UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-07920

 

 

Western Asset High Income Opportunity Fund Inc.

(Exact name of registrant as specified in charter)

 

125 Broad Street, New York, NY

 

10004

(Address of principal executive offices)

 

(Zip code)

 

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

300 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

 

Registrant's telephone number, including area code:

1-800-451-2010

 

 

Date of fiscal year end:

December 31

 

 

 

 

Date of reporting period:

June 30, 2007

 

 



 

WESTERN ASSET HIGH INCOME OPPORTUNITY FUND INC.

 

FORM N-Q

JUNE 30, 2007

 



 

ITEM 1.                  SCHEDULE OF INVESTMENTS

 



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited)

June 30, 2007

 

Face
Amount

 

Security

 

Value

 

CORPORATE BONDS & NOTES — 95.5%

 

 

 

Aerospace & Defense — 1.9%

 

 

 

$

995,000

 

Alliant Techsystems Inc., Senior Subordinated Notes, 6.750% due 4/1/16

 

$

970,125

 

 

 

DRS Technologies Inc., Senior Subordinated Notes:

 

 

 

850,000

 

6.625% due 2/1/16

 

824,500

 

1,750,000

 

7.625% due 2/1/18

 

1,776,250

 

 

 

Hawker Beechcraft Acquisition Co.:

 

 

 

3,060,000

 

Senior Notes, 8.875% due 4/1/15 (a)(b)

 

3,159,450

 

685,000

 

Senior Subordinated Notes, 9.750% due 4/1/17 (b)

 

717,538

 

 

 

L-3 Communications Corp., Senior Subordinated Notes:

 

 

 

700,000

 

7.625% due 6/15/12

 

720,125

 

1,460,000

 

5.875% due 1/15/15

 

1,361,450

 

570,000

 

6.375% due 10/15/15

 

541,500

 

 

 

Total Aerospace & Defense

 

10,070,938

 

Airlines — 1.4%

 

 

 

 

 

Continental Airlines Inc.:

 

 

 

1,010,000

 

Notes, 8.750% due 12/1/11

 

994,850

 

 

 

Pass-Through Certificates:

 

 

 

308,312

 

Series 2000-2, Class C, 8.312% due 4/2/11

 

316,213

 

930,000

 

Series C, 7.339% due 4/19/14

 

918,375

 

 

 

United Airlines Inc., Pass-Through Certificates:

 

 

 

962,968

 

Series 2000-1, Class B, 8.030% due 7/1/11

 

1,074,311

 

2,268,135

 

Series 2000-2, Class B, 7.811% due 10/1/09

 

2,587,091

 

 

 

Series 2001-1:

 

 

 

460,000

 

Class B, 6.932% due 9/1/11

 

533,888

 

1,045,000

 

Class C, 6.831% due 9/1/08

 

1,203,709

 

 

 

Total Airlines

 

7,628,437

 

Auto Components — 1.2%

 

 

 

1,820,000

 

Keystone Automotive Operations Inc., Senior Subordinated Notes, 9.750% due 11/1/13

 

1,592,500

 

4,820,000

 

Visteon Corp., Senior Notes, 8.250% due 8/1/10

 

4,807,950

 

 

 

Total Auto Components

 

6,400,450

 

Automobiles — 2.4%

 

 

 

 

 

Ford Motor Co.:

 

 

 

 

 

Debentures:

 

 

 

575,000

 

8.875% due 1/15/22

 

508,875

 

860,000

 

8.900% due 1/15/32

 

752,500

 

3,895,000

 

Notes, 7.450% due 7/16/31

 

3,130,606

 

 

 

General Motors Corp.:

 

 

 

1,330,000

 

Notes, 7.200% due 1/15/11

 

1,281,787

 

 

 

Senior Debentures:

 

 

 

1,350,000

 

8.250% due 7/15/23

 

1,236,938

 

4,000,000

 

8.375% due 7/15/33

 

3,670,000

 

2,125,000

 

Senior Notes, 7.125% due 7/15/13

 

2,000,156

 

 

 

Total Automobiles

 

12,580,862

 

Building Products — 1.7%

 

 

 

695,000

 

Ainsworth Lumber Co., Ltd., Senior Notes, 7.250% due 10/1/12

 

538,625

 

 

 

Associated Materials Inc.:

 

 

 

4,565,000

 

Senior Discount Notes, step bond to yield 3.960% due 3/1/14

 

3,423,750

 

225,000

 

Senior Subordinated Notes, 9.750% due 4/15/12

 

236,250

 

1,125,000

 

Nortek Inc., Senior Subordinated Notes, 8.500% due 9/1/14

 

1,077,188

 

 

See Notes to Schedule of Investments.

 

1



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 

Face
Amount

 

Security

 

Value

 

Building Products — 1.7% (continued)

 

 

 

$

5,360,000

 

NTK Holdings Inc., Senior Discount Notes, step bond to yield 11.443% due 3/1/14

 

$

3,912,800

 

 

 

Total Building Products

 

9,188,613

 

Capital Markets — 0.3%

 

 

 

 

 

E*TRADE Financial Corp., Senior Notes:

 

 

 

855,000

 

7.375% due 9/15/13

 

872,100

 

875,000

 

7.875% due 12/1/15

 

915,469

 

 

 

Total Capital Markets

 

1,787,569

 

Chemicals — 1.9%

 

 

 

2,745,000

 

Georgia Gulf Corp., Senior Subordinated Notes, 9.500% due 10/15/14

 

2,745,000

 

800,000

 

Huntsman International LLC, Senior Subordinated Notes, 7.875% due 11/15/14

 

861,000

 

 

 

Lyondell Chemical Co.:

 

 

 

 

 

Senior Notes:

 

 

 

725,000

 

8.000% due 9/15/14

 

748,563

 

595,000

 

8.250% due 9/15/16

 

624,750

 

130,000

 

Senior Secured Notes, 10.500% due 6/1/13

 

141,050

 

1,440,000

 

Methanex Corp., Senior Notes, 8.750% due 8/15/12

 

1,591,200

 

2,870,000

 

Montell Finance Co. BV, Debentures, 8.100% due 3/15/27 (b)

 

2,626,050

 

650,000

 

Westlake Chemical Corp., Senior Notes, 6.625% due 1/15/16

 

619,125

 

 

 

Total Chemicals

 

9,956,738

 

Commercial Banks — 0.4%

 

 

 

500,000

 

ATF Capital BV, Senior Notes, 9.250% due 2/21/14 (b)

 

533,750

 

1,530,000

 

TuranAlem Finance BV, Bonds, 8.250% due 1/22/37 (b)

 

1,476,450

 

 

 

Total Commercial Banks

 

2,010,200

 

Commercial Services & Supplies — 2.6%

 

 

 

2,705,000

 

Allied Security Escrow Corp., Senior Subordinated Notes, 11.375% due 7/15/11

 

2,732,050

 

2,580,000

 

Allied Waste North America Inc., Senior Notes, 6.875% due 6/1/17

 

2,509,050

 

525,000

 

Ashtead Holdings PLC, Secured Notes, 8.625% due 8/1/15 (b)

 

538,125

 

4,100,000

 

DynCorp International LLC/DIV Capital Corporation, Senior Subordinated Notes, Series B, 9.500% due 2/15/13

 

4,381,875

 

2,150,000

 

Interface Inc., Senior Notes, 10.375% due 2/1/10

 

2,322,000

 

1,545,000

 

Rental Services Corp., Senior Bonds, 9.500% due 12/1/14 (b)

 

1,583,625

 

 

 

Total Commercial Services & Supplies

 

14,066,725

 

Communications Equipment — 0.5%

 

 

 

3,140,000

 

Lucent Technologies Inc., Debentures, 6.450% due 3/15/29

 

2,747,500

 

Consumer Finance — 4.7%

 

 

 

1,655,000

 

AmeriCredit Corp., Senior Notes, 8.500% due 7/1/15 (b)

 

1,675,687

 

 

 

Ford Motor Credit Co.:

 

 

 

 

 

Notes:

 

 

 

925,000

 

7.875% due 6/15/10

 

925,420

 

2,535,000

 

9.806% due 4/15/12 (c)

 

2,719,391

 

1,140,000

 

7.000% due 10/1/13

 

1,057,502

 

 

 

Senior Notes:

 

 

 

1,037,000

 

10.610% due 6/15/11 (c)

 

1,121,119

 

2,245,000

 

9.875% due 8/10/11

 

2,358,399

 

1,190,000

 

8.105% due 1/13/12 (c)

 

1,188,096

 

1,140,000

 

8.000% due 12/15/16

 

1,093,713

 

 

 

General Motors Acceptance Corp.:

 

 

 

8,300,000

 

Bonds, 8.000% due 11/1/31

 

8,510,363

 

 

See Notes to Schedule of Investments.

 

2



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 

Face
Amount

 

Security

 

Value

 

Consumer Finance — 4.7% (continued)

 

 

 

$

4,660,000

 

Notes, 6.875% due 8/28/12

 

$

4,559,172

 

 

 

Total Consumer Finance

 

25,208,862

 

Containers & Packaging — 2.4%

 

 

 

1,500,000

 

Berry Plastics Corp., Senior Term Loan, 11.610% due 6/15/14 (c)

 

1,466,250

 

3,155,000

 

Graham Packaging Co. Inc., Senior Subordinated Notes, 9.875% due 10/15/14

 

3,206,269

 

2,745,000

 

Graphic Packaging International Corp., Senior Subordinated Notes, 9.500% due 8/15/13

 

2,865,094

 

2,479,000

 

Owens-Brockway Glass Container Inc., Senior Secured Notes, 8.875% due 2/15/09

 

2,534,777

 

955,000

 

Plastipak Holdings Inc., Senior Notes, 8.500% due 12/15/15 (b)

 

993,200

 

725,000

 

Radnor Holdings Corp., Senior Notes, 11.000% due 3/15/10 (d)

 

6,344

 

1,550,000

 

Sealed Air Corp., Notes, 6.950% due 5/15/09 (b)

 

1,587,938

 

 

 

Total Containers & Packaging

 

12,659,872

 

Diversified Consumer Services — 0.5%

 

 

 

 

 

Education Management LLC/Education Management Finance Corp.:

 

 

 

1,175,000

 

Senior Notes, 8.750% due 6/1/14

 

1,210,250

 

50,000

 

Senior Subordinated Notes, 10.250% due 6/1/16

 

52,875

 

1,225,000

 

Service Corp. International, Debentures, 7.875% due 2/1/13

 

1,254,019

 

 

 

Total Diversified Consumer Services

 

2,517,144

 

Diversified Financial Services — 1.7%

 

 

 

1,085,000

 

Basell AF SCA, Senior Secured Subordinated Second Priority Notes, 8.375% due 8/15/15 (b)

 

1,044,312

 

1,250,000

 

CCM Merger Inc., Notes, 8.000% due 8/1/13 (b)

 

1,250,000

 

2,891,000

 

JPMorgan Chase London, zero coupon bond to yield 9.312% due 11/8/07 (b)

 

2,825,577

 

500,000

 

Milacron Escrow Corp., Senior Secured Notes, 11.500% due 5/15/11

 

486,250

 

1,305,000

 

Smurfit Kappa Funding PLC, Senior Subordinated Notes, 7.750% due 4/1/15

 

1,313,156

 

482,000

 

UCAR Finance Inc., Senior Notes, 10.250% due 2/15/12

 

507,305

 

1,310,000

 

Vangent Inc., Senior Subordinated Notes, 9.625% due 2/15/15 (b)

 

1,331,153

 

460,000

 

Vanguard Health Holdings Co. II LLC, Senior Subordinated Notes, 9.000% due 10/1/14

 

457,700

 

 

 

Total Diversified Financial Services

 

9,215,453

 

Diversified Telecommunication Services — 8.1%

 

 

 

2,455,000

 

Cincinnati Bell Inc., Senior Notes, 7.000% due 2/15/15

 

2,418,175

 

385,000

 

Cincinnati Bell Telephone Co., Senior Debentures, 6.300% due 12/1/28

 

344,575

 

 

 

Citizens Communications Co.:

 

 

 

160,000

 

7.050% due 10/1/46

 

132,000

 

150,000

 

Senior Bonds, 7.125% due 3/15/19

 

142,500

 

2,185,000

 

Senior Notes, 7.875% due 1/15/27

 

2,135,838

 

1,555,000

 

GT Group Telecom Inc., Senior Discount Notes, 13.250% due 2/1/10 (d)(e)(f)

 

0

 

480,000

 

Hawaiian Telcom Communications Inc., Senior Subordinated Notes, Series B, 12.500% due 5/1/15

 

547,200

 

 

 

Intelsat Bermuda Ltd.:

 

 

 

2,035,000

 

9.250% due 6/15/16

 

2,172,362

 

3,745,000

 

Senior Notes, 11.250% due 6/15/16

 

4,213,125

 

720,000

 

Intelsat Corp., Senior Notes, 9.000% due 8/15/14

 

754,200

 

 

 

Level 3 Financing Inc.:

 

 

 

660,000

 

9.250% due 11/1/14

 

669,900

 

420,000

 

Senior Notes, 9.150% due 2/15/15 (b)(c)

 

422,100

 

1,950,000

 

Nordic Telephone Co. Holdings, Senior Secured Bonds, 8.875% due 5/1/16 (b)

 

2,076,750

 

 

 

NTL Cable PLC, Senior Notes:

 

 

 

390,000

 

8.750% due 4/15/14

 

403,650

 

2,562,000

 

9.125% due 8/15/16

 

2,696,505

 

 

See Notes to Schedule of Investments.

 

3



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 

Face
Amount

 

Security

 

Value

 

Diversified Telecommunication Services — 8.1% (continued)

 

 

 

$

1,240,000

 

PAETEC Holding Corp., Secured, 9.500% due 7/15/15 (b)

 

$

1,257,050

 

 

 

Qwest Corp.:

 

 

 

4,640,000

 

Notes, 8.875% due 3/15/12

 

5,022,800

 

2,945,000

 

Senior Notes, 7.500% due 10/1/14

 

3,033,350

 

2,100,000

 

Southwestern Bell Telephone Co., Debentures, 7.000% due 11/15/27

 

2,127,796

 

4,245,000

 

Telcordia Technologies Inc., Senior Subordinated Notes, 10.000% due 3/15/13 (b)

 

3,799,275

 

1,095,000

 

Univision Communications Inc., Senior Notes, 9.750% due 3/15/15 (a)(b)

 

1,086,788

 

4,195,000

 

Wind Acquisition Finance SA, Senior Bonds, 10.750% due 12/1/15 (b)

 

4,834,737

 

2,990,000

 

Windstream Corp., Senior Notes, 8.625% due 8/1/16

 

3,176,875

 

 

 

Total Diversified Telecommunication Services

 

43,467,551

 

Electric Utilities — 1.0%

 

 

 

705,406

 

Midwest Generation LLC, Pass-Through Certificates, Series B, 8.560% due 1/2/16

 

752,580

 

2,350,000

 

Orion Power Holdings Inc., Senior Notes, 12.000% due 5/1/10

 

2,667,250

 

2,335,000

 

VeraSun Energy Corp., Senior Notes, 9.375% due 6/1/17 (b)

 

2,183,225

 

 

 

Total Electric Utilities

 

5,603,055

 

Electrical Equipment — 0.1%

 

 

 

335,000

 

Belden CDT Inc., Senior Subordinated Notes, 7.000% due 3/15/17 (b)

 

331,650

 

Electronic Equipment & Instruments — 0.3%

 

 

 

 

 

NXP BV/NXP Funding LLC:

 

 

 

575,000

 

Senior Notes, 9.500% due 10/15/15

 

569,250

 

1,240,000

 

Senior Secured Notes, 7.875% due 10/15/14

 

1,227,600

 

 

 

Total Electronic Equipment & Instruments

 

1,796,850

 

Energy Equipment & Services — 2.4%

 

 

 

2,305,000

 

ANR Pipeline Co., Debentures, 9.625% due 11/1/21

 

3,018,155

 

1,900,000

 

Complete Production Services Inc., Senior Notes, 8.000% due 12/15/16 (b)

 

1,928,500

 

573,000

 

Dresser-Rand Group Inc., Senior Subordinated Notes, 7.375% due 11/1/14

 

578,014

 

740,000

 

GulfMark Offshore Inc., Senior Subordinated Notes, 7.750% due 7/15/14

 

751,100

 

1,725,000

 

Hanover Compressor Co., Senior Notes, 9.000% due 6/1/14

 

1,832,812

 

625,000

 

Pride International Inc., Senior Notes, 7.375% due 7/15/14

 

629,688

 

60,000

 

Southern Natural Gas Co., Senior Notes, 8.000% due 3/1/32

 

68,349

 

3,270,000

 

Tennessee Gas Pipeline Co., Bonds, 8.375% due 6/15/32

 

3,850,745

 

 

 

Total Energy Equipment & Services

 

12,657,363

 

Food & Staples Retailing — 0.3%

 

 

 

1,506,000

 

Delhaize America Inc., Debentures, 9.000% due 4/15/31

 

1,827,002

 

Food Products — 0.5%

 

 

 

 

 

Dole Food Co. Inc., Senior Notes:

 

 

 

2,025,000

 

7.250% due 6/15/10

 

1,964,250

 

575,000

 

8.875% due 3/15/11

 

569,250

 

 

 

Total Food Products

 

2,533,500

 

Gas Utilities — 0.5%

 

 

 

2,890,000

 

Suburban Propane Partners LP/Suburban Energy Finance Corp., Senior Notes, 6.875% due 12/15/13

 

2,803,300

 

Health Care Equipment & Supplies — 0.2%

 

 

 

1,130,000

 

Advanced Medical Optics Inc., Senior Subordinated Notes, 7.500% due 5/1/17 (b)

 

1,073,500

 

Health Care Providers & Services — 5.7%

 

 

 

 

 

Community Health Systems Inc.:

 

 

 

4,270,000

 

Senior Notes, 8.875% due 7/15/15 (b)

 

4,350,062

 

 

See Notes to Schedule of Investments.

 

4



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 

Face
Amount

 

Security

 

Value

 

Health Care Providers & Services — 5.7% (continued)

 

 

 

$

1,350,000

 

Senior Subordinated Notes, 6.500% due 12/15/12

 

$

1,409,021

 

 

 

DaVita Inc.:

 

 

 

 

 

Senior Notes:

 

 

 

1,340,000

 

6.625% due 3/15/13

 

1,314,875

 

315,000

 

6.625% due 3/15/13 (b)

 

309,094

 

1,640,000

 

Senior Subordinated Notes, 7.250% due 3/15/15

 

1,627,700

 

 

 

HCA Inc.:

 

 

 

3,920,000

 

Debentures, 7.500% due 11/15/95

 

3,138,191

 

 

 

Notes:

 

 

 

1,150,000

 

6.375% due 1/15/15

 

980,375

 

970,000

 

7.690% due 6/15/25

 

848,550

 

40,000

 

Senior Notes, 6.250% due 2/15/13

 

36,200

 

 

 

Senior Secured Notes:

 

 

 

1,640,000

 

9.250% due 11/15/16 (b)

 

1,750,700

 

2,035,000

 

9.625% due 11/15/16 (a)(b)

 

2,192,713

 

2,675,000

 

IASIS Healthcare LLC/IASIS Capital Corp., Senior Subordinated Notes, 8.750% due 6/15/14

 

2,688,375

 

 

 

Tenet Healthcare Corp., Senior Notes:

 

 

 

4,250,000

 

7.375% due 2/1/13

 

3,862,188

 

1,190,000

 

9.875% due 7/1/14

 

1,184,050

 

1,305,000

 

Triad Hospitals Inc., Senior Subordinated Notes, 7.000% due 11/15/13

 

1,375,077

 

 

 

Universal Hospital Services Inc., Secured Notes:

 

 

 

505,000

 

8.500% due 6/1/15 (a)(b)

 

502,475

 

530,000

 

8.759% due 6/1/15 (b)(c)

 

532,650

 

2,450,000

 

US Oncology Holdings Inc., Senior Notes, 9.797% due 3/15/12 (a)(b)(c)

 

2,419,375

 

 

 

Total Health Care Providers & Services

 

30,521,671

 

Hotels, Restaurants & Leisure — 5.0%

 

 

 

820,000

 

AMC Entertainment Inc., Senior Subordinated Notes, 8.000% due 3/1/14

 

807,700

 

2,425,000

 

Buffets Inc., Senior Notes, 12.500% due 11/1/14

 

2,334,062

 

1,325,000

 

Caesars Entertainment Inc., Senior Subordinated Notes, 8.875% due 9/15/08

 

1,364,750

 

1,450,000

 

Carrols Corp., Senior Subordinated Notes, 9.000% due 1/15/13

 

1,435,500

 

1,105,000

 

Fontainebleau Las Vegas Holdings LLC/Fontainebleau Las Vegas Capital Corp., 10.250% due 6/15/15 (b)

 

1,093,950

 

2,625,000

 

Herbst Gaming Inc., Senior Subordinated Notes, 7.000% due 11/15/14

 

2,474,062

 

2,515,000

 

Inn of the Mountain Gods Resort & Casino, Senior Notes, 12.000% due 11/15/10

 

2,709,912

 

135,000

 

Isle of Capri Casinos Inc., Senior Subordinated Notes, 7.000% due 3/1/14

 

128,419

 

2,150,000

 

Las Vegas Sands Corp., Senior Notes, 6.375% due 2/15/15

 

2,055,938

 

700,000

 

Mandalay Resort Group, Senior Subordinated Debentures, 7.625% due 7/15/13

 

682,500

 

 

 

MGM MIRAGE Inc.:

 

 

 

1,130,000

 

Notes, 6.750% due 9/1/12

 

1,084,800

 

 

 

Senior Notes:

 

 

 

360,000

 

7.500% due 6/1/16

 

343,350

 

1,840,000

 

7.625% due 1/15/17

 

1,759,500

 

225,000

 

Mohegan Tribal Gaming Authority, Senior Subordinated Notes, 6.875% due 2/15/15

 

219,938

 

1,050,000

 

Outback Steakhouse Inc., Senior Notes, 10.000% due 6/15/15 (b)

 

1,008,000

 

520,000

 

Pinnacle Entertainment Inc., Senior Subordinated Notes, 8.250% due 3/15/12

 

538,200

 

2,290,000

 

Pokagon Gaming Authority, Senior Notes, 10.375% due 6/15/14 (b)

 

2,536,175

 

555,000

 

Sbarro Inc., Senior Notes, 10.375% due 2/1/15

 

543,206

 

 

 

Snoqualmie Entertainment Authority, Senior Secured Notes:

 

 

 

545,000

 

9.150% due 2/1/14 (b)(c)

 

553,175

 

430,000

 

9.125% due 2/1/15 (b)

 

442,900

 

 

 

Station Casinos Inc.:

 

 

 

 

See Notes to Schedule of Investments.

 

5



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 

Face
Amount

 

Security

 

Value

 

Hotels, Restaurants & Leisure — 5.0% (continued)

 

 

 

 

 

Senior Notes:

 

 

 

$

80,000

 

6.000% due 4/1/12

 

$

75,600

 

2,275,000

 

7.750% due 8/15/16

 

2,263,625

 

 

 

Senior Subordinated Notes:

 

 

 

135,000

 

6.875% due 3/1/16

 

119,813

 

165,000

 

6.625% due 3/15/18

 

142,725

 

 

 

Total Hotels, Restaurants & Leisure

 

26,717,800

 

Household Durables — 2.0%

 

 

 

200,000

 

American Greetings Corp., Senior Notes, 7.375% due 6/1/16

 

203,000

 

1,140,000

 

D.R. Horton Inc., Senior Notes, 8.000% due 2/1/09

 

1,172,454

 

1,950,000

 

Jarden Corp., Senior Subordinated Notes, 7.500% due 5/1/17

 

1,935,375

 

 

 

K Hovnanian Enterprises Inc., Senior Notes:

 

 

 

2,440,000

 

7.500% due 5/15/16

 

2,232,600

 

715,000

 

8.625% due 1/15/17

 

689,975

 

1,790,000

 

Norcraft Cos. LP/Norcraft Finance Corp., Senior Subordinated Notes, 9.000% due 11/1/11

 

1,857,125

 

2,210,000

 

Norcraft Holdings LP/Norcraft Capital Corp., Senior Discount Notes, step bond to yield 10.128% due 9/1/12

 

2,033,200

 

295,000

 

Sealy Mattress Co., Senior Subordinated Notes, 8.250% due 6/15/14

 

303,850

 

 

 

Total Household Durables

 

10,427,579

 

Household Products — 0.5%

 

 

 

820,000

 

Nutro Products Inc., Senior Subordinated Notes, 10.750% due 4/15/14 (b)

 

956,974

 

1,235,000

 

Visant Holding Corp., Senior Notes, 8.750% due 12/1/13

 

1,290,575

 

660,000

 

Yankee Acquisition Corp., Series B, 9.750% due 2/15/17

 

641,850

 

 

 

Total Household Products

 

2,889,399

 

Independent Power Producers & Energy Traders — 4.6%

 

 

 

1,035,000

 

AES China Generating Co., Ltd., Class A, 8.250% due 6/26/10

 

1,035,089

 

 

 

AES Corp.:

 

 

 

3,855,000

 

Senior Notes, 9.500% due 6/1/09

 

4,047,750

 

470,000

 

Senior Secured Notes, 9.000% due 5/15/15 (b)

 

499,963

 

 

 

Dynegy Holdings Inc.:

 

 

 

2,090,000

 

Senior Debentures, 7.625% due 10/15/26

 

1,860,100

 

1,890,000

 

Senior Notes, 7.750% due 6/1/19 (b)

 

1,767,150

 

 

 

Edison Mission Energy, Senior Notes:

 

 

 

295,000

 

7.500% due 6/15/13

 

293,525

 

1,670,000

 

7.750% due 6/15/16

 

1,670,000

 

1,400,000

 

7.200% due 5/15/19 (b)

 

1,323,000

 

1,490,000

 

7.625% due 5/15/27 (b)

 

1,415,500

 

 

 

Mirant Mid Atlantic LLC:

 

 

 

500,936

 

Pass-Through Certificates, Series B, 9.125% due 6/30/17

 

566,370

 

964,551

 

Series C, 10.060% due 12/30/28

 

1,158,065

 

1,920,000

 

Mirant North America LLC, Senior Notes, 7.375% due 12/31/13

 

1,972,800

 

 

 

NRG Energy Inc., Senior Notes:

 

 

 

500,000

 

7.250% due 2/1/14

 

502,500

 

6,120,000

 

7.375% due 2/1/16

 

6,150,600

 

165,000

 

7.375% due 1/15/17

 

166,031

 

520,000

 

TXU Corp., Senior Notes, Series Q, 6.500% due 11/15/24

 

432,566

 

 

 

Total Independent Power Producers & Energy Traders

 

24,861,009

 

Insurance — 0.1%

 

 

 

615,000

 

Crum & Forster Holdings Corp., Senior Notes, 7.750% due 5/1/17 (b)

 

604,238

 

Internet & Catalog Retail — 0.2%

 

 

 

1,215,000

 

FTD Inc., Senior Subordinated Notes, 7.750% due 2/15/14

 

1,208,925

 

 

See Notes to Schedule of Investments.

 

6



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 

Face
Amount

 

Security

 

Value

 

IT Services — 0.8%

 

 

 

 

 

SunGard Data Systems Inc.:

 

 

 

$

775,000

 

Senior Notes, 9.125% due 8/15/13

 

$

797,281

 

3,070,000

 

Senior Subordinated Notes, 10.250% due 8/15/15

 

3,261,875

 

 

 

Total IT Services

 

4,059,156

 

Leisure Equipment & Products — 0.3%

 

 

 

1,795,000

 

WMG Acquisition Corp., Senior Subordinated Notes, 7.375% due 4/15/14

 

1,678,325

 

Machinery — 0.1%

 

 

 

730,000

 

American Railcar Industries Inc., Senior Notes, 7.500% due 3/1/14

 

730,000

 

Media — 10.6%

 

 

 

 

 

Affinion Group Inc.:

 

 

 

2,745,000

 

Senior Notes, 10.125% due 10/15/13

 

2,944,012

 

1,035,000

 

Senior Subordinated Notes, 11.500% due 10/15/15

 

1,122,975

 

2,940,000

 

AMC Entertainment Inc., Senior Subordinated Notes, 11.000% due 2/1/16

 

3,263,400

 

 

 

CCH I Holdings LLC/CCH I Holdings Capital Corp.:

 

 

 

880,000

 

Senior Accreting Notes, 12.125% due 1/15/15

 

893,200

 

4,220,000

 

Senior Notes, 11.750% due 5/15/14

 

4,167,250

 

4,350,000

 

CCH I LLC/CCH Capital Corp., Senior Secured Notes, 11.000% due 10/1/15

 

4,562,062

 

2,570,000

 

CCH II LLC/CCH II Capital Corp., Senior Notes, 10.250% due 9/15/10

 

2,698,500

 

540,000

 

Charter Communications Holdings LLC, Senior Discount Notes, 12.125% due 1/15/12

 

559,575

 

850,000

 

Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp., Senior Discount Notes, 11.750% due 5/15/11

 

871,250

 

1,690,000

 

CMP Susquehanna Corp., Senior Subordinated Notes, 9.875% due 5/15/14 (b)

 

1,698,450

 

 

 

CSC Holdings Inc.:

 

 

 

 

 

Senior Debentures:

 

 

 

225,000

 

7.625% due 7/15/18

 

214,875

 

80,000

 

Series B, 8.125% due 8/15/09

 

81,800

 

 

 

Senior Notes:

 

 

 

1,025,000

 

7.875% due 12/15/07

 

1,033,969

 

 

 

Series B:

 

 

 

1,320,000

 

8.125% due 7/15/09

 

1,349,700

 

840,000

 

7.625% due 4/1/11

 

837,900

 

760,000

 

6.750% due 4/15/12

 

725,800

 

683,000

 

Dex Media East LLC/Dex Media East Finance Co., Senior Notes, Series B, 12.125% due 11/15/12

 

736,786

 

1,416,000

 

Dex Media West LLC/Dex Media Finance Co., Senior Subordinated Notes, Series B, 9.875% due 8/15/13

 

1,522,200

 

 

 

EchoStar DBS Corp., Senior Notes:

 

 

 

1,150,000

 

6.625% due 10/1/14

 

1,101,125

 

2,950,000

 

7.125% due 2/1/16

 

2,898,375

 

2,575,000

 

Historic TW Inc., Senior Notes, 6.625% due 5/15/29

 

2,507,259

 

1,810,000

 

Idearc Inc., Senior Notes, 8.000% due 11/15/16

 

1,837,150

 

2,630,000

 

Insight Communications Co. Inc., Senior Discount Notes, 12.250% due 2/15/11

 

2,754,925

 

465,000

 

ION Media Networks Inc., Senior Secured Notes, 11.606% due 1/15/13 (b)(c)

 

482,438

 

1,100,000

 

Lamar Media Corp., Senior Subordinated Notes, 6.625% due 8/15/15

 

1,047,750

 

635,000

 

Primedia Inc., Senior Notes, 8.875% due 5/15/11

 

655,638

 

1,060,000

 

Quebecor Media Inc., Senior Notes, 7.750% due 3/15/16

 

1,081,200

 

 

 

R.H. Donnelley Corp.:

 

 

 

 

 

Senior Discount Notes:

 

 

 

525,000

 

Series A-1, 6.875% due 1/15/13

 

500,063

 

950,000

 

Series A-2, 6.875% due 1/15/13

 

904,875

 

2,675,000

 

Senior Notes, Series A-3, 8.875% due 1/15/16

 

2,795,375

 

 

See Notes to Schedule of Investments.

 

7



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 

Face
Amount

 

Security

 

Value

 

Media — 10.6% (continued)

 

 

 

$

500,000

 

R.H. Donnelley Finance Corp. I, Senior Subordinated Notes, 10.875% due 12/15/12 (b)

 

$

535,625

 

2,540,000

 

Rainbow National Services LLC, Senior Notes, 8.750% due 9/1/12 (b)

 

2,654,300

 

1,935,000

 

Rogers Cable Inc., Senior Secured Second Priority Notes, 6.750% due 3/15/15

 

1,997,918

 

 

 

TL Acquisitions Inc.:

 

 

 

2,370,000

 

Senior Notes, 10.500% due 1/15/15 (b)

 

2,355,685

 

1,790,000

 

Senior Subordinated Notes, step bond to yield 13.249% due 7/15/15 (b)(f)

 

1,344,738

 

 

 

Total Media

 

56,738,143

 

Metals & Mining — 3.4%

 

 

 

175,000

 

Chaparral Steel Co., Senior Notes, 10.000% due 7/15/13

 

191,844

 

6,320,000

 

Freeport-McMoRan Copper & Gold Inc., Senior Notes, 8.375% due 4/1/17

 

6,762,400

 

 

 

Metals USA Holdings Corp., Senior Notes:

 

 

 

135,000

 

11.356% due 1/15/12 (a)(b)(c)

 

135,675

 

1,490,000

 

11.360% due 7/1/12 (a)(b)(c)

 

1,370,800

 

3,720,000

 

Metals USA Inc., Senior Secured Notes, 11.125% due 12/1/15

 

4,073,400

 

1,660,000

 

Noranda Aluminum Holding Corp., Senior Notes, 11.146% due 11/15/14 (a)(b)(c)

 

1,626,800

 

1,995,000

 

Novelis Inc., Senior Notes, 7.250% due 2/15/15

 

2,057,343

 

1,695,000

 

Tube City IMS Corp., Senior Subordinated Notes, 9.750% due 2/1/15 (b)

 

1,745,850

 

 

 

Total Metals & Mining

 

17,964,112

 

Multiline Retail — 1.1%

 

 

 

2,210,000

 

Dollar General Corp., Senior Notes, 10.625% due 7/15/15 (b)

 

2,143,700

 

 

 

Neiman Marcus Group Inc.:

 

 

 

910,000

 

Senior Notes, 9.000% due 10/15/15 (a)

 

978,250

 

2,285,000

 

Senior Subordinated Notes, 10.375% due 10/15/15

 

2,524,925

 

 

 

Total Multiline Retail

 

5,646,875

 

Oil, Gas & Consumable Fuels — 8.9%

 

 

 

2,652,000

 

Belden & Blake Corp., Secured Notes, 8.750% due 7/15/12

 

2,731,560

 

 

 

Chesapeake Energy Corp., Senior Notes:

 

 

 

2,845,000

 

6.625% due 1/15/16

 

2,752,537

 

140,000

 

6.500% due 8/15/17

 

133,350

 

1,180,000

 

6.250% due 1/15/18

 

1,107,725

 

570,000

 

Compagnie Generale de Geophysique SA, Senior Notes, 7.500% due 5/15/15

 

572,850

 

1,600,000

 

Corral Finans AB, 6.855% due 4/15/10 (a)(b)(c)

 

1,600,000

 

 

 

El Paso Corp., Medium-Term Notes:

 

 

 

690,000

 

7.800% due 8/1/31

 

702,183

 

6,275,000

 

7.750% due 1/15/32

 

6,352,245

 

 

 

Enterprise Products Operating LP:

 

 

 

425,000

 

7.034% due 1/15/68 (c)

 

410,444

 

1,310,000

 

Junior Subordinated Notes, 8.375% due 8/1/66 (c)

 

1,400,336

 

2,935,000

 

EXCO Resources Inc., Senior Notes, 7.250% due 1/15/11

 

2,935,000

 

1,905,000

 

International Coal Group Inc., Senior Notes, 10.250% due 7/15/14

 

1,978,819

 

 

 

Mariner Energy Inc., Senior Notes:

 

 

 

940,000

 

7.500% due 4/15/13

 

925,900

 

555,000

 

8.000% due 5/15/17

 

553,613

 

 

 

OPTI Canada Inc., Senior Secured Notes:

 

 

 

400,000

 

7.875% due 12/15/14 (b)

 

402,000

 

850,000

 

8.250% due 12/15/14 (b)

 

867,000

 

1,115,000

 

Petrohawk Energy Corp., Senior Notes, 9.125% due 7/15/13

 

1,184,688

 

 

 

Petroplus Finance Ltd.:

 

 

 

630,000

 

6.750% due 5/1/14 (b)

 

609,525

 

1,020,000

 

7.000% due 5/1/17 (b)

 

986,850

 

 

 

Pogo Producing Co., Senior Subordinated Notes:

 

 

 

60,000

 

7.875% due 5/1/13

 

61,500

 

 

See Notes to Schedule of Investments.

 

8



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 

Face
Amount

 

Security

 

Value

 

Oil, Gas & Consumable Fuels — 8.9% (continued)

 

 

 

$

2,040,000

 

6.875% due 10/1/17

 

$

2,034,900

 

520,000

 

Series B, 8.250% due 4/15/11

 

531,050

 

2,905,000

 

SemGroup LP, Senior Notes, 8.750% due 11/15/15 (b)

 

2,934,050

 

100,000

 

SESI LLC, Senior Notes, 6.875% due 6/1/14

 

97,750

 

1,905,000

 

Stone Energy Corp., Senior Subordinated Notes, 8.250% due 12/15/11

 

1,914,525

 

1,325,000

 

W&T Offshore Inc., Senior Notes, 8.250% due 6/15/14 (b)

 

1,315,062

 

1,275,000

 

Whiting Petroleum Corp., Senior Subordinated Notes, 7.000% due 2/1/14

 

1,204,875

 

 

 

Williams Cos. Inc.:

 

 

 

 

 

Notes:

 

 

 

2,580,000

 

7.875% due 9/1/21

 

2,786,400

 

3,780,000

 

8.750% due 3/15/32

 

4,394,250

 

1,825,000

 

Senior Notes, 7.625% due 7/15/19

 

1,934,500

 

 

 

Total Oil, Gas & Consumable Fuels

 

47,415,487

 

Paper & Forest Products — 2.2%

 

 

 

 

 

Abitibi-Consolidated Co. of Canada, Senior Notes:

 

 

 

1,645,000

 

6.000% due 6/20/13

 

1,369,462

 

1,115,000

 

8.375% due 4/1/15

 

981,200

 

 

 

Abitibi-Consolidated Inc., Debentures:

 

 

 

440,000

 

7.400% due 4/1/18

 

358,600

 

255,000

 

8.850% due 8/1/30

 

215,475

 

 

 

Appleton Papers Inc.:

 

 

 

125,000

 

Senior Notes, 8.125% due 6/15/11

 

129,375

 

2,650,000

 

Senior Subordinated Notes, Series B, 9.750% due 6/15/14

 

2,795,750

 

 

 

NewPage Corp.:

 

 

 

 

 

Senior Secured Notes:

 

 

 

800,000

 

10.000% due 5/1/12

 

868,000

 

1,670,000

 

11.606% due 5/1/12 (c)

 

1,828,650

 

985,000

 

Senior Subordinated Notes, 12.000% due 5/1/13

 

1,081,038

 

 

 

Verso Paper Holdings LLC:

 

 

 

715,000

 

Senior Secured Notes, 9.125% due 8/1/14 (b)

 

741,813

 

1,385,000

 

Senior Subordinated Notes, 11.375% due 8/1/16 (b)

 

1,485,412

 

 

 

Total Paper & Forest Products

 

11,854,775

 

Pharmaceuticals — 0.7%

 

 

 

3,780,000

 

Leiner Health Products Inc., Senior Subordinated Notes, 11.000% due 6/1/12

 

3,591,000

 

Real Estate Investment Trusts (REITs) — 0.7%

 

 

 

75,000

 

Forest City Enterprises Inc., Senior Notes, 7.625% due 6/1/15

 

75,938

 

1,300,000

 

Host Marriott LP, Senior Notes, Series O, 6.375% due 3/15/15

 

1,254,500

 

535,000

 

Kimball Hill Inc., Senior Subordinated Notes, 10.500% due 12/15/12

 

489,525

 

 

 

Ventas Realty LP/Ventas Capital Corp., Senior Notes:

 

 

 

610,000

 

6.500% due 6/1/16

 

597,800

 

1,405,000

 

6.750% due 4/1/17

 

1,394,462

 

 

 

Total Real Estate Investment Trusts (REITs)

 

3,812,225

 

Real Estate Management & Development — 1.0%

 

 

 

1,270,000

 

Ashton Woods USA LLC/Ashton Woods Finance Co., Senior Subordinated Notes, 9.500% due 10/1/15

 

1,181,100

 

4,325,000

 

Realogy Corp., Senior Subordinated Notes, 12.375% due 4/15/15 (b)

 

3,957,375

 

 

 

Total Real Estate Management & Development

 

5,138,475

 

Road & Rail — 1.9%

 

 

 

2,570,000

 

Grupo Transportacion Ferroviaria Mexicana SA de CV, Senior Notes, 9.375% due 5/1/12

 

2,762,750

 

 

 

Hertz Corp.:

 

 

 

725,000

 

Senior Notes, 8.875% due 1/1/14

 

759,437

 

 

See Notes to Schedule of Investments.

 

9



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 

Face
Amount

 

Security

 

Value

 

Road & Rail — 1.9% (continued)

 

 

 

$

4,870,000

 

Senior Subordinated Notes, 10.500% due 1/1/16

 

$

5,405,700

 

 

 

Kansas City Southern de Mexico, Senior Notes:

 

 

 

470,000

 

7.625% due 12/1/13 (b)

 

470,000

 

520,000

 

7.375% due 6/1/14 (b)

 

517,400

 

370,000

 

Kansas City Southern Railway, Senior Notes, 7.500% due 6/15/09

 

369,075

 

 

 

Total Road & Rail

 

10,284,362

 

Semiconductors & Semiconductor Equipment — 0.3%

 

 

 

1,920,000

 

Freescale Semiconductor Inc., Senior Notes, 8.875% due 12/15/14 (b)

 

1,843,200

 

Software — 0.3%

 

 

 

1,390,000

 

Activant Solutions Inc., Senior Subordinated Notes, 9.500% due 5/1/16

 

1,372,625

 

Specialty Retail — 0.5%

 

 

 

 

 

AutoNation Inc., Senior Notes:

 

 

 

660,000

 

7.356% due 4/15/13 (c)

 

661,650

 

345,000

 

7.000% due 4/15/14

 

342,413

 

1,500,000

 

Blockbuster Inc., Senior Subordinated Notes, 9.000% due 9/1/12

 

1,395,000

 

365,000

 

Eye Care Centers of America, Senior Subordinated Notes, 10.750% due 2/15/15

 

404,237

 

 

 

Total Specialty Retail

 

2,803,300

 

Textiles, Apparel & Luxury Goods — 1.2%

 

 

 

 

 

Levi Strauss & Co., Senior Notes:

 

 

 

1,680,000

 

9.750% due 1/15/15

 

1,806,000

 

1,680,000

 

8.875% due 4/1/16

 

1,730,400

 

3,350,000

 

Simmons Co., Senior Discount Notes, step bond to yield 10.002% due 12/15/14

 

2,830,750

 

 

 

Total Textiles, Apparel & Luxury Goods

 

6,367,150

 

Thrifts & Mortgage Finance — 1.1%

 

 

 

5,500,000

 

Ocwen Capital Trust I, Capital Securities, 10.875% due 8/1/27

 

5,747,500

 

Tobacco — 0.3%

 

 

 

 

 

Alliance One International Inc., Senior Notes:

 

 

 

315,000

 

8.500% due 5/15/12 (b)

 

323,663

 

1,130,000

 

11.000% due 5/15/12

 

1,245,825

 

 

 

Total Tobacco

 

1,569,488

 

Trading Companies & Distributors — 1.0%

 

 

 

1,140,000

 

Ashtead Capital Inc., Notes, 9.000% due 8/15/16 (b)

 

1,199,850

 

1,405,000

 

H&E Equipment Services Inc., Senior Notes, 8.375% due 7/15/16

 

1,482,275

 

2,205,000

 

Penhall International Corp., Senior Secured Notes, 12.000% due 8/1/14 (b)

 

2,392,425

 

435,000

 

TransDigm Inc., Senior Subordinated Notes, 7.750% due 7/15/14 (b)

 

441,525

 

 

 

Total Trading Companies & Distributors

 

5,516,075

 

Transportation Infrastructure — 0.7%

 

 

 

3,745,000

 

Saint Acquisition Corp., Secured Notes, 12.500% due 5/15/17 (b)

 

3,557,750

 

Wireless Telecommunication Services — 3.3%

 

 

 

 

 

MetroPCS Wireless Inc., Senior Notes:

 

 

 

675,000

 

9.250% due 11/1/14 (b)

 

700,312

 

85,000

 

9.250% due 11/1/14 (b)

 

88,188

 

 

 

Rural Cellular Corp.:

 

 

 

2,040,000

 

Senior Secured Notes, 8.250% due 3/15/12

 

2,096,100

 

1,490,000

 

Senior Subordinated Notes, 8.360% due 6/1/13 (b)(c)

 

1,490,000

 

 

 

Sprint Capital Corp.:

 

 

 

5,550,000

 

Notes, 8.750% due 3/15/32

 

6,250,210

 

3,250,000

 

Senior Notes, 6.875% due 11/15/28

 

3,101,969

 

 

See Notes to Schedule of Investments.

 

10



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 

Face
Amount

 

Security

 

Value

 

Wireless Telecommunication Services — 3.3% (continued)

 

 

 

$

3,700,000

 

True Move Co., Ltd., 10.750% due 12/16/13 (b)

 

$

3,940,500

 

 

 

Total Wireless Telecommunication Services

 

17,667,279

 

 

 

TOTAL CORPORATE BONDS & NOTES
(Cost — $501,250,829)

 

510,721,057

 

ASSET-BACKED SECURITY — 0.0%

 

 

 

Diversified Financial Services — 0.0%

 

 

 

9,956,016

 

Airplanes Pass-Through Trust, Subordinated Notes, Series D, 10.875% due 3/15/19 (d)(e)(f)
(Cost - $11,102,032)

 

0

 

CONVERTIBLE BOND & NOTE — 0.1%

 

 

 

Diversified Financial Services — 0.1%

 

 

 

570,000

 

Ford Motor Co., Senior Notes, 4.250% due 12/15/36
(Cost - $570,000)

 

716,775

 

LOAN PARTICIPATIONS — 1.1%

 

 

 

United States — 1.1%

 

 

 

1,000,000

 

Penhall International Corp., Term Loan, (Deutsche Bank), 12.824% due 4/1/12(g)

 

1,022,500

 

4,500,000

 

SandRidge Energy, Term Loan, (Bank of America Securities, LLC), 8.975% due 4/1/15(c)(g)

 

4,612,500

 

 

 

TOTAL LOAN PARTICIPATIONS
(Cost — $5,481,028)

 

5,635,000

 

SOVEREIGN BONDS — 1.4%

 

 

 

Brazil — 0.4%

 

 

 

 

 

Federative Republic of Brazil:

 

 

 

1,264,000

 

11.000% due 8/17/40

 

1,659,000

 

640,000

 

Collective Action Securities, Notes, 8.000% due 1/15/18

 

704,160

 

 

 

Total Brazil

 

2,363,160

 

Russia — 1.0%

 

 

 

4,666,550

 

Russian Federation, 7.500% due 3/31/30 (b)

 

5,136,122

 

 

 

TOTAL SOVEREIGN BONDS
(Cost — $7,426,818)

 

7,499,282

 

U.S. GOVERNMENT & AGENCY OBLIGATION — 0.9%

 

 

 

U.S. Government Obligations — 0.9%

 

 

 

5,070,000

 

U.S. Treasury Notes, 4.750% due 5/31/12
(Cost - $5,045,181)

 

5,031,979

 

 

Shares

 

 

 

 

 

COMMON STOCKS — 0.0%

 

 

 

CONSUMER DISCRETIONARY — 0.0%

 

 

 

Household Durables — 0.0%

 

 

 

4,660,992

 

Home Interiors & Gifts Inc. (e)(f)*

 

46,610

 

CONSUMER STAPLES — 0.0%

 

 

 

Food Products — 0.0%

 

 

 

73,499

 

Aurora Foods Inc. (e)(f)*

 

0

 

MATERIALS — 0.0%

 

 

 

Chemicals — 0.0%

 

 

 

1

 

Pliant Corp. (e)(f)*

 

0

 

 

See Notes to Schedule of Investments.

 

11



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 

Shares

 

Security

 

Value

 

TELECOMMUNICATION SERVICES — 0.0%

 

 

 

Diversified Telecommunication Services — 0.0%

 

 

 

3,736

 

McLeodUSA Inc., Class A Shares (e)(f)*

 

$

0

 

20,125

 

Pagemart Wireless (e)(f)*

 

201

 

 

 

TOTAL TELECOMMUNICATION SERVICES

 

201

 

 

 

TOTAL COMMON STOCKS
(Cost — $2,167,617)

 

46,811

 

CONVERTIBLE PREFERRED STOCKS — 0.2%

 

 

 

ENERGY — 0.2%

 

 

 

Oil, Gas & Consumable Fuels — 0.2%

 

 

 

3,111

 

Chesapeake Energy Corp. Convertible, 6.250%
(Cost - $781,633)

 

879,635

 

PREFERRED STOCKS — 0.5%

 

 

 

CONSUMER DISCRETIONARY — 0.5%

 

 

 

Automobiles — 0.3%

 

 

 

22,300

 

Ford Motor Co., 7.400%

 

411,435

 

17,100

 

Ford Motor Co., 8.000%

 

348,327

 

1,600

 

Ford Motor Co., Series F, 7.550%

 

29,184

 

900

 

General Motors Corp., 7.250%

 

17,397

 

10,100

 

General Motors Corp., Senior Notes, 7.250%

 

196,445

 

2,200

 

General Motors Corp., Senior Notes, 7.375%

 

43,032

 

400

 

General Motors Corp., Senior Notes, 7.375%

 

7,944

 

31,700

 

General Motors Corp., Senior Notes, 7.500%

 

639,706

 

 

 

 

 

1,693,470

 

Media — 0.2%

 

 

 

83

 

ION Media Networks Inc.

 

747,000

 

 

 

TOTAL CONSUMER DISCRETIONARY

 

2,440,470

 

FINANCIALS — 0.0%

 

 

 

Diversified Financial Services — 0.0%

 

 

 

3,400

 

Preferred Plus, Series FRD-1, 7.400%

 

61,880

 

8,400

 

Saturns, Series F 2003-5, 8.125%

 

172,200

 

 

 

TOTAL FINANCIALS

 

234,080

 

 

 

TOTAL PREFERRED STOCKS
(Cost — $2,252,787)

 

2,674,550

 

 

Warrants

 

 

 

Value

 

WARRANTS — 0.0%

 

 

 

1,705

 

Cybernet Internet Services International Inc., Expires 7/1/09 (b)(e)(f)*

 

0

 

1,555

 

GT Group Telecom Inc., Class B Shares, Expires 2/1/10 (b)(e)(f)*

 

0

 

1,185

 

IWO Holdings Inc., Expires 1/15/11 (b)(e)(f)*

 

0

 

1,000

 

Jazztel PLC, Expires 7/15/10 (e)(f)*

 

0

 

1,765

 

Merrill Corp., Class B Shares, Expires 5/1/09 (b)(e)(f)*

 

0

 

3,510

 

Viasystems Group Inc., Expires 1/12/10 (e)(f)*

 

0

 

 

 

TOTAL WARRANTS
(Cost — $623,616)

 

0

 

 

 

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT
(Cost — $536,701,541)

 

533,205,089

 

 

Face
Amount

 

 

 

 

 

SHORT-TERM INVESTMENT — 1.9%

 

 

 

Repurchase Agreement — 1.9%

 

 

 

$

10,343,000

 

Morgan Stanley repurchase agreement dated 6/29/07, 5.300% due 7/2/07; Proceeds at maturity - $10,347,568; (Fully collateralized by various U.S. government agency obligations, 0.000% due 1/15/21 to 1/15/30; Market value - $10,550,150)
(Cost - $10,343,000)

 

10,343,000

 

 

 

TOTAL INVESTMENTS — 101.6% (Cost — $547,044,541#)

 

543,548,089

 

 

 

Liabilities in Excess of Other Assets — (1.6)%

 

(8,480,943

)

 

 

TOTAL NET ASSETS — 100.0%

 

$

535,067,146

 

 

See Notes to Schedule of Investments.

 

12



 

Western Asset High Income Opportunity Fund Inc.

 

Schedule of Investments (unaudited) (continued)

June 30, 2007

 


*

 

Non-income producing security.

(a)

 

Payment-in-kind security for which part of the income earned may be paid as additional principal.

(b)

 

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

(c)

 

Variable rate security. Interest rate disclosed is that which is in effect at June 30, 2007.

(d)

 

Security is currently in default.

(e)

 

Illiquid security.

(f)

 

Security is valued in good faith at fair value by or under the direction of the Board of Directors (See Note 1).

(g)

 

Participation interest was acquired through the financial institution indicated parenthetically.

#

 

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

 

See Notes to Schedule of Investments.

 

13



 

Notes to Schedule of Investments (unaudited)

 

1. Organization and Significant Accounting Policies

 

Western Asset High Income Opportunity Fund Inc. (the “Fund”) was incorporated in Maryland and is registered as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended, (the “1940 Act”).

 

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

 

(a) Investment Valuation. Debt securities are valued at the mean between the last quoted bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various other relationships between securities. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund may value these securities at fair value as determined in accordance with the procedures approved by the Fund’s Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates fair value.

 

(b) Repurchase Agreements. When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults, and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.

 

(c) Loan Participations. The Fund may invest in loans arranged through private negotiation between one or more financial institutions. The Fund’s investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of set-off against the borrower and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation.

 

The Fund assumes the credit risk of the borrower, the lender that is selling the participation and any other persons interpositioned between the Fund and the borrower. In the event of the insolvency of the lender selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower.

 

(d) Credit and Market Risk. The Fund invests in high yield instruments that are subject to certain credit and market risks. The yields of high yield obligations reflect, among other things, perceived credit and market risks. The Fund’s investment in securities rated below investment grade typically involves 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.

 

(e) Security Transactions. Security transactions are accounted for on a trade date basis.

 

2. Investments

 

At June 30, 2007, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

Gross unrealized appreciation

 

$

18,901,495

 

Gross unrealized depreciation

 

(22,397,947

)

Net unrealized depreciation

 

$

(3,496,452

)

 

At June 30, 2007, the Fund held Loan Participations with a total cost of $5,481,028 and a total market value of $5,635,000.

 

14



 

ITEM 2.                  CONTROLS AND PROCEDURES.

 

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

 

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

 

ITEM 3.                     EXHIBITS.

 

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

 



 

SIGNATURES

 

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

 

Western Asset High Income Opportunity Fund Inc.

 

By

/s/ R. Jay Gerken

 

R. Jay Gerken

Chief Executive Officer

 

Date:

August 24, 2007

 

 

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

 

By

/s/ R. Jay Gerken

 

R. Jay Gerken

Chief Executive Officer

 

Date:

August 24, 2007

 

 

By

/s/ Kaprel Ozsolak

 

Kaprel Ozsolak

Chief Financial Officer

 

Date:

August 24, 2007