Edgar Filing: WELLS FARGO ADVANTAGE MULTI-SECTOR INCOME FUND

Form N-CSR

LOGO

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-21331

Wells Fargo Advantage Multi-Sector Income Fund

(Exact name of registrant as specified in charter)

525 Market St., San Francisco, CA 94105

(Address of principal executive offices) (Zip code)

C. David Messman

Wells Fargo Funds Management, LLC

525 Market St., San Francisco, CA 94105

(Name and address of agent for service)

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

Date of fiscal year end: October 31

Date of reporting period: October 31, 2013

ITEM 1.

REPORT TO STOCKHOLDERS

LOGO

Wells Fargo Advantage

Multi-Sector Income Fund

LOGO

Annual Report

October 31, 2013

LOGO

This closed-end fund is no longer offered as an initial public offering and is only offered through broker/dealers on the secondary market. A closed-end fund is not required to buy its shares back from investors upon request.

Reduce clutter. Save trees.

Contents


Letter to shareholders			2

Performance highlights			4

Summary portfolio of investments			7

Financial statements
Statement of assets and liabilities			17
Statement of operations			18
Statement of changes in net assets			19
Statement of cash flows			20
Financial highlights			21

Notes to financial statements			22

Report of independent registered public accounting firm			28

Other information			29

Automatic dividend reinvestment plan			32

List of abbreviations			33

The views expressed and any forward-looking statements are as of October 31, 2013, unless otherwise noted, and are those of the Fund managers and/or Wells Fargo Funds Management, LLC. Discussions of individual securities, or the markets generally, or any Wells Fargo Advantage Fund are not intended as individual recommendations. Future events or results may vary significantly from those expressed in any forward-looking statements; the views expressed are subject to change at any time in response to changing circumstances in the market. Wells Fargo Funds Management, LLC and the Fund disclaim any obligation to publicly update or revise any views expressed or forward-looking statements.

NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE


2		Wells Fargo Advantage Multi-Sector Income Fund		Letter to shareholders (unaudited)

LOGO

Karla M. Rabusch

President

Wells Fargo Advantage Funds

Fixed-income markets shifted significantly during the period as economic optimism surged in the U.S. in the opening months of 2013, spurring a rally in equities but also a rise in U.S. Treasury yields.

Dear Valued Shareholder:

We are pleased to offer you this annual report for the Wells Fargo Advantage Multi-Sector Income Fund for the 12-month period that ended October 31, 2013. Fixed-income markets shifted significantly during the period as economic optimism surged in the U.S. in the opening months of 2013, spurring a rally in equities but also a rise in U.S. Treasury yields. Global bond markets largely followed suit with the trends in the U.S. credit markets. Most investment-grade bond sectors experienced price declines as U.S. Treasuries rallied and yields rose during much of 2013. Below-investment-grade securities tended to perform better as their higher-yield spreads seemed to cushion some of the yield increases from the Treasury markets and then rallied later in the period. Emerging markets sovereign debt, however, experienced significant volatility and generally underperformed. Structured products generally protected their pricing better, particularly U.S. commercial mortgage-backed securities. But, globally, high-yield corporate securities performed better than investment-grade sectors over the full breadth of the period, generating positive returns despite significant price corrections in June 2013.

The period began on the heels of strengthening confidence in the credit markets.

In November and December 2012, most investment-grade sectors began to throttle down from a credit rally that lasted through much of September and October 2012. U.S. Treasuries and treasury inflation-protected securities rallied in November 2012 along with their global sovereign equivalents, outperforming global credit sectors, due to a brief flare-up in risk aversion from the deepening recessionary conditions in the eurozone. However, in December 2012, U.S. Treasury yields began to reverse course, shifting higher on growing optimism for economic expansion in the U.S. and appreciating equity values. Most investment-grade credit tiers also saw yields move higher in tandem, resulting in a broad but modest decline in many investment-grade security prices. High-yield securities continued to perform positively during these months, benefiting from sustained investor appetite for higher yield and growing confidence in corporate earnings.

The return of economic optimism in 2013 led to declines in bond prices as yields rose higher.

In the opening months of 2013, U.S. Treasury yields began to once again rise higher on optimistic expectations for a strengthening U.S. economy. Consequently, fixed-income security yields shifted higher and prices declined across much of the U.S. investment-grade bond sectors. Global trends ran a similar course across the largest world economies. U.S. Treasury prices significantly declined in January 2013, most notably in the longer-maturity ranges, as investors began to reprice bond yields for potential interest-rate increases in upcoming years.

In February and March 2013, investment-grade fixed-income markets rebounded when equity market exuberance was reined in by some sobering signs of caution from mixed economic indicators. Investors again returned to the U.S. Treasury market, driving yields lower and bond prices higher. These appreciating trends strengthened during the volatile month of April 2013, which was rattled by geopolitical events, domestic terrorism in Boston, and uncertain global economic conditions. U.S. Treasury prices increased sharply, temporarily erasing all of the price losses endured in January 2013 and, in fact, crossing over into positive gains.

Unfortunately for the core bond investment-grade markets, this recovery in bond prices only proved temporary. The month of May 2013 unleashed a massive rally in the U.S. equity markets; consequently, U.S. Treasury prices declined again, while investment-grade corporate bonds and structured products correspondingly also


Letter to shareholders (unaudited)		Wells Fargo Advantage Multi-Sector Income Fund			3

declined in price. These market moves resulted in the largest monthly losses across the investment-grade bond markets in nearly five years.

The depreciating trends for bonds deepened in mid-June 2013 on comments from Federal Reserve (Fed) Chairman Bernanke that tapering of the Fed’s bond-buying programs may begin later in the year and that the programs may end completely around mid-2014. For the last two weeks of June 2013, that debate appeared to play out daily, as volatility buffeted both the equity and bond markets, finally capitulating to yet another sustained rally in equities and a modest retreat in bond prices. Both U.S. investment-grade bonds and U.S. high-yield bonds posted their worst monthly returns of the year in June 2013—investment-grade securities had their largest quarterly decline in nine years during the second quarter.

In July and August 2013, equity exuberance quieted a bit, and fixed-income markets stabilized. Returns were more mixed, with slightly negative returns in the highest-quality securities to modestly positive returns in the lower-rated credit tiers. In September and October 2013, investment-grade and high-yield bond markets began generating positive returns yet again, as the Fed backtracked on its intentions to taper quantitative easing, postponing it until 2014 at the earliest. Bond markets rallied on the news through the end of the period.

On the whole, the declines in bond prices during May, June, and August 2013 culminated in slightly negative returns across much of the global investment-grade markets during the full period. Global high-yield markets performed significantly better and generated positive returns for the full 12-month period. Thus, the theme for the period was a persistent increase in U.S. Treasury yields that pressured fixed-income security prices before relaxing in September and October 2013. Investment-grade securities generally declined, while high-yield securities benefited from yield cushioning and a stronger investor appetite for equity-correlated returns.

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

Periods of uncertainty can present challenges, but experience has taught us that maintaining long-term investment goals can be an effective way to plan for the future. Although diversification cannot guarantee an investment profit or prevent losses, we believe it can be an effective way to manage investment risk and potentially smooth out overall portfolio performance. We encourage investors to know their investments and to understand that appropriate levels of risk-taking may unlock opportunities.

Thank you for choosing to invest with Wells Fargo Advantage Funds. We appreciate your confidence in us and remain committed to helping you meet your financial needs. For current information about your fund investments, contact your investment professional, visit our website at wellsfargoadvantagefunds.com, or call us directly at 1-800-222-8222. We are available 24 hours a day, 7 days a week.

Sincerely,

LOGO

Karla M. Rabusch

President

Wells Fargo Advantage Funds

The theme for the period was a persistent increase in U.S. Treasury yields that pressured fixed-income security prices before relaxing in September and October 2013. Investment-grade securities generally declined, while high-yield securities benefited from yield cushioning and a stronger investor appetite for equity-correlated returns.


4		Wells Fargo Advantage Multi-Sector Income Fund		Performance highlights (unaudited)

Investment objective

The Fund seeks a high level of current income consistent with limiting its overall exposure to domestic interest-rate risk.

Adviser

Wells Fargo Funds Management, LLC

Subadvisers

First International Advisors, LLC

Wells Capital Management Incorporated

Portfolio managers

Michael Bray, CFA

Christopher Y. Kauffman, CFA

Michael Lee

Niklas Nordenfelt, CFA

Anthony Norris

Alex Perrin

Janet S. Rilling, CFA, CPA

Phillip Susser

Christopher Wightman

Peter Wilson

Average annual total returns¹ (%) as of October 31, 2013


	1 Year			5 Year		10 Year
Based on market value		(5.44	)		16.08		7.51
Based on net asset value (NAV) per share		4.21			15.66		8.16

Figures quoted represent past performance, which is no guarantee of future results, and do not reflect taxes that a shareholder may pay on fund distributions or the sales of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted, which assumes the reinvestment of dividends and capital gains. Performance figures of the Fund do not reflect brokerage commissions that a shareholder would pay on the purchase and sale of shares. If taxes and such brokerage commissions had been reflected, performance would have been lower. To obtain performance information current to the most recent month-end, please call 1-800-222-8222.

The Fund’s gross and net expense ratios for the year ended October 31, 2013, were 1.24% and 1.24%, respectively, which includes 0.07% of interest expense.


Comparison of NAV vs. market value²

LOGO

The Fund is leveraged through a secured debt borrowing facility and also may incur leverage by issuing preferred shares in the future. The use of leverage results in certain risks including, among others, the likelihood of greater volatility of net asset value and the market price of common shares. Foreign investments are especially volatile and can rise or fall dramatically due to differences in the political and economic conditions of the host country. These risks are generally intensified in emerging markets. Derivatives involve 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 to closely track. Bond values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. In general, when interest rates rise, bond values fall and investors may lose principal value. High-yield securities have a greater risk of default and tend to be more volatile than higher-rated debt securities. This Fund is exposed to mortgage- and asset-backed securities risk.

Total returns based on market value are calculated assuming a purchase of common stock on the first day and sale on the last day of the period reported. Total returns based on NAV are calculated based on the NAV at the beginning of the period and end of 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.	This chart does not reflect any brokerage commissions on the purchase and sale of the Fund’s common stock. Dividends and distributions have the effect of reducing the Fund’s NAV.


Performance highlights (unaudited)		Wells Fargo Advantage Multi-Sector Income Fund			5

MANAGERS’ DISCUSSION

The Fund’s return based on market value was (5.44)% during the 12 months ended October 31, 2013. During the same period, the Fund’s return based on NAV was 4.21%.

Overview

The U.S. economy on a relative basis has managed to retain some growth, but growth remains low by historical standards and has disappointed somewhat from optimistic forecasts earlier in the year—so much so that the Federal Reserve (Fed) reneged on intentions to reduce levels of quantitative easing (QE).

Eurozone problems have subsided with action taken by European authorities who displayed a firm commitment to supporting the member countries. Yields on bonds from the European periphery countries declined and spreads in Germany narrowed. However, the eurozone economy continued to struggle. Despite a slight improvement in growth, the inflation picture is one of a region sliding into deflation. In Japan, stimulus measures combined with currency weakness have contributed to improved growth and higher inflation. Growth and inflation in emerging markets continue to fall, leading central banks to ease and provide a healthy backdrop for fixed-income investment.

In the U.S., fixed-income markets generally struggled as Treasury yields rose in anticipation of a reduction in the extraordinarily loose Fed policies. Expectations that tapering in the Fed’s monthly $85 billion asset purchase program would cause rates to rise led to investors selling rate-sensitive bonds. The high-yield market was initially weak. Ultimately, the Fed surprised the markets by postponing the tapering, resulting in a strong rally across all asset classes, including high-yield bonds in the last few months of the period. The continuation of a low-interest-rate environment spurred investor confidence and provided support to the high-yield market.

In the U.S. investment-grade corporate and mortgage-backed markets, low economic growth continued to prove favorable as valuations were supported by large corporate cash balances and strong corporate profits.


Ten largest holdings³ (%) as of October 31, 2013
Poland, 4.00%, 10-25-2023		2.03
Brazil, 10.00%, 1-1-2017		2.00
Texas Competitive Electric Holdings LLC, 3.70%, 10-10-2014		1.96
Sprint Capital Corporation, 6.88%, 11-15-2028		1.88
Hungary, 6.75%, 11-24-2017		1.71
Russia, 7.60%, 7-20-2022		1.66
Dell Incorporated, 0.00%, 4-30-2020		1.63
Indonesia, 7.38%, 9-15-2016		1.57
Mexico, 7.25%, 12-15-2016		1.56
Thailand, 3.25%, 6-16-2017		1.52

Positive contributors to performance

In the international sleeve, positioning in Korea, Russia, Malaysia, Thailand, Indonesia, and Romania contributed to performance. Currency allocations to the Australian dollar, New Zealand dollar, South African rand, and Indonesian rupiah also contributed. In the U.S. high-yield allocation, a number of well-performing specific securities, and a large allocation to the information technology sector aided performance. In the investment-grade U.S. corporate and mortgage-related sleeve, allocations to commercial mortgage-backed securities

(CMBS) were significant contributors to performance. Specific residential mortgage-backed securities (RMBS) also contributed to performance.

Detractors from performance

In the international sleeve, positioning in Brazil, Australia, New Zealand, and Turkey detracted modestly from performance, with the global bonds of Brazil being negatively affected by the removal of a tax levied on investors purchasing domestic bonds. Positioning in the Thai baht, Brazilian real, and Russian ruble detracted slightly. In the U.S. high-yield allocation, the Fund continued to be positioned conservatively with less higher-yielding and more higher-quality issues than the


Credit quality⁴ as of October 31, 2013

broad high-yield market, which detracted from performance as lower-quality securities outperformed higher-quality securities. In addition, Fund holdings within the pipelines and electric utilities sectors detracted from performance due to the impact from low natural gas prices. In the U.S. investment-grade sleeve, asset-backed securities detracted from performance.


6		Wells Fargo Advantage Multi-Sector Income Fund		Performance highlights (unaudited)

Management outlook

In the global bond markets, we continue to question where sustainable growth can emerge from the developed world. Global growth will continue to be hampered by debt levels that have been rising sharply since 2008. Governments will face the constant battle between growth and deficit reduction. We continue to favor the more dynamic, less debt-burdened economies that still provide higher yields, with diversified exposures to the currencies of smaller economies. Also, allocations to the sovereign markets in both Italy and Spain have added value as eurozone worries have subsided. Emerging markets were heavily affected by concerns over Fed tapering of QE, although the fundamentals remain sound.

In the U.S. high-yield market, the Fund’s focus is on bottom-up security selection of bonds issued by companies with high intrinsic value, which, in our view, helps limit downside risk. Much of the high-yield market performance has been driven by the extraordinarily low interest rates, which allow highly indebted companies to more easily make interest payments and refinance debt. The Fund continues to avoid companies that rely solely on such conditions to persist. As a result of the strategy of avoiding uncompensated risk, the Fund maintains its lower-volatility profile. We believe high-yield default rates may remain well below historical averages and high yield may continue to outperform rate-sensitive fixed-income markets.

In the U.S. investment-grade markets, we have seen an increase in corporate leverage due to low interest rates and continue to view the low-growth environment as favorable for credit valuations. We increased our weighting to financial institutions due to improved operating performance, better capital ratios, and limited exposure to event risk. We also expect the earnings of life insurance companies and banks to benefit from increasing interest rates. In structured products, we remained focused on CMBS investment-grade subordinate issues with higher-quality collateral. Non-agency residential MBS have also benefited from improving fundamentals with strength in home appreciation and declining levels of borrower delinquencies and foreclosures.


Effective maturity distribution⁵ as of October 31, 2013


Country allocation⁵ as of October 31, 2013

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

Credit quality is subject to change and is calculated based on the total market value of bonds held by the Fund. The ratings indicated are from Standard & Poor’s, Moody’s Investors Service, and/or Fitch Ratings Ltd. Credit Quality Ratings. Credit quality ratings apply to the underlying holdings of the Fund and not the Fund itself. Standard & Poor’s rates the creditworthiness of bonds on a scale of AAA (highest) to D (lowest). Ratings from A to CCC may be modified by the addition of a plus (+) or minus (–) sign to show relative standing within the rating categories. Standard & Poor’s rates the creditworthiness of short-term notes from SP-1 (highest) to SP-3 (lowest). Moody’s rates the creditworthiness of bonds on a scale of Aaa (highest) to C (lowest). Ratings Aa to B may be modified by the addition of a number 1 (highest) to 3 (lowest) to show relative standing within the ratings categories. Moody’s rates the creditworthiness of short-term U.S. tax-exempt municipal securities from MIG 1/VMIG 1 (highest) to SG (lowest). Fitch rates the creditworthiness of bonds on a scale of AAA (highest) to D (lowest). If a security was rated by all three rating agencies, the middle rating was utilized. If rated by two of three rating agencies, the lower rating was utilized and if rated by one of the agencies that rating was utilized. We generally define higher quality bonds as bonds that have a rating of BBB/Baa and above and lower quality bonds as bonds with a rating below BBB/Baa.

5.	Percentages are subject to change and are calculated based on the total long-term investments of the Fund.


Summary portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			7

The summary portfolio of investments shows the 50 largest portfolio holdings in unaffiliated issuers and any holdings exceeding 1% of the total net assets as of the report date. The remaining securities held are grouped as “Other securities” in each category. You can request a complete schedule of portfolio holdings as of the report date, free of charge, by accessing the following website:

http://a584.g.akamai.net/f/584/1326/1d/www.wellsfargoadvantagefunds.com/pdf/ann/holdings/multisectorincome.pdf or by calling Wells Fargo Advantage Funds at 1-800-222-8222. The complete schedule, filed on Form N-CSR, is also available on the SEC’s website at sec.gov.


Security name	Interest rate			Maturity date		Principal		Value		Percent of net assets


Agency Securities: 2.47%
FHLMC		0.57-8.50	%		4-25-2020 to 7-25-2048	$	29,094,839	$	13,076,972		1.90	%
Other securities									3,958,097		0.57

Total Agency Securities (Cost $16,418,397)									17,035,069		2.47


Asset-Backed Securities: 0.11%
Other securities									750,628		0.11


Total Asset-Backed Securities (Cost $752,616)									750,628		0.11


Common Stocks: 0.10%

Consumer Discretionary: 0.00%

Hotels, Restaurants & Leisure: 0.00%
Other securities									0		0.00


Telecommunication Services: 0.10%

Diversified Telecommunication Services: 0.10%
Other securities									657,928		0.10


Total Common Stocks (Cost $1,617,838)									657,928		0.10


Corporate Bonds and Notes: 62.97%

Consumer Discretionary: 13.93%

Auto Components: 1.31%
Allison Transmission Incorporated 144A		7.13			5-15-2019		3,790,000		4,083,725		0.59
Other securities									4,981,068		0.72

									9,064,793		1.31


Diversified Consumer Services: 1.11%
Service Corporation International		6.75-8.00			4-1-2016 to 4-1-2027		6,683,000		7,324,230		1.06
Other securities									359,325		0.05

									7,683,555		1.11


Hotels, Restaurants & Leisure: 4.39%
CCM Merger Incorporated 144A		9.13			5-1-2019		6,270,000		6,646,200		0.96
CityCenter Holdings LLC (PIK at 11.50%) ¥		10.75			1-15-2017		3,636,822		3,898,673		0.57
DineEquity Incorporated		9.50			10-30-2018		3,475,000		3,865,938		0.56
Greektown Superholdings Incorporated Series A		13.00			7-1-2015		7,850,000		8,193,438		1.19
Other securities									7,640,226		1.11

									30,244,475		4.39


Household Durables: 0.10%
Other securities									687,313		0.10

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


8		Wells Fargo Advantage Multi-Sector Income Fund		Summary portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value		Percent of net assets


Internet & Catalog Retail: 0.12%
Other securities								$	795,830		0.12	%


Media: 5.43%
Gray Television Incorporated		7.50	%		10-1-2020	$	4,200,000		4,399,500		0.64
Local TV Finance LLC 144A		9.25			6-15-2015		4,775,000		4,822,750		0.70
Other securities									28,188,452		4.09

									37,410,702		5.43


Multiline Retail: 0.09%
Other securities									598,982		0.09


Specialty Retail: 1.38%
Other securities									9,551,351		1.38


Consumer Staples: 0.31%

Food & Staples Retailing: 0.09%
Other securities									614,941		0.09


Food Products: 0.11%
Other securities									745,650		0.11


Tobacco: 0.11%
Other securities									757,942		0.11


Energy: 11.43%

Energy Equipment & Services: 3.18%
Gulfmark Offshore Incorporated		6.38			3-15-2022		4,490,000		4,523,675		0.66
NGPL PipeCo LLC 144A		7.77			12-15-2037		5,130,000		4,450,275		0.64
PHI Incorporated		8.63			10-15-2018		3,662,000		3,909,185		0.57
Other securities									9,028,615		1.31

									21,911,750		3.18


Oil, Gas & Consumable Fuels: 8.25%
Rockies Express Pipeline LLC 144A		5.63-7.50			1-15-2019 to 7-15-2038		6,335,000		5,300,563		0.77
Rockies Express Pipeline LLC 144A		6.88			4-15-2040		6,123,000		4,622,865		0.67
Sabine Pass LNG LP		6.50			11-1-2020		4,180,000		4,368,100		0.63
Sabine Pass LNG LP		7.50			11-30-2016		4,635,000		5,173,819		0.75
Other securities									37,447,735		5.43

									56,913,082		8.25


Financials: 14.08%

Capital Markets: 0.22%
Other securities									1,551,838		0.22


Commercial Banks: 1.09%
Other securities									7,511,186		1.09

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


Summary portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			9


Security name	Interest rate			Maturity date		Principal		Value		Percent of net assets


Consumer Finance: 6.53%
Ally Financial Incorporated		5.50-8.30	%		12-31-2013 to 9-15-2020	$	9,523,000	$	10,210,997		1.48	%
Nielsen Finance LLC Company		7.75			10-15-2018		5,350,000		5,831,500		0.85
SLM Corporation		7.25-8.45			6-15-2018 to 1-25-2022		2,605,000		2,950,663		0.42
SLM Corporation		8.00			3-25-2020		3,940,000		4,501,450		0.65
Springleaf Finance Corporation		5.40-7.75			12-1-2015 to 10-1-2021		5,190,000		5,309,138		0.77
Springleaf Finance Corporation		6.90			12-15-2017		4,550,000		4,925,375		0.71
Other securities									11,292,389		1.65

									45,021,512		6.53


Diversified Financial Services: 2.39%
Denali Borrower/Finance Corporation 144A		5.63			10-15-2020		4,350,000		4,306,500		0.62
Other securities									12,169,007		1.77

									16,475,507		2.39


Insurance: 0.59%
Other securities									4,076,693		0.59


Real Estate Management & Development: 0.73%
Other securities									5,002,025		0.73


REITs: 2.53%
DuPont Fabros Technology Incorporated 144A		5.88			9-15-2021		4,655,000		4,771,375		0.69
Other securities									12,666,051		1.84

									17,437,426		2.53


Health Care: 3.22%

Biotechnology: 0.11%
Other securities									757,847		0.11


Health Care Equipment & Supplies: 0.36%
Other securities									2,499,669		0.36


Health Care Providers & Services: 2.38%
Other securities									16,391,959		2.38


Health Care Technology: 0.07%
Other securities									496,200		0.07


Life Sciences Tools & Services: 0.12%
Other securities									858,734		0.12


Pharmaceuticals: 0.18%
Other securities									1,241,169		0.18


Industrials: 3.48%

Aerospace & Defense: 0.20%
Other securities									1,360,375		0.20

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


10		Wells Fargo Advantage Multi-Sector Income Fund		Summary portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value		Percent of net assets


Air Freight & Logistics: 0.42%
Other securities								$	2,877,000		0.42	%


Airlines: 0.43%
Other securities									2,977,734		0.43


Commercial Services & Supplies: 0.93%
Other securities									6,442,061		0.93


Machinery: 0.52%
Other securities									3,574,319		0.52


Professional Services: 0.29%
Other securities									1,968,889		0.29


Trading Companies & Distributors: 0.51%
Other securities									3,523,163		0.51


Transportation Infrastructure: 0.18%
Other securities									1,273,013		0.18


Information Technology: 4.09%

Communications Equipment: 0.29%
Other securities									2,002,300		0.29


Computers & Peripherals: 0.11%
Other securities									729,333		0.11


Electronic Equipment, Instruments & Components: 1.05%
Jabil Circuit Incorporated		8.25	%		3-15-2018	$	5,275,000		6,237,688		0.90
Other securities									1,026,895		0.15

									7,264,583		1.05


Internet Software & Services: 0.04%
Other securities									247,476		0.04


IT Services: 2.27%
SunGard Data Systems Incorporated		7.38			11-15-2018		5,007,000		5,307,420		0.77
Other securities									10,383,641		1.50

									15,691,061		2.27


Software: 0.33%
Other securities									2,278,920		0.33


Materials: 0.97%

Chemicals: 0.20%
Other securities									1,357,233		0.20


Containers & Packaging: 0.47%
Other securities									3,270,494		0.47

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


Summary portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			11


Security name	Interest rate			Maturity date		Principal		Value		Percent of net assets


Metals & Mining: 0.08%
Other securities								$	565,204		0.08	%


Paper & Forest Products: 0.22%
Other securities									1,521,879		0.22


Telecommunication Services: 8.45%

Diversified Telecommunication Services: 3.82%
GCI Incorporated		6.75	%		6-1-2021	$	2,330,000		2,254,275		0.33
GCI Incorporated		8.63			11-15-2019		5,625,000		5,976,563		0.87
Syniverse Holdings Incorporated		9.13			1-15-2019		5,005,000		5,417,913		0.78
Other securities									12,703,153		1.84

									26,351,904		3.82


Wireless Telecommunication Services: 4.63%
Sprint Capital Corporation		6.88			11-15-2028		13,665,000		12,981,711		1.88
Sprint Capital Corporation		8.75			3-15-2032		1,855,000		2,008,038		0.29
Other securities									16,933,661		2.46

									31,923,410		4.63


Utilities: 3.01%

Electric Utilities: 1.55%
Mirant Mid-Atlantic LLC Series C		10.06			12-30-2028		3,614,632		4,021,278		0.58
Other securities									6,698,317		0.97

									10,719,595		1.55


Gas Utilities: 0.41%
Other securities									2,841,500		0.41


Independent Power Producers & Energy Traders: 0.83%
Other securities									5,700,745		0.83


Multi-Utilities: 0.22%
Other securities									1,485,864		0.22


Total Corporate Bonds and Notes (Cost $414,659,788)									434,250,186		62.97


Foreign Corporate Bonds and Notes @: 4.00%

Consumer Discretionary: 0.52%

Auto Components: 0.03%
Other securities									190,628		0.03


Automobiles: 0.10%
Other securities									682,591		0.10


Hotels, Restaurants & Leisure: 0.11%
Other securities									770,610		0.11

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


12		Wells Fargo Advantage Multi-Sector Income Fund		Summary portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value		Percent of net assets


Media: 0.28%
Other securities								$	1,947,923		0.28	%


Consumer Staples: 0.32%

Food & Staples Retailing: 0.15%
Other securities									1,030,532		0.15


Food Products: 0.17%
Other securities									1,150,634		0.17


Financials: 2.43%

Commercial Banks: 2.04%
European Investment Bank (AUD)		6.50	%		8-7-2019		4,880,000		5,092,781		0.74
Other securities									8,947,731		1.30

									14,040,512		2.04


Consumer Finance: 0.09%
Other securities									619,834		0.09


Diversified Financial Services: 0.30%
Other securities									2,103,631		0.30


Industrials: 0.35%

Building Products: 0.08%
Other securities									570,713		0.08


Trading Companies & Distributors: 0.05%
Other securities									299,319		0.05


Transportation Infrastructure: 0.22%
Other securities									1,530,509		0.22


Information Technology: 0.04%

Software: 0.04%
Other securities									274,988		0.04


Materials: 0.08%

Paper & Forest Products: 0.08%
Other securities									564,574		0.08


Telecommunication Services: 0.16%

Diversified Telecommunication Services: 0.12%
Other securities									799,959		0.12


Wireless Telecommunication Services: 0.04%
Other securities									283,873		0.04

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


Summary portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			13


Security name	Interest rate			Maturity date		Principal		Value		Percent of net assets


Utilities: 0.10%

Water Utilities: 0.10%
Other securities								$	729,790		0.10	%


Total Foreign Corporate Bonds and Notes (Cost $26,079,351)									27,590,620		4.00


Foreign Government Bonds @: 26.56%
Brazil (BRL)		8.50	%		1-5-2024		14,580,000		5,938,867		0.86
Brazil (BRL)		10.00			1-1-2017		31,000,000		13,784,248		2.00
Hungary (HUF)		6.75			11-24-2017		2,375,000,000		11,827,957		1.71
Indonesia (IDR)		7.38			9-15-2016		120,100,000,000		10,803,407		1.57
Malaysia (MYR)		3.26			3-1-2018		22,500,000		7,102,557		1.03
Malaysia (MYR)		4.26			9-15-2016		21,100,000		6,892,179		1.00
Mexico (MXN)		7.25			12-15-2016		129,540,000		10,728,292		1.56
Mexico (MXN)		7.75			5-29-2031		34,450,000		2,824,711		0.41
Mexico (MXN)		7.75			11-13-2042		84,190,000		6,760,514		0.98
New Zealand (NZD)		5.50			4-15-2023		5,625,000		4,976,737		0.72
Poland (PLN)		4.00			10-25-2023		43,850,000		14,026,847		2.03
Queensland Treasury (AUD)		5.75			7-22-2024		4,100,000		4,144,134		0.60
Republic of South Africa (ZAR)		2.00			1-31-2025		10,095,498		1,035,675		0.15
Republic of South Africa (ZAR)		6.50			2-28-2041		67,200,000		5,007,358		0.73
Republic of South Africa (ZAR)		7.75			2-28-2023		73,600,000		7,401,240		1.07
Romania (RON)		6.00			4-30-2016		11,750,000		3,771,243		0.55
Russia (RUB)		7.00			1-25-2023		29,000,000		899,730		0.13
Russia (RUB)		7.50			3-15-2018		172,600,000		5,570,216		0.81
Russia (RUB)		7.60			7-20-2022		354,400,000		11,448,388		1.66
State of New South Wales Australia (AUD)		5.00			8-20-2024		3,900,000		3,777,250		0.55
Thailand (THB)		3.25			6-16-2017		325,000,000		10,474,732		1.52
Turkey (TRY)		6.30			2-14-2018		675,000		317,339		0.05
Turkey (TRY)		8.30			6-20-2018		18,200,000		9,144,446		1.33
Turkey (TRY)		9.00			3-8-2017		19,350,000		9,964,584		1.44
Other securities									14,492,220		2.10

Total Foreign Government Bonds (Cost $192,634,180)									183,114,871		26.56


Municipal Obligations: 0.05%

New York: 0.05%
Other securities									337,903		0.05


Total Municipal Obligations (Cost $345,000)									337,903		0.05


Non-Agency Mortgage Backed Securities: 7.42%
Other securities									51,196,294		7.42


Total Non-Agency Mortgage Backed Securities (Cost $48,547,700)									51,196,294		7.42

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


14		Wells Fargo Advantage Multi-Sector Income Fund		Summary portfolio of investments—October 31, 2013


Security name								Value		Percent of net assets


Preferred Stocks: 0.17%

Financials: 0.17%

Diversified Financial Services: 0.17%
Other securities								$	1,192,584		0.17	%


Total Preferred Stocks (Cost $1,130,339)									1,192,584		.017

	Interest rate			Maturity date		Principal


Term Loans: 18.74%
Allison Transmission Incorporated		3.18-3.75	%		8-7-2017 to 8-23-2019	$	3,348,751		3,368,165		0.49
CCM Merger Incorporated		5.00			3-1-2017		2,769,205		2,783,051		0.40
Crown Castle International Corporation		3.25			1-31-2019		6,534,054		6,523,992		0.95
Dell Incorporated <		0.00			4-30-2020		11,320,000		11,250,382		1.63
Goodyear Tire & Rubber Company		4.75			4-30-2019		5,500,000		5,559,565		0.81
Local TV Finance LLC		4.17			5-7-2015		2,492,681		2,488,019		0.36
Springleaf Finance Corporation		4.75			9-30-2019		470,000		474,503		0.07
Texas Competitive Electric Holdings LLC		3.70			10-10-2014		20,096,983		13,519,441		1.96
Other securities									83,240,808		12.07

Total Term Loans (Cost $133,921,834)									129,207,926		18.74


Yankee Corporate Bonds and Notes: 7.59%

Consumer Discretionary: 0.58%

Diversified Consumer Services: 0.10%
Other securities									711,647		0.10


Media: 0.48%
Other securities									3,315,255		0.48


Consumer Staples : 0.33%

Beverages: 0.11%
Other securities									785,334		0.11


Food Products: 0.11%
Other securities									780,000		0.11


Tobacco: 0.11%
Other securities									738,986		0.11


Energy: 0.92%

Energy Equipment & Services: 0.12%
Other securities									810,014		0.12


Oil, Gas & Consumable Fuels: 0.80%
Other securities									5,521,424		0.80


Financials: 1.75%

Commercial Banks: 0.89%
Other securities									6,143,809		0.89

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


Summary portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			15


Security name	Interest rate			Maturity date		Principal		Value		Percent of net assets


Consumer Finance: 0.57%
Wind Acquisition Finance SpA 144A		11.75	%		7-15-2017	$	3,660,000	$	3,888,750		0.57	%


Diversified Financial Services: 0.29%
Other securities									2,005,145		0.29


Health Care: 0.30%

Pharmaceuticals: 0.30%
Other securities									2,087,700		0.30


Industrials: 0.16%

Commercial Services & Supplies: 0.05%
Other securities									343,205		0.05


Road & Rail: 0.11%
Other securities									794,834		0.11


Information Technology: 0.56%

Computers & Peripherals: 0.44%
Other securities									3,032,288		0.44


Internet Software & Services: 0.12%
Other securities									806,885		0.12


Materials: 0.78%

Metals & Mining: 0.60%
Other securities									4,148,960		0.60


Paper & Forest Products: 0.18%
Other securities									1,212,900		0.18


Telecommunication Services: 2.11%

Diversified Telecommunication Services: 1.88%
Intelsat Jackson Holdings SA		5.50-8.50			4-1-2019 to 8-1-2023		8,655,000		9,047,388		1.31
Other securities									3,917,896		0.57

									12,965,284		1.88


Wireless Telecommunication Services: 0.23%
Other securities									1,567,375		0.23


Utilities : 0.10%

Electric Utilities: 0.10%
Other securities									677,625		0.10


Total Yankee Corporate Bonds and Notes (Cost $51,118,726)									52,337,420		7.59

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


16		Wells Fargo Advantage Multi-Sector Income Fund		Summary portfolio of investments—October 31, 2013


Security name	Yield			Shares		Value			Percent of net assets

Short-Term Investments: 3.44%

Investment Companies: 3.44%
Wells Fargo Advantage Cash Investment Money Market Fund, Select Class (l)(u)##		0.08	%		23,733,647	$	23,733,647			3.44	%


Total Short-Term Investments (Cost $23,733,647)							23,733,647			3.44

Total investments in securities (Cost $910,959,416) *							921,405,076			133.62
Other assets and liabilities, net							(231,831,716	)		(33.62	)

Total net assets						$	689,573,360			100.00	%

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

¥	A payment-in-kind (PIK) security is a security in which the issuer may make interest or dividend payments in cash or additional securities. These additional securities generally have the same terms as the original holdings.

@	Foreign bond principal is denominated in local currency.

<	All or a portion of the position represents an unfunded term loan commitment.

(l)	Investment in an affiliate

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

##	All or a portion of this security has been segregated for unfunded term loans.

*	Cost for federal income tax purposes is $915,360,215 and unrealized appreciation (depreciation) consists of:


Gross unrealized appreciation	$	38,521,660
Gross unrealized depreciation		(32,476,799	)

Net unrealized appreciation	$	6,044,861

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


Statement of assets and liabilities—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			17




Assets
Investments
In unaffiliated securities, at value (see cost below)	$	897,671,429
In affiliated securities, at value (see cost below)		23,733,647

Total investments, at value (see cost below)		921,405,076
Cash		2,383,959
Foreign currency, at value (see cost below)		129,996
Receivable for investments sold		2,433,552
Principal paydown receivable		140,231
Receivable for interest		13,486,188
Unrealized gains on forward foreign currency contracts		581,177
Prepaid expenses and other assets		33,715

Total assets		940,593,894


Liabilities
Dividends payable		4,205,501
Payable for investments purchased		15,541,909
Unrealized losses on forward foreign currency contracts		359,874
Secured borrowing payable		230,199,959
Advisory fee payable		427,061
Due to other related parties		38,824
Accrued expenses and other liabilities		247,406

Total liabilities		251,020,534

Total net assets	$	689,573,360


NET ASSETS CONSIST OF
Paid-in capital	$	774,138,238
Overdistributed net investment income		(3,627,622	)
Accumulated net realized losses on investments		(91,624,082	)
Net unrealized gains on investments		10,686,826

Total net assets	$	689,573,360


NET ASSET VALUE PER SHARE
Based on $689,573,360 divided by 42,055,000 shares issued and outstanding (100,000,000 shares authorized)		$16.40


Investments in unaffiliated securities, at cost	$	887,225,769

Investments in affiliated securities, at cost	$	23,733,647

Total investments, at cost	$	910,959,416

Foreign currency, at cost	$	131,103

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


18		Wells Fargo Advantage Multi-Sector Income Fund		Statement of operations—year ended October 31, 2013




Investment income
Interest**	$	58,424,374
Dividends		63,680
Income from affiliated securities		19,029

Total investment income		58,507,083


Expenses
Advisory fee		5,152,515
Administration fee		468,411
Custody and accounting fees		271,389
Professional fees		110,371
Shareholder report expenses		117,290
Trustees’ fees and expenses		18,193
Transfer agent fees		32,967
Interest expense		517,585
Secured borrowing fees		2,009,847
Other fees and expenses		42,176

Total expenses		8,740,744

Net investment income		49,766,339


REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS

Net realized gains on:
Unaffiliated securities		7,101,822
Forward foreign currency contract transactions		852,095

Net realized gains on investments		7,953,917


Net change in unrealized gains (losses) on:
Unaffiliated securities		(32,854,179	)
Forward foreign currency contract transactions		(194,509	)

Net change in unrealized gains (losses) on investments		(33,048,688	)

Net realized and unrealized gains (losses) on investments		(25,094,771	)

Net increase in net assets resulting from operations	$	24,671,568


** Net of foreign interest withholding taxes in the amount of		$56,840

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


Statement of changes in net assets		Wells Fargo Advantage Multi-Sector Income Fund			19


	Year ended October 31, 2013			Year ended October 31, 2012

Operations
Net investment income	$	49,766,339		$	48,986,237
Net realized gains on investments		7,953,917			16,058,375
Net change in unrealized gains (losses) on investments		(33,048,688	)		21,291,967

Net increase in net assets resulting from operations		24,671,568			86,336,579


Distributions to shareholders from
Net investment income		(50,466,000	)		(50,466,000	)

Total increase (decrease) in net assets		(25,794,432	)		35,870,579


Net assets
Beginning of period		715,367,792			679,497,213

End of period	$	689,573,360		$	715,367,792

Overdistributed net investment income	$	(3,627,622	)	$	(4,658,823	)

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


20		Wells Fargo Advantage Multi-Sector Income Fund		Statement of cash flows—year ended October 31, 2013




Cash flows from operating activities:
Net increase in net assets resulting from operations	$	24,671,568

Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities:
Purchase of securities		(736,101,009	)
Proceeds from sales of securities		734,752,777
Paydowns		7,821,310
Amortization		(1,295,360	)
Proceeds from sales of short-term investments, net		2,595,794
Decrease in interest receivable		370,385
Increase in receivable for investments sold		(1,912,302	)
Decrease in principal paydown receivable		28,001
Decrease in prepaid expenses and other assets		11,818
Decrease in payable for investments purchased		(3,140,182	)
Decrease in advisory fee payable		(40,601	)
Decrease in due to other related parties		(3,691	)
Increase in accrued expenses and other liabilities		5,386
Litigation payments received		95,394
Unrealized losses on unaffiliated securities		32,854,179
Unrealized losses on forward foreign currency contract transactions		194,509
Net realized gains on unaffiliated securities		(7,953,917	)

Net cash provided by operating activities		52,954,059


Cash flows from financing activities:
Cash distributions paid		(50,465,999	)
Decrease in secured borrowing payable		(3,251	)

Net cash used in financing activities		(50,469,250	)

Net increase in cash		2,484,809


Cash (including foreign currency):
Beginning of period	$	29,146

End of period	$	2,513,955


Supplemental cash disclosure
Cash paid for interest	$	517,515

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


Financial highlights		Wells Fargo Advantage Multi-Sector Income Fund			21

(For a share outstanding throughout each period)


	Year ended October 31
	2013			2012			2011			2010			2009
Net asset value, beginning of period	$	17.01		$	16.16		$	16.67		$	15.61		$	13.47
Net investment income		1.18			1.16			1.11			1.21			1.33
Net realized and unrealized gains (losses) on investments		(0.59	)		0.89			(0.39	)		1.17			3.26
Distributions to preferred shareholders from net investment income		0.00			0.00			0.00			(0.02	)¹		(0.03	)¹

Total from investment operations		0.59			2.05			0.72			2.36			4.56
Distributions to common shareholders from
Net investment income		(1.20	)		(1.20	)		(1.23	)		(1.30	)		(2.20	)
Tax basis return of capital		0.00			0.00			0.00			0.00			(0.22	)

Total distributions to common shareholders		(1.20	)		(1.20	)		(1.23	)		(1.30	)		(2.42	)
Net asset value, end of period	$	16.40		$	17.01		$	16.16		$	16.67		$	15.61
Market value, end of period	$	14.47		$	16.54		$	14.97		$	16.18		$	13.73
Total return based on market value²		(5.44	)%		19.33	%		0.33	%		28.44	%		44.93	%
Ratios to average net assets (annualized)
Gross expenses³		1.24	%		1.24	%		1.14	%		1.58	%		3.07	%
Net expenses³		1.24	%		1.24	%		1.14	%		1.18	%		1.62	%
Net investment income		7.04	%		7.13	%		6.75	%		7.63	%⁴		9.65	%⁴
Supplemental data
Portfolio turnover rate		40	%		78	%		35	%		70	%		93	%
Net assets of common shareholders, end of period (000s omitted)		$689,573			$715,368			$679,497			$701,110			$656,404

Borrowings outstanding, end of period (000s omitted)		$230,000			$230,000			$230,000			$230,000			$230,000
Asset coverage per $1,000 of borrowing, end of period		$3,998			$4,110			$3,954			$4,048			$3,854

Liquidation value of Preferred Shares, end of period (000s omitted)		N/A			N/A			N/A			N/A			$80,035
Asset coverage ratio for Preferred Shares, end of period		N/A			N/A			N/A			N/A			385	%

1.	Calculated based upon average shares outstanding

Total return is calculated assuming a purchase of common stock on the first day and sale on the last day of the period reported. Dividends and distributions, if any, are assumed for purposes of these calculations to be reinvested at prices obtained under the Fund’s Automatic Dividend Reinvestment Plan. Total return does not reflect brokerage commissions that a shareholder would pay on the purchase and sale of shares.

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


Year ended October 31, 2013	0.07	%
Year ended October 31, 2012	0.11	%
Year ended October 31, 2011	0.09	%
Year ended October 31, 2010	0.08	%
Year ended October 31, 2009	0.47	%

4.	The net investment income ratio reflects distributions paid to preferred shareholders.

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


22		Wells Fargo Advantage Multi-Sector Income Fund		Notes to financial statements

1. ORGANIZATION

The Wells Fargo Advantage Multi-Sector Income Fund (the “Fund”) was organized as a statutory trust under the laws of the state of Delaware on April 10, 2003 and is registered as a diversified closed-end management investment company under the Investment Company Act of 1940, as amended.

2. SIGNIFICANT ACCOUNTING POLICIES

The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund, are in conformity with U.S. generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Securities valuation

All investments are valued each business day as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern Time).

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

Short-term securities, with maturities of 60 days or less at time of purchase, generally are valued at amortized cost which approximates fair value. The amortized cost method involves valuing a security at its cost, plus accretion of discount or minus amortization of premium over the period until maturity.

Equity securities that are listed on a foreign or domestic exchange or market are valued at the official closing price or, if none, the last sales price. If no sale occurs on the primary exchange or market for the security that day, the prior day’s price will be deemed “stale” and fair values will be determined in accordance with the Fund’s Valuation Procedures.

The values of securities denominated in foreign currencies will be converted to U.S. dollars at rates provided by an independent foreign currency pricing source at a time each business day specified by the Management Valuation Team of Wells Fargo Funds Management, LLC (“Funds Management”).

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

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

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

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The values of other assets and liabilities denominated in foreign currencies will be converted to U.S. dollars at rates provided by an independent foreign currency pricing source at a time each


Notes to financial statements		Wells Fargo Advantage Multi-Sector Income Fund			23

business day specified by the Management Valuation Team. Purchases and sales of securities, and income and expenses are converted at the rate of exchange on the respective dates of such transactions. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded and the U.S. dollar equivalent of the amounts actually paid or received. Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities other than investments in securities resulting from changes in exchange rates.

The changes in net assets arising from changes in exchange rates and the changes in net assets resulting from changes in market prices of securities are not separately presented. Such changes are recorded with net realized and unrealized gains or losses from investments. Gains and losses from certain foreign currency transactions are treated as ordinary income for U.S. federal income tax purposes.

Reverse repurchase agreements

The Fund may enter into reverse repurchase agreements with banks and other financial institutions, which are deemed by the investment adviser to be creditworthy. At the time the Fund enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing qualified assets having a value not less than the repurchase price, including accrued interest. If the counterparty to the transaction is rendered insolvent, the Fund may be delayed or limited in the repurchase of the collateral securities.

Forward foreign currency contracts

The Fund may be subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. A forward foreign currency contract is an agreement between two parties to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund enters into forward foreign currency contracts to facilitate transactions in foreign-denominated securities and to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. Forward foreign currency contracts are recorded at the forward rate and marked-to-market daily. When the contracts are closed, realized gains and losses arising from such transactions are recorded as realized gains or losses on forward foreign currency contract transactions. The Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. The Fund’s maximum risk of loss from counterparty credit risk is the unrealized gains on the contracts. This risk may be mitigated if there is a master netting arrangement between the Fund and the counterparty.

When-issued transactions

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

Term loans

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

Security transactions and income recognition

Securities transactions are recorded on a trade date basis. Realized gains or losses are recorded on the basis of identified cost.

Interest income is accrued daily and bond discounts are accreted and premiums are amortized daily based on the effective interest method. To the extent debt obligations are placed on non-accrual status, any related interest income may be reduced by writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. If the issuer subsequently resumes interest payments or when the collectability of interest is reasonably assured, the debt obligation is removed from non-accrual status.

Dividend income is recognized on the ex-dividend date, except for certain dividends from foreign securities, which are recorded as soon as the Fund is informed of the ex-dividend date.

Income from foreign securities is recorded net of foreign taxes withheld where recovery of such taxes is not assured.


24		Wells Fargo Advantage Multi-Sector Income Fund		Notes to financial statements

Distributions to shareholders

Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations, which may differ in amount or character from net investment income and realized gains recognized for purposes of U.S. generally accepted accounting principles.

Federal and other taxes

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

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

Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under federal income tax regulations. U.S. generally accepted accounting principles requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The primary permanent differences causing such reclassifications are due to bond premiums and foreign currency transactions. At October 31, 2013, as a result of permanent book-to-tax differences, the following reclassification adjustments were made on the Statement of Assets and Liabilities:

Overdistributed net

investment income

Accumulated net
realized losses
on investments

$1,730,862

$(1,730,862)

As of October 31, 2013, the Fund had capital loss carryforwards available to offset future net realized capital gains in the amount of $87,159,274 expiring in 2017.

3. FAIR VALUATION MEASUREMENTS

Fair value measurements of investments are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Fund’s investments. The three-level hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to significant unobservable inputs (Level 3). The Fund’s investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs are summarized into three broad levels as follows:

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, use of amortized cost, etc.)

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodologies used for valuing investments in securities are not necessarily an indication of the risk associated with investing in those securities.


Notes to financial statements		Wells Fargo Advantage Multi-Sector Income Fund			25

As of October 31, 2013, the inputs used in valuing investments in securities were as follows:


Investments in securities	Quoted prices (Level 1)		Other significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Agency securities	$	0	$	17,035,069	$	0	$	17,035,069
Asset-backed securities		0		750,628		0		750,628
Corporate bonds and notes		0		434,250,186		0		434,250,186
Equity securities
Common stocks		657,928		0		0		657,928
Preferred stocks		1,192,584		0		0		1,192,584
Foreign corporate bonds and notes		0		27,590,620		0		27,590,620
Foreign government bonds		0		183,114,871		0		183,114,871
Municipal obligations		0		337,903		0		337,903
Non-agency mortgage backed securities		0		51,196,294		0		51,196,294
Term loans		0		116,152,239		13,055,687		129,207,926
Yankee corporate bonds and notes		0		52,337,420		0		52,337,420
Short-term investments
Investment companies		23,733,647		0		0		23,733,647
	$	25,584,159	$	882,765,230	$	13,055,687	$	921,405,076

As of October 31, 2013, the inputs used in valuing the Fund’s other financial instruments were as follows:

Other financial instruments

Quoted prices

(Level 1)

Other significant
observable inputs

(Level 2)

Significant

unobservable inputs

(Level 3)

Total

Forward foreign currency contracts+

221,303

+	Amount represents the net unrealized gains.

Transfers in and transfers out are recognized at the end of the reporting period. For the year ended October 31, 2013, the Fund did not have any transfers into/out of Level 1 or Level 2.

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


	Common stocks			Term loans			Total
Balance as of October 31, 2012	$	2,322		$	16,839,203		$	16,841,525
Accrued discounts (premiums)		0			19,183			19,183
Realized gains (losses)		0			12,816			12,816
Change in unrealized gains (losses)		(2,322	)		(278,073	)		(280,395	)
Purchases		0			13,865,465			13,865,465
Sales		0			(17,402,907	)		(17,402,907	)
Transfers into Level 3		0			0			0
Transfers out of Level 3		0			0			0
Balance as of October 31, 2013	$	0		$	13,055,687		$	13,055,687
Change in unrealized gains (losses) relating to securities still held at October 31, 2013	$	(2,322	)	$	(158,943	)	$	(161,265	)

The investment types categorized above were valued using indicative broker quotes and are therefore considered Level 3 inputs. Quantitative unobservable inputs used by the brokers are often proprietary and not provided to the Fund and therefore the disclosure that would address these inputs is not included above.

4. TRANSACTIONS WITH AFFILIATES AND OTHER EXPENSES

Advisory fee

Funds Management, an indirect wholly owned subsidiary of Wells Fargo & Company (“Wells Fargo”) is the adviser to the Fund and is entitled to receive a fee at an annual rate of 0.55% of the Fund’s average daily total assets. Total assets consist of net assets of the Fund plus borrowings or other leverage for investment purposes to the extent excluded in calculating net assets.


26		Wells Fargo Advantage Multi-Sector Income Fund		Notes to financial statements

Funds Management has retained the services of certain subadvisers to provide daily portfolio management to the Fund. The fees for subadvisory services are borne by Funds Management. Wells Capital Management Incorporated, an affiliate of Funds Management and an indirect, wholly owned subsidiary of Wells Fargo, is a subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate of 0.30% of the Fund’s average daily total assets. First International Advisors, LLC, an affiliate of Funds Management and an indirect, wholly owned subsidiary of Wells Fargo, is also a subadviser to the Fund and is entitled to receive a fee from Funds Management at an annual rate of 0.10% of the Fund’s average daily total assets.

Administration fee

Funds Management also serves as the administrator to the Fund providing the Fund with a wide range of administrative services necessary to the operation of the Fund. Funds Management is entitled to receive an annual administration fee of 0.05% of the Fund’s average daily total assets.

5. CAPITAL SHARE TRANSACTIONS

The Fund has authorized capital of 100,000,000 shares with no par value. For the year ended October 31, 2013 and the year ended October 31, 2012, the Fund did not issue any shares.

6. BORROWINGS

The Fund has borrowed approximately $230 million through a secured debt financing agreement administered by a major financial institution (the “Facility”). The Facility has a commitment amount of $230 million which expires on February 24, 2014, at which point it may be renegotiated and potentially renewed for another one-year term. At October 31, 2013, the Fund had secured borrowings outstanding in the amount of $230,199,959 (including accrued interest and usage and commitment fees payable).

The Fund’s borrowing under the Facility are generally charged interest at a rate based on the rates of the commercial paper notes issued to fund the Fund’s borrowings or at the London Interbank Offered Rate (LIBOR) plus 1.0%. During the year ended October 31, 2013, an effective interest rate of 0.22% was incurred on the borrowings. Interest expense of $517,585, representing 0.07% of the Fund’s average daily net assets, was incurred during the year ended October 31, 2013.

The Fund has pledged all of its assets to secure the borrowings and currently pays, on a monthly basis, a usage fee at an annual rate of 0.40% of the daily average outstanding principal amount of borrowings and a commitment fee at an annual rate of 0.40% of the product of (i) the daily average outstanding principal amount of borrowings and (ii) 1.02. The secured borrowing fees on the Statement of Operations of $2,009,847 represents the usage fee, commitment fee and structuring fees. For the year ended October 31, 2013, the Fund paid structuring fees in the amount of $125,863.

7. INVESTMENT PORTFOLIO TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the year ended October 31, 2013 were as follows:


Purchases at cost		Sales proceeds
U.S. government	Non-U.S. government	U.S. government	Non-U.S. government
$142,200	$437,133,379	$3,364,171	$367,097,035

As of October 31, 2013, the Fund had unfunded term loan commitments of $12,093,913.

8. DERIVATIVE TRANSACTIONS

During the year ended October 31, 2013, the Fund entered into forward foreign currency contracts for economic hedging purposes.

At October 31, 2013, the Fund had forward foreign currency contracts outstanding as follows:

Forward foreign currency contracts to buy:


Exchange date	Counterparty	Contracts to receive			U.S. value at October 31, 2013		In exchange for U.S. $		Unrealized gains
11-7-2013	State Street Bank		215,000,000	THB	$	6,906,327	$	6,822,148	$	84,179
11-27-2013	State Street Bank		6,150,000	MYR		1,945,780		1,870,154		75,626
11-27-2013	State Street Bank		21,850,000	MYR		6,913,055		6,565,505		347,550
12-9-2013	State Street Bank		21,050,000	PLN		6,819,085		6,796,001		23,084


Notes to financial statements		Wells Fargo Advantage Multi-Sector Income Fund			27

Forward foreign currency contracts to sell:


Exchange Date	Counterparty	Contracts to deliver			U.S. value at October 31, 2013		In exchange for U.S. $		Unrealized gains (losses)
11-7-2013	State Street Bank		215,000,000	THB	$	6,906,327	$	6,684,284	$	(222,043	)
11-26-2013	State Street Bank		89,725,000	MXN		6,864,947		6,727,116		(137,831	)
1-30-2014	State Street Bank		14,500,000	TRY		7,152,388		7,203,126		50,738

The Fund had average contract amounts of $25,228,751 and $25,592,827 in forward foreign currency exchange contracts to buy and forward foreign currency exchange contracts to sell, respectively, during the year ended October 31, 2013.

The fair value, realized gains or losses and change in unrealized gains or losses, if any, on derivative instruments are reflected in the appropriate financial statements.

9. DISTRIBUTIONS TO SHAREHOLDERS

The tax character of distributions paid was $50,466,000 and $50,466,000 of ordinary income for the years ended October 31, 2013 and October 31, 2012, respectively.

As of October 31, 2013, the components of distributable earnings on a tax basis were as follows:

Undistributed

ordinary income

Unrealized

gains

Capital loss

carryforward

$594,267

$6,286,027

$(87,159,274)

10. INDEMNIFICATION

Under the Fund’s organizational documents, the officers and directors are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.

11. NEW ACCOUNTING PRONOUNCEMENT

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. ASU 2011-11, which amends FASB ASC Topic 210, Balance Sheet, creates new disclosure requirements which require entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for interim and annual reporting periods beginning on or after January 1, 2013. Management has assessed the potential impact, in addition to expanded financial statement disclosure, that may result from adopting this ASU and determined that there are no significant changes to the financial statements.

12. SUBSEQUENT DISTRIBUTIONS

The Fund declared the following distributions to common shareholders:


Declaration date	Record date	Payable date	Per share amount
October 25, 2013	November 14, 2013	December 2, 2013	$0.10
November 20, 2013	December 16, 2013	January 2, 2014	$0.10

These distributions are not reflected in the accompanying financial statements. The final determination of the source of all distributions is subject to change and made after the Fund’s tax year-end.


28		Wells Fargo Advantage Multi-Sector Income Fund		Report of independent registered public accounting firm

BOARD OF TRUSTEES AND SHAREHOLDERS OF WELLS FARGO ADVANTAGE MULTI-SECTOR INCOME FUND:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments and the summary portfolio of investments, of the Wells Fargo Advantage Multi-Sector Income Fund (the “Fund”), as of October 31, 2013, and the related statement of operations for the year then ended, statements of changes in net assets for each of the years in the two-year period then ended, statement of cash flows for the year then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Wells Fargo Advantage Multi-Sector Income Fund as of October 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, its cash flows for the year then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

LOGO

Boston, Massachusetts

December 23, 2013


Other information (unaudited)		Wells Fargo Advantage Multi-Sector Income Fund			29

TAX INFORMATION

For the fiscal year ended October 31, 2013, $31,763,300 has been designated as interest-related dividends for nonresident alien shareholders pursuant to Section 871 of the Internal Revenue Code.

PROXY VOTING INFORMATION

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1-800-222-8222, visiting our website at wellsfargoadvantagefunds.com, or visiting the SEC website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge on the Fund’s website at wellsfargoadvantagefunds.com or by visiting the SEC website at sec.gov.

PORTFOLIO HOLDINGS INFORMATION

The complete portfolio holdings for the Fund are publicly available on the Fund’s website (wellsfargoadvantagefunds.com) on a monthly, 30-day or more delayed basis. The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q, which is available without charge by visiting the SEC website at sec.gov. In addition, the Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and at regional offices in New York City, at 233 Broadway, and in Chicago, at 175 West Jackson Boulevard, Suite 900. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330.


30		Wells Fargo Advantage Multi-Sector Income Fund		Other information (unaudited)

BOARD OF TRUSTEES AND OFFICERS

The following table provides basic information about the Board of Trustees (the “Trustees”) and Officers of the Fund. Each of the Trustees and Officers listed below acts in identical capacities for each fund in the Wells Fargo Advantage family of funds, which consists of 131 mutual funds¹ comprising the Wells Fargo Funds Trust, Wells Fargo Variable Trust, Wells Fargo Master Trust, and four closed-end funds, including the Fund (collectively the “Fund Complex”). All of the Trustees are also Members of the Audit and Governance Committees of each Trust in the Fund Complex. The mailing address of each Trustee and Officer is 525 Market Street, 12th Floor, San Francisco, CA 94105. The Board of Trustees is classified into three classes of which one is elected annually. Each Trustee serves a three-year term concurrent with the class from which the Trustee is elected. Each Officer serves an indefinite term.

Independent Trustees


Name and year of birth	Position held and length of service	Principal occupations during past five years	Other directorships during past five years
Peter G. Gordon (Born 1942)	Trustee, since 2010; Chairman, since 2010	Co-Founder, Retired Chairman, President and CEO of Crystal Geyser Water Company. Trustee Emeritus, Colby College.	Asset Allocation Trust
Isaiah Harris, Jr. (Born 1952)	Trustee, since 2010	Retired. Prior thereto, President and CEO of BellSouth Advertising and Publishing Corp. from 2005 to 2007, President and CEO of BellSouth Enterprises from 2004 to 2005 and President of BellSouth Consumer Services from 2000 to 2003. Emeritus member of the Iowa State University Foundation Board of Governors. Emeritus Member of the Advisory Board of Iowa State University School of Business. Advisory Board Member, Palm Harbor Academy (charter school). Mr. Harris is a certified public accountant.	CIGNA Corporation; Deluxe Corporation; Asset Allocation Trust
Judith M. Johnson (Born 1949)	Trustee, since 2010; Audit Committee Chairman, since 2010	Retired. Prior thereto, Chief Executive Officer and Chief Investment Officer of Minneapolis Employees Retirement Fund from 1996 to 2008. Ms. Johnson is an attorney, certified public accountant and a certified managerial accountant.	Asset Allocation Trust
Leroy Keith, Jr. (Born 1939)	Trustee, since 2003	Chairman, Bloc Global Services (development and construction). Trustee of the Evergreen Funds from 1983 to 2010. Former Managing Director, Almanac Capital Management (commodities firm), former Partner, Stonington Partners, Inc. (private equity fund), former Director, Obagi Medical Products Co. and former Director, Lincoln Educational Services.	Trustee, Virtus Fund Complex (consisting of 48 portfolios as of 1/31/2013); Asset Allocation Trust
David F. Larcker (Born 1950)	Trustee, since 2010	James Irvin Miller Professor of Accounting at the Graduate School of Business, Stanford University, Morgan Stanley Director of the Center for Leadership Development and Research and Senior Faculty of The Rock Center for Corporate Governance since 2006. From 2005 to 2008, Professor of Accounting at the Graduate School of Business, Stanford University. Prior thereto, Ernst & Young Professor of Accounting at The Wharton School, University of Pennsylvania from 1985 to 2005.	Asset Allocation Trust
Olivia S. Mitchell (Born 1953)	Trustee, since 2010	International Foundation of Employee Benefit Plans Professor, Wharton School of the University of Pennsylvania since 1993. Director of Wharton’s Pension Research Council and Boettner Center on Pensions & Retirement Research, and Research Associate at the National Bureau of Economic Research. Previously, Cornell University Professor from 1978 to 1993.	Asset Allocation Trust
Timothy J. Penny (Born 1951)	Trustee, since 2010	President and CEO of Southern Minnesota Initiative Foundation, a non-profit organization, since 2007 and Senior Fellow at the Humphrey Institute Policy Forum at the University of Minnesota since 1995. Member of the Board of Trustees of NorthStar Education Finance, Inc., a non-profit organization, since 2007.	Asset Allocation Trust


Other information (unaudited)		Wells Fargo Advantage Multi-Sector Income Fund			31


Name and year of birth	Position held and length of service	Principal occupations during past five years	Other directorships during past five years
Michael S. Scofield (Born 1943)	Trustee, since 2003	Served on the Investment Company Institute’s Board of Governors and Executive Committee from 2008-2011 as well the Governing Council of the Independent Directors Council from 2006-2011 and the Independent Directors Council Executive Committee from 2008-2011. Chairman of the IDC from 2008-2010. Institutional Investor (Fund Directions) Trustee of Year in 2007. Trustee of the Evergreen Funds (and its predecessors) from 1984 to 2010. Chairman of the Evergreen Funds from 2000-2010. Former Trustee of the Mentor Funds. Retired Attorney, Law Offices of Michael S. Scofield.	Asset Allocation Trust
Donald C. Willeke (Born 1940)	Trustee, since 2010	Principal of the law firm of Willeke & Daniels. General Counsel of the Minneapolis Employees Retirement Fund from 1984 until its consolidation into the Minnesota Public Employees Retirement Association on June 30, 2010. Director and Vice Chair of The Tree Trust (non-profit corporation). Director of the American Chestnut Foundation (non-profit corporation).	Asset Allocation Trust

Officers


Name and year of birth	Position held and length of service	Principal occupations during past five years
Karla M. Rabusch (Born 1959)	President, since 2010	Executive Vice President of Wells Fargo Bank, N.A. and President of Wells Fargo Funds Management, LLC since 2003.
Jeremy DePalma¹ (Born 1974)	Treasurer, since 2012	Senior Vice President of Wells Fargo Funds Management, LLC since 2009. Senior Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010. Vice President, Evergreen Investment Services, Inc. from 2004 to 2007. Head of the Fund Reporting and Control Team within Fund Administration from 2005 to 2010.
C. David Messman (Born 1960)	Secretary, since 2010; Chief Legal Officer, since 2010	Senior Vice President and Secretary of Wells Fargo Funds Management, LLC since 2001. Vice President and Managing Counsel of Wells Fargo Bank, N.A. from 1996 to 2013. Vice President and Assistant General Counsel of Wells Fargo Bank, N.A. since 2013.
Debra Ann Early (Born 1964)	Chief Compliance Officer, since 2010	Chief Compliance Officer of Wells Fargo Funds Management, LLC since 2007. Chief Compliance Officer of Parnassus Investments from 2005 to 2007. Chief Financial Officer of Parnassus Investments from 2004 to 2007.
David Berardi (Born 1975)	Assistant Treasurer, since 2009	Vice President of Wells Fargo Funds Management, LLC since 2009. Vice President of Evergreen Investment Management Company, LLC from 2008 to 2010. Assistant Vice President of Evergreen Investment Services, Inc. from 2004 to 2008. Manager of Fund Reporting and Control for Evergreen Investment Management Company, LLC from 2004 to 2010.

1.	Jeremy DePalma acts as Treasurer of 58 funds and Assistant Treasurer of 73 funds in the Fund Complex.


32		Wells Fargo Advantage Multi-Sector Income Fund		Automatic dividend reinvestment plan

AUTOMATIC DIVIDEND REINVESTMENT PLAN

All common shareholders are eligible to participate in the Automatic Dividend Reinvestment Plan (“the Plan”). Pursuant to the Plan, unless a common shareholder is ineligible or elects otherwise, all cash dividends and capital gains distributions are automatically reinvested by Computershare Trust Company, N.A., as agent for shareholders in administering the Plan (“Plan Agent”), in additional common shares of the Fund. Whenever the Fund declares an ordinary income dividend or a capital gain dividend (collectively referred to as “dividends”) payable either in shares or in cash, nonparticipants in the Plan will receive cash, and participants in the Plan will receive the equivalent in common shares. The shares are acquired by the Plan Agent for the participant’s account, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized common shares from the Fund (“newly issued common shares”) or (ii) by purchase of outstanding common shares on the open-market (open-market purchases) on the NYSE Amex or elsewhere. If, on the payment date for any dividend or distribution, the net asset value per share of the common shares is equal to or less than the market price per common share plus estimated brokerage commissions (“market premium”), the Plan Agent will invest the amount of such dividend or distribution in newly issued shares on behalf of the participant. The number of newly issued common shares to be credited to the participant’s account will be determined by dividing the dollar amount of the dividend by the net asset value per share on the date the shares are issued, provided that the maximum discount from the then current market price per share on the date of issuance may not exceed 5%. If on the dividend payment date the net asset value per share is greater than the market value or market premium (“market discount”), the Plan Agent will invest the dividend amount in shares acquired on behalf of the participant in open-market purchases. There will be no brokerage charges with respect to shares issued directly by the Fund as a result of dividends or capital gains distributions payable either in shares or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent’s open-market purchases in connection with the reinvestment of dividends. The automatic reinvestment of dividends and distributions will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such dividends. All correspondence concerning the Plan should be directed to the Plan Agent at P.O. Box 43010, Providence, Rhode Island 02940-3010 or by calling 1-800-730-6001.


List of abbreviations		Wells Fargo Advantage Multi-Sector Income Fund			33

The following is a list of common abbreviations for terms and entities that may have appeared in this report.

ACA	— ACA Financial Guaranty Corporation

ADR	— American depositary receipt

ADS	— American depositary shares

AGC	— Assured Guaranty Corporation

AGM	— Assured Guaranty Municipal

Ambac

— Ambac Financial Group Incorporated

AMT	— Alternative minimum tax

AUD	— Australian dollar

BAN	— Bond anticipation notes

BHAC	— Berkshire Hathaway Assurance Corporation

BRL	— Brazilian real

CAB	— Capital appreciation bond

CAD	— Canadian dollar

CCAB	— Convertible capital appreciation bond

CDA	— Community Development Authority

CDO	— Collateralized debt obligation

CHF	— Swiss franc

CLP	— Chilean peso

COP	— Columbian peso

DKK	— Danish krone

DRIVER

— Derivative inverse tax-exempt receipts

DW&P	— Department of Water & Power

DWR	— Department of Water Resources

ECFA	— Educational & Cultural Facilities Authority

EDA	— Economic Development Authority

EDFA	— Economic Development Finance Authority

ETF	— Exchange-traded fund

EUR

— Euro

FDIC	— Federal Deposit Insurance Corporation

FFCB	— Federal Farm Credit Banks

FGIC	— Financial Guaranty Insurance Corporation

FHA	— Federal Housing Administration

FHLB	— Federal Home Loan Bank

FHLMC

— Federal Home Loan Mortgage Corporation

FICO	— The Financing Corporation

FNMA	— Federal National Mortgage Association

FSA	— Farm Service Agency

GBP	— Great British pound

GDR	— Global depositary receipt

GNMA	— Government National Mortgage Association

GO	— General obligation

HCFR	— Healthcare facilities revenue

HEFA	— Health & Educational Facilities Authority

HEFAR

— Higher education facilities authority revenue

HFA	— Housing Finance Authority

HFFA	— Health Facilities Financing Authority

HKD	— Hong Kong dollar

HUD	— Department of Housing and Urban Development

HUF	— Hungarian forint

IDA	— Industrial Development Authority

IDAG	— Industrial Development Agency

IDR	— Indonesian rupiah

IEP	— Irish pound

JPY	— Japanese yen

KRW	— Republic of Korea won

LIBOR

— London Interbank Offered Rate

LIQ	— Liquidity agreement

LLC	— Limited liability company

LLP	— Limited liability partnership

LOC	— Letter of credit

LP	— Limited partnership

MBIA	— Municipal Bond Insurance Association

MFHR	— Multifamily housing revenue

MSTR	— Municipal securities trust receipts

MTN	— Medium-term note

MUD	— Municipal Utility District

MXN	— Mexican peso

MYR	— Malaysian ringgit

National

— National Public Finance Guarantee Corporation

NGN	— Nigerian naira

NOK	— Norwegian krone

NZD	— New Zealand dollar

PCFA	— Pollution Control Financing Authority

PCL	— Public Company Limited

PCR	— Pollution control revenue

PFA	— Public Finance Authority

PFFA	— Public Facilities Financing Authority

PFOTER

— Puttable floating option tax-exempt receipts

plc	— Public limited company

PLN	— Polish zloty

PUTTER

— Puttable tax-exempt receipts

R&D	— Research & development

Radian

— Radian Asset Assurance

RAN	— Revenue anticipation notes

RDA	— Redevelopment Authority

RDFA	— Redevelopment Finance Authority

REIT	— Real estate investment trust

ROC	— Reset option certificates

RON	— Romanian lei

RUB	— Russian ruble

SAVRS

— Select auction variable rate securities

SBA	— Small Business Authority

SEK	— Swedish krona

SFHR	— Single-family housing revenue

SFMR	— Single-family mortgage revenue

SGD	— Singapore dollar

SKK	— Slovakian koruna

SPA	— Standby purchase agreement

SPDR	— Standard & Poor’s Depositary Receipts

STRIPS

— Separate trading of registered interest and principal securities

TAN	— Tax anticipation notes

TBA	— To be announced

THB	— Thai baht

TIPS	— Treasury inflation-protected securities

TRAN	— Tax revenue anticipation notes

TRY	— Turkish lira

TTFA	— Transportation Trust Fund Authority

TVA	— Tennessee Valley Authority

ZAR	— South African rand

This page is intentionally left blank.

LOGO

Transfer Agent, Registrar, Shareholder Servicing

Agent & Dividend Disbursing Agent

Computershare Trust Company, N.A.

P.O. Box 43010

Providence, RI 02940-3010

1-800-730-6001

Website: wellsfargoadvantagefunds.com

Wells Fargo Funds Management, LLC, is a subsidiary of Wells Fargo & Company and is an affiliate of Wells Fargo & Company’s broker/dealer subsidiaries. This material is being prepared by Wells Fargo Funds Distributor, LLC. Member FINRA/SIPC, an affiliate of Wells Fargo & Company.

NOT FDIC INSURED ¡ NO BANK GUARANTEE ¡ MAY LOSE VALUE

220798 12-13

AMSI/AR143 10-13

ITEM 2.

CODE OF ETHICS

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

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

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

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT

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

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

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


	Fiscal		Fiscal
	year ended		year ended
	October 31, 2013		October 31, 2012
Audit fees	$	48,930	$	47,740
Audit-related fees		—		—
Tax fees (1)		3,740		3,650
All other fees		—		—

	$	52,670	$	51,390

(1)

Tax fees consist of fees for tax compliance, tax advice and tax planning. Excise tax fees for fiscal year ended 2012 in the amount of $1,700 was billed on December 2012 and is included in the fiscal year ended October 31, 2013 value. Excise tax fees for fiscal year ended 2011 in the amount of $1,660 was billed on December 2011 and is included in the fiscal year ended October 31, 2012 value.

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

or she shall sign the statement prepared by Management. Such written statement shall be presented to the full Committees at their next regularly scheduled meetings.

(f) Not applicable

(g) Not applicable

(h) Not applicable

ITEM 5.

AUDIT COMMITTEE OF LISTED REGISTRANTS

Not applicable.

ITEM 6.

INVESTMENTS

Except as noted below, the schedules of investments are included as part of the report to shareholders filed under Item 1 of this Form. The schedule of investments for Wells Fargo Advantage Multi-Sector Income Fund, is filed under this Item.


Portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			1


Security name	Interest rate			Maturity date		Principal		Value


Agency Securities: 2.47%
FHLMC		8.50	%		7-1-2028	$	85,205	$	101,536
FHLMC		8.50			3-1-2030		55,646		58,305
FHLMC Series 0196 Class A ±		0.97			12-15-2021		57,287		57,706
FHLMC Series 1383 ±		5.46			2-1-2037		719,015		752,134
FHLMC Series 2011-K16 Class B ±144A		4.59			11-25-2046		1,000,000		999,144
FHLMC Series 2011-K701 Class B ±144A		4.29			7-25-2048		165,000		172,197
FHLMC Series 2011-K702 Class B ±144A		4.77			4-25-2044		740,000		786,661
FHLMC Series 2012-K17 Class B ±144A		4.35			12-25-2044		675,000		659,187
FHLMC Series 2012-K18 Class B ±144A		4.26			1-25-2045		810,000		785,199
FHLMC Series 2012-K501 Class C ±144A		3.49			11-25-2046		800,000		803,146
FHLMC Series 2012-K705 Class B ±144A		4.16			9-25-2044		1,000,000		1,018,689
FHLMC Series 2012-K706 Class B ±144A		4.02			11-25-2044		500,000		505,583
FHLMC Series 2012-K706 Class C ±144A		4.02			11-25-2044		805,000		763,788
FHLMC Series 2012-K707 Class B ±144A		3.88			1-25-2047		930,000		932,499
FHLMC Series 2012-K709 Class B ±144A		3.74			4-25-2045		1,000,000		980,428
FHLMC Series 2012-K711 Class B ±144A		3.56			8-25-2045		264,000		257,698
FHLMC Series 2013-K30 Class B ±144A		3.56			6-25-2045		700,000		620,540
FHLMC Series 2013-K713 Class B ±144A		3.17			4-25-2046		1,000,000		937,048
FHLMC Series 2390 Class FD ±		0.62			12-15-2031		48,043		48,183
FHLMC Series 2567 Class FH ±		0.57			2-15-2033		144,218		143,639
FHLMC Series K007 Class X1 ±(c)		1.22			4-25-2020		1,025,709		60,382
FHLMC Series K016 Class X1 ±(c)		1.58			10-25-2021		389,647		38,416
FHLMC Series K020 Class X1 ±(c)		1.47			5-25-2022		6,934,836		667,624
FHLMC Series K021 Class X1 ±(c)		1.51			6-25-2022		9,246,233		927,240
FNMA ±		4.67			9-1-2032		1,540,446		1,651,062
FNMA		6.00			4-1-2033		70,707		78,368
FNMA ±		6.01			9-1-2037		714,817		774,041
FNMA		6.50			11-1-2032		62,991		69,510
FNMA		7.50			7-1-2017		61,140		64,738
FNMA		7.50			10-1-2028		8,804		8,832
FNMA		7.50			11-1-2028		155,120		167,697
FNMA		7.50			2-1-2030		38,768		39,358
FNMA		7.50			9-1-2030		91,798		98,152
FNMA		8.00			6-1-2030		26,253		26,741
FNMA		12.00			1-1-2016		5,480		5,608
FNMA Series 1996-46 Class FA ±		0.67			8-25-2021		31,548		31,599
FNMA Series 2001-25 Class Z		6.00			6-25-2031		290,843		322,776
FNMA Series 2001-35 Class F ±		0.77			7-25-2031		11,940		12,023
FNMA Series 2001-57 Class F ±		0.67			6-25-2031		12,021		12,082
FNMA Series 2002-77 Class FH ±		0.58			12-18-2032		95,266		95,355
FNMA Series 2002-97 Class FR ±		0.72			1-25-2033		23,978		24,031
FNMA Series G91-16 Class F ±		0.62			6-25-2021		37,956		37,979
FNMA Series G92-17 Class F ±		1.22			3-25-2022		88,112		89,275
GNMA		6.50			6-15-2028		55,162		61,799
GNMA		7.25			7-15-2017		17,771		18,074
GNMA		7.25			8-15-2017		39,738		42,473
GNMA		7.25			8-15-2017		20,330		20,741
GNMA		7.25			9-15-2017		30,471		32,674
GNMA		7.25			10-15-2017		54,811		58,439
GNMA		7.25			10-15-2017		29,444		31,358


2		Wells Fargo Advantage Multi-Sector Income Fund		Portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value


Agency Securities (continued)
GNMA		7.25	%		11-15-2017	$	23,735	$	25,209
GNMA		7.25			1-15-2018		9,067		9,098
GNMA		7.25			1-15-2018		12,838		13,006
GNMA		7.25			2-15-2018		23,114		23,749
GNMA		7.25			5-15-2018		12,208		12,250

Total Agency Securities (Cost $16,418,397)									17,035,069


Asset-Backed Securities: 0.11%
Bear Stearns I Trust Series 2006-HE1 Class 1A2 ±		0.39			12-25-2035		69,018		68,776
CVS Pass-Through Trust Series T		6.04			12-10-2028		610,649		681,852

Total Asset-Backed Securities (Cost $752,616)									750,628


						Shares
Common Stocks: 0.10%

Consumer Discretionary: 0.00%

Hotels, Restaurants & Leisure: 0.00%
Trump Entertainment Resorts Incorporated †(i)(a)							1,161		0


Telecommunication Services: 0.10%

Diversified Telecommunication Services: 0.10%
Fairpoint Communications Incorporated †							70,442		657,928


Total Common Stocks (Cost $1,617,838)									657,928


						Principal

Corporate Bonds and Notes: 62.97%

Consumer Discretionary: 13.93%

Auto Components: 1.31%
Allison Transmission Incorporated 144A		7.13			5-15-2019	$	3,790,000		4,083,725
Cooper Tire & Rubber Company		7.63			3-15-2027		1,805,000		1,732,800
Cooper Tire & Rubber Company		8.00			12-15-2019		450,000		462,375
Goodyear Tire & Rubber Company		7.00			5-15-2022		400,000		430,000
Goodyear Tire & Rubber Company		8.75			8-15-2020		468,000		548,730
United Rentals North America Incorporated		5.75			7-15-2018		1,685,000		1,807,163

									9,064,793


Diversified Consumer Services: 1.11%
Ceridian HCM Holding Incorporated 144A		11.00			3-15-2021		50,000		58,500
Service Corporation International		6.75			4-1-2016		475,000		518,938
Service Corporation International		7.00			6-15-2017		1,410,000		1,580,963
Service Corporation International		7.00			5-15-2019		650,000		698,750
Service Corporation International		7.50			4-1-2027		2,993,000		3,202,510
Service Corporation International		7.63			10-1-2018		680,000		778,600
Service Corporation International		8.00			11-15-2021		475,000		544,469
Sotheby’s 144A		5.25			10-1-2022		315,000		300,825

									7,683,555


Portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			3


Security name	Interest rate			Maturity date		Principal		Value


Hotels, Restaurants & Leisure: 4.39%
Burger King Corporation		9.88	%		10-15-2018	$	850,000	$	953,063
CCM Merger Incorporated 144A		9.13			5-1-2019		6,270,000		6,646,200
CityCenter Holdings LLC		7.63			1-15-2016		600,000		630,900
CityCenter Holdings LLC (PIK at 11.50%) ¥		10.75			1-15-2017		3,636,822		3,898,673
DineEquity Incorporated		9.50			10-30-2018		3,475,000		3,865,938
Greektown Superholdings Incorporated Series A		13.00			7-1-2015		7,850,000		8,193,438
Hilton Worldwide Finance LLC 144A		5.63			10-15-2021		195,000		200,363
Pinnacle Entertainment Incorporated		7.50			4-15-2021		2,580,000		2,831,550
Ruby Tuesday Incorporated		7.63			5-15-2020		2,025,000		1,944,000
Scientific Games Corporation		9.25			6-15-2019		485,000		523,194
Speedway Motorsports Incorporated		6.75			2-1-2019		525,000		557,156

									30,244,475


Household Durables: 0.10%
American Greetings Corporation		7.38			12-1-2021		475,000		473,813
Tempur Sealy International Incorporated		6.88			12-15-2020		200,000		213,500

									687,313


Internet & Catalog Retail: 0.12%
Expedia Incorporated		5.95			8-15-2020		750,000		795,830


Media: 5.43%
Allbritton Communications Company		8.00			5-15-2018		1,275,000		1,364,250
Cablevision Systems Corporation		8.63			9-15-2017		1,310,000		1,526,150
CBS Corporation		8.88			5-15-2019		750,000		962,858
CCO Holdings LLC		8.13			4-30-2020		450,000		492,750
Cinemark USA Incorporated		7.38			6-15-2021		775,000		848,625
CSC Holdings LLC		7.63			7-15-2018		625,000		720,313
CSC Holdings LLC		7.88			2-15-2018		1,100,000		1,273,250
CSC Holdings LLC		8.63			2-15-2019		383,000		452,898
DIRECTV Holdings LLC		3.80			3-15-2022		750,000		718,835
DISH DBS Corporation		5.13			5-1-2020		350,000		354,375
DISH DBS Corporation		7.88			9-1-2019		480,000		558,000
DreamWorks Animation SKG Incorporated 144A		6.88			8-15-2020		1,630,000		1,733,913
EchoStar DBS Corporation		7.13			2-1-2016		125,000		138,125
EchoStar DBS Corporation		7.75			5-31-2015		350,000		382,813
Gray Television Incorporated 144A		7.50			10-1-2020		975,000		1,021,313
Gray Television Incorporated		7.50			10-1-2020		4,200,000		4,399,500
Interpublic Group of Companies		4.00			3-15-2022		750,000		731,796
Lamar Media Corporation		5.88			2-1-2022		690,000		712,425
Lamar Media Corporation		7.88			4-15-2018		2,250,000		2,396,250
Lamar Media Corporation Series C		9.75			4-1-2014		315,000		326,025
LIN Television Corporation		6.38			1-15-2021		275,000		280,500
LIN Television Corporation		8.38			4-15-2018		1,625,000		1,732,656
Live Nation Entertainment Incorporated 144A		7.00			9-1-2020		200,000		212,500
Local TV Finance LLC 144A		9.25			6-15-2015		4,775,000		4,822,750
Lynx I Corporation 144A		5.38			4-15-2021		365,000		366,825
Lynx II Corporation 144A		6.38			4-15-2023		365,000		374,125
National CineMedia LLC		6.00			4-15-2022		1,860,000		1,934,400


4		Wells Fargo Advantage Multi-Sector Income Fund		Portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value


Media (continued)
National CineMedia LLC		7.88	%		7-15-2021	$	650,000	$	718,250
Nexstar Broadcasting Group Incorporated 144A		6.88			11-15-2020		1,750,000		1,828,750
Regal Cinemas Corporation		8.63			7-15-2019		2,650,000		2,862,000
Regal Entertainment Group		5.75			6-15-2023		400,000		395,000
Time Warner Cable Incorporated		4.00			1-15-2022		750,000		768,482

									37,410,702


Multiline Retail: 0.09%
Macy’s Retail Holdings Incorporated		3.88			1-15-2022		600,000		598,982


Specialty Retail: 1.38%
ABC Supply Company Incorporated 144A		5.63			4-15-2021		450,000		455,625
Advance Auto Parts Incorporated		4.50			1-15-2022		600,000		602,030
Ahern Rentals Incorporated 144A		9.50			6-15-2018		1,200,000		1,287,000
Limited Brands Incorporated		6.63			4-1-2021		800,000		880,000
Neiman Marcus Group Limited 144A		8.00			10-15-2021		210,000		214,988
Penske Auto Group Incorporated		5.75			10-1-2022		1,155,000		1,152,113
RadioShack Corporation		6.75			5-15-2019		1,885,000		1,248,813
Rent-A-Center Incorporated		6.63			11-15-2020		1,651,000		1,743,869
Toys “R” Us Property Company II LLC		8.50			12-1-2017		1,905,000		1,966,913

									9,551,351


Consumer Staples: 0.31%

Food & Staples Retailing: 0.09%
SABMiller Holdings Incorporated 144A		3.75			1-15-2022		600,000		614,941


Food Products: 0.11%
Kraft Foods Group Incorporated		3.50			6-6-2022		750,000		745,650


Tobacco: 0.11%
Lorillard Tobacco Company		6.88			5-1-2020		650,000		757,942


Energy: 11.43%

Energy Equipment & Services: 3.18%
Cleaver Brooks Incorporated 144A		8.75			12-15-2019		275,000		299,063
Dresser-Rand Group Incorporated		6.50			5-1-2021		1,155,000		1,227,188
Era Group Incorporated		7.75			12-15-2022		2,565,000		2,609,888
Forum Energy Technologies Incorporated 144A		6.25			10-1-2021		200,000		208,500
Gulfmark Offshore Incorporated		6.38			3-15-2022		4,490,000		4,523,675
Hornbeck Offshore Services Incorporated		5.00			3-1-2021		2,635,000		2,588,888
Hornbeck Offshore Services Incorporated		5.88			4-1-2020		505,000		518,888
NGPL PipeCo LLC 144A		7.77			12-15-2037		5,130,000		4,450,275
Oil States International Incorporated		6.50			6-1-2019		1,480,000		1,576,200
PHI Incorporated		8.63			10-15-2018		3,662,000		3,909,185

									21,911,750


Oil, Gas & Consumable Fuels: 8.25%
Crestwood Midstream Partners LP 144A%%		6.13			3-1-2022		275,000		281,188
CVR Refining LLC/Coffeyville Finance Incorporated		6.50			11-1-2022		1,675,000		1,679,188


Portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			5


Security name	Interest rate			Maturity date		Principal		Value


Oil, Gas & Consumable Fuels (continued)
Denbury Resources Incorporated		6.38	%		8-15-2021	$	50,000	$	53,375
Denbury Resources Incorporated		8.25			2-15-2020		1,010,000		1,111,000
El Paso Corporation		6.50			9-15-2020		445,000		475,378
El Paso Corporation		7.00			6-15-2017		850,000		959,364
El Paso Corporation		7.25			6-1-2018		1,585,000		1,794,875
El Paso Corporation		7.42			2-15-2037		800,000		757,626
El Paso Corporation		7.80			8-1-2031		1,850,000		1,909,126
El Paso Pipeline Partners LP		6.50			4-1-2020		750,000		871,137
Energy Transfer Equity LP		7.50			10-15-2020		3,100,000		3,580,500
Energy Transfer Partners LP		5.20			2-1-2022		750,000		806,832
Exterran Partners LP 144A		6.00			4-1-2021		2,300,000		2,288,500
Inergy Midstream LP 144A		6.00			12-15-2020		1,075,000		1,099,188
Kinder Morgan Energy Partners LP		3.95			9-1-2022		750,000		743,420
Murphy Oil USA Incorporated 144A		6.00			8-15-2023		385,000		390,775
Nabors Industries Incorporated		4.63			9-15-2021		750,000		758,651
Northern Tier Energy LLC		7.13			11-15-2020		1,435,000		1,463,700
Petrohawk Energy Corporation		7.88			6-1-2015		790,000		808,763
Petrohawk Energy Corporation		10.50			8-1-2014		495,000		507,375
Phillips 66		4.30			4-1-2022		625,000		648,712
Pioneer Natural Resources Company		3.95			7-15-2022		750,000		764,099
Pioneer Natural Resources Company		7.50			1-15-2020		1,220,000		1,512,679
Plains Exploration & Production Company		8.63			10-15-2019		2,885,000		3,192,403
Rockies Express Pipeline LLC 144A		5.63			4-15-2020		3,625,000		3,054,063
Rockies Express Pipeline LLC 144A		6.00			1-15-2019		360,000		319,500
Rockies Express Pipeline LLC 144A		6.88			4-15-2040		6,123,000		4,622,865
Rockies Express Pipeline LLC 144A		7.50			7-15-2038		2,350,000		1,927,000
Sabine Pass Liquefaction LLC 144A		5.63			2-1-2021		850,000		858,500
Sabine Pass Liquefaction LLC 144A		5.63			4-15-2023		850,000		833,000
Sabine Pass LNG LP		6.50			11-1-2020		4,180,000		4,368,100
Sabine Pass LNG LP		7.50			11-30-2016		4,635,000		5,173,819
Semgroup LP 144A		7.50			6-15-2021		2,525,000		2,644,938
Suburban Propane Partners LP		7.38			3-15-2020		790,000		847,275
Suburban Propane Partners LP		7.38			8-1-2021		309,000		332,948
Suburban Propane Partners LP		7.50			10-1-2018		422,000		453,123
Tesoro Corporation		9.75			6-1-2019		945,000		1,032,413
Weatherford International Incorporated		6.35			6-15-2017		650,000		737,861
Western Gas Partners		5.38			6-1-2021		503,000		541,966
Williams Partners LP		3.35			8-15-2022		750,000		707,857

									56,913,082


Financials: 14.08%

Capital Markets: 0.22%
Ace Securities Corporation ±		0.57			8-25-2045		118,908		118,557
Ace Securities Corporation ±		2.80			6-25-2033		586,584		583,104
Goldman Sachs Group Incorporated		5.75			1-24-2022		750,000		850,177

									1,551,838


6		Wells Fargo Advantage Multi-Sector Income Fund		Portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value


Commercial Banks: 1.09%
CIT Group Incorporated		5.25	%		3-15-2018	$	500,000	$	540,625
CIT Group Incorporated 144A		5.50			2-15-2019		1,275,000		1,380,188
CIT Group Incorporated 144A		6.63			4-1-2018		550,000		623,563
City National Bank		5.38			7-15-2022		500,000		537,536
Emigrant Bancorp Incorporated 144A		6.25			6-15-2014		3,650,000		3,686,500
HSBC Bank USA		6.00			8-9-2017		650,000		742,774

									7,511,186


Consumer Finance: 6.53%
Ally Financial Incorporated		5.50			2-15-2017		750,000		810,000
Ally Financial Incorporated		6.75			12-1-2014		998,000		1,050,395
Ally Financial Incorporated		7.50			12-31-2013		3,620,000		3,650,046
Ally Financial Incorporated		7.50			9-15-2020		1,160,000		1,357,200
Ally Financial Incorporated		8.00			3-15-2020		940,000		1,116,250
Ally Financial Incorporated		8.30			2-12-2015		2,055,000		2,227,106
BMC Software Finance Incorporated 144A		8.13			7-15-2021		620,000		655,650
Clearwire Communications Finance Corporation 144A		12.00			12-1-2015		940,000		974,780
Clearwire Communications Finance Corporation 144A		12.00			12-1-2015		1,450,000		1,503,650
Discover Financial Services		5.20			4-27-2022		750,000		795,950
Ford Motor Credit Company LLC		5.00			5-15-2018		650,000		720,106
Ford Motor Credit Company LLC		8.00			12-15-2016		250,000		296,946
General Motors Financial Company Incorporated		6.75			6-1-2018		1,415,000		1,602,488
Homer City Funding LLC (PIK at 9.23%) ¥		8.73			10-1-2026		1,351,973		1,395,912
International Lease Finance Corporation 144A		6.75			9-1-2016		100,000		111,125
International Lease Finance Corporation 144A		7.13			9-1-2018		75,000		86,344
International Lease Finance Corporation		8.63			9-15-2015		900,000		1,001,250
Level 3 Financing Incorporated		10.00			2-1-2018		2,010,000		2,148,188
Nielsen Finance LLC Company		7.75			10-15-2018		5,350,000		5,831,500
SLM Corporation		7.25			1-25-2022		930,000		995,100
SLM Corporation		8.00			3-25-2020		3,940,000		4,501,450
SLM Corporation		8.45			6-15-2018		1,675,000		1,955,563
Springleaf Finance Corporation		5.40			12-1-2015		1,535,000		1,607,913
Springleaf Finance Corporation		5.75			9-15-2016		1,100,000		1,163,250
Springleaf Finance Corporation 144A		6.00			6-1-2020		2,285,000		2,250,725
Springleaf Finance Corporation		6.50			9-15-2017		200,000		212,000
Springleaf Finance Corporation		6.90			12-15-2017		4,550,000		4,925,375
Springleaf Finance Corporation 144A		7.75			10-1-2021		70,000		75,250

									45,021,512


Diversified Financial Services: 2.39%
Bank of America Corporation		3.70			9-1-2015		650,000		681,036
Bank of America Corporation		5.70			1-24-2022		250,000		286,884
Blackstone Holdings Finance Company LLC 144A		5.88			3-15-2021		750,000		846,572
Citigroup Incorporated		4.50			1-14-2022		250,000		266,765
Citigroup Incorporated		6.00			8-15-2017		650,000		747,260
Denali Borrower/Finance Corporation 144A		5.63			10-15-2020		4,350,000		4,306,500
General Electric Capital Corporation		4.65			10-17-2021		650,000		711,446
ING U.S. Incorporated		5.50			7-15-2022		750,000		823,292
JPMorgan Chase & Company		3.38			5-1-2023		750,000		702,613


Portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			7


Security name	Interest rate			Maturity date		Principal		Value


Diversified Financial Services (continued)
Moody’s Corporation		5.50	%		9-1-2020	$	1,302,000	$	1,420,870
MPH Intermediate Holding Company (PIK at 9.13%) 144A¥		8.38			8-1-2018		325,000		337,594
Neuberger Berman Group LLC 144A		5.63			3-15-2020		500,000		518,750
Neuberger Berman Group LLC 144A		5.88			3-15-2022		650,000		664,625
Nuveen Investments Incorporated		5.50			9-15-2015		3,560,000		3,453,200
Nuveen Investments Incorporated 144A		9.13			10-15-2017		730,000		708,100

									16,475,507


Insurance: 0.59%
American International Group Incorporated		4.88			6-1-2022		750,000		820,625
Fidelity & Guaranty Life Holdings Incorporated 144A		6.38			4-1-2021		610,000		635,925
Hartford Financial Services Group Incorporated		5.13			4-15-2022		650,000		726,695
Liberty Mutual Group Incorporated 144A		4.95			5-1-2022		750,000		792,626
Prudential Covered Trust 144A		3.00			9-30-2015		408,000		422,163
W.R. Berkley Corporation		4.63			3-15-2022		650,000		678,659

									4,076,693


Real Estate Management & Development: 0.73%
Hockey Merger Sub 2 Incorporated 144A		7.88			10-1-2021		2,770,000		2,860,025
Onex Corporation 144A		7.75			1-15-2021		2,100,000		2,142,000

									5,002,025


REITs: 2.53%
Alexandria Real Estate Company		4.60			4-1-2022		650,000		665,602
American Tower Corporation		5.90			11-1-2021		650,000		708,280
DuPont Fabros Technology Incorporated 144A		5.88			9-15-2021		4,655,000		4,771,375
Essex Portfolio LP		3.63			8-15-2022		750,000		721,847
Health Care Incorporated		5.25			1-15-2022		650,000		703,952
Omega Healthcare Investors Incorporated		6.75			10-15-2022		1,775,000		1,943,625
Sabra Health Care Incorporated		5.38			6-1-2023		850,000		830,875
Sabra Health Care Incorporated		8.13			11-1-2018		943,000		1,023,155
The Geo Group Incorporated		5.13			4-1-2023		1,775,000		1,664,063
The Geo Group Incorporated 144A		5.88			1-15-2022		2,640,000		2,659,800
The Geo Group Incorporated		6.63			2-15-2021		365,000		386,444
Ventas Realty LP		4.25			3-1-2022		650,000		667,036
WEA Finance LLC 144A		4.63			5-10-2021		650,000		691,372

									17,437,426


Health Care: 3.22%

Biotechnology: 0.11%
Amgen Incorporated		3.63			5-15-2022		750,000		757,847


Health Care Equipment & Supplies: 0.36%
Boston Scientific Corporation		6.00			1-15-2020		750,000		874,044
Hologic Incorporated		6.25			8-1-2020		1,530,000		1,625,625

									2,499,669


8		Wells Fargo Advantage Multi-Sector Income Fund		Portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value


Health Care Providers & Services: 2.38%
Aviv Healthcare Properties LP 144A		6.00	%		10-15-2021	$	515,000	$	527,875
Aviv Healthcare Properties LP		7.75			2-15-2019		1,350,000		1,456,313
Capella Healthcare Incorporated		9.25			7-1-2017		885,000		950,269
Centene Corporation		5.75			6-1-2017		1,000,000		1,067,500
Coventry Health Care Incorporated		5.45			6-15-2021		750,000		842,222
DaVita HealthCare Partners Incorporated		5.75			8-15-2022		525,000		538,781
Express Scripts Holding Company		3.90			2-15-2022		665,000		681,600
HCA Incorporated		6.50			2-15-2020		1,875,000		2,085,938
HCA Incorporated		7.50			11-15-2095		800,000		720,000
HCA Incorporated		8.50			4-15-2019		740,000		794,575
Health Management Associates Incorporated		6.13			4-15-2016		175,000		192,500
HealthSouth Corporation		5.75			11-1-2024		45,000		44,663
HealthSouth Corporation		7.25			10-1-2018		360,000		387,000
HealthSouth Corporation		8.13			2-15-2020		495,000		545,119
Humana Incorporated		7.20			6-15-2018		750,000		899,066
MPT Operating Partnership LP		6.38			2-15-2022		800,000		826,000
MPT Operating Partnership LP		6.88			5-1-2021		775,000		833,125
Multiplan Incorporated 144A		9.88			9-1-2018		1,440,000		1,591,200
Select Medical Corporation		6.38			6-1-2021		940,000		907,100
Tenet Healthcare Corporation 144A		6.00			10-1-2020		215,000		227,363
Tenet Healthcare Corporation 144A		8.13			4-1-2022		250,000		273,750

									16,391,959


Health Care Technology: 0.07%
Healthcare Technology Intermediate Incorporated (PIK at 8.13%) 144A¥		7.38			9-1-2018		480,000		496,200


Life Sciences Tools & Services: 0.12%
Life Technologies Corporation		6.00			3-1-2020		750,000		858,734


Pharmaceuticals: 0.18%
Pinnacle Merger Sub Incorporated 144A		9.50			10-1-2023		500,000		527,500
Watson Pharmaceuticals Incorporated		3.25			10-1-2022		750,000		713,669

									1,241,169


Industrials: 3.48%

Aerospace & Defense: 0.20%
TransDigm Group Incorporated		5.50			10-15-2020		550,000		554,125
TransDigm Group Incorporated		7.75			12-15-2018		750,000		806,250

									1,360,375


Air Freight & Logistics: 0.42%
Bristow Group Incorporated		6.25			10-15-2022		2,740,000		2,877,000


Airlines: 0.43%
Aviation Capital Group Corporation 144A		6.75			4-6-2021		1,320,000		1,420,938
Aviation Capital Group Corporation 144A		7.13			10-15-2020		720,000		798,621
Delta Air Lines Incorporated		4.75			11-7-2021		713,576		758,175

									2,977,734


Portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			9


Security name	Interest rate			Maturity date		Principal		Value


Commercial Services & Supplies: 0.93%
ADT Corporation		3.50	%		7-15-2022	$	750,000	$	657,417
ADT Corporation 144A		6.25			10-15-2021		600,000		636,750
Covanta Holding Corporation		6.38			10-1-2022		225,000		232,447
Covanta Holding Corporation		7.25			12-1-2020		230,000		248,780
Interface Incorporated		7.63			12-1-2018		113,000		122,888
Iron Mountain Incorporated		6.00			8-15-2023		2,160,000		2,197,800
Iron Mountain Incorporated		8.38			8-15-2021		759,000		819,720
Penske Truck Leasing Company 144A		3.75			5-11-2017		750,000		787,117
Republic Services Incorporated		3.55			6-1-2022		750,000		739,142

									6,442,061


Machinery: 0.52%
Columbus McKinnon Corporation		7.88			2-1-2019		725,000		778,469
H&E Equipment Services Incorporated		7.00			9-1-2022		2,565,000		2,795,850

									3,574,319


Professional Services: 0.29%
Interactive Data Corporation		10.25			8-1-2018		1,250,000		1,381,250
Verisk Analytics Incorporated		5.80			5-1-2021		530,000		587,639

									1,968,889


Trading Companies & Distributors: 0.51%
Ashtead Capital Incorporated 144A		6.50			7-15-2022		3,285,000		3,523,163


Transportation Infrastructure: 0.18%
Florida East Coast Railway Corporation		8.13			2-1-2017		885,000		931,463
Watco Companies LLC 144A		6.38			4-1-2023		345,000		341,550

									1,273,013


Information Technology: 4.09%

Communications Equipment: 0.29%
Avaya Incorporated		9.75			11-1-2015		575,000		569,250
CyrusOne LP		6.38			11-15-2022		300,000		302,250
Lucent Technologies Incorporated		6.45			3-15-2029		1,285,000		1,130,800

									2,002,300


Computers & Peripherals: 0.11%
Hewlett-Packard Company		4.05			9-15-2022		750,000		729,333


Electronic Equipment, Instruments & Components: 1.05%
CDW Financial Corporation		12.54			10-12-2017		221,000		229,840
Jabil Circuit Incorporated		8.25			3-15-2018		5,275,000		6,237,688
L-3 Communications Corporation		4.95			2-15-2021		750,000		797,055

									7,264,583


Internet Software & Services: 0.04%
Equinix Incorporated		7.00			7-15-2021		75,000		81,938
Verisign Incorporated		4.63			5-1-2023		170,000		165,538

									247,476


10		Wells Fargo Advantage Multi-Sector Income Fund		Portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value


IT Services: 2.27%
Audatex North America Incorporated 144A		6.00	%		6-15-2021	$	1,400,000	$	1,445,500
Audatex North America Incorporated 144A%%		6.13			11-1-2023		420,000		426,300
Audatex North America Incorporated		6.75			6-15-2018		750,000		801,975
Fidelity National Information Services Incorporated		7.88			7-15-2020		1,000,000		1,101,477
First Data Corporation 144A		11.75			8-15-2021		2,120,000		2,157,100
First Data Corporation 144A		7.38			6-15-2019		625,000		672,656
First Data Corporation		11.25			3-31-2016		3,489,000		3,506,445
SunGard Data Systems Incorporated		7.38			11-15-2018		5,007,000		5,307,420
SunGard Data Systems Incorporated		7.63			11-15-2020		250,000		272,188

									15,691,061


Software: 0.33%
Activision Blizzard Incorporated 144A		5.63			9-15-2021		705,000		729,675
Activision Blizzard Incorporated 144A		6.13			9-15-2023		175,000		182,875
CA Incorporated		5.38			12-1-2019		750,000		840,345
Nuance Communications Incorporated 144A		5.38			8-15-2020		530,000		526,025

									2,278,920


Materials: 0.97%

Chemicals: 0.20%
Chemtura Corporation		5.75			7-15-2021		575,000		582,188
Dow Chemical Company		4.13			11-15-2021		750,000		775,045

									1,357,233


Containers & Packaging: 0.47%
Crown Cork & Seal Company Incorporated		7.38			12-15-2026		185,000		204,888
Crown Cork & Seal Company Incorporated (i)		7.50			12-15-2096		600,000		561,000
Owens-Illinois Incorporated		7.80			5-15-2018		1,295,000		1,494,106
Sealed Air Corporation 144A		6.88			7-15-2033		1,075,000		1,010,500

									3,270,494


Metals & Mining: 0.08%
Freeport-McMoRan Copper & Gold Incorporated		3.55			3-1-2022		600,000		565,204
Indalex Holdings Corporation (i)(a)(s)		0.00			2-1-2014		3,170,000		0

									565,204


Paper & Forest Products: 0.22%
Georgia-Pacific LLC		8.88			5-15-2031		1,080,000		1,521,879


Telecommunication Services: 8.45%

Diversified Telecommunication Services: 3.82%
CenturyLink Incorporated		5.80			3-15-2022		600,000		594,000
Citizens Communications Company		7.88			1-15-2027		1,805,000		1,786,950
Frontier Communications Corporation		8.13			10-1-2018		845,000		973,863
Frontier Communications Corporation		8.25			4-15-2017		1,040,000		1,202,500
Frontier Communications Corporation		8.50			4-15-2020		525,000		599,813
GCI Incorporated		6.75			6-1-2021		2,330,000		2,254,275
GCI Incorporated		8.63			11-15-2019		5,625,000		5,976,563


Portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			11


Security name	Interest rate			Maturity date		Principal		Value


Diversified Telecommunication Services (continued)
Qwest Corporation		7.13	%		11-15-2043	$	795,000	$	771,544
Qwest Corporation		7.25			9-15-2025		1,040,000		1,108,232
Qwest Corporation		7.63			8-3-2021		230,000		243,225
Syniverse Holdings Incorporated		9.13			1-15-2019		5,005,000		5,417,913
TW Telecommunications Holdings Incorporated 144A		5.38			10-1-2022		600,000		598,500
TW Telecommunications Holdings Incorporated		5.38			10-1-2022		2,165,000		2,159,588
Windstream Corporation		7.88			11-1-2017		2,330,000		2,664,938

									26,351,904


Wireless Telecommunication Services: 4.63%
Cricket Communications Incorporated		7.75			10-15-2020		1,930,000		2,205,025
Crown Castle International Corporation		5.25			1-15-2023		100,000		99,000
Crown Castle International Corporation		7.13			11-1-2019		70,000		75,600
Crown Castle Towers LLC 144A		6.11			1-15-2040		750,000		853,222
MetroPCS Wireless Incorporated 144A		6.25			4-1-2021		170,000		177,863
MetroPCS Wireless Incorporated		6.63			11-15-2020		3,300,000		3,489,750
MetroPCS Wireless Incorporated 144A		6.63			4-1-2023		505,000		528,356
MetroPCS Wireless Incorporated		7.88			9-1-2018		1,950,000		2,106,000
Motorola Solutions Incorporated		3.75			5-15-2022		750,000		721,906
SBA Communications Corporation		5.63			10-1-2019		160,000		164,400
SBA Telecommunications Corporation		5.75			7-15-2020		2,000,000		2,080,000
SBA Telecommunications Corporation		8.25			8-15-2019		15,000		16,256
Sprint Capital Corporation		6.88			11-15-2028		13,665,000		12,981,711
Sprint Capital Corporation		8.75			3-15-2032		1,855,000		2,008,038
Sprint Corporation 144A		7.25			9-15-2021		200,000		215,500
Sprint Corporation 144A		7.88			9-15-2023		200,000		217,000
Sprint Nextel Corporation 144A		9.00			11-15-2018		325,000		394,063
Sprint Nextel Corporation		11.50			11-15-2021		625,000		814,063
T-Mobile USA Incorporated		6.46			4-28-2019		160,000		169,600
T-Mobile USA Incorporated		6.54			4-28-2020		165,000		174,900
T-Mobile USA Incorporated		6.63			4-28-2021		920,000		972,900
T-Mobile USA Incorporated		6.73			4-28-2022		875,000		924,219
T-Mobile USA Incorporated		6.84			4-28-2023		505,000		534,038

									31,923,410


Utilities: 3.01%

Electric Utilities: 1.55%
Energy Future Intermediate Holding Company LLC 144A		6.88			8-15-2017		500,000		511,250
Great Plains Energy Incorporated		4.85			6-1-2021		750,000		801,441
IPALCO Enterprises Incorporated		5.00			5-1-2018		1,075,000		1,123,375
IPALCO Enterprises Incorporated 144A		7.25			4-1-2016		1,925,000		2,117,500
Mirant Mid-Atlantic LLC Series C		10.06			12-30-2028		3,614,632		4,021,278
Otter Tail Corporation		9.00			12-15-2016		1,835,000		2,134,716
PNM Resources Incorporated		9.25			5-15-2015		9,000		10,035

									10,719,595


12		Wells Fargo Advantage Multi-Sector Income Fund		Portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value


Gas Utilities: 0.41%
AmeriGas Finance LLC		6.75	%		5-20-2020	$	1,775,000	$	1,934,750
AmeriGas Finance LLC		7.00			5-20-2022		795,000		858,600
AmeriGas Partners/Finance Corporation		6.50			5-20-2021		45,000		48,150

									2,841,500


Independent Power Producers & Energy Traders: 0.83%
Calpine Corporation 144A		6.00			1-15-2022		425,000		440,938
NRG Energy Incorporated		8.50			6-15-2019		1,615,000		1,740,163
NSG Holdings LLC 144A		7.75			12-15-2025		2,175,000		2,310,938
Reliant Energy Incorporated		9.24			7-2-2017		759,521		782,306
Reliant Energy Incorporated		9.68			7-2-2026		410,000		426,400

									5,700,745


Multi-Utilities: 0.22%
Ameren Illinois Company		9.75			11-15-2018		500,000		670,333
CMS Energy Corporation		5.05			3-15-2022		750,000		815,531

									1,485,864


Total Corporate Bonds and Notes (Cost $414,659,788)									434,250,186


Foreign Corporate Bonds and Notes @: 4.00%

Consumer Discretionary: 0.52%

Auto Components: 0.03%
Gestamp Fund Luxembourg SA (EUR)		5.88			5-31-2020		135,000		190,628


Automobiles: 0.10%
Jaguar Land Rover plc (GBP)		8.25			3-15-2020		300,000		541,147
Servus Luxembourg Holding SCA (EUR) 144A		7.75			6-15-2018		100,000		141,444

									682,591


Hotels, Restaurants & Leisure: 0.11%
Casino Guichard Perrachon SA (EUR)		4.73			5-26-2021		500,000		770,610


Media: 0.28%
Arqiva Broadcast Finance plc (GBP) 144A		9.50			3-31-2020		100,000		175,171
Telenet Finance V Luxembourg SCA (EUR)		6.25			8-15-2022		400,000		566,453
Unitymedia Hessen GmbH & Company (EUR) 144A		5.13			1-21-2023		500,000		665,915
Ziggo Holding BV (EUR)		3.63			3-27-2020		400,000		540,384

									1,947,923


Consumer Staples: 0.32%

Food & Staples Retailing: 0.15%
Foodcorp Limited (EUR)		8.75			3-1-2018		690,000		1,030,532


Food Products: 0.17%
BRF SA (BRL) 144A		7.75			5-22-2018		3,100,000		1,150,634


Portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			13


Security name	Interest rate			Maturity date		Principal		Value


Financials: 2.43%

Commercial Banks: 2.04%
Eurofima (AUD)		6.25	%		12-28-2018		2,450,000	$	2,508,719
European Investment Bank (AUD)		6.50			8-7-2019		4,880,000		5,092,781
International Bank for Reconstruction & Development (AUD)		5.75			10-1-2020		950,000		969,103
KfW (AUD)		6.25			5-19-2021		1,210,000		1,260,346
KfW (AUD)		6.38			2-17-2015		3,319,000		2,838,008
Sberbank Rossii (NZD)		7.00			1-31-2016		44,000,000		1,371,555

									14,040,512


Consumer Finance: 0.09%
Fiat Industrial SpA (EUR)		6.25			3-9-2018		400,000		619,834


Diversified Financial Services: 0.30%
General Electric Capital Corporation (NZD)		4.25			1-17-2018		2,000,000		1,616,853
Numericable Finance & Company SCA (EUR)		12.38			2-15-2019		300,000		486,778

									2,103,631


Industrials: 0.35%

Building Products: 0.08%
Heidelbergcement AG (EUR)		8.50			10-31-2019		330,000		570,713


Trading Companies & Distributors: 0.05%
Rexel SA (EUR)		7.00			12-17-2018		200,000		299,319


Transportation Infrastructure: 0.22%
Heathrow Funding Limited (EUR)		4.60			2-15-2020		1,000,000		1,530,509


Information Technology: 0.04%

Software: 0.04%
Teamsystem Holdings SpA (EUR) 144A		7.38			5-15-2020		200,000		274,988


Materials: 0.08%

Paper & Forest Products: 0.08%
Smurfit Kappa Funding plc (EUR)		7.25			11-15-2017		400,000		564,574


Telecommunication Services: 0.16%

Diversified Telecommunication Services: 0.12%
Telefonica Emisiones Company (EUR)		4.69			11-11-2019		300,000		449,798
Virgin Media Finance plc (GBP)		8.88			10-15-2019		201,000		350,161

									799,959


Wireless Telecommunication Services: 0.04%
Interxion Holding NV (EUR) 144A		6.00			7-15-2020		200,000		283,873


Utilities: 0.10%

Water Utilities: 0.10%
Befesa Zinc Aser SA (EUR)		8.88			5-15-2018		500,000		729,790


Total Foreign Corporate Bonds and Notes (Cost $26,079,351)									27,590,620


14		Wells Fargo Advantage Multi-Sector Income Fund		Portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value


Foreign Government Bonds @: 26.56%
Australia (AUD)		3.25	%		4-21-2025		3,350,000	$	2,913,808
Brazil (BRL)		8.50			1-5-2024		14,580,000		5,938,867
Brazil (BRL)		10.00			1-1-2017		31,000,000		13,784,248
Chile (CLP)		5.50			8-5-2020		940,000,000		1,871,742
Colombia (COP)		7.75			4-14-2021		5,250,000,000		3,172,999
Hungary (HUF)		6.75			11-24-2017		2,375,000,000		11,827,957
Indonesia (IDR)		7.38			9-15-2016		120,100,000,000		10,803,407
Korea (KRW)		5.25			3-10-2027		2,830,000,000		3,147,336
Malaysia (MYR)		3.26			3-1-2018		22,500,000		7,102,557
Malaysia (MYR)		4.26			9-15-2016		21,100,000		6,892,179
Mexico (MXN)		7.25			12-15-2016		129,540,000		10,728,292
Mexico (MXN)		7.75			5-29-2031		34,450,000		2,824,711
Mexico (MXN)		7.75			11-13-2042		84,190,000		6,760,514
New Zealand (NZD)		5.50			4-15-2023		5,625,000		4,976,737
Nigeria (NGN)		15.10			4-27-2017		500,000,000		3,386,335
Poland (PLN)		4.00			10-25-2023		43,850,000		14,026,847
Queensland Treasury (AUD)		5.75			7-22-2024		4,100,000		4,144,134
Republic of South Africa (ZAR)		2.00			1-31-2025		10,095,498		1,035,675
Republic of South Africa (ZAR)		6.50			2-28-2041		67,200,000		5,007,358
Republic of South Africa (ZAR)		7.75			2-28-2023		73,600,000		7,401,240
Romania (RON)		6.00			4-30-2016		11,750,000		3,771,243
Russia (RUB)		7.00			1-25-2023		29,000,000		899,730
Russia (RUB)		7.50			3-15-2018		172,600,000		5,570,216
Russia (RUB)		7.60			7-20-2022		354,400,000		11,448,388
State of New South Wales Australia (AUD)		5.00			8-20-2024		3,900,000		3,777,250
Thailand (THB)		3.25			6-16-2017		325,000,000		10,474,732
Turkey (TRY)		6.30			2-14-2018		675,000		317,339
Turkey (TRY)		8.30			6-20-2018		18,200,000		9,144,446
Turkey (TRY)		9.00			3-8-2017		19,350,000		9,964,584

Total Foreign Government Bonds (Cost $192,634,180)									183,114,871


Municipal Obligations: 0.05%

New York: 0.05%
Build NYC Resource Corporation Bronx Charter School for Excellence Project Series B (Education Revenue)		5.00			4-1-2018	$	345,000		337,903


Total Municipal Obligations (Cost $345,000)									337,903


Non-Agency Mortgage Backed Securities: 7.42%
American General Mortgage Loan Series 2009 Class 1-A6 ±144A		5.75			9-25-2048		689,918		690,591
American General Mortgage Loan Series 2010 Class 1A-A3 ±144A		5.65			3-25-2058		460,000		477,355
American Home Mortgage Assets Series 2006-2 Class 1A1 ±		1.11			9-25-2046		3,693,928		2,624,691
Argent Securities Incorporated Series 2004-W5 Class AV3B ±		1.07			4-25-2034		98,007		95,039
Asset Backed Funding Corporation Certificates Series 2003-AHL1 Class A1		4.18			3-25-2033		292,430		287,193
Banc of America Commercial Mortgage Securities Incorporated Series 2006-03 Class AM ±		5.86			7-10-2044		1,340,000		1,382,171
Banc of America Commercial Mortgage Securities Incorporated Series 2008-1 Class AM ±		6.25			2-10-2051		550,000		600,085
Banc of America Commercial Mortgage Trust Series 2006-5 Class AM		5.45			9-10-2047		750,000		802,616


Portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			15


Security name	Interest rate			Maturity date		Principal		Value


Non-Agency Mortgage Backed Securities (continued)
Banc of America Commercial Mortgage Trust Series 2007-3 Class AM ±		5.56	%		6-10-2049	$	430,000	$	477,137
Banc of America Funding Corporation Series 2005 Class 5-1A1		5.50			9-25-2035		610,243		623,880
Banc of America Funding Corporation Series 2009 Class R6-3A1 ±144A		2.24			1-26-2037		61,550		61,376
Banc of America Mortgage Securities Series 2003 Class A-3A1 ±		2.81			2-25-2033		183,763		178,993
Bayview Financial Acquisition Trust Series 2005-B Class 1A6		5.21			4-28-2039		11,691		11,693
Bear Stearns Commercial Mortgage Series 2007-PW17 Class AM ±		5.89			6-11-2050		318,000		359,677
Bear Stearns Commercial Mortgage Series 2007-PW18 Class AM ±		6.08			6-11-2050		100,000		111,850
Carrington Mortgage Loan Trust Series 2005-FRE1 Class A5 ±		0.45			12-25-2035		38,538		38,351
Centex Home Equity Series 2002-A Class AF6		5.54			1-25-2032		343,745		343,393
Centex Home Equity Series 2002-D Class AF6 ±		4.66			12-25-2032		121,124		122,956
Centex Home Equity Series 2003-C Class AF4		5.46			4-25-2032		46,137		46,340
Centex Home Equity Series 2004-B Class AF6		4.69			3-25-2034		299,733		299,909
Chase Funding Mortgage Loan Series 2003 Class 5-1A4		4.40			2-25-2030		134,428		134,297
Citigroup Commercial Mortgage Trust Series 2006 Class C4 ±		5.78			3-15-2049		680,000		738,243
Citigroup Commercial Mortgage Trust Series 2007-C6 Class AM ±		5.71			12-10-2049		450,000		499,236
Citigroup Commercial Mortgage Trust Series 2012-GC8 Class C ±144A		4.88			9-10-2045		1,000,000		1,025,156
Citigroup Mortgage Loan Trust Incorporated Series 2003-HE3 Class A3 ±		0.55			12-25-2033		106,306		100,582
Commercial Mortgage Trust Series 2012-CR2 Class C ±		4.86			8-15-2045		1,000,000		1,025,740
Countrywide Asset Backed Certificates Series 2003-5 Class AF5		5.79			2-25-2034		97,099		100,557
Countrywide Home Loans Series 2003-48 Class 2A2 ±		0.67			10-25-2033		194,545		196,615
Credit-Based Asset Servicing & Securitization LLC Series 2005-CB2 Class M1 ±		0.83			4-25-2036		304,098		294,083
Credit Suisse First Boston Commercial Mortgage Trust Series 2006-C4 Class AM		5.51			9-15-2039		1,500,000		1,621,644
Credit Suisse First Boston Mortgage Securities Series 2002-AR5 Class 1A1 ±		2.19			9-25-2032		657,794		652,693
Credit Suisse First Boston Mortgage Securities Series 2003-AR15 Class 3A1 ±		2.81			6-25-2033		238,947		234,056
Credit Suisse First Boston Mortgage Securities Series 2003-AR9 Class 2A2 ±		2.29			3-25-2033		55,056		55,115
Credit Suisse Mortgage Capital Certificate Series 2006 ±		5.79			6-15-2038		1,045,000		1,141,799
Credit Suisse Mortgage Trust Series 2006-C5 Class AM		5.34			12-15-2039		1,000,000		1,066,004
Equity One Asset Backed Securities Series 2004-2 Class AF4 ±		4.62			7-25-2034		423,501		433,312
First Franklin Mortgage Loan Assets Series 2005-FT9 Class A3 ±		0.45			10-25-2035		29,286		29,271
First Horizon Mortgage Pass Through Series 2004-AR1 Class 1A1 ±		2.59			2-25-2034		478,390		471,649
First Horizon Mortgage Pass Through Series 2004-AR4 Class 3A1 ±		2.59			8-25-2034		19,223		18,522
Global Mortgage Securitization Limited Series 2004-A Class A2 ±144A		0.49			11-25-2032		528,874		497,442
GMAC Mortgage Corporation Loan Series 2003-GH1 Class A5		5.60			7-25-2034		16,418		16,688
Greenpoint Mortgage Funding Trust Series 2005-HE4 Class 1A1 ±		0.61			7-25-2030		37,660		36,068
Greenwich Capital Commercial Funding Corporation Series 2006-GG7 Class AM ±		5.83			7-10-2038		2,570,000		2,815,586
Greenwich Capital Commercial Funding Corporation Series 2007-GG11 Class A4		5.74			12-10-2049		475,000		535,343
GS Mortgage Securities Trust Series 2006-GG6 Class AM ±		5.62			4-10-2038		835,000		906,418
GS Mortgage Securities Trust Series 2007-GG10 Class A4 ±		5.80			8-10-2045		1,000,000		1,108,886
GS Mortgage Securities Trust Series 2010-C1 Class X ±144A(c)		1.52			8-10-2043		6,516,227		462,457
GS Mortgage Securities Trust Series 2012-GCJ7 Class XA ±(c)		2.60			5-10-2045		4,910,001		657,469
GSAA Home Equity Trust Series 2004-5 Class AF5 ±		4.65			6-25-2034		57,852		59,239
GSMPS Mortgage Loan Trust Series 2005-AHL Class M1 ±		0.60			4-25-2035		22,274		21,512
GSMPS Mortgage Loan Trust Series 2006-1 Class A1 ±144A		0.47			3-25-2035		220,452		212,849
GSMPS Mortgage Loan Trust Series 2006-SEA1 Class A ±144A		0.47			5-25-2036		330,803		323,963
Home Equity Asset Trust Series 2006-3 Class 2A3 ±		0.35			7-25-2036		8,156		8,133
JPMorgan Chase Commercial Mortgage Trust Series 2007-CB18 Class AM ±		5.47			6-12-2047		875,000		961,954
JPMorgan Chase Commercial Mortgage Trust Series 2007-CB20 Class AM ±		5.87			2-12-2051		785,000		888,408
JPMorgan Mortgage Trust Series 2004-A3 Class 2A1 ±		2.72			7-25-2034		89,054		87,995
JPMorgan Mortgage Trust Series 2004-A3 Series 3A3 ±		4.74			7-25-2034		132,369		131,794
JPMorgan Mortgage Trust Series 2005-A3 Class 11A2 ±		3.32			6-25-2035		530,110		521,966


16		Wells Fargo Advantage Multi-Sector Income Fund		Portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value


Non-Agency Mortgage Backed Securities (continued)
JPMorgan Mortgage Trust Series 2009-7 Class 2A1 ±144A		6.00	%		2-27-2037	$	88,066	$	89,438
JPMorgan Mortgage Trust Series 2009-7 Class 5A1 ±144A		6.00			2-27-2037		449,053		459,692
Lehman Brothers-UBS Commercial Mortgage Trust Series 2007-C1 Class AM		5.46			2-15-2040		750,000		821,040
Lehman Brothers-UBS Commercial Mortgage Trust Series 2008-C1 Class AM ±		6.15			4-15-2041		820,000		926,505
Lehman XS Trust Series 2006-18N Class A5A ±(i)		0.34			12-25-2036		3,106,749		2,153,713
MASTR Adjustable Rate Mortgage Trust Series 2003-6 Class 3A1 ±		2.84			12-25-2033		736,326		726,726
MASTR Adjustable Rate Mortgage Trust Series 2003-6 Class 4A2 ±		4.65			1-25-2034		39,566		38,938
MASTR Adjustable Rate Mortgage Trust Series 2004-13 Class 3A7 ±		2.62			11-21-2034		49,587		51,136
MASTR Alternative Loans Trust Series 2005-1 Class 5A1		5.50			1-25-2020		98,143		99,988
Merrill Lynch Countrywide Commercial Mortgage Trust Series 2006-4 Class AM ±		5.20			12-12-2049		340,000		371,696
Merrill Lynch Countrywide Commercial Mortgage Trust Series 2007-9 Class A4		5.70			9-12-2049		829,000		930,542
Merrill Lynch Mortgage Trust Series 2005-A8 Class A1B3 ±		5.25			8-25-2036		120,000		121,187
Merrill Lynch Mortgage Trust Series 2006-C1 Class AM ±		5.68			5-12-2039		565,000		611,093
Mesa Trust Asset Backed Certificates Series 2001-5 Class A ±144A		0.97			12-25-2031		23,740		21,951
Mid State Trust Series 11 Class A1		4.86			7-15-2038		280,974		299,927
MLCC Mortgage Investors Incorporated Series 2003-G Class A2 ±		1.10			1-25-2029		211,143		207,960
Morgan Stanley Bank of America Merrill Lynch Trust Series 2012-C5 Class XA ±144A(c)		1.89			8-15-2045		5,907,696		580,969
Morgan Stanley Capital I Trust Series 2004-NC1 Class M1 ±		1.22			12-27-2033		760,547		731,012
Morgan Stanley Capital I Trust Series 2005-HQ6 Class A4B		5.04			8-13-2042		650,000		682,482
Morgan Stanley Capital I Trust Series 2006-HQ10 Class AM		5.36			11-12-2041		500,000		551,197
Morgan Stanley Capital I Trust Series 2006-HQ9 Class AJ ±		5.79			7-12-2044		1,000,000		1,083,906
Morgan Stanley Capital I Trust Series 2006-HQ9 Class AM ±		5.77			7-12-2044		25,000		27,436
Morgan Stanley Capital I Trust Series 2006-IQ12 Class AM		5.37			12-15-2043		500,000		548,006
Morgan Stanley Capital I Trust Series 2007-HQ13 Class A3		5.57			12-15-2044		1,355,000		1,481,950
Morgan Stanley Capital I Trust Series 2010-GG10 Class A4B ±144A		5.80			8-15-2045		615,000		681,146
Morgan Stanley Capital I Trust Series 2010-R5 Class 3A ±144A		0.48			3-26-2037		29,989		29,915
Morgan Stanley Capital I Trust Series 2012-C4 Class C ±144A		5.53			3-15-2045		900,000		975,716
New Century Home Equity Loan Trust Series 2004-3 Class M1 ±		1.10			11-25-2034		1,165,049		1,071,261
New Century Home Equity Loan Trust Series 2005-1 Class A1MZ ±		0.46			3-25-2035		62,015		60,543
Provident Funding Mortgage Loan Series 2005-1 Class 2A1 ±		2.71			5-25-2035		79,071		79,805
RBSSP Resecuritization Trust Series 2010-3 Class 4A1 ±144A		3.16			12-26-2035		50,249		50,565
Renaissance Home Equity Loan Trust Series 2004-4 Class AF4		4.88			2-25-2035		762,057		772,861
Residential Asset Mortgage Products Incorporated Series 2006-EFC1 Class A2 ±		0.37			2-25-2036		167,095		165,856
Residential Asset Securities Corporation Series 2004-KS3 Class AI4 ±		3.77			1-25-2032		257,753		259,129
Residential Funding Mortgage Securities I Series 2004-S9 Class 1A19		5.50			12-25-2034		200,000		199,748
Saxon Asset Securities Trust Series 2002-1 Class AF5 ±		6.76			12-25-2030		194,505		192,820
Saxon Asset Securities Trust Series 2003-1 Class AF7		4.03			6-25-2033		747,749		758,086
Sequoia Mortgage Trust Series 2003-1 Class 1A ±		0.93			4-20-2033		33,388		32,743
Structured Adjustable Rate Mortgage Loan Trust Series 2004-2 Class 2A ±		2.60			3-25-2034		93,386		92,682
Structured Asset Investment Loan Trust Series 2005-4 Class M1 ±		0.77			5-25-2035		43,827		43,643
Structured Asset Securities Corporation Series 2002-9 Class A2 ±		0.77			10-25-2027		124,344		123,055
Terwin Mortgage Trust Series 2003-6HE Class A3 ±		1.31			11-25-2033		338,187		336,413
Vendee Mortgage Trust Series 2003-2 Class IO ±(c)		0.82			5-15-2033		7,793,046		273,355
Wachovia Bank Commercial Mortgage Trust Series 2006-C23 Class AM ±		5.47			1-15-2045		1,220,000		1,321,918
Washington Mutual Mortgage Trust Series 2004-RA4 Class 3A		7.50			7-25-2034		313,908		328,504

Total Non-Agency Mortgage Backed Securities (Cost $48,547,700)									51,196,294


Portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			17


Security name	Dividend yield					Shares		Value


Preferred Stocks: 0.17%

Financials: 0.17%

Diversified Financial Services: 0.17%
GMAC Capital Trust I ±		8.13	%				44,400	$	1,192,584


Total Preferred Stocks (Cost $1,130,339)									1,192,584


	Interest rate			Maturity date		Principal

Term Loans: 18.74%
ADS Waste Holdings Incorporated		4.25			10-9-2019	$	1,076,978		1,082,556
Advantage Sales & Marketing LLC		8.25			6-17-2018		452,143		456,099
Albertson’s LLC <		0.00			3-21-2019		55,000		55,000
Albertson’s LLC		4.25			3-21-2016		301,068		302,070
Albertson’s LLC		4.75			3-21-2019		196,432		196,919
Alliance Laundry Systems LLC		4.25			12-10-2018		1,751,263		1,756,376
Alliance Laundry Systems LLC		9.50			12-10-2019		2,028,122		2,047,146
Allison Transmission Incorporated		3.18			8-7-2017		907,435		911,591
Allison Transmission Incorporated		3.75			8-23-2019		2,441,316		2,456,574
American Capital Holdings Incorporated		4.00			8-22-2016		1,401,375		1,404,879
Applied Systems Incorporated		4.25			12-8-2016		583,964		585,908
Applied Systems Incorporated		8.25			6-8-2017		420,000		421,751
Arris Group Incorporated		3.50			4-17-2020		895,500		892,518
Barrington Broadcasting Group LLC		7.50			6-14-2017		2,936,821		2,933,150
Capital Automotive LP		4.00			4-5-2019		3,188,912		3,205,845
Capital Automotive LP		6.00			4-30-2020		1,460,000		1,501,975
CBAC Borrower LLC		8.25			7-2-2020		1,200,000		1,236,000
CCC Information Services Incorporated		4.00			12-20-2019		596,495		595,380
CCM Merger Incorporated		5.00			3-1-2017		2,769,205		2,783,051
CDW LLC		3.50			4-29-2020		895,750		891,836
Centaur LLC <		5.25			2-20-2019		134,500		135,930
Centaur LLC		8.75			2-20-2020		1,850,000		1,870,036
Covanta Energy Holdings		3.50			3-28-2019		2,561,000		2,566,327
Cricket Communications Incorporated		4.75			10-10-2019		297,750		298,867
Crown Castle International Corporation		3.25			1-31-2019		6,534,054		6,523,992
DaVita HealthCare Partners Incorporated		4.00			11-1-2019		1,132,554		1,138,783
Dell Incorporated <		0.00			4-30-2020		11,320,000		11,250,382
DineEquity Incorporated		3.75			10-19-2017		1,405,551		1,416,683
Dunkin’ Brands Incorporated		3.75			2-11-2020		1,561,749		1,565,654
Entercom Radio LLC		5.02			11-23-2018		1,321,278		1,334,491
Federal-Mogul Corporation		2.12			12-27-2014		2,469,296		2,444,158
Federal-Mogul Corporation		2.12			12-27-2015		3,685,369		3,647,852
Focus Brands Incorporated		4.25			2-21-2018		822,505		821,477
Focus Brands Incorporated		10.25			8-21-2018		2,023,863		2,049,161
Genesys Telecommunication Holdings U.S. Incorporated		4.00			2-8-2020		621,875		617,988
Goodyear Tire & Rubber Company		4.75			4-30-2019		5,500,000		5,559,565
HHI Holdings LLC		5.00			10-5-2018		1,950,867		1,962,240
Hub International Limited		4.75			10-2-2020		279,000		281,143
Interactive Data Corporation		3.75			2-11-2018		3,342,144		3,337,966
Kronos Incorporated		4.50			10-30-2019		490,917		492,758


18		Wells Fargo Advantage Multi-Sector Income Fund		Portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value


Term Loans (continued)
Learfield Communications Incorporated		8.75	%		10-9-2021	$	100,000	$	102,000
Level 3 Financing Incorporated		4.00			1-15-2020		1,700,000		1,707,089
LIN Television Corporation		4.00			12-21-2018		742,454		747,154
Local TV Finance LLC		4.17			5-7-2015		2,492,681		2,488,019
LPL Holdings Incorporated		3.25			3-29-2019		3,718,564		3,709,267
LTS Buyer LLC		8.00			4-12-2021		50,000		50,625
MedAssets Incorporated		4.00			12-13-2019		284,084		284,510
MGM Resorts International		3.50			12-20-2019		1,365,620		1,363,422
Mission Broadcasting Incorporated		3.75			10-1-2020		229,167		229,522
Mission Broadcasting Incorporated		3.75			10-1-2020		45,833		45,904
Mission Broadcasting Incorporated		4.25			12-3-2019		285,894		286,537
Nexstar Broadcasting Group Incorporated		4.25			12-3-2019		676,249		677,771
Nielsen Finance LLC Company		2.92			5-2-2016		482,313		483,461
Novelis Incorporated		3.75			3-10-2017		979,956		983,101
nTelos Incorporated		5.75			11-9-2019		1,322,118		1,327,076
Nusil Technology LLC		5.25			4-7-2017		395,640		390,695
Philadelphia Energy Solutions LLC		6.25			4-4-2018		2,860,625		2,560,259
Prestige Brands Incorporated		3.78			1-31-2019		212,974		214,038
Progressive Waste Solutions Limited		3.50			10-24-2019		1,596,465		1,595,795
Riverbed Technology Incorporated		4.00			12-18-2019		149,768		150,517
SBA Senior Finance II LLC		3.75			6-30-2018		725,744		726,347
SBA Senior Finance II LLC		3.75			9-20-2019		150,097		150,285
Sedgwick CMS Holdings Incorporated		8.00			12-12-2018		500,000		508,125
Spin Holdco Incorporated		4.25			11-14-2019		1,110,000		1,107,225
Springleaf Finance Corporation		4.75			9-30-2019		470,000		474,503
Syniverse Holdings Incorporated		4.00			4-23-2019		959,826		961,746
Syniverse Holdings Incorporated		4.00			4-23-2019		169,666		170,019
Tallgrass Energy Partners LP		5.25			11-13-2018		1,731,544		1,742,366
Telesat Holdings Incorporated		3.50			3-28-2019		2,616,974		2,628,437
Tempur-Pedic International Incorporated		3.50			3-18-2020		941,360		940,381
Texas Competitive Electric Holdings LLC		3.70			10-10-2014		20,096,983		13,519,441
Transdigm Group Incorporated		3.75			2-28-2020		3,464,731		3,465,459
TWCC Holding Corporation		7.00			6-26-2020		200,000		204,876
United Surgical Partners International Incorporated		4.25			4-19-2017		1,917,113		1,923,113
United Surgical Partners International Incorporated		4.75			4-3-2019		1,051,679		1,054,834
Valeant Pharmaceuticals International Incorporated		3.75			2-13-2019		1,674,553		1,687,631
Valeant Pharmaceuticals International Incorporated		3.75			12-11-2019		200,054		201,805
W3 Company		9.25			9-13-2020		289,275		294,337
WASH Multifamily Laundry Systems LLC		5.25			2-21-2019		1,661,650		1,665,804
Wendy’s International Incorporated		3.25			5-15-2019		1,351,502		1,352,353

Total Term Loans (Cost $133,921,834)									129,207,926


Yankee Corporate Bonds and Notes: 7.59%

Consumer Discretionary: 0.58%

Diversified Consumer Services: 0.10%
Anglo American Capital Company 144A		4.13			9-27-2022		750,000		711,647


Portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			19


Security name	Interest rate			Maturity date		Principal		Value


Media: 0.48%
Grupo Televisa SA		6.00	%		5-15-2018	$	750,000	$	851,473
Myriad International Holdings BV		6.00			7-18-2020		500,000		532,500
Myriad International Holdings BV 144A		6.38			7-28-2017		750,000		823,125
Videotron Limited		9.13			4-15-2018		363,000		381,604
WPP Finance 2010 Company		3.63			9-7-2022		750,000		726,553

									3,315,255


Consumer Staples: 0.33%

Beverages: 0.11%
Pernod Ricard SA 144A		4.45			1-15-2022		760,000		785,334


Food Products: 0.11%
BRF SA 144A		5.88			6-6-2022		750,000		780,000


Tobacco: 0.11%
BAT International Finance plc 144A		3.25			6-7-2022		750,000		738,986


Energy: 0.92%

Energy Equipment & Services: 0.12%
Ensco plc		4.70			3-15-2021		750,000		810,014


Oil, Gas & Consumable Fuels: 0.80%
Griffin Coal Mining Company Limited 144A(s)		0.00			12-1-2016		1,685,411		1,398,891
Griffin Coal Mining Company Limited (s)		0.00			12-1-2016		137,792		114,367
Lukoil International Finance BV		4.56			4-24-2023		1,400,000		1,338,750
Petrobras International Finance Company		5.38			1-27-2021		670,000		681,017
Petroleos Mexicanos		4.88			1-24-2022		750,000		780,000
Petroplus Finance Limited		5.75			1-20-2020		650,000		686,375
Woodside Finance Limited 144A		8.75			3-1-2019		405,000		522,024

									5,521,424


Financials: 1.75%

Commercial Banks: 0.89%
Banco de Brasil 144A		5.88			1-26-2022		750,000		754,500
Banco del Estado de Chile 144A		3.88			2-8-2022		650,000		635,409
Export Import Bank of Korea		5.00			4-11-2022		750,000		836,235
ITAU Unibanco Holding SA		5.13			5-13-2023		1,650,000		1,546,050
Macquarie Bank Limited 144A		5.00			2-22-2017		750,000		822,284
Royal Bank of Scotland plc		4.38			3-16-2016		750,000		803,527
Standard Chartered Bank 144A		6.40			9-26-2017		650,000		745,804

									6,143,809


Consumer Finance: 0.57%
Wind Acquisition Finance SpA 144A		11.75			7-15-2017		3,660,000		3,888,750


Diversified Financial Services: 0.29%
Corporación Andina de Fomento		4.38			6-15-2022		958,000		970,750
Nielsen Holding and Finance BV 144A		5.50			10-1-2021		415,000		426,413
Preferred Term Securities XII Limited (i)(s)		0.00			12-24-2033		635,000		6


20		Wells Fargo Advantage Multi-Sector Income Fund		Portfolio of investments—October 31, 2013


Security name	Interest rate			Maturity date		Principal		Value


Diversified Financial Services (continued)
Tyco Electronics Group SA		3.50	%		2-3-2022	$	625,000	$	607,976

									2,005,145


Health Care: 0.30%

Pharmaceuticals: 0.30%
VPII Escrow Corporation 144A		6.75			8-15-2018		680,000		744,600
VPII Escrow Corporation 144A		7.50			7-15-2021		1,210,000		1,343,100

									2,087,700


Industrials: 0.16%

Commercial Services & Supplies: 0.05%
Iron Mountain Incorporated		6.75			10-15-2018		250,000		343,205


Road & Rail: 0.11%
Canadian Pacific Railway Company		4.50			1-15-2022		750,000		794,834


Information Technology: 0.56%

Computers & Peripherals: 0.44%
Seagate Technology HDD Holdings		6.80			10-1-2016		650,000		736,125
Seagate Technology HDD Holdings		6.88			5-1-2020		1,035,000		1,135,913
Seagate Technology HDD Holdings		7.00			11-1-2021		1,050,000		1,160,250

									3,032,288


Internet Software & Services: 0.12%
Tencent Holdings Limited 144A		4.63			12-12-2016		750,000		806,885


Materials: 0.78%

Metals & Mining: 0.60%
ArcelorMittal		5.00			2-25-2017		725,000		765,781
Novelis Incorporated		8.38			12-15-2017		550,000		588,500
Novelis Incorporated		8.75			12-15-2020		725,000		806,563
Vale Overseas Limited		4.38			1-11-2022		750,000		733,616
Vedanta Resources plc 144A		6.00			1-31-2019		1,300,000		1,254,500

									4,148,960


Paper & Forest Products: 0.18%
Sappi Limited 144A		7.50			6-15-2032		1,560,000		1,212,900


Telecommunication Services: 2.11%

Diversified Telecommunication Services: 1.88%
Ericsson LM		4.13			5-15-2022		750,000		745,571
Intelsat Bermuda Limited 144A		7.75			6-1-2021		1,195,000		1,260,725
Intelsat Bermuda Limited 144A		8.13			6-1-2023		530,000		560,475
Intelsat Jackson Holdings SA 144A		5.50			8-1-2023		2,900,000		2,798,500
Intelsat Jackson Holdings SA		7.25			4-1-2019		2,055,000		2,214,263
Intelsat Jackson Holdings SA		7.50			4-1-2021		525,000		572,250
Intelsat Jackson Holdings SA		8.50			11-1-2019		1,400,000		1,536,500


Portfolio of investments—October 31, 2013		Wells Fargo Advantage Multi-Sector Income Fund			21


Security name	Interest rate			Maturity date		Principal		Value


Diversified Telecommunication Services (continued)
Intelsat Jackson Holdings SA		7.25	%		10-15-2020	$	1,775,000	$	1,925,875
Qtel International Finance Limited		5.00			10-19-2025		300,000		306,750
Sable International Finance Limited		7.75			2-15-2017		350,000		368,375
Virgin Media Finance plc		6.50			1-15-2018		650,000		676,000

									12,965,284


Wireless Telecommunication Services: 0.23%
Globo Communicacoes Participacoes SA 144A		4.88			4-11-2022		750,000		757,500
Telesat Canada Incorporated 144A		6.00			5-15-2017		775,000		809,875

									1,567,375


Utilities: 0.10%

Electric Utilities: 0.10%
Comision Federal de Electricidad 144A		4.88			5-26-2021		650,000		677,625


Total Yankee Corporate Bonds and Notes (Cost $51,118,726)									52,337,420

	Yield					Shares

Short-Term Investments: 3.44%

Investment Companies: 3.44%
Wells Fargo Advantage Cash Investment Money Market Fund, Select Class (l)(u)##		0.08					23,733,647		23,733,647

Total Short-Term Investments (Cost $23,733,647)									23,733,647


Total investments in securities (Cost $910,959,416) *	133.62	%		921,405,076
Other assets and liabilities, net	(33.62	)		(231,831,716	)

Total net assets	100.00	%	$	689,573,360

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

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

(c)	Interest-only securities entitle holders to receive only the interest payments on the underlying mortgages. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents the coupon rate.

†	Non-income-earning security

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

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

¥	A payment-in-kind (PIK) security is a security in which the issuer may make interest or dividend payments in cash or additional securities. These additional securities generally have the same terms as the original holdings.

%%	Security issued on a when-issued basis.

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

@	Foreign bond principal is denominated in local currency.

<	All or a portion of the position represents an unfunded term loan commitment.

(l)	Investment in an affiliate

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

##	All or a portion of this security has been segregated for when-issued securities and unfunded term loans.

*	Cost for federal income tax purposes is $915,360,215 and unrealized appreciation (depreciation) consists of:


Gross unrealized appreciation	$	38,521,660
Gross unrealized depreciation		(32,476,799	)

Net unrealized appreciation	$	6,044,861


Report of independent registered public accounting firm		Wells Fargo Advantage Multi-Sector Income Fund			1

THE BOARD OF TRUSTEES AND SHAREHOLDERS OF WELLS FARGO ADVANTAGE MULTI-SECTOR INCOME FUND:

We have audited the financial statements of the Wells Fargo Advantage Multi-Sector Income Fund (the “Fund”), as of October 31, 2013, and for each of the years presented and have issued our unqualified report thereon dated December 23, 2013 (which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR). We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our audit included an audit of this portfolio of investments (the “Portfolio”) as of October 31, 2013 appearing in Item 6 of this Form N-CSR. This Portfolio is the responsibility of management. Our responsibility is to express an opinion on this Portfolio based on our audit.

In our opinion, the Portfolio referred to above, when read in conjunction with the financial statements of the Fund, presents fairly, in all material respects, the information set forth therein.

LOGO

Boston, Massachusetts

December 23, 2013

ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES

PROXY VOTING POLICIES AND PROCEDURES

REVISED AS OF FEBRUARY 8, 2012

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

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

3. Responsibilities

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

(b) Funds Management Proxy Committee

(i)

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

(ii)

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

issue. As a general matter, however, proxies are voted consistently on the same matter when securities of an issuer are held by multiple Funds.

(iii)

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

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

(iv)

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

(v)

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

(vi)

Conflicts of Interest. Funds Management may have a conflict of interest regarding a proxy to be voted upon if, for example, Funds Management or its affiliates have other relationships with the issuer of the proxy. In most instances, conflicts of interest are avoided through a strict and objective application of the voting guidelines attached hereto. However, when the Proxy Committee is aware of a material conflict of interest regarding a matter that would otherwise require a vote by the Proxy Committee, the Proxy Committee shall address the material conflict by using any of the following methods: (1) instructing ISS to vote in accordance with the recommendation ISS makes to its clients; (2) disclosing the conflict to the Board and obtaining their consent before voting; (3) submitting the matter to the Board to exercise its authority to vote on such matter; (4) engaging an independent fiduciary who will direct the Proxy Committee on voting instructions for the proxy; (5) consulting with outside legal counsel for guidance on resolution of the conflict of interest; (6) erecting information barriers around the person or persons making voting decisions; (7) voting in proportion to other shareholders (“mirror voting”); or (8) voting in other ways that are consistent with each Fund’s obligation to vote in the best interests of its shareholders. Additionally, the Proxy Committee will not permit its votes to be influenced by any conflict of interest that exists for any other affiliated person of the Fund (such as a sub-adviser or principal underwriter)

or any affiliated persons of such affiliated persons and the Proxy Committee will vote all such matters without regard to the conflict.

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

(vii)

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

(viii)

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

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

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

Each Fund shall disclose in its statement of additional information and semi- and annual reports that information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge on the Funds’ web site at www.wellsfargo.com/advantagefunds or by accessing the Commission’s web site at www.sec.gov.

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

•

The name of the issuer of the portfolio security;

•

The exchange ticker symbol of the portfolio security;

•

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

•

The shareholder meeting date;

•

A brief identification of the matter voted on;

•

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

•

Whether the Fund cast its vote on the matter;

•

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

•

Whether the Fund cast its vote for or against management.

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

APPENDIX A

PROXY VOTING POLICIES AND PROCEDURES

Funds Management will vote proxies relating to portfolio securities held by the Trusts in accordance with the following proxy voting guidelines. To the extent the specific guidelines below do not address a proxy voting proposal, Funds Management will vote pursuant to ISS’ current U.S. and International proxy voting guidelines. Proxies for securities held by the Wells Fargo Advantage Social Awareness Fund related to social and environmental proposals will be voted pursuant to ISS’ current SRI Proxy Voting Guidelines. In addition, proxies related to issues not addressed by the specific guidelines below or by ISS’ current U.S. and International proxy voting guidelines will be forwarded to the Proxy Committee for a vote determination by the Proxy Committee.


Uncontested Election of Directors or Trustees

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

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

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

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

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

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

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

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

THE FUNDS will withhold votes from all directors (except for new nominees) if the company has adopted or renewed a poison pill without shareholder approval since the


company’s last annual meeting, does not put the pill to a vote at the current annual meeting, and does not have a requirement or does not commit to put the pill to shareholder vote within 12 months. In addition, THE FUNDS will withhold votes on all directors at any company that responds to the majority of the shareholders voting by putting the poison pill to a shareholder vote with a recommendation other than to eliminate the pill.		WITHHOLD

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

Limitation on Number of Boards a Director May Sit On

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

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

Ratification of Auditors

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

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

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

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

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

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

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

Company Name Change/Purpose

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

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


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

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

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

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

Anti-Hedging/Pledging/Speculative Investments Policy

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

Approve Other Business

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

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

Independent Board of Directors/Board Committees

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

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

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

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

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


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

Director Fees

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

Minimum Stock Requirements by Directors

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

Indemnification and Liability Provisions for Directors and Officers

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

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

Nominee Statement in the Proxy

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

Director Tenure/Retirement Age

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

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

Board Powers/Procedures/Qualifications

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

Adjourn Meeting to Solicit Additional Votes



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

THE FUNDS will vote for this item when:

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

Reimbursement of Solicitation Expenses

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

Board Structure: Staggered vs. Annual Elections

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

Removal of Directors

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

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

Board Vacancies

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

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

Cumulative Voting

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

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


		AGAINST

Board Size

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

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

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

Shareholder Rights Plan (Poison Pills)

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

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

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

Fair Price Provisions

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

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

Greenmail

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

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

Voting Rights

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


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

Dual Class/Multiple-Voting Stock

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

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

Confidential Voting

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

Vote Tabulations

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

Equal Access to the Proxy

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

Disclosure of Information

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

Annual Meetings

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

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

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


Shareholder Advisory Committees/Independent Inspectors

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

Technical Amendments to the Charter of Bylaws

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

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

Bundled Proposals

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

Dividends

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

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

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

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

Reduce the Par Value of the Common Stock

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

Preferred Stock Authorization

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

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


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

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

Preemptive Rights

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

Share Repurchase Plans

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

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

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

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

Executive and Director Compensation Plans

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

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

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

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

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

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


a premium on full value awards for the past three fiscal years.

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

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

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

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

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

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

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

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

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

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

THE FUNDS will generally vote for retirement plans for directors.

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

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



		FOR

		CASE-BY-CASE

Bonus Plans

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

Deferred Compensation Plans

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

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

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

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

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

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

Tax-Gross-Up Payments

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

Relocation Benefits

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

Exchange Offers/Re-Pricing

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

Golden and Tin Parachutes


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

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

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

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

Stakeholder Laws

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

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

Mergers/Acquisitions and Corporate Restructurings

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

• anticipated financial and operating benefits; • offer price (cost versus premium); • prospects for the combined companies; • how the deal was negotiated; • changes in corporate governance and their impact on shareholder rights.

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

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

Appraisal Rights


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

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

Mutual Fund Proxies

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

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

APPENDIX B

PROXY VOTING POLICIES AND PROCEDURES

Members of Funds Management Proxy Voting Committee

Thomas C. Biwer, CFA

Mr. Biwer has 38 years experience in finance and investments. He has served as an investment analyst, portfolio strategist, and corporate pension officer. He received B.S. and M.B.A. degrees from the University of Illinois and has earned the right to use the CFA designation.

Erik J. Sens, CFA

Mr. Sens has 22 years of investment industry experience. He has served as an investment analyst and portfolio manager. He received undergraduate degrees in Finance and Philosophy from the University of San Francisco and has earned the right to use the CFA designation.

Travis L. Keshemberg, CFA

Mr. Keshemberg has 17 years experience in the investment industry. He has served as a overlay portfolio manager and investment consultant. He holds a Masters Degree from the University of Wisconsin – Milwaukee and Bachelors degree from Marquette University. He has earned the right to use the CFA, CIPM and CIMA designations.

Patrick E. McGuinnis, CFA

Mr. McGuinnis has 12 years of experience in the investment industry as an analyst. He holds B.S. and M.S. degrees in Finance from the University of Wisconsin and has earned the right to use the CFA designation.

ITEM 8.

PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

PORTFOLIO MANAGERS

Niklas Nordenfelt, CFA

Mr. Nordenfelt is currently managing director, senior portfolio manager with the Sutter High Yield Fixed Income team at Wells Capital Management. Niklas joined the Sutter High Yield Fixed Income team of Wells Capital Management in February 2003 as investment strategist. Niklas began his investment career in 1991 and has managed portfolios ranging from quantitative-based

and tactical asset allocation strategies to credit driven portfolios. Previous to joining Sutter, Niklas was at Barclays Global Investors (BGI) from 1996-2002 where he was a principal. At BGI, he worked on their international and emerging markets equity strategies after having managed their asset allocation products. Prior to this, Niklas was a quantitative analyst at Fidelity and a portfolio manager and group leader at Mellon Capital Management. He earned a bachelor’s degree in economics from the University of California, Berkeley, and has earned the right to use the CFA designation.

Philip Susser

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

Janet S. Rilling, CFA, CPA

Mrs. Rilling is a senior portfolio manager for the Wells Capital Management Fixed Income team. She joined Wells Capital Management from Strong Capital Management in 2005. Janet began her investment industry career in 1995, joining Strong as a research analyst and then becoming a portfolio manager in 2000. Prior to joining Strong, she was an auditor with Coopers & Lybrand for three years, specializing in the manufacturing and financial services industries. She earned a bachelor’s degree in accounting and finance and a master’s degree in finance from the University of Wisconsin, Madison. Janet is a Certified Public Accountant and has earned the right to use the CFA designation.

Michael Bray, CFA

Mr. Bray is the managing director of taxable fixed income and senior portfolio manager for the Wells Capital Management Fixed Income team. He began his investment industry career in 1988. Prior to joining Wells Capital Management in 2005, he was managing director at State Street Research and Management, focusing on mutual fund and institutional account management. He also gained experience while with Merrill Lynch & Company as vice president of mortgage securities research and sales. Earlier, he was an analyst with Manufacturers Hanover Company, specializing in mortgage and derivative securities. Michael earned a bachelor’s degree in math and actuarial science from the University of Connecticut, Storrs, and a master’s degree in business administration with an emphasis in finance from The Pennsylvania State University. He has earned the right to use the CFA designation.

Christopher Y. Kauffman, CFA

Mr. Kauffman is a portfolio manager for the Wells Capital Management Fixed Income team. He joined WellsCap from Tattersall Advisory Group (TAG), where he served in a similar role since 2003. He began his investment industry career in 1997 as an investment officer for NISA Investment Advisors, where he was responsible for MBS analysis, risk assessment, and trading. He earned a bachelor’s degree in finance and economics and a master’s degree in business administration with an emphasis in finance from Washington University in St. Louis. He has earned the right to use the CFA designation and is a member of the St. Louis Society of Financial Analysts and the CFA Institute.

Anthony Norris

Mr. Norris is a managing director and senior portfolio manager with the First International Advisors team at Wells Capital Management. Tony is one of five senior members of the investment team that forms the Senior Strategy Team. His responsibilities include developing investment strategies, macro-portfolio allocation, portfolio positioning, and risk management. He joined WellsCap from Evergreen Investments, where he served in a similar role since 1990. Previously, he spent several years in banking, with particular emphasis on foreign exchange. Tony served in senior executive positions at Reserve Asset Managers and Gillett Brothers Fund Management. He began his investment industry career in 1967 at Wallace Brothers Bank. He is a member of the Society of Technical Analysts and is an associate of the International Federation of Technical Analysts.

Peter Wilson

Mr. Wilson is a managing director and senior portfolio manager with the First International Advisors team at Wells Capital Management. Peter is one of five senior members of the investment team that forms the Senior Strategy Team. His responsibilities include macro-portfolio allocation, portfolio positioning, and risk management. He joined WellsCap from Evergreen Investments, where he served in a similar role since 1989. Previously, he served as treasurer and portfolio manager for Axe-Houghton, vice president at Bankers Trust in London and New York, and portfolio manager at Merchant Bankers Kleinwort Benson Ltd. Peter began his investment industry career in 1978 at international stockbrokers James Capel & Co. He was educated in Canada, Hong Kong, and England.

Michael Lee

Mr. Lee is a senior portfolio manager with the First International Advisors team at Wells Capital Management. Mike is one of five senior members of the investment team that forms the Senior Strategy Team. His responsibilities include the day-to-day management and implementation of portfolio strategies. He joined WellsCap from Evergreen Investments, where he served in a similar role since 1992. Prior to this, he worked at Northern Trust Co. Earlier, he held investment positions at JPMorganChase and National Westminster Bank. Michael began his investment industry career in 1982. He is a member of the U.K. Society of Investment Professionals.

Alex Perrin

Mr. Perrin is a senior portfolio manager with the First International Advisors team at Wells Capital Management. Alex is one of five senior members of the investment team that forms the Senior Strategy Team. His responsibilities include developing investment strategies, macro-portfolio allocation, portfolio positioning, and risk management. He joined First International Advisors in 1992. Alex earned a bachelor’s degree in mathematics and computer science from Hull University in the U.K. He is a member of the Society of Technical Analysts and an Associate Member of the U.K. Society of Investment Professionals.

Christopher Wightman

Mr. Wightman is a senior portfolio manager with the First International Advisors team at Wells Capital Management. Chris is one of five senior members of the investment team that forms the Senior Strategy Team. His responsibilities include macro-portfolio allocation, portfolio positioning, and risk management. He joined First International Advisors in 2011 from JP Morgan Chase, where he served as a senior investment manager specializing in global fixed income strategies. Earlier, Chris served as a senior fixed income trader at Fidelity International. He began his investment industry career in 1997 as a Graduate Analyst at Morgan Stanley. Chris earned a B.A. (Hons) in business studies at Staffordshire University (UK).

OTHER FUNDS AND ACCOUNTS MANAGED

The following table provides information about the registered investment companies and other pooled investment vehicles and accounts managed by the portfolio manager of the Fund as of the Fund’s most recent period ended October 31, 2013.


Niklas Nordenfelt

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		4		5		32
Total assets of above accounts (millions)	$	1,670.9	$	480.7	$	2,281.4

performance based fee accounts:

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		0		1		0
Total assets of above accounts (millions)	$	0.0	$	217.9	$	0.0

Philip Susser

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		4		5		32
Total assets of above accounts (millions)	$	1,670.9	$	480.7	$	2,281.4

performance based fee accounts:

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		0		1		0


Total assets of above accounts (millions)	$	0.0	$	217.9	$	0.0

Janet S. Rilling

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		1		4		29
Total assets of above accounts (millions)	$	429	$	2,113	$	3,709

performance based fee accounts:

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		0		0		1
Total assets of above accounts (millions)	$	0.0	$	0.0	$	436

Michael Bray

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		5		2		7
Total assets of above accounts (millions)	$	3,575	$	1,879	$	2,082

performance based fee accounts:

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

Christopher Y. Kauffman

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		4		0		2
Total assets of above accounts (millions)	$	5,273	$	0.0	$	99

performance based fee accounts:

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


Anthony Norris

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		4		19		6
Total assets of above accounts (millions)	$	1,684.41	$	1,726	$	2,331

performance based fee accounts:

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		0		1		0
Total assets of above accounts (millions)	$	0.0	$	217	$	0.0

Peter Wilson

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		4		19		6
Total assets of above accounts (millions)	$	1,684.41	$	1,176	$	2,331

performance based fee accounts:

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		0		1		0
Total assets of above accounts (millions)	$	0.0	$	217	$	0.0

Michael Lee

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		3		19		6
Total assets of above accounts (millions)	$	1,610.38	$	1,726	$	2,331

performance based fee accounts:

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		0		1		0
Total assets of above accounts (millions)	$	0.0	$	217	$	0.0

Alex Perrin

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:


Number of above accounts		3		19		6
Total assets of above accounts (millions)	$	1,610.38	$	1,726	$	2,331

performance based fee accounts:

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		0		1		0
Total assets of above accounts (millions)	$	0.0	$	217	$	0.0

Christopher Wightman

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		3		19		6
Total assets of above accounts (millions)	$	1,610.38	$	1,726	$	2,331

performance based fee accounts:

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
I manage the following types of accounts:
Number of above accounts		0		1		0
Total assets of above accounts (millions)	$	0.0	$	217	$	0.0

MATERIAL CONFLICTS OF INTEREST

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

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

First International Advisors

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

Wells Capital Management

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

COMPENSATION

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

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

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

BENEFICIAL OWNERSHIP OF THE FUND

The following table shows for each Portfolio Manager the dollar value of the Fund beneficially owned by the Portfolio Manager as of October 31, 2013:


Niklas Nordenfelt			none
Phil Susser			none
Janet S. Rilling			none
Michael J. Bray			none
Christopher Kauffman			none
Tony Norris			none
Peter Wilson			none
Michael Lee			none
Alex Perrin			none
Christopher Wightman			none

ITEM 9.

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

Not applicable.

ITEM 10.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of trustees that have been implemented since the Registrant’s last provided disclosure in response to the requirements of this Item.

ITEM 11.

CONTROLS AND PROCEDURES

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

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

ITEM 12.

EXHIBITS

(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as Exhibit 99(a)(1).

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

(a)(3) Not applicable.

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

SIGNATURES

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


Wells Fargo Advantage Multi-Sector Income Fund

By:

		/s/ Karla M. Rabusch

		Karla M. Rabusch
		President

Date: December 23, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.


Wells Fargo Advantage Multi-Sector Income Fund

By:

		/s/ Karla M. Rabusch

		Karla M. Rabusch
		President

Date: December 23, 2013

By:

		/s/ Jeremy DePalma

		Jeremy DePalma
		Treasurer

Date: December 23, 2013