As filed with the Securities and Exchange Commission
on September 11, 2000
Registration No. 333-74295; 811-09253
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment
No. ___
Post-Effective Amendment No. 14 x
-----
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
------
Amendment No. 15 x
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------------------------
WELLS FARGO FUNDS TRUST
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
--------------------------
Registrant's Telephone Number, including Area Code: (800) 643-9691
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Ave., N.W.
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
x Immediately upon filing pursuant to Rule 485(b), or
---
on _________ pursuant to Rule 485(b)
----
60 days after filing pursuant to Rule 485(a)(1), or
----
on _________ pursuant to Rule 485(a)(1)
----
75 days after filing pursuant to Rule 485(a)(2), or
----
on ___________pursuant to Rule 485(a)(2)
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a previously
filed post-effective amendment.
<PAGE>
EXPLANATORY NOTE
This Post-Effective Amendment No. 14 is being filed to add to the
Registration Statement of Wells Fargo Funds Trust (the "Trust"), the audited
financial statements and certain related financial information for the Nebraska
Tax Free Fund of the Trust, and to make certain other non-material changes to
the Registration Statement.
This Post-Effective Amendment does not affect the Registration
Statement for any of the Trust's other funds.
<PAGE>
WELLS FARGO FUNDS TRUST
Cross Reference Sheet
Form N-1A Item Number
Part A Prospectus Captions
1 Front and Back Cover Pages
2 Objectives and Principal Strategies
Important Risks
3 Summary of Expenses
Example of Expenses
4 Objectives and Principal Strategies
Important Risks
See Individual Fund Summaries
General Investment Risks
5 Not applicable
6 Organization and Management of the Funds
7 Your Account
How to Buy Shares
How to Sell Shares
Exchanges
Dividends and Distributions
Taxes
8 Distribution Plan
Exchanges
9 See Individual Fund Summaries
Part B Statement of Additional Information Captions
10 Cover Page and Table of Contents
11 Historical Fund Information
Cover Page
12 Investment Restrictions
Additional Investment Policies
Risk Factors
13 Management
14 Capital Stock
15 Management
16 Portfolio Transactions
17 Capital Stock
18 Determination of Net Asset Value
Additional Purchase and Redemption Information
19 Federal Income Taxes
20 Management
21 Performance Calculations
22 Financial Information
Part C Other Information
23-30 Information required to be included in Part C is set
forth under the appropriate Item, so numbered, in
Part C of this Document.
<PAGE>
25
WELLS FARGO NEBRASKA TAX-FREE FUND
Please read this Prospectus and keep it for future reference. It is
designed to provide you with important information and to help you Institutional
Class decide if a Fund's goals match your own. These securities have not been
approved or disapproved by the U.S. Securities and Exchange Commission ("SEC"),
nor has the SEC passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
Fund shares are NOT deposits or other obligations of, or issued, endorsed or
guaranteed by Wells Fargo Bank, N.A. ("Wells Fargo Bank") or any of its
affiliates. Fund shares are NOT insured or guaranteed by the U.S. Government,
the Federal Deposit Insurance Corporation ("FDIC") or any other governmental
agency. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL.
SEPTEMBER 11, 2000
<PAGE>
TABLE OF CONTENTS
Overview Objective and Principal
Strategy
This section contains Summary of Important Risks
important summary Summary of Expenses
information about the Key Information
Fund.
The Fund Nebraska Tax-Free Fund
General Investment Risks
This section contains Organization and Management important information of the
Fund about the Fund
Your Investment Your Account
How to Buy Shares
Turn to this section for How to Sell Shares information on how to How to
Exchange Shares open an account and how to buy, sell and exchange Fund shares.
Reference Other Information
Glossary
Look here for
additional information
and term definitions
<PAGE>
Nebraska Tax-Free Fund Overview
See the individual Fund description in this Prospectus for further details.
Objective
Seeks current income exempt from federal income tax and Nebraska personal income
tax.
Principal Strategy
We invest primarily in investment grade Nebraska municipal securities of varying
maturities. The portfolio's weighted average maturity will vary depending on
market conditions, economic conditions including interest rates, the differences
in yields between obligations of different maturity lengths and other factors.
Generally, we will attempt to capture greater total return by increasing
maturity when we expect interest rates to decline, and attempt to preserve
capital by shortening maturity when interest rates are expected to increase.
<PAGE>
Summary of Important Risks
This section summarizes important risks for the Fund described in this
Prospectus. Additional information about these and other risks is included
in:
o the individual Fund Description later in this Prospectus; o under the "General
Investment Risks" section beginning on page 11; and o in the Fund's Statement of
Additional Information.
An investment in the Fund is not a deposit of Wells Fargo Bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is possible to lose money by investing in the
Fund.
The Fund invests in debt instruments, such as notes and bonds, which are
subject to credit risk and interest rate risk. Credit risk is the possibility
that an issuer of an instrument will be unable to make interest payments or
repay principal. Changes in the financial strength of an issuer or changes in
the credit rating of a security may affect its value. Interest rate risk is
the risk that interest rates may increase, which will reduce the resale value
of instruments in a Fund's portfolio, including U.S. Government obligations.
Debt securities with longer maturities are generally more sensitive to
interest rate changes than those with shorter maturities. Changes in market
interest rates do not affect the rate payable on debt instruments held in a
Fund, unless the instrument has adjustable or variable rate features, which
can reduce interest rate risk. Changes in market interest rates may also
extend or shorten the duration of certain types of instruments, such as
asset-backed securities, thereby affecting their value and the return on your
investment.
The Fund may invest in municipal obligations that rely on the
creditworthiness or revenue production of their issuers or ancillary credit
enhancement features. The Fund may invest 25% or more of its assets in
municipal obligations whose revenues are generated by substantially similar
projects. A decline in the receipt of such revenues for economic or other
reasons could adversely affect the issuers' ability to meet their payment
obligations and therefore, because a greater percentage of fund assets may be
invested in such securities, the risk of loss is greater. Municipal
obligations may be difficult to obtain because of limited supply, which may
increase the cost of such securities and effectively reduce the portfolio's
yield. Typically, less information is available about a municipal issuer than
is available for other types of securities issuers.
Although we strive to invest in municipal obligations and other securities
with interest that is exempt from federal personal income taxes, including
the federal AMT, some income earned by Fund investments may be subject to
such taxes.
Tax-Free Funds take advantage of tax laws that allow the income from certain
investments to be exempted from federal and, in some cases, state personal
income tax. Capital gains, whether declared by the Fund or realized by the
shareholder through the selling of Fund shares, are generally taxable.
The Fund is considered to be non-diversified according to the Investment
Company Act of 1940, as amended ("1940 Act"). The majority of the issuers of
the securities in the Fund's portfolio are located within Nebraska.
Non-diversified, geographically concentrated funds are riskier than similar
funds that are diversified or spread their investments over several
geographic areas. Default by a single security in the portfolio may have a
greater negative affect than a similar default in a diversified portfolio.
Fund-Specific Risks
Since we invest heavily in Nebraska municipal securities, events in Nebraska
are likely to effect the Fund's investments. The Nebraska economy is
primarily based on agriculture and agricultural processing. but has become
increasingly diversified with relatively steady growth in the manufacturing,
services and finance, insurance and real estate industries. While these
recent trends have helped diversify the Nebraska economy, it may still be
significantly impacted by changes in agricultural conditions such as the
weather, fluctuations in commodity markets, world agricultural production,
import and export and decreases in federal agriculture subsidy and support
programs.
The State of Nebraska does not directly issue debt. The obligations issued by
municipalities or political subdivisions which are permitted to issue debt
are not backed by the State's full faith and credit. Accordingly, the Fund
relies on the availability of, and must individually analyze the economic
condition of, securities issued by the various municipalities and public
authorities in Nebraska. We may invest 25% or more of our assets in Nebraska
municipal securities that are related in such a way that political, economic
or business developments effecting one obligation would effect others.
<PAGE>
Performance History
The Wells Fargo Nebraska Tax-Free Fund was organized as the successor fund to
the Great Plains Tax-Free Bond Fund, which was reorganized into the Wells
Fargo Fund effective September 11, 2000. The historical information shown for
the Nebraska Tax-Free Fund below reflects the historical information for the
Great Plains Tax-Free Bond Fund.
The performance information below shows you how the Fund has performed and
illustrates the variability of the Fund's returns over time. The Fund's
average annual returns for one-, five- and ten-year periods are compared to
the performance of an appropriate broad-based index.
Please remember that prior performance is no guarantee of future results.
Nebraska Tax-Free Fund Institutional Class Calendar Year Returns (%)
[BAR CHART]
1989 7.84
1990 6.31
1991 8.87
1992 5.51
1993 7.70
1994 (3.01)
1995 11.61
1996 3.37
1997 6.41
1998 4.97
Best Qtr.: Q 1 '95 4.57% Worst Qtr.: 1'94 -3.44%
The Fund's year-to-date performance through June 30, 2000 was 0.26%.
Average Annual Total Return %
for the period ending 12/31/98
<TABLE>
<S> <C> <C> <C>
1 Yr 5 Yrs 10 Yrs
Institutional Class (Incept. 9/29/97)1 1.84% 3.93% 5.57%
Lehman Brothers Municipal Index/7-Year 6.36% 5.81% N/A
Lehman Brothers Municipal Index/10-Year 6.76% 6.34% 8.33%
Lipper Intermediate Municipal Debt Average 5.42% 5.24% 6.94%
</TABLE>
<PAGE>
Summary of Expenses
These tables are intended to help you understand the various costs and
expenses you will pay as a shareholder in the Fund. These tables do not
reflect charges that may be imposed in connection with an account through
which you hold Fund shares.
---------------------------------------------- --------------------------
Shareholder Fees Nebraska Tax-Free Fund
--------------------------
Institutional Class
----------------------------------------------
--------------------------
Maximum sales charge (load)
imposed on purchases (as a percentage of
offering price) None
---------------------------------------------- --------------------------
Maximum deferred sales charge (load)
(as a percentage of the lower of the Net None
Asset Value ("NAV") at purchase or the NAV
at redemption)
---------------------------------------------- --------------------------
------------------------------- -----------------------
Nebraska Tax-Free
Fund
-----------------------
-----------------------
Institutional Class
-------------------------------
-----------------------
Management Fee 0.50%
------------------------------- -----------------------
------------------------------- -----------------------
Distribution (12b-1) Fee 0.00%
------------------------------- -----------------------
Other Expenses2 0.54%
------------------------------- -----------------------
TOTAL ANNUAL FUND
OPERATING
EXPENSES 1.04%
------------------------------- -----------------------
Fee Waivers3 0.21%
------------------------------- -----------------------
NET EXPENSES 0.83%
------------------------------- -----------------------
Example of Expenses
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The examples assume a
fixed rate of return and the fund operating expenses remain the same. Your
actual costs may be higher or lower than those shown.
You would pay the following expenses on a $10,000 investment assuming a 5%
annual return and that you redeem your shares at the end of each period:
------------------- ----------------------------------
Nebraska Tax-Free Fund
----------------------------------
----------------------------------
Institutional Class
-------------------
----------------------------------
1 YEAR $ 85
------------------- ----------------------------------
3 YEARS $ 310
------------------- ----------------------------------
5 YEARS $ 554
------------------- ----------------------------------
10 YEARS $1,252
------------------- ----------------------------------
<PAGE>
Key Information
Important information you should look for as you decide to invest in the Fund:
The summary information on the previous pages is designed to provide you with an
overview of the Fund. The sections that follow provide more detailed information
about the investments and management of the Fund.
Investment Objective and Investment Strategies
The investment objective of the Fund in this Prospectus is non-fundamental, that
is, it can be changed by a vote of the Board of Trustees alone. The objective
and strategy descriptions for the Fund tell you: o what the Fund is trying to
achieve; and o how we intend to invest your money.
Permitted Investments
A summary of the Fund's key permitted investments and practices.
Important Risk Factors
Describes the key risk factors for the Fund, and includes risks described in the
"Summary of Important Risks" and "General Investment Risks" sections.
Words appearing in italicized print and highlighted in color are defined in the
Glossary.
<PAGE>
Nebraska Tax-Free Fund
Portfolio Managers: Stephen Galiani
Investment Objective
The Nebraska Tax-Free Fund seeks current income exempt from federal income taxes
and Nebraska personal income tax.
Investment Strategies
We actively manage a portfolio of municipal securities and we buy municipal
securities of any maturity length. The portfolio's weighted average maturity
will vary depending on market conditions, economic conditions including interest
rates, the differences in yields between obligations of different maturity
lengths and other factors. Generally, we will attempt to capture greater total
return by increasing maturity when we expect interest rates to decline, and
attempt to preserve capital by shortening maturity when interest rates are
expected to increase. We invest primarily in a portfolio of investment grade
municipal securities.
Permitted Investments
Under normal market conditions, we invest:
o at least 80% of net assets in municipal securities that pay interest exempt
from federal income tax; o at least 65% of total assets in municipal securities
that pay interest exempt from Nebraska personal income tax; o up to 20% of net
assets in securities whose income is subject to the federal AMT; and o in
municipal obligations rated in the four highest credit categories by NRROs, and
in securities deemed by the advisor to be of
comparable quality.
We may temporarily hold assets in cash or in money market instruments, including
U.S. Government obligations, shares of other mutual funds and repurchase
agreements, or make other short-term investments either to maintain liquidity or
for short-term defensive purposes when we believe it is in the best interests of
shareholders to do so. During these periods, the Fund may not achieve its
objective of current income exempt from federal income taxes and Nebraska
personal income taxes.
Important Risk Factors
Since we invest heavily in Nebraska municipal securities, events in Nebraska are
likely to effect the Fund's investments. The Nebraska economy is primarily based
on agriculture and agricultural processing. but has become increasingly
diversified with relatively steady growth in the manufacturing, services and
finance, insurance and real estate industries. While these recent trends have
helped diversify the Nebraska economy, it may still be significantly impacted by
changes in agricultural conditions such as the weather, fluctuations in
commodity markets, world agricultural production, import and export and
decreases in federal agriculture subsidy and support programs.
The State of Nebraska does not directly issue debt. The obligations issued by
municipalities or political subdivisions which are permitted to issue debt are
not backed by the State's full faith and credit. Accordingly, the Fund relies on
the availability of, and must individually analyze the economic condition of,
securities issued by the various municipalities and public authorities in
Nebraska. We may invest 25% or more of our assets in Nebraska municipal
securities that are related in such a way that political, economic or business
developments effecting one obligation would effect others.
Municipal securities rely on the creditworthiness or revenue production of their
issuers. Municipal obligations may be difficult to obtain because of limited
supply, which may increase the cost of such securities and effectively reduce
the portfolio's yield. Typically, less information is available about a
municipal issuer than is available for other types of securities issuers.
Although we strive to invest in municipal securities and other securities with
interest that is exempt from federal personal income taxes, including the
federal AMT, some income earned by Fund investments may be subject to such
taxes.
You should consider the "Summary of Important Risks" section on page 6; the
"General Investment Risks" section beginning on page 15; and the specific risks
listed here. They are all important to your investment choice.
<PAGE>
Financial Highlights
The Wells Fargo Nebraska Tax-Free Fund was organized as the successor fund to
the Great Plains Tax-Free Bond Fund, which was reorganized into the Wells Fargo
Fund effective September 11, 2000. The historical information shown for the
Nebraska Tax-Free Fund below reflects the historical information for the Great
Plains Tax-Free Bond Fund.
This table is intended to help you understand the Fund's financial performance
for the past 5 years (or since inception, if shorter). Total returns represent
the rate that you would have earned (or lost) on investment in the Fund
(assuming reinvestment of all dividends and distributions). Deloitte & Touche
LLP audited this information which, along with their report and the Fund's
financial statements, is available upon request in the Fund's annual report.
<TABLE>
<S> <C> <C>
Nebraska Tax-Free
Fund
Institutional Class
August 31, 1999 August 31, 19984
Net Asset Value, beginning of period $10.13 $10.00
-------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.42 0.39
Net realized and unrealized gain (loss) on investments (0.36) 0.13
-----
Total from investment operations: 0.06 0.52
-------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.42) (0.39)
Distributions form net realized gain (0.01) (0.00)5
Total from distributions (0.43) (0.39)
--------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.76 $10.13
-------------------------------------------------------------------------------------------------------------
Total return6 0.54% 5.29%
--------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $68,443 $67,372
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 0.84% 0.87%7
Ratio of net investment income (loss) to average net assets 4.16% 4.22%4
PORTFOLIO TURNOVER 7% 8%
Ratios to average net assets (after voluntary waivers):
Ratio of expenses to average net assets 0.83% 0.87%4
Ratio of net investment income (loss) to average net assets 4.17% 4.22%4
</TABLE>
<PAGE>
General Investment Risks
Understanding the risks involved in mutual fund investing will help you make an
informed decision that takes into account your risk tolerance and preferences.
You should carefully consider the risks common to investing in all mutual funds,
including the Wells Fargo Funds. Certain common risks are identified in the
"Summary of Important Risks" section on page 6. Other risks of mutual fund
investing include the following:
o Unlike bank deposits, such as CDs or savings accounts, mutual funds are
not insured by the FDIC. o We cannot guarantee that we will meet our
investment objective.
o We do not guarantee the performance of the Fund, nor can we assure you that
the market value of your investment will not decline. We will not "make
good" any investment loss you may suffer, nor can anyone we contract with
to provide certain services, such as selling agents or investment advisors,
offer or promise to make good any such losses.
o Share prices -- and therefore the value of your investment -- will increase
and decrease with changes in the value of the underlying securities and
other investments. This is referred to as price volatility.
o Investing in any mutual fund, including those deemed conservative, involves
risk, including the possible loss of any money you invest.
o An investment in a single Fund, by itself, does not constitute a
complete investment plan.
o The Fund may also use certain derivative instruments, such as options or
futures contracts. The term "derivatives" covers a wide number of
investments, but in general it refers to any financial instrument whose
value is derived, at least in part, from the price of another security or a
specified index, asset or rate. Some derivatives may be more sensitive to
interest rate changes or market moves, and some may be susceptible to
changes in yields or values due to their structure or contract terms.
We carefully monitor investment practices and risk levels and make every attempt
to ensure that the risk exposure for the Fund remains within the parameters of
its objective.
What follows is a general list of the types of risks (some of which are
described previously) that may apply to the Fund and a table showing some of the
additional investment practices that the Fund may use and the risks associated
with them. Additional information about these practices is available in the
Statement of Additional Information.
Counter-Party Risk -- The risk that the other party in a repurchase agreement or
other transaction will not fulfill its contract obligation.
Credit Risk -- The risk that the issuer of a debt security will be unable to
make interest payments or repay principal on schedule. If an issuer does
default, the affected security could lose all of its value, or be renegotiated
at a lower interest rate or principal amount. Affected securities might also
lose liquidity. Credit risk also includes the risk that a party in a transaction
may not be able to complete the transaction as agreed.
Currency Risk-- The risk that a change in the exchange rate between U.S. dollars
and a foreign currency may reduce the value of an investment made in a security
denominated in that foreign currency.
Experience Risk--The risk presented by a new or innovative security. The risk is
that insufficient experience exists to forecast how the security's value might
be affected by various economic conditions.
Information Risk--The risk that information about a security is either
unavailable, incomplete or is inaccurate.
Interest Rate Risk--The risk that changes in interest rates can reduce the value
of an existing security. Generally, when interest rates increase, the value of a
debt security decreases. The effect is usually more pronounced for securities
with longer dates to maturity.
Leverage Risk--The risk that an investment practice, such as lending portfolio
securities or engaging in forward commitment or when issued securities
transactions, may increase a Fund's exposure to market risk, interest rate risk
or other risks by, in effect, increasing assets available for investment.
General Investment Risks (Cont'd)
Liquidity Risk--The risk that a security cannot be sold at the time desired, or
cannot be sold without adversely affecting the price.
Market Risk--The risk that the value of a stock, bond or other security will be
reduced by market activity. This is a basic risk associated with all securities.
Political Risk--The risk that political actions, events or instability may be
unfavorable for investments made in a particular nation's or region's industry,
government or markets.
Prepayment Risk--The risk that consumers will accelerate their prepayment of
mortgage loans or other receivables, which can shorten the maturity of a
mortgage-backed or other asset-backed security, and reduce a portfolio's return.
Regulatory Risk--The risk that changes in government regulations will adversely
affect the value of a security. Also the risk that an insufficiently regulated
market might permit inappropriate trading practices.
In addition to the general risks discussed above, you should carefully consider
and evaluate any special risks that may apply to investing in the Fund. See the
"Important Risk Factors" section in the summary for the Fund. You should also
see the Statement of Additional Information for additional information about the
investment practices and risks particular to the Fund.
<PAGE>
General Investment Risks (Cont'd)
Investment Practice/Risk
The following table lists some of the additional investment practices of the
Fund, including some not already described in the Investment Objective and
Investment Strategies sections of the Prospectus. The risks indicated after the
description of the practice are NOT the only potential risks associated with
that practice, but are among the more prominent. Market risk is assumed for
each. See the Investment Objective and Investment Strategies for the Fund or the
Statement of Additional Information for more information on these practices.
Investment practices and risk levels are carefully monitored. We attempt to
ensure that the risk exposure for the Fund remains within the parameters of its
objective.
---
NEBRASKA TAX-FREE
--------------------------------------------------- ------------------ ---
Investment Practice Risk
--------------------------------------------------- ------------------
--------------------------------------------------- ------------------
--------------------------------------------------- ------------------
--------------------------------------------------- ------------------ ---
Borrowing Policies
The ability to borrow from banks for temporary Leverage Risk o purposes to meet
shareholder redemptions.
--------------------------------------------------- ------------------ ---
Floating and Variable Rate Debt
Instruments with interest rates that are adjusted Interest Rate o either on a
schedule or when an index or and Credit Risk benchmark changes.
--------------------------------------------------- ------------------ ---
Forward Commitment, When-Issued and Delayed
Delivery Transactions
Securities bought or sold for delivery at a later Interest Rate, o
date or bought or sold for a fixed price at a Leverage, Credit
fixed date. and
Experience Risk
--------------------------------------------------- ------------------ ---
<PAGE>
General Investment Risks (Cont'd)
---
NEBRASKA TAX-FREE
--------------------------------------------------- ------------------ ---
Investment Practice Risk
--------------------------------------------------- ------------------
--------------------------------------------------- ------------------ ---
Illiquid Securities
A security that cannot be readily sold, or cannot Liquidity Risk be readily sold
without negatively affecting its o fair price. Limited to 15% of total assets.
---
--------------------------------------------------- ------------------ ---
Loans of Portfolio Securities
The practice of loaning securities to brokers, Credit, dealers and financial
institutions to increase Counter-Party o return on those securities. Loans may
be made up and Leverage Risk to Investment Company Act of 1940 limits (currently
one-third of total assets including the value of the collateral received).
---
--------------------------------------------------- ------------------ ---
Options
The right or obligation to receive or deliver a Credit,
security or cash payment depending on the Information o
security's price or the performance of an index and Liquidity
or benchmark. Types of options used may Risk
include: options on securities, options on a
stock index, stock index futures and options on
stock index futures to protect liquidity and
portfolio value.
---
--------------------------------------------------- ------------------ ---
Other Mutual Funds
A pro rata portion of the other fund's expenses, Market Risk in addition to the
expenses paid by the Fund, o will be borne by Fund shareholders.
--------------------------------------------------- ------------------ ---
--------------------------------------------------- ------------------ ---
Privately Issued Securities
Securities that are not publicly traded but which Credit and o
may or may not be resold in accordance with Rule Counter-Party
144A under the Securities Act of 1933. Risk
--------------------------------------------------- ------------------ ---
Repurchase Agreements
A transaction in which the seller of a security Liquidity Risk agrees to buy
back a security at an agreed upon o time and price, usually with interest.
--------------------------------------------------- ------------------ ---
<PAGE>
Organization and Management of the Fund
A number of different entities provide services to the Fund. This section shows
how the Fund is organized, lists the entities that perform different services,
and explains how these service providers are compensated. Further information is
available in the Statement of Additional Information for the Fund.
About Wells Fargo Funds Trust
Wells Fargo Funds Trust (the "Trust") was organized as a Delaware business trust
on March 10, 1999. The Board of Trustees of the Trust supervises the Fund's
activities, monitors its contractual arrangements with various service providers
and decides upon matters of general policy.
The Trust was created to succeed to the assets and operations of the various
mutual funds in the Stagecoach Family of Funds and the Norwest Advantage Family
of Funds. The holding company of Wells Fargo Bank, the investment advisor to the
Stagecoach Family of Funds, and the holding company of Norwest Investment
Management, Inc., the investment advisor to the Norwest Advantage Family of
Funds, merged in November 1998. The Board of Trustees of the Trust supervises
the Fund's activities and approves the selection of various companies hired to
manage the Fund's operation. The major service providers are described in the
diagram below. Except for the advisors, which require shareholder vote to
change, if the Board believes that it is in the best interest of the
shareholders it may make a change in one of these companies.
<PAGE>
Organization and Management of the Fund (Cont'd)
--------------------------------------------------------------------------
BOARD OF TRUSTEES
--------------------------------------------------------------------------
Supervises the Fund's activities
--------------------------------------------------------------------------
------------------------------------------ -------------------------------
INVESTMENT ADVISOR CUSTODIAN
------------------------------------------ -------------------------------
<TABLE>
<S> <C>
Wells Fargo Bank, N.A. Wells Fargo Bank Minnesota, N.A.
525 Market St., San Francisco, CA 6th Street & Marquette, Minneapolis, MN
Manages the Fund's investment Provides safekeeping for the Fund's
assets
activities
</TABLE>
------------------------------------------ -------------------------------
--------------------------------------------------------------------------
INVESTMENT SUB-ADVISOR
--------------------------------------------------------------------------
Wells Capital Management Incorporated
525 Market St., San Francisco, CA
Manages the Fund's investment
activities
----------------------------------
----------------------------------
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER
TRANSFER SERVICING
DISTRIBUTOR ADMINISTRATOR AGENT AGENTS
-------------------- ----------------------- ----------------------- ---------------
Stephens Inc. Wells Fargo Bank, N.A. Boston Financial Data Various Agents
111 Center St. 525 Market Street Services, Inc.
Little Rock, AR San Francisco, CA Two Heritage Drive
Markets the Fund, Manages the Quincy, MA Provide
and distributes Fund's business Maintains records services to
Fund shares activities of shareholders and customers
supervises the
paying of dividends
-------------------- ----------------------- ----------------------- -----
</TABLE>
--------------------------------------------------------------------------
FINANCIAL SERVICES FIRMS AND SELLING AGENTS
--------------------------------------------------------------------------
Advise current and prospective shareholders on their Fund investments
--------------------------------------------------------------------------
--------------------------------------------------------------------------
SHAREHOLDERS
--------------------------------------------------------------------------
<PAGE>
Organization and Management of the Fund (Cont'd)
In the following sections, the percentages shown are the percentages of the
average daily net assets of the Fund paid on an annual basis for the services
described.
The Investment Advisor
Wells Fargo Bank provides portfolio management and fundamental security analysis
services as the advisor for the Fund. Wells Fargo Bank, founded in 1852, is the
oldest bank in the western United States and is one of the largest banks in the
United States. Wells Fargo Bank is a wholly owned subsidiary of Wells Fargo &
Company, a national bank holding company. As of March 31, 2000, Wells Fargo Bank
and its affiliates provided advisory services for over $168 billion in assets.
For providing these services to the Fund, Wells Fargo Bank is entitled to
receive a fee of 0.50% of the average annual net assets of the Fund.
The Sub-Advisor
Wells Capital Management Incorporated ("WCM"), a wholly owned subsidiary of
Wells Fargo Bank, N.A., is the sub-advisor for the Fund. In this capacity, it is
responsible for the day-to-day investment management activities of the Fund. As
of March 31, 2000, WCM provided advisory services for over $80 billion in
assets.
The Administrator
Wells Fargo Bank provides the Fund with administration services, including
general supervision of the Fund's operation, coordination of the other services
provided to the Fund, compilation of information for reports to the SEC and the
state securities commissions, preparation of proxy statements and shareholder
reports, and general supervision of data compilation in connection with
preparing periodic reports to the Trust's Trustees and officers. Wells Fargo
Bank also furnishes office space and certain facilities to conduct the Fund's
business. For providing these services, Wells Fargo Bank is entitled to receive
a fee of 0.15% of the average annual net assets of the Fund.
Shareholder Servicing Plan
We have a shareholder servicing plan for the Fund. Under this plan, we have
engaged various shareholder servicing agents to process purchase and redemption
requests, to service shareholder accounts, and to provide other related
services. For these services, the Fund pays 0.25% of its average net assets.
The Transfer Agent
Boston Financial Data Services, Inc. ("BFDS") provides transfer agency and
dividend disbursing services to the Fund. For providing these services, BFDS
receives an annual fee, certain transaction-related fees, and is reimbursed for
out-of-pocket expenses incurred on behalf of the Fund.
<PAGE>
Your Account
This section tells you how Fund shares are priced, how to open an account and
how to buy and sell Fund shares once your account is open.
Pricing Fund Shares
o As with all mutual fund investments, the price you pay to purchase shares
or the price you receive when you redeem shares is not determined until
after a request has been received in proper form.
o We determine the NAV each business day as of the close of regular trading
on the New York Stock Exchange ("NYSE"). We determine the NAV by
subtracting the Fund class's liabilities from its total assets, and then
dividing the result by the total number of outstanding shares of the class.
The Fund's assets are generally valued at current market prices. See the
Statement of Additional Information for further information.
o We process requests to buy or sell shares of the Fund each business day as
of the close of regular trading on the NYSE, which is usually 1:00 p.m.
(Pacific time)/3:00 p.m. (Central time). If the markets close early, the
Fund may close early and may value its shares at earlier times under these
circumstances. Any request we receive in proper form before this time is
processed the same day. Requests we receive after the cutoff time are
processed the next business day.
o The Fund is open for business on each day the NYSE is open for business.
NYSE holidays include New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. When any holiday falls on a weekend,
the NYSE typically is closed on the weekday immediately before or after
such holiday.
HOW TO BUY SHARES
You can open a Fund account and buy Fund shares through an Institution through
which you have established a Customer Account. Investors interested in
purchasing Institutional shares of the Fund should contact an account
representative at their Institution and should understand the following:
o Share purchases are made through a Customer Account at an Institution
in accordance with the terms of the Customer Account involved;
o Institutions are usually the holders of record for Institutional shares
held through Customer Accounts and maintain records reflecting their
customers' beneficial ownership of the shares;
o Institutions are responsible for transmitting their customers' purchase and
redemption orders to the Fund and for delivering required payment on a
timely basis;
o The exercise of voting rights and the delivery of shareholder
communications from the Fund is governed by the terms of the Customer
Account involved; and
o Institutions may charge their customers account fees and may receive fees
from us with respect to investments their customers have made with the
Fund.
HOW TO SELL SHARES
Institutional shares must be redeemed in accordance with the account agreement
governing your Customer Account at the Institution. Please read the Customer
Account agreement with your Institution for rules governing selling shares.
General notes for selling shares
o We process requests we receive from an Institution in proper form before
the close of the NYSE, usually 1:00 p.m. Pacific time, at the NAV
determined on the same business day. Requests we receive after this time
are processed on the next business day.
o Redemption proceeds are usually wired to the redeeming Institution
the following business day.
o We reserve the right to delay payment of a redemption for up to 15 days so
that we may be reasonably certain that investments made by check have been
collected. Payments of redemptions also may be delayed under extraordinary
circumstances or as permitted by the SEC in order to protect remaining
shareholders. Payments of redemptions also may be delayed up to seven days
under normal circumstances, although it is not our policy to delay such
payments.
o Generally, we pay redemption requests in cash, unless the redemption
requests of the shareholder are for more than $250,000 or 1% of the net
assets of the Fund within a ninety-day period. If a request for a
redemption is over these limits, in order to protect the other shareholders
we may pay the redemption in part on in whole in portfolio securities of
equal value.
How to Exchange Shares
Exchanges between Wells Fargo Funds are two transactions: a sale of shares of
one Fund and the purchase of shares of another. In general, the same rules and
procedures that apply to sales and purchases apply to exchanges. There are,
however, additional factors you should keep in mind while making or considering
an exchange:
o You should carefully read the Prospectus for the Fund into which you wish
to exchange.
o Every exchange involves selling Fund shares and that sale may produce
a capital gain or loss for federal income tax purposes.
o You may make exchanges only between like share classes of non-money market
funds and the Service Class shares of money market Funds.
In order to discourage excessive exchange activity that could result in
additional expenses and lower returns for the fund, the fund may restrict or
refuse exchanges from market timers. You may be considered a market timer if you
completed more than one exchange within a 3 month period, or seem to be
following a timing pattern.
Contact your account representative for further details.
<PAGE>
Other Information
Dividend and Capital Gain Distributions
The Fund pays any dividends monthly and any capital gains distributions at least
annually.
Taxes
The following discussion regarding taxes is based on laws that were in effect as
of the date of this Prospectus. The discussion summarizes only some of the
important tax considerations that affect the Fund and you as a shareholder. It
is not intended as a substitute for careful tax planning. You should consult
your tax advisor about your specific tax situation. Federal income tax
considerations are discussed further in the Statement of Additional Information.
Dividends distributed from the Fund attributable to its net interest income from
tax-exempt securities will not be subject to federal income tax. Dividends
distributed from other investments and net short-term capital gain (generally,
the excess of net short-term capital gains over net long-term capital losses)
will be taxable to you as ordinary income. Corporate shareholders may be able to
deduct a portion of their dividends when determining their taxable income.
We will pass on to you net capital gains (generally the excess of net long-term
capital gains over net short-term capital losses) earned by the Fund as a
capital gain distribution. In general, these distributions will be taxable to
you as long-term capital gains which may qualify for taxation at preferential
rates in the hands of non-corporate shareholders. Any distribution that is not
from net investment income, short term capital gains, or net capital gain may be
characterized as a return of capital to shareholders.
<PAGE>
Portfolio Manager
Stephen Galiani
Nebraska Tax-Free Fund since 2000
Mr. Galiani joined WCM in 1997 and is the firm's Managing Director for
Municipals with overall managerial responsibility for municipal strategy,
portfolio management, credit research and trade execution. Prior to WCM, he
served as Director of Fixed Income from 1995 to 1997 for Qualivest Capital
Management. He was President from 1990 to 1995 of Galiani Asset Management
Corporation, an independent advisory practice. Mr. Galiani received a BA in
English from Manhattan College and an MBA from Boston University.
<PAGE>
Glossary
We provide the following definitions to assist you in reading this Prospectus.
For a more complete understanding of these terms you should consult your
financial adviser.
ACH
Refers to the "Automated Clearing House" system maintained by the Federal
Reserve Bank which allows banks to process checks, transfer funds and perform
other tasks.
Annual and Semi-Annual Report
A document that provides certain financial and other important information for
the most recent reporting period and the Fund's portfolio of investments.
Business Day
Any day the New York Stock Exchange is open is a business day for the Fund.
Capital Appreciation, Capital Growth
The increase in the value of a security. See also "total return."
Capitalization
When referring to the size of a company, capitalization means the total number
of a company's outstanding shares of stock multiplied by the price per share.
This is an accepted method of determining a company's size and is sometimes
referred to as "market capitalization."
Capital Structure
Refers to how a company has raised money to operate. Can include, for example,
borrowing or selling stock.
Commercial Paper
Debt instruments issued by banks, corporations and other issuers to finance
short-term credit needs. Commercial paper typically is of high credit quality
and offers below market interest rates.
Convertible Debt Securities
Bonds or notes that are exchangeable for equity securities at a set price on a
set date or at the election of the holder.
Derivatives
Securities whose values are derived in part from the value of another security
or index. An example is a stock option.
Diversified
A diversified fund, as defined by the Investment Company Act of 1940, is one
that invests in cash, Government securities, other investment companies and no
more than 5% of its total assets in a single issuer. These policies must apply
to 75% of the Fund's total assets. Non-diversified funds are not required to
follow such investment policies.
Distributions
Dividends and/or capital gains paid by a Fund on its shares.
Dollar-Denominated
Securities issued by foreign banks, companies or governments in U.S. dollars.
Illiquid Security
A security which cannot be readily sold, or cannot be readily sold without
negatively affecting its fair price.
<PAGE>
Glossary (Cont'd)
Liquidity
The ability to readily sell a security at a fair price.
Nationally Recognized Rating Organization ("NRRO")
A company that examines the ability of a bond issuer to meet its obligations and
which rates the bonds accordingly.
Net Asset Value ("NAV")
The value of a single Fund share. It is determined by adding together all of a
Fund's assets, subtracting accrued expenses and other liabilities, then dividing
by the total number of shares.
Options
An option is the right to buy or sell a security based on an agreed upon price
at a specified time. For example, an option may give the holder of a stock the
right to sell the stock to another party, allowing the seller to profit if the
price has fallen below the agreed price. Options may also be based on the
movement of an index such as the S&P 500.
Repurchase Agreement
An agreement between a buyer and seller of a security in which the seller agrees
to repurchase the security at an agreed upon price and time.
Selling Agent
A person who has an agreement with the Fund's distributor that allows them to
sell the Fund's shares.
Shareholder Servicing Agent
Anyone appointed by the Fund to maintain shareholder accounts and records,
assist and provide information to shareholders or perform similar functions.
Signature Guarantee
A guarantee given by a financial institution that has verified the identity of
the maker of the signature.
Statement of Additional Information
A document that supplements the disclosure made in the Prospectus.
Taxpayer Identification Number
Usually the social security number for an individual or the Employer
Identification Number for a corporation.
Total Return
The total value of capital growth and the value of all distributions, assuming
that distributions were used to purchase additional shares of the Fund.
Turnover Ratio
The percentage of the securities held in the Fund's portfolio, other than
short-term securities, that were bought or sold within a year.
<PAGE>
YOU MAY WISH TO REVIEW THE FOLLOWING DOCUMENT:
STATEMENT OF ADDITIONAL INFORMATION
supplements the disclosures made by this Prospectus. The Statement of Additional
Information has been filed with the SEC and is incorporated by reference into
this Prospectus and is legally part of this Prospectus.
THIS DOCUMENT IS AVAILABLE FREE OF CHARGE:
Call 1-800-222-8222
Write to:
Wells Fargo Funds
PO Box 8266
Boston, MA 02266-8266; or
Visit the SEC's web site at
http://www.sec.gov
REQUEST COPIES FOR A FEE BY WRITING TO:
SEC Public Reference Room, Washington, DC 20549-6009
Call: 1-800-SEC-0330 for details
ICA Reg. No. 811-09253
--------------------------------------------------
NOT FDIC INSURED-NO BANK GUARANTEE-MAY LOSE VALUE WFFT E P (2/00)
--------------------------------------------------
<PAGE>
WELLS FARGO FUNDS TRUST
Telephone: 1-800-222-8222
STATEMENT OF ADDITIONAL INFORMATION
Dated September 11, 2000
NEBRASKA TAX-FREE FUND
Institutional Class
Wells Fargo Funds Trust (the "Trust") is an open-end, management
investment company. This Statement of Additional Information ("SAI") contains
additional information about the Nebraska Tax-Free Fund (the "Fund"), a
non-diversified series in the Trust's family of funds. The Fund is considered
non-diversified under the Investment Company Act of 1940, as amended (the "1940
Act"). This SAI relates to the Institutional Class shares of the Fund.
This SAI is not a prospectus and should be read in conjunction with the
Fund's Prospectus, dated September 11, 2000. All terms used in this SAI that are
defined in the Prospectus have the meanings assigned in the Prospectus. A copy
of the Prospectus may be obtained free of charge by calling 1-800-222-8222 or
writing to Wells Fargo Funds, P.O. Box 8266, Boston, MA 02266-8266.
<PAGE>
i
TABLE OF CONTENTS
Page
<TABLE>
<S> <C> <C>
Investment Policies.........................................................................................1
Additional Permitted Investment Activities and Associated Risks.............................................2
Special Considerations Affecting Nebraska Municipal Obligations............................................14
Management ................................................................................................15
Performance Calculations...................................................................................19
Determination of Net Asset Value...........................................................................22
Additional Purchase and Redemption Information.............................................................22
Portfolio Transactions.....................................................................................23
Fund Expenses..............................................................................................24
Income Taxes...............................................................................................25
Capital Stock..............................................................................................29
Other......................................................................................................30
Counsel....................................................................................................31
Independent Auditors.......................................................................................31
Appendix..................................................................................................A-1
</TABLE>
<PAGE>
25
1
INVESTMENT POLICIES
Fundamental Investment Policies
The Fund has adopted the following investment policies, all of which
are fundamental policies; that is, they may not be changed without approval by
the holders of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such Fund.
The Fund may not:
(1) Purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after and as a result
thereof, the value of the Fund's investments in that industry would equal or
exceed 25% of the current value of the Fund's total assets, provided that (i)
this restriction does not limit the Fund's investments in securities of other
investment companies, (ii) this restriction does not limit the Fund's
investments in municipal securities whose revenues are derived from
substantially similar projects (see (iv) below), (iii) the Fund may invest 25%
or more of the current value of its total assets in private activity bonds or
notes that are the ultimate responsibility of non-government issuers conducting
their principal business activity in the same industry; and (iv) the Fund may
invest 25% or more of the current value of its total assets in securities whose
issuers are located in the same state or securities the interest and principal
on which are paid from revenues of similar type projects;
(2) borrow money, except to the extent permitted under the 1940 Act,
including the rules, regulations and exemptions thereunder;
(3) issue senior securities, except to the extent permitted under the
1940 Act, including the rules, regulations and exemptions thereunder;
(4) make loans to other parties if, as a result, the aggregate value of
such loans would exceed one-third of the Fund's total assets. For the purposes
of this limitation, entering into repurchase agreements, lending securities and
acquiring any debt securities are not deemed to be the making of loans;
(5) underwrite securities of other issuers, except to the extent that
the purchase of permitted investments directly from the issuer thereof or from
an underwriter for an issuer and the later disposition of such securities in
accordance with the Fund's investment program may be deemed to be an
underwriting;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business); nor
(7) purchase or sell commodities, provided that (i) currency will not
be deemed to be a commodity for purposes of this restriction, (ii) this
restriction does not limit the purchase or sale of futures contracts, forward
contracts or options, and (iii) this restriction does not limit the purchase or
sale of securities or other instruments backed by commodities or the purchase or
sale of commodities acquired as a result of ownership of securities or other
instruments.
Non-Fundamental Investment Policies
The Fund has adopted the following non-fundamental policies which may be
changed by the Trustees of the Trust at any time without approval of the
Fund's shareholders.
(1) The Fund may invest in shares of other investment companies to the extent
permitted under section 12(d)(1)(A) of the 1940 Act, including any rules,
regulations and orders obtained thereunder.
(1) The Fund may not invest or hold more than 15% of the Fund's net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days.
(2) The Fund may lend securities from its portfolio to approved brokers, dealers
and financial institutions, to the extent permitted under the 1940 Act,
including the rules, regulations and exemptions thereunder, which currently
limit such activities to one-third of the value of the Fund's total assets
(including the value of the collateral received). Any such loans of portfolio
securities will be fully collateralized based on values that are
marked-to-market daily.
(3) The Fund may not make investments for the purpose of exercising control or
management, provided that this restriction does not limit the Fund's investments
in securities of other investment companies or in entities created under the
laws of foreign countries to facilitate investment in securities in that
country.
(4) The Fund may not purchase securities on margin (except for short-term
credits necessary for the clearance of transactions).
(5) The Fund may not sell securities short, unless it owns or has the right to
obtain securities equivalent in kind and amount to the securities sold short
(short sales "against the box"), and provided that transactions in futures
contracts and options are not deemed to constitute selling securities short.
General
Notwithstanding the foregoing policies, any other investment companies in
which the Fund may invest have adopted their own investment policies, which
may be more or less restrictive than those listed above, thereby allowing the
Fund to participate in certain investment strategies indirectly that are
prohibited under the fundamental and non-fundamental investment policies
listed above.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES AND ASSOCIATED RISKS
Set forth below are descriptions of certain investments and additional
investment policies for the Funds. For purposes of monitoring the investment
policies and restrictions of the Funds (with the exception of the loans of
portfolio securities policy described below), the amount of any securities
lending collateral held by the Fund will be excluded in calculating total
assets.
Asset-Backed Securities
The Fund may invest in various types of asset-backed securities.
Asset-backed securities are securities that represent an interest in an
underlying security. The asset-backed securities in which the Funds invest may
consist of undivided fractional interests in pools of consumer loans or
receivables held in trust. Examples include certificates for automobile
receivables (CARS) and credit card receivables (CARDS). Payments of principal
and interest on these asset-backed securities are "passed through" on a monthly
or other periodic basis to certificate holders and are typically supported by
some form of credit enhancement, such as a surety bond, limited guaranty, or
subordination. The extent of credit enhancement varies, but usually amounts to
only a fraction of the asset-backed security's par value until exhausted.
Ultimately, asset-backed securities are dependent upon payment of the consumer
loans or receivables by individuals, and the certificate holder frequently has
no recourse to the entity that originated the loans or receivables. The actual
maturity and realized yield will vary based upon the prepayment experience of
the underlying asset pool and prevailing interest rates at the time of
prepayment. Asset-backed securities are relatively new instruments and may be
subject to greater risk of default during periods of economic downturn than
other instruments. Also, the secondary market for certain asset-backed
securities may not be as liquid as the market for other types of securities,
which could result in the Fund experiencing difficulty in valuing or liquidating
such securities. The Fund may also invest in securities backed by pools of
mortgages. The investments are described under the heading "Mortgage-Related
Securities."
Bank Obligations
The Fund may invest in bank obligations, including certificates of
deposit, time deposits, bankers' acceptances and other short-term obligations of
domestic banks, foreign subsidiaries of domestic banks, foreign branches of
domestic banks, and domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions. With respect to
such securities issued by foreign branches of domestic banks, foreign
subsidiaries of domestic banks, and domestic and foreign branches of foreign
banks, the Fund may be subject to additional investment risks that are different
in some respects from those incurred by the Fund which invests only in debt
obligations of domestic issuers. Such risks include possible future political
and economic developments, the possible imposition of foreign withholding taxes
on interest income payable on the securities, the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on these
securities and the possible seizure or nationalization of foreign deposits. In
addition, foreign branches of U.S. banks and foreign banks may be subject to
less stringent reserve requirements and to different accounting, auditing,
reporting and recordkeeping standards than those applicable to domestic branches
of U.S. banks.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by the Fund will not benefit from insurance from the
Bank Insurance Fund or the Savings Association Insurance Fund administered by
the Federal Deposit Insurance Corporation. Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft drawn on it by a
customer. These instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. The other
short-term obligations may include uninsured, direct obligations, bearing fixed,
floating- or variable-interest rates.
Bonds
Certain of the debt instruments purchased by the Funds may be bonds. A
bond is an interest-bearing security issued by a company or governmental unit.
The issuer of a bond has a contractual obligation to pay interest at a stated
rate on specific dates and to repay principal (the bond's face value)
periodically or on a specified maturity date. An issuer may have the right to
redeem or "call" a bond before maturity, in which case the investor may have to
reinvest the proceeds at lower market rates. The value of fixed-rate bonds will
tend to fall when interest rates rise and rise when interest rates fall. The
value of "floating-rate" or "variable-rate" bonds, on the other hand, fluctuate
much less in response to market interest rate movements than the value of fixed
rate bonds.
Bonds may be senior or subordinated obligations. Senior obligations
generally have the first claim on a corporation's earnings and assets and, in
the event of liquidation, are paid before subordinated debt. Bonds may be
unsecured (backed only by the issuer's general creditworthiness) or secured
(also backed by specified collateral).
Borrowing
The Fund may borrow money for temporary or emergency purposes,
including the meeting of redemption requests. Borrowing involves special risk
considerations. Interest costs on borrowings may fluctuate with changing market
rates of interest and may partially offset or exceed the return earned on
borrowed funds (or on the assets that were retained rather than sold to meet the
needs for which funds were borrowed). Under adverse market conditions, the Fund
might have to sell portfolio securities to meet interest or principal payments
at a time when investment considerations would not favor such sales. Reverse
repurchase agreements, short sales not against the box, dollar roll transactions
and other similar investments that involve a form of leverage have
characteristics similar to borrowings but are not considered borrowings if the
Fund maintains a segregated account.
Commercial Paper
The Fund may invest in commercial paper (including variable amount
master demand notes) which refers to short-term, unsecured promissory notes
issued by corporations to finance short-term credit needs. Commercial paper is
usually sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations which permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payee of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes.
Investments by the Funds in commercial paper (including variable rate demand
notes and variable rate master demand notes issued by domestic and foreign bank
holding companies, corporations and financial institutions, as well as similar
instruments issued by government agencies and instrumentalities) will consist of
issues that are rated in one of the two highest rating categories by a
Nationally Recognized Ratings Organization ("NRRO"). Commercial paper may
include variable- and floating-rate instruments.
Derivative Securities
The Fund may invest in various instruments that may be considered
"derivatives," including structured notes, bonds or other instruments with
interest rates that are determined by reference to changes in the value of other
interest rates, indices or financial indicators ("References") or the relative
change in two or more References. Some derivative securities represent
relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed than the markets for traditional types of
debt instruments. It is uncertain how these instruments will perform under
different economic and interest rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital gain or loss.
Derivative securities and their underlying instruments may experience periods of
illiquidity, which could cause the Fund to hold a security it might otherwise
sell or could force the sale of a security at inopportune times or for prices
that do not reflect current market value. The possibility of default by the
issuer or the issuer's credit provider may be greater for these structured and
derivative instruments than for other types of instruments. As new types of
derivative securities are developed and offered to investors, the advisor will,
consistent with the Fund's investment objective, policies and quality standards,
consider making investments in such new types of derivative securities.
Diversification
The Fund is non-diversified, which means that it has greater latitude
than a diversified fund with respect to the investment of its assets in the
securities of relatively few municipal issuers. As non-diversified portfolio,
the Fund may present a greater investment risk than a diversified fund. However,
the Fund intends to comply with applicable diversification requirements of the
Internal Revenue Code. These requirements provide that, as of the last day of
each fiscal quarter: (1) with respect to 50% of its assets, the Fund may not:
(a) own the securities of a single issuer, other than a U.S. Government
security, with a value of more than 5% of the Fund's total assets; or (b) own
more than 10% of the outstanding voting securities of a single issuer; and (2)
the Fund may not own the securities of a single issuer, other than a U.S.
Government security, with a value of more than 25% of the Fund's total assets.
Dollar Roll Transactions
The Fund may enter into "dollar roll" transactions wherein the Fund
sells fixed income securities, typically mortgage-backed securities, and makes a
commitment to purchase similar, but not identical, securities at a later date
from the same party. Like a forward commitment, during the roll period no
payment is made for the securities purchased and no interest or principal
payments on the security accrue to the purchaser, but the Fund assumes the risk
of ownership. The Fund is compensated for entering into dollar roll transactions
by the difference between the current sales price and the forward price for the
future purchase, as well as by the interest earned on the cash proceeds of the
initial sale. Like other when-issued securities or firm commitment agreements,
dollar roll transactions involve the risk that the market value of the
securities sold by the Fund may decline below the price at which the Fund is
committed to purchase similar securities. In the event the buyer of securities
under a dollar roll transaction becomes insolvent, the Funds use of the proceeds
of the transaction may be restricted pending a determination by the other party,
or its trustee or receiver, whether to enforce the Funds obligation to
repurchase the securities. The Fund will engage in roll transactions for the
purpose of acquiring securities for its portfolio and not for investment
leverage.
Floating- and Variable-Rate Obligations
The Fund may purchase floating- and variable-rate obligations such as
demand notes and bonds. Variable-rate demand notes include master demand notes
that are obligations that permit the Fund to invest fluctuating amounts, which
may change daily without penalty, pursuant to direct arrangements between the
Fund, as lender, and the borrower. The interest rate on a floating-rate demand
obligation is based on a known lending rate, such as a bank's prime rate, and is
adjusted automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. The issuer of such obligations ordinarily has a right, after a given
period, to prepay in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days' notice to the
holders of such obligations. Frequently, such obligations are secured by letters
of credit or other credit support arrangements provided by banks.
There generally is no established secondary market for these
obligations because they are direct lending arrangements between the lender and
borrower. Accordingly, where these obligations are not secured by letters of
credit or other credit support arrangements, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. Such obligations frequently are not rated by credit rating agencies and
the Fund may invest in obligations which are not so rated only if the Advisor
determines that at the time of investment the obligations are of comparable
quality to the other obligations in which such Fund may invest. The Advisor, on
behalf of the Fund, considers on an ongoing basis the creditworthiness of the
issuers of the floating- and variable-rate demand obligations in such Fund's
portfolio. Floating- and variable-rate instruments are subject to interest-rate
risk and credit risk.
The floating- and variable-rate instruments that the Funds may purchase
include certificates of participation in such instruments.
Forward Commitment, When-Issued and Delayed-Delivery Transactions
The Fund may purchase or sell securities on a when-issued or delayed delivery
basis and make contracts to purchase or sell securities for a fixed price at
a future date beyond customary settlement time. Delivery and payment on such
transaction normally take place within 120 days after the date of the
commitment to purchase. Securities purchased or sold on a when-issued,
delayed-delivery or forward commitment basis involve a risk of loss if the
value of the security to be purchased declines, or the value of the security
to be sold increases, before the settlement date. The Fund will establish a
segregated account in which they will maintain cash, U.S. Government
obligations or other high-quality debt instruments in an amount at least
equal in value to each such Fund's commitments to purchase when-issued
securities. If the value of these assets declines, the Fund will place
additional liquid assets in the account on a daily basis so that the value of
the assets in the account is equal to the amount of such commitments.
Geographic Concentration
The Fund invests principally in municipal securities issued by issuers
within a particular state and the state's political subdivisions. The Fund is
more susceptible to factors adversely affecting issuers of those municipal
securities than would be a more geographically diverse municipal securities
portfolio. These risks arise from the financial condition of the state and its
political subdivisions. To the extent state or local governmental entities are
unable to meet their financial obligations, the income derived by the Fund, its
ability to preserve or realize appreciation of its portfolio assets or its
liquidity could be impaired.
To the extent the Fund's investments are primarily concentrated in
issuers located in a particular state, the value of the Fund's shares may be
especially affected by factors pertaining to that state's economy and other
factors specifically affecting the ability of issuers of that state to meet
their obligations. As a result, the value of the Fund's assets may fluctuate
more widely than the value of shares of a portfolio investing in securities
relating to a number of different states. The ability of state, county or local
governments and quasi-government agencies to meet their obligations will depend
primarily on the availability of tax and other revenues to those governments and
on their fiscal conditions generally. The amounts of tax and other revenues
available to governmental issuers may be affected from time to time by economic,
political and demographic conditions within their state. In addition,
constitutional or statutory restrictions may limit a government's power to raise
revenues or increase taxes. The availability of federal, state and local aid to
governmental issuers may also affect their ability to meet obligations. Payments
of principal of and interest on private activity securities will depend on the
economic condition of the facility specific revenue source from whose revenues
the payments will be made, which in turn, could be affected by economic,
political or demographic conditions in the state.
Illiquid Securities
The Fund may invest in securities not registered under the Securities Act of
1933, as amended (the "1933 Act") and other securities subject to legal or
other restrictions on resale. Because such securities may be less liquid than
other investments, they may be difficult to sell promptly at an acceptable
price. Delay or difficulty in selling securities may result in a loss or be
costly to the Fund
Guaranteed Investment Contracts. Guaranteed investment contracts
("GICs") are issued by insurance companies. In purchasing a GIC, the Fund
contributes cash to the insurance company's general account and the insurance
company then credits to the Fund's deposit fund on a monthly basis guaranteed
interest at a specified rate. The GIC provides that this guaranteed interest
will not be less than a certain minimum rate. The insurance company may assess
periodic charges against a GIC for expense and service costs allocable to it.
There is no secondary market for GICs and, accordingly, GICs are generally
treated as illiquid investments. GICs are typically unrated.
Loans of Portfolio Securities
The Fund may lend its portfolio securities pursuant to guidelines approved by
the Board of Trustees of the Trust to brokers, dealers and financial
institutions, provided: (1) the loan is secured continuously by collateral
consisting of cash, securities of the U.S. Government, its agencies or
instrumentalities, or an irrevocable letter of credit issued by a bank
organized under the laws of the United States, organized under the laws of a
State, or a foreign bank that has filed an agreement with the Federal Reserve
Board to comply with the same rules and regulations applicable to U.S. banks
in securities credit transactions, and such collateral being maintained on a
daily marked-to-market basis in an amount at least equal to the current
market value of the securities loaned plus any accrued interest or dividends;
(2) the Fund may at any time call the loan and obtain the return of the
securities loaned upon sufficient prior notification; (3) the Fund will
receive any interest or dividends paid on the loaned securities; and (4) the
aggregate market value of securities loaned will not at any time exceed the
limits established by the 1940 Act.
The Fund will earn income for lending its securities because cash collateral
pursuant to these loans will be invested subject to the investment
objectives, principal investment strategies and policies of the Fund. In
connection with lending securities, the Fund may pay reasonable finders,
administrative and custodial fees. Loans of securities involve a risk that
the borrower may fail to return the securities or may fail to provide
additional collateral. In either case, the Fund could experience delays in
recovering securities or collateral or could lose all or part of the value of
the loaned securities. Although voting rights, or rights to consent,
attendant to securities on loan pass to the borrower, such loans may be
called at any time and will be called so that the securities may be voted by
the Fund if a material event affecting the investment is to occur. The Fund
may pay a portion of the interest or fees earned from securities lending to a
borrower or securities lending agent. Borrowers and placing brokers may not
be affiliated, directly or indirectly, with the Trust, the Advisor, or the
Distributor.
Mortgage-Related Municipal Securities
The Fund may invest in mortgage-related municipal securities, including
mortgage pass-through securities. Mortgage pass-through securities are
securities representing interests in "pools" of mortgages in which payments of
both interest and principal on the securities are made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
residential mortgage loans which underlie the securities (net of fees paid to
the issuer or guarantor of the securities). Mortgage pass-through securities
created by issuers (such as state and local housing agencies, commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers) may be supported by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance, and letters of credit, which may be issued by governmental entities,
private insurers or the mortgage poolers.
Prepayment Risk. The stated maturities of mortgage-related securities
may be shortened by unscheduled prepayments of principal on the underlying
mortgages. Therefore, it is not possible to predict accurately the average
maturity of a particular mortgage-related security . Variations in the
maturities of mortgage-related securities will affect the yield of the Fund.
Early repayment of principal on mortgage-related securities may expose the Fund
to a lower rate of return upon reinvestment of principal. Also, if a security
subject to prepayment has been purchased at a premium, in the event of
prepayment the value of the premium may be lost. Like other fixed-income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; however, when interest rates decline, the value of
mortgage-related securities with prepayment features may not increase as much as
other fixed-income securities.
Collateralized Mortgage Obligations ("CMOs") and Adjustable Rate Mortgages
("ARMs"). The Fund may also invest in investment grade CMOs. CMOs may be
collateralized by whole mortgage loans but are more typically collateralized
by portfolios of mortgage pass-through securities guaranteed by the
Government National Mortgage Association ("GNMA"), the Federal Home Loan
Mortgage Corporation or Federal National Mortgage Association ("FNMA"). CMOs
are structured into multiple classes, with each class bearing a different
stated maturity. Payments of principal, including prepayments, are first
returned to investors holding the shortest maturity class; investors holding
the longer maturity classes receive principal only after the first class has
been retired.
As new types of mortgage-related securities are developed and offered to
investors, the Advisor will, consistent with the Fund's investment objective,
policies and quality standards, consider making investments in such new types
of mortgage-related securities.
The Fund may investment in adjustable rate municipal mortgage
securities. The interest rates on the mortgages underlying these securities
generally are readjusted at periodic intervals ranging from one year or less to
several years in response to changes in a predetermined commonly-recognized
interest rate index. The adjustable rate feature should reduce, but will not
eliminate, price fluctuations in such securities, particularly when market
interest rates fluctuate. The net asset value of the Fund's shares may fluctuate
to the extent interest rates on underlying mortgages differ from prevailing
market interest rates during interim periods between interest rate reset dates.
Accordingly, investors could experience some loss if they redeem their shares of
the Fund or if the Funds sells these portfolio securities before the interest
rates on the underlying mortgages are adjusted to reflect prevailing market
interest rates. The holder of ARMs and CMOs are also subject to repayment risk.
Mortgage Participation Certificates. The Fund also may invest municipal
mortgage pass-through securities. These mortgage pass-through securities differ
from bonds in that principal is paid back by the borrower over the length of the
loan rather than returned in a lump sum at maturity. They are called
"pass-through" securities because both interest and principal payments,
including prepayments, are passed through to the holder of the security. They
are also subject to prepayment risk.
Municipal Bonds
The Fund may invest in municipal bonds. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
Municipal bonds are debt obligations issued to obtain funds for various public
purposes. Industrial development bonds are a specific type of revenue bond
backed by the credit and security of a private user. Certain types of industrial
development bonds are issued by or on behalf of public authorities to obtain
funds to provide privately-operated facilities.
From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption for
interest on municipal obligations. For example, under federal tax legislation
enacted in 1986, interest on certain private activity bonds must be included in
an investor's alternative minimum taxable income, and corporate investors must
treat all tax-exempt interest as an item of tax preference. Moreover the Fund
cannot predict what legislation, if any, may be proposed in the state
legislature regarding the state income tax status of interest on such
obligations, or which proposals, if any, might be enacted. Such proposals, while
pending or if enacted, might materially and adversely affect the availability of
municipal obligations generally for investment by the Fund and the liquidity and
value of the Fund's portfolio. In such an event, the Fund would re-evaluate its
investment objective and policies and consider possible changes in its structure
or possible dissolution.
Certain of the municipal obligations held by the Fund may be insured as
to the timely payment of principal and interest. The insurance policies usually
are obtained by the issuer of the municipal obligation at the time of its
original issuance. I n the event that the issuer defaults on interest or
principal payment, the insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee that the insurer
will meet its obligations. In addition, such insurance does not protect against
market fluctuations caused by changes in interest rates and other factors.
Municipal Notes
The Fund may invest in municipal notes. Municipal notes include, but
are not limited to, tax anticipation notes ("TANs"), bond anticipation notes
("BANs"), revenue anticipation notes ("RANs") and construction loan notes. Notes
sold as interim financing in anticipation of collection of taxes, a bond sale or
receipt of other revenues are usually general obligations of the issuer.
TANs. An uncertainty in a municipal issuer's capacity to raise taxes as
a result of such events as a decline in its tax base or a rise in delinquencies
could adversely affect the issuer's ability to meet its obligations on
outstanding TANs. Furthermore, some municipal issuers mix various tax proceeds
into a general fund that is used to meet obligations other than those of the
outstanding TANs. Use of such a general fund to meet various obligations could
affect the likelihood of making payments on TANs.
BANs. The ability of a municipal issuer to meet its obligations on its
BANs is primarily dependent on the issuer's adequate access to the longer term
municipal bond market and the likelihood that the proceeds of such bond sales
will be used to pay the principal of, and interest on, BANs.
RANs. A decline in the receipt of certain revenues, such as anticipated
revenues from another level of government, could adversely affect an issuer's
ability to meet its obligations on outstanding RANs. In addition, the
possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal of, and
interest on, RANs.
The values of outstanding municipal securities will vary as a result of
changing market evaluations of the ability of their issuers to meet the interest
and principal payments (i.e., credit risk). Such values also will change in
response to changes in the interest rates payable on new issues of municipal
securities (i.e., market risk). Changes in the value of municipal securities
held in the Fund's portfolio arising from these or other factors will cause
changes in the net asset value per share of the Fund.
Municipal Securities
Stand-by Commitments. The Fund may purchase municipal securities
together with the right to resell them to the seller or a third party at an
agreed-upon price or yield within specified periods prior to their maturity
dates. Such a right to resell is commonly known as a stand-by commitment, and
the aggregate price which the Fund pays for securities with a stand-by
commitment may be higher than the price which otherwise would be paid. The
primary purpose of this practice is to permit the Fund to be as fully invested
as practicable in municipal securities while preserving the necessary
flexibility and liquidity to meet unanticipated redemptions. In this regard, the
Fund acquires stand-by commitments solely to facilitate portfolio liquidity and
does not exercise its rights thereunder for trading purposes. Stand-by
commitments involve certain expenses and risks, including the inability of the
issuer of the commitment to pay for the securities at the time the commitment is
exercised, non-marketability of the commitment, and differences between the
maturity of the underlying security and the maturity of the commitment.
The acquisition of a stand-by commitment does not affect the valuation
or maturity of the underlying municipal securities. The Fund values stand-by
commitments at zero in determining net asset value. When the Fund pays directly
or indirectly for a stand-by commitment, its cost is reflected as unrealized
depreciation for the period during which the commitment is held. Stand-by
commitments do not affect the average weighted maturity of the Fund's portfolio
of securities.
Other Investment Companies
The Fund may invest in shares of other investment companies, up to the
limits prescribed in Section 12(d) of the 1940 Act. Under the 1940 Act, the
Fund's investment in such securities currently is limited to, subject to certain
exceptions, (i) 3% of the total voting stock of any one investment company, (ii)
5% of such Fund's total assets with respect to any one investment company and
(iii) 10% of such Fund's total assets. Other investment companies in which the
Funds invest can be expected to charge fees for operating expenses, such as
investment advisory and administration fees, that would be in addition to those
charged by the Funds.
Participation Interests
The Fund may purchase participation interests such as certificates of
participation in loans or instruments in which the Fund may invest directly that
are owned by banks or other institutions. A participation interest gives the
Fund an undivided proportionate interest in a loan or instrument. Participation
interests, however, do not provide the Fund with any right to enforce compliance
by the borrower, nor any rights of set-off against the borrower and the Fund may
not directly benefit from any collateral supporting the loan in which it
purchased a participation interest. As a result, the Fund will assume the credit
risk of both the borrower and the lender that is selling the participation
interest.
Repurchase Agreements
The Fund may enter into repurchase agreements, wherein the seller of a
security to the Fund agrees to repurchase that security from the Fund at a
mutually agreed upon time and price. The Fund may enter into repurchase
agreements only with respect to securities that could otherwise be purchased by
such Fund. All repurchase agreements will be fully collateralized at 102% based
on values that are marked to market daily. The maturities of the underlying
securities in a repurchase agreement transaction may be greater than twelve
months, although the maximum term of a repurchase agreement will always be less
than twelve months. If the seller defaults and the value of the underlying
securities has declined, the Fund may incur a loss. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security, the Fund's
disposition of the security may be delayed or limited.
The Fund may not enter into a repurchase agreement with a maturity of
more than seven days, if, as a result, more than 15% of the market value of such
Fund's total net assets would be invested in repurchase agreements with
maturities of more than seven days, restricted securities and illiquid
securities. The Fund will only enter into repurchase agreements with primary
broker/dealers and commercial banks that meet guidelines established by the
Board of Trustees and that are not affiliated with the Advisor. The Fund may
participate in pooled repurchase agreement transactions with other funds advised
by the Advisor.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements. Reverse
repurchase agreements are transactions in which the Fund sells a security and
simultaneously commits to repurchase that security from the buyer at an agreed
upon price on an agreed upon future date. The resale price in a reverse
repurchase agreement reflects a market rate of interest that is not related to
the coupon rate or maturity of the sold security. For certain demand agreements,
there is no agreed upon repurchase date and interest payments are calculated
daily, often based on the prevailing overnight repurchase rate. Because certain
of the incidents of ownership of the security are retained by the Fund, reverse
repurchase agreements may be viewed as a form of borrowing by the Fund from the
buyer, collateralized by the security sold by the Fund. The Fund will use the
proceeds of reverse repurchase agreements to Fund redemptions or to make
investments. In most cases these investments either mature or have a demand
feature to resell to the issuer on a date not later than the expiration of the
agreement. Interest costs on the money received in a reverse repurchase
agreement may exceed the return received on the investments made by the Fund
with those monies. Any significant commitment of the Fund's assets to the
reverse repurchase agreements will tend to increase the volatility of the Fund's
net asset value per share.
Stripped Securities
The Fund may purchase Treasury receipts, securities of
government-sponsored enterprises (GSEs), and other "stripped" securities that
evidence ownership in either the future interest payments or the future
principal payments on U.S. Government and other obligations. The stripped
securities the Funds may purchase are issued by the U.S. Government (or a U.S.
Government agency or instrumentality) or by private issuers such as banks,
corporations and other institutions at a discount to their face value. The Fund
will not purchase stripped mortgage-backed securities ("SMBS"). The stripped
securities purchased by the Funds generally are structured to make a lump-sum
payment at maturity and do not make periodic payments of principal or interest.
Hence, the duration of these securities tends to be longer and they are
therefore more sensitive to interest rate fluctuations than similar securities
that offer periodic payments over time. The stripped securities purchased by the
Funds are not subject to prepayment or extension risk.
The Fund may purchase participations in trusts that hold U.S. Treasury
securities (such as TIGRs and CATS) or other obligations where the trust
participations evidence ownership in either the future interest payments or the
future principal payments on the obligations. These participations are normally
issued at a discount to their "face value," and can exhibit greater price
volatility than ordinary debt securities because of the way in which their
principal and interest are returned to investors.
U.S. Government Obligations
The Fund may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Obligations").
Payment of principal and interest on U.S. Government Obligations (i) may be
backed by the full faith and credit of the United States (as with U.S. Treasury
bills and GNMA certificates) or (ii) may be backed solely by the issuing or
guaranteeing agency or instrumentality itself (as with FNMA notes). In the
latter case investors must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not obligated to do so. In addition, U.S. Government Obligations are
subject to fluctuations in market value due to fluctuations in market interest
rates. As a general matter, the value of debt instruments, including U.S.
Government Obligations, declines when market interest rates increase and rises
when market interest rates decrease. Certain types of U.S. Government
Obligations are subject to fluctuations in yield or value due to their structure
or contract terms.
Nationally Recognized Ratings Organizations
The ratings of Moody's, S&P, Division of McGraw Hill, Duff & Phelps
Credit Rating Co., Fitch Investors Service, Inc. Thomson Bank Watch and IBCA
Inc. represent their opinions as to the quality of debt securities. It should be
emphasized, however, that ratings are general and not absolute standards of
quality, and debt securities with the same maturity, interest rate and rating
may have different yields while debt securities of the same maturity and
interest rate with different ratings may have the same yield. Subsequent to
purchase by the Fund, an issue of debt securities may cease to be rated or its
rating may be reduced below the minimum rating required for purchase by the
Funds. The Advisor will consider such an event in determining whether the Fund
should continue to hold the obligation.
SPECIAL CONSIDERATIONS
AFFECTING NEBRASKA MUNICIPAL OBLIGATIONS
The concentration of the Nebraska Tax-Free Fund in securities issued by
governmental units of only one state exposes the Fund to risks greater than
those of a more diversified portfolio holding securities issued by governmental
units of different states in different regions of the country. Nebraska's
Constitution limits the debt the State may incur and sets certain restrictions
on debt incurred by municipalities and political subdivisions. Accordingly, the
availability of Nebraska municipal securities and the economy of the State will
effect the Fund. The following is a brief summary of data and economic trends
based upon information drawn from government web sites and other resources
publicly available as of the date of this SAI. The Trust has not independently
verified such information, but has no reason to believe that such information is
inaccurate in any material respect.
Governmental Units and Finances
Nebraska has 93 counties, 535 incorporated municipalities and over
1,500 other political subdivisions or authorities. These include governmental
units such as school districts, utility districts, the Nebraska Educational
Facilities Authority, and the Nebraska Investment Finance Authority. While these
various municipalities and public authorities dominantly rely on independent
revenue sources, such as property taxes, these entities are not immune from
State revenue short falls which lead to reductions in State aid to the entities.
Furthermore, municipal securities issued by public authorities in Nebraska are
not backed by the State's full faith and credit.
Throughout the early and mid 1990s, State and local revenues, in the
aggregate, increased each year at a rate sufficient to cover all increases in
State and local expenditures. The ending balance in the State's general fund for
fiscal year ending 1999 was $292,993,012 and the projected ending balance of the
general fund for fiscal year ending 2000 is $145,818,044. These ending balances
do not include amounts held in the State's Cash Reserve Fund. The continued
increase in revenues at a level sufficient to cover current and future
expenditures will depend on numerous factors, including the State's economy,
property tax values, and the financial condition of each municipality or public
authority issuing municipal securities.
Generally, the municipal securities issued by the State's various
governmental units have been highly regarded. Notwithstanding, certain Nebraska
municipal securities contained unique risks. Such municipal securities may
include, without limitation, health care providers, nuclear power plants,
facility offerings and other private activity bonds that lack governmental
backing. The Fund's success may be impacted by its ability to adequately
evaluate the unique risks associated with the respective issuers.
Economic Conditions
During the mid and late 1990s, Nebraska's economy experienced
consistent growth. State employment steadily increased from 880,246 in 1994 to
an estimated 911,100 in 1999 with almost uniform increases in all non-farm
industries. Nebraska's unemployment rate has consistently been among the lowest
rates in the Nation. From 1994 through 1999, Nebraska's unemployment rate ranged
from 2.6% to 2.9%. Nebraska's per capital income, while below the national
average, grew from $20,365 in 1994 to $26,412 in 1998. Nebraska also experienced
positive net migration and population growth in the mid and late 1990s,
reversing net out migration from 1974 to 1990. Based upon Census information,
Nebraska's population increased from 1,621,551 in 1994 to 1,666,028 in 1999.
Historically, national economic downturns have had less economic impact
on Nebraska than other states, while at the same time, Nebraska's economy
traditionally has not grown as fast as others in periods of national economic
expansion. During the 1990s, the Nebraska economy increasingly diversified away
from being heavily dependent agriculture. Increases in manufacturing, services
and finance, insurance and real estate industries have helped to more uniformly
distribute Nebraska's gross state product. However, the Nebraska economy remains
heavily dependent upon agriculture and may be adversely effected by the farm
commodities markets, changes in federal agriculture programs, and production and
weather conditions. Additionally, the diversification of the State's gross state
product over the last decade may effect the Nebraska economy's response to
national economic cycles.
Nebraska's economic trends of the 1990s appear to be continuing into
the year 2000. Preliminary numbers for March 2000 indicate that Nebraska's labor
force totaled 940,458 with an unemployment rate of 2.4%. Non-farm payroll jobs
continued to increase into January 2000. However, manufacturing jobs in January
2000 decreased slightly over the year earlier. These numbers and current
economic forecasts indicate that the Nebraska economy will continue to grow in
the near future, but growth rates will slow due in large part to the State's
tight labor market.
As discussed above, most municipal securities owned by the fund are
expected to be obligations of municipalities or other governmental units. Thus,
the actual impact of the State's economy and factors that effect that State's
economy on most of the municipal securities is uncertain. For example, a factor
that may materially effect the State's economy may or may not also effect an
individual municipality's financial condition or the municipality's ability to
meet its obligations pursuant to the respective municipal securities.
<PAGE>
MANAGEMENT
The following information supplements, and should be read in
conjunction with, the section in each Prospectus entitled "Organization and
Management of the Funds." The principal occupations during the past five years
of the Trustees and principal executive Officers of the Trust are listed below.
The address of each, unless otherwise indicated, is 525 Market Street, 12th
Floor, San Francisco, CA 94105. Trustees deemed to be "interested persons" of
the Trust for purposes of the 1940 Act are indicated by an asterisk.
<TABLE>
<S> <C> <C>
Principal Occupations
Name, Age and Address Position During Past 5 Years
--------------------- -------- -------------------
*Robert C. Brown, 65 Trustee Director, Federal Farm Credit Banks Funding
5038 Kestral Parkway South Corporation and Farm Credit System Financial
Sarasota, FL 34231 Assistance Corporation since February 1993.
Donald H. Burkhardt, 70 Trustee Principal of the Burkhardt Law Firm.
777 South Steele Street
Denver, CO 80209
Jack S. Euphrat, 77 Trustee Private Investor.
415 Walsh Road
Atherton, CA 94027
Thomas S. Goho, 56 Trustee Business Associate Professor, Wake Forest
321 Beechcliff Court University, Calloway School of Business and
Winston-Salem, NC 27104 Accountancy since 1994.
Peter G. Gordon, 56 Trustee Chairman and Co-Founder of Crystal Geyser Water
Crystal Geyser Water Co. Company and President of Crystal Geyser Roxane
55 Francisco Street, Suite 410 Water Company since 1977.
San Francisco, CA 94133
*W. Rodney Hughes, 72 Trustee Private Investor.
31 Dellwood Court
San Rafael, CA 94901
*Richard M. Leach, 63 Trustee President of Richard M. Leach Associates (a
P.O. Box 1888 financial consulting firm) since 1992.
New London, NH 03257
*J. Tucker Morse, 54 Trustee Private Investor/Real Estate Developer; Chairman
10 Legare Street of Vault Holdings, LLC.
Charleston, SC 29401
Timothy J. Penny, 45 Trustee Senior Counselor to the public relations firm of
500 North State Street Himle-Horner since January 1995 and Senior Fellow
Waseca, MN 56093 at the Humphrey Institute, Minneapolis, Minnesota
(a public policy organization) since January 1995.
Donald C. Willeke, 59 Trustee Principal on the law firm of Willeke & Daniels.
201 Ridgewood Avenue
Minneapolis, MN 55403
Michael J. Hogan, 41 President Executive Vice President of Wells Fargo Bank, N.A.
since July 1999. Senior Vice President of Wells
Fargo Bank, N.A. from April 1997 to May 1999.
Vice President of American Express Financial
Advisors from May 1996 to April 1997, and Director
of American Express Financial Advisors from March
1993 to May 1996.
Karla M. Rabusch, 41 Treasurer Senior Vice President of Wells Fargo Bank, N.A.,
since May 2000. Vice President of Wells Fargo
Bank, N.A. from December 1997 to May 2000. Prior
thereto, Director of Managed Assets Investment
Accounting of American Express Financial Advisors
from May 1994 to November 1997.
C. David Messman, 40 Secretary Vice President and Senior Counsel of Wells Fargo
Bank, N.A. since January 1996. Prior thereto,
Branch Chief, Division of Investment Management,
U.S. Securities and Exchange Commission.
</TABLE>
Each of the Trustees and Officers listed above act in the identical
capacities for Wells Fargo Variable Trust and Wells Fargo Core Trust (including
the Trust, collectively the "Fund Complex"). All of the non-interested Trustees
are also members of the Audit and Nominating Committees of the Trust, and of
each other trust in the Fund Complex.
Each Trustee receives an annual retainer (payable quarterly) of $40,000
from the Fund Complex, and also receives a combined fee of $1,000 for attendance
at Fund Complex Board meetings, and a combined fee of $250 for attendance at
committee meetings. If a committee meeting is held absent a full Board meeting,
each attending Trustee will receive a $1,000 combined fee. These fees apply
equally for in-person or telephonic meetings, and Trustees are reimbursed for
all out-of-pocket expenses related to attending meetings. The Trustees do not
receive any retirement benefits or deferred compensation from the Trust or any
other member of the Fund Complex. The Trust's officers are not compensated by
the Trust for their services. For the 12-month period ended May 31, 2000, the
Trustees received the following compensation:
Compensation Table
12-Month Period Ended May 31, 2000
Trustee Compensation
Robert C. Brown $ 22,102.00
Donald H. Burkhardt $ 21,134.00
Jack S. Euphrat $ 26,004.00
Thomas S. Goho $ 26,004.00
Peter G. Gordon $ 26,004.00
W. Rodney Hughes $ 25,754.00
Richard M. Leach $ 22,102.00
J. Tucker Morse $ 25,754.00
Timothy J. Penny $ 22,352.00
Donald C. Willeke $ 22,352.00
As of the date of this SAI, Trustees and Officers of the Trust as a
group beneficially owned less than 1% of the outstanding shares of the Trust.
Investment Advisor. Wells Fargo Bank provides investment advisory
services to the Fund. As investment advisor, Wells Fargo Bank furnishes
investment guidance and policy direction in connection with the daily portfolio
management of the Funds. Wells Fargo Bank furnishes to the Trust's Board of
Trustees periodic reports on the investment strategy and performance of the
Fund. Wells Fargo Bank provides the Funds with, among other things, money market
and fixed-income research, analysis and statistical and economic data and
information concerning interest rate and securities markets trends, portfolio
composition, and credit conditions.
As compensation for its advisory services, Well Fargo Bank is entitled
to receive a monthly fee at the annual rate of 0.50% of the Fund's average daily
net assets. Prior to September 11, 2000, First Commerce Investors, Inc. provided
advisory services to the Fund at the rate of 0.50% of the Fund's average annual
net assets. For the fiscal period ended August 31, 1999, the adviser to the
predecessor fund received $340,937 in advisory fees, without waivers. For the
period from September 29, 1997 (date of initial public investment) through
August 31, 1998, the adviser to the predecessor fund received $299,741 and
waived $865 in advisory fees.
General. The Fund's Advisory Contract will continue in effect for more
than two years from the effective date provided the continuance is approved
annually (i) by the holders of a majority of the respective Fund's outstanding
voting securities or by the Trust's Board of Trustees and (ii) by a majority of
the Trustees of the Trust who are not parties to the Advisory Contract or
"interested persons" (as defined in the 1940 Act) of any such party. The Fund's
Advisory Contract may be terminated on 60 days' written notice by either party
and will terminate automatically if assigned.
Investment Sub-Advisor. Wells Fargo Bank has engaged Wells Capital
Management Incorporated ("WCM") to serve as investment sub-advisor to the Fund.
Subject to the direction of the Trust's Board of Trustees and the overall
supervision and control of Wells Fargo Bank and the Trust, WCM makes
recommendations regarding the investment and reinvestment of the Fund's assets.
WCM furnishes to Wells Fargo Bank periodic reports on the investment activity
and performance of the Funds. WCM also furnishes such additional reports and
information as Wells Fargo Bank and the Trust's Board of Trustees and officers
may reasonably request.
As compensation for its sub-advisory services, WCM is entitled to
receive a monthly fee equal to an annual rate of 0.15% of the first $400 million
of the Fund's average daily net assets, 0.125% of the next $400 million of the
Fund's net assets, and 0.10% of net assets over $800 million. This fee payable
to WCM does not increase the advisory fee paid by the Fund to Wells Fargo Bank.
These fees may be paid by Wells Fargo Bank or directly by the Fund. If the
sub-advisory fee is paid directly by the Fund, the compensation paid to Wells
Fargo Bank for advisory fees will be reduced accordingly. Wells Fargo Bank may,
from time to time, reallocate fees and/or services provided with the
sub-advisor.
Administrator. The Trust has retained Wells Fargo Bank as Administrator
on behalf of the Fund. Under the Administration Agreement between Wells Fargo
Bank and the Trust, Wells Fargo Bank shall provide as administration services,
among other things: (i) general supervision of the Fund's operations, including
coordination of the services performed by the Fund's investment Advisor,
transfer agent, custodian, shareholder servicing agent(s), independent auditors
and legal counsel, regulatory compliance, including the compilation of
information for documents such as reports to, and filings with, the U.S.
Securities and Exchange Commission ("SEC") and state securities commissions; and
preparation of proxy statements and shareholder reports for the Fund; and (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Trust's officers and Board of
Trustees. Wells Fargo Bank also furnishes office space and certain facilities
required for conducting the Fund's business together with ordinary clerical and
bookkeeping services. The Administrator is entitled to receive a fee of up to
0.15% of the Fund's average daily net assets on an annual basis.
Prior to September 11, 2000, Federated Services Company, a subsidiary
of Federated Investors, Inc., provided administrative personnel and services
necessary to operate the Fund. For these services, it received fees on an annual
basis of the average daily net assets as follows: 0.15% of the first $250
million in assets, 0.125% of the next $250 million, 0.10% of the next $250
million in assets, and 0.075% of assets in excess of $750 million, with an
annual minimum of not less than $75,000.
For the fiscal years ended August 31, 1999 and August 31, 1998, the
predecessor fund's administrator received fees of $94,008 and $83,702,
respectively, for these services.
Distributor. Stephens Inc. (the "Distributor"), located at 111 Center
Street, Little Rock, Arkansas 72201, serves as the Distributor for the Funds.
Shareholder Servicing Agent. The Fund has approved a Servicing Plan and
has entered into related shareholder servicing agreements with financial
institutions, including Wells Fargo Bank. Under the agreements, Shareholder
Servicing Agents (including Wells Fargo Bank) agree to perform, as agents for
their customers, administrative services, with respect to Fund shares, which
include aggregating and transmitting shareholder orders for purchases, exchanges
and redemptions; maintaining shareholder accounts and records; and providing
such other related services as the Trust or a shareholder may reasonably
request. For providing shareholder services, a Servicing Agent is entitled to a
fee from the Fund, on an annualized basis, of 0.10% of the average daily net
assets of the Institutional Class shares owned of record or beneficially by the
customers of the Servicing Agent during the period for which payment is being
made. The Servicing Plan and related forms of shareholder servicing agreements
were approved by the Trust's Board of Trustees and provide that the Fund shall
not be obligated to make any payments under such Plans or related Agreements
that exceed the maximum amounts payable under the Conduct Rules of the NASD.
Custodian. Wells Fargo Bank Minnesota, N.A. ("Wells Fargo Bank MN"),
located at Norwest Center, 6th and Marquette, Minneapolis, Minnesota 55479, acts
as Custodian for the Fund. The Custodian, among other things, maintains a
custody account or accounts in the name of the Fund, receives and delivers all
assets for the Fund upon purchase and upon sale or maturity, collects and
receives all income and other payments and distributions on account of the
assets of the Fund, and pays all expenses of the Fund. For its services as
Custodian, Wells Fargo Bank MN is entitled to receive a fee of 0.02% of the
average daily net assets of the Fund.
Fund Accountant. Forum Accounting Services, LLC ("Forum Accounting"),
located at Two Portland Square, Portland, Maine 04101, serves as Fund Accountant
for the Fund.
For its services as Fund Accountant, Forum Accounting is entitled to
receive a monthly base fee per Fund of $5,000. Forum Accounting is also entitled
to receive a fee equal to 0.0025% of the average annual daily net assets of the
Fund and certain out-of-pocket expenses.
Transfer and Dividend Disbursing Agent. Boston Financial Data Services,
Inc. ("BFDS"), located at Two Heritage Drive, Quincy, Massachusetts 02171, acts
as Transfer and Dividend Disbursing Agent for the Funds. For providing such
services, BFDS is entitled to receive a per-account fee plus transaction fees
and certain out-of-pocket costs. BFDS is also entitled to receive a complex base
fee from all the Funds of the Trust, Wells Fargo Core Trust and Wells Fargo
Variable Trust.
Underwriting Commissions. Stephens serves as the principal underwriter
distributing securities of the Fund on a continuous basis.
PERFORMANCE CALCULATIONS
The Funds may advertise certain yield and total return information.
Quotations of yield and total return reflect only the performance of a
hypothetical investment in a Fund or class of shares during the particular time
period shown. Yield and total return vary based on changes in the market
conditions and the level of a Fund's expenses, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.
In connection with communicating its performance to current or
prospective shareholders, these figures may also be compared to the performance
of other mutual funds tracked by mutual fund rating services or to unmanaged
indices which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Performance information for a Fund or Class of shares in a Fund may be
useful in reviewing the performance of such Fund or Class of shares and for
providing a basis for comparison with investment alternatives. The performance
of a Fund and the performance of a Class of shares in a Fund, however, may not
be comparable to the performance from investment alternatives because of
differences in the foregoing variables and differences in the methods used to
value portfolio securities, compute expenses and calculate performance.
Performance information may be advertised for non-standardized periods,
including year-to-date and other periods less than a year for the Funds. Annual
and Semi-Annual Reports for the Funds may contain additional performance
information, and are available free of charge upon request.
Average Annual Total Return: The Funds may advertise certain total
return information. As and to the extent required by the SEC, an average annual
compound rate of return ("T") is computed by using the redeemable value at the
end of a specified period ("ERV") of a hypothetical initial investment ("P")
over a period of years ("n") according to the following formula: P(1+T)n=ERV.
Yield Calculations: The Funds may, from time to time, include their
yields and effective yields in advertisements or reports to shareholders or
prospective investors. Quotations of yield for the Funds are based on the
investment income per share earned during a particular seven-day or thirty-day
period, less expenses accrued during a period ("net investment income") and are
computed by dividing net investment income by the offering price per share on
the last date of the period, according to the following formula:
YIELD = 2[(a - b + 1)6 - 1]
-----
cd
where a = dividends and interest earned during the period; b = expenses
accrued for the period (net of reimbursements); c = the average daily number of
shares of each class outstanding during the period that were entitled to receive
dividends; and d = the maximum offering price per share each class of shares on
the last day of the period.
Tax-Equivalent Yield: Quotations of tax-equivalent yield for a Tax-Free
Fund are calculated according the following formula:
TAX EQUIVALENT YIELD = ( E ) + t
---
1 - p
E = Tax-exempt yield
p = stated income tax rate
t = taxable yield
Effective Yield: Effective yields for the Funds are based on the change
in the value of a hypothetical investment (exclusive of capital changes) over a
particular thirty-day period, less a pro-rata share of each Fund's expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized multiplying by 365/30, with the resulting yield
figure carried to at least the nearest hundredth of one percent. "Effective
yield" for the Funds assumes that all dividends received during the period have
been reinvested. Calculation of "effective yield" begins with the same "base
period return" used in the calculation of yield, which is then annualized to
reflect weekly compounding pursuant to the following formula:
Effective Thirty-Day Yield = [Base Period Return +1)365/30]-1
Quotations of yield and total return reflect only the performance of a
hypothetical investment in a Fund or class of shares during the particular time
period shown. Yield and total return vary based on changes in the market
conditions and the level of a Fund's expenses, and no reported performance
figure should be considered an indication of performance which may be expected
in the future. In connection with communicating its yields or total return to
current or prospective shareholders, these figures may also be compared to the
performance of other mutual funds tracked by mutual fund rating services or to
unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.
The yields for each class of shares will fluctuate from time to time,
unlike bank deposits or other investments that pay a fixed yield for a stated
period of time, and do not provide a basis for determining future yields since
they are based on historical data. Yield is a function of portfolio quality,
composition, maturity and market conditions as well as the expenses allocated to
a Fund or to a particular class of a Fund.
In addition, investors should recognize that changes in the net asset
values of shares of each class of a Fund will affect the yield of the respective
class of shares for any specified period, and such changes should be considered
together with such class' yield in ascertaining such class' total return to
shareholders for the period. Yield information for each class of shares may be
useful in reviewing the performance of the class of shares and for providing a
basis for comparison with investment alternatives. The yield of each class of
shares, however, may not be comparable to the yields from investment
alternatives because of differences in the foregoing variables and differences
in the methods used to value portfolio securities, compute expenses and
calculate yield.
For the Year or Period Ended August 31, 19998
Average Annual SEC 30 Tax Equivalent
Total Return Day Yield Yield
Nebraska Tax-Free Fund (2.44%) 3.85% 6.37%
From time to time and only to the extent the comparison is appropriate
for the Fund or a Class of shares, the Trust may quote the performance or
price-earning ratio of the Fund or a Class of in advertising and other types of
literature as compared with the performance of the S&P Index, the Dow Jones
Industrial Average, the Lehman Brothers 20+ Treasury Index, the Lehman Brothers
5-7 Year Treasury Index, Donoghue's Money Fund Averages, Real Estate Investment
Averages (as reported by the National Association of Real Estate Investment
Trusts), Gold Investment Averages (provided by the World Gold Council), Bank
Averages (which is calculated from figures supplied by the U.S. League of
Savings Institutions based on effective annual rates of interest on both
passbook and certificate accounts), average annualized certificate of deposit
rates (from the Federal Reserve G-13 Statistical Releases or the Bank Rate
Monitor), the Salomon One Year Treasury Benchmark Index, the Consumer Price
Index (as published by the U.S. Bureau of Labor Statistics), other managed or
unmanaged indices or performance data of bonds, municipal securities, stocks or
government securities (including data provided by Ibbotson Associates), or by
other services, companies, publications or persons who monitor mutual funds on
overall performance or other criteria. The S&P Index and the Dow Jones
Industrial Average are unmanaged indices of selected common stock prices. The
performance of the Fund or a class also may be compared to that of other mutual
funds having similar objectives. This comparative performance could be expressed
as a ranking prepared by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Bloomberg Financial Markets or Morningstar, Inc.,
independent services which monitor the performance of mutual funds. The Fund's
performance will be calculated by relating net asset value per share of each
class at the beginning of a stated period to the net asset value of the
investment, assuming reinvestment of all gains distributions paid, at the end of
the period. The Fund's comparative performance will be based on a comparison of
yields, as described above, or total return, as reported by Lipper, Survey
Publications, Donoghue or Morningstar, Inc.
Any such comparisons may be useful to investors who wish to compare
past performance of the Funds or a class of shares with the performance of the
Fund's competitors. Of course, past performance cannot be a guarantee of future
results. The Trust also may include, from time to time, a reference to certain
marketing approaches of the Distributor, including, for example, a reference to
a potential shareholder being contacted by a selected broker or dealer. General
mutual fund statistics provided by the Investment Company Institute may also be
used.
The Trust also may use the following information in advertisements and
other types of literature, only to the extent the information is appropriate for
each class of shares of the Fund: (i) the Consumer Price Index may be used to
assess the real rate of return from an investment in each class of shares of the
Fund; (ii) other government statistics, including, but not limited to, The
Survey of Current Business, may be used to illustrate investment attributes of
each class of shares of the Fund or the general economic, business, investment,
or financial environment in which the Fund operates; (iii) the effect of
tax-deferred compounding on the investment returns of each class of shares of
the Fund or on returns in general, may be illustrated by graphs, charts, etc.,
where such graphs or charts would compare, at various points in time, the return
from an investment in each class of shares of the Fund (or returns in general)
on a tax-deferred basis (assuming reinvestment of capital gains and dividends
and assuming one or more tax rates) with the return on a taxable basis; and (iv)
the sectors or industries in which the Fund invests may be compared to relevant
indices of stocks or surveys (e.g., S&P Industry Surveys) to evaluate the
historical performance or current or potential value of each class of shares of
the Fund with respect to the particular industry or sector.
The Trust also may use, in advertisements and other types of literature,
information and statements: (1) showing that bank savings accounts offer a
guaranteed return of principal and a fixed rate of interest, but no
opportunity for capital growth; and (2) describing Wells Fargo Bank, and its
affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Trust also may include in advertising and other types of literature
information and other data from reports and studies prepared by the Tax
Foundation, including information regarding federal and state tax levels and
the related "Tax Freedom Day."
The Trust also may discuss in advertising and other types of literature
that the Fund has been assigned a rating by an NRRO, such as Standard Poor's
Corporation. Such rating would assess the creditworthiness of the investments
held by the Fund. The assigned rating would not be a recommendation to purchase,
sell or hold the Fund's shares since the rating would not comment on the market
price of the Fund's shares or the suitability of the Fund for a particular
investor. In addition, the assigned rating would be subject to change,
suspension or withdrawal as a result of changes in, or unavailability of,
information relating to the Fund or its investments. The Trust may compare the
performance of each class of shares of the Fund with other investments which are
assigned ratings by NRROs. Any such comparisons may be useful to investors who
wish to compare each class' past performance with other rated investments.
From time to time, the Fund may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Wells Fargo Funds Trust,
provides various services to its customers that are also shareholders of the
Funds. These services may include access to Wells Fargo Funds Trust's account
information through Automated Teller Machines (ATMs), the placement of purchase
and redemption requests for shares of the Funds through ATMs and the
availability of combined Wells Fargo Bank and Wells Fargo Funds Trust account
statements."
The Trust also may disclose, in advertising and other types of
literature, information and statements that Wells Capital Management, Inc.
(formerly, Wells Fargo Investment Management) a subsidiary of Wells Fargo Bank,
is listed in the top 100 by Institutional Investor magazine in its July 1997
survey "America's Top 300 Money Managers." This survey ranks money managers in
several asset categories. The Trust also may disclose in advertising and other
types of sales literature the assets and categories of assets under management
by the Trust's investment Advisor and the total amount of assets and mutual fund
assets managed by Wells Fargo Bank. As of June 30, 2000, Wells Fargo Bank and
its affiliates managed over $131 billion in assets.
The Trust may disclose in advertising and other types of literature
that investors can open and maintain Sweep Accounts over the Internet or through
other electronic channels (collectively, "Electronic Channels"). Such
advertising and other literature may discuss the investment options available to
investors, including the types of accounts and any applicable fees. Such
advertising and other literature may disclose that Wells Fargo Bank is the first
major bank to offer an on-line application for a mutual fund account that can be
filled out completely through Electronic Channels. Advertising and other
literature may disclose that Wells Fargo Bank may maintain Web sites, pages or
other information sites accessible through Electronic Channels (an "Information
Site") and may describe the contents and features of the Information Site and
instruct investors on how to access the Information Site and open a Sweep
Account. Advertising and other literature may also disclose the procedures
employed by Wells Fargo Bank to secure information provided by investors,
including disclosure and discussion of the tools and services for accessing
Electronic Channels. Such advertising or other literature may include
discussions of the advantages of establishing and maintaining a Sweep Account
through Electronic Channels and testimonials from Wells Fargo Bank customers or
employees and may also include descriptions of locations where product
demonstrations may occur. The Trust may also disclose the ranking of Wells Fargo
Bank as one of the largest money managers in the United States.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for each class of the Fund is determined as
of the close of regular trading (currently 1:00 p.m. (Pacific time), 3:00 p.m.
(Central time), 4:00 p.m. (Eastern time)) on each day the New York Stock
Exchange ("NYSE") is open for business. Expenses and fees, including advisory
fees, are accrued daily and are taken into account for the purpose of
determining the net asset value of the Fund's shares.
Securities of the Fund for which market quotations are available are
valued at latest prices. Any security for which the primary market is an
exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the latest bid price quoted on
such day. In the case of other Fund securities, including U.S. Government
securities but excluding money market instruments and debt securities maturing
in 60 days or less, the valuations are based on latest quoted bid prices. Money
market instruments and debt securities maturing in 60 days or less are valued at
amortized cost. Futures contracts will be marked to market daily at their
respective settlement prices determined by the relevant exchange. Prices may be
furnished by a reputable independent pricing service approved by the Trust's
Board of Trustees. Prices provided by an independent pricing service may be
determined without exclusive reliance on quoted prices and may take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. All other securities and other assets of
the Fund for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Trust's Board of
Trustees and in accordance with procedures adopted by the Trustees.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund may be purchased on any day the Fund is open for
business. The Fund is open for business each day the NYSE is open for trading (a
"Business Day"). Currently, the NYSE is closed on New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day (each a "Holiday"). When any
Holiday falls on a weekend, the NYSE typically is closed on the weekday
immediately before or after such Holiday.
Payment for shares may, in the discretion of the advisor, be made in
the form of securities that are permissible investments for the Fund. For
further information about this form of payment please contact the Distributor.
In connection with an in-kind securities payment, the Fund will require, among
other things, that the securities be valued on the day of purchase in accordance
with the pricing methods used by the Fund and that such Fund receives
satisfactory assurances that (i) it will have good and marketable title to the
securities received by it; (ii) that the securities are in proper form for
transfer to the Fund; and (iii) adequate information will be provided concerning
the basis and other matters relating to the securities.
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule or
regulation) an emergency exists as a result of which disposal or valuation of
portfolio securities is not reasonably practicable, or for such periods as the
SEC may permit. The Trust may also redeem shares involuntarily or make payment
for redemption in securities or other property if it appears appropriate to do
so in light of the Trust's responsibilities under the 1940 Act. In addition, the
Trust may redeem shares involuntarily to reimburse the Fund for any losses
sustained by reason of the failure of a shareholder to make full payment for
shares purchased or to collect any charge relating to a transaction effected for
the benefit of a shareholder which is applicable to shares of the Fund as
provided from time to time in the Prospectus.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policies
established by the Trust's Board of Trustees, Wells Fargo Bank is responsible
for the Fund's portfolio decisions and the placing of portfolio transactions. In
placing orders, it is the policy of the Trust to obtain the best results taking
into account the dealer's general execution and operational facilities, the type
of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While Wells Fargo Bank generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available.
Purchases and sales of non-equity securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or to
dealers serving as market makers for the securities at a net price. The Fund
also will purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, municipal obligations
and taxable money market securities are traded on a net basis and do not involve
brokerage commissions. The cost of executing the Fund's portfolio securities
transactions will consist primarily of dealer spreads and underwriting
commissions. Under the 1940 Act, persons affiliated with the Trust are
prohibited from dealing with the Trust as a principal in the purchase and sale
of securities unless an exemptive order allowing such transactions is obtained
from the SEC or an exemption is otherwise available. The Fund may purchase
securities from underwriting syndicates of which Stephens or Wells Fargo Bank is
a member under certain conditions in accordance with the provisions of a rule
adopted under the 1940 Act and in compliance with procedures adopted by the
Board of Trustees.
Wells Fargo Bank, as Advisor to the Fund, may, in circumstances in
which two or more dealers are in a position to offer comparable results for the
Fund portfolio transaction, give preference to a dealer that has provided
statistical or other research services to Wells Fargo Bank. By allocating
transactions in this manner, Wells Fargo Bank is able to supplement its research
and analysis with the views and information of securities firms. Information so
received will be in addition to, and not in lieu of, the services required to be
performed by Wells Fargo Bank under the Advisory Contracts, and the expenses of
Wells Fargo Bank will not necessarily be reduced as a result of the receipt of
this supplemental research information. Furthermore, research services furnished
by dealers through which Wells Fargo Bank places securities transactions for the
Fund may be used by Wells Fargo Bank in servicing its other accounts, and not
all of these services may be used by Wells Fargo Bank in connection with
advising the Funds.
Portfolio Turnover. The portfolio turnover rate is not a limiting
factor when Wells Fargo Bank deems portfolio changes appropriate. Changes may be
made in the portfolios consistent with the investment objectives and policies of
the Funds whenever such changes are believed to be in the best interests of the
Funds and their shareholders. The portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities by the average
monthly value of the Fund's portfolio securities. For purposes of this
calculation, portfolio securities exclude all securities having a maturity when
purchased of one year or less. Portfolio turnover generally involves some
expenses to the Fund, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover also can generate short-term capital gain tax
consequences. Portfolio turnover rate is not a limiting factor when Wells Fargo
Bank deems portfolio changes appropriate.
FUND EXPENSES
As of the date of this SAI, Wells Fargo Bank is contractually obligated to
reimburse the Fund for some of its operating expenses or to waive a portion
of the fees payable to it in order to maintain a certain operating expense
ratio. The contract remains in effect unless the Board acts to reduce or
eliminate such waivers. Actual waivers will reduce expenses and, accordingly,
have a favorable impact on the Fund's performance.
Except for the expenses borne by Wells Fargo Bank and Stephens, the Trust
bears all costs of its operations, including the compensation of its
Trustees, who are not affiliated with Stephens or Wells Fargo Bank or any of
their affiliates; advisory, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent auditors, legal counsel, transfer agent and dividend
disbursing agent; expenses of redeeming shares; expenses of preparing and
printing Prospectuses (except the expense of printing and mailing
Prospectuses used for promotional purposes, unless otherwise payable pursuant
to a Plan), shareholders' reports, notices, proxy statements and reports to
regulatory agencies; insurance premiums and certain expenses relating to
insurance coverage; trade association membership dues; brokerage and other
expenses connected with the execution of portfolio transactions; fees and
expenses of its custodian, including those for keeping books and accounts and
calculating the net asset value per share of the Fund; expenses of
shareholders' meetings; expenses relating to the issuance, registration and
qualification of the Fund's shares; pricing services, organizational expenses
and any extraordinary expenses. Expenses attributable to the Fund are charged
against Fund assets. General expenses of the Trust are allocated among all of
the funds of the Trust, including the Fund, in a manner proportionate to the
net assets of the Fund, on a transactional basis, or on such other basis as
the Trust's Board of Trustees deems equitable.
INCOME TAXES
The following information supplements and should be read in conjunction
with the Prospectus section entitled "Taxes." The Prospectus of the Fund
generally describes the tax treatment of distributions by the Fund. This section
of the SAI includes additional information concerning federal and Nebraska
income taxes.
General. The Trust intends to continue to qualify the Fund as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), as long as such qualification is in the best
interests of the Fund's shareholders. The Fund will be treated as a separate
entity for federal income tax purposes. Thus, the provisions of the Code
applicable to regulated investment companies generally will be applied
separately to the Fund, rather than to the Trust as a whole. In addition,
capital gains, net investment income, and operating expenses will be determined
separately for the Fund. As a regulated investment company, the Fund will not be
taxed on its net investment income and capital gain distributed to its
shareholders.
Qualification as a regulated investment company under the Code
requires, among other things, that the Fund derive at least 90% of its annual
gross income from dividends, interest, certain payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities or foreign currencies (to the extent such currency gains are directly
related to the regulated investment company's principal business of investing in
stock or securities) and other income (including, but not limited to, gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; and (b) diversify its
holdings so that, at the end of each quarter of the taxable year, (i) at least
50% of the market value of the Fund's assets is represented by cash, government
securities and other securities limited in respect of any one issuer to an
amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government obligations and the securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
determined to be engaged in the same or similar trades or businesses.
The Fund must also distribute or be deemed to distribute to its
shareholders at least 90% of its net investment income (including, for this
purpose, net short-term capital gain) earned in each taxable year. In general,
these distributions must actually or be deemed to be made in the taxable year.
However, in certain circumstances, such distributions may be made in the 12
months following the taxable year. Furthermore, distributions declared in
October, November or December of one taxable year and paid by January 31 of the
following taxable year will be treated as paid by December 31 of the first
taxable year. The Fund intends to pay out substantially all of its net
investment income and net realized capital gains (if any) for each year.
Excise Tax. A 4% nondeductible excise tax will be imposed on the Fund
(other than to the extent of its tax-exempt interest income) to the extent it
does not meet certain minimum distribution requirements by the end of each
calendar year. The Fund intends to actually or be deemed to distribute
substantially all of its net investment income and net capital gains by the end
of each calendar year and, thus, expects not to be subject to the excise tax.
Taxation of Fund Investments. Except as provided herein, gains and
losses on the sale of portfolio securities by the Fund generally be capital
gains and losses. Such gains and losses will ordinarily be long-term capital
gains and losses if the securities have been held by the Fund for more than one
year at the time of disposition of the securities.
Gains recognized on the disposition of a debt obligation purchased by
the Fund at a market discount (generally at a price less than its principal
amount) will be treated as ordinary income to the extent of the portion of
market discount which accrued, but was not previously recognized pursuant to an
available election, during the term the Fund held the debt obligation.
If the Fund enters into a "constructive sale" of any appreciated
position in stock, a partnership interest, or certain debt instruments, the Fund
must recognize gain (but not loss) with respect to that position. For this
purpose, a constructive sale occurs when the Fund enters into one of the
following transactions with respect to the same or substantially identical
property: (i) a short sale; (ii) an offsetting notional principal contract; or
(iii) a futures or forward contract.
Capital Gain Distributions. Distributions which are designated by the
Fund as capital gain distributions will be taxed to shareholders as long-term
term capital gain (to the extent such dividends do not exceed the Fund's actual
net capital gain for the taxable year), regardless of how long a shareholder has
held Fund shares. Such distributions will be designated as capital gain
distributions in a written notice mailed by the Fund to its shareholders not
later than 60 days after the close of the Fund's taxable year.
Disposition of Fund Shares. A disposition of Fund shares pursuant to a
redemption (including a redemption in-kind) or an exchange will ordinarily
result in a taxable capital gain or loss, depending on the amount received for
the shares (or are deemed to receive in the case of an exchange) and the cost of
the shares.
If a shareholder exchanges or otherwise disposes of Fund shares within
90 days of having acquired such shares and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or a different regulated investment company, the
sales charge previously incurred in acquiring the Fund's shares shall not be
taken into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are acquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.
If a shareholder receives a designated capital gain distribution (to be
treated by the shareholder as a long-term capital gain) with respect to any Fund
share and such Fund share is held for six months or less, then (unless otherwise
disallowed) any loss on the sale or exchange of that Fund share will be treated
as a long-term capital loss to the extent of the designated capital gain
distribution. In addition, if a shareholder holds Fund shares for six months or
less, any loss on the sale or exchange of those shares will be disallowed to the
extent of the amount of exempt-interest dividends received with respect to the
shares. The Treasury Department is authorized to issue regulations reducing the
six months holding requirement to a period of not less than the greater of 31
days or the period between regular dividend distributions where the Fund
regularly distributes at least 90% of its net tax-exempt interest, if any. No
such regulations have been issued as of the date of this SAI. The loss
disallowance rules described in this paragraph do not apply to losses realized
under a periodic redemption plan.
Federal Income Tax Rates. As of the printing of this SAI, the maximum
individual tax rate applicable to ordinary income is 39.6% (marginal tax rates
may be higher for some individuals to reduce or eliminate the benefit of
exemptions and deductions); the maximum individual marginal tax rate applicable
to net capital gain is 20%; and the maximum corporate tax rate applicable to
ordinary income and net capital gain is 35% (marginal tax rates may be higher
for some corporations to reduce or eliminate the benefit of lower marginal
income tax rates). Naturally, the amount of tax payable by an individual or
corporation will be affected by a combination of tax laws covering, for example,
deductions, credits, deferrals, exemptions, sources of income and other matters.
Backup Withholding. The Trust may be required to withhold, subject to
certain exemptions, at a rate of 31% ("backup withholding") on all distributions
and redemption proceeds (including proceeds from exchanges and redemptions
in-kind) paid or credited to an individual Fund shareholder, unless the
shareholder certifies that the "taxpayer identification number" ("TIN") provided
is correct and that the shareholder is not subject to backup withholding, or the
IRS notifies the Trust that the shareholder's TIN is incorrect or that the
shareholder is subject to backup withholding. Such tax withheld does not
constitute any additional tax imposed on the shareholder, and may be claimed as
a tax payment on the shareholder's Federal income tax return. An investor must
provide a valid TIN upon opening or reopening an account. Failure to furnish a
valid TIN to the Trust also could subject the investor to penalties imposed by
the IRS.
Foreign Shareholders. Under the Code, distributions attributable to
income on taxable investments, net short-term capital gain and certain other
items realized by the Fund and paid to a nonresident alien individual, foreign
trust (i.e., trust which a U.S. court is able to exercise primary supervision
over administration of that trust and one or more U.S. persons have authority to
control substantial decisions of that trust), foreign estate (i.e., the income
of which is not subject to U.S. tax regardless of source), foreign corporation,
or foreign partnership (each, a "foreign shareholder") will be subject to U.S.
withholding tax (at a rate of 30% or a lower treaty rate, if applicable).
Withholding will not apply if a distribution paid by the Fund to a foreign
shareholder is "effectively connected" with a U.S. trade or business (or, if an
income tax treaty applies, is attributable to a U.S. permanent establishment of
the foreign shareholder), in which case the reporting and withholding
requirements applicable to U.S. persons will apply. Capital gain distributions
generally are not subject to tax withholding.
New Regulations. On October 6, 1997, the Treasury Department issued new
regulations (the "New Regulations") which make certain modifications to the
backup withholding, U.S. income tax withholding and information reporting rules
applicable to foreign shareholders. The New Regulations will generally be
effective for payments made after December 31, 2000, subject to certain
transition rules. Among other things, the New Regulations will permit the Funds
to estimate the portion of their distributions qualifying as capital gain
distributions for purposes of determining the portion of such distributions paid
to foreign shareholders that will be subject to federal income tax withholding.
Prospective investors are urged to consult their own tax advisors regarding the
New Regulations.
Tax-Exempt Investors and Tax-Deferred Plans. Shares of the Fund would
not be suitable investments for tax-exempt institutions and may not be suitable
for retirement plans qualified under Section 401 of the Code, H.R. 10 plans and
IRAs, since such plans and accounts are generally tax-exempt and, therefore,
would not benefit from the exempt status of dividends from the Fund. Such
dividends may ultimately be taxable to the beneficiaries when distributed to
them.
Additional Considerations for the Nebraska Tax-Free Fund. Individuals,
trusts, estates and corporations subject to the Nebraska income tax will not be
subject to such tax on dividends paid by the Nebraska Tax-Free Fund so long as
the Fund continues as a regulated investment company and to the extent that such
dividends qualify as exempt-interest dividends and are attributable to (i)
interest earned on Nebraska municipal securities to the extent that such
interest is specifically exempt from the Nebraska income tax and the Nebraska
alternative minimum tax; or (ii) interest on obligations of the United States or
its territories and possessions to the extent included in federal adjusted gross
income but exempt from state income taxes under the laws of the United States.
Distributions, characterized as long-term capital gains for federal income tax
purposes will generally receive the same characterization for Nebraska tax
purposes. Additionally, if a shareholder is subject to the Nebraska financial
institutions' franchise tax, fund dividends may effect the determination of such
shareholder's franchise tax.
All shareholders of the Nebraska Tax-Free Fund should consultant their
own tax advisors about other State and local tax consequences of their
investment in the Fund.
Other Matters. Investors should be aware that the investments to be
made by the Fund may involve sophisticated tax rules that may result in income
or gain recognition by the Fund without corresponding current cash receipts.
Although the Fund will seek to avoid significant noncash income, such noncash
income could be recognized by the Fund, in which case the Fund may distribute
cash derived from other sources in order to meet the minimum distribution
requirements described above.
The foregoing discussion and the discussions in the Prospectus
applicable to each shareholder address only some of the federal income and
Nebraska tax considerations generally affecting investments in the Fund. Each
investor is urged to consult his or her tax advisor regarding specific questions
as to federal, state, local and foreign taxes.
CAPITAL STOCK
The Fund is one of the funds in the Wells Fargo Funds Trust family of
funds. The Trust was organized as a Delaware business trust on March 10, 1999.
Most of the Trust's funds are authorized to issue multiple classes of
shares, one class generally subject to a front-end sales charge and, in some
cases, classes subject to a contingent-deferred sales charge, that are offered
to retail investors. Certain of the Trust's funds also are authorized to issue
other classes of shares, which are sold primarily to institutional investors.
Each share in the Fund represents an equal, proportionate interest in the Fund
with other shares. Please contact Shareholder Services at 1-800-222-8222 if you
would like additional information about other funds offered.
All shares of the Fund have equal voting rights and will be voted in
the aggregate, and not by series, except where voting by a series is required by
law or where the matter involved only affects one series. For example, a change
in the Fund's fundamental investment policy affects only one series and would be
voted upon only by shareholders of the Fund involved. Additionally, approval of
an advisory contract, since it affects only one Fund, is a matter to be
determined separately by Series. Approval by the shareholders of one Series is
effective as to that Series whether or not sufficient votes are received from
the shareholders of the other Series to approve the proposal as to those Series.
As used in the Prospectus and in this SAI, the term "majority," when
referring to approvals to be obtained from shareholders of a Class of shares of
the Fund, means the vote of the lesser of (i) 67% of the shares of the Class
represented at a meeting if the holders of more than 50% of the outstanding
shares of the Class are present in person or by proxy, or (ii) more than 50% of
the outstanding shares of the Class of the Fund. The term "majority," when
referring to approvals to be obtained from shareholders of the Fund, means the
vote of the lesser of (i) 67% of the shares of the Fund represented at a meeting
if the holders of more than 50% of the outstanding shares of the Fund are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of the Fund. The term "majority," when referring to the approvals to be obtained
from shareholders of the Trust as a whole, means the vote of the lesser of (i)
67% of the Trust's shares represented at a meeting if the holders of more than
50% of the Trust's outstanding shares are present in person or by proxy, or (ii)
more than 50% of the Trust's outstanding shares.
Shareholders are not entitled to any preemptive rights. All shares are
issued in uncertificated form only, and, when issued, will be fully paid and
non-assessable by the Trust. The Trust may dispense with an annual meeting of
shareholders in any year in which it is not required to elect Trustees under the
1940 Act.
Each share of the Fund represents an equal proportional interest in the
Fund with each other share and is entitled to such dividends and distributions
out of the income earned on the assets belonging to the Fund as are declared in
the discretion of the Trustees. In the event of the liquidation or dissolution
of the Trust, shareholders of the Fund are entitled to receive the assets
attributable to that Fund that are available for distribution, and a
distribution of any general assets not attributable to a particular Fund or
portfolio that are available for distribution in such manner and on such basis
as the Trustees in their sole discretion may determine.
Set forth below, as of August 25, 2000, is the name, address and share
ownership of each person known by the Trust to have beneficial or record
ownership of 5% or more of a class of the Fund or 5% or more of the voting
securities as a whole.
5% Ownership AS OF AUGUST 25, 2000
Type of Percentage
Fund Name and Address Ownership of Class
NEBRASKA TAX-FREE
Institutional Class Firlin & Co. Record 94.53%
c/o National Bank of Commerce
P. O. Box 82408
Lincoln, NE 68501
For purposes of the 1940 Act, any person who owns directly or through one or
more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder
of record of more than 25% of a class (or Fund) and has voting and/or
investment powers, it may be presumed to control such class (or Fund).
OTHER
The Trust's Registration Statement, including the Prospectus and SAI for the
Funds and the exhibits filed therewith, may be examined at the office of the
U.S. Securities and Exchange Commission in Washington, D.C. Statements
contained in the Prospectus or the SAI as to the contents of any contract or
other document referred to herein or in the Prospectus are not necessarily
complete, and, in each instance, reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
COUNSEL
Morrison & Foerster LLP, 2000 Pennsylvania Avenue, N.W., Suite 5500,
Washington, D.C. 20006, as counsel for the Trust, has rendered its opinion as
to certain legal matters regarding the due authorization and valid issuance
of the shares of beneficial interest being sold pursuant to the Fund's
Prospectus.
INDEPENDENT AUDITORS
KPMG LLP has been selected as the independent auditors for the Trust. KPMG
LLP provides audit services, tax return preparation and assistance and
consultation in connection with review of certain SEC filings. KPMG LLP's
address is Three Embarcadero Center, San Francisco, California 94111.
<PAGE>
APPENDIX
The following is a description of the ratings given by Moody's and S&P
to corporate and municipal bonds, municipal notes, and corporate and municipal
commercial paper.
Corporate Bonds
Moody's: The four highest ratings for corporate bonds are "Aaa," "Aa,"
"A" and "Baa." Bonds rated "Aaa" are judged to be of the "best quality" and
carry the smallest amount of investment risk. Bonds rated "Aa" are of "high
quality by all standards," but margins of protection or other elements make
long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds rated "A"
possess many favorable investment attributes and are considered to be upper
medium grade obligations. Bonds rated "Baa" are considered to be medium grade
obligations; interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Moody's also applies numerical modifiers in its rating
system: 1, 2 and 3 in each rating category from "Aa" through "Baa" in its rating
system. The modifier 1 indicates that the security ranks in the higher end of
its category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.
S&P: The four highest ratings for corporate and municipal bonds are
"AAA," "AA," "A" and "BBB." Bonds rated "AAA" have the "highest rating" assigned
by S&P and have "an extremely strong capacity" to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity" to pay interest and
repay principal and "differ from the highest rated obligations only in small
degree." Bonds rated "A" have a "strong capacity" to pay interest and repay
principal, but are "somewhat more susceptible" to adverse effects of changes in
economic conditions or other circumstances than bonds in higher rated
categories. Bonds rated "BBB" are regarded as having "adequate protection
parameters" to pay interest and repay principal, but changes in economic
conditions or other circumstances are more likely to lead to a "weakened
capacity" to make such repayments. The ratings from "AA" to "BBB" may be
modified by the addition of a plus or minus sign to show relative standing
within the category.
Commercial Paper
Moody's: The highest rating for commercial paper is "P-1" (Prime-1).
Issuers rated "P-1" have a "superior ability for repayment of senior short-term
debt obligations." Issuers rated "P-2" (Prime-2) "have a strong capacity for
repayment of senior short-term debt obligations," but earnings trends, while
sound, will be subject to more variation.
<PAGE>
S&P: The "A-1" rating for commercial paper is rated "in the highest
category" by S&P and "the obligor's capacity to meet its financial commitment on
the obligation is strong." The "A-1+" rating indicates that said capacity is
"extremely strong." The A-2 rating indicates that said capacity is
"satisfactory," but that corporate and municipal commercial paper rated "A-2" is
"more susceptible" to the adverse effects of changes in economic conditions or
other circumstances than commercial paper rated in higher rating categories.
<PAGE>
C-5
C-1
WELLS FARGO FUNDS TRUST
File Nos. 333-74295; 811-09253
PART C
OTHER INFORMATION
Item 23. Exhibits.
--------
Exhibit
Number Description
(a) - Amended and Restated Declaration of Trust,
incorporated by reference to Post-Effective
Amendment No. 8, filed December 17, 1999.
(b) - Not applicable.
(c) - Not applicable.
(d)(1)(i) - Investment Advisory Agreement with Wells Fargo
Bank, N.A., incorporated by reference to Post-
Effective
Amendment No. 8, filed December 17, 1999.
(ii) - Fee and Expense Agreement between Wells Fargo
Funds Trust and Wells Fargo Bank, N.A.
(2)(i) - Sub-Advisory Contract with Barclays Global Fund
Advisors, incorporated by reference to Post-
Effective Amendment No. 8, filed December 17,
1999.
(ii) - Sub-Advisory Contract with Galliard Capital
Management, Inc., incorporated by reference to
Post-Effective Amendment No. 8, filed December
17, 1999.
(iii) - Sub-Advisory Contract with Peregrine Capital
Management, Inc., incorporated by reference to
Post-Effective Amendment No. 8, filed December
17, 1999.
(iv) - Sub-Advisory Contract with Schroder Investment
Management North America Inc., incorporated by
reference
to Post-Effective Amendment No. 8, filed
December 17, 1999.
(v) - Sub-Advisory Contract with Smith Asset
Management Group, L.P., incorporated by
reference to Post-Effective Amendment No. 10,
filed May 10, 2000.
(vi) - Form of Sub-Advisory Contract with Wells
Capital Management Incorporated, incorporated
by reference to Post-effective Amendment No. 1,
filed May 28, 1999.
(e)(i) - Form of Distribution Agreement along with Form
of Selling Agreement, incorporated by reference
to Post-effective Amendment No. 1, filed May 28
, 1999.
(ii) - Distribution Plan, incorporated by reference to
Post-Effective Amendment No. 8, filed December
17, 1999.
(f) - Not applicable.
(g)(1) - Custody Agreement with Barclays Global
Investors, N.A., incorporated by reference to
Post-Effective Amendment No. 8, filed December
17, 1999.
(2) - Custody Agreement with Norwest Bank Minnesota,
N.A., incorporated by reference to Post-
Effective Amendment No. 8, filed December 17,
1999.
(3) - Securities Lending Agreement by and among Wells
Fargo Funds Trust, Wells Fargo Bank, N.A. and
Norwest Bank Minnesota, N.A., incorporated by
reference to Post-Effective Amendment No. 8,
filed December 17, 1999.
(h)(1) - Administration Agreement with Wells Fargo Bank,
N.A., incorporated by reference to Post-
Effective Amendment No. 8, filed December 17,
1999.
(2)(i) - Fund Accounting Agreement, incorporated by
reference to Post-Effective Amendment No. 9,
filed February 1, 2000.
(3) - Transfer Agency and Service Agreement with
Boston Financial Data Services, Inc.,
incorporated by reference to Post-Effective
Amendment No. 8, filed December 17, 1999.
(4) - Shareholder Servicing Plan, incorporated by
reference to Post-Effective Amendment No. 8,
filed December 17, 1999.
(5) - Form of Shareholder Servicing Agreement,
incorporated by reference to Post-Effective
Amendment No. 8, filed December 17, 1999.
(i) - Legal Opinion, filed herewith.
(j) - Consent of Independent Auditors, filed
herewith.
(j)(1) - Power of Attorney, Robert C. Brown,
incorporated by reference to Post-Effective
Amendment No. 10, filed May 10, 2000.
(2) - Power of Attorney, Donald H. Burkhardt,
incorporated by reference to Post-Effective
Amendment No. 10, filed May 10, 2000.
(3) - Power of Attorney, Jack S. Euphrat,
incorporated by reference to Post-Effective
Amendment No. 10, filed May 10, 2000.
(4) - Power of Attorney, Thomas S. Goho,
incorporated by reference to Post-Effective
Amendment No. 10, filed May 10, 2000.
(5) - Power of Attorney, Peter G. Gordon,
incorporated by reference to Post-Effective
Amendment No. 10, filed May 10, 2000.
(6) - Power of Attorney, W. Rodney Hughes,
incorporated by reference to Post-Effective
Amendment No. 10, filed May 10, 2000.
(7) - Form of Power of Attorney, Richard M. Leach,
incorporated by reference to Post-Effective
Amendment No.10, filed May 10, 2000.
(8) - Power of Attorney, J. Tucker Morse,
incorporated by reference to Post-Effective
Amendment No. 10, filed May 10, 2000.
(9) - Power of Attorney, Timothy J. Perry,
incorporated by reference to Post-Effective
Amendment No. 10, filed May 10, 2000.
(10) - Power of Attorney, Donald C. Willeke,
incorporated by reference to Post-Effective
Amendment No. 10, filed May 10, 2000.
(11) - Power of Attorney, Michael J. Hogan,
incorporated by reference to Post-Effective
Amendment No. 10, filed May 10, 2000.
(12) - Power of Attorney, Karla M. Rabusch,
incorporated by reference to Post-Effective
Amendment No. 10, filed May 10, 2000.
(k) - Not applicable.
(l) - Not applicable.
(m) - Rule 12b-1 Plan, incorporated by reference to
Post-effective Amendment No. 8, filed December
17, 1999.
(n) - Rule 18f-3 Plan, incorporated by reference to
Post-Effective Amendment No. 8, filed December
17, 1999.
(p) - Code of Ethics, incorporated by reference to
Post-Effective Amendment No. 10, filed May 10,
2000.
Item 24. Persons Controlled by or Under Common Control with the Fund.
-----------------------------------------------------------
Registrant believes that no person is controlled by or under
common control with Registrant.
Item 25. Indemnification.
---------------
Article V of the Registrant's Declaration of Trust limits the
liability and, in certain instances, provides for mandatory indemnification of
the Registrant's trustees, officers, employees, agents and holders of beneficial
interests in the Trust. In addition, the Trustees are empowered under Section
3.9 of the Registrant's Declaration of Trust to obtain such insurance policies
as they deem necessary.
Item 26. Business and Other Connections of Investment Adviser.
----------------------------------------------------
(a) Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly-owned
subsidiary of Wells Fargo & Company, serves as investment adviser to all of the
Registrant's investment portfolios, and to certain other registered open-end
management investment companies. Wells Fargo Bank's business is that of a
national banking association with respect to which it conducts a variety of
commercial banking and trust activities.
To the knowledge of Registrant, none of the directors or
executive officers of Wells Fargo Bank is or has been at any time during the
past two fiscal years engaged in any other business, profession, vocation or
employment of a substantial nature, except that certain executive officers also
hold various positions with and engage in business for Wells Fargo & Company
and/or its subsidiaries.
(b) Barclays Global Fund Advisors ("BGFA"), a wholly-owned
subsidiary of Barclays Global Investors, N.A. ("BGI"), serves as an adviser or
sub-adviser to various Funds of the Trust and as adviser or sub-adviser to
certain other open-end management investment companies. The description of BGFA
in Parts A and B of this Registration Statement is incorporated by reference
herein. The directors and officers of BGFA also serve as directors or officers
of BGI. To the knowledge of the Registrant, none of the directors or executive
officers of BGFA is or has been at any time during the past two fiscal years
engaged in any other business, profession, vocation or employment of a
substantial nature.
(c) Wells Capital Management Incorporated ("WCM"), a
wholly-owned subsidiary of Wells Fargo Bank, N.A., serves as sub-adviser to
various Funds of the Trust. The description of WCM in Parts A and B of this
Registration Statement is incorporated by reference in Parts A and B of this
Registration Statement is incorporated by reference herein. None of the
directors and principal executive officers of WCM serves, or has served in the
past two fiscal years, in such capacity for any other entity.
(d) Peregrine Capital Management, Inc., an indirect wholly-owned
subsidiary of Wells Fargo & Company, serves as sub-adviser to various Funds of
the Trust. The description of Peregrine Capital Management, Inc. ("Peregrine")
in Parts A and B of the Registration Statement, is incorporated by reference
herein. To the knowledge of the Registrant, none of the directors or executive
officers of this sub-adviser is or has been at any time during the last two
fiscal years engaged in any other business, profession, vocation or employment
of a substantial nature.
(e) Schroder Investment Management North America Inc.,
serves as sub-adviser to various Funds of the Trust. Thedescription of Schroder
Investment Management North America Inc. ("SIMNA") in Parts A and B of the
Registration Statement are incorporated by reference herein. The address is 787
Seventh Avenue, 34th Floor, New York, NY 10019. Schroder Capital Management
International Limited ("Schroder Ltd.") is a United Kingdom affiliate of SIMNA
which provides investment management services to international clients located
principally in the United States. Schroder Ltd. and Schroders p.l.c. are
located at 31 Gresham St.,London ECZV 7QA, United Kingdom. To the knowledge of
the Registrant, none of the directors or executive officers of this sub-adviser
is or has been at any time during the last two fiscal years engaged in any
other business, profession, vocation or employment of a substantial nature.
(f) Galliard Capital Management, Inc., an indirect, wholly-owned
subsidiary of Wells Fargo & Company serves as sub-adviser to various Funds of
the Trust. The descriptions of Galliard Capital Management, Inc. ("Galliard") in
Parts A and B of the Registration Statement, are incorporated by reference
herein. The address of Galliard is LaSalle Plaza, Suite 2060, 800 LaSalle
Avenue, Minneapolis, Minnesota 55479. To the knowledge of the Registrant, none
of the directors or executive officers of this sub-adviser is or has been at any
time during the last two fiscal years engaged in any other business, profession,
vocation or employment of a substantial nature.
(g) Smith Asset Management, L.P., an indirect, partially-owned
subsidiary of Wells Fargo & Company serves as sub-adviser to various Funds of
the Trust. The descriptions of Smith Asset Management, L.P. ("Smith") in Parts A
and B, of the Registration Statement, are incorporated by reference herein. The
address of Smith is 300 Crescent Court, Suite 750, Dallas, Texas 75201. To the
knowledge of the Registrant, none of the directors or executive officers of this
sub-adviser is or has been at any time during the last two fiscal years engaged
in any other business, profession, vocation or employment of a substantial
nature.
Item 27. Principal Underwriters.
----------------------
(a) Stephens Inc. ("Stephens"), distributor for the
Registrant, does not presently act as investment adviser for any other
registered investment companies, but does act as principal underwriter for
Barclays Global Funds Inc., Nations Fund, Inc., Nations Fund Trust, Nations
Fund Portfolios, Inc., Nations LifeGoal Funds, Inc. and Nations Institutional
Reserves, and Wells Fargo Variable Trust, Wells Fargo Core Trust and Wells
Fargo Funds Trust and is the exclusive placement agent for Master Investment
Portfolio, all of which are registered open-end management investment companies.
(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV and Schedules A
and D thereto, filed by Stephens with the Securities and Exchange Commission
pursuant to the Investment Advisers Act of 1940 (file No. 501-15510).
(c) Not applicable.
Item 28. Location of Accounts and Records.
--------------------------------
(a) The Registrant maintains accounts, books and other
documents required by Section 31(a) of the Investment Company Act of 1940 and
the rules thereunder (collectively, "Records") at the offices of Stephens Inc.,
111 Center Street, Little Rock,Arkansas 72201.
(b) Wells Fargo Bank maintains all Records relating to its
services as investment adviser and administrator at 525 Market Street, San
Francisco, California 94105.
(c) BGFA and BGI maintain all Records relating to their services
as sub-adviser and custodian, respectively, at 45 Fremont Street, San Francisco,
California 94105.
(d) Stephens maintains all Records relating to its
services as distributor at 111 Center Street, Little Rock, Arkansas 72201.
(e) Norwest Bank Minnesota, N.A. maintains all Records
relating to its services as custodian at 6th & Marquette, Minneapolis,
Minnesota 55479-0040.
(f) Wells Capital Management Incorporated maintains all Records
relating to its services as investment sub-adviser at 525 Market Street, San
Francisco, California 94105.
(g) Peregrine Capital Management, Inc. maintains all
Records relating to its services as investment sub-adviser at 800 LaSalle Avenue
, Minneapolis, Minnesota 55479.
(h) Galliard Capital Management, Inc. ("Galliard")
maintains all Records relating to its services as investment sub-adviser at 800
LaSalle Avenue, Suite 2060, Minneapolis, Minnesota 55479.
(i) Smith Asset Management Group, LP maintains all Records
relating to its services as investment sub-adviser at 500 Crescent Court, Suite
250, Dallas, Texas 75201.
(j) Schroder Investment Management North America Inc.
maintains all Records relating to its services as investment sub-adviser at 787
Seventh Avenue, New York, New York 10019.
Item 29. Management Services.
-------------------
Other than as set forth under the captions "Organization and
Management of the Funds"" in the Prospectus constituting Part A of this
Registration Statement and "Management" in the Statement of Additional
Information constituting Part B of this Registration Statement, the Registrant
is not a party to any management-related service contract.
Item 30. Undertakings. Not applicable.
------------
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement on Form N-1A pursuant to Rule 485(b) under the Securities Act of 1933,
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized in the City of San
Francisco, State of California on the 11th day of September, 2000.
WELLS FARGO FUNDS TRUST
By: /s/ Dorothy A. Peters
--------------------------------------------
Dorothy A. Peters
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 12 to its Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date
indicated:
Signature Title Date
* Trustee
Robert C. Brown
* Trustee
Donald H. Burkhardt
* Trustee
Jack S. Euphrat
* Trustee
Thomas S. Goho
* Trustee
Peter G. Gordon
* Trustee
W. Rodney Hughes
* Trustee
Richard M. Leach
* Trustee
J. Tucker Morse
* Trustee
Timothy J. Penny
* Trustee
------------------------------------
Donald C. Willeke 09/11/2000
*By: /s/ Dorothy A. Peters
-------------------------------
Dorothy A. Peters
As Attorney-in-Fact
September 11, 2000
<PAGE>
WELLS FARGO FUNDS TRUST
FILE NOS. 333-74295; 811-09253
EXHIBIT INDEX
Exhibit Number Description
EX-99.B(i) Opinion and Consent of Counsel
EX-99.B(j) Consent of Independent Auditors
<PAGE>
[GRAPHIC OMITTED][GRAPHIC OMITTED]
September 11, 2000
Wells Fargo Funds Trust
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Beneficial Interest of
Wells Fargo Funds Trust
Ladies/Gentlemen:
We refer to the Registration Statement on Form N-1A (SEC File Nos.
333-74295 and 811-09253) (the "Registration Statement") of Wells Fargo Funds
Trust (the "Trust") relating to the registration of an indefinite number of
shares of beneficial interest of the Trust (collectively, the "Shares").
We have been requested by the Trust to furnish this opinion as
Exhibit (i) to the Registration Statement.
We have examined documents relating to the organization of the
Trust and its series and the authorization and issuance of Shares of its series.
Based upon and subject to the foregoing, we are of the opinion
that:
The issuance and sale of the Shares by the Trust has been duly and
validly authorized by all appropriate action of the trust, and assuming delivery
by sale or in accord with the Trust's dividend reinvestment plan in accordance
with the description set forth in the Funds' current prospectuses under the
Securities Act of 1933, as amended, the Shares will be legally issued, fully
paid and nonassessable by the Trust.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
reference to the description of advice rendered by our firm under the heading
"Counsel" in the Statement of Additional Information, which is included as part
of the Registration Statement.
Very truly yours,
/s/ Morrison & Foerster LLP
MORRISON & FOERSTER LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 14 to Registration Statement (No. 333-74295) under the Securities Act of
1933 and Amendment No. 15 to Registration Statement (No. 811-09253) of the
Securities Act of 1940 on behalf of The Wells Fargo Nebraska Tax-Free Fund of
our reports dated October 20, 1999, relating to the Great Plains Tax-Free Bond
Fund, incorporated by reference in the Statement of Additional Information,
which is part of such Registration Statement, and to the reference to us under
the heading "Financial Highlights", appearing in the Prospectus, which is also a
part of such Registration Statement.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Boston, Massachusetts
September 8, 2000
