Please see important disclosures on last page.
Prudent Investing in an Environment of Rising Interest Rates and Economic Uncertainty Jeffrey M. Piliero, CFA, CFP®, ChFC
Regional Investment ManagerWells Fargo Private Bank
October 10, 2013
Economic Overview
3
Key Macroeconomic Trends
A Cloud of Uncertainty Hangs Over
the Economy
Unprecedented changes in fiscal and monetary policy
Persistence of large budget deficits New regulations regarding healthcare and financial
services Investment and hiring decisions have higher hurdle
rate
The recovery has had a hard time gaining
momentum
Below Trend GDP Growth Bolsters the Case for the New Normal
Real GDP growth has averaged 2.2 % GDP is well below 3.3% 25 year average Stimulus measures have yet to close gap View that slower growth may be the New Normal
QE Has Boosted
Asset Prices But Not
Underlying Fundamental
s
Stimulus has helped drive interest rates lower Stock market has also benefited QE has also led to speculative activity Home prices rising even when homeownership is
declining
Slower Global Growth Has
Pulled Commodity
Prices Lower
Manufacturing activity has slowed around the world We expect the Eurozone to begin to recover later
this year China’s economy likely to gradually regain
momentum Lower commodity prices will limit global inflation
increase
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
4
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
2000 2002 2004 2006 2008 2010 2012 2014
U.S. Real GDP Bars = CAGR Line = Yr/Yr Percent Change
GDP - CAGR: Q2 @ 1.7%
GDP - Yr/Yr Percent Change: Q2 @ 1.4%
Forecast
Economic Growth
Still a considerable amount of uncertainty regarding global economic growth,
fiscal policy and the willingness of businesses and households to commit to major capital purchases
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
5
GDP Components
Residential investment has swung to a positive in the economic outlook, while government spending remains a drag on economic growth
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
GovernmentResidential Investment
-40%
-30%
-20%
-10%
0%
10%
20%
30%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Real Residential Fixed InvestmentBars = Seasonally Adjusted Annual Rate, Line = Yr/Yr % Change
Residential Investment: Q2 @ 13.4%
Residential Investment: Q2 @ 14.9%-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
1996 1998 2000 2002 2004 2006 2008 2010 2012
Real Government Consumption & InvestmentBars = CAGR Line = Yr/Yr % Change
Government Consumption & Investment: Q2 @ -0.4%
Government Consumption & Investment: Q2 @ -2.0%
6
$10.5
$11.0
$11.5
$12.0
$12.5
$13.0
$13.5
$14.0
$14.5
$15.0
$10.5
$11.0
$11.5
$12.0
$12.5
$13.0
$13.5
$14.0
$14.5
$15.0
2000 2002 2004 2006 2008 2010 2012
Output Gap in the U.S. Trillions of Dollars, Potential vs. Actual GDP, Inflation Adjusted
Potential GDP: Q1 @ $14.6 Trillion
Actual GDP: Q1 @ $13.8 Trillion
Output Gap = $819 Billion
Output Gap
The actual trajectory of GDP growth now looks more like
a trend than a temporary deviation from long run
potential growth
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
7
Fed Policy
Even with the Fed apparently set to begin tapering its monthly securities purchases, higher short-term interest rates are still more than 1 year away
Source: Federal Reserve and Wells Fargo Securities, LLC
Pace of FirmingTiming of Firming
0
2
4
6
8
10
12
14
16
0
2
4
6
8
10
12
14
16
2013 2014 2015 2016
Appropriate Timing of Policy FirmingNumber of Participants
J une Release
March Release
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Appropriate Pace of Policy FirmingTarget Federal Funds Rate at Year-End
March ProjectionJ une Projection
2013 2014 2015 Longer Run
8
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
2008 2008 2009 2010 2011 2012
Federal Reserve Balance Sheet Trillions
Agencies & MBS: Aug @ $1,331.2B (Left Axis)Treasuries: Aug @ $1,998.3B (Left Axis)Other: Aug @ $236.1B (Left Axis)S&P 500 Index: Aug @ 1,655.8 (Right Axis)
Federal Reserve Balance Sheet
The massive expansion of the Fed’s balance sheet has lifted asset prices and has also given the economy a
boost
Source: Federal Reserve Board and Wells Fargo Securities, LLC
9
0%
3%
6%
9%
12%
15%
18%
21%
0%
3%
6%
9%
12%
15%
18%
21%
1971 1976 1981 1986 1991 1996 2002 2007 2012
10-Year Treasury & Fed Funds TargetYield
10-Year Treasury Yield: Aug @ 2.84%
Fed Funds Target: Aug @ 0.25%
Market Rates
Long-term interest rates have risen as the timetable for winding down QE has
been shortened
Source: IHS Global Insight and Wells Fargo Securities, LLC
10
-3%
0%
3%
6%
9%
12%
15%
-3%
0%
3%
6%
9%
12%
15%
60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11
Headline CPIYear-over-Year Percent Change
CPI : J ul @ 2.0%
CPI Inflation
Past experience teaches us that today’s low inflation environment in no way
precludes an acceleration later
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
11
Consumer Related
Rising stock prices have helped bolster household finances at a time when real incomes are barely growing. The uneven distribution of these gains is one reason consumer confidence has struggled and some low-end retail chains have suffered.
Source: U.S. Department of Commerce, Conference Board and Wells Fargo Securities, LLC
Consumer ConfidenceHousehold Wealth
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Household AssetsTrillions of Dollars
Financial Assets: Q1 @ $57.7 Trillion
Household Real Estate Holdings: Q1 @ $18.5 Trillion
Other Tangible Assets: Q1 @ $7.6 Trillion
20
40
60
80
100
120
140
160
20
40
60
80
100
120
140
160
87 89 91 93 95 97 99 01 03 05 07 09 11 13
Consumer Confidence IndexConference Board
Confidence Yr/Yr % Chg: J ul @ 22.8%
Confidence: J ul @ 80.3
12-Month Moving Average: J ul @ 69.6
12
2%
6%
10%
14%
18%
2%
6%
10%
14%
18%
94 96 98 00 02 04 06 08 10 12
Unemployment Rate MeasuresPercent
12-Month Rolling Average (NSA): J ul @ 7.7%
Unemployment Rate (SA): J ul @ 7.4%
U6 (SA): J ul @ 14.0%
Unemployment
Unemployment has not provided as clear of a read on the labor market as it
has in the past
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
13
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2.1
2.4
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2.1
2.4
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Th
ousa
nds
Housing StartsMillions of Units
Multifamily StartsMultifamily ForecastSingle-family StartsSingle-family Forecast
Forecast
Homebuilding
We continue to look for a gradual recovery in
homebuilding. Apartments are playing a larger role than in previous building
cycles.
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
14
62%
63%
64%
65%
66%
67%
68%
69%
70%
-24%
-18%
-12%
-6%
0%
6%
12%
18%
24%
88 90 92 94 96 98 00 02 04 06 08 10 12
S&P Case-Shiller National Home Price Index vs. Homeownership Rate
National Home Price Index: Q1 @ 10.2% (Left Axis)
Homeownership Rate: Q2 @ 65.0% (Right Axis)
Home Prices vs. Homeownership
Homeownership continues to fall at a time when home
prices are rising, raising some concerns about the sustainability of recent
price appreciation
Source: S&P, U.S. Department of Commerce and Wells Fargo Securities, LLC
Percent change in real GDP by state 2011-2012
ID0.4
AR1.3
AL1.2
ME0.5
KS1.4
SD0.2
OH2.2
WI3.5
AZ2.6
NH0.5
MT2.1
MS2.4
OK2.1
NV1.5
IL1.9
GA2.1
FL2.4
CO2.1
CA3.5
NE1.5
MO2.0
UT3.4
NM0.2
WA3.6
IA2.4
MI2.2
LA1.5
VA1.1
TX4.8
PA1.7
IN3.3
NC2.7
MN3.5
KY1.4
VT1.2
TN3.3
OR3.9
NY1.3
WV3.3
ND13.4
SC2.7
WY3.3
AK1.1
CT-0.1
DE0.2
HI1.6
MA2.2
MD2.4
NJ1.3
RI1.4
DC0.7
U.S. = 2.5
3.3–13.4
-0.1–1.2
2.2–3.3
1.5–2.2
1.2–1.5
16
88%
90%
92%
94%
96%
98%
100%
102%
88%
90%
92%
94%
96%
98%
100%
102%
69 73 77 81 85 89 93 97 01 05 09 13
Florida Employment: Percent of Previous Peak Percent
Percent of Previous Peak: J ul @ 93.6%
Florida Employment Picture
Nonfarm payrolls remain 6.4 percentage points below
their prerecession peak.
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
17
Florida Economy
18
FloridaUnemployment Rate by County
Source: US Department of Labor and Wells Fargo Securities, LLC
Florida Unemployment RateJune 2013
Less than 5.5%
Greater than 8.5%
6.5% to 7.5%
7.5% to 8.5%
5.5% to 6.5%
19
Employment by Industry
Source: US Department of Labor and Wells Fargo Securities, LLC
InformationProf. & Bus. Svcs.
Educ. & Health Svcs.
Leisure and Hospitality
Financial Activities
Trade, Trans. & Utilites
Manufacturing
Government
Construction
Other Services
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
-2% -1% 0% 1% 2% 3% 4% 5% 6%
3-M
onth
Ann
ualiz
ed P
erc
ent
Ch
an
ge
Year-over-Year Percent Change
Florida Employment Growth by Industry3-Month Moving Averages, J uly 2013
Percent of Total Employees
10% to 25%
5 % to 10%
Less than 5%
Recovering Expanding
Contracting Decelerating
20
Florida – Labor Market
Florida employment growth may be slightly stronger than originally reported. The unemployment rate continues to fall.
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
90 92 94 96 98 00 02 04 06 08 10 12
Florida Nonfarm Employment3-Month Moving Averages
QCEW: Yr/Yr Pct. Change: Dec @ 2.4%Nonfarm: Yr/Yr Pct. Change: J ul @ 1.8%Household: Yr/Yr Pct. Change: J ul @ 2.3%
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Unemployment RateEmployment
0%
2%
4%
6%
8%
10%
12%
0%
2%
4%
6%
8%
10%
12%
90 92 94 96 98 00 02 04 06 08 10 12
Florida vs. U.S. Unemployment RateSeasonally Adjusted
Unemployment Rate: J ul @ 7.1%United States: J ul @ 7.4%
21
Florida – Housing Market
Florida home prices are in line with the national average. Homebuilding has increased modestly.
40
80
120
160
200
240
280
40
80
120
160
200
240
280
90 92 94 96 98 00 02 04 06 08 10 12
CoreLogic HPI : FL vs. U.S.Index, 2000=100, Not Seasonally Adjusted
United States: J un @ 161.9
Florida: J un @ 158.9
Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC
Housing PermitsHome Prices
0
50
100
150
200
250
0
50
100
150
200
250
90 92 94 96 98 00 02 04 06 08 10 12
Thou
sand
s
Thou
sand
s
Florida Housing PermitsThousands of Permits, Seasonally Adjusted Annual Rate
Single-Family: J un @ 60,108Single-Family, 12-MMA: J un @ 51,109Multifamily, 12-MMA: J un @ 30,349
Single-Family Average (1998-2003): 116,250
22
Geopolitical Tensions
The Return ofHousing Speculation
Credit Availability & Financial ReformChina Slowdown
Deleveraging
Monetary/FiscalPolicy Uncertainty
Immigration Reform Energy/Commodity Price Swings
Issues to Watch
23
Our Forecast
Wells Fargo U.S. Economic Forecast
2010 2011 2012 2013 2014
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Real Gross Domestic Product 1 3.7 1.2 2.8 0.1 1.1 1.7 1.7 2.1 2.5 1.8 2.8 1.4 2.1
Personal Consumption 2.9 1.9 1.7 1.7 2.3 1.8 2.0 2.2 2.0 2.5 2.2 1.9 2.3
Inflation Indicators 2
PCE Deflator 2.4 1.7 1.6 1.7 1.4 1.1 1.3 1.3 1.7 2.4 1.8 1.3 1.9
Consumer Price Index 2.8 1.9 1.7 1.9 1.7 1.4 1.6 1.5 1.6 3.1 2.1 1.5 2.1
Industrial Production 1 5.4 2.9 0.3 2.5 4.2 0.6 3.9 4.6 5.7 3.4 3.6 2.6 4.0
Corporate Profits Before Taxes 2 12.8 6.9 6.3 2.7 2.1 5.2 5.3 5.7 25.0 7.9 7.0 4.6 6.4
Trade Weighted Dollar Index 3 72.7 74.5 72.7 73.4 76.2 77.5 77.0 77.8 75.4 70.9 73.5 77.1 79.0
Unemployment Rate 8.3 8.2 8.0 7.8 7.7 7.6 7.5 7.3 9.6 8.9 8.1 7.5 7.1
Housing Starts 4 0.71 0.74 0.78 0.90 0.96 0.87 1.02 1.04 0.59 0.61 0.78 0.99 1.12
Quarter- End Interest Rates 5
Federal Funds Target Rate 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25Conventional Mortgage Rate 3.95 3.68 3.50 3.35 3.57 4.07 4.50 4.60 4.69 4.46 3.66 4.19 4.9510 Year Note 2.23 1.67 1.65 1.78 1.87 2.52 2.60 2.70 3.22 2.78 1.80 2.42 3.13
Forecast as of: August 7, 20131 Compound Annual Growth Rate Quarter-over-Quarter2 Year-over-Year Percentage Change3 Federal Reserve Major Currency I ndex, 1973=100 - Quarter End4 Millions of Units5 Annual Numbers Represent Averages
ForecastActual
20132012
ForecastActual
24
Investment Discipline and Strategy
25
Market Sentiment/Leading Indicators
Source: Bloomberg, ICI
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Cash on the Sidelines
As of 07/2013: $2612.3
MIL
LIO
N D
OLL
AR
S
26
Market Sentiment/Leading Indicators
Source: FactSet; Investment Company Institute
-180
-130
-80
-30
20
70
120
170
650
850
1050
1250
1450
1650
1850
03' 04' 05' 06' 07' 08' 09' 10' 11' 12' 13'
FL
OW
S (B
ILL
ION
DO
LL
AR
S)
IND
EX
LE
VE
L
Money Market Mutual Fund Flows
Money Market Mutual Funds: Flow of Funds
S&P 500 IndexAs of 07/2013: $26.6As of 07/2013: 1685.73
27
Asset PerformanceThe latest bull market is off to a good start, but history shows we could be only in the early stages.
Source: Bloomberg
1947-57
1962-66
1970-73
1982-87
2002-07
Current
1957-611966-68
1974-80
1987-00
Average
0%
100%
200%
300%
400%
500%
600%
700%
0 20 40 60 80 100 120 140 160
BU
LL
MA
RK
ET
R
ET
UR
N
BULL MARKET LENGTH (MONTHS)
Market RecoveriesS&P 500 Price Return
1946 - Current
A larger circle represents a longer bull
28
Strategic AssetAllocation
77%
Key Drivers of Return Variability
Tactical Asset Allocation
6%
SecuritySelection
10%
Source: Wells Fargo; The Journal of Wealth Management, Vol. 8, No. 3, “Strategic Asset Allocation and Other Determinants of Portfolio Returns,” 08/05, data updated August 2009
A Dynamic World Requires Discipline
Strategic asset allocation is the dominant driver of a portfolio’s return variability
Other7%
29
With interest rates at historical lows, bonds may now present price risk to investors.
Bonds Can Be Risky Too
0
2
4
6
8
10
12
14
16
18
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011
Source: Bloomberg Finance LLP, 01/31/13
Yield (in percent)
U.S. 10-Year Treasury Yield
30
Risk is Far More than Volatility
Source, Wells Fargo Private Bank, 06/10
Manage Risk Across Different CategoriesRiskOptics®
Risk Comes in
Many Forms
31
Opportunities to Generate yield
Look beyond “traditional” income-generating assets
Past Performance is no guarantee of future results.Source: FactSet, Bloomberg, as of 01/31/13
0.01%
1.76% 1.99%
2.70%2.83%
4.06%4.51%
4.79%
5.56% 5.63%
6.61%
0%
2%
4%
6%
8%
Diversifying Cash Flow Opportunities Traditional “Safe” Fixed Income
Inflation Assumption
Yields Vary GreatlyYield (in percent)
32
Dividends Provide Yield and Growth
Dividends have accounted for 43 percent of S&P 500 returns
Past Performance is no guarantee of future results.Source: Morningstar Encorr, as of 12/31/2012
Yield (in percent)S&P 500 Total Return
5.1% 5.2% 6.2% 5.8%3.4% 4.3% 5.0% 2.9% 1.9% 2.4% 4.3%
16.7%
-5.3%
3.0%
13.6%
4.4% 1.6%
12.6% 15.3%
-0.5%
6.5%5.6%
-10%
-5%
0%
5%
10%
15%
20%
25%
Dividends Capital Appreciation
33
Asset PerformanceDiversified Strategic Allocations Have Recovered from the Downturn
Source: WMG Research; Morningstar
45
55
65
75
85
95
105
115
125
135
09/07 03/08 09/08 03/09 09/09 03/10 09/10 03/11 09/11 03/12 09/12 03/13
Recovery from Beginning of Financial CrisisHypothetical 4-Asset Group Portfolios (September 2007 - August 2013)
Income Balanced-Income Balanced Balanced-Appreciation Appreciation
S&P 500 Max Drawdown
S&P 500 Recovery
34
Key Investment Themes
35
Global Consumers—The Engine of Growth
Source: Wells Fargo Wealth Management, 01/13
Wages trending higher in emerging markets
Economic growth and urban migration can increase the middle class
Emerging markets nations boosting consumption; frontier-market nations just entering global market
Emerging/frontier economies have attractive demographics
Strategies
Consider emphasizing growth assets
Focus on companies serving price-conscious Emerging Markets consumers and wealthy Asians
Look for strong brands, technology, and segmentation
Overweight consumer goods companies that sell to emerging and frontier markets
36
Velocity―Right Direction/Wrong Speed
Source: Wells Fargo Wealth Management, 01/13
Developed countries held back by too much debt, reactionary policy
Emerging countries more agile, economies still growing strongly Innovation is fast-paced, internet, energy production, increasing
business efficiency
Strategies
Add emerging & frontier markets to mix for growth opportunities where appropriate
Invest in companies/industries positioned to benefit from innovation in technology or business practices
Overweight technology, telecom, consumer discretionary, and materials
Underweight developed market debt, especially U.S. Treasuries
37
A Dynamic World Requires Discipline and Flexibility
Source: Wells Fargo Wealth Management, 01/13
Governmental response to various crises, such as the Eurozone debt crisis, unrest in the Middle East, and slowing growth in emerging economies, could change the short-term outlook for returns
Tax code changes in U.S. require planning review
Strategies
Discipline: develop diversified strategic allocation
Flexibility: implement tactical tilts to take advantage of temporary opportunities - Reduce Fixed Income; Add to Equities
Safety: maintain liquidity to avoid having to sell on unfavorable terms
Avoid risk exposure drift
38
Balancing Risk Preference with Risk Needs
Some complementary strategies may be available to pre-qualified investors only.
Source: Wells Fargo Wealth Management, 01/13
Positive real return is needed to meet goals Consider risk beyond volatility―RiskOptics®
Strategies
Control risk via broad diversification, including complementary strategies
Employ assets with the ability to keep up with inflation―equity and real assets
Do not reach for return by accepting excess risk
39
DisclosuresWells 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.
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 alternative investments and 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.
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.
40
Disclosures (cont.)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 Institute of Supply Management (ISM) Purchasing Manager’s Index gauges internal demand for raw materials/goods that go into end-production. An index values over 50 indicate expansion; below 50 indicates contraction. The values for the index can be between 0 and 100. You cannot invest directly in an index.
The S&P/Case-Shiller® U.S. National Home Price Index is a broad, market value-weighted composite of single-family home price indices for the nine U.S. Census divisions and is calculated quarterly.
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.
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.
Wilshire 5000® Equity Index is an unmanaged index made up of all U.S. stocks regularly traded on the three major U.S. exchanges, including the New York Stock Exchange, American Stock Exchange, and Nasdaq.
Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
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Disclosures (cont.)Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
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.
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.
Morgan Stanley Capital International (MSCI) Emerging Markets Global Index is a market capitalization-weighted benchmark index made up of equities from 29 developing countries.
FTSE NAREIT Equity REIT Total Return Index is an unmanaged index reflecting performance of the U.S. real estate investment trust market.
Equity Hedge: Equity Hedge strategies maintain positions both long and short in primarily equity and equity derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques.
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.
Short Term Asset Management (STAM) is designed for investors seeking professional assistance in managing short-term fixed-income portfolios with an average maturity of generally less than one year.
Additional information is available upon request.
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