Wells Fargo Bank, N.A. Collective Investment Funds. annual report

Wells Fargo Bank, N.A. Collective Investment Funds 2014 annual report

Table of Contents Page Independent Auditors Report 1 Financial Statements: Statement of Operations 3 Statement of Changes in Net Assets 4 Statement of Selected Per Unit Data 5 Supplemental Schedules 6 Notes to Financial Statements 8 Regulatory Statement 12

WELLS FARGO BANK COLLECTIVE INVESTMENT FUNDS The Fund listed here was reorganized into a similar style Wells Fargo Collective Fund effective September 9, 2014. The following report represents the final financial statements for the Fund covering the period January 1, 2014 through September 9, 2014 (reorganization date). International Equity CIT (Formerly Wells Fargo/Thornburg International CIT)

KPMG LLP Two Financial Center 60 South Street Boston, MA 02111 Independent Auditors Report The Unitholders and Wells Fargo Bank. N.A. We have audited the accompanying financial statements of Wells Fargo International Equity CIT, formerly Wells Fargo/Thornburg International CIT ( the Fund ), which comprise the statement of operations, the statement of changes in net assets, and the statement of selected per unit data for the period ended September 9, 2014 (date of reorganization), and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the results of its operations, the changes in their net assets, and their selected per unit data for the period ended September 9, 2014 (date of reorganization), in accordance with U.S. generally accepted accounting principles. KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ( KPMG International ), a Swiss entity.

Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary schedules of investments purchased and sold or redeemed and the schedules of monthly values are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Boston, Massachusetts January 6, 2015 2

3 WELLS FARGO INTERNATIONAL EQUITY CIT Statement of Operations Period ended September 9, 2014 (reorganization date) Investment income: Dividend income from unaffiliated investments (net of foreign taxes withheld of $582,610) $ 12,685,594 Dividend income from affiliated short-term investment 49,530 Total income 12,735,124 Expenses: Accounting/custody fees 2,672,352 Program fees (Class AT) 331,729 Total expenses 3,004,081 Net investment income 9,731,043 Realized and unrealized gain (loss) on investment and foreign currency transactions Net realized gain on: Investments 75,674,735 Foreign currency transactions 4,756,695 Net change in unrealized appreciation (depreciation) of: Investments (116,421,030) Foreign currency translation of other assets and liabilities (2,461,642) Net loss on investment and foreign currency transactions (38,451,242) Net decrease in net assets resulting from operations $ (28,720,199) See accompanying notes to financial statements. 3

4 WELLS FARGO INTERNATIONAL EQUITY CIT Statement of Changes in Net Assets Period ended September 9, 2014 (reorganization date) Increase/(decrease) in net assets from operations: Net investment income $ 9,731,043 Net realized gain on investment and foreign currency transactions 80,431,430 Net change in unrealized appreciation (depreciation) of investment and foreign currency translation on other assets and liabilities (118,882,672) Net decrease in net assets resulting from operations (28,720,199) Participant unit transactions: Class AT proceeds from issuance of units (1,529,281 units) 18,138,977 Class AT payments for withdrawals (1,826,152 units) (21,640,618) Class AT merger (6,236,886 units) (74,023,727) Net change (77,525,368) Class F proceeds from issuance of units (6,425,720 units) 77,109,591 Class F payments for withdrawals (9,754,546 units) (117,151,224) Class F merger (45,635,468 units) (549,756,802) Net change (589,798,435) Class N proceeds from issuance of units (1,899,568 units) 20,046,921 Class N payments for withdrawals (1,503,827 units) (15,963,419) Class N merger (8,828,369 units) (93,909,124) Net change (89,825,622) Class N25 proceeds from issuance of units (61,724 units) 749,823 Class N25 payments for withdrawals (33,289 units) (407,488) Class N25 merger (305,779 units) (3,718,765) Net change (3,376,430) Change in net assets derived from unit transactions (760,525,855) Total decrease in net assets (789,246,054) Net assets: Beginning of period (6,533,757 Class AT units, 48,964,294 Class F units, 8,432,628 Class N units, 277,344 Class N25 units) 789,246,054 End of period (0 Class AT units, 0 Class F units, 0 Class N units, 0 Class N25 units) $ 0 See accompanying notes to financial statements. 4

5 WELLS FARGO INTERNATIONAL EQUITY CIT Statement of Selected Per Unit Data Period ended September 9, 2014 (reorganization date) Class AT Class F Class N Class N25 Per unit operating performance: Unit value, beginning of period $ 12.37 $ 12.50 $ 11.04 $ 12.64 Income from investment operations: Net investment income (1).11.16.14.14 Net realized and unrealized loss on investments (.61) (.61) (.54) (.62) Net asset value at merger (11.87) (12.05) (10.64) (12.16) Total from investment operations (12.37) (12.50) (11.04) (12.64) Unit value, end of period $ $ $ $ Total return per unit (4.01)% (3.60)% (3.63)% (3.80)% Net assets, end of period Ratios: Ratio of expenses to average net assets (2) 1.25% 0.62% 0.68% 0.93% Ratio of net investment income to average net assets (2) 1.33% 1.96% 1.92% 1.66% (1) Based on average number of units outstanding. (2) Annualized. See accompanying notes to financial statements. 5

6 WELLS FARGO INTERNATIONAL EQUITY CIT Supplemental Schedule of Investments Purchased and Sold or Redeemed Period ended September 9, 2014 (reorganization date) Purchased Sold or redeemed Cost Cost Proceeds Merger (1) Gain Short-term investments $ 285,400,934 $ 306,943,177 $ 306,943,177 $ (12,213,657) $ - Equities 883,812,089 811,135,249 891,927,710 (706,941,576) 75,674,735 Total investments $ 1,169,213,023 $ 1,118,078,426 $ 1,198,870,887 $ (719,155,233) $ 75,674,735 (1) This amount represents the cost of investments at the date of the merger. See accompanying independent auditors' report. 6

7 Class AT Class F Class N Class N25 Units Unit Units Unit Units Unit Units Unit outstanding valuation outstanding valuation outstanding valuation outstanding valuation January 31, 2014 6,562,211 $ 11.58 48,716,747 $ 11.71 8,398,565 $ 10.34 283,771 $ 11.84 February 28, 2014 6,660,106 12.02 48,834,465 12.16 8,331,093 10.74 286,902 12.30 March 31, 2014 6,704,643 11.81 49,680,403 11.96 8,694,427 10.56 287,211 12.09 April 30, 2014 6,365,337 11.82 49,467,514 11.97 9,371,815 10.58 289,515 12.10 May 31, 2014 6,426,948 11.95 46,404,535 12.11 9,318,425 10.69 304,648 12.23 June 30, 2014 6,477,640 12.01 46,151,867 12.17 9,263,809 10.75 293,386 12.30 July 31, 2014 6,452,774 11.75 46,042,770 11.91 8,999,971 10.52 307,286 12.03 August 31, 2014 6,220,554 11.88 45,649,123 12.06 8,849,058 10.65 306,661 12.17 September 9, 2014 (reorganization date) 0 0.00 0 0.00 0 0.00 0 0.00 See accompanying independent auditors' report. WELLS FARGO INTERNATIONAL EQUITY CIT Supplemental Schedule of Monthly Values Period ended September 9, 2014 (reorganization date) 7

8 WELLS FARGO BANK INTERNATIONAL EQUITY CIT (FORMERLY WELLS FARGO/THORNBURG INTERNATIONAL CIT) Notes to Financial Statements September 9, 2014 (reorganization date) (1) Fund Description The Wells Fargo Bank Collective Investment Funds for Employee Benefit Trusts, identified above, (the Fund ) is established, operated, and maintained for the collective investment and reinvestment of monies contributed thereto by Wells Fargo Bank, N.A. (the Trustee and Manager) or an affiliate of the Trustee in its capacity as trustee, investment manager, or any other capacity authorized by law for retirement plans (the participants) qualified under Section 401(a) and tax-exempt under Section 501(a) of the Internal Revenue Code (IRC) of 1986, as amended. The purpose of the Fund is to provide certain qualified employee benefit plans with a vehicle for collective investment and reinvestment in a portfolio which will primarily invest its total market value in stocks of international companies that fall within the market capitalization of the Morgan Stanley Capital International All Country World Index Ex-U.S. (2) Summary of Merged and Survivor Funds The Fund covered in this report was reorganized into a similarly invested collective fund as of the closing date of this report. The Trustee determined that in the best interests of all of the funds unit holders, reorganizing the fund provided a more cost effective investment while achieving similar investment objectives. Each unit holder in the closing funds received units of the surviving fund based on a pro-rata ratio for the two funds as of the closing date. The ratio was based on the closing daily net asset value (NAV) for each fund as of the reorganization date of September 9, 2014. Each unit holder received a proportionate amount of units of the new fund using the ratio of the closing fund s NAV divided by the surviving fund s NAV according to the table below. All assets of the International Equity Fund (closing fund) were redeemed and transferred in-kind to the Causeway International Equity Value Fund (surviving fund). No transaction expenses were incurred as a result of the in-kind transition. Additionally, all accrued expenses including but not limited to administrative costs and foreign tax withholding liabilities were transferred directly to the surviving fund. Merging Fund Name Wells Fargo International Equity CIT Merging NAV Net Assets Units Surviving Fund Name $11.83 721,344,705 60,999,506.515 Wells Fargo/Causeway International Equity CIT Surviving Fund NAV Net Assets Units Merger Ratio $11.83 721,344,705 60,999,506.515 1.00 (3) Summary of Significant Accounting Policies The following is a summary of significant accounting policies followed by the Trustee in the preparation of the Fund s financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America and the Wells Fargo Bank Declaration of Trust Establishing Investment Funds for Employee Benefit Trusts, as amended and restated effective January 22, 2014 (Trust Agreement). (a) Basis of Accounting The accompanying financial statements have been presented on the accrual basis of accounting. 8

9 WELLS FARGO BANK INTERNATIONAL EQUITY CIT (FORMERLY WELLS FARGO/THORNBURG INTERNATIONAL CIT) Notes to Financial Statements September 9, 2014 (reorganization date) (b) (c) Fund Valuation Valuation of the Fund s units occurs daily. Unit values are determined by dividing the value of the Fund s net assets by the total number of participants units outstanding on the valuation date. Valuation of Investments and Presentation The Fund s investments are valued on the basis of market valuations, where available, as provided by independent pricing services. Securities for which market valuations are not readily available are valued at fair value as determined by the Trustee. Market valuations are generally determined as follows: Securities traded on security exchanges are valued at closing market prices on the valuation date. Securities traded in the over-the-counter markets are valued at the last sale on the valuation date (if any), otherwise at the last reported bid price. Government and agency obligations are valued based upon the most recent bid quotation for identical or similar obligations. Fixed income securities are valued based upon the most recent bid quotation obtained from major market makers or security exchanges. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange ("NYSE") and therefore may not fully reflect trading or events that occur after the close of the principle exchange in which the foreign investments are traded but before the close of the NYSE. If such trading or events are expected to materially affect the value of the investments, then those investments are fair valued following procedures approved by the Trustees. (d) Investment Transactions and Related Investment Income Investment transactions are accounted for on the trade date. The cost of investments sold is computed on an average cost basis. Dividend income is recorded on the ex-dividend date. Foreign dividends are recorded when information is confirmed by the foreign custodian. The Fund amortizes premiums and accretes market discounts and original issue discounts to the call or the maturity date. Premium amortization and discount accretion amounts are included in interest income. (e) (f) (g) Distributions The Fund does not distribute its investment income to participants, but rather reinvests their investment income back into their respective funds. Purchases and Redemptions of Units Participants' purchases and redemptions of units from the Fund are based on unit values as of the valuation date. Purchases and redemptions of units may occur on a daily basis. Participants' Net Assets Participants have a proportionate, undivided interest in the Fund s net assets. 9

10 WELLS FARGO BANK INTERNATIONAL EQUITY CIT (FORMERLY WELLS FARGO/THORNBURG INTERNATIONAL CIT) Notes to Financial Statements September 9, 2014 (reorganization date) (h) Income Taxes The Fund maintains tax-exempt status by operating as a collective trust fund regulated by the Office of the Comptroller of the Currency and as such no provision for income taxes is required. It is intended that the Fund be exempt from taxation under Section 501(a) of the Code and qualify as a group trust under Revenue Ruling 81-100 and other applicable Internal Revenue Service rules and regulations. The Fund follows accounting policies under ASC 740, Income Taxes, regarding how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. Management has analyzed the Fund s tax positions taken in all potential open tax years and has concluded that as of September 10, 2014, there are no positions which would call into question the Funds tax-exempt status. As such, the Funds do not have an accrual for uncertain tax positions. The Fund s federal and state fiduciary and Federal excise tax returns for tax years for which the applicable statutes of limitations have not expired (open tax years: December 31, 2010; December 31, 2011; December 31, 2012; December 31, 2013; and an open tax period ending September 9, 2014) are subject to examination by the Internal Revenue Service and state jurisdictions. As of and during the period ended September 9, 2014, the Fund did not have a liability for any unrecognized tax benefits. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period, the Fund did not incur any interest or penalties. (i) Expenses In accordance with the Trust Agreement, the Trustee may charge the Fund for custody, accounting, audit fees and certain other expenses incurred. The Trust Investment Committee (the "Committee") of Wells Fargo Bank, N.A. reviews and determines the annual accounting fees charged to the Fund. The Committee also determines any fee cap associated with respect to fees charged to the Fund. Please refer to the Fund Disclosure Document for specific fund expense rates and any caps that may be in effect. The Trustee has agreed to bear all operating expenses in excess of a certain percent of the Funds' respective net assets ("net operating expense ratio cap"). The Fund's investment management fee is not included in the operating expenses to which the net operating expense ratio cap applies. The effects of this expense arrangement have been reflected in the Statement of Operations. (j) (k) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Trustee to typically make estimates and assumptions that affect the reported amounts of income and expenses during the reporting period. Since all assets and liabilities of the closing fund were allocated directly to the surviving fund, no estimates were required in the making of this report. No pending activity or accruals remain in the closing fund. Cash Overdrafts The Fund may have overnight cash overdrafts. Cash overdrafts are funded by the Trustee and settled the next morning. No cash overdraft fees were assessed to the Funds for the period ending September 9, 2014. 10

11 WELLS FARGO BANK INTERNATIONAL EQUITY CIT (FORMERLY WELLS FARGO/THORNBURG INTERNATIONAL CIT) Notes to Financial Statements September 9, 2014 (reorganization date) (l) Regulatory Requirements The Fund is a collective investment fund authorized under the Office of the Comptroller of the Currency s Regulation 9.18 (a)(2). (m) Related Party Transactions The Fund may invest in other funds maintained by the Trustee, if provided for in the Fund s Trust Agreement. The Trustee may also engage sub-advisors if the Fund is an affiliate of the Trustee. Affiliated sub-advisors to the Fund do not charge management fees to the Fund. (4) Foreign Currency Translation Investments in securities, foreign currency holdings, and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the prevailing rate of exchange at the date of valuation. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. Net realized foreign exchange gains or losses arise from sales of foreign currencies. Currency gains or losses are realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded by the Fund and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, including investments in securities, as of September 9, 2014 resulting from changes in the foreign exchange rate. Such realized and unrealized translation gains and losses are combined with the foreign currency contracts on the Fund s statement of operations and changes in net assets. As of September 9, 2014 the Fund recognized losses in relation to foreign currency translation. (5) Class Allocations The Fund issues multiple classes of units. As part of Wells Fargo s Advice Track sm investment advisory program, Class AT units are subject to investment advisory fees in accordance with the Advice Track sm program. Any Wells Fargo Fund offering N series of unit classes are subject to charges for payment of compensation to the Trustee at annual rates.03% for trustee fees and 0.00 -.20% for plan administrative expenses based on the value of such fund assets. Wells Fargo Funds offering F class units do not incur any trustee fees but may incur investment advisory fees. F units are available only in situations where Wells Fargo exercises discretion over investments. Further details of the Fund s component expenses are outlined in the Fund s Disclosure available at www.wellsfargoadvantagefunds.com key word collectives. (6) Subsequent Events The Trustee has evaluated the possibility of subsequent events impacting the Fund s financial statements. The Trustee has determined that there are no subsequent events required to be disclosed in the Fund s financial statements through January 6, 2015 the date the financial statements were available to be issued. 11

Regulatory statement Wells Fargo Bank, N.A. Participation requirements. Participation in each Fund is available to employee benefit accounts which meet the following conditions: The participating account is part of a plan and related trust qualified under Section 401(a) of the Internal Revenue Code (IRC), and which is exempt from tax under IRC Section 501 (a) or is part of a governmental plan as defined by IRC Section 818(a)(6), or a separate account maintained by a life insurance company consisting exclusively of the assets of plans described above. The participating plan or trust instrument of qualified plans adopts documents establishing Wells Fargo Bank s collective investment funds. Wells Fargo Bank, N.A. serves in a fiduciary capacity with respect to a participating account. Filing of Annual Report with Department of Labor A plan administrator receiving this Annual Report may be eligible for a simplified reporting procedure described in Department of Labor Regulations 2520.103-3 for a plan year ending on or after the end of a Fund's fiscal year. The fiscal year end for each Fund is December 31. To such eligible plan administrators, Wells Fargo Bank, N.A. as Trustee for the Funds certifies that the statements of assets and liabilities included in the Annual Report were filed with the Department of Labor on or before the date upon which the annual report of such plans is required to be filed by the plan administrators in accordance with Department of Labor Regulation 2520.103-9. The "Employer Identification Number" of each Fund is as follows: Regulatory requirement Active Management Series EIN Wells Fargo International Equity CIT 45-6651358 Collective funds are authorized under the Comptroller of the Currency's Regulation 9.18(a)(2) and are subject to other pertinent provisions of Regulation 9 as promulgated by the Comptroller of the Currency. In compliance with this Regulation, the Trustee will provide detail of Investment transactions upon request and without charge. 12