N-CSRS 1 d69628dncsrs.htm WESTERN ASSET HIGH YIELD DEFINED OPPORTUNITY FUND INC. Western Asset High Yield Defined Opportunity Fund Inc.
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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 811-22444

 

 

Western Asset High Yield Defined Opportunity Fund Inc.

(Exact name of registrant as specified in charter)

 

 

620 Eighth Avenue, 47th Floor, New York, NY 10018

(Address of principal executive offices) (Zip code)

 

 

George P. Hoyt

Franklin Templeton

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: May 31

Date of reporting period: November 30, 2020

 

 

 


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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   November 30, 2020

WESTERN ASSET

HIGH YIELD DEFINED

OPPORTUNITY FUND INC. (HYI)

 

 

 

Beginning in or after January 2021, as permitted by regulations adopted by the Securities and Exchange Commission, the Fund intends to no longer mail paper copies of the Fund’s shareholder reports like this one, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary (such as a broker-dealer or bank). Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you invest through a financial intermediary and you already elected to receive shareholder reports electronically (“e-delivery”), you will not be affected by this change and you need not take any action. If you have not already elected e-delivery, you may elect to receive shareholder reports and other communications from the Fund electronically by contacting your financial intermediary.

You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. That election will apply to all Legg Mason Funds held in your account at that financial intermediary. If you are a direct shareholder with the Fund, you can call the Fund at 1-888-888-0151, or write to the Fund by regular mail at P.O. Box 505000, Louisville, KY 40233 or by overnight delivery to Computershare, 462 South 4th Street, Suite 1600, Louisville, KY 40202 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. That election will apply to all Legg Mason Funds held in your account held directly with the fund complex.

 

LOGO

 

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


Table of Contents
What’s inside      
Letter from the chairman     III  
Performance review     V  
Fund at a glance     1  
Schedule of investments     2  
Statement of assets and liabilities     17  
Statement of operations     18  
Statements of changes in net assets     19  
Financial highlights     20  
Notes to financial statements     22  
Additional shareholder information     35  
Dividend reinvestment plan     36  

Fund objectives

The Fund’s primary investment objective is to provide high income. As a secondary investment objective, the Fund will seek capital appreciation.

The Fund seeks to achieve its investment objectives by investing, under normal market conditions, at least 80% of its net assets in a portfolio of high-yield corporate fixed-income securities with varying maturities. Corporate securities include those securities that are issued or originated by U.S. or foreign public or private corporations and other business entities.

The Fund has a limited term and as a fundamental policy intends to liquidate and distribute substantially all of its net assets to stockholders after making appropriate provisions for any liabilities of the Fund on or about September 30, 2025.

 

 

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   Western Asset High Yield Defined Opportunity Fund Inc.


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Letter from the chairman

 

LOGO

 

Dear Shareholder,

We are pleased to provide the semi-annual report of Western Asset High Yield Defined Opportunity Fund Inc. for the six-month reporting period ended November 30, 2020. Please read on for Fund performance during the Fund’s reporting period.

Special shareholder notice

On July 31, 2020, Franklin Resources, Inc. (“Franklin Resources”) acquired Legg Mason, Inc. (“Legg Mason”) in an all-cash transaction. As a result of the transaction, Legg Mason Partners Fund Advisor, LLC (“LMPFA”) and the subadvisers became indirect, wholly-owned subsidiaries of Franklin Resources. Under the Investment Company Act of 1940, as amended, consummation of the transaction automatically terminated the management and subadvisory agreements that were in place for the Fund prior to the transaction. The Fund’s manager and subadvisers continue to provide uninterrupted services with respect to the Fund pursuant to new management and subadvisory agreements that were approved by Fund shareholders.

Franklin Resources, whose principal executive offices are at One Franklin Parkway, San Mateo, California 94403, is a global investment management organization operating, together with its subsidiaries, as Franklin Templeton. As of November 30, 2020, after giving effect to the transaction described above, Franklin Templeton’s asset management operations had aggregate assets under management of approximately $1.5 trillion.

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 these goals is through our website, www.lmcef.com. Here you can gain immediate access to market and investment information, including:

 

 

Fund prices and performance,

 

 

Market insights and commentaries from our portfolio managers, and

 

 

A host of educational resources.

 

Western Asset High Yield Defined Opportunity Fund Inc.  

 

III


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Letter from the chairman

 

 

We look forward to helping you meet your financial goals.

Sincerely,

 

LOGO

Jane Trust, CFA

Chairman, President and Chief Executive Officer

December 31, 2020

 

 

IV

   Western Asset High Yield Defined Opportunity Fund Inc.


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Performance review

 

For the six months ended November 30, 2020, Western Asset High Yield Defined Opportunity Fund Inc. returned 11.35% based on its net asset value (“NAV”)i and 11.82% based on its New York Stock Exchange (“NYSE”) market price per share. The Fund’s unmanaged benchmarks, the Bloomberg Barclays U.S. Corporate High Yield — 2% Issuer Cap Index B Componentii and the Bloomberg Barclays U.S. Corporate High Yield — 2% Issuer Cap Index Caa Componentiii, returned 9.03% and 17.02%, respectively, over the same time frame. The Lipper High Yield Closed-End Funds Category Averageiv returned 10.24% for the same period. Please note that Lipper performance returns are based on each fund’s NAV.

During this six-month period, the Fund made distributions to shareholders totaling $0.57 per share. As of November 30, 2020, the Fund estimates that 89% of the distributions were sourced from net investment income and 11% constituted a return of capital.* The performance table shows the Fund’s six-month total return based on its NAV and market price as of November 30, 2020. Past performance is no guarantee of future results.

 

Performance Snapshot as of November 30, 2020 (unaudited)  
Price Per Share   6-Month
Total Return**
 
$15.83 (NAV)     11.35 %† 
$15.22 (Market Price)     11.82 %‡ 

All figures represent past performance and are not a guarantee of future results. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.

** Total returns are based on changes in NAV or market price, respectively. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.

† Total return assumes the reinvestment of all distributions, including returns of capital, if any, at NAV.

‡ Total return assumes the reinvestment of all distributions, including returns of capital, if any, in additional shares in accordance with the Fund’s Dividend Reinvestment Plan.

 

*

These estimates are not for tax purposes. The Fund will issue a Form 1099 with final composition of the distributions for tax purposes after year-end. A return of capital is not taxable and results in a reduction in the tax basis of a shareholder’s investment. For more information about a distribution’s composition, please refer to the Fund’s distribution press release or, if applicable, the Section 19 notice located in the press release section of our website, www.lmcef.com (click on the name of the Fund).

 

Western Asset High Yield Defined Opportunity Fund Inc.  

 

V


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Performance review (cont’d)

 

Looking for additional information?

The Fund is traded under the symbol “HYI” and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available online under the symbol “XHYIX” on most financial websites. Barron’s and The Wall Street Journal’s Monday edition both carry closed-end fund tables that provide additional information. In addition, the Fund issues a quarterly press release that can be found on most major financial websites as well as www.lmcef.com (click on the name of the Fund).

In a continuing effort to provide information concerning the Fund, shareholders may call 1-888-777-0102 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern Time, for the Fund’s current NAV, market price and other information.

Thank you for your investment in Western Asset High Yield Defined Opportunity Fund Inc. As always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund’s investment goals.

Sincerely,

 

LOGO

Jane Trust, CFA

Chairman, President and Chief Executive Officer

December 31, 2020

RISKS: The Fund is a non-diversified, limited term, closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance that the Fund will achieve its investment objective. The Fund’s common stock is traded on the New York Stock Exchange. Similar to stocks, the Fund’s share price will fluctuate with market conditions and, at the time of sale, may be worth more or less than the original investment. Shares of closed-end funds often trade at a discount to their net asset value. Because the Fund is non-diversified, it may be more susceptible to economic, political or regulatory events than a diversified fund. The Fund’s investments are subject to a number of risks, including credit risk, inflation risk and interest rate risk. As interest rates rise, bond prices fall, reducing the value of the Fund’s share price. The Fund may invest in lower-rated high-yield bonds, commonly known as “junk bonds,” which are subject to greater liquidity and credit risk (risk of default) than higher-rated obligations. The Fund is also permitted purchases of equity securities. Equity securities generally have greater price volatility than fixed income securities. Investments in foreign securities involve risks, including the possibility of losses due to changes in currency exchange rates and negative developments in the political, economic, or regulatory structure of specific countries or regions. These risks are greater in emerging markets. Emerging market countries tend to have economic, political and legal systems that are less

 

 

VI

   Western Asset High Yield Defined Opportunity Fund Inc.


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developed and are less stable than those of more developed countries. The Fund may make significant investments in derivative instruments. Derivative instruments can be illiquid, may disproportionately increase losses, and may have a potentially large impact on Fund performance. The Fund may invest in securities or engage in transactions that have the economic effects of leverage which can increase the risk and volatility of the Fund. The Fund may also invest in money market funds, including funds affiliated with the Fund’s manager and subadvisers.

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.

 

 

 

i 

Net asset value (“NAV”) is calculated by subtracting total liabilities, including liabilities associated with financial leverage (if any), from the closing value of all securities held by the Fund (plus all other assets) and dividing the result (total net assets) by the total number of the common shares outstanding. The NAV fluctuates with changes in the market prices of securities in which the Fund has invested. However, the price at which an investor may buy or sell shares of the Fund is the Fund’s market price as determined by supply of and demand for the Fund’s shares.

 

ii 

The Bloomberg Barclays U.S. Corporate High Yield — 2% Issuer Cap B Component is an index of the 2% Issuer Cap component of the broader Bloomberg Barclays U.S. Corporate High Yield Index and is comprised of B-rated securities included in this index. 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.

 

iii 

The Bloomberg Barclays U.S. Corporate High Yield — 2% Issuer Cap Caa Component is an index of the 2% Issuer Cap component of the broader Bloomberg Barclays U.S. Corporate High Yield Index and is comprised of Caa-rated securities included in this index.

 

iv 

Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the six-month period ended November 30, 2020, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 9 funds in the Fund’s Lipper category.

 

Western Asset High Yield Defined Opportunity Fund Inc.  

 

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 November 30, 2020 and May 31, 2020 and does not include derivatives, such as 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 High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report  

 

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Schedule of investments (unaudited)

November 30, 2020

 

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Corporate Bonds & Notes — 91.0%                                
Communication Services — 18.1%                                

Diversified Telecommunication Services — 5.1%

                               

Altice France Holding SA, Senior Secured Notes

    10.500     5/15/27       3,190,000     $ 3,601,749  (a) 

Altice France SA, Senior Secured Notes

    7.375     5/1/26       7,820,000       8,219,211  (a)  

Altice France SA, Senior Secured Notes

    8.125     2/1/27       1,700,000       1,876,196  (a)  

CenturyLink Inc., Senior Notes

    4.500     1/15/29       1,420,000       1,450,175  (a)  

Frontier Communications Corp., Secured Notes

    6.750     5/1/29       1,640,000       1,701,500  (a)  

Intelsat Jackson Holdings SA, Senior Secured Notes

    8.000     2/15/24       1,530,000       1,566,965  (a)  

Total Diversified Telecommunication Services

 

            18,415,796  

Entertainment — 1.1%

                               

Allen Media LLC/Allen Media

                               

Co-Issuer Inc., Senior Notes

    10.500     2/15/28       990,000       1,024,496  (a)  

Netflix Inc., Senior Notes

    5.875     11/15/28       670,000       810,342  

Netflix Inc., Senior Notes

    6.375     5/15/29       1,750,000       2,198,070  

Total Entertainment

                            4,032,908  

Media — 6.6%

                               

Arches Buyer Inc., Senior Notes

    6.125     12/1/28       220,000       226,325  (a)(b)  

Arches Buyer Inc., Senior Secured Notes

    4.250     6/1/28       650,000       653,250  (a)(b)  

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

    5.125     5/1/27       1,233,000       1,298,904  (a)  

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

    5.000     2/1/28       3,250,000       3,427,937  (a)  

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

    4.500     8/15/30       100,000       105,501  (a)  

DISH DBS Corp., Senior Notes

    5.875     11/15/24       5,737,000       6,109,905  

DISH DBS Corp., Senior Notes

    7.750     7/1/26       7,738,000       8,840,781  

Univision Communications Inc., Senior Secured Notes

    9.500     5/1/25       1,060,000       1,179,250  (a) 

UPC Holding BV, Senior Secured Notes

    5.500     1/15/28       540,000       572,063  (a)  

Virgin Media Secured Finance PLC, Senior Secured Notes

    5.500     8/15/26       1,020,000       1,069,087  (a) 

Total Media

                            23,483,003  

Wireless Telecommunication Services — 5.3%

                               

CSC Holdings LLC, Senior Notes

    5.375     2/1/28       2,080,000       2,212,600  (a)  

CSC Holdings LLC, Senior Notes

    6.500     2/1/29       800,000       895,748  (a)  

Sprint Capital Corp., Senior Notes

    6.875     11/15/28       4,288,000       5,572,578  

Sprint Capital Corp., Senior Notes

    8.750     3/15/32       130,000       199,762  

 

See Notes to Financial Statements.

 

 

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Western Asset High Yield Defined Opportunity Fund Inc.

 

Security    Rate      Maturity
Date
     Face
Amount†
     Value  

Wireless Telecommunication Services — continued

 

                          

Sprint Communications Inc., Senior Notes

     11.500      11/15/21        1,452,000      $ 1,587,218  

Sprint Corp., Senior Notes

     7.875      9/15/23        3,160,000        3,648,522  

Sprint Corp., Senior Notes

     7.625      3/1/26        530,000        659,850  

VEON Holdings BV, Senior Notes

     7.504      3/1/22        800,000        861,916  (c)  

VEON Holdings BV, Senior Notes

     7.504      3/1/22        520,000        560,245  (a)  

Vimpel Communications Via VIP Finance Ireland Ltd. OJSC, Senior Notes

     7.748      2/2/21        2,730,000        2,764,865  (a)  

Total Wireless Telecommunication Services

 

              18,963,304  

Total Communication Services

                                64,895,011  
Consumer Discretionary — 16.4%                                    

Auto Components — 2.3%

                                   

Adient Global Holdings Ltd., Senior Notes

     4.875      8/15/26        3,780,000        3,816,666  (a)  

Adient US LLC, Senior Secured Notes

     9.000      4/15/25        570,000        634,838  (a)  

American Axle & Manufacturing Inc., Senior Notes

     6.250      4/1/25        500,000        518,080  

American Axle & Manufacturing Inc., Senior Notes

     6.500      4/1/27        1,980,000        2,071,575  

JB Poindexter & Co. Inc., Senior Notes

     7.125      4/15/26        1,300,000        1,382,875  (a)  

Total Auto Components

                                8,424,034  

Automobiles — 1.6%

                                   

Ford Motor Co., Senior Notes

     8.500      4/21/23        650,000        729,654  

Ford Motor Co., Senior Notes

     9.000      4/22/25        2,320,000        2,822,315  

Ford Motor Credit Co. LLC, Senior Notes

     4.250      9/20/22        200,000        205,290  

Ford Motor Credit Co. LLC, Senior Notes

     3.096      5/4/23        500,000        503,845  

PM General Purchaser LLC, Senior Secured Notes

     9.500      10/1/28        1,340,000        1,462,275  (a)  

Total Automobiles

                                5,723,379  

Diversified Consumer Services — 2.6%

                                   

Carriage Services Inc., Senior Notes

     6.625      6/1/26        2,680,000        2,845,463  (a)  

Frontdoor Inc., Senior Notes

     6.750      8/15/26        710,000        758,813  (a)  

Garda World Security Corp., Senior Notes

     9.500      11/1/27        776,000        866,551  (a)  

Prime Security Services Borrower LLC/ Prime Finance Inc., Secured Notes

     6.250      1/15/28        840,000        880,816  (a)  

Service Corp. International, Senior Notes

     7.500      4/1/27        1,030,000        1,249,967  

Weight Watchers International Inc., Senior Notes

     8.625      12/1/25        2,430,000        2,540,504  (a)  

Total Diversified Consumer Services

                                9,142,114  

Hotels, Restaurants & Leisure — 7.2%

                                   

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

     5.750      4/15/25        370,000        395,615  (a)  

 

See Notes to Financial Statements.

 

Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report  

 

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Schedule of investments (unaudited) (cont’d)

November 30, 2020

 

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security    Rate      Maturity
Date
     Face
Amount†
     Value  

Hotels, Restaurants & Leisure — continued

                                   

Bally’s Corp., Senior Notes

     6.750      6/1/27        1,000,000      $ 1,046,875  (a) 

Boyne USA Inc., Secured Notes

     7.250      5/1/25        1,320,000        1,396,270  (a)  

Caesars Entertainment Inc., Senior Notes

     8.125      7/1/27        1,500,000        1,651,875  (a)  

Carnival Corp., Senior Notes

     7.625      3/1/26        710,000        750,825  (a)  

Golden Nugget Inc., Senior Notes

     6.750      10/15/24        500,000        489,375  (a)  

IRB Holding Corp., Senior Secured Notes

     7.000      6/15/25        620,000        675,351  (a)  

Mohegan Gaming & Entertainment, Senior Notes

     7.875      10/15/24        960,000        952,800  (a)  

NCL Corp. Ltd., Senior Secured Notes

     12.250      5/15/24        2,480,000        2,944,256  (a)  

NCL Corp. Ltd., Senior Secured Notes

     10.250      2/1/26        1,240,000        1,410,500  (a)  

Pinnacle Bidco PLC, Senior Secured Notes

     6.375      2/15/25        320,000  GBP       426,627  (c)  

Saga PLC, Senior Notes

     3.375      5/12/24        1,130,000  GBP       1,386,876  (c)  

Scientific Games International Inc., Senior Notes

     7.000      5/15/28        1,000,000        1,043,310  (a)  

Silversea Cruise Finance Ltd., Senior Secured Notes

     7.250      2/1/25        762,000        782,955  (a)  

Sizzling Platter LLC/Sizzling Platter Finance Corp., Senior Secured Notes

     8.500      11/28/25        800,000        832,064  (a)  

Viking Cruises Ltd., Senior Notes

     5.875      9/15/27        3,230,000        3,066,481  (a)  

Viking Cruises Ltd., Senior Secured Notes

     13.000      5/15/25        1,550,000        1,824,156  (a)  

VOC Escrow Ltd., Senior Secured Notes

     5.000      2/15/28        750,000        729,236  (a)  

Wynn Macau Ltd., Senior Notes

     4.875      10/1/24        250,000        251,401  (a)  

Wynn Macau Ltd., Senior Notes

     5.625      8/26/28        1,360,000        1,392,300  (a)  

Wynn Macau Ltd., Senior Notes

     5.125      12/15/29        390,000        391,667  (a)  

Wynn Resorts Finance LLC/Wynn Resorts Capital Corp., Senior Notes

     7.750      4/15/25        1,460,000        1,576,603  (a)  

Yum! Brands Inc., Senior Notes

     7.750      4/1/25        330,000        365,888  (a)  

Total Hotels, Restaurants & Leisure

                                25,783,306  

Specialty Retail — 2.7%

                                   

L Brands Inc., Senior Secured Notes

     6.875      7/1/25        1,980,000        2,141,390  (a)  

Michaels Stores Inc., Senior Notes

     8.000      7/15/27        690,000        711,866  (a)  

PetSmart Inc., Senior Secured Notes

     5.875      6/1/25        4,660,000        4,738,637  (a)  

Sally Holdings LLC/Sally Capital Inc., Senior Notes

     5.500      11/1/23        760,000        766,175  

Sally Holdings LLC/Sally Capital Inc., Senior Notes

     5.625      12/1/25        1,340,000        1,382,210  

Total Specialty Retail

                                9,740,278  

Total Consumer Discretionary

                                58,813,111  

 

See Notes to Financial Statements.

 

 

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Western Asset High Yield Defined Opportunity Fund Inc.

 

Security    Rate      Maturity
Date
     Face
Amount†
     Value  
Consumer Staples — 1.8%                                    

Food Products — 1.5%

                                   

Kraft Heinz Foods Co., Senior Notes

     3.875      5/15/27        50,000      $ 54,199  (a)  

Kraft Heinz Foods Co., Senior Notes

     4.250      3/1/31        170,000        189,153  (a)  

Kraft Heinz Foods Co., Senior Notes

     5.200      7/15/45        400,000        472,830  

Pilgrim’s Pride Corp., Senior Notes

     5.750      3/15/25        180,000        185,121  (a)  

Pilgrim’s Pride Corp., Senior Notes

     5.875      9/30/27        2,365,000        2,545,331  (a) 

Simmons Foods Inc., Secured Notes

     5.750      11/1/24        935,000        958,375  (a)  

SunOpta Foods Inc., Secured Notes

     9.500      10/9/22        1,000,000        1,025,000  (a) 

Total Food Products

                                5,430,009  

Household Products — 0.3%

                                   

Spectrum Brands Inc., Senior Notes

     5.750      7/15/25        915,000        946,055  

Total Consumer Staples

                                6,376,064  
Energy — 13.9%                                    

Oil, Gas & Consumable Fuels — 13.9%

                                   

Apache Corp., Senior Notes

     5.100      9/1/40        760,000        786,528  

Berry Petroleum Co. LLC, Senior Notes

     7.000      2/15/26        900,000        734,796  (a)  

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

     6.125      11/15/22        1,450,000        1,453,154  (a) 

Continental Resources Inc., Senior Notes

     3.800      6/1/24        180,000        182,316  

Continental Resources Inc., Senior Notes

     4.375      1/15/28        130,000        129,908  

Continental Resources Inc., Senior Notes

     5.750      1/15/31        800,000        860,000  (a)  

Continental Resources Inc., Senior Notes

     4.900      6/1/44        550,000        513,219  

Ecopetrol SA, Senior Notes

     6.875      4/29/30        350,000        443,712  

Ecopetrol SA, Senior Notes

     5.875      5/28/45        1,500,000        1,785,000  

EQM Midstream Partners LP, Senior Notes

     6.000      7/1/25        370,000        394,512  (a)  

EQM Midstream Partners LP, Senior Notes

     6.500      7/1/27        330,000        364,292  (a)  

EQT Corp., Senior Notes

     3.900      10/1/27        1,590,000        1,578,608  

EQT Corp., Senior Notes

     5.000      1/15/29        870,000        920,025  

EQT Corp., Senior Notes

     8.750      2/1/30        150,000        189,563  

Kinder Morgan Inc., Senior Notes

     7.750      1/15/32        810,000        1,162,419  

MEG Energy Corp., Senior Notes

     7.000      3/31/24        2,556,000        2,575,170  (a) 

MEG Energy Corp., Senior Notes

     7.125      2/1/27        770,000        756,525  (a)  

NGPL PipeCo LLC, Senior Notes

     7.768      12/15/37        790,000        1,045,832  (a) 

Occidental Petroleum Corp., Senior Notes

     6.950      7/1/24        420,000        444,150  

Occidental Petroleum Corp., Senior Notes

     2.900      8/15/24        690,000        644,460  

Occidental Petroleum Corp., Senior Notes

     5.875      9/1/25        530,000        535,989  

Occidental Petroleum Corp., Senior Notes

     5.550      3/15/26        440,000        437,325  

Occidental Petroleum Corp., Senior Notes

     6.200      3/15/40        540,000        517,050  

Petrobras Global Finance BV, Senior Notes

     7.375      1/17/27        1,000,000        1,241,570  

 

See Notes to Financial Statements.

 

Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report  

 

5


Table of Contents

Schedule of investments (unaudited) (cont’d)

November 30, 2020

 

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security    Rate      Maturity
Date
     Face
Amount†
     Value  

Oil, Gas & Consumable Fuels — continued

                                   

Petrobras Global Finance BV, Senior Notes

     5.999      1/27/28        2,340,000      $ 2,735,144  

Petrobras Global Finance BV, Senior Notes

     5.750      2/1/29        1,950,000        2,257,125  

Petrobras Global Finance BV, Senior Notes

     6.750      1/27/41        4,540,000        5,482,050  

Range Resources Corp., Senior Notes

     5.000      3/15/23        600,000        587,625  

Range Resources Corp., Senior Notes

     4.875      5/15/25        420,000        390,778  

Range Resources Corp., Senior Notes

     9.250      2/1/26        3,420,000        3,561,930  (a)  

Rockies Express Pipeline LLC, Senior Notes

     7.500      7/15/38        570,000        609,900  (a)  

Rockies Express Pipeline LLC, Senior Notes

     6.875      4/15/40        590,000        628,350  (a)  

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

     6.500      7/15/27        560,000        607,600  

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

     6.875      1/15/29        120,000        134,625  

Transportadora de Gas del Sur SA, Senior Notes

     6.750      5/2/25        1,970,000        1,773,000  (a)  

Vesta Energy Corp., Senior Notes

     8.125      7/24/23        820,000  CAD       280,973  (a)  

Western Midstream Operating LP, Senior Notes

     5.050      2/1/30        180,000        192,488  

Western Midstream Operating LP, Senior Notes

     5.300      3/1/48        540,000        486,000  

Western Midstream Operating LP, Senior Notes

     6.250      2/1/50        3,840,000        3,827,674  

Williams Cos. Inc., Senior Notes

     4.550      6/24/24        530,000        595,741  

Williams Cos. Inc., Senior Notes

     7.500      1/15/31        330,000        433,433  

Williams Cos. Inc., Senior Notes

     5.750      6/24/44        1,620,000        2,044,378  

WPX Energy Inc., Senior Notes

     8.250      8/1/23        430,000        491,767  

YPF SA, Senior Notes

     8.500      7/28/25        4,230,000        3,085,785  (a)  

Total Energy

                                49,902,489  
Financials — 13.4%                                    

Banks — 9.2%

                                   

Bank of America Corp., Junior Subordinated Notes (6.500% to 10/23/24 then 3 mo. USD LIBOR + 4.174%)

     6.500      10/23/24        800,000        904,000  (d)(e)  

Barclays Bank PLC, Subordinated Notes

     10.179      6/12/21        740,000        775,427  (a)  

Barclays Bank PLC, Subordinated Notes

     7.625      11/21/22        1,950,000        2,157,538  

 

See Notes to Financial Statements.

 

 

6

   Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report


Table of Contents

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security    Rate      Maturity
Date
     Face
Amount†
     Value  

Banks — continued

                                   

Barclays PLC, Junior Subordinated Notes (8.000% to 6/15/24 then 5 year Treasury Constant Maturity Rate + 5.672%)

     8.000      6/15/24        900,000      $ 1,003,968  (d)(e) 

BBVA Bancomer SA, Subordinated Notes (5.125% to 1/17/28 then 5 year Treasury Constant Maturity Rate + 2.650%)

     5.125      1/18/33        2,760,000        2,895,240  (a)(e) 

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

     7.375      8/19/25        810,000        938,138  (a)(d)(e) 

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

     5.950      5/15/25        740,000        798,885  (d)(e) 

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

     6.300      5/15/24        3,950,000        4,206,750  (d)(e) 

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

     8.125      12/23/25        1,330,000        1,609,300  (a)(d)(e) 

HSBC Holdings PLC, Junior Subordinated Notes (6.000% to 5/22/27 then USD 5 year ICE Swap Rate + 3.746%)

     6.000      5/22/27        300,000        325,590  (d)(e) 

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

     6.375      3/30/25        860,000        937,507  (d)(e) 

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

     6.375      9/17/24        290,000        309,315  (d)(e) 

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

     6.500      3/23/28        700,000        783,640  (d)(e) 

Intesa Sanpaolo SpA, Subordinated Notes

     5.017      6/26/24        2,590,000        2,829,850  (a) 

Intesa Sanpaolo SpA, Subordinated Notes

     5.710      1/15/26        2,410,000        2,736,411  (a) 

Natwest Group PLC, Junior Subordinated Notes (3 mo. USD LIBOR + 2.320%)

     2.540      9/30/27        7,000,000        6,610,100  (d)(e) 

Natwest Group PLC, Junior Subordinated Notes (8.625% to 8/15/21 then USD 5 year ICE Swap Rate + 7.598%)

     8.625      8/15/21        610,000        635,974  (d)(e) 

 

See Notes to Financial Statements.

 

Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report  

 

7


Table of Contents

Schedule of investments (unaudited) (cont’d)

November 30, 2020

 

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security    Rate      Maturity
Date
     Face
Amount†
     Value  

Banks — continued

                                   

TC Ziraat Bankasi AS, Senior Notes

     5.125      9/29/23        1,080,000      $ 1,066,451  (a) 

UniCredit SpA, Subordinated Notes (7.296% to 4/2/29 then USD 5 year ICE Swap Rate + 4.914%)

     7.296      4/2/34        1,200,000        1,444,848  (a)(e) 

Total Banks

                                32,968,932  

Capital Markets — 1.4%

                                   

Credit Suisse Group AG, Junior Subordinated Notes (7.250% to 9/12/25 then 5 year Treasury Constant Maturity Rate + 4.332%)

     7.250      9/12/25        700,000        788,511  (a)(d)(e) 

Donnelley Financial Solutions Inc., Senior Notes

     8.250      10/15/24        890,000        948,869  

UBS Group AG, Junior Subordinated Notes (7.000% to 1/31/24 then USD 5 year ICE Swap Rate + 4.344%)

     7.000      1/31/24        2,840,000        3,115,324  (a)(d)(e) 

Total Capital Markets

                                4,852,704  

Consumer Finance — 0.4%

                                   

Navient Corp., Senior Notes

     5.875      10/25/24        590,000        617,288  

Navient Corp., Senior Notes

     6.750      6/15/26        700,000        753,812  

Total Consumer Finance

                                1,371,100  

Diversified Financial Services — 2.3%

                                   

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

     4.500      5/15/21        500,000        507,285  

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

     4.625      10/15/27        910,000        991,722  

ASP AMC Merger Sub Inc., Senior Notes

     8.000      5/15/25        715,000        599,631  (a)  

Global Aircraft Leasing Co. Ltd., Senior Notes (6.500% Cash or 7.250% PIK)

     6.500      9/15/24        2,953,312        2,636,127  (a)(f) 

International Lease Finance Corp., Senior Notes

     8.250      12/15/20        3,140,000        3,148,078  

International Lease Finance Corp., Senior Notes

     5.875      8/15/22        310,000        333,907  

Total Diversified Financial Services

                                8,216,750  

Thrifts & Mortgage Finance — 0.1%

                                   

NMI Holdings Inc., Senior Secured Notes

     7.375      6/1/25        400,000        443,422  (a)   

Total Financials

                                47,852,908  
Health Care — 7.8%                                    

Health Care Providers & Services — 2.7%

                                   

CHS/Community Health Systems Inc., Senior Secured Notes

     8.000      3/15/26        1,920,000        2,018,880  (a)   

 

See Notes to Financial Statements.

 

 

8

   Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report


Table of Contents

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Health Care Providers & Services — continued

                               

HCA Inc., Senior Notes

    7.500     11/15/95       1,000,000     $ 1,289,295  

Legacy LifePoint Health LLC, Senior Secured Notes

    6.750     4/15/25       480,000       513,600  (a)  

Magellan Health Inc., Senior Notes

    4.900     9/22/24       1,350,000       1,422,421  

MPH Acquisition Holdings LLC, Senior Notes

    5.750     11/1/28       1,130,000       1,108,106  (a)  

Radiology Partners Inc., Senior Notes

    9.250     2/1/28       540,000       589,950  (a)  

Tenet Healthcare Corp., Secured Notes

    6.250     2/1/27       1,000,000       1,048,895  (a)  

Tenet Healthcare Corp., Senior Secured Notes

    7.500     4/1/25       560,000       613,760  (a)  

Tenet Healthcare Corp., Senior Secured Notes

    4.625     6/15/28       700,000       724,063  (a)  

US Renal Care Inc., Senior Notes

    10.625     7/15/27       460,000       509,450  (a)  

Total Health Care Providers & Services

                            9,838,420  

Pharmaceuticals — 5.1%

                               

Bausch Health Americas Inc., Senior Notes

    8.500     1/31/27       210,000       231,297  (a)  

Bausch Health Cos. Inc., Senior Notes

    6.125     4/15/25       3,290,000       3,389,358  (a)  

Bausch Health Cos. Inc., Senior Notes

    9.000     12/15/25       1,400,000       1,541,680  (a)  

Bausch Health Cos. Inc., Senior Secured Notes

    7.000     3/15/24       210,000       216,615  (a)  

Endo Finance LLC/Endo Finco Inc., Senior Notes

    7.250     1/15/22       1,615,000       1,526,175  (a)  

Teva Pharmaceutical Finance Co. BV, Senior Notes

    2.950     12/18/22       1,840,000       1,838,850  

Teva Pharmaceutical Finance IV BV, Senior Notes

    3.650     11/10/21       110,000       111,075  

Teva Pharmaceutical Finance Netherlands III BV, Senior Notes

    2.200     7/21/21       2,640,000       2,645,874  

Teva Pharmaceutical Finance Netherlands III BV, Senior Notes

    2.800     7/21/23       4,480,000       4,410,157  

Teva Pharmaceutical Finance Netherlands III BV, Senior Notes

    6.000     4/15/24       1,740,000       1,846,705  

Teva Pharmaceutical Finance Netherlands III BV, Senior Notes

    3.150     10/1/26       530,000       503,169  

Total Pharmaceuticals

                            18,260,955  

Total Health Care

                            28,099,375  

 

See Notes to Financial Statements.

 

Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report  

 

9


Table of Contents

Schedule of investments (unaudited) (cont’d)

November 30, 2020

 

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Industrials — 7.5%                                

Aerospace & Defense — 0.7%

                               

Boeing Co., Senior Notes

    3.200     3/1/29       1,000,000     $ 1,025,345  

TransDigm Inc., Senior Secured Notes

    8.000     12/15/25       1,340,000       1,465,290  (a) 

Total Aerospace & Defense

                            2,490,635  
Airlines — 5.4%                                

Delta Air Lines Inc., Senior Notes

    3.400     4/19/21       190,000       190,255  

Delta Air Lines Inc., Senior Notes

    3.625     3/15/22       1,400,000       1,419,263  

Delta Air Lines Inc., Senior Notes

    3.800     4/19/23       3,230,000       3,272,714  

Delta Air Lines Inc., Senior Notes

    2.900     10/28/24       460,000       439,978  

Delta Air Lines Inc., Senior Notes

    7.375     1/15/26       370,000       416,466  

Delta Air Lines Inc., Senior Secured Notes

    7.000     5/1/25       3,220,000       3,682,226  (a)  

Delta Air Lines Inc./SkyMiles IP Ltd., Senior Secured Notes

    4.750     10/20/28       500,000       538,742  (a)  

Mileage Plus Holdings LLC/Mileage Plus Intellectual Property Assets Ltd., Senior Secured Notes

    6.500     6/20/27       1,350,000       1,466,438  (a)  

Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd., Senior Secured Notes

    8.000     9/20/25       2,910,000       3,239,558  (a)  

United Airlines Holdings Inc., Senior Notes

    4.250     10/1/22       3,480,000       3,485,046  

United Airlines Holdings Inc., Senior Notes

    5.000     2/1/24       1,270,000       1,237,456  

Total Airlines

                            19,388,142  

Building Products — 0.1%

                               

CP Atlas Buyer Inc., Senior Notes

    7.000     12/1/28       410,000       425,119  (a)  

Commercial Services & Supplies — 0.2%

                               

GFL Environmental Inc., Senior Notes

    8.500     5/1/27       768,000       850,080  (a)  

Industrial Conglomerates — 0.4%

                               

General Electric Co., Junior Subordinated Notes (5.000% to 1/21/21 then 3 mo. USD LIBOR + 3.330%)

    5.000     1/21/21       1,400,000       1,248,469  (d)(e) 

Trading Companies & Distributors — 0.7%

                               

H&E Equipment Services Inc., Senior Notes

    3.875     12/15/28       1,180,000       1,180,000  (a)(b) 

United Rentals North America Inc., Senior Notes

    5.500     5/15/27       655,000       705,762  

United Rentals North America Inc., Senior Notes

    4.875     1/15/28       610,000       651,938  

Total Trading Companies & Distributors

                            2,537,700  

Total Industrials

                            26,940,145  

 

See Notes to Financial Statements.

 

 

10

   Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report


Table of Contents

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Information Technology — 3.0%                                

Communications Equipment — 1.3%

                               

CommScope Inc., Senior Notes

    8.250     3/1/27       4,270,000     $ 4,606,284  (a) 

CommScope Technologies LLC, Senior Notes

    6.000     6/15/25       60,000       61,563  (a)  

Total Communications Equipment

                            4,667,847  

IT Services — 0.2%

                               

Unisys Corp., Senior Secured Notes

    6.875     11/1/27       770,000       837,606  (a)   

Semiconductors & Semiconductor Equipment — 0.3%

                               

Amkor Technology Inc., Senior Notes

    6.625     9/15/27       1,000,000       1,086,250  (a)   

Software — 0.0%††

                               

Interface Special Holdings Inc., Senior Notes (19.000% PIK)

    19.000     11/1/23       1,440,192       21,603  (a)(f)(g)(h)  

Technology Hardware, Storage & Peripherals — 1.2%

                               

Dell International LLC/EMC Corp., Senior Notes

    7.125     6/15/24       500,000       518,625  (a)  

Seagate HDD Cayman, Senior Notes

    4.750     6/1/23       720,000       781,229  

Seagate HDD Cayman, Senior Notes

    4.750     1/1/25       2,350,000       2,611,584  

Seagate HDD Cayman, Senior Notes

    4.875     6/1/27       210,000       240,041  

Total Technology Hardware, Storage & Peripherals

                            4,151,479  

Total Information Technology

                            10,764,785  
Materials — 6.4%                                

Chemicals — 0.1%

                               

Anagram International Inc./Anagram Holdings LLC, Secured Notes (5.000% Cash and 5.000% PIK or 10.000% Cash)

    10.000     8/15/26       475,305       446,787  (a)(f)   

Construction Materials — 0.2%

                               

Summit Materials LLC/Summit Materials Finance Corp., Senior Notes

    5.125     6/1/25       450,000       458,390  (a)  

U.S. Concrete Inc., Senior Notes

    6.375     6/1/24       170,000       175,844  

Total Construction Materials

                            634,234  

Containers & Packaging — 1.9%

                               

ARD Finance SA, Senior Secured Notes (6.500% Cash or 7.250% PIK)

    6.500     6/30/27       3,495,000       3,687,225  (a)(f) 

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

    6.000     2/15/25       1,905,000       1,971,199  (a)  

Pactiv LLC, Senior Notes

    7.950     12/15/25       410,000       458,946  

Trivium Packaging Finance BV, Senior Notes

    8.500     8/15/27       780,000       845,734  (a)  

Total Containers & Packaging

                            6,963,104  

 

See Notes to Financial Statements.

 

Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report  

 

11


Table of Contents

Schedule of investments (unaudited) (cont’d)

November 30, 2020

 

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Metals & Mining — 4.1%

                               

ArcelorMittal SA, Senior Notes

    7.250     10/15/39       2,020,000     $ 2,682,128  

First Quantum Minerals Ltd., Senior Notes

    7.250     4/1/23       3,270,000       3,346,763  (a)  

First Quantum Minerals Ltd., Senior Notes

    6.875     3/1/26       300,000       310,500  (a)  

Freeport-McMoRan Inc., Senior Notes

    3.550     3/1/22       310,000       316,115  

Freeport-McMoRan Inc., Senior Notes

    3.875     3/15/23       380,000       395,960  

Freeport-McMoRan Inc., Senior Notes

    4.550     11/14/24       410,000       448,899  

Freeport-McMoRan Inc., Senior Notes

    5.400     11/14/34       280,000       347,375  

Freeport-McMoRan Inc., Senior Notes

    5.450     3/15/43       1,750,000       2,183,151  

Northwest Acquisitions ULC/Dominion Finco Inc., Secured Notes

    7.125     11/1/22       411,000       4,624  *(a)(i)  

Teck Resources Ltd., Senior Notes

    6.000     8/15/40       260,000       314,404  

Vale Overseas Ltd., Senior Notes

    6.875     11/21/36       2,220,000       3,150,502  

Vale Overseas Ltd., Senior Notes

    6.875     11/10/39       750,000       1,082,632  

Total Metals & Mining

                            14,583,053  

Paper & Forest Products — 0.1%

                               

Mercer International Inc., Senior Notes

    7.375     1/15/25       400,000       414,250  

Total Materials

                            23,041,428  
Real Estate — 0.7%                                

Equity Real Estate Investment Trusts (REITs) — 0.7%

                               

CoreCivic Inc., Senior Notes

    4.750     10/15/27       570,000       483,075  

Diversified Healthcare Trust, Senior Notes

    9.750     6/15/25       690,000       785,814  

GEO Group Inc., Senior Notes

    5.875     10/15/24       750,000       594,000  

Park Intermediate Holdings LLC/PK

                               

Domestic Property LLC/PK Finance

                               

Co-Issuer, Senior Secured Notes

    5.875     10/1/28       730,000       770,606  (a)  

Total Real Estate

                            2,633,495  
Utilities — 2.0%                                

Electric Utilities — 1.4%

                               

FirstEnergy Corp., Senior Notes

    7.375     11/15/31       1,260,000       1,733,822  

Pampa Energia SA, Senior Notes

    7.375     7/21/23       1,200,000       1,110,012  (c)  

Pampa Energia SA, Senior Notes

    7.500     1/24/27       1,960,000       1,617,245  (a)  

Talen Energy Supply LLC, Senior Notes

    10.500     1/15/26       600,000       482,994  (a)  

Total Electric Utilities

                            4,944,073  

Gas Utilities — 0.6%

                               

Suburban Propane Partners LP/Suburban Energy Finance Corp., Senior Notes

    5.875     3/1/27       1,930,000       2,008,406  

Total Utilities

                            6,952,479  

Total Corporate Bonds & Notes (Cost — $283,199,158)

 

    326,271,290  

 

See Notes to Financial Statements.

 

 

12

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Table of Contents

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security   Rate     Maturity
Date
   

Face

Amount†

    Value  
Sovereign Bonds — 3.4%                                

Argentina — 0.5%

                               

Argentine Republic Government

                               

International Bond, Senior Notes

    1.000     7/9/29       164,491     $ 70,238  

Argentine Republic Government

                               

International Bond, Senior Notes

    0.125     7/9/30       4,355,300       1,709,455  

Total Argentina

                            1,779,693  

Brazil — 0.2%

                               

Brazil Notas do Tesouro Nacional Serie F, Notes

    10.000     1/1/21       2,466,000  BRL       463,334  

Brazil Notas do Tesouro Nacional Serie F, Notes

    10.000     1/1/23       1,680,000  BRL       342,264  

Total Brazil

                            805,598  

Ghana — 0.3%

                               

Ghana Government International Bond, Senior Notes

    7.625     5/16/29       1,000,000       1,024,180  (a)   

Indonesia — 0.8%

                               

Indonesia Treasury Bond, Senior Notes

    8.250     7/15/21       5,985,000,000  IDR      438,622  

Indonesia Treasury Bond, Senior Notes

    7.000     5/15/22       31,811,000,000  IDR      2,356,447  

Total Indonesia

                            2,795,069  

Mexico — 0.3%

                               

Mexican Bonos, Bonds

    6.500     6/9/22       18,070,000  MXN      921,778  

Russia — 1.3%

                               

Russian Federal Bond — OFZ

    7.000     1/25/23       58,120,000  RUB       800,405  

Russian Federal Bond — OFZ

    7.750     9/16/26       183,580,000  RUB      2,703,153  

Russian Federal Bond — OFZ

    8.150     2/3/27       90,000,000  RUB       1,349,056  

Total Russia

                            4,852,614  

Total Sovereign Bonds (Cost — $12,826,988)

 

            12,178,932  
Senior Loans — 2.6%                                
Consumer Discretionary — 1.0%                                

Specialty Retail — 1.0%

                               

PetSmart Inc., Term Loan B2 (3 mo. USD LIBOR + 4.000%)

    5.000     3/11/22       3,645,684       3,633,001  (e)(j)(k)  
Industrials — 1.6%                                

Airlines — 1.6%

                               

Delta Air Lines Inc., Initial Term Loan (3 mo. USD LIBOR + 4.750%)

    5.750     4/29/23       2,605,969       2,635,286  (e)(j)(k)(l) 

Delta Air Lines Inc., Initial Term Loan (3 mo. USD LIBOR + 3.750%)

    4.750     10/20/27       960,000       983,700  (e)(j)(k) 

 

See Notes to Financial Statements.

 

Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report  

 

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Table of Contents

Schedule of investments (unaudited) (cont’d)

November 30, 2020

 

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Airlines — continued

                               

Jetblue Airways Corp., Term Loan (3 mo. USD LIBOR + 5.250%)

    6.250     6/17/24       1,027,000     $ 1,046,470  (e)(j)(k) 

Mileage Plus Holdings LLC, Initial Term Loan (3 mo. USD LIBOR + 5.250%)

    6.250     6/20/27       1,140,000       1,178,133  (e)(j)(k) 

Total Industrials

                            5,843,589  

Total Senior Loans (Cost — $8,965,000)

 

    9,476,590  
                   Shares         
Common Stocks — 0.8%                                
Consumer Discretionary — 0.1%                                

Specialty Retail — 0.1%

                               

Party City Holdings Inc.

                    89,477       409,805  *(g) 
Energy — 0.7%                                

Energy Equipment & Services — 0.0%††

                               

Hercules Offshore Inc. (Escrow)

                    46,103       34,481  *(g)(h) 

Oil, Gas & Consumable Fuels — 0.7%

                               

MWO Holdings LLC

                    442       44,651  *(g)(h) 

Oasis Petroleum Inc.

                    70,313       2,404,704   

Total Oil, Gas & Consumable Fuels

                            2,449,355  

Total Energy

                            2,483,836  

Total Common Stocks (Cost — $7,614,123)

 

    2,893,641  
     Rate     Maturity
Date
    Face
Amount†
        
Convertible Bonds & Notes — 0.7%

 

       
Communication Services — 0.7%

 

       

Media — 0.7%

                               

DISH Network Corp., Senior Notes (Cost — $2,130,135)

    3.375     8/15/26       2,590,000       2,588,446  
                   Shares         
Preferred Stocks — 0.3%

 

       
Financials — 0.3%

 

       

Banks — 0.1%

                               

GMAC Capital Trust I (3 mo. USD LIBOR + 5.785%)

    6.007             17,000       441,830  (e)   

Capital Markets — 0.2%

                               

B Riley Financial Inc.

    6.875             18,500       462,130  

Total Preferred Stocks (Cost — $761,852)

 

    903,960  

 

See Notes to Financial Statements.

 

 

14

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Table of Contents

Western Asset High Yield Defined Opportunity Fund Inc.

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
U.S. Government & Agency Obligations — 0.2%                                

U.S. Government Obligations — 0.2%

                               

U.S. Treasury Notes (Cost — $843,118)

    0.625     5/15/30       850,000     $ 835,656  
Non-U.S. Treasury Inflation Protected Securities — 0.0%††

 

       

Argentina — 0.0%††

                               

Argentina Treasury Bond (Cost — $46,528)

    1.000     8/5/21       6,977,176  ARS      46,572  (g)   

Total Investments before Short-Term Investments (Cost — $316,386,902)

 

    355,195,087  
                   Shares         
Short-Term Investments — 0.4%                                

Dreyfus Government Cash Management, Institutional Shares (Cost — $1,506,709)

    0.010             1,506,709       1,506,709  

Total Investments — 99.4% (Cost — $317,893,611)

 

            356,701,796  

Other Assets in Excess of Liabilities — 0.6%

 

            1,973,757  

Total Net Assets — 100.0%

                          $ 358,675,553  

 

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

 

††

Represents less than 0.1%.

 

*

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) 

Securities traded on a when-issued or delayed delivery basis.

 

(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) 

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

 

(e) 

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.

 

(f) 

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

 

(g) 

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

 

(h) 

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

 

(i) 

The coupon payment on this security is currently in default as of November 30, 2020.

 

(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 November 30, 2020. The interest rate for fully unfunded term loans is to be determined.

 

See Notes to Financial Statements.

 

Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report  

 

15


Table of Contents

Schedule of investments (unaudited) (cont’d)

November 30, 2020

 

Western Asset High Yield Defined Opportunity Fund Inc.

 

Abbreviation(s) used in this schedule:

ARS   — Argentine Peso
BRL   — Brazilian Real
CAD   — Canadian Dollar
GBP   — British Pound
ICE   — Intercontinental Exchange
IDR   — Indonesian Rupiah
LIBOR   — London Interbank Offered Rate
MXN   — Mexican Peso
OFZ   — Obligatsyi Federal’novo Zaima (Russian Federal Loan Obligation)
OJSC   — Open Joint Stock Company
PIK   Payment-In-Kind
RUB   — Russian Ruble
USD   — United States Dollar

At November 30, 2020, the Fund had the following open forward foreign currency contracts:

 

Currency

Purchased

   

Currency

Sold

    Counterparty  

Settlement

Date

   

Unrealized

Appreciation

(Depreciation)

 
CAD     142,708     USD     108,701     BNP Paribas SA     1/19/21     $ 1,222  
EUR     435,970     USD     514,013     BNP Paribas SA     1/19/21       6,839  
EUR     1,100,000     USD     1,299,947     BNP Paribas SA     1/19/21       14,221  
MXN     1,187,601     USD     52,200     BNP Paribas SA     1/19/21       6,249  
USD     779,798     EUR     660,000     BNP Paribas SA     1/19/21       (8,703)  
EUR     500,000     USD     592,024     Goldman Sachs Group Inc.     1/19/21       5,325  
USD     756,454     EUR     640,000     Goldman Sachs Group Inc.     1/19/21       (8,152)  
USD     770,105     EUR     653,007     Goldman Sachs Group Inc.     1/19/21       (10,041)  
USD     1,239,826     GBP     958,362     Goldman Sachs Group Inc.     1/19/21       (38,718)  
USD     443,005     CAD     587,392     JPMorgan Chase & Co.     1/19/21       (9,439)  
Total                                   $ (41,197)  

 

Abbreviation(s) used in this table:

CAD   — Canadian Dollar
EUR   — Euro
GBP   — British Pound
MXN   — Mexican Peso
USD   — United States Dollar

 

See Notes to Financial Statements.

 

 

16

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Table of Contents

Statement of assets and liabilities (unaudited)

November 30, 2020

 

Assets:         

Investments, at value (Cost — $317,893,611)

   $ 356,701,796  

Foreign currency, at value (Cost — $321,778)

     328,959  

Cash

     299  

Interest receivable

     5,189,004  

Receivable for securities sold

     2,761,417  

Unrealized appreciation on forward foreign currency contracts

     33,856  

Prepaid expenses

     4,857  

Total Assets

     365,020,188  
Liabilities:         

Payable for securities purchased

     3,811,544  

Distributions payable

     2,140,561  

Investment management fee payable

     232,653  

Unrealized depreciation on forward foreign currency contracts

     75,053  

Directors’ fees payable

     8,867  

Accrued expenses

     75,957  

Total Liabilities

     6,344,635  
Total Net Assets    $ 358,675,553  
Net Assets:         

Par value ($0.001 par value; 22,651,444 shares issued and outstanding; 100,000,000 common shares authorized)

   $ 22,651  

Paid-in capital in excess of par value

     427,535,074  

Total distributable earnings (loss)

     (68,882,172)  
Total Net Assets    $ 358,675,553  
Shares Outstanding      22,651,444  
Net Asset Value      $15.83  

 

See Notes to Financial Statements.

 

Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report  

 

17


Table of Contents

Statement of operations (unaudited)

For the Six Months Ended November 30, 2020

 

Investment Income:         

Interest

   $ 12,977,981  

Dividends

     35,201  

Less: Foreign taxes withheld

     (9,077)  

Total Investment Income

     13,004,105  
Expenses:         

Investment management fee (Note 2)

     1,394,903  

Directors’ fees

     59,271  

Legal fees

     39,535  

Transfer agent fees

     30,632  

Audit and tax fees

     26,502  

Fund accounting fees

     20,927  

Shareholder reports

     11,083  

Custody fees

     10,067  

Stock exchange listing fees

     8,309  

Insurance

     2,674  

Interest expense

     1,294  

Miscellaneous expenses

     2,692  

Total Expenses

     1,607,889  

Less: Fee waivers and/or expense reimbursements (Note 2)

     (1,716)  

Net Expenses

     1,606,173  
Net Investment Income      11,397,932  

Realized and Unrealized Gain (Loss) on Investments, Forward Foreign Currency

Contracts and Foreign Currency Transactions (Notes 1, 3 and 4):

        

Net Realized Loss From:

        

Investment transactions

     (4,491,591)  

Forward foreign currency contracts

     (311,182)  

Foreign currency transactions

     (19,890)  

Net Realized Loss

     (4,822,663)  

Change in Net Unrealized Appreciation (Depreciation) From:

        

Investments

     30,692,801  

Forward foreign currency contracts

     36,551  

Foreign currencies

     24,887  

Change in Net Unrealized Appreciation (Depreciation)

     30,754,239  
Net Gain on Investments, Forward Foreign Currency Contracts and Foreign Currency Transactions      25,931,576  
Increase in Net Assets From Operations    $ 37,329,508  

 

See Notes to Financial Statements.

 

 

18

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Table of Contents

Statements of changes in net assets

 

For the Six Months Ended November 30, 2020 (unaudited)

and the Year Ended May 31, 2020

   November 30      May 31  
Operations:                  

Net investment income

   $ 11,397,932      $ 25,666,028  

Net realized loss

     (4,822,663)        (26,024,236)  

Change in net unrealized appreciation (depreciation)

     30,754,239        (4,234,714)  

Increase (Decrease) in Net Assets From Operations

     37,329,508        (4,592,922)  
Distributions to Shareholders From (Note 1):                  

Total distributable earnings

     (12,843,369)        (23,306,741)  

Return of capital

            (1,785,000)  

Decrease in Net Assets From Distributions to Shareholders

     (12,843,369)        (25,091,741)  
Fund Share Transactions:                  

Cost of shares repurchased (0 and 98,024 shares repurchased, respectively) (Note 6)

            (1,040,253)  

Decrease in Net Assets From Fund Share Transactions

            (1,040,253)  

Increase (Decrease) in Net Assets

     24,486,139        (30,724,916)  
Net Assets:                  

Beginning of period

     334,189,414        364,914,330  

End of period

   $ 358,675,553      $ 334,189,414  

 

See Notes to Financial Statements.

 

Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report  

 

19


Table of Contents

Financial highlights

 

For a share of capital stock outstanding throughout each year ended May 31,
unless otherwise noted:
       
     20201,2     20201     20191     20181     20171,3     20161,4     20151,4  
Net asset value, beginning of period     $14.75       $16.04       $16.18       $16.93       $16.46       $16.96       $19.38  
Income (loss) from operations:              

Net investment income

    0.50       1.13       1.14       1.10       0.88       1.28       1.30  

Net realized and unrealized gain (loss)

    1.15       (1.32)       (0.22)       (0.73)       0.53       (0.46)       (2.40)  

Total income (loss) from operations

    1.65       (0.19)       0.92       0.37       1.41       0.82       (1.10)  
Less distributions from:              

Net investment income

    (0.57) 5       (1.02)       (1.06)       (1.12)       (0.94)       (1.32)       (1.32)  

Return of capital

          (0.08)                                

Total distributions

    (0.57)       (1.10)       (1.06)       (1.12)       (0.94)       (1.32)       (1.32)  

Anti-dilutive impact of repurchase plan

          0.00 6,7       0.00 6,7                          
Net asset value, end of period     $15.83       $14.75       $16.04       $16.18       $16.93       $16.46       $16.96  
Market price, end of period     $15.22       $14.15       $14.46       $14.55       $15.44       $15.32       $14.46  

Total return, based on NAV8,9

    11.35     (1.28)     5.95     2.20     8.82     5.53     (5.85)

Total return, based on Market Price10

    11.82     5.48     6.97     1.45     7.15     16.17     (8.51)
Net assets, end of period (millions)     $359       $334       $365       $369       $386       $375       $386  
Ratios to average net assets:              

Gross expenses

    0.92 %11      0.91     0.90     0.92     0.91 %11      0.91     0.88

Net expenses

    0.92 11,12      0.89 12       0.88 12       0.92       0.91 11       0.91       0.88  

Net investment income

    6.54 11       7.15       7.10       6.58       7.06 11       8.11       7.18  
Portfolio turnover rate     22     64     89     88     62     70     58

 

See Notes to Financial Statements.

 

 

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1 

Per share amounts have been calculated using the average shares method.

 

2

For the six months ended November 30, 2020 (unaudited).

 

3

For the period September 1, 2016 through May 31, 2017.

 

4

For the year ended August 31.

 

5

The actual source of the Fund’s current fiscal year distributions may be from net investment income, return of capital or a combination of both. Shareholders will be informed of the tax characteristics of the distributions after the close of the fiscal year.

 

6

Amount represents less than $0.005 per share.

 

7

The repurchase plan was completed at an average repurchase price of $11.07 for 98,024 shares and $1,040,253 for the year ended May 31, 2020 and $13.14 for 33,902 shares and $445,351 for the year ended May 31, 2019.

 

8

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.

 

9

The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

10

The total return calculation assumes that distributions are reinvested in accordance with the Fund’s dividend reinvestment plan. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

11

Annualized.

 

12

Reflects fee waivers and/or expense reimbursements.

 

See Notes to Financial Statements.

 

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Notes to financial statements (unaudited)

 

1. Organization and significant accounting policies

Western Asset High Yield Defined Opportunity Fund Inc. (the “Fund”) was incorporated in Maryland on July 20, 2010 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 high income. As a secondary investment objective, the Fund will seek capital appreciation. The Fund seeks to achieve its investment objectives by investing, under normal market conditions, at least 80% of its net assets in a portfolio of high-yield corporate fixed income securities with varying maturities. Corporate securities include those securities that are issued or originated by U.S. or foreign public or private corporations and other business entities. The Fund intends to liquidate on or about September 30, 2025 and distribute substantially all of its net assets to stockholders, after making appropriate provisions for any liabilities of the Fund. Effective August 14, 2020, the Board of Directors of the Fund approved amendments to the Fund’s bylaws. The amended and restated bylaws were subsequently filed on Form 8-K and are available on the Securities and Exchange Commission’s website at www.sec.gov.

The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.

(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. 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

 

 

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readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Directors.

The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North Atlantic Fund Valuation Committee (the “Valuation Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Directors, is responsible for making fair value determinations, 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.

 

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Notes to financial statements (unaudited) (cont’d)

 

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†:                                

Corporate Bonds & Notes:

                               

Information Technology

        $ 10,743,182     $ 21,603     $ 10,764,785  

Other Corporate Bonds & Notes

          315,506,505             315,506,505  

Sovereign Bonds

          12,178,932             12,178,932  

Senior Loans

          9,476,590             9,476,590  

Common Stocks:

                               

Consumer Discretionary

          409,805             409,805  

Energy

  $ 2,404,704             79,132       2,483,836  

Convertible Bonds & Notes

          2,588,446             2,588,446  

Preferred Stocks

    903,960                   903,960  

U.S. Government & Agency Obligations

          835,656             835,656  

Non-U.S. Treasury Inflation

                               

Protected Securities

          46,572             46,572  
Total Long-Term Investments     3,308,664       351,785,688       100,735       355,195,087  
Short-Term Investments†     1,506,709                   1,506,709  
Total Investments   $ 4,815,373     $ 351,785,688     $ 100,735     $ 356,701,796  
Other Financial Instruments:                                

Forward Foreign Currency Contracts

        $ 33,856           $ 33,856  
Total   $ 4,815,373     $ 351,819,544     $ 100,735     $ 356,735,652  

 

 

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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:                                

Forward Foreign Currency Contracts

        $ 75,053           $ 75,053  

 

See Schedule of Investments for additional detailed categorizations.

(b) 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.

Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

(c) 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

 

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Notes to financial statements (unaudited) (cont’d)

 

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.

(d) 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.

(e) Unfunded loan commitments. The Fund may enter into certain credit agreements where all or a portion of the total amount committed may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. The commitments are disclosed in the accompanying Schedule of Investments. At November 30, 2020, the Fund had sufficient cash and/or securities to cover these commitments.

(f) Securities traded on a when-issued and delayed delivery basis. The Fund may trade securities on a when-issued or delayed delivery basis. In when-issued and delayed delivery transactions, the securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction.

Purchasing such securities involves risk of loss if the value of the securities declines prior to settlement. These securities are subject to market fluctuations and their current value is determined in the same manner as for other securities.

(g) 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

 

 

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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.

(h) 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.

(i) 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

 

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Notes to financial statements (unaudited) (cont’d)

 

posting terms, netting provisions in the event of default or termination and credit related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in the Fund’s net assets or NAV over a specified period of time. If these credit related contingent features were triggered, the derivatives counterparty could terminate the positions and demand payment or require additional collateral.

Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. However, absent an event of default by the counterparty or a termination of the agreement, the terms of the ISDA Master Agreements do not result in an offset of reported amounts of financial assets and 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 November 30, 2020, the Fund held forward foreign currency contracts with credit related contingent features which had a liability position of $75,053. 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.

(j) 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.

(k) Distributions to shareholders. Distributions from net investment income of the Fund, if any, are declared quarterly and paid on a monthly basis. The actual source of the Fund’s current fiscal year’s distributions may be from net investment income, return of capital or a

 

 

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combination of both. Shareholders will be informed of the tax characteristics of the distributions after the close of the fiscal year. Distributions of net realized gains, if any, are taxable and 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.

(l) 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.

(m) 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 May 31, 2020, 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.

(n) 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 values 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, LLC (“Western Asset”) is the Fund’s subadviser. Western Asset Management Company Pte. Ltd. (“Western Asset Singapore”), Western Asset Management Company Ltd (“Western Asset Japan”) and Western Asset Management Company Limited (“Western Asset Limited”) serve as additional subadvisers to the Fund, under additional subadvisory agreements with Western Asset. As of July 31, 2020, LMPFA, Western Asset, Western Asset Singapore, Western Asset Japan and Western Asset Limited are indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (“Franklin Resources”). Prior to July 31, 2020, LMPFA, Western Asset, Western Asset Singapore, Western Asset Japan and Western Asset Limited were wholly-owned subsidiaries of Legg Mason, Inc. (“Legg Mason”). As of July 31, 2020, Legg Mason is a subsidiary of Franklin Resources.

 

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Notes to financial statements (unaudited) (cont’d)

 

LMPFA provides administrative and certain oversight services to the Fund. The Fund pays LMPFA an investment management fee, calculated daily and paid monthly, at an annual rate of 0.80% of the Fund’s average daily net assets.

LMPFA delegates to Western Asset the day-to-day portfolio management of the Fund. Western Asset Singapore, Western Asset Japan and Western Asset Limited provide certain subadvisory services to the Fund relating to currency transactions and investments in non-U.S. dollar denominated debt securities. For its services, LMPFA pays Western Asset a fee monthly, at an annual rate equal to 70% of the net management fee it receives from the Fund. In turn, Western Asset pays Western Asset Singapore, Western Asset Japan and Western Asset Limited a monthly subadvisory fee in an amount equal to 100% of the management fee paid to Western Asset on the assets that Western Asset allocates to each such non-U.S. subadviser to manage.

During the six months ended November 30, 2020, fees waived and/or expenses reimbursed amounted to $1,716.

As of July 31, 2020, all officers and one Director of the Fund are employees of Franklin Resources or its affiliates and do not receive compensation from the Fund. Prior to July 31, 2020, all officers and one Director of the Fund were employees of Legg Mason and did not receive compensation from the Fund.

3. Investments

During the six months ended November 30, 2020, 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      $ 72,920,936        $ 2,781,016  
Sales        75,342,854          2,448,791  

At November 30, 2020, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

      Cost      Gross
Unrealized
Appreciation
     Gross
Unrealized
Depreciation
    

Net

Unrealized
Appreciation
(Depreciation)

 
Securities    $ 317,893,611      $ 48,519,405      $ (9,711,220)      $ 38,808,185  
Forward foreign currency contracts             33,856        (75,053)        (41,197)  

 

 

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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 November 30, 2020.

 

ASSET DERIVATIVES1  
      Foreign
Exchange Risk
 
Forward foreign currency contracts    $ 33,856  

 

LIABILITY DERIVATIVES1  
      Foreign
Exchange Risk
 
Forward foreign currency contracts    $ 75,053  

 

1  

Generally, the balance sheet location for asset derivatives is receivables/net unrealized appreciation and for liability derivatives is payables/net unrealized depreciation.

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 November 30, 2020. 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  
      Foreign
Exchange Risk
 
Forward foreign currency contracts    $ (311,182)  

 

CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED  
      Foreign
Exchange Risk
 
Forward foreign currency contracts    $ 36,551  

During the six months ended November 30, 2020, the volume of derivative activity for the Fund was as follows:

 

       

Average Market

Value

 
Forward foreign currency contracts (to buy)      $ 1,904,562  
Forward foreign currency contracts (to sell)        5,542,589  

 

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Notes to financial statements (unaudited) (cont’d)

 

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 November 30, 2020.

 

Counterparty    Gross Assets
Subject to
Master
Agreements1
     Gross
Liabilities
Subject to
Master
Agreements1
     Net Assets
(Liabilities)
Subject to
Master
Agreements
     Collateral
Pledged
(Received)
     Net
Amount2
 
BNP Paribas SA    $ 28,531      $ (8,703)      $ 19,828             $ 19,828  
Goldman Sachs Group Inc.      5,325        (56,911)        (51,586)               (51,586)  
JPMorgan Chase & Co.             (9,439)        (9,439)               (9,439)  
Total    $ 33,856      $ (75,053)      $ (41,197)             $ (41,197)  

 

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 

Represents the net amount receivable (payable) from (to) the counterparty in the event of default.

5. Distributions subsequent to November 30, 2020

The following distributions have been declared by the Fund’s Board of Directors and are payable subsequent to the period end of this report:

 

Record Date      Payable Date        Amount  
11/20/2020        12/1/2020        $ 0.0945  
12/23/2020        12/31/2020        $ 0.0945  
1/22/2021        2/1/2021        $ 0.0945  
2/19/2021        3/1/2021        $ 0.0945  

6. Stock repurchase program

On November 16, 2015, the Fund announced that the Fund’s Board of Directors (the “Board”) had authorized the Fund to repurchase in the open market up to approximately 10% of the Fund’s outstanding common stock when the Fund’s shares are trading at a discount to net asset value. The Board has directed management of the Fund to repurchase shares of common stock at such times and in such amounts as management reasonably believes may enhance stockholder value. The Fund is under no obligation to purchase shares at any specific discount levels or in any specific amounts. During the six months ended November 30, 2020, the Fund did not repurchase any shares.

Since the commencement of the stock repurchase program through November 30, 2020, the Fund repurchased 131,926 shares or 0.58% of its common shares outstanding for a total amount of $1,485,604.

7. Deferred capital losses

As of May 31, 2020, the Fund had deferred capital losses of $94,810,770, which have no expiration date, that will be available to offset future taxable capital gains.

 

 

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8. Other matters

The outbreak of the respiratory illness COVID-19 (commonly referred to as “coronavirus”) has continued to rapidly spread around the world, causing considerable uncertainty for the global economy and financial markets. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. The COVID-19 pandemic could adversely affect the value and liquidity of the Fund’s investments and negatively impact the Fund’s performance. In addition, the outbreak of COVID-19, and measures taken to mitigate its effects, could result in disruptions to the services provided to the Fund by its service providers.

***

The Fund’s investments, payment obligations, and financing terms may be based on floating rates, such as the London Interbank Offered Rate, or “LIBOR,” which is the offered rate for short-term Eurodollar deposits between major international banks. Plans are underway to phase out the use of LIBOR by the end of 2021. There remains uncertainty regarding the nature of any replacement rate and the impact of the transition from LIBOR on the Fund’s transactions and the financial markets generally. As such, the potential effect of a transition away from LIBOR on the Fund or the Fund’s investments cannot yet be determined.

***

On August 14, 2020, the Fund announced that it has elected, by resolution unanimously adopted by the Fund’s board of directors, to be subject to the Maryland Control Share Acquisition Act (the “MCSAA”), effective immediately. The MCSAA protects the interests of all stockholders of a Maryland corporation by providing that any holder of “control shares” acquired in a “control share acquisition” will not be entitled to vote its shares unless the other stockholders of the corporation reinstate those voting rights at a meeting of stockholders by a vote of two-thirds of the votes entitled to be cast on the matter, excluding the “acquiring person” (i.e., the holder or group of holders acting in concert that acquires, or proposes to acquire, “control shares”) and any other holders of “interested shares” as defined in the MCSAA. Generally, “control shares” are shares that, when aggregated with shares already owned by an acquiring person, would entitle the acquiring person to exercise 10% or more, 33 1/3% or more, or a majority of the total voting power of shares entitled to vote in the election of directors.

Application of the MCSAA seeks to limit the ability of an acquiring person to achieve a short-term gain at the expense of the Fund’s ability to pursue its investment objective and policies and seek long-term value for the rest of the Fund’s stockholders. The above description of the MCSAA is only a high-level summary and does not purport to be complete. Investors should refer to the actual provisions of the MCSAA and the Fund’s bylaws for more information, including definitions of key terms, various exclusions and

 

Western Asset High Yield Defined Opportunity Fund Inc. 2020 Semi-Annual Report  

 

33


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Notes to financial statements (unaudited) (cont’d)

 

exemptions from the statute’s scope, and the procedures by which stockholders may approve the reinstatement of voting rights to holders of “control shares.”

 

 

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Additional shareholder information (unaudited)

 

Results of special meeting of shareholders

On July 6, 2020, a special meeting of shareholders was held for the following purposes: 1) to approve a new management agreement between the Fund and its investment manager; and 2) to approve a new subadvisory agreement with respect to each of the Fund’s subadvisers. The following table provides the number of votes cast for or against, as well as the number of abstentions and broker non-votes as to each matter voted on at the special meeting of shareholders. Each item voted on was approved.

 

Item Voted On    Voted For     

Voted

Against

     Abstentions     

Broker

Non-Votes

 
To Approve a New Management Agreement with Legg Mason Partners Fund Advisor, LLC      11,243,655        475,512        400,735        0  
To Approve a New Subadvisory Agreement with Western Asset Management Company, LLC      11,229,428        478,474        412,000        0  
To Approve a New Subadvisory Agreement with Western Asset Management Company Limited      11,219,577        481,696        418,630        0  
To approve a New Subadvisory Agreement with Western Asset Management Company Ltd.      11,202,900        482,260        434,743        0  
To approve a New Subadvisory Agreement with Western Asset Management Company Pte. Ltd.      11,155,721        520,556        443,626        0  

 

Western Asset High Yield Defined Opportunity Fund Inc.  

 

35


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Dividend reinvestment plan (unaudited)

 

Unless you elect to receive distributions in cash (i.e., opt-out), all dividends, including any capital gain dividends and return of capital distributions, on your Common Stock will be automatically reinvested by Computershare Trust Company, N.A., as agent for the stockholders (the “Plan Agent”), in additional shares of Common Stock under the Fund’s Dividend Reinvestment Plan (the “Plan”). You may elect not to participate in the Plan by contacting the Plan Agent. If you do not participate, you will receive all cash distributions paid by check mailed directly to you by Computershare Trust Company, N.A., as dividend paying agent.

If you participate in the Plan, the number of shares of Common Stock you will receive will be determined as follows:

(1) If the market price of the Common Stock (plus $0.03 per share commission) on the payment date (or, if the payment date is not a NYSE trading day, the immediately preceding trading day) is equal to or exceeds the net asset value per share of the Common Stock at the close of trading on the NYSE on the payment date, the Fund will issue new Common Stock at a price equal to the greater of (a) the net asset value per share at the close of trading on the NYSE on the payment date or (b) 95% of the market price per share of the Common Stock on the payment date.

(2) If the net asset value per share of the Common Stock exceeds the market price of the Common Stock (plus $0.03 per share commission) at the close of trading on the NYSE on the payment date, the Plan Agent will receive the dividend or distribution in cash and will buy Common Stock in the open market, on the NYSE or elsewhere, for your account as soon as practicable commencing on the trading day following the payment date and terminating no later than the earlier of (a) 30 days after the dividend or distribution payment date, or (b) the payment date for the next succeeding dividend or distribution to be made to the stockholders; except when necessary to comply with applicable provisions of the federal securities laws. If during this period: (i) the market price (plus $0.03 per share commission) rises so that it equals or exceeds the net asset value per share of the Common Stock at the close of trading on the NYSE on the payment date before the Plan Agent has completed the open market purchases or (ii) if the Plan Agent is unable to invest the full amount eligible to be reinvested in open market purchases, the Plan Agent will cease purchasing Common Stock in the open market and the Fund shall issue the remaining Common Stock at a price per share equal to the greater of (a) the net asset value per share at the close of trading on the NYSE on the day prior to the issuance of shares for reinvestment or (b) 95% of the then current market price per share.

Common Stock in your account will be held by the Plan Agent in non-certificated form. Any proxy you receive will include all shares of Common Stock you have received under the Plan. You may withdraw from the Plan (i.e., opt-out) by notifying the Plan Agent in writing at 462 South 4th Street, Suite 1600, Louisville, KY 40202 or by calling the Plan Agent at 1-888-888-0151. Such withdrawal will be effective immediately if notice is received by the Plan Agent not less than ten business days prior to any dividend or distribution record date;

 

 

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   Western Asset High Yield Defined Opportunity Fund Inc.


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otherwise such withdrawal will be effective as soon as practicable after the Plan Agent’s investment of the most recently declared dividend or distribution on the Common Stock.

Plan participants who sell their shares will be charged a service charge (currently $5.00 per transaction) and the Plan Agent is authorized to deduct brokerage charges actually incurred from the proceeds (currently $0.05 per share commission). There is no service charge for reinvestment of your dividends or distributions in Common Stock. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases. Because all dividends and distributions will be automatically reinvested in additional shares of Common Stock, this allows you to add to your investment through dollar cost averaging, which may lower the average cost of your Common Stock over time. Dollar cost averaging is a technique for lowering the average cost per share over time if the Fund’s net asset value declines. While dollar cost averaging has definite advantages, it cannot assure profit or protect against loss in declining markets.

Automatically reinvesting dividends and distributions does not mean that you do not have to pay income taxes due upon receiving dividends and distributions. Investors will be subject to income tax on amounts reinvested under the Plan.

The Fund reserves the right to amend or terminate the Plan if, in the judgment of the Board of Directors, the change is warranted. The Plan may be terminated, amended or supplemented by the Fund upon notice in writing mailed to stockholders at least 30 days prior to the record date for the payment of any dividend or distribution by the Fund for which the termination or amendment is to be effective. Upon any termination, you will be sent cash for any fractional share of Common Stock in your account. You may elect to notify the Plan Agent in advance of such termination to have the Plan Agent sell part or all of your Common Stock on your behalf. Additional information about the Plan and your account may be obtained from the Plan Agent at 462 South 4th Street, Suite 1600, Louisville, KY 40202 or by calling the Plan Agent at 1-888-888-0151.

 

Western Asset High Yield Defined Opportunity Fund Inc.  

 

37


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Western Asset

High Yield Defined Opportunity Fund Inc.

 

Directors

Robert D. Agdern

Carol L. Colman

Daniel P. Cronin

Paolo M. Cucchi

William R. Hutchinson

Eileen A. Kamerick

Nisha Kumar

Jane Trust

Chairman

Officers

Jane Trust

President and Chief Executive Officer

Christopher Berarducci

Treasurer and Principal Financial Officer

Fred Jensen

Chief Compliance Officer

Jenna Bailey

Identity Theft Prevention Officer

George P. Hoyt*

Secretary and Chief Legal Officer

Thomas C. Mandia

Assistant Secretary

Jeanne M. Kelly

Senior Vice President

 

*

Effective August 13, 2020, Mr. Hoyt became Secretary and Chief Legal Officer.

 

Western Asset High Yield Defined Opportunity Fund Inc.

620 Eighth Avenue

47th Floor

New York, NY 10018

Investment manager

Legg Mason Partners Fund Advisor, LLC

Subadvisers

Western Asset Management Company, LLC

Western Asset Management Company Limited

Western Asset Management Company Ltd

Western Asset Management Company Pte. Ltd.

Custodian

The Bank of New York Mellon

Transfer agent

Computershare Inc.

462 South 4th Street, Suite 1600

Louisville, KY 40202

Independent registered public accounting firm

PricewaterhouseCoopers LLP

Baltimore, MD

Legal counsel

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

New York Stock Exchange Symbol

HYI


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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. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.

The Type of Nonpublic Personal Information the Funds Collect About You

The Funds collect and maintain nonpublic personal information about you in connection with your shareholder account. Such information may include, but is not limited to:

 

 

Personal information included on applications or other forms;

 

 

Account balances, transactions, and mutual fund holdings and positions;

 

 

Bank account information, legal documents, and identity verification documentation;

 

 

Online account access user IDs, passwords, security challenge question responses; and

 

 

Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individual’s total debt, payment history, etc.).

How the Funds Use Nonpublic Personal Information About You

The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with other financial institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services you have authorized or as permitted or required by law.

The Funds may disclose information about you to:

 

 

Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators;

 

 

Service providers, including the Funds’ affiliates, who assist the Funds as part of the ordinary course of business (such as printing, mailing services, or processing or servicing your account with us) or otherwise perform services on the Funds’ behalf, including companies that may perform statistical analysis, market research and marketing services solely for the Funds;

 

 

Permit access to transfer, whether in the United States or countries outside of the United States to such Funds’ employees, agents and affiliates and service providers as required to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators;

 

 

The Funds’ representatives such as legal counsel, accountants and auditors to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators;

 

 

Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.

 

NOT PART OF THE  SEMI-ANNUAL REPORT


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Legg Mason Funds Privacy and Security Notice (cont’d)

 

Except as otherwise permitted by applicable law, companies acting on the Funds’ behalf, including those outside the United States, are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them to perform. The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as permitted or required by applicable law, such as in connection with a law enforcement or regulatory request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be required to disclose your nonpublic personal information to third parties. While it is the Funds’ practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will remain unchanged.

Keeping You Informed of the Funds’ Privacy and Security Practices

The Funds will notify you annually of their privacy policy as required by federal law. While the Funds reserve the right to modify this policy at any time they will notify you promptly if this privacy policy changes.

The Funds’ Security Practices

The Funds maintain appropriate physical, electronic and procedural safeguards designed to guard your nonpublic personal information. The Funds’ internal data security policies restrict access to your nonpublic personal information to authorized employees, who may use your nonpublic personal information for Fund business purposes only.

Although the Funds strive to protect your nonpublic personal information, they cannot ensure or warrant the security of any information you provide or transmit to them, and you do so at your own risk. In the event of a breach of the confidentiality or security of your nonpublic personal information, the Funds will attempt to notify you as necessary, so you can take appropriate protective steps. If you have consented to the Funds using electronic communications or electronic delivery of statements, they may notify you under such circumstances using the most current email address you have on record with them.

In order for the Funds to provide effective service to you, keeping your account information accurate is very important. If you believe that your account information is incomplete, not accurate or not current, if you have questions about the Funds’ privacy practices, or our use of your nonpublic personal information, write the Funds using the contact information on your account statements, email the Funds by clicking on the Contact Us section of the Funds’ website at www.leggmason.com, or contact the Fund at 1-888-777-0102.

Revised April 2018

Legg Mason California Consumer Privacy Act Policy

Although much of the personal information we collect is “nonpublic personal information” subject to federal law, residents of California may, in certain circumstances, have additional rights under the California Consumer Privacy Act (“CCPA”). For example, if you are a broker,

 

NOT PART OF THE  SEMI-ANNUAL REPORT


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Legg Mason Funds Privacy and Security Notice (cont’d)

 

dealer, agent, fiduciary, or representative acting by or on behalf of, or for, the account of any other person(s) or household, or a financial advisor, or if you have otherwise provided personal information to us separate from the relationship we have with personal investors, the provisions of this Privacy Policy apply to your personal information (as defined by the CCPA).

 

 

In addition to the provisions of the Legg Mason Funds Security and Privacy Notice, you may have the right to know the categories and specific pieces of personal information we have collected about you.

 

 

You also have the right to request the deletion of the personal information collected or maintained by the Funds.

If you wish to exercise any of the rights you have in respect of your personal information, you should advise the Funds by contacting them as set forth below. The rights noted above are subject to our other legal and regulatory obligations and any exemptions under the CCPA. You may designate an authorized agent to make a rights request on your behalf, subject to the identification process described below. We do not discriminate based on requests for information related to our use of your personal information, and you have the right not to receive discriminatory treatment related to the exercise of your privacy rights.

We may request information from you in order to verify your identity or authority in making such a request. If you have appointed an authorized agent to make a request on your behalf, or you are an authorized agent making such a request (such as a power of attorney or other written permission), this process may include providing a password/passcode, a copy of government issued identification, affidavit or other applicable documentation, i.e. written permission. We may require you to verify your identity directly even when using an authorized agent, unless a power of attorney has been provided. We reserve the right to deny a request submitted by an agent if suitable and appropriate proof is not provided.

For the 12-month period prior to the date of this Privacy Policy, the Legg Mason Funds have not sold any of your personal information; nor do we have any plans to do so in the future.

Contact Information

Address: Data Privacy Officer, 100 International Dr., Baltimore, MD 21202

Email: DataProtectionOfficer@franklintempleton.com

Phone: 1-800-396-4748

Revised October 2020

 

NOT PART OF THE  SEMI-ANNUAL REPORT


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Western Asset High Yield Defined Opportunity Fund Inc.

Western Asset High Yield Defined Opportunity Fund Inc.

620 Eighth Avenue

47th Floor

New York, NY 10018

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase, at market prices, shares of its stock.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov. To obtain information on Form N-PORT, shareholders can call the Fund at 1-888-777-0102.

Information on how the Fund voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling 1-888-777-0102, (2) at www.lmcef.com and (3) on the SEC’s website at www.sec.gov.

This report is transmitted to the shareholders of Western Asset High Yield Defined Opportunity Fund Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report.

Computershare Inc.

462 South 4th Street, Suite 1600

Louisville, KY 40202

 

WASX013399 1/21 SR20-4066


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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. INVESTMENT PROFESSIONALS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 11. CONTROLS AND PROCEDURES.

 

  (a)

The 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.


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ITEM 12.

DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

 

ITEM 13.

EXHIBITS.

(a) (1) Not applicable.

Exhibit  99.CODE ETH

(a) (2)  Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.CERT

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.906CERT


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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 High Yield Defined Opportunity Fund Inc.

 

By:  

/s/Jane Trust

  Jane Trust
  Chief Executive Officer

Date:    January 26, 2021

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:   January 26, 2021
By:  

/s/Christopher Berarducci

  Christopher Berarducci
  Principal Financial Officer
Date:   January 26, 2021