0001193125-18-205879.txt : 20180627 0001193125-18-205879.hdr.sgml : 20180627 20180627171510 ACCESSION NUMBER: 0001193125-18-205879 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20180430 FILED AS OF DATE: 20180627 DATE AS OF CHANGE: 20180627 EFFECTIVENESS DATE: 20180627 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN ASSET FUNDS INC CENTRAL INDEX KEY: 0000863520 IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06110 FILM NUMBER: 18922502 BUSINESS ADDRESS: STREET 1: 100 INTERNATIONAL DRIVE CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 410-454-2760 MAIL ADDRESS: STREET 1: 100 INTERNATIONAL DRIVE STREET 2: 7TH FLOOR CITY: BALTIMORE STATE: MD ZIP: 21202 FORMER COMPANY: FORMER CONFORMED NAME: LM INSTITUTIONAL FUND ADVISORS I INC DATE OF NAME CHANGE: 19980818 FORMER COMPANY: FORMER CONFORMED NAME: WESTERN ASSET TRUST INC DATE OF NAME CHANGE: 19920703 0000863520 S000041845 Western Asset Macro Opportunities Fund C000129905 Class A LAAAX C000129906 Class C LAACX C000129907 Class FI LAFIX C000129908 Class I LAOIX C000129909 Class IS LAOSX C000174620 Class A2 N-CSRS 1 d517435dncsrs.htm WESTERN ASSET MACRO OPPORTUNITIES FUND Western Asset Macro Opportunities Fund
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-06110

 

 

Western Asset Funds, Inc.

(Exact name of registrant as specified in charter)

 

 

620 Eighth Avenue, 49th Floor, New York, NY 10018

(Address of principal executive offices) (Zip code)

 

 

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: 1-877-721-1926

Date of fiscal year end: October 31

Date of reporting period: April 30, 2018

 

 

 


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ITEM 1. REPORT TO STOCKHOLDERS.

The Semi-Annual Report to Stockholders is filed herewith.


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LOGO

 

Semi-Annual Report   April 30, 2018

WESTERN ASSET

MACRO OPPORTUNITIES FUND

 

 

 

LOGO

 

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE


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What’s inside      
Letter from the president     II  
Investment commentary     III  
Fund at a glance     1  
Fund expenses     2  
Spread duration     4  
Effective duration     5  
Schedule of investments     6  
Statement of assets and liabilities     40  
Statement of operations     42  
Statements of changes in net assets     43  
Financial highlights     44  
Notes to financial statements     50  
Board approval of management and subadvisory agreements     71  

 

Fund objective

The Fund seeks to maximize total return.

 

Letter from the president

 

LOGO

 

Dear Shareholder,

We are pleased to provide the semi-annual report of Western Asset Macro Opportunities Fund for the six-month reporting period ended April 30, 2018. Please read on for Fund performance information and a detailed look at prevailing economic and market conditions during the Fund’s reporting period.

As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our website, www.leggmason.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,

 

LOGO

Jane Trust, CFA

President and Chief Executive Officer

May 31, 2018

 

II    Western Asset Macro Opportunities Fund


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Investment commentary

 

Economic review

Economic activity in the U.S. was somewhat mixed during the six months ended April 30, 2018 (the “reporting period”). Looking back, the U.S. Department of Commerce reported that third and fourth quarter 2017 U.S. gross domestic product (“GDP”)i growth was 3.2% and 2.9%, respectively. Finally, the U.S. Department of Commerce’s second reading for first quarter 2018 GDP growth — released after the reporting period ended — was 2.2%. The deceleration in GDP growth in the first quarter reflected decelerations in personal consumption expenditures (“PCE”), exports, state and local government spending, and federal government spending and a downturn in residential fixed investment. These movements were partly offset by an upturn in private inventory investment and a larger increase in nonresidential fixed investment.

Job growth in the U.S. was solid overall and supported the economy during the reporting period. When the reporting period ended on April 30, 2018, the unemployment rate was 3.9%, as reported by the U.S. Department of Labor. This was the lowest unemployment rate since December 2000. The percentage of longer-term unemployed declined during the reporting period. In April 2018, 20.0% of Americans looking for a job had been out of work for more than six months, versus 23.8% when the period began.

Turning to the global economy, in its April 2018 World Economic Outlook Update, the International Monetary Fund (“IMF”)ii said, “World growth strengthened in 2017 to 3.8 percent, with a notable rebound in global trade. It was driven by an investment recovery in advanced economies, continued strong growth in emerging Asia, a notable upswing in emerging Europe, and signs of recovery in several commodity exporters. Global growth is expected to tick up to 3.9 percent this year and next, supported by strong momentum, favorable market sentiment, accommodative financial conditions, and the domestic and international repercussions of expansionary fiscal policy in the United States.” From a regional perspective, the IMF projects 2018 growth in the Eurozone will be 2.4%, versus 2.3% in 2017. Japan’s economy is expected to expand 1.2% in 2018, compared to 1.7% in 2017. Elsewhere, the IMF projects that overall growth in emerging market countries will accelerate to 4.9% in 2018, versus 4.8% in 2017.

 

Western Asset Macro Opportunities Fund   III


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Investment commentary (cont’d)

 

Market Review

Q. How did the Federal Reserve Board (the “Fed”)iii respond to the economic environment?

A. The Fed increased the federal funds rateiv twice during the reporting period. Looking back, at its meeting that concluded on September 20, 2017 — before the reporting period began — the Fed kept rates on hold, but reiterated its intention to begin reducing its balance sheet, saying, “In October, the Committee will initiate the balance sheet normalization program….” At its meeting that ended on December 13, 2017, the Fed raised rates to a range between 1.25% and 1.50%. As expected, the Fed kept rates on hold at its meeting that concluded on January 31, 2018. However, at its meeting that ended on March 21, 2018, the Fed again raised the federal funds rate, moving it to a range between 1.50% and 1.75%.

Q. What actions did international central banks take during the reporting period?

A. Central banks outside the U.S. largely maintained their accommodative monetary policy stances during the reporting period. Looking back, in December 2016, the European Central Bank (“ECB”)v extended its bond buying program until December 2017. From April 2017 through December 2017, the ECB purchased 60 billion-per-month of bonds. Finally, in October 2017, the ECB announced that it would continue to buy bonds through September 2018, but after December 2017 it would pare its purchases to 30 billion-per-month. However, the ECB did not change its key interest rates. In other developed countries, on November 2, 2017, the Bank of Englandvi raised rates from 0.25% to 0.50% — the first increase since July 2007. After holding rates steady at 0.10% for more than five years, in January 2016, the Bank of Japanvii announced that it cut the rate on current accounts that commercial banks hold with it to -0.10% and kept rates on hold during the reporting period. Elsewhere, the People’s Bank of Chinaviii kept rates steady at 4.35% during the reporting period.

Q. Did Treasury yields trend higher or lower during the reporting period?

A. Both short-term and longer-term Treasury yields moved higher during the six-month reporting period ended April 30, 2018. The yield for the two-year Treasury note began the reporting period at 1.60% — the low for the period — and ended the period at 2.49% — equaling its peak for the period. The yield for the ten-year Treasury began the reporting period at 2.38% and ended the period at 2.95%. The low for the period of 2.32% occurred several times in November 2017 and the high for the period of 3.03% took place on April 25, 2018.

Q. What factors impacted the spread sectors (non-Treasuries) during the reporting period?

A. The spread sectors generally posted weak results during the reporting period. Performance fluctuated given changing expectations for global growth, uncertainties regarding future central bank monetary policy, the signing of the U.S. tax reform bill in December 2017 and concerns over a global trade war. All told, the broad U.S. bond market, as measured by the Bloomberg Barclays U.S. Aggregate Indexix, returned -1.87% during the six-month reporting period ended April 30, 2018.

 

IV    Western Asset Macro Opportunities Fund


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Q. How did the high-yield bond market perform over the reporting period?

A. The U.S. high-yield bond market, as measured by the Bloomberg Barclays U.S. Corporate High Yield — 2% Issuer Cap Indexx, returned -0.17% for the six months ended April 30, 2018. The high-yield market posted a modest gain during the first three months of the reporting period. Those gains were then erased in February and March 2018. This turnaround was triggered by a number of factors, including fears that the Fed may take a more aggressive approach to rate hikes, trade war concerns and high-profile issues in the technology industry. However, the high yield market ended the reporting period on a positive note, as it posted a positive return in April 2018.

Q. How did the emerging market debt asset class perform over the reporting period?

A. The JPMorgan Emerging Markets Bond Index Global (“EMBI Global”)xi returned -2.87% during the six months ended April 30, 2018. The asset class produced choppy results during the reporting period. At times, it was supported by solid investor demand, less concern over a significant shift in U.S. trade policy and a weakening U.S. dollar. However, at other times it was dragged down by rising U.S. interest rates, periods of investor risk aversion and geopolitical issues. In addition, the U.S. dollar rallied in April 2018, negatively impacting the performance of the asset class.

Performance review

For the six months ended April 30, 2018, Class A shares of Western Asset Macro Opportunities Fund, excluding sales charges, returned -0.54%. The Fund’s unmanaged benchmark the ICE BofAML USD LIBOR 3-Month Constant Maturity Indexxii returned 0.69% for the same period. The Lipper Alternative Credit Focus Funds Category Average1 returned 0.51% over the same time frame.

 

Performance Snapshot as of April 30, 2018
(unaudited)
 
(excluding sales charges)   6 months  
Western Asset Macro Opportunities Fund:  

Class A

    -0.54

Class A2

    -0.53

Class C

    -0.92

Class FI

    -0.58

Class I

    -0.40

Class IS

    -0.33
ICE BofAML USD LIBOR 3-Month Constant Maturity Index     0.69
Lipper Alternative Credit Focus Funds
Category Average
    0.51

The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value, investment returns and yields will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please visit our website at www.leggmason.com/mutualfunds.

All share class returns assume the reinvestment of all distributions, including returns of capital, if any, at net asset value and the

 

1  Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the six-month period ended April 30, 2018 including the reinvestment of all distributions, including returns of capital, if any, calculated among the 265 funds in the Fund’s Lipper category, and excluding sales charges, if any.

 

Western Asset Macro Opportunities Fund   V


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Investment commentary (cont’d)

 

deduction of all Fund expenses. Returns have not been adjusted to include sales charges that may apply or the deduction of taxes that a shareholder would pay on Fund distributions. If sales charges were reflected, the performance quoted would be lower. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.

Fund performance figures reflect fee waivers and/or expense reimbursements, without which the performance would have been lower.

The 30-Day SEC Yields for the period ended April 30, 2018 for Class A, Class A2, Class C, Class FI, Class I and Class IS shares were 2.89%, 2.93%, 2.30%, 2.85%, 3.29% and 3.38%, respectively. The 30-Day SEC Yield, calculated pursuant to the standard SEC formula, is based on a Fund’s investments over an annualized trailing 30-day period, and not on the distributions paid by the Fund, which may differ.

 

Total Annual Operating Expenses (unaudited)

As of the Fund’s current prospectus dated March 1, 2018, the gross total annual fund operating expense ratios for Class A, Class A2, Class C, Class FI, Class I and Class IS shares were 1.55%, 3.23%, 2.30%, 1.58%, 1.30% and 1.21%, respectively.

Actual expenses may be higher. For example, expenses may be higher than those shown if average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile.

As a result of expense limitation arrangements, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets will not exceed 1.85% for Class A2 shares. This expense limitation arrangement cannot be terminated prior to December 31, 2019 without the Board of Directors’ consent.

The manager is permitted to recapture amounts waived and/or reimbursed to a class within two years after the fiscal year in which the manager earned the fee or incurred the expense if the class’ total annual operating expenses have fallen to a level below the expense limitation (“expense cap”) in effect at the time the fees were earned or the expenses incurred. In no case will the manager recapture any amount that would result, on any particular business day of the Fund, in the class’ total annual operating expenses exceeding the expense cap or any other lower limit then in effect.

As always, thank you for your confidence in our stewardship of your assets.

Sincerely,

 

LOGO

Jane Trust, CFA

President and Chief Executive Officer

May 31, 2018

RISKS: Fixed-income securities involve interest rate, credit, inflation and reinvestment risks. As interest rates rise, the value of fixed-income securities falls. High-yield (“junk”) bonds possess greater price volatility, illiquidity and possibility of default. Asset-backed, mortgage-backed or mortgage related securities are subject to prepayment and extension risks. International investments are subject to special risks, including currency fluctuations, as well as social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Derivatives,

 

VI    Western Asset Macro Opportunities Fund


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such as options and futures, can be illiquid, may disproportionately increase losses and have a potentially large impact on Fund performance. The Fund may use derivatives to a significant extent, which could result in substantial losses and greater volatility in the Fund’s net assets. Potential active and frequent trading may result in higher transaction costs and increased investor liability. The use of leverage may increase volatility and the possibility of loss. The manager’s investment style may become out of favor and/or the manager’s selection process may prove incorrect; which may have a negative impact on the Fund’s performance. The Fund is non-diversified and may invest its assets in a limited number of issuers or strategies. Please see the Fund’s prospectus for a more complete discussion of these and other risks and the Fund’s investment strategies.

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. Forecasts and predictions are inherently limited and should not be relied upon as an indication of actual or future performance.

 

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 International Monetary Fund (“IMF”) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

 

iii 

The Federal Reserve Board (the “Fed”) is responsible for the formulation of U.S. 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 

The European Central Bank (“ECB”) is responsible for the monetary system of the European Union and the euro currency.

 

vi 

The Bank of England (“BoE”), formally the Governor and Company of the BoE, is the central bank of the United Kingdom. The BoE’s purpose is to maintain monetary and financial stability.

 

vii 

The Bank of Japan is the central bank of Japan. The bank is responsible for issuing and handling currency and treasury securities, implementing monetary policy, maintaining the stability of the Japanese financial system and the yen currency.

 

viii 

The People’s Bank of China is the central bank of the People’s Republic of China with the power to carry out monetary policy and regulate financial institutions in mainland China.

 

ix 

The Bloomberg Barclays 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.

 

x 

The Bloomberg Barclays U.S. Corporate High Yield — 2% Issuer Cap Index is an index of the 2% Issuer Cap component of the Bloomberg Barclays U.S. Corporate High Yield Index, which covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market.

 

xi 

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.

 

xii 

The ICE BofAML USD LIBOR 3-Month Constant Maturity Index (formerly known as BofA Merrill Lynch USD LIBOR 3-Month Constant Maturity Index) is based on the assumed purchase of a synthetic instrument having three months to maturity and with a coupon equal to the closing quote for three-month LIBOR. That issue is sold the following day (priced at a yield equal to the current day closing three-month LIBOR rate) and is rolled into a new three-month instrument. The Index, therefore, will always have a constant maturity equal to exactly three months.

 

Western Asset Macro Opportunities Fund   VII


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Fund at a glance (unaudited)

 

Investment breakdown (%) as a percent of total investments

 

LOGO

 

The bar graph above represents the composition of the Fund’s investments as of April 30, 2018 and October 31, 2017 and does not include derivatives such as written options, futures contracts, swap contracts and forward foreign currency contracts. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time.

 

Represents less than 0.1%.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   1


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Fund expenses (unaudited)

 

Example

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end and back-end sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; service and/or distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested on November 1, 2017 and held for the six months ended April 30, 2018.

Actual expenses

The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.

 

Hypothetical example for comparison purposes

The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or back-end sales charges (loads). Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

Based on actual total return1           Based on hypothetical total return1  
     Actual
Total Return
Without
Sales
Charge2
    Beginning
Account
Value
    Ending
Account
Value
    Annualized
Expense
Ratio
    Expenses
Paid
During
the
Period3
               Hypothetical
Annualized
Total Return
    Beginning
Account
Value
    Ending
Account
Value
    Annualized
Expense
Ratio
    Expenses
Paid
During
the
Period3
 
Class A     -0.54   $ 1,000.00     $ 994.60       1.55   $ 7.67       Class A     5.00   $ 1,000.00     $ 1,017.11       1.55   $ 7.75  
Class A2     -0.53       1,000.00       994.70       1.54       7.62       Class A2     5.00       1,000.00       1,017.16       1.54       7.70  
Class C     -0.92       1,000.00       990.80       2.27       11.20       Class C     5.00       1,000.00       1,013.54       2.27       11.33  
Class FI     -0.58       1,000.00       994.20       1.63       8.06       Class FI     5.00       1,000.00       1,016.71       1.63       8.15  
Class I     -0.40       1,000.00       996.00       1.27       6.29       Class I     5.00       1,000.00       1,018.50       1.27       6.36  
Class IS     -0.33       1,000.00       996.70       1.20       5.94       Class IS     5.00       1,000.00       1,018.84       1.20       6.01  

 

2    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


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1 

For the six months ended April 30, 2018, unless otherwise noted.

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value and does not reflect the deduction of the applicable sales charge with respect to Class A and Class A2 shares or the applicable contingent deferred sales charge (“CDSC”) with respect to Class C shares. Total return is not annualized, as it may not be representative of the total return for the year. Performance figures may reflect compensating balance arrangements and/or expense reimbursements. In the absence of compensating balance arrangements and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

 

3 

Expenses (net of compensating balance arrangements and/or expense reimbursements) are equal to each class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (181), then divided by 365.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   3


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Spread duration (unaudited)

 

Economic exposure — April 30, 2018

 

LOGO

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 Fund’s sectors relative to the selected benchmark sectors as of the end of the reporting period.

 

Benchmark   — ICE BofAML USD LIBOR 3-Month Constant Maturity Index
ABS   — Asset-Backed Securities
EM   — Emerging Markets
HY   — High Yield
IG Credit   — Investment Grade Credit
MBS   — Mortgage-Backed Securities
WAMO   — Western Asset Macro Opportunities Fund

 

4    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


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Effective duration (unaudited)

 

Interest rate exposure — April 30, 2018

 

LOGO

Effective duration measures the sensitivity to changes in relevant interest rates. Effective duration is quantified as the % change in price resulting from a 100 basis points change in interest rates. For a security with positive effective duration, an increase in interest rates would result in a price decline and a decline in interest rates would result in a price increase. This chart highlights the interest rate exposure of the Fund’s sectors relative to the selected benchmark sectors as of the end of the reporting period.

 

Benchmark   — ICE BofAML USD LIBOR 3-Month Constant Maturity Index
ABS   — Asset-Backed Securities
EM   — Emerging Markets
HY   — High Yield
IG Credit   — Investment Grade Credit
MBS   — Mortgage-Backed Securities
WAMO   — Western Asset Macro Opportunities Fund

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   5


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Schedule of investments (unaudited)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Corporate Bonds & Notes — 26.9%  
Consumer Discretionary — 2.1%  

Auto Components — 0.1%

 

Goodyear Tire & Rubber Co., Senior Notes

    5.000     5/31/26       420,000     $ 401,625  

IHO Verwaltungs GmbH, Senior Secured Bonds (4.125% Cash or 4.875% PIK)

    4.125     9/15/21       420,000       422,278  (a)(b) 

IHO Verwaltungs GmbH, Senior Secured Bonds (4.750% Cash or 5.500% PIK)

    4.750     9/15/26       420,000       403,200  (a)(b) 

Total Auto Components

                            1,227,103  

Diversified Consumer Services — 0.0%

 

Wesleyan University, Bonds

    4.781     7/1/2116       580,000       577,132  

Hotels, Restaurants & Leisure — 0.1%

 

1011778 BC ULC/New Red Finance Inc., Secured Notes

    5.000     10/15/25       650,000       628,673  (a) 

Hilton Worldwide Finance LLC/Hilton Worldwide Finance Corp., Senior Notes

    4.875     4/1/27       820,000       795,400  

Total Hotels, Restaurants & Leisure

                            1,424,073  

Household Durables — 0.0%

 

PulteGroup Inc., Senior Notes

    6.375     5/15/33       320,000       334,880  

William Lyon Homes Inc., Senior Notes

    5.875     1/31/25       400,000       390,620  

Total Household Durables

                            725,500  

Internet & Direct Marketing Retail — 1.0%

 

Amazon.com Inc., Senior Notes

    4.950     12/5/44       350,000       396,745  

Amazon.com Inc., Senior Notes

    4.050     8/22/47       6,100,000       6,059,595  (a) 

Amazon.com Inc., Senior Notes

    4.250     8/22/57       8,520,000       8,478,913  (a) 

Netflix Inc., Senior Bonds

    5.500     2/15/22       320,000       333,600  

Netflix Inc., Senior Bonds

    5.875     2/15/25       530,000       545,741  

Total Internet & Direct Marketing Retail

                            15,814,594  

Media — 0.8%

 

Altice France SA, Senior Secured Notes

    7.375     5/1/26       870,000       846,075  (a) 

CCO Holdings LLC/CCO Holdings Capital Corp., Senior Notes

    5.375     5/1/25       290,000       285,831  (a) 

CCO Holdings LLC/CCO Holdings Capital Corp., Senior Notes

    5.125     5/1/27       290,000       272,446  (a) 

Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes

    4.200     3/15/28       4,300,000       4,079,430  

Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes

    5.375     4/1/38       1,000,000       986,945  

Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes

    6.834     10/23/55       3,280,000       3,672,589  

DISH DBS Corp., Senior Notes

    5.875     11/15/24       710,000       607,050  

Myriad International Holdings BV, Senior Notes

    4.850     7/6/27       1,850,000       1,863,598  (a) 

Time Warner Cable LLC, Debentures

    7.300     7/1/38       190,000       224,042  

 

See Notes to Financial Statements.

 

6    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Media — continued

 

Virgin Media Secured Finance PLC, Senior Secured Bonds

    5.250     1/15/26       300,000     $ 286,875  (a) 

Total Media

                            13,124,881  

Multiline Retail — 0.1%

 

Dollar Tree Inc., Senior Notes

    5.750     3/1/23       1,140,000       1,189,533  

Total Consumer Discretionary

                            34,082,816  
Consumer Staples — 1.0%                                

Beverages — 0.4%

                               

Anheuser-Busch InBev Finance Inc., Senior Notes

    3.650     2/1/26       2,770,000       2,712,749  

Anheuser-Busch InBev Finance Inc., Senior Notes

    4.900     2/1/46       310,000       322,836  

Anheuser-Busch InBev Worldwide Inc., Senior Notes

    4.000     4/13/28       1,000,000       995,505  

Anheuser-Busch InBev Worldwide Inc., Senior Notes

    4.600     4/15/48       1,970,000       1,960,617  

Constellation Brands Inc., Senior Notes

    4.750     11/15/24       160,000       167,099  

Cott Holdings Inc., Senior Notes

    5.500     4/1/25       390,000       388,050  (a) 

Pernod-Ricard SA, Senior Notes

    5.500     1/15/42       920,000       1,042,741  (a) 

Total Beverages

                            7,589,597  

Food Products — 0.3%

                               

Fonterra Cooperative Group Ltd., Senior Notes

    3.600     1/29/19       1,000,000  CNY      156,425  (c) 

Kraft Heinz Foods Co., Senior Notes

    4.125     7/1/27       2,140,000  GBP      3,200,939  (c) 

Kraft Heinz Foods Co., Senior Notes

    5.200     7/15/45       1,010,000       1,006,171  

Lamb Weston Holdings Inc., Senior Notes

    4.875     11/1/26       320,000       318,000  (a) 

Total Food Products

                            4,681,535  

Tobacco — 0.3%

                               

BAT Capital Corp., Senior Notes

    3.557     8/15/27       2,020,000       1,893,576  (a) 

BAT Capital Corp., Senior Notes

    4.540     8/15/47       2,500,000       2,389,418  (a) 

Reynolds American Inc., Senior Notes

    6.150     9/15/43       200,000       234,254  

Total Tobacco

                            4,517,248  

Total Consumer Staples

                            16,788,380  
Energy — 4.4%                                

Energy Equipment & Services — 0.2%

                               

Ensco PLC, Senior Notes

    8.000     1/31/24       288,000       286,560  

Halliburton Co., Senior Bonds

    3.800     11/15/25       970,000       964,953  

Halliburton Co., Senior Notes

    4.850     11/15/35       1,250,000       1,329,576  

KCA Deutag UK Finance PLC, Senior Secured Notes

    9.875     4/1/22       1,160,000       1,225,250  (a) 

Total Energy Equipment & Services

                            3,806,339  

Oil, Gas & Consumable Fuels — 4.2%

                               

Anadarko Petroleum Corp., Senior Notes

    3.450     7/15/24       490,000       472,251  

Anadarko Petroleum Corp., Senior Notes

    5.550     3/15/26       1,670,000       1,802,989  

Anadarko Petroleum Corp., Senior Notes

    4.500     7/15/44       1,010,000       958,910  

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   7


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Oil, Gas & Consumable Fuels — continued

                               

Apache Corp., Senior Notes

    5.100     9/1/40       3,980,000     $ 4,037,603  

Apache Corp., Senior Notes

    4.750     4/15/43       1,720,000       1,723,756  

Berry Petroleum Co. Escrow

                440,000       0  *(d)(e)(f) 

Blue Racer Midstream LLC/Blue Racer Finance Corp., Senior Notes

    6.125     11/15/22       1,170,000       1,205,100  (a) 

Cheniere Corpus Christi Holdings LLC, Senior Secured Notes

    5.125     6/30/27       380,000       371,925  

Chesapeake Energy Corp., Senior Notes

    6.125     2/15/21       130,000       131,625  

Chesapeake Energy Corp., Senior Notes

    5.750     3/15/23       1,040,000       964,600  

DCP Midstream Operating LP, Senior Notes

    6.750     9/15/37       900,000       978,750  (a) 

Devon Energy Corp., Senior Notes

    5.850     12/15/25       1,950,000       2,174,297  

Devon Energy Corp., Senior Notes

    5.600     7/15/41       30,000       33,200  

Devon Energy Corp., Senior Notes

    5.000     6/15/45       1,340,000       1,399,602  

Ecopetrol SA, Senior Bonds

    4.125     1/16/25       2,600,000       2,512,250  

Ecopetrol SA, Senior Notes

    5.875     9/18/23       2,310,000       2,463,592  

Ecopetrol SA, Senior Notes

    5.375     6/26/26       2,470,000       2,553,980  

Ecopetrol SA, Senior Notes

    5.875     5/28/45       1,902,000       1,841,136  

Enterprise Products Operating LLC, Junior Subordinated Notes (5.375% to 2/15/28 then 3 mo. USD LIBOR + 2.570%)

    5.375     2/15/78       780,000       740,807  (g) 

EP Energy LLC/Everest Acquisition Finance Inc., Senior Notes

    6.375     6/15/23       1,090,000       583,150  

Exxon Mobil Corp., Senior Notes

    4.114     3/1/46       1,210,000       1,241,390  

Genesis Energy LP/Genesis Energy Finance Corp., Senior Notes

    6.750     8/1/22       950,000       969,000  

Kerr-McGee Corp., Notes

    6.950     7/1/24       1,040,000       1,196,856  

Kinder Morgan Energy Partners LP, Senior Notes

    3.500     9/1/23       540,000       525,678  

Kinder Morgan Energy Partners LP, Senior Notes

    4.250     9/1/24       540,000       539,667  

Kinder Morgan Inc., Senior Notes

    5.300     12/1/34       390,000       395,753  

Magnum Hunter Resources Corp. Escrow

                1,610,000       0  *(d)(e)(f) 

MEG Energy Corp., Senior Notes

    6.375     1/30/23       460,000       417,450  (a) 

MEG Energy Corp., Senior Notes

    7.000     3/31/24       700,000       631,750  (a) 

MPLX LP, Senior Notes

    4.875     12/1/24       1,060,000       1,100,348  

MPLX LP, Senior Notes

    4.875     6/1/25       500,000       518,364  

Noble Energy Inc., Senior Notes

    3.850     1/15/28       1,580,000       1,526,270  

Oasis Petroleum Inc., Senior Notes

    6.875     3/15/22       610,000       629,825  

Occidental Petroleum Corp., Senior Notes

    4.625     6/15/45       550,000       580,621  

Occidental Petroleum Corp., Senior Notes

    4.400     4/15/46       130,000       134,009  

Occidental Petroleum Corp., Senior Notes

    4.100     2/15/47       790,000       779,224  

Petrobras Global Finance BV, Senior Notes

    7.375     1/17/27       2,450,000       2,631,300  

Petrobras Global Finance BV, Senior Notes

    5.999     1/27/28       4,230,000       4,131,018  (a) 

Petrobras Global Finance BV, Senior Notes

    6.750     1/27/41       1,150,000       1,094,225  

 

See Notes to Financial Statements.

 

8    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Oil, Gas & Consumable Fuels — continued

                               

Petrobras Global Finance BV, Senior Notes

    5.625     5/20/43       2,680,000     $ 2,247,448  

Petrobras Global Finance BV, Senior Notes

    6.850     6/5/2115       2,610,000       2,424,690  

Petroleos Mexicanos, Senior Notes

    6.375     1/23/45       3,050,000       2,833,450  

QEP Resources Inc., Senior Notes

    5.250     5/1/23       370,000       362,600  

Range Resources Corp., Senior Notes

    5.875     7/1/22       280,000       284,900  

Range Resources Corp., Senior Notes

    5.000     3/15/23       200,000       193,400  

Range Resources Corp., Senior Notes

    4.875     5/15/25       590,000       549,069  

Rockies Express Pipeline LLC, Senior Notes

    6.875     4/15/40       1,180,000       1,368,800  (a) 

RSP Permian Inc., Senior Notes

    6.625     10/1/22       190,000       198,550  

Sanchez Energy Corp., Senior Notes

    6.125     1/15/23       2,050,000       1,490,760  

Schlumberger Holdings Corp., Senior Notes

    4.000     12/21/25       2,470,000       2,476,293  (a) 

Summit Midstream Holdings LLC/Summit Midstream Finance Corp., Senior Notes

    5.500     8/15/22       320,000       312,000  

Targa Resources Partners LP/Targa Resources Partners Finance Corp., Senior Notes

    4.250     11/15/23       2,590,000       2,454,025  

Teine Energy Ltd., Senior Notes

    6.875     9/30/22       1,175,000       1,207,312  (a) 

Transcontinental Gas Pipe Line Co., LLC, Senior Notes

    7.850     2/1/26       1,350,000       1,648,490  

Williams Cos. Inc., Senior Notes

    8.750     3/15/32       1,140,000       1,507,650  

WPX Energy Inc., Senior Notes

    8.250     8/1/23       1,210,000       1,379,400  

Total Oil, Gas & Consumable Fuels

                            68,931,108  

Total Energy

                            72,737,447  
Financials — 12.9%                                

Banks — 11.6%

                               

ABN AMRO Bank NV, Junior Subordinated Bonds (5.750% to 9/22/20 then EUR 5 year Swap Annual + 5.452%)

    5.750     9/22/20       4,500,000  EUR      5,936,862  (c)(g)(h) 

BAC Capital Trust XIV, Junior Subordinated Notes (the greater of 3 mo. USD LIBOR + 0.400% or 4.000%)

    4.000     5/16/18       1,400,000       1,219,750  (g)(h) 

Banco Bilbao Vizcaya Argentaria SA, Junior Subordinated (6.125% to 11/16/27 then USD 5 year Swap Rate + 3.870%)

    6.125     11/16/27       1,800,000       1,744,290  (g)(h) 

Banco Bilbao Vizcaya Argentaria SA, Junior Subordinated Bonds (9.000% to 5/9/18 then USD 5 year Swap Rate + 8.262%)

    9.000     5/9/18       1,800,000       1,803,452  (c)(g)(h) 

Banco Bilbao Vizcaya Argentaria SA, Junior Subordinated Bonds (8.875% to 4/14/21 then EUR 5 year Swap Annual + 9.177%)

    8.875     4/14/21       5,400,000  EUR      7,671,388  (c)(g)(h) 

Banco Mercantil De Norte, Junior Subordinated Notes (6.875% to 7/6/22 then 5 year Treasury Constant Maturity Rate + 5.035%)

    6.875     7/6/22       830,000       836,225  (a)(g)(h) 

Banco Mercantil De Norte, Junior Subordinated Notes (7.625% to 1/10/28 then 10 year Treasury Constant Maturity Rate + 5.353%)

    7.625     1/10/28       1,830,000       1,896,338  (a)(g)(h) 

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   9


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Banks — continued

                               

Banco Santander SA, Junior Subordinated Bonds (6.375% to 5/19/19 then USD 5 year Swap Rate + 4.788%)

    6.375     5/19/19       2,000,000     $ 2,031,660  (c)(g)(h) 

Banco Santander SA, Junior Subordinated Bonds (6.250% to 9/11/21 then EUR 5 year Swap Annual + 5.640%)

    6.250     9/11/21       5,700,000  EUR      7,631,459  (c)(g)(h) 

Bank of America Corp., Junior Subordinated (5.875% to 3/15/28 then 3 mo. USD LIBOR + 2.931%)

    5.875     3/15/28       6,260,000       6,255,305  (g)(h) 

Bank of America Corp., Junior Subordinated Bonds (6.100% to 3/17/25 then 3 mo. USD LIBOR + 3.898%)

    6.100     3/17/25       3,810,000       3,952,875  (g)(h) 

Bank of America Corp., Junior Subordinated Notes (6.250% to 9/5/24 then 3 mo. USD LIBOR + 3.705%)

    6.250     9/5/24       2,880,000       3,006,000  (g)(h) 

Bank of America Corp., Subordinated Notes

    4.250     10/22/26       6,170,000       6,120,981  

Barclays Bank PLC, Subordinated Notes

    7.625     11/21/22       410,000       449,206  

Barclays PLC, Junior Bonds (8.000% to 12/15/20 then EUR 5 year Swap Annual + 6.750%)

    8.000     12/15/20       4,300,000  EUR      5,984,391  (g)(h) 

BNP Paribas SA, Junior Subordinated Bonds (6.125% to 6/17/22 then EUR 5 year Swap Annual + 5.230%)

    6.125     6/17/22       2,424,000  EUR      3,333,526  (c)(g)(h) 

BNP Paribas SA, Junior Subordinated Notes (7.625% to 3/30/21 then USD 5 year Swap Rate + 6.314%)

    7.625     3/30/21       1,320,000       1,425,270  (a)(g)(h) 

BNP Paribas SA, Junior Subordinated Notes (7.375% to 8/19/25 then USD 5 year Swap Rate + 5.150%)

    7.375     8/19/25       690,000       752,963  (a)(g)(h) 

BPCE SA, Subordinated Notes (2.750% to 11/30/22 then EUR 5 year Swap Annual + 2.370%)

    2.750     11/30/27       4,500,000  EUR      5,810,473  (c)(g) 

Citigroup Inc., Junior Subordinated Bonds (5.350% to 5/15/23 then 3 mo. USD LIBOR + 3.466%)

    5.350     5/15/23       1,910,000       1,886,125  (g)(h) 

Citigroup Inc., Junior Subordinated Bonds (6.300% to 5/15/24 then 3 mo. USD LIBOR + 3.423%)

    6.300     5/15/24       1,720,000       1,760,420  (g)(h) 

Citigroup Inc., Junior Subordinated Bonds (5.950% to 5/15/25 then 3 mo. USD LIBOR + 3.905%)

    5.950     5/15/25       11,210,000       11,364,138  (g)(h) 

Citigroup Inc., Senior Notes

    8.125     7/15/39       791,000       1,149,049  

Citigroup Inc., Senior Notes

    4.650     7/30/45       825,000       850,905  

Citigroup Inc., Subordinated Notes

    4.600     3/9/26       1,910,000       1,930,897  

Citigroup Inc., Subordinated Notes

    4.450     9/29/27       1,590,000       1,582,973  

Citigroup Inc., Subordinated Notes

    4.125     7/25/28       1,870,000       1,803,849  

Citigroup Inc., Subordinated Notes

    5.300     5/6/44       1,820,000       1,945,475  

Compass Bank, Subordinated Notes

    3.875     4/10/25       490,000       474,609  

Cooperatieve Rabobank U.A., Junior Subordinated Bonds (6.625% to 6/29/21 then EUR 5 year Swap Annual + 6.697%)

    6.625     6/29/21       5,400,000  EUR      7,462,220  (c)(g)(h) 

Credit Agricole SA, Junior Subordinated Bonds (6.500% to 6/23/21 then EUR 5 year Swap Annual + 5.120%)

    6.500     6/23/21       2,672,000  EUR      3,639,225  (c)(g)(h) 

Credit Agricole SA, Junior Subordinated Notes (8.125% to 12/23/25 then USD 5 year Swap Rate + 6.185%)

    8.125     12/23/25       1,030,000       1,172,887  (a)(g)(h) 

 

See Notes to Financial Statements.

 

10    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Banks — continued

                               

Danske Bank A/S, Junior Subordinated Notes (5.875% to 4/6/22 then EUR 5 year Swap Annual + 5.471%)

    5.875     4/6/22       4,220,000  EUR    $ 5,707,630  (c)(g)(h) 

HSBC Holdings PLC, Junior Subordinated Bonds (6.375% to 9/17/24 then USD 5 year ICE Swap Rate + 3.705%)

    6.375     9/17/24       570,000       584,820  (g)(h) 

HSBC Holdings PLC, Junior Subordinated Bonds (6.375% to 3/30/25 then USD 5 year ICE Swap Rate + 4.368%)

    6.375     3/30/25       860,000       887,950  (g)(h) 

HSBC Holdings PLC, Senior Notes

    4.300     3/8/26       650,000       660,351  

HSBC Holdings PLC, Subordinated Bonds (6.250% to 3/23/23 then USD 5 year ICE Swap Rate + 3.453%)

    6.250     3/23/23       1,800,000       1,827,018  (g)(h) 

HSBC Holdings PLC, Subordinated Bonds (6.500% to 3/23/28 then USD 5 year ICE Swap Rate + 3.606%)

    6.500     3/23/28       1,800,000       1,829,448  (g)(h) 

HSBC Holdings PLC, Subordinated Notes

    4.250     8/18/25       590,000       584,482  

ING Groep NV, Subordinated Notes (2.500% to 2/15/24 then EUR 5 year Swap Annual + 2.150%)

    2.500     2/15/29       4,400,000  EUR      5,582,043  (c)(g) 

Intesa Sanpaolo SpA, Junior Subordinated Notes (7.000% to 1/19/21 then EUR 5 year Swap Annual + 6.884%)

    7.000     1/19/21       5,527,000  EUR      7,337,579  (c)(g)(h) 

Intesa Sanpaolo SpA, Subordinated Bonds

    5.017     6/26/24       200,000       196,020  (a) 

Intesa Sanpaolo SpA, Subordinated Notes

    5.710     1/15/26       410,000       412,069  (a) 

KBC Group NV, Subordinated Notes (1.875% to 3/11/22 then EUR 5 year Swap Annual + 1.500%)

    1.875     3/11/27       2,600,000  EUR      3,247,217  (c)(g) 

Royal Bank of Scotland Group PLC, Junior Subordinated Notes (8.625% to 8/15/21 then USD 5 year Swap Rate + 7.598%)

    8.625     8/15/21       1,430,000       1,569,425  (g)(h) 

Royal Bank of Scotland Group PLC, Subordinated Notes

    6.125     12/15/22       1,370,000       1,454,023  

Royal Bank of Scotland Group PLC, Subordinated Notes

    6.100     6/10/23       1,080,000       1,149,286  

Royal Bank of Scotland Group PLC, Subordinated Notes

    6.000     12/19/23       400,000       425,348  

Royal Bank of Scotland Group PLC, Subordinated Notes

    5.125     5/28/24       11,480,000       11,673,913  

Santander UK Group Holdings PLC, Subordinated Notes

    4.750     9/15/25       680,000       679,801  (a) 

Santander UK Group Holdings PLC, Subordinated Notes

    5.625     9/15/45       440,000       483,040  (a) 

Societe Generale SA, Subordinated Bonds (2.500% to 9/16/21 then EUR 5 year Swap Annual + 1.830%)

    2.500     9/16/26       4,500,000  EUR      5,700,099  (c)(g) 

Standard Chartered PLC, Subordinated Notes

    5.700     3/26/44       1,200,000       1,334,858  (a) 

UniCredit SpA, Junior Subordinated Bonds (6.625% to 6/3/23 then EUR 5 year Swap Annual + 6.387%)

    6.625     6/3/23       7,790,000  EUR      10,248,694  (c)(g)(h) 

Wachovia Capital Trust III, Junior Subordinated Bonds (the greater of 3 mo. USD LIBOR + 0.930% or 5.570%)

    5.570     5/31/18       13,597,000       13,495,022  (g)(h) 

Wells Fargo & Co., Junior Subordinated Bonds (5.875% to 6/15/25 then 3 mo. USD LIBOR + 3.990%)

    5.875     6/15/25       847,000       877,704  (g)(h) 

Wells Fargo & Co., Senior Notes

    3.550     9/29/25       2,290,000       2,218,759  

Wells Fargo & Co., Subordinated Notes

    4.300     7/22/27       4,960,000       4,907,987  

Wells Fargo & Co., Subordinated Notes

    4.400     6/14/46       1,420,000       1,335,222  

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   11


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Banks — continued

                               

Wells Fargo & Co., Subordinated Notes

    4.750     12/7/46       500,000     $ 494,490  

Total Banks

                            191,789,484  

Capital Markets — 0.9%

                               

Credit Suisse Group Funding Guernsey Ltd., Senior Notes

    4.875     5/15/45       3,130,000       3,248,074  

Goldman Sachs Capital II, Junior Subordinated Bonds (3 mo. USD LIBOR + 0.768%, 4.000% floor)

    4.000     5/31/18       149,000       127,320  (g)(h) 

Goldman Sachs Capital III, Junior Subordinated Bonds (3 mo. USD LIBOR + 0.770% , 4.000% floor)

    4.000     5/31/18       96,000       81,840  (g)(h) 

Goldman Sachs Group Inc., Senior Bonds

    4.750     10/21/45       570,000       581,213  

Goldman Sachs Group Inc., Subordinated Notes

    4.250     10/21/25       610,000       604,589  

Goldman Sachs Group Inc., Subordinated Notes

    6.750     10/1/37       1,700,000       2,066,352  

Goldman Sachs Group Inc., Subordinated Notes

    5.150     5/22/45       4,590,000       4,783,426  

UBS Group AG, Junior Subordinated Bonds (5.750% to 2/19/22 then EUR 5 year Swap Annual + 5.287%)

    5.750     2/19/22       2,080,000  EUR      2,816,919  (c)(g)(h) 

Total Capital Markets

                            14,309,733  

Consumer Finance — 0.0%

 

Ally Financial Inc., Senior Notes

    8.000     11/1/31       240,000       292,848  

Diversified Financial Services — 0.2%

 

AerCap Ireland Capital DAC/AerCap Global Aviation Trust, Senior Bonds

    4.625     7/1/22       333,000       341,220  

DAE Funding LLC, Senior Notes

    4.500     8/1/22       194,000       187,210  (a) 

DAE Funding LLC, Senior Notes

    5.000     8/1/24       200,000       193,260  (a) 

ILFC E-Capital Trust I, Junior Subordinated Notes ((Highest of 3 mo. USD LIBOR, 10 year U.S. Treasury Constant Maturity Rate and 30 year U.S. Treasury Constant Maturity Rate) + 1.550%)

    4.640     12/21/65       740,000       714,100  (a)(g) 

International Lease Finance Corp., Senior Notes

    5.875     8/15/22       640,000       685,734  

Park Aerospace Holdings Ltd., Senior Notes

    5.250     8/15/22       342,000       341,145  (a) 

Park Aerospace Holdings Ltd., Senior Notes

    5.500     2/15/24       560,000       545,300  (a) 

Toll Road Investors Partnership II LP, Senior Bonds

    0.000     2/15/38       200,000       59,486  (a) 

Toll Road Investors Partnership II LP, Senior Notes

    0.000     2/15/24       1,020,000       723,456  (a) 

Total Diversified Financial Services

                            3,790,911  

Insurance — 0.2%

                               

Teachers Insurance & Annuity Association of America, Subordinated Notes

    4.900     9/15/44       2,670,000       2,872,070  (a) 

Thrifts & Mortgage Finance — 0.0%

                               

Quicken Loans Inc., Senior Notes

    5.750     5/1/25       620,000       610,700  (a) 

Total Financials

                            213,665,746  

 

See Notes to Financial Statements.

 

12    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Health Care — 3.5%                                

Health Care Equipment & Supplies — 0.4%

                               

Becton, Dickinson & Co., Senior Notes

    3.700     6/6/27       4,020,000     $ 3,815,134  

DJO Finance LLC/DJO Finance Corp., Secured Notes

    10.750     4/15/20       1,420,000       1,384,500  

DJO Finco Inc./DJO Finance LLC/DJO Finance Corp., Secured Notes

    8.125     6/15/21       1,170,000       1,177,312  (a) 

Total Health Care Equipment & Supplies

                            6,376,946  

Health Care Providers & Services — 1.1%

                               

Cardinal Health Inc., Senior Notes

    3.410     6/15/27       990,000       922,151  

Catholic Health Initiatives, Secured Bonds

    4.350     11/1/42       3,550,000       3,260,097  

Centene Corp., Senior Notes

    4.750     5/15/22       180,000       182,700  

Centene Corp., Senior Notes

    6.125     2/15/24       290,000       304,500  

Centene Corp., Senior Notes

    4.750     1/15/25       610,000       594,750  

CVS Health Corp., Senior Notes

    4.780     3/25/38       1,570,000       1,557,461  

CVS Health Corp., Senior Notes

    5.050     3/25/48       8,690,000       8,862,110  

DaVita Inc., Senior Notes

    5.000     5/1/25       60,000       57,012  

Dignity Health, Secured Bonds

    5.267     11/1/64       760,000       776,678  

Hackensack Meridian Health Inc., Secured Bonds

    4.211     7/1/48       1,060,000       1,056,671  

HCA Inc., Senior Bonds

    5.375     2/1/25       340,000       339,150  

HCA Inc., Senior Secured Bonds

    4.500     2/15/27       240,000       230,400  

HCA Inc., Senior Secured Notes

    5.500     6/15/47       80,000       75,800  

Universal Hospital Services Inc., Secured Notes

    7.625     8/15/20       150,000       151,875  

Total Health Care Providers & Services

                            18,371,355  

Pharmaceuticals — 2.0%

                               

Actavis Funding SCS, Senior Notes

    4.550     3/15/35       70,000       66,110  

Teva Pharmaceutical Finance Netherlands III BV, Senior Notes

    2.800     7/21/23       70,000       58,793  

Teva Pharmaceutical Finance Netherlands III BV, Senior Notes

    3.150     10/1/26       530,000       423,195  

Valeant Pharmaceuticals International Inc., Senior Notes

    7.500     7/15/21       2,270,000       2,315,400  (a) 

Valeant Pharmaceuticals International Inc., Senior Notes

    5.500     3/1/23       1,440,000       1,306,800  (a) 

Valeant Pharmaceuticals International Inc., Senior Notes

    5.875     5/15/23       3,760,000       3,468,600  (a) 

Valeant Pharmaceuticals International Inc., Senior Notes

    6.125     4/15/25       15,730,000       14,246,976  (a) 

Valeant Pharmaceuticals International Inc., Senior Notes

    9.000     12/15/25       2,980,000       3,028,425  (a) 

Valeant Pharmaceuticals International Inc., Senior Notes

    9.250     4/1/26       6,030,000       6,165,675  (a) 

Valeant Pharmaceuticals International Inc., Senior Secured Notes

    6.500     3/15/22       240,000       249,900  (a) 

Valeant Pharmaceuticals International Inc., Senior Secured Notes

    7.000     3/15/24       680,000       719,950  (a) 

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   13


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Pharmaceuticals — continued

 

Valeant Pharmaceuticals International Inc., Senior Secured Notes

    5.500     11/1/25       460,000     $ 459,425  (a) 

Total Pharmaceuticals

                            32,509,249  

Total Health Care

                            57,257,550  
Industrials — 0.8%                                

Air Freight & Logistics — 0.2%

                               

XPO CNW Inc., Senior Bonds

    6.700     5/1/34       850,000       884,000  

XPO Logistics Inc., Senior Notes

    6.500     6/15/22       1,930,000       1,999,963  (a) 

Total Air Freight & Logistics

                            2,883,963  

Airlines — 0.0%

                               

American Airlines, Pass-Through Trust, Senior Secured Bonds

    5.600     7/15/20       348,214       354,778  (a) 

Commercial Services & Supplies — 0.0%

                               

United Rentals North America Inc., Senior Notes

    5.750     11/15/24       410,000       424,862  

United Rentals North America Inc., Senior Notes

    5.875     9/15/26       310,000       324,338  

Total Commercial Services & Supplies

                            749,200  

Industrial Conglomerates — 0.2%

                               

General Electric Co., Senior Notes

    5.875     1/14/38       1,360,000       1,546,929  

General Electric Co., Senior Notes

    6.875     1/10/39       1,330,000       1,695,472  

Total Industrial Conglomerates

                            3,242,401  

Machinery — 0.4%

                               

BlueLine Rental Finance Corp./BlueLine Rental LLC, Senior Secured Notes

    9.250     3/15/24       5,950,000       6,342,402  (a) 

Total Industrials

                            13,572,744  
Information Technology — 0.6%                                

Communications Equipment — 0.0%

                               

CommScope Technologies LLC, Senior Notes

    5.000     3/15/27       320,000       307,200  (a) 

IT Services — 0.0%

                               

First Data Corp., Senior Notes

    7.000     12/1/23       70,000       73,422  (a) 

First Data Corp., Senior Secured Notes

    5.000     1/15/24       730,000       738,212  (a) 

Total IT Services

                            811,634  

Software — 0.3%

                               

Microsoft Corp., Senior Notes

    3.300     2/6/27       3,700,000       3,631,679  

Microsoft Corp., Senior Notes

    3.700     8/8/46       800,000       769,551  

Total Software

                            4,401,230  

Technology Hardware, Storage & Peripherals — 0.3%

                               

Dell International LLC/EMC Corp., Senior Secured Notes

    3.480     6/1/19       2,510,000       2,516,290  (a) 

Dell International LLC/EMC Corp., Senior Secured Notes

    4.420     6/15/21       2,080,000       2,120,389  (a) 

Total Technology Hardware, Storage & Peripherals

                            4,636,679  

Total Information Technology

                            10,156,743  

 

See Notes to Financial Statements.

 

14    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Materials — 0.5%                                

Containers & Packaging — 0.1%

                               

Ardagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., Senior Notes

    6.000     2/15/25       250,000     $ 253,438  (a) 

Ardagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., Senior Secured Notes

    4.625     5/15/23       480,000       483,000  (a) 

Total Containers & Packaging

                            736,438  

Metals & Mining — 0.4%

                               

Anglo American Capital PLC, Senior Notes

    3.625     9/11/24       560,000       535,484  (a) 

Anglo American Capital PLC, Senior Notes

    4.000     9/11/27       270,000       254,751  (a) 

Anglo American Capital PLC, Senior Notes

    4.500     3/15/28       640,000       628,481  (a) 

Arconic Inc., Senior Notes

    5.870     2/23/22       780,000       819,975  

BHP Billiton Finance USA Ltd., Subordinated Notes (6.750% to 10/19/25 then USD 5 year Swap Rate + 5.093%)

    6.750     10/19/75       2,690,000       2,998,678  (a)(g) 

Glencore Funding LLC, Senior Notes

    3.875     10/27/27       1,190,000       1,122,333  (a) 

Yamana Gold Inc., Senior Notes

    4.625     12/15/27       920,000       893,288  (a) 

Total Metals & Mining

                            7,252,990  

Total Materials

                            7,989,428  
Telecommunication Services — 0.4%  

Diversified Telecommunication Services — 0.3%

 

AT&T Inc., Senior Notes

    4.900     8/14/37       1,200,000       1,216,576  

AT&T Inc., Senior Notes

    5.300     8/14/58       1,980,000       2,009,329  

Level 3 Financing Inc., Senior Notes

    6.125     1/15/21       480,000       486,600  

Telecom Italia SpA, Senior Notes

    5.303     5/30/24       480,000       490,680  (a) 

Verizon Communications Inc., Senior Notes

    4.125     8/15/46       1,470,000       1,289,716  

Total Diversified Telecommunication Services

                            5,492,901  

Wireless Telecommunication Services — 0.1%

                               

CSC Holdings LLC, Senior Notes

    8.625     2/15/19       870,000       907,558  

Sprint Capital Corp., Senior Notes

    8.750     3/15/32       20,000       22,963  

Sprint Communications Inc., Senior Notes

    9.000     11/15/18       200,000       205,875  (a) 

Sprint Corp., Senior Notes

    7.625     2/15/25       650,000       685,750  

Total Wireless Telecommunication Services

                            1,822,146  

Total Telecommunication Services

                            7,315,047  
Utilities — 0.7%                                

Electric Utilities — 0.7%

                               

Enel Finance International NV, Senior Notes

    6.000     10/7/39       1,680,000       1,940,253  (a) 

FirstEnergy Corp., Senior Notes

    3.900     7/15/27       2,070,000       2,029,257  

FirstEnergy Corp., Senior Notes

    7.375     11/15/31       5,630,000       7,398,476  

FirstEnergy Corp., Senior Notes

    4.850     7/15/47       250,000       261,060  

Total Utilities

                            11,629,046  

Total Corporate Bonds & Notes (Cost — $430,984,438)

                            445,194,947  

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   15


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Asset-Backed Securities — 3.1%                                

Aegis Asset Backed Securities Trust, 2003-3 M2 (1 mo. USD LIBOR + 2.475%)

    4.347     1/25/34       518,496     $ 489,093  (g) 

Applebee’s/IHOP Funding LLC, 2014-1 A2

    4.277     9/5/44       3,064,600       2,997,184  (a) 

Avis Budget Rental Car Funding AESOP LLC, 2016-1A C

    4.940     6/20/22       3,040,000       3,084,325  (a) 

Avis Budget Rental Car Funding AESOP LLC, 2017-2A A

    2.970     3/20/24       1,930,000       1,880,903  (a) 

Bayview Financial Acquisition Trust, 2006-C 2A3 (1 mo. USD LIBOR + 0.290%)

    2.167     11/28/36       3,502,634       3,343,551  (g) 

CIT Mortgage Loan Trust, 2007-1 1M1 (1 mo. USD LIBOR + 1.500%)

    3.397     10/25/37       5,190,000       5,335,086  (a)(g) 

Community Funding CLO Ltd., 2015-1A A

    5.750     11/1/27       1,790,000       1,776,605  (a) 

Conseco Financial Corp., 1996-4 M1

    7.750     6/15/27       4,413,078       4,533,222  (g) 

CreditShop Credit Card Co., LLC, 2017-1 B (1 mo. USD LIBOR + 8.000%)

    9.897     10/15/22       5,770,086       5,800,044  (a)(g) 

Hertz Vehicle Financing LLC, 2016-4A C

    5.060     7/25/22       2,950,000       2,984,428  (a) 

Hertz Vehicle Financing LLC, 2017-1A B

    3.560     10/25/21       1,430,000       1,419,241  (a) 

Hertz Vehicle Financing LLC, 2018-1A A

    3.290     2/25/24       2,220,000       2,173,853  (a) 

Hertz Vehicle Financing LLC, 2018-1A B

    3.600     2/25/24       1,560,000       1,529,488  (a) 

Nelnet Student Loan Trust, 2008-3 A4 (3 mo. USD LIBOR + 1.650%)

    3.594     11/25/24       1,756,279       1,783,773  (g) 

Option One Mortgage Loan Trust, 2007-FXD1 2A1

    5.866     1/25/37       4,212,793       3,999,552  

Popular ABS Mortgage Pass-Through Trust, 2005-2 M2

    5.717     4/25/35       4,641,918       3,574,517  

Residential Asset Mortgage Products Inc., 2006-RZ3 M1 (1 mo. USD LIBOR + 0.350%)

    2.222     8/25/36       2,160,000       2,120,824  (g) 

SLM Student Loan Trust, 2006-1 A5 (3 mo. USD LIBOR + 0.110%)

    2.470     7/26/21       1,794,906       1,769,291  (g) 

SLM Student Loan Trust, 2008-5 A4 (3 mo. USD LIBOR + 1.700%)

    3.445     7/25/23       1,207,441       1,241,896  (g) 

Total Asset-Backed Securities (Cost — $50,781,817)

                            51,836,876  
Collateralized Mortgage Obligations (i) — 5.3%                                

American Home Mortgage Assets, 2006-6 A1A (1 mo. USD LIBOR + 0.190%)

    2.062     12/25/46       595,458       529,977  (g) 

Banc of America Alternative Loan Trust, 2005-4 CB7, IO (-1.000 x 1 mo. USD LIBOR + 5.100%)

    3.203     5/25/35       619,401       39,698  (g) 

Banc of America Commercial Mortgage Trust, 2007-2 AJ

    5.734     4/10/49       462,196       307,372  (g) 

Banc of America Funding Corp., 2015-R3 2A2

    1.751     2/27/37       4,190,251       3,515,173  (a)(g) 

BCAP LLC Trust, 2011-RR5 4A2 (1 mo. USD LIBOR + 0.160%)

    2.032     11/26/36       5,590,000       3,881,163  (a)(g) 

Bear Stearns ALT-A Trust, 2004-12, Class 1M1 (1 mo. USD LIBOR + 0.930%)

    2.802     1/25/35       2,521,769       2,504,999  (g) 

Bear Stearns Commercial Mortgage Securities Trust, 2007-PW18 AJ

    6.241     6/11/50       67,581       67,516  (g) 

BX Trust, 2017-IMC E (1 mo. USD LIBOR + 3.250%)

    5.147     10/15/32       4,660,000       4,691,748  (a)(g) 

 

See Notes to Financial Statements.

 

16    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Collateralized Mortgage Obligations (I) — conttinued  

BX Trust, 2017-IMC F (1 mo. USD LIBOR + 4.250%)

    6.147     10/15/32       1,390,000     $ 1,400,332  (a)(g) 

Countrywide Alternative Loan Trust, 2005-J04 M2 (1 mo. USD LIBOR + 0.640%)

    2.832     7/25/35       435,527       428,086  (g) 

Credit Suisse Mortgage Trust, 2006-C3 AJ

    6.279     6/15/38       181,491       107,134  (g) 

Credit Suisse Mortgage Trust, 2014-11R 14A1 (1 mo. USD LIBOR + 0.200%)

    1.821     6/27/46       393,430       390,561  (a)(g) 

Credit Suisse Mortgage Trust, 2015-02R 3A2

    1.831     4/27/36       4,060,000       3,202,341  (a)(g) 

Credit Suisse Mortgage Trust, 2015-02R 7A2

    3.207     8/27/36       9,318,204       8,239,937  (a)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2015-HQ2 B (1 mo. USD LIBOR + 7.950%)

    9.822     5/25/25       1,585,825       1,935,073  (g) 

Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2017-DNA2 B1 (1 mo. USD LIBOR + 5.150%)

    7.022     10/25/29       4,880,000       5,503,947  (g) 

Federal National Mortgage Association (FNMA), 2014-M8 SA, IO (-1.000 x 1 mo. USD LIBOR + 4.914%)

    1.500     5/25/18       483,428       17  (g) 

Federal National Mortgage Association (FNMA) — CAS, 2014-C01 M2 (1 mo. USD LIBOR + 4.400%)

    6.272     1/25/24       400,000       456,775  (g) 

Federal National Mortgage Association (FNMA) — CAS, 2015-C03 2M2 (1 mo. USD LIBOR + 5.000%)

    6.872     7/25/25       1,526,623       1,702,430  (a)(g) 

Federal National Mortgage Association (FNMA) — CAS, 2017-C01 1B1 (1 mo. USD LIBOR + 5.750%)

    7.622     7/25/29       3,400,000       4,001,655  (a)(g) 

Federal National Mortgage Association (FNMA) — CAS, 2017-C01 1M2 (1 mo. USD LIBOR + 3.550%)

    5.422     7/25/29       4,590,000       5,023,096  (a)(g) 

Federal National Mortgage Association (FNMA) — CAS, 2017-C05 1B1 (1 mo. USD LIBOR + 3.600%)

    5.472     1/25/30       3,880,000       3,945,413  (a)(g) 

Federal National Mortgage Association (FNMA) — CAS, 2017-C07 1M2 (1 mo. USD LIBOR + 2.400%)

    4.272     5/25/30       3,540,000       3,646,894  (a)(g) 

Federal National Mortgage Association (FNMA) — CAS, 2018-C01 1B1 (1 mo. USD LIBOR + 3.550%)

    5.422     7/25/30       5,280,000       5,291,357  (a)(g) 

Flagstar Mortgage Trust, 2018-2 A4

    3.500     4/25/48       900,000       885,298  (a)(g) 

GE Capital Commercial Mortgage Corp., 2007-C1 AJ

    5.677     12/10/49       120,000       63,029  (g) 

IMPAC Secured Assets Corp., 2006-3 A7 (1 mo. USD LIBOR + 0.270%)

    2.142     11/25/36       1,683,521       1,173,168  (g) 

Indymac IMSC Mortgage Loan Trust, 2007-HOA1 A22 (1 mo. USD LIBOR + 0.180%)

    2.052     7/25/47       1,333,185       1,011,228  (g) 

JPMorgan Chase Commercial Mortgage Securities Trust, 2006-LDP7 AJ

    5.942     4/17/45       410,761       335,149  (g) 

JPMorgan Chase Commercial Mortgage Securities Trust, 2006-LDP9 AJ

    5.411     5/15/47       920,000       673,712  

JPMorgan Chase Commercial Mortgage Securities Trust, 2006-LDP9 AJS

    5.386     5/15/47       270,000       115,986  (g) 

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   17


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Collateralized Mortgage Obligations (I) — conttinued  

JPMorgan Chase Commercial Mortgage Securities Trust, 2007-CB18 AJ

    5.502     6/12/47       661,000     $ 552,289  (g) 

LB-UBS Commercial Mortgage Trust, 2006-C6 AJ

    5.452     9/15/39       962,516       743,062  (g) 

ML-CFC Commercial Mortgage Trust, 2007-5 AJ

    5.450     8/12/48       346,807       265,399  (g) 

ML-CFC Commercial Mortgage Trust, 2007-9 AJ

    6.193     9/12/49       127,340       100,726  (g) 

Morgan Stanley Capital I Trust, 2006-IQ12 AJ

    5.399     12/15/43       762,268       581,230  

Morgan Stanley Re-remic Trust, 2015-R6 1B (1 mo. USD LIBOR + 0.260%)

    2.392     7/26/45       2,222,526       1,433,397  (a)(g) 

Residential Asset Securitization Trust, 2005-A15 1A4

    5.750     2/25/36       177,721       176,982  

Residential Asset Securitization Trust, 2005-A15 2A11, IO (-1.000 x 1 mo. USD LIBOR + 5.550%)

    3.653     2/25/36       2,189,598       313,289  (g) 

Sequoia Mortgage Trust, 2004-3 M1 (1 mo. USD LIBOR + 0.750%)

    2.647     5/20/34       257,134       237,583  (g) 

Starwood Retail Property Trust, 2014-STAR E (1 mo. USD LIBOR + 4.150%)

    6.047     11/15/27       5,070,000       4,751,561  (a)(g) 

UBS-Barclays Commercial Mortgage Trust, 2012-C2 G

    4.895     5/10/63       310,000       206,695  (a)(g) 

UBS-Barclays Commercial Mortgage Trust, 2012-C2 H

    4.895     5/10/63       550,000       256,899  (a)(g) 

Wachovia Bank Commercial Mortgage Trust, 2007-C33 AJ

    6.011     2/15/51       7,830,000       7,802,106  (g) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-4 CB9 (1 mo. USD LIBOR + 0.400%)

    2.272     6/25/35       155,160       132,607  (g) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-AR17 A1C3 (1 mo. USD LIBOR + 0.480%)

    2.352     12/25/45       3,550,374       2,652,546  (g) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2006-AR3 A1B (12 mo. Monthly Treasury Average Index + 1.000%)

    2.283     2/25/46       3,485,685       3,238,148  (g) 

Total Collateralized Mortgage Obligations (Cost — $85,628,721)

 

    88,514,783  
Municipal Bonds — 0.3%  

Florida — 0.0%

                               

Sumter Landing, FL, Community Development District Recreational Revenue, Taxable Community Development District

    4.172     10/1/47       130,000       134,635  

Illinois — 0.2%

                               

Chicago, IL, GO, Taxable Project

    6.314     1/1/44       1,050,000       1,035,226  

Illinois State, GO

    5.100     6/1/33       2,350,000       2,193,396  

Total Illinois

                            3,228,622  

New Jersey — 0.1%

                               

New Jersey State Transportation Trust Fund Authority Revenue, Build America Bonds

    6.561     12/15/40       820,000       1,027,411  

Total Municipal Bonds (Cost — $4,334,571)

                            4,390,668  

 

See Notes to Financial Statements.

 

18    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Non-U.S. Treasury Inflation Protected Securities — 3.8%                          

Argentina — 0.6%

                               

Bonos de la Nacion Argentina con Ajuste por CER, Bonds

    4.000     3/6/20       183,950,000  ARS    $ 9,431,616  

Brazil — 0.3%

                               

Federative Republic of Brazil, Notes

    6.000     8/15/50       14,904,765  BRL      4,756,306  

Japan — 2.9%

                               

Japanese Government CPI Linked Bond, Senior Bonds

    0.100     3/10/24       1,907,350,000  JPY      18,241,259  

Japanese Government CPI Linked Bond, Senior Bonds

    0.100     3/10/25       954,750,000  JPY      9,170,212  

Japanese Government CPI Linked Bond, Senior Bonds

    0.100     3/10/26       2,195,059,468  JPY      21,223,727  

Total Japan

                            48,635,198  

Total Non-U.S. Treasury Inflation Protected Securities (Cost — $64,152,984)

 

    62,823,120  
Senior Loans — 2.4%                                
Consumer Discretionary — 1.0%                                

Auto Components — 0.0%

                               

American Axle & Manufacturing Inc., Term Loan B (1 mo. LIBOR + 2.250%)

    4.150     4/6/24       130,000       130,772  (g)(j)(k) 

Diversified Consumer Services — 0.1%

                               

Prime Security Services Borrower LLC, 2016 First Lien Term Loan (1 mo. LIBOR + 2.750%)

    4.651     5/2/22       1,354,058       1,364,495  (g)(j)(k) 

Hotels, Restaurants & Leisure — 0.4%

                               

1011778 B.C. Unlimited Liability Co., Term Loan B3 (1 mo. LIBOR + 2.250%)

    4.151     2/16/24       1,134,586       1,138,013  (g)(j)(k) 

Aramark Services Inc., 2017 Term Loan B1 (1 mo. LIBOR + 2.000%)

    3.901     3/11/25       1,296,750       1,306,880  (g)(j)(k) 

Caesars Resort Collection LLC, 2017 First Lien Term Loan B (1 mo. LIBOR + 2.750%)

    4.651     12/22/24       1,468,819       1,482,742  (g)(j)(k) 

Golden Nugget Inc., 2017 Incremental Term Loan (1 mo. LIBOR + 2.750%)

    4.645-4.651     10/4/23       847,795       854,742  (g)(j)(k) 

Hilton Worldwide Finance LLC, Term Loan B2 (1 mo. LIBOR + 1.750%)

    3.647     10/25/23       1,024,661       1,034,410  (g)(j)(k) 

Scientific Games International Inc., 2018 Term Loan B5

    4.651-4.744     8/14/24       1,513,371       1,524,826  (g)(j)(k) 

Total Hotels, Restaurants & Leisure

                            7,341,613  

Media — 0.4%

                               

CBS Radio Inc., 2017 Term Loan B (3 mo. LIBOR + 2.750%)

    4.623     11/17/24       139,650       140,719  (g)(j)(k) 

Charter Communications Operating LLC, 2017 Term Loan B (1 mo. LIBOR + 2.000%)

    3.910     4/30/25       1,578,326       1,587,652  (g)(j)(k) 

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   19


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Media — continued

                               

Numericable Group SA, USD Term Loan B12 (3 mo. LIBOR + 3.000%)

    5.348     1/31/26       933,310     $ 924,852  (g)(j)(k) 

Sinclair Television Group Inc., 2017 Term Loan B

          12/12/24       1,430,000       1,438,192  (l) 

Univision Communications Inc., Term Loan C5 (1 mo. LIBOR + 2.750%)

    4.651     3/15/24       1,572,994       1,553,769  (g)(j)(k) 

UPC Financing Partnership, USD Term Loan AR (1 mo. LIBOR + 2.500%)

    4.397     1/15/26       810,000       812,531  (g)(j)(k) 

Ziggo Secured Finance Partnership, USD Term Loan E (1 mo. LIBOR + 2.500%)

    4.397     4/15/25       227,250       226,477  (g)(j)(k) 

Total Media

                            6,684,192  

Specialty Retail — 0.1%

                               

Michaels Stores Inc., 2016 Term Loan B1 (1 mo. LIBOR + 2.750%)

    4.644-4.651     1/30/23       1,337,896       1,347,199  (g)(j)(k) 

Total Consumer Discretionary

                            16,868,271  
Consumer Staples — 0.1%                                

Food Products — 0.1%

                               

Post Holdings Inc., 2017 Series A Incremental Term Loan (1 mo. LIBOR + 2.000%)

    3.900     5/24/24       1,362,131       1,369,672  (g)(j)(k) 
Health Care — 0.3%                                

Health Care Providers & Services — 0.1%

                               

Jaguar Holding Co. II, 2018 Term Loan

    4.401-4.802     8/18/22       1,383,859       1,392,902  (g)(j)(k) 

MPH Acquisition Holdings LLC, 2016 Term Loan B (3 mo. LIBOR + 2.750%)

    5.052     6/7/23       588,628       592,490  (g)(j)(k) 

Total Health Care Providers & Services

                            1,985,392  

Health Care Technology — 0.1%

                               

Change Healthcare Holdings Inc., 2017 Term Loan B (1 mo. LIBOR + 2.750%)

    4.651     3/1/24       1,125,237       1,130,950  (g)(j)(k) 

Life Sciences Tools & Services — 0.0%

                               

PAREXEL International Corp., Term Loan B (1 mo. LIBOR + 2.750%)

    4.651     9/27/24       498,747       501,303  (g)(j)(k) 

Pharmaceuticals — 0.1%

                               

Catalent Pharma Solutions Inc., USD Term Loan B (1 mo. LIBOR + 2.250%)

    4.151     5/20/24       347,903       350,029  (g)(j)(k) 

Valeant Pharmaceuticals International Inc., Term Loan B Series F4 (1 mo. LIBOR + 3.500%)

    5.394     4/1/22       439,260       444,676  (g)(j)(k) 

Total Pharmaceuticals

                            794,705  

Total Health Care

                            4,412,350  
Industrials — 0.3%                                

Air Freight & Logistics — 0.1%

                               

Avolon TLB Borrower 1 (U.S.) LLC, Term Loan B2 (1 mo. LIBOR + 2.250%)

    4.147     4/3/22       1,253,684       1,257,700  (g)(j)(k) 

 

See Notes to Financial Statements.

 

20    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Air Freight & Logistics — continued

                               

XPO Logistics Inc., 2018 Term Loan B (3 mo. LIBOR + 2.000%)

    3.920     2/24/25       1,160,927     $ 1,168,845  (g)(j)(k) 

Total Air Freight & Logistics

                            2,426,545  

Airlines — 0.1%

 

American Airlines Inc., 2017 Incremental Term Loan (3 mo. LIBOR + 2.000%)

    3.897     12/14/23       499,950       501,200  (g)(j)(k) 

American Airlines Inc., 2017 Term Loan B (1 mo. LIBOR + 2.000%)

    3.900     6/26/20       505,000       506,389  (g)(j)(k) 

Total Airlines

                            1,007,589  

Building Products — 0.1%

                               

Quikrete Holdings Inc., 2016 First Lien Term Loan (1 mo. LIBOR + 2.750%)

    4.651     11/15/23       1,209,719       1,216,372  (g)(j)(k) 

Professional Services — 0.0%

                               

Trans Union LLC, Term Loan B3 (1 mo. LIBOR + 2.000%)

    3.901     4/10/23       523,370       525,741  (g)(j)(k) 

Trading Companies & Distributors — 0.0%

                               

Beacon Roofing Supply Inc., 2017 Term Loan B (1 mo. LIBOR + 2.250%)

    4.128     1/2/25       86,000       86,575  (g)(j)(k) 

Total Industrials

                            5,262,822  
Information Technology — 0.3%  

IT Services — 0.1%

                               

First Data Corp., 2024 USD Term Loan (1 mo. LIBOR + 2.250%)

    4.147     4/26/24       1,576,178       1,583,686  (g)(j)(k) 

Semiconductors & Semiconductor Equipment — 0.1%

                               

Micron Technology Inc., Term Loan (1 mo. LIBOR + 1.750%)

    3.660     4/26/22       766,101       772,566  (g)(j)(k) 

ON Semiconductor Corp., 2017 First Lien Term Loan (1 mo. LIBOR + 2.000%)

    3.901     3/31/23       251,315       253,168  (g)(j)(k) 

Total Semiconductors & Semiconductor Equipment

                            1,025,734  

Software — 0.1%

                               

Dell Inc., 2017 First Lien Term Loan (1 mo. LIBOR + 2.000%)

    3.910     9/7/23       1,573,422       1,580,094  (g)(j)(k) 

Technology Hardware, Storage & Peripherals — 0.0%

                               

Western Digital Corp., 2017 Term Loan B3 (1 mo. LIBOR + 2.000%)

    3.900     4/29/23       423,712       426,927  (g)(j)(k) 

Total Information Technology

                            4,616,441  
Materials — 0.2%                                

Construction Materials — 0.1%

                               

American Builders & Contractors Supply Co. Inc., 2018 Term Loan B (1 mo. LIBOR + 2.000%)

    3.901     10/31/23       1,004,925       1,008,127  (g)(j)(k) 

Containers & Packaging — 0.1%

                               

Berry Global Inc., Term Loan Q (1 mo. LIBOR + 2.000%)

    3.897-3.901     10/1/22       1,315,000       1,324,589  (g)(j)(k) 

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   21


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Containers & Packaging — continued

                               

Berry Global Inc., Term Loan R (1 mo. LIBOR + 2.000%)

    3.897     1/19/24       313,417     $ 315,474  (g)(j)(k) 

Reynolds Group Holdings Inc., USD 2017 Term Loan (1 mo. LIBOR + 2.750%)

    4.651     2/5/23       1,037,149       1,044,809  (g)(j)(k) 

Total Containers & Packaging

                            2,684,872  

Total Materials

                            3,692,999  
Real Estate — 0.1%                                

Equity Real Estate Investment Trusts (REITs) — 0.1%

                               

MGM Growth Properties Operating Partnership LP, 2016 Term Loan B (1 mo. LIBOR + 2.000%)

    3.901     4/25/23       896,988       903,995  (g)(j)(k)(l) 

VICI Properties 1 LLC, Replacement Term Loan B (1 mo. LIBOR + 2.000%)

    3.898     12/20/24       623,182       626,428  (g)(j)(k) 

Total Equity Real Estate Investment Trusts (REITs)

                            1,530,423  

Real Estate Management & Development — 0.0%

                               

CityCenter Holdings LLC, 2017 Term Loan B (1 mo. LIBOR + 2.500%)

    4.401     4/18/24       90,444       91,045  (g)(j)(k) 

Total Real Estate

                            1,621,468  
Telecommunication Services — 0.1%                                

Diversified Telecommunication Services — 0.1%

                               

CenturyLink Inc., 2017 Term Loan B (1 mo. LIBOR + 2.750%)

    4.651     1/31/25       503,738       496,968  (g)(j)(k) 

Level 3 Financing Inc., 2017 Term Loan B (1 mo. LIBOR + 2.250%)

    4.148     2/22/24       1,010,000       1,014,960  (g)(j)(k) 

Total Telecommunication Services

                            1,511,928  
Utilities — 0.0%                                

Electric Utilities — 0.0%

                               

TEX Operations Co., LLC, Exit Term Loan B (1 mo. LIBOR + 2.500%)

    4.401     8/4/23       76,259       76,855  (g)(j)(k) 

TEX Operations Co., LLC, Exit Term Loan C (1 mo. LIBOR + 2.500%)

    4.401     8/4/23       13,548       13,654  (g)(j)(k) 

Total Utilities

                            90,509  

Total Senior Loans (Cost — $39,436,603)

                            39,446,460  
Sovereign Bonds — 25.7%                                

Argentina — 2.9%

                               

Provincia de Buenos Aires, Senior Notes

    9.125     3/16/24       850,000       945,625  (a) 

Provincia de Buenos Aires, Senior Notes

    7.875     6/15/27       1,970,000       2,004,475  (a) 

Republic of Argentina, Bonds

    21.200     9/19/18       3,705,000  ARS      175,001  

Republic of Argentina, Bonds (Argentina Central Bank 7 Day Repo Reference Rate)

    27.250     6/21/20       147,240,000  ARS      7,491,757  (g) 

Republic of Argentina, Bonds

    18.200     10/3/21       114,350,000  ARS      5,338,965  

Republic of Argentina, Senior Bonds

    5.625     1/26/22       5,820,000       5,884,020  

 

See Notes to Financial Statements.

 

22    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Argentina — continued

                               

Republic of Argentina, Senior Bonds

    16.000     10/17/23       76,600,000  ARS    $ 3,445,724  

Republic of Argentina, Senior Bonds

    7.500     4/22/26       1,870,000       1,964,435  

Republic of Argentina, Senior Bonds

    15.500     10/17/26       69,530,000  ARS      3,168,221  

Republic of Argentina, Senior Bonds

    7.625     4/22/46       1,040,000       1,008,800  

Republic of Argentina, Senior Notes

    5.875     1/11/28       7,310,000       6,709,666  

Republic of Argentina, Senior Notes

    8.280     12/31/33       2,874,178       3,096,927  

Republic of Argentina, Senior Notes

    7.125     6/28/2117       7,340,000       6,539,940  (a) 

Total Argentina

                            47,773,556  

Australia — 0.9%

                               

Australia Government Bond, Senior Bonds

    3.000     3/21/47       19,890,000  AUD      14,163,977  (c)  

Brazil — 2.2%

                               

Federative Republic of Brazil, Notes

    10.000     1/1/21       25,203,000  BRL      7,559,149  

Federative Republic of Brazil, Notes

    10.000     1/1/23       45,271,000  BRL      13,465,727  

Federative Republic of Brazil, Notes

    10.000     1/1/27       2,469,000  BRL      721,288  

Federative Republic of Brazil, Senior Bonds

    5.000     1/27/45       14,720,000       12,769,600  

Federative Republic of Brazil, Senior Notes

    4.250     1/7/25       1,730,000       1,704,483  

Total Brazil

                            36,220,247  

China — 0.6%

                               

China Government Bond, Senior Bonds

    4.000     5/22/24       2,000,000  CNY      317,406  (c) 

China Government Bond, Senior Bonds

    3.380     11/21/24       11,000,000  CNY      1,684,908  (c) 

China Government Bond, Senior Bonds

    3.390     5/21/25       9,000,000  CNY      1,363,498  (c) 

China Government Bond, Senior Bonds

    3.310     11/30/25       10,500,000  CNY      1,576,130  (c) 

China Government Bond, Senior Bonds

    3.480     6/29/27       23,500,000  CNY      3,540,382  (c) 

China Government Bond, Senior Bonds

    3.600     6/27/28       2,000,000  CNY      302,454  (c) 

China Government Bond, Senior Bonds

    4.290     5/22/29       5,000,000  CNY      799,854  (c) 

Total China

                            9,584,632  

Colombia — 0.5%

                               

Republic of Colombia, Senior Bonds

    5.625     2/26/44       7,356,000       7,904,022  

Ecuador — 0.4%

                               

Republic of Ecuador, Senior Bonds

    10.750     3/28/22       2,000,000       2,117,500  (a) 

Republic of Ecuador, Senior Bonds

    9.650     12/13/26       2,000,000       1,977,500  (a) 

Republic of Ecuador, Senior Notes

    8.875     10/23/27       3,480,000       3,292,950  (a) 

Total Ecuador

                            7,387,950  

Egypt — 0.5%

                               

Arab Republic of Egypt, Bonds

    15.160     10/10/22       74,370,000  EGP      4,241,108  

Arab Republic of Egypt, Bonds

    15.250     12/9/24       22,890,000  EGP      1,322,961  

Arab Republic of Egypt, Senior Bonds

    5.577     2/21/23       2,920,000       2,935,841  (a) 

Total Egypt

                            8,499,910  

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   23


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Indonesia — 2.0%

                               

Republic of Indonesia, Senior Bonds

    7.000     5/15/22       15,740,000,000  IDR    $ 1,151,156  

Republic of Indonesia, Senior Bonds

    8.375     9/15/26       3,359,000,000  IDR      261,718  

Republic of Indonesia, Senior Bonds

    7.000     5/15/27       306,796,000,000  IDR      22,283,368  

Republic of Indonesia, Senior Bonds

    8.375     3/15/34       90,990,000,000  IDR      7,132,046  

Republic of Indonesia, Senior Notes

    4.350     1/11/48       3,230,000       3,006,988  

Total Indonesia

                            33,835,276  

Italy — 3.5%

                               

Italy Buoni Poliennali Del Tesoro, Bonds

    2.000     12/1/25       16,960,000  EUR      21,410,354  

Italy Buoni Poliennali Del Tesoro, Bonds

    5.000     9/1/40       10,765,000  EUR      18,041,553  (c) 

Italy Buoni Poliennali Del Tesoro, Senior Bonds

    3.250     9/1/46       13,390,000  EUR      17,730,141  (c) 

Total Italy

                            57,182,048  

Kuwait — 0.1%

                               

Kuwait International Government Bonds, Senior Notes

    3.500     3/20/27       1,370,000       1,320,765  (a) 

Mexico — 4.8%

                               

United Mexican States, Senior Bonds

    7.750     11/23/34       37,920,000  MXN      2,056,499  

United Mexican States, Senior Bonds

    7.750     11/13/42       1,178,565,400  MXN      63,718,739  

United Mexican States, Senior Bonds

    8.000     11/7/47       242,050,000  MXN      13,442,449  

Total Mexico

                            79,217,687  

Russia — 4.2%

                               

Russian Federal Bond, Bonds

    7.400     12/7/22       50,700,000  RUB      826,481  

Russian Federal Bond, Bonds

    7.000     8/16/23       577,960,000  RUB      9,286,045  

Russian Federal Bond, Bonds

    7.750     9/16/26       534,720,000  RUB      8,831,064  

Russian Federal Bond, Bonds

    8.150     2/3/27       2,093,062,000  RUB      35,411,029  

Russian Federal Bond, Bonds

    7.050     1/19/28       399,699,000  RUB      6,314,956  

Russian Federal Bond, Senior Bonds

    7.000     1/25/23       588,780,000  RUB      9,470,221  

Total Russia

                            70,139,796  

South Africa — 1.2%

                               

Republic of South Africa, Bonds

    10.500     12/21/26       200,980,000  ZAR      18,408,252  

Republic of South Africa, Bonds

    6.500     2/28/41       23,160,000  ZAR      1,408,738  

Total South Africa

                            19,816,990  

Turkey — 1.1%

                               

Republic of Turkey, Bonds

    10.500     8/11/27       29,360,000  TRY      6,578,191  

Republic of Turkey, Senior Bonds

    6.125     10/24/28       12,520,000       12,478,809  

Total Turkey

                            19,057,000  

United Arab Emirates — 0.8%

                               

Abu Dhabi Government International Bond, Senior Notes

    2.500     10/11/22       10,260,000       9,829,080  (a) 

Abu Dhabi Government International Bond, Senior Notes

    4.125     10/11/47       3,270,000       2,993,950  (a) 

Total United Arab Emirates

                            12,823,030  

 

See Notes to Financial Statements.

 

24    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Western Asset Macro Opportunities Fund

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Uruguay — 0.0%

                               

Republic of Uruguay, Senior Bonds

    8.500     3/15/28       50,000  UYU    $ 1,685  (a) 

Total Sovereign Bonds (Cost — $438,837,646)

                            424,928,571  
U.S. Government & Agency Obligations — 25.5%                                

U.S. Government Obligations — 25.5%

                               

U.S. Treasury Bonds

    2.875     5/15/43       220,000       212,111  

U.S. Treasury Bonds

    3.750     11/15/43       157,847,000       176,381,692  

U.S. Treasury Bonds

    3.625     2/15/44       17,771,000       19,475,211  

U.S. Treasury Bonds

    2.500     2/15/45       6,690,000       5,969,780  

U.S. Treasury Bonds

    3.000     11/15/45       38,950,000       38,297,283  

U.S. Treasury Bonds

    3.000     2/15/47       73,030,300       71,726,595  

U.S. Treasury Bonds

    3.000     5/15/47       24,663,000       24,214,538  

U.S. Treasury Bonds

    2.750     8/15/47       58,529,000       54,636,593  

U.S. Treasury Bonds

    2.750     11/15/47       1,439,000       1,342,964  

U.S. Treasury Bonds

    3.000     2/15/48       5,590,000       5,487,480  

U.S. Treasury Notes

    2.875     4/30/25       25,390,000       25,354,295  

Total U.S. Government & Agency Obligations (Cost — $431,702,169)

 

            423,098,542  
                   Shares         
Common Stocks — 0.1%                                
Energy — 0.1%                                

Oil, Gas & Consumable Fuels — 0.1%

                               

Berry Petroleum Co.

                    17,672       165,785  

Blue Ridge Mountain Resources Inc.

                    85,639       652,569  *(e)(f) 

Total Common Stocks (Cost — $2,104,295)

                            818,354  
Convertible Preferred Stocks — 0.1%                                
Energy — 0.1%                                

Oil, Gas & Consumable Fuels — 0.1%

                               

Berry Petroleum Co. (6.000% Cash or 6.000% PIK)

    6.000             20,112       227,517  (b) 

Berry Petroleum Co. (6.000% Cash or 6.000% PIK)

    6.000             287       3,247  (b)(m) 

Sanchez Energy Corp.

    4.875             80,050       1,124,702  

Sanchez Energy Corp.

    6.500             45,800       792,340  

Total Convertible Preferred Stocks (Cost — $3,377,803)

 

                    2,147,806  
Preferred Stocks — 0.0%                                
Financials — 0.0%                                

Consumer Finance — 0.0%

                               

GMAC Capital Trust I (3 mo. USD LIBOR + 5.785%)
(Cost — $398,161)

    7.624             15,225       404,833  (g) 

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   25


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Expiration
Date
    Contracts     Notional
Amount†
    Value  
Purchased Options — 0.3%                                
Exchange-Traded Purchased Options — 0.1%  

Canadian Dollar Futures, Call @ $78.00

    6/8/18       13       13,000     $ 8,450  

Canadian Dollar Futures, Call @ $78.00

    5/4/18       49       49,000       11,270  

Euro BTP Futures, Call @ 145.00 EUR

    5/25/18       272       27,200,000       3,285  

Euro BTP Futures, Call @ 147.00 EUR

    5/25/18       405       40,500,000       4,891  

Euro Bund Futures, Call @ 164.50 EUR

    5/25/18       255       25,500,000       3,079  

Euro Bund Futures, Call @ 165.50 EUR

    5/25/18       574       57,400,000       6,932  

Euro Bund Futures, Call @ 167.00 EUR

    5/25/18       1,180       118,000,000       14,250  

Euro Bund Futures, Call @ 167.50 EUR

    5/25/18       2,233       223,300,000       26,966  

Euro Bund Futures, Put @ 150.00 EUR

    6/22/18       281       28,100,000       3,393  

Euro Bund Futures, Put @ 156.50 EUR

    6/22/18       102       10,200,000       35,721  

Euro Bund Futures, Put @ 158.00 EUR

    5/25/18       103       10,300,000       36,071  

Euro Bund Futures, Put @ 159.00 EUR

    5/25/18       431       43,100,000       348,719  

Euro Currency Futures, Put @ $1.25

    5/4/18       5       625,000       23,563  

Japanese Yen Futures, Call @ $92.00

    6/8/18       165       206,250       146,437  

U.S. Treasury 2-Year Notes Futures, Call @ $106.75

    5/25/18       229       458,000       229  

U.S. Treasury 5-Year Notes Futures, Call @ $113.25

    5/25/18       228       228,000       94,406  

U.S. Treasury 5-Year Notes Futures, Call @ $113.50

    5/25/18       1,141       1,141,000       303,078  

U.S. Treasury 5-Year Notes Futures, Call @ $118.25

    6/22/18       291       291,000       2,274  

U.S. Treasury 5-Year Notes Futures, Put @ $110.25

    5/25/18       2,840       2,840,000       2,840  

U.S. Treasury 5-Year Notes Futures, Put @ $111.75

    5/25/18       245       245,000       1,914  

U.S. Treasury 5-Year Notes Futures, Put @ $112.00

    5/25/18       1,646       1,646,000       25,719  

U.S. Treasury 10-Year Notes Futures, Call @ $119.25

    5/25/18       101       101,000       67,859  

U.S. Treasury 10-Year Notes Futures, Call @ $119.50

    6/22/18       202       202,000       110,469  

U.S. Treasury 10-Year Notes Futures, Call @ $119.75

    5/25/18       51       51,000       19,922  

U.S. Treasury 10-Year Notes Futures, Call @ $123.25

    5/25/18       2,359       2,359,000       36,859  

U.S. Treasury 10-Year Notes Futures, Call @ $123.50

    5/25/18       506       506,000       7,906  

U.S. Treasury 10-Year Notes Futures, Call @ $126.00

    5/25/18       249       249,000       249  

U.S. Treasury 10-Year Notes Futures, Call @ $126.50

    6/22/18       2,361       2,361,000       36,891  

U.S. Treasury 10-Year Notes Futures, Call @ $128.50

    5/25/18       1,319       1,319,000       1,319  

U.S. Treasury 30-Year Bonds Futures, Call @ $143.50

    5/25/18       102       102,000       125,906  

U.S. Treasury Long-Term Bonds Futures, Call @ $142.00

    5/25/18       25       25,000       55,859  

U.S. Treasury Long-Term Bonds Futures, Call @ $143.00

    5/25/18       72       72,000       110,250  

U.S. Treasury Long-Term Bonds Futures, Call @ $143.00

    6/22/18       51       51,000       75,703  

U.S. Treasury Long-Term Bonds Futures, Call @ $144.00

    5/25/18       154       154,000       149,187  

U.S. Treasury Long-Term Bonds Futures, Call @ $155.00

    6/22/18       280       280,000       8,750  

U.S. Treasury Long-Term Bonds Futures, Put @ $130.00

    5/25/18       476       476,000       476  

U.S. Treasury Long-Term Bonds Futures, Put @ $130.50

    5/25/18       1,956       1,956,000       1,956  

 

See Notes to Financial Statements.

 

26    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Western Asset Macro Opportunities Fund

 

Security   Expiration
Date
    Contracts     Notional
Amount†
    Value  
Exchange-Traded Purchased Options — continued  

U.S. Treasury Long-Term Bonds Futures, Put @ $131.50

    5/25/18       2,040       2,040,000     $ 2,040  

U.S. Treasury Long-Term Bonds Futures, Put @ $145.00

    5/25/18       107       107,000       183,906  

Total Exchange-Traded Purchased Options

                            2,098,994  
     Counterparty                            
OTC Purchased Options — 0.2%                                

Credit default swaption with Banc of America N.A to sell protection on Markit CDX.NA.IG.30 Index, Call @ $65.00

  Bank of America N.A.     6/20/18       12,395,000       12,395,000       33,272  

Credit default swaption with Banc of America N.A to sell protection on Markit CDX.NA.IG.30 Index, Call @ $65.00

  Bank of America N.A.     6/20/18       41,540,000       41,540,000       111,508  

Credit default swaption with Barclays Bank PLC. to sell protection on Markit CDX.NA.IG.30 Index, Call @ $60.00

  Barclays Bank PLC     6/20/18       39,990,000       39,990,000       48,057  

U.S. Dollar/Brazilian Real, Put @ 3.35 BRL

  JPMorgan Chase & Co.     7/16/18       22,800,000       22,800,000       128,341  

U.S. Dollar/Brazilian Real, Put @ 3.37 BRL

  JPMorgan Chase & Co.     5/15/18       22,800,000       22,800,000       21,044  

U.S. Dollar/Brazilian Real, Put @ 3.40 BRL

  Morgan Stanley & Co. Inc.     7/24/18       8,100,000       8,100,000       79,348  

U.S. Dollar/Brazilian Real, Put @ 3.50 BRL

  JPMorgan Chase & Co.     7/25/18       8,100,000       8,100,000       173,502  

U.S. Dollar/Colombian Peso, Put @ 2,787.25 COP

  JPMorgan Chase & Co.     6/7/18       22,130,000       22,130,000       292,691  

U.S. Dollar/Indian Rupee, Put @ 65.50 INR

  Goldman Sachs Group Inc.     7/24/18       8,100,000       8,100,000       18,395  

U.S. Dollar/Mexican Peso, Put @ 18.61 MXN

  Morgan Stanley & Co. Inc.     6/7/18       22,130,000       22,130,000       200,719  

U.S. Dollar/Mexican Peso, Put @ 19.00 MXN

  JPMorgan Chase & Co.     7/23/18       8,100,000       8,100,000       209,418  

U.S. Dollar/Mexican Peso, Put @ 19.00 MXN

  Morgan Stanley & Co. Inc.     7/25/18       10,125,000       10,125,000       265,467  

U.S. Dollar/Russian Ruble, Put @ 56.28 RUB

  Goldman Sachs Group Inc.     6/13/18       22,130,000       22,130,000       1,284  

U.S. Dollar/Russian Ruble, Put @ 60.00 RUB

  Goldman Sachs Group Inc.     7/24/18       8,100,000       8,100,000       37,252  

U.S. Dollar/Russian Ruble, Put @ 60.40 RUB

  Citibank N.A.     7/25/18       10,325,000       10,325,000       61,031  

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   27


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Security   Counterparty   Expiration
Date
    Contracts     Notional
Amount†
    Value  
OTC Purchased Options — continued  

U.S. Dollar/Russian Ruble, Put @ 61.85 RUB

  Morgan Stanley & Co. Inc.     8/2/18       32,400,000       32,400,000     $ 456,840  

Total OTC Purchased Options

                            2,138,169  

Total Purchased Options (Cost — $4,925,054)

 

                    4,237,163  

Total Investments before Short-Term Investments (Cost — $1,556,664,262)

 

            1,547,842,123  
          Rate     Maturity
Date
    Face
Amount†
        
Short-Term Investments — 0.8%                                    
Sovereign Bonds — 0.2%                                    

Egypt — 0.2%

                                   

Arab Republic of Egypt Treasury Bills

        19.004     6/12/18       24,000,000  EGP      1,341,738  (n) 

Arab Republic of Egypt Treasury Bills

        17.603     11/13/18       48,100,000  EGP      2,508,482  (n) 

Total Sovereign Bonds (Cost — $3,787,418)

 

    3,850,220  
                        Shares         
Money Market Funds — 0.6%                                    

Western Asset Government Cash Management Portfolio LLC (Cost — $10,100,000)

        1.680             10,100,000       10,100,000  (o)  

Total Short-Term Investments (Cost — $13,887,418)

 

                    13,950,220  

Total Investments — 94.3% (Cost — $1,570,551,680)

 

                    1,561,792,343  

Other Assets in Excess of Liabilities — 5.7%

 

    94,901,609  

Total Net Assets — 100.0%

                              $ 1,656,693,952  

 

Face amount/notional amount denominated in U.S. dollars, unless otherwise noted.

 

* Non-income producing security.

 

(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.

 

(b) 

Payment-in-kind security for which the issuer has the option at each interest payment date of making interest payments in cash or additional debt securities.

 

(c) 

Security is exempt from registration under Regulation S of the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors.

 

(d) 

Value is less than $1.

 

(e) 

Security is valued using significant unobservable inputs (See Note 1).

 

(f) 

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

 

(g) 

Variable rate security. Interest rate disclosed is as of the most recent information available. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description above.

 

(h) 

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

 

See Notes to Financial Statements.

 

28    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


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Western Asset Macro Opportunities Fund

 

 

(i) 

Collateralized mortgage obligations are secured by an underlying pool of mortgages or mortgage pass-through certificates that are structured to direct payments on underlying collateral to different series or classes of the obligations. The interest rate may change positively or inversely in relation to one or more interest rates, financial indices or other financial indicators and may be subject to an upper and/or lower limit.

 

(j) 

Interest rates disclosed represent the effective rates on senior loans. Ranges in interest rates are attributable to multiple contracts under the same loan.

 

(k)

Senior loans may be considered restricted in that the Fund ordinarily is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan.

 

(l) 

All or a portion of this loan is unfunded as of April 30, 2018. The interest rate for fully unfunded term loans is to be determined.

 

(m) 

Restricted security (See Note 6).

 

(n) 

Rate shown represents yield-to-maturity.

 

(o) 

In this instance, as defined in the Investment Company Act of 1940, an “Affiliated Company” represents Fund ownership of at least 5% of the outstanding voting securities of an issuer, or a company which is under common ownership or control. At April 30, 2018, the total market value of investments in Affiliated Companies was $10,100,000 and the cost was $10,100,000 (See Note 10).

 

Abbreviations used in this schedule:

ARS   — Argentine Peso
AUD   — Australian Dollar
BRL   — Brazilian Real
CLO   — Collateral Loan Obligation
CNY   — Chinese Yuan Renminbi
COP   — Colombian Peso
CPI   — Consumer Price Index
EGP   — Egyptian Pound
EUR   — Euro
GBP   — British Pound
GO   — General Obligation
ICE   — Intercontinental Exchange
IDR   — Indonesian Rupiah
INR   — Indian Rupee
IO   — Interest Only
JPY   — Japanese Yen
LIBOR   — London Interbank Offered Rate
MXN   — Mexican Peso
PIK   — Payment-in-kind
RUB   — Russian Ruble
TRY   — Turkish Lira
USD   — United States Dollar
UYU   — Uruguayan Peso
ZAR   — South African Rand

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   29


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

 

Schedule of Written Options  
Schedule of OTC Written Options  
Security   Counterparty   Expiration
Date
    Strike
Price
   
Contracts
    Notional
Amount
    Value  
Credit default swaption with Banc of America N.A. to sell protection on Markit CDX.NA.IG.30 Index, Put   Bank of America N.A.     6/20/18     $ 75.00       41,540,000     $ 41,540,000 ‡    $ 32,974  
Credit default swaption with Barclays Bank PLC. to sell protection on Markit CDX.NA.IG.30 Index, Put   Barclays Bank PLC     6/20/18       70.00       39,990,000       39,990,000 ‡      43,717  
U.S. Dollar/Brazilian Real, Put   Morgan Stanley & Co. Inc.     7/24/18       3.32  BRL      16,200,000       16,200,000       71,912  
U.S. Dollar/Brazilian Real, Put   JPMorgan Chase & Co.     7/25/18       3.40  BRL      16,200,000       16,200,000       160,105  
U.S. Dollar/Indian Rupee, Put   Goldman Sachs Group Inc.     7/24/18       64.80  INR      16,200,000       16,200,000       16,961  
U.S. Dollar/Mexican Peso, Call   JPMorgan Chase & Co.     7/5/18       21.74  MXN      13,960,000       13,960,000       14,141  
U.S. Dollar/Mexican Peso, Call   Citibank N.A.     7/11/18       19.50  MXN      16,200,000       16,200,000       203,197  
U.S. Dollar/Mexican Peso, Put   Goldman Sachs Group Inc.     5/10/18       18.33  MXN      9,750,000       9,750,000       11,846  
U.S. Dollar/Mexican Peso, Put   Citibank N.A.     5/17/18       18.10  MXN      9,800,000       9,800,000       9,722  
U.S. Dollar/Mexican Peso, Put   Citibank N.A.     7/11/18       18.00  MXN      16,200,000       16,200,000       88,679  
U.S. Dollar/Mexican Peso, Put   JPMorgan Chase & Co.     7/23/18       18.40  MXN      16,200,000       16,200,000       194,060  
U.S. Dollar/Mexican Peso, Put   Morgan Stanley & Co. Inc.     7/25/18       18.50  MXN      20,250,000       20,250,000       287,125  
U.S. Dollar/Russian Ruble, Put   Goldman Sachs Group Inc.     7/24/18       58.80  RUB      16,200,000       16,200,000       34,700  
U.S. Dollar/Russian Ruble, Put   Citibank N.A.     7/25/18       58.75  RUB      20,650,000       20,650,000       43,695  
Total OTC Written Options (Premiums received — $1,878,235)     $ 1,212,834  

 

Schedule of Exchange-Traded Written Options  
Security   Expiration
Date
    Strike
Price
    Contracts     Notional
Amount
    Value  
Canadian Dollar Futures, Call     5/4/18     $ 77.50       50     $ 50,000     $ 27,000  
Euro Bund Futures, Call     5/25/18       159.00  EUR      51       5,100,000       25,251  
Euro Bund Futures, Call     5/25/18       158.00   EUR      49       4,900,000       60,948  
Euro Bund Futures, Put     5/25/18       156.50   EUR      51       5,100,000       4,311  
Euro Bund Futures, Put     5/25/18       157.50   EUR      756       75,600,000       164,330  
Euro Bund Futures, Put     6/22/18       157.00   EUR      52       5,200,000       25,118  
Euro Bund Futures, Put     6/22/18       155.00   EUR      204       20,400,000       29,562  
Euro Currency Futures, Call     5/4/18       1.25       101       12,625,000       631  
Euro Currency Futures, Call     6/8/18       1.24       61       7,625,000       20,588  
Euro Currency Futures, Call     6/8/18       1.23       69       8,625,000       31,913  
Euro Currency Futures, Put     5/4/18       1.23       98       12,250,000       162,925  
Japanese Yen Futures, Call     5/4/18       96.00       50       62,500       312  
Japanese Yen Futures, Call     5/4/18       95.00       101       126,250       631  
Japanese Yen Futures, Put     5/4/18       93.00       51       63,750       80,325  

 

See Notes to Financial Statements.

 

30    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


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Western Asset Macro Opportunities Fund

 

Schedule of Exchange-Traded Written Options (cont’d)  
Security   Expiration
Date
    Strike
Price
    Contracts     Notional
Amount
    Value  
Japanese Yen Futures, Put     5/4/18     $ 94.00       50     $ 62,500     $ 139,375  
Japanese Yen Futures, Put     5/4/18       93.50       111       138,750       241,425  
Japanese Yen Futures, Put     6/8/18       92.50       98       122,500       153,125  
Japanese Yen Futures, Put     6/8/18       93.00       103       128,750       207,288  
U.S. Treasury 5-Year Notes Futures, Call     5/11/18       114.00       102       102,000       5,578  
U.S. Treasury 5-Year Notes Futures, Call     5/25/18       113.75       23       23,000       3,773  
U.S. Treasury 5-Year Notes Futures, Call     5/25/18       114.75       353       353,000       8,274  
U.S. Treasury 5-Year Notes Futures, Call     6/22/18       114.25       279       279,000       23,977  
U.S. Treasury 5-Year Notes Futures, Put     5/25/18       113.25       245       245,000       38,281  
U.S. Treasury 10-Year Notes Futures, Call     5/4/18       120.50       5       5,000       156  
U.S. Treasury 10-Year Notes Futures, Call     5/4/18       120.00       51       51,000       4,781  
U.S. Treasury 10-Year Notes Futures, Call     5/4/18       119.50       51       51,000       15,141  
U.S. Treasury 10-Year Notes Futures, Call     5/4/18       119.75       89       89,000       15,297  
U.S. Treasury 10-Year Notes Futures, Call     5/11/18       120.50       102       102,000       7,969  
U.S. Treasury 10-Year Notes Futures, Call     5/11/18       119.75       114       114,000       30,281  
U.S. Treasury 10-Year Notes Futures, Call     5/25/18       120.50       26       26,000       3,656  
U.S. Treasury 10-Year Notes Futures, Call     5/25/18       122.00       151       151,000       4,719  
U.S. Treasury 10-Year Notes Futures, Call     5/25/18       123.00       214       214,000       6,687  
U.S. Treasury 10-Year Notes Futures, Call     5/25/18       121.50       502       502,000       23,531  
U.S. Treasury 10-Year Notes Futures, Call     5/25/18       119.50       50       50,000       25,781  
U.S. Treasury 10-Year Notes Futures, Call     5/25/18       121.00       680       680,000       53,125  
U.S. Treasury 10-Year Notes Futures, Call     5/25/18       120.25       507       507,000       102,984  
U.S. Treasury 10-Year Notes Futures, Call     5/25/18       120.00       1,065       1,065,000       299,531  
U.S. Treasury 10-Year Notes Futures, Call     6/22/18       121.50       202       202,000       18,938  
U.S. Treasury 10-Year Notes Futures, Call     6/22/18       120.00       1,263       1,263,000       434,156  
U.S. Treasury 10-Year Notes Futures, Put     5/25/18       118.50       507       507,000       55,453  
U.S. Treasury 10-Year Notes Futures, Put     5/25/18       120.50       201       201,000       204,141  
U.S. Treasury Long Term Bonds Futures, Call     5/25/18       147.00       689       689,000       107,656  
U.S. Treasury Long-Term Bonds Futures, Call     5/4/18       145.00       102       102,000       12,750  
U.S. Treasury Long-Term Bonds Futures, Call     5/4/18       144.00       64       64,000       27,000  
U.S. Treasury Long-Term Bonds Futures, Call     5/11/18       145.50       93       93,000       17,438  
U.S. Treasury Long-Term Bonds Futures, Call     5/11/18       145.00       177       177,000       52,547  
U.S. Treasury Long-Term Bonds Futures, Call     5/11/18       144.00       100       100,000       65,625  
U.S. Treasury Long-Term Bonds Futures, Call     5/11/18       143.00       101       101,000       124,672  
U.S. Treasury Long-Term Bonds Futures, Call     5/25/18       149.00       146       146,000       6,844  
U.S. Treasury Long-Term Bonds Futures, Call     5/25/18       150.00       365       365,000       11,406  
U.S. Treasury Long-Term Bonds Futures, Call     5/25/18       145.00       25       25,000       14,062  
U.S. Treasury Long-Term Bonds Futures, Call     5/25/18       148.00       596       596,000       55,875  

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   31


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Schedule of Exchange-Traded Written Options (cont’d)  
Security   Expiration
Date
    Strike
Price
    Contracts     Notional
Amount
    Value  
U.S. Treasury Long-Term Bonds Futures, Call     5/25/18     $ 144.50       102     $ 102,000     $ 76,500  
U.S. Treasury Long-Term Bonds Futures, Call     5/25/18       145.50       202       202,000       82,063  
U.S. Treasury Long-Term Bonds Futures, Call     5/25/18       146.00       416       416,000       123,500  
U.S. Treasury Long-Term Bonds Futures, Call     6/22/18       147.00       76       76,000       21,375  
U.S. Treasury Long-Term Bonds Futures, Call     6/22/18       146.00       56       56,000       24,500  
U.S. Treasury Long-Term Bonds Futures, Call     6/22/18       145.00       404       404,000       271,438  
Total Exchange-Traded Written Options (Premiums received — $5,262,035)       3,856,519  
Total Written Options (Premiums received — $7,140,270)     $ 5,069,353  

 

In the event an option is exercised and a credit event occurs as defined under the terms of the swap agreement, the notional amount is the maximum potential amount that could be required to be paid as a seller of credit protection or received as a buyer of credit protection.

 

Abbreviations used in this schedule:

BRL  

— Brazilian Real

EUR   — Euro
INR   — Indian Rupee
MXN   — Mexican Peso
RUB   — Russian Ruble

At April 30, 2018, the Fund had the following open futures contracts:

 

     Number of
Contracts
    Expiration
Date
    Notional
Amount
    Market
Value
    Unrealized
Appreciation
(Depreciation)
 
Contracts to Buy:  
90-Day Eurodollar     73       9/18     $ 17,799,356     $ 17,795,575     $ (3,781)  
90-Day Eurodollar     5,127       12/19       1,245,712,566       1,243,682,025       (2,030,541)  
90-Day Eurodollar     130       3/20       31,733,859       31,528,250       (205,609)  
90-Day Eurodollar     2,597       6/20       631,580,562       629,772,500       (1,808,062)  
90-Day Eurodollar     661       3/21       161,173,365       160,234,663       (938,702)  
Australian Dollar     93       6/18       7,272,179       7,002,900       (269,279)  
Canadian 10-Year Bonds     54       6/18       5,538,296       5,528,486       (9,810)  
Euro     42       6/18       6,364,651       6,364,575       (76)  
Japanese Yen     77       6/18       8,838,407       8,833,825       (4,582)  
Mexican Peso     1,295       6/18       34,610,446       34,343,400       (267,046)  
U.S. Treasury 5-Year Notes     4,785       6/18       545,075,829       543,134,885       (1,940,944)  
U.S. Treasury Long-Term Bonds     4,598       6/18       657,902,786       661,393,563       3,490,777  
U.S. Treasury Ultra Long-Term Bonds     892       6/18       140,458,043       140,155,500       (302,543)  
                                      (4,290,198)  

 

See Notes to Financial Statements.

 

32    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


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Western Asset Macro Opportunities Fund

 

     Number of
Contracts
    Expiration
Date
    Notional
Amount
    Market
Value
    Unrealized
Appreciation
(Depreciation)
 
Contracts to Sell:  
90-Day Eurodollar     1,544       6/18     $ 377,203,133     $ 376,851,800     $ 351,333  
90-Day Eurodollar     1,821       12/18       446,217,452       443,208,638       3,008,814  
Australian 10-Year Bonds     148       6/18       14,182,721       14,250,099       (67,378)  
British Pound     88       6/18       7,669,168       7,576,800       92,368  
Canadian Dollar     25       6/18       1,949,225       1,948,500       725  
Euro BTP     789       6/18       130,071,590       132,448,191       (2,376,601)  
Euro-Bund     4,405       6/18       836,445,576       844,413,704       (7,968,128)  
Euro-Buxl     339       6/18       65,557,027       66,949,398       (1,392,371)  
Euro-Oat     153       6/18       28,413,403       28,418,358       (4,955)  
Japanese 10-Year Bond     51       6/18       70,308,902       70,276,619       32,283  
U.S. Treasury 2-Year Notes     229       6/18       48,693,760       48,558,735       135,025  
U.S. Treasury 10-Year Notes     2,044       6/18       245,923,317       244,513,500       1,409,817  
U.S. Treasury Long-Term Bonds     21       9/18       2,985,900       3,003,000       (17,100)  
                                      (6,796,168)  
Net unrealized depreciation on open futures contracts     $ (11,086,366)  

At April 30, 2018, the Fund had the following open forward foreign currency contracts:

 

Currency
Purchased
    Currency
Sold
     Counterparty   Settlement
Date
    Unrealized
Appreciation
(Depreciation)
 
USD     15,240,000     EUR     12,390,244      Barclays Bank PLC     5/2/18     $ 277,546  
EUR     12,390,244     USD     14,999,629      Citibank N.A.     5/2/18       (37,175)  
BRL     22,181,364     USD     6,480,000      Barclays Bank PLC     5/3/18       (148,256)  
USD     6,371,941     BRL     22,181,364      Barclays Bank PLC     5/3/18       40,198  
BRL     22,181,364     USD     6,371,941      Goldman Sachs Group Inc.     5/3/18       (40,198)  
USD     6,388,642     BRL     22,181,364      Goldman Sachs Group Inc.     5/3/18       56,898  
BRL     33,262,812     USD     9,720,000      Goldman Sachs Group Inc.     5/14/18       (235,752)  
USD     7,863,467     BRL     26,885,193      JPMorgan Chase & Co.     5/17/18       199,745  
ARS     112,149,992     USD     5,366,028      Bank of America N.A.     5/22/18       (241)  
ARS     16,754,000     USD     799,714      Bank of America N.A.     5/22/18       1,877  
BRL     56,660,000     USD     16,272,257      Goldman Sachs Group Inc.     6/4/18       (147,264)  
USD     7,720,911     MXN     147,311,120      Morgan Stanley & Co. Inc.     6/11/18       (107,813)  
USD     7,789,760     COP     22,325,452,160      JPMorgan Chase & Co.     6/12/18       (155,152)  
USD     8,360,222     RUB     480,900,880      Goldman Sachs Group Inc.     6/14/18       762,000  
USD     6,258,557     CAD     8,000,000      Citibank N.A.     6/20/18       20,667  
USD     20,085,000     EUR     16,250,000      JPMorgan Chase & Co.     6/20/18       389,968  
ARS     66,766,000     USD     3,160,521      Bank of America N.A.     7/5/18       (67,215)  
USD     2,580,000     MXN     51,233,640      JPMorgan Chase & Co.     7/9/18       (130,880)  

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   33


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

Currency
Purchased
    Currency
Sold
     Counterparty   Settlement
Date
    Unrealized
Appreciation
(Depreciation)
 
MXN     64,853,426     USD     3,500,727      JPMorgan Chase & Co.     7/16/18     $ (72,893)  
USD     7,752,000     BRL     26,639,748      JPMorgan Chase & Co.     7/17/18       202,176  
PLN     86,308,489     USD     25,568,719      Bank of America N.A.     7/19/18       (945,347)  
USD     17,472,804     ZAR     213,508,933      Bank of America N.A.     7/19/18       514,678  
CAD     41,950,873     USD     33,376,991      Barclays Bank PLC     7/19/18       (643,921)  
CLP     8,494,285,000     USD     14,058,498      Barclays Bank PLC     7/19/18       (212,438)  
GBP     2,280,953     USD     3,259,199      Barclays Bank PLC     7/19/18       (107,011)  
IDR     5,479,628,000     USD     394,672      Barclays Bank PLC     7/19/18       (4,214)  
RUB     1,065,180,000     USD     17,023,813      Barclays Bank PLC     7/19/18       (263,576)  
TRY     61,626,220     USD     14,613,291      Barclays Bank PLC     7/19/18       198,769  
USD     25,498,561     AUD     33,660,000      Barclays Bank PLC     7/19/18       149,261  
USD     16,440,152     CNY     104,279,884      Barclays Bank PLC     7/19/18       45,569  
USD     8,128,859     COP     22,655,130,000      Barclays Bank PLC     7/19/18       75,306  
USD     162,110,154     EUR     130,469,374      Barclays Bank PLC     7/19/18       3,610,758  
USD     22,881,072     KRW     24,373,146,832      Barclays Bank PLC     7/19/18       1,379  
USD     10,237,860     MXN     186,986,316      Barclays Bank PLC     7/19/18       359,238  
USD     26,038,483     TWD     755,116,000      Barclays Bank PLC     7/19/18       373,766  
BRL     40,103,599     USD     11,736,837      Citibank N.A.     7/19/18       (373,334)  
EUR     8,500,000     USD     10,420,065      Citibank N.A.     7/19/18       (93,926)  
PEN     44,133,000     USD     13,637,291      Citibank N.A.     7/19/18       (100,438)  
RUB     1,775,844,934     USD     28,347,752      Citibank N.A.     7/19/18       (405,449)  
TRY     106,123,427     USD     25,141,774      Citibank N.A.     7/19/18       365,333  
USD     37,373,064     AUD     48,187,307      Citibank N.A.     7/19/18       1,083,269  
USD     57,752,508     CNH     365,492,519      Citibank N.A.     7/19/18       102,701  
USD     15,089,892     EUR     12,390,244      Citibank N.A.     7/19/18       37,730  
USD     3,161,366     EUR     2,600,000      Citibank N.A.     7/19/18       2,782  
USD     100,610,287     JPY     10,743,518,534      Citibank N.A.     7/19/18       1,799,662  
USD     92,157     JPY     10,000,000      Citibank N.A.     7/19/18       185  
USD     23,796,940     MXN     441,166,719      Citibank N.A.     7/19/18       489,784  
USD     252,016     MXN     4,800,000      Citibank N.A.     7/19/18       (1,571)  
USD     104,819     MXN     2,000,000      Citibank N.A.     7/19/18       (843)  
BRL     22,181,364     USD     6,344,965      Goldman Sachs Group Inc.     7/19/18       (59,794)  
COP     24,077,436,500     USD     8,574,983      JPMorgan Chase & Co.     7/19/18       (15,821)  
INR     5,515,245,625     USD     84,022,633      JPMorgan Chase & Co.     7/19/18       (2,052,339)  
USD     12,610,623     PHP     660,040,000      JPMorgan Chase & Co.     7/19/18       (94,773)  
ARS     29,020,952     USD     1,368,881      JPMorgan Chase & Co.     7/24/18       (41,288)  
MXN     14,596,023     USD     759,375      JPMorgan Chase & Co.     7/25/18       11,032  
ARS     51,585,000     USD     2,400,419      Citibank N.A.     7/30/18       (49,977)  

 

See Notes to Financial Statements.

 

34    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


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Western Asset Macro Opportunities Fund

 

Currency
Purchased
       Currency
Sold
     Counterparty   Settlement
Date
    Unrealized
Appreciation
(Depreciation)
 
RUB     741,427,425        USD     11,652,790      JPMorgan Chase & Co.     8/3/18     $ (8,492)  
USD     11,947,500        RUB     760,006,640      Morgan Stanley & Co. Inc.     8/3/18       11,410  
ARS     165,796,000        USD     7,948,035      JPMorgan Chase & Co.     9/17/18       (597,465)  
ARS     50,520,000        USD     2,283,906      Citibank N.A.     10/3/18       (63,371)  
ARS     16,480,000        USD     745,027      Citibank N.A.     10/3/18       (20,672)  
ARS     24,110,000        USD     1,089,471      Citibank N.A.     10/3/18       (29,751)  
ARS     16,620,000        USD     751,017      Citibank N.A.     10/3/18       (20,508)  
ARS     16,430,000        USD     742,935      JPMorgan Chase & Co.     10/3/18       (20,777)  
ARS     29,421,950        USD     1,328,305      Citibank N.A.     10/5/18       (36,494)  
ARS     42,090,000        USD     1,898,940      Goldman Sachs Group Inc.     10/5/18       (50,921)  
ARS     66,460,000        USD     2,988,309      Citibank N.A.     10/23/18       (98,236)  
ARS     31,645,839        USD     1,422,924      Citibank N.A.     10/23/18       (46,777)  
ARS     84,905,113        USD     3,822,833      Citibank N.A.     10/23/18       (130,657)  
Total       $3,450,667  

 

Abbreviations used in this table:

ARS   — Argentine Peso
AUD   — Australian Dollar
BRL   — Brazilian Real
CAD   — Canadian Dollar
CLP   — Chilean Peso
CNH   — Chinese Offshore Yuan
CNY   — Chinese Yuan Renminbi
COP   — Colombian Peso
EUR   — Euro
GBP   — British Pound
IDR   — Indonesian Rupiah
INR   — Indian Rupee
JPY   — Japanese Yen
KRW   — South Korean Won
MXN   — Mexican Peso
PEN   — Peruvian Nuevo Sol
PHP   — Philippine Peso
PLN   — Polish Zloty
RUB   — Russian Ruble
TRY   — Turkish Lira
TWD   — Taiwan Dollar
USD   — United States Dollar
ZAR   — South African Rand

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   35


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

At April 30, 2018, the Fund had the following open swap contracts:

 

CENTRALLY CLEARED INTEREST RATE SWAPS  
Notional
Amount*
    Termination
Date
    Payments
Made by
the Fund†
  Payments
Received by
the Fund†
  Upfront
Premiums
Paid
(Received)
    Unrealized
Appreciation
(Depreciation)
 
  51,780,000       9/28/19     3-month LIBOR-BBA quarterly   1.705% semi-annually         $ (668,950
  208,100,000  MXN      4/13/20     28-Day TIIE-Banxico every 28 days   7.190% every 28 days           (96,557
  928,800,000  MXN      4/14/20     28-Day TIIE-Banxico every 28 days   7.108% every 28 days           (505,998
  378,200,000  MXN      4/15/20     28-Day TIIE-Banxico every 28  days   7.085% every 28 days           (214,582
  550,600,000  MXN      4/15/20     28-Day TIIE-Banxico every 28 days   7.075% every 28 days           (317,818
  760,400,000  MXN      5/28/20     28-Day TIIE-Banxico every 28 days   7.440% every 28 days           (157,107
  369,200,000  MXN      5/29/20     28-Day TIIE-Banxico every 28 days   7.400% every 28 days           (91,573
  749,400,000  MXN      6/1/20     28-Day TIIE-Banxico every 28 days   7.340% every 28 days           (232,258
  13,530,000       6/14/20     3-month LIBOR-BBA quarterly   1.671% semi-annually   $ (5,515     (297,016
  33,390,000       12/19/20     3-month LIBOR-BBA quarterly   2.126% semi-annually           (585,188
  94,940,000       6/1/21     3-month LIBOR-BBA quarterly   1.340% semi-annually           (4,226,533
  50,600,000       6/27/21     3-month LIBOR-BBA quarterly   1.220% semi-annually           (2,499,757
  2,119,290,000  MXN      3/31/22     28-Day TIIE-Banxico every 28 days   7.340% every 28 days     84,427       (647,784
  399,264,000       5/31/22     3-month LIBOR-BBA quarterly   2.559% semi-annually     (265,511     (4,831,397
  191,864,000       5/31/22     3-month LIBOR-BBA quarterly   2.250% semi-annually     (1,093,298     (3,645,912
  584,078,000       8/31/22     3-month LIBOR-BBA quarterly   2.850% semi-annually     (1,737,780     148,638  
  26,780,000       12/1/22     3-month LIBOR-BBA quarterly   2.169% semi-annually           (854,226
  147,427,000       5/15/23     3-month LIBOR-BBA quarterly   Daily Federal Funds Effective Rate + 0.355% quarterly     21,222       (3,214
  11,056,100,000  JPY      6/20/24     0.127% semi-annually   6-month Japanese BBA LIBOR semi-annually     1,159       81,948  
  74,655,000       5/23/26     1.738% semi-annually   3-month LIBOR-BBA quarterly           6,684,810  
  47,470,000       5/27/26     1.735% semi-annually   3-month LIBOR-BBA quarterly           4,260,376  
  13,840,000       11/15/43     2.630% semi-annually   3-month LIBOR-BBA quarterly     (6,913     1,092,276  
  102,199,000       11/15/43     2.734% semi-annually   3-month LIBOR-BBA quarterly     (1,056,086     7,107,963  
  286,928,000       11/15/43     2.950% semi-annually   3-month LIBOR-BBA quarterly     (526,222     6,004,122  
  1,473,800,000  JPY      4/19/47     0.785% semi-annually   6-month JPY BBA LIBOR semi-annually     (11,847     31,744  
  12,688,700  EUR      8/23/47     1.498% annually   6-month EURIBOR-Reuters semi-annually     11,852       120,514  
  Total                     $ (4,584,512   $ 5,656,521  

 

See Notes to Financial Statements.

 

36    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


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Western Asset Macro Opportunities Fund

 

 

OTC INTEREST RATE SWAPS  
Swap Counterparty   Notional
Amount*
    Termination
Date
    Payments
Made by
the Fund†
  Payments
Received by
the Fund†
    Upfront
Premiums
Paid
(Received)
    Unrealized
Appreciation
 
Banc of America N.A.     145,220,000  BRL      1/4/21     BRL-CDI     12.487 %**          $ 4,236,308  
Goldman Sachs Group Inc.     287,400,000  BRL      1/2/19     BRL-CDI     9.925 %**            3,070,943  
Total                                     $ 7,307,251  

 

OTC CREDIT DEFAULT SWAPS ON CORPORATE ISSUES — BUY PROTECTION1  
Swap Counterparty
(Reference Entity)
  Notional
Amount2
    Termination
Date
    Implied
Credit
Spread at
April 30,
20183
  Periodic
Payments
Made by
the Fund†
    Market
Value
    Upfront
Premiums
Paid
(Received)
    Unrealized
Appreciation
 
Credit Suisse First Boston Inc. (Toll Brothers Finance Corp., 4.375%, due 4/15/23)   $ 2,080,000       12/20/22     1.07%     1.000% quarterly     $ 7,931     $ (18,116)     $ 26,047  
JPMorgan Chase & Co. (Toll Brothers Finance Corp., 4.375%, due 4/15/23)     2,080,000       12/20/22     1.07%     1.000% quarterly       7,930       (18,387)       26,317  
Total   $ 4,160,000                         $ 15,861     $ (36,503)     $ 52,364  

 

OTC CREDIT DEFAULT SWAPS ON CREDIT INDICES — BUY PROTECTION1  
Reference Entity   Notional
Amount2
    Termination
Date
  Periodic
Payments
Made by
the Fund†
    Market
Value4
    Upfront
Premiums
Paid
(Received)
    Unrealized
Depreciation
 
Credit Suisse (Markit CMBX.NA.AAA.6 Index)   $ 690,515     5/11/63     0.500% monthly     $ (5,330)     $ (4,728)     $ (602)  
Credit Suisse (Markit CMBX.NA.AAA.6 Index)     4,241,737     5/11/63     0.500% monthly       (32,739)       (27,159)       (5,580)  
Morgan Stanley & Co. Inc. (Markit CMBX.NA.AAA.6 Index)     4,734,962     5/11/63     0.500% monthly       (36,546)       (30,265)       (6,281)  
Total   $ 9,667,214                 $ (74,615)     $ (62,152)     $ (12,463)  

 

CENTRALLY CLEARED CREDIT DEFAULT SWAPS ON CREDIT INDICES — SELL PROTECTION5  
Reference Entity   Notional
Amount2*
    Termination
Date
    Periodic
Payments
Received by
the Fund†
  Market
Value4
    Upfront
Premiums
Paid
(Received)
    Unrealized
Appreciation
(Depreciation)
 
Markit CDX.NA.HY.29 Index     7,946,000       12/20/22     5.000% quarterly   $ 578,246     $ 484,411     $ 93,835  
Markit CDX.NA.HY.30 Index     5,030,000       6/20/23     5.000% quarterly     347,900       313,810       34,090  
Markit CDX.NA.IG.29 Index     121,750,000       12/20/22     1.000% quarterly     2,472,377       2,419,013       53,364  
Markit CDX.NA.IG.29 Index     4,160,000       12/20/27     1.000% quarterly     1,968       7,398       (5,430)  
Markit CDX.NA.IG.30 Index     188,805,000       6/20/23     1.000% quarterly     3,499,312       3,416,955       82,357  
Markit ITRX.EUR.XOVER Index     1,457,856  EUR      12/20/19     5.000% quarterly     119,884       58,599       61,285  

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   37


Table of Contents

Schedule of investments (unaudited) (cont’d)

April 30, 2018

 

Western Asset Macro Opportunities Fund

 

CENTRALLY CLEARED CREDIT DEFAULT SWAPS ON CREDIT INDICES — SELL PROTECTION5  
Reference Entity   Notional
Amount2*
    Termination
Date
    Periodic
Payments
Received by
the Fund†
  Market
Value4
    Upfront
Premiums
Paid
(Received)
    Unrealized
Appreciation
(Depreciation)
 
Markit ITRX.EUR.XOVER Index     6,141,712  EUR      12/20/20     5.000% quarterly   $ 683,484     $ 228,349     $ 455,135  
Markit ITRX.EUR.XOVER Index     2,000,000  EUR      6/20/21     5.000% quarterly     255,504       120,740       134,764  
Total                       $ 7,958,675     $ 7,049,275     $ 909,400  

 

OTC CREDIT DEFAULT SWAPS ON SOVEREIGN ISSUES — SELL PROTECTION5  
Swap Counterparty
(Reference Entity)
  Notional
Amount2
    Termination
Date
    Implied
Credit
Spread at
April 30,
20183
  Periodic
Payments
Received by
the Fund†
  Market
Value
    Upfront
Premiums
Paid
(Received)
    Unrealized
Appreciation
 
Barclays Bank PLC (Russian Federation, 7.500%, due 3/31/30)   $ 16,330,000       6/20/23     1.32%   1.000% quarterly   $ (243,087)     $ (418,070)     $ 174,983  

 

1 

If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or the underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or the underlying securities comprising the referenced index.

 

2 

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

 

3 

Implied credit spreads, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end, serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced entity or obligation.

 

4 

The quoted market prices and resulting values for credit default swap agreements on asset-backed securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected loss (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Decreasing market values (sell protection) or increasing market values (buy protection) when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

 

5

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

 

Percentage shown is an annual percentage rate.

 

See Notes to Financial Statements.

 

38    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


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Western Asset Macro Opportunities Fund

 

 

* Notional amount denominated in U.S. dollars, unless otherwise noted.

 

** One time payment made at termination date.

 

Abbreviations used in this table:

BRL   — Brazilian Real
EUR   — Euro
JPY   — Japanese Yen
MXN   — Mexican Peso

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   39


Table of Contents

Statement of assets and liabilities (unaudited)

April 30, 2018

 

Assets:  

Investments in unaffiliated securities, at value (Cost — $1,560,451,680)

   $ 1,551,692,343  

Investments in affiliated securities, at value (Cost — $10,100,000)

     10,100,000  

Foreign currency, at value (Cost — $17,836,308)

     17,407,098  

Cash

     168,329  

Foreign currency collateral for open futures contracts and exchange-traded options,
at value (Cost — $26,666,347)

     26,171,288  

Deposits with brokers for centrally cleared swap contracts

     20,723,819  

Interest and dividends receivable

     18,561,323  

Deposits with brokers for open futures contracts and exchange-traded options

     14,363,444  

Unrealized appreciation on forward foreign currency contracts

     11,183,687  

OTC swaps, at value (premiums received — $36,503)

     7,323,112  

Receivable for Fund shares sold

     4,357,932  

Deposits with brokers for OTC derivatives

     3,950,000  

Receivable for securities sold

     1,204,435  

Receivable for open OTC swap contracts

     65,595  

Prepaid expenses

     104,838  

Total Assets

     1,687,377,243  
Liabilities:         

Payable to broker — variation margin on open futures contracts

     8,496,684  

Unrealized depreciation on forward foreign currency contracts

     7,733,020  

Written options, at value (premiums received — $7,140,270)

     5,069,353  

Payable for securities purchased

     3,042,008  

Payable for Fund shares repurchased

     2,112,820  

Payable to broker — variation margin on centrally cleared swaps

     1,992,102  

Investment management fee payable

     1,572,764  

OTC swaps, at value (premiums received — $480,222)

     317,702  

Service and/or distribution fees payable

     55,551  

Foreign currency collateral for centrally cleared swap contracts, at value (Cost — $30,574)

     49,136  

Accrued foreign capital gains tax

     8,197  

Payable for open OTC swap contracts

     5,659  

Directors’ fees payable

     1,659  

Accrued expenses

     226,636  

Total Liabilities

     30,683,291  
Total Net Assets    $ 1,656,693,952  
Net Assets:  

Par value (Note 8)

   $ 148,424  

Paid-in capital in excess of par value

     1,654,255,625  

Undistributed net investment income

     5,592,015  

Accumulated net realized loss on investments, futures contracts, written options, swap contracts, forward foreign currency contracts and foreign currency transactions

     (2,019,984)  

Net unrealized depreciation on investments, futures contracts, written options, swap contracts, forward foreign currency contracts and foreign currencies

     (1,282,128) † 
Total Net Assets    $ 1,656,693,952  

 

See Notes to Financial Statements.

 

40    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

 

Net Assets:         

Class A

     $54,628,768  

Class A2

     $974,754  

Class C

     $43,070,905  

Class FI

     $39,220,204  

Class I

     $1,336,675,283  

Class IS

     $182,124,038  
Shares Outstanding:         

Class A

     4,891,428  

Class A2

     88,032  

Class C

     3,903,921  

Class FI

     3,517,835  

Class I

     119,741,748  

Class IS

     16,281,167  
Net Asset Value:         

Class A (and redemption price)

     $11.17  

Class A2 (and redemption price)

     $11.07  

Class C*

     $11.03  

Class FI (and redemption price)

     $11.15  

Class I (and redemption price)

     $11.16  

Class IS (and redemption price)

     $11.19  
Maximum Public Offering Price Per Share:         

Class A (based on maximum initial sales charge of 4.25%)

     $11.67  

Class A2 (based on maximum initial sales charge of 4.25%)

     $11.56  

 

Net of accrued foreign capital gains tax of $8,197.
* Redemption price per share is NAV of Class C shares reduced by a 1.00% CDSC if shares are redeemed within one year from purchase payment (See Note 2).

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   41


Table of Contents

Statement of operations (unaudited)

For the Six Months Ended April 30, 2018

 

Investment Income:  

Interest from unaffiliated investments

   $ 34,826,981  

Dividends

     261,544  

Interest from affiliated investments

     203,962  

Less: Foreign taxes withheld

     (235,479)  

Total Investment Income

     35,057,008  
Expenses:  

Investment management fee (Note 2)

     8,852,768  

Transfer agent fees (Note 5)

     566,441  

Service and/or distribution fees (Notes 2 and 5)

     342,631  

Custody fees

     84,219  

Registration fees

     71,539  

Fund accounting fees

     59,273  

Audit and tax fees

     34,995  

Legal fees

     24,354  

Commodity pool reports

     20,493  

Shareholder reports

     20,345  

Directors’ fees

     18,118  

Insurance

     8,076  

Commitment fees (Note 9)

     5,722  

Interest expense

     1,247  

Miscellaneous expenses

     10,767  

Total Expenses

     10,120,988  
Net Investment Income      24,936,020  
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts,
Written Options, Swap Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions (Notes 1, 3 and 4):
        

Net Realized Gain (Loss) From:

 

Investment transactions in unaffiliated securities

     (17,944,591)  

Futures contracts

     (24,748,056)  

Written options

     29,229,454  

Swap contracts

     21,179,802  

Forward foreign currency contracts

     (18,044,062)  

Foreign currency transactions

     1,370,020  

Net Realized Loss

     (8,957,433)  

Change in Net Unrealized Appreciation (Depreciation) From:

 

Investments in unaffiliated securities

     (28,597,234) † 

Futures contracts

     4,957,411  

Written options

     1,945,413  

Swap contracts

     (5,618,922)  

Forward foreign currency contracts

     1,146,712  

Foreign currencies

     (421,364)  

Change in Net Unrealized Appreciation (Depreciation)

     (26,587,984)  
Net Loss on Investments, Futures Contracts, Written Options, Swap Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions      (35,545,417)  
Decrease in Net Assets From Operations    $ (10,609,397)  

 

Net of change in accrued foreign capital gains tax of $26,172.

 

See Notes to Financial Statements.

 

42    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Statements of changes in net assets

 

For the Six Months Ended April 30, 2018 (unaudited)
and the Year Ended October 31, 2017
   2018      2017  
Operations:  

Net investment income

   $ 24,936,020      $ 32,344,590  

Net realized gain (loss)

     (8,957,433)        40,100,322  

Change in net unrealized appreciation (depreciation)

     (26,587,984)        38,828,453  

Increase (Decrease) in Net Assets From Operations

     (10,609,397)        111,273,365  
Distributions to Shareholders From (Notes 1 and 7):  

Net investment income

     (47,000,192)        (15,800,214)  

Net realized gains

     (26,658,341)        (3,072,046)  

Decrease in Net Assets From Distributions to Shareholders

     (73,658,533)        (18,872,260)  
Fund Share Transactions (Note 8):  

Net proceeds from sale of shares

     581,319,249        808,694,307  

Reinvestment of distributions

     51,889,943        13,612,063  

Cost of shares repurchased

     (286,311,513)        (387,045,774)  

Increase in Net Assets From Fund Share Transactions

     346,897,679        435,260,596  

Increase in Net Assets

     262,629,749        527,661,701  
Net Assets:  

Beginning of period

     1,394,064,203        866,402,502  

End of period*

   $ 1,656,693,952      $ 1,394,064,203  

*Includes undistributed net investment income of:

     $5,592,015        $27,656,187  

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   43


Table of Contents

Financial highlights

 

For a share of each class of capital stock outstanding throughout each year ended October 31,
unless otherwise noted:
 
Class A Shares1   20182     2017     2016     2015     2014     20133  
Net asset value, beginning of period     $11.79       $10.88       $10.89       $11.25       $10.46       $10.00  
Income (loss) from operations:            

Net investment income

    0.17       0.30       0.33       0.32       0.34       0.01  

Net realized and unrealized gain (loss)

    (0.22)       0.81       0.36       (0.25)       0.74       0.45  

Total income (loss) from operations

    (0.05)       1.11       0.69       0.07       1.08       0.46  
Less distributions from:            

Net investment income

    (0.35)       (0.16)       (0.28)       (0.25)       (0.09)        

Net realized gains

    (0.22)       (0.04)       (0.42)       (0.18)       (0.20)        

Total distributions

    (0.57)       (0.20)       (0.70)       (0.43)       (0.29)        
Net asset value, end of period     $11.17       $11.79       $10.88       $10.89       $11.25       $10.46  

Total return4

    (0.54)     10.44     6.79     0.71     10.61     4.60
Net assets, end of period (000s)     $54,629       $45,837       $64,282       $67,884       $54,624       $12  
Ratios to average net assets:            

Gross expenses

    1.55 %5      1.55     1.63 %6      1.65 %6      1.68 %6      4.96 %5 

Net expenses7

    1.55 5      1.55       1.63 6      1.65 6,8      1.32 6,8      1.65 5,8 

Net investment income

    2.99 5      2.73       3.14       2.96       3.13       0.51 5 
Portfolio turnover rate     46 %9      150 %9      295 %9      105 %9      122     23

 

1 

Per share amounts have been calculated using the average shares method.

 

2 

For the six months ended April 30, 2018 (unaudited).

 

3 

For the period August 30, 2013 (inception date) to October 31, 2013.

 

4 

Performance figures, exclusive of sales charges, may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

5 

Annualized.

 

6 

Reflects recapture of expenses waived/reimbursed from prior fiscal years.

 

7 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, acquired fund fees and expenses and deferred organizational expenses, to average net assets of Class A shares did not exceed 1.65%. This expense limitation arrangement cannot be terminated prior to December 31, 2019 without the Board of Directors’ consent.

 

8 

Reflects fee waivers and/or expense reimbursements.

 

9 

Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 46% for the six months ended April 30, 2018, 151%, 297% and 117% for the years ended October 31, 2017, 2016 and 2015, respectively.

 

See Notes to Financial Statements.

 

44    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents
For a share of each class of capital stock outstanding throughout each year ended October 31,
unless otherwise noted:
 
Class A2 Shares1    20182      20173  
Net asset value, beginning of period      $11.73        $10.58  
Income (loss) from operations:      

Net investment income

     0.17        0.32  

Net realized and unrealized gain (loss)

     (0.22)        1.07  

Total income (loss) from operations

     (0.05)        1.39  
Less distributions from:      

Net investment income

     (0.39)        (0.20)  

Net realized gains

     (0.22)        (0.04)  

Total distributions

     (0.61)        (0.24)  
Net asset value, end of period      $11.07        $11.73  

Total return4

     (0.53)      13.41
Net assets, end of period (000s)      $975        $358  
Ratios to average net assets:      

Gross expenses5

     1.54      3.23

Net expenses5,6

     1.54        1.85 7 

Net investment income5

     3.06        3.17  
Portfolio turnover rate8      46      150

 

1 

Per share amounts have been calculated using the average shares method.

 

2 

For the six months ended April 30, 2018 (unaudited).

 

3 

For the period December 14, 2016 (inception date) to October 31, 2017.

 

4 

Performance figures, exclusive of sales charges, may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

5 

Annualized.

 

6 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, acquired fund fees and expenses and deferred organizational expenses, to average net assets of Class A2 shares did not exceed 1.85%. This expense limitation arrangement cannot be terminated prior to December 31, 2019 without the Board of Directors’ consent.

 

7 

Reflects fee waivers and/or expense reimbursements.

 

8 

Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 46% for the six months ended April 30, 2018 and 151% for the year ended October 31, 2017, respectively.

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   45


Table of Contents

Financial highlights (cont’d)

 

For a share of each class of capital stock outstanding throughout each year ended October 31,
unless otherwise noted:
 
Class C Shares1   20182     2017     2016     2015     2014     20133  
Net asset value, beginning of period     $11.63       $10.73       $10.76       $11.17       $10.45       $10.00  
Income (loss) from operations:            

Net investment income (loss)

    0.13       0.22       0.26       0.24       0.25       (0.00) 4 

Net realized and unrealized gain (loss)

    (0.23)       0.81       0.35       (0.25)       0.74       0.45  

Total income (loss) from operations

    (0.10)       1.03       0.61       (0.01)       0.99       0.45  
Less distributions from:            

Net investment income

    (0.28)       (0.09)       (0.22)       (0.22)       (0.07)        

Net realized gains

    (0.22)       (0.04)       (0.42)       (0.18)       (0.20)        

Total distributions

    (0.50)       (0.13)       (0.64)       (0.40)       (0.27)        
Net asset value, end of period     $11.03       $11.63       $10.73       $10.76       $11.17       $10.45  

Total return5

    (0.92)     9.67     6.04     (0.01)     9.71     4.50
Net assets, end of period (000s)     $43,071       $37,669       $29,340       $30,637       $14,511       $28  
Ratios to average net assets:            

Gross expenses

    2.27 %6      2.30     2.32 %7      2.36 %7      2.43 %7      4.94 %6 

Net expenses8

    2.27 6      2.30       2.32 7      2.36 7,9      2.19 7,9      2.40 6,9 

Net investment income (loss)

    2.28 6      2.00       2.49       2.25       2.30       (0.07) 6 
Portfolio turnover rate     46 %10      150 %10      295 %10      105 %10      122     23

 

1 

Per share amounts have been calculated using the average shares method.

 

2 

For the six months ended April 30, 2018 (unaudited).

 

3 

For the period August 30, 2013 (inception date) to October 31, 2013.

 

4 

Amount represents less than $0.005 per share.

 

5 

Performance figures, exclusive of CDSC, 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 

Annualized.

 

7 

Reflects recapture of expenses waived/reimbursed from prior fiscal years.

 

8 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, acquired fund fees and expenses and deferred organizational expenses, to average net assets of Class C shares did not exceed 2.40%. This expense limitation arrangement cannot be terminated prior to December 31, 2019 without the Board of Directors’ consent.

 

9 

Reflects fee waivers and/or expense reimbursements.

 

10 

Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 46% for the six months ended April 30, 2018, 151%, 297% and 117% for the years ended October 31, 2017, 2016 and 2015, respectively.

 

See Notes to Financial Statements.

 

46    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents
For a share of each class of capital stock outstanding throughout each year ended October 31,
unless otherwise noted:
 
Class FI Shares1   20182     2017     2016     2015     2014     20133  
Net asset value, beginning of period     $11.79       $10.88       $10.87       $11.22       $10.46       $10.00  
Income (loss) from operations:  

Net investment income

    0.16       0.30       0.33       0.32       0.33       0.01  

Net realized and unrealized gain (loss)

    (0.22)       0.80       0.35       (0.25)       0.73       0.45  

Total income (loss) from operations

    (0.06)       1.10       0.68       0.07       1.06       0.46  
Less distributions from:  

Net investment income

    (0.36)       (0.15)       (0.25)       (0.24)       (0.10)        

Net realized gains

    (0.22)       (0.04)       (0.42)       (0.18)       (0.20)        

Total distributions

    (0.58)       (0.19)       (0.67)       (0.42)       (0.30)        
Net asset value, end of period     $11.15       $11.79       $10.88       $10.87       $11.22       $10.46  

Total return4

    (0.58)     10.35     6.76     0.67     10.51     4.60
Net assets, end of period (000s)     $39,220       $81,279       $25,088       $60,375       $53,027       $10  
Ratios to average net assets:  

Gross expenses

    1.63 %5      1.63 %6      1.69 %6      1.66 %6      1.85 %6      5.01 %5 

Net expenses7

    1.63 5      1.63 6      1.65 6,8      1.65 6,8      1.40 6,8      1.65 5,8 

Net investment income

    2.85 5      2.69       3.18       2.95       3.03       0.47 5 
Portfolio turnover rate     46 %9      150 %9      295 %9      105 %9      122     23

 

1 

Per share amounts have been calculated using the average shares method.

 

2 

For the six months ended April 30, 2018 (unaudited).

 

3 

For the period August 30, 2013 (inception date) to October 31, 2013.

 

4 

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

5 

Annualized.

 

6 

Reflects recapture of expenses waived/reimbursed from prior fiscal years.

 

7 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, acquired fund fees and expenses and deferred organizational expenses, to average net assets of Class FI shares did not exceed 1.65%. This expense limitation arrangement cannot be terminated prior to December 31, 2019 without the Board of Directors’ consent.

 

8 

Reflects fee waivers and/or expense reimbursements.

 

9 

Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 46% for the six months ended April 30, 2018, 151%, 297% and 117% for the years ended October 31, 2017, 2016 and 2015, respectively.

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   47


Table of Contents

Financial highlights (cont’d)

 

For a share of each class of capital stock outstanding throughout each year ended October 31,
unless otherwise noted:
 
Class I Shares1   20182     2017     2016     2015     2014     20133  
Net asset value, beginning of period     $11.80       $10.89       $10.91       $11.25       $10.47       $10.00  
Income (loss) from operations:            

Net investment income

    0.19       0.34       0.36       0.36       0.33       0.01  

Net realized and unrealized gain (loss)

    (0.22)       0.80       0.35       (0.26)       0.75       0.46  

Total income (loss) from operations

    (0.03)       1.14       0.71       0.10       1.08       0.47  
Less distributions from:            

Net investment income

    (0.39)       (0.19)       (0.31)       (0.26)       (0.10)        

Net realized gains

    (0.22)       (0.04)       (0.42)       (0.18)       (0.20)        

Total distributions

    (0.61)       (0.23)       (0.73)       (0.44)       (0.30)        
Net asset value, end of period     $11.16       $11.80       $10.89       $10.91       $11.25       $10.47  

Total return4

    (0.40)     10.66     7.15     1.00     10.72     4.60
Net assets, end of period (000s)     $1,336,675       $1,057,237       $567,343       $512,684       $180,298       $24,394  
Ratios to average net assets:            

Gross expenses

    1.27 %5      1.30     1.34 %6      1.35 %6      1.58 %6      4.50 %5 

Net expenses7

    1.27 5      1.30       1.34 6      1.35 6,8      1.30 6,8      1.32 5,8 

Net investment income

    3.29 5      3.01       3.45       3.28       3.08       0.82 5 
Portfolio turnover rate     46 %9      150 %9      295 %9      105 %9      122     23

 

1 

Per share amounts have been calculated using the average shares method.

 

2 

For the six months ended April 30, 2018 (unaudited).

 

3 

For the period August 30, 2013 (inception date) to October 31, 2013.

 

4 

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

5 

Annualized.

 

6 

Reflects recapture of expenses waived/reimbursed from prior fiscal years.

 

7 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, acquired fund fees and expenses and deferred organizational expenses, to average net assets of Class I shares did not exceed 1.35%. This expense limitation arrangement cannot be terminated prior to December 31, 2019 without the Board of Directors’ consent.

 

8 

Reflects fee waivers and/or expense reimbursements.

 

9 

Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 46% for the six months ended April 30, 2018, 151%, 297% and 117% for the years ended October 31, 2017, 2016 and 2015, respectively.

 

See Notes to Financial Statements.

 

48    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents
For a share of each class of capital stock outstanding throughout each year ended October 31,
unless otherwise noted:
 
Class IS Shares1   20182     2017     2016     2015     2014     20133  
Net asset value, beginning of period     $11.83       $10.92       $10.93       $11.25       $10.47       $10.00  
Income (loss) from operations:            

Net investment income

    0.19       0.34       0.37       0.37       0.38       0.01  

Net realized and unrealized gain (loss)

    (0.22)       0.81       0.36       (0.25)       0.70       0.46  

Total income (loss) from operations

    (0.03)       1.15       0.73       0.12       1.08       0.47  
Less distributions from:            

Net investment income

    (0.39)       (0.20)       (0.32)       (0.26)       (0.10)        

Net realized gains

    (0.22)       (0.04)       (0.42)       (0.18)       (0.20)        

Total distributions

    (0.61)       (0.24)       (0.74)       (0.44)       (0.30)        
Net asset value, end of period     $11.19       $11.83       $10.92       $10.93       $11.25       $10.47  

Total return4

    (0.33)     10.83     7.22     1.19     10.62     4.70
Net assets, end of period (000s)     $182,124       $171,684       $180,349       $104,546       $49,001       $10  
Ratios to average net assets:            

Gross expenses

    1.20 %5      1.21     1.23 %6      1.25 %6      1.30 %6      4.68 %5 

Net expenses7

    1.20 5      1.21       1.23 6      1.25 6      1.04 6,8      1.25 5,8 

Net investment income

    3.35 5      3.08       3.55       3.36       3.43       0.88 5 
Portfolio turnover rate     46 %9      150 %9      295 %9      105 %9      122     23

 

1 

Per share amounts have been calculated using the average shares method.

 

2 

For the six months ended April 30, 2018 (unaudited).

 

3 

For the period August 30, 2013 (inception date) to October 31, 2013.

 

4 

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

5 

Annualized.

 

6 

Reflects recapture of expenses waived/reimbursed from prior fiscal years.

 

7 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, acquired fund fees and expenses and deferred organizational expenses, to average net assets of Class IS shares did not exceed 1.25%. In addition, the ratio of total annual fund operating expenses for Class IS shares did not exceed the ratio of total annual fund operating expenses for Class I shares. These expense limitation arrangements cannot be terminated prior to December 31, 2019 without the Board of Directors’ consent.

 

8 

Reflects fee waivers and/or expense reimbursements.

 

9 

Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 46% for the six months ended April 30, 2018, 151%, 297% and 117% for the years ended October 31, 2017, 2016 and 2015, respectively.

 

See Notes to Financial Statements.

 

Western Asset Macro Opportunities Fund 2018 Semi-Annual Report   49


Table of Contents

Notes to financial statements (unaudited)

 

1. Organization and significant accounting policies

Western Asset Macro Opportunities Fund (the “Fund”) is a separate non-diversified investment series of Western Asset Funds, Inc. (the “Corporation”). The Corporation, a Maryland corporation, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.

The following are significant accounting policies consistently followed by the Funds and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.

(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Prior to December 1, 2017, short-term fixed income securities that would mature in 60 days or less were valued at amortized cost, unless it was determined that using this method would not reflect an investment’s fair value. Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. When the Fund holds securities or other assets that are denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Directors.

The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North Atlantic Fund Valuation Committee (the “Valuation Committee”). The Valuation Committee, pursuant to the policies

 

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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.

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)

 

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Notes to financial statements (unaudited) (cont’d)

 

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

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

 

ASSETS  
Description   Quoted Prices
(Level 1)
    Other Significant
Observable Inputs
(Level 2)
    Significant
Unobservable
Inputs
(Level 3)
    Total  
Long-term investments†:  

Corporate bonds & notes:

 

Energy

        $ 72,737,447     $ 0   $ 72,737,447  

Other corporate bonds & notes

          372,457,500             372,457,500  

Asset-backed securities

          51,836,876             51,836,876  

Collateralized mortgage obligations

          88,514,783             88,514,783  

Municipal bonds

          4,390,668             4,390,668  

Non-U.S. treasury inflation protected securities

          62,823,120             62,823,120  

Senior loans

          39,446,460             39,446,460  

Sovereign bonds

          424,928,571             424,928,571  

U.S. government & agency obligations

          423,098,542             423,098,542  

Common stocks:

 

Energy

          165,785       652,569       818,354  

Convertible preferred stocks

          2,147,806             2,147,806  

Preferred stocks

  $ 404,833                   404,833  

Purchased options:

 

Exchange-traded purchased options

    2,036,198       62,796             2,098,994  

OTC purchased options

          2,138,169             2,138,169  
Total long-term investments     2,441,031       1,544,748,523       652,569       1,547,842,123  
Short-term investments†:                                

Sovereign bonds

          3,850,220             3,850,220  

Money market funds

          10,100,000             10,100,000  
Total short-term investments           13,950,220             13,950,220  
Total investments   $ 2,441,031     $ 1,558,698,743     $ 652,569     $ 1,561,792,343  
Other financial instruments:  

Futures contracts

  $ 8,521,142                 $ 8,521,142  

Forward foreign currency contracts

        $ 11,183,687             11,183,687  

Centrally cleared credit default swaps on credit indices — sell protection

          914,830             914,830  

Centrally cleared interest rate swaps

          25,532,391             25,532,391  

OTC credit default swaps on corporate issues — buy protection‡

          15,861             15,861  

OTC interest rate swaps‡

          7,307,251             7,307,251  
Total other financial instruments   $ 8,521,142     $ 44,954,020           $ 53,475,162  
Total   $ 10,962,173     $ 1,603,652,763     $ 652,569     $ 1,615,267,505  

 

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LIABILITIES  
Description   Quoted Prices
(Level 1)
    Other Significant
Observable Inputs
(Level 2)
    Significant
Unobservable
Inputs
(Level 3)
    Total  
Other financial instruments:  

Written options:

 

OTC written options

        $ 1,212,834           $ 1,212,834  

Exchange-traded written options

  $ 3,856,519                   3,856,519  

Futures contracts

    19,607,508                   19,607,508  

Forward foreign currency contracts

          7,733,020             7,733,020  

Centrally cleared credit default swaps on credit indices — sell protection

          5,430             5,430  

Centrally cleared interest rate swaps

          19,875,870             19,875,870  

OTC credit default swaps on credit indices — buy protection‡

          74,615             74,615  

OTC credit default swaps on sovereign issues — sell protection‡

          243,087             243,087  
Total   $ 23,464,027     $ 29,144,856           $ 52,608,883  

 

See Schedule of Investments for additional detailed categorizations.

 

* Amount represents less than $1.

 

Value includes any premium paid or received with respect to swap contracts.

(b) Securities traded on a to-be-announced basis. The Fund may trade securities on a to-be-announced (“TBA”) basis. In a TBA transaction, the Fund commits to purchasing or selling securities which have not yet been issued by the issuer and for which specific information, such as the face amount, maturity date and underlying pool of investments in U.S. government agency mortgage pass-through securities, is not announced. Securities purchased on a TBA basis are not settled until they are delivered to the Fund. Beginning on the date the Fund enters into a TBA transaction, cash, U.S. government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These securities are subject to market fluctuations and their current value is determined in the same manner as for other securities.

(c) Mortgage dollar rolls. The Fund may enter into mortgage dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month, realizing a gain or loss, and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities to settle on a specified future date.

The Fund executes its mortgage dollar rolls entirely in the TBA market, whereby the Fund makes a forward commitment to purchase a security and, instead of accepting delivery, the position is offset by a sale of the security with a simultaneous agreement to repurchase at a future date. The Fund accounts for mortgage dollar rolls as purchases and sales.

The risk of entering into mortgage dollar rolls is that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a mortgage dollar roll files for bankruptcy or

 

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Notes to financial statements (unaudited) (cont’d)

 

becomes insolvent, the Fund’s use of the proceeds of the mortgage dollar roll may be restricted pending a determination by the counterparty, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.

(d) 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 securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s 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.

(e) Forward foreign currency contracts. The Fund enters 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 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.

Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency.

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

 

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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.

(f) Written options. When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily to reflect the current market value of the option written. If the option expires, the premium received is recorded as a realized gain. When a written call option is exercised, the difference between the premium received plus the option exercise price and the Fund’s basis in the underlying security (in the case of a covered written call option), or the cost to purchase the underlying security (in the case of an uncovered written call option), including brokerage commission, is recognized as a realized gain or loss. When a written put option is exercised, the amount of the premium received is subtracted from the cost of the security purchased by the Fund from the exercise of the written put option to form the Fund’s basis in the underlying security purchased. The writer or buyer of an option traded on an exchange can liquidate the position before the exercise of the option by entering into a closing transaction. The cost of a closing transaction is deducted from the original premium received resulting in a realized gain or loss to the Fund.

The risk in writing a covered call option is that the Fund may forego the opportunity of profit if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. The risk in writing an uncovered call option is that the Fund is exposed to the risk of loss if the market price of the underlying security increases. 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.

(g) Purchased options. When the Fund purchases an option, an amount equal to the premium paid by the Fund is recorded as an investment on the Statement of Assets and Liabilities, the value of which is marked-to-market to reflect the current market value of the option purchased. If the purchased option expires, the Fund realizes a loss equal to the amount of premium paid. When an instrument is purchased or sold through the exercise of an option, the related premium paid is added to the basis of the instrument acquired or deducted from the proceeds of the instrument sold. The risk associated with purchasing put and call options is limited to the premium paid.

(h) Swaptions. The Fund may purchase or write swaption contracts to manage exposure to fluctuations in interest rates or to enhance yield. The Fund may also purchase and write swaption contracts to manage exposure to an underlying instrument. Swaption contracts written by the Fund represent an option that gives the purchaser the right, but not the obligation, to enter into a previously agreed upon swap contract at a future date. Swaption contracts purchased by the Fund represent an option that gives the Fund the right, but not the obligation, to enter into a previously agreed upon swap contract at a future date.

 

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Notes to financial statements (unaudited) (cont’d)

 

When the Fund writes a swaption, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily to reflect the current market value of the swaption written. If the swaption expires, the Fund realizes a gain equal to the amount of the premium received.

When the Fund purchases a swaption, an amount equal to the premium paid by the Fund is recorded as an investment on the Statement of Assets and Liabilities, the value of which is marked-to-market daily to reflect the current market value of the swaption purchased. If the swaption expires, the Fund realizes a loss equal to the amount of the premium paid.

Swaptions are marked-to-market daily based upon quotations from market makers. Changes in the value of the swaption are reported as unrealized gains or losses in the Statement of Operations.

(i) Inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value or interest rate is periodically adjusted according to the rate of inflation. As the index measuring inflation changes, the principal value or interest rate of inflation-indexed bonds will be adjusted accordingly. Inflation adjustments to the principal amount of inflation-indexed bonds are reflected as an increase or decrease to investment income on the Statement of Operations. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.

(j) Stripped securities. The Fund may invest in ‘‘Stripped Securities,’’ a term used collectively for components, or strips, of fixed income securities. Stripped Securities can be principal only securities (“PO”), which are debt obligations that have been stripped of unmatured interest coupons, or interest only securities (“IO”), which are unmatured interest coupons that have been stripped from debt obligations. The market value of Stripped Securities will fluctuate in response to changes in economic conditions, rates of pre-payment, interest rates and the market’s perception of the securities. However, fluctuations in response to interest rates may be greater in Stripped Securities than for debt obligations of comparable maturities that pay interest currently. The amount of fluctuation may increase with a longer period of maturity.

The yield to maturity on IO’s is sensitive to the rate of principal repayments (including prepayments) on the related underlying debt obligation and principal payments may have a material effect on yield to maturity. If the underlying debt obligation experiences greater than anticipated prepayments of principal, the Fund may not fully recoup its initial investment in IO’s.

(k) 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.

 

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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. 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.

(l) Options on futures contracts. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in the underlying futures contract at the specified option exercise price at any time prior to the expiration date of the option. Upon exercise of an option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer’s futures margin account that represents the amount by which the market price of the futures contract exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the futures contract. The potential for loss related to the purchase of an option on a futures contract is limited to the premium paid for the option plus transaction costs. Because the value of the option is fixed at the point of purchase, there are no daily cash payments by the purchaser to reflect changes in the value of the underlying contract; however, the value of the option changes daily and that change would be reflected in the net asset value of the Fund. The potential for loss related to writing call options is unlimited. The potential for loss related to writing put options is limited only by the aggregate strike price of the put option less the premium received.

(m) Loan participations. The Fund may invest in loans arranged through private negotiation between one or more financial institutions. The Fund’s 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.

(n) Unfunded loan commitments. The Fund may enter into certain credit agreements where all or a portion of which may be unfunded. The Fund is obligated to fund these

 

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Notes to financial statements (unaudited) (cont’d)

 

commitments at the borrower’s discretion. The commitments are disclosed in the accompanying Schedule of Investments. At April 30, 2018, the Fund had sufficient cash and/or securities to cover these commitments.

(o) 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. The use of swaps involves risks that are different from those associated with other portfolio transactions. Swap agreements are privately negotiated in the over-the-counter market and may be entered into as a bilateral contract (“OTC Swaps”) or centrally cleared (“Centrally Cleared Swaps”). Unlike Centrally Cleared Swaps, the Fund has credit exposure to the counterparties of OTC Swaps.

In a Centrally Cleared Swap, immediately following execution of the swap, the swap agreement is submitted to a clearinghouse or central counterparty (the “CCP”) and the CCP becomes the ultimate counterparty of the swap agreement. The Fund is required to interface with the CCP through a broker, acting in an agency capacity. All payments are settled with the CCP through the broker. Upon entering into a Centrally Cleared Swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities.

Swap contracts are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of Centrally Cleared Swaps, if any, is recorded as a receivable or payable for variation margin on the Statement of Assets and Liabilities. 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 Fund’s 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.

OTC swap 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 Fund’s maximum exposure in the event of a defined credit event on a credit default swap to sell protection is the notional amount. As of April 30, 2018, the total notional value of all credit default swaps to sell protection was $344,021,000 and EUR 9,599,568. These amounts would be offset by the value of the swap’s reference entity, upfront premiums received on the swap and any amounts received from the settlement of a credit default swap where the Fund bought protection for the same referenced security/entity.

 

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For average notional amounts of swaps held during the six months ended April 30, 2018, 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 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 issuer’s 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 entity’s 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 Schedule of Investments 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 Fund’s 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 Fund’s exposure to the counterparty). As the protection seller, the Fund’s maximum risk is the notional amount of the contract. Credit default swaps are

 

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Notes to financial statements (unaudited) (cont’d)

 

considered to have credit 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.

Interest rate swaps

The Fund enters into interest rate swap contracts to manage its exposure to interest rate risk. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional principal amount. The Fund may elect to pay a fixed rate and receive a floating rate, receive a fixed rate and pay a floating rate, or receive and pay a floating rate, on a notional principal amount. Interest rate swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as an unrealized gain or loss in the Statement of Operations. When a swap contract is terminated early, the Fund records a realized gain or loss equal to the difference between the original cost and the settlement amount of the closing transaction.

The risks of interest rate swaps include changes in market conditions that will affect the value of the contract or changes in the present value of the future cash flow streams and the possible inability of the counterparty to fulfill its obligations under the agreement. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that amount is positive. This risk is mitigated by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.

(p) Credit and market risk. The Fund invests in high-yield and emerging market instruments that are subject to certain credit and market risks. The yields of high-yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Fund’s investments in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Fund’s investments in non-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.

Investments in securities that are collateralized by real estate mortgages are subject to certain credit and liquidity risks. When market conditions result in an increase in default rates of the underlying mortgages and the foreclosure values of underlying real estate properties are materially below the outstanding amount of these underlying mortgages, collection of the full amount of accrued interest and principal on these investments may be

 

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doubtful. Such market conditions may significantly impair the value and liquidity of these investments and may result in a lack of correlation between their credit ratings and values.

(q) Foreign investment risks. The Fund’s investments in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.

(r) 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 subadviser 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 subadviser. In addition, declines in the values of underlying collateral received may expose the Fund to increased risk of loss.

With exchange traded and centrally cleared derivatives, there is less counterparty risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default of the clearing broker or clearinghouse.

The Fund has entered into master agreements, such as an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement, with certain of its derivative counterparties that govern over-the-counter derivatives and provide for general obligations, representations, agreements, collateral posting terms, netting provisions in the event of default or termination and credit related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in the Fund’s net assets or NAV over a specified period of time. If these credit related contingent features were triggered, the derivatives counterparty could terminate the positions and demand payment or require additional collateral.

 

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Notes to financial statements (unaudited) (cont’d)

 

Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. However, absent an event of default by the counterparty or a termination of the agreement, the terms of the ISDA Master Agreements do not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the Fund and the applicable counterparty. The enforceability of the right to offset may vary by jurisdiction.

Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearinghouse for exchange traded derivatives while collateral terms are contract specific for over-the-counter traded derivatives. Cash collateral that has been pledged to cover obligations of the Fund under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities. Securities pledged as collateral, if any, for the same purpose are noted in the Schedule of Investments.

As of April 30, 2018, the Fund held OTC written options, forward foreign currency contracts and OTC credit default swaps with credit related contingent features which had a liability position of $9,263,556. If a contingent feature in the master agreements would have been triggered, the Fund would have been required to pay this amount to its derivatives counterparties. As of April 30, 2018, the Fund had posted with its counterparties cash and/or securities as collateral to cover the net liability of these derivatives amounting to $3,950,000, which could be used to reduce the required payment.

At April 30, 2018, the Fund held non-cash collateral from Bank of America N.A., Barclays Bank PLC, Goldman Sachs Group Inc., and Morgan Stanley & Co. in the amounts of $4,489,756, $265,649, $3,757,739 and $197,644, respectively. These amounts could be used to reduce the Fund’s exposure to the counterparty in the event of default.

(s) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income (including interest income from payment-in-kind securities), adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Paydown gains and losses on mortgage- and asset-backed securities are recorded as adjustments to interest income. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. Foreign dividend income is recorded on the ex-dividend date or as soon as practicable after the Fund determines the existence 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.

(t) Distributions to shareholders. Distributions from net investment income and 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.

 

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(u) Share class accounting. Investment income, common expenses and realized/unrealized gains (losses) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Fees relating to a specific class are charged directly to that share class.

(v) Compensating balance arrangements. The Fund has an arrangement with its custodian bank whereby a portion of the custodian’s fees is paid indirectly by credits earned on the Fund’s cash on deposit with the bank.

(w) Federal and other taxes. It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986 (the “Code”), as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Fund’s financial statements.

Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of October 31, 2017, no provision for income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates. Realized gains upon the disposition of the securities issued in or by certain foreign countries are subject to capital gains tax imposed by those countries. As of April 30, 2018, there were $8,197 of capital gains tax liabilities accrued on unrealized gains.

(x) 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 Fund’s investment manager. Western Asset Management Company (“Western Asset”), Western Asset Management Company Limited (“Western Asset Limited”), Western Asset Management Company Pte. Ltd. (“Western Singapore”) and Western Asset Management Company Ltd. (“Western Japan”) are the Fund’s subadvisers. LMPFA, Western Asset, Western Asset Limited, Western Singapore and Western Japan 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 1.15% of the Fund’s average daily net assets.

 

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Notes to financial statements (unaudited) (cont’d)

 

As a result of expense limitation arrangements between the Fund and LMPFA, the ratio of total annual fund operating expenses other than interest, brokerage commissions, taxes, extraordinary expenses, acquired fund fees and expenses and deferred organizational expenses, to average net assets of Class A, Class A2, Class C, Class FI, Class I and Class IS shares did not exceed 1.65%, 1.85%, 2.40%, 1.65%, 1.35% and 1.25%, respectively. In addition, the ratio of total annual fund operating expenses for Class IS shares did not exceed the ratio of total annual fund operating expenses for Class I shares. These expense limitation arrangements cannot be terminated prior to December 31, 2019 without the Board of Directors’ consent.

LMPFA is permitted to recapture amounts waived and/or reimbursed to a class within two years after the fiscal year in which LMPFA earned the fee or incurred the expense if the class’ total annual operating expenses have fallen to a level below the expense limitation (“expense cap”) in effect at the time the fees were earned or the expenses incurred. In no case will LMPFA recapture any amount that would result, on any particular business day of the Fund, in the class’ total annual operating expenses exceeding the expense cap or any other lower limit then in effect.

Pursuant to these arrangements, at April 30, 2018, the Fund had remaining fee waivers and/or expense reimbursements subject to recapture by LMPFA and respective dates of expiration as follows:

 

        Class A2  
Expires October 31, 2019      $ 328  
Total fee waivers/expense reimbursements subject to recapture      $ 328  

For the six months ended April 30, 2018, LMPFA did not recapture any fees.

Legg Mason Investor Services, LLC (‘‘LMIS’’), a wholly-owned broker-dealer subsidiary of Legg Mason, serves as the Fund’s sole and exclusive distributor.

There is a maximum initial sales charge of 4.25% for Class A and Class A2 shares. There is a contingent deferred sales charge (“CDSC”) of 1.00% on Class C shares, which applies if redemption occurs within 12 months from purchase payment. In certain cases, Class A and Class A2 shares have a 1.00% CDSC, which applies if redemption occurs within 18 months from purchase payment. This CDSC only applies to those purchases of Class A and Class A2 shares, which, when combined with current holdings of other shares of funds sold by LMIS, equal or exceed $1,000,000 in the aggregate. These purchases do not incur an initial sales charge.

For the six months ended April 30, 2018, LMIS and its affiliates retained sales charges of $16,110 and $1,195 on sales of the Fund’s Class A and Class A2 shares, respectively. In addition, for the six months ended April 30, 2018, CDSCs paid to LMIS and its affiliates were:

 

        Class A        Class A2        Class C  
CDSCs                        $ 3,063  

All officers of the Corporation are employees of Legg Mason or its affiliates and do not receive compensation from the Corporation.

 

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3. Investments

During the six months ended April 30, 2018, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S. Government & Agency Obligations were as follows:

 

        Investments        U.S. Government &
Agency Obligations
 
Purchases      $ 290,466,742        $ 625,864,662  
Sales        101,788,604          568,902,712  

At April 30, 2018, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

      Cost/Premiums
Paid
(Received)
     Gross
Unrealized
Appreciation
     Gross
Unrealized
Depreciation
     Net
Unrealized
Appreciation/
(Depreciation)
 
Securities    $ 1,570,551,680      $ 34,489,288      $ (43,248,625)      $ (8,759,337)  
Written options      (7,140,270)        3,349,651        (1,278,734)        2,070,917  
Forward foreign currency contracts             11,183,687        (7,733,020)        3,450,667  
Futures contracts             8,521,142        (19,607,508)        (11,086,366)  
Swap contracts      1,948,038        33,981,819        (19,893,763)        14,088,056  

4. Derivative instruments and hedging activities

Below is a table, grouped by derivative type, that provides information about the fair value and the location of derivatives within the Statement of Assets and Liabilities at April 30, 2018.

 

ASSET DERIVATIVES1  
      Interest
Rate Risk
     Foreign
Exchange Risk
     Credit Risk      Total  
Purchased options2    $ 1,909,274      $ 2,135,052      $ 192,837      $ 4,237,163  
Futures contracts3      8,428,049        93,093               8,521,142  
OTC swap contracts4      7,307,251               15,861        7,323,112  
Centrally cleared swap contracts5      25,532,391               914,830        26,447,221  
Forward foreign currency contracts             11,183,687               11,183,687  
Total    $ 43,176,965      $ 13,411,832      $ 1,123,528      $ 57,712,325  
LIABILITY DERIVATIVES1  
      Interest
Rate Risk
     Foreign
Exchange Risk
     Credit Risk      Total  
Written options    $ 2,790,981      $ 2,201,681      $ 76,691      $ 5,069,353  
Futures contracts3      19,066,525        540,983               19,607,508  
OTC swap contracts4                    317,702        317,702  
Centrally cleared swap contracts5      19,875,870               5,430        19,881,300  
Forward foreign currency contracts             7,733,020               7,733,020  
Total    $ 41,733,376      $ 10,475,684      $ 399,823      $ 52,608,883  

 

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Notes to financial statements (unaudited) (cont’d)

 

 

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 

Market value of purchased options is reported in Investments in unaffiliated securities at value in the Statement of Assets and Liabilities.

 

3 

Includes cumulative appreciation (depreciation) of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the receivables and/or payables on the Statement of Assets and Liabilities.

 

4 

Values include premiums paid (received) on swap contracts which are shown separately in the Statement of Assets and Liabilities.

 

5 

Includes cumulative appreciation (depreciation) of centrally cleared swap contracts as reported in the Schedule of Investments. Only variation margin is reported within the receivables and/or payables on the Statement of Assets and Liabilities.

The following tables provide information about the effect of derivatives and hedging activities on the Fund’s Statement of Operations for the six months ended April 30, 2018. The first table provides additional detail about the amounts and sources of gains (losses) realized on derivatives during the period. The second table provides additional information about the change in unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.

 

AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED  
      Interest
Rate Risk
     Foreign
Exchange Risk
     Credit Risk      Total  
Purchased options1    $ (9,483,720)      $ (4,545,428)      $ (74,717)      $ (14,103,865)  
Written options      22,083,152        7,078,030        68,272        29,229,454  
Futures contracts      (28,037,168)        3,289,112               (24,748,056)  
Swap contracts      19,674,975               1,504,827        21,179,802  
Forward foreign currency contracts             (18,044,062)               (18,044,062)  
Total    $ 4,237,239      $ (12,222,348)      $ 1,498,382      $ (6,486,727)  

 

1 

Net realized gain (loss) from purchased options is reported in net realized gain (loss) from investment transactions in unaffiliated securities in the Statement of Operations.

 

CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED  
      Interest
Rate Risk
     Foreign
Exchange Risk
     Credit Risk      Total  
Purchased options1    $ 781,307      $ 206,380      $ (26,530)      $ 961,157  
Written options      717,581        1,139,412        88,420        1,945,413  
Futures contracts      3,596,043        1,361,368               4,957,411  
Swap contracts      (5,753,502)               134,580        (5,618,922)  
Forward foreign currency contracts             1,146,712               1,146,712  
Total    $ (658,571)      $ 3,853,872      $ 196,470      $ 3,391,771  

 

1 

The change in unrealized appreciation (depreciation) from purchased options is reported in the change in net unrealized appreciation (depreciation) from investments in unaffiliated securities in the Statement of Operations.

 

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During the six months ended April 30, 2018, the volume of derivative activity for the Fund was as follows:

 

        Average Market
Value
 
Purchased options      $ 3,827,928  
Written options        5,743,492  
Futures contracts (to buy)        2,467,593,582  
Futures contracts (to sell)        3,328,079,623  
Forward foreign currency contracts (to buy)        423,883,295  
Forward foreign currency contracts (to sell)        598,750,267  
        Average Notional
Balance
 
Interest rate swap contracts      $ 1,734,831,824  
Credit default swap contracts (to buy protection)        46,784,245  
Credit default swap contracts (to sell protection)        263,462,430  

The following table presents the Fund’s OTC derivative assets and liabilities by counterparty net of amounts available for offset under an ISDA Master Agreement and net of the related collateral pledged (received) by the Fund as of April 30, 2018.

 

Counterparty   Gross Assets Subject
to Master
Agreements1
    Gross Liabilities
Subject to Master
Agreements1
    (Liabilities)
Subject to Master
Agreements
    Collateral  Pledged
(Received)2,3
    Net
Amount4,5
 
Bank of America N.A.   $ 4,897,643     $ (1,045,777)     $ 3,851,866     $ (4,489,756)     $ (637,890)  
Barclays Bank PLC     5,179,847       (1,666,220)       3,513,627       (265,649)       3,247,978  
Citibank N.A.     3,963,144       (1,854,472)       2,108,672       1,280,000       3,388,672  
Credit Suisse First Boston Inc.     7,931       (38,069)       (30,138)       30,000       (138)  
Goldman Sachs Group Inc.     3,946,772       (597,436)       3,349,336       (3,757,739)       (408,403)  
JPMorgan Chase & Co.     1,635,847       (3,558,186)       (1,922,339)       2,640,000       717,661  
M organ Stanley & Co. Inc.     1,013,784       (503,396)       510,388       (197,644)       312,744  
Total   $ 20,644,968     $ (9,263,556)     $ 11,381,412     $ (4,760,788)     $ 6,620,624  

 

1 

Absent an event of default or early termination, derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.

 

2 

Gross amounts are not offset in the Statement of Assets and Liabilities.

 

3 

In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization.

 

4 

Represents the net amount receivable (payable) from (to) the counterparty in the event of default.

 

5 

Net amount may also include forward foreign currency exchange contracts that are not required to be collateralized.

5. Class specific expenses, waivers and/or expense reimbursements

The Fund has adopted a Rule 12b-1 shareholder services and distribution plan and under that plan the Fund pays service and/or distribution fees with respect to its Class A, Class A2, Class C and Class FI shares calculated at the annual rate of 0.25%, 0.25%, 1.00% and 0.25% of the average daily net assets of each class, respectively. Service and/or distribution fees are accrued daily and paid monthly.

 

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Notes to financial statements (unaudited) (cont’d)

 

For the six months ended April 30, 2018, class specific expenses were as follows:

 

        Service and/or
Distribution Fees
       Transfer Agent
Fees
 
Class A      $ 61,643        $ 26,098  
Class A2        927          312  
Class C        202,812          14,996  
Class FI        77,249          57,207  
Class I                 467,160  
Class IS                 668  
Total      $ 342,631        $ 566,441  

6. Restricted securities

The following Fund investment is restricted as to resale.

 

Security   Number of
Shares
    Acquisition
Date
    Cost     Value
at 4/30/2018
    Value Per
Share
    Percent of
Net Assets
 
Berry Petroleum Co., Convertible Preferred Stock     287       2/17     $ 2,870     $ 3,247     $ 11.31       0.00

7. Distributions to shareholders by class

 

        Six Months Ended
April 30, 2018
       Year Ended
October 31, 2017
 
Net Investment Income:                      
Class A      $ 1,391,661        $ 897,346  
Class A2        20,743          95 1 
Class C        953,655          228,699  
Class FI        2,544,996          361,756  
Class I        35,945,106          10,849,972  
Class IS        6,144,031          3,462,346  
Total      $ 47,000,192        $ 15,800,214  
Net Realized Gains:                      
Class A      $ 862,738        $ 203,059  
Class A2        11,493          17 1 
Class C        723,482          98,781  
Class FI        1,508,867          86,353  
Class I        20,171,093          2,056,743  
Class IS        3,380,668          627,093  
Total      $ 26,658,341        $ 3,072,046  

 

1 

For the period December 14, 2016 (inception date) to October 31, 2017.

 

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8. Capital shares

At April 30, 2018, the Corporation had 42.7 billion shares of capital stock authorized with a par value of $0.001 per share. Transactions in shares of each class were as follows:

 

     Six Months Ended
April 30, 2018
     Year Ended
October 31, 2017
 
      Shares      Amount      Shares      Amount  
Class A                                    
Shares sold      1,596,957      $ 18,219,448        2,920,764      $ 32,872,931  
Shares issued on reinvestment      176,864        2,003,869        76,597        801,204  
Shares repurchased      (771,320)        (8,784,066)        (5,017,466)        (55,991,517)  
Net increase (decrease)      1,002,501      $ 11,439,251        (2,020,105)      $ (22,317,382)  
Class A2                                    
Shares sold      57,798      $ 663,511        30,551 1     $ 356,036 1 
Shares issued on reinvestment      2,871        32,236        11 1       112 1 
Shares repurchased      (3,181)        (36,179)        (18) 1       (202) 1 
Net increase      57,488      $ 659,568        30,544 1     $ 355,946 1 
Class C                                    
Shares sold      934,989      $ 10,606,066        1,334,659      $ 14,966,550  
Shares issued on reinvestment      119,685        1,342,867        24,580        255,137  
Shares repurchased      (390,586)        (4,428,648)        (853,598)        (9,413,355)  
Net increase      664,088      $ 7,520,285        505,641      $ 5,808,332  
Class FI                                    
Shares sold      526,767      $ 6,079,234        5,108,857      $ 59,389,568  
Shares issued on reinvestment      358,077        4,053,427        42,826        447,966  
Shares repurchased      (4,261,122)        (48,873,476)        (563,824)        (6,341,956)  
Net increase (decrease)      (3,376,278)      $ (38,740,815)        4,587,859      $ 53,495,578  
Class I                                    
Shares sold      44,509,259      $ 509,302,521        58,257,995      $ 653,867,804  
Shares issued on reinvestment      3,420,098        38,681,306        887,748        9,276,967  
Shares repurchased      (17,773,899)        (202,770,275)        (21,634,748)        (240,297,928)  
Net increase      30,155,458      $ 345,213,552        37,510,995      $ 422,846,843  
Class IS                                    
Shares sold      3,135,170      $ 36,448,469        4,273,017      $ 47,241,418  
Shares issued on reinvestment      509,818        5,776,238        270,619        2,830,677  
Shares repurchased      (1,878,935)        (21,418,869)        (6,545,999)        (75,000,816)  
Net increase (decrease)      1,766,053      $ 20,805,838        (2,002,363)      $ (24,928,721)  

 

1 

For the period December 14, 2016 (inception date) to October 31, 2017.

9. Redemption facility

The Fund and certain other participating funds within the Corporation (the “Participating Funds”) have available an unsecured revolving credit facility (the “Redemption Facility”), from the lenders and The Bank of New York Mellon (“BNY Mellon”), as administrative

 

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Notes to financial statements (unaudited) (cont’d)

 

agent for the lenders. The Redemption Facility is to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of shares. Under the agreement, BNY Mellon provides a 364-day revolving credit facility, in the aggregate amount of $265 million. Unless renewed, the agreement will terminate on November 19, 2018. Any borrowings under the Redemption Facility will bear interest at current market rates as set forth in the credit agreement. The annual commitment fee to maintain the Redemption Facility is 0.10% and is incurred on the unused portion of the facility and is allocated to all Participating Funds pro rata based on net assets. For the six months ended April 30, 2018, the Fund incurred a commitment fee in the amount of $5,722. The Fund did not utilize the Redemption Facility during the six months ended April 30, 2018.

10. Transactions with affiliated companies

As defined by the 1940 Act, an affiliated company is one in which the Fund owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. The Fund may invest in Western Asset Government Cash Management Portfolio, LLC (“Cash Management Portfolio”), an affiliated private money market fund managed by Western Asset, the Fund’s subadviser. Cash Management Portfolio is available as a cash management vehicle for certain proprietary investment companies affiliated with Legg Mason. While Cash Management Portfolio is not a registered money market fund, it conducts all of its investment activities in accordance with the requirements of Rule 2a-7 under the 1940 Act. Based on the Fund’s relative ownership, the following companies were considered affiliated companies for all or some portion of the six months ended April 30, 2018. The following transactions were effected in shares of such companies for the six months ended April 30, 2018.

 

     Affiliate
Value at
October  31,
2017
    Purchased     Sold     Realized
Gain
(Loss)
    Interest
Income
    Net Increase
(Decrease) in
Unrealized
Appreciation
(Depreciation)
    Affiliate
Value at
April  31,
2018
 
    Cost     Shares     Cost     Shares          
Western Asset Government Cash Management Portfolio LLC   $ 10,800,000     $ 568,517,391       568,517,391     $ 569,217,391       569,217,391           $ 203,962           $ 10,100,000  

 

70    Western Asset Macro Opportunities Fund 2018 Semi-Annual Report


Table of Contents

Board approval of management and subadvisory agreements (unaudited)

 

The Executive and Contracts Committee of the Board of Directors considered the Investment Management Agreement between the Corporation and LMPFA with respect to the Fund and the Investment Advisory Agreements between LMPFA and Western Asset Management Company (“Western Asset”), Western Asset Management Company Limited in London (“WAML”), Western Asset Management Company Pte. Ltd. in Singapore (“Western Singapore”) and Western Asset Management Company Ltd. in Japan (“Western Japan,” and together with Western Singapore and WAML, the “Non-U.S. Subadvisers” and together with Western Asset, the “Subadvisers”) (collectively, the “Agreements”) with respect to the Fund at meetings held on September 12, 2017 and October 17, 2017. At a meeting held on November 14, 2017, the Executive and Contracts Committee reported to the full Board of Directors its considerations and recommendation with respect to the Agreements and the Board of Directors, including a majority of the Independent Directors, considered and approved renewal of the Agreements.

The Directors noted that although Western Asset’s business is operated through separate legal entities, such as the Non-U.S. Subadvisers, its business is highly integrated and senior investment personnel at Western Asset have supervisory oversight responsibility over the investment decisions made by the Non-U.S. Subadvisers. Therefore, in connection with their deliberations noted below, the Directors primarily focused on the information provided by Western Asset when considering the approval of the Investment Advisory Agreements between LMPFA and the Non-U.S. Subadvisers with respect to the Fund. The Directors also noted that the Fund does not pay any management fees directly to Western Asset or to any of the Non-U.S. Subadvisers because LMPFA pays the Subadvisers for services provided to the Fund out of the management fee LMPFA receives from the Fund.

In arriving at their decision to renew the Agreements, the Directors met with representatives of Western Asset, including relevant investment advisory personnel, as well as representatives of LMPFA; reviewed a variety of information prepared by LMPFA and Western Asset and materials provided by Broadridge and counsel to the Independent Directors; reviewed performance and expense information for the Fund’s peer group of comparable funds selected and prepared by Broadridge and for certain other comparable products available from Western Asset, including separate accounts managed by Western Asset; and requested and reviewed additional information as necessary. These reviews were in addition to information obtained by the Directors at their regular quarterly meetings with respect to the Fund’s performance and other relevant matters, and related discussions with Western Asset’s personnel.

As part of their review, the Directors examined LMPFA’s ability to provide high quality oversight and administrative and shareholder support services to the Fund, and the Subadvisers’ ability to provide high quality investment management services to the Fund. The Directors considered the experience of LMPFA’s personnel in providing the types of services that LMPFA is responsible for providing to the Fund; the ability of LMPFA to attract and retain capable personnel; the capability and integrity of LMPFA’s senior management and staff;

 

Western Asset Macro Opportunities Fund   71


Table of Contents

Board approval of management and subadvisory agreements (unaudited) (cont’d)

 

and the level of skill required to provide such services to the Fund. The Directors considered the investment philosophy and research and decision-making processes of the Subadvisers; the experience of their key advisory personnel responsible for management of the Fund; the ability of the Subadvisers to attract and retain capable research and advisory personnel; the capability and integrity of the Subadvisers’ senior management and staff; and the level of skill required to manage the Fund. In addition, the Directors reviewed the quality of LMPFA’s and the Subadvisers’ services with respect to regulatory compliance and compliance with the investment policies of the Fund and conditions that might affect LMPFA’s or a Subadviser’s ability to provide high quality services to the Fund in the future under the Agreements, including its business reputation, financial condition and operational stability. Based on the foregoing, the Directors concluded that the Subadvisers’ investment process, research capabilities and philosophy were well suited to the Fund given the Fund’s investment objectives and policies, and that LMPFA and each of the Subadvisers would be able to meet any reasonably foreseeable obligations under the Agreements.

In reviewing the quality of the services provided to the Fund, the Directors also reviewed comparisons of the performance of the Fund to the performance of certain comparable funds in its peer group and to its investment benchmark over the one- and three-year periods ended August 31, 2017. In that connection, the Directors noted that the performance of the Fund exceeded its peer average performance for both periods. With respect to the Fund, the Directors considered the factors involved in its performance relative to the performance of its investment benchmark and peer group.

The Directors also considered the management fee payable by the Fund to LMPFA, the total expenses payable by the Fund and the fact that LMPFA pays to the Subadvisers the entire management fee it receives from the Fund. They reviewed information concerning management fees paid to investment advisers of similarly managed funds, as well as fees paid by the Subadvisers’ other clients, including separate accounts managed by one or more of the Subadvisers. The Directors observed that the management fee paid by the Fund to LMPFA was higher than the average of the fees paid by funds in its peer group and that total expenses for the Fund were higher than the average of the funds in its peer group. The Directors noted that the management fee paid by the Fund was generally higher than the fees paid by other clients of the Subadvisers for accounts with similar investment strategies, but that the administrative and operational responsibilities for the Subadvisers with respect to the Fund were also relatively higher. In light of this difference, the Directors concluded that the management fee paid by the Fund relative to the fees paid by the Subadvisers’ other clients was reasonable.

The Directors further evaluated the benefits of the advisory relationship to LMPFA and the Subadvisers, including, among others, the profitability of the relationship to LMPFA and the Subadvisers; the direct and indirect benefits that LMPFA and each Subadviser may receive from its relationship with the Fund, including any “fallout benefits,” such as reputational value derived from serving as investment manager or adviser to the Fund; and the affiliations between LMPFA,

 

72    Western Asset Macro Opportunities Fund


Table of Contents

 

the Subadvisers and certain service providers for the Fund. In that connection, the Directors concluded that LMPFA and each Subadviser’s profitability was consistent with levels of profitability that had been determined by courts not to be excessive. The Directors noted that Western Asset does not have soft dollar arrangements.

Finally, the Directors considered, in light of the profitability information provided by LMPFA and Western Asset, the extent to which economies of scale would be realized by the Subadvisers as the assets of the Fund grow. The Directors determined that the lack of breakpoints was appropriate and that the management fee structure for the Fund is reasonable.

In their deliberations with respect to these matters, the Independent Directors were advised by their independent counsel, who is independent, within the meaning of Securities and Exchange Commission rules regarding the independence of counsel, of LMPFA and the Subadvisers. The Independent Directors weighed each of the foregoing matters in light of the advice given to them by their independent counsel as to the law applicable to the review of investment advisory contracts. In arriving at a decision, the Directors, including the Independent Directors, did not identify any single matter as all-important or controlling, and the foregoing summary does not detail all the matters considered. The Directors judged the terms and conditions of the Agreements, including the investment advisory fees, in light of all of the surrounding circumstances.

Based upon their review, the Directors, including all of the Independent Directors, determined, in the exercise of their business judgment, that they were generally satisfied with the quality of services being provided by LMPFA and the Subadvisers, but they would continue to closely monitor the performance of LMPFA and the Subadvisers; that the fees to be paid to the Subadvisers and LMPFA under the relevant Agreements were fair and reasonable, given the scope and quality of the services rendered by the Subadvisers and LMPFA; and that approval of the Agreements was in the best interest of the Fund and its shareholders.

 

Western Asset Macro Opportunities Fund   73


Table of Contents

Western Asset

Macro Opportunities Fund

 

Directors

William E. B. Siart

Chairman

Robert Abeles, Jr.

Anita L. DeFrantz

Ronald L. Olson

Avedick B. Poladian

Jaynie M. Studenmund

Investment manager

Legg Mason Partners Fund Advisor, LLC

Subadvisers

Western Asset Management Company, LLC*

Western Asset Management Company Limited

Western Asset Management Company Pte. Ltd.

Western Asset Management Company Ltd

Transfer agent

BNY Mellon Investment Servicing (US) Inc.

4400 Computer Drive

Westborough, MA 01581

Custodian

The Bank of New York Mellon (“BNY”)**

Independent registered public accounting firm

PricewaterhouseCoopers LLP

Baltimore, MD

Legal counsel

Ropes & Gray LLP

1211 Avenue of the Americas

New York, NY 10036

 

* Prior to May 2, 2018, known as Western Asset Management Company.
** Effective May 7, 2018, BNY became custodian.

 

Western Asset Macro Opportunities Fund

The Fund is a separate investment series of Western Asset Funds, Inc.

Western Asset Macro Opportunities Fund

Legg Mason Funds

620 Eighth Avenue, 49th Floor

New York, NY 10018

 

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 Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s 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, shareholders can call the Fund at 1-877-721-1926.

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 the Fund at 1-877-721-1926, (2) at www.leggmason.com/mutualfunds and (3) on the SEC’s website at www.sec.gov.

 

This report is submitted for the general information of the shareholders of Western Asset Macro Opportunities Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by a current prospectus.

Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the Fund. Please read the prospectus carefully before investing.

www.leggmason.com

© 2018 Legg Mason Investor Services, LLC

Member FINRA, SIPC


Table of Contents

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-end 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 individual’s total debt, payment history, etc.).

How the Funds Use Nonpublic Personal Information About You

The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with other financial institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services you have authorized or as permitted or required by law. The Funds may disclose information about you to:

 

 

Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business or 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


Table of Contents

Legg Mason Funds Privacy and Security Notice (cont’d)

 

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 1-877-721-1926.

 

 

NOT PART OF THE SEMI-ANNUAL REPORT


Table of Contents

Western Asset Management Company, LLC

Legg Mason, Inc. Subsidiaries

www.leggmason.com

© 2018 Legg Mason Investor Services, LLC Member FINRA, SIPC

WASX016460 6/18 SR18-3346


Table of Contents
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 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 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 second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.


Table of Contents
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


Table of Contents

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 Funds, Inc.
By:  

/s/ Jane Trust

  Jane Trust
  Chief Executive Officer
Date:   June 22, 2018

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

 

By:  

/s/ Jane Trust

  Jane Trust
  Chief Executive Officer
Date:   June 22, 2018
By:  

/s/ Richard F. Sennett

  Richard F. Sennett
  Principal Financial Officer
Date:   June 22, 2018
EX-99.CERT 2 d517435dex99cert.htm CERTIFICATIONS 302 Certifications 302

CERTIFICATIONS PURSUANT TO SECTION 302

EX-99.CERT

CERTIFICATIONS

I, Jane Trust, certify that:

 

1. I have reviewed this report on Form N-CSR of Western Asset Funds, Inc. – Western Asset Macro Opportunities Fund;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officers and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:   June 22, 2018      

/s/ Jane Trust

        Jane Trust
        Chief Executive Officer


CERTIFICATIONS

I, Richard F. Sennett, certify that:

 

1. I have reviewed this report on Form N-CSR of Western Asset Funds, Inc. - Western Asset Macro Opportunities Fund;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial information included in this report, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officers and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:   June 22, 2018      

/s/ Richard F. Sennett

        Richard F. Sennett
        Principal Financial Officer
EX-99.906CERT 3 d517435dex99906cert.htm CERTIFICATIONS 906 Certifications 906

CERTIFICATIONS PURSUANT TO SECTION 906

EX-99.906CERT

CERTIFICATION

Jane Trust, Chief Executive Officer, and Richard F. Sennett, Principal Financial Officer of Western Asset Funds, Inc. - Western Asset Macro Opportunities Fund (the “Registrant”), each certify to the best of their knowledge that:

1. The Registrant’s periodic report on Form N-CSR for the period ended April 30, 2018 (the “Form N-CSR”) fully complies with the requirements of section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

Chief Executive Officer      Principal Financial Officer

Western Asset Funds, Inc. –

Western Asset Macro Opportunities Fund

    

Western Asset Funds, Inc. –

Western Asset Macro Opportunities Fund

/s/ Jane Trust

    

/s/ Richard F. Sennett

Jane Trust      Richard F. Sennett
Date: June 22, 2018      Date: June 22, 2018

This certification is being furnished to the Securities and Exchange Commission solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Form N-CSR with the Commission.

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