Investor Guide Wells Fargo Advantage Absolute Return Fund. Explore a nontraditional approach to asset allocation

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1 Investor Guide Wells Fargo Advantage Absolute Return Fund Explore a nontraditional approach to asset allocation

2 Is it time to consider a nontraditional approach to investing? The fund s strategy has allowed the managers to invest where opportunity may lie and avoid asset classes that analysis suggests may not be as promising. Recent stock market volatility and low interest rates have led to a proliferation of alternative, or nontraditional, investments, such as absolute return funds. While such funds share the goal of delivering positive returns whether markets are rising or falling, each pursues it differently. This may be confusing to investors and leave them wondering whether a nontraditional strategy is the right choice to get their portfolio on track. Search for opportunity wherever it may lie The managers of the Wells Fargo Advantage Absolute Return Fund look for opportunities to deliver: The potential for more consistent returns Lower portfolio volatility potential Enhanced portfolio diversification The Wells Fargo Advantage Absolute Return Fund managers seek to provide these benefits by finding the best opportunities among a broad array of investments, including alternatives.

3 Pursue the potential for consistent returns The Wells Fargo Advantage Absolute Return Fund is an alternative to traditional asset allocation strategies. It may be right for you if you re ready to: Consider nontraditional asset classes to enhance diversification Taking a fund-of-funds approach, the Absolute Return Fund may invest in GMO mutual funds of stocks, bonds, and, if the manager believes they re warranted, alternative investments. These alternatives provide exposure to asset classes that don t typically move in lockstep with traditional stock and bond markets and so may offer the benefits of true diversification. Returns and risk patterns may differ from those of a traditional balanced portfolio. Invest in GMO s best ideas, unconstrained by allocation ranges The fund may invest in as many or as few underlying markets as the manager believes are needed to pursue attractive opportunities and avoid exposure to overpriced markets. While a positive total return is the fund s goal, the managers focus on preserving capital is equally important. Pursue consistent positive returns with an emphasis on capital preservation Because the Absolute Return Fund is measured against positive return goals over a market cycle and not a benchmark such as the S&P 500 Index, the managers sole focus is on generating positive returns and avoiding permanent losses. The fund seeks annualized excess returns of 5% above the Consumer Price Index (CPI) with annualized volatility of 5% to10% over a complete market cycle.* * The fund invests substantially all of its investable assets directly in the Benchmark-Free Allocation Fund, for which GMO serves as investment advisor. The Benchmark-Free Allocation Fund seeks annualized excess returns of 5% (net of Benchmark- Free Allocation Fund fees) above the CPI, with annualized volatility of 5% to 10%, over a complete market cycle. 1

4 Experience unconventional thinking for uncommon results GMO s proven investment process has allowed the fund managers to navigate up and down markets, while managing portfolio risk. GMO s proprietary seven-year forecast is founded on the powerful yet simple premise that asset class valuations and returns always revert to the mean. Using an investment process based on this philosophy, GMO has honed its ability for more than two decades to: Add value across a wide range of asset classes Focus on capital preservation Avoid bubbles and overvalued markets GMO s investment approach The Absolute Return Fund managers select from GMO-managed strategies to construct a fund-of-funds portfolio that they believe will deliver risk-adjusted returns over time. 1 Asset Allocation team An extensive, experienced team uses a time-tested investment process to support the fund. 2 Seven-year asset class forecasting model The team seeks to identify attractively valued asset classes around the world using a proprietary model that is based on the conviction that asset class valuations eventually revert back to fair value. 3 Assessment of attractiveness of asset classes and underlying strategies The manager considers valuation and fundamental factors to determine allocation to the major asset classes: U.S. equities, international developed equities, emerging markets equities, global fixed income, and alternative investments. Within each asset class, the manager evaluates and selects institutional GMO-managed strategies to construct the portfolio. 4 Final portfolio The result is a fund that pursues consistent positive returns for the intermediate and long term and is not constrained by a benchmark. The fund participates in up markets and focuses on minimizing losses in down markets, when those markets are overpriced. 2

5 Access the flexibility to go where opportunity leads This chart illustrates how the GMO strategy has allowed the fund managers to invest where opportunity may lie and avoid the asset classes that analysis suggests may not be as promising. How the fund has adapted to changing market conditions July 2003 Unconventional August 2008 Defensive March 2013 Bonds out of favor GMO has the flexibility to change the portfolio s makeup based on market conditions. Emerging markets debt 10% TIPS 31% Alternative strategies 1 43% Alternative strategies and cash 1 38% International value 7% REITs 8% Emerging equity 14% Emerging markets debt 2% Strategic fixed income 30% Emerging equity 10% Developed fixed income 5% Emerging markets debt 3% Int'l developed equity 25% Int l small cap 31% Quality equity 25% Quality equity 20% Market conditions: Equity markets were rising on most major exchanges around the world, and bond yields remained low. Fund strategy: Almost equally divided between stocks and bonds Large allocation to international investments Emphasis on emerging markets Market conditions: As bubbles burst and markets crashed around the world, a larger portion of the portfolio was allocated to fixed income and alternatives. Fund strategy: A focus on high-quality U.S. equities Emerging markets sold off Alternatives added for diversification Market conditions: Growth returned around the world. Fund strategy: Expanded allocation to equities Emerging markets and developed equities added back, including risk premium strategy No direct exposure to U.S. traditional fixed income 1. Combination of the GMO Alpha Only Fund and other private vehicles. The Absolute Return Fund invests substantially all of its assets in the GMO Benchmark-Free Allocation Fund. The portfolio allocations shown represent the GMO Benchmark-Free Allocation Fund. Portfolio allocation is subject to change and may have changed since the date specified. 3

6 Gain access to a seasoned team GMO meets our rigorous selection criteria with its unwavering focus on long-term performance and risk management. A leading institutional money manager Since 1977, GMO a privately held global investment management firm has served clients in the corporate, public, endowment, and foundation marketplaces. The firm now brings its record of proven performance across a broad range of asset classes to the Wells Fargo Advantage Absolute Return Fund, giving individual investors access to its experience and capabilities. Ben Inker, CFA Co-head of the Asset Allocation Team In his years at GMO, Mr. Inker has served as an analyst for quantitative equities and asset allocation, as a portfolio manager of several equity and asset allocation portfolios, as co-head of international quantitative equities, and as chief investment officer of quantitative developed equities. He earned a bachelor s degree in economics from Yale University and has earned the right to use the Chartered Financial Analyst (CFA ) designation. Sam Wilderman, CFA Co-head of the Asset Allocation Team Before joining the Asset Allocation team, Mr. Wilderman was co-head of the GMO Quantitative Equity team and lead manager for U.S. quantitative portfolios. Prior to 2005, he was responsible for research and portfolio management for GMO s emerging markets strategies. He joined GMO in 1996 following the completion of his bachelor s degree in economics from Yale University. Mr. Wilderman has earned the right to use the Chartered Financial Analyst (CFA ) designation. Our relationship with GMO At Wells Fargo Advantage Funds, we use a multi-boutique investment model that gives you the: Expertise of independent investment teams Proprietary research and analysis of leading money managers Unique, time-tested strategies 4

7 Wells Fargo Advantage Absolute Return Fund Fund objective and strategy n n Seeks a positive total return I nvests in GMO mutual funds of stocks, bonds, and alternatives Investment category Absolute return Investor profile This fund may be suitable for investors seeking a positive total return with an emphasis on capital preservation. Portfolio management This fund is co-managed by Ben Inker, CFA, and Sam Wilderman, CFA. The fund is also supported by a team of investment analysts. Ticker symbols Class A: WARAX Class C: WARCX Administrator Class: WARDX Institutional Class: WABIX

8 Strength. Expertise. Partnership. Wells Fargo Advantage Funds skillfully guides institutions, financial advisors, and individuals through the investment terrain to help them reach their financial objectives. Everything we do on behalf of our investors is built on the standards of integrity and service established by our parent company, Wells Fargo & Company; the expertise of our independent investment teams and rigorous ongoing investment review; and the collaborative level of superior service that is our trademark. More information about Wells Fargo Advantage Funds is available free upon request. To obtain literature, please write, , or call: Wells Fargo Advantage Funds P.O. Box 8266 Boston, MA Investment professionals: Website: wellsfargoadvantagefunds.com Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. Absolute return funds are not intended to outperform stocks and bonds in strong markets, and there is no guarantee of positive returns or that the fund s objectives will be achieved. Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Bond values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. In general, when interest rates rise, bond values fall and investors may lose principal value. Alternative investments, such as commodities, real estate, and short strategies, are speculative and entail a high degree of risk. Foreign investments are especially volatile and can rise or fall dramatically due to differences in the political and economic conditions of the host country. The fund will indirectly be exposed to all of the risks of an investment in the underlying funds and will indirectly bear expenses of the underlying funds. The use of derivatives may reduce returns and/or increase volatility. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). This fund is exposed to high-yield risk, mortgage- and asset-backed securities risk, and smaller-company securities risk. Consult the fund s prospectus for additional information on these and other risks. Carefully consider a fund s investment objectives, risks, charges, and expenses before investing. For a current prospectus and, if available, a summary prospectus, containing this and other information, visit wellsfargoadvantagefunds.com. Read it carefully before investing. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Advantage Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA/SIPC, an affiliate of Wells Fargo & Company. Wells Fargo Funds Distributor, LLC, and GMO LLC are not affiliates Wells Fargo Funds Management, LLC. All rights reserved. FABR