Asset Allocation Strategy. Several forecast changes. See page 8. Several tactical shifts. See page 12. Darrell Cronk, CFA®,

President, Wells Fargo Investment Institute & CIO, Wealth and Investment Management.

Global Asset Allocation Team: Tracie McMillion, CFA®, Head of Global Asset Allocation.

Anne Symanovich,

Global Research Analyst,

Chris Haverland, CFA®,

Global Asset Allocation Strategist,

Ken Johnson,,

Global Research Analyst,

Mike Taylor, CFA®,

Global Research Analyst.

Veronica Willis Global Research Analyst.

Asset Class Strategists: Paul Christopher, CFA®,

Head Global Market Strategist.

Brian Rehling, CFA®,

Co-Head of Global Fixed Income Strategy.

George Rusnak,

Co-Head of Global Fixed Income Strategy.

Peter Wilson,

Global Fixed Income Strategist.

Stuart Freeman, CFA®,

Co-Head of Global Equity Strategy.

Sean Lynch, CFA®,

Co-Head of Global Equity Strategy.

Scott Wren,

Senior Global Equity Strategist.

Sameer Samana, CFA®,

Global Quantitative Strategist.

Peter Donisanu,

Global Research Analyst.

Craig Holke,

Global Research Analyst.

John LaForge

Head of Real Asset Strategy

Adam Taback,

Head of Global Alternative Investments.

Jim Sweetman,

Global Alternative Investments Strategist.

Justin Lenarcic,

Global Alternative Investments Strategist

Global Economic Summary

Market Summaries

2

.

Have We Seen the Worst of the Commodities Bear?. Commodity prices have weakened over the past 12 months, yet they rebounded in March, led largely by rising gold and oil prices. Is stabilization in commodity prices here to stay, or will prices slide lower again? Concerns about slowing global economic growth, especially in emerging markets, coupled with oversupplies of many commodities, have been the principal drivers of falling commodity prices during the past year. It has taken some time for the sector to adjust to the shifting supply-anddemand dynamics, but we observed signs of price stabilization during the first quarter of 2016. While the recent rally in commodity markets largely can be attributed to elevated gold prices and the rebound in oil prices, agriculture and base-metal prices also have seen some improvements. Precious metals have outperformed other commodities so far this year, with gold leading the way. The gold rally has been particularly impressive, but we remain unconvinced that it is sustainable. Today, gold prices remain expensive compared to those of most other commodities, including other precious metals, as well as to equities. It is therefore unlikely that the latest rally in gold prices is signaling a new uptrend for gold. While energy prices have lagged on a one-year basis, the rebound in crude-oil prices has contributed to positive performance for the sector. It’s possible that the worst of the decline in oil prices is over and that prices will continue to rebound. The oil market remains oversupplied, as supply and demand continue to even out. We expect oil prices to end the year higher.

Precious Metals Prices Have Outperformed Other Commodities 120 110 100 90 80 Precious Metals Agriculture Base Metals Energy

70 60 50 40

1/15

3/15

5/15

7/15

9/15

11/15

1/16

3/16

Source: Bloomberg, Wells Fargo Investment Institute, 3/29/16*

Both agriculture and base-metal prices have benefited from a weaker U.S. dollar and stronger global demand. Aside from energy, base-metal prices had suffered the greatest declines over the past year, as investors fretted over slowing emerging-market growth and weakening global manufacturing activity. Inventories for copper, aluminum, and zinc have fallen, and demand has been steady. We don’t expect base-metal prices to rally in the near term, but they should remain stable. Agricultural commodity prices have been the most stable of the sector and could see some upside as global demand improves. Our overall view on commodities is not bullish. While oil and certain agricultural commodities could see some upside in the near term, we do not anticipate a strong rally in prices. Commodity prices should remain low and range-bound in the coming year with limited downside. Commodities can play an important role in a diversified portfolio strategy. With most of the price damage and volatility likely behind us for now, we recommend a broadly, diversified commodity position for investors seeking to mitigate portfolio volatility. Today’s attractive prices provide an opportunity to gradually increase exposure to commodities toward long-term allocations.

*The Bloomberg precious metals subindex is a commodity group subindex of the Bloomberg Commodity Index. It is composed of futures contracts on gold and silver. The Bloomberg industrial metals subindex is a commodity group subindex of the Bloomberg Commodity Index. It is composed of futures contracts on aluminum, copper, zinc, and nickel. The Bloomberg energy subindex is a commodity group subindex of the Bloomberg Commodity Index. It is composed of futures contracts on crude oil, heating oil, unleaded gasoline and natural gas. The Bloomberg agriculture subindex is a commodity group subindex of the Bloomberg Commodity Index. It is composed of futures contracts on coffee, corn, cotton, soybeans, soybean oil, soybean meal, sugar and wheat. All indices indexed to 100 as of 1/2/2015.

Investment Themes

3

April 28, 2016

Market Forecasts

7

Strategic Asset Allocation

8

Tactical Asset Allocation

9

International Equity Market Strategy

11

15

Global Alternative Strategies Outlook

17

Asset Allocation Strategy Report April 28, 2016

Global Economic Summary. The third look at U.S. gross domestic product (GDP) for the fourth quarter was revised upward to 1.4 percent annualized. Personal consumption was revised up to 2.4 percent from 2.0 percent. Business investment weakened, but residential investment and government expenditures increased. Corporate profits fell 7.8 percent in the quarter. Profits have declined in four of the past five quarters. March’s U.S. employment report surprised to the upside, with 215,000 net positions added. The service sector added 199,000 jobs, but the goods-producing sector employment declined 4,000. The unemployment rate increased to 5.0 percent as individuals entered—and, more importantly, reentered—the labor market. Wages beat expectations to increase 0.3 percent for the month and are up 2.3 percent over the past twelve months. Headline inflation fell for the month, with the Consumer Price Index (CPI) down 0.2 percent in February and only up 1.0 percent from a year ago. Excluding food and energy, prices rose 0.3 percent for the month and 2.3 percent for the past twelve months. The effect from the decline in energy prices appears to be waning. The Institute for Supply Management (ISM) manufacturing survey improved to 51.8 points in March. The ISM non-manufacturing services survey increased to 54.5 points, above expectations reversing the decline begun in November. Employment was the only component of the manufacturing survey that declined. Within the services survey, all components improved, with only prices remaining in contractionary (below 50) territory. Consumer confidence rebounded in March to 96.2. February’s surprise seven-month low of 92.2 was revised up to 94.0. Although confidence in present conditions fell slightly, expectations for the future recovered significantly. Housing starts rose 5.2 percent, but building permits fell 3.1 percent in February. Improved weather likely had an effect on starts. Although they declined for the month, permits remain near post-recession highs. Existing-home sales decreased 7.1 percent in February to a seasonally-adjusted 5.08-million-unit pace. New-home sales picked up 2.0 percent for the month to a seasonally-adjusted annual rate of 512,000 units. In March, the European Union’s government statistics office reported that the Eurozone economy expanded in the fourth quarter at a better-than-expected 1.6 percent annualized rate. While the fourth-quarter GDP revision was a positive surprise, a detailed breakdown of the growth figures reflects a slight slowdown in household consumption and generally weaker retail sales figures during the quarter. In Japan, a final read on GDP for the fourth quarter showed that the economy contracted 1.1 percent on a quarter-overquarter seasonally adjusted annualized basis. A contraction in household spending during the quarter and weaker-thanexpected trade data slowed Japan’s economic growth. A bright spot in Japan’s economy has been a modest rebound in business investment, with activity climbing 1.5 percent, largely due to a rebound in investment activity outside of construction activity. Measures of economic activity in China were mixed in March but biased to the downside. Growth in exports contracted sharply and industrial production activity slowed in February. Meanwhile, China’s services sector, an important contributor to the country’s economic rebalancing this year, showed signs of slowing during the first quarter. A bright spot in China’s economy continues to be housing, with major Chinese cities reporting increased existing residential apartment prices in February.

2

U.S. Corporate Profits Plunged in 2015 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15%

Year Over Year Growth Rate of U.S. Corporate Profits

3/10 9/10 3/11 9/11 3/12 9/12 3/13 9/13 3/14 9/14 3/15 9/15 Source: Bloomberg, 4/7/2016

More Chinese Cities Saw Higher Apartment Prices in February 50

Number of Cities with Increasing Prices

40 30 20 10 0

3/15 4/15 5/15 6/15 7/15 8/15 9/15 10/15 11/15 12/15 1/16 2/16 Source: Bloomberg, 4/7/2016

Global Growth Rates U.S. Real Economic Growth (GDP)1 Eurozone Real Economic Growth1 Japanese Real Economic Growth1 Chinese Real Economic Growth2

1Q16 1.2%b N/A 0.5%b 6.7%b

4Q15 1.4% 1.3% -1.1% 6.8%

3Q15 2.0% 1.2% 1.4% 6.9%

Key U.S. Economic Data Unemployment Rate Leading Economic Index (LEI) Durable Goods Orders ISM Manufacturing ISM Service Retail Sales Consumer Confidence New Home Sales (millions) Existing Home Sales (millions) U.S. Dollar Index

3/16 5.0% 0.2%a 0.3%a 51.8 54.5 0.1%b 96.2 0.520a 5.20a 94.59

2/16 4.9% 0.1% -3.0% 49.5 53.4 -0.1% 94.0 0.512 5.08 98.21

3/15 5.5% 0.3% 5.1% 52.3 56.9 1.1% 101.4 0.485 5.25 98.36

U.S. Inflation Consumer Price Index (CPI) (Core) Producer Price Index (PPI) (Core)

3/16 0.2%b 0.2%b 0.3%b 0.1%b

2/16 -0.2% 0.3% -0.2% 0.0%

YoY 1.1%b,2 2.3%b,2 0.4%b,2 1.3%b,2

1

Annualized Q/Q % change; 2 Year-over-year % change Action Economics estimate, FactSet; b Bloomberg survey estimate Data source: Bloomberg, FactSet; 4/7/16 See end of report for important definitions and disclosures. a

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Asset Allocation Strategy Report April 28, 2016

Market Summary,

3

Global Fixed Income, Fixed income continued its strong performance as all major classes rose for the month and quarter, fueled by dovish monetary policy, a weaker dollar, and stabilizing oil prices. Domestically, investment-grade (IG) and high-yield (HY) corporate bonds led, while Treasury Inflation-Protected Securities (TIPS) gained on rising core inflation. Both developed (DM) and emerging-market (EM) bonds were strong as well.

Market Observations. The Federal Reserve (Fed) lowered its “dot plot” of future rates, and Fed Chair Janet Yellen followed the March meeting with dovish comments. We expect only one federal funds rate hike in 2016, which should contribute to a “lower for longer” interest-rate environment. Treasury securities rose by 0.2 and 3.2 percent, respectively, for the month and quarter, while TIPS delivered returns of 1.8 and 4.5 percent on higher core inflation. Municipals’ monthly and quarterly returns were 0.3 and 1.7 percent, respectively. Municipal underperformance has made their relative value more compelling, with higher yield ratios to comparable taxable bonds. Seasonal weakness during tax time also may restore better value to the market.

Global Fixed Income Index Total Returns—As of 3/31/16 MTD

QTD

YTD 1 Year 3 Year 5 Year

U.S. Investment Grade Bonds 0.9%

3.0%

3.0%

2.0%

2.5%

3.8%

0.4%

1.0%

1.0%

1.0%

1.0%

1.2%

Intermediate-Term IG Bonds 0.6%

2.6%

2.6%

2.4%

2.3%

3.6%

Short-Term IG Bonds Long-Term IG Bonds

2.8%

7.3%

7.3%

0.4%

4.4%

8.2%

U.S. Treasury Bills

0.0%

0.1%

0.1%

0.1%

0.0%

0.1%

U.S. High Yield Bonds

4.4%

3.4%

3.4% -3.7%

1.8%

4.9%

DM Bonds (Unhedged)

3.7%

9.1%

9.1%

8.2%

0.1%

0.3%

DM Bonds (Hedged)

0.7%

4.3%

4.3%

3.7%

5.3%

5.5%

EM Bonds (U.S. Dollar)

3.3%

5.2%

5.2%

4.4%

2.4%

6.0%

EM Bonds (Local Currency)1

9.5% 11.1% 11.1% -2.4% -7.2% -2.5%

IG indicates Investment Grade, DM indicates Developed Market and EM indicates Emerging Market. Past performance is no guarantee of future results. Returns over one year are annualized. 1 Returns are converted to dollars for U.S. investors. Sources: Barclays, JP Morgan See end of report for important definitions and disclosures.

Investment-grade corporates returned a solid 2.8 percent and 7.3 percent as risk assets recovered and oil prices stabilized. This also fueled a 4.4 and 3.4 percent monthly and quarterly return for HY corporates. We recently moved HY corporates to evenweight on stabilizing fundamentals and a more-balanced risk/return profile.

gaining 18 percent as the real rebounded. Oil-sensitive economies such as Colombia (+15.4 percent) and Russia (+15 percent) also did well. Dollar-denominated EM sovereign bonds rose 3.3 percent in March and 5.2 percent YTD.

Two key factors influenced international currency and fixedincome returns. The first was a change in monetary-policy expectations after the European Central Bank’s (ECB) and Fed’s March meetings. The second was improvement in risk assets, fueled by the Fed’s dovish stance and the oil-price rise. For DM bonds, the fall in the U.S. Dollar Index (DXY) meant that unhedged bonds (+3.7 percent) outperformed hedged bonds (+0.7 percent). From mid-month, Eurozone yields declined after the ECB’s decision to expand its bond-buying program by one-third, to €80 billion ($90 billion). The peripheral markets of Italy (+6.1 percent) and Spain (+5.8 percent) were the best Eurozone performers. Currency strength drove gains in all markets; the biggest winners from dollar weakness were the commodity-linked markets of Australia and New Zealand (+7.3 and +6.2 percent, respectively, in dollar terms), also supported by the oil-price rise and EM outperformance. Underperformers were Japan (+1.5 percent) and the UK (+3.0 percent, where pound strength was offset by “Brexit” concerns).

We expect a “lower-for-longer” rate environment in 2016 and believe that the yield curve remains attractive through the intermediate-maturity area. As we expect a flattening curve and higher volatility, we favor a relatively defensive yield-curve and bond-structure positioning.

The mix of a dovish Fed, a weaker dollar, and higher oil prices was a powerful stimulus to EM bonds and currencies, which many considered oversold. Local-currency-denominated bonds gained 9.5 percent in dollar terms. Almost three-quarters of this gain stemmed from local-currency strength. Flows into EM assets were strong but apparently indiscriminate, as higher-beta plays (i.e., markets sensitive to improvement in the risk environment) did best, but poor fundamentals did not impede good performance. Brazil, where political problems are hampering economic reforms, was the chief beneficiary,

Wells Fargo Investment Institute Perspective.

In the municipal market, we prefer bonds rated single-A or better from general-obligation and essential-service issuers. We prefer short-to-intermediate issues with higher coupons and favorable optionality. We favor raising HY credit quality and would avoid energy and commodity issuers. We remain underweight DM debt, as many DM yields are below Treasury yields despite often-weaker fundamentals. DM easing has left core yields near or below zero, further undermining value. Despite the dollar’s recent weakness, we continue to favor dollar-hedged strategies to mitigate the impact of possible further dollar strength, which we foresee into year-end. We are evenweight EM dollar-denominated debt but remain skeptical of the recent rebound in EM currencies, given weak fundamentals and our expectation that oil will not strengthen much into year-end. Our strategic benchmark is dollar denominated; we would require a higher degree of conviction to add local-currency risk at this stage. Please see page 16 for our currency-hedging guidance. For more information, please request our Global Fixed Income Strategy report.

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Asset Allocation Strategy Report April 28, 2016

Market Summary,,

4

Global Equities,,

After finishing February with a rally off mid-month panic lows, the S&P 500 Index continued its positive trading action in March. Volatility in the first two months was followed by a market that traded higher on most days without many pullbacks. Investors seemed to step back from the “world is coming to an end” scenario that prevailed early in 2016 as oil prices held above $30 per barrel and fears over a high-yield debt meltdown and collapse in Chinese economic growth eased substantially. In addition, dollar strength waned, which should ease headwinds for corporations doing business overseas. (A weaker dollar makes U.S. goods more pricecompetitive in foreign markets.) Early in the month, equity markets and oil continued to be linked. Yet, late in March, as the crude-oil price began to fade, stocks continued to rise. In our opinion, equity investors seemed comfortable buying stocks as long as the price of oil appeared to be stabilizing over the $30 per barrel level. Thus, it seems that the price of stocks and oil decoupled (to some extent) last month. We continue to believe that stocks can rise even if the price of oil stays relatively stable in the $30-to-$40per-barrel range.

Market Observations. After a nerve-racking and volatile start to 2016, equities gained much-needed positive traction in March. The recovery in oil and the depreciation of the dollar helped investors to shake off pessimism and gain confidence in the market. Large-cap U.S. stocks gained 6.8 percent in March, bringing the quarter’s return to 1.3 percent. All sectors were positive for the month. The Energy sector returned 9.3 percent, Information Technology 9.2 percent, and Utilities 8.0 percent. Mid-cap stocks rallied, rising 8.2 percent. As with large-cap, all sectors gained. Energy jumped 16.4 percent, followed by Materials (10.5 percent), and Financials (8.8 percent). Smallcap stocks gained 8.0 percent. The top three performers were Energy (19.9 percent), Materials (12.6 percent), and Durables (10.1 percent). Developed Markets (DM) rose 6.6 percent in dollar terms as dollar depreciation boosted returns for U.S. investors. All major DMs had monthly gains, with Australia leading (+12.7 percent), followed by Canada (+10.0 percent). Despite the March rally, most DMs remain in negative territory year-to-date (YTD). The MSCI Emerging Markets Index rose 13.3 percent in dollar terms and 8.4 percent in local-currency terms. Brazil and South Africa led the way with returns of 30.5 and 18.0 percent, respectively. Israel had the only negative monthly return (-0.2). Frontier Markets rose 2.9 percent in dollar terms on mixed performance. Kuwait and Nigeria gained 4.4 and 1.8 percent, respectively, while Bangladesh and Argentina declined by 6.2 and 3.2 percent, respectively.

Wells Fargo Investment Institute Perspective. We remain optimistic that this cyclical bull market has more room to run as fundamentals improve in the U.S. and abroad. Many major central banks seem determined to keep easy-money policies in place. We think it likely that the ECB,

Global Equities Index Total Returns—As of 3/31/16 MTD

QTD

YTD 1 Year 3 Year 5 Year

6.8%

1.3%

1.3%

1.8% 11.8% 11.6%

Large Cap Equity (Growth) 6.7%

0.7%

0.7%

2.5% 13.6% 12.4%

7.2%

1.6%

1.6% -1.5%

Large Cap Equity Large Cap Equity (Value)

9.4% 10.2%

8.2%

2.2%

2.2% -4.0% 10.4% 10.3%

Mid Cap Equity (Growth) 7.1%

0.6%

0.6% -4.7% 11.0% 10.0%

9.2%

3.9%

3.9% -3.4%

Mid Cap Equity Mid Cap Equity (Value)

9.9% 10.5%

8.0% -1.5% -1.5% -9.8%

6.8%

7.2%

Small Cap Equity (Growth)

7.7% -4.7% -4.7% -11.8%

7.9%

7.7%

Small Cap Equity (Value)

8.3%

Small Cap Equity

DM Equity (U.S. Dollar) 1

DM Equity (Local)

EM Equity (U.S. Dollar) EM Equity (Local) 1

1.7% -7.7%

5.7%

6.7%

6.6% -2.9% -2.9% -7.9%

1.7%

2.7%

2.8%

3.0% -6.4% -6.4% -10.8%

6.9%

6.7%

13.3%

5.8%

5.8% -11.7% -4.1% -3.8%

8.4%

2.8%

2.8% -7.4%

2.4%

1.7%

FM Equity (U.S. Dollar)

2.9% -0.8% -0.8% -12.1%

2.2%

1.7%

FM Equity (Local) 1

2.3% -1.6% -1.6% -11.7%

5.4%

4.4%

DM indicates Developed Market; EM indicates Emerging Market; FM indicates Frontier Market. Past performance is no guarantee of future results. Returns over one year are annualized. 1 Returns are in local currencies as experienced by local investors. U.S. investors would experience gains or losses on currency conversion. Sources: Standard & Poor’s, Russell Indexes, MSCI Barra See end of report for important definitions and disclosures.

Bank of Japan (BOJ), and People’s Bank of China (PBOC) will introduce further monetary measures to boost economic growth and avoid deflation. Based on recent comments from Fed Chair Janet Yellen, the Fed is in no hurry to hike the fed funds rate. Indeed, the Chairwoman cited uncertainty in global economies, a domestic labor market that still holds some slack, and lack of wage growth as concerns. The economy continues to proceed at a below-trend pace. We believe that this should allow corporations to generate modest earnings growth in coming quarters. We believe that the macro environment this year will not likely differ much from that of the past several years. American companies have learned how to make money in this slow-recovery environment. Our equity strategy remains intact. We are focused on cyclical market sectors that are sensitive to the ebb and flow of the economy. We recommend overweight positions in the Consumer Discretionary, Industrials and Information Technology sectors. Our bias is toward large-cap U.S. stocks. We also recommend an overweight in DM equities. We continue to favor stocks over bonds in a well-diversified portfolio. Our year-end target range for the S&P 500 Index is 2000–2100. For more information, please request our Global Equity Strategy report.

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Asset Allocation Strategy Report April 28, 2016

Market Summary

5

Global Real Assets REITs and MLPs.

Global Real Estate Investment Trusts (REITs) gained nicely for the month and for the first quarter. This was the case for both U.S. and international REITs. Master Limited Partnership (MLP) markets, on the other hand, had mixed results throughout the quarter. The month of March was particularly strong, but it could not combat an overall loss for the full quarter.

Market Observations. MLPs gained 8.3 percent in March (by far their best month in the quarter). Much of this was due to surging oil prices. MLP performance started improving once West Texas Intermediate (WTI) found its $26-per-barrel bottom in mid-February, and the rally continued through most of March. As for individual selection, we continue to advise remaining defensive, focusing on higher-quality partnerships.

Global Real Assets Index Total Returns, REITs and MLPs—As of 3/31/16 Global REITs Domestic REITs International REITs MLPs

MTD

QTD

YTD 1 Year 3 Year 5 Year

9.6%

5.4%

5.4%

1.3%

6.2%

10.2%

5.8%

5.8%

4.7%

9.9% 11.6%

9.0%

5.2%

5.2% -1.7%

8.5%

2.0%

5.3%

8.3% -4.2% -4.2% -31.8% -10.3% -0.6%

Past performance is no guarantee of future results. Returns over one year are annualized. Sources: FTSE, Alerian See end of report for important definitions and disclosures.

REITs and MLPs both provide higher income opportunities for investors, but the main dynamics driving the two sectors

are dramatically different. For REITs, the fundamentals remain strong in the U.S. and many foreign markets. We favor U.S. REITs in particular, given the probability of continued economic growth and fair valuations. These, combined with healthy dividend yields, give domestic REITs favorable total-return possibilities for 2016. For MLPs, valuations suggest that many partnerships are undervalued, yet fundamentals remain in question with oil prices hovering in the $30-to-$40-per-barrel range. If, as we suspect, the majority of the oil-price downside has been seen, select buying opportunities should emerge in coming quarters. Once it is clear that oil has found its bottom, we see the potential to add to quality MLPs.

Commodities.

Global Real Assets Index Total Returns, Commodities—As of 3/31/16

U.S. REITs, similarly, turned in strong performance in March. The FTSE NAREIT All Equity REITs Index gained roughly 10 percent. For the quarter, the index returned 5.8 percent. We remain comfortable with our tactical overweight on U.S. REITs established last December. It reflects our favorable view of REIT operating fundamentals and fair valuations.

Wells Fargo Investment Institute Perspective.

Commodity prices overall ended the month higher as markets continue to balance supply and demand.

Market Observations. Metals. Copper and other base metals prices remain off recent lows, but they weakened slightly in March on concern over weak global economic growth and manufacturing activity. Any improvements in the economic data could lend some support. Gold and other precious-metals prices are still up for the year but have retreated from recent highs. Gold prices have been elevated as investors anticipate a more dovish Fed than initially expected this year; gold remains expensive relative to other assets. Higher interest rates, muted global inflation, and a stronger dollar could limit the rally. The dollar has gone through a weak period but could resume strengthening as central banks abroad ease monetary policies further. Expectations that the Fed will raise rates once this year may drive metal prices lower. Agriculture. Agricultural commodity prices had strengthened earlier in the month but gave up some gains as the U.S. Department of Agriculture (USDA) expects planting to increase for corn this season and meat supplies are ample. Strong foreign demand, especially for soybeans, and USDA forecasts for a smaller wheat and soybean crop this year could help boost prices. Should the dollar strengthen, this could put downward pressure on prices as producers are incentivized to increase exports at the lower prices. Dry weather in Ghana and Brazil may offer some support for sugar, coffee, and cocoa prices as investors become concerned about supply disruptions.

MTD

QTD

YTD 1 Year 3 Year 5 Year

Commodities (S&P GSCI)

4.9% -2.5% -2.5% -28.7% -24.5% -17.4%

Commodities (BCOM)

3.8%

Commodities (RICI)

5.0% -0.9% -0.9% -21.1% -18.4% -14.0%

0.4%

0.4% -19.6% -16.9% -14.1%

Past performance is no guarantee of future results. Returns over one year are annualized. Source: Bloomberg See end of report for important definitions and disclosures.

Energy. Energy prices are higher this month but have been volatile. Crude-oil prices recovered from February’s mid-$20s on improving fundamentals, expectations for the U.S. to begin cutting production, and steadily improving demand. Concerns about Organization of the Petroleum Exporting Countries (OPEC) production could keep prices low in the near term. The oil market remains oversupplied, but supply and demand growth continue to balance, and we expect oil prices to end the year higher than current levels. Natural-gas prices have rebounded from recent lows but could weaken further as we enter the stockpiling season.

Wells Fargo Investment Institute Perspective. We expect agricultural and energy commodity prices to outperform precious and base metal prices, but commodity prices overall could become range-bound in the coming years. We recommend a diversified position for investors who seek to grow their portfolio value. These investors have an opportunity to gradually increase their exposure to commodities toward their long-term target allocation.

For more information, please request our Global Real Assets Strategy report.

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Asset Allocation Strategy Report April 28, 2016

Market Summary,

6

Global Alternative Investments*, Early estimates from Hedge Fund Research (HFR) indicate positive industry performance in March, with the HFRI Fund Weighted Composite up 1.8 percent. Oil gains propelled equity and credit sectors higher while dampening volatility. Equity Hedge strategies, especially those with a growth bias, paced gains for the month with the HFRI Equity (Hedge) Total Index up 3.4 percent. Unfortunately, the rebound in oil led to widespread losses for Macro strategies that were still largely short energy futures and long fixed-income futures. The HFRI Macro (Total) Index fell -1.4 percent, with a notable spread between Discretionary Macro performance (+0.4 percent) and Systematic Macro performance (-2.8 percent). Both Event Driven and Relative Value strategies benefited from a supportive credit and equity environment, with the HFRI Event Driven (Total) Index up 2.7 percent and the HFRI Relative Value (Total) Index up 2.3 percent. Corporate activity picked up throughout the quarter, with companies conducting $682.3 billion of transactions globally. The bidding war for Starwood Hotels & Resorts, coupled with activists’ push for change at Yahoo, dominated headlines in March. Arbitrage and Long/ Short Credit strategies benefited from corporate and sovereign spreads tightening, although many managers question whether anything changed fundamentally over the course of the month.

Global Alternative Investments Index Total Returns—As of 3/31/16

Market Observations.

Past performance is no guarantee of future results. Returns over one year are annualized. Source: Hedge Fund Research, Inc. See end of report for important definitions and disclosures.

Hedge funds’ positive March returns capped one of the more difficult quarters for active management in years. Many hoped that the narrative driving risky assets would shift from central bank rhetoric, especially after the Fed’s decision in December to raise interest rates, toward fundamentals where security selection would benefit. Instead, several of the same macro forces driving asset prices continued to exert a strong influence. Most notable was oil, where a mid-February reversal carried into March, boosting equities and credit. Unfortunately, many hedge fund managers missed the recovery due to defensive positioning and the decision not to meaningfully increase net long exposure. In fact, data indicates that some managers shifted to being net short momentum names, specifically those in the Internet and Software sectors. By month end, markets were once again driven by Fed comments. A hawkish tone by a member of the Federal Open Market Committee (FOMC) weeks earlier was countered by a very dovish message from Chair Yellen, one that hinted at the influence of global financial conditions on monetary policy. Several macro managers view this as a sign that the Fed will try to contain tail risks, which could lead to more aggressive positioning.

Wells Fargo Investment Institute Perspective. Credit dispersion within corporate and securitized sectors remains favorable for Relative Value; we therefore maintain our tactical overweight. Recent mark-to-market losses on loans have been difficult for Structured Credit managers, but fundamental drivers within residential and commercial real estate remain supportive. We maintain an evenweight recommendation for Macro, largely due to uncertainties around global monetary policy and its implications for asset trends. However, with the Fed acknowledging that global financial conditions are playing an

MTD

QTD

YTD 1 Year 3 Year 5 Year

Global Hedge Funds

1.8% -0.8% -0.8% -4.1%

2.1%

1.8%

Relative Value Arbitrage

2.3%

0.0%

0.0% -2.0%

2.5%

3.7%

Arbitrage

2.6%

2.6%

2.6%

1.7%

1.7%

2.1%

Long/Short Credit

3.0%

0.8%

0.8% -2.5%

1.1%

2.8%

Struct Credit/Asset Backed 0.4% -2.3% -2.3% -1.6%

4.7%

7.4%

-1.4%

1.2%

1.2% -3.3%

1.2%

0.2%

Systematic

-2.8%

2.2%

2.2% -4.8%

2.6%

0.9%

Discretionary

0.4% -0.8% -0.8% -2.1% -1.0% -0.8%

Macro

2.7% -1.0% -1.0% -6.3%

1.5%

2.0%

Activist

3.1% -4.3% -4.3% -6.5%

4.3%

4.1%

Distressed Credit

3.0% -1.3% -1.3% -10.1% -0.8%

1.3%

Merger Arbitrage

1.0%

Event Driven

2.3%

3.3%

2.7%

3.4% -1.7% -1.7% -4.5%

2.6%

1.8%

Directional Equity

3.8% -0.5% -0.5% -4.4%

4.1%

2.8%

Equity Market Neutral

1.0%

4.1%

2.7%

Equity Hedge

1.1%

0.6%

1.1%

0.6%

3.3%

increasing role in U.S. monetary policy, we could see less frequent and acute tail risks, which would be positive for macro managers. We maintain an underweight recommendation for Event Driven. Global transaction volume remains supportive for managers, especially those focused on smaller, less-crowded deals. Expectations are for a gradual increase in default rates, fallen angels, and other credit events that can provide attractive opportunities for Distressed Debt managers later this year and into 2017. Equity Hedge remains one of our highest-conviction strategies in the current environment; we maintain our overweight outlook. However, stock picking was difficult in the first quarter, and alpha was at its lowest levels in years, largely driven by exposure to certain style factors such as momentum, growth, value, and small vs. large caps. We remain evenweight on Private Capital. Within Private Equity, we remain cautious about Large Cap Buyout and late-stage Venture Capital strategies. Instead, we favor obtaining Large Cap Buyout exposure via Secondary funds. In Private Debt, we see Europe as more attractive than the U.S. for Distressed and Direct Lending strategies, as Europe’s economic recovery continues to lag that of the U.S. We remain evenweight on Private Real Estate. Stable but modest economic growth, a low-interest-rate environment, and strong recent returns should continue to drive capital into private real estate. For more information, please request our Global Alternatives Outlook.

*Alternative investments are not suitable for all investors. Any offer to purchase or sell a specific alternative investment product will be made by the product’s official offering documents. Investors could lose all or a substantial amount investing in these products. Please see end of report for important definitions and disclosures.

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Asset Allocation Strategy Report April 28, 2016

Investment Themes and Actions for 2016, Theme,

Trends,

Strategic (Long-Term Investments),

Consumers, Commodities, and Currencies

Consumers should increase their spending as employment improves

The U.S. and Europe are showing the strongest prospects for growth

Underweight DM bonds; hedge 25 percent

A past surge in consumption has created excess factory capacity

EM should continue to grow faster than DM, but their lead has narrowed

In EM bonds, select dollardenominated bonds

.

.

.

The dollar may continue to gain, though not as much as in 2015 .

Commodity prices will likely be volatile but should stabilize as supply adjusts to a lower level of demand

7

Tactical (Short-Term Opportunities), .

.

.

.

Economic growth should gradually absorb excess production capacity .

.

Fuel for Growth

Nearing mid- to late-cycle appears to favor growthoriented sectors

.

.

The U.S. economy should still post a solid pace of growth in 2016. Europe and Japan should slowly gain momentum

We believe a growing U.S. economy should benefit domestically-oriented companies across all market capitalizations

Overweight U.S. large-cap stocks, Eurozone stocks .

Overweight U.S. REITs

.

.

Underweight EM stocks DM should offer more opportunity than emerging ones Underweight DM bonds .

.

.

Overweight Consumer Discretionary, Industrials, and Information Technology

.

EM face slow trade growth and increased geopolitical conflict; we expect growth to be slightly higher than in 2015

.

Do not become impatient with low returns and take on too much risk

.

.

Disruptions and Volatility

Transient market disruptions (e.g., “flash crashes”) due to increased automation of trading and interconnection of markets

.

.

Expect volatility from technical change and geopolitical events .

Favor companies that innovate products and business methods

Avoid trying to time the stock markets, as being out of the market at the wrong time can be very costly .

.

Business methods being overhauled

Diversify broadly across asset classes

.

.

New industries being born

.

Consider alternative investments for the potential to mute volatility and private equity to access emerging technologies

.

Many workers no longer “employees” or “contractors” but something in between

.

.

Living Longer and Living Better

.

Labor force aging

.

Labor participation may fall as workers retire in large numbers

.

Investors should seek longterm growth, even as they age, to match their longer life expectancy .

Health care and senior support consuming increased share of U.S. GDP .

Seek to exploit price drops as favorable entry points to desired investments

If younger, investors should expect to finance more of their own retirement than previous generations did

Underweight the most volatile equities (small-caps, emerging market). Stay overweight less volatile equities (U.S. large-caps).

.

Favor countries that can make productive use of an aging labor force, .

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Wells Fargo Investment Institute Forecasts, GDP Growth. Economic growth should gain modestly in developed economies as positive trends edge out negative ones; emerging economies should maintain their 2015 pace. In February, we lowered our 2016 growth forecasts to reflect the effects of an unexpected precipitous decline in energy prices during the fourth quarter of 2015. We expect the U.S. and UK to lead the developed economies. Developed economies face excess factory capacity but should benefit from supportive monetary policy, low energy prices, expanding credit, and improving labor markets. Low commodity prices, a positive for developed economies, remain a challenge for emerging ones, particularly Brazil and Russia, weighing on growth across emerging economies. Inflation. We expect inflationary pressures to remain subdued in developed economies due to persistently weak energy prices. Lower-for-longer commodity prices and global excess factory capacity should constrain inflation in most countries. But improving confidence, borrowing, and wage growth should raise inflation in developed countries from its near-zero levels. EMs should see falling inflation except in high-debt, lowgrowth locales such as South America and Russia. Unemployment Rate. We expect a stronger U.S. labor market in 2016 as business spending grows. Job growth in 2015 tapered off from 2014, but lower labor-force participation has been keeping the unemployment rate low. Interest Rates. The domestic yield curve should flatten as the federal funds rate rises to 50–75bp while longer-term rates remain closer to current levels. Monetary policy has been diverging, with gradual tightening slated for the U.S. while Europe and Japan remain accommodative; this should increase volatility. We expect global DM yields to remain depressed. Demand for sovereign debt worldwide has been strong, which has suppressed yields. Domestic Stocks. We expect the U.S. economy to grow about 2 percent this year. Slow growth does not favor the continued outperformance of small-cap stocks; we therefore reduce small-caps to underweight. The decline in energy prices in the first quarter has depressed corporate earnings; this leads us to reduce our 2016 earnings estimates for all domestic stocks slightly despite anticipated earnings improvements for the next three quarters and beyond. We expect the strengthening of earnings in the coming quarters to support higher priceearnings ratios. We see large and midsized companies as best-positioned to exploit U.S. growth. Our target adjustments are modest, because adverse events and reduced liquidity could temper the support for higher valuations. Foreign Stocks. EM stocks have benefited from a weakening dollar and stabilizing commodity prices. We continue to believe that this group will be negatively impacted by slower global trade and the looming threat of debt issues in emerging markets. China’s growth has stabilized, bringing relief to the EM world. Valuation is near its historical averages, with the current price-earnings multiple at 10.9 times our 2016 estimates. In the DM world, the weak dollar has resulted in the yen touching an 18-month high vs. the dollar. This has resulted in weak Japanese equity markets and worries that currency strength will choke off any rebound in economic growth. European markets have also lagged as economic data has been lackluster and earnings estimates have been lowered. We continue to believe that market gains will need to be driven by a turn in earnings, which should take place in the second half of the year.

Asset Allocation Strategy Report April 28, 2016

2016E

2015

2014

Macro Domestic GDP Growth Domestic Inflation Domestic Unemployment Rate

2.1% 1.4% 4.8%

2.4% 0.1% 5.0%

2.4% 1.6% 5.6%

Fixed Income 10-Year U.S. Treasury Yield 30-Year U.S. Treasury Yield Fed Funds Rate

2.0-2.5% 2.5-3.0% 0.5-0.75%

2.3% 3.0% 0.50%

2.17% 2.75% 0.25%

International Global GDP Growth Developed Market GDP Growth Developed Market Inflation Emerging Market GDP Growth Emerging Market Inflation Eurozone GDP Growth Eurozone Inflation MSCI Developed Market Index MSCI Emerging Market Index

3.3% 1.9% 1.3% 4.2% 5.6% 1.8% 1.0% 1590-1690 720-800

3.1% 1.9% 0.4% 4.0% 4.5% 1.5% 0.0% 1716 794

3.4% 1.8% 0.7% 4.6% 5.3% 0.9% -0.2% 1775 956

Commodities West Texas Intermediate Crude-Oil Price Brent Crude-Oil Price Gold Price

$35-45 $40-50 $950-1050

$38 $37 $1061

$53 $57 $1184

Domestic Equities ▲ 2190-2290 S&P 500 Index S&P 500 Operating Earnings per Share ▼ $119 ▲ 1650-1750 Russell Mid-Cap Index Russell Small-Cap Index 970-1070

2044 $118 1596 1135

2059 $119 1663 1205

Currency Euro (dollars per euro) Yen (yen per dollar)

$1.09 ¥120

$1.21 ¥119

▲ $1.10-1.14 ▲ ¥107-113

8

E: estimate. ▼/▲: recent forecast change. Wells Fargo Investment Institute forecasts. See end of report for important definitions and disclosures. Sources: FactSet, Bloomberg, Wells Fargo Investment Institute Investment Strategy Committee; as of 4/27/16. Projections are not guaranteed and are subject to change.

Commodities. Supply and demand are continuing to balance, leading us to expect price stabilization this year. Gold prices remain expensive relative to other commodities and asset classes. They should drift lower based on lower inflation expectations. We anticipate plenty of volatility in the oil markets as prices continue to rebound from February’s lows. Currencies. The dollar still has long-term fundamental advantages, but we have lowered our 2016 exchange rate targets close to today’s levels. This is, in part, because upcoming events may push the dollar either higher or lower. Also, the dollar has lost some policy support: The Fed has moderated expectations for higher rates, and European and Japanese easing policies face constraints. Among emerging nations, Brazil and China should see currency weakness while Mexico and India may actually see appreciation.

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Asset Allocation Strategy Report April 28, 2016

Strategic Asset Allocation,

9

Capital Market Assumptions, Annual update; as of July 2015.

Capital market and asset class assumptions are estimates of how asset classes and combinations of classes may respond during various market environments. For example, Downside risk based on our assumptions about average returns and the variability of returns, represents the minimum return that would be statistically likely in 95 percent of annual returns. In other words, in 19 out of 20 years, performance would be likely to be better than this figure and in the 20th year it would likely be worse. There is no guarantee that any particular 20-year period would follow this pattern. Hypothetical returns represent our estimate of likely average returns over the next several market cycles. They do not represent the returns that an investor should expect in any particular year. Geometric return is the compounded annual return that would give the same result as a given series of annual returns based on those same assumptions. The return and risk assumptions are statistical averages that do not represent the experience of any individual investor or any specific time period. Standard deviation is a measure of volatility. It reflects the degree of variability surrounding the outcome of an investment decision; the higher the standard deviation, the greater the risk. Yield on a bond is the yieldto-maturity of the bond. Dividend yield on an equity or real-asset investment represents the projected dividend as a percentage of the purchase price. The assumptions are not designed to predict actual performance, and there are no assurances that any estimates used will be achieved. The information given has been provided as a guide to help with investment planning and does not represent the maximum loss a portfolio could experience.

Capital Market Assumptions

Global Alternative Investments*

Global Real Assets

Global Equities

Global Fixed Income

Inflation

Hypothetical Arithmetic Return 2.5%

Hypothetical Hypothetical Risk Geometric Return Standard Deviation 2.5%

Yield or Dividend Yield

Downside Risk

Cash Alternatives

2.5%

2.5%

1.5%

2.5%

0.1%

Short-Term Taxable Bonds Intermediate-Term Taxable Bonds Long-Term Taxable Bonds U.S. Investment Grade Taxable Bonds Short-Term Muni Bonds Intermediate-Term Muni Bonds Long-Term Muni Bonds Investment Grade Muni Bonds Preferred Stock High Yield Taxable Bonds High Yield Municipal Bonds Developed Market Bonds Emerging Market Bonds Global TIPS

2.75% 3.25% 3.5% 3.25% 2.25% 2.75% 3.0% 2.75% 5.25% 7.0% 5.5% 3.25% 7.0% 3.25%

2.7% 3.1% 3.1% 3.1% 2.2% 2.6% 2.6% 2.6% 4.6% 6.2% 4.7% 2.9% 6.2% 3.1%

1.75% 5.0% 9.5% 5.0% 1.75% 5.0% 9.5% 5.0% 12.0% 13.0% 13.0% 8.0% 13.5% 6.0%

2.75% 3.25% 3.5% 3.25% 2.25% 2.75% 3.0% 2.75% 5.25% 7.0% 5.5% 3.25% 7.0% 3.25%

-0.1% -4.8% -11.3% -4.8% -0.6% -5.3% -11.8% -5.3% -13.3% -13.0% -14.4% -9.4% -13.7% -6.3%

U.S. Large Cap U.S. Mid Cap U.S. Small Cap Developed Market Equities Developed Market Small Cap Equities Emerging Market Equities Frontier Market Equities

9.0% 10.0% 10.75% 9.0% 9.5% 11.75% 12.5%

7.8% 8.5% 9.0% 7.6% 7.7% 9.3% 9.2%

16.5% 18.25% 20.0% 17.5% 20.0% 24.0% 28.0%

2.25% 1.75% 1.25% 2.25% 1.5% 1.75% 2.0%

-15.9% -17.2% -18.8% -17.2% -20.0% -23.0% -27.1%

Global REITs MLPs Private Real Estate Commodities Timberland

8.75% 9.0% 9.0% 5.5% 8.75%

7.3% 7.7% 7.9% 4.4% 7.7%

18.0% 17.0% 15.75% 15.0% 15.25%

4.0% 6.0% 5.25% 5.0%

-18.1% -16.5% -14.8% -17.2% -14.4%

Hedge Funds–Relative Value* Hedge Funds–Macro* Hedge Funds–Event Driven* Hedge Funds–Equity Hedge* Private Equity* Private Debt*

5.5% 5.25% 5.75% 6.0% 13.5% 9.25%

5.3% 5.1% 5.5% 5.6% 11.2% 8.1%

6.25% 6.5% 7.0% 9.0% 23.0% 16.0%

6.75%

-4.5% -5.1% -5.4% -8.1% -20.0% -14.9%

*Alternative investments are not suitable for all investors. Any offer to purchase or sell a specific alternative investment product will be made by the product’s official offering documents. Investors could lose all or a substantial amount investing in these products. Please see end of report for important definitions and disclosures.

 Table of Contents

Asset Allocation Strategy Report April 28, 2016

Strategic Asset Allocation,

10

Four Asset Groups: Fixed Income, Equities, Real Assets, and Alternative Investments, Annual update; updated July 2015, These allocations span the set of investments available to investors, utilizing broad diversification in an effort to help control portfolio risk. Special issues such as liquidity, cash flow, and taxability would be taken into consideration in the choice of investment vehicles for each asset class. Depending on their tax bracket and on market conditions, investors may elect taxable or tax-free bonds to implement their fixed income allocation. IMPORTANT: The projections or other information generated by Morningstar Direct regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time. Morningstar Direct Methodology: Based on accepted statistical methods, the Morningstar Direct tool uses a simulation model to arrive at the expected returns for the Strategic Asset Allocation Mixes shown below. The simulation model uses assumptions about inflation, financial market returns and the relationships among these variables. These assumptions were derived from Wells Fargo Investment Institute’s Capital Market Assumptions which are discussed in this report. Using Monte Carlo simulation, the Morningstar Direct tool simulates 5,000 different potential outcomes varying risk, return, and correlation among the assets. Some of these scenarios will assume strong financial market returns, similar to the best periods of history for investors. Others will be similar to the worst periods in investing history. Most scenarios will fall somewhere in between. The results shown are the median (50th percentile) outcomes from the 5,000 iterations.

Portfolio Allocations across the Efficient Frontier 100% U.S. Stocks

80%

60%

Other Bonds Foreign Stocks

40% Real Assets 20%

Investment-Grade U.S. Bonds Alternatives Cash Equivalents

0% Fixed Income

Income

Balanced Income

Balanced

Balanced Appreciation

Appreciation

Maximum Appreciation

Strategic Asset Allocation Mixes (please see page 11 for the tactical overlay) Investment Objective

U.S. Investment Grade Bonds U.S. High Yield Bonds Developed Market Bonds Emerging Market Bonds Total Fixed Income

Income 3%

BalancedIncome 3%

Balanced 3%

BalancedAppreciation 3%

58% 8% 12% 5% 83%

40% 7% 9% 5% 61%

30% 6% 6% 5% 47%

20% 5% 3% 4% 32%

10% 5% 2% 4% 21%

13% 4%

12% 6% 2% 5% 4%

17% 8% 4% 8% 6%

20% 8% 5% 10% 8%

Global Real Assets

Global REITs Private Real Estate Commodities Total Real Assets Hedge Funds–Relative Value* Hedge Funds–Macro* Hedge Funds–Event Driven* Hedge Funds–Equity Hedge* Private Equity* Total Alternative Investments*

Total Portfolio

Appreciation 3%

Maximum Appreciation 3%

2% 4% 3% 9%

21%

29%

43%

51%

22% 9% 6% 13% 9% 3% 62%

3% 2%

4% 2%

5%

6%

4% 4% 2% 10%

4% 4% 2% 10%

4% 4% 2% 10%

4% 4% 3% 11%

4% 4% 3% 11%

5% 2% 2%

5% 2% 2%

4% 2% 3%

2%

9%

2% 11%

2% 2% 4% 3% 4% 15%

2%

9%

2% 2% 3% 3% 2% 12%

4% 4% 5% 15%

3% 5% 5% 15%

100%

100%

100%

100%

100%

100%

100%

U.S. Large Cap U.S. Mid Cap U.S. Small Cap Developed Market Equities Emerging Market Equities Frontier Market Equities Total Equities

GLobal Alternative Investments*

Global Equities

Global Fixed Income

Cash Alternatives

Fixed Income 3%

4%

24% 10% 7% 14% 13% 3% 71%

Summary Statistics. Based on forward-looking capital market assumptions. For important information on the methodology used to calculate expected returns, see above. Expected Arithmetic Return Expected Geometric Return Standard Deviation Yield Downside Risk

4.20% 4.10% 4.43% 3.49% -2.93%

5.46% 5.28% 6.12% 3.23% -4.29%

6.42% 6.10% 8.01% 2.97% -6.22%

7.30% 6.75% 10.31% 2.68% -8.78%

8.06% 7.30% 12.26% 2.48% -10.86%

8.89% 7.82% 14.55% 2.24% -13.28%

9.28% 8.05% 15.62% 1.85% -14.38%

*Alternative investments are not suitable for all investors. Any offer to purchase or sell a specific alternative investment product will be made by the product’s official offering documents. Investors could lose all or a substantial amount investing in these products. Please see end of report for important definitions and disclosures.

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Asset Allocation Strategy Report April 28, 2016

Tactical Asset Allocation,

11

Recommended Tactical Tilts,

Reduce U.S. Small-Cap Equities to Underweight; put proceeds in Cash Alternatives Reduce Developed-Market Equities to Evenweight; put proceeds in Intermediate Investment-Grade Bonds (increasing the overweight) The strategic (evenweight) asset allocations are based on long-term strategies. However, capital markets tend to move in cycles, and there may be short-term opportunities to enhance the risk/return relationship within a portfolio by temporarily adjusting the allocations. The tactical asset allocation overweights and underweights are designed to provide guidance on shorter-term (6–18 months) weightings in the portfolio. The minimum position of any asset class is zero, meaning that no short selling is permitted. The maximum position of all asset classes together is 100 percent, meaning that no leverage is permitted. The actual extent of overweights and underweights is a judgment call. It should be enough to make a difference without crowding out other assets or creating a vacuum. Also, all the tactical recommendations have to be considered together. It would not be mathematically possible to underweight two asset groups while maintaining an evenweight in the other two. Adjustments must be made to bring all the broad asset classes into a proper relationship. These are guidelines to be used prudently for investors with temperaments that agree with a more aggressive, tactical investment style.

Additional Asset Class Guidance, We recommend selecting long/short equity strategies: These strategies provide diversification in an equity portfolio by utilizing both long and short exposures to the asset class. While they do provide diversification, investors should expect higher tracking error to traditional benchmarks from these strategies. Prudent use through controlled allocations is recommended. Underweight

Evenweight

Overweight

Cash & Global Fixed Income Long-Term Investment-Grade Bonds Developed Market Bonds

U.S. Investment Grade Bonds Short-Term Investment Grade Bonds U.S. High Yield Bonds Emerging Market Bonds

Cash Alternatives** Intermediate-Term Investment Grade Bonds

Global Equities U.S. Small Cap** Emerging Market Equities

U.S. Mid Cap Frontier Market Equities Developed Market Equities**

U.S. Large Cap

Global Real Assets Real Estate–Public REITs, International Real Estate–Private REITs Commodities

Real Estate–Public REITs, Domestic

Global Alternative Investments* Hedge Funds–Event-Driven*

Private Equity* Private Debt* Hedge Funds–Macro*

Hedge Funds–Relative Value* Hedge Funds–Equity Hedge*

Underweight

Evenweight

Overweight

*Alternative investments are not suitable for all investors. Any offer to purchase or sell a specific alternative investment product will be made by the product’s official offering documents. Investors could lose all or a substantial amount investing in these products. Please see end of report for important definitions and disclosures. **Changed this month.

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Asset Allocation Strategy Report April 28, 2016

Tactical Asset Allocation,

12

Tactical Recommendations Summary, Asset Class

Weight,

Global Fixed Income

:

U.S. Investment Grade Bonds: Evenweight. Short-Term Investment Grade Bonds:

Evenweight..

Intermediate-Term Investment Grade Bonds:

Overweight.

Long-Term Investment Grade Bonds: U.S. High Yield Bonds:

Underweight. Evenweight

Global Equities

:

.

Developed Market Bonds:

Underweight.

Emerging Market Bonds:

Evenweight.

U.S. Large Cap Equities:

Overweight.

U.S. Mid Cap Equities: U.S. Small Cap Equities: Developed Market Equities: Emerging Market Equities:

Global Alternative Investments*

:

Global Real Assets

:

Frontier Market Equities:

Rationale and Further Detail, While yields remain near historically low levels, they are nonetheless currently attractive on a global scale. Our outlook for continued U.S. economic expansion is supportive. Even as the Fed slowly increases rates, we expect there will be minimal yield opportunities in short-term bonds. Short-term, fixed-income securities are a defensive investment—which may help support fixed-income assets against an unexpected increase in yields/decline in prices due to a stronger-than-expected economic recovery or unanticipated inflation. We believe that the yield curve remains attractive through the intermediate bond area. Given our expectations for Fed rate increases that are likely to be slower for longer, we recommend that investors consider owning more intermediate maturities given the available yield pickup. We would be cautious in adding new long-maturity positions. In our opinion, the risk/reward tradeoff is not yet sufficiently compelling, and we remain underweight given the price sensitivity of longer-maturity positions. We recently raised our high-yield recommendation to evenweight. The risk/reward tradeoff has recently moderated with increased stabilization in the Energy sector and a lower-for-longer interest-rate environment. We continue to recommend moving up in credit quality within the sector and avoiding lower-quality issuers in energy and commodities. Low sovereign yields should remain so given a sluggish global recovery and central-bank support. Hedging is recommended for appropriate investors in an attempt to mitigate further currency weakness, especially in the euro and British pound. See page 16 of this report for additional information. Higher yields and spreads in dollar-denominated sectors may offer the potential for more stable returns, but local-currency bonds remain volatile. We recommend a 100-percent dollar-denominated strategy.

Seven of the ten sectors of the S&P 500 should post negative year-over-year earnings comparisons in the first quarter. But for 2016 overall, we expect 3 percent earnings growth if later quarters produce better results. We continue to favor large-cap U.S. stocks at this point in the cycle. Evenweight. We still favor large-caps over mid-caps even though mid-caps have outperformed by approximately 2 percent year-to-date. Later in a cycle, mid-caps typically underperform; we are keeping an eye out for opportunities. Underweight Modest domestic economic growth this year makes small-cap companies unlikely to grow earnings faster than large- and (was Evenweight). mid-caps, as we had previously expected. We therefore reduce this asset class to underweight. Evenweight In several respects–less advantageous currency values, weak trade, and event risks–the fundamental outlook has shifted (was Overweight). from attractive to balanced between upside and downside risks and no longer justifies an overweight. Underweight , EM growth should outpace DM growth. However, selectivity is important, as economic and political challenges remain. Higher earnings growth for many commodity-centric markets remains a challenge. Evenweight. Frontier markets offer attractive opportunities for growth. However, concerns about liquidity and breadth of investment options offset some of the positive long-term fundamentals.

Commodities:

Evenweight.

Global REITs:

Overweight

Private Real Estate:

Evenweight.

Hedge: Relative Value*:

Overweight ,

Recent weakness within commercial mortgage-backed securities and collateralized loan obligations presents attractive opportunities for investors, but mark-to-market volatility should be anticipated.

Hedge: Macro*:

Evenweight.

With views on global growth seemingly changing month-to-month, we expect trends in equities, currencies, and fixed income to be short-lived and more difficult to trade over the near term.

Hedge: Event Driven*:

Underweight

Tax inversions are again under pressure from regulators, leading the market to price certain deals at much wider spreads.

Hedge: Equity Hedge*:

Overweight,

Private Equity*, Private Debt*:

Evenweight.

Security dispersion remains favorable and correlations are contained, although we are cognizant of the impact that factor reversals (e.g., momentum, growth, and value) can have on expected returns and volatility. We maintain a strong preference for lower-net-exposure managers. Small- and Mid-Cap buyout and other niche Private Equity opportunities are compelling, especially those focused on severe dislocations across industries and geographies. Within Private Debt we are most constructive on international Distressed/ Special Situation strategies.

Commodity prices remain weak on long-term concerns about imbalance between robust production growth and weak demand. In our view, commodity prices may remain soft but are in a long-term consolidation period. Diversify broadly. The fundamentals for U.S. equity REITs remain attractive, with commercial-property demand and rents continuing to rise in conjunction with stronger economic growth. Non-U.S.-listed real estate is generally less attractive, given the higher degree of economic uncertainty in many overseas markets as well as the potential for further strengthening in the dollar. We prefer Opportunistic real estate strategies that can target distressed capital structures, as opposed to strategies focused on Core markets where we believe prices are extended. Value-Add investors can benefit from overpricing in core markets by developing and/or leasing properties to sell into core markets.

*Alternative investments are not suitable for all investors. Any offer to purchase or sell a specific alternative investment product will be made by the product’s official offering documents. Investors could lose all or a substantial amount investing in these products. Please see end of report for important definitions and disclosures.

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Asset Allocation Strategy Report April 28, 2016

Tactical Asset Allocation.

13

Fixed Income Sector Strategy: Domestic Investment-Grade Securities. Data as of March 31, 2016 Total Sector Returns

Sector Recommendations Sector – U.S. Government – Credit – Securitized Total

Benchmark Weight 40% 30% 30% 100%

Recommended Weight 35% 35% 30% 100%

Duration

Tactical Recommendation Underweight Overweight Evenweight Underweight

Source: Wells Fargo Investment Institute, 3/31/16 See end of report for important definitions and disclosures.

Sector Recommendations – – – – – – – –

Taxable Sectors Treasury Securities Agencies Treasury Inflation-Protected Securities (TIPs) Corporate Securities Preferred Securities Residential MBS Commercial MBS Asset Backed Securities

Guidance Unfavorable Neutral Favorable Favorable Neutral Neutral Neutral Neutral

– – – –

Tax-Exempt Sectors Taxable Municipal State & Local General Obligation Essential Service Revenue Pre-Refunded

Guidance Neutral Neutral Favorable Neutral

Source: Wells Fargo Investment Institute, 3/31/16

U.S. Government (Underweight). We do see better opportunities in other taxable sectors but recommend that investors hold government allocations for diversification and liquidity. Government securities continue to offer a hedge in the event of unexpected international events or an economic slowdown. Government securities are also generally the beneficiary of risk-off events in the market. Investment-Grade Credit (Overweight). We see value in high-quality corporate debt; an overweight allocation can allow fixed-income portfolios to generate yield through exposure to these credits. We believe that high-grade corporate debt offers investors better liquidity than can be found in most other credit holdings and has the potential to outperform in the coming months. Investors are currently getting paid well to take credit risk, and we do not see a high probability of the economy “rolling over.” When purchasing investment-grade credit holdings, investors should consider their liquidity needs. We have a bias toward higher quality in the current market.

Sector U.S. Government Credit Securitized U.S. Municipal Bonds

1 Month 0.2% 2.5% 0.3% 0.3%

Year-to-Date 3.1% 3.9% 2.0% 1.7%

12 Months 2.4% 0.9% 2.4% 4.0%

Source: FactSet, 3/31/16

Investment-Grade Securitized (Evenweight). Yield is an important component of an investor’s sector selection, and the securitized sector offers investors income opportunities that cannot be found in other highly-rated, fixed-income securities. This sector provides diversification to a fixed-income portfolio and does not move in lockstep with other sectors. We believe that the optionality available in the securitized sector is attractive; we would focus on the middle of the coupon stack. Yet investors should be aware that increases in interest rates could lead to an extension of durations, which can affect portfolio yield. Duration (Underweight). Duration positioning is critical for fixed-income investors. Duration is a measure of a bond’s price sensitivity to changes in interest rates. We currently recommend that investors position just short of duration benchmarks—as a result of the low-rate environment and our hesitancy to lock in current rates for a significant period of time. Conversely, investors must take care not to move too short and be left with little yield/income generation in their portfolios. Even as breakeven inflation rates have turned higher, inflation expectations remain low. There may be opportunities to extend durations should rates move higher. U.S. Municipal Bonds. Municipal bond underperformance in February and March provides more compelling relative value than recent norms, with higher yield ratios relative to comparable taxable bonds. Seasonal weakness during tax time may also return better relative value to the market. Headline concerns over credit challenges continue but should remain specific to certain issuers and generally avoidable. Any negative spillover to the broader market could present an opportunity to long-term investors. U.S. Taxable Bonds. Given our expectation for slowly rising rates, total-return expectations should be modest. U.S. taxablebond rates remain attractive relative to developed-country yields. Downside risk in rates should be limited by a global economy that is only improving slowly, a Fed that is moving cautiously, and inflation expectations that remain below targets. For investors still looking for yield, security selection is considered key as the bond market continues to differentiate credits. For more information, please request our Monthly Fixed Income Guidance report.

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Asset Allocation Strategy Report April 28, 2016

Tactical Asset Allocation,

14

Domestic Equity Sector Strategy, Data as of March 31, 2016, Sector Recommendations

– – – – – – – – – –

Sector Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecom Services Utilities Total

Total Returns: S&P 500 Index Groups S&P 500 Index Weight 12.9% 10.4% 6.8% 15.6% 14.3% 10.2% 20.8% 2.8% 2.8% 3.5% 100.0%

Recommended Weight 14.9% 8.5% 6.5% 16.5% 14.8% 11.6% 21.8% 3.0% 2.4% 0.0% 100.0%

Tactical Recommendation Overweight Underweight Evenweight Evenweight Evenweight Overweight Overweight Evenweight Evenweight Underweight

Sector Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecom Services Utilities S&P 500 Index

1 Month 6.67% 4.75% 9.31% 7.32% 2.77% 7.11% 9.15% 7.68% 6.36% 8.03% 6.78%

Year-to-Date 1.60% 5.57% 4.02% -5.06% -5.50% 4.99% 2.60% 3.61% 16.61% 15.56% 1.35%

12 Months 6.75% 11.43% -15.54% -4.55% -5.18% 3.21% 8.06% -6.00% 18.74% 15.96% 1.78%

Source: Wells Fargo Investment Institute, 3/31/16

Source: FactSet, 3/31/16 Past performance is no guarantee of future results.

Consumer Discretionary (Overweight). In March, nearly all the best-performing sectors were those more sensitive to the ebb and flow of the economic cycle. Consumer Discretionary gained 6.7 percent on the month, in line with the S&P 500 Index (+6.6 percent). Stocks were far less volatile in March than in the prior month. An improving labor market should boost consumer spending and this sector.

Industrials (Overweight). Industrials slightly outperformed the S&P 500 Index, posting a 7.1-percent gain. Many Industrials benefit from lower commodity prices, and we suspect that those benefits will become more visible in 2016. Note that this sector has outperformed the S&P 500 Index since mid-July 2015; we expect this trend to continue.

Consumer Staples (Underweight). As with most of the more defensive sectors, Consumer Staples underperformed the S&P 500 Index in March, gaining 4.8 percent. Valuations remain high in this sector, and we look for it to underperform in the quarters ahead. We recommend an underweight. Energy (Evenweight). The Energy sector was the best performer in March at 9.3 percent. The price of oil found at least a temporary bottom and appears to have stabilized in the $30-to-$40-per-barrel range. Energy-sector earnings should continue to drag down the overall equity earnings performance in the first quarter. We look for Energy earnings to be down 90 percent year-over-year. Financials (Evenweight). Financials were a slight outperformer in March, with the sector posting a 7.3-percent gain. This occurred despite the continuing belief that interest rates are not likely to rise quickly. Investors also found some positives as the stabilizing price of oil calmed fears of defaults on bank loans related to energy companies. Health Care (Evenweight). This sector was the worst performer last month but did post a 2.8-percent gain. Fewer uninsured people signing up for coverage under the ACA (Affordable Care Act) than initially estimated will likely trim this sector’s earnings growth rate in coming quarters.

Information Technology (Overweight). This sector was the second-best performer last month at 9.2 percent. But our outlook calls for increased levels of technology business capital spending in coming quarters. We also see M&A activity continuing at a good pace in the quarters ahead. Materials (Evenweight). Materials gained 7.7 percent in March, following robust gains in the prior month. This sector had been oversold, in our opinion, as investors sold any stock in this sector that had the slightest connection with commodities. Furthermore, some Materials companies benefit from lower input prices. Telecom Services (Evenweight). Telecom was a slight underperformer last month at 6.4 percent. An attractive yield and the defensive nature of the sector kept some investors interested. Utilities (Underweight). Utilities posted a robust gain of 8 percent as the hunt for yield continued in March. We do not look for this month’s outperformance to hold as the year progresses.

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Asset Allocation Strategy Report April 28, 2016

Tactical Asset Allocation,

15

International Equity Market Strategy Developed Market Equities. Global market sentiment improved during the month of March on easing uncertainties surrounding China, global growth and central-bank policy. Economic conditions across developed markets reflected moderately positive trends, counterbalancing some global growth uncertainties. Trends in regional rankings still favor Europe vs. Pacific countries. Economic and market indicators among Pacific countries have improved slightly on mixed data out of Japan and Australia, while the pace of improvements across Europe rose modestly from February to March. We continue to view economic momentum and current market volatility as favoring our overweight to European equities.

Emerging Market Equities. Uncertainties surrounding economic growth conditions eased in March, enabling a broad rally across emerging-market assets. From February to March, economic conditions improved moderately for Emerging Asia and Europe, Middle East and African, and Latin American (Mexico) countries. Signs of economic stabilization and improving market valuations in these regions were balanced against a lack of market conviction, leaving our emerging-market regional rankings unchanged.

Cross-Regional Trends. The trend of lower global interest rates continues to favor countries with relatively high external debt. Low global bond yields are an important part of the favorable equity environment for high-debt countries, which are concentrated in Europe. In addition, low commodity prices continue to favor commodity importers, a grouping that features heavy representation from Europe, our only regional overweight. The least favorable economic trends remain concentrated among commodity exporters. Most industrial and agricultural commodity prices broke below their early-year lows this year, a development that is most negative for Latin America, South Africa, and Russia, and explains most of the slow economic and earnings growth in those regions.

International Equity Recommendations by Regions Region.

Principal Members.

Recommendation.

Recommended Weighting

Benchmark Weight*

75%

64%

.

.

Developed Market Equities (Overweight)

.

Denmark, France, Germany, Great Britain, Italy, Netherlands, Spain, Sweden, Switzerland

Overweight

Australia, Hong Kong, Japan, Singapore

Underweight

25%

36%

China, India, Indonesia, Malaysia, Philippines, South Korea, Taiwan, Thailand

Evenweight

74%

74%

Emerging Europe, Middle East and Africa

Poland, Russia, South Africa, Turkey

Evenweight

14%

14%

Latin America

Brazil, Chile, Mexico

Evenweight

12%

12%

Europe

.

.

.

.

.

Asia Pacific

.

.

.

.

.

Emerging Market Equities (Underweight)

.

Emerging Asia

.

.

.

.

.

.

.

.

.

.

.

.

.

.

*Benchmarks are Morgan Stanley Capital International (MSCI) indices: MSCI EAFE for DM and MSCI Emerging Markets for EM. Source: Wells Fargo Investment Institute, 3/31/16 The table above provides explicit recommendations on what to overweight or underweight for investors who want to take direct exposure based on our international perspective. Following the categories in our strategic allocations, the recommendations are separated into DM and EM equities. For additional perspective, please note that our current tactical advice is to overweight DMs relative to their long-term target and underweight the EM allocation.

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Asset Allocation Strategy Report April 28, 2016

Currency Hedging Guidance The U.S. Dollar vs. Developed-Market Currencies. We have moderated our expectation for continued dollar strengthening against DM currencies through the end of 2016. Although still outpacing our forecast for all developed economies, U.S. growth should slow somewhat this year, and we expect only one rate rise from the Fed in 2016. Further Eurozone and Japanese monetary stimulus is likely, though the timing and amounts are yet to be determined. While the fundamental supports for medium-term dollar strength may still be in place, and structural risks to the Eurozone and Japanese economies remain, we acknowledge considerable near-term uncertainty about U.S. and foreign central-bank policy, especially after the Fed took a significantly more dovish stance last month.

Year-End 2016 Currency Targets March 31, 2016 $1.14

Year-end 2016 Forecasts $1.10-1.14

Expected Return vs. U.S. Dollar -1.8%

¥112.57

¥107-113

2.3%

.

Dollars per euro: Yen per dollar:

,

,

.

,

,

.

,.

.

Source: Wells Fargo Investment Institute, 4/27/16

The U.S. Dollar vs. Emerging-Market Currencies. We continue to favor the dollar against EM currencies, but the dovish stance taken in the March 16 FOMC statement, and in Fed Chair Yellen’s communications, along with the continued oil-price rise, has spurred inflows into EM assets and strengthened their currencies over the past month. However, we remain skeptical of the recent rebound in EM currencies, given continued challenges to global and EM growth and our expectation that oil will not strengthen much through yearend. Inflows into EM currencies have come from hedge funds and mutual funds, as investors brought weightings closer to neutral, but the rally appears vulnerable. Performance of individual currencies and bond markets (see page 3) indicates that flows have largely been into the higher-beta countries— those markets most sensitive to the overall improvement in the risk environment, irrespective of the local political or economic situation. Oil-sensitive countries, where non-oil fundamentals are often challenged, also performed well. Given this, we would like to see a clearer bottom in place for commodities as well as for EM foreign exchange before taking a more neutral stance on the dollar. In addition, even as commodity markets stabilize, several large EM economies likely will remain troubled by structural economic, political, and governance issues. Economic structure and financial markets in emerging economies generally have improved since the crisis of the late 1990s, through the growth of liquid local-currency

16

markets and floating exchange rates. Smaller foreign-debt exposure and the ability to devalue local exchange rates may make economies more resilient against external shocks (as we have seen). However, a greater willingness to use the exchange rate as an economic-adjustment tool may keep even the currencies of relatively robust EM countries under some pressure unless the global environment for growth improves significantly. This is particularly likely should U.S. interest rates rise further later in the year (albeit modestly, as we expect).

Currency Hedging. Based on our views on the direction of the dollar, we provide our currency-hedging guidance in the matrix below. For DM fixed income, where the benchmark index is denominated in local currency, we recommend hedging 25 percent of exposure to mitigate the impact of any resumption of the dollar’s rise. For EM fixed income, the strategic benchmark consists exclusively of dollar-denominated sovereign EM bonds—so our evenweight recommendation for the debt class and our still-favorable view on the dollar vs. EM local currencies suggest that hedging is unnecessary.

Hedging Matrix. Asset Class. Developed Fixed Income,

Strategic Benchmark. Local currency,

Currency Advice. 25% hedged, 75% unhedged.

Developed Equities,

Local currency,

No hedge.

Emerging Fixed Income,

U.S. dollar,

No hedge.

Emerging Equities,

Local currency,

No hedge.

Source: Wells Fargo Investment Institute, 4/27/16

,

The table above provides guidance for investors who want and are able to hedge against currency losses, or to take advantage of the dollar’s move in either direction. Please note that implementation may vary according to the hedging instruments available to investors.

We do not favor hedging of currency risk for equities at this time. The hurdle to hedging currency risk is higher for equities than for bonds because, in equity markets, currency movements have had a smaller influence on total return than for fixed income. Further, the cost and complexity of currency hedging for equities may be greater. It is important to consider that many actively-managed mutual funds may already incorporate an element of currency hedging. In addition, the cost of hedging against losses from EM currencies is far higher than for those of developed markets, and the availability of efficient hedging instruments is more limited.

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Global Alternative Investment Strategies Outlook, Our Quantitative Outlook is based on a collection of multi-market factors that we believe to be important drivers of performance for the hedge fund strategies shown. The direction and persistency of trends within these factors determine our quantitative outlook. Our Qualitative Outlook integrates top-down and bottom-up views on the opportunity set for each strategy, adding observations from portfolio managers including changes in portfolio composition, exposure, and leverage. The Quantitative and Qualitative Outlooks are combined to produce our Overall Outlook.

Asset Allocation Strategy Report April 28, 2016

17

Highest-Conviction Strategies Long/Short Credit Structured Credit Discretionary Macro Directional Equity Hedge Private Debt

Global Alternative Investment Strategies Outlook* HFRI YTD Performance (Through 3/31/16)

Quantitative Outlook

Qualitative Outlook

Overall Outlook

Change in Outlook Since Prior Month

Relative Value

0.0%

Favorable

Favorable

Overweight

No Change

Arbitrage

2.6%

Favorable

Neutral

Evenweight

No Change

Hedge Fund Strategies

2016 Outlook

Long/Short Credit

0.8%

Favorable

Favorable

Overweight

No Change

Structured Credit/Asset-Backed

-2.3%

Favorable

Neutral

Overweight

No Change

Macro

1.2%

Neutral

Neutral

Evenweight

No Change

Systematic

2.2%

Neutral

Neutral

Evenweight

No Change

Discretionary

-0.8%

Neutral

Favorable

Overweight

No Change

Event Driven

-1.0%

Neutral

Unfavorable

Underweight

No Change

Activist

-4.3%

Neutral

Unfavorable

Underweight

No Change

Distressed Credit

-1.3%

Favorable

Neutral

Evenweight

No Change

Merger Arbitrage

1.1%

Neutral

Neutral

Evenweight

No Change

Equity Hedge

-1.7%

Neutral

Favorable

Overweight

No Change

Directional

-0.5%

Neutral

Favorable

Overweight

No Change

Equity Market Neutral

0.6%

Neutral

Neutral

Evenweight

No Change

*Alternative investments are not suitable for all investors. Any offer to purchase or sell a specific alternative investment product will be made by the product’s official offering documents. Investors could lose all or a substantial amount investing in these products. Please see end of report for important definitions and disclosures.

Notes on performance numbers, Hedge Fund Research, Inc. (HFR) maintains two sets of indices to report hedge-fund performance. This report generally uses the HFRI series, which covers a select subset of the manager universe. Relative Value strategy performance is represented by the HFRI Relative Value Arbitrage Index. Arbitrage strategy performance is represented by the HFRI Relative Value: Fixed Income—Sovereign Index. Long/short credit strategy performance is represented by the HFRI Relative Value: Fixed Income—Corporate Index. Structured Credit/Asset Backed strategy performance is represented by the HFRI Relative Value: Fixed Income—Asset Backed Index.

Event Driven strategy performance is represented by the HFRI Event Driven Index. Activist strategy performance is represented by the HFRI Event Driven: Activist Index. Distressed Credit strategy performance is represented by the HFRI Event Driven: Distressed Restructuring Index. Merger Arbitrage strategy performance is represented by the HFRI Event Driven: Merger Arbitrage Index. Equity Hedge strategy performance is represented by the HFRI Equity Hedge Index. Directional Equity strategy performance is represented by the HFRX Equity Hedge: Multi-Strategy Index. Equity-Market Neutral strategy performance is represented by the HFRI Equity Hedge: Equity Market Neutral Index

Macro strategy performance is represented by the HFRI Macro/CTA Index. Systematic strategy performance is represented by the HFRI Macro: Systematic Diversified CTA Index. Discretionary strategy performance is represented by the HFRI Macro: Discretionary Thematic Index.

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Definitions

Asset Allocation Strategy Report April 28, 2016

18

.

.

Investment Objectives. Fixed Income. Emphasis on a high level of current income through holdings of fixed-income investments; no emphasis on potential capital appreciation Income. Emphasis on achieving a high level of current income with minimal consideration for potential capital appreciation Balanced: Income Biased. Emphasis on the production of current income with some consideration for capital appreciation Balanced. Balance in emphasis between current income and longer-term capital appreciation Balanced: Appreciation Biased. Emphasis on potential capital appreciation with some consideration for current income Appreciation. Emphasis on potential capital appreciation with income not a consideration Maximum Appreciation. Exclusive emphasis on potential capital appreciation

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Disclosures, Risk Considerations Past performance does not indicate future results. The value or income associated with a security or an investment may fluctuate. There is always the potential for loss as well as gain. Investments discussed 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. Asset allocation and diversification are investment methods used to manage risk. They do not assure or guarantee better performance and cannot eliminate the risk of investment losses. Your individual allocation may be different than the strategic long-term allocation above due to your unique individual circumstances, but is targeted to be in the allocation ranges detailed. The asset allocation reflected above may fluctuate based on asset values, portfolio decisions, and account needs. 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. 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. Convertible securities are subject to the same interest rate, price and credit risks as regular debt securities. Prices tend to be inversely affected by changes in interest rates. In addition, a convertible security is also subject to the risks associated with common stocks. The return and principal value of stocks fluctuate with changes in market conditions. Alternative investments, such as hedge funds, carry specific investor qualifications which can include high income and net-worth requirements as well as relatively high investment minimums. They are complex investment vehicles which generally have high costs and substantial risks. The high expenses often associated with these investments must be offset by trading profits and other income. They tend to be more volatile than other types of investments and present an increased risk of investment loss. There may also be a lack of transparency as to the underlying assets. Alternative investments are subject to fewer regulatory requirements than mutual funds and other registered investment company products and thus may offer investors fewer legal protections than they would have with more traditional investments. Additionally, there may be no secondary market for alternative investment interests and transferability may be limited or even prohibited. Other risks may apply as well, depending on the specific investment product. Please carefully review the prospectus, private placement memorandum or other offering documents for complete information regarding terms, including all applicable fees, as well as risks and other factors you should consider before investing.

Asset Allocation Strategy Report April 28, 2016

corporation for federal income tax purposes which would reduce the amount of cash flows distributed by the MLP. Other risks include the volatility associated with the use of leverage; volatility of the commodities markets; market risks; supply and demand; natural and man-made catastrophes; competition; liquidity; market price discount from Net Asset Value and other material risks. There are special risks associated with investing in preferred securities. Preferred securities are subject to interest rate and credit risks and are generally subordinated to bonds or other debt instruments in an issuer’s capital structure, subjecting them to a greater risk of non-payment than more senior securities. In addition, the issue may be callable which may negatively impact the return of the security. Preferred dividends are not guaranteed and are subject to deferral or elimination. Private debt has speculative characteristics that include potential default, limited liquidity and the infrequent availability of independent credit ratings for private companies. There are risks associated with investments in private companies. Such companies are not subject to SEC reporting requirements and are not required to maintain effective internal controls over financial reporting. These companies may have limited financial resources; shorter operating histories; more asset concentration risk; narrower product lines and smaller market shares that larger companies. In addition, securities issued by private companies are typically illiquid and there may be no readily available trading market for such securities. Investing in real estate involves special risks, including the possible illiquidity of the underlying property, credit risk, interest rate fluctuations and the impact of varied economic conditions. The prices of small and mid-size company stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions. Technology and internet-related stocks, especially of smaller, less-seasoned companies, tend to be more volatile than the overall market. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk, especially when real interest rates rise. This may cause the underlying value of the bond to fluctuate more than other fixed income securities. TIPS have special tax consequences, generating phantom income on the “inflation compensation” component of the principal. A holder of TIPS may be required to report this income annually although no income related to “inflation compensation” is received until maturity. There is no assurance that any of the target prices or other forward-looking statements mentioned will be attained. Index and Other Definitions An index is unmanaged and not available for direct investment

Investments in fixed-income securities are subject to interest rate and credit risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline in the bond’s price. Credit risk is the risk that an issuer will default on payments of interest and principal. High yield fixed income securities are considered speculative, involve greater risk of default, and tend to be more volatile than investment grade fixed income securities. Municipal bonds offer interest payments exempt from federal taxes, and potentially state and local income taxes. They are subject to credit risk and potentially the Alternative Minimum Tax (AMT). Quality varies widely depending on the specific issuer. All fixed income investments may be worth less than their original cost upon redemption or maturity.

Core inflation is the change in the core Consumer Price Index (CPI). The core CPI measures the price of a fixed basket of goods and services—excluding the volatile food and energy components—purchased by an average consumer.

Mortgage-related and asset-backed securities are subject to prepayment risks. Changes in prepayments may significantly affect yield, average life and expected maturity.

Consumer Confidence Index measures consumer confidence, which is defined as the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending.

Currency hedging is a technique used to seek to reduce the risk arising from the change in price of one currency against another. The use of hedging to manage currency exchange rate movements may not be successful and could produce disproportionate gains or losses in a portfolio and may increase volatility and costs. Investing in foreign securities presents certain risks that may not be present in domestic securities. For example, investments in foreign, emerging and frontier markets present special risks, including currency fluctuation, the potential for diplomatic and potential instability, regulatory and liquidity risks, foreign taxation and differences in auditing and other financial standards. Master Limited Partnerships (MLPs) involves certain risks which differ from an investment in the securities of a corporation. MLPs may be sensitive to price changes in oil, natural gas, etc., regulatory risk, and rising interest rates. A change in the current tax law regarding MLPs could result in the MLP being treated as a

19

Inflation is the change in the Consumer Price Index (CPI). The CPI measures the price of a fixed basket of goods and services purchased by an average consumer.

Conference Board’s Leading Economic Index (LEI) is a composite average of ten leading indicators in the US. It one of the key elements in the Conference Board’s analytic system, which is designed to signal peaks and troughs in the business cycle.

Markit Manufacturing Purchasing Managers Index (PMI) tracks manufacturing and service sector activity in the Eurozone. An Index value over 50 indicates expansion; below 50 indicates contraction. The values for the index can be between 0 and 100. The Producer Price Index (PPI) program measures the average change over time in the selling prices received by domestic producers for their output. The Market Volatility Index (VIX) is an index designed to track market volatility as an independent entity. The index is calculated based on option activity and is used as an indicator of investor sentiment, with high values implying pessimism and low values implying optimism. The Institute of Supply Management (ISM) Purchasing Manager’s Index gauges internal demand for raw materials/goods that go into end-production. An Index value over 50 indicates expansion; below 50 indicates contraction. The values for the index can be between 0 and 100.

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Disclosures (continued) The US Dollar Index (USDX, DXY) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners’ currencies. The Institute of Supply Management (ISM) Non-manufacturing Index (ISM Services Survey) measures the rate and direction of change in activity in the nonmanufacturing industries. An index with a score over 50 indicates that the industry is expanding, and a score below 50 shows a contraction. The values for the index can be between 0 and 100. Real economic growth is the change in the gross domestic product (GDP) adjusted for inflation—that is, the volume of services and goods produced in the United States. West Texas Intermediate Crude Oil is a light, sweet (i.e., low sulfur) crude oil which is the main type of U.S. crude oil traded in U.S. futures markets. Brent Crude Oil is a light, sweet crude oil extracted from the North Sea. It serves as a major benchmark price for purchases of oil worldwide. Bond credit rating. A grade given to bonds that indicates their credit quality. Private independent rating services such as Standard & Poor’s, Moody’s and Fitch provide these evaluations of a bond issuer’s financial strength, or its the ability to pay a bond’s principal and interest in a timely fashion. The general meaning of these credit rating opinions are as follows: AAA—Extremely strong capacity to meet financial commitments. Highest Rating. AA—Very strong capacity to meet financial commitments. A—Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances. BBB—Adequate capacity to meet financial commitments, but more subject to adverse economic conditions. Caa—Judged to be speculative of poor standing and are subject to very high credit risk. Global Fixed Income Representative Indices, U.S. Investment Grade Corporate Bond. Barclays US Aggregate Bond Index is an index composed of the Government Bond Index, the Asset-Backed Securities Index and the Mortgage-Backed Securities Index and includes U.S. Treasury issues, agency issues, corporate bond issues and mortgage-backed issues. Short, Intermediate and Long Term Investment Grade Bond. Barclays US Aggregate Bond Index is made up of the Barclays U.S. Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index. U.S. Treasury. Barclays US Treasury Index includes public obligations of the U.S. Treasury with a remaining maturity of one year or more. U.S. Corporate. Barclays US Corporate Index includes publicly issued U.S. corporate and Yankee debentures and secured notes that meet specified maturity, liquidity, and quality requirements. U.S. MBS. Barclays US Mortgage Backed Securities (MBS) Index includes mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). U.S. Agency. Barclays US Agency Index measures the performance of the agency sector of the U.S. government bond market and is comprised of investmentgrade native-currency U.S. dollar-denominated debentures issued by government and government-related agencies, including FNMA. U.S. Municipal Bond. Barclays US Municipal Index represents municipal bonds with a minimum credit rating of at least Baa, an outstanding par value of at least $3 million and a remaining maturity of at least one year. The index excludes taxable municipal bonds, bonds with floating rates, derivatives and certificates of participation. U.S. TIPS. Barclays US TIPS Index represents Inflation-Protection securities issued by the U.S. Treasury. U.S. Government. Barclays US Government Bond Index includes U.S.-dollardenominated, fixed-rate, nominal U.S. Treasury securities and U.S. agency debentures. Credit. Barclays US Credit Index includes investment-grade, U.S.-dollardenominated, fixed-rate, taxable corporate- and government-related bonds. Securitized. Barclays US Mortgage Backed Securities (MBS) Index includes agency mortgage backed pass-through securities (both fixed-rate and hybrid ARM) guaranteed by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). U.S. High Yield. Barclays US Corporate High-Yield Index covers the universe of fixed-rate, non-investment-grade debt.

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Developed Market Bond (Unhedged). JPMorgan GBI Global ex-US FX NY Index (Unhedged) in 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. Developed Market Bond (Hedged). 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. Emerging Market Bond (U.S. Dollar). 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. Emerging Market Bond (Local Currency). JPMorgan Government Bond IndexEmerging Markets Global (USD Unhedged) is a comprehensive global local emerging markets index, and consists of regularly traded, liquid fixed-rate, domestic currency government bonds. Preferred Stock. S&P Preferred Stock represents an unmanaged index consisting of U.S.-listed preferred stocks. Global Equity Representative Indices, Large Cap Equity. 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. Large Cap Equity (Growth). Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. Large Cap Equity (Value). Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. Mid Cap Equity. Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap Index is a subset of the Russell 1000® Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap Index represents approximately 27 percent of the total market capitalization of the Russell 1000 companies. Mid Cap Equity (Growth). Russell Midcap Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values. Mid Cap Equity (Value). Russell Midcap Value Index measures the performance of the mid-cap value segment of the U.S. equity universe. It includes those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values. Small Cap Equity. Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 8 percent of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. Small Cap (Growth). Russell 2000 Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher price-to-value ratios and higher forecasted growth values. Small Cap Equity (Value). Russell 2000 Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Developed Market Equity (U.S. Dollar)/(Local). MSCI EAFE Developed Market Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. and Canada. It is unmanaged and unavailable for investment. Statistics are shown in U.S. dollars and local currency. Emerging Market Equity (U.S. Dollar)/(Local). MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

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Disclosures (continued) Frontier Market Equity (U.S. Dollar/Local). MSCI Frontier Markets Index is a free-float-adjusted market-capitalization index that is designed to measure equity performance of the world’s least-developed capital markets. Statistics are shown in U.S. dollars and local currency. Global Real Assets Representative Indices, Global REITs. FTSE EPRA/NAREIT Developed Index is designed to track the performance of listed real-estate companies and REITs in developed countries worldwide. Domestic REITs. FTSE NAREIT US All Equity REITs Index is designed to track the performance of REITs representing equity interests in (as opposed to mortgages on) properties. It represents all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets, other than mortgages secured by real property that also meet minimum size and liquidity criteria. International REITs. FTSE EPRA/NAREIT Developed ex US Index is designed to track the performance of listed real estate companies in developed countries worldwide other than the United States. MLPs. Alerian MLP Index is a composite of the 50 most prominent energy Master Limited Partnerships (MLPs) that provides investors with an unbiased, comprehensive benchmark for this emerging asset class. The index, which is calculated using a float-adjusted, capitalization-weighted methodology, is disseminated real-time on a price-return basis and on a total-return basis. Commodities (S&P GSCI). S&P Goldman Sachs Commodity Index is a tradeweighted index of commodity sector returns representing unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The index includes futures contracts on 24 physical commodities, of which Energy represents nearly 70 percent. Commodities (BCOM). Bloomberg 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 2 percent of the index. Commodities (RICI). The Rogers International Commodity Index is a U.S. dollar based index representing the value of a basket of commodities consumed in the global economy. Representing futures contracts on 37 physical commodities, it is designed to track prices of raw materials not just in the U.S. but around the world. Global Alternative Investments Representative Indices, Global Hedge Funds. HFRI Fund Weighted Composite Index. A global, equalweighted index of over 2,000 single-manager funds that report to HFR Database. Constituent funds report monthly net-of-all-fees performance in U.S. Dollars and have a minimum of $50 Million under management or a 12-month track record of active performance. The HFRI Fund Weighted Composite Index does not include Funds of Hedge Funds. Relative Value Arbitrage. HFRI Relative Value (Total) Index. Strategy 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. RV position may be involved in corporate transactions also, but as opposed to ED exposures, the investment thesis is predicated on realization of a pricing discrepancy between related securities, as opposed to the outcome of the corporate transaction. Arbitrage. HFRI RV: Fixed Income Sovereign Index. Includes strategies predicated on realization of a spread between related instruments in which one or multiple components of the spread is a sovereign fixed income instrument. Strategies employ an investment process designed to isolate attractive opportunities between a variety of fixed income instruments, typically realizing an attractive spread between multiple sovereign bonds or between a corporate and risk free government bond. Fixed Income Sovereign typically employ multiple investment processes including both quantitative and fundamental discretionary approaches and relative to other Relative Value Arbitrage sub-strategies, these have the most significant top-down macro influences, relative to the more idiosyncratic fundamental approaches employed. Long/Short Credit. HFRI RV: Fixed Income—Corporate Index. Includes strategies predicated on realization of a spread between related instruments in which one or multiple components of the spread is a corporate fixed-income instrument.

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Strategies are designed to isolate attractive opportunities between a variety of fixed income instruments, typically realizing an attractive spread between multiple corporate bonds or between a corporate and risk free government bond. They typically involve arbitrage positions with little or no net credit market exposure, but are predicated on specific, anticipated idiosyncratic developments. Structured Credit/Asset Backed. HFRI RV: Fixed Income—Asset Backed Index. Includes strategies predicated on realization of a spread between related instruments in which one or multiple components of the spread is a fixed-income instrument backed by physical collateral or other financial obligations (loans, credit cards) other than those of a specific corporation. Strategies are designed to isolate attractive opportunities between a variety of fixed income instruments specifically securitized by collateral commitments, which frequently include loans, pools and portfolios of loans, receivables, real estate, machinery or other tangible financial commitments. Investment thesis may be predicated on an attractive spread given the nature and quality of the collateral, the liquidity characteristics of the underlying instruments and on issuance and trends in collateralized fixed-income instruments, broadly speaking. In many cases, investment managers hedge, limit, or offset interest-rate exposure in the interest of isolating the risk of the position to strictly the disparity between the yield of the instrument and that of the lower-risk instruments. Macro. HFRI Macro (Total) Index. Encompass a broad range of strategies 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 on 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 are integral to investment thesis. Systematic Macro. HFRI Macro: Systematic Diversified Index. Diversified strategies employing mathematical, algorithmic and technical models, with little or no influence of individuals over the portfolio positioning. Strategies are designed to identify opportunities in markets exhibiting trending or momentum characteristics across individual instruments or asset classes. Strategies typically employ quantitative processes which focus on statistically robust or technical patterns in the return series of the asset, and they typically focus on highly liquid instruments and maintain shorter holding periods than either discretionary or mean-reverting strategies. Although some strategies seek to employ counter-trend models, strategies benefit most from an environment characterized by persistent, discernible trending behavior. Typically have no greater than 35 percent of portfolio in either dedicated currency or commodity exposures over a given market cycle. Discretionary Macro. HFRI Macro: Discretionary Thematic Index. Strategies primarily rely on the evaluation of market data, relationships and influences, as interpreted by individuals who make decisions on portfolio positions; strategies employ an investment process most heavily influenced by top-down analysis of macroeconomic variables. Investment Managers may trade actively in developed and emerging markets, focusing on both absolute and relative levels on equity markets, interest rates/fixed income markets, currency and commodity markets; they frequently employ spread trades to isolate a differential between instrument identified by the Investment Manager as being inconsistent with expected value. Portfolio positions typically are predicated on the evolution of investment themes the Manager expects to develop over a relevant time frame, which in many cases contain contrarian or volatility-focused components. Event Driven. HFRI Event Driven (Total) Index. Maintains positions in companies currently or prospectively involved in corporate transactions of a wide variety including mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments. Security types can range from most senior in the capital structure to most junior or subordinated and frequently involve additional derivative securities. Exposure includes a combination of sensitivities to equity markets, credit markets and idiosyncratic, company-specific developments. Investment theses are typically predicated on fundamental (as opposed to quantitative) characteristics, with the realization of the thesis predicated on a specific development exogenous to the existing capital structure.

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Disclosures (continued) Activist. HFRI ED: Activist Index. Strategies may obtain or attempt to obtain representation on the company’s board of directors in an effort to impact the firm’s policies or strategic direction and in some cases may advocate activities such as division or asset sales, partial or complete corporate divestiture, dividends or share buybacks, and changes in management. Strategies employ an investment process primarily focused on opportunities in equity and equity-related instruments of companies that are currently or prospectively engaged in a corporate transaction, security issuance/repurchase, asset sales, division spin-off or other catalyst-oriented situation. These involve both announced transactions and situations in which no formal announcement is expected to occur. Activist strategies would expect to have greater than 50 percent of the portfolio in activist positions, as described. Distressed Credit. HFRI ED: Distressed/Restructuring Index. Strategies focus on corporate fixed-income instruments, primarily corporate credit instruments of companies trading at significant discounts to their value at issuance or obliged (par value) at maturity as a result of either formal bankruptcy proceedings or financial-market perception of near-term proceedings. Managers are typically actively involved with the management of these companies; they are frequently involved on creditors’ committees in negotiating the exchange of securities for alternative obligations, either swaps of debt, equity or hybrid securities. Managers employ fundamental credit processes focused on valuation and asset coverage of securities of distressed firms; in most cases portfolio exposures are concentrated in instruments that are publicly traded, in some cases actively and in others under reduced liquidity but in general for which a reasonable public market exists. Strategies employ primarily debt (greater than 60 percent) but also may maintain related equity exposure. Merger Arbitrage. HFRI ED: Merger Arbitrage Index. Strategies primarily focus on opportunities in equity and equity-related instruments of companies that are currently engaged in a corporate transaction. Merger Arbitrage involves primarily announced transactions, typically with limited or no exposure to situations in which no formal announcement is expected to occur. Opportunities are frequently presented in cross-border, collared, and international transactions that incorporate multiple geographic regulatory institutions, typically with minimal exposure to corporate credits. Strategies typically have over 75 percent of positions in announced transactions over a given market cycle. Equity Hedge. HFRI Equity Hedge (Total) Index. Equity Hedge: Investment Managers who 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; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. EH managers would typically maintain at least 50 percent exposure to, and may in some cases be entirely invested in, equities, both long and short. Directional Equity. HFRX EH: Multi-Strategy Index. Managers 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; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage, holding period, concentrations of market capitalizations, and valuation ranges of typical portfolios. Managers typically do not maintain more than 50 percent exposure to any one Equity Hedge sub-strategy Equity Market Neutral. HFRI EH: Equity Market Neutral Index. Strategies employ sophisticated quantitative techniques to analyze price data to ascertain information about future price movement and relationships between securities. These can include both Factor-based and Statistical Arbitrage/Trading strategies. Factor-based investment strategies include strategies predicated on the systematic analysis of common relationships between securities. In many cases, portfolios are constructed to be neutral to one or multiple variables, such as broader equity markets in dollar or beta terms, and leverage is frequently employed to enhance the return profile of the positions identified. Statistical Arbitrage/Trading strategies consist of strategies predicated on exploiting pricing anomalies which may occur as a function of expected mean reversion inherent in security prices; high-frequency techniques may be employed;

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trading strategies may also be based on technical analysis or designed opportunistically to exploit new information that the investment manager believes has not been fully, completely, or accurately discounted into current security prices. Strategies typically maintain characteristic net equity market exposure no greater than 10 percent long or short. Note: While the HFRI Indices are frequently used, they have limitations (some of which are typical of other widely used indices). These limitations include survivorship bias (the returns of the indices may not be representative of all the hedge funds in the universe because of the tendency of lower performing funds to leave the index); heterogeneity (not all hedge funds are alike or comparable to one another, and the index may not accurately reflect the performance of a described style); and limited data (many hedge funds do not report to indices, and, therefore, the index may omit funds, the inclusion of which might significantly affect the performance shown. The HFRI Indices are based on information hedge fund managers decide on their own, at any time, whether or not they want to provide, or continue to provide, information to HFR Asset Management, L.L.C. Results for funds that go out of business are included in the index until the date that they cease operations. Therefore, these indices may not be complete or accurate representations of the hedge fund universe, and may be biased in several ways. Returns of the underlying hedge funds are net of fees and are denominated in USD. Disclaimers Global Investment Strategy (GIS) is a division of Wells Fargo Investment Institute, Inc. (WFII). The Institute is a registered investment adviser and wholly-owned subsidiary of Wells Fargo & Company and provides investment advice to Wells Fargo Bank, N.A., Wells Fargo Advisors and other Wells Fargo affiliates. Wells Fargo Bank, N.A. is a bank affiliate of Wells Fargo & Company. The information in this report was prepared by the Global Investment Strategy division of WFII. Opinions represent WFII opinion as of the date of this report and are for general informational purposes only and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally. GIS 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 report is not an offer to buy or sell or solicitation of an offer to buy or sell any securities mentioned. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including you existing portfolio, investment objectives, risk tolerance, liquidity needs, and investment time horizon. Your actual portfolio allocation may differ from the strategic and tactical allocations reflected in this report. Wells Fargo Advisors is registered with the U.S. Securities Exchange Commission and the Financial Industry Regulatory Authority, but is not licensed or registered with any financial services regulatory authority outside of the U.S. Non-U.S. residents who maintain U.S.-based financial services account(s) with Wells Fargo Advisors may not be afforded certain protections conferred by legislation and regulations in their country of residence in respect of any investments, investment transactions or communications made with Wells Fargo Advisors. Wells Fargo Wealth and Investment Management (WIM) is a division within Wells Fargo & Company. WIM provides financial products and services through various banking and brokerage affiliates of Wells Fargo & Company. Brokerage products and services are offered through Wells Fargo Advisors. 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. Additional information is available upon request.

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