|
INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE
VALUE
|
Fund objectives
The Funds primary investment objective is to seek a high level of current income, consistent with prudent investment risk, through investment
in a diversified portfolio of debt securities. To a lesser extent, the Fund may also invest in privately placed debt securities and in certain equity securities. Capital appreciation is a secondary investment objective.
|
|
|
II
|
|
Western Asset Investment Grade Income Fund Inc.
|
Letter from the president
Dear Shareholder,
We are pleased to provide the annual report of Western Asset Investment Grade Income Fund Inc. for the twelve-month reporting period ended
December 31, 2020. Please read on for a detailed look at prevailing economic and market conditions during the Funds reporting period and to learn how those conditions have affected Fund performance.
As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the
support you receive from your financial advisor. One way we accomplish this is through our website, www.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.
|
We look
forward to helping you meet your financial goals.
Sincerely,
Jane Trust, CFA
President and Chief Executive Officer
January 29, 2021
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|
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Western Asset Investment Grade Income Fund Inc.
|
|
III
|
Fund overview
Q. What is the Funds investment strategy?
A. The Funds primary investment objective is to seek a high level of current income, consistent with prudent investment risk, through investment in a diversified portfolio of debt securities. To a
lesser extent, the Fund may also invest in privately placed debt securities and in certain equity securities. Capital appreciation is a secondary investment objective.
The Fund invests at least 80% of its net assets in fixed income securities that are rated in the Baa or BBB categories or above at the time of purchase by one or more Nationally Recognized Statistical Rating
Organizations (NRSROs) or unrated securities of comparable quality at the time of purchase (as determined by the investment adviser). If a security is rated by multiple NRSROs and receives different ratings, the Fund will treat the
security as being rated in the highest rating category received from an NRSRO. In addition, the Fund may invest up to 20% in other fixed income securities, and not more than 25% in securities restricted as to resale. The Funds 80% investment
policy may be changed by the Board of Directors without shareholder approval upon 60 days prior notice to shareholders. In addition, convertible bonds and preferred securities may be treated as fixed income securities for purposes
of the policy and so, if appropriately rated, would qualify for the 80% test.
At Western Asset Management Company, LLC (Western Asset), the
Funds investment adviser, we utilize a fixed income team approach, with decisions derived from interaction among various investment management sector specialists. The sector teams are comprised of Western Assets senior portfolio
management personnel, research analysts and an in-house economist. Under this team approach, management of client fixed income portfolios will reflect a consensus of interdisciplinary views within the Western
Asset organization. The individuals responsible for development of investment strategy, day-today portfolio management, oversight and coordination of the Fund are S. Kenneth Leech, Ryan K. Brist and Michael C.
Buchanan.
Q. What were the overall market conditions during the Funds reporting period?
A. Fixed income markets posted positive total results over the twelve-month reporting period ended December 31, 2020. However, most
spread sectors (non-Treasuries) lagged equal durationi Treasuries given several periods of elevated volatility. This was driven by a number of factors, including extreme risk aversion as the COVID-19 pandemic escalated, sharply
falling global growth, ongoing trade conflicts, and a number of geopolitical issues. However, the spread sectors generally outperformed in the latter stages of the reporting period, as continued monetary policy accommodation from the Federal Reserve
Board (the Fed)ii policy and news of effective COVID-19 vaccines triggered increased investor risk appetite.
Both short- and long-term U.S. Treasury yields moved
sharply lower during the reporting period. The yield for the two-year Treasury note began the reporting period at 1.58%, equaling the high for 2020. The low for the period of 0.11% occurred several times
during
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Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
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|
1
|
Fund overview (contd)
the second half of 2020 and ended the period at 0.13%. The yield for the ten-year Treasury began the reporting period at 1.92%, the high for the reporting period. The low of 0.52% occurred on August 4, 2020 and ended the period at 0.93%.
All told, the overall credit market, as represented by the Bloomberg Barclays U.S. Credit Indexiii, returned 9.35% during the twelve months ended December 31, 2020. Over the same period, the overall bond market, as
measured by the Bloomberg Barclays U.S. Aggregate Indexiv, returned 7.51%.
Q. How did we respond to these changing market conditions?
A. A number of adjustments were made to the Funds portfolio during the reporting period. We reduced the Funds allocation to
investment-grade corporate bonds and increased its exposure to high-yield corporate bonds, as we found more attractive valuations in the latter. Within the investment-grade market, we pared the Funds weightings in Basic Industry1, Consumer Non-Cyclicals2 and Energy sectors. Within the high-yield market, we increased the Funds
allocations to Consumer Cyclicals3, Consumer
Non-Cyclicals and Energy sectors.
During the reporting period, Treasury futures, which were used to manage the
Funds duration and yield curvev positioning, detracted from performance.
Performance review
For the twelve months ended December 31, 2020, Western Asset Investment Grade Income Fund Inc. returned 9.11% based on its net asset value
(NAV)vi and 6.62% based on its New York Stock Exchange
(NYSE) market price per share. The Funds unmanaged benchmarks, the Bloomberg Barclays U.S. Corporate High Yield
Indexvii and the Bloomberg Barclays U.S. Credit Index, returned 7.11% and
9.35%, respectively, for the same period. The Lipper Corporate Debt Closed-End Funds BBB-Rated Category Averageviii returned 9.26% over the same time frame. Please note that Lipper performance returns are based on each funds NAV.
During the twelve-month period, the Fund made distributions to shareholders totaling $0.61 per share.* The performance table shows the Funds
twelve-month total return based on its NAV and market price as of December 31, 2020. Past performance is no guarantee of future results.
1
|
Basic Industry consists of the following industries: Chemicals, Metals & Mining and Paper.
|
2
|
Consumer Non-Cyclicals consists of the following industries: Consumer Products, Food/Beverage, Health Care,
Pharmaceuticals, Supermarkets and Tobacco.
|
3
|
Consumer Cyclicals consists of the following industries: Automotive, Entertainment, Gaming, Home Construction, Lodging, Retailers, Restaurants, Textiles, and
other consumer services.
|
*
|
For the tax character of distributions paid during the fiscal year ended December 31, 2020, please refer to page 37 of this report.
|
|
|
|
2
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|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
|
|
|
|
Performance Snapshot as of December 31, 2020
|
|
Price Per Share
|
|
12-Month
Total Return**
|
|
$16.23 (NAV)
|
|
|
9.11
|
%
|
$15.90 (Market Price)
|
|
|
6.62
|
%
|
All figures represent past performance and are not a guarantee of future results.
** 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 at NAV.
Total return assumes the
reinvestment of all distributions in additional shares in accordance with the Funds Dividend Reinvestment Plan.
Q. What
were the leading contributors to performance?
A. The largest contributor to the Funds relative performance during the reporting period
was its security selection. Within the Financials sector, overweights to Goldman Sachs Group Inc. and Credit Suisse USA Inc. were beneficial, as their prices rallied. Elsewhere, within Consumer Cyclicals, an underweight to Ford Motor Company was
rewarded, as was an underweight to Intel Corp. in the Information Technology sector.
Active participation in the new issue market after spreads had
significantly widened was additive for returns. In particular, initiating positions in Proctor & Gamble Corp. in March 2020, and Boeing Co. and Wells Fargo & Co. in April 2020, contributed to performance, as their spreads narrowed
as the reporting period progressed.
From a sector positioning perspective, an overweight to banking (in the Financials sector) and an underweight to the
Real Estate sector were beneficial.
Q. What were the leading detractors from performance?
A. The largest detractor from the Funds relative performance during the reporting period was its sector allocation. The largest headwind for returns
was an overweight to the Energy sector, as it performed poorly given falling oil prices. An underweight to Information Technology was also detrimental, as the sector outperformed over the reporting period.
From a security selection perspective, overweight positions in Whiting Petroleum Corp. and Oasis Petroleum Company were negative for results. The oil price war
between Saudi Arabia and Russia earlier in 2020, along with the demand shock due to COVID-19, significantly impacted the profitability of both issuers given the sharp decline in commodity prices.
Finally, having a shorter duration than that of the benchmark detracted from performance, as rates moved lower across the yield curve.
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Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
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|
3
|
Fund overview (contd)
Looking for additional information?
The Fund is traded under the symbol PAI and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available
online under the symbol XPAIX on most financial websites. Barrons and The Wall Street Journals 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 Funds current NAV,
market price and other information.
Thank you for your investment in Western Asset Investment Grade Income Fund Inc. As always, we appreciate that you
have chosen us to manage your assets and we remain focused on achieving the Funds investment goals.
Sincerely,
Western Asset Management Company, LLC
January 21, 2021
RISKS: The Fund is a diversified 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 objectives. The Funds common stock is traded on the New York Stock Exchange. Similar to stocks, the Funds 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. Diversification does not assure against market loss. The Funds investments are
subject to a number of risks, including interest rate, credit and inflation risks. As interest rates rise, bond prices fall, reducing the value of a fixed income investments price. The Fund may invest in high-yield bonds (commonly known as
junk bonds), which are rated below investment grade and carry more risk than higher-rated securities. To the extent that the Fund invests in asset-backed, mortgage-backed or mortgage-related securities, its exposure to prepayment and
extension risks may be greater than investments in other fixed income securities. Leverage may result in greater volatility of NAV and the market price of common shares and increases a shareholders risk of loss. The Fund may invest, to a
limited extent, in foreign securities, including emerging or developing markets. Investing in foreign securities is subject to certain risks not associated with domestic investing, such as currency fluctuations and social, political, and economic
uncertainties which could result in significant volatility. Emerging market countries tend to have economic, political, and legal systems that are less 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 have a potentially large impact on Fund performance. The Fund may also invest in money market funds,
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4
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|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
including funds affiliated with the Funds manager and subadviser. For more information on Fund risks, see
Summary of information regarding the Fund - Principal Risk Factors in this report.
Portfolio holdings and breakdowns are as of December 31,
2020 and are subject to change and may not be representative of the portfolio managers current or future investments. Please refer to pages 7 through 23 for a list and percentage breakdown of the Funds holdings.
The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The
information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed
should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio managers current or future investments. The Funds top five sector holdings (as a percentage
of net assets) as of December 31, 2020 were: Financials (31.8%), Energy (15.1%), Communication Services (10.0%), Industrials (8.7%) and Health Care (8.0%). The Funds portfolio composition is subject to change at any time.
All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. All index performance reflects no
deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.
The information provided is not intended to be a
forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.
i
|
Duration is the measure of the price sensitivity of a fixed income security to an interest rate change of 100 basis points. Calculation is based on the weighted
average of the present values for all cash flows.
|
ii
|
The Federal Reserve Board (the Fed) is responsible for the formulation of U.S. policies designed to promote economic growth, full employment, stable
prices, and a sustainable pattern of international trade and payments.
|
iii
|
The Bloomberg Barclays U.S. Credit Index is an index composed of corporate and non-corporate debt issues that are
investment grade (rated Baa3/BBB or higher).
|
iv
|
The Bloomberg Barclays U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage- and asset-backed issues, rated investment
grade or higher, and having at least one year to maturity.
|
v
|
The yield curve is the graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities.
|
vi
|
Net asset value (NAV) is calculated by subtracting total liabilities and outstanding preferred stock (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 Funds market price as determined by supply of and demand for the Funds shares.
|
vii
|
The Bloomberg Barclays U.S. Corporate High Yield Index covers the universe of fixed-rate, non-investment grade debt,
including corporate and non-corporate sectors. Pay-in-kind (PIK) bonds, Eurobonds and debt issues from countries
designated as emerging markets are excluded, but Canadian and global bonds (SEC registered) of issuers in non-emerging market countries are included. Original issue zero coupon bonds, step-up coupon structures and 144A securities are also included.
|
viii
|
Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the twelve-month period
ended December 31, 2020, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 6 funds in the Funds Lipper category.
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|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
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|
5
|
Fund at a
glance (unaudited)
Investment breakdown (%) as a percent of total investments
|
The bar graph above represents the Funds portfolio as of December 31, 2020 and December 31, 2019, and does not include derivatives such
as futures contracts. The Funds portfolio is actively managed. As a result, the composition of its portfolio holdings and sectors is subject to change at any time.
|
|
Represents less than 0.1%.
|
|
|
|
6
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
Schedule of investments
December 31, 2020
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
Corporate Bonds & Notes 92.7%
|
|
Communication Services 10.0%
|
|
Diversified Telecommunication Services
3.4%
|
|
AT&T Inc., Senior Notes
|
|
|
4.300
|
%
|
|
|
2/15/30
|
|
|
$
|
80,000
|
|
|
$
|
95,635
|
|
AT&T Inc., Senior Notes
|
|
|
4.500
|
%
|
|
|
5/15/35
|
|
|
|
360,000
|
|
|
|
437,304
|
|
AT&T Inc., Senior Notes
|
|
|
6.350
|
%
|
|
|
3/15/40
|
|
|
|
50,000
|
|
|
|
71,584
|
|
AT&T Inc., Senior Notes
|
|
|
4.900
|
%
|
|
|
6/15/42
|
|
|
|
150,000
|
|
|
|
187,093
|
|
AT&T Inc., Senior Notes
|
|
|
4.800
|
%
|
|
|
6/15/44
|
|
|
|
210,000
|
|
|
|
262,634
|
|
AT&T Inc., Senior Notes
|
|
|
4.550
|
%
|
|
|
3/9/49
|
|
|
|
310,000
|
|
|
|
374,447
|
|
AT&T Inc., Senior Notes
|
|
|
3.500
|
%
|
|
|
9/15/53
|
|
|
|
37,000
|
|
|
|
37,197
|
(a)
|
AT&T Inc., Senior Notes
|
|
|
3.500
|
%
|
|
|
2/1/61
|
|
|
|
70,000
|
|
|
|
69,868
|
|
British Telecommunications PLC, Senior Notes
|
|
|
9.625
|
%
|
|
|
12/15/30
|
|
|
|
70,000
|
|
|
|
116,228
|
|
Corning Inc., Senior Notes
|
|
|
3.900
|
%
|
|
|
11/15/49
|
|
|
|
130,000
|
|
|
|
159,853
|
|
Frontier Communications Corp., Senior Secured Notes
|
|
|
5.875
|
%
|
|
|
10/15/27
|
|
|
|
420,000
|
|
|
|
454,913
|
(a)
|
Telefonica Emisiones SA, Senior Notes
|
|
|
7.045
|
%
|
|
|
6/20/36
|
|
|
|
60,000
|
|
|
|
89,686
|
|
Verizon Communications Inc., Senior Notes
|
|
|
5.150
|
%
|
|
|
9/15/23
|
|
|
|
1,790,000
|
|
|
|
2,018,077
|
|
Verizon Communications Inc., Senior Notes
|
|
|
5.500
|
%
|
|
|
3/16/47
|
|
|
|
630,000
|
|
|
|
919,957
|
|
Total Diversified Telecommunication Services
|
|
|
|
5,294,476
|
|
Media 4.4%
|
|
CCO Holdings LLC/CCO Holdings Capital Corp., Senior Notes
|
|
|
4.500
|
%
|
|
|
5/1/32
|
|
|
|
580,000
|
|
|
|
620,003
|
(a)
|
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured
Notes
|
|
|
6.384
|
%
|
|
|
10/23/35
|
|
|
|
110,000
|
|
|
|
151,012
|
|
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured
Notes
|
|
|
6.484
|
%
|
|
|
10/23/45
|
|
|
|
260,000
|
|
|
|
368,540
|
|
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured
Notes
|
|
|
5.375
|
%
|
|
|
5/1/47
|
|
|
|
350,000
|
|
|
|
437,502
|
|
Comcast Corp., Senior Notes
|
|
|
6.450
|
%
|
|
|
3/15/37
|
|
|
|
220,000
|
|
|
|
339,255
|
|
Comcast Corp., Senior Notes
|
|
|
6.950
|
%
|
|
|
8/15/37
|
|
|
|
160,000
|
|
|
|
258,250
|
|
Comcast Corp., Senior Notes
|
|
|
6.400
|
%
|
|
|
5/15/38
|
|
|
|
950,000
|
|
|
|
1,482,709
|
|
Fox Corp., Senior Notes
|
|
|
5.476
|
%
|
|
|
1/25/39
|
|
|
|
510,000
|
|
|
|
700,234
|
|
Time Warner Cable LLC, Senior Secured Notes
|
|
|
6.550
|
%
|
|
|
5/1/37
|
|
|
|
180,000
|
|
|
|
247,362
|
|
Time Warner Cable LLC, Senior Secured Notes
|
|
|
7.300
|
%
|
|
|
7/1/38
|
|
|
|
200,000
|
|
|
|
297,059
|
|
Time Warner Cable LLC, Senior Secured Notes
|
|
|
6.750
|
%
|
|
|
6/15/39
|
|
|
|
10,000
|
|
|
|
14,266
|
|
Time Warner Cable LLC, Senior Secured Notes
|
|
|
5.500
|
%
|
|
|
9/1/41
|
|
|
|
50,000
|
|
|
|
64,455
|
|
Time Warner Entertainment Co. LP, Senior Secured Notes
|
|
|
8.375
|
%
|
|
|
3/15/23
|
|
|
|
180,000
|
|
|
|
210,527
|
|
See Notes to Financial
Statements.
|
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
7
|
Schedule of investments (contd)
December 31, 2020
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
Banks continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Santander SA, Senior Notes
|
|
|
3.490
|
%
|
|
|
5/28/30
|
|
|
$
|
200,000
|
|
|
$
|
224,520
|
|
Bank of America Corp., Senior Notes
|
|
|
5.875
|
%
|
|
|
2/7/42
|
|
|
|
320,000
|
|
|
|
487,512
|
|
Bank of America Corp., Senior Notes (3.458% to 3/15/24 then 3 mo. USD LIBOR + 0.970%)
|
|
|
3.458
|
%
|
|
|
3/15/25
|
|
|
|
70,000
|
|
|
|
76,250
|
(c)
|
Bank of America Corp., Senior Notes (4.083% to 3/20/50 then 3 mo. USD LIBOR + 3.150%)
|
|
|
4.083
|
%
|
|
|
3/20/51
|
|
|
|
160,000
|
|
|
|
202,619
|
(c)
|
Bank of America Corp., Subordinated Notes
|
|
|
6.110
|
%
|
|
|
1/29/37
|
|
|
|
320,000
|
|
|
|
467,150
|
|
Bank of America Corp., Subordinated Notes
|
|
|
7.750
|
%
|
|
|
5/14/38
|
|
|
|
900,000
|
|
|
|
1,537,154
|
|
Barclays Bank PLC, Subordinated Notes
|
|
|
10.179
|
%
|
|
|
6/12/21
|
|
|
|
240,000
|
|
|
|
249,633
|
(a)
|
Barclays Bank PLC, Subordinated Notes
|
|
|
7.625
|
%
|
|
|
11/21/22
|
|
|
|
450,000
|
|
|
|
500,766
|
|
Barclays PLC, Junior Subordinated Notes (6.125% to 6/15/26 then 5 year Treasury Constant Maturity Rate +
5.867%)
|
|
|
6.125
|
%
|
|
|
12/15/25
|
|
|
|
1,060,000
|
|
|
|
1,144,828
|
(b)(c)
|
Barclays PLC, Subordinated Notes (5.088% to 6/20/29 then 3 mo. USD LIBOR + 3.054%)
|
|
|
5.088
|
%
|
|
|
6/20/30
|
|
|
|
640,000
|
|
|
|
768,275
|
(c)
|
BNP Paribas SA, Junior Subordinated Notes (7.625% to 3/30/21 then USD 5 year ICE Swap Rate + 6.314%)
|
|
|
7.625
|
%
|
|
|
3/30/21
|
|
|
|
330,000
|
|
|
|
334,331
|
(a)(b)(c)
|
BNP Paribas SA, Senior Notes (5.198% to 1/10/29 then 3 mo. USD LIBOR + 2.567%)
|
|
|
5.198
|
%
|
|
|
1/10/30
|
|
|
|
280,000
|
|
|
|
347,606
|
(a)(c)
|
BPCE SA, Subordinated Notes
|
|
|
5.150
|
%
|
|
|
7/21/24
|
|
|
|
410,000
|
|
|
|
467,343
|
(a)
|
Citigroup Inc., Senior Notes
|
|
|
8.125
|
%
|
|
|
7/15/39
|
|
|
|
251,000
|
|
|
|
449,207
|
|
Citigroup Inc., Senior Notes
|
|
|
5.875
|
%
|
|
|
1/30/42
|
|
|
|
240,000
|
|
|
|
365,534
|
|
Citigroup Inc., Subordinated Notes
|
|
|
5.500
|
%
|
|
|
9/13/25
|
|
|
|
750,000
|
|
|
|
902,178
|
|
Citigroup Inc., Subordinated Notes
|
|
|
6.125
|
%
|
|
|
8/25/36
|
|
|
|
404,000
|
|
|
|
569,031
|
|
Citigroup Inc., Subordinated Notes
|
|
|
6.675
|
%
|
|
|
9/13/43
|
|
|
|
370,000
|
|
|
|
603,249
|
|
Commonwealth Bank of Australia, Subordinated Notes
|
|
|
3.743
|
%
|
|
|
9/12/39
|
|
|
|
220,000
|
|
|
|
259,300
|
(a)
|
Cooperatieve Rabobank UA, Senior Notes
|
|
|
5.750
|
%
|
|
|
12/1/43
|
|
|
|
450,000
|
|
|
|
672,683
|
|
Cooperatieve Rabobank UA, Senior Notes
|
|
|
5.250
|
%
|
|
|
8/4/45
|
|
|
|
340,000
|
|
|
|
486,732
|
|
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
|
|
|
|
1,040,000
|
|
|
|
1,268,046
|
(a)(b)(c)
|
Danske Bank A/S, Senior Notes
|
|
|
5.000
|
%
|
|
|
1/12/22
|
|
|
|
1,780,000
|
|
|
|
1,858,805
|
(a)
|
Danske Bank A/S, Senior Notes
|
|
|
5.375
|
%
|
|
|
1/12/24
|
|
|
|
230,000
|
|
|
|
259,734
|
(a)
|
HSBC Holdings PLC, Junior Subordinated Notes (4.600% to 6/17/31 then 5 year Treasury Constant Maturity Rate +
3.649%)
|
|
|
4.600
|
%
|
|
|
12/17/30
|
|
|
|
320,000
|
|
|
|
326,438
|
(b)(c)
|
See Notes to Financial
Statements.
|
|
|
12
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
Banks continued
|
|
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
|
|
|
$
|
337,313
|
(b)(c)
|
HSBC Holdings PLC, Senior Notes
|
|
|
4.950
|
%
|
|
|
3/31/30
|
|
|
|
200,000
|
|
|
|
250,912
|
|
HSBC Holdings PLC, Subordinated Notes
|
|
|
4.250
|
%
|
|
|
8/18/25
|
|
|
|
210,000
|
|
|
|
238,850
|
|
HSBC Holdings PLC, Subordinated Notes
|
|
|
7.625
|
%
|
|
|
5/17/32
|
|
|
|
70,000
|
|
|
|
102,309
|
|
ING Bank NV, Subordinated Notes
|
|
|
5.800
|
%
|
|
|
9/25/23
|
|
|
|
600,000
|
|
|
|
681,912
|
(a)
|
Intesa Sanpaolo SpA, Senior Notes
|
|
|
3.125
|
%
|
|
|
7/14/22
|
|
|
|
300,000
|
|
|
|
310,781
|
(a)
|
Intesa Sanpaolo SpA, Senior Notes
|
|
|
4.700
|
%
|
|
|
9/23/49
|
|
|
|
200,000
|
|
|
|
251,827
|
(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
|
|
|
|
275,699
|
(b)(c)
|
JPMorgan Chase & Co., Senior Notes (3.897% to 1/23/48 then 3 mo. USD LIBOR + 1.220%)
|
|
|
3.897
|
%
|
|
|
1/23/49
|
|
|
|
50,000
|
|
|
|
63,147
|
(c)
|
JPMorgan Chase & Co., Subordinated Notes
|
|
|
5.625
|
%
|
|
|
8/16/43
|
|
|
|
440,000
|
|
|
|
663,457
|
|
JPMorgan Chase & Co., Subordinated Notes
|
|
|
4.950
|
%
|
|
|
6/1/45
|
|
|
|
490,000
|
|
|
|
695,299
|
|
Lloyds Banking Group PLC, Junior Subordinated Notes (7.500% to 6/27/24 then USD 5 year ICE Swap Rate +
4.760%)
|
|
|
7.500
|
%
|
|
|
6/27/24
|
|
|
|
360,000
|
|
|
|
406,800
|
(b)(c)
|
Lloyds Banking Group PLC, Junior Subordinated Notes (7.500% to 9/27/25 then USD 5 year ICE Swap Rate +
4.496%)
|
|
|
7.500
|
%
|
|
|
9/27/25
|
|
|
|
370,000
|
|
|
|
426,425
|
(b)(c)
|
Natwest 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
|
|
|
|
2,075,319
|
(b)(c)
|
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
|
|
|
|
590,000
|
|
|
|
613,677
|
(b)(c)
|
Natwest Group PLC, Subordinated Notes
|
|
|
6.100
|
%
|
|
|
6/10/23
|
|
|
|
1,010,000
|
|
|
|
1,132,520
|
|
Natwest Group PLC, Subordinated Notes
|
|
|
6.000
|
%
|
|
|
12/19/23
|
|
|
|
350,000
|
|
|
|
400,168
|
|
Natwest Group PLC, Subordinated Notes (3.754% to 11/1/24 then 5 year Treasury Constant Maturity Rate +
2.100%)
|
|
|
3.754
|
%
|
|
|
11/1/29
|
|
|
|
230,000
|
|
|
|
244,891
|
(c)
|
NatWest Markets NV, Subordinated Notes
|
|
|
7.750
|
%
|
|
|
5/15/23
|
|
|
|
480,000
|
|
|
|
543,439
|
|
Santander UK Group Holdings PLC, Subordinated Notes
|
|
|
4.750
|
%
|
|
|
9/15/25
|
|
|
|
210,000
|
|
|
|
237,045
|
(a)
|
Standard Chartered PLC, Subordinated Notes
|
|
|
5.700
|
%
|
|
|
3/26/44
|
|
|
|
410,000
|
|
|
|
551,530
|
(a)
|
UniCredit SpA, Senior Notes
|
|
|
6.572
|
%
|
|
|
1/14/22
|
|
|
|
590,000
|
|
|
|
621,846
|
(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
|
|
|
|
1,040,000
|
|
|
|
1,257,890
|
(a)(c)
|
See Notes to Financial
Statements.
|
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
13
|
Schedule of investments (contd)
December 31, 2020
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
Banks continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wachovia Capital Trust III Ltd., Junior Subordinated Bonds (the greater of 3 mo. USD LIBOR + 0.930% or
5.570%)
|
|
|
5.570
|
%
|
|
|
2/8/21
|
|
|
$
|
1,190,000
|
|
|
$
|
1,208,005
|
(b)(c)
|
Wells Fargo & Co., Senior Notes (5.013% to 4/4/50 then 3 mo. USD LIBOR + 4.240%)
|
|
|
5.013
|
%
|
|
|
4/4/51
|
|
|
|
260,000
|
|
|
|
370,168
|
(c)
|
Wells Fargo & Co., Subordinated Notes
|
|
|
5.375
|
%
|
|
|
11/2/43
|
|
|
|
430,000
|
|
|
|
599,246
|
|
Wells Fargo & Co., Subordinated Notes
|
|
|
4.750
|
%
|
|
|
12/7/46
|
|
|
|
580,000
|
|
|
|
760,312
|
|
Westpac Banking Corp., Subordinated Notes
|
|
|
4.421
|
%
|
|
|
7/24/39
|
|
|
|
110,000
|
|
|
|
140,903
|
|
Total Banks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,588,027
|
|
Capital Markets 5.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles Schwab Corp., Junior Subordinated Notes (4.000% to 12/1/30 then 10 year Treasury Constant Maturity Rate +
3.079%)
|
|
|
4.000
|
%
|
|
|
12/1/30
|
|
|
|
320,000
|
|
|
|
338,400
|
(b)(c)
|
CI Financial Corp., Senior Notes
|
|
|
3.200
|
%
|
|
|
12/17/30
|
|
|
|
240,000
|
|
|
|
246,093
|
|
CME Group Inc., Senior Notes
|
|
|
5.300
|
%
|
|
|
9/15/43
|
|
|
|
440,000
|
|
|
|
658,403
|
|
Credit Suisse Group AG, Junior Subordinated Notes (5.250% to 8/11/27 then 5 year Treasury Constant Maturity Rate +
4.889%)
|
|
|
5.250
|
%
|
|
|
2/11/27
|
|
|
|
1,060,000
|
|
|
|
1,123,600
|
(a)(b)(c)
|
Credit Suisse Group AG, Senior Notes (4.194% to 4/1/30 then SOFR + 3.730%)
|
|
|
4.194
|
%
|
|
|
4/1/31
|
|
|
|
250,000
|
|
|
|
294,588
|
(a)(c)
|
Credit Suisse USA Inc., Senior Notes
|
|
|
7.125
|
%
|
|
|
7/15/32
|
|
|
|
40,000
|
|
|
|
62,140
|
|
Goldman Sachs Group Inc., Senior Notes
|
|
|
6.250
|
%
|
|
|
2/1/41
|
|
|
|
570,000
|
|
|
|
893,902
|
|
Goldman Sachs Group Inc., Subordinated Notes
|
|
|
6.750
|
%
|
|
|
10/1/37
|
|
|
|
640,000
|
|
|
|
980,424
|
|
Goldman Sachs Group Inc., Subordinated Notes
|
|
|
5.150
|
%
|
|
|
5/22/45
|
|
|
|
500,000
|
|
|
|
698,963
|
|
KKR Group Finance Co. III LLC, Senior Notes
|
|
|
5.125
|
%
|
|
|
6/1/44
|
|
|
|
820,000
|
|
|
|
1,079,548
|
(a)
|
KKR Group Finance Co. VI LLC, Senior Notes
|
|
|
3.750
|
%
|
|
|
7/1/29
|
|
|
|
70,000
|
|
|
|
81,570
|
(a)
|
Morgan Stanley, Senior Notes
|
|
|
6.375
|
%
|
|
|
7/24/42
|
|
|
|
90,000
|
|
|
|
147,191
|
|
Raymond James Financial Inc., Senior Notes
|
|
|
4.650
|
%
|
|
|
4/1/30
|
|
|
|
70,000
|
|
|
|
85,995
|
|
Raymond James Financial Inc., Senior Notes
|
|
|
4.950
|
%
|
|
|
7/15/46
|
|
|
|
90,000
|
|
|
|
123,740
|
|
UBS AG Stamford, CT, Subordinated Notes
|
|
|
7.625
|
%
|
|
|
8/17/22
|
|
|
|
340,000
|
|
|
|
376,434
|
|
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
|
|
|
|
580,000
|
|
|
|
636,228
|
(a)(b)(c)
|
Total Capital Markets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,827,219
|
|
Consumer Finance 0.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Navient Corp., Senior Notes
|
|
|
7.250
|
%
|
|
|
1/25/22
|
|
|
|
830,000
|
|
|
|
868,906
|
|
Navient Corp., Senior Notes
|
|
|
6.125
|
%
|
|
|
3/25/24
|
|
|
|
290,000
|
|
|
|
310,479
|
|
Total Consumer Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,179,385
|
|
See Notes to Financial
Statements.
|
|
|
14
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
Diversified Financial Services 2.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AerCap Ireland Capital DAC/AerCap Global Aviation Trust, Senior Notes
|
|
|
4.500
|
%
|
|
|
9/15/23
|
|
|
$
|
340,000
|
|
|
$
|
368,865
|
|
AerCap Ireland Capital DAC/AerCap Global Aviation Trust, Senior Notes
|
|
|
4.875
|
%
|
|
|
1/16/24
|
|
|
|
330,000
|
|
|
|
360,462
|
|
Carlyle Finance LLC, Senior Notes
|
|
|
5.650
|
%
|
|
|
9/15/48
|
|
|
|
110,000
|
|
|
|
143,713
|
(a)
|
Carlyle Finance Subsidiary LLC, Senior Notes
|
|
|
3.500
|
%
|
|
|
9/19/29
|
|
|
|
150,000
|
|
|
|
165,094
|
(a)
|
Carlyle Holdings II Finance LLC, Senior Notes
|
|
|
5.625
|
%
|
|
|
3/30/43
|
|
|
|
220,000
|
|
|
|
284,718
|
(a)
|
Finance of America Funding LLC, Senior Notes
|
|
|
7.875
|
%
|
|
|
11/15/25
|
|
|
|
230,000
|
|
|
|
228,275
|
(a)
|
Global Aircraft Leasing Co. Ltd., Senior Notes (6.500% Cash or 7.250% PIK)
|
|
|
6.500
|
%
|
|
|
9/15/24
|
|
|
|
487,037
|
|
|
|
435,898
|
(a)(d)
|
ILFC E-Capital Trust I Ltd. GTD ((Highest of 3 mo. USD LIBOR, 10 year Treasury
Constant Maturity Rate and 30 year Treasury Constant Maturity Rate) + 1.550%)
|
|
|
3.230
|
%
|
|
|
12/21/65
|
|
|
|
470,000
|
|
|
|
317,250
|
(a)(c)
|
ILFC E-Capital Trust II, Ltd. GTD ((Highest of 3 mo. USD LIBOR, 10 year Treasury
Constant Maturity Rate or 30 year Treasury Constant Maturity Rate) + 1.800%)
|
|
|
3.480
|
%
|
|
|
12/21/65
|
|
|
|
270,000
|
|
|
|
187,840
|
(a)(c)
|
Park Aerospace Holdings Ltd., Senior Notes
|
|
|
5.250
|
%
|
|
|
8/15/22
|
|
|
|
392,000
|
|
|
|
411,560
|
(a)
|
Park Aerospace Holdings Ltd., Senior Notes
|
|
|
5.500
|
%
|
|
|
2/15/24
|
|
|
|
220,000
|
|
|
|
240,108
|
(a)
|
Total Diversified Financial Services
|
|
|
|
|
|
|
|
3,143,783
|
|
Insurance 3.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allianz SE, Junior Subordinated Notes (3.500% to 4/30/26 then 5 year Treasury Constant Maturity Rate +
2.973%)
|
|
|
3.500
|
%
|
|
|
11/17/25
|
|
|
|
200,000
|
|
|
|
204,375
|
(a)(b)(c)
|
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
|
|
|
|
652,337
|
(c)
|
American International Group Inc., Junior Subordinated Notes
|
|
|
6.250
|
%
|
|
|
3/15/37
|
|
|
|
80,000
|
|
|
|
90,257
|
|
American International Group Inc., Senior Notes
|
|
|
4.750
|
%
|
|
|
4/1/48
|
|
|
|
70,000
|
|
|
|
93,550
|
|
AXA SA, Subordinated Notes
|
|
|
8.600
|
%
|
|
|
12/15/30
|
|
|
|
200,000
|
|
|
|
311,863
|
|
Everest Reinsurance Holdings Inc., Senior Notes
|
|
|
3.500
|
%
|
|
|
10/15/50
|
|
|
|
140,000
|
|
|
|
159,565
|
|
Fidelity & Guaranty Life Holdings Inc., Senior Notes
|
|
|
5.500
|
%
|
|
|
5/1/25
|
|
|
|
230,000
|
|
|
|
268,985
|
(a)
|
Liberty Mutual Insurance Co., Subordinated Notes
|
|
|
7.875
|
%
|
|
|
10/15/26
|
|
|
|
490,000
|
|
|
|
633,259
|
(a)
|
Massachusetts Mutual Life Insurance Co., Subordinated Notes
|
|
|
4.900
|
%
|
|
|
4/1/77
|
|
|
|
260,000
|
|
|
|
358,433
|
(a)
|
See Notes to Financial
Statements.
|
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
15
|
Schedule of investments (contd)
December 31, 2020
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
Insurance continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MetLife Inc., Junior Subordinated Notes (6.400% to 12/15/36 then 3 mo. USD LIBOR + 2.205%)
|
|
|
6.400
|
%
|
|
|
12/15/36
|
|
|
$
|
1,150,000
|
|
|
$
|
1,490,660
|
(c)
|
New York Life Insurance Co., Subordinated Notes
|
|
|
4.450
|
%
|
|
|
5/15/69
|
|
|
|
90,000
|
|
|
|
121,357
|
(a)
|
Northwestern Mutual Life Insurance Co., Subordinated Notes
|
|
|
3.625
|
%
|
|
|
9/30/59
|
|
|
|
110,000
|
|
|
|
128,230
|
(a)
|
Teachers Insurance & Annuity Association of America, Subordinated Notes
|
|
|
6.850
|
%
|
|
|
12/16/39
|
|
|
|
400,000
|
|
|
|
630,759
|
(a)
|
Total Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,143,630
|
|
Total Financials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,882,044
|
|
Health Care 8.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biotechnology 0.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AbbVie Inc., Senior Notes
|
|
|
4.550
|
%
|
|
|
3/15/35
|
|
|
|
130,000
|
|
|
|
164,798
|
|
AbbVie Inc., Senior Notes
|
|
|
4.050
|
%
|
|
|
11/21/39
|
|
|
|
740,000
|
|
|
|
897,989
|
|
Gilead Sciences Inc., Senior Notes
|
|
|
5.650
|
%
|
|
|
12/1/41
|
|
|
|
60,000
|
|
|
|
86,811
|
|
Gilead Sciences Inc., Senior Notes
|
|
|
4.750
|
%
|
|
|
3/1/46
|
|
|
|
50,000
|
|
|
|
66,376
|
|
Total Biotechnology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,215,974
|
|
Health Care Equipment & Supplies 0.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abbott Laboratories, Senior Notes
|
|
|
4.900
|
%
|
|
|
11/30/46
|
|
|
|
90,000
|
|
|
|
133,647
|
|
Becton Dickinson and Co., Senior Notes
|
|
|
4.669
|
%
|
|
|
6/6/47
|
|
|
|
410,000
|
|
|
|
539,242
|
|
Total Health Care Equipment & Supplies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
672,889
|
|
Health Care Providers & Services 5.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centene Corp., Senior Notes
|
|
|
4.750
|
%
|
|
|
1/15/25
|
|
|
|
240,000
|
|
|
|
246,595
|
|
Centene Corp., Senior Notes
|
|
|
4.250
|
%
|
|
|
12/15/27
|
|
|
|
100,000
|
|
|
|
106,231
|
|
Centene Corp., Senior Notes
|
|
|
4.625
|
%
|
|
|
12/15/29
|
|
|
|
360,000
|
|
|
|
400,142
|
|
Centene Corp., Senior Notes
|
|
|
3.375
|
%
|
|
|
2/15/30
|
|
|
|
500,000
|
|
|
|
526,827
|
|
Cigna Corp., Senior Notes
|
|
|
4.125
|
%
|
|
|
11/15/25
|
|
|
|
340,000
|
|
|
|
391,857
|
|
Cigna Corp., Senior Notes
|
|
|
4.800
|
%
|
|
|
8/15/38
|
|
|
|
340,000
|
|
|
|
443,792
|
|
CVS Health Corp., Senior Notes
|
|
|
4.100
|
%
|
|
|
3/25/25
|
|
|
|
940,000
|
|
|
|
1,064,907
|
|
CVS Health Corp., Senior Notes
|
|
|
4.300
|
%
|
|
|
3/25/28
|
|
|
|
540,000
|
|
|
|
642,974
|
|
CVS Health Corp., Senior Notes
|
|
|
4.780
|
%
|
|
|
3/25/38
|
|
|
|
570,000
|
|
|
|
723,058
|
|
CVS Health Corp., Senior Notes
|
|
|
5.125
|
%
|
|
|
7/20/45
|
|
|
|
340,000
|
|
|
|
458,464
|
|
CVS Health Corp., Senior Notes
|
|
|
5.050
|
%
|
|
|
3/25/48
|
|
|
|
560,000
|
|
|
|
760,203
|
|
Dartmouth-Hitchcock Health, Secured Bonds
|
|
|
4.178
|
%
|
|
|
8/1/48
|
|
|
|
100,000
|
|
|
|
118,455
|
|
DH Europe Finance II Sarl, Senior Notes
|
|
|
3.400
|
%
|
|
|
11/15/49
|
|
|
|
10,000
|
|
|
|
11,896
|
|
HCA Inc., Senior Secured Notes
|
|
|
4.125
|
%
|
|
|
6/15/29
|
|
|
|
210,000
|
|
|
|
243,875
|
|
HCA Inc., Senior Secured Notes
|
|
|
5.125
|
%
|
|
|
6/15/39
|
|
|
|
110,000
|
|
|
|
141,019
|
|
HCA Inc., Senior Secured Notes
|
|
|
5.500
|
%
|
|
|
6/15/47
|
|
|
|
220,000
|
|
|
|
294,311
|
|
See Notes to Financial
Statements.
|
|
|
16
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
Health Care Providers & Services continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HCA Inc., Senior Secured Notes
|
|
|
5.250
|
%
|
|
|
6/15/49
|
|
|
$
|
350,000
|
|
|
$
|
463,037
|
|
Humana Inc., Senior Notes
|
|
|
8.150
|
%
|
|
|
6/15/38
|
|
|
|
80,000
|
|
|
|
128,272
|
|
Humana Inc., Senior Notes
|
|
|
4.800
|
%
|
|
|
3/15/47
|
|
|
|
150,000
|
|
|
|
201,025
|
|
Magellan Health Inc., Senior Notes
|
|
|
4.900
|
%
|
|
|
9/22/24
|
|
|
|
690,000
|
|
|
|
728,740
|
|
Orlando Health Obligated Group, Senior Notes
|
|
|
4.089
|
%
|
|
|
10/1/48
|
|
|
|
170,000
|
|
|
|
210,526
|
|
UnitedHealth Group Inc., Senior Notes
|
|
|
3.700
|
%
|
|
|
12/15/25
|
|
|
|
160,000
|
|
|
|
183,920
|
|
UnitedHealth Group Inc., Senior Notes
|
|
|
3.500
|
%
|
|
|
8/15/39
|
|
|
|
140,000
|
|
|
|
166,778
|
|
Total Health Care Providers & Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,656,904
|
|
Pharmaceuticals 1.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bausch Health Cos. Inc., Senior Notes
|
|
|
5.000
|
%
|
|
|
1/30/28
|
|
|
|
80,000
|
|
|
|
82,543
|
(a)
|
Bausch Health Cos. Inc., Senior Notes
|
|
|
5.250
|
%
|
|
|
1/30/30
|
|
|
|
80,000
|
|
|
|
84,090
|
(a)
|
Bristol-Myers Squibb Co., Senior Notes
|
|
|
3.400
|
%
|
|
|
7/26/29
|
|
|
|
910,000
|
|
|
|
1,060,165
|
|
Bristol-Myers Squibb Co., Senior Notes
|
|
|
5.000
|
%
|
|
|
8/15/45
|
|
|
|
250,000
|
|
|
|
362,169
|
|
Teva Pharmaceutical Finance Netherlands III BV, Senior Notes
|
|
|
7.125
|
%
|
|
|
1/31/25
|
|
|
|
200,000
|
|
|
|
221,456
|
|
Zoetis Inc., Senior Notes
|
|
|
4.700
|
%
|
|
|
2/1/43
|
|
|
|
30,000
|
|
|
|
41,142
|
|
Total Pharmaceuticals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,851,565
|
|
Total Health Care
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,397,332
|
|
Industrials 8.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace & Defense 3.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avolon Holdings Funding Ltd., Senior Notes
|
|
|
5.125
|
%
|
|
|
10/1/23
|
|
|
|
520,000
|
|
|
|
556,980
|
(a)
|
Avolon Holdings Funding Ltd., Senior Notes
|
|
|
3.950
|
%
|
|
|
7/1/24
|
|
|
|
140,000
|
|
|
|
147,981
|
(a)
|
Avolon Holdings Funding Ltd., Senior Notes
|
|
|
4.250
|
%
|
|
|
4/15/26
|
|
|
|
530,000
|
|
|
|
571,540
|
(a)
|
Boeing Co., Senior Notes
|
|
|
2.800
|
%
|
|
|
3/1/24
|
|
|
|
320,000
|
|
|
|
336,245
|
|
Boeing Co., Senior Notes
|
|
|
3.100
|
%
|
|
|
5/1/26
|
|
|
|
1,400,000
|
|
|
|
1,500,189
|
|
Boeing Co., Senior Notes
|
|
|
3.250
|
%
|
|
|
2/1/28
|
|
|
|
370,000
|
|
|
|
397,447
|
|
Boeing Co., Senior Notes
|
|
|
5.705
|
%
|
|
|
5/1/40
|
|
|
|
210,000
|
|
|
|
273,032
|
|
Boeing Co., Senior Notes
|
|
|
5.805
|
%
|
|
|
5/1/50
|
|
|
|
140,000
|
|
|
|
193,252
|
|
Huntington Ingalls Industries Inc., Senior Notes
|
|
|
3.483
|
%
|
|
|
12/1/27
|
|
|
|
200,000
|
|
|
|
224,529
|
|
Lockheed Martin Corp., Senior Notes
|
|
|
4.500
|
%
|
|
|
5/15/36
|
|
|
|
40,000
|
|
|
|
52,824
|
|
Northrop Grumman Systems Corp., Senior Notes
|
|
|
7.875
|
%
|
|
|
3/1/26
|
|
|
|
870,000
|
|
|
|
1,156,400
|
|
United Technologies Corp., Senior Notes
|
|
|
4.625
|
%
|
|
|
11/16/48
|
|
|
|
110,000
|
|
|
|
149,594
|
|
Total Aerospace & Defense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,560,013
|
|
Airlines 1.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delta Air Lines Inc., Senior Notes
|
|
|
2.900
|
%
|
|
|
10/28/24
|
|
|
|
540,000
|
|
|
|
533,162
|
|
Delta Air Lines Inc., Senior Notes
|
|
|
3.750
|
%
|
|
|
10/28/29
|
|
|
|
150,000
|
|
|
|
145,550
|
|
Delta Air Lines Inc., Senior Secured Notes
|
|
|
7.000
|
%
|
|
|
5/1/25
|
|
|
|
260,000
|
|
|
|
300,411
|
(a)
|
Delta Air Lines Inc./SkyMiles IP Ltd., Senior Secured Notes
|
|
|
4.500
|
%
|
|
|
10/20/25
|
|
|
|
320,000
|
|
|
|
342,198
|
(a)
|
See Notes to Financial
Statements.
|
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
17
|
Schedule of investments (contd)
December 31, 2020
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
Airlines continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delta Air Lines Inc./SkyMiles IP Ltd., Senior Secured Notes
|
|
|
4.750
|
%
|
|
|
10/20/28
|
|
|
$
|
180,000
|
|
|
$
|
196,691
|
(a)
|
Delta Air Lines Pass-Through Certificates Trust
|
|
|
8.021
|
%
|
|
|
8/10/22
|
|
|
|
31,692
|
|
|
|
31,010
|
|
Southwest Airlines Co., Senior Notes
|
|
|
4.750
|
%
|
|
|
5/4/23
|
|
|
|
510,000
|
|
|
|
554,496
|
|
Southwest Airlines Co., Senior Notes
|
|
|
5.125
|
%
|
|
|
6/15/27
|
|
|
|
190,000
|
|
|
|
226,275
|
|
Total Airlines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,329,793
|
|
Building Products 0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrier Global Corp., Senior Notes
|
|
|
3.377
|
%
|
|
|
4/5/40
|
|
|
|
180,000
|
|
|
|
197,883
|
|
Carrier Global Corp., Senior Notes
|
|
|
3.577
|
%
|
|
|
4/5/50
|
|
|
|
200,000
|
|
|
|
224,428
|
|
Total Building Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
422,311
|
|
Commercial Services & Supplies 0.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California Institute of Technology, Senior Notes
|
|
|
3.650
|
%
|
|
|
9/1/2119
|
|
|
|
110,000
|
|
|
|
125,464
|
|
Waste Connections Inc., Senior Notes
|
|
|
4.250
|
%
|
|
|
12/1/28
|
|
|
|
480,000
|
|
|
|
572,079
|
|
Total Commercial Services & Supplies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
697,543
|
|
Construction & Engineering 0.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vinci SA, Senior Notes
|
|
|
3.750
|
%
|
|
|
4/10/29
|
|
|
|
890,000
|
|
|
|
1,045,090
|
(a)
|
Industrial Conglomerates 0.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Electric Co., Senior Notes
|
|
|
6.750
|
%
|
|
|
3/15/32
|
|
|
|
200,000
|
|
|
|
280,769
|
|
General Electric Co., Senior Notes
|
|
|
6.875
|
%
|
|
|
1/10/39
|
|
|
|
716,000
|
|
|
|
1,055,873
|
|
General Electric Co., Senior Notes
|
|
|
4.250
|
%
|
|
|
5/1/40
|
|
|
|
60,000
|
|
|
|
71,028
|
|
Total Industrial Conglomerates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,407,670
|
|
Machinery 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Caterpillar Inc., Senior Notes
|
|
|
4.750
|
%
|
|
|
5/15/64
|
|
|
|
220,000
|
|
|
|
326,429
|
|
Road & Rail 0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Union Pacific Corp., Senior Notes
|
|
|
4.375
|
%
|
|
|
11/15/65
|
|
|
|
320,000
|
|
|
|
421,612
|
|
Trading Companies & Distributors 0.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircastle Ltd., Senior Notes
|
|
|
5.250
|
%
|
|
|
8/11/25
|
|
|
|
630,000
|
|
|
|
694,553
|
(a)
|
Aviation Capital Group LLC, Senior Notes
|
|
|
5.500
|
%
|
|
|
12/15/24
|
|
|
|
180,000
|
|
|
|
199,447
|
(a)
|
Total Trading Companies & Distributors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
894,000
|
|
Transportation Infrastructure 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SMBC Aviation Capital Finance DAC, Senior Notes
|
|
|
4.125
|
%
|
|
|
7/15/23
|
|
|
|
350,000
|
|
|
|
374,023
|
(a)
|
Total Industrials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,478,484
|
|
Information Technology 3.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications Equipment 0.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L3Harris Technologies Inc., Senior Notes
|
|
|
4.854
|
%
|
|
|
4/27/35
|
|
|
|
260,000
|
|
|
|
340,563
|
|
L3Harris Technologies Inc., Senior Notes
|
|
|
5.054
|
%
|
|
|
4/27/45
|
|
|
|
210,000
|
|
|
|
291,252
|
|
Total Communications Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
631,815
|
|
See Notes to Financial
Statements.
|
|
|
18
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
IT Services 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Business Machines Corp., Senior Notes
|
|
|
3.500
|
%
|
|
|
5/15/29
|
|
|
$
|
110,000
|
|
|
$
|
127,372
|
|
Semiconductors & Semiconductor Equipment
1.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcom Inc., Senior Notes
|
|
|
4.150
|
%
|
|
|
11/15/30
|
|
|
|
280,000
|
|
|
|
324,828
|
|
Broadcom Inc., Senior Notes
|
|
|
4.300
|
%
|
|
|
11/15/32
|
|
|
|
370,000
|
|
|
|
439,660
|
|
Intel Corp., Senior Notes
|
|
|
4.900
|
%
|
|
|
7/29/45
|
|
|
|
130,000
|
|
|
|
182,945
|
|
Intel Corp., Senior Notes
|
|
|
4.750
|
%
|
|
|
3/25/50
|
|
|
|
10,000
|
|
|
|
13,981
|
|
Intel Corp., Senior Notes
|
|
|
4.950
|
%
|
|
|
3/25/60
|
|
|
|
60,000
|
|
|
|
89,486
|
|
NVIDIA Corp., Senior Notes
|
|
|
3.500
|
%
|
|
|
4/1/40
|
|
|
|
60,000
|
|
|
|
72,209
|
|
NVIDIA Corp., Senior Notes
|
|
|
3.500
|
%
|
|
|
4/1/50
|
|
|
|
190,000
|
|
|
|
231,372
|
|
NVIDIA Corp., Senior Notes
|
|
|
3.700
|
%
|
|
|
4/1/60
|
|
|
|
80,000
|
|
|
|
103,260
|
|
Texas Instruments Inc., Senior Notes
|
|
|
3.875
|
%
|
|
|
3/15/39
|
|
|
|
270,000
|
|
|
|
337,795
|
|
Total Semiconductors & Semiconductor
Equipment
|
|
|
|
|
|
|
|
|
|
|
|
1,795,536
|
|
Software 0.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Microsoft Corp., Senior Notes
|
|
|
4.250
|
%
|
|
|
2/6/47
|
|
|
|
970,000
|
|
|
|
1,374,667
|
|
Technology Hardware, Storage & Peripherals
0.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apple Inc., Senior Notes
|
|
|
3.850
|
%
|
|
|
8/4/46
|
|
|
|
340,000
|
|
|
|
438,739
|
|
HP Inc., Senior Notes
|
|
|
4.650
|
%
|
|
|
12/9/21
|
|
|
|
310,000
|
|
|
|
322,117
|
|
Total Technology Hardware, Storage &
Peripherals
|
|
|
|
|
|
|
|
|
|
|
|
760,856
|
|
Total Information Technology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,690,246
|
|
Materials 5.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals 0.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dow Chemical Co., Senior Notes
|
|
|
7.375
|
%
|
|
|
11/1/29
|
|
|
|
800,000
|
|
|
|
1,141,861
|
|
Ecolab Inc., Senior Notes
|
|
|
4.800
|
%
|
|
|
3/24/30
|
|
|
|
80,000
|
|
|
|
102,156
|
|
Total Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,244,017
|
|
Metals & Mining 4.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anglo American Capital PLC, Senior Notes
|
|
|
4.000
|
%
|
|
|
9/11/27
|
|
|
|
500,000
|
|
|
|
574,49
|
(a)
|
ArcelorMittal SA, Senior Notes
|
|
|
4.550
|
%
|
|
|
3/11/26
|
|
|
|
470,000
|
|
|
|
528,313
|
|
Barrick North America Finance LLC, Senior Notes
|
|
|
5.700
|
%
|
|
|
5/30/41
|
|
|
|
50,000
|
|
|
|
72,540
|
|
Barrick PD Australia Finance Pty Ltd., Senior Notes
|
|
|
5.950
|
%
|
|
|
10/15/39
|
|
|
|
180,000
|
|
|
|
259,809
|
|
First Quantum Minerals Ltd., Senior Notes
|
|
|
7.250
|
%
|
|
|
4/1/23
|
|
|
|
340,000
|
|
|
|
350,948
|
(a)
|
First Quantum Minerals Ltd., Senior Notes
|
|
|
7.500
|
%
|
|
|
4/1/25
|
|
|
|
200,000
|
|
|
|
208,500
|
(a)
|
Glencore Finance Canada Ltd., Senior Notes
|
|
|
6.900
|
%
|
|
|
11/15/37
|
|
|
|
430,000
|
|
|
|
592,377
|
(a)
|
Glencore Finance Canada Ltd., Senior Notes
|
|
|
5.550
|
%
|
|
|
10/25/42
|
|
|
|
150,000
|
|
|
|
184,582
|
(a)
|
Glencore Funding LLC, Senior Notes
|
|
|
4.125
|
%
|
|
|
3/12/24
|
|
|
|
530,000
|
|
|
|
583,809
|
(a)
|
Glencore Funding LLC, Senior Notes
|
|
|
4.000
|
%
|
|
|
3/27/27
|
|
|
|
360,000
|
|
|
|
407,773
|
(a)
|
Glencore Funding LLC, Senior Notes
|
|
|
3.875
|
%
|
|
|
10/27/27
|
|
|
|
170,000
|
|
|
|
191,971
|
(a)
|
See Notes to Financial
Statements.
|
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
19
|
Schedule of investments (contd)
December 31, 2020
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
Metals & Mining continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern Copper Corp., Senior Notes
|
|
|
5.250
|
%
|
|
|
11/8/42
|
|
|
$
|
470,000
|
|
|
$
|
630,946
|
|
Vale Overseas Ltd., Senior Notes
|
|
|
6.875
|
%
|
|
|
11/21/36
|
|
|
|
1,148,000
|
|
|
|
1,685,413
|
|
Yamana Gold Inc., Senior Notes
|
|
|
4.625
|
%
|
|
|
12/15/27
|
|
|
|
350,000
|
|
|
|
383,233
|
|
Total Metals & Mining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,654,705
|
|
Paper & Forest Products 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific LLC, Senior Notes
|
|
|
7.375
|
%
|
|
|
12/1/25
|
|
|
|
250,000
|
|
|
|
326,175
|
|
Total Materials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,224,897
|
|
Real Estate 0.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Real Estate Investment Trusts (REITs) 0.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diversified Healthcare Trust, Senior Notes
|
|
|
4.750
|
%
|
|
|
5/1/24
|
|
|
|
130,000
|
|
|
|
133,847
|
|
MPT Operating Partnership LP/MPT Finance Corp., Senior Notes
|
|
|
5.000
|
%
|
|
|
10/15/27
|
|
|
|
250,000
|
|
|
|
266,381
|
|
MPT Operating Partnership LP/MPT Finance Corp., Senior Notes
|
|
|
4.625
|
%
|
|
|
8/1/29
|
|
|
|
170,000
|
|
|
|
181,980
|
|
Welltower Inc., Senior Notes
|
|
|
4.125
|
%
|
|
|
3/15/29
|
|
|
|
320,000
|
|
|
|
373,818
|
|
Total Equity Real Estate Investment Trusts
(REITs)
|
|
|
|
|
|
|
|
|
|
|
|
956,026
|
|
Real Estate Management & Development 0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security Capital Group Inc., Senior Notes
|
|
|
7.700
|
%
|
|
|
6/15/28
|
|
|
|
280,000
|
|
|
|
365,992
|
|
Total Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,322,018
|
|
Utilities 2.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric Utilities 2.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CenterPoint Energy Houston Electric LLC, Senior Secured Bonds
|
|
|
4.500
|
%
|
|
|
4/1/44
|
|
|
|
210,000
|
|
|
|
279,015
|
|
Exelon Corp., Senior Notes
|
|
|
4.050
|
%
|
|
|
4/15/30
|
|
|
|
120,000
|
|
|
|
142,213
|
|
FirstEnergy Corp., Senior Notes
|
|
|
3.900
|
%
|
|
|
7/15/27
|
|
|
|
310,000
|
|
|
|
342,095
|
|
FirstEnergy Corp., Senior Notes
|
|
|
7.375
|
%
|
|
|
11/15/31
|
|
|
|
830,000
|
|
|
|
1,184,994
|
|
Jersey Central Power & Light Co., Senior Notes
|
|
|
4.300
|
%
|
|
|
1/15/26
|
|
|
|
100,000
|
|
|
|
111,970
|
(a)
|
MidAmerican Energy Co., First Mortgage Bonds
|
|
|
3.650
|
%
|
|
|
4/15/29
|
|
|
|
150,000
|
|
|
|
178,287
|
|
Pacific Gas and Electric Co., Secured Bonds
|
|
|
3.300
|
%
|
|
|
8/1/40
|
|
|
|
20,000
|
|
|
|
20,033
|
|
Southern California Edison Co., First Mortgage Bonds
|
|
|
4.125
|
%
|
|
|
3/1/48
|
|
|
|
310,000
|
|
|
|
370,714
|
|
Virginia Electric & Power Co., Senior Notes
|
|
|
8.875
|
%
|
|
|
11/15/38
|
|
|
|
390,000
|
|
|
|
724,358
|
|
Total Utilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,353,679
|
|
Total Corporate Bonds & Notes (Cost $117,711,321)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143,039,911
|
|
Sovereign Bonds 3.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Argentina 0.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Argentine Republic Government International Bond, Senior Notes
|
|
|
1.000
|
%
|
|
|
7/9/29
|
|
|
|
35,342
|
|
|
|
15,401
|
|
See Notes to Financial
Statements.
|
|
|
20
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
Argentina continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Argentine Republic Government International Bond, Senior Notes
|
|
|
0.125
|
%
|
|
|
7/9/30
|
|
|
$
|
127,826
|
|
|
$
|
52,025
|
|
Argentine Republic Government International Bond, Senior Notes
|
|
|
0.125
|
%
|
|
|
7/9/35
|
|
|
|
412,973
|
|
|
|
151,561
|
|
Provincia de Buenos Aires, Senior Notes
|
|
|
9.125
|
%
|
|
|
3/16/24
|
|
|
|
1,220,000
|
|
|
|
510,875
|
*(a)(e)
|
Total Argentina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
729,862
|
|
Canada 0.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Province of Quebec Canada, Senior Notes
|
|
|
7.970
|
%
|
|
|
7/22/36
|
|
|
|
650,000
|
|
|
|
1,116,599
|
|
Colombia 0.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colombia Government International Bond, Senior Notes
|
|
|
4.500
|
%
|
|
|
3/15/29
|
|
|
|
870,000
|
|
|
|
1,011,706
|
|
Ghana 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ghana Government International Bond, Senior Notes
|
|
|
8.950
|
%
|
|
|
3/26/51
|
|
|
|
310,000
|
|
|
|
324,275
|
(a)
|
Indonesia 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indonesia Government International Bond, Senior Notes
|
|
|
4.350
|
%
|
|
|
1/11/48
|
|
|
|
240,000
|
|
|
|
287,268
|
|
Kenya 0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenya Government International Bond, Senior Notes
|
|
|
8.000
|
%
|
|
|
5/22/32
|
|
|
|
460,000
|
|
|
|
537,139
|
(a)
|
Mexico 0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico Government International Bond, Senior Notes
|
|
|
4.350
|
%
|
|
|
1/15/47
|
|
|
|
360,000
|
|
|
|
411,946
|
|
Qatar 0.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qatar Government International Bond, Senior Notes
|
|
|
3.375
|
%
|
|
|
3/14/24
|
|
|
|
410,000
|
|
|
|
444,645
|
(a)
|
Qatar Government International Bond, Senior Notes
|
|
|
4.817
|
%
|
|
|
3/14/49
|
|
|
|
270,000
|
|
|
|
369,141
|
(a)
|
Total Qatar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
813,786
|
|
United Arab Emirates 0.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abu Dhabi Government International Bond, Senior Notes
|
|
|
4.125
|
%
|
|
|
10/11/47
|
|
|
|
440,000
|
|
|
|
554,235
|
(a)
|
Uruguay 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Uruguay Government International Bond, Senior Notes
|
|
|
4.975
|
%
|
|
|
4/20/55
|
|
|
|
70,000
|
|
|
|
97,388
|
|
Total Sovereign Bonds (Cost $5,719,803)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,884,204
|
|
See Notes to Financial
Statements.
|
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
21
|
Schedule of investments (contd)
December 31, 2020
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Rate
|
|
|
Maturity
Date
|
|
|
Face
Amount
|
|
|
Value
|
|
Municipal Bonds 1.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California 0.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles County, CA Public Works Financing Authority Revenue, Multiple Capital Projects I, Series 2010 B, Taxable
Build America Bonds
|
|
|
7.618
|
%
|
|
|
8/1/40
|
|
|
$
|
650,000
|
|
|
$
|
1,104,974
|
|
University of California Revenue, Taxable, General Series AG
|
|
|
4.062
|
%
|
|
|
5/15/33
|
|
|
|
150,000
|
|
|
|
160,728
|
|
Total California
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,265,702
|
|
Florida 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sumter Landing, FL, Community Development District Recreational Revenue, Taxable Community Development
District
|
|
|
4.172
|
%
|
|
|
10/1/47
|
|
|
|
170,000
|
|
|
|
190,889
|
|
Illinois 0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illinois State, GO, Taxable, Build America Bonds, Series 2010-3
|
|
|
6.725
|
%
|
|
|
4/1/35
|
|
|
|
310,000
|
|
|
|
358,196
|
|
Total Municipal Bonds (Cost $1,575,508)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,814,787
|
|
U.S. Government & Agency Obligations 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Obligations 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Bonds (Cost $125,340)
|
|
|
1.375
|
%
|
|
|
8/15/50
|
|
|
|
135,000
|
|
|
|
126,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
Preferred Stocks 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financials 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delphi Financial Group Inc. (3 mo. USD LIBOR + 3.190%) (Cost $143,068)
|
|
|
3.411
|
%
|
|
|
|
|
|
|
5,725
|
|
|
|
116,647
|
(c)
|
Total Investments before Short-Term Investments (Cost
$125,275,040)
|
|
|
|
150,982,017
|
|
Short-Term Investments 1.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Asset Premier Institutional Government Reserves, Premium Shares
(Cost $1,547,168)
|
|
|
0.010
|
%
|
|
|
|
|
|
|
1,547,168
|
|
|
|
1,547,168
|
(f)
|
Total Investments 98.9% (Cost $126,822,208)
|
|
|
|
|
|
|
|
|
|
|
|
152,529,185
|
|
Other Assets in Excess of Liabilities 1.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,759,417
|
|
Total Net Assets 100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
154,288,602
|
|
See Notes to Financial
Statements.
|
|
|
22
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
Western Asset Investment Grade Income Fund Inc.
*
|
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)
|
Security has no maturity date. The date shown represents the next call date.
|
(c)
|
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.
|
(d)
|
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.
|
(e)
|
The coupon payment on this security is currently in default as of December 31, 2020.
|
(f)
|
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 with the Fund. At December 31, 2020, the total market value of investments in Affiliated Companies was $1,547,168 and the cost was $1,547,168 (Note 7).
|
|
|
|
Abbreviation(s) used in this schedule:
|
|
|
GO
|
|
General Obligation
|
|
|
GTD
|
|
Guaranteed
|
|
|
ICE
|
|
Intercontinental Exchange
|
|
|
JSC
|
|
Joint Stock Company
|
|
|
LIBOR
|
|
London Interbank Offered Rate
|
|
|
PIK
|
|
Payment-In-Kind
|
|
|
SOFR
|
|
Secured Overnight Financing Rate
|
|
|
USD
|
|
United States Dollar
|
At December 31, 2020, 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
|
|
|
51
|
|
|
|
3/21
|
|
|
$
|
11,257,752
|
|
|
$
|
11,269,804
|
|
|
$
|
12,052
|
|
U.S. Treasury 10-Year Notes
|
|
|
45
|
|
|
|
3/21
|
|
|
|
6,203,953
|
|
|
|
6,213,516
|
|
|
|
9,563
|
|
U.S. Treasury Ultra Long- Term Bonds
|
|
|
43
|
|
|
|
3/21
|
|
|
|
9,248,947
|
|
|
|
9,183,188
|
|
|
|
(65,759)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,144)
|
|
Contracts to Sell:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Long-Term Bonds
|
|
|
109
|
|
|
|
3/21
|
|
|
|
19,047,140
|
|
|
|
18,877,437
|
|
|
|
169,703
|
|
Net unrealized appreciation on open futures contracts
|
|
|
|
|
|
|
$
|
125,559
|
|
See Notes to Financial
Statements.
|
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
23
|
Statement of assets and liabilities
December 31, 2020
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
Investments in unaffiliated securities, at value (Cost $125,275,040)
|
|
$
|
150,982,017
|
|
Investments in affiliated securities, at value (Cost $1,547,168)
|
|
|
1,547,168
|
|
Interest receivable
|
|
|
1,687,571
|
|
Deposits with brokers for open futures contracts
|
|
|
225,297
|
|
Receivable from broker net variation margin on open futures contracts
|
|
|
899
|
|
Security litigation proceeds receivable
|
|
|
100
|
|
Other assets
|
|
|
13,944
|
|
Prepaid expenses
|
|
|
6,453
|
|
Total Assets
|
|
|
154,463,449
|
|
|
|
Liabilities:
|
|
|
|
|
Investment management fee payable
|
|
|
65,180
|
|
Audit and tax fees payable
|
|
|
46,342
|
|
Transfer agent fees payable
|
|
|
16,496
|
|
Legal fees payable
|
|
|
14,664
|
|
Due to custodian
|
|
|
12,722
|
|
Fund accounting fees payable
|
|
|
11,148
|
|
Directors fees payable
|
|
|
375
|
|
Accrued expenses
|
|
|
7,920
|
|
Total Liabilities
|
|
|
174,847
|
|
Total Net Assets
|
|
$
|
154,288,602
|
|
|
|
Net Assets:
|
|
|
|
|
Par value ($0.01 par value; 9,509,295 shares issued and outstanding; 20,000,000 shares authorized)
|
|
|
$95,093
|
|
Paid-in capital in excess of par value
|
|
|
132,015,997
|
|
Total distributable earnings (loss)
|
|
|
22,177,512
|
|
Total Net Assets
|
|
|
$154,288,602
|
|
|
|
Shares Outstanding
|
|
|
9,509,295
|
|
|
|
Net Asset Value
|
|
|
$16.23
|
|
See Notes to Financial
Statements.
|
|
|
24
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
Statement of operations
For the Year Ended December 31, 2020
|
|
|
|
|
|
|
Investment Income:
|
|
|
|
|
Interest from unaffiliated investments
|
|
$
|
6,695,253
|
|
Interest from affiliated investments
|
|
|
1,907
|
|
Dividends
|
|
|
6,178
|
|
Total Investment Income
|
|
|
6,703,338
|
|
|
|
Expenses:
|
|
|
|
|
Investment management fee (Note 2)
|
|
|
764,738
|
|
Legal fees
|
|
|
105,688
|
|
Fund accounting fees
|
|
|
66,856
|
|
Transfer agent fees
|
|
|
65,924
|
|
Franchise taxes
|
|
|
60,810
|
|
Audit and tax fees
|
|
|
46,342
|
|
Directors fees
|
|
|
25,652
|
|
Stock exchange listing fees
|
|
|
17,082
|
|
Shareholder reports
|
|
|
14,445
|
|
Custody fees
|
|
|
5,680
|
|
Insurance
|
|
|
871
|
|
Miscellaneous expenses
|
|
|
3,628
|
|
Total Expenses
|
|
|
1,177,716
|
|
Less: Fee waivers and/or expense reimbursements (Note 2)
|
|
|
(24,595)
|
|
Net Expenses
|
|
|
1,153,121
|
|
Net Investment Income
|
|
|
5,550,217
|
|
|
|
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts (Notes 1, 3 and 4):
|
|
|
|
|
Net Realized Loss From:
|
|
|
|
|
Investment transactions in unaffiliated securities
|
|
|
(269,442)
|
|
Futures contracts
|
|
|
(1,697,710)
|
|
Net Realized Loss
|
|
|
(1,967,152)
|
|
Change in Net Unrealized Appreciation (Depreciation) From:
|
|
|
|
|
Investments in unaffiliated securities
|
|
|
9,314,725
|
|
Futures contracts
|
|
|
(84,551)
|
|
Change in Net Unrealized Appreciation (Depreciation)
|
|
|
9,230,174
|
|
Net Gain on Investments and Futures Contracts
|
|
|
7,263,022
|
|
Increase in Net Assets From Operations
|
|
$
|
12,813,239
|
|
See Notes to Financial
Statements.
|
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
25
|
Statements of changes in net assets
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
|
2019
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
5,550,217
|
|
|
$
|
5,845,678
|
|
Net realized loss
|
|
|
(1,967,152)
|
|
|
|
(79,108)
|
|
Change in net unrealized appreciation (depreciation)
|
|
|
9,230,174
|
|
|
|
14,844,335
|
|
Increase in Net Assets From Operations
|
|
|
12,813,239
|
|
|
|
20,610,905
|
|
|
|
|
Distributions to Shareholders From (Note 1):
|
|
|
|
|
|
|
|
|
Total distributable earnings
|
|
|
(5,769,834)
|
|
|
|
(6,525,410)
|
|
Decrease in Net Assets From Distributions to
Shareholders
|
|
|
(5,769,834)
|
|
|
|
(6,525,410)
|
|
|
|
|
Fund Share Transactions:
|
|
|
|
|
|
|
|
|
Reinvestment of distributions (8,106 and 18,288 shares issued, respectively)
|
|
|
125,762
|
|
|
|
274,028
|
|
Increase in Net Assets From Fund Share Transactions
|
|
|
125,762
|
|
|
|
274,028
|
|
Increase in Net Assets
|
|
|
7,169,167
|
|
|
|
14,359,523
|
|
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
147,119,435
|
|
|
|
132,759,912
|
|
End of year
|
|
$
|
154,288,602
|
|
|
$
|
147,119,435
|
|
See Notes to Financial
Statements.
|
|
|
26
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Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
Financial highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a share of capital stock outstanding throughout each year ended December
31:
|
|
|
|
20201
|
|
|
20191
|
|
|
20181
|
|
|
20171
|
|
|
20161
|
|
|
|
|
|
|
|
Net asset value, beginning of year
|
|
$
|
15.48
|
|
|
$
|
14.00
|
|
|
$
|
15.39
|
|
|
$
|
14.61
|
|
|
$
|
13.84
|
|
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.58
|
|
|
|
0.62
|
|
|
|
0.65
|
|
|
|
0.68
|
|
|
|
0.70
|
|
Net realized and unrealized gain (loss)
|
|
|
0.78
|
|
|
|
1.55
|
|
|
|
(1.35)
|
|
|
|
0.79
|
|
|
|
0.76
|
|
Total income (loss) from operations
|
|
|
1.36
|
|
|
|
2.17
|
|
|
|
(0.70)
|
|
|
|
1.47
|
|
|
|
1.46
|
|
|
|
|
|
|
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.61)
|
|
|
|
(0.69)
|
|
|
|
(0.69)
|
|
|
|
(0.69)
|
|
|
|
(0.69)
|
|
Total distributions
|
|
|
(0.61)
|
|
|
|
(0.69)
|
|
|
|
(0.69)
|
|
|
|
(0.69)
|
|
|
|
(0.69)
|
|
|
|
|
|
|
|
Net asset value, end of year
|
|
$
|
16.23
|
|
|
$
|
15.48
|
|
|
$
|
14.00
|
|
|
$
|
15.39
|
|
|
$
|
14.61
|
|
Market price, end of year
|
|
$
|
15.90
|
|
|
|
$15.52
|
|
|
$
|
13.20
|
|
|
$
|
15.76
|
|
|
$
|
14.31
|
|
Total return, based on NAV2,3
|
|
|
9.11
|
%
|
|
|
15.77
|
%
|
|
|
(4.62)
|
%
|
|
|
10.27
|
%
|
|
|
10.76
|
%
|
Total return, based on Market Price4
|
|
|
6.62
|
%
|
|
|
23.05
|
%
|
|
|
(11.96)
|
%
|
|
|
15.31
|
%
|
|
|
15.44
|
%
|
|
|
|
|
|
|
Net assets, end of year (millions)
|
|
$
|
154
|
|
|
$
|
147
|
|
|
$
|
133
|
|
|
$
|
146
|
|
|
$
|
138
|
|
|
|
|
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expenses
|
|
|
0.81
|
%
|
|
|
0.85
|
%
|
|
|
0.82
|
%
|
|
|
0.76
|
%
|
|
|
0.77
|
%
|
Net expenses5,6
|
|
|
0.79
|
|
|
|
0.83
|
|
|
|
0.80
|
|
|
|
0.74
|
|
|
|
0.75
|
|
Net investment income
|
|
|
3.80
|
|
|
|
4.12
|
|
|
|
4.47
|
|
|
|
4.53
|
|
|
|
4.87
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
41
|
%
|
|
|
66
|
%
|
|
|
52
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
1
|
Per share amounts have been calculated using the average shares method.
|
2
|
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.
|
3
|
The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future results.
|
4
|
The total return calculation assumes that distributions are reinvested in accordance with the Funds dividend reinvestment plan. Past performance is no
guarantee of future results.
|
5
|
Reflects fee waivers and/or expense reimbursements.
|
6
|
The investment adviser has agreed to waive the Funds management fee to an extent sufficient to offset the net management fee payable in connection with any
investment in an affiliated money market fund.
|
See Notes to Financial Statements.
|
|
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Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
27
|
Notes to financial statements
1. Organization and significant accounting policies
Western Asset Investment Grade Income Fund Inc. (the Fund) is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as a closed-end diversified investment company. The Funds primary investment objective is to seek a high level of current income, consistent with prudent investment risk, through investment
in a diversified portfolio of debt securities. To a lesser extent, the Fund may also invest in privately placed debt securities and in certain equity securities. Capital appreciation is a secondary investment objective. The Board of Directors of the
Fund approved amendments to the Funds bylaws effective April 14, 2020 and approved an amendment and restatement of the Funds bylaws effective November 2, 2020. The amended and restated bylaws were subsequently filed on Form 8-K and are available on the Securities and Exchange Commissions 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. 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
|
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28
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Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
value, the Fund values these securities as determined in accordance with procedures approved by the Funds 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 Funds 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 issuers 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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Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
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|
29
|
Notes to financial statements (contd)
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 Funds 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 Funds 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
|
|
|
|
|
|
$
|
143,039,911
|
|
|
|
|
|
|
$
|
143,039,911
|
|
Sovereign Bonds
|
|
|
|
|
|
|
5,884,204
|
|
|
|
|
|
|
|
5,884,204
|
|
Municipal Bonds
|
|
|
|
|
|
|
1,814,787
|
|
|
|
|
|
|
|
1,814,787
|
|
U.S. Government & Agency Obligations
|
|
|
|
|
|
|
126,468
|
|
|
|
|
|
|
|
126,468
|
|
Preferred Stocks
|
|
|
|
|
|
|
116,647
|
|
|
|
|
|
|
|
116,647
|
|
Total Long-Term Investments
|
|
|
|
|
|
|
150,982,017
|
|
|
|
|
|
|
|
150,982,017
|
|
Short-Term Investments
|
|
$
|
1,547,168
|
|
|
|
|
|
|
|
|
|
|
|
1,547,168
|
|
Total Investments
|
|
$
|
1,547,168
|
|
|
$
|
150,982,017
|
|
|
|
|
|
|
$
|
152,529,185
|
|
Other Financial Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts
|
|
$
|
191,318
|
|
|
|
|
|
|
|
|
|
|
$
|
191,318
|
|
Total
|
|
$
|
1,738,486
|
|
|
$
|
150,982,017
|
|
|
|
|
|
|
$
|
152,720,503
|
|
|
LIABILITIES
|
|
Description
|
|
Quoted Prices
(Level 1)
|
|
|
Other Significant
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
Other Financial Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts
|
|
$
|
65,759
|
|
|
|
|
|
|
|
|
|
|
$
|
65,759
|
|
|
See Schedule of Investments for additional detailed categorizations.
|
(b) Futures contracts. The Fund uses futures contracts generally to gain exposure to, or
hedge against, changes in interest rates or gain exposure to, or hedge against, changes in
|
|
|
30
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
certain asset classes. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
Upon entering into a futures contract, the Fund is required to deposit cash or securities with a broker in an amount equal to a certain percentage of the contract
amount. This is known as the initial margin and subsequent payments (variation margin) are made or received by the Fund each day, depending on the daily fluctuation in the value of the contract. For
certain futures, including foreign denominated futures, variation margin is not settled daily, but is recorded as a net variation margin payable or receivable. The daily changes in contract value are recorded as unrealized gains or losses in the
Statement of Operations and the Fund recognizes a realized gain or loss when the contract is closed.
Futures contracts involve, to varying degrees, risk
of loss in excess of the amounts reflected in the financial statements. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.
(c) 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 Funds investments in securities rated below investment grade
typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The
consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Funds investments in non-U.S. dollar denominated
securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.
Investments in securities that are
collateralized by real estate mortgages are subject to certain credit and liquidity risks. When market conditions result in an increase in default rates of the underlying mortgages and the foreclosure values of underlying real estate properties are
materially below the outstanding amount of these underlying mortgages, collection of the full amount of accrued interest and principal on these investments may be doubtful. Such market conditions may significantly impair the value and liquidity of
these investments and may result in a lack of correlation between their credit ratings and values.
(d) 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 Funds investment adviser attempts to mitigate counterparty risk by (i) periodically assessing the
creditworthiness of its trading partners, (ii) monitoring
|
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
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|
31
|
Notes to financial statements (contd)
and/or limiting the amount of its net exposure to each individual counterparty based on its assessment and (iii) requiring
collateral from the counterparty for certain transactions.
Market events and changes in overall economic conditions may impact the assessment of such
counterparty risk by the investment adviser. 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 (OTC) derivatives and provide for general obligations, representations, agreements, collateral posting terms, netting provisions in the event of default or termination and credit
related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in the Funds net assets or net asset value per share 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 OTC 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 December 31, 2020,
the Fund did not have any open OTC derivative transactions with credit related contingent features in a net liability position.
|
|
|
32
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
(e) 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. 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.
(f) Distributions to shareholders.
Distributions from net investment income of the Fund, if any, are declared quarterly and paid on a monthly basis. Distributions of net realized gains, if any, are declared at least annually.
Distributions to shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Compensating balance arrangements. The Fund has an arrangement with its custodian bank
whereby a portion of the custodians fees is paid indirectly by credits earned on the Funds cash on deposit with the bank.
(h) Federal and other taxes. It is the Funds 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 Funds financial statements.
Management has analyzed the Funds tax positions taken on income tax returns for all open tax years and has concluded that as of December 31, 2020, no provision for income tax is required in the
Funds financial statements. The Funds 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.
(i) Reclassification. GAAP requires that certain
components of net assets be reclassified to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. During the current year, the following
reclassifications have been made:
2. Investment management agreement and other transactions with affiliates
The Fund has entered into an Investment Advisory Agreement with Western Asset Management Company, LLC (Adviser), pursuant to which the Adviser provides
investment advice and administrative services to the Fund. In return for its services, the Fund pays the Adviser a monthly fee at an annual rate of 0.70% of the average monthly net assets of the
|
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
33
|
Notes to financial statements (contd)
Fund up to $60,000,000 and 0.40% of such net assets in excess of $60,000,000. If expenses (including the Advisers fee but excluding
interest, taxes, brokerage fees, the expenses of any offering by the Fund of its securities, and extraordinary expenses beyond the control of the Fund) borne by the Fund in any fiscal year exceed 1.5% of average net assets up to $30,000,000 and 1%
of average net assets over $30,000,000, the Adviser has contractually agreed to reimburse the Fund for any excess.
In addition, the Adviser has agreed
to waive the Funds management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund (the affiliated money market fund waiver). The affiliated money
market fund waiver is not subject to the recapture provision.
During the year ended December 31, 2020, fees waived and/or expenses reimbursed
amounted to $24,595, which included an affiliated money market fund waiver of $371.
Western Asset Management Company Limited (Western
London) provides the Fund with investment research, advice, management and supervision and a continuous investment program for the Funds portfolio of non-dollar securities consistent with the
Funds investment objectives and policies. As compensation, the Adviser pays Western London a fee based on the pro rata assets of the Fund managed by Western London during the month.
Under the terms of an administrative services agreement among the Fund, the Adviser, and Legg Mason Partners Fund Advisor, LLC (LMPFA), the Adviser (not the Fund) pays LMPFA a monthly fee of $3,000 (an
annual rate of $36,000). As of July 31, 2020, the Adviser, LMPFA and Western London are indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (Franklin Resources). Prior to July 31, 2020, the Adviser, LMPFA and
Western London were indirect, wholly-owned subsidiaries of Legg Mason, Inc. (Legg Mason). As of July 31, 2020, Legg Mason is a subsidiary of Franklin Resources.
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 year ended December 31, 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
|
|
$
|
47,819,029
|
|
|
$
|
11,133,105
|
|
Sales
|
|
|
50,288,534
|
|
|
|
12,094,081
|
|
|
|
|
34
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
At December 31, 2020, the aggregate cost of investments and the aggregate gross unrealized appreciation and
depreciation of investments for federal income tax purposes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Appreciation
|
|
|
Gross
Unrealized
Depreciation
|
|
|
Net
Unrealized
Appreciation
|
|
Securities
|
|
$
|
126,916,544
|
|
|
$
|
26,818,455
|
|
|
$
|
(1,205,814)
|
|
|
$
|
25,612,641
|
|
Futures contracts
|
|
|
|
|
|
|
191,318
|
|
|
|
(65,759)
|
|
|
|
125,559
|
|
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 December 31, 2020.
|
|
|
|
|
ASSET
DERIVATIVES1
|
|
|
|
Interest
Rate Risk
|
|
Futures contracts2
|
|
$
|
191,318
|
|
|
|
|
|
|
LIABILITY
DERIVATIVES1
|
|
|
|
Interest
Rate Risk
|
|
Futures contracts2
|
|
$
|
65,759
|
|
1
|
Generally, the balance sheet location for asset derivatives is receivables/net unrealized appreciation and for liability derivatives is payables/net unrealized
depreciation.
|
2
|
Includes cumulative unrealized appreciation (depreciation) of futures contracts as reported in the Schedule of Investments. Only variation margin is reported
within the receivables and/or payables on the Statement of Assets and Liabilities.
|
The following tables provide information about the
effect of derivatives and hedging activities on the Funds Statement of Operations for the year ended December 31, 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 Funds derivatives and hedging activities during the period.
|
|
|
|
|
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED
|
|
|
|
Interest
Rate Risk
|
|
Futures contracts
|
|
$
|
(1,697,710)
|
|
|
|
|
|
|
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED
|
|
|
|
Interest
Rate Risk
|
|
Futures contracts
|
|
$
|
(84,551)
|
|
|
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
35
|
Notes to financial statements (contd)
During the year ended December 31, 2020, the volume of derivative activity for the Fund was as follows:
|
|
|
|
|
|
|
Average Market
Value
|
|
Futures contracts (to buy)
|
|
$
|
31,801,087
|
|
Futures contracts (to sell)
|
|
|
26,899,320
|
|
5. Distributions subsequent to December 31, 2020
The following distributions have been declared by the Funds Board of Directors and are payable subsequent to the period end of this report:
|
|
|
|
|
|
|
|
|
Record Date
|
|
Payable Date
|
|
|
Amount
|
|
1/22/2021
|
|
|
2/1/2021
|
|
|
$
|
0.0465
|
|
2/19/2021
|
|
|
3/1/2021
|
|
|
$
|
0.0465
|
|
3/24/2021
|
|
|
4/1/2021
|
|
|
$
|
0.0465
|
|
4/23/2021
|
|
|
5/3/2021
|
|
|
$
|
0.0465
|
|
5/21/2021
|
|
|
6/1/2021
|
|
|
$
|
0.0465
|
|
6. Stock repurchase program
On November 20, 2015, the Fund announced that the Funds Board of Directors (the Board) had authorized the Fund to repurchase in the open market up to approximately 10% of the Funds
outstanding common stock when the Funds 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 shareholder value. The Fund is under no obligation to purchase shares at any specific discount levels or in any specific amounts. During the year ended December 31, 2020, the Fund did not repurchase any shares.
7. Transactions with affiliated company
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 with the Fund. The following company was considered an affiliated
company for all or some portion of the year ended December 31, 2020. The following transactions were effected in such company for the year ended December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliate
Value at
December 31, 2019
|
|
|
Purchased
|
|
|
Sold
|
|
|
|
Cost
|
|
|
Shares
|
|
|
Cost
|
|
|
Shares
|
|
Western Asset Premier Institutional Government Reserves, Premium Shares
|
|
$
|
28,103
|
|
|
$
|
24,460,792
|
|
|
|
24,460,792
|
|
|
$
|
22,941,727
|
|
|
|
22,941,727
|
|
|
|
|
36
|
|
Western Asset Investment Grade Income Fund Inc. 2020 Annual Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(contd)
|
|
Realized
Gain (Loss)
|
|
|
Interest
Income
|
|
|
Net Increase
(Decrease) in
Unrealized
Appreciation
(Depreciation)
|
|
|
Affiliate
Value at
December 31,
2020
|
|
Western Asset Premier Institutional Government Reserves, Premium Shares
|
|
|
|
|
|
$
|
1,907
|
|
|
|
|
|
|
$
|
1,547,168
|
|
|
|
|
Independent Directors
|
|
|
Robert Abeles, Jr.
|
|
|
|
|
Year of birth
|
|
1945
|
Position(s) with Fund
|
|
Director
|
Term of office and length of time served1
|
|
Since 2013
|
Principal occupation(s) during the past five years
|
|
Board Member, Great Public Schools Now (since 2018); Senior Vice President Emeritus (since 2016) and formerly, Senior Vice President, Finance and
Chief Financial Officer (2009 to 2016) at University of Southern California; Board Member, Excellent Education Development (since 2012)
|
Number of funds in fund complex overseen by Director
|
|
57
|
Other board memberships held by Director during the past five years
|
|
None
|
|
|
Jane F. Dasher
|
|
|
|
|
Year of birth
|
|
1949
|
Position(s) with Fund
|
|
Director
|
Term of office and length of time served1
|
|
Since 1999
|
Principal occupation(s) during the past five years
|
|
Chief Financial Officer, Long Light Capital, LLC, formerly known as Korsant Partners, LLC (a family investment company) (since
1997)
|
Number of funds in fund complex overseen by Director
|
|
57
|
Other board membership held by Director during the past five years
|
|
Director, Visual Kinematics, Inc. (since 2018)
|
|
|
Anita L. DeFrantz
|
|
|
|
|
Year of birth
|
|
1952
|
Position(s) with Fund
|
|
Director
|
Term of office and length of time served1
|
|
Since 1998
|
Principal occupation(s) during the past five years
|
|
President of Tubman Truth Corp. (since 2015); President Emeritus (since 2015) and formerly, President (1987 to 2015) and Director (1990 to 2015) of
LA84 (formerly Amateur Athletic Foundation of Los Angeles); Member (since 1986), Member of the Executive Board (since 2013) and Vice President (since 2017) of the International Olympic Committee
|
Number of funds in fund complex overseen by Director
|
|
57
|
Other board memberships held by Director during the past five years
|
|
None
|
|
|
|
Western Asset Investment Grade Income Fund Inc.
|
|
41
|
Additional information
(unaudited) (contd)
Information about Directors and Officers
|
|
|
Independent Directors (contd)
|
|
|
Susan B. Kerley
|
|
|
|
|
Year of birth
|
|
1951
|
Position(s) with Fund
|
|
Director
|
Term of office and length of time served1
|
|
Since 1992
|
Principal occupation(s) during the past five years
|
|
Investment Consulting Partner, Strategic Management Advisors, LLC (investment consulting) (since 1990)
|
Number of funds in fund complex overseen by Director
|
|
57
|
Other board memberships held by Director during the past five years
|
|
Director and Trustee (since 1990) and Chairman (since 2017 and 2005 to 2012) of various series of MainStay Family of Funds (66 funds); formerly,
Investment Company Institute (ICI) Board of Governors (2006 to 2014); ICI Executive Committee (2011 to 2014); Chairman of the Independent Directors Council (2012 to 2014)
|
|
|
Michael Larson
|
|
|
|
|
Year of birth
|
|
1959
|
Position(s) with Fund
|
|
Director
|
Term of office and length of time served1
|
|
Since 2004
|
Principal occupation(s) during the past five years
|
|
Chief Investment Officer for William H. Gates III (since 1994)2
|
Number of funds in fund complex overseen by Director
|
|
57
|
Other board memberships held by Director during the past five years
|
|
Republic Services, Inc. (since 2009); Fomento Economico Mexicano, SAB (since 2011); Ecolab Inc. (since 2012); formerly, AutoNation, Inc. (2010 to
2018)
|
|
|
Avedick B. Poladian
|
|
|
|
|
Year of birth
|
|
1951
|
Position(s) with Fund
|
|
Director
|
Term of office and length of time served1
|
|
Since 2007
|
Principal occupation(s) during the past five years
|
|
Director and Advisor (since 2017) and former Executive Vice President and Chief Operating Officer (2002 to 2016) of Lowe Enterprises, Inc.
(privately held real estate and hospitality firm); formerly, Partner, Arthur Andersen, LLP (1974 to 2002)
|
Number of funds in fund complex overseen by Director
|
|
57
|
Other board memberships held by Director during the past five years
|
|
Occidental Petroleum Corporation (since 2008); California Resources Corporation (since 2014); and Public Storage (since 2010)
|
|
|
|
42
|
|
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
Independent Directors (contd)
|
|
|
William E.B. Siart
|
|
|
|
|
Year of birth
|
|
1946
|
Position(s) with Fund
|
|
Director and Chairman of the Board
|
Term of office and length of time served1
|
|
Since 1997
|
Principal occupation(s) during the past five years
|
|
Chairman of Great Public Schools Now (since 2015); Chairman of Excellent Education Development (since 2000); formerly, Trustee of The Getty Trust
(since 2005 to 2017); Chairman of Walt Disney Concert Hall, Inc. (1998 to 2006)
|
Number of funds in fund complex overseen by Director
|
|
57
|
Other board memberships held by Director during the past five years
|
|
Member of Board of United States Golf Association, Executive Committee Member (since 2017); Trustee, University of Southern California (since
1994)
|
|
|
Jaynie Miller Studenmund
|
|
|
|
|
Year of birth
|
|
1954
|
Position(s) with Fund
|
|
Director
|
Term of office and length of time served1
|
|
Since 2004
|
Principal occupation(s) during the past five years
|
|
Corporate Board Member and Advisor (since 2004); formerly, Chief Operating Officer of Overture Services, Inc. (publicly traded internet company that
created search engine marketing) (2001 to 2004); President and Chief Operating Officer, PayMyBills (internet innovator in bill presentment/payment space) (1999 to 2001); Executive vice president for consumer and business banking for three national
financial institutions (1984 to 1997)
|
Number of funds in fund complex overseen by Director
|
|
57
|
Other board memberships held by Director during the past five years
|
|
Director of Pacific Premier Bancorp Inc. and Pacific Premier Bank (since 2019); Director of EXL (operations management and analytics company) (since
2018); Director of CoreLogic, Inc. (information, analytics and business services company) (since 2012); formerly, Director of Pinnacle Entertainment, Inc. (gaming and hospitality company) (2012 to 2018); Director of LifeLock, Inc. (identity theft
protection company) (2015 to 2017); Director of Orbitz Worldwide, Inc. (online travel company) (2007 to 2014)
|
|
|
Peter J. Taylor
|
|
|
|
|
Year of birth
|
|
1958
|
Position(s) with Fund
|
|
Director
|
Term of office and length of time served1
|
|
Since 2019
|
Principal occupation(s) during the past five years
|
|
President, ECMC Foundation (nonprofit organization) (since 2014); formerly, Executive Vice President and Chief Financial Officer for University of
California system (2009 to 2014)
|
Number of funds in fund complex overseen by Director
|
|
57
|
Other board memberships held by Director during the past five years
|
|
Director of Pacific Mutual Holding Company3 (since 2016); Member of the
Board of Trustees of California State University system (since 2015); Ralph M. Parson Foundation (since 2015), Kaiser Family Foundation (since 2012), and Edison International (since 2011)
|
|
|
|
Interested Director
|
|
|
|
|
|
Western Asset Investment Grade Income Fund Inc.
|
|
43
|
Additional information
(unaudited) (contd)
Information about Directors and Officers
|
|
|
Ronald L. Olson4
|
|
|
|
|
Year of birth
|
|
1941
|
Position(s) with Fund
|
|
Director
|
Term of office and length of time served1
|
|
Since 2005
|
Principal occupation(s) during the past five years
|
|
Partner of Munger, Tolles & Olson LLP (law partnership) (since 1968)
|
Number of funds in fund complex overseen by Director
|
|
57
|
Other board memberships held by Director during the past five years
|
|
Berkshire Hathaway, Inc. (since 1997)
|
|
|
|
Interested Director and Officer
|
|
|
Jane Trust, CFA5
|
|
|
|
|
Year of birth
|
|
1962
|
Position(s) with Fund
|
|
Director, President and Chief Executive Officer
|
Term of office and length of time served1
|
|
Since 2015
|
Principal occupation(s) during the past five years
|
|
Senior Vice President, Fund Board Management, Franklin Templeton (since 2020); Officer and/or Trustee/Director of 147 funds associated with Legg
Mason Partners Fund Advisor, LLC (LMPFA) or its affiliates (since 2015); President and Chief Executive Officer of LMPFA (since 2015); formerly, Senior Managing Director (2018 to 2020) and Managing Director (2016 to 2018) of Legg
Mason & Co., LLC (Legg Mason & Co.); Senior Vice President of LMPFA (2015)
|
Number of funds in fund complex overseen by Director
|
|
145
|
Other board memberships held by Director during the past five years
|
|
None
|
|
|
|
Additional Officers
|
|
|
Ted P. Becker
Franklin Templeton
620 Eighth Avenue, 47th Floor, New York, NY 10018
|
|
|
|
|
Year of birth
|
|
1951
|
Position(s) with Fund
|
|
Chief Compliance Officer
|
Term of office1 and length of time served6
|
|
Since 2007
|
Principal occupation(s) during the past five years
|
|
Vice President, Global Compliance of Franklin Templeton (since 2020); Chief Compliance Officer of LMPFA (since 2006); Chief Compliance Officer of
certain funds associated with Legg Mason & Co. or its affiliates (since 2006); formerly, Director of Global Compliance at Legg Mason, Inc. (2006 to 2020); Managing Director of Compliance of Legg Mason & Co. (2005 to
2020)
|
|
|
|
44
|
|
Western Asset Investment Grade Income Fund Inc.
|
|
|
|
Additional Officers (contd)
|
|
|
Susan Kerr
Franklin Templeton
620 Eighth Avenue, 47th Floor, New York, NY 10018
|
|
|
|
|
Year of birth
|
|
1949
|
Position(s) with Fund
|
|
Chief Anti-Money Laundering Compliance Officer
|
Term of office1 and length of time served6
|
|
Since 2013
|
Principal occupation(s) during the past five years
|
|
Senior Compliance Analyst, Franklin Templeton (since 2020); Chief Anti-Money Laundering Compliance Officer of certain funds associated with Legg
Mason & Co. or its affiliates (since 2013) and Anti-Money Laundering Compliance Officer (since 2012), Senior Compliance Officer (since 2011) and Assistant Vice President (since 2010) of Legg Mason Investor Services, LLC (LMIS);
formerly, Assistant Vice President of Legg Mason & Co. (2010 to 2020)
|
|
|
Jenna Bailey
Franklin Templeton
100 First Stamford Place, 5th Floor, Stamford, CT 06902
|
|
|
|
|
Year of birth
|
|
1978
|
Position(s) with Fund
|
|
Identity Theft Prevention Officer
|
Term of office1 and length of time served6
|
|
Since 2015
|
Principal occupation(s) during the past five years
|
|
Senior Compliance Analyst of Franklin Templeton (since 2020); Identity Theft Prevention Officer of certain funds associated with Legg
Mason & Co. or its affiliates (since 2015); formerly, Compliance Officer of Legg Mason & Co. (2013 to 2020); Assistant Vice President of Legg Mason & Co. (2011 to 2020)
|
|
|
Marc A. De Oliveira*
Franklin Templeton
100 First Stamford Place, 6th Floor,
Stamford, CT 06902
|
|
|
|
|
Year of birth
|
|
1971
|
Position(s) with Fund
|
|
Secretary and Chief Legal Officer
|
Term of office1 and length of time served6
|
|
Since 2020
|
Principal occupation(s) during the past five years
|
|
Associate General Counsel of Franklin Templeton (since 2020); Assistant Secretary of certain funds associated with Legg Mason & Co. or its
affiliates (since 2006); formerly, Managing Director (2016 to 2020) and Associate General Counsel of Legg Mason & Co. (2005 to 2020)
|
|
|
|
Western Asset Investment Grade Income Fund Inc.
|
|
45
|
Additional information
(unaudited) (contd)
Information about Directors and Officers
|
|
|
Additional Officers (contd)
|
|
|
Thomas C. Mandia
Franklin Templeton
100 First Stamford Place, 6th Floor, Stamford,
CT 06902
|
|
|
|
|
Year of birth
|
|
1962
|
Position(s) with Fund
|
|
Assistant Secretary
|
Term of office1 and length of time served6
|
|
Since 2020
|
Principal occupation(s) during the past five years
|
|
Senior Associate General Counsel of Franklin Templeton (since 2020); Secretary of LMPFA (since 2006); Assistant Secretary of certain funds
associated with Legg Mason & Co. or its affiliates (since 2006); Secretary of LM Asset Services, LLC (LMAS) (since 2002) and Legg Mason Fund Asset Management, Inc. (LMFAM) (since 2013) (formerly registered investment
advisers); formerly, Managing Director and Deputy General Counsel of Legg Mason & Co. (2005 to 2020)
|
|
|
Christopher Berarducci
Franklin Templeton
620 Eighth Avenue, 47th Floor, New York, NY
10018
|
|
|
|
|
Year of birth
|
|
1974
|
Position(s) with Fund
|
|
Treasurer and Principal Financial Officer
|
Term of office1 and length of time served6
|
|
Since 2019
|
Principal occupation(s) during the past five years
|
|
Vice President, Fund Administration and Reporting, Franklin Templeton (since 2020); Treasurer (since 2010) and Principal Financial Officer (since
2019) of certain funds associated with Legg Mason & Co. or its affiliates; formerly, Managing Director (2020), Director (2015 to 2020), and Vice President (2011 to 2015) of Legg Mason & Co.
|
|
|
Jeanne M. Kelly
Franklin Templeton
620 Eighth Avenue, 47th Floor, New York, NY
10018
|
|
|
|
|
Year of birth
|
|
1951
|
Position(s) with Fund
|
|
Senior Vice President
|
Term of office1 and length of time served6
|
|
Since 2007
|
Principal occupation(s) during the past five years
|
|
U.S. Fund Board Team Manager, Franklin Templeton (since 2020); Senior Vice President of certain funds associated with Legg Mason & Co. or
its affiliates (since 2007); Senior Vice President of LMPFA (since 2006); President and Chief Executive Officer of LMAS and LMFAM (since 2015); formerly, Managing Director of Legg Mason & Co. (2005 to 2020), Senior Vice President of LMFAM
(2013 to 2015)
|
|
Directors who are not interested persons of the Fund within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as
amended (the 1940 Act).
|
|
Effective January 1, 2020, the Board also oversees substantially all the mutual funds in the Legg Mason fund complex that are advised by Western Asset
Management Company, LLC, which are a part of the Legg Mason fund complex. Additionally, effective April 24, 2020, each board member serves as a Trustee of Western
|
|
|
|
46
|
|
Western Asset Investment Grade Income Fund Inc.
|
|
Asset Inflation-Linked Income Fund and Western Asset Inflation-Linked Opportunities & Income Fund, closed-end investment companies that are part of the same fund complex.
|
|
Effective March 6, 2020, Mr. Larson became a Director.
|
*
|
Effective September 15, 2020, Mr. De Oliveira became Secretary and Chief Legal Officer.
|
1
|
Each of the Directors of the Fund holds office until his or her successor shall have been duly elected and shall qualify, subject to prior death, resignation,
retirement, disqualification or removal from office and applicable law and the rules of the New York Stock Exchange. Each officer holds office until his or her respective successor is chosen and qualified, or in each case until he or she sooner
dies, resigns, is removed with or without cause or becomes disqualified.
|
2
|
Mr. Larson is the chief investment officer for William H. Gates III and in that capacity oversees the investments of Mr. Gates and the investments of
the Bill and Melinda Gates Foundation Trust (such combined investments are referred to as the Accounts). Since 1997, Western Asset has provided discretionary investment advice with respect to one or more Accounts.
|
3
|
Western Asset and its affiliates provide investment advisory services with respect to registered investment companies sponsored by an affiliate of Pacific Mutual
Holding Company (Pacific Holdings). Affiliates of Pacific Holdings receive compensation from LMPFA or its affiliates for shareholder or distribution services provided with respect to registered investment companies for which Western
Asset or its affiliates serve as investment adviser.
|
4
|
Mr. Olson is an interested person of the Fund, as defined in the 1940 Act, because his law firm has provided legal services to Western Asset.
|
5
|
Ms. Trust is an interested person of the Fund, as defined in the 1940 Act, because of her position with LMPFA and/or certain of its affiliates.
|
6
|
Indicates the earliest year in which the officer took such office. Each officer of the Fund is an interested person (as defined above) of the Fund.
|
|
|
|
Western Asset Investment Grade Income Fund Inc.
|
|
47
|
Annual chief executive officer and principal financial officer
certifications (unaudited)
The Funds Chief Executive Officer (CEO) has submitted to the NYSE the required annual certification and the Fund also has included the
Certifications of the Funds CEO and Principal Financial Officer required by Section 302 of the Sarbanes-Oxley Act in the Funds Form N-CSR filed with the SEC for the period of this report.
|
|
|
48
|
|
Western Asset Investment Grade Income Fund Inc.
|
Other shareholder communications regarding accounting matters (unaudited)
The Funds Audit Committee has established guidelines and procedures regarding the receipt, retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters (collectively, Accounting Matters). Persons with complaints or concerns regarding Accounting Matters may submit their complaints to the Chief Compliance Officer (CCO). Persons
who are uncomfortable submitting complaints to the CCO, including complaints involving the CCO, may submit complaints directly to the Funds Audit Committee Chair. Complaints may be submitted on an anonymous basis.
The CCO may be contacted at:
Legg Mason & Co., LLC
Compliance Department
620 Eighth Avenue, 47th Floor
New York, New York 10018
Complaints may also be
submitted by telephone at 1-800-742-5274. Complaints submitted through this number will be received by the CCO.
|
|
|
Western Asset Investment Grade Income Fund Inc.
|
|
49
|
Summary of information regarding the Fund (unaudited)
Investment Objectives
The Funds
primary investment objective is to seek a high level of current income, consistent with prudent investment risk, through investment in a diversified portfolio of debt securities. To a lesser extent, the Fund may also invest in privately placed debt
securities and in certain equity securities. Capital appreciation is a secondary investment objective.
Principal Investment Policies
and Strategies
The Fund invests at least 80% of its net assets in fixed income securities that are rated in the Baa or BBB categories or above at
the time of purchase by one or more Nationally Recognized Statistical Rating Organizations (NRSROs) or unrated securities of comparable quality at the time of purchase (as determined by the investment adviser). If a security is rated by
multiple NRSROs and receives different ratings, the Fund will treat the security as being rated in the highest rating category received from an NRSRO. In addition, the Fund may invest up to 20% in other fixed income securities, and not more than 25%
in securities restricted as to resale. In addition, convertible bonds and preferred securities may be treated as fixed income securities for purposes of the policy and so, if appropriately rated, would qualify for the 80% test. The
Funds 80% investment policy may be changed by the Board of Directors without shareholder approval upon 60 days prior notice to shareholders.
At least 75% of the Funds total assets will be invested in the following types of interest-bearing debt securities:
(1)
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marketable and privately placed straight debt securities which are rated at the time of purchase within the four highest grades assigned by Moodys
Investors Service, Inc. (Moodys) (Aaa, Aa, A or Baa) or S&P Global Ratings (S&P) (AAA, AA, A or BBB);
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(2)
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marketable securities of, or guaranteed by, the U.S. Government, its agencies or instrumentalities;
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(3)
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marketable securities (payable in U.S. dollars) of, or guaranteed by, the Government of Canada or a Province of Canada or any instrumentality or
political subdivision thereof, acquired under circumstances that would not subject the Fund to payment of U. S. Interest Equalization Tax, such securities not to exceed 25% of the Funds total assets;
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(4)
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obligations of, or guaranteed by, U.S. banks or U.S. bank holding companies (i.e., companies whose primary assets are U.S. banks), which obligations,
although not rated as a matter of policy by either Moodys or S&P, are considered by management to have investment quality comparable to securities which may be purchased under item (1) above, provided that investments will not be made
in obligations of First Interstate Bancorp, First Interstate Bank of California or any of their subsidiaries; and
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Western Asset Investment Grade Income Fund Inc.
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The foregoing requirement for 75% of
total assets (the 75% policy) is a fundamental policy of the Fund which may only be changed with the approval of the holders of the Funds voting securities as discussed below. In investing up to 75% of the Funds total assets
in the debt securities (as described above) which are not rated, the Adviser selects securities which, in the opinion of the Adviser, are of a quality comparable to one of the four highest grades of debt securities which are rated.
Up to 25% of the Funds total assets may consist of:
(1)
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interest-bearing debt securities not included in items (1) through (5) above, which include straight debt securities rated below the four highest
grades assigned by Moodys or S&P (although the Adviser does not currently intend to invest in debt securities rated less than B by Moodys or S&P), which securities lack desirable investment characteristics with assurance of
interest and principal payments over any long period of time being small.
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(2)
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securities which may be convertible into or exchangeable for, or carry warrants to purchase, common stock or other equity interests; and
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Trust preferred
interests and capital securities are considered debt securities and not preferred stock for purposes of the foregoing policy and the 75% policy. The Fund will not invest for the purpose of exercising control or management.
The Fund may invest in securities of other investment companies to the extent permitted under the Investment Company Act of 1940, as amended (the 1940
Act).
Subject to certain restrictions, the Fund may leverage its portfolio borrowing from banks or other lending institutions in negotiated
transactions and issuing publicly or privately and from time to time, bonds, debentures or notes, in series or otherwise, with such interest rates and other terms and provisions, including conversion rights if deemed advisable, as the Board of
Directors of the Fund may from time to time determine, provided that immediately after any such borrowing or issuance the aggregate amount of such indebtedness outstanding would not exceed 20% of the value of the Funds total assets. Subject to
such limitations as may be specified in applicable margin regulations of the Board of Governors of the Federal Reserve System, amounts so borrowed and securities so issued by the Fund could be secured by a pledge or mortgage, provided that as a
result not more than 40% of the value of the Funds total assets would be subject in the aggregate to such pledges and mortgages. Borrowings may be for long or short term, and, subject to compliance with applicable legal requirements, including
applicable provisions of the 1940 Act, may be evidenced by documented discount notes or other short-term notes of the Fund generically referred to as commercial paper.
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Western Asset Investment Grade Income Fund Inc.
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Summary of information regarding the Fund (unaudited) (contd)
Subject to certain requirements of the Securities and Exchange Commission (the SEC), the Fund may lend its portfolio securities to any broker, dealer or
financial institution.
The Fund may invest in asset-backed securities. The Fund may also invest in mortgage-backed securities (MBS) such as
mortgage pass-through securities, collateralized mortgage obligations and multi-class pass-through securities. The Fund may also invest in debt securities which are secured with collateral consisting of mortgage loans or MBS, and in other types of
MBS. The Fund may also invest in mortgage pass-through securities issued by governmental, government-related and private entities which are stripped MBS (SMBS). As new types of MBS are developed and offered to investors, the Adviser
will, consistent with the Funds investment objectives, policies and quality standards, consider making investments in such new types of mortgage-backed securities.
The Fund may invest in floating rate, inverse floating rate and index obligations whose interest payments or maturity values float with, or inversely to, an underlying index or price.
The Fund may invest in foreign securities. The Fund may enter into certain foreign currency transactions, including both spot purchases and sales, and
forward foreign currency contracts. Typically, the Fund would not enter into a forward currency contract with a term of greater than one year, although it may on some occasions do so.
Investment Restrictions
Except as otherwise noted, the Funds investment objective,
strategies and investment policies are not fundamental and may be changed by the Board of Directors without the approval of the shareholders. The following investment restrictions are fundamental policies for the protection of the Funds
shareholders and, subject to compliance with the requirements of the 1940 Act, may only be changed with the approval of the holders of the Funds voting securities as specified below and provide that the Fund will not:
1.
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Issue any senior securities (as defined in the 1940 Act), except in connection with borrowings permitted in Item 2 below or insofar as interest rate
futures contracts as permitted by Item 17 below might be considered to be the issuance of a senior security.
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2.
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Borrow any money except (a) as described under Principal Investment Policies and Strategies and (b) from banks for temporary or
emergency purposes in an amount not exceeding 5% of the value of its total assets, provided, however, that without reference to such 5% limitation the Fund may enter into and hold interest rate futures contracts and may make deposits or have similar
arrangements in connection therewith.
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3.
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Mortgage, pledge or hypothecate its assets except (a) as described under Principal Investment Policies and Strategies and (b) that
up to 15% of the value of its assets may be security for temporary borrowing, provided, however, that this limitation shall not apply to deposits or similar arrangements made in connection with the entering into and
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Western Asset Investment Grade Income Fund Inc.
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holding of interest rate futures contracts or to the writing of call options in an amount not to exceed 15% of the value of its assets.
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4.
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Act as an underwriter, except to the extent that, in connection with the disposition of restricted portfolio securities, the Fund may be deemed to be an
underwriter under applicable laws.
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5.
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Purchase or sell real estate, except that the Fund may purchase or sell securities secured by real estate or interests therein or issued by companies,
including real estate investment trusts, which own real estate or interests therein.
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6.
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Purchase or sell commodities or commodity contracts, provided that the Fund may enter into and hold interest rate futures contracts and make deposits or
have similar arrangements in connection therewith, and the Fund may write listed covered call options and buy and sell put and call options on debt securities in an amount not to exceed 15% of the value of its total assets.
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7.
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Invest more than 5% of the value of its total assets in the securities of any one issuer (other than cash items and securities of the U.S. Government or
its agencies or instrumentalities) or purchase more than 10% of any class of the outstanding voting securities of any one issuer.
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8.
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Invest more than 25% of the value of its total assets in restricted securities, which are securities acquired in private placement transactions.
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9.
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Concentrate its investments in any particular industry; however, it may invest up to 25% of the value of its total assets in the securities of issues in
any one industry. As to utility companies, gas, electric, water and telephone companies will be considered as separate industries.
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10.
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Invest more than 25% of the value of its total assets in securities of, or guaranteed by, the Government of Canada or a Province of Canada or any
instrumentality or political subdivision thereof.
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11.
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Purchase or retain the securities of any issuer, if, to the Funds knowledge, those officers or directors of the Fund or of its investment adviser
who individually own beneficially more than 0.5% of the outstanding securities of such issuer, together own beneficially more than 5% of such outstanding securities.
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12.
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Make loans to other persons, except for the purchase of debt securities in private placement transactions or public offerings in accordance with the
Funds investment objectives and policies and for loans of portfolio securities subject to compliance with the requirements of the SEC.
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Western Asset Investment Grade Income Fund Inc.
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Summary of information regarding the Fund (unaudited) (contd)
13.
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Purchase securities on margin, except that it may obtain such short-term credits as may be necessary for the clearance of purchases or sales of
securities, provided that the Fund may enter into and hold interest rate futures contracts and may make deposits or have similar arrangements in connection therewith.
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14.
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Participate on a joint or a joint and several basis in any securities trading account.
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15.
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Invest in puts, calls or combinations thereof, provided that the Fund may enter into and hold interest rate futures contracts and make deposits or have
similar arrangements in connection therewith, and the Fund may write listed covered call options and buy and sell put and call options on debt securities in an amount not to exceed 15% of the value of its total assets.
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16.
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Make short sales, except for sales against the box, provided that the Fund may enter into and hold interest rate futures contracts and may
make deposits or have similar arrangements in connection therewith.
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17.
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Enter into and hold any interest rate futures contracts, if, immediately thereafter, the sum of (a) the then aggregate futures market prices of
financial instruments required to be delivered under open futures contract sales of the Fund and (b) the aggregate purchase prices under open futures contract purchases of the Fund, would exceed 30% of the total assets of the Fund, at market
value.
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The foregoing fundamental policies may not be changed without approval of the holders of the lesser of (a) 67% of the
Funds voting securities present at a meeting, if the holders of more than 50% of outstanding voting securities are present in person or by proxy, or (b) more than 50% of the Funds outstanding voting securities.
Any investment policy or restriction which involves a maximum percentage of securities or assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after an acquisition of securities and results therefrom. Securities received upon conversion or upon exercise of warrants and securities remaining upon the breakup of units or detachment of warrants may be retained to
permit advantageous disposition.
Principal Risk Factors
The Fund is a diversified, 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 objectives. Similar to stocks, the Funds 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. Diversification does not assure
against market loss.
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Western Asset Investment Grade Income Fund Inc.
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Investment and Market Risk. An
investment in the Fund is subject to investment risk, including the possible loss of the entire amount that you invest. Your investment in the common stock represents an indirect investment in the fixed income securities and other investments owned
by the Fund, most of which could be purchased directly. The value of the Funds portfolio securities may move up or down, sometimes rapidly and unpredictably. At any point in time, your common stock may be worth less than your original
investment, even after taking into account the reinvestment of Fund dividends and distributions.
Market Discount Risk. Shares of closed-end investment companies frequently trade at a discount from their net asset value. This risk is separate and distinct from the risk that the Funds net asset value could decrease as a result of its
investment activities. Whether investors will realize gains or losses upon the sale of the common share will depend not upon the Funds net asset value but upon whether the market price of the common stock at the time of sale is above or below
the investors purchase price for the common stock.
Because the market price of the common stock will be determined by factors such as relative
supply of and demand for the common stock in the market, general market and economic conditions and other factors beyond the control of the Fund, the Fund cannot predict whether the shares of common stock will trade at, above or below net asset
value or at, above or below the initial public offering price. The Funds common stock is designed primarily for long term investors and you should not view the Fund as a vehicle for trading purposes.
Fixed Income Securities Risk. In addition to the risks described elsewhere in this section with respect to valuations and liquidity, fixed income securities,
including high-yield securities, are also subject to certain risks, including:
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Issuer Risk. The value of fixed income securities may decline for a number of reasons that directly relate to the issuer, such as management performance,
financial leverage and reduced demand for the issuers goods and services.
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Interest Rate Risk. The market price of the Funds investments will change in response to changes in interest rates and other factors. During periods
of declining interest rates, the market price of fixed income securities generally rises. Conversely, during periods of rising interest rates, the market price of such securities generally declines. The magnitude of these fluctuations in the market
price of fixed income securities is generally greater for securities with longer maturities. Additionally, such risk may be greater during the current period of historically low interest rates. Fluctuations in the market price of the Funds
securities will not affect interest income derived from securities already owned by the Fund, but will be reflected in the Funds net asset value. The Fund may utilize certain strategies, including futures contracts, options on futures and
options based on U.S.
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Western Asset Investment Grade Income Fund Inc.
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55
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Summary of information regarding the Fund (unaudited) (contd)
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Treasury securities, for the purpose of reducing the interest rate sensitivity of the portfolio, although there is no assurance that it will do so or that such strategies will be successful.
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Prepayment Risk. During periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled,
forcing the Fund to reinvest the proceeds from such prepayment in lower yielding securities, which may result in a decline in the Funds income and distributions to shareholders. This is known as prepayment or call risk. Debt
securities frequently have call features that allow the issuer to redeem the security at dates prior to its stated maturity at a specified price (typically greater than par) only if certain prescribed conditions are met. An issuer may choose to
redeem a debt security if, for example, the issuer can refinance the debt at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer.
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Reinvestment Risk. Reinvestment risk is the risk that income from the Funds portfolio will decline if and when the Fund invests the proceeds from
matured, traded or called fixed income securities at market interest rates that are below the portfolios current earnings rate. A decline in income could affect the Funds common stock price, its distributions or its overall return.
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Extension Risk. When interest rates rise, repayments of fixed income securities, particularly asset- and mortgage- backed securities, may occur more
slowly than anticipated, extending the effective duration of these fixed income securities at below market interest rates and causing their market prices to decline more than they would have declined due to the rise in interest rates alone. This may
cause the Funds share price to be more volatile.
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Credit Risk. If an issuer or guarantor of a security held by the Fund or
a counterparty to a financial contract with the Fund defaults or its credit is downgraded, or is perceived to be less creditworthy, or if the value of the assets underlying a security declines, the value of your investment will typically decline.
Changes in actual or perceived creditworthiness may occur quickly. The Fund could be delayed or hindered in its enforcement of rights against an issuer, guarantor or counterparty. Subordinated securities are more likely to suffer a credit loss than non-subordinated securities of the same issuer and will be disproportionately affected by a default, downgrade or perceived decline in creditworthiness.
Counterparty Risk. The Fund may enter into transactions with counterparties that become unable or unwilling to fulfill their contractual obligations. There can be no assurance that any such counterparty will
not default on its obligations to the Fund. In the event of a counterparty default, the Fund may be hindered or delayed in exercising rights against a counterparty and may experience significant losses. To the extent that the Fund enters into
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Western Asset Investment Grade Income Fund Inc.
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multiple transactions with a single or small set of counterparties, the Fund will be subject to increased counterparty risk.
Lower and Unrated Securities Risk. The Fund may invest in below investment grade securities (commonly referred to as high-yield securities or junk bonds) at the time of investment.
High yield debt securities are generally subject to greater credit risks than higher-grade debt securities, including the risk of default on the payment of interest or principal. High yield debt securities are considered speculative, typically have
lower liquidity and are more difficult to value than higher grade bonds. High yield debt securities tend to be volatile and more susceptible to adverse events, credit downgrades and negative sentiments and may be difficult to sell at a desired
price, or at all, during periods of uncertainty or market turmoil.
Mortgage-backed and Asset-backed Securities Risk. When market interest rates
increase, the market values of mortgage-backed securities decline. At the same time, mortgage refinancings and prepayments slow, which lengthens the effective duration of these securities. As a result, the negative effect of the interest rate
increase on the market value of mortgage-backed securities is usually more pronounced than it is for other types of fixed income securities, potentially increasing the volatility of the Fund. Conversely, when market interest rates decline, while the
value of mortgage-backed securities may increase, the rate of prepayment of the underlying mortgages also tends to increase, which shortens the effective duration of these securities. Mortgage-backed securities are also subject to the risk that
underlying borrowers will be unable to meet their obligations and the value of property that secures the mortgage may decline in value and be insufficient, upon foreclosure, to repay the associated loan. Investments in asset-backed securities are
subject to similar risks.
Variable and Floating Rate Securities Risk. Variable rate securities reset at specified intervals, while floating rate
securities reset whenever there is a change in a specified index rate. In most cases, these reset provisions reduce the impact of changes in market interest rates on the value of the security. However, the value of these securities may decline if
their interest rates do not rise as much, or as quickly, as other interest rates. Conversely, these securities will not generally increase in value if interest rates decline. The Fund may also invest in inverse floating rate debt instruments
(inverse floaters). Interest payments on inverse floaters vary inversely with changes in interest rates. Inverse floaters pay higher interest (and therefore generally increase in value) when interest rates decline, and vice versa. An
inverse floater may exhibit greater price volatility than a fixed rate obligation of similar credit quality.
Leverage Risk. The value of your
investment may be more volatile if the Fund uses leverage-through borrowing of money and, under certain circumstances, short sales, futures contracts, and other investment techniques. The Funds leveraging strategy may not be
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Western Asset Investment Grade Income Fund Inc.
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57
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Summary of information regarding the Fund (unaudited) (contd)
successful. Leverage is a speculative technique that may expose the Fund to greater risk and increased costs. Increases and decreases in the value of the
Funds portfolio will be magnified when the Fund uses leverage. As a result, leverage will cause greater changes in the Funds net asset value than if leverage were not used. The Fund will also have to pay interest with respect to its
leverage, which may reduce the Funds return. This expense may be greater than the Funds return on the underlying investments. It is anticipated that interest with respect to leverage will be based on shorter-term interest rates that
would be periodically reset. There can be no assurance that the use of leverage will result in a higher yield on the shares. When leverage is employed, the net asset value and market price of the shares and the yield to shareholders will be more
volatile. The use of leverage will cause the Funds net asset value to fall more sharply in response to increases in interest rates than it would in the absence of the use of leverage. Leverage creates two major types of risks for shareholders:
the likelihood of greater volatility of net asset value and market price of the shares because changes in the value of the Funds assets, including investments bought with the proceeds from the use of leverage, are borne entirely by the
shareholders; and the possibility either that net investment income will fall if the interest and dividend rates on leverage rise or that net investment income will fluctuate because the interest and dividend rates on leverage vary.
Foreign Securities and Emerging Markets Risk. A fund that invests in foreign (non-U.S.) securities may experience
more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies. The securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of
industries. Investments in foreign securities (including those denominated in U.S. dollars) are subject to economic and political developments in the countries and regions where the issuers operate or are domiciled, or where the securities are
traded, such as changes in economic or monetary policies. Values may also be affected by restrictions on receiving the investment proceeds from a foreign country. Less information may be publicly available about foreign companies than about U.S.
companies. Foreign companies are generally not subject to the same accounting, auditing and financial reporting standards as are U.S. companies. The Public Company Accounting Oversight Board, which regulates auditors of U.S. public companies, is
unable to inspect audit work papers in certain foreign countries. Investors in foreign countries often have limited rights and few practical remedies to pursue shareholder claims, including class actions or fraud claims, and the ability of the SEC,
the U.S. Department of Justice and other authorities to bring and enforce actions against foreign issuers or foreign persons is limited. Foreign investments may also be adversely affected by U.S. government or international interventions,
restrictions or economic sanctions, which could negatively affect the value of an investment or result in the Fund selling an investment at a disadvantageous time. In addition, the Funds investments in foreign securities may be subject to the
risk of nationalization or
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Western Asset Investment Grade Income Fund Inc.
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expropriation of assets, imposition of currency exchange controls or restrictions on the repatriation of foreign currency, confiscatory taxation, political or financial instability and adverse
diplomatic developments. In addition, there may be difficulty in obtaining or enforcing a court judgment abroad. Dividends or interest on, or proceeds from the sale of, foreign securities may be subject to
non-U.S. withholding taxes, and special U.S. tax considerations may apply.
The risks of foreign investment are
greater for investments in emerging markets. Emerging market countries typically have economic and political systems that are less fully developed, and that can be expected to be less stable, than those of more advanced countries. Low trading
volumes may result in a lack of liquidity and in price volatility. Emerging market countries may have policies that restrict investment by foreigners, that require governmental approval prior to investments by foreign persons, or that prevent
foreign investors from withdrawing their money at will. An investment in emerging market securities should be considered speculative.
Restricted
Securities. Restricted securities are securities subject to legal or contractual restrictions on their resale, such as private placements. Such restrictions might prevent the sale of restricted securities at a time when the sale would otherwise
be desirable. Under SEC regulations, certain restricted securities acquired through private placements can be traded freely among qualified purchasers. While restricted securities are generally presumed to be illiquid, it may be determined that a
particular restricted security is liquid. Investing in these restricted securities could have the effect of increasing the Funds illiquidity if qualified purchasers become, for a time, uninterested in buying these securities.
Restricted securities may be sold only (1) pursuant to SEC Rule 144A or another exemption, (2) in privately negotiated transactions or (3) in public
offerings with respect to which a registration statement is in effect under the 1933 Act. Rule 144A securities, although not registered in the U.S., may be sold to qualified institutional buyers in accordance with Rule 144A under the 1933 Act. As
noted above, the Fund may determine that some Rule 144A securities are liquid. Where registration is required, the Fund may be obligated to pay all or part of the registration expenses and a considerable period may elapse between the time of the
decision to sell and the time the Fund may be permitted to sell a restricted security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might obtain a less favorable price than
prevailed when it decided to sell.
Illiquid securities may be difficult to value, and the Fund may have difficulty disposing of such securities
promptly. The Fund does not consider non-U.S. securities to be restricted if they can be freely sold in the principal markets in which they are traded, even if they are not registered for sale in the U.S.
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Western Asset Investment Grade Income Fund Inc.
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59
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Summary of information regarding the Fund (unaudited) (contd)
Foreign Currency Risk. The value of investments in securities denominated in foreign currencies increases or decreases as the rates of exchange between those
currencies and the U.S. dollar change. Currency conversion costs and currency fluctuations could erase investment gains or add to investment losses. Currency exchange rates can be volatile, and are affected by factors such as general economic
conditions, the actions of the U.S. and foreign governments or central banks, the imposition of currency controls and speculation. The Fund may be unable or may choose not to hedge its foreign currency exposure. The Fund may also engage in foreign
currency transactions on a spot (cash) basis at the rate prevailing in the currency exchange market at the time of the transaction. In cases when a particular currency is difficult to hedge or difficult to hedge against the U.S. dollar, the Fund may
seek to hedge against price movements in that currency by entering into transactions using options and futures contracts on foreign currencies and forward currency contracts (collectively, Currency Instruments), on another currency or a
basket of currencies, the value of which Western Asset believes will have a high degree of positive correlation to the value of the currency being hedged. The risk that movements in the price of the Currency Instrument will not correlate perfectly
with movements in the price of the currency subject to the hedging transaction is magnified when this strategy is used.
Derivatives Risk. Using
derivatives can increase Fund losses and reduce opportunities for gains when market prices, interest rates, currencies, or the derivatives themselves behave in a way not anticipated by the Fund. Using derivatives also can have a leveraging effect
and increase Fund volatility. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. Derivatives may not be available at the time or price desired, may be difficult to sell, unwind or value, and
the counterparty may default on its obligations to the Fund. Derivatives are generally subject to the risks applicable to the assets, rates, indices or other indicators underlying the derivative. The value of a derivative may fluctuate more than the
underlying assets, rates, indices or other indicators to which it relates. Use of derivatives may have different tax consequences for the Fund than an investment in the underlying security, and those differences may affect the amount, timing and
character of income distributed to shareholders. The U.S. government and foreign governments are in the process of adopting and implementing regulations governing derivatives markets, including mandatory clearing of certain derivatives, margin and
reporting requirements. The ultimate impact of the regulations remains unclear. Additional regulation of derivatives may make derivatives more costly, limit their availability or utility, otherwise adversely affect their performance or disrupt
markets.
Futures contracts require the Fund to deposit initial margin and may require the Fund to increase the level of its initial margin
payment as a result of margin calls. If the Fund has insufficient cash to meet daily variation margin requirements, it might need to sell securities at a disadvantageous time or price. If the Fund were unable to liquidate a futures contract or an
option on a futures position due to the absence of a liquid secondary market,
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the imposition of price limits or otherwise, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case
of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the future or option or to maintain cash or securities in a segregated account.
The SEC adopted a new rule on October 28, 2020 that mandates that a funds derivatives risk management program provide for specific items as
required by the rule, including compliance with a value-at-risk (VaR) test. Compliance with these new requirements will be required after an eighteen month
transition period following the rules effective date of February 19, 2021. Following the compliance date, these requirements may limit the ability of the Fund to use derivatives and similar financing transactions as part of its investment
strategies. These requirements may increase the cost of the Funds investments in derivatives, which could adversely affect shareholders.
Portfolio Turnover Risk. The length of time the Fund has held a particular security is not generally a consideration in investment decisions. A change in the
securities held by the Fund is known as portfolio turnover. As a result of the Funds investment policies, under certain market conditions the Funds turnover rate may be higher than that of other investment companies.
Portfolio turnover generally involves some expense to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestment in other securities.
These transactions may result in realization of taxable capital gains.
Higher portfolio turnover rates, such as those above 100%, are likely to result
in higher brokerage commissions or other transaction costs and could give rise to a greater amount of taxable capital gains.
Management Risk. The
Fund is subject to management risk because it is an actively managed investment portfolio. Western Asset will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these will
produce the desired results.
Market Events Risk. The market values of securities or other assets will fluctuate, sometimes sharply and
unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or
other factors, political developments, investor sentiment, the global and domestic effects of a pandemic, and other factors that may or may not be related to the issuer of the security or other asset. Economies and financial markets throughout the
world are increasingly interconnected. Economic, financial or political events, trading and tariff arrangements, public health events, terrorism, natural disasters and other circumstances in one country or
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Western Asset Investment Grade Income Fund Inc.
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61
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Summary of information regarding the Fund (unaudited) (contd)
region could have profound impacts on global economies or markets. As a result, whether or not the Fund invests in securities of issuers located in or with
significant exposure to the countries directly affected, the value and liquidity of the Funds investments may be negatively affected.
The rapid
and global spread of a highly contagious novel coronavirus respiratory disease, designated COVID-19, has resulted in extreme volatility in the financial markets and severe losses; reduced liquidity of many
instruments; restrictions on international and, in some cases, local travel; significant disruptions to business operations (including business closures); strained healthcare systems; disruptions to supply chains, consumer demand and employee
availability; and widespread uncertainty regarding the duration and long-term effects of this pandemic. Some sectors of the economy and individual issuers have experienced particularly large losses. In addition, the
COVID-19 pandemic may result in a sustained domestic or even global economic downturn or recession, domestic and foreign political and social instability, damage to diplomatic and international trade relations
and increased volatility and/or decreased liquidity in the securities markets. Developing or emerging market countries may be more impacted by the COVID-19 pandemic as they may have less established health
care systems and may be less able to control or mitigate the effects of the pandemic. The impact of the COVID-19 pandemic may last for an extended period of time. The ultimate economic fallout from the
pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. Certain risks, such as interest rate risk, credit risk, liquidity risk and counterparty risk, may be heightened as a result of such market
events. The U.S. government and the Federal Reserve, as well as certain foreign governments and central banks, are taking extraordinary actions to support local and global economies and the financial markets in response to the COVID-19 pandemic, including by pushing interest rates to very low levels. These actions have resulted in significant expansion of public debt, including in the U.S. This and other government intervention into the
economy and financial markets to address the COVID-19 pandemic may not work as intended, particularly if the efforts are perceived by investors as being unlikely to achieve the desired results. Government
actions to mitigate the economic impact of the pandemic have resulted in a large expansion of government deficits and debt, the long term consequences of which are not known. The COVID-19 pandemic could
adversely affect the value and liquidity of the Funds investments and negatively impact the Funds 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.
Liquidity Risk. Liquidity risk exists when particular
investments are difficult to sell. Securities may become illiquid securities after purchase by the Fund, particularly during periods of market turmoil. When the Fund holds illiquid investments, the portfolio may be
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62
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Western Asset Investment Grade Income Fund Inc.
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harder to value, especially in changing markets, and if the Fund is forced to sell these investments in order to segregate assets or for other cash needs, the Fund may suffer a loss.
LIBOR Risk. The Funds 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. In 2017, the head of the UK Financial Conduct Authority announced a desire to phase out the use of LIBOR by the end of 2021. The
administrator of LIBOR recently announced a delay in the phase out of a majority of the U.S. dollar LIBOR publications until mid-2023, with the remainder of LIBOR publications to end at the end of 2021.There
remains uncertainty regarding the nature of any replacement rate and the impact of the transition from LIBOR on the Funds transactions and the financial markets generally. As such, the potential effect of a transition away from LIBOR on the
Fund or the Funds investments cannot yet be determined.
Operational Risk. The valuation of the Funds investments may be negatively
impacted because of the operational risks arising from factors such as processing errors and human errors, inadequate or failed internal or external processes, failures in systems and technology, changes in personnel, and errors caused by third
party service providers or trading counterparties. It is not possible to identify all of the operational risks that may affect the Fund or to develop processes and controls that completely eliminate or mitigate the occurrence of such failures. The
Fund and its shareholders could be negatively impacted as a result.
Cybersecurity Risk. Cybersecurity incidents, both intentional and
unintentional, may allow an unauthorized party to gain access to Fund assets, Fund or proprietary information, cause the Fund, Western Asset, Western London and/or their service providers to suffer data breaches, data corruption or loss of
operational functionality or prevent fund investors from purchasing, redeeming or exchanging shares or receiving distributions. The Fund, Western Asset, and Western London have limited ability to prevent or mitigate cybersecurity incidents affecting
third party service providers, and such third party service providers may have limited indemnification obligations to the Fund or the manager. Cybersecurity incidents may result in financial losses to the Fund and its shareholders, and substantial
costs may be incurred in order to prevent any future cybersecurity incidents. Issuers of securities in which the Fund invests are also subject to cybersecurity risks, and the value of these securities could decline if the issuers experience
cybersecurity incidents.
More Information
For a complete list of the Funds fundamental investment restrictions and more detailed descriptions of the Funds investment policies, strategies and risks, see the Funds prospectus, dated
March 15, 1973, as amended or superseded by subsequent disclosures.
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Western Asset Investment Grade Income Fund Inc.
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63
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Summary of information regarding the Fund (unaudited) (contd)
The Funds fundamental investment restrictions may not be changed without the approval of the holders of a majority of the outstanding voting securities, as
defined in the 1940 Act.
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64
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Western Asset Investment Grade Income Fund Inc.
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Dividend
reinvestment plan (unaudited)
The Fund offers to all shareholders a Dividend Reinvestment Plan (Plan). For participants in the Plan, cash distributions (e.g., dividends and capital gains) of registered shareholders (those who own
shares in their own name on the Funds records) are automatically invested in shares of the Fund. Interested shareholders may obtain more information or sign up for the Plan by contacting the agent. Shareholders who own shares in a brokerage,
bank, or other financial institution account must contact the Company where their account is held in order to participate in the Plan.
If you elect to
participate in the Plan you will automatically receive your dividend or net capital gains distribution in newly issued shares of the Fund if the market price of a share on the date of the distribution is at or above the net asset value
(NAV) of a Fund share. The number of shares to be issued to you will be determined by dividing the amount of the cash distribution to which you are entitled (net of any applicable withholding taxes) by the greater of the NAV per share on
such date or 95% of the market price of a share on such date. If the market price of a share on such distribution date is below the NAV the Agent will, as agent for the participants, buy shares of the Funds stock through a broker on the open
market or in a negotiated transaction (subject to price and other terms to which the agent may agree). The price per share of shares purchased for each participants account with respect to a particular dividend or other distribution will be
the average price (including brokerage commissions, transfer taxes and any other costs of purchase) of all shares purchased with respect to that dividend or other distribution. All shares of common stock acquired on your behalf through the Plan will
be automatically credited to an account maintained on the books of the Agent. Full and fractional shares will be voted by the Agent in accordance with your instructions.
Additional information regarding the plan
The Fund will pay all costs applicable to the Plan,
with the exceptions noted below. Brokerage commissions, transfer taxes and any other costs of purchase or sale by the Agent under the Plan will be charged to participants. The commission participants pay for selling shares under the Plan is
calculated as $2.50 plus $0.15 per share. Beneficial shareholders should contact the company holding their account for further information concerning fees that may apply to selling shares under the Plan. In the event the Fund determines to no longer
pay the costs applicable to the Plan, the Agent will terminate the Plan and may, but is not obligated to, offer a new plan under which it would impose a direct service charge on participants.
All shares acquired through the Plan receive voting rights and are eligible for any stock split, stock dividend, or other rights accruing to shareholders that the Board of Directors may declare. Distributions to
Plan participants will be in the form of stock, unless the Agent is notified in writing 10 days prior to the record date fixed by the Board of Directors for the distribution that you wish to receive a cash payment. Beneficial shareholders should
contact the company holding their account for further information regarding deadlines that might apply.
You may terminate participation in the Plan at
any time by giving written notice to the Agent. Such termination will be effective prior to the record date next succeeding the receipt of such instructions or by a later date of termination specified in such instructions.
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Western Asset Investment Grade Income Fund Inc.
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65
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Dividend reinvestment plan
(unaudited) (contd)
Upon termination of the Plan, a participant may request a certificate for the full shares credited to his or her account or may request the sale of all or part of
such shares. If the participant instructs the Agent to sell the shares credited to the participants account, the Agent may accumulate such shares and those of any other terminating participants for purposes of such sale. Brokerage charges,
transfer taxes, and any other costs of sale will be allocated pro rata among the selling participants. Any such sale may be made on any securities exchange where such shares are traded, in the over-the counter
market or in negotiated transactions, and may be subject to such terms of price, delivery, etc., as the Agent may agree to. Fractional shares credited to a terminating account will be paid for in cash at the current market price at the time of
termination.
Dividends and other distributions invested in additional shares under the Plan are subject to income tax just as if they had been received
in cash. After year end, dividends paid on the accumulated shares will be included in the Form 1099-DIV information return to the Internal Revenue Service and only one Form
1099-DIV will be sent to each participant each year.
Registered shareholders can make inquiries regarding the
Plan, as well as sign up or terminate their participation in the Plan by contacting Computershare Inc., 462 South 4th Street, Suite 1600, Louisville, KY 40202, telephone number 1-888-888-0151. Beneficial Shareholders can make inquiries regarding the Plan as well as sign up or terminate their participation in the Plan by contacting the company where their account is held.
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66
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Western Asset Investment Grade Income Fund Inc.
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Important tax information (unaudited)
The following information is provided with respect to the distributions paid during the taxable year ended December 31, 2020:
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Record Date:
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1/24/2020
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Monthly
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Payable Date:
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2/3/2020
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March 2020 through
December 2020
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Ordinary Income:
Qualified Dividend Income for Individuals
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0.93
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%
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1.42
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%
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Dividends Qualifying for the Dividends
Received Deduction for Corporations
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1.56
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%
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1.42
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%
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Interest-related Dividends*
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58.00
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%
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62.00
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%
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*
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The following percentage of ordinary income distributions paid monthly by the Fund represent Interest-related dividends eligible for exemption from U.S.
withholding tax for nonresident shareholders and foreign corporations.
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Western Asset Investment Grade Income Fund Inc.
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67
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Western Asset
Investment Grade Income Fund Inc.
Directors
Robert Abeles, Jr
Jane F. Dasher
Anita L. DeFrantz
Susan B. Kerley
Michael Larson*
Ronald L. Olson
Avedick B. Poladian
William E.B. Siart
Chairman
Jaynie M. Studenmund
Peter J. Taylor
Jane Trust
Officers
Jane Trust
President and Chief Executive Officer
Christopher Berarducci
Treasurer and Principal Financial Officer
Ted P. Becker
Chief Compliance Officer
Susan Kerr
Chief Anti-Money Laundering Compliance
Officer
Jenna Bailey
Identity Theft Prevention
Officer
Marc A. De Oliveira**
Secretary and
Chief Legal Officer
Thomas C. Mandia
Assistant
Secretary
Jeanne M. Kelly
Senior Vice
President
*
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Effective March 6, 2020, Mr. Larson became a Director.
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**
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Effective September 15, 2020, Mr. De Oliveira became Secretary and Chief Legal Officer.
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Western Asset Investment Grade Income Fund Inc.
620 Eighth Avenue
47th Floor
New York, NY 10018
Investment advisers
Western Asset Management Company, LLC
Western Asset
Management Company Limited
Custodian
The Bank of New York Mellon
Independent registered public accounting firm
PricewaterhouseCoopers LLP
100 East Pratt Street
Baltimore, MD 21202
Legal counsel
Ropes & Gray LLP
1211 Avenue of the
Americas
New York, NY 10036
Transfer
agent
Computershare Inc.
462 South 4th Street,
Suite 1600
Louisville, KY 40202
New
York Stock Exchange Symbol
PAI
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:
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Personal information included on applications or other forms;
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Account balances, transactions, and mutual fund holdings and positions;
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Bank account information, legal documents, and identity verification documentation;
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Online account access user IDs, passwords, security challenge question responses; and
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Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individuals total debt,
payment history, etc.).
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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:
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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;
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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;
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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;
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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;
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Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.
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NOT PART OF THE ANNUAL REPORT
|
Legg Mason Funds Privacy and Security Notice (contd)
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,
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NOT PART OF THE ANNUAL REPORT
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Legg Mason Funds Privacy and Security Notice (contd)
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).
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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.
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You also have the right to request the deletion of the personal information collected or maintained by the Funds.
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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
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NOT PART OF THE ANNUAL REPORT
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Western Asset Investment Grade Income Fund Inc.
Western Asset Investment Grade Income 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 Funds Forms N-PORT are available on the
SECs 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 SECs website at www.sec.gov.
This report is transmitted to the shareholders of Western Asset Investment
Grade Income 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
WASX013146 2/21 SR21-4095