UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED
SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number
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811-22294
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Western Asset Investment Grade Defined
Opportunity Trust Inc.
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(Exact name of registrant as
specified in charter)
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55 Water Street, New York, NY
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10041
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(Address of principal executive
offices)
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(Zip code)
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Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
100 First Stamford Place,
Stamford, CT 06902
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(Name and address of agent for
service)
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Registrants telephone number, including
area code:
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(888)777-0102
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Date of fiscal year end:
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November 30
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Date of reporting period:
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November 30,
2009
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ITEM 1. REPORT
TO STOCKHOLDERS.
The
Annual
Report to Stockholders is
filed herewith.
ANNUAL REPORT
/ NOVEMBER 30, 2009
Western Asset Investment
Grade Defined Opportunity Trust Inc.
(IGI)
Managed by
WESTERN ASSET
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INVESTMENT
PRODUCTS: NOT FDIC INSURED
·
NO BANK
GUARANTEE
·
MAY LOSE
VALUE
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Fund objectives
The Funds primary investment
objective is to provide current income and then to liquidate and distribute
substantially all of the Funds net assets to stockholders on or about December 2,
2024. As a secondary investment objective, the Fund will seek capital
appreciation.
Whats inside
Letter from the chairman
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I
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Fund overview
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1
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Fund at a glance
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6
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Schedule of investments
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7
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Statement of assets and liabilities
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16
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Statement of operations
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17
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Statement of changes in net assets
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18
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Financial highlights
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19
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Notes to financial statements
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20
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Report of independent registered public accounting firm
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27
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Board approval of management and subadvisory agreements
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28
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Additional information
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32
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Annual chief executive officer and chief financial officer
certifications
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38
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Dividend reinvestment plan
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39
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Legg Mason
Partners Fund Advisor, LLC (LMPFA) is the Funds investment manager. Western
Asset Management Company (Western Asset), Western Asset Management Company
Limited (Western Asset Limited), Western Asset Management Company Pte. Ltd.
(Western Singapore) and Western Asset Management Company Ltd in Japan
(Western Japan) are the Funds subadvisers. LMPFA, Western Asset, Western
Asset Limited, Western Singapore and Western Japan are wholly-owned
subsidiaries of Legg Mason, Inc.
Letter from the chairman
Dear Shareholder,
Over the course of the
reporting period from the Funds commencement of operations on June 26,
2009 through November 30, 2009, market conditions improved. While the U.S.
economy was weak during the first part of the reporting period, the lengthiest
recession since the Great Depression finally appeared to have ended during the
third quarter of 2009.
Looking back, the U.S.
Department of Commerce reported that fourth quarter 2008 U.S. gross domestic
product (GDP)
i
contracted 5.4%. Economic weakness accelerated
during the first quarter of 2009, as GDP fell 6.4%. However, the economic
environment started to get relatively better during the second quarter, as GDP
fell 0.7%. The economys more modest contraction was due, in part, to smaller
declines in both exports and business spending. After contracting four
consecutive quarters, the Commerce Department reported that third quarter 2009
GDP growth was 2.2%. A variety of factors helped the economy to expand,
including the governments $787 billion stimulus program and its Cash for
Clunkers car rebate program, which helped spur an increase in car sales.
Even before GDP advanced in
the third quarter, there were signs that the economy was starting to regain its
footing. The manufacturing sector, as measured by the Institute for Supply
Managements PMI
ii
, rose to 52.9
in August 2009, the first time it surpassed 50 since January 2008 (a
reading below 50 indicates a contraction, whereas a reading above 50 indicates
an expansion). PMI data subsequently showed that manufacturing expanded from September through
November as well.
The housing market also saw
some improvement during the reporting period. According to its most recent
data, the S&P/Case-Shiller Home Price Index
iii
indicated that home prices rose for the fourth
straight month in September. In addition, the Commerce Department reported
that, during October, sales of existing homes reached their highest level in
two years.
One area that remained
weakand could hamper the magnitude of economic recoverywas the labor market.
While monthly job losses have moderated compared to earlier in the year, the
unemployment rate remained
Western Asset
Investment Grade Defined Opportunity Trust Inc.
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I
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Letter from the chairman
continued
elevated during the reporting
period. After reaching a twenty-six-year high of 10.2% in October 2009,
the unemployment rate fell to 10.0% in November. Since December 2007, the
unemployment rate has more than doubled and the number of unemployed workers
has risen by 8.2 million.
The Federal Reserve Board
(Fed)
iv
continued to pursue an accommodative monetary
policy during the reporting period. After reducing the federal funds rate
v
from 5.25% in August 2007 to a range of 0
to 1/4 percent in December 2008a historic lowthe Fed maintained this
stance through the end of 2009. In conjunction with its December 2009
meeting, the Fed said that it will maintain the target range for the federal
funds rate at 0 to 1/4 percent and continues to anticipate that economic
conditions, including low rates of resource utilization, subdued inflation
trends, and stable inflation expectations, are likely to warrant exceptionally
low levels of the federal funds rate for an extended period.
Both short- and long-term
Treasury yields fluctuated during the reporting period. After starting the
period at 1.12% and 3.55%, respectively, two- and ten-year Treasury yields then
moved higher as economic news improved and peaked on August 7, 2009 at
1.32% and 3.89%, respectively. Yields then moved lower upon the release of
certain disappointing economic data, and two- and ten-year yields ended the
reporting period at 0.67% and 3.21%, respectively.
In a reversal from 2008 and
early 2009, investor risk aversion faded during the reporting period, driving
spread sector (non-Treasury) prices higher. For the period from June 30,
2009 through November 30, 2009, the overall bond market, as measured by
the Barclays Capital U.S. Aggregate Index
vi
returned
5.61%. Lower-quality corporate bonds outperformed their higher-quality
counterparts over that period, as bonds rated AA and A returned 7.96% and
9.89%, respectively, whereas bonds rated BBB gained 12.24%.
vii
The high-yield bond market
produced very strong results during the reporting period. In sharp contrast to
its poor results in late 2008 and February 2009, the asset class posted
positive returns during every month covered by this report. This strong rally
was due to a variety of factors, including the unfreezing of the credit
markets, improving economic data and strong investor demand. All told, for the
period from June 30, 2009 through November 30, 2009, the Citigroup
High Yield Market Index
viii
returned 16.74%.
Emerging market debt prices
rallied sharply and also posted strong returns throughout the reporting period.
This upturn was triggered by rising commodity prices, optimism that the worst
of the global recession was over and increased investor risk appetite. For the
period from June 30, 2009 through November 30, 2009, the JPMorgan
Emerging Markets Bond Index Global (EMBI Global)
ix
returned
11.53%.
II
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Western Asset Investment Grade Defined Opportunity
Trust Inc.
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Special shareholder notice
On July 27, 2009, the
Fund declared its initial distribution of $0.1045 per common share, payable August 21,
2009. Based on the Funds offering price of $20.00 per share, this equates to
an annualized distribution rate of 6.27%. On July 27, 2009, the Fund also
declared monthly distributions of $0.1045 per common share for September, October and
November 2009.
This information is not for
tax reporting purposes but is being provided to announce the amount of the
Funds distributions that have been declared by the Board of Directors. In
early 2010, after definitive information is available, the Fund will send
shareholders a Form 1099-DIV, if applicable, specifying how the
distributions paid by the Fund during the prior calendar year should be
characterized for purposes of reporting the distributions on a shareholders
tax return (e.g., ordinary income, long-term capital gain or return of
capital).
A special note regarding increased market
volatility
Dramatically higher
volatility in the financial markets has been very challenging for many
investors. Market movements have been rapidsometimes in reaction to economic
news, and sometimes creating the news. In the midst of this evolving market
environment, we at Legg Mason want to do everything we can to help you reach
your financial goals. Now, as always, we remain committed to providing you with
excellent service and a full spectrum of investment choices. Rest assured, we
will continue to work hard to ensure that our investment managers make every
effort to deliver strong long-term results.
We also remain committed to
supplementing the support you receive from your financial advisor. One way we
accomplish this is through our enhanced website, www.leggmason.com/cef. Here
you can gain immediate access to many special features to help guide you
through difficult times, including:
·
Fund
prices and performance,
·
Market
insights and commentaries from our portfolio managers, and
·
A
host of educational resources.
During periods of market
unrest, it is especially important to work closely with your financial advisor
and remember that reaching ones investment goals unfolds over time and through
multiple market cycles. Time and again, history has shown that, over the long
run, the markets have eventually recovered and grown.
Western Asset
Investment Grade Defined Opportunity Trust Inc.
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III
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Letter from the chairman
continued
Information
about your fund
Please
read on for a more detailed look at prevailing economic and market conditions
during the Funds reporting period and to learn how those conditions have
affected Fund performance.
Important
information with regard to recent regulatory developments that may affect the
Fund is contained in the Notes to Financial Statements included in this report.
As
always, thank you for your confidence in our stewardship of your assets. We
look forward to helping you meet your financial goals.
Sincerely,
R. Jay Gerken, CFA
Chairman,
President and Chief Executive Officer
December 24,
2009
All
index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
i
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Gross
domestic product (GDP) is the market value of all final goods and services
produced within a country in a given period of time.
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ii
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The
Institute for Supply Managements PMI is based on a survey of purchasing
executives who buy the raw materials for manufacturing at more than 350
companies. It offers an early reading on the health of the manufacturing
sector.
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iii
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The
S&P/Case-Shiller Home Price Index measures the residential housing
market, tracking changes in the value of the residential real estate market
in twenty metropolitan regions across the United States.
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iv
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The
Federal Reserve Board (Fed) is responsible for the formulation of policies
designed to promote economic growth, full employment, stable prices, and a
sustainable pattern of international trade and payments.
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v
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The
federal funds rate is the rate charged by one depository institution on an
overnight sale of immediately available funds (balances at the Federal
Reserve) to another depository institution; the rate may vary from depository
institution to depository institution and from day to day.
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vi
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The
Barclays Capital U.S. Aggregate Index is a broad-based bond index comprised
of government, corporate, mortgage- and asset-backed issues, rated investment
grade or higher, and having at least one year to maturity.
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vii
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For
the period from June 30, 2009 through November 30, 2009, as
measured by the Barclays Capital U.S. Corporate Investment Grade Index. The
Barclays Capital U.S. Corporate Investment Grade Index is an unmanaged index
consisting of publicly issued U.S. corporate and specified foreign debentures
and secured notes that are rated investment grade (Baa3/BBB- or higher) by at
least two rating agencies, have at least one year to final maturity and have
at least $250 million par amount outstanding. To qualify, bonds must be
SEC-registered.
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viii
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The
Citigroup High Yield Market Index is a broad-based unmanaged index of
high-yield securities.
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ix
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The
JPMorgan Emerging Markets Bond Index Global (EMBI Global) tracks total
returns for U.S. dollar-denominated debt instruments issued by emerging
market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds
and local market instruments.
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IV
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Western
Asset Investment Grade Defined Opportunity Trust Inc.
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Fund overview
Q.
What is the Funds investment
strategy?
A.
The Funds primary investment objective is to
provide current income and then to liquidate and distribute substantially all
of the Funds net assets to stockholders on or about December 2, 2024. As
a secondary investment objective, the Fund will seek capital appreciation.
The
Fund seeks to achieve its investment objectives by investing, under normal
market conditions, at least 80% of its net assets in investment grade corporate
fixed-income securities of varying maturities. The Fund may invest up to 20% of
its net assets in corporate fixed-income securities of below investment grade
quality at the time of investment and other securities, including obligations
of the U.S. government, its agencies or instrumentalities, common stocks,
warrants and depositary receipts. While the Fund may invest up to 20% of its
net assets in below investment grade securities, the Fund will, under normal market
conditions, maintain a portfolio with an overall dollar-weighted average of
investment grade credit quality. The Fund may invest up to 20% of its net
assets in securities of foreign issuers located anywhere in the world,
including issuers located in emerging market countries. Additionally, the Fund
may invest up to 20% of its net assets in non-U.S. dollar denominated
securities.
The
Fund may invest in derivative instruments, such as options contracts, futures
contracts, options on futures contracts, indexed securities, credit default
swaps and other swap agreements; provided that the Funds exposure to
derivative instruments, as measured by the total notional amount of all such
instruments, will not exceed 20% of its net assets.
In
purchasing securities and other investments for the Fund, we may take full
advantage of the entire range of maturities and durations
i
offered by corporate fixed-income securities
and may adjust the average maturity or duration of the Funds portfolio from
time to time, depending on our assessment of the relative yields available on
securities of different maturities and durations and our expectations of future
changes in interest rates.
The
Fund may take on leveraging risk by utilizing certain management techniques,
whereby it will segregate liquid assets, enter into offsetting transactions or
own positions covering its obligations. To the extent the Fund covers its
commitment under such a portfolio management technique, such instrument will
not be considered a senior security for the purposes of the Investment Company
Act of 1940. However as a fundamental policy, the Fund will not leverage its
capital structure by issuing senior securities such as preferred shares or debt
instruments.
At
Western Asset Management Company (Western Asset), the Funds subadviser, we
utilize a fixed-income team approach, with decisions derived from interaction
among various investment management sector specialists. The sector teams are
comprised of Western Assets senior portfolio
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
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1
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Fund overview
continued
managers,
research analysts and an in-house economist. Under this team approach,
management of client fixed-income portfolios will reflect a consensus of
interdisciplinary views within the Western Asset organization.
Q.
What were the overall market
conditions during the Funds reporting period?
A.
During the period from the Funds commencement of
operations on June 26, 2009 through November 30, 2009, the
fixed-income market returned to more normal conditions given the aggressive
actions taken by the Federal Reserve Board (Fed)
ii
, the U.S. Department of the Treasury and other
government entities. The yields on two- and ten-year Treasuries began the
reporting period at 1.12% and 3.55%, respectively. Treasury yields initially
moved in a relatively narrow range, before moving higher in August as
economic conditions generally improved and there were concerns regarding the
massive amount of new Treasury issuance that would be needed to fund the
economic stimulus package. Two- and ten-year yields peaked on August 7,
2009 at 1.32% and 3.89%, respectively, and then generally moved lower as the
economic data appeared to weaken in the following weeks. This was especially
the case at the end of the reporting period due to some mixed economic data. At
the conclusion of the reporting period, two- and ten-year Treasury yields were
0.67% and 3.21%, respectively.
The
corporate bond market generated strong results during the reporting period, as
there were signs that the economy was stabilizing and investor risk aversion
abated. This led to falling demand for Treasuries and a strong sharp rally in
the spread sectors (non-U.S. Treasuries). Also supporting the spread sectors
was strong demand from investors seeking incremental yields given the low rates
available from short-term fixed-income securities. The corporate bond market
was also supported by improving technicals, some encouraging corporate earnings
news and signs that the recession was drawing to a close. Looking at the
reporting period as a whole, lower-quality corporate bonds outperformed their
higher-quality counterparts. For the period from June 30, 2009 through November 30,
2009, as measured by the Barclays Capital U.S. Corporate Investment Grade Index
iii
, bonds rated AA and A
returned 7.96% and 9.89%, respectively, whereas bonds rated BBB returned
12.24%.
Q.
How did we respond to these
changing market conditions?
A.
The Fund was launched on June 26, 2009. As we
initially invested the Funds assets, we sought to take advantage of attractive
valuations in the investment grade and high-yield corporate bond markets.
Within the investment grade space, we established positions in the Financials,
Industrials and Utilities sectors. We made an allocation to high-yield bonds
which we believed offered compelling yields and capital appreciation potential.
The Funds high-yield exposure enhanced its performance during the reporting period.
During the reporting period, the Fund utilized Treasury futures primarily for
hedging purposes. This strategy was a modest detractor from performance.
2
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Western
Asset Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
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Performance
review
For
the period from its commencement of operations on June 26, 2009 through November 30,
2009, Western Asset Investment Grade Defined Opportunity Trust Inc. returned
10.32% based on its net asset value (NAV)
iv
and 0.33%
based on its New York Stock Exchange (NYSE) market price per share. The Funds
unmanaged benchmark, the Barclays Capital U.S. Credit Index
v
, returned 9.85% for the same
period. The Lipper Corporate Debt BBB-Rated Closed-End Funds Category Average
vi
returned 13.20% for the period from June 30,
2009 through November 30, 2009. Please note that Lipper performance
returns are based on each funds NAV.
During
this period, the Fund made distributions to shareholders totaling $0.42 per
share. The performance table shows the Funds total return since commencement
of operations based on its NAV and market price as of November 30, 2009.
Past performance is no guarantee of future results.
PERFORMANCE
SNAPSHOT
as of November 30, 2009 (unaudited)
PRICE
PER SHARE
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TOTAL RETURN*
SINCE COMMENCEMENT OF OPERATIONS**
(not annualized)
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$20.58(NAV)
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10.32%
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$19.64(Market
Price)
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0.33%
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All figures
represent past performance and are not a guarantee of future results.
* Total returns are based on changes in NAV or market price,
respectively. Total returns assume the reinvestment of all distributions in
additional shares in accordance with the Funds Dividend Reinvestment Plan.
** The Fund commenced operations on June 26, 2009.
Q.
What were the leading
contributors to performance?
A.
The largest contributor to the Funds relative
performance for the reporting period was its overweight position in securities
rated BBB and below. Given improving conditions in the economy and the
financial markets, investor risk aversion abated and lower-rated securities
outperformed their higher-rated counterparts.
The
Funds overweight to the Financials sector, banks in particular, also
contributed to performance. Financials continued to rally given the stability
in the market, a steep yield curve
vii
and
better-than-expected third quarter earnings.
Although
Communications
1
as a whole lagged the overall credit market,
our security selection in Communications was a significant contributor to
performance. Overweights to companies such as
British
Telecommunications PLC
and
News
America Inc.
were additive as Telecommunication Services (Telecom)
and Media holdings traded tighter on prospects of a turning economy (Media
tends to lead out of a recession as Advertising
2
picks up),
continued stable cash flows and earnings from large Telecom companies.
1
Communications
consists of the following industries: Media Cable, Media Non-Cable and
Telecommunications.
2
Advertising is
included in the Media sub-sector.
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
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3
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Fund overview
continued
Lastly,
the Fund benefited from its lack of exposure to a number of securities that
lagged the overall benchmark. Among the Funds twenty largest underweight
positions relative to the benchmark, fifteen of them underperformed the
benchmark.
Q.
What were the leading detractors
from performance?
A.
The largest detractor from performance was security
selection in select Insurance and Financials conglomerates, as underweight
positions in a number of strong performers, including
American International Group, Inc.
,
UBS AG
and
Dow Chemicals Co.
, detracted from relative results. We chose
to underweight these securities as we did not find their risk/reward
characteristics to be compelling.
The
Funds overweight to Communications was also a detractor from performance as
the sector overall underperformed the general credit market mainly due to the
increase in mergers and acquisition risk.
Looking
for additional information?
The
Fund is traded under the symbol IGI and its closing market price is available
in most newspapers under the NYSE listings. The daily NAV is available on-line
under the symbol XIGIX on most financial websites.
Barrons
and
The Wall
Street Journal
s Monday edition both carry closed-end fund tables
that provide additional information. In addition, the Fund issues a quarterly
press release that can be found on most major financial websites, as well as
www.leggmason.com/cef.
In
a continuing effort to provide information concerning the Fund, shareholders
may call 1-888-777-0102 (toll free), Monday through Friday from 8:00 a.m.
to 5:30 p.m. Eastern Standard Time, for the Funds current NAV, market
price and other information.
Thank
you for your investment in Western Asset Investment Grade Defined Opportunity
Trust Inc. As always, we appreciate that you have chosen us to manage your
assets and we remain focused on achieving the Funds investment goals.
Sincerely,
Western Asset Management Company
December 14,
2009
4
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Western
Asset Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
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The
information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio
holdings and breakdowns are as of November 30, 2009 and are subject to
change and may not be representative of the portfolio managers current or
future investments. Please refer to pages 7 through 15 for a list and
percentage breakdown of the Funds holdings.
The
mention of sector breakdowns is for informational purposes only and should not
be construed as a recommendation to purchase or sell any securities. The
information provided regarding such sectors is not a sufficient basis upon
which to make an investment decision. Investors seeking financial advice regarding
the appropriateness of investing in any securities or investment strategies
discussed should consult their financial professional. The Funds top five
sector holdings (as a percentage of net assets) as of November 30, 2009
were: Financials (29.9%), Telecommunication Services (11.3%), Consumer
Discretionary (10.9%), Energy (10.5%) and Industrials (7.3%). The Funds
portfolio composition is subject to change at any time.
RISKS:
The Funds investments are subject to credit risk, interest rate risk, inflation
risk and interest rate risk. As interest rates rise, bond prices fall, reducing
the value of the Funds holdings. The Fund may invest in lower-rated high-yield
bonds which are subject to greater credit risk (risk of default) than
higher-rated obligations. The Fund may use derivatives, such as options and
futures, which can be illiquid, may disproportionately increase losses, and
have a potentially large impact on Fund performance. The Fund may invest in
securities or engage in transactions that have the economic effects of leverage
which can increase the risk and volatility of the Fund. The Fund will
distribute all of its net assets to shareholders on or about December 2,
2024. The Fund does not guarantee the return of any specified amount.
All
index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
i
|
Duration
is the measure of the price sensitivity of a fixed-income security to an
interest rate change of 100 basis points. Calculation is based on the
weighted average of the present values for all cash flows.
|
ii
|
The
Federal Reserve Board (Fed) is responsible for the formulation of policies
designed to promote economic growth, full employment, stable prices and a
sustainable pattern of international trade and payments.
|
iii
|
The
Barclays Capital U.S. Corporate Investment Grade Index is an unmanaged index
consisting of publicly issued U.S. corporate and specified foreign debentures
and secured notes that are rated investment grade (Baa3/BBB- or higher) by at
least two rating agencies, have at least one year to final maturity and have
at least $250 million par amount outstanding. To qualify, bonds must be
SEC-registered.
|
iv
|
Net
asset value (NAV) is calculated by subtracting total liabilities and
outstanding preferred stock (if any) from the closing value of all securities
held by the Fund (plus all other assets) and dividing the result (total net
assets) by the total number of the common shares outstanding. The NAV fluctuates
with changes in the market prices of securities in which the Fund has
invested. However, the price at which an investor may buy or sell shares of
the Fund is the Funds market price as determined by supply of and demand for
the Funds shares.
|
v
|
The
Barclays Capital U.S. Credit Index is an index composed of corporate and
non-corporate debt issues that are investment grade (rated Baa3/BBB- or
higher).
|
vi
|
Lipper, Inc.,
a wholly-owned subsidiary of Reuters, provides independent insight on global
collective investments. Returns are based on the period from June 30,
2009 through November 30, 2009, including the reinvestment of all
distributions, including returns of capital, if any, calculated among the 22
funds in the Funds Lipper category.
|
vii
|
The
yield curve is the graphical depiction of the relationship between the yield
on bonds of the same credit quality but different maturities.
|
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
5
|
Fund at a glance
(unaudited)
INVESTMENT BREAKDOWN
(%) As a percent of total
investments
|
The
bar graph above represents the composition of the Funds investments as of
November 30, 2009 and does not include derivatives. The Fund is actively
managed. As a result, the composition of the Funds investments is subject to
change at any time.
|
|
Represents
less than 0.1%.
|
6
|
Western Asset Investment Grade Defined Opportunity
Trust Inc. 2009 Annual Report
|
Schedule of investments
November 30,
2009
WESTERN ASSET INVESTMENT GRADE DEFINED OPPORTUNITY TRUST INC.
FACE
AMOUNT
|
|
SECURITY
|
|
VALUE
|
|
CORPORATE
BONDS & NOTES 91.9%
|
|
|
|
CONSUMER
DISCRETIONARY 9.9%
|
|
|
|
|
|
Hotels, Restaurants &
Leisure 0.9%
|
|
|
|
$
|
1,250,000
|
|
Harrahs
Operating Escrow LLC/Harrahs Escrow Corp., Senior Secured Notes, 11.250% due
6/1/17
(a)
|
|
$
|
1,281,250
|
|
540,000
|
|
Yum!
Brands Inc., Senior Notes, 4.250% due 9/15/15
|
|
557,225
|
|
|
|
Total Hotels,
Restaurants & Leisure
|
|
1,838,475
|
|
|
|
Household Durables 0.4%
|
|
|
|
720,000
|
|
Fortune
Brands Inc., Senior Notes, 4.875% due 12/1/13
|
|
743,446
|
|
|
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Media 7.9%
|
|
|
|
|
|
Affinion
Group Inc.:
|
|
|
|
1,750,000
|
|
Senior Notes, 10.125% due 10/15/13
|
|
1,793,750
|
|
250,000
|
|
Senior Subordinated Notes, 10.125% due 10/15/13
|
|
256,250
|
|
|
|
Comcast
Corp.:
|
|
|
|
2,500,000
|
|
6.400% due 5/15/38
|
|
2,598,865
|
|
1,500,000
|
|
Senior Notes, 5.700% due 7/1/19
|
|
1,605,474
|
|
1,250,000
|
|
DISH
DBS Corp., Senior Notes, 7.875% due 9/1/19
|
|
1,265,625
|
|
1,000,000
|
|
Globo
Communicacoes e Participacoes SA, Bonds, 7.250% due 4/26/22
(a)
|
|
1,042,500
|
|
2,400,000
|
|
News
America Inc., Senior Notes, 6.650% due 11/15/37
|
|
2,540,678
|
|
1,760,000
|
|
Omnicom
Group Inc., Notes, 6.250% due 7/15/19
|
|
1,948,165
|
|
|
|
Time
Warner Cable Inc.:
|
|
|
|
500,000
|
|
Debentures, 7.300% due 7/1/38
|
|
565,482
|
|
1,100,000
|
|
Senior Notes, 8.750% due 2/14/19
|
|
1,370,026
|
|
1,000,000
|
|
Univision
Communications Inc., Senior Secured Notes, 12.000% due 7/1/14
(a)
|
|
1,092,500
|
|
1,000,000
|
|
WPP
Finance UK, Senior Notes, 8.000% due 9/15/14
|
|
1,141,122
|
|
|
|
Total Media
|
|
17,220,437
|
|
|
|
Specialty Retail 0.2%
|
|
|
|
500,000
|
|
Blockbuster
Inc., Senior Secured Notes, 11.750% due 10/1/14
(a)
|
|
470,000
|
|
|
|
Textiles, Apparel & Luxury Goods 0.5%
|
|
|
|
1,000,000
|
|
Oxford
Industries Inc., Senior Secured Notes, 11.375% due 7/15/15
|
|
1,095,000
|
|
|
|
TOTAL
CONSUMER DISCRETIONARY
|
|
21,367,358
|
|
CONSUMER
STAPLES 5.9%
|
|
|
|
|
|
Beverages 1.2%
|
|
|
|
1,000,000
|
|
Anheuser-Busch
InBev Worldwide Inc., Senior Notes, 7.750% due 1/15/19
(a)
|
|
1,201,331
|
|
1,200,000
|
|
Diageo
Capital PLC, Notes, 5.750% due 10/23/17
|
|
1,327,593
|
|
|
|
Total Beverages
|
|
2,528,924
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
7
|
Schedule of investments
continued
November 30,
2009
WESTERN ASSET INVESTMENT GRADE DEFINED OPPORTUNITY TRUST INC.
FACE
AMOUNT
|
|
SECURITY
|
|
VALUE
|
|
|
|
Food & Staples Retailing
2.0%
|
|
|
|
$
|
600,000
|
|
CVS Caremark Corp., Senior Notes, 6.600% due
3/15/19
|
|
$
|
674,104
|
|
2,135,000
|
|
Safeway Inc., Senior Notes, 6.250% due 3/15/14
|
|
2,398,719
|
|
1,100,000
|
|
Walgreen Co., Senior Notes, 5.250% due 1/15/19
|
|
1,209,864
|
|
|
|
Total Food & Staples
Retailing
|
|
4,282,687
|
|
|
|
Food Products 1.2%
|
|
|
|
1,080,000
|
|
Mead Johnson Nutrition Co., Senior Notes, 4.900%
due 11/1/19
(a)
|
|
1,105,093
|
|
1,500,000
|
|
Smithfield Foods Inc., Senior Secured Notes,
10.000% due 7/15/14
(a)
|
|
1,578,750
|
|
|
|
Total Food Products
|
|
2,683,843
|
|
|
|
Tobacco 1.5%
|
|
|
|
450,000
|
|
Altria Group Inc., Senior Notes, 8.500% due
11/10/13
|
|
527,855
|
|
600,000
|
|
Lorillard Tobacco Co., Senior Notes, 8.125% due
6/23/19
|
|
665,177
|
|
2,000,000
|
|
Reynolds American Inc., Senior Secured Notes,
7.625% due 6/1/16
|
|
2,176,500
|
|
|
|
Total Tobacco
|
|
3,369,532
|
|
|
|
TOTAL
CONSUMER STAPLES
|
|
12,864,986
|
|
ENERGY
10.5%
|
|
|
|
|
|
Energy Equipment &
Services 0.8%
|
|
|
|
1,500,000
|
|
Southern Natural Gas Co., Senior Notes, 8.000% due
3/1/32
|
|
1,760,145
|
|
|
|
Oil, Gas & Consumable
Fuels 9.7%
|
|
|
|
|
|
Anadarko Petroleum Corp., Senior Notes:
|
|
|
|
600,000
|
|
5.950% due 9/15/16
|
|
655,596
|
|
1,100,000
|
|
6.450% due 9/15/36
|
|
1,158,615
|
|
1,500,000
|
|
ConocoPhillips, Notes, 6.500% due 2/1/39
|
|
1,710,543
|
|
1,000,000
|
|
DCP Midstream LLC, Senior Notes, 9.750% due 3/15/19
(a)
|
|
1,221,662
|
|
1,000,000
|
|
Devon Financing Corp. ULC, Debentures, 7.875% due
9/30/31
|
|
1,265,862
|
|
2,000,000
|
|
Enterprise Products Operating LP, Senior Notes,
9.750% due 1/31/14
|
|
2,437,632
|
|
800,000
|
|
EOG Resources Inc., Senior Notes, 6.875% due
10/1/18
|
|
948,252
|
|
|
|
Hess Corp., Notes:
|
|
|
|
1,400,000
|
|
8.125% due 2/15/19
|
|
1,725,736
|
|
440,000
|
|
7.875% due 10/1/29
|
|
527,648
|
|
800,000
|
|
Kinder Morgan Energy Partners LP, Senior Notes,
5.950% due 2/15/18
|
|
859,730
|
|
1,000,000
|
|
Pemex Project Funding Master Trust, Senior Bonds,
6.625% due 6/15/35
|
|
1,006,746
|
|
1,109,000
|
|
Petrobras International Finance Co., Senior Notes,
5.750% due 1/20/20
|
|
1,135,339
|
|
1,000,000
|
|
Quicksilver Resources Inc., Senior Notes, 11.750%
due 1/1/16
|
|
1,116,250
|
|
1,500,000
|
|
Shell International Finance BV, Senior Notes,
6.375% due 12/15/38
|
|
1,746,258
|
|
700,000
|
|
Valero Energy Corp., Senior Notes, 9.375% due
3/15/19
|
|
846,572
|
|
1,000,000
|
|
Williams Cos. Inc., Senior Notes, 8.750% due
1/15/20
|
|
1,170,809
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
8
|
Western Asset Investment Grade Defined Opportunity
Trust Inc. 2009 Annual Report
|
WESTERN ASSET INVESTMENT GRADE DEFINED OPPORTUNITY TRUST INC.
FACE
AMOUNT
|
|
SECURITY
|
|
VALUE
|
|
|
|
Oil, Gas & Consumable
Fuels 9.7%
continued
|
|
|
|
|
|
XTO Energy Inc., Senior Notes:
|
|
|
|
$
|
500,000
|
|
5.750% due 12/15/13
|
|
$
|
552,163
|
|
900,000
|
|
5.500% due 6/15/18
|
|
954,990
|
|
|
|
Total Oil, Gas &
Consumable Fuels
|
|
21,040,403
|
|
|
|
TOTAL
ENERGY
|
|
22,800,548
|
|
FINANCIALS
29.5%
|
|
|
|
|
|
Capital Markets 5.6%
|
|
|
|
3,500,000
|
|
Bear Stearns Cos. Inc., Senior Notes, 7.250% due
2/1/18
|
|
4,053,878
|
|
|
|
Goldman Sachs Group Inc., Senior Notes:
|
|
|
|
4,250,000
|
|
5.950% due 1/18/18
|
|
4,554,585
|
|
500,000
|
|
7.500% due 2/15/19
|
|
591,475
|
|
990,000
|
|
Merrill Lynch & Co. Inc., Notes, 6.875%
due 4/25/18
|
|
1,063,605
|
|
1,750,000
|
|
Morgan Stanley, Medium-Term Notes, 6.625% due
4/1/18
|
|
1,901,662
|
|
|
|
Total Capital Markets
|
|
12,165,205
|
|
|
|
Commercial Banks 6.1%
|
|
|
|
240,000
|
|
BankAmerica Institutional Capital A, Junior
Subordinated Bonds, 8.070% due 12/31/26
(a)
|
|
226,200
|
|
250,000
|
|
BankAmerica Institutional Capital B, Junior
Subordinated Bonds, 7.700% due 12/31/26
(a)
|
|
231,875
|
|
1,000,000
|
|
BB&T Corp., Senior Notes, 5.700% due 4/30/14
|
|
1,097,518
|
|
110,000
|
|
Commonwealth Bank of Australia, Senior Notes,
5.000% due 10/15/19
(a)
|
|
113,224
|
|
560,000
|
|
Credit Suisse/New York, Senior Notes, 5.300% due
8/13/19
|
|
587,928
|
|
|
|
Royal Bank of Scotland Group PLC:
|
|
|
|
480,000
|
|
Senior Notes, 6.400% due 10/21/19
|
|
487,470
|
|
|
|
Subordinated Notes:
|
|
|
|
120,000
|
|
5.000% due 11/12/13
|
|
107,574
|
|
740,000
|
|
5.000% due 10/1/14
|
|
652,680
|
|
1,000,000
|
|
RSHB Capital, Loan Participation Notes, Senior
Secured Notes, 9.000% due 6/11/14
(a)
|
|
1,124,600
|
|
2,100,000
|
|
Svenska Handelsbanken AB, Senior Notes, 4.875% due
6/10/14
(a)
|
|
2,248,640
|
|
6,000,000
|
|
Wachovia Corp., Senior Notes, 5.750% due 2/1/18
|
|
6,321,240
|
|
|
|
Total Commercial Banks
|
|
13,198,949
|
|
|
|
Consumer Finance 2.7%
|
|
|
|
2,760,000
|
|
American Express Co., Senior Notes, 8.125% due
5/20/19
|
|
3,322,201
|
|
1,250,000
|
|
FMG Finance Pty Ltd., Senior Secured Notes, 10.625%
due 9/1/16
(a)
|
|
1,368,750
|
|
1,000,000
|
|
Ford Motor Credit Co., LLC, Senior Notes, 12.000%
due 5/15/15
|
|
1,153,676
|
|
|
|
Total Consumer Finance
|
|
5,844,627
|
|
|
|
Diversified Financial Services
9.3%
|
|
|
|
2,760,000
|
|
Bank of America Corp., Senior Notes, 7.625% due
6/1/19
|
|
3,166,153
|
|
840,000
|
|
Blackstone Holdings Finance Co. LLC, Senior Notes, 6.625%
due 8/15/19
(a)
|
|
859,803
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
9
|
Schedule of investments
continued
November 30,
2009
WESTERN ASSET INVESTMENT GRADE DEFINED OPPORTUNITY TRUST INC.
FACE AMOUNT
|
|
SECURITY
|
|
VALUE
|
|
|
|
Diversified Financial Services
9.3%
continued
|
|
|
|
$1,450,000
|
|
Boeing Capital Corp., Senior Notes, 4.700% due
10/27/19
|
|
$
|
1,470,362
|
|
|
|
Citigroup Inc., Senior Notes:
|
|
|
|
300,000
|
|
6.375% due 8/12/14
|
|
315,888
|
|
470,000
|
|
5.500% due 10/15/14
|
|
479,305
|
|
2,250,000
|
|
6.000% due 8/15/17
|
|
2,261,304
|
|
500,000
|
|
8.500% due 5/22/19
|
|
565,629
|
|
2,000,000
|
|
6.875% due 3/5/38
|
|
1,943,962
|
|
1,350,000
|
|
8.125% due 7/15/39
|
|
1,488,575
|
|
|
|
General Electric Capital Corp., Senior Notes:
|
|
|
|
2,000,000
|
|
5.250% due 10/19/12
|
|
2,158,928
|
|
790,000
|
|
6.000% due 8/7/19
|
|
833,682
|
|
1,500,000
|
|
6.875% due 1/10/39
|
|
1,578,026
|
|
500,000
|
|
International
Lease Finance Corp., Medium-Term Notes, Senior Notes, 5.750% due 6/15/11
|
|
464,806
|
|
1,500,000
|
|
JPMorgan Chase & Co., Senior Notes, 6.400%
due 5/15/38
|
|
1,666,255
|
|
870,000
|
|
TNK-BP Finance SA, Senior Notes, 7.500% due 3/13/13
(a)
|
|
902,625
|
|
|
|
Total Diversified Financial
Services
|
|
20,155,303
|
|
|
|
Insurance 2.6%
|
|
|
|
1,300,000
|
|
ACE INA Holdings Inc., Senior Notes, 5.600% due
5/15/15
|
|
1,434,473
|
|
|
|
Chubb Corp., Senior Notes:
|
|
|
|
600,000
|
|
5.750% due 5/15/18
|
|
665,750
|
|
600,000
|
|
6.500% due 5/15/38
|
|
701,703
|
|
1,500,000
|
|
MetLife Inc., Senior Notes, 6.817% due 8/15/18
|
|
1,711,927
|
|
690,000
|
|
Nationwide Mutual Insurance Co., Notes, 9.375% due
8/15/39
(a)
|
|
725,741
|
|
400,000
|
|
Travelers Cos. Inc., Senior Notes, 6.250% due
6/15/37
|
|
448,160
|
|
|
|
Total Insurance
|
|
5,687,754
|
|
|
|
Real Estate Investment Trusts
(REITs) 1.5%
|
|
|
|
|
|
Developers Diversified Realty Corp., Senior Notes:
|
|
|
|
505,000
|
|
4.625% due 8/1/10
|
|
500,151
|
|
660,000
|
|
9.625% due 3/15/16
|
|
688,026
|
|
1,500,000
|
|
Ventas Realty LP/Ventas Capital Corp., Senior
Notes, 6.750% due 4/1/17
|
|
1,432,500
|
|
580,000
|
|
WEA Finance LLC, Senior Notes, 6.750% due 9/2/19
(a)
|
|
610,544
|
|
|
|
Total Real Estate Investment
Trusts (REITs)
|
|
3,231,221
|
|
|
|
Thrifts & Mortgage
Finance 1.7%
|
|
|
|
3,500,000
|
|
Countrywide Financial Corp., Medium-Term Notes,
5.800% due 6/7/12
|
|
3,744,342
|
|
|
|
TOTAL FINANCIALS
|
|
64,027,401
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
10
|
Western Asset Investment Grade Defined Opportunity
Trust Inc. 2009 Annual Report
|
WESTERN ASSET INVESTMENT GRADE DEFINED OPPORTUNITY TRUST INC.
FACE AMOUNT
|
|
SECURITY
|
|
VALUE
|
|
HEALTH CARE 6.0%
|
|
|
|
|
|
Health Care Equipment &
Supplies 0.5%
|
|
|
|
$1,000,000
|
|
Biomet Inc., Senior Toggle Notes, 10.375% due
10/15/17
(b)
|
|
$
|
1,077,500
|
|
|
|
Health Care Providers &
Services 3.2%
|
|
|
|
440,000
|
|
AmerisourceBergen Corp., Senior Notes, 4.875% due
11/15/19
|
|
444,837
|
|
|
|
Humana Inc., Senior Notes:
|
|
|
|
1,000,000
|
|
6.450% due 6/1/16
|
|
1,017,147
|
|
1,000,000
|
|
7.200% due 6/15/18
|
|
1,046,929
|
|
600,000
|
|
McKesson Corp., Senior Notes, 6.500% due 2/15/14
|
|
672,564
|
|
1,000,000
|
|
Tenet Healthcare Corp., Senior Notes, 10.000% due
5/1/18
(a)
|
|
1,117,500
|
|
1,300,000
|
|
UnitedHealth Group Inc., 4.875% due 2/15/13
|
|
1,371,772
|
|
1,200,000
|
|
WellPoint Inc., Notes, 5.250% due 1/15/16
|
|
1,252,007
|
|
|
|
Total Health Care
Providers & Services
|
|
6,922,756
|
|
|
|
Pharmaceuticals 2.3%
|
|
|
|
1,500,000
|
|
GlaxoSmithKline Capital Inc., 5.650% due 5/15/18
|
|
1,674,240
|
|
560,000
|
|
Pfizer Inc., Senior Notes, 7.200% due 3/15/39
|
|
714,801
|
|
1,100,000
|
|
Roche Holdings Inc., Senior Notes, 6.000% due
3/1/19
(a)
|
|
1,243,565
|
|
1,300,000
|
|
Wyeth, Notes, 5.950% due 4/1/37
|
|
1,432,171
|
|
|
|
Total Pharmaceuticals
|
|
5,064,777
|
|
|
|
TOTAL HEALTH CARE
|
|
13,065,033
|
|
INDUSTRIALS
6.5%
|
|
|
|
|
|
Aerospace & Defense
0.4%
|
|
|
|
|
|
L-3 Communications Corp.:
|
|
|
|
380,000
|
|
Senior Notes, 5.200% due 10/15/19
(a)
|
|
391,030
|
|
|
|
Senior Subordinated Notes:
|
|
|
|
100,000
|
|
5.875% due 1/15/15
|
|
98,500
|
|
460,000
|
|
6.375% due 10/15/15
|
|
454,825
|
|
|
|
Total Aerospace &
Defense
|
|
944,355
|
|
|
|
Air Freight & Logistics
0.4%
|
|
|
|
700,000
|
|
United Parcel Service Inc., Senior Notes, 6.200%
due 1/15/38
|
|
805,634
|
|
|
|
Airlines 2.4%
|
|
|
|
1,725,000
|
|
American Airlines Pass-Through Trust, Secured
Notes, 7.858% due 4/1/13
|
|
1,716,375
|
|
|
|
Continental Airlines Inc.:
|
|
|
|
190,000
|
|
9.250% due 5/10/17
|
|
192,375
|
|
810,000
|
|
7.250% due 11/10/19
|
|
818,100
|
|
|
|
Delta Air Lines Inc.:
|
|
|
|
540,000
|
|
7.750% due 12/17/19
|
|
546,075
|
|
1,500,000
|
|
Pass-Through Certificates, 7.570% due 11/18/10
|
|
1,507,500
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
11
|
Schedule of investments
continued
November 30,
2009
WESTERN ASSET INVESTMENT GRADE DEFINED OPPORTUNITY TRUST INC.
FACE AMOUNT
|
|
SECURITY
|
|
VALUE
|
|
|
|
Airlines 2.4%
continued
|
|
|
|
|
|
United Airlines Inc.:
|
|
|
|
$
|
250,000
|
|
Notes, 9.750% due 1/15/17
|
|
$
|
254,375
|
|
220,000
|
|
Senior Secured Notes, 10.400% due 11/1/16
|
|
226,600
|
|
|
|
Total Airlines
|
|
5,261,400
|
|
|
|
Commercial Services &
Supplies 0.9%
|
|
|
|
|
|
Republic Services Inc., Senior Notes:
|
|
|
|
220,000
|
|
5.500% due 9/15/19
(a)
|
|
230,912
|
|
580,000
|
|
5.250% due 11/15/21
(a)
|
|
591,549
|
|
1,000,000
|
|
RSC Equipment Rental Inc., Senior Secured Notes, 10.000%
due 7/15/17
(a)
|
|
1,082,500
|
|
|
|
Total Commercial
Services & Supplies
|
|
1,904,961
|
|
|
|
Industrial Conglomerates 1.9%
|
|
|
|
950,000
|
|
Hutchison Whampoa International Ltd., Notes, 4.625%
due 9/11/15
(a)
|
|
970,644
|
|
950,000
|
|
Tyco International Finance SA, Notes, 4.125% due
10/15/14
|
|
990,109
|
|
1,800,000
|
|
United Technologies Corp., Senior Notes, 6.125% due
2/1/19
|
|
2,078,419
|
|
|
|
Total Industrial Conglomerates
|
|
4,039,172
|
|
|
|
Road & Rail 0.5%
|
|
|
|
1,000,000
|
|
Kansas City Southern de Mexico, Senior Notes,
12.500% due 4/1/16
|
|
1,145,000
|
|
|
|
TOTAL INDUSTRIALS
|
|
14,100,522
|
|
MATERIALS 6.2%
|
|
|
|
|
|
Containers & Packaging
0.9%
|
|
|
|
440,000
|
|
Ball Corp., Senior Notes, 7.125% due 9/1/16
|
|
453,200
|
|
1,300,000
|
|
Solo Cup Co., Senior Secured Notes, 10.500% due
11/1/13
(a)
|
|
1,374,750
|
|
|
|
Total Containers &
Packaging
|
|
1,827,950
|
|
|
|
Metals & Mining 4.0%
|
|
|
|
2,770,000
|
|
Freeport-McMoRan Copper & Gold Inc.,
Senior Notes, 8.375% due 4/1/17
|
|
2,992,254
|
|
2,000,000
|
|
Rio Tinto Finance USA Ltd., Senior Notes, 9.000%
due 5/1/19
|
|
2,553,618
|
|
2,100,000
|
|
Vale Overseas Ltd., Notes, 6.875% due 11/21/36
|
|
2,148,104
|
|
1,000,000
|
|
Xstrata Finance Canada Ltd., Senior Bonds, 5.800%
due 11/15/16
(a)
|
|
1,009,860
|
|
|
|
Total Metals & Mining
|
|
8,703,836
|
|
|
|
Paper & Forest Products
1.3%
|
|
|
|
500,000
|
|
NewPage Corp., Senior Secured Notes, 11.375%
due 12/31/14
(a)
|
|
495,000
|
|
1,120,000
|
|
PE Paper Escrow GmbH, Senior Secured Notes, 12.000%
due 8/1/14
(a)
|
|
1,231,408
|
|
1,000,000
|
|
Verso Paper Holdings LLC, Senior Secured Notes,
11.500% due 7/1/14
(a)
|
|
1,095,000
|
|
|
|
Total Paper & Forest
Products
|
|
2,821,408
|
|
|
|
TOTAL MATERIALS
|
|
13,353,194
|
|
TELECOMMUNICATION SERVICES 10.9%
|
|
|
|
|
|
Diversified Telecommunication
Services 8.7%
|
|
|
|
|
|
AT&T Inc., Global Notes:
|
|
|
|
2,250,000
|
|
5.600% due 5/15/18
|
|
2,401,783
|
|
790,000
|
|
6.550% due 2/15/39
|
|
855,773
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
12
|
Western Asset Investment Grade Defined Opportunity
Trust Inc. 2009 Annual Report
|
WESTERN ASSET INVESTMENT GRADE DEFINED OPPORTUNITY TRUST INC.
FACE AMOUNT
|
|
SECURITY
|
|
VALUE
|
|
|
|
Diversified Telecommunication
Services 8.7%
continued
|
|
|
|
$2,000,000
|
|
British Telecommunications PLC, Bonds, 9.625% due
12/15/30
|
|
$
|
2,566,864
|
|
800,000
|
|
Deutsche Telekom International Finance BV, Bonds,
8.750% due 6/15/30
|
|
1,048,010
|
|
1,500,000
|
|
Embarq Corp., Notes, 7.995% due 6/1/36
|
|
1,580,440
|
|
1,000,000
|
|
France Telecom SA, Senior Notes, 5.375% due 7/8/19
|
|
1,088,192
|
|
1,000,000
|
|
Intelsat Corp., Senior Notes, 9.250% due 8/15/14
|
|
1,012,500
|
|
1,000,000
|
|
Koninklijke KPN NV, Senior Notes, 8.375% due
10/1/30
|
|
1,276,616
|
|
500,000
|
|
Qwest Corp., Senior Notes, 7.875% due 9/1/11
|
|
521,875
|
|
1,200,000
|
|
SBC Communications Inc., Notes, 5.100% due 9/15/14
|
|
1,308,050
|
|
1,000,000
|
|
Telecom Italia Capital SA, Senior Notes, 7.721% due
6/4/38
|
|
1,165,515
|
|
410,000
|
|
Telefonica Emisiones SAU, Senior Notes, 7.045% due
6/20/36
|
|
482,133
|
|
1,500,000
|
|
Valor Telecommunications Enterprises LLC/Finance
Corp., 7.750% due 2/15/15
|
|
1,546,088
|
|
1,460,000
|
|
Verizon Communications Inc., Senior Notes, 8.950%
due 3/1/39
|
|
1,999,999
|
|
|
|
Total Diversified
Telecommunication Services
|
|
18,853,838
|
|
|
|
Wireless Telecommunication
Services 2.2%
|
|
|
|
2,000,000
|
|
Cellco Partnership/Verizon Wireless Capital LLC,
Senior Notes, 8.500% due 11/15/18
|
|
2,559,104
|
|
1,000,000
|
|
Rogers Communications Inc., Senior Notes, 6.800%
due 8/15/18
|
|
1,149,534
|
|
1,250,000
|
|
Sprint Capital Corp., Senior Notes, 8.750% due
3/15/32
|
|
1,076,562
|
|
|
|
Total Wireless Telecommunication
Services
|
|
4,785,200
|
|
|
|
TOTAL TELECOMMUNICATION SERVICES
|
|
23,639,038
|
|
UTILITIES 6.5%
|
|
|
|
|
|
Electric Utilities 5.7%
|
|
|
|
|
|
Commonwealth Edison Co., First Mortgage Bonds:
|
|
|
|
600,000
|
|
5.800% due 3/15/18
|
|
656,605
|
|
600,000
|
|
6.450% due 1/15/38
|
|
678,705
|
|
2,020,000
|
|
FirstEnergy Corp., Notes, 7.375% due 11/15/31
|
|
2,264,574
|
|
730,000
|
|
FirstEnergy Solutions Corp., Senior Notes, 4.800%
due 2/15/15
(a)
|
|
759,532
|
|
1,030,000
|
|
IPALCO Enterprises Inc., 7.250% due 4/1/16
(a)
|
|
1,032,575
|
|
|
|
MidAmerican Energy Holdings Co.:
|
|
|
|
1,000,000
|
|
Bonds, 6.125% due 4/1/36
|
|
1,075,365
|
|
1,000,000
|
|
Senior Notes, 5.750% due 4/1/18
|
|
1,087,687
|
|
|
|
Pacific Gas & Electric Co., Senior Notes:
|
|
|
|
800,000
|
|
8.250% due 10/15/18
|
|
1,012,854
|
|
1,000,000
|
|
5.800% due 3/1/37
|
|
1,051,479
|
|
2,000,000
|
|
Reliant Energy Mid-Atlantic Power Holdings LLC,
Senior Notes, 9.681% due 7/2/26
|
|
2,055,000
|
|
500,000
|
|
Virginia Electric and Power Co., Senior Notes,
8.875% due 11/15/38
|
|
716,730
|
|
|
|
Total Electric Utilities
|
|
12,391,106
|
|
|
|
Independent Power
Producers & Energy Traders 0.5%
|
|
|
|
1,100,000
|
|
AES Corp., Senior Notes, 8.000% due 6/1/20
|
|
1,094,500
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
13
|
Schedule of investments
continued
November 30,
2009
WESTERN ASSET INVESTMENT GRADE DEFINED OPPORTUNITY TRUST INC.
FACE AMOUNT
|
|
SECURITY
|
|
VALUE
|
|
|
|
Multi-Utilities 0.3%
|
|
|
|
$
|
500,000
|
|
Dominion Resources Inc., Senior Notes, 8.875% due
1/15/19
|
|
$
|
641,445
|
|
|
|
TOTAL UTILITIES
|
|
14,127,051
|
|
|
|
TOTAL CORPORATE BONDS & NOTES (Cost
$185,053,807)
|
|
199,345,131
|
|
COLLATERALIZED SENIOR LOANS 5.1%
|
|
|
|
CONSUMER DISCRETIONARY 1.0%
|
|
|
|
|
|
Diversified Consumer Services
0.4%
|
|
|
|
997,455
|
|
Thomson Learning, Term Loan B, 2.760% due 7/5/14
(c)
|
|
854,695
|
|
|
|
Hotels, Restaurants &
Leisure 0.6%
|
|
|
|
547,820
|
|
Venetian Macau, Term Loan B, 5.790% due 4/1/13
(c)
|
|
520,429
|
|
948,420
|
|
Venetian Macau, Term Loan B, 5.790% due 4/1/13
(c)
|
|
900,999
|
|
|
|
Total Hotels,
Restaurants & Leisure
|
|
1,421,428
|
|
|
|
TOTAL CONSUMER DISCRETIONARY
|
|
2,276,123
|
|
FINANCIALS 0.4%
|
|
|
|
|
|
Diversified Financial Services
0.4%
|
|
|
|
985,498
|
|
CCM Merger Inc., Term Loan B, 8.500% due 7/21/12
(c)
|
|
941,459
|
|
HEALTH CARE 0.4%
|
|
|
|
|
|
Health Care Equipment &
Supplies 0.4%
|
|
|
|
997,815
|
|
Fenwal Inc., Term Loan, 2.622% due 3/1/14
(c)
|
|
863,941
|
|
INDUSTRIALS
0.8%
|
|
|
|
|
|
Airlines 0.4%
|
|
|
|
1,000,000
|
|
Delta Airlines, Credit-Linked Deposit Facility,
2.284% due 4/30/12
(c)
|
|
846,250
|
|
|
|
Commercial Services &
Supplies 0.4%
|
|
|
|
995,000
|
|
Nielsen Finance LLC, Term Loan, 3.994% due 6/10/14
(c)
|
|
899,409
|
|
|
|
TOTAL INDUSTRIALS
|
|
1,745,659
|
|
INFORMATION TECHNOLOGY 0.9%
|
|
|
|
|
|
IT Services 0.4%
|
|
|
|
994,924
|
|
First Data Corp., Term Loan, 3.035% due 10/15/14
(c)
|
|
830,071
|
|
|
|
Semiconductors &
Semiconductor Equipment 0.5%
|
|
|
|
997,494
|
|
Freescale Semiconductor Inc., Term Loan, 12.500%
due 12/15/14
(c)
|
|
1,024,094
|
|
|
|
TOTAL INFORMATION TECHNOLOGY
|
|
1,854,165
|
|
MATERIALS 0.9%
|
|
|
|
|
|
Chemicals 0.5%
|
|
|
|
1,000,000
|
|
Lyondell Chemical Co., Term Loan, 13.000% due
12/15/09
(c)
|
|
1,039,250
|
|
|
|
Containers & Packaging
0.4%
|
|
|
|
994,898
|
|
Berry Plastics Group Inc., Term Loan C, 2.296% due
4/3/15
(c)
|
|
842,899
|
|
|
|
TOTAL MATERIALS
|
|
1,882,149
|
|
TELECOMMUNICATION SERVICES 0.4%
|
|
|
|
|
|
Diversified Telecommunication
Services 0.4%
|
|
|
|
996,381
|
|
Level 3 Communications Inc., Term Loan, 2.691% due
3/1/14
(c)
|
|
847,340
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
14
|
Western Asset Investment Grade Defined Opportunity
Trust Inc. 2009 Annual Report
|
WESTERN ASSET INVESTMENT GRADE DEFINED OPPORTUNITY TRUST INC.
FACE AMOUNT
|
|
SECURITY
|
|
VALUE
|
|
UTILITIES 0.3%
|
|
|
|
|
|
Independent Power Producers & Energy Traders
0.3%
|
|
|
|
$
|
994,924
|
|
Energy
Future Holdings, Term Loan, 3.744% due 10/10/14
(c)
|
|
$
|
739,284
|
|
|
|
TOTAL
COLLATERALIZED SENIOR LOANS (Cost $10,677,505)
|
|
11,150,120
|
|
SOVEREIGN
BOND 0.5%
|
|
|
|
|
|
Russia 0.5%
|
|
|
|
940,000
|
|
Russian
Federation, 7.500% due 3/31/30
(c)
(Cost $930,950)
|
|
1,069,344
|
|
U.S.
GOVERNMENT & AGENCY OBLIGATIONS 0.6%
|
|
|
|
|
|
U.S. Government Agencies 0.5%
|
|
|
|
630,000
|
|
Federal
National Mortgage Association (FNMA), Subordinated Debentures, zero coupon
bond to yield 6.179% due 10/9/19
(d)
|
|
363,241
|
|
690,000
|
|
Tennessee
Valley Authority, 5.250% due 9/15/39
|
|
708,927
|
|
|
|
Total U.S. Government Agencies
|
|
1,072,168
|
|
|
|
U.S. Government Obligation 0.1%
|
|
|
|
170,000
|
|
U.S.
Treasury Bonds, 4.250% due 5/15/39
|
|
171,355
|
|
|
|
TOTAL
U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost $1,197,964)
|
|
1,243,523
|
|
MUNICIPAL
BOND 0.4%
|
|
|
|
|
|
California 0.4%
|
|
|
|
910,000
|
|
California
State, GO, Build America Bonds, 7.300% due 10/1/39
(Cost $913,564)
|
|
907,743
|
|
|
|
TOTAL
INVESTMENTS BEFORE SHORT-TERM INVESTMENTS
(Cost $198,773,790)
|
|
213,715,861
|
|
SHORT-TERM
INVESTMENTS 0.0%
|
|
|
|
|
|
U.S. Government Agencies 0.0%
|
|
|
|
5,000
|
|
Federal
Home Loan Mortgage Corp. (FHLMC), Discount Notes, 0.295% due 1/25/10
(d)(e)(f)
|
|
4,998
|
|
|
|
Federal
National Mortgage Association (FNMA), Discount Notes:
|
|
|
|
24,000
|
|
0.069% - 0.119% due 1/25/10
(d)(e)(f)
|
|
23,997
|
|
30,000
|
|
0.290% due 1/27/10
(d)(e)(f)
|
|
29,986
|
|
|
|
TOTAL
SHORT-TERM INVESTMENTS (Cost $58,981)
|
|
58,981
|
|
|
|
TOTAL
INVESTMENTS 98.5% (Cost $198,832,771#)
|
|
213,774,842
|
|
|
|
Other
Assets in Excess of Liabilities 1.5%
|
|
3,176,740
|
|
|
|
TOTAL
NET ASSETS 100.0%
|
|
$216,951,582
|
|
|
|
|
|
|
|
|
|
(a)
Security is exempt from
registration under Rule 144A of the Securities Act of 1933. This security
may be resold in transactions that are exempt from registration, normally to
qualified institutional buyers. This security has been deemed liquid pursuant
to guidelines approved by the Board of Directors, unless otherwise noted.
(b)
Payment-in-kind security for
which part of the income earned may be paid as additional principal.
(c)
Variable rate security.
Interest rate disclosed is that which is in effect at November 30, 2009.
(d)
On September 7, 2008,
the Federal Housing Finance Agency placed Fannie Mae (FNMA) and Freddie Mac
(FHLMC) into conservatorship.
(e)
All or a portion of this
security is held at the broker as collateral for open futures contracts.
(f)
Rate shown represents
yield-to-maturity.
#
Aggregate cost for federal
income tax purposes is $199,046,688.
Abbreviation used in this
schedule:
GO General
Obligation
See Notes to Financial Statements.
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
15
|
Statement of assets and liabilities
November 30,
2009
ASSETS:
|
|
|
|
Investments, at value (Cost $198,832,771)
|
|
$213,774,842
|
|
Cash
|
|
159,651
|
|
Interest receivable
|
|
3,583,330
|
|
Prepaid expenses
|
|
4,034
|
|
Total Assets
|
|
217,521,857
|
|
LIABILITIES:
|
|
|
|
Payable for securities purchased
|
|
333,231
|
|
Investment management fee payable
|
|
115,207
|
|
Directors fees payable
|
|
4,814
|
|
Payable to broker variation margin on open
futures contracts
|
|
313
|
|
Accrued expenses
|
|
116,710
|
|
Total Liabilities
|
|
570,275
|
|
TOTAL NET ASSETS
|
|
$216,951,582
|
|
NET ASSETS:
|
|
|
|
Par value ($0.001 par value; 10,542,556 shares
issued and outstanding; 100,000,000 shares authorized)
|
|
$
|
10,543
|
|
Paid-in capital in excess of par value
|
|
200,928,870
|
|
Undistributed net investment income
|
|
430,790
|
|
Accumulated net realized gain on investments and
futures contracts
|
|
647,379
|
|
Net unrealized appreciation on investments and
futures contracts
|
|
14,934,000
|
|
TOTAL NET ASSETS
|
|
$216,951,582
|
|
Shares Outstanding
|
|
10,542,556
|
|
Net Asset Value
|
|
$20.58
|
|
|
|
|
|
|
See Notes to Financial Statements.
16
|
Western Asset Investment Grade Defined
Opportunity Trust Inc. 2009 Annual Report
|
Statement of operations
For the
Period Ended November 30, 2009
INVESTMENT
INCOME:
|
|
|
|
Interest
|
|
$
5,286,810
|
|
EXPENSES:
|
|
|
|
Investment
management fee (Note 2)
|
|
578,173
|
|
Audit
and tax
|
|
51,600
|
|
Shareholder
reports
|
|
25,993
|
|
Organization
expenses
|
|
25,000
|
|
Directors
fees
|
|
24,359
|
|
Legal
fees
|
|
22,317
|
|
Transfer
agent fees
|
|
15,017
|
|
Excise
tax (Note 1)
|
|
10,476
|
|
Custody
fees
|
|
1,783
|
|
Insurance
|
|
1,577
|
|
Miscellaneous
expenses
|
|
6,100
|
|
Total Expenses
|
|
762,395
|
|
Less: Expense reimbursements (Note 2)
|
|
(25,000
|
)
|
Compensating balance agreements (Note 1)
|
|
(366
|
)
|
Net Expenses
|
|
737,029
|
|
NET
INVESTMENT INCOME
|
|
4,549,781
|
|
REALIZED
AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS (NOTES 1, 3
AND 4):
|
|
|
|
Net
Realized Gain (Loss) From:
|
|
|
|
Investment transactions
|
|
955,597
|
|
Futures contracts
|
|
(32,717
|
)
|
Net Realized Gain
|
|
922,880
|
|
Change
in Net Unrealized Appreciation/Depreciation From:
|
|
|
|
Investments
|
|
14,942,071
|
|
Futures contracts
|
|
(8,071
|
)
|
Change in Net Unrealized Appreciation/Depreciation
|
|
14,934,000
|
|
NET
GAIN ON INVESTMENTS AND FUTURES CONTRACTS
|
|
15,856,880
|
|
INCREASE
IN NET ASSETS FROM OPERATIONS
|
|
$20,406,661
|
|
For
the period June 26, 2009 (commencement of operations) through November 30,
2009.
See Notes to Financial Statements.
Western Asset Investment
Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
17
|
Statement of changes in net assets
FOR THE PERIOD ENDED NOVEMBER 30, 2009
|
|
2009
|
|
OPERATIONS:
|
|
|
|
Net investment income
|
|
$ 4,549,781
|
|
Net realized gain
|
|
922,880
|
|
Change in net unrealized appreciation/depreciation
|
|
14,934,000
|
|
Increase in Net Assets From
Operations
|
|
20,406,661
|
|
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
|
|
|
|
Net investment income
|
|
(4,404,968
|
)
|
Decrease in Net Assets From
Distributions to Shareholders
|
|
(4,404,968
|
)
|
FUND SHARE TRANSACTIONS:
|
|
|
|
Net proceeds from sale of shares (10,525,136 shares
issued)
|
|
200,609,294
|
|
Reinvestment of distributions (17,420 shares
reinvested)
|
|
340,595
|
|
Increase in Net Assets From Fund
Share Transactions
|
|
200,949,889
|
|
INCREASE IN NET ASSETS
|
|
216,951,582
|
|
NET ASSETS:
|
|
|
|
End of period*
|
|
$216,951,582
|
|
* Includes undistributed net investment income of:
|
|
$430,790
|
|
For
the period June 26, 2009 (commencement of operations) through November 30,
2009.
See Notes to Financial Statements.
18
|
Western Asset Investment Grade Defined
Opportunity Trust Inc. 2009 Annual Report
|
Financial highlights
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE
PERIOD ENDED NOVEMBER 30, UNLESS OTHERWISE NOTED:
|
|
2009
1,2
|
|
NET ASSET VALUE, BEGINNING OF PERIOD
|
|
$19.06
|
3
|
INCOME FROM OPERATIONS:
|
|
|
|
Net investment income
|
|
0.44
|
|
Net realized and unrealized gain
|
|
1.50
|
|
Total income from operations
|
|
1.94
|
|
LESS DISTRIBUTIONS FROM:
|
|
|
|
Net investment income
|
|
(0.42
|
)
|
Total distributions
|
|
(0.42
|
)
|
NET ASSET VALUE, END OF PERIOD
|
|
$20.58
|
|
MARKET PRICE, END OF PERIOD
|
|
$19.64
|
|
Total return, based on NAV
4,5
|
|
10.32
|
%
|
Total return, based on Market
Price
5
|
|
0.33
|
%
|
NET ASSETS, END OF PERIOD (000s)
|
|
$216,952
|
|
RATIOS TO AVERAGE NET ASSETS:
|
|
|
|
Gross expenses
6
|
|
0.86
|
%
|
Net expenses
6,7,8
|
|
0.83
|
|
Net investment income
6
|
|
5.12
|
|
PORTFOLIO TURNOVER RATE
|
|
19
|
%
|
1
|
For
the period June 26, 2009 (commencement of operations) through
November 30, 2009.
|
2
|
Per
share amounts have been calculated using the average shares method.
|
3
|
Initial
public offering price of $20.00 per share less offering costs and sales load
totaling $0.94 per share.
|
4
|
Performance
figures may reflect fee waivers and/or expense reimbursements. In the absence
of fee waivers and/or expense reimbursements, the total return would have
been lower. Past performance is no guarantee of future results. Total returns
for periods of less than one year are not annualized.
|
5
|
The
total return calculation assumes that distributions are reinvested in
accordance with the Funds dividend reinvestment plan. Past performance is no
guarantee of future results. Total returns for periods of less than one year
are not annualized.
|
6
|
Annualized.
|
7
|
The
investment manager has agreed to reimburse all organization expenses (Note
2).
|
8
|
The
impact to the expense ratio was less than 0.01% as a result of compensating
balance agreements.
|
See Notes to Financial Statements.
Western Asset Investment
Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
19
|
Notes to financial statements
1.
Organization and significant accounting policies
Western
Asset Investment Grade Defined Opportunity Trust Inc. (the Fund) was
incorporated in Maryland on April 24, 2009 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 Funds primary investment
objective is to provide current income and then to liquidate and distribute
substantially all of the Funds net assets to stockholders on or about December 2,
2024. As a secondary investment objective, the Fund will seek capital
appreciation.
The
following are significant accounting policies consistently followed by the Fund
and are in conformity with U.S. generally accepted accounting principles (GAAP).
Estimates and assumptions are required to be made regarding assets, liabilities
and changes in net assets resulting from operations when financial statements
are prepared. Changes in the economic environment, financial markets and any
other parameters used in determining these estimates could cause actual results
to differ. Subsequent events have been evaluated through January 19, 2010,
the issuance date of the financial statements.
(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
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 values
these securities at fair value as determined in accordance with procedures
approved by the Funds 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
(formerly, Statement of Financial Accounting Standards No. 157) (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 Funds 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
20
|
Western Asset Investment Grade Defined
Opportunity Trust Inc. 2009 Annual Report
|
·
Level 2 other
significant observable inputs (including quoted prices for similar investments,
interest rates, prepayment speeds, credit risk, etc.)
·
Level 3
significant unobservable inputs (including the Funds own assumptions in determining
the fair value of investments)
The
inputs or 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 the
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
convert future amounts to a single present amount.
The
following is a summary of the inputs used in valuing the Funds assets carried
at fair value:
DESCRIPTION
|
|
QUOTED PRICES
(LEVEL 1)
|
|
OTHER
SIGNIFICANT
OBSERVABLE
INPUTS
(LEVEL 2)
|
|
SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)
|
|
TOTAL
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
|
Corporate bonds & notes
|
|
|
|
$199,345,131
|
|
|
|
$199,345,131
|
|
Collateralized senior loans
|
|
|
|
11,150,120
|
|
|
|
11,150,120
|
|
Sovereign bond
|
|
|
|
1,069,344
|
|
|
|
1,069,344
|
|
U.S. government & agency obligations
|
|
|
|
1,243,523
|
|
|
|
1,243,523
|
|
Municipal bond
|
|
|
|
907,743
|
|
|
|
907,743
|
|
Total long-term investments
|
|
|
|
213,715,861
|
|
|
|
213,715,861
|
|
Short-term investments
|
|
|
|
58,981
|
|
|
|
58,981
|
|
Total investments
|
|
|
|
213,774,842
|
|
|
|
213,774,842
|
|
Other financial instruments:
|
|
|
|
|
|
|
|
|
|
Futures contracts
|
|
$(8,071)
|
|
|
|
|
|
(8,071
|
)
|
Total
|
|
$(8,071)
|
|
$213,774,842
|
|
|
|
$213,766,771
|
|
See
Schedule of Investments for additional detailed categorizations.
Fair
value represents the unrealized appreciation/(depreciation) of futures
contracts.
(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, a fund takes possession of
an underlying debt obligation subject to an obligation of the seller to
repurchase, and of the fund to resell, the obligation at an agreed-upon price
and time, thereby determining the yield during a funds holding period. When
entering into repurchase agreements, it is the Funds policy that its custodian
or a third party custodian, acting on the
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
21
|
Notes to financial statements
continued
Funds
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
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 may use futures
contracts to gain exposure to, or hedge against, changes in the value of
interest rates, equities or foreign currencies. A futures contract represents a
commitment for the future purchase or sale of an asset at a specified price on
a specified date.
Upon
entering into a futures contract, the Fund is required to deposit cash or 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. The daily changes in contract value
are recorded as unrealized gains or losses in the Statement of Operations and
the Fund recognizes a realized gain or loss when the contract is closed.
Futures
contracts involve, to varying degrees, risk of loss in excess of the amounts
reflected in the financial statements. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(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 Funds 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. The consequences of political, social,
economic or diplomatic changes may have disruptive effects on the market prices
of investments held by the Fund.
(e) Security transactions and investment income.
Security
transactions are accounted for on a trade date basis. Interest income, adjusted
for amortization of premium and accretion of discount, is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by use of the specific identification method. To
the extent
22
|
Western Asset Investment Grade Defined
Opportunity Trust Inc. 2009 Annual Report
|
any
issuer defaults or credit event occurs by the issuer, the Fund may halt any
additional interest income accruals and consider the realizability of interest
accrued up to the date of default or credit event.
(f) Distributions to shareholders.
Distributions
from net investment income for the Fund, if any, are declared and paid on a
monthly basis. Distributions of net realized gains, if any, are declared at
least annually. Distributions are recorded on the ex-dividend date and are
determined in accordance with income tax regulations, which may differ from
GAAP.
(g) Compensating balance agreements.
The Fund has an
arrangement with its custodian bank whereby a portion of the custodians fees
is paid indirectly by credits earned on the Funds cash deposit with the bank.
The amount is shown as a reduction of expenses in the Statement of Operations.
(h) Federal and other taxes.
It is the Funds
policy to comply with the federal income and excise tax requirements of the
Internal Revenue Code of 1986 (the Code) as amended, applicable to regulated
investment companies. Accordingly, the Fund intends to distribute its taxable
income and net realized gains, if any, to shareholders in accordance with the
timing requirements imposed by the Code. Therefore, no federal income tax
provision is required in the Funds financial statements. However, due to the
timing of when distributions are made, the Fund may be subject to an excise tax
of 4% of the amount by which 98% of the Funds annual taxable income exceeds
the distributions from such taxable income for the year. The Fund has accrued
$10,476 of Federal excise tax attributable to the taxable period ended November 30,
2009. The Fund anticipates being subject to an excise tax of approximately
$49,180 for calendar year 2009.
Management
has analyzed the Funds tax positions and has concluded that as of November 30,
2009, no provision for income tax is required in the Funds financial
statements. The Funds federal and state income and federal excise tax returns
for tax years for which the applicable statutes of limitations have not expired
are subject to examination by Internal Revenue Service and state departments of
revenue.
(i) Reclassification.
GAAP requires that certain
components of net assets be adjusted to reflect permanent differences between
financial and tax reporting. These reclassifications have no effect on net
assets or net asset values per share. During the current period, the Fund had
the following reclassifications:
|
|
UNDISTRIBUTED NET
INVESTMENT INCOME
|
|
ACCUMULATED NET
REALIZED GAIN
|
|
PAID-IN CAPITAL
|
|
(a)
|
|
$ 10,476
|
|
|
|
$(10,476)
|
|
(b)
|
|
275,501
|
|
$(275,501)
|
|
|
|
(a)
Reclassifications
are primarily due to a non-deductible excise tax accrued by the Fund.
(b)
Reclassifications
are primarily due to differences between book and tax amortization of premium
on fixed-income securities.
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
23
|
Notes to financial statements
continued
2.
Investment management agreement and other transactions with affiliates
Legg
Mason Partners Fund Advisor, LLC (LMPFA) is the Funds investment manager and
Western Asset Management Company (Western Asset) is the Funds subadviser.
Western Asset Management Company Pte. Ltd. in Singapore (Western Singapore),
Western Asset Management Company Ltd in Japan (Western Japan) and Western
Asset Management Company Limited in London (Western Asset Limited) serve as
additional subadvisers to the Fund, under additional subadvisory agreements
with Western Asset. LMPFA, Western Asset, Western Singapore, Western Japan and
Western Asset Limited are wholly-owned subsidiaries of Legg Mason, Inc. (Legg
Mason).
LMPFA
provides administrative and certain oversight services to the Fund. The Fund
pays LMPFA an investment management fee, calculated daily and paid monthly, at
an annual rate of 0.65% of the Funds average daily net assets.
LMPFA
has delegated to Western Asset the day-to-day portfolio management of the Fund.
Western Singapore, Western Asset Japan and Western Asset Limited provide
certain advisory services to the Fund relating to currency transactions and
investment in non-U.S. dollar denominated securities. For its services, LMPFA
pays Western Asset 70% of the net management fee it receives from the Fund.
Western Asset will pay each of Western Singapore, Western Japan and Western
Asset Limited a fee for its services at no additional expense to the Fund. Each
of Western Singapore, Western Japan and Western Asset Limited will receive a
fee from Western Asset payable monthly, in an amount equal to 70% of the Funds
fee paid to LMPFA by the Fund related to the Funds assets that Western Asset
allocates to Western Singapore, Western Japan and Western Asset Limited,
respectively, to manage.
LMPFA
has agreed to pay (i) all of the Funds organizational costs and (ii) the
Funds offering costs, other than sales load, in excess of $0.04 per Common
Share. During the period ended November 30, 2009, LMPFA reimbursed
organization expenses to the Fund amounting to $25,000 and paid $517,534 in
offering costs.
Certain
officers and one Director of the Fund are employees of Legg Mason or its
affiliates and do not receive compensation from the Fund.
3.
Investments
During
the period June 26, 2009 through November 30, 2009, the aggregate
cost of purchases and proceeds from sales of investments were as follows:
|
|
INVESTMENTS
|
|
Purchases
|
|
$230,999,331
|
|
Sales
|
|
33,152,031
|
|
24
|
Western Asset Investment Grade Defined
Opportunity Trust Inc. 2009 Annual Report
|
At
November 30, 2009, the aggregate gross unrealized appreciation and
depreciation of investments for federal income tax purposes were as follows:
Gross unrealized appreciation
|
|
$14,811,489
|
|
Gross unrealized depreciation
|
|
(83,335
|
)
|
Net unrealized appreciation
|
|
$14,728,154
|
|
At
November 30, 2009, the Fund had the following open futures contracts:
|
|
NUMBER OF
CONTRACTS
|
|
EXPIRATION
DATE
|
|
BASIS
VALUE
|
|
MARKET
VALUE
|
|
UNREALIZED
LOSS
|
|
Contracts to Sell:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury 10-Year Notes
|
|
5
|
|
3/10
|
|
$591,617
|
|
$599,688
|
|
$(8,071)
|
|
4.
Derivative instruments and hedging activities
Financial
Accounting Standards Board Codification Topic 815 (formerly, Statement of
Financial Accounting Standards No. 161) (ASC Topic 815) requires
enhanced disclosure about an entitys derivative and hedging activities.
Below
is a table, grouped by derivative type that provides information about the fair
value and the location of derivatives within the Statement of Assets and
Liabilities at November 30, 2009.
LIABILITY
DERIVATIVES
1
|
|
INTEREST
RATE
CONTRACTS
RISK
|
|
OTHER
CONTRACTS
RISK
|
|
TOTAL
|
|
Futures contracts
2
|
|
$(8,071)
|
|
|
|
$(8,071)
|
|
1
|
Generally,
the balance sheet location for asset derivatives is receivables/net
unrealized appreciation(depreciation) and for liability derivatives is
payables/net unrealized appreciation(depreciation).
|
2
|
Includes
cumulative appreciation/depreciation of futures contracts as reported in the
footnotes. Only current days variation margin is reported within the
receivables and/or payables of the Statement of Assets and Liabilities.
|
The
following tables provide information about the effect of derivatives and
hedging activities on the Funds Statement of Operations for the period June 26,
2009 through November 30, 2009. The first table provides additional detail
about the amounts and sources of gains/(losses) realized on derivatives during
the period. The second table provides additional information about the changes
in unrealized appreciation/(depreciation) resulting from the Funds derivatives
and hedging activities during the period.
AMOUNT OF
REALIZED GAIN OR (LOSS) ON DERIVATIVES RECOGNIZED
|
|
INTEREST
RATE
CONTRACTS
RISK
|
|
OTHER
CONTRACTS
RISK
|
|
TOTAL
|
|
Futures contracts
|
|
$(32,717)
|
|
|
|
$(32,717)
|
|
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
25
|
Notes to financial statements
continued
CHANGE IN
UNREALIZED APPRECIATION/DEPRECIATION ON DERIVATIVES RECOGNIZED
|
|
INTEREST
RATE
CONTRACTS
RISK
|
|
OTHER
CONTRACTS
RISK
|
|
TOTAL
|
|
Futures contracts
|
|
$(8,071)
|
|
|
|
$(8,071)
|
|
During
the period June 26, 2009 through November 30, 2009, the Fund had
average market values of $273,656 and $1,081,339 in futures contracts to buy
and futures contracts to sell, respectively.
5.
Distributions subsequent to November 30, 2009
On
November 16, 2009, the Funds Board of Directors (Board) declared three
distributions, each in the amount of $0.1045 per share, payable on December 28,
2009, January 29, 2010 and February 26, 2010 to shareholders of
record on December 18, 2009, January 22, 2010 and February 19,
2010.
6. Income
tax information and distributions to shareholders
The
tax character of distributions paid during the taxable period ended November 30
was as follows:
|
|
2009
|
|
Distributions Paid From:
|
|
|
|
Ordinary income
|
|
$4,404,968
|
|
As
of November 30, 2009, the components of accumulated earnings on a tax
basis were as follows:
Undistributed
ordinary income net
|
|
$ 1,371,980
|
|
Other
book/tax temporary differences
(a)
|
|
(79,894
|
)
|
Unrealized
appreciation/(depreciation)
(b)
|
|
14,720,083
|
|
Total
accumulated earnings/(losses) net
|
|
$16,012,169
|
|
(a)
|
Other
book/tax temporary differences are attributable primarily to the tax deferral
of losses on straddles, the realization for tax purposes of unrealized losses
on certain futures and book/tax differences in the timing of the
deductibility of various expenses.
|
(b)
|
The
difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales and the difference between book and tax amortization
methods for premiums on fixed-income securities.
|
26
|
Western
Asset Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
Report of independent registered public accounting firm
The Board of Directors and Shareholders
Western Asset Investment Grade Defined Opportunity Trust Inc.:
We
have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Western Asset Investment Grade Defined
Opportunity Trust Inc. as of November 30, 2009, and the related statements
of operations, changes in net assets and the financial highlights for the
period from June 26, 2009 (commencement of operations) to November 30,
2009. These financial statements and financial highlights are the
responsibility of the Funds management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of November 30,
2009, by correspondence with the custodian and brokers or by other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and
financial highlights referred to above present fairly, in all material
respects, the financial position of Western Asset Investment Grade Defined
Opportunity Trust Inc. as of November 30, 2009, and the results of its
operations, the changes in its net assets, and the financial highlights for the
period from June 26, 2009 to November 30, 2009, in conformity with U.S.
generally accepted accounting principles.
New
York, New York
January 19, 2010
Western Asset
Investment Grade Defined Opportunity Trust Inc. 2009 Annual Report
|
27
|
Board approval of management and subadvisory agreements
(unaudited)
At
an in-person meeting (the Organization Meeting) of the Board of Directors
(the Board) of Western Asset Investment Grade Defined Opportunity Trust (the Fund)
held on May 21, 2009, the Board received a proposal from Legg Mason, Inc.
(Legg Mason) to launch a non-diversified, closed-end management investment
company registered under the Investment Company Act of 1940, as amended (the 1940
Act). As part of this proposal, the Board at the Organization Meeting considered
the initial approval for a two-year period of the Funds management agreement
(the Management Agreement), pursuant to which Legg Mason Partners Fund
Advisor, LLC (the Manager) provides the Fund with investment advisory and
administrative services. The Board also approved sub-advisory agreements
(individually, a Sub-Advisory Agreement and collectively, the Sub-Advisory
Agreements) with the Managers affiliates, Western Asset Management Company (Western
Asset), Western Asset Management Company Pte. Ltd. in Singapore (Western
Asset Singapore), Western Asset Management Company Ltd in Japan (Western
Asset Japan) and Western Asset Management Company Limited in London (Western
Asset London). Western Asset, Western Asset Singapore, Western Asset Japan and
Western Asset London collectively are hereinafter referred to as the Sub-Advisers,
and Western Asset Singapore, Western Asset Japan, and Western Asset London
collectively are hereinafter referred to as the Non-U.S. Sub-Advisers. The Sub-Advisers
provide sub-advisory services to the Fund pursuant to the Sub-Advisory
Agreements. The Manager and the Sub-Advisers are wholly-owned subsidiaries of
Legg Mason. The Funds investment objective is to provide high current income,
and then to liquidate on or about December 2, 2024 and distribute all of
the Funds net assets to shareholders. As a secondary investment objective, the
Fund will seek capital appreciation. The Fund intends to pursue its investment
objective by investing, under normal market conditions, at least 80% of its
total managed assets in investment grade corporate fixed income securities of
varying maturities. Up to 20% of its total managed assets may be invested in (i) corporate
fixed income securities of below investment grade quality (commonly referred to
as high yield securities or junk bonds) at the time of investment, or (ii) other
securities, including obligations of the U.S. Government, its agencies or
instrumentalities, common stocks, warrants and depositary receipts. The Fund
may invest up to 20% of its total assets in non-U.S. dollar denominated
securities of issuers located anywhere in the world, including emerging market
countries, and of issuers that operate in any industry. The Fund does not
intend to leverage its capital structure by issuing senior securities (such as
preferred stock or debt instruments) but may borrow for temporary or emergency
purposes as permitted by the 1940 Act. In addition, the Fund may invest in
certain instruments and enter into transactions that may have the economic
effect of creating leverage as permitted by the 1940 Act. The Directors who are
not interested persons (as defined in the 1940 Act (the Independent
Directors)) of the Fund were assisted in their review by Fund counsel and independent
legal counsel and met with independent legal counsel in executive sessions
separate from representatives of the Manager and Western Asset. The
28
|
Western
Asset Investment Grade Defined Opportunity Trust Inc.
|
Independent
Directors requested and received information from the Manager and Western Asset
they deemed reasonably necessary for their review of the Management Agreement
and the Sub-Advisory Agreements.
Nature,
extent and quality of the services to be provided to the fund under the
management agreement and sub-advisory agreements
The
Board received and considered information regarding the nature, extent and
quality of the respective services to be provided to the Fund and its
shareholders by the Manager and the Sub-Advisers under the Management Agreement
and the Sub-Advisory Agreements. The Directors also considered the Managers
supervisory responsibilities in respect of the Sub-Advisers and Western Assets
supervisory responsibilities in respect of the Non-U.S. Sub-Advisers. The Board
noted that the Fund is newly organized and has no operating history but took
into consideration its knowledge gained and information received at regular
meetings throughout the year related to the services rendered by the Manager in
its management of other funds under the supervision of the Board, including the
Managers coordination and oversight of the activities of sub-advisers and
other service providers to those funds. The Board reviewed information received
from the Manager and the Funds Chief Compliance Officer (the CCO) regarding
the compliance policies and procedures established pursuant to the 1940 Act and
reviewed the investment program of Western Asset with the CCO.
As
a newly organized fund, the Fund had no historical performance information
available at the time of the Organization Meeting for the Board to consider in
its evaluation of the terms and conditions of the Management Agreement and the
Sub-Advisory Agreements. The Board reviewed the investment objectives and
policies of the Fund with the Manager and Western Asset and the qualifications,
backgrounds and responsibilities of the senior personnel of the Fund and the
portfolio management team that would be primarily responsible for the day-to-day
portfolio management of the Fund. The Board members discussed with
representatives of the Manager and Western Asset the Sub-Advisers experience
and capabilities in the management of funds and investment vehicles comparable
to the Fund and also discussed the Sub-Advisers compliance capabilities. The
Board also considered, based on its knowledge of the Manager and the Managers
affiliates, the financial resources available to be employed by Legg Mason for
the benefit of the Fund.
The
Board also considered the division of responsibilities of the Manager and the
Sub-Advisers under the Management Agreement and Sub-Advisory Agreements,
respectively, including the Managers coordination and oversight of services
provided to the Fund by Western Asset and others and Western Assets
coordination and oversight of services provided by the Non-U.S. Sub-Advisers.
The Manager does not provide day-to-day portfolio management services. Rather,
portfolio management for the Fund is provided by Western Asset pursuant to the
Sub-Advisory Agreement between the Manager and
Western Asset
Investment Grade Defined Opportunity Trust Inc.
|
29
|
Board approval of management and subadvisory agreements
(unaudited)
continued
Western
Asset (the Western Asset Sub-Advisory Agreement). The Western Asset
Sub-Advisory Agreement permits Western Asset to delegate certain of Western
Assets responsibilities, including its sub-advisory duties thereunder,
provided that Western Asset, in each case, will supervise the activities of the
delegee. The Non-U.S. Sub-Advisers each help provide certain sub-advisory
services to the Fund pursuant to a separate Sub-Advisory Agreement with Western
Asset.
The
Board concluded that, overall, it was satisfied with the nature, extent and
quality of the respective services expected to be provided by the Manager under
the Management Agreement and by the Manager and the Sub-Advisers under the
Sub-Advisory Agreements.
Management
fees, expense ratios and profitability
The
Board reviewed and considered the contractual management fee (the Contractual
Management Fee) payable by the Fund to the Manager under the Management
Agreement and the contractual management fees (the Sub-Advisory Contractual
Management Fees) payable to the Sub-Advisers under the respective Sub-Advisory
Agreements in light of the nature, extent and quality of the management and
sub-advisory services expected to be provided by the Manager and the
Sub-Advisers to the Fund. The Contractual Management Fee is an annual fee,
payable monthly, in an amount equal to 0.65% of the Funds average daily net
assets. The Board noted that the Manager, and not the Fund, pays the
Sub-Advisory Contractual Management Fees to Western Asset and, accordingly,
that the retention of Western Asset would not increase the fees and expenses to
be incurred by the Fund. Similarly, the Board noted that Western Asset, and not
the Fund, pays the Contractual Sub-Advisory Fees to each Non-U.S. Sub-Adviser
and that the retention of such Non-U.S. Sub-Adviser would not increase the fees
and expenses to be incurred by the Fund. The Board also noted that the Manager
will provide the Fund with regulatory compliance and administrative services,
office facilities and officers (including the chief financial, chief legal and
chief compliance officers), and that the Manager will coordinate and oversee
the provision of services to the Fund by other fund service providers,
including the Sub-Advisers.
The
Board received and considered information comparing the Contractual Management
Fee on a gross basis with those of a group of comparable funds and investment
vehicles. The Board obtained confirmation from the Manager that the fees and
expenses of the Fund are in line with those of comparable funds and investment
vehicles. The Manager discussed the expected expense ratio of the Fund and the
costs of organization. Management discussed with the Board the Funds proposed
underwriting arrangements. Underwriters were to receive a sales load of 4.50% of
the offering price of each share. The Board noted a proposal by the Manager to
pay (i) all of the Funds organizational expenses, estimated at $25,000,
and (ii) the Funds offering expenses (other than sales load, but
inclusive of a partial expense reimbursement to the
30
|
Western
Asset Investment Grade Defined Opportunity Trust Inc.
|
underwriters
of $0.0067 per share) in excess of $0.04 per share. As a newly organized fund,
the Board noted that the Fund had no historical profitability information
available for the Board to consider at the time of the Organization Meeting but
the Board received and reviewed with the Manager pro forma information
regarding the projected profitability to the Manager of its services to the
Fund. Under the circumstances, the Board concluded that the profitability
projected in the pro forma information was reasonable, but did not give such
information significant weight in its evaluations.
Economies
of scale
The
Manager stated that as the Funds assets increase over time, the Fund and its
shareholders should realize economies of scale as certain expenses, such as
fixed fund fees, become a smaller percentage of overall assets. However, the
Board noted that the Manager, in the Contractual Management Fee, incorporates
no breakpoints to reflect the potential for reducing the Contractual Management
Fee or the Sub-Advisory Contractual Management Fees as assets grow. The Board
considered that, as a newly organized fund, there was uncertainty regarding the
ability of the Fund to attract assets and the rate of asset growth that will be
achieved. In light of the uncertainties as to the growth of assets, the Board
concluded the Contractual Management Fee structure and the Sub-Advisory Contractual
Management Fees structure each is appropriate at this time.
Taking
all of the above into consideration, the Board determined that the Contractual
Management Fee and the Sub-Advisory Contractual Management Fees were reasonable
in light of the expense information presented and the nature, extent and
quality of the services expected to be provided under the Management Agreement
and the Sub-Advisory Agreements.
Other
benefits to the manager
The
Board considered other benefits expected to be received by the Manager and its
affiliates, including the Sub-Advisers, as a result of the Managers
relationship with the Fund. In light of the expected costs of providing
investment management and other services to the Fund and the Managers
commitment to the Fund, the other ancillary benefits that the Manager and its
affiliates expect to receive were considered reasonable.
Based
on their discussions and considerations, including those described above, the
Board, including the Independent Directors, approved the Management Agreement
and the Sub-Advisory Agreements.
No
single factor reviewed by the Board was identified by the Board as the
principal factor in determining whether to approve the Management Agreement and
the Sub-Advisory Agreements.
Western Asset Investment
Grade Defined Opportunity Trust Inc.
|
31
|
Additional information
(unaudited)
Information
about Directors and Officers
The
business and affairs of Western Asset Investment Grade Defined Opportunity
Trust Inc. (the Fund) are managed under the direction of the Board of
Directors. Information pertaining to the Directors and Officers of the Fund is
set forth below.
NON-INTERESTED DIRECTORS
CAROL
L. COLMAN
|
|
|
c/o
Chairman of the Fund, Legg Mason & Co., LLC (Legg Mason)
|
620
Eighth Avenue, New York, NY 10018
|
|
|
|
Birth year
|
|
1946
|
|
|
|
Position(s) held
with Fund
1
|
|
Director
and Member of the Nominating and Audit Committees, Class I
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
President,
Colman Consulting Co. (consulting)
|
|
|
|
Number of portfolios in
fund complex overseen
by director (including
the Fund)
|
|
21
|
|
|
|
Other board member
ships held by Director
|
|
None
|
|
|
|
DANIEL
P. CRONIN
|
|
|
c/o
Chairman of the Fund, Legg Mason
|
620
Eighth Avenue, New York, NY 10018
|
|
|
|
Birth year
|
|
1946
|
|
|
|
Position(s) held
with Fund
1
|
|
Director
and Member of the Nominating and Audit Committees, Class I
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
Retired;
formerly, Associate General Counsel, Pfizer Inc. (prior to and including
2004)
|
|
|
|
Number of portfolios in
fund complex overseen
by director (including
the Fund)
|
|
21
|
|
|
|
Other board member
ships held by Director
|
|
None
|
|
|
|
32
|
|
Western Asset Investment Grade Defined Opportunity
Trust Inc.
|
PAOLO
M. CUCCHI
|
|
|
c/o
Chairman of the Fund, Legg Mason
|
620
Eighth Avenue, New York, NY 10018
|
|
|
|
Birth year
|
|
1941
|
|
|
|
Position(s) held
with Fund
1
|
|
Director
and Member of the Nominating and Audit Committees, Class I
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
Professor
of French and Italian at Drew University; formerly, Vice President and Dean
of College of Liberal Arts at Drew University (from 1984 to 2009)
|
|
|
|
Number of portfolios in
fund complex overseen
by director (including
the Fund)
|
|
21
|
|
|
|
Other board member
ships held by Director
|
|
None
|
|
|
|
LESLIE
H. GELB
|
|
|
c/o
Chairman of the Fund, Legg Mason
|
620
Eighth Avenue, New York, NY 10018
|
|
Birth year
|
|
1937
|
|
|
|
Position(s) held
with Fund
1
|
|
Director
and Member of the Nominating and Audit Committees, Class II
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
President
Emeritus and Senior Board Fellow (since 2003), The Council on Foreign
Relations; formerly, President (prior to 2003), the Council on Foreign
Relations; formerly, Columnist, Deputy Editorial Page Editor and Editor,
Op-Ed Page, The New York Times
|
|
|
|
Number of portfolios in
fund complex overseen
by director (including
the Fund)
|
|
21
|
|
|
|
Other board member
ships held by Director
|
|
Director
of two registered investment companies advised by Blackstone Asia Advisors
L.L.C.: India Fund, Inc. and Asia Tigers Fund, Inc. (since 1994)
|
|
|
|
Western Asset
Investment Grade Defined Opportunity Trust Inc.
|
|
33
|
Additional information
(unaudited)
continued
Information
about Directors and Officers
WILLIAM
R. HUTCHINSON
|
|
|
c/o
Chairman of the Fund, Legg Mason
|
620
Eighth Avenue, New York, NY 10018
|
|
|
|
Birth year
|
|
1942
|
|
|
|
Position(s) held
with Fund
1
|
|
Director
and Member of the Nominating and Audit Committees, Class II
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
President,
W.R. Hutchinson & Associates Inc. (Consulting) (since 2001)
|
|
|
|
Number of portfolios in
fund complex overseen
by director (including
the Fund)
|
|
21
|
|
|
|
Other board member
ships held by Director
|
|
Director
2
of Associated BanCorp (banking) (since 1994)
|
|
|
|
RIORDAN
ROETT
|
|
|
c/o
Chairman of the Fund, Legg Mason
|
620
Eighth Avenue, New York, NY 10018
|
|
Birth year
|
|
1938
|
|
|
|
Position(s) held
with Fund
1
|
|
Director
and Member of the Nominating and Audit Committees, Class III
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
The
Sarita and Don Johnston Professor of Political Science and Director of
Western Hemisphere Studies, Paul H. Nitze School of Advanced International
Studies, The John Hopkins University (since 1973)
|
|
|
|
Number of portfolios in
fund complex overseen
by director (including
the Fund)
|
|
21
|
|
|
|
Other board member
ships held by Director
|
|
None
|
|
|
|
34
|
|
Western Asset Investment Grade Defined Opportunity
Trust Inc.
|
JESWALD
W. SALACUSE
|
|
|
c/o
Chairman of the Fund, Legg Mason
|
620
Eighth Avenue, New York, NY 10018
|
|
|
|
Birth year
|
|
1938
|
|
|
|
Position(s) held
with Fund
1
|
|
Director
and Member of the Nominating and Audit Committees, Class III
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
Henry
J. Braker Professor of Commercial Law, The Fletcher School of Law and
Diplomacy, Tufts University (since 1986); President and Member, Arbitration
Tribunals, World Bank/ICSID (since 2004)
|
|
|
|
Number of portfolios in
fund complex overseen
by director (including
the Fund)
|
|
21
|
|
|
|
Other board member
ships held by Director
|
|
Director
of two registered investment companies advised by Blackstone Asia Advisors
L.L.C.: India Fund, Inc. and Asia Tigers Fund, Inc. (since 1993)
|
INTERESTED DIRECTOR
|
|
|
|
R.
JAY GERKEN, CFA
3
|
|
|
Legg
Mason
|
620
Eighth Avenue, New York, NY 10018
|
|
Birth year
|
|
1951
|
|
|
|
Position(s) held
with Fund
1
|
|
Director,
Chairman, President and Chief Executive Officer, Class II
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
Managing
Director, Legg Mason & Co., LLC; Chairman of the Board and
Trustee/Director of 148 funds associated with Legg Mason Partners Fund
Advisor, LLC (LMPFA) and its affiliates; President of LMPFA (since 2006);
Chairman, President and Chief Executive Officer (CEO) of certain mutual
funds associated with Legg Mason, Inc. or its affiliates; President and
CEO, Smith Barney Fund Management LLC and Chairman, President and CEO, Citi
Fund Management, Inc. (formerly registered investment advisers) (since
2002); formerly, Managing Director of Citigroup Global Markets Inc. (prior to
2006); formerly, Chairman, President and CEO, Travelers Investment Adviser
Inc. (from 2002 to 2005)
|
|
|
|
Number of portfolios in
fund complex overseen
by director (including
the Fund)
|
|
135
|
|
|
|
Other board member
ships held by Director
|
|
Former
Trustee, Consulting Group Capital Markets Funds (from 2002 to 2006)
|
|
|
|
Western Asset
Investment Grade Defined Opportunity Trust Inc.
|
|
35
|
Additional information
(unaudited)
continued
Information
about Directors and Officers
OFFICERS
KAPREL
OZSOLAK
|
|
|
Legg
Mason
|
55
Water Street, New York, NY 10041
|
|
|
|
Birth year
|
|
1965
|
|
|
|
Position(s) held
with Fund
1
|
|
Chief
Financial Officer and Treasurer
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
Director
of Legg Mason; Chief Financial Officer and Treasurer of certain funds
associated with Legg Mason; formerly, Controller of certain funds associated
with certain predecessor firms of Legg Mason (from 2002 to 2004)
|
|
|
|
TED
P. BECKER
|
|
|
Legg
Mason
|
620
Eighth Avenue, New York, NY 10018
|
|
|
|
Birth year
|
|
1951
|
|
|
|
Position(s) held
with Fund
1
|
|
Chief
Compliance Officer
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
Director
of Global Compliance at Legg Mason (since 2006); Chief Compliance Officer of
LMPFA (since 2006); Managing Director of Compliance at Legg Mason, (since
2005); Chief Compliance Officer with certain mutual funds associated with
Legg Mason, LMPFA and certain affiliates (since 2006); formerly, Managing
Director of Compliance at Citigroup Asset Management (CAM) or its
predecessors (from 2002 to 2005)
|
|
|
|
ROBERT
I. FRENKEL
|
|
|
Legg
Mason
|
100
First Stamford Place, Stamford, CT 06902
|
|
|
|
Birth year
|
|
1954
|
|
|
|
Position(s) held
with Fund
1
|
|
Secretary
and Chief Legal Officer
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
Managing
Director and General Counsel of Global Mutual Funds for Legg Mason and its
predecessor (since 1994); Secretary and Chief Legal Officer of mutual funds
associated with Legg Mason (since 2003); formerly, Secretary of CFM (from
2001 to 2004)
|
|
|
|
36
|
|
Western Asset Investment Grade Defined Opportunity
Trust Inc.
|
THOMAS
C. MANDIA
|
|
|
Legg
Mason
|
100
First Stamford Place, Stamford, CT 06902
|
|
|
|
Birth year
|
|
1962
|
|
|
|
Position(s) held
with Fund
1
|
|
Assistant
Secretary
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
Managing
Director and Deputy General Counsel of Legg Mason (since 2005); Managing
Director and Deputy General Counsel for CAM (from 1992 to 2005)
|
|
|
|
STEVEN
FRANK
|
|
|
Legg
Mason
|
55
Water Street, New York, NY 10041
|
|
|
|
Birth year
|
|
1967
|
|
|
|
Position(s) held
with Fund
1
|
|
Controller
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
Vice
President of Legg Mason (since 2002); Controller of certain funds associated
with Legg Mason or its predecessors (since 2005); formerly, Assistant
Controller of certain mutual funds associated with Legg Mason predecessors
(from 2001 to 2005)
|
|
|
|
ALBERT
LASKAJ
|
|
|
Legg
Mason
|
55
Water Street, New York, NY 10041
|
|
|
|
Birth year
|
|
1977
|
|
|
|
Position(s) held
with Fund
1
|
|
Controller
|
|
|
|
Term of office
1
and length of
time served
|
|
Since
2009
|
|
|
|
Principal
occupation(s) during
past five years
|
|
Vice
President of Legg Mason (since 2008); Controller of certain funds associated
with Legg Mason (since 2007); formerly, Assistant Controller of certain
mutual funds associated with Legg Mason (from 2005 to 2007); formerly,
Accounting Manager of certain mutual funds associated with certain
predecessor firms of Legg Mason (from 2003 to 2005)
|
|
|
|
1
The Funds Board
of Directors is divided into three classes: Class I, Class II and Class III.
The terms of office of the Class I, II and III Directors expire at
the Annual Meetings of Stockholders in the year 2010, year 2011 and year 2012,
respectively, or thereafter in each case when their respective successors are
duly elected and qualified. The Funds executive officers are chosen each year
at the first meeting of the Funds Board of Directors following the Annual
Meeting of Stockholders, to hold office until the meeting of the Board
following the next Annual Meeting of Stockholders and until their successors
are duly elected and qualified.
2
Non-Executive
Chairman of the Board (Since December 1, 2009)
3
Mr. Gerken
is an interested person of the Fund as defined in the 1940 Act because Mr. Gerken
is an officer of LMPFA and certain of its affiliates.
Western Asset Investment
Grade Defined Opportunity Trust Inc.
|
|
37
|
Annual chief executive officer and chief financial officer
certifications
(unaudited)
The
Funds Chief Executive Officer (CEO) has submitted to the NYSE the required
annual certification, and the Fund also has included the certifications of the
Funds CEO and Chief Financial Officer required by Section 302 of the
Sarbanes-Oxley Act in the Funds Form N-CSR filed with the SEC for the
period of this report.
38
|
Western Asset Investment Grade Defined Opportunity
Trust Inc.
|
Dividend reinvestment plan
(unaudited)
Unless
you elect to receive distributions in cash (i.e., opt-out), all dividends,
including any capital gain dividends, on your Common Stock will be
automatically reinvested by American Stock Transfer & Trust Company
LLC, as agent for the stockholders (the Plan Agent), in additional shares of
Common Stock under the Funds Dividend Reinvestment Plan (the Plan). You may
elect not to participate in the Plan by contacting the Plan Agent. If you do
not participate, you will receive all cash distributions paid by check mailed
directly to you by American Stock Transfer & Trust Company LLC, as
dividend paying agent.
If
you participate in the Plan, the number of shares of Common Stock you will
receive will be determined as follows:
(1) If the market price
of the Common Stock on the record date (or, if the record date is not a NYSE
trading day, the immediately preceding trading day) for determining
stockholders eligible to receive the relevant dividend or distribution (the determination
date) is equal to or exceeds 98% of the net asset value per share of the
Common Stock, the Fund will issue new Common Stock at a price equal to the
greater of (a) 98% of the net asset value per share at the close of trading
on the NYSE on the determination date or (b) 95% of the market price per
share of the Common Stock on the determination date.
(2) If 98% of the net
asset value per share of the Common Stock exceeds the market price of the
Common Stock on the determination date, the Plan Agent will receive the
dividend or distribution in cash and will buy Common Stock in the open market,
on the NYSE or elsewhere, for your account as soon as practicable commencing on
the trading day following the determination date and terminating no later than
the earlier of (a) 30 days after the dividend or distribution payment
date, or (b) the record date for the next succeeding dividend or
distribution to be made to the stockholders; except when necessary to comply
with applicable provisions of the federal securities laws. If during this
period: (i) the market price rises so that it equals or exceeds 98% of the
net asset value per share of the Common Stock at the close of trading on the
NYSE on the determination date before the Plan Agent has completed the open
market purchases or (ii) if the Plan Agent is unable to invest the full
amount eligible to be reinvested in open market purchases, the Plan Agent will
cease purchasing Common Stock in the open market and the Fund shall issue the
remaining Common Stock at a price per share equal to the greater of (a) 98%
of the net asset value per share at the close of trading on the Exchange on the
determination date or (b) 95% of the then current market price per share.
Common
Stock in your account will be held by the Plan Agent in non-certificated form.
Any proxy you receive will include all shares of Common Stock you have received
under the Plan.
Western Asset
Investment Grade Defined Opportunity Trust Inc.
|
39
|
Dividend reinvestment plan
(unaudited)
continued
You
may withdraw from the Plan (i.e., opt-out) by notifying the Plan Agent in
writing at 59 Maiden Lane, New York, New York 10038 or by calling the Plan
Agent at 1-877-366-6441. Such withdrawal will be effective immediately if
notice is received by the Plan Agent not less than ten business days prior to
any dividend or distribution record date; otherwise such withdrawal will be
effective as soon as practicable after the Plan Agents investment of the most
recently declared dividend or distribution on the Common Stock. The Plan may be
terminated by the Fund upon notice in writing mailed to stockholders at least
30 days prior to the record date for the payment of any dividend or distribution
by the Fund for which the termination is to be effective. Upon any termination,
you will be sent a certificate or certificates for the full number of shares of
Common Stock held for you under the Plan and cash for any fractional share of
Common Stock. You may elect to notify the Plan Agent in advance of such
termination to have the Plan Agent sell part or all of your Common Stock on
your behalf. You will be charged a service charge and the Plan Agent is
authorized to deduct brokerage charges actually incurred for this transaction
from the proceeds.
There
is no service charge for reinvestment of your dividends or distributions in
Common Stock. However, all participants will pay a pro rata share of brokerage
commissions incurred by the Plan Agent when it makes open market purchases.
Because all dividends and distributions will be automatically reinvested in
additional shares of Common Stock, this allows you to add to your investment
through dollar cost averaging, which may lower the average cost of your Common
Stock over time. Dollar cost averaging is a technique for lowering the average
cost per share over time if the Funds net asset value declines. While dollar
cost averaging has definite advantages, it cannot assure profit or protect
against loss in declining markets.
Automatically
reinvesting dividends and distributions does not mean that you do not have to
pay income taxes due upon receiving dividends and distributions. Investors will
be subject to income tax on amounts reinvested under the Plan.
The
Fund reserves the right to amend or terminate the Plan if, in the judgment of
the Board of Directors, the change is warranted. There is no direct service
charge to participants in the Plan; however, the Fund reserves the right to
amend the Plan to include a service charge payable by the participants.
Additional information about the Plan and your account may be obtained from the
Plan Agent at 1-877-366-6441.
40
|
Western Asset Investment Grade Defined Opportunity
Trust Inc.
|
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Western
Asset Investment Grade Defined Opportunity Trust Inc.
Directors
|
Investment manager
|
Carol
L. Colman
|
Legg
Mason Partners Fund Advisor, LLC
|
Daniel
P. Cronin
|
|
Paolo M. Cucchi
|
Subadvisers
|
Leslie H. Gelb
|
Western
Asset Management Company
|
R.
Jay Gerken, CFA
|
|
Chairman
|
Western
Asset Management Company Limited
|
William
R. Hutchinson
|
|
Riordan
Roett
|
Western
Asset Management Company Pte. Ltd. in Singapore
|
Jeswald
W. Salacuse
|
|
|
Western
Asset Management Company Ltd in Japan
|
Officers
|
|
R.
Jay Gerken, CFA
|
Custodian
|
President and Chief Executive
Officer
|
State
Street Bank and Trust Company
|
|
1
Lincoln Street
|
Kaprel
Ozsolak
|
Boston,
Massachusetts 02111
|
Chief Financial Officer and
Treasurer
|
|
|
Transfer agent
|
Ted
P. Becker
|
American
Stock Transfer & Trust Company
|
Chief Compliance Officer
|
59
Maiden Lane
|
|
New
York, New York 10038
|
Robert
I. Frenkel
|
|
Secretary and Chief Legal Officer
|
Independent registered public
accounting firm
|
|
KPMG
LLP
|
Thomas
C. Mandia
|
345
Park Avenue
|
Assistant Secretary
|
New
York, New York 10154
|
|
|
Steven
Frank
|
Legal counsel
|
Controller
|
Simpson
Thacher & Bartlett LLP
|
|
425
Lexington Avenue
|
Albert
Laskaj
|
New
York, New York 10017
|
Controller
|
|
|
New York Stock Exchange Symbol
|
|
IGI
|
Western
Asset Investment Grade Defined Opportunity Trust Inc.
55
Water Street
New York, New York 10041
Privacy policy
We
are committed to keeping nonpublic personal information about you secure and
confidential. This notice is intended to help you understand how we fulfill
this commitment. From time to time, we may collect a variety of personal
information about you, including:
·
Information we
receive from you on applications and forms, via the telephone, and through our
websites;
·
Information
about your transactions with us, our affiliates, or others (such as your
purchases, sales, or account balances); and
·
Information we
receive from consumer reporting agencies.
We
do not disclose nonpublic personal information about our customers or former
customers, except to our affiliates (such as broker-dealers or investment
advisers with the Legg Mason family of companies) or as is otherwise permitted
by applicable law or regulation. For example, we may share this information
with others in order to process your transactions or service an account. We may
also provide this information to companies that perform marketing services on
our behalf, such as printing and mailing, or to other financial institutions
with whom we have joint marketing agreements. When we enter into such
agreements, we will require these companies to protect the confidentiality of
this information and to use it only to perform the services for which we hired
them.
With
respect to our internal security procedures, we maintain physical, electronic,
and procedural safeguards to protect your nonpublic personal information, and
we restrict access to this information.
If
you decide at some point either to close your account(s) or become an
inactive customer, we will continue to adhere to our privacy policies and
practices with respect to your nonpublic personal information.
NOT PART OF THE ANNUAL REPORT
|
Western
Asset Investment Grade Defined Opportunity Trust Inc.
WESTERN
ASSET INVESTMENT GRADE DEFINED OPPORTUNITY TRUST INC.
55
Water Street
New
York, New York 10041
Notice
is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase,
at market prices, shares of its common stock in the open market.
The
Fund files its complete schedule of portfolio holdings with the Securities and
Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The Funds Forms N-Q are available on the SECs website
at www.sec.gov. The Funds Forms N-Q may be reviewed and copied at the SECs
Public Reference Room in Washington, D.C., and information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330. To obtain information on Form N-Q from the Fund,
shareholders can call 1-888-777-0102.
Information
on how the Fund voted proxies relating to portfolio securities during the prior
12-month period ended June 30th of each year and a description of the
policies and procedures that the Fund uses to determine how to vote proxies
related to portfolio transactions are available (1) without charge, upon
request, by calling 1-888-777-0102, (2) on the Funds website at
www.leggmason.com/cef and (3) on the SECs website at www.sec.gov.
This
report is transmitted to the shareholders of Western Asset Investment Grade
Defined Opportunity Trust Inc. for their information. This is not a prospectus,
circular or representation intended for use in the purchase of shares of the
Fund or any securities mentioned in this report.
American
Stock
Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
WASX012164 1/10 SR10-1005
ITEM 2.
CODE
OF ETHICS.
The
registrant has adopted a code of ethics that applies to the registrants
principal executive officer, principal financial officer, principal accounting
officer or controller.
ITEM 3.
AUDIT
COMMITTEE FINANCIAL EXPERT.
The Board of Directors of the registrant has
determined that William R. Hutchinson, the Chairman of the Boards Audit
Committee, possesses the technical attributes identified in Instruction 2(b) of
Item 3 to Form N-CSR to qualify as an audit committee financial expert,
and has designated Mr. Hutchinson as the Audit Committees financial
expert. Mr. Hutchinson is an independent Director pursuant to paragraph
(a)(2) of Item 3 to Form N-CSR.
ITEM 4.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
a)
Audit
Fees
. The aggregate fees billed in the fiscal year ending November 30,
2009 (the Reporting Periods) for professional services rendered by the
Registrants principal accountant (the Auditor) for the audit of the
Registrants annual financial statements, or services that are normally
provided by the Auditor in connection with the statutory and regulatory filings
or engagements for the Reporting Period, were $5,500 in 2009.
b)
Audit-Related Fees
.
There were no fees billed in the Reporting Periods for assurance and related
services by the Auditor that are reasonably related to the performance of the
audit of the Registrants financial statements and are not reported under
paragraph (a) of the Item 4 for Western Asset Investment Grade Defined
Opportunity Trust Inc.
In addition, there were no
Audit-Related Fees billed in the Reporting Period for assurance and related
services by the Auditor to the Registrants investment adviser (not including
any sub-adviser whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity controlling,
controlled by or under common control with the investment adviser that provides
ongoing services to the
Western
Asset Investment Grade Defined Opportunity Trust Inc.
(service affiliates),
that were reasonably related to the performance of the annual audit of the
service affiliates. Accordingly, there were no such fees that required
pre-approval by the Audit Committee for the Reporting Period (prior to August 6,
2003 services provided by the Auditor were not required to be pre-approved).
(c)
Tax Fees
. The aggregate fees billed in
the Reporting Period for professional services rendered by the Auditor for tax
compliance, tax advice and tax planning (Tax Services) were $0 in 2009. These
services consisted of (i) review or preparation of U.S. federal, state,
local and excise tax returns; (ii) U.S. federal, state and local tax
planning, advice and assistance regarding statutory, regulatory or
administrative developments, and (iii) tax advice regarding tax
qualification matters and/or treatment of various financial instruments held or
proposed to be acquired or held.
There were no fees billed
for tax services by the Auditors to service affiliates during the Reporting
Period that required pre-approval by the Audit Committee.
d)
All Other Fees
.
There were no other fees billed in the Reporting Period for products and
services provided by the Auditor, other than the services reported in
paragraphs (a) through (c) of this Item 4 for the Western Asset
Investment Defined Opportunity Trust Inc..
All Other Fees. There
were no other non-audit services rendered by the Auditor to Legg Mason Partners
Fund Advisors, LLC (LMPFA), and any entity controlling, controlled by or
under common control with LMPFA that provided ongoing services to Western Asset
Investment Defined Opportunity Trust Inc. requiring pre-approval by the Audit
Committee in the Reporting Period.
(e) Audit Committees
preapproval policies and procedures described in paragraph (c) (7) of
Rule 2-01 of Regulation S-X.
(1) The Charter for
the Audit Committee (the Committee) of the Board of each registered
investment company (the Fund) advised by LMPFA or one of their affiliates
(each, an Adviser) requires that the Committee shall approve (a) all
audit and permissible non-audit services to be provided to the Fund and (b) all
permissible non-audit services to be provided by the Funds independent
auditors to the Adviser and any Covered Service Providers if the engagement
relates directly to the operations and financial reporting of the Fund. The Committee duly implements policies and
procedures by which such services are approved other than by the full
Committee.
The Committee
shall not approve non-audit services that the Committee believes impairs the
independence of the auditors. As of the
date of the approval of this Audit Committee Charter, permissible non-audit
services include any professional services (including tax services), that are
not prohibited services as described below, provided to the Fund by the
independent auditors, other than those provided to the Fund in connection with
an audit or a review of the financial statements of the Fund. Permissible non-audit services does not
include: (i) bookkeeping or other services related to the accounting
records or financial statements of the Fund; (ii) financial information
systems design and implementation; (iii) appraisal or valuation services,
fairness opinions or contribution-in-kind reports; (iv) actuarial
services; (v) internal audit outsourcing services; (vi) management
functions or human resources; (vii) broker or dealer, investment adviser
or investment banking services; (viii) legal services and expert services
unrelated to the audit; and (ix) any other service the Public Company
Accounting Oversight Board determines, by regulation, is impermissible.
Pre-approval by
the Committee of any permissible non-audit services is not required so long as:
(i) the aggregate amount of all such permissible non-audit services provided
to the Fund, the Adviser and any service providers controlling, controlled by
or under common control with the Adviser that provide ongoing services to the
Fund (Covered Service Providers) constitutes not more than 5% of the total
amount of revenues paid to the independent auditors during the fiscal year in
which the permissible non-audit services are provided to (a) the Fund, (b) the
Adviser and (c) any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the Fund during the
fiscal year in which the services are provided that would have to be approved
by the Committee; (ii) the permissible non-audit services were not
recognized by the Fund at the time of the engagement to be non-audit services;
and (iii) such services are promptly brought to the attention of the
Committee and approved by the Committee (or its delegate(s)) prior to the
completion of the audit.
(2) For the
Western Asset Investment Grade Defined Opportunity Trust Inc., the percentage
of fees that were approved by the audit committee, with respect to:
Audit-Related Fees was 100% 2009; Tax Fees was 100% for 2009; and Other Fees
were 100% for 2009.
(f) N/A
(g) Non-audit fees
billed by the Auditor for services rendered to Western Asset Investment Grade
Defined Opportunity Trust Inc., LMPFA and any entity controlling, controlled
by, or under common control with LMPFA that provides ongoing services to
Western Asset Investment Grade Defined Opportunity Trust Inc. during the
reporting period were $0 in 2009.
(h) Yes. Western Asset Investment Grade Defined
Opportunity Trust Inc.s Audit
Committee has considered whether the provision of non-audit services that were
rendered to Service Affiliates, which were not pre-approved (not requiring
pre-approval), is compatible with maintaining the Accountants
independence. All services provided by
the Auditor to the Western Asset Investment Grade Defined Opportunity
Trust Inc. or to Service Affiliates,
which were required to be pre-approved, were pre-approved as required.
ITEM 5.
AUDIT
COMMITTEE OF LISTED REGISTRANTS.
a)
The independent
board members are acting as the registrants audit committee as specified in Section 3(a)(58)(B)
of the Exchange Act
. The Audit Committee consists of the following
Board members:
William R. Hutchinson
Paolo M. Cucchi
Daniel P. Cronin
Carol L. Colman
Leslie H. Gelb
Dr. Riordan Roett
Jeswald W. Salacuse
b) Not applicable
ITEM 6.
SCHEDULE
OF INVESTMENTS.
Included
herein under Item 1.
ITEM 7.
DISCLOSURE
OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.
Proxy Voting Guidelines and Procedures
Legg Mason Partners Fund
Advisor, LLC (LMPFA) delegates the responsibility for voting proxies for the
fund to the subadviser through its contracts with the subadviser. The
subadviser will use its own proxy voting policies and procedures to vote
proxies. Accordingly, LMPFA does not expect to have proxy-voting responsibility
for the fund. Should LMPFA become responsible for voting proxies for any
reason, such as the inability of the subadviser to provide investment advisory
services, LMPFA shall utilize the proxy voting guidelines established by the
most recent subadviser to vote proxies until a new subadviser is retained.
The subadvisers Proxy
Voting Policies and Procedures govern in determining how proxies relating to
the funds portfolio securities are voted and are provided below. Information
regarding how each fund voted proxies (if any) relating to portfolio securities
during the most recent 12-month period ended June 30 is available without
charge (1) by calling 888-425-6432, (2) on the funds website at
http://www.leggmason.com/individualinvestors and (3) on the SECs website
at http://www.sec.gov.
Background
Western Asset Management
Company (WA), Western Asset Management Company Limited (WAML), Western
Asset Management Company Ltd. (WAMCL) and Western Asset Management Company
Pte. Ltd. (WAMC) (together Western Asset) have adopted and implemented
policies and procedures that we believe are reasonably designed to ensure that
proxies are voted in the best interest of clients, in accordance with our
fiduciary duties and SEC Rule 206(4)-6 under the Investment Advisers Act
of 1940 (Advisers Act). Our authority to vote the proxies of our clients is
established through investment management agreements or comparable documents,
and our proxy voting guidelines have been tailored to reflect these specific
contractual obligations. In addition to SEC requirements governing advisers,
our proxy voting policies reflect the long-standing fiduciary standards and
responsibilities for ERISA accounts. Unless a manager of ERISA assets has been
expressly precluded from voting proxies, the Department of Labor has determined
that the responsibility for these votes lies with the Investment Manager.
In exercising its voting
authority, Western Asset will not consult or enter into agreements with
officers, directors or employees of Legg Mason Inc. or any of its affiliates
(except that WA, WAML, WAMCL and WAMC may so consult and agree with each other)
regarding the voting of any securities owned by its clients.
Policy
Western Assets proxy voting
procedures are designed and implemented in a way that is reasonably expected to
ensure that proxy matters are handled in the best interest of our clients.
While the guidelines included in the procedures are intended to provide a
benchmark for voting standards, each vote is ultimately cast on a case-by-case
basis, taking into consideration Western Assets contractual obligations to our
clients and all other relevant facts and circumstances at the time of the vote
(such that these guidelines may be overridden to the extent Western Asset deems
appropriate).
Procedures
Responsibility and Oversight
The Western Asset Compliance
Department (Compliance Department) is responsible for administering and
overseeing the proxy voting process. The gathering of proxies is coordinated
through the Corporate Actions area of Investment Support (Corporate Actions).
Research analysts and portfolio managers are responsible for determining
appropriate voting positions on each proxy utilizing any applicable guidelines
contained in these procedures.
Client Authority
Prior to August 1,
2003, all existing client investment management agreements (IMAs) will be
reviewed to determine whether Western Asset has authority to vote client
proxies. At account start-up, or upon amendment of an IMA, the applicable
client IMA are similarly reviewed. If an agreement is silent on proxy voting,
but contains an overall delegation of discretionary authority or if the account
represents assets of an ERISA plan, Western Asset will assume responsibility
for proxy voting. The Client Account Transition Team maintains a matrix of
proxy voting authority.
Proxy Gathering
Registered owners of record,
client custodians, client banks and trustees (Proxy Recipients) that receive
proxy materials on behalf of clients should forward them to Corporate Actions.
Prior to August 1, 2003, Proxy Recipients of existing clients will be
reminded of the appropriate routing to Corporate Actions for proxy materials
received and reminded of their responsibility to forward all proxy materials on
a timely basis. Proxy Recipients for new clients (or, if Western Asset becomes
aware that the applicable Proxy Recipient for an existing client has changed,
the Proxy Recipient for the existing client) are notified at start-up of
appropriate routing to Corporate Actions of proxy materials received and
reminded of their responsibility to forward all proxy materials on a timely
basis. If Western Asset personnel other than Corporate Actions receive proxy
materials, they should promptly forward the materials to Corporate Actions.
Proxy Voting
Once proxy materials are
received by Corporate Actions, they are forwarded to the Compliance Department
for coordination and the following actions:
a.
Proxies are reviewed to determine accounts impacted.
b.
Impacted accounts are checked to confirm Western Asset voting authority.
c.
Compliance Department staff reviews proxy issues to determine any material
conflicts of interest. (See conflicts of interest section of these procedures
for further information on determining material conflicts of interest.)
d.
If a material conflict of interest exists, (i) to the extent reasonably
practicable and permitted by applicable law, the client is promptly notified,
the conflict is disclosed and Western Asset obtains the clients proxy voting
instructions, and (ii) to the extent that it is not reasonably practicable or
permitted by applicable law to notify the client and obtain such instructions
(e.g., the client is a mutual fund or other commingled vehicle or is an ERISA
plan client), Western Asset seeks voting instructions from an independent third
party.
e.
Compliance Department staff provides proxy material to the appropriate research
analyst or portfolio manager to obtain their recommended vote. Research
analysts and portfolio managers determine votes on a case-by-case basis taking
into account the voting guidelines contained in these procedures. For avoidance
of doubt, depending on the best interest of each individual client, Western
Asset may vote the same proxy differently for different clients. The analysts
or portfolio managers basis for their decision is documented and maintained by
the Compliance Department.
f.
Compliance Department staff votes the proxy pursuant to the instructions
received in (d) or (e) and returns the voted proxy as indicated in
the proxy materials.
Timing
Western Asset personnel act
in such a manner to ensure that, absent special circumstances, the proxy
gathering and proxy voting steps noted above can be completed before the
applicable deadline for returning proxy votes.
Recordkeeping
Western Asset maintains
records of proxies voted pursuant to Section 204-2 of the Advisers Act and
ERISA DOL Bulletin 94-2. These records include:
a.
A copy of Western Assets policies and procedures.
b.
Copies of proxy statements received regarding client securities.
c.
A copy of any document created by Western Asset that was material to making a
decision how to vote proxies.
d.
Each written client request for proxy voting records and Western Assets
written response to both verbal and written client requests.
e.
A proxy log including:
1.
Issuer name;
2.
Exchange ticker symbol of the issuers shares to be voted;
3.
Council on Uniform Securities Identification Procedures (CUSIP) number for
the shares to be voted;
4.
A brief identification of the matter voted on;
5.
Whether the matter was proposed by the issuer or by a shareholder of the
issuer;
6.
Whether a vote was cast on the matter;
7.
A record of how the vote was cast; and
8.
Whether the vote was cast for or against the recommendation of the issuers
management team.
Records are maintained in an
easily accessible place for five years, the first two in Western Assets
offices.
Disclosure
Part II of the WA Form ADV,
the WAML Form ADV, WAMCL Form ADV and WAMC Form ADV, each,
contain a description of Western Assets proxy policies. Prior to August 1,
2003, Western Asset will deliver
Part II of its revised Form ADV
to all existing clients, along with a letter identifying the new disclosure.
Clients will be provided a copy of these policies and procedures upon request.
In addition, upon request, clients may receive reports on how their proxies
have been voted.
Conflicts of Interest
All proxies are reviewed by
the Compliance Department for material conflicts of interest. Issues to be
reviewed include, but are not limited to:
1.
Whether Western Asset (or, to the extent required to be considered by
applicable law, its affiliates) manages assets for the company or an employee
group of the company or otherwise has an interest in the company;
2.
Whether Western Asset or an officer or director of Western Asset or the
applicable portfolio manager or analyst responsible for recommending the proxy
vote (together, Voting Persons) is a close relative of or has a personal or
business relationship with an executive, director or person who is a candidate
for director of the company or is a participant in a proxy contest; and
3.
Whether there is any other business or personal relationship where a Voting
Person has a personal interest in the outcome of the matter before
shareholders.
Voting Guidelines
Western Assets substantive
voting decisions turn on the particular facts and circumstances of each proxy
vote and are evaluated by the designated research analyst or portfolio manager.
The examples outlined below are meant as guidelines to aid in the decision
making process.
Guidelines are grouped
according to the types of proposals generally presented to shareholders. Part I
deals with proposals which have been approved and are recommended by a
companys board of directors; Part II deals with proposals submitted by
shareholders for inclusion in proxy statements; Part III addresses issues
relating to voting shares of investment companies; and Part IV addresses
unique considerations pertaining to foreign issuers.
I.
Board Approved Proposals
The vast majority of matters
presented to shareholders for a vote involve proposals made by a company itself
that have been approved and recommended by its board of directors. In view of
the enhanced corporate governance practices currently being implemented in
public companies, Western Asset generally votes in support of decisions reached
by independent boards of directors. More specific guidelines related to certain
board-approved proposals are as follows:
1. Matters relating to the
Board of Directors
Western Asset votes proxies
for the election of the companys nominees for directors and for board-approved
proposals on other matters relating to the board of directors with the
following exceptions:
a.
Votes are withheld for the entire board of directors if the board does not have
a majority of independent directors or the board does not have nominating,
audit and compensation committees composed solely of independent directors.
b.
Votes are withheld for any nominee for director who is considered an independent
director by the company and who has received compensation from the company
other than for service as a director.
c.
Votes are withheld for any nominee for director who attends less than 75% of
board and committee meetings without valid reasons for absences.
d.
Votes are cast on a case-by-case basis in contested elections of directors.
2.
Matters relating to Executive Compensation
Western Asset generally
favors compensation programs that relate executive compensation to a companys
long-term performance. Votes are cast on a case-by-case basis on board-approved
proposals relating to executive compensation, except as follows:
a.
Except where the firm is otherwise withholding votes for the entire board of
directors, Western Asset votes for stock option plans that will result in a
minimal annual dilution.
b.
Western Asset votes against stock option plans or proposals that permit
replacing or repricing of underwater options.
c.
Western Asset votes against stock option plans that permit issuance of options
with an exercise price below the stocks current market price.
d.
Except where the firm is otherwise withholding votes for the entire board of
directors, Western Asset votes for employee stock purchase plans that limit the
discount for shares purchased under the plan to no more than 15% of their
market value, have an offering period of 27 months or less and result in
dilution of 10% or less.
3.
Matters relating to Capitalization
The management of a
companys capital structure involves a number of important issues, including
cash flows, financing needs and market conditions that are unique to the
circumstances of each company. As a result, Western Asset votes on a
case-by-case basis on board-approved proposals involving changes to a companys
capitalization except where Western Asset is otherwise withholding votes for
the entire board of directors.
a.
Western Asset votes for proposals relating to the authorization of additional
common stock.
b.
Western Asset votes for proposals to effect stock splits (excluding reverse
stock splits).
c.
Western Asset votes for proposals authorizing share repurchase programs.
4.
Matters relating to Acquisitions, Mergers, Reorganizations and Other
Transactions
Western Asset votes these
issues on a case-by-case basis on board-approved transactions.
5.
Matters relating to Anti-Takeover Measures
Western Asset votes against
board-approved proposals to adopt anti-takeover measures except as follows:
a.
Western Asset votes on a case-by-case basis on proposals to ratify or approve
shareholder rights plans.
b.
Western Asset votes on a case-by-case basis on proposals to adopt fair price
provisions.
6.
Other Business Matters
Western Asset votes for
board-approved proposals approving such routine business matters such as
changing the companys name, ratifying the appointment of auditors and
procedural matters relating to the shareholder meeting.
a.
Western Asset votes on a case-by-case basis on proposals to amend a companys
charter or bylaws.
b.
Western Asset votes against authorization to transact other unidentified,
substantive business at the meeting.
II.
Shareholder Proposals
SEC regulations permit
shareholders to submit proposals for inclusion in a companys proxy statement.
These proposals generally seek to change some aspect of a companys corporate
governance structure or to change some aspect of its business operations.
Western Asset votes in accordance with the recommendation of the companys
board of directors on all shareholder proposals, except as follows:
1. Western Asset votes for
shareholder proposals to require shareholder approval of shareholder rights
plans.
2. Western Asset votes for
shareholder proposals that are consistent with Western Assets proxy voting
guidelines for board-approved proposals.
3. Western Asset votes on a
case-by-case basis on other shareholder proposals where the firm is otherwise
withholding votes for the entire board of directors.
III.
Voting Shares of Investment Companies
Western Asset may utilize
shares of open or closed-end investment companies to implement its investment
strategies. Shareholder votes for investment companies that fall within the
categories listed in Parts I and II above are voted in accordance with those
guidelines.
1. Western Asset votes on a
case-by-case basis on proposals relating to changes in the investment
objectives of an investment company taking into account the original intent of
the fund and the role the fund plays in the clients portfolios.
2. Western Asset votes on a
case-by-case basis all proposals that would result in increases in expenses
(e.g., proposals to adopt 12b-1 plans, alter investment advisory arrangements
or approve fund mergers) taking into account comparable expenses for similar
funds and the services to be provided.
IV.
Voting Shares of Foreign Issuers
In the event Western Asset
is required to vote on securities held in foreign issuers i.e. issuers that
are incorporated under the laws of a foreign jurisdiction and that are not
listed on a U.S. securities exchange or the NASDAQ stock market, the following
guidelines are used, which are premised on the existence of a sound corporate
governance and disclosure framework. These guidelines, however, may not be
appropriate under some circumstances for foreign issuers and therefore apply
only where applicable.
1. Western Asset votes for
shareholder proposals calling for a majority of the directors to be independent
of management.
2. Western Asset votes for
shareholder proposals seeking to increase the independence of board nominating,
audit and compensation committees.
3. Western Asset votes for
shareholder proposals that implement corporate governance standards similar to
those established under U.S. federal law and the listing requirements of U.S.
stock exchanges, and that do not otherwise violate the laws of the jurisdiction
under which the company is incorporated.
4. Western Asset votes on a
case-by-case basis on proposals relating to (1) the issuance of common
stock in excess of 20% of a companys outstanding common stock where
shareholders do not have preemptive rights, or (2) the issuance of common
stock in excess of 100% of a companys outstanding common stock where
shareholders have preemptive rights.
ITEM
8.
PORTFOLIO MANAGERS OF CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
(a)(1):
NAME
AND
|
|
LENGTH OF
|
|
PRINCIPAL OCCUPATION(S) DURING
|
ADDRESS
|
|
TIME
SERVED
|
|
PAST 5
YEARS
|
|
|
|
|
|
Stephen
A. Walsh
Western Asset
385 East Colorado Blvd.
Pasadena, CA 91101
|
|
Since 2009
|
|
Co-portfolio
manager of the fund; Deputy Chief Investment Officer of Western Asset since
2000.
|
|
|
|
|
|
Michael C. Buchanan
Western Asset
385 East Colorado Blvd.
Pasadena, CA
91101
|
|
Since 2009
|
|
Co-portfolio
manager of the fund; Head of Credit of Western Asset since 2005; Managing
Director and head of U.S. Credit Products from 2003-2005 at Credit Suisse
Asset Management
|
|
|
|
|
|
Jeffrey Van Schaick
Western Asset
385 East Colorado Blvd
Pasadena, CA
91101
|
|
Since 2009
|
|
Co-portfolio manager of the fund;
portfolio manager/research analyst with Western Asset and has been employed
as portfolio manager/research analyst with Western Asset for at least the
past five years.
|
|
|
|
|
|
Dipankar Shewaram
Western Asset
385 East Colorado Blvd
|
|
Since 2009
|
|
Co-portfolio manager of the fund;
portfolio manager with Western Asset since 2009; Partner/Principal, Senior
Portfolio Manager for Blue Bay Asset Management from 2002-2008.
|
Pasadena, CA
91101
|
|
|
|
|
|
|
|
|
|
Timothy Settel
Western Asset
385 East Colorado Blvd
Pasadena, CA
91101
|
|
Since 2009
|
|
Co-portfolio manager of the fund;
portfolio manager/research analyst with Western Asset and has been employed
as portfolio manager/research analyst with Western Asset for at least the
past five years.
|
|
|
|
|
|
Ryan Brist
Western Asset
385 East Colorado Blvd
Pasadena, CA
91101
|
|
Since 2009
|
|
Co-portfolio manager of the fund;
Head of U.S. Investment Grade Credit of Western Asset since 2009; Chief
Investment Officer and Portfolio Manager of Logan Circle Partners
2007-2009);Co-Chief Investment Officer and Senior Portfolio Manager at
Delaware Investment Advisors (2000-2007)
|
(a)(2): DATA TO BE PROVIDED BY FINANCIAL CONTROL
The following tables set forth certain additional information with respect to the funds portfolio managers for the fund. Unless noted otherwise, all information is provided as of November 30, 2009.
Other Accounts Managed by Portfolio Managers
The table below identifies the number of accounts (other than the fund) for which the funds portfolio managers have day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. For each category, the number of accounts and total assets in the accounts where fees are based on performance is also indicated.
|
|
Registered
|
|
Other
Pooled
|
|
|
Portfolio
|
|
Investment
|
|
Investment
|
|
Other
|
Manager(s)
|
|
Companies
|
|
Vehicles
|
|
Accounts
|
|
|
|
|
|
|
|
Stephen A. Walsh
|
|
110 registered investment companies with $184.9 billion
in total assets under management
|
|
232 Other pooled
investment vehicles with $112.1billion
in assets under management*
|
|
841 O
ther accounts with $201.4 billion in
total assets under management**
|
|
|
|
|
|
|
|
Jeffrey Van Schaick
|
|
3 registered investment companies with $0.9 billion
in total assets under management
|
|
4 Other pooled investment vehicles with $0.4 billion
in assets under management***
|
|
17 Other accounts with $6.2 billion in total assets
under management****
|
Michael C. Buchanan
|
|
17 registered investment Companies with $9.4 billion
in total assets Under management
|
|
8 Other pooled investment vehicles with $4.0 billion
in assets under management
|
|
14 Other accounts with $1.9 billion in total assets
under management
|
Dipankar Shewaram
|
|
0 registered investment Companies with $0 billion in
total assets Under management
|
|
8 Other pooled investment vehicles with $0.8 million
in assets under management
|
|
34 Other accounts with $10.1 billion in total assets
under management
@
|
|
|
|
|
|
|
|
Timothy Settel
|
|
0 registered investment Companies with $0 billion in
total assets Under management
|
|
1 Other pooled investment vehicle with $0.6 million
in assets under management
@@
|
|
0 Other accounts with $0 billion in total assets
under management
|
|
|
|
|
|
|
|
Ryan Brist
|
|
3 registered investment Companies with $0.9 billion
in total assets Under management
|
|
4 Other pooled investment vehicles with $0.4 million
in assets under management***
|
|
17 Other accounts with $6.2 billion in total assets
under management****
|
*
Includes 7 accounts managed, totaling
$1.1 billion, for which advisory fee is performance based.
**
Includes
95 accounts managed, totaling $25.3 billion, for which advisory fee is
performance based.
***
Includes
1 account managed, totaling less than $0.1 billion, for which advisory fee is
performance based.
****
Includes
2 accounts managed, totaling $0.2 billion, for which advisory fee is
performance based.
@
Includes
11 accounts managed, totaling $2.6 billion, for which advisory fee is
performance based.
@@
Includes
1 account managed, totaling $0.3 billion, for which advisory fee is performance
based.
The numbers above reflect the overall number of portfolios
managed by employees of Western Asset Management Company (Western Asset). Mr. Walsh
is involved in the management of all the Firms portfolios, but they are not
solely responsible for particular portfolios. Western Assets investment
discipline emphasizes a team approach that combines the efforts of groups of
specialists working in different market sectors. They are responsible for
overseeing implementation of Western Assets overall investment ideas and
coordinating the work of the various sector teams. This structure ensures that
client portfolios benefit from a consensus that draws on the expertise of all
team members.
(a)(3):
Portfolio Manager Compensation
With respect to the
compensation of the portfolio managers, Western Assets compensation system assigns
each employee a total compensation range, which is derived from annual market
surveys that benchmark each role with its job function and peer universe. This
method is designed to reward employees with total compensation reflective of
the external market value of their skills, experience, and ability to produce
desired results. Standard compensation includes competitive base salaries,
generous employee benefits, and a retirement plan.
In addition, the subadvisers
employees are eligible for bonuses. These are structured to closely align the
interests of employees with those of the subadviser, and are determined by the
professionals job function and pre-tax performance as measured by a formal
review process. All bonuses are completely discretionary. The principal factor
considered is a portfolio managers investment performance versus appropriate
peer groups and benchmarks (
e.g
.,
a securities index and with respect to a fund, the benchmark set forth in the
funds Prospectus to which the funds average annual total returns are compared
or, if none, the benchmark set forth in the funds annual report). Performance
is reviewed on a 1, 3 and 5 year basis for
compensationwith 3 years
having the most emphasis. The subadviser may also measure a portfolio managers
pre-tax investment performance against other benchmarks, as it determines
appropriate. Because portfolio managers are generally responsible for multiple
accounts (including the funds) with similar investment strategies, they are
generally compensated on the performance of the aggregate group of similar
accounts, rather than a specific account. Other factors that may be considered
when making bonus decisions include client service, business development,
length of service to the subadviser, management or supervisory
responsibilities, contributions to developing business strategy and overall contributions
to the subadvisers business.
Finally, in order to attract
and retain top talent, all professionals are eligible for additional incentives
in recognition of outstanding performance. These are determined based upon the
factors described above and include Legg Mason stock options and long-term
incentives that vest over a set period of time past the award date.
Potential Conflicts of Interest
Conflicts of Interest
The manager, subadvisers and
portfolio managers have interests which conflict with the interests of the
fund. There is no guarantee that the policies and procedures adopted by the
manager, the subadvisers and the fund will be able to identify or mitigate
these conflicts of interest.
Some examples of material
conflicts of interest include:
Allocation
of Limited Time and Attention
. A portfolio manager who is
responsible for managing multiple funds and/or accounts may devote unequal time
and attention to the management of those funds and/or accounts. A portfolio
manager may not be able to formulate as complete a strategy or identify equally
attractive investment opportunities for each of those funds and accounts as
might be the case if he or she were to devote substantially more attention to
the management of a single fund. Such a portfolio manager may make general
determinations across multiple funds, rather than tailoring a unique approach
for each fund. The effects of this conflict may be more pronounced where funds
and/or accounts overseen by a particular portfolio manager have different
investment strategies.
Allocation
of Limited Investment Opportunities; Aggregation of Orders
. If a
portfolio manager identifies a limited investment opportunity that may be
suitable for multiple funds and/or accounts, the opportunity may be allocated
among these several funds or accounts, which may limit the funds ability to
take full advantage of the investment opportunity. Additionally, a subadviser
may aggregate transaction orders for multiple accounts for purpose of
execution. Such aggregation may cause the price or brokerage costs to be less
favorable to a particular client than if similar transactions were not being
executed concurrently for other accounts. In addition, a subadvisers trade
allocation policies may result in the funds orders not being fully executed or
being delayed in execution.
Pursuit of
Differing Strategies
. At times, a portfolio manager may determine that
an investment opportunity may be appropriate for only some of the funds and/or
accounts for which he or she exercises investment responsibility, or may decide
that certain of the funds and/or accounts should take differing positions with
respect to a particular security. In these cases, the portfolio manager may
place separate transactions for one or more funds or accounts which may affect
the market price of the security or the execution of the transaction, or both,
to the detriment or benefit of one or more other funds and/or accounts. For
example, a portfolio manager may determine that it would be in the interest of
another account to sell a security that the fund holds long, potentially
resulting in a decrease in the market value of the security held by the fund.
Cross
Trades
. Portfolio managers may manage funds that engage in cross trades,
where one of the managers funds or accounts sells a particular security to
another fund or account managed by the same
manager.
Cross trades may pose conflicts of interest because of, for example, the
possibility that one account sells a security to another account at a higher
price than an independent third party would pay or otherwise enters into a
transaction that it would not enter into with an independent party, such as the
sale of a difficult-to-obtain security.
Selection
of Broker/Dealers
. Portfolio managers may select or influence the
selection of the brokers and dealers that are used to execute securities
transactions for the funds and/or accounts that they supervise. In addition to
executing trades, some brokers and dealers provide subadvisers with brokerage
and research services, These services may be taken into account in the
selection of brokers and dealers whether a broker is being selected to effect a
trade on an agency basis for a commission or (as is normally the case for the
funds) whether a dealer is being selected to effect a trade on a principal
basis. This may result in the payment of higher brokerage fees and/or execution
at a less favorable price than might have otherwise been available. The
services obtained may ultimately be more beneficial to certain of the managers
funds or accounts than to others (but not necessarily to the funds that pay the
increased commission or incur the less favorable execution). A decision as to
the selection of brokers and dealers could therefore yield disproportionate
costs and benefits among the funds and/or accounts managed.
Variation in Financial and Other
Benefits
. A conflict of interest arises where the financial
or other benefits available to a portfolio manager differ among the funds
and/or accounts that he or she manages. If the amount or structure of the
investment managers management fee and/or a portfolio managers compensation
differs among funds and/or accounts (such as where certain funds or accounts
pay higher management fees or performance-based management fees), the portfolio
manager might be motivated to help certain funds and/or accounts over others.
Similarly, the desire to maintain assets under management or to enhance the
portfolio managers performance record or to derive other rewards, financial or
otherwise, could influence the portfolio manager in affording preferential
treatment to those funds and/or accounts that could most significantly benefit
the portfolio manager. A portfolio manager may, for example, have an incentive
to allocate favorable or limited opportunity investments or structure the
timing of investments to favor such funds and/or accounts. Also, a portfolio
managers or the managers or a subadvisers desire to increase assets under
management could influence the portfolio manager to keep a fund open for new
investors without regard to potential benefits of closing the fund to new
investors. Additionally, the portfolio manager might be motivated to favor
funds and/or accounts in which he or she has an ownership interest or in which
the investment manager and/or its affiliates have ownership interests.
Conversely, if a portfolio manager does not personally hold an investment in
the fund, the portfolio managers conflicts of interest with respect to the
fund may be more acute.
Related Business Opportunities
. The
investment manager or its affiliates may provide more services (such as
distribution or recordkeeping) for some types of funds or accounts than for
others. In such cases, a portfolio manager may benefit, either directly or
indirectly, by devoting disproportionate attention to the management of funds
and/or accounts that provide greater overall returns to the investment manager
and its affiliates.
(a)(4):
Portfolio Manager Securities Ownership
The table below identifies the dollar range of securities beneficially
owned by each portfolio managers as of November 30, 2009.
Portfolio
Manager(s)
|
|
Dollar Range of
Portfolio
Securities
Beneficially
Owned
|
|
|
|
Stephen
A. Walsh
|
|
B
|
Jeffrey Van Schaick
|
|
A
|
Michael
C. Buchanan
|
|
A
|
Dipankar
Shewaram
|
|
A
|
Timothy
Settel
|
|
A
|
Ryan
Brist
|
|
A
|
Dollar Range ownership is as follows:
A: none
B: $1 - $10,000
C: 10,001 - $50,000
D: $50,001 - $100,000
E: $100,001 - $500,000
F: $500,001 - $1 million
G: over $1 million
ITEM 9.
PURCHASES
OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED
PURCHASERS.
None.
ITEM 10.
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 11.
CONTROLS
AND PROCEDURES.
(a)
The
registrants principal executive officer and principal financial officer have
concluded that the registrants 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 registrants internal control over financial reporting
(as defined in Rule 30a-3(d) under the 1940 Act) that occurred during
the registrants last fiscal half-year (the registrants second fiscal
half-year in the case of an annual report) that have materially affected, or
are likely to materially affect the registrants internal control over
financial reporting.
ITEM 12.
EXHIBITS.
(a) (1) Code of
Ethics attached hereto.
Exhibit 99.CODE ETH
(a) (2) Certifications
pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.CERT
(b) Certifications
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.906CERT
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, there unto duly authorized.
Western Asset Investment Grade Defined Opportunity Trust Inc.
By:
|
/s/
R. Jay Gerken
|
|
|
(R.
Jay Gerken)
|
|
|
Chief Executive Officer
of
|
|
|
Western
Asset Investment Grade Defined Opportunity Trust Inc.
|
|
|
|
|
Date:
|
January 29,
2010
|
|
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
of
|
|
|
Western
Asset Investment Grade Defined Opportunity Trust Inc.
|
|
|
|
|
Date:
|
January 29, 2010
|
|
|
|
|
|
|
|
By:
|
/s/
Kaprel Ozsolak
|
|
|
(Kaprel
Ozsolak)
|
|
|
Chief Financial Officer
of
|
|
|
Western
Asset Investment Grade Defined Opportunity Trust Inc.
|
|
|
|
|
Date:
|
January 29,
2010
|
|
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