N-Q 1 d77087dnq.htm WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC. (DMO) WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC. (DMO)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-22369

Western Asset Mortgage Defined Opportunity Fund Inc.

(Exact name of registrant as specified in charter)

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

(Address of principal executive offices) (Zip code)

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

Registrant’s telephone number, including area code: (888)777-0102

Date of fiscal year end: December 31

Date of reporting period: September 30, 2015

 

 

 


 

ITEM 1. SCHEDULE OF INVESTMENTS.


WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC.

FORM N-Q

SEPTEMBER 30, 2015


WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC.

 

Schedule of investments (unaudited)    September 30, 2015

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT†
     VALUE  
RESIDENTIAL MORTGAGE-BACKED SECURITIES - 94.8%           

ABFS Mortgage Loan Trust, 2002-3 M1

     5.902     9/15/33         1,241,597       $ 986,754   

Accredited Mortgage Loan Trust, 2003-3 A1

     5.210     1/25/34         1,145,758         1,118,864   

Adjustable Rate Mortgage Trust, 2005-05 1A1

     2.512     9/25/35         304,136         237,087 (a)(b) 

Adjustable Rate Mortgage Trust, 2005-07 2A21

     2.574     10/25/35         1,014,032         933,191 (a)(b) 

Adjustable Rate Mortgage Trust, 2005-10 1A21

     2.785     1/25/36         371,284         323,647 (a)(b) 

Adjustable Rate Mortgage Trust, 2005-12 5A1

     0.444     3/25/36         402,679         254,112 (a)(b) 

AFC Home Equity Loan Trust, 2003-3 1A

     0.944     10/25/30         1,768,469         1,609,110 (a)(c) 

American Home Mortgage Assets, 2005-2 2A1A

     2.743     1/25/36         1,487,479         1,053,398 (a)(b) 

American Home Mortgage Assets, 2006-4 1A12

     0.404     10/25/46         2,565,129         1,723,936 (a)(b) 

American Home Mortgage Investment Trust, 2005-1 6A

     2.535     6/25/45         109,545         107,774 (a)(b) 

American Home Mortgage Investment Trust, 2005-SD1 1A1

     0.644     9/25/35         306,785         238,833 (a)(b)(c) 

American Home Mortgage Investment Trust, 2007-2 2A

     0.994     3/25/47         13,108,636         1,564,483 (a) 

American Home Mortgage Investment Trust, 2007-A 4A

     1.091     7/25/46         2,354,800         858,837 (a)(b)(c) 

Ameriquest Mortgage Securities Inc., 2002-4 M3

     5.444     2/25/33         1,891,054         1,586,598 (a) 

Ameriquest Mortgage Securities Inc., 2002-D M1

     3.944     2/25/33         2,220,000         1,877,916 (a) 

Argent Securities Inc., 2005-W5 A2D

     0.514     1/25/36         4,324,534         3,359,017 (a) 

Argent Securities Inc., 2006-M2 A2C

     0.344     9/25/36         2,522,731         994,236 (a) 

Argent Securities Inc., 2006-M2 A2D

     0.434     9/25/36         665,823         265,297 (a) 

Argent Securities Inc., 2006-M3 A2C

     0.354     10/25/36         4,106,498         1,781,967 (a) 

Asset-Backed Funding Certificates, 2005-HE1 M2

     0.854     3/25/35         2,730,567         2,183,976 (a) 

Banc of America Alternative Loan Trust, 2005-9 1CB5, IO

     4.906     10/25/35         6,032,154         852,702 (a) 

Banc of America Funding Corp., 2004-B 6A1

     2.185     12/20/34         529,410         375,056 (a)(b) 

Banc of America Funding Corp., 2004-C 3A1

     2.825     12/20/34         790,471         738,022 (a)(b) 

Banc of America Funding Corp., 2006-D 2A1

     2.944     5/20/36         114,439         102,698 (a)(b) 

Banc of America Funding Corp., 2006-D 6A1

     4.670     5/20/36         1,538,498         1,311,528 (a)(b) 

Banc of America Funding Corp., 2006-F 1A1

     2.702     7/20/36         688,437         676,470 (a)(b) 

Banc of America Funding Corp., 2006-H 3A1

     2.871     9/20/46         145,819         117,922 (a)(b) 

Banc of America Funding Corp., 2014-R5 1A2

     2.030     9/26/45         3,750,000         2,377,553 (a)(b)(c) 

Banc of America Funding Corp., 2015-R4 4A3

     19.292     1/1/30         6,519,146         3,959,416 (a)(c) 

Bayview Financial Acquisition Trust, 2007-A 2A

     0.544     5/28/37         1,584,189         1,192,973 (a)(b) 

Bayview Financial Asset Trust, 2007-SR1A M1

     0.994     3/25/37         3,906,396         3,420,050 (a)(c) 

Bayview Financial Asset Trust, 2007-SR1A M2

     1.094     3/25/37         4,755,882         4,056,767 (a)(c) 

Bayview Financial Asset Trust, 2007-SR1A M3

     1.344     3/25/37         2,154,719         1,725,499 (a)(c) 

Bayview Financial Asset Trust, 2007-SR1A M4

     1.694     3/25/37         930,094         699,338 (a)(c) 

BCAP LLC Trust, 2009-RR4 8A2

     2.992     9/26/35         2,436,707         1,966,181 (a)(b)(c) 

BCAP LLC Trust, 2010-RR06 4A13

     2.992     9/26/35         1,998,504         1,584,382 (a)(b)(c) 

BCAP LLC Trust, 2010-RR6 1212

     5.500     2/26/35         1,932,768         1,936,738 (c) 

Bear Stearns Alt-A Trust, 2005-9 25A1

     2.515     11/25/35         477,495         377,607 (a)(b) 

Bear Stearns Alt-A Trust, 2006-2 23A1

     2.947     3/25/36         1,725,479         1,342,055 (a)(b) 

Bear Stearns Asset-Backed Securities Trust, 2003-SD2 1A

     3.717     6/25/43         79,175         78,130 (a) 

Bear Stearns Asset-Backed Securities Trust, 2004-BO1 M9B

     4.194     10/25/34         450,472         418,931 (a) 

Bear Stearns Asset-Backed Securities Trust, 2005-CL1 A1

     0.639     9/25/34         133,900         124,020 (a) 

Bear Stearns Mortgage Funding Trust, 2007-AR5 2A1

     0.374     6/25/37         2,147,210         1,839,849 (a)(b) 

Centex Home Equity Loan Trust, 2004-D MV1

     0.814     9/25/34         1,294,433         1,178,320 (a) 

Chase Mortgage Finance Corp., 2006-S3 2A1

     5.500     11/25/21         276,170         229,831 (b) 

 

See Notes to Schedule of Investments.

 

1


WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2015

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT†
     VALUE  
RESIDENTIAL MORTGAGE-BACKED SECURITIES - (continued)           

Chaseflex Trust, 2005-2 3A3, IO

     5.306     6/25/35         13,947,028       $ 2,225,604 (a) 

Chevy Chase Mortgage Funding Corp., 2006-2A A1

     0.324     4/25/47         252,613         196,701 (a)(b)(c) 

Citicorp Mortgage Securities Inc., 2007-8 B1

     5.944     9/25/37         4,382,835         2,254,337 (a)(b) 

Citigroup Mortgage Loan Trust Inc., 2004-HYB3 1A

     2.718     9/25/34         169,268         169,197 (a)(b) 

Citigroup Mortgage Loan Trust Inc., 2004-UST1 A2

     1.480     8/25/34         84,309         82,782 (a)(b) 

Citigroup Mortgage Loan Trust Inc., 2005-05

     2.117     8/25/35         286,548         236,138 (a)(b) 

Citigroup Mortgage Loan Trust Inc., 2005-10 1A1A

     2.723     12/25/35         331,980         294,622 (a)(b) 

Citigroup Mortgage Loan Trust Inc., 2006-AR5 2A1A

     2.573     7/25/36         499,967         323,814 (a)(b) 

Citigroup Mortgage Loan Trust Inc., 2007-06 1A1A

     2.241     3/25/37         489,875         370,387 (a)(b) 

Citigroup Mortgage Loan Trust Inc., 2007-AR8 1A1A

     2.660     8/25/47         493,320         429,854 (a)(b) 

Citigroup Mortgage Loan Trust Inc., 2014-6 3A3

     3.551     11/25/35         3,751,228         2,155,081 (a)(b)(c) 

Connecticut Avenue Securities, 2013-C01 M2

     5.444     10/25/23         1,260,000         1,333,090 (a)(b) 

Connecticut Avenue Securities, 2014-C03 1M2

     3.194     7/25/24         3,750,000         3,396,227 (a)(b) 

Countrywide Alternative Loan Trust, 2003-20CB M

     5.585     10/25/33         2,959,658         2,226,406 (a) 

Countrywide Alternative Loan Trust, 2005-03CB 1A6, IO

     6.956     3/25/35         604,699         78,685 (a) 

Countrywide Alternative Loan Trust, 2005-07CB 1A3, IO

     6.406     4/25/35         1,267,292         60,303 (a) 

Countrywide Alternative Loan Trust, 2005-11CB 3A3, IO

     4.806     6/25/35         3,813,317         466,176 (a) 

Countrywide Alternative Loan Trust, 2005-14 3A1

     2.266     5/25/35         384,954         269,455 (a)(b) 

Countrywide Alternative Loan Trust, 2005-36 4A1

     2.444     8/25/35         1,005,085         920,624 (a)(b) 

Countrywide Alternative Loan Trust, 2005-50CB 1A1

     5.500     11/25/35         516,930         503,250 (b) 

Countrywide Alternative Loan Trust, 2005-J10 1A1

     0.694     10/25/35         212,291         168,057 (a)(b) 

Countrywide Alternative Loan Trust, 2006-39CB 1A7, IO

     5.206     1/25/37         19,541,463         3,247,703 (a) 

Countrywide Alternative Loan Trust, 2006-HY10 1A1

     2.099     5/25/36         756,782         603,254 (a)(b) 

Countrywide Alternative Loan Trust, 2006-J8 A5

     6.000     2/25/37         155,550         121,401 (b) 

Countrywide Alternative Loan Trust, 2007-23CB A4, IO

     6.306     9/25/37         10,608,799         3,005,171 (a) 

Countrywide Alternative Loan Trust, 2007-3T1 2A1

     6.000     3/25/27         503,566         496,222 (b) 

Countrywide Asset-Backed Certificates, 2006-S3 A2

     6.085     6/25/21         17,380         105,961 (b) 

Countrywide Asset-Backed Certificates, 2006-S7 A3

     5.712     11/25/35         485,386         475,957 (a)(b) 

Countrywide Asset-Backed Certificates, 2006-S9 A3

     5.728     8/25/36         176,287         176,893 (a)(b) 

Countrywide Asset-Backed Certificates, 2006-SD3 A1

     0.524     7/25/36         1,630,214         1,361,822 (a)(c) 

Countrywide Asset-Backed Certificates, 2007-8 M1

     0.464     11/25/37         4,253,772         991,031 (a) 

Countrywide Asset-Backed Certificates, 2007-SE1 1A1

     0.744     5/25/47         1,050,891         704,106 (a)(c) 

Countrywide Home Equity Loan Trust, 2004-B 1A

     0.427     2/15/29         1,337,735         1,173,427 (a)(b) 

Countrywide Home Equity Loan Trust, 2004-L 2A

     0.487     2/15/34         93,958         81,347 (a)(b) 

Countrywide Home Equity Loan Trust, 2005-E 2A

     0.427     11/15/35         175,030         152,521 (a)(b) 

Countrywide Home Loans, 2004-16 1A3A

     0.954     9/25/34         1,298,195         1,187,915 (a)(b) 

Countrywide Home Loans, 2005-11 3A3

     2.423     4/25/35         827,516         619,708 (a)(b) 

Countrywide Home Loans, 2005-11 6A1

     0.794     3/25/35         71,321         64,587 (a)(b) 

Countrywide Home Loans, 2005-18 A7

     18.992     10/25/35         38,072         51,612 (a)(b) 

Countrywide Home Loans, 2005-HYB7 1A1

     2.967     11/20/35         1,056,434         897,746 (a)(b) 

Countrywide Home Loans, 2005-HYB9 1A1

     2.564     2/20/36         270,553         233,353 (a)(b) 

Countrywide Home Loans, 2005-R2 1AF2

     0.534     6/25/35         1,054,857         807,130 (a)(c) 

Countrywide Home Loans, 2006-HYB4 3B

     2.680     6/20/36         1,412,300         1,211,536 (a)(b) 

 

See Notes to Schedule of Investments.

 

2


WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2015

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT†
     VALUE  
RESIDENTIAL MORTGAGE-BACKED SECURITIES - (continued)           

Countrywide Home Loans, Mortgage Pass-Through Trust,
2005-R1 1AF1

     0.554     3/25/35         604,143       $ 542,809 (a)(c) 

Countrywide Home Loans Mortgage Pass-Through Trust,
2004-23 A

     2.428     11/25/34         277,556         242,280 (a)(b) 

Countrywide Home Loans Mortgage Pass-Through Trust,
2005-02 2A1

     0.514     3/25/35         169,800         150,147 (a)(b) 

Countrywide Home Loans Mortgage Pass-Through Trust,
2005-09 1A1

     0.494     5/25/35         179,425         154,899 (a)(b) 

Countrywide Home Loans Mortgage Pass-Through Trust,
2005-HY10 1A1

     2.916     2/20/36         316,427         270,548 (a)(b) 

Countrywide Home Loans Mortgage Pass-Through Trust,
2005-HYB6 1A1

     2.506     10/20/35         1,200,608         1,014,406 (a)(b) 

Countrywide Home Loans Mortgage Pass-Through Trust,
2005-R2 2A3

     8.000     6/25/35         133,965         142,111 (c) 

Countrywide Home Loans Mortgage Pass-Through Trust,
2006-3 2A1

     0.444     3/25/36         648,607         563,885 (a)(b) 

Credit Suisse First Boston Mortgage Securities Corp.,
2005-10 03A3

     5.500     11/25/35         639,159         578,561 (b) 

Credit Suisse Mortgage Capital Certificates, 2006-8 2A1

     5.500     10/25/21         817,580         791,830 (b) 

Credit Suisse Mortgage Capital Certificates, 2009-05R 2A3

     2.310     7/26/49         3,882,099         3,127,353 (a)(b)(c) 

Credit Suisse Mortgage Capital Certificates, 2009-15R 2A2

     5.555     10/26/36         4,748,792         3,490,395 (a)(b)(c) 

Credit-Based Asset Servicing and Securitization LLC,
2003-RP1 M1

     1.744     3/25/33         2,163,429         2,077,653 (a)(c) 

Credit-Based Asset Servicing and Securitization LLC,
2006-SL1 A3

     0.414     9/25/36         4,604,687         911,618 (a)(c) 

Deutsche ALT-A Securities Inc. Mortgage Loan Trust,
2006-AR1 2A1

     2.932     2/25/36         349,838         285,971 (a)(b) 

Deutsche Mortgage Securities Inc., 2006-PR1 2PO, PO

     0.000     4/15/36         74,541         65,521 (b)(c) 

Deutsche Mortgage Securities Inc., 2006-PR1 4AS1, IO

     8.819     4/15/36         470,593         126,177 (a)(c) 

Deutsche Mortgage Securities Inc., 2006-PR1 4AS2, IO

     15.263     4/15/36         449,670         204,454 (a)(c) 

Deutsche Mortgage Securities Inc., 2006-PR1 5AS1, IO

     10.752     4/15/36         107,993         47,281 (a)(c) 

Deutsche Mortgage Securities Inc., 2006-PR1 5AS3, IO

     7.255     4/15/36         397,364         131,859 (a)(c) 

Downey Savings & Loan Association Mortgage Loan Trust, 2005-AR1 2A1B

     0.536     3/19/45         1,704,349         998,016 (a)(b) 

Downey Savings & Loan Association Mortgage Loan Trust, 2005-AR2 2A1A

     0.426     3/19/45         456,398         412,744 (a)(b) 

EMC Mortgage Loan Trust, 2002-AA A1

     1.134     5/25/39         124,951         120,088 (a)(c) 

EMC Mortgage Loan Trust, 2006-A A1

     0.649     12/25/42         918,877         879,929 (a)(c) 

Federal National Mortgage Association (FNMA), 2012-134, IO

     5.956     12/25/42         5,990,834         1,510,002 (a)(d) 

First Horizon Alternative Mortgage Securities, 2005-AA6 3A1

     2.198     8/25/35         1,339,727         1,161,577 (a)(b) 

First Horizon Alternative Mortgage Securities, 2006-FA6 2A1, PAC-11

     6.250     11/25/36         194,981         156,343 (b) 

First Horizon Alternative Mortgage Securities, 2006-FA8 1A8

     0.564     2/25/37         415,929         227,594 (a)(b) 

First Horizon Mortgage Pass-Through Trust, 2005-AR4 2A1

     2.674     10/25/35         729,568         641,086 (a)(b) 

First Republic Mortgage Loan Trust, 2000-FRB2 A1

     0.707     11/15/30         255,658         230,696 (a)(b) 

Government National Mortgage Association (GNMA), 2013-010 AI, IO

     3.500     1/20/43         3,396,852         644,400 (d) 

 

See Notes to Schedule of Investments.

 

3


WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2015

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT†
     VALUE  
RESIDENTIAL MORTGAGE-BACKED SECURITIES - (continued)           

Greenpoint Mortgage Funding Trust, 2006-AR3 4A1

     0.404     4/25/36         3,882,024       $ 2,941,301 (a)(b) 

GS Mortgage Securities Corp. II, 2000-1A A

     0.916     3/20/23         92,666         92,606 (a)(b)(c) 

GSAA Home Equity Trust, 2005-11 2A2

     0.514     10/25/35         3,940,070         2,924,099 (a)(b) 

GSAA Home Equity Trust, 2005-R1 1A2, IO

     4.801     4/25/35         4,042,242         493,962 (a)(c) 

GSAMP Trust, 2004-SEA2 M2

     1.444     3/25/34         4,090,000         3,311,010 (a) 

GSMPS Mortgage Loan Trust, 2001-2 A

     7.500     6/19/32         660,933         686,987 (a)(c) 

GSMPS Mortgage Loan Trust, 2004-4 2A1

     3.337     6/25/34         267,522         253,199 (a)(c) 

GSMPS Mortgage Loan Trust, 2005-LT1 A1

     0.654     2/25/35         159,073         150,237 (a)(b)(c) 

GSMPS Mortgage Loan Trust, 2005-RP1 1A3

     8.000     1/25/35         159,170         169,602 (c) 

GSMPS Mortgage Loan Trust, 2005-RP1 1A4

     8.500     1/25/35         106,623         116,174 (c) 

GSMPS Mortgage Loan Trust, 2005-RP1 1AF

     0.544     1/25/35         318,823         270,412 (a)(b)(c) 

GSMPS Mortgage Loan Trust, 2006-RP1 1A2

     7.500     1/25/36         599,844         632,447 (c) 

GSMPS Mortgage Loan Trust, 2006-RP1 1A3

     8.000     1/25/36         106,008         114,054 (c) 

GSR Mortgage Loan Trust, 2005-AR4 2A1

     2.764     7/25/35         432,543         395,283 (a)(b) 

GSR Mortgage Loan Trust, 2005-AR5 1A1

     2.790     10/25/35         172,720         151,625 (a)(b) 

GSR Mortgage Loan Trust, 2006-09F 5A2, IO

     6.356     10/25/36         721,348         123,627 (a) 

GSR Mortgage Loan Trust, 2006-10F 4A2, IO

     6.456     1/25/37         1,625,694         455,279 (a) 

GSRPM Mortgage Loan Trust, 2007-1 A

     0.594     10/25/46         2,182,521         1,829,767 (a)(c) 

HarborView Mortgage Loan Trust, 2005-9 B5

     1.216     6/20/35         2,857,664         2,223,003 (a) 

HarborView Mortgage Loan Trust, 2006-02

     2.695     2/25/36         59,965         50,414 (a)(b) 

Home Equity Mortgage Trust, 2006-1 A3

     0.694     5/25/36         3,500,000         328,281 (a) 

Homestar Mortgage Acceptance Corp., 2004-3 M3

     1.794     7/25/34         683,956         560,738 (a)(b) 

Homestar Mortgage Acceptance Corp., 2004-6 M7

     2.144     1/25/35         1,132,859         924,305 (a)(b) 

HSI Asset Loan Obligation Trust, 2007-AR1 4A1

     4.784     1/25/37         316,478         243,982 (a)(b) 

Impac CMB Trust, 2004-8 1A

     0.914     10/25/34         590,705         505,157 (a)(b) 

IMPAC Secured Assets Corp., 2007-1 A2

     0.354     3/25/37         700,615         562,797 (a)(b) 

Indymac Home Equity Loan Asset-Backed Trust, 2001-A

     0.714     3/25/31         113,585         96,110 (a) 

Indymac INDA Mortgage Loan Trust, 2005-AR2 1A1

     2.823     1/25/36         155,542         144,967 (a)(b) 

Indymac INDB Mortgage Loan Trust, 2005-1 A1

     0.494     11/25/35         1,790,303         1,088,076 (a) 

Indymac Index Mortgage Loan Trust, 2004-AR13 1A1

     2.531     1/25/35         128,419         121,209 (a)(b) 

Indymac Index Mortgage Loan Trust, 2004-AR15 1A1

     2.981     2/25/35         186,797         165,201 (a)(b) 

Indymac Index Mortgage Loan Trust, 2005-AR15 A2

     2.575     9/25/35         134,645         115,658 (a)(b) 

Indymac Index Mortgage Loan Trust, 2006-AR07 5A1

     2.763     5/25/36         597,846         492,757 (a)(b) 

Indymac Index Mortgage Loan Trust, 2006-AR09 3A3

     4.214     6/25/36         791,209         734,950 (a)(b) 

Indymac Index Mortgage Loan Trust, 2006-AR11 1A1

     2.951     6/25/36         597,489         461,044 (a)(b) 

Indymac Index Mortgage Loan Trust, 2006-AR25 4A3

     2.775     9/25/36         2,604,092         1,566,437 (a)(b) 

Indymac Index Mortgage Loan Trust, 2007-AR05 2A1

     2.764     5/25/37         2,743,707         2,105,526 (a)(b) 

Indymac Index Mortgage Loan Trust, 2007-AR07 2A1

     2.288     6/25/37         308,241         246,300 (a)(b) 

Irwin Home Equity, 2005-C 1M4

     6.750     4/25/30         608,152         617,139   

Jefferies & Co., 2009-R6 6A2

     2.734     10/26/35         2,981,788         2,625,885 (a)(b)(c) 

JPMorgan Alternative Loan Trust, 2006-A4 A7

     3.819     9/25/36         1,022,880         689,198 (a)(b) 

JPMorgan Alternative Loan Trust, 2006-S1 3A4

     6.180     3/25/36         1,263,721         908,276 (a)(b) 

JPMorgan Alternative Loan Trust, 2007-A1 3A1

     2.527     3/25/37         762,315         601,740 (a) 

 

See Notes to Schedule of Investments.

 

4


WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2015

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT†
     VALUE  
RESIDENTIAL MORTGAGE-BACKED SECURITIES - (continued)           

JPMorgan Mortgage Trust, 2005-S3 1A1

     6.500     1/25/36         1,360,414       $ 1,215,915 (b) 

JPMorgan Mortgage Trust, 2007-S2 3A2

     6.000     6/25/37         180,695         181,647 (b) 

JPMorgan Mortgage Trust, 2007-S2 3A3

     6.500     6/25/37         55,920         57,597 (b) 

Lehman ABS Corp. Home Equity Loan Trust, 2004-2 A

     0.634     6/25/34         84,327         80,375 (a) 

Lehman Mortgage Trust, 2006-3 1A7, IO

     5.206     7/25/36         10,210,502         2,398,998 (a) 

Lehman Mortgage Trust, 2006-3 2A1

     0.554     7/25/36         4,119,581         1,338,992 (a) 

Lehman Mortgage Trust, 2006-3 2A2, IO

     6.946     7/25/36         4,651,630         1,514,866 (a) 

Lehman Mortgage Trust, 2006-7 1A3, IO

     5.156     11/25/36         9,877,813         1,934,584 (a) 

Lehman Mortgage Trust, 2006-7 3A2, IO

     6.956     11/25/36         7,351,863         2,612,826 (a) 

Lehman Mortgage Trust, 2007-1 2A3, IO

     6.436     2/25/37         12,804,895         4,498,001 (a) 

Lehman XS Trust, 2005-9N 1A1

     0.464     2/25/36         1,564,932         1,324,751 (a)(b) 

Lehman XS Trust, 2006-14N 3A2

     0.314     8/25/36         2,650,736         2,055,179 (a)(b) 

Lehman XS Trust, 2006-19 A4

     0.364     12/25/36         1,208,346         848,186 (a)(b) 

Lehman XS Trust, 2007-8H A1

     0.324     6/25/37         69,749         62,476 (a)(b) 

MASTR Adjustable Rate Mortgages Trust, 2004-12 5A1

     2.675     10/25/34         205,615         201,134 (a)(b) 

MASTR Adjustable Rate Mortgages Trust, 2006-0A1 1A1

     0.404     4/25/46         396,257         296,760 (a)(b) 

MASTR Adjustable Rate Mortgages Trust, 2006-2 4A1

     2.699     2/25/36         103,845         102,439 (a)(b) 

MASTR Asset-Backed Securities Trust, 2005-AB1 A5A

     5.712     11/25/35         3,360,000         2,003,571   

MASTR Reperforming Loan Trust, 2005-1 1A2

     6.500     8/25/34         897,549         904,207 (c) 

MASTR Reperforming Loan Trust, 2005-1 1A3

     7.000     8/25/34         239,545         251,155 (c) 

MASTR Reperforming Loan Trust, 2005-1 1A4

     7.500     8/25/34         100,051         105,052 (c) 

MASTR Reperforming Loan Trust, 2005-2 1A3

     7.500     5/25/35         15,138         15,883 (c) 

MASTR Reperforming Loan Trust, 2006-2 1A1

     4.658     5/25/36         1,828,124         1,727,138 (a)(c) 

Merrill Lynch Mortgage Investors Trust, 2005-A2 A5

     2.462     2/25/35         437,691         440,650 (a)(b) 

Merrill Lynch Mortgage Investors Trust, 2006-A1 2A1

     2.656     3/25/36         950,424         640,766 (a)(b) 

Morgan Stanley Capital Inc., 2003-NC10 M2

     2.894     10/25/33         474,981         455,021 (a) 

Morgan Stanley Mortgage Loan Trust, 2004-6AR 2A2

     2.848     8/25/34         489,107         485,600 (a)(b) 

Morgan Stanley Mortgage Loan Trust, 2004-7AR B1

     2.443     9/25/34         595,207         287,922 (a) 

Morgan Stanley Mortgage Loan Trust, 2005-5AR 4A1

     2.752     9/25/35         3,538,973         2,679,615 (a)(b) 

Morgan Stanley Mortgage Loan Trust, 2006-8AR 1A2

     0.264     6/25/36         326,629         159,559 (a)(b) 

Morgan Stanley Mortgage Loan Trust, 2007-05AX 2A3

     0.424     2/25/37         1,532,085         877,441 (a)(b) 

Morgan Stanley Mortgage Loan Trust, 2007-15AR 4A1

     4.647     11/25/37         1,351,140         1,007,616 (a)(b) 

Morgan Stanley Reremic Trust, 2015-R2 1B

     0.893     12/26/46         1,110,781         513,526 (a)(c) 

New Century Home Equity Loan Trust, 2004-3 M3

     1.259     11/25/34         890,933         754,721 (a) 

Nomura Asset Acceptance Corp., 2004-R3 B2

     6.766     2/25/35         214,315         2 (c)(e) 

Nomura Resecuritization Trust, 2014-5R 1A9

     11.965     6/26/35         1,824,273         1,844,522 (a)(b)(c) 

Popular ABS Mortgage Pass-Through Trust, 2004-4 M2

     5.626     9/25/34         1,398,477         1,260,904   

Prime Mortgage Trust, 2006-DR1 2A1

     5.500     5/25/35         3,256,409         3,125,382 (b)(c) 

Provident Bank Home Equity Loan Trust, 2000-2 A1

     0.734     8/25/31         1,393,780         1,074,263 (a) 

RAAC Series, 2006-RP3 A

     0.469     5/25/36         654,859         595,055 (a)(c) 

RAAC Series, 2007-RP2 A

     0.549     2/25/46         1,016,998         953,782 (a)(c) 

Renaissance Home Equity Loan Trust, 2004-3 M1

     5.157     11/25/34         1,068,399         990,346   

Renaissance Home Equity Loan Trust, 2006-1 AF5

     6.166     5/25/36         640,000         462,867   

Renaissance Home Equity Loan Trust, 2006-2 AV3

     0.434     8/25/36         1,413,195         850,933 (a) 

 

See Notes to Schedule of Investments.

 

5


WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2015

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT†
     VALUE  
RESIDENTIAL MORTGAGE-BACKED SECURITIES - (continued)           

Renaissance Home Equity Loan Trust, 2007-1 AF3

     5.612     4/25/37         3,204,382       $ 1,775,519   

Renaissance Home Equity Loan Trust, 2007-2 AF1

     5.893     6/25/37         2,639,747         1,379,901   

Renaissance Home Equity Loan Trust, 2007-2 AF2

     5.675     6/25/37         454,908         229,516   

Renaissance Home Equity Loan Trust, 2007-2 AF5

     6.203     6/25/37         1,956,591         1,079,027   

Renaissance Home Equity Loan Trust, 2007-2 AF6

     5.879     6/25/37         3,291,180         1,716,588   

Renaissance Home Equity Loan Trust, 2007-3 AF3

     7.238     9/25/37         1,700,382         1,107,029   

Residential Accredit Loans Inc., 2005-QA3 CB4

     3.350     3/25/35         2,916,427         1,966,002 (a)(b) 

Residential Accredit Loans Inc., 2006-QA01 A11

     3.226     1/25/36         845,478         667,757 (a)(b) 

Residential Accredit Loans Inc., 2006-QA01 A31

     4.332     1/25/36         1,982,562         1,557,594 (a)(b) 

Residential Accredit Loans Inc., 2006-QA04 A

     0.374     5/25/36         544,833         445,019 (a)(b) 

Residential Accredit Loans Inc., 2006-QA10 A2

     0.374     12/25/36         1,002,584         782,155 (a)(b) 

Residential Accredit Loans Inc., 2006-QO1 3A1

     0.464     2/25/46         3,786,721         2,348,097 (a)(b) 

Residential Accredit Loans Inc., 2006-QO2 A2

     0.464     2/25/46         4,950,469         2,312,651 (a)(b) 

Residential Accredit Loans Inc., 2006-QS13 1A2, IO

     6.966     9/25/36         1,067,264         264,654 (a) 

Residential Accredit Loans Inc., 2007-QA2 A1

     0.324     2/25/37         526,393         459,578 (a)(b) 

Residential Asset Mortgage Products Inc., 2002-RS4 AII

     0.834     8/25/32         273,763         257,535 (a) 

Residential Asset Mortgage Products Inc., 2004-RZ4 M7

     2.694     12/25/34         275,812         242,029 (a)(b) 

Residential Asset Mortgage Products Inc., 2004-SL3 A3

     7.500     12/25/31         956,727         997,799   

Residential Asset Mortgage Products Inc., 2004-SL3 A4

     8.500     12/25/31         123,275         110,600   

Residential Asset Mortgage Products Inc., 2005-SL2 A5

     8.000     10/25/31         322,548         319,744   

Residential Asset Securities Corp., 2003-KS9 A2B

     0.834     11/25/33         1,062,863         900,833 (a) 

Residential Asset Securitization Trust, 2005-A13 1A3

     0.664     10/25/35         224,509         166,917 (a)(b) 

Residential Asset Securitization Trust, 2005-A7 A2, IO

     7.056     6/25/35         2,951,480         551,198 (a) 

Residential Asset Securitization Trust, 2006-A1 1A6

     0.694     4/25/36         2,357,763         1,445,964 (a)(b) 

Residential Asset Securitization Trust, 2006-A1 1A7, IO

     5.306     4/25/36         5,002,425         990,112 (a) 

Residential Asset Securitization Trust, 2007-A1 A6, IO

     6.862     3/25/37         5,864,006         1,709,235 (a) 

Residential Asset Securitization Trust, 2007-A2 1A1

     6.000     4/25/37         428,682         357,874 (b) 

Residential Funding Mortgage Securities I, 2005-SA3 1A

     2.859     8/25/35         1,943,544         1,530,766 (a)(b) 

Residential Funding Mortgage Securities I, 2006-S8 A12, IO

     5.206     9/25/36         8,587,144         1,346,902 (a) 

Residential Funding Mortgage Securities I, 2006-SA2 4A1

     5.768     8/25/36         506,014         452,292 (a)(b) 

Residential Funding Mortgage Securities I, 2007-S6 1A13, IO

     5.306     6/25/37         4,451,115         690,993 (a) 

Residential Funding Mortgage Securities II, 2004-HS1 AI6

     3.640     3/25/34         28,394         28,434 (a)(b) 

Residential Funding Mortgage Securities II, 2005-HI2 M7

     5.810     5/25/35         399,607         402,525 (b) 

Saxon Asset Securities Trust, 2007-3 2A1

     0.414     9/25/47         571,655         561,300 (a) 

Structured Agency Credit Risk Debt Notes, 2015-HQ1 B

     10.944     3/25/25         4,319,436         5,081,990 (a) 

Structured ARM Loan Trust, 2004-07 A3

     0.929     6/25/34         196,792         185,434 (a)(b) 

Structured ARM Loan Trust, 2004-18 1A2

     2.566     12/25/34         655,115         625,974 (a)(b) 

Structured ARM Loan Trust, 2005-04 1A1

     2.582     3/25/35         292,476         261,838 (a)(b) 

Structured ARM Loan Trust, 2005-04 5A

     2.605     3/25/35         233,923         213,058 (a)(b) 

Structured ARM Loan Trust, 2005-07 1A3

     2.568     4/25/35         161,713         153,471 (a)(b) 

 

See Notes to Schedule of Investments.

 

6


WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2015

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT†
     VALUE  
RESIDENTIAL MORTGAGE-BACKED SECURITIES - (continued)           

Structured ARM Loan Trust, 2005-20 4A2

     4.219     10/25/35         415,485       $ 16,518 (a) 

Structured ARM Loan Trust, 2006-4 4A1

     4.416     5/25/36         400,592         312,894 (a)(b) 

Structured ARM Loan Trust, 2006-8 3A5

     4.339     9/25/36         2,235,637         1,784,711 (a)(b) 

Structured ARM Loan Trust, 2007-5 2A2

     2.618     6/25/37         1,081,682         630,648 (a)(b) 

Structured Asset Investment Loan Trust, 2004-8 M7

     2.969     9/25/34         62,612         56,292 (a) 

Structured Asset Investment Loan Trust, 2004-8 M9

     3.944     9/25/34         318,981         112,291 (a) 

Structured Asset Mortgage Investments Inc., 2006-AR5 4A1

     0.414     5/25/46         766,512         439,391 (a)(b) 

Structured Asset Securities Corp., 2004-20 5A1

     6.250     11/25/34         232,380         239,740 (b) 

Structured Asset Securities Corp., 2005-4XS 3M3

     5.500     3/25/35         408,507         4 (e) 

Structured Asset Securities Corp., 2005-5 2A2

     5.500     4/25/35         236,253         233,604 (b) 

Structured Asset Securities Corp., 2005-RF1 A

     0.544     3/25/35         92,221         77,060 (a)(b)(c) 

Structured Asset Securities Corp., 2006-RF3 1A1, PAC-11

     6.000     10/25/36         1,273,380         1,279,133 (c) 

Structured Asset Securities Corp., 2006-RF4 2A2

     6.000     10/25/36         2,087,320         1,151,777 (c) 

Voyager Countywide Delaware Trust, 2009-1 3QB1, IO

     0.457     3/16/30         919,024         791,481 (a)(b)(c) 

Wachovia Mortgage Loan Trust LLC, 2005-B 2A2

     2.670     10/20/35         74,918         68,111 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2004-AR10 A3

     0.744     7/25/44         104,267         98,764 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-09 5A4

     34.511     11/25/35         134,525         225,245 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-10 2A3

     1.094     11/25/35         248,278         179,925 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-8 1A6

     22.572     10/25/35         476,984         630,874 (a) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-AR13 A1C3

     0.684     10/25/45         461,426         392,083 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-AR18 2A1

     2.439     1/25/36         783,806         700,830 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2006-AR10 A1

     0.294     12/25/36         659,378         438,734 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2006-AR15 2A1B

     2.159     11/25/46         712,745         344,269 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2006-AR16 2A2

     2.029     12/25/36         425,086         374,038 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2006-AR18 1A1

     1.798     1/25/37         50,783         43,470 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2007-HY3 4A1

     2.420     3/25/37         170,504         162,026 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2007-HY7 1A1

     2.439     7/25/37         169,159         137,585 (a)(b) 

Washington Mutual Inc., Mortgage Pass-Through Certificates, 2007-HY7 3A1

     2.380     7/25/37         319,601         287,754 (a)(b) 

Wells Fargo Alternative Loan Trust, 2007-PA1 A12, IO

     5.266     3/25/37         6,682,144         1,096,927 (a)(e) 

Wells Fargo Mortgage Backed Securities Trust,
2005-AR2 2A2

     2.619     3/25/35         162,001         165,248 (a)(b) 
          

 

 

 

Total Residential Mortgage-Backed Securities
(Cost - $222,872,168)

             242,204,874   
          

 

 

 

 

See Notes to Schedule of Investments.

 

7


WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2015

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT†/
UNITS
    VALUE  
ASSET-BACKED SECURITIES - 17.3%          

Access Group Inc., 2004-A B1

     1.699     7/1/39         1,400,000      $ 1,170,400 (a) 

American Money Management Corp., 2015-16A E

     5.874     4/14/27         2,500,000        2,246,500 (a)(c) 

Babson CLO Ltd., 2015-2A E

     5.844     7/20/27         1,500,000        1,347,750 (a)(c) 

Bombardier Capital Mortgage Securitization Corp Trust, 1999-A A4

     6.475     3/15/29         2,693,415        2,999,270 (a) 

Bombardier Capital Mortgage Securitization Corp. Trust, 1998-B A

     6.530     10/15/28         912,838        954,092 (a) 

Bombardier Capital Mortgage Securitization Corp. Trust, 1999-A A3

     5.980     3/15/29         502,990        552,968 (a) 

Carlyle Global Market Strategies, 2015-2A D

     5.574     4/27/27         1,250,000        1,092,625 (a)(c) 

Credit-Based Asset Servicing and Securitization LLC, 2006-MH1 M1

     5.357     10/25/36         500,000        530,898 (c) 

Dryden Senior Loan Fund, 2015-40A E

     6.276     8/15/28         1,300,000        1,190,410 (a)(c) 

Firstfed Corp. Manufactured Housing Contract, 1997-2 B

     8.110     5/15/24         489,779        439,219 (c) 

GoldenTree Loan Opportunities Ltd., 2015-10A E2

     5.518     7/20/27         1,250,000        1,128,747 (a)(c) 

Greenpoint Manufactured Housing, 1999-3 1A7

     7.270     6/15/29         1,186,584        1,172,860 (b) 

Greenpoint Manufactured Housing, 1999-3 2A2

     3.562     6/19/29         475,000        413,250 (a)(b) 

Greenpoint Manufactured Housing, 1999-4 A2

     3.702     2/20/30         700,000        609,000 (a)(b) 

Greenpoint Manufactured Housing, 2000-4 A3

     2.200     8/21/31         25,000        23,672 (a)(b) 

Greenpoint Manufactured Housing, 2001-2 IA2

     3.691     2/20/32         425,000        393,394 (a) 

Greenpoint Manufactured Housing, 2001-2 IIA2

     3.694     3/13/32         675,000        617,086 (a) 

Magnus-Relda Holding Vier GmbH, 1A JNR

     7.000     10/28/24         1,089,000 EUR      1,253,354 (c)(f) 

Neuberger Berman CLO Ltd., 2015-19A D

     5.538     7/15/27         2,000,000        1,789,800 (a)(c) 

Newcastle Mortgage Securities Trust, 2006-1 M4

     0.644     3/25/36         4,000,000        2,672,576 (a) 

Oakwood Mortgage Investors Inc., 2001-E A2

     5.050     12/15/31         3,081,012        2,799,740   

Origen Manufactured Housing Contract Trust, 2006-A A2

     2.644     10/15/37         2,192,475        1,982,950 (a)(b) 

Origen Manufactured Housing Contract Trust, 2007-A A2

     2.645     4/15/37         2,237,771        2,007,833 (a)(b) 

Park Place Securities Inc., 2004-WHQ2 M5

     1.919     2/25/35         3,070,364        2,204,853 (a) 

SMB Private Education Loan Trust, 2014-A C

     4.500     9/15/45         2,880,000        2,433,600 (c) 

SMB Private Education Loan Trust, 2014-A R

     0.000     9/15/45         6,875        3,093,750 (c)(f) 

Social Professional Loan Program LLC, 2014-A RC

     0.000     7/14/2124         700        2,676,471 (c)(e)(f) 

Treman Park CLO LLC, 2015-1A E

     6.461     4/20/27         2,800,000        2,651,880 (a)(c) 

Voya CLO Ltd., 2015-1A D

     5.875     4/18/27         2,000,000        1,808,000 (a)(c) 
         

 

 

 

Total Asset-Backed Securities
(Cost - $43,913,804)

            44,256,948   
         

 

 

 
COMMERCIAL MORTGAGE-BACKED SECURITIES - 26.8%          

Banc of America Commercial Mortgage Trust, 2007-2 AJ

     5.794     4/10/49         3,000,000        3,003,019 (a)(d) 

Bank of America Merrill Lynch Large Loan Inc., 2014-INMZ MZB

     8.686     12/15/19         1,500,000        1,500,000 (a)(c) 

BCAP LLC Trust, 2014-RR3 3A2

     0.293     7/26/36         85,000        51,371 (c) 

BCAP LLC Trust, 2014-RR3 5A2

     0.306     10/26/36         100,000        60,306 (a)(c) 

BLCP Hotel Trust, 2014-CLMZ M

     5.935     8/15/29         1,480,185        1,472,835 (a)(c) 

Carefree Portfolio Trust, 2014-CMZB MZB

     7.929     11/15/29         4,000,000        3,986,546 (a)(c) 

CD Commercial Mortgage Trust, 2007-CD4 AJ

     5.398     12/11/49         450,000        393,846 (a) 

Citigroup Commercial Mortgage Trust, 2015-GC27 E

     3.000     2/10/48         2,000,000        1,260,864 (c) 

Citigroup Commercial Mortgage Trust, 2015-GC29 E

     4.295     4/10/48         2,950,000        2,134,689 (a)(c) 

Citigroup Commercial Mortgage Trust, 2015-GC29 F

     4.295     4/10/48         1,410,000        803,087 (a)(c) 

Commercial Mortgage Trust, 2013-CR09 E

     4.400     7/10/45         3,500,000        2,949,119 (a)(c) 

Commercial Mortgage Trust, 2013-CR12 E

     5.254     10/10/46         110,000        97,213 (a)(c) 

Commercial Mortgage Trust, 2015-CR25 D

     3.949     8/10/48         100,000        79,573 (a) 

 

See Notes to Schedule of Investments.

 

8


WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2015

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT†
    VALUE  
COMMERCIAL MORTGAGE-BACKED SECURITIES - (continued)          

Commercial Mortgage Trust, 2015-CR25 E

     4.699     8/10/48         3,000,000      $ 2,277,000 (a)(c) 

Commercial Mortgage Trust, 2015-CR25 F

     4.699     8/10/48         1,400,000        791,700 (a)(c)(e) 

Credit Suisse Commercial Mortgage Trust, 2006-C5 AJ

     5.373     12/15/39         411,000        398,845   

Credit Suisse European Mortgage Capital Ltd., 2014-1MGN B

     7.165     7/20/22         1,488,722 EUR      1,663,497 (a)(c) 

Credit Suisse Mortgage Trust, 2014-USA F

     4.373     9/15/37         1,620,000        1,414,428 (c) 

Credit Suisse Mortgage Trust, 2015-Town MZ

     9.157     3/1/28         4,000,000        3,970,000 (c) 

DBUBS Mortgage Trust, 2011-LC3A G

     3.750     8/10/44         2,600,000        1,439,113 (c) 

Federal Home Loan Mortgage Corp. (FHLMC), Multi-Family Structured Pass-Through Certificates, K008 X1, IO

     1.805     6/25/20         815,266        47,649 (a)(b) 

Federal Home Loan Mortgage Corp. (FHLMC), Multi-Family Structured Pass-Through Certificates, K034 X3, IO

     1.783     9/25/41         10,200,000        1,147,403 (a)(b) 

FREMF Mortgage Trust, 2014-KF04 B

     2.532     6/25/21         1,522,279        1,529,694 (a)(c) 

FREMF Mortgage Trust, 2014-KF05 B

     4.194     9/25/22         2,092,122        2,103,466 (a)(c) 

GE Business Loan Trust, 2005-1A D

     2.927     6/15/33         939,761        883,163 (a)(c) 

GE Business Loan Trust, 2006-1A C

     0.627     5/15/34         279,610        253,925 (a)(c) 

GE Business Loan Trust, 2006-2A C

     0.587     11/15/34         1,359,548        1,202,460 (a)(c) 

GMAC Commercial Mortgage Securities Inc., 2006-C1 AJ

     5.349     11/10/45         2,000,000        1,972,040 (a)(d) 

GS Mortgage Securities Corp., 2010-C1 X, IO

     1.613     8/10/43         13,792,352        792,895 (a)(b)(c) 

GS Mortgage Securities Trust, 2006-GG8 AJ

     5.622     11/10/39         190,000        191,695   

GS Mortgage Securities Trust, 2013-GC14 F

     4.929     8/10/46         160,000        135,379 (a)(c) 

Hyatt Hotel Portfolio Trust, 2014-HYMZ M

     6.432     11/15/16         1,750,000        1,730,296 (a)(c) 

JPMBB Commercial Mortgage Securities Trust, 2015-C31 D

     4.273     8/15/48         550,000        449,870 (a)(d) 

JPMorgan Chase Commercial Mortgage Securities Trust,
2006-CB16 AJ

     5.623     5/12/45         380,000        374,688   

JPMorgan Chase Commercial Mortgage Securities Trust,
2006-LDP7 AJ

     6.100     4/15/45         940,000        924,645 (a) 

JPMorgan Chase Commercial Mortgage Securities Trust,
2006-LDP9 AJ

     5.411     5/15/47         2,290,000        1,982,732   

JPMorgan Chase Commercial Mortgage Securities Trust,
2006-LDP9 AJS

     5.386     5/15/47         420,000        359,655 (a) 

JPMorgan Chase Commercial Mortgage Securities Trust,
2007-CB18 AJ

     5.502     6/12/47         660,000        653,653 (a) 

JPMorgan Chase Commercial Mortgage Securities Trust,
2014-CBMZ M

     6.432     10/15/19         1,900,000        1,893,683 (a)(c) 

ML-CFC Commercial Mortgage Trust, 2007-5 AJ

     5.450     8/12/48         412,000        406,356 (a) 

ML-CFC Commercial Mortgage Trust, 2007-9 AJ

     6.193     9/12/49         1,422,000        1,414,990 (a)(d) 

ML-CFC Commercial Mortgage Trust, 2007-9 AJA

     6.222     9/12/49         400,000        398,701 (a) 

Morgan Stanley Bank of America Merrill Lynch Trust,
2015-C21 E

     3.012     3/15/48         750,000        474,900 (c) 

Morgan Stanley Capital I Trust, 2007-IQ13 AJ

     5.438     3/15/44         1,290,000        1,295,384 (d) 

Morgan Stanley Capital I Trust, 2007-IQ16 AJ

     6.319     12/12/49         1,590,000        1,523,121 (a) 

Motel 6 Trust, 2015-MTL6 F

     5.000     2/5/30         3,000,000        2,886,234 (c) 

UBS-Barclays Commercial Mortgage Trust, 2012-C2 G

     5.000     5/10/63         3,130,000        2,151,233 (a)(c) 

UBS-Barclays Commercial Mortgage Trust, 2012-C2 H

     5.000     5/10/63         5,510,000        2,187,112 (a)(c) 

Wells Fargo Commercial Mortgage Trust, 2013-LC12 E

     3.500     7/15/46         130,000        101,888 (c) 

Wells Fargo Commercial Mortgage Trust, 2015-SG1 D

     4.620     12/15/47         400,000        340,640 (a)(d) 

WF-RBS Commercial Mortgage Trust, 2011-C4 F

     5.000     6/15/44         3,870,000        3,740,187 (a)(c) 

WF-RBS Commercial Mortgage Trust, 2012-C9 E

     4.963     11/15/45         3,500,000        3,198,662 (a)(c) 
         

 

 

 

Total Commercial Mortgage-Backed Securities
(Cost - $68,061,655)

            68,495,450   
         

 

 

 

 

See Notes to Schedule of Investments.

 

9


WESTERN ASSET MORTGAGE DEFINED OPPORTUNITY FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2015

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT†
     VALUE  
CORPORATE BONDS & NOTES - 3.9%           
CONSUMER DISCRETIONARY - 1.3%           

Household Durables - 1.3%

          

William Lyon Homes Inc., Senior Notes

     8.500     11/15/20         3,000,000       $ 3,232,500 (d) 
          

 

 

 
CONSUMER STAPLES - 0.2%           

Food & Staples Retailing - 0.2%

          

CVS Corp., Pass-Through Trust

     9.350     1/10/23         480,000         570,983 (b)(c) 
          

 

 

 
INDUSTRIALS - 0.0%           

Airlines - 0.0%

          

Air 2 US, Notes

     8.027     10/1/19         102,470         109,643 (b)(c) 
          

 

 

 
MATERIALS - 1.4%           

Metals & Mining - 1.4%

          

Evraz Group SA, Senior Notes

     6.750     4/27/18         2,800,000         2,765,000 (c)(d) 

Vedanta Resources PLC, Senior Bonds

     8.250     6/7/21         1,350,000         955,692 (d)(g) 
          

 

 

 

TOTAL MATERIALS

             3,720,692   
          

 

 

 
TELECOMMUNICATION SERVICES - 1.0%           

Wireless Telecommunication Services - 1.0%

          

Digicel Group Ltd., Senior Notes

     8.250     9/30/20         2,650,000         2,464,500 (d)(g) 
          

 

 

 

TOTAL CORPORATE BONDS & NOTES
(Cost - $10,772,663)

             10,098,318   
          

 

 

 

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS
(Cost - $345,620,290)

   

          365,055,590   
          

 

 

 
SHORT-TERM INVESTMENTS - 1.6%           

Repurchase Agreements - 1.6%

          

State Street Bank & Trust Co. repurchase agreement dated 9/30/15; Proceeds at maturity - $4,119,000; (Fully collateralized by U.S. government obligations, 2.000% due 10/31/21; Market value - $4,202,494)
(Cost - $4,119,000)

     0.000     10/1/15         4,119,000         4,119,000   
          

 

 

 

TOTAL INVESTMENTS - 144.4%
(Cost - $349,739,290#)

             369,174,590   

Liabilities in Excess of Other Assets - (44.4)%

             (113,599,329
          

 

 

 

TOTAL NET ASSETS - 100.0%

           $ 255,575,261   
          

 

 

 

 

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

 

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

 

(b) All or a portion of this security is pledged as collateral pursuant to the loan agreement.

 

(c) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors, unless otherwise noted.

 

(d) All or a portion of this security is held by the counterparty as collateral for open reverse repurchase agreements.

 

(e) Illiquid security.

 

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

 

(g) 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, unless otherwise noted.

 

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

Abbreviations used in this schedule:

ARM    — Adjustable Rate Mortgage
CLO    — Collateral Loan Obligation
EUR    — Euro
IO    — Interest Only
PAC    — Planned Amortization Class
PO    — Principal Only

This Schedule of Investments is unaudited and is intended to provide information about the Fund’s portfolio holdings as of the date of the schedule. Other information regarding the Fund is available in the Fund’s most recent annual or semi-annual shareholder report.

 

See Notes to Schedule of Investments.

 

10


Notes to Schedule of Investments (unaudited)

 

1. Organization and significant accounting policies

Western Asset Mortgage Defined Opportunity Fund Inc. (the “Fund”) was incorporated in Maryland on December 11, 2009 and is registered as a non-diversified, limited-term, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund’s primary investment objective is to provide current income. As a secondary investment objective, the Fund will seek capital appreciation. The Fund seeks to achieve its investment objectives by investing primarily in a diverse portfolio of mortgage-backed securities (“MBS”), consisting primarily of non-agency residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”). The Fund intends to liquidate and distribute substantially all of the Fund’s net assets to shareholders on or about March 1, 2022.

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

(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Short-term fixed income securities that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. 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 (formerly, Legg Mason North American Fund Valuation Committee) (the “Valuation Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Directors, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Board of Directors. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

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

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

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

 

11


Notes to Schedule of Investments (unaudited) (continued)

 

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

 

   

Level 1 – quoted prices in active markets for identical investments

 

   

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

 

   

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

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

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

 

ASSETS

 

DESCRIPTION

   QUOTED PRICES
(LEVEL 1)
     OTHER SIGNIFICANT
OBSERVABLE INPUTS
(LEVEL 2)
     SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)
     TOTAL  

Long-term investments†:

           

Residential mortgage-backed securities

     —         $ 242,204,874         —         $ 242,204,874   

Asset-backed securities

     —           36,211,123       $ 8,045,825         44,256,948   

Commercial mortgage-backed securities

     —           62,861,953         5,633,497         68,495,450   

Corporate bonds & notes:

           

Industrials

     —           —           109,643         109,643   

Other corporate bonds & notes

     —           9,988,675         —           9,988,675   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term investments

  

   $ 351,266,625       $ 13,788,965       $ 365,055,590   
  

 

 

    

 

 

    

 

 

    

 

 

 

Short-term investments†

     —           4,119,000         —           4,119,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investments

     —         $ 355,385,625       $ 13,788,965       $ 369,174,590   
  

 

 

    

 

 

    

 

 

    

 

 

 

LIABILITIES

 

DESCRIPTION

   QUOTED PRICES
(LEVEL 1)
     OTHER SIGNIFICANT
OBSERVABLE INPUTS
(LEVEL 2)
     SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)
     TOTAL  

Other financial instruments:

           

Futures contracts

   $ 109,198         —           —         $ 109,198   

Forward foreign currency contracts

     —         $ 80,003         —           80,003   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 109,198       $ 80,003         —         $ 189,201   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

See Schedule of Investments for additional detailed categorizations.

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

 

                        CORPORATE
BOND & NOTES
        

INVESTMENTS IN SECURITIES

   RESIDENTIAL
MORTGAGE-
BACKED
SECURITIES
    ASSET-BACKED
SECURITIES
     COMMERCIAL
MORTGAGE-
BACKED
SECURITIES
    INDUSTRIALS      TOTAL  

Balance as of December 30, 2014

   $ 2,007,750        —         $ 5,499,482        —         $ 7,507,232   

Accrued premiums/discounts

     68,144        —           202,002        —           270,146   

Realized gain (loss)

     —          —           —          —           —     

Change in unrealized appreciation (depreciation)1

     301,659        —           136,861        —           438,520   

Purchases

     —          —           3,970,000        —           3,970,000   

Sales

     —          —           —          —           —     

Transfers into Level 32

     —        $ 8,045,825         1,663,497      $ 109,643         9,818,965   

Transfers out of Level 33

     (2,377,553     —           (5,838,345     —           (8,215,898
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Balance as of September 30, 2015

     —        $ 8,045,825       $ 5,633,497      $ 109,643       $ 13,788,965   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Net change in unrealized appreciation (depreciation) for investments in securities still held at September 30, 20151

            
     —          —         $ (15,509     —         $ (15,509
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

12


Notes to Schedule of Investments (unaudited) (continued)

 

The Fund’s policy is to recognize transfers between levels as of the end of the reporting period.

 

1 

Change in unrealized appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.

 

2 

Transferred into Level 3 as a result of the unavailability of a quoted price in an active market for an identical investment or the unavailability of other significant observable inputs.

 

3 

Transferred out of Level 3 as a result of the availability of a quoted price in an active market for an identical investment or the availability of other significant observable inputs.

2. Investments

At September 30, 2015, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

Gross unrealized appreciation

   $ 26,444,030   

Gross unrealized depreciation

     (7,008,730
  

 

 

 

Net unrealized appreciation

   $ 19,435,300   
  

 

 

 

At September 30, 2015, the Fund had the following open reverse repurchase agreements:

 

Counterparty

   Rate     Effective
Date
     Maturity
Date
    Face Amount of
Reverse Repurchase
Agreements
    

Asset Class of

Collateral*

   Collateral
Value
 

Barclays Capital Inc.

     1.703     9/2/15         10/2/15      $ 221,154       Commercial mortgage-backed securities    $ 340,640   

Barclays Capital Inc.

     1.892     7/20/15         10/21/15        1,883,007       Commercial mortgage-backed securities      2,710,374   

Barclays Capital Inc.

     1.042     7/21/15         10/21/15        1,441,785       Residential mortgage-backed securities      2,154,402   

Barclays Capital Inc.

     1.000     9/24/15         10/27/15        2,497,500       Corporate bonds & notes      3,232,500   

Credit Suisse

     0.750     6/26/13         TBD **      1,990,450       Corporate bonds & notes      2,185,500   
            

Cash

     106,427   

Credit Suisse

     0.850     6/23/14         TBD **      2,217,600       Corporate bonds & notes      2,765,000   
            

Cash

     118,573   

Deutsche Bank AG

     0.750     3/10/14         TBD **      1,101,600       Corporate bonds & notes      955,692   

Deutsche Bank AG

     1.754     9/8/15         10/8/15        4,389,000       Commercial mortgage-backed securities      4,975,059   

Deutsche Bank AG

     1.803     9/3/15         10/5/15        287,000       Commercial mortgage-backed securities      449,870   
         

 

 

       

 

 

 
          $ 16,029,096          $ 19,994,037   
         

 

 

       

 

 

 

 

* Refer to the Schedule of Investments for positions held at the counterparty as collateral for reverse repurchase agreements.

 

** TBD — To Be Determined; These reverse repurchase agreements have no maturity dates because they are renewed daily and can be terminated by either the Fund or the counterparty in accordance with the terms of the agreements.

 

13


Notes to Schedule of Investments (unaudited) (continued)

 

At September 30, 2015, the Fund had the following open futures contracts:

 

     Number of
Contracts
     Expiration
Date
     Basis
Value
     Market
Value
     Unrealized
Depreciation
 
Contracts to Sell:               

Euro-Bund

     5         12/15       $ 856,913       $ 872,633       $ (15,720

U.S. Treasury 5-Year Notes

     10         12/15         1,197,694         1,205,156         (7,462

U.S. Treasury 10-Year Notes

     89         12/15         11,371,343         11,457,359         (86,016
              

 

 

 
Net unrealized depreciation on open futures contracts                $ (109,198
              

 

 

 

At September 30, 2015, the Fund had the following open forward foreign currency contracts:

 

Currency
Purchased
     Currency
Sold
    

Counterparty

   Settlement
Date
     Unrealized
Depreciation
 
USD      2,757,855         EUR         2,538,059       Citibank, N.A.      11/13/15       $ (80,003

Abbreviations used in this table:

EUR    — Euro
USD    — United States Dollar

3. Recent accounting pronouncement

The Fund has adopted the disclosure provisions of Financial Accounting Standards Board Accounting Standards Update No. 2014-11 (“ASU No. 2014-11”), Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures. ASU No. 2014-11 is intended to provide increased transparency about the types of collateral pledged in repurchase agreements and similar transactions that are accounted for as secured borrowings.

 

14


 

ITEM 2. CONTROLS AND PROCEDURES.

 

  (a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.

 

  (b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal quarter that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting

 

ITEM 3. EXHIBITS.

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


SIGNATURES

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

Western Asset Mortgage Defined Opportunity Fund Inc.

 

By   /s/    JANE TRUST        
  Jane Trust
  Chief Executive Officer

Date:

 

November 20, 2015

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:

 

November 20, 2015

By   /s/    RICHARD F. SENNETT        
  Richard F. Sennett
  Principal Financial Officer

Date:

 

November 20, 2015