Edgar Filing: WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND

Form N-CSR

LOGO

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

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: April 30, 2015

ITEM 1. REPORT TO STOCKHOLDERS

LOGO

Wells Fargo Advantage

Income Opportunities Fund

LOGO

Annual Report

April 30, 2015

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.

LOGO

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

Report of independent registered public accounting firm			29

Other information			30

Automatic dividend reinvestment plan			33

List of abbreviations			34

The views expressed and any forward-looking statements are as of April 30, 2015, 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

Expectations that an increase in the federal funds rate might come later in the year rather than sooner pushed long-term interest rates lower for most of the period, even as short-term rates remained anchored near zero.

The generally improving U.S. economy supported the prices of both stocks and high-yield bonds.

Dear Valued Shareholder:

We are pleased to offer you this annual report for the Wells Fargo Advantage Income Opportunities Fund for the 12-month period that ended April 30, 2015.

The 12-month period was marked by declining bond yields around the globe. For example, yields on developed sovereign debt declined sharply as the European Central Bank (ECB) and the Bank of Japan (BOJ) initiated or increased their quantitative easing programs. By the end of the period, some European sovereign debt issues were selling at negative yields. High-yield bonds tended to benefit from worldwide low interest rates (which made high-yield bonds even more attractive) and modest default rates, partially offset by weakness in the high-yield energy sector as a result of a lower price for oil. The BofA Merrill Lynch High Yield Master II Index¹ ended the 12-month period with a 2.57% return.

Major central banks continued to provide liquidity to the markets.

Throughout the reporting period, the Federal Open Market Committee (FOMC), which is the U.S. Federal Reserve’s (Fed’s) monetary policymaking body, kept its key interest rate effectively at zero. Even though the FOMC ended its bond-buying program in October 2014 and guided investors to expect an interest-rate hike in mid- to late 2015, the Fed remained accommodative. Expectations that an increase in the federal funds rate might come later in the year rather than sooner pushed long-term interest rates lower for most of the period, even as short-term rates remained anchored near zero.

The ECB maintained a variety of measures aimed at encouraging lending, including making funds available to banks at low interest rates and imposing a negative interest rate on bank deposits held at the central bank. In January 2015, the bank announced quantitative easing via significant bond purchases in an attempt to raise the eurozone’s inflation to just under its target of 2%. In Japan, the BOJ also maintained an aggressive monetary program aimed at combating deflation. Later in the period, the BOJ widened its program by purchasing Japanese stocks as well as bonds.

A recovering U.S. economy supported the high-yield bond market, but a decline in the price of oil caused weakness in energy bonds.

Reported U.S. gross domestic product (GDP) growth came in at a solid 4.6% annualized rate in the second quarter of 2014, a 5.0% annualized rate in the third quarter, and a 2.2% annualized rate in the fourth quarter. Although an early estimate for annualized GDP growth came in at -0.7% in the first quarter of 2015, the slowdown was attributed to short-term factors such as a harsh winter and a long-lived strike at West Coast ports. The country’s unemployment rate also drifted lower, declining from 6.3% in May 2014 to 5.4% in April 2015.

The generally improving U.S. economy supported the prices of both stocks and high-yield bonds. These markets often trade in sympathy because improved economic growth tends to result in not only higher corporate earnings but also lower default rates and improved access to credit. Despite the favorable economic backdrop, a decline in the price of oil caused losses in energy-related bonds and hindered returns in the broader high-yield bond market. Crude oil prices hit a near-term high in the summer of 2014, trading near $100 per barrel; oil declined sharply to less than $50 per barrel in March 2015. Although oil partly recovered in

¹	The BofA Merrill Lynch High Yield Master II Index is a market-capitalization-weighted index of domestic and Yankee high-yield bonds. The index tracks the performance of high-yield securities traded in the U.S. bond market. You cannot invest directly in an index.


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

April 2015, trading at $59 per barrel as of April 30, many high-yield energy companies that relied on oil trading closer to $100 per barrel found themselves under financial stress. Even so, overall default rates remained moderate through the end of the reporting period, in part because several companies hedged part of their production at above-market prices.

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.

Sincerely,

LOGO

Karla M. Rabusch

President

Wells Fargo Advantage Funds

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.


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 April 30, 2015


	1 year		5 year		10 year
Based on market value		2.59		8.37		6.66
Based on net asset value (NAV) per share		6.21		10.13		7.47

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 March 6, 2016, 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 previously utilized Auction Market Preferred Shares for leverage but secured debt financing to fully redeem those shares in 2010. The Fund’s gross and net expense ratios, which include 0.10% of interest expense, were 1.23% and 0.96%, respectively, for the year ended April 30, 2015. 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 revolving credit 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 closely track. Bond values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. Changes in market conditions and government policies may lead to periods of heightened volatility in the bond market and reduced liquidity for certain bonds held by the Fund. In general, when interest rates rise, bond values fall and investors may lose principal value. Interest rate changes and their impact on the Fund and its share price can be sudden and unpredictable. 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 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 charged on the purchase and sale of the Fund’s common stock. Dividends and distributions paid by the Fund 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 average annual total return based on market value was 2.59% during the 12 months that ended April 30, 2015. During the same period, the Fund’s average annual total return based on net asset value was 6.21%.

Overview

For the 12-month period that ended April 30, 2015, high-yield bond prices declined, driven primarily by weakness in the energy sector; the price of oil fell from approximately $100 per barrel in July 2014 to approximately $59 per barrel at the end of April 2015. Energy-related securities comprise approximately 14% of the high-yield market, and we estimate those issues posted an average decline of more than 5% during the period. However, the rest of the market produced a positive total return of nearly 3%.

Rising stock prices continued to aid high-yield bond performance (high-yield bond performance tends to have high correlation with stock performance), even as the market experienced brief moments of increased volatility and higher prices for long-dated U.S. Treasuries. The rise in interest rates for longer-term Treasuries that began in the summer of 2013 (resulting from investor concerns regarding the wind-down of the U.S. Federal Reserve’s [Fed’s] bond-purchase program) has subsided; since the end of 2013, interest rates for long-dated Treasuries have consistently declined, with a few modest pullbacks. The resulting environment provided a positive backdrop for long-duration high-yield bonds.

Looking at fundamentals, companies’ leverage levels rose over the past several years, though they are not at record highs. Typically, leverage levels are highest during recessions, when cash earnings fall for many companies. That is not the current situation because the economy appears to be gradually improving despite brief respites due to weather and other short-term factors. In addition, the Fed’s accommodative policies have allowed high-yield companies to take advantage of historically low interest rates to keep their interest costs low and extend near-term maturities. As a result, higher leverage levels are having a reduced effect on companies’ cash flows.


Ten largest holdings³(%) as of April 30, 2015
Texas Competitive Electric Holdings Company LLC, 4.66%, 10-10-2015			3.03
Sprint Capital Corporation, 6.88%, 11-15-2028			2.48
NGPL PipeCo LLC, 7.77%, 12-15-2037			2.32
Jabil Circuit Incorporated, 8.25%, 3-15-2018			2.26
Greektown Holdings LLC, 8.88%, 3-15-2019			1.87
Intelsat Jackson Holdings SA, 5.50%, 8-1-2023			1.87
Gray Television Incorporated, 7.50%, 10-1-2020			1.70
CCM Merger Incorporated, 9.13%, 5-1-2019			1.70
Sabine Pass LNG LP, 7.50%, 11-30-2016			1.49
Select Medical Corporation, 6.38%, 6-1-2021			1.47

Credit quality⁴as of April 30, 2015

Contributors to performance

The Fund benefited from allocations to and security selection in specific segments of the energy sector, such as an underweight to exploration and production companies and an overweight to pipeline and other midstream companies. The portfolio also benefited from an underweight to the metals and mining sector. The Fund was also aided by an underweight to higher-yielding securities. Positive selection in oil-field services more than offset the negative effect of an overweight to the underperforming sector.

Detractors from performance

Unfavorable performance from holdings in the electric utilities sector detracted from results.

Please see footnotes on page 6.


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

Effective maturity distribution⁵as of April 30, 2015

Management outlook

Looking ahead, our base case is that high-yield bonds should remain relatively stable and potentially outperform other fixed-income asset classes that may be more affected in a rising-rate environment. In this scenario, the economy improves at a consistent or slightly increasing pace and, at the same time, Treasury yields rise as the Fed reduces its exceptionally accommodative stance.

With respect to energy exploration and development companies, we do not expect a significant increase in defaults in 2015, even if energy prices remain low. Many companies hedged part of their 2015 production. They also have access to secured debt markets that should provide them with liquidity to cover cash-flow shortfalls. In addition, anecdotal reports suggest a considerable amount of money has been raised to invest in distressed energy credits. However, if energy prices remain this low for an extended period, we would expect a significant uptick in energy-company defaults in 2016 and beyond.

We maintain our view that a number of global imbalances exist that are likely to remain dormant but have the potential to trigger renewed fears of systemic risks and a related fall in all risk markets, including high yield. Such imbalances include the high government debt and deficit levels in most of the developed world, a potential real estate and municipal debt bubble in China, and persistent trade and current account deficits/surpluses among various countries throughout the world.

In the long run, we expect the high-yield bond market’s relative performance will be primarily driven by corporate fundamentals and defaults. In the near term, our default outlook remains benign and supportive of high yield. Over a full cycle, we believe the best way to protect the Fund from periodic bouts of systemic fears will be our continued focus on a bottom-up approach that attempts to minimize downside risk while capturing the return potential of high-yield issuers.

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

⁴

The credit quality of portfolio holdings reflected in the chart is based on ratings from Standard & Poor’s, Moody’s Investors Service, and/or Fitch Ratings Ltd. Credit quality ratings apply to the underlying holdings of the Fund and not to the Fund itself. The percentages of the Fund’s portfolio with the ratings depicted in the chart are calculated based on the total market value of fixed income securities and cash equivalents held by the Fund. 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 rating agencies, that rating was utilized. 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 on a scale SP-1 (highest) to SP-3 (lowest). Moody’s rates the creditworthiness of bond 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, ranging from AAA (highest) to D (lowest). Credit quality and credit quality ratings are subject to change and may have changed since the date specified.

⁵	Effective maturity distribution is calculated based on the total market value of fixed income securities and cash equivalents of the Fund. It is subject to change and may have changed since the date specified.


Portfolio of investments—April 30, 2015		Wells Fargo Advantage Income Opportunities Fund			7


Security name						Shares		Value

Common Stocks: 0.34%

Materials: 0.00%

Chemicals: 0.00%
LyondellBasell Industries NV Class A							7	$	725


Telecommunication Services: 0.34%

Diversified Telecommunication Services: 0.34%
Fairpoint Communications Incorporated †							118,376		2,334,375


Total Common Stocks (Cost $2,677,322)									2,335,100


	Interest rate			Maturity date		Principal
Corporate Bonds and Notes: 108.24%

Consumer Discretionary: 16.26%

Auto Components: 0.94%
Cooper Tire & Rubber Company (i)		7.63	%		3-15-2027	$	4,000,000		4,240,000
Cooper Tire & Rubber Company		8.00			12-15-2019		150,000		170,250
Goodyear Tire & Rubber Company		7.00			5-15-2022		700,000		766,500
ZF North America Capital Incorporated 144A		4.00			4-29-2020		385,000		387,406
ZF North America Capital Incorporated 144A		4.50			4-29-2022		385,000		386,444
ZF North America Capital Incorporated 144A		4.75			4-29-2025		575,000		576,438

									6,527,038


Distributors: 0.19%
LKQ Corporation		4.75			5-15-2023		1,355,000		1,334,675


Diversified Consumer Services: 1.92%
Service Corporation International		6.75			4-1-2016		1,250,000		1,300,000
Service Corporation International		7.00			6-15-2017		1,250,000		1,368,750
Service Corporation International		7.50			4-1-2027		7,078,000		8,281,260
Service Corporation International		7.63			10-1-2018		1,100,000		1,270,500
Service Corporation International		8.00			11-15-2021		885,000		1,053,150

									13,273,660


Hotels, Restaurants & Leisure: 4.70%
CCM Merger Incorporated 144A		9.13			5-1-2019		10,830,000		11,764,088
Greektown Holdings LLC 144A		8.88			3-15-2019		12,215,000		12,917,363
Hilton Worldwide Finance LLC		5.63			10-15-2021		320,000		337,600
Pinnacle Entertainment Incorporated		7.50			4-15-2021		6,297,000		6,659,073
Speedway Motorsports Incorporated 144A		5.13			2-1-2023		825,000		832,178

									32,510,302


Household Durables: 0.57%
American Greetings Corporation		7.38			12-1-2021		3,375,000		3,607,031
Tempur Sealy International Incorporated		6.88			12-15-2020		325,000		346,125

									3,953,156

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


8		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—April 30, 2015


Security name	Interest rate			Maturity date		Principal		Value

Media: 6.71%
Cablevision Systems Corporation		8.63	%		9-15-2017	$	2,975,000	$	3,354,313
CCO Holdings LLC 144A		5.13			5-1-2023		170,000		168,300
CCO Holdings LLC 144A		5.38			5-1-2025		170,000		167,025
CCO Holdings LLC 144A		5.88			5-1-2027		545,000		540,231
CCO Holdings LLC		7.38			6-1-2020		2,364,000		2,517,660
CCO Holdings LLC		5.13			2-15-2023		1,425,000		1,408,541
Cequel Communications Holdings I LLC 144A		5.13			12-15-2021		340,000		340,493
Cequel Communications Holdings I LLC 144A		5.13			12-15-2021		1,601,000		1,607,004
Cinemark USA Incorporated		7.38			6-15-2021		1,525,000		1,631,750
CSC Holdings LLC		7.63			7-15-2018		1,145,000		1,293,850
CSC Holdings LLC		7.88			2-15-2018		1,650,000		1,864,500
CSC Holdings LLC		8.63			2-15-2019		635,000		738,188
DISH DBS Corporation		5.88			11-15-2024		315,000		308,700
DISH DBS Corporation		7.88			9-1-2019		2,260,000		2,550,975
EchoStar DBS Corporation		7.13			2-1-2016		1,160,000		1,200,600
EchoStar DBS Corporation		7.75			5-31-2015		650,000		651,625
Gray Television Incorporated		7.50			10-1-2020		11,105,000		11,799,063
Lamar Media Corporation		5.88			2-1-2022		1,785,000		1,887,638
LIN Television Corporation		6.38			1-15-2021		500,000		520,000
Live Nation Entertainment Incorporated 144A		7.00			9-1-2020		810,000		862,650
National CineMedia LLC		6.00			4-15-2022		3,340,000		3,456,900
National CineMedia LLC		7.88			7-15-2021		1,750,000		1,848,350
Nexstar Broadcasting Group Incorporated 144A		6.13			2-15-2022		300,000		311,250
Nexstar Broadcasting Group Incorporated		6.88			11-15-2020		3,510,000		3,703,787
Outfront Media Capital Corporation		5.25			2-15-2022		320,000		331,200
Outfront Media Capital Corporation		5.63			2-15-2024		35,000		36,444
Outfront Media Capital Corporation		5.88			3-15-2025		1,275,000		1,361,063

									46,462,100


Specialty Retail: 1.23%
ABC Supply Company Incorporated 144A		5.63			4-15-2021		730,000		753,725
Century Intermediate Holding Company (PIK at 10.50%) ¥144A(i)		9.75			2-15-2019		290,000		307,400
Penske Auto Group Incorporated		5.38			12-1-2024		1,860,000		1,934,400
Penske Auto Group Incorporated		5.75			10-1-2022		1,965,000		2,063,250
Sonic Automotive Incorporated		5.00			5-15-2023		1,900,000		1,895,250
Sonic Automotive Incorporated		7.00			7-15-2022		1,436,000		1,558,060

									8,512,085


Consumer Staples: 1.20%

Beverages: 0.28%
Cott Beverages Incorporated 144A		5.38			7-1-2022		575,000		554,156
Cott Beverages Incorporated 144A		6.75			1-1-2020		1,295,000		1,356,513

									1,910,669


Food Products: 0.92%
B&G Foods Incorporated		4.63			6-1-2021		670,000		671,675
Darling Ingredients Incorporated		5.38			1-15-2022		295,000		300,163
Pilgrim’s Pride Corporation 144A		5.75			3-15-2025		1,860,000		1,906,500
Simmons Foods Incorporated 144A		7.88			10-1-2021		3,625,000		3,525,313

									6,403,651

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


Portfolio of investments—April 30, 2015		Wells Fargo Advantage Income Opportunities Fund			9


Security name	Interest rate			Maturity date		Principal		Value

Energy: 23.74%

Energy Equipment & Services: 8.98%
Bristow Group Incorporated		6.25	%		10-15-2022	$	5,830,000	$	5,713,400
Cleaver Brooks Incorporated 144A(i)		8.75			12-15-2019		810,000		822,150
Compressco Partners LP 144A(i)		7.25			8-15-2022		1,980,000		1,801,800
Era Group Incorporated		7.75			12-15-2022		7,340,000		7,193,200
Forum Energy Technologies Incorporated		6.25			10-1-2021		315,000		297,675
Gulfmark Offshore Incorporated		6.38			3-15-2022		7,033,000		5,556,070
Hilcorp Energy Company 144A		5.00			12-1-2024		900,000		873,000
Hornbeck Offshore Services Incorporated		5.00			3-1-2021		4,705,000		3,916,913
Hornbeck Offshore Services Incorporated		5.88			4-1-2020		4,562,000		4,128,610
NGPL PipeCo LLC 144A		7.12			12-15-2017		6,445,000		6,573,900
NGPL PipeCo LLC 144A		7.77			12-15-2037		14,540,000		16,066,700
NGPL PipeCo LLC 144A		9.63			6-1-2019		715,000		736,450
PHI Incorporated		5.25			3-15-2019		8,550,000		8,250,750
Pride International Incorporated		8.50			6-15-2019		210,000		250,169

									62,180,787


Oil, Gas & Consumable Fuels: 14.76%
Alpha Natural Resources Incorporated		6.25			6-1-2021		800,000		152,000
Arch Coal Incorporated		7.00			6-15-2019		1,950,000		429,000
Arch Coal Incorporated		7.25			6-15-2021		775,000		166,625
CVR Refining LLC		6.50			11-1-2022		2,148,000		2,169,475
Denbury Resources Incorporated		4.63			7-15-2023		1,280,000		1,152,000
Denbury Resources Incorporated		5.50			5-1-2022		130,000		123,175
Denbury Resources Incorporated		6.38			8-15-2021		700,000		689,500
El Paso LLC		6.50			9-15-2020		1,155,000		1,342,210
El Paso LLC		7.00			6-15-2017		1,973,000		2,164,606
El Paso LLC (i)		7.42			2-15-2037		1,820,000		2,077,670
El Paso LLC		7.80			8-1-2031		3,050,000		3,657,612
Energy XXI Gulf Coast Incorporated 144A		6.88			3-15-2024		3,525,000		1,401,188
Energy XXI Gulf Coast Incorporated		7.75			6-15-2019		975,000		462,516
Exterran Partners LP		6.00			4-1-2021		4,000,000		3,920,000
Northern Tier Energy LLC		7.13			11-15-2020		6,200,000		6,448,000
Overseas Shipholding Group Incorporated		7.50			2-15-2021		2,750,000		2,653,750
Overseas Shipholding Group Incorporated		8.13			3-30-2018		3,880,000		3,943,050
Pioneer Natural Resources Company		7.50			1-15-2020		3,170,000		3,786,885
Rockies Express Pipeline LLC 144A		5.63			4-15-2020		6,255,000		6,614,663
Rockies Express Pipeline LLC 144A		6.88			4-15-2040		8,100,000		8,829,000
Rockies Express Pipeline LLC 144A		7.50			7-15-2038		4,425,000		5,088,750
Sabine Oil & Gas Corporation		7.25			6-15-2019		850,000		212,500
Sabine Oil & Gas Corporation		7.50			9-15-2020		4,950,000		1,311,750
Sabine Pass Liquefaction LLC		5.63			2-1-2021		1,425,000		1,457,362
Sabine Pass Liquefaction LLC		5.63			4-15-2023		1,710,000		1,727,100
Sabine Pass Liquefaction LLC		5.75			5-15-2024		525,000		530,250
Sabine Pass Liquefaction LLC		6.25			3-15-2022		3,415,000		3,585,750
Sabine Pass LNG LP		6.50			11-1-2020		9,370,000		9,791,650
Sabine Pass LNG LP		7.50			11-30-2016		9,700,000		10,331,470
SemGroup Corporation		7.50			6-15-2021		4,420,000		4,641,000
Suburban Propane Partners LP		5.50			6-1-2024		480,000		493,200

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


10		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—April 30, 2015


Security name	Interest rate			Maturity date		Principal		Value

Oil, Gas & Consumable Fuels (continued)
Suburban Propane Partners LP		7.38	%		8-1-2021	$	592,000	$	636,400
Swift Energy Company		7.13			6-1-2017		7,975,000		5,582,500
Swift Energy Company		8.88			1-15-2020		1,750,000		822,500
Ultra Petroleum Corporation 144A		5.75			12-15-2018		650,000		611,000
Ultra Petroleum Corporation 144A		6.13			10-1-2024		3,550,000		3,132,875

									102,138,982


Financials: 19.67%

Banks: 0.94%
CIT Group Incorporated 144A		5.50			2-15-2019		2,225,000		2,320,960
CIT Group Incorporated 144A		6.63			4-1-2018		3,880,000		4,161,300

									6,482,260


Capital Markets: 1.77%
Jefferies Finance LLC 144A		6.88			4-15-2022		6,910,000		6,599,050
Jefferies Finance LLC 144A		7.38			4-1-2020		515,000		508,563
Jefferies Finance LLC 144A		7.50			4-15-2021		3,025,000		2,974,331
Neuberger Berman Group LLC 144A		5.63			3-15-2020		900,000		939,420
Neuberger Berman Group LLC 144A		5.88			3-15-2022		1,125,000		1,210,781

									12,232,145


Consumer Finance: 6.52%
Ally Financial Incorporated		7.50			9-15-2020		200,000		234,280
Ally Financial Incorporated		8.00			3-15-2020		2,791,000		3,307,330
Ford Motor Credit Company LLC		8.00			12-15-2016		200,000		220,742
General Motors Financial Company Incorporated		6.75			6-1-2018		2,215,000		2,504,102
Homer City Generation LLC		8.73			10-1-2026		2,961,295		3,005,715
Navient Corporation		5.88			3-25-2021		1,000,000		995,000
Navient Corporation		8.00			3-25-2020		7,010,000		7,807,317
SLM Corporation		6.13			3-25-2024		2,975,000		2,893,188
SLM Corporation		7.25			1-25-2022		1,600,000		1,696,000
SLM Corporation		8.45			6-15-2018		3,110,000		3,469,827
Springleaf Finance Corporation		5.40			12-1-2015		2,650,000		2,689,750
Springleaf Finance Corporation		5.75			9-15-2016		2,325,000		2,409,281
Springleaf Finance Corporation		6.00			6-1-2020		2,850,000		2,914,125
Springleaf Finance Corporation		6.50			9-15-2017		550,000		582,313
Springleaf Finance Corporation		6.90			12-15-2017		6,950,000		7,384,375
Springleaf Finance Corporation		7.75			10-1-2021		805,000		885,500
Springleaf Finance Corporation		8.25			10-1-2023		1,892,000		2,156,880

									45,155,725


Diversified Financial Services: 1.91%
Denali Borrower LLC 144A		5.63			10-15-2020		6,930,000		7,406,438
Infinity Acquisition LLC 144A(i)		7.25			8-1-2022		4,310,000		4,062,175
NewStar Financial Incorporated 144A		7.25			5-1-2020		1,750,000		1,771,875

									13,240,488


Insurance: 0.70%
Hub Holdings LLC (PIK at 8.88%) ¥144A		8.13			7-15-2019		4,820,000		4,813,975

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


Portfolio of investments—April 30, 2015		Wells Fargo Advantage Income Opportunities Fund			11


Security name	Interest rate			Maturity date		Principal		Value

Real Estate Management & Development: 1.43%
Hockey Merger Sub 2 Incorporated 144A		7.88	%		10-1-2021	$	3,480,000	$	3,584,400
Onex Corporation 144A		7.75			1-15-2021		6,170,000		6,324,250

									9,908,650


REITs: 6.40%
Crown Castle International Corporation		4.88			4-15-2022		760,000		792,775
Crown Castle International Corporation		5.25			1-15-2023		4,385,000		4,628,806
DuPont Fabros Technology Incorporated LP		5.88			9-15-2021		7,670,000		7,948,038
Iron Mountain Incorporated		5.75			8-15-2024		9,570,000		9,892,988
Iron Mountain Incorporated		6.00			8-15-2023		3,560,000		3,791,400
Iron Mountain Incorporated		7.75			10-1-2019		605,000		641,300
Iron Mountain Incorporated		8.38			8-15-2021		926,000		965,355
Omega Healthcare Investors Incorporated		6.75			10-15-2022		3,375,000		3,537,878
Sabra Health Care Incorporated		5.38			6-1-2023		1,425,000		1,503,375
Sabra Health Care Incorporated		5.50			2-1-2021		1,960,000		2,082,500
The Geo Group Incorporated		5.13			4-1-2023		2,400,000		2,472,000
The Geo Group Incorporated		5.88			1-15-2022		4,350,000		4,621,875
The Geo Group Incorporated		5.88			10-15-2024		770,000		818,125
The Geo Group Incorporated		6.63			2-15-2021		605,000		638,275

									44,334,690


Health Care: 11.99%

Health Care Equipment & Supplies: 1.51%
Crimson Merger Sub Incorporated 144A		6.63			5-15-2022		7,425,000		6,598,969
Hologic Incorporated		6.25			8-1-2020		3,700,000		3,834,125

									10,433,094


Health Care Providers & Services: 7.66%
Acadia Healthcare Company Incorporated 144A		5.63			2-15-2023		315,000		322,088
Aviv Healthcare Properties LP		6.00			10-15-2021		850,000		973,624
Aviv Healthcare Properties LP		7.75			2-15-2019		4,435,000		4,606,856
Capella Healthcare Incorporated		9.25			7-1-2017		8,300,000		8,549,000
Centene Corporation		5.75			6-1-2017		1,925,000		2,038,094
Community Health Systems Incorporated		6.88			2-1-2022		1,315,000		1,395,544
DaVita HealthCare Partners Incorporated		5.00			5-1-2025		725,000		725,000
DaVita HealthCare Partners Incorporated		5.75			8-15-2022		2,925,000		3,107,813
Fresenius Medical Care Holdings Incorporated 144A		5.63			7-31-2019		1,000,000		1,092,500
Fresenius Medical Care Holdings Incorporated		6.88			7-15-2017		700,000		766,500
HCA Incorporated		5.88			3-15-2022		750,000		839,063
HCA Incorporated		6.50			2-15-2020		6,525,000		7,438,500
HealthSouth Corporation		5.13			3-15-2023		930,000		957,900
HealthSouth Corporation		5.75			11-1-2024		125,000		131,875
HealthSouth Corporation		7.75			9-15-2022		1,750,000		1,846,250
MPT Operating Partnership LP		6.38			2-15-2022		1,780,000		1,922,400
MPT Operating Partnership LP		6.88			5-1-2021		3,175,000		3,413,125
Select Medical Corporation		6.38			6-1-2021		10,230,000		10,153,275
Tenet Healthcare Corporation		6.00			10-1-2020		2,600,000		2,775,500

									53,054,907


Health Care Technology: 1.16%
Emdeon Incorporated		11.00			12-31-2019		7,315,000		8,009,925

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


12		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—April 30, 2015


Security name	Interest rate			Maturity date		Principal		Value

Pharmaceuticals: 1.66%
Endo Finance LLC 144A		5.38	%		1-15-2023	$	1,275,000	$	1,258,266
Endo Finance LLC 144A		5.75			1-15-2022		1,180,000		1,194,750
Endo Finance LLC 144A		6.00			2-1-2025		1,275,000		1,305,281
Endo Finance LLC 144A		7.25			1-15-2022		3,925,000		4,150,688
Pinnacle Incorporated 144A		9.50			10-1-2023		975,000		1,100,531
Salix Pharmaceuticals Incorporated 144A		6.50			1-15-2021		2,064,000		2,342,640
Valeant Pharmaceuticals International Incorporated 144A		5.63			12-1-2021		140,000		143,325

									11,495,481


Industrials: 7.09%

Airlines: 0.57%
Aviation Capital Group Corporation 144A		6.75			4-6-2021		2,190,000		2,544,412
Aviation Capital Group Corporation 144A		7.13			10-15-2020		1,210,000		1,420,993

									3,965,405


Commercial Services & Supplies: 2.54%
ADT Corporation		4.13			6-15-2023		1,775,000		1,690,688
ADT Corporation		6.25			10-15-2021		6,390,000		6,869,250
Covanta Holding Corporation		5.88			3-1-2024		3,240,000		3,353,400
Covanta Holding Corporation		6.38			10-1-2022		3,205,000		3,405,313
Covanta Holding Corporation		7.25			12-1-2020		2,150,000		2,279,000

									17,597,651


Construction & Engineering: 1.12%
AECOM 144A		5.75			10-15-2022		355,000		367,425
AECOM 144A		5.88			10-15-2024		4,280,000		4,433,609
United Rentals North America Incorporated		4.63			7-15-2023		1,965,000		1,989,563
United Rentals North America Incorporated		5.50			7-15-2025		910,000		921,876

									7,712,473


Trading Companies & Distributors: 2.86%
Ashtead Capital Incorporated 144A		6.50			7-15-2022		6,975,000		7,467,640
H&E Equipment Services Incorporated		7.00			9-1-2022		8,210,000		8,599,975
International Lease Finance Corporation 144A		7.13			9-1-2018		1,015,000		1,149,488
International Lease Finance Corporation		8.63			9-15-2015		1,700,000		1,740,375
Light Tower Rentals Incorporated 144A		8.13			8-1-2019		970,000		802,675

									19,760,153


Information Technology: 8.72%

Electronic Equipment, Instruments & Components: 2.72%
Jabil Circuit Incorporated		8.25			3-15-2018		13,532,000		15,663,290
Zebra Technologies Corporation 144A		7.25			10-15-2022		2,910,000		3,142,800

									18,806,090


Internet Software & Services: 0.56%
Infor (US) Incorporated 144A		6.50			5-15-2022		635,000		652,463
Sophia Holding Finance LP (PIK at 10.38%) 144A¥		9.63			12-1-2018		3,175,000		3,222,625

									3,875,088

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


Portfolio of investments—April 30, 2015		Wells Fargo Advantage Income Opportunities Fund			13


Security name	Interest rate			Maturity date		Principal		Value

IT Services: 3.51%
Audatex North America Incorporated 144A		6.00	%		6-15-2021	$	2,925,000	$	3,020,964
Audatex North America Incorporated 144A		6.13			11-1-2023		1,320,000		1,376,100
First Data Corporation 144A		6.75			11-1-2020		1,391,000		1,481,415
First Data Corporation 144A		7.38			6-15-2019		2,870,000		2,982,648
First Data Corporation 144A		8.88			8-15-2020		435,000		460,013
First Data Corporation		11.75			8-15-2021		7,190,000		8,250,525
SunGard Data Systems Incorporated		6.63			11-1-2019		840,000		875,700
SunGard Data Systems Incorporated		7.38			11-15-2018		3,547,000		3,688,880
SunGard Data Systems Incorporated		7.63			11-15-2020		2,025,000		2,141,438

									24,277,683


Semiconductors & Semiconductor Equipment: 0.35%
Micron Technology Incorporated		5.88			2-15-2022		2,310,000		2,428,388


Software: 0.44%
Activision Blizzard Incorporated 144A		5.63			9-15-2021		1,155,000		1,234,406
Activision Blizzard Incorporated 144A		6.13			9-15-2023		285,000		314,036
Boxer Parent Company Incorporated (PIK at 9.75%) ¥144A		9.00			10-15-2019		1,810,000		1,484,200

									3,032,642


Technology Hardware, Storage & Peripherals: 1.14%
NCR Corporation		5.88			12-15-2021		380,000		389,500
NCR Corporation		6.38			12-15-2023		7,165,000		7,541,163

									7,930,663


Materials: 2.09%

Chemicals: 0.07%
Celanese US Holdings LLC		5.88			6-15-2021		440,000		482,900


Containers & Packaging: 1.34%
Crown Americas LLC		6.25			2-1-2021		515,000		541,394
Crown Cork & Seal Company Incorporated		7.38			12-15-2026		60,000		69,000
Crown Cork & Seal Company Incorporated (i)		7.50			12-15-2096		1,225,000		1,188,250
Owens-Illinois Incorporated		7.80			5-15-2018		837,000		941,625
Sealed Air Corporation 144A		8.38			9-15-2021		3,740,000		4,216,850
Silgan Holdings Incorporated		5.00			4-1-2020		2,250,000		2,334,375

									9,291,494


Metals & Mining: 0.15%
Cliffs Natural Resources Incorporated 144A		8.25			3-31-2020		1,040,000		1,019,200
Indalex Holdings Corporation (a)(i)(s)		11.50			2-1-2020		5,985,000		0

									1,019,200


Paper & Forest Products: 0.53%
Georgia-Pacific LLC		8.88			5-15-2031		2,430,000		3,651,772


Telecommunication Services: 14.13%

Diversified Telecommunication Services: 6.87%
Citizens Communications Company		7.88			1-15-2027		4,205,000		4,173,463
Frontier Communications Corporation		8.13			10-1-2018		1,980,000		2,229,975

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


14		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—April 30, 2015


Security name	Interest rate			Maturity date		Principal		Value

Diversified Telecommunication Services (continued)
Frontier Communications Corporation		8.25	%		4-15-2017	$	2,380,000	$	2,629,900
Frontier Communications Corporation		8.50			4-15-2020		1,000,000		1,107,500
GCI Incorporated		6.75			6-1-2021		4,145,000		4,227,900
GCI Incorporated 144A		6.88			4-15-2025		2,150,000		2,203,750
Level 3 Financing Incorporated		8.13			7-1-2019		1,475,000		1,550,225
Level 3 Financing Incorporated 144A		5.13			5-1-2023		1,595,000		1,591,013
Level 3 Financing Incorporated		5.38			8-15-2022		2,545,000		2,599,081
Level 3 Financing Incorporated 144A		5.38			5-1-2025		1,595,000		1,593,006
Level 3 Financing Incorporated 144A		5.63			2-1-2023		1,275,000		1,306,875
Level 3 Financing Incorporated		6.13			1-15-2021		1,690,000		1,789,288
Level 3 Financing Incorporated		7.00			6-1-2020		297,000		318,161
Qwest Corporation		7.13			11-15-2043		1,810,000		1,854,861
Qwest Corporation		7.25			9-15-2025		2,755,000		3,195,445
Qwest Corporation		7.63			8-3-2021		440,000		478,500
Syniverse Holdings Incorporated		9.13			1-15-2019		8,845,000		8,314,300
Windstream Corporation		6.38			8-1-2023		625,000		551,563
Windstream Corporation		7.88			11-1-2017		5,380,000		5,800,286

									47,515,092


Wireless Telecommunication Services: 7.26%
MetroPCS Wireless Incorporated		6.63			11-15-2020		5,910,000		6,168,563
SBA Communications Corporation 144A		4.88			7-15-2022		1,400,000		1,384,250
SBA Communications Corporation		5.63			10-1-2019		270,000		282,420
SBA Communications Corporation		5.75			7-15-2020		2,795,000		2,927,763
Sprint Capital Corporation		6.88			11-15-2028		19,000,000		17,195,000
Sprint Capital Corporation		8.75			3-15-2032		3,390,000		3,474,750
Sprint Communications Incorporated 144A		9.00			11-15-2018		750,000		853,358
Sprint Communications Incorporated		11.50			11-15-2021		1,200,000		1,458,000
Sprint Corporation		7.13			6-15-2024		1,585,000		1,537,450
Sprint Corporation		7.25			9-15-2021		330,000		331,238
Sprint Corporation		7.88			9-15-2023		430,000		431,613
T-Mobile USA Incorporated		6.13			1-15-2022		140,000		144,375
T-Mobile USA Incorporated		6.25			4-1-2021		290,000		303,050
T-Mobile USA Incorporated		6.38			3-1-2025		2,730,000		2,803,683
T-Mobile USA Incorporated		6.46			4-28-2019		265,000		273,613
T-Mobile USA Incorporated		6.50			1-15-2024		140,000		146,125
T-Mobile USA Incorporated		6.54			4-28-2020		275,000		290,111
T-Mobile USA Incorporated		6.63			4-1-2023		825,000		856,515
T-Mobile USA Incorporated		6.63			4-28-2021		1,510,000		1,593,050
T-Mobile USA Incorporated		6.73			4-28-2022		5,645,000		5,948,419
T-Mobile USA Incorporated		6.84			4-28-2023		1,765,000		1,866,488

									50,269,834


Utilities: 3.35%

Electric Utilities: 1.15%
Energy Future Intermediate Holding Company LLC (s)		10.00			12-1-2020		150,000		7,875
IPALCO Enterprises Incorporated 144A		7.25			4-1-2016		3,403,000		3,544,565
Otter Tail Corporation (i)		9.00			12-15-2016		3,985,000		4,439,282

									7,991,722

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


Portfolio of investments—April 30, 2015		Wells Fargo Advantage Income Opportunities Fund			15


Security name	Interest rate			Maturity date		Principal		Value

Gas Utilities: 0.54%
AmeriGas Finance LLC		6.75	%		5-20-2020	$	1,675,000	$	1,777,594
AmeriGas Finance LLC		7.00			5-20-2022		1,840,000		1,968,800

									3,746,394


Independent Power & Renewable Electricity Producers: 1.66%
Calpine Corporation 144A		5.88			1-15-2024		455,000		486,850
Calpine Corporation 144A		6.00			1-15-2022		865,000		921,225
Calpine Corporation 144A		7.88			1-15-2023		1,057,000		1,162,700
NSG Holdings LLC 144A		7.75			12-15-2025		5,854,410		6,410,579
Reliant Energy Incorporated		9.24			7-2-2017		1,202,051		1,274,174
Reliant Energy Incorporated		9.68			7-2-2026		780,000		846,300
TerraForm Power Operating LLC 144A		5.88			2-1-2023		345,000		359,663

									11,461,491


Total Corporate Bonds and Notes (Cost $720,986,852)									749,184,580


Loans: 9.28%

Consumer Discretionary: 3.36%

Distributors: 0.49%
Spin Holdco Incorporated ±		4.25			11-14-2019		3,384,090		3,386,899


Diversified Consumer Services: 0.10%
CCM Merger Incorporated ±		4.50			8-8-2021		709,860		714,296


Hotels, Restaurants & Leisure: 0.46%
Centaur Acquisition LLC ±		8.75			2-20-2020		3,135,000		3,153,277


Media: 1.71%
Learfield Communications Incorporated ±		8.75			10-9-2021		4,625,234		4,665,704
TWCC Holdings Corporation ±		7.00			6-26-2020		7,690,000		7,190,150

									11,855,854


Specialty Retail: 0.60%
Focus Brands Incorporated ±(i)		10.25			8-21-2018		4,124,203		4,144,824


Energy: 0.01%

Energy Equipment & Services: 0.01%
Tallgrass Operations LLC ±		4.25			11-13-2018		96,394		95,792


Financials: 0.23%

Diversified Financial Services: 0.15%
American Beacon Advisors Incorporated <		9.75			3-3-2023		1,010,000		1,012,525


Insurance: 0.08%
Asurion LLC ±		8.50			3-3-2021		575,000		582,763


Health Care: 0.32%

Health Care Providers & Services: 0.32%
United Surgical Partners International Incorporated ±		4.75			4-3-2019		2,183,005		2,183,005

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


16		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—April 30, 2015


Security name	Interest rate			Maturity date		Principal		Value

Industrials: 1.56%

Airlines: 0.03%
LM U.S. Corp Acquisition Incorporated ±		8.25	%		1-25-2021	$	185,000	$	185,000


Commercial Services & Supplies: 0.44%
W3 Company ±(i)		9.25			9-13-2020		488,775		439,898
WASH Multifamily Laundry Systems LLC ±		4.50			2-21-2019		2,601,900		2,598,648

									3,038,546


Machinery: 0.54%
Alliance Laundry Systems LLC ±		9.50			12-10-2019		3,742,755		3,752,112


Transportation Infrastructure: 0.55%
HGIM Corporation ±		5.50			6-18-2020		4,852,634		3,804,125


Information Technology: 0.22%

Internet Software & Services: 0.12%
Vertafore Incorporated ±		9.75			10-29-2017		845,000		849,487


Technology Hardware, Storage & Peripherals: 0.10%
Peak 10 Incorporated ±		8.25			6-17-2022		700,239		680,401


Telecommunication Services: 0.55%

Diversified Telecommunication Services: 0.41%
nTelos Incorporated ±		5.75			11-9-2019		3,314,469		2,867,016


Wireless Telecommunication Services: 0.14%
LTS Buyer LLC ±		8.00			4-12-2021		935,369		933,807


Utilities: 3.03%

Electric Utilities: 3.03%
Texas Competitive Electric Holdings Company LLC (s)		4.66			10-10-2015		34,355,889		20,976,331


Total Loans (Cost $78,100,912)									64,216,060


	Dividend yield					Shares
Preferred Stocks: 0.31%

Financials: 0.31%

Banks: 0.31%
GMAC Capital Trust I ±		7.72					81,784		2,149,284


Total Preferred Stocks (Cost $2,078,248)									2,149,284


	Interest rate					Principal

Yankee Corporate Bonds and Notes: 8.65%

Consumer Discretionary: 0.07%

Auto Components: 0.06%
Sensata Technologies Holdings 144A		5.00			10-1-2025	$	385,000		396,550

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


Portfolio of investments—April 30, 2015		Wells Fargo Advantage Income Opportunities Fund			17


Security name	Interest rate			Maturity date		Principal		Value

Media: 0.01%
Videotron Limited		9.13	%		4-15-2018	$	78,000	$	79,607


Energy: 0.14%

Oil, Gas & Consumable Fuels: 0.14%
Griffin Coal Mining Company Limited 144A(a)(i)(s)		9.50			12-1-2016		2,119,383		851,398
Griffin Coal Mining Company Limited (a)(i)(s)		9.50			12-1-2016		290,088		116,534

									967,932


Financials: 0.79%

Banks: 0.79%
Nielsen Holding and Finance BV 144A		5.50			10-1-2021		700,000		717,500
Preferred Term Securities XII Limited (a)(i)(s)		0.00			12-24-2033		1,540,000		0
Teekay Corporation		8.50			1-15-2020		4,250,000		4,781,250

									5,498,750


Health Care: 1.39%

Pharmaceuticals: 1.39%
Mallinckrodt plc 144A		4.88			4-15-2020		160,000		162,600
Mallinckrodt plc 144A		5.50			4-15-2025		320,000		326,400
Valeant Pharmaceuticals International Incorporated 144A		5.88			5-15-2023		1,610,000		1,648,238
Valeant Pharmaceuticals International Incorporated 144A		6.13			4-15-2025		645,000		667,575
Valeant Pharmaceuticals International Incorporated 144A		6.75			8-15-2018		1,120,000		1,185,800
Valeant Pharmaceuticals International Incorporated 144A		7.50			7-15-2021		5,175,000		5,608,406

									9,599,019


Industrials: 0.44%

Aerospace & Defense: 0.09%
Bombardier Incorporated 144A		7.50			3-15-2025		645,000		639,356


Commercial Services & Supplies: 0.35%
GFL Environmental Incorporated 144A		7.88			4-1-2020		2,350,000		2,391,125


Materials: 1.64%

Containers & Packaging: 0.53%
Ardagh Finance Holdings SA (PIK at 8.63%) ¥144A		8.63			6-15-2019		1,527,669		1,581,011
Ardagh Packaging Finance plc 144A		9.13			10-15-2020		1,925,000		2,069,375

									3,650,386


Metals & Mining: 0.81%
FMG Resources (August 2006) Proprietary Limited 144A		6.88			4-1-2022		1,275,000		957,844
Novelis Incorporated		8.38			12-15-2017		1,100,000		1,144,000
Novelis Incorporated		8.75			12-15-2020		3,250,000		3,469,375

									5,571,219


Paper & Forest Products: 0.30%
Sappi Limited 144A		7.50			6-15-2032		2,155,000		2,101,125

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


18		Wells Fargo Advantage Income Opportunities Fund		Portfolio of investments—April 30, 2015


Security name	Interest rate			Maturity date		Principal		Value

Telecommunication Services: 4.18%

Diversified Telecommunication Services: 3.96%
Intelsat Jackson Holdings SA		5.50	%		8-1-2023	$	13,715,000	$	12,909,244
Intelsat Jackson Holdings SA		7.25			10-15-2020		3,825,000		3,944,053
Intelsat Jackson Holdings SA		7.50			4-1-2021		3,364,000		3,494,355
Intelsat Luxembourg SA		7.75			6-1-2021		2,595,000		2,387,400
Intelsat Luxembourg SA		8.13			6-1-2023		4,190,000		3,778,856
Virgin Media Secured Finance plc 144A		5.38			4-15-2021		274,500		287,196
Virgin Media Secured Finance plc 144A		6.38			4-15-2023		605,000		636,763

									27,437,867


Wireless Telecommunication Services: 0.22%
Telesat Canada Incorporated 144A		6.00			5-15-2017		1,475,000		1,500,813


Total Yankee Corporate Bonds and Notes (Cost $61,705,363)									59,883,525


	Yield					Shares

Short-Term Investments: 4.84%

Investment Companies: 4.84%
Wells Fargo Advantage Cash Investment Money Market Fund, Select Class (l)(u)##		0.11					33,527,336		33,527,336


Total Short-Term Investments (Cost $33,527,336)									33,527,336



Total investments in securities (Cost $899,076,033) *	131.66	%		911,246,109
Other assets and liabilities, net	(31.66	)		(219,076,878	)

Total net assets	100.00	%	$	692,169,231

†	Non-income-earning security

144A	The security may be resold in transactions exempt from registration, normally to qualified institutional buyers, pursuant to Rule 144A under the Securities Act of 1933.

¥	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.

(a)	The security is fair valued in accordance with procedures approved by the Board of Trustees.

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

(i)	Illiquid security for which the designation as illiquid is unaudited.

(l)	The security represents an affiliate of the Fund as defined in the Investment Company Act of 1940.

(u)	The rate represents the 7-day annualized yield at period end.

##	All or a portion of this security is segregated for unfunded loans.

*	Cost for federal income tax purposes is $904,253,018 and unrealized gains (losses) consists of:


Gross unrealized gains	$	41,949,201
Gross unrealized losses		(34,956,110	)

Net unrealized gains	$	6,993,091

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


Statement of assets and liabilities—April 30, 2015		Wells Fargo Advantage Income Opportunities Fund			19




Assets
Investments
In unaffiliated securities, at value (cost $865,548,697)	$	877,718,773
In affiliated securities, at value (cost $33,527,336)		33,527,336

Total investments, at value (cost $899,076,033)		911,246,109
Receivable for investments sold		2,702,249
Receivable for interest and dividends		14,475,007
Prepaid expenses and other assets		26,248

Total assets		928,449,613


Liabilities
Dividends payable		4,826,367
Payable for investments purchased		989,800
Secured borrowing payable		229,983,150
Advisory fee payable		251,565
Administration fee payable		37,852
Accrued expenses and other liabilities		191,648

Total liabilities		236,280,382

Total net assets	$	692,169,231


NET ASSETS CONSIST OF
Paid-in capital	$	983,331,382
Overdistributed net investment income		(1,697,386	)
Accumulated net realized losses on investments		(301,634,841	)
Net unrealized gains on investments		12,170,076

Total net assets	$	692,169,231


NET ASSET VALUE PER SHARE
Based on $692,169,231 divided by 70,983,001 shares issued and outstanding (100,000,000 shares authorized)		$9.75

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


20		Wells Fargo Advantage Income Opportunities Fund		Statement of operations—year ended April 30, 2015




Investment income
Interest	$	61,368,483
Dividends		166,179
Income from affiliated securities		21,759

Total investment income		61,556,421


Expenses
Advisory fee		5,573,388
Administration fee		464,449
Custody and accounting fees		56,299
Professional fees		72,993
Shareholder report expenses		67,886
Trustees’ fees and expenses		6,723
Transfer agent fees		28,966
Interest expense		716,685
Secured borrowing fees		1,586,387
Other fees and expenses		45,449

Total expenses		8,619,225
Less: Fee waivers and/or expense reimbursements		(1,907,846	)

Net expenses		6,711,379

Net investment income		54,845,042


REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains on investments		4,607,980
Net change in unrealized gains (losses) on investments		(22,142,612	)

Net realized and unrealized gains (losses) on investments		(17,534,632	)

Net increase in net assets resulting from operations	$	37,310,410

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


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


	Year ended April 30, 2015			Year ended April 30, 2014

Operations
Net investment income	$	54,845,042		$	58,419,766
Net realized gains on investments		4,607,980			8,206,695
Net change in unrealized gains (losses) on investments		(22,142,612	)		(18,641,627	)

Net increase in net assets resulting from operations		37,310,410			47,984,834


Distributions to shareholders from
Net investment income		(57,922,129	)		(57,922,129	)


Capital share transactions
Net asset value of shares issued under the Automatic Dividend Reinvestment Plan		0			162,908

Total decrease in net assets		(20,611,719	)		(9,774,387	)


Net assets
Beginning of period		712,780,950			722,555,337

End of period	$	692,169,231		$	712,780,950


Overdistributed net investment income	$	(1,697,386	)	$	(1,534,172	)

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


22		Wells Fargo Advantage Income Opportunities Fund		Statement of cash flows—year ended April 30, 2015




Cash flows from operating activities:
Net increase in net assets resulting from operations	$	37,310,410

Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities:
Purchase of investment securities		(419,853,975	)
Proceeds from disposition of investment securities		430,727,499
Amortization		(673,521	)
Proceeds from sales of short-term investment securities, net		1,447,086
Increase in receivable for investments sold		(2,652,473	)
Increase in receivable for interest and dividends		(191,971	)
Increase in prepaid expenses and other assets		(24,823	)
Decrease in payable for investments purchased		(12,197,715	)
Decrease in advisory fee payable		(64,298	)
Decrease in administration fee payable		(800	)
Decrease in accrued expenses and other liabilities		(103,616	)
Litigation payments received		213,889
Net realized gains on investments		(4,607,980	)
Net change in unrealized gains (losses) on investments		22,142,612

Net cash provided by operating activities		51,470,324


Cash flows from financing activities:
Cash distributions paid		(57,922,129	)
Decrease in secured borrowing payable		(221,643	)

Net cash used in financing activities		(58,143,772	)

Net decrease in cash		(6,673,448	)


Cash:
Beginning of period	$	6,673,448

End of period	$	0


Supplemental cash disclosure
Cash paid for interest	$	783,463

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)


	Year ended April 30
	2015			2014			2013			2012			2011
Net asset value, beginning of period		$10.04			$10.18			$9.67			$10.11			$9.69
Net investment income		0.77	¹		0.82	¹		0.88	¹		0.95	¹		1.02	¹
Net realized and unrealized gains (losses) on investments		(0.24	)		(0.14	)		0.54			(0.37	)		0.42
Distributions to preferred shareholders from net investment income		0.00			0.00			0.00			0.00			(0.00	)^1,2

Total from investment operations		0.53			0.68			1.42			0.58			1.44
Distributions to common shareholders from
Net investment income		(0.82	)		(0.82	)		(0.91	)		(1.02	)		(1.02	)
Net asset value, end of period		$9.75			$10.04			$10.18			$9.67			$10.11
Market value, end of period		$8.93			$9.52			$10.23			$10.29			$10.38
Total return based on market value³		2.59	%		1.60	%		8.90	%		10.03	%		19.68	%
Ratios to average net assets (annualized)
Gross expenses⁴		1.23	%		1.27	%		1.29	%		1.35	%		1.44	%
Net expenses⁴		0.96	%		1.01	%		1.05	%		1.03	%		1.09	%
Net investment income		7.85	%		8.35	%		8.89	%		9.89	%		10.55	%⁵
Supplemental data
Portfolio turnover rate		33	%		31	%		27	%		25	%		42	%
Net assets, end of period (000s omitted)		$692,169			$712,781			$722,555			$683,807			$709,850

Borrowings outstanding, end of period (000s omitted)		$230,000			$230,000			$230,000			$230,000			$230,000
Asset coverage per $1,000 of borrowing, end of period		$4,009			$4,099			$4,142			$3,973			$4,088

¹	Calculated based upon average shares outstanding

²	Amount is less than $0.005.

Total return is calculated assuming a purchase of common stock on the first day and sale on the last day of the period reported. 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. Total return does not reflect brokerage commissions that a shareholder would pay on the purchase and sale of shares.

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

Year ended April 30, 2015 0.10%

Year ended April 30, 2014 0.07%

Year ended April 30, 2013 0.08%

Year ended April 30, 2012 0.08%

Year ended April 30, 2011 0.11%

⁵	The net investment income ratio reflects any 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

1. ORGANIZATION

The 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. As an investment company, the Fund follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies.

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).

Debt securities are valued at the evaluated bid price provided by an independent pricing service or, if a reliable price is not available, the quoted bid price from an independent broker-dealer.

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 that day, the prior day’s price will be deemed “stale” and a fair value price will be determined in accordance with the Fund’s Valuation Procedures.

Equity securities that are not listed on a foreign or domestic exchange or market, but have a public trading market, are valued at the quoted bid price from an independent broker-dealer that the Management Valuation Team of Wells Fargo Funds Management, LLC (“Funds Management”) has determined is an acceptable source.

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. 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.

Loans

The Fund may invest in direct debt instruments which are interests in amounts owed to lenders by corporate or other borrowers. The loans pay interest at rates which are periodically reset by reference to a base lending rate plus a spread.


Notes to financial statements		Wells Fargo Advantage Income Opportunities Fund			25

Investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. When the Fund purchases participations, it generally has no rights to enforce compliance with terms of the loan agreement with the borrower. As a result, the Fund assumes the credit risk of both the borrower and the lender that is selling the participation. When the Fund purchases assignments from lenders, it acquires direct rights against the borrower on the loan and may enforce compliance by the borrower with the terms of the loan agreement. Loans may include fully funded term loans or unfunded loan commitments, which are contractual obligations for future funding.

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.

Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under federal income tax regulations. U.S. generally accepted accounting principles require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or the net asset value per share. The primary permanent difference causing such reclassification is due to bond premiums. At April 30, 2015, as a result of permanent book-to-tax differences, the following reclassification adjustments were made on the Statement of Assets and Liabilities:

Overdistributed net

investment income

Accumulated net

realized losses

on investments

$6,705,227

$(6,705,227)

As of April 30, 2015 capital loss carryforwards available to offset future net realized capital gains were as follows through the indicated expiration dates:


2016	2017	2018
$8,993,446	$130,598,584	$155,329,141

As of April 30, 2015, the Fund had $1,536,683 of current year deferred post-October capital losses, which will be recognized on the first day of the following fiscal year.

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


26		Wells Fargo Advantage Income Opportunities Fund		Notes to financial statements

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 follows:

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.

The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of April 30, 2015:


	Quoted prices (Level 1)		Other significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets
Investments in :

Common stocks
Materials	$	725	$	0	$	0	$	725
Telecommunication services		2,334,375		0		0		2,334,375

Corporate bonds and notes		0		749,184,580		0		749,184,580

Loans		0		44,735,333		19,480,727		64,216,060

Preferred stocks
Financials		2,149,284		0		0		2,149,284

Yankee corporate bonds and notes		0		59,883,525		0		59,883,525

Short-term investments
Investment companies		33,527,336		0		0		33,527,336
Total assets	$	38,011,720	$	853,803,438	$	19,480,727	$	911,295,885

The Fund recognizes transfers between levels within the fair value hierarchy at the end of the reporting period. At April 30, 2015, 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:


	Loans
Balance as of April 30, 2014	$	9,669,157
Accrued discounts (premiums)		3,668
Realized gains (losses)		(25,368	)
Change in unrealized gains (losses)		19,057
Purchases		5,373,674
Sales		(2,571,300	)
Transfers into Level 3		7,011,839
Transfers out of Level 3		0
Balance as of April 30, 2015	$	19,480,727
Change in unrealized gains (losses) relating to securities still held at April 30, 2015	$	45,337

The investment type categorized above was valued using indicative broker quotes. These indicative broker quotes are 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.


Notes to financial statements		Wells Fargo Advantage Income Opportunities Fund			27

4. TRANSACTIONS WITH AFFILIATES

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 March 6, 2016 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 previously utilized Auction Market Preferred Shares for leverage but secured debt financing to fully redeem those shares in 2010. Funds Management contractually waived its advisory fee in the amount of $1,907,846 for the year ended April 30, 2015.

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.

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 years ended April 30, 2015 and April 30, 2014, the Fund issued 0 and 15,971 shares, respectively.

6. BORROWINGS

The Fund has borrowed approximately $230 million through a revolving credit facility administered by a major financial institution (the “Facility”). The Facility has a commitment amount of $230 million with no specific contract expiration date but the Facility can be terminated upon 180 days’ notice. The Fund is charged interest at London Interbank Offered Rate (LIBOR) plus 0.70% and a commitment fee of 0.30% of the average daily unutilized amount of the commitment which may be waived if the amount drawn on the Facility is over 75% of the committed amount.

Prior to March 6, 2015, the Fund borrowed under a secured debt financing agreement and was charged interest at a rate based on the rates of the commercial paper notes issued to fund the Fund’s borrowings or at LIBOR plus 1.0%. The Fund had pledged all of its assets to secure the borrowings and paid both a usage fee and a commitment fee each at an annual rate of 0.40% of the daily average outstanding principal amount of borrowings.

At April 30, 2015, the Fund had borrowings outstanding in the amount of $229,983,150 (including accrued interest and commitment fees payable). The borrowing fees on the Statement of Operations of $1,586,387 represents the usage and commitment fees for the year ended April 30, 2015. During the year ended April 30, 2015, an effective interest rate of 0.31% was incurred on the borrowings and the Fund incurred interest expense in the amount of $716,685, representing 0.10% of the Fund’s average daily net assets.

7. INVESTMENT PORTFOLIO TRANSACTIONS

Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the year ended April 30, 2015 were $334,165,511 and $294,202,985, respectively.

As of April 30, 2015, the Fund had unfunded term loan commitments of $989,800.

8. DISTRIBUTIONS TO SHAREHOLDERS

The tax character of distributions paid was $57,922,129 and $57,922,129 of ordinary income for the years ended
April 30, 2015 and April 30, 2014, respectively.


28		Wells Fargo Advantage Income Opportunities Fund		Notes to financial statements

As of April 30, 2015, the components of distributable earnings on a tax basis were as follows:


Undistributed ordinary income	Unrealized gains	Post-October capital losses deferred	Capital loss carryforward
$3,207,395	$6,993,091	$(1,536,683)	(294,921,171)

9. INDEMNIFICATION

Under the Fund’s organizational documents, the officers and Trustees have been granted certain indemnification rights 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.

10. SUBSEQUENT DISTRIBUTIONS

The Fund declared the following distributions to shareholders:


Declaration date	Record date	Payable date	Per share amount
April 25, 2015	May 13, 2015	June 1, 2015	$0.068
May 20, 2015	June 15, 2015	July 1, 2015	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.


Report of independent registered public accounting firm		Wells Fargo Advantage Income Opportunities Fund			29

BOARD OF TRUSTEES AND SHAREHOLDERS OF WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Wells Fargo Advantage Income Opportunities Fund (the “Fund”), as of April 30, 2015, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, the statement of cash flows for the year then ended, and the financial highlights of each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of April 30, 2015, by correspondence with the custodian and brokers, or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Wells Fargo Advantage Income Opportunities Fund as of April 30, 2015, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, its cash flows for the year then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally acceptable accounting principles.

LOGO

Boston, Massachusetts

June 25, 2015


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

TAX INFORMATION

For the fiscal year ended April 30, 2015, $49,675,929 has been designated as interest-related dividends for nonresident alien shareholders pursuant to Section 871 of the Internal Revenue Code.

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, 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 on the Fund’s website at wellsfargoadvantagefunds.com or by visiting the SEC website at sec.gov.

PORTFOLIO HOLDINGS INFORMATION

The complete portfolio holdings for the Fund are publicly available monthly on the Fund’s website (wellsfargoadvantagefunds.com), on a one-month 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 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			31

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 Officers¹ listed below acts in identical capacities for each fund in the Wells Fargo Advantage family of funds, which consists of 134 mutual funds comprising 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”). 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 or longer	Other directorships during past five years
William R. Ebsworth (Born 1957)	Trustee, since 2015*	Retired. From 1984 to 2013, equities analyst, portfolio manager, research director at Fidelity Management and Research Company and retired in 2013 as Chief Investment Officer of Fidelity Strategic Advisers, Inc. in Boston, Tokyo, and Hong Kong where he led a team of investment professionals managing client assets. Prior thereto, Board member of Hong Kong Securities Clearing Co., Hong Kong Options Clearing Corp., the Thailand International Fund, Ltd., Fidelity Investments Life Insurance Company, and Empire Fidelity Investments Life Insurance Company. Mr. Ebsworth is an Adjunct Lecturer, Finance, at Babson College and a Chartered Financial Analyst.	Asset Allocation Trust
Jane A. Freeman (Born 1953)	Trustee, since 2015*	Retired. From 2012 to 2014 and 1999 to 2008, Chief Financial Officer of Scientific Learning Corporation. From 2008 to 2012, Ms. Freeman provided consulting services related to strategic business projects. Prior to 1999, Portfolio Manager at Rockefeller & Co. and Scudder, Stevens & Clark. Board member of the Harding Loevner Funds from 1996 to 2014, serving as both Lead Independent Director and chair of the Audit Committee. Board member of the Russell Exchange Traded Funds Trust from 2011 to 2012 and the chair of the Audit Committee. Ms. Freeman is a Chartered Financial Analyst (inactive), Chair of Taproot Foundation (non-profit organization) and a Board Member of Ruth Bancroft Garden (non-profit organization).	Asset Allocation Trust
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. Chairman of the Board of CIGNA Corporation since 2009, and Director since 2005. From 2003 to 2011, Director of Deluxe Corporation. 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. Mr. Harris is a certified public accountant.	CIGNA 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
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


32		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 or longer	Other directorships during past five years
Timothy J. Penny (Born 1951)	Trustee, since 2010	President and Chief Executive Officer 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
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 complex (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

*	William R. Ebsworth and Jane A. Freeman each became a Trustee effective January 1, 2015.

Officers


Name and year of birth	Position held and length of service	Principal occupations during past five years or longer
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. Assistant General Counsel of Wells Fargo Bank, N.A. since 2013 and Vice President and Managing Counsel of Wells Fargo Bank N.A. from 1996 to 2013.
Debra Ann Early (Born 1964)	Chief Compliance Officer, since 2010	Senior Vice President of Wells Fargo Funds Management, LLC since 2007 and Chief Compliance Officer from 2007 to 2014. Chief Compliance Officer of Parnassus Investments from 2005 to 2007. Chief Financial Officer of Parnassus Investments from 2004 to 2007 and Senior Audit Manager of PricewaterhouseCoopers LLP from 1998 to 2004.
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 61 funds and Assistant Treasurer of 73 funds in the Fund Complex.


Automatic dividend reinvestment plan		Wells Fargo Advantage Income Opportunities Fund			33

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 (“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 30170, College Station, Texas 77842-3170 or by calling 1-800-730-6001.


34		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	— Columbian Peso

CLP	— Chilean peso

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	— Indonesian rupiah

IEP	— Irish pound

JPY	— Japanese yen

KRW	— Republic of Korea won

LIBOR

— London Interbank Offered Rate

LIFER

— Long Inverse Floating Exempt Receipts

LIQ	— Liquidity agreement

LLC	— Limited liability company

LLLP	— Limited liability limited partnership

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

NGN	— Nigerian naira

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

PIK	— Payment-in-kind

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

RON	— Romanian leu

RUB	— Russian ruble

SAVRS

— Select auction variable rate securities

SBA	— Small Business Authority

SDR	— Swedish depositary receipt

SEK	— Swedish krona

SFHR	— Single-family housing revenue

SFMR	— Single-family mortgage revenue

SGD	— Singapore dollar

SPA	— Standby purchase agreement

SPDR	— Standard & Poor’s Depositary Receipts

SPEAR

— Short Puttable Exempt Adjustable Receipts

STRIPS

— Separate trading of registered interest and

principal securities

TAN	— Tax anticipation notes

TBA	— To be announced

THB	— Thai baht

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

This page is intentionally left blank.

LOGO

Transfer Agent, Registrar, Shareholder Servicing

Agent & Dividend Disbursing Agent

Computershare Trust Company, N.A.

P.O. Box 30170

College Station, TX 77842-3170

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. Certain material contained in this report may be considered marketing material and has been reviewed by Wells Fargo Funds Distributor, LLC, Member FINRA/SIPC, an affiliate of Wells Fargo & Company.

NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE

233644 06-15

AIO/AR156 04-15

ITEM 2. CODE OF ETHICS

(a) As of the end of the period, covered by the report, Wells Fargo Advantage Income Opportunities Fund has adopted a code of ethics that applies to its President and Treasurer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.

(c) During the period covered by this report, there were no amendments to the provisions of the code of ethics adopted in Item 2(a) above.

(d) During the period covered by this report, there were no implicit or explicit waivers to the provisions of the code of ethics adopted in Item 2(a) above.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Trustees of Wells Fargo Advantage Income Opportunities Fund has determined that Judith Johnson is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mrs. Johnson is independent for purposes of Item 3 of Form N-CSR.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

(a), (b), (c), (d) The following table presents aggregate fees billed in each of the last two fiscal years for services rendered to the Registrant by the Registrant’s principal accountant. These fees were billed to the registrant and were approved by the Registrant’s audit committee.


	Fiscal		Fiscal
	year ended		year ended
	April 30, 2015		April 30, 2014
Audit fees	$	49,110	$	49,110
Audit-related fees(1)		—		16,585
Tax fees (2)		4,030		3,830
All other fees		—		—

	$	53,140	$	69,525

(1)	Audit-related fees consist of agreed-upon procedures performed that are not reported under audit fees. Effective with the 2015 fiscal year end, agreed-upon procedures are not necessary under the financing agreement.

(2)	Tax fees consist of fees for tax compliance, tax advice, tax planning and excise tax.

(e) The Chairman of the Audit Committees is authorized to pre-approve: (1) audit services for the Wells Fargo Advantage Income Opportunities Fund; (2) non-audit tax or compliance consulting or training services provided to the Wells Fargo Advantage Income Opportunities Fund by the independent auditors (“Auditors”) if the fees for any particular engagement are not anticipated to exceed $50,000; and (3) non-audit tax or compliance consulting or training services provided by the Auditors to a Wells Fargo Advantage Income Opportunities Fund’s investment adviser and its controlling entities (where pre-approval is required because the engagement relates directly to the operations and financial reporting of the Wells Fargo Advantage Income Opportunities Fund) if the fee to the Auditors for any particular engagement is not anticipated to exceed $50,000. For any such pre-approval sought from the Chairman, Management shall prepare a brief description of the proposed services. If the Chairman approves of such service, he or she shall sign the statement prepared by Management. Such written statement shall be presented to the full Committees at their next regularly scheduled meetings.

(f) Not applicable

(g) Not applicable

(h) Not applicable

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS

Not applicable.

ITEM 6. INVESTMENTS

A Portfolio of Investments for Wells Fargo Advantage Income Opportunities Fund 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

PROXY VOTING POLICIES AND PROCEDURES

REVISED AS OF AUGUST 13, 2014

1. Scope of Policies and Procedures. These Policies and Procedures (“Procedures”) are used to determine how to vote proxies relating to portfolio securities held by the series of Wells Fargo Funds Trust, Wells Fargo Master Trust, Wells Fargo Variable Trust, Asset Allocation Trust, Wells Fargo Advantage Global Dividend Opportunity Fund, Wells Fargo Advantage Income Opportunities Fund, Wells Fargo Advantage Multi-Sector Income Fund, and Wells Fargo Advantage Utilities & High Income Fund (the “Trusts”) except for those series that exclusively hold non-voting securities (hereafter, all such series, and all such Trusts not having separate series, holding voting securities are referred to as the “Funds”).

2. Voting Philosophy. The Funds and Wells Fargo Funds Management, LLC (“Funds Management”) have adopted these Procedures to ensure that proxies are voted in the best interests of Fund shareholders, without regard to any relationship that any affiliated person of the Fund (or an affiliated person of such affiliated person) may have with the issuer. Funds Management exercises its voting responsibility, as a fiduciary, with the goal of maximizing value to shareholders consistent with governing laws and the investment policies of each Fund. While securities are not purchased to exercise control or to seek to effect corporate change through share ownership, the Funds support sound corporate governance practices within companies in which they invest.

3. Responsibilities

(a) Board of Trustees. The Board of Trustees of each Trust (the “Board”) has delegated the responsibility for voting proxies relating to the Funds’ portfolio securities to Funds Management. The Board retains the authority to make or ratify any voting decisions or approve any changes to these Procedures as the Board deems appropriate. Funds Management will provide reports to the Board regarding voting matters when and as reasonably requested by the Board. The Board shall review these Procedures as often as it deems appropriate to consider whether any revisions are warranted. On an annual basis, the Board shall receive and review a report from Funds Management on the proxy voting process.

(b) Funds Management Proxy Committee

(i)

Responsibilities. The Funds Management Proxy Voting Committee (the “Proxy Committee”) shall be responsible for overseeing the proxy voting process to ensure its implementation in conformance with these Procedures. The Proxy Committee shall monitor Institutional Shareholder Services (“ISS”), the proxy voting agent for Funds Management, to determine that ISS is accurately applying the Procedures as set forth herein. The Proxy Committee shall review the continuing appropriateness of the Procedures set forth herein, recommend revisions to the Board as necessary and provide an annual update to the Board on the proxy voting process.

(ii)

Voting Guidelines. Appendix A hereto sets forth guidelines regarding how proxies will be voted on the issues specified. ISS will vote proxies for or against as directed by the guidelines. Where the guidelines specify a “case by case” determination for a particular issue, ISS will forward the proxy to the Proxy Committee for a vote determination by the Proxy Committee. Finally, with respect to issues for which a vote for or against is specified by the Procedures, the Proxy Committee shall have the authority to direct ISS to forward the proxy to the Proxy Committee for a discretionary vote by the Proxy Committee if the Proxy Committee determines that a case-by-case review of such matter is warranted. The Proxy Committee may also consult Fund sub-advisers on certain proxy voting issues on a case-by-case basis as the Proxy Committee deems appropriate or to the extent that a sub-adviser of a Fund makes a recommendation regarding a proxy voting issue. As a general matter, however, proxies are voted consistently on the same matter when securities of an issuer are held by multiple Funds.

(iii)

Proxy Committee. In all cases, the Proxy Committee will exercise its voting discretion in accordance with the voting philosophy of the Funds. In cases where a proxy is forwarded by ISS to the Proxy Committee, the Proxy Committee may be assisted in its voting decision through receipt of: (i) independent research and voting recommendations provided by ISS or other independent sources; (ii) input from the investment sub-adviser responsible for purchasing the security; and (iii) information provided by company management and shareholder groups.

Voting decisions made by the Proxy Committee will be reported to ISS to ensure that the vote is registered in a timely manner and included in Form N-PX reporting.

(iv)

Securities on Loan. As a general matter, securities on loan will not be recalled to facilitate proxy voting (in which case the borrower of the security shall be entitled to vote the proxy). However, if the Proxy Committee is aware of an item in time to recall the security and has determined in good faith that the importance of the matter to be voted upon outweighs the loss in lending revenue that would result from recalling the security (i.e., if there is a controversial upcoming merger or acquisition, or some other significant matter), the security will be recalled for voting.

(v)

Practical Limitations to Proxy Voting. While Funds Management uses its best efforts to vote proxies, in certain circumstances it may be impractical or impossible for Funds Management to vote proxies (e.g., limited value or unjustifiable costs). For example, in accordance with local law or business practices, many foreign companies prevent the sales of shares that have been voted for a certain period beginning prior to the shareholder meeting and ending on the day following the meeting (“share blocking”). Due to these restrictions, Funds Management must balance the benefits to its clients of voting proxies against the potentially serious portfolio management consequences of a reduced flexibility to sell the underlying shares at the most advantageous time. As a result, Funds Management will generally not vote those proxies in the absence of an unusual, significant vote or compelling economic importance. Additionally, Funds Management may not be able to vote proxies for certain foreign securities if Funds Management does not receive the proxy statement in time to vote the proxies due to custodial processing delays.

(vi)

Conflicts of Interest. Funds Management may have a conflict of interest regarding a proxy to be voted upon if, for example, Funds Management or its affiliates have other relationships with the issuer of the proxy. In most instances, conflicts of interest are avoided through a strict and objective application of the voting guidelines attached hereto. However, when the Proxy Committee is aware of a material conflict of interest regarding a matter that would otherwise require a vote by the Proxy Committee, the Proxy Committee shall address the material conflict by using any of the following

methods: (1) instructing ISS to vote in accordance with the recommendation ISS makes to its clients; (2) disclosing the conflict to the Board and obtaining their consent before voting; (3) submitting the matter to the Board to exercise its authority to vote on such matter; (4) engaging an independent fiduciary who will direct the Proxy Committee on voting instructions for the proxy; (5) consulting with outside legal counsel for guidance on resolution of the conflict of interest; (6) erecting information barriers around the person or persons making voting decisions; (7) voting in proportion to other shareholders (“mirror voting”); or (8) voting in other ways that are consistent with each Fund’s obligation to vote in the best interests of its shareholders. Additionally, the Proxy Committee will not permit its votes to be influenced by any conflict of interest that exists for any other affiliated person of the Fund (such as a sub-adviser or principal underwriter) or any affiliated persons of such affiliated persons and the Proxy Committee will vote all such matters without regard to the conflict.

Funds Management may also have a conflict of interest regarding a proxy to be voted on if a member of the Board has an affiliation, directly or indirectly, with a public or private company (an “Identified Company”). Identified Companies include a Board member’s employer, as well as any company of which the Board member is a director or officer or a 5% or more shareholder. The Proxy Committee shall address such a conflict by instructing ISS to vote in accordance with the recommendation ISS makes to its clients.

(vii)

Meetings. The Proxy Committee shall convene as needed and when discretionary voting determinations need to be considered, and shall have the authority to act by vote of a majority of the Proxy Committee members available at that time. The Proxy Committee shall also meet at least semi-annually to review the Procedures and the performance of ISS in exercising its proxy voting responsibilities.

(viii)

Membership. The voting members of the Proxy Committee shall be Tom Biwer, Travis Keshemberg, Patrick McGuinnis and Erik Sens. Andrew Owen shall be a non-voting member and serve in an advisory capacity on the Proxy Committee. Changes to the membership of the Proxy Committee will be made only with Board approval. Upon departure from Funds Management, a member’s position on the Proxy Committee will automatically terminate.

4. Disclosure of Policies and Procedures. Each Fund shall disclose in its statement of additional information a description of the policies and procedures it uses to determine how to vote proxies relating to securities held in its portfolio. In addition, each Fund shall disclose in its semi- and annual reports that a description of its proxy voting policies and procedures is available without charge, upon request, by calling 1-800-222-8222, on the Fund’s web site at www.wellsfargo.com/advantagefunds and on the Securities and Exchange Commission’s website at http://www.sec.gov.

5. Disclosure of Proxy Voting Record. Each Trust shall file with the Commission an annual report on Form N-PX not later than August 31 of each year (beginning August 31, 2004), containing the Trust’s proxy voting record for the most recent twelve-month period ended June 30.

Each Fund shall disclose in its statement of additional information and semi- and annual reports that 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 Funds’ web site at www.wellsfargo.com/advantagefunds or by accessing the Commission’s web site at www.sec.gov.

Each Fund shall disclose the following information on Form N-PX for each matter relating to a portfolio security considered at any shareholder meeting held during the period covered by the report and with respect to which the Fund was entitled to vote:

•

The name of the issuer of the portfolio security;

•

The exchange ticker symbol of the portfolio security;

•

The Council of Uniform Securities Identification Procedures (“CUSIP”) number for the portfolio security (unless the CUSIP is not available through reasonably practicable means, in which case it will be omitted);

•

The shareholder meeting date;

•

A brief identification of the matter voted on;

•

Whether the matter was proposed by the issuer or by a security holder;

•

Whether the Fund cast its vote on the matter;

•

How the Fund cast its vote (e.g. for or against a proposal, or abstain; for or withhold regarding election of directors); and

•

Whether the Fund cast its vote for or against management.

Form N-PX shall be made available to Fund shareholders through the SEC web site.

Appendix A

Proxy Voting Policies and Procedures

Funds Management will vote proxies relating to portfolio securities held by the Trusts in accordance with the following proxy voting guidelines. To the extent the specific guidelines below do not address a proxy voting proposal, Funds Management will vote pursuant to ISS’ current U.S. and International proxy voting guidelines. Proxies related to issues not addressed by the specific guidelines below or by ISS’ current U.S. and International proxy voting guidelines will be forwarded to the Proxy Committee for a vote determination by the Proxy Committee.



Uncontested Election of Directors or Trustees

THE FUNDS will generally vote for all uncontested director or trustee nominees. The Nominating Committee is in the best position to select nominees who are available and capable of working well together to oversee management of the company. THE FUNDS will not require a performance test for directors.		FOR

THE FUNDS will generally vote for reasonably crafted shareholder proposals calling for directors to be elected with an affirmative majority of votes cast and/or the elimination of the plurality standard for electing directors, unless the company has adopted formal corporate governance principles that present a meaningful alternative to the majority voting standard.		FOR
Board and Committee Independence

THE FUNDS will withhold votes from insiders and affiliated outsiders on boards that are not at least majority independent.		WITHHOLD

THE FUNDS will withhold votes from any insiders or affiliated outsiders on audit, compensation or nominating committees. THE FUNDS will withhold votes from any insiders or affiliated outsiders on the board if any of these key committees has not been established.		WITHHOLD

Attendance and Overboarding

THE FUNDS will withhold votes from directors who sit on more than six boards.		WITHHOLD

THE FUNDS will withhold votes from CEO directors who sit on more than two outside boards besides their own.		WITHHOLD

THE FUNDS will withhold votes for a director if the nominee fails to attend at least 75% of the board and committee meetings without a valid excuse.		WITHHOLD

Responsiveness

THE FUNDS will withhold votes from the entire board (except for new nominees) where the director(s) receive more than 50% withhold votes out of those cast and the issue that was the underlying cause of the high level of withhold votes has not been addressed.		WITHHOLD

Poor Governance Practices

THE FUNDS will withhold votes from all directors (except for new nominees) if the company has adopted or renewed a poison pill without shareholder approval since the company’s last annual meeting, does not put the pill to a vote at the current annual meeting, and does not have a requirement or does not commit to put the pill to shareholder vote within 12 months. In addition, THE FUNDS will withhold votes on all directors at any company that responds to the majority of the shareholders voting by putting the poison pill to a shareholder vote with a recommendation other than to eliminate the pill.		WITHHOLD



THE FUNDS will vote against routine election of directors if any of the following apply: company fails to disclose adequate information in a timely manner, serious issues with the finances, questionable transactions, conflicts of interest, record of abuses against minority shareholder interests, bundling of director elections, and/or egregious governance practices.		WITHHOLD

Audit Issues

THE FUNDS will withhold votes from members of the Audit Committee and/or the full board if poor accounting practices, which rise to a level of serious concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures, are identified.		WITHHOLD

THE FUNDS will withhold votes from members of the Audit Committee if the company receives an adverse opinion on the company’s financial statements from its auditor.		WITHHOLD

THE FUNDS will withhold votes from members of the Audit Committee if there is persuasive evidence that the audit committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm.		WITHHOLD

Compensation Issues

THE FUNDS will withhold votes from compensation committee members where there is a pay-for-performance disconnect (for Russell 3000 companies).		WITHHOLD

THE FUNDS will withhold votes from compensation committee members if they fail to submit one-time transferable stock options (TSO’s) to shareholders for approval.

Ratification of Auditors

THE FUNDS will vote against auditors and withhold votes from audit committee members if non-audit fees are greater than audit fees, audit-related fees, and permitted tax fees, combined. THE FUNDS will follow the disclosure categories being proposed by the SEC in applying the above formula.		AGAINST/ WITHHOLD

With the above exception, THE FUNDS will generally vote for proposals to ratify auditors unless:		FOR

• an auditor has a financial interest in or association with the company, and is therefore not independent, or		AGAINST

• there is reason to believe that the independent auditor has rendered an opinion that is neither accurate nor indicative of the company’s financial position.		AGAINST

THE FUNDS will vote against proposals that require auditors to attend annual meetings as auditors are regularly reviewed by the board audit committee, and such attendance is unnecessary.		AGAINST

THE FUNDS will vote for shareholder proposals requesting a shareholder vote for audit firm ratification.		FOR



THE FUNDS will vote against shareholder proposals asking for audit firm rotation. This practice is viewed as too disruptive and too costly to implement for the benefit achieved.		AGAINST

Company Name Change/Purpose

THE FUNDS will vote for proposals to change the company name as management and the board is best suited to determine if such change in company name is necessary.		FOR

However, where the name change is requested in connection with a reorganization of the company, the vote will be based on the merits of the reorganization.		CASE-BY- CASE

In addition, THE FUNDS will generally vote for proposals to amend the purpose of the company. Management is in the best position to know whether the description of what the company does is accurate, or whether it needs to be updated by deleting, adding or revising language.		FOR

Employee Stock Purchase Plans/401(k) Employee Benefit Plans

THE FUNDS will vote for proposals to adopt, amend or increase authorized shares for employee stock purchase plans and 401(k) plans for employees as properly structured plans enable employees to purchase common stock at a slight discount and thus own a beneficial interest in the company, provided that the total cost of the company’s plan is not above the allowable cap for the company.		FOR

Similarly, THE FUNDS will generally vote for proposals to adopt or amend thrift and savings plans, retirement plans, pension plans and profit plans.		FOR

Anti-Hedging/Pledging/Speculative Investments Policy

THE FUNDS will consider proposals prohibiting named executive officers from engaging in derivative or speculative transactions involving company stock, including hedging, holding stock in a margin account, or pledging stock as collateral for a loan on a case-by-case basis. The company’s existing policies regarding responsible use of company stock will be considered.		CASE-BY- CASE

Approve Other Business

THE FUNDS will generally vote for proposals to approve other business. This transfer of authority allows the corporation to take certain ministerial steps that may arise at the annual or special meeting.		FOR

However, THE FUNDS retains the discretion to vote against such proposals if adequate information is not provided in the proxy statement, or the measures are significant and no further approval from shareholders is sought.		AGAINST

Independent Board of Directors/Board Committees

THE FUNDS will vote for proposals requiring that two-thirds of the board be independent directors. An independent board faces fewer conflicts and is best prepared to protect stockholders’ interests.		FOR


THE FUNDS will vote for proposals requesting that the board audit, compensation and/or nominating committees be composed of independent directors only. Committees should be composed entirely of independent directors in order to avoid conflicts of interest.		FOR

THE FUNDS will vote against proposals from shareholders requesting an independent compensation consultant.		AGAINST

Director Fees

THE FUNDS will vote for proposals to set director fees.		FOR

Minimum Stock Requirements by Directors

THE FUNDS will vote against proposals requiring directors to own a minimum number of shares of company stock in order to qualify as a director, or to remain on the board. Minimum stock ownership requirements can impose an across-the-board requirement that could prevent qualified individuals from serving as directors.		AGAINST

Indemnification and Liability Provisions for Directors and Officers

THE FUNDS will vote for proposals to allow indemnification of directors and officers, when the actions taken were on behalf of the company and no criminal violations occurred. THE FUNDS will also vote in favor of proposals to purchase liability insurance covering liability in connection with those actions. Not allowing companies to indemnify directors and officers to the degree possible under the law would limit the ability of the company to attract qualified individuals.		FOR

Alternatively, THE FUNDS will vote against indemnity proposals that are overly broad. For example, THE FUNDS will oppose proposals to indemnify directors for acts going beyond mere carelessness, such as gross negligence, acts taken in bad faith, acts not otherwise allowed by state law or more serious violations of fiduciary obligations.		AGAINST

Nominee Statement in the Proxy

THE FUNDS will vote against proposals that require board nominees to have a statement of candidacy in the proxy, since the proxy statement already provides adequate information pertaining to the election of directors.		AGAINST

Director Tenure/Retirement Age

THE FUNDS will vote against proposals to limit the tenure of directors as such limitations based on an arbitrary number could prevent qualified individuals from serving as directors. However, THE FUNDS is in favor of inserting cautionary language when the average director tenure on the board exceeds 15 years for the entire board.		AGAINST

The Funds will vote for proposals to establish a mandatory retirement age for directors provided that such retirement age is not less than 65.		FOR

Board Powers/Procedures/Qualifications

THE FUNDS will consider on a case-by-case basis proposals to amend the corporation’s By-laws so that the Board of Directors shall have the power, without the assent or vote of the shareholders, to make, alter, amend, or rescind the By-laws, fix the amount to be reserved as working capital, and fix the number of directors and what number shall constitute a quorum of the Board. In determining these issues, THE FUNDS will rely on the proxy voting Guidelines.		CASE-BY-CASE



Adjourn Meeting to Solicit Additional Votes

THE FUNDS will examine proposals to adjourn the meeting to solicit additional votes on a case-by-case basis. As additional solicitation may be costly and could result in coercive pressure on shareholders, THE FUNDS will consider the nature of the proposal and its vote recommendations for the scheduled meeting.		CASE-BY-CASE

THE FUNDS will vote for this item when:

THE FUNDS is supportive of the underlying merger proposal; the company provides a sufficient, compelling reason to support the adjournment proposal; and the authority is limited to adjournment proposals requesting the authority to adjourn solely to solicit proxies to approve a transaction THE FUNDS supports.		FOR

Reimbursement of Solicitation Expenses

THE FUNDS will consider contested elections on a case-by-case basis, considering the following factors: long-term financial performance of the target company relative to its industry; management’s track record; background of the proxy contest; qualifications of director or trustee nominees (both slates); evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and stock ownership positions.		CASE-BY-CASE

Board Structure: Staggered vs. Annual Elections

THE FUNDS will consider the issue of classified boards on a case-by-case basis. In some cases, the division of the board into classes, elected for staggered terms, can entrench the incumbent management and make them less responsive to shareholder concerns. On the other hand, in some cases, staggered elections may provide for the continuity of experienced directors on the Board.		CASE-BY-CASE

Removal of Directors

THE FUNDS will consider on a case-by-case basis proposals to eliminate shareholders’ rights to remove directors with or without cause or only with approval of two-thirds or more of the shares entitled to vote.		CASE-BY-CASE

However, a requirement that a 75% or greater vote be obtained for removal of directors is abusive and will warrant a vote against the proposal.		AGAINST

Board Vacancies

THE FUNDS will vote against proposals that allow the board to fill vacancies without shareholder approval as these authorizations run contrary to basic shareholders’ rights.		AGAINST

Alternatively, THE FUNDS will vote for proposals that permit shareholders to elect directors to fill board vacancies.		FOR



Cumulative Voting

THE FUNDS will vote on proposals to permit or eliminate cumulative voting on a case-by-case basis based upon the existence of a counter balancing governance structure and company performance, in accordance with its proxy voting guideline philosophy.		CASE-BY-CASE

THE FUNDS will vote against cumulative voting if the board is elected annually.		AGAINST

Board Size

THE FUNDS will vote for proposals that seek to fix the size of the board, as the ability for management to increase or decrease the size of the board in the face of a proxy contest may be used as a takeover defense.		FOR

However, if the company has cumulative voting, downsizing the board may decrease a minority shareholder’s chances of electing a director.

By increasing the size of the board, management can make it more difficult for dissidents to gain control of the board. Fixing the size of the board also prevents a reduction in the board size as a means to oust independent directors or those who cause friction within an otherwise homogenous board.

Shareholder Rights Plan (Poison Pills)

THE FUNDS will generally vote for proposals that request a company to submit its poison pill for shareholder ratification.		FOR

Alternatively, THE FUNDS will analyze proposals to redeem a company’s poison pill, or requesting the ratification of a poison pill on a case-by-case basis.		CASE-BY-CASE

Poison pills are one of the most potent anti-takeover measures and are generally adopted by boards without shareholder approval. These plans harm shareholder value and entrench management by deterring stock acquisition offers that are not favored by the board.

Fair Price Provisions

THE FUNDS will consider fair price provisions on a case-by-case basis, evaluating factors such as the vote required to approve the proposed mechanism, the vote required to approve the proposed acquisition, the vote required to repeal the fair price provision, and the mechanism for determining the fair price.		CASE-BY-CASE

THE FUNDS will vote against fair price provisions with shareholder vote requirements of 75% or more of disinterested shares.		AGAINST

Greenmail

THE FUNDS will generally vote in favor of proposals limiting the corporation’s authority to purchase shares of common stock (or other outstanding securities) from a holder of a stated interest (5% or more) at a premium unless the same offer is made to all shareholders. These are known as “anti-greenmail” provisions. Greenmail discriminates against rank-and-file shareholders and may have an adverse effect on corporate image.		FOR

If the proposal is bundled with other charter or bylaw amendments, THE FUNDS will analyze such proposals on a case-by-case basis. In addition, THE FUNDS will analyze restructurings that involve the payment of pale greenmail on a case-by-case basis.		CASE-BY-CASE



Voting Rights

THE FUNDS will vote for proposals that seek to maintain or convert to a one-share, one-vote capital structure as such a principle ensures that management is accountable to all the company’s owners.		FOR

Alternatively, THE FUNDS will vote against any proposals to cap the number of votes a shareholder is entitled to. Any measure that places a ceiling on voting may entrench management and lessen its interest in maximizing shareholder value.		AGAINST

Dual Class/Multiple-Voting Stock

THE FUNDS will vote against proposals that authorize, amend or increase dual class or multiple-voting stock which may be used in exchanges or recapitalizations. Dual class or multiple-voting stock carry unequal voting rights, which differ from those of the broadly traded class of common stock.		AGAINST

Alternatively, THE FUNDS will vote for the elimination of dual class or multiple-voting stock, which carry different rights than the common stock.		FOR

Confidential Voting

THE FUNDS will vote for proposals to adopt confidential voting.		FOR

Vote Tabulations

THE FUNDS will vote against proposals asking corporations to refrain from counting abstentions and broker non-votes in their vote tabulations and to eliminate the company’s discretion to vote unmarked proxy ballots. Vote counting procedures are determined by a number of different standards, including state law, the federal proxy rules, internal corporate policies, and mandates of the various stock exchanges.		AGAINST

Equal Access to the Proxy

THE FUNDS will evaluate Shareholder proposals requiring companies to give shareholders access to the proxy ballot for the purpose of nominating board members, on a case-by-case basis taking into account the ownership threshold proposed in the resolution and the proponent’s rationale for the proposal at the targeted company in terms of board and director conduct.		CASE-BY-CASE

Disclosure of Information

THE FUNDS will vote against shareholder proposals requesting fuller disclosure of company policies, plans, or business practices. Such proposals rarely enhance shareholder return and in many cases would require disclosure of confidential business information.		AGAINST

Annual Meetings

THE FUNDS will vote for proposals to amend procedures or change date or location of the annual meeting. Decisions as to procedures, dates or locations of meetings are best placed with management.		FOR



Alternatively, THE FUNDS will vote against proposals from shareholders calling for a change in the location or date of annual meetings as no date or location proposed will be acceptable to all shareholders.		AGAINST

THE FUNDS will generally vote in favor of proposals to reduce the quorum necessary for shareholders’ meetings, subject to a minimum of a simple majority of the company’s outstanding voting shares.		FOR

Shareholder Advisory Committees/Independent Inspectors

THE FUNDS will vote against proposals seeking to establish shareholder advisory committees or independent inspectors. The existence of such bodies dilutes the responsibility of the board for managing the affairs of the corporation.		AGAINST

Technical Amendments to the Charter of Bylaws

THE FUNDS will generally vote in favor of charter and bylaw amendments proposed solely to conform to modern business practices, for simplification, or to comply with what management’s counsel interprets as applicable law.		FOR

However, amendments that have a material effect on shareholder’s rights will be considered on a case-by-case basis.		CASE-BY-CASE

Bundled Proposals

THE FUNDS will vote for bundled or “conditional” proxy proposals on a case-by-case basis, as THE FUNDS will examine the benefits and costs of the packaged items, and determine if the effect of the conditioned items are in the best interests of shareholders.		CASE-BY-CASE

Dividends

THE FUNDS will vote for proposals to allocate income and set dividends.		FOR

THE FUNDS will also vote for proposals that authorize a dividend reinvestment program as it allows investors to receive additional stock in lieu of a cash dividend.		FOR

However, if a proposal for a special bonus dividend is made that specifically rewards a certain class of shareholders over another, THE FUNDS will vote against the proposal.		AGAINST

THE FUNDS will also vote against proposals from shareholders requesting management to redistribute profits or restructure investments. Management is best placed to determine how to allocate corporate earnings or set dividends.		AGAINST

Reduce the Par Value of the Common Stock

THE FUNDS will vote for proposals to reduce the par value of common stock.		FOR



Preferred Stock Authorization

THE FUNDS will generally vote for proposals to create preferred stock in cases where the company expressly states that the stock will not be used as a takeover defense or carry superior voting rights, or where the stock may be used to consummate beneficial acquisitions, combinations or financings.		FOR

Alternatively, THE FUNDS will vote against proposals to authorize or issue preferred stock if the board has asked for the unlimited right to set the terms and conditions for the stock and may issue it for anti-takeover purposes without shareholder approval (blank check preferred stock).		AGAINST

In addition, THE FUNDS will vote against proposals to issue preferred stock if the shares to be used have voting rights greater than those available to other shareholders.		AGAINST

THE FUNDS will vote for proposals to require shareholder approval of blank check preferred stock issues for other than general corporate purposes (white squire placements).		FOR

Preemptive Rights

THE FUNDS will generally vote for proposals to eliminate preemptive rights. Preemptive rights are unnecessary to protect shareholder interests due to the size of most modern companies, the number of investors and the liquidity of trading.		FOR

Share Repurchase Plans

THE FUNDS will vote for share repurchase plans, unless:		FOR

• there is clear evidence of past abuse of the authority; or		AGAINST

• the plan contains no safeguards against selective buy-backs.		AGAINST

Corporate stock repurchases are a legitimate use of corporate funds and can add to long-term shareholder returns.

Executive and Director Compensation Plans

THE FUNDS will analyze on a case-by-case basis proposals on executive or director compensation plans, with the view that viable compensation programs reward the creation of stockholder wealth by having high payout sensitivity to increases in shareholder value. Such proposals may seek shareholder approval to adopt a new plan, or to increase shares reserved for an existing plan.		CASE-BY-CASE

THE FUNDS will review the potential cost and dilutive effect of the plan. After determining how much the plan will cost, ISS evaluates whether the cost is reasonable by comparing the cost to an allowable cap. The allowable cap is industry-specific, market cap-base, and pegged to the average amount paid by companies performing in the top quartile of their peer groups. If the proposed cost is below the allowable cap, THE FUNDS will vote for the plan. ISS will also apply a pay for performance overlay in assessing equity-based compensation plans for Russell 3000 companies.		FOR

If the proposed cost is above the allowable cap, THE FUNDS will vote against the plan.		AGAINST

Among the plan features that may result in a vote against the plan are:

• plan administrators are given the authority to reprice or replace underwater options; repricing guidelines will conform to changes in the NYSE and NASDAQ listing rules.		AGAINST



THE FUNDS will vote against equity plans that have high average three-year burn rate. (The burn rate is calculated as the total number of stock awards and stock options granted any given year divided by the number of common shares outstanding.) THE FUNDS will define a high average three-year burn rate as the following: The company’s most recent three-year burn rate exceeds one standard deviation of its four-digit GICS peer group segmented by Russell 3000 index and non-Russell 3000 index; and the company’s most recent three-year burn rate exceeds 2% of common shares outstanding. For companies that grant both full value awards and stock options to their employees, THE FUNDS shall apply a premium on full value awards for the past three fiscal years.		AGAINST

Even if the equity plan fails the above burn rate, THE FUNDS will vote for the plan if the company commits in a public filing to a three-year average burn rate equal to its GICS group burn rate mean plus one standard deviation. If the company fails to fulfill its burn rate commitment, THE FUNDS will consider withholding from the members of the compensation committee.		FOR

THE FUNDS will calculate a higher award value for awards that have Dividend Equivalent Rights (DER’s) associated with them.		CASE-BY-CASE

THE FUNDS will generally vote for shareholder proposals requiring performance-based stock options unless the proposal is overly restrictive or the company demonstrates that it is using a substantial portion of performance-based awards for its top executives.		FOR

THE FUNDS will vote for shareholder proposals asking the company to expense stock options, as a result of the FASB final rule on expensing stock options.

THE FUNDS will generally vote for shareholder proposals to exclude pension fund income in the calculation of earnings used in determining executive bonuses/compensation.		FOR

THE FUNDS will generally vote for TSO awards within a new equity plan if the total cost of the equity plan is less than the company’s allowable cap.		FOR

THE FUNDS will generally vote against shareholder proposals to ban future stock option grants to executives. This may be supportable in extreme cases where a company is a serial repricer, has a huge overhang, or has highly dilutive, broad-based (non-approved) plans and is not acting to correct the situation.		FOR

THE FUNDS will evaluate shareholder proposals asking companies to adopt holding periods for their executives on a case-by-case basis taking into consideration the company’s current holding period or officer share ownership requirements, as well as actual officer stock ownership in the company.		AGAINST

For certain OBRA-related proposals, THE FUNDS will vote for plan provisions that (a) place a cap on annual grants or amend administrative features, and (b) add performance criteria to existing compensation plans to comply with the provisions of Section 162(m) of the Internal Revenue Code.		CASE-BY-CASE

In addition, director compensation plans may also include stock plans that provide directors with the option of taking all or a portion of their cash compensation in the form of stock. THE FUNDS will consider these plans based on their voting power dilution.		FOR

THE FUNDS will generally vote for retirement plans for directors.		CASE-BY-CASE



THE FUNDS will evaluate compensation proposals (Tax Havens) requesting share option schemes or amending an existing share option scheme on a case-by-case basis.		FOR

Stock options align management interests with those of shareholders by motivating executives to maintain stock price appreciation. Stock options, however, may harm shareholders by diluting each owner’s interest. In addition, exercising options can shift the balance of voting power by increasing executive ownership.		CASE-BY-CASE

Bonus Plans

THE FUNDS will vote for proposals to adopt annual or long-term cash or cash-and-stock bonus plans on a case-by-case basis. These plans enable companies qualify for a tax deduction under the provisions of Section 162(m) of the IRC. Payouts under these plans may either be in cash or stock and are usually tied to the attainment of certain financial or other performance goals. THE FUNDS will consider whether the plan is comparable to plans adopted by companies of similar size in the company’s industry and whether it is justified by the company’s performance.		CASE-BY-CASE

Deferred Compensation Plans

THE FUNDS will generally vote for proposals to adopt or amend deferred compensation plans as they allow the compensation committee to tailor the plan to the needs of the executives or board of directors, unless		FOR

• the proposal is embedded in an executive or director compensation plan that is contrary to guidelines		AGAINST

Disclosure on Executive or Director Compensation Cap or Restrict Executive or Director Compensation

THE FUNDS will generally vote for shareholder proposals requiring companies to report on their executive retirement benefits (deferred compensation, split-dollar life insurance, SERPs, and pension benefits.		FOR

THE FUNDS will generally vote for shareholder proposals requesting to put extraordinary benefits contained in SERP agreements to a shareholder vote, unless the company’s executive pension plans do not contain excessive benefits beyond what is offered under employee-wide plans.		FOR

THE FUNDS will generally vote against proposals seek to limit executive and director pay.		AGAINST

Tax-Gross-Up Payments

THE FUNDS will examine on a case-by-case basis proposals calling for companies to adopt a policy of not providing tax gross-up payments to executives.		CASE-BY-CASE

Relocation Benefits

The FUNDS will not consider relocation benefits as a problematic pay practice in connection with management say-on-pay proposals.



Exchange Offers/Re-Pricing

The FUNDS will not vote against option exchange programs made available to executives and directors that are otherwise found acceptable.

Golden and Tin Parachutes

THE FUNDS will vote for proposals that seek shareholder ratification of golden or tin parachutes as shareholders should have the opportunity to approve or disapprove of these severance agreements.		FOR

Alternatively, THE FUNDS will examine on a case-by-case basis proposals that seek to ratify or cancel golden or tin parachutes. Effective parachutes may encourage management to consider takeover bids more fully and may also enhance employee morale and productivity. Among the arrangements that will be considered on their merits are:		CASE-BY-CASE

• arrangements guaranteeing key employees continuation of base salary for more than three years or lump sum payment of more than three times base salary plus retirement benefits; • guarantees of benefits if a key employee voluntarily terminates; • guarantees of benefits to employees lower than very senior management; and • indemnification of liability for excise taxes.

By contrast, THE FUNDS will vote against proposals that would guarantee benefits in a management-led buyout.		AGAINST

Stakeholder Laws

THE FUNDS will vote against resolutions that would allow the Board to consider stakeholder interests (local communities, employees, suppliers, creditors, etc.) when faced with a takeover offer.		AGAINST

Similarly, THE FUNDS will vote for proposals to opt out of stakeholder laws, which permit directors, when taking action, to weight the interests of constituencies other than shareholders in the process of corporate decision-making. Such laws allow directors to consider nearly any factor they deem relevant in discharging their duties.		FOR



Mergers/Acquisitions and Corporate Restructurings

THE FUNDS will consider proposals on mergers and acquisitions on a case-by-case basis. THE FUNDS will determine if the transaction is in the best economic interests of the shareholders. THE FUNDS will take into account the following factors:		CASE-BY-CASE

• anticipated financial and operating benefits; • offer price (cost versus premium); • prospects for the combined companies;

• how the deal was negotiated; • changes in corporate governance and their impact on shareholder rights.

In addition, THE FUNDS will also consider whether current shareholders would control a minority of the combined company’s outstanding voting power, and whether a reputable financial advisor was retained in order to ensure the protection of shareholders’ interests.		CASE-BY-CASE

On all other business transactions, i.e. corporate restructuring, spin-offs, asset sales, liquidations, and restructurings, THE FUNDS will analyze such proposals on a case-by-case basis and utilize the majority of the above factors in determining what is in the best interests of shareholders. Specifically, for liquidations, the cost versus premium factor may not be applicable, but THE FUNDS may also review the compensation plan for executives managing the liquidation.		CASE-BY-CASE

Appraisal Rights

THE FUNDS will vote for proposals to restore, or provide shareholders with rights of appraisal.		FOR

Rights of appraisal provide shareholders who are not satisfied with the terms of certain corporate transactions (such as mergers) the right to demand a judicial review in order to determine the fair value of their shares.

Mutual Fund Proxies

THE FUNDS will vote mutual fund proxies on a case-by-case basis. Proposals may include, and are not limited to, the following issues:		CASE-BY-CASE

• eliminating the need for annual meetings of mutual fund shareholders; • entering into or extending investment advisory agreements and management contracts; • permitting securities lending and participation in repurchase agreements; • changing fees and expenses; and • changing investment policies.

APPENDIX B

PROXY VOTING POLICIES AND PROCEDURES

Members of Funds Management Proxy Voting Committee

Thomas C. Biwer, CFA

Mr. Biwer has over 40 years of experience in finance and investments. He has served as an investment analyst, portfolio strategist, and corporate pension officer. He received B.S. and M.B.A. degrees from the University of Illinois and has earned the right to use the CFA designation.

Erik J. Sens, CFA

Mr. Sens has over 25 years of investment industry experience. He has served as an investment analyst and portfolio manager. He received undergraduate degrees in Finance and Philosophy from the University of San Francisco and has earned the right to use the CFA designation.

Travis L. Keshemberg, CFA

Mr. Keshemberg has over 20 years of experience in the investment industry. He has served as a overlay portfolio manager and investment consultant. He holds a Masters Degree from the University of Wisconsin – Milwaukee and Bachelors degree from Marquette University. He has earned the right to use the CFA, CIPM and CIMA designations.

Aldo Ceccarelli, CFA

Mr. Ceccarelli has over 14 years of investment industry experience. He has served as a fixed income analyst and head of the Funds Management investments team. He earned his bachelor’s degree in business administration with an emphasis in economics from Santa Clara University and has earned the right to use the CFA designation.

Melissa Duller, CIMA

Ms. Duller has over 16 years of experience in the investment industry. She has served as an investment analyst and as a regional investment manager for high net worth individuals, personal trusts, and charitable foundations. She has earned the right to use the CIMA designation.

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

Niklas Nordenfelt, CFA

Mr. Nordenfelt is currently managing director, senior portfolio manager with the Sutter High Yield Fixed Income team at Wells Capital Management. Niklas joined the Sutter High Yield Fixed Income team of Wells Capital Management in February 2003 as investment strategist. Niklas began his investment career in 1991 and has managed portfolios ranging from quantitative-based and tactical asset allocation strategies to credit driven portfolios. Previous to joining Sutter, Niklas was at Barclays Global Investors (BGI) from 1996-2002 where he was a principal. At BGI, he worked on their international and emerging markets equity strategies after having managed their asset allocation products. Prior to this, Niklas was a quantitative analyst at Fidelity and a portfolio manager and group leader at Mellon Capital Management. He earned a bachelor’s degree in economics from the University of California, Berkeley, and has earned the right to use the CFA designation.

Philip Susser

Mr. Susser is currently managing director, senior portfolio manager, and co-head of the Sutter High Yield Fixed Income team at Wells Capital Management. Philip joined the Sutter High Yield Fixed Income team as a senior research analyst in 2001. He has extensive research experience in the cable/satellite, gaming, hotels, restaurants, printing/publishing, telecom, REIT, lodging and distressed sectors. Philip’s investment experience began in 1995 spending three years as a securities lawyer at Cahill Gordon and Shearman & Sterling representing underwriters and issuers of high yield debt. Later, Philip evaluated venture investment opportunities for MediaOne Ventures before joining Deutsche Bank as a research analyst. He received his bachelor’s degree in economics from the University of Pennsylvania and his law degree from the University of Michigan Law School.

OTHER FUNDS AND ACCOUNTS MANAGED

The following table provides information about the registered investment companies and other pooled investment vehicles and accounts managed by the portfolio manager of the Fund as of the Fund’s most recent year ended August 31, 2012.

Niklas Nordenfelt


I manage the following types of accounts:	Other Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
Number of above accounts		4		5		14
Total assets of above accounts (millions)	$	1,013.8	$	226.0	$	1,515.4

performance based fee accounts:

I manage the following types of accounts:	Other Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
Number of above accounts		0		0		0
Total assets of above accounts (millions)	$	0.0	$	0.0	$	0.0

Philip Susser


I manage the following types of accounts:	Other Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
Number of above accounts		4		5		14
Total assets of above accounts (millions)	$	1,013.8	$	226.0	$	1,515.4

performance based fee accounts:

I manage the following types of accounts:	Other Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
Number of above accounts		0		0		0
Total assets of above accounts (millions)	$	0.0	$	0.0	$	0.0

MATERIAL CONFLICTS OF INTEREST

The Portfolio Managers face inherent conflicts of interest in their day-to-day management of the Funds and other accounts because the Funds may have different investment objectives, strategies and risk profiles than the other accounts managed by the Portfolio Managers. For instance, to the extent that the Portfolio Managers manage accounts with different investment strategies than the Funds, they may from time to time be inclined to purchase securities, including initial public offerings, for one account but not for a Fund. Additionally, some of the accounts managed by the Portfolio Managers may have different fee structures, including performance fees, which are or have the potential to be higher or lower, in some cases significantly higher or lower, than the fees paid by the Funds. The differences in fee structures may provide an incentive to the Portfolio Managers to allocate more favorable trades to the higher-paying accounts.

To minimize the effects of these inherent conflicts of interest, the Sub-Advisers have adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures, that they believe address the potential conflicts associated with managing portfolios for multiple clients and ensure that all clients are treated fairly and equitably. Additionally, some of the Sub-Advisers minimize inherent conflicts of interest by assigning the Portfolio Managers to accounts having similar objectives. Accordingly, security block purchases are allocated to all accounts with similar objectives in proportionate weightings. Furthermore, the Sub-Advisers have adopted a Code of Ethics under Rule 17j-1 of the 1940 Act and Rule 204A-1 under the Investment Advisers Act of 1940 (the “Advisers Act”) to address potential conflicts associated with managing the Funds and any personal accounts the Portfolio Managers may maintain.

Wells Capital Management

Wells Capital Management’s Portfolio Managers often provide investment management for separate accounts advised in the same or similar investment style as that provided to mutual funds. While management of multiple accounts could potentially lead to conflicts of interest over various issues such as trade allocation, fee disparities and research acquisition, Wells Capital Management has implemented policies and procedures for the express purpose of ensuring that clients are treated fairly and that potential conflicts of interest are minimized.

COMPENSATION

The Portfolio Managers were compensated by their employing sub-adviser from the fees the Adviser paid the Sub-Adviser using the following compensation structure:

Wells Capital Management Compensation. The compensation structure for Wells Capital Management’s Portfolio Managers includes a competitive fixed base salary plus variable incentives (Wells Capital Management utilizes investment management compensation surveys as confirmation). Incentive bonuses are typically tied to pretax relative investment performance of all accounts under his or her management within acceptable risk parameters. Relative investment performance is generally evaluated for 1, 3, and 5 year performance results, with a predominant weighting on the 3- and 5- year time periods, versus the relevant benchmarks and/or peer groups consistent with the investment style. This evaluation takes into account relative performance of the accounts to each account’s individual benchmark and/or the relative composite performance of all accounts to one or more relevant benchmarks consistent with the overall investment style. In the case of each Fund, the benchmark(s) against which the performance of the Fund’s portfolio may be compared for these purposes generally are indicated in the Performance” sections of the Prospectuses.

BENEFICIAL OWNERSHIP OF THE FUND

The following table shows for each Portfolio Manager the dollar value of the Fund beneficially owned by the Portfolio Manager as of April 30, 2015:


Niklas Nordenfelt		none
Phil Susser		none

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 “Fund”) 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 Fund 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 Fund’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) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as Exhibit COE.

(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:		June 25, 2015

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:		June 25, 2015

By:
		/s/ Jeremy DePalma

		Jeremy DePalma
		Treasurer

Date:		June 25, 2015