the U.S., a gap grew between the stock market rebound and devastating economic data points, including an April unemployment rate of 14.7%, the highest level since World War II. Purchasing managers’ indices reflected weakening activity in May in both the manufacturing and services sectors. U.S. corporate earnings reports indicated a 14% year-over-year contraction in earnings from the first quarter of 2019. However, high demand for technology, driven by remote activity, supported robust information technology sector earnings, which helped drive major technology stocks higher.
Financial markets posted widely positive returns in June despite ongoing economic weakness and high levels of uncertainty on the containment of the coronavirus and the timing of an effective vaccine. There were hopeful signs as economies reopened, with both U.S. and U.K. retail sales rebounding sharply in May. However, year over year, sales remained depressed. Vitally important to market sentiment was the ongoing commitment by central banks globally to do all they could to provide economic support through liquidity and low borrowing costs. U.S. economic activity was aided by one-time $1,200 stimulus checks and $600 bonus weekly unemployment benefits which expired at the end of July. However, unemployment remained historically high, easing somewhat from 14.7% in April to 11.1% in June. During June, numerous states reported increases of coronavirus cases. China’s economic recovery picked up momentum in June, though it remained far from a full recovery.
July was a broadly positive month for both global equities and fixed income. However, economic data and a resurgence of coronavirus cases pointed to the vulnerability of the global economy and the ongoing imperative to regain control of the pandemic. Second-quarter GDP shrank from the previous quarter by 9.5% and 12.1% in the U.S. and eurozone, respectively. In contrast, China reported a 3.2% year-over-year expansion in its second-quarter GDP. U.S. unemployment remained high despite adding 1.8 million jobs in July, with a double-digit jobless rate persisting. However, manufacturing activity grew in both the U.S. and eurozone. In Asia, while China’s manufacturing sector continued to expand, activity in Japan and South Korea contracted. In July, a rising concern was the rapid and broad reemergence of coronavirus infections.
The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July. U.S. stocks had strong monthly gains, led by the so-called FAANG stocks—Facebook, Apple, Amazon, Netflix, and Google (Alphabet)—which dominate these indices and continued to rally. U.S. stocks generally surpassed other broadly positive global equity performance while fixed-income market monthly returns were broadly flat. Generally stronger-than-expected second-quarter earnings boosted investor sentiment along with the Fed’s announcement of a policy shift that will likely lead to longer-term low interest rates and supportive monetary policy. The U.S. Flash Purchasing Managers’ Indices for both manufacturing and services beat expectations while U.S. housing market indicators were strong. In Europe, retail sales expanded and consumer confidence remained steady. China’s economy continued its fairly steady expansion. Overall, developed markets performed better than emerging market equities for the month of August as people took comfort in better-known equities in perceived safer markets.
4 | Wells Fargo Short-Term High Yield Bond Fund
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Letter to shareholders (unaudited)
Don’t let short-term uncertainty derail long-term investment goals.
Periods of investment uncertainty can present challenges, but experience has taught us that maintaining long-term investment goals can be an effective way to plan for the future. To help you create a sound strategy based on your personal goals and risk tolerance, Wells Fargo Funds offers more than 100 mutual funds spanning a wide range of asset classes and investment styles. Although diversification cannot guarantee an investment profit or prevent losses, we believe it can be an effective way to manage investment risk and potentially smooth out overall portfolio performance. We encourage investors to know their investments and to understand that appropriate levels of risk-taking may unlock opportunities.
Thank you for choosing to invest with Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Andrew Owen
President
Wells Fargo Funds
|
For further information about your Fund, contact your investment professional, visit our website at wfam.com, or call us directly at 1-800-222-8222. |
Notice to Shareholders
At a meeting held on August 10-12, 2020, the Board of Trustees of the Fund approved a change to the Fund’s automatic conversion feature for Class C shares in order to shorten the required holding period from 10 to 8 years. As a result, on a monthly basis beginning November 5, 2020, Class C shares will convert automatically into Class A shares 8 years after the initial date of purchase or, if you acquired your Class C shares through an exchange or conversion from another share class, 8 years after the date you acquired your Class C shares. When Class C shares that you acquired through a purchase or exchange convert, any other Class C shares that you purchased with reinvested dividends and distributions also will convert into Class A shares on a pro rata basis.
Please note that a shorter holding period may apply depending on your intermediary. Please see “Appendix A—Sales Charge Reductions and Waivers for Certain Intermediaries” in the Fund’s prospectus for further information.
Wells Fargo Short-Term High Yield Bond Fund | 5
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Performance highlights (unaudited)
Investment objective
The Fund seeks total return, consisting of a high level of current income and capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Chris Lee, CFA®‡*
Michael J. Schueller, CFA®‡
Average annual total returns (%) as of August 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 (SSTHX) | 2-29-2000 | 0.63 | 2.55 | 3.16 | 3.74 | * | 3.18 | 3.47 | 0.95 | 0.82 | ||||||||||||||||||||||||
Class C (WFHYX) | 3-31-2008 | 1.84 | 2.41 | 2.70 | 2.84 | 2.41 | 2.70 | 1.70 | 1.57 | |||||||||||||||||||||||||
Administrator Class (WDHYX) | 7-30-2010 | – | – | – | 3.90 | 3.34 | 3.64 | 0.89 | 0.66 | |||||||||||||||||||||||||
Institutional Class (STYIX)3 | 11-30-2012 | – | – | – | 4.06 | 3.49 | 3.74 | 0.62 | 0.51 | |||||||||||||||||||||||||
ICE BofA High Yield U.S. Corporates, Cash Pay, BB Rated, 1-5 Year Index4 | – | – | – | – | 4.73 | 5.24 | 5.78 | – | – |
* | 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.
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 3.00%. 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.
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. High-yield securities have a greater risk of default and tend to be more volatile than higher-rated debt securities. Loans are subject to risks similar to those associated with other below investment-grade bond investments, such as credit risk (for example, risk of issuer default), below-investment-grade bond risk (for example, risk of greater volatility in value), and risk that the loan may become illiquid or difficult to price. The use of derivatives may reduce returns and/or increase volatility. 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. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Short-Term High Yield Bond Fund
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Performance highlights (unaudited)
Growth of $10,000 investment as of August 31, 20205 |
‡ | CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute. |
* | Mr. Lee became a portfolio manager of the Fund on August 6, 2020. |
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 December 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 0.81% for Class A, 1.56% for Class C, 0.65% for Administrator Class, and 0.50% 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 caps. Prior to or after the commitment expiration date, the caps may be increased or the commitment to maintain the caps may be terminated only with the approval of the Board of Trustees. Without these caps, 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 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. |
4 | The ICE BofA High Yield U.S. Corporates, Cash Pay, BB Rated, 1-5 Year Index is an unmanaged index that generally tracks the performance of BB rated U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market with maturities of one to five years. 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 performance of the ICE BofA High Yield U.S. Corporates, Cash Pay, BB Rated, 1-5 Year 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 3.00%. |
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 | The credit quality distribution of portfolio holdings reflected in the chart is based on ratings from Standard & Poor’s, Moody’s Investors Service, and/ or Fitch Ratings Ltd. Credit quality ratings apply to the underlying holdings of the Fund and not to the Fund itself. The percentages of the Fund’s portfolio with the ratings depicted in the chart are calculated based on the total market value of fixed income securities held by the Fund. If a security was rated by all three rating agencies, the middle rating was utilized. If rated by two of three rating agencies, the lower rating was utilized, and if rated by one of the rating agencies, that rating was utilized. Standard & Poor’s rates the creditworthiness of bonds, ranging from AAA (highest) to D (lowest). Ratings from A to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories. Standard & Poor’s rates the creditworthiness of short-term notes from SP-1 (highest) to SP-3 (lowest). Moody’s rates the creditworthiness of bonds, ranging from Aaa (highest) to C (lowest). Ratings Aa to B may be modified by the addition of a number 1 (highest) to 3 (lowest) to show relative standing within the ratings categories. Moody’s rates the creditworthiness of short-term U.S. tax exempt municipal securities from MIG 1/VMIG 1 (highest) to SG (lowest). Fitch rates the creditworthiness of bonds, ranging from AAA (highest) to D (lowest). Credit quality distribution is subject to change and may have changed since the date specified. |
Wells Fargo Short-Term High Yield Bond Fund | 7
Table of Contents
Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
∎ | The Fund underperformed its benchmark, the ICE BofA High Yield U.S. Corporates, Cash Pay, BB Rated, 1–5 Year Index, for the 12-month period that ended August 31, 2020. |
∎ | The Fund’s conservative positioning relative to the benchmark detracted from performance as the Fund has a lower yield and shorter duration, both of which detracted during a period when credit spreads rose but were more than offset by a large decline in Treasury rates. |
∎ | The Fund focuses on conservative credit selection and seeks to limit volatility, which led to significant outperformance relative to the benchmark during the first quarter of 2020 when credit spreads widened dramatically. |
Ten largest holdings (%) as of August 31, 20206 | ||||
TerraForm Power Operating LLC, 4.25%, 1-31-2023 | 1.94 | |||
Sirius XM Radio Incorporated, 3.88%, 8-1-2022 | 1.88 | |||
Springleaf Finance Corporation, 7.75%, 10-1-2021 | 1.56 | |||
Advanced Disposal Services Incorporated, 3.00%, 11-10-2023 | 1.54 | |||
Alcoa Nederland Holding Company BV, 6.75%, 9-30-2024 | 1.48 | |||
Nordstrom Incorporated, 8.75%, 5-15-2025 | 1.47 | |||
Group 1 Automotive Incorporated, 5.00%, 6-1-2022 | 1.45 | |||
Penske Auto Group Incorporated, 5.75%, 10-1-2022 | 1.45 | |||
Rockies Express Pipeline LLC, 3.60%, 5-15-2025 | 1.42 | |||
Fortress Transportation & Infrastructure Investors LLC, 6.75%, 3-15-2022 | 1.41 |
The coronavirus made a significant impact.
After years of steady expansion, the U.S. economy received a traumatic shock in 2020 with the arrival of the coronavirus. Public reaction and government-ordered lockdowns resulted in a collapse in economic activity with the second quarter of 2020 recording a nearly 10% drop in gross domestic product. Unemployment swiftly soared to double digits. Most areas of consumption declined precipitously. Travel and leisure services bore the brunt of the disruption. Spurred by a negative demand shock, prices for many goods declined in March and April, pushing most inflation indicators substantially lower.
The Federal Reserve (Fed) responded to the pandemic with a dramatic easing of monetary policy, setting overnight rate targets to near zero as well as purchasing bonds for its own
account. A host of credit support measures were put in place to improve the functioning of teetering financial markets. In their actions and rhetoric, the monetary authorities made it clear that an aggressive posture to support the economic and financial markets would be in place as long as needed.
Fiscal policy also responded swiftly to the pandemic in the form of relief payments to the general public as well as extended unemployment benefits. These measures more than offset the loss of income associated with unemployment increases and other wage losses for many people.
Economic activity probably bottomed in late April, and by the end of May, both consumption and employment were turning around. Substantial job gains occurred while claims for unemployment insurance began to subside. Prices generally stabilized, with oil rallying from distressed levels and core inflation measures rebounding from their crisis lows. Stock indices hit new all-time highs over the course of the summer, while Treasury yields remained extremely low. Credit spreads, which widened sharply in the March–April period, narrowed substantially in the ensuing few months.
Please see footnotes on page 7.
8 | Wells Fargo Short-Term High Yield Bond Fund
Table of Contents
Performance highlights (unaudited)
Credit quality as of August 31, 20207 |
![]() |
The Fund invests in shorter-duration and more conservative securities relative to the index.
BB-rated high-yield credit spreads relative to U.S. Treasury yields rallied steadily in a tight range before widening dramatically in March 2020 in response to government-ordered lockdowns in the midst of the coronavirus pandemic. The Fund’s conservative positioning and shorter spread duration caused it to outperform through the downturn and for much of the recovery. However, the Fund’s shorter duration became a drag as the spread recovery picked up steam toward the end of the period, particularly for BB-rated credit, which rallied on the Fed’s support of the
fallen angel part of the high-yield market. Total returns for the high-yield market were also supported by the significant decline in Treasury rates.
Due to the Fund’s strategy of selecting higher-rated, short-term high-yield securities, our focus is primarily on individual credit selection. However, with the Fed setting the overnight rate near zero, the three-month London Interbank Offered Rate (LIBOR) declined from 2.14% to 0.25% during the period, leading us to reduce our allocation to floating-rate bank loans from a high of 24.3% to 15.3%.
We continued to adhere to the Fund’s basic portfolio strategy.
The Fund’s investments fit into three principal categories. The first category is short-maturity bonds that we expect to be repaid on the maturity date. The second category is bonds with high coupons that we expect to be refinanced on the call date. These two categories comprised 70% to 80% of the portfolio during the reporting period. The third category consists of floating-rate bank loans.
Yields on the Fund’s leveraged-loan holdings were higher than on its fixed-rate holdings for much of the period, but this reversed with the collapse of three-month LIBOR.
Conservative credit selection may likely continue to drive our selection process, and we monitor market conditions to determine the Fund’s floating-rate exposure. We intend to continue evaluating relative-value opportunities for the Fund in the upcoming period and expect that we will maintain our average credit quality while lengthening the average maturity to gain exposure to spreads that remain attractive.
Please see footnotes on page 7.
Wells Fargo Short-Term High Yield Bond 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 March 1, 2020 to August 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 3-1-2020 | Ending account value 8-31-2020 | Expenses paid during the period1 | Annualized net expense ratio | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,031.56 | $ | 4.09 | 0.80 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.11 | $ | 4.06 | 0.80 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,027.66 | $ | 7.95 | 1.56 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,017.29 | $ | 7.91 | 1.56 | % | ||||||||
Administrator Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,032.33 | $ | 3.32 | 0.65 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.87 | $ | 3.30 | 0.65 | % | ||||||||
Institutional Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,033.12 | $ | 2.56 | 0.50 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.62 | $ | 2.54 | 0.50 | % |
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 Short-Term High Yield Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Corporate Bonds and Notes: 72.39% | ||||||||||||||||
Communication Services: 9.43% | ||||||||||||||||
Diversified Telecommunication Services: 2.68% | ||||||||||||||||
CenturyLink Incorporated | 6.45 | % | 6-15-2021 | $ | 3,130,000 | $ | 3,236,827 | |||||||||
CenturyLink Incorporated Series W | 6.75 | 12-1-2023 | 7,000,000 | 7,752,570 | ||||||||||||
CommScope Holding Company Incorporated 144A | 5.50 | 3-1-2024 | 2,020,000 | 2,085,650 | ||||||||||||
Level 3 Financing Incorporated | 5.38 | 1-15-2024 | 3,390,000 | 3,428,138 | ||||||||||||
Level 3 Financing Incorporated | 5.38 | 5-1-2025 | 3,515,000 | 3,620,099 | ||||||||||||
20,123,284 | ||||||||||||||||
|
| |||||||||||||||
Entertainment: 0.51% | ||||||||||||||||
Live Nation Entertainment Incorporated 144A | 4.88 | 11-1-2024 | 3,940,000 | 3,871,444 | ||||||||||||
|
| |||||||||||||||
Media: 4.30% | ||||||||||||||||
Communications Finance Incorporated | 6.88 | 9-1-2027 | 485,000 | 501,975 | ||||||||||||
CSC Holdings LLC | 6.75 | 11-15-2021 | 900,000 | 945,000 | ||||||||||||
DISH DBS Corporation | 5.88 | 7-15-2022 | 4,835,000 | 5,103,343 | ||||||||||||
DISH DBS Corporation | 6.75 | 6-1-2021 | 4,030,000 | 4,130,750 | ||||||||||||
Gray Television Incorporated 144A | 5.13 | 10-15-2024 | 2,400,000 | 2,453,496 | ||||||||||||
Lamar Media Corporation | 5.00 | 5-1-2023 | 2,558,000 | 2,586,778 | ||||||||||||
Nielsen Finance LLC 144A | 5.00 | 4-15-2022 | 2,485,000 | 2,487,361 | ||||||||||||
Sirius XM Radio Incorporated 144A | 3.88 | 8-1-2022 | 13,950,000 | 14,072,063 | ||||||||||||
32,280,766 | ||||||||||||||||
|
| |||||||||||||||
Wireless Telecommunication Services: 1.94% | ||||||||||||||||
Sprint Corporation | 7.88 | 9-15-2023 | 4,080,000 | 4,745,550 | ||||||||||||
T-Mobile USA Incorporated | 4.00 | 4-15-2022 | 9,442,000 | 9,795,036 | ||||||||||||
14,540,586 | ||||||||||||||||
|
| |||||||||||||||
Consumer Discretionary: 16.19% |
| |||||||||||||||
Auto Components: 1.94% | ||||||||||||||||
Allison Transmission Incorporated 144A | 5.00 | 10-1-2024 | 8,885,000 | 8,974,117 | ||||||||||||
Goodyear Tire & Rubber Company | 5.13 | 11-15-2023 | 5,540,000 | 5,553,905 | ||||||||||||
14,528,022 | ||||||||||||||||
|
| |||||||||||||||
Automobiles: 1.25% | ||||||||||||||||
Ford Motor Company | 8.50 | 4-21-2023 | 8,480,000 | 9,373,834 | ||||||||||||
|
| |||||||||||||||
Hotels, Restaurants & Leisure: 1.07% | ||||||||||||||||
MGM Resorts International | 7.75 | 3-15-2022 | 3,455,000 | 3,666,619 | ||||||||||||
Royal Caribbean Cruises Limited 144A | 9.13 | 6-15-2023 | 4,150,000 | 4,367,875 | ||||||||||||
8,034,494 | ||||||||||||||||
|
| |||||||||||||||
Household Durables: 2.43% | ||||||||||||||||
KB Home | 7.50 | 9-15-2022 | 8,055,000 | 8,830,294 | ||||||||||||
Newell Brands Incorporated | 4.35 | 4-1-2023 | 6,973,000 | 7,373,948 | ||||||||||||
Pulte Group Incorporated | 4.25 | 3-1-2021 | 2,030,000 | 2,050,300 | ||||||||||||
18,254,542 | ||||||||||||||||
|
| |||||||||||||||
Internet & Direct Marketing Retail: 0.84% | ||||||||||||||||
QVC Incorporated | 4.38 | 3-15-2023 | 6,070,000 | 6,327,975 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term High Yield Bond Fund | 11
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Multiline Retail: 3.11% | ||||||||||||||||
Macy’s Incorporated 144A | 8.38 | % | 6-15-2025 | $ | 9,470,000 | $ | 9,939,901 | |||||||||
Macy’s Retail Holdings Incorporated | 3.45 | 1-15-2021 | 2,365,000 | 2,353,175 | ||||||||||||
Nordstrom Incorporated 144A | 8.75 | 5-15-2025 | 9,985,000 | 11,019,011 | ||||||||||||
23,312,087 | ||||||||||||||||
|
| |||||||||||||||
Specialty Retail: 5.06% | ||||||||||||||||
Group 1 Automotive Incorporated | 5.00 | 6-1-2022 | 10,865,000 | 10,865,000 | ||||||||||||
L Brands Incorporated | 5.63 | 2-15-2022 | 4,930,000 | 5,065,575 | ||||||||||||
L Brands Incorporated | 5.63 | 10-15-2023 | 1,400,000 | 1,459,794 | ||||||||||||
L Brands Incorporated 144A | 9.38 | 7-1-2025 | 5,175,000 | 6,027,840 | ||||||||||||
Penske Auto Group Incorporated | 3.50 | 9-1-2025 | 275,000 | 276,986 | ||||||||||||
Penske Auto Group Incorporated | 5.75 | 10-1-2022 | 10,800,000 | 10,807,560 | ||||||||||||
The Gap Incorporated «144A | 8.63 | 5-15-2025 | 3,090,000 | 3,449,213 | ||||||||||||
37,951,968 | ||||||||||||||||
|
| |||||||||||||||
Textiles, Apparel & Luxury Goods: 0.49% | ||||||||||||||||
Levi Strauss & Company | 5.00 | 5-1-2025 | 3,625,000 | 3,706,563 | ||||||||||||
|
| |||||||||||||||
Consumer Staples: 1.33% |
| |||||||||||||||
Food Products: 1.22% | ||||||||||||||||
Albertsons Company LLC | 6.63 | 6-15-2024 | 8,895,000 | 9,181,419 | ||||||||||||
|
| |||||||||||||||
Personal Products: 0.11% | ||||||||||||||||
Edgewell Personal Care Company | 4.70 | 5-24-2022 | 785,000 | 820,325 | ||||||||||||
|
| |||||||||||||||
Energy: 11.53% |
| |||||||||||||||
Energy Equipment & Services: 0.50% | ||||||||||||||||
Hilcorp Energy Company 144A | 5.00 | 12-1-2024 | 3,935,000 | 3,728,413 | ||||||||||||
|
| |||||||||||||||
Oil, Gas & Consumable Fuels: 11.03% | ||||||||||||||||
Apache Corporation | 4.63 | 11-15-2025 | 1,535,000 | 1,569,538 | ||||||||||||
Buckeye Partners LP 144A | 4.13 | 3-1-2025 | 1,360,000 | 1,366,773 | ||||||||||||
Crestwood Midstream Partners LP | 6.25 | 4-1-2023 | 6,405,000 | 6,307,580 | ||||||||||||
DCP Midstream Operating LP 144A | 4.75 | 9-30-2021 | 4,660,000 | 4,753,200 | ||||||||||||
EnLink Midstream Partners LP | 4.15 | 6-1-2025 | 7,450,000 | 6,639,589 | ||||||||||||
EQT Corporation | 7.88 | 2-1-2025 | 1,981,000 | 2,274,049 | ||||||||||||
Occidental Petroleum Corporation (3 Month LIBOR +1.45%) ± | 1.73 | 8-15-2022 | 2,815,000 | 2,661,373 | ||||||||||||
Occidental Petroleum Corporation | 8.00 | 7-15-2025 | 3,625,000 | 3,944,036 | ||||||||||||
Rockies Express Pipeline LLC 144A | 3.60 | 5-15-2025 | 10,825,000 | 10,630,583 | ||||||||||||
Southern Star Central Corporation 144A | 5.13 | 7-15-2022 | 6,088,000 | 6,080,474 | ||||||||||||
Suburban Propane Partners LP | 5.50 | 6-1-2024 | 9,025,000 | 9,166,873 | ||||||||||||
Sunoco LP | 4.88 | 1-15-2023 | 2,755,000 | 2,799,934 | ||||||||||||
Tallgrass Energy Partners LP 144A | 4.75 | 10-1-2023 | 9,565,000 | 9,373,700 | ||||||||||||
Targa Resources Partners LP | 4.25 | 11-15-2023 | 9,345,000 | 9,403,687 | ||||||||||||
Western Gas Partners LP | 4.00 | 7-1-2022 | 3,305,000 | 3,362,838 | ||||||||||||
Western Gas Partners LP | 5.38 | 6-1-2021 | 2,452,000 | 2,476,520 | ||||||||||||
82,810,747 | ||||||||||||||||
|
| |||||||||||||||
Financials: 11.14% |
| |||||||||||||||
Banks: 1.26% | ||||||||||||||||
CIT Group Incorporated | 5.00 | 8-15-2022 | 9,000,000 | 9,416,250 | ||||||||||||
|
| |||||||||||||||
Capital Markets: 1.01% | ||||||||||||||||
Blue Cube Spinco Incorporated | 10.00 | 10-15-2025 | 7,185,000 | 7,609,634 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Short-Term High Yield Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Consumer Finance: 5.53% | ||||||||||||||||
Ford Motor Credit Company LLC | 4.13 | % | 8-17-2027 | $ | 4,600,000 | $ | 4,592,686 | |||||||||
General Motors Financial Company | 2.75 | 6-20-2025 | 3,195,000 | 3,299,203 | ||||||||||||
General Motors Financial Company | 4.20 | 3-1-2021 | 8,870,000 | 8,989,755 | ||||||||||||
General Motors Financial Company | 4.20 | 11-6-2021 | 1,930,000 | 1,995,892 | ||||||||||||
Navient Corporation | 5.00 | 10-26-2020 | 4,950,000 | 4,960,494 | ||||||||||||
Navient Corporation | 6.63 | 7-26-2021 | 3,217,000 | 3,297,425 | ||||||||||||
Springleaf Finance Corporation | 6.13 | 3-15-2024 | 2,500,000 | 2,710,675 | ||||||||||||
Springleaf Finance Corporation | 7.75 | 10-1-2021 | 11,145,000 | 11,674,388 | ||||||||||||
41,520,518 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 1.00% | ||||||||||||||||
LPL Holdings Incorporated 144A | 5.75 | 9-15-2025 | 7,245,000 | 7,534,800 | ||||||||||||
|
| |||||||||||||||
Insurance: 0.05% | ||||||||||||||||
Genworth Mortgage Holdings LLC 144A | 6.50 | 8-15-2025 | 350,000 | 368,102 | ||||||||||||
|
| |||||||||||||||
Mortgage REITs: 1.26% | ||||||||||||||||
Starwood Property Trust Incorporated | 5.00 | 12-15-2021 | 9,328,000 | 9,467,920 | ||||||||||||
|
| |||||||||||||||
Thrifts & Mortgage Finance: 1.03% | ||||||||||||||||
Ladder Capital Finance Holdings LP 144A | 5.25 | 3-15-2022 | 7,785,000 | 7,707,150 | ||||||||||||
|
| |||||||||||||||
Health Care: 6.73% |
| |||||||||||||||
Health Care Providers & Services: 6.37% | ||||||||||||||||
Centene Corporation | 4.75 | 1-15-2025 | 3,375,000 | 3,471,458 | ||||||||||||
HCA Incorporated | 5.88 | 5-1-2023 | 4,365,000 | 4,779,675 | ||||||||||||
HealthSouth Corporation | 5.13 | 3-15-2023 | 7,545,000 | 7,601,588 | ||||||||||||
Magellan Health Incorporated | 4.90 | 9-22-2024 | 4,710,000 | 4,898,400 | ||||||||||||
MEDNAX Incorporated 144A | 5.25 | 12-1-2023 | 8,890,000 | 9,045,575 | ||||||||||||
Molina Healthcare Incorporated 144A | 4.88 | 6-15-2025 | 2,500,000 | 2,543,750 | ||||||||||||
Molina Healthcare Incorporated | 5.38 | 11-15-2022 | 6,800,000 | 7,142,550 | ||||||||||||
Tenet Healthcare Corporation | 4.63 | 7-15-2024 | 5,485,000 | 5,611,155 | ||||||||||||
Universal Health Services Incorporated 144A | 4.75 | 8-1-2022 | 2,700,000 | 2,702,700 | ||||||||||||
47,796,851 | ||||||||||||||||
|
| |||||||||||||||
Life Sciences Tools & Services: 0.36% | ||||||||||||||||
Charles River Laboratories Incorporated 144A | 5.50 | 4-1-2026 | 2,550,000 | 2,683,875 | ||||||||||||
|
| |||||||||||||||
Industrials: 6.72% |
| |||||||||||||||
Airlines: 0.72% | ||||||||||||||||
American Airlines Group Company 144A | 5.00 | 6-1-2022 | 5,330,000 | 3,437,850 | ||||||||||||
United Continental Holdings Incorporated | 4.25 | 10-1-2022 | 2,100,000 | 1,942,500 | ||||||||||||
5,380,350 | ||||||||||||||||
|
| |||||||||||||||
Commercial Services & Supplies: 2.47% | ||||||||||||||||
ADT Corporation | 6.25 | 10-15-2021 | 9,025,000 | 9,538,071 | ||||||||||||
Aramark Services Incorporated 144A | 6.38 | 5-1-2025 | 3,305,000 | 3,461,988 | ||||||||||||
Covanta Holding Corporation | 5.88 | 7-1-2025 | 1,575,000 | 1,643,261 | ||||||||||||
Plastipak Holdings Incorporated 144A | 6.25 | 10-15-2025 | 3,830,000 | 3,882,471 | ||||||||||||
18,525,791 | ||||||||||||||||
|
| |||||||||||||||
Construction & Engineering: 1.68% | ||||||||||||||||
Great Lakes Dredge & Dock Corporation | 8.00 | 5-15-2022 | 8,980,000 | 9,298,521 | ||||||||||||
Taylor Morrison Communities Incorporated 144A | 5.88 | 4-15-2023 | 2,870,000 | 3,038,613 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term High Yield Bond Fund | 13
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Construction & Engineering (continued) | ||||||||||||||||
Taylor Morrison Communities Incorporated 144A | 6.00 | % | 9-1-2023 | $ | 280,000 | $ | 287,000 | |||||||||
12,624,134 | ||||||||||||||||
|
| |||||||||||||||
Electronic Equipment, Instruments & Components: 0.19% | ||||||||||||||||
Wesco Distribution Incorporated 144A | 7.13 | 6-15-2025 | 1,285,000 | 1,412,125 | ||||||||||||
|
| |||||||||||||||
Machinery: 0.26% | ||||||||||||||||
Trimas Corporation 144A | 4.88 | 10-15-2025 | 1,915,000 | 1,946,119 | ||||||||||||
|
| |||||||||||||||
Trading Companies & Distributors: 1.40% | ||||||||||||||||
Fortress Transportation & Infrastructure Investors LLC 144A | 6.75 | 3-15-2022 | 10,600,000 | 10,522,717 | ||||||||||||
|
| |||||||||||||||
Information Technology: 2.46% |
| |||||||||||||||
IT Services: 1.23% | ||||||||||||||||
Cardtronics Incorporated 144A | 5.50 | 5-1-2025 | 9,135,000 | 9,226,350 | ||||||||||||
|
| |||||||||||||||
Software: 0.43% | ||||||||||||||||
NortonLifeLock Incorporated 144A | 5.00 | 4-15-2025 | 3,135,000 | 3,197,700 | ||||||||||||
|
| |||||||||||||||
Technology Hardware, Storage & Peripherals: 0.80% | ||||||||||||||||
Dell International LLC 144A | 5.88 | 6-15-2021 | 1,436,000 | 1,438,240 | ||||||||||||
Dell International LLC 144A | 7.13 | 6-15-2024 | 4,400,000 | 4,568,476 | ||||||||||||
6,006,716 | ||||||||||||||||
|
| |||||||||||||||
Materials: 1.67% |
| |||||||||||||||
Chemicals: 0.32% | ||||||||||||||||
Chemours Company | 6.63 | 5-15-2023 | 2,370,000 | 2,381,826 | ||||||||||||
|
| |||||||||||||||
Containers & Packaging: 1.35% | ||||||||||||||||
Reynolds Group Holding Limited 144A | 5.13 | 7-15-2023 | 3,450,000 | 3,500,715 | ||||||||||||
Sealed Air Corporation 144A | 5.13 | 12-1-2024 | 1,330,000 | 1,463,000 | ||||||||||||
Sealed Air Corporation 144A | 5.25 | 4-1-2023 | 4,835,000 | 5,174,417 | ||||||||||||
10,138,132 | ||||||||||||||||
|
| |||||||||||||||
Real Estate: 2.90% |
| |||||||||||||||
Equity REITs: 2.90% | ||||||||||||||||
CoreCivic Incorporated | 4.63 | 5-1-2023 | 6,812,000 | 6,471,400 | ||||||||||||
CoreCivic Incorporated | 5.00 | 10-15-2022 | 1,555,000 | 1,531,675 | ||||||||||||
SBA Communications Corporation | 4.00 | 10-1-2022 | 1,885,000 | 1,897,667 | ||||||||||||
Service Properties Trust Company | 4.35 | 10-1-2024 | 9,300,000 | 8,739,117 | ||||||||||||
Service Properties Trust Company | 7.50 | 9-15-2025 | 2,855,000 | 3,105,207 | ||||||||||||
21,745,066 | ||||||||||||||||
|
| |||||||||||||||
Utilities: 2.29% |
| |||||||||||||||
Electric Utilities: 0.36% | ||||||||||||||||
NextEra Energy Operating Partners LP 144A | 4.25 | 7-15-2024 | 2,575,000 | 2,748,401 | ||||||||||||
|
| |||||||||||||||
Independent Power & Renewable Electricity Producers: 1.93% | ||||||||||||||||
TerraForm Power Operating LLC 144A | 4.25 | 1-31-2023 | 13,968,000 | 14,459,674 | ||||||||||||
|
| |||||||||||||||
Total Corporate Bonds and Notes (Cost $537,628,949) |
| 543,266,670 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Short-Term High Yield Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Loans: 15.24% |
| |||||||||||||||
Communication Services: 3.99% |
| |||||||||||||||
Media: 3.30% | ||||||||||||||||
CSC Holdings LLC (1 Month LIBOR +2.25%) ± | 2.42 | % | 1-15-2026 | $ | 2,437,875 | $ | 2,349,502 | |||||||||
CSC Holdings LLC (1 Month LIBOR +2.50%) ± | 2.67 | 4-15-2027 | 10,869,748 | 10,504,851 | ||||||||||||
Diamond Sports Group LLC (1 Month LIBOR +3.25%) ± | 3.42 | 8-24-2026 | 8,767,915 | 7,397,928 | ||||||||||||
Virgin Media Bristol LLC (1 Month LIBOR +2.50%) ± | 2.67 | 1-31-2028 | 4,615,000 | 4,486,795 | ||||||||||||
24,739,076 | ||||||||||||||||
|
| |||||||||||||||
Wireless Telecommunication Services: 0.69% | ||||||||||||||||
SBA Senior Finance II LLC (1 Month LIBOR +1.75%) ± | 1.92 | 4-11-2025 | 5,306,645 | 5,177,322 | ||||||||||||
|
| |||||||||||||||
Consumer Discretionary: 0.40% |
| |||||||||||||||
Specialty Retail: 0.40% | ||||||||||||||||
Sally Beauty Holdings Incorporated (1 Month LIBOR +2.25%) ± ‡ | 2.42 | 7-5-2024 | 3,043,299 | 2,974,824 | ||||||||||||
|
| |||||||||||||||
Energy: 1.06% |
| |||||||||||||||
Oil, Gas & Consumable Fuels: 1.06% | ||||||||||||||||
Apergy Corporation (3 Month LIBOR +5.00%) ± ‡ | 6.00 | 6-3-2027 | 8,015,207 | 7,995,169 | ||||||||||||
|
| |||||||||||||||
Financials: 0.89% |
| |||||||||||||||
Diversified Financial Services: 0.89% | ||||||||||||||||
Delos Finance SARL (3 Month LIBOR +1.75%) ± | 2.06 | 10-6-2023 | 6,905,500 | 6,711,317 | ||||||||||||
|
| |||||||||||||||
Health Care: 0.69% |
| |||||||||||||||
Health Care Providers & Services: 0.69% | ||||||||||||||||
Select Medical Corporation (1 Month LIBOR +2.50%) ± | 2.68 | 3-6-2025 | 5,319,589 | 5,164,416 | ||||||||||||
|
| |||||||||||||||
Industrials: 6.20% |
| |||||||||||||||
Aerospace & Defense: 0.77% | ||||||||||||||||
Rexnord LLC (1 Month LIBOR +1.75%) ± | 1.92 | 8-21-2024 | 5,781,250 | 5,757,489 | ||||||||||||
|
| |||||||||||||||
Airlines: 0.54% | ||||||||||||||||
Mileage Plus Holdings LLC (2 Month LIBOR +5.25%) ± | 6.25 | 6-21-2027 | 1,000,000 | 1,010,630 | ||||||||||||
United Airlines Incorporated (1 Month LIBOR +1.75%) ± | 1.91 | 4-1-2024 | 3,285,012 | 3,087,911 | ||||||||||||
4,098,541 | ||||||||||||||||
|
| |||||||||||||||
Building Products: 0.90% | ||||||||||||||||
Flex Acquisition Company (3 Month LIBOR +3.00%) ± | 4.00 | 12-29-2023 | 7,000,000 | 6,752,480 | ||||||||||||
|
| |||||||||||||||
Commercial Services & Supplies: 3.42% | ||||||||||||||||
Advanced Disposal Services Incorporated (1 Month LIBOR +2.25%) ± | 3.00 | 11-10-2023 | 11,559,352 | 11,499,474 | ||||||||||||
Aramark Services Incorporated (1 Month LIBOR +1.75%) ± | 1.91 | 3-28-2024 | 3,736,782 | 3,577,969 | ||||||||||||
Aramark Services Incorporated (1 Month LIBOR +1.75%) ± | 1.91 | 3-11-2025 | 7,611,734 | 7,253,982 | ||||||||||||
KAR Auction Services Incorporated (1 Month LIBOR +2.25%) ± ‡ | 2.44 | 9-19-2026 | 3,436,356 | 3,324,674 | ||||||||||||
25,656,099 | ||||||||||||||||
|
| |||||||||||||||
Machinery: 0.57% | ||||||||||||||||
Columbus McKinnon Corporation (3 Month LIBOR +2.50%) ± ‡ | 3.50 | 1-31-2024 | 4,308,214 | 4,265,132 | ||||||||||||
|
| |||||||||||||||
Information Technology: 1.10% |
| |||||||||||||||
Semiconductors & Semiconductor Equipment: 1.10% | ||||||||||||||||
ON Semiconductor Corporation (1 Month LIBOR +2.00%) ± | 2.16 | 9-19-2026 | 8,394,813 | 8,263,686 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term High Yield Bond Fund | 15
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Materials: 0.91% |
| |||||||||||||||
Chemicals: 0.91% | ||||||||||||||||
Ineos US Finance LLC (2 Month LIBOR +2.00%) ± | 2.21 | % | 4-1-2024 | $ | 7,046,078 | $ | 6,841,319 | |||||||||
|
| |||||||||||||||
Total Loans (Cost $118,386,437) |
| 114,396,870 | ||||||||||||||
|
| |||||||||||||||
Non-Agency Mortgage-Backed Securities: 0.00% | ||||||||||||||||
Salomon Brothers Mortgage Securities VII Series 1994-5 Class B2 ±± | 4.26 | 4-25-2024 | 18,022 | 16,727 | ||||||||||||
|
| |||||||||||||||
Total Non-Agency Mortgage-Backed Securities (Cost $17,848) |
| 16,727 | ||||||||||||||
|
| |||||||||||||||
Yankee Corporate Bonds and Notes: 10.11% |
| |||||||||||||||
Communication Services: 0.91% |
| |||||||||||||||
Media: 0.91% | ||||||||||||||||
Nielsen Holding and Finance BV 144A | 5.50 | 10-1-2021 | 6,800,000 | 6,808,500 | ||||||||||||
|
| |||||||||||||||
Consumer Discretionary: 0.64% |
| |||||||||||||||
Automobiles: 0.12% | ||||||||||||||||
Fiat Chrysler Automobiles NV | 5.25 | 4-15-2023 | 896,000 | 949,760 | ||||||||||||
|
| |||||||||||||||
Hotels, Restaurants & Leisure: 0.52% | ||||||||||||||||
International Game Technology plc 144A | 6.25 | 2-15-2022 | 3,781,000 | 3,884,864 | ||||||||||||
|
| |||||||||||||||
Energy: 1.51% |
| |||||||||||||||
Energy Equipment & Services: 1.47% | ||||||||||||||||
Alcoa Nederland Holding Company BV 144A | 6.75 | 9-30-2024 | 10,705,000 | 11,073,038 | ||||||||||||
|
| |||||||||||||||
Oil, Gas & Consumable Fuels: 0.04% | ||||||||||||||||
Cenovus Energy Incorporated | 5.38 | 7-15-2025 | 265,000 | 269,649 | ||||||||||||
|
| |||||||||||||||
Financials: 1.36% |
| |||||||||||||||
Diversified Financial Services: 1.36% | ||||||||||||||||
DAE Funding LLC 144A | 5.25 | 11-15-2021 | 6,155,000 | 6,155,000 | ||||||||||||
DAE Funding LLC 144A | 5.75 | 11-15-2023 | 4,050,000 | 4,029,750 | ||||||||||||
10,184,750 | ||||||||||||||||
|
| |||||||||||||||
Health Care: 1.85% |
| |||||||||||||||
Pharmaceuticals: 1.85% | ||||||||||||||||
Teva Pharmaceutical Finance BV | 2.20 | 7-21-2021 | 3,800,000 | 3,779,955 | ||||||||||||
Teva Pharmaceutical Finance BV | 2.80 | 7-21-2023 | 7,385,000 | 7,122,833 | ||||||||||||
Teva Pharmaceutical Finance BV | 3.65 | 11-10-2021 | 3,000,000 | 3,008,850 | ||||||||||||
13,911,638 | ||||||||||||||||
|
| |||||||||||||||
Industrials: 0.97% |
| |||||||||||||||
Airlines: 0.97% | ||||||||||||||||
Air Canada Company 144A | 7.75 | 4-15-2021 | 7,300,000 | 7,300,000 | ||||||||||||
|
| |||||||||||||||
Materials: 2.87% |
| |||||||||||||||
Chemicals: 1.23% | ||||||||||||||||
Park Aerospace Holdings Company 144A | 5.25 | 8-15-2022 | 9,305,000 | 9,237,743 | ||||||||||||
|
| |||||||||||||||
Metals & Mining: 1.64% | ||||||||||||||||
Constellium NV Company 144A | 5.75 | 5-15-2024 | 3,000,000 | 3,060,000 | ||||||||||||
FMG Resources Proprietary Limited 144A | 4.75 | 5-15-2022 | 8,909,000 | 9,209,679 | ||||||||||||
12,269,679 | ||||||||||||||||
|
| |||||||||||||||
Total Yankee Corporate Bonds and Notes (Cost $74,830,992) | 75,889,621 | |||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Short-Term High Yield Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Yield | Shares | Value | ||||||||||||||
Short-Term Investments: 1.95% | ||||||||||||||||
Investment Companies: 1.95% | ||||||||||||||||
Securities Lending Cash Investments LLC (I)(r)(u) | 0.09 | % | 991,590 | $ | 991,590 | |||||||||||
Wells Fargo Government Money Market Fund Select Class (I)(u) | 0.06 | 13,625,847 | 13,625,847 | |||||||||||||
Total Short-Term Investments (Cost $14,617,437) |
| 14,617,437 | ||||||||||||||
|
|
Total investments in securities (Cost $745,481,663) | 99.69 | % | 748,187,325 | |||||
Other assets and liabilities, net | 0.31 | 2,313,928 | ||||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 750,501,253 | ||||
|
|
|
|
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. |
« | All or a portion of this security is on loan. |
± | Variable rate investment. The rate shown is the rate in effect at period end. |
‡ | Security is valued using significant unobservable inputs. |
±± | The coupon of the security is adjusted based on the principal and interest payments received from the underlying pool of mortgages as well as the credit quality and the actual prepayment speed of the underlying mortgages. |
(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:
LIBOR | London Interbank Offered Rate |
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:
Value, beginning of period | Purchases | Sales proceeds | Net realized gains (losses) | Net unrealized gains (losses) | Income from affiliated securities | Value, end of period | % of net assets | |||||||||||||||||||||||||||||
Short-Term Investments | ||||||||||||||||||||||||||||||||||||
Investment Companies | ||||||||||||||||||||||||||||||||||||
Securities Lending Cash Investments LLC | $ | 5,730,944 | $ | 27,003,859 | $ | (31,743,470 | ) | $ | 257 | $ | 0 | $ | 43,027 | # | $ | 991,590 | ||||||||||||||||||||
Wells Fargo Government Money Market Fund Select Class | 47,797,221 | 575,033,904 | (609,205,278 | ) | 0 | 0 | 572,545 | 13,625,847 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
$ | 257 | $ | 0 | $ | 615,572 | $ | 14,617,437 | 1.95 | % | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
# | Amount shown represents income before fees and rebates. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term High Yield Bond Fund | 17
Table of Contents
Statement of assets and liabilities—August 31, 2020
Assets | ||||
Investments in unaffiliated securities (including $973,212 of securities loaned), at value (cost $730,864,226) | $ | 733,569,888 | ||
Investments in affiliated securities, at value (cost $14,617,437) | 14,617,437 | |||
Receivable for investments sold | 547,877 | |||
Receivable for Fund shares sold | 707,817 | |||
Receivable for interest | 10,762,208 | |||
Receivable for securities lending income, net | 141 | |||
Prepaid expenses and other assets | 1,972 | |||
|
| |||
Total assets | 760,207,340 | |||
|
| |||
Liabilities | ||||
Due to custodian bank | 547,877 | |||
Payable upon receipt of securities loaned | 990,497 | |||
Payable for investments purchased | 6,100,099 | |||
Payable for Fund shares redeemed | 1,004,956 | |||
Management fee payable | 232,994 | |||
Dividends payable | 519,526 | |||
Administration fees payable | 61,543 | |||
Distribution fee payable | 29,199 | |||
Trustees’ fees and expenses payable | 3,378 | |||
Accrued expenses and other liabilities | 216,018 | |||
|
| |||
Total liabilities | 9,706,087 | |||
|
| |||
Total net assets | $ | 750,501,253 | ||
|
| |||
Net assets consist of | ||||
Paid-in capital | $ | 796,492,800 | ||
Total distributable loss | (45,991,547 | ) | ||
|
| |||
Total net assets | $ | 750,501,253 | ||
|
| |||
Computation of net asset value and offering price per share | ||||
Net assets – Class A | $ | 97,985,422 | ||
Shares outstanding – Class A1 | 12,113,471 | |||
Net asset value per share – Class A | $8.09 | |||
Maximum offering price per share – Class A2 | $8.34 | |||
Net assets – Class C | $ | 46,065,823 | ||
Shares outstanding – Class C1 | 5,693,191 | |||
Net asset value per share – Class C | $8.09 | |||
Net assets – Administrator Class | $ | 52,406,229 | ||
Shares outstanding – Administrator Class1 | 6,479,205 | |||
Net asset value per share – Administrator Class | $8.09 | |||
Net assets – Institutional Class | $ | 554,043,779 | ||
Shares outstanding – Institutional Class1 | 68,590,206 | |||
Net asset value per share – Institutional Class | $8.08 |
1 | The Fund has an unlimited number of authorized shares. |
2 | Maximum offering price is computed as 100/97 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.
18 | Wells Fargo Short-Term High Yield Bond Fund
Table of Contents
Statement of operations—year ended August 31, 2020
Investment income | ||||
Interest | $ | 32,599,388 | ||
Income from affiliated securities | 586,960 | |||
|
| |||
Total investment income | 33,186,348 | |||
|
| |||
Expenses | ||||
Management fee | 4,086,710 | |||
Administration fees | ||||
Class A | 161,873 | |||
Class C | 82,433 | |||
Administrator Class | 65,371 | |||
Institutional Class | 492,901 | |||
Shareholder servicing fees | ||||
Class A | 252,765 | |||
Class C | 128,692 | |||
Administrator Class | 162,657 | |||
Distribution fee | ||||
Class C | 385,991 | |||
Custody and accounting fees | 81,470 | |||
Professional fees | 55,493 | |||
Registration fees | 94,015 | |||
Shareholder report expenses | 78,537 | |||
Trustees’ fees and expenses | 21,326 | |||
Other fees and expenses | 68,325 | |||
|
| |||
Total expenses | 6,218,559 | |||
Less: Fee waivers and/or expense reimbursements | ||||
Fund-level | (950,620 | ) | ||
Class A | (25,513 | ) | ||
Class C | (9,780 | ) | ||
Administrator Class | (76,996 | ) | ||
|
| |||
Net expenses | 5,155,650 | |||
|
| |||
Net investment income | 28,030,698 | |||
|
| |||
Realized and unrealized gains (losses) on investments | ||||
Net realized gains (losses) on | ||||
Unaffiliated securities | (8,783,470 | ) | ||
Affiliated securities | 257 | |||
|
| |||
Net realized losses on investments | (8,783,213 | ) | ||
Net change in unrealized gains (losses) on investments | 719,608 | |||
|
| |||
Net realized and unrealized gains (losses) on investments | (8,063,605 | ) | ||
|
| |||
Net increase in net assets resulting from operations | $ | 19,967,093 | ||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Short-Term High Yield Bond Fund | 19
Table of Contents
Statement of changes in net assets
Year ended August 31, 2020 | Year ended August 31, 2019 | |||||||||||||||
Operations | ||||||||||||||||
Net investment income | $ | 28,030,698 | $ | 33,006,486 | ||||||||||||
Net realized losses on investments | (8,783,213 | ) | (2,706,939 | ) | ||||||||||||
Net change in unrealized gains (losses) on investments | 719,608 | 11,155,238 | ||||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from operations | 19,967,093 | 41,454,785 | ||||||||||||||
|
| |||||||||||||||
Distributions to shareholders from net investment income and net realized gains | ||||||||||||||||
Class A | (3,365,905 | ) | (3,762,988 | ) | ||||||||||||
Class C | (1,320,606 | ) | (1,689,410 | ) | ||||||||||||
Administrator Class | (2,251,888 | ) | (3,168,104 | ) | ||||||||||||
Institutional Class | (22,262,821 | ) | (25,680,553 | ) | ||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | (29,201,220 | ) | (34,301,055 | ) | ||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold | ||||||||||||||||
Class A | 3,568,287 | 28,517,927 | 2,334,881 | 18,662,572 | ||||||||||||
Class C | 467,805 | 3,751,623 | 550,907 | 4,399,664 | ||||||||||||
Administrator Class | 1,535,701 | 12,304,096 | 3,608,062 | 28,884,553 | ||||||||||||
Institutional Class | 31,620,693 | 251,527,794 | 39,157,823 | 312,749,375 | ||||||||||||
|
| |||||||||||||||
296,101,440 | 364,696,164 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions | ||||||||||||||||
Class A | 403,131 | 3,208,961 | 455,888 | 3,644,906 | ||||||||||||
Class C | 161,523 | 1,286,290 | 206,987 | 1,655,385 | ||||||||||||
Administrator Class | 279,640 | 2,231,101 | 388,986 | 3,109,963 | ||||||||||||
Institutional Class | 2,252,068 | 17,917,547 | 2,585,685 | 20,647,043 | ||||||||||||
|
| |||||||||||||||
24,643,899 | 29,057,297 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed | ||||||||||||||||
Class A | (4,836,165 | ) | (37,567,439 | ) | (5,701,043 | ) | (45,524,301 | ) | ||||||||
Class C | (2,263,342 | ) | (17,866,207 | ) | (3,080,040 | ) | (24,607,930 | ) | ||||||||
Administrator Class | (6,110,858 | ) | (48,807,964 | ) | (6,065,662 | ) | (48,429,129 | ) | ||||||||
Institutional Class | (52,343,372 | ) | (408,601,197 | ) | (50,462,701 | ) | (402,058,756 | ) | ||||||||
|
| |||||||||||||||
(512,842,807 | ) | (520,620,116 | ) | |||||||||||||
|
| |||||||||||||||
Net decrease in net assets resulting from capital share transactions | (192,097,468 | ) | (126,866,655 | ) | ||||||||||||
|
| |||||||||||||||
Total decrease in net assets | (201,331,595 | ) | (119,712,925 | ) | ||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 951,832,848 | 1,071,545,773 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 750,501,253 | $ | 951,832,848 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Short-Term High Yield Bond Fund
Table of Contents
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.07 | $7.99 | $8.07 | $8.10 | $8.07 | |||||||||||||||
Net investment income | 0.26 | 0.25 | 0.24 | 0.23 | 0.24 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.02 | 0.09 | (0.08 | ) | (0.03 | ) | 0.03 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.28 | 0.34 | 0.16 | 0.20 | 0.27 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.26 | ) | (0.26 | ) | (0.24 | ) | (0.23 | ) | (0.24 | ) | ||||||||||
Net asset value, end of period | $8.09 | $8.07 | $7.99 | $8.07 | $8.10 | |||||||||||||||
Total return1 | 3.61 | % | 4.40 | % | 2.00 | % | 2.51 | % | 3.37 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.94 | % | 0.94 | % | 0.93 | % | 0.92 | % | 0.92 | % | ||||||||||
Net expenses | 0.81 | % | 0.81 | % | 0.81 | % | 0.81 | % | 0.81 | % | ||||||||||
Net investment income | 3.19 | % | 3.18 | % | 2.96 | % | 2.88 | % | 2.95 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 78 | % | 44 | % | 34 | % | 35 | % | 32 | % | ||||||||||
Net assets, end of period (000s omitted) | $97,985 | $104,671 | $127,024 | $172,151 | $296,817 |
1 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
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Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.07 | $8.00 | $8.07 | $8.10 | $8.07 | |||||||||||||||
Net investment income | 0.20 | 0.19 | 0.18 | 0.17 | 0.18 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.02 | 0.08 | (0.07 | ) | (0.03 | ) | 0.03 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.22 | 0.27 | 0.11 | 0.14 | 0.21 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.20 | ) | (0.20 | ) | (0.18 | ) | (0.17 | ) | (0.18 | ) | ||||||||||
Net asset value, end of period | $8.09 | $8.07 | $8.00 | $8.07 | $8.10 | |||||||||||||||
Total return1 | 2.84 | % | 3.49 | % | 1.36 | % | 1.75 | % | 2.60 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 1.69 | % | 1.69 | % | 1.68 | % | 1.67 | % | 1.67 | % | ||||||||||
Net expenses | 1.56 | % | 1.56 | % | 1.56 | % | 1.56 | % | 1.56 | % | ||||||||||
Net investment income | 2.43 | % | 2.43 | % | 2.21 | % | 2.11 | % | 2.20 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 78 | % | 44 | % | 34 | % | 35 | % | 32 | % | ||||||||||
Net assets, end of period (000s omitted) | $46,066 | $59,113 | $77,169 | $111,268 | $123,745 |
1 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
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Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.06 | $7.99 | $8.07 | $8.10 | $8.07 | |||||||||||||||
Net investment income | 0.27 | 0.27 | 0.25 | 0.24 | 0.25 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.03 | 0.08 | (0.08 | ) | (0.03 | ) | 0.03 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.30 | 0.35 | 0.17 | 0.21 | 0.28 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.27 | ) | (0.28 | ) | (0.25 | ) | (0.24 | ) | (0.25 | ) | ||||||||||
Net asset value, end of period | $8.09 | $8.06 | $7.99 | $8.07 | $8.10 | |||||||||||||||
Total return | 3.90 | % | 4.44 | % | 2.16 | % | 2.68 | % | 3.54 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.88 | % | 0.87 | % | 0.86 | % | 0.86 | % | 0.86 | % | ||||||||||
Net expenses | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | ||||||||||
Net investment income | 3.29 | % | 3.34 | % | 3.13 | % | 3.03 | % | 3.11 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 78 | % | 44 | % | 34 | % | 35 | % | 32 | % | ||||||||||
Net assets, end of period (000s omitted) | $52,406 | $86,892 | $102,673 | $134,070 | $274,878 |
The accompanying notes are an integral part of these financial statements.
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Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.05 | $7.98 | $8.06 | $8.09 | $8.06 | |||||||||||||||
Net investment income | 0.29 | 0.28 | 0.27 | 0.25 | 0.26 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.03 | 0.08 | (0.08 | ) | (0.02 | ) | 0.03 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.32 | 0.36 | 0.19 | 0.23 | 0.29 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.29 | ) | (0.29 | ) | (0.27 | ) | (0.26 | ) | (0.26 | ) | ||||||||||
Net asset value, end of period | $8.08 | $8.05 | $7.98 | $8.06 | $8.09 | |||||||||||||||
Total return | 4.06 | % | 4.59 | % | 2.31 | % | 2.83 | % | 3.69 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.61 | % | 0.61 | % | 0.59 | % | 0.59 | % | 0.59 | % | ||||||||||
Net expenses | 0.50 | % | 0.50 | % | 0.50 | % | 0.50 | % | 0.50 | % | ||||||||||
Net investment income | 3.47 | % | 3.49 | % | 3.27 | % | 3.16 | % | 3.26 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 78 | % | 44 | % | 34 | % | 35 | % | 32 | % | ||||||||||
Net assets, end of period (000s omitted) | $554,044 | $701,157 | $764,680 | $1,010,757 | $735,285 |
The accompanying notes are an integral part of these financial statements.
24 | Wells Fargo Short-Term High Yield Bond Fund
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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 Short-Term High Yield Bond 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.
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.
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.
Loans
The Fund may invest in direct debt instruments which are interests in amounts owed to lenders by corporate or other borrowers. The loans pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. Investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. When the Fund purchases participations, it generally has no rights to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund assumes the credit risk of both the borrower and the lender that is selling the
Wells Fargo Short-Term High Yield Bond Fund | 25
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Notes to financial statements
participation. When the Fund purchases assignments from lenders, it acquires direct rights against the borrower on the loan and may enforce compliance by the borrower with the terms of the loan agreement. Loans may include fully funded term loans or unfunded loan commitments, which are contractual obligations for future funding.
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.
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 are declared daily and paid monthly. Distributions from net realized gains, if any, 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 August 31, 2020, the aggregate cost of all investments for federal income tax purposes was $746,879,652 and the unrealized gains (losses) consisted of:
Gross unrealized gains | $ | 10,641,966 | ||
Gross unrealized losses | (9,334,293 | ) | ||
Net unrealized losses | $ | 1,307,673 |
As of August 31, 2020, the Fund had capital loss carryforwards which consist of $15,482,218 in short-term capital losses and $31,825,898 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.
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) |
26 | Wells Fargo Short-Term High Yield Bond Fund
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Notes to financial statements
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 August 31, 2020:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Corporate bonds and notes | $ | 0 | $ | 543,266,670 | $ | 0 | $ | 543,266,670 | ||||||||
Loans | 0 | 95,837,071 | 18,559,799 | 114,396,870 | ||||||||||||
Non-agency mortgage-backed securities | 0 | 16,727 | 0 | 16,727 | ||||||||||||
Yankee corporate bonds and notes | 0 | 75,889,621 | 0 | 75,889,621 | ||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 14,617,437 | 0 | 0 | 14,617,437 | ||||||||||||
Total assets | $ | 14,617,437 | $ | 715,010,089 | �� | $ | 18,559,799 | $ | 748,187,325 |
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
Loans | ||||
Balance as of August 31, 2019 | $ | 6,794,351 | ||
Accrued discounts (premiums) | (78 | ) | ||
Realized gains (losses) | (1,857 | ) | ||
Change in unrealized gains (losses) | (79,548 | ) | ||
Purchases | 12,593,158 | |||
Sales | (746,227 | ) | ||
Transfers into Level 3 | 0 | |||
Transfers out of Level 3 | 0 | |||
Balance as of August 31, 2020 | $ | 18,559,799 | ||
Change in unrealized gains (losses) relating to securities still held at August 31, 2020 | $ | (64,044 | ) |
The loan obligations in the Level 3 table were valued using indicative broker quotes. These indicative broker quotes are considered Level 3 inputs. Quantitative unobservable inputs used by the brokers are often proprietary and not provided to the Fund and therefore the disclosure that would address these inputs is not included above.
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
Wells Fargo Short-Term High Yield Bond Fund | 27
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Notes to financial statements
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 | 0.500 | % | ||
Next $500 million | 0.475 | |||
Next $2 billion | 0.450 | |||
Next $2 billion | 0.425 | |||
Next $5 billion | 0.390 | |||
Over $10 billion | 0.380 |
For the year ended August 31, 2020, the management fee was equivalent to an annual rate of 0.49% 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 0.35% and declining to 0.20% 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 | 0.16 | % | ||
Administrator Class | 0.10 | |||
Institutional Class | 0.08 |
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 December 31, 2020 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.81% for Class A shares, 1.56% for Class C shares, and 0.65% for Administrator Class shares, and 0.50% 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 August 31, 2020, Funds Distributor received $2,776 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 August 31, 2020.
28 | Wells Fargo Short-Term High Yield Bond Fund
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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 August 31, 2020 were $626,150,483 and $675,903,178, 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 Federal 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 August 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 | |||||||||
Barclays Capital Inc. | $ | 518,865 | $ | (518,865 | ) | $ | 0 | |||||
Scotia Capital (USA) Inc. | 454,347 | (454,347 | ) | 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 $350,000,000 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 August 31, 2020, there were no borrowings by the Fund under the agreement.
8. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid was $29,201,220 and $34,301,055 of ordinary income for the years ended August 31, 2020 and August 31, 2019, respectively.
As of August 31, 2020, the components of distributable loss on a tax basis were as follows:
Undistributed ordinary income | Unrealized gains | Capital loss carryforward | ||
$528,422 | $1,307,673 | $(47,308,116) |
Wells Fargo Short-Term High Yield Bond Fund | 29
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Notes to financial statements
9. INDEMNIFICATION
Under the Fund’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 Fund. The Fund has entered into a separate agreement with each Trustee that converts indemnification rights currently existing under the Fund’s organizational documents into contractual rights that cannot be changed in the future without the consent of the Trustee. Additionally, in the normal course of business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’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 on fair value measurements in Topic 820, Fair Value Measurements. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has adopted this guidance which did not have a material impact on the financial statements.
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.
30 | Wells Fargo Short-Term High Yield Bond 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 Short-Term High Yield Bond Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of August 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 August 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 August 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
October 28, 2020
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TAX INFORMATION
For the fiscal year ended August 31, 2020, $19,999,334 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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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 142 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 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). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008 | 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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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 (Emeritus), 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 Wheelock (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. Interim President of the McKnight Foundation from January to September 2020. 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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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 the Treasurer of 77 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. |
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BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Wells Fargo Short-Term High Yield Bond Fund
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Funds Trust (the “Trust”) must determine annually whether to approve the continuation of the Trust’s investment management and sub-advisory agreements. In this regard, at a Board meeting held on May 26, 2020 and May 28, 2020 (together, the “Meeting”), the Board, all the members of which have no direct or indirect interest in the investment management and sub-advisory agreements and are not “interested persons” of the Trust, as defined in the 1940 Act (the “Independent Trustees”), reviewed and approved for Wells Fargo Short-Term High Yield Bond Fund (the “Fund”): (i) an investment management agreement (the “Management Agreement”) with Wells Fargo Funds Management, LLC (“Funds Management”); and (ii) an investment sub-advisory agreement (the “Sub-Advisory Agreement”) with Wells Capital Management Incorporated (the “Sub-Adviser”), an affiliate of Funds Management. The Management Agreement and the Sub-Advisory Agreement are collectively referred to as the “Advisory Agreements.”
At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of Funds Management and the Sub-Adviser and the approval of the Advisory Agreements. Prior to the Meeting, including at a Board meeting held in April 2020, the Trustees conferred extensively among themselves and with representatives of Funds Management about these matters. Also, the Board has adopted a team-based approach, with each team consisting of a sub-set of Trustees, to assist the full Board in the discharge of its duties in reviewing investment performance and other matters throughout the year. The Independent Trustees were assisted in their evaluation of the Advisory Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately.
In providing information to the Board, Funds Management and the Sub-Adviser were guided by a detailed set of requests for information submitted to them by independent legal counsel on behalf of the Independent Trustees at the start of the Board’s annual contract renewal process earlier in 2020. In considering and approving the Advisory Agreements, the Trustees considered the information they believed relevant, including but not limited to the information discussed below. The Board considered not only the specific information presented in connection with the Meeting, but also the knowledge gained over time through interaction with Funds Management and the Sub-Adviser about various topics. In this regard, the Board reviewed reports of Funds Management at each of its quarterly meetings, which included, among other things, portfolio reviews and investment performance reports. In addition, the Board and the teams mentioned above confer with portfolio managers at various times throughout the year. The Board did not identify any particular information or consideration that was all-important or controlling, and each individual Trustee may have attributed different weights to various factors.
After its deliberations, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable. The Board considered the approval of the Advisory Agreements for the Fund as part of its consideration of agreements for funds across the complex, but its approvals were made on a fund-by-fund basis. The following summarizes a number of important, but not necessarily all, factors considered by the Board in support of its approvals.
Nature, extent and quality of services
The Board received and considered various information regarding the nature, extent and quality of services provided to the Fund by Funds Management and the Sub-Adviser under the Advisory Agreements. This information included a description of the investment advisory services and Fund-level administrative services covered by the Management Agreement, as well as, among other things, a summary of the background and experience of senior management of Wells Fargo Asset Management (“WFAM”), of which Funds Management and the Sub-Adviser are a part, and a summary of investments made in the business of WFAM. The Board also received a description of Funds Management’s and the Sub-Adviser’s business continuity plans and of their approaches to data privacy and cybersecurity, and related testing. The Board also received and reviewed information about Funds Management’s role as administrator of the Fund’s liquidity risk management program, Funds Management’s approach to risk management, and Funds Management’s intermediary and vendor oversight program.
The Board also considered the qualifications, background, tenure and responsibilities of each of the portfolio managers primarily responsible for the day-to-day portfolio management of the Fund. The Board evaluated the ability of Funds Management and the Sub-Adviser to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of Funds Management and the Sub-Adviser. In addition, the Board took into account the full range of services provided to the Fund by Funds Management and its affiliates.
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Fund investment performance and expenses
The Board considered the investment performance results for the Fund over various time periods ended December 31, 2019. The Board also considered more current results for various time periods ended March 31, 2020. The Board considered these results in comparison to the investment performance of funds in a universe that was determined by Broadridge Inc. (“Broadridge”) to be similar to the Fund (the “Universe”), and in comparison to the Fund’s benchmark index and to other comparative data. Broadridge is an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds in the performance Universe. The Board noted that the investment performance of the Fund (Class A) was lower than the average investment performance of the Universe for the one-, three-, five- and ten-year periods ended December 31, 2019. The Board also noted that the investment performance of the Fund (Administrator Class) was higher than the average investment performance of the Universe for the one-, three- and five-year periods ended March 31, 2020, and lower than the average investment performance of the Universe for the ten-year period ended March 31, 2020. The Board also noted that the investment performance of the Fund was lower than its benchmark index, the ICE BofA High Yield U.S. Corporates, Cash Pay, BB Rated, 1-5 Year Index, for all periods ended December 31, 2019. The Board also noted that the investment performance of the Fund was higher than or in range of its benchmark index, the ICE BofA High Yield U.S. Corporates, Cash Pay, BB Rated, 1-5 Year Index, for the one- and three-year periods ended March 31, 2020, and lower than its benchmark for the five- and ten-year periods ended March 31, 2020.
The Board received information concerning, and discussed factors contributing to, the underperformance of the Fund relative to the Universe and benchmark for the periods identified above. The Board took note of the explanations for the relative underperformance during these periods, including with respect to the Fund’s structural biases and investment restrictions that affected the Fund’s investment performance. The Board also took note of the Fund’s outperformance relative to the Universe and benchmark for certain of the time periods under review.
The Board also received and considered information regarding the Fund’s net operating expense ratios and their various components, including actual management fees, custodian and other non-management fees, and Rule 12b-1 and non-Rule 12b-1 shareholder service fees. The Board considered these ratios in comparison to the median ratios of funds in class-specific expense groups that were determined by Broadridge to be similar to the Fund (the “Groups”). The Board received a description of the methodology used by Broadridge to select the mutual funds in the expense Groups and an explanation of how funds comprising expense groups and their expense ratios may vary from year-to-year. Based on the Broadridge reports, the Board noted that the net operating expense ratios of the Fund were lower than the median net operating expense ratios of the expense Groups for each share class.
The Board took into account the Fund’s investment performance and expense information provided to it among the factors considered in deciding to re-approve the Advisory Agreements.
Investment management and sub-advisory fee rates
The Board reviewed and considered the contractual fee rates payable by the Fund to Funds Management under the Management Agreement, as well as the contractual fee rates payable by the Fund to Funds Management for class-level administrative services under a Class-Level Administration Agreement, which include, among other things, class-level transfer agency and sub-transfer agency costs (collectively, the “Management Rates”). The Board also reviewed and considered the contractual investment sub-advisory fee rates that are payable by Funds Management to the Sub-Adviser for investment sub-advisory services.
Among other information reviewed by the Board was a comparison of the Fund’s Management Rates with the average contractual investment management fee rates of funds in the expense Groups at a common asset level as well as transfer agency costs of the funds in the expense Groups. The Board noted that the Management Rates of the Fund were lower than the sum of these average rates for the Fund’s expense Groups for all share classes.
The Board also received and considered information about the portion of the total management fee that was retained by Funds Management after payment of the fee to the Sub-Adviser for sub-advisory services. In assessing the reasonableness of this amount, the Board received and evaluated information about the nature and extent of responsibilities retained and risks assumed by Funds Management and not delegated to or assumed by the Sub-Adviser, and about Funds Management’s on-going oversight services. Given the affiliation between Funds Management and the Sub-Adviser, the Board ascribed limited relevance to the allocation of fees between them.
The Board also received and considered information about the nature and extent of services offered and fee rates charged by Funds Management and the Sub-Adviser to other types of clients with investment strategies similar to those of the Fund. In this regard, the Board received information about the significantly greater scope of services, and compliance, reporting and
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Other information (unaudited)
other legal burdens and risks of managing proprietary mutual funds compared with those associated with managing assets of other types of clients, including third-party sub-advised fund clients and non-mutual fund clients such as institutional separate accounts.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board determined that the compensation payable to Funds Management under the Management Agreement and to the Sub-Adviser under the Sub-Advisory Agreement was reasonable.
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of both WFAM and Wells Fargo & Co. (“Wells Fargo”) from providing services to the fund family as a whole. The Board noted that the Sub-Adviser’s profitability information with respect to providing services to the Fund and other funds in the family was subsumed in the WFAM and Wells Fargo profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability, including a description of the methodology used to allocate certain expenses. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such as the size, type and age of fund.
Based on its review, the Board did not deem the profits reported by Funds Management, WFAM or Wells Fargo from services provided to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
The Board received and considered information about the potential for Funds Management to experience economies of scale in the provision of management services to the Fund, the difficulties of calculating economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. The Board noted the existence of breakpoints in the Fund’s management fee structure, which operate generally to reduce the Fund’s expense ratios as the Fund grows in size, and the size of the Fund in relation to such breakpoints. The Board considered that in addition to management fee breakpoints, Funds Management shares potential economies of scale from its management business in a variety of ways, including through fee waiver and expense reimbursement arrangements, services that benefit shareholders, competitive management fee rates set at the outset without regard to breakpoints, and investments in the business intended to enhance services available to shareholders.
The Board concluded that Funds Management’s arrangements with respect to the Fund, including contractual breakpoints, constituted a reasonable approach to sharing potential economies of scale with the Fund and its shareholders.
Other benefits to Funds Management and the Sub-Adviser
The Board received and considered information regarding potential “fall-out” or ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, as a result of their relationships with the Fund. Ancillary benefits could include, among others, benefits directly attributable to other relationships with the Fund and benefits potentially derived from an increase in Funds Management’s and the Sub-Adviser’s business as a result of their relationships with the Fund. The Board noted that various affiliates of Funds Management may receive distribution-related fees, shareholder servicing payments and sub-transfer agency fees in respect of shares sold or held through them and services provided.
The Board also reviewed information about soft dollar credits earned and utilized by the Sub-Adviser, fees earned by Funds Management and the Sub-Adviser from managing a private investment vehicle for the fund family’s securities lending collateral, and commissions earned by an affiliated broker from portfolio transactions.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board did not find that any ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, were unreasonable.
Conclusion
At the Meeting, after considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable.
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LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Wells Fargo Funds Trust (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) on behalf of each of its series, including the Fund, which is reasonably designed to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) previously approved the designation of Wells Fargo Funds Management, LLC (“Funds Management”), the Fund’s investment manager, as the administrator of the Program, and Funds Management has established a Liquidity Risk Management Council composed of personnel from multiple departments within Funds Management and its affiliates to assist Funds Management in the implementation and on-going administration of the Program.
The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent the Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if the Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s “highly liquid investments” below its HLIM; and (6) periodic reporting to the Board.
At a meeting of the Board held on May 26 and 28, 2020, the Board received a written report (the “Report”) from Funds Management that addressed the operation of the Program and assessed its adequacy and effectiveness of implementation. The Report covered the initial period from December 1, 2018 through December 31, 2019 (the “Reporting Period”). No significant liquidity events impacting the Fund were noted in the Report. There were no material changes to the Program during the Reporting Period. The Report concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
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Effective June 1, 2020, shareholders purchasing Fund shares through an Oppenheimer & Co. Inc. (“Oppenheimer”) platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred or back-end, sales charge waivers) and discounts, which may differ from those disclosed in the Fund’s Prospectus or SAI.
Front-end sales load waivers on Class A shares available at Oppenheimer |
Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan. |
Shares purchased by or through a 529 Plan. |
Shares purchased through an Oppenheimer affiliated investment advisory program. |
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 from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 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 (known as Rights of Restatement). |
A shareholder in the Fund’s Class C shares will have their shares exchanged at net asset value to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the exchange is in line with the policies and procedures of Oppenheimer. |
Employees and registered representatives of Oppenheimer or its affiliates and their family members. |
Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in the Prospectus. |
CDSC waivers on A and C shares available at Oppenheimer |
Death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Prospectus. |
Return of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the Prospectus. |
Shares sold to pay Oppenheimer fees but only if the transaction is initiated by Oppenheimer. |
Shares acquired through a right of reinstatement. |
Front-end load discounts available at Oppenheimer: breakpoints, rights of accumulation & letters of intent |
Breakpoints as described in the 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 Oppenheimer. Eligible fund family assets not held at Oppenheimer may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
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Effective June 15, 2020, shareholders purchasing fund shares through a Robert W. Baird & Co. (“Baird”) platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or the SAI.
Front-end sales load waivers on Class A shares available at Baird |
Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing share of the same fund. |
Share purchase by employees and registers representatives of Baird or its affiliate and their family members as designated by Baird. |
Shares purchase from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as rights of reinstatement). |
A shareholder in the Funds Investor C Shares will have their share exchanged at net asset value to Investor A shares of the fund if the shares are no longer subject to CDSC and the exchange is in line with the policies and procedures of Baird. |
Employer-sponsored retirement plans or charitable accounts in a transactional brokerage account at Baird, including 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 or SAR-SEPs. |
CDSC waivers on A and C shares available at Baird |
Shares sold due to death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
Shares bought due to returns of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 72as described in the Fund’s Prospectus. |
Shares sold to pay Baird fees but only if the transaction is initiated by Baird. |
Shares acquired through a right of reinstatement. |
Front-end load discounts available at Baird: breakpoint and/or rights of accumulation |
Breakpoints as described in the Prospectus. |
Rights of accumulations which entitles 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 Baird. Eligible fund family assets not held at Baird may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets. |
Letters of Intent (LOI) allow for breakpoint discounts based on anticipated purchases within a fund family through Baird, over a13-month period of time. |
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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
© 2020 Wells Fargo & Company. All rights reserved
PAR-0920-00415 10-20
A222/AR222 08-20
Table of Contents
Annual Report
August 31, 2020
Wells Fargo
Ultra Short-Term Income 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 August 31, 2020, unless otherwise noted, and are those of the Fund’s portfolio 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 Ultra Short-Term Income Fund | 1
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Letter to shareholders (unaudited)
Andrew Owen
President
Wells Fargo Funds
Dear Shareholder:
We are pleased to offer you this annual report for the Wells Fargo Ultra Short-Term Income Fund for the 12-month period that ended August 31, 2020. Global stock markets saw earlier gains erased in March as governments around the world took unprecedented measures, attempting to stop the spread of the coronavirus at the expense of short-term economic output. However, markets rebounded from April on to offset much of the losses as central banks attempted to bolster capital markets and confidence.
For the 12-month period, equities had broadly positive total returns despite intense volatility in March. Non-U.S. developed market equities had the weakest performance and U.S. stocks performed strongly. Fixed-income securities were more modest though also generally positive. For the period, U.S. stocks, based on the S&P 500 Index,1 gained 21.94%. International stocks, as measured by the MSCI ACWI ex USA Index (Net),2 returned 8.31%, while the MSCI EM Index (Net)3 had somewhat stronger performance, with a 14.49% gain. For bond investors, the Bloomberg Barclays U.S. Aggregate Bond Index4 returned 6.47%, the Bloomberg Barclays Global Aggregate ex-USD Index5 gained a more modest 4.58%, and the Bloomberg Barclays Municipal Bond Index6 returned 3.24% while the ICE BofA U.S. High Yield Index7 returned 3.71%.
The fiscal year began with supportive central bank actions.
As the period began, several central banks had just cut interest rates in response to a global economic slowdown. Ongoing concerns regarding U.S.-China trade tensions and Brexit remained unresolved. The Federal Reserve (Fed) cut U.S. interest rates again in September. U.S. manufacturing data disappointed investors. The U.S. Congress announced it would pursue an impeachment investigation of President Trump. Meanwhile, the U.K. Brexit impasse showed no signs of resolution. Officials in China said that hitting the country’s economic growth goals for the year would be difficult considering the weight of tariffs and trade restrictions. Although the S&P 500 Index finished the third quarter with the best year-to-date returns in more than 20 years, concerns about future returns remained.
The fourth quarter started on a strong note, with U.S.-China trade tensions relaxing in October along with renewed optimism for a U.K. Brexit deal and positive macroeconomic data. The initial estimate of U.S. third-quarter gross domestic product (GDP) growth was a resilient 1.9% annualized rate, while the U.S. unemployment rate fell to a 50-year low of
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 and emerging 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 Ultra Short-Term Income Fund
Table of Contents
Letter to shareholders (unaudited)
3.5% in September. However, despite strength among U.S. consumers, business confidence declined while manufacturing activity contracted. Concerned with a potential economic slowdown, the Fed lowered interest rates another quarter point in late October—its third rate cut in four months. This helped push the S&P 500 Index to an all-time high while emerging market equities rallied and global bonds declined overall, reflecting a broad pickup in risk appetite.
Equity markets continued to rally in November despite ongoing geopolitical risks. Hopes for a U.S.-China trade deal buoyed investor confidence. U.S. business sentiment improved slightly, and manufacturing and services activity picked up. While consumer confidence and purchasing managers’ activity rose in the eurozone, China reported weakening manufacturing and consumer data. Bond yields rose marginally, leading to slightly negative returns for global government and investment-grade corporate bonds.
Financial markets ended 2019 with a boost from the U.S. and China accord on a Phase One trade deal. That, along with the landslide win by the pro-Brexit U.K. Conservative Party in a national election and ongoing central bank support, gave investors greater confidence. U.S. economic indicators were generally positive, with the exception of manufacturing activity and business confidence. Consumer confidence was resilient, fed by a robust labor market, tame inflation, and lower interest rates, which boosted housing affordability and stimulated homebuyer activity. The impeachment of President Trump had little impact on markets. Meanwhile, slowing Chinese economic activity, partly attributable to the trade war, led to further government stimulus at year-end through lower reserve ratios, allowing banks to lend more money.
The year-end rally continued in early January 2020. However, capital market volatility picked up sharply in late January on concerns over the potential impact of the coronavirus on the global economy and stock markets. As sentiment began to sour, perceived safe havens did well in January. The U.S. dollar and Japanese yen both rose and government bonds outperformed equities. While the S&P 500 Index held its ground, emerging market equities tumbled, including those in Asia.
In February, the coronavirus became the major market focus. Fears of the virus’s impact on global growth led to expectations of increased global central bank monetary policy support. That led the 10-year U.S. Treasury yield to fall to an all-time low of 1.1%. Although equity markets initially shrugged off concerns about the outbreak, focusing instead on strong fourth-quarter earnings and improving business confidence in January, market sentiment turned sharply lower and the S&P 500 Index lost 8.2% for the month. Oil prices tumbled as Russia and the Organization of the Petroleum Exporting Countries compounded a major decline in oil demand with a brutal price war, partly aimed at dissuading further U.S. shale production, causing the price of West Texas Intermediate crude oil to plummet.
The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems. This abrupt stoppage of economic activity led to the sharp deceleration of global output, sending economies into a deep contraction. Central banks responded swiftly, slashing interest rates and expanding quantitative easing programs to restore liquidity and confidence to the markets. In the U.S., the Fed introduced several new lending programs, funding investment-grade bonds, money market mutual funds, and commercial paper while purchasing Treasuries, mortgage-backed securities, and overnight repurchase agreements. Meanwhile, stock markets tumbled quickly into a bear market, ending the longest bull stock market in U.S. history.
Markets rebounded strongly in April, fueled by unprecedented government and central bank stimulus measures. The U.S. economy contracted by an annualized 5.0% pace in the first quarter, with 30 million new unemployment insurance claims in six weeks. In the
“The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems.”
Wells Fargo Ultra Short-Term Income Fund | 3
Table of Contents
Letter to shareholders (unaudited)
“The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July.”
eurozone, first-quarter real GDP shrank 3.8%, with the composite April Flash Purchasing Managers’ Index, a monthly survey of purchasing managers, falling to an all-time low of 13.5. The European Central Bank expanded its quantitative easing to include the purchase of additional government bonds of countries with the greatest virus-related need, including Italy and Spain. China’s first-quarter GDP fell by 6.8% year over year. However, retail sales, production, and investment showed signs of recovery. Extreme oil-price volatility continued as global supply far exceeded demand.
The global equity market rebound continued in May, with widespread strong monthly gains. Investors regained confidence on reports of early signs of success in human trials of a coronavirus vaccine. Growth stocks continued to outperform value stocks while returns on global government bonds were generally flat. In the U.S., a gap grew between the stock market rebound and devastating economic data points, including an April unemployment rate of 14.7%, the highest level since World War II. Purchasing managers’ indices reflected weakening activity in May in both the manufacturing and services sectors. U.S. corporate earnings reports indicated a 14% year-over-year contraction in earnings from the first quarter of 2019. However, high demand for technology, driven by remote activity, supported robust information technology sector earnings, which helped drive major technology stocks higher.
Financial markets posted widely positive returns in June despite ongoing economic weakness and high levels of uncertainty on the containment of the coronavirus and the timing of an effective vaccine. There were hopeful signs as economies reopened, with both U.S. and U.K. retail sales rebounding sharply in May. However, year over year, sales remained depressed. Vitally important to market sentiment was the ongoing commitment by central banks globally to do all they could to provide economic support through liquidity and low borrowing costs. U.S. economic activity was aided by one-time $1,200 stimulus checks and $600 bonus weekly unemployment benefits which expired at the end of July. However, unemployment remained historically high, easing somewhat from 14.7% in April to 11.1% in June. During June, numerous states reported increases of coronavirus cases. China’s economic recovery picked up momentum in June, though it remained far from a full recovery.
July was a broadly positive month for both global equities and fixed income. However, economic data and a resurgence of coronavirus cases pointed to the vulnerability of the global economy and the ongoing imperative to regain control of the pandemic. Second-quarter GDP shrank from the previous quarter by 9.5% and 12.1% in the U.S. and eurozone, respectively. In contrast, China reported a 3.2% year-over-year expansion in its second-quarter GDP. U.S. unemployment remained high despite adding 1.8 million jobs in July, with a double-digit jobless rate persisting. However, manufacturing activity grew in both the U.S. and eurozone. In Asia, while China’s manufacturing sector continued to expand, activity in Japan and South Korea contracted. In July, a rising concern was the rapid and broad reemergence of coronavirus infections.
The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July. U.S. stocks had strong monthly gains, led by the so-called FAANG stocks—Facebook, Apple, Amazon, Netflix, and Google (Alphabet)—which dominate these indices and continued to rally. U.S. stocks generally surpassed other broadly positive global equity performance while fixed-income market monthly returns were broadly flat. Generally stronger-than-expected second-quarter earnings boosted investor sentiment along with the Fed’s announcement of a policy shift that will likely lead to longer-term low interest rates and supportive monetary policy. The U.S. Flash Purchasing Managers’ Indices for both manufacturing and services beat expectations while U.S. housing market indicators were strong. In Europe, retail sales expanded and consumer confidence remained steady. China’s economy continued its fairly steady expansion. Overall, developed markets performed better than emerging market equities for the month of August as people took comfort in better-known equities in perceived safer markets.
4 | Wells Fargo Ultra Short-Term Income Fund
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Letter to shareholders (unaudited)
Don’t let short-term uncertainty derail long-term investment goals.
Periods of investment uncertainty can present challenges, but experience has taught us that maintaining long-term investment goals can be an effective way to plan for the future. To help you create a sound strategy based on your personal goals and risk tolerance, Wells Fargo Funds offers more than 100 mutual funds spanning a wide range of asset classes and investment styles. Although diversification cannot guarantee an investment profit or prevent losses, we believe it can be an effective way to manage investment risk and potentially smooth out overall portfolio performance. We encourage investors to know their investments and to understand that appropriate levels of risk-taking may unlock opportunities.
Thank you for choosing to invest with Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Andrew Owen
President
Wells Fargo Funds
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For further information about your Fund, contact your investment professional, visit our website at wfam.com, or call us directly at 1-800-222-8222. |
Notice to Shareholders
At a meeting held on August 10-12, 2020, the Board of Trustees of the Fund approved the following changes:
∎ | A change to the Fund’s automatic conversion feature for Class C shares in order to shorten the required holding period from 10 to 8 years. As a result, on a monthly basis beginning November 5, 2020, Class C shares will convert automatically into Class A shares 8 years after the initial date of purchase or, if you acquired your Class C shares through an exchange or conversion from another share class, 8 years after the date you acquired your Class C shares. When Class C shares that you acquired through a purchase or exchange convert, any other Class C shares that you purchased with reinvested dividends and distributions also will convert into Class A shares on a pro rata basis. |
Please note that a shorter holding period may apply depending on your intermediary. Please see “Appendix A—Sales Charge Reductions and Waivers for Certain Intermediaries” in the Fund’s prospectus for further information.
∎ | Changes to the Class A sales charge schedule for the Fund, effective with every purchase made on or after September 21, 2020. |
NEW Class A Sales Charge Schedule effective September 21, 2020
Amount of Purchase | Front-end Sales Price | Front-end Sales Charge As % of Net Amount Invested | Commission Paid to Intermediary As % of Public Offering Price | |||||||||
Less than $100,000 | 2.00 | % | 2.04 | % | 1.75 | % | ||||||
$100,000 but less than $250,000 | 1.00 | % | 1.01 | % | 0.85 | % | ||||||
$250,000 and over | 0.00 | %1 | 0.00 | % | 0.40 | %2 |
1 | If you redeem Class A shares purchased at or above the $250,000 breakpoint level within twelve months from the date of purchase, you will pay a CDSC of 0.40% of the NAV of the shares on the date of original purchase. Certain exceptions apply (see “CDSC Waivers” in the Fund’s Prospectus). For redemptions of Class A shares of the Fund purchased prior to August 1, 2018, the CDSC terms that were in place at the time of purchase will continue to apply. |
2 | The commission paid to an intermediary on purchases above the $250,000 breakpoint level includes an advance by Wells Fargo Funds Distributor of the first year’s shareholder servicing fee. |
Wells Fargo Ultra Short-Term Income Fund | 5
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Performance highlights (unaudited)
Investment objective
The Fund seeks current income consistent with capital preservation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Christopher Y. Kauffman, CFA®‡
Jay N. Mueller, CFA®‡
Michael J. Schueller, CFA®‡
Noah M. Wise, CFA®‡
Average annual total returns (%) as of August 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 (SADAX) | 8-31-1999 | 0.57 | 1.42 | 1.11 | 2.62 | 1.83 | 1.31 | 0.71 | 0.51 | |||||||||||||||||||||||||
Class A2 (WUSNX)3 | 5-29-2020 | – | – | – | 2.48 | 1.80 | 1.30 | 0.81 | 0.51 | |||||||||||||||||||||||||
Class C (WUSTX) | 7-18-2008 | 0.73 | 1.07 | 0.56 | 1.73 | 1.07 | 0.56 | 1.46 | 1.26 | |||||||||||||||||||||||||
Administrator Class (WUSDX) | 4-8-2005 | – | – | – | 2.61 | 1.97 | 1.46 | 0.65 | 0.51 | |||||||||||||||||||||||||
Institutional Class (SADIX) | 8-31-1999 | – | – | – | 2.83 | 2.18 | 1.67 | 0.38 | 0.26 | |||||||||||||||||||||||||
Bloomberg Barclays Short-Term Government/ Corporate Bond Index4 | – | – | – | – | 1.96 | 1.55 | 0.92 | – | – |
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 2.00%. 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 A2, Administrator Class, and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
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. Loans are subject to risks similar to those associated with other below-investment-grade bond investments, such as credit risk (for example, risk of issuer default), below-investment-grade bond risk (for example, risk of greater volatility in value), and risk that the loan may become illiquid or difficult to price. The use of derivatives may reduce returns and/or increase volatility. Foreign investments are especially volatile and can rise or fall dramatically due to differences in the political and economic conditions of the host country. These risks are generally intensified in emerging markets. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). The Fund is exposed to high-yield securities risk and mortgage- and asset-backed securities risk. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Ultra Short-Term Income Fund
Table of Contents
Performance highlights (unaudited)
Growth of $10,000 investment as of August 31, 20205 |
‡ | 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 December 31, 2021, to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 0.50% for Class A, 0.50% for Class A2, 1.25% for Class C, 0.50% for Administrator Class, and 0.25% 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 caps. Prior to or after the commitment expiration date, the caps may be increased or the commitment to maintain the caps may be terminated only with the approval of the Board of Trustees. Without these caps, 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 for the Class A2 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 Class A2 shares would be higher. |
4 | The Bloomberg Barclays Short-Term Government/Corporate Bond Index contains securities that have fallen out of the Bloomberg Barclays U.S. Government/Credit Bond Index because of the standard minimum one-year-to-maturity constraint. Securities in the Bloomberg Barclays Short-Term Government/Corporate Bond Index must have a maturity from 1 up to (but not including) 12 months. You cannot invest directly in an index. |
5 | The chart compares the performance of Class A shares for the most recent 10 years with the performance of the Bloomberg Barclays Short-Term U.S. Government/Corporate Bond 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 2.00%. |
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 Ultra Short-Term Income Fund | 7
Table of Contents
Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
∎ | The Fund (Class A shares, excluding sales charges) outperformed its benchmark, the Bloomberg Barclays Short-Term Government/Corporate Bond Index, for the 12-month period that ended August 31, 2020. |
∎ | An underweight to U.S. Treasuries and an overweight to corporate debt contributed. Overweights to both financials and industrials contributed, as did selection within both sectors. |
∎ | Duration positioning was mostly neutral while curve positioning contributed. |
∎ | An overweight to BB-rated securities contributed during the period, as did an underweight to AAA. |
∎ | An overweight to structured products detracted. While structured products posted positive returns, and returns exceeded like-duration U.S. Treasuries, they tended to underperform the benchmark, detracting slightly from performance. |
Ten largest holdings (%) as of August 31, 20206 | ||||
FNMA 2.00%, 9-17-2035 | 3.59 | |||
iShares Short-Term Corporate Bond ETF | 2.45 | |||
SPDR Portfolio Short Term Corporate Bond ETF | 2.07 | |||
Invesco BulletShares 2021 High Yield Corporate Bond ETF | 1.09 | |||
Nissan Auto Lease Trust Series 2019-A Class A3 2.76%, 3-15-2022 | 0.92 | |||
Ally Master Owner Trust Series 2018-4 Class A 3.30%, 7-17-2023 | 0.89 | |||
Banco Santander SA 3.50%, 4-11-2022 | 0.81 | |||
FNMA 2.00%, 10-19-2035 | 0.81 | |||
Daimler Trucks Retail Trust Series 2018-1 Class A4 3.03%, 11-15-2024 | 0.78 | |||
Morgan Stanley 2.75%, 5-19-2022 | 0.76 |
The coronavirus made a significant impact.
After years of steady expansion, the U.S. economy received a traumatic shock in 2020 with the arrival of the coronavirus. Public reaction and government-ordered lockdowns resulted in a collapse in economic activity, with the second quarter of 2020 recording a nearly 10% drop in gross domestic product. Unemployment swiftly soared to double digits. Most areas of consumption declined precipitously. Travel and leisure services bore the brunt of the disruption. Spurred by a negative demand shock, prices for many goods declined in March and April, pushing most inflation indicators substantially lower.
The Federal Reserve responded to the pandemic with a dramatic easing of monetary policy, setting overnight rate targets to near zero, as well as purchasing bonds for its own account. A host of credit support measures were put in place
to improve the functioning of teetering financial markets. In their actions and rhetoric, the monetary authorities made it clear that an aggressive posture to support the economic and financial markets would be in place as long as needed.
Fiscal policy also responded swiftly to the pandemic in the form of relief payments to the general public as well as extended unemployment benefits. These measures more than offset the loss of income associated with unemployment increases and other wage losses for many people.
Economic activity probably bottomed in late April, and by the end of May, both consumption and employment were turning around. Substantial job gains occurred while claims for unemployment insurance began to subside. Prices generally stabilized, with oil rallying from distressed levels and core inflation measures rebounding from their crisis lows. Stock indices hit new all-time highs over the course of the summer, while Treasury yields remained extremely low. Credit spreads, which widened sharply in the March–April period, narrowed substantially in the ensuing few months.
Please see footnotes on page 7.
8 | Wells Fargo Ultra Short-Term Income Fund
Table of Contents
Performance highlights (unaudited)
Portfolio composition as of August 31, 20207 |
|
We continue to consistently implement our time-tested process and philosophy as we strive to capitalize on market dislocations.
The Fund’s largest commitment remains in short-term corporate bonds. During the period, we reduced the overweight to corporate debt and the Fund was near its cyclical low for high-yield and credit exposure coming into 2020, providing the flexibility to selectively add risk within the portfolio. In March and April 2020, we exploited market volatility through a number of tactical trades in sectors with significant dislocations. We added to U.S. high-yield bonds, focusing on short, BB-rated, less-cyclical credits in sectors such as health care and telecommunications. We strategically added to new issue higher-quality investment-grade credit
issued at large discounts and we extended duration in credit. The Fund’s second-largest sector commitment was to securitized debt: asset-backed securities, residential mortgage-backed securities (MBS), commercial mortgage-backed securities, and collateralized mortgage and loan obligations. We continue to find value in owning structured products over Treasuries and agencies and maintain a material allocation to structured products within the Fund. We rotated into TBA MBS as the period ended given the asset class’s relative attractiveness over specified mortgage pools. Lastly, we added to short U.S. Treasury bills late in the period. These moves were phased in, and we continue to maintain liquidity and the flexibility to reallocate the portfolio as needed.
We generally maintained the Fund’s duration near the 0.5-year mark, in line with its benchmark. Our duration positioning remains focused on the short-term horizon and oscillates around a neutral position until we are confident in a trend reversal. Given the Federal Open Market Committee’s commitment to keeping rates anchored near zero, we will look to add a marginal amount of duration on market dislocations, as we did as the period came to a close.
The outlook is for recovery amid uncertainty.
The outlook holds considerable uncertainty, as the ultimate resolution of the coronavirus pandemic remains unknown. Consumer behavior is likely to have been altered by the crisis, though lower consumption in some areas, such as travel and leisure, could well be offset by higher spending on housing, in-home entertainment, and the like. The upcoming U.S. elections represent an additional source of uncertainty, with the potential for meaningful swings in tax, spending, and regulatory policies. Bearing in mind the higher-than-normal degree of uncertainty, we expect the present recovery to continue, albeit at a gradually declining pace, as pent-up demand is satisfied and lingering damage from the pandemic proves difficult to heal. We believe it could take a year or longer to make up for all of the shortfall.
Please see footnotes on page 7.
Wells Fargo Ultra Short-Term Income 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 March 1, 2020 to August 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 3-1-2020 | Ending account value 8-31-2020 | Expenses paid during the period1 | Annualized net expense ratio | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,013.57 | $ | 2.99 | 0.59 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.17 | $ | 3.00 | 0.59 | % | ||||||||
Class A2 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,012.24 | $ | 1.26 | 0.50 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,011.31 | $ | 1.26 | 0.50 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,009.72 | $ | 6.77 | 1.34 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,018.40 | $ | 6.80 | 1.34 | % | ||||||||
Administrator Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,013.93 | $ | 2.63 | 0.52 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.52 | $ | 2.64 | 0.52 | % | ||||||||
Institutional Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.05 | $ | 1.52 | 0.30 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,023.63 | $ | 1.53 | 0.30 | % |
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 Ultra Short-Term Income Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities: 8.36% | ||||||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 2.67 | % | 6-1-2032 | $ | 1,451 | $ | 1,459 | |||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 2.75 | 11-1-2035 | 1,254,142 | 1,320,997 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.40%) ± | 2.90 | 7-1-2029 | 558 | 559 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.23%) ± | 3.25 | 3-1-2035 | 486,050 | 512,383 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.47 | 10-1-2038 | 510,760 | 515,250 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.21%) ± | 3.72 | 5-1-2035 | 154,216 | 162,741 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.75 | 4-1-2032 | 76,858 | 77,263 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.77 | 9-1-2038 | 1,096,978 | 1,162,442 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.33%) ± | 3.83 | 1-1-2029 | 28,729 | 28,832 | ||||||||||||
FHLMC (1 Year Treasury Constant Maturity +2.25%) ± | 3.86 | 4-1-2038 | 448,262 | 473,330 | ||||||||||||
FHLMC | 4.50 | 1-1-2022 | 850 | 892 | ||||||||||||
FHLMC | 4.50 | 6-1-2024 | 554,609 | 587,078 | ||||||||||||
FHLMC | 4.50 | 9-1-2026 | 859,672 | 910,782 | ||||||||||||
FHLMC | 5.50 | 12-1-2022 | 196,025 | 204,020 | ||||||||||||
FHLMC | 5.50 | 12-1-2023 | 219,756 | 230,238 | ||||||||||||
FHLMC | 6.00 | 10-1-2021 | 127,843 | 129,802 | ||||||||||||
FHLMC | 6.00 | 10-1-2021 | 137,021 | 139,373 | ||||||||||||
FHLMC | 6.00 | 1-1-2024 | 160,836 | 166,574 | ||||||||||||
FHLMC | 7.00 | 6-1-2031 | 204,100 | 233,577 | ||||||||||||
FHLMC | 9.50 | 9-1-2020 | 60 | 59 | ||||||||||||
FHLMC | 9.50 | 12-1-2022 | 443 | 447 | ||||||||||||
FHLMC | 10.00 | 11-17-2021 | 701 | 706 | ||||||||||||
FHLMC Series 2611 Class HD | 5.00 | 5-15-2023 | 265,078 | 276,168 | ||||||||||||
FHLMC Series 2649 Class WL | 4.00 | 7-15-2023 | 380,045 | 386,209 | ||||||||||||
FHLMC Series 2704 Class BH | 4.50 | 11-15-2023 | 200,320 | 207,406 | ||||||||||||
FHLMC Series 2881 Class AE | 5.00 | 8-15-2034 | 118,970 | 123,476 | ||||||||||||
FHLMC Series 2953 Class LD | 5.00 | 12-15-2034 | 95,678 | 99,566 | ||||||||||||
FHLMC Series 3609 Class LA | 4.00 | 12-15-2024 | 423 | 425 | ||||||||||||
FHLMC Series 3834 Class EA | 3.50 | 6-15-2029 | 61,264 | 61,746 | ||||||||||||
FHLMC Series 3888 Class NA | 2.25 | 1-15-2040 | 761,970 | 772,515 | ||||||||||||
FHLMC Series 3924 Class MF (1 Month LIBOR +0.50%) ± | 0.66 | 9-15-2041 | 1,138,298 | 1,144,764 | ||||||||||||
FHLMC Series 4172 Class PB | 1.50 | 7-15-2040 | 134,058 | 134,482 | ||||||||||||
FHLMC Series 4348 Class MH | 3.00 | 6-15-2039 | 1,272,965 | 1,304,048 | ||||||||||||
FHLMC Series 4764 Class BA | 4.00 | 6-15-2042 | 430,410 | 435,924 | ||||||||||||
FHLMC Series 4889 Class CD | 3.00 | 4-15-2049 | 2,937,407 | 3,073,598 | ||||||||||||
FHLMC Series 4938 Class BF (1 Month LIBOR +0.50%) ± | 0.67 | 12-25-2049 | 8,001,453 | 8,041,907 | ||||||||||||
FHLMC Series KF15 Class A (1 Month LIBOR +0.67%) ± | 0.82 | 2-25-2023 | 498,588 | 497,538 | ||||||||||||
FHLMC Series KI01 Class A (1 Month LIBOR +0.16%) ± | 0.31 | 9-25-2022 | 351,882 | 351,840 | ||||||||||||
FHLMC Series QO04 Class AFL (12 Month Treasury Average +0.74%) ± | 1.91 | 5-25-2044 | 2,062,084 | 2,060,283 | ||||||||||||
FHLMC Series T-42 Class A6 | 9.50 | 2-25-2042 | 520,302 | 664,332 | ||||||||||||
FNMA %% | 2.00 | 9-17-2035 | 44,440,000 | 46,238,431 | ||||||||||||
FNMA %% | 2.00 | 10-19-2035 | 10,000,000 | 10,391,406 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 2.69 | 6-1-2034 | 763,755 | 778,711 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.22%) ± | 2.72 | 6-1-2032 | 67,654 | 67,987 | ||||||||||||
FNMA (6 Month LIBOR +1.51%) ± | 2.79 | 9-1-2037 | 269,633 | 279,148 | ||||||||||||
FNMA (6 Month LIBOR +1.38%) ± | 3.28 | 10-1-2031 | 43,705 | 43,972 | ||||||||||||
FNMA (12 Month LIBOR +1.82%) ± | 3.42 | 9-1-2040 | 1,382,837 | 1,448,710 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 3.45 | 7-1-2038 | 778,669 | 819,510 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.31%) ± | 3.45 | 5-1-2036 | 358,852 | 379,969 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 3.53 | 4-1-2038 | 1,354,099 | 1,424,761 | ||||||||||||
FNMA (12 Month Treasury Average +2.20%) ± | 3.57 | 8-1-2045 | 263,294 | 274,396 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.21%) ± | 3.58 | 2-1-2035 | 623,500 | 656,067 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.02%) ± | 3.65 | 12-1-2034 | 236,947 | 247,934 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.25%) ± | 3.65 | 11-1-2033 | 1,051,980 | 1,107,568 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.26%) ± | 3.69 | 8-1-2036 | 1,302,641 | 1,372,629 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.23%) ± | 3.76 | 12-1-2040 | 118,053 | 118,721 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Ultra Short-Term Income Fund | 11
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities (continued) | ||||||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.36%) ± | 3.77 | % | 11-1-2034 | $ | 599,914 | $ | 634,497 | |||||||||
FNMA (12 Month Treasury Average +2.45%) ± | 3.78 | 5-1-2036 | 475,800 | 499,501 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.13%) ± | 3.79 | 5-1-2032 | 4,368 | 4,379 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.27%) ± | 3.81 | 2-1-2033 | 288,316 | 290,279 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.27%) ± | 3.90 | 2-1-2036 | 721,115 | 734,165 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.26%) ± | 4.01 | 11-1-2035 | 111,748 | 113,208 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.20%) ± | 4.03 | 11-1-2031 | 49,351 | 49,479 | ||||||||||||
FNMA (1 Year Treasury Constant Maturity +2.28%) ± | 4.15 | 11-1-2032 | 422,133 | 423,302 | ||||||||||||
FNMA | 4.50 | 1-1-2027 | 1,102,965 | 1,174,352 | ||||||||||||
FNMA | 5.00 | 5-1-2022 | 53,971 | 56,908 | ||||||||||||
FNMA | 5.00 | 6-1-2024 | 1,010,423 | 1,066,024 | ||||||||||||
FNMA (6 Month LIBOR +2.86%) ± | 5.23 | 4-1-2033 | 727 | 730 | ||||||||||||
FNMA | 6.00 | 4-1-2021 | 5,598 | 5,634 | ||||||||||||
FNMA | 6.00 | 1-1-2023 | 516,102 | 537,791 | ||||||||||||
FNMA | 6.50 | 8-1-2031 | 244,120 | 291,989 | ||||||||||||
FNMA | 9.00 | 10-15-2021 | 656 | 660 | ||||||||||||
FNMA | 9.00 | 6-1-2024 | 2,192 | 2,210 | ||||||||||||
FNMA | 9.50 | 12-1-2020 | 58 | 59 | ||||||||||||
FNMA Series 1990-111 Class Z | 8.75 | 9-25-2020 | 8 | 8 | ||||||||||||
FNMA Series 1990-119 Class J | 9.00 | 10-25-2020 | 253 | 253 | ||||||||||||
FNMA Series 1990-124 Class Z | 9.00 | 10-25-2020 | 19 | 19 | ||||||||||||
FNMA Series 1991-132 Class Z | 8.00 | 10-25-2021 | 7,265 | 7,487 | ||||||||||||
FNMA Series 1992-71 Class X | 8.25 | 5-25-2022 | 7,608 | 7,974 | ||||||||||||
FNMA Series 2000-T6 Class A2 | 9.50 | 11-25-2040 | 263,859 | 304,090 | ||||||||||||
FNMA Series 2001-T10 Class A3 | 9.50 | 12-25-2041 | 405,567 | 491,831 | ||||||||||||
FNMA Series 2001-T12 Class A3 | 9.50 | 8-25-2041 | 382,083 | 469,664 | ||||||||||||
FNMA Series 2002-T1 Class A4 | 9.50 | 11-25-2031 | 460,548 | 569,461 | ||||||||||||
FNMA Series 2002-W04 Class A6 ±± | 4.01 | 5-25-2042 | 483,232 | 512,953 | ||||||||||||
FNMA Series 2003-W11 Class A1 ±± | 4.07 | 6-25-2033 | 11,241 | 11,449 | ||||||||||||
FNMA Series 2003-W3 Class 1A4 ±± | 3.93 | 8-25-2042 | 26,086 | 27,740 | ||||||||||||
FNMA Series 2007-W2 Class 1A1 (1 Month LIBOR +0.32%) ± | 0.50 | 3-25-2037 | 251,618 | 251,857 | ||||||||||||
FNMA Series 2009-31 Class B | 4.00 | 5-25-2024 | 4 | 4 | ||||||||||||
FNMA Series 2010-115 Class NC | 2.75 | 1-25-2039 | 415,738 | 420,732 | ||||||||||||
FNMA Series 2010-25 Class ND | 3.50 | 3-25-2025 | 668 | 657 | ||||||||||||
FNMA Series 2010-37 Class A1 | 5.41 | 5-25-2035 | 3,010,085 | 3,168,596 | ||||||||||||
FNMA Series 2010-57 Class DQ | 3.00 | 6-25-2025 | 108,110 | 110,371 | ||||||||||||
FNMA Series 2012-72 Class QE | 3.00 | 1-25-2038 | 101,650 | 102,405 | ||||||||||||
FNMA Series 2013-26 Class AK | 2.50 | 11-25-2038 | 2,163,487 | 2,192,921 | ||||||||||||
FNMA Series 2014-19 Class HA | 2.00 | 6-25-2040 | 540,623 | 550,423 | ||||||||||||
GNMA | 7.00 | 6-15-2033 | 346,297 | 426,706 | ||||||||||||
GNMA Series 2017-H13 Class FJ (1 Month LIBOR +0.20%) ± | 0.36 | 5-20-2067 | 7,737 | 7,734 | ||||||||||||
GNMA Series 2017-H16 Class FD (1 Month LIBOR +0.20%) ± | 0.36 | 8-20-2067 | 30,101 | 30,091 | ||||||||||||
Total Agency Securities (Cost $105,968,606) | 107,695,544 | |||||||||||||||
|
| |||||||||||||||
Asset-Backed Securities: 12.25% | ||||||||||||||||
Ally Master Owner Trust Series 2018-4 Class A | 3.30 | 7-17-2023 | 11,174,000 | 11,453,007 | ||||||||||||
American Credit Acceptance Receivables Trust Series 2018-1 Class C 144A | 3.55 | 4-10-2024 | 466,449 | 467,590 | ||||||||||||
American Credit Acceptance Receivables Trust Series 2019-2 Class A 144A | 2.85 | 7-12-2022 | 423,813 | 424,089 | ||||||||||||
California Republic Auto Receivables Trust Series 2017-1 Class A4 | 2.28 | 6-15-2022 | 990,905 | 993,990 | ||||||||||||
Chesapeake Funding II LLC Series 2017-3A Class A1 144A | 1.91 | 8-15-2029 | 1,562,115 | 1,566,728 | ||||||||||||
Chesapeake Funding II LLC Series 2018-3A Class A1 144A | 3.39 | 1-15-2031 | 4,120,519 | 4,257,221 | ||||||||||||
CommonBond Student Loan Trust Series 2018-BGS Class A1 144A | 3.56 | 9-25-2045 | 6,323,365 | 6,548,657 | ||||||||||||
Daimler Trucks Retail Trust Series 2018-1 Class A4 144A | 3.03 | 11-15-2024 | 10,000,000 | 10,053,618 | ||||||||||||
Drive Auto Receivables Trust Series 2017-3 Class D 144A | 3.53 | 12-15-2023 | 2,618,671 | 2,653,745 | ||||||||||||
Drive Auto Receivables Trust Series 2017-BA Class D 144A | 3.72 | 10-17-2022 | 801,815 | 806,327 |
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Ultra Short-Term Income Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Asset-Backed Securities (continued) | ||||||||||||||||
DT Auto Owner Trust Series 2017-3A Class D 144A | 3.58 | % | 5-15-2023 | $ | 1,682,758 | $ | 1,695,780 | |||||||||
DT Auto Owner Trust Series 2017-4A Class D 144A | 3.47 | 7-17-2023 | 2,690,863 | 2,706,413 | ||||||||||||
Education Loan Asset-Backed Trust Series 2013-1 Class A1 (1 Month LIBOR +0.80%) 144A± | 0.98 | 6-25-2026 | 449,201 | 448,913 | ||||||||||||
Educational Services of America Incorporated Series 2015-2 Class A (1 Month LIBOR +1.00%) 144A± | 1.18 | 12-25-2056 | 792,563 | 784,629 | ||||||||||||
Exeter Automobile Receivables Trust Series 2019-2A Class A 144A | 2.93 | 7-15-2022 | 99,162 | 99,247 | ||||||||||||
Fifth Third Auto Trust Series 2019-1 Class A2A | 2.66 | 5-16-2022 | 1,203,529 | 1,208,122 | ||||||||||||
Finance of America HECM Buyout Series 2020-HB2 Class A 144A±± | 1.71 | 7-25-2030 | 6,020,945 | 6,020,140 | ||||||||||||
Flagship Credit Auto Trust Series 2018-4 Class A 144A | 3.41 | 5-15-2023 | 990,476 | 1,002,893 | ||||||||||||
Flagship Credit Auto Trust Series 2019-4 Class A 144A | 2.17 | 6-17-2024 | 3,592,973 | 3,650,198 | ||||||||||||
Ford Credit Auto Lease Trust Series 2018-B Class A4 | 3.30 | 2-15-2022 | 3,835,000 | 3,886,632 | ||||||||||||
Hertz Vehicle Financing LLC Series 2016-2A Class A2 144A | 2.95 | 3-25-2022 | 3,354,085 | 3,359,972 | ||||||||||||
Hertz Vehicle Financing LLC Series 2017-2A Class A 144A | 3.29 | 10-25-2023 | 1,169,468 | 1,169,529 | ||||||||||||
Hertz Vehicle Financing LLC Series 2018-1A Class A 144A | 3.29 | 2-25-2024 | 1,268,362 | 1,269,040 | ||||||||||||
Honda Auto Receivables Owner Series 2019-1 Class A2 | 2.75 | 9-20-2021 | 766,358 | 768,846 | ||||||||||||
Hyundai Auto Lease Securitization Trust Series 2018-B Class A4 | 3.29 | 1-15-2025 | 6,000,000 | 6,273,450 | ||||||||||||
Hyundai Auto Lease Securitization Trust Series 2019-A Class A3 144A | 2.98 | 7-15-2022 | 5,200,000 | 5,263,358 | ||||||||||||
MFRA Trust Series 2020-NQM1 Class A1 144A±± | 1.65 | 8-25-2049 | 5,000,000 | 4,999,943 | ||||||||||||
MMAF Equipment Finance LLC Series 2019-A Class A2 144A | 2.84 | 1-10-2022 | 1,422,040 | 1,433,524 | ||||||||||||
Navient Student Loan Trust Series 2017-3A Class A3 (1 Month LIBOR +1.05%) 144A± | 1.23 | 7-26-2066 | 8,510,000 | 8,468,636 | ||||||||||||
Nissan Auto Lease Trust Series 2019-A Class A3 | 2.76 | 3-15-2022 | 11,738,000 | 11,877,489 | ||||||||||||
Nissan Auto Lease Trust Series 2019-B Class A3 | 2.27 | 7-15-2022 | 5,375,000 | 5,451,881 | ||||||||||||
Oscar US Funding Trust Series 2016-2A Class A4 144A | 2.99 | 12-15-2023 | 2,062,642 | 2,074,353 | ||||||||||||
Prestige Auto Receivables Trust Series 2017-1A Class B 144A | 2.39 | 5-16-2022 | 27,340 | 27,358 | ||||||||||||
Santander Drive Auto Receivables Trust Series 2017-1 Class D | 3.17 | 4-17-2023 | 5,392,289 | 5,446,063 | ||||||||||||
Santander Drive Auto Receivables Trust Series 2019-3 Class B | 2.28 | 9-15-2023 | 1,102,000 | 1,114,879 | ||||||||||||
Santander Retail Auto Lease Trust Series 2019-A Class A2 144A | 2.72 | 1-20-2022 | 2,720,938 | 2,740,575 | ||||||||||||
SLC Student Loan Trust Series 2006-2 Class A5 (3 Month LIBOR +0.10%) ± | 0.41 | 9-15-2026 | 499,849 | 499,611 | ||||||||||||
SLM Student Loan Trust Series 2011-2 Class A1 (1 Month LIBOR +0.60%) ± | 0.78 | 11-25-2027 | 752,399 | 751,380 | ||||||||||||
SLM Student Loan Trust Series 2012-3 Class A (1 Month LIBOR +0.65%) ± | 0.83 | 12-27-2038 | 4,192,919 | 4,125,203 | ||||||||||||
SLM Student Loan Trust Series 2013-1 Class A3 (1 Month LIBOR +0.55%) ± | 0.73 | 5-26-2055 | 4,509,997 | 4,439,393 | ||||||||||||
SLM Student Loan Trust Series 2014-A Class B 144A | 3.50 | 11-15-2044 | 6,200,000 | 6,295,426 | ||||||||||||
SoFi Professional Loan Program LLC Series 2017-A Class A1 (1 Month LIBOR +0.70%) 144A± | 0.87 | 3-26-2040 | 2,038,103 | 2,035,891 | ||||||||||||
South Texas Higher Education 2012-1 Class A2 (3 Month LIBOR +0.85%) ± | 2.28 | 10-1-2024 | 1,186,353 | 1,187,006 | ||||||||||||
Student Loan Consolidation Center Series 2011-1 Class A (1 Month LIBOR +1.22%) 144A± | 1.40 | 10-25-2027 | 2,684,283 | 2,695,103 | ||||||||||||
Tesla Auto Lease Trust Series 2018-B Class A 144A | 3.71 | 8-20-2021 | 1,389,371 | 1,404,703 | ||||||||||||
Towd Point Asset Funding LLC Series 2019-HE1 Class A1 (1 Month LIBOR +0.90%) 144A± | 1.08 | 4-25-2048 | 2,424,643 | 2,407,068 | ||||||||||||
Towd Point Asset Trust Series 2018-SL1 Class A (1 Month LIBOR +0.60%) 144A± | 0.78 | 1-25-2046 | 3,079,692 | 3,023,686 | ||||||||||||
Westlake Automobile Receivables Trust Series 2019-2A Class A2A 144A | 2.57 | 2-15-2023 | 5,540,343 | 5,582,564 | ||||||||||||
Wheels SPV LLC Series 2018-1A Class A2 144A | 3.06 | 4-20-2027 | 779,238 | 784,080 | ||||||||||||
World Omni Auto Receivables Trust Series 2016-B Class A3 | 1.30 | 2-15-2022 | 116,957 | 116,996 | ||||||||||||
Total Asset-Backed Securities (Cost $156,895,135) | 157,814,945 | |||||||||||||||
|
| |||||||||||||||
Corporate Bonds and Notes: 19.40% | ||||||||||||||||
Communication Services: 0.74% | ||||||||||||||||
Diversified Telecommunication Services: 0.16% | ||||||||||||||||
Level 3 Financing Incorporated | 5.13 | 5-1-2023 | 2,000,000 | 2,000,000 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Ultra Short-Term Income Fund | 13
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Media: 0.47% | ||||||||||||||||
NBCUniversal Enterprise Incorporated 144A | 5.25 | % | 12-31-2049 | $ | 6,000,000 | $ | 6,090,000 | |||||||||
|
| |||||||||||||||
Wireless Telecommunication Services: 0.11% | ||||||||||||||||
Sprint Spectrum Company LLC 144A | 3.36 | 3-20-2023 | 1,406,250 | 1,422,703 | ||||||||||||
|
| |||||||||||||||
Consumer Discretionary: 1.44% | ||||||||||||||||
Automobiles: 0.59% | ||||||||||||||||
Ford Motor Company | 8.50 | 4-21-2023 | 1,900,000 | 2,100,270 | ||||||||||||
General Motors Company | 5.40 | 10-2-2023 | 5,000,000 | 5,542,372 | ||||||||||||
7,642,642 | ||||||||||||||||
|
| |||||||||||||||
Household Durables: 0.18% | ||||||||||||||||
Lennar Corporation | 6.25 | 12-15-2021 | 2,250,000 | 2,330,325 | ||||||||||||
|
| |||||||||||||||
Multiline Retail: 0.22% | ||||||||||||||||
Macy’s Retail Holdings Incorporated | 3.45 | 1-15-2021 | 2,800,000 | 2,786,000 | ||||||||||||
|
| |||||||||||||||
Textiles, Apparel & Luxury Goods: 0.45% | ||||||||||||||||
Ralph Lauren Corporation | 1.70 | 6-15-2022 | 3,190,000 | 3,253,075 | ||||||||||||
Tapestry Incorporated | 3.00 | 7-15-2022 | 2,495,000 | 2,509,146 | ||||||||||||
5,762,221 | ||||||||||||||||
|
| |||||||||||||||
Consumer Staples: 1.71% | ||||||||||||||||
Food & Staples Retailing: 0.37% | ||||||||||||||||
Cargill Incorporated 144A | 1.38 | 7-23-2023 | 4,700,000 | 4,811,202 | ||||||||||||
|
| |||||||||||||||
Food Products: 0.54% | ||||||||||||||||
Conagra Brands Incorporated | 3.80 | 10-22-2021 | 3,560,000 | 3,692,900 | ||||||||||||
Land O’Lakes Incorporated 144A | 6.00 | 11-15-2022 | 3,000,000 | 3,195,000 | ||||||||||||
6,887,900 | ||||||||||||||||
|
| |||||||||||||||
Tobacco: 0.80% | ||||||||||||||||
Altria Group Incorporated | 4.75 | 5-5-2021 | 5,000,000 | 5,151,080 | ||||||||||||
BAT Capital Corporation | 2.76 | 8-15-2022 | 5,000,000 | 5,199,700 | ||||||||||||
10,350,780 | ||||||||||||||||
|
| |||||||||||||||
Energy: 2.74% | ||||||||||||||||
Oil, Gas & Consumable Fuels: 2.74% | ||||||||||||||||
BP Capital Markets America Incorporated | 2.94 | 4-6-2023 | 1,000,000 | 1,061,085 | ||||||||||||
DCP Midstream Operating LP 144A | 4.75 | 9-30-2021 | 3,500,000 | 3,570,000 | ||||||||||||
EQT Corporation | 3.00 | 10-1-2022 | 2,750,000 | 2,719,008 | ||||||||||||
Exxon Mobil Corporation | 1.57 | 4-15-2023 | 7,000,000 | 7,217,714 | ||||||||||||
Marathon Petroleum Corporation | 4.50 | 5-1-2023 | 3,000,000 | 3,265,080 | ||||||||||||
Midwest Connector Capital Company 144A | 3.63 | 4-1-2022 | 1,654,000 | 1,665,494 | ||||||||||||
Occidental Petroleum Corporation | 2.60 | 8-13-2021 | 2,195,000 | 2,196,010 | ||||||||||||
Occidental Petroleum Corporation | 2.70 | 8-15-2022 | 3,090,000 | 3,038,011 | ||||||||||||
The Phillips 66 Company | 3.70 | 4-6-2023 | 5,000,000 | 5,381,992 | ||||||||||||
Valero Energy Corporation | 2.70 | 4-15-2023 | 3,000,000 | 3,135,878 | ||||||||||||
Western Gas Partners LP | 5.38 | 6-1-2021 | 2,000,000 | 2,020,000 | ||||||||||||
35,270,272 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Ultra Short-Term Income Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Financials: 8.09% | ||||||||||||||||
Banks: 1.71% | ||||||||||||||||
Citibank NA (3 Month LIBOR +0.60%) ± | 2.84 | % | 5-20-2022 | $ | 6,000,000 | $ | 6,104,889 | |||||||||
Fifth Third Bancorp | 1.63 | 5-5-2023 | 3,000,000 | 3,077,930 | ||||||||||||
JPMorgan Chase & Company (U.S. SOFR +1.46%) ± | 1.51 | 6-1-2024 | 7,250,000 | 7,414,179 | ||||||||||||
JPMorgan Chase & Company (3 Month LIBOR +0.70%) ± | 3.21 | 4-1-2023 | 2,635,000 | 2,748,002 | ||||||||||||
Synchrony Bank | 3.65 | 5-24-2021 | 2,650,000 | 2,690,004 | ||||||||||||
22,035,004 | ||||||||||||||||
|
| |||||||||||||||
Capital Markets: 1.89% | ||||||||||||||||
Goldman Sachs Group Incorporated | 5.75 | 1-24-2022 | 5,000,000 | 5,366,921 | ||||||||||||
IntercontinentalExchange Incorporated | 0.70 | 6-15-2023 | 5,000,000 | 5,032,180 | ||||||||||||
Morgan Stanley | 2.75 | 5-19-2022 | 9,435,000 | 9,798,164 | ||||||||||||
State Street Corporation (U.S. SOFR +2.69%) 144A± | 2.83 | 3-30-2023 | 4,000,000 | 4,145,010 | ||||||||||||
24,342,275 | ||||||||||||||||
|
| |||||||||||||||
Consumer Finance: 3.25% | ||||||||||||||||
BMW US Capital LLC 144A | 3.80 | 4-6-2023 | 5,000,000 | 5,408,096 | ||||||||||||
Daimler Finance North America LLC 144A | 1.75 | 3-10-2023 | 1,715,000 | 1,753,186 | ||||||||||||
Ford Motor Credit Company LLC | 3.20 | 1-15-2021 | 3,665,000 | 3,665,000 | ||||||||||||
General Motors Financial Company Incorporated | 1.70 | 8-18-2023 | 2,000,000 | 2,011,847 | ||||||||||||
General Motors Financial Company Incorporated | 4.20 | 11-6-2021 | 2,500,000 | 2,585,352 | ||||||||||||
Hyundai Capital America Company 144A | 2.38 | 2-10-2023 | 1,720,000 | 1,765,184 | ||||||||||||
Hyundai Capital America Company 144A | 2.75 | 9-18-2020 | 4,000,000 | 4,003,903 | ||||||||||||
Nissan Motor Acceptance Corporation 144A | 3.65 | 9-21-2021 | 4,000,000 | 4,052,230 | ||||||||||||
The American Express Company (3 Month LIBOR +0.62%) ± | 0.87 | 5-20-2022 | 3,000,000 | 3,020,939 | ||||||||||||
Toyota Motor Credit Corporation | 2.90 | 3-30-2023 | 5,000,000 | 5,317,107 | ||||||||||||
Volkswagen Group of America Finance LLC 144A | 2.70 | 9-26-2022 | 3,875,000 | 4,028,334 | ||||||||||||
Volkswagen Group of America Finance LLC 144A | 3.13 | 5-12-2023 | 4,000,000 | 4,244,375 | ||||||||||||
41,855,553 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 0.45% | ||||||||||||||||
National Securities Clearing Corporation 144A | 1.20 | 4-23-2023 | 5,000,000 | 5,093,913 | ||||||||||||
WEA Finance LLC 144A | 3.25 | 10-5-2020 | 698,000 | 698,518 | ||||||||||||
5,792,431 | ||||||||||||||||
|
| |||||||||||||||
Insurance: 0.79% | ||||||||||||||||
AIG Global Funding 144A | 0.80 | 7-7-2023 | 5,000,000 | 5,037,828 | ||||||||||||
Athene Global Funding 144A | 2.80 | 5-26-2023 | 5,000,000 | 5,197,797 | ||||||||||||
10,235,625 | ||||||||||||||||
|
| |||||||||||||||
Health Care: 0.63% | ||||||||||||||||
Biotechnology: 0.40% | ||||||||||||||||
AbbVie Incorporated | 3.38 | 11-14-2021 | 4,935,000 | 5,109,054 | ||||||||||||
|
| |||||||||||||||
Pharmaceuticals: 0.23% | ||||||||||||||||
Royalty Pharma plc 144A%% | 0.75 | 9-2-2023 | 3,000,000 | 2,998,354 | ||||||||||||
|
| |||||||||||||||
Industrials: 2.09% | ||||||||||||||||
Aerospace & Defense: 0.08% | ||||||||||||||||
The Boeing Company | 4.51 | 5-1-2023 | 1,000,000 | 1,056,053 | ||||||||||||
|
| |||||||||||||||
Air Freight & Logistics: 0.40% | ||||||||||||||||
FedEx Corporation | 3.40 | 1-14-2022 | 5,000,000 | 5,200,389 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Ultra Short-Term Income Fund | 15
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Airlines: 0.47% | ||||||||||||||||
Delta Air Lines Incorporated | 3.40 | % | 4-19-2021 | $ | 3,000,000 | $ | 3,006,986 | |||||||||
Delta Air Lines Incorporated | 3.63 | 3-15-2022 | 3,000,000 | 2,984,233 | ||||||||||||
5,991,219 | ||||||||||||||||
|
| |||||||||||||||
Industrial Conglomerates: 0.37% | ||||||||||||||||
General Electric Company (3 Month LIBOR +1.00%) ± | 1.31 | 3-15-2023 | 1,729,000 | 1,728,509 | ||||||||||||
Honeywell International Incorporated | 0.48 | 8-19-2022 | 3,000,000 | 3,006,753 | ||||||||||||
4,735,262 | ||||||||||||||||
|
| |||||||||||||||
Machinery: 0.77% | ||||||||||||||||
CNH Industrial Capital LLC | 1.95 | 7-2-2023 | 6,405,000 | 6,503,827 | ||||||||||||
CNH Industrial Capital LLC | 4.38 | 11-6-2020 | 3,375,000 | 3,385,023 | ||||||||||||
9,888,850 | ||||||||||||||||
|
| |||||||||||||||
Information Technology: 0.64% | ||||||||||||||||
IT Services: 0.16% | ||||||||||||||||
Leidos Incorporated 144A | 2.95 | 5-15-2023 | 2,000,000 | 2,103,510 | ||||||||||||
|
| |||||||||||||||
Semiconductors & Semiconductor Equipment: 0.28% | ||||||||||||||||
Microchip Technology Incorporated 144A | 2.67 | 9-1-2023 | 3,475,000 | 3,596,900 | ||||||||||||
|
| |||||||||||||||
Technology Hardware, Storage & Peripherals: 0.20% | ||||||||||||||||
Dell International LLC 144A | 7.13 | 6-15-2024 | 2,505,000 | 2,600,916 | ||||||||||||
|
| |||||||||||||||
Real Estate: 0.54% | ||||||||||||||||
Equity REITs: 0.54% | ||||||||||||||||
Service Properties Trust | 4.50 | 6-15-2023 | 3,500,000 | 3,465,000 | ||||||||||||
Tanger Properties LP | 3.88 | 12-1-2023 | 3,515,000 | 3,500,448 | ||||||||||||
6,965,448 | ||||||||||||||||
|
| |||||||||||||||
Utilities: 0.78% | ||||||||||||||||
Independent Power & Renewable Electricity Producers: 0.16% | ||||||||||||||||
TerraForm Power Operating LLC 144A | 4.25 | 1-31-2023 | 2,000,000 | 2,070,400 | ||||||||||||
|
| |||||||||||||||
Multi-Utilities: 0.62% | ||||||||||||||||
Dominion Energy Incorporated | 2.72 | 8-15-2021 | 2,700,000 | 2,755,674 | ||||||||||||
DTE Energy Company | 2.25 | 11-1-2022 | 5,000,000 | 5,177,353 | ||||||||||||
7,933,027 | ||||||||||||||||
|
| |||||||||||||||
Total Corporate Bonds and Notes (Cost $243,156,936) | 249,864,315 | |||||||||||||||
|
| |||||||||||||||
Shares | ||||||||||||||||
Exchange-Traded Funds: 5.60% | ||||||||||||||||
Invesco BulletShares 2021 High Yield Corporate Bond ETF | 605,241 | 13,975,015 | ||||||||||||||
iShares Short-Term Corporate Bond ETF | 572,000 | 31,511,480 | ||||||||||||||
SPDR Portfolio Short Term Corporate Bond ETF | 847,800 | 26,646,354 | ||||||||||||||
Total Exchange-Traded Funds (Cost $70,145,520) | 72,132,849 | |||||||||||||||
|
| |||||||||||||||
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Ultra Short-Term Income Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Municipal Obligations: 0.61% | ||||||||||||||||
Indiana: 0.22% | ||||||||||||||||
Education Revenue: 0.22% | ||||||||||||||||
Indiana Secondary Market for Education Loans Incorporated (1 Month LIBOR +0.80%) ± | 0.98 | % | 2-25-2044 | $ | 2,846,005 | $ | 2,839,857 | |||||||||
|
| |||||||||||||||
New Jersey: 0.13% | ||||||||||||||||
Transportation Revenue: 0.13% | ||||||||||||||||
New Jersey Transportation Trust Authority Taxable Transportation System Series B | 2.38 | 6-15-2022 | 1,700,000 | 1,709,962 | ||||||||||||
|
| |||||||||||||||
New York: 0.06% | ||||||||||||||||
Transportation Revenue: 0.06% | ||||||||||||||||
New York Metropolitan Transportation Authority BAN | 4.00 | 2-1-2022 | 790,000 | 803,967 | ||||||||||||
|
| |||||||||||||||
Wisconsin: 0.20% | ||||||||||||||||
Housing Revenue: 0.20% | ||||||||||||||||
Wisconsin PFA Affinity Living Group Project (Citizens Bank LOC) | 3.75 | 2-1-2022 | 2,500,000 | 2,500,350 | ||||||||||||
|
| |||||||||||||||
Total Municipal Obligations (Cost $7,793,087) | 7,854,136 | |||||||||||||||
|
| |||||||||||||||
Non-Agency Mortgage-Backed Securities: 23.31% | ||||||||||||||||
Angel Oak Mortgage Trust I LLC Series 2019-3 Class A1 144A±± | 2.93 | 5-25-2059 | 1,492,979 | 1,508,431 | ||||||||||||
Angel Oak Mortgage Trust I LLC Series 2019-4 Class A1 144A±± | 2.99 | 7-26-2049 | 3,510,726 | 3,555,655 | ||||||||||||
Angel Oak Mortgage Trust I LLC Series 2020-4 Class A1 144A±± | 1.47 | 6-25-2065 | 3,910,005 | 3,917,256 | ||||||||||||
Banc of America Funding Corporation Series 2016-R1 Class A1 144A±± | 2.50 | 3-25-2040 | 787,207 | 786,977 | ||||||||||||
Bluemountain CLO Limited Series 2015-1A Class A1R (3 Month LIBOR +1.33%) 144A± | 1.60 | 4-13-2027 | 371,326 | 371,360 | ||||||||||||
Bravo Residential Funding Trust Series 2020-RPL1 Class A1 144A±± | 2.50 | 5-26-2059 | 1,962,696 | 2,025,082 | ||||||||||||
Bunker Hill Loan Depositary Trust Series 2019-2 Class A1 144A | 2.88 | 7-25-2049 | 3,964,266 | 4,047,001 | ||||||||||||
Carlyle C17 CLO Limited Series C17A Class A1AR (3 Month LIBOR +1.03%) 144A± | 1.30 | 4-30-2031 | 3,000,000 | 2,972,169 | ||||||||||||
Cascade Funding Mortgage Trust Series 2018- RM2 Class A 144A±± | 4.00 | 10-25-2068 | 1,055,265 | 1,095,824 | ||||||||||||
CCG Receivables Trust Series 2019-1 Class A2 144A | 2.80 | 9-14-2026 | 1,915,572 | 1,949,818 | ||||||||||||
CD Commercial Mortgage Trust Series 2017-CD3 Class A1 | 1.97 | 2-10-2050 | 1,621,361 | 1,627,520 | ||||||||||||
CGDBB Commercial Mortgage Trust Series 2017-BIOC Class A (1 Month LIBOR +0.79%) 144A± | 0.95 | 7-15-2032 | 5,115,843 | 5,103,038 | ||||||||||||
Citigroup Commercial Mortgage Trust Series 2015-GC27 Class A3 | 3.06 | 2-10-2048 | 5,805,000 | 5,884,990 | ||||||||||||
Citigroup Commercial Mortgage Trust Series 2017-MDRB Class A (1 Month LIBOR +1.10%) 144A± | 1.26 | 7-15-2030 | 2,365,399 | 2,253,477 | ||||||||||||
Collateralized Mortgage Obligation Trust Series 66 Class Z | 8.00 | 9-20-2021 | 179 | 179 | ||||||||||||
Colt Funding LLC Series 2018-3 Class A1 144A±± | 3.69 | 10-26-2048 | 1,196,802 | 1,197,875 | ||||||||||||
Colt Funding LLC Series 2019-1 Class A1 144A±± | 3.71 | 3-25-2049 | 1,313,363 | 1,329,492 | ||||||||||||
Colt Funding LLC Series 2020-2 Class A1 144A±± | 1.85 | 3-25-2065 | 6,334,244 | 6,358,261 | ||||||||||||
Commercial Mortgage Pass-Through Certificate Series 2010-C1 Class A3 144A | 4.21 | 7-10-2046 | 152,555 | 152,407 | ||||||||||||
Commercial Mortgage Trust Series 2014-CR15 Class A2 | 2.93 | 2-10-2047 | 2,372,757 | 2,400,602 | ||||||||||||
Commercial Mortgage Trust Series 2014-CR16 Class ASB | 3.65 | 4-10-2047 | 3,048,230 | 3,166,125 | ||||||||||||
Commercial Mortgage Trust Series 2014-LC17 Class A2 | 3.16 | 10-10-2047 | 21,363 | 21,348 | ||||||||||||
Commercial Mortgage Trust Series 2014-UBS2 Class A3 | 3.47 | 3-10-2047 | 4,170,000 | 4,218,275 | ||||||||||||
Commercial Mortgage Trust Series 2014-UBS5 Class A2 | 3.03 | 9-10-2047 | 666,485 | 667,447 | ||||||||||||
Countrywide Home Loans Mortgage Pass-Through Trust Series 2001-HYB1 Class 1A1 ±± | 2.90 | 6-19-2031 | 122,823 | 120,872 | ||||||||||||
Countrywide Home Loans Mortgage Pass-Through Trust Series 2001-HYB1 Class 2A1 ±± | 3.60 | 6-19-2031 | 77,092 | 75,862 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Ultra Short-Term Income Fund | 17
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Non-Agency Mortgage-Backed Securities (continued) | ||||||||||||||||
Credit Suisse Mortgage Trust Series 2019-SKLZ Class A (1 Month LIBOR +1.25%) 144A± | 1.41 | % | 1-15-2034 | $ | 3,600,000 | $ | 3,472,852 | |||||||||
Credit Suisse Mortgage Trust Series 2020-AFC1 Class A3 144A±± | 2.51 | 2-25-2050 | 5,977,020 | 6,032,046 | ||||||||||||
Credit Suisse Mortgage Trust Series 2020-SPT1 Class A1 144A | 1.62 | 4-25-2065 | 5,722,154 | 5,721,991 | ||||||||||||
Crown Point Limited Series 2015-3A Class A1AR (3 Month LIBOR +0.91%) 144A± | 1.19 | 12-31-2027 | 3,773,078 | 3,759,502 | ||||||||||||
DBWF Mortgage Trust Series 2018-GLKS (1 Month LIBOR +1.03%) 144A± | 1.19 | 12-19-2030 | 635,000 | 612,938 | ||||||||||||
Deephaven Residential Mortgage Series 2019-4A Class A1 144A±± | 2.79 | 10-25-2059 | 3,841,683 | 3,895,733 | ||||||||||||
Deephaven Residential Mortgage Series 2020-1 Class A2 144A±± | 2.49 | 1-25-2060 | 2,636,538 | 2,643,255 | ||||||||||||
DLJ Mortgage Acceptance Corporation Series 1990-2 Class A ±± | 3.57 | 1-25-2022 | 1,277 | 1,277 | ||||||||||||
DLL Securitization Trust Series 2018-ST2 Class A3 144A | 3.46 | 1-20-2022 | 3,983,349 | 4,032,290 | ||||||||||||
Dryden Senior Loan Fund Series 2013-30A (3 Month LIBOR +0.82%) 144A± | 1.10 | 11-15-2028 | 5,580,000 | 5,529,864 | ||||||||||||
Ellington Financial Mortgage Trust Series 2020-1 Class A1 144A±± | 2.01 | 5-25-2065 | 2,423,527 | 2,455,626 | ||||||||||||
EquiFirst Mortgage Loan Trust Series 2003-2 Class 3A3 (1 Month LIBOR +1.13%) ± | 1.29 | 9-25-2033 | 309,020 | 301,955 | ||||||||||||
Galton Funding Mortgage Trust Series 2020-H1 Class A1 144A±± | 2.31 | 1-25-2060 | 6,572,654 | 6,667,817 | ||||||||||||
GB Trust Series 2020-FlLIX (1 Month LIBOR +1.12%) 144A± | 1.29 | 8-15-2037 | 8,000,000 | 8,015,539 | ||||||||||||
GCAT Series 2019-NQM1 Class A1 144A | 2.99 | 2-25-2059 | 4,408,145 | 4,459,892 | ||||||||||||
GCAT Series 2019-NQM2 Class A1 144A | 2.86 | 9-25-2059 | 4,196,799 | 4,258,067 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2010-C2 Class A2 144A±± | 5.16 | 12-10-2043 | 252,688 | 252,509 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2011-GC3 Class A4 144A | 4.75 | 3-10-2044 | 3,338,557 | 3,346,066 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2013-GC16 Class AAB | 3.81 | 11-10-2046 | 1,584,760 | 1,658,470 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2014-GC22 Class A3 | 3.52 | 6-10-2047 | 2,934,697 | 2,966,645 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2015-GS1 Class A1 | 1.94 | 11-10-2048 | 67,068 | 67,098 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2016-GS3 Class A1 | 1.43 | 10-10-2049 | 242,482 | 242,504 | ||||||||||||
Goldman Sachs Mortgage Securities Trust Series 2020-NQM1 Class A1 144A±± | 1.38 | 9-27-2060 | 5,600,000 | 5,602,198 | ||||||||||||
GPMT Limited Series 2018-FL1 Class A (1 Month LIBOR +0.90%) 144A± | 1.07 | 11-21-2035 | 925,430 | 911,545 | ||||||||||||
GSMPS Mortgage Loan Trust Series 1998-1 Class A 144A±± | 8.00 | 9-19-2027 | 31,366 | 30,407 | ||||||||||||
Halcyon Loan Advisors Funding Series 2014-3A Class AR (3 Month LIBOR +1.10%) 144A± | 1.36 | 10-22-2025 | 1,418,435 | 1,414,764 | ||||||||||||
Homeward Opportunities Fund I Trust Series 2019-1 Class A1 144A±± | 3.45 | 1-25-2059 | 3,008,993 | 3,052,107 | ||||||||||||
Hospitality Mortgage Trust Series 2019 Class A (1 Month LIBOR +1.00%) 144A± | 1.16 | 11-15-2036 | 3,991,417 | 3,818,193 | ||||||||||||
InTown Hotel Portfolio Trust Series 2018-STAY Class A (1 Month LIBOR +0.70%) 144A± | 0.86 | 1-15-2033 | 4,000,000 | 3,912,898 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2011-C5 Class A3 | 4.17 | 8-15-2046 | 1,817,642 | 1,850,227 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2018-PHH Class A (1 Month LIBOR +0.91%) 144A± | 2.41 | 6-15-2035 | 3,571,081 | 3,359,902 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2019-MFP Class A (1 Month LIBOR +0.96%) 144A± | 1.12 | 7-15-2036 | 5,000,000 | 4,868,746 | ||||||||||||
KKR Financial Holdings LLC (3 Month LIBOR +1.34%) 144A± | 1.62 | 4-15-2029 | 8,000,000 | 7,985,272 | ||||||||||||
LCM XII LP Series 2013-A Class ARR (3 Month LIBOR +1.14%) 144A± | 1.41 | 7-19-2027 | 6,000,000 | 5,956,020 | ||||||||||||
Lendmark Funding Trust Series 2018-2A Class A 144A | 4.23 | 4-20-2027 | 3,000,000 | 3,031,233 | ||||||||||||
Marlette Funding Trust Series 2019-4A Class A 144A | 2.39 | 12-17-2029 | 2,948,207 | 2,972,053 | ||||||||||||
Marlette Funding Trust Series 2020-2A Class A 144A | 1.02 | 9-16-2030 | 8,000,000 | 8,011,742 | ||||||||||||
Master Mortgages Trust Series 2002-3 Class 4A1 ±± | 3.81 | 10-25-2032 | 2,004 | 1,957 | ||||||||||||
Mello Warehouse Securitization Series 2018-W1 Class A (1 Month LIBOR +0.85%) 144A± | 1.03 | 11-25-2051 | 3,666,667 | 3,663,472 | ||||||||||||
Mello Warehouse Securitization Series 2019-1 Class A (1 Month LIBOR +0.80%) 144A± | 0.98 | 6-25-2052 | 5,065,000 | 5,068,460 | ||||||||||||
MF1 Limited Class 2020-Fl3 Class A (1 Month LIBOR +2.05%) 144A± | 2.21 | 7-15-2035 | 3,255,000 | 3,267,741 | ||||||||||||
Morgan Stanley Capital I Trust Series 2011-C2 Class A4 144A | 4.66 | 6-15-2044 | 2,957,989 | 3,028,704 | ||||||||||||
Morgan Stanley Capital I Trust Series 2016-C30 Class A1 | 1.39 | 9-15-2049 | 2,176,966 | 2,177,862 | ||||||||||||
New Residential Mortgage Loan Trust Series 2018-NQM1 Class A1 144A±± | 3.99 | 11-25-2048 | 2,350,298 | 2,409,356 |
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Ultra Short-Term Income Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Non-Agency Mortgage-Backed Securities (continued) | ||||||||||||||||
Ocwen Master Advance Receivable Series 2020-T1 Class AT1 144A | 1.28 | % | 8-15-2052 | $ | 7,280,000 | $ | 7,292,487 | |||||||||
Ondeck Asset Securitization Trust LLC Series 2018-1A Class A 144A | 3.50 | 4-18-2022 | 1,484,047 | 1,475,768 | ||||||||||||
Onslow Bay Financial LLC Series 2020-EXP1 1A8 144A±± | 3.50 | 2-25-2060 | 1,916,018 | 1,969,151 | ||||||||||||
OZML Funding Limited Series 2013-3A Class AIRR (3 Month LIBOR +1.18%) 144A± | 1.44 | 1-22-2029 | 4,969,666 | 4,949,435 | ||||||||||||
Palmer Square Loan Funding Limited Series 2018-4A Class A1 (3 Month LIBOR +0.90%) 144A± | 1.18 | 11-15-2026 | 2,543,182 | 2,534,634 | ||||||||||||
ReadyCap Commercial Mortgage Trust Series 2019-5 Class A 144A | 3.78 | 2-25-2052 | 2,748,722 | 2,682,003 | ||||||||||||
Residential Mortgage Loan Trust Series 2019-2 Class A1 144A±± | 2.91 | 5-25-2059 | 3,348,726 | 3,399,607 | ||||||||||||
Salomon Brothers Mortgage Securities VII Series 1990-2 Class A ±± | 2.37 | 11-25-2020 | 112,284 | 112,277 | ||||||||||||
Sequoia Mortgage Trust Series 2017-CH2 Class A10 144A±± | 4.00 | 12-25-2047 | 1,264,358 | 1,272,857 | ||||||||||||
Shackleton CLO Limited Series 2019-15A Class A (3 Month LIBOR +1.25%) 144A± | 1.53 | 1-15-2030 | 2,840,000 | 2,825,641 | ||||||||||||
Starwood Mortgage Residential Trust Series 2019-1 Class A1 144A±± | 2.94 | 6-25-2049 | 3,130,562 | 3,180,671 | ||||||||||||
Starwood Mortgage Residential Trust Series 2019-INV1 Class A1 144A±± | 2.61 | 9-27-2049 | 3,329,091 | 3,368,453 | ||||||||||||
Starwood Mortgage Residential Trust Series 2020-1 Class A3 144A±± | 2.56 | 2-25-2050 | 3,560,826 | 3,607,763 | ||||||||||||
Starwood Mortgage Residential Trust Series 2020-2 Class A1 144A±± | 2.72 | 4-25-2060 | 6,379,620 | 6,383,315 | ||||||||||||
TCW CLO 2017-1 Limited Series 2017-1A Class BR (3 Month LIBOR +1.55%) 144A± | 1.82 | 7-29-2029 | 5,540,000 | 5,469,265 | ||||||||||||
TCW CLO 2019-1 AMR Limited Series 2019-1A Class A (3 Month LIBOR +1.07%) 144A± | 1.35 | 2-15-2029 | 4,075,000 | 4,055,526 | ||||||||||||
Towd Point Mortgage Trust Series 2015-4 Class A2 144A±± | 3.75 | 4-25-2055 | 3,080,000 | 3,201,766 | ||||||||||||
Towd Point Mortgage Trust Series 2016-3 Class A1 144A±± | 2.25 | 4-25-2056 | 1,509,392 | 1,530,703 | ||||||||||||
Towd Point Mortgage Trust Series 2017-1 Class A1 144A±± | 2.75 | 10-25-2056 | 3,908,528 | 4,018,628 | ||||||||||||
Towd Point Mortgage Trust Series 2017-4 Class A1 144A±± | 2.75 | 6-25-2057 | 2,398,373 | 2,500,688 | ||||||||||||
Towd Point Mortgage Trust Series 2018-2 Class A1 144A±± | 3.25 | 3-25-2058 | 1,786,928 | 1,890,584 | ||||||||||||
Towd Point Mortgage Trust Series 2019-SJ3 Class A1 144A±± | 3.00 | 11-25-2059 | 4,168,422 | 4,234,892 | ||||||||||||
UBS Commercial Mortgage Trust Series 2012-C1 Class A3 | 3.40 | 5-10-2045 | 1,347,805 | 1,387,661 | ||||||||||||
UBS Commercial Mortgage Trust Series 2018-NYCH Class A (1 Month LIBOR +0.85%) 144A± | 1.01 | 2-15-2032 | 4,115,000 | 3,968,021 | ||||||||||||
Vendee Mortgage Trust Series 2011-1 Class DA | 3.75 | 2-15-2035 | 944,192 | 957,943 | ||||||||||||
Venture CDO Limited Series 2015-20A Class AR (3 Month LIBOR +0.82%) 144A± | 1.10 | 4-15-2027 | 4,465,526 | 4,441,703 | ||||||||||||
Verus Securitization Trust Series 2019-1 Class A1 144A±± | 3.40 | 12-25-2059 | 3,257,850 | 3,333,237 | ||||||||||||
Verus Securitization Trust Series 2020-2 Class A1 144A±± | 2.23 | 5-25-2060 | 1,891,208 | 1,902,077 | ||||||||||||
Verus Securitization Trust Series 2020-INV1 Class A1 144A±± | 1.98 | 3-25-2060 | 2,608,448 | 2,629,197 | ||||||||||||
Vista Point Securitization Trust Series 2020-1 Class A1 144A±± | 1.76 | 3-25-2065 | 5,688,369 | 5,703,398 | ||||||||||||
Wilshire Funding Corporation Series 1996-3 Class M2 ±± | 7.09 | 8-25-2032 | 131,543 | 134,854 | ||||||||||||
Wilshire Funding Corporation Series 1996-3 Class M3 ±± | 7.09 | 8-25-2032 | 102,963 | 98,875 | ||||||||||||
Wilshire Funding Corporation Series 1998-2 Class M1 (1 Week LIBOR +2.00%) ± | 2.09 | 12-28-2037 | 142,757 | 143,430 | ||||||||||||
Total Non-Agency Mortgage-Backed Securities (Cost $299,900,444) | 300,252,648 | |||||||||||||||
|
| |||||||||||||||
Yankee Corporate Bonds and Notes: 9.39% | ||||||||||||||||
Consumer Discretionary: 0.97% | ||||||||||||||||
Auto Components: 0.49% | ||||||||||||||||
Toyota Industries Corporation 144A | 3.11 | 3-12-2022 | 6,145,000 | 6,341,823 | ||||||||||||
|
| |||||||||||||||
Automobiles: 0.05% | ||||||||||||||||
Fiat Chrysler Automobiles NV | 5.25 | 4-15-2023 | 530,000 | 561,800 | ||||||||||||
|
| |||||||||||||||
Household Durables: 0.43% | ||||||||||||||||
Panasonic Corporation 144A | 2.54 | 7-19-2022 | 5,400,000 | 5,571,759 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Ultra Short-Term Income Fund | 19
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Consumer Staples: 0.36% | ||||||||||||||||
Food & Staples Retailing: 0.36% | ||||||||||||||||
Seven & I Holdings Company Limited 144A | 3.35 | % | 9-17-2021 | $ | 4,500,000 | $ | 4,609,886 | |||||||||
|
| |||||||||||||||
Energy: 0.89% | ||||||||||||||||
Oil, Gas & Consumable Fuels: 0.89% | ||||||||||||||||
Aker BP ASA 144A | 6.00 | 7-1-2022 | 5,000,000 | 5,098,021 | ||||||||||||
TransCanada PipeLines Limited | 9.88 | 1-1-2021 | 6,200,000 | 6,389,155 | ||||||||||||
11,487,176 | ||||||||||||||||
|
| |||||||||||||||
Financials: 6.95% | ||||||||||||||||
Banks: 6.55% | ||||||||||||||||
ANZ New Zealand International Company 144A | 1.90 | 2-13-2023 | 2,800,000 | 2,893,715 | ||||||||||||
Banco de Bogota SA 144A | 5.38 | 2-19-2023 | 1,500,000 | 1,575,015 | ||||||||||||
Banco Santander Chile 144A | 2.50 | 12-15-2020 | 8,255,000 | 8,228,997 | ||||||||||||
Banco Santander SA | 3.50 | 4-11-2022 | 10,020,000 | 10,446,582 | ||||||||||||
Bank of Nova Scotia | 1.63 | 5-1-2023 | 5,000,000 | 5,147,464 | ||||||||||||
Banque Federative du Credit Mutuel SA 144A | 2.13 | 11-21-2022 | 7,700,000 | 7,963,693 | ||||||||||||
Barclays Bank plc | 1.70 | 5-12-2022 | 5,000,000 | 5,092,026 | ||||||||||||
Corporación Andina de Fomento | 4.38 | 6-15-2022 | 5,400,000 | 5,710,554 | ||||||||||||
Credit Suisse AG | 2.80 | 4-8-2022 | 2,000,000 | 2,077,816 | ||||||||||||
Danske Bank A/S 144A | 5.00 | 1-12-2022 | 8,565,000 | 9,028,897 | ||||||||||||
Global Bank Corporation 144A | 4.50 | 10-20-2021 | 1,180,000 | 1,210,857 | ||||||||||||
Lloyds Banking Group plc (1 Year Treasury Constant Maturity +1.10%) ± | 1.33 | 6-15-2023 | 3,215,000 | 3,245,830 | ||||||||||||
Mizuho Financial Group Incorporated (3 Month LIBOR +0.99%) ± | 1.24 | 7-10-2024 | 2,420,000 | 2,449,474 | ||||||||||||
Royal Bank of Scotland Group plc | 6.13 | 12-15-2022 | 3,000,000 | 3,293,400 | ||||||||||||
Skandinaviska Enskilda Banken AB 144A%% | 0.55 | 9-1-2023 | 6,000,000 | 5,998,320 | ||||||||||||
Suncorp-Metway Limited 144A | 2.38 | 11-9-2020 | 2,000,000 | 2,007,701 | ||||||||||||
Swedbank AB 144A | 1.30 | 6-2-2023 | 2,000,000 | 2,039,592 | ||||||||||||
UniCredit SpA 144A | 6.57 | 1-14-2022 | 5,615,000 | 5,969,401 | ||||||||||||
84,379,334 | ||||||||||||||||
|
| |||||||||||||||
Capital Markets: 0.16% | ||||||||||||||||
UBS Group AG (1 Year Treasury Constant Maturity +0.83%) 144A± | 1.01 | 7-30-2024 | 2,000,000 | 2,010,960 | ||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 0.24% | ||||||||||||||||
NatWest Markets plc 144A | 2.38 | 5-21-2023 | 3,060,000 | 3,161,356 | ||||||||||||
|
| |||||||||||||||
Health Care: 0.06% | ||||||||||||||||
Pharmaceuticals: 0.06% | ||||||||||||||||
Shire Acquisitions Investment Ireland Limited | 2.40 | 9-23-2021 | 687,000 | 700,813 | ||||||||||||
|
| |||||||||||||||
Materials: 0.16% | ||||||||||||||||
Chemicals: 0.16% | ||||||||||||||||
Park Aerospace Holdings Company 144A | 5.25 | 8-15-2022 | 2,115,000 | 2,099,703 | ||||||||||||
|
| |||||||||||||||
Total Yankee Corporate Bonds and Notes (Cost $118,461,180) | 120,924,610 | |||||||||||||||
|
| |||||||||||||||
Yankee Government Bonds: 0.31% | ||||||||||||||||
Abu Dhabi Government Class L 144A%% | 0.75 | 9-2-2023 | 4,000,000 | 3,995,064 | ||||||||||||
|
| |||||||||||||||
Total Yankee Government Bonds (Cost $3,990,520) | 3,995,064 | |||||||||||||||
|
| |||||||||||||||
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Ultra Short-Term Income Fund
Table of Contents
Portfolio of investments—August 31, 2020
Yield | Maturity date | Principal | Value | |||||||||||||
Short-Term Investments: 29.64% | ||||||||||||||||
Investment Companies: 14.11% | ||||||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u)## | 0.06 | % | $ | 181,770,847 | $ | 181,770,847 | ||||||||||
|
| |||||||||||||||
U.S. Treasury Securities: 15.53% | ||||||||||||||||
U.S. Cash Management Bill (z) | 0.13 | 11-17-2020 | 25,000,000 | 24,996,524 | ||||||||||||
U.S. Treasury Bill (z) | 0.09 | 11-27-2020 | 25,000,000 | 24,993,807 | ||||||||||||
U.S. Treasury Bill (z) | 0.09 | 12-17-2020 | 25,000,000 | 24,992,384 | ||||||||||||
U.S. Treasury Bill (z) | 0.10 | 12-24-2020 | 25,000,000 | 24,991,094 | ||||||||||||
U.S. Treasury Bill (z) | 0.10 | 1-7-2021 | 25,000,000 | 24,989,775 | ||||||||||||
U.S. Treasury Bill (z) | 0.10 | 1-14-2021 | 25,000,000 | 24,989,100 | ||||||||||||
U.S. Treasury Bill (z) | 0.14 | 9-10-2020 | 25,000,000 | 24,999,515 | ||||||||||||
U.S. Treasury Bill (z) | 0.17 | 10-15-2020 | 25,000,000 | 24,997,250 | ||||||||||||
199,949,449 | ||||||||||||||||
|
| |||||||||||||||
Total Short-Term Investments (Cost $381,717,904) | 381,720,296 | |||||||||||||||
|
|
Total investments in securities (Cost $1,388,029,332) | 108.87 | % | 1,402,254,407 | |||||
Other assets and liabilities, net | (8.87 | ) | (114,300,374 | ) | ||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 1,287,954,033 | ||||
|
|
|
|
± | Variable rate investment. The rate shown is the rate in effect at period end. |
%% | The security is purchased on a when-issued basis. |
±± | The coupon of the security is adjusted based on the principal and interest payments received from the underlying pool of mortgages as well as the credit quality and the actual prepayment speed of the underlying mortgages. |
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. |
(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. |
## | All or a portion of this security is segregated for when-issued securities. |
(z) | Zero coupon security. The rate represents the current yield to maturity. |
Abbreviations:
BAN | Bond anticipation notes |
FHLMC | Federal Home Loan Mortgage Corporation |
FNMA | Federal National Mortgage Association |
GNMA | Government National Mortgage Association |
LIBOR | London Interbank Offered Rate |
LOC | Letter of credit |
PFA | Public Finance Authority |
REIT | Real estate investment trust |
SOFR | Secured Overnight Financing Rate |
Futures Contracts
Description | Number of contracts | Expiration date | Notional cost | Notional value | Unrealized gains | Unrealized losses | ||||||||||||||||||
Short | ||||||||||||||||||||||||
2-Year U.S. Treasury Notes | (1,002) | 12-31-2020 | $ | (221,272,804 | ) | $ | (221,387,203 | ) | $ | 0 | $ | (114,399 | ) | |||||||||||
5-Year U.S. Treasury Notes | (436) | 12-31-2020 | (54,844,067 | ) | (54,949,625 | ) | 0 | (105,558 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||||
$ | 0 | $ | (219,957 | ) | ||||||||||||||||||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Ultra Short-Term Income Fund | 21
Table of Contents
Portfolio of investments—August 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:
Value, beginning of period | Purchases | Sales Proceeds | 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 * | $ | 0 | $ | 260,727,185 | $ | (260,727,481 | ) | $ | 296 | $ | 0 | $ | 145,181 | # | $ | 0 | ||||||||||||||||
Wells Fargo Government Money Market Fund Select Class | 62,084,487 | 878,886,971 | (759,200,611 | ) | 0 | 0 | 589,244 | $ | 181,770,847 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
$ | 296 | $ | 0 | $ | 734,425 | $ | 181,770,847 | 14.11 | % | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
* | 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.
22 | Wells Fargo Ultra Short-Term Income Fund
Table of Contents
Statement of assets and liabilities—August 31, 2020
Assets | ||||
Investments in unaffiliated securities, at value (cost $1,206,258,485) | $ | 1,220,483,560 | ||
Investments in affiliated securities, at value (cost $181,770,847) | 181,770,847 | |||
Cash | 6,650,229 | |||
Segregated cash for futures contracts | 1,958,340 | |||
Due from broker | 539,328 | |||
Receivable for investments sold | 23,524,014 | |||
Principal paydown receivable | 42,673 | |||
Receivable for Fund shares sold | 8,742,046 | |||
Receivable for interest | 3,915,214 | |||
|
| |||
Total assets | 1,447,626,251 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 62,170,524 | |||
Payable for when-issued transactions | 92,723,969 | |||
Payable for Fund shares redeemed | 3,342,435 | |||
Payable for daily variation margin on open futures contracts | 17,030 | |||
Management fee payable | 135,328 | |||
Dividends payable | 692,786 | |||
Administration fees payable | 94,728 | |||
Distribution fee payable | 3,305 | |||
Trustees’ fees and expenses payable | 3,628 | |||
Accrued expenses and other liabilities | 488,485 | |||
|
| |||
Total liabilities | 159,672,218 | |||
|
| |||
Total net assets | $ | 1,287,954,033 | ||
|
| |||
Net assets consist of | ||||
Paid-in capital | $ | 1,306,288,264 | ||
Total distributable loss | (18,334,231 | ) | ||
|
| |||
Total net assets | $ | 1,287,954,033 | ||
|
| |||
Computation of net asset value and offering price per share | ||||
Net assets – Class A | $ | 232,660,158 | ||
Shares outstanding – Class A1 | 27,056,812 | |||
Net asset value per share – Class A | $8.60 | |||
Maximum offering price per share – Class A2 | $8.78 | |||
Net assets – Class A2 | $ | 29,971,120 | ||
Shares outstanding – Class A21 | 3,487,616 | |||
Net asset value per share – Class A2 | $8.59 | |||
Net assets – Class C | $ | 5,186,921 | ||
Shares outstanding – Class C1 | 603,901 | |||
Net asset value per share – Class C | $8.59 | |||
Net assets – Administrator Class | $ | 15,359,263 | ||
Shares outstanding – Administrator Class1 | 1,794,354 | |||
Net asset value per share – Administrator Class | $8.56 | |||
Net assets – Institutional Class | $ | 1,004,776,571 | ||
Shares outstanding – Institutional Class1 | 116,915,430 | |||
Net asset value per share – Institutional Class | $8.59 |
1 | The Fund has an unlimited number of authorized shares. |
2 | Maximum offering price is computed as 100/98 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 Ultra Short-Term Income Fund | 23
Table of Contents
Statement of operations—year ended August 31, 2020
Investment income | ||||
Interest | $ | 24,628,356 | ||
Dividends | 1,830,903 | |||
Income from affiliated securities | 626,369 | |||
|
| |||
Total investment income | 27,085,628 | |||
|
| |||
Expenses | ||||
Management fee | 3,407,415 | |||
Administration fees |
| |||
Class A | 336,059 | |||
Class A2 | 3,415 | 1 | ||
Class C | 7,393 | |||
Administrator Class | 15,283 | |||
Institutional Class | 658,124 | |||
Shareholder servicing fees |
| |||
Class A | 524,820 | |||
Class A2 | 5,336 | 1 | ||
Class C | 11,479 | |||
Administrator Class | 38,137 | |||
Distribution fee |
| |||
Class C | 34,474 | |||
Custody and accounting fees | 69,624 | |||
Professional fees | 71,701 | |||
Registration fees | 104,392 | |||
Shareholder report expenses | 62,896 | |||
Trustees’ fees and expenses | 21,326 | |||
Other fees and expenses | 22,530 | |||
|
| |||
Total expenses | 5,394,404 | |||
Less: Fee waivers and/or expense reimbursements |
| |||
Fund-level | (1,181,183 | ) | ||
Class A | (20,796 | ) | ||
Class A2 | (1,086 | )1 | ||
Administrator Class | (8,840 | ) | ||
|
| |||
Net expenses | 4,182,499 | |||
|
| |||
Net investment income | 22,903,129 | |||
|
| |||
Realized and unrealized gains (losses) on investments | ||||
Net realized gains (losses) on |
| |||
Unaffiliated securities | 3,461,893 | |||
Affiliated securities | 296 | |||
Futures contracts | (5,690,074 | ) | ||
|
| |||
Net realized losses on investments | (2,227,885 | ) | ||
|
| |||
Net change in unrealized gains (losses) on |
| |||
Unaffiliated securities | 6,127,183 | |||
Futures contracts | (268,598 | ) | ||
|
| |||
Net change in unrealized gains (losses) on investments | 5,858,585 | |||
|
| |||
Net realized and unrealized gains (losses) on investments | 3,630,700 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 26,533,829 | ||
|
|
1 | For the period from May 29, 2020 (commencement of class operations) to August 31, 2020 |
The accompanying notes are an integral part of these financial statements.
24 | Wells Fargo Ultra Short-Term Income Fund
Table of Contents
Statement of changes in net assets
Year ended August 31, 2020 | Year ended August 31, 2019 | |||||||||||||||
Operations |
| |||||||||||||||
Net investment income | $ | 22,903,129 | $ | 23,807,281 | ||||||||||||
Net realized losses on investments | (2,227,885 | ) | (5,173,986 | ) | ||||||||||||
Net change in unrealized gains (losses) on investments | 5,858,585 | 14,893,045 | ||||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from operations | 26,533,829 | 33,526,340 | ||||||||||||||
|
| |||||||||||||||
Distributions to shareholders from net investment income and net realized gains | ||||||||||||||||
Class A | (3,964,308 | ) | (4,691,164 | ) | ||||||||||||
Class A2 | (30,109 | )1 | N/A | |||||||||||||
Class C | (52,076 | ) | (69,389 | ) | ||||||||||||
Administrator Class | (305,804 | ) | (302,857 | ) | ||||||||||||
Institutional Class | (18,189,256 | ) | (18,718,916 | ) | ||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | (22,541,553 | ) | (23,782,326 | ) | ||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold |
| |||||||||||||||
Class A | 8,329,991 | 71,282,611 | 3,440,445 | 29,216,109 | ||||||||||||
Class A2 | 3,699,192 | 1 | 31,741,098 | 1 | N/A | N/A | ||||||||||
Class C | 326,075 | 2,771,975 | 442,509 | 3,748,406 | ||||||||||||
Administrator Class | 885,043 | 7,527,535 | 508,071 | 4,302,476 | ||||||||||||
Institutional Class | 97,580,721 | 833,509,510 | 79,096,663 | 671,176,689 | ||||||||||||
|
| |||||||||||||||
946,832,729 | 708,443,680 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions |
| |||||||||||||||
Class A | 449,530 | 3,833,027 | 534,195 | 4,540,259 | ||||||||||||
Class A2 | 3,494 | 1 | 30,011 | 1 | N/A | N/A | ||||||||||
Class C | 6,034 | 51,385 | 8,101 | 68,784 | ||||||||||||
Administrator Class | 35,133 | 298,099 | 35,444 | 299,894 | ||||||||||||
Institutional Class | 1,111,053 | 9,469,223 | 1,026,803 | 8,724,965 | ||||||||||||
|
| |||||||||||||||
13,681,745 | 13,633,902 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed |
| |||||||||||||||
Class A | (6,943,941 | ) | (59,012,666 | ) | (7,567,845 | ) | (64,257,129 | ) | ||||||||
Class A2 | (215,070 | )1 | (1,847,277 | )1 | N/A | N/A | ||||||||||
Class C | (344,149 | ) | (2,912,841 | ) | (432,645 | ) | (3,668,839 | ) | ||||||||
Administrator Class | (742,061 | ) | (6,251,836 | ) | (711,430 | ) | (6,017,265 | ) | ||||||||
Institutional Class | (79,721,788 | ) | (677,493,195 | ) | (70,211,953 | ) | (595,758,632 | ) | ||||||||
|
| |||||||||||||||
(747,517,815 | ) | (669,701,865 | ) | |||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from capital share transactions | 212,996,659 | 52,375,717 | ||||||||||||||
|
| |||||||||||||||
Total increase in net assets | 216,988,935 | 62,119,731 | ||||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 1,070,965,098 | 1,008,845,367 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 1,287,954,033 | $ | 1,070,965,098 | ||||||||||||
|
|
1 | For the period from May 29, 2020 (commencement of class operations) to August 31, 2020 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Ultra Short-Term Income Fund | 25
Table of Contents
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.54 | $8.46 | $8.48 | $8.49 | $8.46 | |||||||||||||||
Net investment income | 0.16 | 0.17 | 1 | 0.13 | 0.09 | 0.08 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.06 | 0.08 | (0.02 | ) | (0.01 | ) | 0.03 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.22 | 0.25 | 0.11 | 0.08 | 0.11 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.16 | ) | (0.17 | ) | (0.13 | ) | (0.09 | ) | (0.08 | ) | ||||||||||
Net asset value, end of period | $8.60 | $8.54 | $8.46 | $8.48 | $8.49 | |||||||||||||||
Total return2 | 2.62 | % | 3.04 | % | 1.24 | % | 0.97 | % | 1.28 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.77 | % | 0.80 | % | 0.80 | % | 0.79 | % | 0.79 | % | ||||||||||
Net expenses | 0.64 | % | 0.70 | % | 0.70 | % | 0.70 | % | 0.70 | % | ||||||||||
Net investment income | 1.92 | % | 2.05 | % | 1.47 | % | 1.09 | % | 0.93 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 68 | % | 36 | % | 55 | % | 56 | % | 51 | % | ||||||||||
Net assets, end of period (000s omitted) | $232,660 | $215,503 | $243,909 | $274,079 | $319,565 |
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.
26 | Wells Fargo Ultra Short-Term Income Fund
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Financial highlights
(For a share outstanding throughout the period)
CLASS A2 | Year ended August 31, 20201 | |||
Net asset value, beginning of period | $8.52 | |||
Net investment income | 0.03 | |||
Net realized and unrealized gains (losses) on investments | 0.07 | |||
|
| |||
Total from investment operations | 0.10 | |||
Distributions to shareholders from | ||||
Net investment income | (0.03 | ) | ||
Net asset value, end of period | $8.59 | |||
Total return2 | 1.22 | % | ||
Ratios to average net assets (annualized) | ||||
Gross expenses | 0.66 | % | ||
Net expenses | 0.50 | % | ||
Net investment income | 1.38 | % | ||
Supplemental data | ||||
Portfolio turnover rate | 68 | % | ||
Net assets, end of period (000s omitted) | $29,971 |
1 | For the period from May 29, 2020 (commencement of class operations) to August 31, 2020 |
2 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Ultra Short-Term Income Fund | 27
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.54 | $8.46 | $8.47 | $8.48 | $8.45 | |||||||||||||||
Net investment income | 0.10 | 0.11 | 0.06 | 0.02 | 0.01 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.05 | 0.08 | (0.01 | ) | 0.00 | 0.03 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.15 | 0.19 | 0.05 | 0.02 | 0.04 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.10 | ) | (0.11 | ) | (0.06 | ) | (0.03 | ) | (0.01 | ) | ||||||||||
Net asset value, end of period | $8.59 | $8.54 | $8.46 | $8.47 | $8.48 | |||||||||||||||
Total return1 | 1.73 | % | 2.27 | % | 0.60 | % | 0.22 | % | 0.52 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 1.51 | % | 1.55 | % | 1.55 | % | 1.54 | % | 1.54 | % | ||||||||||
Net expenses | 1.40 | % | 1.45 | % | 1.45 | % | 1.45 | % | 1.45 | % | ||||||||||
Net investment income | 1.16 | % | 1.31 | % | 0.72 | % | 0.34 | % | 0.17 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 68 | % | 36 | % | 55 | % | 56 | % | 51 | % | ||||||||||
Net assets, end of period (000s omitted) | $5,187 | $5,257 | $5,056 | $5,760 | $7,464 |
1 | Total return calculations do not include any sales charges. |
The accompanying notes are an integral part of these financial statements.
28 | Wells Fargo Ultra Short-Term Income Fund
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Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.51 | $8.43 | $8.45 | $8.46 | $8.42 | |||||||||||||||
Net investment income | 0.17 | 0.19 | 1 | 0.13 | 0.10 | 0.09 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.05 | 0.08 | (0.01 | ) | (0.01 | ) | 0.04 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.22 | 0.27 | 0.12 | 0.09 | 0.13 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.17 | ) | (0.19 | ) | (0.14 | ) | (0.10 | ) | (0.09 | ) | ||||||||||
Net asset value, end of period | $8.56 | $8.51 | $8.43 | $8.45 | $8.46 | |||||||||||||||
Total return | 2.61 | % | 3.19 | % | 1.39 | % | 1.12 | % | 1.55 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.71 | % | 0.74 | % | 0.74 | % | 0.73 | % | 0.73 | % | ||||||||||
Net expenses | 0.54 | % | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | ||||||||||
Net investment income | 2.03 | % | 2.20 | % | 1.54 | % | 1.24 | % | 1.05 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 68 | % | 36 | % | 55 | % | 56 | % | 51 | % | ||||||||||
Net assets, end of period (000s omitted) | $15,359 | $13,748 | $15,037 | $27,245 | $26,679 |
1 | Calculated based upon average shares outstanding |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Ultra Short-Term Income Fund | 29
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $8.54 | $8.46 | $8.48 | $8.49 | $8.45 | |||||||||||||||
Net investment income | 0.19 | 0.20 | 0.15 | 0.12 | 0.11 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.05 | 0.08 | (0.02 | ) | (0.01 | ) | 0.04 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.24 | 0.28 | 0.13 | 0.11 | 0.15 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.19 | ) | (0.20 | ) | (0.15 | ) | (0.12 | ) | (0.11 | ) | ||||||||||
Net asset value, end of period | $8.59 | $8.54 | $8.46 | $8.48 | $8.49 | |||||||||||||||
Total return | 2.83 | % | 3.40 | % | 1.59 | % | 1.33 | % | 1.75 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.44 | % | 0.47 | % | 0.47 | % | 0.46 | % | 0.46 | % | ||||||||||
Net expenses | 0.32 | % | 0.35 | % | 0.35 | % | 0.35 | % | 0.35 | % | ||||||||||
Net investment income | 2.25 | % | 2.41 | % | 1.80 | % | 1.43 | % | 1.27 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 68 | % | 36 | % | 55 | % | 56 | % | 51 | % | ||||||||||
Net assets, end of period (000s omitted) | $1,004,777 | $836,456 | $744,844 | $1,061,908 | $1,197,514 |
The accompanying notes are an integral part of these financial statements.
30 | Wells Fargo Ultra Short-Term Income 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 Ultra Short-Term Income 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.
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.
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.
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 allows 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.
Wells Fargo Ultra Short-Term Income Fund | 31
Table of Contents
Notes to financial statements
When-issued transactions
The Fund may purchase securities on a forward commitment or when-issued basis. The Fund records a when-issued transaction on the trade date and will segregate assets in an amount at least equal in value to the Fund’s commitment to purchase when-issued securities. Securities purchased on a when-issued basis are marked-to-market daily and the Fund begins earning interest on the settlement date. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
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 interest rates and is subject to interest rate 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.
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.
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 are declared daily and paid monthly. Distributions from net realized gains, if any, 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 August 31, 2020, the aggregate cost of all investments for federal income tax purposes was $1,387,953,270 and the unrealized gains (losses) consisted of:
Gross unrealized gains | $ | 16,460,498 | ||
Gross unrealized losses | (2,379,318 | ) | ||
Net unrealized gains | $ | 14,081,180 |
32 | Wells Fargo Ultra Short-Term Income Fund
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Notes to financial statements
As of August 31, 2020, the Fund had capital loss carryforwards which consisted of $3,429,987 in short-term capital losses and $28,918,817 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.
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 August 31, 2020:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Agency securities | $ | 0 | $ | 107,695,544 | $ | 0 | $ | 107,695,544 | ||||||||
Asset-backed securities | 0 | 157,814,945 | 0 | 157,814,945 | ||||||||||||
Corporate bonds and notes | 0 | 249,864,315 | 0 | 249,864,315 | ||||||||||||
Exchange-traded funds | 72,132,849 | 0 | 0 | 72,132,849 | ||||||||||||
Municipal obligations | 0 | 7,854,136 | 0 | 7,854,136 | ||||||||||||
Non-agency mortgage-backed securities | 0 | 300,252,648 | 0 | 300,252,648 | ||||||||||||
Yankee corporate bonds and notes | 0 | 120,924,610 | 0 | 120,924,610 | ||||||||||||
Yankee government bonds | 0 | 3,995,064 | 3,995,064 | |||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 181,770,847 | 0 | 0 | 181,770,847 | ||||||||||||
U.S. Treasury securities | 199,949,449 | 0 | 0 | 199,949,449 | ||||||||||||
Total assets | $ | 453,853,145 | $ | 948,401,262 | $ | 0 | $ | 1,402,254,407 | ||||||||
Liabilities | ||||||||||||||||
Futures contracts | $ | 219,957 | $ | 0 | $ | 0 | $ | 219,957 | ||||||||
Total liabilities | $ | 219,957 | $ | 0 | $ | 0 | $ | 219,957 |
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
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.
Wells Fargo Ultra Short-Term Income Fund | 33
Table of Contents
Notes to financial statements
For the year ended August 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 | 0.250 | % | ||
Next $4 billion | 0.225 | |||
Next $5 billion | 0.190 | |||
Over $10 billion | 0.180 |
Prior to June 1, 2020, the management fee rate was as follows:
Average daily net assets | Management fee | |||
First $1 billion | 0.350 | % | ||
Next $4 billion | 0.325 | |||
Next $3 billion | 0.290 | |||
Next $2 billion | 0.265 | |||
Over $10 billion | 0.255 |
For the year ended August 31, 2020, the management fee was equivalent to an annual rate of 0.32% 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 0.15% and declining to 0.05% 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 A2, Class C | 0.16 | % | ||
Administrator Class | 0.10 | |||
Institutional Class | 0.08 |
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 December 31, 2021 to
34 | Wells Fargo Ultra Short-Term Income Fund
Table of Contents
Notes to financial statements
waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.50% for Class A shares, 0.50% for Class A2 shares, 1.25% for Class C shares, 0.50% for Administrator Class shares, and 0.25% 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 June 1, 2020, the Fund’s expenses were capped at 0.70% for Class A shares, 1.45% for Class C shares, and 0.55% for Administrator Class shares, and 0.35% 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 August 31, 2020, Funds Distributor received $1,790 from the sale of Class A shares and $17 in contingent deferred sales charges from redemptions of Class A shares. No contingent deferred sales charges were incurred by Class C shares for the year ended August 31, 2020.
Shareholder servicing fees
The Trust has entered into contracts with one or more shareholder servicing agents, whereby Class A, Class A2, 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 short-term securities, for the year ended August 31, 2020 were as follows:
Purchases at cost | Sales proceeds | |||||
U.S. government | Non-U.S. government | U.S. government | Non-U.S. government | |||
$159,472,968 | $868,578,862 | $97,018,228 | $576,238,565 |
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 Federal 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 August 31, 2020, the Fund did not have any securities on loan.
7. DERIVATIVE TRANSACTIONS
During the year ended August 31, 2020, the Fund entered into futures contracts to help manage duration. The Fund had an average notional amount of $279,022,737 in short futures contracts during the year ended August 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.
Wells Fargo Ultra Short-Term Income Fund | 35
Table of Contents
Notes to financial statements
8. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $350,000,000 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 August 31, 2020, there were no borrowings by the Fund under the agreement.
9. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid was $22,541,553 and $23,782,326 of ordinary income for the years ended August 31, 2020 and August 31, 2019, respectively.
As of August 31, 2020, the components of distributable loss on a tax basis were as follows:
Undistributed ordinary income | Unrealized gains | Capital loss carryforward | ||
$626,179 | $14,081,180 | $(32,348,804) |
10. INDEMNIFICATION
Under the Fund’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 Fund. The Fund has entered into a separate agreement with each Trustee that converts indemnification rights currently existing under the Fund’s organizational documents into contractual rights that cannot be changed in the future without the consent of the Trustee. Additionally, in the normal course of business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’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 on fair value measurements in Topic 820, Fair Value Measurements. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has adopted this guidance which did not have a material impact on the 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.
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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 Ultra Short-Term Income Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of August 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 August 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 August 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
October 28, 2020
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TAX INFORMATION
For the fiscal year ended August 31, 2019, $21,084,384 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 142 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 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). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008 | 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 | |||
David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business (Emeritus), 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 |
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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 | |||
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 Wheelock (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. Interim President of the McKnight Foundation from January to September 2020. 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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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 the Treasurer of 77 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. |
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Other information (unaudited)
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Wells Fargo Ultra Short-Term Income Fund
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Funds Trust (the “Trust”) must determine annually whether to approve the continuation of the Trust’s investment management and sub-advisory agreements. In this regard, at a Board meeting held on May 26, 2020 and May 28, 2020 (together, the “Meeting”), the Board, all the members of which have no direct or indirect interest in the investment management and sub-advisory agreements and are not “interested persons” of the Trust, as defined in the 1940 Act (the “Independent Trustees”), reviewed and approved for Wells Fargo Ultra Short-Term Income Fund (the “Fund”): (i) an investment management agreement (the “Management Agreement”) with Wells Fargo Funds Management, LLC (“Funds Management”); and (ii) an investment sub-advisory agreement (the “Sub-Advisory Agreement”) with Wells Capital Management Incorporated (the “Sub-Adviser”), an affiliate of Funds Management. The Management Agreement and the Sub-Advisory Agreement are collectively referred to as the “Advisory Agreements.”
At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of Funds Management and the Sub-Adviser and the approval of the Advisory Agreements. Prior to the Meeting, including at a Board meeting held in April 2020, the Trustees conferred extensively among themselves and with representatives of Funds Management about these matters. Also, the Board has adopted a team-based approach, with each team consisting of a sub-set of Trustees, to assist the full Board in the discharge of its duties in reviewing investment performance and other matters throughout the year. The Independent Trustees were assisted in their evaluation of the Advisory Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately.
In providing information to the Board, Funds Management and the Sub-Adviser were guided by a detailed set of requests for information submitted to them by independent legal counsel on behalf of the Independent Trustees at the start of the Board’s annual contract renewal process earlier in 2020. In considering and approving the Advisory Agreements, the Trustees considered the information they believed relevant, including but not limited to the information discussed below. The Board considered not only the specific information presented in connection with the Meeting, but also the knowledge gained over time through interaction with Funds Management and the Sub-Adviser about various topics. In this regard, the Board reviewed reports of Funds Management at each of its quarterly meetings, which included, among other things, portfolio reviews and investment performance reports. In addition, the Board and the teams mentioned above confer with portfolio managers at various times throughout the year. The Board did not identify any particular information or consideration that was all-important or controlling, and each individual Trustee may have attributed different weights to various factors.
After its deliberations, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable. The Board considered the approval of the Advisory Agreements for the Fund as part of its consideration of agreements for funds across the complex, but its approvals were made on a fund-by-fund basis. The following summarizes a number of important, but not necessarily all, factors considered by the Board in support of its approvals.
Nature, extent and quality of services
The Board received and considered various information regarding the nature, extent and quality of services provided to the Fund by Funds Management and the Sub-Adviser under the Advisory Agreements. This information included a description of the investment advisory services and Fund-level administrative services covered by the Management Agreement, as well as, among other things, a summary of the background and experience of senior management of Wells Fargo Asset Management (“WFAM”), of which Funds Management and the Sub-Adviser are a part, and a summary of investments made in the business of WFAM. The Board also received a description of Funds Management’s and the Sub-Adviser’s business continuity plans and of their approaches to data privacy and cybersecurity, and related testing. The Board also received and reviewed information about Funds Management’s role as administrator of the Fund’s liquidity risk management program, Funds Management’s approach to risk management, and Funds Management’s intermediary and vendor oversight program.
The Board also considered the qualifications, background, tenure and responsibilities of each of the portfolio managers primarily responsible for the day-to-day portfolio management of the Fund. The Board evaluated the ability of Funds Management and the Sub-Adviser to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of Funds Management and the Sub-Adviser. In addition, the Board took into account the full range of services provided to the Fund by Funds Management and its affiliates.
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Other information (unaudited)
Fund investment performance and expenses
The Board considered the investment performance results for the Fund over various time periods ended December 31, 2019. The Board also considered more current results for various time periods ended March 31, 2020. The Board considered these results in comparison to the investment performance of funds in a universe that was determined by Broadridge Inc. (“Broadridge”) to be similar to the Fund (the “Universe”), and in comparison to the Fund’s benchmark index and to other comparative data. Broadridge is an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds in the performance Universe. The Board noted that the investment performance of the Fund (Administrator Class) was higher than the average investment performance of the Universe for the one-, three-, five- and ten-year periods ended December 31, 2019. The Board also noted that the investment performance of the Fund (Administrator Class) was higher than the average investment performance of the Universe for the three-, five- and ten-year periods ended March 31, 2020, and lower than the average investment performance of the Universe for the one-year period ended March 31, 2020. The Board also noted that the investment performance of the Fund was higher than its benchmark index, the Bloomberg Barclays Short-Term U.S. Government/Corporate Bond Index, for all periods ended December 31, 2019. The Board also noted that the investment performance of the Fund was higher than its benchmark index, the Bloomberg Barclays Short-Term U.S. Government/Corporate Bond Index, for the ten-year period ended March 31, 2020, and lower than its benchmark index for the one-, three- and five-year periods ended March 31, 2020.
The Board also received and considered information regarding the Fund’s net operating expense ratios and their various components, including actual management fees, custodian and other non-management fees, and Rule 12b-1 and non-Rule 12b-1 shareholder service fees. The Board considered these ratios in comparison to the median ratios of funds in class-specific expense groups that were determined by Broadridge to be similar to the Fund (the “Groups”). The Board received a description of the methodology used by Broadridge to select the mutual funds in the expense Groups and an explanation of how funds comprising expense groups and their expense ratios may vary from year-to-year. Based on the Broadridge reports, the Board noted that the net operating expense ratios of the Fund were lower than or equal to the median net operating expense ratios of the expense Groups for each share class.
The Board took into account the Fund’s investment performance and expense information provided to it among the factors considered in deciding to re-approve the Advisory Agreements.
Investment management and sub-advisory fee rates
The Board reviewed and considered the contractual fee rates payable by the Fund to Funds Management under the Management Agreement, as well as the contractual fee rates payable by the Fund to Funds Management for class-level administrative services under a Class-Level Administration Agreement, which include, among other things, class-level transfer agency and sub-transfer agency costs (collectively, the “Management Rates”). The Board also reviewed and considered the contractual investment sub-advisory fee rates that are payable by Funds Management to the Sub-Adviser for investment sub-advisory services.
Among other information reviewed by the Board was a comparison of the Fund’s Management Rates with the average contractual investment management fee rates of funds in the expense Groups at a common asset level as well as transfer agency costs of the funds in the expense Groups. The Board noted that the Management Rates of the Fund were in range of the sum of these average rates for the Fund’s expense Groups for all share classes.
The Board also received and considered information about the portion of the total management fee that was retained by Funds Management after payment of the fee to the Sub-Adviser for sub-advisory services. In assessing the reasonableness of this amount, the Board received and evaluated information about the nature and extent of responsibilities retained and risks assumed by Funds Management and not delegated to or assumed by the Sub-Adviser, and about Funds Management’s on-going oversight services. Given the affiliation between Funds Management and the Sub-Adviser, the Board ascribed limited relevance to the allocation of fees between them.
The Board also received and considered information about the nature and extent of services offered and fee rates charged by Funds Management and the Sub-Adviser to other types of clients with investment strategies similar to those of the Fund. In this regard, the Board received information about the significantly greater scope of services, and compliance, reporting and other legal burdens and risks of managing proprietary mutual funds compared with those associated with managing assets of other types of clients, including third-party sub-advised fund clients and non-mutual fund clients such as institutional separate accounts.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board determined that the compensation payable to Funds Management under the Management Agreement and to the Sub-Adviser under the Sub-Advisory Agreement was reasonable.
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Other information (unaudited)
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of both WFAM and Wells Fargo & Co. (“Wells Fargo”) from providing services to the fund family as a whole. The Board noted that the Sub-Adviser’s profitability information with respect to providing services to the Fund and other funds in the family was subsumed in the WFAM and Wells Fargo profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability, including a description of the methodology used to allocate certain expenses. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such as the size, type and age of fund.
Based on its review, the Board did not deem the profits reported by Funds Management, WFAM or Wells Fargo from services provided to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
The Board received and considered information about the potential for Funds Management to experience economies of scale in the provision of management services to the Fund, the difficulties of calculating economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. The Board noted the existence of breakpoints in the Fund’s management fee structure, which operate generally to reduce the Fund’s expense ratios as the Fund grows in size, and the size of the Fund in relation to such breakpoints. The Board considered that in addition to management fee breakpoints, Funds Management shares potential economies of scale from its management business in a variety of ways, including through fee waiver and expense reimbursement arrangements, services that benefit shareholders, competitive management fee rates set at the outset without regard to breakpoints, and investments in the business intended to enhance services available to shareholders.
The Board concluded that Funds Management’s arrangements with respect to the Fund, including contractual breakpoints, constituted a reasonable approach to sharing potential economies of scale with the Fund and its shareholders.
Other benefits to Funds Management and the Sub-Adviser
The Board received and considered information regarding potential “fall-out” or ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, as a result of their relationships with the Fund. Ancillary benefits could include, among others, benefits directly attributable to other relationships with the Fund and benefits potentially derived from an increase in Funds Management’s and the Sub-Adviser’s business as a result of their relationships with the Fund. The Board noted that various affiliates of Funds Management may receive distribution-related fees, shareholder servicing payments and sub-transfer agency fees in respect of shares sold or held through them and services provided.
The Board also reviewed information about soft dollar credits earned and utilized by the Sub-Adviser, fees earned by Funds Management and the Sub-Adviser from managing a private investment vehicle for the fund family’s securities lending collateral, and commissions earned by an affiliated broker from portfolio transactions.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board did not find that any ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, were unreasonable.
Conclusion
At the Meeting, after considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable.
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Other information (unaudited)
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Wells Fargo Funds Trust (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) on behalf of each of its series, including the Fund, which is reasonably designed to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) previously approved the designation of Wells Fargo Funds Management, LLC (“Funds Management”), the Fund’s investment manager, as the administrator of the Program, and Funds Management has established a Liquidity Risk Management Council composed of personnel from multiple departments within Funds Management and its affiliates to assist Funds Management in the implementation and on-going administration of the Program.
The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent the Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if the Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s “highly liquid investments” below its HLIM; and (6) periodic reporting to the Board.
At a meeting of the Board held on May 26 and 28, 2020, the Board received a written report (the “Report”) from Funds Management that addressed the operation of the Program and assessed its adequacy and effectiveness of implementation. The Report covered the initial period from December 1, 2018 through December 31, 2019 (the “Reporting Period”). No significant liquidity events impacting the Fund were noted in the Report. There were no material changes to the Program during the Reporting Period. The Report concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
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Effective June 1, 2020, shareholders purchasing Fund shares through an Oppenheimer & Co. Inc. (“Oppenheimer”) platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred or back-end, sales charge waivers) and discounts, which may differ from those disclosed in the Fund’s Prospectus or SAI.
Front-end Sales Load Waivers on Class A Shares available at Oppenheimer |
Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan. |
Shares purchased by or through a 529 Plan. |
Shares purchased through an Oppenheimer affiliated investment advisory program. |
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 from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 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 (known as Rights of Restatement). |
A shareholder in the Fund’s Class C shares will have their shares exchanged at net asset value to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the exchange is in line with the policies and procedures of Oppenheimer. |
Employees and registered representatives of Oppenheimer or its affiliates and their family members. |
Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in the Prospectus. |
CDSC Waivers on A and C Shares available at Oppenheimer |
Death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Prospectus. |
Return of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the Prospectus. |
Shares sold to pay Oppenheimer fees but only if the transaction is initiated by Oppenheimer. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Oppenheimer: Breakpoints, Rights of Accumulation & Letters of Intent |
Breakpoints as described in the 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 Oppenheimer. Eligible fund family assets not held at Oppenheimer may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
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Effective June 15, 2020, shareholders purchasing fund shares through a Robert W. Baird & Co. (“Baird”) platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or the SAI.
Front-end Sales Load Waivers on Class A Shares available at Baird |
Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing share of the same fund. |
Share purchase by employees and registers representatives of Baird or its affiliate and their family members as designated by Baird. |
Shares purchase from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as rights of reinstatement). |
A shareholder in the Funds Investor C Shares will have their share exchanged at net asset value to Investor A shares of the fund if the shares are no longer subject to CDSC and the exchange is in line with the policies and procedures of Baird. |
Employer-sponsored retirement plans or charitable accounts in a transactional brokerage account at Baird, including 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 or SAR-SEPs. |
CDSC Waivers on A and C Shares available at Baird |
Shares sold due to death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
Shares bought due to returns of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 72 as described in the Fund’s Prospectus. |
Shares sold to pay Baird fees but only if the transaction is initiated by Baird. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Baird: Breakpoint and/or Rights of Accumulation |
Breakpoints as described in the Prospectus. |
Rights of accumulations which entitles 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 Baird. Eligible fund family assets not held at Baird may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets. |
Letters of Intent (LOI) allow for breakpoint discounts based on anticipated purchases within a fund family through Baird, over a 13-month period of time. |
Wells Fargo Ultra Short-Term Income Fund | 47
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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:
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Website: wfam.com
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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
© 2020 Wells Fargo & Company. All rights reserved
PAR-0920-00416 10-20
A223/AR223 08-20
Table of Contents
Annual Report
August 31, 2020
Wells Fargo High Yield Bond 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
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The views expressed and any forward-looking statements are as of August 31, 2020, unless otherwise noted, and are those of the Fund’s portfolio 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 High Yield Bond Fund | 1
Table of Contents
Letter to shareholders (unaudited)
Andrew Owen
President
Wells Fargo Funds
We are pleased to offer you this annual report for the Wells Fargo High Yield Bond Fund for the 12-month period that ended August 31, 2020. Global stock markets saw earlier gains erased in March as governments around the world took unprecedented measures, attempting to stop the spread of the coronavirus at the expense of short-term economic output. However, markets rebounded from April on to offset much of the losses as central banks attempted to bolster capital markets and confidence.
For the 12-month period, equities had broadly positive total returns despite intense volatility in March. Non-U.S. developed market equities had the weakest performance and U.S. stocks performed strongly. Fixed-income securities were more modest though also generally positive. For the period, U.S. stocks, based on the S&P 500 Index,1 gained 21.94%. International stocks, as measured by the MSCI ACWI ex USA Index (Net),2 returned 8.31%, while the MSCI EM Index (Net)3 had somewhat stronger performance, with a 14.49% gain. For bond investors, the Bloomberg Barclays U.S. Aggregate Bond Index4 returned 6.47%, the Bloomberg Barclays Global Aggregate ex-USD Index5 gained a more modest 4.58%, and the Bloomberg Barclays Municipal Bond Index6 returned 3.24% while the ICE BofA U.S. High Yield Index7 returned 3.71%.
The fiscal year began with supportive central bank actions.
As the period began, several central banks had just cut interest rates in response to a global economic slowdown. Ongoing concerns regarding U.S.-China trade tensions and Brexit remained unresolved. The Federal Reserve (Fed) cut U.S. interest rates again in September. U.S. manufacturing data disappointed investors. The U.S. Congress announced it would pursue an impeachment investigation of President Trump. Meanwhile, the U.K. Brexit impasse showed no signs of resolution. Officials in China said that hitting the country’s economic growth goals for the year would be difficult considering the weight of tariffs and trade restrictions. Although the S&P 500 Index finished the third quarter with the best year-to-date returns in more than 20 years, concerns about future returns remained.
The fourth quarter started on a strong note, with U.S.-China trade tensions relaxing in October along with renewed optimism for a U.K. Brexit deal and positive macroeconomic data. The initial estimate of U.S. third-quarter gross domestic product (GDP) growth was a resilient 1.9% annualized rate, while the U.S. unemployment rate fell to a 50-year low of
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 and emerging 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 High Yield Bond Fund
Table of Contents
Letter to shareholders (unaudited)
3.5% in September. However, despite strength among U.S. consumers, business confidence declined while manufacturing activity contracted. Concerned with a potential economic slowdown, the Fed lowered interest rates another quarter point in late October—its third rate cut in four months. This helped push the S&P 500 Index to an all-time high while emerging market equities rallied and global bonds declined overall, reflecting a broad pickup in risk appetite.
Equity markets continued to rally in November despite ongoing geopolitical risks. Hopes for a U.S.-China trade deal buoyed investor confidence. U.S. business sentiment improved slightly, and manufacturing and services activity picked up. While consumer confidence and purchasing managers’ activity rose in the eurozone, China reported weakening manufacturing and consumer data. Bond yields rose marginally, leading to slightly negative returns for global government and investment-grade corporate bonds.
Financial markets ended 2019 with a boost from the U.S. and China accord on a Phase One trade deal. That, along with the landslide win by the pro-Brexit U.K. Conservative Party in a national election and ongoing central bank support, gave investors greater confidence. U.S. economic indicators were generally positive, with the exception of manufacturing activity and business confidence. Consumer confidence was resilient, fed by a robust labor market, tame inflation, and lower interest rates, which boosted housing affordability and stimulated homebuyer activity. The impeachment of President Trump had little impact on markets. Meanwhile, slowing Chinese economic activity, partly attributable to the trade war, led to further government stimulus at year-end through lower reserve ratios, allowing banks to lend more money.
The year-end rally continued in early January 2020. However, capital market volatility picked up sharply in late January on concerns over the potential impact of the coronavirus on the global economy and stock markets. As sentiment began to sour, perceived safe havens did well in January. The U.S. dollar and Japanese yen both rose and government bonds outperformed equities. While the S&P 500 Index held its ground, emerging market equities tumbled, including those in Asia.
In February, the coronavirus became the major market focus. Fears of the virus’s impact on global growth led to expectations of increased global central bank monetary policy support. That led the 10-year U.S. Treasury yield to fall to an all-time low of 1.1%. Although equity markets initially shrugged off concerns about the outbreak, focusing instead on strong fourth-quarter earnings and improving business confidence in January, market sentiment turned sharply lower and the S&P 500 Index lost 8.2% for the month. Oil prices tumbled as Russia and the Organization of the Petroleum Exporting Countries compounded a major decline in oil demand with a brutal price war, partly aimed at dissuading further U.S. shale production, causing the price of West Texas Intermediate crude oil to plummet.
The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems. This abrupt stoppage of economic activity led to the sharp deceleration of global output, sending economies into a deep contraction. Central banks responded swiftly, slashing interest rates and expanding quantitative easing programs to restore liquidity and confidence to the markets. In the U.S., the Fed introduced several new lending programs, funding investment-grade bonds, money market mutual funds, and commercial paper while purchasing Treasuries, mortgage-backed securities, and overnight repurchase agreements. Meanwhile, stock markets tumbled quickly into a bear market, ending the longest bull stock market in U.S. history.
Markets rebounded strongly in April, fueled by unprecedented government and central bank stimulus measures. The U.S. economy contracted by an annualized 5.0% pace in the first quarter, with 30 million new unemployment insurance claims in six weeks. In the
“The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems.”
Wells Fargo High Yield Bond Fund | 3
Table of Contents
Letter to shareholders (unaudited)
“The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July.”
eurozone, first-quarter real GDP shrank 3.8%, with the composite April Flash Purchasing Managers’ Index, a monthly survey of purchasing managers, falling to an all-time low of 13.5. The European Central Bank expanded its quantitative easing to include the purchase of additional government bonds of countries with the greatest virus-related need, including Italy and Spain. China’s first-quarter GDP fell by 6.8% year over year. However, retail sales, production, and investment showed signs of recovery. Extreme oil-price volatility continued as global supply far exceeded demand.
The global equity market rebound continued in May, with widespread strong monthly gains. Investors regained confidence on reports of early signs of success in human trials of a coronavirus vaccine. Growth stocks continued to outperform value stocks while returns on global government bonds were generally flat. In the U.S., a gap grew between the stock market rebound and devastating economic data points, including an April unemployment rate of 14.7%, the highest level since World War II. Purchasing managers’ indices reflected weakening activity in May in both the manufacturing and services sectors. U.S. corporate earnings reports indicated a 14% year-over-year contraction in earnings from the first quarter of 2019. However, high demand for technology, driven by remote activity, supported robust information technology sector earnings, which helped drive major technology stocks higher.
Financial markets posted widely positive returns in June despite ongoing economic weakness and high levels of uncertainty on the containment of the coronavirus and the timing of an effective vaccine. There were hopeful signs as economies reopened, with both U.S. and U.K. retail sales rebounding sharply in May. However, year over year, sales remained depressed. Vitally important to market sentiment was the ongoing commitment by central banks globally to do all they could to provide economic support through liquidity and low borrowing costs. U.S. economic activity was aided by one-time $1,200 stimulus checks and $600 bonus weekly unemployment benefits which expired at the end of July. However, unemployment remained historically high, easing somewhat from 14.7% in April to 11.1% in June. During June, numerous states reported increases of coronavirus cases. China’s economic recovery picked up momentum in June, though it remained far from a full recovery.
July was a broadly positive month for both global equities and fixed income. However, economic data and a resurgence of coronavirus cases pointed to the vulnerability of the global economy and the ongoing imperative to regain control of the pandemic. Second-quarter GDP shrank from the previous quarter by 9.5% and 12.1% in the U.S. and eurozone, respectively. In contrast, China reported a 3.2% year-over-year expansion in its second-quarter GDP. U.S. unemployment remained high despite adding 1.8 million jobs in July, with a double-digit jobless rate persisting. However, manufacturing activity grew in both the U.S. and eurozone. In Asia, while China’s manufacturing sector continued to expand, activity in Japan and South Korea contracted. In July, a rising concern was the rapid and broad reemergence of coronavirus infections.
The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July. U.S. stocks had strong monthly gains, led by the so-called FAANG stocks—Facebook, Apple, Amazon, Netflix, and Google (Alphabet)—which dominate these indices and continued to rally. U.S. stocks generally surpassed other broadly positive global equity performance while fixed-income market monthly returns were broadly flat. Generally stronger-than-expected second-quarter earnings boosted investor sentiment along with the Fed’s announcement of a policy shift that will likely lead to longer-term low interest rates and supportive monetary policy. The U.S. Flash Purchasing Managers’ Indices for both manufacturing and services beat expectations while U.S. housing market indicators were strong. In Europe, retail sales expanded and consumer confidence remained steady. China’s economy continued its fairly steady expansion. Overall, developed markets performed better than emerging market equities for the month of August as people took comfort in better-known equities in perceived safer markets.
4 | Wells Fargo High Yield Bond Fund
Table of Contents
Letter to shareholders (unaudited)
Don’t let short-term uncertainty derail long-term investment goals.
Periods of investment uncertainty can present challenges, but experience has taught us that maintaining long-term investment goals can be an effective way to plan for the future. To help you create a sound strategy based on your personal goals and risk tolerance, Wells Fargo Funds offers more than 100 mutual funds spanning a wide range of asset classes and investment styles. Although diversification cannot guarantee an investment profit or prevent losses, we believe it can be an effective way to manage investment risk and potentially smooth out overall portfolio performance. We encourage investors to know their investments and to understand that appropriate levels of risk-taking may unlock opportunities.
Thank you for choosing to invest with Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Andrew Owen
President
Wells Fargo Funds
|
For further information about your Fund, contact your investment professional, visit our website at wfam.com, or call us directly at 1-800-222-8222. |
Notice to Shareholders
At a meeting held on August 10-12, 2020, the Board of Trustees of the Fund approved a change to the Fund’s automatic conversion feature for Class C shares in order to shorten the required holding period from 10 to 8 years. As a result, on a monthly basis beginning November 5, 2020, Class C shares will convert automatically into Class A shares 8 years after the initial date of purchase or, if you acquired your Class C shares through an exchange or conversion from another share class, 8 years after the date you acquired your Class C shares. When Class C shares that you acquired through a purchase or exchange convert, any other Class C shares that you purchased with reinvested dividends and distributions also will convert into Class A shares on a pro rata basis.
Please note that a shorter holding period may apply depending on your intermediary. Please see “Appendix A—Sales Charge Reductions and Waivers for Certain Intermediaries” in the Fund’s prospectus for further information.
Wells Fargo High Yield Bond Fund | 5
Table of Contents
Performance highlights (unaudited)
Investment objective
The Fund seeks total return, consisting of a high level of current income and capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Robert Junkin
Margaret D. Patel
Average annual total returns (%) as of August 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 (EKHAX) | 1-20-1998 | 0.43 | 4.45 | 5.28 | 5.31 | 5.42 | 5.76 | 1.04 | 0.93 | |||||||||||||||||||||||||
Class C (EKHCX) | 1-21-1998 | 3.83 | 4.70 | 5.00 | 4.83 | 4.70 | 5.00 | 1.79 | 1.68 | |||||||||||||||||||||||||
Administrator Class (EKHYX) | 4-14-1998 | – | – | – | 5.76 | 5.64 | 5.99 | 0.98 | 0.80 | |||||||||||||||||||||||||
Institutional Class (EKHIX)3 | 10-31-2014 | – | – | – | 6.04 | 5.82 | 6.12 | 0.71 | 0.53 | |||||||||||||||||||||||||
ICE BofA U.S. High Yield Constrained Index4 | – | – | – | – | 3.62 | 6.27 | 6.68 | – | – |
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 4.50%. 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.
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. High-yield securities have a greater risk of default and tend to be more volatile than higher-rated debt securities. Loans are subject to risks similar to those associated with other below investment-grade bond investments, such as credit risk (for example, risk of issuer default), below investment-grade bond risk (for example, risk of greater volatility in value), and risk that the loan may become illiquid or difficult to price. The Fund is exposed to foreign investment risk. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo High Yield Bond Fund
Table of Contents
Performance highlights (unaudited)
Growth of $10,000 investment as of August 31, 20205 |
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 December 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, 1.68% for Class C, 0.80% for Administrator Class, and 0.53% 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 caps. Prior to or after the commitment expiration date, the caps may be increased or the commitment to maintain the caps may be terminated only with the approval of the Board of Trustees. Without these caps, 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 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. |
4 | The ICE BofA U.S. High Yield Constrained Index is a market value-weighted index of all domestic and Yankee high-yield bonds, including deferred interest bonds and payment-in kind securities. Issues included in the index have maturities of one year or more and have a credit rating lower than BBB–/Baa3, but are not in default. The ICE BofA U.S. High Yield Constrained Index limits any individual issuer to a maximum of 2% benchmark exposure. You cannot invest directly in an index. Copyright 2020. ICE Data Indices, LLC. All rights reserved. |
5 | The chart compares the performance of Class A shares for the most recent ten years with the performance of the ICE BofA U.S. High Yield Constrained 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 4.50%. |
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 | The credit quality distribution of portfolio holdings reflected in the chart is based on ratings from Standard & Poor’s, Moody’s Investors Service, and/ or Fitch Ratings Ltd. Credit quality ratings apply to the underlying holdings of the Fund and not to the Fund itself. The percentages of the Fund’s portfolio with the ratings depicted in the chart are calculated based on the total market value of fixed income securities held by the Fund. If a security was rated by all three rating agencies, the middle rating was utilized. If rated by two of three rating agencies, the lower rating was utilized, and if rated by one of the rating agencies, that rating was utilized. Standard & Poor’s rates the creditworthiness of bonds, ranging from AAA (highest) to D (lowest). Ratings from A to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories. Standard & Poor’s rates the creditworthiness of short-term notes from SP-1 (highest) to SP-3 (lowest). Moody’s rates the creditworthiness of bonds, ranging from Aaa (highest) to C (lowest). Ratings Aa to B may be modified by the addition of a number 1 (highest) to 3 (lowest) to show relative standing within the ratings categories. Moody’s rates the creditworthiness of short-term U.S. tax-exempt municipal securities from MIG 1/VMIG 1 (highest) to SG (lowest). Fitch rates the creditworthiness of bonds, ranging from AAA (highest) to D (lowest). Credit quality distribution is 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 High Yield Bond Fund | 7
Table of Contents
Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
∎ | The Fund outperformed its benchmark, the ICE BofA U. S. High Yield Constrained Index, for the 12-month period that ended August 31, 2020. |
∎ | The Fund’s overweight to better-quality high-yield bonds contributed to performance in the fiscal year because higher-quality credit tiers substantially outperformed lower-quality ratings, as investors grew more risk averse due to the sharp drop in economic activity in the second quarter of 2020, as well as from increases in companies filing for bankruptcy protection. |
∎ | Most better-rated sectors of the corporate bond market had positive total returns, from modest price increases plus coupon income. Lower-tier high-yield bonds had moderate price declines, reflecting investor concerns about declining credit quality. |
∎ | The Fund’s modest allocation to common stocks (about 9% of total assets) modestly detracted from returns. Historically, our small allocation to stocks has helped performance. However, in the fiscal year that ended August 31, 2020, the Fund’s equity return lagged that of the stock market. While the equity index had a double-digit positive return, the Fund’s equity portfolio was only moderately positive. |
∎ | Detractors from bond performance included Rayonier Advanced Materials Incorporated*, which produces specialty cellulose fibers, and Mallinckrodt PLC*, a specialty pharmaceutical company with exposure to opioid litigation. Also detracting was Diebold Nixdorf, Incorporated*, which makes automatic teller machines. |
∎ | Detractors from equity performance included natural gas distributor Atmos Energy Corporation* as well as Curtiss-Wright Corporation*, a manufacturer of precision components as well as engineered services for industrial companies. In addition, Saul Centers, Incorporated*, a regional real estate investment trust, detracted from performance. |
Ten largest holdings (%) as of August 31, 20206 | ||||
Ball Corporation | 4.22 | |||
Bausch Health Companies Incorporated | 3.49 | |||
Tronox Finance plc | 3.43 | |||
Broadcom Incorporated | 3.30 | |||
Davita Incorporated | 3.26 | |||
Valvoline, Incorporated | 3.19 | |||
Post Holdings Incorporated | 2.93 | |||
MTS Systems Corporation | 2.86 | |||
Western Digital Corporation | 2.75 | |||
TransDigm Incorporated | 2.65 |
Credit quality as of August 31, 20207 |
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The average yield for high-yield bonds declined slightly over the fiscal year from 5.87% on August 31, 2019, to 5.36% on August 31, 2020. However, yields of bottom-tier, very low-rated bonds generally increased in the fiscal year as defaults in this bond sector began to grow. Treasury yields fell significantly over the fiscal year. For example, the yield to maturity of a Treasury note due in 10 years fell from 1.50% at the end of August 2019 to 0.70% at month-end August 2020.
The Fund’s stock allocation was a relatively modest 9% of total assets. The Fund’s stock holdings slightly underperformed its fixed-income holdings in the fiscal year. The total return of the Fund’s equity portion underperformed its equity benchmark due to security selection in the industrials and information technology sectors, as well as the Fund’s overweight to the underperforming utilities sector. Offsetting the relative underperformance of the Fund’s equity holdings, its fixed-income assets outperformed their benchmark, and the Fund benefited overall from asset diversification. Several of the Fund’s outperforming holdings were in the information technology sector, with Broadcom Incorporated, Apple Incorporated, and Akamai Technologies, Incorporated, contributing to outperformance. Health care issues AbbVie Incorporated, Bristol-Myers Squibb Company, and Amgen Incorporated also outperformed.
Strong bond performers included those from cyclically sensitive industries such as automotive, commodities, and technology. Adient Global Holdings Limited, a manufacturer of automotive seating components; Tronox Holdings PLC, a producer of chemicals for paints and plastics; and Broadcom Incorporated, a semiconductor designer and developer, all outperformed.
Please see footnotes on page 7.
8 | Wells Fargo High Yield Bond Fund
Table of Contents
Performance highlights (unaudited)
Fixed-income investors realized generally positive returns during the period.
Despite volatility in the economy and financial markets in the second half of the Fund’s fiscal year caused by the coronavirus, the backdrop for corporate bonds was generally positive: Treasury rates declined over the fiscal year, inflation remained low, and economic growth for most of the fiscal year was positive.
High-yield bonds had returns mostly from coupon income, with small gains in bond prices for better-rated issues. Investment-grade corporate bonds generally produced higher returns than high-yield bonds, as most sectors saw moderate price increases in addition to coupon income, reflecting falling Treasury interest rates.
Interest rates on all Treasury issues dropped significantly in the fiscal year as the Federal Reserve (Fed) aggressively eased monetary conditions in reaction to the coronavirus pandemic. For example, notes due in 10 years fell from a yield of 1.50% at August 31, 2019, to 0.70% on August 31, 2020.
We expect continued growth in the months ahead.
The Fund’s positioning reflects our expectation of continued recovery in economic growth after the very sharp decline in activity beginning in March 2020, as large sectors of the economy were shut down in reaction to the coronavirus crisis. We think high-yield bonds could offer modest returns with yields stable or somewhat lower, with mild price appreciation if yields decline from today’s levels. We expect Treasury yields to remain at today’s very low levels, reflecting Fed policy of providing sufficient liquidity to mitigate any declines in economic activity. In addition, we expect inflation will remain at quite low levels, even if the economy accelerates over the balance of 2020. With the backdrop of continued low Treasury rates, we are optimistic that the equity market should earn more than the risk-free rate of return. In addition, we find stock prices for many companies to be reasonable compared with their earnings growth rates. With Treasury issues likely to be at low levels for the foreseeable future, we see stock dividend yields as attractive alternatives to the yields offered on short-maturity fixed-income securities.
The portfolio maintains an allocation to out-of-benchmark BBB-rated debt with continued avoidance of lower-quality CCC-rated and distressed holdings, which we believe do not represent good relative investment value. In addition, the Fund is concentrated in companies with operations primarily in the U.S. and has minimal exposure to companies with products and services that are dependent on commodity-based emerging market economies, many of which continue to experience growth rates that are below historical levels.
Virtually all of the Fund’s bond holdings are in companies with U.S. public equity outstanding, which we think provides a more flexible capital structure and more transparent reporting of financial results. We hold a modest allocation to common stocks, believing that this exposure offers fixed-income investors the potential for capital appreciation, as well as exposure to attractive industries that may not have suitable fixed-income securities outstanding. In today’s high-yield bond market, most bonds are trading at prices around their face value, limiting the potential for future capital appreciation in our bond holdings in our assessment.
Risk in the high-yield market could increase.
We believe risk in the high-yield market could arise from highly levered companies in weak or highly competitive industries, putting pressure on those companies as they seek to service their debts. Thus, at a time of historically low interest rates and relatively narrow yield advantage to be gained from speculative-grade bonds, we continue to position the Fund in relatively higher-quality issues and in industries we perceive to be stable to growing, which we believe may offer the best possibility of earning attractive total returns with lower risk of principal losses from deteriorating credits.
Please see footnotes on page 7.
Wells Fargo High Yield Bond 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 March 1, 2020 to August 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 3-1-2020 | Ending account value 8-31-2020 | Expenses paid during the period1 | Annualized net expense ratio | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,035.74 | $ | 4.71 | 0.92 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.51 | $ | 4.67 | 0.92 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,034.93 | $ | 8.59 | 1.68 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,016.69 | $ | 8.52 | 1.68 | % | ||||||||
Administrator Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,039.52 | $ | 4.05 | 0.79 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.17 | $ | 4.01 | 0.79 | % | ||||||||
Institutional Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,040.85 | $ | 2.72 | 0.53 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.47 | $ | 2.69 | 0.53 | % |
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 High Yield Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Shares | Value | |||||||||||||||
Common Stocks: 9.01% |
| |||||||||||||||
Health Care: 4.37% |
| |||||||||||||||
Biotechnology: 3.30% | ||||||||||||||||
AbbVie Incorporated | 75,000 | $ | 7,182,750 | |||||||||||||
Alexion Pharmaceuticals Incorporated † | 15,000 | 1,713,300 | ||||||||||||||
Amgen Incorporated | 11,000 | 2,786,520 | ||||||||||||||
11,682,570 | ||||||||||||||||
|
| |||||||||||||||
Health Care Equipment & Supplies: 0.15% | ||||||||||||||||
Abbott Laboratories | 5,000 | 547,350 | ||||||||||||||
|
| |||||||||||||||
Health Care Providers & Services: 0.22% | ||||||||||||||||
McKesson Corporation | 5,000 | 767,200 | ||||||||||||||
|
| |||||||||||||||
Pharmaceuticals: 0.70% | ||||||||||||||||
Bristol-Myers Squibb Company | 40,000 | 2,488,000 | ||||||||||||||
|
| |||||||||||||||
Industrials: 0.15% |
| |||||||||||||||
Machinery: 0.15% | ||||||||||||||||
John Bean Technologies Corporation | 5,000 | 512,550 | ||||||||||||||
|
| |||||||||||||||
Information Technology: 4.11% |
| |||||||||||||||
Electronic Equipment, Instruments & Components: 0.31% | ||||||||||||||||
Amphenol Corporation Class A | 10,000 | 1,098,000 | ||||||||||||||
|
| |||||||||||||||
IT Services: 1.00% | ||||||||||||||||
Akamai Technologies Incorporated † | 15,000 | 1,746,450 | ||||||||||||||
Leidos Holdings Incorporated | 20,000 | 1,809,800 | ||||||||||||||
3,556,250 | ||||||||||||||||
|
| |||||||||||||||
Semiconductors & Semiconductor Equipment: 1.56% | ||||||||||||||||
Applied Materials Incorporated | 10,000 | 616,000 | ||||||||||||||
Broadcom Incorporated | 10,000 | 3,471,500 | ||||||||||||||
Microchip Technology Incorporated | 7,000 | 767,900 | ||||||||||||||
Micron Technology Incorporated † | 15,000 | 682,650 | ||||||||||||||
5,538,050 | ||||||||||||||||
|
| |||||||||||||||
Software: 0.51% | ||||||||||||||||
Microsoft Corporation | 8,000 | 1,804,240 | ||||||||||||||
|
| |||||||||||||||
Technology Hardware, Storage & Peripherals: 0.73% | ||||||||||||||||
Apple Incorporated | 20,000 | 2,580,800 | ||||||||||||||
|
| |||||||||||||||
Real Estate: 0.14% |
| |||||||||||||||
Equity REITs: 0.14% | ||||||||||||||||
Crown Castle International Corporation | 3,000 | 489,750 | ||||||||||||||
|
| |||||||||||||||
Utilities: 0.24% |
| |||||||||||||||
Independent Power & Renewable Electricity Producers: 0.11% | ||||||||||||||||
Vistra Energy Corporation | 20,000 | 384,600 | ||||||||||||||
|
| |||||||||||||||
Multi-Utilities: 0.13% | ||||||||||||||||
DTE Energy Company | 4,000 | 474,680 | ||||||||||||||
|
| |||||||||||||||
Total Common Stocks (Cost $27,187,051) |
| 31,924,040 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo High Yield Bond Fund | 11
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Corporate Bonds and Notes: 76.45% | ||||||||||||||||
Communication Services: 0.89% |
| |||||||||||||||
Media: 0.89% | ||||||||||||||||
CCO Holdings LLC 144A | 5.75 | % | 2-15-2026 | $ | 3,000,000 | $ | 3,144,180 | |||||||||
|
| |||||||||||||||
Consumer Discretionary: 3.71% |
| |||||||||||||||
Auto Components: 2.49% | ||||||||||||||||
Allison Transmission Incorporated 144A | 5.00 | 10-1-2024 | 1,000,000 | 1,010,030 | ||||||||||||
Dana Holding Corporation | 5.50 | 12-15-2024 | 1,500,000 | 1,530,000 | ||||||||||||
Speedway Motors Incorporated 144A | 4.88 | 11-1-2027 | 2,000,000 | 1,900,000 | ||||||||||||
Tenneco Incorporated | 5.00 | 7-15-2026 | 6,000,000 | 4,395,000 | ||||||||||||
8,835,030 | ||||||||||||||||
|
| |||||||||||||||
Household Durables: 1.22% | ||||||||||||||||
Installed Building Company 144A | 5.75 | 2-1-2028 | 4,110,000 | 4,336,050 | ||||||||||||
|
| |||||||||||||||
Consumer Staples: 4.40% |
| |||||||||||||||
Food Products: 3.82% | ||||||||||||||||
Lamb Weston Holdings Incorporated 144A | 4.88 | 11-1-2026 | 3,000,000 | 3,139,140 | ||||||||||||
Post Holdings Incorporated 144A | 5.00 | 8-15-2026 | 10,000,000 | 10,378,000 | ||||||||||||
13,517,140 | ||||||||||||||||
|
| |||||||||||||||
Household Products: 0.58% | ||||||||||||||||
Spectrum Brands Incorporated | 5.75 | 7-15-2025 | 2,000,000 | 2,065,000 | ||||||||||||
|
| |||||||||||||||
Energy: 2.58% |
| |||||||||||||||
Oil, Gas & Consumable Fuels: 2.58% | ||||||||||||||||
Cheniere Corpus Christi Holdings LLC | 5.13 | 6-30-2027 | 3,500,000 | 3,942,865 | ||||||||||||
Cheniere Energy Partners LP | 4.50 | 10-1-2029 | 5,000,000 | 5,197,850 | ||||||||||||
9,140,715 | ||||||||||||||||
|
| |||||||||||||||
Financials: 2.48% |
| |||||||||||||||
Banks: 0.95% | ||||||||||||||||
Bank of America Corporation (3 Month LIBOR +3.90%) ± | 6.10 | 12-29-2049 | 3,000,000 | 3,366,150 | ||||||||||||
|
| |||||||||||||||
Consumer Finance: 1.02% | ||||||||||||||||
Navient Corporation | 5.88 | 10-25-2024 | 1,000,000 | 1,028,750 | ||||||||||||
SLM Corporation | 5.50 | 1-25-2023 | 2,500,000 | 2,580,500 | ||||||||||||
3,609,250 | ||||||||||||||||
|
| |||||||||||||||
Insurance: 0.51% | ||||||||||||||||
Genworth Holdings Incorporated « | 4.80 | 2-15-2024 | 2,000,000 | 1,829,230 | ||||||||||||
|
| |||||||||||||||
Health Care: 16.06% |
| |||||||||||||||
Health Care Equipment & Supplies: 2.79% | ||||||||||||||||
Teleflex Incorporated 144A | 4.25 | 6-1-2028 | 4,000,000 | 4,220,000 | ||||||||||||
Teleflex Incorporated | 4.88 | 6-1-2026 | 5,415,000 | 5,658,675 | ||||||||||||
9,878,675 | ||||||||||||||||
|
| |||||||||||||||
Health Care Providers & Services: 8.21% | ||||||||||||||||
AMN Healthcare Incorporated 144A | 4.63 | 10-1-2027 | 2,250,000 | 2,349,855 | ||||||||||||
Centene Corporation | 4.63 | 12-15-2029 | 3,000,000 | 3,287,515 |
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo High Yield Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Health Care Providers & Services (continued) | ||||||||||||||||
Davita Incorporated 144A | 4.63 | % | 6-1-2030 | $ | 11,000,000 | $ | 11,563,750 | |||||||||
Encompass Health Corporation | 5.75 | 11-1-2024 | 2,334,000 | 2,345,647 | ||||||||||||
HealthSouth Corporation | 5.13 | 3-15-2023 | 5,000,000 | 5,037,500 | ||||||||||||
West Street Merger Sub Incorporated 144A | 6.38 | 9-1-2025 | 4,400,000 | 4,525,180 | ||||||||||||
29,109,447 | ||||||||||||||||
|
| |||||||||||||||
Health Care Technology: 0.89% | ||||||||||||||||
IQVIA Incorporated 144A | 5.00 | 10-15-2026 | 3,000,000 | 3,134,130 | ||||||||||||
|
| |||||||||||||||
Life Sciences Tools & Services: 1.87% | ||||||||||||||||
Charles River Laboratories Incorporated 144A | 5.50 | 4-1-2026 | 6,300,000 | 6,630,750 | ||||||||||||
|
| |||||||||||||||
Pharmaceuticals: 2.30% | ||||||||||||||||
Catalent Pharma Solutions Incorporated 144A | 4.88 | 1-15-2026 | 8,000,000 | 8,160,000 | ||||||||||||
|
| |||||||||||||||
Industrials: 11.27% |
| |||||||||||||||
Aerospace & Defense: 4.56% | ||||||||||||||||
Huntington Ingalls Industries Incorporated 144A | 5.00 | 11-15-2025 | 2,500,000 | 2,583,356 | ||||||||||||
Moog Incorporated 144A | 4.25 | 12-15-2027 | 4,050,000 | 4,181,625 | ||||||||||||
TransDigm Group Incorporated | 6.38 | 6-15-2026 | 9,200,000 | 9,405,436 | ||||||||||||
16,170,417 | ||||||||||||||||
|
| |||||||||||||||
Commercial Services & Supplies: 3.97% | ||||||||||||||||
Clean Harbors Incorporated 144A | 4.88 | 7-15-2027 | 3,000,000 | 3,147,360 | ||||||||||||
Clean Harbors Incorporated 144A | 5.13 | 7-15-2029 | 4,250,000 | 4,667,839 | ||||||||||||
Stericycle Incorporated 144A | 5.38 | 7-15-2024 | 6,000,000 | 6,270,000 | ||||||||||||
14,085,199 | ||||||||||||||||
|
| |||||||||||||||
Construction & Engineering: 0.93% | ||||||||||||||||
Aecom Company | 5.13 | 3-15-2027 | 3,000,000 | 3,289,650 | ||||||||||||
|
| |||||||||||||||
Trading Companies & Distributors: 1.81% | ||||||||||||||||
WESCO Distribution Incorporated | 5.38 | 6-15-2024 | 6,245,000 | 6,416,738 | ||||||||||||
|
| |||||||||||||||
Information Technology: 19.07% |
| |||||||||||||||
Communications Equipment: 1.08% | ||||||||||||||||
CommScope Technologies Finance LLC 144A | 6.00 | 6-15-2025 | 3,733,000 | 3,827,109 | ||||||||||||
|
| |||||||||||||||
Electronic Equipment, Instruments & Components: 5.46% | ||||||||||||||||
MTS Systems Corporation 144A | 5.75 | 8-15-2027 | 10,000,000 | 10,128,800 | ||||||||||||
TTM Technologies Incorporated 144A | 5.63 | 10-1-2025 | 9,000,000 | 9,225,000 | ||||||||||||
19,353,800 | ||||||||||||||||
|
| |||||||||||||||
IT Services: 1.29% | ||||||||||||||||
Gartner Incorporated 144A | 5.13 | 4-1-2025 | 4,400,000 | 4,574,680 | ||||||||||||
|
| |||||||||||||||
Semiconductors & Semiconductor Equipment: 5.84% | ||||||||||||||||
Broadcom Incorporated 144A | 4.75 | 4-15-2029 | 10,000,000 | 11,697,634 | ||||||||||||
Microchip Technology Incorporated 144A | 4.25 | 9-1-2025 | 8,650,000 | 9,007,068 | ||||||||||||
�� | 20,704,702 | |||||||||||||||
|
| |||||||||||||||
Software: 2.65% | ||||||||||||||||
Citrix Systems Incorporated | 3.30 | 3-1-2030 | 2,000,000 | 2,128,018 | ||||||||||||
Fair Isaac Corporation 144A | 5.25 | 5-15-2026 | 1,000,000 | 1,148,300 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo High Yield Bond Fund | 13
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Software (continued) | ||||||||||||||||
NortonLifeLock Incorporated 144A | 5.00 | % | 4-15-2025 | $ | 6,000,000 | $ | 6,120,000 | |||||||||
9,396,318 | ||||||||||||||||
|
| |||||||||||||||
Technology Hardware, Storage & Peripherals: 2.75% | ||||||||||||||||
Western Digital Corporation | 4.75 | 2-15-2026 | 8,995,000 | 9,733,849 | ||||||||||||
|
| |||||||||||||||
Materials: 12.13% |
| |||||||||||||||
Chemicals: 5.69% | ||||||||||||||||
Koppers Incorporated 144A | 6.00 | 2-15-2025 | 3,363,000 | 3,455,483 | ||||||||||||
Olin Corporation | 5.50 | 8-15-2022 | 3,275,000 | 3,340,500 | ||||||||||||
Tronox Incorporated 144A | 6.50 | 4-15-2026 | 2,000,000 | 2,059,323 | ||||||||||||
Valvoline Incorporated | 4.38 | 8-15-2025 | 10,901,000 | 11,311,968 | ||||||||||||
20,167,274 | ||||||||||||||||
|
| |||||||||||||||
Containers & Packaging: 6.44% | ||||||||||||||||
Ball Corporation | 2.88 | 8-15-2030 | 15,000,000 | 14,967,000 | ||||||||||||
Berry Global Incorporated 144A | 4.50 | 2-15-2026 | 6,000,000 | 6,117,510 | ||||||||||||
Berry Global Incorporated | 5.13 | 7-15-2023 | 1,714,000 | 1,735,425 | ||||||||||||
22,819,935 | ||||||||||||||||
|
| |||||||||||||||
Real Estate: 3.86% |
| |||||||||||||||
Equity REITs: 3.86% | ||||||||||||||||
Equinix Incorporated | 5.38 | 5-15-2027 | 430,000 | 470,313 | ||||||||||||
Iron Mountain Incorporated 144A | 4.50 | 2-15-2031 | 3,500,000 | 3,594,063 | ||||||||||||
Iron Mountain Incorporated 144A | 4.88 | 9-15-2027 | 500,000 | 518,750 | ||||||||||||
Sabra Health Care LP/Sabra Capital Corporation | 3.90 | 10-15-2029 | 3,639,000 | 3,532,150 | ||||||||||||
SBA Communications Corporation 144A | 3.88 | 2-15-2027 | 5,350,000 | 5,553,033 | ||||||||||||
13,668,309 | ||||||||||||||||
|
| |||||||||||||||
Total Corporate Bonds and Notes (Cost $264,326,872) |
| 270,963,727 | ||||||||||||||
|
| |||||||||||||||
Yankee Corporate Bonds and Notes: 13.14% |
| |||||||||||||||
Consumer Discretionary: 3.36% |
| |||||||||||||||
Auto Components: 2.44% | ||||||||||||||||
Adient Global Holdings Limited 144A | 4.88 | 8-15-2026 | 9,210,000 | 8,634,375 | ||||||||||||
|
| |||||||||||||||
Hotels, Restaurants & Leisure: 0.92% | ||||||||||||||||
International Game Technology plc 144A | 6.50 | 2-15-2025 | 3,000,000 | 3,262,500 | ||||||||||||
|
| |||||||||||||||
Financials: 3.43% |
| |||||||||||||||
Diversified Financial Services: 3.43% | ||||||||||||||||
Tronox Finance plc 144A | 5.75 | 10-1-2025 | 12,000,000 | 12,152,520 | ||||||||||||
|
| |||||||||||||||
Health Care: 3.49% |
| |||||||||||||||
Pharmaceuticals: 3.49% | ||||||||||||||||
Bausch Health Companies Incorporated 144A | 5.25 | 1-30-2030 | 12,450,000 | 12,375,176 | ||||||||||||
|
| |||||||||||||||
Industrials: 0.92% |
| |||||||||||||||
Electrical Equipment: 0.92% | ||||||||||||||||
Sensata Technologies BV 144A | 5.63 | 11-1-2024 | 3,000,000 | 3,270,000 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo High Yield Bond Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Information Technology: 1.94% | ||||||||||||||||
Technology Hardware, Storage & Peripherals: 1.94% | ||||||||||||||||
Seagate HDD 144A | 4.09 | % | 6-1-2029 | $ | 3,273,000 | $ | 3,504,863 | |||||||||
Seagate HDD | 4.88 | 6-1-2027 | 3,018,000 | 3,372,735 | ||||||||||||
6,877,598 | ||||||||||||||||
|
| |||||||||||||||
Total Yankee Corporate Bonds and Notes (Cost $45,990,070) |
| 46,572,169 | ||||||||||||||
|
| |||||||||||||||
Yield | Shares | |||||||||||||||
Short-Term Investments: 0.64% | ||||||||||||||||
Investment Companies: 0.64% |
| |||||||||||||||
Securities Lending Cash Investments LLC (l)(r)(u) | 0.09 | 1,738,500 | 1,738,500 | |||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u) | 0.06 | 526,937 | 526,937 | |||||||||||||
Total Short-Term Investments (Cost $2,265,437) | 2,265,437 | |||||||||||||||
|
|
Total investments in securities (Cost $339,769,430) | 99.24 | % | 351,725,373 | |||||
Other assets and liabilities, net | 0.76 | 2,703,293 | ||||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 354,428,666 | ||||
|
|
|
|
† | 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. |
± | Variable rate investment. The rate shown is the rate in effect at period end. |
« | 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:
LIBOR | London Interbank Offered Rate |
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:
Value, beginning of period | Purchases | Sales proceeds | Net realized gains (losses) | Net change in unrealized gains (losses) | Income from affiliated securities | Value, period | % of net assets | |||||||||||||||||||||||||
Short-Term Investments | ||||||||||||||||||||||||||||||||
Investment Companies | ||||||||||||||||||||||||||||||||
Securities Lending Cash Investments LLC | $ | 8,781,534 | $ | 49,615,665 | (56,659,613 | ) | $ | 914 | $ | 0 | $ | 154,710 | # | $ | 1,738,500 | |||||||||||||||||
Wells Fargo Government Money Market Fund Select Class | 5,876,344 | 141,201,613 | (146,551,020 | ) | 0 | 0 | 41,413 | 526,937 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
$ | 914 | $ | 0 | $ | 196,123 | $ | 2,265,437 | 0.64 | % | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
# | Amount shown represents income before fees and rebates. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo High Yield Bond Fund | 15
Table of Contents
Statement of assets and liabilities—August 31, 2020
Assets | ||||
Investments in unaffiliated securities (including $1,705,142 of securities loaned), at value (cost $337,503,993) | $ | 349,459,936 | ||
Investments in affiliated securities, at value (cost $2,265,437) | 2,265,437 | |||
Receivable for investments sold | 1,750,482 | |||
Receivable for Fund shares sold | 264,708 | |||
Receivable for dividends and interest | 3,388,355 | |||
Receivable for securities lending income, net | 44 | |||
|
| |||
Total assets | 357,128,962 | |||
|
| |||
Liabilities | ||||
Payable upon receipt of securities loaned | 1,737,116 | |||
Payable for Fund shares redeemed | 444,073 | |||
Management fee payable | 131,086 | |||
Dividends payable | 166,644 | |||
Administration fees payable | 41,734 | |||
Distribution fee payable | 5,266 | |||
Trustees’ fees and expenses payable | 1,932 | |||
Accrued expenses and other liabilities | 172,445 | |||
|
| |||
Total liabilities | 2,700,296 | |||
|
| |||
Total net assets | $ | 354,428,666 | ||
|
| |||
Net assets consist of | ||||
Paid-in capital | $ | 399,657,899 | ||
Total distributable loss | (45,229,233 | ) | ||
|
| |||
Total net assets | $ | 354,428,666 | ||
|
| |||
Computation of net asset value and offering price per share | ||||
Net assets – Class A | $ | 251,409,942 | ||
Shares outstanding – Class A1 | 75,411,868 | |||
Net asset value per share – Class A | $3.33 | |||
Maximum offering price per share – Class A2 | $3.49 | |||
Net assets – Class C | $ | 8,265,383 | ||
Shares outstanding – Class C1 | 2,472,691 | |||
Net asset value per share – Class C | $3.34 | |||
Net assets – Administrator Class | $ | 21,185,375 | ||
Shares outstanding – Administrator Class1 | 6,347,420 | |||
Net asset value per share – Administrator Class | $3.34 | |||
Net assets – Institutional Class | $ | 73,567,966 | ||
Shares outstanding – Institutional Class1 | 22,046,093 | |||
Net asset value per share – Institutional Class | $3.34 |
1 | The Fund has an unlimited number of authorized shares. |
2 | Maximum offering price is computed as 100/95.50 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.
16 | Wells Fargo High Yield Bond Fund
Table of Contents
Statement of operations—year ended August 31, 2020
Investment income | ||||
Interest | $ | 16,847,067 | ||
Dividends | 775,945 | |||
Income from affiliated securities | 76,096 | |||
|
| |||
Total investment income | 17,699,108 | |||
|
| |||
Expenses | ||||
Management fee | 1,974,587 | |||
Administration fees |
| |||
Class A | 408,957 | |||
Class C | 15,304 | |||
Administrator Class | 23,155 | |||
Institutional Class | 56,558 | |||
Shareholder servicing fees |
| |||
Class A | 638,075 | |||
Class C | 23,878 | |||
Administrator Class | 57,824 | |||
Distribution fee |
| |||
Class C | 71,552 | |||
Custody and accounting fees | 31,055 | |||
Professional fees | 64,210 | |||
Registration fees | 77,485 | |||
Shareholder report expenses | 81,141 | |||
Trustees’ fees and expenses | 21,326 | |||
Other fees and expenses | 29,103 | |||
|
| |||
Total expenses | 3,574,210 | |||
Less: Fee waivers and/or expense reimbursements |
| |||
Fund-level | (407,753 | ) | ||
Class A | (15,158 | ) | ||
Class C | (79 | ) | ||
Administrator Class | (17,741 | ) | ||
Institutional Class | (49,793 | ) | ||
|
| |||
Net expenses | 3,083,686 | |||
|
| |||
Net investment income | 14,615,422 | |||
|
| |||
Payment from affiliate | 31,431 | |||
|
| |||
Realized and unrealized gains (losses) on investments | ||||
Net realized gains (losses) on |
| |||
Unaffiliated securities | (14,584,278 | ) | ||
Affiliated securities | 914 | |||
|
| |||
Net realized losses on investments | (14,583,364 | ) | ||
Net change in unrealized gains (losses) on investments | 18,161,495 | |||
|
| |||
Net realized and unrealized gains (losses) on investments | 3,578,131 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 18,224,984 | ||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo High Yield Bond Fund | 17
Table of Contents
Statement of changes in net assets
Year ended August 31, 2020 | Year ended August 31, 2019 | |||||||||||||||
Operations |
| |||||||||||||||
Net investment income | $ | 14,615,422 | $ | 18,191,630 | ||||||||||||
Payment from affiliate | 31,431 | 0 | ||||||||||||||
Net realized losses on investments | (14,583,364 | ) | (2,340,442 | ) | ||||||||||||
Net change in unrealized gains (losses) on investments | 18,161,495 | (106,513 | ) | |||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from operations | 18,224,984 | 15,744,675 | ||||||||||||||
|
| |||||||||||||||
Distributions to shareholders from net investment income and net realized gains | ||||||||||||||||
Class A | (10,215,739 | ) | (11,648,408 | ) | ||||||||||||
Class C | (310,197 | ) | (966,845 | ) | ||||||||||||
Administrator Class | (956,624 | ) | (1,048,193 | ) | ||||||||||||
Institutional Class | (3,097,746 | ) | (4,608,052 | ) | ||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | (14,580,306 | ) | (18,271,498 | ) | ||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold |
| |||||||||||||||
Class A | 4,641,622 | 15,155,503 | 12,335,218 | 39,632,798 | ||||||||||||
Class C | 215,082 | 688,486 | 215,166 | 696,992 | ||||||||||||
Administrator Class | 1,596,322 | 5,195,585 | 1,559,733 | 5,085,129 | ||||||||||||
Institutional Class | 10,922,542 | 35,419,171 | 24,871,051 | 80,385,234 | ||||||||||||
|
| |||||||||||||||
56,458,745 | 125,800,153 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions |
| |||||||||||||||
Class A | 2,842,804 | 9,241,024 | 3,272,349 | 10,551,156 | ||||||||||||
Class C | 89,154 | 289,705 | 291,746 | 931,523 | ||||||||||||
Administrator Class | 278,499 | 906,613 | 309,697 | 998,849 | ||||||||||||
Institutional Class | 939,820 | 3,063,178 | 1,388,617 | 4,476,567 | ||||||||||||
|
| |||||||||||||||
13,500,520 | 16,958,095 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed |
| |||||||||||||||
Class A | (15,248,102 | ) | (49,382,003 | ) | (15,355,876 | ) | (49,481,698 | ) | ||||||||
Class C | (1,551,285 | ) | (5,081,240 | ) | (11,351,514 | ) | (36,368,438 | ) | ||||||||
Administrator Class | (3,020,506 | ) | (9,617,779 | ) | (1,663,412 | ) | (5,370,540 | ) | ||||||||
Institutional Class | (12,861,136 | ) | (41,411,140 | ) | (44,246,117 | ) | (141,384,353 | ) | ||||||||
|
| |||||||||||||||
(105,492,162 | ) | (232,605,029 | ) | |||||||||||||
|
| |||||||||||||||
Net decrease in net assets resulting from capital share transactions | (35,532,897 | ) | (89,846,781 | ) | ||||||||||||
|
| |||||||||||||||
Total decrease in net assets | (31,888,219 | ) | (92,373,604 | ) | ||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 386,316,885 | 478,690,489 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 354,428,666 | $ | 386,316,885 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo High Yield Bond Fund
Table of Contents
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS A | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $3.29 | $3.28 | $3.40 | $3.31 | $3.16 | |||||||||||||||
Net investment income | 0.13 | 0.14 | 0.14 | 0.14 | 0.13 | |||||||||||||||
Payment from affiliate | 0.00 | 1 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.04 | 0.01 | (0.12 | ) | 0.10 | 0.15 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.17 | 0.15 | 0.02 | 0.24 | 0.28 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.13 | ) | (0.14 | ) | (0.13 | ) | (0.15 | ) | (0.13 | ) | ||||||||||
Tax basis return of capital | 0.00 | 0.00 | (0.01 | ) | (0.00 | )1 | 0.00 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.13 | ) | (0.14 | ) | (0.14 | ) | (0.15 | ) | (0.13 | ) | ||||||||||
Net asset value, end of period | $3.33 | $3.29 | $3.28 | $3.40 | $3.31 | |||||||||||||||
Total return2 | 5.31 | %3 | 4.79 | % | 0.68 | % | 7.28 | % | 9.25 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 1.04 | % | 1.04 | % | 1.02 | % | 1.01 | % | 1.04 | % | ||||||||||
Net expenses | 0.93 | % | 0.93 | % | 0.93 | % | 0.93 | % | 1.01 | % | ||||||||||
Net investment income | 4.01 | % | 4.36 | % | 4.26 | % | 4.39 | % | 4.24 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 34 | % | 26 | % | 18 | % | 20 | % | 75 | % | ||||||||||
Net assets, end of period (000s omitted) | $251,410 | $273,553 | $272,170 | $314,156 | $370,560 |
1 | Amount is less than $0.005. |
2 | Total return calculations do not include any sales charges. |
3 | During the year ended August 31, 2020, the Fund received a payment from an affiliate that had an impact of less than 0.005% on total return. See Note 4 in the Notes to Financial Statements for additional information. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo High Yield Bond Fund | 19
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
CLASS C | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $3.29 | $3.28 | $3.40 | $3.31 | $3.16 | |||||||||||||||
Net investment income | 0.11 | 1 | 0.12 | 1 | 0.12 | 0.12 | 0.11 | |||||||||||||
Payment from affiliate | 0.01 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.03 | 0.01 | (0.12 | ) | 0.09 | 0.15 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.15 | 0.13 | (0.00 | ) | 0.21 | 0.26 | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.10 | ) | (0.12 | ) | (0.11 | ) | (0.12 | ) | (0.11 | ) | ||||||||||
Tax basis return of capital | 0.00 | 0.00 | (0.01 | ) | (0.00 | )2 | 0.00 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.10 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | (0.11 | ) | ||||||||||
Net asset value, end of period | $3.34 | $3.29 | $3.28 | $3.40 | $3.31 | |||||||||||||||
Total return3 | 4.83 | %4 | 4.00 | % | (0.07 | )% | 6.49 | % | 8.44 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 1.79 | % | 1.79 | % | 1.77 | % | 1.76 | % | 1.80 | % | ||||||||||
Net expenses | 1.68 | % | 1.68 | % | 1.68 | % | 1.68 | % | 1.77 | % | ||||||||||
Net investment income | 3.25 | % | 3.64 | % | 3.51 | % | 3.65 | % | 3.48 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 34 | % | 26 | % | 18 | % | 20 | % | 75 | % | ||||||||||
Net assets, end of period (000s omitted) | $8,265 | $12,220 | $47,811 | $61,734 | $72,908 |
1 | Calculated based upon average shares outstanding |
2 | Amount is less than $0.005. |
3 | Total return calculations do not include any sales charges. |
4 | During the year ended August 31, 2020, the Fund received a payment from an affiliate which had a 0.31% impact on the total return. See Note 4 in the Notes to Financial Statements for additional information. |
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo High Yield Bond Fund
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
ADMINISTRATOR CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $3.29 | $3.29 | $3.41 | $3.31 | $3.16 | |||||||||||||||
Net investment income | 0.13 | 0.15 | 1 | 0.15 | 0.15 | 0.14 | 1 | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.05 | 0.00 | (0.12 | ) | 0.10 | 0.15 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.18 | 0.15 | 0.03 | 0.25 | 0.29 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.13 | ) | (0.15 | ) | (0.14 | ) | (0.15 | ) | (0.14 | ) | ||||||||||
Tax basis return of capital | 0.00 | 0.00 | (0.01 | ) | (0.00 | )2 | 0.00 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.13 | ) | (0.15 | ) | (0.15 | ) | (0.15 | ) | (0.14 | ) | ||||||||||
Net asset value, end of period | $3.34 | $3.29 | $3.29 | $3.41 | $3.31 | |||||||||||||||
Total return | 5.76 | % | 4.60 | % | 0.82 | % | 7.74 | % | 9.48 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.99 | % | 0.98 | % | 0.96 | % | 0.95 | % | 0.98 | % | ||||||||||
Net expenses | 0.79 | % | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | ||||||||||
Net investment income | 4.14 | % | 4.48 | % | 4.39 | % | 4.55 | % | 4.43 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 34 | % | 26 | % | 18 | % | 20 | % | 75 | % | ||||||||||
Net assets, end of period (000s omitted) | $21,185 | $24,667 | $23,940 | $31,592 | $76,688 |
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 High Yield Bond Fund | 21
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $3.29 | $3.28 | $3.41 | $3.31 | $3.17 | |||||||||||||||
Net investment income | 0.14 | 0.15 | 0.16 | 0.16 | 0.14 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.05 | 0.01 | (0.13 | ) | 0.10 | 0.14 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.19 | 0.16 | 0.03 | 0.26 | 0.28 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.14 | ) | (0.15 | ) | (0.15 | ) | (0.16 | ) | (0.14 | ) | ||||||||||
Tax basis return of capital | 0.00 | 0.00 | (0.01 | ) | (0.00 | )1 | 0.00 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.14 | ) | (0.15 | ) | (0.16 | ) | (0.16 | ) | (0.14 | ) | ||||||||||
Net asset value, end of period | $3.34 | $3.29 | $3.28 | $3.41 | $3.31 | |||||||||||||||
Total return | 6.04 | % | 5.20 | % | 0.79 | % | 8.03 | % | 9.27 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.71 | % | 0.71 | % | 0.69 | % | 0.68 | % | 0.70 | % | ||||||||||
Net expenses | 0.53 | % | 0.53 | % | 0.53 | % | 0.53 | % | 0.61 | % | ||||||||||
Net investment income | 4.39 | % | 4.75 | % | 4.67 | % | 4.79 | % | 4.65 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 34 | % | 26 | % | 18 | % | 20 | % | 75 | % | ||||||||||
Net assets, end of period (000s omitted) | $73,568 | $75,877 | $134,770 | $125,991 | $100,023 |
1 | Amount is less than $0.005. |
The accompanying notes are an integral part of these financial statements.
22 | Wells Fargo High Yield Bond 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 High Yield Bond 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.
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.
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 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.
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.
Wells Fargo High Yield Bond Fund | 23
Table of Contents
Notes to financial statements
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.
Dividend income is recognized on the ex-dividend date.
Distributions to shareholders
Distributions to shareholders from net investment income are declared daily and paid monthly. Distributions from net realized gains, if any, 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 August 31, 2020, the aggregate cost of all investments for federal income tax purposes was $339,769,430 and the unrealized gains (losses) consisted of:
Gross unrealized gains | $ | 15,382,061 | ||
Gross unrealized losses | (3,426,118 | ) | ||
Net unrealized gains | $ | 11,955,943 |
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 causing such reclassification is due to recognition of partnership income. At August 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 loss | |
$(95,425) | $95,425 |
As of August 31, 2020, the Fund had capital loss carryforwards which consist of $16,415,740 in short-term capital losses and $41,199,521 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.
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
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Notes to financial statements
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 August 31, 2020:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Common stocks | ||||||||||||||||
Health care | $ | 15,485,120 | $ | 0 | $ | 0 | $ | 15,485,120 | ||||||||
Industrials | 512,550 | 0 | 0 | 512,550 | ||||||||||||
Information technology | 14,577,340 | 0 | 0 | 14,577,340 | ||||||||||||
Real estate | 489,750 | 0 | 0 | 489,750 | ||||||||||||
Utilities | 859,280 | 0 | 0 | 859,280 | ||||||||||||
Corporate bonds and notes | 0 | 270,963,727 | 0 | 270,963,727 | ||||||||||||
Yankee corporate bonds and notes | 0 | 46,572,169 | 0 | 46,572,169 | ||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 2,265,437 | 0 | 0 | 2,265,437 | ||||||||||||
Total assets | $ | 34,189,477 | $ | 317,535,896 | $ | 0 | $ | 351,725,373 |
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
For the year ended August 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 | 0.550 | % | ||
Next $500 million | 0.525 | |||
Next $2 billion | 0.500 | |||
Next $2 billion | 0.475 | |||
Next $5 billion | 0.440 | |||
Over $10 billion | 0.430 |
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Notes to financial statements
For the year ended August 31, 2020, the management fee was equivalent to an annual rate of 0.55% 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 0.35% and declining to 0.20% 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 | 0.16 | % | ||
Administrator Class | 0.10 | |||
Institutional Class | 0.08 |
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 December 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, 1.68% for Class C shares, 0.80% for Administrator Class shares and 0.53% for Institutional Class shares. Prior to or after the commitment period, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees.
Other transactions
On August 14, 2020, Class A and Class C of the Fund were reimbursed by Funds Management in the amount of $79 and $31,352, respectively. The reimbursements were made in connection with resolving certain fee reimbursements.
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 August 31, 2020, Funds Distributor received $1,610 from the sale of Class A shares and $16 in contingent deferred sales charges from redemptions of Class C shares. No contingent deferred sales charges were incurred by Class A for the year ended August 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 $0 and $13,977,500 in interfund purchases and sales, respectively, during the year ended August 31, 2020.
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Notes to financial statements
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the year ended August 31, 2020 were $120,947,013 and $149,352,069, 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 Federal 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 the borrower to return a loaned security, the Fund has the right to use the collateral to offset any losses incurred. As of August 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 | |||||
Citigroup Global Markets Inc. | $1,705,142 | $(1,705,142) | $ | 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 $350,000,000 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 August 31, 2020, there were no borrowings by the Fund under the agreement.
8. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid was $14,580,306 and $18,271,498 of ordinary income for the years ended August 31, 2020 and August 31, 2019, respectively.
As of August 31, 2020, the components of distributable loss on a tax basis were as follows:
Undistributed ordinary income | Unrealized gains | Capital loss carryforward | ||
$624,617 | $11,955,943 | $(57,615,261) |
9. INDEMNIFICATION
Under the Fund’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 Fund. The Fund has entered into a separate agreement with each Trustee that converts indemnification rights currently existing under the Fund’s organizational documents into contractual rights that cannot be changed in the future without the consent of the Trustee. Additionally, in the normal course of business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
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Notes to financial statements
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 on fair value measurements in Topic 820, Fair Value Measurements. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has adopted this guidance which did not have a material impact on the financial statements.
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.
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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 High Yield Bond Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of August 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 August 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 August 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
October 28, 2020
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TAX INFORMATION
For corporate shareholders, pursuant to Section 854 of the Internal Revenue Code, 3.70% of ordinary income dividends qualify for the corporate dividends-received deduction for the fiscal year ended August 31, 2020.
Pursuant to Section 854 of the Internal Revenue Code, $673,399 of income dividends paid during the fiscal year ended August 31, 2020 has been designated as qualified dividend income (QDI).
For the fiscal year ended August 31, 2020, $11,700,534 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 142 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 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). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008 | 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 | |||
David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business (Emeritus), 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 |
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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 | |||
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 Wheelock (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. Interim President of the McKnight Foundation from January to September 2020. 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 the Treasurer of 77 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. |
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Other information (unaudited)
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Wells Fargo High Yield Bond Fund
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Funds Trust (the “Trust”) must determine annually whether to approve the continuation of the Trust’s investment management and sub-advisory agreements. In this regard, at a Board meeting held on May 26, 2020 and May 28, 2020 (together, the “Meeting”), the Board, all the members of which have no direct or indirect interest in the investment management and sub-advisory agreements and are not “interested persons” of the Trust, as defined in the 1940 Act (the “Independent Trustees”), reviewed and approved for Wells Fargo High Yield Bond Fund (the “Fund”): (i) an investment management agreement (the “Management Agreement”) with Wells Fargo Funds Management, LLC (“Funds Management”); and (ii) an investment sub-advisory agreement (the “Sub-Advisory Agreement”) with Wells Capital Management Incorporated (the “Sub-Adviser”), an affiliate of Funds Management. The Management Agreement and the Sub-Advisory Agreement are collectively referred to as the “Advisory Agreements.”
At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of Funds Management and the Sub-Adviser and the approval of the Advisory Agreements. Prior to the Meeting, including at a Board meeting held in April 2020, the Trustees conferred extensively among themselves and with representatives of Funds Management about these matters. Also, the Board has adopted a team-based approach, with each team consisting of a sub-set of Trustees, to assist the full Board in the discharge of its duties in reviewing investment performance and other matters throughout the year. The Independent Trustees were assisted in their evaluation of the Advisory Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately.
In providing information to the Board, Funds Management and the Sub-Adviser were guided by a detailed set of requests for information submitted to them by independent legal counsel on behalf of the Independent Trustees at the start of the Board’s annual contract renewal process earlier in 2020. In considering and approving the Advisory Agreements, the Trustees considered the information they believed relevant, including but not limited to the information discussed below. The Board considered not only the specific information presented in connection with the Meeting, but also the knowledge gained over time through interaction with Funds Management and the Sub-Adviser about various topics. In this regard, the Board reviewed reports of Funds Management at each of its quarterly meetings, which included, among other things, portfolio reviews and investment performance reports. In addition, the Board and the teams mentioned above confer with portfolio managers at various times throughout the year. The Board did not identify any particular information or consideration that was all-important or controlling, and each individual Trustee may have attributed different weights to various factors.
After its deliberations, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable. The Board considered the approval of the Advisory Agreements for the Fund as part of its consideration of agreements for funds across the complex, but its approvals were made on a fund-by-fund basis. The following summarizes a number of important, but not necessarily all, factors considered by the Board in support of its approvals.
Nature, extent and quality of services
The Board received and considered various information regarding the nature, extent and quality of services provided to the Fund by Funds Management and the Sub-Adviser under the Advisory Agreements. This information included a description of the investment advisory services and Fund-level administrative services covered by the Management Agreement, as well as, among other things, a summary of the background and experience of senior management of Wells Fargo Asset Management (“WFAM”), of which Funds Management and the Sub-Adviser are a part, and a summary of investments made in the business of WFAM. The Board also received a description of Funds Management’s and the Sub-Adviser’s business continuity plans and of their approaches to data privacy and cybersecurity, and related testing. The Board also received and reviewed information about Funds Management’s role as administrator of the Fund’s liquidity risk management program, Funds Management’s approach to risk management, and Funds Management’s intermediary and vendor oversight program.
The Board also considered the qualifications, background, tenure and responsibilities of each of the portfolio managers primarily responsible for the day-to-day portfolio management of the Fund. The Board evaluated the ability of Funds Management and the Sub-Adviser to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of Funds Management and the Sub-Adviser. In addition, the Board took into account the full range of services provided to the Fund by Funds Management and its affiliates.
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Other information (unaudited)
Fund investment performance and expenses
The Board considered the investment performance results for the Fund over various time periods ended December 31, 2019. The Board also considered more current results for various time periods ended March 31, 2020. The Board considered these results in comparison to the investment performance of funds in a universe that was determined by Broadridge Inc. (“Broadridge”) to be similar to the Fund (the “Universe”), and in comparison to the Fund’s benchmark index and to other comparative data. Broadridge is an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds in the performance Universe. The Board noted that the investment performance of the Fund (Administrator Class) was higher than the average investment performance of the Universe for the one-, five- and ten-year periods ended December 31, 2019, and lower than the average investment performance of the Universe for the three-year period ended December 31, 2019. The Board also noted that the investment performance of the Fund (Administrator Class) was higher than the average investment performance of the Universe for all periods ended March 31, 2020. The Board also noted that the investment performance of the Fund was higher than its benchmark index, the ICE BofA U.S. High Yield Constrained Index, for the one-year period ended December 31, 2019, and lower than its benchmark for the three-, five- and ten year periods ended December 31, 2019. The Board also noted that the investment performance of the Fund was higher than or in range of its benchmark index, the ICE BofA U.S. High Yield Constrained Index, for the one-, three- and five-year periods ended March 31, 2020, and lower than its benchmark index for the ten-year period ended March 31, 2020.
The Board received information concerning, and discussed factors contributing to, the underperformance of the Fund relative to the Universe and benchmark for the periods identified above. The Board took note of the explanations for the relative underperformance during these periods, including with respect to investment decisions that affected the Fund’s investment performance. The Board also took note of the Fund’s outperformance relative to the Universe for the majority of time periods under review, as well as outperformance relative to the benchmark over the more recent time periods under review.
The Board also received and considered information regarding the Fund’s net operating expense ratios and their various components, including actual management fees, custodian and other non-management fees, and Rule 12b-1 and non-Rule 12b-1 shareholder service fees. The Board considered these ratios in comparison to the median ratios of funds in class-specific expense groups that were determined by Broadridge to be similar to the Fund (the “Groups”). The Board received a description of the methodology used by Broadridge to select the mutual funds in the expense Groups and an explanation of how funds comprising expense groups and their expense ratios may vary from year-to-year. Based on the Broadridge reports, the Board noted that the net operating expense ratios of the Fund were lower than the median net operating expense ratios of the expense Groups for each share class.
The Board took into account the Fund’s investment performance and expense information provided to it among the factors considered in deciding to re-approve the Advisory Agreements.
Investment management and sub-advisory fee rates
The Board reviewed and considered the contractual fee rates payable by the Fund to Funds Management under the Management Agreement, as well as the contractual fee rates payable by the Fund to Funds Management for class-level administrative services under a Class-Level Administration Agreement, which include, among other things, class-level transfer agency and sub-transfer agency costs (collectively, the “Management Rates”). The Board also reviewed and considered the contractual investment sub-advisory fee rates that are payable by Funds Management to the Sub-Adviser for investment sub-advisory services.
Among other information reviewed by the Board was a comparison of the Fund’s Management Rates with the average contractual investment management fee rates of funds in the expense Groups at a common asset level as well as transfer agency costs of the funds in the expense Groups. The Board noted that the Management Rates of the Fund were lower than, equal to or in range of the sum of these average rates for the Fund’s expense Groups for all share classes.
The Board also received and considered information about the portion of the total management fee that was retained by Funds Management after payment of the fee to the Sub-Adviser for sub-advisory services. In assessing the reasonableness of this amount, the Board received and evaluated information about the nature and extent of responsibilities retained and risks assumed by Funds Management and not delegated to or assumed by the Sub-Adviser, and about Funds Management’s on-going oversight services. Given the affiliation between Funds Management and the Sub-Adviser, the Board ascribed limited relevance to the allocation of fees between them.
The Board also received and considered information about the nature and extent of services offered and fee rates charged by Funds Management and the Sub-Adviser to other types of clients with investment strategies similar to those of the Fund. In this regard, the Board received information about the significantly greater scope of services, and compliance, reporting and other legal burdens and risks of managing proprietary mutual funds compared with those associated with managing assets of other types of clients, including third-party sub-advised fund clients and non-mutual fund clients such as institutional separate accounts.
Wells Fargo High Yield Bond Fund | 35
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Other information (unaudited)
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board determined that the compensation payable to Funds Management under the Management Agreement and to the Sub-Adviser under the Sub-Advisory Agreement was reasonable.
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of both WFAM and Wells Fargo & Co. (“Wells Fargo”) from providing services to the fund family as a whole. The Board noted that the Sub-Adviser’s profitability information with respect to providing services to the Fund and other funds in the family was subsumed in the WFAM and Wells Fargo profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability, including a description of the methodology used to allocate certain expenses. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such as the size, type and age of fund.
Based on its review, the Board did not deem the profits reported by Funds Management, WFAM or Wells Fargo from services provided to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
The Board received and considered information about the potential for Funds Management to experience economies of scale in the provision of management services to the Fund, the difficulties of calculating economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. The Board noted the existence of breakpoints in the Fund’s management fee structure, which operate generally to reduce the Fund’s expense ratios as the Fund grows in size, and the size of the Fund in relation to such breakpoints. The Board considered that in addition to management fee breakpoints, Funds Management shares potential economies of scale from its management business in a variety of ways, including through fee waiver and expense reimbursement arrangements, services that benefit shareholders, competitive management fee rates set at the outset without regard to breakpoints, and investments in the business intended to enhance services available to shareholders.
The Board concluded that Funds Management’s arrangements with respect to the Fund, including contractual breakpoints, constituted a reasonable approach to sharing potential economies of scale with the Fund and its shareholders.
Other benefits to Funds Management and the Sub-Adviser
The Board received and considered information regarding potential “fall-out” or ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, as a result of their relationships with the Fund. Ancillary benefits could include, among others, benefits directly attributable to other relationships with the Fund and benefits potentially derived from an increase in Funds Management’s and the Sub-Adviser’s business as a result of their relationships with the Fund. The Board noted that various affiliates of Funds Management may receive distribution-related fees, shareholder servicing payments and sub-transfer agency fees in respect of shares sold or held through them and services provided.
The Board also reviewed information about soft dollar credits earned and utilized by the Sub-Adviser, fees earned by Funds Management and the Sub-Adviser from managing a private investment vehicle for the fund family’s securities lending collateral, and commissions earned by an affiliated broker from portfolio transactions.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board did not find that any ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, were unreasonable.
Conclusion
At the Meeting, after considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable.
36 | Wells Fargo High Yield Bond Fund
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Other information (unaudited)
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Wells Fargo Funds Trust (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) on behalf of each of its series, including the Fund, which is reasonably designed to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) previously approved the designation of Wells Fargo Funds Management, LLC (“Funds Management”), the Fund’s investment manager, as the administrator of the Program, and Funds Management has established a Liquidity Risk Management Council composed of personnel from multiple departments within Funds Management and its affiliates to assist Funds Management in the implementation and on-going administration of the Program.
The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent the Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if the Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s “highly liquid investments” below its HLIM; and (6) periodic reporting to the Board.
At a meeting of the Board held on May 26 and 28, 2020, the Board received a written report (the “Report”) from Funds Management that addressed the operation of the Program and assessed its adequacy and effectiveness of implementation. The Report covered the initial period from December 1, 2018 through December 31, 2019 (the “Reporting Period”). No significant liquidity events impacting the Fund were noted in the Report. There were no material changes to the Program during the Reporting Period. The Report concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
Wells Fargo High Yield Bond Fund | 37
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Effective June 1, 2020, shareholders purchasing Fund shares through an Oppenheimer & Co. Inc. (“Oppenheimer”) platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred or back-end, sales charge waivers) and discounts, which may differ from those disclosed in the Fund’s Prospectus or SAI.
Front-end Sales Load Waivers on Class A Shares available at Oppenheimer |
Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan. |
Shares purchased by or through a 529 Plan. |
Shares purchased through an Oppenheimer affiliated investment advisory program. |
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 from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 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 (known as Rights of Restatement). |
A shareholder in the Fund’s Class C shares will have their shares exchanged at net asset value to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the exchange is in line with the policies and procedures of Oppenheimer. |
Employees and registered representatives of Oppenheimer or its affiliates and their family members. |
Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in the Prospectus. |
CDSC Waivers on A and C Shares available at Oppenheimer |
Death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Prospectus. |
Return of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the Prospectus. |
Shares sold to pay Oppenheimer fees but only if the transaction is initiated by Oppenheimer. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Oppenheimer: Breakpoints, Rights of Accumulation & Letters of Intent |
Breakpoints as described in the 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 Oppenheimer. Eligible fund family assets not held at Oppenheimer may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
38 | Wells Fargo High Yield Bond Fund
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Effective June 15, 2020, shareholders purchasing fund shares through a Robert W. Baird & Co. (“Baird”) platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or the SAI.
Front-end Sales Load Waivers on Class A Shares available at Baird |
Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing share of the same fund. |
Share purchase by employees and registers representatives of Baird or its affiliate and their family members as designated by Baird. |
Shares purchase from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as rights of reinstatement). |
A shareholder in the Funds Investor C Shares will have their share exchanged at net asset value to Investor A shares of the fund if the shares are no longer subject to CDSC and the exchange is in line with the policies and procedures of Baird. |
Employer-sponsored retirement plans or charitable accounts in a transactional brokerage account at Baird, including 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 or SAR-SEPs. |
CDSC Waivers on A and C Shares available at Baird |
Shares sold due to death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
Shares bought due to returns of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 72 as described in the Fund’s Prospectus. |
Shares sold to pay Baird fees but only if the transaction is initiated by Baird. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Baird: Breakpoint and/or Rights of Accumulation |
Breakpoints as described in the Prospectus. |
Rights of accumulations which entitles 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 Baird. Eligible fund family assets not held at Baird may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets. |
Letters of Intent (LOI) allow for breakpoint discounts based on anticipated purchases within a fund family through Baird, over a 13-month period of time. |
Wells Fargo High Yield Bond Fund | 39
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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
© 2020 Wells Fargo & Company. All rights reserved.
PAR-0920-00411 10-20
A218/AR218 08-20
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Annual Report
August 31, 2020
Wells Fargo
Conservative Income 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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Reduce clutter. Save trees. |
Sign up for electronic delivery of prospectuses and shareholder reports at wellsfargo.com/ |
The views expressed and any forward-looking statements are as of August 31, 2020, unless otherwise noted, and are those of the Fund’s portfolio 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 Conservative Income Fund | 1
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Letter to shareholders (unaudited)
Andrew Owen
President
Wells Fargo Funds
Dear Shareholder:
We are pleased to offer you this annual report for the Wells Fargo Conservative Income Fund for the 12-month period that ended August 31, 2020. Global stock markets saw earlier gains erased in March as governments around the world took unprecedented measures, attempting to stop the spread of the coronavirus at the expense of short-term economic output. However, markets rebounded from April on to offset much of the losses as central banks attempted to bolster capital markets and confidence.
For the 12-month period, equities had broadly positive total returns despite intense volatility in March. Non-U.S. developed market equities had the weakest performance and U.S. stocks performed strongly. Fixed-income securities were more modest though also generally positive. For the period, U.S. stocks, based on the S&P 500 Index,1 gained 21.94%. International stocks, as measured by the MSCI ACWI ex USA Index (Net),2 returned 8.31%, while the MSCI EM Index (Net)3 had somewhat stronger performance, with a 14.49% gain. For bond investors, the Bloomberg Barclays U.S. Aggregate Bond Index4 returned 6.47%, the Bloomberg Barclays Global Aggregate ex-USD Index5 gained a more modest 4.58%, and the Bloomberg Barclays Municipal Bond Index6 returned 3.24% while the ICE BofA U.S. High Yield Index7 returned 3.71%.
The fiscal year began with supportive central bank actions.
As the period began, several central banks had just cut interest rates in response to a global economic slowdown. Ongoing concerns regarding U.S.-China trade tensions and Brexit remained unresolved. The Federal Reserve (Fed) cut U.S. interest rates again in September. U.S. manufacturing data disappointed investors. The U.S. Congress announced it would pursue an impeachment investigation of President Trump. Meanwhile, the U.K. Brexit impasse showed no signs of resolution. Officials in China said that hitting the country’s economic growth goals for the year would be difficult considering the weight of tariffs and trade restrictions. Although the S&P 500 Index finished the third quarter with the best year-to-date returns in more than 20 years, concerns about future returns remained.
The fourth quarter started on a strong note, with U.S.-China trade tensions relaxing in October along with renewed optimism for a U.K. Brexit deal and positive macroeconomic data. The initial estimate of U.S. third-quarter gross domestic product (GDP) growth was a resilient 1.9% annualized rate, while the U.S. unemployment rate fell to a 50-year low of
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 and emerging 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 Conservative Income Fund
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Letter to shareholders (unaudited)
3.5% in September. However, despite strength among U.S. consumers, business confidence declined while manufacturing activity contracted. Concerned with a potential economic slowdown, the Fed lowered interest rates another quarter point in late October—its third rate cut in four months. This helped push the S&P 500 Index to an all-time high while emerging market equities rallied and global bonds declined overall, reflecting a broad pickup in risk appetite.
Equity markets continued to rally in November despite ongoing geopolitical risks. Hopes for a U.S.-China trade deal buoyed investor confidence. U.S. business sentiment improved slightly, and manufacturing and services activity picked up. While consumer confidence and purchasing managers’ activity rose in the eurozone, China reported weakening manufacturing and consumer data. Bond yields rose marginally, leading to slightly negative returns for global government and investment-grade corporate bonds.
Financial markets ended 2019 with a boost from the U.S. and China accord on a Phase One trade deal. That, along with the landslide win by the pro-Brexit U.K. Conservative Party in a national election and ongoing central bank support, gave investors greater confidence. U.S. economic indicators were generally positive, with the exception of manufacturing activity and business confidence. Consumer confidence was resilient, fed by a robust labor market, tame inflation, and lower interest rates, which boosted housing affordability and stimulated homebuyer activity. The impeachment of President Trump had little impact on markets. Meanwhile, slowing Chinese economic activity, partly attributable to the trade war, led to further government stimulus at year-end through lower reserve ratios, allowing banks to lend more money.
The year-end rally continued in early January 2020. However, capital market volatility picked up sharply in late January on concerns over the potential impact of the coronavirus on the global economy and stock markets. As sentiment began to sour, perceived safe havens did well in January. The U.S. dollar and Japanese yen both rose and government bonds outperformed equities. While the S&P 500 Index held its ground, emerging market equities tumbled, including those in Asia.
In February, the coronavirus became the major market focus. Fears of the virus’s impact on global growth led to expectations of increased global central bank monetary policy support. That led the 10-year U.S. Treasury yield to fall to an all-time low of 1.1%. Although equity markets initially shrugged off concerns about the outbreak, focusing instead on strong fourth-quarter earnings and improving business confidence in January, market sentiment turned sharply lower and the S&P 500 Index lost 8.2% for the month. Oil prices tumbled as Russia and the Organization of the Petroleum Exporting Countries compounded a major decline in oil demand with a brutal price war, partly aimed at dissuading further U.S. shale production, causing the price of West Texas Intermediate crude oil to plummet.
The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems. This abrupt stoppage of economic activity led to the sharp deceleration of global output, sending economies into a deep contraction. Central banks responded swiftly, slashing interest rates and expanding quantitative easing programs to restore liquidity and confidence to the markets. In the U.S., the Fed introduced several new lending programs, funding investment-grade bonds, money market mutual funds, and commercial paper while purchasing Treasuries, mortgage-backed securities, and overnight repurchase agreements. Meanwhile, stock markets tumbled quickly into a bear market, ending the longest bull stock market in U.S. history.
Markets rebounded strongly in April, fueled by unprecedented government and central bank stimulus measures. The U.S. economy contracted by an annualized 5.0% pace in the first quarter, with 30 million new unemployment insurance claims in six weeks. In the
“The global spread of the coronavirus led country after country to clamp down on social and business-related activity in order to contain the virus from causing even greater devastation and overwhelming health care systems.”
Wells Fargo Conservative Income Fund | 3
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Letter to shareholders (unaudited)
“The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July.”
eurozone, first-quarter real GDP shrank 3.8%, with the composite April Flash Purchasing Managers’ Index, a monthly survey of purchasing managers, falling to an all-time low of 13.5. The European Central Bank expanded its quantitative easing to include the purchase of additional government bonds of countries with the greatest virus-related need, including Italy and Spain. China’s first-quarter GDP fell by 6.8% year over year. However, retail sales, production, and investment showed signs of recovery. Extreme oil-price volatility continued as global supply far exceeded demand.
The global equity market rebound continued in May, with widespread strong monthly gains. Investors regained confidence on reports of early signs of success in human trials of a coronavirus vaccine. Growth stocks continued to outperform value stocks while returns on global government bonds were generally flat. In the U.S., a gap grew between the stock market rebound and devastating economic data points, including an April unemployment rate of 14.7%, the highest level since World War II. Purchasing managers’ indices reflected weakening activity in May in both the manufacturing and services sectors. U.S. corporate earnings reports indicated a 14% year-over-year contraction in earnings from the first quarter of 2019. However, high demand for technology, driven by remote activity, supported robust information technology sector earnings, which helped drive major technology stocks higher.
Financial markets posted widely positive returns in June despite ongoing economic weakness and high levels of uncertainty on the containment of the coronavirus and the timing of an effective vaccine. There were hopeful signs as economies reopened, with both U.S. and U.K. retail sales rebounding sharply in May. However, year over year, sales remained depressed. Vitally important to market sentiment was the ongoing commitment by central banks globally to do all they could to provide economic support through liquidity and low borrowing costs. U.S. economic activity was aided by one-time $1,200 stimulus checks and $600 bonus weekly unemployment benefits which expired at the end of July. However, unemployment remained historically high, easing somewhat from 14.7% in April to 11.1% in June. During June, numerous states reported increases of coronavirus cases. China’s economic recovery picked up momentum in June, though it remained far from a full recovery.
July was a broadly positive month for both global equities and fixed income. However, economic data and a resurgence of coronavirus cases pointed to the vulnerability of the global economy and the ongoing imperative to regain control of the pandemic. Second-quarter GDP shrank from the previous quarter by 9.5% and 12.1% in the U.S. and eurozone, respectively. In contrast, China reported a 3.2% year-over-year expansion in its second-quarter GDP. U.S. unemployment remained high despite adding 1.8 million jobs in July, with a double-digit jobless rate persisting. However, manufacturing activity grew in both the U.S. and eurozone. In Asia, while China’s manufacturing sector continued to expand, activity in Japan and South Korea contracted. In July, a rising concern was the rapid and broad reemergence of coronavirus infections.
The stock market continued to rally in August despite concerns over rising numbers of COVID-19 cases in the United States and several European countries, including France and Spain, as well as the expiration of the $600 weekly bonus unemployment benefit at the end of July. U.S. stocks had strong monthly gains, led by the so-called FAANG stocks—Facebook, Apple, Amazon, Netflix, and Google (Alphabet)—which dominate these indices and continued to rally. U.S. stocks generally surpassed other broadly positive global equity performance while fixed-income market monthly returns were broadly flat. Generally stronger-than-expected second-quarter earnings boosted investor sentiment along with the Fed’s announcement of a policy shift that will likely lead to longer-term low interest rates and supportive monetary policy. The U.S. Flash Purchasing Managers’ Indices for both manufacturing and services beat expectations while U.S. housing market indicators were strong. In Europe, retail sales expanded and consumer confidence remained steady. China’s economy continued its fairly steady expansion. Overall, developed markets performed better than emerging market equities for the month of August as people took comfort in better-known equities in perceived safer markets.
4 | Wells Fargo Conservative Income Fund
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Letter to shareholders (unaudited)
Don’t let short-term uncertainty derail long-term investment goals.
Periods of investment uncertainty can present challenges, but experience has taught us that maintaining long-term investment goals can be an effective way to plan for the future. To help you create a sound strategy based on your personal goals and risk tolerance, Wells Fargo Funds offers more than 100 mutual funds spanning a wide range of asset classes and investment styles. Although diversification cannot guarantee an investment profit or prevent losses, we believe it can be an effective way to manage investment risk and potentially smooth out overall portfolio performance. We encourage investors to know their investments and to understand that appropriate levels of risk-taking may unlock opportunities.
Thank you for choosing to invest with Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Andrew Owen
President
Wells Fargo Funds
|
For further information about your Fund, contact your investment professional, visit our website at wfam.com, or call us directly at 1-800-222-8222. |
Wells Fargo Conservative Income Fund | 5
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Performance highlights (unaudited)
Investment objective
The Fund seeks current income consistent with capital preservation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Andrew M. Greenberg, CFA®‡
Anthony J. Melville, CFA®‡
Jeffrey L. Weaver, CFA®‡
Average annual total returns (%) as of August 31, 2020
Expense ratios1 (%) | ||||||||||||||||||||||
Inception date | 1 year | 5 year | Since Inception | Gross | Net2 | |||||||||||||||||
Class A2 (WCIAX)3 | 5-29-2020 | 2.06 | 1.49 | 1.10 | 0.70 | 0.50 | ||||||||||||||||
Institutional Class (WCIIX) | 5-31-2013 | 2.30 | 1.73 | 1.33 | 0.37 | 0.27 | ||||||||||||||||
Bloomberg Barclays 6-9 Month Treasury Bill Index4 | – | 1.84 | 1.35 | 0.97 | * | – | – |
* | Based on the inception date of the oldest Fund class. |
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. 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.
Class A2 shares and Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge.
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. 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, mortgage- and asset-backed securities risk, and municipal securities risk. Consult the Fund’s prospectus for additional information on these and other risks.
Please see footnotes on page 7.
6 | Wells Fargo Conservative Income Fund
Table of Contents
Performance highlights (unaudited)
Growth of $1,000,000 investment as of August 31, 20205 |
‡ | 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 December 31, 2020 (December 31, 2021 for Class A2 shares), to waive fees and/or reimburse expenses to the extent necessary to cap total annual fund operating expenses after fee waivers at 0.50% for Class A2 and 0.27% 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 caps. Prior to or after the commitment expiration date, the caps may be increased or the commitment to maintain the caps may be terminated only with the approval of the Board of Trustees. Without these caps, 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 A2 shares prior to their inception reflects the performance of the Institutional Class shares, adjusted to reflect the higher expenses applicable to the Class A2 shares. |
4 | The Bloomberg Barclays 6-9 Month Treasury Bill Index includes all publicly issued zero-coupon U.S. Treasury bills that have a remaining maturity of less than nine months and more than six, are rated investment-grade, and have $250 million or more of outstanding face value. You cannot invest directly in an index. |
5 | The chart compares the performance of Institutional Class shares since inception with the performance of the Bloomberg Barclays 6-9 Month Treasury Bill Index. The chart assumes a hypothetical investment of $1,000,000 in Institutional Class shares and reflects all operating expenses. |
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 Conservative Income Fund | 7
Table of Contents
Performance highlights (unaudited)
MANAGER’S DISCUSSION
Fund highlights
∎ | The Fund outperformed its benchmark, the Bloomberg Barclays 6–9 Month Treasury Bill Index, for the 12-month period that ended August 31, 2020. |
∎ | The Fund is primarily invested in securities with a yield advantage over Treasuries, which added to performance. Asset-backed securities (ABS) were the best-performing asset class within the portfolio, followed by corporate notes and taxable municipal securities. |
∎ | Duration and yield curve positioning were slight detractors to performance. |
Ten largest holdings (%) as of August 31, 20206 | ||||
Hyundai Auto Lease Securitization Trust Series 2019-B Class A3, 2.04%, 8-15-2022 | 1.98 | |||
Trillium Credit Card Trust II Series 2019-2A Class A, 3.04%, 1-26-2024 | 1.84 | |||
Skandinaviska Enskilda Banken, 0.56%, 9-1-2023 | 1.56 | |||
Toyota Auto Receivables Owner Trust Series 2020-A Class A2, 1.67%, 11-15-2022 | 1.54 | |||
Capital One Multi Asset Execution Trust Series 2017-A4 Class A4, 1.99%, 7-17-2023 | 1.49 | |||
USAA Capital Corporation, 2.00%, 6-1-2021 | 1.38 | |||
BP Capital Markets America Incorporated, 4.74%, 3-11-2021 | 1.33 | |||
Guardian Life Global Funding, 1.95%, 10-27-2021 | 1.32 | |||
Buckeye Ohio Tobacco Settlement Financing Authority, 1.58%, 6-1-2021 | 1.32 | |||
Berkshire Hathaway Finance Corporation, | 1.32 |
The Fed emphasizes lower for longer.
We believe the Federal Reserve (Fed) will keep the target federal funds rate at the current range of 0 to 25 basis points (bps; 100 bps equal 1.00%) for the foreseeable future in order to stimulate growth, which was dramatically affected by the economic shutdown in response to the spread of the coronavirus. The Fund’s duration will likely be positioned in a conservative manner in a range close to neutral in anticipation of a prolonged recovery period. We continue to leverage the expertise of our global credit research capabilities to mitigate credit risk from issuers hurt by the coronavirus pandemic.
We extended duration in anticipation of a lower interest rate environment.
The Fed decreased the federal funds rate by 25 bps in September 2019 and again in October 2019. In March 2020, the Fed took aggressive action with cuts totaling 150 bps in
response to the coronavirus pandemic. This action took the federal funds target rate down to a range of 0 to 25 bps, a level that has not been seen since the global financial crisis. The Fed also injected liquidity and programs to support credit markets in March and April of 2020 in order to ensure orderly markets. Investors rushed to raise cash, creating a huge imbalance between buyers and sellers of short-term instruments, including commercial paper, corporate notes, and asset-backed securities, which led to a lack of liquidity for fixed-income investors. Following the Fed’s aggressive actions, liquidity returned and the market for risk assets normalized. The Fund’s duration, which was shorter than the benchmark and detracted slightly from performance, was increased to 0.64 years from 0.48 years to take advantage of historically wide credit spreads, which outweighed the low Treasury yield environment. We expect to maintain the Fund’s duration in a range close to neutral as interest rates should remain low for quite some time.
Portfolio composition as of August 31, 20207 |
|
Yield-advantaged sectors added value.
The Fund’s largest allocation was to corporate bonds followed by our allocation to asset-backed securities (ABS). Both sectors have recovered but the ABS sector provided slightly higher returns than corporate bonds. The Fund’s ABS exposure is in AAA-rated consumer ABS, which continues to perform well as consumers have continued to meet their auto and credit card obligations. The Fund’s allocation to A-rated banks was the largest contributor to performance.
The Fund’s sector allocation changed over the course of the year as our allocation to fixed-rate corporate bonds increased by 7%. This increase benefited the Fund’s investors
as rates moved lower. The allocation to floating-rate corporate notes remained unchanged at 23%. The allocation to commercial paper was reduced by 4% to 8%. These changes were implemented in order to lengthen the duration of the portfolio from 0.48 years to 0.64 years.
Please see footnotes on page 7.
8 | Wells Fargo Conservative Income Fund
Table of Contents
Performance highlights (unaudited)
Outlook
As mentioned previously, we believe interest rates will remain low for an extended period to aid the economic recovery. Interest rate risk in this current environment is minimal. We will continue to rely on our Global Credit Research team to mitigate credit risk and identify opportunities to add value to the portfolio. We will monitor the economic recovery back to precrisis levels as the employment outlook and the health of the consumer improve.
Please see footnotes on page 7.
Wells Fargo Conservative Income Fund | 9
Table of Contents
As a shareholder of the Fund, you incur ongoing costs, including management fees 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 March 1, 2020 to August 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. 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.
Beginning account value 3-1-2020 | Ending account value 8-31-2020 | Expenses paid during the period1 | Annualized net expense ratio | |||||||||||||
Class A2 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,005.26 | $ | 1.26 | 0.50 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,011.31 | $ | 1.26 | 0.50 | % | ||||||||
Institutional Class | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,009.94 | $ | 1.36 | 0.27 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,023.78 | $ | 1.37 | 0.27 | % |
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 Conservative Income Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Agency Securities: 0.21% |
| |||||||||||||||
FHLMC Multi Family Structured Pass-Through Securities Series K-714 Class A2 ±± | 3.03 | % | 10-25-2020 | $ | 819,477 | $ | 819,939 | |||||||||
|
| |||||||||||||||
Total Agency Securities (Cost $819,477) |
| 819,939 | ||||||||||||||
|
| |||||||||||||||
Asset-Backed Securities: 26.64% | ||||||||||||||||
American Express Credit Account Master Trust Series 2017-6 Class A | 2.04 | 5-15-2023 | 2,236,000 | 2,240,928 | ||||||||||||
AmeriCredit Automobile Receivables Trust Series 2019-1 Class A2A | 2.93 | 6-20-2022 | 316,146 | 317,064 | ||||||||||||
AmeriCredit Automobile Receivables Trust Series 2020-1 Class A3 | 1.11 | 8-19-2024 | 3,400,000 | 3,438,978 | ||||||||||||
BlueMountain CLO Limited Series 2012-2A Class AR2 (3 Month LIBOR +1.05%) 144A± | 1.30 | 11-20-2028 | 5,000,000 | 4,965,880 | ||||||||||||
Canadian Pacer Auto Receivables Trust Series 2019-1A Class A2 144A | 2.78 | 3-21-2022 | 598,719 | 601,472 | ||||||||||||
Capital One Multi-Asset Execution Trust Series 2017-A4 Class A4 | 1.99 | 7-17-2023 | 5,706,000 | 5,709,994 | ||||||||||||
CarMax Auto Owner Trust Series 2018-4 Class A2A | 3.11 | 2-15-2022 | 269,254 | 269,729 | ||||||||||||
CarMax Auto Owner Trust Series 2020-1 Class A2 | 1.87 | 4-17-2023 | 2,823,092 | 2,848,048 | ||||||||||||
CCG Receivables Trust Series 2018-2 Class A2 144A | 3.09 | 12-15-2025 | 1,634,009 | 1,653,630 | ||||||||||||
CCG Receivables Trust Series 2020-1 Class A2 144A | 0.54 | 12-14-2027 | 2,290,000 | 2,290,820 | ||||||||||||
Chesapeake Funding II LLC Series 2020-1A Class A1 144A | 0.87 | 8-16-2032 | 1,865,000 | 1,870,047 | ||||||||||||
Delamare Cards Series 2018-1A Class A1 (1 Month LIBOR +0.70%) 144A± | 0.86 | 11-19-2025 | 5,000,000 | 5,001,444 | ||||||||||||
Dell Equipment Finance Trust Series 2019-2 Class A2 144A | 1.95 | 12-22-2021 | 2,724,401 | 2,741,619 | ||||||||||||
Dorchester Park CLO Limited Series 2016-25A Class AR (3 Month LIBOR +0.90%) 144A± | 1.17 | 4-20-2028 | 4,901,729 | 4,873,118 | ||||||||||||
Enterprise Fleet Financing LLC Series 2020-1 Class A2 144A | 1.78 | 12-22-2025 | 2,500,000 | 2,539,707 | ||||||||||||
Evergreen Credit Card Trust Series 2019-3 Class B 144A | 2.36 | 10-16-2023 | 3,750,000 | 3,807,795 | ||||||||||||
Ford Credit Auto Owner Trust Series 2019-B Class A3 | 2.23 | 10-15-2023 | 1,785,000 | 1,823,757 | ||||||||||||
GM Financial Securitized Term Auto Receivables Trust Series 2020-1 Class A2 | 1.83 | 1-17-2023 | 891,435 | 897,558 | ||||||||||||
Hertz Fleet Lease Funding LP Series 2017-1 Class A1 (1 Month LIBOR +0.65%) 144A± | 0.81 | 4-10-2031 | 297,353 | 297,260 | ||||||||||||
Hyundai Auto Lease Securitization Trust Series 2019-B Class A3 144A | 2.04 | 8-15-2022 | 7,500,000 | 7,612,109 | ||||||||||||
Mercedes-Benz Auto Receivables Trust Series 2019-1 Class A2A | 2.04 | 6-15-2022 | 660,844 | 665,387 | ||||||||||||
NextGear Floorplan Master Trust Series 2018-1A Class A1 (1 Month LIBOR +0.64%) 144A± | 0.80 | 2-15-2023 | 5,000,000 | 4,985,737 | ||||||||||||
Oscar US Funding Trust Series 2019-2A Class A2 144A | 2.49 | 8-10-2022 | 273,885 | 275,172 | ||||||||||||
Penarth Master Issuer plc Series 2019-1A Class A1 (1 Month LIBOR +0.54%) 144A± | 0.69 | 7-18-2023 | 2,000,000 | 1,997,288 | ||||||||||||
Santander Consumer Auto Receivables Trust Series 2020-B Class A2 144A | 0.38 | 2-15-2023 | 2,600,000 | 2,600,160 | ||||||||||||
Santander Retail Auto Lease Trust Series 2019-B Class A2A 144A | 2.29 | 4-20-2022 | 2,550,715 | 2,574,375 | ||||||||||||
Santander Retail Auto Lease Trust Series 2019-C Class A2A 144A | 1.89 | 9-20-2022 | 2,500,829 | 2,525,539 | ||||||||||||
Santander Retail Auto Lease Trust Series 2020-A Class A2 144A | 1.69 | 1-20-2023 | 492,710 | 497,762 | ||||||||||||
SoFi Consumer Loan Program Trust Series 2018-4 Class A 144A | 3.54 | 11-26-2027 | 1,142,322 | 1,151,173 | ||||||||||||
SoFi Consumer Loan Program Trust Series 2019-2 Class A 144A | 3.01 | 4-25-2028 | 573,958 | 580,588 | ||||||||||||
SoFi Consumer Loan Program Trust Series 2020-1 Class A 144A | 2.02 | 1-25-2029 | 2,260,685 | 2,283,772 | ||||||||||||
Tesla Auto Lease Trust Series 2020-A Class A2 144A | 0.55 | 5-22-2023 | 1,500,000 | 1,501,933 | ||||||||||||
Toyota Auto Receivables Owner Trust Series 2020-A Class A2 | 1.67 | 11-15-2022 | 5,855,000 | 5,900,208 | ||||||||||||
Trillium Credit Card Trust II Series 2019-2A Class A 144A | 3.04 | 1-26-2024 | 7,000,000 | 7,069,801 | ||||||||||||
Trillium Credit Card Trust II Series 2020-1A Class B 144A | 2.33 | 12-26-2024 | 1,355,000 | 1,371,375 | ||||||||||||
Venture CDO Limited Series 16-25A Class AR (3 Month LIBOR +1.23%) 144A± | 1.50 | 4-20-2029 | 5,000,000 | 4,985,075 | ||||||||||||
Verizon Owner Trust Series 2017-3A Class A1A 144A | 2.06 | 4-20-2022 | 699,852 | 701,487 | ||||||||||||
Verizon Owner Trust Series 2018-1A Class A1 144A | 2.82 | 9-20-2022 | 2,057,131 | 2,073,130 | ||||||||||||
Volvo Financial Equipment LLC Series 2019-1A Class A2 144A | 2.90 | 11-15-2021 | 463,588 | 465,359 | ||||||||||||
World Omni Auto Lease Trust Series 2020-A Class A2 | 1.71 | 11-15-2022 | 2,365,000 | 2,388,136 | ||||||||||||
Total Asset-Backed Securities (Cost $101,916,539) |
| 102,394,414 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Conservative Income Fund | 11
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Corporate Bonds and Notes: 33.84% |
| |||||||||||||||
Communication Services: 0.87% |
| |||||||||||||||
Diversified Telecommunication Services: 0.27% | ||||||||||||||||
Verizon Communications Incorporated | 3.45 | % | 3-15-2021 | $ | 1,025,000 | $ | 1,042,327 | |||||||||
|
| |||||||||||||||
Media: 0.60% | ||||||||||||||||
Comcast Corporation (3 Month LIBOR +0.33%) ± | 0.63 | 10-1-2020 | 2,279,000 | 2,279,754 | ||||||||||||
|
| |||||||||||||||
Consumer Discretionary: 0.25% |
| |||||||||||||||
Textiles, Apparel & Luxury Goods: 0.25% | ||||||||||||||||
Ralph Lauren Corporation | 1.70 | 6-15-2022 | 940,000 | 958,586 | ||||||||||||
|
| |||||||||||||||
Consumer Staples: 0.39% |
| |||||||||||||||
Food Products: 0.39% | ||||||||||||||||
WM Wrigley Jr. Company 144A | 3.38 | 10-21-2020 | 1,500,000 | 1,503,309 | ||||||||||||
|
| |||||||||||||||
Energy: 2.80% |
| |||||||||||||||
Oil, Gas & Consumable Fuels: 2.80% | ||||||||||||||||
BP Capital Markets America Incorporated | 4.74 | 3-11-2021 | 5,000,000 | 5,118,290 | ||||||||||||
Chevron Corporation (3 Month LIBOR +0.90%) ± | 1.15 | 5-11-2023 | 4,525,000 | 4,618,810 | ||||||||||||
Exxon Mobil Corporation (3 Month LIBOR +0.33%) ± | 0.61 | 8-16-2022 | 1,000,000 | 1,004,470 | ||||||||||||
10,741,570 | ||||||||||||||||
|
| |||||||||||||||
Financials: 28.23% |
| |||||||||||||||
Banks: 3.25% | ||||||||||||||||
Bank of America Corporation (3 Month LIBOR +0.37%) ± | 2.74 | 1-23-2022 | 2,000,000 | 2,018,045 | ||||||||||||
Bank of America Corporation | 5.70 | 1-24-2022 | 1,000,000 | 1,073,118 | ||||||||||||
Citibank NA | 3.40 | 7-23-2021 | 2,040,000 | 2,092,606 | ||||||||||||
JPMorgan Chase & Company (3 Month LIBOR +1.10%) ± | 1.42 | 6-7-2021 | 1,000,000 | 1,007,218 | ||||||||||||
PNC Bank NA | 2.15 | 4-29-2021 | 2,000,000 | 2,022,289 | ||||||||||||
PNC Bank NA (3 Month LIBOR +0.33%) ± | 0.58 | 2-24-2023 | 2,300,000 | 2,304,161 | ||||||||||||
Truist Financial Corporation | 2.05 | 5-10-2021 | 1,000,000 | 1,010,776 | ||||||||||||
U.S. Bank NA (3 Month LIBOR +0.40%) ± | 0.71 | 12-9-2022 | 945,000 | 948,620 | ||||||||||||
12,476,833 | ||||||||||||||||
|
| |||||||||||||||
Capital Markets: 2.71% | ||||||||||||||||
Charles Schwab Corporation (3 Month LIBOR +0.32%) ± | 0.57 | 5-21-2021 | 4,540,000 | 4,548,322 | ||||||||||||
Goldman Sachs Group Incorporated | 2.35 | 11-15-2021 | 1,000,000 | 1,004,033 | ||||||||||||
Goldman Sachs Group Incorporated | 5.25 | 7-27-2021 | 2,500,000 | 2,610,277 | ||||||||||||
Morgan Stanley (3 Month LIBOR +1.18%) ± | 1.45 | 1-20-2022 | 1,000,000 | 1,004,023 | ||||||||||||
State Street Corporation (U.S. SOFR +2.69%) 144A± | 2.83 | 3-30-2023 | 1,225,000 | 1,269,409 | ||||||||||||
10,436,064 | ||||||||||||||||
|
| |||||||||||||||
Consumer Finance: 5.68% | ||||||||||||||||
American Honda Finance Corporation | 1.70 | 9-9-2021 | 2,000,000 | 2,026,061 | ||||||||||||
Caterpillar Financial Services Corporation (3 Month LIBOR +0.30%) ± | 0.62 | 3-8-2021 | 1,500,000 | 1,501,940 | ||||||||||||
Caterpillar Financial Services Corporation | 0.95 | 5-13-2022 | 5,000,000 | 5,052,204 | ||||||||||||
Daimler Finance NA LLC 144A | 3.88 | 9-15-2021 | 3,242,000 | 3,347,121 | ||||||||||||
John Deere Capital Corporation | 2.35 | 1-8-2021 | 2,000,000 | 2,014,388 | ||||||||||||
PACCAR Financial Corporation | 0.80 | 6-8-2023 | 1,930,000 | 1,954,596 | ||||||||||||
Toyota Motor Credit Corporation (3 Month LIBOR +0.13%) ± | 0.38 | 8-13-2021 | 1,900,000 | 1,901,718 |
The accompanying notes are an integral part of these financial statements.
12 | Wells Fargo Conservative Income Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Consumer Finance (continued) | ||||||||||||||||
Toyota Motor Credit Corporation | 1.15 | % | 5-26-2022 | $ | 2,000,000 | $ | 2,031,549 | |||||||||
Toyota Motor Credit Corporation | 1.90 | 4-8-2021 | 2,000,000 | 2,018,894 | ||||||||||||
21,848,471 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 1.97% | ||||||||||||||||
National Rural Utilities Cooperative Finance | 2.40 | 4-25-2022 | 3,950,000 | 4,075,795 | ||||||||||||
WEA Finance LLC 144A | 3.25 | 10-5-2020 | 3,491,000 | 3,493,588 | ||||||||||||
7,569,383 | ||||||||||||||||
|
| |||||||||||||||
Insurance: 14.62% | ||||||||||||||||
AIG Global Funding (3 Month LIBOR +0.46%) 144A± | 0.76 | 6-25-2021 | 2,600,000 | 2,608,587 | ||||||||||||
AIG Global Funding 144A | 0.80 | 7-7-2023 | 1,525,000 | 1,536,537 | ||||||||||||
Athene Global Funding 144A | 2.80 | 5-26-2023 | 3,000,000 | 3,118,678 | ||||||||||||
Berkshire Hathaway Finance Corporation | 4.25 | 1-15-2021 | 5,000,000 | 5,073,105 | ||||||||||||
Guardian Life Global Funding 144A | 1.95 | 10-27-2021 | 5,000,000 | 5,090,944 | ||||||||||||
Jackson National Life Global Company (3 Month LIBOR +0.48%) 144A± | 0.79 | 6-11-2021 | 2,500,000 | 2,507,502 | ||||||||||||
Jackson National Life Global Company 144A | 2.25 | 4-29-2021 | 4,000,000 | 4,051,569 | ||||||||||||
MassMutual Global Funding 144A | 2.45 | 11-23-2020 | 1,710,000 | 1,717,161 | ||||||||||||
MassMutual Global Funding II 144A | 1.95 | 9-22-2020 | 4,936,000 | 4,940,889 | ||||||||||||
Metropolitan Life Global Funding Incorporated 144A | 1.95 | 9-15-2021 | 4,175,000 | 4,248,209 | ||||||||||||
New York Life Global Funding (3 Month LIBOR +0.16%) 144A± | 0.46 | 10-1-2020 | 1,300,000 | 1,300,204 | ||||||||||||
New York Life Global Funding 144A | 2.00 | 4-13-2021 | 600,000 | 606,290 | ||||||||||||
New York Life Global Funding 144A | 2.95 | 1-28-2021 | 4,545,000 | 4,594,470 | ||||||||||||
Principal Life Global Funding II 144A | 2.38 | 11-21-2021 | 1,250,000 | 1,279,884 | ||||||||||||
Protective Life Global Funding (3 Month LIBOR +0.52%) 144A± | 0.83 | 6-28-2021 | 5,000,000 | 5,018,276 | ||||||||||||
Protective Life Global Funding 144A | 2.16 | 9-25-2020 | 2,360,000 | 2,362,923 | ||||||||||||
The Allstate Corporation (3 Month LIBOR +0.43%) ± | 0.74 | 3-29-2021 | 825,000 | 826,780 | ||||||||||||
USAA Capital Corporation 144A | 2.00 | 6-1-2021 | 5,220,000 | 5,289,883 | ||||||||||||
56,171,891 | ||||||||||||||||
|
| |||||||||||||||
Health Care: 0.78% |
| |||||||||||||||
Biotechnology: 0.78% | ||||||||||||||||
AbbVie Incorporated (3 Month LIBOR +0.65%) 144A± | 0.90 | 11-21-2022 | 3,000,000 | 3,014,602 | ||||||||||||
|
| |||||||||||||||
Utilities: 0.52% |
| |||||||||||||||
Electric Utilities: 0.52% | ||||||||||||||||
Florida Power & Light Company (3 Month LIBOR +0.38%) ± | 0.64 | 7-28-2023 | 2,000,000 | 2,001,922 | ||||||||||||
|
| |||||||||||||||
Total Corporate Bonds and Notes (Cost $129,094,863) |
| 130,044,712 | ||||||||||||||
|
| |||||||||||||||
Municipal Obligations: 7.29% |
| |||||||||||||||
California: 2.05% |
| |||||||||||||||
Education Revenue: 0.40% | ||||||||||||||||
University of California Series BF | 0.63 | 5-15-2023 | 1,500,000 | 1,510,245 | ||||||||||||
|
| |||||||||||||||
Miscellaneous Revenue: 1.09% | ||||||||||||||||
Ontario CA Pension Obligation | 1.97 | 6-1-2021 | 585,000 | 590,645 | ||||||||||||
Ontario CA Pension Obligation | 2.07 | 6-1-2022 | 915,000 | 933,721 | ||||||||||||
Pomona CA Pension Obligation Series BJ | 4.00 | 8-1-2023 | 1,000,000 | 1,067,160 | ||||||||||||
San Luis Unit/Westlands Water District Financing Authority (AGM Insured) | 1.09 | 9-1-2022 | 1,000,000 | 1,006,470 | ||||||||||||
West Covina CA Public Financing Authoriy Series A | 1.75 | 8-1-2021 | 595,000 | 595,244 | ||||||||||||
4,193,240 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Conservative Income Fund | 13
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Water & Sewer Revenue: 0.56% | ||||||||||||||||
El Dorado CA Irrigation District Revenue Refunding Bond Series C | 0.64 | % | 3-1-2021 | $ | 1,500,000 | $ | 1,502,295 | |||||||||
El Dorado CA Irrigation District Revenue Refunding Bond Series C | 0.74 | 3-1-2022 | 650,000 | 652,971 | ||||||||||||
2,155,266 | ||||||||||||||||
|
| |||||||||||||||
7,858,751 | ||||||||||||||||
|
| |||||||||||||||
Connecticut: 0.36% |
| |||||||||||||||
GO Revenue: 0.36% | ||||||||||||||||
Connecticut Series A | 3.00 | 7-1-2021 | 1,350,000 | 1,377,837 | ||||||||||||
|
| |||||||||||||||
Florida: 0.20% |
| |||||||||||||||
Education Revenue: 0.20% | ||||||||||||||||
Florida Development Finance Corporation Refunding Bond Nova Southeastern University | 1.65 | 4-1-2021 | 750,000 | 751,470 | ||||||||||||
|
| |||||||||||||||
New York: 1.09% |
| |||||||||||||||
Airport Revenue: 0.34% | ||||||||||||||||
Port Authority of New York & New Jersey Consolidated Notes Series Aaa | 1.09 | 7-1-2023 | 1,305,000 | 1,322,487 | ||||||||||||
|
| |||||||||||||||
Tax Revenue: 0.59% | ||||||||||||||||
New York Dormitory Authority Personal Income Tax Revenue Series B | 5.00 | 3-31-2021 | 2,200,000 | 2,261,930 | ||||||||||||
|
| |||||||||||||||
Utilities Revenue: 0.16% | ||||||||||||||||
Long Island NY Power Authority Electric System Series C | 0.66 | 3-1-2022 | 180,000 | 180,034 | ||||||||||||
Long Island NY Power Authority Electric System Series C ## | 0.76 | 3-1-2023 | 430,000 | 430,185 | ||||||||||||
610,219 | ||||||||||||||||
|
| |||||||||||||||
4,194,636 | ||||||||||||||||
|
| |||||||||||||||
Ohio: 1.32% |
| |||||||||||||||
Tobacco Revenue: 1.32% | ||||||||||||||||
Buckeye Ohio Tobacco Settlement Financing Authority ## | 1.58 | 6-1-2021 | 5,065,000 | 5,086,628 | ||||||||||||
|
| |||||||||||||||
Pennsylvania: 0.97% |
| |||||||||||||||
Education Revenue: 0.41% | ||||||||||||||||
Pennsylvania State University Series D | 1.09 | 9-1-2021 | 1,560,000 | 1,572,059 | ||||||||||||
|
| |||||||||||||||
Tax Revenue: 0.56% | ||||||||||||||||
Philadelphia PA School District AMT Series A | 4.00 | 6-30-2021 | 2,100,000 | 2,163,819 | ||||||||||||
|
| |||||||||||||||
3,735,878 | ||||||||||||||||
|
| |||||||||||||||
Tennessee: 1.04% |
| |||||||||||||||
Health Revenue: 1.04% | ||||||||||||||||
Nashville & Davidson Counties TN Vanderbilt University Medical Center Series D (1 Month LIBOR +2.50%) ± | 2.66 | 7-1-2046 | 4,000,000 | 4,002,480 | ||||||||||||
|
| |||||||||||||||
Texas: 0.26% |
| |||||||||||||||
Education Revenue: 0.26% | ||||||||||||||||
Texas Tech University Improvement & Refunding Bonds Financing System | 0.51 | 2-15-2022 | 1,000,000 | 1,000,310 | ||||||||||||
|
| |||||||||||||||
Total Municipal Obligations (Cost $28,004,333) |
| 28,007,990 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
14 | Wells Fargo Conservative Income Fund
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Yankee Corporate Bonds and Notes: 22.70% | ||||||||||||||||
Energy: 1.16% |
| |||||||||||||||
Oil, Gas & Consumable Fuels: 1.16% | ||||||||||||||||
BP Capital Markets plc (3 Month LIBOR +0.25%) ± | 0.51 | % | 11-24-2020 | $ | 1,270,000 | $ | 1,270,612 | |||||||||
Total Capital International SA | 2.22 | 7-12-2021 | 2,112,000 | 2,142,866 | ||||||||||||
Total Capital SA | 4.25 | 12-15-2021 | 1,000,000 | 1,051,306 | ||||||||||||
4,464,784 | ||||||||||||||||
|
| |||||||||||||||
Financials: 20.85% |
| |||||||||||||||
Banks: 19.15% | ||||||||||||||||
ABN AMRO Bank NV (3 Month LIBOR +0.57%) 144A± | 0.82 | 8-27-2021 | 5,000,000 | 5,021,200 | ||||||||||||
Australia & New Zealand Banking Group 144A | 4.88 | 1-12-2021 | 1,000,000 | 1,016,525 | ||||||||||||
Banque Federative du Credit Mutuel 144A | 2.75 | 10-15-2020 | 2,278,000 | 2,284,943 | ||||||||||||
Barclays Bank plc (3 Month LIBOR +0.46%) ± | 0.73 | 1-11-2021 | 2,000,000 | 2,002,364 | ||||||||||||
Barclays Bank plc | 1.70 | 5-12-2022 | 1,075,000 | 1,094,786 | ||||||||||||
Cooperatieve Rabobank UA (3 Month LIBOR +0.43%) ± | 0.67 | 4-26-2021 | 3,000,000 | 3,008,406 | ||||||||||||
Credit Suisse AG | 2.10 | 11-12-2021 | 1,000,000 | 1,021,330 | ||||||||||||
Credit Suisse AG | 2.80 | 4-8-2022 | 4,150,000 | 4,311,468 | ||||||||||||
DnB Bank ASA (3 Month LIBOR +0.62%) 144A± | 0.96 | 12-2-2022 | 500,000 | 503,875 | ||||||||||||
HSBC Holdings plc | 2.95 | 5-25-2021 | 1,000,000 | 1,019,119 | ||||||||||||
HSBC Holdings plc | 4.00 | 3-30-2022 | 2,013,000 | 2,121,601 | ||||||||||||
Lloyds Banking Group plc | 3.00 | 1-11-2022 | 1,500,000 | 1,551,221 | ||||||||||||
Macquarie Bank Limited 144A | 2.85 | 1-15-2021 | 4,000,000 | 4,036,500 | ||||||||||||
Mitsubishi UFJ Financial Group Incorporated (3 Month LIBOR +0.65%) ± | 0.89 | 7-26-2021 | 2,735,000 | 2,746,658 | ||||||||||||
Mitsubishi UFJ Financial Group Incorporated (3 Month LIBOR +0.70%) ± | 1.02 | 3-7-2022 | 2,060,000 | 2,074,012 | ||||||||||||
Mitsubishi UFJ Financial Group Incorporated | 3.22 | 3-7-2022 | 1,000,000 | 1,041,614 | ||||||||||||
Mizuho Financial Group (3 Month LIBOR +0.84%) ± | 1.11 | 7-16-2023 | 5,000,000 | 5,018,336 | ||||||||||||
National Australia Bank Limited | 3.70 | 11-4-2021 | 1,410,000 | 1,450,354 | ||||||||||||
Nordea Bank AB 144A | 1.00 | 6-9-2023 | 2,850,000 | 2,886,663 | ||||||||||||
Santander UK plc (3 Month LIBOR +0.66%) ± | 0.94 | 11-15-2021 | 2,629,000 | 2,644,653 | ||||||||||||
Santander UK plc (3 Month LIBOR +0.62%) ± | 0.97 | 6-1-2021 | 2,500,000 | 2,509,726 | ||||||||||||
Santander UK plc | 3.40 | 6-1-2021 | 520,000 | 532,136 | ||||||||||||
Skandinaviska Enskilda Banken (3 Month LIBOR +0.32%) 144A±%% | 0.57 | 9-1-2023 | 6,000,000 | 6,001,344 | ||||||||||||
Skandinaviska Enskilda Banken (3 Month LIBOR +0.65%) 144A± | 0.96 | 12-12-2022 | 1,250,000 | 1,260,049 | ||||||||||||
Societe Generale SA (3 Month LIBOR +1.33%) 144A± | 1.61 | 4-8-2021 | 5,000,000 | 5,036,365 | ||||||||||||
Sumitomo Mitsui Banking Corporation (3 Month LIBOR +1.14%) ± | 1.41 | 10-19-2021 | 815,000 | 823,854 | ||||||||||||
Svenska Handelsbanken AB (3 Month LIBOR +0.47%) ± | 0.73 | 5-24-2021 | 4,000,000 | 4,013,360 | ||||||||||||
Swedbank AB 144A | 1.30 | 6-2-2023 | 2,225,000 | 2,269,046 | ||||||||||||
United Overseas Bank Limited (3 Month LIBOR +0.48%) 144A± | 0.74 | 4-23-2021 | 1,800,000 | 1,802,208 | ||||||||||||
Westpac Banking Corporation (3 Month LIBOR +1.00%) ± | 1.25 | 5-13-2021 | 2,500,000 | 2,517,145 | ||||||||||||
73,620,861 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 1.70% | ||||||||||||||||
Shell International Finance BV | 1.75 | 9-12-2021 | 2,000,000 | 2,030,326 | ||||||||||||
Shell International Finance BV | 2.38 | 8-21-2022 | 2,000,000 | 2,079,414 | ||||||||||||
UBS AG 144A | 1.75 | 4-21-2022 | 2,375,000 | 2,423,400 | ||||||||||||
6,533,140 | ||||||||||||||||
|
| |||||||||||||||
Industrials: 0.69% |
| |||||||||||||||
Electrical Equipment: 0.69% | ||||||||||||||||
Siemens Financieringsmaatschappij NV 144A | 1.70 | 9-15-2021 | 2,600,000 | 2,638,442 | ||||||||||||
|
| |||||||||||||||
Total Yankee Corporate Bonds and Notes (Cost $86,652,237) |
| 87,257,227 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Wells Fargo Conservative Income Fund | 15
Table of Contents
Portfolio of investments—August 31, 2020
Interest rate | Maturity date | Principal | Value | |||||||||||||
Short-Term Investments: 7.82% | ||||||||||||||||
Commercial Paper: 7.66% | ||||||||||||||||
Catholic Health Initiatives (z) | 1.30 | % | 9-3-2020 | $ | 4,500,000 | $ | 4,499,966 | |||||||||
Glencore Funding LLC 144A(p)(z) | 0.49 | 10-13-2020 | 3,000,000 | 2,998,481 | ||||||||||||
Ionic Capital Management LLC (p)(z) | 0.33 | 9-18-2020 | 2,000,000 | 1,999,706 | ||||||||||||
Lexington Parker Capital Company LLC (p)(z) | 0.27 | 10-20-2020 | 10,000,000 | 9,997,681 | ||||||||||||
LMA Americas LLC 144A(p)(z) | 0.29 | 11-2-2020 | 5,000,000 | 4,998,486 | ||||||||||||
Mountcliff Funding LLC 144A(p)(z) | 0.18 | 9-14-2020 | 950,000 | 949,945 | ||||||||||||
TransCanada PipeLines Limited 144A(z) | 0.23 | 10-5-2020 | 4,000,000 | 3,999,249 | ||||||||||||
29,443,514 | ||||||||||||||||
|
| |||||||||||||||
Yield | Shares | |||||||||||||||
Investment Companies: 0.16% | ||||||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u)## | 0.06 | 588,730 | 588,730 | |||||||||||||
|
| |||||||||||||||
Total Short-Term Investments (Cost $30,028,882) |
| 30,032,244 | ||||||||||||||
|
|
Total investments in securities (Cost $376,516,331) | 98.50 | % | 378,556,526 | |||||
Other assets and liabilities, net | 1.50 | 5,767,042 | ||||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 384,323,568 | ||||
|
|
|
|
±± | The coupon of the security is adjusted based on the principal and interest payments received from the underlying pool of mortgages as well as the credit quality and the actual prepayment speed of the underlying mortgages. |
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. |
± | Variable rate investment. The rate shown is the rate in effect at period end. |
## | All or a portion of this security is segregated for when-issued securities. |
%% | The security is purchased on a when-issued basis. |
(z) | Zero coupon security. The rate represents the current yield to maturity. |
(p) | Asset-backed commercial paper |
(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:
AGM | Assured Guaranty Municipal |
AMT | Alternative minimum tax |
FHLMC | Federal Home Loan Mortgage Corporation |
GO | General obligation |
LIBOR | London Interbank Offered Rate |
SOFR | Secured Overnight Financing Rate |
The accompanying notes are an integral part of these financial statements.
16 | Wells Fargo Conservative Income Fund
Table of Contents
Portfolio of investments—August 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:
Value, beginning of period | Purchases | Sales proceeds | 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 | ||||||||||||||||||||||||||||||||
Wells Fargo Government Money Market Fund Select Class | $ | 220,913 | $ | 301,403,678 | $ | (301,035,861 | ) | $ | 0 | $ | 0 | $ | 26,405 | $ | 588,730 | 0.16 | % |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Conservative Income Fund | 17
Table of Contents
Statement of assets and liabilities—August 31, 2020
Assets | ||||
Investments in unaffiliated securities, at value (cost $375,927,601) | $ | 377,967,796 | ||
Investments in affiliated securities, at value (cost $588,730) | 588,730 | |||
Receivable for investments sold | 10,566,583 | |||
Receivable for Fund shares sold | 184,800 | |||
Receivable for interest | 1,229,022 | |||
Prepaid expenses and other assets | 27,219 | |||
|
| |||
Total assets | 390,564,150 | |||
|
| |||
Liabilities | ||||
Payable for when-issued transactions | 6,000,000 | |||
Payable for Fund shares redeemed | 64,445 | |||
Management fee payable | 48,833 | |||
Dividends payable | 93,322 | |||
Administration fees payable | 25,562 | |||
Trustees’ fees and expenses payable | 3,341 | |||
Accrued expenses and other liabilities | 5,079 | |||
|
| |||
Total liabilities | 6,240,582 | |||
|
| |||
Total net assets | $ | 384,323,568 | ||
|
| |||
Net assets consist of | ||||
Paid-in capital | $ | 385,399,893 | ||
Total distributable loss | (1,076,325 | ) | ||
|
| |||
Total net assets | $ | 384,323,568 | ||
|
| |||
Computation of net asset value per share | ||||
Net assets – Class A2 | $ | 71,052 | ||
Shares outstanding – Class A21 | 7,070 | |||
Net asset value per share – Class A2 | $10.05 | |||
Net assets – Institutional Class | $ | 384,252,516 | ||
Shares outstanding – Institutional Class1 | 38,233,961 | |||
Net asset value per share – Institutional Class | $10.05 |
1 | The Fund has an unlimited number of authorized shares. |
The accompanying notes are an integral part of these financial statements.
18 | Wells Fargo Conservative Income Fund
Table of Contents
Statement of operations—year ended August 31, 2020
Investment income | ||||
Interest (net of foreign interest withholding taxes of $3,173) | $ | 7,686,988 | ||
Income from affiliated securities | 26,405 | |||
|
| |||
Total investment income | 7,713,393 | |||
|
| |||
Expenses | ||||
Management fee | 958,017 | |||
Administration fees |
| |||
Class A2 | 23 | 1 | ||
Institutional Class | 306,554 | |||
Shareholder servicing fees | ||||
Class A2 | 35 | 1 | ||
Custody and accounting fees | 28,080 | |||
Professional fees | 44,695 | |||
Registration fees | 44,906 | |||
Shareholder report expenses | 20,661 | |||
Trustees’ fees and expenses | 21,326 | |||
Other fees and expenses | 14,100 | |||
|
| |||
Total expenses | 1,438,397 | |||
Less: Fee waivers and/or expense reimbursements | ||||
Fund-level | (403,693 | ) | ||
Class A2 | (13 | )1 | ||
|
| |||
Net expenses | 1,034,691 | |||
|
| |||
Net investment income | 6,678,702 | |||
|
| |||
Realized and unrealized gains (losses) on investments | ||||
Net realized losses on investments | (1,261,670 | ) | ||
Net change in unrealized gains (losses) on investments | 1,229,474 | |||
|
| |||
Net realized and unrealized gains (losses) on investments | (32,196 | ) | ||
|
| |||
Net increase in net assets resulting from operations | $ | 6,646,506 | ||
|
|
1 | For the period from May 29, 2020 (commencement of class operations) to August 31, 2020 |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Conservative Income Fund | 19
Table of Contents
Statement of changes in net assets
Year ended August 31, 2020 | Year ended August 31, 2019 | |||||||||||||||
Operations |
| |||||||||||||||
Net investment income | $ | 6,678,702 | $ | 10,875,313 | ||||||||||||
Net realized losses on investments | (1,261,670 | ) | (993,936 | ) | ||||||||||||
Net change in unrealized gains (losses) on investments | 1,229,474 | 441,843 | ||||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from operations | 6,646,506 | 10,323,220 | ||||||||||||||
|
| |||||||||||||||
Distributions to shareholders from net investment income and net realized gains | ||||||||||||||||
Class A2 | (122 | )1 | N/A | |||||||||||||
Institutional Class | (6,761,898 | ) | (10,880,158 | ) | ||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | (6,762,020 | ) | (10,880,158 | ) | ||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold | ||||||||||||||||
Class A2 | 7,063 | 1 | 70,834 | 1 | N/A | N/A | ||||||||||
Institutional Class | 35,880,506 | 359,015,049 | 62,007,026 | 619,230,806 | ||||||||||||
|
| |||||||||||||||
359,085,883 | 619,230,806 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions | ||||||||||||||||
Class A2 | 7 | 1 | 65 | 1 | N/A | N/A | ||||||||||
Institutional Class | 570,498 | 5,703,164 | 821,227 | 8,198,093 | ||||||||||||
|
| |||||||||||||||
5,703,229 | 8,198,093 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed | ||||||||||||||||
Institutional Class | (31,457,672 | ) | (312,900,963 | ) | (69,621,267 | ) | (694,323,386 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from capital share transactions | 51,888,149 | (66,894,487 | ) | |||||||||||||
|
| |||||||||||||||
Total increase (decrease) in net assets | 51,772,635 | (67,451,425 | ) | |||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 332,550,933 | 400,002,358 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 384,323,568 | $ | 332,550,933 | ||||||||||||
|
|
1 | For the period from May 29, 2020 (commencement of class operations) to August 31, 2020 |
The accompanying notes are an integral part of these financial statements.
20 | Wells Fargo Conservative Income Fund
Table of Contents
(For a share outstanding throughout the period)
CLASS A2 | Year ended August 31, 20201 | |||
Net asset value, beginning of period | $10.02 | |||
Net investment income | 0.02 | |||
Net realized and unrealized gains on investments | 0.03 | |||
|
| |||
Total from investment operations | 0.05 | |||
Distributions to shareholders from | ||||
Net investment income | (0.02 | ) | ||
Net asset value, end of period | $10.05 | |||
Total return2 | 0.53 | % | ||
Ratios to average net assets (annualized) | ||||
Gross expenses | 0.70 | % | ||
Net expenses | 0.50 | % | ||
Net investment income | 0.78 | % | ||
Supplemental data | ||||
Portfolio turnover rate | 102 | % | ||
Net assets, end of period (000s omitted) | $71 |
1 | For the period from May 29, 2020 (commencement of class operations) to August 31, 2020 |
2 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
Wells Fargo Conservative Income Fund | 21
Table of Contents
Financial highlights
(For a share outstanding throughout each period)
Year ended August 31 | ||||||||||||||||||||
INSTITUTIONAL CLASS | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net asset value, beginning of period | $10.00 | $9.99 | $10.01 | $10.01 | $10.00 | |||||||||||||||
Net investment income | 0.17 | 0.26 | 0.18 | 0.12 | 0.07 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.06 | 0.01 | (0.02 | ) | 0.00 | 1 | 0.01 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.23 | 0.27 | 0.16 | 0.12 | 0.08 | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||
Net investment income | (0.18 | ) | (0.26 | ) | (0.18 | ) | (0.12 | ) | (0.07 | ) | ||||||||||
Net realized gains | 0.00 | 0.00 | (0.00 | )1 | 0.00 | 0.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions to shareholders | (0.18 | ) | (0.26 | ) | (0.18 | ) | (0.12 | ) | (0.07 | ) | ||||||||||
Net asset value, end of period | $10.05 | $10.00 | $9.99 | $10.01 | $10.01 | |||||||||||||||
Total return | 2.30 | % | 2.71 | % | 1.65 | % | 1.20 | % | 0.79 | % | ||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||
Gross expenses | 0.38 | % | 0.37 | % | 0.37 | % | 0.36 | % | 0.36 | % | ||||||||||
Net expenses | 0.27 | % | 0.27 | % | 0.27 | % | 0.27 | % | 0.27 | % | ||||||||||
Net investment income | 1.74 | % | 2.54 | % | 1.79 | % | 1.17 | % | 0.72 | % | ||||||||||
Supplemental data | ||||||||||||||||||||
Portfolio turnover rate | 102 | % | 171 | % | 197 | % | 197 | % | 269 | % | ||||||||||
Net assets, end of period (000s omitted) | $384,253 | $332,551 | $400,002 | $419,239 | $547,829 |
1 | Amount is less than $0.005. |
The accompanying notes are an integral part of these financial statements.
22 | Wells Fargo Conservative Income 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 Conservative Income 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.
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.
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 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.
When-issued transactions
The Fund may purchase securities on a forward commitment or when-issued basis. The Fund records a when-issued transaction on the trade date and will segregate assets in an amount at least equal in value to the Fund’s commitment to purchase when-issued securities. Securities purchased on a when-issued basis are marked-to-market daily and the Fund begins earning interest on the settlement date. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
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.
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.
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 are declared daily and paid monthly. Distributions from net realized gains, if any, 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 Conservative Income Fund | 23
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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 August 31, 2020, the aggregate cost of all investments for federal income tax purposes was $376,603,155 and the unrealized gains (losses) consisted of:
Gross unrealized gains | $ | 2,180,983 | ||
Gross unrealized losses | (227,612 | ) | ||
Net unrealized gains | $ | 1,953,371 |
As of August 31, 2020, the Fund had capital loss carryforwards which consist of $3,032,650 in short-term capital losses.
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 August 31, 2020:
Quoted prices (Level 1) | Other significant (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Agency securities | $ | 0 | $ | 819,939 | $ | 0 | $ | 819,939 | ||||||||
Asset-backed securities | 0 | 102,394,414 | 0 | 102,394,414 | ||||||||||||
Corporate bonds and notes | 0 | 130,044,712 | 0 | 130,044,712 | ||||||||||||
Municipal obligations | 0 | 28,007,990 | 0 | 28,007,990 | ||||||||||||
Yankee corporate bonds and notes | 0 | 87,257,227 | 0 | 87,257,227 | ||||||||||||
Short-term investments | ||||||||||||||||
Commercial paper | 0 | 29,443,514 | 0 | 29,443,514 | ||||||||||||
Investment companies | 588,730 | 0 | 0 | 588,730 | ||||||||||||
Total assets | $ | 588,730 | $ | 377,967,796 | $ | 0 | $ | 378,556,526 |
Additional sector, industry or geographic detail is included in the Portfolio of Investments.
For the year ended August 31, 2020, the Fund did not have any transfers into/out of Level 3.
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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 $1 billion | 0.250 | % | ||
Next $4 billion | 0.225 | |||
Next $5 billion | 0.190 | |||
Over $10 billion | 0.180 |
For the year ended August 31, 2020, the management fee was equivalent to an annual rate of 0.25% 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, 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 0.10% and declining to 0.05% 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 A2 | 0.16 | % | ||
Institutional Class | 0.08 |
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 December 31, 2020 (December 31, 2021 for Class A2 shares) to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.50% for Class A2 shares and 0.27% 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.
Shareholder servicing fee
The Trust has entered into contracts with one or more shareholder servicing agents, whereby Class A2 of the Fund is charged a fee at an annual rate of 0.25% of its average daily net assets. 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 $0 and $43,832,000 in interfund purchases and sales, respectively, during the year ended August 31, 2020.
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Notes to financial statements
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the year ended August 31, 2020 were as follows:
Purchases at cost | Sales proceeds | |||||
U.S. government | Non-U.S. government | U.S. government | Non-U.S. government | |||
$1,981,839 | $449,653,719 | $5,665,894 | $328,190,699 |
6. BANK BORROWINGS
The Trust (excluding the money market funds), Wells Fargo Master Trust and Wells Fargo Variable Trust are parties to a $350,000,000 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 August 31, 2020, there were no borrowings by the Fund under the agreement.
7. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid was $6,762,020 and $10,880,158 of ordinary income for the years ended August 31, 2020 and August 31, 2019, respectively.
As of August 31, 2020, the components of distributable loss on a tax basis were as follows:
Undistributed ordinary income | Unrealized gains | Capital loss carryforward | ||
$96,276 | $1,953,371 | $(3,032,650) |
8. INDEMNIFICATION
Under the Fund’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 Fund. The Fund has entered into a separate agreement with each Trustee that converts indemnification rights currently existing under the Fund’s organizational documents into contractual rights that cannot be changed in the future without the consent of the Trustee. Additionally, in the normal course of business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
9. 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 on fair value measurements in Topic 820, Fair Value Measurements. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has adopted this guidance which did not have a material impact on the financial statements.
10. 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.
26 | Wells Fargo Conservative Income 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 Conservative Income Fund (the Fund), one of the funds constituting Wells Fargo Funds Trust, including the portfolio of investments, as of August 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 August 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 August 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
October 28, 2020
Wells Fargo Conservative Income Fund | 27
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TAX INFORMATION
For the fiscal year ended August 31, 2020, $4,599,238 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.
SPECIAL MEETING OF SHAREHOLDERS
On August 19, 2020, a Special Meeting of Shareholders for the Fund was held to consider the following proposal. The results of the proposal are indicated below.
Proposal 1 – To consider a revision to the Fund’s fundamental investment policy regarding industry concentration to allow the Fund to concentrate its investments in the banking industry.
Shares voted “For” | 18,251,078 | |||||
Shares voted “Against” | 1,380,523 | |||||
Shares voted “Abstain” | 0 |
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 Conservative Income 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 142 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 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). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008 | 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 (Emeritus), 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 Wheelock (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. Interim President of the McKnight Foundation from January to September 2020. 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. | ||
Jeremy DePalma1 (Born 1974) | Treasurer, since 2012 | 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. | ||
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. |
1 | Jeremy DePalma acts as Treasurer of 77 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. |
Wells Fargo Conservative Income Fund | 31
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Other information (unaudited)
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Wells Fargo Conservative Income Fund
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Funds Trust (the “Trust”) must determine annually whether to approve the continuation of the Trust’s investment management and sub-advisory agreements. In this regard, at a Board meeting held on May 26, 2020 and May 28, 2020 (together, the “Meeting”), the Board, all the members of which have no direct or indirect interest in the investment management and sub-advisory agreements and are not “interested persons” of the Trust, as defined in the 1940 Act (the “Independent Trustees”), reviewed and approved for Wells Fargo Conservative Income Fund (the “Fund”): (i) an investment management agreement (the “Management Agreement”) with Wells Fargo Funds Management, LLC (“Funds Management”); and (ii) an investment sub-advisory agreement (the “Sub-Advisory Agreement”) with Wells Capital Management Incorporated (the “Sub-Adviser”), an affiliate of Funds Management. The Management Agreement and the Sub-Advisory Agreement are collectively referred to as the “Advisory Agreements.”
At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of Funds Management and the Sub-Adviser and the approval of the Advisory Agreements. Prior to the Meeting, including at a Board meeting held in April 2020, the Trustees conferred extensively among themselves and with representatives of Funds Management about these matters. Also, the Board has adopted a team-based approach, with each team consisting of a sub-set of Trustees, to assist the full Board in the discharge of its duties in reviewing investment performance and other matters throughout the year. The Independent Trustees were assisted in their evaluation of the Advisory Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately.
In providing information to the Board, Funds Management and the Sub-Adviser were guided by a detailed set of requests for information submitted to them by independent legal counsel on behalf of the Independent Trustees at the start of the Board’s annual contract renewal process earlier in 2020. In considering and approving the Advisory Agreements, the Trustees considered the information they believed relevant, including but not limited to the information discussed below. The Board considered not only the specific information presented in connection with the Meeting, but also the knowledge gained over time through interaction with Funds Management and the Sub-Adviser about various topics. In this regard, the Board reviewed reports of Funds Management at each of its quarterly meetings, which included, among other things, portfolio reviews and investment performance reports. In addition, the Board and the teams mentioned above confer with portfolio managers at various times throughout the year. The Board did not identify any particular information or consideration that was all-important or controlling, and each individual Trustee may have attributed different weights to various factors.
After its deliberations, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable. The Board considered the approval of the Advisory Agreements for the Fund as part of its consideration of agreements for funds across the complex, but its approvals were made on a fund-by-fund basis. The following summarizes a number of important, but not necessarily all, factors considered by the Board in support of its approvals.
Nature, extent and quality of services
The Board received and considered various information regarding the nature, extent and quality of services provided to the Fund by Funds Management and the Sub-Adviser under the Advisory Agreements. This information included a description of the investment advisory services and Fund-level administrative services covered by the Management Agreement, as well as, among other things, a summary of the background and experience of senior management of Wells Fargo Asset Management (“WFAM”), of which Funds Management and the Sub-Adviser are a part, and a summary of investments made in the business of WFAM. The Board also received a description of Funds Management’s and the Sub-Adviser’s business continuity plans and of their approaches to data privacy and cybersecurity, and related testing. The Board also received and reviewed information about Funds Management’s role as administrator of the Fund’s liquidity risk management program, Funds Management’s approach to risk management, and Funds Management’s intermediary and vendor oversight program.
The Board also considered the qualifications, background, tenure and responsibilities of each of the portfolio managers primarily responsible for the day-to-day portfolio management of the Fund. The Board evaluated the ability of Funds Management and the Sub-Adviser to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of Funds Management and the Sub-Adviser. In addition, the Board took into account the full range of services provided to the Fund by Funds Management and its affiliates.
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Other information (unaudited)
Fund investment performance and expenses
The Board considered the investment performance results for the Fund over various time periods ended December 31, 2019. The Board also considered more current results for various time periods ended March 31, 2020. The Board considered these results in comparison to the investment performance of funds in a universe that was determined by Broadridge Inc. (“Broadridge”) to be similar to the Fund (the “Universe”), and in comparison to the Fund’s benchmark index and to other comparative data. Broadridge is an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds in the performance Universe. The Board noted that the investment performance of the Fund (Institutional Class) was higher than or equal to the average investment performance of the Universe for the one-, three- and five-year periods ended December 31, 2019. The Board also noted that the investment performance of the Fund (Institutional Class) was higher than the average investment performance of the Universe for all periods ended March 31, 2020. The Board also noted that the investment performance of the Fund was higher than its benchmark index, the Bloomberg Barclays 6-9 Month Treasury Bill Index, for all periods ended December 31, 2019. The Board also noted that the investment performance of the Fund was lower than its benchmark index, the Bloomberg Barclays 6-9 Month Treasury Bill Index, for the one- and three-year periods ended March 31, 2020, and in range of its benchmark for the five-year period ended March 31, 2020.
The Board also received and considered information regarding the Fund’s net operating expense ratios and their various components, including actual management fees, custodian and other non-management fees, and Rule 12b-1 and non-Rule 12b-1 shareholder service fees. The Board considered these ratios in comparison to the median ratios of funds in class-specific expense groups that were determined by Broadridge to be similar to the Fund (the “Groups”). The Board received a description of the methodology used by Broadridge to select the mutual funds in the expense Groups and an explanation of how funds comprising expense groups and their expense ratios may vary from year-to-year. Based on the Broadridge reports, the Board noted that the net operating expense ratio of the Fund was lower than the median net operating expense ratio of the expense Group for the Institutional Class.
The Board took into account the Fund’s investment performance and expense information provided to it among the factors considered in deciding to re-approve the Advisory Agreements.
Investment management and sub-advisory fee rates
The Board reviewed and considered the contractual fee rates payable by the Fund to Funds Management under the Management Agreement, as well as the contractual fee rates payable by the Fund to Funds Management for class-level administrative services under a Class-Level Administration Agreement, which include, among other things, class-level transfer agency and sub-transfer agency costs (collectively, the “Management Rates”). The Board also reviewed and considered the contractual investment sub-advisory fee rates that are payable by Funds Management to the Sub-Adviser for investment sub-advisory services.
Among other information reviewed by the Board was a comparison of the Fund’s Management Rates with the average contractual investment management fee rates of funds in the expense Groups at a common asset level as well as transfer agency costs of the funds in the expense Groups. The Board noted that the Management Rate of the Fund was lower than the sum of the average rates for the Fund’s expense Group for the Institutional Class.
The Board also received and considered information about the portion of the total management fee that was retained by Funds Management after payment of the fee to the Sub-Adviser for sub-advisory services. In assessing the reasonableness of this amount, the Board received and evaluated information about the nature and extent of responsibilities retained and risks assumed by Funds Management and not delegated to or assumed by the Sub-Adviser, and about Funds Management’s on-going oversight services. Given the affiliation between Funds Management and the Sub-Adviser, the Board ascribed limited relevance to the allocation of fees between them.
The Board also received and considered information about the nature and extent of services offered and fee rates charged by Funds Management and the Sub-Adviser to other types of clients with investment strategies similar to those of the Fund. In this regard, the Board received information about the significantly greater scope of services, and compliance, reporting and other legal burdens and risks of managing proprietary mutual funds compared with those associated with managing assets of other types of clients, including third-party sub-advised fund clients and non-mutual fund clients such as institutional separate accounts.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board determined that the compensation payable to Funds Management under the Management Agreement and to the Sub-Adviser under the Sub-Advisory Agreement was reasonable.
Wells Fargo Conservative Income Fund | 33
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Other information (unaudited)
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of both WFAM and Wells Fargo & Co. (“Wells Fargo”) from providing services to the fund family as a whole. The Board noted that the Sub-Adviser’s profitability information with respect to providing services to the Fund and other funds in the family was subsumed in the WFAM and Wells Fargo profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability, including a description of the methodology used to allocate certain expenses. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such as the size, type and age of fund.
Based on its review, the Board did not deem the profits reported by Funds Management, WFAM or Wells Fargo from services provided to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
The Board received and considered information about the potential for Funds Management to experience economies of scale in the provision of management services to the Fund, the difficulties of calculating economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. The Board noted the existence of breakpoints in the Fund’s management fee structure, which operate generally to reduce the Fund’s expense ratios as the Fund grows in size, and the size of the Fund in relation to such breakpoints. The Board considered that in addition to management fee breakpoints, Funds Management shares potential economies of scale from its management business in a variety of ways, including through fee waiver and expense reimbursement arrangements, services that benefit shareholders, competitive management fee rates set at the outset without regard to breakpoints, and investments in the business intended to enhance services available to shareholders.
The Board concluded that Funds Management’s arrangements with respect to the Fund, including contractual breakpoints, constituted a reasonable approach to sharing potential economies of scale with the Fund and its shareholders.
Other benefits to Funds Management and the Sub-Adviser
The Board received and considered information regarding potential “fall-out” or ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, as a result of their relationships with the Fund. Ancillary benefits could include, among others, benefits directly attributable to other relationships with the Fund and benefits potentially derived from an increase in Funds Management’s and the Sub-Adviser’s business as a result of their relationships with the Fund. The Board noted that various affiliates of Funds Management may receive distribution-related fees, shareholder servicing payments and sub-transfer agency fees in respect of shares sold or held through them and services provided.
The Board also reviewed information about soft dollar credits earned and utilized by the Sub-Adviser, fees earned by Funds Management and the Sub-Adviser from managing a private investment vehicle for the fund family’s securities lending collateral, and commissions earned by an affiliated broker from portfolio transactions.
Based on its consideration of the factors and information it deemed relevant, including those described here, the Board did not find that any ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, were unreasonable.
Conclusion
At the Meeting, after considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board unanimously approved the continuation of the Advisory Agreements for a one-year term and determined that the compensation payable to Funds Management and the Sub-Adviser under each of the Advisory Agreements was reasonable.
34 | Wells Fargo Conservative Income Fund
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LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Wells Fargo Funds Trust (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) on behalf of each of its series, including the Fund, which is reasonably designed to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) previously approved the designation of Wells Fargo Funds Management, LLC (“Funds Management”), the Fund’s investment manager, as the administrator of the Program, and Funds Management has established a Liquidity Risk Management Council composed of personnel from multiple departments within Funds Management and its affiliates to assist Funds Management in the implementation and on-going administration of the Program.
The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent the Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if the Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s “highly liquid investments” below its HLIM; and (6) periodic reporting to the Board.
At a meeting of the Board held on May 26 and 28, 2020, the Board received a written report (the “Report”) from Funds Management that addressed the operation of the Program and assessed its adequacy and effectiveness of implementation. The Report covered the initial period from December 1, 2018 through December 31, 2019 (the “Reporting Period”). No significant liquidity events impacting the Fund were noted in the Report. There were no material changes to the Program during the Reporting Period. The Report concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
Wells Fargo Conservative Income Fund | 35
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Effective June 1, 2020, shareholders purchasing Fund shares through an Oppenheimer & Co. Inc. (“Oppenheimer”) platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred or back-end, sales charge waivers) and discounts, which may differ from those disclosed in the Fund’s Prospectus or SAI.
Front-end Sales Load Waivers on Class A Shares available at Oppenheimer |
Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan. |
Shares purchased by or through a 529 Plan. |
Shares purchased through an Oppenheimer affiliated investment advisory program. |
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 from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 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 (known as Rights of Restatement). |
A shareholder in the Fund’s Class C shares will have their shares exchanged at net asset value to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the exchange is in line with the policies and procedures of Oppenheimer. |
Employees and registered representatives of Oppenheimer or its affiliates and their family members. |
Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in the Prospectus. |
CDSC Waivers on A and C Shares available at Oppenheimer |
Death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Prospectus. |
Return of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the Prospectus. |
Shares sold to pay Oppenheimer fees but only if the transaction is initiated by Oppenheimer. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Oppenheimer: Breakpoints, Rights of Accumulation & Letters of Intent |
Breakpoints as described in the 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 Oppenheimer. Eligible fund family assets not held at Oppenheimer may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
36 | Wells Fargo Conservative Income Fund
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Effective June 15, 2020, shareholders purchasing fund shares through a Robert W. Baird & Co. (“Baird”) platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in the Fund’s Prospectus or the SAI.
Front-end Sales Load Waivers on Class A Shares available at Baird |
Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing share of the same fund. |
Share purchase by employees and registers representatives of Baird or its affiliate and their family members as designated by Baird. |
Shares purchase from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as rights of reinstatement). |
A shareholder in the Funds Investor C Shares will have their share exchanged at net asset value to Investor A shares of the fund if the shares are no longer subject to CDSC and the exchange is in line with the policies and procedures of Baird. |
Employer-sponsored retirement plans or charitable accounts in a transactional brokerage account at Baird, including 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 or SAR-SEPs. |
CDSC Waivers on A and C Shares available at Baird |
Shares sold due to death or disability of the shareholder. |
Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
Shares bought due to returns of excess contributions from an IRA Account. |
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 72 as described in the Fund’s Prospectus. |
Shares sold to pay Baird fees but only if the transaction is initiated by Baird. |
Shares acquired through a right of reinstatement. |
Front-end load Discounts Available at Baird: Breakpoint and/or Rights of Accumulation |
Breakpoints as described in the Prospectus. |
Rights of accumulations which entitles 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 Baird. Eligible fund family assets not held at Baird may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets. |
Letters of Intent (LOI) allow for breakpoint discounts based on anticipated purchases within a fund family through Baird, over a 13-month period of time. |
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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
© 2020 Wells Fargo & Company. All rights reserved
PAR-0920-00408 10-20
A265/AR265 08-20
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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 | Fiscal | |||||||
year ended | year ended | |||||||
August 31, 2020 | August 31, 2019 | |||||||
Audit fees | $ | 482,350 | $ | 426,800 | ||||
Audit-related fees | — | — | ||||||
Tax fees (1) | 40,180 | 39,575 | ||||||
All other fees | — | — | ||||||
|
|
|
| |||||
$ | 522,530 | $ | 466,375 | |||||
|
|
|
|
(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.
Such written statement shall be presented to the full Committees at their next regularly scheduled meetings.
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(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: | October 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: | October 28, 2020 | |
By: | /s/ Nancy Wiser | |
Nancy Wiser | ||
Treasurer | ||
Date: | October 28, 2020 | |
By: | /s/ Jeremy DePalma | |
Jeremy DePalma | ||
Treasurer | ||
Date: | October 28, 2020 |