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A note about disclosures: Please be sure to read the important disclosures at the end of this presentation Wells Fargo Private Bank provides financial.

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Presentation on theme: "A note about disclosures: Please be sure to read the important disclosures at the end of this presentation Wells Fargo Private Bank provides financial."— Presentation transcript:

1 A note about disclosures: Please be sure to read the important disclosures at the end of this presentation Wells Fargo Private Bank provides financial services and products through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries. 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. The Golf Lover’s Guide to Successful Philanthropic Investing October 10 th, 2013 Gregory S. Jordan, CFA National Philanthropic Investment Officer The following information and opinions are provided courtesy of Wells Fargo Bank N.A.

2 2 PAR for the Course

3 3 Northstar TM CA Course Map P A R lan = Course Map

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

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

6 6 P A R sset Allocation = Clubs

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

8 8 P A R sset Allocation = Clubs Tactical Asset Allocation Security Selection Other Strategic Asset Allocation Key Drivers of Return Variability 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 9 P A R sset Allocation = Clubs 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 Performance of Three Portfolios January 2000 through March 2013 Total Diversified Portfolio 60% S&P 500, 40% Barclays Agg S&P 500 TR $0 $50,000 $100,000 $150,000 $200,000 $250,000

10 10 P A R isk Management = Avoiding the Sand Traps

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

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

13 13 Watch Out for “FORE!”

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

15 15 F O R E ailure to Funnel the Flow of Information

16 16 F O R E utsmarting the Market Theory

17 17 F O R E utsmarting the Market Theory Don’t try to pick tops and bottoms. Trying to time the market may reduce your returns. Source: WMG Research; Morningstar, January 2013

18 18 F O R E ebalance without Discipline

19 19 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. Index Level 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 Growth of $100 May-08 Dec-08Jun-09Dec-09Jun-10Dec-10Jun-11Dec-11Jun-12Dec-12Jun-13 Balanced Allocation2013 BalancedNo Rebalance $ $113.64

20 20 F O R E motion vs. IPS

21 21 F O R E 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 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.

23 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 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 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 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 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 A note about disclosures: Please be sure to read the important disclosures at the end of this presentation Wells Fargo Private Bank provides financial services and products through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries. 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. The following information and opinions are provided courtesy of Wells Fargo Bank N.A. Four Potential Opportunities and One Key Risk

29 29 Opportunity #1 Longer Term – Stocks are Still More Attractive than Bonds

30 30 Household Net Worth Rebounds Improvements in total household net worth reflects increases in house prices, stock prices, and other assets. Source: Federal Reserve Board, 06/07/13 Consumer Assets Rebounding 03/31/98-03/31/13

31 31 Large U.S. Corporations Deploying Cash Large companies cut spending in half from Since then, these companies have increased spending steadily. Source: Standard & Poor’s, Bloomberg, 03/15/13 S&P 500 Companies Spending Cash

32 32 Bull Markets: Historical Perspective History shows that the current bull market may only be in the middle stages. 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 Bull Market Return Percent

33 33 Third Time’s A Charm: Triple Top in 2000, 2007, 2013 There are some significant differences this time E S&P 500 Earnings$56.13$82.54$ Year Treasury Yield5.1%4.1%2.6% Inflation (YoY%)3.4%4.1%2.0% Central Bank Rates Investor SentimentPositive Fragile E: estimate Source: FactSet, Wells Fargo Wealth Management, 06/10/13. Estimates are not guaranteed and are subject to change.

34 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. Past performance is no guarantee of future results. Data range: Source: FactSet, Bloomberg, as of 02/15/13 When Yields Rise, the S&P 500 has Returned…

35 35 Equities Source: WMG Research; FactSet

36 36 Opportunity #2 Diversification of Bond and Cash Flow Generating Assets

37 37 Look beyond “traditional” income-generating assets. Past Performance is no guarantee of future results. 3% inflation assumption based on our 2013 outlook. Source: FactSet, Bloomberg, as of 06/30/13 Diversifying Cash Flow Opportunities Traditional “Stable” Fixed Income Inflation Assumption Yields Vary Greatly Yield (in percent) Diversified Income Streams

38 38 Opportunity #3 Emerging Equity Market Exposure

39 39 Emerging Economies Have Low Debt/GDP In general, emerging economies have more fiscal flexibility than the larger developed economies. Source: 2012 growth estimates, Wells Fargo Wealth Management; International Monetary Fund (IMF) World Economic Outlook (WEO) database, 10/12 Emerging Economies Debt/GDP Lower Estimated 2012 Ratio of Public Debt/GDP Estimated 2012 Growth Rate (%) Bubble size = 2012 Net (Public) Debt Estimates in US$ trillion (Brazil, China and Russia = Gross Debt in US$ trillion)

40 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. 1 Defined as having daily per capita spending of $10 to $100 in purchasing-power-parity terms. Source: McKinsey Quarterly, 01/12 More Global Middle Class 1 Consumers

41 41 Global Trends Source: International Monetary Fund

42 42 Opportunity #4 Diversification is Still a Potential Risk-Reducer

43 43 Asset Performance 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 44 Risk #1 The Challenges of Higher Interest Rates

45 45 Today’s Interest Rate Dilemma Source: FactSet, 07/10/13 Past performance is no guarantee of future results Since 1980, there have been only two negative return years (1994 and 1999) in the Barclays U.S. Aggregate Index

46 46 A Generation of Positive Bond Performance Annual Performance of Barclays Intermediate Aggregate and Corporate Bonds 1980 Through 2012

47 47 Market Sentiment/Leading Indicators Bond flows outpaced stock flows for the last three years, but that trend has recently begun to reverse Source: ICI, as of 05/31/13 Annual Flows of Long-Term Funds $$Billions YTD 13’ Domestic Equity International Equity EM Equity Taxable Bond Global Bond Tax-exempt Bond Money Market

48 48 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. 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. YieldDurationPar Value+100bp*+200bp*+300bp* 30-year bond3.50% year bond3.25% year note2.50% year note1.40% year note0.35%

49 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 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 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 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 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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