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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-09255
Wells Fargo Variable Trust
(Exact name of registrant as specified in charter)
525 Market St., San Francisco, CA 94105
(Address of principal executive offices) (Zip code)
C. David Messman
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: December 31
Registrant is making a filing for 6 of its series:
Wells Fargo VT Discovery Fund, Wells Fargo VT Index Asset Allocation Fund, Wells Fargo VT International Equity Fund, Wells Fargo VT Omega Growth Fund, Wells Fargo VT Opportunity Fund, and Wells Fargo VT Small Cap Growth Fund.
Date of reporting period: June 30, 2016
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ITEM 1. | REPORT TO STOCKHOLDERS |
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Semi-Annual Report
June 30, 2016
Wells Fargo VT Discovery Fund
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Reduce clutter. Save trees.
Sign up for electronic delivery of prospectuses and shareholder reports at wellsfargo.com/advantagedelivery
2 | ||||
4 | ||||
6 | ||||
7 | ||||
Financial statements | ||||
11 | ||||
12 | ||||
13 | ||||
14 | ||||
15 | ||||
19 | ||||
25 |
The views expressed and any forward-looking statements are as of June 30, 2016, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Funds Management, LLC. 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 Funds Management, LLC and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
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2 | Wells Fargo VT Discovery Fund | Letter to shareholders (unaudited) |
Karla M. Rabusch
President
Wells Fargo Funds
Although markets gyrated significantly following the U.K.’s surprising decision to leave the E.U. (Brexit), U.S. stocks generally delivered positive results overall for the six-month reporting period.
Dear Valued Shareholder:
We are pleased to offer you this semi-annual report for the Wells Fargo VT Discovery Fund for the six-month period that ended June 30, 2016. During this period, which began with the first quarter of 2016, U.S. and international stock markets experienced heightened volatility, with intermittent rebounds interspersed with sell-offs. The U.S. economy displayed resilience throughout the period, although growth was somewhat sluggish amid ongoing pressures that included slowing growth in China, a strengthening U.S. dollar, and uncertainty regarding interest-rate increases by the U.S. Federal Reserve (Fed); international economies faced deeper ongoing challenges. During June 2016, global markets became especially volatile as the U.K.’s vote over whether to leave the European Union (E.U.) approached. Although markets gyrated significantly following the U.K.’s surprising decision to leave the E.U. (Brexit), U.S. stocks generally delivered positive results overall for the six-month reporting period. International emerging markets also delivered positive results, while international developed markets generally declined.
In the first quarter of 2016, market volatility increased globally amid ongoing concerns.
Stock markets worldwide fluctuated widely in the first quarter of 2016. Most declined sharply in the first six weeks of the year on concerns such as weak global growth, falling commodity prices, and uncertainty over the timing and impact of the Fed’s interest-rate increases. As the quarter progressed, fears abated somewhat and global markets generally rallied back. The U.S. economy ended the quarter on a positive note as much of the quarter’s data reflected resiliency.
With ongoing uncertainties about global growth and financial markets, however, the Fed held off from raising the target interest rate during the quarter. Outside the U.S., the eurozone fell into deflation in February; in response, the European Central Bank announced an expansion of its stimulus program. In China, the government in March set a growth rate of 6.5% to 7.0% for 2016, an acknowledgment that the country’s growth has been slowing. In emerging markets, although central-bank stimulus and improved prices for oil and other commodities led to stock-market rallies in the quarter, many of these countries’ economies face credit downgrades due to challenges such as the likelihood of a stronger U.S. dollar, which would make dollar-denominated debt more expensive.
Worries over interest rates and the U.K.’s vote largely drove the markets during the second quarter of 2016.
U.S. stocks began the quarter in positive territory but started to lose some steam in early May on worries that a possible June interest-rate increase by the Fed could hurt the market. In mid-May, stocks briefly plunged following comments by Fed officials noting that a June interest-rate increase remained on the table. But once investors had processed this information, stocks again rallied, finishing up for the month. The first three weeks of June brought heightened volatility, spurred largely by a disappointing jobs report and uncertainty over whether the U.K. would remain in the E.U.
The U.K.’s Brexit vote on June 23 shocked countries in Europe and much of the rest of the world. Stock markets plummeted as investors worldwide worried that the U.K.’s departure from the E.U. would slow global growth and prolong the low-interest-rate environment. Following the initial rout, however, U.S. stocks rallied as investors seemed to decide that any negative effects would be more localized and
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Letter to shareholders (unaudited) | Wells Fargo VT Discovery Fund | 3 |
not create a serious risk for global growth. By quarter-end, the broad U.S. stock market had moved back into positive territory.
Don’t let short-term uncertainty derail long-term investment goals.
Periods of 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 in Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Karla M. Rabusch
President
Wells Fargo Funds
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.
For further information about your Fund, contact your investment professional, visit our website at wellsfargofunds.com, or call us directly at 1-800-260-5969. We are available 24 hours a day, 7 days a week.
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4 | Wells Fargo VT Discovery Fund | Performance highlights (unaudited) |
Investment objective
The Fund seeks long-term capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Michael T. Smith, CFA®
Chris Warner, CFA®
Average annual total returns (%) as of June 30, 2016
Expense ratios1 (%) | ||||||||||||||||||||||
Inception date | 1 year | 5 year | 10 year | Gross | Net2 | |||||||||||||||||
Class 2 | 5-8-1992 | (9.58 | ) | 9.03 | 8.98 | 1.17 | 1.15 | |||||||||||||||
Russell 2500TM Growth Index3 | – | (7.69 | ) | 9.27 | 7.96 | – | – |
Figures quoted represent past performance, which is no guarantee of future results. 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 and assumes the reinvestment of dividends and capital gains. Current month-end performance is available by calling 1-800-260-5969. Performance figures of the Fund do not reflect fees charged pursuant to the terms of variable life insurance policies and variable annuity contracts. If sales loads or charges had been reflected, performance would have been lower.
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.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Smaller-company stocks tend to be more volatile and less liquid than those of larger companies. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). The Fund is exposed to foreign investment risk. Consult the Fund’s prospectus for additional information on these and other risks.
Please refer to the prospectus provided by your participating insurance company for detailed information describing the separate accounts for information regarding surrender charges, mortality and expense risk fees, and other charges that may be assessed by the participating insurance companies.
Please see footnotes on page 5.
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Performance highlights (unaudited) | Wells Fargo VT Discovery Fund | 5 |
Ten largest holdings (%) as of June 30, 20164 | ||||
CoStar Group Incorporated | 2.57 | |||
KAR Auction Services Incorporated | 2.41 | |||
Zayo Group Holdings Incorporated | 2.39 | |||
ServiceMaster Global Holdings Incorporated | 2.30 | |||
Allegion plc | 2.22 | |||
Tyler Technologies Incorporated | 2.11 | |||
Aramark | 1.91 | |||
VCA Incorporated | 1.90 | |||
DexCom Incorporated | 1.87 | |||
A.O. Smith Corporation | 1.87 |
Sector distribution as of June 30, 20165 |
1 | Reflects the expense ratios as stated in the most recent prospectus. 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 committed through April 30, 2017, to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s Total Annual Fund Operating Expenses After Fee Waiver at the amount shown. After this time, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses, and extraordinary expenses are excluded from the expense cap. Without this cap, the Fund’s returns would have been lower. |
3 | The Russell 2500TM Growth Index measures the performance of those Russell 2500 companies with higher price/book ratios and higher forecasted growth values. You cannot invest directly in an index. |
4 | The ten largest holdings, excluding cash and cash equivalents, 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. |
5 | 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. |
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6 | Wells Fargo VT Discovery Fund | Fund expenses (unaudited) |
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution (12b-1) 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 January 1, 2016 to June 30, 2016.
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 separate account charges assessed by participating insurance companies. 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 separate account charges assessed by participating insurance companies were included, your costs would have been higher.
Beginning account value 1-1-2016 | Ending account value 6-30-2016 | Expenses paid during the period¹ | Net annualized expense ratio | |||||||||||||
Class 2 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,008.46 | $ | 5.74 | 1.15 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.14 | $ | 5.77 | 1.15 | % |
1 | Expenses paid is equal to the annualized expense ratio 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). |
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Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Discovery Fund | 7 |
Security name | Shares | Value | ||||||||||||||
Common Stocks: 98.65% | ||||||||||||||||
Consumer Discretionary: 21.69% | ||||||||||||||||
Auto Components: 0.82% | ||||||||||||||||
Gentherm Incorporated † | 28,533 | $ | 977,255 | |||||||||||||
|
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Distributors: 1.09% | ||||||||||||||||
Pool Corporation | 13,900 | 1,307,017 | ||||||||||||||
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Diversified Consumer Services: 4.15% | ||||||||||||||||
Bright Horizons Family Solutions Incorporated † | 33,300 | 2,208,123 | ||||||||||||||
ServiceMaster Global Holdings Incorporated † | 68,825 | 2,739,235 | ||||||||||||||
4,947,358 | ||||||||||||||||
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| |||||||||||||||
Hotels, Restaurants & Leisure: 5.90% | ||||||||||||||||
Aramark | 68,100 | 2,275,902 | ||||||||||||||
Dave & Buster’s Entertainment Incorporated † | 27,683 | 1,295,288 | ||||||||||||||
Six Flags Entertainment Corporation | 27,300 | 1,582,035 | ||||||||||||||
Vail Resorts Incorporated | 13,700 | 1,893,751 | ||||||||||||||
7,046,976 | ||||||||||||||||
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Media: 1.60% | ||||||||||||||||
Cinemark Holdings Incorporated | 52,300 | 1,906,858 | ||||||||||||||
|
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Specialty Retail: 6.18% | ||||||||||||||||
Burlington Stores Incorporated † | 31,800 | 2,121,378 | ||||||||||||||
Lithia Motors Incorporated Class A | 11,800 | 838,626 | ||||||||||||||
Sally Beauty Holdings Incorporated † | 50,100 | 1,473,441 | ||||||||||||||
The Michaels Companies Incorporated † | 60,568 | 1,722,554 | ||||||||||||||
ULTA Salon, Cosmetics and Fragrance Incorporated † | 5,000 | 1,218,200 | ||||||||||||||
7,374,199 | ||||||||||||||||
|
| |||||||||||||||
Textiles, Apparel & Luxury Goods: 1.95% | ||||||||||||||||
Coach Incorporated | 34,900 | 1,421,826 | ||||||||||||||
Columbia Sportswear Company | 15,776 | 907,751 | ||||||||||||||
2,329,577 | ||||||||||||||||
|
| |||||||||||||||
Consumer Staples: 1.50% | ||||||||||||||||
Beverages: 1.50% | ||||||||||||||||
Constellation Brands Incorporated Class A | 10,800 | 1,786,320 | ||||||||||||||
|
| |||||||||||||||
Energy: 0.92% | ||||||||||||||||
Oil, Gas & Consumable Fuels: 0.92% | ||||||||||||||||
Diamondback Energy Incorporated † | 12,100 | 1,103,641 | ||||||||||||||
|
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Financials: 5.50% | ||||||||||||||||
Capital Markets: 3.52% | ||||||||||||||||
Evercore Partners Incorporated Class A | 28,600 | 1,263,834 | ||||||||||||||
Raymond James Financial Incorporated | 17,900 | 882,470 | ||||||||||||||
SEI Investments Company | 42,700 | 2,054,297 | ||||||||||||||
4,200,601 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
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8 | Wells Fargo VT Discovery Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Real Estate Management & Development: 1.16% | ||||||||||||||||
CBRE Group Incorporated Class A † | 52,400 | $ | 1,387,552 | |||||||||||||
|
| |||||||||||||||
Thrifts & Mortgage Finance: 0.82% | ||||||||||||||||
LendingTree Incorporated †« | 10,993 | 971,012 | ||||||||||||||
|
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Health Care: 17.54% | ||||||||||||||||
Biotechnology: 2.74% | ||||||||||||||||
Alnylam Pharmaceuticals Incorporated † | 10,023 | 556,176 | ||||||||||||||
bluebird bio Incorporated †« | 9,700 | 419,913 | ||||||||||||||
Ligand Pharmaceuticals Incorporated †« | 11,221 | 1,338,329 | ||||||||||||||
Ophthotech Corporation † | 6,600 | 336,798 | ||||||||||||||
Prothena Corporation plc †« | 8,741 | 305,585 | ||||||||||||||
Ultragenyx Pharmaceutical Incorporated † | 6,300 | 308,133 | ||||||||||||||
3,264,934 | ||||||||||||||||
|
| |||||||||||||||
Health Care Equipment & Supplies: 6.90% | ||||||||||||||||
Align Technology Incorporated † | 23,200 | 1,868,760 | ||||||||||||||
DexCom Incorporated † | 28,156 | 2,233,615 | ||||||||||||||
Integra LifeSciences Holdings Corporation | 23,000 | 1,834,940 | ||||||||||||||
Nevro Corporation †« | 19,296 | 1,423,273 | ||||||||||||||
Teleflex Incorporated | 4,932 | 874,493 | ||||||||||||||
8,235,081 | ||||||||||||||||
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Health Care Providers & Services: 5.08% | ||||||||||||||||
Amedisys Incorporated † | 28,900 | 1,458,872 | ||||||||||||||
HealthEquity Incorporated † | 48,654 | 1,478,352 | ||||||||||||||
Surgical Care Affiliates Incorporated † | 17,945 | 855,438 | ||||||||||||||
VCA Incorporated † | 33,600 | 2,271,696 | ||||||||||||||
6,064,358 | ||||||||||||||||
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Health Care Technology: 1.35% | ||||||||||||||||
Veeva Systems Incorporated Class A † | 47,157 | 1,608,997 | ||||||||||||||
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Life Sciences Tools & Services: 1.47% | ||||||||||||||||
Cambrex Corporation † | 33,934 | 1,755,406 | ||||||||||||||
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Industrials: 21.94% | ||||||||||||||||
Aerospace & Defense: 1.21% | ||||||||||||||||
Orbital ATK Incorporated | 17,000 | 1,447,380 | ||||||||||||||
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Airlines: 1.52% | ||||||||||||||||
Spirit Airlines Incorporated † | 40,300 | 1,808,261 | ||||||||||||||
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Building Products: 5.36% | ||||||||||||||||
A.O. Smith Corporation | 25,300 | 2,229,183 | ||||||||||||||
Allegion plc | 38,200 | 2,652,226 | ||||||||||||||
Masonite International Corporation † | 22,900 | 1,514,606 | ||||||||||||||
6,396,015 | ||||||||||||||||
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|
The accompanying notes are an integral part of these financial statements.
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Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Discovery Fund | 9 |
Security name | Shares | Value | ||||||||||||||
Commercial Services & Supplies: 3.85% | ||||||||||||||||
KAR Auction Services Incorporated | 68,915 | $ | 2,876,512 | |||||||||||||
Waste Connections Incorporated | 23,900 | 1,721,995 | ||||||||||||||
4,598,507 | ||||||||||||||||
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Electrical Equipment: 1.08% | ||||||||||||||||
Acuity Brands Incorporated | 5,219 | 1,294,103 | ||||||||||||||
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Industrial Conglomerates: 1.36% | ||||||||||||||||
Carlisle Companies Incorporated | 15,357 | 1,622,928 | ||||||||||||||
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Machinery: 2.31% | ||||||||||||||||
John Bean Technologies Corporation | 18,714 | 1,145,671 | ||||||||||||||
Proto Labs Incorporated †« | 11,100 | 638,916 | ||||||||||||||
WABCO Holdings Incorporated † | 10,600 | 970,642 | ||||||||||||||
2,755,229 | ||||||||||||||||
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Professional Services: 1.57% | ||||||||||||||||
TransUnion † | 55,850 | 1,867,624 | ||||||||||||||
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Road & Rail: 2.00% | ||||||||||||||||
J.B. Hunt Transport Services Incorporated | 14,700 | 1,189,671 | ||||||||||||||
Kansas City Southern | 13,300 | 1,198,197 | ||||||||||||||
2,387,868 | ||||||||||||||||
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Trading Companies & Distributors: 1.68% | ||||||||||||||||
HD Supply Holdings Incorporated † | 57,639 | 2,006,990 | ||||||||||||||
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Information Technology: 25.63% | ||||||||||||||||
Communications Equipment: 1.19% | ||||||||||||||||
Harris Corporation | 17,000 | 1,418,480 | ||||||||||||||
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Electronic Equipment, Instruments & Components: 2.76% | ||||||||||||||||
Cognex Corporation | 25,376 | 1,093,706 | ||||||||||||||
FLIR Systems Incorporated | 43,900 | 1,358,705 | ||||||||||||||
Universal Display Corporation † | 12,400 | 840,720 | ||||||||||||||
3,293,131 | ||||||||||||||||
|
| |||||||||||||||
Internet Software & Services: 3.27% | ||||||||||||||||
CoStar Group Incorporated † | 14,019 | 3,065,395 | ||||||||||||||
Yandex NV Class A † | 38,502 | 841,269 | ||||||||||||||
3,906,664 | ||||||||||||||||
|
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IT Services: 7.52% | ||||||||||||||||
Broadridge Financial Solutions Incorporated | 32,600 | 2,125,520 | ||||||||||||||
EPAM Systems Incorporated † | 27,619 | 1,776,178 | ||||||||||||||
Euronet Worldwide Incorporated † | 22,793 | 1,577,048 | ||||||||||||||
Vantiv Incorporated Class A † | 25,053 | 1,418,000 | ||||||||||||||
WEX Incorporated † | 23,500 | 2,083,745 | ||||||||||||||
8,980,491 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
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10 | Wells Fargo VT Discovery Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Software: 10.89% | ||||||||||||||||
Guidewire Software Incorporated † | 30,891 | $ | 1,907,828 | |||||||||||||
HubSpot Incorporated †« | 28,900 | 1,254,838 | ||||||||||||||
Paycom Software Incorporated † | 49,722 | 2,148,488 | ||||||||||||||
Secureworks Corporation Class A †« | 37,931 | 534,827 | ||||||||||||||
ServiceNow Incorporated † | 29,400 | 1,952,160 | ||||||||||||||
Tableau Software Incorporated Class A † | 17,837 | 872,586 | ||||||||||||||
Take-Two Interactive Software Incorporated † | 47,700 | 1,808,784 | ||||||||||||||
Tyler Technologies Incorporated † | 15,075 | 2,513,153 | ||||||||||||||
12,992,664 | ||||||||||||||||
|
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Materials: 1.54% | ||||||||||||||||
Construction Materials: 1.54% | ||||||||||||||||
Vulcan Materials Company | 15,300 | 1,841,508 | ||||||||||||||
|
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Telecommunication Services: 2.39% | ||||||||||||||||
Diversified Telecommunication Services: 2.39% | ||||||||||||||||
Zayo Group Holdings Incorporated † | 102,112 | 2,851,987 | ||||||||||||||
|
| |||||||||||||||
Total Common Stocks (Cost $103,135,433) | 117,736,972 | |||||||||||||||
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Yield | ||||||||||||||||
Short-Term Investments: 6.36% | ||||||||||||||||
Investment Companies: 6.36% | ||||||||||||||||
Securities Lending Cash Investments LLC (l)(r)(u) | 0.47 | % | 5,183,425 | 5,183,425 | ||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u) | 0.31 | 2,413,178 | 2,413,178 | |||||||||||||
Total Short-Term Investments (Cost $7,596,603) | 7,596,603 | |||||||||||||||
|
|
Total investments in securities (Cost $110,732,036) * | 105.01 | % | 125,333,575 | |||||
Other assets and liabilities, net | (5.01 | ) | (5,984,300 | ) | ||||
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Total net assets | 100.00 | % | $ | 119,349,275 | ||||
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† | Non-income-earning security |
« | All or a portion of this security is on loan. |
(l) | The issuer of the security is an affiliated person of the Fund as defined in the Investment Company Act of 1940. |
(r) | The investment is a non-registered investment vehicle purchased with cash collateral received from securities on loan. |
(u) | The rate represents the 7-day annualized yield at period end. |
* | Cost for federal income tax purposes is $110,978,118 and unrealized gains (losses) consists of: |
Gross unrealized gains | $ | 18,271,845 | ||
Gross unrealized losses | (3,916,388 | ) | ||
|
| |||
Net unrealized gains | $ | 14,355,457 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Statement of assets and liabilities—June 30, 2016 (unaudited) | Wells Fargo VT Discovery Fund | 11 |
Assets | ||||
Investments | ||||
In unaffiliated securities (including $5,072,802 of securities loaned), at value (cost $103,135,433) | $ | 117,736,972 | ||
In affiliated securities, at value (cost $7,596,603) | 7,596,603 | |||
|
| |||
Total investments, at value (cost $110,732,036) | 125,333,575 | |||
Cash | 4,584 | |||
Receivable for investments sold | 540,316 | |||
Receivable for Fund shares sold | 13,715 | |||
Receivable for dividends | 57,063 | |||
Receivable for securities lending income | 11,497 | |||
Prepaid expenses and other assets | 3,205 | |||
|
| |||
Total assets | 125,963,955 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 1,152,364 | |||
Payable for Fund shares redeemed | 136,195 | |||
Payable upon receipt of securities loaned | 5,183,425 | |||
Management fee payable | 71,225 | |||
Distribution fee payable | 24,538 | |||
Administration fee payable | 7,852 | |||
Accrued expenses and other liabilities | 39,081 | |||
|
| |||
Total liabilities | 6,614,680 | |||
|
| |||
Total net assets | $ | 119,349,275 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Paid-in capital | $ | 97,994,584 | ||
Accumulated net investment loss | (290,450 | ) | ||
Accumulated net realized gains on investments | 7,043,602 | |||
Net unrealized gains on investments | 14,601,539 | |||
|
| |||
Total net assets | $ | 119,349,275 | ||
|
| |||
COMPUTATION OF NET ASSET VALUE PER SHARE | ||||
Net assets – Class 2 | $ | 119,349,275 | ||
Shares outstanding – Class 21 | 4,553,930 | |||
Net asset value per share – Class 2 | $26.21 |
1 | The Fund has an unlimited number of authorized shares. |
The accompanying notes are an integral part of these financial statements.
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12 | Wells Fargo VT Discovery Fund | Statement of operations—six months ended June 30, 2016 (unaudited) |
Investment income | ||||
Dividends | $ | 325,869 | ||
Securities lending income, net | 29,426 | |||
Income from affiliated securities | 3,591 | |||
|
| |||
Total investment income | 358,886 | |||
|
| |||
Expenses | ||||
Management fee | 423,480 | |||
Administration fee | ||||
Class 2 | 45,171 | |||
Distribution fee | ||||
Class 2 | 141,160 | |||
Custody and accounting fees | 12,779 | |||
Professional fees | 17,764 | |||
Shareholder report expenses | 15,049 | |||
Trustees’ fees and expenses | 7,350 | |||
Other fees and expenses | 2,224 | |||
|
| |||
Total expenses | 664,977 | |||
Less: Fee waivers and/or expense reimbursements | (15,641 | ) | ||
|
| |||
Net expenses | 649,336 | |||
|
| |||
Net investment loss | (290,450 | ) | ||
|
| |||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS | ||||
Net realized losses on investments | (1,703,319 | ) | ||
Net change in unrealized gains (losses) on investments | 2,504,078 | |||
|
| |||
Net realized and unrealized gains (losses) on investments | 800,759 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 510,309 | ||
|
|
The accompanying notes are an integral part of these financial statements.
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Statement of changes in net assets | Wells Fargo VT Discovery Fund | 13 |
Six months ended June 30, 2016 (unaudited) | Year ended December 31, 2015 | |||||||||||||||
Operations | ||||||||||||||||
Net investment loss | $ | (290,450 | ) | $ | (1,004,481 | ) | ||||||||||
Net realized gains (losses) on investments | (1,703,319 | ) | 9,025,317 | |||||||||||||
Net change in unrealized gains (losses) on investments | 2,504,078 | (9,495,134 | ) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | 510,309 | (1,474,298 | ) | |||||||||||||
|
| |||||||||||||||
Distributions to shareholders from | ||||||||||||||||
Net realized gains – Class 2 | 0 | (20,334,034 | ) | |||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold – Class 2 | 203,394 | 4,933,624 | 505,503 | 14,950,495 | ||||||||||||
Reinvestment of distributions – Class 2 | 0 | 0 | 708,256 | 20,334,034 | ||||||||||||
Payment for shares redeemed – Class 2 | (529,710 | ) | (12,933,359 | ) | (843,307 | ) | (25,127,064 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from capital share transactions | (7,999,735 | ) | 10,157,465 | |||||||||||||
|
| |||||||||||||||
Total decrease in net assets | (7,489,426 | ) | (11,650,867 | ) | ||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 126,838,701 | 138,489,568 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 119,349,275 | $ | 126,838,701 | ||||||||||||
|
| |||||||||||||||
Undistributed (accumulated) net investment income (loss) | $ | (290,450 | ) | $ | 0 | |||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
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14 | Wells Fargo VT Discovery Fund | Financial highlights |
(For a share outstanding throughout each period)
Six months ended (unaudited) | Year ended December 31 | |||||||||||||||||||||||
CLASS 2 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||
Net asset value, beginning of period | $25.99 | $30.71 | $35.20 | $25.16 | $21.37 | $21.28 | ||||||||||||||||||
Net investment loss | (0.06 | ) | (0.21 | ) | (0.22 | ) | (0.17 | ) | (0.01 | ) | (0.18 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | 0.28 | 0.21 | 0.16 | 11.06 | 3.80 | 0.27 | ||||||||||||||||||
|
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|
|
|
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|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.22 | 0.00 | (0.06 | ) | 10.89 | 3.79 | 0.09 | |||||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | (0.00 | )1 | 0.00 | 0.00 | |||||||||||||||||
Net realized gains | 0.00 | (4.72 | ) | (4.43 | ) | (0.85 | ) | 0.00 | 0.00 | |||||||||||||||
|
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|
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|
| |||||||||||||
Total distributions to shareholders | 0.00 | (4.72 | ) | (4.43 | ) | (0.85 | ) | 0.00 | 0.00 | |||||||||||||||
Net asset value, end of period | $26.21 | $25.99 | $30.71 | $35.20 | $25.16 | $21.37 | ||||||||||||||||||
Total return2 | 0.85 | % | (1.46 | )% | 0.36 | % | 43.80 | % | 17.74 | % | 0.42 | % | ||||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||||||
Gross expenses | 1.18 | % | 1.17 | % | 1.14 | % | 1.16 | % | 1.21 | % | 1.18 | % | ||||||||||||
Net expenses | 1.15 | % | 1.15 | % | 1.14 | % | 1.15 | % | 1.15 | % | 1.15 | % | ||||||||||||
Net investment loss | (0.51 | )% | (0.72 | )% | (0.68 | )% | (0.56 | )% | (0.03 | )% | (0.75 | )% | ||||||||||||
Supplemental data | ||||||||||||||||||||||||
Portfolio turnover rate | 35 | % | 90 | % | 79 | % | 88 | % | 98 | % | 113 | % | ||||||||||||
Net assets, end of period (000s omitted) | $119,349 | $126,839 | $138,490 | $158,451 | $111,458 | $98,099 |
1 | Amount is less than $0.005. |
2 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Notes to financial statements (unaudited) | Wells Fargo VT Discovery Fund | 15 |
1. ORGANIZATION
Wells Fargo Variable 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 VT Discovery 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 a Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the principal exchange or market that day, the prior day’s price will be deemed “stale” and a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
Investments in registered open-end investment companies are valued at net asset value. Interests in non-registered investment vehicles that are redeemable at net asset value are fair valued 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 Management Valuation Team of 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 Management Valuation Team which may include items for ratification.
Valuations of fair valued securities are compared to the next actual sales price when available, or other appropriate market values, to assess the continued appropriateness of the fair valuation methodologies used. These securities are fair valued on a day-to-day basis, taking into consideration changes to appropriate market information and any significant changes to the inputs considered in the valuation process until there is a readily available price provided on an exchange or by an independent pricing service. Valuations received from an independent pricing service or independent broker-dealer quotes are periodically validated by comparisons to most recent trades and valuations provided by other independent pricing services in addition to the review of prices by the manager and/or subadviser. Unobservable inputs used in determining fair valuations are identified based on the type of security, taking into consideration factors utilized by market participants in valuing the investment, knowledge about the issuer and the current market environment.
Security loans
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. The Fund continues to receive interest or dividends on the securities loaned. The Fund 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 additional required collateral is delivered to the Fund on the next business day. In a securities lending transaction, the net asset value of the Fund will be affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. 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 addition, the investment of any cash collateral received may lose all or part of its value. The Fund has the right under the lending agreement to recover the securities from the borrower on demand.
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16 | Wells Fargo VT Discovery Fund | Notes to financial statements (unaudited) |
The Fund lends its securities through an unaffiliated securities lending agent. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). The Securities Lending Fund is exempt from registration under Section 3(c)(7) of the 1940 Act and is managed by Funds Management and is subadvised by Wells Capital Management Incorporated (“WellsCap”), an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”). Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser. The Securities Lending Fund seeks to provide a positive return compared to the daily Fed Funds Open rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments. Securities Lending Fund investments are fair valued based upon the amortized cost valuation technique. Income earned from investment in the Securities Lending Fund is included in securities lending income on the Statement of Operations.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date.
Distributions to shareholders
Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations, which may differ in amount or character from net investment income and realized gains recognized for purposes of U.S. generally accepted accounting principles.
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.
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to significant unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
n | Level 1 – quoted prices in active markets for identical securities |
n | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, use of amortized cost, etc.) |
n | 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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Notes to financial statements (unaudited) | Wells Fargo VT Discovery Fund | 17 |
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of June 30, 2016:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Common stocks | ||||||||||||||||
Consumer discretionary | $ | 25,889,240 | $ | 0 | $ | 0 | $ | 25,889,240 | ||||||||
Consumer staples | 1,786,320 | 0 | 0 | 1,786,320 | ||||||||||||
Energy | 1,103,641 | 0 | 0 | 1,103,641 | ||||||||||||
Financials | 6,559,165 | 0 | 0 | 6,559,165 | ||||||||||||
Health care | 20,928,776 | 0 | 0 | 20,928,776 | ||||||||||||
Industrials | 26,184,905 | 0 | 0 | 26,184,905 | ||||||||||||
Information technology | 30,591,430 | 0 | 0 | 30,591,430 | ||||||||||||
Materials | 1,841,508 | 0 | 0 | 1,841,508 | ||||||||||||
Telecommunication services | 2,851,987 | 0 | 0 | 2,851,987 | ||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 2,413,178 | 0 | 0 | 2,413,178 | ||||||||||||
Investments measured at net asset value* | 5,183,425 | |||||||||||||||
Total assets | $ | 120,150,150 | $ | 0 | $ | 0 | $ | 125,333,575 |
* | Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been categorized in the fair value hierarchy. The fair value amount presented in the table is intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Statement of Assets and Liabilities. The Fund’s investment in Securities Lending Cash Investments, LLC valued at $5,183,425 does not have a redemption period notice, can be redeemed daily and does not have any unfunded commitments. |
The Fund recognizes transfers between levels within the fair value hierarchy at the end of the reporting period. At June 30, 2016, the Fund did not have any transfers into/out of Level 1, Level 2, or Level 3.
4. TRANSACTIONS WITH AFFILIATES
Management fee
Funds Management, an indirect wholly owned subsidiary of 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, providing fund-level administrative services in connection with the Fund’s operations, and providing any other fund-level administrative services reasonably necessary for the operation of the Fund. As compensation for its services under the investment management agreement, Funds Management is entitled to receive an annual management fee starting at 0.75% and declining to 0.58% as the average daily net assets of the Fund increase. For the six months ended June 30, 2016, the management fee was equivalent to an annual rate of 0.75% 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. WellsCap is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.45% and declining to 0.35% as the average daily net assets of the Fund increase.
Administration fee
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 a class level administration fee of 0.08% which is calculated based on the average daily net assets of Class 2 shares.
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. Waiver of fees and/or reimbursement of expenses by Funds Management were made first from fund level expenses on a proportionate basis and then from class specific expenses. Funds Management has committed through April 30, 2017 to waive fees and/or reimburse expenses to
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18 | Wells Fargo VT Discovery Fund | Notes to financial statements (unaudited) |
the extent necessary to cap the Fund’s expenses at 1.15% for Class 2 shares. After this time, 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 2 shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. A distribution fee is charged to Class 2 shares and paid to Wells Fargo Funds Distributor, LLC, the principal underwriter, at an annual rate of 0.25% of the average daily net assets of Class 2 shares.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the six months ended June 30, 2016 were $41,010,152 and $48,815,913, respectively.
The Fund may purchase or sell investment securities to other Wells Fargo funds under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which generally do not incur broker commissions, are effected at current market prices. Interfund trades are included within the respective purchases and sales amounts shown.
6. BANK BORROWINGS
The Trust and Wells Fargo Funds Trust (excluding the money market funds and certain other funds) are parties to a $200,000,000 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 0.20% of the unused balance is allocated to each participating fund.
For the six months ended June 30, 2016, there were no borrowings by the Fund under the agreement.
7. CONCENTRATION RISK
Concentration risks result from exposure to a limited number of sectors. A fund that invests a substantial portion of its assets in any sector may be more affected by changes in that sector than would be a fund whose investments are not heavily weighted in any sector.
8. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
Table of Contents
Other information (unaudited) | Wells Fargo VT Discovery Fund | 19 |
PROXY VOTING INFORMATION
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-260-5969, visiting our website at wellsfargofunds.com, or visiting the SEC website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website at wellsfargofunds.com or by visiting the SEC website at sec.gov.
PORTFOLIO HOLDINGS INFORMATION
The complete portfolio holdings for the Fund are publicly available monthly on the Fund’s website (wellsfargofunds.com), on a one-month delayed basis. In addition, top ten holdings information (excluding derivative positions) for the Fund is publicly available on the Fund’s website on a monthly, seven-day or more delayed basis. The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q, which is available by visiting the SEC website at sec.gov. In addition, the Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and at regional offices in New York City, at 233 Broadway, and in Chicago, at 175 West Jackson Boulevard, Suite 900. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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20 | Wells Fargo VT Discovery Fund | 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 financial 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 lead 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. Mr. Ebsworth is a CFA® charterholder and an Adjunct Lecturer, Finance, at Babson College. | Asset Allocation Trust | |||
Jane A. Freeman (Born 1953) | Trustee, since 2015 | 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 Chair of Taproot Foundation (non-profit organization), a Board Member of Ruth Bancroft Garden (non-profit organization) and an inactive chartered financial analyst. | Asset Allocation Trust | |||
Peter G. Gordon (Born 1942) | Trustee, since 1998; Chairman, since 2005 | Co-Founder, Retired Chairman, President and CEO of Crystal Geyser Water Company. Trustee Emeritus, Colby College. | Asset Allocation Trust | |||
Isaiah Harris, Jr. (Born 1952) | Trustee, since 2009 | 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 (charter school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation; Asset Allocation Trust | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008; Audit Committee Chairman, 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. | Asset Allocation Trust | |||
David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | Asset Allocation Trust |
Table of Contents
Other information (unaudited) | Wells Fargo VT Discovery Fund | 21 |
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 | 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. | Asset Allocation Trust | |||
Timothy J. Penny (Born 1951) | Trustee, since 1996 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007 and Senior Fellow at the Humphrey Institute Policy Forum at the University of Minnesota since 1995. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | Asset Allocation Trust | |||
Michael S. Scofield (Born 1943) | Trustee, since 2010 | Served on the Investment Company Institute’s Board of Governors and Executive Committee from 2008-2011 as well the Governing Council of the Independent Directors Council from 2006-2011 and the Independent Directors Council Executive Committee from 2008-2011. Chairman of the IDC from 2008-2010. Institutional Investor (Fund Directions) Trustee of Year in 2007. Trustee of the Evergreen Funds complex (and its predecessors) from 1984 to 2010. Chairman of the Evergreen Funds from 2000-2010. Former Trustee of the Mentor Funds. Retired Attorney, Law Offices of Michael S. Scofield. | Asset Allocation Trust |
* | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
Officers
Name and year of birth | Position held and length of service | Principal occupations during past five years or longer | ||||
Karla M. Rabusch (Born 1959) | President, since 2003 | Executive Vice President of Wells Fargo Bank, N.A. and President of Wells Fargo Funds Management, LLC since 2003. | ||||
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. | ||||
C. David Messman (Born 1960) | Secretary, since 2000; Chief Legal Officer, since 2003 | Senior Vice President and Secretary of Wells Fargo Funds Management, LLC since 2001. Assistant General Counsel of Wells Fargo Bank, N.A. since 2013 and Vice President and Managing Counsel of Wells Fargo Bank, N.A. from 1996 to 2013. | ||||
Michael Whitaker (Born 1967) | Chief Compliance Officer, since 2016* | Executive Vice President of Wells Fargo Funds Management, LLC since 2016. Chief Compliance Officer of Fidelity’s Fixed Income Funds and Asset Allocation Funds from 2008 to 2016, Compliance Officer of FMR Co., Inc. from 2014 to 2016, Fidelity Investments Money Management, Inc. from 2014 to 2016, 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 69 funds and Assistant Treasurer of 73 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 1-800-260-5969 or by visiting the website at wellsfargofunds.com. |
* | Michael Whitaker became Chief Compliance Officer effective May 16, 2016. |
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22 | Wells Fargo VT Discovery Fund | Other information (unaudited) |
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Variable 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 an in-person meeting held on May 24-25, 2016 (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 VT Discovery 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 an in-person meeting in April 2016, 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 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 2016. 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 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 Funds Management, and 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 performance and expenses
The Board considered the performance results for the Fund over various time periods ended December 31, 2015. The Board considered these results in comparison to the 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.
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Other information (unaudited) | Wells Fargo VT Discovery Fund | 23 |
The Board noted that the performance of the Fund was higher than or in range of the average performance of the Universe for all periods under review except the three-year period. The Board also noted that the performance of the Fund was lower than its benchmark, the Russell 2500TM Growth Index, for all periods under review except the ten-year period.
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.
The Board took into account the Fund 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 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. However, 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 mutual funds compared with those associated with managing assets of non-mutual fund clients such as collective funds or 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, in light of the services covered by the Advisory Agreements.
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of Wells Fargo as a whole, from providing services to the Fund and the fund family as a whole. The Board also received and considered information concerning the profitability of the Sub-Adviser from providing services to the fund family as a whole, noting that the Sub-Adviser’s profitability information with respect to providing services to the Fund was subsumed in the Wells Fargo and Funds Management profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability. 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 and type of fund. Based on its review, the Board did not deem the profits reported by Funds Management or Wells Fargo from its services to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
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24 | Wells Fargo VT Discovery Fund | Other information (unaudited) |
Economies of scale
With respect to possible economies of scale, 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. It considered that, for a small fund or a fund that shrinks in size, breakpoints conversely can result in higher fee levels. The Board also considered that fee waiver and expense reimbursement arrangements and competitive fee rates at the outset are means of sharing potential economies of scale with shareholders of the Fund and the fund family as a whole. The Board considered Funds Management’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments that Funds Management incurs across the fund family as a whole.
The Board concluded that the Fund’s fee and expense arrangements, 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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List of abbreviations | Wells Fargo VT Discovery Fund | 25 |
The following is a list of common abbreviations for terms and entities that may have appeared in this report.
ACA | — ACA Financial Guaranty Corporation |
ADR | — American depositary receipt |
ADS | — American depositary shares |
AGC | — Assured Guaranty Corporation |
AGM | — Assured Guaranty Municipal |
Ambac | — Ambac Financial Group Incorporated |
AMT | — Alternative minimum tax |
AUD | — Australian dollar |
BAN | — Bond anticipation notes |
BHAC | — Berkshire Hathaway Assurance Corporation |
BRL | — Brazilian real |
CAB | — Capital appreciation bond |
CAD | — Canadian dollar |
CCAB | — Convertible capital appreciation bond |
CDA | — Community Development Authority |
CDO | — Collateralized debt obligation |
CHF | — Swiss franc |
COP | — Colombian peso |
CLP | — Chilean peso |
DKK | — Danish krone |
DRIVER | — Derivative inverse tax-exempt receipts |
DW&P | — Department of Water & Power |
DWR | — Department of Water Resources |
ECFA | — Educational & Cultural Facilities Authority |
EDA | — Economic Development Authority |
EDFA | — Economic Development Finance Authority |
ETF | — Exchange-traded fund |
EUR | — Euro |
FDIC | — Federal Deposit Insurance Corporation |
FFCB | — Federal Farm Credit Banks |
FGIC | — Financial Guaranty Insurance Corporation |
FHA | — Federal Housing Administration |
FHLB | — Federal Home Loan Bank |
FHLMC | — Federal Home Loan Mortgage Corporation |
FICO | — The Financing Corporation |
FNMA | — Federal National Mortgage Association |
FSA | — Farm Service Agency |
GBP | — Great British pound |
GDR | — Global depositary receipt |
GNMA | — Government National Mortgage Association |
GO | — General obligation |
HCFR | — Healthcare facilities revenue |
HEFA | — Health & Educational Facilities Authority |
HEFAR | — Higher education facilities authority revenue |
HFA | — Housing Finance Authority |
HFFA | — Health Facilities Financing Authority |
HKD | — Hong Kong dollar |
HUD | — Department of Housing and Urban Development |
HUF | — Hungarian forint |
IDA | — Industrial Development Authority |
IDAG | — Industrial Development Agency |
IDR | — Indonesian rupiah |
IEP | — Irish pound |
JPY | — Japanese yen |
KRW | — Republic of Korea won |
LIBOR | — London Interbank Offered Rate |
LIFER | — Long Inverse Floating Exempt Receipts |
LIQ | — Liquidity agreement |
LLC | — Limited liability company |
LLLP | — Limited liability limited partnership |
LLP | — Limited liability partnership |
LOC | — Letter of credit |
LP | — Limited partnership |
MBIA | — Municipal Bond Insurance Association |
MFHR | — Multifamily housing revenue |
MSTR | — Municipal securities trust receipts |
MTN | — Medium-term note |
MUD | — Municipal Utility District |
MXN | — Mexican peso |
MYR | — Malaysian ringgit |
National | — National Public Finance Guarantee Corporation |
NGN | — Nigerian naira |
NOK | — Norwegian krone |
NZD | — New Zealand dollar |
PCFA | — Pollution Control Financing Authority |
PCL | — Public Company Limited |
PCR | — Pollution control revenue |
PFA | — Public Finance Authority |
PFFA | — Public Facilities Financing Authority |
PFOTER | — Puttable floating option tax-exempt receipts |
plc | — Public limited company |
PLN | — Polish zloty |
PUTTER | — Puttable tax-exempt receipts |
R&D | — Research & development |
Radian | — Radian Asset Assurance |
RAN | — Revenue anticipation notes |
RDA | — Redevelopment Authority |
RDFA | — Redevelopment Finance Authority |
REIT | — Real estate investment trust |
ROC | — Reset option certificates |
RON | — Romanian lei |
RUB | — Russian ruble |
SAVRS | — Select auction variable rate securities |
SBA | — Small Business Authority |
SDR | — Swedish depositary receipt |
SEK | — Swedish krona |
SFHR | — Single-family housing revenue |
SFMR | — Single-family mortgage revenue |
SGD | — Singapore dollar |
SPA | — Standby purchase agreement |
SPDR | — Standard & Poor’s Depositary Receipts |
SPEAR | — Short Puttable Exempt Adjustable Receipts |
STRIPS | — Separate trading of registered interest and |
principal securities |
TAN | — Tax anticipation notes |
TBA | — To be announced |
THB | — Thai baht |
TIPS | — Treasury inflation-protected securities |
TRAN | — Tax revenue anticipation notes |
TRY | — Turkish lira |
TTFA | — Transportation Trust Fund Authority |
TVA | — Tennessee Valley Authority |
ZAR | — South African rand |
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, email, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 8266
Boston, MA 02266-8266
Email: fundservice@wellsfargo.com
Website: wellsfargofunds.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
1-800-260-5969 or visit the Fund’s website at wellsfargofunds.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is a trade name used by the asset management businesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA, an affiliate of Wells Fargo & Company.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
© 2016 Wells Fargo Funds Management, LLC. All rights reserved.
244417 08-16 SVT1/SAR138 6-16 |
Table of Contents
Semi-Annual Report
June 30, 2016
Wells Fargo VT Index Asset Allocation Fund
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Reduce clutter. Save trees.
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Financial statements | ||||
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43 |
The views expressed and any forward-looking statements are as of June 30, 2016, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Funds Management, LLC. 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 Funds Management, LLC and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
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2 | Wells Fargo VT Index Asset Allocation Fund | Letter to shareholders (unaudited) |
Karla M. Rabusch
President
Wells Fargo Funds
During much of the period, investors appeared to focus on macrolevel economic issues such as recessionary fears, inconsistent global growth data, and geopolitical concerns rather than fundamental company and business characteristics.
Dear Valued Shareholder:
We are pleased to offer you this semi-annual report for the Wells Fargo VT Index Asset Allocation Funds for the six-month period that ended June 30, 2016. During much of the period, investors appeared to focus on macrolevel economic issues such as recessionary fears, inconsistent global growth data, and geopolitical concerns rather than fundamental company and business characteristics. Global equity, bond, and currency markets were volatile due to these concerns and equity performance, particularly in developed markets overseas, was restrained.
Just before the period ended, the decision of referendum voters in the U.K. to leave the European Union (E.U.) injected new uncertainty into the markets and sent stock prices and bond yields significantly lower. Regional equity markets recovered to varying degrees in the days that followed the vote, while bond prices remained elevated and yields lower as investors sought perceived safe havens due to their short-term fears.
Shifting investor sentiment reflected changing economic and business data.
The S&P 500 Index,1 a common measure of U.S. stock performance, recorded a gain of 3.84% for the six-month period that ended June 30, 2016. As anticipated, the U.S. Federal Reserve (Fed) increased the federal funds rate in December and suggested it planned to pursue additional increases in 2016. During the first six weeks of 2016, the index suffered the worst loss to open a year on record before reversing course in mid-February and trending higher fitfully through the end of June 2016. Improving domestic economic data and the Fed’s indications that it would maintain accommodative monetary policies helped improve investor sentiment. The U.S. dollar continued to strengthen, which negatively affected investment returns and U.S. corporate profits earned overseas.
Overseas, global equity markets hit low points during the first six weeks of 2016 before starting to rebound in the middle of February 2016 when business data improved and central bankers reasserted their commitment to initiatives intended to encourage economic activity. The People’s Bank of China (PBOC) continued a practice of allowing the value of the country’s currency to decline in an attempt to bolster exports. In addition, the PBOC reduced reserve ratios, which also was intended to encourage lending. The European Central Bank (ECB) pushed the deposit interest rate further into negative territory. The negative interest-rate policy is intended to encourage banks to lend their assets rather than keep them on deposit. The ECB also expanded its bond-buying program, which injects liquidity into the markets and encourages investment. The Bank of Japan (BOJ) followed the ECB’s lead by setting a negative deposit rate and continued its own bond-buying program.
For the six-month reporting period, the Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net)2 recorded a return of -10.24%. In contrast, the MSCI Emerging Markets (EM) Index (Net)3 earned a return
1 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value-weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index. |
2 | The Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States and Canada. 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 indexes 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 the equity market performance of emerging markets. The MSCI EM Index (Net) consists of the following 23 emerging markets country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, the Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey, and United Arab Emirates. You cannot invest directly in an index. |
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Letter to shareholders (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 3 |
of 6.41% as investors appeared to realize the investment opportunities available in markets where stock prices have declined substantially in recent years.
A December federal funds rate increase marked divergence of central bank policies.
Bond markets were volatile as well. The Fed’s decision to tighten credit conditions through higher interest rates in December 2015 contrasted with actions by the ECB, the PBOC, and the BOJ. In January 2016, amid falling stock markets, U.S. corporate profits declined for the second consecutive quarter. The Fed expressed hesitancy about additional credit tightening in the near term, which investors appeared to read as accommodative of business activity. Overall, policy actions of central banks and intermittently positive economic data heartened investors. The bond markets received heightened interest as a perceived safe haven after the U.K. referendum to leave the E.U.
Bonds, particularly those in international markets, benefited during the period, with the Barclays Global Aggregate ex U.S. Dollar Bond Index4 gaining 11.94%, the Barclays U.S. Aggregate Bond Index5 gaining 5.31%, and the Barclays U.S. Treasury Index6 adding 5.37% during the period.
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,
Karla M. Rabusch
President
Wells Fargo Funds
For further information about your Fund, contact your investment professional, visit our website at wellsfargofunds.com, or call us directly at 1-800-260-5969. We are available 24 hours a day, 7 days a week.
4 | The Barclays Global Aggregate ex U.S. Dollar Bond Index tracks an international basket of government, corporate, agency, and mortgage-related bonds. You cannot invest directly in an index. |
5 | The 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. |
6 | The Barclays U.S. Treasury Index is an unmanaged index of prices of U.S. Treasury bonds with maturities of 1 to 30 years. You cannot invest directly in an index. |
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4 | Wells Fargo VT Index Asset Allocation Fund | Performance highlights (unaudited) |
Investment objective
The Fund seeks long-term total return, consisting of capital appreciation and current income.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Kandarp Acharya, CFA®, FRM
Christian L. Chan, CFA®
Average annual total returns (%) as of June 30, 2016
Expense ratios1 (%) | ||||||||||||||||||||||
Inception date | 1 year | 5 year | 10 year | Gross | Net2 | |||||||||||||||||
Class 2 | 4-15-1994 | 3.95 | 11.29 | 7.09 | 1.10 | 1.00 | ||||||||||||||||
Index Asset Allocation Composite Index3 | – | 5.16 | 11.95 | 8.55 | – | – | ||||||||||||||||
Barclays U.S. Treasury Index4 | – | 6.22 | 3.53 | 4.86 | – | – | ||||||||||||||||
S&P 500 Index5 | – | 3.99 | 12.10 | 7.42 | – | – |
Figures quoted represent past performance, which is no guarantee of future results. 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 and assumes the reinvestment of dividends and capital gains. Current month-end performance is available by calling 1-800-260-5969. Performance figures of the Fund do not reflect fees charged pursuant to the terms of variable life insurance policies and variable annuity contracts. If sales loads or charges had been reflected, performance would have been lower.
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.
Balanced funds may invest in stocks and bonds. Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Bond values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. Changes in market conditions and government policies may lead to periods of heightened volatility in the bond market and reduced liquidity for certain bonds held by the Fund. In general, when interest rates rise, bond values fall and investors may lose principal value. Interest-rate changes and their impact on the Fund and its share price can be sudden and unpredictable. The use of derivatives may reduce returns and/or increase volatility. Consult the Fund’s prospectus for additional information on these and other risks.
Please refer to the prospectus provided by your participating insurance company for detailed information describing the separate accounts for information regarding surrender charges, mortality and expense risk fees, and other charges that may be assessed by the participating insurance companies.
Please see footnotes on page 5.
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Performance highlights (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 5 |
Ten largest holdings (%) as of June 30, 20166 | ||||
Apple Incorporated | 1.72 | |||
Microsoft Corporation | 1.32 | |||
Exxon Mobil Corporation | 1.28 | |||
Johnson & Johnson | 1.10 | |||
General Electric Company | 0.95 | |||
Amazon.com Incorporated | 0.91 | |||
Berkshire Hathaway Incorporated Class B | 0.89 | |||
AT&T Incorporated | 0.87 | |||
Facebook Incorporated Class A | 0.87 | |||
Verizon Communications Incorporated | 0.75 |
Equity sector distribution as of June 30, 20167 |
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Neutral target allocation |
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Current target allocation as of June 30, 20168 |
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1 | Reflects the expense ratios as stated in the most recent prospectus. 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 committed through April 30, 2017, to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s Total Annual Fund Operating Expenses After Fee Waiver at the amounts shown. After this time, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses, and extraordinary expenses are excluded from the expense cap. Without this cap, the Fund’s returns would have been lower. |
3 | Source: Wells Fargo Funds Management, LLC. The Index Asset Allocation Composite Index is weighted 40% in the Barclays U.S. Treasury Index and 60% in the S&P 500 Index. You cannot invest directly in an index. |
4 | The Barclays U.S. Treasury Index is an unmanaged index of prices of U.S. Treasury bonds with maturities of 1 to 30 years. You cannot invest directly in an index. |
5 | 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. |
6 | The ten largest holdings, excluding cash and cash equivalents, 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 | Current target allocation includes the effect of any tactical futures overlay that may be in place. The amounts are subject to change and may have changed since the date specified. |
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6 | Wells Fargo VT Index Asset Allocation Fund | Fund expenses (unaudited) |
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution (12b-1) 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 January 1, 2016 to June 30, 2016.
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 separate account charges assessed by participating insurance companies. 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 separate account charges assessed by participating insurance companies were included, your costs would have been higher.
Beginning account value 1-1-2016 | Ending account value 6-30-2016 | Expenses paid during the period¹ | Net annualized expense ratio | |||||||||||||
Class 2 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,036.29 | $ | 5.06 | 1.00 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.89 | $ | 5.02 | 1.00 | % |
1 | Expenses paid is equal to the annualized expense ratio 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). |
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 7 |
Security name | Shares | Value | ||||||||||||||
Common Stocks: 59.76% | ||||||||||||||||
Consumer Discretionary: 7.33% | ||||||||||||||||
Auto Components: 0.19% | ||||||||||||||||
BorgWarner Incorporated | 588 | $ | 17,358 | |||||||||||||
Delphi Automotive plc | 737 | 46,136 | ||||||||||||||
Johnson Controls Incorporated | 1,751 | 77,499 | ||||||||||||||
The Goodyear Tire & Rubber Company | 718 | 18,424 | ||||||||||||||
159,417 | ||||||||||||||||
|
| |||||||||||||||
Automobiles: 0.32% | ||||||||||||||||
Ford Motor Company | 10,540 | 132,488 | ||||||||||||||
General Motors Company | 3,785 | 107,116 | ||||||||||||||
Harley-Davidson Incorporated | 489 | 22,152 | ||||||||||||||
261,756 | ||||||||||||||||
|
| |||||||||||||||
Distributors: 0.08% | ||||||||||||||||
Genuine Parts Company | 404 | 40,905 | ||||||||||||||
LKQ Corporation † | 828 | 26,248 | ||||||||||||||
67,153 | ||||||||||||||||
|
| |||||||||||||||
Diversified Consumer Services: 0.02% | ||||||||||||||||
H&R Block Incorporated | 606 | 13,938 | ||||||||||||||
|
| |||||||||||||||
Hotels, Restaurants & Leisure: 1.03% | ||||||||||||||||
Carnival Corporation | 1,184 | 52,333 | ||||||||||||||
Chipotle Mexican Grill Incorporated † | 79 | 31,818 | ||||||||||||||
Darden Restaurants Incorporated | 307 | 19,445 | ||||||||||||||
Marriott International Incorporated Class A « | 515 | 34,227 | ||||||||||||||
McDonald’s Corporation | 2,371 | 285,326 | ||||||||||||||
Royal Caribbean Cruises Limited | 453 | 30,419 | ||||||||||||||
Starbucks Corporation | 3,956 | 225,967 | ||||||||||||||
Starwood Hotels & Resorts Worldwide Incorporated | 455 | 33,647 | ||||||||||||||
Wyndham Worldwide Corporation | 302 | 21,511 | ||||||||||||||
Wynn Resorts Limited | 219 | 19,850 | ||||||||||||||
Yum! Brands Incorporated | 1,101 | 91,295 | ||||||||||||||
845,838 | ||||||||||||||||
|
| |||||||||||||||
Household Durables: 0.29% | ||||||||||||||||
D.R. Horton Incorporated | 891 | 28,049 | ||||||||||||||
Garmin Limited | 316 | 13,405 | ||||||||||||||
Harman International Industries Incorporated | 190 | 13,646 | ||||||||||||||
Leggett & Platt Incorporated | 362 | 18,502 | ||||||||||||||
Lennar Corporation Class A | 495 | 22,820 | ||||||||||||||
Mohawk Industries Incorporated † | 172 | 32,639 | ||||||||||||||
Newell Rubbermaid Incorporated | 1,233 | 59,887 | ||||||||||||||
PulteGroup Incorporated | 850 | 16,567 | ||||||||||||||
Whirlpool Corporation | 204 | 33,995 | ||||||||||||||
239,510 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
8 | Wells Fargo VT Index Asset Allocation Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Internet & Catalog Retail: 1.31% | ||||||||||||||||
Amazon.com Incorporated † | 1,044 | $ | 747,107 | |||||||||||||
Expedia Incorporated | 316 | 33,591 | ||||||||||||||
Netflix Incorporated † | 1,156 | 105,751 | ||||||||||||||
The Priceline Group Incorporated † | 134 | 167,287 | ||||||||||||||
TripAdvisor Incorporated † | 308 | 19,804 | ||||||||||||||
1,073,540 | ||||||||||||||||
|
| |||||||||||||||
Leisure Products: 0.07% | ||||||||||||||||
Hasbro Incorporated | 302 | 25,365 | ||||||||||||||
Mattel Incorporated | 919 | 28,756 | ||||||||||||||
54,121 | ||||||||||||||||
|
| |||||||||||||||
Media: 1.62% | ||||||||||||||||
CBS Corporation Class B | 1,121 | 61,027 | ||||||||||||||
Comcast Corporation Class A | 6,531 | 425,756 | ||||||||||||||
Discovery Communications Incorporated Class A † | 406 | 10,243 | ||||||||||||||
Discovery Communications Incorporated Class C † | 644 | 15,359 | ||||||||||||||
Interpublic Group of Companies Incorporated | 1,086 | 25,087 | ||||||||||||||
News Corporation Class A | 1,027 | 11,656 | ||||||||||||||
News Corporation Class B | 290 | 3,384 | ||||||||||||||
Omnicom Group Incorporated | 641 | 52,235 | ||||||||||||||
Scripps Networks Interactive Incorporated Class A | 256 | 15,941 | ||||||||||||||
Tegna Incorporated | 588 | 13,624 | ||||||||||||||
The Walt Disney Company | 4,032 | 394,410 | ||||||||||||||
Time Warner Incorporated | 2,124 | 156,199 | ||||||||||||||
Twenty-First Century Fox Incorporated Class A | 2,960 | 80,068 | ||||||||||||||
Twenty-First Century Fox Incorporated Class B | 1,164 | 31,719 | ||||||||||||||
Viacom Incorporated Class B | 936 | 38,816 | ||||||||||||||
1,335,524 | ||||||||||||||||
|
| |||||||||||||||
Multiline Retail: 0.37% | ||||||||||||||||
Dollar General Corporation | 766 | 72,004 | ||||||||||||||
Dollar Tree Incorporated † | 635 | 59,842 | ||||||||||||||
Kohl’s Corporation | 496 | 18,808 | ||||||||||||||
Macy’s Incorporated | 833 | 27,997 | ||||||||||||||
Nordstrom Incorporated | 346 | 13,165 | ||||||||||||||
Target Corporation | 1,591 | 111,084 | ||||||||||||||
302,900 | ||||||||||||||||
|
| |||||||||||||||
Specialty Retail: 1.54% | ||||||||||||||||
Advance Auto Parts Incorporated | 198 | 32,003 | ||||||||||||||
AutoNation Incorporated † | 191 | 8,973 | ||||||||||||||
AutoZone Incorporated † | 80 | 63,507 | ||||||||||||||
Bed Bath & Beyond Incorporated | 417 | 18,023 | ||||||||||||||
Best Buy Company Incorporated | 761 | 23,287 | ||||||||||||||
CarMax Incorporated † | 523 | 25,643 | ||||||||||||||
Foot Locker Incorporated | 367 | 20,134 | ||||||||||||||
L Brands Incorporated | 683 | 45,850 | ||||||||||||||
Lowe’s Companies Incorporated | 2,393 | 189,454 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 9 |
Security name | Shares | Value | ||||||||||||||
Specialty Retail (continued) | ||||||||||||||||
O’Reilly Automotive Incorporated † | 260 | $ | 70,486 | |||||||||||||
Ross Stores Incorporated | 1,085 | 61,509 | ||||||||||||||
Signet Jewelers Limited | 210 | 17,306 | ||||||||||||||
Staples Incorporated | 1,746 | 15,051 | ||||||||||||||
The Gap Incorporated | 612 | 12,987 | ||||||||||||||
The Home Depot Incorporated | 3,360 | 429,038 | ||||||||||||||
The TJX Companies Incorporated | 1,786 | 137,933 | ||||||||||||||
Tiffany & Company | 295 | 17,889 | ||||||||||||||
Tractor Supply Company | 360 | 32,825 | ||||||||||||||
ULTA Salon, Cosmetics and Fragrance Incorporated † | 169 | 41,175 | ||||||||||||||
Urban Outfitters Incorporated † | 233 | 6,408 | ||||||||||||||
1,269,481 | ||||||||||||||||
|
| |||||||||||||||
Textiles, Apparel & Luxury Goods: 0.49% | ||||||||||||||||
Coach Incorporated | 750 | 30,555 | ||||||||||||||
HanesBrands Incorporated | 1,019 | 25,607 | ||||||||||||||
Michael Kors Holdings Limited † | 476 | 23,552 | ||||||||||||||
Nike Incorporated Class B | 3,596 | 198,499 | ||||||||||||||
PVH Corporation | 218 | 20,542 | ||||||||||||||
Ralph Lauren Corporation | 154 | 13,801 | ||||||||||||||
Under Armour Incorporated Class A | 494 | 19,824 | ||||||||||||||
Under Armour Incorporated Class C † | 497 | 18,108 | ||||||||||||||
VF Corporation | 901 | 55,402 | ||||||||||||||
405,890 | ||||||||||||||||
|
| |||||||||||||||
Consumer Staples: 6.31% | ||||||||||||||||
Beverages: 1.40% | ||||||||||||||||
Brown-Forman Corporation Class B | 271 | 27,035 | ||||||||||||||
Constellation Brands Incorporated Class A | 476 | 78,730 | ||||||||||||||
Dr Pepper Snapple Group Incorporated | 502 | 48,508 | ||||||||||||||
Molson Coors Brewing Company Class B | 497 | 50,262 | ||||||||||||||
Monster Beverage Corporation † | 380 | 61,070 | ||||||||||||||
PepsiCo Incorporated | 3,901 | 413,272 | ||||||||||||||
The Coca-Cola Company | 10,517 | 476,736 | ||||||||||||||
1,155,613 | ||||||||||||||||
|
| |||||||||||||||
Food & Staples Retailing: 1.40% | ||||||||||||||||
Costco Wholesale Corporation | 1,183 | 185,778 | ||||||||||||||
CVS Health Corporation | 2,901 | 277,742 | ||||||||||||||
Sysco Corporation | 1,416 | 71,848 | ||||||||||||||
The Kroger Company | 2,576 | 94,771 | ||||||||||||||
Wal-Mart Stores Incorporated | 4,125 | 301,208 | ||||||||||||||
Walgreens Boots Alliance Incorporated | 2,334 | 194,352 | ||||||||||||||
Whole Foods Market Incorporated | 867 | 27,761 | ||||||||||||||
1,153,460 | ||||||||||||||||
|
| |||||||||||||||
Food Products: 1.11% | ||||||||||||||||
Archer Daniels Midland Company | 1,587 | 68,066 | ||||||||||||||
Campbell Soup Company | 484 | 32,201 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
10 | Wells Fargo VT Index Asset Allocation Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Food Products (continued) | ||||||||||||||||
ConAgra Foods Incorporated | 1,178 | $ | 56,320 | |||||||||||||
General Mills Incorporated | 1,605 | 114,469 | ||||||||||||||
Hormel Foods Corporation | 729 | 26,681 | ||||||||||||||
Kellogg Company | 680 | 55,522 | ||||||||||||||
McCormick & Company Incorporated | 311 | 33,174 | ||||||||||||||
Mead Johnson Nutrition Company | 504 | 45,738 | ||||||||||||||
Mondelez International Incorporated Class A | 4,192 | 190,778 | ||||||||||||||
The Hershey Company | 379 | 43,013 | ||||||||||||||
The J.M. Smucker Company | 323 | 49,228 | ||||||||||||||
The Kraft Heinz Company | 1,609 | 142,364 | ||||||||||||||
Tyson Foods Incorporated Class A | 811 | 54,167 | ||||||||||||||
911,721 | ||||||||||||||||
|
| |||||||||||||||
Household Products: 1.22% | ||||||||||||||||
Church & Dwight Company Incorporated | 346 | 35,600 | ||||||||||||||
Colgate-Palmolive Company | 2,412 | 176,558 | ||||||||||||||
Kimberly-Clark Corporation | 973 | 133,768 | ||||||||||||||
The Clorox Company | 349 | 48,298 | ||||||||||||||
The Procter & Gamble Company | 7,190 | 608,777 | ||||||||||||||
1,003,001 | ||||||||||||||||
|
| |||||||||||||||
Personal Products: 0.07% | ||||||||||||||||
The Estee Lauder Companies Incorporated Class A | 601 | 54,703 | ||||||||||||||
|
| |||||||||||||||
Tobacco: 1.11% | ||||||||||||||||
Altria Group Incorporated | 5,284 | 364,385 | ||||||||||||||
Philip Morris International | 4,190 | 426,207 | ||||||||||||||
Reynolds American Incorporated | 2,235 | 120,534 | ||||||||||||||
911,126 | ||||||||||||||||
|
| |||||||||||||||
Energy: 4.42% | ||||||||||||||||
Energy Equipment & Services: 0.66% | ||||||||||||||||
Baker Hughes Incorporated | 1,182 | 53,344 | ||||||||||||||
Diamond Offshore Drilling Incorporated « | 173 | 4,209 | ||||||||||||||
FMC Technologies Incorporated † | 611 | 16,295 | ||||||||||||||
Halliburton Company | 2,320 | 105,073 | ||||||||||||||
Helmerich & Payne Incorporated | 291 | 19,535 | ||||||||||||||
National Oilwell Varco Incorporated | 1,018 | 34,256 | ||||||||||||||
Schlumberger Limited | 3,753 | 296,787 | ||||||||||||||
Transocean Limited | 926 | 11,010 | ||||||||||||||
540,509 | ||||||||||||||||
|
| |||||||||||||||
Oil, Gas & Consumable Fuels: 3.76% | ||||||||||||||||
Anadarko Petroleum Corporation | 1,379 | 73,432 | ||||||||||||||
Apache Corporation | 1,022 | 56,895 | ||||||||||||||
Cabot Oil & Gas Corporation | 1,256 | 32,329 | ||||||||||||||
Chesapeake Energy Corporation † | 1,578 | 6,754 | ||||||||||||||
Chevron Corporation | 5,090 | 533,585 | ||||||||||||||
Cimarex Energy Company | 255 | 30,427 | ||||||||||||||
Columbia Pipeline Group Incorporated | 1,079 | 27,504 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 11 |
Security name | Shares | Value | ||||||||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||||||||
Concho Resources Incorporated † | 351 | $ | 41,864 | |||||||||||||
ConocoPhillips | 3,345 | 145,842 | ||||||||||||||
Devon Energy Corporation | 1,415 | 51,294 | ||||||||||||||
EOG Resources Incorporated | 1,486 | 123,962 | ||||||||||||||
EQT Corporation | 466 | 36,082 | ||||||||||||||
Exxon Mobil Corporation | 11,201 | 1,049,982 | ||||||||||||||
Hess Corporation | 711 | 42,731 | ||||||||||||||
Kinder Morgan Incorporated | 4,943 | 92,533 | ||||||||||||||
Marathon Oil Corporation | 2,289 | 34,358 | ||||||||||||||
Marathon Petroleum Corporation | 1,430 | 54,283 | ||||||||||||||
Murphy Oil Corporation | 437 | 13,875 | ||||||||||||||
Newfield Exploration Company † | 531 | 23,460 | ||||||||||||||
Noble Energy Incorporated | 1,157 | 41,502 | ||||||||||||||
Occidental Petroleum Corporation | 2,063 | 155,880 | ||||||||||||||
ONEOK Incorporated | 567 | 26,904 | ||||||||||||||
Phillips 66 Company | 1,263 | 100,206 | ||||||||||||||
Pioneer Natural Resources Company | 441 | 66,684 | ||||||||||||||
Range Resources Corporation | 458 | 19,758 | ||||||||||||||
Southwestern Energy Company † | 1,045 | 13,146 | ||||||||||||||
Spectra Energy Corporation | 1,847 | 67,656 | ||||||||||||||
Tesoro Corporation | 323 | 24,199 | ||||||||||||||
The Williams Companies Incorporated | 1,844 | 39,886 | ||||||||||||||
Valero Energy Corporation | 1,269 | 64,719 | ||||||||||||||
3,091,732 | ||||||||||||||||
|
| |||||||||||||||
Financials: 9.41% | ||||||||||||||||
Banks: 3.12% | ||||||||||||||||
Bank of America Corporation | 27,748 | 368,216 | ||||||||||||||
BB&T Corporation | 2,217 | 78,947 | ||||||||||||||
Citigroup Incorporated | 7,927 | 336,026 | ||||||||||||||
Citizens Financial Group Incorporated | 1,428 | 28,531 | ||||||||||||||
Comerica Incorporated | 473 | 19,454 | ||||||||||||||
Fifth Third Bancorp | 2,073 | 36,464 | ||||||||||||||
Huntington Bancshares Incorporated | 2,158 | 19,293 | ||||||||||||||
JPMorgan Chase & Company | 9,878 | 613,819 | ||||||||||||||
KeyCorp | 2,275 | 25,139 | ||||||||||||||
M&T Bank Corporation | 429 | 50,721 | ||||||||||||||
People’s United Financial Incorporated | 839 | 12,300 | ||||||||||||||
PNC Financial Services Group Incorporated | 1,349 | 109,795 | ||||||||||||||
Regions Financial Corporation | 3,422 | 29,121 | ||||||||||||||
SunTrust Banks Incorporated | 1,354 | 55,622 | ||||||||||||||
US Bancorp | 4,383 | 176,766 | ||||||||||||||
Wells Fargo & Company (l) | 12,480 | 590,678 | ||||||||||||||
Zions Bancorporation | 553 | 13,897 | ||||||||||||||
2,564,789 | ||||||||||||||||
|
| |||||||||||||||
Capital Markets: 1.05% | ||||||||||||||||
Affiliated Managers Group Incorporated † | 145 | 20,412 | ||||||||||||||
Ameriprise Financial Incorporated | 448 | 40,253 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
12 | Wells Fargo VT Index Asset Allocation Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Capital Markets (continued) | ||||||||||||||||
Bank of New York Mellon Corporation | 2,909 | $ | 113,015 | |||||||||||||
BlackRock Incorporated | 339 | 116,118 | ||||||||||||||
Charles Schwab Corporation | 3,248 | 82,207 | ||||||||||||||
E*TRADE Financial Corporation † | 752 | 17,664 | ||||||||||||||
Franklin Resources Incorporated | 995 | 33,203 | ||||||||||||||
Goldman Sachs Group Incorporated | 1,043 | 154,969 | ||||||||||||||
Invesco Limited | 1,126 | 28,758 | ||||||||||||||
Legg Mason Incorporated | 284 | 8,375 | ||||||||||||||
Morgan Stanley | 4,081 | 106,024 | ||||||||||||||
Northern Trust Corporation | 579 | 38,365 | ||||||||||||||
State Street Corporation | 1,069 | 57,640 | ||||||||||||||
T. Rowe Price Group Incorporated | 670 | 48,890 | ||||||||||||||
865,893 | ||||||||||||||||
|
| |||||||||||||||
Consumer Finance: 0.42% | ||||||||||||||||
American Express Company | 2,184 | 132,700 | ||||||||||||||
Capital One Financial Corporation | 1,383 | 87,834 | ||||||||||||||
Discover Financial Services | 1,113 | 59,646 | ||||||||||||||
Navient Corporation | 893 | 10,671 | ||||||||||||||
Synchrony Financial † | 2,252 | 56,931 | ||||||||||||||
347,782 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 1.29% | ||||||||||||||||
Berkshire Hathaway Incorporated Class B † | 5,062 | 732,927 | ||||||||||||||
CME Group Incorporated | 915 | 89,121 | ||||||||||||||
Intercontinental Exchange Incorporated | 321 | 82,163 | ||||||||||||||
Leucadia National Corporation | 900 | 15,597 | ||||||||||||||
Moody’s Corporation | 456 | 42,732 | ||||||||||||||
S&P Global Incorporated | 715 | 76,691 | ||||||||||||||
The NASDAQ OMX Group Incorporated | 310 | 20,048 | ||||||||||||||
1,059,279 | ||||||||||||||||
|
| |||||||||||||||
Insurance: 1.59% | ||||||||||||||||
AFLAC Incorporated | 1,118 | 80,675 | ||||||||||||||
American International Group Incorporated | 3,023 | 159,886 | ||||||||||||||
Aon plc | 715 | 78,099 | ||||||||||||||
Arthur J. Gallagher & Company | 478 | 22,753 | ||||||||||||||
Assurant Incorporated | 166 | 14,327 | ||||||||||||||
Chubb Limited | 1,254 | 163,910 | ||||||||||||||
Cincinnati Financial Corporation | 399 | 29,881 | ||||||||||||||
Lincoln National Corporation | 645 | 25,007 | ||||||||||||||
Loews Corporation | 723 | 29,708 | ||||||||||||||
Marsh & McLennan Companies Incorporated | 1,408 | 96,392 | ||||||||||||||
MetLife Incorporated | 2,968 | 118,215 | ||||||||||||||
Principal Financial Group Incorporated | 727 | 29,887 | ||||||||||||||
Prudential Financial Incorporated | 1,193 | 85,109 | ||||||||||||||
The Allstate Corporation | 1,011 | 70,719 | ||||||||||||||
The Hartford Financial Services Group Incorporated | 1,062 | 47,132 | ||||||||||||||
The Progressive Corporation | 1,575 | 52,763 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 13 |
Security name | Shares | Value | ||||||||||||||
Insurance (continued) | ||||||||||||||||
The Travelers Companies Incorporated | 789 | $ | 93,923 | |||||||||||||
Torchmark Corporation | 302 | 18,670 | ||||||||||||||
UnumProvident Corporation | 641 | 20,377 | ||||||||||||||
Willis Towers Watson plc | 373 | 46,368 | ||||||||||||||
XL Group plc | 768 | 25,582 | ||||||||||||||
1,309,383 | ||||||||||||||||
|
| |||||||||||||||
Real Estate Management & Development: 0.03% | ||||||||||||||||
CBRE Group Incorporated Class A † | 788 | 20,866 | ||||||||||||||
|
| |||||||||||||||
REITs: 1.91% | ||||||||||||||||
American Tower Corporation | 1,146 | 130,197 | ||||||||||||||
Apartment Investment & Management Company Class A | 423 | 18,680 | ||||||||||||||
AvalonBay Communities Incorporated | 370 | 66,744 | ||||||||||||||
Boston Properties Incorporated | 414 | 54,607 | ||||||||||||||
Crown Castle International Corporation | 910 | 92,301 | ||||||||||||||
Digital Realty Trust Incorporated | 396 | 43,160 | ||||||||||||||
Equinix Incorporated | 187 | 72,506 | ||||||||||||||
Equity Residential | 987 | 67,985 | ||||||||||||||
Essex Property Trust Incorporated | 176 | 40,144 | ||||||||||||||
Extra Space Storage Incorporated | 338 | 31,279 | ||||||||||||||
Federal Realty Investment Trust | 191 | 31,620 | ||||||||||||||
General Growth Properties Incorporated | 1,574 | 46,937 | ||||||||||||||
HCP Incorporated | 1,261 | 44,614 | ||||||||||||||
Host Hotels & Resorts Incorporated | 2,018 | 32,712 | ||||||||||||||
Iron Mountain Incorporated | 645 | 25,690 | ||||||||||||||
Kimco Realty Corporation | 1,133 | 35,554 | ||||||||||||||
Prologis Incorporated | 1,418 | 69,539 | ||||||||||||||
Public Storage Incorporated | 398 | 101,725 | ||||||||||||||
Realty Income Corporation | 695 | 48,205 | ||||||||||||||
Simon Property Group Incorporated | 835 | 181,112 | ||||||||||||||
SL Green Realty Corporation | 270 | 28,747 | ||||||||||||||
The Macerich Company | 340 | 29,033 | ||||||||||||||
UDR Incorporated | 721 | 26,619 | ||||||||||||||
Ventas Incorporated | 913 | 66,485 | ||||||||||||||
Vornado Realty Trust | 479 | 47,957 | ||||||||||||||
Welltower Incorporated | 964 | 73,428 | ||||||||||||||
Weyerhaeuser Company | 2,018 | 60,076 | ||||||||||||||
1,567,656 | ||||||||||||||||
|
| |||||||||||||||
Health Care: 8.98% | ||||||||||||||||
Biotechnology: 1.74% | ||||||||||||||||
AbbVie Incorporated | 4,368 | 270,423 | ||||||||||||||
Alexion Pharmaceuticals Incorporated † | 605 | 70,640 | ||||||||||||||
Amgen Incorporated | 2,029 | 308,712 | ||||||||||||||
Biogen Incorporated † | 592 | 143,157 | ||||||||||||||
Celgene Corporation † | 2,092 | 206,334 | ||||||||||||||
Gilead Sciences Incorporated | 3,597 | 300,062 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
14 | Wells Fargo VT Index Asset Allocation Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Biotechnology (continued) | ||||||||||||||||
Regeneron Pharmaceuticals Incorporated † | 210 | $ | 73,338 | |||||||||||||
Vertex Pharmaceuticals Incorporated † | 667 | 57,375 | ||||||||||||||
1,430,041 | ||||||||||||||||
|
| |||||||||||||||
Health Care Equipment & Supplies: 1.68% | ||||||||||||||||
Abbott Laboratories | 3,969 | 156,021 | ||||||||||||||
Baxter International Incorporated | 1,491 | 67,423 | ||||||||||||||
Becton Dickinson & Company | 573 | 97,175 | ||||||||||||||
Boston Scientific Corporation † | 3,665 | 85,651 | ||||||||||||||
C.R. Bard Incorporated | 197 | 46,327 | ||||||||||||||
Danaher Corporation | 1,618 | 163,418 | ||||||||||||||
Dentsply Sirona Incorporated | 632 | 39,209 | ||||||||||||||
Edwards Lifesciences Corporation † | 572 | 57,046 | ||||||||||||||
Hologic Incorporated † | 654 | 22,628 | ||||||||||||||
Intuitive Surgical Incorporated † | 103 | 68,125 | ||||||||||||||
Medtronic plc | 3,798 | 329,552 | ||||||||||||||
St. Jude Medical Incorporated | 767 | 59,826 | ||||||||||||||
Stryker Corporation | 848 | 101,616 | ||||||||||||||
Varian Medical Systems Incorporated † | 256 | 21,051 | ||||||||||||||
Zimmer Holdings Incorporated | 537 | 64,644 | ||||||||||||||
1,379,712 | ||||||||||||||||
|
| |||||||||||||||
Health Care Providers & Services: 1.66% | ||||||||||||||||
Aetna Incorporated | 947 | 115,657 | ||||||||||||||
AmerisourceBergen Corporation | 495 | 39,263 | ||||||||||||||
Anthem Incorporated | 710 | 93,251 | ||||||||||||||
Cardinal Health Incorporated | 880 | 68,649 | ||||||||||||||
Centene Corporation † | 460 | 32,830 | ||||||||||||||
Cigna Corporation | 692 | 88,569 | ||||||||||||||
DaVita HealthCare Partners Incorporated † | 440 | 34,021 | ||||||||||||||
Express Scripts Holding Company † | 1,709 | 129,542 | ||||||||||||||
HCA Holdings Incorporated † | 813 | 62,609 | ||||||||||||||
Henry Schein Incorporated † | 221 | 39,073 | ||||||||||||||
Humana Incorporated | 402 | 72,312 | ||||||||||||||
Laboratory Corporation of America Holdings † | 276 | 35,955 | ||||||||||||||
McKesson Corporation | 608 | 113,483 | ||||||||||||||
Patterson Companies Incorporated | 224 | 10,727 | ||||||||||||||
Quest Diagnostics Incorporated | 382 | 31,099 | ||||||||||||||
UnitedHealth Group Incorporated | 2,568 | 362,602 | ||||||||||||||
Universal Health Services Incorporated Class B | 242 | 32,452 | ||||||||||||||
1,362,094 | ||||||||||||||||
|
| |||||||||||||||
Health Care Technology: 0.06% | ||||||||||||||||
Cerner Corporation † | 812 | 47,583 | ||||||||||||||
|
| |||||||||||||||
Life Sciences Tools & Services: 0.36% | ||||||||||||||||
Agilent Technologies Incorporated | 885 | 39,259 | ||||||||||||||
Illumina Incorporated † | 397 | 55,731 | ||||||||||||||
PerkinElmer Incorporated | 294 | 15,411 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 15 |
Security name | Shares | Value | ||||||||||||||
Life Sciences Tools & Services (continued) | ||||||||||||||||
Thermo Fisher Scientific Incorporated | 1,062 | $ | 156,921 | |||||||||||||
Waters Corporation † | 218 | 30,662 | ||||||||||||||
297,984 | ||||||||||||||||
|
| |||||||||||||||
Pharmaceuticals: 3.48% | ||||||||||||||||
Allergan plc † | 1,068 | 246,804 | ||||||||||||||
Bristol-Myers Squibb Company | 4,509 | 331,637 | ||||||||||||||
Eli Lilly & Company | 2,624 | 206,640 | ||||||||||||||
Endo International plc † | 553 | 8,621 | ||||||||||||||
Johnson & Johnson | 7,430 | 901,259 | ||||||||||||||
Mallinckrodt plc † | 295 | 17,930 | ||||||||||||||
Merck & Company Incorporated | 7,477 | 430,750 | ||||||||||||||
Mylan NV † | 1,153 | 49,856 | ||||||||||||||
Perrigo Company plc | 386 | 34,999 | ||||||||||||||
Pfizer Incorporated | 16,383 | 576,845 | ||||||||||||||
Zoetis Incorporated | 1,233 | 58,518 | ||||||||||||||
2,863,859 | ||||||||||||||||
|
| |||||||||||||||
Industrials: 5.89% | ||||||||||||||||
Aerospace & Defense: 1.57% | ||||||||||||||||
General Dynamics Corporation | 776 | 108,050 | ||||||||||||||
Honeywell International Incorporated | 2,058 | 239,387 | ||||||||||||||
L-3 Communications Holdings Incorporated | 207 | 30,365 | ||||||||||||||
Lockheed Martin Corporation | 708 | 175,704 | ||||||||||||||
Northrop Grumman Corporation | 487 | 108,250 | ||||||||||||||
Raytheon Company | 802 | 109,032 | ||||||||||||||
Rockwell Collins Incorporated | 351 | 29,884 | ||||||||||||||
Textron Incorporated | 725 | 26,506 | ||||||||||||||
The Boeing Company | 1,617 | 210,000 | ||||||||||||||
TransDigm Group Incorporated † | 143 | 37,708 | ||||||||||||||
United Technologies Corporation | 2,102 | 215,560 | ||||||||||||||
1,290,446 | ||||||||||||||||
|
| |||||||||||||||
Air Freight & Logistics: 0.43% | ||||||||||||||||
C.H. Robinson Worldwide Incorporated | 385 | 28,586 | ||||||||||||||
Expeditors International of Washington Incorporated | 492 | 24,128 | ||||||||||||||
FedEx Corporation | 674 | 102,300 | ||||||||||||||
United Parcel Service Incorporated Class B | 1,864 | 200,790 | ||||||||||||||
355,804 | ||||||||||||||||
|
| |||||||||||||||
Airlines: 0.30% | ||||||||||||||||
Alaska Air Group Incorporated | 332 | 19,352 | ||||||||||||||
American Airlines Group Incorporated | 1,561 | 44,192 | ||||||||||||||
Delta Air Lines Incorporated | 2,084 | 75,920 | ||||||||||||||
Southwest Airlines Company | 1,725 | 67,637 | ||||||||||||||
United Continental Holdings Incorporated † | 907 | 37,223 | ||||||||||||||
244,324 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
16 | Wells Fargo VT Index Asset Allocation Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Building Products: 0.09% | ||||||||||||||||
Allegion plc | 258 | $ | 17,913 | |||||||||||||
Fortune Brands Home & Security Incorporated | 411 | 23,826 | ||||||||||||||
Masco Corporation | 899 | 27,815 | ||||||||||||||
69,554 | ||||||||||||||||
|
| |||||||||||||||
Commercial Services & Supplies: 0.26% | ||||||||||||||||
Cintas Corporation | 233 | 22,864 | ||||||||||||||
Pitney Bowes Incorporated | 509 | 9,060 | ||||||||||||||
Republic Services Incorporated | 640 | 32,838 | ||||||||||||||
Stericycle Incorporated † | 228 | 23,739 | ||||||||||||||
Tyco International plc | 1,149 | 48,947 | ||||||||||||||
Waste Management Incorporated | 1,115 | 73,891 | ||||||||||||||
211,339 | ||||||||||||||||
|
| |||||||||||||||
Construction & Engineering: 0.05% | ||||||||||||||||
Fluor Corporation | 376 | 18,529 | ||||||||||||||
Jacobs Engineering Group Incorporated † | 329 | 16,387 | ||||||||||||||
Quanta Services Incorporated † | 408 | 9,433 | ||||||||||||||
44,349 | ||||||||||||||||
|
| |||||||||||||||
Electrical Equipment: 0.32% | ||||||||||||||||
Acuity Brands Incorporated | 118 | 29,259 | ||||||||||||||
AMETEK Incorporated | 630 | 29,125 | ||||||||||||||
Eaton Corporation plc | 1,237 | 73,886 | ||||||||||||||
Emerson Electric Company | 1,738 | 90,654 | ||||||||||||||
Rockwell Automation Incorporated | 351 | 40,302 | ||||||||||||||
263,226 | ||||||||||||||||
|
| |||||||||||||||
Industrial Conglomerates: 1.36% | ||||||||||||||||
3M Company | 1,638 | 286,847 | ||||||||||||||
General Electric Company | 24,840 | 781,963 | ||||||||||||||
Roper Industries Incorporated | 273 | 46,563 | ||||||||||||||
1,115,373 | ||||||||||||||||
|
| |||||||||||||||
Machinery: 0.76% | ||||||||||||||||
Caterpillar Incorporated | 1,577 | 119,552 | ||||||||||||||
Cummins Incorporated | 428 | 48,124 | ||||||||||||||
Deere & Company | 806 | 65,318 | ||||||||||||||
Dover Corporation | 419 | 29,045 | ||||||||||||||
Flowserve Corporation | 352 | 15,900 | ||||||||||||||
Illinois Tool Works Incorporated | 873 | 90,932 | ||||||||||||||
Ingersoll-Rand plc | 695 | 44,258 | ||||||||||||||
Paccar Incorporated | 947 | 49,121 | ||||||||||||||
Parker-Hannifin Corporation | 363 | 39,222 | ||||||||||||||
Pentair plc | 488 | 28,446 | ||||||||||||||
Snap-on Incorporated | 157 | 24,778 | ||||||||||||||
Stanley Black & Decker Incorporated | 405 | 45,044 | ||||||||||||||
Xylem Incorporated | 483 | 21,566 | ||||||||||||||
621,306 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 17 |
Security name | Shares | Value | ||||||||||||||
Professional Services: 0.18% | ||||||||||||||||
Dun & Bradstreet Corporation | 98 | $ | 11,940 | |||||||||||||
Equifax Incorporated | 321 | 41,216 | ||||||||||||||
Nielsen Holdings plc | 975 | 50,671 | ||||||||||||||
Robert Half International Incorporated | 354 | 13,509 | ||||||||||||||
Verisk Analytics Incorporated † | 417 | 33,810 | ||||||||||||||
151,146 | ||||||||||||||||
|
| |||||||||||||||
Road & Rail: 0.47% | ||||||||||||||||
CSX Corporation | 2,582 | 67,339 | ||||||||||||||
J.B. Hunt Transport Services Incorporated | 240 | 19,423 | ||||||||||||||
Kansas City Southern | 291 | 26,216 | ||||||||||||||
Norfolk Southern Corporation | 798 | 67,934 | ||||||||||||||
Ryder System Incorporated | 145 | 8,865 | ||||||||||||||
Union Pacific Corporation | 2,271 | 198,145 | ||||||||||||||
387,922 | ||||||||||||||||
|
| |||||||||||||||
Trading Companies & Distributors: 0.10% | ||||||||||||||||
Fastenal Company « | 780 | 34,624 | ||||||||||||||
United Rentals Incorporated † | 238 | 15,970 | ||||||||||||||
W.W. Grainger Incorporated « | 152 | 34,542 | ||||||||||||||
85,136 | ||||||||||||||||
|
| |||||||||||||||
Information Technology: 11.82% | ||||||||||||||||
Communications Equipment: 0.59% | ||||||||||||||||
Cisco Systems Incorporated | 13,586 | 389,782 | ||||||||||||||
F5 Networks Incorporated † | 180 | 20,491 | ||||||||||||||
Harris Corporation | 336 | 28,036 | ||||||||||||||
Juniper Networks Incorporated | 954 | 21,455 | ||||||||||||||
Motorola Solutions Incorporated | 429 | 28,301 | ||||||||||||||
488,065 | ||||||||||||||||
|
| |||||||||||||||
Electronic Equipment, Instruments & Components: 0.21% | ||||||||||||||||
Amphenol Corporation Class A | 831 | 47,641 | ||||||||||||||
Corning Incorporated | 2,905 | 59,494 | ||||||||||||||
FLIR Systems Incorporated | 371 | 11,482 | ||||||||||||||
TE Connectivity Limited | 966 | 55,168 | ||||||||||||||
173,785 | ||||||||||||||||
|
| |||||||||||||||
Internet Software & Services: 2.47% | ||||||||||||||||
Akamai Technologies Incorporated † | 474 | 26,511 | ||||||||||||||
Alphabet Incorporated Class A † | 793 | 557,899 | ||||||||||||||
Alphabet Incorporated Class C † | 797 | 551,604 | ||||||||||||||
eBay Incorporated | 2,855 | 66,836 | ||||||||||||||
Facebook Incorporated Class A † | 6,245 | 713,679 | ||||||||||||||
VeriSign Incorporated † | 257 | 22,220 | ||||||||||||||
Yahoo! Incorporated † | 2,360 | 88,642 | ||||||||||||||
2,027,391 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
18 | Wells Fargo VT Index Asset Allocation Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
IT Services: 2.19% | ||||||||||||||||
Accenture plc Class A | 1,685 | $ | 190,894 | |||||||||||||
Alliance Data Systems Corporation † | 159 | 31,151 | ||||||||||||||
Automatic Data Processing Incorporated | 1,230 | 113,000 | ||||||||||||||
Cognizant Technology Solutions Corporation Class A † | 1,636 | 93,645 | ||||||||||||||
CSRA Incorporated | 370 | 8,669 | ||||||||||||||
Fidelity National Information Services Incorporated | 749 | 55,186 | ||||||||||||||
Fiserv Incorporated † | 601 | 65,347 | ||||||||||||||
Global Payments Incorporated | 416 | 29,694 | ||||||||||||||
International Business Machines Corporation | 2,385 | 361,995 | ||||||||||||||
MasterCard Incorporated Class A | 2,622 | 230,893 | ||||||||||||||
Paychex Incorporated | 865 | 51,468 | ||||||||||||||
PayPal Holdings Incorporated † | 2,979 | 108,763 | ||||||||||||||
Teradata Corporation † | 351 | 8,800 | ||||||||||||||
The Western Union Company | 1,326 | 25,433 | ||||||||||||||
Total System Services Incorporated | 456 | 24,218 | ||||||||||||||
Visa Incorporated Class A | 5,145 | 381,605 | ||||||||||||||
Xerox Corporation | 2,572 | 24,408 | ||||||||||||||
1,805,169 | ||||||||||||||||
|
| |||||||||||||||
Semiconductors & Semiconductor Equipment: 1.70% | ||||||||||||||||
Analog Devices Incorporated | 830 | 47,011 | ||||||||||||||
Applied Materials Incorporated | 2,942 | 70,520 | ||||||||||||||
Broadcom Limited | 1,002 | 155,711 | ||||||||||||||
First Solar Incorporated † | 206 | 9,987 | ||||||||||||||
Intel Corporation | 12,756 | 418,397 | ||||||||||||||
KLA-Tencor Corporation | 420 | 30,765 | ||||||||||||||
Lam Research Corporation | 431 | 36,230 | ||||||||||||||
Linear Technology Corporation | 645 | 30,012 | ||||||||||||||
Microchip Technology Incorporated « | 580 | 29,441 | ||||||||||||||
Micron Technology Incorporated † | 2,801 | 38,542 | ||||||||||||||
NVIDIA Corporation | 1,370 | 64,404 | ||||||||||||||
Qorvo Incorporated † | 344 | 19,009 | ||||||||||||||
QUALCOMM Incorporated | 3,967 | 212,512 | ||||||||||||||
Skyworks Solutions Incorporated | 514 | 32,526 | ||||||||||||||
Texas Instruments Incorporated | 2,712 | 169,907 | ||||||||||||||
Xilinx Incorporated | 685 | 31,599 | ||||||||||||||
1,396,573 | ||||||||||||||||
|
| |||||||||||||||
Software: 2.50% | ||||||||||||||||
Activision Blizzard Incorporated | 1,376 | 54,531 | ||||||||||||||
Adobe Systems Incorporated † | 1,351 | 129,412 | ||||||||||||||
Autodesk Incorporated † | 607 | 32,863 | ||||||||||||||
CA Incorporated | 799 | 26,231 | ||||||||||||||
Citrix Systems Incorporated † | 419 | 33,558 | ||||||||||||||
Electronic Arts Incorporated † | 814 | 61,669 | ||||||||||||||
Intuit Incorporated | 690 | 77,011 | ||||||||||||||
Microsoft Corporation | 21,233 | 1,086,493 | ||||||||||||||
Oracle Corporation | 8,407 | 344,099 | ||||||||||||||
Red Hat Incorporated † | 490 | 35,574 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 19 |
Security name | Shares | Value | ||||||||||||||
Software (continued) | ||||||||||||||||
Salesforce.com Incorporated † | 1,720 | $ | 136,585 | |||||||||||||
Symantec Corporation | 1,654 | 33,973 | ||||||||||||||
2,051,999 | ||||||||||||||||
|
| |||||||||||||||
Technology Hardware, Storage & Peripherals: 2.16% | ||||||||||||||||
Apple Incorporated | 14,796 | 1,414,498 | ||||||||||||||
EMC Corporation | 5,276 | 143,349 | ||||||||||||||
Hewlett Packard Enterprise Company | 4,488 | 81,996 | ||||||||||||||
HP Incorporated | 4,621 | 57,994 | ||||||||||||||
NetApp Incorporated | 780 | 19,180 | ||||||||||||||
Seagate Technology plc | 806 | 19,634 | ||||||||||||||
Western Digital Corporation | 760 | 35,918 | ||||||||||||||
1,772,569 | ||||||||||||||||
|
| |||||||||||||||
Materials: 1.71% | ||||||||||||||||
Chemicals: 1.23% | ||||||||||||||||
Air Products & Chemicals Incorporated | 525 | 74,571 | ||||||||||||||
Albemarle Corporation | 302 | 23,955 | ||||||||||||||
CF Industries Holdings Incorporated | 629 | 15,159 | ||||||||||||||
Dow Chemical Company | 3,033 | 150,770 | ||||||||||||||
E.I. du Pont de Nemours & Company | 2,359 | 152,863 | ||||||||||||||
Eastman Chemical Company | 401 | 27,228 | ||||||||||||||
Ecolab Incorporated | 712 | 84,443 | ||||||||||||||
FMC Corporation | 361 | 16,718 | ||||||||||||||
International Flavors & Fragrances Incorporated | 214 | 26,979 | ||||||||||||||
LyondellBasell Industries NV Class A | 922 | 68,615 | ||||||||||||||
Monsanto Company | 1,179 | 121,920 | ||||||||||||||
PPG Industries Incorporated | 719 | 74,884 | ||||||||||||||
Praxair Incorporated | 770 | 86,540 | ||||||||||||||
The Mosaic Company | 945 | 24,740 | ||||||||||||||
The Sherwin-Williams Company | 211 | 61,964 | ||||||||||||||
1,011,349 | ||||||||||||||||
|
| |||||||||||||||
Construction Materials: 0.09% | ||||||||||||||||
Martin Marietta Materials Incorporated | 172 | 33,024 | ||||||||||||||
Vulcan Materials Company | 359 | 43,209 | ||||||||||||||
76,233 | ||||||||||||||||
|
| |||||||||||||||
Containers & Packaging: 0.18% | ||||||||||||||||
Avery Dennison Corporation | 240 | 17,940 | ||||||||||||||
Ball Corporation | 382 | 27,615 | ||||||||||||||
International Paper Company | 1,110 | 47,042 | ||||||||||||||
Owens-Illinois Incorporated † | 437 | 7,870 | ||||||||||||||
Sealed Air Corporation | 532 | 24,456 | ||||||||||||||
WestRock Company | 682 | 26,509 | ||||||||||||||
151,432 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
20 | Wells Fargo VT Index Asset Allocation Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Metals & Mining: 0.21% | ||||||||||||||||
Alcoa Incorporated | 3,552 | $ | 32,927 | |||||||||||||
Freeport-McMoRan Incorporated | 3,382 | 37,675 | ||||||||||||||
Newmont Mining Corporation | 1,432 | 56,020 | ||||||||||||||
Nucor Corporation | 858 | 42,394 | ||||||||||||||
169,016 | ||||||||||||||||
|
| |||||||||||||||
Telecommunication Services: 1.74% | ||||||||||||||||
Diversified Telecommunication Services: 1.74% | ||||||||||||||||
AT&T Incorporated | 16,628 | 718,496 | ||||||||||||||
CenturyLink Incorporated | 1,474 | 42,761 | ||||||||||||||
Frontier Communications Corporation | 3,168 | 15,650 | ||||||||||||||
Level 3 Communications Incorporated † | 783 | 40,317 | ||||||||||||||
Verizon Communications Incorporated | 11,011 | 614,854 | ||||||||||||||
1,432,078 | ||||||||||||||||
|
| |||||||||||||||
Utilities: 2.15% | ||||||||||||||||
Electric Utilities: 1.35% | ||||||||||||||||
Alliant Energy Corporation | 610 | 24,223 | ||||||||||||||
American Electric Power Company Incorporated | 1,327 | 93,009 | ||||||||||||||
Duke Energy Corporation | 1,860 | 159,569 | ||||||||||||||
Edison International | 880 | 68,350 | ||||||||||||||
Entergy Corporation | 483 | 39,292 | ||||||||||||||
Eversource Energy | 856 | 51,274 | ||||||||||||||
Exelon Corporation | 2,490 | 90,536 | ||||||||||||||
FirstEnergy Corporation | 1,147 | 40,042 | ||||||||||||||
NextEra Energy Incorporated | 1,246 | 162,478 | ||||||||||||||
PG&E Corporation | 1,340 | 85,653 | ||||||||||||||
Pinnacle West Capital Corporation | 299 | 24,237 | ||||||||||||||
PPL Corporation | 1,828 | 69,007 | ||||||||||||||
The Southern Company | 2,535 | 135,952 | ||||||||||||||
Xcel Energy Incorporated | 1,372 | 61,438 | ||||||||||||||
1,105,060 | ||||||||||||||||
|
| |||||||||||||||
Independent Power & Renewable Electricity Producers: 0.04% | ||||||||||||||||
AES Corporation | 1,780 | 22,214 | ||||||||||||||
NRG Energy Incorporated | 850 | 12,742 | ||||||||||||||
34,956 | ||||||||||||||||
|
| |||||||||||||||
Multi-Utilities: 0.71% | ||||||||||||||||
Ameren Corporation | 655 | 35,095 | ||||||||||||||
CenterPoint Energy Incorporated | 1,163 | 27,912 | ||||||||||||||
CMS Energy Corporation | 753 | 34,533 | ||||||||||||||
Consolidated Edison Incorporated | 821 | 66,041 | ||||||||||||||
Dominion Resources Incorporated | 1,664 | 129,676 | ||||||||||||||
DTE Energy Company | 484 | 47,974 | ||||||||||||||
NiSource Incorporated | 868 | 23,019 | ||||||||||||||
Public Service Enterprise Group Incorporated | 1,367 | 63,716 | ||||||||||||||
SCANA Corporation | 386 | 29,205 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 21 |
Security name | Shares | Value | ||||||||||||||
Multi-Utilities (continued) | ||||||||||||||||
Sempra Energy | 639 | $ | 72,859 | |||||||||||||
WEC Energy Group Incorporated | 852 | 55,636 | ||||||||||||||
585,666 | ||||||||||||||||
|
| |||||||||||||||
Water Utilities: 0.05% | ||||||||||||||||
American Water Works Company Incorporated | 480 | 40,565 | ||||||||||||||
|
| |||||||||||||||
Total Common Stocks (Cost $29,444,524) | 49,129,685 | |||||||||||||||
|
| |||||||||||||||
Expiration date | ||||||||||||||||
Rights: 0.00% | ||||||||||||||||
Consumer Staples: 0.00% | ||||||||||||||||
Food & Staples Retailing: 0.00% | ||||||||||||||||
Safeway Casa Ley Contingent Value Rights (a)(i)† | 1-30-2019 | 684 | 0 | |||||||||||||
Safeway PDC Contingent Value Rights (a)(i)† | 1-30-2017 | 684 | 0 | |||||||||||||
Total Rights (Cost $725) | 0 | |||||||||||||||
|
| |||||||||||||||
Interest rate | Maturity date | Principal | ||||||||||||||
U.S. Treasury Securities: 38.37% | ||||||||||||||||
U.S. Treasury Bond | 2.50 | % | 2-15-2045 | $ | �� 184,000 | 191,733 | ||||||||||
U.S. Treasury Bond | 2.50 | 2-15-2046 | 69,000 | 71,914 | ||||||||||||
U.S. Treasury Bond | 2.50 | 5-15-2046 | 67,000 | 69,897 | ||||||||||||
U.S. Treasury Bond | 2.75 | 8-15-2042 | 126,000 | 138,940 | ||||||||||||
U.S. Treasury Bond | 2.75 | 11-15-2042 | 126,000 | 138,723 | ||||||||||||
U.S. Treasury Bond | 2.88 | 5-15-2043 | 182,000 | 204,793 | ||||||||||||
U.S. Treasury Bond | 2.88 | 8-15-2045 | 143,000 | 160,618 | ||||||||||||
U.S. Treasury Bond | 3.00 | 5-15-2042 | 84,000 | 97,109 | ||||||||||||
U.S. Treasury Bond | 3.00 | 11-15-2044 | 184,000 | 211,737 | ||||||||||||
U.S. Treasury Bond | 3.00 | 5-15-2045 | 148,000 | 170,264 | ||||||||||||
U.S. Treasury Bond | 3.00 | 11-15-2045 | 142,000 | 163,416 | ||||||||||||
U.S. Treasury Bond | 3.13 | 11-15-2041 | 66,000 | 78,014 | ||||||||||||
U.S. Treasury Bond | 3.13 | 2-15-2042 | 87,000 | 102,894 | ||||||||||||
U.S. Treasury Bond | 3.13 | 2-15-2043 | 129,000 | 152,190 | ||||||||||||
U.S. Treasury Bond | 3.13 | 8-15-2044 | 183,000 | 215,554 | ||||||||||||
U.S. Treasury Bond | 3.38 | 5-15-2044 | 184,000 | 226,960 | ||||||||||||
U.S. Treasury Bond | 3.50 | 2-15-2039 | 61,000 | 77,010 | ||||||||||||
U.S. Treasury Bond | 3.63 | 8-15-2043 | 152,000 | 196,264 | ||||||||||||
U.S. Treasury Bond | 3.63 | 2-15-2044 | 184,000 | 237,410 | ||||||||||||
U.S. Treasury Bond | 3.75 | 8-15-2041 | 68,000 | 88,798 | ||||||||||||
U.S. Treasury Bond | 3.75 | 11-15-2043 | 183,000 | 241,639 | ||||||||||||
U.S. Treasury Bond | 3.88 | 8-15-2040 | 71,000 | 94,297 | ||||||||||||
U.S. Treasury Bond | 4.25 | 5-15-2039 | 57,000 | 79,704 | ||||||||||||
U.S. Treasury Bond | 4.25 | 11-15-2040 | 74,000 | 103,701 | ||||||||||||
U.S. Treasury Bond | 4.38 | 2-15-2038 | 32,000 | 45,634 | ||||||||||||
U.S. Treasury Bond | 4.38 | 11-15-2039 | 57,000 | 81,058 | ||||||||||||
U.S. Treasury Bond | 4.38 | 5-15-2040 | 83,000 | 118,178 | ||||||||||||
U.S. Treasury Bond | 4.38 | 5-15-2041 | 65,000 | 92,887 | ||||||||||||
U.S. Treasury Bond | 4.50 | 2-15-2036 | 70,000 | 100,836 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
22 | Wells Fargo VT Index Asset Allocation Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Interest rate | Maturity date | Principal | Value | ||||||||||||
U.S. Treasury Securities (continued) | ||||||||||||||||
U.S. Treasury Bond | 4.50 | % | 5-15-2038 | $ | 36,000 | $ | 52,232 | |||||||||
U.S. Treasury Bond | 4.50 | 8-15-2039 | 59,000 | 85,338 | ||||||||||||
U.S. Treasury Bond | 4.63 | 2-15-2040 | 102,000 | 150,016 | ||||||||||||
U.S. Treasury Bond | 4.75 | 2-15-2037 | 24,000 | 35,700 | ||||||||||||
U.S. Treasury Bond | 4.75 | 2-15-2041 | 88,000 | 132,144 | ||||||||||||
U.S. Treasury Bond | 5.00 | 5-15-2037 | 29,000 | 44,578 | ||||||||||||
U.S. Treasury Bond | 5.25 | 11-15-2028 | 45,000 | 63,350 | ||||||||||||
U.S. Treasury Bond | 5.25 | 2-15-2029 | 33,000 | 46,671 | ||||||||||||
U.S. Treasury Bond | 5.38 | 2-15-2031 | 70,000 | 103,841 | ||||||||||||
U.S. Treasury Bond | 5.50 | 8-15-2028 | 35,000 | 50,049 | ||||||||||||
U.S. Treasury Bond | 6.00 | 2-15-2026 | 42,000 | 59,179 | ||||||||||||
U.S. Treasury Bond | 6.13 | 11-15-2027 | 49,000 | 72,342 | ||||||||||||
U.S. Treasury Bond | 6.13 | 8-15-2029 | 25,000 | 38,257 | ||||||||||||
U.S. Treasury Bond | 6.25 | 5-15-2030 | 45,000 | 70,743 | ||||||||||||
U.S. Treasury Bond | 6.38 | 8-15-2027 | 21,000 | 31,401 | ||||||||||||
U.S. Treasury Bond | 6.50 | 11-15-2026 | 28,000 | 41,490 | ||||||||||||
U.S. Treasury Bond | 6.63 | 2-15-2027 | 18,000 | 27,074 | ||||||||||||
U.S. Treasury Bond | 6.75 | 8-15-2026 | 21,000 | 31,462 | ||||||||||||
U.S. Treasury Bond | 7.25 | 8-15-2022 | 24,000 | 32,686 | ||||||||||||
U.S. Treasury Note | 0.50 | 7-31-2017 | 135,000 | 134,963 | ||||||||||||
U.S. Treasury Note | 0.63 | 7-31-2017 | 127,000 | 127,134 | ||||||||||||
U.S. Treasury Note | 0.63 | 8-31-2017 | 184,000 | 184,180 | ||||||||||||
U.S. Treasury Note | 0.63 | 9-30-2017 | 160,000 | 160,169 | ||||||||||||
U.S. Treasury Note | 0.63 | 11-30-2017 | 153,000 | 153,125 | ||||||||||||
U.S. Treasury Note | 0.63 | 4-30-2018 | 164,000 | 164,128 | ||||||||||||
U.S. Treasury Note | 0.63 | 6-30-2018 | 117,000 | 117,087 | ||||||||||||
U.S. Treasury Note | 0.75 | 10-31-2017 | 157,000 | 157,399 | ||||||||||||
U.S. Treasury Note | 0.75 | 12-31-2017 | 163,000 | 163,446 | ||||||||||||
U.S. Treasury Note | 0.75 | 1-31-2018 | 116,000 | 116,322 | ||||||||||||
U.S. Treasury Note | 0.75 | 2-28-2018 | 153,000 | 153,430 | ||||||||||||
U.S. Treasury Note | 0.75 | 3-31-2018 | 133,000 | 133,379 | ||||||||||||
U.S. Treasury Note | 0.75 | 4-15-2018 | 127,000 | 127,352 | ||||||||||||
U.S. Treasury Note | 0.75 | 4-30-2018 | 119,000 | 119,353 | ||||||||||||
U.S. Treasury Note | 0.75 | 2-15-2019 | 107,000 | 107,221 | ||||||||||||
U.S. Treasury Note | 0.88 | 7-15-2017 | 119,000 | 119,432 | ||||||||||||
U.S. Treasury Note | 0.88 | 8-15-2017 | 116,000 | 116,440 | ||||||||||||
U.S. Treasury Note | 0.88 | 10-15-2017 | 119,000 | 119,483 | ||||||||||||
U.S. Treasury Note | 0.88 | 11-15-2017 | 113,000 | 113,472 | ||||||||||||
U.S. Treasury Note | 0.88 | 11-30-2017 | 115,000 | 115,485 | ||||||||||||
U.S. Treasury Note | 0.88 | 1-15-2018 | 125,000 | 125,576 | ||||||||||||
U.S. Treasury Note | 0.88 | 1-31-2018 | 115,000 | 115,539 | ||||||||||||
U.S. Treasury Note | 0.88 | 3-31-2018 | 118,000 | 118,585 | ||||||||||||
U.S. Treasury Note | 0.88 | 5-31-2018 | 119,000 | 119,655 | ||||||||||||
U.S. Treasury Note | 0.88 | 7-15-2018 | 117,000 | 117,635 | ||||||||||||
U.S. Treasury Note | 0.88 | 10-15-2018 | 106,000 | 106,567 | ||||||||||||
U.S. Treasury Note | 0.88 | 4-15-2019 | 109,000 | 109,532 | ||||||||||||
U.S. Treasury Note | 0.88 | 5-15-2019 | 110,000 | 110,537 | ||||||||||||
U.S. Treasury Note | 0.88 | 6-15-2019 | 108,000 | 108,561 | ||||||||||||
U.S. Treasury Note | 0.88 | 7-31-2019 | 76,000 | 76,321 | ||||||||||||
U.S. Treasury Note | 1.00 | 9-15-2017 | 119,000 | 119,637 | ||||||||||||
U.S. Treasury Note | 1.00 | 12-15-2017 | 132,000 | 132,825 | ||||||||||||
U.S. Treasury Note | 1.00 | 12-31-2017 | 115,000 | 115,732 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 23 |
Security name | Interest rate | Maturity date | Principal | Value | ||||||||||||
U.S. Treasury Securities (continued) | ||||||||||||||||
U.S. Treasury Note | 1.00 | % | 2-15-2018 | $ | 125,000 | $ | 125,835 | |||||||||
U.S. Treasury Note | 1.00 | 3-15-2018 | 125,000 | 125,869 | ||||||||||||
U.S. Treasury Note | 1.00 | 5-15-2018 | 124,000 | 124,940 | ||||||||||||
U.S. Treasury Note | 1.00 | 5-31-2018 | 152,000 | 153,187 | ||||||||||||
U.S. Treasury Note | 1.00 | 8-15-2018 | 117,000 | 117,942 | ||||||||||||
U.S. Treasury Note | 1.00 | 9-15-2018 | 117,000 | 117,955 | ||||||||||||
U.S. Treasury Note | 1.00 | 3-15-2019 | 107,000 | 107,920 | ||||||||||||
U.S. Treasury Note | 1.00 | 6-30-2019 | 58,000 | 58,496 | ||||||||||||
U.S. Treasury Note | 1.00 | 8-31-2019 | 79,000 | 79,620 | ||||||||||||
U.S. Treasury Note | 1.00 | 9-30-2019 | 100,000 | 100,758 | ||||||||||||
U.S. Treasury Note | 1.00 | 11-30-2019 | 96,000 | 96,641 | ||||||||||||
U.S. Treasury Note | 1.13 | 6-15-2018 | 124,000 | 125,255 | ||||||||||||
U.S. Treasury Note | 1.13 | 1-15-2019 | 106,000 | 107,205 | ||||||||||||
U.S. Treasury Note | 1.13 | 5-31-2019 | 65,000 | 65,802 | ||||||||||||
U.S. Treasury Note | 1.13 | 12-31-2019 | 95,000 | 96,032 | ||||||||||||
U.S. Treasury Note | 1.13 | 3-31-2020 | 93,000 | 93,959 | ||||||||||||
U.S. Treasury Note | 1.13 | 4-30-2020 | 104,000 | 105,032 | ||||||||||||
U.S. Treasury Note | 1.13 | 2-28-2021 | 153,000 | 154,088 | ||||||||||||
U.S. Treasury Note | 1.13 | 6-30-2021 | 154,000 | 154,884 | ||||||||||||
U.S. Treasury Note | 1.25 | 10-31-2018 | 165,000 | 167,294 | ||||||||||||
U.S. Treasury Note | 1.25 | 11-15-2018 | 108,000 | 109,523 | ||||||||||||
U.S. Treasury Note | 1.25 | 11-30-2018 | 155,000 | 157,216 | ||||||||||||
U.S. Treasury Note | 1.25 | 12-15-2018 | 108,000 | 109,574 | ||||||||||||
U.S. Treasury Note | 1.25 | 1-31-2019 | 125,000 | 126,856 | ||||||||||||
U.S. Treasury Note | 1.25 | 4-30-2019 | 51,000 | 51,807 | ||||||||||||
U.S. Treasury Note | 1.25 | 10-31-2019 | 75,000 | 76,189 | ||||||||||||
U.S. Treasury Note | 1.25 | 1-31-2020 | 152,000 | 154,244 | ||||||||||||
U.S. Treasury Note | 1.25 | 2-29-2020 | 103,000 | 104,549 | ||||||||||||
U.S. Treasury Note | 1.25 | 3-31-2021 | 153,000 | 154,811 | ||||||||||||
U.S. Treasury Note | 1.38 | 6-30-2018 | 127,000 | 128,935 | ||||||||||||
U.S. Treasury Note | 1.38 | 7-31-2018 | 151,000 | 153,371 | ||||||||||||
U.S. Treasury Note | 1.38 | 9-30-2018 | 208,000 | 211,453 | ||||||||||||
U.S. Treasury Note | 1.38 | 11-30-2018 | 74,000 | 75,289 | ||||||||||||
U.S. Treasury Note | 1.38 | 12-31-2018 | 91,000 | 92,614 | ||||||||||||
U.S. Treasury Note | 1.38 | 2-28-2019 | 121,000 | 123,207 | ||||||||||||
U.S. Treasury Note | 1.38 | 1-31-2020 | 101,000 | 102,937 | ||||||||||||
U.S. Treasury Note | 1.38 | 2-29-2020 | 154,000 | 156,936 | ||||||||||||
U.S. Treasury Note | 1.38 | 3-31-2020 | 153,000 | 155,911 | ||||||||||||
U.S. Treasury Note | 1.38 | 4-30-2020 | 153,000 | 155,911 | ||||||||||||
U.S. Treasury Note | 1.38 | 5-31-2020 | 106,000 | 107,963 | ||||||||||||
U.S. Treasury Note | 1.38 | 8-31-2020 | 173,000 | 176,197 | ||||||||||||
U.S. Treasury Note | 1.38 | 9-30-2020 | 173,000 | 176,176 | ||||||||||||
U.S. Treasury Note | 1.38 | 10-31-2020 | 157,000 | 159,864 | ||||||||||||
U.S. Treasury Note | 1.38 | 1-31-2021 | 157,000 | 159,809 | ||||||||||||
U.S. Treasury Note | 1.38 | 4-30-2021 | 153,000 | 155,666 | ||||||||||||
U.S. Treasury Note | 1.38 | 5-31-2021 | 153,000 | 155,791 | ||||||||||||
U.S. Treasury Note | 1.38 | 6-30-2023 | 126,000 | 126,753 | ||||||||||||
U.S. Treasury Note | 1.50 | 8-31-2018 | 200,000 | 203,797 | ||||||||||||
U.S. Treasury Note | 1.50 | 12-31-2018 | 144,000 | 146,981 | ||||||||||||
U.S. Treasury Note | 1.50 | 1-31-2019 | 161,000 | 164,377 | ||||||||||||
U.S. Treasury Note | 1.50 | 2-28-2019 | 147,000 | 150,158 | ||||||||||||
U.S. Treasury Note | 1.50 | 3-31-2019 | 60,000 | 61,350 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
24 | Wells Fargo VT Index Asset Allocation Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Interest rate | Maturity date | Principal | Value | ||||||||||||
U.S. Treasury Securities (continued) | ||||||||||||||||
U.S. Treasury Note | 1.50 | % | 5-31-2019 | $ | 158,000 | $ | 161,586 | |||||||||
U.S. Treasury Note | 1.50 | 10-31-2019 | 152,000 | 155,557 | ||||||||||||
U.S. Treasury Note | 1.50 | 11-30-2019 | 153,000 | 156,580 | ||||||||||||
U.S. Treasury Note | 1.50 | 5-31-2020 | 153,000 | 156,586 | ||||||||||||
U.S. Treasury Note | 1.50 | 1-31-2022 | 128,000 | 130,630 | ||||||||||||
U.S. Treasury Note | 1.50 | 2-28-2023 | 126,000 | 127,890 | ||||||||||||
U.S. Treasury Note | 1.50 | 3-31-2023 | 126,000 | 127,841 | ||||||||||||
U.S. Treasury Note | 1.63 | 3-31-2019 | 154,000 | 157,880 | ||||||||||||
U.S. Treasury Note | 1.63 | 4-30-2019 | 159,000 | 163,087 | ||||||||||||
U.S. Treasury Note | 1.63 | 6-30-2019 | 157,000 | 161,201 | ||||||||||||
U.S. Treasury Note | 1.63 | 7-31-2019 | 155,000 | 159,196 | ||||||||||||
U.S. Treasury Note | 1.63 | 8-31-2019 | 155,000 | 159,226 | ||||||||||||
U.S. Treasury Note | 1.63 | 12-31-2019 | 152,000 | 156,216 | ||||||||||||
U.S. Treasury Note | 1.63 | 6-30-2020 | 152,000 | 156,329 | ||||||||||||
U.S. Treasury Note | 1.63 | 7-31-2020 | 171,000 | 175,876 | ||||||||||||
U.S. Treasury Note | 1.63 | 11-30-2020 | 155,000 | 159,559 | ||||||||||||
U.S. Treasury Note | 1.63 | 8-15-2022 | 117,000 | 120,012 | ||||||||||||
U.S. Treasury Note | 1.63 | 11-15-2022 | 150,000 | 153,574 | ||||||||||||
U.S. Treasury Note | 1.63 | 4-30-2023 | 128,000 | 130,915 | ||||||||||||
U.S. Treasury Note | 1.63 | 5-31-2023 | 128,000 | 130,915 | ||||||||||||
U.S. Treasury Note | 1.63 | 2-15-2026 | 102,000 | 103,211 | ||||||||||||
U.S. Treasury Note | 1.63 | 5-15-2026 | 105,000 | 106,345 | ||||||||||||
U.S. Treasury Note | 1.75 | 10-31-2018 | 66,000 | 67,689 | ||||||||||||
U.S. Treasury Note | 1.75 | 9-30-2019 | 154,000 | 158,825 | ||||||||||||
U.S. Treasury Note | 1.75 | 10-31-2020 | 148,000 | 153,012 | ||||||||||||
U.S. Treasury Note | 1.75 | 12-31-2020 | 157,000 | 162,427 | ||||||||||||
U.S. Treasury Note | 1.75 | 2-28-2022 | 129,000 | 133,349 | ||||||||||||
U.S. Treasury Note | 1.75 | 3-31-2022 | 128,000 | 132,285 | ||||||||||||
U.S. Treasury Note | 1.75 | 4-30-2022 | 126,000 | 130,213 | ||||||||||||
U.S. Treasury Note | 1.75 | 5-15-2022 | 111,000 | 114,725 | ||||||||||||
U.S. Treasury Note | 1.75 | 9-30-2022 | 144,000 | 148,601 | ||||||||||||
U.S. Treasury Note | 1.75 | 1-31-2023 | 129,000 | 132,991 | ||||||||||||
U.S. Treasury Note | 1.75 | 5-15-2023 | 226,000 | 233,195 | ||||||||||||
U.S. Treasury Note | 1.88 | 8-31-2017 | 118,000 | 119,816 | ||||||||||||
U.S. Treasury Note | 1.88 | 9-30-2017 | 102,000 | 103,677 | ||||||||||||
U.S. Treasury Note | 1.88 | 10-31-2017 | 114,000 | 115,964 | ||||||||||||
U.S. Treasury Note | 1.88 | 6-30-2020 | 86,000 | 89,306 | ||||||||||||
U.S. Treasury Note | 1.88 | 11-30-2021 | 128,000 | 133,335 | ||||||||||||
U.S. Treasury Note | 1.88 | 5-31-2022 | 128,000 | 133,165 | ||||||||||||
U.S. Treasury Note | 1.88 | 8-31-2022 | 142,000 | 147,630 | ||||||||||||
U.S. Treasury Note | 1.88 | 10-31-2022 | 143,000 | 148,625 | ||||||||||||
U.S. Treasury Note | 2.00 | 7-31-2020 | 101,000 | 105,431 | ||||||||||||
U.S. Treasury Note | 2.00 | 9-30-2020 | 106,000 | 110,733 | ||||||||||||
U.S. Treasury Note | 2.00 | 11-30-2020 | 122,000 | 127,504 | ||||||||||||
U.S. Treasury Note | 2.00 | 2-28-2021 | 136,000 | 142,285 | ||||||||||||
U.S. Treasury Note | 2.00 | 5-31-2021 | 146,000 | 152,924 | ||||||||||||
U.S. Treasury Note | 2.00 | 8-31-2021 | 127,000 | 133,047 | ||||||||||||
U.S. Treasury Note | 2.00 | 10-31-2021 | 126,000 | 132,010 | ||||||||||||
U.S. Treasury Note | 2.00 | 11-15-2021 | 178,000 | 186,650 | ||||||||||||
U.S. Treasury Note | 2.00 | 2-15-2022 | 133,000 | 139,343 | ||||||||||||
U.S. Treasury Note | 2.00 | 7-31-2022 | 144,000 | 150,812 | ||||||||||||
U.S. Treasury Note | 2.00 | 11-30-2022 | 129,000 | 135,037 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 25 |
Security name | Interest rate | Maturity date | Principal | Value | ||||||||||||
U.S. Treasury Securities (continued) | ||||||||||||||||
U.S. Treasury Note | 2.00 | % | 2-15-2023 | $ | 220,000 | $ | 230,493 | |||||||||
U.S. Treasury Note | 2.00 | 2-15-2025 | 289,000 | 302,445 | ||||||||||||
U.S. Treasury Note | 2.00 | 8-15-2025 | 220,000 | 230,106 | ||||||||||||
U.S. Treasury Note | 2.13 | 8-31-2020 | 138,000 | 144,771 | ||||||||||||
U.S. Treasury Note | 2.13 | 1-31-2021 | 132,000 | 138,811 | ||||||||||||
U.S. Treasury Note | 2.13 | 6-30-2021 | 142,000 | 149,605 | ||||||||||||
U.S. Treasury Note | 2.13 | 8-15-2021 | 178,000 | 187,623 | ||||||||||||
U.S. Treasury Note | 2.13 | 9-30-2021 | 128,000 | 134,920 | ||||||||||||
U.S. Treasury Note | 2.13 | 12-31-2021 | 126,000 | 132,876 | ||||||||||||
U.S. Treasury Note | 2.13 | 6-30-2022 | 126,000 | 132,891 | ||||||||||||
U.S. Treasury Note | 2.13 | 12-31-2022 | 129,000 | 136,029 | ||||||||||||
U.S. Treasury Note | 2.13 | 5-15-2025 | 234,000 | 247,281 | ||||||||||||
U.S. Treasury Note | 2.25 | 11-30-2017 | 117,000 | 119,756 | ||||||||||||
U.S. Treasury Note | 2.25 | 7-31-2018 | 49,000 | 50,663 | ||||||||||||
U.S. Treasury Note | 2.25 | 3-31-2021 | 135,000 | 142,873 | ||||||||||||
U.S. Treasury Note | 2.25 | 4-30-2021 | 142,000 | 150,320 | ||||||||||||
U.S. Treasury Note | 2.25 | 7-31-2021 | 131,000 | 138,845 | ||||||||||||
U.S. Treasury Note | 2.25 | 11-15-2024 | 290,000 | 309,473 | ||||||||||||
U.S. Treasury Note | 2.25 | 11-15-2025 | 219,000 | 233,774 | ||||||||||||
U.S. Treasury Note | 2.38 | 7-31-2017 | 96,000 | 97,890 | ||||||||||||
U.S. Treasury Note | 2.38 | 5-31-2018 | 58,000 | 59,969 | ||||||||||||
U.S. Treasury Note | 2.38 | 6-30-2018 | 74,000 | 76,604 | ||||||||||||
U.S. Treasury Note | 2.38 | 12-31-2020 | 123,000 | 130,591 | ||||||||||||
U.S. Treasury Note | 2.38 | 8-15-2024 | 289,000 | 311,194 | ||||||||||||
U.S. Treasury Note | 2.50 | 8-15-2023 | 190,000 | 205,868 | ||||||||||||
U.S. Treasury Note | 2.50 | 5-15-2024 | 281,000 | 305,302 | ||||||||||||
U.S. Treasury Note | 2.63 | 1-31-2018 | 81,000 | 83,601 | ||||||||||||
U.S. Treasury Note | 2.63 | 4-30-2018 | 62,000 | 64,294 | ||||||||||||
U.S. Treasury Note | 2.63 | 8-15-2020 | 149,000 | 159,331 | ||||||||||||
U.S. Treasury Note | 2.63 | 11-15-2020 | 240,000 | 257,175 | ||||||||||||
U.S. Treasury Note | 2.75 | 12-31-2017 | 90,000 | 92,904 | ||||||||||||
U.S. Treasury Note | 2.75 | 2-28-2018 | 71,000 | 73,543 | ||||||||||||
U.S. Treasury Note | 2.75 | 2-15-2019 | 128,000 | 134,930 | ||||||||||||
U.S. Treasury Note | 2.75 | 11-15-2023 | 251,000 | 276,767 | ||||||||||||
U.S. Treasury Note | 2.75 | 2-15-2024 | 217,000 | 239,599 | ||||||||||||
U.S. Treasury Note | 2.88 | 3-31-2018 | 80,000 | 83,162 | ||||||||||||
U.S. Treasury Note | 3.13 | 5-15-2019 | 142,000 | 151,801 | ||||||||||||
U.S. Treasury Note | 3.13 | 5-15-2021 | 155,000 | 170,567 | ||||||||||||
U.S. Treasury Note | 3.38 | 11-15-2019 | 159,000 | 172,788 | ||||||||||||
U.S. Treasury Note | 3.50 | 2-15-2018 | 120,000 | 125,644 | ||||||||||||
U.S. Treasury Note | 3.50 | 5-15-2020 | 138,000 | 151,708 | ||||||||||||
U.S. Treasury Note | 3.63 | 8-15-2019 | 145,000 | 157,942 | ||||||||||||
U.S. Treasury Note | 3.63 | 2-15-2020 | 191,000 | 210,204 | ||||||||||||
U.S. Treasury Note | 3.63 | 2-15-2021 | 199,000 | 222,748 | ||||||||||||
U.S. Treasury Note | 3.75 | 11-15-2018 | 141,000 | 151,366 | ||||||||||||
U.S. Treasury Note | 3.88 | 5-15-2018 | 65,000 | 69,050 | ||||||||||||
U.S. Treasury Note | 4.00 | 8-15-2018 | 74,000 | 79,403 | ||||||||||||
U.S. Treasury Note | 4.25 | 11-15-2017 | 86,000 | 90,344 | ||||||||||||
U.S. Treasury Note | 4.75 | 8-15-2017 | 80,000 | 83,738 | ||||||||||||
U.S. Treasury Note | 6.25 | 8-15-2023 | 35,000 | 46,925 | ||||||||||||
U.S. Treasury Note | 6.88 | 8-15-2025 | 21,000 | 30,823 | ||||||||||||
U.S. Treasury Note | 7.13 | 2-15-2023 | 24,000 | 33,042 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
26 | Wells Fargo VT Index Asset Allocation Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Interest rate | Maturity date | Principal | Value | ||||||||||||
U.S. Treasury Securities (continued) | ||||||||||||||||
U.S. Treasury Note | 7.50 | % | 11-15-2024 | $ | 22,000 | $ | 32,731 | |||||||||
U.S. Treasury Note | 7.63 | 11-15-2022 | 12,000 | 16,753 | ||||||||||||
U.S. Treasury Note | 7.63 | 2-15-2025 | 20,000 | 30,178 | ||||||||||||
U.S. Treasury Note | 7.88 | 2-15-2021 | 15,000 | 19,677 | ||||||||||||
U.S. Treasury Note | 8.00 | 11-15-2021 | 48,000 | 65,364 | ||||||||||||
U.S. Treasury Note | 8.13 | 8-15-2019 | 29,000 | 35,603 | ||||||||||||
U.S. Treasury Note | 8.13 | 5-15-2021 | 17,000 | 22,769 | ||||||||||||
U.S. Treasury Note | 8.13 | 8-15-2021 | 15,000 | 20,311 | ||||||||||||
U.S. Treasury Note | 8.50 | 2-15-2020 | 15,000 | 19,121 | ||||||||||||
U.S. Treasury Note | 8.75 | 5-15-2020 | 12,000 | 15,593 | ||||||||||||
U.S. Treasury Note | 8.75 | 8-15-2020 | 27,000 | 35,598 | ||||||||||||
U.S. Treasury Note | 8.88 | 8-15-2017 | 25,000 | 27,333 | ||||||||||||
U.S. Treasury Note | 8.88 | 2-15-2019 | 29,000 | 35,232 | ||||||||||||
U.S. Treasury Note | 9.00 | 11-15-2018 | 18,000 | 21,559 | ||||||||||||
U.S. Treasury Note | 9.13 | 5-15-2018 | 16,000 | 18,559 | ||||||||||||
Total U.S. Treasury Securities (Cost $30,325,065) | 31,540,927 | |||||||||||||||
|
| |||||||||||||||
Yield | Shares | |||||||||||||||
Short-Term Investments: 1.65% | ||||||||||||||||
Investment Companies: 1.40% | ||||||||||||||||
Securities Lending Cash Investments LLC (l)(r)(u) | 0.47 | 107,875 | 107,875 | |||||||||||||
Wells Fargo Cash Investment Government Money Market Fund Select Class (l)(u) | 0.31 | 1,042,078 | 1,042,078 | |||||||||||||
1,149,953 | ||||||||||||||||
|
| |||||||||||||||
Principal | ||||||||||||||||
U.S. Treasury Securities: 0.25% | ||||||||||||||||
U.S. Treasury Bill #(z) | 0.20 | 8-18-2016 | $ | 207,000 | 206,937 | |||||||||||
|
| |||||||||||||||
Total Short-Term Investments (Cost $1,356,897) | 1,356,890 | |||||||||||||||
|
|
Total investments in securities (Cost $61,127,211) * | 99.78 | % | 82,027,502 | |||||
Other assets and liabilities, net | 0.22 | 181,588 | ||||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 82,209,090 | ||||
|
|
|
|
† | Non-income-earning security |
« | All or a portion of this security is on loan. |
(a) | The security is fair valued in accordance with procedures approved by the Board of Trustees. |
(i) | Illiquid security |
(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 vehicle 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 as collateral for investments in derivative instruments. |
(z) | Zero coupon security. The rate represents the current yield to maturity. |
* | Cost for federal income tax purposes is $62,768,793 and unrealized gains (losses) consists of: |
Gross unrealized gains | $ | 21,865,051 | ||
Gross unrealized losses | (2,606,342 | ) | ||
|
| |||
Net unrealized gains | $ | 19,258,709 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Statement of assets and liabilities—June 30, 2016 (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 27 |
Assets | ||||
Investments | ||||
In unaffiliated securities (including $105,555 of securities loaned), at value (cost $59,613,282) | $ | 80,286,871 | ||
In affiliated securities, at value (cost $1,513,929) | 1,740,631 | |||
|
| |||
Total investments, at value (cost $61,127,211) | 82,027,502 | |||
Cash | 17,462 | |||
Receivable for investments sold | 757,669 | |||
Receivable for dividends and interest | 201,537 | |||
Receivable for daily variation margin on open futures contracts | 21,753 | |||
Receivable for securities lending income | 66 | |||
Prepaid expenses and other assets | 5,807 | |||
|
| |||
Total assets | 83,031,796 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 561,734 | |||
Payable for Fund shares redeemed | 61,829 | |||
Payable upon receipt of securities loaned | 107,875 | |||
Management fee payable | 34,973 | |||
Distribution fee payable | 16,819 | |||
Administration fee payable | 5,381 | |||
Accrued expenses and other liabilities | 34,095 | |||
|
| |||
Total liabilities | 822,706 | |||
|
| |||
Total net assets | $ | 82,209,090 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Paid-in capital | $ | 60,360,036 | ||
Overdistributed net investment income | (194,167 | ) | ||
Accumulated net realized gains on investments | 1,537,713 | |||
Net unrealized gains on investments | 20,505,508 | |||
|
| |||
Total net assets | $ | 82,209,090 | ||
|
| |||
COMPUTATION OF NET ASSET VALUE PER SHARE | ||||
Net assets – Class 2 | $ | 82,209,090 | ||
Shares outstanding – Class 21 | 4,326,835 | |||
Net asset value per share – Class 2 | $19.00 |
1 | The Fund has an unlimited number of authorized shares. |
The accompanying notes are an integral part of these financial statements.
Table of Contents
28 | Wells Fargo VT Index Asset Allocation Fund | Statement of operations—six months ended June 30, 2016 (unaudited) |
Investment income | ||||
Dividends (net of foreign withholding taxes of $130) | $ | 529,791 | ||
Interest | 235,937 | |||
Income from affiliated securities | 13,181 | |||
Securities lending income, net | 883 | |||
|
| |||
Total investment income | 779,792 | |||
|
| |||
Expenses | ||||
Management fee | 235,945 | |||
Administration fee | ||||
Class 2 | 31,459 | |||
Distribution fee | ||||
Class 2 | 98,310 | |||
Custody and accounting fees | 16,861 | |||
Professional fees | 21,506 | |||
Shareholder report expenses | 8,937 | |||
Trustees’ fees and expenses | 8,920 | |||
Other fees and expenses | 9,993 | |||
|
| |||
Total expenses | 431,931 | |||
Less: Fee waivers and/or expense reimbursements | (38,690 | ) | ||
|
| |||
Net expenses | 393,241 | |||
|
| |||
Net investment income | 386,551 | |||
|
| |||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS | ||||
Net realized gains on: | ||||
Unaffiliated securities | 757,754 | |||
Affiliated securities | 3,278 | |||
Futures transactions | 216,856 | |||
|
| |||
Net realized gains on investments | 977,888 | |||
|
| |||
Net change in unrealized gains (losses) on: | ||||
Unaffiliated securities | 1,978,511 | |||
Affiiliated securities | (91,630 | ) | ||
Futures transactions | (385,290 | ) | ||
|
| |||
Net change in unrealized gains (losses) on investments | 1,501,591 | |||
|
| |||
Net realized and unrealized gains (losses) on investments | 2,479,479 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 2,866,030 | ||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
Statement of changes in net assets | Wells Fargo VT Index Asset Allocation Fund | 29 |
Six months ended June 30, 2016 (unaudited) | Year ended December 31, 2015 | |||||||||||||||
Operations | ||||||||||||||||
Net investment income | $ | 386,551 | $ | 837,040 | ||||||||||||
Net realized gains on investments | 977,888 | 9,821,765 | ||||||||||||||
Net change in unrealized gains (losses) on investments | 1,501,591 | (9,533,114 | ) | |||||||||||||
|
| |||||||||||||||
Net increase in net assets resulting from operations | 2,866,030 | 1,125,691 | ||||||||||||||
|
| |||||||||||||||
Distributions to shareholders from | ||||||||||||||||
Net investment income – Class 2 | (593,375 | ) | (897,884 | ) | ||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from share sold – Class 2 | 161,859 | 2,981,510 | 198,509 | 3,701,571 | ||||||||||||
Reinvestment of distributions – Class 2 | 31,845 | 593,375 | 48,466 | 897,884 | ||||||||||||
Payment for shares redeemed – Class 2 | (279,356 | ) | (5,133,449 | ) | (834,694 | ) | (15,478,408 | ) | ||||||||
|
| |||||||||||||||
Net decrease in net assets resulting from capital share transactions | (1,558,564 | ) | (10,878,953 | ) | ||||||||||||
|
| |||||||||||||||
Total increase (decrease) in net assets | 714,091 | (10,651,146 | ) | |||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 81,494,999 | 92,146,145 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 82,209,090 | $ | 81,494,999 | ||||||||||||
|
| |||||||||||||||
Undistributed (overdistributed) net investment income | $ | (194,167 | ) | $ | 12,657 | |||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
30 | Wells Fargo VT Index Asset Allocation Fund | Financial highlights |
(For a share outstanding throughout each period)
Six months ended (unaudited) | Year ended December 31 | |||||||||||||||||||||||
CLASS 2 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||
Net asset value, beginning of period | $18.47 | $18.43 | $15.85 | $13.47 | $12.09 | $11.72 | ||||||||||||||||||
Net investment income | 0.09 | 0.18 | 0.27 | 0.24 | 0.21 | 0.21 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.58 | 0.05 | 2.57 | 2.39 | 1.36 | 0.54 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.67 | 0.23 | 2.84 | 2.63 | 1.57 | 0.75 | ||||||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||||||
Net investment income | (0.14 | ) | (0.19 | ) | (0.26 | ) | (0.25 | ) | (0.19 | ) | (0.38 | ) | ||||||||||||
Net asset value, end of period | $19.00 | $18.47 | $18.43 | $15.85 | $13.47 | $12.09 | ||||||||||||||||||
Total return1 | 3.63 | % | 1.25 | % | 18.06 | % | 19.63 | % | 13.03 | % | 6.48 | % | ||||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||||||
Gross expenses | 1.10 | % | 1.10 | % | 1.02 | % | 1.11 | % | 1.13 | % | 1.06 | % | ||||||||||||
Net expenses | 1.00 | % | 1.00 | % | 0.99 | % | 1.00 | % | 1.00 | % | 0.99 | % | ||||||||||||
Net investment income | 0.98 | % | 0.95 | % | 1.58 | % | 1.57 | % | 1.58 | % | 1.70 | % | ||||||||||||
Supplemental data | ||||||||||||||||||||||||
Portfolio turnover rate | 8 | % | 44 | % | 3 | % | 11 | % | 8 | % | 17 | % | ||||||||||||
Net assets, end of period (000s omitted) | $82,209 | $81,495 | $92,146 | $86,935 | $84,791 | $89,402 |
1 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Notes to financial statements (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 31 |
1. ORGANIZATION
Wells Fargo Variable 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 VT Index Asset Allocation 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 a Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities and futures 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, the prior day’s price will be deemed “stale” and a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
Debt securities are valued at the evaluated bid price provided by an independent pricing service 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 vehicles 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 Management Valuation Team of 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 Management Valuation Team which may include items for ratification.
Valuations of fair valued securities are compared to the next actual sales price when available, or other appropriate market values, to assess the continued appropriateness of the fair valuation methodologies used. These securities are fair valued on a day-to-day basis, taking into consideration changes to appropriate market information and any significant changes to the inputs considered in the valuation process until there is a readily available price provided on an exchange or by an independent pricing service. Valuations received from an independent pricing service or independent broker-dealer quotes are periodically validated by comparisons to most recent trades and valuations provided by other independent pricing services in addition to the review of prices by the manager and/or subadviser. Unobservable inputs used in determining fair valuations are identified based on the type of security, taking into consideration factors utilized by market participants in valuing the investment, knowledge about the issuer and the current market environment.
Security loans
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. The Fund continues to receive interest or dividends on the securities loaned. The Fund 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 additional required collateral is delivered to the Fund on the next business day. In a securities lending transaction, the net asset value of the Fund will be affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. 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
Table of Contents
32 | Wells Fargo VT Index Asset Allocation Fund | Notes to financial statements (unaudited) |
experience delays or costs in doing so. In addition, the investment of any cash collateral received may lose all or part of its value. The Fund has the right under the lending agreement to recover the securities from the borrower on demand.
The Fund lends its securities through an unaffiliated securities lending agent. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). The Securities Lending Fund is exempt from registration under Section 3(c)(7) of the 1940 Act and is managed by Funds Management and is subadvised by Wells Capital Management Incorporated (“WellsCap”), an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”). Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser. The Securities Lending Fund seeks to provide a positive return compared to the daily Fed Funds Open rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments. Securities Lending Fund investments are fair valued based upon the amortized cost valuation technique. Income earned from investment in the Securities Lending Fund is included in securities lending income on the Statement of Operations.
Futures contracts
The Fund is subject to interest rate risk and equity price risk in the normal course of pursuing its investment objectives. The Fund may buy and sell futures contracts in order to gain exposure to, or protect against, changes in security values and interest rates. 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.
The aggregate principal amounts of the contracts are not recorded in the financial statements. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset or liability and in the Statement of Operations as unrealized gains or losses until the contracts are closed, at which point they are recorded as net realized gains or losses on futures contracts. With futures contracts, there is minimal counterparty risk to the Fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date. Dividend income is recorded net of foreign taxes withheld where recovery of such taxes is not assured.
Interest income is accrued daily and bond discounts are accreted and premiums are amortized daily based on the effective interest method. 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 become doubtful based on consistently applied procedures. If the issuer subsequently resumes interest payments or when the collectability of interest is reasonably assured, the debt obligation is removed from non-accrual status.
Distributions to shareholders
Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations, which may differ in amount or character from net investment income and realized gains recognized for purposes of U.S. generally accepted accounting principles.
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.
Table of Contents
Notes to financial statements (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 33 |
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to significant unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
n | Level 1 – quoted prices in active markets for identical securities |
n | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, use of amortized cost, etc.) |
n | 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 June 30, 2016:
Quoted prices (Level 1) | Other significant (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Common stocks | ||||||||||||||||
Consumer discretionary | $ | 6,029,068 | $ | 0 | $ | 0 | $ | 6,029,068 | ||||||||
Consumer staples | 5,189,624 | 0 | 0 | 5,189,624 | ||||||||||||
Energy | 3,632,241 | 0 | 0 | 3,632,241 | ||||||||||||
Financials | 7,735,648 | 0 | 0 | 7,735,648 | ||||||||||||
Health care | 7,381,273 | 0 | 0 | 7,381,273 | ||||||||||||
Industrials | 4,839,925 | 0 | 0 | 4,839,925 | ||||||||||||
Information technology | 9,715,551 | 0 | 0 | 9,715,551 | ||||||||||||
Materials | 1,408,030 | 0 | 0 | 1,408,030 | ||||||||||||
Telecommunication services | 1,432,078 | 0 | 0 | 1,432,078 | ||||||||||||
Utilities | 1,766,247 | 0 | 0 | 1,766,247 | ||||||||||||
Rights | ||||||||||||||||
Consumer staples | 0 | 0 | 0 | 0 | ||||||||||||
U.S. Treasury securities | 31,540,927 | 0 | 0 | 31,540,927 | ||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 1,042,078 | 0 | 0 | 1,042,078 | ||||||||||||
U.S. Treasury securities | 206,937 | 0 | 0 | 206,937 | ||||||||||||
Investments measured at net asset value* | 107,875 | |||||||||||||||
81,919,627 | 0 | 0 | 82,027,502 | |||||||||||||
Futures contracts | 21,753 | 0 | 0 | 21,753 | ||||||||||||
Total assets | $ | 81,941,380 | $ | 0 | $ | 0 | $ | 82,049,255 |
* | Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been categorized in the fair value hierarchy. The fair value amount presented in the table is intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Statement of Assets and Liabilities. The Fund’s investment in Securities Lending Cash Investments, LLC valued at $107,875 does not have a redemption period notice, can be redeemed daily and does not have any unfunded commitments. |
Futures contracts are reported at their variation margin at measurement date, which represents the amount due to the Fund at that date. All other assets and liabilities are reported at their market value at measurement date.
The Fund recognizes transfers between levels within the fair value hierarchy at the end of the reporting period. At June 30, 2016, the Fund did not have any transfers into/out of Level 1, Level 2, or Level 3.
Table of Contents
34 | Wells Fargo VT Index Asset Allocation Fund | Notes to financial statements (unaudited) |
4. TRANSACTIONS WITH AFFILIATES
Management fee
Funds Management, an indirect wholly owned subsidiary of 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, providing fund-level administrative services in connection with the Fund’s operations, and providing any other fund-level administrative services reasonably necessary for the operation of the Fund. As compensation for its services under the investment management agreement, Funds Management is entitled to receive an annual management fee starting at 0.60% and declining to 0.43% as the average daily net assets of the Fund increase. For the six months ended June 30, 2016, the management fee was equivalent to an annual rate of 0.60% 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. WellsCap 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 0.10% as the average daily net assets of the Fund increase.
Administration fee
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 a class level administration fee of 0.08% which is calculated based on the average daily net assets of Class 2 shares.
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. Waiver of fees and/or reimbursement of expenses by Funds Management were made first from fund level expenses on a proportionate basis and then from class specific expenses. Funds Management has committed through April 30, 2017 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 1.00% for Class 2 shares. After this time, 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 2 shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. A distribution fee is charged to Class 2 shares and paid to Wells Fargo Funds Distributor, LLC, the principal underwriter, at an annual rate of 0.25% of the average daily net assets of Class 2 shares.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six months ended June 30, 2016 were as follows:
Purchases at cost | Sales proceeds | |||||
U.S. Government | Non-U.S. Government | U.S. Government | Non-U.S. Government | |||
$4,580,932 | $1,476,132 | $6,364,048 | $1,251,346 |
The Fund may purchase or sell investment securities to other Wells Fargo funds under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which generally do not incur broker commissions, are effected at current market prices. Interfund trades are included within the respective purchases and sales amounts shown.
6. INVESTMENTS IN AFFILIATES
An affiliated investment is a company which is under common ownership or control of the Fund or which the Fund has ownership of at least 5% of the outstanding voting shares. The following is a summary of transactions for the long-term holdings of issuers that were either affiliates of the Fund at the beginning of the period or the end of the period.
Shares, beginning of period | Shares purchased | Shares sold | Shares, end of period | Value, end of period | Income from securities | Realized gains | ||||||||||||||||||||||
Wells Fargo & Company | 12,512 | 151 | 183 | 12,480 | $ | 590,678 | $ | 9,433 | $ | 3,278 |
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Notes to financial statements (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 35 |
7. DERIVATIVE TRANSACTIONS
During the six months ended June 30, 2016, the Fund entered into futures contracts to certain asset classes consistent with an active asset allocation strategy.
At June 30, 2016, the Fund had long/short futures contracts outstanding as follows:
Expiration date | Counterparty | Contracts | Type | Contract value at | Unrealized gains (losses) | |||||||||||
9-16-2016 | Goldman Sachs | 4 Long | S&P 500 E-Mini Index | $ | 418,040 | $ | 1,336 | |||||||||
9-21-2016 | Goldman Sachs | 11 Short | U.S. Treasury Bonds | 2,050,125 | (139,250 | ) | ||||||||||
9-21-2016 | Goldman Sachs | 86 Short | 10-Year U.S. Treasury Notes | 11,436,656 | (268,026 | ) | ||||||||||
9-30-2016 | Goldman Sachs | 7 Long | 5-Year U.S. Treasury Notes | 855,148 | 11,157 |
The Fund had an average notional amount of $4,472,504 and $10,936,077 in long and short futures contracts, respectively, during the six months ended June 30, 2016.
A summary of derivative instruments by primary risk exposure is outlined in the following tables.
The fair value of derivative instruments as of June 30, 2016 was as follows for the Fund:
Asset derivatives | ||||||
Statement of Assets and Liabilities location | Fair value | |||||
Interest rate contracts | Receivable for daily variation margin on open futures contracts | $ | 17,073 | * | ||
Equity contracts | Receivable for daily variation margin on open futures contracts | 4,680 | * | |||
$ | 21,753 |
* | Only the current day’s variation margin as of June 30, 2016 is reported separately on the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the six months ended June 30, 2016 was as follows for the Fund:
Amount of realized gains (losses) on derivatives | Change in unrealized derivatives | |||||||
Equity contracts | $ | 536,835 | $ | 3,859 | ||||
Interest rate contracts | (319,979 | ) | (389,149 | ) | ||||
$ | 216,856 | $ | (385,290 | ) |
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 clearing house 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 derivative type, including any collateral exposure, is as follows:
Derivative type | Counterparty | Gross amounts Statement of Assets and Liabilities | Amounts subject to netting agreements | Collateral received | Net amount of assets | |||||||||||
Futures – variation margin | Goldman Sachs | $21,753 | $ | 0 | $ | 0 | $ | 21,753 |
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36 | Wells Fargo VT Index Asset Allocation Fund | Notes to financial statements (unaudited) |
8. BANK BORROWINGS
The Trust and Wells Fargo Funds Trust (excluding the money market funds and certain other funds) are parties to a $200,000,000 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 0.20% of the unused balance is allocated to each participating fund.
For the six months ended June 30, 2016, there were no borrowings by the Fund under the agreement.
9. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
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Other information (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 37 |
PROXY VOTING INFORMATION
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-260-5969, visiting our website at wellsfargofunds.com, or visiting the SEC website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website at wellsfargofunds.com or by visiting the SEC website at sec.gov.
PORTFOLIO HOLDINGS INFORMATION
The complete portfolio holdings for the Fund are publicly available monthly on the Fund’s website (wellsfargofunds.com), on a one-month delayed basis. In addition, top ten holdings information (excluding derivative positions) for the Fund is publicly available on the Fund’s website on a monthly, seven-day or more delayed basis. The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q, which is available by visiting the SEC website at sec.gov. In addition, the Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and at regional offices in New York City, at 233 Broadway, and in Chicago, at 175 West Jackson Boulevard, Suite 900. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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38 | Wells Fargo VT Index Asset Allocation Fund | 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 directorships | |||
William R. Ebsworth (Born 1957) | Trustee, since 2015 | Retired. From 1984 to 2013, equities analyst, portfolio manager, research director and chief financial 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 lead 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. Mr. Ebsworth is a CFA® charterholder and an Adjunct Lecturer, Finance, at Babson College. | Asset Allocation Trust | |||
Jane A. Freeman (Born 1953) | Trustee, since 2015 | 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 Chair of Taproot Foundation (non-profit organization), a Board Member of Ruth Bancroft Garden (non-profit organization) and an inactive chartered financial analyst. | Asset Allocation Trust | |||
Peter G. Gordon (Born 1942) | Trustee, since 1998; Chairman, since 2005 | Co-Founder, Retired Chairman, President and CEO of Crystal Geyser Water Company. Trustee Emeritus, Colby College. | Asset Allocation Trust | |||
Isaiah Harris, Jr. (Born 1952) | Trustee, since 2009 | 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 (charter school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation; Asset Allocation Trust | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008; Audit Committee Chairman, 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. | Asset Allocation Trust | |||
David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | Asset Allocation Trust |
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Other information (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 39 |
Name and year of birth | Position held and length of service* | Principal occupations during past five years or longer | Current other public company directorships | |||
Olivia S. Mitchell (Born 1953) | Trustee, since 2006 | 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. | Asset Allocation Trust | |||
Timothy J. Penny (Born 1951) | Trustee, since 1996 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007 and Senior Fellow at the Humphrey Institute Policy Forum at the University of Minnesota since 1995. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | Asset Allocation Trust | |||
Michael S. Scofield (Born 1943) | Trustee, since 2010 | Served on the Investment Company Institute’s Board of Governors and Executive Committee from 2008-2011 as well the Governing Council of the Independent Directors Council from 2006-2011 and the Independent Directors Council Executive Committee from 2008-2011. Chairman of the IDC from 2008-2010. Institutional Investor (Fund Directions) Trustee of Year in 2007. Trustee of the Evergreen Funds complex (and its predecessors) from 1984 to 2010. Chairman of the Evergreen Funds from 2000-2010. Former Trustee of the Mentor Funds. Retired Attorney, Law Offices of Michael S. Scofield. | Asset Allocation Trust |
* | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
Officers
Name and year of birth | Position held and length of service | Principal occupations during past five years or longer | ||||
Karla M. Rabusch (Born 1959) | President, since 2003 | Executive Vice President of Wells Fargo Bank, N.A. and President of Wells Fargo Funds Management, LLC since 2003. | ||||
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. | ||||
C. David Messman (Born 1960) | Secretary, since 2000; Chief Legal Officer, since 2003 | Senior Vice President and Secretary of Wells Fargo Funds Management, LLC since 2001. Assistant General Counsel of Wells Fargo Bank, N.A. since 2013 and Vice President and Managing Counsel of Wells Fargo Bank, N.A. from 1996 to 2013. | ||||
Michael Whitaker (Born 1967) | Chief Compliance Officer, since 2016* | Executive Vice President of Wells Fargo Funds Management, LLC since 2016. Chief Compliance Officer of Fidelity’s Fixed Income Funds and Asset Allocation Funds from 2008 to 2016, Compliance Officer of FMR Co., Inc. from 2014 to 2016, Fidelity Investments Money Management, Inc. from 2014 to 2016, 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 69 funds and Assistant Treasurer of 73 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 1-800-260-5969 or by visiting the website at wellsfargofunds.com. |
* | Michael Whitaker became Chief Compliance Officer effective May 16, 2016. |
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40 | Wells Fargo VT Index Asset Allocation Fund | Other information (unaudited) |
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Variable 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 an in-person meeting held on May 24-25, 2016 (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 VT Index Asset Allocation 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 an in-person meeting in April 2016, 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 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 2016. 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 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 Funds Management, and 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 performance and expenses
The Board considered the performance results for the Fund over various time periods ended December 31, 2015. The Board considered these results in comparison to the 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.
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Other information (unaudited) | Wells Fargo VT Index Asset Allocation Fund | 41 |
The Board noted that the performance of the Fund was higher than the average performance of the Universe for all periods under review. The Board also noted that the performance of the Fund was higher than or in range of its benchmark, the Index Asset Allocation Composite Index, for all periods under review except the one- and ten-year periods.
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.
The Board took into account the Fund 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 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 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. However, 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 mutual funds compared with those associated with managing assets of non-mutual fund clients such as collective funds or 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, in light of the services covered by the Advisory Agreements.
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of Wells Fargo as a whole, from providing services to the Fund and the fund family as a whole. The Board also received and considered information concerning the profitability of the Sub-Adviser from providing services to the fund family as a whole, noting that the Sub-Adviser’s profitability information with respect to providing services to the Fund was subsumed in the Wells Fargo and Funds Management profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability. 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 and type of fund. Based on its review, the Board did not deem the profits reported by Funds Management or Wells Fargo from its services to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
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42 | Wells Fargo VT Index Asset Allocation Fund | Other information (unaudited) |
Economies of scale
With respect to possible economies of scale, 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. It considered that, for a small fund or a fund that shrinks in size, breakpoints conversely can result in higher fee levels. The Board also considered that fee waiver and expense reimbursement arrangements and competitive fee rates at the outset are means of sharing potential economies of scale with shareholders of the Fund and the fund family as a whole. The Board considered Funds Management’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments that Funds Management incurs across the fund family as a whole.
The Board concluded that the Fund’s fee and expense arrangements, 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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List of abbreviations | Wells Fargo VT Index Asset Allocation Fund | 43 |
The following is a list of common abbreviations for terms and entities that may have appeared in this report.
ACA | — ACA Financial Guaranty Corporation |
ADR | — American depositary receipt |
ADS | — American depositary shares |
AGC | — Assured Guaranty Corporation |
AGM | — Assured Guaranty Municipal |
Ambac | — Ambac Financial Group Incorporated |
AMT | — Alternative minimum tax |
AUD | — Australian dollar |
BAN | — Bond anticipation notes |
BHAC | — Berkshire Hathaway Assurance Corporation |
BRL | — Brazilian real |
CAB | — Capital appreciation bond |
CAD | — Canadian dollar |
CCAB | — Convertible capital appreciation bond |
CDA | — Community Development Authority |
CDO | — Collateralized debt obligation |
CHF | — Swiss franc |
COP | — Colombian peso |
CLP | — Chilean peso |
DKK | — Danish krone |
DRIVER | — Derivative inverse tax-exempt receipts |
DW&P | — Department of Water & Power |
DWR | — Department of Water Resources |
ECFA | — Educational & Cultural Facilities Authority |
EDA | — Economic Development Authority |
EDFA | — Economic Development Finance Authority |
ETF | — Exchange-traded fund |
EUR | — Euro |
FDIC | — Federal Deposit Insurance Corporation |
FFCB | — Federal Farm Credit Banks |
FGIC | — Financial Guaranty Insurance Corporation |
FHA | — Federal Housing Administration |
FHLB | — Federal Home Loan Bank |
FHLMC | — Federal Home Loan Mortgage Corporation |
FICO | — The Financing Corporation |
FNMA | — Federal National Mortgage Association |
FSA | — Farm Service Agency |
GBP | — Great British pound |
GDR | — Global depositary receipt |
GNMA | — Government National Mortgage Association |
GO | — General obligation |
HCFR | — Healthcare facilities revenue |
HEFA | — Health & Educational Facilities Authority |
HEFAR | — Higher education facilities authority revenue |
HFA | — Housing Finance Authority |
HFFA | — Health Facilities Financing Authority |
HKD | — Hong Kong dollar |
HUD | — Department of Housing and Urban Development |
HUF | — Hungarian forint |
IDA | — Industrial Development Authority |
IDAG | — Industrial Development Agency |
IDR | — Indonesian rupiah |
IEP | — Irish pound |
JPY | — Japanese yen |
KRW | — Republic of Korea won |
LIBOR | — London Interbank Offered Rate |
LIFER | — Long Inverse Floating Exempt Receipts |
LIQ | — Liquidity agreement |
LLC | — Limited liability company |
LLLP | — Limited liability limited partnership |
LLP | — Limited liability partnership |
LOC | — Letter of credit |
LP | — Limited partnership |
MBIA | — Municipal Bond Insurance Association |
MFHR | — Multifamily housing revenue |
MSTR | — Municipal securities trust receipts |
MTN | — Medium-term note |
MUD | — Municipal Utility District |
MXN | — Mexican peso |
MYR | — Malaysian ringgit |
National | — National Public Finance Guarantee Corporation |
NGN | — Nigerian naira |
NOK | — Norwegian krone |
NZD | — New Zealand dollar |
PCFA | — Pollution Control Financing Authority |
PCL | — Public Company Limited |
PCR | — Pollution control revenue |
PFA | — Public Finance Authority |
PFFA | — Public Facilities Financing Authority |
PFOTER | — Puttable floating option tax-exempt receipts |
plc | — Public limited company |
PLN | — Polish zloty |
PUTTER | — Puttable tax-exempt receipts |
R&D | — Research & development |
Radian | — Radian Asset Assurance |
RAN | — Revenue anticipation notes |
RDA | — Redevelopment Authority |
RDFA | — Redevelopment Finance Authority |
REIT | — Real estate investment trust |
ROC | — Reset option certificates |
RON | — Romanian lei |
RUB | — Russian ruble |
SAVRS | — Select auction variable rate securities |
SBA | — Small Business Authority |
SDR | — Swedish depositary receipt |
SEK | — Swedish krona |
SFHR | — Single-family housing revenue |
SFMR | — Single-family mortgage revenue |
SGD | — Singapore dollar |
SPA | — Standby purchase agreement |
SPDR | — Standard & Poor’s Depositary Receipts |
SPEAR | — Short Puttable Exempt Adjustable Receipts |
STRIPS | — Separate trading of registered interest and |
principal securities |
TAN | — Tax anticipation notes |
TBA | — To be announced |
THB | — Thai baht |
TIPS | — Treasury inflation-protected securities |
TRAN | — Tax revenue anticipation notes |
TRY | — Turkish lira |
TTFA | — Transportation Trust Fund Authority |
TVA | — Tennessee Valley Authority |
ZAR | — South African rand |
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, email, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 8266
Boston, MA 02266-8266
Email: fundservice@wellsfargo.com
Website: wellsfargofunds.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
1-800-260-5969 or visit the Fund’s website at wellsfargofunds.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is a trade name used by the asset management businesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA, an affiliate of Wells Fargo & Company.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
© 2016 Wells Fargo Funds Management, LLC. All rights reserved.
244418 08-16 SVT2/SAR136 6-16 |
Table of Contents
Semi-Annual Report
June 30, 2016
Wells Fargo VT International Equity Fund
Table of Contents
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The views expressed and any forward-looking statements are as of June 30, 2016, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Funds Management, LLC. 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 Funds Management, LLC and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
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2 | Wells Fargo VT International Equity Fund | Letter to shareholders (unaudited) |
Karla M. Rabusch
President
Wells Fargo Funds
During much of the period, investors appeared to focus on macrolevel economic issues such as recessionary fears, inconsistent global growth data, and geopolitical concerns rather than fundamental company and business characteristics.
Dear Valued Shareholder:
We are pleased to offer you this semi-annual report for the Wells Fargo VT International Equity Fund for the six-month period that ended June 30, 2016. During much of the period, investors appeared to focus on macrolevel economic issues such as recessionary fears, inconsistent global growth data, and geopolitical concerns rather than fundamental company and business characteristics. Global equity, bond, and currency markets were volatile due to these concerns, and equity performance, particularly in developed markets overseas, was restrained.
Just before the period ended, the decision of referendum voters in the U.K. to leave the European Union (E.U.) injected new uncertainty into the markets and sent stock prices and bond yields significantly lower. Regional equity markets recovered to varying degrees in the days that followed the vote, while bond prices remained elevated and yields lower as investors sought perceived safe havens due to their short-term fears.
Shifting investor sentiment reflected changing economic and business data.
The decision of the U.S. Federal Reserve (Fed) to tighten credit conditions through higher interest rates in December 2015 contrasted with actions by the European Central Bank (ECB), the People’s Bank of China (PBOC), and the Bank of Japan (BOJ). During the first six weeks of 2016, the S&P 500 Index1 suffered the worst loss to open a year on record before trending higher through the end of June 2016.
The U.S. dollar strengthened in comparison with other world currencies, which negatively affected investment returns and U.S. corporate profits earned overseas. Beginning in mid-February, improving domestic economic data and the Fed’s indications that it would maintain accommodative monetary policies helped improve investor sentiment. The S&P 500 Index, a common measure of U.S. stock performance, recorded a gain of 3.84% for the six-month period that ended June 30, 2016.
Central bank policies demonstrate resolve to reignite global economic growth.
Overseas, global equity markets hit low points during the first six weeks of 2016 before starting to rebound in the middle of February 2016 when business data improved and central bankers reasserted their commitment to initiatives intended to encourage economic activity. The PBOC continued a practice of allowing the value of the country’s currency to decline in an attempt to bolster exports. In addition, the PBOC reduced reserve ratios, which also was intended to encourage lending. The ECB pushed the deposit interest rate further into negative territory. The negative interest-rate policy is intended to encourage banks to lend their assets rather than keep them on deposit. The ECB also expanded its bond-buying program, which injects liquidity into the markets and encourages investment. The BOJ followed the ECB’s lead by setting a negative deposit rate and continued its own bond-buying program. For its part, the Fed indicated it would approach any additional interest-rate increases in 2016 cautiously, which further reassured investors globally.
After the referendum in the U.K. to exit the E.U., most equity markets rebounded, but bond markets remained volatile. Yields fell to historical lows and prices
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. |
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Letter to shareholders (unaudited) | Wells Fargo VT International Equity Fund | 3 |
increased. Income-seeking investors turned increasingly to riskier assets, including stocks, in the low-yielding environment.
For the six-month reporting period, the Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net)2 recorded a return of -10.24%. In contrast, the MSCI Emerging Markets (EM) Index (Net)3 earned a return of 6.41% as investors appeared to realize the investment opportunities available in markets where stock prices have declined substantially in recent years.
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,
Karla M. Rabusch
President
Wells Fargo Funds
For further information about your Fund, contact your investment professional, visit our website at wellsfargofunds.com, or call us directly at 1-800-260-5969. We are available 24 hours a day, 7 days a week.
2 | The Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States and Canada. 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 indexes 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 the equity market performance of emerging markets. The MSCI EM Index (Net) consists of the following 23 emerging markets country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, the Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey, and United Arab Emirates. You cannot invest directly in an index. |
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4 | Wells Fargo VT International Equity Fund | Performance highlights (unaudited) |
Investment objective
The Fund seeks long-term capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio manager
Dale A. Winner, CFA®
Average annual total returns (%) as of June 30, 20161
Expense ratios2 (%) | ||||||||||||||||||||||
Inception date | 1 year | 5 year | 10 year | Gross | Net3 | |||||||||||||||||
Class 1 | 8-17-1998 | (14.93 | ) | 0.87 | 1.10 | 0.95 | 0.69 | |||||||||||||||
Class 2 | 7-31-2002 | (15.10 | ) | 0.64 | 0.86 | 1.20 | 0.94 | |||||||||||||||
MSCI ACWI ex USA Index (Net)4 | – | (10.24 | ) | 0.10 | 1.87 | – | – |
Figures quoted represent past performance, which is no guarantee of future results. 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 and assumes the reinvestment of dividends and capital gains. Current month-end performance is available by calling 1-800-260-5969. Performance figures of the Fund do not reflect fees charged pursuant to the terms of variable life insurance policies and variable annuity contracts. If sales loads or charges had been reflected, performance would have been lower.
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.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. 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 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 smaller-company securities risk. Consult the Fund’s prospectus for additional information on these and other risks.
Please refer to the prospectus provided by your participating insurance company for detailed information describing the separate accounts for information regarding surrender charges, mortality and expense risk fees, and other charges that may be assessed by the participating insurance companies.
Please see footnotes on page 5.
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Performance highlights (unaudited) | Wells Fargo VT International Equity Fund | 5 |
Ten largest holdings (%) as of June 30, 20165 | ||||
Vodafone Group plc | 3.34 | |||
SAP SE | 3.31 | |||
Smiths Group plc | 2.85 | |||
Metro AG | 2.76 | |||
Rheinmetall AG | 2.71 | |||
Compagnie de Saint-Gobain SA | 2.68 | |||
Novartis AG | 2.66 | |||
Wolseley plc | 2.65 | |||
Hitachi Limited | 2.51 | |||
Koninklijke Philips NV | 2.50 |
Country allocation as of June 30, 20166 |
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Sector distribution as of June 30, 20166 |
1 | Historical performance shown for all classes of the Fund prior to July 19, 2010, is based on the performance of the Fund’s predecessor, Evergreen VA International Equity Fund. Effective July 16, 2010, the Fund changed its name from Wells Fargo Advantage VT International Core Fund to Wells Fargo VT International Equity Fund. |
2 | Reflects the expense ratios as stated in the most recent prospectuses. The expense ratios shown are subject to change and may differ from the annualized expense ratios shown in the financial highlights of this report. |
3 | The manager has contractually committed through April 30, 2017, to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s Total Annual Fund Operating Expenses After Fee Waiver at the amounts shown. After this time, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses, and extraordinary expenses are excluded from the expense cap. Without this cap, the Fund’s returns would have been lower. |
4 | The Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States and Canada. 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 indexes or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. You cannot invest directly in an index. |
5 | The ten largest holdings, excluding cash and cash equivalents, 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. |
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6 | Wells Fargo VT International Equity Fund | Fund expenses (unaudited) |
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution (12b-1) 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 January 1, 2016 to June 30, 2016.
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 separate account charges assessed by participating insurance companies. 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 separate account charges assessed by participating insurance companies were included, your costs would have been higher.
Beginning account value 1-1-2016 | Ending account value 6-30-2016 | Expenses paid during the period¹ | Net annualized expense ratio | |||||||||||||
Class 1 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 939.83 | $ | 3.33 | 0.69 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.43 | $ | 3.47 | 0.69 | % | ||||||||
Class 2 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 940.08 | $ | 4.53 | 0.94 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.19 | $ | 4.72 | 0.94 | % |
1 | Expenses paid is equal to the annualized 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). |
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Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT International Equity Fund | 7 |
Security name | Shares | Value | ||||||||||||||
Common Stocks: 85.59% | ||||||||||||||||
Brazil: 0.14% | ||||||||||||||||
Cosan Limited Class A (Energy, Oil, Gas & Consumable Fuels) | 65,456 | $ | 426,119 | |||||||||||||
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Canada: 3.79% | ||||||||||||||||
Cameco Corporation (Energy, Oil, Gas & Consumable Fuels) « | 494,567 | 5,425,400 | ||||||||||||||
Lundin Mining Corporation (Materials, Metals & Mining) † | 1,788,775 | 6,036,657 | ||||||||||||||
11,462,057 | ||||||||||||||||
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China: 8.65% | ||||||||||||||||
China Everbright Limited (Financials, Capital Markets) | 3,546,000 | 6,880,377 | ||||||||||||||
China Mobile Limited (Telecommunication Services, Wireless Telecommunication Services) | 451,500 | 5,216,726 | ||||||||||||||
Dongfeng Motor Group Company Limited H Shares (Consumer Discretionary, Automobiles) | 2,790,000 | 2,940,803 | ||||||||||||||
Industrial & Commercial Bank of China Limited H Shares (Financials, Banks) | 7,768,000 | 4,331,968 | ||||||||||||||
Shanghai Pharmaceuticals Holding Company Limited H Shares (Health Care, Health Care Providers & Services) | 1,221,100 | 2,707,642 | ||||||||||||||
Xinyi Solar Holdings Limited (Information Technology, Semiconductors & Semiconductor Equipment) « | 4,722,000 | 1,875,813 | ||||||||||||||
Xtep International Holdings Limited (Consumer Discretionary, Textiles, Apparel & Luxury Goods) | 4,162,179 | 2,236,928 | ||||||||||||||
26,190,257 | ||||||||||||||||
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France: 2.68% | ||||||||||||||||
Compagnie de Saint-Gobain SA (Industrials, Building Products) | 213,983 | 8,111,151 | ||||||||||||||
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Germany: 14.39% | ||||||||||||||||
Bayer AG (Health Care, Pharmaceuticals) | 47,125 | 4,732,990 | ||||||||||||||
Metro AG (Consumer Staples, Food & Staples Retailing) | 271,190 | 8,340,742 | ||||||||||||||
Muenchener Rueckversicherungs Gesellschaft AG (Financials, Insurance) | 30,651 | 5,140,019 | ||||||||||||||
Rheinmetall AG (Industrials, Industrial Conglomerates) | 137,985 | 8,207,169 | ||||||||||||||
SAP SE (Information Technology, Software) | 133,504 | 10,026,835 | ||||||||||||||
Siemens AG (Industrials, Industrial Conglomerates) | 69,325 | 7,114,210 | ||||||||||||||
43,561,965 | ||||||||||||||||
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Hong Kong: 2.36% | ||||||||||||||||
Value Partners Group Limited (Financials, Capital Markets) | 3,306,000 | 3,061,335 | ||||||||||||||
Xinyi Automobile Glass Holdings Limited (Consumer Discretionary, Auto Components) †(a) | 649,250 | 233,878 | ||||||||||||||
Xinyi Glass Holdings Limited (Consumer Discretionary, Auto Components) | 5,194,000 | 3,841,965 | ||||||||||||||
7,137,178 | ||||||||||||||||
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Italy: 4.99% | ||||||||||||||||
ANIMA Holding SpA (Financials, Capital Markets) 144A | 1,306,049 | 6,157,425 | ||||||||||||||
Eni SpA (Energy, Oil, Gas & Consumable Fuels) | 290,323 | 4,676,282 | ||||||||||||||
Prysmian SpA (Industrials, Electrical Equipment) | 194,687 | 4,273,213 | ||||||||||||||
15,106,920 | ||||||||||||||||
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Japan: 15.16% | ||||||||||||||||
Coca-Cola East Japan Company Limited (Consumer Staples, Beverages) | 389,700 | 7,458,687 | ||||||||||||||
Daiwa House Industry Company Limited (Financials, Real Estate Management & Development) | 199,000 | 5,844,034 | ||||||||||||||
Daiwa Securities Group Incorporated (Financials, Capital Markets) | 954,000 | 5,026,024 | ||||||||||||||
Hitachi Limited (Information Technology, Electronic Equipment, Instruments & Components) | 1,810,000 | 7,583,638 | ||||||||||||||
Mitsubishi UFJ Financial Group Incorporated (Financials, Banks) | 1,661,600 | 7,448,708 |
The accompanying notes are an integral part of these financial statements.
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8 | Wells Fargo VT International Equity Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Japan (continued) | ||||||||||||||||
Mitsui Fudosan Company Limited (Financials, Real Estate Management & Development) | 278,000 | $ | 6,380,315 | |||||||||||||
Nomura Holdings Incorporated (Financials, Capital Markets) | 1,546,300 | 5,499,503 | ||||||||||||||
West Holdings Corporation (Consumer Discretionary, Household Durables) « | 105,300 | 640,689 | ||||||||||||||
45,881,598 | ||||||||||||||||
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Netherlands: 6.71% | ||||||||||||||||
Akzo Nobel NV (Materials, Chemicals) | 101,980 | 6,335,076 | ||||||||||||||
Koninklijke Philips NV (Industrials, Industrial Conglomerates) « | 304,817 | 7,570,517 | ||||||||||||||
NN Group NV (Financials, Insurance) « | 232,814 | 6,408,999 | ||||||||||||||
20,314,592 | ||||||||||||||||
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Norway: 1.23% | ||||||||||||||||
Frontline Limited (Energy, Oil, Gas & Consumable Fuels) « | 166,872 | 1,304,864 | ||||||||||||||
Marine Harvest ASA (Consumer Staples, Food Products) « | 142,488 | 2,403,381 | ||||||||||||||
3,708,245 | ||||||||||||||||
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South Korea: 4.61% | ||||||||||||||||
Hana Financial Group Incorporated (Financials, Banks) | 324,009 | 6,587,387 | ||||||||||||||
Samsung Electronics Company Limited GDR (Information Technology, Semiconductors & Semiconductor Equipment) 144A | 10,197 | 6,372,509 | ||||||||||||||
SK Telecom Company Limited (Telecommunication Services, Wireless Telecommunication Services) | 5,345 | 1,004,148 | ||||||||||||||
13,964,044 | ||||||||||||||||
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Switzerland: 5.04% | ||||||||||||||||
Novartis AG (Health Care, Pharmaceuticals) | 97,637 | 8,058,811 | ||||||||||||||
Zurich Insurance Group AG (Financials, Insurance) | 29,013 | 7,177,314 | ||||||||||||||
15,236,125 | ||||||||||||||||
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United Kingdom: 12.63% | ||||||||||||||||
Capita plc (Industrials, Professional Services) | 190,168 | 2,450,411 | ||||||||||||||
Reckitt Benckiser Group plc (Consumer Staples, Household Products) | 44,029 | 4,414,856 | ||||||||||||||
Smiths Group plc (Industrials, Industrial Conglomerates) | 559,073 | 8,639,470 | ||||||||||||||
United Business Media plc (Consumer Discretionary, Media) | 536,920 | 4,604,782 | ||||||||||||||
Vodafone Group plc (Telecommunication Services, Wireless Telecommunication Services) | 3,316,752 | 10,112,302 | ||||||||||||||
Wolseley plc (Industrials, Trading Companies & Distributors) | 154,615 | 8,006,521 | ||||||||||||||
38,228,342 | ||||||||||||||||
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United States: 3.21% | ||||||||||||||||
Coach Incorporated (Consumer Discretionary, Textiles, Apparel & Luxury Goods) | 78,532 | 3,199,394 | ||||||||||||||
Pfizer Incorporated (Health Care, Pharmaceuticals) | 185,178 | 6,520,117 | ||||||||||||||
9,719,511 | ||||||||||||||||
|
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Total Common Stocks (Cost $270,051,688) | 259,048,104 | |||||||||||||||
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The accompanying notes are an integral part of these financial statements.
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Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT International Equity Fund | 9 |
Security name | Expiration date | Shares | Value | |||||||||||||
Participation Notes: 1.64% | ||||||||||||||||
China: 1.64% | ||||||||||||||||
HSBC Bank plc (Kweichow Moutai Company Limited Class A) (Consumer Staples, Beverages) † | 2-19-2019 | 113,208 | $ | 4,974,363 | ||||||||||||
|
| |||||||||||||||
Total Participation Notes (Cost $3,366,557) | 4,974,363 | |||||||||||||||
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Yield | ||||||||||||||||
Short-Term Investments: 13.57% | ||||||||||||||||
Investment Companies: 13.57% | ||||||||||||||||
Securities Lending Cash Investments LLC (l)(r)(u) | 0.47 | % | 9,546,570 | 9,546,570 | ||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u) | 0.31 | 31,532,467 | 31,532,467 | |||||||||||||
Total Short-Term Investments (Cost $41,079,037) | 41,079,037 | |||||||||||||||
|
|
Total investments in securities (Cost $314,497,282) * | 100.80 | % | 305,101,504 | |||||
Other assets and liabilities, net | (0.80 | ) | (2,422,192 | ) | ||||
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|
|
| |||||
Total net assets | 100.00 | % | $ | 302,679,312 | ||||
|
|
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« | All or a portion of this security is on loan. |
† | Non-income-earning security |
(a) | The security is fair valued in accordance with procedures approved by the Board of Trustees. |
144A | The security may be resold in transactions exempt from registration, normally to qualified institutional buyers, pursuant to Rule 144A under the Securities Act of 1933. |
(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 vehicle purchased with cash collateral received from securities on loan. |
(u) | The rate represents the 7-day annualized yield at period end. |
* | Cost for federal income tax purposes is $314,740,153 and unrealized gains (losses) consists of: |
Gross unrealized gains | $ | 18,981,944 | ||
Gross unrealized losses | (28,620,593 | ) | ||
|
| |||
Net unrealized losses | $ | (9,638,649 | ) |
The accompanying notes are an integral part of these financial statements.
Table of Contents
10 | Wells Fargo VT International Equity Fund | Statement of assets and liabilities—June 30, 2016 (unaudited) |
Assets | ||||
Investments | ||||
In unaffiliated securities (including $9,105,044 of securities loaned), at value (cost $273,418,245) | $ | 264,022,467 | ||
In affiliated securities, at value (cost $41,079,037) | 41,079,037 | |||
|
| |||
Total investments, at value (cost $314,497,282) | 305,101,504 | |||
Cash | 258,000 | |||
Foreign currency, at value (cost $3,459,335) | 3,212,800 | |||
Receivable for investments sold | 90,405 | |||
Receivable for Fund shares sold | 35,297 | |||
Receivable for dividends | 2,145,997 | |||
Receivable for securities lending income | 23,013 | |||
Unrealized gains on forward foreign currency contracts | 2,020,143 | |||
Prepaid expenses and other assets | 4,354 | |||
|
| |||
Total assets | 312,891,513 | |||
|
| |||
Liabilities | ||||
Payable for Fund shares redeemed | 135,267 | |||
Unrealized losses on forward foreign currency contracts | 235,527 | |||
Payable upon receipt of securities loaned | 9,546,570 | |||
Management fee payable | 137,192 | |||
Distribution fee payable | 58,484 | |||
Administration fees payable | 20,364 | |||
Accrued expenses and other liabilities | 78,797 | |||
|
| |||
Total liabilities | 10,212,201 | |||
|
| |||
Total net assets | $ | 302,679,312 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Paid-in capital | $ | 285,254,451 | ||
Undistributed net investment income | 13,749,699 | |||
Accumulated net realized gains on investments | 11,516,295 | |||
Net unrealized losses on investments | (7,841,133 | ) | ||
|
| |||
Total net assets | $ | 302,679,312 | ||
|
| |||
COMPUTATION OF NET ASSET VALUE PER SHARE | ||||
Net assets – Class 1 | $ | 24,414,646 | ||
Shares outstanding – Class 11 | 5,387,666 | |||
Net asset value per share – Class 1 | $4.53 | |||
Net assets – Class 2 | $ | 278,264,666 | ||
Shares outstanding – Class 21 | 61,169,236 | |||
Net asset value per share – Class 2 | $4.55 |
1 | The Fund has an unlimited number of authorized shares. |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Statement of operations—six months ended June 30, 2016 (unaudited) | Wells Fargo VT International Equity Fund | 11 |
Investment income | ||||
Dividends (net of foreign withholding taxes of $594,421) | $ | 6,988,212 | ||
Securities lending income, net | 66,184 | |||
Income from affiliated securities | 36,849 | |||
|
| |||
Total investment income | 7,091,245 | |||
|
| |||
Expenses | ||||
Management fee | 1,203,746 | |||
Administration fees | ||||
Class 1 | 10,239 | |||
Class 2 | 110,136 | |||
Distribution fee | ||||
Class 2 | 344,175 | |||
Custody and accounting fees | 45,896 | |||
Professional fees | 21,965 | |||
Shareholder report expenses | 20,802 | |||
Trustees’ fees and expenses | 10,778 | |||
Other fees and expenses | 8,402 | |||
|
| |||
Total expenses | 1,776,139 | |||
Less: Fee waivers and/or expense reimbursements | (393,732 | ) | ||
|
| |||
Net expenses | 1,382,407 | |||
|
| |||
Net investment income | 5,708,838 | |||
|
| |||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS | ||||
Net realized losses on: | ||||
Unaffiliated securities | (9,033,391 | ) | ||
Forward foreign currency contract transactions | (1,305,308 | ) | ||
|
| |||
Net realized losses on investments | (10,338,699 | ) | ||
|
| |||
Net change in unrealized gains (losses) on: | ||||
Unaffiliated securities | (15,482,369 | ) | ||
Forward foreign currency contract transactions | 974,569 | |||
|
| |||
Net change in unrealized gains (losses) on investments | (14,507,800 | ) | ||
|
| |||
Net realized and unrealized gains (losses) on investments | (24,846,499 | ) | ||
|
| |||
Net decrease in net assets resulting from operations | $ | (19,137,661 | ) | |
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
12 | Wells Fargo VT International Equity Fund | Statement of changes in net assets |
Six months ended June 30, 2016 (unaudited) | Year ended December 31, 2015 | |||||||||||||||
Operations | ||||||||||||||||
Net investment income | $ | 5,708,838 | $ | 6,247,038 | ||||||||||||
Net realized gains (losses) on investments | (10,338,699 | ) | 30,216,711 | |||||||||||||
Net change in unrealized gains (losses) on investments | (14,507,800 | ) | (27,072,622 | ) | ||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | (19,137,661 | ) | 9,391,127 | |||||||||||||
|
| |||||||||||||||
Distributions to shareholders from | ||||||||||||||||
Net investment income | ||||||||||||||||
Class 1 | 0 | (1,411,647 | ) | |||||||||||||
Class 2 | 0 | (11,944,889 | ) | |||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | 0 | (13,356,536 | ) | |||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold | ||||||||||||||||
Class 1 | 142,902 | 650,902 | 1,225,746 | 6,328,345 | ||||||||||||
Class 2 | 3,134,014 | 13,877,101 | 4,763,141 | 24,649,508 | ||||||||||||
|
| |||||||||||||||
14,528,003 | 30,977,853 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions | ||||||||||||||||
Class 1 | 0 | 0 | 274,639 | 1,411,647 | ||||||||||||
Class 2 | 0 | 0 | 2,310,423 | 11,944,889 | ||||||||||||
|
| |||||||||||||||
0 | 13,356,536 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed | ||||||||||||||||
Class 1 | (1,037,376 | ) | (4,666,876 | ) | (1,838,812 | ) | (9,547,629 | ) | ||||||||
Class 2 | (2,957,698 | ) | (13,512,578 | ) | (8,932,752 | ) | (48,861,658 | ) | ||||||||
|
| |||||||||||||||
(18,179,454 | ) | (58,409,287 | ) | |||||||||||||
|
| |||||||||||||||
Net decrease in net assets resulting from capital share transactions | (3,651,451 | ) | (14,074,898 | ) | ||||||||||||
|
| |||||||||||||||
Total decrease in net assets | (22,789,112 | ) | (18,040,307 | ) | ||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 325,468,424 | 343,508,731 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 302,679,312 | $ | 325,468,424 | ||||||||||||
|
| |||||||||||||||
Undistributed net investment income | $ | 13,749,699 | $ | 8,040,861 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
Financial highlights | Wells Fargo VT International Equity Fund | 13 |
(For a share outstanding throughout each period)
Six months ended (unaudited) | Year ended December 31 | |||||||||||||||||||||||
CLASS 1 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||
Net asset value, beginning of period | $4.82 | $4.92 | $5.48 | $4.94 | $4.77 | $5.75 | ||||||||||||||||||
Net investment income | 0.09 | 1 | 0.11 | 1 | 0.18 | 1 | 0.12 | 1 | 0.13 | 1 | 0.11 | 1 | ||||||||||||
Net realized and unrealized gains (losses) on investments | (0.38 | ) | 0.02 | (0.46 | ) | 0.82 | 0.45 | (0.80 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.29 | ) | 0.13 | (0.28 | ) | 0.94 | 0.58 | (0.69 | ) | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||||||
Net investment income | 0.00 | (0.23 | ) | (0.16 | ) | (0.13 | ) | (0.08 | ) | (0.04 | ) | |||||||||||||
Net realized gains | 0.00 | 0.00 | (0.12 | ) | (0.27 | ) | (0.33 | ) | (0.25 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions to shareholders | 0.00 | (0.23 | ) | (0.28 | ) | (0.40 | ) | (0.41 | ) | (0.29 | ) | |||||||||||||
Net asset value, end of period | $4.53 | $4.82 | $4.92 | $5.48 | $4.94 | $4.77 | ||||||||||||||||||
Total return2 | (6.02 | )% | 2.30 | % | (5.30 | )% | 19.94 | % | 13.68 | % | (12.79 | )% | ||||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||||||
Gross expenses | 0.95 | % | 0.95 | % | 0.94 | % | 0.95 | % | 0.98 | % | 0.97 | % | ||||||||||||
Net expenses | 0.69 | % | 0.69 | % | 0.69 | % | 0.69 | % | 0.69 | % | 0.69 | % | ||||||||||||
Net investment income | 3.91 | % | 2.04 | % | 3.44 | % | 2.36 | % | 2.68 | % | 2.06 | % | ||||||||||||
Supplemental data | ||||||||||||||||||||||||
Portfolio turnover rate | 23 | % | 34 | % | 39 | % | 32 | % | 140 | % | 66 | % | ||||||||||||
Net assets, end of period (000s omitted) | $24,415 | $30,254 | $32,599 | $42,021 | $43,089 | $46,017 |
1 | Calculated based upon average shares outstanding |
2 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
Table of Contents
14 | Wells Fargo VT International Equity Fund | Financial highlights |
(For a share outstanding throughout each period)
Six months ended (unaudited) | Year ended December 31 | |||||||||||||||||||||||
CLASS 2 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||
Net asset value, beginning of period | $4.84 | $4.95 | $5.50 | $4.96 | $4.78 | $5.74 | ||||||||||||||||||
Net investment income | 0.08 | 0.09 | 1 | 0.16 | 0.11 | 1 | 0.11 | 0.09 | 1 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.37 | ) | 0.01 | (0.45 | ) | 0.82 | 0.47 | (0.79 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.29 | ) | 0.10 | (0.29 | ) | 0.93 | 0.58 | (0.70 | ) | |||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||||||
Net investment income | 0.00 | (0.21 | ) | (0.14 | ) | (0.12 | ) | (0.07 | ) | (0.01 | ) | |||||||||||||
Net realized gains | 0.00 | 0.00 | (0.12 | ) | (0.27 | ) | (0.33 | ) | (0.25 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions to shareholders | 0.00 | (0.21 | ) | (0.26 | ) | (0.39 | ) | (0.40 | ) | (0.26 | ) | |||||||||||||
Net asset value, end of period | $4.55 | $4.84 | $4.95 | $5.50 | $4.96 | $4.78 | ||||||||||||||||||
Total return2 | (5.99 | )% | 1.80 | % | (5.35 | )% | 19.52 | % | 13.48 | % | (12.91 | )% | ||||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||||||
Gross expenses | 1.20 | % | 1.20 | % | 1.20 | % | 1.20 | % | 1.23 | % | 1.22 | % | ||||||||||||
Net expenses | 0.94 | % | 0.94 | % | 0.94 | % | 0.94 | % | 0.94 | % | 0.94 | % | ||||||||||||
Net investment income | 3.78 | % | 1.77 | % | 3.07 | % | 2.08 | % | 2.41 | % | 1.75 | % | ||||||||||||
Supplemental data | ||||||||||||||||||||||||
Portfolio turnover rate | 23 | % | 34 | % | 39 | % | 32 | % | 140 | % | 66 | % | ||||||||||||
Net assets, end of period (000s omitted) | $278,265 | $295,215 | $310,909 | $319,565 | $296,705 | $227,692 |
1 | Calculated based upon average shares outstanding |
2 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Notes to financial statements (unaudited) | Wells Fargo VT International Equity Fund | 15 |
1. ORGANIZATION
Wells Fargo Variable 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 VT International Equity 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 a Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the principal exchange or market that day, the prior day’s price will be deemed “stale” and a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
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 Management Valuation Team of Wells Fargo Funds Management, LLC (“Funds Management”).
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore may not fully reflect trading or events that occur after the close of the principal exchange in which the foreign securities are traded, but before the close of the New York Stock Exchange. If such trading or events are expected to materially affect the value of such securities, then fair value pricing procedures approved by the Board of Trustees of the Fund are applied. These procedures take into account multiple factors including movements in U.S. securities markets after foreign exchanges close. Foreign securities that are fair valued under these procedures are categorized as Level 2 and the application of these procedures may result in transfers between Level 1 and Level 2. Depending on market activity, such fair valuations may be frequent. Such fair value pricing may result in net asset values that are higher or lower than net asset values based on the last reported sales price or latest quoted bid price. On June 30, 2016, such fair value pricing was used in pricing foreign securities.
Investments in registered open-end investment companies are valued at net asset value. Interests in non-registered investment vehicles that are redeemable at net asset value are fair valued 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 Management Valuation Team. 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 Management Valuation Team which may include items for ratification.
Valuations of fair valued securities are compared to the next actual sales price when available, or other appropriate market values, to assess the continued appropriateness of the fair valuation methodologies used. These securities are fair valued on a day-to-day basis, taking into consideration changes to appropriate market information and any significant changes to the inputs considered in the valuation process until there is a readily available price provided on an exchange or by an independent pricing service. Valuations received from an independent pricing service or independent broker-dealer quotes are periodically validated by comparisons to most recent trades and valuations provided by other independent pricing services in addition to the review of prices by the manager and/or subadviser. Unobservable inputs used in determining fair valuations are identified based on the type of security, taking into consideration factors utilized by market participants in valuing the investment, knowledge about the issuer and the current market environment.
Table of Contents
16 | Wells Fargo VT International Equity Fund | Notes to financial statements (unaudited) |
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 Management Valuation Team. 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 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.
Forward foreign currency contracts
The Fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. 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 contract transactions. The Fund could 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.
Security loans
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. The Fund continues to receive interest or dividends on the securities loaned. The Fund 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 additional required collateral is delivered to the Fund on the next business day. In a securities lending transaction, the net asset value of the Fund will be affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. 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 addition, the investment of any cash collateral received may lose all or part of its value. The Fund has the right under the lending agreement to recover the securities from the borrower on demand.
The Fund lends its securities through an unaffiliated securities lending agent. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). The Securities Lending Fund is exempt from registration under Section 3(c)(7) of the 1940 Act and is managed by Funds Management and is subadvised by Wells Capital Management Incorporated (“WellsCap”), an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”). Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser. The Securities Lending Fund seeks to provide a positive return compared to the daily Fed Funds Open rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments. Securities Lending Fund investments are fair valued based upon the amortized cost valuation technique. Income earned from investment in the Securities Lending Fund is included in securities lending income on the Statement of Operations.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date, except for certain dividends from foreign securities, which are recorded as soon as the custodian verifies the ex-dividend date. Dividend income from foreign securities is recorded net of foreign taxes withheld where recovery of such taxes is not assured.
Table of Contents
Notes to financial statements (unaudited) | Wells Fargo VT International Equity Fund | 17 |
Distributions to shareholders
Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations, which may differ in amount or character from net investment income and realized gains recognized for purposes of U.S. generally accepted accounting principles.
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 December 31, 2015, the Fund had capital loss carryforwards available to offset future net realized capital gains in the amount of $1,334,528 expiring in 2017.
Class allocations
The separate classes of shares offered by the Fund differ principally in distribution fees. Class specific expenses are charged directly to that share class. Investment income, common expenses, and realized and unrealized gains (losses) on investments are allocated daily to each class of shares based on the relative proportion of net assets of each class.
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to significant unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
n | Level 1 – quoted prices in active markets for identical securities |
n | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, use of amortized cost, etc.) |
n | 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.
Table of Contents
18 | Wells Fargo VT International Equity Fund | Notes to financial statements (unaudited) |
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of June 30, 2016:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in : | ||||||||||||||||
Common stocks | ||||||||||||||||
Brazil | $ | 426,119 | $ | 0 | $ | 0 | $ | 426,119 | ||||||||
Canada | 11,462,057 | 0 | 0 | 11,462,057 | ||||||||||||
China | 0 | 26,190,257 | 0 | 26,190,257 | ||||||||||||
France | 0 | 8,111,151 | 0 | 8,111,151 | ||||||||||||
Germany | 0 | 43,561,965 | 0 | 43,561,965 | ||||||||||||
Hong Kong | 0 | 7,137,178 | 0 | 7,137,178 | ||||||||||||
Italy | 0 | 15,106,920 | 0 | 15,106,920 | ||||||||||||
Japan | 0 | 45,881,598 | 0 | 45,881,598 | ||||||||||||
Netherlands | 0 | 20,314,592 | 0 | 20,314,592 | ||||||||||||
Norway | 0 | 3,708,245 | 0 | 3,708,245 | ||||||||||||
South Korea | 0 | 13,964,044 | 0 | 13,964,044 | ||||||||||||
Switzerland | 0 | 15,236,125 | 0 | 15,236,125 | ||||||||||||
United Kingdom | 0 | 38,228,342 | 0 | 38,228,342 | ||||||||||||
United States | 9,719,511 | 0 | 0 | 9,719,511 | ||||||||||||
Participation notes | 0 | 4,974,363 | 0 | 4,974,363 | ||||||||||||
China | ||||||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 31,532,467 | 0 | 0 | 31,532,467 | ||||||||||||
Investments measured at net asset value* | 9,546,570 | |||||||||||||||
53,140,154 | 242,414,780 | 0 | 305,101,504 | |||||||||||||
Forward foreign currency contracts | 0 | 2,020,143 | 0 | 2,020,143 | ||||||||||||
Total assets | $ | 53,140,154 | $ | 244,434,923 | $ | 0 | $ | 307,121,647 | ||||||||
Liabilities | ||||||||||||||||
Forward foreign currency contracts | $ | 0 | $ | 235,527 | $ | 0 | $ | 235,527 | ||||||||
Total liabilities | $ | 0 | $ | 235,527 | $ | 0 | $ | 235,527 |
* | Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been categorized in the fair value hierarchy. The fair value amount presented in the table is intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Statement of Assets and Liabilities. The Fund’s investment in Securities Lending Cash Investments, LLC valued at $9,546,570 does not have a redemption period notice, can be redeemed daily and does not have any unfunded commitments. |
Forward foreign currency contracts are reported at their unrealized gains (losses) at measurement date, which represents the change in the contract’s value from trade date. All other assets and liabilities are reported at their market value at measurement date.
The Fund recognizes transfers between levels within the fair value hierarchy at the end of the reporting period. At June 30, 2016, the Fund did not have any transfers into/out of Level 1, Level 2, or Level 3.
4. TRANSACTIONS WITH AFFILIATES
Management fee
Funds Management, an indirect wholly owned subsidiary of 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, providing fund-level administrative services in connection with the Fund’s operations, and providing any other fund-level administrative services reasonably necessary for the operation of the Fund. As compensation for its services under the investment management agreement, Funds
Table of Contents
Notes to financial statements (unaudited) | Wells Fargo VT International Equity Fund | 19 |
Management is entitled to receive an annual management fee starting at 0.80% and declining to 0.63% as the average daily net assets of the Fund increase. For the six months ended June 30, 2016, the management fee was equivalent to an annual rate of 0.80% of the Fund’s average daily net assets.
Funds Management has retained the services of a subadviser to provide daily portfolio management to the Fund. The fee for subadvisory services is borne by Funds Management. WellsCap is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.45% and declining to 0.40% as the average daily net assets of the Fund increase.
Administration fees
Under a class-level administration agreement, Funds Management provides class-level administrative services to the Fund, which includes paying fees and expenses for services provided by the transfer agent, sub-transfer agents, omnibus account servicers and record-keepers. As compensation for its services under the class-level administration agreement, Funds Management receives a class level administration fee of 0.08% which is calculated based on the average daily net assets of each class.
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. Waiver of fees and/or reimbursement of expenses by Funds Management were made first from fund level expenses on a proportionate basis and then from class specific expenses. Funds Management has committed through April 30, 2017 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.69% for Class 1 shares and 0.94% for Class 2 shares. After this time, 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 2 shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. A distribution fee is charged to Class 2 shares and paid to Wells Fargo Funds Distributor, LLC, the principal underwriter, at an annual rate of 0.25% of the average daily net assets of Class 2 shares.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the six months ended June 30, 2016 were $66,871,807 and $82,963,606, respectively.
The Fund may purchase or sell investment securities to other Wells Fargo funds under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which generally do not incur broker commissions, are effected at current market prices. Interfund trades are included within the respective purchases and sales amounts shown.
6. DERIVATIVE TRANSACTIONS
During the six months ended June 30, 2016, the Fund entered into forward foreign currency contracts for economic hedging purposes.
At June 30, 2016, the Fund had forward foreign currency contracts outstanding as follows:
Forward foreign currency contracts to buy:
Exchange date | Counterparty | Contracts to receive | U.S. value at June 30, 2016 | In exchange for U.S. $ | Unrealized gains | |||||||||||||
7-13-2016 | Citibank | 36,800,000 | JPY | $ | 356,448 | $ | 339,810 | $ | 16,638 | |||||||||
7-13-2016 | Citibank | 551,883,000 | JPY | 5,345,589 | 5,067,447 | 278,142 |
Table of Contents
20 | Wells Fargo VT International Equity Fund | Notes to financial statements (unaudited) |
Forward foreign currency contracts to sell:
Exchange date | Counterparty | Contracts to deliver | U.S. value at June 30, 2016 | In exchange for U.S. $ | Unrealized gains | |||||||||||||
7-13-2016 | Credit Suisse | 9,259,451 | EUR | $ | 10,278,467 | $ | 10,616,933 | $ | 338,466 | |||||||||
7-13-2016 | Citibank | 588,683,000 | JPY | 5,702,037 | 5,466,510 | (235,527 | ) | |||||||||||
7-25-2016 | Morgan Stanley | 760,000 | GBP | 1,011,912 | 1,102,281 | 90,369 | ||||||||||||
7-25-2016 | Morgan Stanley | 760,000 | GBP | 1,011,912 | 1,109,881 | 97,969 | ||||||||||||
7-25-2016 | Morgan Stanley | 760,000 | GBP | 1,011,912 | 1,117,474 | 105,562 | ||||||||||||
7-25-2016 | Morgan Stanley | 760,000 | GBP | 1,011,912 | 1,094,662 | 82,750 | ||||||||||||
9-15-2016 | Credit Suisse | 21,585,000 | EUR | 24,015,884 | 24,439,292 | 423,408 | ||||||||||||
9-22-2016 | Morgan Stanley | 4,280,000 | GBP | 5,702,048 | 6,288,887 | 586,839 |
The Fund had average contract amounts of $7,910,217 and $48,505,550 in forward foreign currency contracts to buy and forward foreign currency contracts to sell, respectively, during the six months ended June 30, 2016.
The fair value, realized losses and change in unrealized gains (losses), if any, on derivative instruments are reflected in the appropriate financial statements.
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 clearing house 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 derivative type, including any collateral exposure, is as follows:
Derivative type | Counterparty | Gross amounts of assets in the Statement of Assets and Liabilities | Amounts subject to netting agreements | Collateral received | Net amount of assets | |||||||||||||
Forward foreign currency contracts | Citibank | $ | 294,780 | * | $ | (235,527 | ) | $ | 0 | $ | 59,253 | |||||||
Credit Suisse | 761,874 | * | 0 | 0 | 761,874 | |||||||||||||
Morgan Stanley | 963,489 | * | 0 | 0 | 963,489 |
* | Amount represents net unrealized gains. |
Derivative type | Counterparty | Gross amounts of liabilities in the Statement of Assets and Liabilities | Amounts subject to netting agreements | Collateral pledged | Net amount of liabilities | |||||||||||
Forward foreign currency contracts | Citibank | $235,527** | $ | (235,527 | ) | $ | 0 | $ | 0 |
** | Amount represents net unrealized losses. |
7. BANK BORROWINGS
The Trust and Wells Fargo Funds Trust (excluding the money market funds and certain other funds) are parties to a $200,000,000 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 0.20% of the unused balance is allocated to each participating fund.
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Notes to financial statements (unaudited) | Wells Fargo VT International Equity Fund | 21 |
For the six months ended June 30, 2016, there were no borrowings by the Fund under the agreement.
8. CONCENTRATION RISK
Concentration risks result from exposure to a limited number of sectors. A fund that invests a substantial portion of its assets in any sector may be more affected by changes in that sector than would be a fund whose investments are not heavily weighted in any sector.
9. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
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22 | Wells Fargo VT International Equity Fund | Other information (unaudited) |
PROXY VOTING INFORMATION
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-260-5969, visiting our website at wellsfargofunds.com, or visiting the SEC website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website at wellsfargofunds.com or by visiting the SEC website at sec.gov.
PORTFOLIO HOLDINGS INFORMATION
The complete portfolio holdings for the Fund are publicly available monthly on the Fund’s website (wellsfargofunds.com), on a one-month delayed basis. In addition, top ten holdings information (excluding derivative positions) for the Fund is publicly available on the Fund’s website on a monthly, seven-day or more delayed basis. The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q, which is available by visiting the SEC website at sec.gov. In addition, the Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and at regional offices in New York City, at 233 Broadway, and in Chicago, at 175 West Jackson Boulevard, Suite 900. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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Other information (unaudited) | Wells Fargo VT International Equity Fund | 23 |
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 financial 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 lead 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. Mr. Ebsworth is a CFA® charterholder and an Adjunct Lecturer, Finance, at Babson College. | Asset Allocation Trust | |||
Jane A. Freeman (Born 1953) | Trustee, since 2015 | 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 Chair of Taproot Foundation (non-profit organization), a Board Member of Ruth Bancroft Garden (non-profit organization) and an inactive chartered financial analyst. | Asset Allocation Trust | |||
Peter G. Gordon (Born 1942) | Trustee, since 1998; Chairman, since 2005 | Co-Founder, Retired Chairman, President and CEO of Crystal Geyser Water Company. Trustee Emeritus, Colby College. | Asset Allocation Trust | |||
Isaiah Harris, Jr. (Born 1952) | Trustee, since 2009 | 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 (charter school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation; Asset Allocation Trust | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008; Audit Committee Chairman, 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. | Asset Allocation Trust | |||
David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | Asset Allocation Trust |
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24 | Wells Fargo VT International Equity Fund | 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 | 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. | Asset Allocation Trust | |||
Timothy J. Penny (Born 1951) | Trustee, since 1996 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007 and Senior Fellow at the Humphrey Institute Policy Forum at the University of Minnesota since 1995. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | Asset Allocation Trust | |||
Michael S. Scofield (Born 1943) | Trustee, since 2010 | Served on the Investment Company Institute’s Board of Governors and Executive Committee from 2008-2011 as well the Governing Council of the Independent Directors Council from 2006-2011 and the Independent Directors Council Executive Committee from 2008-2011. Chairman of the IDC from 2008-2010. Institutional Investor (Fund Directions) Trustee of Year in 2007. Trustee of the Evergreen Funds complex (and its predecessors) from 1984 to 2010. Chairman of the Evergreen Funds from 2000-2010. Former Trustee of the Mentor Funds. Retired Attorney, Law Offices of Michael S. Scofield. | Asset Allocation Trust |
* | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
Officers
Name and year of birth | Position held and length of service | Principal occupations during past five years or longer | ||||
Karla M. Rabusch (Born 1959) | President, since 2003 | Executive Vice President of Wells Fargo Bank, N.A. and President of Wells Fargo Funds Management, LLC since 2003. | ||||
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. | ||||
C. David Messman (Born 1960) | Secretary, since 2000; Chief Legal Officer, since 2003 | Senior Vice President and Secretary of Wells Fargo Funds Management, LLC since 2001. Assistant General Counsel of Wells Fargo Bank, N.A. since 2013 and Vice President and Managing Counsel of Wells Fargo Bank, N.A. from 1996 to 2013. | ||||
Michael Whitaker (Born 1967) | Chief Compliance Officer, since 2016* | Executive Vice President of Wells Fargo Funds Management, LLC since 2016. Chief Compliance Officer of Fidelity’s Fixed Income Funds and Asset Allocation Funds from 2008 to 2016, Compliance Officer of FMR Co., Inc. from 2014 to 2016, Fidelity Investments Money Management, Inc. from 2014 to 2016, 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 69 funds and Assistant Treasurer of 73 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 1-800-260-5969 or by visiting the website at wellsfargofunds.com. |
* | Michael Whitaker became Chief Compliance Officer effective May 16, 2016. |
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Other information (unaudited) | Wells Fargo VT International Equity Fund | 25 |
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Variable 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 an in-person meeting held on May 24-25, 2016 (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 VT International Equity 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 an in-person meeting in April 2016, 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 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 2016. 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 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 Funds Management, and 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 performance and expenses
The Board considered the performance results for the Fund over various time periods ended December 31, 2015. The Board considered these results in comparison to the 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.
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26 | Wells Fargo VT International Equity Fund | Other information (unaudited) |
The Board noted that the performance of the Fund was higher than or in range of the average performance of the Universe for all periods under review except the one-year period under review. The Board also noted that the performance of the Fund was higher than its benchmark, the MSCI ACWI Index ex USA, for all periods under review except the ten-year period.
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.
The Board took into account the Fund 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 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 in range of the sum of these average rates for the Fund’s expense Groups for all share classes except Class R and Administrator Class. The Board noted that the net operating expense ratios of the Fund were in range of the median net operating expense ratios of the expense Groups for all share classes The Board also discussed and accepted Funds Management’s proposal to revise the Management Agreement to reduce fees at all asset levels for the Fund.
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. However, 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 mutual funds compared with those associated with managing assets of non-mutual fund clients such as collective funds or 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, in light of the services covered by the Advisory Agreements.
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of Wells Fargo as a whole, from providing services to the Fund and the fund family as a whole. The Board also received and considered information concerning the profitability of the Sub-Adviser from providing services to the fund family as a whole, noting that the Sub-Adviser’s profitability information with respect to providing services to the Fund was subsumed in the Wells Fargo and Funds Management profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such
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Other information (unaudited) | Wells Fargo VT International Equity Fund | 27 |
as the size and type of fund. Based on its review, the Board did not deem the profits reported by Funds Management or Wells Fargo from its services to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
With respect to possible economies of scale, 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. It considered that, for a small fund or a fund that shrinks in size, breakpoints conversely can result in higher fee levels. The Board also considered that fee waiver and expense reimbursement arrangements and competitive fee rates at the outset are means of sharing potential economies of scale with shareholders of the Fund and the fund family as a whole. The Board also discussed and accepted Funds Management’s proposal to revise the Management Agreement to reduce fees at all asset levels for the Fund. The Board considered Funds Management’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments that Funds Management incurs across the fund family as a whole.
The Board concluded that the Fund’s fee and expense arrangements, 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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28 | Wells Fargo VT International Equity Fund | List of abbreviations |
The following is a list of common abbreviations for terms and entities that may have appeared in this report.
ACA | — ACA Financial Guaranty Corporation |
ADR | — American depositary receipt |
ADS | — American depositary shares |
AGC | — Assured Guaranty Corporation |
AGM | — Assured Guaranty Municipal |
Ambac | — Ambac Financial Group Incorporated |
AMT | — Alternative minimum tax |
AUD | — Australian dollar |
BAN | — Bond anticipation notes |
BHAC | — Berkshire Hathaway Assurance Corporation |
BRL | — Brazilian real |
CAB | — Capital appreciation bond |
CAD | — Canadian dollar |
CCAB | — Convertible capital appreciation bond |
CDA | — Community Development Authority |
CDO | — Collateralized debt obligation |
CHF | — Swiss franc |
COP | — Colombian peso |
CLP | — Chilean peso |
DKK | — Danish krone |
DRIVER | — Derivative inverse tax-exempt receipts |
DW&P | — Department of Water & Power |
DWR | — Department of Water Resources |
ECFA | — Educational & Cultural Facilities Authority |
EDA | — Economic Development Authority |
EDFA | — Economic Development Finance Authority |
ETF | — Exchange-traded fund |
EUR | — Euro |
FDIC | — Federal Deposit Insurance Corporation |
FFCB | — Federal Farm Credit Banks |
FGIC | — Financial Guaranty Insurance Corporation |
FHA | — Federal Housing Administration |
FHLB | — Federal Home Loan Bank |
FHLMC | — Federal Home Loan Mortgage Corporation |
FICO | — The Financing Corporation |
FNMA | — Federal National Mortgage Association |
FSA | — Farm Service Agency |
GBP | — Great British pound |
GDR | — Global depositary receipt |
GNMA | — Government National Mortgage Association |
GO | — General obligation |
HCFR | — Healthcare facilities revenue |
HEFA | — Health & Educational Facilities Authority |
HEFAR | — Higher education facilities authority revenue |
HFA | — Housing Finance Authority |
HFFA | — Health Facilities Financing Authority |
HKD | — Hong Kong dollar |
HUD | — Department of Housing and Urban Development |
HUF | — Hungarian forint |
IDA | — Industrial Development Authority |
IDAG | — Industrial Development Agency |
IDR | — Indonesian rupiah |
IEP | — Irish pound |
JPY | — Japanese yen |
KRW | — Republic of Korea won |
LIBOR | — London Interbank Offered Rate |
LIFER | — Long Inverse Floating Exempt Receipts |
LIQ | — Liquidity agreement |
LLC | — Limited liability company |
LLLP | — Limited liability limited partnership |
LLP | — Limited liability partnership |
LOC | — Letter of credit |
LP | — Limited partnership |
MBIA | — Municipal Bond Insurance Association |
MFHR | — Multifamily housing revenue |
MSTR | — Municipal securities trust receipts |
MTN | — Medium-term note |
MUD | — Municipal Utility District |
MXN | — Mexican peso |
MYR | — Malaysian ringgit |
National | — National Public Finance Guarantee Corporation |
NGN | — Nigerian naira |
NOK | — Norwegian krone |
NZD | — New Zealand dollar |
PCFA | — Pollution Control Financing Authority |
PCL | — Public Company Limited |
PCR | — Pollution control revenue |
PFA | — Public Finance Authority |
PFFA | — Public Facilities Financing Authority |
PFOTER | — Puttable floating option tax-exempt receipts |
plc | — Public limited company |
PLN | — Polish zloty |
PUTTER | — Puttable tax-exempt receipts |
R&D | — Research & development |
Radian | — Radian Asset Assurance |
RAN | — Revenue anticipation notes |
RDA | — Redevelopment Authority |
RDFA | — Redevelopment Finance Authority |
REIT | — Real estate investment trust |
ROC | — Reset option certificates |
RON | — Romanian lei |
RUB | — Russian ruble |
SAVRS | — Select auction variable rate securities |
SBA | — Small Business Authority |
SDR | — Swedish depositary receipt |
SEK | — Swedish krona |
SFHR | — Single-family housing revenue |
SFMR | — Single-family mortgage revenue |
SGD | — Singapore dollar |
SPA | — Standby purchase agreement |
SPDR | — Standard & Poor’s Depositary Receipts |
SPEAR | — Short Puttable Exempt Adjustable Receipts |
STRIPS | — Separate trading of registered interest and |
principal securities |
TAN | — Tax anticipation notes |
TBA | — To be announced |
THB | — Thai baht |
TIPS | — Treasury inflation-protected securities |
TRAN | — Tax revenue anticipation notes |
TRY | — Turkish lira |
TTFA | — Transportation Trust Fund Authority |
TVA | — Tennessee Valley Authority |
ZAR | — South African rand |
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, email, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 8266
Boston, MA 02266-8266
Email: fundservice@wellsfargo.com
Website: wellsfargofunds.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
1-800-260-5969 or visit the Fund’s website at wellsfargofunds.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is a trade name used by the asset management businesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA, an affiliate of Wells Fargo & Company.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
© 2016 Wells Fargo Funds Management, LLC. All rights reserved.
244419 08-16 SVT3/SAR140 6-16 |
Table of Contents
Semi-Annual Report
June 30, 2016
Wells Fargo VT Omega Growth Fund
Table of Contents
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20 | ||||
26 |
The views expressed and any forward-looking statements are as of June 30, 2016, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Funds Management, LLC. 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 Funds Management, LLC and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
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2 | Wells Fargo VT Omega Growth Fund | Letter to shareholders (unaudited) |
Karla M. Rabusch
President
Wells Fargo Funds
Although markets gyrated significantly following the U.K.’s surprising decision to leave the E.U. (Brexit), U.S. stocks generally delivered positive results overall for the six-month reporting period.
Dear Valued Shareholder:
We are pleased to offer you this semi-annual report for the Wells Fargo VT Omega Growth Fund for the six-month period that ended June 30, 2016. During this period, which began with the first quarter of 2016, U.S. and international stock markets experienced heightened volatility, with intermittent rebounds interspersed with sell-offs. The U.S. economy displayed resilience throughout the period, although growth was somewhat sluggish amid ongoing pressures that included slowing growth in China, a strengthening U.S. dollar, and uncertainty regarding interest-rate increases by the U.S. Federal Reserve (Fed); international economies faced deeper ongoing challenges. During June 2016, global markets became especially volatile as the U.K.’s vote over whether to leave the European Union (E.U.) approached. Although markets gyrated significantly following the U.K.’s surprising decision to leave the E.U. (Brexit), U.S. stocks generally delivered positive results overall for the six-month reporting period. International emerging markets also delivered positive results, while international developed markets generally declined.
In the first quarter of 2016, market volatility increased globally amid ongoing concerns.
Stock markets worldwide fluctuated widely in the first quarter of 2016. Most declined sharply in the first six weeks of the year on concerns such as weak global growth, falling commodity prices, and uncertainty over the timing and impact of the Fed’s interest-rate increases. As the quarter progressed, fears abated somewhat and global markets generally rallied back. The U.S. economy ended the quarter on a positive note as much of the quarter’s data reflected resiliency.
With ongoing uncertainties about global growth and financial markets, however, the Fed held off from raising the target interest rate during the quarter. Outside the U.S., the eurozone fell into deflation in February; in response, the European Central Bank announced an expansion of its stimulus program. In China, the government in March set a growth rate of 6.5% to 7.0% for 2016, an acknowledgment that the country’s growth has been slowing. In emerging markets, although central-bank stimulus and improved prices for oil and other commodities led to stock-market rallies in the quarter, many of these countries’ economies face credit downgrades due to challenges such as the likelihood of a stronger U.S. dollar, which would make dollar-denominated debt more expensive.
Worries over interest rates and the U.K.’s vote largely drove the markets during the second quarter of 2016.
U.S. stocks began the quarter in positive territory but started to lose some steam in early May on worries that a possible June interest-rate increase by the Fed could hurt the market. In mid-May, stocks briefly plunged following comments by Fed officials noting that a June interest-rate increase remained on the table. But once investors had processed this information, stocks again rallied, finishing up for the month. The first three weeks of June brought heightened volatility, spurred largely by a disappointing jobs report and uncertainty over whether the U.K. would remain in the E.U.
The U.K.’s Brexit vote on June 23 shocked countries in Europe and much of the rest of the world. Stock markets plummeted as investors worldwide worried that the U.K.’s departure from the E.U. would slow global growth and prolong the low-interest-rate environment. Following the initial rout, however, U.S. stocks rallied as investors seemed to decide that any negative effects would be more localized and not create a serious risk for global growth. By quarter-end, the broad U.S. stock market had moved back into positive territory.
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Letter to shareholders (unaudited) | Wells Fargo VT Omega Growth Fund | 3 |
Don’t let short-term uncertainty derail long-term investment goals.
Periods of 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 in Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Karla M. Rabusch
President
Wells Fargo Funds
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.
For further information about your Fund, contact your investment professional, visit our website at wellsfargofunds.com, or call us directly at 1-800-260-5969. We are available 24 hours a day, 7 days a week.
Table of Contents
4 | Wells Fargo VT Omega Growth Fund | Performance highlights (unaudited) |
Investment objective
The Fund seeks long-term capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Michael T. Smith, CFA®
Chris Warner, CFA®
Average annual total returns (%) as of June 30, 2016
Expense ratios1 (%) | ||||||||||||||||||||||
Inception date | 1 year | 5 year | 10 year | Gross | Net2 | |||||||||||||||||
Class 1 | 3-6-1997 | (4.07 | ) | 9.20 | 9.89 | 0.79 | 0.75 | |||||||||||||||
Class 2 | 7-31-2002 | (4.32 | ) | 8.93 | 9.62 | 1.04 | 1.00 | |||||||||||||||
Russell 3000® Growth Index3 | – | 1.88 | 12.04 | 8.65 | – | – |
Figures quoted represent past performance, which is no guarantee of future results. 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 and assumes the reinvestment of dividends and capital gains. Current month-end performance is available by calling 1-800-260-5969. Performance figures of the Fund do not reflect fees charged pursuant to the terms of variable life insurance policies and variable annuity contracts. If sales loads or charges had been reflected, performance would have been lower.
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.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. 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 smaller-company securities risk. Consult the Fund’s prospectus for additional information on these and other risks.
Please refer to the prospectus provided by your participating insurance company for detailed information describing the separate accounts for information regarding surrender charges, mortality and expense risk fees, and other charges that may be assessed by the participating insurance companies.
Please see footnotes on page 5.
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Performance highlights (unaudited) | Wells Fargo VT Omega Growth Fund | 5 |
Ten largest holdings (%) as of June 30, 20164 | ||||
Amazon.com Incorporated | 4.01 | |||
Facebook Incorporated Class A | 3.67 | |||
The Home Depot Incorporated | 3.32 | |||
Visa Incorporated Class A | 3.17 | |||
Alphabet Incorporated Class A | 3.08 | |||
Bristol-Myers Squibb Company | 2.87 | |||
UnitedHealth Group Incorporated | 2.63 | |||
Apple Incorporated | 2.38 | |||
Reynolds American Incorporated | 2.34 | |||
Alphabet Incorporated Class C | 2.25 |
Sector distribution as of June 30, 20165 |
![]() |
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 April 30, 2017, to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s Total Annual Fund Operating Expenses After Fee Waiver at the amounts shown. After this time, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses, and extraordinary expenses are excluded from the expense cap. Without this cap, the Fund’s returns would have been lower. |
3 | The Russell 3000® Growth Index measures the performance of those Russell 3000® Index companies with higher price/book ratios and higher forecasted growth values. The stocks in this index are also members of either the Russell 1000® Growth Index or the Russell 2000® Growth Index. You cannot invest directly in an index. |
4 | The ten largest holdings, excluding cash and cash equivalents, 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. |
5 | 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. |
Table of Contents
6 | Wells Fargo VT Omega Growth Fund | Fund expenses (unaudited) |
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution (12b-1) 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 January 1, 2016 to June 30, 2016.
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 separate account charges assessed by participating insurance companies. 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 separate account charges assessed by participating insurance companies were included, your costs would have been higher.
Beginning account value 1-1-2016 | Ending account value 6-30-2016 | Expenses paid during the period¹ | Net annualized expense ratio | |||||||||||||
Class 1 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 977.25 | $ | 3.69 | 0.75 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.13 | $ | 3.77 | 0.75 | % | ||||||||
Class 2 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 976.04 | $ | 4.91 | 1.00 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.89 | $ | 5.02 | 1.00 | % |
1 | Expenses paid is equal to the annualized 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). |
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Omega Growth Fund | 7 |
Security name | Shares | Value | ||||||||||||||
Common Stocks: 99.20% | ||||||||||||||||
Consumer Discretionary: 21.75% | ||||||||||||||||
Diversified Consumer Services: 1.70% | ||||||||||||||||
ServiceMaster Global Holdings Incorporated † | 33,877 | $ | 1,348,305 | |||||||||||||
|
| |||||||||||||||
Hotels, Restaurants & Leisure: 7.32% | ||||||||||||||||
McDonald’s Corporation | 12,400 | 1,492,216 | ||||||||||||||
Starbucks Corporation | 28,500 | 1,627,920 | ||||||||||||||
Vail Resorts Incorporated | 9,300 | 1,285,539 | ||||||||||||||
Yum! Brands Incorporated | 17,100 | 1,417,932 | ||||||||||||||
5,823,607 | ||||||||||||||||
|
| |||||||||||||||
Internet & Catalog Retail: 4.00% | ||||||||||||||||
Amazon.com Incorporated † | 4,450 | 3,184,509 | ||||||||||||||
|
| |||||||||||||||
Media: 1.31% | ||||||||||||||||
Cinemark Holdings Incorporated | 28,499 | 1,039,074 | ||||||||||||||
|
| |||||||||||||||
Multiline Retail: 1.57% | ||||||||||||||||
Dollar General Corporation | 13,300 | 1,250,200 | ||||||||||||||
|
| |||||||||||||||
Specialty Retail: 4.59% | ||||||||||||||||
O’Reilly Automotive Incorporated † | 3,700 | �� | 1,003,070 | |||||||||||||
The Home Depot Incorporated | 20,700 | 2,643,183 | ||||||||||||||
3,646,253 | ||||||||||||||||
|
| |||||||||||||||
Textiles, Apparel & Luxury Goods: 1.26% | ||||||||||||||||
Coach Incorporated | 24,600 | 1,002,204 | ||||||||||||||
|
| |||||||||||||||
Consumer Staples: 8.67% | ||||||||||||||||
Beverages: 6.33% | ||||||||||||||||
Constellation Brands Incorporated Class A | 10,360 | 1,713,544 | ||||||||||||||
Dr Pepper Snapple Group Incorporated | 17,000 | 1,642,710 | ||||||||||||||
Monster Beverage Corporation † | 10,400 | 1,671,384 | ||||||||||||||
5,027,638 | ||||||||||||||||
|
| |||||||||||||||
Tobacco: 2.34% | ||||||||||||||||
Reynolds American Incorporated | 34,500 | 1,860,585 | ||||||||||||||
|
| |||||||||||||||
Financials: 6.07% | ||||||||||||||||
Capital Markets: 2.06% | ||||||||||||||||
Raymond James Financial Incorporated | 16,306 | 803,886 | ||||||||||||||
SEI Investments Company | 17,300 | 832,303 | ||||||||||||||
1,636,189 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financial Services: 2.96% | ||||||||||||||||
Intercontinental Exchange Incorporated | 5,000 | 1,279,800 | ||||||||||||||
S&P Global Incorporated | 10,000 | 1,072,600 | ||||||||||||||
2,352,400 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
8 | Wells Fargo VT Omega Growth Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Real Estate Management & Development: 1.05% | ||||||||||||||||
CBRE Group Incorporated Class A † | 31,600 | $ | 836,768 | |||||||||||||
|
| |||||||||||||||
Health Care: 16.71% | ||||||||||||||||
Biotechnology: 2.24% | ||||||||||||||||
Alexion Pharmaceuticals Incorporated † | 4,600 | 537,096 | ||||||||||||||
Biogen Incorporated † | 3,000 | 725,460 | ||||||||||||||
Celgene Corporation † | 5,266 | 519,386 | ||||||||||||||
1,781,942 | ||||||||||||||||
|
| |||||||||||||||
Health Care Equipment & Supplies: 5.29% | ||||||||||||||||
Baxter International Incorporated | 20,200 | 913,444 | ||||||||||||||
Boston Scientific Corporation † | 44,300 | 1,035,291 | ||||||||||||||
Dexcom Incorporated † | 13,100 | 1,039,223 | ||||||||||||||
Intuitive Surgical Incorporated † | 1,834 | 1,213,026 | ||||||||||||||
4,200,984 | ||||||||||||||||
|
| |||||||||||||||
Health Care Providers & Services: 3.93% | ||||||||||||||||
Amedisys Incorporated † | 12,400 | 625,952 | ||||||||||||||
Surgical Care Affiliates Incorporated † | 8,631 | 411,440 | ||||||||||||||
UnitedHealth Group Incorporated | 14,800 | 2,089,760 | ||||||||||||||
3,127,152 | ||||||||||||||||
|
| |||||||||||||||
Health Care Technology: 1.10% | ||||||||||||||||
Veeva Systems Incorporated Class A † | 25,580 | 872,790 | ||||||||||||||
|
| |||||||||||||||
Pharmaceuticals: 4.15% | ||||||||||||||||
Bristol-Myers Squibb Company | 31,010 | 2,280,786 | ||||||||||||||
Novo Nordisk A/S ADR | 19,000 | 1,021,820 | ||||||||||||||
3,302,606 | ||||||||||||||||
|
| |||||||||||||||
Industrials: 11.28% | ||||||||||||||||
Aerospace & Defense: 1.21% | ||||||||||||||||
Orbital ATK Incorporated | 11,300 | 962,082 | ||||||||||||||
|
| |||||||||||||||
Airlines: 0.70% | ||||||||||||||||
Delta Air Lines Incorporated | 15,290 | 557,015 | ||||||||||||||
|
| |||||||||||||||
Commercial Services & Supplies: 2.13% | ||||||||||||||||
KAR Auction Services Incorporated | 40,500 | 1,690,470 | ||||||||||||||
|
| |||||||||||||||
Electrical Equipment: 1.03% | ||||||||||||||||
Acuity Brands Incorporated | 3,300 | 818,268 | ||||||||||||||
|
| |||||||||||||||
Industrial Conglomerates: 1.27% | ||||||||||||||||
Carlisle Companies Incorporated | 9,600 | 1,014,528 | ||||||||||||||
|
| |||||||||||||||
Machinery: 0.47% | ||||||||||||||||
Proto Labs Incorporated †« | 6,538 | 376,327 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Omega Growth Fund | 9 |
Security name | Shares | Value | ||||||||||||||
Professional Services: 1.06% | ||||||||||||||||
Verisk Analytics Incorporated † | 10,400 | $ | 843,232 | |||||||||||||
|
| |||||||||||||||
Road & Rail: 2.32% | ||||||||||||||||
J.B. Hunt Transport Services Incorporated | 10,400 | 841,672 | ||||||||||||||
Kansas City Southern | 11,100 | 999,999 | ||||||||||||||
1,841,671 | ||||||||||||||||
|
| |||||||||||||||
Trading Companies & Distributors: 1.09% | ||||||||||||||||
HD Supply Holdings Incorporated † | 24,808 | 863,815 | ||||||||||||||
|
| |||||||||||||||
Information Technology: 30.46% | ||||||||||||||||
Communications Equipment: 1.38% | ||||||||||||||||
Harris Corporation | 13,100 | 1,093,064 | ||||||||||||||
|
| |||||||||||||||
Internet Software & Services: 11.88% | ||||||||||||||||
Alphabet Incorporated Class A † | 3,480 | 2,448,284 | ||||||||||||||
Alphabet Incorporated Class C † | 2,589 | 1,791,847 | ||||||||||||||
CoStar Group Incorporated † | 5,000 | 1,093,300 | ||||||||||||||
Facebook Incorporated Class A † | 25,505 | 2,914,711 | ||||||||||||||
Tencent Holdings Limited ADR | 51,900 | 1,192,143 | ||||||||||||||
9,440,285 | ||||||||||||||||
|
| |||||||||||||||
IT Services: 7.98% | ||||||||||||||||
Alliance Data Systems Corporation † | 2,100 | 411,432 | ||||||||||||||
Broadridge Financial Solutions Incorporated | 16,097 | 1,049,524 | ||||||||||||||
EPAM Systems Incorporated † | 17,015 | 1,094,235 | ||||||||||||||
PayPal Holdings Incorporated † | 34,800 | 1,270,548 | ||||||||||||||
Visa Incorporated Class A | 33,944 | 2,517,626 | ||||||||||||||
6,343,365 | ||||||||||||||||
|
| |||||||||||||||
Software: 6.84% | ||||||||||||||||
Adobe Systems Incorporated † | 11,400 | 1,092,006 | ||||||||||||||
Salesforce.com Incorporated † | 14,300 | 1,135,563 | ||||||||||||||
ServiceNow Incorporated † | 16,380 | 1,087,632 | ||||||||||||||
Take-Two Interactive Software Incorporated † | 33,200 | 1,258,944 | ||||||||||||||
Tyler Technologies Incorporated † | 5,200 | 866,892 | ||||||||||||||
5,441,037 | ||||||||||||||||
|
| |||||||||||||||
Technology Hardware, Storage & Peripherals: 2.38% | ||||||||||||||||
Apple Incorporated | 19,820 | 1,894,792 | ||||||||||||||
|
| |||||||||||||||
Materials: 3.02% | ||||||||||||||||
Chemicals: 1.63% | ||||||||||||||||
The Sherwin-Williams Company | 4,400 | 1,292,148 | ||||||||||||||
|
| |||||||||||||||
Construction Materials: 1.39% | ||||||||||||||||
Vulcan Materials Company | 9,200 | 1,107,312 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
10 | Wells Fargo VT Omega Growth Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Telecommunication Services: 1.24% | ||||||||||||||||
Diversified Telecommunication Services: 1.24% | ||||||||||||||||
Zayo Group Holdings Incorporated † | 35,400 | $ | 988,720 | |||||||||||||
|
| |||||||||||||||
Total Common Stocks (Cost $62,147,756) | 78,861,337 | |||||||||||||||
|
| |||||||||||||||
Yield | ||||||||||||||||
Short-Term Investments: 0.86% | ||||||||||||||||
Investment Companies: 0.86% | ||||||||||||||||
Securities Lending Cash Investments LLC (l)(r)(u) | 0.47 | % | 356,500 | 356,500 | ||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u) | 0.31 | 331,283 | 331,283 | |||||||||||||
Total Short-Term Investments (Cost $687,783) | 687,783 | |||||||||||||||
|
|
Total investments in securities (Cost $62,835,539) * | 100.06 | % | 79,549,120 | |||||
Other assets and liabilities, net | (0.06 | ) | (48,022 | ) | ||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 79,501,098 | ||||
|
|
|
|
† | Non-income-earning security |
« | All or a portion of this security is on loan. |
(l) | The issuer of the security is an affiliated person of the Fund as defined in the Investment Company Act of 1940. |
(r) | The investment is a non-registered investment vehicle purchased with cash collateral received from securities on loan. |
(u) | The rate represents the 7-day annualized yield at period end. |
* | Cost for federal income tax purposes is $62,986,409 and unrealized gains (losses) consists of: |
Gross unrealized gains | $ | 17,982,886 | ||
Gross unrealized losses | (1,420,175 | ) | ||
|
| |||
Net unrealized gains | $ | 16,562,711 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Statement of assets and liabilities—June 30, 2016 (unaudited) | Wells Fargo VT Omega Growth Fund | 11 |
Assets | ||||
Investments | ||||
In unaffiliated securities (including $349,246 of securities loaned), at value (cost $62,147,756) | $ | 78,861,337 | ||
In affiliated securities, at value (cost $687,783) | 687,783 | |||
|
| |||
Total investments, at value (cost $62,835,539) | 79,549,120 | |||
Receivable for investments sold | 908,127 | |||
Receivable for Fund shares sold | 25,890 | |||
Receivable for dividends | 75,938 | |||
Receivable for securities lending income | 99 | |||
Prepaid expenses and other assets | 3,311 | |||
|
| |||
Total assets | 80,562,485 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 407,839 | |||
Payable for Fund shares redeemed | 214,652 | |||
Payable upon receipt of securities loaned | 356,500 | |||
Management fee payable | 35,664 | |||
Distribution fee payable | 9,167 | |||
Administration fees payable | 5,321 | |||
Accrued expenses and other liabilities | 32,244 | |||
|
| |||
Total liabilities | 1,061,387 | |||
|
| |||
Total net assets | $ | 79,501,098 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Paid-in capital | $ | 61,272,152 | ||
Undistributed net investment income | 32,578 | |||
Accumulated net realized gains on investments | 1,482,787 | |||
Net unrealized gains on investments | 16,713,581 | |||
|
| |||
Total net assets | $ | 79,501,098 | ||
|
| |||
COMPUTATION OF NET ASSET VALUE PER SHARE | ||||
Net assets – Class 1 | $ | 35,298,594 | ||
Shares outstanding – Class 11 | 1,549,979 | |||
Net asset value per share – Class 1 | $22.77 | |||
Net assets – Class 2 | $ | 44,202,504 | ||
Shares outstanding – Class 21 | 2,009,079 | |||
Net asset value per share – Class 2 | $22.00 |
1 | The Fund has an unlimited number of authorized shares. |
The accompanying notes are an integral part of these financial statements.
Table of Contents
12 | Wells Fargo VT Omega Growth Fund | Statement of operations—six months ended June 30, 2016 (unaudited) |
Investment income | ||||
Dividends (net of foreign withholding taxes of $888) | $ | 382,035 | ||
Securities lending income, net | 3,144 | |||
Income from affiliated securities | 2,457 | |||
|
| |||
Total investment income | 387,636 | |||
|
| |||
Expenses | ||||
Management fee | 238,940 | |||
Administration fees | ||||
Class 1 | 14,317 | |||
Class 2 | 17,542 | |||
Distribution fee | ||||
Class 2 | 54,819 | |||
Custody and accounting fees | 9,328 | |||
Professional fees | 25,094 | |||
Shareholder report expenses | 6,714 | |||
Trustees’ fees and expenses | 9,942 | |||
Other fees and expenses | 2,028 | |||
|
| |||
Total expenses | 378,724 | |||
Less: Fee waivers and/or expense reimbursements | (25,230 | ) | ||
|
| |||
Net expenses | 353,494 | |||
|
| |||
Net investment income | 34,142 | |||
|
| |||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS | ||||
Net realized losses on investments | (676,459 | ) | ||
Net change in unrealized losses on investments | (1,734,709 | ) | ||
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| |||
Net realized and unrealized losses on investments | (2,411,168 | ) | ||
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| |||
Net decrease in net assets resulting from operations | $ | (2,377,026 | ) | |
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The accompanying notes are an integral part of these financial statements.
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Statement of changes in net assets | Wells Fargo VT Omega Growth Fund | 13 |
Six months ended June 30, 2016 (unaudited) | Year ended December 31, 2015 | |||||||||||||||
Operations | ||||||||||||||||
Net investment income (loss) | $ | 34,142 | $ | (244,546 | ) | |||||||||||
Net realized gains (losses) on investments | (676,459 | ) | 6,494,195 | |||||||||||||
Net change in unrealized losses on investments | (1,734,709 | ) | (4,579,099 | ) | ||||||||||||
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Net increase (decrease) in net assets resulting from operations | (2,377,026 | ) | 1,670,550 | |||||||||||||
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Distributions to shareholders from | ||||||||||||||||
Net realized gains | ||||||||||||||||
Class 1 | 0 | (7,419,706 | ) | |||||||||||||
Class 2 | 0 | (9,347,294 | ) | |||||||||||||
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| |||||||||||||||
Total distributions to shareholders | 0 | (16,767,000 | ) | |||||||||||||
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| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold | ||||||||||||||||
Class 1 | 65,189 | 1,414,259 | 72,950 | 1,869,588 | ||||||||||||
Class 2 | 40,398 | 847,222 | 123,489 | 3,149,327 | ||||||||||||
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2,261,481 | 5,018,915 | |||||||||||||||
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Reinvestment of distributions | ||||||||||||||||
Class 1 | 0 | 0 | 315,732 | 7,419,706 | ||||||||||||
Class 2 | 0 | 0 | 410,690 | 9,347,294 | ||||||||||||
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0 | 16,767,000 | |||||||||||||||
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Payment for shares redeemed | ||||||||||||||||
Class 1 | (247,239 | ) | (5,431,742 | ) | (368,743 | ) | (9,447,612 | ) | ||||||||
Class 2 | (247,881 | ) | (5,277,180 | ) | (513,389 | ) | (13,161,588 | ) | ||||||||
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(10,708,922 | ) | (22,609,200 | ) | |||||||||||||
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Net decrease in net assets resulting from capital share transactions | (8,447,441 | ) | (823,285 | ) | ||||||||||||
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| |||||||||||||||
Total decrease in net assets | (10,824,467 | ) | (15,919,735 | ) | ||||||||||||
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Net assets | ||||||||||||||||
Beginning of period | 90,325,565 | 106,245,300 | ||||||||||||||
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End of period | $ | 79,501,098 | $ | 90,325,565 | ||||||||||||
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Undistributed (accumulated) net investment income (loss) | $ | 32,578 | $ | (1,564 | ) | |||||||||||
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The accompanying notes are an integral part of these financial statements.
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14 | Wells Fargo VT Omega Growth Fund | Financial highlights |
(For a share outstanding throughout each period)
Six months ended June 30, 2016 (unaudited) | Year ended December 31 | |||||||||||||||||||||||
CLASS 1 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||
Net asset value, beginning of period | $23.30 | $27.57 | $32.78 | $25.56 | $22.78 | $24.26 | ||||||||||||||||||
Net investment income (loss) | 0.06 | (0.03 | ) | (0.03 | ) | (0.01 | ) | 0.11 | (0.06 | ) | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.59 | ) | 0.52 | 1.22 | 9.81 | 4.43 | (1.21 | ) | ||||||||||||||||
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Total from investment operations | (0.53 | ) | 0.49 | 1.19 | 9.80 | 4.54 | (1.27 | ) | ||||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | (0.12 | ) | 0.00 | 0.00 | |||||||||||||||||
Net realized gains | 0.00 | (4.76 | ) | (6.40 | ) | (2.46 | ) | (1.76 | ) | (0.21 | ) | |||||||||||||
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Total distributions to shareholders | 0.00 | (4.76 | ) | (6.40 | ) | (2.58 | ) | (1.76 | ) | (0.21 | ) | |||||||||||||
Net asset value, end of period | $22.77 | $23.30 | $27.57 | $32.78 | $25.56 | $22.78 | ||||||||||||||||||
Total return1 | (2.27 | )% | 1.62 | % | 4.09 | % | 40.22 | % | 20.76 | % | (5.36 | )% | ||||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||||||
Gross expenses | 0.81 | % | 0.79 | % | 0.75 | % | 0.79 | % | 0.80 | % | 0.80 | % | ||||||||||||
Net expenses | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | ||||||||||||
Net investment income (loss) | 0.22 | % | (0.11 | )% | (0.10 | )% | (0.12 | )% | 0.40 | % | (0.27 | )% | ||||||||||||
Supplemental data | ||||||||||||||||||||||||
Portfolio turnover rate | 43 | % | 101 | % | 88 | % | 95 | % | 93 | % | 110 | % | ||||||||||||
Net assets, end of period (000s omitted) | $35,299 | $40,362 | $47,210 | $55,867 | $47,842 | $45,293 |
1 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
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Financial highlights | Wells Fargo VT Omega Growth Fund | 15 |
(For a share outstanding throughout each period)
Six months ended June 30, 2016 (unaudited) | Year ended December 31 | |||||||||||||||||||||||
CLASS 2 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||
Net asset value, beginning of period | $22.54 | $26.89 | $32.19 | $25.13 | $22.48 | $24.00 | ||||||||||||||||||
Net investment income (loss) | (0.02 | ) | (0.09 | ) | (0.10 | ) | (0.12 | ) | 0.02 | (0.14 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (0.52 | ) | 0.50 | 1.20 | 9.68 | 4.39 | (1.17 | ) | ||||||||||||||||
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Total from investment operations | (0.54 | ) | 0.41 | 1.10 | 9.56 | 4.41 | (1.31 | ) | ||||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | (0.04 | ) | 0.00 | 0.00 | |||||||||||||||||
Net realized gains | 0.00 | (4.76 | ) | (6.40 | ) | (2.46 | ) | (1.76 | ) | (0.21 | ) | |||||||||||||
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Total distributions to shareholders | 0.00 | (4.76 | ) | (6.40 | ) | (2.50 | ) | (1.76 | ) | (0.21 | ) | |||||||||||||
Net asset value, end of period | $22.00 | $22.54 | $26.89 | $32.19 | $25.13 | $22.48 | ||||||||||||||||||
Total return1 | (2.40 | )% | 1.34 | % | 3.86 | % | 39.88 | % | 20.39 | % | (5.54 | )% | ||||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||||||
Gross expenses | 1.06 | % | 1.04 | % | 1.00 | % | 1.04 | % | 1.05 | % | 1.05 | % | ||||||||||||
Net expenses | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | ||||||||||||
Net investment income (loss) | (0.03 | )% | (0.36 | )% | (0.35 | )% | (0.37 | )% | 0.12 | % | (0.52 | )% | ||||||||||||
Supplemental data | ||||||||||||||||||||||||
Portfolio turnover rate | 43 | % | 101 | % | 88 | % | 95 | % | 93 | % | 110 | % | ||||||||||||
Net assets, end of period (000s omitted) | $44,203 | $49,963 | $59,035 | $68,658 | $62,599 | $66,756 |
1 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
Table of Contents
16 | Wells Fargo VT Omega Growth Fund | Notes to financial statements (unaudited) |
1. ORGANIZATION
Wells Fargo Variable 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 VT Omega Growth Fund (the “Fund”) which is a diversified series of the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund, are in conformity with U.S. generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Securities valuation
All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern Time), although a Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the principal exchange or market that day, the prior day’s price will be deemed “stale” and a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
Investments in registered open-end investment companies are valued at net asset value. Interests in non-registered investment vehicles that are redeemable at net asset value are fair valued 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 Management Valuation Team of 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 Management Valuation Team which may include items for ratification.
Valuations of fair valued securities are compared to the next actual sales price when available, or other appropriate market values, to assess the continued appropriateness of the fair valuation methodologies used. These securities are fair valued on a day-to-day basis, taking into consideration changes to appropriate market information and any significant changes to the inputs considered in the valuation process until there is a readily available price provided on an exchange or by an independent pricing service. Valuations received from an independent pricing service or independent broker-dealer quotes are periodically validated by comparisons to most recent trades and valuations provided by other independent pricing services in addition to the review of prices by the manager and/or subadviser. Unobservable inputs used in determining fair valuations are identified based on the type of security, taking into consideration factors utilized by market participants in valuing the investment, knowledge about the issuer and the current market environment.
Security loans
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. The Fund continues to receive interest or dividends on the securities loaned. The Fund 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 additional required collateral is delivered to the Fund on the next business day. In a securities lending transaction, the net asset value of the Fund will be affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. 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 addition, the investment of any cash collateral received may lose all or part of its value. The Fund has the right under the lending agreement to recover the securities from the borrower on demand.
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Notes to financial statements (unaudited) | Wells Fargo VT Omega Growth Fund | 17 |
The Fund lends its securities through an unaffiliated securities lending agent. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). The Securities Lending Fund is exempt from registration under Section 3(c)(7) of the 1940 Act and is managed by Funds Management and is subadvised by Wells Capital Management Incorporated (“WellsCap”), an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”). Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser. The Securities Lending Fund seeks to provide a positive return compared to the daily Fed Funds Open rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments. Securities Lending Fund investments are fair valued based upon the amortized cost valuation technique. Income earned from investment in the Securities Lending Fund is included in securities lending income on the Statement of Operations.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date. Dividend income is recorded net of foreign taxes withheld where recovery of such taxes is not assured.
Distributions to shareholders
Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations, which may differ in amount or character from net investment income and realized gains recognized for purposes of U.S. generally accepted accounting principles.
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 December 31, 2015, the Fund had capital loss carryforwards available to offset future net realized capital gains in the amount of $2,110,011 with $1,338,632 expiring in 2016 and $771,379 expiring in 2017.
Class allocations
The separate classes of shares offered by the Fund differ principally in distribution fees. Class specific expenses are charged directly to that share class. Investment income, common expenses and realized and unrealized gains (losses) on investments are allocated daily to each class of shares based on the relative proportion of net assets of each class.
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to significant unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
n | Level 1 – quoted prices in active markets for identical securities |
n | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, use of amortized cost, etc.) |
n | 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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18 | Wells Fargo VT Omega Growth Fund | Notes to financial statements (unaudited) |
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of June 30, 2016:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Common stocks | ||||||||||||||||
Consumer discretionary | $ | 17,294,152 | $ | 0 | $ | 0 | $ | 17,294,152 | ||||||||
Consumer staples | 6,888,223 | 0 | 0 | 6,888,223 | ||||||||||||
Financials | 4,825,357 | 0 | 0 | 4,825,357 | ||||||||||||
Health care | 13,285,474 | 0 | 0 | 13,285,474 | ||||||||||||
Industrials | 8,967,408 | 0 | 0 | 8,967,408 | ||||||||||||
Information technology | 24,212,543 | 0 | 0 | 24,212,543 | ||||||||||||
Materials | 2,399,460 | 0 | 0 | 2,399,460 | ||||||||||||
Telecommunication services | 988,720 | 0 | 0 | 988,720 | ||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 331,283 | 0 | 0 | 331,283 | ||||||||||||
Investments measured at net asset value* | 356,500 | |||||||||||||||
Total assets | $ | 79,192,620 | $ | 0 | $ | 0 | $ | 79,549,120 |
* | Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been categorized in the fair value hierarchy. The fair value amount presented in the table is intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Statement of Assets and Liabilities. The Fund’s investment in Securities Lending Cash Investments, LLC valued at $356,500 does not have a redemption period notice, can be redeemed daily and does not have any unfunded commitments. |
The Fund recognizes transfers between levels within the fair value hierarchy at the end of the reporting period. At June 30, 2016, common stocks with a market value of $1,192,143 were transferred from Level 2 to Level 1 because of an increase in the market activity of these securities. 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, 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, providing fund-level administrative services in connection with the Fund’s operations, and providing any other fund-level administrative services reasonably necessary for the operation of the Fund. As compensation for its services under the investment management agreement, Funds Management is entitled to receive an annual management fee starting at 0.60% and declining to 0.43% as the average daily net assets of the Fund increase. For the six months ended June 30, 2016, the management fee was equivalent to an annual rate of 0.60% 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. WellsCap is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.45% and declining to 0.30% as the average daily net assets of the Fund increase.
Administration fees
Under a class-level administration agreement, Funds Management provides class-level administrative services to the Fund, which includes paying fees and expenses for services provided by the transfer agent, sub-transfer agents, omnibus account servicers and record-keepers. As compensation for its services under the class-level administration agreement, Funds Management receives a class level administration fee of 0.08% which is calculated based on the average daily net assets of each class.
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. Waiver of fees and/or reimbursement of expenses by Funds Management were made first from fund level expenses on a proportionate basis and then from class specific expenses. Funds Management has committed through April 30, 2017 to waive fees and/or reimburse expenses to
Table of Contents
Notes to financial statements (unaudited) | Wells Fargo VT Omega Growth Fund | 19 |
the extent necessary to cap the Fund’s expenses at 0.75% for Class 1 shares and 1.00% for Class 2 shares. After this time, 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 2 shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. A distribution fee is charged to Class 2 shares and paid to Wells Fargo Funds Distributor, LLC (“Funds Distributor”), the principal underwriter, at an annual rate of 0.25% of the average daily net assets of Class 2 shares.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the six months ended June 30, 2016 were $35,471,334 and $44,409,259, respectively.
The Fund may purchase or sell investment securities to other Wells Fargo funds under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which generally do not incur broker commissions, are effected at current market prices. Interfund trades are included within the respective purchases and sales amounts shown.
6. BANK BORROWINGS
The Trust and Wells Fargo Funds Trust (excluding the money market funds and certain other funds) are parties to a $200,000,000 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 0.20% of the unused balance is allocated to each participating fund.
For the six months ended June 30, 2016, there were no borrowings by the Fund under the agreement.
7. CONCENTRATION RISK
Concentration risks result from exposure to a limited number of sectors. A fund that invests a substantial portion of its assets in any sector may be more affected by changes in that sector than would be a fund whose investments are not heavily weighted in any sector.
8. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
9. SUBSEQUENT DISTRIBUTIONS
On July 7, 2016, the Fund declared distributions from long-term capital gains to shareholders of record on July 6, 2016. The per share amounts payable on July 8, 2016 were as follows:
Long-term capital gains | ||||
Class 1 | $ | 1.24515 | ||
Class 2 | 1.24515 |
These distributions are not reflected in the accompanying financial statements. The final determination of the source of all distributions is subject to change and made after the Fund’s tax year-end.
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20 | Wells Fargo VT Omega Growth Fund | Other information (unaudited) |
PROXY VOTING INFORMATION
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-260-5969, visiting our website at wellsfargofunds.com, or visiting the SEC website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website at wellsfargofunds.com or by visiting the SEC website at sec.gov.
PORTFOLIO HOLDINGS INFORMATION
The complete portfolio holdings for the Fund are publicly available monthly on the Fund’s website (wellsfargofunds.com), on a one-month delayed basis. In addition, top ten holdings information (excluding derivative positions) for the Fund is publicly available on the Fund’s website on a monthly, seven-day or more delayed basis. The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q, which is available by visiting the SEC website at sec.gov. In addition, the Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and at regional offices in New York City, at 233 Broadway, and in Chicago, at 175 West Jackson Boulevard, Suite 900. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Table of Contents
Other information (unaudited) | Wells Fargo VT Omega Growth Fund | 21 |
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 financial 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 lead 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. Mr. Ebsworth is a CFA® charterholder and an Adjunct Lecturer, Finance, at Babson College. | Asset Allocation Trust | |||
Jane A. Freeman (Born 1953) | Trustee, since 2015 | 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 Chair of Taproot Foundation (non-profit organization), a Board Member of Ruth Bancroft Garden (non-profit organization) and an inactive chartered financial analyst. | Asset Allocation Trust | |||
Peter G. Gordon (Born 1942) | Trustee, since 1998; Chairman, since 2005 | Co-Founder, Retired Chairman, President and CEO of Crystal Geyser Water Company. Trustee Emeritus, Colby College. | Asset Allocation Trust | |||
Isaiah Harris, Jr. (Born 1952) | Trustee, since 2009 | 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 (charter school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation; Asset Allocation Trust | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008; Audit Committee Chairman, 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. | Asset Allocation Trust | |||
David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | Asset Allocation Trust |
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22 | Wells Fargo VT Omega Growth Fund | 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 | 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. | Asset Allocation Trust | |||
Timothy J. Penny (Born 1951) | Trustee, since 1996 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007 and Senior Fellow at the Humphrey Institute Policy Forum at the University of Minnesota since 1995. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | Asset Allocation Trust | |||
Michael S. Scofield (Born 1943) | Trustee, since 2010 | Served on the Investment Company Institute’s Board of Governors and Executive Committee from 2008-2011 as well the Governing Council of the Independent Directors Council from 2006-2011 and the Independent Directors Council Executive Committee from 2008-2011. Chairman of the IDC from 2008-2010. Institutional Investor (Fund Directions) Trustee of Year in 2007. Trustee of the Evergreen Funds complex (and its predecessors) from 1984 to 2010. Chairman of the Evergreen Funds from 2000-2010. Former Trustee of the Mentor Funds. Retired Attorney, Law Offices of Michael S. Scofield. | Asset Allocation Trust |
* | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
Officers
Name and year of birth | Position held and length of service | Principal occupations during past five years or longer | ||||
Karla M. Rabusch (Born 1959) | President, since 2003 | Executive Vice President of Wells Fargo Bank, N.A. and President of Wells Fargo Funds Management, LLC since 2003. | ||||
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. | ||||
C. David Messman (Born 1960) | Secretary, since 2000; Chief Legal Officer, since 2003 | Senior Vice President and Secretary of Wells Fargo Funds Management, LLC since 2001. Assistant General Counsel of Wells Fargo Bank, N.A. since 2013 and Vice President and Managing Counsel of Wells Fargo Bank, N.A. from 1996 to 2013. | ||||
Michael Whitaker (Born 1967) | Chief Compliance Officer, since 2016* | Executive Vice President of Wells Fargo Funds Management, LLC since 2016. Chief Compliance Officer of Fidelity’s Fixed Income Funds and Asset Allocation Funds from 2008 to 2016, Compliance Officer of FMR Co., Inc. from 2014 to 2016, Fidelity Investments Money Management, Inc. from 2014 to 2016, 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 69 funds and Assistant Treasurer of 73 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 1-800-260-5969 or by visiting the website at wellsfargofunds.com. |
* | Michael Whitaker became Chief Compliance Officer effective May 16, 2016. |
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Other information (unaudited) | Wells Fargo VT Omega Growth Fund | 23 |
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Variable 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 an in-person meeting held on May 24-25, 2016 (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 VT Omega Growth 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 an in-person meeting in April 2016, 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 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 2016. 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 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 Funds Management, and 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 performance and expenses
The Board considered the performance results for the Fund over various time periods ended December 31, 2015. The Board considered these results in comparison to the 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.
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24 | Wells Fargo VT Omega Growth Fund | Other information (unaudited) |
The Board noted that the performance of the Fund was lower than the average performance of the Universe for all periods under review except the five- and ten-year periods under review. The Board also noted that the performance of the Fund was lower than its benchmark, the Russell 3000® Growth Index, for all periods under review except the ten-year period.
The Board received information concerning, and discussed factors contributing to, the underperformance of the Fund relative to the Universe and benchmark for the periods noted above. The Board took note of the explanations for the relative underperformance in these periods, including with respect to market factors and investment decisions that affected the Fund’s performance and of longer term outperformance.
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 in range of the median net operating expense ratios of the expense Groups.
The Board took into account the Fund 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 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. However, 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 mutual funds compared with those associated with managing assets of non-mutual fund clients such as collective funds or 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, in light of the services covered by the Advisory Agreements.
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of Wells Fargo as a whole, from providing services to the Fund and the fund family as a whole. The Board also received and considered information concerning the profitability of the Sub-Adviser from providing services to the fund family as a whole, noting that the Sub-Adviser’s profitability information with respect to providing services to the Fund was subsumed in the Wells Fargo and Funds Management profitability analysis.
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Other information (unaudited) | Wells Fargo VT Omega Growth Fund | 25 |
Funds Management reported on the methodologies and estimates used in calculating profitability. 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 and type of fund. Based on its review, the Board did not deem the profits reported by Funds Management or Wells Fargo from its services to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
With respect to possible economies of scale, 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. It considered that, for a small fund or a fund that shrinks in size, breakpoints conversely can result in higher fee levels. The Board also considered that fee waiver and expense reimbursement arrangements and competitive fee rates at the outset are means of sharing potential economies of scale with shareholders of the Fund and the fund family as a whole. The Board considered Funds Management’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments that Funds Management incurs across the fund family as a whole.
The Board concluded that the Fund’s fee and expense arrangements, 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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26 | Wells Fargo VT Omega Growth Fund | List of abbreviations |
The following is a list of common abbreviations for terms and entities that may have appeared in this report.
ACA | — ACA Financial Guaranty Corporation |
ADR | — American depositary receipt |
ADS | — American depositary shares |
AGC | — Assured Guaranty Corporation |
AGM | — Assured Guaranty Municipal |
Ambac | — Ambac Financial Group Incorporated |
AMT | — Alternative minimum tax |
AUD | — Australian dollar |
BAN | — Bond anticipation notes |
BHAC | — Berkshire Hathaway Assurance Corporation |
BRL | — Brazilian real |
CAB | — Capital appreciation bond |
CAD | — Canadian dollar |
CCAB | — Convertible capital appreciation bond |
CDA | — Community Development Authority |
CDO | — Collateralized debt obligation |
CHF | — Swiss franc |
COP | — Colombian peso |
CLP | — Chilean peso |
DKK | — Danish krone |
DRIVER | — Derivative inverse tax-exempt receipts |
DW&P | — Department of Water & Power |
DWR | — Department of Water Resources |
ECFA | — Educational & Cultural Facilities Authority |
EDA | — Economic Development Authority |
EDFA | — Economic Development Finance Authority |
ETF | — Exchange-traded fund |
EUR | — Euro |
FDIC | — Federal Deposit Insurance Corporation |
FFCB | — Federal Farm Credit Banks |
FGIC | — Financial Guaranty Insurance Corporation |
FHA | — Federal Housing Administration |
FHLB | — Federal Home Loan Bank |
FHLMC | — Federal Home Loan Mortgage Corporation |
FICO | — The Financing Corporation |
FNMA | — Federal National Mortgage Association |
FSA | — Farm Service Agency |
GBP | — Great British pound |
GDR | — Global depositary receipt |
GNMA | — Government National Mortgage Association |
GO | — General obligation |
HCFR | — Healthcare facilities revenue |
HEFA | — Health & Educational Facilities Authority |
HEFAR | — Higher education facilities authority revenue |
HFA | — Housing Finance Authority |
HFFA | — Health Facilities Financing Authority |
HKD | — Hong Kong dollar |
HUD | — Department of Housing and Urban Development |
HUF | — Hungarian forint |
IDA | — Industrial Development Authority |
IDAG | — Industrial Development Agency |
IDR | — Indonesian rupiah |
IEP | — Irish pound |
JPY | — Japanese yen |
KRW | — Republic of Korea won |
LIBOR | — London Interbank Offered Rate |
LIFER | — Long Inverse Floating Exempt Receipts |
LIQ | — Liquidity agreement |
LLC | — Limited liability company |
LLLP | — Limited liability limited partnership |
LLP | — Limited liability partnership |
LOC | — Letter of credit |
LP | — Limited partnership |
MBIA | — Municipal Bond Insurance Association |
MFHR | — Multifamily housing revenue |
MSTR | — Municipal securities trust receipts |
MTN | — Medium-term note |
MUD | — Municipal Utility District |
MXN | — Mexican peso |
MYR | — Malaysian ringgit |
National | — National Public Finance Guarantee Corporation |
NGN | — Nigerian naira |
NOK | — Norwegian krone |
NZD | — New Zealand dollar |
PCFA | — Pollution Control Financing Authority |
PCL | — Public Company Limited |
PCR | — Pollution control revenue |
PFA | — Public Finance Authority |
PFFA | — Public Facilities Financing Authority |
PFOTER | — Puttable floating option tax-exempt receipts |
plc | — Public limited company |
PLN | — Polish zloty |
PUTTER | — Puttable tax-exempt receipts |
R&D | — Research & development |
Radian | — Radian Asset Assurance |
RAN | — Revenue anticipation notes |
RDA | — Redevelopment Authority |
RDFA | — Redevelopment Finance Authority |
REIT | — Real estate investment trust |
ROC | — Reset option certificates |
RON | — Romanian lei |
RUB | — Russian ruble |
SAVRS | — Select auction variable rate securities |
SBA | — Small Business Authority |
SDR | — Swedish depositary receipt |
SEK | — Swedish krona |
SFHR | — Single-family housing revenue |
SFMR | — Single-family mortgage revenue |
SGD | — Singapore dollar |
SPA | — Standby purchase agreement |
SPDR | — Standard & Poor’s Depositary Receipts |
SPEAR | — Short Puttable Exempt Adjustable Receipts |
STRIPS | — Separate trading of registered interest and |
principal securities |
TAN | — Tax anticipation notes |
TBA | — To be announced |
THB | — Thai baht |
TIPS | — Treasury inflation-protected securities |
TRAN | — Tax revenue anticipation notes |
TRY | — Turkish lira |
TTFA | — Transportation Trust Fund Authority |
TVA | — Tennessee Valley Authority |
ZAR | — South African rand |
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, email, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 8266
Boston, MA 02266-8266
Email: fundservice@wellsfargo.com
Website: wellsfargofunds.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 1-800-260-5969 or visit the Fund’s website at wellsfargofunds.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is a trade name used by the asset management businesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA, an affiliate of Wells Fargo & Company.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
© 2016 Wells Fargo Funds Management, LLC. All rights reserved.
244420 08-16 SVT5/SAR142 6-16 |
Table of Contents
Semi-Annual Report
June 30, 2016
Wells Fargo VT Opportunity Fund
Table of Contents
Reduce clutter. Save trees.
Sign up for electronic delivery of prospectuses and shareholder reports at wellsfargo.com/advantagedelivery
Contents
2 | ||||
4 | ||||
6 | ||||
7 | ||||
Financial statements | ||||
11 | ||||
12 | ||||
13 | ||||
14 | ||||
16 | ||||
20 | ||||
26 |
The views expressed and any forward-looking statements are as of June 30, 2016, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Funds Management, LLC. 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 Funds Management, LLC and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
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2 | Wells Fargo VT Opportunity Fund | Letter to shareholders (unaudited) |
Karla M. Rabusch
President
Wells Fargo Funds
Although markets gyrated significantly following the U.K.’s surprising decision to leave the E.U. (Brexit), U.S. stocks generally delivered positive results overall for the six-month reporting period.
Dear Valued Shareholder:
We are pleased to offer you this semi-annual report for the Wells Fargo VT Opportunity Fund for the six-month period that ended June 30, 2016. During this period, which began with the first quarter of 2016, U.S. and international stock markets experienced heightened volatility, with intermittent rebounds interspersed with sell-offs. The U.S. economy displayed resilience throughout the period, although growth was somewhat sluggish amid ongoing pressures that included slowing growth in China, a strengthening U.S. dollar, and uncertainty regarding interest-rate increases by the U.S. Federal Reserve (Fed); international economies faced deeper ongoing challenges. During June 2016, global markets became especially volatile as the U.K.’s vote over whether to leave the European Union (E.U.) approached. Although markets gyrated significantly following the U.K.’s surprising decision to leave the E.U. (Brexit), U.S. stocks generally delivered positive results overall for the six-month reporting period. International emerging markets also delivered positive results, while international developed markets generally declined.
In the first quarter of 2016, market volatility increased globally amid ongoing concerns.
Stock markets worldwide fluctuated widely in the first quarter of 2016. Most declined sharply in the first six weeks of the year on concerns such as weak global growth, falling commodity prices, and uncertainty over the timing and impact of the Fed’s interest-rate increases. As the quarter progressed, fears abated somewhat and global markets generally rallied back. The U.S. economy ended the quarter on a positive note as much of the quarter’s data reflected resiliency.
With ongoing uncertainties about global growth and financial markets, however, the Fed held off from raising the target interest rate during the quarter. Outside the U.S., the eurozone fell into deflation in February; in response, the European Central Bank announced an expansion of its stimulus program. In China, the government in March set a growth rate of 6.5% to 7.0% for 2016, an acknowledgment that the country’s growth has been slowing. In emerging markets, although central-bank stimulus and improved prices for oil and other commodities led to stock-market rallies in the quarter, many of these countries’ economies face credit downgrades due to challenges such as the likelihood of a stronger U.S. dollar, which would make dollar-denominated debt more expensive.
Worries over interest rates and the U.K.’s vote largely drove the markets during the second quarter of 2016.
U.S. stocks began the quarter in positive territory but started to lose some steam in early May on worries that a possible June interest-rate increase by the Fed could hurt the market. In mid-May, stocks briefly plunged following comments by Fed officials noting that a June interest-rate increase remained on the table. But once investors had processed this information, stocks again rallied, finishing up for the month. The first three weeks of June brought heightened volatility, spurred largely by a disappointing jobs report and uncertainty over whether the U.K. would remain in the E.U.
The U.K.’s Brexit vote on June 23 shocked countries in Europe and much of the rest of the world. Stock markets plummeted as investors worldwide worried that the U.K.’s departure from the E.U. would slow global growth and prolong the low-interest-rate environment. Following the initial rout, however, U.S. stocks rallied as investors seemed to decide that any negative effects would be more localized and not create a serious risk for global growth. By quarter-end, the broad U.S. stock market had moved back into positive territory.
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Letter to shareholders (unaudited) | Wells Fargo VT Opportunity Fund | 3 |
Don’t let short-term uncertainty derail long-term investment goals.
Periods of 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 in Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Karla M. Rabusch
President
Wells Fargo Funds
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.
For further information about your Fund, contact your investment professional, visit our website at wellsfargofunds.com, or call us directly at 1-800-260-5969. We are available 24 hours a day, 7 days a week.
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4 | Wells Fargo VT Opportunity Fund | Performance highlights (unaudited) |
Investment objective
The Fund seeks long-term capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio manager
Ann M. Miletti
Average annual total returns (%) as of June 30, 20161
Expense ratios2 (%) | ||||||||||||||||||||||
Inception date | 1 year | 5 year | 10 year | Gross | Net3 | |||||||||||||||||
Class 1 | 8-26-2011 | (1.89 | ) | 8.19 | 7.43 | 0.84 | 0.75 | |||||||||||||||
Class 2 | 5-8-1992 | (2.11 | ) | 7.93 | 7.30 | 1.09 | 1.00 | |||||||||||||||
Russell 3000® Index4 | – | 2.14 | 11.60 | 7.40 | – | – |
Figures quoted represent past performance, which is no guarantee of future results. 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 and assumes the reinvestment of dividends and capital gains. Current month-end performance is available by calling 1-800-260-5969. Performance figures of the Fund do not reflect fees charged pursuant to the terms of variable life insurance policies and variable annuity contracts. If sales loads or charges had been reflected, performance would have been lower.
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.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Smaller-company stocks tend to be more volatile and less liquid than those of larger companies. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). The Fund is exposed to foreign investment risk. Consult the Fund’s prospectus for additional information on these and other risks.
Please refer to the prospectus provided by your participating insurance company for detailed information describing the separate accounts for information regarding surrender charges, mortality and expense risk fees, and other charges that may be assessed by the participating insurance companies.
Please see footnotes on page 5.
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Performance highlights (unaudited) | Wells Fargo VT Opportunity Fund | 5 |
Ten largest holdings (%) as of June 30, 20165 | ||||
Tyco International plc | 3.00 | |||
Medtronic plc | 2.77 | |||
Alphabet Incorporated Class C | 2.54 | |||
Apple Incorporated | 2.38 | |||
Bio-Rad Laboratories Incorporated Class A | 2.16 | |||
American International Group Incorporated | 1.81 | |||
United Technologies Corporation | 1.78 | |||
Chubb Limited | 1.75 | |||
American Tower Corporation | 1.74 | |||
PNC Financial Services Group Incorporated | 1.66 |
Sector distribution as of June 30, 20166 |
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1 | Historical performance shown for Class 1 shares prior to their inception reflects the performance of Class 2 shares, and includes the higher expenses applicable to Class 2 shares. If these expenses had not been included, returns would be higher. |
2 | Reflects the expense ratios as stated in the most recent prospectuses. The expense ratios shown are subject to change and may differ from the annualized expense ratios shown in the financial highlights of this report. |
3 | The manager has contractually committed through April 30, 2017, to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s Total Annual Fund Operating Expenses After Fee Waiver at the amounts shown. After this time, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses, and extraordinary expenses are excluded from the expense cap. Without this cap, the Fund’s returns would have been lower. |
4 | The Russell 3000® Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. You cannot invest directly in an index. |
5 | The ten largest holdings, excluding cash and cash equivalents, 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. |
Table of Contents
6 | Wells Fargo VT Opportunity Fund | Fund expenses (unaudited) |
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution (12b-1) 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 January 1, 2016 to June 30, 2016.
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 separate account charges assessed by participating insurance companies. 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 separate account charges assessed by participating insurance companies were included, your costs would have been higher.
Beginning account value 1-1-2016 | Ending account value 6-30-2016 | Expenses paid during the period¹ | Net annualized expense ratio | |||||||||||||
Class 1 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,028.80 | $ | 3.78 | 0.75 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.13 | $ | 3.77 | 0.75 | % | ||||||||
Class 2 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,027.55 | $ | 5.04 | 1.00 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.89 | $ | 5.02 | 1.00 | % |
1 | Expenses paid is equal to the annualized 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). |
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Opportunity Fund | 7 |
Security name | Shares | Value | ||||||||||||||
Common Stocks: 98.60% | ||||||||||||||||
Consumer Discretionary: 12.97% | ||||||||||||||||
Household Durables: 1.14% | ||||||||||||||||
Harman International Industries Incorporated | 31,058 | $ | 2,230,586 | |||||||||||||
|
| |||||||||||||||
Media: 4.71% | ||||||||||||||||
Comcast Corporation Class A | 46,643 | 3,040,657 | ||||||||||||||
Discovery Communications Incorporated Class C † | 53,864 | 1,284,656 | ||||||||||||||
Omnicom Group Incorporated | 24,931 | 2,031,627 | ||||||||||||||
Twenty-First Century Fox Incorporated Class B | 106,262 | 2,895,640 | ||||||||||||||
9,252,580 | ||||||||||||||||
|
| |||||||||||||||
Multiline Retail: 3.63% | ||||||||||||||||
Dollar General Corporation | 32,604 | 3,064,776 | ||||||||||||||
Nordstrom Incorporated « | 43,095 | 1,639,765 | ||||||||||||||
Target Corporation | 34,547 | 2,412,072 | ||||||||||||||
7,116,613 | ||||||||||||||||
|
| |||||||||||||||
Specialty Retail: 2.33% | ||||||||||||||||
Dick’s Sporting Goods Incorporated | 43,444 | 1,957,587 | ||||||||||||||
Lowe’s Companies Incorporated | 32,905 | 2,605,089 | ||||||||||||||
4,562,676 | ||||||||||||||||
|
| |||||||||||||||
Textiles, Apparel & Luxury Goods: 1.16% | ||||||||||||||||
Ralph Lauren Corporation | 25,485 | 2,283,966 | ||||||||||||||
|
| |||||||||||||||
Consumer Staples: 6.26% | ||||||||||||||||
Food & Staples Retailing: 1.08% | ||||||||||||||||
The Kroger Company | 57,819 | 2,127,161 | ||||||||||||||
|
| |||||||||||||||
Food Products: 2.70% | ||||||||||||||||
Mead Johnson Nutrition Company | 31,649 | 2,872,147 | ||||||||||||||
The Hershey Company | 21,337 | 2,421,536 | ||||||||||||||
5,293,683 | ||||||||||||||||
|
| |||||||||||||||
Household Products: 1.23% | ||||||||||||||||
Church & Dwight Company Incorporated | 23,451 | 2,412,873 | ||||||||||||||
|
| |||||||||||||||
Personal Products: 1.25% | ||||||||||||||||
The Estee Lauder Companies Incorporated Class A | 26,974 | 2,455,173 | ||||||||||||||
|
| |||||||||||||||
Energy: 8.68% | ||||||||||||||||
Energy Equipment & Services: 2.01% | ||||||||||||||||
Halliburton Company | 59,430 | 2,691,585 | ||||||||||||||
Weatherford International plc † | 226,076 | 1,254,722 | ||||||||||||||
3,946,307 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
8 | Wells Fargo VT Opportunity Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Oil, Gas & Consumable Fuels: 6.67% | ||||||||||||||||
Concho Resources Incorporated † | 19,287 | $ | 2,300,360 | |||||||||||||
EOG Resources Incorporated | 36,671 | 3,059,095 | ||||||||||||||
Newfield Exploration Company † | 63,742 | 2,816,122 | ||||||||||||||
Pioneer Natural Resources Company | 20,272 | 3,065,329 | ||||||||||||||
Range Resources Corporation « | 42,605 | 1,837,980 | ||||||||||||||
13,078,886 | ||||||||||||||||
|
| |||||||||||||||
Financials: 14.64% | ||||||||||||||||
Banks: 4.76% | ||||||||||||||||
Citigroup Incorporated | 76,320 | 3,235,205 | ||||||||||||||
PNC Financial Services Group Incorporated | 39,914 | 3,248,600 | ||||||||||||||
Webster Financial Corporation | 84,305 | 2,862,155 | ||||||||||||||
9,345,960 | ||||||||||||||||
|
| |||||||||||||||
Capital Markets: 1.80% | ||||||||||||||||
E*TRADE Financial Corporation † | 49,285 | 1,157,705 | ||||||||||||||
TD Ameritrade Holding Corporation | 82,944 | 2,361,830 | ||||||||||||||
3,519,535 | ||||||||||||||||
|
| |||||||||||||||
Insurance: 6.34% | ||||||||||||||||
American International Group Incorporated | 67,172 | 3,552,727 | ||||||||||||||
Chubb Limited | 26,248 | 3,430,876 | ||||||||||||||
The Progressive Corporation | 70,292 | 2,354,782 | ||||||||||||||
Willis Towers Watson plc | 24,965 | 3,103,399 | ||||||||||||||
12,441,784 | ||||||||||||||||
|
| |||||||||||||||
REITs: 1.74% | ||||||||||||||||
American Tower Corporation | 30,102 | 3,419,888 | ||||||||||||||
|
| |||||||||||||||
Health Care: 14.03% | ||||||||||||||||
Health Care Equipment & Supplies: 3.83% | ||||||||||||||||
Medtronic plc | 62,689 | 5,439,525 | ||||||||||||||
Zimmer Holdings Incorporated | 17,185 | 2,068,730 | ||||||||||||||
7,508,255 | ||||||||||||||||
|
| |||||||||||||||
Health Care Providers & Services: 2.32% | ||||||||||||||||
Cigna Corporation | 21,609 | 2,765,736 | ||||||||||||||
Patterson Companies Incorporated | 37,354 | 1,788,883 | ||||||||||||||
4,554,619 | ||||||||||||||||
|
| |||||||||||||||
Life Sciences Tools & Services: 5.07% | ||||||||||||||||
Agilent Technologies Incorporated | 60,311 | 2,675,396 | ||||||||||||||
Bio-Rad Laboratories Incorporated Class A † | 29,581 | 4,230,675 | ||||||||||||||
Thermo Fisher Scientific Incorporated | 20,612 | 3,045,629 | ||||||||||||||
9,951,700 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Opportunity Fund | 9 |
Security name | Shares | Value | ||||||||||||||
Pharmaceuticals: 2.81% | ||||||||||||||||
Merck & Company Incorporated | 50,393 | $ | 2,903,141 | |||||||||||||
Novartis AG ADR | 31,714 | 2,616,722 | ||||||||||||||
5,519,863 | ||||||||||||||||
|
| |||||||||||||||
Industrials: 15.07% | ||||||||||||||||
Aerospace & Defense: 4.40% | ||||||||||||||||
B/E Aerospace Incorporated | 59,445 | 2,744,873 | ||||||||||||||
BWX Technologies Incorporated | 66,997 | 2,396,483 | ||||||||||||||
United Technologies Corporation | 34,127 | 3,499,724 | ||||||||||||||
8,641,080 | ||||||||||||||||
|
| |||||||||||||||
Airlines: 1.08% | ||||||||||||||||
United Continental Holdings Incorporated † | 51,616 | 2,118,321 | ||||||||||||||
|
| |||||||||||||||
Commercial Services & Supplies: 4.47% | ||||||||||||||||
Republic Services Incorporated | 56,246 | 2,885,982 | ||||||||||||||
Tyco International plc | 138,179 | 5,886,425 | ||||||||||||||
8,772,407 | ||||||||||||||||
|
| |||||||||||||||
Electrical Equipment: 0.77% | ||||||||||||||||
Babcock & Wilcox Enterprises Incorporated † | 103,295 | 1,517,404 | ||||||||||||||
|
| |||||||||||||||
Machinery: 1.03% | ||||||||||||||||
Colfax Corporation † | 75,990 | 2,010,695 | ||||||||||||||
|
| |||||||||||||||
Road & Rail: 3.32% | ||||||||||||||||
Canadian Pacific Railway Limited | 8,127 | 1,046,676 | ||||||||||||||
Hertz Global Holdings Incorporated | 286,945 | 3,176,481 | ||||||||||||||
J.B. Hunt Transport Services Incorporated | 28,281 | 2,288,781 | ||||||||||||||
6,511,938 | ||||||||||||||||
|
| |||||||||||||||
Information Technology: 22.46% | ||||||||||||||||
Electronic Equipment, Instruments & Components: 2.73% | ||||||||||||||||
Amphenol Corporation Class A | 47,362 | 2,715,263 | ||||||||||||||
TE Connectivity Limited | 46,449 | 2,652,702 | ||||||||||||||
5,367,965 | ||||||||||||||||
|
| |||||||||||||||
Internet Software & Services: 2.54% | ||||||||||||||||
Alphabet Incorporated Class C † | 7,194 | 4,978,967 | ||||||||||||||
|
| |||||||||||||||
IT Services: 4.75% | ||||||||||||||||
Alliance Data Systems Corporation † | 12,504 | 2,449,784 | ||||||||||||||
Cognizant Technology Solutions Corporation Class A † | 34,867 | 1,995,787 | ||||||||||||||
Global Payments Incorporated | 36,173 | 2,582,029 | ||||||||||||||
MasterCard Incorporated Class A | 25,999 | 2,289,472 | ||||||||||||||
9,317,072 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
10 | Wells Fargo VT Opportunity Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Semiconductors & Semiconductor Equipment: 3.77% | ||||||||||||||||
ARM Holdings plc | 122,195 | $ | 1,856,107 | |||||||||||||
Broadcom Limited | 20,144 | 3,130,378 | ||||||||||||||
Texas Instruments Incorporated | 38,606 | 2,418,666 | ||||||||||||||
7,405,151 | ||||||||||||||||
|
| |||||||||||||||
Software: 6.29% | ||||||||||||||||
Check Point Software Technologies Limited Ǡ | 27,021 | 2,153,033 | ||||||||||||||
Citrix Systems Incorporated † | 28,550 | 2,286,570 | ||||||||||||||
Oracle Corporation | 65,612 | 2,685,499 | ||||||||||||||
Red Hat Incorporated † | 35,991 | 2,612,945 | ||||||||||||||
Salesforce.com Incorporated † | 32,898 | 2,612,430 | ||||||||||||||
12,350,477 | ||||||||||||||||
|
| |||||||||||||||
Technology Hardware, Storage & Peripherals: 2.38% | ||||||||||||||||
Apple Incorporated | 48,804 | 4,665,662 | ||||||||||||||
|
| |||||||||||||||
Materials: 4.49% | ||||||||||||||||
Chemicals: 2.48% | ||||||||||||||||
PPG Industries Incorporated | 26,629 | 2,773,410 | ||||||||||||||
Praxair Incorporated | 18,704 | 2,102,143 | ||||||||||||||
4,875,553 | ||||||||||||||||
|
| |||||||||||||||
Containers & Packaging: 1.21% | ||||||||||||||||
Crown Holdings Incorporated † | 46,766 | 2,369,633 | ||||||||||||||
|
| |||||||||||||||
Metals & Mining: 0.80% | ||||||||||||||||
Steel Dynamics Incorporated | 63,879 | 1,565,036 | ||||||||||||||
|
| |||||||||||||||
Total Common Stocks (Cost $161,778,663) | 193,489,469 | |||||||||||||||
|
| |||||||||||||||
Yield | ||||||||||||||||
Short-Term Investments: 3.35% | ||||||||||||||||
Investment Companies: 3.35% | ||||||||||||||||
Securities Lending Cash Investments LLC (l)(r)(u) | 0.47 | % | 4,805,475 | 4,805,475 | ||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u) | 0.31 | 1,768,251 | 1,768,251 | |||||||||||||
Total Short-Term Investments (Cost $6,573,726) | 6,573,726 | |||||||||||||||
|
|
Total investments in securities (Cost $168,352,389) * | 101.95 | % | 200,063,195 | |||||
Other assets and liabilities, net | (1.95 | ) | (3,827,623 | ) | ||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 196,235,572 | ||||
|
|
|
|
† | Non-income-earning security |
« | All or a portion of this security is on loan. |
(l) | The issuer of the security is an affiliated person of the Fund as defined in the Investment Company Act of 1940. |
(r) | The investment is a non-registered investment vehicle purchased with cash collateral received from securities on loan. |
(u) | The rate represents the 7-day annualized yield at period end. |
* | Cost for federal income tax purposes is $168,758,419 and unrealized gains (losses) consists of: |
Gross unrealized gains | $ | 39,133,924 | ||
Gross unrealized losses | (7,829,148 | ) | ||
|
| |||
Net unrealized gains | $ | 31,304,776 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Statement of assets and liabilities—June 30, 2016 (unaudited) | Wells Fargo VT Opportunity Fund | 11 |
Assets | ||||
Investments | ||||
In unaffiliated securities (including $4,697,965 of securities loaned), at value (cost $161,778,663) | $ | 193,489,469 | ||
In affiliated securities, at value (cost $6,573,726) | 6,573,726 | |||
|
| |||
Total investments, at value (cost $168,352,389) | 200,063,195 | |||
Receivable for investments sold | 1,375,785 | |||
Receivable for Fund shares sold | 19,938 | |||
Receivable for dividends | 157,802 | |||
Receivable for securities lending income | 1,505 | |||
Prepaid expenses and other assets | 4,350 | |||
|
| |||
Total assets | 201,622,575 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 153,307 | |||
Payable for Fund shares redeemed | 249,981 | |||
Payable upon receipt of securities loaned | 4,805,475 | |||
Management fee payable | 100,430 | |||
Distribution fee payable | 34,182 | |||
Administration fees payable | 13,102 | |||
Accrued expenses and other liabilities | 30,526 | |||
|
| |||
Total liabilities | 5,387,003 | |||
|
| |||
Total net assets | $ | 196,235,572 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Paid-in capital | $ | 138,837,191 | ||
Undistributed net investment income | 4,535,466 | |||
Accumulated net realized gains on investments | 21,152,129 | |||
Net unrealized gains on investments | 31,710,786 | |||
|
| |||
Total net assets | $ | 196,235,572 | ||
|
| |||
COMPUTATION OF NET ASSET VALUE PER SHARE | ||||
Net assets – Class 1 | $ | 32,381,837 | ||
Shares outstanding – Class 11 | 1,259,049 | |||
Net asset value per share – Class 1 | $25.72 | |||
Net assets – Class 2 | $ | 163,853,735 | ||
Shares outstanding – Class 21 | 6,365,665 | |||
Net asset value per share – Class 2 | $25.74 |
1 | The Fund has an unlimited number of authorized shares. |
The accompanying notes are an integral part of these financial statements.
Table of Contents
12 | Wells Fargo VT Opportunity Fund | Statement of operations—six months ended June 30, 2016 (unaudited) |
Investment income | ||||
Dividends (net of foreign withholding taxes of $16,720) | $ | 1,340,230 | ||
Securities lending income, net | 15,537 | |||
Income from affiliated securities | 3,319 | |||
|
| |||
Total investment income | 1,359,086 | |||
|
| |||
Expenses | ||||
Management fee | 670,018 | |||
Administration fees | ||||
Class 1 | 12,998 | |||
Class 2 | 63,576 | |||
Distribution fee | ||||
Class 2 | 198,674 | |||
Custody and accounting fees | 10,316 | |||
Professional fees | 22,797 | |||
Shareholder report expenses | 8,510 | |||
Trustees’ fees and expenses | 10,706 | |||
Other fees and expenses | 3,105 | |||
|
| |||
Total expenses | 1,000,700 | |||
Less: Fee waivers and/or expense reimbursements | (84,150 | ) | ||
|
| |||
Net expenses | 916,550 | |||
|
| |||
Net investment income | 442,536 | |||
|
| |||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS | ||||
Net realized gains on investments | 2,041,701 | |||
Net change in unrealized gains (losses) on investments | 2,671,421 | |||
|
| |||
Net realized and unrealized gains (losses) on investments | 4,713,122 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 5,155,658 | ||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
Statement of changes in net assets | Wells Fargo VT Opportunity Fund | 13 |
Six months ended June 30, 2016 (unaudited) | Year ended December 31, 2015 | |||||||||||||||
Operations | ||||||||||||||||
Net investment income | $ | 442,536 | $ | 4,169,899 | ||||||||||||
Net realized gains on investments | 2,041,701 | 19,932,472 | ||||||||||||||
Net change in unrealized gains (losses) on investments | 2,671,421 | (27,908,779 | ) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | 5,155,658 | (3,806,408 | ) | |||||||||||||
|
| |||||||||||||||
Distributions to shareholders from | ||||||||||||||||
Net investment income | ||||||||||||||||
Class 1 | 0 | (155,286 | ) | |||||||||||||
Class 2 | 0 | (243,668 | ) | |||||||||||||
Net realized gains | ||||||||||||||||
Class 1 | 0 | (3,986,797 | ) | |||||||||||||
Class 2 | 0 | (19,507,701 | ) | |||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | 0 | (23,893,452 | ) | |||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold | ||||||||||||||||
Class 1 | 15,350 | 380,817 | 77,816 | 1,613,192 | ||||||||||||
Class 2 | 89,304 | 2,198,135 | 261,064 | 5,454,558 | ||||||||||||
|
| |||||||||||||||
2,578,952 | 7,067,750 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions | ||||||||||||||||
Class 1 | 0 | 0 | 159,926 | 4,142,083 | ||||||||||||
Class 2 | 0 | 0 | 760,253 | 19,751,369 | ||||||||||||
|
| |||||||||||||||
0 | 23,893,452 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed | ||||||||||||||||
Class 1 | (177,793 | ) | (4,422,888 | ) | (279,846 | ) | (7,750,062 | ) | ||||||||
Class 2 | (473,132 | ) | (11,704,936 | ) | (1,248,271 | ) | (34,407,074 | ) | ||||||||
|
| |||||||||||||||
(16,127,824 | ) | (42,157,136 | ) | |||||||||||||
|
| |||||||||||||||
Net decrease in net assets resulting from capital share transactions | (13,548,872 | ) | (11,195,934 | ) | ||||||||||||
|
| |||||||||||||||
Total decrease in net assets | (8,393,214 | ) | (38,895,794 | ) | ||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 204,628,786 | 243,524,580 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 196,235,572 | $ | 204,628,786 | ||||||||||||
|
| |||||||||||||||
Undistributed net investment income | $ | 4,535,466 | $ | 4,092,930 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
14 | Wells Fargo VT Opportunity Fund | Financial highlights |
(For a share outstanding throughout each period)
Six months ended (unaudited) | Year ended December 31 | |||||||||||||||||||||||
CLASS 1 | 2015 | 2014 | 2013 | 2012 | 20111 | |||||||||||||||||||
Net asset value, beginning of period | $25.00 | $28.82 | $26.11 | $20.02 | $17.40 | $16.52 | ||||||||||||||||||
Net investment income | 0.15 | 0.57 | 0.10 | 0.08 | 0.10 | 0.04 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.57 | (1.28 | ) | 2.69 | 6.11 | 2.64 | 0.84 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.72 | (0.71 | ) | 2.79 | 6.19 | 2.74 | 0.88 | |||||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||||||
Net investment income | 0.00 | (0.12 | ) | (0.08 | ) | (0.10 | ) | (0.11 | ) | 0.00 | ||||||||||||||
Net realized gains | 0.00 | (2.99 | ) | 0.00 | 0.00 | (0.01 | ) | 0.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions to shareholders | 0.00 | (3.11 | ) | (0.08 | ) | (0.10 | ) | (0.12 | ) | 0.00 | ||||||||||||||
Net asset value, end of period | $25.72 | $25.00 | $28.82 | $26.11 | $20.02 | $17.40 | ||||||||||||||||||
Total return2 | 2.88 | % | (2.85 | )% | 10.70 | % | 30.99 | % | 15.80 | % | 5.33 | % | ||||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||||||
Gross expenses | 0.84 | % | 0.84 | % | 0.82 | % | 0.84 | % | 0.86 | % | 0.83 | % | ||||||||||||
Net expenses | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | ||||||||||||
Net investment income | 0.67 | % | 2.02 | % | 0.37 | % | 0.32 | % | 0.46 | % | 0.61 | % | ||||||||||||
Supplemental data | ||||||||||||||||||||||||
Portfolio turnover rate | 15 | % | 41 | % | 33 | % | 26 | % | 36 | % | 35 | % | ||||||||||||
Net assets, end of period (000s omitted) | $32,382 | $35,539 | $42,178 | $44,636 | $40,950 | $42,116 |
1 | For the period from August 26, 2011 (commencement of class operations) to December 31, 2011 |
2 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
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Financial highlights | Wells Fargo VT Opportunity Fund | 15 |
(For a share outstanding throughout each period)
Six months ended (unaudited) | Year ended December 31 | |||||||||||||||||||||||
CLASS 2 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||
Net asset value, beginning of period | $25.05 | $28.86 | $26.15 | $20.05 | $17.38 | $18.42 | ||||||||||||||||||
Net investment income | 0.08 | 0.50 | 0.04 | 0.02 | 0.05 | 0.03 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.61 | (1.28 | ) | 2.69 | 6.13 | 2.65 | (1.04 | ) | ||||||||||||||||
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Total from investment operations | 0.69 | (0.78 | ) | 2.73 | 6.15 | 2.70 | (1.01 | ) | ||||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||||||
Net investment income | 0.00 | (0.04 | ) | (0.02 | ) | (0.05 | ) | (0.02 | ) | (0.03 | ) | |||||||||||||
Net realized gains | 0.00 | (2.99 | ) | 0.00 | 0.00 | (0.01 | ) | 0.00 | ||||||||||||||||
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Total distributions to shareholders | 0.00 | (3.03 | ) | (0.02 | ) | (0.05 | ) | (0.03 | ) | (0.03 | ) | |||||||||||||
Net asset value, end of period | $25.74 | $25.05 | $28.86 | $26.15 | $20.05 | $17.38 | ||||||||||||||||||
Total return1 | 2.75 | % | (3.08 | )% | 10.42 | % | 30.68 | % | 15.52 | % | (5.52 | )% | ||||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||||||
Gross expenses | 1.09 | % | 1.09 | % | 1.07 | % | 1.09 | % | 1.10 | % | 1.07 | % | ||||||||||||
Net expenses | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.04 | % | ||||||||||||
Net investment income | 0.42 | % | 1.76 | % | 0.12 | % | 0.07 | % | 0.21 | % | 0.18 | % | ||||||||||||
Supplemental data | ||||||||||||||||||||||||
Portfolio turnover rate | 15 | % | 41 | % | 33 | % | 26 | % | 36 | % | 35 | % | ||||||||||||
Net assets, end of period (000s omitted) | $163,854 | $169,090 | $201,347 | $211,077 | $188,313 | $201,535 |
1 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
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16 | Wells Fargo VT Opportunity Fund | Notes to financial statements (unaudited) |
1. ORGANIZATION
Wells Fargo Variable 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 VT Opportunity 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 a Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the principal exchange or market that day, the prior day’s price will be deemed “stale” and a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
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 Management Valuation Team of Wells Fargo Funds Management, LLC (“Funds Management”).
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore may not fully reflect trading or events that occur after the close of the principal exchange in which the foreign securities are traded, but before the close of the New York Stock Exchange. If such trading or events are expected to materially affect the value of such securities, then fair value pricing procedures approved by the Board of Trustees of the Fund are applied. These procedures take into account multiple factors including movements in U.S. securities markets after foreign exchanges close. Foreign securities that are fair valued under these procedures are categorized as Level 2 and the application of these procedures may result in transfers between Level 1 and Level 2. Depending on market activity, such fair valuations may be frequent. Such fair value pricing may result in net asset values that are higher or lower than net asset values based on the last reported sales price or latest quoted bid price. On June 30, 2016, such fair value pricing was used in pricing foreign securities.
Investments in registered open-end investment companies are valued at net asset value. Interests in non-registered investment vehicles that are redeemable at net asset value are fair valued 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 Management Valuation Team. 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 Management Valuation Team which may include items for ratification.
Valuations of fair valued securities are compared to the next actual sales price when available, or other appropriate market values, to assess the continued appropriateness of the fair valuation methodologies used. These securities are fair valued on a day-to-day basis, taking into consideration changes to appropriate market information and any significant changes to the inputs considered in the valuation process until there is a readily available price provided on an exchange or by an independent pricing service. Valuations received from an independent pricing service or independent broker-dealer quotes are periodically validated by comparisons to most recent trades and valuations provided by other independent pricing services in addition to the review of prices by the manager and/or subadviser. Unobservable inputs used in determining fair valuations are identified based on the type of security, taking into consideration factors utilized by market participants in valuing the investment, knowledge about the issuer and the current market environment.
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Notes to financial statements (unaudited) | Wells Fargo VT Opportunity Fund | 17 |
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 Management Valuation Team. 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 and the changes in net assets resulting from changes in market prices of securities are not separately presented. Such changes are included in net realized and unrealized gains or losses from investments.
Security loans
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. The Fund continues to receive interest or dividends on the securities loaned. The Fund 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 additional required collateral is delivered to the Fund on the next business day. In a securities lending transaction, the net asset value of the Fund will be affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. 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 addition, the investment of any cash collateral received may lose all or part of its value. The Fund has the right under the lending agreement to recover the securities from the borrower on demand.
The Fund lends its securities through an unaffiliated securities lending agent. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). The Securities Lending Fund is exempt from registration under Section 3(c)(7) of the 1940 Act and is managed by Funds Management and is subadvised by Wells Capital Management Incorporated (“WellsCap”), an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”). Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser. The Securities Lending Fund seeks to provide a positive return compared to the daily Fed Funds Open rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments. Securities Lending Fund investments are fair valued based upon the amortized cost valuation technique. Income earned from investment in the Securities Lending Fund is included in securities lending income on the Statement of Operations.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date, except for certain dividends from foreign securities, which are recorded as soon as the custodian verifies the ex-dividend date. Dividend income from foreign securities is recorded net of foreign taxes withheld where recovery of such taxes is not assured.
Distributions to shareholders
Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations, which may differ in amount or character from net investment income and realized gains recognized for purposes of U.S. generally accepted accounting principles.
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.
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18 | Wells Fargo VT Opportunity Fund | Notes to financial statements (unaudited) |
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 December 31, 2015, the Fund had capital loss carryforwards available to offset future net realized capital gains in the amount of $360,675 expiring in 2016.
Class allocations
The separate classes of shares offered by the Fund differ principally in distribution fees. Class specific expenses are charged directly to that share class. Investment income, common expenses and realized and unrealized gains (losses) on investments are allocated daily to each class of shares based on the relative proportion of net assets of each class.
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to significant unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
n | Level 1 – quoted prices in active markets for identical securities |
n | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, use of amortized cost, etc.) |
n | 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 June 30, 2016:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Common stocks | ||||||||||||||||
Consumer discretionary | $ | 25,446,421 | $ | 0 | $ | 0 | $ | 25,446,421 | ||||||||
Consumer staples | 12,288,890 | 0 | 0 | 12,288,890 | ||||||||||||
Energy | 17,025,193 | 0 | 0 | 17,025,193 | ||||||||||||
Financials | 28,727,167 | 0 | 0 | 28,727,167 | ||||||||||||
Health care | 27,534,437 | 0 | 0 | 27,534,437 | ||||||||||||
Industrials | 29,571,845 | 0 | 0 | 29,571,845 | ||||||||||||
Information technology | 42,229,187 | 1,856,107 | 0 | 44,085,294 | ||||||||||||
Materials | 8,810,222 | 0 | 0 | 8,810,222 | ||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 1,768,251 | 0 | 0 | 1,768,251 | ||||||||||||
Investments measured at net asset value* | 4,805,475 | |||||||||||||||
Total assets | $ | 193,401,613 | $ | 1,856,107 | $ | 0 | $ | 200,063,195 |
* | Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been categorized in the fair value hierarchy. The fair value amount presented in the table is intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Statement of Assets and Liabilities. The Fund’s investment in Securities Lending Cash Investments, LLC valued at $4,805,475 does not have a redemption period notice, can be redeemed daily and does not have any unfunded commitments. |
The Fund recognizes transfers between levels within the fair value hierarchy at the end of the reporting period. At June 30, 2016, the Fund did not have any transfers into/out Level 1, Level 2, or Level 3.
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Notes to financial statements (unaudited) | Wells Fargo VT Opportunity Fund | 19 |
4. TRANSACTIONS WITH AFFILIATES
Management fee
Funds Management, an indirect wholly owned subsidiary of 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, providing fund-level administrative services in connection with the Fund’s operations, and providing any other fund-level administrative services reasonably necessary for the operation of the Fund. As compensation for its services under the investment management agreement, Funds Management is entitled to receive an annual management fee starting at 0.70% and declining to 0.58% as the average daily net assets of the Fund increase. For the six months ended June 30, 2016, the management fee was equivalent to an annual rate of 0.70% 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. WellsCap is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.45% and declining to 0.30% as the average daily net assets of the Fund increase.
Administration fees
Under a class-level administration agreement, Funds Management provides class-level administrative services to the Fund, which includes paying fees and expenses for services provided by the transfer agent, sub-transfer agents, omnibus account servicers and record-keepers. As compensation for its services under the class-level administration agreement, Funds Management receives an annual fee of 0.08% which is calculated based on the average daily net assets of each class.
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. Waiver of fees and/or reimbursement of expenses by Funds Management were made first from fund level expenses on a proportionate basis and then from class specific expenses. Funds Management has committed through April 30, 2017 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.75% for Class 1 shares and 1.00% for Class 2 shares. After this time, 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 2 shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. A distribution fee is charged to Class 2 shares and paid to Wells Fargo Funds Distributor, LLC (“Funds Distributor”), the principal underwriter, at an annual rate of 0.25% of the average daily net assets of Class 2 shares.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the six months ended June 30, 2016 were $29,022,180 and $42,131,836, respectively.
The Fund may purchase or sell investment securities to other Wells Fargo funds under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which generally do not incur broker commissions, are effected at current market prices. Interfund trades are included within the respective purchases and sales amounts shown.
6. BANK BORROWINGS
The Trust and Wells Fargo Funds Trust (excluding the money market funds and certain other funds) are parties to a $200,000,000 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 0.20% of the unused balance is allocated to each participating fund.
For the six months ended June 30, 2016, there were no borrowings by the Fund under the agreement.
7. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
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20 | Wells Fargo VT Opportunity Fund | Other information (unaudited) |
PROXY VOTING INFORMATION
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-260-5969, visiting our website at wellsfargofunds.com, or visiting the SEC website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website at wellsfargofunds.com or by visiting the SEC website at sec.gov.
PORTFOLIO HOLDINGS INFORMATION
The complete portfolio holdings for the Fund are publicly available monthly on the Fund’s website (wellsfargofunds.com), on a one-month delayed basis. In addition, top ten holdings information (excluding derivative positions) for the Fund is publicly available on the Fund’s website on a monthly, seven-day or more delayed basis. The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q, which is available by visiting the SEC website at sec.gov. In addition, the Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and at regional offices in New York City, at 233 Broadway, and in Chicago, at 175 West Jackson Boulevard, Suite 900. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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Other information (unaudited) | Wells Fargo VT Opportunity Fund | 21 |
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 financial 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 lead 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. Mr. Ebsworth is a CFA® charterholder and an Adjunct Lecturer, Finance, at Babson College. | Asset Allocation Trust | |||
Jane A. Freeman (Born 1953) | Trustee, since 2015 | 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 Chair of Taproot Foundation (non-profit organization), a Board Member of Ruth Bancroft Garden (non-profit organization) and an inactive chartered financial analyst. | Asset Allocation Trust | |||
Peter G. Gordon (Born 1942) | Trustee, since 1998; Chairman, since 2005 | Co-Founder, Retired Chairman, President and CEO of Crystal Geyser Water Company. Trustee Emeritus, Colby College. | Asset Allocation Trust | |||
Isaiah Harris, Jr. (Born 1952) | Trustee, since 2009 | 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 (charter school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation; Asset Allocation Trust | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008; Audit Committee Chairman, 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. | Asset Allocation Trust | |||
David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | Asset Allocation Trust |
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22 | Wells Fargo VT Opportunity Fund | 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 | 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. | Asset Allocation Trust | |||
Timothy J. Penny (Born 1951) | Trustee, since 1996 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007 and Senior Fellow at the Humphrey Institute Policy Forum at the University of Minnesota since 1995. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | Asset Allocation Trust | |||
Michael S. Scofield (Born 1943) | Trustee, since 2010 | Served on the Investment Company Institute’s Board of Governors and Executive Committee from 2008-2011 as well the Governing Council of the Independent Directors Council from 2006-2011 and the Independent Directors Council Executive Committee from 2008-2011. Chairman of the IDC from 2008-2010. Institutional Investor (Fund Directions) Trustee of Year in 2007. Trustee of the Evergreen Funds complex (and its predecessors) from 1984 to 2010. Chairman of the Evergreen Funds from 2000-2010. Former Trustee of the Mentor Funds. Retired Attorney, Law Offices of Michael S. Scofield. | Asset Allocation Trust |
* | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
Officers
Name and year of birth | Position held and length of service | Principal occupations during past five years or longer | ||||
Karla M. Rabusch (Born 1959) | President, since 2003 | Executive Vice President of Wells Fargo Bank, N.A. and President of Wells Fargo Funds Management, LLC since 2003. | ||||
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. | ||||
C. David Messman (Born 1960) | Secretary, since 2000; Chief Legal Officer, since 2003 | Senior Vice President and Secretary of Wells Fargo Funds Management, LLC since 2001. Assistant General Counsel of Wells Fargo Bank, N.A. since 2013 and Vice President and Managing Counsel of Wells Fargo Bank, N.A. from 1996 to 2013. | ||||
Michael Whitaker (Born 1967) | Chief Compliance Officer, since 2016* | Executive Vice President of Wells Fargo Funds Management, LLC since 2016. Chief Compliance Officer of Fidelity’s Fixed Income Funds and Asset Allocation Funds from 2008 to 2016, Compliance Officer of FMR Co., Inc. from 2014 to 2016, Fidelity Investments Money Management, Inc. from 2014 to 2016, 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 69 funds and Assistant Treasurer of 73 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 1-800-260-5969 or by visiting the website at wellsfargofunds.com. |
* | Michael Whitaker became Chief Compliance Officer effective May 16, 2016. |
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Other information (unaudited) | Wells Fargo VT Opportunity Fund | 23 |
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Variable 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 an in-person meeting held on May 24-25, 2016 (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 VT Opportunity 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 an in-person meeting in April 2016, 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 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 2016. 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 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 Funds Management, and 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 performance and expenses
The Board considered the performance results for the Fund over various time periods ended December 31, 2015. The Board considered these results in comparison to the 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
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24 | Wells Fargo VT Opportunity Fund | Other information (unaudited) |
Universe. The Board noted that the performance of the Fund was lower than the average performance of the Universe for all periods under review except the ten-year period under review. The Board also noted that the performance of the Fund was lower than its benchmark, the Russell 3000® Index, for all periods under review.
The Board received information concerning, and discussed factors contributing to, the underperformance of the Fund relative to the Universe and benchmark for the periods noted above. The Board took note of the explanations for the relative underperformance in these periods, including with respect to market factors and investment decisions that affected the Fund’s performance.
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 in range of the median net operating expense ratios of the expense Groups.
The Board took into account the Fund 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 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. However, 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 mutual funds compared with those associated with managing assets of non-mutual fund clients such as collective funds or 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, in light of the services covered by the Advisory Agreements.
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of Wells Fargo as a whole, from providing services to the Fund and the fund family as a whole. The Board also received and considered information concerning the profitability of the Sub-Adviser from providing services to the fund family as a whole, noting that the Sub-Adviser’s profitability information with respect to providing services to the Fund was subsumed in the Wells Fargo and Funds Management profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such
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Other information (unaudited) | Wells Fargo VT Opportunity Fund | 25 |
as the size and type of fund. Based on its review, the Board did not deem the profits reported by Funds Management or Wells Fargo from its services to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
With respect to possible economies of scale, 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. It considered that, for a small fund or a fund that shrinks in size, breakpoints conversely can result in higher fee levels. The Board also considered that fee waiver and expense reimbursement arrangements and competitive fee rates at the outset are means of sharing potential economies of scale with shareholders of the Fund and the fund family as a whole. The Board considered Funds Management’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments that Funds Management incurs across the fund family as a whole.
The Board concluded that the Fund’s fee and expense arrangements, 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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26 | Wells Fargo VT Opportunity Fund | List of abbreviations |
The following is a list of common abbreviations for terms and entities that may have appeared in this report.
ACA | — ACA Financial Guaranty Corporation |
ADR | — American depositary receipt |
ADS | — American depositary shares |
AGC | — Assured Guaranty Corporation |
AGM | — Assured Guaranty Municipal |
Ambac | — Ambac Financial Group Incorporated |
AMT | — Alternative minimum tax |
AUD | — Australian dollar |
BAN | — Bond anticipation notes |
BHAC | — Berkshire Hathaway Assurance Corporation |
BRL | — Brazilian real |
CAB | — Capital appreciation bond |
CAD | — Canadian dollar |
CCAB | — Convertible capital appreciation bond |
CDA | — Community Development Authority |
CDO | — Collateralized debt obligation |
CHF | — Swiss franc |
COP | — Colombian peso |
CLP | — Chilean peso |
DKK | — Danish krone |
DRIVER | — Derivative inverse tax-exempt receipts |
DW&P | — Department of Water & Power |
DWR | — Department of Water Resources |
ECFA | — Educational & Cultural Facilities Authority |
EDA | — Economic Development Authority |
EDFA | — Economic Development Finance Authority |
ETF | — Exchange-traded fund |
EUR | — Euro |
FDIC | — Federal Deposit Insurance Corporation |
FFCB | — Federal Farm Credit Banks |
FGIC | — Financial Guaranty Insurance Corporation |
FHA | — Federal Housing Administration |
FHLB | — Federal Home Loan Bank |
FHLMC | — Federal Home Loan Mortgage Corporation |
FICO | — The Financing Corporation |
FNMA | — Federal National Mortgage Association |
FSA | — Farm Service Agency |
GBP | — Great British pound |
GDR | — Global depositary receipt |
GNMA | — Government National Mortgage Association |
GO | — General obligation |
HCFR | — Healthcare facilities revenue |
HEFA | — Health & Educational Facilities Authority |
HEFAR | — Higher education facilities authority revenue |
HFA | — Housing Finance Authority |
HFFA | — Health Facilities Financing Authority |
HKD | — Hong Kong dollar |
HUD | — Department of Housing and Urban Development |
HUF | — Hungarian forint |
IDA | — Industrial Development Authority |
IDAG | — Industrial Development Agency |
IDR | — Indonesian rupiah |
IEP | — Irish pound |
JPY | — Japanese yen |
KRW | — Republic of Korea won |
LIBOR | — London Interbank Offered Rate |
LIFER | — Long Inverse Floating Exempt Receipts |
LIQ | — Liquidity agreement |
LLC | — Limited liability company |
LLLP | — Limited liability limited partnership |
LLP | — Limited liability partnership |
LOC | — Letter of credit |
LP | — Limited partnership |
MBIA | — Municipal Bond Insurance Association |
MFHR | — Multifamily housing revenue |
MSTR | — Municipal securities trust receipts |
MTN | — Medium-term note |
MUD | — Municipal Utility District |
MXN | — Mexican peso |
MYR | — Malaysian ringgit |
National | — National Public Finance Guarantee Corporation |
NGN | — Nigerian naira |
NOK | — Norwegian krone |
NZD | — New Zealand dollar |
PCFA | — Pollution Control Financing Authority |
PCL | — Public Company Limited |
PCR | — Pollution control revenue |
PFA | — Public Finance Authority |
PFFA | — Public Facilities Financing Authority |
PFOTER | — Puttable floating option tax-exempt receipts |
plc | — Public limited company |
PLN | — Polish zloty |
PUTTER | — Puttable tax-exempt receipts |
R&D | — Research & development |
Radian | — Radian Asset Assurance |
RAN | — Revenue anticipation notes |
RDA | — Redevelopment Authority |
RDFA | — Redevelopment Finance Authority |
REIT | — Real estate investment trust |
ROC | — Reset option certificates |
RON | — Romanian lei |
RUB | — Russian ruble |
SAVRS | — Select auction variable rate securities |
SBA | — Small Business Authority |
SDR | — Swedish depositary receipt |
SEK | — Swedish krona |
SFHR | — Single-family housing revenue |
SFMR | — Single-family mortgage revenue |
SGD | — Singapore dollar |
SPA | — Standby purchase agreement |
SPDR | — Standard & Poor’s Depositary Receipts |
SPEAR | — Short Puttable Exempt Adjustable Receipts |
STRIPS | — Separate trading of registered interest and |
principal securities |
TAN | — Tax anticipation notes |
TBA | — To be announced |
THB | — Thai baht |
TIPS | — Treasury inflation-protected securities |
TRAN | — Tax revenue anticipation notes |
TRY | — Turkish lira |
TTFA | — Transportation Trust Fund Authority |
TVA | — Tennessee Valley Authority |
ZAR | — South African rand |
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, email, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 8266
Boston, MA 02266-8266
Email: fundservice@wellsfargo.com
Website: wellsfargofunds.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
1-800-260-5969 or visit the Fund’s website at wellsfargofunds.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is a trade name used by the asset management businesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA, an affiliate of Wells Fargo & Company.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
© 2016 Wells Fargo Funds Management, LLC. All rights reserved.
244421 08-16 SVT6/SAR143 6-16 |
Table of Contents
Semi-Annual Report
June 30, 2016
Wells Fargo VT Small Cap Growth Fund
Table of Contents
Reduce clutter. Save trees.
Sign up for electronic delivery of prospectuses and shareholder reports at wellsfargo.com/advantagedelivery
Contents
Letter to shareholders | 2 | |||
Performance highlights | 4 | |||
Fund expenses | 6 | |||
Portfolio of investments | 7 | |||
Financial statements | ||||
Statement of assets and liabilities | 12 | |||
Statement of operations | 13 | |||
Statement of changes in net assets | 14 | |||
Financial highlights | 15 | |||
Notes to financial statements | 17 | |||
Other information | 21 | |||
List of abbreviations | 27 |
The views expressed and any forward-looking statements are as of June 30, 2016, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Funds Management, LLC. 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 Funds Management, LLC and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
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2 | Wells Fargo VT Small Cap Growth Fund | Letter to shareholders (unaudited) |
Karla M. Rabusch
President
Wells Fargo Funds
Although markets gyrated significantly following the U.K.’s surprising decision to leave the E.U. (Brexit), U.S. stocks generally delivered positive results overall for the six-month reporting period.
Dear Valued Shareholder:
We are pleased to offer you this semi-annual report for the Wells Fargo VT Small Cap Growth Fund for the six-month period that ended June 30, 2016. During this period, which began with the first quarter of 2016, U.S. and international stock markets experienced heightened volatility, with intermittent rebounds interspersed with sell-offs. The U.S. economy displayed resilience throughout the period, although growth was somewhat sluggish amid ongoing pressures that included slowing growth in China, a strengthening U.S. dollar, and uncertainty regarding interest-rate increases by the U.S. Federal Reserve (Fed); international economies faced deeper ongoing challenges. During June 2016, global markets became especially volatile as the U.K.’s vote over whether to leave the European Union (E.U.) approached. Although markets gyrated significantly following the U.K.’s surprising decision to leave the E.U. (Brexit), U.S. stocks generally delivered positive results overall for the six-month reporting period. International emerging markets also delivered positive results, while international developed markets generally declined.
In the first quarter of 2016, market volatility increased globally amid ongoing concerns.
Stock markets worldwide fluctuated widely in the first quarter of 2016. Most declined sharply in the first six weeks of the year on concerns such as weak global growth, falling commodity prices, and uncertainty over the timing and impact of the Fed’s interest-rate increases. As the quarter progressed, fears abated somewhat and global markets generally rallied back. The U.S. economy ended the quarter on a positive note as much of the quarter’s data reflected resiliency.
With ongoing uncertainties about global growth and financial markets, however, the Fed held off from raising the target interest rate during the quarter. Outside the U.S., the eurozone fell into deflation in February; in response, the European Central Bank announced an expansion of its stimulus program. In China, the government in March set a growth rate of 6.5% to 7.0% for 2016, an acknowledgment that the country’s growth has been slowing. In emerging markets, although central-bank stimulus and improved prices for oil and other commodities led to stock-market rallies in the quarter, many of these countries’ economies face credit downgrades due to challenges such as the likelihood of a stronger U.S. dollar, which would make dollar-denominated debt more expensive.
Worries over interest rates and the U.K.’s vote largely drove the markets during the second quarter of 2016.
U.S. stocks began the quarter in positive territory but started to lose some steam in early May on worries that a possible June interest-rate increase by the Fed could hurt the market. In mid-May, stocks briefly plunged following comments by Fed officials noting that a June interest-rate increase remained on the table. But once investors had processed this information, stocks again rallied, finishing up for the month. The first three weeks of June brought heightened volatility, spurred largely by a disappointing jobs report and uncertainty over whether the U.K. would remain in the E.U.
The U.K.’s Brexit vote on June 23 shocked countries in Europe and much of the rest of the world. Stock markets plummeted as investors worldwide worried that the U.K.’s departure from the E.U. would slow global growth and prolong the low-interest-rate environment. Following the initial rout, however, U.S. stocks rallied as investors seemed to decide that any negative effects would be more localized and not create a serious risk for global growth. By quarter-end, the broad U.S. stock market had moved back into positive territory.
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Letter to shareholders (unaudited) | Wells Fargo VT Small Cap Growth Fund | 3 |
Don’t let short-term uncertainty derail long-term investment goals.
Periods of 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 in Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.
Sincerely,
Karla M. Rabusch
President
Wells Fargo Funds
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.
For further information about your Fund, contact your investment professional, visit our website at wellsfargofunds.com, or call us directly at 1-800-260-5969. We are available 24 hours a day, 7 days a week.
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4 | Wells Fargo VT Small Cap Growth Fund | Performance highlights (unaudited) |
The Fund is currently closed to new insurance companies.1
Investment objective
The Fund seeks long-term capital appreciation.
Manager
Wells Fargo Funds Management, LLC
Subadviser
Wells Capital Management Incorporated
Portfolio managers
Joseph M. Eberhardy, CFA®, CFP
Thomas C. Ognar, CFA®
Bruce C. Olson, CFA®
Average annual total returns (%) as of June 30, 20162
Expense ratios3 (%) | ||||||||||||||||||||||
Inception date | 1 year | 5 year | 10 year | Gross | Net4 | |||||||||||||||||
Class 1 | 7-16-2010 | (15.59 | ) | 6.97 | 7.62 | 0.93 | 0.93 | |||||||||||||||
Class 2 | 5-1-1995 | (15.85) | 6.69 | 7.45 | 1.18 | 1.18 | ||||||||||||||||
Russell 2000® Growth Index5 | – | (10.75) | 8.51 | 7.14 | – | – |
Figures quoted represent past performance, which is no guarantee of future results. 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 and assumes the reinvestment of dividends and capital gains. Current month-end performance is available by calling 1-800-260-5969. Performance figures of the Fund do not reflect fees charged pursuant to the terms of variable life insurance policies and variable annuity contracts. If sales loads or charges had been reflected, performance would have been lower.
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.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Smaller-company stocks tend to be more volatile and less liquid than those of larger companies. Consult the Fund’s prospectus for additional information on these and other risks.
Please refer to the prospectus provided by your participating insurance company for detailed information describing the separate accounts for information regarding surrender charges, mortality and expense risk fees, and other charges that may be assessed by the participating insurance companies.
Please see footnotes on page 5.
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Performance highlights (unaudited) | Wells Fargo VT Small Cap Growth Fund | 5 |
Ten largest holdings (%) as of June 30, 20166 | ||||
Proofpoint Incorporated | 3.57 | |||
MarketAxess Holdings Incorporated | 3.43 | |||
Acadia Healthcare Company Incorporated | 3.06 | |||
SPS Commerce Incorporated | 3.04 | |||
InterXion Holding NV | 2.71 | |||
Q2 Holdings Incorporated | 2.42 | |||
On Assignment Incorporated | 2.17 | |||
Wageworks Incorporated | 2.08 | |||
Ligand Pharmaceuticals Incorporated | 2.08 | |||
Envestnet Incorporated | 1.98 |
Sector distribution as of June 30, 20167 |
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1 | Please see the Fund’s current Statement of Additional Information for further details. |
2 | Historical performance shown for Class 1 shares prior to their inception reflects the performance of Class 2 shares, and includes the higher expenses applicable to Class 2 shares. If these expenses had not been included, returns would be higher. |
3 | 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. |
4 | The manager has contractually committed through April 30, 2017, to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s Total Annual Fund Operating Expenses After Fee Waiver at 0.95% for Class 1 and 1.20% for Class 2. After this time, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses, and extraordinary expenses are excluded from the expense cap. Without this cap, the Fund’s returns would have been lower. |
5 | The Russell 2000® Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. You cannot invest directly in an index. |
6 | The ten largest holdings, excluding cash and cash equivalents, 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. |
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6 | Wells Fargo VT Small Cap Growth Fund | Fund expenses (unaudited) |
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution (12b-1) 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 January 1, 2016 to June 30, 2016.
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 separate account charges assessed by participating insurance companies. 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 separate account charges assessed by participating insurance companies were included, your costs would have been higher.
Beginning account value 1-1-2016 | Ending account value 6-30-2016 | Expenses paid during the period1 | Net annualized expense ratio | |||||||||||||
Class 1 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 987.36 | $ | 4.69 | 0.95 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.14 | $ | 4.77 | 0.95 | % | ||||||||
Class 2 | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 984.81 | $ | 5.92 | 1.20 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,018.90 | $ | 6.02 | 1.20 | % |
1 | Expenses paid is equal to the annualized 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). |
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Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Small Cap Growth Fund | 7 |
Security name | Shares | Value | ||||||||||||||
Common Stocks: 98.50% | ||||||||||||||||
Consumer Discretionary: 11.63% | ||||||||||||||||
Auto Components: 1.50% | ||||||||||||||||
Gentherm Incorporated † | 22,740 | $ | 778,843 | |||||||||||||
Motorcar Parts of America Incorporated † | 94,773 | 2,575,930 | ||||||||||||||
3,354,773 | ||||||||||||||||
|
| |||||||||||||||
Diversified Consumer Services: 0.99% | ||||||||||||||||
Grand Canyon Education Incorporated † | 55,300 | 2,207,576 | ||||||||||||||
|
| |||||||||||||||
Hotels, Restaurants & Leisure: 3.49% | ||||||||||||||||
Jack in the Box Incorporated | 14,500 | 1,245,840 | ||||||||||||||
Planet Fitness Incorporated Class A †« | 57,916 | 1,093,454 | ||||||||||||||
The Habit Restaurants Incorporated Class A †« | 158,778 | 2,600,784 | ||||||||||||||
Wingstop Incorporated †« | 73,269 | 1,996,580 | ||||||||||||||
Zoe’s Kitchen Incorporated †« | 23,143 | 839,397 | ||||||||||||||
7,776,055 | ||||||||||||||||
|
| |||||||||||||||
Household Durables: 0.41% | ||||||||||||||||
Universal Electronics Incorporated † | 12,800 | 925,184 | ||||||||||||||
|
| |||||||||||||||
Leisure Products: 0.33% | ||||||||||||||||
MCBC Holdings Incorporated | 65,654 | 725,477 | ||||||||||||||
|
| |||||||||||||||
Media: 1.15% | ||||||||||||||||
IMAX Corporation † | 87,320 | 2,574,194 | ||||||||||||||
|
| |||||||||||||||
Multiline Retail: 0.35% | ||||||||||||||||
Ollie S Bargain Outlet Holding † | 31,600 | 786,524 | ||||||||||||||
|
| |||||||||||||||
Specialty Retail: 2.27% | ||||||||||||||||
Five Below Incorporated † | 18,928 | 878,448 | ||||||||||||||
Lithia Motors Incorporated Class A | 25,050 | 1,780,304 | ||||||||||||||
Monro Muffler Brake Incorporated | 10,230 | 650,219 | ||||||||||||||
Sportsman’s Warehouse Holdings Incorporated † | 218,014 | 1,757,193 | ||||||||||||||
5,066,164 | ||||||||||||||||
|
| |||||||||||||||
Textiles, Apparel & Luxury Goods: 1.14% | ||||||||||||||||
G-III Apparel Group Limited † | 55,540 | 2,539,289 | ||||||||||||||
|
| |||||||||||||||
Energy: 2.88% | ||||||||||||||||
Oil, Gas & Consumable Fuels: 2.88% | ||||||||||||||||
Matador Resources Company †« | 52,383 | 1,037,183 | ||||||||||||||
PDC Energy Incorporated † | 35,820 | 2,063,590 | ||||||||||||||
RSP Permian Incorporated † | 95,521 | 3,332,728 | ||||||||||||||
6,433,501 | ||||||||||||||||
|
| |||||||||||||||
Financials: 5.29% | ||||||||||||||||
Capital Markets: 0.34% | ||||||||||||||||
Financial Engines Incorporated « | 29,700 | 768,339 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
8 | Wells Fargo VT Small Cap Growth Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
Diversified Financial Services: 3.43% | ||||||||||||||||
MarketAxess Holdings Incorporated | 52,578 | $ | 7,644,841 | |||||||||||||
|
| |||||||||||||||
Thrifts & Mortgage Finance: 1.52% | ||||||||||||||||
LendingTree Incorporated †« | 38,488 | 3,399,645 | ||||||||||||||
|
| |||||||||||||||
Health Care: 31.56% | ||||||||||||||||
Biotechnology: 4.44% | ||||||||||||||||
Alder Biopharmaceuticals Incorporated †« | 26,900 | 671,693 | ||||||||||||||
Ligand Pharmaceuticals Incorporated †« | 38,880 | 4,637,218 | ||||||||||||||
Radius Health Incorporated †« | 34,088 | 1,252,734 | ||||||||||||||
Repligen Corporation † | 81,400 | 2,227,104 | ||||||||||||||
Ultragenyx Pharmaceutical Incorporated † | 22,962 | 1,123,071 | ||||||||||||||
9,911,820 | ||||||||||||||||
|
| |||||||||||||||
Health Care Equipment & Supplies: 14.62% | ||||||||||||||||
Abiomed Incorporated † | 22,210 | 2,427,331 | ||||||||||||||
Cerus Corporation †« | 191,092 | 1,192,414 | ||||||||||||||
Cynosure Incorporated Class A † | 83,037 | 4,039,335 | ||||||||||||||
Entellus Medical Incorporated †« | 71,112 | 1,299,216 | ||||||||||||||
Glaukos Corporation † | 57,568 | 1,678,683 | ||||||||||||||
Inogen Incorporated † | 74,220 | 3,719,164 | ||||||||||||||
Integra LifeSciences Holdings Corporation | 16,500 | 1,316,370 | ||||||||||||||
Natus Medical Incorporated † | 56,950 | 2,152,710 | ||||||||||||||
Nevro Corporation †« | 59,879 | 4,416,675 | ||||||||||||||
NxStage Medical Incorporated † | 179,640 | 3,894,595 | ||||||||||||||
The Spectranetics Corporation † | 216,137 | 4,043,923 | ||||||||||||||
Zeltiq Aesthetics Incorporated †« | 89,560 | 2,447,675 | ||||||||||||||
32,628,091 | ||||||||||||||||
|
| |||||||||||||||
Health Care Providers & Services: 9.67% | ||||||||||||||||
AAC Holdings Incorporated †« | 31,668 | 722,664 | ||||||||||||||
Acadia Healthcare Company Incorporated † | 123,160 | 6,823,064 | ||||||||||||||
Adeptus Health Incorporated Class A †« | 30,060 | 1,552,900 | ||||||||||||||
Diplomat Pharmacy Incorporated †« | 70,849 | 2,479,715 | ||||||||||||||
ExamWorks Group Incorporated † | 120,316 | 4,193,013 | ||||||||||||||
HealthEquity Incorporated † | 138,925 | 4,221,236 | ||||||||||||||
Teladoc Incorporated †« | 99,266 | 1,590,241 | ||||||||||||||
21,582,833 | ||||||||||||||||
|
| |||||||||||||||
Health Care Technology: 0.55% | ||||||||||||||||
Veeva Systems Incorporated Class A † | 35,720 | 1,218,766 | ||||||||||||||
|
| |||||||||||||||
Life Sciences Tools & Services: 1.78% | �� | |||||||||||||||
ICON plc ADR † | 24,600 | 1,722,246 | ||||||||||||||
INC Research Holdings Incorporated Class A † | 58,883 | 2,245,209 | ||||||||||||||
3,967,455 | ||||||||||||||||
|
| |||||||||||||||
Pharmaceuticals: 0.50% | ||||||||||||||||
Relypsa Incorporated †« | 59,700 | 1,104,450 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Small Cap Growth Fund | 9 |
Security name | Shares | Value | ||||||||||||||
Industrials: 12.40% | ||||||||||||||||
Aerospace & Defense: 0.62% | ||||||||||||||||
HEICO Corporation | 20,700 | $ | 1,382,967 | |||||||||||||
|
| |||||||||||||||
Airlines: 0.65% | ||||||||||||||||
SkyWest Incorporated | 54,900 | 1,452,654 | ||||||||||||||
|
| |||||||||||||||
Building Products: 0.85% | ||||||||||||||||
Apogee Enterprises Incorporated | 40,850 | 1,893,398 | ||||||||||||||
|
| |||||||||||||||
Commercial Services & Supplies: 0.97% | ||||||||||||||||
G&K Services Incorporated Class A | 15,940 | 1,220,526 | ||||||||||||||
Multi-Color Corporation | 14,780 | 937,052 | ||||||||||||||
2,157,578 | ||||||||||||||||
|
| |||||||||||||||
Construction & Engineering: 1.83% | ||||||||||||||||
Dycom Industries Incorporated † | 32,460 | 2,913,610 | ||||||||||||||
Granite Construction Incorporated | 26,000 | 1,184,300 | ||||||||||||||
4,097,910 | ||||||||||||||||
|
| |||||||||||||||
Machinery: 2.38% | ||||||||||||||||
John Bean Technologies Corporation | 41,120 | 2,517,366 | ||||||||||||||
Milacron Holdings Corporation †« | 113,827 | 1,651,630 | ||||||||||||||
Mueller Water Products Incorporated Class A | 99,400 | 1,135,148 | ||||||||||||||
5,304,144 | ||||||||||||||||
|
| |||||||||||||||
Professional Services: 4.68% | ||||||||||||||||
CEB Incorporated | 15,511 | 956,718 | ||||||||||||||
On Assignment Incorporated † | 131,021 | 4,841,226 | ||||||||||||||
Wageworks Incorporated † | 77,588 | 4,640,538 | ||||||||||||||
10,438,482 | ||||||||||||||||
|
| |||||||||||||||
Trading Companies & Distributors: 0.42% | ||||||||||||||||
Beacon Roofing Supply Incorporated † | 20,500 | 932,135 | ||||||||||||||
|
| |||||||||||||||
Information Technology: 34.74% | ||||||||||||||||
Communications Equipment: 0.63% | ||||||||||||||||
Infinera Corporation † | 124,274 | 1,401,811 | ||||||||||||||
|
| |||||||||||||||
Internet Software & Services: 11.56% | ||||||||||||||||
2U Incorporated †« | 51,770 | 1,522,556 | ||||||||||||||
Demandware Incorporated † | 29,800 | 2,232,020 | ||||||||||||||
Envestnet Incorporated †« | 132,861 | 4,425,600 | ||||||||||||||
LogMeIn Incorporated † | 39,390 | 2,498,508 | ||||||||||||||
Q2 Holdings Incorporated † | 192,766 | 5,401,303 | ||||||||||||||
SPS Commerce Incorporated † | 111,832 | 6,777,019 | ||||||||||||||
Stamps.com Incorporated † | 15,120 | 1,321,790 | ||||||||||||||
Xactly Corporation † | 126,195 | 1,616,558 | ||||||||||||||
25,795,354 | ||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
10 | Wells Fargo VT Small Cap Growth Fund | Portfolio of investments—June 30, 2016 (unaudited) |
Security name | Shares | Value | ||||||||||||||
IT Services: 3.04% | ||||||||||||||||
InterXion Holding NV † | 164,210 | $ | 6,056,065 | |||||||||||||
Maximus Incorporated | 13,290 | 735,867 | ||||||||||||||
6,791,932 | ||||||||||||||||
|
| |||||||||||||||
Semiconductors & Semiconductor Equipment: 2.67% | ||||||||||||||||
Cavium Incorporated † | 37,570 | 1,450,202 | ||||||||||||||
MaxLinear Incorporated Class A † | 29,021 | 521,798 | ||||||||||||||
Microsemi Corporation † | 57,000 | 1,862,760 | ||||||||||||||
Monolithic Power Systems Incorporated | 31,250 | 2,135,000 | ||||||||||||||
5,969,760 | ||||||||||||||||
|
| |||||||||||||||
Software: 16.84% | ||||||||||||||||
Callidus Software Incorporated † | 163,884 | 3,274,402 | ||||||||||||||
CommVault Systems Incorporated † | 28,300 | 1,222,277 | ||||||||||||||
CyberArk Software Limited †« | 61,150 | 2,971,279 | ||||||||||||||
Fleetmatics Group plc † | 62,519 | 2,708,948 | ||||||||||||||
Guidewire Software Incorporated † | 17,590 | 1,086,358 | ||||||||||||||
HubSpot Incorporated †« | 59,728 | 2,593,390 | ||||||||||||||
Paycom Software Incorporated † | 93,850 | 4,055,259 | ||||||||||||||
Paylocity Holding Corporation †« | 46,657 | 2,015,582 | ||||||||||||||
Proofpoint Incorporated † | 126,400 | 7,974,576 | ||||||||||||||
Qlik Technologies Incorporated † | 105,669 | 3,125,689 | ||||||||||||||
Rapid7 Incorporated †« | 79,070 | 994,701 | ||||||||||||||
Ringcentral Incorporated Class A † | 122,980 | 2,425,166 | ||||||||||||||
Synchronoss Technologies Incorporated † | 59,958 | 1,910,262 | ||||||||||||||
Tyler Technologies Incorporated † | 7,270 | 1,211,982 | ||||||||||||||
37,569,871 | ||||||||||||||||
|
| |||||||||||||||
Total Common Stocks (Cost $197,423,755) | 219,802,973 | |||||||||||||||
|
| |||||||||||||||
Exchange-Traded Funds: 0.60% | ||||||||||||||||
iShares Russell 2000 Growth Index Fund ETF « | 9,752 | 1,337,779 | ||||||||||||||
|
| |||||||||||||||
Total Exchange-Traded Funds (Cost $1,376,395) | 1,337,779 | |||||||||||||||
|
| |||||||||||||||
Yield | ||||||||||||||||
Short-Term Investments: 19.99% | ||||||||||||||||
Investment Companies: 19.99% | ||||||||||||||||
Securities Lending Cash Investments LLC (l)(r)(u) | 0.47 | % | 41,613,795 | 41,613,795 | ||||||||||||
Wells Fargo Government Money Market Fund Select Class (l)(u) | 0.31 | 2,990,395 | 2,990,395 | |||||||||||||
Total Short-Term Investments (Cost $44,604,190) | 44,604,190 | |||||||||||||||
|
|
Total investments in securities (Cost $243,404,340) * | 119.09 | % | 265,744,942 | |||||
Other assets and liabilities, net | (19.09 | ) | (42,602,069 | ) | ||||
|
|
|
| |||||
Total net assets | 100.00 | % | $ | 223,142,873 | ||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
Portfolio of investments—June 30, 2016 (unaudited) | Wells Fargo VT Small Cap Growth Fund | 11 |
† | Non-income-earning security |
« | All or a portion of this security is on loan. |
(l) | The issuer of the security is an affiliated person of the Fund as defined in the Investment Company Act of 1940. |
(r) | The investment is a non-registered investment vehicle purchased with cash collateral received from securities on loan. |
(u) | The rate represents the 7-day annualized yield at period end. |
* | Cost for federal income tax purposes is $244,413,458 and unrealized gains (losses) consists of: |
Gross unrealized gains | $ | 36,012,148 | ||
Gross unrealized losses | (14,680,664 | ) | ||
|
| |||
Net unrealized gains | $ | 21,331,484 |
The accompanying notes are an integral part of these financial statements.
Table of Contents
12 | Wells Fargo VT Small Cap Growth Fund | Statement of assets and liabilities—June 30, 2016 (unaudited) |
Assets | ||||
Investments | ||||
In unaffiliated securities (including $40,641,225 of securities loaned), at value (cost $198,800,150) | $ | 221,140,752 | ||
In affiliated securities, at value (cost $44,604,190) | 44,604,190 | |||
|
| |||
Total investments, at value (cost $243,404,340) | 265,744,942 | |||
Receivable for investments sold | 1,897,641 | |||
Receivable for Fund shares sold | 76,806 | |||
Receivable for dividends | 15,028 | |||
Receivable for securities lending income | 71,861 | |||
Prepaid expenses and other assets | 1,412 | |||
|
| |||
Total assets | 267,807,690 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 2,544,394 | |||
Payable for Fund shares redeemed | 253,507 | |||
Payable upon receipt of securities loaned | 41,613,795 | |||
Management fee payable | 147,709 | |||
Distribution fee payable | 41,959 | |||
Administration fees payable | 14,771 | |||
Accrued expenses and other liabilities | 48,682 | |||
|
| |||
Total liabilities | 44,664,817 | |||
|
| |||
Total net assets | $ | 223,142,873 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Paid-in capital | $ | 180,812,196 | ||
Accumulated net investment loss | (325,665 | ) | ||
Accumulated net realized gains on investments | 20,315,740 | |||
Net unrealized gains on investments | 22,340,602 | |||
|
| |||
Total net assets | $ | 223,142,873 | ||
|
| |||
COMPUTATION OF NET ASSET VALUE PER SHARE | ||||
Net assets – Class 1 | $ | 20,442,487 | ||
Shares outstanding – Class 11 | 2,380,963 | |||
Net asset value per share – Class 1 | $8.59 | |||
Net assets – Class 2 | $ | 202,700,386 | ||
Shares outstanding – Class 21 | 24,034,182 | |||
Net asset value per share – Class 2 | $8.43 |
1 | The Fund has an unlimited number of authorized shares. |
The accompanying notes are an integral part of these financial statements.
Table of Contents
Statement of operations—six months ended June 30, 2016 (unaudited) | Wells Fargo VT Small Cap Growth Fund | 13 |
Investment income | ||||
Dividends | $ | 420,626 | ||
Securities lending income, net | 477,051 | |||
Income from affiliated securities | 5,879 | |||
|
| |||
Total investment income | 903,556 | |||
|
| |||
Expenses | ||||
Management fee | 837,689 | |||
Administration fees |
| |||
Class 1 | 7,571 | |||
Class 2 | 76,197 | |||
Distribution fee |
| |||
Class 2 | 238,117 | |||
Custody and accounting fees | 15,132 | |||
Professional fees | 20,485 | |||
Shareholder report expenses | 21,698 | |||
Trustees’ fees and expenses | 9,965 | |||
Other fees and expenses | 1,690 | |||
|
| |||
Total expenses | 1,228,544 | |||
Less: Fee waivers and/or expense reimbursements | (355 | ) | ||
|
| |||
Net expenses | 1,228,189 | |||
|
| |||
Net investment loss | (324,633 | ) | ||
|
| |||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS | ||||
Net realized losses on investments | (1,099,116 | ) | ||
Net change in unrealized gains (losses) on investments | (4,223,399 | ) | ||
|
| |||
Net realized and unrealized gains (losses) on investments | (5,322,515 | ) | ||
|
| |||
Net decrease in net assets resulting from operations | $ | (5,647,148 | ) | |
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
14 | Wells Fargo VT Small Cap Growth Fund | Statement of changes in net assets |
Six months ended June 30, 2016 (unaudited) | Year ended December 31, 2015 | |||||||||||||||
Operations |
| |||||||||||||||
Net investment loss | $ | (324,633 | ) | $ | (2,417,468 | ) | ||||||||||
Net realized gains (losses) on investments | (1,099,116 | ) | 21,693,855 | |||||||||||||
Net change in unrealized gains (losses) on investments | (4,223,399 | ) | (27,525,796 | ) | ||||||||||||
|
| |||||||||||||||
Net decrease in net assets resulting from operations | (5,647,148 | ) | (8,249,409 | ) | ||||||||||||
|
| |||||||||||||||
Distributions to shareholders from |
| |||||||||||||||
Net realized gains |
| |||||||||||||||
Class 1 | 0 | (3,363,108 | ) | |||||||||||||
Class 2 | 0 | (29,271,572 | ) | |||||||||||||
|
| |||||||||||||||
Total distributions to shareholders | 0 | (32,634,680 | ) | |||||||||||||
|
| |||||||||||||||
Capital share transactions | Shares | Shares | ||||||||||||||
Proceeds from shares sold |
| |||||||||||||||
Class 1 | 113,787 | 905,582 | 359,480 | 3,697,863 | ||||||||||||
Class 2 | 851,267 | 6,640,060 | 5,605,448 | 55,550,499 | ||||||||||||
|
| |||||||||||||||
7,545,642 | 59,248,362 | |||||||||||||||
|
| |||||||||||||||
Reinvestment of distributions |
| |||||||||||||||
Class 1 | 0 | 0 | 331,015 | 3,363,108 | ||||||||||||
Class 2 | 0 | 0 | 2,924,233 | 29,271,572 | ||||||||||||
|
| |||||||||||||||
0 | 32,634,680 | |||||||||||||||
|
| |||||||||||||||
Payment for shares redeemed |
| |||||||||||||||
Class 1 | (307,260 | ) | (2,447,795 | ) | (905,115 | ) | (8,809,137 | ) | ||||||||
Class 2 | (3,325,524 | ) | (25,577,545 | ) | (4,812,770 | ) | (48,006,796 | ) | ||||||||
|
| |||||||||||||||
(28,025,340 | ) | (56,815,933 | ) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from capital share transactions | (20,479,698 | ) | 35,067,109 | |||||||||||||
|
| |||||||||||||||
Total decrease in net assets | (26,126,846 | ) | (5,816,980 | ) | ||||||||||||
|
| |||||||||||||||
Net assets | ||||||||||||||||
Beginning of period | 249,269,719 | 255,086,699 | ||||||||||||||
|
| |||||||||||||||
End of period | $ | 223,142,873 | $ | 249,269,719 | ||||||||||||
|
| |||||||||||||||
Accumulated net investment loss | $ | (325,665 | ) | $ | (1,032 | ) | ||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Table of Contents
Financial highlights | Wells Fargo VT Small Cap Growth Fund | 15 |
(For a share outstanding throughout each period)
Six months ended June 30, 2016 (unaudited) | Year ended December 31 | |||||||||||||||||||||||
CLASS 1 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||
Net asset value, beginning of period | $8.70 | $10.08 | $11.32 | $7.93 | �� | $7.71 | $8.06 | |||||||||||||||||
Net investment loss | (0.00 | )1,2 | (0.06 | ) | (0.07 | ) | (0.07 | ) | (0.04 | ) | (0.06 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | (0.11 | ) | (0.02 | ) | (0.21 | ) | 3.98 | 0.65 | (0.29 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.11 | ) | (0.08 | ) | (0.28 | ) | 3.91 | 0.61 | (0.35 | ) | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||||||
Net realized gains | 0.00 | (1.30 | ) | (0.96 | ) | (0.52 | ) | (0.39 | ) | 0.00 | ||||||||||||||
Net asset value, end of period | $8.59 | $8.70 | $10.08 | $11.32 | $7.93 | $7.71 | ||||||||||||||||||
Total return3 | (1.26 | )% | (2.63 | )% | (1.67 | )% | 50.55 | % | 8.11 | % | (4.34 | )% | ||||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||||||
Gross expenses | 0.95 | % | 0.93 | % | 0.93 | % | 0.93 | % | 0.94 | % | 0.94 | % | ||||||||||||
Net expenses | 0.95 | % | 0.93 | % | 0.93 | % | 0.93 | % | 0.94 | % | 0.94 | % | ||||||||||||
Net investment loss | (0.08 | )% | (0.69 | )% | (0.75 | )% | (0.73 | )% | (0.56 | )% | (0.73 | )% | ||||||||||||
Supplemental data | ||||||||||||||||||||||||
Portfolio turnover rate | 24 | % | 77 | % | 54 | % | 67 | % | 65 | % | 118 | % | ||||||||||||
Net assets, end of period (000s omitted) | $20,442 | $22,402 | $28,121 | $35,192 | $25,699 | $29,351 |
1 | Calculated based upon average shares outstanding |
2 | Amount is less than $0.005. |
3 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
Table of Contents
16 | Wells Fargo VT Small Cap Growth Fund | Financial highlights |
(For a share outstanding throughout each period)
Six months ended June 30, 2016 (unaudited) | Year ended December 31 | |||||||||||||||||||||||
CLASS 2 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||
Net asset value, beginning of period | $8.56 | $9.96 | $11.22 | $7.88 | $7.68 | $8.05 | ||||||||||||||||||
Net investment loss | (0.02 | ) | (0.08 | ) | (0.10 | ) | (0.09 | ) | (0.07 | ) | (0.09 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | (0.11 | ) | (0.02 | ) | (0.20 | ) | 3.95 | 0.66 | (0.28 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.13 | ) | (0.10 | ) | (0.30 | ) | 3.86 | 0.59 | (0.37 | ) | ||||||||||||||
Distributions to shareholders from | ||||||||||||||||||||||||
Net realized gains | 0.00 | (1.30 | ) | (0.96 | ) | (0.52 | ) | (0.39 | ) | 0.00 | ||||||||||||||
Net asset value, end of period | $8.43 | $8.56 | $9.96 | $11.22 | $7.88 | $7.68 | ||||||||||||||||||
Total return1 | (1.52 | )% | (2.88 | )% | (1.88 | )% | 50.23 | % | 7.87 | % | (4.60 | )% | ||||||||||||
Ratios to average net assets (annualized) | ||||||||||||||||||||||||
Gross expenses | 1.20 | % | 1.18 | % | 1.18 | % | 1.18 | % | 1.19 | % | 1.20 | % | ||||||||||||
Net expenses | 1.20 | % | 1.18 | % | 1.18 | % | 1.18 | % | 1.19 | % | 1.19 | % | ||||||||||||
Net investment loss | (0.33 | )% | (0.93 | )% | (1.00 | )% | (0.98 | )% | (0.81 | )% | (0.98 | )% | ||||||||||||
Supplemental data | ||||||||||||||||||||||||
Portfolio turnover rate | 24 | % | 77 | % | 54 | % | 67 | % | 65 | % | 118 | % | ||||||||||||
Net assets, end of period (000s omitted) | $202,700 | $226,867 | $226,966 | $250,473 | $182,213 | $203,348 |
1 | Returns for periods of less than one year are not annualized. |
The accompanying notes are an integral part of these financial statements.
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Notes to financial statements (unaudited) | Wells Fargo VT Small Cap Growth Fund | 17 |
1. ORGANIZATION
Wells Fargo Variable 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 VT Small Cap Growth Fund (the “Fund”) which is a diversified series of the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund, are in conformity with U.S. generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Securities valuation
All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern Time), although the Fund may deviate from this calculation time under unusual or unexpected circumstances.
Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the primary exchange or market that day, the prior day’s price will be deemed “stale” and a fair value price will be determined in accordance with the Fund’s Valuation Procedures.
Investments in registered open-end investment companies are valued at net asset value. Interests in non-registered investment vehicles that are redeemable at net asset value are fair valued 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 Management Valuation Team of 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 Management Valuation Team which may include items for ratification.
Valuations of fair valued securities are compared to the next actual sales price when available, or other appropriate market values, to assess the continued appropriateness of the fair valuation methodologies used. These securities are fair valued on a day-to-day basis, taking into consideration changes to appropriate market information and any significant changes to the inputs considered in the valuation process until there is a readily available price provided on an exchange or by an independent pricing service. Valuations received from an independent pricing service or independent broker-dealer quotes are periodically validated by comparisons to most recent trades and valuations provided by other independent pricing services in addition to the review of prices by the manager and/or subadviser. Unobservable inputs used in determining fair valuations are identified based on the type of security, taking into consideration factors utilized by market participants in valuing the investment, knowledge about the issuer and the current market environment.
Security loans
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. The Fund continues to receive interest or dividends on the securities loaned. The Fund 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 additional required collateral is delivered to the Fund on the next business day. In a securities lending transaction, the net asset value of the Fund will be affected by an increase or decrease in the value of the securities loaned and by an increase or decrease in the value of the instrument in which collateral is invested. The amount of securities lending activity undertaken by the Fund fluctuates from time to time. 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 addition, the investment of any cash collateral received may lose all or part of its value. The Fund has the right under the lending agreement to recover the securities from the borrower on demand.
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18 | Wells Fargo VT Small Cap Growth Fund | Notes to financial statements (unaudited) |
The Fund lends its securities through an unaffiliated securities lending agent. Cash collateral received in connection with its securities lending transactions is invested in Securities Lending Cash Investments, LLC (the “Securities Lending Fund”). The Securities Lending Fund is exempt from registration under Section 3(c)(7) of the 1940 Act and is managed by Funds Management and is subadvised by Wells Capital Management Incorporated (“WellsCap”) , an affiliate of Funds Management and an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”). Funds Management receives an advisory fee starting at 0.05% and declining to 0.01% as the average daily net assets of the Securities Lending Fund increase. All of the fees received by Funds Management are paid to WellsCap for its services as subadviser. The Securities Lending Fund seeks to provide a positive return compared to the daily Fed Funds Open rate by investing in high-quality, U.S. dollar-denominated short-term money market instruments. Securities Lending Fund investments are fair valued based upon the amortized cost valuation technique. Income earned from investment in the Securities Lending Fund is included in securities lending income on the Statement of Operations.
Security transactions and income recognition
Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.
Dividend income is recognized on the ex-dividend date.
Distributions to shareholders
Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations, which may differ in amount or character from net investment income and realized gains recognized for purposes of U.S. generally accepted accounting principles.
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.
Class allocations
The separate classes of shares offered by the Fund differ principally in distribution fees. Class specific expenses are charged directly to that share class. Investment income, common expenses and realized and unrealized gains (losses) on investments are allocated daily to each class of shares based on the relative proportion of net assets of each class.
3. FAIR VALUATION MEASUREMENTS
Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to significant unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:
n | Level 1 – quoted prices in active markets for identical securities |
n | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, use of amortized cost, etc.) |
n | 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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Notes to financial statements (unaudited) | Wells Fargo VT Small Cap Growth Fund | 19 |
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of June 30, 2016:
Quoted prices (Level 1) | Other significant observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Investments in: | ||||||||||||||||
Common stocks | ||||||||||||||||
Consumer discretionary | $ | 25,955,236 | $ | 0 | $ | 0 | $ | 25,955,236 | ||||||||
Energy | 6,433,501 | 0 | 0 | 6,433,501 | ||||||||||||
Financials | 11,812,825 | 0 | 0 | 11,812,825 | ||||||||||||
Health care | 70,413,415 | 0 | 0 | 70,413,415 | ||||||||||||
Industrials | 27,659,268 | 0 | 0 | 27,659,268 | ||||||||||||
Information technology | 77,528,728 | 0 | 0 | 77,528,728 | ||||||||||||
Exchange-traded fund | 1,337,779 | 0 | 0 | 1,337,779 | ||||||||||||
Short-term investments | ||||||||||||||||
Investment companies | 2,990,395 | 0 | 0 | 2,990,395 | ||||||||||||
Investments measured at net asset value* | 41,613,795 | |||||||||||||||
Total assets | $ | 224,131,147 | $ | 0 | $ | 0 | $ | 265,744,942 |
* | Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been categorized in the fair value hierarchy. The fair value amount presented in the table is intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Statement of Assets and Liabilities. The Fund’s investment in Securities Lending Cash Investment, LLC valued at $41,613,795 does not have a redemption period notice, can be redeemed daily and does not have any unfunded commitments. |
The Fund recognizes transfers between levels within the fair value hierarchy at the end of the reporting period. At June 30, 2016, the Fund did not have any transfers into/out of Level 1, Level 2, or Level 3.
4. TRANSACTIONS WITH AFFILIATES
Management fee
Funds Management, an indirect wholly owned subsidiary 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, providing fund-level administrative services in connection with the Fund’s operations, and providing any other fund-level administrative services reasonably necessary for the operation of the Fund. As compensation for its services under the investment management agreement, Funds Management is entitled to receive an annual management fee starting at 0.80% and declining to 0.63% as the average daily net assets at the Fund increase. For the six months ended June 30, 2016, the management fee was equivalent to an annual rate of 0.80% of the Fund’s average daily net assets.
Funds Management has retained the services of a subadviser to provide daily portfolio management to the Fund. The fee for subadvisory services is borne by Funds Management. WellsCap is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate starting at 0.55% and declining to 0.40% as the average daily net assets of the Fund increase.
Administration fees
Under a class-level administration agreement, Funds Management provides class-level administrative services to the Fund, which includes paying fees and expenses for services provided by the transfer agent, sub-transfer agents, omnibus account servicers and record-keepers. As compensation for its services under the class-level administration agreement, Funds Management receives a class level administration fee of 0.08% which is calculated based on the average daily net assets of each class.
Funds Management has contractually waived and/or reimbursed advisory and administration fees to the extent necessary to maintain certain net operating expense ratios for the Fund. Waiver of fees and/or reimbursement of expenses by Funds Management were made first from fund level expenses on a proportionate basis and then from class specific expenses. Funds Management has committed through April 30, 2017 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund’s expenses at 0.95% for Class 1 shares and 1.20% for Class 2 shares. After this time, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees.
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20 | Wells Fargo VT Small Cap Growth Fund | Notes to financial statements (unaudited) |
Distribution fee
The Trust has adopted a distribution plan for Class 2 shares of the Fund pursuant to Rule 12b-1 under the 1940 Act. A distribution fees is charged to Class 2 shares and paid to Wells Fargo Funds Distributor, LLC, the principal underwriter, at an annual rate of 0.25% of the average daily net assets of Class 2 shares.
5. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the six months ended June 30, 2016 were $53,305,178 and $69,542,512, respectively.
The Fund may purchase or sell investment securities to other Wells Fargo funds under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which generally do not incur broker commissions, are effected at current market prices. Interfund trades are included within the respective purchases and sales amounts shown.
6. BANK BORROWINGS
The Trust and Wells Fargo Funds Trust (excluding the money market funds and certain other funds) are parties to a $200,000,000 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 0.20% of the unused balance is allocated to each participating fund.
For the six months ended June 30, 2016, there were no borrowings by the Fund under the agreement.
7. CONCENTRATION RISK
Concentration risks result from exposure to a limited number of sectors. A fund that invests a substantial portion of its assets in any sector may be more affected by changes in that sector than would be a fund whose investments are not heavily weighted in any sector.
8. INDEMNIFICATION
Under the Trust’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Trust may enter into contracts with service providers that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.
9. SUBSEQUENT DISTRIBUTIONS
On July 7, 2016, the Fund declared distributions from long-term capital gains to shareholders of record on July 6, 2016. The per share amounts payable on July 8, 2016 were as follows:
Long-term capital gains | ||||
Class 1 | $ | 0.82556 | ||
Class 2 | 0.82556 |
These distributions are not reflected in the accompanying financial statements. The final determination of the source of all distributions is subject to change and made after the Fund’s tax year-end.
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Other information (unaudited) | Wells Fargo VT Small Cap Growth Fund | 21 |
PROXY VOTING INFORMATION
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, upon request, by calling 1-800-260-5969, visiting our website at wellsfargofunds.com, or visiting the SEC website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website at wellsfargofunds.com or by visiting the SEC website at sec.gov.
PORTFOLIO HOLDINGS INFORMATION
The complete portfolio holdings for the Fund are publicly available monthly on the Fund’s website (wellsfargofunds.com), on a one-month delayed basis. In addition, top ten holdings information (excluding derivative positions) for the Fund is publicly available on the Fund’s website on a monthly, seven-day or more delayed basis. The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q, which is available by visiting the SEC website at sec.gov. In addition, the Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and at regional offices in New York City, at 233 Broadway, and in Chicago, at 175 West Jackson Boulevard, Suite 900. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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22 | Wells Fargo VT Small Cap Growth Fund | 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 directorships | |||
William R. Ebsworth (Born 1957) | Trustee, since 2015 | Retired. From 1984 to 2013, equities analyst, portfolio manager, research director and chief financial 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 lead 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. Mr. Ebsworth is a CFA® charterholder and an Adjunct Lecturer, Finance, at Babson College. | Asset Allocation Trust | |||
Jane A. Freeman (Born 1953) | Trustee, since 2015 | 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 Chair of Taproot Foundation (non-profit organization), a Board Member of Ruth Bancroft Garden (non-profit organization) and an inactive chartered financial analyst. | Asset Allocation Trust | |||
Peter G. Gordon (Born 1942) | Trustee, since 1998; Chairman, since 2005 | Co-Founder, Retired Chairman, President and CEO of Crystal Geyser Water Company. Trustee Emeritus, Colby College. | Asset Allocation Trust | |||
Isaiah Harris, Jr. (Born 1952) | Trustee, since 2009 | 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 (charter school). Advisory Board Member, Child Evangelism Fellowship (non-profit). Mr. Harris is a certified public accountant (inactive status). | CIGNA Corporation; Asset Allocation Trust | |||
Judith M. Johnson (Born 1949) | Trustee, since 2008; Audit Committee Chairman, 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. | Asset Allocation Trust | |||
David F. Larcker (Born 1950) | Trustee, since 2009 | James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005. | Asset Allocation Trust |
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Other information (unaudited) | Wells Fargo VT Small Cap Growth Fund | 23 |
Name and year of birth | Position held and length of service* | Principal occupations during past five years or longer | Current other public company directorships | |||
Olivia S. Mitchell (Born 1953) | Trustee, since 2006 | 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. | Asset Allocation Trust | |||
Timothy J. Penny (Born 1951) | Trustee, since 1996 | President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007 and Senior Fellow at the Humphrey Institute Policy Forum at the University of Minnesota since 1995. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007. | Asset Allocation Trust | |||
Michael S. Scofield (Born 1943) | Trustee, since 2010 | Served on the Investment Company Institute’s Board of Governors and Executive Committee from 2008-2011 as well the Governing Council of the Independent Directors Council from 2006-2011 and the Independent Directors Council Executive Committee from 2008-2011. Chairman of the IDC from 2008-2010. Institutional Investor (Fund Directions) Trustee of Year in 2007. Trustee of the Evergreen Funds complex (and its predecessors) from 1984 to 2010. Chairman of the Evergreen Funds from 2000-2010. Former Trustee of the Mentor Funds. Retired Attorney, Law Offices of Michael S. Scofield. | Asset Allocation Trust |
* | Length of service dates reflect the Trustee’s commencement of service with the Trust’s predecessor entities, where applicable. |
Officers
Name and year of birth | Position held and length of service | Principal occupations during past five years or longer | ||||
Karla M. Rabusch (Born 1959) | President, since 2003 | Executive Vice President of Wells Fargo Bank, N.A. and President of Wells Fargo Funds Management, LLC since 2003. | ||||
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. | ||||
C. David Messman (Born 1960) | Secretary, since 2000; Chief Legal Officer, since 2003 | Senior Vice President and Secretary of Wells Fargo Funds Management, LLC since 2001. Assistant General Counsel of Wells Fargo Bank, N.A. since 2013 and Vice President and Managing Counsel of Wells Fargo Bank, N.A. from 1996 to 2013. | ||||
Michael Whitaker (Born 1967) | Chief Compliance Officer, since 2016* | Executive Vice President of Wells Fargo Funds Management, LLC since 2016. Chief Compliance Officer of Fidelity’s Fixed Income Funds and Asset Allocation Funds from 2008 to 2016, Compliance Officer of FMR Co., Inc. from 2014 to 2016, Fidelity Investments Money Management, Inc. from 2014 to 2016, 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 69 funds and Assistant Treasurer of 73 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 1-800-260-5969 or by visiting the website at wellsfargofunds.com. |
* | Michael Whitaker became Chief Compliance Officer effective May 16, 2016. |
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24 | Wells Fargo VT Small Cap Growth Fund | Other information (unaudited) |
BOARD CONSIDERATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS:
Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Variable 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 an in-person meeting held on May 24-25, 2016 (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 VT Small Cap Growth 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 an in-person meeting in April 2016, 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 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 2016. 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 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 Funds Management, and 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 performance and expenses
The Board considered the performance results for the Fund over various time periods ended December 31, 2015. The Board considered these results in comparison to the 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.
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Other information (unaudited) | Wells Fargo VT Small Cap Growth Fund | 25 |
The Board noted that the performance of the Fund was higher than or in range of the average performance of the Universe for all periods under review except the one-year period. The Board also noted that the performance of the Fund was lower than its benchmark, the Russell 2000® Growth Index, for all periods under review.
The Board received information concerning, and discussed factors contributing to, the underperformance of the Fund relative to the Universe and benchmark for the periods noted above. The Board took note of the explanations for the relative underperformance in these periods, including with respect to market factors and investment decisions that affected the Fund’s performance.
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.
The Board took into account the Fund 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 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. However, 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 mutual funds compared with those associated with managing assets of non-mutual fund clients such as collective funds or 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, in light of the services covered by the Advisory Agreements.
Profitability
The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of Wells Fargo as a whole, from providing services to the Fund and the fund family as a whole. The Board also received and considered information concerning the profitability of the Sub-Adviser from providing services to the fund family as a whole, noting that the Sub-Adviser’s profitability information with respect to providing services to the Fund was subsumed in the Wells Fargo and Funds Management profitability analysis.
Funds Management reported on the methodologies and estimates used in calculating profitability. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such
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26 | Wells Fargo VT Small Cap Growth Fund | Other information (unaudited) |
as the size and type of fund. Based on its review, the Board did not deem the profits reported by Funds Management or Wells Fargo from its services to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.
Economies of scale
With respect to possible economies of scale, 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. It considered that, for a small fund or a fund that shrinks in size, breakpoints conversely can result in higher fee levels. The Board also considered that fee waiver and expense reimbursement arrangements and competitive fee rates at the outset are means of sharing potential economies of scale with shareholders of the Fund and the fund family as a whole. The Board considered Funds Management’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments that Funds Management incurs across the fund family as a whole.
The Board concluded that the Fund’s fee and expense arrangements, 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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List of abbreviations | Wells Fargo VT Small Cap Growth Fund | 27 |
The following is a list of common abbreviations for terms and entities that may have appeared in this report.
ACA | — ACA Financial Guaranty Corporation |
ADR | — American depositary receipt |
ADS | — American depositary shares |
AGC | — Assured Guaranty Corporation |
AGM | — Assured Guaranty Municipal |
Ambac | — Ambac Financial Group Incorporated |
AMT | — Alternative minimum tax |
AUD | — Australian dollar |
BAN | — Bond anticipation notes |
BHAC | — Berkshire Hathaway Assurance Corporation |
BRL | — Brazilian real |
CAB | — Capital appreciation bond |
CAD | — Canadian dollar |
CCAB | — Convertible capital appreciation bond |
CDA | — Community Development Authority |
CDO | — Collateralized debt obligation |
CHF | — Swiss franc |
COP | — Colombian peso |
CLP | — Chilean peso |
DKK | — Danish krone |
DRIVER | — Derivative inverse tax-exempt receipts |
DW&P | — Department of Water & Power |
DWR | — Department of Water Resources |
ECFA | — Educational & Cultural Facilities Authority |
EDA | — Economic Development Authority |
EDFA | — Economic Development Finance Authority |
ETF | — Exchange-traded fund |
EUR | — Euro |
FDIC | — Federal Deposit Insurance Corporation |
FFCB | — Federal Farm Credit Banks |
FGIC | — Financial Guaranty Insurance Corporation |
FHA | — Federal Housing Administration |
FHLB | — Federal Home Loan Bank |
FHLMC | — Federal Home Loan Mortgage Corporation |
FICO | — The Financing Corporation |
FNMA | — Federal National Mortgage Association |
FSA | — Farm Service Agency |
GBP | — Great British pound |
GDR | — Global depositary receipt |
GNMA | — Government National Mortgage Association |
GO | — General obligation |
HCFR | — Healthcare facilities revenue |
HEFA | — Health & Educational Facilities Authority |
HEFAR | — Higher education facilities authority revenue |
HFA | — Housing Finance Authority |
HFFA | — Health Facilities Financing Authority |
HKD | — Hong Kong dollar |
HUD | — Department of Housing and Urban Development |
HUF | — Hungarian forint |
IDA | — Industrial Development Authority |
IDAG | — Industrial Development Agency |
IDR | — Indonesian rupiah |
IEP | — Irish pound |
JPY | — Japanese yen |
KRW | — Republic of Korea won |
LIBOR | — London Interbank Offered Rate |
LIFER | — Long Inverse Floating Exempt Receipts |
LIQ | — Liquidity agreement |
LLC | — Limited liability company |
LLLP | — Limited liability limited partnership |
LLP | — Limited liability partnership |
LOC | — Letter of credit |
LP | — Limited partnership |
MBIA | — Municipal Bond Insurance Association |
MFHR | — Multifamily housing revenue |
MSTR | — Municipal securities trust receipts |
MTN | — Medium-term note |
MUD | — Municipal Utility District |
MXN | — Mexican peso |
MYR | — Malaysian ringgit |
National | — National Public Finance Guarantee Corporation |
NGN | — Nigerian naira |
NOK | — Norwegian krone |
NZD | — New Zealand dollar |
PCFA | — Pollution Control Financing Authority |
PCL | — Public Company Limited |
PCR | — Pollution control revenue |
PFA | — Public Finance Authority |
PFFA | — Public Facilities Financing Authority |
PFOTER | — Puttable floating option tax-exempt receipts |
plc | — Public limited company |
PLN | — Polish zloty |
PUTTER | — Puttable tax-exempt receipts |
R&D | — Research & development |
Radian | — Radian Asset Assurance |
RAN | — Revenue anticipation notes |
RDA | — Redevelopment Authority |
RDFA | — Redevelopment Finance Authority |
REIT | — Real estate investment trust |
ROC | — Reset option certificates |
RON | — Romanian lei |
RUB | — Russian ruble |
SAVRS | — Select auction variable rate securities |
SBA | — Small Business Authority |
SDR | — Swedish depositary receipt |
SEK | — Swedish krona |
SFHR | — Single-family housing revenue |
SFMR | — Single-family mortgage revenue |
SGD | — Singapore dollar |
SPA | — Standby purchase agreement |
SPDR | — Standard & Poor’s Depositary Receipts |
SPEAR | — Short Puttable Exempt Adjustable Receipts |
STRIPS | — Separate trading of registered interest and |
principal securities |
TAN | — Tax anticipation notes |
TBA | — To be announced |
THB | — Thai baht |
TIPS | — Treasury inflation-protected securities |
TRAN | — Tax revenue anticipation notes |
TRY | — Turkish lira |
TTFA | — Transportation Trust Fund Authority |
TVA | — Tennessee Valley Authority |
ZAR | — South African rand |
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For more information
More information about Wells Fargo Funds is available free upon request. To obtain literature, please write, email, visit the Fund’s website, or call:
Wells Fargo Funds
P.O. Box 8266
Boston, MA 02266-8266
Email: fundservice@wellsfargo.com
Website: wellsfargofunds.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
1-800-260-5969 or visit the Fund’s website at wellsfargofunds.com. Read the prospectus carefully before you invest or send money.
Wells Fargo Asset Management (WFAM) is a trade name used by the asset management businesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA, an affiliate of Wells Fargo & Company.
NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE
© 2016 Wells Fargo Funds Management, LLC. All rights reserved.
244422 08-16 SVT7/SAR144 6-16 |
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ITEM 2. | CODE OF ETHICS |
Not applicable.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT |
Not applicable.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Not applicable.
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS |
Not applicable.
ITEM 6. | INVESTMENTS |
A Portfolio of Investments for each series of Wells Fargo Variable 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 MANAGEMEENT 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 Variable Trust (the “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 Trust 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.
(b) There were no significant changes in the Trust’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter 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.
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ITEM 12. | EXHIBITS |
(a)(1) Not applicable.
(a)(2) Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is filed and attached hereto as Exhibit 99.906CERT.
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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 Variable Trust | ||
By: | /s/ Karla M. Rabusch | |
Karla M. Rabusch | ||
President | ||
Date: | August 25, 2016 |
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 Variable Trust | ||
By: | /s/ Karla M. Rabusch | |
Karla M. Rabusch | ||
President | ||
Date: | August 25, 2016 | |
By: | /s/ Jeremy DePalma | |
Jeremy DePalma | ||
Treasurer | ||
Date: | August 25, 2016 |