UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number811-02351
Western Asset Investment Grade Income Fund Inc.
(Exact name of registrant as specified in charter)
620 Eighth Avenue, 49th Floor, New York, NY 10018
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
100 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant’s telephone number, including area code: (888)777-0102
Date of fiscal year end: December 31
Date of reporting period: June 30, 2019
ITEM 1. | REPORT TO STOCKHOLDERS. |
TheSemi-Annual Report to Stockholders is filed herewith.
Semi-Annual Report | June 30, 2019 |
WESTERN ASSET
INVESTMENT GRADE
INCOME FUND INC. (PAI)
Beginning in January 2021, as permitted by regulations adopted by the Securities and Exchange Commission, the Fund intends to no longer mail paper copies of the Fund’s shareholder reports like this one, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary (such as a broker-dealer or bank). Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you invest through a financial intermediary and you already elected to receive shareholder reports electronically(“e-delivery”), you will not be affected by this change and you need not take any action. If you have not already electede-delivery, you may elect to receive shareholder reports and other communications from the Fund electronically by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. That election will apply to all Legg Mason Funds held in your account at that financial intermediary. If you are a direct shareholder with the Fund, you can call the Fund at1-888-888-0151, or write to the Fund by regular mail at P.O. Box 505000, Louisville, KY 40233 or by overnight delivery to Computershare, 462 South 4th Street, Suite 1600, Louisville, KY 40202 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. That election will apply to all Legg Mason Funds held in your account held directly with the fund complex.
INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE |
Fund objectives
The Fund seeks a high level of current income, consistent with prudent investment risk. Capital appreciation is a secondary investment objective.
The Fund’s investment policies provide that the Fund invests at least 80% of its net assets in fixed income securities that are rated in the Baa or BBB categories or above at the time of purchase by one or more Nationally Recognized Statistical Rating Organizations (“NRSROs”) or unrated securities of comparable quality at the time of purchase (as determined by the investment adviser); up to 20% in other fixed income securities; and not more than 25% in securities restricted as to resale.
II | Western Asset Investment Grade Income Fund Inc. |
Dear Shareholder,
We are pleased to provide the semi-annual report of Western Asset Investment Grade Income Fund Inc. for thesix-month reporting period ended June 30, 2019. Please read on for Fund performance information during the Fund’s reporting period.
As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our website, www.lmcef.com. Here you can gain immediate access to market and investment information, including:
• | Fund prices and performance, |
• | Market insights and commentaries from our portfolio managers, and |
• | A host of educational resources. |
We look forward to helping you meet your financial goals.
Sincerely,
Jane Trust, CFA
President and Chief Executive Officer
July 26, 2019
Western Asset Investment Grade Income Fund Inc. | III |
For the six months ended June 30, 2019, Western Asset Investment Grade Income Fund Inc. returned 10.87% based on its net asset value (“NAV”)1 and 15.32% based on its New York Stock Exchange (“NYSE”) market price per share. The Fund’s unmanaged benchmarks, the Bloomberg Barclays U.S. Corporate High Yield Index2 and the Bloomberg Barclays U.S. Credit Index3 , returned 9.94% and 9.35%, respectively, for the same period. The Lipper Corporate DebtClosed-End FundsBBB-Rated Category Average4 returned 8.87% over the same time frame. Please note that Lipper performance returns are based on each fund’s NAV.
During thissix-month period, the Fund made distributions to shareholders totaling $0.35 per share. As of June 30, 2019, the Fund estimates that all of the distributions were sourced from net investment income.* The performance table shows the Fund’ssix-month total return based on its NAV and market price as of June 30, 2019.Past performance is no guarantee of future results.
Performance Snapshotas of June 30, 2019 (unaudited) | ||||
Price Per Share | 6-Month Total Return** | |||
$ 15.16 (NAV) | 10.87 | %† | ||
$ 14.87 (Market Price) | 15.32 | %‡ |
All figures represent past performance and are not a guarantee of future results. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.
** Total returns are based on changes in NAV or market price, respectively. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.
† Total return assumes the reinvestment of all distributions, including returns of capital, if any, at NAV.
* | This estimate is not for tax purposes. The Fund will issue a Form 1099 with final composition of the distributions for tax purposes afteryear-end. A return of capital is not taxable and results in a reduction in the tax basis of a shareholder’s investment. For more information about a distribution’s composition, please refer to the Fund’s distribution press release or, if applicable, the Section 19 notice located in the press release section of our website, www.lmcef.com (click on the name of the Fund). |
1 | Net asset value (“NAV”) is calculated by subtracting total liabilities and outstanding preferred stock (if any) from the closing value of all securities held by the Fund (plus all other assets) and dividing the result (total net assets) by the total number of the common shares outstanding. The NAV fluctuates with changes in the market prices of securities in which the Fund has invested. However, the price at which an investor may buy or sell shares of the Fund is the Fund’s market price as determined by supply of and demand for the Fund’s shares. |
2 | The Bloomberg Barclays U.S. Corporate High Yield Index covers the universe of fixed-rate,non-investment grade debt, including corporate andnon-corporate sectors.Pay-in-kind (“PIK”) bonds, Eurobonds and debt issues from countries designated as emerging markets are excluded, but Canadian and global bonds (SEC registered) of issuers innon-emerging market countries are included. Original issue zero coupon bonds,step-up coupon structures and 144A securities are also included. |
3 | The Bloomberg Barclays U.S. Credit Index is an index composed of corporate andnon-corporate debt issues that are investment grade (rated Baa3/BBB or higher). |
4 | Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on thesix-month period ended June 30, 2019, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 6 funds in the Fund’s Lipper category. |
IV | Western Asset Investment Grade Income Fund Inc. |
‡ Total return assumes the reinvestment of all distributions, including returns of capital, if any, in additional shares in accordance with the Fund’s Dividend Reinvestment Plan.
Looking for additional information?
The Fund is traded under the symbol “PAI” and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is availableon-line under the symbol “XPAIX” on most financial websites.Barron’sand theWall Street Journal’s Mondayedition both carryclosed-end fund tables that provide additional information. In addition, the Fund issues a quarterly press release that can be found on most major financial websites as well as www.lmcef.com (click on the name of the Fund).
In a continuing effort to provide information concerning the Fund, shareholders may call1-888-777-0102 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern Time, for the Fund’s current NAV, market price and other information.
Thank you for your investment in Western Asset Investment Grade Income Fund Inc. As always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund’s investment goals.
Sincerely,
Jane Trust, CFA
President and Chief Executive Officer
July 26, 2019
RISKS: The Fund is a diversifiedclosed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance that the Fund will achieve its investment objectives. The Fund’s common stock is traded on the New York Stock Exchange. Similar to stocks, the Fund’s share price will fluctuate with market conditions and, at the time of sale, may be worth more or less than the original investment. Shares ofclosed-end funds often trade at a discount to their net asset value. Diversification does not assure against market loss. The Fund’s investments are subject to a number of risks, including interest rate, credit and inflation risks. As interest rates rise, bond prices fall, reducing the value of a fixed-income investment’s price. The Fund may invest in high-yield bonds (commonly known as “junk” bonds), which are rated below investment grade and carry more risk than higher-rated securities. To the extent that the Fund invests in asset-backed, mortgage-backed or mortgage related securities, its exposure to prepayment and extension risks may be greater than investments in other fixed-income securities. Leverage may result in greater volatility of NAV and the market price of common shares and increases a shareholder’s risk of loss. The Fund may invest, to a limited extent, in foreign securities, including emerging markets, which are subject to additional risks. The Fund may make significant investments in derivative instruments. Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance.
All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.
Western Asset Investment Grade Income Fund Inc. | V |
Investment breakdown(%) as a percent of total investments
† | The bar graph above represents the Fund’s portfolio as of June 30, 2019 and December 31, 2018, and does not include derivatives such as futures contracts. The Fund’s portfolio is actively managed. As a result, the composition of its portfolio holdings and sectors is subject to change at any time. |
‡ | Represents less than 0.1%. |
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 1 |
Economic exposure —June 30, 2019
Total Spread Duration | ||
PAI | — 7.99 years | |
Benchmark | — 7.26 years |
Spread duration measures the sensitivity to changes in spreads. The spread over Treasuries is the annual risk-premium demanded by investors to holdnon-Treasury securities. Spread duration is quantified as the % change in price resulting from a 100 basis points change in spreads. For a security with positive spread duration, an increase in spreads would result in a price decline and a decline in spreads would result in a price increase. This chart highlights the market sector exposure of the Fund’s sectors relative to the selected benchmark sectors as of the end of the reporting period.
Benchmark | — Bloomberg Barclays U.S. Credit Index | |
EM | — Emerging Markets | |
HY | — High Yield | |
IG Credit | — Investment Grade Credit | |
PAI | — Western Asset Investment Grade Income Fund Inc. |
2 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Interest rate exposure —June 30, 2019
Total Effective Duration | ||
PAI | — 7.25 years | |
Benchmark | — 7.41 years |
Effective duration measures the sensitivity to changes in relevant interest rates. Effective duration is quantified as the % change in price resulting from a 100 basis points change in interest rates. For a security with positive effective duration, an increase in interest rates would result in a price decline and a decline in interest rates would result in a price increase. This chart highlights the interest rate exposure of the Fund’s sectors relative to the selected benchmark sectors as of the end of the reporting period.
Benchmark | — Bloomberg Barclays U.S. Credit Index | |
EM | — Emerging Markets | |
HY | — High Yield | |
IG Credit | — Investment Grade Credit | |
PAI | — Western Asset Investment Grade Income Fund Inc. |
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 3 |
Schedule of investments(unaudited)
June 30, 2019
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Corporate Bonds & Notes — 89.7% | ||||||||||||||||
Communication Services — 10.5% | ||||||||||||||||
Diversified Telecommunication Services — 3.9% | ||||||||||||||||
AT&T Inc., Senior Notes | 4.300 | % | 2/15/30 | $ | 80,000 | $ | 85,701 | |||||||||
AT&T Inc., Senior Notes | 4.500 | % | 5/15/35 | 360,000 | 377,439 | |||||||||||
AT&T Inc., Senior Notes | 6.350 | % | 3/15/40 | 50,000 | 61,679 | |||||||||||
AT&T Inc., Senior Notes | 5.350 | % | 9/1/40 | 30,000 | 33,922 | |||||||||||
AT&T Inc., Senior Notes | 4.900 | % | 6/15/42 | 150,000 | 159,260 | |||||||||||
AT&T Inc., Senior Notes | 4.800 | % | 6/15/44 | 210,000 | 222,003 | |||||||||||
AT&T Inc., Senior Notes | 4.550 | % | 3/9/49 | 310,000 | 316,931 | |||||||||||
AT&T Inc., Senior Notes (3 mo. USD LIBOR + 1.180%) | 3.616 | % | 6/12/24 | 480,000 | 486,377 | (a) | ||||||||||
Bell Canada Inc., Senior Notes | 4.300 | % | 7/29/49 | 330,000 | 356,175 | |||||||||||
British Telecommunications PLC, Senior Notes | 9.625 | % | 12/15/30 | 70,000 | 105,642 | |||||||||||
Koninklijke KPN NV, Senior Notes | 8.375 | % | 10/1/30 | 410,000 | 541,480 | |||||||||||
Telefonica Emisiones SAU, Senior Notes | 7.045 | % | 6/20/36 | 60,000 | 78,654 | |||||||||||
Verizon Communications Inc., Senior Notes | 5.150 | % | 9/15/23 | 1,790,000 | 1,999,967 | |||||||||||
Verizon Communications Inc., Senior Notes | 5.500 | % | 3/16/47 | 630,000 | 792,056 | |||||||||||
Total Diversified Telecommunication Services | 5,617,286 | |||||||||||||||
Entertainment — 0.7% | ||||||||||||||||
Walt Disney Co., Senior Notes | 6.550 | % | 3/15/33 | 545,000 | 737,989 | (b) | ||||||||||
Walt Disney Co., Senior Notes | 7.750 | % | 12/1/45 | 130,000 | 217,637 | (b) | ||||||||||
Total Entertainment | 955,626 | |||||||||||||||
Media — 3.9% | ||||||||||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes | 6.384 | % | 10/23/35 | 110,000 | 129,367 | |||||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes | 6.484 | % | 10/23/45 | 260,000 | 306,795 | |||||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes | 5.375 | % | 5/1/47 | 350,000 | 369,910 | |||||||||||
Comcast Corp., Senior Notes | 6.450 | % | 3/15/37 | 220,000 | 298,527 | |||||||||||
Comcast Corp., Senior Notes | 6.950 | % | 8/15/37 | 160,000 | 226,983 | |||||||||||
Comcast Corp., Senior Notes | 6.400 | % | 5/15/38 | 950,000 | 1,285,658 | |||||||||||
Discovery Communications LLC, Senior Notes | 4.125 | % | 5/15/29 | 100,000 | 104,241 | |||||||||||
Discovery Communications LLC, Senior Notes | 5.300 | % | 5/15/49 | 60,000 | 64,665 | |||||||||||
Fox Corp., Senior Notes | 5.476 | % | 1/25/39 | 510,000 | 602,840 | (b) | ||||||||||
Tencent Holdings Ltd., Senior Notes | 3.975 | % | 4/11/29 | 390,000 | 408,004 | (b) | ||||||||||
Time Warner Cable LLC, Senior Secured Notes | 6.550 | % | 5/1/37 | 180,000 | 208,281 |
See Notes to Financial Statements.
4 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Media — continued | ||||||||||||||||
Time Warner Cable LLC, Senior Secured Notes | 7.300 | % | 7/1/38 | $ | 200,000 | $ | 243,064 | |||||||||
Time Warner Cable LLC, Senior Secured Notes | 6.750 | % | 6/15/39 | 10,000 | 11,620 | |||||||||||
Time Warner Cable LLC, Senior Secured Notes | 5.500 | % | 9/1/41 | 50,000 | 52,522 | |||||||||||
Time Warner Entertainment Co. LP, Senior Secured Notes | 8.375 | % | 3/15/23 | 180,000 | 213,427 | |||||||||||
Time Warner Entertainment Co. LP, Senior Secured Notes | 8.375 | % | 7/15/33 | 410,000 | 552,905 | |||||||||||
UBM PLC, Senior Notes | 5.750 | % | 11/3/20 | 570,000 | 590,458 | (b) | ||||||||||
Total Media | 5,669,267 | |||||||||||||||
Wireless Telecommunication Services — 2.0% | ||||||||||||||||
America Movil SAB de CV, Senior Notes | 6.125 | % | 3/30/40 | 850,000 | 1,111,670 | |||||||||||
Sprint Corp., Senior Notes | 7.250 | % | 9/15/21 | 640,000 | 681,600 | |||||||||||
Sprint Corp., Senior Notes | 7.875 | % | 9/15/23 | 340,000 | 370,175 | |||||||||||
Telefonica Europe BV, Senior Notes | 8.250 | % | 9/15/30 | 230,000 | 322,874 | |||||||||||
Vodafone Group PLC, Senior Notes | 5.250 | % | 5/30/48 | 370,000 | 409,072 | |||||||||||
Total Wireless Telecommunication Services | 2,895,391 | |||||||||||||||
Total Communication Services | 15,137,570 | |||||||||||||||
Consumer Discretionary — 3.1% | ||||||||||||||||
Automobiles — 0.9% | ||||||||||||||||
Ford Motor Credit Co. LLC, Senior Notes | 8.125 | % | 1/15/20 | 410,000 | 421,663 | |||||||||||
Ford Motor Credit Co. LLC, Senior Notes | 5.113 | % | 5/3/29 | 350,000 | 357,764 | |||||||||||
General Motors Co., Senior Notes | 6.600 | % | 4/1/36 | 170,000 | 188,470 | |||||||||||
General Motors Co., Senior Notes | 6.750 | % | 4/1/46 | 270,000 | 305,164 | |||||||||||
Total Automobiles | 1,273,061 | |||||||||||||||
Diversified Consumer Services — 0.2% | ||||||||||||||||
Board of Trustees of The Leland Stanford Junior University | 3.089 | % | 5/1/29 | 340,000 | 355,917 | |||||||||||
Hotels, Restaurants & Leisure — 1.1% | ||||||||||||||||
Marriott International Inc., Senior Notes | 3.600 | % | 4/15/24 | 200,000 | 208,596 | |||||||||||
McDonald’s Corp., Senior Notes | 4.700 | % | 12/9/35 | 150,000 | 171,118 | |||||||||||
McDonald’s Corp., Senior Notes | 4.875 | % | 12/9/45 | 230,000 | 264,421 | |||||||||||
McDonald’s Corp., Senior Notes | 4.450 | % | 9/1/48 | 10,000 | 10,982 | |||||||||||
Sands China Ltd., Senior Notes | 4.600 | % | 8/8/23 | 200,000 | 210,608 | |||||||||||
Sands China Ltd., Senior Notes | 5.125 | % | 8/8/25 | 450,000 | 483,489 | |||||||||||
Sands China Ltd., Senior Notes | 5.400 | % | 8/8/28 | 200,000 | 217,712 | |||||||||||
Total Hotels, Restaurants & Leisure | 1,566,926 | |||||||||||||||
Household Durables — 0.2% | ||||||||||||||||
Lennar Corp., Senior Notes | 5.000 | % | 6/15/27 | 250,000 | 263,750 |
See Notes to Financial Statements.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 5 |
Schedule of investments(unaudited) (cont’d)
June 30, 2019
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Specialty Retail — 0.7% | ||||||||||||||||
Home Depot Inc., Senior Notes | 3.900 | % | 12/6/28 | $ | 590,000 | $ | 649,835 | |||||||||
Target Corp., Senior Notes | 3.375 | % | 4/15/29 | 340,000 | 360,999 | |||||||||||
Total Specialty Retail | 1,010,834 | |||||||||||||||
Total Consumer Discretionary | 4,470,488 | |||||||||||||||
Consumer Staples — 5.2% | ||||||||||||||||
Beverages — 2.6% | ||||||||||||||||
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide Inc., Senior Notes | 4.900 | % | 2/1/46 | 840,000 | 936,713 | |||||||||||
Anheuser-Busch InBev Worldwide Inc., Senior Notes | 4.150 | % | 1/23/25 | 1,390,000 | 1,506,680 | |||||||||||
Anheuser-Busch InBev Worldwide Inc., Senior Notes | 4.600 | % | 4/15/48 | 70,000 | 75,046 | |||||||||||
Pernod Ricard SA, Senior Notes | 5.750 | % | 4/7/21 | 350,000 | 369,679 | (b) | ||||||||||
Pernod Ricard SA, Senior Notes | 5.500 | % | 1/15/42 | 670,000 | 786,930 | (b) | ||||||||||
Total Beverages | 3,675,048 | |||||||||||||||
Food & Staples Retailing — 0.1% | ||||||||||||||||
Kroger Co., Senior Notes | 4.650 | % | 1/15/48 | 90,000 | 90,653 | |||||||||||
Food Products — 0.3% | ||||||||||||||||
Kraft Heinz Foods Co., Senior Notes | 5.000 | % | 7/15/35 | 50,000 | 52,531 | |||||||||||
Kraft Heinz Foods Co., Senior Notes | 5.000 | % | 6/4/42 | 150,000 | 155,199 | |||||||||||
Mars Inc., Senior Notes | 2.700 | % | 4/1/25 | 140,000 | 142,949 | (b) | ||||||||||
Mars Inc., Senior Notes | 3.200 | % | 4/1/30 | 140,000 | 145,599 | (b) | ||||||||||
Total Food Products | 496,278 | |||||||||||||||
Tobacco — 2.2% | ||||||||||||||||
Altria Group Inc., Senior Notes | 3.800 | % | 2/14/24 | 190,000 | 198,195 | |||||||||||
Altria Group Inc., Senior Notes | 4.400 | % | 2/14/26 | 410,000 | 439,066 | |||||||||||
Altria Group Inc., Senior Notes | 4.800 | % | 2/14/29 | 870,000 | 936,719 | |||||||||||
Philip Morris International Inc., Senior Notes | 2.875 | % | 5/1/24 | 680,000 | 690,622 | |||||||||||
Philip Morris International Inc., Senior Notes | 4.500 | % | 3/20/42 | 100,000 | 107,892 | |||||||||||
Reynolds American Inc., Senior Notes | 8.125 | % | 5/1/40 | 270,000 | 351,716 | |||||||||||
Reynolds American Inc., Senior Notes | 7.000 | % | 8/4/41 | 320,000 | 375,809 | |||||||||||
Reynolds American Inc., Senior Notes | 5.850 | % | 8/15/45 | 90,000 | 97,077 | |||||||||||
Total Tobacco | 3,197,096 | |||||||||||||||
Total Consumer Staples | 7,459,075 | |||||||||||||||
Energy — 15.4% | ||||||||||||||||
Energy Equipment & Services — 0.1% | ||||||||||||||||
Halliburton Co., Senior Notes | 5.000 | % | 11/15/45 | 200,000 | 218,535 | |||||||||||
Oil, Gas & Consumable Fuels — 15.3% | ||||||||||||||||
Anadarko Finance Co., Senior Notes | 7.500 | % | 5/1/31 | 465,000 | 617,125 |
See Notes to Financial Statements.
6 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Oil, Gas & Consumable Fuels — continued | ||||||||||||||||
Anadarko Petroleum Corp., Senior Notes | 4.850 | % | 3/15/21 | $ | 367,000 | $ | 380,025 | |||||||||
Anadarko Petroleum Corp., Senior Notes | 5.550 | % | 3/15/26 | 460,000 | 517,367 | |||||||||||
Apache Corp., Senior Notes | 6.000 | % | 1/15/37 | 106,000 | 120,506 | |||||||||||
Apache Corp., Senior Notes | 5.100 | % | 9/1/40 | 160,000 | 162,013 | |||||||||||
Apache Corp., Senior Notes | 5.250 | % | 2/1/42 | 90,000 | 92,249 | |||||||||||
BP Capital Markets America Inc., Senior Notes | 3.410 | % | 2/11/26 | 440,000 | 461,501 | |||||||||||
Cimarex Energy Co., Senior Notes | 4.375 | % | 6/1/24 | 600,000 | 635,899 | |||||||||||
Cimarex Energy Co., Senior Notes | 3.900 | % | 5/15/27 | 170,000 | 174,848 | |||||||||||
Concho Resources Inc., Senior Notes | 4.300 | % | 8/15/28 | 180,000 | 193,983 | |||||||||||
ConocoPhillips, Senior Notes | 6.500 | % | 2/1/39 | 810,000 | 1,138,949 | |||||||||||
Continental Resources Inc., Senior Notes | 4.500 | % | 4/15/23 | 690,000 | 725,563 | |||||||||||
Continental Resources Inc., Senior Notes | 4.375 | % | 1/15/28 | 140,000 | 147,462 | |||||||||||
Devon Energy Corp., Senior Notes | 5.850 | % | 12/15/25 | 350,000 | 414,953 | |||||||||||
Devon Energy Corp., Senior Notes | 5.600 | % | 7/15/41 | 320,000 | 380,484 | |||||||||||
Ecopetrol SA, Senior Notes | 5.375 | % | 6/26/26 | 740,000 | 816,886 | |||||||||||
Energy Transfer Operating LP, Senior Notes | 7.500 | % | 10/15/20 | 250,000 | 265,259 | |||||||||||
Energy Transfer Operating LP, Senior Notes | 4.200 | % | 9/15/23 | 860,000 | 902,220 | |||||||||||
Energy Transfer Operating LP, Senior Notes | 5.250 | % | 4/15/29 | 30,000 | 33,548 | |||||||||||
Energy Transfer Operating LP, Senior Notes | 6.625 | % | 10/15/36 | 20,000 | 23,313 | |||||||||||
Energy Transfer Operating LP, Senior Notes | 5.800 | % | 6/15/38 | 40,000 | 44,576 | |||||||||||
Enterprise Products Operating LLC, Senior Notes | 6.125 | % | 10/15/39 | 320,000 | 395,307 | |||||||||||
Enterprise Products Operating LLC, Senior Notes (5.375% to 2/15/28 then 3 mo. USD LIBOR + 2.570%) | 5.375 | % | 2/15/78 | 360,000 | 335,347 | (a) | ||||||||||
Kerr-McGee Corp., Senior Notes | 6.950 | % | 7/1/24 | 1,080,000 | 1,266,473 | |||||||||||
Kinder Morgan Inc., Senior Notes | 7.800 | % | 8/1/31 | 2,000,000 | 2,691,666 | |||||||||||
Lukoil International Finance BV, Senior Notes | 4.563 | % | 4/24/23 | 200,000 | 207,786 | (b) | ||||||||||
MEG Energy Corp., Senior Notes | 6.375 | % | 1/30/23 | 600,000 | 573,750 | (b) | ||||||||||
MPLX LP, Senior Notes | 4.800 | % | 2/15/29 | 420,000 | 462,976 | |||||||||||
MPLX LP, Senior Notes | 4.500 | % | 4/15/38 | 380,000 | 384,294 | |||||||||||
Noble Energy Inc., Senior Notes | 6.000 | % | 3/1/41 | 390,000 | 447,037 | |||||||||||
Noble Energy Inc., Senior Notes | 5.250 | % | 11/15/43 | 150,000 | 161,865 | |||||||||||
Petrobras Global Finance BV, Senior Notes | 7.375 | % | 1/17/27 | 190,000 | 217,740 | |||||||||||
Petrobras Global Finance BV, Senior Notes | 6.900 | % | 3/19/49 | 280,000 | 298,760 | |||||||||||
Petrobras Global Finance BV, Senior Notes | 6.850 | % | 6/5/2115 | 300,000 | 311,748 | |||||||||||
Petroleos Mexicanos, Senior Notes | 6.875 | % | 8/4/26 | 450,000 | 456,705 | |||||||||||
Petroleos Mexicanos, Senior Notes | 6.625 | % | 6/15/35 | 1,005,000 | 933,394 | |||||||||||
Phillips 66, Senior Notes | 5.875 | % | 5/1/42 | 160,000 | 198,343 | |||||||||||
Saudi Arabian Oil Co., Senior Notes | 4.375 | % | 4/16/49 | 450,000 | 457,070 | (b) |
See Notes to Financial Statements.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 7 |
Schedule of investments(unaudited) (cont’d)
June 30, 2019
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Oil, Gas & Consumable Fuels — continued | ||||||||||||||||
Shell International Finance BV, Senior Notes | 6.375 | % | 12/15/38 | $ | 250,000 | $ | 352,299 | |||||||||
Transcontinental Gas Pipe Line Co. LLC, Senior Notes | 7.850 | % | 2/1/26 | 470,000 | 600,487 | |||||||||||
Transcontinental Gas Pipe Line Co. LLC, Senior Notes | 7.250 | % | 12/1/26 | 230,000 | 286,909 | |||||||||||
Transcontinental Gas Pipe Line Co. LLC, Senior Notes | 5.400 | % | 8/15/41 | 310,000 | 354,960 | |||||||||||
Western Midstream Operating LP, Senior Notes | 4.650 | % | 7/1/26 | 660,000 | 669,676 | |||||||||||
Western Midstream Operating LP, Senior Notes | 4.750 | % | 8/15/28 | 680,000 | 688,451 | |||||||||||
Williams Cos. Inc., Senior Notes | 7.500 | % | 1/15/31 | 47,000 | 60,855 | |||||||||||
Williams Cos. Inc., Senior Notes | 7.750 | % | 6/15/31 | 37,000 | 48,817 | |||||||||||
Williams Cos. Inc., Senior Notes | 8.750 | % | 3/15/32 | 610,000 | 868,802 | |||||||||||
Total Oil, Gas & Consumable Fuels | 21,980,246 | |||||||||||||||
Total Energy | 22,198,781 | |||||||||||||||
Financials — 29.9% | ||||||||||||||||
Banks — 20.5% | ||||||||||||||||
Banco Mercantil del Norte SA, Junior Subordinated Notes (7.500% to 6/27/29 then 10 year Treasury Constant Maturity Rate + 5.470%) | 7.500 | % | 6/27/29 | 200,000 | 202,400 | (a)(b)(c) | ||||||||||
Banco Nacional de Costa Rica, Senior Notes | 5.875 | % | 4/25/21 | 340,000 | 348,075 | (b) | ||||||||||
Banco Santander SA, Senior Notes | 3.848 | % | 4/12/23 | 400,000 | 415,524 | |||||||||||
Bank of America Corp., Senior Notes | 5.875 | % | 2/7/42 | 320,000 | 425,848 | |||||||||||
Bank of America Corp., Senior Notes (3.458% to 3/15/24 then 3 mo. USD LIBOR + 0.970%) | 3.458 | % | 3/15/25 | 70,000 | 72,707 | (a) | ||||||||||
Bank of America Corp., Subordinated Notes | 6.110 | % | 1/29/37 | 320,000 | 408,658 | |||||||||||
Bank of America Corp., Subordinated Notes | 7.750 | % | 5/14/38 | 900,000 | 1,329,811 | |||||||||||
Barclays Bank PLC, Subordinated Notes | 10.179 | % | 6/12/21 | 240,000 | 271,725 | (b) | ||||||||||
Barclays Bank PLC, Subordinated Notes | 7.625 | % | 11/21/22 | 450,000 | 491,668 | |||||||||||
Barclays PLC, Junior Subordinated Notes (8.000% to 6/15/24 then 5 year Treasury Constant Maturity Rate + 5.672%) | 8.000 | % | 6/15/24 | 700,000 | 734,625 | (a)(c) | ||||||||||
Barclays PLC, Senior Notes (4.338% to 5/16/23 then 3 mo. USD LIBOR + 1.356%) | 4.338 | % | 5/16/24 | 380,000 | 392,724 | (a) | ||||||||||
Barclays PLC, Subordinated Notes (5.088% to 6/20/29 then 3 mo. USD LIBOR + 3.054%) | 5.088 | % | 6/20/30 | 640,000 | 655,325 | (a) | ||||||||||
BNP Paribas SA, Junior Subordinated Notes (7.625% to 3/30/21 then USD 5 year ICE Swap Rate + 6.314%) | 7.625 | % | 3/30/21 | 330,000 | 349,503 | (a)(b)(c) | ||||||||||
BNP Paribas SA, Senior Notes (5.198% to 1/10/29 then 3 mo. USD LIBOR + 2.567%) | 5.198 | % | 1/10/30 | 280,000 | 320,923 | (a)(b) |
See Notes to Financial Statements.
8 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Banks — continued | ||||||||||||||||
BPCE SA, Subordinated Notes | 5.150 | % | 7/21/24 | $ | 410,000 | $ | 443,827 | (b) | ||||||||
Citigroup Inc., Senior Notes | 8.125 | % | 7/15/39 | 251,000 | 402,010 | |||||||||||
Citigroup Inc., Senior Notes | 5.875 | % | 1/30/42 | 240,000 | 317,364 | |||||||||||
Citigroup Inc., Subordinated Notes | 5.500 | % | 9/13/25 | 750,000 | 850,174 | |||||||||||
Citigroup Inc., Subordinated Notes | 6.125 | % | 8/25/36 | 404,000 | 494,732 | |||||||||||
Citigroup Inc., Subordinated Notes | 6.675 | % | 9/13/43 | 370,000 | 514,022 | |||||||||||
Cooperatieve Rabobank UA, Senior Notes | 5.750 | % | 12/1/43 | 450,000 | 572,828 | |||||||||||
Cooperatieve Rabobank UA, Senior Notes | 5.250 | % | 8/4/45 | 340,000 | 411,569 | |||||||||||
Credit Agricole SA, Junior Subordinated Notes (8.125% to 12/23/25 then USD 5 year ICE Swap Rate + 6.185%) | 8.125 | % | 12/23/25 | 1,040,000 | 1,205,872 | (a)(b)(c) | ||||||||||
Credit Agricole SA, Junior Subordinated Notes (8.375% to 10/13/19 then 3 mo. USD LIBOR + 6.982%) | 8.375 | % | 10/13/19 | 560,000 | 564,480 | (a)(b)(c) | ||||||||||
Danske Bank A/S, Senior Notes | 5.000 | % | 1/12/22 | 1,780,000 | 1,862,649 | (b) | ||||||||||
Danske Bank A/S, Senior Notes | 5.375 | % | 1/12/24 | 230,000 | 248,765 | (b) | ||||||||||
HSBC Holdings PLC, Junior Subordinated Notes (6.500% to 3/23/28 then USD 5 year ICE Swap Rate + 3.606%) | 6.500 | % | 3/23/28 | 300,000 | 314,754 | (a)(c) | ||||||||||
HSBC Holdings PLC, Senior Notes (3.973% to 5/22/29 then 3 mo. USD LIBOR + 1.610%) | 3.973 | % | 5/22/30 | 530,000 | 554,068 | (a) | ||||||||||
HSBC Holdings PLC, Subordinated Notes | 4.250 | % | 8/18/25 | 210,000 | 221,288 | |||||||||||
ING Bank NV, Subordinated Notes | 5.800 | % | 9/25/23 | 600,000 | 664,165 | (b) | ||||||||||
Intesa Sanpaolo SpA, Senior Notes | 3.125 | % | 7/14/22 | 300,000 | 297,068 | (b) | ||||||||||
Intesa Sanpaolo SpA, Subordinated Notes | 5.710 | % | 1/15/26 | 690,000 | 698,932 | (b) | ||||||||||
JPMorgan Chase & Co., Junior Subordinated Notes (6.000% to 8/1/23 then 3 mo. USD LIBOR + 3.300%) | 6.000 | % | 8/1/23 | 260,000 | 273,511 | (a)(c) | ||||||||||
JPMorgan Chase & Co., Senior Notes (3 mo. USD LIBOR + 1.220%) | 3.897 | % | 1/23/49 | 50,000 | 52,497 | (a) | ||||||||||
JPMorgan Chase & Co., Subordinated Notes | 5.625 | % | 8/16/43 | 440,000 | 559,707 | |||||||||||
JPMorgan Chase & Co., Subordinated Notes | 4.950 | % | 6/1/45 | 490,000 | 582,646 | |||||||||||
Lloyds Banking Group PLC, Junior Subordinated Notes (6.750% to 6/27/26 then 5 year Treasury Constant Maturity Rate + 4.815%) | 6.750 | % | 6/27/26 | 200,000 | 205,850 | (a)(c) | ||||||||||
Lloyds Banking Group PLC, Junior Subordinated Notes (7.500% to 6/27/24 then USD 5 year ICE Swap Rate + 4.760%) | 7.500 | % | 6/27/24 | 360,000 | 379,350 | (a)(c) | ||||||||||
Lloyds Banking Group PLC, Junior Subordinated Notes (7.500% to 9/27/25 then USD 5 year ICE Swap Rate + 4.496%) | 7.500 | % | 9/27/25 | 370,000 | 389,279 | (a)(c) |
See Notes to Financial Statements.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 9 |
Schedule of investments(unaudited) (cont’d)
June 30, 2019
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Banks — continued | ||||||||||||||||
NatWest Markets NV, Subordinated Notes | 7.750 | % | 5/15/23 | $ | 480,000 | $ | 539,688 | |||||||||
Royal Bank of Scotland Group PLC, Junior Subordinated Notes (7.648% to 9/30/31 then 3 mo. USD LIBOR + 2.500%) | 7.648 | % | 9/30/31 | 1,360,000 | 1,778,200 | (a)(c) | ||||||||||
Royal Bank of Scotland Group PLC, Junior Subordinated Notes (8.625% to 8/15/21 then USD 5 year ICE Swap Rate + 7.598%) | 8.625 | % | 8/15/21 | 590,000 | 637,347 | (a)(c) | ||||||||||
Royal Bank of Scotland Group PLC, Subordinated Notes | 6.100 | % | 6/10/23 | 1,010,000 | 1,097,203 | |||||||||||
Royal Bank of Scotland Group PLC, Subordinated Notes | 6.000 | % | 12/19/23 | 350,000 | 381,415 | |||||||||||
Santander UK Group Holdings PLC, Subordinated Notes | 4.750 | % | 9/15/25 | 210,000 | 218,352 | (b) | ||||||||||
Standard Chartered PLC, Subordinated Notes | 5.700 | % | 3/26/44 | 410,000 | 478,119 | (b) | ||||||||||
UniCredit SpA, Senior Notes | 6.572 | % | 1/14/22 | 590,000 | 627,431 | (b) | ||||||||||
UniCredit SpA, Subordinated Notes (7.296% to 4/2/29 then USD 5 year ICE Swap Rate + 4.914%) | 7.296 | % | 4/2/34 | 1,040,000 | 1,104,163 | (a)(b) | ||||||||||
Wachovia Capital Trust III, Junior Subordinated Bonds (the greater of 3 mo. USD LIBOR + 0.930% or 5.570%) | 5.570 | % | 7/29/19 | 1,190,000 | 1,192,356 | (a)(c) | ||||||||||
Wells Fargo & Co., Senior Notes (3.196% to 6/17/26 then 3 mo. USD LIBOR + 1.170%) | 3.196 | % | 6/17/27 | 730,000 | 744,631 | (a) | ||||||||||
Wells Fargo & Co., Subordinated Notes | 5.375 | % | 11/2/43 | 430,000 | 524,429 | |||||||||||
Wells Fargo & Co., Subordinated Notes | 4.750 | % | 12/7/46 | 580,000 | 662,086 | |||||||||||
Total Banks | 29,486,343 | |||||||||||||||
Capital Markets — 3.7% | ||||||||||||||||
CME Group Inc., Senior Notes | 5.300 | % | 9/15/43 | 440,000 | 563,938 | |||||||||||
Credit Suisse USA Inc., Senior Notes | 7.125 | % | 7/15/32 | 40,000 | 56,991 | |||||||||||
Goldman Sachs Group Inc., Senior Notes | 5.375 | % | 3/15/20 | 270,000 | 275,616 | |||||||||||
Goldman Sachs Group Inc., Senior Notes | 6.250 | % | 2/1/41 | 570,000 | 765,385 | |||||||||||
Goldman Sachs Group Inc., Subordinated Notes | 6.750 | % | 10/1/37 | 640,000 | 838,147 | |||||||||||
Goldman Sachs Group Inc., Subordinated Notes | 5.150 | % | 5/22/45 | 500,000 | 573,096 | |||||||||||
KKR Group Finance Co. III LLC, Senior Notes | 5.125 | % | 6/1/44 | 820,000 | 912,991 | (b) | ||||||||||
KKR Group Finance Co. VI LLC, Senior Notes | 3.750 | % | 7/1/29 | 80,000 | 82,203 | (b)(d) | ||||||||||
Morgan Stanley, Senior Notes | 5.500 | % | 7/24/20 | 100,000 | 103,245 | |||||||||||
Morgan Stanley, Senior Notes | 6.375 | % | 7/24/42 | 90,000 | 125,813 | |||||||||||
Raymond James Financial Inc., Senior Notes | 4.950 | % | 7/15/46 | 90,000 | 101,670 |
See Notes to Financial Statements.
10 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Capital Markets — continued | ||||||||||||||||
UBS AG Stamford, CT, Subordinated Notes | 7.625 | % | 8/17/22 | $ | 340,000 | $ | 381,516 | |||||||||
UBS Group Funding Switzerland AG, Junior Subordinated Notes (7.000% to 1/31/24 then USD 5 year ICE Swap Rate + 4.344%) | 7.000 | % | 1/31/24 | 580,000 | 616,560 | (a)(b)(c) | ||||||||||
Total Capital Markets | 5,397,171 | |||||||||||||||
Consumer Finance — 0.8% | ||||||||||||||||
Navient Corp., Senior Notes | 7.250 | % | 1/25/22 | 830,000 | 898,475 | |||||||||||
Navient Corp., Senior Notes | 6.125 | % | 3/25/24 | 290,000 | 298,700 | |||||||||||
Total Consumer Finance | 1,197,175 | |||||||||||||||
Diversified Financial Services — 1.5% | ||||||||||||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust, Senior Notes | 4.875 | % | 1/16/24 | 330,000 | 354,590 | |||||||||||
Carlyle Finance LLC, Senior Notes | 5.650 | % | 9/15/48 | 110,000 | 119,643 | (b) | ||||||||||
Carlyle Holdings II Finance LLC, Senior Notes | 5.625 | % | 3/30/43 | 220,000 | 239,878 | (b) | ||||||||||
ILFCE-Capital Trust I, Ltd. GTD ((Highest of 3 mo. USD LIBOR, 10 year U.S. Treasury Constant Maturity Rate and 30 year U.S. Treasury Constant Maturity Rate) + 1.550%) | 4.090 | % | 12/21/65 | 470,000 | 332,986 | (a)(b) | ||||||||||
ILFCE-Capital Trust II, Ltd. GTD ((Highest of 3 mo. USD LIBOR, 10 year U.S. Treasury Constant Maturity Rate and 30 year U.S. Treasury Constant Maturity Rate) + 1.800%) | 4.340 | % | 12/21/65 | 270,000 | 197,100 | (a)(b) | ||||||||||
International Lease Finance Corp., Senior Notes | 8.250 | % | 12/15/20 | 190,000 | 205,056 | |||||||||||
Park Aerospace Holdings Ltd., Senior Notes | 5.250 | % | 8/15/22 | 392,000 | 414,853 | (b) | ||||||||||
Park Aerospace Holdings Ltd., Senior Notes | 5.500 | % | 2/15/24 | 220,000 | 237,431 | (b) | ||||||||||
Total Diversified Financial Services | 2,101,537 | |||||||||||||||
Insurance — 3.4% | ||||||||||||||||
Allstate Corp., Junior Subordinated Notes (6.500% to 5/15/37 then 3 mo. USD LIBOR + 2.120%) | 6.500 | % | 5/15/57 | 480,000 | 547,929 | (a) | ||||||||||
American International Group Inc., Junior Subordinated Notes (6.250% to 3/15/37 then 3 mo. USD LIBOR + 2.056%) | 6.250 | % | 3/15/37 | 80,000 | 82,128 | (a)(c) | ||||||||||
American International Group Inc., Senior Notes | 6.400 | % | 12/15/20 | 90,000 | 95,047 | |||||||||||
American International Group Inc., Senior Notes | 4.750 | % | 4/1/48 | 70,000 | 77,379 | |||||||||||
AXA SA, Subordinated Notes | 8.600 | % | 12/15/30 | 200,000 | 284,680 | |||||||||||
Delphi Financial Group Inc., Senior Notes | 7.875 | % | 1/31/20 | 170,000 | 174,881 | |||||||||||
Fidelity & Guaranty Life Holdings Inc., Senior Notes | 5.500 | % | 5/1/25 | 230,000 | 239,775 | (b) |
See Notes to Financial Statements.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 11 |
Schedule of investments(unaudited) (cont’d)
June 30, 2019
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Insurance — continued | ||||||||||||||||
Liberty Mutual Insurance Co., Subordinated Notes | 7.875 | % | 10/15/26 | $ | 490,000 | $ | 617,342 | (b) | ||||||||
Massachusetts Mutual Life Insurance Co., Subordinated Notes | 4.900 | % | 4/1/77 | 260,000 | 304,278 | (b) | ||||||||||
MetLife Inc., Junior Subordinated Notes (6.400% to 12/15/36 then 3 mo. USD LIBOR + 2.205%) | 6.400 | % | 12/15/36 | 1,150,000 | 1,316,733 | (a)(c) | ||||||||||
New York Life Insurance Co., Subordinated Notes | 4.450 | % | 5/15/69 | 90,000 | 99,418 | (b) | ||||||||||
Reinsurance Group of America Inc., Senior Notes | 3.900 | % | 5/15/29 | 430,000 | 446,752 | |||||||||||
Teachers Insurance & Annuity Association of America, Subordinated Notes | 6.850 | % | 12/16/39 | 400,000 | 567,733 | (b) | ||||||||||
Total Insurance | 4,854,075 | |||||||||||||||
Total Financials | 43,036,301 | |||||||||||||||
Health Care — 6.2% | ||||||||||||||||
Biotechnology — 0.3% | ||||||||||||||||
Celgene Corp., Senior Notes | 5.000 | % | 8/15/45 | 250,000 | 297,106 | |||||||||||
Gilead Sciences Inc., Senior Notes | 5.650 | % | 12/1/41 | 60,000 | 75,716 | |||||||||||
Gilead Sciences Inc., Senior Notes | 4.750 | % | 3/1/46 | 50,000 | 56,971 | |||||||||||
Total Biotechnology | 429,793 | |||||||||||||||
Health Care Equipment & Supplies — 0.6% | ||||||||||||||||
Abbott Laboratories, Senior Notes | 4.900 | % | 11/30/46 | 90,000 | 111,371 | |||||||||||
Becton Dickinson and Co., Senior Notes | 4.685 | % | 12/15/44 | 200,000 | 222,181 | |||||||||||
Becton Dickinson and Co., Senior Notes | 4.669 | % | 6/6/47 | 410,000 | 460,006 | |||||||||||
Total Health Care Equipment & Supplies | 793,558 | |||||||||||||||
Health Care Providers & Services — 4.4% | ||||||||||||||||
Cigna Corp., Senior Notes | 4.125 | % | 11/15/25 | 340,000 | 362,368 | (b) | ||||||||||
Cigna Corp., Senior Notes | 4.800 | % | 8/15/38 | 340,000 | 367,099 | (b) | ||||||||||
CVS Health Corp., Senior Notes | 4.100 | % | 3/25/25 | 940,000 | 992,075 | |||||||||||
CVS Health Corp., Senior Notes | 4.300 | % | 3/25/28 | 540,000 | 569,904 | |||||||||||
CVS Health Corp., Senior Notes | 4.780 | % | 3/25/38 | 570,000 | 595,556 | |||||||||||
CVS Health Corp., Senior Notes | 5.125 | % | 7/20/45 | 340,000 | 363,135 | |||||||||||
CVS Health Corp., Senior Notes | 5.050 | % | 3/25/48 | 560,000 | 597,386 | |||||||||||
Dartmouth-Hitchcock Health, Secured Bonds | 4.178 | % | 8/1/48 | 100,000 | 108,047 | |||||||||||
HCA Inc., Senior Secured Notes | 4.125 | % | 6/15/29 | 210,000 | 216,306 | |||||||||||
HCA Inc., Senior Secured Notes | 5.125 | % | 6/15/39 | 110,000 | 114,724 | |||||||||||
HCA Inc., Senior Secured Notes | 5.500 | % | 6/15/47 | 220,000 | 235,390 | |||||||||||
HCA Inc., Senior Secured Notes | 5.250 | % | 6/15/49 | 350,000 | 365,284 | |||||||||||
Humana Inc., Senior Notes | 8.150 | % | 6/15/38 | 80,000 | 112,742 |
See Notes to Financial Statements.
12 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Health Care Providers & Services — continued |
| |||||||||||||||
Humana Inc., Senior Notes | 4.800 | % | 3/15/47 | $ | 230,000 | $ | 249,990 | |||||||||
Magellan Health Inc., Senior Notes | 4.900 | % | 9/22/24 | 730,000 | 723,795 | |||||||||||
Orlando Health Obligated Group, Senior Notes | 4.089 | % | 10/1/48 | 170,000 | 180,772 | |||||||||||
UnitedHealth Group Inc., Senior Notes | 3.700 | % | 12/15/25 | 160,000 | 170,537 | |||||||||||
Total Health Care Providers & Services | 6,325,110 | |||||||||||||||
Pharmaceuticals — 0.9% | ||||||||||||||||
Allergan Funding SCS, Senior Notes | 4.550 | % | 3/15/35 | 130,000 | 131,466 | |||||||||||
Bausch Health Cos. Inc., Senior Notes | 9.000 | % | 12/15/25 | 170,000 | 190,579 | (b) | ||||||||||
Bristol-Myers Squibb Co., Senior Notes | 3.400 | % | 7/26/29 | 910,000 | 953,552 | (b) | ||||||||||
Zoetis Inc., Senior Notes | 4.700 | % | 2/1/43 | 30,000 | 33,952 | |||||||||||
Total Pharmaceuticals | 1,309,549 | |||||||||||||||
Total Health Care | 8,858,010 | |||||||||||||||
Industrials — 6.3% | ||||||||||||||||
Aerospace & Defense — 2.8% | ||||||||||||||||
Avolon Holdings Funding Ltd., Senior Notes | 3.625 | % | 5/1/22 | 350,000 | 355,198 | (b) | ||||||||||
Avolon Holdings Funding Ltd., Senior Notes | 5.125 | % | 10/1/23 | 210,000 | 222,810 | (b) | ||||||||||
Avolon Holdings Funding Ltd., Senior Notes | 3.950 | % | 7/1/24 | 140,000 | 143,616 | (b) | ||||||||||
Boeing Co., Senior Notes | 2.800 | % | 3/1/24 | 320,000 | 325,714 | |||||||||||
Boeing Co., Senior Notes | 3.100 | % | 5/1/26 | 1,400,000 | 1,441,947 | |||||||||||
Huntington Ingalls Industries Inc., Senior Notes | 3.483 | % | 12/1/27 | 200,000 | 203,580 | |||||||||||
Lockheed Martin Corp., Senior Notes | 4.500 | % | 5/15/36 | 40,000 | 45,962 | |||||||||||
Northrop Grumman Systems Corp., Senior Notes | 7.875 | % | 3/1/26 | 870,000 | 1,112,420 | |||||||||||
United Technologies Corp., Senior Notes | 4.625 | % | 11/16/48 | 110,000 | 128,461 | |||||||||||
Total Aerospace & Defense | 3,979,708 | |||||||||||||||
Airlines — 0.4% | ||||||||||||||||
Continental Airlines Pass-Through Trust | 7.250 | % | 11/10/19 | 124,908 | 126,726 | |||||||||||
Continental Airlines Pass-Through Trust | 7.256 | % | 3/15/20 | 8,376 | 8,465 | |||||||||||
Continental Airlines Pass-Through Trust | 6.250 | % | 4/11/20 | 66,620 | 67,962 | |||||||||||
Delta Air Lines Pass-Through Certificates Trust | 8.021 | % | 8/10/22 | 43,620 | 48,169 | |||||||||||
Delta Air Lines Pass-Through Certificates Trust, Senior Secured Notes | 7.750 | % | 12/17/19 | 60,943 | 62,219 | |||||||||||
US Airways Pass-Through Trust, Senior Secured Notes | 5.900 | % | 10/1/24 | 223,051 | 246,249 | |||||||||||
Total Airlines | 559,790 | |||||||||||||||
Commercial Services & Supplies — 1.0% | ||||||||||||||||
Republic Services Inc., Senior Notes | 5.500 | % | 9/15/19 | 130,000 | 130,732 | |||||||||||
Republic Services Inc., Senior Notes | 5.250 | % | 11/15/21 | 330,000 | 351,753 | |||||||||||
Waste Connections Inc., Senior Notes | 4.250 | % | 12/1/28 | 480,000 | 525,389 |
See Notes to Financial Statements.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 13 |
Schedule of investments(unaudited) (cont’d)
June 30, 2019
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Commercial Services & Supplies — continued | ||||||||||||||||
Waste Management Inc., Senior Notes | 3.200 | % | 6/15/26 | $ | 20,000 | $ | 20,822 | |||||||||
Waste Management Inc., Senior Notes | 4.000 | % | 7/15/39 | 350,000 | 375,687 | |||||||||||
Total Commercial Services & Supplies | 1,404,383 | |||||||||||||||
Construction & Engineering — 0.7% | ||||||||||||||||
Vinci SA, Senior Notes | 3.750 | % | 4/10/29 | 890,000 | 957,157 | (b) | ||||||||||
Industrial Conglomerates — 0.8% | ||||||||||||||||
General Electric Co., Senior Notes | 6.750 | % | 3/15/32 | 200,000 | 246,603 | |||||||||||
General Electric Co., Senior Notes | 6.875 | % | 1/10/39 | 716,000 | 899,173 | |||||||||||
Total Industrial Conglomerates | 1,145,776 | |||||||||||||||
Machinery — 0.2% | ||||||||||||||||
Caterpillar Inc., Senior Notes | 4.750 | % | 5/15/64 | 220,000 | 260,756 | |||||||||||
Road & Rail — 0.2% | ||||||||||||||||
Union Pacific Corp., Senior Notes | 4.375 | % | 11/15/65 | 320,000 | 339,329 | |||||||||||
Transportation Infrastructure — 0.2% | ||||||||||||||||
SMBC Aviation Capital Finance DAC, Senior Notes | 4.125 | % | 7/15/23 | 350,000 | 366,484 | (b) | ||||||||||
Total Industrials | 9,013,383 | |||||||||||||||
Information Technology — 2.1% | ||||||||||||||||
Communications Equipment — 0.3% | ||||||||||||||||
Harris Corp., Senior Notes | 4.854 | % | 4/27/35 | 260,000 | 289,230 | |||||||||||
Harris Corp., Senior Notes | 5.054 | % | 4/27/45 | 210,000 | 246,595 | |||||||||||
Total Communications Equipment | 535,825 | |||||||||||||||
IT Services — 0.1% | ||||||||||||||||
International Business Machines Corp., Senior Notes | 3.500 | % | 5/15/29 | 110,000 | 115,229 | |||||||||||
Semiconductors & Semiconductor Equipment — 0.4% | ||||||||||||||||
Intel Corp., Senior Notes | 4.900 | % | 7/29/45 | 130,000 | 157,154 | |||||||||||
KLA-Tencor Corp., Senior Notes | 4.100 | % | 3/15/29 | 110,000 | 115,821 | |||||||||||
KLA-Tencor Corp., Senior Notes | 5.000 | % | 3/15/49 | 40,000 | 44,626 | |||||||||||
Texas Instruments Inc., Senior Notes | 3.875 | % | 3/15/39 | 270,000 | 295,180 | |||||||||||
Total Semiconductors & Semiconductor Equipment | 612,781 | |||||||||||||||
Software — 0.8% | ||||||||||||||||
Microsoft Corp., Senior Notes | 4.250 | % | 2/6/47 | 970,000 | 1,144,601 | |||||||||||
Technology Hardware, Storage & Peripherals — 0.5% | ||||||||||||||||
Apple Inc., Senior Notes | 3.850 | % | 8/4/46 | 340,000 | 361,998 | |||||||||||
HP Inc., Senior Notes | 4.650 | % | 12/9/21 | 310,000 | 326,234 | |||||||||||
Total Technology Hardware, Storage & Peripherals | 688,232 | |||||||||||||||
Total Information Technology | 3,096,668 |
See Notes to Financial Statements.
14 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Materials — 7.5% | ||||||||||||||||
Chemicals — 0.8% | ||||||||||||||||
Dow Chemical Co., Senior Notes | 7.375 | % | 11/1/29 | $ | 800,000 | $ | 1,056,027 | |||||||||
Metals & Mining — 6.5% | ||||||||||||||||
Alcoa Nederland Holding BV, Senior Notes | 6.750 | % | 9/30/24 | 250,000 | 265,313 | (b) | ||||||||||
Alcoa Nederland Holding BV, Senior Notes | 6.125 | % | 5/15/28 | 800,000 | 838,000 | (b) | ||||||||||
Anglo American Capital PLC, Senior Notes | 4.000 | % | 9/11/27 | 500,000 | 502,382 | (b) | ||||||||||
ArcelorMittal, Senior Notes | 5.125 | % | 6/1/20 | 70,000 | 71,623 | |||||||||||
ArcelorMittal, Senior Notes | 5.250 | % | 8/5/20 | 800,000 | 820,531 | |||||||||||
ArcelorMittal, Senior Notes | 6.125 | % | 6/1/25 | 50,000 | 56,883 | |||||||||||
ArcelorMittal, Senior Notes | 4.550 | % | 3/11/26 | 470,000 | 497,205 | |||||||||||
Barrick North America Finance LLC, Senior Notes | 5.700 | % | 5/30/41 | 50,000 | 59,905 | |||||||||||
Barrick PD Australia Finance Pty Ltd., Senior Notes | 5.950 | % | 10/15/39 | 180,000 | 221,041 | |||||||||||
BHP Billiton Finance USA Ltd., Senior Notes (6.750% to 10/19/25 then USD 5 year ICE Swap Rate + 5.093%) | 6.750 | % | 10/19/75 | 470,000 | 536,984 | (a)(b) | ||||||||||
First Quantum Minerals Ltd., Senior Notes | 7.000 | % | 2/15/21 | 72,000 | 73,575 | (b) | ||||||||||
First Quantum Minerals Ltd., Senior Notes | 7.500 | % | 4/1/25 | 200,000 | 191,250 | (b) | ||||||||||
Freeport-McMoRan Inc., Senior Notes | 3.550 | % | 3/1/22 | 60,000 | 60,375 | |||||||||||
Freeport-McMoRan Inc., Senior Notes | 6.875 | % | 2/15/23 | 630,000 | 665,438 | |||||||||||
Glencore Finance Canada Ltd., Senior Notes | 6.900 | % | 11/15/37 | 430,000 | 515,392 | (b) | ||||||||||
Glencore Finance Canada Ltd., Senior Notes | 5.550 | % | 10/25/42 | 150,000 | 155,340 | (b) | ||||||||||
Glencore Funding LLC, Senior Notes | 4.125 | % | 3/12/24 | 530,000 | 550,637 | (b) | ||||||||||
Glencore Funding LLC, Senior Notes | 4.000 | % | 3/27/27 | 360,000 | 363,846 | (b) | ||||||||||
Glencore Funding LLC, Senior Notes | 3.875 | % | 10/27/27 | 170,000 | 170,333 | (b) | ||||||||||
Hudbay Minerals Inc., Senior Notes | 7.250 | % | 1/15/23 | 30,000 | 31,013 | (b) | ||||||||||
Northwest Acquisitions ULC/Dominion Finco Inc., Secured Notes | 7.125 | % | 11/1/22 | 380,000 | 263,150 | (b) | ||||||||||
Southern Copper Corp., Senior Notes | 5.375 | % | 4/16/20 | 150,000 | 153,274 | |||||||||||
Southern Copper Corp., Senior Notes | 5.250 | % | 11/8/42 | 470,000 | 517,202 | |||||||||||
Vale Overseas Ltd., Senior Notes | 6.875 | % | 11/21/36 | 1,148,000 | 1,384,775 | |||||||||||
Yamana Gold Inc., Senior Notes | 4.950 | % | 7/15/24 | 370,000 | 390,189 | |||||||||||
Total Metals & Mining | 9,355,656 | |||||||||||||||
Paper & Forest Products — 0.2% | ||||||||||||||||
Georgia-Pacific LLC, Senior Notes | 7.375 | % | 12/1/25 | 250,000 | 316,946 | |||||||||||
Total Materials | 10,728,629 |
See Notes to Financial Statements.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 15 |
Schedule of investments(unaudited) (cont’d)
June 30, 2019
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Real Estate — 1.3% | ||||||||||||||||
Equity Real Estate Investment Trusts (REITs) — 1.1% | ||||||||||||||||
AvalonBay Communities Inc., Senior Notes | 3.300 | % | 6/1/29 | $ | 490,000 | $ | 510,318 | |||||||||
MPT Operating Partnership LP/MPT Finance Corp., Senior Notes | 5.000 | % | 10/15/27 | 250,000 | 258,125 | |||||||||||
Ventas Realty LP, Senior Notes | 2.650 | % | 1/15/25 | 460,000 | 458,479 | (d) | ||||||||||
Welltower Inc., Senior Notes | 4.125 | % | 3/15/29 | 320,000 | 339,690 | |||||||||||
Total Equity Real Estate Investment Trusts (REITs) | 1,566,612 | |||||||||||||||
Real Estate Management & Development — 0.2% | ||||||||||||||||
Security Capital Group Inc., Senior Notes | 7.700 | % | 6/15/28 | 280,000 | 342,956 | |||||||||||
Total Real Estate | 1,909,568 | |||||||||||||||
Utilities — 2.2% | ||||||||||||||||
Electric Utilities — 2.0% | ||||||||||||||||
CenterPoint Energy Houston Electric LLC, Senior Secured Bonds | 4.500 | % | 4/1/44 | 210,000 | 241,740 | |||||||||||
FirstEnergy Corp., Senior Notes | 3.900 | % | 7/15/27 | 310,000 | 325,863 | |||||||||||
FirstEnergy Corp., Senior Notes | 7.375 | % | 11/15/31 | 830,000 | 1,135,609 | |||||||||||
Jersey Central Power & Light Co., Senior Notes | 4.300 | % | 1/15/26 | 100,000 | 107,465 | (b) | ||||||||||
MidAmerican Energy Co. | 3.650 | % | 4/15/29 | 150,000 | 161,967 | |||||||||||
Southern California Edison Co., First Mortgage Bonds | 4.125 | % | 3/1/48 | 310,000 | 313,035 | |||||||||||
Virginia Electric & Power Co., Senior Notes | 8.875 | % | 11/15/38 | 390,000 | 640,878 | |||||||||||
Total Electric Utilities | 2,926,557 | |||||||||||||||
Independent Power and Renewable Electricity Producers — 0.2% | ||||||||||||||||
NRG Energy Inc., Senior Secured Notes | 3.750 | % | 6/15/24 | 200,000 | 205,654 | (b) | ||||||||||
Total Utilities | 3,132,211 | |||||||||||||||
Total Corporate Bonds & Notes (Cost — $115,941,991) |
| 129,040,684 | ||||||||||||||
Sovereign Bonds — 6.3% | ||||||||||||||||
Argentina — 1.8% | ||||||||||||||||
Argentine Republic Government International Bond, Senior Notes | 7.500 | % | 4/22/26 | 370,000 | 313,390 | |||||||||||
Argentine Republic Government International Bond, Senior Notes | 6.875 | % | 1/26/27 | 120,000 | 96,556 | |||||||||||
Argentine Republic Government International Bond, Senior Notes | 5.875 | % | 1/11/28 | 390,000 | 297,619 | |||||||||||
Argentine Republic Government International Bond, Senior Notes | 7.625 | % | 4/22/46 | 150,000 | 119,288 | |||||||||||
Argentine Republic Government International Bond, Senior Notes | 6.875 | % | 1/11/48 | 150,000 | 111,564 |
See Notes to Financial Statements.
16 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
Argentina — continued | ||||||||||||||||
Provincia de Buenos Aires, Senior Notes | 9.125 | % | 3/16/24 | $ | 1,220,000 | $ | 1,024,812 | (b) | ||||||||
Provincia de Cordoba, Senior Notes | 7.450 | % | 9/1/24 | 740,000 | 584,607 | (b) | ||||||||||
Total Argentina | 2,547,836 | |||||||||||||||
Canada — 0.7% | ||||||||||||||||
Province of Quebec Canada, Senior Notes | 7.970 | % | 7/22/36 | 650,000 | 1,052,695 | |||||||||||
Colombia — 0.7% | ||||||||||||||||
Colombia Government International Bond, Senior Notes | 4.500 | % | 3/15/29 | 870,000 | 951,345 | |||||||||||
Ecuador — 0.9% | ||||||||||||||||
Ecuador Government International Bond, Senior Notes | 10.750 | % | 3/28/22 | 610,000 | 687,018 | (b) | ||||||||||
Ecuador Government International Bond, Senior Notes | 10.750 | % | 1/31/29 | 510,000 | 576,943 | (b) | ||||||||||
Total Ecuador | 1,263,961 | |||||||||||||||
Egypt — 0.4% | ||||||||||||||||
Egypt Government International Bond, Senior Notes | 7.600 | % | 3/1/29 | 240,000 | 253,747 | (b) | ||||||||||
Egypt Government International Bond, Senior Notes | 8.700 | % | 3/1/49 | 240,000 | 258,818 | (b) | ||||||||||
Total Egypt | 512,565 | |||||||||||||||
Ghana — 0.2% | ||||||||||||||||
Ghana Government International Bond, Senior Notes | 8.950 | % | 3/26/51 | 310,000 | 321,784 | (b) | ||||||||||
Indonesia — 0.2% | ||||||||||||||||
Indonesia Government International Bond, Senior Notes | 4.350 | % | 1/11/48 | 240,000 | 248,354 | |||||||||||
Kenya — 0.3% | ||||||||||||||||
Kenya Government International Bond, Senior Notes | 8.000 | % | 5/22/32 | 460,000 | 486,975 | (b) | ||||||||||
Mexico — 0.2% | ||||||||||||||||
Mexico Government International Bond, Senior Notes | 4.350 | % | 1/15/47 | 360,000 | 357,754 | |||||||||||
Qatar — 0.5% | ||||||||||||||||
Qatar Government International Bond, Senior Notes | 3.375 | % | 3/14/24 | 410,000 | 424,196 | (b) | ||||||||||
Qatar Government International Bond, Senior Notes | 4.817 | % | 3/14/49 | 270,000 | 310,121 | (b) | ||||||||||
Total Qatar | 734,317 |
See Notes to Financial Statements.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 17 |
Schedule of investments(unaudited) (cont’d)
June 30, 2019
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Maturity Date | Face Amount | Value | ||||||||||||
United Arab Emirates — 0.3% | ||||||||||||||||
Abu Dhabi Government International Bond, Senior Notes | 4.125 | % | 10/11/47 | $ | 440,000 | $ | 482,959 | (b) | ||||||||
Uruguay — 0.1% | ||||||||||||||||
Uruguay Government International Bond, Senior Notes | 4.975 | % | 4/20/55 | 70,000 | 77,438 | |||||||||||
Total Sovereign Bonds (Cost — $8,949,078) | 9,037,983 | |||||||||||||||
Municipal Bonds — 1.4% | ||||||||||||||||
Alabama — 0.2% | ||||||||||||||||
Alabama State Economic Settlement Authority, BP Settlement Revenue, Series B | 3.163 | % | 9/15/25 | 280,000 | 286,639 | |||||||||||
California — 0.8% | ||||||||||||||||
Los Angeles County, CA Public Works Financing Authority Revenue, Multiple Capital Projects I, Series 2010 B, Taxable Build America Bonds | 7.618 | % | 8/1/40 | 650,000 | 1,016,457 | |||||||||||
University of California Revenue, Taxable, General Series AG | 4.062 | % | 5/15/33 | 150,000 | 157,535 | |||||||||||
Total California | 1,173,992 | |||||||||||||||
Florida — 0.1% | ||||||||||||||||
Sumter Landing, FL, Community Development District Recreational Revenue, Taxable Community Development District | 4.172 | % | 10/1/47 | 170,000 | 188,069 | |||||||||||
Illinois — 0.3% | ||||||||||||||||
Illinois State, GO, Taxable, Build America Bonds, Series2010-3 | 6.725 | % | 4/1/35 | 310,000 | 358,524 | |||||||||||
Total Municipal Bonds (Cost — $1,869,972) | 2,007,224 | |||||||||||||||
U.S. Government & Agency Obligations — 0.4% | ||||||||||||||||
U.S. Government Obligations — 0.4% | ||||||||||||||||
U.S. Treasury Bonds | 3.000 | % | 2/15/49 | 180,000 | 197,726 | |||||||||||
U.S. Treasury Notes | 2.375 | % | 5/15/29 | 440,000 | 454,747 | |||||||||||
Total U.S. Government & Agency Obligations (Cost — $649,299) |
| 652,473 | ||||||||||||||
Shares | ||||||||||||||||
Preferred Stocks — 0.1% | ||||||||||||||||
Financials — 0.1% | ||||||||||||||||
Insurance — 0.1% | ||||||||||||||||
Delphi Financial Group Inc. (3 mo. USD LIBOR + 3.190%) (Cost — $143,068) | 5.708 | % | 5,725 | 131,675 | (a) | |||||||||||
Total Investments before Short-Term Investments (Cost — $127,553,408) |
| 140,870,039 |
See Notes to Financial Statements.
18 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Western Asset Investment Grade Income Fund Inc.
Security | Rate | Shares | Value | |||||||||||||
Short-Term Investments — 0.2% | ||||||||||||||||
Western Asset Government Cash Management Portfolio LLC | 2.320 | % | 205,424 | $ | 205,424 | (e) | ||||||||||
Total Investments — 98.1% (Cost — $127,758,832) | 141,075,463 | |||||||||||||||
Other Assets in Excess of Liabilities — 1.9% | 2,790,668 | |||||||||||||||
Total Net Assets — 100.0% | $ | 143,866,131 |
(a) | Variable rate security. Interest rate disclosed is as of the most recent information available. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description above. |
(b) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors. |
(c) | Security has no maturity date. The date shown represents the next call date. |
(d) | Securities traded on a when-issued or delayed delivery basis. |
(e) | In this instance, as defined in the Investment Company Act of 1940, an “Affiliated Company” represents Fund ownership of at least 5% of the outstanding voting securities of an issuer, or a company which is under common ownership or control. At June 30, 2019, the total market value of investments in Affiliated Companies was $205,424 and the cost was $205,424 (Note 7). |
Abbreviations used in this schedule: | ||
GO | — General Obligation | |
GTD | — Guaranteed | |
ICE | — Intercontinental Exchange | |
LIBOR | — London Interbank Offered Rate | |
USD | — United States Dollar |
At June 30, 2019, the Fund had the following open futures contracts:
Number of Contracts | Expiration Date | Notional Amount | Market Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||
Contracts to Buy: | ||||||||||||||||||||
U.S. Treasury2-Year Notes | 63 | 9/19 | $ | 13,525,859 | $ | 13,556,320 | $ | 30,461 | ||||||||||||
U.S. Treasury5-Year Notes | 124 | 9/19 | 14,431,646 | 14,651,375 | 219,729 | |||||||||||||||
U.S. Treasury Ultra Long- Term Bonds | 35 | 9/19 | 5,971,865 | 6,214,687 | 242,822 | |||||||||||||||
493,012 |
See Notes to Financial Statements.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 19 |
Schedule of investments(unaudited) (cont’d)
June 30, 2019
Western Asset Investment Grade Income Fund Inc.
Number of Contracts | Expiration Date | Notional Amount | Market Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||
Contracts to Sell: | ||||||||||||||||||||
U.S. Treasury10-Year Notes | 137 | 9/19 | $ | 17,164,579 | $ | 17,531,719 | $ | (367,140) | ||||||||||||
U.S. Treasury Long-Term Bonds | 106 | 9/19 | 16,058,817 | 16,492,938 | (434,121) | |||||||||||||||
(801,261) | ||||||||||||||||||||
Net unrealized depreciation on open futures contracts |
| $ | (308,249) |
See Notes to Financial Statements.
20 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Statement of assets and liabilities(unaudited)
June 30, 2019
Assets: | ||||
Investments in unaffiliated securities, at value (Cost — $127,553,408) | $ | 140,870,039 | ||
Investments in affiliated securities, at value (Cost — $205,424) | 205,424 | |||
Cash | 1,042,032 | |||
Interest receivable | 1,885,063 | |||
Receivable for securities sold | 1,272,959 | |||
Deposits with brokers for open futures contracts | 287,283 | |||
Other assets | 13,944 | |||
Prepaid expenses | 51,343 | |||
Total Assets | 145,628,087 | |||
Liabilities: | ||||
Payable for securities purchased | 1,129,182 | |||
Distributions payable | 545,813 | |||
Investment management fee payable | 59,445 | |||
Directors’ fees payable | 511 | |||
Payable to broker — variation margin on open futures contracts | 55 | |||
Accrued expenses | 26,950 | |||
Total Liabilities | 1,761,956 | |||
Total Net Assets | $ | 143,866,131 | ||
Net Assets: | ||||
Par value ($0.01 par value; 9,492,402 shares issued and outstanding; 20,000,000 shares authorized) | $ | 94,924 | ||
Paid-in capital in excess of par value | 131,754,619 | |||
Total distributable earnings (loss) | 12,016,588 | |||
Total Net Assets | $ | 143,866,131 | ||
Shares Outstanding | 9,492,402 | |||
Net Asset Value | $15.16 |
See Notes to Financial Statements.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 21 |
Statement of operations (unaudited)
For the Six Months Ended June 30, 2019
Investment Income: | ||||
Interest from unaffiliated investments | $ | 3,531,209 | ||
Interest from affiliated investments | 8,422 | |||
Dividends | 5,074 | |||
Less: Foreign taxes withheld | (205) | |||
Total Investment Income | 3,544,500 | |||
Expenses: | ||||
Investment management fee (Note 2) | 363,580 | |||
Legal fees | 67,284 | |||
Fund accounting fees | 33,034 | |||
Franchise taxes | 28,260 | |||
Audit and tax fees | 21,899 | |||
Transfer agent fees | 18,681 | |||
Shareholder reports | 10,889 | |||
Directors’ fees | 8,802 | |||
Stock exchange listing fees | 6,205 | |||
Custody fees | 910 | |||
Miscellaneous expenses | 5,950 | |||
Total Expenses | 565,494 | |||
Less: Fee waivers and/or expense reimbursements (Note 2) | (11,901) | |||
Net Expenses | 553,593 | |||
Net Investment Income | 2,990,907 | |||
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts (Notes 1, 3 and 4): | ||||
Net Realized Gain (Loss) From: | ||||
Investment transactions in unaffiliated securities | 1,089,411 | |||
Futures contracts | (1,089,187) | |||
Net Realized Gain | 224 | |||
Change in Net Unrealized Appreciation (Depreciation) From: | ||||
Investments in unaffiliated securities | 11,007,216 | |||
Futures contracts | 243,139 | |||
Change in Net Unrealized Appreciation (Depreciation) | 11,250,355 | |||
Net Gain on Investments and Futures Contracts | 11,250,579 | |||
Increase in Net Assets From Operations | $ | 14,241,486 |
See Notes to Financial Statements.
22 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Statements of changes in net assets
For the Six Months Ended June 30, 2019 (unaudited) and the Year Ended December 31, 2018 | 2019 | 2018 | ||||||
Operations: | ||||||||
Net investment income | $ | 2,990,907 | $ | 6,202,375 | ||||
Net realized gain | 224 | 1,267,530 | ||||||
Change in net unrealized appreciation (depreciation) | 11,250,355 | (14,127,809) | ||||||
Increase (Decrease) in Net Assets From Operations | 14,241,486 | (6,657,904) | ||||||
Distributions to Shareholders From (Note 1): | ||||||||
Total distributable earnings | (3,273,510) | (6,543,202) | ||||||
Decrease in Net Assets From Distributions to Shareholders | (3,273,510) | (6,543,202) | ||||||
Fund Share Transactions: | ||||||||
Reinvestment of distributions (9,501 and 0 shares issued, respectively) | 138,243 | — | ||||||
Increase in Net Assets From Fund Share Transactions | 138,243 | — | ||||||
Increase (Decrease) in Net Assets | 11,106,219 | (13,201,106) | ||||||
Net Assets: | ||||||||
Beginning of period | 132,759,912 | 145,961,018 | ||||||
End of period | $ | 143,866,131 | $ | 132,759,912 |
See Notes to Financial Statements.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 23 |
For a share of capital stock outstanding throughout each year ended December 31, unless otherwise noted: | ||||||||||||||||||||||||
20191,2 | 20181 | 20171 | 20161 | 20151 | 20141 | |||||||||||||||||||
Net asset value, beginning of period | $14.00 | $15.39 | $14.61 | $13.84 | $14.84 | $14.45 | ||||||||||||||||||
Income (loss) from operations: | ||||||||||||||||||||||||
Net investment income | 0.32 | 0.65 | 0.68 | 0.70 | 0.70 | 0.73 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 1.19 | (1.35) | 0.79 | 0.76 | (1.01) | 0.35 | ||||||||||||||||||
Total income (loss) from operations | 1.51 | (0.70) | 1.47 | 1.46 | (0.31) | 1.08 | ||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.35) | 3 | (0.69) | (0.69) | (0.69) | (0.69) | (0.69) | |||||||||||||||||
Total distributions | (0.35) | (0.69) | (0.69) | (0.69) | (0.69) | (0.69) | ||||||||||||||||||
Net asset value, end of period | $15.16 | $14.00 | $15.39 | $14.61 | $13.84 | $14.84 | ||||||||||||||||||
Market price, end of period | $14.87 | $13.20 | $15.76 | $14.31 | $13.02 | $13.45 | ||||||||||||||||||
Total return, based on NAV4,5 | 10.87 | % | (4.62) | % | 10.27 | % | 10.76 | % | (2.21) | % | 7.57 | % | ||||||||||||
Total return, based on Market Price6 | 15.32 | % | (11.96) | % | 15.31 | % | 15.44 | % | 1.88 | % | 7.44 | % | ||||||||||||
Net assets, end of period (millions) | $144 | $133 | $146 | $138 | $131 | $140 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Gross expenses | 0.82 | %7 | 0.82 | % | 0.76 | % | 0.77 | % | 0.76 | % | 0.73 | % | ||||||||||||
Net expenses8 | 0.81 | 7 | 0.80 | 0.74 | 0.75 | 0.74 | 0.71 | |||||||||||||||||
Net investment income | 4.36 | 7 | 4.47 | 4.53 | 4.87 | 4.82 | 4.87 | |||||||||||||||||
Portfolio turnover rate | 45 | % | 52 | % | 50 | % | 50 | % | 42 | % | 38 | % |
1 | Per share amounts have been calculated using the average shares method. |
2 | For the six months ended June 30, 2019 (unaudited). |
3 | The actual source of the Fund’s current fiscal year distributions may be from net investment income, return of capital or a combination of both. Shareholders will be informed of the tax characteristics of the distributions after the close of the fiscal year. |
4 | Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
5 | The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
6 | The total return calculation assumes that distributions are reinvested in accordance with the Fund’s dividend reinvestment plan. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
7 | Annualized. |
8 | Reflects fee waivers and/or expense reimbursements. |
See Notes to Financial Statements.
24 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Notes to financial statements(unaudited)
1. Organization and significant accounting policies
Western Asset Investment Grade Income Fund Inc. (the “Fund”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as aclosed-end diversified investment company. The Fund seeks a high level of current income, consistent with prudent investment risk. Capital appreciation is a secondary investment objective.
The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.
(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Investments inopen-end funds are valued at the closing net asset value per share of each fund on the day of valuation. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. When the Fund holds securities or other assets that are denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Directors.
The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North Atlantic Fund Valuation Committee (the “Valuation Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Directors, is responsible for making fair value determinations,
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 25 |
Notes to financial statements(unaudited) (cont’d)
evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Board of Directors. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.
The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security; the issuer’s financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts’ research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.
For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Directors, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair valuation occurrences are reported to the Board of Directors quarterly.
The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.
GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:
• | Level 1 — quoted prices in active markets for identical investments |
• | Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
• | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
26 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities carried at fair value:
ASSETS | ||||||||||||||||
Description | Quoted Prices (Level 1) | Other Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Long-Term Investments†: | ||||||||||||||||
Corporate Bonds & Notes | — | $ | 129,040,684 | — | $ | 129,040,684 | ||||||||||
Sovereign Bonds | — | 9,037,983 | — | 9,037,983 | ||||||||||||
Municipal Bonds | — | 2,007,224 | — | 2,007,224 | ||||||||||||
U.S. Government & Agency Obligations | — | 652,473 | — | 652,473 | ||||||||||||
Preferred Stocks | — | 131,675 | — | 131,675 | ||||||||||||
Total Long-Term Investments | — | 140,870,039 | — | 140,870,039 | ||||||||||||
Short-Term Investments† | — | 205,424 | — | 205,424 | ||||||||||||
Total Investments | — | $ | 141,075,463 | — | $ | 141,075,463 | ||||||||||
Other Financial Instruments: | ||||||||||||||||
Futures Contracts | $ | 493,012 | — | — | $ | 493,012 | ||||||||||
Total | $ | 493,012 | $ | 141,075,463 | — | $ | 141,568,475 | |||||||||
LIABILITIES | ||||||||||||||||
Description | Quoted Prices (Level 1) | Other Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Other Financial Instruments: | ||||||||||||||||
Futures Contracts | $ | 801,261 | — | — | $ | 801,261 |
† | See Schedule of Investments for additional detailed categorizations. |
(b) Futures contracts.The Fund uses futures contracts generally to gain exposure to, or hedge against, changes in interest rates or gain exposure to, or hedge against, changes in certain asset classes. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
Upon entering into a futures contract, the Fund is required to deposit cash or securities with a broker in an amount equal to a certain percentage of the contract amount. This is known as the ‘‘initial margin’’ and subsequent payments (‘‘variation margin’’) are made or received by the Fund each day, depending on the daily fluctuation in the value of the contract. For certain futures, including foreign denominated futures, variation margin is not settled daily,
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 27 |
Notes to financial statements(unaudited) (cont’d)
but is recorded as a net variation margin payable or receivable. The daily changes in contract value are recorded as unrealized gains or losses in the Statement of Operations and the Fund recognizes a realized gain or loss when the contract is closed.
Futures contracts involve, to varying degrees, risk of loss in excess of the amounts reflected in the financial statements. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.
(c) Securities traded on a when-issued and delayed delivery basis. The Fund may trade securities on a when-issued or delayed delivery basis. In when-issued and delayed delivery transactions, the securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction.
Purchasing such securities involves risk of loss if the value of the securities declines prior to settlement. These securities are subject to market fluctuations and their current value is determined in the same manner as for other securities.
(d) Credit and market risk.The Fund invests in high-yield and emerging market instruments that are subject to certain credit and market risks. The yields of high-yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Fund’s investments in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Fund’s investments innon-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.
Investments in securities that are collateralized by real estate mortgages are subject to certain credit and liquidity risks. When market conditions result in an increase in default rates of the underlying mortgages and the foreclosure values of underlying real estate properties are materially below the outstanding amount of these underlying mortgages, collection of the full amount of accrued interest and principal on these investments may be doubtful. Such market conditions may significantly impair the value and liquidity of these investments and may result in a lack of correlation between their credit ratings and values.
(e) Foreign investment risks.The Fund’s investments in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign
28 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.
(f) Counterparty risk and credit-risk-related contingent features of derivative instruments.The Fund may invest in certain securities or engage in other transactions, where the Fund is exposed to counterparty credit risk in addition to broader market risks. The Fund may invest in securities of issuers, which may also be considered counterparties as trading partners in other transactions. This may increase the risk of loss in the event of default or bankruptcy by the counterparty or if the counterparty otherwise fails to meet its contractual obligations. The Fund’s investment adviser attempts to mitigate counterparty risk by (i) periodically assessing the creditworthiness of its trading partners, (ii) monitoring and/or limiting the amount of its net exposure to each individual counterparty based on its assessment and (iii) requiring collateral from the counterparty for certain transactions.
Market events and changes in overall economic conditions may impact the assessment of such counterparty risk by the investment adviser. In addition, declines in the values of underlying collateral received may expose the Fund to increased risk of loss.
With exchange traded and centrally cleared derivatives, there is less counterparty risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default of the clearing broker or clearinghouse.
The Fund has entered into master agreements, such as an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement, with certain of its derivative counterparties that governover-the-counter derivatives and provide for general obligations, representations, agreements, collateral posting terms, netting provisions in the event of default or termination and credit related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in the Fund’s net assets or NAV over a specified period of time. If these credit related contingent features were triggered, the derivatives counterparty could terminate the positions and demand payment or require additional collateral.
Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. However, absent an event of default by the counterparty or a termination of the agreement, the terms of the ISDA Master Agreements do not result in an offset of reported amounts of financial assets and
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 29 |
Notes to financial statements(unaudited) (cont’d)
financial liabilities in the Statement of Assets and Liabilities across transactions between the Fund and the applicable counterparty. The enforceability of the right to offset may vary by jurisdiction.
Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearinghouse for exchange traded derivatives while collateral terms are contract specific forover-the-counter traded derivatives. Cash collateral that has been pledged to cover obligations of the Fund under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities. Securities pledged as collateral, if any, for the same purpose are noted in the Schedule of Investments.
As of June 30, 2019, the Fund did not have any open OTC derivative transactions with credit related contingent features in a net liability position.
(g) Security transactions and investment income.Security transactions are accounted for on a trade date basis. Interest income (including interest income frompayment-in-kind securities), adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Paydown gains and losses on mortgage- and asset-backed securities are recorded as adjustments to interest income. Dividend income is recorded on theex-dividend date for dividends received in cash and/or securities. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults or a credit event occurs that impacts the issuer, the Fund may halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default or credit event.
(h) Distributions to shareholders.Distributions from net investment income of the Fund, if any, are declared quarterly and paid on a monthly basis. Distributions of net realized gains, if any, are declared at least annually. The actual source of the Fund’s monthly distributions may be from net investment income, return of capital or a combination of both. Shareholders will be informed of the tax characteristics of the distributions after the close of the fiscal year. Distributions to shareholders of the Fund are recorded on theex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(i) Compensating balance arrangements.The Fund has an arrangement with its custodian bank whereby a portion of the custodian’s fees is paid indirectly by credits earned on the Fund’s cash on deposit with the bank.
(j) Federal and other taxes.It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986 (the “Code”), as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Fund’s financial statements.
30 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of December 31, 2018, no provision for income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.
(k) Reclassification.GAAP requires that certain components of net assets be reclassified to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share.
2. Investment management agreement and other transactions with affiliates
The Fund has entered into an Investment Advisory Agreement with Western Asset Management Company, LLC (“Adviser”), which is a wholly owned subsidiary of Legg Mason, Inc., (“Legg Mason”) pursuant to which the Adviser provides investment advice and administrative services to the Fund. In return for its services, the Fund pays the Adviser a monthly fee at an annual rate of 0.70% of the average monthly net assets of the Fund up to $60,000,000 and 0.40% of such net assets in excess of $60,000,000. If expenses (including the Adviser’s fee but excluding interest, taxes, brokerage fees, the expenses of any offering by the Fund of its securities, and extraordinary expenses beyond the control of the Fund) borne by the Fund in any fiscal year exceed 1.5% of average net assets up to $30,000,000 and 1% of average net assets over $30,000,000, the Adviser has contractually agreed to reimburse the Fund for any excess.
During the six months ended June 30, 2019, fees waived and/or expenses reimbursed amounted to $11,901.
Western Asset Management Company Limited (“WAML”) provides the Fund with investment research, advice, management and supervision and a continuous investment program for the Fund’s portfolio ofnon-dollar securities consistent with the Fund’s investment objectives and policies. As compensation, the Adviser pays WAML a fee based on the pro rata assets of the Fund managed by WAML during the month.
Under the terms of an administrative services agreement among the Fund, the Adviser, and Legg Mason Partners Fund Advisor, LLC (“LMPFA”), the Adviser (not the Fund) pays LMPFA a monthly fee of $3,000 (an annual rate of $36,000). LMPFA and WAML are wholly-owned subsidiaries of Legg Mason, Inc.
All officers and one Director of the Fund are employees of Legg Mason or its affiliates and do not receive compensation from the Fund.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 31 |
Notes to financial statements(unaudited) (cont’d)
3. Investments
During the six months ended June 30, 2019, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S. Government & Agency Obligations were as follows:
Investments | U.S. Government & Agency Obligations | |||||||
Purchases | $ | 45,210,406 | $ | 15,418,518 | ||||
Sales | 41,115,797 | 21,389,224 |
At June 30, 2019, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | |||||||||||||
Securities | $ | 127,758,832 | $ | 14,387,826 | $ | (1,071,195) | $ | 13,316,631 | ||||||||
Futures contracts | — | 493,012 | (801,261) | (308,249) |
4. Derivative instruments and hedging activities
Below is a table, grouped by derivative type, that provides information about the fair value and the location of derivatives within the Statement of Assets and Liabilities at June 30, 2019.
ASSET DERIVATIVES1 | ||||
Interest Rate Risk | ||||
Futures contracts2 | $ | 493,012 | ||
LIABILITY DERIVATIVES1 | ||||
Interest Rate Risk | ||||
Futures contracts2 | $ | 801,261 |
1 | Generally, the balance sheet location for asset derivatives is receivables/net unrealized appreciation (depreciation) and for liability derivatives is payables/net unrealized appreciation (depreciation). |
2 | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the receivables and/or payables on the Statement of Assets and Liabilities. |
32 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
The following tables provide information about the effect of derivatives and hedging activities on the Fund’s Statement of Operations for the six months ended June 30, 2019. The first table provides additional detail about the amounts and sources of gains (losses) realized on derivatives during the period. The second table provides additional information about the change in unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED | ||||
Interest Rate Risk | ||||
Futures contracts | $ | (1,089,187) | ||
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED | ||||
Interest Rate Risk | ||||
Futures contracts | $ | 243,139 |
During the six months ended June 30, 2019, the volume of derivative activity for the Fund was as follows:
Average Market Value | ||||
Futures contracts (to buy) | $ | 22,314,719 | ||
Futures contracts (to sell) | 27,575,534 |
5. Distributions subsequent to June 30, 2019
The following distributions have been declared by the Fund’s Board of Directors and are payable subsequent to the period end of this report:
Record Date | Payable Date | Amount | ||||||
6/21/2019 | 7/1/2019 | $ | 0.0575 | |||||
7/19/2019 | 8/1/2019 | $ | 0.0575 | |||||
8/23/2019 | 9/3/2019 | $ | 0.0575 | |||||
9/20/2019 | 10/1/2019 | $ | 0.0575 |
6. Stock repurchase program
On November 20, 2015, the Fund announced that the Fund’s Board of Directors (the “Board”) had authorized the Fund to repurchase in the open market up to approximately 10% of the Fund’s outstanding common stock when the Fund’s shares are trading at a discount to net asset value. The Board has directed management of the Fund to repurchase shares of common stock at such times and in such amounts as management reasonably believes may enhance stockholder value. The Fund is under no obligation to purchase shares at any specific discount levels or in any specific amounts. During the six months ended June 30, 2019, the Fund did not repurchase any shares.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 33 |
Notes to financial statements(unaudited) (cont’d)
7. Transactions with affiliated companies
As defined by the 1940 Act, an affiliated company is one in which the Fund owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. The Fund may invest in Western Asset Government Cash Management Portfolio, LLC (“Cash Management Portfolio”), an affiliated private money market fund managed by Western Asset, the Fund’s investment adviser. Cash Management Portfolio is available as a cash management vehicle for certain proprietary investment companies affiliated with Legg Mason. While Cash Management Portfolio is not a registered money market fund, it conducts all of its investment activities in accordance with the requirements of Rule2a-7 under the 1940 Act. Based on the Fund’s relative ownership, the following companies were considered affiliated companies for all or some portion of the six months ended June 30, 2019. The following transactions were effected in shares of such companies for the six months ended June 30, 2019.
Affiliate Value at December 31, 2018 | Purchased | Sold | ||||||||||||||||||
Cost | Shares | Cost | Shares | |||||||||||||||||
Western Asset Government Cash Management Portfolio LLC | $ | 268 | $ | 19,508,422 | 19,508,422 | $ | 19,303,266 | 19,303,266 |
(cont’d) | Realized Gain (Loss) | Interest Income | Net Increase (Decrease) in Unrealized Appreciation (Depreciation) | Affiliate Value at June 30, 2019 | ||||||||||||
Western Asset Government Cash Management Portfolio LLC | — | $ | 8,422 | — | $ | 205,424 |
8. Deferred capital losses
As of December 31, 2018, the Fund had deferred capital losses of $1,759,195, which have no expiration date, that will be available to offset future taxable capital gains.
9. Recent accounting pronouncement
The Fund has adopted the disclosure provisions of the Financial Accounting Standards Board Accounting Standards UpdateNo. 2018-13,Fair Value Measurement (Topic 820)— Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement(“ASU2018-13”) which introduces new fair value disclosure requirements as well as eliminates and modifies certain existing fair value disclosure requirements. ASU2018-13 would be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years; however, management has elected to early adopt ASU2018-13. The impact of the Fund’s adoption was limited to changes in the Fund’s financial statement
34 | Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report |
disclosures regarding fair value, primarily those disclosures related to transfers between levels of the fair value hierarchy.
Western Asset Investment Grade Income Fund Inc. 2019 Semi-Annual Report | 35 |
Additional shareholder information (unaudited)
Results of annual meeting of shareholders
The Fund’s annual meeting of shareholders was held on May 10, 2019. Of the 9,487,659 common shares outstanding, the following shares were voted in the meeting:
Election of Directors: | For | Withheld | ||||||
Robert Abeles, Jr. | 8,305,721 | 269,865 | ||||||
Anita L. DeFrantz | 8,325,105 | 250,481 | ||||||
Ronald L. Olson | 8,322,042 | 253,544 | ||||||
Avedick B. Poladian | 8,258,323 | 317,263 | ||||||
William E. B. Siart | 8,252,290 | 323,296 | ||||||
Jaynie M. Studenmund | 8,310,902 | 264,684 | ||||||
Peter J. Taylor | 8,304,326 | 271,260 | ||||||
Jane Trust | 8,312,659 | 262,927 |
36 | Western Asset Investment Grade Income Fund Inc. |
Dividend reinvestment plan (unaudited)
The Fund offers to all shareholders a Dividend Reinvestment Plan (“Plan”). For participants in the Plan, cash distributions (e.g., dividends and capital gains) of registered shareholders (those who own shares in their own name on the Fund’s records) are automatically invested in shares of the Fund. Interested shareholders may obtain more information or sign up for the Plan by contacting the agent. Shareholders who own shares in a brokerage, bank, or other financial institution account must contact the Company where their account is held in order to participate in the Plan.
If you elect to participate in the Plan you will automatically receive your dividend or net capital gains distribution in newly issued shares of the Fund if the market price of a share on the date of the distribution is at or above the net asset value (“NAV”) of a Fund share. The number of shares to be issued to you will be determined by dividing the amount of the cash distribution to which you are entitled (net of any applicable withholding taxes) by the greater of the NAV per share on such date or 95% of the market price of a share on such date. If the market price of a share on such distribution date is below the NAV the Agent will, as agent for the participants, buy shares of the Fund’s stock through a broker on the open market or in a negotiated transaction (subject to price and other terms to which the agent may agree). The price per share of shares purchased for each participant’s account with respect to a particular dividend or other distribution will be the average price (including brokerage commissions, transfer taxes and any other costs of purchase) of all shares purchased with respect to that dividend or other distribution. All shares of common stock acquired on your behalf through the Plan will be automatically credited to an account maintained on the books of the Agent. Full and fractional shares will be voted by the Agent in accordance with your instructions.
Additional information regarding the plan
The Fund will pay all costs applicable to the Plan, with the exceptions noted below. Brokerage commissions, transfer taxes and any other costs of purchase or sale by the Agent under the Plan will be charged to participants. The commission participants pay for selling shares under the Plan is calculated as $2.50 plus $0.15 per share. Beneficial shareholders should contact the company holding their account for further information concerning fees that may apply to selling shares under the Plan. In the event the Fund determines to no longer pay the costs applicable to the Plan, the Agent will terminate the Plan and may, but is not obligated to, offer a new plan under which it would impose a direct service charge on participants.
All shares acquired through the Plan receive voting rights and are eligible for any stock split, stock dividend, or other rights accruing to shareholders that the Board of Directors may declare. Distributions to Plan participants will be in the form of stock, unless the Agent is notified in writing 10 days prior to the record date fixed by the Board of Directors for the distribution that you wish to receive a cash payment. Beneficial shareholders should contact the company holding their account for further information regarding deadlines that might apply.
You may terminate participation in the Plan at any time by giving written notice to the Agent. Such termination will be effective prior to the record date next succeeding the receipt of such instructions or by a later date of termination specified in such instructions.
Western Asset Investment Grade Income Fund Inc. | 37 |
Dividend reinvestment plan (unaudited) (cont’d)
Upon termination of the Plan, a participant may request a certificate for the full shares credited to his or her account or may request the sale of all or part of such shares. If the participant instructs the Agent to sell the shares credited to the participant’s account, the Agent may accumulate such shares and those of any other terminating participants for purposes of such sale. Brokerage charges, transfer taxes, and any other costs of sale will be allocated pro rata among the selling participants. Any such sale may be made on any securities exchange where such shares are traded, in theover-the counter market or in negotiated transactions, and may be subject to such terms of price, delivery, etc., as the Agent may agree to. Fractional shares credited to a terminating account will be paid for in cash at the current market price at the time of termination.
Dividends and other distributions invested in additional shares under the Plan are subject to income tax just as if they had been received in cash. After year end, dividends paid on the accumulated shares will be included in the Form1099-DIV information return to the Internal Revenue Service and only one Form1099-DIV will be sent to each participant each year.
Registered shareholders can make inquiries regarding the Plan, as well as sign up or terminate their participation in the Plan by contacting Computershare Inc., 462 South 4th Street, Suite 1600, Louisville, KY 40202, telephone number1-888-888-0151. Beneficial Shareholders can make inquiries regarding the Plan as well as sign up or terminate their participation in the Plan by contacting the company where their account is held.
38 | Western Asset Investment Grade Income Fund Inc. |
Western Asset
Investment Grade Income Fund Inc.
Directors
Robert Abeles, Jr
Anita L. DeFrantz
Ronald L. Olson
Avedick B. Poladian
William E.B. Siart
Chairman
Jaynie M. Studenmund
Peter J. Taylor*
Jane Trust
Officers
Jane Trust
President and Chief Executive Officer
Richard F. Sennett
Principal Financial Officer and Treasurer
Ted P. Becker**
Chief Compliance Officer
Robert I. Frenkel
Secretary and Chief Legal Officer
Thomas C. Mandia
Assistant Secretary
Jenna Bailey
Identity Theft Prevention Officer
Jeanne M. Kelly
Senior Vice President
* | Effective March 1, 2019, Mr. Taylor became a Director. |
** | Effective July 17, 2019, Mr. Becker became Chief Compliance Officer. |
Western Asset Investment Grade Income Fund Inc.
620 Eighth Avenue
49th Floor
New York, NY 10018
Investment advisers
Western Asset Management Company, LLC
Western Asset Management Company Limited
Custodian
The Bank of New York Mellon
Independent registered public accounting firm
Pricewaterhouse Coopers LLP
100 East Pratt Street
Baltimore, MD 21202
Legal counsel
Ropes & Gray LLP
1211 Avenue of the Americas
New York, NY 10036
Transfer agent
Computershare Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
New York Stock Exchange Symbol
PAI
Legg Mason Funds Privacy and Security Notice
Your Privacy and the Security of Your Personal Information is Very Important to the Legg Mason Funds
This Privacy and Security Notice (the “Privacy Notice”) addresses the Legg Mason Funds’ privacy and data protection practices with respect to nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds’ distributor, Legg Mason Investor Services, LLC, as well as Legg Mason-sponsoredclosed-end funds. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.
The Type of Nonpublic Personal Information the Funds Collect About You
The Funds collect and maintain nonpublic personal information about you in connection with your shareholder account. Such information may include, but is not limited to:
• | Personal information included on applications or other forms; |
• | Account balances, transactions, and mutual fund holdings and positions; |
• | Bank account information, legal documents, and identity verification documentation; |
• | Online account access user IDs, passwords, security challenge question responses; and |
• | Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individual’s total debt, payment history, etc.). |
How the Funds Use Nonpublic Personal Information About You
The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with other financial institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services you have authorized or as permitted or required by law. The Funds may disclose information about you to:
• | Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business or to comply with obligations to government regulators; |
• | Service providers, including the Funds’ affiliates, who assist the Funds as part of the ordinary course of business (such as printing, mailing services, or processing or servicing your account with us) or otherwise perform services on the Funds’ behalf, including companies that may perform statistical analysis, market research and marketing services solely for the Funds; |
• | Permit access to transfer, whether in the United States or countries outside of the United States to such Funds’ employees, agents and affiliates and service providers as required to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators; |
• | The Funds’ representatives such as legal counsel, accountants and auditors to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators; |
• | Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust. |
NOT PART OF THE SEMI-ANNUAL REPORT |
Legg Mason Funds Privacy and Security Notice (cont’d)
Except as otherwise permitted by applicable law, companies acting on the Funds’ behalf, including those outside the United States, are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them to perform.
The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as permitted or required by applicable law, such as in connection with a law enforcement or regulatory request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be required to disclose your nonpublic personal information to third parties. While it is the Funds’ practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will remain unchanged.
Keeping You Informed of the Funds’ Privacy and Security Practices
The Funds will notify you annually of their privacy policy as required by federal law. While the Funds reserve the right to modify this policy at any time they will notify you promptly if this privacy policy changes.
The Funds’ Security Practices
The Funds maintain appropriate physical, electronic and procedural safeguards designed to guard your nonpublic personal information. The Funds’ internal data security policies restrict access to your nonpublic personal information to authorized employees, who may use your nonpublic personal information for Fund business purposes only.
Although the Funds strive to protect your nonpublic personal information, they cannot ensure or warrant the security of any information you provide or transmit to them, and you do so at your own risk. In the event of a breach of the confidentiality or security of your nonpublic personal information, the Funds will attempt to notify you as necessary so you can take appropriate protective steps. If you have consented to the Funds using electronic communications or electronic delivery of statements, they may notify you under such circumstances using the most current email address you have on record with them.
In order for the Funds to provide effective service to you, keeping your account information accurate is very important. If you believe that your account information is incomplete, not accurate or not current, if you have questions about the Funds’ privacy practices, or our use of your nonpublic personal information, write the Funds using the contact information on your account statements, email the Funds by clicking on the Contact Us section of the Funds’ website at www.leggmason.com, or contact the Funds at1-888-777-0102.
Revised April 2018
NOT PART OF THE SEMI-ANNUAL REPORT |
Western Asset Investment Grade Income Fund Inc.
Western Asset Investment Grade Income Fund Inc.
620 Eighth Avenue
49th Floor
New York, NY 10018
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase, at market prices, shares of its stock.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year as an exhibit to its reports onForm N-PORT. Previously, the Fund filed a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on FormN-Q. The Fund’sForms N-PORT andN-Q are available on the SEC’s website at www.sec.gov. To obtain information onForms N-PORT andN-Q, shareholders can call the Fund at1-888-777-0102.
Information on how the Fund voted proxies relating to portfolio securities during the prior12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling1-888-777-0102, (2) at www.lmcef.com and (3) on the SEC’s website at www.sec.gov.
This report is transmitted to the shareholders of Western Asset Investment Grade Income Fund Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report.
Computershare Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
WASX012841 8/19 SR19-3694
ITEM 2. | CODE OF ETHICS. |
Not applicable.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Not applicable.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Not applicable.
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
ITEM 6. | SCHEDULE OF INVESTMENTS. |
Included herein under Item 1.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 8. | INVESTMENT PROFESSIONALS OFCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BYCLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
Not applicable.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule30a-3(b) under the 1940 Act and15d-15(b) under the Securities Exchange Act of 1934. |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting. |
ITEM 12. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable
ITEM 13. | EXHIBITS. |
(a) (1) Not applicable.
Exhibit 99.CODE ETH
(a) (2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.CERT
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.
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, there unto duly authorized.
Western Asset Investment Grade Income Fund Inc. | ||
By: | /s/ Jane Trust | |
Jane Trust | ||
Chief Executive Officer |
Date: August 28, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Jane Trust | |
Jane Trust | ||
Chief Executive Officer |
Date: August 28, 2019
By: | /s/ Richard F. Sennett | |
Richard F. Sennett | ||
Principal Financial Officer |
Date: August 28, 2019