Edgar Filing: WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND

Form N-CSRS

LOGO

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-21269

Wells Fargo Advantage Income Opportunities Fund

(Exact name of registrant as specified in charter)

525 Market St., San Francisco, CA 94105

(Address of principal executive offices) (Zip code)

C. David Messman

Wells Fargo Funds Management, LLC

525 Market St., San Francisco, CA 94105

(Name and address of agent for service)

Registrant’s telephone number, including area code: 800-222-8222

Date of fiscal year end: April 30

Date of reporting period: October 31, 2013

ITEM 1. REPORT TO STOCKHOLDERS

LOGO

Wells Fargo Advantage

Income Opportunities Fund

LOGO

Semi-Annual Report

October 31, 2013

LOGO

This closed-end fund is no longer offered as an initial public offering and is only offered through broker/ dealers on the secondary market. A closed-end fund is not required to buy its shares back from investors upon request.

Reduce clutter. Save trees.

Contents


Letter to shareholders			2

Performance highlights			4

Portfolio of investments			7

Financial statements
Statement of assets and liabilities			19
Statement of operations			20
Statement of changes in net assets			21
Statement of cash flows			22
Financial highlights			23

Notes to financial statements			24

Other information			28

Automatic dividend reinvestment plan			31

List of abbreviations			32

The views expressed and any forward-looking statements are as of October 31, 2013, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Funds Management, LLC. Discussions of individual securities, or the markets generally, or any Wells Fargo Advantage Fund are not intended as individual recommendations. Future events or results may vary significantly from those expressed in any forward-looking statements; the views expressed are subject to change at any time in response to changing circumstances in the market. Wells Fargo Funds Management, LLC and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.

NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE


2		Wells Fargo Advantage Income Opportunities Fund		Letter to shareholders (unaudited)

LOGO

Karla M. Rabusch

President

Wells Fargo Advantage Funds

Fixed-income markets shifted significantly during the period as economic optimism surged in the opening months of 2013, spurring a rally in equities; a rise in U.S. Treasury yields; and, ultimately, significant outperformance from high-yield bonds.

Dear Valued Shareholder:

We are pleased to offer you this semi-annual report for the Wells Fargo Advantage Income Opportunities Fund for the six-month period that ended October 31, 2013. Fixed-income markets shifted significantly during the period as economic optimism surged in the opening months of 2013, spurring a rally in equities; a rise in U.S. Treasury yields; and, ultimately, significant outperformance from high-yield bonds. Most investment-grade bond sectors experienced price declines along with rising Treasury yields during much of 2013. However, below-investment-grade securities tended to perform better as their higher-yield spreads cushioned some of the yield increases from the Treasury markets before rallying later in the period. On the whole, U.S. high-yield corporate securities generated strong positive returns during the period, overcoming significant price corrections in June 2013.

The return of economic optimism in 2013 led to declines in bond prices as yields rose higher.

Before the period began, U.S. Treasury yields began to rise higher on optimistic expectations for a strengthening U.S. economy during the opening months of 2013. Consequently, fixed-income security yields shifted higher and prices declined across much of the U.S. investment-grade bond sectors, most notably in the longer-maturity ranges, as investors began to reprice bond yields for potential interest-rate increases in upcoming years. Nonetheless, high-yield securities generally withstood the rate shocks and continued to provide positive returns.

These trends continued into May 2013 which was rattled by geopolitical events, domestic terrorism in Boston, and uncertain global economic conditions. U.S. Treasury prices increased sharply, temporarily erasing all of the price losses endured in January 2013 and, in fact, crossing over into positive gains. Meanwhile, U.S. high-yield bonds continued to generate positive returns for the month.

Unfortunately, this streak for high yield would end in May 2013 as a massive rally in the U.S. equity markets erupted, driving U.S. Treasury prices down and this time dragging with them the high-yield bond market. These market moves resulted in the largest monthly losses across the investment-grade bond markets in nearly five years, while high yield saw its first monthly decline in just over a year.

The depreciating trends for bonds deepened in mid-June 2013 on comments from Federal Reserve (Fed) Chairman Bernanke that tapering of the Fed’s bond-buying programs could begin later in the year and that the programs may end completely around mid-2014. For the last two weeks of June 2013, that debate appeared to play out daily, as volatility buffeted both the equity and bond markets, finally capitulating to yet another sustained rally in equities and a modest retreat in bond prices. Both investment-grade bonds and high-yield bonds posted their worst monthly returns of the year in June 2013—investment-grade securities had their largest quarterly decline in nine years during the second quarter and high yield had its worst quarter since 2011.

In July and August 2013, equity exuberance quieted a bit, and fixed-income markets stabilized. Returns were more mixed, with slightly negative returns in the highest-quality securities to modestly positive in the lower credit tiers. In September and October 2013, investment-grade and high-yield bond markets began generating positive returns yet again, as the Fed backtracked on its intentions to taper quantitative easing, postponing it until 2014 at the


Letter to shareholders (unaudited)		Wells Fargo Advantage Income Opportunities Fund			3

earliest. Bond markets rallied on the news through the end of the period, and the high-yield bond markets significantly outperformed the investment-grade markets.

On the whole, strong returns in high yield during the final months of the period overcame the sharp price declines during May, June, and August 2013, culminating in positive returns across the high-yield market during the full period. Thus, the theme for the period was a persistent increase in U.S. Treasury yields that pressured fixed-income security prices before relaxing in September and October 2013. High-yield securities benefited from yield cushioning during the yield rises before rallying on strong investor appetite for equity-correlated returns.

Don’t let short-term uncertainty derail long-term investment goals.

Periods of uncertainty can present challenges, but experience has taught us that maintaining long-term investment goals can be an effective way to plan for the future. Although diversification cannot guarantee an investment profit or prevent losses, we believe it can be an effective way to manage investment risk and potentially smooth out overall portfolio performance. We encourage investors to know their investments and to understand that appropriate levels of risk-taking may unlock opportunities.

Thank you for choosing to invest with Wells Fargo Advantage Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs. For current information about your fund investments, contact your investment professional, visit our website at wellsfargoadvantagefunds.com, or call us directly at 1-800-222-8222. We are available 24 hours a day, 7 days a week.

Sincerely,

LOGO

Karla M. Rabusch

President

Wells Fargo Advantage Funds

The theme for the period was a persistent increase in U.S. Treasury yields that pressured fixed-income security prices before relaxing in September and October 2013. High-yield securities benefited from yield cushioning during the yield rises before rallying on strong investor appetite for equity-correlated returns.


4		Wells Fargo Advantage Income Opportunities Fund		Performance highlights (unaudited)

Investment objective

The Fund seeks a high level of current income. Capital appreciation is a secondary objective.

Adviser

Wells Fargo Funds Management, LLC

Subadviser

Wells Capital Management Incorporated

Portfolio managers

Niklas Nordenfelt, CFA

Phillip Susser

Average annual total returns¹ (%) as of October 31, 2013


	1 year			5 year		10 year
Based on market value		(4.29	)		21.10		6.85
Based on net asset value (NAV) per share		7.90			18.99		7.32

Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes that a shareholder may pay on fund distributions or the sales of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted, which assumes the reinvestment of dividends and capital gains. Performance figures of the Fund do not reflect brokerage commissions that a shareholder would pay on the purchase and sale of shares. If taxes and such brokerage commissions had been reflected, performance would have been lower. To obtain performance information current to the most recent month-end, please call 1-800-222-8222.

The Adviser has committed through February 25, 2014, to waive fees and/or reimburse expenses to the extent necessary to limit the Fund’s borrowing expenses to an amount that is 0.05% lower than what the borrowing expenses would have been if the Fund had not redeemed its Auction Market Preferred Shares. The Fund’s gross and net expense ratios for the six months ended October 31, 2013, were 1.27% and 1.02%, respectively, which includes 0.07% of interest expense. Without this waiver and/or reimbursement, the Fund’s returns would have been lower.


Comparison of NAV vs. market value²

LOGO

The Fund is leveraged through a secured debt borrowing facility and also may incur leverage by issuing preferred shares in the future. The use of leverage results in certain risks including, among others, the likelihood of greater volatility of net asset value and the market price of common shares. Derivatives involve additional risks including interest rate risk, credit risk, the risk of improper valuation, and the risk of non-correlation to the relevant instruments that they are designed to hedge or to closely track. 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. High-yield securities have a greater risk of default and tend to be more volatile than higher-rated debt securities.

Total returns based on market value are calculated assuming a purchase of common stock on the first day and a sale on the last day of the period reported. Total returns based on NAV are calculated based on the NAV at the beginning of the period and end of the period. Dividends and distributions, if any, are assumed for the purposes of these calculations to be reinvested at prices obtained under the Fund’s Automatic Dividend Reinvestment Plan.

2.	This chart does not reflect any brokerage commissions on the purchase and sale of the Fund’s common stock. Dividends and distributions have the effect of reducing the Fund’s NAV.


Performance highlights (unaudited)		Wells Fargo Advantage Income Opportunities Fund			5

MANAGER’S DISCUSSION

The Fund’s return based on market value was -4.29% during the 6 months ended October 31, 2013. During the same period, the Fund’s returns based on NAV was 7.90%.

Overview

Fixed-income markets generally struggled as Treasury yields rose in anticipation of a reduction in the extraordinarily loose Federal Reserve (Fed) policies. Expectations that tapering in the Fed’s monthly $85 billion asset purchase program would cause rates to rise led to investors selling rate-sensitive bonds. The high-yield market was initially weak yet managed to generate positive returns in spite of the rate volatility with credit spreads declining during the period. Ultimately, the Fed surprised the markets by postponing the tapering, resulting in a strong rally across all asset classes, including high-yield bonds in the last few months of the period. Although the Fed’s decision was based on weaker-than-hoped-for economic data, the continuation of a low-interest-rate environment spurred investor confidence and provided support to the market.


Ten largest holdings³(%) as of October 31, 2013
Texas Competitive Electric Holdings LLC, 3.71%, 10-10-2014			3.31
Dell Incorporated, 0.00% 4-30-2020			2.66
Sprint Capital Corporation, 6.88%, 11-15-2028			2.59
Jabil Circuit Incorporated, 8.25%, 3-15-2018			2.29
Greektown Superholdings Incorporated Series A, 13.00%, 7-1-2015			1.93
Nielsen Finance LLC, 7.75%, 10-15-2018			1.83
CCM Merger Incorporated, 9.13%, 5-1-2019			1.65
Sabine Pass LNG LP, 7.50%, 11-30-2016			1.55
Local TV Finance LLC, 9.25%, 6-15-2015			1.44
Sabine Pass LNG LP, 6.50%, 11-1-2020			1.39

Credit quality⁴as of October 31, 2013

LOGO

Contributors to performance

The Fund benefited from the continuation of accommodative monetary policy. The interest earned on higher yields combined with a decline in spreads helped offset market shifts to higher interest rates. Compared with the broad high-yield market, the Fund’s lower exposure to interest-rate sensitivity was a positive contributor to performance. A number of well-performing securities and a significant allocation to the information technology sector also aided performance.

Detractors to performance

The Fund continued to be positioned conservatively with less higher-yielding and more higher-quality issues than the broad high-yield market. Although the market was volatile during the period, the volatility was almost entirely due to rising interest rates. Credit continued to outperform with lower-quality securities outperforming amid a market

that continues to benefit from the Fed-induced low interest rates. In addition, Fund holdings within the pipelines and electric utilities sectors detracted from performance due to the impact from low natural gas prices.

3.	The ten largest holdings are calculated based on the value of the securities divided by total net assets of the Fund. Holdings are subject to change and may have changed since the date specified.

Credit quality is subject to change and is calculated based on the total market value of bonds held by the Fund. The ratings indicated are from Standard & Poor’s, Moody’s Investors Service, and/or Fitch Ratings Ltd. Credit Quality Ratings. Credit quality ratings apply to the underlying holdings of the Fund and not the Fund itself. Standard & Poor’s rates the creditworthiness of bonds on a scale of AAA (highest) to D (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. Standard & Poor’s rates the creditworthiness of short-term notes from SP-1 (highest) to SP-3 (lowest). Moody’s rates the creditworthiness of bonds on a scale of Aaa (highest) to C (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 ratings categories. Moody’s rates the creditworthiness of short-term U.S. tax-exempt municipal securities from MIG 1/VMIG 1 (highest) to SG (lowest). Fitch rates the creditworthiness of bonds on a scale of AAA (highest) to D (lowest). If a security was rated by all three rating agencies, the middle rating was utilized. If rated by two of three rating agencies, the lower rating was utilized and if rated by one of the agencies that rating was utilized. We generally define higher quality bonds as bonds that have a rating of BBB/Baa and above and lower quality bonds as bonds with a rating below BBB/Baa.


6		Wells Fargo Advantage Income Opportunities Fund		Performance highlights (unaudited)

Effective maturity distribution⁵as of October 31, 2013

LOGO

Management outlook

The Fund’s focus is on bottom-up security selection of bonds issued by companies with high intrinsic value, which, in our view, limits downside risk. Much of the high-yield market performance has been driven by the extraordinarily low interest rates, which allow highly indebted and highly leveraged companies to meet interest expense and term out maturities. The Fund continues to avoid companies that rely on such conditions to persist. As a result of the strategy of avoiding uncompensated risk, the Fund maintains its

lower-volatility profile. We do not feel it is prudent to stretch for yield in the current environment because of the relatively low compensation for taking incremental risk. That said, conditions are quite benign for the high-yield market, with the bulk of issuers enjoying high interest coverage ratios (ability to generate sufficient cash to meet interest expense) and low near-term maturities. We believe default rates may remain well below historical averages and high yield may continue to outperform rate-sensitive fixed-income markets.

5.	Effective maturity distribution is subject to change and are calculated based on the total long-term investments of the Fund.


Portfolio of investments—October 31, 2013 (unaudited)		Wells Fargo Advantage Income Opportunities Fund			7


Security name						Shares		Value


Common Stocks: 0.18%

Consumer Discretionary: 0.00%

Hotels, Restaurants & Leisure: 0.00%
Trump Entertainment Resorts Incorporated †(a)(i)							2,149	$	0


Telecommunication Services: 0.18%

Diversified Telecommunication Services: 0.18%
Fairpoint Communications Incorporated †							134,376		1,255,072


Total Common Stocks (Cost $3,109,765)									1,255,072


	Interest rate			Maturity date		Principal
Corporate Bonds and Notes: 108.62%

Consumer Discretionary: 25.36%

Auto Components: 2.37%
Allison Transmission Incorporated 144A		7.13	%		5-15-2019	$	8,015,000		8,636,162
Cooper Tire & Rubber Company		7.63			3-15-2027		4,305,000		4,132,800
Cooper Tire & Rubber Company		8.00			12-15-2019		150,000		154,125
Goodyear Tire & Rubber Company		7.00			5-15-2022		700,000		752,500
United Rentals North America Incorporated		5.75			7-15-2018		2,675,000		2,868,938

									16,544,525


Diversified Consumer Services: 2.30%
Ceridian HCM Holding Incorporated 144A		11.00			3-15-2021		75,000		87,750
Service Corporation International		6.75			4-1-2016		1,250,000		1,365,625
Service Corporation International		7.00			6-15-2017		1,250,000		1,401,563
Service Corporation International		7.00			5-15-2019		1,125,000		1,209,375
Service Corporation International		7.50			4-1-2027		7,078,000		7,573,460
Service Corporation International		7.63			10-1-2018		1,100,000		1,259,500
Service Corporation International		8.00			11-15-2021		885,000		1,014,431
Sotheby’s 144A		5.25			10-1-2022		2,265,000		2,163,075

									16,074,779


Hotels, Restaurants & Leisure: 8.26%
Burger King Corporation		9.88			10-15-2018		1,600,000		1,794,000
CCM Merger Incorporated 144A		9.13			5-1-2019		10,830,000		11,479,800
CityCenter Holdings LLC		7.63			1-15-2016		2,050,000		2,155,575
CityCenter Holdings LLC (PIK at 11.50%) ¥		10.75			1-15-2017		4,816,305		5,163,079
DineEquity Incorporated		9.50			10-30-2018		8,475,000		9,428,437
Greektown Superholdings Incorporated Series A		13.00			7-1-2015		12,887,000		13,450,806
Greektown Superholdings Incorporated Series B		13.00			7-1-2015		1,475,000		1,539,531
Hilton Worldwide Finance LLC 144A		5.63			10-15-2021		320,000		328,800
Pinnacle Entertainment Incorporated		7.50			4-15-2021		6,187,000		6,790,232
Ruby Tuesday Incorporated		7.63			5-15-2020		3,405,000		3,268,800
Scientific Games Corporation		9.25			6-15-2019		1,130,000		1,218,988
Speedway Motorsports Incorporated		6.75			2-1-2019		980,000		1,040,025

									57,658,073

The accompanying notes are an integral part of these financial statements.


8		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—October 31, 2013 (unaudited)


Security name	Interest rate			Maturity date		Principal		Value


Household Durables: 0.19%
American Greetings Corporation		7.38	%		12-1-2021	$	950,000	$	947,625
Tempur Sealy International Incorporated		6.88			12-15-2020		325,000		346,938

									1,294,563


Media: 9.99%
Allbritton Communications Company		8.00			5-15-2018		3,274,000		3,503,180
Cablevision Systems Corporation		8.63			9-15-2017		2,975,000		3,465,876
CCO Holdings LLC		8.13			4-30-2020		746,000		816,870
Cinemark USA Incorporated		7.38			6-15-2021		1,525,000		1,669,875
CSC Holdings LLC		7.63			7-15-2018		1,145,000		1,319,611
CSC Holdings LLC		7.88			2-15-2018		1,650,000		1,909,875
CSC Holdings LLC		8.63			2-15-2019		635,000		750,887
DISH DBS Corporation		5.13			5-1-2020		575,000		582,187
DISH DBS Corporation		7.88			9-1-2019		2,260,000		2,627,250
DreamWorks Animation SKG Incorporated 144A		6.88			8-15-2020		2,690,000		2,861,487
EchoStar DBS Corporation		7.13			2-1-2016		1,160,000		1,281,800
EchoStar DBS Corporation		7.75			5-31-2015		650,000		710,937
Gray Television Incorporated 144A		7.50			10-1-2020		1,615,000		1,691,713
Gray Television Incorporated		7.50			10-1-2020		6,920,000		7,248,700
Lamar Media Corporation		5.88			2-1-2022		1,785,000		1,843,013
Lamar Media Corporation		7.88			4-15-2018		4,090,000		4,355,850
Lamar Media Corporation Series C		9.75			4-1-2014		620,000		641,700
LIN Television Corporation		6.38			1-15-2021		500,000		510,000
LIN Television Corporation		8.38			4-15-2018		3,475,000		3,705,219
Live Nation Entertainment Incorporated 144A		7.00			9-1-2020		330,000		350,625
Local TV Finance LLC 144A		9.25			6-15-2015		9,943,218		10,042,650
Lynx I Corporation 144A		5.38			4-15-2021		605,000		608,025
Lynx II Corporation 144A		6.38			4-15-2023		605,000		620,125
National CineMedia LLC		6.00			4-15-2022		3,635,000		3,780,400
National CineMedia LLC		7.88			7-15-2021		1,150,000		1,270,750
Nexstar Broadcasting Group Incorporated 144A		6.88			11-15-2020		3,510,000		3,667,950
Regal Cinemas Corporation		8.63			7-15-2019		6,665,000		7,198,200
Regal Entertainment Group		5.75			6-15-2023		665,000		656,688

									69,691,443


Specialty Retail: 2.25%
ABC Supply Company Incorporated 144A		5.63			4-15-2021		730,000		739,125
Ahern Rentals Incorporated 144A		9.50			6-15-2018		1,985,000		2,128,912
L Brands Incorporated		6.63			4-1-2021		925,000		1,017,500
Neiman Marcus Group Limited 144A		8.00			10-15-2021		340,000		348,075
Penske Auto Group Incorporated		5.75			10-1-2022		1,965,000		1,960,088
RadioShack Corporation		6.75			5-15-2019		3,698,000		2,449,925
Rent-A-Center Incorporated		6.63			11-15-2020		2,765,000		2,920,531
Toys “R” Us Property Company II LLC		8.50			12-1-2017		4,025,000		4,155,813

									15,719,969

The accompanying notes are an integral part of these financial statements.


Portfolio of investments—October 31, 2013 (unaudited)		Wells Fargo Advantage Income Opportunities Fund			9


Security name	Interest rate			Maturity date		Principal		Value


Energy: 20.68%

Energy Equipment & Services: 5.44%
Cleaver Brooks Incorporated 144A		8.75	%		12-15-2019	$	475,000	$	516,562
Dresser-Rand Group Incorporated		6.50			5-1-2021		1,825,000		1,939,063
Era Group Incorporated		7.75			12-15-2022		4,285,000		4,359,987
Forum Energy Technologies Incorporated 144A		6.25			10-1-2021		315,000		328,387
Gulfmark Offshore Incorporated		6.38			3-15-2022		7,433,000		7,488,748
Hornbeck Offshore Services Incorporated		5.00			3-1-2021		4,395,000		4,318,088
Hornbeck Offshore Services Incorporated		5.88			4-1-2020		840,000		863,100
NGPL PipeCo LLC 144A		7.77			12-15-2037		8,690,000		7,538,575
Oil States International Incorporated		6.50			6-1-2019		3,759,000		4,003,335
PHI Incorporated		8.63			10-15-2018		5,955,000		6,356,963
Pride International Incorporated		8.50			6-15-2019		210,000		268,012

									37,980,820


Oil, Gas & Consumable Fuels: 15.24%
Crestwood Midstream Partners LP 144A%%		6.13			3-1-2022		475,000		485,687
CVR Refining LLC/Coffeyville Finance Incorporated		6.50			11-1-2022		2,850,000		2,857,125
Denbury Resources Incorporated		4.63			7-15-2023		675,000		622,687
Denbury Resources Incorporated		6.38			8-15-2021		700,000		747,250
Denbury Resources Incorporated		8.25			2-15-2020		5,965,000		6,561,500
El Paso Corporation		6.50			9-15-2020		1,155,000		1,233,847
El Paso Corporation		7.00			6-15-2017		3,183,000		3,592,538
El Paso Corporation		7.25			6-1-2018		3,149,000		3,565,969
El Paso Corporation		7.42			2-15-2037		1,820,000		1,723,600
El Paso Corporation		7.80			8-1-2031		3,050,000		3,147,478
Energy Transfer Equity LP		7.50			10-15-2020		5,950,000		6,872,249
Exterran Partners LP 144A		6.00			4-1-2021		3,100,000		3,084,500
Ferrellgas LP		9.13			10-1-2017		2,300,000		2,417,300
Inergy Midstream LP 144A		6.00			12-15-2020		1,230,000		1,257,675
Kinder Morgan Energy 144A		6.00			1-15-2018		125,000		136,080
Murphy Oil USA Incorporated 144A		6.00			8-15-2023		635,000		644,525
Northern Tier Energy LLC		7.13			11-15-2020		2,390,000		2,437,800
Petrohawk Energy Corporation		7.88			6-1-2015		2,045,000		2,093,569
Petrohawk Energy Corporation		10.50			8-1-2014		1,065,000		1,091,625
Pioneer Natural Resources Company		7.50			1-15-2020		3,170,000		3,930,486
Plains Exploration & Production Company		8.63			10-15-2019		6,380,000		7,059,802
Rockies Express Pipeline LLC 144A		5.63			4-15-2020		6,255,000		5,269,838
Rockies Express Pipeline LLC 144A		6.00			1-15-2019		630,000		559,125
Rockies Express Pipeline LLC 144A		6.88			4-15-2040		10,760,000		8,123,800
Rockies Express Pipeline LLC 144A		7.50			7-15-2038		4,425,000		3,628,500
Sabine Pass LNG LP 144A		5.63			2-1-2021		1,425,000		1,439,250
Sabine Pass LNG LP 144A		5.63			4-15-2023		1,425,000		1,396,500
Sabine Pass LNG LP		6.50			11-1-2020		9,260,000		9,676,700
Sabine Pass LNG LP		7.50			11-30-2016		9,675,000		10,799,719
Semgroup LP 144A		7.50			6-15-2021		4,200,000		4,399,500
Suburban Propane Partners LP		7.38			3-15-2020		1,475,000		1,581,938
Suburban Propane Partners LP		7.38			8-1-2021		592,000		637,880
Suburban Propane Partners LP		7.50			10-1-2018		802,000		861,148
Tesoro Corporation		9.75			6-1-2019		2,185,000		2,387,113

									106,324,303

The accompanying notes are an integral part of these financial statements.


10		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—October 31, 2013 (unaudited)


Security name	Interest rate			Maturity date		Principal		Value


Financials: 21.74%

Commercial Banks: 1.66%
CIT Group Incorporated 144A		5.25	%		4-1-2014	$	1,205,000	$	1,224,581
CIT Group Incorporated		5.25			3-15-2018		875,000		946,094
CIT Group Incorporated 144A		5.50			2-15-2019		2,225,000		2,408,561
Emigrant Bancorp Incorporated 144A		6.25			6-15-2014		6,950,000		7,019,500

									11,598,736


Consumer Finance: 12.96%
Ally Financial Incorporated		5.50			2-15-2017		1,325,000		1,431,000
Ally Financial Incorporated		6.75			12-1-2014		1,869,000		1,967,122
Ally Financial Incorporated		7.50			12-31-2013		6,855,000		6,911,896
Ally Financial Incorporated		7.50			9-15-2020		1,930,000		2,258,100
Ally Financial Incorporated		8.00			3-15-2020		1,545,000		1,834,687
Ally Financial Incorporated		8.30			2-12-2015		8,820,000		9,558,675
American General Finance Corporation		5.40			12-1-2015		2,650,000		2,775,875
American General Finance Corporation		5.75			9-15-2016		2,325,000		2,458,687
American General Finance Corporation		6.50			9-15-2017		550,000		583,000
BMC Software Finance Incorporated 144A		8.13			7-15-2021		1,025,000		1,083,937
Clearwire Communications Finance Corporation 144A		12.00			12-1-2015		5,420,000		5,620,540
Ford Motor Credit Company LLC		8.00			12-15-2016		200,000		237,556
General Motors Financial Company Incorporated		6.75			6-1-2018		2,770,000		3,137,025
Homer City Funding LLC (PIK at 9.23%) ¥		8.73			10-1-2026		3,084,040		3,184,271
International Lease Finance Corporation 144A		6.75			9-1-2016		2,200,000		2,444,750
International Lease Finance Corporation 144A		7.13			9-1-2018		1,015,000		1,168,519
International Lease Finance Corporation		8.63			9-15-2015		1,700,000		1,891,250
Level 3 Financing Incorporated		10.00			2-1-2018		4,555,000		4,868,156
Nielsen Finance LLC		4.50			10-1-2020		200,000		196,000
Nielsen Finance LLC		7.75			10-15-2018		11,690,000		12,742,100
SLM Corporation		7.25			1-25-2022		1,600,000		1,712,000
SLM Corporation		8.00			3-25-2020		6,460,000		7,380,550
SLM Corporation		8.45			6-15-2018		3,110,000		3,630,925
Springleaf Finance Corporation 144A		6.00			6-1-2020		3,800,000		3,743,000
Springleaf Finance Corporation		6.90			12-15-2017		6,950,000		7,523,375
Springleaf Finance Corporation 144A		7.75			10-1-2021		100,000		107,500

									90,450,496


Diversified Financial Services: 2.52%
Denali Borrower/Finance Corporation 144A		5.63			10-15-2020		7,150,000		7,078,500
MPH Intermediate Holding Company (PIK at 9.13%) 144A¥		8.38			8-1-2018		575,000		597,281
Neuberger Berman Group LLC 144A		5.63			3-15-2020		900,000		933,750
Neuberger Berman Group LLC 144A		5.88			3-15-2022		1,125,000		1,150,313
Nuveen Investments Incorporated		5.50			9-15-2015		6,830,000		6,625,100
Nuveen Investments Incorporated 144A		9.13			10-15-2017		1,220,000		1,183,400

									17,568,344


Insurance: 0.15%
Fidelity & Guaranty Life Holdings Incorporated 144A		6.38			4-1-2021		995,000		1,037,287

The accompanying notes are an integral part of these financial statements.


Portfolio of investments—October 31, 2013 (unaudited)		Wells Fargo Advantage Income Opportunities Fund			11


Security name	Interest rate			Maturity date		Principal		Value


Real Estate Management & Development: 1.18%
Hockey Incorporated 144A		7.88	%		10-1-2021	$	4,560,000	$	4,708,200
Onex Corporation 144A		7.75			1-15-2021		3,480,000		3,549,600

									8,257,800


REITs: 3.27%
DuPont Fabros Technology Incorporated 144A		5.88			9-15-2021		7,670,000		7,861,750
Omega Healthcare Investors Incorporated		6.75			10-15-2022		3,375,000		3,695,625
Sabra Health Care Incorporated		5.38			6-1-2023		1,425,000		1,392,938
Sabra Health Care Incorporated		8.13			11-1-2018		1,853,000		2,010,505
The Geo Group Incorporated		5.13			4-1-2023		3,000,000		2,812,500
The Geo Group Incorporated 144A		5.88			1-15-2022		4,350,000		4,382,625
The Geo Group Incorporated		6.63			2-15-2021		605,000		640,544

									22,796,487


Health Care: 5.24%

Health Care Equipment & Supplies: 0.39%
Hologic Incorporated		6.25			8-1-2020		2,590,000		2,751,875


Health Care Providers & Services: 4.60%
Aviv Healthcare Properties LP 144A		6.00			10-15-2021		850,000		871,250
Aviv Healthcare Properties LP		7.75			2-15-2019		3,725,000		4,018,344
Capella Healthcare Incorporated		9.25			7-1-2017		1,455,000		1,562,306
Centene Corporation		5.75			6-1-2017		1,925,000		2,054,937
DaVita HealthCare Partners Incorporated		5.75			8-15-2022		1,360,000		1,395,700
DaVita HealthCare Partners Incorporated		6.38			11-1-2018		140,000		146,825
Fresenius Medical Care Holdings Incorporated 144A		5.63			7-31-2019		1,800,000		1,926,000
Fresenius Medical Care Holdings Incorporated		6.88			7-15-2017		700,000		791,000
HCA Incorporated		5.88			3-15-2022		750,000		789,375
HCA Incorporated		6.50			2-15-2020		5,675,000		6,313,438
HCA Incorporated		7.50			11-15-2095		1,350,000		1,215,000
HCA Incorporated		8.50			4-15-2019		975,000		1,046,906
Health Management Associates Incorporated		6.13			4-15-2016		475,000		522,500
HealthSouth Corporation		5.75			11-1-2024		100,000		99,250
HealthSouth Corporation		7.25			10-1-2018		675,000		725,625
HealthSouth Corporation		8.13			2-15-2020		820,000		903,025
MPT Operating Partnership LP		6.38			2-15-2022		1,325,000		1,368,063
MPT Operating Partnership LP		6.88			5-1-2021		3,175,000		3,413,125
Multiplan Incorporated 144A		9.88			9-1-2018		565,000		624,325
Select Medical Corporation		6.38			6-1-2021		1,560,000		1,505,400
Tenet Healthcare Corporation 144A		6.00			10-1-2020		355,000		375,413
Tenet Healthcare Corporation 144A		8.13			4-1-2022		400,000		438,000

									32,105,807


Health Care Technology: 0.12%
Healthcare Technology Intermediate Incorporated (PIK at 8.13%) 144A¥		7.38			9-1-2018		790,000		816,663


Pharmaceuticals: 0.13%
Pinnacle Incorporated 144A		9.50			10-1-2023		835,000		880,925

The accompanying notes are an integral part of these financial statements.


12		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—October 31, 2013 (unaudited)


Security name	Interest rate			Maturity date		Principal		Value


Industrials: 5.52%

Aerospace & Defense: 0.30%
TransDigm Group Incorporated		7.75	%		12-15-2018	$	1,939,000	$	2,084,425


Air Freight & Logistics: 0.69%
Bristow Group Incorporated		6.25			10-15-2022		4,555,000		4,782,750


Airlines: 0.53%
Aviation Capital Group Corporation 144A		6.75			4-6-2021		2,190,000		2,357,465
Aviation Capital Group Corporation 144A		7.13			10-15-2020		1,210,000		1,342,127

									3,699,592


Commercial Services & Supplies: 1.26%
ADT Corporation 144A		6.25			10-15-2021		990,000		1,050,637
Covanta Holding Corporation		6.38			10-1-2022		900,000		929,786
Interface Incorporated		7.63			12-1-2018		270,000		293,625
Iron Mountain Incorporated		5.75			8-15-2024		475,000		453,625
Iron Mountain Incorporated		6.00			8-15-2023		3,560,000		3,622,300
Iron Mountain Incorporated		8.38			8-15-2021		2,244,000		2,423,520

									8,773,493


Machinery: 0.97%
Columbus McKinnon Corporation		7.88			2-1-2019		1,575,000		1,691,156
H&E Equipment Services Incorporated		7.00			9-1-2022		4,680,000		5,101,200

									6,792,356


Professional Services: 0.63%
Interactive Data Corporation		10.25			8-1-2018		4,005,000		4,425,525


Trading Companies & Distributors: 0.84%
Ashtead Capital Incorporated 144A		6.50			7-15-2022		5,435,000		5,829,037


Transportation Infrastructure: 0.30%
Florida East Coast Railway Corporation		8.13			2-1-2017		1,465,000		1,541,912
Watco Companies LLC 144A		6.38			4-1-2023		570,000		564,300

									2,106,212


Information Technology: 7.86%

Communications Equipment: 0.63%
Avaya Incorporated		9.75			11-1-2015		1,150,000		1,138,500
CyrusOne LP		6.38			11-15-2022		500,000		503,750
Lucent Technologies Incorporated		6.45			3-15-2029		3,100,000		2,728,000

									4,370,250


Electronic Equipment, Instruments & Components: 2.35%
CDW Financial Corporation		12.54			10-12-2017		372,000		386,880
Jabil Circuit Incorporated		8.25			3-15-2018		13,532,000		16,001,590

									16,388,470

The accompanying notes are an integral part of these financial statements.


Portfolio of investments—October 31, 2013 (unaudited)		Wells Fargo Advantage Income Opportunities Fund			13


Security name	Interest rate			Maturity date		Principal		Value


Internet Software & Services: 0.06%
Equinix Incorporated		7.00	%		7-15-2021	$	125,000	$	136,562
Verisign Incorporated		4.63			5-1-2023		290,000		282,388

									418,950


IT Services: 4.45%
Audatex North America Incorporated 144A		6.00			6-15-2021		2,300,000		2,374,750
Audatex North America Incorporated 144A%%		6.13			11-1-2023		695,000		705,425
Audatex North America Incorporated		6.75			6-15-2018		1,375,000		1,470,287
Fidelity National Information Services Incorporated		7.88			7-15-2020		3,200,000		3,524,726
First Data Corporation 144A		11.75			8-15-2021		3,505,000		3,566,337
First Data Corporation 144A		7.38			6-15-2019		1,325,000		1,426,031
First Data Corporation		11.25			3-31-2016		9,555,000		9,602,775
SunGard Data Systems Incorporated		7.38			11-15-2018		7,230,000		7,663,800
SunGard Data Systems Incorporated		7.63			11-15-2020		650,000		707,688

									31,041,819


Software: 0.37%
Activision Blizzard Incorporated 144A		5.63			9-15-2021		1,155,000		1,195,425
Activision Blizzard Incorporated 144A		6.13			9-15-2023		285,000		297,825
Nuance Communications Incorporated 144A		5.38			8-15-2020		1,130,000		1,121,525

									2,614,775


Materials: 1.79%

Chemicals: 0.20%
Celanese US Holdings LLC		5.88			6-15-2021		440,000		470,800
Chemtura Corporation		5.75			7-15-2021		950,000		961,875

									1,432,675


Containers & Packaging: 1.10%
Ball Corporation		5.75			5-15-2021		400,000		422,500
Ball Corporation		6.75			9-15-2020		375,000		407,812
Crown Americas LLC		6.25			2-1-2021		515,000		545,900
Crown Cork & Seal Company Incorporated		7.38			12-15-2026		300,000		332,250
Crown Cork & Seal Company Incorporated (i)		7.50			12-15-2096		1,225,000		1,145,375
Owens-Illinois Incorporated		7.80			5-15-2018		837,000		965,689
Sealed Air Corporation 144A		6.88			7-15-2033		1,715,000		1,612,100
Silgan Holdings Incorporated		5.00			4-1-2020		2,250,000		2,238,750

									7,670,376


Metals & Mining: 0.00%
Indalex Holdings Corporation (s)(a)(i)		11.50			2-1-2014		5,985,000		0


Paper & Forest Products: 0.49%
Georgia-Pacific LLC		8.88			5-15-2031		2,430,000		3,424,227

The accompanying notes are an integral part of these financial statements.


14		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—October 31, 2013 (unaudited)


Security name	Interest rate			Maturity date		Principal		Value


Telecommunication Services: 15.37%

Diversified Telecommunication Services: 7.41%
Citizens Communications Company		7.88	%		1-15-2027	$	4,205,000	$	4,162,950
Frontier Communications Corporation		8.13			10-1-2018		1,980,000		2,281,950
Frontier Communications Corporation		8.25			4-15-2017		2,380,000		2,751,875
Frontier Communications Corporation		8.50			4-15-2020		1,000,000		1,142,500
GCI Incorporated		6.75			6-1-2021		4,145,000		4,010,287
GCI Incorporated		8.63			11-15-2019		8,750,000		9,296,875
Qwest Corporation		7.13			11-15-2043		1,810,000		1,756,596
Qwest Corporation		7.25			9-15-2025		2,755,000		2,935,750
Qwest Corporation		7.63			8-3-2021		440,000		465,300
Syniverse Holdings Incorporated		9.13			1-15-2019		8,545,000		9,249,963
TW Telecommunications Holdings Incorporated 144A		5.38			10-1-2022		990,000		987,525
TW Telecommunications Holdings Incorporated		5.38			10-1-2022		6,525,000		6,508,688
Windstream Corporation		7.88			11-1-2017		5,380,000		6,153,375

									51,703,634


Wireless Telecommunication Services: 7.96%
Cricket Communications Incorporated		7.75			10-15-2020		3,835,000		4,381,487
Crown Castle International Corporation		5.25			1-15-2023		4,385,000		4,341,150
Crown Castle International Corporation		7.13			11-1-2019		220,000		237,600
MetroPCS Wireless Incorporated 144A		6.25			4-1-2021		290,000		303,413
MetroPCS Wireless Incorporated		6.63			11-15-2020		5,910,000		6,249,825
MetroPCS Wireless Incorporated 144A		6.63			4-1-2023		825,000		863,156
MetroPCS Wireless Incorporated		7.88			9-1-2018		3,015,000		3,256,200
SBA Telecommunications Corporation		5.63			10-1-2019		270,000		277,425
SBA Telecommunications Corporation		5.75			7-15-2020		2,795,000		2,906,800
SBA Telecommunications Corporation		8.25			8-15-2019		93,000		100,789
Sprint Capital Corporation		6.88			11-15-2028		19,000,000		18,050,000
Sprint Capital Corporation		8.75			3-15-2032		6,270,000		6,787,275
Sprint Corporation 144A		7.25			9-15-2021		330,000		355,575
Sprint Corporation 144A		7.88			9-15-2023		330,000		358,050
Sprint Nextel Corporation 144A		9.00			11-15-2018		750,000		909,375
Sprint Nextel Corporation		11.50			11-15-2021		1,200,000		1,563,000
T-Mobile USA Incorporated		6.46			4-28-2019		265,000		280,900
T-Mobile USA Incorporated		6.54			4-28-2020		275,000		291,500
T-Mobile USA Incorporated		6.63			4-28-2021		1,510,000		1,596,825
T-Mobile USA Incorporated		6.73			4-28-2022		1,445,000		1,526,281
T-Mobile USA Incorporated		6.84			4-28-2023		850,000		898,875

									55,535,501


Utilities: 5.06%

Electric Utilities: 2.92%
Energy Future Holdings Corporation		10.00			12-1-2020		150,000		157,500
Energy Future Intermediate Holding Company LLC 144A		6.88			8-15-2017		875,000		894,688
IPALCO Enterprises Incorporated		5.00			5-1-2018		2,050,000		2,142,250
IPALCO Enterprises Incorporated 144A		7.25			4-1-2016		3,783,000		4,161,300
Mirant Mid-Atlantic LLC Series C		10.06			12-30-2028		7,560,525		8,411,084
Otter Tail Corporation		9.00			12-15-2016		3,985,000		4,635,882

									20,402,704

The accompanying notes are an integral part of these financial statements.


Portfolio of investments—October 31, 2013 (unaudited)		Wells Fargo Advantage Income Opportunities Fund			15


Security name	Interest rate			Maturity date		Principal		Value


Gas Utilities: 0.56%
AmeriGas Finance LLC		6.50	%		5-20-2021	$	75,000	$	80,250
AmeriGas Finance LLC		6.75			5-20-2020		1,675,000		1,825,750
AmeriGas Finance LLC		7.00			5-20-2022		1,840,000		1,987,200

									3,893,200


Independent Power Producers & Energy Traders: 1.58%
Calpine Corporation 144A		6.00			1-15-2022		715,000		741,812
NRG Energy Incorporated		8.50			6-15-2019		3,675,000		3,959,813
NSG Holdings LLC 144A		7.75			12-15-2025		3,640,000		3,867,500
Reliant Energy Incorporated		9.24			7-2-2017		1,621,527		1,670,173
Reliant Energy Incorporated		9.68			7-2-2026		780,000		811,200

									11,050,498


Total Corporate Bonds and Notes (Cost $725,283,714)									757,993,364


	Dividend yield					Shares
Preferred Stocks: 0.31%

Financials: 0.31%

Diversified Financial Services: 0.31%
GMAC Capital Trust I ±		8.13					81,784		2,196,718


Total Preferred Stocks (Cost $2,078,248)									2,196,718


	Interest rate					Principal

Term Loans: 14.14%
Advantage Sales & Marketing LLC		8.25			6-17-2018	$	846,429		853,835
Alliance Laundry Systems LLC		9.50			12-10-2019		3,407,755		3,439,720
Applied Systems Incorporated		8.25			6-8-2017		680,000		682,836
Capital Automotive LP		4.00			4-5-2019		5,105,779		5,132,891
Capital Automotive LP		6.00			4-30-2020		2,450,000		2,520,437
CBAC Borrower LLC		8.25			7-2-2020		1,965,000		2,023,950
CCM Merger Incorporated		5.00			3-1-2017		4,604,130		4,627,150
Centaur LLC		8.75			2-20-2020		3,135,000		3,168,952
Dell Incorporated <		0.00			4-30-2020		18,645,000		18,530,333
Federal-Mogul Corporation		2.12			12-27-2014		2,000,071		1,979,710
Federal-Mogul Corporation		2.12			12-27-2015		1,534,579		1,518,957
Focus Brands Incorporated		10.25			8-21-2018		4,124,203		4,175,755
Four Seasons Holdings Incorporated		6.25			12-24-2020		550,000		563,750
HHI Holdings LLC		5.00			10-5-2018		3,348,865		3,368,388
Learfield Communications Incorporated		8.75			10-9-2021		165,000		168,300
Level 3 Financing Incorporated		4.00			1-15-2020		5,750,000		5,773,978
LTS Buyer LLC		8.00			4-12-2021		85,000		86,063
nTelos Incorporated		5.75			11-9-2019		1,120,715		1,124,918
Philadelphia Energy Solutions LLC		6.25			4-4-2018		4,736,200		4,238,899
Sedgwick CMS Holdings Incorporated		8.00			12-12-2018		850,000		863,813
Spin Holdco Incorporated		4.25			11-14-2019		1,850,000		1,845,375
Springleaf Finance Corporation		4.75			9-30-2019		775,000		782,425
Tallgrass Energy Partners LP		5.25			11-13-2018		2,358,360		2,373,099

The accompanying notes are an integral part of these financial statements.


16		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—October 31, 2013 (unaudited)


Security name	Interest rate			Maturity date		Principal		Value


Term Loans (continued)
Texas Competitive Electric Holdings LLC		3.71	%		10-10-2014	$	34,355,889	$	23,111,550
TWCC Holdings Corporation		7.00			6-26-2020		330,000		338,045
United Surgical Partners International Incorporated		4.75			4-3-2019		2,216,418		2,223,068
W3 Company		9.25			9-13-2020		488,775		497,329
WASH Multifamily Laundry Systems LLC		5.25			2-21-2019		2,641,725		2,648,329

Total Term Loans (Cost $107,570,400)									98,661,855


Yankee Corporate Bonds and Notes: 6.38%

Consumer Discretionary: 0.23%

Media: 0.23%
Videotron Limited		5.00			7-15-2022		745,000		731,963
Videotron Limited		6.38			12-15-2015		100,000		100,500
Videotron Limited		9.13			4-15-2018		714,000		750,593

									1,583,056


Energy: 0.29%

Oil, Gas & Consumable Fuels: 0.29%
Griffin Coal Mining Company Limited 144A(s)		9.50			12-1-2016		2,119,383		1,759,087
Griffin Coal Mining Company Limited (s)		9.50			12-1-2016		290,088		240,773

									1,999,860


Financials: 0.44%

Consumer Finance: 0.34%
Wind Acquisition Finance SpA 144A		11.75			7-15-2017		2,205,000		2,342,813


Diversified Financial Services: 0.10%
Nielsen Holding and Finance BV 144A		5.50			10-1-2021		700,000		719,250
Preferred Term Securities XII Limited (s)(i)		0.00			12-24-2033		1,540,000		15

									719,265


Health Care: 0.49%

Pharmaceuticals: 0.49%
VPII Escrow Corporation 144A		6.75			8-15-2018		1,120,000		1,226,400
VPII Escrow Corporation 144A		7.50			7-15-2021		1,995,000		2,214,450

									3,440,850


Information Technology: 0.79%

Computers & Peripherals: 0.79%
Seagate Technology HDD Holdings		6.80			10-1-2016		1,275,000		1,443,938
Seagate Technology HDD Holdings		6.88			5-1-2020		1,860,000		2,041,350
Seagate Technology HDD Holdings		7.00			11-1-2021		1,805,000		1,994,525

									5,479,813

The accompanying notes are an integral part of these financial statements.


Portfolio of investments—October 31, 2013 (unaudited)		Wells Fargo Advantage Income Opportunities Fund			17


Security name	Interest rate			Maturity date		Principal		Value


Materials: 0.83%

Metals & Mining: 0.59%
Novelis Incorporated		8.38	%		12-15-2017	$	1,100,000	$	1,177,000
Novelis Incorporated		8.75			12-15-2020		2,675,000		2,975,938

									4,152,938


Paper & Forest Products: 0.24%
Sappi Limited 144A		7.50			6-15-2032		2,155,000		1,675,513


Telecommunication Services: 3.31%

Diversified Telecommunication Services: 3.09%
Intelsat Bermuda Limited 144A		7.75			6-1-2021		1,985,000		2,094,175
Intelsat Bermuda Limited 144A		8.13			6-1-2023		890,000		941,175
Intelsat Jackson Holdings Limited 144A		5.50			8-1-2023		4,775,000		4,607,875
Intelsat Jackson Holdings Limited		7.25			4-1-2019		6,515,000		7,019,913
Intelsat Jackson Holdings Limited		7.50			4-1-2021		2,214,000		2,413,260
Intelsat Jackson Holdings Limited		8.50			11-1-2019		905,000		993,238
Intelsat Jackson Holdings SA		7.25			10-15-2020		3,225,000		3,499,125

									21,568,761


Wireless Telecommunication Services: 0.22%
Telesat Canada Incorporated 144A		6.00			5-15-2017		1,475,000		1,541,375


Total Yankee Corporate Bonds and Notes (Cost $42,818,482)									44,504,244


	Yield					Shares

Short-Term Investments: 4.32%

Investment Companies: 4.32%
Wells Fargo Advantage Cash Investment Money Market Fund, Select Class (l)(u)##		0.08					30,116,566		30,116,566


Total Short-Term Investments (Cost $30,116,566)									30,116,566


Total investments in securities
(Cost $910,977,175) *	133.95	%		934,727,819
Other assets and liabilities, net	(33.95	)		(236,887,088	)

Total net assets	100.00	%	$	697,840,731

The accompanying notes are an integral part of these financial statements.


18		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—October 31, 2013 (unaudited)

†	Non-income-earning security

(a)	Security is fair valued by the Management Valuation Team, and in certain instances by the Board of Trustees, in accordance with procedures approved by the Board of Trustees.

144A	Security that may be resold to “qualified institutional buyers” under Rule 144A or security offered pursuant to Section 4(2) of the Securities Act of 1933, as amended.

¥	A payment-in-kind (PIK) security is a security in which the issuer may make interest or dividend payments in cash or additional securities. These additional securities generally have the same terms as the original holdings.

%%	Security issued on a when-issued basis.

(s)	Security is currently in default with regards to scheduled interest and/or principal payments. The Fund has stopped accruing interest on this security.

±	Variable rate investment. The rate shown is the rate in effect at period end.

<	All or a portion of the position represents an unfunded term loan commitment.

(i)	Illiquid security

(l)	Investment in an affiliate

(u)	Rate shown is the 7-day annualized yield at period end.

##	All or a portion of this security has been segregated for when-issued securities or unfunded term loans.

*	Cost for federal income tax purposes is $918,958,153 and unrealized appreciation (depreciation) consists of:


Gross unrealized appreciation	$	49,099,058
Gross unrealized depreciation		(33,329,392	)

Net unrealized appreciation	$	15,769,666

The accompanying notes are an integral part of these financial statements.


Statement of assets and liabilities —October 31, 2013 (unaudited)		Wells Fargo Advantage Income Opportunities Fund			19




Assets
Investments
In unaffiliated securities, at value (see cost below)	$	904,611,253
In affiliated securities, at value (see cost below)		30,116,566

Total investments, at value (see cost below)		934,727,819
Cash		5,221,111
Receivable for investments sold		1,713,331
Receivable for interest and dividends		15,393,685
Prepaid expenses and other assets		17,001

Total assets		957,072,947


Liabilities
Dividends payable		4,826,367
Payable for investments purchased		23,677,776
Secured borrowing payable		230,211,266
Advisory fee payable		315,744
Due to other related parties		39,053
Accrued expenses and other liabilities		162,010

Total liabilities		259,232,216

Total net assets	$	697,840,731


NET ASSETS CONSIST OF
Paid-in capital	$	983,331,382
Overdistributed net investment income		(7,830,738	)
Accumulated net realized losses on investments		(301,410,557	)
Net unrealized gains on investments		23,750,644

Total net assets	$	697,840,731


NET ASSET VALUE PER SHARE
Based on $697,840,731 divided by 70,983,001 shares issued and outstanding (100,000,000 shares authorized)		$9.83


Investments in unaffiliated securities, at cost	$	880,860,609

Investments in affiliated securities, at cost	$	30,116,566

Total investments, at cost	$	910,977,175

The accompanying notes are an integral part of these financial statements.


20		Wells Fargo Advantage Income Opportunities Fund		Statement of operations—six months ended October 31, 2013 (unaudited)




Investment income
Interest	$	33,471,378
Dividends		68,445
Income from affiliated securities		6,226

Total investment income		33,546,049


Expenses
Advisory fee		2,805,107
Administration fee		233,759
Custody and accounting fees		28,173
Professional fees		35,840
Shareholder report expenses		50,886
Trustees’ fees and expenses		5,897
Transfer agent fees		13,055
Interest expense		243,915
Secured borrowing fees		1,017,509
Other fees and expenses		27,357

Total expenses		4,461,498
Less: Fee waivers and/or expense reimbursements		(881,937	)

Net expenses		3,579,561

Net investment income		29,966,488


REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS

Net realized gains on investments		3,320,733
Net change in unrealized gains (losses) on investments		(29,203,671	)

Net realized and unrealized gains (losses) on investments		(25,882,938	)

Net increase in net assets resulting from operations	$	4,083,550

The accompanying notes are an integral part of these financial statements.


Statement of changes in net assets		Wells Fargo Advantage Income Opportunities Fund			21


	Six months ended October 31, 2013 (unaudited)			Year ended April 30, 2013

Operations
Net investment income	$	29,966,488		$	62,380,589
Net realized gains on investments		3,320,733			11,572,543
Net change in unrealized gains (losses) on investments		(29,203,671	)		27,158,011

Net increase in net assets resulting from operations		4,083,550			101,111,143


Distributions to shareholders from
Net investment income		(28,961,064	)		(64,767,000	)


Capital share transactions
Net asset value of common shares issued under the Automatic Dividend Reinvestment Plan		162,908			2,403,707

Total increase (decrease) in net assets		(24,714,606	)		38,747,850


Net assets
Beginning of period		722,555,337			683,807,487

End of period	$	697,840,731		$	722,555,337


Overdistributed net investment income	$	(7,830,738	)	$	(4,920,932	)

The accompanying notes are an integral part of these financial statements.


22		Wells Fargo Advantage Income Opportunities Fund		Statement of cash flows—six months ended October 31, 2013 (unaudited)




Cash flows from operating activities:
Net increase in net assets resulting from operations	$	4,083,550

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:
Purchase of investment securities		(254,208,973	)
Proceeds from disposition of investment securities		255,640,903
Amortization		(1,263,335	)
Purchase of short-term investment securities, net		(12,918,997	)
Decrease in dividends and interest receivable		813,438
Decrease in receivable for investments sold		7,370,107
Decrease in prepaid expenses and other assets		82,880
Increase in payable for investments purchased		8,392,169
Increase in advisory fee payable		12,092
Increase in due to other related parties		151
Decrease in accrued expenses and other liabilities		(72,949	)
Unrealized losses on investments		29,203,671
Litigation payments received		202,244
Net realized gains on investments		(3,320,733	)

Net cash provided by operating activities		34,016,218


Cash flows from financing activities:
Cash distributions paid		(28,797,275	)
Increase in secured borrowing payable		2,168

Net cash used in financing activities		(28,795,107	)

Net increase in cash		5,221,111


Cash:
Beginning of period	$	0

End of period	$	5,221,111


Supplemental cash disclosure:
Cash paid for interest	$	246,989


Supplemental non-cash financing disclosure:
Reinvestment of dividends	$	162,908

The accompanying notes are an integral part of these financial statements.


Financial highlights		Wells Fargo Advantage Income Opportunities Fund			23

(For a share outstanding throughout each period)


	Six months ended October 31, 2013 (unaudited)			Year ended April 30
	Six months ended October 31, 2013 (unaudited)			2013			2012			2011			2010			2009
Net asset value, beginning of period	$	10.18		$	9.67		$	10.11		$	9.69		$	7.37		$	12.32
Net investment income		0.42	¹		0.88	¹		0.95	¹		1.02	¹		1.06	¹		1.35	¹
Net realized and unrealized gains (losses) on investments		(0.36	)		0.54			(0.37	)		0.42			2.41			(4.91	)
Distributions to preferred shareholders from
Net investment income		0.00			0.00			0.00			(0.00	)^1,2		(0.01	)¹		(0.08	)¹

Total from investment operations		0.06			1.42			0.58			1.44			3.46			(3.64	)
Distributions to common shareholders from
Net investment income		(0.41	)		(0.91	)		(1.02	)		(1.02	)		(1.08	)		(1.31	)
Tax basis return of capital		0.00			0.00			0.00			0.00			(0.06	)¹		0.00

Total distributions to common shareholders		(0.41	)		(0.91	)		(1.02	)		(1.02	)		(1.14	)		(1.31	)
Net asset value, end of period	$	9.83		$	10.18		$	9.67		$	10.11		$	9.69		$	7.37
Market value, end of period	$	9.14		$	10.23		$	10.29		$	10.38		$	9.63		$	7.30
Total return based on market value³		(6.62	)%		8.90	%		10.03	%		19.68	%		49.84	%		(25.48	)%
Ratios to average net assets (annualized)
Gross expenses⁴		1.27	%		1.29	%		1.35	%		1.44	%		1.79	%		3.09	%
Net expenses⁴		1.02	%		1.05	%		1.03	%		1.09	%		1.13	%		2.30	%
Net investment income		8.52	%		8.89	%		9.89	%		10.55	%⁵		11.81	%⁵		14.35	%⁵
Supplemental data
Portfolio turnover rate		16	%		27	%		25	%		42	%		108	%		88	%
Net assets of common shareholders, end of period (000s omitted)		$697,841			$722,555			$683,807			$709,850			$676,144			$508,602

Borrowings outstanding, end of period (000s omitted)		$230,000			$230,000			$230,000			$230,000			N/A			N/A
Asset coverage per $1,000 of borrowing, end of period		$4,034			$4,142			$3,973			$4,088			N/A			N/A

Liquidation value of Preferred Shares, end of period (000s omitted)		N/A			N/A			N/A			N/A			$196,000			$196,000
Asset coverage ratio for Preferred Shares, end of period		N/A			N/A			N/A			N/A			394	%		315	%

1.	Calculated based upon average common shares outstanding

2.	Amount is less than $0.005.

Total return is calculated assuming a purchase of common stock on the first day and a sale on the last day of the period reported. Dividends and distributions, if any, are assumed for purposes of these calculations to be reinvested at prices obtained under the Fund’s Automatic Dividend Reinvestment Plan. Total return does not reflect brokerage commissions that a shareholder would pay on the purchase and sale of shares. Returns for periods of less than one year are not annualized

4.	Ratios include interest expense relating to interest associated with borrowings and/or leverage transactions as follows:


Six months ended October 31, 2013	0.07	%
Year ended April 30, 2013	0.08	%
Year ended April 30, 2012	0.08	%
Year ended April 30, 2011	0.11	%
Year ended April 30, 2010	0.02	%
Year ended April 30, 2009	0.79	%

5.	The net investment income ratio reflects distributions paid to preferred shareholders.

The accompanying notes are an integral part of these financial statements.


24		Wells Fargo Advantage Income Opportunities Fund		Notes to financial statements (unaudited)

1. ORGANIZATION

Wells Fargo Advantage Income Opportunities Fund (the “Fund”) was organized as a statutory trust under the laws of the state of Delaware on December 3, 2002 and is registered as a diversified closed-end management investment company under the Investment Company Act of 1940, as amended.

2. SIGNIFICANT ACCOUNTING POLICIES

The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund, are in conformity with U.S. generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Securities valuation

All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern Time).

Fixed income securities acquired with maturities exceeding 60 days are valued based on evaluated bid prices provided by an independent pricing service which may utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. If prices are not available from the independent pricing service or prices received are deemed not representative of market value, values will be obtained from an independent broker-dealer or otherwise determined based on the Fund’s Valuation Procedures.

Short-term securities, with maturities of 60 days or less at time of purchase, generally are valued at amortized cost which approximates fair value. The amortized cost method involves valuing a security at its cost, plus accretion of discount or minus amortization of premium over the period until maturity.

Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the primary exchange or market for the security that day, the prior day’s price will be deemed “stale” and fair values will be determined in accordance with the Fund’s Valuation Procedures.

Investments in registered open-end investment companies are valued at net asset value.

Investments which are not valued using any of the methods discussed above are valued at their fair value, as determined in good faith by the Board of Trustees of the Fund. The Board of Trustees has established a Valuation Committee comprised of the Trustees and has delegated to it the authority to take any actions regarding the valuation of portfolio securities that the Valuation Committee deems necessary or appropriate, including determining the fair value of portfolio securities, unless the determination has been delegated to the Management Valuation Team of Wells Fargo Funds Management, LLC (“Funds Management”). The Board of Trustees retains the authority to make or ratify any valuation decisions or approve any changes to the Valuation Procedures as it deems appropriate. On a quarterly basis, the Board of Trustees receives reports on any valuation actions taken by the Valuation Committee or the Management Valuation Team which may include items for ratification.

Valuations of fair valued securities are compared to the next actual sales price when available, or other appropriate market values, to assess the continued appropriateness of the fair valuation methodologies used. These securities are fair valued on a day-to-day basis, taking into consideration changes to appropriate market information and any significant changes to the inputs considered in the valuation process until there is a readily available price provided on an exchange or by an independent pricing service. Valuations received from an independent pricing service or independent broker-dealer quotes are periodically validated by comparisons to most recent trades and valuations provided by other independent pricing services in addition to the review of prices by the adviser and/or subadviser. Unobservable inputs used in determining fair valuations are identified based on the type of security, taking into consideration factors utilized by market participants in valuing the investment, knowledge about the issuer and the current market environment.

When-issued transactions

The Fund may purchase securities on a forward commitment or when-issued basis. The Fund records a when-issued transaction on the trade date and will segregate assets in an amount at least equal in value to the Fund’s commitment to purchase when-issued securities. Securities purchased on a when-issued basis are marked-to-market daily and the Fund begins earning interest on the settlement date. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.


Notes to financial statements (unaudited)		Wells Fargo Advantage Income Opportunities Fund			25

Term loans

The Fund may invest in term loans. The Fund begins earning interest when the loans are funded. The loans pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. The Fund assumes the credit risk of the borrower and there could be potential loss to the Fund in the event of default by the borrower.

Security transactions and income recognition

Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.

Interest income is accrued daily and bond discounts are accreted and premiums are amortized daily based on the effective interest method. To the extent debt obligations are placed on non-accrual status, any related interest income may be reduced by writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. If the issuer subsequently resumes interest payments or when the collectability of interest is reasonably assured, the debt obligation is removed from non-accrual status.

Dividend income is recognized on the ex-dividend date.

Distributions to shareholders

Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations, which may differ in amount or character from net investment income and realized gains recognized for purposes of U.S. generally accepted accounting principles.

Federal and other taxes

The Fund intends to continue to qualify as a regulated investment company by distributing substantially all of its investment company taxable income and any net realized capital gains (after reduction for capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes was required.

The Fund’s income and federal excise tax returns and all financial records supporting those returns for the prior three fiscal years are subject to examination by the federal and Delaware revenue authorities. Management has analyzed the Fund’s tax positions taken on federal, state, and foreign tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability.

As of April 30, 2013, capital loss carryforwards available to offset future net realized capital gains were as follows through the indicated expiration dates:


2015	2016		2017		2018
$1,830,407	$	15,525,027	$	130,598,584	$	155,329,141

3. FAIR VALUATION MEASUREMENTS

Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to significant unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follow

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, use of amortized cost, etc.)

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodologies used for valuing investments in securities are not necessarily an indication of the risk associated with investing in those securities.


26		Wells Fargo Advantage Income Opportunities Fund		Notes to financial statements (unaudited)

As of October 31, 2013, the inputs used in valuing investments in securities were as follows:


Investments in securities	Quoted prices (Level 1)		Other significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Equity securities
Common stocks	$	1,255,072	$	0	$	0	$	1,255,072
Preferred stocks		2,196,718		0		0		2,196,718
Corporate bonds and notes		0		757,993,364		0		757,993,364
Term loans		0		80,623,248		18,038,607		98,661,855
Yankee corporate bonds and notes		0		44,504,244		0		44,504,244
Short-term investments
Investment companies		30,116,566		0		0		30,116,566
	$	33,568,356	$	883,120,856	$	18,038,607	$	934,727,819

Transfers in and transfers out are recognized at the end of the reporting period. For the six months ended October 31, 2013, the Fund did not have any transfers into/out of Level 1 or Level 2.

The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:


	Common stocks			Term loans			Total
Balance as of April 30, 2013	$	2,149		$	20,331,214		$	20,333,363
Accrued discounts (premiums)		0			8,053			8,053
Realized gains (losses)		0			(2,524	)		(2,524	)
Change in unrealized gains (losses)		(2,149	)		(689,881	)		(692,030	)
Purchases		0			5,419,262			5,419,262
Sales		0			(219,409	)		(219,409	)
Transfers into Level 3		0			0			0
Transfers out of Level 3		0			(6,808,108	)		(6,808,108	)
Balance as of October 31, 2013	$	0		$	18,038,607		$	18,038,607
Change in unrealized gains (losses) relating to securities still held at October 31, 2013	$	(2,149	)	$	(604,345	)	$	(606,494	)

The investment types categorized above were valued using indicative broker quotes and are therefore considered Level 3 inputs.

Quantitative unobservable inputs used by the brokers are often proprietary and not provided to the Fund and therefore the disclosure that would address these inputs is not included above.

4. TRANSACTIONS WITH AFFILIATES AND OTHER EXPENSES

Advisory fee

Funds Management, an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”), is the adviser to the Fund and is entitled to receive a fee at an annual rate of 0.60% of the Fund’s average daily total assets. Total assets consist of the net assets of the Fund plus borrowings or other leverage for investment purposes to the extent excluded in calculating net assets. Funds Management has committed through February 25, 2014, to waive fees and/or reimburse expenses to the extent necessary to limit the Fund’s borrowing expenses to an amount that is 0.05% lower than what the borrowing expenses would have been if the Fund had not redeemed its Auction Market Preferred Shares (“Preferred Shares”). Funds Management contractually waived its advisory fee in the amount of $881,937 for the six months ended October 31, 2013.

Funds Management has retained the services of a subadviser to provide daily portfolio management to the Fund. The fee for subadvisory services is borne by Funds Management. Wells Capital Management Incorporated, an affiliate of Funds Management and an indirect, wholly owned subsidiary of Wells Fargo, is the subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate of 0.40% of the Fund’s average daily total assets.


Notes to financial statements (unaudited)		Wells Fargo Advantage Income Opportunities Fund			27

Administration fee

Funds Management also serves as the administrator to the Fund providing the Fund with a wide range of administrative services necessary to the operation of the Fund. Funds Management is entitled to receive an annual administration fee from the Fund equal to 0.05% of the Fund’s average daily total assets.

5. CAPITAL SHARE TRANSACTIONS

The Fund has authorized capital of 100,000,000 shares with no par value. For the six months ended October 31, 2013, and year ended April 30, 2013, the Fund issued 15,971 and 241,079 shares, respectively.

The Fund no longer has any Preferred Shares outstanding.

6. BORROWINGS

The Fund has borrowed approximately $230 million through a secured debt financing agreement administered by a major financial institution (the “Facility”). The Facility has a commitment amount of $230 million which expires on February 24, 2014, at which point it may be renegotiated and potentially renewed for another one-year term. At October 31, 2013, the Fund had secured borrowings outstanding in the amount of $230,211,266 (including accrued interest and usage and commitment fees payable).

The Fund’s borrowings under the Facility are generally charged interest at a rate based on the rates of the commercial paper notes issued to fund the Fund’s borrowings or at the London Interbank Offered Rate (LIBOR) plus 1.0%. During the six months ended October 31, 2013, an effective interest rate of 0.21% was incurred on the borrowings. Interest expense of $243,915, representing 0.07% of the Fund’s average daily net assets, was incurred during the six months ended October 31, 2013.

The Fund has pledged all of its assets to secure the borrowings and currently pays, on a monthly basis, a usage fee at an annual rate of 0.40% of the daily average outstanding principal amount of borrowings and commitment fee at an annual rate of 0.40% of the product of (i) the daily average outstanding principal amount of borrowings and (ii) 1.02. The secured borrowing fees on the Statement of Operations of $1,017,509 represents the usage fee, commitment fee and structuring fees. For the six months ended October 31, 2013, the Fund paid structuring fees in the amount of $67,660.

7. INVESTMENT PORTFOLIO TRANSACTIONS

Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the six months ended October 31, 2013 were $190,729,310 and $149,548,464, respectively.

As of October 31, 2013, the Fund had unfunded term loan commitments of $19,730,700.

8. INDEMNIFICATION

Under the Fund’s organizational documents, the officers and directors are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.

9. SUBSEQUENT DISTRIBUTIONS

The Fund declared the following distributions to common shareholders:


Declaration date	Record date	Payable date	Per share amount
October 25, 2013	November 14, 2013	December 2, 2013	$0.068
November 15, 2013	December 16, 2013	January 2, 2014	0.068

These distributions are not reflected in the accompanying financial statements. The final determination of the source of all distributions is subject to change and made after the Fund’s tax year-end.


28		Wells Fargo Advantage Income Opportunities Fund		Other information (unaudited)

PROXY VOTING INFORMATION

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1-800-222-8222, visiting our website at wellsfargoadvantagefunds.com, or visiting the SEC website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge on the Fund’s website at wellsfargoadvantagefunds.com or by visiting the SEC website at sec.gov.

ANNUAL MEETING OF SHAREHOLDERS

On August 5, 2013, an Annual Meeting of Shareholders for the Fund was held to consider the following proposal. The results of the proposal are indicated below.

Proposal 1 – Election of trustees:


Net assets voted “For”	Peter G. Gordon	$	614,443,892
Net assets voted “Withhold”		$	28,132,659
Net assets voted “For”	Timothy J. Penny	$	613,052,485
Net assets voted “Withhold”		$	29,524,066
Net assets voted “For”	Michael S. Scofield	$	613,588,348
Net assets voted “Withhold”		$	28,988,203

PORTFOLIO HOLDINGS INFORMATION

The complete portfolio holdings for the Fund are publicly available on the Fund’s website (wellsfargoadvantagefunds.com) on a monthly, 30-day or more delayed basis. The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q, which is available without charge by visiting the SEC website at sec.gov. In addition, the Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and at regional offices in New York City, at 233 Broadway, and in Chicago, at 175 West Jackson Boulevard, Suite 900. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330.


Other information (unaudited)		Wells Fargo Advantage Income Opportunities Fund			29

BOARD OF TRUSTEES AND OFFICERS

The following table provides basic information about the Board of Trustees (the “Trustees”) and Officers of the Fund. Each of the Trustees and Officers listed below acts in identical capacities for each fund in the Wells Fargo Advantage family of funds, which consists of 131 mutual funds¹comprising the Wells Fargo Funds Trust, Wells Fargo Variable Trust, Wells Fargo Master Trust, and four closed-end funds, including the Fund (collectively the “Fund Complex”). All of the Trustees are also Members of the Audit and Governance Committees of each Trust in the Fund Complex. The mailing address of each Trustee and Officer is 525 Market Street, 12th Floor, San Francisco, CA 94105. The Board of Trustees is classified into three classes of which one is elected annually. Each Trustee serves a three-year term concurrent with the class from which the Trustee is elected. Each Officer serves an indefinite term.

Independent Trustees


Name and year of birth	Position held and length of service	Principal occupations during past five years	Other directorships during past five years
Peter G. Gordon (Born 1942)	Trustee, since 2010; Chairman, since 2010	Co-Founder, Retired Chairman, President and CEO of Crystal Geyser Water Company. Trustee Emeritus, Colby College.	Asset Allocation Trust
Isaiah Harris, Jr. (Born 1952)	Trustee, since 2010	Retired. Prior thereto, President and CEO of BellSouth Advertising and Publishing Corp. from 2005 to 2007, President and CEO of BellSouth Enterprises from 2004 to 2005 and President of BellSouth Consumer Services from 2000 to 2003. Emeritus member of the Iowa State University Foundation Board of Governors. Emeritus Member of the Advisory Board of Iowa State University School of Business. Advisory Board Member, Palm Harbor Academy (charter school). Mr. Harris is a certified public accountant.	CIGNA Corporation; Deluxe Corporation; Asset Allocation Trust
Judith M. Johnson (Born 1949)	Trustee, since 2010; Audit Committee Chairman, since 2010	Retired. Prior thereto, Chief Executive Officer and Chief Investment Officer of Minneapolis Employees Retirement Fund from 1996 to 2008. Ms. Johnson is an attorney, certified public accountant and a certified managerial accountant.	Asset Allocation Trust
Leroy Keith, Jr. (Born 1939)	Trustee, since 2003	Chairman, Bloc Global Services (development and construction). Trustee of the Evergreen Funds from 1983 to 2010. Former Managing Director, Almanac Capital Management (commodities firm), former Partner, Stonington Partners, Inc. (private equity fund), former Director, Obagi Medical Products Co. and former Director, Lincoln Educational Services.	Trustee, Virtus Fund Complex (consisting of 48 portfolios as of 1/31/2013); Asset Allocation Trust
David F. Larcker (Born 1950)	Trustee, since 2010	James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Morgan Stanley Director of the Center for Leadership Development and Research and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005.	Asset Allocation Trust
Olivia S. Mitchell (Born 1953)	Trustee, since 2010	International Foundation of Employee Benefit Plans Professor, Wharton School of the University of Pennsylvania since 1993. Director of Wharton’s Pension Research Council and Boettner Center on Pensions & Retirement Research, and Research Associate at the National Bureau of Economic Research. Previously, Cornell University Professor from 1978 to 1993.	Asset Allocation Trust
Timothy J. Penny (Born 1951)	Trustee, since 2010	President and CEO of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007 and Senior Fellow at the Humphrey Institute Policy Forum at the University of Minnesota since 1995. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007.	Asset Allocation Trust


30		Wells Fargo Advantage Income Opportunities Fund		Other information (unaudited)


Name and year of birth	Position held and length of service	Principal occupations during past five years	Other directorships during past five years
Michael S. Scofield (Born 1943)	Trustee, since 2003	Served on the Investment Company Institute’s Board of Governors and Executive Committee from 2008-2011 as well the Governing Council of the Independent Directors Council from 2006-2011 and the Independent Directors Council Executive Committee from 2008-2011. Chairman of the IDC from 2008-2010. Institutional Investor (Fund Directions) Trustee of Year in 2007. Trustee of the Evergreen Funds (and its predecessors) from 1984 to 2010. Chairman of the Evergreen Funds from 2000-2010. Former Trustee of the Mentor Funds. Retired Attorney, Law Offices of Michael S. Scofield.	Asset Allocation Trust
Donald C. Willeke (Born 1940)	Trustee, since 2010	Principal of the law firm of Willeke & Daniels. General Counsel of the Minneapolis Employees Retirement Fund from 1984 until its consolidation into the Minnesota Public Employees Retirement Association on June 30, 2010. Director and Vice Chair of The Tree Trust (non-profit corporation). Director of the American Chestnut Foundation (non-profit corporation).	Asset Allocation Trust

Officers


Name and year of birth	Position held and length of service	Principal occupations during past five years
Karla M. Rabusch (Born 1959)	President, since 2010	Executive Vice President of Wells Fargo Bank, N.A. and President of Wells Fargo Funds Management, LLC since 2003.
Jeremy DePalma¹ (Born 1974)	Treasurer, since 2012	Senior Vice President of Wells Fargo Funds Management, LLC since 2009. Senior Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010. Vice President, Evergreen Investment Services, Inc. from 2004 to 2007. Head of the Fund Reporting and Control Team within Fund Administration from 2005 to 2010.
C. David Messman (Born 1960)	Secretary, since 2010; Chief Legal Officer, since 2010	Senior Vice President and Secretary of Wells Fargo Funds Management, LLC since 2001. Vice President and Managing Counsel of Wells Fargo Bank, N.A. from 1996 to 2013. Vice President and Assistant General Counsel of Wells Fargo Bank, N.A. since 2013.
Debra Ann Early (Born 1964)	Chief Compliance Officer, since 2010	Chief Compliance Officer of Wells Fargo Funds Management, LLC since 2007. Chief Compliance Officer of Parnassus Investments from 2005 to 2007. Chief Financial Officer of Parnassus Investments from 2004 to 2007.
David Berardi (Born 1975)	Assistant Treasurer, since 2009	Vice President of Wells Fargo Funds Management, LLC since 2009. Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010. Assistant Vice President of Evergreen Investment Services, Inc. from 2004 to 2008. Manager of Fund Reporting and Control for Evergreen Investment Management Company, LLC from 2004 to 2010.

1.	Jeremy DePalma acts as Treasurer of 58 funds and Assistant Treasurer of 73 funds in the Fund Complex.


Automatic dividend reinvestment plan		Wells Fargo Advantage Income Opportunities Fund			31

AUTOMATIC DIVIDEND REINVESTMENT PLAN

All common shareholders are eligible to participate in the Automatic Dividend Reinvestment Plan (“the Plan”). Pursuant to the Plan, unless a common shareholder is ineligible or elects otherwise, all cash dividends and capital gains distributions are automatically reinvested by Computershare Trust Company, N.A., as agent for shareholders in administering the Plan (“Plan Agent”), in additional common shares of the Fund. Whenever the Fund declares an ordinary income dividend or a capital gain dividend (collectively referred to as “dividends”) payable either in shares or in cash, nonparticipants in the Plan will receive cash, and participants in the Plan will receive the equivalent in common shares. The shares are acquired by the Plan Agent for the participant’s account, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized common shares from the Fund (“newly issued common shares”) or (ii) by purchase of outstanding common shares on the open-market (open-market purchases) on the NYSE Amex or elsewhere. If, on the payment date for any dividend or distribution, the net asset value per share of the common shares is equal to or less than the market price per common share plus estimated brokerage commissions (“market premium”), the Plan Agent will invest the amount of such dividend or distribution in newly issued shares on behalf of the participant. The number of newly issued common shares to be credited to the participant’s account will be determined by dividing the dollar amount of the dividend by the net asset value per share on the date the shares are issued, provided that the maximum discount from the then current market price per share on the date of issuance may not exceed 5%. If on the dividend payment date the net asset value per share is greater than the market value or market premium (“market discount”), the Plan Agent will invest the dividend amount in shares acquired on behalf of the participant in open-market purchases. There will be no brokerage charges with respect to shares issued directly by the Fund as a result of dividends or capital gains distributions payable either in shares or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent’s open-market purchases in connection with the reinvestment of dividends. The automatic reinvestment of dividends and distributions will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such dividends. All correspondence concerning the Plan should be directed to the Plan Agent at P.O. Box 43010, Providence, Rhode Island 02940-3010 or by calling 1-800-730-6001.


32		Wells Fargo Advantage Income Opportunities Fund		List of abbreviations

The following is a list of common abbreviations for terms and entities that may have appeared in this report.

ACA	— ACA Financial Guaranty Corporation

ADR	— American depositary receipt

ADS	— American depositary shares

AGC	— Assured Guaranty Corporation

AGM	— Assured Guaranty Municipal

Ambac

— Ambac Financial Group Incorporated

AMT	— Alternative minimum tax

AUD	— Australian dollar

BAN	— Bond anticipation notes

BHAC	— Berkshire Hathaway Assurance Corporation

BRL	— Brazilian real

CAB	— Capital appreciation bond

CAD	— Canadian dollar

CCAB	— Convertible capital appreciation bond

CDA	— Community Development Authority

CDO	— Collateralized debt obligation

CHF	— Swiss franc

COP	— Certificate of participation

DKK	— Danish krone

DRIVER

— Derivative inverse tax-exempt receipts

DW&P	— Department of Water & Power

DWR	— Department of Water Resources

ECFA	— Educational & Cultural Facilities Authority

EDA	— Economic Development Authority

EDFA	— Economic Development Finance Authority

ETF	— Exchange-traded fund

EUR

— Euro

FDIC	— Federal Deposit Insurance Corporation

FFCB	— Federal Farm Credit Banks

FGIC	— Financial Guaranty Insurance Corporation

FHA	— Federal Housing Administration

FHLB	— Federal Home Loan Bank

FHLMC

— Federal Home Loan Mortgage Corporation

FICO	— The Financing Corporation

FNMA	— Federal National Mortgage Association

FSA	— Farm Service Agency

GBP	— Great British pound

GDR	— Global depositary receipt

GNMA	— Government National Mortgage Association

GO	— General obligation

HCFR	— Healthcare facilities revenue

HEFA	— Health & Educational Facilities Authority

HEFAR

— Higher education facilities authority revenue

HFA	— Housing Finance Authority

HFFA	— Health Facilities Financing Authority

HKD	— Hong Kong dollar

HUD	— Department of Housing and Urban Development

HUF	— Hungarian forint

IDA	— Industrial Development Authority

IDAG	— Industrial Development Agency

IDR	— Industrial development revenue

IEP	— Irish pound

JPY	— Japanese yen

KRW	— Republic of Korea won

LIBOR

— London Interbank Offered Rate

LIQ	— Liquidity agreement

LLC	— Limited liability company

LLP	— Limited liability partnership

LOC	— Letter of credit

LP	— Limited partnership

MBIA	— Municipal Bond Insurance Association

MFHR	— Multifamily housing revenue

MSTR	— Municipal securities trust receipts

MTN	— Medium-term note

MUD	— Municipal Utility District

MXN	— Mexican peso

MYR	— Malaysian ringgit

National

— National Public Finance Guarantee Corporation

NOK	— Norwegian krone

NZD	— New Zealand dollar

PCFA	— Pollution Control Financing Authority

PCL	— Public Company Limited

PCR	— Pollution control revenue

PFA	— Public Finance Authority

PFFA	— Public Facilities Financing Authority

PFOTER

— Puttable floating option tax-exempt receipts

plc	— Public limited company

PLN	— Polish zloty

PUTTER

— Puttable tax-exempt receipts

R&D	— Research & development

Radian

— Radian Asset Assurance

RAN	— Revenue anticipation notes

RDA	— Redevelopment Authority

RDFA	— Redevelopment Finance Authority

REIT	— Real estate investment trust

ROC	— Reset option certificates

SAVRS

— Select auction variable rate securities

SBA	— Small Business Authority

SEK	— Swedish krona

SFHR	— Single-family housing revenue

SFMR	— Single-family mortgage revenue

SGD	— Singapore dollar

SKK	— Slovakian koruna

SPA	— Standby purchase agreement

SPDR	— Standard & Poor’s Depositary Receipts

STRIPS

— Separate trading of registered interest and principal securities

TAN	— Tax anticipation notes

TBA	— To be announced

TIPS	— Treasury inflation-protected securities

TRAN	— Tax revenue anticipation notes

TRY	— Turkish lira

TTFA	— Transportation Trust Fund Authority

TVA	— Tennessee Valley Authority

ZAR	— South African rand

LOGO

Transfer Agent, Registrar, Shareholder Servicing

Agent & Dividend Disbursing Agent

Computershare Trust Company, N.A.

P.O. Box 43010

Providence, RI 02940-3010

1-800-730-6001

Website: wellsfargoadvantagefunds.com

Wells Fargo Funds Management, LLC, is a subsidiary of Wells Fargo & Company and is an affiliate of Wells Fargo & Company’s broker/dealer subsidiaries. This material is being prepared by Wells Fargo Funds Distributor, LLC. Member FINRA/SIPC, an affiliate of Wells Fargo & Company.

NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE

220815 12-13

SIO/SAR148 10-13

ITEM 2. CODE OF ETHICS

Not applicable.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT

Not applicable.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS

Not applicable.

ITEM 6. INVESTMENTS

The Portfolio of investments is included as part of the report to shareholders filed under Item 1 of this Form.

ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES

Not applicable.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

Not applicable.

ITEM 9.

PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS

Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of trustees that have been implemented since the Registrant’s last provided disclosure in response to the requirements of this Item.

ITEM 11. CONTROLS AND PROCEDURES

(a) The President and Treasurer have concluded that the Wells Fargo Advantage Income Opportunities Fund (the “Trust”) disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) provide reasonable assurances that material information relating to the Trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing of this report.

(b) There were no significant changes in the Trust’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

ITEM 12. EXHIBITS

(a)(1) Not applicable

(a)(2) Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.

(a)(3) Not applicable.

(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is filed and attached hereto as Exhibit 99.906CERT.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Wells Fargo Advantage Income Opportunities Fund

By:		/s/ Karla M. Rabusch

		Karla M. Rabusch
		President

Date:		December 23, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.


Wells Fargo Advantage Income Opportunities Fund

By:		/s/ Karla M. Rabusch

		Karla M. Rabusch
		President

Date:		December 23, 2013

By:		/s/ Jeremy DePalma

		Jeremy DePalma
		Treasurer

Date:		December 23, 2013

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents