N-Q 1 d627325dnq.htm WESTERN ASSET INCOME FUND (PAI) Western Asset Income Fund (PAI)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-02351

Western Asset Investment Grade Income Fund Inc.

(Exact name of registrant as specified in charter)

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

(Address of principal executive offices) (Zip code)

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

Registrant’s telephone number, including area code: 1-888-777-0102

Date of fiscal year end: December 31

Date of reporting period: September 30, 2018

 

 

 


 

ITEM 1.

SCHEDULE OF INVESTMENTS.


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

FORM N-Q

SEPTEMBER 30, 2018


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited)    September 30, 2018

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  
CORPORATE BONDS & NOTES - 86.9%           
COMMUNICATION SERVICES - 10.5%           

Diversified Telecommunication Services - 3.8%

          

AT&T Inc., Senior Notes

     4.300     2/15/30      $ 80,000      $ 77,106 (a)  

AT&T Inc., Senior Notes

     4.500     5/15/35        360,000        337,296  

AT&T Inc., Senior Notes

     6.350     3/15/40        50,000        55,151  

AT&T Inc., Senior Notes

     5.350     9/1/40        30,000        29,847  

AT&T Inc., Senior Notes

     4.800     6/15/44        210,000        194,360  

AT&T Inc., Senior Notes

     5.450     3/1/47        50,000        50,134  

AT&T Inc., Senior Notes

     4.550     3/9/49        310,000        273,098  

AT&T Inc., Senior Notes (3 mo. USD LIBOR + 1.180%)

     3.514     6/12/24        480,000        482,532 (b)  

British Telecommunications PLC, Senior Notes

     9.625     12/15/30        330,000        469,667  

Koninklijke KPN NV, Senior Notes

     8.375     10/1/30        200,000        258,359  

Telefonica Emisiones SAU, Senior Notes

     7.045     6/20/36        60,000        72,580  

Verizon Communications Inc., Senior Notes

     5.150     9/15/23        1,790,000        1,918,201  

Verizon Communications Inc., Senior Notes

     5.500     3/16/47        730,000        802,321  

Verizon Communications Inc., Senior Notes

     5.012     8/21/54        139,000        140,276  
          

 

 

 

Total Diversified Telecommunication Services

             5,160,928  
          

 

 

 

Media - 4.8%

          

21st Century Fox America Inc., Senior Notes

     6.550     3/15/33        545,000        687,794  

21st Century Fox America Inc., Senior Notes

     7.750     12/1/45        130,000        199,793  

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

     5.125     5/1/27        420,000        399,000 (a)  

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

     6.384     10/23/35        110,000        118,613  

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

     6.484     10/23/45        260,000        280,411  

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

     5.375     5/1/47        350,000        332,802  

Comcast Corp., Senior Notes

     6.450     3/15/37        220,000        262,352  

Comcast Corp., Senior Notes

     6.950     8/15/37        160,000        197,943  

Comcast Corp., Senior Notes

     6.400     5/15/38        950,000        1,126,942  

Time Warner Cable LLC, Senior Secured Notes

     8.750     2/14/19        690,000        704,321  

Time Warner Cable LLC, Senior Secured Notes

     6.550     5/1/37        180,000        195,796  

Time Warner Cable LLC, Senior Secured Notes

     7.300     7/1/38        200,000        229,716  

Time Warner Cable LLC, Senior Secured Notes

     6.750     6/15/39        10,000        10,937  

Time Warner Cable LLC, Senior Secured Notes

     5.500     9/1/41        50,000        48,312  

 

See Notes to Schedule of Investments.

 

1


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Media - (continued)

          

Time Warner Entertainment Co. LP, Senior Secured Notes

     8.375     7/15/33      $ 410,000      $ 510,363  

UBM PLC, Senior Notes

     5.750     11/3/20        570,000        578,397 (a)  

Virgin Media Finance PLC, Senior Notes

     6.375     4/15/23        600,000        617,250 (a)  

Warner Media LLC, Senior Notes

     4.900     6/15/42        150,000        140,710  
          

 

 

 

Total Media

             6,641,452  
          

 

 

 

Wireless Telecommunication Services - 1.9%

          

America Movil SAB de CV, Senior Notes

     6.125     3/30/40        850,000        1,010,102  

Sprint Communications Inc., Senior Notes

     9.000     11/15/18        50,000        50,372 (a)  

Sprint Corp., Senior Notes

     7.250     9/15/21        330,000        349,800  

Sprint Corp., Senior Notes

     7.875     9/15/23        340,000        367,625  

Telefonica Europe BV, Senior Notes

     8.250     9/15/30        230,000        294,917  

Vodafone Group PLC, Senior Notes

     5.250     5/30/48        490,000        493,805  
          

 

 

 

Total Wireless Telecommunication Services

             2,566,621  
          

 

 

 

TOTAL COMMUNICATION SERVICES

             14,369,001  
          

 

 

 
CONSUMER DISCRETIONARY - 2.1%           

Auto Components - 0.1%

          

ZF North America Capital Inc., Senior Notes

     4.750     4/29/25        160,000        160,178 (a)  
          

 

 

 

Automobiles - 0.7%

          

Ford Motor Credit Co. LLC, Senior Notes

     8.125     1/15/20        410,000        433,268  

General Motors Co., Senior Notes

     6.600     4/1/36        170,000        181,711  

General Motors Co., Senior Notes

     6.750     4/1/46        280,000        304,052  
          

 

 

 

Total Automobiles

             919,031  
          

 

 

 

Hotels, Restaurants & Leisure - 1.0%

          

GLP Capital LP/GLP Financing II Inc., Senior Notes

     5.250     6/1/25        160,000        163,392  

GLP Capital LP/GLP Financing II Inc., Senior Notes

     5.375     4/15/26        100,000        101,801  

McDonald’s Corp., Senior Notes

     4.700     12/9/35        150,000        156,376  

McDonald’s Corp., Senior Notes

     4.875     12/9/45        230,000        241,443  

McDonald’s Corp., Senior Notes

     4.450     9/1/48        10,000        9,845  

Sands China Ltd., Senior Notes

     5.125     8/8/25        450,000        449,630 (a)  

Sands China Ltd., Senior Notes

     5.400     8/8/28        200,000        199,530 (a)  
          

 

 

 

Total Hotels, Restaurants & Leisure

             1,322,017  
          

 

 

 

Household Durables - 0.3%

          

Newell Brands Inc., Senior Notes

     4.200     4/1/26        480,000        456,965  
          

 

 

 

TOTAL CONSUMER DISCRETIONARY

             2,858,191  
          

 

 

 

 

See Notes to Schedule of Investments.

 

2


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  
CONSUMER STAPLES - 2.5%           

Beverages - 1.4%

          

Anheuser-Busch InBev Finance Inc., Senior Notes

     4.900     2/1/46      $ 840,000      $ 852,685  

Pernod Ricard SA, Senior Notes

     5.750     4/7/21        350,000        368,501 (a)  

Pernod Ricard SA, Senior Notes

     5.500     1/15/42        670,000        745,186 (a)  
          

 

 

 

Total Beverages

             1,966,372  
          

 

 

 

Food & Staples Retailing - 0.1%

          

Kroger Co., Senior Notes

     4.650     1/15/48        90,000        85,140  
          

 

 

 

Food Products - 0.3%

          

Kraft Heinz Foods Co., Senior Notes

     5.000     7/15/35        50,000        49,530  

Kraft Heinz Foods Co., Senior Notes

     5.000     6/4/42        150,000        143,711  

Kraft Heinz Foods Co., Senior Notes

     5.200     7/15/45        250,000        245,248  
          

 

 

 

Total Food Products

             438,489  
          

 

 

 

Tobacco - 0.7%

          

Philip Morris International Inc., Senior Notes

     4.500     3/20/42        100,000        97,642  

Reynolds American Inc., Senior Notes

     8.125     5/1/40        270,000        355,421  

Reynolds American Inc., Senior Notes

     7.000     8/4/41        320,000        381,128  

Reynolds American Inc., Senior Notes

     5.850     8/15/45        90,000        98,214  
          

 

 

 

Total Tobacco

             932,405  
          

 

 

 

TOTAL CONSUMER STAPLES

             3,422,406  
          

 

 

 
ENERGY - 16.6%           

Energy Equipment & Services - 0.5%

          

ENSCO International Inc., Senior Notes

     7.200     11/15/27        120,000        113,100  

Ensco PLC, Senior Notes

     5.200     3/15/25        130,000        113,587  

Halliburton Co., Senior Notes

     5.000     11/15/45        200,000        214,396  

Petrofac Ltd., Senior Notes

     3.400     10/10/18        310,000        309,995 (a)  
          

 

 

 

Total Energy Equipment & Services

             751,078  
          

 

 

 

Oil, Gas & Consumable Fuels - 16.1%

          

Anadarko Finance Co., Senior Notes

     7.500     5/1/31        465,000        571,674  

Anadarko Petroleum Corp., Senior Notes

     4.850     3/15/21        460,000        473,004  

Anadarko Petroleum Corp., Senior Notes

     5.550     3/15/26        460,000        488,827  

Apache Corp., Senior Notes

     6.000     1/15/37        106,000        116,165  

Apache Corp., Senior Notes

     5.100     9/1/40        160,000        158,763  

Apache Corp., Senior Notes

     5.250     2/1/42        90,000        90,772  

Cenovus Energy Inc., Senior Notes

     5.250     6/15/37        90,000        89,258  

Cimarex Energy Co., Senior Notes

     3.900     5/15/27        70,000        66,992  

Concho Resources Inc., Senior Notes

     3.750     10/1/27        70,000        66,940  

Concho Resources Inc., Senior Notes

     4.300     8/15/28        180,000        179,628  

ConocoPhillips, Senior Notes

     6.500     2/1/39        810,000        1,053,480  

 

See Notes to Schedule of Investments.

 

3


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Oil, Gas & Consumable Fuels - (continued)

          

Continental Resources Inc., Senior Notes

     4.375     1/15/28      $ 280,000      $ 278,433  

Devon Energy Corp., Senior Notes

     5.850     12/15/25        350,000        381,988  

Devon Energy Corp., Senior Notes

     5.600     7/15/41        320,000        340,466  

Devon Energy Corp., Senior Notes

     5.000     6/15/45        270,000        266,933  

Ecopetrol SA, Senior Notes

     5.375     6/26/26        740,000        764,975  

Ecopetrol SA, Senior Notes

     5.875     5/28/45        176,000        174,724  

Enbridge Energy Partners LP, Senior Notes

     9.875     3/1/19        120,000        123,200  

Energy Transfer Equity LP, Senior Secured Notes

     7.500     10/15/20        250,000        268,125  

Energy Transfer Partners LP, Senior Notes

     4.200     9/15/23        860,000        867,774  

Energy Transfer Partners LP, Senior Notes

     6.625     10/15/36        20,000        22,380  

Energy Transfer Partners LP, Senior Notes

     5.800     6/15/38        40,000        41,671  

Enterprise Products Operating LLC, Senior Notes

     6.125     10/15/39        320,000        375,574  

Enterprise Products Operating LLC, Senior Notes

     4.250     2/15/48        170,000        160,684  

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

     5.375     2/15/78        540,000        502,268 (b)  

Hess Corp., Senior Notes

     7.875     10/1/29        580,000        702,469  

Hess Corp., Senior Notes

     6.000     1/15/40        300,000        312,333  

KazMunayGas National Co. JSC, Senior Notes

     6.375     10/24/48        370,000        389,455 (a)  

Kerr-McGee Corp., Senior Notes

     6.950     7/1/24        1,080,000        1,217,611  

Kinder Morgan Inc., Medium-Term

     7.800     8/1/31        2,000,000        2,496,457  

Lukoil International Finance BV, Senior Notes

     4.563     4/24/23        200,000        199,068 (a)  

MEG Energy Corp., Senior Notes

     6.375     1/30/23        600,000        549,000 (a)  

MPLX LP, Senior Notes

     4.500     4/15/38        380,000        359,285  

Noble Energy Inc., Senior Notes

     6.000     3/1/41        390,000        418,604  

Noble Energy Inc., Senior Notes

     5.250     11/15/43        150,000        148,460  

Noble Energy Inc., Senior Notes

     4.950     8/15/47        390,000        374,885  

Petrobras Global Finance BV, Senior Notes

     7.375     1/17/27        190,000        192,783  

Petrobras Global Finance BV, Senior Notes

     6.850     6/5/2115        300,000        258,000  

Petroleos Mexicanos, Senior Notes

     6.875     8/4/26        450,000        475,830  

Petroleos Mexicanos, Senior Notes

     6.625     6/15/35        2,635,000        2,631,047  

Phillips 66, Senior Notes

     5.875     5/1/42        160,000        184,727  

Shell International Finance BV, Senior Notes

     6.375     12/15/38        250,000        323,574  

Transcontinental Gas Pipe Line Co., LLC, Senior Notes

     7.850     2/1/26        470,000        573,307  

Transcontinental Gas Pipe Line Co., LLC, Senior Notes

     5.400     8/15/41        310,000        333,732  

Western Gas Partners LP, Senior Notes

     4.650     7/1/26        660,000        647,963  

Western Gas Partners LP, Senior Notes

     4.750     8/15/28        440,000        432,382  

 

See Notes to Schedule of Investments.

 

4


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Oil, Gas & Consumable Fuels - (continued)

          

Williams Cos. Inc., Senior Notes

     7.500     1/15/31      $ 47,000      $ 57,279  

Williams Cos. Inc., Senior Notes

     7.750     6/15/31        37,000        44,776  

Williams Cos. Inc., Senior Notes

     8.750     3/15/32        610,000        815,629  
          

 

 

 

Total Oil, Gas & Consumable Fuels

             22,063,354  
          

 

 

 

TOTAL ENERGY

             22,814,432  
          

 

 

 
FINANCIALS - 30.8%           

Banks - 18.4%

          

Banco Nacional de Costa Rica, Senior Notes

     5.875     4/25/21        340,000        338,941 (a)  

Banco Santander SA, Senior Notes

     3.848     4/12/23        400,000        391,200  

Bank of America Corp., Senior Notes

     5.875     2/7/42        320,000        379,333  

Bank of America Corp., Senior Notes (3.004% to 12/20/22 then 3 mo. USD LIBOR + 0.790%)

     3.004     12/20/23        107,000        103,898 (b)  

Bank of America Corp., Senior Notes (4.271% to 7/23/28 then 3 mo. USD LIBOR + 1.310%)

     4.271     7/23/29        440,000        439,994 (b)  

Bank of America Corp., Subordinated Notes

     6.110     1/29/37        320,000        369,076  

Bank of America Corp., Subordinated Notes

     7.750     5/14/38        900,000        1,218,259  

Barclays Bank PLC, Subordinated Notes

     10.179     6/12/21        240,000        273,578 (a)  

Barclays Bank PLC, Subordinated Notes

     7.625     11/21/22        450,000        488,644  

Barclays PLC, Junior Subordinated Notes (7.750% to 9/15/23 then USD 5 year Swap Rate + 4.842%)

     7.750     9/15/23        330,000        331,650 (b)(c)  

Barclays PLC, Senior Notes (4.338% to 5/16/23 then 3 mo. USD LIBOR + 1.356%)

     4.338     5/16/24        380,000        375,787 (b)  

Barclays PLC, Senior Notes (4.972% to 5/16/28 then 3 mo. USD LIBOR + 1.902%)

     4.972     5/16/29        260,000        256,498 (b)  

Barclays PLC, Subordinated Notes

     4.836     5/9/28        240,000        225,590  

BBVA Bancomer SA, Subordinated Notes (5.125% to 1/18/28 then 5 year Treasury Constant Maturity Rate + 2.650%)

     5.125     1/18/33        320,000        292,400 (a)(b)  

BNP Paribas SA, Junior Subordinated Notes (7.000% to 8/16/28 then USD 5 year Swap Rate + 3.980%)

     7.000     8/16/28        220,000        222,035 (a)(b)(c)  

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

     7.625     3/30/21        330,000        347,325 (a)(b)(c)  

BNP Paribas SA, Senior Notes

     4.400     8/14/28        280,000        275,318 (a)  

BNP Paribas SA, Subordinated Notes

     4.625     3/13/27        220,000        217,532 (a)  

BPCE SA, Subordinated Notes

     5.150     7/21/24        410,000        417,501 (a)  

Citigroup Inc., Senior Notes

     8.125     7/15/39        251,000        363,380  

Citigroup Inc., Senior Notes

     5.875     1/30/42        240,000        279,861  

 

See Notes to Schedule of Investments.

 

5


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Banks - (continued)

          

Citigroup Inc., Subordinated Notes

     5.500     9/13/25      $ 750,000      $ 800,157  

Citigroup Inc., Subordinated Notes

     4.450     9/29/27        400,000        395,813  

Citigroup Inc., Subordinated Notes

     6.125     8/25/36        404,000        461,713  

Citigroup Inc., Subordinated Notes

     6.675     9/13/43        370,000        455,106  

Cooperatieve Rabobank U.A., Senior Notes

     5.250     5/24/41        570,000        641,278  

Cooperatieve Rabobank U.A., Senior Notes

     5.750     12/1/43        450,000        504,264  

Cooperatieve Rabobank U.A., Senior Notes

     5.250     8/4/45        340,000        358,426  

Cooperatieve Rabobank UA, Junior Subordinated Notes (11.000% to 6/30/19 then 3 mo. USD LIBOR + 10.868%)

     11.000     6/30/19        708,000        749,949 (a)(b)(c)  

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

     8.125     12/23/25        1,040,000        1,146,585 (a)(b)(c)  

Credit Agricole SA, Junior Subordinated Notes (8.375% to 10/13/19 then 3 mo. USD LIBOR + 6.982%)

     8.375     10/13/19        560,000        584,010 (a)(b)(c)  

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        300,000        289,875 (b)(c)  

HSBC Holdings PLC, Subordinated Notes

     4.250     8/18/25        210,000        206,332  

ING Bank NV, Subordinated Notes

     5.800     9/25/23        600,000        633,291 (a)  

Intesa Sanpaolo SpA, Senior Notes

     3.125     7/14/22        300,000        279,006 (a)  

Intesa Sanpaolo SpA, Senior Notes

     3.875     7/14/27        360,000        307,779 (a)  

Intesa Sanpaolo SpA, Subordinated Notes

     5.710     1/15/26        690,000        628,593 (a)  

JPMorgan Chase & Co., Junior Subordinated Notes (6.000% to 8/1/23 then 3 mo. USD LIBOR + 3.300%)

     6.000     8/1/23        260,000        270,725 (b)(c)  

JPMorgan Chase & Co., Subordinated Notes

     5.625     8/16/43        440,000        501,732  

JPMorgan Chase & Co., Subordinated Notes

     4.950     6/1/45        410,000        430,916  

Lloyds Banking Group PLC, Junior Subordinated Notes (7.500% to 6/27/24 then USD 5 year Swap Rate + 4.760%)

     7.500     6/27/24        360,000        372,150 (b)(c)  

NatWest Markets NV, Subordinated Notes

     7.750     5/15/23        480,000        531,439  

Royal Bank of Scotland Group PLC, Junior Subordinated Notes (7.648% to 9/30/31 then 3 mo. USD LIBOR + 2.500%)

     7.648     9/30/31        1,360,000        1,708,500 (b)(c)  

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

     8.625     8/15/21        590,000        633,513 (b)(c)  

 

See Notes to Schedule of Investments.

 

6


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Banks - (continued)

          

Royal Bank of Scotland Group PLC, Senior Notes (4.892% to 5/18/28 then 3 mo. USD LIBOR + 1.754%)

     4.892     5/18/29      $ 200,000      $ 199,148 (b)  

Royal Bank of Scotland Group PLC, Subordinated Notes

     6.100     6/10/23        1,010,000        1,054,862  

Royal Bank of Scotland Group PLC, Subordinated Notes

     6.000     12/19/23        350,000        364,518  

Santander UK Group Holdings PLC,

          

Subordinated Notes

     4.750     9/15/25        210,000        205,014 (a)  

Standard Chartered PLC, Subordinated Notes

     5.700     3/26/44        410,000        426,032 (a)  

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

     5.570     10/29/18        1,190,000        1,180,183 (b)(c)  

Wells Fargo & Co., Senior Notes

     3.000     10/23/26        310,000        287,968  

Wells Fargo & Co., Subordinated Notes

     5.375     11/2/43        430,000        462,943  

Wells Fargo & Co., Subordinated Notes

     4.750     12/7/46        580,000        579,115  
          

 

 

 

Total Banks

             25,258,735  
          

 

 

 

Capital Markets - 5.2%

          

CME Group Inc., Senior Notes

     5.300     9/15/43        440,000        507,959  

Credit Suisse Group AG, Junior Subordinated Notes (6.250% to 12/18/24 then USD 5 year Swap Rate + 3.455%)

     6.250     12/18/24        1,170,000        1,156,837 (a)(b)(c)  

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

     7.250     9/12/25        400,000        402,500 (a)(b)(c)  

Goldman Sachs Group Inc., Senior Notes

     5.375     3/15/20        270,000        278,372  

Goldman Sachs Group Inc., Senior Notes

     6.250     2/1/41        570,000        686,431  

Goldman Sachs Group Inc., Subordinated Notes

     6.750     10/1/37        640,000        771,212  

Goldman Sachs Group Inc., Subordinated Notes

     5.150     5/22/45        500,000        511,404  

Intercontinental Exchange Inc., Senior Notes

     3.750     9/21/28        640,000        633,615  

KKR Group Finance Co. III LLC, Senior Notes

     5.125     6/1/44        820,000        815,890 (a)  

Moody’s Corp, Senior Notes

     2.750     12/15/21        500,000        489,390  

Morgan Stanley, Senior Notes

     5.500     7/24/20        100,000        103,798  

Morgan Stanley, Senior Notes

     6.375     7/24/42        90,000        112,587  

Raymond James Financial Inc., Senior Notes

     4.950     7/15/46        90,000        91,705  

Societe Generale SA, Junior Subordinated Notes (6.750% to 4/6/28 then USD 5 year Swap Rate + 3.929%)

     6.750     4/6/28        200,000        186,850 (a)(b)(c)  

UBS AG Stamford, CT, Subordinated Notes

     7.625     8/17/22        340,000        379,610  
          

 

 

 

Total Capital Markets

             7,128,160  
          

 

 

 

 

See Notes to Schedule of Investments.

 

7


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Consumer Finance - 1.7%

          

Ally Financial Inc., Subordinated Notes

     8.000     12/31/18      $ 201,000      $ 203,261  

Nationwide Building Society, Senior Notes (3 mo. USD LIBOR + 1.392%)

     4.363     8/1/24        210,000        209,126 (a)(b)  

Navient Corp., Senior Notes

     7.250     1/25/22        830,000        878,763  

Navient Corp., Senior Notes

     6.125     3/25/24        290,000        291,450  

Synchrony Financial, Senior Notes

     3.700     8/4/26        856,000        774,428  
          

 

 

 

Total Consumer Finance

             2,357,028  
          

 

 

 

Diversified Financial Services - 1.8%

          

Carlyle Finance LLC, Senior Notes

     5.650     9/15/48        110,000        110,563 (a)  

Carlyle Holdings II Finance LLC, Senior Notes

     5.625     3/30/43        220,000        217,869 (a)  

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

     4.780     12/21/65        470,000        428,875 (a)(b)  

ILFC E-Capital Trust II, Senior Notes ((Highest of 3 mo. USD LIBOR, 10 year U.S. Treasury Constant Maturity Rate and 30 year U.S. Treasury Constant Maturity Rate) + 1.800%)

     5.030     12/21/65        270,000        245,700 (a)(b)  

International Lease Finance Corp., Senior Notes

     6.250     5/15/19        130,000        132,549  

International Lease Finance Corp., Senior Notes

     8.250     12/15/20        190,000        207,732  

Park Aerospace Holdings Ltd., Senior Notes

     5.250     8/15/22        392,000        396,900 (a)  

Park Aerospace Holdings Ltd., Senior Notes

     5.500     2/15/24        220,000        226,050 (a)  

Voya Financial Inc., Senior Notes

     5.700     7/15/43        500,000        550,499  
          

 

 

 

Total Diversified Financial Services

             2,516,737  
          

 

 

 

Insurance - 3.7%

          

Allstate Corp., Junior Subordinated Notes (6.500% to 5/15/37 then 3 mo. USD LIBOR + 2.120%)

     6.500     5/15/57        480,000        534,000 (b)  

American International Group Inc., Junior Subordinated Notes (6.250% to 3/15/37 then 3 mo. USD LIBOR + 2.056%)

     6.250     3/15/87        80,000        80,600 (b)  

American International Group Inc., Senior Notes

     6.400     12/15/20        90,000        95,807  

American International Group Inc., Senior Notes

     4.750     4/1/48        70,000        69,085  

Aon PLC, Senior Notes

     4.750     5/15/45        90,000        90,373  

AXA SA, Subordinated Notes

     8.600     12/15/30        200,000        260,500  

Berkshire Hathaway Finance Corp., Senior Notes

     4.200     8/15/48        480,000        477,994  

Brighthouse Financial Inc., Senior Notes

     3.700     6/22/27        40,000        35,574  

Delphi Financial Group Inc., Senior Notes

     7.875     1/31/20        170,000        179,567  

 

See Notes to Schedule of Investments.

 

8


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Insurance - (continued)

          

Fidelity & Guaranty Life Holdings Inc., Senior Notes

     5.500     5/1/25      $ 230,000      $ 229,126 (a)  

Liberty Mutual Group Inc., Senior Notes

     7.800     3/15/37        190,000        222,775 (a)  

Liberty Mutual Insurance Co., Subordinated Notes

     7.875     10/15/26        490,000        594,778 (a)  

Massachusetts Mutual Life Insurance Co., Subordinated Notes

     4.900     4/1/77        260,000        257,332 (a)  

MetLife Inc., Junior Subordinated Notes

     6.400     12/15/36        1,150,000        1,221,875  

Nuveen Finance LLC, Senior Notes

     2.950     11/1/19        210,000        209,767 (a)  

Teachers Insurance & Annuity Association of America, Subordinated Notes

     6.850     12/16/39        400,000        525,947 (a)  
          

 

 

 

Total Insurance

             5,085,100  
          

 

 

 

TOTAL FINANCIALS

             42,345,760  
          

 

 

 
HEALTH CARE - 7.0%           

Biotechnology - 0.7%

          

AbbVie Inc., Senior Notes

     2.500     5/14/20        430,000        425,348  

AbbVie Inc., Senior Notes

     4.700     5/14/45        180,000        173,585  

Celgene Corp., Senior Notes

     5.000     8/15/45        250,000        249,353  

Gilead Sciences Inc., Senior Notes

     5.650     12/1/41        60,000        69,103  

Gilead Sciences Inc., Senior Notes

     4.750     3/1/46        50,000        51,656  
          

 

 

 

Total Biotechnology

             969,045  
          

 

 

 

Health Care Equipment & Supplies - 1.0%

          

Abbott Laboratories, Senior Notes

     2.900     11/30/21        540,000        533,649  

Abbott Laboratories, Senior Notes

     4.900     11/30/46        230,000        250,766  

Becton Dickinson & Co., Senior Notes

     4.685     12/15/44        200,000        197,938  

Becton Dickinson & Co., Senior Notes

     4.669     6/6/47        410,000        407,108  
          

 

 

 

Total Health Care Equipment & Supplies

             1,389,461  
          

 

 

 

Health Care Providers & Services - 4.8%

          

Cardinal Health Inc., Senior Notes

     3.410     6/15/27        270,000        249,650  

CVS Health Corp., Senior Notes

     4.100     3/25/25        940,000        938,806  

CVS Health Corp., Senior Notes

     4.300     3/25/28        540,000        536,799  

CVS Health Corp., Senior Notes

     4.780     3/25/38        1,330,000        1,327,795  

CVS Health Corp., Senior Notes

     5.125     7/20/45        340,000        350,805  

CVS Health Corp., Senior Notes

     5.050     3/25/48        730,000        749,539  

Dartmouth-Hitchcock Health, Secured Bonds

     4.178     8/1/48        100,000        96,766  

Halfmoon Parent Inc., Senior Secured Notes

     4.125     11/15/25        340,000        339,550 (a)  

Halfmoon Parent Inc., Senior Secured Notes

     4.375     10/15/28        340,000        339,693 (a)  

Halfmoon Parent Inc., Senior Secured Notes

     4.800     8/15/38        340,000        342,024 (a)  

HCA Inc., Senior Secured Notes

     5.500     6/15/47        370,000        376,012  

 

See Notes to Schedule of Investments.

 

9


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Health Care Providers & Services - (continued)

          

Humana Inc., Senior Notes

     8.150     6/15/38      $ 80,000      $ 109,049  

Humana Inc., Senior Notes

     4.800     3/15/47        230,000        235,491  

Magellan Health Inc., Senior Notes

     4.400     9/22/24        420,000        406,341  

Orlando Health Obligated Group, Senior Notes

     4.089     10/1/48        170,000        164,367  
          

 

 

 

Total Health Care Providers & Services

             6,562,687  
          

 

 

 

Pharmaceuticals - 0.5%

          

Allergan Funding SCS, Senior Notes

     4.550     3/15/35        190,000        185,343  

Allergan Funding SCS, Senior Notes

     4.750     3/15/45        200,000        195,170  

Bausch Health Cos. Inc., Senior Notes

     9.000     12/15/25        320,000        345,600 (a)  

Zoetis Inc., Senior Notes

     4.700     2/1/43        30,000        30,811  
          

 

 

 

Total Pharmaceuticals

             756,924  
          

 

 

 

TOTAL HEALTH CARE

             9,678,117  
          

 

 

 
INDUSTRIALS - 5.1%           

Aerospace & Defense - 1.5%

          

Avolon Holdings Funding Ltd., Senior Notes

     5.125     10/1/23        210,000        212,789 (a)  

Huntington Ingalls Industries Inc., Senior Notes

     3.483     12/1/27        200,000        187,820  

Lockheed Martin Corp., Senior Notes

     4.500     5/15/36        40,000        41,820  

Northrop Grumman Systems Corp., Senior Notes

     7.875     3/1/26        870,000        1,065,348  

United Technologies Corp., Senior Notes

     4.125     11/16/28        510,000        507,556  

United Technologies Corp., Senior Notes

     4.625     11/16/48        110,000        111,058  
          

 

 

 

Total Aerospace & Defense

             2,126,391  
          

 

 

 

Airlines - 0.5%

          

Continental Airlines 1999-1 Class A Pass Through Trust, Senior Secured Notes

     6.545     2/2/19        31,870        32,249  

Continental Airlines 2009-2 Class A Pass Through Trust, Senior Secured Notes

     7.250     11/10/19        134,052        139,331  

Continental Airlines 2012-1 Class B Pass Through Trust, Senior Secured Notes

     6.250     4/11/20        83,850        85,979  

Continental Airlines Pass Through Trust 1999-2, Class A-1, Senior Secured Notes

     7.256     3/15/20        39,796        40,940  

Delta Air Lines 2007-1 Class B Pass Through Trust, Senior Secured Notes

     8.021     8/10/22        47,811        52,525 (d)  

Delta Air Lines 2009-1 Class A Pass Through Trust, Senior Secured Notes

     7.750     12/17/19        82,257        85,946  

US Airways 2012-1 Class A Pass Through Trust, Senior Secured Notes

     5.900     10/1/24        248,880        267,546  
          

 

 

 

Total Airlines

             704,516  
          

 

 

 

Commercial Services & Supplies - 1.1%

          

Republic Services Inc., Senior Notes

     5.500     9/15/19        130,000        133,063  

Republic Services Inc., Senior Notes

     5.250     11/15/21        330,000        347,488  

 

See Notes to Schedule of Investments.

 

10


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Commercial Services & Supplies - (continued)

          

Taylor Morrison Communities Inc./Taylor Morrison Holdings II Inc., Senior Notes

     5.250     4/15/21      $ 320,000      $ 322,400 (a)  

Waste Management Holdings Inc., Senior Notes

     7.100     8/1/26        260,000        314,507  

Waste Management Inc., Senior Notes

     7.750     5/15/32        250,000        331,995  
          

 

 

 

Total Commercial Services & Supplies

             1,449,453  
          

 

 

 

Industrial Conglomerates - 1.3%

          

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

     5.000     1/21/21        710,000        692,605 (b)(c)  

General Electric Co., Senior Notes

     6.875     1/10/39        716,000        895,894  

General Electric Co., Subordinated Notes

     5.300     2/11/21        138,000        143,849  
          

 

 

 

Total Industrial Conglomerates

             1,732,348  
          

 

 

 

Machinery - 0.2%

          

Caterpillar Inc., Senior Notes

     4.750     5/15/64        220,000        228,670  

Wabtec Corp., Senior Notes

     4.150     3/15/24        60,000        59,650  
          

 

 

 

Total Machinery

             288,320  
          

 

 

 

Road & Rail - 0.2%

          

Union Pacific Corp., Senior Notes

     4.500     9/10/48        30,000        30,722  

Union Pacific Corp., Senior Notes

     4.375     11/15/65        320,000        297,596  
          

 

 

 

Total Road & Rail

             328,318  
          

 

 

 

Transportation Infrastructure - 0.3%

          

SMBC Aviation Capital Finance DAC, Senior Notes

     4.125     7/15/23        350,000        350,814 (a)  
          

 

 

 

TOTAL INDUSTRIALS

             6,980,160  
          

 

 

 
INFORMATION TECHNOLOGY - 2.5%           

Communications Equipment - 0.4%

          

Harris Corp., Senior Notes

     4.854     4/27/35        260,000        267,578  

Harris Corp., Senior Notes

     5.054     4/27/45        210,000        221,764  
          

 

 

 

Total Communications Equipment

             489,342  
          

 

 

 

Semiconductors & Semiconductor Equipment - 0.1%

 

       

Intel Corp., Senior Notes

     4.900     7/29/45        130,000        144,327  
          

 

 

 

Software - 0.8%

          

Microsoft Corp., Senior Notes

     4.250     2/6/47        970,000        1,021,046  

salesforce.com Inc., Senior Notes

     3.700     4/11/28        100,000        99,263  
          

 

 

 

Total Software

             1,120,309  
          

 

 

 

Technology Hardware, Storage & Peripherals - 1.2%

 

       

Apple Inc., Senior Notes

     3.850     8/4/46        340,000        326,868  

Dell International LLC/EMC Corp., Senior Secured Notes

     4.420     6/15/21        620,000        629,734 (a)  

 

See Notes to Schedule of Investments.

 

11


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Technology Hardware, Storage & Peripherals - (continued)

 

       

HP Inc., Senior Notes

     4.650     12/9/21      $ 310,000      $ 319,353  

Seagate HDD Cayman, Senior Notes

     4.250     3/1/22        420,000        417,703  
          

 

 

 

Total Technology Hardware, Storage & Peripherals

 

          1,693,658  
          

 

 

 

TOTAL INFORMATION TECHNOLOGY

             3,447,636  
          

 

 

 
MATERIALS - 6.7%           

Chemicals - 1.0%

          

Dow Chemical Co., Senior Notes

     7.375     11/1/29        800,000        1,003,654  

Syngenta Finance NV, Senior Notes

     4.892     4/24/25        230,000        226,078 (a)  

Syngenta Finance NV, Senior Notes

     5.676     4/24/48        200,000        180,371 (a)  
          

 

 

 

Total Chemicals

             1,410,103  
          

 

 

 

Metals & Mining - 5.5%

          

Alcoa Nederland Holding BV, Senior Notes

     6.750     9/30/24        250,000        265,625 (a)  

Alcoa Nederland Holding BV, Senior Notes

     6.125     5/15/28        800,000        824,000 (a)  

Anglo American Capital PLC, Senior Notes

     4.000     9/11/27        500,000        461,527 (a)  

ArcelorMittal, Senior Notes

     5.125     6/1/20        70,000        71,717  

ArcelorMittal, Senior Notes

     6.125     6/1/25        50,000        54,399  

Barrick North America Finance LLC, Senior Notes

     5.700     5/30/41        50,000        54,252  

Barrick PD Australia Finance Pty Ltd., Senior Notes

     5.950     10/15/39        180,000        197,977  

BHP Billiton Finance USA Ltd., Senior Notes

     5.000     9/30/43        100,000        111,256  

BHP Billiton Finance USA Ltd., Senior Notes (6.750% to 10/20/25 then USD 5 year Swap Rate + 5.093%)

     6.750     10/19/75        470,000        516,412 (a)(b)  

First Quantum Minerals Ltd., Senior Notes

     7.000     2/15/21        230,000        227,844 (a)  

Freeport-McMoRan Inc., Senior Notes

     3.550     3/1/22        60,000        58,200  

Freeport-McMoRan Inc., Senior Notes

     6.875     2/15/23        630,000        674,100  

Glencore Finance Canada Ltd., Senior Notes

     6.900     11/15/37        430,000        480,786 (a)  

Glencore Finance Canada, Ltd., Senior Notes

     5.550     10/25/42        150,000        148,475 (a)  

Glencore Funding LLC, Senior Notes

     4.000     3/27/27        560,000        526,558 (a)  

Glencore Funding LLC, Senior Notes

     3.875     10/27/27        170,000        158,031 (a)  

Northwest Acquisitions ULC/Dominion Finco Inc., Senior Secured Notes

     7.125     11/1/22        380,000        389,500 (a)  

Southern Copper Corp., Senior Notes

     5.375     4/16/20        150,000        154,728  

Southern Copper Corp., Senior Notes

     5.250     11/8/42        470,000        476,770  

Vale Overseas Ltd., Senior Notes

     6.875     11/21/36        1,148,000        1,338,798  

Yamana Gold Inc., Senior Notes

     4.950     7/15/24        370,000        365,199  
          

 

 

 

Total Metals & Mining

             7,556,154  
          

 

 

 

 

See Notes to Schedule of Investments.

 

12


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Paper & Forest Products - 0.2%

          

Georgia-Pacific LLC, Senior Notes

     7.375     12/1/25      $ 250,000      $ 298,920  
          

 

 

 

TOTAL MATERIALS

             9,265,177  
          

 

 

 
REAL ESTATE - 0.8%           

Equity Real Estate Investment Trusts (REITs) - 0.6%

          

American Homes 4 Rent LP, Senior Notes

     4.250     2/15/28        10,000        9,585  

MPT Operating Partnership LP/MPT Finance Corp., Senior Notes

     5.000     10/15/27        250,000        241,563  

Washington Prime Group LP, Senior Notes

     5.950     8/15/24        200,000        189,518  

WEA Finance LLC, Senior Notes

     4.125     9/20/28        340,000        337,327 (a)  
          

 

 

 

Total Equity Real Estate Investment Trusts (REITs)

             777,993  
          

 

 

 

Real Estate Management & Development - 0.2%

          

Security Capital Group Inc., Senior Notes

     7.700     6/15/28        280,000        336,482  
          

 

 

 

TOTAL REAL ESTATE

             1,114,475  
          

 

 

 
UTILITIES - 2.3%           

Electric Utilities - 2.3%

          

CenterPoint Energy Houston Electric LLC, Senior Secured Bonds

     4.500     4/1/44        210,000        221,833  

Enel Finance International NV, Senior Notes

     2.875     5/25/22        300,000        285,584 (a)  

FirstEnergy Corp., Senior Notes

     3.900     7/15/27        310,000        302,110  

FirstEnergy Corp., Senior Notes

     7.375     11/15/31        830,000        1,073,726  

Pacific Gas & Electric Co., Senior Notes

     3.300     12/1/27        500,000        458,000  

Pacific Gas & Electric Co., Senior Notes

     6.050     3/1/34        130,000        148,146  

Virginia Electric & Power Co., Senior Notes

     8.875     11/15/38        390,000        607,521  
          

 

 

 

TOTAL UTILITIES

             3,096,920  
          

 

 

 

TOTAL CORPORATE BONDS & NOTES

(Cost - $113,048,162)

 

 

          119,392,275  
          

 

 

 
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 6.1%           

U.S. Government Obligations - 6.1%

          

U.S. Treasury Notes

     2.625     8/31/20        2,300,000        2,291,959  

U.S. Treasury Notes

     2.750     8/31/23        3,380,000        3,350,755  

U.S. Treasury Notes

     2.875     9/30/23        230,000        229,223  

U.S. Treasury Notes

     2.875     7/31/25        120,000        118,992  

U.S. Treasury Notes

     2.750     8/31/25        200,000        196,739  

U.S. Treasury Notes

     2.875     8/15/28        1,855,000        1,826,704  

U.S. Treasury Notes

     3.125     5/15/48        430,000        424,373  
          

 

 

 

TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS

(Cost - $8,446,071)

 

 

        8,438,745  
          

 

 

 
SOVEREIGN BONDS - 4.1%           

Argentina - 2.0%

          

Argentine Republic Government International Bond, Senior Notes

     7.500     4/22/26        370,000        330,780  

 

See Notes to Schedule of Investments.

 

13


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

Argentina - (continued)

          

Argentine Republic Government International Bond, Senior Notes

     6.875     1/26/27      $ 120,000      $ 102,300  

Argentine Republic Government International Bond, Senior Notes

     5.875     1/11/28        390,000        309,660  

Argentine Republic Government International Bond, Senior Notes

     7.625     4/22/46        150,000        122,214  

Argentine Republic Government International Bond, Senior Notes

     6.875     1/11/48        150,000        116,250  

Provincia de Buenos Aires, Senior Notes

     9.125     3/16/24        1,220,000        1,129,598 (a)  

Provincia de Cordoba, Senior Notes

     7.450     9/1/24        740,000        638,398 (a)  
          

 

 

 

Total Argentina

             2,749,200  
          

 

 

 

Canada - 0.7%

          

Province of Quebec Canada, Senior Notes, Step Bond

     7.970     7/22/36        650,000        979,854  
          

 

 

 

Ecuador - 0.5%

          

Ecuador Government International Bond, Senior Notes

     10.750     3/28/22        610,000        650,412 (a)  
          

 

 

 

Indonesia - 0.3%

          

Indonesia Government International Bond, Senior Notes

     4.350     1/11/48        440,000        403,531  
          

 

 

 

Mexico - 0.2%

          

Mexico Government International Bond, Senior Notes

     4.350     1/15/47        360,000        327,604  
          

 

 

 

United Arab Emirates - 0.3%

          

Abu Dhabi Government International Bond, Senior Notes

     4.125     10/11/47        440,000        421,344 (a)  
          

 

 

 

Uruguay - 0.1%

          

Uruguay Government International Bond, Senior Notes

     4.975     4/20/55        70,000        70,175  
          

 

 

 

TOTAL SOVEREIGN BONDS

(Cost - $5,820,981)

             5,602,120  
          

 

 

 
MUNICIPAL BONDS - 1.3%           

Alabama - 0.2%

          

Alabama Economic Settlement Authority, BP Settlement Revenue, Series B

     3.163     9/15/25        280,000        275,036  
          

 

 

 

 

See Notes to Schedule of Investments.

 

14


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

SECURITY

   RATE     MATURITY
DATE
     FACE
AMOUNT
     VALUE  

California - 0.8%

          

Los Angeles County Public Works Financing Authority Revenue, Multiple Capital Projects I, Series 2010 B, Taxable Build America Bonds

     7.618     8/1/40      $ 650,000      $ 940,270  

University of California Revenue, Taxable, General Series AG

     4.062     5/15/33        150,000        151,485  
          

 

 

 

Total California

             1,091,755  
          

 

 

 

Florida - 0.1%

          

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

     4.172     10/1/47        170,000        168,560  
          

 

 

 

Illinois - 0.2%

          

State of Illinois, GO Build America Bonds-Taxable

     6.725     4/1/35        310,000        329,592  
          

 

 

 

TOTAL MUNICIPAL BONDS

(Cost - $1,876,802)

             1,864,943  
          

 

 

 
                  SHARES         
PREFERRED STOCKS - 0.3%           
FINANCIALS - 0.3%           

Capital Markets - 0.2%

          

Carlyle Group LP

     5.875        10,775        243,946  
          

 

 

 

Insurance - 0.1%

          

Delphi Financial Group Inc. (3 mo. USD LIBOR + 3.190%)

     5.504        5,725        132,391 (b)  
          

 

 

 

TOTAL PREFERRED STOCKS

(Cost - $412,443)

             376,337  
          

 

 

 

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS

(Cost - $129,604,459)

 

 

     135,674,420  
          

 

 

 
SHORT-TERM INVESTMENTS - 0.4%           

Western Asset Government Cash Management Portfolio LLC

(Cost - $502,094)

     2.100        502,094        502,094 (e)  
          

 

 

 

TOTAL INVESTMENTS - 99.1%

(Cost - $130,106,553)

             136,176,514  

Other Assets in Excess of Liabilities - 0.9%

             1,231,192  
          

 

 

 

TOTAL NET ASSETS - 100.0%

           $ 137,407,706  
          

 

 

 

 

See Notes to Schedule of Investments.

 

15


WESTERN ASSET INVESTMENT GRADE INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    September 30, 2018

 

 

(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)

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.

 

(c)

Security has no maturity date. The date shown represents the next call date. (d) Security is valued using significant unobservable inputs (Note 1).

 

(e)

In this instance, as defined in the Investment Company Act of 1940, an “Affiliated Company” represents Fund ownership of at least 5% of the outstanding voting securities of an issuer, or a company which is under common ownership or control. At September 30, 2018, the total market value of investments in Affiliated Companies was $502,094 and the cost was $502,094 (Note 2).

Abbreviations used in this schedule:

 

GO    — General Obligation
ICE    — Intercontinental Exchange
JSC    — Joint Stock Company
LIBOR    — London Interbank Offered Rate

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

 

     Number of
Contracts
     Expiration
Date
     Notional
Amount
     Market
Value
     Unrealized
Appreciation
(Depreciation)
 
Contracts to Buy:

 

U.S. Treasury 2-Year Notes

     31        12/18      $ 6,535,212      $ 6,532,766      $ (2,446

U.S. Treasury 5-Year Notes

     26        12/18        2,944,867        2,924,391        (20,476

U.S. Treasury Ultra Long-Term Bonds

     16        12/18        2,561,093        2,468,500        (92,593
              

 

 

 
                 (115,515
              

 

 

 
Contracts to Sell:

 

U.S. Treasury 10-Year Notes

     74        12/18        8,899,436        8,789,813        109,623  

U.S. Treasury Long-Term Bonds

     95        12/18        13,650,189        13,347,500        302,689  
              

 

 

 
                 412,312  
              

 

 

 
Net unrealized appreciation on open futures contracts

 

   $ 296,797  
              

 

 

 

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

 

See Notes to Schedule of Investments.

 

16


Notes to Schedule of Investments (unaudited)

 

1. Organization and significant accounting policies

Western Asset Investment Grade Income Fund Inc. (the “Fund”) (formerly Western Asset Income Fund), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a closed-end diversified investment company. The Fund seeks a high level of current income, consistent with prudent investment risk. Capital appreciation is a secondary investment objective.

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

(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. When the Fund holds securities or other assets that are denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Directors.

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

 

17


Notes to Schedule of Investments (unaudited) (continued)

 

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

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

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

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

 

   

Level 1 – quoted prices in active markets for identical investments

 

   

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

 

   

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

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

 

18


Notes to Schedule of Investments (unaudited) (continued)

 

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:

           

Industrials

     —        $ 6,927,635      $ 52,525      $ 6,980,160  

Other Corporate Bonds & Notes

     —          112,412,115        —          112,412,115  

U.S. Government & Agency Obligations

     —          8,438,745        —          8,438,745  

Sovereign Bonds

     —          5,602,120        —          5,602,120  

Municipal Bonds

     —          1,864,943        —          1,864,943  

Preferred Stocks:

           

Financials

   $ 243,946        132,391        —          376,337  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Long-Term Investments

     243,946        135,377,949        52,525        135,674,420  
  

 

 

    

 

 

    

 

 

    

 

 

 

Short-Term Investments†

     —          502,094        —          502,094  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments

   $ 243,946      $ 135,880,043      $ 52,525      $ 136,176,514  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other Financial Instruments:

           

Futures Contracts

   $ 412,312        —          —        $ 412,312  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 656,258      $ 135,880,043      $ 52,525      $ 136,588,826  
  

 

 

    

 

 

    

 

 

    

 

 

 

LIABILITIES

 

DESCRIPTION

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

Other Financial Instruments:

           

Futures Contracts

   $ 115,515        —          —        $ 115,515  

 

See Schedule of Investments for additional detailed categorizations.

2. Transactions with affiliated companies

As defined by the 1940 Act, an affiliated company is one in which the Fund owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. The Fund may invest in Western Asset Government Cash Management Portfolio, LLC (“Cash Management Portfolio”), an affiliated private money market fund managed by , the Fund’s investment adviser. Cash Management Portfolio is available as a cash management vehicle for certain proprietary investment companies affiliated with Legg Mason. While Cash Management Portfolio is not a registered money market fund, it conducts all of its investment activities in accordance with the requirements of Rule 2a-7 under the 1940 Act. Based on the Fund’s relative ownership, the following companies were considered affiliated companies for all or some portion of the period ended September 30, 2018. The

 

19


Notes to Schedule of Investments (unaudited) (continued)

 

following transactions were effected in shares of such companies for the period ended September 30, 2018.

 

     Affiliate
Value at
December 31,

2017
     Purchased      Sold  
   Cost      Shares      Cost      Shares  

Western Asset Government Cash Management Portfolio LLC

   $ 1,100,244      $ 19,709,722        19,709,722      $ 20,307,872        20,307,872  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(cont’d)

   Realized
Gain (Loss)
     Interest
Income
     Net Increase
(Decrease) in
Unrealized
Appreciation
(Depreciation)
     Affiliate
Value at
September 30,
2018
 

Western Asset Government Cash Management Portfolio LLC

     —        $ 9,477        —        $ 502,094  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20


 

ITEM 2.

CONTROLS AND PROCEDURES.

 

  (a)

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

 

  (b)

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

 

ITEM 3.

EXHIBITS.

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


SIGNATURES

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

Western Asset Investment Grade Income Fund Inc.

 

By

  /s/    JANE TRUST        
  Jane Trust
  Chief Executive Officer

Date:

 

November 26, 2018

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

 

By   /s/    JANE TRUST        
  Jane Trust
  Chief Executive Officer

Date:

 

November 26, 2018

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

Date:

 

November 26, 2018