UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number |
811-22294 | |||||||
| ||||||||
Western Asset Investment Grade Defined Opportunity Trust 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) | ||||||||
| ||||||||
Registrants telephone number, including area code: |
(888)777-0102 |
| ||||||
| ||||||||
Date of fiscal year end: |
November 30 |
| ||||||
| ||||||||
Date of reporting period: |
May 31, 2012 |
| ||||||
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
May 31, 2012 |
|
Semi-Annual Report
Western Asset Investment Grade Defined Opportunity Trust Inc.
(IGI)
INVESTMENT PRODUCTS: NOT FDIC INSURED · NO BANK GUARANTEE · MAY LOSE VALUE
|
II |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. |
|
|
Fund objectives
The Funds primary investment objective is to provide current income and then to liquidate and distribute substantially all of the Funds net assets to stockholders on or about December 2, 2024. As a secondary investment objective, the Fund will seek capital appreciation. There can be no assurance the Fund will achieve its investment objectives.
Whats inside
Letter from the chairman |
II |
|
|
Investment commentary |
III |
|
|
Fund at a glance |
1 |
|
|
Spread duration |
2 |
|
|
Effective duration |
3 |
|
|
Schedule of investments |
4 |
|
|
Statement of assets and liabilities |
15 |
|
|
Statement of operations |
16 |
|
|
Statements of changes in net assets |
17 |
|
|
Financial highlights |
18 |
|
|
Notes to financial statements |
19 |
|
|
Additional shareholder information |
32 |
|
|
Dividend reinvestment plan |
33 |
Letter from the chairman |
|
|
Dear Shareholder,
We are pleased to provide the semi-annual report of Western Asset Investment Grade Defined Opportunity Trust Inc. for the six-month reporting period ended May 31, 2012. Please read on for Fund performance information and a detailed look at prevailing economic and market conditions during the Funds 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,
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
June 29, 2012
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. |
|
Investment commentary
Economic review
The U.S. economy continued to grow over the six months ended May 31, 2012, albeit at an uneven pace. Looking back, U.S. gross domestic product (GDP)i growth, as reported by the U.S. Department of Commerce, was 1.8% in the third quarter of 2011. The economy then gathered some momentum late in 2011, as the Commerce Department reported that fourth quarter GDP growth was 3.0% the fastest pace since the second quarter of 2010. However, economic growth in the U.S. then moderated somewhat, as the Commerce Department reported that first quarter 2012 GDP growth was 1.9%.
Two factors constraining economic growth were the weak job market and continued troubles in the housing market. While there was some improvement during the reporting period, unemployment remained elevated. When the reporting period began, unemployment, as reported by the U.S. Department of Labor, was 8.7%. Unemployment then generally declined over the next five months and was 8.1% in April 2012, the lowest rate since January 2009. However, the unemployment rate then moved up to 8.2% in May 2012. The housing market showed some positive signs, although it still appears to be searching for a bottom. According to the National Association of Realtors (NAR), existing-home sales fluctuated throughout the period. Existing-home sales fell 1.5% on a seasonally adjusted basis in May 2012 versus the previous month. However, the NAR reported that the median existing-home price for all housing types was $182,600 in May 2012, up 7.9% from May 2011. In addition, the inventory of unsold homes fell 0.4% in May versus the previous month.
The manufacturing sector overcame a soft patch in the summer of 2011 and continued to expand during the reporting period. Based on the Institute for Supply Managements PMI (PMI)ii, in August 2011, it had a reading of 50.6, its lowest reading in two years (a reading below 50 indicates a contraction, whereas a reading above 50 indicates an expansion). The manufacturing sector gathered momentum and ended January 2012 at 54.1, its highest reading since June 2011. After falling to 52.4 in February, the PMI rose to 53.4 in March and 54.8 in April. The PMI then dipped to 53.5 in May 2012.
IV
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. |
|
|
Investment commentary (contd)
Market review
Q. Did Treasury yields trend higher or lower during the six months ended May 31, 2012?
A. Both short- and long-term Treasury yields fluctuated during the reporting period. When the period began, two- and ten-year Treasury yields were 0.25% and 2.08%, respectively. With the economy initially gathering some momentum, Treasury yields moved higher during the first half of the period. Two-year Treasury yields rose as high as 0.41% on March 20, 2012 and ten-year Treasuries peaked at 2.39% around the same time. Yields then fell in late March, as well as in April and May given renewed fears over the European sovereign debt crisis. When the reporting period ended on May 31, 2012, two-year Treasury yields were 0.27% and ten-year Treasury yields were 1.59%, the latter being a historic low.
Q. How did the Federal Reserve Board (Fed)iii respond to the economic environment?
A. The Fed took a number of actions as it sought to meet its dual mandate of fostering maximum employment and price stability. As has been the case since December 2008, the Fed kept the federal funds rateiv at a historically low range between zero and 0.25%. In August 2011, the Fed declared its intention to keep the federal funds rate steady until mid-2013. Then, in September 2011, the Fed announced its intention to purchase $400 billion of longer-term Treasury securities and to sell an equal amount of shorter-term Treasury securities by June 2012 (often referred to as Operation Twist). In January 2012, the Fed extended the period it expects to keep rates on hold, saying economic conditions including low rates of resource utilization and a subdued outlook for inflation over the medium run are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. In June, after the reporting period ended, the Fed announced that it would extend Operation Twist until the end of 2012 and that it was prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
Q. What factors impacted the spread sectors (non-Treasuries) during the reporting period?
A. The spread sectors experienced periods of volatility during the period. Risk appetite was often robust over the first three months of the period, due to some better-than-expected economic data and signs of progress in the European sovereign debt crisis. However, fears related to the situation in Europe caused a number of spread sectors to weaken in April. While the spread sectors posted positive absolute returns in April, they generally lagged equal-durationv Treasuries. Several of the riskiest spread sectors then performed poorly in May given a flight to quality that was triggered by escalating fears of contagion from Europe and some disappointing economic data in the U.S. For the six months ended May 31, 2012, the Barclays Capital U.S. Aggregate Indexvi returned 3.46%.
Q. How did the high-yield market perform over the six months ended May 31, 2012?
A. Despite a setback in May 2012, the U.S. high-yield bond market generated a strong return during the reporting period. The asset class, as measured by the Barclays Capital U.S. High Yield 2% Issuer Cap Indexvii, rallied during four of the first five months of the period. Risk appetite was often solid during
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. |
|
this period as investors looked to generate incremental yield in the low interest rate environment. However, the high-yield market faltered in May as risk aversion increased due to several macro issues that negatively impacted investor sentiment. All told, the high-yield market gained 7.81% for the six months ended May 31, 2012.
Q. How did the emerging market debt asset class perform over the reporting period?
A. After a strong start, the asset class gave back a portion of its gains late in the reporting period. During the first five months of the period, emerging market debt was supported by solid growth in developing countries and overall solid demand. However, a confluence of events, including the European sovereign debt crisis, moderating growth in the U.S. and fears that Chinas economy would experience a hard landing, caused the asset class to fall sharply in May 2012. Overall, the JPMorgan Emerging Markets Bond Index Global (EMBI Global)viii returned 4.97% over the six months ended May 31, 2012.
Performance review
For the six months ended May 31, 2012, Western Asset Investment Grade Defined Opportunity Trust Inc. returned 7.95% based on its net asset value (NAV)ix and 10.06% based on its New York Stock Exchange (NYSE) market price per share. The Funds unmanaged benchmark, the Barclays Capital U.S. Credit Indexx, returned 6.13% for the same period. The Lipper Corporate Debt BBB-Rated Closed-End Funds Category Averagexi returned 7.23% over the same time frame. Please note that Lipper performance returns are based on each funds NAV.
During this six-month period, the Fund made distributions to shareholders totaling $0.77 per share, which may have included a return of capital. The performance table shows the Funds six-month total return based on its NAV and market price as of May 31, 2012. Past performance is no guarantee of future results.
Performance Snapshot as of May 31, 2012 (unaudited)
Price Per Share |
|
6-Month |
$21.49 (NAV) |
|
7.95% |
$22.87 (Market Price) |
|
10.06% |
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.
Total return assumes the reinvestment of all distributions, including returns of capital, if any, at NAV. Prior to January 1, 2012, total return assumed the reinvestment of all distributions in additional shares in accordance with the Funds Dividend Reinvestment Plan.
Total return assumes the reinvestment of all distributions, including returns of capital, if any, in additional shares in accordance with the Funds Dividend Reinvestment Plan.
Looking for additional information?
The Fund is traded under the symbol IGI and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available on-line under the symbol XIGIX on most financial websites. Barrons and the Wall Street Journals Monday edition both carry closed-end fund
VI |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. |
|
|
Investment commentary (contd)
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.
In a continuing effort to provide information concerning the Fund, shareholders may call 1-888-777-0102 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern Time, for the Funds current NAV, market price and other information.
As always, thank you for your confidence in our stewardship of your assets.
Sincerely,
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
June 29, 2012
RISKS: The Funds investments are subject to credit risk, inflation risk and interest rate risk. As interest rates rise, bond prices fall, reducing the value of the Funds holdings. The Fund may invest in lower-rated high-yield bonds which are subject to greater credit risk (risk of default) than higher-rated obligations. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses and have a potentially large impact on Fund performance. The Fund may invest in securities or engage in transactions that have the economic effects of leverage which can increase the risk and volatility of the Fund.
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.
The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. |
|
i |
|
Gross domestic product (GDP) is the market value of all final goods and services produced within a country in a given period of time. |
ii |
|
The Institute for Supply Managements PMI is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 companies. It offers an early reading on the health of the manufacturing sector. |
iii |
|
The Federal Reserve Board (Fed) is responsible for the formulation of policies designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments. |
iv |
|
The federal funds rate is the rate charged by one depository institution on an overnight sale of immediately available funds (balances at the Federal Reserve) to another depository institution; the rate may vary from depository institution to depository institution and from day to day. |
v |
|
Duration is the measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows. |
vi |
|
The Barclays Capital U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage- and asset-backed issues, rated investment grade or higher, and having at least one year to maturity. |
vii |
|
The Barclays Capital U.S. High Yield 2% Issuer Cap Index is an index of the 2% Issuer Cap component of the Barclays Capital U.S. Corporate High Yield Index, which covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market. |
viii |
|
The JPMorgan Emerging Markets Bond Index Global (EMBI Global) tracks total returns for U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds and local market instruments. |
ix |
|
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 Funds market price as determined by supply of and demand for the Funds shares. |
x |
|
The Barclays Capital U.S. Credit Index is an index composed of corporate and non-corporate debt issues that are investment grade (rated Baa3/BBB or higher). |
xi |
|
Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the six-month period ended May 31, 2012, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 27 funds in the Funds Lipper category. |
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
Fund at a glance (unaudited)
Investment breakdown (%) as a percent of total investments
The bar graph above represents the composition of the Funds investments as of May 31, 2012 and November 30, 2011 and does not include derivatives, such as futures contracts, swap contracts and forward foreign currency contracts. The Fund is actively managed. As a result, the composition of the Funds investments is subject to change at any time.
2 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Spread duration (unaudited)
Economic Exposure May 31, 2012
Spread duration measures the sensitivity to changes in spreads. The spread over Treasuries is the annual risk-premium demanded by investors to hold non-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 Funds sectors relative to the selected benchmark sectors as of the end of the reporting period.
______________________
BC U.S. Credit |
Barclays Capital U.S. Credit Index |
EM |
Emerging Markets |
HY |
High Yield |
IG Credit |
Investment Grade Credit |
IGI |
Western Asset Investment Grade Defined Opportunity Trust Inc. |
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
Effective duration (unaudited)
Interest Rate Exposure May 31, 2012
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 Funds sectors relative to the selected benchmark sectors as of the end of the reporting period.
______________________
BC U.S. Credit |
Barclays Capital U.S. Credit Index |
EM |
Emerging Markets |
HY |
High Yield |
IG Credit |
Investment Grade Credit |
IGI |
Western Asset Investment Grade Defined Opportunity Trust Inc. |
4 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Schedule of investments (unaudited)
May 31, 2012
Western Asset Investment Grade Defined Opportunity Trust Inc.
Security |
|
Rate |
|
Maturity |
|
Face |
|
Value |
|
Corporate Bonds & Notes 92.6% |
|
|
|
|
|
|
|
|
|
Consumer Discretionary 9.0% |
|
|
|
|
|
|
|
|
|
Automobiles 0.5% |
|
|
|
|
|
|
|
|
|
Ford Motor Credit Co., LLC, Senior Notes |
|
12.000 |
% |
5/15/15 |
|
$1,000,000 |
|
$ 1,270,000 |
|
Hotels, Restaurants & Leisure 0.9% |
|
|
|
|
|
|
|
|
|
Caesars Entertainment Operating Co. Inc., Senior Secured Notes |
|
11.250 |
% |
6/1/17 |
|
1,250,000 |
|
1,334,375 |
|
NCL Corp. Ltd., Senior Secured Notes |
|
11.750 |
% |
11/15/16 |
|
320,000 |
|
369,600 |
|
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., Senior Secured Notes |
|
5.375 |
% |
3/15/22 |
|
420,000 |
|
407,925 |
(a) |
Total Hotels, Restaurants & Leisure |
|
|
|
|
|
|
|
2,111,900 |
|
Household Durables 0.1% |
|
|
|
|
|
|
|
|
|
Whirlpool Corp., Senior Notes |
|
4.700 |
% |
6/1/22 |
|
260,000 |
|
261,958 |
|
Media 6.3% |
|
|
|
|
|
|
|
|
|
Comcast Corp., Bonds |
|
6.400 |
% |
5/15/38 |
|
2,500,000 |
|
3,084,663 |
|
Comcast Corp., Senior Notes |
|
5.700 |
% |
7/1/19 |
|
1,500,000 |
|
1,789,512 |
|
DISH DBS Corp., Senior Notes |
|
7.875 |
% |
9/1/19 |
|
1,250,000 |
|
1,396,875 |
|
News America Inc., Senior Notes |
|
6.650 |
% |
11/15/37 |
|
2,400,000 |
|
2,774,806 |
|
Nielsen Finance LLC/Nielsen Finance Co., Senior Notes |
|
11.500 |
% |
5/1/16 |
|
340,000 |
|
385,900 |
|
Time Warner Cable Inc., Debentures |
|
7.300 |
% |
7/1/38 |
|
500,000 |
|
638,554 |
|
Time Warner Cable Inc., Senior Notes |
|
8.750 |
% |
2/14/19 |
|
1,100,000 |
|
1,459,186 |
|
United Business Media Ltd., Notes |
|
5.750 |
% |
11/3/20 |
|
830,000 |
|
855,891 |
(a) |
WPP Finance 2010, Senior Notes |
|
4.750 |
% |
11/21/21 |
|
870,000 |
|
917,106 |
(a) |
WPP Finance UK, Senior Notes |
|
8.000 |
% |
9/15/14 |
|
1,000,000 |
|
1,136,004 |
|
Total Media |
|
|
|
|
|
|
|
14,438,497 |
|
Specialty Retail 0.7% |
|
|
|
|
|
|
|
|
|
American Greetings Corp., Senior Notes |
|
7.375 |
% |
12/1/21 |
|
280,000 |
|
292,600 |
|
Gap Inc., Senior Notes |
|
5.950 |
% |
4/12/21 |
|
1,240,000 |
|
1,282,544 |
|
Total Specialty Retail |
|
|
|
|
|
|
|
1,575,144 |
|
Textiles, Apparel & Luxury Goods 0.5% |
|
|
|
|
|
|
|
|
|
Oxford Industries Inc., Senior Secured Notes |
|
11.375 |
% |
7/15/15 |
|
1,000,000 |
|
1,068,760 |
|
Total Consumer Discretionary |
|
|
|
|
|
|
|
20,726,259 |
|
Consumer Staples 6.3% |
|
|
|
|
|
|
|
|
|
Beverages 1.4% |
|
|
|
|
|
|
|
|
|
Anheuser-Busch InBev Worldwide Inc., Senior Notes |
|
7.750 |
% |
1/15/19 |
|
450,000 |
|
596,189 |
|
Molson Coors Brewing Co., Senior Notes |
|
3.500 |
% |
5/1/22 |
|
690,000 |
|
704,791 |
|
Pernod-Ricard SA, Senior Bonds |
|
5.750 |
% |
4/7/21 |
|
890,000 |
|
1,006,720 |
(a) |
Pernod-Ricard SA, Senior Notes |
|
5.500 |
% |
1/15/42 |
|
960,000 |
|
989,634 |
(a) |
Total Beverages |
|
|
|
|
|
|
|
3,297,334 |
|
See Notes to Financial Statements.
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
Western Asset Investment Grade Defined Opportunity Trust Inc.
Security |
|
Rate |
|
Maturity |
|
Face |
|
Value |
|
Food & Staples Retailing 0.3% |
|
|
|
|
|
|
|
|
|
CVS Caremark Corp., Senior Notes |
|
6.600 |
% |
3/15/19 |
|
$ 600,000 |
|
$ 757,810 |
|
Food Products 1.6% |
|
|
|
|
|
|
|
|
|
Kraft Foods Group Inc., Senior Notes |
|
3.500 |
% |
6/6/22 |
|
550,000 |
|
563,316 |
(a) |
Kraft Foods Group Inc., Senior Notes |
|
5.000 |
% |
6/4/42 |
|
860,000 |
|
896,730 |
(a) |
Kraft Foods Inc., Senior Notes |
|
5.375 |
% |
2/10/20 |
|
1,030,000 |
|
1,219,531 |
|
Smithfield Foods Inc., Senior Secured Notes |
|
10.000 |
% |
7/15/14 |
|
801,000 |
|
925,155 |
|
Total Food Products |
|
|
|
|
|
|
|
3,604,732 |
|
Tobacco 3.0% |
|
|
|
|
|
|
|
|
|
Altria Group Inc., Senior Notes |
|
9.250 |
% |
8/6/19 |
|
1,000,000 |
|
1,375,883 |
|
Lorillard Tobacco Co., Senior Notes |
|
8.125 |
% |
6/23/19 |
|
540,000 |
|
674,331 |
|
Lorillard Tobacco Co., Senior Notes |
|
8.125 |
% |
5/1/40 |
|
470,000 |
|
586,229 |
|
Lorillard Tobacco Co., Senior Notes |
|
7.000 |
% |
8/4/41 |
|
510,000 |
|
575,028 |
|
Philip Morris International Inc., Senior Notes |
|
4.500 |
% |
3/20/42 |
|
1,140,000 |
|
1,248,751 |
|
Reynolds American Inc., Senior Secured Notes |
|
7.625 |
% |
6/1/16 |
|
2,000,000 |
|
2,416,856 |
|
Total Tobacco |
|
|
|
|
|
|
|
6,877,078 |
|
Total Consumer Staples |
|
|
|
|
|
|
|
14,536,954 |
|
Energy 13.2% |
|
|
|
|
|
|
|
|
|
Oil, Gas & Consumable Fuels 13.2% |
|
|
|
|
|
|
|
|
|
Anadarko Petroleum Corp., Senior Notes |
|
5.950 |
% |
9/15/16 |
|
340,000 |
|
385,889 |
|
Apache Corp., Senior Notes |
|
5.100 |
% |
9/1/40 |
|
140,000 |
|
159,905 |
|
Apache Corp., Senior Notes |
|
5.250 |
% |
2/1/42 |
|
160,000 |
|
187,061 |
|
Arch Coal Inc., Senior Notes |
|
7.000 |
% |
6/15/19 |
|
440,000 |
|
379,500 |
(a) |
ConocoPhillips, Notes |
|
6.500 |
% |
2/1/39 |
|
1,500,000 |
|
2,067,522 |
|
DCP Midstream LLC, Senior Notes |
|
9.750 |
% |
3/15/19 |
|
1,000,000 |
|
1,306,717 |
(a) |
DCP Midstream Partners LP, Senior Notes |
|
4.950 |
% |
4/1/22 |
|
900,000 |
|
927,812 |
|
Devon Energy Corp., Senior Notes |
|
3.250 |
% |
5/15/22 |
|
20,000 |
|
20,325 |
|
Devon Financing Corp. ULC, Debentures |
|
7.875 |
% |
9/30/31 |
|
1,080,000 |
|
1,544,913 |
|
Enterprise Products Operating LP, Senior Notes |
|
9.750 |
% |
1/31/14 |
|
2,000,000 |
|
2,270,378 |
|
EOG Resources Inc., Senior Notes |
|
6.875 |
% |
10/1/18 |
|
800,000 |
|
1,011,756 |
|
Hess Corp., Notes |
|
8.125 |
% |
2/15/19 |
|
1,400,000 |
|
1,821,764 |
|
Hess Corp., Notes |
|
7.875 |
% |
10/1/29 |
|
440,000 |
|
582,828 |
|
Hess Corp., Senior Bonds |
|
6.000 |
% |
1/15/40 |
|
520,000 |
|
589,558 |
|
Kerr-McGee Corp., Notes |
|
6.950 |
% |
7/1/24 |
|
1,320,000 |
|
1,641,737 |
|
Kerr-McGee Corp., Notes |
|
7.875 |
% |
9/15/31 |
|
830,000 |
|
1,069,161 |
|
Kinder Morgan Energy Partners LP, Senior Notes |
|
5.950 |
% |
2/15/18 |
|
800,000 |
|
933,360 |
|
Noble Energy Inc., Senior Notes |
|
6.000 |
% |
3/1/41 |
|
660,000 |
|
755,363 |
|
Pemex Project Funding Master Trust, Senior Bonds |
|
6.625 |
% |
6/15/35 |
|
1,000,000 |
|
1,147,500 |
|
Petrobras International Finance Co., Senior Notes |
|
5.750 |
% |
1/20/20 |
|
1,109,000 |
|
1,213,572 |
|
Petrobras International Finance Co., Senior Notes |
|
6.750 |
% |
1/27/41 |
|
2,490,000 |
|
2,882,058 |
|
See Notes to Financial Statements.
6 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Schedule of investments (unaudited) (contd)
May 31, 2012
Western Asset Investment Grade Defined Opportunity Trust Inc.
Security |
|
Rate |
|
Maturity |
|
Face |
|
Value |
|
Oil, Gas & Consumable Fuels continued |
|
|
|
|
|
|
|
|
|
Petroleos Mexicanos, Senior Notes |
|
5.500 |
% |
1/21/21 |
|
$ 250,000 |
|
$ 276,250 |
|
Phillips 66, Senior Notes |
|
5.875 |
% |
5/1/42 |
|
260,000 |
|
278,486 |
(a) |
Quicksilver Resources Inc., Senior Notes |
|
11.750 |
% |
1/1/16 |
|
1,000,000 |
|
1,030,000 |
|
Shell International Finance BV, Senior Notes |
|
6.375 |
% |
12/15/38 |
|
1,500,000 |
|
2,081,599 |
|
TNK-BP Finance SA, Senior Notes |
|
7.500 |
% |
3/13/13 |
|
870,000 |
|
908,063 |
(a) |
Transcontinental Gas Pipe Line Co. LLC, Senior Notes |
|
5.400 |
% |
8/15/41 |
|
10,000 |
|
11,741 |
|
Valero Energy Corp., Senior Notes |
|
9.375 |
% |
3/15/19 |
|
700,000 |
|
927,491 |
|
Williams Cos. Inc., Notes |
|
7.875 |
% |
9/1/21 |
|
952,000 |
|
1,238,379 |
|
Williams Cos. Inc., Senior Notes |
|
7.750 |
% |
6/15/31 |
|
62,000 |
|
78,741 |
|
Williams Cos. Inc., Senior Notes |
|
8.750 |
% |
3/15/32 |
|
148,000 |
|
206,834 |
|
Williams Partners LP, Senior Notes |
|
5.250 |
% |
3/15/20 |
|
460,000 |
|
520,898 |
|
Total Energy |
|
|
|
|
|
|
|
30,457,161 |
|
Financials 32.8% |
|
|
|
|
|
|
|
|
|
Capital Markets 8.1% |
|
|
|
|
|
|
|
|
|
Bear Stearns Cos. LLC, Senior Notes |
|
7.250 |
% |
2/1/18 |
|
1,570,000 |
|
1,853,283 |
|
Credit Suisse New York, Senior Notes |
|
5.300 |
% |
8/13/19 |
|
560,000 |
|
627,894 |
|
GFI Group Inc., Senior Notes |
|
8.375 |
% |
7/19/18 |
|
810,000 |
|
716,850 |
|
Goldman Sachs Group Inc., Senior Notes |
|
5.950 |
% |
1/18/18 |
|
4,250,000 |
|
4,444,344 |
|
Goldman Sachs Group Inc., Senior Notes |
|
7.500 |
% |
2/15/19 |
|
500,000 |
|
568,648 |
|
Goldman Sachs Group Inc., Senior Notes |
|
5.375 |
% |
3/15/20 |
|
470,000 |
|
478,930 |
|
Goldman Sachs Group Inc., Senior Notes |
|
5.250 |
% |
7/27/21 |
|
870,000 |
|
862,162 |
|
Goldman Sachs Group Inc., Senior Notes |
|
6.250 |
% |
2/1/41 |
|
2,550,000 |
|
2,576,321 |
|
Merrill Lynch & Co. Inc., Notes |
|
6.875 |
% |
4/25/18 |
|
990,000 |
|
1,089,171 |
|
Morgan Stanley, Medium-Term Notes |
|
6.625 |
% |
4/1/18 |
|
1,750,000 |
|
1,778,436 |
|
Morgan Stanley, Senior Notes |
|
5.500 |
% |
1/26/20 |
|
1,950,000 |
|
1,835,510 |
|
Morgan Stanley, Senior Notes |
|
5.500 |
% |
7/24/20 |
|
200,000 |
|
187,678 |
|
State Street Corp., Junior Subordinated Notes |
|
4.956 |
% |
3/15/18 |
|
1,330,000 |
|
1,393,191 |
|
UBS AG Stamford CT, Senior Notes |
|
4.875 |
% |
8/4/20 |
|
250,000 |
|
263,758 |
|
Total Capital Markets |
|
|
|
|
|
|
|
18,676,176 |
|
Commercial Banks 6.0% |
|
|
|
|
|
|
|
|
|
BankAmerica Institutional Capital A, Junior Subordinated Bonds |
|
8.070 |
% |
12/31/26 |
|
240,000 |
|
242,400 |
(a) |
BankAmerica Institutional Capital B, Junior Subordinated Bonds |
|
7.700 |
% |
12/31/26 |
|
250,000 |
|
251,875 |
(a) |
CIT Group Inc., Secured Notes |
|
5.250 |
% |
4/1/14 |
|
630,000 |
|
644,175 |
(a) |
CIT Group Inc., Secured Notes |
|
6.625 |
% |
4/1/18 |
|
480,000 |
|
501,600 |
(a) |
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, Senior Notes |
|
5.250 |
% |
5/24/41 |
|
310,000 |
|
335,175 |
|
Intesa Sanpaolo SpA, Senior Notes |
|
3.625 |
% |
8/12/15 |
|
2,020,000 |
|
1,739,267 |
(a) |
See Notes to Financial Statements.
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
Western Asset Investment Grade Defined Opportunity Trust Inc.
Security |
|
Rate |
|
Maturity |
|
Face |
|
Value |
|
Commercial Banks continued |
|
|
|
|
|
|
|
|
|
Intesa Sanpaolo SpA, Senior Notes |
|
6.500 |
% |
2/24/21 |
|
$ 330,000 |
|
$ 286,117 |
(a) |
Lloyds TSB Bank PLC, Senior Notes |
|
4.200 |
% |
3/28/17 |
|
610,000 |
|
609,837 |
|
Lloyds TSB Bank PLC, Senior Notes |
|
6.375 |
% |
1/21/21 |
|
80,000 |
|
86,434 |
|
NB Capital Trust IV, Junior Subordinated Notes |
|
8.250 |
% |
4/15/27 |
|
1,030,000 |
|
1,039,991 |
|
Royal Bank of Scotland Group PLC, Junior Subordinated Bonds |
|
7.648 |
% |
9/30/31 |
|
680,000 |
|
525,300 |
(b)(c) |
Royal Bank of Scotland Group PLC, Senior Notes |
|
6.400 |
% |
10/21/19 |
|
1,170,000 |
|
1,211,200 |
|
Royal Bank of Scotland Group PLC, Subordinated Notes |
|
5.000 |
% |
10/1/14 |
|
990,000 |
|
969,984 |
|
Wachovia Capital Trust III, Junior Subordinated Bonds |
|
5.570 |
% |
7/16/12 |
|
270,000 |
|
252,113 |
(b)(c) |
Wachovia Corp., Senior Notes |
|
5.750 |
% |
2/1/18 |
|
4,400,000 |
|
5,103,080 |
|
Total Commercial Banks |
|
|
|
|
|
|
|
13,798,548 |
|
Consumer Finance 3.7% |
|
|
|
|
|
|
|
|
|
Ally Financial Inc., Senior Notes |
|
8.000 |
% |
3/15/20 |
|
1,500,000 |
|
1,698,750 |
|
American Express Co., Senior Notes |
|
8.125 |
% |
5/20/19 |
|
2,760,000 |
|
3,686,405 |
|
HSBC Finance Corp., Senior Notes |
|
6.676 |
% |
1/15/21 |
|
1,620,000 |
|
1,750,893 |
|
SLM Corp., Senior Notes |
|
7.250 |
% |
1/25/22 |
|
1,430,000 |
|
1,406,811 |
|
Total Consumer Finance |
|
|
|
|
|
|
|
8,542,859 |
|
Diversified Financial Services 10.8% |
|
|
|
|
|
|
|
|
|
Bank of America Corp., Senior Notes |
|
7.625 |
% |
6/1/19 |
|
2,760,000 |
|
3,159,295 |
|
Bank of America Corp., Senior Notes |
|
5.625 |
% |
7/1/20 |
|
180,000 |
|
186,724 |
|
Bank of America Corp., Senior Notes |
|
5.875 |
% |
2/7/42 |
|
2,380,000 |
|
2,438,369 |
|
Citigroup Inc., Senior Notes |
|
6.375 |
% |
8/12/14 |
|
300,000 |
|
321,906 |
|
Citigroup Inc., Senior Notes |
|
6.000 |
% |
8/15/17 |
|
2,250,000 |
|
2,442,004 |
|
Citigroup Inc., Senior Notes |
|
8.500 |
% |
5/22/19 |
|
500,000 |
|
613,219 |
|
Citigroup Inc., Senior Notes |
|
6.875 |
% |
3/5/38 |
|
2,000,000 |
|
2,353,864 |
|
Citigroup Inc., Senior Notes |
|
8.125 |
% |
7/15/39 |
|
1,350,000 |
|
1,796,290 |
|
Citigroup Inc., Senior Notes |
|
5.875 |
% |
1/30/42 |
|
410,000 |
|
437,840 |
|
General Electric Capital Corp., Notes |
|
5.300 |
% |
2/11/21 |
|
890,000 |
|
992,434 |
|
General Electric Capital Corp., Senior Notes |
|
6.000 |
% |
8/7/19 |
|
790,000 |
|
928,782 |
|
General Electric Capital Corp., Senior Notes |
|
6.875 |
% |
1/10/39 |
|
3,010,000 |
|
3,865,770 |
|
ILFC E-Capital Trust I |
|
5.030 |
% |
12/21/65 |
|
370,000 |
|
251,156 |
(a)(b) |
International Lease Finance Corp., Senior Notes |
|
8.875 |
% |
9/1/17 |
|
810,000 |
|
909,225 |
|
International Lease Finance Corp., Senior Notes |
|
6.250 |
% |
5/15/19 |
|
220,000 |
|
220,055 |
|
International Lease Finance Corp., Senior Notes |
|
8.250 |
% |
12/15/20 |
|
330,000 |
|
368,775 |
|
International Lease Finance Corp., Senior Secured Notes |
|
6.750 |
% |
9/1/16 |
|
670,000 |
|
721,925 |
(a) |
International Lease Finance Corp., Senior Secured Notes |
|
7.125 |
% |
9/1/18 |
|
1,030,000 |
|
1,138,150 |
(a) |
See Notes to Financial Statements.
8 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Schedule of investments (unaudited) (contd)
May 31, 2012
Western Asset Investment Grade Defined Opportunity Trust Inc.
Security |
|
Rate |
|
Maturity |
|
Face |
|
Value |
|
Diversified Financial Services continued |
|
|
|
|
|
|
|
|
|
JPMorgan Chase & Co., Senior Notes |
|
6.400 |
% |
5/15/38 |
|
$1,500,000 |
|
$ 1,768,611 |
|
Total Diversified Financial Services |
|
|
|
|
|
|
|
24,914,394 |
|
Insurance 3.5% |
|
|
|
|
|
|
|
|
|
American International Group Inc., Senior Notes |
|
4.875 |
% |
9/15/16 |
|
600,000 |
|
633,337 |
|
American International Group Inc., Senior Notes |
|
6.400 |
% |
12/15/20 |
|
1,000,000 |
|
1,123,900 |
|
Berkshire Hathaway Finance Corp., Senior Notes |
|
4.400 |
% |
5/15/42 |
|
250,000 |
|
252,411 |
|
Delphi Financial Group Inc., Senior Notes |
|
7.875 |
% |
1/31/20 |
|
290,000 |
|
346,422 |
|
ING Capital Funding Trust III, Junior Subordinated Bonds |
|
4.070 |
% |
9/30/12 |
|
410,000 |
|
340,520 |
(b)(c) |
MetLife Inc., Senior Notes |
|
6.817 |
% |
8/15/18 |
|
1,300,000 |
|
1,578,939 |
|
Mitsui Sumitomo Insurance Co., Ltd., Notes |
|
7.000 |
% |
3/15/72 |
|
1,110,000 |
|
1,147,839 |
(a)(b) |
Nationwide Mutual Insurance Co., Notes |
|
9.375 |
% |
8/15/39 |
|
520,000 |
|
687,507 |
(a) |
Teachers Insurance & Annuity Association of America College Retirement Equity Fund, Notes |
|
6.850 |
% |
12/16/39 |
|
1,050,000 |
|
1,382,387 |
(a) |
Travelers Cos. Inc., Senior Notes |
|
6.250 |
% |
6/15/37 |
|
400,000 |
|
526,841 |
|
Total Insurance |
|
|
|
|
|
|
|
8,020,103 |
|
Real Estate Investment Trusts (REITs) 0.6% |
|
|
|
|
|
|
|
|
|
Boston Properties LP, Senior Notes |
|
3.850 |
% |
2/1/23 |
|
520,000 |
|
518,851 |
|
WEA Finance LLC/WT Finance Aust Pty. Ltd., Senior Notes |
|
6.750 |
% |
9/2/19 |
|
580,000 |
|
691,234 |
(a) |
Total Real Estate Investment Trusts (REITs) |
|
|
|
|
|
|
|
1,210,085 |
|
Thrifts & Mortgage Finance 0.1% |
|
|
|
|
|
|
|
|
|
Santander Holdings USA Inc., Senior Notes |
|
4.625 |
% |
4/19/16 |
|
270,000 |
|
263,081 |
|
Total Financials |
|
|
|
|
|
|
|
75,425,246 |
|
Health Care 5.2% |
|
|
|
|
|
|
|
|
|
Biotechnology 0.7% |
|
|
|
|
|
|
|
|
|
Amgen Inc., Senior Notes |
|
5.150 |
% |
11/15/41 |
|
1,020,000 |
|
1,055,929 |
|
Gilead Sciences Inc., Senior Notes |
|
5.650 |
% |
12/1/41 |
|
480,000 |
|
558,368 |
|
Total Biotechnology |
|
|
|
|
|
|
|
1,614,297 |
|
Health Care Equipment & Supplies 0.5% |
|
|
|
|
|
|
|
|
|
Biomet Inc., Senior Toggle Notes |
|
10.375 |
% |
10/15/17 |
|
1,000,000 |
|
1,069,375 |
(d) |
Health Care Providers & Services 3.0% |
|
|
|
|
|
|
|
|
|
CIGNA Corp., Senior Notes |
|
4.500 |
% |
3/15/21 |
|
470,000 |
|
511,349 |
|
Highmark Inc., Senior Notes |
|
4.750 |
% |
5/15/21 |
|
570,000 |
|
592,947 |
(a) |
Humana Inc., Senior Notes |
|
6.450 |
% |
6/1/16 |
|
1,000,000 |
|
1,138,673 |
|
Humana Inc., Senior Notes |
|
7.200 |
% |
6/15/18 |
|
1,000,000 |
|
1,211,894 |
|
InVentiv Health Inc., Senior Notes |
|
10.000 |
% |
8/15/18 |
|
580,000 |
|
493,000 |
(a) |
Tenet Healthcare Corp., Senior Secured Notes |
|
10.000 |
% |
5/1/18 |
|
1,000,000 |
|
1,145,000 |
|
Tenet Healthcare Corp., Senior Secured Notes |
|
8.875 |
% |
7/1/19 |
|
430,000 |
|
480,525 |
|
See Notes to Financial Statements.
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
9 |
Western Asset Investment Grade Defined Opportunity Trust Inc.
Security |
|
Rate |
|
Maturity |
|
Face |
|
Value |
|
Health Care Providers & Services continued |
|
|
|
|
|
|
|
|
|
WellPoint Inc., Notes |
|
5.250 |
% |
1/15/16 |
|
$1,200,000 |
|
$ 1,345,212 |
|
Total Health Care Providers & Services |
|
|
|
|
|
|
|
6,918,600 |
|
Pharmaceuticals 1.0% |
|
|
|
|
|
|
|
|
|
Pfizer Inc., Senior Notes |
|
7.200 |
% |
3/15/39 |
|
560,000 |
|
855,059 |
|
Wyeth, Notes |
|
5.950 |
% |
4/1/37 |
|
1,100,000 |
|
1,451,825 |
|
Total Pharmaceuticals |
|
|
|
|
|
|
|
2,306,884 |
|
Total Health Care |
|
|
|
|
|
|
|
11,909,156 |
|
Industrials 5.1% |
|
|
|
|
|
|
|
|
|
Aerospace & Defense 0.5% |
|
|
|
|
|
|
|
|
|
Exelis Inc., Senior Notes |
|
5.550 |
% |
10/1/21 |
|
885,000 |
|
961,024 |
(a) |
L-3 Communications Corp., Senior Subordinated Notes |
|
6.375 |
% |
10/15/15 |
|
217,000 |
|
222,425 |
|
Total Aerospace & Defense |
|
|
|
|
|
|
|
1,183,449 |
|
Air Freight & Logistics 0.4% |
|
|
|
|
|
|
|
|
|
United Parcel Service Inc., Senior Notes |
|
6.200 |
% |
1/15/38 |
|
700,000 |
|
960,396 |
|
Airlines 2.2% |
|
|
|
|
|
|
|
|
|
Continental Airlines Inc., Pass-Through Certificates |
|
9.250 |
% |
5/10/17 |
|
344,073 |
|
377,190 |
|
Continental Airlines Inc., Pass-Through Certificates |
|
6.545 |
% |
2/2/19 |
|
226,989 |
|
243,446 |
|
Continental Airlines Inc., Pass-Through Certificates, Senior Secured Notes |
|
7.250 |
% |
11/10/19 |
|
730,414 |
|
821,716 |
|
Continental Airlines Inc., Secured Notes |
|
6.250 |
% |
10/22/21 |
|
290,000 |
|
296,163 |
|
Delta Air Lines, Pass-Through Trust, Senior Secured Notes |
|
7.750 |
% |
2/17/19 |
|
728,114 |
|
831,870 |
|
Delta Air Lines Inc., Pass-Through Certificates, Secured Notes |
|
8.021 |
% |
8/10/22 |
|
190,229 |
|
194,033 |
|
United Air Lines Inc., Senior Secured Notes |
|
9.875 |
% |
8/1/13 |
|
427,000 |
|
441,945 |
(a) |
United Air Lines Inc., Senior Secured Notes |
|
12.000 |
% |
11/1/13 |
|
570,000 |
|
602,062 |
(a) |
United Airlines, Pass-Through Trust, Pass-Through Certificates, Secured Notes |
|
9.750 |
% |
1/15/17 |
|
208,722 |
|
238,986 |
|
United Airlines, Pass-Through Trust, Senior Secured Notes |
|
10.400 |
% |
11/1/16 |
|
160,170 |
|
183,394 |
|
US Airways 2012-1 Pass-Through Trust, Senior Secured Bonds |
|
5.900 |
% |
4/1/26 |
|
890,000 |
|
904,462 |
|
Total Airlines |
|
|
|
|
|
|
|
5,135,267 |
|
Commercial Services & Supplies 0.1% |
|
|
|
|
|
|
|
|
|
Republic Services Inc., Senior Notes |
|
5.500 |
% |
9/15/19 |
|
220,000 |
|
256,883 |
|
Electrical Equipment 0.3% |
|
|
|
|
|
|
|
|
|
ABB Finance U.S.A. Inc., Senior Notes |
|
4.375 |
% |
5/8/42 |
|
720,000 |
|
746,086 |
|
See Notes to Financial Statements.
10 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Schedule of investments (unaudited) (contd)
May 31, 2012
Western Asset Investment Grade Defined Opportunity Trust Inc.
Security |
|
Rate |
|
Maturity |
|
Face |
|
Value |
|
Industrial Conglomerates 0.7% |
|
|
|
|
|
|
|
|
|
United Technologies Corp., Senior Notes |
|
4.500 |
% |
6/1/42 |
|
$1,480,000 |
|
$ 1,591,798 |
|
Machinery 0.1% |
|
|
|
|
|
|
|
|
|
Valmont Industries Inc., Senior Notes |
|
6.625 |
% |
4/20/20 |
|
180,000 |
|
214,792 |
|
Road & Rail 0.8% |
|
|
|
|
|
|
|
|
|
Burlington Northern Santa Fe LLC, Senior Notes |
|
4.400 |
% |
3/15/42 |
|
1,010,000 |
|
1,016,233 |
|
Kansas City Southern de Mexico, Senior Notes |
|
12.500 |
% |
4/1/16 |
|
650,000 |
|
741,000 |
|
Total Road & Rail |
|
|
|
|
|
|
|
1,757,233 |
|
Total Industrials |
|
|
|
|
|
|
|
11,845,904 |
|
Information Technology 0.4% |
|
|
|
|
|
|
|
|
|
IT Services 0.2% |
|
|
|
|
|
|
|
|
|
Mantech International Corp., Senior Notes |
|
7.250 |
% |
4/15/18 |
|
540,000 |
|
572,400 |
|
Semiconductors & Semiconductor Equipment 0.2% |
|
|
|
|
|
|
|
|
|
National Semiconductor Corp., Senior Notes |
|
6.600 |
% |
6/15/17 |
|
360,000 |
|
447,902 |
|
Total Information Technology |
|
|
|
|
|
|
|
1,020,302 |
|
Materials 6.2% |
|
|
|
|
|
|
|
|
|
Chemicals 0.7% |
|
|
|
|
|
|
|
|
|
Eastman Chemical Co., Senior Notes |
|
4.800 |
% |
9/1/42 |
|
500,000 |
|
496,585 |
|
Ecolab Inc., Senior Notes |
|
5.500 |
% |
12/8/41 |
|
260,000 |
|
304,511 |
|
Potash Corp. of Saskatchewan Inc., Senior Notes |
|
5.625 |
% |
12/1/40 |
|
530,000 |
|
671,183 |
|
Total Chemicals |
|
|
|
|
|
|
|
1,472,279 |
|
Containers & Packaging 0.7% |
|
|
|
|
|
|
|
|
|
Rock-Tenn Co., Senior Notes |
|
4.450 |
% |
3/1/19 |
|
810,000 |
|
829,609 |
(a) |
Rock-Tenn Co., Senior Notes |
|
4.900 |
% |
3/1/22 |
|
790,000 |
|
820,635 |
(a) |
Total Containers & Packaging |
|
|
|
|
|
|
|
1,650,244 |
|
Metals & Mining 4.2% |
|
|
|
|
|
|
|
|
|
Barrick Gold Corp., Senior Notes |
|
5.250 |
% |
4/1/42 |
|
1,380,000 |
|
1,457,714 |
(a) |
Cliffs Natural Resources Inc., Senior Notes |
|
4.875 |
% |
4/1/21 |
|
620,000 |
|
646,602 |
|
Freeport-McMoRan Copper & Gold Inc., Senior Notes |
|
3.550 |
% |
3/1/22 |
|
705,000 |
|
700,655 |
|
Rio Tinto Finance USA Ltd., Senior Notes |
|
9.000 |
% |
5/1/19 |
|
2,000,000 |
|
2,751,632 |
|
Southern Copper Corp., Senior Notes |
|
5.375 |
% |
4/16/20 |
|
260,000 |
|
286,872 |
|
Vale Overseas Ltd., Notes |
|
6.875 |
% |
11/21/36 |
|
2,100,000 |
|
2,413,473 |
|
Xstrata Finance Canada Ltd., Senior Bonds |
|
5.800 |
% |
11/15/16 |
|
1,200,000 |
|
1,355,063 |
(a) |
Total Metals & Mining |
|
|
|
|
|
|
|
9,612,011 |
|
Paper & Forest Products 0.6% |
|
|
|
|
|
|
|
|
|
NewPage Corp., Senior Secured Notes |
|
11.375 |
% |
12/31/14 |
|
500,000 |
|
312,500 |
(e) |
PE Paper Escrow GmbH, Senior Secured Notes |
|
12.000 |
% |
8/1/14 |
|
1,030,000 |
|
1,107,250 |
(a) |
Total Paper & Forest Products |
|
|
|
|
|
|
|
1,419,750 |
|
Total Materials |
|
|
|
|
|
|
|
14,154,284 |
|
See Notes to Financial Statements.
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
Western Asset Investment Grade Defined Opportunity Trust Inc.
Security |
|
Rate |
|
Maturity |
|
Face |
|
Value |
|
Telecommunication Services 7.2% |
|
|
|
|
|
|
|
|
|
Diversified Telecommunication Services 4.5% |
|
|
|
|
|
|
|
|
|
AT&T Inc., Global Notes |
|
5.600 |
% |
5/15/18 |
|
$1,500,000 |
|
$ 1,792,395 |
|
AT&T Inc., Global Notes |
|
6.550 |
% |
2/15/39 |
|
250,000 |
|
320,271 |
|
AT&T Inc., Senior Notes |
|
5.550 |
% |
8/15/41 |
|
1,060,000 |
|
1,247,123 |
|
British Telecommunications PLC, Bonds |
|
9.875 |
% |
12/15/30 |
|
2,000,000 |
|
3,031,078 |
|
Embarq Corp., Notes |
|
7.995 |
% |
6/1/36 |
|
1,500,000 |
|
1,541,068 |
|
Koninklijke KPN NV, Senior Notes |
|
8.375 |
% |
10/1/30 |
|
330,000 |
|
443,651 |
|
Telecom Italia Capital SA, Senior Notes |
|
7.721 |
% |
6/4/38 |
|
1,000,000 |
|
885,000 |
|
Telefonica Emisiones SAU, Senior Notes |
|
5.877 |
% |
7/15/19 |
|
400,000 |
|
373,968 |
|
Verizon Communications Inc., Senior Notes |
|
8.950 |
% |
3/1/39 |
|
430,000 |
|
697,875 |
|
Total Diversified Telecommunication Services |
|
|
|
|
|
|
|
10,332,429 |
|
Wireless Telecommunication Services 2.7% |
|
|
|
|
|
|
|
|
|
America Movil SAB de CV, Senior Notes |
|
6.125 |
% |
3/30/40 |
|
1,400,000 |
|
1,680,781 |
|
Cellco Partnership/Verizon Wireless Capital LLC, Senior Notes |
|
8.500 |
% |
11/15/18 |
|
2,000,000 |
|
2,739,448 |
|
Rogers Communications Inc., Senior Notes |
|
6.800 |
% |
8/15/18 |
|
1,000,000 |
|
1,234,627 |
|
Sprint Nextel Corp., Senior Notes |
|
9.000 |
% |
11/15/18 |
|
280,000 |
|
303,800 |
(a) |
Telefonica Europe BV |
|
8.250 |
% |
9/15/30 |
|
390,000 |
|
382,295 |
|
Total Wireless Telecommunication Services |
|
|
|
|
|
|
|
6,340,951 |
|
Total Telecommunication Services |
|
|
|
|
|
|
|
16,673,380 |
|
Utilities 7.2% |
|
|
|
|
|
|
|
|
|
Electric Utilities 5.5% |
|
|
|
|
|
|
|
|
|
Commonwealth Edison Co., First Mortgage Bonds |
|
5.800 |
% |
3/15/18 |
|
600,000 |
|
727,634 |
|
Commonwealth Edison Co., First Mortgage Bonds |
|
6.450 |
% |
1/15/38 |
|
600,000 |
|
841,238 |
|
FirstEnergy Corp., Notes |
|
7.375 |
% |
11/15/31 |
|
2,230,000 |
|
2,847,139 |
|
IPALCO Enterprises Inc., Senior Secured Notes |
|
7.250 |
% |
4/1/16 |
|
1,030,000 |
|
1,122,700 |
(a) |
MidAmerican Energy Holdings Co., Bonds |
|
6.125 |
% |
4/1/36 |
|
1,000,000 |
|
1,271,705 |
|
MidAmerican Energy Holdings Co., Senior Notes |
|
5.750 |
% |
4/1/18 |
|
1,000,000 |
|
1,190,260 |
|
Pacific Gas & Electric Co., Senior Notes |
|
8.250 |
% |
10/15/18 |
|
600,000 |
|
812,443 |
|
Pacific Gas & Electric Co., Senior Notes |
|
5.800 |
% |
3/1/37 |
|
820,000 |
|
1,029,129 |
|
Reliant Energy Mid-Atlantic Power Holdings LLC, Senior Notes |
|
9.681 |
% |
7/2/26 |
|
2,000,000 |
|
1,900,000 |
|
Virginia Electric and Power Co., Senior Notes |
|
8.875 |
% |
11/15/38 |
|
500,000 |
|
848,555 |
|
Total Electric Utilities |
|
|
|
|
|
|
|
12,590,803 |
|
Gas Utilities 0.9% |
|
|
|
|
|
|
|
|
|
Southern Natural Gas Co., Senior Notes |
|
8.000 |
% |
3/1/32 |
|
1,500,000 |
|
2,029,282 |
|
Independent Power Producers & Energy Traders 0.5% |
|
|
|
|
|
|
|
|
|
AES Corp., Senior Notes |
|
8.000 |
% |
6/1/20 |
|
1,100,000 |
|
1,243,000 |
|
See Notes to Financial Statements.
12 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Schedule of investments (unaudited) (contd)
May 31, 2012
Western Asset Investment Grade Defined Opportunity Trust Inc.
Security |
|
Rate |
|
Maturity |
|
Face |
|
Value |
|
Multi-Utilities 0.3% |
|
|
|
|
|
|
|
|
|
Dominion Resources Inc., Senior Notes |
|
8.875 |
% |
1/15/19 |
|
$ 500,000 |
|
$ 689,975 |
|
Total Utilities |
|
|
|
|
|
|
|
16,553,060 |
|
Total Corporate Bonds & Notes (Cost $188,682,306) |
|
|
|
|
|
|
|
213,301,706 |
|
Collateralized Senior Loans 2.3% |
|
|
|
|
|
|
|
|
|
Consumer Discretionary 0.6% |
|
|
|
|
|
|
|
|
|
Hotels, Restaurants & Leisure 0.4% |
|
|
|
|
|
|
|
|
|
CCM Merger Inc., New Term Loan B |
|
6.000 |
% |
3/1/17 |
|
897,131 |
|
892,645 |
(f) |
Media 0.2% |
|
|
|
|
|
|
|
|
|
Cengage Learning Acquisitions Inc., Extended Term Loan |
|
5.740 |
% |
7/5/17 |
|
680,407 |
|
578,346 |
(f) |
Total Consumer Discretionary |
|
|
|
|
|
|
|
1,470,991 |
|
Energy 0.2% |
|
|
|
|
|
|
|
|
|
Oil, Gas & Consumable Fuels 0.2% |
|
|
|
|
|
|
|
|
|
Chesapeake Energy Corp., Term Loan |
|
|
|
12/1/17 |
|
430,000 |
|
420,003 |
(g) |
Health Care 0.4% |
|
|
|
|
|
|
|
|
|
Health Care Equipment & Supplies 0.4% |
|
|
|
|
|
|
|
|
|
Fenwal Inc., First Lien Term Loan |
2.489 - 2.717 |
% |
2/28/14 |
|
933,082 |
|
909,755 |
(f) | |
Industrials 0.4% |
|
|
|
|
|
|
|
|
|
Commercial Services & Supplies 0.4% |
|
|
|
|
|
|
|
|
|
Nielsen Finance LLC, Term Loan B |
|
3.989 |
% |
5/2/16 |
|
970,219 |
|
965,489 |
(f) |
Information Technology 0.4% |
|
|
|
|
|
|
|
|
|
IT Services 0.4% |
|
|
|
|
|
|
|
|
|
First Data Corp., Extended Term Loan B |
|
4.239 |
% |
3/23/18 |
|
401,246 |
|
365,594 |
(f) |
First Data Corp., Non-Extended Term Loan B2 |
|
2.989 |
% |
9/24/14 |
|
486,648 |
|
462,924 |
(f) |
Total Information Technology |
|
|
|
|
|
|
|
828,518 |
|
Utilities 0.3% |
|
|
|
|
|
|
|
|
|
Electric Utilities 0.3% |
|
|
|
|
|
|
|
|
|
Texas Competitive Electric Holdings Co. LLC, Extended Term Loan |
|
4.739 |
% |
10/10/17 |
|
944,308 |
|
552,774 |
(f) |
Total Collateralized Senior Loans (Cost $5,220,014) |
|
|
|
|
|
|
|
5,147,530 |
|
Municipal Bonds 0.5% |
|
|
|
|
|
|
|
|
|
Illinois 0.5% |
|
|
|
|
|
|
|
|
|
Illinois State, GO |
|
5.665 |
% |
3/1/18 |
|
530,000 |
|
590,033 |
|
Illinois State, GO |
|
5.877 |
% |
3/1/19 |
|
530,000 |
|
592,530 |
|
Total Municipal Bonds (Cost $1,060,000) |
|
|
|
|
|
|
|
1,182,563 |
|
See Notes to Financial Statements.
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
Western Asset Investment Grade Defined Opportunity Trust Inc.
Security |
|
Rate |
|
Maturity |
|
Face |
|
Value |
|
Sovereign Bonds 0.9% |
|
|
|
|
|
|
|
|
|
Russia 0.9% |
|
|
|
|
|
|
|
|
|
RSHB Capital, Loan Participation Notes, Senior Secured Notes |
|
9.000 |
% |
6/11/14 |
|
$1,000,000 |
|
$ 1,101,450 |
(a) |
Russian Foreign Bond Eurobond, Senior Bonds |
|
7.500 |
% |
3/31/30 |
|
805,000 |
|
948,894 |
(a) |
Total Sovereign Bonds (Cost $1,823,278) |
|
|
|
|
|
|
|
2,050,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
Convertible Preferred Stocks 0.3% |
|
|
|
|
|
|
|
|
|
Financials 0.3% |
|
|
|
|
|
|
|
|
|
Citigroup Inc. (Cost $888,750) |
|
7.500 |
% |
|
|
7,500 |
|
630,600 |
|
Preferred Stocks 2.2% |
|
|
|
|
|
|
|
|
|
Financials 2.2% |
|
|
|
|
|
|
|
|
|
Commercial Banks 0.7% |
|
|
|
|
|
|
|
|
|
PNC Financial Services Group Inc. |
|
6.125 |
% |
|
|
16,650 |
|
427,905 |
(b) |
Santander Finance Preferred SA Unipersonal |
|
10.500 |
% |
|
|
7,725 |
|
194,284 |
|
U.S. Bancorp |
|
6.000 |
% |
|
|
39,550 |
|
1,024,345 |
(b) |
Total Commercial Banks |
|
|
|
|
|
|
|
1,646,534 |
|
Consumer Finance 1.0% |
|
|
|
|
|
|
|
|
|
GMAC Capital Trust I |
|
8.125 |
% |
|
|
98,600 |
|
2,259,912 |
(b) |
Diversified Financial Services 0.5% |
|
|
|
|
|
|
|
|
|
Citigroup Capital XIII |
|
7.875 |
% |
|
|
45,600 |
|
1,206,576 |
(b) |
Total Preferred Stocks (Cost $5,190,744) |
|
|
|
|
|
|
|
5,113,022 |
|
Total Investments before Short-Term Investments (Cost $202,865,092) |
|
|
|
|
227,425,765 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Face |
|
|
|
Short-Term Investments 0.4% |
|
|
|
|
|
|
|
|
|
Repurchase Agreements 0.4% |
|
|
|
|
|
|
|
|
|
Goldman Sachs & Co. repurchase agreement dated 5/31/12; Proceeds at maturity $1,000,005; (Fully collateralized by U.S. government agency obligations, 0.200% due 2/27/13; Market value $1,025,000) (Cost $1,000,000) |
|
0.170 |
% |
6/1/12 |
|
$1,000,000 |
|
1,000,000 |
|
Total Investments 99.2% (Cost $203,865,092#) |
|
|
|
|
|
|
|
228,425,765 |
|
Other Assets in Excess of Liabilities 0.8% |
|
|
|
|
|
|
|
1,859,032 |
|
Total Net Assets 100.0% |
|
|
|
|
|
|
|
$230,284,797 |
|
See Notes to Financial Statements.
14 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Schedule of investments (unaudited) (contd)
May 31, 2012
Western Asset Investment Grade Defined Opportunity Trust Inc.
(a) |
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, unless otherwise noted. | |
(b) |
Variable rate security. Interest rate disclosed is as of the most recent information available. | |
(c) |
Security has no maturity date. The date shown represents the next call date. | |
(d) |
Payment-in-kind security for which part of the income earned may be paid as additional principal. | |
(e) |
The coupon payment on these securities is currently in default as of May 31, 2012. | |
(f) |
Interest rates disclosed represent the effective rates on collateralized senior loans. Ranges in interest rates are attributable to multiple contracts under the same loan. | |
(g) |
All or a portion of this loan is unfunded as of May 31, 2012. The interest rate for fully unfunded term loans is to be determined. | |
# |
Aggregate cost for federal income tax purposes is substantially the same. | |
|
| |
|
Abbreviation used in this schedule: | |
|
GO |
General Obligation |
See Notes to Financial Statements.
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
Statement of assets and liabilities (unaudited)
May 31, 2012
Assets: |
|
|
|
Investments, at value (Cost $203,865,092) |
|
$228,425,765 |
|
Cash |
|
484,504 |
|
Interest receivable |
|
3,481,761 |
|
Receivable for securities sold |
|
2,090,559 |
|
Deposits with brokers for open futures contracts |
|
521,003 |
|
Unrealized appreciation on forward foreign currency contracts |
|
99,253 |
|
Prepaid expenses |
|
22,858 |
|
Total Assets |
|
235,125,703 |
|
|
|
|
|
Liabilities: |
|
|
|
Payable for securities purchased |
|
4,552,632 |
|
Investment management fee payable |
|
127,161 |
|
Payable to broker variation margin on open futures contracts |
|
103,771 |
|
Accrued expenses |
|
57,342 |
|
Total Liabilities |
|
4,840,906 |
|
Total Net Assets |
|
$230,284,797 |
|
|
|
|
|
Net Assets: |
|
|
|
Par value ($0.001 par value; 10,716,079 shares issued and outstanding; 100,000,000 shares authorized) |
|
$ 10,716 |
|
Paid-in capital in excess of par value |
|
204,371,368 |
|
Undistributed net investment income |
|
1,720,189 |
|
Accumulated net realized loss on investments, futures contracts, swap contracts and foreign currency transactions |
|
(40,580) |
|
Net unrealized appreciation on investments, futures contracts and foreign currencies |
|
24,223,104 |
|
Total Net Assets |
|
$230,284,797 |
|
|
|
|
|
Shares Outstanding |
|
10,716,079 |
|
|
|
|
|
Net Asset Value |
|
$21.49 |
|
See Notes to Financial Statements.
16 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Statement of operations (unaudited)
For the Six Months Ended May 31, 2012
Investment Income: |
|
|
|
Interest |
|
$ 6,749,660 |
|
Dividends |
|
177,731 |
|
Total Investment Income |
|
6,927,391 |
|
|
|
|
|
Expenses: |
|
|
|
Investment management fee (Note 2) |
|
743,063 |
|
Excise tax (Note 1) |
|
49,223 |
|
Audit and tax |
|
28,172 |
|
Directors fees |
|
19,596 |
|
Transfer agent fees |
|
17,153 |
|
Shareholder reports |
|
14,864 |
|
Fund accounting fees |
|
11,321 |
|
Legal fees |
|
10,673 |
|
Stock exchange listing fees |
|
8,524 |
|
Insurance |
|
2,901 |
|
Custody fees |
|
1,953 |
|
Miscellaneous expenses |
|
3,015 |
|
Total Expenses |
|
910,458 |
|
Net Investment Income |
|
6,016,933 |
|
|
|
|
|
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Swap Contracts and Foreign Currency Transactions (Notes 1, 3 and 4): |
|
|
|
Net Realized Gain (Loss) From: |
|
|
|
Investment transactions |
|
2,038,849 |
|
Futures contracts |
|
(1,161,263) |
|
Swap contracts |
|
27,427 |
|
Foreign currency transactions |
|
130,141 |
|
Net Realized Gain |
|
1,035,154 |
|
Change in Net Unrealized Appreciation (Depreciation) From: |
|
|
|
Investments |
|
10,832,389 |
|
Futures contracts |
|
(617,374) |
|
Foreign currencies |
|
47,277 |
|
Change in Net Unrealized Appreciation (Depreciation) |
|
10,262,292 |
|
Net Gain on Investments, Futures Contracts, Swap Contracts and Foreign Currency Transactions |
|
11,297,446 |
|
Increase in Net Assets From Operations |
|
$17,314,379 |
|
See Notes to Financial Statements.
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
Statements of changes in net assets
For the Six Months Ended May 31, 2012 (unaudited) |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Operations: |
|
|
|
|
|
Net investment income |
|
$ 6,016,933 |
|
$ 12,279,329 |
|
Net realized gain |
|
1,035,154 |
|
1,492,940 |
|
Change in net unrealized appreciation (depreciation) |
|
10,262,292 |
|
(7,611,127) |
|
Increase in Net Assets From Operations |
|
17,314,379 |
|
6,161,142 |
|
|
|
|
|
|
|
Distributions to Shareholders From (Note 1): |
|
|
|
|
|
Net investment income |
|
(6,706,808) |
|
(11,428,059) |
|
Net realized gains |
|
(1,512,836) |
|
(2,329,225) |
|
Decrease in Net Assets From Distributions to Shareholders |
|
(8,219,644) |
|
(13,757,284) |
|
|
|
|
|
|
|
Fund Share Transactions: |
|
|
|
|
|
Reinvestment of distributions (39,751 and 29,395 shares issued, respectively) |
|
836,029 |
|
612,686 |
|
Increase in Net Assets From Fund Share Transactions |
|
836,029 |
|
612,686 |
|
Increase (Decrease) in Net Assets |
|
9,930,764 |
|
(6,983,456) |
|
|
|
|
|
|
|
Net Assets: |
|
|
|
|
|
Beginning of period |
|
220,354,033 |
|
227,337,489 |
|
End of period* |
|
$230,284,797 |
|
$220,354,033 |
|
*Includes undistributed net investment income of: |
|
$1,720,189 |
|
$2,410,064 |
|
See Notes to Financial Statements.
18 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Financial highlights
For a share of capital stock outstanding throughout each year ended November 30, unless otherwise noted:
|
|
20121,2 |
|
20112 |
|
20102 |
|
20092,3 |
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period |
|
$20.64 |
|
$21.35 |
|
$20.58 |
|
$19.064 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations: |
|
|
|
|
|
|
|
|
|
Net investment income |
|
0.56 |
|
1.15 |
|
1.17 |
|
0.44 |
|
Net realized and unrealized gain (loss) |
|
1.06 |
|
(0.57) |
|
0.85 |
|
1.50 |
|
Total income from operations |
|
1.62 |
|
0.58 |
|
2.02 |
|
1.94 |
|
|
|
|
|
|
|
|
|
|
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.63) |
|
(1.07) |
|
(1.17) |
|
(0.42) |
|
Net realized gains |
|
(0.14) |
|
(0.22) |
|
(0.08) |
|
|
|
Total distributions |
|
(0.77) |
|
(1.29) |
|
(1.25) |
|
(0.42) |
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period |
|
$21.49 |
|
$20.64 |
|
$21.35 |
|
$20.58 |
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period |
|
$22.87 |
|
$21.55 |
|
$20.79 |
|
$19.64 |
|
Total return, based on NAV5,6 |
|
7.95 |
% |
2.96 |
% |
10.28 |
% |
10.32 |
% |
Total return, based on market price7 |
|
10.06 |
% |
10.40 |
% |
12.52 |
% |
0.33 |
% |
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000s) |
|
$230,285 |
|
$220,354 |
|
$227,337 |
|
$216,952 |
|
|
|
|
|
|
|
|
|
|
|
Ratios to average net assets: |
|
|
|
|
|
|
|
|
|
Gross expenses |
|
0.80 |
%8 |
0.80 |
% |
0.81 |
% |
0.86 |
%8 |
Net expenses9 |
|
0.80 |
8 |
0.80 |
|
0.81 |
|
0.83 |
8,10 |
Net investment income |
|
5.26 |
8 |
5.43 |
|
5.60 |
|
5.12 |
8 |
|
|
|
|
|
|
|
|
|
|
Portfolio turnover rate |
|
39 |
% |
49 |
% |
31 |
% |
19 |
% |
1 |
For the six months ended May 31, 2012 (unaudited). |
2 |
Per share amounts have been calculated using the average shares method. |
3 |
For the period June 26, 2009 (commencement of operations) through November 30, 2009. |
4 |
Initial public offering price of $20.00 per share less offering costs and sales load totaling $0.94 per share. |
5 |
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. |
6 |
The total return calculation assumes that distributions are reinvested at NAV. Prior to Janaury 1, 2012, the total return calculation assumed the reinvestment of all distributions in accordance with the Funds dividend reinvestment plan. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
7 |
The total return calculation assumes that distributions are reinvested in accordance with the Funds dividend reinvestment plan. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
8 |
Annualized. |
9 |
The impact of compensating balance arrangements, if any, was less than 0.01%. |
10 |
The investment manager has agreed to reimburse all organization expenses. |
See Notes to Financial Statements.
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
Notes to financial statements (unaudited)
1. Organization and significant accounting policies
Western Asset Investment Grade Defined Opportunity Trust Inc. (the Fund) was incorporated in Maryland on April 24, 2009 and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the 1940 Act). The Funds primary investment objective is to provide current income and then to liquidate and distribute substantially all of the Funds net assets to stockholders on or about December 2, 2024. As a secondary investment objective, the Fund will seek capital appreciation. There can be no assurance the Fund will achieve its investment objectives.
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 internal models 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. Short-term fixed income securities that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investments fair value. 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
20 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Notes to financial statements (unaudited) (contd)
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 Funds 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 American 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, evaluating the effectiveness of the Funds 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 issuers 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.
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
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 Funds own assumptions in determining the fair value of investments)
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 Funds assets and liabilities carried at fair value:
ASSETS | |||||||||
Description |
|
Quoted Prices |
|
Other Significant |
|
Significant |
|
Total |
|
Long-term investments: |
|
|
|
|
|
|
|
|
|
Corporate bonds & notes |
|
|
|
$213,301,706 |
|
|
|
$213,301,706 |
|
Collateralized senior loans |
|
|
|
5,147,530 |
|
|
|
5,147,530 |
|
Municipal bonds |
|
|
|
1,182,563 |
|
|
|
1,182,563 |
|
Sovereign bonds |
|
|
|
2,050,344 |
|
|
|
2,050,344 |
|
Convertible preferred stocks |
|
$ 630,600 |
|
|
|
|
|
630,600 |
|
Preferred stocks |
|
5,113,022 |
|
|
|
|
|
5,113,022 |
|
Total long-term investments |
|
$5,743,622 |
|
$221,682,143 |
|
|
|
$227,425,765 |
|
Short-term investments |
|
|
|
1,000,000 |
|
|
|
1,000,000 |
|
Total investments |
|
$5,743,622 |
|
$222,682,143 |
|
|
|
$228,425,765 |
|
Other financial instruments: |
|
|
|
|
|
|
|
|
|
Futures contracts |
|
$ 53,978 |
|
|
|
|
|
$ 53,978 |
|
Forward foreign currency contracts |
|
|
|
$ 99,253 |
|
|
|
99,253 |
|
Total other financial instruments |
|
$ 53,978 |
|
$ 99,253 |
|
|
|
$ 153,231 |
|
Total |
|
$5,797,600 |
|
$ 222,781,396 |
|
|
|
$228,578,996 |
|
LIABILITIES | |||||||||
Description |
|
Quoted Prices |
|
Other Significant |
|
Significant |
|
Total |
|
Other financial instruments: |
|
|
|
|
|
|
|
|
|
Futures contracts |
|
$490,800 |
|
|
|
|
|
$490,800 |
|
See Schedule of Investments for additional detailed categorizations.
(b) Repurchase agreements. The Fund may enter into repurchase agreements with institutions that its investment adviser has determined are creditworthy. Each repurchase agreement is recorded at cost. Under the terms of a typical repurchase agreement, the Fund acquires a debt security subject to an obligation of the seller to repurchase, and of the Fund to resell, the security at an
22 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Notes to financial statements (unaudited) (contd)
agreed-upon price and time, thereby determining the yield during the Funds holding period. When entering into repurchase agreements, it is the Funds policy that its custodian or a third party custodian, acting on the Funds behalf, take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction maturity exceeds one business day, the value of the collateral is marked-to-market and measured against the value of the agreement in an effort to ensure the adequacy of the collateral. If the counterparty defaults, the Fund generally has the right to use the collateral to satisfy the terms of the repurchase transaction. However, if the market value of the collateral declines during the period in which the Fund seeks to assert its rights or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.
(c) 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 cash equivalents 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, but is recorded as a net variation margin payable or receivable. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. 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.
(d) Forward foreign currency contracts. The Fund enters into forward foreign currency contracts to hedge against, or manage exposure to, foreign issuers or markets. The Fund may also enter into a forward foreign currency contract to hedge against foreign currency exchange rate risk on its non-U.S. dollar denominated securities or to facilitate settlement of a foreign currency denominated portfolio transaction. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price with delivery and settlement at a future date. The contract is marked-to-market
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
daily and the change in value is recorded by the Fund as an unrealized gain or loss. When a forward foreign currency contract is closed, through either delivery or offset by entering into another forward foreign currency contract, the Fund recognizes a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it is closed.
Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
(e) Swap agreements. The Fund invests in swaps for the purpose of managing its exposure to interest rate, credit or market risk, or for other purposes, including to increase the Funds return. The use of swaps involves risks that are different from those associated with other portfolio transactions.
Swap contracts are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon termination of the swap agreement. Collateral, in the form of restricted cash or securities, may be required to be held in segregated accounts with the Funds custodian in compliance with the terms of the swap contracts. Securities posted as collateral for swap contracts are identified in the Schedule of Investments and restricted cash, if any, is identified on the Statement of Assets and Liabilities. Risks may exceed amounts recorded in the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts terms, and the possible lack of liquidity with respect to the swap agreements.
Payments received or made at the beginning of the measurement period are reflected as a premium or deposit, respectively, on the Statement of Assets and Liabilities. These upfront payments are amortized over the life of the swap and are recognized as realized gain or loss in the Statement of Operations. Net periodic payments received or paid by the Fund are recognized as a realized gain or loss in the Statement of Operations.
The Funds maximum exposure in the event of a defined credit event on a credit default swap to sell protection is the notional amount. As of May 31, 2012, the Fund did not hold any credit default swaps to sell protection.
For average notional amounts of swaps held during the six months ended May 31, 2012, see Note 4.
Credit default swaps
The Fund enters into credit default swap (CDS) contracts for investment purposes, to manage its credit risk or to add leverage. CDS agreements
24 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Notes to financial statements (unaudited) (contd)
involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party, typically corporate or sovereign issuers, on a specified obligation, or in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising a credit index. The Fund may use a CDS to provide protection against defaults of the issuers (i.e., to reduce risk where the Fund has exposure to an issuer) or to take an active long or short position with respect to the likelihood of a particular issuers default. As a seller of protection, the Fund generally receives an upfront payment or a stream of payments throughout the term of the swap provided that there is no credit event. If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the maximum potential amount of future payments (undiscounted) that the Fund could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. These amounts of potential payments will be partially offset by any recovery of values from the respective referenced obligations. As a seller of protection, the Fund effectively adds leverage to its portfolio because, in addition to its total net assets, the Fund is subject to investment exposure on the notional amount of the swap. As a buyer of protection, the Fund generally receives an amount up to the notional value of the swap if a credit event occurs.
Implied spreads are the theoretical prices a lender receives for credit default protection. When spreads rise, market perceived credit risk rises and when spreads fall, market perceived credit risk falls. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to enter into the agreement. Wider credit spreads and decreasing market values, when compared to the notional amount of the swap, represent a deterioration of the referenced entitys credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. Credit spreads utilized in determining the period end market value of credit default swap agreements on corporate or sovereign issues are disclosed in the Notes to Financial Statements and serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for credit derivatives. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values, particularly in relation to the notional amount of the contract as well as the annual payment rate, serve as an indication of the current status of the payment/performance risk.
The Funds maximum risk of loss from counterparty risk, as the protection buyer, is the fair value of the contract (this risk is mitigated by the posting of collateral by the counterparty to the Fund to cover the Funds exposure to the counterparty). As the protection seller, the Funds maximum risk is the notional amount of the contract. Credit default swaps are considered to have credit
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
risk-related contingent features since they require payment by the protection seller to the protection buyer upon the occurrence of a defined credit event.
Entering into a CDS agreement involves, to varying degrees, elements of credit, market and documentation risk in excess of the related amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreement may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreement, and that there will be unfavorable changes in net interest rates.
(f) Loan participations. The Fund may invest in loans arranged through private negotiation between one or more financial institutions. The Funds investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement related to the loan, or any rights of off-set against the borrower and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation.
The Fund assumes the credit risk of the borrower, the lender that is selling the participation and any other persons interpositioned between the Fund and the borrower. In the event of the insolvency of the lender selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any off-set between the lender and the borrower.
(g) Unfunded loan commitments. The Fund may enter into certain credit agreements all or a portion of which may be unfunded. The Fund is obligated to fund these commitments at the borrowers discretion. The commitments are disclosed in the accompanying Schedule of Investments. At May 31, 2012, the Fund had sufficient cash and/or securities to cover these commitments.
(h) Credit and market risk. The Fund invests in high-yield instruments that are subject to certain credit and market risks. The yields of high-yield obligations reflect, among other things, perceived credit and market risks. The Funds investment in securities rated below investment grade typically involves 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.
(i) Foreign investment risks. The Funds 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 investments may also subject the Fund to foreign government exchange restrictions,
26 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Notes to financial statements (unaudited) (contd)
expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.
(j) 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 Funds investment manager 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 manager. In addition, declines in the values of underlying collateral received may expose the Fund to increased risk of loss.
The Fund has entered into master agreements with certain of its derivative counterparties that provide for general obligations, representations, agreements, collateral, events 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 Funds 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.
As of May 31, 2012, the Fund did not have any open derivative transactions with credit related contingent features in a net liability position.
(k) Foreign currency translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.
The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange rates.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
(l) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practicable after the Fund determines the existance of a dividend declaration after exercising reasonable due diligence. 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.
(m) 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. Distributions to shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(n) Compensating balance arrangements. The Fund has an arrangement with its custodian bank whereby a portion of the custodians fees is paid indirectly by credits earned on the Funds cash on deposit with the bank.
(o) Federal and other taxes. It is the Funds 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 Funds financial statements. However, due to the timing of when distributions are made, the Fund may be subject to an excise tax of 4% of the amount by which 98% of the Funds annual taxable income and 98.2% of net realized gains exceed the distributions from such taxable income and realized gains for the calendar year. The Fund paid $86,055 of federal excise tax attributable to calendar year 2011 in March 2012.
28 |
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
|
Notes to financial statements (unaudited) (contd)
Management has analyzed the Funds tax positions taken on income tax returns for all open tax years and has concluded that as of May 31, 2012 no provision for income tax is required in the Funds financial statements. The Funds 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 Internal Revenue Service and state departments of revenue.
(p) 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
Legg Mason Partners Fund Advisor, LLC (LMPFA) is the Funds investment manager. Western Asset Management Company (Western Asset), Western Asset Management Company Pte. Ltd. (Western Singapore), Western Asset Management Company Ltd (Western Japan) and Western Asset Management Company Limited (Western Asset Limited) are the Funds subadvisers. LMPFA, Western Asset, Western Singapore, Western Japan and Western Asset Limited are wholly-owned subsidiaries of Legg Mason, Inc. (Legg Mason).
LMPFA provides administrative and certain oversight services to the Fund. The Fund pays LMPFA an investment management fee, calculated daily and paid monthly, at an annual rate of 0.65% of the Funds average daily net assets.
LMPFA delegates to Western Asset the day-to-day portfolio management of the Fund. Western Singapore, Western Japan and Western Asset Limited provide certain advisory services to the Fund relating to currency transactions and investment in non-U.S. dollar denominated debt securities. For its services, LMPFA pays Western Asset 70% of the net management fee it receives from the Fund. In turn, Western Asset pays Western Singapore, Western Japan and Western Asset Limited a fee for their services at no additional expense to the Fund. Each of Western Singapore, Western Japan and Western Asset Limited receives a fee from Western Asset, payable monthly, in an amount equal to 70% of the Funds fee paid to LMPFA by the Fund related to the Funds assets that Western Asset allocates to Western Singapore, Western Japan and Western Asset Limited, respectively, to manage.
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 Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
3. Investments
During the six months ended May 31, 2012, 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 & |
|
Purchases |
|
$63,424,890 |
|
$24,728,757 |
|
Sales |
|
64,319,278 |
|
24,749,948 |
|
At May 31, 2012, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:
Gross unrealized appreciation |
|
$26,337,570 |
|
Gross unrealized depreciation |
|
(1,776,897) |
|
Net unrealized appreciation |
|
$24,560,673 |
|
At May 31, 2012, the Fund had the following open futures contracts:
|
|
Number of |
|
Expiration |
|
Basis |
|
Market |
|
Unrealized |
|
Contracts to Buy: |
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury 2-Year Notes |
|
15 |
|
9/12 |
|
$ 3,304,502 |
|
$ 3,306,094 |
|
$ 1,592 |
|
U.S. Treasury 5-Year Notes |
|
42 |
|
9/12 |
|
5,213,199 |
|
5,215,875 |
|
2,676 |
|
U.S. Treasury Ultra Long-Term Bonds |
|
10 |
|
9/12 |
|
1,640,290 |
|
1,690,000 |
|
49,710 |
|
|
|
|
|
|
|
|
|
|
|
53,978 |
|
Contracts to Sell: |
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury 10-Year Notes |
|
112 |
|
9/12 |
|
14,860,167 |
|
15,001,000 |
|
(140,833 |
) |
U.S. Treasury 30-Year Bonds |
|
151 |
|
9/12 |
|
22,257,564 |
|
22,607,531 |
|
(349,967 |
) |
|
|
|
|
|
|
|
|
|
|
(490,800 |
) |
Net unrealized loss on open futures contracts |
|
|
|
|
|
|
|
|
|
$(436,822 |
) |
At May 31, 2012, the Fund had the following open forward foreign currency contracts:
Foreign Currency |
Counterparty |
|
Local |
|
Market |
|
Settlement |
|
Unrealized |
|
Contracts to Buy: |
|
|
|
|
|
|
|
|
|
|
Euro |
Citibank, N.A. |
|
888,855 |
|
$1,099,676 |
|
8/16/12 |
|
$ 171 |
|
Contracts to Sell: |
|
|
|
|
|
|
|
|
|
|
Euro |
Citibank, N.A. |
|
404,000 |
|
499,822 |
|
8/16/12 |
|
25,548 |
|
Euro |
Citibank, N.A. |
|
1,227,000 |
|
1,518,023 |
|
8/16/12 |
|
73,534 |
|
|
|
|
|
|
|
|
|
99,082 |
| |
Net unrealized gain on open forward foreign currency contracts |
|
|
|
$99,253 |
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
Notes to financial statements (unaudited) (contd)
4. Derivative instruments and hedging activities
Financial Accounting Standards Board Codification Topic 815 requires enhanced disclosure about an entitys derivative 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 May 31, 2012.
ASSET DERIVATIVES1 | |||||||
|
|
Interest Rate |
|
Foreign |
|
Total |
|
Futures contracts2 |
|
$53,978 |
|
|
|
$ 53,978 |
|
Forward foreign currency contracts |
|
|
|
$99,253 |
|
99,253 |
|
Total |
|
$53,978 |
|
$99,253 |
|
$153,231 |
|
LIABILITY DERIVATIVES1 | |||
|
|
Interest Rate |
|
Futures contracts2 |
|
$490,800 |
|
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 footnotes. Only variation margin is reported within the receivables and/or payables of the Statement of Assets and Liabilities.
The following tables provide information about the effect of derivatives and hedging activities on the Funds Statement of Operations for the six months ended May 31, 2012. 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 Funds derivatives and hedging activities during the period.
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED | |||||||||||
|
|
Interest |
|
Foreign |
|
Credit |
|
Total |
| ||
Futures contracts |
|
$(1,161,263 |
) |
|
|
|
|
|
$(1,161,263 |
) |
|
Swap contracts |
|
|
|
|
|
|
$27,427 |
|
27,427 |
|
|
Forward foreign currency contracts |
|
|
|
|
$130,141 |
|
|
|
130,141 |
|
|
Total |
|
$(1,161,263 |
) |
|
$130,141 |
|
$27,427 |
|
$(1,003,695 |
) |
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. 2012 Semi-Annual Report |
|
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED | |||||||||
|
|
Interest Rate |
|
Foreign |
|
Total |
| ||
Futures contracts |
|
$(617,374 |
) |
|
|
|
$(617,374 |
) |
|
Forward foreign currency contracts |
|
|
|
|
$47,277 |
|
47,277 |
|
|
Total |
|
$(617,374 |
) |
|
$47,277 |
|
$(570,097 |
) |
|
During the six months ended May 31, 2012, the volume of derivative activity for the Fund was as follows:
|
|
Average |
|
Futures contracts (to buy) |
|
$ 7,130,600 |
|
Futures contracts (to sell) |
|
29,238,491 |
|
Forward foreign currency contracts (to buy) |
|
157,097 |
|
Forward foreign currency contracts (to sell) |
|
2,137,799 |
|
|
|
Average |
|
Credit default swap contracts (to sell protection) |
|
$194,286 |
|
At May 31, 2012, there were no open positions held in this derivative.
5. Distributions subsequent to May 31, 2012
On May 10, 2012, the Funds Board of Directors declared three distributions, each in the amount of $0.1045 per share, payable on June 29, 2012, July 27, 2012 and August 31, 2012 to shareholders of record on June 22, 2012, July 20, 2012 and August 24, 2012, respectively.
6. Recent accounting pronouncement
In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU No. 2011-04). ASU No. 2011-04 establishes common requirements for measuring fair value and for disclosing information about fair value measurements. ASU No. 2011-04 is effective during interim and annual periods beginning after December 15, 2011. Management has evaluated ASU No. 2011-04 and concluded that it does not materially impact the financial statement amounts; however, as required, additional disclosure has been included about fair value measurement.
|
Western Asset Investment Grade Defined Opportunity Trust Inc. |
|
Additional shareholder information (unaudited)
Results of annual meeting of shareholders
The Annual Meeting of Shareholders of Western Asset Investment Grade Defined Opportunity Trust Inc. was held on March 30, 2012, for the purpose of considering and voting upon the election of Directors. The following table provides information concerning the matter voted upon at the meeting:
Election of directors
Nominees |
|
Votes For |
|
Votes Withheld |
|
Riordan Roett |
|
8,136,374 |
|
167,047 |
|
Jeswald W. Salacuse |
|
8,135,970 |
|
167,451 |
|
At May 31, 2012, in addition to Riordan Roett and Jeswald W. Salacuse, the other Directors of the Fund were as follows:
Carol L. Colman
Daniel P. Cronin
Paolo M. Cucchi
Leslie H. Gelb
R. Jay Gerken
William R. Hutchinson
|
Western Asset Investment Grade Defined Opportunity Trust Inc. |
|
Dividend reinvestment plan (unaudited)
Unless you elect to receive distributions in cash (i.e., opt-out), all dividends, including any capital gain dividends, on your Common Stock will be automatically reinvested by American Stock Transfer & Trust Company LLC, as agent for the stockholders (the Plan Agent), in additional shares of Common Stock under the Funds Dividend Reinvestment Plan (the Plan). You may elect not to participate in the Plan by contacting the Plan Agent. If you do not participate, you will receive all cash distributions paid by check mailed directly to you by American Stock Transfer & Trust Company LLC, as dividend paying agent.
If you participate in the Plan, the number of shares of Common Stock you will receive will be determined as follows:
(1) If the market price of the Common Stock on the record date (or, if the record date is not a NYSE trading day, the immediately preceding trading day) for determining stockholders eligible to receive the relevant dividend or distribution (the determination date) is equal to or exceeds 98% of the net asset value per share of the Common Stock, the Fund will issue new Common Stock at a price equal to the greater of (a) 98% of the net asset value per share at the close of trading on the NYSE on the determination date or (b) 95% of the market price per share of the Common Stock on the determination date.
(2) If 98% of the net asset value per share of the Common Stock exceeds the market price of the Common Stock on the determination date, the Plan Agent will receive the dividend or distribution in cash and will buy Common Stock in the open market, on the NYSE or elsewhere, for your account as soon as practicable commencing on the trading day following the determination date and terminating no later than the earlier of (a) 30 days after the dividend or distribution payment date, or (b) the record date for the next succeeding dividend or distribution to be made to the stockholders; except when necessary to comply with applicable provisions of the federal securities laws. If during this period: (i) the market price rises so that it equals or exceeds 98% of the net asset value per share of the Common Stock at the close of trading on the NYSE on the determination date before the Plan Agent has completed the open market purchases or (ii) if the Plan Agent is unable to invest the full amount eligible to be reinvested in open market purchases, the Plan Agent will cease purchasing Common Stock in the open market and the Fund shall issue the remaining Common Stock at a price per share equal to the greater of (a) 98% of the net asset value per share at the close of trading on the Exchange on the determination date or (b) 95% of the then current market price per share.
|
Western Asset Investment Grade Defined Opportunity Trust Inc. |
|
Dividend reinvestment plan (unaudited) (contd)
Common Stock in your account will be held by the Plan Agent in non-certificated form. Any proxy you receive will include all shares of Common Stock you have received under the Plan.
You may withdraw from the Plan (i.e., opt-out) by notifying the Plan Agent in writing at 59 Maiden Lane, New York, New York 10038 or by calling the Plan Agent at 1-888-888-0151. Such withdrawal will be effective immediately if notice is received by the Plan Agent not less than ten business days prior to any dividend or distribution record date; otherwise such withdrawal will be effective as soon as practicable after the Plan Agents investment of the most recently declared dividend or distribution on the Common Stock. The Plan may be terminated by the Fund upon notice in writing mailed to stockholders at least 30 days prior to the record date for the payment of any dividend or distribution by the Fund for which the termination is to be effective. Upon any termination, you will be sent a certificate or certificates for the full number of shares of Common Stock held for you under the Plan and cash for any fractional share of Common Stock. You may elect to notify the Plan Agent in advance of such termination to have the Plan Agent sell part or all of your Common Stock on your behalf. You will be charged a service charge and the Plan Agent is authorized to deduct brokerage charges actually incurred for this transaction from the proceeds.
There is no service charge for reinvestment of your dividends or distributions in Common Stock. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases. Because all dividends and distributions will be automatically reinvested in additional shares of Common Stock, this allows you to add to your investment through dollar cost averaging, which may lower the average cost of your Common Stock over time. Dollar cost averaging is a technique for lowering the average cost per share over time if the Funds net asset value declines. While dollar cost averaging has definite advantages, it cannot assure profit or protect against loss in declining markets.
Automatically reinvesting dividends and distributions does not mean that you do not have to pay income taxes due upon receiving dividends and distributions. Investors will be subject to income tax on amounts reinvested under the Plan.
The Fund reserves the right to amend or terminate the Plan if, in the judgment of the Board of Directors, the change is warranted. There is no direct service charge to participants in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants. Additional information about the Plan and your account may be obtained from the Plan Agent at 1-888-888-0151.
Western Asset
Investment Grade Defined Opportunity Trust Inc.
Directors |
Western Asset Investment Grade Defined Opportunity Trust Inc. |
Independent registered public accounting firm |
Carol L. Colman | ||
Daniel P. Cronin |
620 Eighth Avenue |
KPMG LLP |
Paolo M. Cucchi |
49th Floor |
345 Park Avenue |
Leslie H. Gelb |
New York, NY 10018 |
New York, NY 10154 |
R. Jay Gerken |
|
|
Chairman |
Investment manager |
Legal counsel |
William R. Hutchinson |
Legg Mason Partners Fund Advisor, LLC |
Simpson Thacher & Bartlett LLP |
Riordan Roett |
|
425 Lexington Avenue |
Jeswald W. Salacuse |
Subadvisers |
New York, NY 10017 |
|
Western Asset Management Company |
|
Officers |
Western Asset Management Company Limited |
New York Stock Exchange Symbol |
R. Jay Gerken |
Western Asset Management Company Ltd |
IGI |
President and Chief Executive Officer |
Western Asset Management Company Pte. Ltd. |
|
Richard F. Sennett |
|
|
Principal Financial Officer |
Custodian |
|
Ted P. Becker |
State Street Bank and Trust Company |
|
Chief Compliance Officer |
1 Lincoln Street |
|
Vanessa A. Williams |
Boston, MA 02111 |
|
Identity Theft Prevention Officer |
|
|
Robert I. Frenkel |
Transfer agent |
|
Secretary and Chief Legal Officer |
American Stock Transfer & Trust Company |
|
Thomas C. Mandia |
59 Maiden Lane |
|
Assistant Secretary |
New York, NY 10038 |
|
Steven Frank |
|
|
Treasurer |
|
|
Jeanne M. Kelly |
|
|
Senior Vice President |
|
|
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-sponsored closed-end funds and certain closed-ends funds managed or sub-advised by Legg Mason or its affiliates. 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;
· 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 individuals 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 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 marketing services solely for the Funds;
· The Funds representatives such as legal counsel, accountants and auditors; and
· 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 (contd)
Except as otherwise permitted by applicable law, companies acting on the Funds behalf 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, or if you have questions about the Funds privacy practices, 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 Fund at 1-888-777-0102.
Revised April 2011
|
|
|
|
|
|
|
NOT PART OF THE SEMI-ANNUAL REPORT |
|
|
|
|
|
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc.
Western Asset Investment Grade Defined Opportunity Trust 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 price shares of its common stock in the open market.
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 on Form N-Q. The Funds Forms N-Q are available on the SECs website at www.sec.gov. The Funds Forms N-Q may be reviewed and copied at the SECs Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Fund, shareholders can call 1-888-777-0102.
Information on how the Fund voted proxies relating to portfolio securities during the prior 12-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 calling 1-888-777-0102, (2) on the Funds website at www.lmcef.com and (3) on the SECs website at www.sec.gov.
This report is transmitted to the shareholders of Western Asset Investment Grade Defined Opportunity Trust 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.
American Stock
Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
WASX012742 7/12 SR12-1691
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 FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrants principal executive officer and principal financial officer have concluded that the registrants disclosure controls and procedures (as defined in Rule 30a- 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 Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrants internal control over financial reporting (as defined in Rule 30a-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 registrants internal control over financial reporting.
ITEM 12. 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 Defined Opportunity Trust Inc. |
| |
|
| |
By: |
/s/ R. Jay Gerken |
|
|
R. Jay Gerken |
|
|
Chief Executive Officer of |
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. | |
|
| |
Date: |
July 25, 2012 |
|
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: |
/s/ R. Jay Gerken |
|
|
R. Jay Gerken |
|
|
Chief Executive Officer of |
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. | |
|
|
|
Date: |
July 25, 2012 |
|
|
| |
|
| |
By: |
/s/ Richard F. Sennett |
|
|
Richard F. Sennett |
|
|
Principal Financial Officer of |
|
|
Western Asset Investment Grade Defined Opportunity Trust Inc. | |
|
|
|
Date: |
July 25, 2012 |
|