<PAGE>
As filed with the Securities and Exchange Commission
on March 11, 1999
Registration No. 333-_____; 811-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [_]
Post-Effective Amendment No. ___ [_]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. __ [_]
________________________
WELLS FARGO VARIABLE TRUST
(Exact Name of Registrant as specified in Certificate of Trust)
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):
[_] 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.
Pursuant to Regulation 270.24f-2 under the Investment Company Act of 1940, the
Registrant hereby elects to register an indefinite number of units of its
beneficial interests.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
WELLS FARGO VARIABLE 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
4 See Individual Fund Summaries
Objectives and Principal Strategies
General Investment Risks
5 Not Applicable
6 Organization and Management of the Funds
7 Investing in the Funds
Pricing Fund Shares
8 Dividends and Distributions
9 See Individual Fund Summaries
Part B Statement of Additional Information Captions
- ------ --------------------------------------------
10 Cover Page and Table of Contents
11 Historical Fund Information
12 Investment Restrictions
Additional Permitted 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>
May 25, 1999
FRONT COVER
WELLS FARGO VARIABLE TRUST
PROSPECTUS
Corporate Bond Fund Please read this prospectus and keep it for
future reference. It is designed to provide you
Large Company with important information and to help you
Growth Fund decide if a Fund's goals match your own.
Small Cap Fund
THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE 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 OF WELLS
FARGO BANK, N.A. ("WELLS FARGO BANK") OR
ANY OF ITS AFFILIATES. FUND SHARES ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION ("FDIC")
OR ANY OTHER GOVERNMENT AGENCY. AN
INVESTMENT IN A FUND INVOLVES CERTAIN
RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
<PAGE>
INSIDE FRONT COVER
TABLE OF CONTENTS
OVERVIEW
This section contains important OBJECTIVES AND PRINCIPAL STRATEGIES
summary information about the IMPORTANT RISKS
Funds.
- --------------------------------------------------------------------------------
THE FUNDS
CORPORATE BOND FUND
LARGE COMPANY GROWTH FUND
This section contains important SMALL CAP FUND
information about the individual
Funds.
GENERAL INVESTMENT RISKS
ORGANIZATION AND MANAGEMENT
OF THE FUNDS
- --------------------------------------------------------------------------------
YOUR INVESTMENT
Turn to this section for information INVESTING IN THE FUNDS
on your investments including OTHER INFORMATION
how to buy and sell Fund shares.
- --------------------------------------------------------------------------------
GLOSSARY
2
<PAGE>
WELLS FARGO VARIABLE TRUST
FUNDS OVERVIEW
<TABLE>
<CAPTION>
FUND OBJECTIVE PRINCIPAL STRATEGY
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<S> <C> <C>
CORPORATE BOND Seeks a high level of current income, We invest in corporate debt securities of any maturity with attractive
FUND consistent with reasonable risk. yields based on current economic conditions. We generally maintain an
average portfolio maturity of 10-15 years.
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LARGE COMPANY Seeks long-term capital appreciation. We invest in common stocks of large, high-quality domestic companies
GROWTH FUND that we believe possess superior growth potential.
- ------------------------------------------------------------------------------------------------------------------------------------
SMALL CAP FUND Seeks long-term capital appreciation. We invest in equity securities of domestic and foreign companies whose
market capitalization falls within the range of the Russell 2000
Index, which is considered a small capitalization index. We buy
stocks that we believe have above-average prospects for capital
growth, or that may be involved in new or innovative products,
services and processes.
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</TABLE>
3
<PAGE>
IMPORTANT RISKS
This section summarizes important risks that are common to all of the Funds
described in this Prospectus, and important risks that relate specifically to
particular Funds. Both are important to your investment choice. Additional
information about these and other risks is included in the individual Fund
Descriptions later in this Prospectus and under General Investment Risks
beginning on page __. An investment in a 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.
- --------------------------------------------------------------------------------
COMMON RISKS FOR THE FUNDS
- --------------------------------------------------------------------------------
EQUITY SECURITIES. The Equity and Allocation Funds invest in equity securities,
which are subject to equity market risk. This is the risk that stock prices will
fluctuate and can decline and reduce the value of a Fund's portfolio. Certain
types of stock and certain individual stocks selected for a Fund's portfolio may
underperform or decline in value more than the overall market. As of the date of
this Prospectus, the equity markets, as measured by the S&P 500 Index and other
commonly used indexes, are trading at or close to record levels. There can be no
guarantee that these levels will continue. The Funds that invest in smaller
companies, in foreign companies (including investments made through American
Depositary Receipts and similar instruments), and in emerging markets are
subject to additional risks, including less liquidity and greater price
volatility. A Fund's investments in foreign companies and emerging markets are
also subject to special risks associated with international investing, including
currency, political, regulatory and diplomatic risks.
DEBT SECURITIES. The Corporate Bond 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 a securities 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 securities 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
securities held in a Fund, unless the securities 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 securities, such as
asset-backed securities, thereby affecting their value and the return on your
investment. The equity funds may invest some of their assets in debt securities.
- --------------------------------------------------------------------------------
FUND SPECIFIC RISKS
- --------------------------------------------------------------------------------
CORPORATE BOND This Fund may invest in securities regardless of their
FUND rating, or in securities that are unrated or are in
default at the time of purchase. This Fund is subject
to the debt securities risks described in the Common
Risks section above.
- --------------------------------------------------------------------------------
LARGE COMPANY This Fund is primarily subject to the equity
GROWTH FUND securities risks described in the Common Risks section
above.
- --------------------------------------------------------------------------------
SMALL CAP FUND This Fund may invest in companies that pay low or no
dividends, have smaller market capitalizations, have
less market liquidity, have no or relatively short
operating histories, or are newly public companies.
Some of these companies have aggressive capital
structures, including high debt levels, or are
involved in rapidly growing or changing industries
and/or new technologies. Because the Fund may invest
in such aggressive securities, share prices may rise
and fall more than the share prices of other funds. In
addition, our active trading investment strategy may
result in a higher-than-average portfolio turnover
ratio, increased trading expenses, and higher short-
term capital gains.
- --------------------------------------------------------------------------------
4
<PAGE>
The summary information on the previous pages is designed to provide you with an
overview of each Fund. The sections that follow provide more detailed
information about the investments and management of each Fund.
Important information you should look for:
Investment Objective and Investment Policies
What is the Fund trying to achieve? How do we intend to invest your money?
What makes a Fund different from the other Funds offered in this Prospectus?
Permitted Investments
A summary of the Fund's key permitted investments and practices.
Important Risk Factors
What are key risk factors for the Fund? They include the factors described in
"General Investment Risks" together with any special risk factors for each Fund.
WORDS APPEARING IN ITALICIZED PRINT AND HIGHLIGHTED IN COLOR ARE DEFINED IN THE
GLOSSARY.
5
<PAGE>
CORPORATE BOND FUND
INVESTMENT OBJECTIVE
The Corporate Bond Fund seeks a high level of current income, consistent with
reasonable risk.
INVESTMENT POLICIES
We seek a high rate of current income by actively managing a diversified
portfolio consisting primarily of corporate debt securities. When purchasing
these securities we consider, among other things, the yield differences for
various corporate sectors, and the current economic cycle's potential effect on
the various types of bonds. We may invest in securities of any maturity. Under
normal market conditions, we expect to maintain a dollar-weighted average
maturity for portfolio securities of between 10 and 15 years. We also may invest
in U.S. Government obligations.
PERMITTED INVESTMENTS
Under normal market conditions, we invest:
. at least 65% of our total assets in corporate debt securities;
. in U.S. Government obligations;
. up to 25% of our total assets in debt securities that are below investment-
grade; and
. up to 25% of our total assets in securities of foreign issuers.
IMPORTANT RISK FACTORS
We may invest in securities regardless of their rating, or in securities that
are unrated or are in default at the time of purchase.
You should consider the Common Risks on page __, the General Investment Risks
beginning on page __ and the specific risks listed here. They are all important
to your investment choice.
PORTFOLIO MANAGERS
. N. GRAHAM ALLEN, FCMA
MANAGING DIRECTOR OF GLOBAL FIXED INCOME INVESTING
Will manage the Corporate Bond Fund upon inception. Mr. Allen has been with
Wells Capital Management, Inc. ("WCM") since January 1998. Before joining
WCM, Mr. Allen managed international fixed-income portfolios for Bradford &
Marzec, Inc. for ten years. He has over thirteen years of investment
management experience.
. JOHN W. (JACK) BURGESS
Will co-manage the Corporate Bond Fund upon inception. Mr. Burgess has been a
portfolio manager with WCM since January 1998, and was an independent
financial advisor from 1995 until joining the firm. Before that, he managed
equity and fixed-income portfolios for Aurora National Life Assurance Company
and related entities since 1988. Mr. Burgess has over ten years of investment
management experience.
. JACQUELINE A. FLIPPIN
PRINCIPAL
Will co-manage the Corporate Bond Fund upon inception, and has been with WCM
since January 1998. Before joining the firm, Ms. Flippin was a short-term
debt securities trader and portfolio manager for McMorgan & Company since
[19__.] Ms. Flippin has over ten years of investment management experience.
. DAVID KOKOSKA, CFA
PRINCIPAL
Will co-manage the Corporate Bond Fund upon inception, and has been with
Wells Fargo since January 1998. Before joining WCM, Mr. Kokoska co-managed
international fixed-income portfolios for Bradford & Marzec, Inc. since 1993.
Mr. Kokoska has over [___] years of investment management experience.
. SCOTT SMITH, CFA
PRINCIPAL
Will co-manage the Corporate Bond Fund upon inception, and has been with
Wells Fargo/WCM since 1987, specializing in corporate and mortgage-backed
securities investments. Mr. Smith has over eleven years of investment
management experience.
6
<PAGE>
LARGE COMPANY GROWTH FUND
INVESTMENT OBJECTIVE
The Large Company Growth Fund seeks long-term capital appreciation.
INVESTMENT POLICIES
We invest primarily in common stocks of large, high-quality domestic companies
that have superior growth potential. We look for companies that are attractively
valued with fundamental characteristics that we believe are significantly better
than the market average and support internal earnings growth capability. We may
also invest in the securities of companies whose growth potential we believe is
generally unrecognized or misperceived by the market.
PERMITTED INVESTMENTS
Under normal market conditions, we invest:
. at least 65% of our total assets in equity securities, including common and
preferred stocks, and securities convertible into common stocks;
. the majority of our total assets in issues of companies with market
capitalization that is greater than the median of the Russell 1000 Index (As
of [MARCH 31, 1999,] this median was [$____ BILLION.] The range is expected
to change frequently.); and
. up to 20% of our total assets in foreign companies [THROUGH AMERICAN
DEPOSITARY RECEIPTS AND SIMILAR INSTRUMENTS].
We will normally limit our investment in a single issuer to 10% or less of our
total assets. We may hedge against currency risk in the portfolio by using
foreign currency forward contracts.
IMPORTANT RISK FACTORS
This Fund is primarily subject to the equity market risks described in the
Common Risks section.
You should consider the Common Risks on page ___, and the General Investment
Risks beginning on page ___. They are all important to your investment choice.
PORTFOLIO MANAGERS
. JOHN S. DALE, CFA
Senior Vice President
Will manage the Large Company Growth Fund upon inception, and has been with
Peregrine Capital Management, Inc. ("Peregrine") and its affiliates since
1968. Mr. Dale has over thirty years of equity investment management
experience.
. GARY E. NUSSBAUM
Senior Vice President
Will co-manage the Large Company Growth Fund upon inception, and has been
with Peregrine and its affiliates since 1990. Mr. Nussbaum has over nine
years of investment management experience.
7
<PAGE>
SMALL CAP FUND
INVESTMENT OBJECTIVE
The Small Cap Fund seeks long-term capital appreciation.
INVESTMENT POLICIES
We actively manage a diversified portfolio of common stocks issued by companies
whose market capitalization falls within the range of the Russell 2000 Index. As
of March 31, 1999, the range was [$___ MILLION TO $____ BILLION,] but it is
expected to change frequently. We will sell the stock of any company whose
market capitalization exceeds the range of this index for sixty consecutive
days.
We invest in the common stocks of domestic and foreign companies we believe have
above-average prospects for capital growth, or that may be involved in new or
innovative products, services and processes.
PERMITTED INVESTMENTS
Under normal market conditions, we invest:
. in an actively managed, broadly diversified portfolio of growth-oriented
common stocks;
. in at least 20 common stock issues spread across multiple industry groups and
sectors of the economy;
. up to 40% of our assets in initial public offerings or recent start-ups and
newer issues;
. no more than 25% of our assets in foreign companies through American
Depositary Receipts or similar issues; and
. up to 15% of our portfolio in emerging markets.
IMPORTANT RISK FACTORS
This Fund is designed for investors willing to assume above-average risk. We may
invest in companies that:
. pay low or no dividends;
. have smaller market capitalization;
. have less market liquidity;
. have no or relatively short operating histories, or are new public companies
or are initial public offerings;
. have aggressive capital structures including high debt levels; or
. are involved in rapidly growing or changing industries and/or new
technologies.
Because we may invest in such aggressive securities, share prices may rise and
fall more than the share prices of other funds. In addition, our active trading
investment strategy may result in a higher-than-average portfolio turnover
ratio, increased trading expenses, and higher short-term capital gains.
You should consider the Common Risks on page ___, the General Investment Risks
beginning on page ___, and the specific risks listed here. They are all
important to your investment choice.
PORTFOLIO MANAGERS
. KENNETH LEE
PRINCIPAL
Will manage the Small Cap Fund upon inception, and has been with Wells
Fargo/Wells Capital Management since 1993. Mr. Lee has seven years of
experience in the investment industry, and has managed equity investment
portfolios since 1995.
. THOMAS ZEIFANG, CFA
Will co-manage the Small Cap Fund upon inception, and has been with Wells
Fargo/Wells Capital Management since 1995. Mr. Zeifang provided fundamental
security analysis for Fleet Investment Advisors for three years prior to
joining Wells Fargo. He has over five years of equity investment management
experience.
8
<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 on page ___. Other risks of mutual fund investing
include the following:
. Unlike bank deposits such as CDs or savings accounts, mutual funds are not
insured by the FDIC.
. We cannot guarantee that we will meet our investment objectives.
. We do not guarantee the performance of a 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.
. 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.
. Investing in any mutual fund, including those deemed conservative, involves
risk, including the possible loss of any money you invest.
. An investment in a single Fund, by itself, does not constitute a complete
investment plan.
. The Funds that invest in smaller companies, foreign companies (including
investments made through American Depositary Receipts and similar
instruments), and in emerging markets are subject to additional risks,
including less liquidity and greater price volatility. A Fund's investment in
foreign and emerging markets may also be subject to special risks associated
with international trade, including currency, political, regulatory and
diplomatic risk.
. The Funds may invest a portion of their assets in U.S. Government
obligations. It is important to recognize that the U.S. Government does not
guarantee the market value or current yield of those obligations. Not all
U.S. Government obligations are backed by the full faith and credit of the
U.S. Treasury, and the U.S. Government's guarantee does not extend to the
Funds themselves.
. The Large Company Growth 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.
. The Corporate Bond Fund also invests a portion of its assets in GNMAs, FNMAs
and FHLMCs. Each are mortgage-backed securities representing partial
ownership of a pool of residential mortgage loans. A "pool" or group of such
mortgages is assembled and, after being approved by the issuing entity, is
offered to invest through securities dealers. Mortgage-backed securities are
subject to prepayment risk, which can alter the maturity of the securities
and also reduce the rate of return on such investments. Collateralized
mortgage obligations ("CMOs") represent principal-only and interest-only
portions of such securities that are subject to increased interest-rate and
credit risk.
. The Corporate Bond and Large Company Growth Funds may enter into forward
currency exchange contracts ("forward contracts") to try to reduce currency
exchange risks to the Funds from foreign securities investments. A forward
contract is an obligation to buy or sell a specific currency for an agreed
price at a future date which is individually negotiated and privately traded
by currency traders and their customers.
. The market value of lower-rated, debt securities and unrated securities of
comparable quality that the Corporate Bond Fund may invest in tends to
reflect individual developments affecting the issuer to a greater extent than
the market value of higher-rated securities, which react primarily to
fluctuations in the general level of interest rates. Lower-rated securities
also tend to be more sensitive to economic conditions than higher-rated
securities. These lower-rated debt securities are considered by the rating
agencies, on balance, to be predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation and generally involve more credit risk than
securities in higher-rating categories. Even securities rate "BBB" by S&P or
by Moody's ratings which are considered investment-grade, possess some
speculative characteristics.
9
<PAGE>
GENERAL INVESTMENT RISKS (CONT'D)
Investment practices and risk levels are carefully monitored. Every attempt is
made to ensure that the risk exposure for each Fund remains within the
parameters of its objective.
What follows is a general list of the types of risks (some of which are
described above) that may apply to a given Fund and a table showing some of the
additional investment practices that each 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.
DIPLOMATIC RISK--The risk that an adverse change in the diplomatic relations
between the United States and another country might reduce the value of
liquidity of investments in either country.
EMERGING MARKET RISK--The risk that the emerging market, as defined in the
glossary, may be more sensitive to certain economic changes. For example,
emerging market countries are often dependent on international trade and are
therefore often vulnerable to recessions in other countries. They may have
obsolete financial systems, have volatile currencies and may be more sensitive
than more mature markets to a variety of economic factors. Emerging market
securities may also be less liquid than securities of more developed countries
and could be difficult to sell, particularly during a market downturn.
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 maturities.
LEVERAGE RISK--The risk that an investment practice, such as lending portfolio
securities, may increase a Fund's exposure to market risk, interest rate risk or
other risks by, in effect, increasing assets available for investment.
LIQUIDITY RISK--The risk that a security cannot be sold, 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 prepay mortgage loans, which can
alter the maturity of a mortgage-backed security, increase interest-rate risk,
and reduce rates of 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.
YEAR 2000 RISK--The Funds' principal service providers have advised the Funds
that they are working on the necessary changes to their computer systems to
avoid any system failure based on an inability to distinguish the year 2000 from
the year 1900, and that they expect their systems to be adapted in time. There
can, of course, be no assurance of success. In addition, the companies or
entities in which the Funds invest also could be adversely impacted by the Year
2000 issue. The extent of such impact cannot be predicted.
10
<PAGE>
GENERAL INVESTMENT RISKS (CONT'D)
INVESTMENT PRACTICE/RISK
The following table lists some of the additional investment practices of the
Funds, including some not disclosed in the Investment Objective and Investment
Policies 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 Policies for each Fund or the Statement of
Additional Information for more information on these practices.
THESE INVESTMENT PRACTICES AND RISKS ARE COMMON TO ALL THE FUNDS:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
INVESTMENT PRACTICE RISK
<S> <C>
- -------------------------------------------------------------------------------------
FLOATING AND VARIABLE RATE DEBT
Instruments with interest rates that are adjusted either Interest Rate and
on a schedule or when an index or benchmark changes. Credit Risk
- -------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A transaction in which the seller of a security agrees to Credit and
buy back a security at an agreed upon time and price, Counter-Party Risk
usually with interest.
- -------------------------------------------------------------------------------------
OTHER MUTUAL FUNDS
The temporary investment in shares of another mutual Market Risk
fund. A pro rata portion of the other fund's expenses,
in addition to the expenses paid by the Funds, will be
borne by Fund shareholders.
- -------------------------------------------------------------------------------------
FOREIGN SECURITIES
Securities issued by a non-U.S. company or debt of a Information, Political,
foreign government in the form of an American Regulatory, Diplomatic,
Depositary Receipt or similar instrument. Liquidity and Currency
Risk
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
INVESTMENT PRACTICE RISK
<S> <C>
- ----------------------------------------------------------------------------------------------
PRIVATELY ISSUED SECURITIES
Securities that are not publicly traded but which may be Liquidity Risk
resold in accordance with Rule 144A of the Securities
Act of 1933.
- ----------------------------------------------------------------------------------------------
LOANS OF PORTFOLIO SECURITIES
The practice of loaning securities to brokers, dealers and Credit, Counter-Party
financial institutions to increase return on those and Leverage Risk
securities. Loans may be made up to 1940 Act limits
(currently 33 1/3% of total assets).
- ----------------------------------------------------------------------------------------------
BORROWING POLICIES
The ability to borrow from banks for temporary purposes to meet Leverage Risk
shareholder redemptions.
- ----------------------------------------------------------------------------------------------
ILLIQUID SECURITIES Liquidity Risk
A security that cannot be readily sold, or cannot be
readily sold without negatively affecting its fair
price. Limited to 15% of total assets (10% for money market funds).
- ----------------------------------------------------------------------------------------------
</TABLE>
THESE INVESTMENT PRACTICES AND RISKS ARE COMMON TO THE LARGE COMPANY
GROWTH AND SMALL CAP FUNDS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
INVESTMENT PRACTICE RISK
<S> <C>
- ------------------------------------------------------------------------------------
OPTIONS
The right or obligation to receive or deliver a Credit, Information and
security or cash payment depending on the security's Liquidity Risk
price or the performance of an index or benchmark.
Types of options used may include: options on
securities, options on a stock index, stock index
futures and options on stock index futures to protect
liquidity and portfolio value.
- ------------------------------------------------------------------------------------
EMERGING MARKETS
Investments in companies located or operating in
countries considered developing or to have "emerging"
stock markets. Generally, these investments have the
same type of risks as foreign securities, but to a higher
degree. Limited to [15%] of total assets for all Funds.
- ------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
GENERAL INVESTMENT RISKS (CONT'D)
<TABLE>
<CAPTION>
THESE INVESTMENT PRACTICES AND RISKS ARE COMMON TO THE CORPORATE BOND FUND:
- -------------------------------------------------------------------------------------
<S> <C>
INVESTMENT PRACTICE RISK
- -------------------------------------------------------------------------------------
FORWARDING COMMITMENTS, WHEN-ISSUED SECURITIES
DELAYED DELIVERY TRANSACTIONS Interest Rate,
Securities bought or sold for delivery at a later date or Leverage, Credit and
bought or sold for a fixed price at a fixed date. Experience Risk
- -------------------------------------------------------------------------------------
MORTGAGE- AND ASSET-BACKED SECURITIES
Securities consisting of an undivided fractional Interest Rate, Credit,
interests in pools of consumer loans, such as mortgage Prepayment and
loans, loans, car credit card debt, or receivables Experience Risk
held in trust.
- -------------------------------------------------------------------------------------
HIGH YIELD SECURITIES
Debt securities of lower quality that produce generally Interest Rate and
higher rates of return. These securities tend to be Credit Risk
more sensitive to economic conditions and during
sustained periods of rising interest rates, may
experience increased interest and/or principal defaults.
- -------------------------------------------------------------------------------------
STRIPPED OBLIGATIONS
Securities that give ownership to either future Interest Rate Risk
payments of interest or a future payment of
principal, but not both. These securities tend to have
greater interest rate sensitivity than conventional debt
obligations. Each Fund may invest up to [20%] of
assets in interest-only or principal-only obligations, or
a combination thereof.
- -------------------------------------------------------------------------------------
LOAN PARTICIPATIONS
Debt obligations that represent a portion of a larger Credit Risk
loan made by a bank. Generally sold without
guarantee or recourse, some participations sell at
a discount because of the borrower's credit problems.
Limited to [5%] of total assets.
- -------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
ORGANIZATION AND MANAGEMENT OF THE FUNDS
A number of different entities provide services to the Funds. This section shows
how the Funds are organized, the entities that perform different services, and
how they are compensated. Further information is available in the Statement of
Additional Information for the Funds.
ABOUT WELLS FARGO VARIABLE TRUST
Wells Fargo Variable Trust (the "Trust") was organized as a Delaware business
trust on March 10, 1999. The Board of Trustees of the Trust supervises each
Fund's activities, monitors its contractual arrangements with various service
providers and decides upon matters of general policy.
The Funds are available for purchase through certain variable annuity contracts
("VA Contracts") and variable life insurance policies ("VLI Policies") offered
by the separate accounts of Participating Insurance Companies. Individual
holders of VA Contracts and VLI Policies are not the "shareholders" of or
"investors" in the Funds. Rather, the Participating Insurance Companies and
their separate accounts are the shareholders or investors, although such
companies will pass through voting rights to the holders of VA Contracts and VLI
Policies. The Trust currently does not foresee any disadvantages to the holders
of VA Contracts and VLI Policies arising from the fact that the interests of the
holders of VA Contracts and VLI Policies arising from the fact that the
interests of the holders of VA Contracts and VLI Policies may differ.
Nevertheless, the Trust's Board of Trustees intends to monitor events in order
to identify any conflicts which may arise and to determine what action, if any,
should be taken in response to such conflicts. The VA Contracts and VLI Policies
are described in the separate prospectuses issued by the Participating Insurance
Companies. The Trust assumes no responsibility for such prospectuses.
In the following sections, the percentages shown are the percentages of the
average daily net assets of each Fund class paid on an annual basis for the
services described.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SHAREHOLDERS
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
FINANCIAL SERVICES FIRMS AND SELLING AGENTS
- ----------------------------------------------------------------------------------------------
Advise current and prospective shareholders on their Fund investments
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
SHAREHOLDER
TRANSFER SERVICING
DISTRIBUTOR ADMINISTRATOR FOR AGENT AGENTS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stephens Inc. Wells Fargo Bank, N.A. BFDS Various Agents
111 Center St. 525 Market St. Two Heritage Drive
Little Rock, AR San Francisco,CA Quincy, MA
Markets the Funds, Manages the Maintains records Provide
distributes shares, and Funds' business of shares and services to
manages the Funds' activities supervises the customers
business activities paying of dividends
- ----------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------
INVESTMENT SUB-ADVISORS
- ----------------------------------------------------------------------------------------------
<S> <C>
Wells Capital Management, Inc. Peregrine Capital Management, Inc.
525 Market Street 800 LaSalle Avenue, Suite 1850
San Francisco, CA Minneapolis, MN
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
INVESTMENT ADVISOR CUSTODIAN
- ----------------------------------------------------------------------------------------------
Wells Fargo Bank, N.A. Norwest Bank Minnesota, N.A.
525 Market St., San Francisco, CA 6th St. & Marquette, Minneapolis, MN
Manages the Funds' investment Provides safekeeping for the Funds'
activities assets
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
BOARD OF TRUSTEES
- ----------------------------------------------------------------------------------------------
Supervises the Funds' activities
- ----------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
ORGANIZATION AND MANAGEMENT OF THE FUNDS (CONT'D)
THE INVESTMENT ADVISOR
Wells Fargo Bank provides portfolio management and fundamental security analysis
services as the advisor for each of the Funds. 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, 1999,
Wells Fargo Bank and its affiliates provided advisory services for over [$63]
billion in assets.
For providing these services, Wells Fargo Bank is entitled to receive the
following fees:
- ---------------------------------------------------------------------------
Corporate Bond Fund .80
- ---------------------------------------------------------------------------
Large Company Growth Fund .75
- ---------------------------------------------------------------------------
Small Cap Fund .90
- ---------------------------------------------------------------------------
THE SUB-ADVISORS
Wells Capital Management ("WCM"), a wholly owned subsidiary of Wells Fargo Bank
N.A., is the sub-advisor for the Corporate Bond and Small Cap Funds. In this
capacity, it is responsible for the day-to-day investment management activities
of the Funds. As of March 31, 1999, WCM provided advisory services for over
[$32] billion in assets.
Peregrine Capital Management, Inc., a wholly owned subsidiary of Norwest Bank
Minnesota, N.A., is the sub-advisor for the Large Company Growth Fund. As of
April 1, 1999, Peregrine provided investment advisory services for approximately
[$52.9] billion in assets.
THE ADMINISTRATOR
Wells Fargo Bank provides the Funds with administrative services, including
general supervision of each Fund's operation, coordination of the other services
provided to each Fund, compilation of information for reports to the SEC and
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 each Fund's
business. For providing these services, Wells Fargo Bank is entitled to receive
a fee of .15% of the average annual net assets of each Fund.
SHAREHOLDER SERVICING PLAN
We have a shareholder servicing plan for each 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 each Fund pays shareholder servicing agents as follows:
- ---------------------------------------------------------------------------
FUND
- ---------------------------------------------------------------------------
Corporate Bond Fund .25%
- ---------------------------------------------------------------------------
Large Company Growth Fund .25%
- ---------------------------------------------------------------------------
Small Cap Fund .25%
- ---------------------------------------------------------------------------
14
<PAGE>
ORGANIZATION AND MANAGEMENT OF THE FUNDS (CONT'D)
THE DISTRIBUTOR
Stephens, as the principal underwriter of the Funds within the meaning of the
1940 Act, has entered into a Distribution Agreement with the Trust pursuant to
which Stephens has the responsibility for distributing shares of the Funds.
Stephens, as distributor of each Fund's shares, or the Participating Insurance
Companies that offer VA Contracts and VLI Policies that are funded by the Funds,
bears all of the Funds' marketing expenses. These expenses include the cost of
printing prospectuses, statements of additional information and other
sales-related materials.
INVESTING IN THE FUNDS
The Funds are available for purchase through certain VA Contracts and VLI
Policies offered by the separate accounts of Participating Insurance Companies.
The separate accounts of the Participating Insurance Companies place orders to
purchase and redeem shares of each Fund based on, among other things, the amount
of premium payments to be invested and the amount of surrender and transfer
requests (as defined in the prospectuses describing the VA Contracts and VLI
Policies issued by the Participating Insurance Companies) to be effected on that
day pursuant to VA Contracts and VLI policies. Please refer to the prospectus
provided by your selling agent for more detailed information describing the
separate accounts.
The Trust does not assess any fees, either when it sells or when it redeems its
shares. Surrender charges, mortality and expense risk fees and other charges may
be assessed by Participating Insurance Companies under the VA Contracts or VLI
Policies. These fees and charges are described in the Participating Insurance
Companies' prospectuses.
Should any conflict between VA Contract and VLI Policy holders arise which would
require that a substantial amount of net assets be withdrawn from a Fund of the
Trust, orderly portfolio management could be disrupted to the potential
detriment of the VA Contract and VLI Policy holders.
DIVIDENDS AND DISTRIBUTIONS
Each Fund is treated separately in determining the amounts of dividends of net
investment income and distributions of capital gains payable to its
shareholders. Dividends and distributions are automatically reinvested on the
payment date for each shareholder's account in additional shares of the Fund
that paid the dividend or distribution at NAV or are paid in cash at the
election of the Participating Insurance Company.
The Funds in this Prospectus pay dividends, if any, periodically, and make any
capital gains distributions annually. The Corporate Bond Fund pays any dividends
monthly, the Large Company Growth Fund pays any dividends quarterly, and the
Small Cap Fund pays any dividends annually. Participating Insurance Companies
will be informed by January 31 about the amount and character of dividends and
distributions.
TAXES
The following discussion regarding taxes is based on tax laws which were in
effect as of the date of this Prospectus and summarizes only some of the
important tax considerations generally affecting a Fund and Participating
Insurance Companies as its shareholders. You should consult your own tax advisor
and refer to the prospectus provided by your selling agent to determine your tax
consequences of your investment in a VA Contract or VLI Policy. Further federal
income tax considerations are discussed in the SAI.
We will pass on to Participating Insurance Companies net investment income and
any net short-term capital gain (generally, the excess of net short-term capital
gains over net long-term capital losses) earned by a Fund as dividend
distributions taxable to them as ordinary income. We will pass on to
Participating Insurance Companies any net capital gain (generally, the excess of
net long-term capital gains over net short-term capital losses) earned by a Fund
as capital gain distributions. In general, these distributions will be taxable
to them as long-term capital gain.
In general, all distributions from a Fund are taxable to Participating Insurance
Companies when paid, even though such distributions are automatically reinvested
in additional Fund shares. However, distributions declared in October, November
and December of one year and distributed in January of the following year will
be taxable as if they were paid on December 31 of the first year. At the end of
each year, Participating Insurance Companies will be notified as to the federal
income tax status of your distributions from a Fund during the year.
Redemptions (including redemptions in-kind) and exchanges of Fund shares 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 exchanges) and
the amount paid (or are deemed to have paid) for them.
PRICING FUND SHARES:
. 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.
. We determine the Net Asset Value ("NAV") of each class of the Funds'
shares each business day as of the close of regular trading on the NYSE. We
determine the NAV by subtracting the Fund class' liabilities from its total
assets, and then dividing the result by the total number of outstanding
shares of that class. Each Fund's assets are generally valued at current
market prices. See the Statement of Additional Information for further
disclosure.
. We process requests to buy or sell shares each business day as of the
close of regular trading on the New York Stock Exchange ("NYSE"), which is
usually 1:00 p.m. (Pacific time)/3:00 p.m. (Central time). Any request we
receive in proper form before the close of regular trading on the NYSE is
processed the same day. Requests we receive after the close are processed
the next business day.
. The Funds are 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.
15
<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.
AMERICAN DEPOSITARY RECEIPTS ("ADRS")
Receipts for non-U.S. company stocks. The stocks underlying ADRs are typically
held in bank vaults. The ADR's owner is entitled to any capital gains or
dividends. ADRs are one way of owning an equity interest in foreign companies.
ANNUAL AND SEMI-ANNUAL REPORT
A document that provides certain financial and other important information for
the most recent reporting period and each Fund's portfolio of investments.
ASSET-BACKED SECURITIES
Securities consisting of an undivided fractional interest in pools of consumer
loans, such as car loans or credit card debt, or receivables held in trust.
BELOW INVESTMENT-GRADE
Securities rated BBB or lower by S&P or Baa or lower by Moody's Investor
Services, or that may be unrated securities or securities considered to be "high
risk."
BUSINESS DAY
Any day the New York Stock Exchange is open is a business day for the Funds.
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.
CURRENT INCOME
Earnings in the form of dividends or interest as opposed to capital growth. See
also "total return."
DEBT SECURITIES
Generally, a promise to pay interest and repay principal by an individual or
group of individuals sold as a security. The owner of the security is entitled
to receive any such payments. Examples include bonds and mortgage-backed
securities and can include securities in which the right to receive interest and
principal repayment have been sold separately.
DERIVATIVES
Securities whose values are derived in part from the value of another security
or index. An example is a stock option.
DISTRIBUTIONS
Dividends and/or capital gains paid by a Fund on its shares.
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 Funds' total assets.
DOLLAR-DENOMINATED
Securities issued by foreign banks, companies or governments in U.S. dollars.
DURATION
A measure of a security's or portfolio's sensitivity to changes in interest
rates. Duration is usually expressed in years, with longer durations typically
more sensitive to interest rate changes than shorter durations.
16
<PAGE>
GLOSSARY (CONT'D)
EMERGING MARKETS
Markets associated with a country that is considered by international financial
organizations, such as the International Finance Corporation and the
International Bank for Reconstruction and Development, and the international
financial community to have an "emerging" stock market. Such markets may be
under-capitalized, have less-developed legal and financial systems or may have
less stable currencies than markets in the developed world.
FDIC
The Federal Deposit Insurance Corporation. This is the company that provides
federally sponsored insurance covering bank deposits such as savings accounts
and CDs. Mutual funds are not FDIC insured.
FHLMC
FHLMC securities are commonly known as "Freddie Mac" and are issued by the
Federal Home Loan Mortgage Corporation.
FNMA
FNMA securities are known as "Fannie Maes" are issued by the Federal National
Mortgage Association, and FHLMC securities as "Freddie Mac" and are issued by
the Federal Home Loan Mortgage Corporation.
GNMA
GNMA securities are commonly known as "Ginnie Maes" and are issued by the
Government National Mortgage Association.
HEDGE
Strategy used to offset investment risk. A perfect hedge is one eliminating the
possibility of future gain or loss.
ILLIQUID SECURITY
A security which cannot be readily sold, or cannot be readily sold without
negatively affecting its fair price.
INITIAL PUBLIC OFFERING
The first time a company's stock is offered for sale to the public.
INVESTMENT-GRADE DEBT
A type of bond rated in the top four investment categories by a nationally
recognized ratings organization. Generally these are bonds whose issuers are
considered to have a strong ability to pay interest and repay principal,
although some investment-grade bonds may have some speculative characteristics.
LIQUIDITY
The ability to readily sell a security at a fair price.
MOODY'S
A nationally recognized ratings organization.
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. The NAV is calculated separately for each class
of the Fund, and is determined as of the close of regular trading on each
business day the NYSE is open, typically 1:00 P.M. (Pacific time)/3:00 p.m.
(Central time).
OPTIONS
An option is the right to buy or sell a security based on an agreed upon price
for 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.
PRESERVATION OF CAPITAL
The attempt by a fund's manager to reduce drops in the net asset value of fund
shares in order to preserve the initial investment.
PRINCIPAL STABILITY
The degree to which share prices for a fund remain steady. Money market funds
attempt to achieve the highest degree of principal stability by maintaining a
$1.00 per share net asset value. More aggressive funds may not consider
principal stability an objective.
PUBLIC OFFERING PRICE (POP)
The NAV with the sales load added.
PRICE-TO-EARNINGS RATIO
The ratio between a stock's price and its historical, current or anticipated
earnings. Low ratios typically indicate a high yield. High ratios are
characteristic of growth stocks which generally have low current yields.
17
<PAGE>
GLOSSARY (CONT'D)
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.
RUSSELL 1000 INDEX
An index comprised of 1000 largest firms listed on the Russell 3000 Index. The
Russell 3000 Index is a listing of 3000 corporations by the Frank Russell
Company that is intended to be representative of the U.S. economy. The Russell
1000 is considered a "large cap" index.
RUSSELL 2000 INDEX
An index comprised of the 2000 smallest firms listed on the Russell 3000 Index.
The Russell 3000 Index is a listing of 3000 corporations by the Frank Russell
Company that is intended to be representative of the U.S. economy. The Russell
2000 is considered a "small cap" index.
SELLING AGENT
A person who has an agreement with the Funds' distributors that allows them to
sell a 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.
S&P, S&P 500 INDEX
Standard and Poors, a nationally recognized ratings organization. S&P's also
publishes various indexes or lists of companies representative of sectors of the
U.S. economy.
STATEMENT OF ADDITIONAL INFORMATION
A document that supplements the disclosure made in the Prospectus.
STRIPPED TREASURY SECURITIES
Debt obligations in which the interest payments and the repayment of principal
are separated and sold as securities.
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 Funds.
TURNOVER RATIO
The percentage of the securities held in a Fund's portfolio, other than
short-term securities, that were bought or sold within a year.
UNDERVALUED
Describes a stock that is believed to be worth more than its current price.
U.S. GOVERNMENT OBLIGATIONS
Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
VALUE STRATEGY
A strategy of investing which tries to identify and buy undervalued stocks under
the assumption that the stock will eventually rise to its "fair market" value.
WARRANTS
The right to buy a stock at a set price for a set time.
WEIGHTED-AVERAGE MATURITY
The average maturity for the debt securities in a portfolio on a
dollar-for-dollar basis.
ZERO COUPON BONDS
Bonds that make no periodic interest payments and which are usually sold at a
discount of their face value. Zero coupon bonds are subject to interest rate and
credit risk.
18
<PAGE>
BACK COVER
WELLS FARGO VARIABLE TRUST
You may wish to review the following documents:
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.
ANNUAL/SEMI-ANNUAL REPORT
provides certain financial and other important information, including a
discussion of the market conditions and investment strategies that significantly
affected Fund performance, for the most recent reporting period.
These documents are available free of charge:
Call 1-800-[680-8920], or
Write to:
Wells Fargo Variable Trust
PO Box 7066
San Francisco, CA 94120-7066
Visit the SEC's web site:
http://www.sec.gov, or
Request copies for a fee by writing to:
SEC Public Reference Room, Washington, DC 20549-6009
(call: 1-800-SEC-0330 for details)
1
<PAGE>
WELLS FARGO VARIABLE TRUST
800-680-8920
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 25, 1999
CORPORATE BOND FUND
LARGE COMPANY GROWTH FUND
SMALL CAP FUND
Wells Fargo Variable Trust (the "Trust") is an open-end series investment
company. This Statement of Additional Information ("SAI") contains additional
information about three of the series of the Trust -- the CORPORATE BOND FUND,
LARGE COMPANY GROWTH FUND, and the SMALL CAP FUND (each, a "Fund" and
collectively, the "Funds"). The investment objective of each Fund is described
in the Prospectus.
This SAI is not a prospectus and should be read in conjunction with the Funds'
Prospectus, dated May 25, 1999. 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 without charge by calling (800) 780-7743 or by
writing to Fortis Benefits Insurance Company, P.O. Box 64272, St. Paul, MN
55164; or by calling (800) 680-8920 or by writing to American Skandia, P.O. Box
883, Shelton, Connecticut 06484-0883, Attn: Wells Fargo Variable Annuity
Administration.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Historical Fund Information............................................... 1
Investment Restrictions................................................... 2
Additional Permitted Investment Activities and Associated Risks........... 5
Management................................................................ 17
Performance Calculations.................................................. 24
Determination of Net Asset Value.......................................... 28
Additional Purchase and Redemption Information............................ 28
Portfolio Transactions.................................................... 29
Fund Expenses............................................................. 31
Federal Income Taxes...................................................... 31
Capital Stock............................................................. 35
Other..................................................................... 37
Counsel................................................................... 37
Independent Auditors...................................................... 37
Appendix.................................................................. A-1
</TABLE>
i
<PAGE>
HISTORICAL FUND INFORMATION
On March 25, 1999, the Board of Trustees of Norwest Select Funds
("Norwest"), the Board of Trustees of Life & Annuity Trust ("Annuity Trust") and
the Board of Trustees of the Trust approved an Agreement and Plan of
Reorganization providing for, among other things, the transfer of the assets and
stated liabilities of various predecessor Select and Annuity Trust portfolios to
the Funds. Prior to September 17, 1999, the effective date of the consolidation
of the Funds and the predecessor Select and Annuity Trust portfolios (the
"Consolidation"), the Funds had only nominal assets.
The CORPORATE BOND FUND will commence operations on September 17, 1999, as
successor to U.S. Government Allocation Fund of Annuity Trust and the Income
Fund of Norwest. The predecessor Annuity Trust U.S. Government Allocation Fund
commenced operations on October 27, 1993. The predecessor Norwest Income Fund
commenced operations on June 1, 1994.
The LARGE COMPANY GROWTH FUND will commence operations on September 17,
1999, as successor to the ValuGrowth Stock Fund of Norwest. The predecessor
Norwest ValuGrowth Stock Fund commenced operations on June 1, 1994.
The SMALL CAP FUND will commence operations on September 17, 1999, as
successor to the Strategic Growth Fund of Annuity Trust and the Small Company
Stock Fund of Norwest. The predecessor Annuity Trust Strategic Growth Fund
commenced operations on May 1, 1998. The predecessor Norwest Small Company
Stock Fund commenced operations on May 1, 1995.
1
<PAGE>
INVESTMENT RESTRICTIONS
Fundamental Investment Policies
-------------------------------
Each Fund has adopted the following investment restrictions, 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 Investment Company Act of 1940, as
amended (the "1940 Act")) of the outstanding voting securities of such Fund.
The Funds may not:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of a Fund's investments in that industry would equal 25% of
the current value of the Fund's total assets, provided that there is no
limitation with respect to investment in (i) securities issued or guaranteed by
the United States Government, its agencies or instrumentalities, and (ii) in
municipal securities.
(2) purchase securities of any issuer if, as a result, with respect to 75%
of a Fund's total assets, more than 5% of the value of its total assets would be
invested in the securities of any one issuer or, with respect to 100% of its
assets, the Fund's ownership would be more than 10% of the outstanding voting
securities of such issuer. This policy does not restrict a Fund's ability to
invest in securities issued or guaranteed by the U.S. Government, its agencies
and instrumentalities.
(3) borrow money except to the extent permitted by the 1940 Act, and the
rules, regulations and exemptions thereunder;
(4) issue senior securities except to the extent permitted by the 1940
Act, and the rules, regulations and exemptions thereunder;
(5) make loans to other parties if, as a result, the aggregate value of
such loans would exceed one-third of a 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;
(6) 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 a Fund's investment program may be deemed to be an underwriting;
(7) 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
2
<PAGE>
instruments backed by real estate or securities of companies engaged in the real
estate business); nor
(8) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Funds from purchasing or selling options and futures contracts, or from
investing in securities or other instruments backed by physical commodities, and
[(III) IN THE CASE OF THE LARGE COMPANY GROWTH FUND PURCHASING SECURITIES OF AN
ISSUER WHICH INVESTS OR DEALS IN COMMODITIES OR COMMODITY CONTRACTS.]
Non-Fundamental Investment Policies
-----------------------------------
Each Fund has adopted the following non-fundamental policies which may be
changed by a vote of a majority of the Trustees of the Trust or at any time
without approval of such Fund's shareholders.
(1) Each Fund may invest in shares of other open-end management investment
companies, subject to the limitations of the 1940 Act, the rules thereunder, and
any orders obtained thereunder now or in the future. Funds in a master/feeder
or core/gateway structure, such as the Income Equity Fund, generally invest in
the securities of one or more open-end management investment companies pursuant
to various provisions of the 1940 Act. 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 a Fund.
(2) Each 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.
(3) Each Fund may invest in futures or options contracts regulated by the
CFTC for (i) bona fide hedging purposes within the meaning of the rules of the
CFTC and (ii) for other purposes if, as a result, no more than 5% of the Fund's
net assets would be invested in initial margin and premiums (excluding amounts
"in-the-money") required to establish the contracts.
Each Fund (i) will not hedge more than [50%] of its total assets by selling
futures contracts, buying put options, and writing call options (so called
"short positions"), (ii) will not buy futures contracts or write put options
whose underlying value exceeds [25%] of the Fund's total assets, and (iii) will
not buy call options with a value exceeding [5%] of the Fund's total assets.
(4) Each Fund may lend securities from its portfolio to brokers, dealers
and financial institutions, in amounts not to exceed (in the aggregate) up to
the limits established by and under the 1940 Act, including any exemptive relief
obtained thereunder, which limits are currently generally one-third of a Fund's
total assets. Any such loans of portfolio securities will be fully
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collateralized based on values that are marked to market daily. [A FUND WILL NOT
ENTER INTO ANY PORTFOLIO SECURITY LENDING ARRANGEMENT HAVING A DURATION OF
LONGER THAN ONE YEAR.]
(5) Each Fund may not make investments for the purpose of exercising
control or management. (Investments by the Fund in entities created under the
laws of foreign countries solely to facilitate investment in securities in that
country will not be deemed the making of investments for the purpose of
exercising control.)
(6) Each Fund may not purchase securities on margin (except for short-term
credits necessary for the clearance of transactions).
(7) Each 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.
(8) Each Fund may not purchase interests, leases, or limited partnership
interests in oil, gas, or other mineral exploration or development programs.
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ADDITIONAL PERMITTED INVESTMENT ACTIVITIES AND ASSOCIATED RISKS
ASSET-BACKED SECURITIES. The Corporate Bond Fund may purchase asset-backed
securities unrelated to mortgage loans. These asset-backed securities 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 letter of credit, 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.
BANK OBLIGATIONS. The Funds 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, a Fund may be subject to additional investment risks that are
different in some respects from those incurred by a Fund which invests only in
debt obligations of U.S. 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 a Fund will not benefit from insurance from the Bank Insurance
Fund or the Savings Association Insurance Fund administered by the Federal
Deposit Insurance Corporation ("FDIC"). 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
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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 Corporate Bond Fund
may be bonds. The Fund invests no more than 25% in bonds that are below
investment grade. 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).
COMMERCIAL PAPER. The Funds 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 Statistical Ratings Organization ("NRRO"). Commercial
paper may include variable- and floating-rate instruments.
CONVERTIBLE SECURITIES. The Funds may invest in convertible securities that
provide current income and are issued by companies that have a strong earnings
and credit record. The Funds may purchase convertible securities that are fixed-
income debt securities or preferred stocks, and which may be converted at a
stated price within a specified period of time into a certain quantity of the
common stock of the same issuer. Convertible securities, while usually
subordinate to similar nonconvertible securities, are senior to common stocks in
an issuer's capital structure. Convertible securities offer flexibility by
providing the investor with a steady income stream (which generally yield a
lower amount than similar nonconvertible securities and a higher amount than
common stocks) as well as the opportunity to take advantage of increases in the
price of the issuer's common stock through the conversion feature. Fluctuations
in the convertible security's price can reflect changes in the market value of
the common stock or changes in market interest rates. At most, 5% of each Fund's
net assets will be invested, at the
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time of purchase, in convertible securities that are not rated in the four
highest rating categories by one or more Narrows, such as Moody's Investors
Service, Inc. ("Moody's") or S&P, or unrated but determined by the advisor to be
of comparable quality.
DERIVATIVE SECURITIES. The Corporate Bond 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.
EMERGING MARKETS. The Large Company Growth and Small Cap Funds may invest up
to [15%] of their assets in equity securities of companies in "emerging
markets." The Funds consider the following factors, among others, in determining
which countries have emerging markets: (i) countries with an emerging stock
market as defined by the International Finance Corporation; (ii) countries with
low- to middle-income economies according to the International Bank for
Reconstruction and Development (more commonly referred to as the World Bank);
and (iii) countries listed in World Bank publications as developing. The Advisor
believes that investment in equity securities of emerging market issuers offers
significant potential for long-term capital appreciation.
There are special risks involved in investing in emerging-market countries.
Many investments in emerging markets can be considered speculative, and their
prices can be much more volatile than in the more developed nations of the
world. This difference reflects the greater uncertainties of investing in less
established markets and economies. The financial markets of emerging markets
countries are generally less well capitalized and thus securities of issuers
based in such countries may be less liquid. Most are heavily dependent on
international trade, and some are especially vulnerable to recessions in other
countries. Many of these countries are also sensitive to world commodity
prices. Some countries may still have obsolete financial systems, economic
problems or archaic legal systems. The currencies of certain emerging market
countries, and therefore the value of securities denominated in such currencies,
may be more volatile than currencies of developed countries. In addition, many
of these nations are experiencing political and social uncertainties.
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FLOATING- AND VARIABLE-RATE OBLIGATIONS. The Funds 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 a 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, a 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 each 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 each Fund,
considers on an ongoing basis the creditworthiness of the issuers of the
floating- and variable-rate demand obligations in such Fund's portfolio. No
Fund will invest more than 15% of the value of its total net assets in floating-
or variable-rate demand obligations whose demand feature is not exercisable
within seven days. Such obligations may be treated as liquid, if an active
secondary market exists. 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.
FOREIGN OBLIGATIONS. The Funds may invest in foreign securities through
American Depositary Receipts ("ADRs"), Canadian Depositary Receipts ("CDRs"),
European Depositary Receipts ("EDRs"), International Depositary Receipts
("IDRs") and Global Depositary Receipts ("GDRs") or other similar securities
convertible into securities of foreign issuers. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs (sponsored or unsponsored) are receipts typically
issued by a U.S. bank or trust company and traded on a U.S. stock exchange, and
CDRs are receipts typically issued by a Canadian bank or trust company that
evidence ownership of underlying foreign securities. Issuers of unsponsored
ADRs are not contractually obligated to disclose material information in the
U.S. and, therefore, such information may not correlate to the market value of
the unsponsored ADR. EDRs and IDRs are receipts typically issued by European
banks and trust companies, and GDRs are receipts issued by either a U.S. or non-
U.S. banking institution, that evidence ownership of the underlying foreign
securities. Generally, ADRs in registered form are designed for use in U.S.
securities markets and EDRs and IDRs in bearer form are designed primarily for
use in Europe. Each Fund may not invest 25% or more of its assets in foreign
obligations.
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Investments in foreign obligations involve certain considerations that are not
typically associated with investing in domestic securities. There may be less
publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to the same accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries, taxes
may be withheld at the source under foreign tax laws, and there is a possibility
of expropriation or confiscatory taxation, political, social and monetary
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries.
Investment income on certain foreign securities in which a Fund may invest may
be subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject.
Foreign Currency Transactions. The Funds may enter into forward currency
exchange contracts in order to protect against uncertainty in the level of
future foreign exchange rates. A forward currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are entered
into the interbank market conducted between currency traders (usually large
commercial banks) and their customers. Forward currency exchange contracts may
be bought or sold to protect the Funds against a possible loss resulting from an
adverse change in the relationship between foreign currencies and the U.S.
dollar, or between foreign currencies. Although such contracts are intended to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time, they tend to limit any potential gain which might result
should the value of such currency increase.
FORWARD COMMITMENTS, WHEN-ISSUED PURCHASES AND DELAYED-DELIVERY TRANSACTIONS.
Each 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. 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.
Each Fund will segregate cash, U.S. Government obligations or other high-
quality debt instruments in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will segregate additional liquid assets on a daily basis so
that the value of the segregated assets is equal to the amount of such
commitments.
ILLIQUID SECURITIES. The Funds may invest in securities not registered under
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. Each Fund may
invest up to 15% of its net assets in illiquid securities.
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LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio securities to
brokers, dealers and financial institutions, provided: (1) the loan is secured
continuously by collateral consisting of U.S. Government securities or cash or
letters of credit maintained on a daily marked-to-market basis in an amount at
least equal to the current market value of the securities loaned; (2) the Fund
may at any time call the loan and obtain the return of the securities loaned
within five business days; (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 imposed by the 1940 Act.
A Fund will earn income for lending its securities because cash collateral
pursuant to these loans will be invested in short-term money market instruments.
In connection with lending securities, a Fund may pay reasonable finders,
administrative and custodial fees. A Fund will not enter into any security
lending arrangement having a duration longer than one year. 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, a 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 a Fund if a material
event affecting the investment is to occur. A Fund may pay a portion of the
interest or fees earned from securities lending to a borrower or placing broker.
Borrowers and placing brokers may not be affiliated, directly or indirectly,
with Wells Fargo Bank, Stephens Inc. or any of their affiliates.
LOWER RATED SECURITIES. The Corporate Bond Income Fund may invest up to
[100%] of its net assets in non-investment grade bonds. These are commonly
known as "junk bonds." Their default and other risks are greater than those of
higher rated securities. You should carefully consider these risks before
investing in the Fund.
Various investment services publish ratings of some of the types of securities
in which the Fund may invest. Higher yields are ordinarily available from
securities in the lower rating categories, such as securities rated Ba or lower
Moody's Investors Service, Inc. ("Moody's) or BB or lower by Standard & Poor's
Ratings Group ("S&P"), or from unrated securities deemed by the Advisor to be of
comparable quality. These ratings represent the opinions of the rating services
with respect to the issuer's ability to pay interest and repay principal. They
do not purport to reflect the risk of fluctuations in market value and are not
absolute standards of quality. The Advisor will consider these ratings in
connection with the investment of the Fund's assets but they will not be a
determining or limiting factor.
The Corporate Bond Fund may invest in securities regardless of their rating or
in securities that are unrated, including up to 5% of their assets in securities
that are in default at the time of purchase. As an operating policy, however,
the Funds will generally invest in securities that are rated at least Caa by
Moody's or CCC by S&P, except for defaulted securities as noted below, or that
are unrated but of comparable quality as determined by the Advisor.
The Corporate Bond Fund may also buy debt securities of issuers that are not
currently paying interest, as well as issuers who are in default, and may keep
an issue that has defaulted. The
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Fund will buy defaulted debt securities if, in the opinion of advisors, they
present an opportunity for later price recovery, the issuer may resume interest
payments, or other advantageous developments appear likely in the near future.
In general, securities that default lose much of their value before the actual
default so that the security, and thus the net asset value of the Funds would be
impacted before the default. Defaulted debt securities may be illiquid and, as
such, will be part of the 15% limit discussed under "Illiquid Investments."
If the rating on an issue held in the Fund's portfolio is changed by the
rating service or the security goes into default, this event will be considered
by the Fund in its evaluation of the overall investment merits of that security
but will not generally result in an automatic sale of the security.
Certain of the high yielding, fixed-income securities in which the Fund may
invest may be purchased at a discount. When held to maturity or retired, these
securities may include an element of capital gain. Capital losses may be
realized when securities purchased at a premium, that is, in excess of their
stated or par value, are held to maturity or are called or redeemed at a price
lower than their purchase price. Capital gains or losses also may be realized
upon the sale of securities.
MONEY MARKET INSTRUMENTS AND TEMPORARY INVESTMENTS. The Funds may invest in
the following types of high quality money market instruments that have remaining
maturities not exceeding one year: (i) U.S. Government obligations; (ii)
negotiable certificates of deposit, bankers' acceptances and fixed time deposits
and other obligations of domestic banks (including foreign branches) that have
more than $1 billion in total assets at the time of investment and are members
of the Federal Reserve System or are examined by the Comptroller of the Currency
or whose deposits are insured by the FDIC; (iii) commercial paper rated at the
date of purchase "Prime-1" by Moody's or "A-1" or "A-1--" by S&P, or, if
unrated, of comparable quality as determined by Wells Fargo Bank, as investment
advisor; and (iv) repurchase agreements. The Funds also may invest in short-
term U.S. dollar-denominated obligations of foreign banks (including U.S.
branches) that at the time of investment: (i) have more than $10 billion, or the
equivalent in other currencies, in total assets; (ii) are among the 75 largest
foreign banks in the world as determined on the basis of assets; (iii) have
branches or agencies in the United States; and (iv) in the opinion of Wells
Fargo Bank, as investment advisor, are of comparable quality to obligations of
U.S. banks which may be purchased by the Funds.
Letters of Credit. Certain of the debt obligations (including certificates of
participation, commercial paper and other short-term obligations) which the
Funds may purchase may be backed by an unconditional and irrevocable letter of
credit of a bank, savings and loan association or insurance company which
assumes the obligation for payment of principal and interest in the event of
default by the issuer. Only banks, savings and loan associations and insurance
companies which, in the opinion of Wells Fargo Bank, are of comparable quality
to issuers of other permitted investments of the Fund may be used for letter of
credit-backed investments.
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Repurchase Agreements. A 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. A Fund may enter into repurchase
agreements only with respect to securities that could otherwise be purchased by
the 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, a 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. Each Fund may not enter
into a repurchase agreement with a maturity of more than seven days, if, as a
result, more than 15% (10% for the Money Market Fund) 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. A 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 investment advisor. The
Funds may participate in pooled repurchase agreement transactions with other
funds advised by Wells Fargo Bank.
MORTGAGE-RELATED SECURITIES. The Corporate Bond Fund may invest in mortgage-
related 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). Payment of principal and interest on some
mortgage pass-through securities (but not the market value of the securities
themselves) may be guaranteed by the full faith and credit of the U.S.
Government or its agencies or instrumentalities. Mortgage pass-through
securities created by non- government issuers (such as 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 would 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 Corporate Bond Fund may also invest in investment grade CMOs.
CMOs may be
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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 ("FHLMC") 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 invest in ARMs issued or guaranteed by the GNMA, FNMA or the
FHLMC. The full and timely payment of principal and interest on GNMA ARMs is
guaranteed by GNMA and backed by the full faith and credit of the U.S.
Government. FNMA also guarantees full and timely payment of both interest and
principal, while FHLMC guarantees full and timely payment of interest and
ultimate payment of principal. FNMA and FHLMC ARMs are not backed by the full
faith and credit of the United States. However, because FNMA and FHLMC are
government-sponsored enterprises, these securities are generally considered to
be high quality investments that present minimal credit risks. The yields
provided by these ARMs have historically exceeded the yields on other types of
U.S. Government securities with comparable maturities, although there can be no
assurance that this historical performance will continue.
The mortgages underlying ARMs guaranteed by GNMA are typically insured or
guaranteed by the Federal Housing Administration, the Veterans Administration or
the Farmers Home Administration, while those underlying ARMs issued by FNMA or
FHLMC are typically conventional residential mortgages which are not so insured
or guaranteed, but which conform to specific underwriting, size and maturity
standards.
The interest rates on the mortgages underlying the ARMs and some of the CMOs
in which the Fund may invest 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 Fund
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.
The Corporate Bond Fund will not invest in CMOs that, at the time of purchase,
are "high-risk mortgage securities" as defined in the then current Federal
Financial Institutions Examination Council Supervisory Policy Statement on
Securities Activities. High-risk mortgage securities are generally those with
long durations or those which are likely to be more sensitive to interest-rate
fluctuations.
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OPTIONS TRADING. The Large Company Growth and Small Cap Funds may purchase
or sell options on individual securities or options on indices of securities as
described below. The purchaser of an option risks a total loss of the premium
paid for the option if the price of the underlying security does not increase or
decrease sufficiently to justify the exercise of such option. The seller of an
option, on the other hand, will recognize the premium as income if the option
expires unrecognized but foregoes any capital appreciation in excess of the
exercise price in the case of a call option and may be required to pay a price
in excess of current market value in the case of a put option.
A call option for a particular security gives the purchaser of the option the
right to buy, and a writer the obligation to sell, the underlying security at
the stated exercise price at any time prior to the expiration of the option,
regardless of the market price of the security. The premium paid to the writer
is in consideration for undertaking the obligation under the option contract. A
put option for a particular security gives the purchaser the right to sell, and
the writer the option to buy, the security at the stated exercise price at any
time prior to the expiration date of the option, regardless of the market price
of the security.
The Funds will write call options only if they are "covered." In the case of
a call option on a security or currency, the option is "covered" if a Fund owns
the instrument underlying the call or has an absolute and immediate right to
acquire that instrument without additional cash consideration (or, if additional
cash consideration is required, cash, U.S. Government securities or other liquid
high grade debt obligations, in such amount are held in a segregated account by
the Fund's custodian) upon conversion or exchange of other securities held by
it. For a call option on an index, the option is covered if a Fund maintains
with its custodian a diversified portfolio of securities comprising the index or
liquid assets equal to the contract value. A call option is also covered if a
Fund holds an offsetting call on the same instrument or index as the call
written. The Funds will write put options only if they are "secured" by liquid
assets maintained in a segregated account by the Funds' custodian in an amount
not less than the exercise price of the option at all times during the option
period.
Each Fund may buy put and call options and write covered call and secured put
options. Options trading is a highly specialized activity which entails greater
than ordinary investment risk. Options may be more volatile than the underlying
instruments, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
instruments themselves. Purchasing options is a specialized investment
technique that entails a substantial risk of a complete loss of the amounts paid
as premiums to the writer of the option. If the Advisor is incorrect in its
forecast of market value or other factors when writing options, the Fund would
be in a worse position than it would have been had if it had not written the
option. If a Fund wishes to sell an underlying instrument (in the case of a
covered call option) or liquidate assets in a segregated account (in the case of
a secured put option), the Fund must purchase an offsetting option if available,
thereby incurring additional transactions costs.
Below is a description of some of the types of options in which the Funds may
invest.
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<PAGE>
A stock index option is an option contract whose value is based on the value
of a stock index at some future point in time. Stock indexes fluctuate with
changes in the market values of the stocks included in the index. The
effectiveness of purchasing or writing stock index options will depend upon the
extent to which price movements in a Fund's investment portfolio correlate with
price movements of the stock index selected. Accordingly, successful use by a
Fund of options on stock indexes will be subject to the Advisor's ability to
correctly analyze movements in the direction of the stock market generally or of
particular industry or market segments. When a Fund writes an option on a stock
index, the Fund will place in a segregated account with the Fund's custodian
cash or liquid securities in an amount at least equal to the market value of the
underlying stock index and will maintain the account while the option is open or
otherwise will cover the transaction.
The Funds may invest in stock index futures contracts and options on stock
index futures contracts. A stock index futures contract is an agreement in
which one party agrees to deliver to the other an amount of cash equal to a
specific dollar amount multiplied by the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made. Stock index futures contracts may be
purchased to protect a Fund against an increase in the prices of stocks that
Fund intends to purchase. The purchase of options on stock index futures
contracts are similar to other options contracts as described above, where a
Fund pays a premium for the option to purchase or sell a stock index futures
contract for a specified price at a specified date. With options on stock index
futures contracts, a Fund risks the loss of the premium paid for the option.
The Funds may also invest in interest-rate futures contracts and options on
interest-rate futures contracts. These securities are similar to stock index
futures contracts and options on stock index futures contracts, except they
derive their price from an underlying interest rate rather than a stock index.
Interest-rate and index swaps involve the exchange by a Fund with another
party of their respective commitments to pay or receive interest (for example,
an exchange of floating-rate payments for fixed-rate payments). Index swaps
involve the exchange by a Fund with another party of cash flows based upon the
performance of an index of securities. Interest-rate swaps involve the exchange
by a Fund with another party of cash flows based upon the performance of a
specified interest rate. In each case, the exchange commitments can involve
payments to be made in the same currency or in different currencies. The Funds
will usually enter into swaps on a net basis. In so doing, the two payment
streams are netted out, with a Fund receiving or paying, as the case may be,
only the net amount of the two payments. If a Fund enters into a swap, it will
maintain a segregated account on a gross basis, unless the contract provides for
a segregated account on a net basis. The risk of loss with respect to swaps
generally is limited to the net amount of payments that a Fund is contractually
obligated to make. There is also a risk of a default by the other party to a
swap, in which case a Fund may not receive net amount of payments that the Fund
contractually is entitled to receive
OTHER INVESTMENT COMPANIES. The Funds may invest in shares of other
registered investment companies, up to the limits prescribed in Section 12(d) of
the 1940 Act. Under the 1940 Act, a Fund's investment in such securities
currently is generally limited to, subject to certain exceptions, (i) 3% of the
total voting stock of any one investment company, (ii) 5% of
15
<PAGE>
such Fund's net assets with respect to any one investment company and (iii) 10%
of such Fund's net assets in aggregate. 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.
Privately Issued Securities. The Funds may invest in privately issued
securities, including those which may be resold only in accordance with Rule
144A under the Securities Act of 1933 ("Rule 144A Securities"). Rule 144A
Securities are restricted securities that are not publicly traded. Accordingly,
the liquidity of the market for specific Rule 144A Securities may vary. Delay or
difficulty in selling such securities may result in a loss to a Fund. Privately
issued or Rule 144A securities that are determined by the investment advisor to
be "illiquid" are subject to the Funds' policy of not investing more than 15% of
its net assets in illiquid securities. The investment advisor, under guidelines
approved by Board of Trustees of the Trust, will evaluate the liquidity
characteristics of each Rule 144A Security proposed for purchase by a Fund on a
case-by-case basis and will consider the following factors, among others, in
their evaluation: (1) the frequency of trades and quotes for the Rule 144A
Security; (2) the number of dealers willing to purchase or sell the Rule 144A
Security and the number of other potential purchasers; (3) dealer undertakings
to make a market in the Rule 144A Security; and (4) the nature of the Rule 144A
Security and the nature of the marketplace trades (e.g., the time needed to
dispose of the Rule 144A Security, the method of soliciting offers and the
mechanics of transfer).
STRIPPED SECURITIES. The Funds may purchase Treasury receipts 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 Funds 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.
U.S. GOVERNMENT OBLIGATIONS. The Funds 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 Government National Mortgage Association
("GNMA") certificates) or (ii) may be backed solely by the issuing or
guaranteeing agency or instrumentality itself (as with Federal National Mortgage
Association ("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
16
<PAGE>
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.
WARRANTS. Each of the Funds may invest no more than 5% of its net assets at
the time of purchase in warrants (other than those that have been acquired in
units or attached to other securities), and not more than 2% of its net assets
in warrants which are not listed on the New York or American Stock Exchange.
Warrants represent rights to purchase securities at a specific price valid for a
specific period of time. The prices of warrants do not necessarily correlate
with the prices of the underlying securities. The Funds may only purchase
warrants on securities in which the Fund may invest directly.
ZERO COUPON BONDS. The Corporate Bond Fund may invest in zero coupon bonds.
Zero coupon bonds are securities that make no periodic interest payments, but
are instead sold at discounts from face value. The buyer of such a bond
receives the rate of return by the gradual appreciation of the security, which
is redeemed at face value on a specified maturity date. Because zero coupon
bonds bear no interest, they are more sensitive to interest-rate changes and are
therefore more volatile. When interest rates rise, the discount to face value
of the security deepens and the securities decrease more rapidly in value, when
interest rates fall, zero coupon securities rise more rapidly in value because
the bonds carry fixed interest rates that become more attractive in a falling
interest rate environment.
NATIONALLY RECOGNIZED RATINGS ORGANIZATIONS. The ratings of Moody's Investors
Service, Inc., Standard & Poor's Ratings Group, 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 a 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 a Fund.
The advisor will consider such an event in determining whether the Fund involved
should continue to hold the obligation.
MANAGEMENT
The following information supplements, and should be read in conjunction with,
the section in the Prospectus entitled "Organization and Management of the
Funds." The principal occupations during the past five years of the Trustees
and executive officers of Wells Fargo Variable Trust are listed below. The
address of each, unless otherwise indicated, is 111 Center Street, Little Rock,
Arkansas 72201. Trustees deemed to be "interested persons" of Wells Fargo
Variable Trust for purposes of the 1940 Act are indicated by an asterisk.
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<PAGE>
<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position During Past 5 Years
- --------------------- -------- -------------------
<S> <C> <C>
*Robert C. Brown, 65 Trustee Director, Federal Farm Credit Banks Funding
1431 Landings Place 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; previously Associate
Professor of Finance.
Peter G. Gordon, 56 Trustee Chairman and Co-Founder of Crystal Geyser
Crystal Geyser Water Co. Water Company and President of Crystal Geyser
55 Francisco Street, Suite 410 Roxane 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;
Four Beaufain Street Chairman of Vault Holdings, LLC.
Charleston, SC 29401
Timothy J. Penny, 45 Trustee Senior Counselor to the public relations firm
500 North State Street of Himle-Horner since January 1995 and Senior
Waseca, MN 56095 Fellow at the Humphrey Institute, Minneapolis,
Minnesota (a public policy organization) since
January 1995.
Richard H. Blank, Jr., 42 Chief Operating Vice President of Stephens Inc.; Director of
Officer, Stephens Sports Management Inc.; and Director
Secretary and of Capo Inc.
</TABLE>
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<PAGE>
Treasurer
Compensation Table
------------------
Aggregate Total Compensation
Compensation from Registrant and
Name and Position from Registrant Fund Complex
- ------------------ --------------- ------------
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
Each of the Trustees and Officers listed above, act in the identical
capacities for Wells Fargo Variable Trust and Wells Fargo Core Trust
(collectively the "Fund Complex"). Trustees are compensated annually by the
Trust and by all the registrants in each fund complex they serve beginning
September 17, 1999, and beginning March 26, 1999, receive a per-meeting fee of
$250. Trustees also are reimbursed for all out-of-pocket expenses relating to
attendance at board meetings. Each of the Trustees and Officers of the Trust
serves in the identical capacity as trustees and/or officers of each registered
open-end management investment company in the Fund Complex. The Trustees are
compensated by other companies and trusts within a fund complex for their
services as directors/trustees to such companies and trusts. Currently the
Trustees do not
19
<PAGE>
receive any retirement benefits or deferred compensation from the Trust or any
other member of each fund complex.
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. Each of the Funds is advised by Wells Fargo Bank pursuant
to an Advisory Contract. The Advisory Contracts provide that Wells Fargo Bank
shall furnish to the Funds investment guidance and policy direction in
connection with the daily portfolio management of each Fund. Under the Advisory
Contracts, Wells Fargo Bank furnishes to the Board of Trustees periodic reports
on the investment strategy and performance of each Fund. Wells Fargo Bank has
agreed to provide to the Funds, among other things, money market and fixed-
income research, analysis and statistical and economic data and information
concerning interest rate and security market trends, portfolio composition,
credit conditions and, in the case of the Corporate Bond Fund, average
maturities of the portfolios. As compensation for its advisory services, Wells
Fargo Bank is entitled to receive a monthly fee at the annual rate of [0.60%] of
each Fund's average daily net assets, with the exceptions of the Corporate Bond
Fund, from which Wells Fargo Bank is entitled to receive [0.50%] of the Fund's
average daily net assets.
General. Each 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 Wells Fargo Variable Trust's Board of Trustees and (ii) by a
majority of the Trustees of Wells Fargo Variable Trust who are not parties to
the Advisory Contract or "interested persons" (as defined in the 1940 Act) of
any such party. A Fund's Advisory Contract may be terminated on 60 days' written
notice by either party and will terminate automatically if assigned.
INVESTMENT SUB-ADVISORS. Wells Capital Management ("WCM") serves as sub-
advisor to the Corporate Bond and Small Cap Funds. As sub-advisor, WCM makes
recommendations regarding the investment and reinvestment of the Funds' assets,
furnishes to Wells Fargo Bank periodic reports on the investment activity and
performance of the Funds, and 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 [0.25% OF THE FIRST
$200 MILLION OF THE CORPORATE BOND AND SMALL CAP FUNDS' AVERAGE DAILY NET
ASSETS, 0.20% OF THE NEXT $200 MILLION OF SUCH FUNDS' NET ASSETS, AND 0.15% OF
NET ASSETS OVER $400 MILLION.] As compensation for sub-advisory services for the
Corporate Bond Fund, WCM is entitled to receive a monthly fee equal to an annual
rate of 0.15% of the first $400 million of the Corporate Bond Fund's average
daily net assets, 0.125% of the next $400 million of such Fund's net assets, and
0.10% of net assets over $800 million. WCM receives a minimum annual fee from
each Fund of $120,000. This minimum annual fee does not increase the advisory
fees paid by the Funds to Wells Fargo Bank.
Peregrine Capital Management, Inc. ("Peregrine") to serve as sub-advisor
to the Large Company Growth Fund. Subject to the direction of the
20
<PAGE>
Trust's Board of Trustees and the overall supervision and control of Wells Fargo
Bank and the Trust, Peregrine makes recommendations regarding the investment and
reinvestment of the Funds' assets. Peregrine furnishes to Wells Fargo Bank
periodic reports on the investment activity and performance of the Funds.
Peregrine also furnishes such additional reports and information as Wells Fargo
Bank and the Trust's Board of Trustees and officers may reasonably request.
[INSERT PEREGRINE SUB-ADVISORY FEES]
General. Each Fund's Sub-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 (ii) by the Trust's Board of Trustees, including a majority
of the Trustees of the Company who are not parties to the Sub-Advisory Contract
or "interested persons" (as defined in the 1940 Act) of any such party. A
Fund's Sub-Advisory Contract may be terminated on 60 days written notice by
either party and will terminate automatically if assigned.
PORTFOLIO MANAGERS.
------------------
N. GRAHAM ALLEN, FCMA
MANAGING DIRECTOR OF GLOBAL FIXED INCOME INVESTING, WCM
Will manage the Corporate Bond Fund upon inception. Mr. Allen has been with
Wells Capital Management, Inc. ("WCM") since January 1998. Before joining WCM,
Mr. Allen managed international fixed-income portfolios for Bradford & Marzec,
Inc. for ten years. He has over thirteen years of investment management
experience.
JOHN W. (JACK) BURGESS
WCM
Will co-manage the Corporate Bond Fund upon inception. Mr. Burgess has been a
portfolio manager with WCM since January 1998, and was an independent financial
advisor from 1995 until joining the firm. Before that, he managed equity and
fixed-income portfolios for Aurora National Life Assurance Company and related
entities since 1988. Mr. Burgess has over ten years of investment management
experience.
JOHN S. DALE, CFA
SENIOR VICE PRESIDENT, PEREGRINE
Will manage the Large Company Growth Fund upon inception, and has been with
Peregrine and its affiliates since 1968. Mr. Dale has over thirty years of
equity investment management experience.
21
<PAGE>
JACQUELINE A. FLIPPIN
PRINCIPAL, WCM
Will co-manage the Corporate Bond Fund upon inception, and has been with WCM
since January 1998. Before joining the firm, Ms. Flippin was a short-term debt
securities trader and portfolio manager for McMorgan & Company since [19__.]
Ms. Flippin has over ten years of investment management experience.
DAVID KOKOSKA, CFA
PRINCIPAL, WCM
Will co-manage the Corporate Bond Fund upon inception, and has been with Wells
Fargo since January 1998. Before joining WCM, Mr. Kokoska co-managed
international fixed-income portfolios for Bradford & Marzec, Inc. since 1993.
Mr. Kokoska has over [___] years of investment management experience.
KENNETH LEE
PRINCIPAL, WCM
Mr. Lee will be responsible as portfolio manager of the Small Cap Fund upon
inception. He is also generally responsible for portfolio management and
fundamental security analysis on the small and mid cap growth equity team. Prior
to his current position, he worked as an associate in the high-net-worth
portfolio management group. He has 7 years of investment experience, including
5 years at this firm. Mr. Lee holds a B.A. in Economics and a B.A. in
Organizational Studies from the University of California at Davis and is
currently a Chartered Financial Analyst Level III candidate.
GARY E. NUSSBAUM
Senior Vice President, Peregrine
Will co-manage the Large Company Growth Fund upon inception, and has been with
Peregrine and its affiliates since 1990. Mr. Nussbaum has over nine years of
investment management experience.
SCOTT SMITH, CFA
PRINCIPAL, WCM
Will co-manage the Corporate Bond Fund upon inception, and has been with Wells
Fargo/WCM since 1987, specializing in corporate and mortgage-backed securities
investments. Mr. Smith has over eleven years of investment management
experience.
THOMAS M. ZEIFANG, CFA
WCM
Mr. Zeifang will be responsible as co-manager of the Small Cap Fund upon
inception. He is also responsible for fundamental security analysis on the
small and mid cap growth equity team. Prior to joining the firm in 1995, he
spent 3 years as an analyst at Fleet Investment Advisors and 3 years as an
assistant portfolio manager at Marine Midland Bank. Mr. Zeifang holds an M.B.A.
in Finance and Business Policy from the William E. Simon School of Business
Administration and a B.B.A. in Finance from Saint Bonaventure University. Mr.
Zeifang is a Chartered Financial Analyst and a member of the Association for
Investment Management and Research (AIMR).
22
<PAGE>
ADMINISTRATOR. The Trust has retained Wells Fargo Bank as Administrator on
-------------
behalf of each 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 Funds' operations, including
coordination of the services performed by each 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 SEC and
state securities commissions; and preparation of proxy statements and
shareholder reports for each 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 furnish
office space and certain facilities required for conducting the Funds' business
together with ordinary clerical and bookkeeping services. The Administrator is
entitled to receive a fee of 0.15%, of the average daily net assets on an annual
basis of each Fund.
CUSTODIAN. Norwest Bank Minnesota, N.A. ("Norwest Bank") acts as Custodian
---------
for each Fund. The Custodian, among other things, maintains a custody account
or accounts in the name of each Fund, receives and delivers all assets for each
Fund upon purchase and upon sale or maturity, collects and receives all income
and other payments and distributions on account of the assets of each Fund and
pays all expenses of each Fund. For its services as Custodian, Norwest Bank is
entitled to receive fees as follows: 0.02% of the average daily net assets of
each Fund.
FUND ACCOUNTANT. Forum acts as Fund Accountant for the Funds. The Fund
---------------
Accountant, among other things, computes net asset values on a daily basis and
performance calculations on a regular basis and as requested by the Funds. For
providing such services, Forum is entitled to receive a fee of [___%.]
TRANSFER AND DIVIDEND DISBURSING AGENT. State Street Bank, acting through its
--------------------------------------
affiliate Boston Financial Data Services ("BFDS") acts as Transfer and Dividend
Disbursing Agent for the Funds. For providing such services, BFDS is entitled
to receive a per-account fee of [0.04% OF THE AVERAGE DAILY NET ASSETS OF EACH
SUCH ACCOUNT ON AN ANNUAL BASIS].
SHAREHOLDER SERVICING AGENT. Wells Fargo Variable Trust has approved a
Servicing Plan on behalf of each Fund and has approved the Funds' entry into
related shareholder servicing agreements with financial institutions, including
Fortis Benefits Insurance Company and American Skandia Life Insurance Company.
Under the agreements, Shareholder Servicing Agents (including these companies)
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 Company
to a shareholder may reasonably request. For providing shareholder services, a
Servicing Agent is entitled to a fee from the applicable Fund, on an annualized
basis, of the average daily net assets of the class of shares owned of record or
beneficially by the customers of the Servicing Agent during the period for which
payment is being made. For providing these services, a shareholder servicing
agent is entitled to a fee from the Fund of up to 0.25%, on an annualized basis,
of the average daily net asset value of the Fund shares owned by or
23
<PAGE>
attributable to such customers of the Shareholder Servicing Agent. The Servicing
Plan and related shareholder servicing agreements were approved by Wells Fargo
Variable Trust's Board of Trustees including a majority of the Trustees who were
not "interested persons" (as defined in the Act) of the Funds and who had no
direct or indirect financial interest in the operation of the Servicing Plan or
in any agreement related to the Servicing Plan (the "Servicing Plan Qualified
Trustees"). The actual fee payable to servicing agents under the Servicing Plan
for the Funds is determined, within such limits, from time to time by mutual
agreement between Wells Fargo Variable Trust and each servicing agent and will
not exceed the maximum amounts payable by mutual funds sold by members of the
NASD under the Conduct Rules of the NASD.
General. The Servicing Plan for the Funds will continue in effect from year
-------
to year if such continuance is approved by a majority vote of the Trustees of
Wells Fargo Variable Trust, including the Trustees who are not "interested"
persons, as defined under the 1940 Act. Any form of servicing agreement related
to the Servicing Plan also must be approved by such vote of the Trustees.
Servicing agreements may be terminated at any time, without payment of any
penalty, by vote of a majority of the Trustees who are not "interested" persons,
as defined under the 1940 Act. No material amendment to the Servicing Plan may
be made except by a majority vote of the Trustees, including the Trustees who
are not "interested" persons, as defined under the 1940 Act.
The Servicing Plan for the Funds requires that the administrator shall provide
to the Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under the Servicing Plan.
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 yield of a Fund and the
yield of a Class of shares in a Fund, 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.
24
<PAGE>
Performance information may be advertised for non-standardized periods,
including year-to-date and other periods less than a year for the Funds.
AVERAGE ANNUAL TOTAL RETURN: Each Fund may advertise certain total return
information. Any Fund advertising would be accompanied by performance
information of the related insurance company separate accounts or by an
explanation that Fund performance information does not reflect separate account
fees and charges. As and to the extent required by the SEC, an average annual
total rate of return ("T") is computed by using the redeemable value at the end
of a specified period ("ERV") of a hypothetical initial investment of $1,000
("P") over a period of years ("n") according to the following formula: P(1+T)/n/
= ERV.
CUMULATIVE TOTAL RETURN: In addition to the above performance information,
the Funds may advertise cumulative total return of shares. Cumulative total
return of shares is computed on a per share basis and assumes the reinvestment
of dividends and distributions. Cumulative total return of shares generally is
expressed as a percentage rate which is calculated by combining the income and
principal charges for a specified period and dividing by the net asset value per
share at the beginning of the period. Advertisements may include the percentage
rate of total return of shares or may include the value of a hypothetical
investment in shares at the end of the period which assumes the application of
the percentage rate of total return.
YIELD CALCULATIONS: The Corporate Bond Fund may advertise certain yield
information. As and to the extent required by the SEC, yield is calculated based
on a 30-day (or one month) period, computed by dividing the net investment
income per share earned during the period by the net asset value per share on
the last day of the period, according to the following formula: YIELD = 2[((a-
b/cd)+1)/6/-1], 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 outstanding during the period that were entitled to receive
dividends; and d = the net asset value per share on the last day of the period.
The net investment income of each Fund includes actual interest income, plus or
minus amortized purchase discount (which may include original issue discount) or
premium, less accrued expenses. Realized and unrealized gains and losses on
portfolio securities are not included in the Fund's net investment income.
The yields for the Corporate Bond Fund 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
the Fund.
In addition, investors should recognize that changes in the net asset value of
shares of the Corporate Bond Fund will affect the yield of the Fund for any
specified period, and such changes should be considered together with the Fund's
yield in ascertaining the Fund's total return to shareholders for the period.
Yield information for the Funds may be useful in reviewing the performance of
the Funds and for providing a basis for comparison with investment alternatives.
The yield of a Fund, however, may not be comparable to the yields from
investment alternatives
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because of differences in the foregoing variables and differences in the methods
used to value portfolio securities, compute expenses and calculate yield.
From time to time, and only to the extent the comparison is appropriate for a
Fund, Wells Fargo Variable Trust may quote the Fund's performance or price-
earning ratio in advertising and other types of literature as compared to the
performance of the S&P 500 Index, the Dow Jones Industrial Average, the Wilshire
5000 Equity Index, 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), Ten Year U.S.
Government Bond Average, S&P's Corporate Bond Yield Averages, Schabacter
Investment Management Indices, Salomon Brothers High Grade Bond Index, Lehman
Brothers Long-Term High Quality Government/Corporate Bond Index, other managed
or unmanaged indices or performance data of bonds, 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 500 Index and the Dow Jones Industrial
Average are unmanaged indices of selected common stock prices. Unmanaged indices
may assume the reinvestment of dividends, but generally do not reflect
deductions for administrative and management costs and expenses. Managed indices
generally do reflect such deductions.
The Funds' performance also may be compared to those 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 Funds'
performance is calculated by relating net asset value per share at the beginning
of a stated period to the net asset value of the investment, assuming
reinvestment of all gains distributions and dividends paid, at the end of the
period. The Money Market 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 a Fund's
past performance with that of its competitors. Of course, past performance
cannot be a guarantee of future results. Wells Fargo Variable 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 holder being
contacted by a selected broker or dealer. General mutual fund statistics
provided by the Investment Company Institute may also be used.
Wells Fargo Variable Trust also may disclose, in advertising and other types
of literature, information and statements that Wells Capital Management, Inc.
("WCM" formerly, WFIM), a division of Wells Fargo Bank, is listed in the top 100
by Institutional Investor magazine in its
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July 1997 survey "America's Top 300 Money Managers." This survey ranks money
managers in several asset categories. Wells Fargo Variable Trust also may
disclose in advertising and other types of sales literature the assets and
categories of assets under management by its investment advisor or sub-advisor
and the total amount of assets and mutual fund assets managed by Wells Fargo
Bank. As of October 31, 1998, Wells Fargo Bank and its affiliates provided
investment advisory services for approximately $62 billion of assets of
individuals, trusts, estates and institutions and $23 billion of mutual fund
assets.
In addition, Wells Fargo Variable 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. Wells Fargo Variable 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."
Wells Fargo Variable Trust also may use the following information in
advertisements and other types of literature, only to the extent the information
is appropriate for a Fund: (i) the Consumer Price Index may be used to assess
the real rate of return from an investment in a Fund; (ii) other government
statistics, including, but not limited to, The Survey of Current Business, may
be used to illustrate investment attributes of a Fund or the general economic,
business, investment, or financial environment in which a Fund operates; (iii)
the effect of tax-deferred compounding on the investment returns of a 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 a 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
a Fund invests may be compared to relevant indices of stocks or surveys (e.g.,
S&P Industry Surveys) to evaluate a Fund's historical performance or current or
potential value with respect to the particular industry or sector.
Wells Fargo Variable Trust also may discuss in advertising and other types of
literature that a Fund has been assigned a rating by an NRSRO, such as Standard
& Poor's Corporation. Such rating would assess the creditworthiness of the
investments held by a Fund. The assigned rating would not be a recommendation to
purchase, sell or hold a Fund's shares since the rating would not comment on the
net asset value 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. Wells Fargo Variable
Trust may compare a Fund's performance with other investments which are assigned
ratings by NRSROs. Any such comparisons may be useful to investors who wish to
compare the Fund's past performance with other rated investments.
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DETERMINATION OF NET ASSET VALUE
Net asset value per share for each of the Funds is determined by the custodian
of the Fund at 1:00 p.m. (Pacific time) on each day the New York Stock Exchange
("NYSE") is open for trading. Net asset value per share for the Money Market
Fund is determined by the custodian at 9:00 a.m. (Pacific time) on each day
Wells Fargo Bank is open for business.
Securities for which market quotations are available are valued at latest
prices. Securities for which the primary market is a national securities
exchange or the National Association of Securities Dealers Automated Quotations
National Market System are valued at last sale prices. In the absence of any
sale of such securities on the valuation date and in the case of other
securities, including U.S. Government obligations but excluding debt instruments
maturing in 60 days or less, the valuations are based on latest quoted bid
prices. Debt instruments maturing in 60 days or less are valued at amortized
cost. Futures contracts are marked to market daily at their respective
settlement prices determined by the relevant exchange. These prices are not
necessarily final closing prices but are intended to represent prices prevailing
during the final 30 seconds of the trading day. Options listed on a national
exchange are valued at the last sale price on the exchange on which they are
traded at the close of the NYSE, or, in the absence of any sale on the valuation
date, at latest quoted bid prices. Options not listed on a national exchange are
valued at latest quoted bid prices. In all cases, bid prices are furnished by a
reputable independent pricing service approved by the 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 Funds for which current
market quotations are not readily available are valued at fair value as
determined in good faith by Wells Fargo Variable Trust's Trustees and in
accordance with procedures adopted by the Trustees.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Payment for shares may, in the discretion of the advisor, be made in the form
of securities that are permissible investments for the Funds as described in the
Prospectuses. For further information about this form of payment please contact
Stephens. In connection with an in-kind securities payment, the Funds will
require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by a 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.
As indicated in the Prospectus, the Trust may suspend redemption rights or
postpone redemption payments for such periods as are permitted under the 1940
Act. 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 Wells Fargo Variable Trust's responsibilities under the 1940 Act.
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PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities on a securities exchange are effected
through brokers who charge a negotiated commission for their services. Orders
may be directed to any broker including, to the extent and in the manner
permitted by applicable law, Stephens or Wells Fargo Securities Inc. In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price that includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount.
Purchases and sales of non-equity securities are usually principal
transactions. Non-equity securities normally are purchased or sold from or to
dealers serving as market makers for the securities at a net price. Each of the
Funds also may purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, money market securities
are traded on a net basis and do not involve brokerage commissions. The cost of
executing non-equity securities transactions consists primarily of dealer
spreads and underwriting commissions. Under the 1940 Act, persons affiliated
with Wells Fargo Variable Trust are prohibited from dealing with Wells Fargo
Variable Trust as principals 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.
Wells Fargo Variable 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 Wells Fargo Variable Trust's Board of Trustees, Wells
Fargo Bank, as advisor, is responsible for each Fund's portfolio decisions and
the placing of portfolio transactions. In placing orders, it is the policy of
Wells Fargo Variable 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. Wells Fargo Bank generally seeks reasonably competitive
spreads or commissions.
In assessing the best overall terms available for any transaction, Wells Fargo
Bank considers factors deemed relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. As a result,
the Fund may pay a broker/dealer which furnishes brokerage and research services
a higher commission than that which may be charged by another broker/dealer for
effecting the same transaction. Such brokerage and research services might
consist of reports and statistics relating to specific companies or industries,
general summaries of groups of stocks or bonds and their comparative earnings
and yields, or broad overviews of the stock, bond and government securities
markets and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by Wells Fargo Bank and does not
reduce the advisory fees payable by
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a Fund. The Board of Trustees will periodically review the commissions paid by
each Fund to consider whether the commissions paid over representative periods
of time appear to be reasonable in relation to the benefits inuring to the Fund.
It is possible that certain of the supplementary research or other services
received will primarily benefit one or more other investment companies or other
accounts for which investment discretion is exercised. Conversely, a Fund may be
the primary beneficiary of the research or services received as a result of
portfolio transactions effected for such other account or investment company.
Under Section 28(e) of the Securities Exchange Act of 1934, an advisor shall
not be "deemed to have acted unlawfully or to have breached its fiduciary duty"
solely because under certain circumstances it has caused the account to pay a
higher commission than the lowest available. To obtain the benefit of Section
28(e), an advisor must make a good faith determination that the commissions paid
are "reasonable in relation to the value of the brokerage and research services
provided . . . viewed in terms of either that particular transaction or its
overall responsibilities with respect to the accounts as to which it exercises
investment discretion and that the services provided by a broker provide an
advisor with lawful and appropriate assistance in the performance of its
investment decision-making responsibilities." Accordingly, the price to a Fund
in any transaction may be less favorable than that available from another
broker/dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered.
Broker/dealers may furnish statistical, research and other information or
services which are deemed to be beneficial to a Fund's investment programs.
Research services received from brokers supplement the advisors' own research
and may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities, market,
specific industry groups and individual companies; information on political
developments; portfolio management strategies; performance information on
securities and information concerning prices of securities; and information
supplied by specialized services with respect to the performance, investment
activities and fees and expenses of other mutual funds. Such information may be
communicated electronically, orally or in written form. Research services may
also include the providing of equipment used to communicate research
information, the arranging of meetings with management of companies and the
providing of access to consultants who supply research information.
The outside research assistance may be useful, since the brokers utilized by
the funds as a group may follow a broader universe of securities and other
matters than the staff of Wells Fargo Bank can follow. In addition, this
research may provide Wells Fargo Bank with a diverse perspective on financial
markets. Research services which are provided to Wells Fargo Bank by brokers are
available for the benefit of all accounts managed or advised by Wells Fargo
Bank. It is the opinion of Wells Fargo Bank that this material is beneficial in
supplementing their research and analysis; and, therefore, it may benefit the
Funds by improving the qualify of Wells Fargo Bank's investment advice. The
advisory fees paid by the Funds are not reduced because Wells Fargo Bank may
receive such services.
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FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive fees from the Funds
in whole or in part. Any such waiver will reduce expenses of a Fund and,
accordingly, have a favorable impact on such Fund's performance. Except for the
expenses borne by Wells Fargo Bank and Stephens, the Funds bear all costs of
their respective operations, including the compensation of Wells Fargo Variable
Trust's trustees who are not officers or employees of Wells Fargo Bank or
Stephens or any of their affiliates; advisory, shareholder servicing, and
administration fees; payments pursuant to any Plans; interest charges; taxes;
fees and expenses of independent auditors; legal counsel, transfer agent and
dividend disbursing agent; expenses of redeeming Fund 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' or investors' 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 the custodian, including those of keeping books and accounts and
calculating the net asset value of each Fund; expenses of shareholders' or
investors' meetings; expenses relating to the issuance, registration and
qualification of shares of the Funds; pricing services; organizational expenses;
and any extraordinary expenses. Expenses attributable to a Fund are charged
against the respective assets of the Fund. A pro rata portion of the expenses of
Wells Fargo Variable Trust are charged against the assets of a Fund.
FEDERAL INCOME TAXES
The following information supplements and should be read in conjunction with
the Prospectus section entitled "Taxes." The Prospectus of the Funds describes
generally the tax treatment of the Funds and their shareholders (i.e., the
Participating Insurance Companies and their separate accounts). This section of
the SAI includes additional information concerning federal income taxes.
IN GENERAL. The Trust intends to qualify each 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 interest of the Fund's
shareholders. Each 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 to each Fund, rather than to the
Company as a whole. In addition, net capital gains, net investment income, and
operating expenses will be determined separately for each Fund. As a regulated
investment company, each Fund will not be taxed on its net investment income and
capital gains distributed to its shareholders.
For a Fund to qualify as a regulated investment company under the Code, the
following requirements must also be satisfied: (a) at least 90% of the Fund's
annual gross income must be derived 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 Fund's principal business of investing in stock or
securities) and other income (including but not limited to gains from options,
futures or forward contracts)
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derived with respect to its business of investing in such stock, securities or
currencies; (b) the Fund must 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; and (c) for taxable years beginning before August 5, 1997, the Fund,
in general, must derive less than 30% of its gross income in a taxable year from
the sale or other disposition of securities or options thereon held for less
than three months.
Each Fund must also distribute or be deemed to distribute to its shareholders
at least 90% of its net investment income (which, for this purpose, includes net
short-term capital gains) earned in each taxable year. Although a Fund must
ordinarily make such distributions during the taxable year in which it realized
the net investment income, in certain circumstances, the Fund may make such
distributions in the following taxable year. Furthermore, distributions to a
shareholder of record declared in October, November or December of one taxable
year and paid by January 31 of the following taxable year are treated as paid by
December 31 of the first taxable year. The Funds intend to pay out substantially
all of their net investment income and net realized capital gains (if any) for
each year.
EXCISE TAX. A 4% non-deductible excise tax will be imposed on each Fund to
the extent it does not meet certain minimum distribution requirements by the end
of each calendar year. Each 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 PORTFOLIO INVESTMENTS. Except as provided herein, gains and
losses on the sale of portfolio securities by a Fund will 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 (including tax-exempt
obligations purchased after April 30, 1993) purchased by a 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 an option granted by a Fund lapses or is terminated through a closing
transaction, such as a repurchase by the Fund of the option from its holder, the
Fund will realize a short-term capital gain or loss, depending on whether the
premium income is greater or less than the amount paid by the Fund in the
closing transaction. Some realized capital losses may be deferred if they
result from a position which is part of a "straddle," discussed below. If
securities are sold by a Fund pursuant to the exercise of a call option written
by it, the Fund will add the premium received to the sale price of the
securities delivered in determining the amount of gain or loss on
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the sale. If securities are purchased by a Fund pursuant to the exercise of a
put option written by it, the Fund will subtract the premium received from its
cost basis in the securities purchased.
The amount of any gain or loss realized by a Fund on closing out a regulated
futures contract, dealer equity option, or a nonequity option will generally
result in a realized capital gain or loss for federal income tax purposes. Such
contracts and options held at the end of each fiscal year will be required to be
"marked to market" for federal income tax purposes pursuant to Section 1256 of
the Code. In this regard, they will be deemed to have been sold at market value.
Under Section 1256 of the Code, sixty percent (60%) of any net gain or loss
recognized on these deemed sales and sixty percent (60%) of any net realized
gain or loss from any actual sales, will generally be treated as long-term
capital gain or loss, and the remainder will be treated as short-term capital
gain or loss. Transactions that qualify as designated hedges are excepted from
the "mark-to-market" rule and the "60%/40%" rule.
Under Section 988 of the Code, a Fund will generally recognize ordinary income
or loss to the extent gain or loss realized on the disposition of portfolio
securities is attributable to changes in foreign currency exchange rates. In
addition, gain or loss realized on the disposition of a foreign currency forward
contract, futures contract, option or similar financial instrument, or of
foreign currency itself, will generally be treated as ordinary income or loss.
The Funds will attempt to monitor Section 988 transactions, where applicable, to
avoid adverse federal tax impact.
Offsetting positions held by the Funds involving certain financial forward,
futures or options contracts may be considered, for federal income tax purposes,
to constitute "straddles." "Straddles" are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
"straddles" is governed by Section 1092 of the Code which, in certain
circumstances, overrides or modifies the provisions of Section 1256 of the Code,
described above. If a Fund were treated as entering into "straddles" by
engaging in certain financial forward, futures or option contracts, such
straddles could be characterized as "mixed straddles" if the futures, forwards,
or options comprising a part of such straddles were governed by Section 1256 of
the Code. A Fund may make one or more elections with respect to "mixed
straddles." Depending upon which election is made, if any, the results with
respect to the Fund may differ. Generally, to the extent the straddle rules
apply to positions established by a Fund, losses realized by the Fund may be
deferred to the extent of unrealized gain in any offsetting positions.
Moreover, as a result of the straddle and the conversion transaction rules,
short-term capital loss on straddle positions may be recharacterized as long-
term capital loss, and long-term capital gain may be characterized as short-term
capital gain or ordinary income.
If a 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.
If a Fund purchases shares in a "passive foreign investment company" ("PFIC"),
the Fund may be subject to federal income tax and an interest charge imposed by
the Internal Revenue
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Service (the "IRS") upon certain distributions from the PFIC or the Fund's
disposition of its PFIC shares. If a Fund invests in a PFIC, the Fund intends to
make an available election to mark-to-market its interest in PFIC shares. Under
the election, the Fund will be treated as recognizing at the end of each taxable
year the difference, if any, between the fair market value of its interest in
the PFIC shares and its basis in such shares. In some circumstances, the
recognition of loss may be suspended. The Fund will adjust its basis in the PFIC
shares by the amount of income (or loss) recognized. Although such income (or
loss) will be taxable to the Fund as ordinary income (or loss) notwithstanding
any distributions by the PFIC, the Fund will not be subject to federal income
tax or the interest charge with respect to its interest in the PFIC under the
election.
Income and dividends received by the Fund from sources within foreign
countries and gains on the disposition of foreign securities may be subject to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes.
TAXATION OF A SEPARATE ACCOUNT OF A PARTICIPATING INSURANCE COMPANY. Under
the Code, the investments of a segregated asset account, such as the separate
accounts of the Participating Insurance Companies, must be "adequately
diversified" in order for the holders of the VA Contracts or VLI Policies
underlying the account to receive the tax-favored tax treatment generally
afforded holders of annuities or life insurance policies.
In general, the investments of a segregated asset account are considered to be
"adequately diversified" only if (i) no more than 55% of the value of the total
assets of the account is represented by any one investment; (ii) no more than
70% of the value of the total assets of the account is represented by any two
investments; (iii) no more than 80% of the value of the total assets of the
account is represented by any three investments; and (iv) no more than 90% of
the value of the total assets of the account is represented by any four
investments. In general, all securities of the same issuer are treated as a
single investment for such purposes. However, Treasury Regulations provide a
"look-through rule" with respect to a segregated asset account's investments in
a regulated investment company for purposes of the applicable diversification
requirements, provided certain conditions are satisfied by the regulated
investment company. In particular, if the beneficial interests in the regulated
investment company are held by one or more segregated asset accounts of one or
more insurance companies, and if public access to such regulated investment
company is available exclusively through the purchase of a VA Contract or VLI
Policy, then a segregated asset account's beneficial interest in the regulated
investment company is not treated as a single investment. Instead, a pro rata
portion of each asset of the regulated investment company is treated as an asset
of the segregated asset account.
Each Fund intends to satisfy the relevant conditions at all times to enable
the corresponding separate accounts to be "adequately diversified."
Accordingly, each separate account of the Participating Insurance Companies will
be able to treat its interests in a Fund as ownership of a pro rata portion of
each asset of the Fund, so that individual holders of the VA Contracts or VLI
Policies underlying the separate account will qualify for favorable federal
income tax treatment under the Code.
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For information concerning the federal income tax consequences for the holders
of VA Contracts and VLI Policies, such holders should consult the prospectus
used in connection with the issuance of their particular contracts or policies
and should consult their own tax advisors.
CAPITAL GAIN DISTRIBUTIONS
Distributions which are designated by a Fund as capital gain distributions
will be taxed to shareholders as long-term term capital gain (to the extent of
the Fund's actual net capital gains 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 ordinarily will result in a taxable capital gain or
loss, depending on the amount received for the shares (or deemed to be received
in the case of an exchange) and the cost of the shares.
If a shareholder exchanges or otherwise disposes of Fund shares 90 days of
having acquired such shares and if, as 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 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-month holding requirement to a period of not less than the greater of 31
days or the period between regular dividend distributions where a 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). The amount of tax payable by an individual or corporation,
however, may be affected by a combination of tax laws covering, for example,
deductions, credits, deferrals, exemptions, sources of income and other matters.
OTHER MATTERS. Investors should be aware that the investments to be made by
the Funds may involve sophisticated tax rules that may result in income or gain
recognition by the Funds without corresponding current cash receipts. Although
each Fund will seek to avoid significant noncash income, such noncash income
could be recognized by a 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 tax considerations generally
affecting investments in the Portfolio. Each investor is urged to consult his
or her tax advisor regarding specific questions as to Federal, state, local or
foreign taxes.
CAPITAL STOCK
Wells Fargo Variable Trust, an open-end, management investment company, was
organized as a Delaware Business Trust on March 10, 1999. As of the date of
this SAI, Wells Fargo Variable Trust's Board of Trustees has authorized the
issuance of three series of shares, each representing an unlimited number of
beneficial interests -- the Corporate Bond Fund, the Large Company Growth Fund,
and the Small Cap Fund -- and the Board of Trustees may, in the future,
authorize the creation of additional investment portfolios.
All shares of a 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 a
Fund's fundamental investment policy would be voted upon only by shareholders of
the Fund involved. Additionally, approval of an advisory contract is a matter to
be determined separately by Fund. Approval by the shareholders of one Fund is
effective as to that Fund whether or not sufficient votes are received from the
Shareholders of the other investment portfolios to approve the proposal as to
those investment portfolios. As used in the Prospectus and in this SAI, 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 shareholders of more than 50% of the
35
<PAGE>
outstanding interests 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 Wells Fargo
Variable Trust as a whole, means the vote of the lesser of (i) 67% of Wells
Fargo Variable Trust's shares represented at a meeting if the shareholders of
more than 50% of Wells Fargo Variable Trust's outstanding shares are present in
person or by proxy, or (ii) more than 50% of Wells Fargo Variable Trust's
outstanding shares. Shareholders are entitled to one vote for each full share
held and fractional votes for fractional shares held.
Wells Fargo Variable 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.
However, Wells Fargo Variable Trust has undertaken to hold a special meeting of
its shareholders for the purpose of voting on the question of removal of a
Trustee or Trustees if requested in writing by the shareholders of at least 10%
of Wells Fargo Variable Trust's outstanding voting shares, and to assist in
communicating with other shareholders as required by Section 16(c) of the 1940
Act.
Each share of a 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
Wells Fargo Variable Trust, shareholders of a Fund are entitled to receive the
assets attributable to the Fund that are available for distribution, and a
distribution of any general assets not attributable to a particular investment
portfolio that are available for distribution in such manner and on such basis
as the Trustees in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares, when
issued as described in the Prospectus, will be fully paid and non-assessable by
Wells Fargo Variable Trust.
Set forth below 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 the voting
securities of a Fund as a whole.
5% OWNERSHIP AS OF NOVEMBER 1, 1998
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE
NAME OF FUND OF SHAREHOLDER OF CLASS CAPACITY
------------ -------------- -------- --------
<S> <C> <C> <C>
Fortis Benefits [ %] Record
P.O. Box 64272
St. Paul, MN 55164
Corporate Bond Fund American Skandia Life [____%] Record
P.O. BOX 883
Shelton, CT 06484
Fortis Benefits [ %] Record
P.O. Box 64272
St. Paul, MN 55164
Large Company Growth American Skandia Life 99.94% Record
P.O. Box 883
Shelton, CT 06484
</TABLE>
36
<PAGE>
<TABLE>
<S> <C> <C> <C>
Fortis Benefits [ %] Record
P.O. Box 64272
St. Paul, MN 55164
Small Cap American Skandia Life [99.79%] Record
P.O. Box 883
Shelton, CT 06484
</TABLE>
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 Registration Statement, including the Prospectus, the SAI and the exhibits
filed therewith, may be examined at the office of the SEC 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 Funds' Prospectus.
INDEPENDENT AUDITORS
KPMG LLP has been selected as the independent auditors for Wells Fargo
Variable 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.
37
<PAGE>
APPENDIX
The following is a description of the ratings given by Moody's and S&P to
corporate bonds and 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 have speculative
characteristics as well. Moody's applies numerical modifiers: 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 bonds are "AAA,""AA,""A" and
"BBB." Bonds rated "AAA" have the highest ratings 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 issued 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 an "adequate capacity" 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.
CORPORATE COMMERCIAL PAPER
MOODY'S: The highest rating for corporate commercial paper is "P-1" (Prime-
1). Issuers rated "P-1" have a "superior capacity for repayment of short-term
promissory obligations." Issuers rated "P-2" (Prime-2) "have a strong capacity
for repayment of short-term promissory obligations," but earnings trends, while
sound, will be subject to more variation.
S&P: The "A-1" rating for corporate commercial paper indicates that the
"degree of safety regarding timely payment is either overwhelming or very
strong." Commercial paper with "overwhelming safety characteristics" will be
rated "A-1+." Commercial paper with a strong capacity for timely payments on
issues will be rated "A-2."
A-1
<PAGE>
WELLS FARGO VARIABLE TRUST
FILE NOS. 333-_____; 811-_____
PART C
OTHER INFORMATION
Item 23. Exhibits.
---------
Exhibit
Number Description
------- -----------
1 - Form of Declaration of Trust, to be filed by amendment.
2 - Form of By-Laws, to be filed by amendment.
3 - Not applicable
4(a) - Form of Investment Advisory Contract with Wells Fargo
Bank, N.A., to be filed by amendment.
(b)(i) - Form of Sub-Advisory Contract with Wells Capital
Management, Inc., to be filed by amendment.
(ii) - Form of Sub-Advisory Contract with Barclays Global Fund
Advisors, to be filed by amendment.
5(a) - Form of Distribution Agreement, to be added by amendment
(b) - Form of Selling Agreement, to be added by amendment.
6 - Not applicable.
7 - Form of Custody Agreement with Norwest Bank Minnesota,
N.A., to be filed by amendment.
8(a) - Form of Participation Agreement with American Skandia
Life Assurance Corporation, to be filed by amendment.
(b) - Form of Administration Agreement with Wells Fargo Bank,
N.A., to be filed by amendment.
(c) - Form of Agency Agreement with Wells Fargo Bank, N.A., to
be filed by amendment.
(d) - Form of Shareholder Servicing Plan, to be filed by
amendment.
(e) - Form of Shareholder Servicing Agreement, to be filed by
amendment.
9 - Form of Legal Opinion.
10 - Not applicable.
11 - Not applicable.
C-1
<PAGE>
12 - Not applicable.
13 - Not applicable.
14 - Not applicable.
15 - Form of Rule 18f-3 Plan, to be added by amendment.
Item 24. Persons Controlled by or Under
Common Control with the Fund.
----------------------------
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 and its four Funds. 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.
------------------------------
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, except those set forth below, 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. Set forth below are the names and principal businesses
of the directors and executive officers of Wells Fargo Bank who are or during
the past two fiscal years have been engaged in any other business, profession,
vocation or employment of a substantial nature for their own account or in the
capacity of director, officer, employee, partner or trustee. All the directors
of Wells Fargo Bank also serve as directors of Wells Fargo & Company.
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
H. Jesse Arnelle Senior Partner of Arnelle, Hastie, McKee,
Director Wills & Greene
455 Market Street
San Francisco, CA 94105
Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408
Michael R. Bowlin Chairman of the Board, Chief Executive Officer,
Chief Operating
C-2
<PAGE>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
Officer and President of Atlantic
Richfield Co. (ARCO)
Highway 150
Santa Paula, CA 93060
Edward Carson Chairman of the Board and Chief Executive Officer
of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Director of Aztar Corporation
2390 East Camelback Road Suite 400
Phoenix, AZ 85016
Director of Castle & Cook, Inc.
10900 Wilshire Blvd.
Los Angeles, CA 90024
William S. Davila President and Director of The Vons Companies, Inc.
Director 618 Michillinda Avenue
Arcadia, CA 91007
Officer of Western Association of Food Chains
825 Colorado Blvd. #203
Los Angeles, CA 90041
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Co.
P.O. Box 1000
Lebec, CA 93243
Director of Turner Casting Corp.
P.O. Box 1099
Cudahy, CA 90201
Director of The Bakersfield Californian
P.O. Box 440
1707 I Street
Bakersfield, CA 93302
Director of Kern County Economic Development Corp.
P.O. Box 1229
2700 M Street, Suite 225
Bakersfield, CA 93301
Chairman of the Board of Trustees of Whittier
College
13406 East Philadelphia Avenue
P.O. Box 634
Whittier, CA 90608
Paul Hazen Chairman of the Board of Directors
Chairman of the and Chief Executive Officer of
C-3
<PAGE>
Board of Directors Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
Director of Pacific Telesis Group
130 Kearny Street
San Francisco, CA 94108
Director of Phelps Dodge Corp.
2600 North Central Avenue
Phoenix, AZ 85004
Director of Safeway Inc.
Fourth and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Accounting Professor and Dean Emeritus of
Director Graduate School of Business, Stanford University
Stanford, CA 94305
Director of Homestake Mining Co.
650 California Street
San Francisco, CA 94108
Director of California Water Service Company
1720 North First Street
San Jose, CA 95112
Director of Boise Cascade Corp.
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of Enron Corp.
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
C-4
<PAGE>
Thomas L. Lee Chairman and Chief Executive Officer
of The Newhall Land and Farming Company
10302 Avenue 7 1-2
Firebaugh, CA 93622
Director of Calmat Co.
501 El Charro Rod
Pleasanton, CA 94588
Director of the Los Angeles Area Chamber of
Commerce
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Ellen M. Newman President of Ellen Newman Associates
Director 323 Geary Street, Suite 507
San Francisco, CA 94102
Chair of Board of Trustees of
University of California at San Francisco
Foundation
250 Executive Park Blvd., Suite 2000
San Francisco, CA 94143
Director of American Conservatory Theater
30 Grant Avenue
San Francisco, CA 94108
Director of California Chamber of Commerce
1201 K Street, 12th Floor
Sacramento, CA 95814
Philip J. Quigley Chairman, Chief Executive Officer and
Director Director of Pacific Telesis Group
130 Kearney Street, Rm. 3700
San Francisco, CA 94108
Director of Varian Associates
3050 Hansen Way
P.O. Box 10800
Palo Alto, CA 94303
Carl E. Reichardt Director of Ford Motor Company
Director The American Road
Dearborn, MI 48121
Director of Hospital Corporation of America,
HCA-Hospital Corp. of America
One Park Plaza
Nashville, TN 37203
C-5
<PAGE>
Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Donald B. Rice President, Chief Operating Officer and Director of
Director Teledyne, Inc.
2049 Century Park East
Los Angeles, CA 90067
Director of Vulcan Materials Company
One Metroplex Drive
Birmingham, AL 35209
Retired Secretary of the Air Force
Richard J. Stegemeier Chairman (Emeritus) of Unocal Corp
44141 Yucca Avenue
Lancaster, CA 93534
Director of Foundation Health Corporation
166 4th
Fort Irwin, CA 92310
Director of Halliburton Company
3600 Lincoln Plaza
500 North Alcard Street
Dallas, TX 75201
Director of Northrop Grumman corp.
1840 Century Park East
Los Angeles, CA 90067
Director of Outboard Marine Corporation
100 Seahorse Drive
Waukegan, IL 60085
Director of Pacific Enterprises
555 West Fifth Street Suite 2900
Los Angeles, CA 90031
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Susan G. Swenson President and Chief Executive Officer of
Director Cellular One 651 Gateway Blvd.
San Francisco, CA 94080
C-6
<PAGE>
David M. Tellep Chairman of the Board of Directors and
Chief Executive Officer of Lockheed Martin Corp.
6801 Rockledge Drive
Bethesda, MD 20817
Director of Edison International and
Southern California Edison Company
2244 Walnut Grove Ave.
Rosemead, CA 91770
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Chang-Lin Tien Chancellor of University of California at Berkeley
Director UC at Berkeley
Berkeley, CA 94720
John A. Young President, Director and Chief Executive Officer of
Director Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
William F. Zuendt President and Chief Operating Officer of
President Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
Director of 3Com Corp.
5400 Bayfront Plaza
P.O. Box 58145
Santa Clara, CA 95052
Director of MasterCard International
888 Seventh Avenue
New York, NY 10106
Trustee of Golden Gate University
536 Mission Street
San Francisco, CA 94163
Barclays Global Fund Advisors ("BGFA"), a wholly-owned subsidiary of
Barclays Global Investors, N.A. ("BGI", formerly, Wells Fargo Institutional
Trust Company), serves as sub-adviser to the Asset Allocation and U.S.
Government Allocation Funds of the Trust and as adviser or sub-adviser to
certain other open-end management investment companies.
The directors and officers of BGFA consist primarily of persons who
during the past two years have been active in the investment management business
of the former sub-adviser to the Asset Allocation and U.S. Government
Allocation Funds, Wells Fargo Nikko Investment Advisors ("WFNIA") and, in some
cases, the service
C-7
<PAGE>
business of BGI. With the exception of Irving Cohen, each of the directors and
executive officers of BGFA will also have substantial responsibilities as
directors and/or officers of BGI. To the knowledge of the Registrant, except as
set forth below, 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.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- ----------------- --------------------------------
<S> <C>
Frederick L.A. Grauer Director of BGFA and Co-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
Patricia Dunn Director of BGFA and C-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
Lawrence G. Tint Chairman of the Board of Directors of BGFA
Chairman and Director and Chief Executive Officer of BGI
45 Fremont Street, San Francisco, CA 94105
Geoffrey Fletcher Chief Financial Officer of BGFA and BGI since May 1997
Chief Financial Officer 45 Fremont Street, San Francisco, CA 94105
Managing Director and Principal Accounting Officer at
Bankers Trust Company from 1988 - 1997
505 Market Street, San Francisco, CA 94105
</TABLE>
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 MasterWorks Funds Inc.,
Stagecoach Funds, Inc. and Stagecoach Trust, 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 Advisors 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, administrator and custodian and transfer and dividend
disbursing agent at 525 Market Street, San Francisco, California 94105.
C-8
<PAGE>
(c) BGFA and BGI maintain all Records relating to their services as
sub-adviser and custodian, respectively, to the Asset Allocation and U.S.
Government Allocation Funds at 45 Fremont Street, San Francisco, California
94105.
(d) Stephens maintains all Records relating to its services as
sponsor, co- administrator and distributor at 111 Center Street, Little Rock,
Arkansas 72201.
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.
-------------
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of its most current annual report to
shareholders, upon request and without charge.
(d) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the provisions
set forth above in response to Item 27, or otherwise, the
registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses
incurred or paid by a trustee, officer or controlling person of
the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(e) Registrant undertakes to hold a special meeting of its
shareholders for the purpose of voting on the question of removal
of a trustee or trustees if requested in writing by the holders
of at least 10% of the Trust's outstanding voting securities, and
to assist in communicating with other shareholders as required by
Section 16(c) of the Investment Company Act of 1940.
C-9
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereto
duly authorized in the City of Little Rock, State of Arkansas on the 11th day of
March, 1999.
WELLS FARGO VARIABLE TRUST
By /s/ Richard H. Blank, Jr.
----------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
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
-------------------------
Marco E. Adelfio
* Trustee
-------------------------
Janis E. Fonda
* Trustee
-------------------------
Eileen M. Smiley
/s/ Richard H. Blank, Jr. Secretary and Treasurer 3/11/99
-------------------------
Richard H. Blank, Jr. (Principal Financial Officer)
*By: /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
March 11, 1999
<PAGE>
WELLS FARGO VARIABLE TRUST
FILE NOS. 333- ; 811-
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EX-99.B9 Form of Opinion of Counsel
<PAGE>
EXHIBIT 99.B9
[MORRISON & FOERSTER LLP LETTERHEAD]
March 11, 1999
Wells Fargo Variable Trust
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Common Stock of
Wells Fargo Variable Trust
--------------------------
Ladies/Gentlemen:
We refer to the Registration Statement on Form N-1A (SEC File Nos. 333-
_____ and 811-______) (the "Registration Statement") of Wells Fargo Variable
Trust (the "Trust") relating to the registration of an indefinite number of
shares of common stock of the Trust (collectively, the "Shares").
We have been requested by the Trust to furnish this opinion as Exhibit 9
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 corporate action, 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.
<PAGE>
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,
MORRISON & FOERSTER LLP
