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PORTFOLIO OF INVESTMENTS January 31, 2013 (UNAUDITED)
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WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND
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Short-Term Investments : 2.47%
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Security name
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Yield
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Shares
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Value
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Investment Companies : 2.47%
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Wells Fargo Advantage Cash Investment Money Market Fund, Select
Class (l)(u)##
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0.14
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%
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17,592,680
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$
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17,592,680
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Total Short-Term Investments (Cost $17,592,680)
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17,592,680
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Total investments in securities (Cost $899,884,097)*
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132.44
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%
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944,230,966
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Other assets and liabilities, Net
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(32.44
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)
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(231,259,174
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)
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Total net assets
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100.00
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%
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$
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712,971,792
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Non-income-earning security
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144A
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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.
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¥
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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.
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%%
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Security issued on a when-issued basis.
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(s)
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Security is currently in default with regards to scheduled interest and/or principal payments. The Fund has stopped accruing interest on this security.
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±
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Variable rate investment. The rate shown is the rate in effect at period end.
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(a)
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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.
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<
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All or a portion of the position represents an unfunded loan commitment.
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¤
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Security issued in zero coupon form with no periodic interest payments.
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(l)
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Investment in an affiliate
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(u
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Rate shown is the 7-day annualized yield at period end.
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##
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All or a portion of this security has been segregated for when-issued securities or unfunded loans.
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*
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Cost for federal income tax purposes is $908,795,609 and unrealized appreciation (depreciation) consists of:
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Gross unrealized appreciation $51,693,888
Gross unrealized depreciation
(16,258,531)
Net unrealized appreciation
$35,435,357
10
WELLS FARGO ADVANTAGE INCOME OPPORTUNITIES FUND (the Fund)
NOTES TO PORTFOLIO OF INVESTMENTS JANUARY 31, 2013 (unaudited)
Securities valuation
All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (normally 4 p.m. Eastern Time).
Fixed income securities acquired with maturities exceeding 60 days are valued based on evaluated bid prices received from an independent pricing service
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
independent pricing service or values received are deemed not representative of market value, values will be obtained from a broker-dealer or otherwise determined based on the Funds Valuation Procedures.
Debt securities of sufficient credit quality acquired with 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.
Equity securities that are listed on a foreign or domestic exchange, except for The Nasdaq Stock Market, Inc. (Nasdaq), are valued at the official closing price or, if none, the last sales
price. Securities listed on Nasdaq are valued at the Nasdaq Official Closing Price (NOCP). If no NOCP is available, securities are valued at the last sales price. If no sales price is shown on the Nasdaq, the bid price will be used. If
no sale occurs on the primary exchange or market for the security that day or if no sale occurs and no bid price is shown on Nasdaq, the prior days price will be deemed stale and fair values will be determined in accordance with
the Funds Valuation Procedures.
Investments in registered open-end investment companies are valued at net asset value. Non-registered
investment companies are fair 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 or appropriate, including determining the fair value of portfolio securities, unless the determination has been delegated to the Management
Valuation Team of Wells Fargo Funds Management, LLC (Funds Management). The Board of Trustees retains the authority to make or ratify any valuation decisions or approve any changes to the Valuation Procedures as it deems appropriate. On
a quarterly basis, the Board of Trustees receives reports on any valuation actions taken by the Valuation Committee or the Management Valuation Team which may include items for ratification.
Valuations of fair valued securities are compared to the next actual sales price when available, or other appropriate market 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 subadviser. Unobservable inputs used in determining fair valuations are identified based on the type of security, taking into consideration factors
utilized by market participants in valuing the investment, knowledge about the issuer and the current market environment.
When-issued
transactions
The Fund may purchase securities on a forward commitment or when-issued basis. The Fund records a when-issued
transaction on the trade date and will segregate assets in an amount at least equal in value to the Funds 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 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.
As of January 31, 2013, the Fund had unfunded loan commitments of $6,477,875.
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 Funds 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 Funds 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
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quoted prices in active markets for identical securities
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Level 2
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other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, use of amortized cost, etc.)
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Level 3
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significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments)
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11
The inputs or methodologies used for valuing investments in securities are not necessarily an indication of
the risk associated with investing in those securities.
As of January 31, 2013, the inputs used in valuing investments in securities,
which are carried at fair value, were as follows:
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Investments in securities
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Quoted prices
(Level 1)
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Significant
other
observable
inputs
(Level 2)
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Significant
unobservable
inputs
(Level 3)
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Total
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Equity securities
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Common stocks
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$
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1,244,322
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$
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0
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$
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2,149
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$
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1,246,471
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Preferred stocks
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1,413,510
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0
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0
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1,413,510
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Corporate bonds and notes
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0
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792,051,056
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0
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792,051,056
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Term loans
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0
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73,640,914
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17,055,139
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90,696,053
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Yankee corporate bonds and notes
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0
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41,231,196
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0
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41,231,196
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Short-term investments
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Investment companies
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17,592,680
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0
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0
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17,592,680
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$
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20,250,512
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$
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906,923,166
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$
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17,057,288
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$
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944,230,966
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Transfers in and transfers out are recognized at the end of the reporting period. For the nine months ended
January 31, 2013, the Fund did not have any transfers into/out of Level 1 or Level 2.
The following is a reconciliation of assets
in which significant unobservable inputs (Level 3) were used in determining fair value:
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Common
stocks
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Term loans
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Total
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Balance as of April 30, 2012
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$
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9,671
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$
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5,611,506
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$
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5,621,177
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Accrued discounts (premiums)
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0
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6,866
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6,866
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Realized gains (losses)
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0
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27,213
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27,213
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Change in unrealized gains (losses)
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(7,522
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)
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65,827
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58,305
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Purchases
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0
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8,941,175
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8,941,175
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Sales
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0
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(2,650,037
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(2,650,037
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)
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Transfers into Level 3
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0
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5,052,589
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5,052,589
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Transfers out of Level 3
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0
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0
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0
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Balance as of January 31, 2013
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$
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2,149
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$
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17,055,139
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$
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17,057,288
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Change in unrealized gains (losses) relating to securities still held at January 31, 2013
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$
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(7,522
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$
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115,479
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$
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107,957
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The investments types categorized above were valued using indicative broker quotes and are therefore considered Level 3
inputs.
12
List of Abbreviation
ACA ACA Financial Guaranty Corporation
ADR American depositary receipt
ADS American depositary shares
AGC Assured Guaranty Corporation
AGM Assured Guaranty Municipal
Ambac Ambac Financial Group
Incorporated
AMT Alternative minimum tax
AUD Australian dollar
BAN Bond anticipation notes
BHAC Berkshire Hathaway Assurance Corporation
BRL Brazilian real
CAB Capital appreciation bond
CAD Canadian dollar
CCAB Convertible capital appreciation bond
CDA Community
Development Authority
CDO Collateralized debt obligation
CHF Swiss franc
COP Certificate of participation
DKK Danish krone
DRIVER Derivative inverse tax-exempt receipts
DW&P Department of Water & Power
DWR Department of
Water Resources
ECFA Educational & Cultural Facilities Authority
EDA Economic Development Authority
EDFA Economic Development Finance Authority
ETF Exchange-traded
fund
EUR Euro
FDIC Federal Deposit Insurance Corporation
FFCB Federal Farm Credit
Banks
FGIC Financial Guaranty Insurance Corporation
FHA Federal Housing Administration
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage
Corporation
FICO The Financing Corporation
FNMA Federal National Mortgage Association
FSA Farm Service Agency
GBP Great British pound
GDR Global depositary receipt
GNMA Government National Mortgage
Association
GO General obligation
HCFR Healthcare facilities revenue
HEFA Health &
Educational Facilities Authority
HEFAR Higher education facilities authority revenue
HFA Housing Finance Authority
HFFA Health Facilities Financing Authority
HKD Hong Kong dollar
HUD Department of Housing and Urban Development
HUF Hungarian forint
IDA Industrial Development Authority
IDAG Industrial Development
Agency
IDR Industrial development revenue
IEP Irish pound
13
JPY Japanese yen
KRW Republic of Korea won
LIBOR London Interbank Offered Rate
LIQ Liquidity agreement
LLC Limited liability company
LLP Limited liability partnership
LOC Letter of credit
LP Limited partnership
MBIA Municipal Bond Insurance Association
MFHR Multifamily housing
revenue
MSTR Municipal securities trust receipts
MTN Medium-term note
MUD Municipal Utility District
MXN Mexican peso
MYR Malaysian ringgit
National National Public Finance Guarantee Corporation
NOK
Norwegian krone
NZD New Zealand dollar
PCFA Pollution Control Financing Authority
PCL Public Company
Limited
PCR Pollution control revenue
PFA Public Finance Authority
PFFA Public Facilities Financing
Authority
PFOTER Puttable floating option tax-exempt receipts
plc Public limited company
PLN Polish zloty
PUTTER Puttable tax-exempt receipts
R&D Research & development
Radian Radian Asset Assurance
RAN Revenue anticipation notes
RDA Redevelopment Authority
RDFA Redevelopment Finance Authority
REIT Real estate investment
trust
ROC Reset option certificates
SAVRS Select auction variable rate securities
SBA Small Business
Authority
SEK Swedish krona
SFHR Single-family housing revenue
SFMR Single-family mortgage
revenue
SGD Singapore dollar
SKK Slovakian koruna
SPA Standby purchase agreement
SPDR Standard & Poors Depositary Receipts
STRIPS Separate trading of registered interest and
principal securities
TAN Tax anticipation notes
TBA To be announced
TIPS Treasury inflation-protected securities
TRAN Tax revenue anticipation notes
TRY Turkish lira
TTFA Transportation Trust Fund Authority
TVA Tennessee Valley Authority
ZAR South African rand
14
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
Trusts internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrants last fiscal quarter that has materially affected or is reasonably likely to
materially affect, the registrants 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.
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Wells Fargo Advantage Income Opportunities Fund
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By:
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/s/ Karla M. Rabusch
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Karla M. Rabusch
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|
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President
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|
Date: March 26, 2013
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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.
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Wells Fargo Advantage Income Opportunities Fund
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|
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By:
|
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/s/ Karla M. Rabusch
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Karla M. Rabusch
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President
|
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Date: March 26, 2013
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By:
|
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/s/ Jeremy DePalma
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Jeremy DePalma
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Treasurer
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Date: March 26, 2013
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