All information is as of 12-31-17 unless otherwise indicated. Overview General fund information Key drivers of performance Ticker: WSCGX Portfolio managers: Paul von Kuster, CFA; Daniel Hagen, CFA; James Ross, CFA; William Grierson, CFA Subadvisor: Peregrine Capital Management Category: Small-cap growth Fund strategy Focuses on small, rapidly growing, misunderstood companies that have the potential for dramatic price appreciation Conducts rigorous fundamental research to target companies in the discovery and rediscovery phases of development Focuses on younger companies in the discovery phase that have long-term earnings growth of more than 20%, high profitability, and unique products or services Looks for rediscovery-phase companies that have new management, near-term earnings growth of greater than 40%, recovering profitability, and/or takeover or restructuring potential Average annual total returns (%) as of 12-31-17* Small Company Growth Fund Inst 3 month Year to date 1 year 3 year 5 year 10 year Since inception (12-31-82) 5.06 20.61 20.61 7.51 14.58 9.46 11.82 Russell 2000 Growth Index 4.59 22.17 22.17 10.28 15.21 9.19 *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 and principal value 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 1.00%. The fund s net expense ratio is 0.95%. The manager has contractually committed, through September 30, 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 0.95% 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. The fund outperformed its benchmark, the Russell 2000 Growth Index, for the 3-month period and underperformed the benchmark for the 12-month period that ended December 31, 2017. For the 3-month period, stock selection in a variety of sectors, such as industrials, materials, and financials, boosted relative returns. However, stock selection in health care constrained results. For the 12-month period, stock selection in health care and consumer discretionary hindered relative returns the most. However, stock selection in information technology (IT) aided results. Market and portfolio overview U.S. growth stocks continued to rally during the fourth quarter, boosted by a confluence of positive factors. Synchronized expansion in the global economy and favorable earnings from a variety of U.S. companies provided key catalysts for strong market gains. Consensus earnings estimates overall continued to rise, reflecting the improving fundamental backdrop. As the quarter progressed, stocks received an additional boost from growing optimism regarding the prospects for taxreform legislation. Consequently, market leadership modestly shifted toward sectors that generally are anticipated to be significant beneficiaries of tax-reform legislation, such as financials and industrials. Leading up to the fourth quarter, market leadership in 2017 often was found in stocks with the highest valuations as well as in companies with no earnings; this was especially evident in the small-cap biotechnology industry. These market dynamics created a challenging environment for our valuation-sensitive investment process. During the fourth quarter, we observed a widening in market leadership, which created a more conducive environment for our team s emphasis on attractively valued, rapidly growing companies. We continue to have a favorable outlook for the dynamic, rapidly growing companies in the fund. We also believe that small-cap growth stocks overall may benefit from what we view as attractive relative valuations and potentially upward earnings revisions resulting from more favorable tax rates. We have continued to identify companies with the potential to deliver rapid earnings growth through a variety of catalysts, such as revenue growth and profit margin expansion, which could enable the fund to potentially generate attractive relative performance irrespective of economic conditions. Looking ahead, we believe our investment approach that is centered on paying a belowmarket multiple for above-market earnings growth may benefit as market leadership continues to normalize. QU002 01-18 (See pages 4 5 for important information.) 1
Quarterly attribution analysis Contributors A strong rally in Steel Dynamics, Inc., a leading domestic steel producer and metals recycler, led to outperformance in the materials sector. The stock reacted positively to indications from company management of a likely improvement in domestic steel consumption in 2018 within areas such as energy and construction. Several holdings in the industrials sector rebounded this quarter, which boosted relative returns. Increased optimism for the U.S. economy and positive fundamental developments for key contributors, such as Copart, Inc., and On Assignment, Inc., led to outperformance in the sector. Copart, a global leader in online vehicle auctions, was the fund s top performer, aided by strong operating profits in its recent quarter despite challenges from recent hurricanes. We believe Copart may be well positioned to continue generating robust earnings growth, influenced by its track record of sound capital-allocation decisions and favorable industry trends, such as rising costs to repair newer vehicles. Professional-services firm On Assignment also performed well, influenced by better-than-anticipated results from its acquisition of Creative Circle, LLC, which has expanded the firm s presence into the digital-marketing and creative-staffing markets. A strong gain from banking holding SVB Financial Group drove success in the financials sector. SVB reported broad strength across a variety of metrics, highlighted by favorable loan growth and fee income as well as by strong credit quality. Detractors Weakness in the equipment and supplies and health care IT industries led to underperformance in health care. Nevro Corp. and Glaukos Corp., which provide innovative medical devices, were among the top detractors from relative returns. Nevro experienced robust patient demand for its spinal cord stimulation system, evidenced by strong revenue growth in its recent quarter. However, we believe the stock s decline likely was influenced by rather conservative full-year guidance, which likely was less robust than some investors anticipated. We remain optimistic, especially given the company s potential to expand its existing pain-management device into other areas, such as head and neck. Glaukos, which provides solutions for treating glaucoma, suffered from some uncertainties created by the emergence of a new competitor. We recognize that Glaukos is planning to release a second-generation device within the next year, which we believe may alleviate competitive pressures. Small Company Growth Fund versus Russell 2000 Growth Index Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Info Tech Materials Real Estate Sector weights (average % weight during the quarter) Small Company Growth Fund Russell 2000 Growth Index Telecom Services Utilities Cash 10.80 2.29 1.24 8.86 19.67 19.00 29.45 3.68 1.28 0.00 0.00 3.74 13.72 2.70 1.23 6.18 23.51 18.18 24.50 4.70 3.46 1.07 0.74 0.00 Over/underweight -2.92-0.41 0.01 2.68-3.84 0.82 4.95-1.02-2.18-1.07-0.74 3.74 Sector returns (%) Fund sector return 8.71 9.45 28.96 10.12-2.86 10.47 2.22 18.40 4.20 0.00 0.00 0.30 Index sector return 8.37 8.48 8.88 5.91 3.27 7.55 1.33 3.94 1.80-1.86 6.08 0.00 Relative return 0.34 0.97 20.08 4.21-6.13 2.92 0.89 14.46 2.40 1.86-6.08 0.30 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 portfolio based 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. Our exposure to any given sector is a result of our security selection process. 2
Fund information Top holdings Stock % of net assets SS&C Technologies Holdings, Inc. 1.90 Copart, Inc. 1.55 PTC Inc. 1.52 On Assignment, Inc. 1.48 Teradyne, Inc. 1.41 2U, Inc. 1.40 Cadence Design Systems, Inc. 1.40 QTS Realty Trust, Inc. Class A 1.34 Performance Food Group Company 1.32 Evercore Inc Class A 1.31 Portfolio characteristics Russell 2000 Growth Fund Index Weighted average market cap $3.39B $1.41B Weighted median market cap $4.00B $2.64B EPS growth (3- to 5-year forecast) 16.00% 14.30% P/E ratio (trailing 12-month) 25.04x 26.31x Turnover¹ 44.34% P/B ratio 3.43x 4.44x P/S ratio 1.65x 1.77x Number of equity holdings 121 1,175 Source: FactSet Fund facts Inception date 12-31-82 Net expense ratio Inst 0.95% Assets all share classes $1,823.04M Portfolio holdings and characteristics are subject to change and may have changed since the date specified. The holdings listed should not be considered recommendations to purchase or sell a particular security. 1. Calculated based on a one-year period. High portfolio turnover may result in increased expenses and higher short-term capital gains. Performance (%) 1 year 3 year 5 year 10 year Small Company Growth Fund Inst 20.61 7.51 14.58 9.46 Russell 2000 Growth Index 22.17 10.28 15.21 9.19 Lipper Small-Cap Growth Funds Average 23.16 9.68 13.83 8.31 Morningstar Small Growth Average 21.50 9.97 13.96 8.42 Rankings and ratings Morningstar total return rankings Institutional Class (as of 12-31-17) Morningstar Category: Small growth 1 year 382 out of 684 funds 3 year 501 out of 609 funds 5 year 205 out of 544 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 small growth category, based on risk-adjusted returns as of 12-31-17. Performance and volatility measures 2 Fund Alpha -1.94 Beta 0.98 Sharpe ratio 0.48 Standard deviation 14.76% R-squared 0.94 Information ratio -0.78 Upside capture 87.67% Downside capture 101.70% Tracking error 3.62% Past performance is no guarantee of future results. 2. Calculated for the Institutional Class based on a three-year period. Relative measures are compared with the fund s benchmark. 3
Share class availability Share class Ticker Gross expense ratio (%) Net expense ratio (%) Contractual expense waiver date A WFSAX 1.33 1.33 9-30-18 C WSMCX 2.08 2.08 9-30-18 Admin NVSCX 1.25 1.20 9-30-18 Inst WSCGX 1.00 0.95 9-30-18 R6 WSCRX 0.90 0.90 9-30-18 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 1.35% (A), 2.10 (C), 1.20 (Admin), 0.95 (I), and 0.90 (R6). 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. Benchmark descriptions: 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. The Morningstar Category average is the average return for the peer group based on the returns of each individual fund within the group. The total return of the Morningstar Category average does not include the effect of sales charges. You cannot invest directly in a Morningstar Category average. The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price/book ratios and higher forecasted growth values. You cannot invest directly in an index. Attribution analysis: Performance attribution and sector returns are calculated using the Brinson-Fachler attribution model. As such, performance attribution calculations may differ from the fund s actual investment results. Definition of terms: Alpha measures the difference between a fund s actual returns and its expected performance given its level of risk (as measured by beta). Beta measures fund volatility relative to general market movements. It is a standardized measure of systematic 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% reflects product 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). This value is determined by taking the annualized excess return over a benchmark (style benchmark by default) 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 the benchmark. The measure ranges from 0.0, which means that the fund s performance bears no relationship to the performance of the index, to 1.0, which means that the fund s performance was perfectly synchronized with the performance of the benchmark. Sharpe ratio measures the potential reward offered by a mutual fund relative to its risk level. The ratio uses a fund s standard deviation and its excess return to determine reward per unit of risk. The higher the 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 its average 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 a benchmark 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% reflects product performance greater than the benchmark and an upside capture ratio less than 100% reflects performance less than the benchmark. 4
Risks: Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Smaller-company stocks tend to be more volatile and less liquid than those of larger companies. 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 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. The inception date of the Institutional Class was March 31, 2008. Performance shown prior to the inception of the Institutional Class reflects the performance of the Administrator Class, which incepted on November 11, 1994, and includes expenses that are not applicable to and are higher than those of the Institutional Class. Performance prior to November 11, 1994, reflects the performance of an unregistered collective investment fund that was not subject to the same requirements and restrictions as the Small Company Growth Fund. 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 small growth funds, the Small Company Growth Fund received 2 stars among 609 funds, 3 stars among 544 funds, and 3 stars among 406 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. 307885 01-18 QU002 01-18 5