Edgar Filing: WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.

Western Asset Variable Rate Strategic Fund Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-21609

Western Asset Variable Rate Strategic Fund Inc.

(Exact name of registrant as specified in charter)

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

(Address of principal executive offices) (Zip code)

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

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

Date of fiscal year end: September 30

Date of reporting period: June 30, 2017

ITEM 1.

SCHEDULE OF INVESTMENTS.

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.

FORM N-Q

JUNE 30, 2017

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.


Schedule of investments (unaudited)		June 30, 2017


SECURITY	RATE			MATURITY DATE		FACE AMOUNT†		VALUE
COLLATERALIZED MORTGAGE OBLIGATIONS - 45.8%
Adjustable Rate Mortgage Trust, 2005-11 5A1		1.756	%		2/25/36		122,015	$	98,537	^(a)
Banc of America Funding Corp., 2004-B 6A1		2.057	%		12/20/34		319,214		231,830	^(a)
Banc of America Funding Corp., 2005-E 8A1		2.075	%		6/20/35		309,038		204,816	^(a)
Banc of America Funding Corp., 2015-R3 2A2		1.154	%		2/27/37		1,541,026		989,548	^(a)(b)
Bayview Commercial Asset Trust, 2006-1A B2		2.916	%		4/25/36		415,670		303,812	^(a)(b)
Bear Stearns Alt-A Trust, 2004-03 A1		1.856	%		4/25/34		325,730		316,057	^(a)
Bear Stearns Alt-A Trust, 2004-10 1A3		2.216	%		9/25/34		12,600		12,614	^(a)
Bear Stearns ARM Trust, 2004-08 11A1		3.111	%		11/25/34		210,438		204,908	^(a)
CGBAM Commercial Mortgage Trust, 2016-IMC A		3.072	%		11/15/21		890,000		892,361	^(a)(b)
Chevy Chase Mortgage Funding Corp., 2004-2A A1		1.486	%		5/25/35		265,150		242,845	^(a)(b)
Chevy Chase Mortgage Funding Corp., 2004-3A A1		1.466	%		8/25/35		237,377		227,719	^(a)(b)
Commercial Mortgage Trust, 2007-C9 AJ		5.650	%		12/10/49		96,076		96,066	^(a)
Commercial Mortgage Trust, 2016-SAVA A		1.720	%		10/15/34		550,000		553,032	^(a)(b)
Countrywide Alternative Loan Trust, 2004-6CB A		1.796	%		5/25/34		261,088		261,081	^(a)
Countrywide Alternative Loan Trust, 2005-24 4A1		1.442	%		7/20/35		628,177		598,550	^(a)
Countrywide Home Loans, 2004-20 2A1		3.009	%		9/25/34		382,018		285,913	^(a)
Countrywide Home Loans, 2004-R1 2A		6.500	%		11/25/34		45,766		45,413	^(b)
Countrywide Home Loans, 2005-HYB9 3A1A		3.309	%		2/20/36		390,885		354,789	^(a)
Countrywide Home Loans, 2005-R2 2A1		7.000	%		6/25/35		121,494		121,719	^(b)
Countrywide Home Loans, 2006-R2 AF1		1.636	%		7/25/36		99,570		91,817	^(a)(b)
Countrywide Home Loans, Mortgage Pass-Through Trust, 2004-29 2A1		1.876	%		2/25/35		31,394		27,701	^(a)
Countrywide Home Loans Mortgage Pass-Through Trust, 2005-R1 1AF1		1.576	%		3/25/35		158,548		140,963	^(a)(b)
Credit Suisse Mortgage Trust, 2014-5R 3A1		1.224	%		12/27/36		125,595		123,670	^(a)(b)
Credit Suisse Mortgage Trust, 2015-02R 7A2		2.854	%		8/27/36		1,200,245		1,010,176	^(a)(b)
Credit Suisse Mortgage Trust, 2015-10R 3A2		1.503	%		10/27/46		1,110,000		1,067,160	^(a)(b)
Deutsche Bank Commercial Mortgage Trust, 2016-C1 ASB		3.038	%		5/10/49		250,000		254,521
Deutsche Mortgage Securities Inc., 2004-4 3AR1		3.964	%		6/25/34		210,969		204,892	^(a)
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2013-DN1 M2		8.366	%		7/25/23		420,000		519,191	^(a)
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2015-DNA1 M2		3.066	%		10/25/27		270,000		277,005	^(a)
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2015-HQ1 M3		5.016	%		3/25/25		260,000		282,971	^(a)
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2016-DNA3 M2		3.216	%		12/25/28		350,000		358,836	^(a)
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2016-DNA4 M2		2.516	%		3/25/29		530,000		536,157	^(a)
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2017-DNA2 B2		12.466	%		10/25/29		370,000		370,916	^(a)
Federal National Mortgage Association (FNMA), 2013-25 BI, IO		3.000	%		3/25/33		8,956,883		987,328
Federal National Mortgage Association (FNMA), 2013-62 AI, IO		3.000	%		6/25/33		5,888,644		788,550

See Notes to Schedule of Investments.

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.


Schedule of investments (unaudited) (cont’d)		June 30, 2017


SECURITY	RATE			MATURITY DATE		FACE AMOUNT†		VALUE
COLLATERALIZED MORTGAGE OBLIGATIONS - (continued)
Federal National Mortgage Association (FNMA), STRIPS, 347 2, IO		5.000	%		1/25/34		864,705	$	168,708
Federal National Mortgage Association (FNMA), STRIPS, IO, 339 30		5.500	%		8/25/18		30,702		326	^(a)
Federal National Mortgage Association (FNMA) - CAS, 2013-C01 M2		6.466	%		10/25/23		300,000		353,300	^(a)
Federal National Mortgage Association (FNMA) - CAS, 2016-C01 1B		12.966	%		8/25/28		259,996		350,215	^(a)(b)
Federal National Mortgage Association (FNMA) - CAS, 2016-C04 1B		11.466	%		1/25/29		899,867		1,119,730	^(a)(b)
Federal National Mortgage Association (FNMA) - CAS, 2016-C04 1M1		2.666	%		1/25/29		267,979		271,618	^(a)(b)
Federal National Mortgage Association (FNMA) - CAS, 2016-C04 1M2		5.466	%		1/25/29		1,250,000		1,378,827	^(a)(b)
Federal National Mortgage Association (FNMA) - CAS, 2016-C06 1B		10.466	%		4/25/29		1,010,000		1,182,645	^(a)(b)
GMRF Mortgage Acquisition Co., LLC, 2017-1 A22		3.000	%		7/25/56		254,544		254,582	^(a)(b)
Government National Mortgage Association (GNMA), 2010-H03 FA		1.594	%		3/20/60		124,767		125,013	^(a)(c)
Government National Mortgage Association (GNMA), 2010-H10 FC		2.044	%		5/20/60		102,960		104,405	^(a)(c)
Government National Mortgage Association (GNMA), 2010-H11 FA		2.044	%		6/20/60		589,977		599,342	^(a)(c)
Government National Mortgage Association (GNMA), 2011-H01 AF		1.443	%		11/20/60		1,105,381		1,102,329	^(a)(c)
Government National Mortgage Association (GNMA), 2011-H03 FA		1.493	%		1/20/61		122,633		122,582	^(a)(c)
Government National Mortgage Association (GNMA), 2011-H05 FA		1.493	%		12/20/60		238,619		238,723	^(a)(c)
Government National Mortgage Association (GNMA), 2011-H05 FB		1.493	%		12/20/60		221,263		221,025	^(a)(c)
Government National Mortgage Association (GNMA), 2011-H06 FA		1.443	%		2/20/61		524,848		524,281	^(a)(c)
Government National Mortgage Association (GNMA), 2011-H07 FA		1.493	%		2/20/61		382,625		382,755	^(a)(c)
Government National Mortgage Association (GNMA), 2011-H08 FD		1.493	%		2/20/61		335,535		335,393	^(a)(c)
Government National Mortgage Association (GNMA), 2011-H09 AF		1.493	%		3/20/61		686,453		686,159	^(a)(c)
Government National Mortgage Association (GNMA), 2011-H11 FB		1.493	%		4/20/61		133,647		133,715	^(a)(c)
Government National Mortgage Association (GNMA), 2012-H18 NA		1.513	%		8/20/62		577,513		577,615	^(a)(c)
Government National Mortgage Association (GNMA), 2012-H23 SA		1.523	%		10/20/62		404,594		404,439	^(a)(c)
Government National Mortgage Association (GNMA), 2012-H23 WA		1.513	%		10/20/62		613,971		614,681	^(a)(c)
GSMPS Mortgage Loan Trust, 2005-RP2 1AF		1.566	%		3/25/35		533,674		475,305	^(a)(b)
GSMPS Mortgage Loan Trust, 2006-RP2 1AF1		1.616	%		4/25/36		266,903		222,700	^(a)(b)
HarborView Mortgage Loan Trust, 2004-10 4A		3.406	%		1/19/35		154,613		152,423	^(a)
HarborView Mortgage Loan Trust, 2005-14 3A1A		3.523	%		12/19/35		68,460		66,612	^(a)
IMPAC Secured Assets Corp., 2005-2 A1		1.536	%		3/25/36		1,208,024		976,957	^(a)
Indymac Index Mortgage Loan Trust, 2004-AR07 A2		2.076	%		9/25/34		154,767		144,941	^(a)
JPMBB Commercial Mortgage Securities Trust, 2013-C17 ASB		3.705	%		1/15/47		150,000		157,795
JPMorgan Chase Commercial Mortgage Securities Trust, 2006-LDP9 AJ		5.411	%		5/15/47		1,210,000		858,558

See Notes to Schedule of Investments.

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.


Schedule of investments (unaudited) (cont’d)		June 30, 2017


SECURITY	RATE			MATURITY DATE		FACE AMOUNT†		VALUE
COLLATERALIZED MORTGAGE OBLIGATIONS - (continued)
JPMorgan Chase Commercial Mortgage Securities Trust, 2007-CB18 AJ		5.502	%		6/12/47		690,000	$	598,938	^(a)
JPMorgan Mortgage Trust, 2005-A3 3A4		3.177	%		6/25/35		214,739		214,949	^(a)
MASTR Adjustable Rate Mortgages Trust, 2003-6 2A1		3.159	%		12/25/33		69,735		68,084	^(a)
MASTR Reperforming Loan Trust, 2005-2 1A1F		1.566	%		5/25/35		830,995		713,822	^(a)(b)
MASTR Reperforming Loan Trust, 2006-2 2A1		3.482	%		5/25/36		92,967		84,666	^(a)(b)
Morgan Stanley Bank of America Merrill Lynch Trust, 2016 C32 ASB		3.514	%		12/15/49		350,000		367,146
Morgan Stanley Capital I Trust, 2007-HQ11 AJ		5.508	%		2/12/44		355,059		348,258	^(a)
Morgan Stanley Capital I Trust, 2007-IQ16 AM		6.330	%		12/12/49		460,000		465,671	^(a)
Morgan Stanley Mortgage Loan Trust, 2006-6AR 2A		3.294	%		5/25/36		500,641		434,314	^(a)
Morgan Stanley Reremic Trust, 2015-R2 1A1		1.394	%		12/26/46		415,066		406,399	^(a)(b)
Morgan Stanley Reremic Trust, 2015-R2 1B		1.394	%		12/26/46		1,497,568		776,166	^(a)(b)
Morgan Stanley Reremic Trust, 2015-R6 1A1		1.284	%		7/26/45		242,033		229,622	^(a)(b)
Mortgage IT Trust, 2005-3 A1		1.516	%		8/25/35		285,969		273,943	^(a)
MSCG Trust, 2016-SNR A		3.460	%		11/15/34		660,000		663,763	^(a)(b)
Nomura Resecuritization Trust, 2015-1R 2A2		1.497	%		10/26/36		1,070,000		1,054,799	^(a)(b)
Prime Mortgage Trust, 2006-DR1 2A2		6.000	%		5/25/35		474,424		443,154	^(b)
Residential Accredit Loans Inc., 2004-QA2 A2		1.656	%		6/25/34		167,040		164,375	^(a)
Structured ARM Loan Trust, 2004-09XS A		1.586	%		7/25/34		367,632		359,581	^(a)
Structured Asset Mortgage Investments Inc., 2004-AR3 1A1		1.809	%		7/19/34		240,191		232,237	^(a)
Structured Asset Mortgage Investments Inc., 2006-AR2 A1		1.446	%		2/25/36		611,951		551,489	^(a)
Structured Asset Mortgage Investments Inc., 2006-AR3 11A1		1.426	%		4/25/36		246,969		224,059	^(a)
Structured Asset Securities Corp., 2005-RF1 A		1.566	%		3/25/35		152,278		135,266	^(a)(b)
Structured Asset Securities Corp., 2005-RF2 A		0.783	%		4/25/35		156,663		141,574	^(a)(b)
Washington Mutual Inc., Mortgage Pass-Through Certificates, 2003-AR8		1.576	%		10/25/45		420,143		402,889	^(a)
Washington Mutual Inc., Mortgage Pass-Through Certificates, 2004-AR11		2.847	%		10/25/34		121,692		121,844	^(a)
Washington Mutual Inc., Mortgage Pass-Through Certificates, 2004-AR12 A2A		1.606	%		10/25/44		108,397		106,671	^(a)
Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-4 CB9		1.616	%		6/25/35		501,390		415,416	^(a)
Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-AR01 A2A3		2.016	%		1/25/45		86,264		85,684	^(a)
Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-AR08 2AB3		1.576	%		7/25/45		646,609		630,079	^(a)
Washington Mutual Inc., Mortgage Pass-Through Certificates, 2005-AR13 A1C3		1.706	%		10/25/45		179,181		173,122	^(a)
Wells Fargo Commercial Mortgage Trust, 2015-C31 D		3.852	%		11/15/48		454,630		349,790
Wells Fargo Commercial Mortgage Trust, 2015-NXS3 ASB		3.371	%		9/15/57		140,000		145,491

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost - $37,399,212)									38,774,424

See Notes to Schedule of Investments.

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.


Schedule of investments (unaudited) (cont’d)		June 30, 2017


SECURITY	RATE			MATURITY DATE		FACE AMOUNT†		VALUE
ASSET-BACKED SECURITIES - 30.3%
Ace Securities Corp., 2005-HE3 M4		2.161	%		5/25/35		1,280,000	$	1,131,596	^(a)
Allegro CLO Ltd., 2015-1A D		4.656	%		7/25/27		250,000		252,476	^(a)(b)
ALM Loan Funding, 2013-10A B		3.758	%		1/15/25		250,000		250,105	^(a)(b)
Ameriquest Mortgage Securities Inc., 2002-AR1 M1		2.095	%		9/25/32		101,152		99,985	^(a)
Ares CLO Ltd., 2013-2A XR		2.153	%		7/28/29		300,000		300,000	^(a)(b)
Argent Securities Inc., 2003-W3 M1		2.341	%		9/25/33		24,093		21,898	^(a)
Avery Point CLO Ltd., 2014-1A CR		3.506	%		4/25/26		250,000		251,801	^(a)(b)
Bear Stearns Asset-Backed Securities Trust, 2007-SD1 1A2A		6.000	%		10/25/36		599,039		466,091
BlueMountain CLO Ltd., 2014-2A DR		4.307	%		7/20/26		250,000		250,063	^(a)(b)(d)
Carlyle Global Market Strategies, 2013-4A C		3.958	%		10/15/25		250,000		250,071	^(a)(b)
Carlyle Global Market Strategies, 2017-2A A1B		2.551	%		7/20/31		250,000		249,199	^(a)(b)
Carlyle Global Market Strategies, 2017-2A C		5.031	%		7/20/31		250,000		250,958	^(a)(b)
Cent CLO LP, 2014-21A A1BR		2.380	%		7/27/26		250,000		250,021	^(a)(b)
Chase Funding Mortgage Loan Asset-Backed Certificates, 2004-1 1A7		3.985	%		11/25/33		260,490		269,041
Citigroup Mortgage Loan Trust Inc., 2005-OPT1 M1		1.846	%		2/25/35		244,419		234,756	^(a)
Conseco Financial Corp., 1997-4 M1		7.220	%		2/15/29		413,838		429,256	^(a)
Countrywide Asset-Backed Certificates, 2003-5 AF5		5.270	%		2/25/34		609,593		624,314
Countrywide Asset-Backed Certificates, 2004-BC1 M1		1.966	%		2/25/34		91,675		88,842	^(a)
Countrywide Asset-Backed Certificates, 2007-13 2A1		2.116	%		10/25/47		664,497		641,508	^(a)
Countrywide Home Equity Loan Trust, 2006-HW 2A1B		1.309	%		11/15/36		443,922		375,489	^(a)
Credit-Based Asset Servicing and Securitization LLC, 2007-SP1 A4		6.020	%		12/25/37		355,115		368,171	^(b)
Greenpoint Home Equity Loan Trust, 2004-4 A		1.549	%		8/15/30		95,475		91,445	^(a)
Greenpoint Manufactured Housing, 1999-3 1A7		7.270	%		6/15/29		136,849		140,994
GSAA Trust, 2006-5 2A3		1.486	%		3/25/36		908,498		668,694	^(a)
GSAMP Trust, 2004-OPT B1		3.616	%		11/25/34		50,630		34,531	^(a)
GSAMP Trust, 2004-SEA2 M2		2.466	%		3/25/34		1,105,381		826,000	^(a)
GSRPM Mortgage Loan Trust, 2007-1 A		1.616	%		10/25/46		289,755		251,104	^(a)(b)
Indymac Seconds Asset Backed Trust, 2006-A A		1.476	%		6/25/36		2,127,299		384,669	^(a)
Jamestown CLO Ltd., 2017-10A A2		3.320	%		7/17/29		250,000		250,000	^(a)(b)(d)
JFIN CLO Ltd., 2017-1A A1		2.324	%		4/24/29		200,000		200,763	^(a)(b)
Lehman XS Trust, 2006-8 2A4A		1.476	%		6/25/36		1,829,440		1,258,822	^(a)
Long Beach Mortgage Loan Trust, 2001-3 M1		2.041	%		9/25/31		105,731		103,843	^(a)
Long Beach Mortgage Loan Trust, 2002-1 2M1		2.341	%		5/25/32		113,212		113,109	^(a)
Madison Park Funding Ltd., 2013-11A C		3.903	%		10/23/25		250,000		250,170	^(a)(b)
Magnetite CLO Ltd., 2014-9A A1R		2.250	%		7/25/26		250,000		250,000	^(a)(b)
Marathon CLO Ltd., 2015-8A C		5.208	%		7/18/27		250,000		252,357	^(a)(b)
Morgan Stanley Capital Inc., 2003-NC9 M		2.341	%		9/25/33		508,038		503,681	^(a)
Morgan Stanley Capital Inc., 2004-HE8 A7		2.276	%		9/25/34		74,135		69,222	^(a)
Morgan Stanley Capital Inc., 2004-HES M2		3.091	%		6/25/34		824,383		812,195	^(a)
Navient Student Loan Trust, 2016-6A A2		1.966	%		3/25/66		600,000		602,770	^(a)(b)
Neuberger Berman CLO Ltd., 2017-24A C		3.549	%		4/19/30		250,000		246,456	^(a)(b)
New Century Home Equity Loan Trust, 2004-3 M1		2.146	%		11/25/34		638,898		611,852	^(a)
New Residential Mortgage Loan Trust, 2017-1A A1		4.000	%		2/25/57		736,890		764,717	^(a)(b)
Novastar Home Equity Loan, 2004-1 M3		2.041	%		6/25/34		690,000		676,789	^(a)
OneMain Financial Issuance Trust, 2016-3A A		3.830	%		6/18/31		925,000		958,605	^(b)
Option One Mortgage Loan Trust, 2005-1 A4		2.016	%		2/25/35		43,017		43,030	^(a)
Option One Mortgage Loan Trust, 2005-3 M4		1.836	%		8/25/35		1,040,000		517,327	^(a)

See Notes to Schedule of Investments.

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.


Schedule of investments (unaudited) (cont’d)		June 30, 2017


SECURITY	RATE			MATURITY DATE		FACE AMOUNT†		VALUE
ASSET-BACKED SECURITIES - (continued)
Origen Manufactured Housing Contract Trust, 2007-A A2		2.775	%		4/15/37		394,115	$	367,631	^(a)
OSCAR US Funding Trust, 2017-1A A2A		2.300	%		5/11/20		170,000		170,369	^(b)
Park Place Securities Inc., 2004-WHQ2 M2		2.161	%		2/25/35		79,045		79,297	^(a)
People’s Choice Home Loan Securities Trust, 2004-2 M1		2.116	%		10/25/34		55,266		55,472	^(a)
RAAC Series, 2006-RP2 A		1.466	%		2/25/37		102,347		102,089	^(a)(b)
RAAC Series, 2006-RP3 A		1.486	%		5/25/36		450,938		443,819	^(a)(b)
Receivables Acquisition LLC, 2017-1 A2B		6.991	%		9/16/19		479,195		479,195	^(e)
Regatta IV Funding Ltd., 2014-1A D		4.656	%		7/25/26		250,000		249,573	^(a)(b)
Renaissance Home Equity Loan Trust, 2003-2 A		2.096	%		8/25/33		71,288		67,146	^(a)
Residential Asset Mortgage Products Inc., 2003-RS7 MII1		2.341	%		8/25/33		19,566		18,558	^(a)
Residential Asset Mortgage Products Inc., 2003-SL1 M1		7.321	%		4/25/31		500,195		270,219	^(a)
Residential Asset Securities Corp., 2005-KS12 M4		1.856	%		1/25/36		460,000		350,870	^(a)
Residential Asset Securities Corp., 2006-KS2 M3		1.626	%		3/25/36		1,260,000		1,090,476	^(a)
Residential Funding Mortgage Securities Trust, 2006-HSA3 A		1.346	%		5/25/36		694,650		656,861	^(a)
SACO I Trust, 2006-3 A3		1.676	%		4/25/36		155,681		345,821	^(a)
SACO I Trust, 2006-4 A1		1.556	%		3/25/36		151,934		291,679	^(a)
Seneca Park CLO Ltd., 2014-1A AR		2.278	%		7/17/26		250,000		250,488	^(a)(b)
SLM Student Loan Trust, 2007-A A4A		1.486	%		12/16/41		600,000		551,029	^(a)
SMB Private Education Loan Trust, 2016-C A2A		2.340	%		9/15/34		800,000		789,317	^(b)
Structured Asset Investment Loan Trust, 2004-9 M4		3.166	%		10/25/34		117,619		95,608	^(a)
Towd Point Mortgage Trust, 2017-1 A1		2.750	%		10/25/56		692,491		692,326	^(a)(b)
Venture CDO Ltd., 2017-28A A2		2.716	%		7/20/30		300,000		297,664	^(a)(b)(d)

TOTAL ASSET-BACKED SECURITIES (Cost - $23,882,401)									25,654,293

CORPORATE BONDS & NOTES - 39.9%
CONSUMER DISCRETIONARY - 3.2%
Auto Components - 0.3%
Goodyear Tire & Rubber Co., Senior Bonds		5.125	%		11/15/23		90,000		94,500
ZF North America Capital Inc., Senior Notes		4.750	%		4/29/25		200,000		211,750	^(b)

Total Auto Components									306,250

Automobiles - 2.1%
Ford Motor Credit Co., LLC, Senior Notes		5.875	%		8/2/21		250,000		279,038	^(c)
General Motors Financial Co. Inc., Senior Notes		4.375	%		9/25/21		400,000		422,033	^(c)
General Motors Financial Co. Inc., Senior Notes		4.250	%		5/15/23		1,000,000		1,047,947	^(c)

Total Automobiles									1,749,018

Diversified Consumer Services - 0.0%
Service Corp. International, Senior Notes		7.625	%		10/1/18		30,000		32,138

Media - 0.8%
DISH DBS Corp., Senior Notes		6.750	%		6/1/21		400,000		445,000
DISH DBS Corp., Senior Notes		5.875	%		7/15/22		190,000		204,725

Total Media									649,725

TOTAL CONSUMER DISCRETIONARY									2,737,131

CONSUMER STAPLES - 2.4%
Beverages - 0.5%
Anheuser-Busch InBev Finance Inc., Senior Notes		2.430	%		2/1/21		440,000		455,927	^(a)(c)

Food Products - 1.4%
Kraft Heinz Foods Co., Senior Notes		3.950	%		7/15/25		920,000		947,587	^(c)
Smithfield Foods Inc., Senior Notes		2.700	%		1/31/20		220,000		221,433	^(b)

Total Food Products									1,169,020

See Notes to Schedule of Investments.

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.


Schedule of investments (unaudited) (cont’d)		June 30, 2017


SECURITY	RATE			MATURITY DATE		FACE AMOUNT†		VALUE
Tobacco - 0.5%
Altria Group Inc., Senior Notes		9.250	%		8/6/19		350,000	$	401,906	^(c)

TOTAL CONSUMER STAPLES									2,026,853

ENERGY - 9.2%
Energy Equipment & Services - 0.5%
Ensco PLC, Senior Notes		5.200	%		3/15/25		300,000		245,250	^(c)
Halliburton Co., Senior Notes		3.250	%		11/15/21		170,000		174,451	^(c)

Total Energy Equipment & Services									419,701

Oil, Gas & Consumable Fuels - 8.7%
Anadarko Petroleum Corp., Senior Notes		4.850	%		3/15/21		210,000		224,327
BP Capital Markets PLC, Senior Notes		3.561	%		11/1/21		190,000		198,993	^(c)
Chesapeake Energy Corp., Senior Notes		4.408	%		4/15/19		400,000		394,000	^(a)
Chevron Corp., Senior Notes		2.100	%		5/16/21		330,000		329,185	^(c)
Continental Resources Inc., Senior Notes		5.000	%		9/15/22		500,000		492,500	^(c)
Ecopetrol SA, Senior Notes		4.250	%		9/18/18		240,000		246,120	^(c)
Enterprise Products Operating LLC, Junior Subordinated Notes		4.877	%		8/1/66		80,000		80,400	^(a)(c)
Enterprise Products Operating LLC, Junior Subordinated Notes		7.034	%		1/15/68		120,000		123,480	^(a)(c)
LUKOIL International Finance BV, Senior Notes		7.250	%		11/5/19		240,000		264,599	^(f)
NGPL PipeCo LLC, Senior Secured Notes		7.119	%		12/15/17		230,000		235,463	^(b)
Occidental Petroleum Corp., Senior Notes		4.100	%		2/1/21		40,000		42,631
Petrobras Global Finance BV, Senior Notes		3.000	%		1/15/19		1,230,000		1,225,941
Petrobras Global Finance BV, Senior Notes		6.125	%		1/17/22		1,230,000		1,271,820
Petroleos Mexicanos, Senior Notes		3.500	%		7/23/20		250,000		253,250
Rosneft Finance SA, Senior Notes		7.875	%		3/13/18		200,000		207,379	^(f)
Shell International Finance BV, Senior Notes		1.875	%		5/10/21		600,000		592,970	^(c)
Shell International Finance BV, Senior Notes		1.750	%		9/12/21		120,000		117,822	^(c)
Transcontinental Gas Pipe Line Co., LLC, Senior Notes		7.850	%		2/1/26		210,000		270,610
Whiting Petroleum Corp., Senior Notes		5.000	%		3/15/19		500,000		499,375
Williams Cos. Inc., Senior Notes		4.550	%		6/24/24		250,000		258,125

Total Oil, Gas & Consumable Fuels									7,328,990

TOTAL ENERGY									7,748,691

FINANCIALS - 16.6%
Banks - 11.9%
Bank of America Corp., Junior Subordinated Notes		6.250	%		9/5/24		650,000		707,688	^(a)(g)
Bank of America Corp., Subordinated Notes		4.000	%		1/22/25		660,000		672,146	^(c)
Citigroup Inc., Junior Subordinated Bonds		6.300	%		5/15/24		570,000		607,763	^(a)(g)
Citigroup Inc., Subordinated Bonds		4.400	%		6/10/25		900,000		938,651	^(c)
Cooperatieve Rabobank U.A., Junior Subordinated Notes		11.000	%		6/30/19		260,000		302,965	^(a)(b)(c)(g)
Credit Agricole SA, Junior Subordinated Notes		8.375	%		10/13/19		620,000		694,400	^(a)(b)(c)(g)
JPMorgan Chase & Co., Junior Subordinated Bonds		5.150	%		5/1/23		1,320,000		1,362,240	^(a)(c)(g)
M&T Bank Corp., Junior Subordinated Bonds		6.450	%		2/15/24		1,190,000		1,317,925	^(a)(c)(g)
PNC Financial Services Group Inc., Junior Subordinated Bonds		4.850	%		6/1/23		990,000		1,009,800	^(a)(c)(g)
Santander UK Group Holdings PLC, Senior Notes		3.571	%		1/10/23		200,000		204,763	^(c)
Wachovia Capital Trust III, Junior Subordinated Bonds		5.570	%		7/31/17		1,800,000		1,812,150	^(a)(c)(g)
Wells Fargo & Co., Senior Notes		3.500	%		3/8/22		450,000		467,789	^(c)

Total Banks									10,098,280

See Notes to Schedule of Investments.

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.


Schedule of investments (unaudited) (cont’d)		June 30, 2017


SECURITY	RATE			MATURITY DATE		FACE AMOUNT†		VALUE
Capital Markets - 2.0%
Bank of New York Mellon Corp., Junior Subordinated Notes		4.500	%		6/20/23		1,340,000	$	1,336,650	^(a)(c)(g)
Goldman Sachs Capital III, Junior Subordinated Bonds		4.000	%		7/31/17		43,000		36,980	^(a)(g)
Goldman Sachs Group Inc., Senior Notes		2.300	%		12/13/19		340,000		341,123	^(c)

Total Capital Markets									1,714,753

Consumer Finance - 1.6%
Ally Financial Inc., Senior Notes		8.000	%		3/15/20		225,000		256,500
American Express Co., Senior Notes		2.650	%		12/2/22		517,000		518,244	^(c)
HSBC Finance Corp., Senior Notes		6.676	%		1/15/21		500,000		563,929	^(c)

Total Consumer Finance									1,338,673

Diversified Financial Services - 0.3%
International Lease Finance Corp., Senior Notes		5.875	%		8/15/22		190,000		214,977	^(c)

Insurance - 0.8%
MetLife Inc., Junior Subordinated Bonds		5.250	%		6/15/20		680,000		707,690	^(a)(c)(g)

TOTAL FINANCIALS									14,074,373

HEALTH CARE - 0.7%
Health Care Equipment & Supplies - 0.7%
Becton, Dickinson & Co., Senior Notes		3.734	%		12/15/24		139,000		141,499	^(c)
Medtronic Inc., Senior Notes		3.500	%		3/15/25		440,000		458,178	^(c)

TOTAL HEALTH CARE									599,677

INDUSTRIALS - 2.3%
Airlines - 0.4%
Air 2 U.S., Notes		8.027	%		10/1/19		13,367		13,944	^(b)
American Airlines, Pass-Through Trust, Secured Bonds		4.100	%		1/15/28		243,549		256,640	^(c)
Delta Air Lines Inc., Pass-Through Certificates, Secured Notes		8.021	%		8/10/22		34,950		39,755

Total Airlines									310,339

Construction & Engineering - 0.3%
Brundage-Bone Concrete Pumping Inc., Senior Secured Notes		10.375	%		9/1/21		200,000		211,000	^(b)

Industrial Conglomerates - 1.6%
General Electric Co., Junior Subordinated Bonds		5.000	%		1/21/21		1,312,000		1,394,197	^(a)(c)(g)

TOTAL INDUSTRIALS									1,915,536

INFORMATION TECHNOLOGY - 0.9%
Electronic Equipment, Instruments & Components - 0.3%
Interface Security Systems Holdings Inc./Interface Security Systems LLC, Senior Secured Notes		9.250	%		1/15/18		260,000		259,675

Semiconductors & Semiconductor Equipment - 0.2%
QUALCOMM Inc., Senior Notes		2.100	%		5/20/20		130,000		130,649

Technology Hardware, Storage & Peripherals - 0.4%
Dell International LLC/EMC Corp., Senior Secured Notes		4.420	%		6/15/21		340,000		358,752	^(b)(c)

TOTAL INFORMATION TECHNOLOGY									749,076

MATERIALS - 1.7%
Chemicals - 0.3%
Equate Petrochemical BV, Senior Notes		3.000	%		3/3/22		280,000		276,472	^(b)

Construction Materials - 0.8%
Cemex SAB de CV, Senior Secured Notes		5.908	%		10/15/18		650,000		677,300	^(a)(b)(c)

Metals & Mining - 0.6%
Vale Overseas Ltd., Senior Notes		4.375	%		1/11/22		500,000		510,150

TOTAL MATERIALS									1,463,922

See Notes to Schedule of Investments.

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.


Schedule of investments (unaudited) (cont’d)		June 30, 2017


SECURITY	RATE			MATURITY DATE		FACE AMOUNT†		VALUE
TELECOMMUNICATION SERVICES - 2.7%
Diversified Telecommunication Services - 1.0%
AT&T Inc., Senior Notes		3.600	%		2/17/23		810,000	$	830,023	^(c)
Cincinnati Bell Telephone Co., LLC, Senior Debentures		6.300	%		12/1/28		45,000		44,438

Total Diversified Telecommunication Services									874,461

Wireless Telecommunication Services - 1.7%
Sprint Corp., Senior Notes		7.250	%		9/15/21		530,000		590,287
Sprint Corp., Senior Notes		7.625	%		2/15/25		740,000		853,775

Total Wireless Telecommunication Services									1,444,062

TOTAL TELECOMMUNICATION SERVICES									2,318,523

UTILITIES - 0.2%
Electric Utilities - 0.2%
FirstEnergy Corp., Senior Notes		2.850	%		7/15/22		130,000		130,028

TOTAL CORPORATE BONDS & NOTES (Cost - $30,907,799)									33,763,810

MORTGAGE-BACKED SECURITIES - 2.3%
GNMA - 2.3%
Government National Mortgage Association (GNMA)		6.500	%		8/15/34		139,231		158,171
Government National Mortgage Association (GNMA) II		2.097	%		8/20/58		123,276		125,686	^(a)(c)
Government National Mortgage Association (GNMA) II		2.440	%		10/20/59		63,937		66,079	^(a)
Government National Mortgage Association (GNMA) II		2.398	%		12/20/59		137,643		141,368	^(a)
Government National Mortgage Association (GNMA) II		2.410	%		12/20/59		573,641		589,949	^(a)(c)
Government National Mortgage Association (GNMA) II		2.440	%		1/20/60		549,861		566,497	^(a)(c)
Government National Mortgage Association (GNMA) II		2.160	%		7/20/60		130,302		132,923	^(a)
Government National Mortgage Association (GNMA) II		2.249	%		7/20/60		130,713		133,957	^(a)

TOTAL MORTGAGE-BACKED SECURITIES (Cost - $1,900,159)									1,914,630

SENIOR LOANS - 1.9%
CONSUMER DISCRETIONARY - 1.2%
Media - 0.9%
Univision Communications Inc., Term Loan C5		3.976	%		3/15/24		764,861		752,193	^(h)(i)

Specialty Retail - 0.3%
Michaels Stores Inc., 2016 Term Loan B1		3.839-3.976	%		1/30/23		240,486		240,250	^(h)(i)

TOTAL CONSUMER DISCRETIONARY									992,443

INDUSTRIALS - 0.3%
Airlines - 0.3%
American Airlines Inc., 2017 Term Loan B		3.220	%		6/26/20		288,840		288,931	^(h)(i)

INFORMATION TECHNOLOGY - 0.2%
IT Services - 0.2%
First Data Corp., 2017 Term Loan		3.716	%		4/26/24		217,701		217,892	^(h)(i)

TELECOMMUNICATION SERVICES - 0.2%
Diversified Telecommunication Services - 0.2%
Virgin Media Bristol LLC, USD Term Loan I		3.909	%		1/31/25		137,809		138,053	^(h)(i)

TOTAL SENIOR LOANS (Cost - $1,605,927)									1,637,319

See Notes to Schedule of Investments.

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.


Schedule of investments (unaudited) (cont’d)		June 30, 2017


SECURITY	RATE			MATURITY DATE		FACE AMOUNT†			VALUE
SOVEREIGN BONDS - 5.0%
Brazil - 3.1%
Federative Republic of Brazil, Notes		10.000	%		1/1/21		7,980,000	^BRL	$	2,405,838
Federative Republic of Brazil, Notes		10.000	%		1/1/23		833,000	^BRL		247,817

Total Brazil										2,653,655

Mexico - 1.4%
United Mexican States, Medium-Term Notes		6.750	%		9/27/34		85,000			108,780	^(c)
United Mexican States, Senior Bonds		6.500	%		6/9/22		15,090,000	^MXN		827,430
United Mexican States, Senior Notes		5.550	%		1/21/45		210,000			235,988	^(c)

Total Mexico										1,172,198

Russia - 0.5%
Russian Foreign Bond - Eurobond, Senior Bonds		12.750	%		6/24/28		254,000			444,348	^(f)

TOTAL SOVEREIGN BONDS (Cost - $4,426,850)										4,270,201


						SHARES
COMMON STOCKS - 0.0%
INDUSTRIALS - 0.0%
Marine - 0.0%
Tricer HoldCo, S.C.A. (Cost - $13,316)							1,628			4,200	*^(e)(j)

PREFERRED STOCKS - 2.5%
FINANCIALS - 2.5%
Capital Markets - 2.5%
Northern Trust Corp.		5.850	%				28,000			772,520
State Street Corp.		5.900	%				49,000			1,377,390	^(a)

TOTAL FINANCIALS										2,149,910

INDUSTRIALS - 0.0%
Marine - 0.0%
Tricer Tracking Preferred Equity Certificates		8.000	%				723,900			7,239	*^(e)(j)

TOTAL PREFERRED STOCKS (Cost - $2,035,133)										2,157,149

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost - $102,170,797)										108,176,026

SHORT-TERM INVESTMENTS - 3.3%
State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost - $2,830,537)		0.935	%				2,830,537			2,830,537

TOTAL INVESTMENTS - 131.0% (Cost - $105,001,334#)										111,006,563
Liabilities in Excess of Other Assets - (31.0)%										(26,298,619	)

TOTAL NET ASSETS - 100.0%									$	84,707,944

See Notes to Schedule of Investments.

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.


Schedule of investments (unaudited) (cont’d)		June 30, 2017

†	Face amount denominated in U.S. dollars, unless otherwise noted.

*	Non-income producing security.

(a)	Variable rate security. Interest rate disclosed is as of the most recent information available.

(b)

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

(c)	All or a portion of this security is held by the counterparty as collateral for open reverse repurchase agreements.

(d)	Security is purchased on a when-issued basis.

(e)	Security is valued using significant unobservable inputs (See Note 1).

(f)

Security is exempt from registration under Regulation S of the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors, unless otherwise noted.

(g)	Security has no maturity date. The date shown represents the next call date.

(h)	Senior loans may be considered restricted in that the Fund ordinarily is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan.

(i)	Interest rates disclosed represent the effective rates on senior loans. Ranges in interest rates are attributable to multiple contracts under the same loan.

(j)	Security is valued in good faith in accordance with procedures approved by the Board of Directors (See Note 1).

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

Abbreviations used in this schedule:



ARM		— Adjustable Rate Mortgage
BRL		— Brazilian Real
CDO		— Collateralized Debt Obligation
CLO		— Collateral Loan Obligation
IO		— Interest Only
MXN		— Mexican Peso
STRIPS		— Separate Trading of Registered Interest and Principal Securities

At June 30, 2017, the Fund had the following open reverse repurchase agreements:


Counterparty	Rate			Effective Date		Maturity Date		Face Amount of Reverse Repurchase Agreements		Asset Class of Collateral*	Collateral Value
Barclays Capital Inc.		2.100	%		6/15/17		TBD**	$	757,500	Corporate Bonds & Notes	$	923,420
Barclays Capital Inc.		2.100	%		6/15/17		TBD**		282,125	Sovereign Bonds		344,768
Bank of America		1.450	%		6/21/17		7/21/17		5,229,000	Collateralized Mortgage Obligations		6,172,457
Bank of America		1.360	%		6/6/17		7/6/17		561,000	Mortgage-Backed Securities		589,949
Bank of America		1.450	%		6/21/17		7/21/17		633,000	Mortgage-Backed Securities		692,183
Morgan Stanley		2.117	%		6/12/17		7/12/17		4,091,000	Corporate Bonds & Notes		4,558,282
Morgan Stanley		2.316	%		6/23/17		7/24/17		6,532,000	Corporate Bonds & Notes		7,192,334
Morgan Stanley		2.566	%		6/23/17		7/24/17		1,012,000	Corporate Bonds & Notes		1,432,150
Morgan Stanley		1.879	%		5/8/17		8/7/17		3,706,000	Corporate Bonds & Notes		4,036,370
Royal Bank of Canada		1.850	%		5/4/17		8/4/17		4,296,445	Corporate Bonds & Notes		4,595,084

								$	27,100,070		$	30,536,997

*	Refer to the Schedule of Investments for positions held at the counterparty as collateral for reverse repurchase agreements.

**	TBD-To Be Determined; These reverse repurchase agreements have no maturity dates because they are renewed daily and can be terminated by either the Fund or the counterparty in accordance with the terms of the agreements.

See Notes to Schedule of Investments.

WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.


Schedule of investments (unaudited) (cont’d)		June 30, 2017

At June 30, 2017, the Fund had the following open futures contracts:


	Number of Contracts		Expiration Date		Notional Amount		Market Value		Unrealized Appreciation (Depreciation)
Contracts to Buy:
90-Day Eurodollar		32		12/18	$	7,831,329	$	7,856,000	$	24,671
U.S. Treasury 2-Year Notes		8		9/17		1,730,703		1,728,875		(1,828	)
U.S. Treasury 10-Year Notes		101		9/17		12,709,472		12,678,656		(30,816	)
U.S. Treasury Ultra Long-Term Bonds		4		9/17		649,766		663,500		13,734

										5,761

Contracts to Sell:
90-Day Eurodollar		17		9/17		4,192,170		4,192,413		(243	)
90-Day Eurodollar		33		12/17		8,132,705		8,128,312		4,393
90-Day Eurodollar		32		12/19		7,806,259		7,836,401		(30,142	)
U.S. Treasury 5-Year Notes		73		9/17		8,626,097		8,602,023		24,074

										(1,918	)

Net unrealized appreciation on open futures contracts									$	3,843

At June 30, 2017, the Fund had the following open forward foreign currency contracts:


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation
BRL	2,770,000		USD	832,007	Barclays Bank PLC		7/20/17	$	1,419
BRL	111,000		USD	33,340	Barclays Bank PLC		7/20/17		57
MXN	14,070,000		USD	744,090	Barclays Bank PLC		7/20/17		29,323
USD	943,218		BRL	3,000,000	Barclays Bank PLC		7/20/17		40,591

Total								$	71,390

Abbreviations used in this table:


BRL		— Brazilian Real
MXN		— Mexican Peso
USD		— United States Dollar

At June 30, 2017, the Fund had the following open swap contracts:


CENTRALLY CLEARED INTEREST RATE SWAPS
CENTRAL COUNTERPARTY	NOTIONAL AMOUNT		TERMINATION DATE		PAYMENTS MADE BY THE FUND†		PAYMENTS RECEIVED BY THE FUND†		UPFRONT PREMIUMS PAID (RECEIVED)			UNREALIZED APPRECIATION
Chicago Mercantile Exchange	$	2,500,000		6/28/23		1.238% semi-annually		3-Month LIBOR Quarterly	$	(2,677	)	$	117,130
Chicago Mercantile Exchange		25,000,000		6/28/26		1.454% semi-annually		3-Month LIBOR Quarterly		(39,421	)		1,671,721

Total	$	27,500,000							$	(42,098	)	$	1,788,851

†	Percentage shown is an annual percentage rate.

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

See Notes to Schedule of Investments.

Notes to Schedule of Investments (unaudited)

1. Organization and significant accounting policies

Western Asset Variable Rate Strategic Fund Inc. (the “Fund”) was incorporated in Maryland on August 3, 2004 and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Board of Directors authorized 100 million shares of $0.001 par value common stock. The Fund’s primary investment objective is to maintain a high level of current income. The Fund invests primarily in variable rate instruments of U.S. and non-U.S. issuers, including U.S. and non-U.S. investment grade and high-yield debt, senior loans, emerging market debt and derivatives related to these securities.

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

(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Short-term fixed income securities that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value. Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. When the Fund holds securities or other assets that are denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Directors.

The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North Atlantic Fund Valuation Committee (the “Valuation Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Directors, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Board of Directors. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

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

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

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

Notes to Schedule of Investments (unaudited) (continued)

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

•

Level 1 – quoted prices in active markets for identical investments

•

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

•

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

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

The following is a summary of the inputs used in valuing the Fund’s assets and liabilities carried at fair value:


ASSETS
DESCRIPTION	QUOTED PRICES (LEVEL 1)		OTHER SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		TOTAL
Long-Term Investments†:
Collateralized Mortgage Obligations		—	$	38,774,424		—	$	38,774,424
Asset-Backed Securities		—		25,175,098	$	479,195		25,654,293
Corporate Bonds & Notes		—		33,763,810		—		33,763,810
Mortgage-Backed Securities		—		1,914,630		—		1,914,630
Senior Loans		—		1,637,319		—		1,637,319
Sovereign Bonds		—		4,270,201		—		4,270,201
Common Stocks		—		—		4,200		4,200
Preferred Stocks:
Financials	$	2,149,910		—		—		2,149,910
Industrials		—		—		7,239		7,239

Total Long-Term Investments	$	2,149,910	$	105,535,482	$	490,634	$	108,176,026

Short-Term Investments†	$	2,830,537		—		—	$	2,830,537

Total Investments	$	4,980,447	$	105,535,482	$	490,634	$	111,006,563

Other Financial Instruments:
Futures Contracts	$	66,872		—		—	$	66,872
Forward Foreign Currency Contracts		—	$	71,390		—		71,390
Centrally Cleared Interest Rate Swaps		—		1,788,851		—		1,788,851

Total Other Financial Instruments	$	66,872	$	1,860,241		—	$	1,927,113

Total	$	5,047,319	$	107,395,723	$	490,634	$	112,933,676


LIABILITIES
DESCRIPTION	QUOTED PRICES (LEVEL 1)		OTHER SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		TOTAL
Other Financial Instruments:
Futures Contracts	$	63,029		—		—	$	63,029

†	See Schedule of Investments for additional detailed categorizations.

2. Investments

At June 30, 2017, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:


Gross unrealized appreciation	$	7,948,458
Gross unrealized depreciation		(1,943,229	)

Net unrealized appreciation	$	6,005,229

ITEM 2.

CONTROLS AND PROCEDURES.

(a)

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

(b)

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

ITEM 3.

EXHIBITS.

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

SIGNATURES

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

Western Asset Variable Rate Strategic Fund Inc.


By		/s/ JANE TRUST
		Jane Trust
		Chief Executive Officer

Date: August 23, 2017

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



By		/s/ JANE TRUST
		Jane Trust
		Chief Executive Officer

Date: August 23, 2017



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

Date: August 23, 2017