Wells Fargo Advantage Dow Jones Target Date Funds SM

Transcription

1 All information is as of unless otherwise indicated. SM Asset Allocation Analy sis GENERAL FUND INFORMATION Portfolio Managers: Rodney H. Alldredge; George V. Daniels, Jr.; James P. Lauder; Paul T. Torregrosa Subadvisor: Global Index Advisors, Inc. Subadvisors for the Master Portfolios: SSgA Funds Management and Wells Capital Management Category: Target Date FUND STRATEGY The target date represents the year in which investors may likely begin withdrawing assets. The Funds gradually seek to reduce market risk as the target date approaches and after it arrives by decreasing equity exposure and increasing fixed-income exposure. The principal value is not guaranteed at any time, including at the target date. Each Fund follows an asset allocation strategy designed to approximate, before fees and expenses, the total return of a Dow Jones Target Date Index with the same target year as the Fund. To increase the probability of capital preservation as retirement nears, each Fund targets a risk level that becomes more conservative as the target date approaches. The Funds continue to become more conservative for 10 years after the target date. Each Fund implements its asset allocation by investing in three major asset class portfolios (equity, fixed income, and short-term investment). Each Fund s risk target and allocations are updated monthly. The equity and fixed-income asset class portfolios are invested equally across passively managed style, market cap, region, or sector sleeves. PHILOSOPHY AND PROCESS Our research indicates that as investors approach retirement, their mindsets tend to shift toward capital preservation from capital appreciation. By reducing equity exposure as participants approach the retirement date, we hope to reduce the chance of dramatic downside volatility in the years immediately preceding retirement. In retirement, the focus is on preservation of assets with the potential for capital appreciation. We believe that regimented asset allocation with disciplined rebalancing among core asset classes is the largest contributor to portfolio performance, and we use style-pure indexed portfolios to gain exposure to the underlying asset classes. AVERAGE ANNUAL TOTAL RETURNS* (AS OF ) Wells Fargo Advantage Dow Jones Target Today Fund SM Admin 3 Month Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception (3-1-94) 0.39% 7.65% 7.65% 4.38% 4.88% 4.35% 5.53% Dow Jones Target Today Index 0.66% 8.53% 8.53% 5.25% 5.75% 6.21% Lipper Mixed-Asset Target Allocation Conservative Funds Average Wells Fargo Advantage Dow Jones Target 2020 Fund SM Admin 2.99% 9.65% 9.65% 2.54% 3.92% 3.85% 3.86% 11.45% 11.45% 1.17% 4.28% 3.12% 6.85% Dow Jones Target 2020 Index 4.15% 12.42% 12.42% 1.84% 5.02% 5.71% Lipper Mixed-Asset Target 2020 Funds Average 5.57% 12.23% 12.23% -1.01% 2.85% 2.04% Figures quoted represent past performance, which is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Current month-end performance is available at the Funds website, wellsfargo.com/advantagefunds. Administrator Class shares are sold without a front-end sales charge or contingent deferred sales charge. The advisor has committed, through June 30, 2011, to waive fees and/or reimburse expenses to maintain the contractual expense cap at 0.80% for the Target Today Fund and 0.85% for the Target 2020 Fund, including underlying master portfolio fees and expenses but excluding certain other expenses. Without these reductions, the Funds' returns would have been lower. The net expense ratio is 0.80% for the Target Today Fund and 0.85% for the Target 2020 Fund. The gross expense ratio is 1.01% for the Target Today Fund and 0.96% for the Target 2020 Fund. See additional performance information on pages 6 7. Video-enabled edition. This Quarterly Report features four video links to enhanced content. For more information about each module, see page 10. CM (See pages for important information.) 1

2 Asset Allocation Analy sis PORTFOLIO ALLOCATION DISCUSSION GLIDE PATH OVERVIEW With two exceptions, dated Target Date Funds decreased their equity exposure and increased their bond exposure as they progressed down the glide path. The Target 2050 and Target 2045 Funds, which have yet to move down the glide path, increased their equity allocations slightly. The Target Today Fund was rebalanced at the beginning of each month to its minimum constrained equity allocation of 15%. The Funds asset allocations were driven by: The continued progression of the 2010 through 2040 Funds down the glide path, which reduced the equity risk and equity exposure of each of these Funds. The lack of significant changes in either absolute or relative levels of risk for equities and bonds during the quarter, which resulted in relatively small asset allocation shifts in all dated Funds. A decrease in the rolling 36-month correlations between bonds and cash, which increased the diversification benefits of holding bonds and cash in a portfolio containing stocks. This led to a slight increase in the amount of equities that the Target 2045 and Target 2050 Funds were able to hold and still maintain a 90% equity risk profile. PORTFOLIO ALLOCATIONS % of Potential Risk of the Equity Market Fund 2045 Fund 2040 Fund 2035 Fund 2030 Fund 2025 Fund 2020 Fund 2015 Fund 2010 Fund Today Fund Years Until Retirement Years In Retirement Target Today Fund Target 2010 Fund Target 2020 Fund 5% 79% 16% 4% 4% 24% Equities 1.73% Equities 2.65% 46% Equities 4.95% 50% Fixed Income -1.04% 72% Fixed Income -0.94% Fixed Income -0.66% Short-Term 0.00% Short-Term 0.00% Short-Term 0.00% Target 2030 Fund Target 2040 Fund Target 2050 Fund 4% 8% 4% 6% 4% 24% Equities 7.79% Equities 9.54% Equities 9.78% 72% Fixed Income -0.32% 88% Fixed Income -0.11% 90% Fixed Income -0.08% Short-Term 0.00% Short-Term 0.00% Short-Term 0.00% Allocations are subject to change and may have changed since the date specified. Allocations shown are as of the end of the period. to return is based on average allocations over the quarter. 2

3 Portfolio Analysis STOCK PORTFOLIO DISCUSSION The underlying diversified stock portfolio used within each Wells Fargo Advantage Dow Jones Target Date Fund outperformed the blended benchmark of 67% in the Russell 3000 Index and 33% in the MSCI All Country World ex-u.s. Index for the quarter. Within the domestic equity allocation, the portfolio benefited from its overweight to small-cap stocks relative to the Russell 3000 Index. Within the foreign equity allocation, the portfolio s underweight to Europe/Canada generated most of the outperformance as those markets lagged the overall MSCI All Country World ex-u.s. Index for the quarter. AVERAGE ANNUAL TOTAL RETURNS* (AS OF ) Stock Portfolio: Target Date Funds Stock Portfolio: Dow Jones Target Date Indexes 3 Month Year to Date 1 Year 3 Year Since Inception ( ) 10.85% 18.91% 18.91% -0.51% 4.50% 11.04% 19.43% 19.43% -0.52% Blended Stock Benchmark % 15.08% 15.08% -2.90% 1. Blended benchmark is 66.7% Russell 3000 Index and 33.3% MSCI All Country World ex-u.s. Index, rebalanced monthly. STOCK PORTFOLIO ALLOCATION Portfolio Allocation 2 Portfolio Return Blended Stock Benchmark Component Allocation 1 Blended Stock Benchmark Component Return 1 Component Attribution 3 Large-Cap Growth 11.16% 11.55% 22.30% 10.99% -0.03% Large-Cap Value 11.27% 9.47% 20.59% 9.75% 0.00% Mid-Cap Growth 11.03% 13.90% 8.69% 14.01% 0.08% Mid-Cap Value 11.11% 10.49% 9.66% 12.24% -0.16% Small-Cap Growth 11.01% 15.19% 2.78% 17.11% 0.36% Small-Cap Value 11.41% 14.45% 2.65% 15.36% 0.35% Asia/Pacific 11.01% 10.36% 8.06% 10.64% -0.02% Europe/Canada 11.12% 6.26% 17.26% 5.60% 0.35% Emerging Markets 10.88% 7.48% 8.02% 7.34% -0.06% 2. Allocations rebalanced back to 11.11% at the beginning of each month. 3. Component Attribution = (Portfolio Component Over/Underweight) (Blended Stock Benchmark Component Return Blended Stock 3 Benchmark Return) + Portfolio Component Weight (Portfolio Component Return Blended Stock Benchmark Component Return). (See pages for important information.) 3

4 Portfolio Analysis FIXED-INCOME PORTFOLIO DISCUSSION The underlying fixed-income portfolio used within each Target Date Fund underperformed the blended benchmark of 75% in the Barclays Capital U.S. Aggregate Bond Index and 25% in the Barclays Capital Global Aggregate ex-u.s. Dollar Bond Index. The portfolio s slight underweight to mortgage-backed securities, the best-performing domestic fixed-income asset class, hurt performance. A significant overweight to corporate bonds also detracted. Internationally, the portfolio s lack of exposure to foreign corporate bonds hurt performance relative to the Barclays Capital Global Aggregate ex-u.s. Dollar Bond Index. FIXED-INCOME PORTFOLIO ALLOCATION AVERAGE ANNUAL TOTAL RETURNS* (AS OF ) 3 Month Year to Date 1 Year 3 Year Since Inception ( ) Fixed-Income Portfolio: Target Date Funds -1.31% 6.51% 6.51% 6.23% 7.00% Fixed-Income Portfolio: Dow Jones Target Date Indexes -1.19% 6.81% 6.81% 6.68% Blended Fixed-Income 4 Benchmark -1.26% 6.24% 6.24% 5.91% 4. Blended benchmark is composed of 75% in the Barclays Capital U.S. Aggregate Bond Index and 25% in the Barclays Capital Global Aggregate ex-u.s. Dollar Bond Index, rebalanced monthly. Portfolio Allocation 5 Blended Fixed-Income Benchmark Allocation 4 Component Over/ Underweight U.S. Government 24.63% 34.29% -9.66% U.S. Corporate 24.66% 14.09% 10.57% U.S. Mortgage 25.00% 26.62% -1.62% Foreign Bond 25.71% 25.00% 0.71% 5. Allocations rebalanced back to 25% at the beginning of each month. SHORT-TERM INVESTMENT PORTFOLIO DISCUSSION The end of 2010 looked a lot like the end of 2009, with the Federal Reserve effectively maintaining a zero interest-rate policy; a somewhat shaky credit environment; a declining supply of moneyfund-eligible investments; a host of new regulations on the horizon; and a sluggish economy in Europe and the United States. With little change in interest rates, credit risk, and the investment outlook, the managers made no significant changes to the short-term investment portfolio. The team continued to emphasize the purchase of highly liquid, high-quality names maturing in one to three months and continued to hold a high degree of liquidity. The managers believe that this strategy gives them the flexibility to respond to rapidly changing market conditions in a short period of time as well as helps them maintain a commitment to preservation of principal and liquidity. AVERAGE ANNUAL TOTAL RETURNS* (AS OF ) Short-Term Investment Portfolio: Target Date Funds Barclays Capital 1 3 Month Treasury Bill Index 3 Month Year to Date 1 Year 3 Year Since Inception ( ) 0.00% 0.00% 0.00% 0.92% 2.34% 0.04% 0.13% 0.13% 0.68% (See pages for important information.) 4

5 Portfolio Information EQUITY PORTFOLIO TOP HOLDINGS Stock % of Net Assets Apple, Inc. 0.82% Exxon Mobil Corp. 0.82% Microsoft Corp. 0.59% International Business Machines Corp. 0.51% Procter & Gamble Co. 0.50% General Electric Co. 0.43% Google, Inc., Class A 0.41% Chevron Corp. 0.40% AT&T, Inc. 0.39% Johnson & Johnson 0.38% PORTFOLIO CHARACTERISTICS Equity Portfolio Russell 3000 Index Weighted Average Market Cap $34.98B $71.73B Weighted Median Market Cap $7.95B $30.12B EPS Growth (3- to 5-year forecast) 11.45% 10.24% P/E Ratio (trailing 12-month) 15.86x 16.03x P/B Ratio 1.91x 2.19x P/S Ratio 1.13x 1.29x Number of Equity Holdings 4,652 2,952 FIXED-INCOME PORTFOLIO PORTFOLIO CHARACTERISTICS Fixed-Income Portfolio Barclays Capital U.S. Aggregate Bond Index Duration 5.66 years 4.98 years Average Maturity 7.84 years 7.08 years Sector Weights U.S. Government 24.63% 45.72% U.S. Corporate 24.66% 18.79% U.S. Mortgage 25.00% 35.49% Foreign Bond 25.71% 0.00% Credit Quality Allocation 6 AAA/Aaa 59.42% 77.74% AA/Aa 20.24% 4.47% A/A 11.30% 9.74% BBB/Baa 9.04% 8.05% BB/Ba 0.00% Other 0.00% 6. The ratings indicated are from Standard & Poor's, Fitch, and/or Moody's Investors Service. If a security was rated by all three rating agencies, the median rating was used. If a security was rated by two of the three rating agencies, the lower rating was used. If a security was rated by one of the rating agencies, that rating was used. Portfolio holdings, characteristics, sector weights, and allocations are subject to change and may have changed since the date specified. 5

6 Fund Performance AVERAGE ANNUAL TOTAL RETURNS* (AS OF ) 3 Month Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception Wells Fargo Advantage Dow Jones Target Today Fund SM Admin 0.39% 7.65% 7.65% 4.38% 4.88% 4.35% 5.53% ( ) Dow Jones Target Today Index 0.66% 8.53% 8.53% 5.25% 5.75% 6.21% Lipper Mixed-Asset Target Allocation Conservative Funds Average 2.99% 9.65% 9.65% 2.54% 3.92% 3.85% Wells Fargo Advantage Dow Jones Target 2010 Fund SM Admin 1.39% 8.80% 8.80% 2.91% 4.56% 3.76% 6.43% ( ) Dow Jones Target 2010 Index 1.64% 9.71% 9.71% 3.75% 5.36% 5.82% Lipper Mixed-Asset Target 2010 Funds Average 4.07% 10.69% 10.69% 0.51% 3.76% 3.43% Wells Fargo Advantage Dow Jones Target 2015 Fund SM Admin 2.53% 9.97% 9.97% 2.05% 2.58% ( ) Dow Jones Target 2015 Index 2.76% 10.94% 10.94% 2.75% Lipper Mixed-Asset Target 2015 Funds Average 5.04% 11.29% 11.29% -0.52% 2.91% 2.00% Wells Fargo Advantage Dow Jones Target 2020 Fund SM Admin 3.86% 11.45% 11.45% 1.17% 4.28% 3.12% 6.85% ( ) Dow Jones Target 2020 Index 4.15% 12.42% 12.42% 1.84% 5.02% 5.71% Lipper Mixed-Asset Target 2020 Funds Average 5.57% 12.23% 12.23% -1.01% 2.85% 2.04% Wells Fargo Advantage Dow Jones Target 2025 Fund SM Admin 5.58% 13.11% 13.11% 0.81% 0.76% ( ) Dow Jones Target 2025 Index 5.83% 14.12% 14.12% 1.18% Lipper Mixed-Asset Target 2025 Funds Average 7.44% 13.41% 13.41% -1.15% 2.75% Wells Fargo Advantage Dow Jones Target 2030 Fund SM Admin 7.12% 14.60% 14.60% 0.06% 4.05% 2.79% 7.26% ( ) Dow Jones Target 2030 Index 7.40% 15.67% 15.67% 0.61% 4.94% 5.75% Lipper Mixed-Asset Target 2030 Funds Average 7.59% 13.65% 13.65% -2.12% 2.50% 2.26% Wells Fargo Advantage Dow Jones Target 2035 Fund SM Admin 8.40% 15.79% 15.79% -0.15% -0.41% ( ) Dow Jones Target 2035 Index 8.67% 16.89% 16.89% 0.20% Lipper Mixed-Asset Target 2035 Funds Average 8.90% 14.41% 14.41% -2.00% 2.35% The advisor has committed, through June 30, 2011, to waive fees and/or reimburse expenses to maintain the contractual expense cap at 0.80% for the Target Today Fund, 0.83% for the Target 2010 Fund, 0.84% for the Target 2015 Fund, 0.85% for the Target 2020 Fund, 0.85% for the Target 2025 Fund, 0.86% for the Target 2030 Fund, and 0.87% for the Target 2035 Fund, including underlying master portfolio fees and expenses but excluding certain other expenses. Without these reductions, the Funds' returns would have been lower. The net expense ratio is 0.80% for the Target Today Fund, 0.83% for the Target 2010 Fund, 0.84% for the Target 2015 Fund, 0.85% for the Target 2020 Fund, 0.85% for the Target 2025 Fund, 0.86% for the Target 2030 Fund, and 0.87% for the Target 2035 Fund. The gross expense ratio is 1.01% for the Target Today Fund, 0.98% for the Target 2010 Fund, 1.03% for the Target 2015 Fund, 0.96% for the Target 2020 Fund, 1.01% for the Target 2025 Fund, 0.98% for the Target 2030 Fund, and 1.06% for the Target 2035 Fund. (Continued on next page.) 6

7 Fund Performance AVERAGE ANNUAL TOTAL RETURNS* CONTINUED (AS OF ) 3 Month Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception Wells Fargo Advantage Dow Jones Target 2040 Fund SM Admin 9.19% 16.60% 16.60% -0.45% 4.08% 2.51% 7.62% ( ) Dow Jones Target 2040 Index 9.49% 17.67% 17.67% 0.04% 4.84% 5.83% Lipper Mixed-Asset Target 2040 Funds Average 8.60% 14.39% 14.39% -2.56% 2.32% 1.97% Wells Fargo Advantage Dow Jones Target 2045 Fund SM Admin 9.53% 16.74% 16.74% -0.04% -0.4% ( ) Dow Jones Target 2045 Index 9.77% 17.95% 17.95% 0.11% Lipper Mixed-Asset Target 2045 Funds Average 9.39% 14.67% 14.67% -2.29% 2.12% Wells Fargo Advantage Dow Jones Target 2050 Fund SM Admin 9.52% 16.93% 16.93% -0.15% -0.49% ( ) Dow Jones Target 2050 Index 9.77% 17.95% 17.95% 0.11% Lipper Mixed-Asset Target Funds Average 8.89% 14.50% 14.50% -2.79% 1.67% The advisor has committed, through June 30, 2011, to waive fees and/or reimburse expenses to maintain the contractual expense cap at 0.87% for the Target 2040 Fund, 0.87% for the Target 2045 Fund, and 0.87% for the Target 2050 Fund, including underlying master portfolio fees and expenses but excluding certain other expenses. Without these reductions, the Funds' returns would have been lower. The net expense ratio is 0.87% for the Target 2040 Fund, 0.87% for the Target 2045 Fund, and 0.87% for the Target 2050 Fund. The gross expense ratio is 0.99% for the Target 2040 Fund, 1.22% for the Target 2045 Fund, and 1.03% for the Target 2050 Fund. (See pages for important information.) 7

8 Fund Fee Table SHARE CLASS AVAILABILITY Investor Class Class A* Class B* Class C Admin Class Inst Class Wells Fargo Advantage Dow Jones Target Today Fund SM WFBTX STWRX WFOKX WFODX WFLOX WOTDX Gross expense ratio 1.23% 1.17% 1.92% 1.92% 1.01% 0.72% Net expense ratio 0.86% 0.96% 1.71% 1.71% 0.80% 0.45% Contractual cap expense ratio 0.86% 0.96% 1.71% 1.71% 0.80% 0.45% Contractual cap waiver date Wells Fargo Advantage Dow Jones Target 2010 Fund SM WFCTX STNRX SPTBX WFOCX WFLGX WFOAX Gross expense ratio 1.21% 1.14% 1.90% 1.89% 0.98% 0.71% Net expense ratio 0.89% 0.99% 1.74% 1.74% 0.83% 0.48% Contractual cap expense ratio 0.89% 0.99% 1.74% 1.74% 0.83% 0.48% Contractual cap waiver date Wells Fargo Advantage Dow Jones Target 2015 Fund SM WFQEX WFFFX WFSCX Gross expense ratio 1.27% 1.03% 0.72% Net expense ratio 0.90% 0.84% 0.49% Contractual cap expense ratio 0.90% 0.84% 0.49% Contractual cap waiver date Wells Fargo Advantage Dow Jones Target 2020 Fund SM WFDTX STTRX STPBX WFLAX WFLPX WFOBX Gross expense ratio 1.19% 1.13% 1.88% 1.88% 0.96% 0.69% Net expense ratio 0.91% 1.01% 1.76% 1.76% 0.85% 0.50% Contractual cap expense ratio 0.91% 1.01% 1.76% 1.76% 0.85% 0.50% Contractual cap waiver date Wells Fargo Advantage Dow Jones Target 2025 Fund SM WFGYX WFTRX WFTYX Gross expense ratio 1.24% 1.01% 0.66% Net expense ratio 0.91% 0.85% 0.50% Contractual cap expense ratio 0.91% 0.85% 0.50% Contractual cap waiver date Wells Fargo Advantage Dow Jones Target 2030 Fund SM WFETX STHRX SGPBX WFDMX WFLIX WFOOX Gross expense ratio 1.20% 1.14% 1.90% 1.89% 0.98% 0.71% Net expense ratio 0.92% 1.02% 1.77% 1.77% 0.86% 0.51% Contractual cap expense ratio 0.92% 1.02% 1.77% 1.77% 0.86% 0.51% Contractual cap waiver date (Continued on next page.) 8

9 Fund Fee Table SHARE CLASS AVAILABILITY (CONTINUED) Investor Class Class A* Class B* Class C Admin Class Inst Class Wells Fargo Advantage Dow Jones Target 2035 Fund SM WFQTX WFQWX WFQRX Gross expense ratio 1.29% 1.06% 0.75% Net expense ratio 0.93% 0.87% 0.52% Contractual cap expense ratio 0.93% 0.87% 0.52% Contractual cap waiver date Wells Fargo Advantage Dow Jones Target 2040 Fund SM WFFTX STFRX SLPBX WFOFX WFLWX WFOSX Gross expense ratio 1.22% 1.16% 1.91% 1.91% 0.99% 0.72% Net expense ratio 0.93% 1.03% 1.78% 1.78% 0.87% 0.52% Contractual cap expense ratio 0.93% 1.03% 1.78% 1.78% 0.87% 0.52% Contractual cap waiver date Wells Fargo Advantage Dow Jones Target 2045 Fund SM WFQSX WFQYX WFQPX Gross expense ratio 1.46% 1.22% 0.95% Net expense ratio 0.93% 0.87% 0.52% Contractual cap expense ratio 0.93% 0.87% 0.52% Contractual cap waiver date Wells Fargo Advantage Dow Jones Target 2050 Fund SM WFQGX WFQDX WFQFX Gross expense ratio 1.23% 1.03% 0.71% Net expense ratio 0.93% 0.87% 0.52% Contractual cap expense ratio 0.93% 0.87% 0.52% Contractual cap waiver date The advisor has committed to waive fees and/or reimburse expenses to maintain the Funds' contractual expense cap ratios as shown, including underlying master portfolio fees and expenses but excluding certain other expenses. Please consult the prospectus for additional information on applicable sales charges and expenses for the available share classes. *Class A and Class B shares are closed to new investors and additional investments from existing shareholders. 9

10 Video and audio resources: This Quarterly Report features video links to learn more about key aspects of the. See below for a brief description of each video, featuring James P. Lauder, CEO of Global Index Advisors. 1. People Learn more about the portfolio management team at Global Index Advisors (GIA), along with all of the other talented professionals involved in managing the Wells Fargo Advantage Dow Jones Target Date Funds. 2. Philosophy Learn more about the investment philosophy associated with the Wells Fargo Advantage Dow Jones Target Date Funds, including: the team s focus on helping investors reach retirement readiness; the construction of the Funds glide path; and why the team features style-pure investments to offer consistent asset allocation representation. 3. Process Learn more about the investment process of the Wells Fargo Advantage Dow Jones Target Date Funds, including how modern portfolio theory, along with the glide path, helps manage risk and hear more details on Composite Major Asset Class grouping and glide path construction. 4. Key Differentiators Learn more about what makes the different from other target date funds, including: the team's commitment to develop and use a transparent and repeatable process; how a conservative glide path and diverse asset allocation manage downside risk; and use of a style-pure, conservative, and objective investment process. Index Definitions: The Lipper Averages are compiled by Lipper, Inc., an independent mutual fund research and rating service. Each Lipper Average represents a universe of funds that are similar in investment objective. You cannot invest directly in a Lipper Average. The Dow Jones Target Date Indexes (each an Index or collectively the Indexes ) are a series of indexes designed as benchmarks for multi-asset class portfolios with risk profiles that become more conservative over time. The index weightings among the major asset classes are adjusted monthly based on a published set of index rules. The indexes with longer time horizons have higher allocations to equity securities, while the indexes with shorter time horizons replace some of their stock allocations with allocations to fixed-income securities and money market instruments. The index returns reflect hypothetical back-tested performance. The Barclays Capital U.S. Aggregate Bond Index includes bonds from the Treasury, governmentrelated, corporate, agency, mortgage-backed securities, and asset-backed securities sectors. The Barclays Capital Global Aggregate ex-u.s. Dollar Bond Index tracks an international basket of government, corporate, agency, and mortgage-related bonds. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The MSCI All Country World ex-u.s. Index is designed to measure the equity market performance of developed and emerging markets, excluding the United States. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. The Barclays Capital 1 3 Month Treasury Bill Index includes all publicly issued zero-coupon U.S. Treasury bills that have a remaining maturity of less than three months and more than one month, are rated investment grade and have $250 million or more of outstanding face value. You cannot invest directly in an index. Users with a printed version of this report can view any or all of the modules listed above by opening a web browser and entering the following text into the browser's address bar: wellsfargoadvantagefunds.com/video_lauder 10

11 Risks: 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. 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 active trading risk, foreign investment risk, mortgage- and asset-backed securities risk, smaller-company investment risk, and allocation methodology risk (risk that the allocation methodology of the Dow Jones Target Date Index with total returns the Fund seeks to approximate, before fees and expenses will not meet an investor s goals). Consult the Fund's prospectus for additional information on these and other risks. Credit Quality Ratings: Credit quality ratings apply to underlying holdings of the Fund and not the Fund itself. Standard & Poor's and Fitch rate the creditworthiness of bonds ranging from AAA (highest) to D (lowest). Standard & Poor's rates the creditworthiness of shortterm notes ranging from SP-1 (highest) to SP-3 (lowest). Ratings from A to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories. Moody s rates the creditworthiness of bonds ranging from Aaa (highest) to CC (lowest). Ratings Aa to B may be modified by the addition of a number 1 (highest) to 3 (lowest) to show relative standing within the rating categories. Diversification and asset allocation do not assure or guarantee better performance and cannot eliminate the risk of investment losses. The Dow Jones Target Date Indexes are a product of Dow Jones Indexes, a licensed trademark of CME Group Index Services LLC ( CME ). Dow Jones and Dow Jones Target Date Indexes are service marks of Dow Jones Trademark Holdings, LLC, and have been licensed for use for certain purposes by CME and sublicensed for use by Global Index Advisors, Inc, and Wells Fargo Funds Management, LLC. The Dow Jones Target Date Indexes are based in part on the Barclays Capital Bond Indexes, which are published by Barclays Capital Inc. The, based on the Dow Jones Target Date Indexes, are not sponsored, endorsed, sold, or promoted by Dow Jones, CME, or Barclays Capital or any of their respective affiliates, and neither Dow Jones, CME, nor Barclays Capital, nor any of their respective affiliates, makes any representation regarding the advisability of investing in such product(s) and/or about the quality, accuracy, and/or completeness of the Dow Jones Target Date Indexes or the Barclays Capital Bond Indexes. IN NO EVENT SHALL DOW JONES, CME, BARCLAYS CAPITAL, OR ANY OF THEIR LICENSORS HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. The views expressed in this document are as of December 31, 2010, and are those of the portfolio manager(s) and Wells Fargo Funds Management, LLC. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any Wells Fargo Advantage Fund. Any specific securities discussed may or may not be current or future holdings of the Fund. The securities discussed should not be considered recommendations to purchase or sell a particular security. Administrator Class shares for the Target Today, Target 2010, Target 2020, Target 2030, and Target 2040 Funds incepted on November 8, Performance shown prior to the inception of the Administrator Class shares reflects the performance of the Class A shares and includes expenses that are not applicable to and are higher than those of the Administrator Class shares but does not include Class A sales charges. If it did include Class A sales charges, returns would be lower. Carefully consider a fund s investment objectives, risks, charges, and expenses before investing. For a current prospectus, containing this and other information, visit wellsfargo.com/advantagefunds. 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 CM