emerging markets equity income fund report · pdf filequarterly report q4 2017 wells fargo...

Quarterly Report Q1 2018 | All information is as of 3/31/2018 unless otherwise indicated.

Ticker: EQIIXPortfolio managers: Anthony Cragg, Alison Shimada, and Elaine TseSubadvisor: Wells Capital Management Inc.Category: Diversified emerging mkts

■ Maintains an active fundamental investment discipline that combines rigorous bottom-up and top-downanalysis to provide core exposure to emerging markets

■ Seeks success in emerging markets by using quantitative and qualitative screens to find companies withstrong business models, attractive growth prospects, sustainable cash-flow generation, strong financialprofiles, and above-average dividend yields

■ Attempts to exploit the inefficiencies in emerging markets by actively managing country and sector weights,seeking to maximize the benefits of stock selection

3.024.998.8124.931.421.42MSCI Emerging MarketsIndex (Net)

7.454.156.7517.133.303.30Emerging Markets EquityIncome Fund-Inst

Since inception(5/31/12)10 year5 year3 year1 year

Year todate3 month

*Returns for periods of less than one year are not annualized.

Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes ashareholder may pay on a fund. Investment return and principal value of an investment will fluctuate so that an investor’sshares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higherthan the performance data quoted and assumes the reinvestment of dividends and capital gains. Current month-endperformance is available at the fund’s website, wellsfargofunds.com. Institutional Class shares are sold without a front-endsales charge or contingent deferred sales charge.

The fund’s gross expense ratio is 1.32%. The fund’s net expense ratio is 1.23%. The manager has contractuallycommitted, through February 28, 2019, to waive fees and/or reimburse expenses to the extent necessary to cap thefund’s total annual fund operating expenses after fee waivers at 1.22% for the Institutional Class. Brokeragecommissions, stamp duty fees, interest, taxes, acquired fund fees and expenses (if any), and extraordinaryexpenses are excluded from the cap. After this time, the cap may be increased or the commitment to maintain thecap may be terminated only with the approval of the Board of Trustees. Without this cap, the fund’s returns wouldhave been lower. The expense ratio paid by an investor is the net expense ratio (the total annual fund operatingexpenses after fee waivers) as stated in the prospectus.

■ The fund outperformed its benchmark, the MSCI Emerging MarketsIndex (Net), for the 3-month period and underperformed itsbenchmark for the 12-month period that ended March 31, 2018.

■ From a sector perspective, strong stock selection in the financialsand consumer discretionary sectors were leading contributorsduring the quarter.

■ During the quarter, dividend-paying stocks outperformed the broadbenchmark and were a tailwind to relative performance.

Emerging markets began the first quarter of 2018 by extending the rallythat investors enjoyed during 2017. The continuation of global growth andtrade, combined with a weaker U.S. dollar and higher oil prices, propelledthe benchmark index to a gain of more than 8% during the month ofJanuary, the best monthly performance for emerging market equitiessince March 2016. However, a sharp correction in global equities and arise in volatility, largely driven by increasing trade tensions between theU.S. and China, led to significantly weaker emerging market performancein February and March.

Emerging markets were not immune from the broader equity marketvolatility in the latter part of the quarter as the MSCI Emerging MarketsIndex (Net) recorded two consecutive months of negative returns.Markets declined globally after U.S. President Donald Trump announcedplans to impose tariffs on steel and aluminum imports in early March andproposed an additional $50 billion in tariffs later in the month specificallytargeting China. Elsewhere, Brazil was the best-performing market duringthe first quarter. Confidence indicators have improved in the country,inflation is beginning to drift lower, and improving economic dataaccompanied by low interest rates continued to support equityperformance.

As we expected, market performance has broadened beyond the low-dividend cyclical stocks that dominated the market in 2017 and began toreward fundamentals and higher-dividend payers during the first quarter.In fact, the highest dividend-paying quintile of the benchmarkoutperformed the lowest quintile by 4.7% during the quarter. Thisdynamic was a significant tailwind for a fund that focuses on dividendyield as a leading indicator for quality companies in emerging markets.

(See pages 8–9 for important information.)

1 CM306 04-18 Wells Fargo Emerging Markets Equity Income Fund

Portfolio management note: Anthony Cragg will be retiring effective June 15, 2018.

Quarterly Report Q1 2018

■ Strong stock selection in the consumer discretionary sector was aleading contributor during the quarter and was led by PetrobrasDistribuidora S.A. The Brazilian fuel distribution company had aninitial public offering in December 2017 and has performed wellsince. The company’s stock advanced more than 38% during thequarter after announcing earnings that met analysts’ expectationsand management indicated expectations for improvements inmargins and operating efficiency. During the quarter, the fund’sinvestments in the sector outperformed the benchmark by roughly12%.

■ Investments in the financials sector were also notable contributorsduring the quarter. Specifically, Itausa - Investimentos Itau S.A. wasa significant contributor to relative performance as the Braziliancompany’s equity advanced more than 34% during the quarter. Thebank benefited from continued macroeconomic improvement inBrazil and a 25-basis-point (bp; 100 bps equal 1.00%) central bankrate cut during the quarter. Other investments in Brazilian bankssuch as Banco do Brasil S.A. and Banco Bradesco S.A. alsosupported relative results during the quarter.

■ Stock selection in the small real estate sector also contributedduring the first quarter. Specifically, the development companyChina Resources Land Ltd. contributed as shares advancedfollowing the release of solid fourth-quarter earnings.

■ An overweight to the relatively poor-performing telecommunicationservices sector, along with weak stock selection in the sector, wasthe largest detractor during the period. The sector underperformedthe broad index by more than 5% and the fund, as is consistent withour dividend focus, averaged an overweight to the sector during thequarter. Within the sector, an investment in China CommunicationsServices Corp. Ltd. was the leading detractor and the stockdeclined following an announced deleveraging by the country’sNational Congress of the Communist Party of China and an ongoingdiscussion of companies being potentially forced to cancel data-roaming fees.

■ The small health care sector was also a detractor during thequarter. Notably, the fund’s lack of exposure to the biotechnologyindustry weighed on results as the industry advanced 37.1% duringthe period. None of the listed biotechnology companies maintain adividend yield that would qualify for inclusion in the fund.

Emerging Markets Equity Income Fund versus MSCI Emerging Markets Index (Net)

-1.0

0.0

1.0

2.0

CashUtilitiesTelecommun-ication

services

Real estateMaterialsInformationtechnology

IndustrialsHealth careFinancialsEnergyConsumerstaples

Consumerdiscretionary

Value addedfrom sectorweight (%)Value addedfrom stockselection (%)Total valueadded (%)

CashUtilitiesTelecommunication

servicesReal estateMaterialsInformationtechnologyIndustrialsHealth careFinancialsEnergy

Consumerstaples


3.483.160.82-1.01-1.46-14.111.59-2.124.661.23-2.25-1.62Over/underweight

0.002.314.612.807.3827.675.182.7124.077.046.369.88MSCI EmergingMarkets Index(Net)

3.485.475.431.795.9213.566.770.5928.738.274.118.26Emerging MarketsEquity IncomeFund

1.01-1.37-4.9616.670.470.90-0.45-1.564.09-2.780.4212.01Relative return

0.002.90-3.90-2.140.811.70-0.847.414.107.51-1.17-6.05Index sectorreturn

1.011.53-8.8614.531.282.60-1.295.858.194.73-0.755.96Fund sector return

Sources: FactSet and Wells Fargo Funds Management, LLC Past performance is no guarantee of future results.

Sector weights are subject to change and may have changed since the date specified.

When reviewing the performance attribution of our portfolio, it is vital to remember that we construct our portfolio from the bottom up, one stock at a time. Each stock is included in the portfoliobased on its own investment thesis. To help manage risk, we are aware of our sector and security weights, but we do not include a holding to obtain a sector distribution to resemble an index. Ourexposure to any given sector is a result of our security selection process.

2 Wells Fargo Emerging Markets Equity Income Fund


■ The fund underperformed its benchmark for the trailing 12-monthperiod that ended March 31, 2018, based largely on a structuralunderweight to the information technology (IT) sector and a marketenvironment where high-beta, low-dividend companiesoutperformed the rest of the market.

■ The fund employs a dividend screen to identify those companieswith a dividend yield greater than the benchmark average; however,the fund typically has a focus on stocks that have a dividend yield ofat least 100 bps higher than the index average so that the fund’syield remains above the index average even if stock pricesappreciate. The focus on high dividend-yielding stocks was asignificant headwind to relative performance during the last threequarters of 2017 as the lowest-yielding equities consistentlyoutperformed their higher-yielding peers. In fact, over the trailing 12-month period, stocks in the top 20% in terms of dividend yield haveunderperformed the lowest 20% by approximately 20%. This marketdynamic reversed during the first quarter of 2018 when the top 20%of dividend-paying stocks outperformed the lowest 20% by almost5%.

■ The rotation into cyclical low-dividend equities during much of 2017weighed on performance, and, specifically, the fund’s structuralunderweight to the IT sector was a severe headwind to relativeresults. The fund’s dividend screen precludes investments in manyof the internet-based equities that have been the fastest-growingcompanies over the period. A lack of exposure to this industry wasthe largest detractor for the trailing 12-month period.

■ Investments in the consumer discretionary sector were notablecontributors over the previous year. Specifically, South Africanspecialty retail companies Mr Price Group Ltd. and TruworthsInternational Ltd. were significant contributors as both equitiesadvanced by double digits since they were purchased. They wereadded to the portfolio to capitalize on a recovery in consumerspending that accelerated based on improving political eventsduring the fourth quarter of 2017.

■ A significant underweight to the relatively poor-performingconsumer staples sector was also a notable contributor during theyear.


-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

CashUtilitiesTelecommun-ication

services

Real estateMaterialsInformationtechnology

IndustrialsHealth careFinancialsEnergyConsumerstaples


Value addedfrom sectorweight (%)Value addedfrom stockselection (%)Total valueadded (%)

CashUtilitiesTelecommunication

servicesReal estateMaterialsInformationtechnologyIndustrialsHealth careFinancialsEnergy

Consumerstaples


4.513.652.96-1.16-2.23-13.582.21-2.153.451.51-1.95-3.85Over/underweight

0.002.525.072.747.2527.075.482.4423.696.866.5710.30MSCI EmergingMarkets Index(Net)

4.516.178.031.585.0213.497.690.2927.148.374.626.45Emerging MarketsEquity IncomeFund

2.27-4.70-5.291.131.00-17.08-9.15-5.04-0.94-7.222.717.66Relative return

0.009.114.3232.4620.1739.669.5035.0725.4924.7115.5016.58Index sectorreturn

2.274.41-0.9733.5921.1722.580.3530.0324.5517.4918.2124.24Fund sector return

Sources: FactSet and Wells Fargo Funds Management, LLC Past performance is no guarantee of future results.

Sector weights are subject to change and may have changed since the date specified.




■ An overweight to and strong stock selection in the Brazilian equitymarket was the largest contributor during the quarter. The marketrallied after a regional tribunal upheld the conviction of formerPresident Lula in January, and, in February, the Brazilian centralbank cut interest rates by 25 bps. For the fund, investments in thefinancials and consumer discretionary sectors were both significantcontributors.

■ Strong stock selection in South African equities was also a notablecontributor. Specifically, having no exposure to the mediaconglomerate Naspers Ltd. and investments in specialty retailcompanies Truworths and Mr Price Group supported relativeresults.

■ Investments in South Korea were notable detractors during thequarter. A lack of exposure to the South Korean biotechnologyindustry and an investment in poor-performing Korea Electric PowerCorp. weighed on quarterly performance.


-1.0

0.0

1.0

2.0

CashOtherTaiwanSouthKorea

SouthAfrica

RussiaPakistanOtherSouth

America

Other AsiaMexicoMalaysiaMacauIndonesiaIndiaChina &Hong Kong

Brazil

Value addedfrom countryweight (%)

Value addedfrom stockselection (%)

Total valueadded (%)

CashOtherTaiwanSouth KoreaSouth AfricaRussiaPakistanOther South

AmericaOther AsiaMexicoMalaysiaMacauIndonesiaIndiaChina & Hong

KongBrazil

3.489.02-0.47-5.75-1.59-1.89-0.08-0.052.03-1.450.440.310.16-1.98-5.072.90Over/underweight

0.003.9611.2914.756.843.530.081.974.432.912.390.002.168.3030.127.27MSCI Emerging Markets Index (Net)

3.4812.9810.829.005.251.640.001.926.461.462.830.312.326.3225.0510.17Emerging Markets Equity Income Fund

1.015.11-1.49-2.959.835.96-10.78-4.08-2.714.734.62-4.201.92-1.632.326.82Relative Return

0.00-3.734.90-0.66-3.449.5510.783.400.010.917.950.00-7.18-6.951.8512.36MSCI Emerging Markets Index (Net)

1.011.383.41-3.616.3915.510.00-0.68-2.705.6412.57-4.20-5.26-8.584.1719.18Emerging Markets Equity Income Fund

Sources: FactSet and Wells Fargo Funds Management, LLC

Past performance is no guarantee of future results.

Country weights are subject to change and may have changed since the date specified.




■ An underweight to and strong stock selection in the relatively poor-performing equity market of Mexico was a significant contributorduring the trailing 12-month period. The country’s equity marketwas pressured by increasing political rhetoric from U.S. PresidentTrump, and investors feared the outcome of a potentialrenegotiation of the North American Free Trade Agreement.

■ The fund’s investment in gaming operator Wynn Macau, Ltd., madeinvestments in Macau a notable contributor during the previousyear. We have since exited the position after the chief executiveofficer of Wynn Macau’s parent company was accused ofmisconduct.

■ An underweight to China/Hong Kong and, specifically, a lack ofexposure to the Chinese internet software and services industrywere the largest detractors during the period. China’s equity marketposted a 40% gain during the year that was due largely to theroughly 65% return in the IT sector.


-8.0-7.0-6.0-5.0-4.0-3.0-2.0-1.00.01.02.03.04.05.06.0

CashOtherTaiwanSouthKorea

SouthAfrica

RussiaPakistanOtherSouth

America

Other AsiaMexicoMalaysiaMacauIndonesiaIndiaChina &Hong Kong

Brazil

Value addedfrom countryweight (%)

Value addedfrom stockselection (%)

Total valueadded (%)

CashOtherTaiwanSouth KoreaSouth AfricaRussiaPakistanOther South

AmericaOther AsiaMexicoMalaysiaMacauIndonesiaIndiaChina & Hong

KongBrazil

4.516.61-0.94-3.35-2.27-1.45-0.08-0.203.28-1.420.310.070.50-2.01-6.222.64Over/underweight

0.004.3111.7515.136.393.390.081.964.443.322.340.002.298.6328.827.16MSCI Emerging Markets Index (Net)

4.5110.9210.8111.784.121.940.001.767.721.902.650.072.796.6222.609.80Emerging Markets Equity Income Fund

2.1640.91-2.26-14.539.5316.3017.94-6.89-16.147.942.10-4.20-5.00-5.51-24.112.05Relative Return

0.005.5419.7225.2332.2820.81-17.9425.0322.320.8624.650.007.8110.2438.8426.36MSCI Emerging Markets Index (Net)

2.1646.4517.4610.7041.8137.110.0018.146.188.8026.75-4.202.814.7314.7328.41Emerging Markets Equity Income Fund

Sources: FactSet and Wells Fargo Funds Management, LLC


Country weights are subject to change and may have changed since the date specified.




During the first quarter, emerging markets moved to greater breadth of participationamong sectors and countries, as we expected. We continue to focus on growth withconsideration of related risks. Catalysts for future earnings growth include wage growth,fiscal policy, improving business sentiment, and increasing capital expenditures. Themeswe see going forward include state-owned enterprise reform in China, further consumer ITpenetration, environmental protection, and consumer and business confidence recoveries.

We expect gross domestic product (GDP) growth in China will slow from 6.9% in 2017, butnot much below 6.5%. Any economic impact from U.S. tariffs may be muted as exportshave dropped to 19% of China’s GDP from 35% 10 years ago. The tech-heavy Taiwanesemarket could see contributions to earnings from artificial intelligence, machine learning,high-performance computing, the internet of things, and electric vehicles. Earnings growthin Korea topped 40% in 2017 and, in our view, will be positive but in the middle singledigits in 2018.

Notwithstanding our long-term structural bullish view on India, the market is facing multipleheadwinds: rising bond yields and a worsening current account deficit, political uncertaintywith the Bharatiya Janata Party’s recent surprise loss in the state of Uttar Pradesh, and astate-owned banking sector overhang due to a Punjab National Bank fraud. We areinvesting in private banks that could gain market share gains from state-owned banks.

We are positive on Malaysia thanks to export and GDP growth, robust domestic demand,an undervalued currency, and the benefits of higher oil prices. We are more cautious onthe Philippines due to higher-than-expected inflation, which could drive the peso’s valuelower. With the exception of Brazil, all economies in the Latin American region are growingbelow potential and uncertainty may be sustained this year on elections in Colombia,Mexico, Brazil, and Venezuela. We are positive on South Africa due to recent politicalchanges. Political tensions between Russia, the U.S., and Europe remain high, addingvolatility to Russia’s currency and market.

2/28/191.181.22EQIRXR6

2/28/191.881.90EQIHXR

2/28/191.231.32EQIIXInst

2/28/191.461.57EQIDXAdmin

2/28/192.382.40EQICXC

2/28/191.631.65EQIAXA

Contractual expensewaiver date

Net expense ratio(%)

Gross expense ratio(%)Ticker

Shareclass

The manager has contractually committed to waive fees and/or reimburse expenses to theextent necessary to cap the fund’s total annual fund operating expenses after fee waivers at1.62% (A), 2.37% (C), 1.45% (Admin), 1.22% (Inst), 1.87% (R), and 1.17% (R6). Brokeragecommissions, stamp duty fees, interest, taxes, acquired fund fees and expenses (if any), andextra ordinary expenses are excluded from the cap. After this time, the cap may be increased orthe commitment to maintain the cap may be terminated only with the approval of the Board ofTrustees. Without this cap, the fund’s returns would have been lower. The expense ratio paid byan investor is the net expense ratio (the total annual fund operating expenses after fee waivers)as stated in the prospectus.



1.27PICC Property & Casualty Co. Ltd. Class H

1.28Vedanta Limited

1.36Hon Hai Precision Industry Co., Ltd.

1.46CNOOC Limited

1.79China Petroleum & Chemical Corporation Class H

2.07Itausa - Investimentos Itau S.A.

3.25Industrial and Commercial Bank of China Limited Class H

3.78Taiwan Semiconductor Manufacturing Co., Ltd.

4.00China Construction Bank Corporation Class H

4.29Samsung Electronics Co Ltd Pfd Non-Voting

% of net assetsStock

847117Number of equity holdings

1.35x1.01xP/S ratio

1.76x1.52xP/B ratio

65.03%Turnover1

14.04x11.47xP/E ratio (trailing 12-month)

13.68%10.94%EPS Growth (3- to 5-year forcast)

$25.83B$20.69BWeighted median market cap

$101.99B$70.31BWeighted average market cap

MSCI Emerging MarketsIndex (Net)

Fund

Source: FactSet

$661.18MAssets—all share classes

1.23%Net expense ratio—Inst

5/31/12Inception date

Portfolio holdings and characteristics are subject to change and may have changed since the datespecified. Holdings typically include the underlying ordinary shares combined with any depositaryreceipts. The holdings listed should not be considered recommendations to purchase or sell aparticular security.

1. Calculated based on a one-year period.

3.034.458.2322.90Morningstar Diversified EmergingMkts Average

3.024.998.8124.93MSCI Emerging Markets Index (Net)

2.954.658.1823.20Lipper Emerging Markets FundsAverage

4.156.7517.13Emerging Markets Equity IncomeFund-Inst

10 year5 year3 year1 year

Morningstar total return rankings—Institutional Class (as of 3/31/18)

N/A10 year

303 out of 4745 year



Diversified emerging mktsMorningstar Category

Overall Morningstar Rating ™ ★★★

The Overall Morningstar Rating, a weighted average of the 3-, 5-, and 10-year (if applicable)ratings, is out of 666 funds in the Diversified emerging mkts category, based on risk-adjustedreturns as of 3/31/18.

4.69%Tracking error

82.60%Downside capture

70.53%Upside capture

-0.44Information ratio

0.94R-squared

13.30%Standard deviation

0.47Sharpe ratio

0.79Beta

-0.28Alpha

Fund


2. Calculated for the Institutional Class based on a three-year period. Relative measures arecompared with the fund’s benchmark.



Benchmark descriptions:

The Lipper averages are compiled by Lipper, Inc., an independent mutual fund research and ratingservice. Each Lipper average represents a universe of funds that are similar in investment objective.You cannot invest directly in a Lipper average.

The Lipper Emerging Markets Funds Average is an average of funds that seek long-term capitalappreciation by investing at least 65% of total assets in emerging market equity securities, whereemerging markets are defined by a country's gross national product per capita or other economicmeasures. The total return of the Lipper average does not include the effect of sales charges. Youcannot invest directly in a Lipper average.

The Morningstar Category average is the average return for the peer group based on the returns ofeach individual fund within the group. The total return of the Morningstar Category average does notinclude the effect of sales charges. You cannot invest directly in a Morningstar Category average.

The Morgan Stanley Capital International (MSCI) Emerging Markets (EM) Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure large- and mid-cap equitymarket performance of emerging markets. The MSCI EM Index consists of the following 24 emergingmarket country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary,India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, the Philippines, Poland, Qatar, Russia,South Africa, Taiwan, Thailand, Turkey, and the United Arab Emirates. You cannot invest directly inan index.

Source: MSCI makes no express or implied warranties or representations and shall have no liabilitywhatsoever with respect to any MSCI data contained herein. The MSCI data may not be furtherredistributed or used as a basis for other indexes or any securities or financial products. This report isnot approved, reviewed, or produced by MSCI.

Attribution analysis:

Performance attribution and sector and country returns are calculated using the Brinson-Fachler attribution model. As a result, performance attribution calculations may differ from thefund’s actual investment results.

Definition of terms:

Alpha measures the difference between a fund’s actual returns and its expected performance given itslevel of risk (as measured by beta).

Beta measures fund volatility relative to general market movements. It is a standardized measure ofsystematic risk in comparison with a specified index. The benchmark beta is 1.00 by definition.

Downside capture measures a fund’s replication of its benchmark during periods of negative returns.During periods of negative benchmark returns, a downside capture ratio less than 100% reflectsproduct performance greater than the benchmark and a downside capture ratio greater than 100%reflects performance less than the benchmark.

Information ratio measures the consistency of excess return (return in excess of a benchmark). Thisvalue is determined by taking the annualized excess return over a benchmark (style benchmark bydefault) and dividing it by the standard deviation of excess return.

R-squared is a measurement of how similar a fund’s historical performance has been to that of thebenchmark. The measure ranges from 0.0, which means that the fund’s performance bears norelationship to the performance of the index, to 1.0, which means that the fund’s performance wasperfectly synchronized with the performance of the benchmark.

Sharpe ratio measures the potential reward offered by a mutual fund relative to its risk level. The ratiouses a fund’s standard deviation and its excess return to determine reward per unit of risk. The higherthe Sharpe ratio, the better the fund’s historical risk-adjusted performance.

Standard deviation represents the degree to which an investment’s performance has varied from itsaverage performance over a particular time period.

Tracking error measures the extent to which a manager’s performance mimics that of a benchmark.The value is the standard deviation of the difference between a fund’s performance and abenchmark’s performance.

Upside capture measures a fund’s replication of its benchmark during periods of positive returns.During periods of positive benchmark returns, an upside capture ratio greater than 100% reflectsproduct performance greater than the benchmark and an upside capture ratio less than 100% reflectsperformance less than the benchmark.



Risks: Stock values fluctuate in response to the activities of individual companiesand general market and economic conditions. Foreign investments are especiallyvolatile and can rise or fall dramatically due to differences in the political andeconomic conditions of the host country. These risks are generally intensified inemerging markets. The use of derivatives may reduce returns and/or increasevolatility. Certain investment strategies tend to increase the total risk of aninvestment (relative to the broader market). This fund is exposed to smaller-company securities risk. Consult the fund’s prospectus for additional informationon these and other risks.

The views expressed in this document are as of March 31, 2018, and are those of the portfoliomanager(s). The views are subject to change at any time in response to changing circumstances in themarket and are not intended to predict or guarantee the future performance of any individual security,market sector or the markets generally, or any Wells Fargo Fund. Any specific securities discussedmay or may not be current or future holdings of the fund. The securities discussed should not beconsidered recommendations to purchase or sell a particular security. Wells Fargo FundsManagement, LLC, disclaims any obligation to publicly update or revise any views expressed orforward-looking statements.

The Morningstar Rating for funds, or star rating, is calculated for managed products (including mutualfunds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, andseparate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutualfunds are considered a single population for comparative purposes. It is calculated based on aMorningstar risk-adjusted return measure that accounts for variation in a managed product's monthlyexcess performance, placing more emphasis on downward variations and rewarding consistentperformance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% ofproducts in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35%receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The OverallMorningstar Rating for a managed product is derived from a weighted average of the performancefigures associated with its 3-, 5-, and 10-year (if applicable) Morningstar Rating metrics. The weightsare: 100% 3-year rating for 36–59 months of total returns, 60% 5-year rating/40% 3-year rating for60–119 months of total returns, and 50% 10-year rating/30% 5-year rating/20% 3-year rating for 120 ormore months of total returns. While the 10-year overall star rating formula seems to give the mostweight to the 10-year period, the most recent 3-year period actually has the greatest impact because itis included in all three rating periods. Across U.S.-domiciled diversified emerging markets funds, theEmerging Markets Equity Income Fund received 3 stars among 666 funds and 3 stars among 474funds for the 3- and 5-year periods, respectively. The Morningstar Rating is for the Institutional Classonly; other classes may have different performance characteristics.


Carefully consider a fund’s investment objectives, risks, charges, and expenses beforeinvesting. For a current prospectus and, if available, a summary prospectus, containingthis and other information, visit wellsfargofunds.com. Read it carefully before investing.Wells Fargo Asset Management (WFAM) is a trade name used by the asset managementbusinesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly ownedsubsidiary of Wells Fargo & Company, provides investment advisory and administrative servicesfor Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory andother services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC,Member FINRA, an affiliate of Wells Fargo & Company. Neither Wells Fargo Funds Distributornor Wells Fargo Funds Management holds fund shareholder accounts or assets. This materialis for general informational and educational purposes only and is NOT intended to provideinvestment advice or a recommendation of any kind—including a recommendation for anyspecific investment, strategy, or plan. 311562


NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE

CM306 04-18

emerging markets equity income fund report · pdf filequarterly report q4 2017 wells fargo...

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