N-Q 1 a13-10282_3nq.htm N-Q

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-02351

 

Western Asset Income Fund

(Exact name of registrant as specified in charter)

 

620 Eighth Avenue, 49th Floor, New York, NY

 

10018

(Address of principal executive offices)

 

(Zip code)

 

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

1-888-777-0102

 

 

Date of fiscal year end:

December 31

 

 

Date of reporting period:

March 31, 2013

 

 



 

ITEM 1.                 SCHEDULE OF INVESTMENTS

 



 

WESTERN ASSET INCOME FUND

 

FORM N-Q

MARCH 31, 2013

 


 

WESTERN ASSET INCOME FUND

 

Schedule of investments (unaudited)

March 31, 2013

 

SECURITY

 

RATE

 

MATURITY
DATE

 

FACE
AMOUNT

 

VALUE

 

CORPORATE BONDS & NOTES — 94.9%

 

 

 

 

 

 

 

 

 

CONSUMER DISCRETIONARY — 7.8%

 

 

 

 

 

 

 

 

 

Automobiles — 1.2%

 

 

 

 

 

 

 

 

 

Escrow GCB General Motors

 

 

 

$

2,710,000

 

$

0

*(a)(b)(c)

Ford Motor Co., Senior Notes

 

4.750%

 

1/15/43

 

330,000

 

307,132

 

Ford Motor Credit Co., LLC, Senior Notes

 

7.000%

 

4/15/15

 

610,000

 

673,099

 

Ford Motor Credit Co., LLC, Senior Notes

 

8.125%

 

1/15/20

 

410,000

 

517,671

 

Ford Motor Credit Co., LLC, Senior Notes

 

4.250%

 

9/20/22

 

220,000

 

227,469

 

Total Automobiles

 

 

 

 

 

 

 

1,725,371

 

Household Durables — 0.0%

 

 

 

 

 

 

 

 

 

NVR Inc., Senior Notes

 

3.950%

 

9/15/22

 

10,000

 

10,265

 

Internet & Catalog Retail — 0.3%

 

 

 

 

 

 

 

 

 

QVC Inc., Senior Secured Notes

 

5.125%

 

7/2/22

 

400,000

 

423,712

 

Media — 5.1%

 

 

 

 

 

 

 

 

 

Comcast Corp., Bonds

 

6.400%

 

5/15/38

 

950,000

 

1,194,772

 

Comcast Corp., Notes

 

6.450%

 

3/15/37

 

220,000

 

279,076

 

Comcast Corp., Senior Notes

 

6.950%

 

8/15/37

 

160,000

 

212,739

 

Lynx I Corp., Senior Secured Notes

 

5.375%

 

4/15/21

 

270,000

 

280,800

(d)

News America Inc., Senior Notes

 

6.550%

 

3/15/33

 

545,000

 

643,194

 

News America Inc., Senior Notes

 

7.750%

 

12/1/45

 

130,000

 

178,420

 

TCI Communications Inc.

 

8.750%

 

8/1/15

 

160,000

 

188,963

 

Time Warner Cable Inc., Senior Notes

 

8.750%

 

2/14/19

 

520,000

 

687,706

 

Time Warner Entertainment Co., LP, Senior Notes

 

8.375%

 

7/15/33

 

530,000

 

732,651

 

Time Warner Inc., Senior Debentures

 

7.700%

 

5/1/32

 

595,000

 

810,836

 

Time Warner Inc., Senior Notes

 

4.900%

 

6/15/42

 

150,000

 

150,687

 

UBM PLC, Notes

 

5.750%

 

11/3/20

 

640,000

 

677,862

(d)

WPP Finance 2010, Senior Notes

 

4.750%

 

11/21/21

 

840,000

 

907,283

 

WPP Finance UK, Senior Notes

 

8.000%

 

9/15/14

 

180,000

 

197,607

 

Total Media

 

 

 

 

 

 

 

7,142,596

 

Multiline Retail — 0.5%

 

 

 

 

 

 

 

 

 

Macy’s Retail Holdings Inc., Notes

 

5.750%

 

7/15/14

 

400,000

 

424,288

 

Target Corp., Senior Notes

 

4.000%

 

7/1/42

 

270,000

 

262,717

 

Total Multiline Retail

 

 

 

 

 

 

 

687,005

 

Specialty Retail — 0.7%

 

 

 

 

 

 

 

 

 

American Greetings Corp., Senior Notes

 

7.375%

 

12/1/21

 

160,000

 

161,600

 

Gap Inc., Senior Notes

 

5.950%

 

4/12/21

 

730,000

 

834,477

 

Total Specialty Retail

 

 

 

 

 

 

 

996,077

 

TOTAL CONSUMER DISCRETIONARY

 

 

 

 

 

 

 

10,985,026

 

CONSUMER STAPLES — 3.9%

 

 

 

 

 

 

 

 

 

Beverages — 1.3%

 

 

 

 

 

 

 

 

 

Anheuser-Busch InBev Worldwide Inc., Senior Notes

 

5.375%

 

1/15/20

 

260,000

 

313,583

 

Heineken NV, Senior Notes

 

4.000%

 

10/1/42

 

140,000

 

132,793

(d)

Pernod-Ricard SA, Senior Bonds

 

5.750%

 

4/7/21

 

530,000

 

629,825

(d)

Pernod-Ricard SA, Senior Notes

 

5.500%

 

1/15/42

 

670,000

 

746,083

(d)

Total Beverages

 

 

 

 

 

 

 

1,822,284

 

Food & Staples Retailing — 0.3%

 

 

 

 

 

 

 

 

 

Safeway Inc., Senior Notes

 

6.350%

 

8/15/17

 

370,000

 

431,821

 

Safeway Inc., Senior Notes

 

4.750%

 

12/1/21

 

40,000

 

43,059

 

Total Food & Staples Retailing

 

 

 

 

 

 

 

474,880

 

Food Products — 0.2%

 

 

 

 

 

 

 

 

 

Kraft Foods Group Inc., Senior Notes

 

5.000%

 

6/4/42

 

200,000

 

214,443

 

Tobacco — 2.1%

 

 

 

 

 

 

 

 

 

Altria Group Inc., Senior Notes

 

9.700%

 

11/10/18

 

160,000

 

222,667

 

Altria Group Inc., Senior Notes

 

9.250%

 

8/6/19

 

40,000

 

55,755

 

Altria Group Inc., Senior Notes

 

4.750%

 

5/5/21

 

70,000

 

79,227

 

 

See Notes to Schedule of Investments.

 

1


 

WESTERN ASSET INCOME FUND

 

Schedule of investments (unaudited) (cont’d)

March 31, 2013

 

SECURITY

 

RATE

 

MATURITY
DATE

 

FACE
AMOUNT

 

VALUE

 

Tobacco — continued

 

 

 

 

 

 

 

 

 

 

 

Lorillard Tobacco Co., Senior Notes

 

8.125%

 

6/23/19

 

$

300,000

 

$

381,670

 

Lorillard Tobacco Co., Senior Notes

 

8.125%

 

5/1/40

 

270,000

 

351,602

 

Lorillard Tobacco Co., Senior Notes

 

7.000%

 

8/4/41

 

320,000

 

379,122

 

Philip Morris International Inc., Senior Notes

 

6.875%

 

3/17/14

 

490,000

 

520,590

 

Philip Morris International Inc., Senior Notes

 

4.500%

 

3/20/42

 

260,000

 

267,252

 

Reynolds American Inc., Senior Notes

 

4.750%

 

11/1/42

 

720,000

 

702,099

 

Total Tobacco

 

 

 

 

 

 

 

2,959,984

 

TOTAL CONSUMER STAPLES

 

 

 

 

 

 

 

5,471,591

 

ENERGY — 14.2%

 

 

 

 

 

 

 

 

 

Energy Equipment & Services — 0.5%

 

 

 

 

 

 

 

 

 

Baker Hughes Inc., Senior Notes

 

7.500%

 

11/15/18

 

370,000

 

485,528

 

Baker Hughes Inc., Senior Notes

 

5.125%

 

9/15/40

 

240,000

 

278,990

 

Total Energy Equipment & Services

 

 

 

 

 

 

 

764,518

 

Oil, Gas & Consumable Fuels — 13.7%

 

 

 

 

 

 

 

 

 

Anadarko Finance Co., Senior Notes

 

7.500%

 

5/1/31

 

465,000

 

616,249

 

Anadarko Petroleum Corp., Senior Notes

 

6.375%

 

9/15/17

 

35,000

 

41,776

 

Apache Corp.

 

6.900%

 

9/15/18

 

100,000

 

125,740

 

Apache Corp., Senior Notes

 

6.000%

 

1/15/37

 

190,000

 

228,205

 

Apache Corp., Senior Notes

 

5.100%

 

9/1/40

 

80,000

 

86,062

 

Apache Corp., Senior Notes

 

5.250%

 

2/1/42

 

90,000

 

99,130

 

Arch Coal Inc., Senior Notes

 

7.000%

 

6/15/19

 

260,000

 

234,650

 

ConocoPhillips, Notes

 

6.500%

 

2/1/39

 

810,000

 

1,083,152

 

ConocoPhillips, Senior Notes

 

6.000%

 

1/15/20

 

310,000

 

387,856

 

Devon Energy Corp., Senior Notes

 

5.600%

 

7/15/41

 

320,000

 

349,655

 

Devon Financing Corp. LLC, Debentures

 

7.875%

 

9/30/31

 

380,000

 

515,323

 

El Paso Corp., Medium-Term Notes

 

7.800%

 

8/1/31

 

2,000,000

 

2,223,166

 

Enbridge Energy Partners LP

 

9.875%

 

3/1/19

 

120,000

 

163,714

 

Energy Transfer Partners LP, Senior Notes

 

9.700%

 

3/15/19

 

170,000

 

229,157

 

Enterprise Products Operating LLC, Senior Notes

 

3.350%

 

3/15/23

 

420,000

 

427,721

 

Enterprise Products Operating LLC, Senior Notes

 

6.125%

 

10/15/39

 

320,000

 

376,254

 

EOG Resources Inc., Senior Notes

 

5.875%

 

9/15/17

 

540,000

 

647,643

 

Hess Corp., Notes

 

7.875%

 

10/1/29

 

1,180,000

 

1,522,095

 

Hess Corp., Senior Bonds

 

6.000%

 

1/15/40

 

300,000

 

335,391

 

Kerr-McGee Corp., Notes

 

6.950%

 

7/1/24

 

1,080,000

 

1,352,873

 

LUKOIL International Finance BV, Bonds

 

6.356%

 

6/7/17

 

310,000

 

352,904

(d)

Noble Energy Inc., Senior Notes

 

6.000%

 

3/1/41

 

390,000

 

465,610

 

Pacific Rubiales Energy Corp., Senior Notes

 

5.125%

 

3/28/23

 

100,000

 

100,900

(d)

Pemex Project Funding Master Trust, Senior Bonds

 

6.625%

 

6/15/35

 

2,635,000

 

3,155,412

 

Petrobras International Finance Co., Global Notes

 

5.875%

 

3/1/18

 

879,000

 

986,960

 

Petrobras International Finance Co., Senior Notes

 

6.750%

 

1/27/41

 

780,000

 

881,629

 

Phillips 66, Senior Notes

 

5.875%

 

5/1/42

 

160,000

 

187,928

 

Shell International Finance BV, Senior Notes

 

6.375%

 

12/15/38

 

250,000

 

345,279

 

Transcontinental Gas Pipe Line Co. LLC, Senior Notes

 

5.400%

 

8/15/41

 

310,000

 

352,810

 

Transcontinental Gas Pipe Line Co. LLC, Senior Notes

 

4.450%

 

8/1/42

 

450,000

 

445,607

 

Williams Cos. Inc., Debentures

 

7.500%

 

1/15/31

 

47,000

 

57,695

 

Williams Cos. Inc., Senior Notes

 

7.750%

 

6/15/31

 

37,000

 

46,099

 

Williams Cos. Inc., Senior Notes

 

8.750%

 

3/15/32

 

610,000

 

821,253

 

Total Oil, Gas & Consumable Fuels

 

 

 

 

 

 

 

19,245,898

 

TOTAL ENERGY

 

 

 

 

 

 

 

20,010,416

 

FINANCIALS — 39.0%

 

 

 

 

 

 

 

 

 

Capital Markets — 6.4%

 

 

 

 

 

 

 

 

 

Goldman Sachs Capital I, Capital Securities

 

6.345%

 

2/15/34

 

555,000

 

578,242

 

Goldman Sachs Capital II, Junior Subordinated Bonds

 

4.000%

 

6/1/43

 

880,000

 

740,300

(e)

Goldman Sachs Group Inc., Senior Notes

 

6.000%

 

5/1/14

 

40,000

 

42,162

 

Goldman Sachs Group Inc., Senior Notes

 

5.375%

 

3/15/20

 

270,000

 

307,611

 

Goldman Sachs Group Inc., Senior Notes

 

5.250%

 

7/27/21

 

510,000

 

577,865

 

 

See Notes to Schedule of Investments.

 

2


 

WESTERN ASSET INCOME FUND

 

Schedule of investments (unaudited) (cont’d)

March 31, 2013

 

SECURITY

 

RATE

 

MATURITY
DATE

 

FACE
AMOUNT

 

VALUE

 

Capital Markets — continued

 

 

 

 

 

 

 

 

 

Goldman Sachs Group Inc., Senior Notes

 

6.250%

 

2/1/41

 

$

570,000

 

$

677,362

 

Goldman Sachs Group Inc., Subordinated Notes

 

6.750%

 

10/1/37

 

640,000

 

717,177

 

Merrill Lynch & Co. Inc., Senior Notes

 

6.400%

 

8/28/17

 

300,000

 

352,108

 

Merrill Lynch & Co. Inc., Subordinated Notes

 

5.700%

 

5/2/17

 

1,000,000

 

1,116,179

 

Merrill Lynch & Co. Inc., Subordinated Notes

 

6.110%

 

1/29/37

 

320,000

 

360,432

 

Merrill Lynch & Co. Inc., Subordinated Notes

 

7.750%

 

5/14/38

 

740,000

 

986,259

 

Morgan Stanley, Medium-Term Notes

 

6.625%

 

4/1/18

 

100,000

 

119,540

 

Morgan Stanley, Senior Notes

 

6.000%

 

5/13/14

 

860,000

 

906,437

 

Morgan Stanley, Senior Notes

 

5.500%

 

7/24/20

 

100,000

 

115,166

 

Morgan Stanley, Senior Notes

 

6.375%

 

7/24/42

 

90,000

 

108,131

 

State Street Corp., Junior Subordinated Notes

 

4.956%

 

3/15/18

 

480,000

 

545,290

 

UBS AG Stamford CT, Subordinated Notes

 

7.625%

 

8/17/22

 

340,000

 

379,937

 

Vesey Street Investment Trust I, Senior Notes

 

4.404%

 

9/1/16

 

310,000

 

336,974

 

Total Capital Markets

 

 

 

 

 

 

 

8,967,172

 

Commercial Banks — 11.5%

 

 

 

 

 

 

 

 

 

Barclays Bank PLC, Subordinated Notes

 

10.179%

 

6/12/21

 

240,000

 

321,449

(d)

Barclays Bank PLC, Subordinated Notes

 

7.625%

 

11/21/22

 

320,000

 

315,600

 

BBVA US Senior SAU, Senior Notes

 

3.250%

 

5/16/14

 

340,000

 

342,057

 

BBVA US Senior SAU, Senior Notes

 

4.664%

 

10/9/15

 

1,150,000

 

1,179,294

 

BNP Paribas SA, Senior Notes

 

3.250%

 

3/3/23

 

410,000

 

398,481

 

CIT Group Inc., Secured Notes

 

5.250%

 

4/1/14

 

370,000

 

384,337

(d)

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, Senior Notes

 

5.250%

 

5/24/41

 

570,000

 

644,730

 

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, Subordinated Notes

 

3.950%

 

11/9/22

 

470,000

 

473,215

 

Credit Agricole SA, Subordinated Notes

 

8.375%

 

10/13/19

 

560,000

 

612,500

(d)(e)(f)

HSBC Finance Capital Trust IX, Junior Subordinated Notes

 

5.911%

 

11/30/35

 

1,350,000

 

1,360,125

(e)

Intesa Sanpaolo SpA, Senior Notes

 

3.625%

 

8/12/15

 

1,240,000

 

1,239,120

(d)

Intesa Sanpaolo SpA, Senior Notes

 

3.875%

 

1/16/18

 

610,000

 

589,839

 

M&T Bank Corp., Junior Subordinated Notes

 

6.875%

 

6/15/16

 

1,100,000

 

1,176,188

(d)(f)

Mizuho Financial Group Cayman Ltd.

 

5.790%

 

4/15/14

 

550,000

 

574,545

(d)

Nordea Bank AB, Subordinated Notes

 

4.875%

 

5/13/21

 

510,000

 

552,050

(d)

Rabobank Nederland NV, Junior Subordinated Notes

 

11.000%

 

6/30/19

 

708,000

 

946,950

(d)(e)(f)

Royal Bank of Scotland Group PLC, Junior Subordinated Bonds

 

7.648%

 

9/30/31

 

1,140,000

 

1,185,600

(e)(f)

Royal Bank of Scotland Group PLC, Subordinated Notes

 

5.000%

 

10/1/14

 

580,000

 

597,400

 

Royal Bank of Scotland Group PLC, Subordinated Notes

 

5.050%

 

1/8/15

 

170,000

 

176,215

 

Royal Bank of Scotland Group PLC, Subordinated Notes

 

6.125%

 

12/15/22

 

740,000

 

765,381

 

Royal Bank of Scotland NV, Subordinated Notes

 

7.750%

 

5/15/23

 

480,000

 

540,289

 

Standard Chartered PLC, Subordinated Notes

 

3.950%

 

1/11/23

 

260,000

 

258,944

(d)

Wachovia Capital Trust III, Junior Subordinated Bonds

 

5.570%

 

5/24/13

 

1,190,000

 

1,194,165

(e)(f)

Wells Fargo & Co., Subordinated Notes

 

3.450%

 

2/13/23

 

210,000

 

211,411

 

Wells Fargo Capital X, Capital Securities

 

5.950%

 

12/15/36

 

160,000

 

160,713

 

Total Commercial Banks

 

 

 

 

 

 

 

16,200,598

 

Consumer Finance — 3.5%

 

 

 

 

 

 

 

 

 

Ally Financial Inc., Senior Notes

 

7.500%

 

12/31/13

 

1,551,000

 

1,616,918

 

Ally Financial Inc., Subordinated Notes

 

8.000%

 

12/31/18

 

201,000

 

240,446

 

American Express Co., Subordinated Debentures

 

6.800%

 

9/1/66

 

370,000

 

398,675

(e)

Capital One Financial Corp., Senior Notes

 

6.750%

 

9/15/17

 

230,000

 

277,872

 

HSBC Finance Corp., Senior Notes

 

6.676%

 

1/15/21

 

1,300,000

 

1,538,337

 

SLM Corp., Senior Notes

 

7.250%

 

1/25/22

 

830,000

 

927,525

 

Total Consumer Finance

 

 

 

 

 

 

 

4,999,773

 

Diversified Financial Services — 11.8%

 

 

 

 

 

 

 

 

 

Bank of America Corp., Senior Notes

 

6.500%

 

8/1/16

 

70,000

 

80,618

 

Bank of America Corp., Senior Notes

 

7.625%

 

6/1/19

 

70,000

 

88,919

 

 

See Notes to Schedule of Investments.

 

3


 

WESTERN ASSET INCOME FUND

 

Schedule of investments (unaudited) (cont’d)

March 31, 2013

 

SECURITY

 

RATE

 

MATURITY
DATE

 

FACE
AMOUNT

 

VALUE

 

Diversified Financial Services — continued

 

 

 

 

 

 

 

 

 

Bank of America Corp., Senior Notes

 

5.625%

 

7/1/20

 

$

30,000

 

$

35,009

 

Bank of America Corp., Senior Notes

 

3.300%

 

1/11/23

 

440,000

 

433,866

 

Bank of America Corp., Senior Notes

 

5.875%

 

2/7/42

 

320,000

 

380,170

 

Bank of America Corp., Subordinated Notes

 

5.420%

 

3/15/17

 

100,000

 

110,817

 

Beaver Valley Funding Corp., Senior Secured Bonds

 

9.000%

 

6/1/17

 

98,000

 

99,308

 

Citigroup Inc., Junior Subordinated Notes

 

5.950%

 

1/30/23

 

1,000,000

 

1,037,500

(e)(f)

Citigroup Inc., Senior Notes

 

6.375%

 

8/12/14

 

620,000

 

664,436

 

Citigroup Inc., Senior Notes

 

5.500%

 

10/15/14

 

270,000

 

288,116

 

Citigroup Inc., Senior Notes

 

6.010%

 

1/15/15

 

210,000

 

227,394

 

Citigroup Inc., Senior Notes

 

8.500%

 

5/22/19

 

1,280,000

 

1,705,277

 

Citigroup Inc., Senior Notes

 

8.125%

 

7/15/39

 

450,000

 

659,620

 

Citigroup Inc., Senior Notes

 

5.875%

 

1/30/42

 

240,000

 

286,834

 

Citigroup Inc., Subordinated Notes

 

4.050%

 

7/30/22

 

940,000

 

971,042

 

Citigroup Inc., Subordinated Notes

 

6.125%

 

8/25/36

 

550,000

 

628,939

 

General Electric Capital Corp., Junior Subordinated Bonds

 

6.250%

 

12/15/22

 

600,000

 

658,520

(e)(f)

General Electric Capital Corp., Notes

 

5.300%

 

2/11/21

 

530,000

 

607,579

 

General Electric Capital Corp., Senior Notes

 

5.900%

 

5/13/14

 

600,000

 

635,741

 

General Electric Capital Corp., Senior Notes

 

6.875%

 

1/10/39

 

280,000

 

366,865

 

General Electric Capital Corp., Subordinated Debentures

 

6.375%

 

11/15/67

 

700,000

 

742,000

(e)

ILFC E-Capital Trust I

 

4.680%

 

12/21/65

 

470,000

 

411,250

(d)(e)

ILFC E-Capital Trust II, Bonds

 

6.250%

 

12/21/65

 

790,000

 

744,575

(d)(e)

International Lease Finance Corp., Senior Notes

 

8.750%

 

3/15/17

 

190,000

 

223,488

 

International Lease Finance Corp., Senior Notes

 

8.875%

 

9/1/17

 

470,000

 

565,175

 

International Lease Finance Corp., Senior Notes

 

6.250%

 

5/15/19

 

130,000

 

142,350

 

International Lease Finance Corp., Senior Notes

 

8.250%

 

12/15/20

 

190,000

 

232,750

 

International Lease Finance Corp., Senior Secured Notes

 

7.125%

 

9/1/18

 

700,000

 

822,500

(d)

JPMorgan Chase & Co., Subordinated Notes

 

6.125%

 

6/27/17

 

720,000

 

844,911

 

UFJ Finance Aruba AEC

 

6.750%

 

7/15/13

 

355,000

 

361,373

 

ZFS Finance USA Trust II, Bonds

 

6.450%

 

12/15/65

 

1,440,000

 

1,551,600

(d)(e)

Total Diversified Financial Services

 

 

 

 

 

 

 

16,608,542

 

Insurance — 5.6%

 

 

 

 

 

 

 

 

 

Allstate Corp., Junior Subordinated Debentures

 

6.500%

 

5/15/57

 

480,000

 

525,600

(e)

American International Group Inc., Junior Subordinated Debentures

 

6.250%

 

3/15/37

 

80,000

 

88,608

 

American International Group Inc., Senior Notes

 

6.400%

 

12/15/20

 

90,000

 

111,460

 

AXA SA, Subordinated Bonds

 

8.600%

 

12/15/30

 

200,000

 

256,456

 

Delphi Financial Group Inc., Senior Notes

 

7.875%

 

1/31/20

 

170,000

 

209,460

 

Fidelity & Guaranty Life Holdings Inc., Senior Notes

 

6.375%

 

4/1/21

 

190,000

 

193,800

(d)

ING Capital Funding Trust III, Junior Subordinated Bonds

 

3.911%

 

6/30/13

 

1,470,000

 

1,418,550

(e)(f)

ING US Inc., Senior Notes

 

2.900%

 

2/15/18

 

230,000

 

233,288

(d)

ING US Inc., Senior Notes

 

5.500%

 

7/15/22

 

810,000

 

896,178

(d)

Liberty Mutual Group Inc., Junior Subordinated Bonds

 

7.800%

 

3/15/37

 

70,000

 

81,550

(d)

Liberty Mutual Insurance Co., Subordinated Notes

 

7.875%

 

10/15/26

 

490,000

 

624,020

(d)

MetLife Inc., Junior Subordinated Debentures

 

6.400%

 

12/15/36

 

1,210,000

 

1,323,438

 

Prudential Financial Inc., Junior Subordinated Debentures

 

8.875%

 

6/15/38

 

340,000

 

417,772

(e)

Prudential Holdings LLC, Bonds, AGM-Insured

 

7.245%

 

12/18/23

 

260,000

 

322,635

(d)

Sompo Japan Insurance Inc., Junior Subordinated Notes

 

5.325%

 

3/28/73

 

400,000

 

399,000

(d)(e)

Teachers Insurance & Annuity Association of America - College Retirement Equity Fund, Notes

 

6.850%

 

12/16/39

 

400,000

 

533,753

(d)

Willis North America Inc., Senior Notes

 

5.625%

 

7/15/15

 

230,000

 

249,447

 

Total Insurance

 

 

 

 

 

 

 

7,885,015

 

Real Estate Investment Trusts (REITs) — 0.1%

 

 

 

 

 

 

 

 

 

Health Care REIT Inc., Senior Notes

 

5.875%

 

5/15/15

 

130,000

 

142,530

 

 

See Notes to Schedule of Investments.

 

4


 

WESTERN ASSET INCOME FUND

 

Schedule of investments (unaudited) (cont’d)

March 31, 2013

 

SECURITY

 

RATE

 

MATURITY
DATE

 

FACE
AMOUNT

 

VALUE

 

Thrifts & Mortgage Finance — 0.1%

 

 

 

 

 

 

 

 

 

Santander Holdings USA Inc., Senior Notes

 

4.625%

 

4/19/16

 

$

160,000

 

$

171,100

 

TOTAL FINANCIALS

 

 

 

 

 

 

 

54,974,730

 

HEALTH CARE — 3.3%

 

 

 

 

 

 

 

 

 

Biotechnology — 0.8%

 

 

 

 

 

 

 

 

 

Amgen Inc., Senior Notes

 

5.150%

 

11/15/41

 

580,000

 

622,354

 

Gilead Sciences Inc., Senior Notes

 

4.400%

 

12/1/21

 

220,000

 

247,638

 

Gilead Sciences Inc., Senior Notes

 

5.650%

 

12/1/41

 

240,000

 

291,251

 

Total Biotechnology

 

 

 

 

 

 

 

1,161,243

 

Health Care Providers & Services — 2.0%

 

 

 

 

 

 

 

 

 

Aetna Inc., Senior Notes

 

6.500%

 

9/15/18

 

240,000

 

296,408

 

Catholic Health Initiatives, Secured Bonds

 

4.350%

 

11/1/42

 

30,000

 

30,227

 

HCA Inc., Senior Notes

 

5.750%

 

3/15/14

 

65,000

 

67,356

 

Humana Inc.

 

8.150%

 

6/15/38

 

190,000

 

266,495

 

Humana Inc., Senior Notes

 

6.450%

 

6/1/16

 

220,000

 

253,832

 

Humana Inc., Senior Notes

 

4.625%

 

12/1/42

 

210,000

 

201,007

 

Tenet Healthcare Corp., Senior Secured Notes

 

8.875%

 

7/1/19

 

300,000

 

337,500

 

Tenet Healthcare Corp., Senior Secured Notes

 

4.500%

 

4/1/21

 

560,000

 

548,800

(d)

UnitedHealth Group Inc., Senior Notes

 

6.000%

 

11/15/17

 

31,000

 

36,856

 

UnitedHealth Group Inc., Senior Notes

 

3.950%

 

10/15/42

 

110,000

 

103,594

 

UnitedHealth Group Inc., Senior Notes

 

4.250%

 

3/15/43

 

350,000

 

344,151

 

WellPoint Inc., Notes

 

5.875%

 

6/15/17

 

290,000

 

341,384

 

Total Health Care Providers & Services

 

 

 

 

 

 

 

2,827,610

 

Health Care Technology — 0.2%

 

 

 

 

 

 

 

 

 

Merge Healthcare Inc., Senior Secured Notes

 

11.750%

 

5/1/15

 

250,000

 

266,875

 

Pharmaceuticals — 0.3%

 

 

 

 

 

 

 

 

 

AbbVie Inc., Senior Notes

 

4.400%

 

11/6/42

 

270,000

 

272,226

(d)

Zoetis Inc., Senior Notes

 

3.250%

 

2/1/23

 

20,000

 

20,282

(d)

Zoetis Inc., Senior Notes

 

4.700%

 

2/1/43

 

160,000

 

163,331

(d)

Total Pharmaceuticals

 

 

 

 

 

 

 

455,839

 

TOTAL HEALTH CARE

 

 

 

 

 

 

 

4,711,567

 

INDUSTRIALS — 6.7%

 

 

 

 

 

 

 

 

 

Aerospace & Defense — 1.3%

 

 

 

 

 

 

 

 

 

Esterline Technologies Corp., Senior Notes

 

7.000%

 

8/1/20

 

750,000

 

827,812

 

Exelis Inc., Senior Notes

 

4.250%

 

10/1/16

 

470,000

 

504,631

 

Exelis Inc., Senior Notes

 

5.550%

 

10/1/21

 

520,000

 

552,946

 

Total Aerospace & Defense

 

 

 

 

 

 

 

1,885,389

 

Airlines — 1.6%

 

 

 

 

 

 

 

 

 

American Airlines, Pass-Through Trust, Senior Secured Notes

 

4.000%

 

7/15/25

 

330,000

 

335,569

(d)

Delta Air Lines Inc., Pass-Through Certificates, Secured Notes

 

8.021%

 

8/10/22

 

98,238

 

108,189

 

Delta Air Lines Inc., Pass-Through Certificates, Senior Secured Notes

 

7.750%

 

12/17/19

 

237,754

 

274,606

 

United Air Lines Inc., Pass-Through Trust, Pass-Through Certificates, Secured Notes

 

9.750%

 

1/15/17

 

103,946

 

120,577

 

United Airlines Inc., Pass-Through Certificates

 

9.250%

 

5/10/17

 

181,277

 

203,030

 

United Airlines Inc., Pass-Through Certificates

 

6.545%

 

2/2/19

 

118,762

 

131,232

 

United Airlines Inc., Pass-Through Certificates, Secured Notes

 

6.250%

 

4/11/20

 

170,000

 

178,500

 

United Airlines Inc., Pass-Through Certificates, Senior Secured Notes

 

6.125%

 

4/29/18

 

140,000

 

140,700

 

United Airlines Inc., Pass-Through Certificates, Senior Secured Notes

 

7.250%

 

11/10/19

 

192,848

 

225,149

 

United Airlines Inc., Senior Secured Notes

 

7.256%

 

3/15/20

 

157,448

 

170,044

 

 

See Notes to Schedule of Investments.

 

5


 

WESTERN ASSET INCOME FUND

 

Schedule of investments (unaudited) (cont’d)

March 31, 2013

 

SECURITY

 

RATE

 

MATURITY
DATE

 

FACE
AMOUNT

 

VALUE

 

Airlines — continued

 

 

 

 

 

 

 

 

 

US Airways, Pass-Through Trust, Senior Secured Bonds

 

5.900%

 

10/1/24

 

$

360,000

 

$

402,300

 

Total Airlines

 

 

 

 

 

 

 

2,289,896

 

Commercial Services & Supplies — 0.6%

 

 

 

 

 

 

 

 

 

Republic Services Inc., Senior Notes

 

5.500%

 

9/15/19

 

130,000

 

154,331

 

Republic Services Inc., Senior Notes

 

5.250%

 

11/15/21

 

330,000

 

385,754

 

Waste Management Inc., Senior Notes

 

7.750%

 

5/15/32

 

250,000

 

346,249

 

Total Commercial Services & Supplies

 

 

 

 

 

 

 

886,334

 

Electrical Equipment — 0.8%

 

 

 

 

 

 

 

 

 

Eaton Corp., Senior Notes

 

4.150%

 

11/2/42

 

1,070,000

 

1,043,253

(d)

Industrial Conglomerates — 1.2%

 

 

 

 

 

 

 

 

 

General Electric Co., Senior Notes

 

4.125%

 

10/9/42

 

1,070,000

 

1,072,723

 

United Technologies Corp., Senior Notes

 

6.125%

 

2/1/19

 

200,000

 

249,466

 

United Technologies Corp., Senior Notes

 

4.500%

 

6/1/42

 

340,000

 

362,395

 

Total Industrial Conglomerates

 

 

 

 

 

 

 

1,684,584

 

Machinery — 0.7%

 

 

 

 

 

 

 

 

 

Valmont Industries Inc., Senior Notes

 

6.625%

 

4/20/20

 

790,000

 

935,457

 

Marine — 0.2%

 

 

 

 

 

 

 

 

 

Horizon Lines LLC, Senior Secured Notes

 

11.000%

 

10/15/16

 

289,000

 

289,723

 

Road & Rail — 0.3%

 

 

 

 

 

 

 

 

 

Burlington Northern Santa Fe LLC, Senior Notes

 

4.400%

 

3/15/42

 

350,000

 

348,289

 

TOTAL INDUSTRIALS

 

 

 

 

 

 

 

9,362,925

 

INFORMATION TECHNOLOGY — 1.8%

 

 

 

 

 

 

 

 

 

Computers & Peripherals — 0.9%

 

 

 

 

 

 

 

 

 

Dell Inc., Senior Notes

 

3.100%

 

4/1/16

 

1,010,000

 

1,017,081

 

Hewlett-Packard Co., Senior Notes

 

4.650%

 

12/9/21

 

310,000

 

321,440

 

Total Computers & Peripherals

 

 

 

 

 

 

 

1,338,521

 

IT Services — 0.6%

 

 

 

 

 

 

 

 

 

Electronic Data Systems Corp., Notes

 

7.450%

 

10/15/29

 

420,000

 

490,579

 

Mantech International Corp., Senior Notes

 

7.250%

 

4/15/18

 

320,000

 

339,200

 

Total IT Services

 

 

 

 

 

 

 

829,779

 

Semiconductors & Semiconductor Equipment — 0.1%

 

 

 

 

 

 

 

 

 

National Semiconductor Corp., Senior Notes

 

6.600%

 

6/15/17

 

110,000

 

133,475

 

Software — 0.2%

 

 

 

 

 

 

 

 

 

Interface Security Systems Holdings Inc./Interface Security Systems LLC, Senior Secured Notes

 

9.250%

 

1/15/18

 

210,000

 

216,825

(d)

TOTAL INFORMATION TECHNOLOGY

 

 

 

 

 

 

 

2,518,600

 

MATERIALS — 7.1%

 

 

 

 

 

 

 

 

 

Chemicals — 1.0%

 

 

 

 

 

 

 

 

 

Dow Chemical Co., Debentures

 

7.375%

 

11/1/29

 

800,000

 

1,063,290

 

Dow Chemical Co., Senior Notes

 

4.375%

 

11/15/42

 

170,000

 

163,043

 

Ecolab Inc., Senior Notes

 

5.500%

 

12/8/41

 

140,000

 

160,931

 

Total Chemicals

 

 

 

 

 

 

 

1,387,264

 

Containers & Packaging — 0.9%

 

 

 

 

 

 

 

 

 

Rock-Tenn Co., Senior Notes

 

4.450%

 

3/1/19

 

470,000

 

510,234

 

Rock-Tenn Co., Senior Notes

 

3.500%

 

3/1/20

 

150,000

 

153,338

 

Rock-Tenn Co., Senior Notes

 

4.900%

 

3/1/22

 

460,000

 

497,606

 

Rock-Tenn Co., Senior Notes

 

4.000%

 

3/1/23

 

80,000

 

80,903

 

Total Containers & Packaging

 

 

 

 

 

 

 

1,242,081

 

Metals & Mining — 5.0%

 

 

 

 

 

 

 

 

 

ArcelorMittal, Senior Notes

 

4.250%

 

2/25/15

 

340,000

 

351,475

 

ArcelorMittal, Senior Notes

 

4.250%

 

8/5/15

 

340,000

 

353,379

 

ArcelorMittal, Senior Notes

 

5.000%

 

2/25/17

 

10,000

 

10,465

 

 

See Notes to Schedule of Investments.

 

6


 

WESTERN ASSET INCOME FUND

 

Schedule of investments (unaudited) (cont’d)

March 31, 2013

 

SECURITY

 

RATE

 

MATURITY
DATE

 

FACE
AMOUNT

 

VALUE

 

Metals & Mining — continued

 

 

 

 

 

 

 

 

 

Barrick Gold Corp., Senior Notes

 

5.250%

 

4/1/42

 

$

560,000

 

$

561,660

 

Cliffs Natural Resources Inc., Senior Notes

 

3.950%

 

1/15/18

 

110,000

 

110,443

 

Cliffs Natural Resources Inc., Senior Notes

 

5.900%

 

3/15/20

 

480,000

 

512,073

 

Cliffs Natural Resources Inc., Senior Notes

 

4.800%

 

10/1/20

 

340,000

 

338,752

 

Cliffs Natural Resources Inc., Senior Notes

 

4.875%

 

4/1/21

 

140,000

 

137,961

 

FMG Resources (August 2006) Pty Ltd., Senior Notes

 

7.000%

 

11/1/15

 

740,000

 

775,150

(d)

Freeport-McMoRan Copper & Gold Inc., Senior Notes

 

5.450%

 

3/15/43

 

120,000

 

118,595

(d)

Rio Tinto Finance USA Ltd., Senior Notes

 

9.000%

 

5/1/19

 

660,000

 

909,238

 

Southern Copper Corp., Senior Notes

 

5.375%

 

4/16/20

 

150,000

 

170,316

 

Southern Copper Corp., Senior Notes

 

5.250%

 

11/8/42

 

470,000

 

445,030

 

Steel Dynamics Inc., Senior Notes

 

6.125%

 

8/15/19

 

140,000

 

151,200

(d)

Vale Overseas Ltd., Notes

 

6.875%

 

11/21/36

 

1,148,000

 

1,303,963

 

Xstrata Finance Canada Ltd., Senior Notes

 

4.000%

 

10/25/22

 

260,000

 

261,867

(d)

Xstrata Finance Canada Ltd., Senior Notes

 

6.900%

 

11/15/37

 

430,000

 

508,676

(d)

Total Metals & Mining

 

 

 

 

 

 

 

7,020,243

 

Paper & Forest Products — 0.2%

 

 

 

 

 

 

 

 

 

Georgia-Pacific Corp.

 

7.375%

 

12/1/25

 

250,000

 

340,391

 

TOTAL MATERIALS

 

 

 

 

 

 

 

9,989,979

 

TELECOMMUNICATION SERVICES — 6.5%

 

 

 

 

 

 

 

 

 

Diversified Telecommunication Services — 5.1%

 

 

 

 

 

 

 

 

 

AT&T Inc., Global Notes

 

6.550%

 

2/15/39

 

1,230,000

 

1,519,409

 

AT&T Inc., Senior Notes

 

5.550%

 

8/15/41

 

500,000

 

551,131

 

AT&T Inc., Senior Notes

 

4.300%

 

12/15/42

 

14,000

 

13,044

(d)

British Telecommunications PLC, Bonds

 

9.625%

 

12/15/30

 

330,000

 

511,506

 

Deutsche Telekom International Finance BV, Senior Notes

 

5.750%

 

3/23/16

 

160,000

 

180,672

 

Koninklijke KPN NV, Senior Notes

 

8.375%

 

10/1/30

 

200,000

 

261,928

 

Koninklijke KPN NV, Senior Subordinated Notes

 

7.000%

 

3/28/73

 

350,000

 

345,625

(d)(e)

Qwest Corp., Debentures

 

6.875%

 

9/15/33

 

1,000,000

 

993,982

 

Telecom Italia Capital SpA, Senior Notes

 

7.200%

 

7/18/36

 

20,000

 

19,930

 

Telecom Italia Capital SpA, Senior Notes

 

7.721%

 

6/4/38

 

390,000

 

405,966

 

Telefonica Chile SA, Senior Notes

 

3.875%

 

10/12/22

 

200,000

 

196,340

(d)

Telefonica Emisiones SAU, Senior Notes

 

3.729%

 

4/27/15

 

230,000

 

238,028

 

Telefonica Emisiones SAU, Senior Notes

 

5.877%

 

7/15/19

 

230,000

 

253,023

 

Telefonica Emisiones SAU, Senior Notes

 

7.045%

 

6/20/36

 

120,000

 

128,820

 

Verizon Communications Inc., Senior Notes

 

5.850%

 

9/15/35

 

570,000

 

654,250

 

Verizon Communications Inc., Senior Notes

 

3.850%

 

11/1/42

 

1,090,000

 

942,731

 

Total Diversified Telecommunication Services

 

 

 

 

 

 

 

7,216,385

 

Wireless Telecommunication Services — 1.4%

 

 

 

 

 

 

 

 

 

America Movil SAB de CV, Senior Notes

 

6.125%

 

3/30/40

 

850,000

 

989,415

 

Rogers Wireless Inc., Secured Notes

 

6.375%

 

3/1/14

 

300,000

 

315,399

 

Sprint Capital Corp., Global Notes

 

6.900%

 

5/1/19

 

330,000

 

362,175

 

Telefonica Europe BV

 

8.250%

 

9/15/30

 

230,000

 

272,165

 

Total Wireless Telecommunication Services

 

 

 

 

 

 

 

1,939,154

 

TOTAL TELECOMMUNICATION SERVICES

 

 

 

 

 

 

 

9,155,539

 

UTILITIES — 4.6%

 

 

 

 

 

 

 

 

 

Electric Utilities — 3.1%

 

 

 

 

 

 

 

 

 

Duke Energy Corp., Senior Notes

 

6.300%

 

2/1/14

 

500,000

 

523,064

 

Electricite de France S.A., Subordinated Notes

 

5.250%

 

1/29/23

 

190,000

 

188,754

(d)(e)(f)

Enersis SA, Notes

 

7.400%

 

12/1/16

 

452,000

 

527,193

 

FirstEnergy Corp., Notes

 

7.375%

 

11/15/31

 

320,000

 

374,874

 

FirstEnergy Corp., Senior Notes

 

4.250%

 

3/15/23

 

350,000

 

353,983

 

IPALCO Enterprises Inc., Senior Secured Notes

 

5.000%

 

5/1/18

 

470,000

 

507,600

 

Pacific Gas & Electric Co., First Mortgage Bonds

 

6.050%

 

3/1/34

 

140,000

 

175,127

 

PNPP II Funding Corp.

 

9.120%

 

5/30/16

 

978,000

 

1,016,206

 

 

See Notes to Schedule of Investments.

 

7


 

WESTERN ASSET INCOME FUND

 

Schedule of investments (unaudited) (cont’d)

March 31, 2013

 

SECURITY

 

RATE

 

MATURITY
DATE

 

FACE
AMOUNT

 

VALUE

 

Electric Utilities — continued

 

 

 

 

 

 

 

 

 

Virginia Electric and Power Co., Senior Notes

 

8.875%

 

11/15/38

 

$

390,000

 

$

655,661

 

Total Electric Utilities

 

 

 

 

 

 

 

4,322,462

 

Gas Utilities — 0.1%

 

 

 

 

 

 

 

 

 

Southern Natural Gas Co., Senior Notes

 

5.900%

 

4/1/17

 

170,000

 

198,141

(d)

Multi-Utilities — 1.4%

 

 

 

 

 

 

 

 

 

CenterPoint Energy Inc.

 

6.850%

 

6/1/15

 

1,150,000

 

1,292,238

 

Dominion Resources Inc., Senior Notes

 

8.875%

 

1/15/19

 

250,000

 

340,224

 

DTE Energy Co.

 

6.350%

 

6/1/16

 

260,000

 

301,460

 

Total Multi-Utilities

 

 

 

 

 

 

 

1,933,922

 

TOTAL UTILITIES

 

 

 

 

 

 

 

6,454,525

 

TOTAL CORPORATE BONDS & NOTES (Cost — $119,680,842)

 

 

 

 

 

133,634,898

 

ASSET-BACKED SECURITIES — 0.2%

 

 

 

 

 

 

 

 

 

SLM Student Loan Trust, 2011-A A3 (Cost — $330,000)

 

2.703%

 

1/15/43

 

330,000

 

348,325

(d)(e)

COLLATERALIZED MORTGAGE OBLIGATIONS — 0.2%

 

 

 

 

 

 

 

 

 

Thornburg Mortgage Securities Trust, 2007-4 2A1

 

6.146%

 

9/25/37

 

175,897

 

174,044

(e)

Thornburg Mortgage Securities Trust, 2007-4 3A1

 

6.104%

 

9/25/37

 

172,765

 

176,674

(e)

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost — $345,685)

 

 

 

350,718

 

MUNICIPAL BONDS — 0.2%

 

 

 

 

 

 

 

 

 

California — 0.1%

 

 

 

 

 

 

 

 

 

University of California Revenue

 

4.062%

 

5/15/33

 

150,000

 

150,364

 

Pennsylvania — 0.1%

 

 

 

 

 

 

 

 

 

Philadelphia, PA, Authority For Industrial Development, City Service Agreement Revenue, Taxable

 

3.964%

 

4/15/26

 

90,000

 

89,131

 

TOTAL MUNICIPAL BONDS (Cost — $239,401)

 

 

 

 

 

 

 

239,495

 

SOVEREIGN BONDS — 0.9%

 

 

 

 

 

 

 

 

 

Canada — 0.7%

 

 

 

 

 

 

 

 

 

Quebec Province

 

7.970%

 

7/22/36

 

650,000

 

992,161

 

Mexico — 0.0%

 

 

 

 

 

 

 

 

 

United Mexican States, Senior Notes

 

4.750%

 

3/8/44

 

30,000

 

31,125

 

Russia — 0.2%

 

 

 

 

 

 

 

 

 

RSHB Capital, Loan Participation Notes, Secured Notes

 

7.125%

 

1/14/14

 

200,000

 

208,360

(d)

Russian Foreign Bond - Eurobond, Senior Bonds

 

7.500%

 

3/31/30

 

41,850

 

51,842

(d)

Total Russia

 

 

 

 

 

 

 

260,202

 

TOTAL SOVEREIGN BONDS (Cost — $1,013,798)

 

 

 

 

 

 

 

1,283,488

 

U.S. GOVERNMENT & AGENCY OBLIGATIONS — 0.2%

 

 

 

 

 

 

 

 

 

U.S. Government Obligations — 0.2%

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes (Cost - $243,265)

 

2.000%

 

2/15/23

 

240,000

 

243,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

 

 

 

PREFERRED STOCKS — 1.6%

 

 

 

 

 

 

 

 

 

FINANCIALS — 1.6%

 

 

 

 

 

 

 

 

 

Consumer Finance — 1.2%

 

 

 

 

 

 

 

 

 

GMAC Capital Trust I

 

8.125%

 

 

 

63,250

 

1,720,400

(e)

Diversified Financial Services — 0.3%

 

 

 

 

 

 

 

 

 

Citigroup Capital XIII

 

7.875%

 

 

 

15,253

 

436,083

(e)

 

See Notes to Schedule of Investments.

 

8


 

WESTERN ASSET INCOME FUND

 

Schedule of investments (unaudited) (cont’d)

March 31, 2013

 

SECURITY

 

RATE

 

 

 

SHARES

 

VALUE

 

Thrifts & Mortgage Finance — 0.1%

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association (FNMA)

 

8.250%

 

 

 

11,700

 

$

38,025

*(b)(e)

TOTAL PREFERRED STOCKS (Cost — $2,195,589)

 

 

 

 

 

 

 

2,194,508

 

TOTAL INVESTMENTS — 98.2% (Cost — $124,048,580#)

 

 

 

 

 

138,294,469

 

Other Assets in Excess of Liabilities — 1.8%

 

 

 

 

 

 

 

2,526,994

 

TOTAL NET ASSETS — 100.0%

 

 

 

 

 

 

 

$

140,821,463

 

 

*

Non-income producing security.

(a)

Value is less than $1.

(b)

Illiquid security.

(c)

Security is valued in good faith in accordance with procedures approved by the Board of Directors (See Note 1).

(d)

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.

(e)

Variable rate security. Interest rate disclosed is as of the most recent information available.

(f)

Security has no maturity date. The date shown represents the next call date.

#

Aggregate cost for federal income tax purposes is substantially the same.

 

 

 

Abbreviations used in this schedule:

 

AGM

- Assured Guaranty Municipal Corp.

 

REIT

- Real Estate Investment Trust

 

See Notes to Schedule of Investments.

 

9

 


 

Notes to schedule of investments (unaudited)

 

1. Organization and significant accounting policies

 

Western Asset Income Fund (the “Fund”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as a closed-end diversified investment company.

 

The Fund seeks high level of current income, consistent with prudent investment risk. Capital appreciation is a secondary investment objective.

 

The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”).

 

(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities.  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 investment’s 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. If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Directors.

 

The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North 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 Fund’s pricing policies, and reporting to the Board of Directors. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

 

The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances.  Examples of possible factors include, but are not limited to, the type of security; the issuer’s financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts’ research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.

 

For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Directors, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair valuation occurrences are reported to the Board of Directors quarterly.

 

The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.

 

10


 

Notes to schedule of investments (unaudited) (continued)

 

GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date.  These inputs are summarized in the three broad levels listed below:

 

·                  Level 1—quoted prices in active markets for identical investments

·                  Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

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

 

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

 

The following is a summary of the inputs used in valuing the Fund’s assets and liabilities carried at fair value:

 

ASSETS

 

 

QUOTED
PRICES

 

OTHER
SIGNIFICANT
OBSERVABLE
INPUTS

 

SIGNIFICANT
UNOBSERVABLE
INPUTS

 

 

 

DESCRIPTION

 

(LEVEL 1)

 

(LEVEL 2)

 

(LEVEL 3)

 

TOTAL

 

Long-term investments†:

 

 

 

 

 

 

 

 

 

Corporate bonds & notes

 

 

$

133,634,898

 

0

*

$

133,634,898

 

Asset-backed securities

 

 

348,325

 

 

348,325

 

Collateralized mortgage obligations

 

 

350,718

 

 

350,718

 

Municipal bonds

 

 

239,495

 

 

239,495

 

Sovereign bonds

 

 

1,283,488

 

 

1,283,488

 

U.S. government & agency obligations

 

 

243,037

 

 

243,037

 

Preferred stocks

 

$

2,194,508

 

 

 

2,194,508

 

Total investments

 

$

2,194,508

 

$

136,099,961

 

0

*

$

138,294,469

 

Other financial instruments:

 

 

 

 

 

 

 

 

 

Futures contracts

 

$

15,580

 

 

 

$

15,580

 

Total

 

$

2,210,088

 

$

136,099,961

 

0

*

$

138,310,049

 

 

LIABILITIES

 

 

QUOTED
PRICES

 

OTHER
SIGNIFICANT
OBSERVABLE
INPUTS

 

SIGNIFICANT
UNOBSERVABLE
INPUTS

 

 

 

DESCRIPTION

 

(LEVEL 1)

 

(LEVEL 2)

 

(LEVEL 3)

 

TOTAL

 

Other financial instruments:

 

 

 

 

 

 

 

 

 

Futures contracts

 

$

189,161

 

 

 

$

189,161

 

 

†See Schedule of Investments for additional detailed categorizations.

* Value is less than $1.

 

(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 repurchae 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 agreed-upon price and time, thereby determining the yield during the Fund’s holding period. When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian, acting on the Fund’s 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.

 

11


 

Notes to schedule of investments (unaudited) (continued)

 

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.

 

Futures contracts involve, to varying degrees, risk of loss. 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) 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 Fund’s investments 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.

 

(e) Counterparty risk and credit-risk-related contingent features of derivative instruments. The Fund may invest in certain securities or engage in other transactions, where the Fund is exposed to counterparty credit risk in addition to broader market risks. The Fund may invest in securities of issuers, which may also be considered counterparties as trading partners in other transactions. This may increase the risk of loss in the event of default or bankruptcy by the counterparty or if the counterparty otherwise fails to meet its contractual obligations. The Fund’s investment 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 Fund’s net assets or NAV over a specified period of time.  If these credit related contingent features were triggered, the derivatives counterparty could terminate the positions and demand payment or require additional collateral.

 

As of March 31, 2013, the Fund did not have any open derivative transactions with credit related contingent features in a net liability position.

 

(f) Security transactions.  Security transactions are accounted for on a trade date basis.

 

2.  Investments

 

At March 31, 2013, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

Gross unrealized appreciation

 

$

14,963,633

 

Gross unrealized depreciation

 

(717,744

)

Net unrealized appreciation

 

$

14,245,889

 

 

At March 31, 2013, the Fund had the following open futures contracts:

 

 

 

NUMBER OF
CONTRACTS

 

EXPIRATION
DATE

 

BASIS
VALUE

 

MARKET
VALUE

 

UNREALIZED
GAIN (LOSS)

 

Contracts to Buy:

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury 2-Year Notes

 

2

 

6/13

 

$

440,944

 

$

440,906

 

$

(38

)

U.S. Treasury 5-Year Notes

 

122

 

6/13

 

15,119,092

 

15,134,672

 

15,580

 

U.S. Treasury Ultra Long-Term Bonds

 

3

 

6/13

 

475,838

 

472,781

 

(3,057

)

 

 

 

 

 

 

 

 

 

 

12,485

 

Contracts to Sell:

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury 10-Year Notes

 

4

 

6/13

 

524,854

 

527,938

 

(3,084

)

U.S. Treasury 30-Year Bonds

 

127

 

6/13

 

18,164,548

 

18,347,530

 

(182,982

)

 

 

 

 

 

 

 

 

 

 

(186,066

)

Net unrealized loss on open futures contracts

 

 

 

 

 

 

 

$

(173,581

)

 

12


 

Notes to schedule of investments (unaudited) (continued)

 

3. Derivative instruments and hedging activities

 

GAAP requires enhanced disclosure about an entity’s derivative and hedging activities.

 

The following is a summary of the Fund’s derivative instruments categorized by risk exposure at March 31, 2013.

 

Futures Contracts

 

Primary Underlying
Risk

 

Unrealized
Appreciation

 

Unrealized
Depreciation

 

Total

 

Interest Rate Risk

 

$

15,580

 

$

(189,161

)

$

(173,581

)

 

During the period ended March 31, 2013, the volume of derivative activity for the Fund was as follows:

 

 

 

Average Market Value

 

Futures contracts (to buy)

 

$

15,988,564

 

Futures contracts (to sell)

 

19,432,855

 

 

13


 

ITEM 2.                                                  CONTROLS AND PROCEDURES.

 

(a)                                 The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in 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 registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal quarter that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

 

ITEM 3.                                                  EXHIBITS.

 

Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are attached hereto.

 



 

SIGNATURES

 

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

 

Western Asset Income Fund

 

 

 

By:

/s/ R. Jay Gerken

 

R. Jay Gerken

 

President

 

 

 

Date: May 24, 2013

 

 

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

 

By:

/s/ R. Jay Gerken

 

R. Jay Gerken

 

President

 

 

 

Date: May 24, 2013

 

 

 

By:

/s/ Richard F. Sennett

 

Richard F. Sennett

 

Principal Financial Officer

 

 

 

Date: May 24, 2013