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The Golf Lover’s Guide to Successful Philanthropic Investing

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1 The Golf Lover’s Guide to Successful Philanthropic Investing
The following information and opinions are provided courtesy of Wells Fargo Bank N.A. The Golf Lover’s Guide to Successful Philanthropic Investing October 10th, 2013 Gregory S. Jordan, CFA National Philanthropic Investment Officer

2 PAR for the Course When things are going as expected, we say it’s “Par for the course.”

3 P lan = Course Map A R Any successful investment journey must start with planning which can be as simple as a discovery of goals and objectives incorporating issue around risk and time horizon. The investment plan becomes essentially the “course map” for the investment experience. NorthstarTM CA Course Map

4 P lan = Course Map A R Need to start at hole #1
All the Investment Committee wants is to find the best performance for the lowest fees… Failing to plan can lead you to some undesirable places. Need to start at hole #1 1 repaydebt.org, March,2013

5 P lan = Course Map A R Key Principles for Successful
The Mission Matters 1 Understand Cash –Flow Needs 2 The Importance Of Time Horizon 3 Key Principles for Successful Philanthropic Investing

6 sset Allocation = Clubs R
P A sset Allocation = Clubs R How many of you are going out on the golf course today with only one club? Likewise you should not embark on the investment journey with only one kind of asset. Matching the right clubs to your shots is an important ingredient to a successful golf game. Matching your goals and objectives to an appropriate asset allocation between different types of assets is an important ingredient to investment success.

7 sset Allocation = Clubs R
P A sset Allocation = Clubs R Design The Appropriate Asset Allocation 4 Aim For Consistent Returns Through Diversification 5 Key Principles for Successful Philanthropic Investing

8 Key Drivers of Return Variability
P A sset Allocation = Clubs R Key Drivers of Return Variability Tactical Asset Allocation Security Selection Other Strategic Asset Allocation Sources: Wells Fargo; “Determinants of Portfolio Returns,” 2/10 Asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment losses.

9 Performance of Three Portfolios
sset Allocation = Clubs R Performance of Three Portfolios January 2000 through March 2013 Total Diversified Portfolio 60% S&P 500, 40% Barclays Agg S&P 500 TR $250,000 $200,000 $150,000 $100,000 $50,000 $0 Portfolio Blend: 3% Cash,;5% Short Term Bonds, 17% Interm Bonds, 5% HY Bonds, 5% Developed Bonds, 5% EM Bonds; 15% US Large Cap, 5% US Mid Cap, 3% US Small Cap, 10% Developed Equities, 6% EM Equities; 7% REITS; 5% Commodities; 2% Hedge Fund Conserv, 5% HF Diversified, 3% Hedge Fund Aggressive

10 isk Management = Avoiding the Sand Traps
Managing risk in order to keep you engaged in your plan for the long haul is important, but it is also a big stumbling block for many investors. Many investors will take either too much or too little risk with implications to their investment success. Likewise, as you play the game of golf, if you take too much risk, you’ll find yourself playing from the woods, the sand trap, the lake…too little risk and your buddies will be home in bed by the time you finish the course.

11 isk Management = Avoiding the Sand Traps
Understand The Risks In The Portfolio 6 Key Principles for Successful Philanthropic Investing

12 Manage Risk Across Different Categories
P A R isk Management = Avoiding the Sand Traps Manage Risk Across Different Categories Source: Wells Fargo Wealth Management, 09/11

13 Watch Out for “FORE!” Just as a bad shot can put you out of the game for a long time, so too can a bad investment decision.

14 F O R E Key Principles for Successful Philanthropic Investing
Build Discipline And Process Into Sustainable Stewardship 7 Key Principles for Successful Philanthropic Investing

15 ailure to Funnel the Flow of Information O R E
Try saying that really quick! Some investors try to take action on information that in reality is just noise and this can cause a portfolio to go terribly off course (aka the investor yelling FORE).

16 utsmarting the Market Theory R E
F O utsmarting the Market Theory R E This is the false belief that if you do enough work or enough research that you can outsmart the market and avoid any losses or downturns and only capture the gains. This is not possible, but does not keep some investors from trying.

17 utsmarting the Market Theory R E
F O utsmarting the Market Theory R E Data: Effects of missing best performing days of the market. Returns are annualized price returns. Frequency: Annual Updated: 6/14/2013 Source: WMG Research; FactSet Don’t try to pick tops and bottoms. Trying to time the market may reduce your returns. Source: WMG Research; Morningstar, January 2013

18 ebalance without Discipline E
F O R ebalance without Discipline E Rebalancing is a key component of the “R” in PAR, risk management. Rebalancing by taking some profits and trimming risk exposures when the markets have been on a tear or adding risk exposure when the markets have been weak will often help an investor take advantage of market volatility, but can be emotionally difficult for some investors to implement.

19 Rebalancing Has Added To Returns
Rebalancing a Diversified Portfolio has added just over 1 percent additional return per year on average in each of the past five years. 5 Year Cumulative Performance May - 08 Jun 13 60 70 80 90 100 110 120 130 Growth of $100 Dec 09 10 11 12 Balanced Allocation 2013 Balanced No Rebalance $119.13 $113.64 Index Level Rebalancing a Diversified Portfolio has added just over 1 percent additional return per year on average in each of the past five years. Source: Markov Processes International, (MPI), 06/30/13. See disclosures for composition of portfolio and important definitions. Past performance is no guarantee of future results.

20 F O R E motion vs. IPS

21 Components of a Well-Constructed Investment Policy Statement
Motion vs. IPS Components of a Well-Constructed Investment Policy Statement Purpose Scope Objective Fiduciary Duty Roles Spending Policy Investment Philosophy Strategy Asset Allocation Active/Passive Styles Rebalancing Liquidity Guidelines and Restrictions Performance Measurement and Benchmark

22 Remember PAR / FORE DO: Plan around the Mission, Cash-Flows and Time Horizon. Focus on Asset Allocation and Diversification. Think more broadly about Risk. DON’T: Let information Flow take you off course. Try to Outsmart the Market. Be Reluctant to rebalance. Let Emotion instead of a well-constructed IPS guide the decisions. DO: Start with a Plan. Use Asset Allocation to smooth the ride. Manage Risk to keep your plan on track. DON’T Let information Flow take you off course. Try to Outsmart the Market. Be Reluctant to rebalance. Let your Emotions guide your decisions.

23 Disclosures Wells Fargo Private Bank provides products and services through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries. The information and opinions in this report were prepared by the investment management division within Wells Fargo Private Bank. Information and opinions have been obtained or derived from sources we consider reliable, but we cannot guarantee their accuracy or completeness. Opinions represent Wells Fargo Private Bank’s opinion as of the date of this report and are for general information purposes only. Wells Fargo Private Bank does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report. This material is for general information only, is not suitable for all investors and is not soliciting any action from any particular investor. Information and opinions presented have been obtained or derived from sources we believe reliable, but we cannot guarantee their accuracy or completeness. Opinions represent WFB’s judgment as of the date of the report and are subject to change without notice. WFC affiliates may issue reports or have opinions, which are inconsistent with, and reach different conclusions from, this report. This report is not an offer to buy or sell or a solicitation of an offer to buy or sell any securities mentioned. Wells Fargo & Company and/or its affiliates may trade for their own accounts, be on the opposite side of customer orders, or have a long or short position in the securities mentioned herein. The investments discussed or recommended in this report are not insured by the Federal Deposit Insurance Corporation (FDIC) and may be unsuitable for some investors depending on their specific investment objectives and financial position. Past performance is not a guide to future performance. Income from investments may fluctuate. The price or value of the investments also may fluctuate. There is always the potential for loss as well as gain. Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. Investing in foreign securities presents certain risks that may not be present in domestic securities and may not be suitable for all investors. These risks are heightened in emerging markets. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity. Products that invest in commodities may employ more complex strategies which may expose investors to additional risks. Real estate investment carries a certain degree of risk and may not be suitable for all investors. Some real assets may be available to pre-qualified investors only. Some complementary strategies may be available to prequalified investors only. Hedge strategies and private investments may be speculative and involve a high degree of risk. Hedge strategies and private investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. There is no secondary market for the investor’s interest in a hedge fund or private equity investment and none is expected to develop. There may be restrictions on transferring interests in a hedge fund or private equity investment.

24 Disclosures (cont.) Fixed income securities are subject to availability and market fluctuation. These securities may be worth less than the original cost upon redemption. Certain high-yield/high-risk bonds carry particular market risks and may experience greater volatility in market value than investment grade corporate bonds. Government bonds and Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and fixed principal value. Interest from certain municipal bonds may be subject to state and/or local taxes and in some instances, the alternative minimum tax. Municipal bonds offer interest payments exempt from federal taxes, and potentially state and local income taxes. Unlike U.S. Treasuries, municipal bonds are subject to credit risk and potentially the Alternative Minimum Tax (AMT). Quality varies widely depending in the specific issuer. Corporate bonds generally provide higher yields than U.S. Treasuries while incurring higher risk. Yields are subject to change with economic conditions. Yield is only one factor that should be considered when making an investment decision. Wells Fargo & Company and its affiliates do not provide legal advice. Please consult your legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your situation at the time your tax preparer submits your return . You cannot invest directly in an index. The Barclays Capital U.S. Aggregate Bond Index is composed of the Barclays Capital U.S. Government/Credit Index and the Barclays Capital U.S. Mortgage-Backed Securities Index, and includes Treasury issues, agency issues, corporate bond issues, and mortgage-backed securities. You cannot invest directly in an index. S&P 500 Index is a capitalization-weighted index calculated on a total-return basis with dividends reinvested. The index includes 500 widely held U.S. market industrial, utility, transportation and financial companies. S&P Midcap 400 Index is an unmanaged capitalization-weighted index of common stocks representing all major industries in the mid-range of the U.S. stock market. S&P Small Cap 600 Index is an unmanaged capitalization-weighted index of common stocks representing all major industries in the small-cap (between $300mn and $2 billion) are of the market. MSCI AC World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The Index consists of 46 country indices comprising 23 developed and 23 emerging market country indices. The developed market country indices included are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The emerging market country indices included are: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. Barclays U.S. TIPS Index consists of inflation-protection securities issued by the U.S. Treasury. The Market Volatility Index (VIX) is an index designed to track market volatility as an independent entity. The index calculated based on option activity and is used as an indicator of investor sentiment, with high values implying pessimism and low values implying optimism.

25 Disclosures (cont.) JPMorgan Emerging Markets Bond Index (EMBI Global) currently covers 27 emerging market countries. Included in the EMBI Global are U.S. dollar-denominated Brady bonds, Eurobonds, traded loans, and local market debt instruments issued by sovereign and quasi-sovereign entities. JPMorgan Non-U.S. Global Government Bond Index (Hedged) is an unmanaged market index representative of the total return performance, on a hedged basis, of major non-U.S. bond markets. It is calculated in U.S. dollars. Unless otherwise noted, index returns reflect the reinvestment of dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. It is not possible to invest directly in an index. FTSE NAREIT Equity REIT Total Return Index is an unmanaged index reflecting performance of the U.S. real estate investment trust market. S&P GSCI™ Commodity Index is a composite of commodity sector returns, representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. Individual components qualify for inclusion in the Index on the basis of liquidity and are weighted by their respective world production quantities. BBA LIBOR rate is a consensus derived from those submitted by major banks in London at 11:00 am London time. It is an average derived from sixteen quotations provided by banks determined by the British Bankers’ Association. The four highest and four lowest are then eliminated and an average of the remaining eight is calculated to arrive at the fix at 11:00 am. The fix is rounded to five decimal places. Eurodollar LIBOR is calculated on am ACT/360 basis and settlement is for two days hence. Prior to January 1995 the BBA did not "fix" LIBOR Barclays U.S. TIPS Index consists of inflation-protection securities issued by the U.S. Treasury. Barclays U.S. Mortgage-Backed Securities Index includes mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). The MBS Index is formed by grouping the universe of over 600,000 individual fixed rate MBS pools into approximately 3,500 generic aggregates. Barclays High Yield Bond Index is an unmanaged index that includes all fixed income securities having a maximum quality rating of Ba1, a minimum amount outstanding of $100 million, and at least one year to maturity. Barclays U.S. Treasury Index is the U.S. Treasury component of the U.S. Government Index. The index consists of public obligations of the U.S. Treasury with a remaining maturity of one year or more. Dow Jones-UBS Commodity Index represents futures contracts on 19 physical commodities. No related group of commodities (e.g., energy, precious metals, livestock, and grains) may constitute more than 33 percent of the index as of the annual reweightings of the components. No single commodity may constitute less than two percent of the index. NAREIT Global Real Estate Index measures the performance of listed real estate companies and REITs worldwide, the series acts as a performance measure of the overall market. Investing in commodities is not suitable for all investors. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. The prices of various commodities may fluctuate based on numerous factors including changes in supply and demand relationships, weather and acts of nature, agricultural conditions, international trade conditions, fiscal monetary and exchange control programs, domestic and foreign political and economic events and policies, and changes in interest rates or sectors affecting a particular industry or commodity. Products that invest in commodities may employ more complex strategies which may expose investors to additional risks, including futures roll yield risk.

26 Disclosures (cont.) Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000®. Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index. Morgan Stanley Capital International (MSCI) Emerging Markets Global Index is a market capitalization-weighted benchmark index made up of equities from 29 developing countries. MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. As of June 2007 the MSCI EAFE Index consisted of 21 developed-market country indices. MSCI Europe, Australasia, Far East & Canada Gross Return Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. FTSE EPRA NAREIT Equity REIT Total Return USD Index is an unmanaged index reflecting performance of the U.S. real estate investment trust market. Relative Value Arbitrage: Investment Managers who maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities. HFRX Relative Value Arbitrage Index strategies allow investment managers to maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities. Managers employ a variety of fundamental and quantitative techniques to establish investment theses, and security types range broadly across equity, fixed income, derivative or other security types. Fixed income strategies are typically quantitatively driven to measure the existing relationship between instruments and, in some cases, identify attractive positions in which the risk adjusted spread between these instruments represents an attractive opportunity for the investment manager. HFRX Event Driven: Merger Arbitrage Index strategies employ an investment process primarily focused on opportunities in equity and equity- related instruments of companies which are currently engaged in a corporate transaction. Merger Arbitrage involves primarily announced transactions, typically with limited or no exposure to situations which pre-, post-date or situations in which no formal announcement is expected to occur. Opportunities are frequently presented in cross border, collared and international transactions which incorporate multiple geographic regulatory institutions, with typically involve minimal exposure to corporate credits. HFRX Macro/CTA Index strategies allow Macro strategy managers to trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets. Managers employ a variety of techniques, both discretionary and systematic analysis, combinations of top down and bottom up theses, quantitative and fundamental approaches and long and short term holding periods. Although some strategies employ RV techniques, Macro strategies are distinct from RV strategies in that the primary investment thesis is predicated on predicted or future movements in the underlying instruments, rather than realization of a valuation discrepancy between securities. In a similar way, while both Macro and equity hedge managers may hold equity securities, the overriding investment thesis is predicated on the impact movements in underlying macroeconomic variables may have on security prices, as opposed to EH, in which the fundamental characteristics on the company are the most significant and integral to investment thesis.

27 Disclosures (cont.) Dow Jones-UBS Commodity TR USD Index represents futures contracts on 19 physical commodities. No related group of commodities (e.g., energy, precious metals, livestock and grains) may constitute more than 33 percent of the index as of the annual reweightings of the components. No single commodity may constitute less than 2 percent of the index. Barclays U.S. Treasury Bill 1-3 months Index includes public obligations of the U.S. Treasury with a maturity of one to three months. Barclays U.S. Corporate HY Bond Index includes publicly issued U.S. corporate and Yankee debentures and secured notes that meet specified maturity, liquidity, and quality requirements. JPMorgan GBI Global ex-US TR USD is an unmanaged index market representative of the total return performance in U.S. dollars on an unhedged basis of major non-U.S. bond markets. JP Morgan Emerging Markets Bond Index (EMBI Global) currently covers 27 emerging market countries. Included in the EMBI Global are U.S.- dollar-denominated Brady bonds, Eurobonds, traded loans, and local market debt instruments issued by sovereign and quasi-sovereign entities. Total Diversified Portfolio is based on a mix of 3% Cash,19% US Agg Bonds, 5% High Yield Bonds, 5% Developed Bonds, 5% EM Bonds; 15% US Large Cap, 6.60% US Mid Cap, 3.80% US Small Cap, 9% Developed Equities, 6.60% EM Equities; 7% REITS; 5% Commodities; 4% HF Rel Value, 2% HF Macro, 4% HF Event Driven. Diversified Portfolio Balanced Allocation = 3% BarCap US Treasury Bill 1-3 Months, 19% BarCap US Aggregate Bond Index, 5% BarCap US Corporate High Yield Index, 5% JPM GBI Global Ex-US TR USD Index, 5% JPM EMBI Global TR USD Index, 16% S&P 500 Index, 6% Russell Mid Cap TR USD Index, 3% Russell 2000 TR USD Index, 10% MSCI EAFE Free GR USD Index, 6% MSCI EM USD Index, 7% FTSE EPRA/NAREIT Developed TR USD Index, 5% DJ UBS Commodity TR USD Index, 4% HFRX Relative Value Arbitrage Index, 2% HFRX Macro/CTA Index, 4% HFRX Event Driven Index Wells Fargo Bank, N.A. (the “Bank”) offers various advisory and fiduciary products and services. Wells Fargo affiliates, including Financial Advisors of Wells Fargo Advisors, LLC, a separate non-Bank affiliate, may be paid an ongoing or one-time referral fee in relation to clients referred to the Bank. The role of the Financial Advisor with respect to Bank products and services is limited to referral and relationship management services. The Bank is responsible for the day-to-day management of the account and for providing investment advice, investment management services and wealth management services to clients. The views, opinions and portfolios may differ from our broker dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliate of Wells Fargo & Company. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company. NOTE: All images used in this presentation are sourced from Wikimedia Commons unless otherwise noted. Additional information is available upon request. © 2013 Wells Fargo Bank, N.A. All rights reserved

28 Four Potential Opportunities and One Key Risk

29 Longer Term – Stocks are Still More Attractive than Bonds
Opportunity #1 Longer Term – Stocks are Still More Attractive than Bonds Now that the economy has recovered, investors should focus on globalizing all four asset groups and planning for higher interest rates, inflation, and taxes. We strongly believe these strategies allow investors to take advantage of opportunities and mitigate the risks associated with today’s investment landscape.

30 Household Net Worth Rebounds
Improvements in total household net worth reflects increases in house prices, stock prices, and other assets. Consumer Assets Rebounding 03/31/98-03/31/13 Consumer confidence is improving as asset prices recover. Total household net worth stands at $70.35 trillion, approaching its all-time high. We estimate growth will continue as house and stock prices keep climbing. Source: Federal Reserve Board, 06/07/13 Source: Federal Reserve Board, 06/07/13

31 Large U.S. Corporations Deploying Cash
Large companies cut spending in half from Since then, these companies have increased spending steadily. S&P 500 Companies Spending Cash Improving confidence in the business community is also reflected in this chart, showing the changes in the amount of cash companies are spending. From 2007 to 2009, S&P 500 companies pared down their spending by half: accumulating cash on their balance sheets as a cushion against the effects of the “financial crisis.” As uncertainty eases, large corporations are seeking to make the best use of their cash holdings. Buyback activities as well as mergers and acquisitions have increased over the past few years, but are still well below 2007 levels. Source: Standard & Poor’s, Bloomberg, 03/15/13 Source: Standard & Poor’s, Bloomberg, 03/15/13

32 Bull Markets: Historical Perspective
History shows that the current bull market may only be in the middle stages. Bull Market Return Percent The ‘07-’09 bear market lasted longer than most and losses were the worst since the Great Depression. The bear market peak-to-trough loss was nearly 57 percent and the duration was 17 months. Historically, recovery periods have lasted, on average, two years. However, the ’07-’09 bear market has taken roughly four years to climb back to prior peaks, with the Dow Industrials, S&P 500, MidCap, and Small Cap indices surpassing their prior highs just recently. This recovery seems to be in line with the other two largest bear market declines in ‘73-’74 and ‘00-’02, where the recovery period was close to five years. The average post-WWII bull run has lasted nearly six years. Source: Bloomberg, LLP, 06/13 Past performance is no guarantee of future results. S&P 500 is an unmanaged index and is unavailable for direct investment. Source: Bloomberg Finance LLP, S&P 500 Index Price Return as of 06/30/13

33 Third Time’s A Charm: Triple Top in 2000, 2007, 2013
There are some significant differences this time. 2000 2007 2013E S&P 500 Earnings $56.13 $82.54 $108.00 10-Year Treasury Yield 5.1% 4.1% 2.6% Inflation (YoY%) 3.4% 2.0% Central Bank Rates Investor Sentiment Positive Fragile S&P 500 Earnings in year end 2013 are projected to be $108 vs. actual year end $56 in 2000 & $82 in 2007. 10 Year Treasury yields recently have been running near 2.5% in 2013 vs. 5.1% in 2000 & 4.1% in 2007. In 2000 & 2007 inflation was accelerating around the world and central banks were tightening. The opposite is true in 2013. In early 2000 & 2007 investors were optimistic if not euphoric. Today investor sentiment remains fragile. E: estimate Source: FactSet, Wells Fargo Wealth Management, 06/10/13. Estimates are not guaranteed and are subject to change.

34 Rising Bond Yields and Stock Returns
Historically, periods of rising Treasury yields that peaked below seven percent were accompanied by positive average stock returns. When Yields Rise, the S&P 500 has Returned… We have already seen Treasury markets respond to the Fed’s talk of tapering bond purchases with higher yields. When looking at the 10-year Treasury yields during rising rate periods, going back to 1950, we can observe the following behavior in the S&P 500 Index: Out of 16 periods where the 10-year U.S. Treasury increased by at least 100bps, only six periods experienced negative returns for the S&P 500. The average trough-to-peak period has lasted 773 days with the 10-year U.S. Treasury rising by an average 2.73 percent. The average return for the S&P 500 during all these periods is percent. The average return for the S&P 500 during the 10 positive periods is 25.9 percent. The average return for the S&P 500 during the six down periods is -8.8 percent. The six periods of negative S&P 500 returns happened when the starting point for the 10-year Treasury was above 4.48 percent. There are four periods where the starting point is below three percent (similar to today). The 10-year Treasury peaked below five percent in all four periods and the S&P 500 was positive in all four periods, rising an average of just over 30 percent. Two of the periods happened in the last three years, with the 10-year U.S. Treasury rising percent. Both periods saw positive returns for the S&P 500: percent in 2008 and percent, respectively, in 2010. Source: FactSet, as of 02/15/13 Past performance is no guarantee of future results. Data range: Source: FactSet, Bloomberg, as of 02/15/13

35 Equities Source: WMG Research; FactSet
Data: S&P 500 Forward P/E. Point-in-time First Call estimates. Range: 10-Year Rolling Frequency: Monthly Updated: 8/09/2013 Source: FactSet Notes: Source: WMG Research; FactSet

36 Diversification of Bond and Cash Flow Generating Assets
Opportunity #2 Diversification of Bond and Cash Flow Generating Assets Now that the economy has recovered, investors should focus on globalizing all four asset groups and planning for higher interest rates, inflation, and taxes. We strongly believe these strategies allow investors to take advantage of opportunities and mitigate the risks associated with today’s investment landscape.

37 Diversified Income Streams
Look beyond “traditional” income-generating assets. Yields Vary Greatly Yield (in percent) Diversifying Cash Flow Opportunities Traditional “Stable” Fixed Income Inflation Assumption With cash and government bonds yielding so little, we suggest looking at income-generating investment opportunities across the global credit and capital spectrum. Within traditional fixed income, consider municipal bonds, which are currently yielding slightly more than Treasuries while providing a tax advantage to investors. Our outlook for many municipalities is improving, based on strong growth in tax revenues and sizable budget cuts at the state and local levels. Corporate bonds (both investment grade and high yield) can provide higher yields than Treasury bonds and may also be less sensitive to swings in interest rates. Although the high-yield corporate bonds may be vulnerable to short-term swings in the equity market, their outsized yield provides a cushion for total-return investors. Foreign bonds may offer higher yields, as well as credit and currency diversification. We like the credit fundamentals and valuations in emerging-market bonds, and suggest favoring these over developed-market bonds until the European debt crisis abates. Source: FactSet, 06/13 Past Performance is no guarantee of future results. 3% inflation assumption based on our 2013 outlook. Source: FactSet, Bloomberg, as of 06/30/13

38 Emerging Equity Market Exposure
Opportunity #3 Emerging Equity Market Exposure Now that the economy has recovered, investors should focus on globalizing all four asset groups and planning for higher interest rates, inflation, and taxes. We strongly believe these strategies allow investors to take advantage of opportunities and mitigate the risks associated with today’s investment landscape.

39 Emerging Economies Have Low Debt/GDP
In general, emerging economies have more fiscal flexibility than the larger developed economies. Emerging Economies Debt/GDP Lower Estimated 2012 Ratio of Public Debt/GDP Bubble size = 2012 Net (Public) Debt Estimates in US$ trillion (Brazil, China and Russia = Gross Debt in US$ trillion) While developed economies are focused on bringing down their bloated debt levels, constraining their growth, emerging economies generally have low debt levels and, therefore, greater flexibility to grow their economies. Estimated 2012 Growth Rate (%) Source: 2012 growth estimates, Wells Fargo Wealth Management; International Monetary Fund (IMF) World Economic Outlook (WEO) database, 10/12

40 Emerging Economies’ Growing Middle Class
Middle class consumers are increasing at a rapid pace, especially in emerging economies, adding spending power to the global markets. More Global Middle Class1 Consumers According to McKinsey, “from 1980 to 2009, the global middle class grew by around 700 million people to 1.8 billion. Over the next 20 years, it is likely to grow by an additional 3 billion to roughly 5 billion people. The world has never before witnessed income growth of this speed and magnitude. China and India are doubling their real per capita incomes at about 10 times the pace England achieved during the Industrial Revolution and at about 200 times the scale. In all likelihood the expansion of the global middle class will continue the acceleration in demand for resources – energy, food, materials, water – that has taken place since 2000.” Source: McKinsey Quarterly, Mobilizing for a Resource Revolution, 01/12, Richard Dobbs, Jeremy Oppenheim, and Fraser Thompson 1 Defined as having daily per capita spending of $10 to $100 in purchasing-power-parity terms. Source: McKinsey Quarterly, 01/12

41 Global Trends Source: International Monetary Fund
Data: Price to earnings multiple of selected emerging market countries. Range: 6/30/2003 – 6/30/2013 Frequency: Monthly Updated: 7/15/2013 Source: Factset Notes: Source: International Monetary Fund

42 Diversification is Still a Potential Risk-Reducer
Opportunity #4 Diversification is Still a Potential Risk-Reducer Now that the economy has recovered, investors should focus on globalizing all four asset groups and planning for higher interest rates, inflation, and taxes. We strongly believe these strategies allow investors to take advantage of opportunities and mitigate the risks associated with today’s investment landscape.

43 Asset Performance While the S&P 500 is back to its all-time high and has seen a tremendous resurgence since its low point in 2009, the index is up a mere 41 percent since A more diversified portfolio, which includes bonds, is up almost twice as much, and a fully diversified portfolio, which includes international assets, real assets, and complementary strategies, is up an even greater amount at a 130 percent gain. Source: Wells Fargo Wealth Management, Morningstar, 06/30/13 Frequency: Monthly Hypothetical Total Diversified Portfolio is based on a mix of 3% Cash,19% US Agg Bonds, 5% High Yield Bonds, 5% Developed Bonds, 5% EM Bonds; 15% US Large Cap, 6.60% US Mid Cap, 3.80% US Small Cap, 9% Developed Equities, 6.60% EM Equities; 7% REITS; 5% Commodities; 4% HF Rel Value, 2% HF Macro, 4% HF Event Driven. The portfolio is rebalanced quarterly. Hypothetical examples do not represent actual performance results achieved and are for illustrative purposes only. Source: Wells Fargo Wealth Management, Morningstar, 06/30/13

44 The Challenges of Higher Interest Rates
Risk #1 The Challenges of Higher Interest Rates Now that the economy has recovered, investors should focus on globalizing all four asset groups and planning for higher interest rates, inflation, and taxes. We strongly believe these strategies allow investors to take advantage of opportunities and mitigate the risks associated with today’s investment landscape.

45 Today’s Interest Rate Dilemma
Since 1980, there have been only two negative return years (1994 and 1999) in the Barclays U.S. Aggregate Index.1 U.S. Treasuries have experienced a 30-year bull market with rates reaching historic lows. With yields now around two percent, we believe Treasuries offer little long-term value. Instead we would focus on diversifying income streams through corporate bonds, munis, high yield, foreign/emerging debt, preferreds, and dividend-paying stocks. 1994 1999 Source: FactSet, 07/10/13 Past performance is no guarantee of future results

46 A Generation of Positive Bond Performance
Annual Performance of Barclays Intermediate Aggregate and Corporate Bonds 1980 Through 2012 We believe the global economy is at a crossroads – developed economies are aging while emerging economies are coming of age. Many far reaching decisions are being made by governments and policymakers around the world. Today, I’ll discuss five major investment themes that that we believe will drive the global economy and financial markets in 2012 and beyond. For each theme, I will highlight specific actions investors can take now to potentially benefit from the changes we are seeing.

47 Market Sentiment/Leading Indicators
Bond flows outpaced stock flows for the last three years, but that trend has recently begun to reverse Annual Flows of Long-Term Funds $$Billions YTD 13’ 2012 2011 2010 2009 2008 2007 2006 2005 Domestic Equity 14 -156 -132 -81 -29 -149 -65 -31 18 International Equity 32 -3 5 39 12 -37 71 87 55 EM Equity 22 17 28 21 -10 20 15 Taxable Bond 86 254 137 225 310 98 45 27 Global Bond 13 29 4 Tax-exempt Bond 7 50 -12 11 69 8 Money Market -98 -1 -124 -525 -539 637 654 245 62 Data: Net new flows in/out of bond mutual funds as measured by the Investment Company Institute Range: Trailing nine years Frequency: Annual, YTD as of May 2013 Updated: 05/08/2013 Source: ICI Source: ICI, as of 05/31/13

48 The P0tential Impact of Rising Rates
In the table below, you can see the duration and price performance of five generic bonds. The coupon levels (yields) are based on an upward-sloping interest-rate curve. We show the impact on each bond’s price in three hypothetical interest-rate scenarios. Yield Duration Par Value +100bp* +200bp* +300bp* 30-year bond 3.50% 18.48 100 84 71 61 20-year bond 3.25% 14.62 87 75 66 10-year note 2.50% 8.80 92 77 5-year note 1.40% 4.81 95 91 2-year note 0.35% 1.99 98 96 94 Source: Wells Fargo Advisors *Market value after instantaneous increase in the yield curve; 100 basis points (bp) equals 1 percent. Examples are used for illustrative purposes only and do not reflect the rates for any investment available for purchase through Wells Fargo Advisors. Duration is a measure used to determine a bond/s or bond portfolio’s sensitivity to movements in interest rates. Generally, the longer the duration the more sensitive a bond or bond portfolio is to changes in interest rates.

49 Disclosures Wells Fargo Private Bank provides products and services through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries. The information and opinions in this report were prepared by the investment management division within Wells Fargo Private Bank. Information and opinions have been obtained or derived from sources we consider reliable, but we cannot guarantee their accuracy or completeness. Opinions represent Wells Fargo Private Bank’s opinion as of the date of this report and are for general information purposes only. Wells Fargo Private Bank does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report. This material is for general information only, is not suitable for all investors and is not soliciting any action from any particular investor. Information and opinions presented have been obtained or derived from sources we believe reliable, but we cannot guarantee their accuracy or completeness. Opinions represent WFB’s judgment as of the date of the report and are subject to change without notice. WFC affiliates may issue reports or have opinions, which are inconsistent with, and reach different conclusions from, this report. This report is not an offer to buy or sell or a solicitation of an offer to buy or sell any securities mentioned. Wells Fargo & Company and/or its affiliates may trade for their own accounts, be on the opposite side of customer orders, or have a long or short position in the securities mentioned herein. The investments discussed or recommended in this report are not insured by the Federal Deposit Insurance Corporation (FDIC) and may be unsuitable for some investors depending on their specific investment objectives and financial position. Past performance is not a guide to future performance. Income from investments may fluctuate. The price or value of the investments also may fluctuate. There is always the potential for loss as well as gain. Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. Investing in foreign securities presents certain risks that may not be present in domestic securities and may not be suitable for all investors. These risks are heightened in emerging markets. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity. Products that invest in commodities may employ more complex strategies which may expose investors to additional risks. Real estate investment carries a certain degree of risk and may not be suitable for all investors. Some real assets may be available to pre-qualified investors only. Some complementary strategies may be available to prequalified investors only. Hedge strategies and private investments may be speculative and involve a high degree of risk. Hedge strategies and private investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. There is no secondary market for the investor’s interest in a hedge fund or private equity investment and none is expected to develop. There may be restrictions on transferring interests in a hedge fund or private equity investment.

50 Disclosures (cont.) Fixed income securities are subject to availability and market fluctuation. These securities may be worth less than the original cost upon redemption. Certain high-yield/high-risk bonds carry particular market risks and may experience greater volatility in market value than investment grade corporate bonds. Government bonds and Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and fixed principal value. Interest from certain municipal bonds may be subject to state and/or local taxes and in some instances, the alternative minimum tax. Municipal bonds offer interest payments exempt from federal taxes, and potentially state and local income taxes. Unlike U.S. Treasuries, municipal bonds are subject to credit risk and potentially the Alternative Minimum Tax (AMT). Quality varies widely depending in the specific issuer. Corporate bonds generally provide higher yields than U.S. Treasuries while incurring higher risk. Yields are subject to change with economic conditions. Yield is only one factor that should be considered when making an investment decision. Wells Fargo & Company and its affiliates do not provide legal advice. Please consult your legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your situation at the time your tax preparer submits your return . You cannot invest directly in an index. The Barclays Capital U.S. Aggregate Bond Index is composed of the Barclays Capital U.S. Government/Credit Index and the Barclays Capital U.S. Mortgage-Backed Securities Index, and includes Treasury issues, agency issues, corporate bond issues, and mortgage-backed securities. You cannot invest directly in an index. S&P 500 Index is a capitalization-weighted index calculated on a total-return basis with dividends reinvested. The index includes 500 widely held U.S. market industrial, utility, transportation and financial companies. S&P Midcap 400 Index is an unmanaged capitalization-weighted index of common stocks representing all major industries in the mid-range of the U.S. stock market. S&P Small Cap 600 Index is an unmanaged capitalization-weighted index of common stocks representing all major industries in the small-cap (between $300mn and $2 billion) are of the market. MSCI AC World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The Index consists of 46 country indices comprising 23 developed and 23 emerging market country indices. The developed market country indices included are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The emerging market country indices included are: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. Barclays U.S. TIPS Index consists of inflation-protection securities issued by the U.S. Treasury. The Market Volatility Index (VIX) is an index designed to track market volatility as an independent entity. The index calculated based on option activity and is used as an indicator of investor sentiment, with high values implying pessimism and low values implying optimism.

51 Disclosures (cont.) JPMorgan Emerging Markets Bond Index (EMBI Global) currently covers 27 emerging market countries. Included in the EMBI Global are U.S. dollar-denominated Brady bonds, Eurobonds, traded loans, and local market debt instruments issued by sovereign and quasi-sovereign entities. JPMorgan Non-U.S. Global Government Bond Index (Hedged) is an unmanaged market index representative of the total return performance, on a hedged basis, of major non-U.S. bond markets. It is calculated in U.S. dollars. Unless otherwise noted, index returns reflect the reinvestment of dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. It is not possible to invest directly in an index. FTSE NAREIT Equity REIT Total Return Index is an unmanaged index reflecting performance of the U.S. real estate investment trust market. S&P GSCI™ Commodity Index is a composite of commodity sector returns, representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. Individual components qualify for inclusion in the Index on the basis of liquidity and are weighted by their respective world production quantities. BBA LIBOR rate is a consensus derived from those submitted by major banks in London at 11:00 am London time. It is an average derived from sixteen quotations provided by banks determined by the British Bankers’ Association. The four highest and four lowest are then eliminated and an average of the remaining eight is calculated to arrive at the fix at 11:00 am. The fix is rounded to five decimal places. Eurodollar LIBOR is calculated on am ACT/360 basis and settlement is for two days hence. Prior to January 1995 the BBA did not "fix" LIBOR Barclays U.S. TIPS Index consists of inflation-protection securities issued by the U.S. Treasury. Barclays U.S. Mortgage-Backed Securities Index includes mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). The MBS Index is formed by grouping the universe of over 600,000 individual fixed rate MBS pools into approximately 3,500 generic aggregates. Barclays High Yield Bond Index is an unmanaged index that includes all fixed income securities having a maximum quality rating of Ba1, a minimum amount outstanding of $100 million, and at least one year to maturity. Barclays U.S. Treasury Index is the U.S. Treasury component of the U.S. Government Index. The index consists of public obligations of the U.S. Treasury with a remaining maturity of one year or more. Dow Jones-UBS Commodity Index represents futures contracts on 19 physical commodities. No related group of commodities (e.g., energy, precious metals, livestock, and grains) may constitute more than 33 percent of the index as of the annual reweightings of the components. No single commodity may constitute less than two percent of the index. NAREIT Global Real Estate Index measures the performance of listed real estate companies and REITs worldwide, the series acts as a performance measure of the overall market. Investing in commodities is not suitable for all investors. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. The prices of various commodities may fluctuate based on numerous factors including changes in supply and demand relationships, weather and acts of nature, agricultural conditions, international trade conditions, fiscal monetary and exchange control programs, domestic and foreign political and economic events and policies, and changes in interest rates or sectors affecting a particular industry or commodity. Products that invest in commodities may employ more complex strategies which may expose investors to additional risks, including futures roll yield risk.

52 Disclosures (cont.) Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000®. Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index. Morgan Stanley Capital International (MSCI) Emerging Markets Global Index is a market capitalization-weighted benchmark index made up of equities from 29 developing countries. MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. As of June 2007 the MSCI EAFE Index consisted of 21 developed-market country indices. MSCI Europe, Australasia, Far East & Canada Gross Return Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. FTSE EPRA NAREIT Equity REIT Total Return USD Index is an unmanaged index reflecting performance of the U.S. real estate investment trust market. Relative Value Arbitrage: Investment Managers who maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities. HFRX Relative Value Arbitrage Index strategies allow investment managers to maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities. Managers employ a variety of fundamental and quantitative techniques to establish investment theses, and security types range broadly across equity, fixed income, derivative or other security types. Fixed income strategies are typically quantitatively driven to measure the existing relationship between instruments and, in some cases, identify attractive positions in which the risk adjusted spread between these instruments represents an attractive opportunity for the investment manager. HFRX Event Driven: Merger Arbitrage Index strategies employ an investment process primarily focused on opportunities in equity and equity-related instruments of companies which are currently engaged in a corporate transaction. Merger Arbitrage involves primarily announced transactions, typically with limited or no exposure to situations which pre-, post-date or situations in which no formal announcement is expected to occur. Opportunities are frequently presented in cross border, collared and international transactions which incorporate multiple geographic regulatory institutions, with typically involve minimal exposure to corporate credits. HFRX Macro/CTA Index strategies allow Macro strategy managers to trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets. Managers employ a variety of techniques, both discretionary and systematic analysis, combinations of top down and bottom up theses, quantitative and fundamental approaches and long and short term holding periods. Although some strategies employ RV techniques, Macro strategies are distinct from RV strategies in that the primary investment thesis is predicated on predicted or future movements in the underlying instruments, rather than realization of a valuation discrepancy between securities. In a similar way, while both Macro and equity hedge managers may hold equity securities, the overriding investment thesis is predicated on the impact movements in underlying macroeconomic variables may have on security prices, as opposed to EH, in which the fundamental characteristics on the company are the most significant and integral to investment thesis.

53 Disclosures (cont.) Dow Jones-UBS Commodity TR USD Index represents futures contracts on 19 physical commodities. No related group of commodities (e.g., energy, precious metals, livestock and grains) may constitute more than 33 percent of the index as of the annual reweightings of the components. No single commodity may constitute less than 2 percent of the index. Barclays U.S. Treasury Bill 1-3 months Index includes public obligations of the U.S. Treasury with a maturity of one to three months. Barclays U.S. Corporate HY Bond Index includes publicly issued U.S. corporate and Yankee debentures and secured notes that meet specified maturity, liquidity, and quality requirements. JPMorgan GBI Global ex-US TR USD is an unmanaged index market representative of the total return performance in U.S. dollars on an unhedged basis of major non-U.S. bond markets. JP Morgan Emerging Markets Bond Index (EMBI Global) currently covers 27 emerging market countries. Included in the EMBI Global are U.S.-dollar-denominated Brady bonds, Eurobonds, traded loans, and local market debt instruments issued by sovereign and quasi- sovereign entities. Total Diversified Portfolio is based on a mix of 3% Cash,19% US Agg Bonds, 5% High Yield Bonds, 5% Developed Bonds, 5% EM Bonds; 15% US Large Cap, 6.60% US Mid Cap, 3.80% US Small Cap, 9% Developed Equities, 6.60% EM Equities; 7% REITS; 5% Commodities; 4% HF Rel Value, 2% HF Macro, 4% HF Event Driven. Diversified Portfolio Balanced Allocation = 3% BarCap US Treasury Bill 1-3 Months, 19% BarCap US Aggregate Bond Index, 5% BarCap US Corporate High Yield Index, 5% JPM GBI Global Ex-US TR USD Index, 5% JPM EMBI Global TR USD Index, 16% S&P 500 Index, 6% Russell Mid Cap TR USD Index, 3% Russell 2000 TR USD Index, 10% MSCI EAFE Free GR USD Index, 6% MSCI EM USD Index, 7% FTSE EPRA/NAREIT Developed TR USD Index, 5% DJ UBS Commodity TR USD Index, 4% HFRX Relative Value Arbitrage Index, 2% HFRX Macro/CTA Index, 4% HFRX Event Driven Index Wells Fargo Bank, N.A. (the “Bank”) offers various advisory and fiduciary products and services. Wells Fargo affiliates, including Financial Advisors of Wells Fargo Advisors, LLC, a separate non-Bank affiliate, may be paid an ongoing or one-time referral fee in relation to clients referred to the Bank. The role of the Financial Advisor with respect to Bank products and services is limited to referral and relationship management services. The Bank is responsible for the day-to-day management of the account and for providing investment advice, investment management services and wealth management services to clients. The views, opinions and portfolios may differ from our broker dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliate of Wells Fargo & Company. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company. NOTE: All images used in this presentation are sourced from Wikimedia Commons unless otherwise noted. Additional information is available upon request. © 2013 Wells Fargo Bank, N.A. All rights reserved


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