Money market overview. Portfolio Manager Commentary Overview, strategy, and outlook: As of October 31, 2018

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1 WELLS FARGO MONEY MARKET FUNDS Portfolio Manager Commentary Overview, strategy, and outlook: As of October, 08 Contributing authors Jeffrey L. Weaver, Head of Money Funds and Short Duration Strategies Laurie R. White, Managing Director and Senior Fund Manager, Michael C. Bird, Senior Fund Manager, James C. Randazzo, Senior Fund Manager, Municipal Money Markets Madeleine M. Gish, Senior Fund Manager, John R. Kelly, Senior Fund Manager, Daniel J. Tronstad, Senior Fund Manager, Money market overview Prime sector As was widely expected by market participants, the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate by 5 basis points (bps; 00 bps equal.00%) to.00%.5% at the conclusion of its September 6 meeting. The accompanying statement took note of ongoing strengthening in the labor market and economic activity rising at an accelerated rate. Average job gains and spending growth were also strong, inflation remained muted with the Consumer Price Index near %, and longer-run expectations were little changed. Again, the phrase, risks to the economic outlook appear roughly balanced was included. The major change to the statement, however, was the removal of the description of monetary policy as accommodative. The statement seemed to imply that one more rate hike is expected in 08 and three are projected for 09. The meeting s minutes were released in mid-october and signaled the strong economy would continue to justify tightening, though potentially moderating effects of emerging market volatility, U.S.-China trade tensions, and Hurricane Florence were also discussed. Since the meeting, officials have signaled some uncertainty about the exact level of rates that would neither dampen nor spur growth. To illustrate that point, we refer to the Summary of Economic Projections, or dot plot. The dots show a median year-end rate for both 09 and 00 (.5% and.75%, respectively) unchanged from the median rates published after the June meeting. But the distribution of dots for year-end 00 published after the September meeting was more symmetrical around the median, compared with a higher rate skew in June. As is usually the case, issuance in the short end of the yield curve slows at -end and at quarter-end as managers hold more cash available for potential outflows. So the timing of this hike resulted in a greater impact on fund yields from a 5 bp higher reset on overnight securities. At the same time, London Interbank Offered Rate (LIBOR) settings were also moving up. You may recall we experienced a large increase in rates before the March tightening but a very muted response to the June hike. This time around, three LIBOR increased 8 bps in September and another 6 bps in October. Three- fixed-rate paper is now being placed to mature after the new year as issuers are incented to get funding past year-end. During the first week of October, issuance of commercial paper written to mature in 8 or more days spiked as investors and issuers put quarter-end behind them. The first week of October averaged % written 8 days or longer compared with 9.80% in September. Not only do issuers want to get funded past year-end, those affected by regulatory requirements prefer maturity dates days or more after year-end, which puts targeted issuance to the first

2 week of February. A look at the pattern of commercial paper maturing after December shows issuers winding up yearend financing at a faster pace than the previous two years. Money market yield curves, as of 0// LIBOR Asset-backed commercial paper Tier commercial paper Agency discount notes Overnight wk. mo. mo. mo. 6 mo. mo. Sources: Bloomberg L.P. and Wells Capital Management Inc. Weekly pattern of commercial paper maturing after December Billions ($) Source: U.S. Federal Reserve Board Weeks after December 06 (outstanding as of November, 06) 07 (outstanding as of November, 07) 08 (outstanding as of October, 08) As we near the end of the tightening cycle, money market participants may look to extend weighted average maturities (WAMs) to lock in higher yields, but we are more than a few s away from that scenario. In the meantime, we believe breakeven yield calculations favor buying shortdated fixed maturities or securities that reset frequently over longer-dated maturities and resets. Our strategy of emphasizing highly liquid portfolios, relatively short WAMs, and a position in securities that reset frequently allows us to capture future FOMC rate moves with minimal net asset value (NAV) pricing pressures and afford the flexibility to add longer-dated securities as opportunities arise. U.S. government sector Since the first quarter s big surge in Treasury bill (T-bill) issuance, which propelled market yields higher, the government money markets have settled up into those higher yields, reflecting a calm state of acceptance both that 0 4 T-bill supply will continue to increase and that the Federal Reserve (Fed) will continue to gradually but steadily increase overnight interest rates. U.S. Treasury bills outstanding Billions ($) Jan-7 Apr-7 Source: Bloomberg L.P. Jul-7 Oct-7 Jan-8 Apr-8 Jul-8 Over the 0-week period following the suspension of the debt ceiling in early February, net T-bill issuance totaled $ billion, pushing T-bills yields and repurchase agreement (repo) rates higher. Subsequent swings in T-bill activity, smaller but still significant, did little to shake the market out of its new, higher ranges. As shown graphically above, those swings saw T-bills outstanding fall by $4 billion over five weeks in April, then increase by $8 billion in July and August before falling again by $6 billion beginning in September. The issuance roller-coaster, a function of the seasonality of the U.S. Treasury s cash needs and being mostly driven by the timing of tax receipts, began to swing up again in October. This increase is $ billion strong in October, with an excess of another $00 billion expected yet in the fourth quarter before the next downswing begins. A rider of this roller-coaster might be able to see the curvature of the earth at this point, as each contraction in supply is smaller than the preceding expansion, pushing the rider ever higher. We believe that given the country s expected fiscal trajectory, pretty soon it ll be goodbye, troposphere; hello, stratosphere. Excess of tri-party repo yield over RRP Oct-7 Excess of tri-party repo yield over RRP Average before and after February 5, 08 Dec-7 Feb-8 Apr-8 Jun-8 Aug-8 Sources: Federal Reserve Board, Bloomberg L.P., and the Bank of New York

3 The new rate regime is perhaps best seen in the behavior of overnight repo rates. As shown on the previous page, overnight repo, as measured by the Fed s Tri-Party General Collateral Rate, yielded, on average, 0.04% over the rate on the Fed s reverse repurchase agreement (RRP) facility over the roughly six s ending February 5, when the T-bill supply boost kicked in. Since that date, repo rates have exceeded the RRP rate by an average of 0.7%. T-bill supply has come and gone over those eight-plus s, but, as shown in the chart below, repo rates have hardly budged, apart from their usual day-to-day gyrations. Three- T-bill yields have also moved convincingly higher this year. As seen in the chart below, for the first two years of the Fed s hiking cycle, a skeptical T-bill market had to be dragged grudgingly higher by each Fed hike. In early 08, the combination of T-bill supply, a strong economy, and indications the Fed had basically achieved its two mandates led the market to consistently trade as though it was convinced the next quarterly hike was coming. - T-bill yield versus RRP Oct-5 - T-bill yield Federal RRP rate Apr-6 Oct-6 Apr-7 Sources: Bloomberg L.P. and Wells Capital Management Oct-7 Wells Fargo FNAV money market fund NAVs Fund NAV May-8 Municipal Cash Management MMF* Institutional Cash Investment MMF* Select Heritage MMF* Select Jun-8 Jul-8 Aug-8 Sep-8 Apr-8 Wells Fargo FNAV money market fund weekly liquid assets Percent of fund May-8 Jun-8 Municipal Cash Management MMF* Institutional Heritage MMF* Select Cash Investment MMF* Select 0% SEC minimum Jul-8 Aug-8 Sep-8 The Fed likely won t raise rates each quarter into perpetuity, and any number of things, such as economic fundamentals, risk asset corrections, and trade disruptions, could slow or halt the Fed. But while the Fed-driven stair-step march higher in rates will eventually plateau, the U.S. fiscal path over the next few years seems fairly well established. Those deficits will need to be funded, which should help support yields on repos, T-bills, and other government securities. Municipal sector The municipal yield curve continued to steepen during the of October as rate increases on high-grade notes outpaced the relatively modest rise in rates in the short end. Demand for variable-rate demand notes (VRDNs) and tender option bonds (TOBs) 4 in the overnight and weekly sectors remained robust as municipal money market funds were the recipients of approximately $.4 billion in client inflows, according to Crane Data. The Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index 5 rose slightly to.6% by the end of October, up from.56% at the end of September. As of October, the index is now up bps following the FOMC s 5 bp tightening on September 6, 08, leaving the SIFMA/-Week LIBOR ratio at 7%. Further out on the curve, yields on high-grade commercial paper and notes continued to rise as the market continued to cope with large secondary market balances. This area of the municipal yield curve has recently had to contend with weak technicals leading to the return of yields over % in the municipal money market space. One-year high-grade notes finished out the at approximately.07%, up from.94% the previous. With heightened prospects for additional rate hikes by the FOMC in the near future, the municipal note market continues to appear biased toward higher rates.

4 During the, we maintained our focus primarily on daily and weekly VRDNs and TOBs for liquidity and principal preservation. While the municipal money market curve has steepened recently, we feel that a conservative posture with respect to weighted average maturity is still warranted given both the flatness of the municipal money market yield curve relative to taxables and expectations for additional FOMC rate hikes in the near future. Additionally, we continue to feel that the short end of the curve remains particularly attractive on both a nominal and tax-adjusted basis. On the horizon Looking forward, the calendar of events is rather sparse, at least as far as the markets go. At -end, the elephant in the room seems to be the midterm elections, which will have passed by the time this commentary goes to press. There seems to be a heightened level of interest in the elections on the part of not only pundits but voters as well. From an investment perspective, at least on the short end, this election probably won t have any consequences. If, as pollsters predict, the Democrats regain control of the House and the Republicans retain control of the Senate, we anticipate it will be business as usual. There will be a certain amount of gridlock, as we saw when the House returned to Republican control after the midterm elections during former President Obama s first term. But partisanship ultimately took a back seat when push came to shove and the country s funding business needed to be done, and our markets remained largely unaffected except for minor, temporary blips. On the other hand, if the Republicans manage to pull a rabbit out of the hat and retain control of both houses, then it would be business as usual. Either way, we have difficulty finding negative consequences for short-term markets after November 6. One thing everyone probably can agree on, though, is a sense of relief with the end of the incessant and ubiquitous political ads! Rates for sample investment instruments current -end % (October 08) Sector day week 6 Wells Fargo Fund 7-day current yield U.S. Treasury repos.0.0 Cash Investment MMF* Select.0 Fed reverse repo rate.00 Heritage MMF* Select.9 U.S. Treasury bills Municipal Cash Management MMF* Inst.5 Agency discount notes LIBOR Government MMF** Select.07 Asset-backed commercial paper Treasury Plus MMF** Inst.04 Dealer commercial paper % Treasury MMF** Inst.0 Municipals Sources: Bloomberg L.P. and Wells Capital Management Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes that a shareholder may pay on a fund. Yields will fluctuate. Current performance may be lower or higher than the performance data quoted and assumes the reinvestment of dividends and capital gains. Current -end performance is available at the funds website, wellsfargofunds.com. Money market funds are sold without a front-end sales charge or contingent deferred sales charge. Other fees and expenses apply to an investment in the fund and are described in the fund s current prospectus. The manager has contractually committed to certain fee waivers and/or expense reimbursements. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses, and extraordinary expenses are excluded from the cap. Without these reductions, the seven-day current yield for the Institutional Class of the Cash Investment Money Market Fund, Heritage Money Market Fund, Municipal Cash Management Money Market Fund, Government Money Market Fund, Treasury Plus Money Market Fund, and 00% Treasury Money Market Fund would have been.8%,.9%,.9%,.00%,.0%, and.9%, respectively, and the total returns would have been lower. The cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. The expense ratio paid by an investor is the net expense ratio (the total annual fund operating expenses after fee waivers) as stated in the prospectus. 4

5 For more information, please contact: Institutional Sales Desk: Website: wellsfargofunds.com (Click Institutional Cash Management ). The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. You cannot invest directly in an index.. Weighted average maturity (WAM): An average of the effective maturities of all securities held in the portfolio, weighted by each security s percentage of total investments. The maturity of a portfolio security is the period remaining until the date on which the principal amount is unconditionally required to be paid, or in the case of a security called for redemption, the date on which the redemption payment is unconditionally required to be made. WAM calculations allow for the maturities of certain securities with demand features or periodic interest rate resets to be shortened. WAM is a way to measure a fund s sensitivity to potential interest rate changes. WAM is subject to change and may have changed since the date specified.. Variable-rate demand notes (VRDNs) are debt securities commonly held within the Wells Fargo Money Market Funds. Like all bonds, VRDN values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. Changes in market conditions and government policies may lead to periods of heightened volatility in the bond market and reduced liquidity for certain bonds. In general, when interest rates rise, bond values fall and investors may lose principal value. Interest rate changes can be sudden and unpredictable. In addition to credit and interest rate risk, VRDNs are subject to municipal securities risk. 4. A tender option bond (TOB) is a type of VRDN where a long-term bond is placed into a trust. Floating-rate securities are created from the trust. 5. The SIFMA Municipal Swap Index is a seven-day high-grade market index composed of tax-exempt variable-rate demand obligations with certain characteristics. The index is calculated and published by Bloomberg. The index is overseen by SIFMA s Municipal Swap Index Committee. You cannot invest directly in an index. * For floating NAV money market funds: You could lose money by investing in the fund. Because the share price of the fund will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund s liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time. For retail money market funds: You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund s liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time. ** For government money market funds: You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time. For the municipal money market funds, a portion of the fund s income may be subject to federal, state, and/or local income taxes or the alternative minimum tax. Any capital gains distributions may be taxable. For the government money market funds, the U.S. government guarantee applies to certain underlying securities and not to shares of the fund. The views expressed and any forward-looking statements are as of October, 08, and are those of the fund managers and the Money Market team at Wells Capital Management, subadvisor to the Wells Fargo Money Market Funds, and Wells Fargo Funds Management, LLC. Discussions of individual securities, the markets generally, or any Wells Fargo Funds are not intended as individual recommendations. Future events or results may vary significantly from those expressed in any forward-looking statements; the views expressed are subject to change at any time in response to changing circumstances in the market. Wells Fargo Funds Management, LLC, disclaims any obligation to publicly update or revise any views expressed or forward-looking statements. Carefully consider a fund s investment objectives, risks, charges, and expenses before investing. For a current prospectus and, if available, a summary prospectus, containing this and other information, visit wellsfargofunds.com. Read it carefully before investing. Wells Fargo Asset Management (WFAM) is the trade name for certain investment advisory/management firms owned by Wells Fargo & Company. These firms include but are not limited to Wells Capital Management Incorporated and Wells Fargo Funds Management, LLC. Certain products managed by WFAM entities are distributed by Wells Fargo Funds Distributor, LLC (a broker/dealer and Member FINRA). 08 Wells Fargo Funds Management, LLC. All rights reserved. FN-774 IHA-6890 FASS0-8