Edgar Filing: WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND

Gross unrealized appreciation

41,185,778

Gross unrealized depreciation

(19,852,164

Net unrealized appreciation

21,333,614

Form N-Q

LOGO

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number: 811-21269

Wells Fargo Advantage Income Opportunities Fund

(Exact name of registrant as specified in charter)

525 Market Street, 12^th Floor, San Francisco, CA 94105

(Address of principal executive offices) (Zip code)

C. David Messman

Wells Fargo Funds Management, LLC

525 Market Street, 12^th Floor, 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, 2012

Date of reporting period: July 31, 2012

ITEM 1. PORTFOLIO OF INVESTMENTS


WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND		PORTFOLIO OF INVESTMENTS — July 31, 2012 (UNAUDITED)


Security Name						Shares		Value
Common Stocks : 0.12%

Consumer Discretionary : 0.00%

Hotels, Restaurants & Leisure : 0.00%
Trump Entertainment Resorts Incorporated †(i)							2,149	$	8,596

Telecommunication Services : 0.12%

Diversified Telecommunication Services : 0.12%
Fairpoint Communications Incorporated †							134,375		821,032

Total Common Stocks (Cost $3,109,765)									829,628

	Interest Rate			Maturity Date		Principal
Corporate Bonds and Notes : 111.42%

Consumer Discretionary : 25.33%

Auto Components : 2.08%

Allison Transmission Incorporated 144A		7.13	%		05/15/2019	$	6,075,000		6,386,344
Cooper Tire & Rubber Company		7.63			03/15/2027		4,455,000		4,393,744
Cooper Tire & Rubber Company		8.00			12/15/2019		150,000		160,688
Goodyear Tire & Rubber Company		7.00			05/15/2022		700,000		714,875
United Rentals Financing Escrow Corporation 144A		5.75			07/15/2018		2,675,000		2,795,375

									14,451,026

Diversified Consumer Services : 2.89%

Carriage Services Incorporated		7.88			01/15/2015		4,055,000		4,095,550
Service Corporation International		6.75			04/01/2016		1,250,000		1,381,250
Service Corporation International		7.00			05/15/2019		1,125,000		1,223,438
Service Corporation International		7.50			04/01/2027		9,376,000		9,797,920
Service Corporation International		7.63			10/01/2018		1,000,000		1,160,000
Service Corporation International		8.00			11/15/2021		880,000		1,036,200
Service Corporation International		7.00			06/15/2017		1,250,000		1,421,875

									20,116,233

Hotels, Restaurants & Leisure : 7.71%

Ameristar Casinos Incorporated		7.50			04/15/2021		5,502,000		5,928,405
Burger King Corporation		9.88			10/15/2018		1,600,000		1,834,000
CCM Merger Incorporated 144A		9.13			05/01/2019		6,890,000		6,993,350
Chukchansi Economic Development Authority 144A ±		9.75			05/30/2020		2,399,000		1,775,260
CityCenter Holdings LLC		7.63			01/15/2016		350,000		368,813
CityCenter Holdings LLC 144A		7.63			01/15/2016		1,700,000		1,787,125
CityCenter Holdings LLC ¥		10.75			01/15/2017		3,471,305		3,657,888
Dineequity Incorporated		9.50			10/30/2018		8,475,000		9,364,875
Greektown Superholdings Incorporated Series A		13.00			07/01/2015		6,812,000		7,408,050
Greektown Superholdings Incorporated Series B		13.00			07/01/2015		1,475,000		1,604,063
NAI Entertainment Holdings LLC 144A		8.25			12/15/2017		3,510,000		3,904,875
Penn National Gaming Incorporated		8.75			08/15/2019		1,499,000		1,658,269
Ruby Tuesday Incorporated 144A		7.63			05/15/2020		3,700,000		3,325,375
Scientific Games Corporation		9.25			06/15/2019		1,130,000		1,245,825
Speedway Motorsports Incorporated		6.75			02/01/2019		450,000		473,625
Speedway Motorsports Incorporated		8.75			06/01/2016		2,075,000		2,251,375

									53,581,173

Household Durables : 0.15%
American Greetings Corporation		7.38			12/01/2021		950,000		1,007,000


1


PORTFOLIO OF INVESTMENTS — July 31, 2012 (UNAUDITED)		WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND


Security Name	Interest Rate			Maturity Date		Principal		Value
Media : 10.89%

Cablevision Systems Corporation		8.63	%		09/15/2017	$	2,975,000	$	3,398,938
CCH II Capital Corporation		13.50			11/30/2016		12,981,015		14,376,474
CCO Holdings LLC		6.50			04/30/2021		1,525,000		1,650,813
CCO Holdings LLC		7.00			01/15/2019		2,075,000		2,277,313
CCO Holdings LLC		7.88			04/30/2018		300,000		327,375
CCO Holdings LLC		8.13			04/30/2020		746,000		842,980
Cinemark USA Incorporated		7.38			06/15/2021		1,525,000		1,692,750
Cinemark USA Incorporated		8.63			06/15/2019		1,100,000		1,226,500
CSC Holdings LLC		7.63			07/15/2018		650,000		736,125
CSC Holdings LLC		7.88			02/15/2018		1,650,000		1,885,125
CSC Holdings LLC		8.50			04/15/2014		200,000		220,500
DISH DBS Corporation		7.88			09/01/2019		2,260,000		2,627,250
EchoStar DBS Corporation		7.13			02/01/2016		1,160,000		1,280,350
EchoStar DBS Corporation		7.75			05/31/2015		650,000		727,188
Gray Television Incorporated		10.50			06/29/2015		9,133,000		9,680,980
Lamar Media Corporation		5.88			02/01/2022		1,175,000		1,239,625
Lamar Media Corporation		7.88			04/15/2018		3,925,000		4,356,750
Lamar Media Corporation Series C		9.75			04/01/2014		925,000		1,037,156
LIN Television Corporation		8.38			04/15/2018		3,475,000		3,605,313
Local TV Finance LLC 144A		9.25			06/15/2015		7,825,000		7,981,500
National CineMedia LLC 144A		6.00			04/15/2022		1,725,000		1,785,375
National CineMedia LLC		7.88			07/15/2021		1,150,000		1,239,125
Regal Cinemas Corporation		8.63			07/15/2019		5,500,000		6,146,250
Salem Communications Corporation		9.63			12/15/2016		4,573,000		5,064,598
Sirius XM Radio Incorporated 144A		9.75			09/01/2015		250,000		263,594

									7,669,947

Specialty Retail : 1.62%

Gap Incorporated		5.95			04/12/2021		1,175,000		1,242,121
Limited Brands Incorporated		6.63			04/01/2021		925,000		1,027,906
RadioShack Corporation		6.75			05/15/2019		3,925,000		2,512,000
Rent-A-Center Incorporated		6.63			11/15/2020		700,000		755,125
Toys “R” Us Property Company LLC		10.75			07/15/2017		1,225,000		1,353,625
Toys “R” Us Property Company LLC		8.50			12/01/2017		4,025,000		4,347,000

									11,237,777

Consumer Staples : 1.32%

Food Products : 1.32%

B&G Foods Incorporated		7.63			01/15/2018		405,000		437,400
Dole Food Company Incorporated		13.88			03/15/2014		3,075,000		3,474,750
Smithfield Foods Incorporated		10.00			07/15/2014		4,465,000		5,257,538

									9,169,688

Energy : 17.94%

Energy Equipment & Services : 6.74%

Bristow Group Incorporated		7.50			09/15/2017		3,210,000		3,330,375
Dresser Rand Group Incorporated		6.50			05/01/2021		1,825,000		1,916,250
Gulfmark Offshore Incorporated 144A		6.38			03/15/2022		3,475,000		3,553,188
Hornbeck Offshore Services Incorporated Series B 144A		5.88			04/01/2020		750,000		750,000
Hornbeck Offshore Services Incorporated Series B		8.00			09/01/2017		4,920,000		5,264,400
NGPL PipeCo LLC 144A		7.12			12/15/2017		625,000		642,188
NGPL PipeCo LLC 144A		7.77			12/15/2037		4,575,000		4,483,500
NGPL PipeCo LLC 144A		9.63			06/01/2019		4,250,000		4,621,875
Oil States International Incorporated		6.50			06/01/2019		3,354,000		3,530,085
PHI Incorporated		8.63			10/15/2018		5,725,000		5,911,063
Pride International Incorporated		8.50			06/15/2019		210,000		276,199
Rockies Express Pipeline LLC 144A		3.90			04/15/2015		3,475,000		3,388,125
Rockies Express Pipeline LLC 144A		5.63			04/15/2020		700,000		665,000


				2


WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND		PORTFOLIO OF INVESTMENTS — July 31, 2012 (UNAUDITED)


Security Name	Interest Rate			Maturity Date		Principal		Value
Energy Equipment & Services (continued)

Rockies Express Pipeline LLC 144A		6.88	%		04/15/2040	$	8,035,000	$	7,251,588
Rockies Express Pipeline LLC 144A		7.50			07/15/2038		1,350,000		1,279,125

									46,862,961

Oil, Gas & Consumable Fuels : 11.20%

Coffeyville Resources Incorporated 144A		9.00			04/01/2015		1,947,000		2,068,688
Crestwood Midstream Partners LP		7.75			04/01/2019		1,350,000		1,370,250
Denbury Resources Incorporated		6.38			08/15/2021		700,000		750,750
Denbury Resources Incorporated		8.25			02/15/2020		2,975,000		3,346,875
El Paso Corporation		6.50			09/15/2020		1,155,000		1,295,863
El Paso Corporation		7.00			06/15/2017		2,938,000		3,367,280
El Paso Corporation		7.25			06/01/2018		3,149,000		3,633,467
El Paso Corporation		7.42			02/15/2037		1,820,000		1,952,787
El Paso Corporation		7.80			08/01/2031		3,050,000		3,551,127
Encore Acquisition Company		9.50			05/01/2016		700,000		766,500
Energy Transfer Equity LP		7.50			10/15/2020		5,950,000		6,797,875
Ferrellgas Finance Corporation		9.13			10/01/2017		4,925,000		5,269,750
Griffin Coal Mining Company Limited (s)		9.50			12/01/2016		652,804		554,067
Holly Corporation		9.88			06/15/2017		4,265,000		4,723,488
Inergy LP		6.88			08/01/2021		824,000		846,660
Inergy LP		7.00			10/01/2018		950,000		980,875
Petrohawk Energy Corporation		7.88			06/01/2015		2,045,000		2,126,800
Petrohawk Energy Corporation		10.50			08/01/2014		1,065,000		1,174,333
Pioneer Natural Resource Company		7.50			01/15/2020		3,170,000		3,941,955
Plains Exploration & Production Company		8.63			10/15/2019		6,380,000		7,177,500
Regency Energy Partners		6.88			12/01/2018		475,000		508,250
Sabine Pass LNG LP		7.25			11/30/2013		4,940,000		5,137,600
Sabine Pass LNG LP		7.50			11/30/2016		8,525,000		8,983,219
Ship Finance International Limited		8.50			12/15/2013		2,250,000		2,238,750
Suburban Propane Partners LP		7.38			03/15/2020		575,000		603,750
Susser Holdings LLC		8.50			05/15/2016		2,000,000		2,180,000
Tesoro Corporation		9.75			06/01/2019		2,185,000		2,479,975

									77,828,434

Financials : 26.68%

Capital Markets : 1.96%

ETRADE Financial Corporation*		12.50			11/30/2017		9,741,000		11,153,445
Oppenheimer Holdings Incorporated		8.75			04/15/2018		2,500,000		2,437,500

									13,590,945

Commercial Banks : 2.90%
CIT Group Incorporated 144A		4.75			02/15/2015		3,475,000		3,614,372
CIT Group Incorporated		5.00			05/15/2017		425,000		444,125
CIT Group Incorporated 144A		5.25			04/01/2014		7,275,000		7,584,188
CIT Group Incorporated		5.25			03/15/2018		875,000		926,406
CIT Group Incorporated 144A		5.50			02/15/2019		2,225,000		2,347,375
Emigrant Bancorp Incorporated 144A(i)		6.25			06/15/2014		5,725,000		5,262,620

									20,179,086

Consumer Finance : 14.49%

Ally Financial Incorporated		5.50			02/15/2017		1,325,000		1,380,673
Ally Financial Incorporated		6.75			12/01/2014		2,344,000		2,528,590
Ally Financial Incorporated		6.88			08/28/2012		2,862,000		2,867,724
Ally Financial Incorporated		7.50			12/31/2013		6,855,000		7,376,254
Ally Financial Incorporated		8.30			02/12/2015		8,820,000		9,801,225
American General Finance Corporation		5.40			12/01/2015		2,800,000		2,408,000
American General Finance Corporation		5.75			09/15/2016		2,325,000		1,918,125
American General Finance Corporation		6.50			09/15/2017		550,000		446,875


3


PORTFOLIO OF INVESTMENTS — July 31, 2012 (UNAUDITED)		WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND


Security Name	Interest Rate			Maturity Date		Principal		Value
Consumer Finance (continued)

Clearwire Communications Finance Corporation 144A		12.00	%		12/01/2015	$	5,420,000	$	5,110,500
Ford Motor Credit Company LLC		7.00			10/01/2013		500,000		531,889
Ford Motor Credit Company LLC		8.00			12/15/2016		200,000		236,446
General Motors Financial Company		6.75			06/01/2018		2,325,000		2,560,506
Homer City Funding LLC		8.73			10/01/2026		2,817,836		2,712,167
International Lease Finance Corporation		6.38			03/25/2013		865,000		886,625
International Lease Finance Corporation 144A		6.75			09/01/2016		2,200,000		2,414,500
International Lease Finance Corporation 144A		7.13			09/01/2018		300,000		339,375
International Lease Finance Corporation		8.63			09/15/2015		1,700,000		1,916,750
JBS USA Finance Incorporated		11.63			05/01/2014		8,465,000		9,597,194
Level 3 Financing Incorporated		10.00			02/01/2018		4,555,000		4,976,338
Nielsen Finance LLC Company		11.50			05/01/2016		1,170,000		1,316,250
Nielson Finance LLC Company		7.75			10/15/2018		11,270,000		12,678,750
Springleaf Finance Corporation		6.90			12/15/2017		7,050,000		5,745,750
Sprint Capital Corporation		6.88			11/15/2028		16,375,000		14,696,563
Sprint Capital Corporation		8.75			03/15/2032		6,270,000		6,254,325

									100,701,394

Diversified Financial Services : 4.38%

Dolphin Subsidiary II Incorporated 144A		7.25			10/15/2021		4,700,000		5,346,250
Hub International Holdings Incorporated 144A		10.25			06/15/2015		6,650,000		6,683,250
Neuberger Berman Group 144A		5.63			03/15/2020		900,000		942,750
Neuberger Berman Group 144A		5.88			03/15/2022		1,125,000		1,189,688
Nuveen Investments Incorporated		5.50			09/15/2015		5,800,000		5,220,000
Nuveen Investments Incorporated		10.50			11/15/2015		7,795,000		7,911,925
USI Holdings Corporation ±144A		4.34			11/15/2014		1,175,000		1,104,500
USI Holdings Corporation 144A		9.75			05/15/2015		2,055,000		2,075,550

									30,473,913

Real Estate Management & Development : 0.45%
Ashtead Capital Incorporated 144A		6.50			07/15/2022		3,025,000		3,146,000

REITs : 2.50%

Dupont Fabros Technology Incorporated		8.50			12/15/2017		11,580,000		12,766,950
Host Hotels & Resorts Incorporated		9.00			05/15/2017		490,000		540,225
Omega Healthcare Investors Incorporated 144A		5.88			03/15/2024		325,000		347,750
Omega Healthcare Investors Incorporated		6.75			10/15/2022		3,375,000		3,729,375

									17,384,300

Health Care : 5.39%

Health Care Equipment & Supplies : 0.53%

Biomet Incorporated ¥		10.38			10/15/2017		1,215,000		1,300,050
Fresenius Medical Care Incorporated		6.88			07/15/2017		700,000		796,250
Hologic Incorporated 144A		6.25			08/01/2020		1,495,000		1,580,963

									3,677,263

Health Care Providers & Services : 4.17%

Apria Healthcare Group Incorporated		11.25			11/01/2014		1,340,000		1,400,300
Aviv Healthcare Incorporated		7.75			02/15/2019		3,725,000		3,850,719
Centene Corporation		5.75			06/01/2017		1,925,000		2,018,844
Community Health Systems Incorporated		7.13			07/15/2020		1,325,000		1,387,938
Community Health Systems Incorporated		8.88			07/15/2015		765,000		780,300
Emergency Medical Services Corporation		8.13			06/01/2019		800,000		851,000
HCA Incorporated		5.88			03/15/2022		750,000		807,188
HCA Incorporated		6.50			02/15/2020		5,675,000		6,341,813
HCA Incorporated		7.50			11/15/2095		1,350,000		1,100,250
HCA Incorporated		8.50			04/15/2019		375,000		422,578


				4


WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND		PORTFOLIO OF INVESTMENTS — July 31, 2012 (UNAUDITED)


Security Name	Interest Rate			Maturity Date		Principal		Value
Health Care Providers & Services (continued)

Health Management Associates Incorporated		6.13	%		04/15/2016	$	475,000	$	510,031
HealthSouth Corporation		7.25			10/01/2018		750,000		812,813
HealthSouth Corporation		7.75			09/15/2022		750,000		815,625
MPT Operating Partnership LP		6.38			02/15/2022		775,000		802,125
MPT Operating Partnership LP		6.88			05/01/2021		3,175,000		3,373,438
PSS World Medical Incorporated		6.38			03/01/2022		450,000		470,250
Sabra Health Care LP		8.13			11/01/2018		2,850,000		3,063,750
Tenet Healthcare Corporation		10.00			05/01/2018		150,000		174,000

									28,982,962

Pharmaceuticals : 0.69%

Mylan Incorporated 144A		6.00			11/15/2018		1,300,000		1,400,750
Mylan Incorporated 144A		7.63			07/15/2017		1,400,000		1,561,875
Mylan Incorporated 144A		7.88			07/15/2020		1,625,000		1,848,438

									4,811,063

Industrials : 5.67%

Aerospace & Defense : 1.25%

Alliant Techsystems Incorporated		6.75			04/01/2016		4,470,000		4,581,750
GeoEye Incorporated		9.63			10/01/2015		1,140,000		1,262,550
L-3 Communications Holdings Incorporated		6.38			10/15/2015		1,338,000		1,366,433
TransDigm Group Incorporated		7.75			12/15/2018		1,300,000		1,449,500

									8,660,233

Commercial Services & Supplies : 2.78%

Casella Waste Systems Incorporated		11.00			07/15/2014		4,385,000		4,648,100
Corrections Corporation of America		7.75			06/01/2017		2,110,000		2,285,394
Covanta Holding Corporation		6.38			10/01/2022		900,000		966,596
Crown Cork & Seal Company Incorporated (i)		7.50			12/15/2096		1,225,000		1,058,094
Geo Group Incorporated		7.75			10/15/2017		2,955,000		3,184,013
Interface Incorporated		7.63			12/01/2018		300,000		321,000
Iron Mountain Incorporated		8.38			08/15/2021		3,520,000		3,898,400
KAR Holdings Incorporated ±		4.47			05/01/2014		3,013,000		3,001,701

									19,363,298

Machinery : 1.03%

Cleaver-Brooks Incorporated 144A		12.25			05/01/2016		1,440,000		1,537,200
Columbus McKinnon Corporation		7.88			02/01/2019		1,575,000		1,669,500
CPM Holdings Incorporated		10.63			09/01/2014		3,025,000		3,206,500
Titan International Incorporated		7.88			10/01/2017		700,000		724,500

									7,137,700

Professional Services : 0.52%

Affinia Group Incorporated 144A		10.75			08/15/2016		184,000		199,410
Interactive Data Corporation		10.25			08/01/2018		3,005,000		3,403,163

									3,602,573

Transportation Infrastructure : 0.09%

Overseas Shipholding Group		7.50			02/15/2024		1,250,000		625,000

Information Technology : 9.20%

Communications Equipment : 0.96%

Allbritton Communications Company		8.00			05/15/2018		3,274,000		3,478,625
Lucent Technologies Incorporated		6.45			03/15/2029		3,100,000		1,767,000


5


PORTFOLIO OF INVESTMENTS — July 31, 2012 (UNAUDITED)		WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND


Security Name	Interest Rate			Maturity Date		Principal		Value
Communications Equipment (continued)

Seagate Technology Holdings		6.80	%		10/01/2016	$	1,275,000	$	1,418,438

									6,664,063

Computers & Peripherals : 0.50%

Seagate HDD Cayman		6.88			05/01/2020		650,000		701,188
Seagate HDD Cayman		7.75			12/15/2018		2,500,000		2,768,750

									3,469,938

Electronic Equipment, Instruments & Components : 2.78%

CDW Financial Corporation		12.54			10/12/2017		2,900,000		3,110,250
Jabil Circuit Incorporated		8.25			03/15/2018		13,532,000		16,238,400

									19,348,650

Internet Software & Services : 0.36%

Equinix Incorporated		7.00			07/15/2021		125,000		139,063
Equinix Incorporated		8.13			03/01/2018		2,125,000		2,353,438

									2,492,501

IT Services : 4.60%

Audatex North America Incorporated 144A		6.75			06/15/2018		1,375,000		1,467,813
Fidelity National Information Services Incorporated 144A		5.00			03/15/2022		500,000		527,500
Fidelity National Information Services Incorporated		7.63			07/15/2017		550,000		607,750
Fidelity National Information Services Incorporated 144A		7.63			07/15/2017		325,000		357,500
Fidelity National Information Services Incorporated		7.88			07/15/2020		2,450,000		2,762,375
First Data Corporation 144A		7.38			06/15/2019		1,325,000		1,382,969
First Data Corporation		11.25			03/31/2016		10,125,000		9,644,063
SunGard Data Systems Incorporated		7.38			11/15/2018		3,750,000		3,984,375
SunGard Data Systems Incorporated		7.63			11/15/2020		550,000		590,563
SunGard Data Systems Incorporated		10.25			08/15/2015		7,664,750		7,846,788
TW Telecommunications Holdings Incorporated		8.00			03/01/2018		1,272,000		1,421,460
Unisys Corporation		12.50			01/15/2016		185,000		197,025
Unisys Corporation 144A		12.75			10/15/2014		1,068,000		1,153,440

									31,943,621

Materials : 1.91%

Chemicals : 0.60%

Huntsman International LLC		5.50			06/30/2016		2,855,000		2,862,138
Solutia Incorporated		7.88			03/15/2020		989,000		1,169,493
Solutia Incorporated		8.75			11/01/2017		100,000		113,250

									4,144,881

Containers & Packaging : 0.61%

Ball Corporation		5.00			03/15/2022		475,000		502,313
Ball Corporation		6.75			09/15/2020		375,000		415,313
Crown Americas LLC		7.63			05/15/2017		950,000		1,030,750
Owens Brockway Glass Container Incorporated		7.38			05/15/2016		740,000		834,350
Silgan Holdings Incorporated 144A		5.00			04/01/2020		1,450,000		1,497,125

									4,279,851

Metals & Mining : 0.00%
Indalex Holdings Corporation (s)(i)(a)		11.50			02/01/2014		5,985,000		1

Paper & Forest Products : 0.70%

Clearwater Paper Corporation		10.63			06/15/2016		1,175,000		1,310,125


				6


WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND		PORTFOLIO OF INVESTMENTS — July 31, 2012 (UNAUDITED)


Security Name	Interest Rate			Maturity Date		Principal		Value
Paper & Forest Products (continued)

Georgia-Pacific Corporation		8.88	%		05/15/2031	$	2,430,000	$	3,566,671

									4,876,796

Telecommunication Services : 11.07%

Diversified Telecommunication Services : 7.18%

Avaya Incorporated		9.75			11/01/2015		1,150,000		897,000
Citizens Communications Company		7.88			01/15/2027		4,205,000		3,773,988
FairPoint Communications Incorporated 144A		10.88			04/01/2017		2,550,000		2,836,875
Frontier Communications Corporation		8.13			10/01/2018		1,980,000		2,158,200
Frontier Communications Corporation		8.25			04/15/2017		2,380,000		2,606,100
Frontier Communications Corporation		8.50			04/15/2020		1,000,000		1,082,500
GCI Incorporated		6.75			06/01/2021		1,075,000		1,042,750
GCI Incorporated		8.63			11/15/2019		8,675,000		9,217,188
Intelsat Jackson Holdings Company		7.25			10/15/2020		1,700,000		1,814,750
Intelsat Jackson Holdings Company 144A		7.25			10/15/2020		1,525,000		1,620,313
Qwest Corporation		7.63			08/03/2021		440,000		470,981
SBA Telecommunications Incorporated 144A		5.75			07/15/2020		250,000		263,125
SBA Telecommunications Incorporated		8.00			08/15/2016		709,000		754,376
SBA Telecommunications Incorporated		8.25			08/15/2019		543,000		604,088
Syniverse Holdings Incorporated		9.13			01/15/2019		7,875,000		8,603,438
Telesat Canada Incorporated 144A		6.00			05/15/2017		1,225,000		1,267,875
U.S. West Communications Incorporated		7.13			11/15/2043		1,810,000		1,814,525
U.S. West Communications Incorporated		7.25			09/15/2025		2,755,000		3,165,906
Windstream Corporation		7.88			11/01/2017		5,380,000		5,911,275

									49,905,253

Wireless Telecommunication Services : 3.89%

CC Holdings LLC 144A		7.75			05/01/2017		650,000		704,438
Cricket Communications Incorporated		7.75			05/15/2016		3,355,000		3,556,300
Cricket Communications Incorporated		7.75			10/15/2020		3,200,000		3,056,000
Crown Castle International Corporation		7.13			11/01/2019		165,000		181,088
Crown Castle International Corporation		9.00			01/15/2015		650,000		708,906
Intelsat Limited		11.25			06/15/2016		4,265,000		4,488,913
iPCS Incorporated ¥		3.72			05/01/2014		2,607,559		2,561,927
MetroPCS Communications Incorporated		6.63			11/15/2020		4,975,000		5,024,750
MetroPCS Communications Incorporated		7.88			09/01/2018		1,050,000		1,113,000
Sprint Nextel Corporation 144A		9.00			11/15/2018		750,000		875,625
Sprint Nextel Corporation 144A		11.50			11/15/2021		1,200,000		1,440,000
Sprint Nextel Corporation Series F		5.95			03/15/2014		3,315,000		3,323,288

									27,034,235

Utilities : 6.91%

Electric Utilities : 2.65%

Energy Future Holdings Corporation		10.00			12/01/2020		150,000		165,188
IPALCO Enterprises Incorporated		5.00			05/01/2018		1,750,000		1,802,500
IPALCO Enterprises Incorporated 144A		7.25			04/01/2016		3,528,000		3,933,720
Mirant Mid-Atlantic LLC Series C		10.06			12/30/2028		7,560,525		8,203,169
Otter Tail Corporation		9.00			12/15/2016		3,985,000		4,323,725

									18,428,302

Gas Utilities : 0.28%

AmeriGas Finance LLC		6.75			05/20/2020		900,000		951,750
AmeriGas Finance LLC		7.00			05/20/2022		925,000		982,813

									1,934,563

Independent Power Producers & Energy Traders : 3.98%

Calpine Construction Finance Corporation 144A		8.00			06/01/2016		2,700,000		2,926,125


7


PORTFOLIO OF INVESTMENTS — July 31, 2012 (UNAUDITED)		WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND


Security Name	Interest Rate			Maturity Date		Principal		Value
Independent Power Producers & Energy Traders (continued)

Calpine Corporation 144A		7.25	%		10/15/2017	$	9,694,000	$	10,493,755
NRG Energy Incorporated		7.38			01/15/2017		6,050,000		6,276,875
NRG Energy Incorporated		8.50			06/15/2019		3,675,000		3,932,250
RRI Energy Incorporated		7.63			06/15/2014		1,020,000		1,086,300
RRI Energy Incorporated		9.24			07/02/2017		2,021,662		2,112,637
RRI Energy Incorporated		9.68			07/02/2026		780,000		819,000

									27,646,942

Total Corporate Bonds and Notes (Cost $737,395,756)									774,429,566

	Dividend Yield					Shares
Preferred Stocks : 0.19%

Financials : 0.19%

Consumer Finance : 0.19%
GMAC Capital Trust ±		8.13					53,000		1,292,140

Total Preferred Stocks (Cost $1,325,000)									1,292,140

	Interest Rate					Principal
Term Loans : 12.02%
Advantage Sales & Marketing Incorporated		9.25			06/18/2018		900,000		895,500
Capital Automotive LP		5.25			03/10/2017		6,963,608		6,951,979
CCM Merger Incorporated		6.00			03/01/2017		6,296,169		6,222,692
Coinmach Corporation		3.25			11/20/2014		6,555,327		6,284,919
Energy Transfer Equity LP		3.75			03/21/2017		3,250,000		3,198,553
Fairpoint Communications Incorporated		6.50			01/22/2016		5,366,061		4,833,909
Federal Mogul Corporation		2.18			12/29/2014		2,576,222		2,446,200
Federal Mogul Corporation		2.19			12/28/2015		1,707,201		1,621,039
First Data Corporation B1		3.00			09/24/2014		2,867,975		2,783,141
First Data Corporation B2		3.00			09/24/2014		5,354,373		5,195,990
First Data Corporation B3		3.00			09/24/2014		1,485,523		1,441,581
Focus Brands Incorporated		10.25			08/22/2018		2,900,000		2,918,125
Gray Television Incorporated		3.75			12/31/2014		1,791,186		1,776,068
HHI Holdings Limited		7.00			03/21/2017		2,221,886		2,221,886
Level 3 Financing Incorporated		2.65			03/13/2014		1,300,000		1,294,800
Merisant Company (i)		7.50			01/08/2014		1,355,162		1,341,611
Newsday LLC		10.50			08/01/2013		5,920,000		5,999,565
Panolam Industries International (i)		8.25			12/31/2013		416,315		407,989
Springleaf Finance Corporation		5.50			05/05/2017		1,350,000		1,288,683
Texas Competitive Electric Holdings Company LLC		4.75			10/10/2014		29,862,911		20,782,794
Texas Competitive Electric Holdings Company LLC		3.75			10/10/2017		675,000		428,551
United Surgical Partners International		6.00			03/19/2019		2,244,375		2,249,986
WASH Multifamily Laundry Systems LLC		7.00			08/28/2014		984,655		974,808

Total Term Loans (Cost $88,426,989)									83,560,369

Yankee Corporate Bonds and Notes : 4.02%

Consumer Discretionary : 0.73%

Media : 0.73%

Intelsat Limited ¥		11.50			02/04/2017		2,650,000		2,756,000
Videotron Limited		5.00			07/15/2022		500,000		522,500
Videotron Limited		6.38			12/15/2015		100,000		102,250
Videotron Limited		9.13			04/15/2018		1,525,000		1,666,063

									5,046,813


				8


WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND		PORTFOLIO OF INVESTMENTS — July 31, 2012 (UNAUDITED)


Security Name			Interest Rate			Maturity Date		Principal		Value
Energy : 0.58%

Oil, Gas & Consumable Fuels : 0.58%
Griffin Coal Mining Company Limited 144A(s)				9.50	%		12/01/2016	$	4,769,384	$	4,048,015

Financials : 0.00%

Diversified Financial Services : 0.00%
Preferred Term Securities XII Limited ±(s)(i)				1.97			12/24/2033		1,540,000		462

Information Technology : 0.11%

Computers & Peripherals : 0.11%
Seagate HDD Cayman Company				7.00			11/01/2021		725,000		787,531

Materials : 1.01%

Metals & Mining : 0.65%

Novelis Incorporated				7.25			02/15/2015		630,000		630,000
Novelis Incorporated				8.38			12/15/2017		1,100,000		1,204,500
Novelis Incorporated				8.75			12/15/2020		2,425,000		2,691,750

											4,526,250

Paper & Forest Products : 0.36%

PE Paper Escrow GmbH 144A				12.00			08/01/2014		715,000		759,402
Sappi Limited 144A				7.50			06/15/2032		2,155,000		1,756,325

											2,515,727

Telecommunication Services : 1.59%

Wireless Telecommunication Services : 1.59%

Digicel Group Limited 144A				12.00			04/01/2014		870,000		967,875
Intelsat Jackson Holdings				7.25			04/01/2019		5,475,000		5,851,406
Intelsat Jackson Holdings				7.50			04/01/2021		2,214,000		2,368,980
Wind Acquisition Finance SA 144A				11.75			07/15/2017		2,205,000		1,830,123

											11,018,384

Total Yankee Corporate Bonds and Notes (Cost $26,831,901)											27,943,182

Short-Term Investments : 3.94%

			Yield					Shares
Investment Companies : 3.94%

Wells Fargo Advantage Cash Investment Money Market Fund, Select Class (l)(u)				0.16					27,409,174		27,409,174

Total Short-Term Investments (Cost $27,409,174)											27,409,174

Total Investments in Securities (Cost $884,498,585)*	131.71	%									915,464,059

Other Assets and Liabilities, Net	(31.71	)									(220,381,354	)

Total Net Assets	100.00	%								$	695,082,705

±	Variable rate investment

144A

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

†	Non-income earning security

¥	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.


9


PORTFOLIO OF INVESTMENTS — July 31, 2012 (UNAUDITED)		WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND

(s)

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

(i)

Illiquid security

(a)

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

(l)

Investment in an affiliate

(u)

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

*	Cost for federal income tax purposes is $894,130,445 and unrealized appreciation (depreciation) consists of:


				10

WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND

NOTES TO PORTFOLIO OF INVESTMENTS – JULY 31, 2012 (UNAUDITED)

The following notes are to be read in conjunction with the Portfolio of Investments for Wells Fargo Advantage Income Opportunities Fund (the “Fund”).

Securities valuation

Investments in equity securities are valued each business day as of the close of regular trading on the New York Stock Exchange, which is usually 4:00 p.m. (Eastern Time). Securities which are traded on a national or foreign securities exchange are valued at the last reported sales price, except that securities listed on The Nasdaq Stock Market, Inc. (“Nasdaq”) are valued at the Nasdaq Official Closing Price (“NOCP”), and if no NOCP is available, then at the last reported sales price. If no sales price is shown on the Nasdaq, the bid price will be used. In the absence of any sale of securities listed on the Nasdaq, and in the case of other securities (including U.S. Government obligations, but excluding debt securities maturing in 60 days or less), the price will be deemed “stale” and the valuations will be determined in accordance with the Fund’s Valuation Procedures.

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

Debt securities of sufficient credit quality with original maturities of 60 days or less generally are valued at amortized cost which approximates fair value. The amortized cost method involves valuing a security at its cost, plus accretion of discount or minus amortization of premium over the period until maturity.

Investments in open-end mutual funds and non-registered investment companies are generally 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 by procedures established in good faith and approved by the Board of Trustees. 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 in determining the fair value of portfolio securities, unless the responsibility has been delegated to the Management Valuation Team of Wells Fargo Funds Management, LLC (“Funds Management”). The Board of Trustees retains the authority to make or ratify any valuation decisions or approve any changes to the Fair Value Procedures as it deems appropriate. On a quarterly basis, the Board of Trustees considers for ratification any valuation actions taken by the Valuation Committee or the Management Valuation Team.

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

When-issued transactions

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

Term loans

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

Fair valuation measurements

Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to significant unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as 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 securities are not necessarily an indication of the risk associated with investing in those securities.

As of July 31, 2012, the inputs used in valuing the Fund’s assets, which are carried at fair value, were as follows:


Investments in Securities	Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Equity securities
Common stocks	$	821,032	$	0	$	8,596	$	829,628
Preferred stocks		1,292,140		0		0		1,292,140
Corporate bonds and notes		0		774,429,566		0		774,429,566
Term loans		0		75,762,383		7,797,986		83,560,369
Yankee corporate bonds and notes		0		27,943,182		0		27,943,182
Short-term investments
Investment companies		27,409,174		0		0		27,409,174
	$	29,522,346	$	878,135,131	$	7,806,582	$	915,464,059

Transfers in and transfers out are recognized at the end of the reporting period. For the three months ended July 31, 2012, the Fund did not have any transfers into/out of Level 1 and Level 2.

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


	Common stocks			Term Loans			Total
Balance as of April 30, 2012	$	9,671		$	5,611,506		$	5,621,177
Accrued discounts (premiums)		0			4,080			4,080
Realized gains (losses)		0			285			285
Change in unrealized gains (losses)		(1,075	)		(56,036	)		(57,111	)
Purchases		0			0			0
Sales		0			(11,835	)		(11,835	)
Transfers into Level 3		0			2,249,986			2,249,986
Transfers out of Level 3		0			0			0
Balance as of July 31, 2012	$	8,596		$	7,797,986		$	7,806,582

Change in unrealized gains (losses) relating to securities still held at July 31, 2012	($	1,075	)	($	52,529	)	($	53,604	)

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

The following is a list of common abbreviations for terms and entities which may have appeared in the portfolio of investments.

ACB — Agricultural Credit Bank

ADR — American Depository Receipt

ADS — American Depository Shares

AGC-ICC — Assured Guaranty Corporation - Insured Custody Certificates

AGM — Assured Guaranty Municipal

AMBAC — American Municipal Bond Assurance Corporation

AMT — Alternative Minimum Tax

AUD — Australian Dollar

BAN — Bond Anticipation Notes

BHAC — Berkshire Hathaway Assurance Corporation

BRL — Brazil Real

CAB — Capital Appreciation Bond

CAD — Canadian Dollar

CCAB — Convertible Capital Appreciation Bond

CDA — Community Development Authority

CDO — Collateralized Debt Obligation

CHF — Swiss Franc

COP — Certificate of Participation

CR — Custody Receipts

DKK — Danish Krone

DRIVER — Derivative Inverse Tax-Exempt Receipts

DW&P — Department of Water & Power

DWR — Department of Water Resources

ECFA — Educational & Cultural Facilities Authority

EDA — Economic Development Authority

EDFA — Economic Development Finance Authority

ETF — Exchange-Traded Fund

EUR — Euro

FFCB — Federal Farm Credit Bank

FGIC — Financial Guaranty Insurance Corporation

FGLMC — Federal Government Loan Mortgage Company

FHA — Federal Housing Authority

FHLB — Federal Home Loan Bank

FHLMC — Federal Home Loan Mortgage Corporation

FICO — The Financing Corporation

FNMA — Federal National Mortgage Association

FSA — Farm Service Agency

GBP — Great British Pound

GDR — Global Depository Receipt

GNMA — Government National Mortgage Association

GO — General Obligation

HCFR — Healthcare Facilities Revenue

HEFA — Health & Educational Facilities Authority

HEFAR — Higher Education Facilities Authority Revenue

HFA — Housing Finance Authority

HFFA — Health Facilities Financing Authority

HKD — Hong Kong Dollar

HUF — Hungarian Forint

IBC — Insured Bond Certificate

IDA — Industrial Development Authority

IDAG — Industrial Development Agency

IDR — Industrial Development Revenue

IEP — Irish Pound

JPY — Japanese Yen

KRW — Republic of Korea Won

LIBOR — London Interbank Offered Rate

LIQ — Liquidity Agreement

LLC — Limited Liability Company

LLP — Limited Liability Partnership

LOC — Letter of Credit

LP — Limited Partnership

MBIA — Municipal Bond Insurance Association

MFHR — Multi-Family Housing Revenue

MSTR — Municipal Securities Trust Receipts

MTN — Medium Term Note

MUD — Municipal Utility District

MXN — Mexican Peso

MYR — Malaysian Ringgit

NATL-RE — National Public Finance Guarantee Corporation

NOK — Norwegian Krone

NZD — New Zealand Dollar

PCFA — Pollution Control Finance Authority

PCR — Pollution Control Revenue

PFA — Public Finance Authority

PFFA — Public Facilities Financing Authority

PFOTER — Puttable Floating Option Tax-Exempt Receipts

plc — Public Limited Company

PLN — Polish Zloty

PUTTER — Puttable Tax-Exempt Receipts

R&D — Research & Development

RDA — Redevelopment Authority

RDFA — Redevelopment Finance Authority

REIT — Real Estate Investment Trust

ROC — Reset Option Certificates

SAVRS — Select Auction Variable Rate Securities

SBA — Small Business Authority

SEK — Swedish Krona

SFHR — Single Family Housing Revenue

SFMR — Single Family Mortgage Revenue

SGD — Singapore Dollar

SKK — Slovakian Koruna

SPA — Standby Purchase Agreement

SPDR — Standard & Poor’s Depositary Receipts

STRIPS — Separate Trading of Registered Interest and Principal Securities

TAN — Tax Anticipation Notes

TBA — To Be Announced

TIPS — Treasury Inflation-Protected Securities

TRAN — Tax Revenue Anticipation Notes

TCR — Transferable Custody Receipts

TRY — Turkish Lira

TTFA — Transportation Trust Fund Authority

TVA — Tennessee Valley Authority

XLCA — XL Capital Assurance

ZAR — South African Rand

ITEM 2. CONTROLS AND PROCEDURES

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

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

SIGNATURES

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


Wells Fargo Advantage Income Opportunities Fund

By:		/s/ Karla M. Rabusch

		Karla M. Rabusch
		President

Date:		September 24, 2012

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 dates indicated.


Wells Fargo Advantage Income Opportunities Fund

By:		/s/ Karla M. Rabusch

		Karla M. Rabusch
		President

Date:		September 24, 2012

By:		/s/ Nancy Wiser

		Nancy Wiser
		Treasurer

Date:		September 24, 2012