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 |
811-21609 |
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Western Asset Variable Rate Strategic Fund Inc. | ||||||
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(Exact name of registrant as specified in charter) | ||||||
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620 Eighth Avenue, New York, NY |
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10018 | ||||
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(Address of principal executive offices) |
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(Zip code) | ||||
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Robert I. Frenkel, Esq. | ||||||
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(Name and address of agent for service) | ||||||
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Registrant’s telephone number, including area code: |
(888) 777-0102 |
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Date of fiscal year end: |
September 30 |
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Date of reporting period: |
June 30, 2011 |
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ITEM 1. SCHEDULE OF INVESTMENTS
WESTERN ASSET
VARIABLE RATE STRATEGIC FUND INC.
FORM N-Q
JUNE 30, 2011
Schedule of investments (unaudited)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
| ||
|
COLLATERALIZED MORTGAGE OBLIGATIONS — 30.2% |
|
|
|
|
|
|
|
|
| ||
|
Adjustable Rate Mortgage Trust, 2005-11 5A1 |
|
0.456% |
|
2/25/36 |
|
$ |
280,810 |
|
$ |
144,341 |
(a) |
|
Banc of America Funding Corp., 2003-1 A1 |
|
6.000% |
|
5/20/33 |
|
241,374 |
|
254,992 |
| ||
|
Banc of America Funding Corp., 2004-B 6A1 |
|
3.221% |
|
12/20/34 |
|
832,576 |
|
419,647 |
(a) | ||
|
Banc of America Funding Corp., 2005-E 8A1 |
|
2.899% |
|
6/20/35 |
|
711,267 |
|
373,782 |
(a) | ||
|
Bayview Commercial Asset Trust, 2006-1A B2 |
|
1.886% |
|
4/25/36 |
|
1,097,250 |
|
274,244 |
(a)(b) | ||
|
Bear Stearns Alt-A Trust, 2004-03 A1 |
|
0.826% |
|
4/25/34 |
|
746,848 |
|
626,078 |
(a) | ||
|
Bear Stearns Alt-A Trust, 2004-10 1A3 |
|
1.186% |
|
9/25/34 |
|
168,965 |
|
144,840 |
(a) | ||
|
Bear Stearns ARM Trust, 2004-8 11A1 |
|
2.892% |
|
11/25/34 |
|
630,431 |
|
577,674 |
(a) | ||
|
Bear Stearns Asset-Backed Securities Trust, 2005-AC3 1A1 |
|
0.686% |
|
7/25/35 |
|
812,633 |
|
648,468 |
(a) | ||
|
Citigroup Mortgage Loan Trust Inc., 2010-7 4A1 |
|
1.244% |
|
9/25/37 |
|
151,324 |
|
149,927 |
(a)(b) | ||
|
Countrywide Alternative Loan Trust, 2005-24 4A1 |
|
0.416% |
|
7/20/35 |
|
816,306 |
|
530,459 |
(a) | ||
|
Countrywide Home Loan, Mortgage Pass-Through Trust, 2004-29 2A1 |
|
0.516% |
|
2/25/35 |
|
78,659 |
|
49,322 |
(a) | ||
|
Countrywide Home Loans, 2004-20 2A1 |
|
2.945% |
|
9/25/34 |
|
847,010 |
|
510,856 |
(a) | ||
|
Countrywide Home Loans, 2004-R1 2A |
|
6.500% |
|
11/25/34 |
|
166,173 |
|
169,362 |
(b) | ||
|
Countrywide Home Loans, 2005-HYB9 3A1A |
|
2.608% |
|
2/20/36 |
|
1,108,112 |
|
745,804 |
(a) | ||
|
Countrywide Home Loans, 2005-R2 2A1 |
|
7.000% |
|
6/25/35 |
|
402,410 |
|
415,772 |
(b) | ||
|
Countrywide Home Loans, 2005-R3 AF |
|
0.586% |
|
9/25/35 |
|
639,884 |
|
572,785 |
(a)(b) | ||
|
Countrywide Home Loans Mortgage Pass-Through Trust, 2005-R1 1AF1 |
|
0.546% |
|
3/25/35 |
|
536,674 |
|
460,745 |
(a)(b) | ||
|
Deutsche Mortgage Securities Inc., 2004-4 3AR1 |
|
2.801% |
|
6/25/34 |
|
380,853 |
|
294,006 |
(a) | ||
|
Downey Savings & Loan Association Mortgage Loan Trust, 2005-AR5 2A1A |
|
0.516% |
|
8/19/45 |
|
772,591 |
|
484,373 |
(a) | ||
|
Downey Savings & Loan Association Mortgage Loan Trust, 2006-AR1 1A1A |
|
1.198% |
|
3/19/46 |
|
450,992 |
|
243,423 |
(a) | ||
|
Federal Home Loan Mortgage Corp. (FHLMC), PAC IO |
|
5.000% |
|
1/15/19 |
|
1,458,429 |
|
90,920 |
| ||
|
Federal Home Loan Mortgage Corp. (FHLMC), PAC IO, 2638 DI |
|
5.000% |
|
5/15/23 |
|
1,519,891 |
|
140,594 |
| ||
|
Federal Home Loan Mortgage Corp. (FHLMC), PAC-1 IO |
|
5.000% |
|
3/15/22 |
|
2,235,215 |
|
180,243 |
| ||
|
Federal National Mortgage Association (FNMA), STRIPS, IO |
|
5.000% |
|
7/1/33 |
|
6,128,640 |
|
1,316,415 |
| ||
|
Federal National Mortgage Association (FNMA), STRIPS, IO, 339 30 |
|
5.500% |
|
7/1/18 |
|
1,834,438 |
|
201,374 |
(a) | ||
|
Granite Mortgages PLC, 2003-2 1A3 |
|
0.774% |
|
7/20/43 |
|
84,071 |
|
81,128 |
(a)(b) | ||
|
Granite Mortgages PLC, 2004-1 2A1 |
|
0.567% |
|
3/20/44 |
|
141,939 |
|
134,629 |
(a)(c) | ||
|
Granite Mortgages PLC, 2004-3 2A1 |
|
0.387% |
|
9/20/44 |
|
54,618 |
|
52,570 |
(a) | ||
|
GSMPS Mortgage Loan Trust, 2005-LT1 A1 |
|
0.416% |
|
2/25/35 |
|
234,587 |
|
205,264 |
(a)(b)(c) | ||
|
GSMPS Mortgage Loan Trust, 2005-RP2 1AF |
|
0.536% |
|
3/25/35 |
|
1,083,787 |
|
925,528 |
(a)(b) | ||
|
GSMPS Mortgage Loan Trust, 2005-RP3 1AF |
|
0.536% |
|
9/25/35 |
|
238,748 |
|
201,843 |
(a)(b) | ||
|
GSMPS Mortgage Loan Trust, 2006-RP2 1AF1 |
|
0.586% |
|
4/25/36 |
|
502,889 |
|
417,745 |
(a)(b) | ||
|
Harborview Mortgage Loan Trust, 2004-10 4A |
|
2.712% |
|
1/19/35 |
|
468,146 |
|
439,439 |
(a) | ||
|
Harborview Mortgage Loan Trust, 2004-11 3A1A |
|
0.536% |
|
1/19/35 |
|
273,295 |
|
164,461 |
(a) | ||
|
Harborview Mortgage Loan Trust, 2005-14 3A1A |
|
2.945% |
|
12/19/35 |
|
263,060 |
|
195,585 |
(a) | ||
|
IMPAC Secured Assets Corp., 2005-2 A1 |
|
0.506% |
|
3/25/36 |
|
2,272,368 |
|
1,122,278 |
(a) | ||
|
Indymac Index Mortgage Loan Trust, 2004-AR07 A2 |
|
1.046% |
|
9/25/34 |
|
312,758 |
|
207,309 |
(a) | ||
|
Indymac Index Mortgage Loan Trust, 2004-AR08 2A2A |
|
0.586% |
|
11/25/34 |
|
87,799 |
|
59,029 |
(a) | ||
|
Indymac Index Mortgage Loan Trust, 2004-AR12 A1 |
|
0.576% |
|
12/25/34 |
|
104,379 |
|
63,349 |
(a) | ||
|
Indymac Index Mortgage Loan Trust, 2005-AR21 4A1 |
|
5.135% |
|
10/25/35 |
|
712,588 |
|
554,066 |
(a) | ||
|
JPMorgan Chase Commercial Mortgage Securities Corp., 2007-CB18 A1 |
|
5.320% |
|
6/12/47 |
|
235,974 |
|
237,608 |
| ||
|
JPMorgan Mortgage Trust, 2005-A3 3A4 |
|
5.006% |
|
6/25/35 |
|
400,000 |
|
343,377 |
(a) | ||
|
Luminent Mortgage Trust, 2006-2 A1A |
|
0.386% |
|
2/25/46 |
|
1,063,206 |
|
638,692 |
(a) | ||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (cont’d)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
| ||
|
COLLATERALIZED MORTGAGE OBLIGATIONS — Continued |
|
|
|
|
|
|
|
|
|
|
|
|
MASTR ARM Trust, 2003-6 2A1 |
|
2.447% |
|
12/25/33 |
|
$ |
209,661 |
|
$ |
194,847 |
(a) |
|
MASTR ARM Trust, 2004-7 6M1 |
|
0.836% |
|
8/25/34 |
|
550,000 |
|
440,457 |
(a) | ||
|
MASTR Asset Securitization Trust, 2003-11 6A16 |
|
5.250% |
|
12/25/33 |
|
119,018 |
|
122,302 |
| ||
|
MASTR Reperforming Loan Trust, 2005-2 1A1F |
|
0.536% |
|
5/25/35 |
|
1,624,378 |
|
1,335,945 |
(a)(b) | ||
|
MASTR Reperforming Loan Trust, 2006-2 1A1 |
|
5.399% |
|
5/25/36 |
|
585,644 |
|
523,277 |
(a)(b) | ||
|
MASTR Reperforming Loan Trust, 2006-2 2A1 |
|
3.680% |
|
5/25/36 |
|
185,776 |
|
168,723 |
(a)(b) | ||
|
Morgan Stanley Mortgage Loan Trust, 2006-6AR 2A |
|
2.657% |
|
5/25/36 |
|
1,184,198 |
|
716,515 |
(a) | ||
|
Residential Accredit Loans Inc., 2004-QA2 A2 |
|
0.626% |
|
6/25/34 |
|
794,844 |
|
620,923 |
(a) | ||
|
Residential Accredit Loans Inc., 2005-QO4 2A1 |
|
0.466% |
|
12/25/45 |
|
496,855 |
|
271,069 |
(a) | ||
|
Residential Asset Mortgage Products Inc., 2003-SL1 M1 |
|
7.319% |
|
4/25/31 |
|
963,840 |
|
651,300 |
(a) | ||
|
Structured ARM Loan Trust, 2004-20 1A1 |
|
2.647% |
|
1/25/35 |
|
183,147 |
|
137,895 |
(a) | ||
|
Structured ARM Loan Trust, 2004-9XS A |
|
0.556% |
|
7/25/34 |
|
902,400 |
|
778,673 |
(a) | ||
|
Structured Asset Mortgage Investments Inc., 2004-AR3 1A1 |
|
0.786% |
|
7/19/34 |
|
583,461 |
|
491,216 |
(a) | ||
|
Structured Asset Mortgage Investments Inc., 2006-AR2 A1 |
|
0.416% |
|
2/25/36 |
|
1,015,480 |
|
642,331 |
(a) | ||
|
Structured Asset Mortgage Investments Inc., 2006-AR3 11A1 |
|
0.396% |
|
4/25/36 |
|
466,007 |
|
285,901 |
(a) | ||
|
Structured Asset Securities Corp., 1998-2 M1 |
|
1.286% |
|
2/25/28 |
|
93,234 |
|
83,733 |
(a) | ||
|
Structured Asset Securities Corp., 1998-3 M1 |
|
1.186% |
|
3/25/28 |
|
107,826 |
|
98,634 |
(a) | ||
|
Structured Asset Securities Corp., 1998-8 M1 |
|
1.126% |
|
8/25/28 |
|
355,893 |
|
283,488 |
(a) | ||
|
Structured Asset Securities Corp., 2005-4XS 3A4 |
|
4.790% |
|
3/25/35 |
|
620,000 |
|
615,665 |
| ||
|
Structured Asset Securities Corp., 2005-RF1 A |
|
0.536% |
|
3/25/35 |
|
309,987 |
|
262,380 |
(a)(b) | ||
|
Structured Asset Securities Corp., 2005-RF2 A |
|
0.536% |
|
4/25/35 |
|
326,218 |
|
269,198 |
(a)(b) | ||
|
Structured Asset Securities Corp., 2005-RF3 1A |
|
0.536% |
|
6/25/35 |
|
317,264 |
|
259,514 |
(a)(b) | ||
|
Structured Asset Securities Corp., 2005-RF3 2A |
|
4.049% |
|
6/25/35 |
|
4,896,132 |
|
4,239,367 |
(a)(b) | ||
|
Voyager Dwnys Delaware Trust, 2009-1 UGL2 |
|
1.198% |
|
3/20/47 |
|
249,621 |
|
22,029 |
(a)(b)(c)(d) | ||
|
WaMu Mortgage Pass-Through Certificates, 2003-AR11 A6 |
|
2.709% |
|
10/25/33 |
|
519,763 |
|
510,739 |
(a) | ||
|
WaMu Mortgage Pass-Through Certificates, 2004-AR14 A1 |
|
2.580% |
|
1/25/35 |
|
261,487 |
|
252,502 |
(a) | ||
|
WaMu Mortgage Pass-Through Certificates, 2005-AR13 A1C3 |
|
0.676% |
|
10/25/45 |
|
380,099 |
|
235,864 |
(a) | ||
|
WaMu Mortgage Pass-Through Certificates, 2007-HY3 1A1 |
|
5.348% |
|
3/25/37 |
|
246,909 |
|
163,238 |
(a) | ||
|
WaMu Mortgage Pass-Through Certificates, 2007-OA6 1A |
|
1.088% |
|
7/25/47 |
|
1,421,781 |
|
920,630 |
(a) | ||
|
Washington Mutual Inc., 2004-AR11 |
|
2.718% |
|
10/25/34 |
|
321,989 |
|
300,814 |
(a) | ||
|
Washington Mutual Inc., 2004-AR12 A2A |
|
0.578% |
|
10/25/44 |
|
262,774 |
|
212,759 |
(a) | ||
|
Washington Mutual Inc. Mortgage Pass-Through Certificates, 2003-AR8 |
|
0.546% |
|
10/25/45 |
|
891,256 |
|
660,496 |
(a) | ||
|
Washington Mutual Inc. Mortgage Pass-Through Certificates, 2004-AR13 A1A |
|
0.610% |
|
11/25/34 |
|
698,986 |
|
574,042 |
(a) | ||
|
Washington Mutual Inc. Pass-Through Certificates, 2005-AR8 2AB3 |
|
0.546% |
|
7/25/45 |
|
579,179 |
|
429,425 |
(a) | ||
|
Washington Mutual Inc. Pass-Through Certificates, 2006-AR2 A1A |
|
1.218% |
|
4/25/46 |
|
314,691 |
|
171,273 |
(a) | ||
|
Washington Mutual Inc., Mortgage Pass-Through Certificates |
|
0.586% |
|
1/25/45 |
|
200,941 |
|
159,763 |
(a) | ||
|
Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-AR01 A1A |
|
0.506% |
|
1/25/45 |
|
44,761 |
|
36,380 |
(a) | ||
|
Washington Mutual Inc., Mortgage Pass-Through Certificates, 2006-AR08 1A3 |
|
5.605% |
|
8/25/46 |
|
375,000 |
|
263,058 |
(a) | ||
|
Washington Mutual Inc., Mortgage Pass-Through Certificates, 2006-AR11 1A |
|
1.238% |
|
9/25/46 |
|
579,425 |
|
388,678 |
(a) | ||
|
Washington Mutual Inc., Pass-Through Certificates, 2003-AR10 A7 |
|
2.624% |
|
10/25/33 |
|
217,526 |
|
214,972 |
(a) | ||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (cont’d)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
| ||
|
Wells Fargo Mortgage Backed Securities Trust, 2004-DD 1A1 |
|
2.745% |
|
1/25/35 |
|
$ |
707,943 |
|
$ |
659,530 |
(a) |
|
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost — $38,844,379) |
|
|
|
35,733,891 |
| ||||||
|
ASSET-BACKED SECURITIES — 25.7% |
|
|
|
|
|
|
|
|
| ||
|
ABFS Mortgage Loan Trust, 2002-3 M1 |
|
5.902% |
|
9/15/33 |
|
863,518 |
|
692,599 |
| ||
|
Access Group Inc., 2005-B A2 |
|
0.504% |
|
7/25/22 |
|
449,906 |
|
422,578 |
(a) | ||
|
AmeriCredit Automobile Receivables Trust, 2011-2 A2 |
|
0.900% |
|
9/8/14 |
|
400,000 |
|
400,287 |
| ||
|
Ameriquest Mortgage Securities Inc., 2002-AR1 M1 |
|
1.284% |
|
9/25/32 |
|
255,929 |
|
208,706 |
(a) | ||
|
Ameriquest Mortgage Securities Inc., 2005-R1 M1 |
|
0.636% |
|
3/25/35 |
|
800,000 |
|
648,685 |
(a) | ||
|
Argent Securities Inc., 2003-W3 M1 |
|
1.311% |
|
9/25/33 |
|
168,414 |
|
153,654 |
(a) | ||
|
Argent Securities Inc., 2005-W3 A2D |
|
0.526% |
|
11/25/35 |
|
700,000 |
|
432,469 |
(a) | ||
|
Bear Stearns Asset-Backed Securities Trust, 2001-3 A1 |
|
0.636% |
|
10/27/32 |
|
40,433 |
|
35,406 |
(a) | ||
|
Bear Stearns Asset-Backed Securities Trust, 2005-SD3 1A |
|
0.676% |
|
7/25/35 |
|
723,430 |
|
565,602 |
(a) | ||
|
Bear Stearns Asset-Backed Securities Trust, 2007-SD1 1A2A |
|
6.000% |
|
10/25/36 |
|
1,165,242 |
|
867,267 |
| ||
|
Brazos Higher Education Authority Inc., 2011-1 A3 |
|
1.307% |
|
11/25/33 |
|
400,000 |
|
374,627 |
(a) | ||
|
Chase Funding Mortgage Loan Asset-Backed Certificates, 2004-1 1A7 |
|
3.985% |
|
11/25/33 |
|
657,757 |
|
628,332 |
| ||
|
Citigroup Mortgage Loan Trust Inc., 2005-OPT1 M1 |
|
0.606% |
|
2/25/35 |
|
244,419 |
|
202,799 |
(a) | ||
|
Citigroup Mortgage Loan Trust Inc., 2005-OPT4 M2 |
|
0.616% |
|
7/25/35 |
|
750,000 |
|
653,543 |
(a) | ||
|
Countrywide Asset-Backed Certificates, 2003-5 AF5 |
|
5.739% |
|
2/25/34 |
|
631,145 |
|
618,047 |
| ||
|
Countrywide Asset-Backed Certificates, 2004-BC1 M1 |
|
0.936% |
|
2/25/34 |
|
180,107 |
|
153,688 |
(a) | ||
|
Countrywide Asset-Backed Certificates, 2005-5 M1 |
|
0.646% |
|
10/25/35 |
|
600,000 |
|
553,871 |
(a) | ||
|
Countrywide Asset-Backed Certificates, 2007-13 2A1 |
|
1.086% |
|
10/25/47 |
|
895,041 |
|
627,021 |
(a) | ||
|
Countrywide Home Equity Loan Trust, 2006-HW 2A1B |
|
0.369% |
|
11/15/36 |
|
1,035,250 |
|
797,526 |
(a) | ||
|
EMC Mortgage Loan Trust, 2004-C A1 |
|
0.736% |
|
3/25/31 |
|
215,631 |
|
171,322 |
(a)(b) | ||
|
Equity One ABS Inc., 2004-1 AF5 |
|
5.110% |
|
4/25/34 |
|
300,000 |
|
278,316 |
| ||
|
First Franklin Mortgage Loan Asset-Backed Certificates, 2005-FFH4 2A4 |
|
0.536% |
|
12/25/35 |
|
400,000 |
|
372,283 |
(a) | ||
|
First Horizon ABS Trust, 2007-HE1 A |
|
0.316% |
|
9/25/29 |
|
130,206 |
|
101,682 |
(a) | ||
|
GMAC Mortgage Servicer Advance Funding Co., Ltd., 2011-1A A |
|
3.720% |
|
3/15/23 |
|
600,000 |
|
605,973 |
(b) | ||
|
Greenpoint Home Equity Loan Trust, 2004-4 A |
|
0.747% |
|
8/15/30 |
|
554,548 |
|
370,793 |
(a) | ||
|
Greenpoint Manufactured Housing, 1999-3 1A7 |
|
7.270% |
|
6/15/29 |
|
230,000 |
|
207,131 |
| ||
|
Greenpoint Manufactured Housing, 2000-4 A3 |
|
2.253% |
|
8/21/31 |
|
500,000 |
|
420,000 |
(a) | ||
|
Greenpoint Manufactured Housing, 2000-7 A2 |
|
3.686% |
|
11/17/31 |
|
300,000 |
|
253,500 |
(a) | ||
|
GSAMP Trust, 2004-OPT B1 |
|
1.786% |
|
11/25/34 |
|
94,482 |
|
37,569 |
(a) | ||
|
GSRPM Mortgage Loan Trust, 2007-1 A |
|
0.586% |
|
10/25/46 |
|
149,667 |
|
82,809 |
(a)(b) | ||
|
Hertz Vehicle Financing LLC, 2009-2A A1 |
|
4.260% |
|
3/25/14 |
|
630,000 |
|
658,575 |
(b) | ||
|
Home Equity Mortgage Trust, 2006-2 2A1 |
|
0.346% |
|
7/25/36 |
|
614,920 |
|
156,610 |
(a) | ||
|
IXIS Real Estate Capital Trust, 2005-HE4 A3 |
|
0.526% |
|
2/25/36 |
|
200,137 |
|
173,920 |
(a) | ||
|
John Deere Owner Trust, 2011-A A2 |
|
0.640% |
|
6/16/14 |
|
720,000 |
|
720,593 |
| ||
|
Lehman XS Trust, (Structured Asset Securities Corp.), 2005-1 2A2 |
|
1.694% |
|
7/25/35 |
|
1,184,957 |
|
667,441 |
(a) | ||
|
Lehman XS Trust, 2005-5N 3A1A |
|
0.486% |
|
11/25/35 |
|
414,786 |
|
308,790 |
(a) | ||
|
Long Beach Mortgage Loan Trust, 2001-3 M1 |
|
1.011% |
|
9/25/31 |
|
234,371 |
|
177,700 |
(a) | ||
|
Long Beach Mortgage Loan Trust, 2002-1 2M1 |
|
1.311% |
|
5/25/32 |
|
642,624 |
|
504,117 |
(a) | ||
|
MASTR Asset-Backed Securities Trust, 2005-AB1 A5A |
|
5.712% |
|
11/25/35 |
|
720,000 |
|
300,889 |
| ||
|
MASTR Specialized Loan Trust, 2007-1 A |
|
0.556% |
|
1/25/37 |
|
528,392 |
|
199,449 |
(a)(b) | ||
|
Merrill Lynch Mortgage Investors Trust, 2007-SD1 A1 |
|
0.636% |
|
2/25/47 |
|
1,175,673 |
|
577,296 |
(a) | ||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (cont’d)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
| ||
|
ASSET-BACKED SECURITIES — Continued |
|
|
|
|
|
|
|
|
|
|
|
|
Morgan Stanley ABS Capital I, 2007-NC2 M1 |
|
0.556% |
|
2/25/37 |
|
$ |
1,100,000 |
|
$ |
25,282 |
(a) |
|
Morgan Stanley ABS Capital I, 2007-NC2 M2 |
|
0.606% |
|
2/25/37 |
|
1,000,000 |
|
7,826 |
(a) | ||
|
Morgan Stanley ABS Capital I, 2007-NC2 M3 |
|
0.736% |
|
2/25/37 |
|
424,797 |
|
527 |
(a) | ||
|
Morgan Stanley Capital Inc., 2003-NC9 M |
|
1.311% |
|
9/25/33 |
|
1,405,369 |
|
1,060,593 |
(a) | ||
|
Morgan Stanley Capital Inc., 2004-HE8 A7 |
|
0.716% |
|
9/25/34 |
|
74,135 |
|
60,540 |
(a) | ||
|
National Collegiate Student Loan Trust, IO, 2007-2 AIO |
|
6.700% |
|
7/25/12 |
|
4,500,000 |
|
270,000 |
| ||
|
New Century Home Equity Loan Trust, 2004-3 M1 |
|
1.116% |
|
11/25/34 |
|
638,898 |
|
478,744 |
(a) | ||
|
Nissan Auto Receivables Owner Trust, 2011-A A2 |
|
0.650% |
|
12/16/13 |
|
300,000 |
|
300,739 |
| ||
|
Nissan Auto Receivables Owner Trust, 2011-A A3 |
|
1.180% |
|
2/16/15 |
|
300,000 |
|
301,841 |
| ||
|
Option One Mortgage Loan Trust, 2005-1 A4 |
|
0.586% |
|
2/25/35 |
|
222,461 |
|
191,375 |
(a) | ||
|
Origen Manufactured Housing, 2007-A A2 |
|
3.697% |
|
4/15/37 |
|
900,000 |
|
585,000 |
(a) | ||
|
Park Place Securities Inc., 2004-WHQ2 M2 |
|
0.816% |
|
2/25/35 |
|
750,000 |
|
637,488 |
(a) | ||
|
People’s Choice Home Loan Securities Trust, 2004-2 M1 |
|
1.086% |
|
10/25/34 |
|
189,548 |
|
152,290 |
(a) | ||
|
RAAC Series, 2006-RP2 A |
|
0.436% |
|
2/25/37 |
|
316,381 |
|
233,128 |
(a)(b) | ||
|
RAAC Series, 2006-RP3 A |
|
0.456% |
|
5/25/36 |
|
1,198,194 |
|
764,974 |
(a)(b) | ||
|
RAAC Series, 2006-RP4 A |
|
0.476% |
|
1/25/46 |
|
673,019 |
|
509,031 |
(a)(b) | ||
|
RAAC Series, 2007-RP3 M1 |
|
0.986% |
|
10/25/46 |
|
1,200,000 |
|
103,093 |
(a)(b) | ||
|
RAAC Series, 2007-RP4 A |
|
0.536% |
|
11/25/46 |
|
1,162,096 |
|
729,205 |
(a)(b) | ||
|
RAAC Series, 2007-SP3 A1 |
|
1.386% |
|
9/25/37 |
|
302,907 |
|
248,133 |
(a) | ||
|
Renaissance Home Equity Loan Trust, 2003-1 A |
|
1.046% |
|
6/25/33 |
|
234,211 |
|
188,501 |
(a) | ||
|
Renaissance Home Equity Loan Trust, 2003-2 A |
|
0.626% |
|
8/25/33 |
|
176,577 |
|
163,049 |
(a) | ||
|
Renaissance Net Interest Margin Trust, 2007-2 N |
|
8.353% |
|
6/25/37 |
|
128,633 |
|
1 |
(b)(e) | ||
|
Residential Asset Mortgage Products Inc., 2003-RS7 MII1 |
|
1.311% |
|
8/25/33 |
|
52,412 |
|
40,127 |
(a) | ||
|
Residential Asset Mortgage Products Inc., 2003-RZ4 A7 |
|
4.790% |
|
6/25/33 |
|
258,015 |
|
264,450 |
| ||
|
Residential Asset Mortgage Products Inc., 2004-RZ3 MII2 |
|
1.836% |
|
9/25/34 |
|
400,000 |
|
297,562 |
(a) | ||
|
SACO I Trust, 2005-WM3 A3 |
|
0.886% |
|
9/25/35 |
|
245,503 |
|
108,248 |
(a) | ||
|
SACO I Trust, 2006-3 A3 |
|
0.646% |
|
4/25/36 |
|
528,881 |
|
194,049 |
(a) | ||
|
SACO I Trust, 2006-4 A1 |
|
0.356% |
|
3/25/36 |
|
565,025 |
|
202,481 |
(a) | ||
|
Sail Net Interest Margin Notes, 2004-2A A |
|
5.500% |
|
3/27/34 |
|
107,070 |
|
1 |
(b)(d)(e) | ||
|
SLC Student Loan Trust, 2008-1 A4A |
|
1.847% |
|
12/15/32 |
|
720,000 |
|
739,579 |
(a) | ||
|
SLM Student Loan Trust, 2003-04 A5A |
|
0.997% |
|
3/15/33 |
|
574,474 |
|
549,829 |
(a)(b) | ||
|
SLM Student Loan Trust, 2003-04 A5E |
|
0.997% |
|
3/15/33 |
|
574,474 |
|
565,742 |
(a)(b)(c) | ||
|
SLM Student Loan Trust, 2003-1 A5C |
|
0.997% |
|
12/15/32 |
|
502,108 |
|
486,794 |
(a)(b)(c) | ||
|
SLM Student Loan Trust, 2011-A A2 |
|
4.370% |
|
4/17/28 |
|
420,000 |
|
435,755 |
(b) | ||
|
Soundview Home Equity Loan Trust, 2005-3 M2 |
|
0.706% |
|
6/25/35 |
|
353,764 |
|
337,179 |
(a) | ||
|
Structured Asset Investment Loan Trust, 2004-9 M4 |
|
1.486% |
|
10/25/34 |
|
159,816 |
|
46,943 |
(a) | ||
|
Structured Asset Securities Corp., 2003-AL1 A |
|
3.357% |
|
4/25/31 |
|
153,499 |
|
148,662 |
(b) | ||
|
Structured Asset Securities Corp., 2004-6XS A5B |
|
5.550% |
|
3/25/34 |
|
592,976 |
|
568,830 |
| ||
|
Structured Asset Securities Corp., 2005-4XS 2A1A |
|
1.961% |
|
3/25/35 |
|
616,123 |
|
456,844 |
(a) | ||
|
Structured Asset Securities Corp., 2005-SC1 1A1 |
|
0.456% |
|
5/25/31 |
|
835,112 |
|
438,293 |
(a)(b) | ||
|
Structured Asset Securities Corp., 2005-WF1 A3 |
|
0.516% |
|
2/25/35 |
|
338,541 |
|
298,660 |
(a) | ||
|
Structured Asset Securities Corp., 2006-GEL1 A2 |
|
0.536% |
|
11/25/35 |
|
501,196 |
|
436,040 |
(a)(b)(c) | ||
|
Structured Asset Securities Corp., 2007-BC3 2A3 |
|
0.366% |
|
5/25/47 |
|
290,000 |
|
88,810 |
(a) | ||
|
Vanderbilt Mortgage Finance, 2000-B IB2 |
|
9.250% |
|
7/7/30 |
|
214,607 |
|
211,897 |
(a) | ||
|
TOTAL ASSET-BACKED SECURITIES (Cost — $36,052,756) |
|
|
|
30,311,600 |
| ||||||
|
COLLATERALIZED SENIOR LOANS — 6.3% |
|
|
|
|
|
|
|
|
| ||
|
CONSUMER DISCRETIONARY — 1.5% |
|
|
|
|
|
|
|
|
| ||
|
Hotels, Restaurants & Leisure — 0.4% |
|
|
|
|
|
|
|
|
| ||
|
BLB Worldwide Holdings Inc., Term Loan |
|
6.500% |
|
11/5/17 |
|
75,000 |
|
8,250 |
(e)(f) | ||
|
Caesars Entertainment Operating Co. Inc., Term Loan B2 |
|
3.000% |
|
1/28/15 |
|
460,941 |
|
414,845 |
(f) | ||
|
Total Hotels, Restaurants & Leisure |
|
|
|
|
|
|
|
423,095 |
| ||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (cont’d)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
| ||
|
Media — 0.7% |
|
|
|
|
|
|
|
|
| ||
|
Charter Communications Operating LLC, Term Loan C |
3.18580 - 3.274% |
|
9/6/16 |
|
$ |
859,423 |
|
$ |
857,808 |
(f) | |
|
Multiline Retail — 0.4% |
|
|
|
|
|
|
|
|
| ||
|
Neiman-Marcus Group Inc., Term Loan |
|
4.750% |
|
5/16/18 |
|
465,000 |
|
459,901 |
(f) | ||
|
TOTAL CONSUMER DISCRETIONARY |
|
|
|
|
|
|
|
1,740,804 |
| ||
|
HEALTH CARE — 1.9% |
|
|
|
|
|
|
|
|
| ||
|
Health Care Providers & Services — 1.9% |
|
|
|
|
|
|
|
|
| ||
|
Community Health Systems Inc., Delayed Draw Term Loan |
|
2.504% |
|
7/25/14 |
|
16,326 |
|
15,804 |
(f) | ||
|
Community Health Systems Inc., Term Loan B |
2.5040 - 3.754% |
|
7/25/14 |
|
477,525 |
|
462,273 |
(f) | |||
|
Emergency Medical Services Corp., Term Loan |
|
5.250% |
|
5/25/18 |
|
300,000 |
|
299,438 |
(f) | ||
|
HCA Inc., Term Loan B1 |
|
2.496% |
|
11/18/13 |
|
630,983 |
|
627,431 |
(f) | ||
|
Health Management Associates Inc., Term Loan B |
|
1.996% |
|
2/28/14 |
|
899,589 |
|
873,049 |
(f) | ||
|
TOTAL HEALTH CARE |
|
|
|
|
|
|
|
2,277,995 |
| ||
|
INDUSTRIALS — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
Marine — 0.0% |
|
|
|
|
|
|
|
|
| ||
|
Trico Shipping AS, Term Loan A |
|
10.000% |
|
5/12/14 |
|
23,203 |
|
23,203 |
(c)(f) | ||
|
Road & Rail — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
Hertz Corp. Term Loan |
|
2.750% |
|
3/9/18 |
|
250,000 |
|
249,102 |
(f) | ||
|
TOTAL INDUSTRIALS |
|
|
|
|
|
|
|
272,305 |
| ||
|
INFORMATION TECHNOLOGY — 0.5% |
|
|
|
|
|
|
|
|
| ||
|
IT Services — 0.5% |
|
|
|
|
|
|
|
|
| ||
|
First Data Corp., Term Loan B |
|
4.000% |
|
3/23/18 |
|
301,701 |
|
277,364 |
(f) | ||
|
First Data Corp., Term Loan B2 |
|
2.750% |
|
9/24/14 |
|
365,915 |
|
339,614 |
(f) | ||
|
TOTAL INFORMATION TECHNOLOGY |
|
|
|
|
|
|
|
616,978 |
| ||
|
MATERIALS — 0.7% |
|
|
|
|
|
|
|
|
| ||
|
Construction Materials — 0.3% |
|
|
|
|
|
|
|
|
| ||
|
Fairmount Minerals, Term Loan B |
|
4.000% |
|
3/1/17 |
|
300,000 |
|
300,875 |
| ||
|
Containers & Packaging — 0.4% |
|
|
|
|
|
|
|
|
| ||
|
Berry Plastics Group Inc., Term Loan C |
|
2.261% |
|
4/3/15 |
|
489,770 |
|
463,904 |
(f) | ||
|
TOTAL MATERIALS |
|
|
|
|
|
|
|
764,779 |
| ||
|
TELECOMMUNICATION SERVICES — 0.4% |
|
|
|
|
|
|
|
|
| ||
|
Diversified Telecommunication Services — 0.4% |
|
|
|
|
|
|
|
|
| ||
|
Level 3 Financing Inc., Term Loan A |
|
2.533% |
|
3/13/14 |
|
500,000 |
|
484,844 |
(f) | ||
|
UTILITIES — 1.1% |
|
|
|
|
|
|
|
|
| ||
|
Electric Utilities — 0.6% |
|
|
|
|
|
|
|
|
| ||
|
Texas Competitive Electric Holdings Co. LLC, Term Loan |
4.6895 - 4.768% |
|
10/10/17 |
|
930,144 |
|
727,339 |
(f) | |||
|
Independent Power Producers & Energy Traders — 0.5% |
|
|
|
|
|
|
| ||||
|
NRG Holdings Inc., Term Loan |
|
4.000% |
|
2/1/13 |
|
74,298 |
|
74,269 |
(f) | ||
|
NRG Holdings Inc., Term Loan |
3.4410 - 5.500% |
|
8/31/15 |
|
491,280 |
|
492,338 |
(f) | |||
|
Total Independent Power Producers & Energy Traders |
|
|
|
|
|
|
566,607 |
| |||
|
TOTAL UTILITIES |
|
|
|
|
|
|
|
1,293,946 |
| ||
|
TOTAL COLLATERALIZED SENIOR LOANS (Cost — $7,588,703) |
|
|
|
|
|
7,451,651 |
| ||||
|
CORPORATE BONDS & NOTES — 27.7% |
|
|
|
|
|
|
|
|
| ||
|
CONSUMER DISCRETIONARY — 2.6% |
|
|
|
|
|
|
|
|
| ||
|
Automobiles — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
Ford Motor Credit Co., LLC, Senior Notes |
|
9.875% |
|
8/10/11 |
|
220,000 |
|
221,667 |
| ||
|
Consumer Finance — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
Abbey National Treasury Services PLC, Senior Notes |
|
1.854% |
|
4/25/14 |
|
180,000 |
|
179,072 |
(a) | ||
|
Diversified Consumer Services — 0.0% |
|
|
|
|
|
|
|
|
| ||
|
Service Corp. International, Senior Notes |
|
7.625% |
|
10/1/18 |
|
30,000 |
|
33,075 |
| ||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (cont’d)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
| ||
|
Hotels, Restaurants & Leisure — 1.1% |
|
|
|
|
|
|
|
|
| ||
|
Caesar’s Entertainment Operating Co. Inc., Senior Secured Notes |
|
11.250% |
|
6/1/17 |
|
$ |
175,000 |
|
$ |
194,031 |
|
|
CCM Merger Inc., Notes |
|
8.000% |
|
8/1/13 |
|
100,000 |
|
98,750 |
(b) | ||
|
Choctaw Resort Development Enterprise, Senior Notes |
|
7.250% |
|
11/15/19 |
|
218,000 |
|
166,770 |
(b) | ||
|
El Pollo Loco Inc. |
|
12.000% |
|
12/28/17 |
|
120,000 |
|
120,000 |
(c) | ||
|
El Pollo Loco Inc., Senior Notes |
|
11.750% |
|
11/15/13 |
|
120,000 |
|
120,600 |
| ||
|
El Pollo Loco Inc., Senior Secured Notes |
|
11.750% |
|
12/1/12 |
|
20,000 |
|
21,200 |
| ||
|
Inn of the Mountain Gods Resort & Casino, Senior Secured Notes |
|
8.750% |
|
11/30/20 |
|
28,000 |
|
27,580 |
(b) | ||
|
Landry’s Restaurants Inc., Senior Secured Notes |
|
11.625% |
|
12/1/15 |
|
40,000 |
|
43,000 |
| ||
|
MGM Resorts International, Senior Notes |
|
7.625% |
|
1/15/17 |
|
230,000 |
|
222,525 |
| ||
|
MGM Resorts International, Senior Secured Notes |
|
10.375% |
|
5/15/14 |
|
20,000 |
|
22,800 |
| ||
|
MGM Resorts International, Senior Secured Notes |
|
11.125% |
|
11/15/17 |
|
55,000 |
|
63,112 |
| ||
|
Mohegan Tribal Gaming Authority, Senior Subordinated Notes |
|
6.875% |
|
2/15/15 |
|
200,000 |
|
135,000 |
| ||
|
NCL Corp. Ltd., Senior Secured Notes |
|
11.750% |
|
11/15/16 |
|
60,000 |
|
69,450 |
| ||
|
Snoqualmie Entertainment Authority, Senior Secured Notes |
|
4.204% |
|
2/1/14 |
|
10,000 |
|
9,050 |
(a)(b) | ||
|
Station Casinos Inc., Senior Notes |
|
7.750% |
|
8/15/16 |
|
155,000 |
|
16 |
(d)(e) | ||
|
Station Casinos Inc., Senior Subordinated Notes |
|
6.875% |
|
3/1/16 |
|
15,000 |
|
2 |
(d)(e) | ||
|
Total Hotels, Restaurants & Leisure |
|
|
|
|
|
|
|
1,313,886 |
| ||
|
Media — 1.0% |
|
|
|
|
|
|
|
|
| ||
|
Cablevision Systems Corp., Senior Notes |
|
7.750% |
|
4/15/18 |
|
570,000 |
|
610,613 |
| ||
|
Cengage Learning Acquisitions Inc., Senior Notes |
|
10.500% |
|
1/15/15 |
|
40,000 |
|
36,400 |
(b) | ||
|
Charter Communications Operating LLC/Charter Communications Operating Capital, Senior Secured Notes |
|
10.875% |
|
9/15/14 |
|
100,000 |
|
110,500 |
(b) | ||
|
CMP Susquehanna Corp. |
|
3.443% |
|
5/15/14 |
|
2,000 |
|
1,530 |
(a)(b)(d) | ||
|
Comcast Corp., Senior Notes |
|
6.500% |
|
1/15/17 |
|
200,000 |
|
233,377 |
| ||
|
UPC Holding BV, Senior Notes |
|
9.875% |
|
4/15/18 |
|
30,000 |
|
33,450 |
(b) | ||
|
Virgin Media Finance PLC, Senior Bonds |
|
9.500% |
|
8/15/16 |
|
60,000 |
|
68,100 |
| ||
|
Virgin Media Finance PLC, Senior Notes |
|
9.125% |
|
8/15/16 |
|
140,000 |
|
147,700 |
| ||
|
Total Media |
|
|
|
|
|
|
|
1,241,670 |
| ||
|
Textiles, Apparel & Luxury Goods — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Oxford Industries Inc., Senior Secured Notes |
|
11.375% |
|
7/15/15 |
|
105,000 |
|
119,175 |
| ||
|
TOTAL CONSUMER DISCRETIONARY |
|
|
|
|
|
|
|
3,108,545 |
| ||
|
CONSUMER STAPLES — 0.7% |
|
|
|
|
|
|
|
|
| ||
|
Beverages — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Anheuser-Busch InBev Worldwide Inc., Senior Notes |
|
4.125% |
|
1/15/15 |
|
90,000 |
|
96,871 |
| ||
|
Food & Staples Retailing — 0.3% |
|
|
|
|
|
|
|
|
| ||
|
CVS Corp., Pass-through Certificates |
|
6.117% |
|
1/10/13 |
|
360,274 |
|
379,188 |
(b) | ||
|
Kroger Co., Notes |
|
3.900% |
|
10/1/15 |
|
60,000 |
|
63,521 |
| ||
|
Total Food & Staples Retailing |
|
|
|
|
|
|
|
442,709 |
| ||
|
Food Products — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
Kraft Foods Inc., Senior Notes |
|
2.625% |
|
5/8/13 |
|
260,000 |
|
267,607 |
| ||
|
Tobacco — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Alliance One International Inc., Senior Notes |
|
10.000% |
|
7/15/16 |
|
70,000 |
|
67,900 |
| ||
|
TOTAL CONSUMER STAPLES |
|
|
|
|
|
|
|
875,087 |
| ||
|
ENERGY — 5.5% |
|
|
|
|
|
|
|
|
| ||
|
Energy Equipment & Services — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
Complete Production Services Inc., Senior Notes |
|
8.000% |
|
12/15/16 |
|
155,000 |
|
162,750 |
| ||
|
Hercules Offshore LLC, Senior Secured Notes |
|
10.500% |
|
10/15/17 |
|
60,000 |
|
63,000 |
(b) | ||
|
Total Energy Equipment & Services |
|
|
|
|
|
|
|
225,750 |
| ||
|
Oil, Gas & Consumable Fuels — 5.3% |
|
|
|
|
|
|
|
|
| ||
|
Anadarko Petroleum Corp., Senior Notes |
|
7.625% |
|
3/15/14 |
|
160,000 |
|
183,576 |
| ||
|
Anadarko Petroleum Corp., Senior Notes |
|
6.375% |
|
9/15/17 |
|
40,000 |
|
45,913 |
| ||
|
Berry Petroleum Co., Senior Notes |
|
10.250% |
|
6/1/14 |
|
60,000 |
|
68,850 |
| ||
|
BP Capital Markets PLC, Senior Notes |
|
3.125% |
|
10/1/15 |
|
230,000 |
|
236,374 |
| ||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (cont’d)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
| ||
|
Oil, Gas & Consumable Fuels — continued |
|
|
|
|
|
|
|
|
|
| |
|
Chesapeake Energy Corp., Senior Notes |
|
7.250% |
|
12/15/18 |
|
$ |
285,000 |
|
$ |
312,075 |
|
|
Chesapeake Energy Corp., Senior Notes |
|
6.625% |
|
8/15/20 |
|
150,000 |
|
158,625 |
| ||
|
CONSOL Energy Inc., Senior Notes |
|
8.250% |
|
4/1/20 |
|
160,000 |
|
175,200 |
| ||
|
El Paso Corp., Medium-Term Notes |
|
7.375% |
|
12/15/12 |
|
194,000 |
|
209,150 |
| ||
|
Enterprise Products Operating LLP, Junior Subordinated Notes |
|
8.375% |
|
8/1/66 |
|
80,000 |
|
86,690 |
(a) | ||
|
Enterprise Products Operating LLP, Subordinated Notes |
|
7.034% |
|
1/15/68 |
|
120,000 |
|
126,315 |
(a) | ||
|
Kinder Morgan Energy Partners LP, Senior Notes |
|
6.000% |
|
2/1/17 |
|
170,000 |
|
191,942 |
| ||
|
LUKOIL International Finance BV, Bonds |
|
6.356% |
|
6/7/17 |
|
210,000 |
|
227,325 |
(b) | ||
|
LUKOIL International Finance BV, Senior Notes |
|
7.250% |
|
11/5/19 |
|
240,000 |
|
266,208 |
(b) | ||
|
Petrobras International Finance Co., Senior Notes |
|
3.875% |
|
1/27/16 |
|
250,000 |
|
255,829 |
| ||
|
Petrobras International Finance Co., Senior Notes |
|
5.750% |
|
1/20/20 |
|
780,000 |
|
835,969 |
| ||
|
Plains Exploration & Production Co., Senior Notes |
|
10.000% |
|
3/1/16 |
|
60,000 |
|
67,800 |
| ||
|
Plains Exploration & Production Co., Senior Notes |
|
8.625% |
|
10/15/19 |
|
40,000 |
|
43,800 |
| ||
|
Range Resources Corp., Senior Subordinated Notes |
|
6.750% |
|
8/1/20 |
|
550,000 |
|
572,000 |
| ||
|
SandRidge Energy Inc., Senior Notes |
|
3.930% |
|
4/1/14 |
|
1,000,000 |
|
990,862 |
(a) | ||
|
Shell International Finance BV, Senior Notes |
|
3.100% |
|
6/28/15 |
|
380,000 |
|
397,508 |
| ||
|
Teekay Corp., Senior Notes |
|
8.500% |
|
1/15/20 |
|
110,000 |
|
114,125 |
| ||
|
TNK-BP Finance SA, Senior Notes |
|
7.875% |
|
3/13/18 |
|
200,000 |
|
230,500 |
(b) | ||
|
Williams Cos. Inc., Senior Notes |
|
8.750% |
|
3/15/32 |
|
370,000 |
|
471,726 |
| ||
|
Total Oil, Gas & Consumable Fuels |
|
|
|
|
|
|
|
6,268,362 |
| ||
|
TOTAL ENERGY |
|
|
|
|
|
|
|
6,494,112 |
| ||
|
FINANCIALS — 9.5% |
|
|
|
|
|
|
|
|
| ||
|
Capital Markets — 1.3% |
|
|
|
|
|
|
|
|
| ||
|
Goldman Sachs Capital III, Preferred Securities |
|
1.024% |
|
9/1/12 |
|
550,000 |
|
418,886 |
(a)(g) | ||
|
Goldman Sachs Group Inc., Senior Notes |
|
5.250% |
|
10/15/13 |
|
340,000 |
|
364,996 |
| ||
|
Morgan Stanley, Senior Notes |
|
2.761% |
|
5/14/13 |
|
310,000 |
|
318,456 |
(a) | ||
|
Morgan Stanley, Senior Notes |
|
6.000% |
|
5/13/14 |
|
400,000 |
|
435,936 |
| ||
|
Total Capital Markets |
|
|
|
|
|
|
|
1,538,274 |
| ||
|
Commercial Banks — 3.3% |
|
|
|
|
|
|
|
|
| ||
|
Barclays Bank PLC, Senior Notes |
|
5.000% |
|
9/22/16 |
|
200,000 |
|
215,396 |
| ||
|
BBVA US Senior SAU, Senior Notes |
|
3.250% |
|
5/16/14 |
|
400,000 |
|
395,840 |
| ||
|
Credit Agricole SA, Subordinated Notes |
|
8.375% |
|
10/13/19 |
|
420,000 |
|
441,000 |
(a)(b)(g) | ||
|
Danske Bank A/S, Senior Notes |
|
1.331% |
|
4/14/14 |
|
300,000 |
|
300,248 |
(a)(b) | ||
|
Intesa Sanpaolo SpA, Senior Notes |
|
3.625% |
|
8/12/15 |
|
140,000 |
|
136,519 |
(b) | ||
|
Lloyds TSB Bank PLC, Medium-Term Notes, Senior Bonds |
|
4.375% |
|
1/12/15 |
|
180,000 |
|
182,831 |
(b) | ||
|
Lloyds TSB Bank PLC, Senior Notes |
|
6.375% |
|
1/21/21 |
|
280,000 |
|
292,016 |
| ||
|
Rabobank Nederland NV, Junior Subordinated Notes |
|
11.000% |
|
6/30/19 |
|
260,000 |
|
332,724 |
(a)(b)(g) | ||
|
Rabobank Nederland NV, Senior Notes |
|
2.125% |
|
10/13/15 |
|
340,000 |
|
337,150 |
| ||
|
Royal Bank of Scotland PLC, Senior Notes |
|
4.875% |
|
3/16/15 |
|
270,000 |
|
280,450 |
| ||
|
Wachovia Capital Trust III, Junior Subordinated Bonds |
|
5.570% |
|
8/22/11 |
|
300,000 |
|
275,625 |
(a)(g) | ||
|
Wells Fargo & Co., Senior Notes |
|
3.750% |
|
10/1/14 |
|
450,000 |
|
474,620 |
| ||
|
Wells Fargo & Co., Senior Notes |
|
3.676% |
|
6/15/16 |
|
250,000 |
|
257,124 |
| ||
|
Total Commercial Banks |
|
|
|
|
|
|
|
3,921,543 |
| ||
|
Consumer Finance — 2.7% |
|
|
|
|
|
|
|
|
| ||
|
Ally Financial Inc., Senior Notes |
|
6.750% |
|
12/1/14 |
|
307,000 |
|
318,512 |
| ||
|
Ally Financial Inc., Senior Notes |
|
8.000% |
|
3/15/20 |
|
280,000 |
|
298,200 |
| ||
|
GMAC Inc., Senior Notes |
|
2.454% |
|
12/1/14 |
|
1,956,000 |
|
1,872,608 |
(a) | ||
|
SLM Corp. |
|
0.574% |
|
1/27/14 |
|
700,000 |
|
664,232 |
(a) | ||
|
Total Consumer Finance |
|
|
|
|
|
|
|
3,153,552 |
| ||
|
Diversified Financial Services — 1.9% |
|
|
|
|
|
|
|
|
| ||
|
Air 2 US, Notes |
|
8.027% |
|
10/1/19 |
|
90,394 |
|
90,394 |
(b) | ||
|
Chukchansi Economic Development Authority, Senior Notes |
|
3.917% |
|
11/15/12 |
|
250,000 |
|
205,000 |
(a)(b) | ||
|
Citigroup Inc., Senior Notes |
|
6.375% |
|
8/12/14 |
|
850,000 |
|
940,533 |
| ||
|
Citigroup Inc., Senior Notes |
|
5.500% |
|
10/15/14 |
|
120,000 |
|
130,596 |
| ||
|
International Lease Finance Corp., Senior Notes |
|
8.750% |
|
3/15/17 |
|
490,000 |
|
537,162 |
| ||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (cont’d)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
| ||
|
Diversified Financial Services — continued |
|
|
|
|
|
|
|
|
| ||
|
TNK-BP Finance SA |
|
6.875% |
|
7/18/11 |
|
$ |
190,000 |
|
$ |
190,713 |
(b) |
|
Unitymedia GmbH, Senior Secured Bonds |
|
8.125% |
|
12/1/17 |
|
100,000 |
|
106,750 |
(b) | ||
|
Total Diversified Financial Services |
|
|
|
|
|
|
|
2,201,148 |
| ||
|
Insurance — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
American International Group Inc., Senior Notes |
|
3.750% |
|
11/30/13 |
|
170,000 |
|
174,038 |
(b) | ||
|
Thrifts & Mortgage Finance — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
Santander Holdings USA Inc., Senior Notes |
|
4.625% |
|
4/19/16 |
|
240,000 |
|
241,449 |
| ||
|
TOTAL FINANCIALS |
|
|
|
|
|
|
|
11,230,004 |
| ||
|
HEALTH CARE — 0.7% |
|
|
|
|
|
|
|
|
| ||
|
Health Care Providers & Services — 0.7% |
|
|
|
|
|
|
|
|
| ||
|
Community Health Systems Inc., Senior Notes |
|
8.875% |
|
7/15/15 |
|
60,000 |
|
61,950 |
| ||
|
HCA Inc., Senior Secured Notes |
|
9.625% |
|
11/15/16 |
|
105,000 |
|
111,956 |
(h) | ||
|
Tenet Healthcare Corp., Senior Secured Notes |
|
9.000% |
|
5/1/15 |
|
150,000 |
|
161,625 |
| ||
|
Tenet Healthcare Corp., Senior Secured Notes |
|
8.875% |
|
7/1/19 |
|
326,000 |
|
361,453 |
| ||
|
Universal Hospital Services Inc., Senior Secured Notes |
|
8.500% |
|
6/1/15 |
|
10,000 |
|
10,350 |
(h) | ||
|
Vanguard Health Holdings Co., II LLC, Senior Notes |
|
8.000% |
|
2/1/18 |
|
80,000 |
|
83,000 |
| ||
|
TOTAL HEALTH CARE |
|
|
|
|
|
|
|
790,334 |
| ||
|
INDUSTRIALS — 1.4% |
|
|
|
|
|
|
|
|
| ||
|
Airlines — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
DAE Aviation Holdings Inc., Senior Notes |
|
11.250% |
|
8/1/15 |
|
160,000 |
|
167,200 |
(b) | ||
|
Delta Air Lines Inc., Pass-Through Certificates, Secured Notes |
|
8.021% |
|
8/10/22 |
|
68,907 |
|
70,023 |
| ||
|
Delta Air Lines Inc., Senior Secured Notes |
|
9.500% |
|
9/15/14 |
|
27,000 |
|
28,924 |
(b) | ||
|
Total Airlines |
|
|
|
|
|
|
|
266,147 |
| ||
|
Building Products — 0.0% |
|
|
|
|
|
|
|
|
| ||
|
Ashton Woods USA LLC/Ashton Woods Finance Co., Senior Subordinated Notes, Step Bond |
|
0.000% |
|
6/30/15 |
|
7,800 |
|
4,758 |
(b)(d) | ||
|
Commercial Services & Supplies — 0.3% |
|
|
|
|
|
|
|
|
| ||
|
ACCO Brands Corp., Senior Secured Notes |
|
10.625% |
|
3/15/15 |
|
80,000 |
|
89,700 |
| ||
|
Altegrity Inc., Senior Subordinated Notes |
|
10.500% |
|
11/1/15 |
|
120,000 |
|
124,800 |
(b) | ||
|
RSC Equipment Rental Inc./RSC Holdings III LLC, Senior Secured Notes |
|
10.000% |
|
7/15/17 |
|
80,000 |
|
89,600 |
(b) | ||
|
Total Commercial Services & Supplies |
|
|
|
|
|
|
|
304,100 |
| ||
|
Construction & Engineering — 0.5% |
|
|
|
|
|
|
|
|
| ||
|
Odebrecht Finance Ltd., Senior Notes |
|
6.000% |
|
4/5/23 |
|
580,000 |
|
579,275 |
(b) | ||
|
Industrial Conglomerates — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Leucadia National Corp., Senior Notes |
|
8.125% |
|
9/15/15 |
|
80,000 |
|
88,600 |
| ||
|
Road & Rail — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
Kansas City Southern de Mexico, Senior Notes |
|
12.500% |
|
4/1/16 |
|
163,000 |
|
193,970 |
| ||
|
RailAmerica Inc., Senior Secured Notes |
|
9.250% |
|
7/1/17 |
|
88,000 |
|
97,020 |
| ||
|
Total Road & Rail |
|
|
|
|
|
|
|
290,990 |
| ||
|
Trading Companies & Distributors — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Ashtead Capital Inc., Notes |
|
9.000% |
|
8/15/16 |
|
50,000 |
|
52,375 |
(b) | ||
|
H&E Equipment Services Inc., Senior Notes |
|
8.375% |
|
7/15/16 |
|
95,000 |
|
97,612 |
| ||
|
Total Trading Companies & Distributors |
|
|
|
|
|
|
|
149,987 |
| ||
|
TOTAL INDUSTRIALS |
|
|
|
|
|
|
|
1,683,857 |
| ||
|
INFORMATION TECHNOLOGY — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
IT Services — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Ceridian Corp., Senior Notes |
|
12.250% |
|
11/15/15 |
|
53,250 |
|
54,315 |
(h) | ||
|
Semiconductors & Semiconductor Equipment — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Freescale Semiconductor Inc., Senior Secured Notes |
|
9.250% |
|
4/15/18 |
|
130,000 |
|
140,725 |
(b) | ||
|
TOTAL INFORMATION TECHNOLOGY |
|
|
|
|
|
|
|
195,040 |
| ||
|
MATERIALS — 2.3% |
|
|
|
|
|
|
|
|
| ||
|
Containers & Packaging — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
Reynolds Group Issuer Inc./Reynolds Group Issuer LLC, Senior Secured Notes |
|
7.125% |
|
4/15/19 |
|
250,000 |
|
249,375 |
(b) | ||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (cont’d)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
| ||
|
Metals & Mining — 1.7% |
|
|
|
|
|
|
|
|
| ||
|
Barrick Gold Corp., Senior Notes |
|
1.750% |
|
5/30/14 |
|
$ |
250,000 |
|
$ |
250,659 |
(b) |
|
Freeport-McMoRan Copper & Gold Inc., Senior Notes |
|
8.375% |
|
4/1/17 |
|
170,000 |
|
185,938 |
| ||
|
Metals USA Inc., Senior Secured Notes |
|
11.125% |
|
12/1/15 |
|
150,000 |
|
159,000 |
| ||
|
Steel Dynamics Inc., Senior Notes |
|
7.375% |
|
11/1/12 |
|
95,000 |
|
100,700 |
| ||
|
Steel Dynamics Inc., Senior Notes |
|
7.625% |
|
3/15/20 |
|
370,000 |
|
393,125 |
| ||
|
Teck Resources Ltd., Senior Secured Notes |
|
9.750% |
|
5/15/14 |
|
16,000 |
|
19,380 |
| ||
|
Teck Resources Ltd., Senior Secured Notes |
|
10.250% |
|
5/15/16 |
|
23,000 |
|
27,512 |
| ||
|
Vale Overseas Ltd., Notes |
|
6.250% |
|
1/23/17 |
|
338,000 |
|
383,206 |
| ||
|
Vedanta Resources PLC, Senior Notes |
|
8.750% |
|
1/15/14 |
|
390,000 |
|
420,225 |
(b) | ||
|
Vedanta Resources PLC, Senior Notes |
|
8.750% |
|
1/15/14 |
|
70,000 |
|
75,425 |
(b) | ||
|
Total Metals & Mining |
|
|
|
|
|
|
|
2,015,170 |
| ||
|
Paper & Forest Products — 0.4% |
|
|
|
|
|
|
|
|
| ||
|
Appleton Papers Inc., Senior Secured Notes |
|
11.250% |
|
12/15/15 |
|
199,000 |
|
201,985 |
| ||
|
NewPage Corp., Senior Secured Notes |
|
11.375% |
|
12/31/14 |
|
205,000 |
|
192,188 |
| ||
|
Total Paper & Forest Products |
|
|
|
|
|
|
|
394,173 |
| ||
|
TOTAL MATERIALS |
|
|
|
|
|
|
|
2,658,718 |
| ||
|
TELECOMMUNICATION SERVICES — 3.6% |
|
|
|
|
|
|
|
|
| ||
|
Diversified Telecommunication Services — 1.9% |
|
|
|
|
|
|
|
|
| ||
|
Axtel SAB de CV, Senior Notes |
|
7.625% |
|
2/1/17 |
|
377,000 |
|
359,092 |
(b) | ||
|
CC Holdings GS V LLC, Senior Secured Notes |
|
7.750% |
|
5/1/17 |
|
150,000 |
|
163,125 |
(b) | ||
|
Cincinnati Bell Telephone Co., Senior Debentures |
|
6.300% |
|
12/1/28 |
|
45,000 |
|
36,675 |
| ||
|
Deutsche Telekom International Finance BV, Senior Notes |
|
4.875% |
|
7/8/14 |
|
300,000 |
|
327,655 |
| ||
|
Deutsche Telekom International Finance BV, Senior Notes |
|
5.750% |
|
3/23/16 |
|
140,000 |
|
158,497 |
| ||
|
Frontier Communications Corp., Senior Notes |
|
8.750% |
|
4/15/22 |
|
34,000 |
|
37,230 |
| ||
|
Intelsat Jackson Holdings Ltd., Senior Notes |
|
9.500% |
|
6/15/16 |
|
40,000 |
|
42,050 |
| ||
|
Intelsat Jackson Holdings Ltd., Senior Notes |
|
8.500% |
|
11/1/19 |
|
140,000 |
|
148,750 |
| ||
|
Qwest Corp., Senior Notes |
|
3.497% |
|
6/15/13 |
|
250,000 |
|
256,875 |
(a) | ||
|
Telecom Italia Capital, Senior Notes |
|
5.250% |
|
10/1/15 |
|
320,000 |
|
332,995 |
| ||
|
Telefonica Emisiones SAU, Senior Notes |
|
5.855% |
|
2/4/13 |
|
210,000 |
|
222,778 |
| ||
|
Verizon Florida Inc., Senior Notes |
|
6.125% |
|
1/15/13 |
|
200,000 |
|
214,776 |
| ||
|
Total Diversified Telecommunication Services |
|
|
|
|
|
|
|
2,300,498 |
| ||
|
Wireless Telecommunication Services — 1.7% |
|
|
|
|
|
|
|
|
| ||
|
Cricket Communications Inc., Senior Secured Notes |
|
7.750% |
|
5/15/16 |
|
125,000 |
|
133,125 |
| ||
|
New Cingular Wireless Services Inc., Notes |
|
8.125% |
|
5/1/12 |
|
100,000 |
|
106,045 |
| ||
|
Sprint Capital Corp., Senior Notes |
|
6.875% |
|
11/15/28 |
|
650,000 |
|
619,125 |
| ||
|
True Move Co., Ltd. |
|
10.750% |
|
12/16/13 |
|
230,000 |
|
249,263 |
(b) | ||
|
True Move Co., Ltd., Notes |
|
10.750% |
|
12/16/13 |
|
531,000 |
|
575,471 |
(b) | ||
|
Vodafone Group PLC, Senior Notes |
|
5.000% |
|
12/16/13 |
|
266,000 |
|
289,603 |
| ||
|
Total Wireless Telecommunication Services |
|
|
|
|
|
|
|
1,972,632 |
| ||
|
TOTAL TELECOMMUNICATION SERVICES |
|
|
|
|
|
|
|
4,273,130 |
| ||
|
UTILITIES — 1.2% |
|
|
|
|
|
|
|
|
| ||
|
Electric Utilities — 0.4% |
|
|
|
|
|
|
|
|
| ||
|
EEB International Ltd., Senior Bonds |
|
8.750% |
|
10/31/14 |
|
192,000 |
|
204,768 |
(b) | ||
|
FirstEnergy Solutions Corp., Senior Notes |
|
4.800% |
|
2/15/15 |
|
260,000 |
|
279,183 |
| ||
|
Total Electric Utilities |
|
|
|
|
|
|
|
483,951 |
| ||
|
Independent Power Producers & Energy Traders — 0.8% |
|
|
|
|
|
|
|
|
| ||
|
Calpine Corp., Senior Secured Notes |
|
7.500% |
|
2/15/21 |
|
280,000 |
|
287,000 |
(b) | ||
|
Edison Mission Energy, Senior Notes |
|
7.750% |
|
6/15/16 |
|
80,000 |
|
72,400 |
| ||
|
Edison Mission Energy, Senior Notes |
|
7.625% |
|
5/15/27 |
|
45,000 |
|
33,300 |
| ||
|
Energy Future Intermediate Holding Co. LLC/EFIH Finance Inc., Senior Secured Notes |
|
10.000% |
|
12/1/20 |
|
459,000 |
|
491,800 |
| ||
|
Total Independent Power Producers & Energy Traders |
|
|
|
|
|
|
|
884,500 |
| ||
|
TOTAL UTILITIES |
|
|
|
|
|
|
|
1,368,451 |
| ||
|
TOTAL CORPORATE BONDS & NOTES (Cost — $31,132,124) |
|
|
|
|
|
32,677,278 |
| ||||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (cont’d)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
| ||
|
MORTGAGE-BACKED SECURITIES — 0.5% |
|
|
|
|
|
|
|
|
| ||
|
GNMA — 0.5% |
|
|
|
|
|
|
|
|
| ||
|
Government National Mortgage Association (GNMA) (Cost - $585,490) |
|
6.500% |
|
8/15/34 |
|
$ |
516,419 |
|
$ |
612,816 |
|
|
MUNICIPAL BONDS — 3.4% |
|
|
|
|
|
|
|
|
| ||
|
Carroll County, KY, PCR, Kentucky Utilities Co. Project, AMBAC |
|
0.180% |
|
7/27/11 |
|
500,000 |
|
418,125 |
(a)(c) | ||
|
Florida Educational Loan Marketing Corp., Education Loan Revenue |
|
0.405% |
|
7/23/11 |
|
700,000 |
|
583,625 |
(a)(c) | ||
|
Illinois State, GO |
|
4.961% |
|
3/1/16 |
|
425,000 |
|
439,790 |
| ||
|
New York State Energy Research & Development Authority Facilities Revenue, Consolidated Edison Co., XLCA |
|
0.369% |
|
6/23/11 |
|
500,000 |
|
393,750 |
(a) | ||
|
North Carolina State Education Assistance Authority Revenue, Student Loan Backed Notes |
|
1.135% |
|
7/25/25 |
|
600,000 |
|
585,198 |
(a) | ||
|
North Carolina State Education Assistance Authority Revenue, Student Loan Backed Notes |
|
1.210% |
|
10/25/41 |
|
400,000 |
|
373,076 |
(a) | ||
|
Person County, NC, Industrial Facilities & Pollution Control Financing Authority Revenue, Carolina Power & Light Co., AMBAC |
|
0.193% |
|
7/25/11 |
|
550,000 |
|
493,625 |
(a) | ||
|
Wake County, NC, Industrial Facilities & Pollution Control Financing Authority Revenue, Carolina Power & Light Co., AMBAC |
|
0.193% |
|
10/1/22 |
|
800,000 |
|
700,000 |
| ||
|
TOTAL MUNICIPAL BONDS (Cost — $3,981,267) |
|
|
|
|
|
3,987,189 |
| ||||
|
SOVEREIGN BONDS — 4.2% |
|
|
|
|
|
|
|
|
| ||
|
Brazil — 2.8% |
|
|
|
|
|
|
|
|
| ||
|
Brazil Nota do Tesouro Nacional, Notes |
|
10.000% |
|
1/1/14 |
|
247,000 |
BRL |
149,840 |
| ||
|
Brazil Nota do Tesouro Nacional, Notes |
|
10.000% |
|
1/1/17 |
|
5,470,000 |
BRL |
3,178,481 |
| ||
|
Total Brazil |
|
|
|
|
|
|
|
3,328,321 |
| ||
|
India — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
ICICI Bank Ltd., Subordinated Bonds |
|
6.375% |
|
4/30/22 |
|
130,000 |
|
126,901 |
(a)(b) | ||
|
Mexico — 0.3% |
|
|
|
|
|
|
|
|
| ||
|
United Mexican States, Medium-Term Notes |
|
6.750% |
|
9/27/34 |
|
265,000 |
|
309,388 |
| ||
|
Russia — 0.4% |
|
|
|
|
|
|
|
|
| ||
|
Russian Foreign Bond-Eurobond |
|
12.750% |
|
6/24/28 |
|
254,000 |
|
450,850 |
(b) | ||
|
Venezuela — 0.6% |
|
|
|
|
|
|
|
|
| ||
|
Bolivarian Republic of Venezuela |
|
5.750% |
|
2/26/16 |
|
912,000 |
|
711,360 |
(b) | ||
|
TOTAL SOVEREIGN BONDS (Cost — $4,577,387) |
|
|
|
|
|
4,926,820 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
SHARES |
|
|
| ||
|
COMMON STOCKS — 0.3% |
|
|
|
|
|
|
|
|
| ||
|
CONSUMER DISCRETIONARY — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Media — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Charter Communications Inc., Class A Shares |
|
|
|
|
|
2,966 |
|
160,935 |
* | ||
|
ENERGY — 0.0% |
|
|
|
|
|
|
|
|
| ||
|
Oil, Gas & Consumable Fuels — 0.0% |
|
|
|
|
|
|
|
|
| ||
|
SemGroup Corp., Class A Shares |
|
|
|
|
|
116 |
|
2,978 |
* | ||
|
INDUSTRIALS — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Building Products — 0.0% |
|
|
|
|
|
|
|
|
| ||
|
Ashton Woods USA LLC, Class B Membership |
|
|
|
|
|
2 |
|
1,290 |
(c)(d) | ||
|
Nortek Inc. |
|
|
|
|
|
43 |
|
1,547 |
* | ||
|
Total Building Products |
|
|
|
|
|
|
|
2,837 |
| ||
|
Marine — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
DeepOcean Group Holding AS |
|
|
|
|
|
3,101 |
|
49,616 |
(c) | ||
|
TOTAL INDUSTRIALS |
|
|
|
|
|
|
|
52,453 |
| ||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (cont’d)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
SECURITY |
|
|
|
|
|
SHARES |
|
VALUE |
| ||
|
MATERIALS — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Chemicals — 0.1% |
|
|
|
|
|
|
|
|
| ||
|
Georgia Gulf Corp. |
|
|
|
|
|
3,741 |
|
$ |
90,308 |
* | |
|
TOTAL COMMON STOCKS (Cost — $300,783) |
|
|
|
|
|
|
|
306,674 |
| ||
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
RATE |
|
|
|
|
|
|
| ||
|
PREFERRED STOCKS — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
CONSUMER DISCRETIONARY — 0.0% |
|
|
|
|
|
|
|
|
| ||
|
Media — 0.0% |
|
|
|
|
|
|
|
|
| ||
|
CMP Susquehanna Radio Holdings Corp. |
|
0.000% |
|
|
|
559 |
|
0 |
*(a)(b)(i) | ||
|
FINANCIALS — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
Diversified Financial Services — 0.2% |
|
|
|
|
|
|
|
|
| ||
|
Citigroup Capital XII |
|
8.500% |
|
|
|
11,450 |
|
295,639 |
(a) | ||
|
TOTAL PREFERRED STOCKS (Cost — $300,227) |
|
|
|
|
|
295,639 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
EXPIRATION |
|
WARRANTS |
|
|
| ||
|
WARRANTS — 0.0% |
|
|
|
|
|
|
|
|
| ||
|
Buffets Restaurant Holdings |
|
|
|
4/28/14 |
|
29 |
|
0 |
*(c)(d)(i) | ||
|
Charter Communications Inc. |
|
|
|
11/30/14 |
|
22 |
|
264 |
*(c) | ||
|
CMP Susquehanna Radio Holdings Co. |
|
|
|
3/23/19 |
|
639 |
|
0 |
*(b)(c)(d)(i) | ||
|
Nortek Inc. |
|
|
|
12/7/14 |
|
115 |
|
920 |
*(c)(d) | ||
|
SemGroup Corp. |
|
|
|
11/30/14 |
|
122 |
|
824 |
*(d) | ||
|
TOTAL WARRANTS (Cost — $1,528) |
|
|
|
|
|
|
|
2,008 |
| ||
|
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $123,364,644) |
|
116,305,566 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
MATURITY |
|
FACE |
|
|
| ||
|
SHORT-TERM INVESTMENTS — 1.9% |
|
|
|
|
|
|
|
|
| ||
|
U.S. Government Agencies — 0.4% |
|
|
|
|
|
|
|
|
| ||
|
Federal Home Loan Mortgage Corp. (FHLMC), Discount Notes (Cost - $414,733) |
|
0.120% |
|
1/10/12 |
|
$ |
415,000 |
|
414,778 |
(j)(k) | |
|
Repurchase Agreements — 1.5% |
|
|
|
|
|
|
|
|
| ||
|
State Street Bank & Trust Co. repurchase agreement dated 6/30/11; Proceeds at maturity - $1,809,001; (Fully collateralized by U.S. Government Obligations, 1.000% due 04/30/12; Market value - $1,845,185) (Cost - $1,809,000) |
|
0.010% |
|
7/1/11 |
|
1,809,000 |
|
1,809,000 |
| ||
|
TOTAL SHORT-TERM INVESTMENTS (Cost — $2,223,733) |
|
|
|
2,223,778 |
| ||||||
|
TOTAL INVESTMENTS — 100.4 % (Cost — $125,588,377#) |
|
|
|
118,529,344 |
| ||||||
|
Liabilities in Excess of Other Assets — (0.4)% |
|
|
|
|
|
|
|
(415,607 |
) | ||
|
TOTAL NET ASSETS — 100.0% |
|
|
|
|
|
|
|
$ |
118,113,737 |
| |
|
† |
|
Face amount denominated in U.S. dollars, unless otherwise noted. | ||
|
* |
|
Non-income producing security. | ||
|
(a) |
|
Variable rate security. Interest rate disclosed is as of the most recent information available. | ||
|
(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) |
|
Security is valued in good faith in accordance with procedures approved by the Board of Directors (See Note 1). | ||
|
(d) |
|
Illiquid security. | ||
|
(e) |
|
The coupon payment on these securities is currently in default as of June 30, 2011. | ||
|
(f) |
|
Interest rates disclosed represent the effective rates on collateralized senior loans. Ranges in interest rates are attributable to multiple contracts under the same loan. | ||
|
(g) |
|
Security has no maturity date. The date shown represents the next call date. | ||
|
(h) |
|
Payment-in-kind security for which part of the income earned may be paid as additional principal. | ||
|
(i) |
|
Value is less than $1. | ||
|
(j) |
|
Rate shown represents yield-to-maturity. | ||
|
(k) |
|
All or a portion of this security is held at the broker as collateral for open futures contracts. | ||
|
# |
|
Aggregate cost for federal income tax purposes is substantially the same. | ||
|
|
|
| ||
|
|
|
Abbreviations used in this schedule: | ||
|
|
|
ARM |
|
- Adjustable Rate Mortgage |
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (cont’d)
June 30, 2011
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
|
|
|
BRL |
|
- Brazilian Real |
|
|
|
GO |
|
- General Obligation |
|
|
|
IO |
|
- Interest Only |
|
|
|
PAC |
|
- Planned Amortization Class |
|
|
|
STRIPS |
|
- Separate Trading of Registered Interest and Principal Securities |
SCHEDULE OF WRITTEN OPTIONS
|
SECURITY |
|
EXPIRATION |
|
STRIKE |
|
CONTRACTS |
|
VALUE |
| ||
|
Eurodollar Mid Curve 2-Year Futures, Call |
|
9/16/11 |
|
$ |
98.750 |
|
54 |
|
$ |
5,400 |
|
|
Eurodollar Mid Curve 2-Year Futures, Put |
|
9/16/11 |
|
98.125 |
|
54 |
|
32,400 |
| ||
|
|
|
|
|
STRIKE |
|
NOTIONAL |
|
|
| ||
|
Interest rate swaption with Barclays Capital Inc., Put |
|
9/12/11 |
|
1.96% |
|
10,000,000 |
|
138,340 |
| ||
|
TOTAL WRITTEN OPTIONS (Premiums received — $116,199) |
|
|
|
$ |
176,140 |
| |||||
See Notes to Schedule of Investments.
Notes to Schedule of Investments (unaudited)
1. Organization and significant accounting policies
Western Asset Variable Rate Strategic Fund Inc. (the “Fund”) was incorporated in Maryland on August 3, 2004 and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Board of Directors authorized 100 million shares of $0.001 par value common stock. The Fund’s primary investment objective is to maintain a high level of current income.
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, which are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various other relationships between securities. Publicly traded foreign government debt securities are typically traded internationally in the over-the-counter market, and are valued at the mean between the last quoted bid and asked prices as of the close of business of that market. 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 reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates fair value.
The Fund has adopted Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”). ASC Topic 820 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Fund’s investments, and requires additional disclosure about fair value. The hierarchy of inputs is summarized below.
· Level 1—quoted prices in active markets for identical investments
· Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
· Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
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.
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities carried at fair value:
Notes to Schedule of Investments (unaudited) (continued)
|
ASSETS | |||||||||||||
|
|
|
QUOTED |
|
OTHER |
|
SIGNIFICANT |
|
|
| ||||
|
DESCRIPTION |
|
(LEVEL 1) |
|
(LEVEL 2) |
|
(LEVEL 3) |
|
TOTAL |
| ||||
|
Long-term investments†: |
|
|
|
|
|
|
|
|
| ||||
|
Collateralized mortgage obligations |
|
— |
|
$ |
35,506,598 |
|
$ |
227,293 |
|
$ |
35,733,891 |
| |
|
Asset-backed securities |
|
— |
|
28,823,024 |
|
1,488,576 |
|
30,311,600 |
| ||||
|
Collateralized senior loans |
|
— |
|
7,428,448 |
|
23,203 |
|
7,451,651 |
| ||||
|
Corporate bonds & notes |
|
— |
|
32,557,278 |
|
120,000 |
|
32,677,278 |
| ||||
|
Mortgage-backed securities |
|
— |
|
612,816 |
|
— |
|
612,816 |
| ||||
|
Municipal bonds |
|
— |
|
2,985,439 |
|
1,001,750 |
|
3,987,189 |
| ||||
|
Sovereign bonds |
|
— |
|
4,926,820 |
|
— |
|
4,926,820 |
| ||||
|
Common stocks: |
|
|
|
|
|
|
|
|
| ||||
|
Industrials |
|
1,547 |
|
— |
|
50,906 |
|
52,453 |
| ||||
|
Other common stocks |
|
254,221 |
|
— |
|
— |
|
254,221 |
| ||||
|
Preferred stocks: |
|
|
|
|
|
|
|
|
| ||||
|
Consumer discretionary |
|
— |
|
0 |
* |
— |
|
0 |
* | ||||
|
Financials |
|
295,639 |
|
— |
|
— |
|
295,639 |
| ||||
|
Warrants |
|
824 |
|
— |
|
1,184 |
|
2,008 |
| ||||
|
Total long-term investments |
|
$ |
552,231 |
|
$ |
112,840,423 |
|
$ |
2,912,912 |
|
$ |
116,305,566 |
|
|
Short-term investments† |
|
— |
|
2,223,778 |
|
— |
|
2,223,778 |
| ||||
|
Total investments |
|
$ |
552,231 |
|
$ |
115,064,201 |
|
$ |
2,912,912 |
|
$ |
118,529,344 |
|
|
Other financial instruments: |
|
|
|
|
|
|
|
|
| ||||
|
Futures contracts |
|
$ |
125,095 |
|
— |
|
— |
|
$ |
125,095 |
| ||
|
Interest rate swaps |
|
— |
|
$ |
97,536 |
|
— |
|
97,536 |
| |||
|
Credit default swaps on credit indices-sell protection‡ |
|
— |
|
41,651 |
|
— |
|
41,651 |
| ||||
|
Credit default swaps on corporate issues-buy protection‡ |
|
— |
|
2,404 |
|
— |
|
2,404 |
| ||||
|
Total other financial instruments |
|
$ |
125,095 |
|
$ |
141,591 |
|
— |
|
$ |
266,686 |
| |
|
Total |
|
$ |
677,326 |
|
$ |
115,205,792 |
|
$ |
2,912,912 |
|
$ |
118,796,030 |
|
|
LIABILITIES | ||||||||||||
|
|
|
QUOTED |
|
OTHER |
|
SIGNIFICANT |
|
|
| |||
|
DESCRIPTION |
|
(LEVEL 1) |
|
(LEVEL 2) |
|
(LEVEL 3) |
|
TOTAL |
| |||
|
Other financial instruments: |
|
|
|
|
|
|
|
|
| |||
|
Written options |
|
$ |
37,800 |
|
$ |
138,340 |
|
— |
|
$ |
176,140 |
|
|
Futures contracts |
|
37,292 |
|
— |
|
— |
|
37,292 |
| |||
|
Interest rate swaps‡ |
|
— |
|
558,709 |
|
— |
|
558,709 |
| |||
|
Credit default swaps on corporate issues-buy protection‡ |
|
— |
|
5,711 |
|
— |
|
5,711 |
| |||
|
Total |
|
$ |
75,092 |
|
$ |
702,760 |
|
— |
|
$ |
777,852 |
|
* Value is less than $1.
‡Values include any premiums paid or received with respect to swap contracts.
Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Notes to Schedule of Investments (unaudited) (continued)
|
INVESTMENTS IN SECURITIES |
|
COLLATERALIZED |
|
ASSET- |
|
COLLATERALIZED |
|
CORPORATE |
| ||||
|
Balance as of September 30, 2010 |
|
$ |
710,918 |
|
$ |
494,995 |
|
— |
|
$ |
412,165 |
| |
|
Accrued premiums/discounts |
|
5,559 |
|
199 |
|
— |
|
— |
| ||||
|
Realized gain (loss)(1) |
|
(92,469 |
) |
739 |
|
— |
|
(331 |
) | ||||
|
Change in unrealized appreciation (depreciation)(2) |
|
132,980 |
|
13,478 |
|
— |
|
(5,910 |
) | ||||
|
Net purchases (sales) |
|
(379,768 |
) |
813,125 |
|
$ |
23,203 |
|
93,264 |
| |||
|
Transfers into Level 3 |
|
— |
|
436,040 |
|
— |
|
— |
| ||||
|
Transfers out of Level 3 |
|
(149,927 |
) |
(270,000 |
) |
— |
|
(379,188 |
) | ||||
|
Balance as of June 30, 2011 |
|
$ |
227,293 |
|
$ |
1,488,576 |
|
$ |
23,203 |
|
$ |
120,000 |
|
|
Net change in unrealized appreciation (depreciation) for investments in securities still held at June 30, 2011(2) |
|
$ |
134,377 |
|
$ |
9,836 |
|
— |
|
— |
| ||
|
|
|
|
|
COMMON STOCKS |
|
|
|
|
| ||||
|
|
|
MUNICIPAL |
|
|
|
|
|
|
| ||||
|
INVESTMENTS IN SECURITIES |
|
BONDS |
|
INDUSTRIALS |
|
WARRANTS |
|
TOTAL |
| ||||
|
Balance as of September 30, 2010 |
|
— |
|
$ |
900 |
|
$ |
0 |
* |
$ |
1,618,978 |
| |
|
Accrued premiums/discounts |
|
$ |
514 |
|
— |
|
— |
|
6,272 |
| |||
|
Realized gain (loss)(1) |
|
— |
|
— |
|
— |
|
(92,061 |
) | ||||
|
Change in unrealized appreciation (depreciation)(2) |
|
(514 |
) |
(22,484 |
) |
0 |
* |
117,550 |
| ||||
|
Net purchases (sales) |
|
1,001,750 |
|
72,490 |
|
— |
|
1,624,064 |
| ||||
|
Transfers into Level 3 |
|
— |
|
— |
|
1,184 |
|
437,224 |
| ||||
|
Transfers out of Level 3 |
|
— |
|
— |
|
— |
|
(799,115 |
) | ||||
|
Balance as of June 30, 2011 |
|
$ |
1,001,750 |
|
$ |
50,906 |
|
$ |
1,184 |
|
$ |
2,912,912 |
|
|
Net change in unrealized appreciation (depreciation) for investments in securities still held at June 30, 2011(2) |
|
$ |
(514 |
) |
$ |
(22,484 |
) |
0 |
* |
$ |
121,215 |
| |
* Value is less than $1.
(1) This amount is included in net realized gain (loss) from investment transactions.
(2) Change in unrealized appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.
(b) Repurchase Agreements. The Fund may enter into repurchase agreements with institutions that its investment adviser has determined are creditworthy. Each repurchase agreement is recorded at cost. Under the terms of a typical repurchase agreement, the Fund acquires a debt security subject to an obligation of the seller to repurchase, and of the Fund to resell, the security at an agreed-upon price and time, thereby determining the yield during the Fund’s holding period. When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian, acting on the Fund’s behalf, 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 maturity exceeds one business day, the value of the collateral is marked-to-market and measured against the value of the agreement in an effort to ensure the adequacy of the collateral. If the counterparty defaults, the Fund generally has the right to use the collateral to satisfy the terms of the repurchase transaction. However, if the market value of the collateral declines during the period in which the Fund seeks to assert its rights 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) 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 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.
Notes to Schedule of Investments (unaudited) (continued)
Upon entering into a futures contract, the Fund is required to deposit cash or cash equivalents 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. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded.
Futures contracts involve, to varying degrees, risk of loss. 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.
(d) Written Options. When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily to reflect the current market value of the option written. If the option expires, the premium received is recorded as a realized gain. When a written call option is exercised, the difference between the premium received plus the option exercise price and the Fund’s basis in the underlying security (in the case of a covered written call option), or the cost to purchase the underlying security (in the case of an uncovered written call option), including brokerage commission, is recognized as a realized gain or loss. When a written put option is exercised, the amount of the premium received is subtracted from the cost of the security purchased by the Fund from the exercise of the written put option to form the Fund’s basis in the underlying security purchased. The writer or buyer of an option traded on an exchange can liquidate the position before the exercise of the option by entering into a closing transaction. The cost of a closing transaction is deducted from the original premium received resulting in a realized gain or loss to the Fund.
The risk in writing a covered call option is that the Fund may forego the opportunity of profit if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. The risk in writing an uncovered call option is that the Fund is exposed to the risk of loss if the market price of the underlying security increases. 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.
(e) Swap Agreements. The Fund invests in swaps for the purpose of managing its exposure to interest rate, credit or market risk, or for other purposes. The use of swaps involves risks that are different from those associated with ordinary portfolio transactions.
Swap contracts are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon termination of the swap agreement. Collateral, in the form of restricted cash or securities, may be required to be held in segregated accounts with the Fund’s custodian in compliance with the terms of the swap contracts. Securities posted as collateral for swap contracts are identified in the Schedule of Investments.
Credit Default Swaps
The Fund enters into credit default swap (“CDS”) contracts for investment purposes, to manage its credit risk or to add leverage. CDS agreements involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party, typically corporate or sovereign issuers, on a specified obligation, or in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising a credit index. The Fund may use a CDS to provide protection against defaults of the issuers (i.e., to reduce risk where the Fund has exposure to an issuer) or to take an active long or short position with respect to the likelihood of a particular issuer’s default. As a seller of protection, the Fund generally receives an upfront payment or a stream of payments throughout the term of the swap provided that there is no credit event. If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the maximum potential amount of future payments (undiscounted) that the Fund could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. These amounts of potential payments will be partially offset by any recovery of values from the respective referenced obligations. As a seller of protection, the Fund effectively adds leverage to its portfolio because, in addition to its total net assets, the Fund is subject to investment exposure on the notional amount of the swap. As a buyer of protection, the Fund generally receives an amount up to the notional value of the swap if a credit event occurs.
Implied spreads are the theoretical prices a lender receives for credit default protection. When spreads rise, market perceived credit risk rises and when spreads fall, market perceived credit risk falls. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to enter into the agreement. Wider credit spreads and decreasing market values, when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default
Notes to Schedule of Investments (unaudited) (continued)
or other credit event occurring as defined under the terms of the agreement. Credit spreads utilized in determining the period end market value of credit default swap agreements on corporate or sovereign issues are disclosed in the Notes to the Schedule of Investments and serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for credit derivatives. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values, particularly in relation to the notional amount of the contract as well as the annual payment rate, serve as an indication of the current status of the payment/performance risk.
The Fund’s maximum risk of loss from counterparty risk, as the protection buyer, is the fair value of the contract (this risk is mitigated by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty). As the protection seller, the Fund’s maximum risk is the notional amount of the contract. Credit default swaps are considered to have credit risk-related contingent features since they require payment by the protection seller to the protection buyer upon the occurrence of a defined credit event.
Entering into a CDS agreement involves, to varying degrees, elements of credit, market and documentation risk. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreement may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreement, and that there will be unfavorable changes in net interest rates.
Interest Rate Swaps
The Fund enters into interest rate swap contracts to manage its exposure to interest rate risk. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional principal amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional principal amount. Interest rate swaps are marked-to-market daily based upon quotations from market makers.
The risks of interest rate swaps include changes in market conditions that will affect the value of the contract or changes in the present value of the future cash flow streams and the possible inability of the counterparty to fulfill its obligations under the agreement. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that that amount is positive. This risk is mitigated by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.
(f) Swaptions. The Fund purchases and writes swaption contracts to manage exposure to fluctuations in interest rates or to enhance yield. The Fund may also purchase or write options to manage exposure to an underlying instrument. Swaption contracts written by the Fund represent an option that gives the purchaser the right, but not the obligation, to enter into a previously agreed upon swap contract at a future date. Swaption contracts purchased by the Fund represent an option that gives the Fund the right, but not the obligation, to enter into a previously agreed upon swap contract at a future date.
When the Fund writes a swaption, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily to reflect the current market value of the swaption written. If the swaption expires, the Fund realizes a gain equal to the amount of the premium received.
When the Fund purchases a swaption, an amount equal to the premium paid by the Fund is recorded as an investment, the value of which is marked-to-market daily to reflect the current market value of the swaption purchased. If the swaption expires, the Fund realizes a loss equal to the amount of the premium paid.
Swaptions are marked-to-market daily based upon quotations from market makers.
(g) Stripped Securities. The Fund may invest in ‘‘Stripped Securities,’’ a term used collectively for components, or strips, of fixed income securities. Stripped securities can be principal only securities (“PO”), which are debt obligations that have been stripped of unmatured interest coupons or, interest only securities (“IO”), which are unmatured interest coupons that have been stripped from debt obligations. The market value of Stripped Securities will fluctuate in response to changes in economic conditions, rates of pre-payment, interest rates and the market’s perception of the securities. However, fluctuations in response to interest rates may be greater in Stripped Securities than for debt obligations of comparable maturities that pay interest currently. The amount of fluctuation may increase with a longer period of maturity.
The yield to maturity on IO’s is sensitive to the rate of principal repayments (including prepayments) on the related underlying debt obligation and principal payments may have a material effect on yield to maturity. If the underlying
Notes to Schedule of Investments (unaudited) (continued)
debt obligation experiences greater than anticipated prepayments of principal, the Fund may not fully recoup its initial investment in IO’s.
(h) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
(i) Loan Participations. The Fund may invest in loans arranged through private negotiation between one or more financial institutions. The Fund’s investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement related to the loan, or any rights of off-set against the borrower and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation.
The Fund assumes the credit risk of the borrower, the lender that is selling the participation and any other persons interpositioned between the Fund and the borrower. In the event of the insolvency of the lender selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any off-set between the lender and the borrower.
(j) Counterparty Risk and Credit-Risk-Related Contingent Features of Derivative Instruments. The Fund may invest in certain securities or engage in other transactions, where the Fund is exposed to counterparty credit risk in addition to broader market risks. The Fund may invest in securities of issuers, which may also be considered counterparties as trading partners in other transactions. This may increase the risk of loss in the event of default or bankruptcy by the counterparty or if the counterparty otherwise fails to meet its contractual obligations. The Fund’s investment manager attempts to mitigate counterparty risk by (i) periodically assessing the creditworthiness of its trading partners, (ii) monitoring and/or limiting the amount of its net exposure to each individual counterparty based on its assessment and (iii) requiring collateral from the counterparty for certain transactions. Market events and changes in overall economic conditions may impact the assessment of such counterparty risk by the investment manager. In addition, declines in the values of underlying collateral received may expose the Fund to increased risk of loss.
The Fund has entered into master agreements with certain of its derivative counterparties that provide for general obligations, representations, agreements, collateral, events of default or termination and credit related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in the Fund’s net assets or NAV over a specified period of time. If this credit related contingent features were triggered, the derivatives counterparty could terminate the positions and demand payment or require additional collateral.
As of June 30, 2011, the Fund held written options, interest rate swaps, and credit default swaps with credit related contingent features which had a liability position of $740,560. If a contingent feature in the Master Agreements would have been triggered, the Fund would have been required to pay this amount to its derivatives counterparties. As of June 30, 2011, the Fund had posted with its counterparties cash and securities as collateral to cover the net liability of all derivatives amounting to $200,000, which could be used to reduce the required payment.
(k) Credit and Market Risk. The Fund invests in high-yield and emerging market instruments that are subject to certain credit and market risks. The yields of high-yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Fund’s investment 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 Fund’s investment 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 residential 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
Notes to Schedule of Investments (unaudited) (continued)
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.
(l) Other Risks. Consistent with its (their) objective to seek high current income, the Fund(s) may invest in instruments whose values and interest rates are linked to foreign currencies, interest rates, indices or some other financial indicator. The value at maturity or interest rates for these instruments will increase or decrease according to the change in the indicator to which they are indexed, amongst other factors. These securities are generally more volatile in nature, and the risk of loss of principal may be greater.
(m) Security Transactions. Security transactions are accounted for on a trade date basis.
2. Investments
At June 30, 2011, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:
|
Gross unrealized appreciation |
|
$ |
6,656,319 |
|
|
Gross unrealized depreciation |
|
(13,715,352 |
) | |
|
Net unrealized depreciation |
|
$ |
(7,059,033 |
) |
At June 30, 2011, the Fund had the following open futures contracts:
|
|
|
NUMBER OF |
|
EXPIRATION |
|
BASIS |
|
MARKET |
|
UNREALIZED |
| |||
|
Contracts to Buy: |
|
|
|
|
|
|
|
|
|
|
| |||
|
90-Day Eurodollar |
|
61 |
|
3/12 |
|
$ |
15,085,323 |
|
$ |
15,176,038 |
|
$ |
90,715 |
|
|
U.S. Treasury 5-Year Notes |
|
162 |
|
9/11 |
|
19,275,261 |
|
19,309,641 |
|
34,380 |
| |||
|
U.S. Treasury 10-Year Notes |
|
2 |
|
9/11 |
|
247,069 |
|
244,656 |
|
(2,413 |
) | |||
|
|
|
|
|
|
|
|
|
|
|
122,682 |
| |||
|
Contracts to Sell: |
|
|
|
|
|
|
|
|
|
|
| |||
|
U.S. Treasury 2-Year Notes |
|
78 |
|
9/11 |
|
17,073,934 |
|
17,108,813 |
|
(34,879 |
) | |||
|
Net unrealized gain on open futures contracts |
|
|
|
|
|
|
|
$ |
87,803 |
| ||||
During the period ended June 30, 2011, written option transactions for the Fund were as follows:
|
|
|
Number of Contracts |
|
Premiums |
| |
|
Written options, outstanding as of September 30, 2010 |
|
17 |
|
$ |
9,720 |
|
|
Options written |
|
13,460,116 |
|
134,762 |
| |
|
Options closed |
|
(3,460,000 |
) |
(16,089 |
) | |
|
Options exercised |
|
(8 |
) |
(2,474 |
) | |
|
Options expired |
|
(17 |
) |
(9,720 |
) | |
|
Written options, outstanding as of June 30, 2011 |
|
10,000,108 |
|
$ |
116,199 |
|
At June 30, 2011, the Fund had the following open swap contracts:
INTEREST RATE SWAPS
|
SWAP COUNTERPARTY |
|
NOTIONAL |
|
TERMINATION |
|
PAYMENTS |
|
PAYMENTS |
|
UPFRONT |
|
UNREALIZED |
| |||
|
Barclays Capital Inc. |
|
$ |
5,520,000 |
|
3/18/19 |
|
4.250% Semi-Annually |
|
3-Month LIBOR |
|
$ |
72,390 |
|
$ |
(626,848 |
) |
|
JPMorgan Securities Inc. |
|
10,000,000 |
|
10/12/11 |
|
0.360% Semi-Annually |
|
3-Month LIBOR |
|
— |
|
(2,651 |
) | |||
|
JPMorgan Securities Inc. |
|
6,000,000 |
|
10/15/11 |
|
0.361% Semi-Annually |
|
3-Month LIBOR |
|
— |
|
(1,600 |
) | |||
|
Barclays Capital Inc. |
|
10,000,000 |
|
6/14/16 |
|
1.785% Semi-Annually |
|
3-Month LIBOR |
|
— |
|
97,536 |
| |||
|
Total |
|
$ |
31,520,000 |
|
|
|
|
|
|
|
$ |
72,390 |
|
$ |
(533,563 |
) |
Notes to Schedule of Investments (unaudited) (continued)
|
CREDIT DEFAULT SWAPS ON CREDIT INDICES - SELL PROTECTION 1 | |||||||||||||||||
|
SWAP COUNTERPARTY |
|
NOTIONAL |
|
TERMINATION |
|
PERIODIC |
|
MARKET |
|
UPFRONT |
|
UNREALIZED |
| ||||
|
JPMorgan Chase Bank (CDX North America High Yield Index) |
|
$ |
2,697,000 |
|
6/20/12 |
|
2.750 |
% |
$ |
41,651 |
|
$ |
(34,142 |
) |
$ |
75,793 |
|
|
CREDIT DEFAULT SWAPS ON CORPORATE ISSUES - BUY PROTECTION4 | |||||||||||||||||
|
SWAP COUNTERPARTY (REFERENCE ENTITY) |
|
NOTIONAL |
|
TERMINATION |
|
PERIODIC |
|
MARKET |
|
UPFRONT |
|
UNREALIZED |
| ||||
|
Goldman Sachs Group Inc. (Assured Guaranty Municipal Corp., 0.480% due 11/15/13) |
|
$ |
90,000 |
|
3/20/15 |
|
5.000% quarterly |
|
$ |
(2,533 |
) |
$ |
654 |
|
$ |
(3,187 |
) |
|
Goldman Sachs Group Inc. (Assured Guaranty Municipal Corp., 0.480% due 11/15/13) |
|
120,000 |
|
3/20/20 |
|
5.000% quarterly |
|
2,219 |
|
2,757 |
|
(538 |
) | ||||
|
Goldman Sachs Group Inc. (Assured Guaranty Municipal Corp., 0.480%, due 11/15/13) |
|
60,000 |
|
3/20/13 |
|
5.000% quarterly |
|
(2,241 |
) |
(409 |
) |
(1,832 |
) | ||||
|
Goldman Sachs Group Inc. (Assured Guaranty Municipal Corp., 0.480%, due 11/15/13) |
|
10,000 |
|
3/20/13 |
|
5.000% quarterly |
|
(374 |
) |
(41 |
) |
(333 |
) | ||||
|
Goldman Sachs Group Inc. (Assured Guaranty Municipal Corp., 0.480%, due 11/15/13) |
|
20,000 |
|
3/20/15 |
|
5.000% quarterly |
|
(563 |
) |
203 |
|
(766 |
) | ||||
|
Goldman Sachs Group Inc. (Assured Guaranty Municipal Corp., 0.480%, due 11/15/13) |
|
10,000 |
|
3/20/20 |
|
5.000% quarterly |
|
185 |
|
278 |
|
(93 |
) | ||||
|
Total |
|
$ |
310,000 |
|
|
|
|
|
$ |
(3,307 |
) |
$ |
3,442 |
|
$ |
(6,749 |
) |
1 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
2 The maximum potential amount the Fund could be required to make as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.
3 The quoted market prices and resulting values for credit default swap agreements on asset-backed securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement been closed/sold as of the period end. Decreasing market values when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
4 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the underlying securities comprising the referenced index.
‡ Percentage shown is an annual percentage rate.
3. Derivative Instruments and Hedging Activities
Financial Accounting Standards Board Codification Topic 815 requires enhanced disclosure about an entity’s derivative and hedging activities.
The following is a summary of the Fund’s derivatives instruments categorized by risk exposure at June 30, 2011.
|
|
|
Futures Contracts |
|
Written |
|
Swap |
|
|
| |||||||
|
Primary Underlying |
|
Unrealized |
|
Unrealized |
|
Options, at |
|
Contracts, at |
|
Total |
| |||||
|
Interest Rate Contracts |
|
$ |
125,095 |
|
$ |
(37,292 |
) |
$ |
(176,140 |
) |
$ |
(476,173 |
) |
$ |
(564,510 |
) |
|
Credit Contracts |
|
— |
|
— |
|
— |
|
38,344 |
|
38,344 |
| |||||
|
Total |
|
$ |
125,095 |
|
$ |
(37,292 |
) |
$ |
(176,140 |
) |
$ |
(437,829 |
) |
$ |
(526,166 |
) |
During the period ended June 30, 2011, the volume of derivative activity for the Fund was as follows:
Notes to Schedule of Investments (unaudited) (continued)
|
|
|
Average market |
| |
|
Written options |
|
$ |
25,168 |
|
|
Futures contracts (to buy) |
|
42,829,454 |
| |
|
Futures contracts (to sell) |
|
16,698,427 |
| |
|
|
|
|
| |
|
|
|
Average notional |
| |
|
Interest rate swap contracts |
|
$ |
23,720,000 |
|
|
Credit default swap contracts (to buy protection) |
|
376,000 |
| |
|
Credit default swap contracts (to sell protection) |
|
2,697,000 |
| |
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 Variable Rate Strategic Fund Inc.
|
By |
/s/ R. Jay Gerken |
| |
|
|
R. Jay Gerken |
| |
|
|
Chief Executive Officer |
| |
|
|
|
| |
|
|
|
| |
|
Date: |
August 24, 2011 |
| |
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, 2011 |
| |
|
|
|
| |
|
|
|
| |
|
By |
/s/ Kaprel Ozsolak |
| |
|
|
Kaprel Ozsolak |
| |
|
|
Chief Financial Officer |
| |
|
|
|
| |
|
|
|
| |
|
Date: |
August 24, 2011 |
| |