Opportunities in Multifamily Private Real Estate

WEEKLY GUIDANCE FROM OUR I NVESTMENT STRATEGY COMMITTEE James Sweetman Senior Global Alternative Investment Strategist Yegin Chen Global Alternative Investment Strategist Asset Group Overviews Equities... 5 Fixed Income... 6 Real Assets... 7 Alternative Investments... 8 Opportunities in Multifamily Private Real Estate January 28, 2019 Key takeaways» Private real estate funds feature a variety of strategies with differing risk and return profiles. At this point in the cycle, we are most constructive toward value-add and opportunistic strategies investing in multifamily residential real estate.» We expect well-located and stable multifamily real estate to benefit from several key trends stemming from the growing demand for multifamily (rental) housing across three key constituents Millennials, seniors, and U.S. immigrants. What it may mean for investors» We favor firms and funds with experienced teams that can perform sophisticated economic and real estate analyses, secure attractive financing, and drive the assetlevel improvements that are needed to boost investment value. We also favor market participants that are well positioned to capitalize upon the current environment and multifamily opportunities as they arise. As we approach the latter stages of the current cycle, it is important to assess where real estate opportunities still exist. Headwinds facing private real estate strategies include rising rates, increasing costs, overbuilding, and regulation. Nevertheless, we believe that value-add and opportunistic real estate strategies capitalizing on long-term demographic trends offer compelling opportunities over the next three to five years. 1 In particular, we expect that the value-add multifamily real estate market is poised to deliver attractive opportunities. We believe that investing in well-located and stable multifamily assets can offer strong risk-adjusted return potential (typically, for class B/workforce housing in desirable locations). This segment does not compete with Class A properties, properties that are generally new properties with a physical age of less than 10 years (a market facing some overbuilding and overheating). With U.S. median household incomes at approximately $60,000, the bulk of demand for new housing is likely to be within workforce housing, making the value-add, multifamily real estate strategy a compelling investment opportunity. 2 (Multifamily real estate involves investing in buildings particularly apartment buildings with separate units that are rented by different households.) 1 Value-add real estate investors seek capital appreciation through improved real estate, along with income (such as rental income). Opportunistic real estate strategies are higher-risk, higher potential return investments (with returns primarily from capital appreciation). Opportunistic real estate investors acquire assets requiring significant improvement (or investment), typically with lower occupancy rates than core real estate or valueadd investments. Please see the end of this report for the risks associated with these strategies. 2 Federal Reserve Bank of St. Louis, September 12, 2018. Data is household income as of 2017. 2019 Wells Fargo Investment Institute. All rights reserved. Page 1 of 10

Opportunities in Multifamily Private Real Estate Historically low homeownership rates U.S. homeownership rates are historically low. Chart 1 shows that homeownership rates in the third quarter had declined by 5% from the 2004 highs, to 64.4%. Additionally, U.S. homeownership in the western and northeastern regions was even lower, likely due to stable (or growing) populations and limited affordability. Chart 1. Homeownership rates have been declining since 2004 across the U.S. and all its regions 75 73 71 69 67 Percent 65 63 61 59 57 55 Source: U.S. Census Bureau, November 28, 2018. U.S. Northeast Midwest South West Q1-1993 Q4-1993 Q3-1994 Q2-1995 Q1-1996 Q4-1996 Q3-1997 Q2-1998 Q1-1999 Q4-1999 Q3-2000 Q2-2001 Q1-2002 Q4-2002 Q3-2003 Q2-2004 Q1-2005 Q4-2005 Q3-2006 Q2-2007 Q1-2008 Q4-2008 Q3-2009 Q2-2010 Q1-2011 Q4-2011 Q3-2012 Q2-2013 Q1-2014 Q4-2014 Q3-2015 Q2-2016 Q1-2017 Q4-2017 Q3-2018 We expect rising interest rates to continue pressuring homeownership rates lower (along with the cost of homes themselves). In contrast, there appears to be growing multifamily housing demand across three key constituents Millennials, seniors, and U.S. immigrants. Millennials o According to a Pew Research survey conducted in 2016, more than 70% of Millennials moved into a rental property that year, as compared to 22% that moved into a home. This is influenced by factors including delayed marriage and childbirth; historically high student debt; and the conveniences of living in a low maintenance, affordable multifamily community with excellent amenities. Seniors o A record number of Baby Boomers are selling their homes and renting for increased accessibility and/or a maintenance free lifestyle. A Freddie Mac survey found that more than five million Baby Boomers expect that they will rent their next home by 2020. 3 Due to improved living standards and medical advances, this generation is living longer, healthier lives than generations before them. 3 Freddie Mac, Over Five Million Baby Boomers Expect to Rent Their Next Home by 2020, June 28, 2016. 2019 Wells Fargo Investment Institute. All rights reserved. Page 2 of 10

Opportunities in Multifamily Private Real Estate U.S. immigrants o Immigration now provides approximately 45% of the U.S. population increase. In a few years, it could represent more than 50% of net new housing demand. 4 Declining rental vacancy rates When homeownership becomes less affordable, we would expect more U.S. citizens to rent. Chart 2 shows that the rental vacancy rate has declined to historically low levels. Chart 2. Low rental vacancy rates indicate solid demand for rental units 12 10 Percent (%) 8 6 4 2 0 Q1-1993 Q1-1994 Q1-1995 Q1-1996 Q1-1997 Q1-1998 Q1-1999 Q1-2000 Q1-2001 Q1-2002 Q1-2003 Q1-2004 Q1-2005 Q1-2006 Q1-2007 Q1-2008 Q1-2009 Q1-2010 Q1-2011 Q1-2012 Q1-2013 Q1-2014 Q1-2015 Q1-2016 Q1-2017 Q1-2018 Source: U.S. Census Bureau, November 27, 2018. The typical qualities of class B multifamily units clean, modern, and affordable are highly coveted by many renters. When real estate demand outstrips supply, the results typically are higher rents, occupancy, and net operating income (NOI). Modest new supply New supply remains muted. As Chart 3 shows, new, completed residential housing units are down 25-35% from the monthly levels seen in the 2000-2007 time frame and below the 25-year U.S. monthly mean. 4 The Counselors of Real Estate, Housing Demand and Immigration Trends, July 31, 2018. 2019 Wells Fargo Investment Institute. All rights reserved. Page 3 of 10

Opportunities in Multifamily Private Real Estate Chart 3. Muted new housing completions suggest tight supply Monthly, housing units completed (000) 200 180 160 140 120 100 80 60 40 20 0 Jan-93 Mar-94 May-95 Jul-96 Sep-97 Nov-98 Jan-00 Mar-01 May-02 Jul-03 Sep-04 Nov-05 Jan-07 Mar-08 May-09 Jul-10 Sep-11 Nov-12 Jan-14 Mar-15 May-16 Jul-17 Sep-18 Source: U.S. Census Bureau, November 27, 2018. The supply of affordable multifamily housing has become increasingly sparse, due to high building costs; the proclivity of developers to build Class A housing; and tighter bank lending standards. This likely will continue to put upward pressure on multifamily rents and occupancy where new construction is not projected to keep up with growing demand. Investment implications While recent private real estate trends have offered positive returns, the next several years likely will see higher interest and capitalization (cap) rates, 5 along with lower returns, driven by slowing income growth, pockets of illiquidity and distress, and reduced capital flows into U.S. real estate. Given the solid appreciation in core real estate values nationwide and the anticipated slowdown of that appreciation, we are more favorable toward U.S. value-add and opportunistic real estate strategies today (than core real estate). Both of these strategies can benefit from active management, including needed capital expenditures; asset management; and other measures to improve an asset s net operating income (NOI*). Real estate holdings purchased by value-add and opportunistic investors generally have greater NOI improvement potential, and they are more likely (than other real estate assets) to be acquired for attractive cap rates during market corrections or dislocation. In particular, we favor firms and funds with experienced teams that are able to perform deep real estate analyses, secure attractive financing, and drive the asset-level improvements. We also favor firms (and funds) that can capitalize upon the current environment and multifamily opportunities as they arise. 5 Capitalization rate (cap rate) is define as the net operating income (NOI) of a property divided by its market value. Similar to bond yields, when the denominator, or the market value goes up, the yield or the cap rate goes down. 2019 Wells Fargo Investment Institute. All rights reserved. Page 4 of 10

EQUITIES Scott Wren, Senior Global Equity Strategist Ken Johnson, CFA, Investment Strategy Analyst U.S. Large Cap Equities U.S. Mid Cap Equities Neutral U.S. Small Cap Equities Neutral Developed Market Ex-U.S. Equities Most Emerging Market Equities What are potentially the best U.S. equity sector values in 2019? During periods of volatility following significant equity downturns, it is important to reassess which sectors might look attractive relative to their forward-looking fundamentals. Our macroeconomic outlook calls for good U.S. and global gross domestic product (GDP) growth and modest inflation in 2019. That typically is a good environment for stocks. Therefore, given the pullback in recent months, we wanted to review and analyze the 11 S&P 500 sectors to assess where we believe the best potential places to put sidelined funds to work (or adjust sector weightings, if needed). How do we identify which S&P 500 sectors we believe offer the best current values? As discussed in the Equity Sector Insights in a Changing Market Landscape report, we use three value characteristics to help us determine where the best relative values might currently reside. 6 Our year-end target S&P 500 Index midpoint of 2800 and our $173 earnings estimate for 2019 suggest a 12-month trailing price/earnings (P/E) ratio of 16.2x as 2019 comes to a close. Based on the S&P 500 level at the time of this writing, the market is trading at 15.2x this year s earnings estimate. So, which sectors look cheap? We use a composite sector value indicator, based on three value characteristics, that ranks sectors from most favorable to least favorable (see chart). For example, Financials have the best composite value ranking. The sector s trailing P/E of 11.9x and price-to-free-cash flow (price/fcf) ratio (9.0) are both the lowest relative to the other 10 S&P 500 sectors. In addition, this sector s forecast total yield is highest among the 11 sectors. Other sectors showing strong value composite scores include Information Technology and Industrials. Key takeaways» We see compelling value in the Financials, Information Technology, and Industrials sectors.» We have a most favorable view on Financials and Industrials and a favorable view on Information Technology. S&P 500 sector Value Pillar with three metrics illustrated 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Trailing P/E Price/FCF Forecast Total Yield 11.9 9.0 21.4 23.1 21.2 21.8 17.6 17.9 17.9 18.7 19.2 19.6 19.5 19.9 16.5 5.1 3.9 3.9 4.6 1.1 0.1 1.4 24.2 20.9 3.2 23.3 19.6 33.4 25.2 1.7 2.0 Sources: Wells Fargo Investment Institute, FactSet, January 23, 2019. ** Utilities have negative free cash flow. ***Materials have a negative forecast total yield. Forecasts are based on certain assumptions and on views of market and economic conditions which are subject to change. For illustrative purposes only. The Trailing Price to Earnings (P/E) ratio is based on the trailing 12-month as reported earnings. The Price/Cash flow ratio (P/CF ratio) is a ratio used to compare a company's market value to its cash flow. Forecast yield is a valuation indicator that measures the combined total of the forecasted dividend yield plus the buyback yield. 6 Wells Fargo Investment Institute, Equity Sector Insights in a Changing Market Landscape, December 20, 2018. 2019 Wells Fargo Investment Institute. All rights reserved. Page 5 of 10

FIXED INCOME Brian Rehling, CFA Co-Head of Global Fixed Income Strategy U.S. Taxable Investment Grade Fixed Income U.S. Short-Term Taxable Fixed Income U.S. Intermediate Term Taxable Fixed Income U.S. Long-Term Taxable Fixed Income High Yield Taxable Fixed Income Developed Market Ex.-U.S. Fixed Income Stressing preferred stock Investors often focus on the risk that higher yields pose for preferred securities, given the perpetual nature of many of these securities. While significantly higher yields can impact preferred security prices, we believe that the far greater risk has been credit and illiquidity risk. These risks were highlighted in the recent market sell-off that impacted both equities and the preferred sector, despite Treasury yields that declined throughout the sell-off. We remain favorable on the preferred sector for investors that are focused on income generation. Yet, this sector is susceptible to additional price declines if selling emerges again for equities and other riskier asset classes. For the majority of investors, the main attraction in owning preferred securities should be income generation, rather than price appreciation. A total return view of the preferred sector shows that over the past five years, the average annual return of the S&P U.S Preferred Stock Index was 5.23% (through January 22, 2019), albeit with periods of significant volatility. A deeper look at index performance shows that the value of the S&P U.S. Preferred Stock Index is lower today than it was five years ago. This suggests that the positive returns investors experienced over that time period were primarily the result of income generation. Investors should expect preferred securities to be one of the more volatile fixed-income classes. In our opinion, this volatility needs to be accepted as a trade-off for the higher yield potential that historically has characterized the sector. We strongly believe that investors should consider a professional manager to oversee their preferred allocations. Key takeaways» Given the higher volatility of the preferred sector, we believe that exposure should be diversified among a variety of issuers, sectors and structures.» Investors should not purchase allocations in the preferred sector without a full understanding of the sector s risks.» We currently have a favorable view of the preferred-security sector. S&P Preferred Stock Index 855 835 815 795 Index value 775 755 Emerging Market Fixed Income 735 715 695 675 1/22/2014 1/22/2015 1/22/2016 1/22/2017 1/22/2018 1/22/2019 Sources: Bloomberg, January 23, 2019. Past performance is not a guarantee of future results. No investment should be purchased on the basis of yield alone. Before investing, you should be aware of, and understand, all risks associated with a particular security or investment vehicle. Please see the end of this report for the risks associated with preferred securities. For illustrative purposes only. An index is unmanaged and is not available for direct investment. 2019 Wells Fargo Investment Institute. All rights reserved. Page 6 of 10

REAL ASSETS Austin Pickle, CFA Investment Strategy Analyst I always prefer to believe the best of everybody it saves so much trouble. --Rudyard Kipling Commodities Private Real Estate Public Real Estate Erratic weather leads to volatile natural-gas prices Last week saw record-breaking low temperatures across much of the northeastern United States. This week, we thought it fitting to discuss the commodity most impacted by weather natural gas. What may surprise some is just how tight the relationship between temperature and natural gas inventories can be. We illustrate this connection in the chart below, which plots the two-week change in inventories on the vertical axis and the two-week total degree days on the horizontal axis. Degree days measure how current temperatures compare to a standard temperature (usually 65 degrees Fahrenheit). High or low temperatures (greater degree days) cause natural-gas demand to rise and inventories to drop. Notice the R 2. R 2, for those readers who are not statisticians, essentially measures how close the data points (blue dots) are to the regression line (black line). A 0.96 R 2 is considered extremely high (the maximum value is 1). In other words, predicting unexpected short-term changes in inventories (and by extension, prices), is as easy as predicting abnormal weather in advance of everyone else. Which is to say, it isn t. With such an intimate connection to the erratic weather, it should be no surprise that natural-gas prices are consistently more volatile than stocks or even oil. In fact, while all eyes were on the recent equity market meltdown, natural-gas prices quietly surged 80% from September to November, only to then drop 40%. This violent price whipsaw should serve as a cautionary tale to novice natural-gas investors who are not familiar with its potential volatility. Key takeaways» Natural-gas inventories are closely connected to temperatures.» Natural-gas prices tend to be significantly more volatile than stocks or even oil. Natural gas inventories versus total degree days 250 200 R² = 0.9632 150 100 50 0-50 -100-150 -200-250 -300-350 -400-450 -500-550 75 125 175 225 275 325 375 425 475 525 Total degree days (two-week rolling sum) Sources: Bloomberg, U.S. Department of Energy, National Oceanic and Atmospheric Administration, Wells Fargo Investment Institute. Weekly data: July 11, 2002 - January 18, 2019. Change in natural gas inventories (two-week rolling sum) 2019 Wells Fargo Investment Institute. All rights reserved. Page 7 of 10

ALTERNATIVE INVESTMENTS Justin Lenarcic Global Alternative Investment Strategist Neutral Private Equity Neutral Hedge Funds-Macro Neutral Hedge Funds-Event Driven Hedge Funds-Relative Value Hedge Funds-Equity Hedge Alternative investments, such as hedge funds, private equity, private debt and private real estate funds are not suitable for all investors and are only open to accredited or qualified investors within the meaning of U.S. securities laws. The truth about hedge fund redemptions A recent article from Hedge Fund Research, Inc. indicated that investors redeemed approximately $22.5 billion from hedge funds in the fourth quarter. Let s explore how significant $22.5 billion in redemptions really is. While fourth quarter redemptions were the largest seen since the third quarter of 2016, outflows of that magnitude reflect only 0.7% of hedge fund industry capital. Additionally, when looking at cumulative redemptions for 2018, only $34 billion was redeemed, which represents approximately 1% of industry capital. 7 We also can consider that investors redeemed more than $209 billion from U.S. equity mutual funds year to date through November 2018, which represents almost 3% of net assets. 8 Truth be told, the significant move in asset prices experienced in the fourth quarter often warrants large-scale portfolio rebalancing, which is one reason why we expected hedge fund redemptions to be larger than they actually were. The fourth quarter redemptions were in line with the historical average. For this analysis, we often rely on the SS&C GlobeOp Forward Redemption Indicator. 9 As the chart shows, while December redemptions were slightly higher than average, they are by no means emblematic of broad-based investor concern. Key takeaways» While investors hedge fund redemptions in the fourth quarter were the largest since the third quarter of 2016, they were less than 1% of industry assets. We do not believe that they reflect a large scale loss of positive sentiment. Hedge fund redemptions are in line with those of the post-crisis period Percentage redeeming 25 20 15 10 5 0 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16 Mar-17 Aug-17 Jan-18 Jun-18 Nov-18 1 month or less 1-2 months 2-3 months Greater than 3 months Average total Source: SS&C GlobeOp, January 2019. 7 Hedge Fund Research, Inc., Hedge Fund Industry Capital Falls from Record on Investor Outflows, January 18, 2019. 8 Investment Company Institute, December 27, 2018. 9 The SS&C GlobeOp Forward Redemption Indicator represents the sum of forward redemption notices received from investors in hedge funds administered by SS&C GlobeOp on the SS&C GlobeOp platform, divided by the assets under administration at the beginning of the month. 2019 Wells Fargo Investment Institute. All rights reserved. Page 8 of 10

Risk Considerations Each asset class has its own risk and return characteristics. The level of risk associated with a particular investment or asset class generally correlates with the level of return the investment or asset class might achieve. Stock markets, especially foreign markets, are volatile. Stock values may fluctuate in response to general economic and market conditions, the prospects of individual companies, and industry sectors. Foreign investing has additional risks including those associated with currency fluctuation, political and economic instability, and different accounting standards. These risks are heightened in emerging markets. Small- and mid-cap stocks are generally more volatile, subject to greater risks and are less liquid than large company stocks. Bonds are subject to market, interest rate, price, credit/default, liquidity, inflation and other risks. Prices tend to be inversely affected by changes in interest rates. High yield (junk) bonds have lower credit ratings and are subject to greater risk of default and greater principal risk. The commodities markets are considered speculative, carry substantial risks, and have experienced periods of extreme volatility. Investing in a volatile and uncertain commodities market may cause a portfolio to rapidly increase or decrease in value which may result in greater share price volatility. Real estate has special risks including the possible illiquidity of underlying properties, credit risk, interest rate fluctuations and the impact of varied economic conditions. Privately offered real estate funds are speculative and involve a high degree of risk. Investments in real estate and real estate investment trusts have special risks, including the possible illiquidity of the underlying properties, credit risk, interest rate fluctuations and the impact of varied economic conditions. There can be no assurance a secondary market will exist and there may be restrictions on transferring interests. There are special risks associated with investing in preferred securities. Preferred securities generally offer no voting rights with respect to the issuer and are normally 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. Sector investing can be more volatile than investments that are broadly diversified over numerous sectors of the economy and will increase a portfolio s vulnerability to any single economic, political, or regulatory development affecting the sector. This can result in greater price volatility. Risks associated with the Consumer Discretionary sector include, among others, apparel price deflation due to low-cost entries, high inventory levels and pressure from e-commerce players; reduction in traditional advertising dollars, increasing household debt levels that could limit consumer appetite for discretionary purchases, declining consumer acceptance of new product introductions, and geopolitical uncertainty that could affect consumer sentiment. Consumer Staples industries can be significantly affected by competitive pricing particularly with respect to the growth of low-cost emerging market production, government regulation, the performance of the overall economy, interest rates, and consumer confidence. The Energy sector may be adversely affected by changes in worldwide energy prices, exploration, production spending, government regulation, and changes in exchange rates, depletion of natural resources, and risks that arise from extreme weather conditions. Investing in the Financial services companies will subject a investment to adverse economic or regulatory occurrences affecting the sector. Some of the risks associated with investment in the Health Care sector include competition on branded products, sales erosion due to cheaper alternatives, research and development risk, government regulations and government approval of products anticipated to enter the market. There is increased risk investing in the Industrials sector. The industries within the sector can be significantly affected by general market and economic conditions, competition, technological innovation, legislation and government regulations, among other things, all of which can significantly affect a portfolio s performance. Materials industries can be significantly affected by the volatility of commodity prices, the exchange rate between foreign currency and the dollar, export/import concerns, worldwide competition, procurement and manufacturing and cost containment issues. Real estate investments have special risks, including possible illiquidity of the underlying properties, credit risk, interest rate fluctuations, and the impact of varied economic conditions. Risks associated with the Technology sector include increased competition from domestic and international companies, unexpected changes in demand, regulatory actions, technical problems with key products, and the departure of key members of management. Technology and Internetrelated stocks smaller, less-seasoned companies, tend to be more volatile than the overall market. The telecommunications (communication services) sector is subject to the risks associated with rising interest rates which could increase debt service costs, competition, increased costs to providers due to potential for large equipment upgrades. Utilities are sensitive to changes in interest rates, and the securities within the sector can be volatile and may underperform in a slow economy. Alternative investments, such as hedge funds, private equity/private debt and private real estate funds, are speculative and involve a high degree of risk that is suitable only for those investors who have the financial sophistication and expertise to evaluate the merits and risks of an investment in a fund and for which the fund does not represent a complete investment program. They entail significant risks that can include losses due to leveraging or other speculative investment practices, lack of liquidity, volatility of returns, restrictions on transferring interests in a fund, potential lack of diversification, absence and/or delay of information regarding valuations and pricing, complex tax structures and delays in tax reporting, less regulation and higher fees than mutual funds. Hedge fund, private equity, private debt and private real estate fund investing involves other material risks including capital loss and the loss of the entire amount invested. A fund's offering documents should be carefully reviewed prior to investing. The value-added strategy seeks to add value by making enhancements to properties. These properties may have operational issues and usually require additional leverage to acquire. There is no guarantee value appreciation will be achieved and the operating company may be forced to sell properties at a lower price than anticipated. An opportunistic investment style bears the highest level of risk among real estate 2019 Wells Fargo Investment Institute. All rights reserved. Page 9 of 10

strategies as it typically involve a significant amount of value creation through the development of underperforming properties in less competitive markets or other properties with unsustainable capital structures. Although these investments have the potential to generate income, there is no guarantee they will do so over their investment time periods. In addition, private real estate is considered illiquid, there is no assurance a secondary market will exist and there may be restrictions on transferring interests. Since the opportunistic properties have little to no cash flows at time of acquisition, higher leverage is often employed and sponsors may be subject to less favorable debt terms and higher interest rates than more stabilized properties. All investments may be negatively impacted by varied economic and market condition which may be unpredictable. Hedge fund strategies, such as Equity Hedge, Event Driven, Macro and Relative Value, may expose investors to the risks associated with the use of short selling, leverage, derivatives and arbitrage methodologies. Short sales involve leverage and theoretically unlimited loss potential since the market price of securities sold short may continuously increase. The use of leverage in a portfolio varies by strategy. Leverage can significantly increase return potential but create greater risk of loss. Derivatives generally have implied leverage which can magnify volatility and may entail other risks such as market, interest rate, credit, counterparty and management risks. Arbitrage strategies expose a fund to the risk that the anticipated arbitrage opportunities will not develop as anticipated, resulting in potentially reduced returns or losses to the fund. Definitions An index is unmanaged and not available for direct investment. S&P 500 Index is a market capitalization-weighted index composed of 500 widely held common stocks that is generally considered representative of the US stock market. S&P Preferred Stock Index measures the performance of preferred stocks listed in U.S. with a market capitalization over $100 million. General Disclosures Global Investment Strategy (GIS) is a division of Wells Fargo Investment Institute, Inc. (WFII). WFII is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company. The information in this report was prepared by Global Investment Strategy. Opinions represent GIS opinion as of the date of this report and are for general information 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. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. 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 your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Wells Fargo Advisors is registered with the U.S. Securities and 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 Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company. CAR 0119-04509 2019 Wells Fargo Investment Institute. All rights reserved. Page 10 of 10