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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-21269

 

 

Wells Fargo 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)

 

 

Catherine Kennedy

Wells Fargo Funds Management, LLC

525 Market St., San Francisco, CA 94105

(Name and address of agent for service)

 

 

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

Date of fiscal year end: April 30

Date of reporting period: April 30, 2021

 

 

 


ITEM 1. REPORT TO STOCKHOLDERS

 


Annual Report
April 30, 2021
Wells Fargo
Income Opportunities Fund (EAD)




Contents
 
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The views expressed and any forward-looking statements are as of April 30, 2021, unless otherwise noted, and are those of the Fund's portfolio managers and/or Wells Fargo Asset Management. Discussions of individual securities or the markets generally 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 Asset Management and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.
 INVESTMENT PRODUCTS: NOT FDIC INSURED  ■  NO BANK GUARANTEE  ■  MAY LOSE VALUE 

Wells Fargo Income Opportunities Fund  |  1


Letter to shareholders (unaudited)
Andrew Owen
President
Wells Fargo Funds
Dear Shareholder:
We are pleased to offer you this annual report for the Wells Fargo Income Opportunities Fund for the 12-month period that ended April 30, 2021. Despite the initial challenges presented by the spread of COVID-19 cases and the business restrictions implemented throughout much of the world, global stocks showed robust returns, supported by global stimulus programs, a rapid vaccination rollout, and recovering consumer and corporate sentiment. Bond markets mostly produced positive returns, as investors searched for yield and diversification during difficult market stretches.
For the 12-month period, equities had robust returns, as policymakers continued to fight the effects of COVID-19. Emerging market stocks led both non-U.S. developed market equities and U.S. stocks. While gains from fixed-income securities were mostly positive, they were more modest than equities. For the period, U.S. stocks, based on the S&P 500 Index,1 gained 45.98%. International stocks, as measured by the MSCI ACWI ex USA Index (Net),2 returned 42.98%, while the MSCI EM Index (Net),3 had stronger performance, with a 48.71% gain. Among bond indexes, the Bloomberg Barclays U.S. Aggregate Bond Index,4 returned -0.27%, the Bloomberg Barclays Global Aggregate ex-USD Index (unhedged),5 gained 6.71%, and the Bloomberg Barclays Municipal Bond Index,6 returned 7.75%, and the ICE BofA U.S. High Yield Index,7 returned 20.10%.
The COVID-19 lockdown began over a year ago.
In May 2020, investors regained confidence on reports of early success in human trials of a COVID-19 vaccine. Growth stocks outperformed value, while returns on global government bonds were flat. However, in the U.S., the April unemployment rate rose to 14.7%, its highest level since World War II. Purchasing Managers’ Indexes (PMIs), a monthly survey of purchasing managers, reflected broadly weakening activity in May. U.S. corporate earnings contracted 14% year over year from the first quarter of 2019. However, high demand for information technology (IT), driven by remote activity, supported robust IT sector earnings, which helped drive IT stocks higher.
By June, economies started to reopen and global central banks committed to do all they could to provide economic support through liquidity and low borrowing costs. U.S. economic activity was aided by one-time $1,200 stimulus checks and $600 weekly bonus unemployment benefits that lasted through July. However, unemployment remained historically high and COVID-19 cases began to increase by late June. China’s economic recovery began to pick up momentum.

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.
2 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 and emerging markets, excluding the United States. 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.

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.
3 The MSCI Emerging Markets (EM) Index (Net) is a free-float-adjusted market-capitalization-weighted index that is designed to measure equity market performance of emerging markets. You cannot invest directly in an index.

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.
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.

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.
5 The Bloomberg Barclays Global Aggregate ex-USD Index (unhedged) 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.

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.
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.

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.
7 The ICE BofA 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 2021. ICE Data Indices, LLC. All rights reserved.

2  |  Wells Fargo Income Opportunities Fund


Letter to shareholders (unaudited)
July was broadly positive for equities and fixed income. However, economic data and a resurgence of COVID-19 cases underscored the urgent need to regain control of the pandemic. Second-quarter gross domestic product (GDP) shrank from the previous quarter by 9.5% and 12.1% in the U.S. and the eurozone, respectively. In contrast, China’s second-quarter GDP grew 3.2% year over year. The U.S. economy added 1.8 million jobs in July, but a double-digit jobless rate persisted.
The stock market continued to rally in August despite concerns over rising numbers of U.S. and European COVID-19 cases as well as the July expiration of the $600 weekly bonus unemployment benefit. Relatively strong second-quarter earnings boosted investor sentiment along with the U.S. Federal Reserve’s announcement of a monetary policy shift expected to support longer-term low interest rates. U.S. manufacturing and services activity indexes beat expectations while the U.S. housing market maintained strength. In Europe, retail sales expanded and consumer confidence was steady. China’s economy continued to expand.
Stocks grew more volatile in September on mixed economic data. U.S. economic activity continued to grow. However, U.S. unemployment remained elevated at 7.9% in September. With the U.S. Congress delaying further fiscal relief and uncertainties surrounding a possible vaccine, doubts crept back into the financial markets. In the U.K., a lack of progress in Brexit talks weighed on markets. China’s economy picked up steam, fueled by increased global demand.
In October, capital markets stepped back from their six-month rally. Market volatility rose in advance of the U.S. election and amid a global increase in COVID-19 infections. Europe introduced tighter restrictions affecting economic activity. U.S. markets looked favorably at the prospect of Democratic control of the federal purse strings, which could lead to additional fiscal stimulus and a boost to economic activity. Meanwhile, China reported 4.9% third-quarter GDP growth.
Global stocks rallied in November, propelled by optimism over three promising COVID-19 vaccines. Reversing recent trends, value stocks outperformed growth stocks and cyclical stocks outpaced IT stocks. However, U.S. unemployment remained elevated, with a net job loss of 10 million since February. The eurozone services PMI contracted sharply while the region’s manufacturing activity grew. The U.S. election results added to the upbeat mood as investors anticipated more consistent policies in the new administration.
Financial markets ended the year with strength on high expectations for a rapid rollout of the COVID-19 vaccines, the successful passage of a $900 billion stimulus package, and rising expectations of additional economic support from a Democratic-led Congress. U.S. economic data were mixed with still-elevated unemployment and weak retail sales but growth in manufacturing output. In contrast, China’s economic expansion continued in both manufacturing and nonmanufacturing. U.S. COVID-19 infection rates continued to rise even as new state and local lockdown measures were implemented.
The calendar year 2021 began with emerging market stocks leading all major asset classes in January, driven by China’s strong economic growth and a broad recovery in corporate earnings, which propelled China’s stock market higher. In the United States, positive news on vaccine trials and January's expansion in both the manufacturing and services sectors were offset by a weak December monthly jobs report. This was compounded by technical factors as some hedge funds were forced to sell stocks to protect themselves against a well-publicized short squeeze coordinated by a group of retail investors. Eurozone sentiment and economic growth were particularly weak, reflecting the impact of a new lockdown with stricter social distancing along with a slow vaccine rollout.
February saw major domestic equity indexes driven higher on the hope of a new stimulus bill, improving COVID-19 vaccination numbers, and the gradual reopening of the economy. Most S&P 500 companies reported better-than-expected earnings, with positive surprises coming from the financials, IT, health care, and materials sectors. Japan saw its economy strengthen as a result of strong export numbers. Meanwhile, crude oil prices continued their climb, rising more than 25% for the year. Domestic government bonds experienced a sharp sell-off in late February as markets priced in a more robust economic recovery and higher future growth and inflation expectations.
Global stocks rallied in November, propelled by optimism over three promising COVID-19 vaccines.

Wells Fargo Income Opportunities Fund  |  3


Letter to shareholders (unaudited)
The passage of the massive domestic stimulus bill highlighted March activity, leading to increased forecasts for U.S. growth in 2021.
The passage of the massive domestic stimulus bill highlighted March activity, leading to increased forecasts for U.S. growth in 2021. Domestic employment surged as COVID-19 vaccinations and an increasingly open economy spurred hiring. A majority of U.S. small companies reported they were operating at pre-pandemic capacity or higher. Value continued its outperformance of growth in the month, continuing the trend that started in late 2020. Meanwhile, most major developed global equity indexes were up month to date on the back of rising optimism regarding the outlook for global growth. While the U.S. and U.K. have been the most successful in terms of the vaccine rollout, even in markets where the vaccine has lagged, such as in the eurozone and Japan, equity indexes in many of those countries are also in positive territory this year.
Equity markets produced another strong showing in April. Domestically, the continued reopening of the economy had a strong impact on positive equity performance as people started leaving their households and jobless claims continued to fall. Domestic corporate bonds performed well and the U.S. dollar weakened. Meanwhile, the U.S. government continued to seek to invest in the recovery, this time by outlining a package of over $2 billion to improve infrastructure. The primary headwind in April was inflation, as investors tried to determine the breadth and longevity of recent price increases. Developed Europe has been supported by a meaningful increase in the pace of vaccinations. Unfortunately many emerging market countries have not been as successful. India in particular has seen COVID-19 cases surge, serving as an example of the need to get vaccinations rolled out to less developed nations.
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.
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,
Andrew Owen
President
Wells Fargo Funds

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

4  |  Wells Fargo Income Opportunities Fund


Letter to shareholders (unaudited)
Notice to Shareholders
On November 17, 2020, the Fund announced a renewal of its open-market share repurchase program (the “Buyback Program”). Under the renewed Buyback Program, the Fund may repurchase up to 10% of its outstanding shares in open market transactions during the period beginning on January 1, 2021 and ending on December 31, 2021. 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.
The Fund’s managed distribution plan 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 net asset value 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.
Preparing for LIBOR Transition
The global financial industry is preparing to transition away from the London Interbank Offered Rate (LIBOR), a key benchmark interest rate, to new alternative rates. LIBOR underpins more than $350 trillion of financial contracts. It is the benchmark rate for a wide spectrum of products ranging from residential mortgages to corporate bonds to derivatives. Regulators have called for a market-wide transition away from LIBOR to successor reference rates by the end of 2021 (expected to be extended through June 30, 2023 for most tenors of the U.S. dollar LIBOR), which requires proactive steps be taken by issuers, counterparties, and asset managers to identify impacted products and adopt new reference rates.
The Fund holds at least one security that uses LIBOR as a floating reference rate and has a maturity date after December 31, 2021.
Although the transition process away from LIBOR has become increasingly well-defined in advance of the anticipated discontinuation date, there remains uncertainty regarding the nature of successor reference rates, and any potential effects of the transition away from LIBOR on investment instruments that use it as a benchmark rate. The transition process may result in, among other things, increased volatility or illiquidity in markets for instruments that currently rely on LIBOR and could negatively impact the value of certain instruments held by the Fund.
Wells Fargo Asset Management is monitoring LIBOR exposure closely and has put resources and controls in place to manage this transition effectively. The Fund’s portfolio management team is evaluating LIBOR holdings to understand what happens to those securities when LIBOR ceases to exist, including examining security documentation to identify the presence or absence of fallback language identifying a replacement rate to LIBOR.
While the pace of transition away from LIBOR will differ by asset class and investment strategy, the portfolio management team will monitor market conditions for those holdings to identify and mitigate deterioration or volatility in pricing and liquidity and ensure appropriate actions are taken in a timely manner.

Wells Fargo Income Opportunities Fund  |  5


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 perferred 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 Chris Lee, CFA®, Michael J. Schueller, CFA®
    
Average annual total returns (%) as of April 30, 20211
  1 year 5 year 10 year
Based on market value 38.39 11.56 7.62
Based on net asset value (NAV) 31.99 10.65 8.53
ICE BofA U.S. High Yield Constrained Index2 20.01 7.31 6.26
Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes that a shareholder may pay on an investment in a fund. 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.
Please keep in mind that high double-digit returns were primarily achieved during favorable market conditions. You should not expect that such favorable returns can be consistently achieved. A fund’s performance, especially for short time periods, should not be the sole factor in making your investment decision.
The Fund’s expense ratio for the year ended April 30, 2021, was 1.29% which includes 0.33% of interest expense.
1 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 at the end of the period. Dividends and distributions, if any, are assumed for the purposes of these calculations to be reinvested at prices obtained under the Fund’s Automatic Dividend Reinvestment Plan.
2 The ICE BofA U.S. High Yield Constrained Index is a market-value-weighted index of all domestic and Yankee high-yield bonds, including deferred interest bonds and payment-in-kind securities. Issues included in the index have maturities of one year or more and have a credit rating lower than BBB-/Baa3 but are not in default. The ICE BofA U.S. High Yield Constrained Index limits any individual issuer to a maximum of 2% benchmark exposure. You cannot invest directly in an index. Copyright 2021. ICE Data Indices, LLC. All rights reserved.
    
Comparison of NAV vs. market value1
1 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.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

6  |  Wells Fargo Income Opportunities Fund


Performance highlights (unaudited)
More detailed information about the Fund’s investment objective, principal investment strategies and the principal risks associated with investing in the Fund can be found on page 11.
Risk summary
This closed-end fund is no longer available as an initial public offering and is only offered through broker-dealers on the secondary market. A closed-end fund is not required to buy its shares back from investors upon request. Shares of the Fund may trade at either a premium or discount relative to the Fund’s net asset value, and there can be no assurance that any discount will decrease. The values of, and/or the income generated by, securities held by the Fund may decline due to general market conditions or other factors, including those directly involving the issuers of such securities. Debt securities are subject to credit risk and interest rate risk, and high yield securities and unrated securities of similar credit quality have a much greater risk of default and their values tend to be more volatile than higher-rated securities with similar maturities. The Fund is leveraged through a revolving credit facility and also may incur leverage by issuing preferred shares in the future. The use of leverage results in certain risks including, among others, the likelihood of greater volatility of the 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.

Wells Fargo Income Opportunities Fund  |  7


Performance highlights (unaudited)
MANAGER'S DISCUSSION
The Fund’s return based on market value was 38.39% for the 12-month period that ended April 30, 2021. During the same period, the Fund’s return based on its net asset value (NAV) was 31.99%. Based on its market value and NAV returns, the Fund outperformed the ICE BofA U.S. High Yield Constrained Index, which returned 20.01% for the 12-month period that ended April 30, 2021.
Market overview
During the period, the ICE BofA U.S. High Yield Constrained Index returned 20.01%, one of the strongest 12-month periods of return in the history of high-yield bonds. Spread tightening over the period more than offset a 99-basis-point (bps; 100 bps equal 1.00%) rise in the 10-year Treasury, and the yield on the index declined dramatically to 4.13%.
Sector allocation added to performance.
Sector allocation was positive overall. The three energy sub-sectors—exploration and production, midstream, and oil-field services—each contributed significantly to outperformance. Airlines, automobiles, and media/entertainment also contributed positively to outperformance. Underweights to the metals and mining, food and beverage, and gaming sectors were the biggest detractors to performance.
Ten largest holdings (%) as of April 30, 20211
Occidental Petroleum Corporation, 6.45%, 9-15-2036 1.97
Service Corporation International, 7.50%, 4-1-2027 1.89
Dell International LLC, 7.13%, 6-15-2024 1.88
Delta Air Lines Incorporated, 4.75%, 10-20-2028 1.60
American Airlines Group Incorporated, 5.75%, 4-20-2029 1.36
Hawaiian Brand Intellectual Property Limited , 5.75%, 1-20-2026 1.32
CCO Holdings LLC, 4.50%, 8-15-2030 1.31
Bristow Group Incorporated 1.30
Mileage Plus Holdings LLC, 6.50%, 6-20-2027 1.27
Cinemark USA Incorporated, 4.88%, 6-1-2023 1.23
1 Figures represent the percentage of the Fund's net assets. Holdings are subject to change and may have changed since the date specified.
Security selection added to performance.
Security selection was positive over the 12-month period that ended April 30, 2021. Outperformance within the energy sector proved to be the most important driver of performance, aided by allocation within the media and entertainment sector. The Fund’s use of leverage had a positive impact on total return performance during this reporting period.
This past year will be remembered for the unprecedented government response to the COVID-19 pandemic and, for high-yield investors in particular, the U.S. Federal Reserve (Fed) buying bonds in the secondary corporate bond markets. The Fed’s announcement of the Secondary Market Credit Facility (SMCF) on March 23, 2020, marked the turning point in the sharp but short-lived COVID-19 bear market. Since then, the high-yield market returned 36.2% and had just one month of negative returns. The resolution to the 2020 U.S. election, the rollout of COVID-19 vaccines, and multiple rounds of fiscal stimulus have only strengthened the recovery and rally in risk assets that began with the Fed’s SMCF announcement.
Cumulatively, these events have made what we call the “reflation” trade a successful one. Over the past year, the “reflation” trade has been marked by a recovery in the price of oil, rising rates, and the nearly complete recovery in valuations of the sectors most directly affected by the COVID-19 restrictions. Approximately halfway through the year, the portfolio underwent a repositioning to capture opportunities arising from the “reflation” trade.
 

8  |  Wells Fargo Income Opportunities Fund


Performance highlights (unaudited)
Credit quality as of April 30, 20211
1 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 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 the 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.
Top contributors
The energy sector, which comprises about one-eighth of the high-yield market, had suffered a double whammy of a poorly timed oil price war in the weeks leading up to the COVID-19-induced demand shock. After seeing West Texas Intermediate (WTI) oil fall to unprecedented lows, the Organization of the Petroleum Exporting Countries agreed to, and maintained, supply reductions, which have gradually reduced the oversupply of oil and led to a dramatic recovery in WTI and energy bond prices. Twelve months ago, WTI stood below $20 per barrel. On April 30, 2021, WTI stood at $64 per barrel. Energy bond spreads have tightened from 1,340 bps to 426 bps over the same period. Investments in the reorganized equity of two exploration and production (E&P) companies, E&P bonds, midstream bonds, and the reorganized equity of an offshore oil services company proved to be important over the past year.
Treasury bond yields in the 5- to 10-year portion of the curve have also undergone a dramatic repricing in the past 12 months, with the 10-year yield rising 99 bps from 64 bps to 163 bps. Just as the rapidly improving economic outlook pushed the 10-year Treasury yield higher, so, too, has it driven high-yield spreads tighter. The option-adjusted spread on the high-yield market stood at 764 bps one year ago. It stood at 330 bps on April 30, 2021.
Effective maturity distribution as of April 30, 20211
1 Figures represent the percentage of the Fund’s fixed-income securities. These amounts are subject to change and may have changed since the date specified.
Main detractors
The main detractors from performance over the past year came from the Fund’s underweights to the metals and mining and food and beverage sectors. While credit quality in both sectors is on the rise, many bonds in these sectors have longer durations than the index average, making them vulnerable to rising rates and a less attractive way to capture spread compression.
One year ago, there was significant uncertainty regarding the length and severity of the COVID-19 crisis and the extent to which businesses would suffer from it. Today, while businesses anticipate a full recovery, the recovery in valuations in the capital markets is nearly complete. As recently as last fall, companies directly affected by COVID-19 had inverted credit curves (near-term maturities trading at higher yields than longer ones) and traded at a significant discount to minimally disrupted companies. Those credit curves have now normalized and the discount one earns for investing in directly affected companies is very slight. Capturing this compression in several key investments in the leisure, air transportation, automotive, and media sectors contributed to outperformance.
 

Wells Fargo Income Opportunities Fund  |  9


Performance highlights (unaudited)
Management outlook
The current high-yield landscape features early-cycle fiscal and monetary policies coupled with late-cycle valuations. The former makes us largely constructive on the prospects for improvement in issuer fundamentals, but the latter tempers our return expectations. We believe the majority of the systemic spread tightening is behind us and it’s critically important to get idiosyncratic credit issues correct to outperform. Always the hallmark of our investment process, security selection, comprehensive research, and tactical portfolio management will be ever more salient in capitalizing on opportunities in these evolving credit markets.

10  |  Wells Fargo Income Opportunities Fund


Objective, strategies and risks (unaudited)
Investment objective
The Fund seeks a high level of current income. The Fund may, as a secondary objective, also seek capital appreciation to the extent consistent with its primary investment objective. The Fund’s investment objectives are fundamental policies and may not be changed without the approval of a majority of the outstanding voting securities (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) of the Fund.
Principal investment strategies
Under normal market conditions, the Fund allocates at least 80% of its total assets to U.S. dollar-denominated below investment-grade bonds, debentures, and other income obligations, including loans and preferred stocks (often called “high yield” securities or “junk bonds”). 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 portfolio managers. We may invest in below investment-grade debt securities of any credit quality, however, we may not purchase securities rated CCC or below at a time when 20% of the Fund’s total assets are already held with such a rating. We are not required to sell securities rated CCC or below if the 20% limit is exceeded due to security downgrades. Securities may be issued by domestic or foreign issuers (including foreign governments). The Fund may invest up to 10% of its total assets in U.S. dollar-denominated securities of foreign issuers, excluding emerging markets securities.
For purposes of the Fund’s credit quality policies, if a security receives different ratings from nationally recognized securities rating organizations, the Fund will use the rating that the portfolio managers believe is most representative of the security’s credit quality. The Fund’s high yield securities may have fixed or variable principal payments and all types of interest rate and dividend payment and reset terms, including fixed rate, adjustable rate, contingent, deferred, payment in kind and auction rate features. The Fund may invest in securities with a broad range of maturities.
The Fund is managed following a rigorous investment process that emphasizes both quality and value. The research driven approach includes both a top-down review of macroeconomic factors and intensive, bottom-up scrutiny of individual securities. We consider both broad economic and issuer specific factors in selecting securities for the Fund. In assessing the appropriate maturity and duration for the Fund and the credit quality parameters and weighting objectives for each sector and industry, we consider a variety of factors that are expected to influence the economic environment and the dynamics of the high yield market. These factors include fundamental economic indicators, such as interest rate trends, the rates of economic growth and inflation, the performance of equity markets, commodities prices, Federal Reserve monetary policy and the relative value of the U.S. dollar compared to other currencies. Once we determine the preferable portfolio characteristics, we conduct further evaluation to determine capacity and inventory levels in each targeted industry. We also identify any circumstances that may lead to improved business conditions, thus increasing the attractiveness of a particular industry. We select individual securities based upon the terms of the securities (such as yields compared to U.S. Treasuries or comparable issues), liquidity and rating, sector and issuer diversification. We also employ due diligence and fundamental research to assess an issuer’s credit quality, taking into account financial condition and profitability, future capital needs, potential for change in rating, industry outlook, the competitive environment and management ability.
The analysis of issuers may include, among other things, historic and current financial conditions, current and anticipated cash flow and borrowing requirements, value of assets in relation to historical costs, strength of management, responsiveness to business conditions, credit standing, the company’s leverage versus industry norms and current and anticipated results of operations. While we consider as one factor in our credit analysis the ratings assigned by the rating services, we perform our own independent credit analysis of issuers.
In making decisions for the Fund, we rely on the knowledge, experience and judgment of our team who have access to a wide variety of research. We apply a strict sell discipline, which is as important as purchase criteria in determining the performance of the Fund. We routinely meet to review profitability outlooks and discuss any deteriorating business fundamentals, as well as consider changes in equity valuations and market perceptions before selling securities.
In other than normal market conditions, when changing economic conditions and other factors cause the yield difference between lower rated and higher rated securities to narrow, the Fund may purchase higher rated U.S. debt instruments if we believe that the risk of loss of income and principal may be reduced substantially with only a relatively small reduction in yield.
We regularly review the investments of the portfolio and may sell a portfolio holding when it has achieved its valuation target, there is deterioration in the underlying fundamental of the business, or we have identified a more attractive investment opportunity.
The Fund expects to issue preferred shares or debt securities, or to borrow money, for leveraging purposes. By using leverage, the Fund seeks to obtain a higher return for holders of common shares than if it did not use leverage. Leveraging is a

Wells Fargo Income Opportunities Fund  |  11


Objective, strategies and risks (unaudited)
speculative technique, and there are special risks involved. There can be no assurance that any leveraging strategies, if employed by the Fund, will be successful, and such strategies can result in losses to the Fund.
In contrast to the investment objectives of the Fund, which are fundamental, the investment policies of the Fund described above are non-fundamental and may be changed by the Board of Trustees of the Fund so long as shareholders are provided with at least 60 days prior written notice of any change to the extent required by the rules under the 1940 Act.
Other investment techniques and strategies
As part of or in addition to the principal investment strategies discussed above, the Fund may at times invest a portion of its assets in the investment strategies and may use certain investment techniques as described below.
Convertible and Other Securities. The Fund’s investment in fixed income securities may include bonds and preferred stocks that are convertible into the equity securities of the issuer or a related company. The Fund will not invest more than 20% of its total assets in convertible securities. Depending upon the relationship of the conversion price to the market value of the underlying securities, convertible securities may trade more like equity securities than debt instruments. Consistent with its objectives and other investment policies, the Fund may also invest a portion of its assets in equity securities, including common stocks, depositary receipts, warrants, rights and other equity interests.
Loans. The Fund may invest in direct debt instruments which are interests in amounts owed to lenders by corporate or other borrowers. The loans in which the Fund invests primarily consist of direct obligations of a borrower. The Fund may invest in a loan at origination as a co-lender or by acquiring in the secondary market participations in, assignments of or novations of a corporate loan. By purchasing a participation, the Fund acquires some or all of the interest of a bank or other lending institution in a loan to a borrower. The participations typically will result in the Fund having a contractual relationship only with the lender, not the borrower. The Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. Many such loans are secured, although some may be unsecured. Loans that are fully secured offer the Fund more protection than an unsecured loan in the event of non-payment of scheduled interest or principal. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower’s obligation, or that the collateral can be liquidated. Direct debt instruments may involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to the Fund in the event of fraud or misrepresentation. In addition, loan participations involve a risk of insolvency of the lending bank or other financial intermediary. The markets in loans are not regulated by federal securities laws or the U.S. Securities and Exchange Commission.
Preferred Shares. The Fund may invest in preferred shares. Preferred shares are equity securities, but they have many characteristics of fixed income securities, such as a fixed dividend payment rate and/or a liquidity preference over the issuer’s common shares. However, because preferred shares are equity securities, they may be more susceptible to risks traditionally associated with equity investments than the Fund’s fixed income securities.
Structured Securities. The Fund may invest in structured securities. The value of the principal and/or interest on such securities is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (“Reference”) or the relative change in two or more References. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the Reference. The terms of the structured securities may provide in certain circumstances that no principal is due at maturity and, therefore, may result in a loss of the Fund’s investment. Changes in the interest rate or principal payable at maturity may be a multiple of the changes in the value of the Reference. Consequently, structured securities may entail a greater degree of market risk than other types of fixed income securities.
Asset-Backed Securities. The Fund may invest in asset-backed securities but will not invest in mortgage-backed securities. Asset-backed securities are securities that represent a participation in, or are secured by and payable from, a stream of payments generated by particular assets, most often a pool or pools of similar assets (e.g., trade receivables). The credit quality of these securities depends primarily upon the quality of the underlying assets and the level of credit support and/or enhancement provided.
The underlying assets (e.g., loans) are subject to prepayments which shorten the securities’ weighted average maturity and may lower their return. If required payments of principal and interest are not made and any credit support or enhancement is exhausted, losses or delays in payment may result. The value of these securities also may change because of changes in the market’s perception of the creditworthiness of the servicing agent for the pool, the originator of the pool, or the financial institution or Fund providing the credit support or enhancement.

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Objective, strategies and risks (unaudited)
Real Estate Investment Trusts.The Fund may invest a portion of its assets in real estate investment trusts (“REITs”). REITs primarily invest in income-producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs, or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. The Fund will indirectly bear its proportionate share of any management and other expenses paid by REITs in which it invests in addition to the expenses paid by the Fund. Distributions received by the Fund from REITs may consist of dividends, capital gains, and/or return of capital.
U.S. Government Securities.The Fund may invest in U.S. government securities, including debt securities issued or guaranteed by the U.S. Treasury, U.S. Government agencies or government-sponsored entities. These securities may have fixed, floating or variable rates.
Zero-Coupon, Step-Up Coupon, and Pay-in-Kind Securities. Zero-coupon, step-up coupon, and pay-in-kind securities are types of debt securities that do not make regular cash interest payments. Asset-backed securities, convertible securities, corporate debt securities, foreign securities, high yield securities, mortgage-backed securities, municipal securities, participation interests, stripped securities, U.S. Government and related obligations and other types of debt instruments may be structured as zero-coupon, step-up coupon, and pay-in-kind securities.
Instead of making periodic interest payments, zero-coupon securities are sold at discounts from face value. The interest earned by the investor from holding this security to maturity is the difference between the maturity value and the purchase price. Step-up coupon bonds are debt securities that do not pay interest for a specified period of time and then, after the initial period, pay interest at a series of different rates. Pay-in-kind securities normally give the issuer an option to pay cash at a coupon payment date or to give the holder of the security a similar security with the same coupon rate and a face value equal to the amount of the coupon payment that would have been made. To the extent these securities do not pay current cash income, the market prices of these securities would generally be more volatile and likely to respond to a greater degree to changes in interest rates than the market prices of securities that pay cash interest periodically having similar maturities and credit qualities.
Investments in Equity Securities. The Fund may invest in equity securities. Equity securities, such as common stock, generally represent an ownership interest in a company. While equity securities have historically generated higher average returns than fixed income securities, equity securities have also experienced significantly more volatility in those returns. An adverse event, such as an unfavorable earnings report, may depress the value of a particular equity security held by the Fund. Also, the price of equity securities, particularly common stocks, are sensitive to general movements in the stock market. A drop in the stock market may depress the price of equity securities held by the Fund.
Other Investment Companies. The Fund may invest in other investment companies to the extent permitted under the 1940 Act and the rules, regulations, and exemptive orders thereunder. The Fund, as a holder of the securities of other investment companies, will bear its pro rata portion of the other investment companies’ expenses, including advisory fees. These expenses are in addition to the direct expenses of the Fund’s own operations.
Defensive and Temporary Investments. The Fund may hold some of its assets in cash or in money market instruments, including U.S. Government obligations, shares of other mutual funds and repurchase agreements, or make other short-term investments for purposes of maintaining liquidity or for short-term defensive purposes when we believe it is in the best interests of the shareholders to do so. During these periods, the Fund may not achieve its objectives.
Derivatives. The Fund may invest up to 10% of its total assets in futures and options on securities and indices and in other derivatives. In addition, the Fund may enter into interest rate swap transactions with respect to the total amount the Fund is leveraged in order to hedge against adverse changes in interest rates affecting dividends payable on any preferred shares or interest payable on borrowings constituting leverage. In connection with any such swap transaction, the Fund will segregate liquid securities in the amount of its obligations under the transaction. A derivative is a security or instrument whose value is determined by reference to the value or the change in value of one or more securities, currencies, indices or other financial instruments. The Fund does not use derivatives as a primary investment technique and generally does not anticipate using derivatives for non-hedging purposes. In the event the Advisor uses derivatives for non-hedging purposes, no more than 3% of the Fund’s total assets will be committed to initial margin for derivatives for such purposes. The Fund may use derivatives for a variety of purposes, including:
As a hedge against adverse changes in securities market prices or interest rates; and
As a substitute for purchasing or selling securities.

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Objective, strategies and risks (unaudited)
Repurchase Agreements. The Fund may enter into repurchase agreements with broker-dealers, member banks of the Federal Reserve System and other financial institutions. Repurchase agreements are arrangements under which the Fund purchases securities and the seller agrees to repurchase the securities within a specific time and at a specific price. We review and monitor the creditworthiness of any institution which enters into a repurchase agreement with the Fund. The counterparty’s obligations under the repurchase agreement are collateralized with U.S. Treasury and/or agency obligations with a market value of not less than 100% of the obligations, valued daily. Collateral is held by the Fund’s custodian in a segregated, safekeeping account for the benefit of the Fund. Repurchase agreements afford the Fund an opportunity to earn income on temporarily available cash at low risk. In the event that the counterparty to a repurchase agreement is unwilling or unable to fulfill its contractual obligations to repurchase the underlying security, the Fund may lose money, suffer delays, or incur costs arising from holding or selling the underlying security.
Portfolio Turnover. It is the policy of the Fund not to engage in trading for short-term profits although portfolio turnover is not considered a limiting factor in the execution of investment decisions for the Fund.
Principal risks
An investment in the Fund may lose money, is not a deposit of Wells Fargo Bank, N.A. or its affiliates, is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, and is primarily subject to the risks briefly summarized below.
Market Risk. The values of, and/or the income generated by, securities held by the Fund may decline due to general market conditions or other factors, including those directly involving the issuers of such securities. Securities markets are volatile and may decline significantly in response to adverse issuer, regulatory, political, or economic developments. Different sectors of the market and different security types may react differently to such developments. Political, geopolitical, natural and other events, including war, terrorism, trade disputes, government shutdowns, market closures, natural and environmental disasters, epidemics, pandemics and other public health crises and related events have led, and in the future may lead, to economic uncertainty, decreased economic activity, increased market volatility and other disruptive effects on U.S. and global economies and markets. Such events may have significant adverse direct or indirect effects on the Fund and its investments. In addition, economies and financial markets throughout the world are becoming increasingly interconnected, which increases the likelihood that events or conditions in one country or region will adversely impact markets or issuers in other countries or regions.
Debt Securities Risk. Debt securities are subject to credit risk and interest rate risk. Credit risk is the possibility that the issuer or guarantor of a debt security may be unable, or perceived to be unable, to pay interest or repay principal when they become due. In these instances, the value of an investment could decline, and the Fund could lose money. Credit risk increases as an issuer’s credit quality or financial strength declines. Interest rate risk is the possibility that interest rates will change over time. When interest rates rise, the value of debt securities tends to fall. The longer the terms of the debt securities held by a Fund, the more the Fund is subject to this risk. If interest rates decline, interest that the Fund is able to earn on its investments in debt securities may also decline, which could cause the Fund to reduce the dividends it pays to shareholders, but the value of those securities may increase. Very low or negative interest rates may magnify interest rate risk.
High Yield Securities Risk.High yield securities and unrated securities of similar credit quality (commonly known as “junk bonds”) have a much greater risk of default (or in the case of bonds currently in default, of not returning principal) and their values tend to be more volatile than higher-rated securities with similar maturities. Additionally, these securities tend to be less liquid and more difficult to value than higher-rated securities.
Asset-Backed Securities Risk.Asset-backed securities are securities that represent a participation in, or are secured by and payable from, a stream of payments generated by particular assets, most often a pool or pools of similar assets (e.g., trade receivables). The credit quality of these securities depends primarily upon the quality of the underlying assets and the level of credit support and/or enhancement provided. Asset-backed securities are subject to risk of default on the underlying assets, particularly during periods of economic downturn. Defaults on the underlying assets may cause such securities to decline in value and become less liquid. Rising interest rates tend to extend the duration of these securities, making them more sensitive to changes in interest rates than instruments with fixed payment schedules. As a result, in a period of rising interest rates, these securities may exhibit additional volatility.
When interest rates decline or are low, borrowers may pay off their debts sooner than expected, which can reduce the returns of the Fund.
The underlying assets (e.g., loans) are subject to prepayments which shorten the securities’ weighted average maturity and may lower their return. If required payments of principal and interest are not made and any credit support or enhancement is

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Objective, strategies and risks (unaudited)
exhausted, losses or delays in payment may result. The value of these securities also may change because of changes in the market’s perception of the creditworthiness of the servicing agent for the pool, the originator of the pool, or the financial institution or Fund providing the credit support or enhancement.
Leverage Risk. The use of leverage through the issuance of preferred shares and/or debt securities, or from borrowing money, may result in certain risks to the Fund as described below. Certain transactions, such as derivatives, also may give rise to a form of economic leverage. Leveraging is a speculative technique, and there are special risks involved, including the risk that downside outcomes for common shareholders are magnified as a result of losses and declines in value of portfolio securities purchased with borrowed money. In addition, the costs of the financial leverage may exceed the income from investments made with such leverage, interest rates or dividends payable on the financial leverage may affect the yield and distributions to the common shareholders, and the net asset value and market value of common shares may be more volatile than if the Fund had not been leveraged. The use of leverage may cause the Fund to have to liquidate portfolio positions when it may not be advantageous to do so. There can be no assurance that any leveraging strategies will be successful.
Because many derivatives have a leverage component (i.e., a notional value in excess of the assets needed to establish and/or maintain the derivative position), adverse changes in the value or level of the underlying asset, rate or index may result in a loss substantially greater than the amount invested in the derivative itself.
Anti-takeover Provisions Risk. The Fund’s governing documents include provisions that could limit the ability of other entities or persons to acquire control of the Fund or to change the composition of its Board of Trustees. Such provisions could limit the ability of shareholders to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund. These provisions include staggered terms of office for the Trustees, advance notice requirements for shareholder proposals, and supermajority voting requirements for open-ending the Fund or a merger, liquidation, asset sale or similar transactions.
Closed-end Fund Risk. Closed-end funds involve investment risks different from those associated with other investment companies. Shares of closed-end funds frequently trade at either a premium or discount relative to their net asset value (“NAV”). There can be no assurance that the discount will decrease. It is possible that a market discount may increase and the Fund may suffer realized or unrealized capital losses due to further decline in the market price of the securities held by the Fund, thereby adversely affecting the NAV of the Fund’s shares. Similarly, there can be no assurance that the Fund’s shares will trade at a premium, will continue to trade at a premium or that the premium will not decrease over time.
Convertible Securities Risk. A convertible security has characteristics of both equity and debt securities and, as a result, is exposed to risks that are typically associated with both types of securities. The market value of a convertible security tends to decline as interest rates increase but also tends to reflect changes in the market price of the common stock of the issuing company. A convertible security is also exposed to the risk that an issuer is unable to meet its obligation to make dividend or interest and principal payments when due as a result of changing financial or market conditions. In the event of a liquidation of the issuer, holders of a convertible security would generally be paid only after holders of any senior debt obligations. The Fund may be forced to convert a convertible security before it would otherwise choose to do so, which may decrease the Fund’s return.
Derivatives Risk. The use of derivatives, such as futures, options and swap agreements, presents risks different from, and possibly greater than, the risks associated with investing directly in traditional securities. The use of derivatives can lead to losses because of adverse movements in the price or value of the derivatives’ underlying assets, indexes or rates and the derivatives themselves, which may be magnified by certain features of the derivatives. These risks are heightened when derivatives are used to enhance the Fund’s return or as a substitute for a position or security, rather than solely to hedge (or mitigate) the risk of a position or security held by the Fund. The success of a derivative strategy will be affected by the portfolio manager’s ability to assess and predict market or economic developments and their impact on the derivatives’ underlying assets, indexes or rates and the derivatives themselves. Certain derivative instruments may become illiquid and, as a result, may be difficult to sell when the portfolio manager believes it would be appropriate to do so. Certain derivatives create leverage, which can magnify the impact of a decline in the value of their underlying assets, indexes or rates and increase the volatility of the Fund’s net asset value. Certain derivatives (e.g., over-the-counter swaps) are also subject to the risk that the counterparty to the derivative contract will be unwilling or unable to fulfill its contractual obligations, which may cause the Fund to lose money, suffer delays or incur costs arising from holding or selling an underlying asset. Changes in laws or regulations may make the use of derivatives more costly, may limit the availability of derivatives, or may otherwise adversely affect the use, value or performance of derivatives.
Equity Securities Risk. The values of equity securities may experience periods of substantial price volatility and may decline significantly over short time periods. In general, the values of equity securities are more volatile than those of debt securities.

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Objective, strategies and risks (unaudited)
Equity securities fluctuate in value and price in response to factors specific to the issuer of the security, such as management performance, financial condition, and market demand for the issuer’s products or services, as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions. Different parts of a market, industry and sector may react differently to adverse issuer, market, regulatory, political, and economic developments.
Foreign Investment Risk.Foreign investments may be subject to lower liquidity, greater price volatility and risks related to adverse political, regulatory, market or economic developments. Foreign companies may be subject to significantly higher levels of taxation than U.S. companies, including potentially confiscatory levels of taxation, thereby reducing the earnings potential of such foreign companies. Foreign investments may involve exposure to changes in foreign currency exchange rates. Such changes may reduce the U.S. dollar value of the investments. Foreign investments may be subject to additional risks such as potentially higher withholding and other taxes, and may also be subject to greater trade settlement, custodial, and other operational risks than domestic investments. Certain foreign markets may also be characterized by less stringent investor protection and disclosure standards.
Futures Contracts Risk. A Fund that uses futures contracts, which are a type of derivative, is subject to the risk of loss caused by unanticipated market movements. In addition, there may at times be an imperfect correlation between the movement in the prices of futures contracts and the value of their underlying instruments or indexes, and there may at times not be a liquid secondary market for certain futures contracts.
Inflation Risk. Inflation risk is the risk that the value of assets or income from the Fund’s investments will be worth less in the future as inflation decreases the value of money. As inflation increases, the real, or inflation-adjusted, value of the common shares and distributions can decline and the dividend payments on the Fund’s preferred shares, if any, or interest payments on Fund borrowings, if any, may increase.
Issuer Risk. The value of corporate income-producing securities may decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods and services.
Loan Risk. Loans may be unrated, less liquid and more difficult to value than traditional debt securities. Loans may be made to finance highly leveraged corporate operations or acquisitions. The highly leveraged capital structure of the borrowers in such transactions may make such loans especially vulnerable to adverse changes in financial, economic or market conditions. Loans generally are subject to restrictions on transfer, and only limited opportunities may exist to sell such loans in secondary markets. As a result, the Fund may be unable to sell loans at a desired time or price. If the Fund acquires only an assignment or a participation in a loan made by a third party, the Fund may not be able to control amendments, waivers or the exercise of any remedies that a lender would have under a direct loan and may assume liability as a lender.
Management Risk. Investment decisions, techniques, analyses or models implemented by the Fund’s manager or sub-advisor in seeking to achieve the Fund’s investment objectives may not produce the returns expected, may cause the Fund’s shares to lose value or may cause the Fund to underperform other funds with similar investment objectives.
Market Price of Shares Risk.Whether investors will realize a gain or loss upon the sale of the Fund’s common shares will depend upon whether the market value of the shares at the time of sale is above or below the price the investor paid, taking into account transaction costs, for the shares and is not directly dependent upon the Fund’s net asset value. Because the market value of the Fund’s shares will be determined by factors such as the relative demand for and supply of the shares in the market, general market conditions and other factors beyond the control of the Fund, the Fund cannot predict whether its common shares will trade at, below or above net asset value, or below or above the initial offering price for the shares.
Options Risk. A Fund that purchases options, which are a type of derivative, is subject to the risk that gains, if any, realized on the position, will be less than the amount paid as premiums to the writer of the option. A Fund that writes options receives a premium that may be small relative to the loss realized in the event of adverse changes in the value of the underlying instruments. A Fund that writes covered call options gives up the opportunity to profit from any price increase in the underlying security above the option exercise price while the option is in effect. Options may be more volatile than the underlying instruments. In addition, there may at times be an imperfect correlation between the movement in values of options and their underlying securities and there may at times not be a liquid secondary market for certain options.
Prepayment Risk. During periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled, forcing the Fund to reinvest in lower yielding securities. This is known as call or prepayment risk. Debt securities frequently have call features that allow the issuer to repurchase the security prior to its stated maturity. An issuer may redeem an obligation if the issuer can refinance the debt at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer.

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Objective, strategies and risks (unaudited)
Reinvestment Risk. Reinvestment risk is the risk that income from the Fund’s bond portfolio will decline if and when the Fund invests the proceeds from matured, traded or called bonds at market interest rates that are below the portfolio’s current earnings rate. A decline in income could affect the common shares’ market price or their overall returns.
U.S. Government Obligations Risk. U.S. Government obligations may be adversely impacted by changes in interest rates, and securities issued or guaranteed by U.S. Government agencies or government-sponsored entities may not be backed by the full faith and credit of the U.S. Government.

Wells Fargo Income Opportunities Fund  |  17


Portfolio of investments—April 30, 2021

        Shares Value
Common stocks: 2.76%          
Energy: 2.76%          
Energy equipment & services: 1.30%          
Bristow Group Incorporated          273,466 $   7,235,910
Oil, gas & consumable fuels: 1.46%          
Denbury Incorporated          103,310    5,621,097
Whiting Petroleum Corporation           61,847    2,478,209
             8,099,306
Total Common stocks (Cost $10,224,703)           15,335,216
    
    Interest
rate
Maturity
date
Principal  
Corporate bonds and notes: 106.55%          
Communication services: 16.38%          
Diversified telecommunication services: 1.43%          
Cablevision Lightpath LLC 144A   5.63% 9-15-2028 $ 1,665,000    1,706,625
Cablevision Lightpath LLC   3.88 9-15-2027    480,000      473,400
Frontier Communications Corporation 144A   5.88 10-15-2027    510,000      541,875
Level 3 Financing Incorporated 144A   3.63 1-15-2029  2,405,000    2,329,844
Level 3 Financing Incorporated 144A   4.25 7-1-2028  1,250,000    1,259,513
Windstream Corporation 144A   7.75 8-15-2028   1,560,000    1,626,300
             7,937,557
Entertainment: 0.88%          
Live Nation Entertainment Incorporated 144A   3.75 1-15-2028    685,000      682,500
Live Nation Entertainment Incorporated 144A   5.63 3-15-2026    764,000      794,560
Live Nation Entertainment Incorporated 144A   6.50 5-15-2027   3,075,000    3,397,875
             4,874,935
Interactive media & services: 0.45%          
Rackspace Technology Company 144A   5.38 12-1-2028  2,450,000    2,501,156
Media: 12.78%          
Block Communications Incorporated   4.88 3-1-2028    400,000      407,000
CCO Holdings LLC 144A   4.50 8-15-2030  7,150,000    7,274,339
CCO Holdings LLC 144A   4.50 5-1-2032    850,000      858,500
CCO Holdings LLC 144A   5.00 2-1-2028    375,000      391,875
CCO Holdings LLC 144A   5.13 5-1-2027    750,000      784,923
CCO Holdings LLC 144A   5.50 5-1-2026    325,000      335,400
CCO Holdings LLC 144A   5.75 2-15-2026 1,865,000 1,930,275
Cinemark USA Incorporated   4.88 6-1-2023 6,857,000 6,848,086
Cinemark USA Incorporated 144A   5.88 3-15-2026 495,000 512,944
Cinemark USA Incorporated 144A   8.75 5-1-2025 1,110,000 1,208,513
CSC Holdings LLC 144A   4.13 12-1-2030 825,000 820,875
CSC Holdings LLC 144A   4.63 12-1-2030 2,400,000 2,346,000
CSC Holdings LLC 144A   5.38 2-1-2028 1,125,000 1,183,939
CSC Holdings LLC 144A   5.50 5-15-2026 2,425,000 2,493,870
CSC Holdings LLC 144A   7.50 4-1-2028 2,150,000 2,367,688
Diamond Sports Group LLC 144A   5.38 8-15-2026 1,525,000 1,113,250
Diamond Sports Group LLC 144A   6.63 8-15-2027 3,950,000 2,133,000
Gray Television Incorporated 144A   5.88 7-15-2026 525,000 544,688
The accompanying notes are an integral part of these financial statements.

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Portfolio of investments—April 30, 2021

    Interest
rate
Maturity
date
Principal Value
Media (continued)          
Gray Television Incorporated 144A   7.00% 5-15-2027 $   675,000 $      736,594
Gray Television Incorporated 144A   4.75 10-15-2030  1,900,000    1,900,000
Nexstar Broadcasting Incorporated 144A   4.75 11-1-2028  2,460,000    2,506,125
Nexstar Broadcasting Incorporated 144A   5.63 7-15-2027  3,900,000    4,119,375
Nielsen Finance LLC 144A   5.63 10-1-2028  1,330,000    1,418,113
Nielsen Finance LLC 144A   5.88 10-1-2030  5,350,000    5,858,250
Outfront Media Capital Corporation 144A   4.63 3-15-2030  1,600,000    1,584,000
Outfront Media Capital Corporation 144A   5.00 8-15-2027    305,000      314,531
QVC Incorporated   4.75 2-15-2027    400,000      422,000
Salem Media Group Incorporated 144A   6.75 6-1-2024  6,525,000    6,443,438
Scripps Escrow II Incorporated 144A   5.38 1-15-2031  2,325,000    2,356,969
Scripps Escrow II Incorporated 144A   5.88 7-15-2027    400,000      420,888
Scripps Escrow II Incorporated 144A   3.88 1-15-2029    525,000      521,761
The E.W. Scripps Company 144A   5.13 5-15-2025  4,394,000    4,509,518
Townsquare Media Incorporated 144A   6.88 2-1-2026   4,090,000    4,263,825
            70,930,552
Wireless telecommunication services: 0.84%          
Consolidated Communications Holdings Incorporated 144A   6.50 10-1-2028  1,615,000    1,739,920
Sprint Capital Corporation   8.75 3-15-2032   1,975,000    2,927,938
             4,667,858
Consumer discretionary: 16.14%          
Auto components: 2.49%          
Clarios Global LP 144A   6.25 5-15-2026    325,000      344,723
Clarios Global LP 144A   6.75 5-15-2025 200,000 214,750
Clarios Global LP 144A   8.50 5-15-2027 3,885,000 4,195,800
Cooper Tire & Rubber Company   7.63 3-15-2027 5,190,000 6,066,954
Dana Incorporated %%   4.25 9-1-2030 1,390,000 1,403,900
Goodyear Tire & Rubber Company   5.13 11-15-2023 1,475,000 1,475,148
Tenneco Incorporated   5.00 7-15-2026 140,000 135,607
          13,836,882
Automobiles: 0.20%          
Ford Motor Company   9.00 4-22-2025 425,000 519,031
Ford Motor Company   9.63 4-22-2030 425,000 596,063
          1,115,094
Diversified consumer services: 3.62%          
Carriage Services Incorporated 144A%%   4.25 5-15-2029 2,220,000 2,206,125
Carriage Services Incorporated 144A   6.63 6-1-2026 5,380,000 5,665,140
Service Corporation International   7.50 4-1-2027 8,700,000 10,505,250
Service Corporation International   8.00 11-15-2021 1,635,000 1,694,269
          20,070,784
Hotels, restaurants & leisure: 6.08%          
Carnival Corporation 144A   10.50 2-1-2026 3,050,000 3,594,883
Carnival Corporation 144A   5.75 3-1-2027 1,275,000 1,344,335
Carnival Corporation   7.63 3-1-2026 3,798,000 4,158,810
Carnival Corporation 144A   9.88 8-1-2027 1,500,000 1,762,500
Carnival Corporation 144A   11.50 4-1-2023 3,225,000 3,706,170
CCM Merger Incorporated 144A   6.38 5-1-2026 3,610,000 3,772,450
NCL Corporation Limited 144A   5.88 3-15-2026 1,785,000 1,865,325
The accompanying notes are an integral part of these financial statements.

Wells Fargo Income Opportunities Fund  |  19


Portfolio of investments—April 30, 2021

    Interest
rate
Maturity
date
Principal Value
Hotels, restaurants & leisure (continued)          
NCL Corporation Limited 144A   12.25% 5-15-2024 $ 3,215,000 $    3,921,625
Royal Caribbean Cruises Limited 144A   5.50 4-1-2028  3,080,000    3,229,996
Royal Caribbean Cruises Limited 144A   9.13 6-15-2023  3,825,000    4,222,647
Royal Caribbean Cruises Limited 144A   10.88 6-1-2023  1,525,000    1,750,700
Yum! Brands Incorporated 144A   7.75 4-1-2025       400,000      437,000
            33,766,441
Household durables: 0.54%          
WASH Multifamily Acquisition Incorporated 144A   5.75 4-15-2026  2,870,000    2,981,213
Multiline retail: 0.32%          
Macy's Incorporated 144A   8.38 6-15-2025  1,600,000    1,765,168
Specialty retail: 2.61%          
Asbury Automotive Group Incorporated   4.75 3-1-2030  1,069,000    1,117,105
Asbury Automotive Group Incorporated   4.50 3-1-2028  1,162,000    1,196,860
Group 1 Automotive Incorporated 144A   4.00 8-15-2028  1,525,000    1,523,094
Lithia Motors Incorporated 144A   4.38 1-15-2031    520,000      547,300
Lithia Motors Incorporated 144A   4.63 12-15-2027    400,000      420,000
Lithia Motors Incorporated 144A   5.25 8-1-2025  4,200,000    4,336,500
NMG Holding Company Incorporated 144A   7.13 4-1-2026  1,935,000    1,979,273
Rent-A-Center Incorporated 144A   6.38 2-15-2029    515,000      558,507
Sonic Automotive Incorporated   6.13 3-15-2027   2,699,000    2,813,708
            14,492,347
Textiles, apparel & luxury goods: 0.28%          
The William Carter Company 144A   5.50 5-15-2025    400,000      422,732
The William Carter Company 144A   5.63 3-15-2027 1,050,000 1,103,813
          1,526,545
Consumer staples: 1.68%          
Beverages: 0.21%          
Primo Water Holdings Incorporated 144A   5.50 4-1-2025 1,125,000 1,156,185
Food & staples retailing: 0.21%          
PetSmart Incorporated 144A   4.75 2-15-2028 560,000 577,500
PetSmart Incorporated 144A   7.75 2-15-2029 560,000 606,743
          1,184,243
Food products: 1.26%          
CHS Incorporated 144A   6.00 1-15-2029 125,000 131,583
CHS Incorporated 144A   6.88 4-15-2029 3,835,000 4,007,575
Kraft Heinz Foods Company   4.38 6-1-2046 2,645,000 2,834,655
          6,973,813
Energy: 21.06%          
Energy equipment & services: 3.87%          
Bristow Group Incorporated ♦†   6.25 10-15-2022 9,325,000 0
Bristow Group Incorporated   6.88 3-1-2028 4,820,000 4,886,275
Hilcorp Energy Company 144A   5.75 2-1-2029 835,000 849,613
Hilcorp Energy Company 144A   6.00 2-1-2031 835,000 860,050
Hilcorp Energy Company 144A   6.25 11-1-2028 1,450,000 1,505,057
Oceaneering International Incorporated   4.65 11-15-2024 300,000 292,875
The accompanying notes are an integral part of these financial statements.

20  |  Wells Fargo Income Opportunities Fund


Portfolio of investments—April 30, 2021

    Interest
rate
Maturity
date
Principal Value
Energy equipment & services (continued)          
Oceaneering International Incorporated   6.00% 2-1-2028 $ 4,050,000 $    3,957,660
Pattern Energy Operations LP 144A   4.50 8-15-2028  6,750,000    6,834,375
USA Compression Partners LP   6.88 4-1-2026   2,150,000    2,254,684
            21,440,589
Oil, gas & consumable fuels: 17.19%          
Aethon United 144A   8.25 2-15-2026  3,555,000    3,779,214
Antero Resources Corporation   5.00 3-1-2025  4,200,000    4,263,000
Antero Resources Corporation 144A   8.38 7-15-2026    555,000      623,198
Archrock Partners LP 144A   6.25 4-1-2028  1,785,000    1,866,050
Archrock Partners LP 144A   6.88 4-1-2027  1,375,000    1,462,656
Buckeye Partners LP   5.85 11-15-2043  2,375,000    2,337,903
Cheniere Energy Partners LP   4.50 10-1-2029  1,075,000    1,122,031
Cheniere Energy Partners LP   5.63 10-1-2026  1,325,000    1,381,313
DCP Midstream Operating Company   5.13 5-15-2029  5,000,000    5,337,500
Encino Acquisition Partners Company 144A   8.50 5-1-2028  3,940,000    3,860,097
EnLink Midstream LLC   5.38 6-1-2029  5,850,000    5,850,000
EnLink Midstream Partners LP   4.40 4-1-2024    900,000      922,806
EnLink Midstream Partners LP   5.05 4-1-2045  3,350,000    2,755,375
EnLink Midstream Partners LP   5.60 4-1-2044  2,196,000    1,894,050
EnLink Midstream Partners LP 144A   5.63 1-15-2028    525,000      542,719
Enviva Partners LP 144A   6.50 1-15-2026  6,275,000    6,580,906
Harvest Midstream LP 144A   7.50 9-1-2028  1,935,000    2,084,963
Murphy Oil Corporation   5.75 8-15-2025    360,000      368,206
Murphy Oil Corporation   5.88 12-1-2027 400,000 402,000
Murphy Oil Corporation   6.38 7-15-2028 1,665,000 1,689,975
New Fortress Energy Incorporated 144A   6.50 9-30-2026 3,625,000 3,698,696
Occidental Petroleum Corporation   4.63 6-15-2045 4,550,000 4,117,750
Occidental Petroleum Corporation   6.20 3-15-2040 1,425,000 1,514,063
Occidental Petroleum Corporation   6.45 9-15-2036 9,630,000 10,942,088
Occidental Petroleum Corporation   6.60 3-15-2046 1,215,000 1,339,538
Range Resources Corporation 144A   8.25 1-15-2029 555,000 602,047
Range Resources Corporation   9.25 2-1-2026 3,225,000 3,541,308
Rockies Express Pipeline LLC 144A   6.88 4-15-2040 2,000,000 2,147,500
Rockies Express Pipeline LLC 144A   7.50 7-15-2038 1,150,000 1,276,500
Southwestern Energy Company   7.50 4-1-2026 750,000 793,275
Southwestern Energy Company   7.75 10-1-2027 2,650,000 2,848,565
Southwestern Energy Company   8.38 9-15-2028 1,510,000 1,659,067
Tallgrass Energy Partners LP 144A   5.50 9-15-2024 2,786,000 2,838,238
Tallgrass Energy Partners LP 144A   6.00 12-31-2030 3,495,000 3,503,738
Western Midstream Operating LP   5.30 2-1-2030 1,860,000 2,029,725
Western Midstream Operating LP   5.30 3-1-2048 3,181,000 3,260,557
Western Midstream Operating LP   6.50 2-1-2050 150,000 169,724
          95,406,341
Financials: 11.01%          
Capital markets: 0.62%          
Oppenheimer Holdings Incorporated   5.50 10-1-2025 3,320,000 3,444,500
Consumer finance: 5.09%          
FirstCash Incorporated 144A   4.63 9-1-2028 1,230,000 1,263,825
Ford Motor Credit Company LLC   4.00 11-13-2030 910,000 929,338
Ford Motor Credit Company LLC   4.39 1-8-2026 4,200,000 4,483,500
Ford Motor Credit Company LLC   5.11 5-3-2029 5,825,000 6,362,065
The accompanying notes are an integral part of these financial statements.

Wells Fargo Income Opportunities Fund  |  21


Portfolio of investments—April 30, 2021

    Interest
rate
Maturity
date
Principal Value
Consumer finance (continued)          
Ford Motor Credit Company LLC   5.13% 6-16-2025 $   850,000 $      928,540
Hawaiian Brand Intellectual Property Limited 144A   5.75 1-20-2026  6,950,000    7,340,938
Springleaf Finance Corporation   5.38 11-15-2029  1,975,000    2,130,057
Springleaf Finance Corporation   6.63 1-15-2028    350,000      398,125
Springleaf Finance Corporation   7.13 3-15-2026  2,450,000    2,863,438
Springleaf Finance Corporation   8.25 10-1-2023   1,342,000    1,518,138
            28,217,964
Diversified financial services: 0.44%          
LPL Holdings Incorporated   4.63 11-15-2027    575,000      599,438
United Shore Financial Services LLC 144A   5.50 11-15-2025   1,801,000    1,870,789
             2,470,227
Insurance: 1.89%          
Amwins Group Incorporated   7.75 7-1-2026  3,945,000    4,186,631
Broadstreet Partners Incorporated 144A   5.88 4-15-2029  2,140,000    2,172,528
Genworth Mortgage Holding 144A   6.50 8-15-2025  1,155,000    1,254,226
HUB International Limited 144A   7.00 5-1-2026  1,475,000    1,528,203
USI Incorporated 144A   6.88 5-1-2025   1,325,000    1,346,531
            10,488,119
Mortgage REITs: 1.23%          
Blackstone Mortgage Trust Incorporated   4.38 5-5-2022  1,245,000    1,273,760
Starwood Property Trust Incorporated   4.75 3-15-2025  2,135,000    2,223,133
Starwood Property Trust Incorporated   5.00 12-15-2021  1,165,000    1,176,068
Starwood Property Trust Incorporated 144A   5.50 11-1-2023   2,035,000    2,136,750
          6,809,711
Thrifts & mortgage finance: 1.74%          
Ladder Capital Finance Holdings LP 144A   4.25 2-1-2027 575,000 564,518
Ladder Capital Finance Holdings LP 144A   5.25 3-15-2022 625,000 627,344
Ladder Capital Finance Holdings LP 144A   5.25 10-1-2025 4,800,000 4,848,000
United Wholesale Mortgage LLC 144A   5.50 4-15-2029 3,690,000 3,626,458
          9,666,320
Health care: 7.46%          
Health care equipment & supplies: 0.55%          
Surgery Center Holdings Incorporated 144A   6.75 7-1-2025 3,025,000 3,066,594
Health care providers & services: 5.00%          
AdaptHealth LLC   4.63 8-1-2029 720,000 715,975
Air Methods Corporation   8.00 5-15-2025 1,860,000 1,743,722
Centene Corporation 144A   5.38 8-15-2026 350,000 367,150
CHS Incorporated 144A   6.63 2-15-2025 3,380,000 3,561,675
Davita Incorporated 144A   4.63 6-1-2030 1,625,000 1,645,313
Encompass Health Corporation   4.50 2-1-2028 600,000 621,750
Encompass Health Corporation   4.75 2-1-2030 550,000 577,500
Encompass Health Corporation   4.63 4-1-2031 520,000 551,200
HealthSouth Corporation   5.75 9-15-2025 1,725,000 1,783,219
Magellan Health Incorporated   4.90 9-22-2024 990,000 1,079,100
MPT Operating Partnership LP   4.63 8-1-2029 875,000 926,406
MPT Operating Partnership LP   5.00 10-15-2027 2,275,000 2,394,438
MPT Operating Partnership LP   5.25 8-1-2026 3,200,000 3,300,000
The accompanying notes are an integral part of these financial statements.

22  |  Wells Fargo Income Opportunities Fund


Portfolio of investments—April 30, 2021

    Interest
rate
Maturity
date
Principal Value
Health care providers & services (continued)          
Select Medical Corporation 144A   6.25% 8-15-2026 $ 2,625,000 $    2,790,992
Tenet Healthcare Corporation 144A   4.63 6-15-2028    425,000      439,127
Tenet Healthcare Corporation 144A   4.88 1-1-2026  2,950,000    3,065,050
Tenet Healthcare Corporation 144A   5.13 11-1-2027    650,000      681,720
Tenet Healthcare Corporation 144A   6.25 2-1-2027    625,000      655,469
Tenet Healthcare Corporation 144A   7.50 4-1-2025    400,000      431,000
Vizient Incorporated 144A   6.25 5-15-2027       375,000      397,215
            27,728,021
Health care technology: 1.20%          
Change Healthcare Holdings Incorporated 144A   5.75 3-1-2025  6,550,000    6,656,438
Life sciences tools & services: 0.29%          
Ortho-Clinical Diagnostics Incorporated 144A   7.25 2-1-2028    270,000      296,190
Ortho-Clinical Diagnostics Incorporated 144A   7.38 6-1-2025   1,191,000    1,283,303
             1,579,493
Pharmaceuticals: 0.42%          
Bausch Health Companies Incorporated   6.25 2-15-2029  1,300,000    1,374,750
Bausch Health Companies Incorporated 144A   7.00 3-15-2024       935,000      958,375
             2,333,125
Industrials: 15.06%          
Aerospace & defense: 2.14%          
RBS Global & Rexnord LLC 144A   4.88 12-15-2025  1,175,000    1,201,191
Signature Aviation US Holdings Incorporated 144A   4.00 3-1-2028  1,625,000    1,637,188
Signature Aviation US Holdings Incorporated 144A   5.38 5-1-2026  4,350,000    4,447,788
Spirit AeroSystems Holdings Incorporated   4.60 6-15-2028 1,925,000 1,881,688
Spirit AeroSystems Holdings Incorporated 144A   5.50 1-15-2025 910,000 962,325
TransDigm Incorporated 144A   6.25 3-15-2026 1,650,000 1,746,938
          11,877,118
Airlines: 6.56%          
American Airlines Group Incorporated 144A   3.75 3-1-2025 1,740,000 1,529,025
American Airlines Group Incorporated 144A   5.50 4-20-2026 3,750,000 3,937,500
American Airlines Group Incorporated 144A   5.75 4-20-2029 7,025,000 7,527,288
Delta Air Lines Incorporated   3.75 10-28-2029 1,985,000 1,977,103
Delta Air Lines Incorporated 144A   4.75 10-20-2028 8,085,000 8,878,326
Hawaiian Airlines Incorporated   3.90 7-15-2027 1,293,421 1,268,183
Mileage Plus Holdings LLC 144A   6.50 6-20-2027 6,400,000 7,024,000
United Airlines Incorporated 144A   4.63 4-15-2029 2,875,000 2,987,700
United Airlines Pass-Through Trust Certificates Series 2020-1 Class B   4.88 7-15-2027 1,193,715 1,246,601
          36,375,726
Commercial services & supplies: 2.15%          
Corecivic Incorporated   8.25 4-15-2026 3,220,000 3,236,100
Covanta Holding Corporation   5.88 7-1-2025 1,500,000 1,564,125
IAA Spinco Incorporated 144A   5.50 6-15-2027 3,650,000 3,837,063
Plastipak Holdings Incorporated 144A   6.25 10-15-2025 3,225,000 3,313,688
          11,950,976
The accompanying notes are an integral part of these financial statements.

Wells Fargo Income Opportunities Fund  |  23


Portfolio of investments—April 30, 2021

    Interest
rate
Maturity
date
Principal Value
Electrical equipment: 0.20%          
Sensata Technologies BV 144A   4.00% 4-15-2029 $ 1,105,000 $   1,111,851
Machinery: 1.61%          
Meritor Incorporated 144A   4.50 12-15-2028  1,765,000    1,787,063
Stevens Holding Company Incorporated 144A   6.13 10-1-2026  3,600,000    3,870,000
Werner FinCo LP 144A   8.75 7-15-2025   3,125,000    3,292,969
             8,950,032
Road & rail: 0.90%          
Uber Technologies Incorporated 144A   8.00 11-1-2026  4,600,000    4,978,120
Trading companies & distributors: 1.50%          
Fortress Transportation & Infrastructure Investors LLC 144A   5.50 5-1-2028  3,880,000    4,020,650
Fortress Transportation & Infrastructure Investors LLC 144A   6.50 10-1-2025  3,660,000    3,806,400
Fortress Transportation & Infrastructure Investors LLC 144A   9.75 8-1-2027       443,000      511,665
             8,338,715
Information technology: 6.89%          
Communications equipment: 0.88%          
CommScope Incorporated 144A   8.25 3-1-2027  3,220,000    3,449,425
CommScope Technologies Finance LLC 144A   6.00 6-15-2025   1,388,000    1,412,290
             4,861,715
IT services: 1.62%          
Cardtronics Incorporated   5.50 5-1-2025  5,440,000    5,589,600
Flexential Intermediate Corporation 144A   11.25 8-1-2024  1,510,000    1,630,800
Sabre GLBL Incorporated 144A   9.25 4-15-2025   1,500,000    1,792,500
             9,012,900
Software: 1.96%          
Fair Isaac Corporation 144A   5.25 5-15-2026 2,450,000 2,719,500
IQVIA Incorporated 144A   5.00 5-15-2027 725,000 758,531
Logan Merger Sub Incorporated 144A   5.50 9-1-2027 850,000 885,921
MPH Acquisition Holdings LLC 144A   5.75 11-1-2028 3,680,000 3,628,811
NortonLifeLock Incorporated 144A   5.00 4-15-2025 1,150,000 1,164,858
SS&C Technologies Incorporated 144A   5.50 9-30-2027 1,625,000 1,726,359
          10,883,980
Technology hardware, storage & peripherals: 2.43%          
Dell International LLC 144A   7.13 6-15-2024 10,175,000 10,448,708
NCR Corporation 144A   5.13 4-15-2029 595,000 612,106
NCR Corporation 144A   6.13 9-1-2029 1,825,000 1,984,688
NCR Corporation 144A   8.13 4-15-2025 400,000 436,000
          13,481,502
Materials: 4.82%          
Containers & packaging: 2.47%          
Berry Global Incorporated 144A   5.63 7-15-2027 350,000 372,750
Crown Cork & Seal Company Incorporated   7.38 12-15-2026 3,475,000 4,222,125
Flex Acquisition Company Incorporated 144A   6.88 1-15-2025 2,700,000 2,743,875
The accompanying notes are an integral part of these financial statements.

24  |  Wells Fargo Income Opportunities Fund


Portfolio of investments—April 30, 2021

    Interest
rate
Maturity
date
Principal Value
Containers & packaging (continued)          
Flex Acquisition Company Incorporated 144A   7.88% 7-15-2026 $ 1,495,000 $    1,564,144
Owens-Brockway Packaging Incorporated 144A   5.88 8-15-2023  1,300,000    1,407,250
Owens-Brockway Packaging Incorporated 144A   6.38 8-15-2025    750,000      831,563
Sealed Air Corporation 144A   5.13 12-1-2024   2,350,000    2,558,563
            13,700,270
Metals & mining: 1.36%          
Arches Buyer Incorporated 144A   4.25 6-1-2028    465,000      463,256
Arches Buyer Incorporated   6.13 12-1-2028  1,270,000    1,301,750
Cleveland Cliffs Incorporated 144A   4.88 3-1-2031    685,000      696,988
Cleveland Cliffs Incorporated   5.88 6-1-2027  1,530,000    1,604,588
Cleveland Cliffs Incorporated 144A   9.88 10-17-2025  1,036,000    1,216,005
Indalex Holdings Corporation ♦†   11.50 2-1-2021  5,646,283            0
Kaiser Aluminum Corporation 144A   4.63 3-1-2028    800,000      822,000
Kaiser Aluminum Corporation 144A   6.50 5-1-2025    550,000      583,000
Novelis Corporation 144A   5.88 9-30-2026       850,000      886,712
             7,574,299
Paper & forest products: 0.99%          
Clearwater Paper Corporation 144A   5.38 2-1-2025    798,000      845,880
Clearwater Paper Corporation 144A   4.75 8-15-2028    665,000      670,034
Vertical US Newco Incorporated 144A   5.25 7-15-2027   3,775,000    3,951,972
             5,467,886
Real estate: 1.59%          
Equity REITs: 1.59%          
Service Properties Trust Company   3.95 1-15-2028 1,860,000 1,720,500
Service Properties Trust Company   4.38 2-15-2030 1,425,000 1,325,250
Service Properties Trust Company   4.75 10-1-2026 675,000 658,125
Service Properties Trust Company   4.95 2-15-2027 1,850,000 1,817,681
Service Properties Trust Company   5.25 2-15-2026 1,050,000 1,051,491
Service Properties Trust Company   7.50 9-15-2025 550,000 623,376
The Geo Group Incorporated   5.88 10-15-2024 2,050,000 1,646,253
          8,842,676
Utilities: 4.46%          
Electric utilities: 1.47%          
NextEra Energy Operating Partners LP 144A   4.25 7-15-2024 2,150,000 2,279,000
NextEra Energy Operating Partners LP 144A   4.25 9-15-2024 32,000 33,800
NextEra Energy Operating Partners LP 144A   4.50 9-15-2027 3,450,000 3,724,344
PG&E Corporation   5.00 7-1-2028 475,000 497,563
PG&E Corporation   5.25 7-1-2030 1,525,000 1,627,938
          8,162,645
Independent power & renewable electricity producers: 2.99%          
NSG Holdings LLC 144A   7.75 12-15-2025 5,448,048 5,802,171
TerraForm Power Operating LLC 144A   4.25 1-31-2023 5,225,000 5,362,156
TerraForm Power Operating LLC 144A   4.75 1-15-2030 1,000,000 1,041,250
The accompanying notes are an integral part of these financial statements.

Wells Fargo Income Opportunities Fund  |  25


Portfolio of investments—April 30, 2021

    Interest
rate
Maturity
date
Principal Value
Independent power & renewable electricity producers
(continued)
         
TerraForm Power Operating LLC 144A   5.00% 1-31-2028 $ 2,250,000 $    2,413,125
Vistra Operations Company LLC 144A   5.63 2-15-2027   1,900,000    1,976,000
            16,594,702
Total Corporate bonds and notes (Cost $559,613,872)          591,253,328
Loans: 12.76%          
Communication services: 1.21%          
Diversified telecommunication services: 0.09%          
Frontier Communications Corporation (1 Month LIBOR +3.75%)<±   4.25 10-8-2027    240,832      239,827
Frontier Communications Corporation (1 Month LIBOR +3.75%)±   4.50 10-8-2027    269,168      268,046
Intelsat Jackson Holdings SA 2020 Debtor-in-Possession Term Loan (1 Month LIBOR +5.50%)±   6.50 7-13-2022         10,085       10,186
               518,059
Media: 0.93%          
Clear Channel Outdoor Holdings (1 Month LIBOR +3.50%)±   3.69 8-21-2026  2,403,899    2,326,445
Diamond Sports Group LLC (1 Month LIBOR +3.25%)±   3.37 8-24-2026    384,025      273,618
Hubbard Radio LLC (3 Month LIBOR +4.25%)<±   5.25 3-28-2025   2,567,956    2,533,725
             5,133,788
Wireless telecommunication services: 0.19%          
Consolidated Communications Holdings Incorporated (1 Month LIBOR +3.50%)<±   4.25 10-2-2027  1,047,000    1,044,383
Consumer discretionary: 1.00%          
Distributors: 0.11%          
Spin Holdco Incorporated (1 Month LIBOR +4.00%)±   4.75 3-1-2028    585,000      582,256
Hotels, restaurants & leisure: 0.22%          
Carnival Corporation (1 Month LIBOR +7.50%)±   8.50 6-30-2025    545,875      561,569
CCM Merger Incorporated (1 Month LIBOR +3.75%)±   4.50 11-4-2025 662,582 662,999
          1,224,568
Specialty retail: 0.67%          
Great Outdoors Group LLC (1 Month LIBOR +4.25%)<±   5.00 3-6-2028 2,329,175 2,337,187
Rent-A-Center Incorporated (3 Month LIBOR +4.00%)±   4.75 2-17-2028 1,375,000 1,383,016
          3,720,203
Consumer staples: 0.21%          
Food & staples retailing: 0.21%          
PetSmart Incorporated (1 Month LIBOR +3.75%)±   4.50 2-12-2028 1,190,000 1,192,380
Energy: 0.33%          
Oil, gas & consumable fuels: 0.33%          
AL NGPL Holdings LLC (1 Month LIBOR +3.75%)<±   4.75 4-9-2028 1,830,000 1,828,865
The accompanying notes are an integral part of these financial statements.

26  |  Wells Fargo Income Opportunities Fund


Portfolio of investments—April 30, 2021

    Interest
rate
Maturity
date
Principal Value
Financials: 2.97%          
Capital markets: 0.56%          
Nexus Buyer LLC (1 Month LIBOR +3.75%)<±   3.86% 11-9-2026 $ 1,656,556 $    1,647,926
VFH Parent LLC (1 Month LIBOR +3.00%)±   3.12 3-1-2026   1,477,564    1,473,559
             3,121,485
Diversified financial services: 2.01%          
Mallinckrodt International Finance SA (3 Month LIBOR +4.75%)<±   3.50 9-24-2024  3,663,165    3,550,968
Resolute Investment Managers Incorporated (1 Month LIBOR +3.75%)<±   4.75 4-30-2024    563,456      562,752
Resolute Investment Managers Incorporated (1 Month LIBOR +8.00%)‡±   9.00 4-30-2025  2,110,000    2,099,450
Russell Investments US Institutional Holdco Incorporated (1 Month LIBOR +3.00%)<±   4.00 5-30-2025  2,780,000    2,748,725
Stonepeak Lonestar Holdings LLC (1 Month LIBOR +4.50%)±   4.69 10-19-2026   2,192,419    2,193,975
            11,155,870
Insurance: 0.40%          
HUB International Limited (1 Month LIBOR +3.25%)±   4.00 4-25-2025  1,691,261    1,688,623
USI Incorporated (1 Month LIBOR +3.25%)±   3.45 12-2-2026       532,654      527,423
             2,216,046
Health care: 1.24%          
Health care equipment & supplies: 0.40%          
Surgery Center Holdings Incorporated (3 Month LIBOR +3.25%)<±   4.25 9-3-2024  2,239,199    2,229,750
Health care providers & services: 0.58%          
Medrisk Incorporated (1 Month LIBOR +3.75%)<±   4.50 4-1-2028    775,000      770,800
National Mentor Holdings Incorporated (1 Month LIBOR +3.75%)±   1.88 3-2-2028    233,790      233,400
National Mentor Holdings Incorporated (1 Month LIBOR +3.75%)±   4.50 2-18-2028  2,125,364    2,121,815
National Mentor Holdings Incorporated (1 Month LIBOR +3.75%)±   4.50 2-18-2028         70,845       70,727
          3,196,742
Health care technology: 0.26%          
Project Ruby Ultimate Parent Corporation (1 Month LIBOR +3.25%)±   4.00 3-3-2028 1,470,000 1,458,975
Industrials: 2.77%          
Airlines: 1.59%          
JetBlue Airways Corporation (1 Month LIBOR +5.25%)<±   6.25 6-17-2024 2,961,538 3,037,680
Mileage Plus Holdings LLC (1 Month LIBOR +5.25%)±   6.25 6-21-2027 4,055,000 4,324,374
United Airlines Incorporated (3 Month LIBOR +3.75%)<±   4.50 4-13-2028 930,000 940,295
WestJet Airlines Limited (3 Month LIBOR +3.00%)±   4.00 12-11-2026 518,687 501,020
          8,803,369
Industrial conglomerates: 0.51%          
Werner Finco LP (3 Month LIBOR +4.00%)‡±   5.00 7-24-2024 2,827,674 2,813,536
The accompanying notes are an integral part of these financial statements.

Wells Fargo Income Opportunities Fund  |  27


Portfolio of investments—April 30, 2021

    Interest
rate
Maturity
date
Principal Value
Machinery: 0.12%          
Alliance Laundry Systems LLC (1 Month LIBOR +3.50%)±   4.25% 10-8-2027 $   663,338 $      662,853
Professional services: 0.29%          
The Dun & Bradstreet Corporation (1 Month LIBOR +3.25%)±   3.36 2-6-2026  1,651,690    1,641,879
Road & rail: 0.26%          
Uber Technologies Incorporated (1 Month LIBOR +3.50%)±   3.61 4-4-2025  1,436,308    1,434,254
Information technology: 1.67%          
IT services: 1.09%          
Fiserv Investment Solutions Incorporated (1 Month LIBOR +4.00%)±   4.19 2-18-2027    719,873      720,176
Flexential Intermediate Corporation (3 Month LIBOR +3.50%)±   3.70 8-1-2024    494,872      459,083
Flexential Intermediate Corporation (3 Month LIBOR +7.25%)±   7.43 8-1-2025  3,125,000    2,699,875
Sabre GLBL Incorporated (1 Month LIBOR +4.00%)<±   4.75 12-17-2027   2,159,588    2,176,130
             6,055,264
Software: 0.58%          
Emerald Topco Incorporated (1 Month LIBOR +3.50%)±   3.61 7-24-2026  2,117,750    2,097,102
I-Logic Technologies Bidco Limited (1 Month LIBOR +4.00%)±   4.50 2-16-2028   1,110,000    1,110,000
             3,207,102
Materials: 0.72%          
Containers & packaging: 0.37%          
Flex Acquisition Company Incorporated (1 Month LIBOR +3.50%)±   4.00 2-23-2028  1,614,000    1,595,617
Reynolds Group Holdings Incorporated (1 Month LIBOR +3.25%)±   2.86 2-5-2023       446,261      445,083
             2,040,700
Paper & forest products: 0.35%          
Clearwater Paper Corporation (1 Month LIBOR +3.00%)‡±   3.13 7-26-2026    204,646      204,646
Vertical US Newco Incorporated (1 Month LIBOR +4.25%)±   4.48 7-30-2027 1,761,161 1,763,363
          1,968,009
Utilities: 0.64%          
Electric utilities: 0.64%          
ExGen Renewables IV LLC (1 Month LIBOR +2.75%)±   3.75 12-15-2027 3,546,113 3,545,226
Total Loans (Cost $69,681,627)         70,795,562
    
The accompanying notes are an integral part of these financial statements.

28  |  Wells Fargo Income Opportunities Fund


Portfolio of investments—April 30, 2021

      Expiration
date
Shares Value
Warrants: 0.10%          
Energy: 0.10%          
Oil, gas & consumable fuels: 0.10%          
Denbury Incorporated     9-18-2025     19,979 $     543,229
Total Warrants (Cost $314,574)              543,229
    
    Interest
rate
Maturity
date
Principal  
Yankee corporate bonds and notes: 9.67%          
Communication services: 2.28%          
Diversified telecommunication services: 0.98%          
Intelsat Jackson Holdings SA   5.50% 8-1-2023 $ 8,490,000    5,194,904
Intelsat Jackson Holdings SA 144A   8.00 2-15-2024       225,000      232,594