Wells Fargo Short-Term High Yield Bond Fund

All information is as of 12-31-17 unless otherwise indicated. General fund information Ticker: STYIX Portfolio manager: Thomas Price, CFA; Kevin Maas, CFA; Michael Schueller, CFA Subadvisor: Wells Capital Management Inc. Category: High-yield bond Fund strategy Seeks to generate competitive short-term yields by investing in BB- and B-rated corporate debt securities with an average effective maturity of less than three years Focuses on higher-quality, below-investment-grade corporate debt securities and seeks lower volatility than the funds in the high-yield bond and bank-loan categories Bottom-up security selection subjects companies to rigorous quantitative and qualitative analysis to assess their ability to fulfill debt obligations and to identify securities that offer the best total return potential while also meeting our low-volatility criteria Key drivers of performance The Federal Reserve (Fed) continued to raise rates, the economy expanded, and inflation remained muted. In response, short-term Treasury yields rose and longer-term yields declined. The high-yield market was relatively stable, with little change in spreads occurring during the quarter. In this environment, the fund returned 0.41% during the fourth quarter and 2.52% during 2017. Average annual total returns (%) as of 12-31-17* Year to Since inception 3 month date 1 year 3 year 5 year 10 year (6-30-97) Short-Term High Yield Bond Fund Inst 0.41 2.52 2.52 3.23 2.88 3.97 4.40 Lipper High Yield Funds Average 0.48 6.58 6.58 5.00 4.63 6.43 ICE BofA Merrill Lynch High Yield U.S. Corporates, Cash Pay, BB Rated, 1 5 Year Index -0.04 4.30 4.30 4.95 4.82 6.81 *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 that a shareholder may pay on a fund. Investment return, principal value, and yields of an investment will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted and assumes the reinvestment of dividends and capital gains. Current month-end performance is available at the fund s website, wellsfargofunds.com. Institutional Class shares are sold without a front-end sales charge or contingent deferred sales charge. The fund s gross expense ratio is 0.60%. The fund s net expense ratio is 0.51%. The manager has contractually committed, through December 31, 2018, to waive fees and/or reimburse expenses to the extent necessary to cap the fund s total annual fund operating expenses after fee waiver at 0.50% for the Institutional Class. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses (if any), and extraordinary expenses are excluded from the cap. Without these reductions, the fund s returns would have been lower. After this time, 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 or the total annual fund operating expense after fee waivers, as stated in the prospectus. Portfolio characteristics Wells Fargo Short-Term High Yield Bond Fund ICE BofA ML High Yield, U.S. Corp, Cash Pay, BB, 1 5 Year Index Avg. eff. duration 0.99 2.46 Avg. eff. maturity (yrs.) 2.02 3.35 30-day SEC yield 2.85% Credit-quality allocation (%) 1 BBB/Baa 11.71 0.00 BB/Ba 58.17 100.00 B/B 26.86 0.00 Cash equivalents 3.25 0.00 Fixed/floating allocation (%) Fixed-rate bonds 67.41 100.00 Floating-rate loans 29.33 0.00 Floating-rate bonds 0.00 0.00 Cash equivalents 3.25 0.00 1. The ratings indicated are from Standard & Poor's, Fitch, and/or Moody's Investors Service. The percentages of the fund s portfolio with the ratings depicted in the chart are calculated based on the total investments of the fund. If a security was rated by all three rating agencies, the median rating was used. If a security was rated by two of three rating agencies, the lower rating was used. If a security was rated by one of the agencies, that rating was used. Due to rounding, percentages may not add up to 100%. The fund's 30-day unsubsidized SEC yield is 2.76%. (See pages 4 5 for important information.) 1 QU214 01-18

Fixed-income market review The yield curve flattened substantially during the quarter Yield (%) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 U.S. Treasury yield curve 9-30-17 12-31-17 0.0 0 yr. 5 yr. 10 yr. 15 yr. 20 yr. 25 yr. 30 yr. The Treasury yield curve flattened significantly during the quarter. As the Fed raised rates, short-term yields rose. Longer-term yields on Treasury bonds with maturities greater than 15 years, however, declined amid little sign of inflation and investor demand. The difference between the 30-year Treasury yield and the 2-year Treasury yield was 82 basis points (bps; 100 bps equal 1.00%) at year-end. For historical perspective, the Treasury yield curve was at its steepest point in February 2011 (400 bps) and at its narrowest in May 2000 (-61 bps). Most yield-advantaged sectors experienced tighter spreads Spreads (bps) 120 100 80 60 40 20 0 Option-adjusted spreads 9-30-17 12-31-17 MBS ABS CMBS Credit Gov't-related Within high yield, higher oil prices benefited energy companies but the communications, pharmaceutical, and retail sectors faced challenges. Default rates continued to decline after peaking in January 2017. In other asset classes, investment-grade credit outperformed comparable-duration Treasuries for the ninth consecutive quarter. Economic growth supported credit metrics, and strong demand absorbed a record amount of new issuance. Commercial mortgage-backed securities (CMBS) spreads tightened due to demand for yield. Despite more issuance in asset-backed securities (ABS), especially for autos, spreads remained firm. Within mortgage-backed securities (MBS), the reduction of the Fed s balance sheet appeared to have little effect during the quarter. Benchmark total return, Q4 2017 High-yield sectors (%) High-yield subsectors (%) Credit quality (%) Industrials -0.05 Electric generation 2.26 BB -0.04 Utilities 1.38 Energy E&P 1.72 Financials -0.11 Building materials 0.99 Personal & hh products -1.94 Cable/satellite TV -1.94 Food-wholesale -2.18 The ICE BofA Merrill Lynch High Yield U.S. Corporates, Cash Pay, BB Rated, 1 5 Year Index returned -0.04% during the fourth quarter. Within high-yield sectors, industrials returned -0.05%, utilities returned 1.38%, and financials returned -0.11%. Within the subsectors, electric and energy were top performers while wholesale food and cable/satellite TV were bottom performers. Within the broader one- to five-year index, BB-rated bonds returned -0.04%, B-rated bonds returned 0.68%, and CCC-rated bonds returned 0.28%. High-yield loans returned 1.17% for the quarter, outperforming the broader-based fixed-rate high-yield index, with higher-quality loans outperforming. Sources: Bloomberg L.P. and ICE Bank of America Merrill Lynch Past performance is no guarantee of future results. 2

Portfolio review and strategy Outlook Sector attribution and positioning Sector exposure is driven by bottom-up security selection rather than a top-down view. Sector allocation contributed to results in the fourth quarter. The fund had little exposure to the underperforming financials sector, which helped results. The fund was conservatively positioned within the energy sector, with no exposure to exploration and production and oil-field services companies, which tend to be among the most volatile in this sector. The fund s energy exposure is in midstream companies, which tend to be less volatile. Results in the communications subsectors were positive for the fund despite weakness in the cable/satellite TV and wireline subsectors. Investments in floating-rate bank loans contributed to results because our higher-quality loans outperformed fixed-rate high-yield debt on the front end of the yield curve. The fund will normally have between 20% and 30% in bank loans, which are typically senior in a company s capital structure and may help insulate the fund from interest-rate increases due to their floating-rate structure. Quality attribution and positioning We remain focused on selecting B-rated or higher debt of companies with good balance sheets and strong fundamentals. Credit-quality allocation helped results during the quarter. While the benchmark consists solely of BB-rated credits, the fund s allocation to cash and BBB-rated credits outperformed, as did its sizable allocation to B-rated credits. We continue to emphasize higher-quality companies within each credit tier. Issue selection attribution and positioning Security selection contributed to results. Our bias toward higher-quality debt on the shorter end of the curve led to positive results. Notable contributors included positioning within the media entertainment, retail, technology, and midstream energy subsectors. On the negative side, the fund s issue selection within electric utilities as well as metals and mining detracted. We think the risk/reward opportunities in the short-term high-yield market look attractive as we head into 2018. The economic expansion has continued and, with good fundamentals, high-yield default rates in aggregate do not appear poised to accelerate this year. Tax reform likely will be helpful to the high-yield market. Although fewer high-yield companies stand to benefit from lower corporate tax rates compared with investment-grade companies, many will in fact benefit. The loss of interest deductions is worse for highly leveraged companies, but the company debt we tend to own is among the higher-quality high-yield issues. Because there is less incentive to use debt as a source of capital, companies may choose to delever, which would be a technical positive for the high-yield market. Credit offers opportunity, but tight spreads are a reason to be selective Spread (bps) 1,400 Corporate bond option-adjusted spreads 1,200 1,000 BBB-rated 800 BB-rated (highest-quality high-yield tier) 600 400 200 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bloomberg L.P. Past performance is no guarantee of future results. 3

Fund facts Inception date 6-30-97 Net expense ratio Inst 0.51% Assets all share classes $1,403.42M Rankings and ratings Morningstar total return rankings Institutional Class (as of 12-31-17) Morningstar Category: High yield bond 1 year 686 out of 699 funds 3 year 564 out of 609 funds 5 year 479 out of 501 funds 10 year NA Overall Morningstar Rating The Overall Morningstar Rating, a weighted average of the 3-, 5-, and 10-year (if applicable) ratings, is out of 609 funds in the high yield bond category, based on risk-adjusted returns as of 12-31-17. Share class availability Share class Ticker Gross expense ratio (%) Net expense ratio (%) Contractual expense waiver date A SSTHX 0.93 0.82 12-31-18 C WFHYX 1.68 1.57 12-31-18 Admin WDHYX 0.87 0.66 12-31-18 Inst STYIX 0.60 0.51 12-31-18 The manager has contractually committed to waive fees and/or reimburse expenses to the extent necessary to cap the fund s total annual fund operating expenses after fee waiver at 0.81% (A), 1.56 (C), 0.65 (Admin), and 0.50 (I). Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses (if any), and extraordinary expenses are excluded from the cap. Without these reductions, the fund s returns would have been lower. After this time, 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 or the total annual fund operating expense after fee waivers, as stated in the prospectus. Portfolio characteristics: Portfolio characteristics, sector weights, and allocations are subject to change and may have changed since the date specified. Benchmark descriptions: The ICE BofA Merrill Lynch High Yield U.S. Corporates, Cash Pay, BB Rated, 1 5 Year Index is an unmanaged index that generally tracks the performance of BB-rated U.S. dollar denominated corporate bonds publicly issued in the U.S. domestic market with maturities of one to five years. You cannot invest directly in an index. Copyright 2018. ICE Data Indices, LLC. All rights reserved. Source: ICE Data Indices, LLC ( BofAML ), used with permission. BofAML is licensing the BofAML indices and related data as is, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the indices or any data included in, related to, or derived therefrom, assumes no liability in connection with their use, and does not sponsor, endorse, or recommend Wells Fargo Funds Management, LLC, or any of its products or services. The Lipper High Yield Funds Index is an average of funds that aim at high (relative) current yield from fixed-income securities, have no quality or maturity restrictions, and tend to invest in lower-grade debt issues. The total return of the Lipper average does not include the effect of sales charges. The Lipper averages are compiled by Lipper, Inc., an independent mutual fund research and rating service. Each Lipper average represents a universe of funds that are similar in investment objective. You cannot invest directly in a Lipper average. Definition of terms: 30-day SEC yield: The 30-day SEC yield is calculated with a standardized formula mandated by the SEC. The formula is based on maximum offering price per share and includes the effect of any fee waivers. Without waivers, yields would be reduced. The 30-day unsubsidized SEC yield does not reflect waivers in effect. A fund's actual distribution rate will differ from the SEC yield, and any income distributions from the fund may be higher or lower than the SEC yield. Credit-quality ratings: Credit-quality ratings apply to underlying holdings of the fund and not the fund itself. Standard & Poor's and Fitch rate the creditworthiness of bonds from AAA (highest) to D (lowest). Ratings from A to CCC may be modified by the addition of a plus (+) or minus (-) to show relative standing within the rating categories. Standard & Poor's rates the creditworthiness of short-term notes from SP-1 (highest) to SP-3 (lowest). Moody s rates the creditworthiness of bonds from Aaa (highest) to CC (lowest). Ratings Aa to B may be modified by the addition of a number 1 (highest) to 3 (lowest) to show relative standing within the ratings categories. Credit quality and credit-quality ratings are subject to change. Duration: Duration is the weighted average of the timing of cash-flow payments from fixedincome securities. Duration is used as a measurement of sensitivity to interest rates. Yield curve: The yield curve is a graphical representation of fixed-income security yields (usually U.S. Treasuries) at their respective maturities, starting with the shortest time to maturity and sequentially plotting in a line chart to the longest maturity. 4

Risks: Bond 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 held by the fund. In general, when interest rates rise, bond values fall and investors may lose principal value. Interest-rate changes and their impact on the fund and its share price can be sudden and unpredictable. High-yield securities have a greater risk of default and tend to be more volatile than higher-rated debt securities. Loans are subject to risks similar to those associated with other below-investment-grade bond investments, such as credit risk (for example, risk of issuer default), below-investment-grade bond risk (for example, risk of greater volatility in value), and risk that the loan may become illiquid or difficult to price. The use of derivatives may reduce returns and/or increase volatility. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market).this fund is exposed to foreign investment risk. Consult the fund s prospectus for additional information on these and other risks. The inception date of the Administrator Class was July 30, 2010. Historical performance shown for the Administrator Class shares prior to their inception reflects the performance of the Class A shares and includes the higher expenses applicable to Class A. The inception date of the Institutional Class was November 30, 2012. Historical performance for the Institutional Class shares prior to their inception reflects the performance of the Administrator Class shares and includes the higher expenses applicable to the Administrator Class shares. If these expenses had not been included, returns would be higher. The inception date of Class C was March 31, 2008. Historical performance shown prior to the inception of the Class C shares reflects the performance of the former Investor Class shares, adjusted to reflect the higher expenses applicable to Class C. The views expressed in this document are as of December 31, 2017, and are those of the portfolio manager(s). The views are subject to change at any time in response to changing circumstances in the market 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 discussed may or may not be current or future holdings of the fund. The securities discussed should not be considered recommendations to purchase or sell a particular security. Wells Fargo Funds Management, LLC, disclaims any obligation to publicly update or revise any views expressed or forward-looking statements. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar risk-adjusted return measure that accounts for variation in a fund s monthly performance (including the effects of sales charges, loads, and redemption fees, unless otherwise indicated), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each 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. (Each share class is counted as a fraction of one fund within this scale and is rated separately, which may cause slight variations in the distribution percentages.) Across U.S.-domiciled high yield bond funds, the Short-Term High Yield Bond Fund received 2 stars among 609 funds, 1 star among 501 funds, and 1 star among 319 funds for the 3-, 5-, and 10- year periods, respectively. Morningstar Ratings and Rankings are for the Institutional Class only; other classes may have different performance characteristics. The Morningstar Return ranking is based on the fund s total return rank relative to all funds that have the same category for the same time period. Past performance is no guarantee of future results. 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 a trade name used by the asset management businesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other 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 Distributor nor Wells Fargo Funds Management holds fund shareholder accounts or assets. This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind including a recommendation for any specific investment, strategy, or plan. 307893 01-18 QU214 01-18 5