Edgar Filing: WELLS FARGO INCOME OPPORTUNITIES FUND

Declaration date

Record date

Payable date

Per share amount

October 26, 2018

November 14, 2018

December 3, 2018

November 9, 2018

December 17, 2018

January 2, 2018

N-CSRS/A

LOGO

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-21269

Wells Fargo 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)

Alexander Kymn

Wells Fargo Funds Management, LLC

525 Market St., San Francisco, CA 94105

(Name and address of agent for service)

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

Date of fiscal year end: April 30

Date of reporting period: October 31, 2018

ITEM 1. REPORT TO STOCKHOLDERS

Semi-Annual Report

October 31, 2018

Wells Fargo Income Opportunities Fund (EAD)

LOGO

Beginning on January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-730-6001.

You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call 1-800-730-6001. Your election to receive reports in paper will apply to all Wells Fargo Funds held in your account with your financial intermediary or, if you are a direct investor, to all Wells Fargo Funds that you hold.

LOGO

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Contents


Letter to shareholders			2

Performance highlights			6

Portfolio of investments			9

Financial statements
Statement of assets and liabilities			21
Statement of operations			22
Statement of changes in net assets			23
Statement of cash flows			24
Financial highlights			25

Notes to financial statements			26

Other information			31

Automatic dividend reinvestment plan			38

The views expressed and any forward-looking statements are as of October 31, 2018, 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 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 Income Opportunities Fund		Letter to shareholders (unaudited)

LOGO

Andrew Owen

President

Wells Fargo Funds

Global economic, business, and investing data during the reporting period were mixed and volatile.

Dear Shareholder:

We are pleased to offer you this semi-annual report for the Wells Fargo Income Opportunities Fund for the six-month period that ended October 31, 2018. Global economic, business, and investing data during the reporting period were mixed and volatile. While investors earned positive results in many domestic equity, high-yield bond, and municipal bond markets during the period, their returns were negative overseas.

For the period, U.S. stocks, as measured by the S&P 500 Index,¹ gained 3.40% and international stocks, as measured by the MSCI ACWI ex USA Index (Net),² declined 11.32%. Based on the MSCI EM Index (Net),³ emerging market stocks lost 16.53%. For bond investors, the Bloomberg Barclays U.S. Aggregate Bond Index⁴ declined 0.19% and the Bloomberg Barclays Global Aggregate ex-USD Index⁵ fell 5.58%. The Bloomberg Barclays Municipal Bond Index⁶ added 0.46%, and the ICE BofAML U.S. High Yield Index⁷ was up 1.10%.

Global trade tensions escalated as the second quarter of 2018 closed.

Global trade tensions escalated during the second quarter of 2018. The U.S. government’s decision to impose tariffs on a wide range of products manufactured overseas drew retaliatory responses from foreign governments, which punished U.S. commodity producers and product manufacturers. Investors were left to wonder about next steps in what appeared to be an escalating divergence in global economic policies and growth prospects.

Inflation trended higher. The CPI-U⁸ added 0.1% in June after an increase of 0.2% in May. On a year-over-year basis, the all-items index rose 2.9% for the 12 months that ended June 30, 2018. The index for all items less food and energy rose 2.3% for the same 12-month period.

¹	The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value-weighted index with each stock’s weight in the index proportionate to its market value. You cannot invest directly in an index.

The Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States and Canada. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. You cannot invest directly in an index.

The MSCI Emerging Markets (EM) Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure large- and mid-cap equity market performance of emerging markets. The MSCI EM Index (Net) consists of the following 24 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, the Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey, and the United Arab Emirates. You cannot invest directly in an index.

⁴

The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. You cannot invest directly in an index.

⁵	The Bloomberg Barclays Global Aggregate ex-USD Index is an unmanaged index that provides a broad-based measure of the global investment-grade fixed-income markets excluding the U.S. dollar-denominated debt market. You cannot invest directly in an index.

⁶	The Bloomberg Barclays Municipal Bond Index is an unmanaged index composed of long-term tax-exempt bonds with a minimum credit rating of Baa. You cannot invest directly in an index.

⁷

The ICE BofAML U.S. High Yield 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. Copyright 2018. ICE Data Indices, LLC. All rights reserved.

⁸

The Consumer Price Index for All Urban Consumers (CPI-U) measures the changes in the price of a basket of goods and services purchased by urban consumers. The urban consumer population is deemed by many as a better representative measure of the general public because close to 90% of the country’s population lives in highly populated areas. You cannot invest directly in an index.


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

U.S. stocks gained following positive economic data while international stocks and bonds declined.

During the summer months, the U.S. economy strengthened. Revised second-quarter GDP data released in August showed the U.S. economy growing at a 4.2% rate. The unemployment rate in the U.S. was 3.7% by the end of September, according to the U.S. Department of Labor. Wages showed more consistent growth, and consumer confidence remained strong. Several U.S. equity market indices reached records during August, with the S&P 500 Index gaining 7.20% for the three-month period that ended September 30, 2018. In contrast, the MSCI ACWI ex USA Index (Net) gained 0.71% and the MSCI EM Index declined 1.09% during the same three-month period.

In June, the U.S. Federal Reserve increased the target range for the federal funds rate to range from 1.75% to 2.00%, then again in September to range from 2.00% to 2.25%. Long-term interest rates in the U.S. remained at higher levels relative to the prior 10 years. Rates on 10-year and 30-year Treasury bonds—2.46% and 2.81%, respectively, on January 1, 2018—were 3.15% and 3.39%, respectively, on October 31, 2018. Investor concerns about an inverted yield curve waned, only to be replaced by concerns about the potentially negative influence of higher interest rates on economic activity.

October proved to be a difficult month for stock markets globally.

As interest rates and bond yields gained during October, stock markets struggled. For the month, the S&P 500 Index fell 6.84%, the MSCI ACWI ex USA Index (Net) dropped 8.13%, and the MSCI EM Index (Net) lost 8.71%. The Bureau of Economic Analysis released its first estimate of third-quarter GDP, which, at an annualized 3.5% rate, indicated that growth may be slowing compared with the second quarter. Readings on consumer sentiment and business spending were mixed.

Economic signals overseas also were mixed as the third quarter ended and the fourth quarter began. In early August, the BOE’s Monetary Policy Committee increased its key interest rate to 0.75%. The ECB and the BOJ maintained low interest rates and accommodative monetary policies. Amid rising trade uncertainty, the PBOC cut reserve requirement ratios and accelerated infrastructure spending and tax cuts for business enterprises and individuals. Nevertheless, a strengthening U.S. dollar and the trade tensions remained headwinds for investors overseas.

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

Periods of investment 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.

During the summer months, the U.S. economy strengthened.


4		Wells Fargo Income Opportunities Fund		Letter to shareholders (unaudited)

Thank you for choosing to invest with Wells Fargo Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs.

Sincerely,

LOGO

Andrew Owen

President

Wells Fargo Funds

Notice to shareholders

On November 9, 2018, the Fund announced an extension of its open-market share repurchase program (the “Buyback Program”). Under the extended Buyback Program, the Fund may repurchase up to 10% of its outstanding shares during the period in open-market transactions beginning on January 1, 2019 and ending on December 31, 2019. The Fund’s Board of Trustees has delegated to Wells Fargo Funds Management, LLC, the Fund’s adviser, discretion to administer the Buyback Program including the determination of the amount and timing of repurchases in accordance with the best interests of the Fund and subject to applicable legal limitations.

On August 15, 2018, the Fund announced the commencement of a managed distribution plan, which began with the monthly distribution declared in September 2018, that provides for the declaration of monthly distributions to common shareholders of the Fund at an annual minimum fixed rate of 8% based on the Fund’s average monthly NAV per share over the prior 12 months. Under the managed distribution plan, monthly distributions may be sourced from income, paid-in capital, and/or capital gains, if any. To the extent that sufficient investment income is not available on a monthly basis, the Fund may distribute paid-in capital and/or capital gains, if any, in order to maintain its managed distribution level. You should not draw any conclusions about the Fund’s investment performance from the amount of the Fund’s distributions or from the terms of the managed distribution plan. Shareholders may elect to reinvest distributions received pursuant to the managed distribution plan in the Fund under the existing dividend reinvestment plan, which is described later in this report.

For further information about your Fund, contact your investment professional, visit our website at wellsfargofunds.com, or call us directly at 1-800-222-8222.

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6		Wells Fargo Income Opportunities Fund		Performance highlights (unaudited)

Investment objective

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

Strategy summary

Under normal market conditions, the Fund invests at least 80% of its total assets in below-investment-grade (high yield) debt securities, loans and preferred stocks. These securities are rated Ba or lower by Moody’s or BB or lower by S&P, or are unrated securities of comparable quality as determined by the subadviser.

Adviser

Wells Fargo Funds Management, LLC

Subadviser

Wells Capital Management Incorporated

Portfolio managers

Niklas Nordenfelt, CFA^®

Phillip Susser

Average annual total returns (%) as of October 31, 2018¹


	6 months			1 year			5 year		10 year
Based on market value		(3.38	)		(4.65	)		5.25		12.90
Based on net asset value (NAV)		1.79			1.86			7.13		12.90
ICE BofAML U.S. High Yield Index²		1.10			0.86			4.69		11.16

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, 2019, 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 annualized gross and net expense ratios, which include 1.11% of interest expense, were 2.06% and 2.02%, respectively, for the six months ended October 31, 2018. Without this waiver and/or reimbursement, the Fund’s returns would have been lower.

Comparison of NAV vs. market value³

LOGO

The Fund is leveraged through a revolving credit facility. The use of leverage results in certain risks, including, among others, the likelihood of greater volatility of net asset value and the market value 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. This closed-end fund is no longer offered as an initial public offering and is only offered through broker/dealers on the secondary market.

Please see footnotes on page 8.


Performance highlights (unaudited)		Wells Fargo Income Opportunities Fund			7

MANAGER’S DISCUSSION

The Fund’s return based on market value was -3.38% during the six-month period that ended October 31, 2018. During the same period, the Fund’s return based on net asset value (NAV) was 1.79%. Relative to the ICE BofAML U.S. High Yield Index, which returned 1.10% over the same period, the Fund’s market value return trailed the index while its NAV return outperformed the index.

Interest income from high-yield bonds offset principal losses during the period.

While high-yield market returns were modest during the reporting period—slightly over 1%, as measured by the index—the asset class outperformed many higher-quality, fixed-income alternatives. The return was primarily driven by interest income offset by principal loss. The principal loss was caused by a modest increase in spreads between Treasury bonds and corporate credits as well as higher Treasury yields. The lowest-quality bonds outperformed higher-quality bonds. The higher rates mirror the continued strength in the economy that had been building for a considerable amount of time.

Investment flows into high yield have been negative for a number of years. Nonetheless, the market technicals have been strong. High yield has lacked new issuance, and more companies have been upgraded to investment grade (issuers that may be considered rising stars) than have been downgraded to high yield (companies considered fallen angels). This has had the effect of slightly shrinking the size of the high-yield market. By contrast, the bank-loan market has grown over this time and has been the source for financing many of the more aggressively structured deals. This has been a positive for high yield as credit quality by rating has improved. Currently, relative to history, high yield has fewer CCC-rated credits and more BB-rated credits in the benchmark.

From a fundamental perspective, levels of corporate leverage among U.S. companies included in the index remained elevated for this point in the credit cycle, though they declined as the end of the period approached. The cash-flow impact of these higher leverage levels is somewhat offset by issuers’ ability to pay low interest rates. A rising London Interbank Offered Rate and higher bond yields will gradually reduce these coverage levels, but rates continue to be low in the context of history.

While we continue to remain cautiously optimistic that this environment will continue in the near term, we are cognizant that ideal environments never last forever and that the longer spreads stay low, the risk of an ultimate sell-off increases.


Ten largest holdings (%) as of October 31, 2018⁴
LPL Holdings Incorporated, 5.75%, 9-15-2025			2.70
NGPL PipeCo LLC, 7.77%, 12-15-2037			2.46
Tallgrass Energy Partners LP, 5.50%, 9-15-2024			2.18
Pattern Energy Group Incorporated, 5.88%, 2-1-2024			1.92
KAR Auction Services Incorporated, 5.13%, 6-1-2025			1.87
NCR Corporation, 6.38%, 12-15-2023			1.69
Dell International LLC, 7.13%, 6-15-2024			1.69
Service Corporation International, 7.50%, 4-1-2027			1.61
Intelsat Jackson Holdings SA, 5.50%, 8-1-2023			1.59
Montreign Operating Company LLC, 10.55%, 1-24-2023			1.55

Credit quality as of October 31, 2018⁵

The influence of security selection outweighed industry selection.

Overall industry selection did not have a meaningful impact on Fund performance during the reporting period that ended October 31, 2018. Security selection within the energy exploration and production and consumer cyclical service sectors and an underweight to and weak selection within pharmaceuticals were the leading detractors from performance.

Security selection drove outperformance.

Security selection was the main driver of outperformance during the period. Selection within the oil-field services and transportation services sectors and underweights to home construction and banking were the largest contributors to relative performance. Neither rating distribution nor maturity allocation had a meaningful impact on performance over the period.

Please see footnotes on page 8.


8		Wells Fargo Income Opportunities Fund		Performance highlights (unaudited)

Effective maturity distribution as of October 31, 2018⁶

We have a favorable view of conditions in the high-yield market.

While some credit and economic fundamentals are mixed, on the whole, we view the current environment as better than average for high yield. That said, the rising discount rate and lower-than-average overall spreads likely will work against the market over the long run. As cycles turn, historically, that’s what one should expect—improving economic conditions with a corresponding tightening of interest rates in the U.S. by the U.S. Federal Reserve. Current spreads reflect these positive conditions,

offering significantly less-than-average upside through price appreciation and compression in spreads. But, one could argue that high-yield investors are receiving fair compensation for the current, rather favorable conditions, especially relative to the high valuations for most other asset classes.

In the short term, we continue to expect solid economic growth driven by continued consumer strength in the U.S. We believe geopolitical risks and other global macroeconomic imbalances are growing and could surprise the markets by creating incremental uncertainty about future government policies.

Most asset classes are richly valued based on historical measures, and we expect that, at some point in the future, there may be a better entry point to buy most asset classes, including high yield. High yield, however, is rather unique in that it has historically benefited from relatively high coupons, which cushioned downside risks of potential price declines. With a benign default outlook, high yield should continue to perform well, on a relative basis, though idiosyncratic or individual bond risk is high. We lean toward spreads remaining flat from these levels in the short run before ultimately widening—potentially significantly—in the mid to longer term.

Over a full cycle, we believe the best way to insulate the Fund from periodic bouts of systemic fears and rebalancing is by following a bottom-up investment process that attempts to minimize downside risk while capturing the return potential of high-yield issuers.

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.

The ICE BofAML U.S. High Yield Index (formerly known as BofA Merrill Lynch U.S. High Yield 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 United States bond market. You cannot invest directly in an index. Copyright 2018. ICE Data Indices, LLC. All rights reserved.

³	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 are included in the Fund’s average annual total returns but have the effect of reducing the Fund’s NAV.

⁴	The ten largest holdings, excluding cash and cash equivalents and any money markets, 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.

⁵

The credit quality distribution 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 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, ranging from AAA (highest) to D (lowest). Ratings from A to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories. Standard & Poor’s rates the creditworthiness of short-term notes from SP-1 (highest) to SP-3 (lowest). Moody’s rates the creditworthiness of bonds, ranging from 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 distribution is subject to change and may have changed since the date specified.

⁶	Amounts are calculated based on the total investments of the Fund. These amounts are subject to change and may have changed since the date specified.


Portfolio of investments—October 31, 2018 (unaudited)		Wells Fargo Income Opportunities Fund			9


Security name						Shares		Value

Common Stocks: 0.00%

Materials: 0.00%

Chemicals: 0.00%

LyondellBasell Industries NV Class A							7	$	625


Total Common Stocks (Cost $606)									625


	Interest rate			Maturity date		Principal
Corporate Bonds and Notes: 117.29%

Communication Services: 18.00%

Diversified Telecommunication Services: 2.26%

GCI Incorporated		6.75	%		6-1-2021	$	2,625,000		2,647,444

Level 3 Financing Incorporated		5.13			5-1-2023		1,595,000		1,583,038

Level 3 Financing Incorporated		5.25			3-15-2026		1,050,000		1,008,000

Level 3 Financing Incorporated		5.38			8-15-2022		2,545,000		2,548,181

Level 3 Financing Incorporated		5.38			1-15-2024		1,125,000		1,113,750

Level 3 Financing Incorporated		5.38			5-1-2025		1,595,000		1,557,119

Level 3 Financing Incorporated		5.63			2-1-2023		1,275,000		1,279,501

Level 3 Financing Incorporated		6.13			1-15-2021		1,690,000		1,694,225

									13,431,258


Entertainment: 0.59%

Live Nation Entertainment Incorporated 144A		4.88			11-1-2024		2,300,000		2,202,250

Live Nation Entertainment Incorporated 144A		5.38			6-15-2022		790,000		795,925

Live Nation Entertainment Incorporated 144A		5.63			3-15-2026		500,000		500,000

									3,498,175


Media: 12.81%

Altice US Finance I Corporation 144A		5.50			5-15-2026		2,200,000		2,142,932

Altice US Finance I Corporation 144A		5.38			7-15-2023		2,400,000		2,399,544

CCO Holdings LLC 144A		4.00			3-1-2023		175,000		166,688

CCO Holdings LLC 144A		5.00			2-1-2028		350,000		326,813

CCO Holdings LLC		5.13			2-15-2023		2,266,000		2,254,670

CCO Holdings LLC 144A		5.13			5-1-2023		2,965,000		2,950,175

CCO Holdings LLC 144A		5.13			5-1-2027		750,000		705,938

CCO Holdings LLC		5.25			9-30-2022		2,048,000		2,058,240

CCO Holdings LLC 144A		5.38			5-1-2025		7,195,000		7,042,106

CCO Holdings LLC 144A		5.50			5-1-2026		325,000		316,469

CCO Holdings LLC 144A		5.75			2-15-2026		5,675,000		5,618,250

CCO Holdings LLC 144A		5.88			4-1-2024		2,350,000		2,370,563

Cequel Communications Holdings 144A		7.75			7-15-2025		3,625,000		3,824,375

Cinemark USA Incorporated		4.88			6-1-2023		750,000		732,188

CSC Holdings LLC 144A		5.38			2-1-2028		1,125,000		1,060,313

CSC Holdings LLC		8.63			2-15-2019		635,000		641,350

Dish Network Corporation		3.38			8-15-2026		1,825,000		1,625,984

EMI Music Publishing Group 144A		7.63			6-15-2024		3,528,000		3,788,190

Gray Television Incorporated 144A		5.13			10-15-2024		2,400,000		2,283,000

Gray Television Incorporated 144A		5.88			7-15-2026		6,650,000		6,381,939

Lamar Media Corporation		5.38			1-15-2024		725,000		725,906

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


10		Wells Fargo Income Opportunities Fund		Portfolio of investments—October 31, 2018 (unaudited)


Security name	Interest rate			Maturity date		Principal		Value

Media (continued)

National CineMedia LLC		6.00	%		4-15-2022	$	7,000,000	$	7,070,000

Nexstar Broadcasting Group Incorporated 144A		5.63			8-1-2024		725,000		692,375

Nexstar Broadcasting Group Incorporated		5.88			11-15-2022		425,000		431,460

Nexstar Broadcasting Group Incorporated 144A		6.13			2-15-2022		2,865,000		2,918,719

Nielsen Finance LLC 144A		5.00			4-15-2022		1,945,000		1,893,944

Outfront Media Capital Corporation		5.25			2-15-2022		320,000		322,304

Outfront Media Capital Corporation		5.63			2-15-2024		735,000		735,919

Outfront Media Capital Corporation		5.88			3-15-2025		1,275,000		1,279,781

Salem Media Group Incorporated 144A		6.75			6-1-2024		6,225,000		5,571,375

The E.W. Scripps Company 144A		5.13			5-15-2025		6,019,000		5,657,860

									75,989,370


Wireless Telecommunication Services: 2.34%

Sprint Capital Corporation		6.88			11-15-2028		2,600,000		2,554,500

Sprint Capital Corporation		8.75			3-15-2032		2,675,000		2,909,330

Sprint Communications Incorporated		7.00			8-15-2020		380,000		393,300

T-Mobile USA Incorporated		4.00			4-15-2022		1,075,000		1,061,563

T-Mobile USA Incorporated		4.50			2-1-2026		225,000		210,587

T-Mobile USA Incorporated		4.75			2-1-2028		225,000		208,406

T-Mobile USA Incorporated		5.13			4-15-2025		725,000		714,125

T-Mobile USA Incorporated		5.38			4-15-2027		2,050,000		2,003,875

T-Mobile USA Incorporated		6.00			3-1-2023		500,000		511,300

T-Mobile USA Incorporated		6.38			3-1-2025		3,050,000		3,145,313

T-Mobile USA Incorporated		6.50			1-15-2024		140,000		144,900

									13,857,199


Consumer Discretionary: 14.23%

Auto Components: 2.63%

Allison Transmission Incorporated 144A		4.75			10-1-2027		1,695,000		1,557,281

Allison Transmission Incorporated 144A		5.00			10-1-2024		8,325,000		8,080,412

Cooper Tire & Rubber Company		7.63			3-15-2027		5,190,000		5,566,275

Cooper Tire & Rubber Company		8.00			12-15-2019		400,000		416,000

									15,619,968


Distributors: 0.39%

LKQ Corporation		4.75			5-15-2023		2,375,000		2,291,875


Diversified Consumer Services: 2.30%

Carriage Services Incorporated 144A		6.63			6-1-2026		1,125,000		1,127,813

Service Corporation International		4.63			12-15-2027		1,250,000		1,171,875

Service Corporation International		7.50			4-1-2027		8,700,000		9,570,000

Service Corporation International		8.00			11-15-2021		1,635,000		1,786,238

									13,655,926


Hotels, Restaurants & Leisure: 2.69%

CCM Merger Incorporated 144A		6.00			3-15-2022		8,475,000		8,623,313

Hilton Domestic Operating Company Incorporated 144A		5.13			5-1-2026		1,175,000		1,148,563

KFC Holding Company 144A		5.00			6-1-2024		2,075,000		2,046,469

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


Portfolio of investments—October 31, 2018 (unaudited)		Wells Fargo Income Opportunities Fund			11


Security name	Interest rate			Maturity date		Principal		Value

Hotels, Restaurants & Leisure (continued)

MGM Growth Properties Operating Partnership LP		5.63	%		5-1-2024	$	225,000	$	225,281

Wyndham Hotels & Resorts Company 144A		5.38			4-15-2026		4,025,000		3,904,250

									15,947,876


Specialty Retail: 5.38%

Asbury Automotive Group Incorporated		6.00			12-15-2024		7,200,000		7,074,000

Group 1 Automotive Incorporated		5.00			6-1-2022		2,259,000		2,202,525

Group 1 Automotive Incorporated 144A		5.25			12-15-2023		3,275,000		3,152,188

Lithia Motors Incorporated 144A		5.25			8-1-2025		6,825,000		6,432,563

Penske Auto Group Incorporated		3.75			8-15-2020		1,045,000		1,034,550

Penske Auto Group Incorporated		5.38			12-1-2024		5,398,000		5,242,808

Penske Auto Group Incorporated		5.75			10-1-2022		2,100,000		2,128,875

Sonic Automotive Incorporated		5.00			5-15-2023		3,200,000		2,976,224

Sonic Automotive Incorporated		6.13			3-15-2027		1,799,000		1,632,593

									31,876,326


Textiles, Apparel & Luxury Goods: 0.84%

The William Carter Company		5.25			8-15-2021		1,200,000		1,204,500

Wolverine World Wide Incorporated 144A		5.00			9-1-2026		3,925,000		3,797,438

									5,001,938


Consumer Staples: 1.65%

Beverages: 0.18%

Cott Beverages Incorporated 144A		5.50			4-1-2025		1,125,000		1,071,563


Food Products: 1.17%

B&G Foods Incorporated		4.63			6-1-2021		670,000		665,813

B&G Foods Incorporated		5.25			4-1-2025		1,750,000		1,666,875

Darling Ingredients Incorporated		5.38			1-15-2022		295,000		295,738

Lamb Weston Holdings Incorporated 144A		4.63			11-1-2024		375,000		367,301

Lamb Weston Holdings Incorporated 144A		4.88			11-1-2026		75,000		72,375

Pilgrim’s Pride Corporation 144A		5.75			3-15-2025		2,360,000		2,200,700

Pilgrim’s Pride Corporation 144A		5.88			9-30-2027		400,000		363,000

Prestige Brands Incorporated 144A		6.38			3-1-2024		660,000		651,750

US Foods Incorporated 144A		5.88			6-15-2024		670,000		663,300

									6,946,852


Household Products: 0.30%

Central Garden & Pet Company		5.13			2-1-2028		400,000		369,000

Central Garden & Pet Company		6.13			11-15-2023		405,000		412,088

Spectrum Brands Incorporated		5.75			7-15-2025		775,000		751,750

Spectrum Brands Incorporated		6.63			11-15-2022		250,000		255,313

									1,788,151


Energy: 27.95%

Energy Equipment & Services: 8.74%

Bristow Group Incorporated		6.25			10-15-2022		6,900,000		5,071,500

Bristow Group Incorporated 144A		8.75			3-1-2023		1,550,000		1,460,875

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


12		Wells Fargo Income Opportunities Fund		Portfolio of investments—October 31, 2018 (unaudited)


Security name	Interest rate			Maturity date		Principal		Value

Energy Equipment & Services (continued)

Diamond Offshore Drilling Incorporated		4.88	%		11-1-2043	$	2,875,000	$	1,955,000

Era Group Incorporated		7.75			12-15-2022		4,745,000		4,697,550

Hilcorp Energy Company 144A		5.00			12-1-2024		3,100,000		2,921,750

Hilcorp Energy Company 144A		5.75			10-1-2025		4,195,000		4,079,638

Hilcorp Energy Company 144A		6.25			11-1-2028		1,450,000		1,395,640

Hornbeck Offshore Services Incorporated		1.50			9-1-2019		7,847,000		7,066,765

Hornbeck Offshore Services Incorporated		5.00			3-1-2021		1,800,000		1,287,000

Hornbeck Offshore Services Incorporated		5.88			4-1-2020		2,450,000		1,855,875

NGPL PipeCo LLC 144A		4.38			8-15-2022		675,000		666,563

NGPL PipeCo LLC 144A		4.88			8-15-2027		1,050,000		1,010,625

NGPL PipeCo LLC 144A		7.77			12-15-2037		12,450,000		14,566,500

Oceaneering International Incorporated		6.00			2-1-2028		1,700,000		1,657,480

USA Compression Partners LP 144A		6.88			4-1-2026		2,100,000		2,136,750

									51,829,511


Oil, Gas & Consumable Fuels: 19.21%

Andeavor Logistics LP		5.25			1-15-2025		1,150,000		1,173,000

Archrock Partners LP		6.00			10-1-2022		1,650,000		1,633,500

Carrizo Oil & Gas Incorporated		8.25			7-15-2025		1,600,000		1,660,000

Cheniere Energy Partners LP		5.25			10-1-2025		9,200,000		9,027,500

Cheniere Energy Partners LP 144A		5.63			10-1-2026		1,225,000		1,206,625

Continental Resources Incorporated		3.80			6-1-2024		2,000,000		1,932,027

Continental Resources Incorporated		4.38			1-15-2028		500,000		483,457

DCP Midstream Operating LP		2.70			4-1-2019		1,425,000		1,414,313

Denbury Resources Incorporated		6.38			8-15-2021		6,205,000		5,770,650

Denbury Resources Incorporated 144A		9.25			3-31-2022		1,362,000		1,419,885

Enable Midstream Partner LP		2.40			5-15-2019		5,475,000		5,445,900

Enable Oklahoma Intrastate Transmission LLC 144A		6.25			3-15-2020		1,100,000		1,131,847

EnLink Midstream Partners LP		4.15			6-1-2025		200,000		185,921

EnLink Midstream Partners LP		4.40			4-1-2024		6,450,000		6,176,076

EnLink Midstream Partners LP		4.85			7-15-2026		2,275,000		2,155,434

Exterran Partners LP		6.00			4-1-2021		5,075,000		5,024,250

Gulfport Energy Corporation		6.00			10-15-2024		1,625,000		1,523,438

Kinder Morgan Incorporated		6.50			9-15-2020		1,155,000		1,212,621

Kinder Morgan Incorporated		7.42			2-15-2037		1,820,000		2,055,204

Murphy Oil Corporation		4.45			12-1-2022		3,200,000		3,115,767

Murphy Oil Corporation		5.75			8-15-2025		360,000		358,093

Murphy Oil Corporation		6.88			8-15-2024		1,425,000		1,488,385

Nabors Industries Incorporated		0.75			1-15-2024		2,850,000		2,124,196

Rockies Express Pipeline LLC 144A		5.63			4-15-2020		7,320,000		7,478,844

Rockies Express Pipeline LLC 144A		6.88			4-15-2040		5,300,000		5,763,750

Rockies Express Pipeline LLC 144A		7.50			7-15-2038		1,150,000		1,316,750

Rose Rock Midstream LP		5.63			7-15-2022		2,450,000		2,352,000

Rose Rock Midstream LP		5.63			11-15-2023		1,775,000		1,677,375

Sabine Pass Liquefaction LLC		5.63			2-1-2021		2,275,000		2,353,945

Sabine Pass Liquefaction LLC		6.25			3-15-2022		3,075,000		3,276,446

SemGroup Corporation		6.38			3-15-2025		5,725,000		5,538,938

SemGroup Corporation		7.25			3-15-2026		2,869,000		2,800,861

Southern Star Central Corporation 144A		5.13			7-15-2022		3,054,000		3,004,373

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


Portfolio of investments—October 31, 2018 (unaudited)		Wells Fargo Income Opportunities Fund			13


Security name	Interest rate			Maturity date		Principal		Value

Oil, Gas & Consumable Fuels (continued)

Southwestern Energy Company		6.20	%		1-23-2025	$	75,000	$	72,938

Southwestern Energy Company		7.50			4-1-2026		750,000		763,125

Southwestern Energy Company		7.75			10-1-2027		750,000		765,000

Summit Midstream Holdings LLC		5.75			4-15-2025		400,000		383,000

Tallgrass Energy Partners LP 144A		4.75			10-1-2023		1,250,000		1,236,719

Tallgrass Energy Partners LP 144A		5.50			9-15-2024		12,825,000		12,905,156

Tesoro Logistics LP		6.38			5-1-2024		725,000		766,325

Ultra Resources Incorporated 144A		7.13			4-15-2025		8,550,000		3,762,000

									113,935,634


Financials: 6.60%

Banks: 0.06%

Citigroup Incorporated		4.13			3-9-2021		115,000		114,713

Citigroup Incorporated		6.13			3-9-2028		195,000		202,313

									317,026


Capital Markets: 0.11%

MSCI Incorporated 144A		5.38			5-15-2027		675,000		668,250


Consumer Finance: 2.53%

Ally Financial Incorporated		7.50			9-15-2020		300,000		318,000

Ally Financial Incorporated		8.00			12-31-2018		1,300,000		1,308,125

Ally Financial Incorporated		8.00			3-15-2020		3,016,000		3,163,030

FirstCash Incorporated 144A		5.38			6-1-2024		2,750,000		2,708,750

Navient Corporation		8.00			3-25-2020		2,725,000		2,844,219

Springleaf Finance Corporation		6.00			6-1-2020		1,375,000		1,404,219

Springleaf Finance Corporation		7.13			3-15-2026		1,850,000		1,752,875

Springleaf Finance Corporation		8.25			12-15-2020		75,000		80,250

Springleaf Finance Corporation		8.25			10-1-2023		1,342,000		1,439,295

									15,018,763


Diversified Financial Services: 2.86%

LPL Holdings Incorporated 144A		5.75			9-15-2025		16,525,000		16,029,250

Vantiv LLC 144A		4.38			11-15-2025		975,000		920,156

									16,949,406


Insurance: 1.04%

AmWINS Group Incorporated 144A		7.75			7-1-2026		2,200,000		2,260,500

HUB International Limited 144A		7.00			5-1-2026		1,300,000		1,268,800

USIS Merger Subordinate Incorporated 144A		6.88			5-1-2025		2,700,000		2,632,500

									6,161,800


Health Care: 12.14%

Health Care Equipment & Supplies: 2.28%

Hill-Rom Holdings Incorporated 144A		5.00			2-15-2025		975,000		940,875

Hill-Rom Holdings Incorporated 144A		5.75			9-1-2023		325,000		328,624

Hologic Incorporated 144A		4.38			10-15-2025		4,700,000		4,406,250

Hologic Incorporated 144A		4.63			2-1-2028		475,000		434,031

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


14		Wells Fargo Income Opportunities Fund		Portfolio of investments—October 31, 2018 (unaudited)


Security name	Interest rate			Maturity date		Principal		Value

Health Care Equipment & Supplies (continued)

Kinetics Concepts Incorporated 144A		7.88	%		2-15-2021	$	4,000,000	$	4,090,000

Surgery Center Holdings Incorporated 144A		6.75			7-1-2025		1,000,000		937,500

Surgery Center Holdings Incorporated 144A		8.88			4-15-2021		2,325,000		2,388,938

									13,526,218


Health Care Providers & Services: 8.39%

Acadia Healthcare Company Incorporated		6.50			3-1-2024		310,000		315,115

Centene Corporation 144A		5.38			6-1-2026		1,425,000		1,446,375

Centene Corporation		6.13			2-15-2024		650,000		679,250

CHS Incorporated		5.13			8-1-2021		4,850,000		4,595,375

Davita Incorporated		5.00			5-1-2025		2,125,000		2,000,156

HCA Incorporated		5.88			3-15-2022		750,000		784,688

HCA Incorporated		6.50			2-15-2020		6,525,000		6,737,063

HealthSouth Corporation		5.75			9-15-2025		1,725,000		1,707,750

Mednax Incorporated 144A		5.25			12-1-2023		1,075,000		1,075,000

MPH Acquisition Holdings LLC 144A		7.13			6-1-2024		6,825,000		6,932,972

MPT Operating Partnership LP		5.00			10-15-2027		2,275,000		2,137,818

MPT Operating Partnership LP		5.25			8-1-2026		3,200,000		3,088,000

MPT Operating Partnership LP		6.38			3-1-2024		395,000		408,825

NVA Holdings Company 144A		6.88			4-1-2026		425,000		419,688

Polaris Intermediate Corporation 144A		8.50			12-1-2022		1,200,000		1,230,000

Select Medical Corporation		6.38			6-1-2021		6,730,000		6,788,888

Tenet Healthcare Corporation		4.63			7-15-2024		614,000		591,804

Tenet Healthcare Corporation		6.00			10-1-2020		575,000		588,829

Vizient Incorporated 144A		10.38			3-1-2024		7,235,000		7,886,150

Wellcare Health Plans Incorporated 144A		5.38			8-15-2026		350,000		349,125

									49,762,871


Health Care Technology: 1.33%

Change Healthcare Holdings Incorporated 144A		5.75			3-1-2025		6,300,000		6,158,250

Quintiles IMS Holdings Incorporated 144A		4.88			5-15-2023		1,375,000		1,359,531

Quintiles IMS Holdings Incorporated 144A		5.00			10-15-2026		375,000		360,818

									7,878,599


Life Sciences Tools & Services: 0.14%

Charles River Laboratories Incorporated 144A		5.50			4-1-2026		800,000		798,000


Industrials: 7.25%

Aerospace & Defense: 0.11%

RBS Global & Rexnord LLC 144A		4.88			12-15-2025		700,000		656,250


Airlines: 1.09%

Aviation Capital Group Corporation 144A		6.75			4-6-2021		2,190,000		2,332,550

BBA US Holdings Incorporated 144A		5.38			5-1-2026		4,150,000		4,103,313

									6,435,863


Commercial Services & Supplies: 5.22%

Acco Brands Corporation 144A		5.25			12-15-2024		725,000		674,250

Advanced Disposal Services Incorporated 144A		5.63			11-15-2024		5,900,000		5,752,500

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


Portfolio of investments—October 31, 2018 (unaudited)		Wells Fargo Income Opportunities Fund			15


Security name	Interest rate			Maturity date		Principal		Value

Commercial Services & Supplies (continued)

Aramark Services Incorporated 144A		5.00	%		2-1-2028	$	450,000	$	426,938

Aramark Services Incorporated		5.13			1-15-2024		1,256,000		1,249,720

Covanta Holding Corporation		5.88			3-1-2024		5,268,000		5,254,830

Covanta Holding Corporation		5.88			7-1-2025		1,500,000		1,455,000

Covanta Holding Corporation		6.00			1-1-2027		750,000		723,750

Covanta Holding Corporation		6.38			10-1-2022		3,205,000		3,273,106

KAR Auction Services Incorporated 144A		5.13			6-1-2025		11,725,000		11,109,438

Waste Pro USA Incorporated 144A		5.50			2-15-2026		725,000		686,938

Wrangler Buyer Corporation 144A		6.00			10-1-2025		320,000		343,200

									30,949,670


Electrical Equipment: 0.26%

Resideo Funding Incorporated 144A		6.13			11-1-2026		1,550,000		1,558,107


Machinery: 0.57%

Stevens Holding Company Incorporated 144A		6.13			10-1-2026		3,400,000		3,387,658


Information Technology: 9.25%

Communications Equipment: 0.25%

CommScope Technologies Finance LLC 144A		6.00			6-15-2025		1,550,000		1,507,375


IT Services: 4.12%

Cardtronics Incorporated		5.13			8-1-2022		3,375,000		3,240,000

Cardtronics Incorporated 144A		5.50			5-1-2025		3,100,000		2,883,000

First Data Corporation 144A		5.00			1-15-2024		2,325,000		2,301,750

First Data Corporation 144A		5.38			8-15-2023		550,000		554,813

First Data Corporation 144A		5.75			1-15-2024		2,100,000		2,113,125

First Data Corporation 144A		7.00			12-1-2023		5,425,000		5,625,725

Gartner Incorporated 144A		5.13			4-1-2025		4,975,000		4,937,688

Infor Software Parent LLC (PIK at 7.88%) 144A¥		7.13			5-1-2021		1,260,000		1,266,300

Information Incorporated		6.50			5-15-2022		875,000		872,813

Zayo Group LLC		6.00			4-1-2023		625,000		637,500

									24,432,714


Software: 0.57%

CDK Global Incorporated		4.88			6-1-2027		425,000		397,906

CDK Global Incorporated		5.00			10-15-2024		1,050,000		1,036,560

CDK Global Incorporated		5.88			6-15-2026		650,000		654,875

Fair Isaac Corporation 144A		5.25			5-15-2026		350,000		345,188

Symantec Corporation 144A		5.00			4-15-2025		975,000		917,267

									3,351,796


Technology Hardware, Storage & Peripherals: 4.31%

Dell International LLC 144A		5.88			6-15-2021		5,125,000		5,195,690

Dell International LLC 144A		7.13			6-15-2024		9,450,000		10,001,070

NCR Corporation		5.88			12-15-2021		380,000		380,475

NCR Corporation		6.38			12-15-2023		10,038,000		10,012,905

									25,590,140

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


16		Wells Fargo Income Opportunities Fund		Portfolio of investments—October 31, 2018 (unaudited)


Security name	Interest rate			Maturity date		Principal		Value

Materials: 4.38%

Chemicals: 0.18%

Celanese U.S. Holdings LLC		5.88	%		6-15-2021	$	440,000	$	459,162

Valvoline Incorporated		5.50			7-15-2024		625,000		621,094

									1,080,256


Containers & Packaging: 4.14%

Ball Corporation		4.88			3-15-2026		1,100,000		1,084,875

Ball Corporation		5.25			7-1-2025		630,000		633,938

Berry Global Incorporated		5.13			7-15-2023		700,000		696,500

Berry Global Incorporated		6.00			10-15-2022		575,000		587,219

Crown Americas LLC 144A		4.75			2-1-2026		1,650,000		1,557,188

Crown Cork & Seal Company Incorporated		7.38			12-15-2026		2,910,000		3,113,700

Flex Acquisition Company Incorporated 144A		6.88			1-15-2025		3,425,000		3,202,375

Flex Acquisition Company Incorporated 144A		7.88			7-15-2026		750,000		723,975

Owens-Brockway Glass Container Incorporated 144A		5.38			1-15-2025		925,000		897,250

Owens-Brockway Glass Container Incorporated 144A		5.88			8-15-2023		1,300,000		1,295,125

Owens-Illinois Incorporated 144A		6.38			8-15-2025		7,800,000		7,839,000

Reynolds Group Issuer Incorporated 144A		5.13			7-15-2023		401,000		392,479

Sealed Air Corporation 144A		5.13			12-1-2024		2,350,000		2,291,250

Silgan Holdings Incorporated		5.50			2-1-2022		225,000		227,250

									24,542,124


Metals & Mining: 0.06%

Indalex Holdings Corporation (a)		11.50			2-1-2020		5,985,000		0

Novelis Corporation 144A		6.25			8-15-2024		325,000		321,750

									321,750


Real Estate: 7.69%

Equity REITs: 7.69%

CoreCivic Incorporated		4.63			5-1-2023		800,000		754,000

CoreCivic Incorporated		5.00			10-15-2022		2,175,000		2,101,594

Crown Castle International Corporation		5.25			1-15-2023		4,385,000		4,573,249

Equinix Incorporated		5.75			1-1-2025		2,300,000		2,343,125

Equinix Incorporated		5.88			1-15-2026		2,350,000		2,385,250

ESH Hospitality Incorporated 144A		5.25			5-1-2025		7,800,000		7,380,750

Iron Mountain Incorporated 144A		4.38			6-1-2021		2,500,000		2,487,500

Iron Mountain Incorporated 144A		5.25			3-15-2028		1,325,000		1,189,188

Iron Mountain Incorporated 144A		5.38			6-1-2026		2,175,000		2,001,000

Iron Mountain Incorporated		6.00			8-15-2023		5,185,000		5,308,144

MGM Growth Properties LLC		4.50			1-15-2028		775,000		693,625

Sabra Health Care LP		5.38			6-1-2023		2,100,000		2,089,500

Sabra Health Care REIT Incorporated		5.50			2-1-2021		2,285,000		2,314,991

SBA Communications Corporation		4.00			10-1-2022		250,000		239,375

SBA Communications Corporation		4.88			7-15-2022		1,485,000		1,477,575

The Geo Group Incorporated		5.13			4-1-2023		1,874,000		1,759,218

The Geo Group Incorporated		5.88			1-15-2022		2,595,000		2,565,806

The Geo Group Incorporated		5.88			10-15-2024		2,925,000		2,712,353

The Geo Group Incorporated		6.00			4-15-2026		1,360,000		1,244,400

									45,620,643

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


Portfolio of investments—October 31, 2018 (unaudited)		Wells Fargo Income Opportunities Fund			17


Security name	Interest rate			Maturity date		Principal		Value

Telecommunication Services: 1.64%

Diversified Telecommunication Services: 1.26%

Zayo Group LLC 144A		5.75	%		1-15-2027	$	1,975,000	$	1,935,895

Zayo Group LLC		6.38			5-15-2025		5,396,000		5,517,410

									7,453,305


Wireless Telecommunication Services: 0.38%

T-Mobile USA Incorporated		6.50			1-15-2026		1,900,000		2,004,500

T-Mobile USA Incorporated		6.00			4-15-2024		275,000		281,875

									2,286,375


Utilities: 6.51%

Gas Utilities: 0.35%

AmeriGas Partners LP		5.75			5-20-2027		2,250,000		2,086,875


Independent Power & Renewable Electricity Producers: 6.16%

NextEra Energy Operating Partners LP 144A		4.25			9-15-2024		350,000		332,500

NextEra Energy Operating Partners LP 144A		4.50			9-15-2027		730,000		673,425

NSG Holdings LLC 144A		7.75			12-15-2025		8,427,007		9,101,167

Pattern Energy Group Incorporated 144A		5.88			2-1-2024		11,518,000		11,402,820

TerraForm Global Operating LLC 144A		6.13			3-1-2026		2,800,000		2,604,000

TerraForm Power Operating LLC 144A		4.25			1-31-2023		7,150,000		6,774,625

TerraForm Power Operating LLC 144A		5.00			1-31-2028		2,075,000		1,854,531

TerraForm Power Operating LLC 144A		6.63			6-15-2025		3,600,000		3,753,000

									36,496,068


Total Corporate Bonds and Notes (Cost $704,982,413)									695,579,524


Loans: 5.03%

Consumer Discretionary: 1.68%

Hotels, Restaurants & Leisure: 1.68%

CCM Merger Incorporated (1 Month LIBOR +2.75%) ±		4.55			8-8-2021		733,940		734,491

Montreign Operating Company LLC (1 Month LIBOR +8.25%) ±		10.55			1-24-2023		10,372,875		9,205,927

									9,940,418


Energy: 0.56%

Oil, Gas & Consumable Fuels: 0.56%

Encino Acquisition Partners Holdings LLC <%%‡		0.00			9-21-2025		1,225,000		1,243,375

Ultra Resources Incorporated <%%		0.00			4-12-2024		2,200,000		2,056,208

									3,299,583


Financials: 0.36%

Diversified Financial Services: 0.36%

Resolute Investment Managers Incorporated (3 Month LIBOR +7.50%) ±‡		10.03			4-30-2023		2,110,000		2,125,825


Health Care: 0.37%

Health Care Providers & Services: 0.02%

Press Ganey Holdings Incorporated (1 Month LIBOR +6.50%) ±‡		8.80			10-21-2024		112,360		112,922

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


18		Wells Fargo Income Opportunities Fund		Portfolio of investments—October 31, 2018 (unaudited)


Security name	Interest rate			Maturity date		Principal		Value

Health Care Technology: 0.35%

Emerald Bidco Incorporated (1 Month LIBOR +2.75%) ±		5.05	%		10-23-2023	$	2,104,968	$	2,105,620


Industrials: 0.38%

Commercial Services & Supplies: 0.38%

Advantage Sales & Marketing LLC (1 Month LIBOR +6.50%) ±		8.80			7-25-2022		2,025,000		1,687,493

MTL Publishing LLC Class B6 <%%		0.00			8-20-2023		575,000		574,897

									2,262,390


Information Technology: 1.31%

IT Services: 1.31%

Ancestry.com Incorporated (1 Month LIBOR +3.25%) ±		5.55			10-19-2023		7,771,125		7,790,553


Real Estate: 0.22%

Real Estate Management & Development: 0.22%

Capital Automotive LP (1 Month LIBOR +6.00%) ±		8.30			3-24-2025		1,262,425		1,279,784


Utilities: 0.15%

Independent Power & Renewable Electricity Producers: 0.15%

Vistra Energy Corporation (1 Month LIBOR +2.25%) ±		4.55			12-14-2023		908,813		909,158


Total Loans (Cost $31,178,641)									29,826,253


				Expiration date		Shares
Rights: 0.07%

Utilities: 0.07%

Independent Power & Renewable Electricity Producers: 0.07%

Vistra Energy Corporation †					12-31-2046		559,650		408,545


Total Rights (Cost $582,794)									408,545


				Maturity date		Principal
Yankee Corporate Bonds and Notes: 11.36%

Energy: 3.03%

Energy Equipment & Services: 0.89%

Ensco plc		5.75			10-1-2044	$	7,377,000		5,163,900

Trinidad Drilling Limited 144A		6.63			2-15-2025		100,000		100,000

									5,263,900


Oil, Gas & Consumable Fuels: 2.14%

Baytex Energy Corporation 144A		5.13			6-1-2021		3,600,000		3,501,000

Baytex Energy Corporation 144A		5.63			6-1-2024		2,434,000		2,184,515

Griffin Coal Mining Company Limited 144A(a)		9.50			12-1-2016		1,410,935		0

Griffin Coal Mining Company Limited (a)		9.50			12-1-2016		193,118		0

Rockpoint Gas Storage 144A		7.00			3-31-2023		2,950,000		2,935,250

Teekay Corporation		8.50			1-15-2020		4,050,000		4,110,750

									12,731,515

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


Portfolio of investments—October 31, 2018 (unaudited)		Wells Fargo Income Opportunities Fund			19


Security name	Interest rate			Maturity date		Principal		Value

Financials: 3.10%

Banks: 0.91%

Intelsat Connect Finance Company 144A		9.50	%		2-15-2023	$	825,000	$	793,031

Nielsen Holding and Finance BV 144A		5.00			2-1-2025		4,000,000		3,895,000

Nielsen Holding and Finance BV 144A		5.50			10-1-2021		700,000		703,500

Preferred Term Securities XII Limited (a)†		0.00			12-24-2033		1,540,000		0

									5,391,531


Diversified Financial Services: 2.19%

Intelsat Jackson Holdings SA		5.50			8-1-2023		10,515,000		9,410,925

Intelsat Jackson Holdings SA 144A		8.00			2-15-2024		225,000		235,406

Intelsat Jackson Holdings SA 144A		8.50			10-15-2024		3,400,000		3,340,500

									12,986,831


Health Care: 2.52%

Pharmaceuticals: 2.52%

Bausch Health Companies Incorporated 144A		5.50			3-1-2023		3,825,000		3,624,188

Bausch Health Companies Incorporated 144A		5.50			11-1-2025		925,000		906,500

Bausch Health Companies Incorporated 144A		5.88			5-15-2023		3,600,000		3,442,500

Bausch Health Companies Incorporated 144A		6.13			4-15-2025		3,750,000		3,448,875

Bausch Health Companies Incorporated 144A		6.50			3-15-2022		525,000		543,375

Bausch Health Companies Incorporated 144A		7.00			3-15-2024		975,000		1,021,010

Bausch Health Companies Incorporated 144A		7.50			7-15-2021		1,169,000		1,186,535

Bausch Health Companies Incorporated 144A		8.50			1-31-2027		750,000		763,125

									14,936,108


Industrials: 2.18%

Aerospace & Defense: 0.19%

Avolon Holdings Funding Limited 144A		5.13			10-1-2023		1,175,000		1,152,969


Commercial Services & Supplies: 1.40%

Ritchie Brothers Auctioneers Incorporated 144A		5.38			1-15-2025		8,400,000		8,274,000


Machinery: 0.33%

Sensata Technologies BV 144A		5.00			10-1-2025		760,000		733,400

Sensata Technologies BV 144A		6.25			2-15-2026		1,225,000		1,246,438

									1,979,838


Professional Services: 0.26%

IHS Markit Limited 144A		4.75			2-15-2025		1,400,000		1,385,972

IHS Markit Limited 144A		5.00			11-1-2022		125,000		127,600

									1,513,572


Materials: 0.53%

Containers & Packaging: 0.53%

Ardagh Packaging Finance plc 144A		4.25			9-15-2022		600,000		582,000

Ardagh Packaging Finance plc 144A		4.63			5-15-2023		275,000		267,438

Ardagh Packaging Finance plc 144A		7.25			5-15-2024		1,300,000		1,306,500

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


20		Wells Fargo Income Opportunities Fund		Portfolio of investments—October 31, 2018 (unaudited)


Security name	Interest rate			Maturity date		Principal		Value

Containers & Packaging (continued)

OI European Group BV 144A		4.00	%		3-15-2023	$	1,075,000	$	1,006,469

									3,162,407


Total Yankee Corporate Bonds and Notes (Cost $70,237,598)									67,392,671


	Yield					Shares
Short-Term Investments: 4.64%

Investment Companies: 4.64%

Wells Fargo Government Money Market Fund Select Class (l)(u)##		2.07					27,549,823		27,549,823


Total Short-Term Investments (Cost $27,549,823)									27,549,823


Total investments in securities (Cost $834,531,875)	138.39	%		820,757,441

Other assets and liabilities, net	(38.39	)		(227,697,069	)

Total net assets	100.00	%	$	593,060,372

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.

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

‡	Security is valued using significant unobservable inputs.

<	All or a portion of the position represents an unfunded loan commitment. The rate represents current interest rate if the loan is partially funded.

%%	The security is issued on a when-issued basis.

†	Non-income-earning security

(l)	The issuer of the security is an affiliated person 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 when-issued securities.

Abbreviations:

LIBOR

London Interbank Offered Rate

REIT	Real estate investment trust

Investments in Affiliates

An affiliated investment is an investment in which the Fund owns at least 5% of the outstanding voting shares of the issuer or as a result of other relationships, such as the Fund and the issuer having the same investment manager. Transactions with issuers that were either affiliated persons of the Fund at the beginning of the period or the end of the period were as follows:


	Shares, beginning of period		Shares purchased		Shares sold		Shares, end of period		Net realized gains (losses)		Net change in unrealized gains (losses)		Income from affiliated securities		Value, end of period		% of net assets
Short-Term Investments
Investment Companies
Wells Fargo Government Money Market Fund Select Class		44,347,095		51,217,582		68,014,854		27,549,823	$	0	$	0	$	301,582	$	27,549,823		4.64	%

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


Statement of assets and liabilities—October 31, 2018 (unaudited)		Wells Fargo Income Opportunities Fund			21




Assets
Investments in unaffiliated securities, at value (cost $806,982,052)	$	793,207,618
Investments in affiliated securities, at value (cost $27,549,823)		27,549,823
Cash		209,429
Receivable for investments sold		805,729
Receivable for interest		11,621,959
Prepaid expenses and other assets		24,657

Total assets		833,419,215


Liabilities
Secured borrowing payable		230,000,000
Payable for investments purchased		4,436,138
Dividends payable		4,145,220
Payable for Fund shares repurchased		860,833
Advisory fee payable		400,666
Administration fee payable		35,430
Trustees’ fees and expenses payable		797
Accrued expenses and other liabilities		479,759

Total liabilities		240,358,843

Total net assets	$	593,060,372


NET ASSETS CONSIST OF
Paid-in capital	$	653,900,282
Total distributable loss		(60,839,910	)

Total net assets	$	593,060,372


NET ASSET VALUE PER SHARE
Based on $593,060,372 divided by 67,357,079 shares issued and outstanding (100,000,000 shares authorized)		$8.80

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


22		Wells Fargo Income Opportunities Fund		Statement of operations—six months ended October 31, 2018 (unaudited)




Investment income
Interest	$	25,206,507
Income from affiliated securities		301,582
Dividends		14

Total investment income		25,508,103


Expenses
Advisory fee		2,558,571
Administration fee		213,214
Custody and accounting fees		15,627
Professional fees		44,361
Shareholder report expenses		50,410
Trustees’ fees and expenses		11,090
Transfer agent fees		18,148
Interest expense		3,460,933
Other fees and expenses		37,763

Total expenses		6,410,117
Less: Fee waivers and/or expense reimbursements		(145,397	)

Net expenses		6,264,720

Net investment income		19,243,383


REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses on investments		(618,228	)
Net change in unrealized gains (losses) on investments		(11,829,311	)

Net realized and unrealized gains (losses) on investments		(12,447,539	)

Net increase in net assets resulting from operations	$	6,795,844

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


Statement of changes in net assets		Wells Fargo Income Opportunities Fund			23


	Six months ended October 31, 2018 (unaudited)			Year ended April 30, 2018¹

Operations
Net investment income	$	19,243,383		$	42,212,028
Net realized losses on investments		(618,228	)		(25,345,884	)
Net change in unrealized gains (losses) on investments		(11,829,311	)		8,362,224

Net increase in net assets resulting from operations		6,795,844			25,228,368


Distributions to shareholders from
Net investment income and net realized gains		(22,038,135	)		(43,320,836	)
Tax basis return of capital		0			(4,338,720	)

Total distributions to shareholders		(22,038,135	)		(47,659,556	)


Capital share transactions
Cost of shares repurchased		(12,560,053	)		(13,222,865	)

Total decrease in net assets		(27,802,344	)		(35,654,053	)


Net assets
Beginning of period		620,862,716			656,516,769

End of period	$	593,060,372		$	620,862,716

Effective for all filings after November 4, 2018, the SEC prospectively eliminated the requirement to parenthetically disclose undistributed net investment income at the end of the period and permitted the aggregation of distributions, with the exception of tax basis returns of capital. Overdistributed net investment income at April 30, 2018 was $3,650,485. The disaggregated distributions information for the year ended April 30, 2018 is included in Note 8, Distributions to Shareholders, in the notes to the financial statements.

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


24		Wells Fargo Income Opportunities Fund		Statement of cash flows—six months ended October 31, 2018 (unaudited)




Cash flows from operating activities:
Net increase in net assets resulting from operations	$	6,795,844

Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities:
Purchase of long-term securities		(81,568,110	)
Proceeds from sales of long-term securities		79,670,299
Amortization		(622,781	)
Purchases and sales of short-term securities, net		16,797,272
Increase in receivable for investments sold		(143,604	)
Decrease in receivable for interest		193,992
Decrease in prepaid expenses and other assets		27,380
Increase in payable for investments purchased		710,884
Increase in advisory fee payable		3,373
Increase in administration fee payable		347
Increase in trustee’s fees and expenses payable		615
Decrease in accrued expenses and other liabilities		(925,414	)
Net realized losses on investments		618,228
Net change in unrealized gains (losses) on investments		11,829,311

Net cash provided by operating activities		33,387,636


Cash flows from financing activities:
Payment for shares repurchased		(11,699,220	)
Cash distributions paid		(21,479,145	)

Net cash used in financing activities		(33,178,365	)

Net increase in cash		209,271


Cash:
Beginning of period	$	158

End of period	$	209,429


Supplemental cash disclosure
Cash paid for interest	$	4,358,720

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


Financial highlights		Wells Fargo Income Opportunities Fund			25

(For a share outstanding throughout each period)


	Six months ended October 31, 2018 (unaudited)			Year ended April 30
	Six months ended October 31, 2018 (unaudited)			2018			2017			2016			2015			2014
Net asset value, beginning of period		$9.00			$9.31			$8.56			$9.75			$10.04			$10.18
Net investment income		0.28	¹		0.60	¹		0.74	¹		0.77	¹		0.77	¹		0.82	¹
Net realized and unrealized gains (losses) on investments		(0.19	)		(0.23	)		0.81			(1.14	)		(0.24	)		(0.14	)

Total from investment operations		0.09			0.37			1.55			(0.37	)		0.53			0.68
Distributions to shareholders from
Net investment income		(0.32	)		(0.62	)		(0.79	)		(0.82	)		(0.82	)		(0.82	)
Tax basis return of capital		0.00			(0.66	)		(0.01	)		0.00			0.00			0.00

Total distributions to shareholders		(0.32	)		(0.68	)		(0.80	)		(0.82	)		(0.82	)		(0.82	)
Anti-dilutive effect of shares repurchased		0.03			0.00	²		0.00	²		0.00			0.00			0.00
Net asset value, end of period		$8.80			$9.00			$9.31			$8.56			$9.75			$10.04
Market value, end of period		$7.49			$8.07			$8.64			$7.76			$8.93			$9.52
Total return based on market value³		(3.38	)%		1.24	%		22.55	%		(3.47	)%		2.59	%		1.60	%
Ratios to average net assets (annualized)
Gross expenses⁴		2.06	%		1.68	%		1.40	%		1.30	%		1.23	%		1.27	%
Net expenses⁴		2.02	%		1.63	%		1.23	%		1.10	%		0.96	%		1.01	%
Net investment income		6.20	%		6.53	%		8.15	%		8.76	%		7.85	%		8.35	%
Supplemental data
Portfolio turnover rate		7	%		33	%		43	%		25	%		33	%		31	%
Net assets, end of period (000s omitted)		$593,060			$620,863			$656,517			$607,437			$692,169			$712,781

Borrowings outstanding, end of period (000s omitted)		$230,000			$230,000			$230,000			$230,000			$230,000			$230,000
Asset coverage per $1,000 of borrowing, end of period		$3,579			$3,699			$3,854			$3,641			$4,009			$4,099

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 sales of shares.

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


Six months ended October 31, 2018 (unaudited)	1.11	%
Year ended April 30, 2018	0.74	%
Year ended April 30, 2017	0.48	%
Year ended April 30, 2016	0.37	%
Year ended April 30, 2015	0.10	%
Year ended April 30, 2014	0.07	%

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


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

1. ORGANIZATION

Wells Fargo 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 (the “1940 Act”). As an investment company, the Fund follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 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), although the Fund may deviate from this calculation time under unusual or unexpected circumstances.

Debt securities are valued at the evaluated bid price provided by an independent pricing service service (e.g. taking into account various factors, including yields, maturities, or credit ratings) 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 principal exchange or market that day, a fair value price will be determined in accordance with the Fund’s Valuation Procedures.

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

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

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. 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.


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

Interest income is accrued daily and bond discounts are accreted and premiums are amortized daily. 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 been determined to be doubtful based on consistently applied procedures and the fair value has decreased. 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

Under a monthly distribution plan, the Fund pays distributions to shareholders at an annual minimum fixed rate of 8% based on the Fund’s average monthly net asset value per share over the prior 12 months. The monthly distributions may be sourced from income, paid-in capital, and/or capital gains, if any. To the extent that sufficient investment income is not available on a monthly basis, the Fund may distribute paid-in capital and/or capital gains, if any, in order to maintain its managed distribution level.

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 accordance with income tax regulations and may differ from U.S. generally accepted accounting principles. Dividend sources are estimated at the time of declaration. The tax character of distributions is determined as of the Fund’s fiscal year end. Therefore, a portion of the Fund’s distributions made prior to the Fund’s fiscal year end may be categorized as a tax return of capital at year end.

Federal and other taxes

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

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

As of October 31, 2018, the aggregate cost of all investments for federal income tax purposes was $841,309,658 and the unrealized gains (losses) consisted of:



Gross unrealized gains	$	18,117,678

Gross unrealized losses		(38,669,895	)

Net unrealized losses	$	(20,552,217	)

As of April 30, 2018, the Fund had capital loss carryforwards which consisted of $23,493,902 in short-term capital losses and $12,053,764 in long-term capital losses.

3. FAIR VALUATION MEASUREMENTS

Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to 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, 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.


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

The following is a summary of the inputs used in valuing the Fund’s assets and liabilities as of October 31, 2018:



	Quoted prices (Level 1)		Other significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total

Assets
Investments in:

Common stocks

Materials	$	625	$	0	$	0	$	625

Corporate bonds and notes		0		695,579,524		0		695,579,524

Loans		0		26,344,131		3,482,122		29,826,253

Rights

Utilities		0		408,545		0		408,545

Yankee corporate bonds and notes		0		67,392,671		0		67,392,671

Short-term investments

Investment companies		27,549,823		0		0		27,549,823

Total assets	$	27,550,448	$	789,724,871	$	3,482,122	$	820,757,441

Additional sector, industry or geographic detail is included in the Portfolio of Investments.

At October 31, 2018, the Fund did not have any transfers into/out of Level 3.

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, 2019 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. Funds Management contractually waived its advisory fee in the amount of $145,397 for the six months ended October 31, 2018.

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.

Interfund transactions

The Fund may purchase or sell portfolio investment securities to certain other Wells Fargo affiliates pursuant to Rule 17a-7 under the 1940 Act and under procedures adopted by the Board of Trustees. The procedures have been designed to ensure that these interfund transactions, which do not incur broker commissions, are effected at current market prices. Pursuant to these procedures, the Fund had $16,783,625 in interfund purchases during the six months ended October 31, 2018.

5. CAPITAL SHARE TRANSACTIONS

The Fund has authorized capital of 100,000,000 shares with no par value. For the six months ended October 31, 2018 and the year ended April 30, 2018, the Fund did not issue any shares.

On November 10, 2017, the Fund extended its open-market share repurchase program (the “Buyback Program”). Under the Buyback Program, the Fund may repurchase up to 10% of its outstanding shares in open market transactions during the period beginning on January 1, 2018 and ending on December 31, 2018. The Fund’s Board of Trustees has delegated


Notes to financial statements (unaudited)		Wells Fargo Income Opportunities Fund			29

to Funds Management discretion to administer the Buyback Program including the determination of the amount and timing of repurchases in accordance with the best interests of the Fund and subject to applicable legal limitations. During the six months ended October 31, 2018, the Fund purchased 1,594,736 of its shares on the open market at a total cost of $12,560,053 (weighted average price per share of $7.92). The weighted average discount of these repurchased shares was 12.08%.

6. BORROWINGS

The Fund has borrowed $230,000,000 through a revolving credit facility administered by a major financial institution (the “Facility”). The Facility has a commitment amount of $230,000,000 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. The financial institution holds a security interest in all the assets of the Fund as collateral for the borrowing.

During the six months ended October 31, 2018, the Fund had average borrowings outstanding of $230,000,000 at an average annual interest rate of 2.98% and paid interest in the amount of $3,460,933, which represents 1.11% of its average daily net assets (on an annualized basis). Based on the nature of the terms of the Facility and comparative market rates, the carrying amount of the borrowings at October 31, 2018 approximates its fair value. If measured at fair value, the borrowings would be categorized as a Level 2 under the fair value hierarchy.

7. INVESTMENT PORTFOLIO TRANSACTIONS

Purchases and sales of investments, excluding U.S. government obligations (if any) and short-term securities, for the six months ended October 31, 2018 were $65,512,278 and $55,214,211, respectively.

As of October 31, 2018, the Fund had unfunded term loan commitments of $3,861,969.

8. DISTRIBUTIONS TO SHAREHOLDERS

Effective for all filings after November 4, 2018, the Securities and Exchange Commission eliminated the requirement to separately state the components of distributions to shareholders. Distributions to shareholders for the year ended April 30, 2018 consisted of $43,320,836 from net investment income.

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. NEW ACCOUNTING PRONOUNCEMENTS

In August 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 updates the disclosure requirements for fair value measurements by modifying or removing certain disclosures and adding certain new disclosures. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Management has adopted the removal and modification of disclosures early, as permitted, and will adopt the additional new disclosures at the effective date.

In March 2017, FASB issued ASU No. 2017-08, Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium. The amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for fiscal years beginning after December 15, 2018 and for interim periods within those fiscal years. Management is currently evaluating the potential impact of this new guidance to the financial statements.

In November 2016, FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash (a Consensus of the Emerging Issues Task Force), which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts described as restricted cash and restricted cash equivalents should be included with the cash and cash equivalents in reconciling the beginning and end of period total amounts shown on the statement of cash flows. Management has


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

evaluated the impact of adopting this ASU and determined that it will not result in any material changes to presentation of amounts in the financial statements. This ASU is effective for interim and annual reporting periods beginning after December 15, 2017.

In August 2016, FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (a Consensus of the Emerging Issues Task Force), which is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Management has evaluated the impact of adopting this ASU and determined that it will not result in any material changes to presentation of amounts in the financial statements. This ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those financial years, with early adoption permitted.

11. SUBSEQUENT DISTRIBUTIONS

The Fund declared the following distributions to common shareholders:

These distributions are not reflected in the accompanying financial statements.


Other information (unaudited)		Wells Fargo Income Opportunities Fund			31

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 wellsfargofunds.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 wellsfargofunds.com or by visiting the SEC website at sec.gov.

ANNUAL MEETING OF SHAREHOLDERS

On August 13, 2018, an Annual Meeting of Shareholders for the Fund was held to consider the following proposal. The results of the proposal are indicated below.

Proposal 1 – Election of trustees:


Net assets voted “For”	William R. Ebsworth	$	431,813,092

Net assets voted “Withhold”		$	112,655,197

Net assets voted “For”	Jane A. Freeman	$	431,133,260

Net assets voted “Withhold”		$	113,335,029

Net assets voted “For”	Judith M. Johnson	$	431,056,054
Net assets voted “Withhold”		$	113,412,235

PORTFOLIO HOLDINGS INFORMATION

The complete portfolio holdings for the Fund are publicly available monthly on the Fund’s website (wellsfargofunds.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.


32		Wells Fargo Income Opportunities Fund		Other information (unaudited)

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 family of funds, which consists of 152 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	Current other public company or investment company directorships

Class I – Non-Interested Trustees to serve until 2020 Annual Meeting of Shareholders

Isaiah Harris, Jr.² (Born 1952)	Trustee, since 2010	Retired. From 1984 to 2013, equities analyst, portfolio manager, research director and chief investment officer at Fidelity Management and Research Company in Boston, Tokyo, and Hong Kong, and retired in 2013 as Chief Investment Officer of Fidelity Strategic Advisers, Inc. 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. Board member of the Vincent Memorial Hospital Endowment (non-profit organization), where he serves on the Investment Committee and as a Chair of the Audit Committee. Mr. Ebsworth is a CFA^® charterholder.	N/A

David F. Larcker (Born 1950)	Trustee, since 2010	James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Director of the Corporate Governance Research Initiative 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.	N/A

Olivia S. Mitchell (Born 1953)	Trustee, since 2010, Nominating and Governance Committee Chairman, since 2018	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.	N/A

Class II – Non-Interested Trustees to serve until 2018 Annual Meeting of Shareholders

William R. Ebsworth (Born 1957)	Trustee, since 2015	Retired. From 1984 to 2013, equities analyst, portfolio manager, research director and chief investment officer at Fidelity Management and Research Company in Boston, Tokyo, and Hong Kong, and retired in 2013 as Chief Investment Officer of Fidelity Strategic Advisers, Inc. 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. Board member of the Vincent Memorial Hospital Endowment (non-profit organization), where he serves on the Investment Committee and as a Chair of the Audit Committee. Mr. Ebsworth is a CFA^® charterholder.	N/A


Other information (unaudited)		Wells Fargo Income Opportunities Fund			33


Name and year of birth	Position held and length of service	Principal occupations during past five years or longer	Current other public company or investment company directorships

Jane A. Freeman (Born 1953)	Trustee, since 2015; Chair Liaison, since 2018	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 Board Member of The Ruth Bancroft Garden (non-profit organization). She is also an inactive Chartered Financial Analyst.	N/A

Judith M. Johnson² (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.	N/A

Class III – Non-Interested Trustees to serve until 2019 Annual Meeting of Shareholders

Timothy J. Penny (Born 1951)	Trustee, since 2010; Chairman, since 2018: Vice Chairman, from 2017 to 2018	President and Chief Executive Officer of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007.	N/A

James G. Polisson (Born 1959)	Trustee, since 2018; Advisory Board Member, from 2017 to 2018	Retired. Chief Marketing Officer, Source (ETF) UK Services, Ltd, from 2015 to 2017. From 2012 to 2015, Principal of The Polisson Group, LLC, a management consulting, corporate advisory and principal investing company. Chief Executive Officer and Managing Director at Russell Investments, Global Exchange Traded Funds from 2010 to 2012. Managing Director of Barclays Global Investors from 1998 to 2010 and Global Chief Marketing Officer for iShares and Barclays Global Investors from 2000 to 2010. Trustee of the San Francisco Mechanics’ Institute, a non-profit organization, from 2013 to 2015. Board member of the Russell Exchange Traded Fund Trust from 2011 to 2012. Director of Barclays Global Investors Holdings Deutschland GmbH from 2006 to 2009. Mr. Polisson is an attorney and has a retired status with the Massachusetts and District of Columbia Bar Associations.	N/A

Michael S. Scofield³ (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. Trustee of the Evergreen Fund 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.	N/A

Pamela Wheelock (Born 1959)	Trustee, since 2018; Advisory Board Member, from 2017 to 2018	Chief Operating Officer, Twin Cities Habitat for Humanity, since January, 2017. Vice President of University Services, University of Minnesota from 2012 to 2017. Prior thereto, on the Board of Directors, Governance Committee and Finance Committee for the Minnesota Philanthropy Partners (Saint Paul Foundation) from 2012 to 2018, Interim President and Chief Executive Officer of Blue Cross Blue Shield of Minnesota from 2010 to 2011, Chairman of the Board from 2009 to 2011 and Board Director from 2003 to 2015. Vice President, Leadership and Community Engagement, Bush Foundation, Saint Paul, Minnesota (a private foundation) from 2009 to 2011. Executive Vice President and Chief Financial Officer, Minnesota Sports and Entertainment from 2004 to 2009 and Senior Vice President from 2002 to 2004. Commissioner of Finance, State of Minnesota, from 1999 to 2002. Currently the Board Chair of the Minnesota Wild Foundation since 2010.	N/A


34		Wells Fargo Income Opportunities Fund		Other information (unaudited)

Officers


Name and year of birth	Position held and length of service	Principal occupations during past five years or longer

Andrew Owen (Born 1960)	President, since 2017	Executive Vice President of Wells Fargo & Company and Head of Affiliated Managers, Wells Fargo Asset Management, since 2014. In addition, Mr. Owen is currently President, Chief Executive Officer and Director of Wells Fargo Funds Management, LLC since 2017. Prior thereto, Executive Vice President responsible for marketing, investments and product development for Wells Fargo Funds Management, LLC, from 2009 to 2014.

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 and head of the Fund Reporting and Control Team within Fund Administration from 2005 to 2010.

Alexander Kymn (Born 1973)	Secretary, since 2018; Chief Legal Officer, since 2018	Senior Company Counsel of Wells Fargo Bank, N.A. since 2018 (previously Senior Counsel from 2007 to 2018). Vice President of Wells Fargo Funds Management, LLC from 2008 to 2014.

Michael H. Whitaker (Born 1967)	Chief Compliance Officer, since 2016	Senior Vice President and Chief Compliance Officer since 2016. Senior Vice President and Chief Compliance Officer for Fidelity Investments from 2007 to 2016.

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. Manager of Fund Reporting and Control for Evergreen Investment Management Company, LLC from 2004 to 2010.

¹	Jeremy DePalma acts as Treasurer of 76 funds and Assistant Treasurer of 76 funds in the Fund Complex.

²	Mr. Harris will replace Ms. Johnson as the Chairman of the Audit Committee effective January 1, 2019.

³	Mr. Scofield is expected to retire on December 31, 2018.


Other information (unaudited)		Wells Fargo Income Opportunities Fund			35

BOARD CONSIDERATION OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS:

Wells Fargo Income Opportunities Fund

Under the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of Wells Fargo Income Opportunities Fund (the “Fund”) must determine whether to approve the continuation of the Fund’s investment advisory and sub-advisory agreements. In this regard, at an in-person meeting held on May 22-23, 2018 (the “Meeting”), the Board, all the members of which have no direct or indirect interest in the investment advisory and sub-advisory agreements and are not “interested persons” of the Fund, as defined in the 1940 Act (the “Independent Trustees”), reviewed and approved: (i) an investment advisory agreement with Wells Fargo Funds Management, LLC (“Funds Management”); and (ii) an investment sub-advisory agreement with Wells Capital Management Incorporated (the “Sub-Adviser”), an affiliate of Funds Management. The investment advisory agreement with Funds Management and the investment sub-advisory agreement with the Sub-Adviser are collectively referred to as the “Advisory Agreements.”

At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of Funds Management and the Sub-Adviser and the continuation of the Advisory Agreements. Prior to the Meeting, including at an in-person meeting in April 2018, the Trustees conferred extensively among themselves and with representatives of Funds Management about these matters. Also, the Board has adopted a team-based approach, with each team consisting of a sub-set of Trustees, to assist the full Board in the discharge of its duties in reviewing investment performance and other matters throughout the year. The Independent Trustees were assisted in their evaluation of the Advisory Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately.

In providing information to the Board, Funds Management and the Sub-Adviser were guided by a detailed set of requests for information submitted to them by independent legal counsel on behalf of the Independent Trustees at the start of the Board’s annual contract renewal process earlier in 2018. In considering and approving the Advisory Agreements, the Trustees considered the information they believed relevant, including but not limited to the information discussed below. The Board considered not only the specific information presented in connection with the Meeting, but also the knowledge gained over time through interaction with Funds Management and the Sub-Adviser about various topics. In this regard, the Board reviewed reports of Funds Management at each of its quarterly meetings, which included, among other things, portfolio reviews and investment performance reports. In addition, the Board and the teams mentioned above confer with portfolio managers at various times throughout the year. The Board did not identify any particular information or consideration that was all-important or controlling, and each individual Trustee may have attributed different weights to various factors.

After its deliberations, the Board unanimously approved the continuation of the Advisory Agreements and determined that the compensation payable to Funds Management and the Sub-Adviser is reasonable. The Board considered the continuation of the Advisory Agreements for the Fund as part of its consideration of agreements for funds across the complex, but its approvals were made on a fund-by-fund basis. The following summarizes a number of important, but not necessarily all, factors considered by the Board in support of its approvals.

Nature, extent and quality of services

The Board received and considered various information regarding the nature, extent and quality of services provided to the Fund by Funds Management and the Sub-Adviser under the Advisory Agreements. This information included, among other things, a summary of the background and experience of senior management of Wells Fargo Asset Management (“WFAM”), of which Funds Management and the Sub-Adviser are a part, a summary of investments made in the business of WFAM, a summary of certain organizational and personnel changes involving Funds Management and the Sub-Adviser, and a description of Funds Management’s and the Sub-Adviser’s business continuity planning programs and of their approaches to data privacy and cybersecurity. The Board considered the additional services provided to the Fund due to the fact that the Fund is a closed-end fund, including, but not limited to, monitoring and evaluating the Fund’s discount. The Board also considered the qualifications, background, tenure and responsibilities of each of the portfolio managers primarily responsible for the day-to-day portfolio management of the Fund.

The Board evaluated the ability of Funds Management and the Sub-Adviser to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of Funds Management and the Sub-Adviser. In addition, the Board took into account the full range of services provided to the Fund by Funds Management and its affiliates.

Fund investment performance and expenses

The Board considered the investment performance results for the Fund over various time periods ended December 31, 2017. The Board considered these results in comparison to the investment performance of funds in a Universe that was determined


36		Wells Fargo Income Opportunities Fund		Other information (unaudited)

by Broadridge Inc. (“Broadridge”) to be similar to the Fund (the “Universe”), and in comparison to the Fund’s benchmark index and to other comparative data. The Board received a description of the methodology used by Broadridge to select the funds in the performance Universe. The Board noted that the investment performance of the Fund was higher than the average performance of the Universe for all periods under review. The Board also noted that the performance of the Fund was higher than or in range of its benchmark, the ICE BofAML U.S. High Yield Index, for all periods under review.

The Board also received and considered information regarding the Fund’s net operating expense ratio and its various components, including actual management fees, and custodian and other non-management fees. The Board considered this ratio in comparison to the median ratio of funds in an expense group that was determined by Broadridge to be similar to the Fund (the “Group”). Broadridge is an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the funds in the expense Group and an explanation of how funds comprising expense groups and their expense ratios may vary from year-to-year. Based on the Broadridge reports, the Board noted that the net operating expense ratio of the Fund was lower than the median net operating expense ratio of the expense Group.

The Board took into account the Fund’s investment performance and expense information provided to it among the factors considered in deciding to re-approve the Advisory Agreements.

Investment advisory and sub-advisory fee rates

The Board reviewed and considered the contractual investment advisory fee rate that is payable by the Fund to Funds Management for investment advisory services (the “Advisory Agreement Rate”), both on a stand-alone basis and on a combined basis with the Fund’s contractual administration fee rate (the “Management Rate”). The Board also reviewed and considered the contractual investment sub-advisory fee rate that is payable by Funds Management to the Sub-Adviser for investment sub-advisory services (the “Sub-Advisory Agreement Rate”).

Among other information reviewed by the Board was a comparison of the Management Rate of the Fund with those of other funds in the expense Group at a common asset level. The Board noted that the Management Rate of the Fund was lower than the average rate for the Fund’s expense Group.

The Board also received and considered information about the portion of the total advisory fee that was retained by Funds Management after payment of the fee to the Sub-Adviser for sub-advisory services. In assessing the reasonableness of this amount, the Board received and evaluated information about the nature and extent of responsibilities retained and risks assumed by Funds Management and not delegated to or assumed by the Sub-Adviser, and about Funds Management’s on-going oversight services. Given the affiliation between Funds Management and the Sub-Adviser, the Board ascribed limited relevance to the allocation of the advisory fee between them.

Based on its consideration of the factors and information it deemed relevant, including those described here, the Board determined that the Advisory Agreement Rate and the Sub-Advisory Agreement Rate was reasonable.

Profitability

The Board received and considered information concerning the profitability of Funds Management, as well as the profitability of both WFAM and Wells Fargo & Co. (“Wells Fargo”) as a whole, from providing services to the Fund and the fund family as a whole. The Board noted that the Sub-Adviser’s profitability information with respect to providing services to the Fund was subsumed in the WFAM and Wells Fargo profitability analysis.

Funds Management reported on the methodologies and estimates used in calculating profitability, including a description of the methodology used to allocate certain expenses and recent enhancements made to the methodology. Among other things, the Board noted that the levels of profitability reported on a fund-by-fund basis varied widely, depending on factors such as the size and type of fund. Based on its review, the Board did not deem the profits reported by Funds Management, WFAM or Wells Fargo from services provided to the Fund to be at a level that would prevent it from approving the continuation of the Advisory Agreements.

Economies of scale

The Board considered the extent to which Funds Management may experience economies of scale in the provision of management services, and the extent to which scale benefits, if any, would be shared with shareholders. The Board noted that, as is typical of closed-end funds, there are no breakpoints in the Management Rate. Although the Fund would not share in any potential economies of scale through contractual breakpoints, the Board noted that competitive management fee rates set at the outset without regard to breakpoints and fee waiver and expense reimbursement arrangements, as well as investments in the business to enhance services available to Fund shareholders, are means of sharing potential economies of scale with shareholders of the Fund. The Board concluded that the Fund’s fee waiver and expense arrangements constituted


Other information (unaudited)		Wells Fargo Income Opportunities Fund			37

a reasonable approach to sharing potential economies of scale with the Fund and its shareholders. The Board also noted that it would have opportunities to revisit the Management Rate as part of future contract reviews.

Other benefits to Funds Management and the Sub-Adviser

The Board received and considered information regarding potential “fall-out” or ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, as a result of their relationships with the Fund. Ancillary benefits could include, among others, benefits directly attributable to other relationships with the Fund and benefits potentially derived from an increase in Funds Management’s and the Sub-Adviser’s business as a result of their relationships with the Fund. The Board also reviewed information about soft dollar credits earned and utilized by the Sub-Adviser and commissions earned by affiliated brokers from portfolio transactions.

Based on its consideration of the factors and information it deemed relevant, including those described here, the Board did not find that any ancillary benefits received by Funds Management and its affiliates, including the Sub-Adviser, were unreasonable.

Conclusion

At the Meeting, after considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board unanimously approved the continuation of the Advisory Agreements for an additional one-year period and determined that the compensation payable to Funds Management and the Sub-Adviser is reasonable.


38		Wells Fargo Income Opportunities Fund		Automatic dividend reinvestment plan

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 505000, Louisville, Kentucky 40233 or by calling 1-800-730-6001.

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LOGO

Transfer Agent, Registrar, Shareholder Servicing

Agent & Dividend Disbursing Agent

Computershare Trust Company, N.A.

P.O. Box 505000

Louisville, Kentucky 40233

1-800-730-6001

Website: wellsfargofunds.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, an affiliate of Wells Fargo & Company. Neither Wells Fargo Funds Management nor Wells Fargo Funds Distributor has Fund customer accounts/assets, and neither provides investment advice/recommendations or acts as an investment advice fiduciary to any investor.

NOT FDIC INSURED ◾ NO BANK GUARANTEE ◾ MAY LOSE VALUE

318251 12-18

SIO/SAR148 10-18

ITEM 2. CODE OF ETHICS

Not applicable.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT

Not applicable.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS

Not applicable.

ITEM 6. INVESTMENTS

A Portfolio of Investments for Wells Fargo 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

Not applicable.

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

Not applicable.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS


Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
5/1/2018 to 5/31/2018		0		0		0		6,627,002
6/1/2018 to 6/30/2018		0		0		0		6,627,002
7/1/2018 to 7/31/2018		35,235		7.99		35,235		6,591,767
8/1/2018 to 8/31/2018		258,146		8.03		258,146		6,333,621
9/1/2018 to 9/30/2018		389,753		8.02		389,753		5,943,868
10/1/2018 to 10/31/2018		911,602		7.74		911,602		5,032,266

Total		1,594,736		7.95		1,594,736

On November 10, 2017, the Fund announced an extension of its open-market share repurchase program (the “Buyback Program”). Under the extended Buyback Program, the Fund may repurchase up to 10% of its outstanding shares during the period in open market transactions beginning on January 1, 2018 and ending on December 31, 2018.

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

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

ITEM 12. EXHIBITS

(a)(1) Not applicable

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

(a)(3) Not applicable.

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

SIGNATURES

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

Jeremy DePalma


Wells Fargo Income Opportunities Fund

By:
		/s/ Andrew Owen

		Andrew Owen
		President

Date:		December 21, 2018

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 Income Opportunities Fund

By:
		/s/ Andrew Owen

		Andrew Owen
		President

Date:		December 21, 2018

By:
		/s/ Jeremy DePalma

		Jeremy DePalma
		Treasurer

Date:		December 21, 2018