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, 49th 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, 2018
| ITEM 1. | SCHEDULE OF INVESTMENTS. |
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
FORM N-Q
JUNE 30, 2018
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| COLLATERALIZED MORTGAGE OBLIGATIONS(a) - 47.8% | ||||||||||||||||
| Adjustable Rate Mortgage Trust, 2004-2, CB1 (1 mo. USD LIBOR + 1.150%) |
3.241 | % | 2/25/35 | 119,104 | $ | 105,315 | (b) | |||||||||
| Adjustable Rate Mortgage Trust, 2005-11, 5A1 (1 mo. USD LIBOR + 0.540%) |
2.631 | % | 2/25/36 | 99,250 | 76,073 | (b) | ||||||||||
| Alternative Loan Trust, 2005-24, 4A1 (1 mo. USD LIBOR + 0.230%) |
2.314 | % | 7/20/35 | 479,673 | 471,005 | (b) | ||||||||||
| Banc of America Funding Trust, 2004-B, 6A1 |
2.265 | % | 12/20/34 | 289,916 | 226,699 | (b) | ||||||||||
| Banc of America Funding Trust, 2005-E, 8A1 (Cost of Funds for the 11th District of San Francisco + 1.430%) |
2.325 | % | 6/20/35 | 263,028 | 188,141 | (b) | ||||||||||
| Banc of America Funding Trust, 2015-R3, 2A2 |
2.090 | % | 2/27/37 | 1,566,525 | 1,339,855 | (b)(c) | ||||||||||
| Bear Stearns ALT-A Trust, 2004-3, A1 (1 mo. USD LIBOR + 0.640%) |
2.731 | % | 4/25/34 | 272,106 | 272,726 | (b) | ||||||||||
| BX Trust, 2017-IMC, A (1 mo. LIBOR + 1.050%) |
3.123 | % | 10/15/32 | 450,000 | 451,321 | (b)(c) | ||||||||||
| CD Mortgage Trust, 2016-CD2, A4 |
3.526 | % | 11/10/49 | 250,000 | 248,274 | (b) | ||||||||||
| CD Mortgage Trust, 2017-CD6, XA, IO |
1.123 | % | 11/13/50 | 6,618,454 | 414,440 | (b) | ||||||||||
| Chevy Chase Funding LLC Mortgage-Backed Certificates Series, 2004-2A, A1 (1 mo. USD LIBOR + 0.270%) |
2.361 | % | 5/25/35 | 232,040 | 228,322 | (b)(c) | ||||||||||
| Chevy Chase Funding LLC Mortgage-Backed Certificates Series, 2004-3A, A1 (1 mo. USD LIBOR + 0.250%) |
2.341 | % | 8/25/35 | 203,267 | 200,260 | (b)(c) | ||||||||||
| CHL Mortgage Pass-Through Trust, 2004-20, 2A1 |
3.491 | % | 9/25/34 | 313,414 | 248,663 | (b) | ||||||||||
| CHL Mortgage Pass-Through Trust, 2004-29, 2A1 (1 mo. USD LIBOR + 0.660%) |
2.751 | % | 2/25/35 | 23,390 | 22,758 | (b) | ||||||||||
| CHL Mortgage Pass-Through Trust, 2005-HYB9, 3A1A (12 mo. USD LIBOR + 1.750%) |
3.462 | % | 2/20/36 | 273,241 | 252,340 | (b) | ||||||||||
| Citigroup Commercial Mortgage Trust, 2013-375P, A |
3.251 | % | 5/10/35 | 340,000 | 338,057 | (c) | ||||||||||
| Commercial Mortgage Trust, 2016-SAVA, A (1 mo. LIBOR + 1.720%) |
3.793 | % | 10/15/34 | 379,650 | 379,745 | (b)(c) | ||||||||||
| Countrywide Alternative Loan Trust, 2004-6CB, A (1 mo. USD LIBOR + 0.580%) |
2.671 | % | 5/25/34 | 159,848 | 160,109 | (b) | ||||||||||
| CSMC Series, 2015-10R, 3A2 (Federal Reserve US 12 mo. Cumulative Avg 1 Year CMT + 0.840%) |
2.304 | % | 10/27/46 | 1,110,000 | 1,074,892 | (b)(c) | ||||||||||
| CSMC Trust, 2015-2R, 7A2 |
3.208 | % | 8/27/36 | 1,200,245 | 1,068,605 | (b)(c) | ||||||||||
See Notes to Schedule of Investments.
1
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| COLLATERALIZED MORTGAGE OBLIGATIONS(a) - (continued) | ||||||||||||||||
| CSMC Trust, 2018-J1, B2 |
3.683 | % | 2/25/48 | 870,000 | $ | 811,949 | (b)(d) | |||||||||
| DBJPM 16-C1 Mortgage Trust, 2016-C1, ASB |
3.038 | % | 5/10/49 | 250,000 | 245,736 | |||||||||||
| Deutsche Mortgage Securities Inc. Mortgage Loan Trust, 2004-4, 3AR1 |
4.528 | % | 6/25/34 | 200,973 | 200,911 | (b) | ||||||||||
| Fannie Mae Interest Strip, 20347, 2 |
5.000 | % | 1/25/34 | 719,069 | 151,605 | |||||||||||
| Fannie Mae REMICS, 2013-25, BI |
3.000 | % | 3/25/33 | 7,373,528 | 808,838 | (e) | ||||||||||
| Fannie Mae REMICS, 2013-62, AI |
3.000 | % | 6/25/33 | 5,084,315 | 663,596 | (e) | ||||||||||
| Federal National Mortgage Association (FNMA) - CAS, 2013-C01, M2 (1 mo. USD LIBOR + 5.250%) |
7.341 | % | 10/25/23 | 300,000 | 346,547 | (b) | ||||||||||
| Federal National Mortgage Association (FNMA) - CAS, 2014-C04, 1M2 (1 mo. USD LIBOR + 4.900%) |
6.991 | % | 11/25/24 | 424,868 | 486,240 | (b) | ||||||||||
| Federal National Mortgage Association (FNMA) - CAS, 2016-C01, 1B (1 mo. USD LIBOR + 11.750%) |
13.841 | % | 8/25/28 | 259,474 | 373,967 | (b) | ||||||||||
| Federal National Mortgage Association (FNMA) - CAS, 2016-C04, 1B (1 mo. USD LIBOR + 10.250%) |
12.341 | % | 1/25/29 | 899,483 | 1,193,553 | (b) | ||||||||||
| Federal National Mortgage Association (FNMA) - CAS, 2016-C04, 1M2 (1 mo. USD LIBOR + 4.250%) |
6.341 | % | 1/25/29 | 950,000 | 1,071,571 | (b) | ||||||||||
| Federal National Mortgage Association (FNMA) - CAS, 2016-C06, 1B (1 mo. USD LIBOR + 9.250%) |
11.341 | % | 4/25/29 | 1,009,706 | 1,264,757 | (b) | ||||||||||
| Federal National Mortgage Association (FNMA) - CAS, 2018-C03, 1M1 (1 mo. USD LIBOR + 0.680%) |
2.771 | % | 10/25/30 | 532,542 | 532,488 | (b) | ||||||||||
| Federal National Mortgage Association (FNMA) - CAS, 2016-C04, 1M1 (1 mo. USD LIBOR + 1.450%) |
3.541 | % | 1/25/29 | 154,468 | 155,821 | (b) | ||||||||||
| Freddie Mac Structured Agency Credit Risk Debt Notes, 2013-DN1, M2 (1 mo. USD LIBOR + 7.150%) |
9.241 | % | 7/25/23 | 420,000 | 508,290 | (b) | ||||||||||
| Freddie Mac Structured Agency Credit Risk Debt Notes, 2015-DNA1, M2 (1 mo. USD LIBOR + 1.850%) |
3.941 | % | 10/25/27 | 262,669 | 267,623 | (b) | ||||||||||
| Freddie Mac Structured Agency Credit Risk Debt Notes, 2015-HQ1, M3 (1 mo. USD LIBOR + 3.800%) |
5.891 | % | 3/25/25 | 260,000 | 278,695 | (b) | ||||||||||
See Notes to Schedule of Investments.
2
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| COLLATERALIZED MORTGAGE OBLIGATIONS(a) - (continued) | ||||||||||||||||
| Freddie Mac Structured Agency Credit Risk Debt Notes, 2016-DNA3, M2 (1 mo. USD LIBOR + 2.000%) |
4.091 | % | 12/25/28 | 338,528 | $ | 343,434 | (b) | |||||||||
| Freddie Mac Structured Agency Credit Risk Debt Notes, 2016-DNA4, M2 (1 mo. USD LIBOR + 1.300%) |
3.391 | % | 3/25/29 | 530,000 | 535,796 | (b) | ||||||||||
| Freddie Mac Structured Agency Credit Risk Debt Notes, 2017-DNA2, B2 (1 mo. USD LIBOR + 11.250%) |
13.341 | % | 10/25/29 | 369,749 | 395,357 | (b) | ||||||||||
| Galton Funding Mortgage Trust, 2017-1, A22 |
3.000 | % | 7/25/56 | 178,289 | 172,416 | (b)(c) | ||||||||||
| Government National Mortgage Association, 2010-H03, FA (1 mo. USD LIBOR + 0.550%) |
2.526 | % | 3/20/60 | 109,435 | 109,918 | (b)(e) | ||||||||||
| Government National Mortgage Association, 2010-H11, FA (1 mo. USD LIBOR + 1.000%) |
2.976 | % | 6/20/60 | 556,033 | 566,287 | (b)(e) | ||||||||||
| Government National Mortgage Association, 2011-H01, AF (1 mo. USD LIBOR + 0.450%) |
2.367 | % | 11/20/60 | 1,017,967 | 1,020,921 | (b)(e) | ||||||||||
| Government National Mortgage Association, 2011-H03, FA (1 mo. USD LIBOR + 0.500%) |
2.417 | % | 1/20/61 | 109,659 | 110,047 | (b)(e) | ||||||||||
| Government National Mortgage Association, 2011-H05, FA (1 mo. USD LIBOR + 0.500%) |
2.417 | % | 12/20/60 | 212,588 | 213,263 | (b)(e) | ||||||||||
| Government National Mortgage Association, 2011-H05, FB (1 mo. USD LIBOR + 0.500%) |
2.417 | % | 12/20/60 | 187,726 | 188,447 | (b)(e) | ||||||||||
| Government National Mortgage Association, 2011-H07, FA (1 mo. USD LIBOR + 0.500%) |
2.417 | % | 2/20/61 | 352,693 | 353,604 | (b)(e) | ||||||||||
| Government National Mortgage Association, 2011-H08, FD (1 mo. USD LIBOR + 0.500%) |
2.417 | % | 2/20/61 | 304,142 | 305,193 | (b)(e) | ||||||||||
| Government National Mortgage Association, 2011-H11, FB (1 mo. USD LIBOR + 0.500%) |
2.417 | % | 4/20/61 | 121,889 | 122,312 | (b)(e) | ||||||||||
| Government National Mortgage Association, 2012-H18, NA (1 mo. USD LIBOR + 0.520%) |
2.437 | % | 8/20/62 | 517,363 | 519,602 | (b)(e) | ||||||||||
| Government National Mortgage Association, 2012-H23, SA (1 mo. USD LIBOR + 0.530%) |
2.447 | % | 10/20/62 | 387,645 | 390,070 | (b)(e) | ||||||||||
| Government National Mortgage Association, 2012-H23, WA (1 mo. USD LIBOR + 0.520%) |
2.437 | % | 10/20/62 | 569,311 | 571,512 | (b)(e) | ||||||||||
| Government National Mortgage Association (GNMA), 2010-H10, FC (1 mo. USD LIBOR + 1.000%) |
2.976 | % | 5/20/60 | 88,259 | 89,550 | (b)(e) | ||||||||||
| Government National Mortgage Association (GNMA), 2011-H06, FA (1 mo. USD LIBOR + 0.450%) |
2.367 | % | 2/20/61 | 476,239 | 477,320 | (b)(e) | ||||||||||
See Notes to Schedule of Investments.
3
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| COLLATERALIZED MORTGAGE OBLIGATIONS(a) - (continued) | ||||||||||||||||
| Government National Mortgage Association (GNMA), 2011-H09, AF (1 mo. USD LIBOR + 0.500%) |
2.417 | % | 3/20/61 | 620,145 | $ | 622,135 | (b)(e) | |||||||||
| GSMPS Mortgage Loan Trust, 2005-RP2, IAF (1 mo. USD LIBOR + 0.350%) |
2.441 | % | 3/25/35 | 473,935 | 446,655 | (b)(c) | ||||||||||
| GSMPS Mortgage Loan Trust, 2006-RP2, 1AF1 (1 mo. USD LIBOR + 0.400%) |
2.491 | % | 4/25/36 | 235,873 | 201,081 | (b)(c) | ||||||||||
| HarborView Mortgage Loan Trust, 2004-10, 4A |
3.888 | % | 1/19/35 | 119,110 | 118,527 | (b) | ||||||||||
| HarborView Mortgage Loan Trust, 2005-14, 3A1A |
4.029 | % | 12/19/35 | 55,435 | 55,085 | (b) | ||||||||||
| IndyMac INDX Mortgage Loan Trust, 2004-AR7, A2 (1 mo. USD LIBOR + 0.860%) |
2.951 | % | 9/25/34 | 135,981 | 127,354 | (b) | ||||||||||
| JPMBB Commercial Mortgage Securities Trust, 2013-C17, ASB |
3.705 | % | 1/15/47 | 150,000 | 152,177 | |||||||||||
| JPMorgan Chase Commercial Mortgage Securities Trust, 2006-LDP9, AJ |
5.411 | % | 5/15/47 | 1,080,000 | 777,618 | |||||||||||
| JPMorgan Chase Commercial Mortgage Securities Trust, 2007-CB18, AJ |
5.502 | % | 6/12/47 | 660,000 | 550,872 | (b) | ||||||||||
| JPMorgan Chase Commercial Mortgage Securities Trust, 2015-FL7, C (1 mo. LIBOR + 2.850%) |
4.923 | % | 5/15/28 | 421,169 | 421,699 | (b)(c) | ||||||||||
| JPMorgan Mortgage Trust, 2005-A3, 3A4 |
3.674 | % | 6/25/35 | 166,505 | 170,054 | (b) | ||||||||||
| Lanark Master Issuer PLC, 2018-1A, 1A (3 mo. USD LIBOR + 0.420%) |
2.749 | % | 12/22/69 | 629,800 | 632,069 | (b)(c) | ||||||||||
| LSTAR Securities Investment Ltd., 2017-6, A (1 mo. USD LIBOR + 1.750%) |
3.732 | % | 9/1/22 | 644,918 | 650,537 | (b)(c)(f) | ||||||||||
| LSTAR Securities Investment Trust, 2018-2, A1 (1 mo. USD LIBOR + 1.500%) |
3.482 | % | 4/1/23 | 768,186 | 770,376 | (b)(c) | ||||||||||
| MASTR Adjustable Rate Mortgages Trust, 2003-6, 2A1 |
3.603 | % | 12/25/33 | 40,324 | 39,377 | (b) | ||||||||||
| MASTR Reperforming Loan Trust, 2005-2, 1A1F (1 mo. USD LIBOR + 0.350%) |
2.441 | % | 5/25/35 | 740,719 | 611,208 | (b)(c) | ||||||||||
| MASTR Reperforming Loan Trust, 2006-2, 2A1 |
3.847 | % | 5/25/36 | 87,185 | 82,205 | (b)(c) | ||||||||||
| Morgan Stanley Bank of America Merrill Lynch Trust, 2016-C32, ASB |
3.514 | % | 12/15/49 | 350,000 | 350,245 | |||||||||||
| Morgan Stanley Capital I Trust, 2017-ASHF, A (1 mo. LIBOR + 0.850%) |
2.923 | % | 11/15/34 | 290,000 | 291,466 | (b)(c) | ||||||||||
| Morgan Stanley Mortgage Loan Trust, 2006-6AR, 2A |
3.629 | % | 5/25/36 | 397,363 | 359,429 | (b) | ||||||||||
See Notes to Schedule of Investments.
4
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| COLLATERALIZED MORTGAGE OBLIGATIONS(a) - (continued) | ||||||||||||||||
| Morgan Stanley Re-REMIC Trust, 2015-R6, 1A1 (1 mo. USD LIBOR + 0.260%) |
2.480 | % | 7/26/45 | 181,651 | $ | 179,726 | (b)(c) | |||||||||
| Morgan Stanley Resecuritization Trust, 2015-R2, 1A1 (Federal Reserve US 12 mo. Cumulative Avg 1 Year CMT + 0.710%) |
2.174 | % | 12/27/46 | 269,006 | 267,056 | (b)(c) | ||||||||||
| Morgan Stanley Resecuritization Trust, 2015-R2, 1B (Federal Reserve US 12 mo. Cumulative Avg 1 Year CMT + 0.710%) |
2.174 | % | 12/27/46 | 1,473,762 | 1,164,398 | (b)(c) | ||||||||||
| MortgageIT Trust, 2005-3, A1 (1 mo. USD LIBOR + 0.600%) |
2.691 | % | 8/25/35 | 222,185 | 217,967 | (b) | ||||||||||
| MSCG Trust, 2016-SNR, A |
3.460 | % | 11/15/34 | 588,109 | 573,206 | (b)(c) | ||||||||||
| New Residential Mortgage Loan Trust, 2015-1A, A3 |
3.750 | % | 5/28/52 | 376,920 | 379,125 | (b)(c) | ||||||||||
| New Residential Mortgage Loan Trust, 2017-1A, A1 |
4.000 | % | 2/25/57 | 569,660 | 576,838 | (b)(c) | ||||||||||
| Nomura Resecuritization Trust, 2015-1R, 2A2 (1 mo. USD LIBOR + 0.190%) |
3.876 | % | 10/26/36 | 1,070,000 | 1,078,701 | (b)(c) | ||||||||||
| Prime Mortgage Trust, 2006-DR1, 2A2 |
6.000 | % | 5/25/35 | 430,734 | 317,962 | (c) | ||||||||||
| RAMP Series Trust, 2003-SL1, M1 |
7.306 | % | 4/25/31 | 456,472 | 310,997 | (b) | ||||||||||
| Reperforming Loan REMIC Trust, 2004-R1, 2A |
6.500 | % | 11/25/34 | 36,915 | 36,748 | (c) | ||||||||||
| Reperforming Loan REMIC Trust, 2005-R2, 2A1 |
7.000 | % | 6/25/35 | 100,603 | 102,839 | (c) | ||||||||||
| Reperforming Loan REMIC Trust, 2006-R2, AF1 (1 mo. USD LIBOR + 0.420%) |
2.511 | % | 7/25/36 | 80,273 | 74,823 | (b)(c) | ||||||||||
| Structured Adjustable Rate Mortgage Loan Trust, 2004-9XS, A (1 mo. USD LIBOR + 0.370%) |
2.461 | % | 7/25/34 | 284,587 | 285,803 | (b) | ||||||||||
| Structured Asset Mortgage Investments II Trust, 2004-AR3, 1A1 (1 mo. USD LIBOR + 0.600%) |
2.685 | % | 7/19/34 | 202,246 | 200,226 | (b) | ||||||||||
| Structured Asset Mortgage Investments II Trust, 2006-AR3, 11A1 (1 mo. USD LIBOR + 0.210%) |
2.301 | % | 4/25/36 | 207,194 | 191,649 | (b) | ||||||||||
| Structured Asset Securities Corp., 2005-RF1, A (1 mo. USD LIBOR + 0.350%) |
2.310 | % | 3/25/35 | 134,463 | 125,795 | (b)(c) | ||||||||||
| Structured Asset Securities Corp., 2005-RF2, A (1 mo. USD LIBOR + 0.350%) |
2.441 | % | 4/25/35 | 141,523 | 133,917 | (b)(c) | ||||||||||
| UBS Commercial Mortgage Trust, 2017-C4, A4 |
3.563 | % | 10/15/50 | 410,000 | 404,228 | |||||||||||
See Notes to Schedule of Investments.
5
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| COLLATERALIZED MORTGAGE OBLIGATIONS(a) - (continued) |
|
|||||||||||||||
| WaMu Mortgage Pass-Through Certificates Series Trust, 2004-AR11, A |
3.359 | % | 10/25/34 | 94,786 | $ | 95,458 | (b) | |||||||||
| WaMu Mortgage Pass-Through Certificates Series Trust, 2004-AR12, A2A (1 mo. USD LIBOR + 0.780%) |
2.871 | % | 10/25/44 | 90,121 | 90,098 | (b) | ||||||||||
| WaMu Mortgage Pass-Through Certificates Series Trust, 2005-AR1, A2A3 (1 mo. USD LIBOR + 0.800%) |
2.891 | % | 1/25/45 | 69,175 | 69,308 | (b) | ||||||||||
| WaMu Mortgage Pass-Through Certificates Series Trust, 2005-AR13, A1B3 (1 mo. USD LIBOR + 0.360%) |
2.451 | % | 10/25/45 | 335,274 | 332,936 | (b) | ||||||||||
| WaMu Mortgage Pass-Through Certificates Series Trust, 2005-AR13, A1C3 (1 mo. USD LIBOR + 0.490%) |
2.581 | % | 10/25/45 | 142,986 | 143,571 | (b) | ||||||||||
| WaMu Mortgage Pass-Through Certificates Series Trust, 2005-AR8, 2AB3 (1 mo. USD LIBOR + 0.720%) |
2.811 | % | 7/25/45 | 514,637 | 512,717 | (b) | ||||||||||
| WaMu Mortgage Pass-Through Certificates Series Trust, 2007-OA2, 1A (Federal Reserve US 12 mo. Cumulative Avg 1 Year CMT + 0.700%) |
2.258 | % | 3/25/47 | 903,833 | 815,105 | (b) | ||||||||||
| Washington Mutual Mortgage Pass-Through Certificates, 2005-4, CB9 (1 mo. USD LIBOR + 0.400%) |
2.491 | % | 6/25/35 | 424,766 | 366,979 | (b) | ||||||||||
| Wells Fargo Commercial Mortgage Trust, 2015-C31, D |
3.852 | % | 11/15/48 | 454,630 | 363,104 | |||||||||||
| Wells Fargo Commercial Mortgage Trust, 2015-NXS3, ASB |
3.371 | % | 9/15/57 | 140,000 | 139,945 | |||||||||||
|
|
|
|||||||||||||||
| TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS |
|
40,596,230 | ||||||||||||||
|
|
|
|||||||||||||||
| CORPORATE BONDS & NOTES - 44.2% | ||||||||||||||||
| CONSUMER DISCRETIONARY - 3.3% | ||||||||||||||||
| Auto Components - 0.3% |
||||||||||||||||
| ZF North America Capital Inc., Senior Notes |
4.750 | % | 4/29/25 | 200,000 | 200,262 | (c) | ||||||||||
|
|
|
|||||||||||||||
| Automobiles - 2.0% |
||||||||||||||||
| Ford Motor Credit Co. LLC, Senior Notes |
5.875 | % | 8/2/21 | 250,000 | 265,217 | (e) | ||||||||||
| General Motors Financial Co. Inc., Senior Notes |
4.375 | % | 9/25/21 | 400,000 | 408,015 | (e) | ||||||||||
| General Motors Financial Co. Inc., Senior Notes |
4.250 | % | 5/15/23 | 1,000,000 | 1,000,097 | (e) | ||||||||||
|
|
|
|||||||||||||||
| Total Automobiles |
1,673,329 | |||||||||||||||
|
|
|
|||||||||||||||
See Notes to Schedule of Investments.
6
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| Internet & Direct Marketing Retail - 0.4% |
||||||||||||||||
| Amazon.com Inc., Senior Notes |
1.900 | % | 8/21/20 | 370,000 | $ | 362,510 | ||||||||||
|
|
|
|||||||||||||||
| Media - 0.6% |
||||||||||||||||
| DISH DBS Corp., Senior Notes |
6.750 | % | 6/1/21 | 130,000 | 130,488 | |||||||||||
| DISH DBS Corp., Senior Notes |
5.875 | % | 7/15/22 | 190,000 | 179,312 | |||||||||||
| DISH DBS Corp., Senior Notes |
5.875 | % | 11/15/24 | 270,000 | 229,500 | |||||||||||
|
|
|
|||||||||||||||
| Total Media |
539,300 | |||||||||||||||
|
|
|
|||||||||||||||
| TOTAL CONSUMER DISCRETIONARY |
2,775,401 | |||||||||||||||
|
|
|
|||||||||||||||
| CONSUMER STAPLES - 3.6% | ||||||||||||||||
| Beverages - 0.5% |
||||||||||||||||
| Anheuser-Busch InBev Finance Inc., Senior Notes (3 mo. USD LIBOR + 1.260%) |
3.623 | % | 2/1/21 | 440,000 | 453,166 | (b)(e) | ||||||||||
|
|
|
|||||||||||||||
| Food & Staples Retailing - 0.7% |
||||||||||||||||
| Walmart Inc., Senior Notes |
1.900 | % | 12/15/20 | 560,000 | 548,848 | |||||||||||
|
|
|
|||||||||||||||
| Food Products - 1.3% |
||||||||||||||||
| Kraft Heinz Foods Co., Senior Notes |
3.950 | % | 7/15/25 | 920,000 | 895,599 | (e) | ||||||||||
| Smithfield Foods Inc., Senior Notes |
2.700 | % | 1/31/20 | 220,000 | 216,926 | (c) | ||||||||||
|
|
|
|||||||||||||||
| Total Food Products |
1,112,525 | |||||||||||||||
|
|
|
|||||||||||||||
| Tobacco - 1.1% |
||||||||||||||||
| Altria Group Inc., Senior Notes |
9.250 | % | 8/6/19 | 350,000 | 373,924 | (e) | ||||||||||
| BAT Capital Corp., Senior Notes |
2.764 | % | 8/15/22 | 450,000 | 431,917 | (c) | ||||||||||
| Philip Morris International Inc., Senior Notes |
1.875 | % | 11/1/19 | 170,000 | 167,836 | |||||||||||
|
|
|
|||||||||||||||
| Total Tobacco |
973,677 | |||||||||||||||
|
|
|
|||||||||||||||
| TOTAL CONSUMER STAPLES |
3,088,216 | |||||||||||||||
|
|
|
|||||||||||||||
| ENERGY - 5.6% | ||||||||||||||||
| Energy Equipment & Services - 0.5% |
||||||||||||||||
| Ensco PLC, Senior Notes |
5.200 | % | 3/15/25 | 300,000 | 250,125 | (e) | ||||||||||
| Halliburton Co., Senior Notes |
3.250 | % | 11/15/21 | 170,000 | 170,072 | |||||||||||
|
|
|
|||||||||||||||
| Total Energy Equipment & Services |
420,197 | |||||||||||||||
|
|
|
|||||||||||||||
| Oil, Gas & Consumable Fuels - 5.1% |
||||||||||||||||
| Anadarko Petroleum Corp., Senior Notes |
4.850 | % | 3/15/21 | 440,000 | 453,084 | |||||||||||
| BP Capital Markets PLC, Senior Notes |
3.561 | % | 11/1/21 | 190,000 | 191,942 | |||||||||||
| Chesapeake Energy Corp., Senior Notes (3 mo. USD LIBOR + 3.250%) |
5.598 | % | 4/15/19 | 400,000 | 400,000 | (b) | ||||||||||
| Chevron Corp., Senior Notes |
2.100 | % | 5/16/21 | 330,000 | 322,411 | |||||||||||
| Continental Resources Inc., Senior Notes |
5.000 | % | 9/15/22 | 500,000 | 507,178 | (e) | ||||||||||
| Enterprise Products Operating LLC, Senior Notes (3 mo. USD LIBOR + 3.708%) |
6.066 | % | 8/1/66 | 80,000 | 80,300 | (b)(e) | ||||||||||
| Lukoil International Finance BV, Senior Notes |
7.250 | % | 11/5/19 | 240,000 | 252,048 | (g) | ||||||||||
| Occidental Petroleum Corp., Senior Notes |
4.100 | % | 2/1/21 | 40,000 | 40,947 | |||||||||||
See Notes to Schedule of Investments.
7
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| Oil, Gas & Consumable Fuels - (continued) |
||||||||||||||||
| Petrobras Global Finance BV, Senior Notes |
6.125 | % | 1/17/22 | 418,000 | $ | 426,151 | ||||||||||
| Petroleos Mexicanos, Senior Notes |
3.500 | % | 7/23/20 | 250,000 | 249,625 | |||||||||||
| Shell International Finance BV, Senior Notes |
1.875 | % | 5/10/21 | 600,000 | 581,928 | (e) | ||||||||||
| Shell International Finance BV, Senior Notes |
1.750 | % | 9/12/21 | 120,000 | 114,993 | |||||||||||
| Transcontinental Gas Pipe Line Co., LLC, Senior Notes |
7.850 | % | 2/1/26 | 210,000 | 254,873 | |||||||||||
| Williams Cos. Inc., Senior Notes |
4.550 | % | 6/24/24 | 250,000 | 251,250 | |||||||||||
| Williams Partners LP, Senior Notes |
5.250 | % | 3/15/20 | 200,000 | 206,261 | |||||||||||
|
|
|
|||||||||||||||
| Total Oil, Gas & Consumable Fuels |
4,332,991 | |||||||||||||||
|
|
|
|||||||||||||||
| TOTAL ENERGY |
4,753,188 | |||||||||||||||
|
|
|
|||||||||||||||
| FINANCIALS - 19.7% | ||||||||||||||||
| Banks - 15.4% |
||||||||||||||||
| ABN AMRO Bank NV, Senior Notes |
2.450 | % | 6/4/20 | 200,000 | 196,769 | (c) | ||||||||||
| Banco Santander Chile, Senior Notes |
2.500 | % | 12/15/20 | 210,000 | 204,756 | (c) | ||||||||||
| Banco Santander SA, Senior Notes |
3.125 | % | 2/23/23 | 200,000 | 189,984 | |||||||||||
| Bank of America Corp., Junior Subordinated Notes (6.250% to 9/5/24 then 3 mo. USD LIBOR + 3.705%) |
6.250 | % | 9/5/24 | 650,000 | 680,063 | (b)(h) | ||||||||||
| Bank of America Corp., Subordinated Notes |
4.000 | % | 1/22/25 | 660,000 | 652,078 | (e) | ||||||||||
| Citigroup Inc., Junior Subordinated Bonds (6.300% to 5/15/24 then 3 mo. USD LIBOR + 3.423%) |
6.300 | % | 5/15/24 | 570,000 | 579,211 | (b)(h) | ||||||||||
| Citigroup Inc., Subordinated Notes |
4.400 | % | 6/10/25 | 900,000 | 895,879 | (e) | ||||||||||
| Cooperatieve Rabobank U.A., Junior Subordinated Notes (11.000% to 6/30/19 then 3 mo. USD LIBOR + 10.868%) |
11.000 | % | 6/30/19 | 260,000 | 279,500 | (b)(c)(e)(h) | ||||||||||
| Cooperatieve Rabobank UA, Senior Notes |
2.250 | % | 1/14/20 | 250,000 | 246,958 | |||||||||||
| Cooperatieve Rabobank UA, Senior Notes |
4.750 | % | 1/15/20 | 110,000 | 112,664 | (c) | ||||||||||
| Cooperatieve Rabobank UA, Senior Notes (3 mo. USD LIBOR + 0.430%) |
2.792 | % | 4/26/21 | 600,000 | 600,687 | (b) | ||||||||||
| Credit Agricole SA, Junior Subordinated Notes (8.375% to 10/13/19 then 3 mo. USD LIBOR + 6.982%) |
8.375 | % | 10/13/19 | 620,000 | 647,900 | (b)(c)(e)(h) | ||||||||||
| JPMorgan Chase & Co., Junior Dubordinated Notes (5.150% to 5/01/23 then 3 mo. USD LIBOR + 3.250%) |
5.150 | % | 5/1/23 | 1,320,000 | 1,303,500 | (b)(e)(h) | ||||||||||
| M&T Bank Corp., Junior Subordinated Notes (6.450% to 2/15/24 then 3 mo. USD LIBOR + 3.610%) |
6.450 | % | 2/15/24 | 1,190,000 | 1,276,275 | (b)(e)(h) | ||||||||||
| Nordea Bank AB, Subordinated Notes |
4.875 | % | 5/13/21 | 310,000 | 318,978 | (c) | ||||||||||
See Notes to Schedule of Investments.
8
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| Banks - (continued) |
||||||||||||||||
| PNC Financial Services Group Inc., Junior Subordinated Notes (4.850% to 6/1/23 then 3 mo. USD LIBOR + 3.040%) |
4.850 | % | 6/1/23 | 990,000 | $ | 983,070 | (b)(e)(h) | |||||||||
| Royal Bank of Canada, Senior Notes (3 mo. USD LIBOR + 0.390%) |
2.749 | % | 4/30/21 | 240,000 | 240,016 | (b) | ||||||||||
| Santander UK Group Holdings PLC, Senior Notes |
3.571 | % | 1/10/23 | 200,000 | 194,472 | |||||||||||
| Sumitomo Mitsui Banking Corp., Senior Notes |
2.092 | % | 10/18/19 | 560,000 | 553,297 | |||||||||||
| Toronto-Dominion Bank, Senior Notes |
3.250 | % | 6/11/21 | 50,000 | 50,006 | |||||||||||
| US Bank NA, Senior Notes (3 mo. USD LIBOR + 0.320%) |
2.682 | % | 4/26/21 | 640,000 | 640,385 | (b) | ||||||||||
| Wachovia Capital Trust III, Junior Subordinated Bonds (the greater of 3 mo. USD LIBOR + 0.930% or 5.570%) |
5.570 | % | 7/30/18 | 1,800,000 | 1,777,500 | (b)(e)(h) | ||||||||||
| Wells Fargo & Co., Senior Notes |
3.500 | % | 3/8/22 | 450,000 | 448,762 | |||||||||||
|
|
|
|||||||||||||||
| Total Banks |
13,072,710 | |||||||||||||||
|
|
|
|||||||||||||||
| Capital Markets - 1.9% |
||||||||||||||||
| Bank of New York Mellon Corp., Junior Subordinated Notes (4.550% to 6/20/23 then 3 mo. USD LIBOR + 2.460%) |
4.500 | % | 6/20/23 | 1,340,000 | 1,273,000 | (b)(e)(h) | ||||||||||
| Goldman Sachs Capital III (4.000% to 7/30/18 then 3 mo. USD LIBOR + 0.770%) |
4.000 | % | 7/30/18 | 43,000 | 36,227 | (b)(h) | ||||||||||
| Goldman Sachs Group Inc., Senior Notes |
2.300 | % | 12/13/19 | 340,000 | 336,573 | |||||||||||
|
|
|
|||||||||||||||
| Total Capital Markets |
1,645,800 | |||||||||||||||
|
|
|
|||||||||||||||
| Consumer Finance - 0.9% |
||||||||||||||||
| Ally Financial Inc., Senior Notes |
8.000 | % | 3/15/20 | 225,000 | 241,031 | |||||||||||
| American Express Co., Senior Notes |
2.650 | % | 12/2/22 | 517,000 | 496,962 | (e) | ||||||||||
|
|
|
|||||||||||||||
| Total Consumer Finance |
737,993 | |||||||||||||||
|
|
|
|||||||||||||||
| Diversified Financial Services - 0.6% |
||||||||||||||||
| International Lease Finance Corp., Senior Notes |
8.625 | % | 1/15/22 | 290,000 | 332,964 | |||||||||||
| International Lease Finance Corp., Senior Notes |
5.875 | % | 8/15/22 | 190,000 | 201,971 | |||||||||||
|
|
|
|||||||||||||||
| Total Diversified Financial Services |
534,935 | |||||||||||||||
|
|
|
|||||||||||||||
See Notes to Schedule of Investments.
9
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| Insurance - 0.9% |
||||||||||||||||
| Ambac Assurance Corp., Subordinated Notes |
5.100 | % | 6/7/20 | 4,066 | $ | 5,468 | (c) | |||||||||
| Ambac LSNI LLC, Senior Secured Notes (3 mo. USD LIBOR + 5.000%) |
7.337 | % | 2/12/23 | 19,548 | 19,867 | (b)(c) | ||||||||||
| MetLife Inc., Junior Subordinated Notes (5.250% to 6/15/20 then 3 mo. USD LIBOR + 3.575%) |
5.250 | % | 6/15/20 | 680,000 | 693,464 | (b)(e)(h) | ||||||||||
|
|
|
|||||||||||||||
| Total Insurance |
718,799 | |||||||||||||||
|
|
|
|||||||||||||||
| TOTAL FINANCIALS |
16,710,237 | |||||||||||||||
|
|
|
|||||||||||||||
| HEALTH CARE - 3.1% | ||||||||||||||||
| Biotechnology - 0.2% |
||||||||||||||||
| Gilead Sciences Inc., Senior Notes |
1.850 | % | 9/20/19 | 180,000 | 177,844 | |||||||||||
|
|
|
|||||||||||||||
| Health Care Equipment & Supplies - 1.0% |
||||||||||||||||
| Becton Dickinson and Co., Senior Notes (3 mo. USD LIBOR + 1.030%) |
3.344 | % | 6/6/22 | 250,000 | 250,958 | (b) | ||||||||||
| Becton Dickinson and Co., Senior Notes |
3.734 | % | 12/15/24 | 139,000 | 135,891 | |||||||||||
| Medtronic Inc., Senior Notes |
3.500 | % | 3/15/25 | 440,000 | 435,774 | (e) | ||||||||||
|
|
|
|||||||||||||||
| Total Health Care Equipment & Supplies |
822,623 | |||||||||||||||
|
|
|
|||||||||||||||
| Health Care Providers & Services - 1.2% |
||||||||||||||||
| CVS Health Corp., Senior Notes |
3.350 | % | 3/9/21 | 900,000 | 899,582 | |||||||||||
| Humana Inc., Senior Notes |
2.500 | % | 12/15/20 | 140,000 | 137,493 | |||||||||||
|
|
|
|||||||||||||||
| Total Health Care Providers & Services |
1,037,075 | |||||||||||||||
|
|
|
|||||||||||||||
| Pharmaceuticals - 0.7% |
||||||||||||||||
| Teva Pharmaceutical Finance IV BV, Senior Notes |
3.650 | % | 11/10/21 | 30,000 | 28,753 | |||||||||||
| Teva Pharmaceutical Finance Netherlands III BV, Senior Notes |
1.700 | % | 7/19/19 | 500,000 | 488,239 | |||||||||||
| Teva Pharmaceutical Finance Netherlands III BV, Senior Notes |
2.200 | % | 7/21/21 | 60,000 | 55,693 | |||||||||||
|
|
|
|||||||||||||||
| Total Pharmaceuticals |
572,685 | |||||||||||||||
|
|
|
|||||||||||||||
| TOTAL HEALTH CARE |
2,610,227 | |||||||||||||||
|
|
|
|||||||||||||||
| INDUSTRIALS - 2.7% | ||||||||||||||||
| Aerospace & Defense - 0.4% |
||||||||||||||||
| General Dynamics Corp., Senior Notes (3 mo. USD LIBOR + 0.380%) |
2.736 | % | 5/11/21 | 370,000 | 371,441 | (b) | ||||||||||
|
|
|
|||||||||||||||
| Airlines - 0.3% |
||||||||||||||||
| Airbus SAS Pass-Through-Trust |
8.027 | % | 10/1/19 | 6,163 | 6,259 | (c) | ||||||||||
| American Airlines 2016-1 Class A Pass Through Trust, 2016-1, A |
4.100 | % | 1/15/28 | 232,024 | 232,128 | |||||||||||
| Delta Air Lines 2007-1 Class B Pass Through Trust, Senior Secured Notes |
8.021 | % | 8/10/22 | 29,395 | 32,341 | |||||||||||
|
|
|
|||||||||||||||
| Total Airlines |
270,728 | |||||||||||||||
|
|
|
|||||||||||||||
See Notes to Schedule of Investments.
10
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| Construction & Engineering - 0.3% |
||||||||||||||||
| Brundage-Bone Concrete Pumping Inc., Senior Secured Notes |
10.375 | % | 9/1/23 | 200,000 | $ | 213,500 | (c) | |||||||||
|
|
|
|||||||||||||||
| Electrical Equipment - 0.2% |
||||||||||||||||
| ABB Finance USA Inc., Senior Notes |
2.800 | % | 4/3/20 | 140,000 | 139,881 | |||||||||||
|
|
|
|||||||||||||||
| Industrial Conglomerates - 1.5% |
||||||||||||||||
| General Electric Co., Junior Subordinated Notes (5.000% to 1/21/21 then 3 mo. USD LIBOR + 3.330%) |
5.000 | % | 1/21/21 | 1,312,000 | 1,293,960 | (b)(e)(h) | ||||||||||
|
|
|
|||||||||||||||
| TOTAL INDUSTRIALS |
2,289,510 | |||||||||||||||
|
|
|
|||||||||||||||
| INFORMATION TECHNOLOGY - 0.6% | ||||||||||||||||
| Semiconductors & Semiconductor Equipment - 0.2% |
||||||||||||||||
| QUALCOMM Inc., Senior Notes |
2.100 | % | 5/20/20 | 130,000 | 129,930 | |||||||||||
|
|
|
|||||||||||||||
| Technology Hardware, Storage & Peripherals - 0.4% |
||||||||||||||||
| Dell International LLC/EMC Corp., Senior Secured Notes |
4.420 | % | 6/15/21 | 340,000 | 345,202 | (c)(e) | ||||||||||
|
|
|
|||||||||||||||
| TOTAL INFORMATION TECHNOLOGY |
475,132 | |||||||||||||||
|
|
|
|||||||||||||||
| MATERIALS - 1.6% | ||||||||||||||||
| Chemicals - 0.3% |
||||||||||||||||
| Equate Petrochemical BV, Senior Notes |
3.000 | % | 3/3/22 | 280,000 | 268,627 | (c) | ||||||||||
|
|
|
|||||||||||||||
| Construction Materials - 0.7% |
||||||||||||||||
| Cemex SAB de CV, Senior Secured Notes (3 mo. USD |
7.098 | % | 10/15/18 | 650,000 | 652,925 | (b)(c)(e) | ||||||||||
|
|
|
|||||||||||||||
| Metals & Mining - 0.6% |
||||||||||||||||
| Anglo American Capital PLC, Senior Notes |
4.125 | % | 4/15/21 | 320,000 | 323,486 | (c) | ||||||||||
| Vale Overseas Ltd., Senior Notes |
4.375 | % | 1/11/22 | 159,000 | 161,304 | |||||||||||
|
|
|
|||||||||||||||
| Total Metals & Mining |
484,790 | |||||||||||||||
|
|
|
|||||||||||||||
| TOTAL MATERIALS |
1,406,342 | |||||||||||||||
|
|
|
|||||||||||||||
| TELECOMMUNICATION SERVICES - 3.7% | ||||||||||||||||
| Diversified Telecommunication Services - 1.4% |
||||||||||||||||
| AT&T Inc., Senior Notes |
3.600 | % | 2/17/23 | 810,000 | 798,862 | (e) | ||||||||||
| Verizon Communications Inc., Senior Notes (3 mo. USD |
3.443 | % | 5/15/25 | 380,000 | 379,916 | (b) | ||||||||||
|
|
|
|||||||||||||||
| Total Diversified Telecommunication Services |
1,178,778 | |||||||||||||||
|
|
|
|||||||||||||||
| Wireless Telecommunication Services - 2.3% |
||||||||||||||||
| Sprint Corp., Senior Notes |
7.250 | % | 9/15/21 | 530,000 | 552,525 | |||||||||||
| Sprint Corp., Senior Notes |
7.625 | % | 2/15/25 | 740,000 | 756,657 | |||||||||||
See Notes to Schedule of Investments.
11
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| Wireless Telecommunication Services - (continued) |
||||||||||||||||
| Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC/Sprint Spectrum Co. III LLC, Senior Secured Notes |
3.360 | % | 9/20/21 | 446,875 | $ | 442,965 | (c) | |||||||||
| Vodafone Group PLC, Senior Notes (3 mo. USD LIBOR + 0.990%) |
3.290 | % | 1/16/24 | 220,000 | 219,148 | (b) | ||||||||||
|
|
|
|||||||||||||||
| Total Wireless Telecommunication Services |
1,971,295 | |||||||||||||||
|
|
|
|||||||||||||||
| TOTAL TELECOMMUNICATION SERVICES |
3,150,073 | |||||||||||||||
|
|
|
|||||||||||||||
| UTILITIES - 0.3% | ||||||||||||||||
| Electric Utilities - 0.3% |
||||||||||||||||
| FirstEnergy Corp., Senior Notes |
2.850 | % | 7/15/22 | 290,000 | 281,307 | |||||||||||
|
|
|
|||||||||||||||
| TOTAL CORPORATE BONDS & NOTES |
37,539,633 | |||||||||||||||
|
|
|
|||||||||||||||
| ASSET-BACKED SECURITIES - 27.4% | ||||||||||||||||
| AccessLex Institute, 2007-1, A4 (3 mo. USD LIBOR + 0.060%) |
2.420 | % | 1/25/23 | 261,368 | 256,446 | (b) | ||||||||||
| ACIS CLO Ltd., 2015-6A, A1 (3 mo. USD LIBOR + 1.590%) |
3.948 | % | 5/1/27 | 170,000 | 170,127 | (b)(c) | ||||||||||
| Ajax Mortgage Loan Trust, 2016-1, A, Step Bond |
4.250 | % | 7/25/47 | 749,048 | 752,991 | (c) | ||||||||||
| Ameriquest Mortgage Securities Inc. Asset-Backed Pass-Through Certificates Series, 2002-AR1, M1 (1 mo. USD LIBOR + 1.065%) |
3.031 | % | 9/25/32 | 92,463 | 92,724 | (b) | ||||||||||
| Ameriquest Mortgage Securities Inc. Asset-Backed Pass-Through Certificates Series, 2005-R7, M2 (1 mo. USD LIBOR + 0.500%) |
2.591 | % | 9/25/35 | 270,000 | 271,769 | (b) | ||||||||||
| Apex Credit CLO 2017 Ltd., 2017-1A, A1 (3 mo. USD LIBOR + 1.470%) |
3.829 | % | 4/24/29 | 200,000 | 200,835 | (b)(c) | ||||||||||
| Ares XLIV CLO Ltd., 2017-44A, C (3 mo. USD LIBOR + 3.450%) |
5.798 | % | 10/15/29 | 250,000 | 251,869 | (b)(c) | ||||||||||
| Ares XXVII CLO Ltd., 2013-2A, XR (3 mo. USD LIBOR + 0.900%) |
3.259 | % | 7/28/29 | 187,500 | 187,500 | (b)(c) | ||||||||||
| Argent Securities Inc., 2003-W3, M1 (1 mo. USD LIBOR + 1.125%) |
3.216 | % | 9/25/33 | 24,093 | 23,971 | (b) | ||||||||||
| Bear Stearns Asset Backed Securities Trust, 2007-SD1, 1A2A |
6.000 | % | 10/25/36 | 525,504 | 418,179 | |||||||||||
| BlueMountain CLO Ltd., 2014-2A, DR (3 mo. USD LIBOR + 3.000%) |
5.359 | % | 7/20/26 | 250,000 | 250,130 | (b)(c) | ||||||||||
| Bowman Park CLO Ltd., 2014-1A, AR (3 mo. USD LIBOR + 1.180%) |
3.510 | % | 11/23/25 | 250,000 | 250,052 | (b)(c) | ||||||||||
See Notes to Schedule of Investments.
12
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| ASSET-BACKED SECURITIES - (continued) | ||||||||||||||||
| Carlyle Global Market Strategies, 2017-2A, A1B (3 mo. USD |
3.579 | % | 7/20/31 | 250,000 | $ | 250,701 | (b)(c) | |||||||||
| Carlyle US CLO Ltd., 2017-2A, C (3 mo. USD LIBOR + 3.700%) |
6.059 | % | 7/20/31 | 250,000 | 255,368 | (b)(c) | ||||||||||
| Cent CLO 21 Ltd., 2014-21A, A1BR (3 mo. USD LIBOR + 1.210%) |
3.576 | % | 7/27/26 | 250,000 | 250,080 | (b)(c) | ||||||||||
| Chase Funding Trust Series, 2004-1, 1A7, Step Bond |
4.985 | % | 11/25/33 | 220,407 | 229,186 | |||||||||||
| CIT Mortgage Loan Trust, 2007-1, 2A3 (1 mo. USD LIBOR + 1.450%) |
3.541 | % | 10/25/37 | 575,433 | 580,776 | (b)(c) | ||||||||||
| Citigroup Mortgage Loan Trust Inc., 2005-OPT1, M1 (1 mo. USD |
2.721 | % | 2/25/35 | 244,419 | 244,381 | (b) | ||||||||||
| Conseco Finance Corp., 1997-4 M1 |
7.220 | % | 2/15/29 | 348,492 | 361,102 | (b) | ||||||||||
| Countrywide Asset-Backed Certificates, 2007-10, 1A1 (1 mo. USD |
2.271 | % | 6/25/47 | 827,465 | 794,034 | (b) | ||||||||||
| Countrywide Asset-Backed Certificates, 2007-13, 2A1 (1 mo. USD |
2.991 | % | 10/25/47 | 603,063 | 602,801 | (b) | ||||||||||
| Countrywide Home Equity Loan Trust, 2006-HW, 2A1B (1 mo. USD |
2.223 | % | 11/15/36 | 365,493 | 322,853 | (b) | ||||||||||
| Credit-Based Asset Servicing & Securitization LLC, 2007-SP1, A4, Step Bond |
5.634 | % | 12/25/37 | 244,044 | 249,552 | (c) | ||||||||||
| CWABS Inc. Asset-Backed Certificates Series, 2003-5, AF5, Step Bond |
5.203 | % | 2/25/34 | 563,379 | 581,697 | |||||||||||
| GreenPoint Home Equity Loan Trust, 2004-4, A (1 mo. USD |
2.479 | % | 8/15/30 | 68,397 | 66,271 | (b) | ||||||||||
| Grippen Park CLO Ltd., 2017-1A, D (3 mo. USD LIBOR + 3.300%) |
5.659 | % | 1/20/30 | 500,000 | 503,756 | (b)(c) | ||||||||||
| GSAA Home Equity Trust, 2006-5, 2A3 (1 mo. USD LIBOR + 0.270%) |
2.361 | % | 3/25/36 | 791,091 | 579,211 | (b) | ||||||||||
| GSAMP Trust, 2004-OPT, B1 (1 mo. USD LIBOR + 2.400%) |
4.168 | % | 11/25/34 | 47,651 | 39,197 | (b) | ||||||||||
| GSRPM Mortgage Loan Trust, 2007-1, A (1 mo. USD LIBOR + 0.400%) |
2.491 | % | 10/25/46 | 261,483 | 248,632 | (b)(c) | ||||||||||
| Home Equity Loan Trust, 2006-HSA3, A (1 mo. USD LIBOR + 0.130%) |
2.221 | % | 5/25/36 | 533,264 | 507,579 | (b) | ||||||||||
| Home Equity Mortgage Loan Asset-Backed Trust Series INDS-, 2006-A, A (1 mo. USD LIBOR + 0.260%) |
2.351 | % | 6/25/36 | 2,049,955 | 295,603 | (b) | ||||||||||
| Jamestown CLO X Ltd., 2017-10A, A2 (3 mo. USD LIBOR + 1.850%) |
4.203 | % | 7/17/29 | 250,000 | 251,926 | (b)(c) | ||||||||||
See Notes to Schedule of Investments.
13
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| ASSET-BACKED SECURITIES - (continued) | ||||||||||||||||
| Lehman XS Trust, 2006-8, 2A4A (1 mo. USD LIBOR + 0.260%) |
2.351 | % | 6/25/36 | 1,661,507 | $ | 1,475,788 | (b) | |||||||||
| Long Beach Mortgage Loan Trust, 2001-3, M1 (1 mo. USD LIBOR + 0.825%) |
2.916 | % | 9/25/31 | 50,409 | 51,543 | (b) | ||||||||||
| Long Beach Mortgage Loan Trust, 2002-1, 2M1 (1 mo. LIBOR + 1.125%) |
3.072 | % | 5/25/32 | 82,900 | 82,970 | (b) | ||||||||||
| Magnetite CLO Ltd., 2014-9A, A1R (3 mo. USD LIBOR + 1.000%) |
3.360 | % | 7/25/26 | 250,000 | 249,816 | (b)(c) | ||||||||||
| Marathon CLO VIII Ltd., 2015-8A, C (3 mo. USD LIBOR + 4.050%) |
6.405 | % | 7/18/27 | 250,000 | 250,157 | (b)(c) | ||||||||||
| Morgan Stanley ABS Capital I Inc. Trust, 2004-HE5, M2 (1 mo. USD LIBOR + 1.875%) |
3.966 | % | 6/25/34 | 741,651 | 734,628 | (b) | ||||||||||
| Mosaic Solar Loan Trust, 2018-2GS, A |
4.200 | % | 2/20/44 | 110,000 | 110,554 | (c)(f) | ||||||||||
| Navient Student Loan Trust, 2017-5A, A (1 mo. USD LIBOR + 0.800%) |
2.891 | % | 7/26/66 | 159,881 | 161,601 | (b)(c) | ||||||||||
| Neuberger Berman Loan Advisers CLO 24 Ltd., 2017-24A, C (3 mo. USD LIBOR + 2.450%) |
4.805 | % | 4/19/30 | 250,000 | 251,539 | (b)(c) | ||||||||||
| New Century Home Equity Loan Trust, 2004-3, M1 (1 mo. USD |
3.021 | % | 11/25/34 | 638,898 | 646,203 | (b) | ||||||||||
| NovaStar Mortgage Funding Trust Series, 2004-1, M3 (1 mo. USD |
2.916 | % | 6/25/34 | 636,044 | 633,405 | (b) | ||||||||||
| OneMain Financial Issuance Trust, 2016-3A, A |
3.830 | % | 6/18/31 | 925,000 | 927,747 | (c) | ||||||||||
| Option One Mortgage Loan Trust, 2005-1, A4 (1 mo. USD LIBOR + 0.800%) |
2.891 | % | 2/25/35 | 11,823 | 11,846 | (b) | ||||||||||
| Option One Mortgage Loan Trust, 2005-3, M4 (1 mo. USD LIBOR + 0.930%) |
3.021 | % | 8/25/35 | 520,000 | 469,693 | (b) | ||||||||||
| Origen Manufactured Housing Contract Trust, 2007-A, A2 |
4.580 | % | 4/15/37 | 315,274 | 281,954 | (b) | ||||||||||
| OSCAR US Funding Trust VI LLC, 2017-1A, A2A |
2.300 | % | 5/11/20 | 77,982 | 77,998 | (c) | ||||||||||
| People’s Choice Home Loan Securities Trust Series, 2004-2, M1 (1 mo. USD LIBOR + 0.900%) |
2.991 | % | 10/25/34 | 23,027 | 23,134 | (b) | ||||||||||
| RAAC Trust, 2006-RP2, A (1 mo. USD LIBOR + 0.250%) |
2.341 | % | 2/25/37 | 35,425 | 35,492 | (b)(c) | ||||||||||
| RAAC Trust, 2006-RP3, A (1 mo. USD LIBOR + 0.270%) |
2.361 | % | 5/25/36 | 394,973 | 389,143 | (b)(c) | ||||||||||
| RAMP Series Trust, 2003-RS7, MII1 (1 mo. USD LIBOR + 1.125%) |
3.216 | % | 8/25/33 | 19,566 | 18,692 | (b) | ||||||||||
See Notes to Schedule of Investments.
14
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| ASSET-BACKED SECURITIES - (continued) | ||||||||||||||||
| RASC Series Trust, 2005-KS12, M4 (1 mo. USD LIBOR + 0.640%) |
2.731 | % | 1/25/36 | 460,000 | $ | 366,946 | (b) | |||||||||
| RASC Series Trust, 2006-KS2, M3 (1 mo. USD LIBOR + 0.410%) |
2.501 | % | 3/25/36 | 1,260,000 | 1,101,727 | (b) | ||||||||||
| Renaissance Home Equity Loan Trust, 2003-2, A (1 mo. USD LIBOR + 0.880%) |
2.971 | % | 8/25/33 | 71,288 | 69,866 | (b) | ||||||||||
| SACO I Trust, 2006-3, A3 (1 mo. USD LIBOR + 0.460%) |
2.551 | % | 4/25/36 | 116,070 | 114,318 | (b) | ||||||||||
| SACO I Trust, 2006-4, A1 (1 mo. USD LIBOR + 0.340%) |
2.431 | % | 3/25/36 | 113,233 | 110,753 | (b) | ||||||||||
| Seneca Park CLO Ltd., 2014-1A, AR (3 mo. USD LIBOR + 1.120%) |
3.473 | % | 7/17/26 | 250,000 | 249,994 | (b)(c) | ||||||||||
| SLM Private Credit Student Loan Trust, 2006-A, A5 (3 mo. USD LIBOR + 0.290%) |
2.631 | % | 6/15/39 | 93,314 | 91,540 | (b) | ||||||||||
| SLM Private Credit Student Loan Trust, 2007-A, A4A (3 mo. USD LIBOR + 0.240%) |
2.581 | % | 12/16/41 | 600,000 | 585,283 | (b) | ||||||||||
| SLM Student Loan Trust, 2006-10, A6 (3 mo. USD LIBOR + 0.150%) |
2.510 | % | 3/25/44 | 960,000 | 929,343 | (b) | ||||||||||
| SLM Student Loan Trust, 2008-6, A4 (3 mo. USD LIBOR + 1.100%) |
3.460 | % | 7/25/23 | 150,173 | 151,518 | (b) | ||||||||||
| SLM Student Loan Trust, 2010-1, A (1 mo. USD LIBOR + 0.400%) |
2.360 | % | 3/25/25 | 101,109 | 99,740 | (b) | ||||||||||
| SMB Private Education Loan Trust, 2016-C, A2A |
2.340 | % | 9/15/34 | 800,000 | 777,730 | (c) | ||||||||||
| Structured Asset Investment Loan Trust, 2004-9, M4 (1 mo. USD LIBOR + 1.950%) |
4.041 | % | 10/25/34 | 117,619 | 116,632 | (b) | ||||||||||
| Terwin Mortgage Trust Series TMTS, 2004-5HE, M1 (1 mo. USD LIBOR + 0.885%) |
2.976 | % | 6/25/35 | 445,682 | 445,765 | (b) | ||||||||||
| Towd Point Mortgage Trust, 2017-1, A1 |
2.750 | % | 10/25/56 | 548,232 | 538,323 | (b)(c) | ||||||||||
| Venture XXVIII CLO Ltd., 2017-28A, A2 (3 mo. USD LIBOR + 1.110%) |
3.469 | % | 7/20/30 | 300,000 | 299,840 | (b)(c) | ||||||||||
|
|
|
|||||||||||||||
| TOTAL ASSET-BACKED SECURITIES |
23,274,520 | |||||||||||||||
|
|
|
|||||||||||||||
| SOVEREIGN BONDS - 3.1% | ||||||||||||||||
| Brazil - 0.9% |
||||||||||||||||
| Brazil Notas do Tesouro, Series F, Notes |
10.000 | % | 1/1/21 | 1,885,000 | BRL | 493,590 | ||||||||||
| Brazil Notas do Tesouro, Series F, Notes |
10.000 | % | 1/1/23 | 833,000 | BRL | 210,041 | ||||||||||
| Brazil Notas do Tesouro, Series F, Notes |
10.000 | % | 1/1/27 | 108,000 | BRL | 25,510 | ||||||||||
|
|
|
|||||||||||||||
| Total Brazil |
729,141 | |||||||||||||||
|
|
|
|||||||||||||||
See Notes to Schedule of Investments.
15
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| Mexico - 1.2% |
||||||||||||||||
| Mexican Bonos, Bonds |
6.500 | % | 6/9/22 | 15,090,000 | MXN | $ | 729,584 | |||||||||
| Mexico Government International Bond, Senior Notes |
6.750 | % | 9/27/34 | 85,000 | 99,981 | (e) | ||||||||||
| Mexico Government International Bond, Senior Notes |
5.550 | % | 1/21/45 | 210,000 | 220,238 | (e) | ||||||||||
|
|
|
|||||||||||||||
| Total Mexico |
1,049,803 | |||||||||||||||
|
|
|
|||||||||||||||
| Russia - 0.5% |
||||||||||||||||
| Russian Foreign Bond - Eurobond, Senior Notes |
12.750 | % | 6/24/28 | 254,000 | 415,051 | (g) | ||||||||||
|
|
|
|||||||||||||||
| Saudi Arabia - 0.2% |
||||||||||||||||
| Saudi Government International Bonds, Senior Notes |
2.875 | % | 3/4/23 | 200,000 | 192,676 | (c) | ||||||||||
|
|
|
|||||||||||||||
| United Arab Emirates - 0.3% |
||||||||||||||||
| Abu Dhabi Government International Bond, Senior Notes |
2.500 | % | 10/11/22 | 270,000 | 259,031 | (c) | ||||||||||
|
|
|
|||||||||||||||
| TOTAL SOVEREIGN BONDS |
2,645,702 | |||||||||||||||
|
|
|
|||||||||||||||
| SHARES | ||||||||||||||||
| PREFERRED STOCKS - 2.4% | ||||||||||||||||
| FINANCIALS - 2.4% | ||||||||||||||||
| Capital Markets - 2.4% |
||||||||||||||||
| Northern Trust Corp. |
5.850 | % | 28,000 | 763,560 | ||||||||||||
| State Street Corp. (5.900% to 3/15/24 then 3 mo. USD LIBOR + 3.108%) |
5.900 | % | 49,000 | 1,320,060 | (b) | |||||||||||
|
|
|
|||||||||||||||
| TOTAL FINANCIALS |
2,083,620 | |||||||||||||||
|
|
|
|||||||||||||||
| INDUSTRIALS - 0.0% | ||||||||||||||||
| Marine - 0.0% |
||||||||||||||||
| Tricer Tracking Preferred Equity Certificates, (8.000% PIK) |
8.000 | % | 781,762 | 7,818 | (d)(f)(i) | |||||||||||
|
|
|
|||||||||||||||
| TOTAL PREFERRED STOCKS |
2,091,438 | |||||||||||||||
|
|
|
|||||||||||||||
| FACE AMOUNT† |
||||||||||||||||
| MORTGAGE-BACKED SECURITIES - 2.0% | ||||||||||||||||
| GNMA - 2.0% |
||||||||||||||||
| Government National Mortgage Association (GNMA) |
6.500 | % | 8/15/34 | 111,437 | 123,775 | |||||||||||
| Government National Mortgage Association (GNMA) II (1 year Treasury Constant Maturity Rate + 1.102%) |
3.165 | % | 8/20/58 | 111,556 | 113,762 | (b)(e) | ||||||||||
See Notes to Schedule of Investments.
16
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
RATE | MATURITY DATE |
FACE AMOUNT† |
VALUE | ||||||||||||
| GNMA - (continued) |
||||||||||||||||
| Government National Mortgage Association (GNMA) II |
3.500 | % | 10/20/59-1/20/60 | 556,602 | $ | 573,497 | (b)(e) | |||||||||
| Government National Mortgage Association (GNMA) II (UST Yield Curve CMT 1 year + 1.410%) |
3.470 | % | 12/20/59 | 501,667 | 516,066 | (b)(e) | ||||||||||
| Government National Mortgage Association (GNMA) II (UST Yield Curve CMT 1 year + 1.389%) |
3.450 | % | 12/20/59 | 116,980 | 120,229 | (b)(e) | ||||||||||
| Government National Mortgage Association (GNMA) II (UST Yield Curve CMT 1 year + 1.248%) |
3.307 | % | 7/20/60 | 114,831 | 117,711 | (b)(e) | ||||||||||
| Government National Mortgage Association (GNMA) II (1 mo. USD LIBOR + 1.178%) |
3.052 | % | 7/20/60 | 121,702 | 124,453 | (b)(e) | ||||||||||
|
|
|
|||||||||||||||
| TOTAL MORTGAGE-BACKED SECURITIES |
1,689,493 | |||||||||||||||
|
|
|
|||||||||||||||
| SENIOR LOANS - 1.9% | ||||||||||||||||
| CONSUMER DISCRETIONARY - 1.2% | ||||||||||||||||
| Media - 0.9% |
||||||||||||||||
| Univision Communications Inc., 2017 Replacement Term Loan (1 mo. LIBOR + 2.750%) |
4.844 | % | 3/15/24 | 756,612 | 732,562 | (b)(j)(k) | ||||||||||
|
|
|
|||||||||||||||
| Specialty Retail - 0.3% |
||||||||||||||||
| Michaels Stores Inc., 2018 Term Loan B |
— | 1/30/23 | 237,826 | 236,280 | (l) | |||||||||||
|
|
|
|||||||||||||||
| TOTAL CONSUMER DISCRETIONARY |
968,842 | |||||||||||||||
|
|
|
|||||||||||||||
| INDUSTRIALS - 0.3% | ||||||||||||||||
| Airlines - 0.3% |
||||||||||||||||
| American Airlines Inc., 2018 Replacement Term Loan |
— | 6/27/25 | 288,840 | 284,350 | (l) | |||||||||||
|
|
|
|||||||||||||||
| INFORMATION TECHNOLOGY - 0.2% | ||||||||||||||||
| IT Services - 0.2% |
||||||||||||||||
| First Data Corp., 2024 USD Term Loan (1 mo. LIBOR + 2.000%) |
4.091 | % | 4/26/24 | 200,923 | 199,968 | (b)(j)(k) | ||||||||||
|
|
|
|||||||||||||||
| TELECOMMUNICATION SERVICES - 0.2% | ||||||||||||||||
| Diversified Telecommunication Services - 0.2% |
||||||||||||||||
| Virgin Media Bristol LLC, Term Loan K (1 mo. LIBOR + 2.500%) |
4.573 | % | 1/15/26 | 137,809 | 136,991 | (b)(j)(k) | ||||||||||
|
|
|
|||||||||||||||
| TOTAL SENIOR LOANS |
1,590,151 | |||||||||||||||
|
|
|
|||||||||||||||
| U.S. GOVERNMENT & AGENCY OBLIGATIONS - 0.4% | ||||||||||||||||
| U.S. Government Obligations - 0.4% |
||||||||||||||||
| U.S. Treasury Notes |
2.625 | % | 6/30/23 | 370,000 | 368,230 | |||||||||||
|
|
|
|||||||||||||||
See Notes to Schedule of Investments.
17
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| SECURITY |
SHARES | VALUE | ||||||||||||||
| COMMON STOCKS - 0.0% | ||||||||||||||||
| INDUSTRIALS - 0.0% | ||||||||||||||||
| Marine - 0.0% |
||||||||||||||||
| Tricer HoldCo, S.C.A. |
1,628 | $ | 6,805 | *(d)(f) | ||||||||||||
|
|
|
|||||||||||||||
| TOTAL INVESTMENTS - 129.2% |
109,802,202 | |||||||||||||||
| Liabilities in Excess of Other Assets - (29.2)% |
(24,821,527 | ) | ||||||||||||||
|
|
|
|||||||||||||||
| TOTAL NET ASSETS - 100.0% |
$ | 84,980,675 | ||||||||||||||
|
|
|
|||||||||||||||
| † | Face amount denominated in U.S. dollars, unless otherwise noted. |
| * | Non-income producing security. |
| (a) | Collateralized mortgage obligations are secured by an underlying pool of mortgages or mortgage pass-through certificates that are structured to direct payments on underlying collateral to different series or classes of the obligations. The interest rate may change positively or inversely in relation to one or more interest rates, financial indices or other financial indicators and may be subject to an upper and/or lower limit. |
| (b) | Variable rate security. Interest rate disclosed is as of the most recent information available. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description above. |
| (c) | 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. |
| (d) | Security is valued in good faith in accordance with procedures approved by the Board of Directors (Note 1). |
| (e) | All or a portion of this security is held by the counterparty as collateral for open reverse repurchase agreements. |
| (f) | Security is valued using significant unobservable inputs (Note 1). |
| (g) | 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. |
| (h) | Security has no maturity date. The date shown represents the next call date. |
| (i) | Payment-in-kind security for which the issuer has the option at each interest payment date of making interest payments in cash or additional securities. |
| (j) | Interest rates disclosed represent the effective rates on senior loans. Ranges in interest rates are attributable to multiple contracts under the same loan. |
| (k) | 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. |
| (l) | All or a portion of this loan is unfunded as of June 30, 2018. The interest rate for fully unfunded term loans is to be determined. |
See Notes to Schedule of Investments.
18
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
Abbreviations used in this schedule:
| BRL | — Brazilian Real | |
| CAS | — Connecticut Avenue Securities | |
| CD | — Certificate of Deposit | |
| CLO | — Collateral Loan Obligation | |
| CMT | — Constant Maturity Treasury | |
| FNMA | — Federal National Mortgage Association | |
| GNMA | — Government National Mortgage Association | |
| IO | — Interest Only | |
| LIBOR | — London Interbank Offered Rate | |
| MXN | — Mexican Peso | |
| REMIC | — Real Estate Mortgage Investment Conduit |
At June 30, 2018, 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 |
||||||||||||||||
| Bank of America |
2.200 | % | 6/15/2018 | 7/16/2018 | $ | 945,000 | Mortgage-Backed Securities | $ | 1,021,620 | |||||||||||||
| Bank of America |
2.200 | % | 6/20/2018 | 9/20/2018 | 1,956,000 | Collateralized Mortgage Obligations | 2,307,419 | |||||||||||||||
| Bank of America |
2.200 | % | 6/29/2018 | 7/30/2018 | 398,000 | Mortgage-Backed Securities | 430,336 | |||||||||||||||
| Bank of America |
2.300 | % | 6/6/2018 | 7/6/2018 | 107,000 | Mortgage-Backed Securities | 113,762 | |||||||||||||||
| Bank of America |
2.340 | % | 6/6/2018 | 7/6/2018 | 858,000 | Collateralized Mortgage Obligations | 1,004,778 | |||||||||||||||
| Barclays Capital Inc. |
2.450 | % | 5/1/2018 | 8/1/2018 | 2,073,000 | Collateralized Mortgage Obligations | 2,347,985 | |||||||||||||||
| Barclays Capital Inc. |
2.600 | % | 6/14/2018 | TBD | ** | 85,744 | Sovereign Bonds | 99,981 | ||||||||||||||
| Barclays Capital Inc. |
2.600 | % | 6/14/2018 | TBD | ** | 536,250 | Corporate Bonds & Notes | 652,925 | ||||||||||||||
| Barclays Capital Inc. |
2.600 | % | 6/14/2018 | TBD | ** | 180,075 | Sovereign Bonds | 220,238 | ||||||||||||||
| Morgan Stanley & Co. |
3.163 | % | 5/7/2018 | 8/6/2018 | 3,586,000 | Corporate Bonds & Notes | 3,870,322 | |||||||||||||||
| Morgan Stanley & Co. |
3.481 | % | 5/21/2018 | 8/20/2018 | 6,336,275 | Corporate Bonds & Notes | 6,806,404 | |||||||||||||||
| Morgan Stanley & Co. |
3.731 | % | 5/21/2018 | 8/20/2018 | 1,042,244 | Corporate Bonds & Notes | 1,405,203 | |||||||||||||||
| RBC Capital Markets |
2.730 | % | 6/6/2018 | 7/6/2018 | 1,050,000 | Collateralized Mortgage Obligations | 1,472,434 | |||||||||||||||
See Notes to Schedule of Investments.
19
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| Counterparty |
Rate | Effective Date |
Maturity Date |
Face Amount of Reverse Repurchase Agreements |
Asset Class of Collateral* | Collateral Value |
||||||||||||||||||
| RBC Capital Markets |
3.020 | % | 6/6/2018 | 9/4/2018 | $ | 2,159,330 | Corporate Bonds & Notes | $ | 2,288,440 | |||||||||||||||
| RBC Capital Markets |
3.030 | % | 6/11/2018 | 9/11/2018 | 3,385,475 | Corporate Bonds & Notes | 3,598,106 | |||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| $ | 24,698,393 | $ | 27,639,953 | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| * | 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. |
At June 30, 2018, 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 |
117 | 12/19 | $ | 28,396,623 | $ | 28,382,738 | $ | (13,885 | ) | |||||||||||
| 90-Day Eurodollar |
51 | 6/20 | 12,397,854 | 12,370,050 | (27,804 | ) | ||||||||||||||
| U.S. Treasury 2-Year Notes |
7 | 9/18 | 1,479,185 | 1,482,797 | 3,612 | |||||||||||||||
| U.S. Treasury 5-Year Notes |
11 | 9/18 | 1,243,014 | 1,249,789 | 6,775 | |||||||||||||||
| U.S. Treasury 10-Year Notes |
88 | 9/18 | 10,551,799 | 10,576,500 | 24,701 | |||||||||||||||
| U.S. Treasury Ultra Long-Term Bonds |
4 | 9/18 | 620,007 | 638,250 | 18,243 | |||||||||||||||
|
|
|
|||||||||||||||||||
| 11,642 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||
| Contracts to Sell: | ||||||||||||||||||||
| 90-Day Eurodollar |
103 | 12/18 | 25,094,902 | 25,070,200 | 24,702 | |||||||||||||||
| U.S. Treasury Long-Term Bonds |
14 | 9/18 | 2,011,409 | 2,030,000 | (18,591 | ) | ||||||||||||||
|
|
|
|||||||||||||||||||
| 6,111 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||
| Net unrealized appreciation on open futures contracts |
|
$ | 17,753 | |||||||||||||||||
|
|
|
|||||||||||||||||||
At June 30, 2018, the Fund had the following open forward foreign currency contracts:
| Currency Purchased |
Currency Sold |
Counterparty |
Settlement Date |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||
| MXN | 14,070,000 | USD | 758,949 | Citibank N.A. | 7/19/18 | $ | (52,780 | ) | ||||||||||||||
| USD | 34,827 | BRL | 119,000 | Citibank N.A. | 7/19/18 | 4,198 | ||||||||||||||||
| ARS | 430,000 | USD | 19,439 | Citibank N.A. | 10/3/18 | (5,920 | ) | |||||||||||||||
| ARS | 430,000 | USD | 19,431 | Citibank N.A. | 10/3/18 | (5,911 | ) | |||||||||||||||
| ARS | 620,000 | USD | 28,016 | Citibank N.A. | 10/3/18 | (8,523 | ) | |||||||||||||||
See Notes to Schedule of Investments.
20
WESTERN ASSET VARIABLE RATE STRATEGIC FUND INC.
| Schedule of investments (unaudited) (cont’d) | June 30, 2018 |
| Currency Purchased |
Currency Sold |
Counterparty |
Settlement Date |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||
| ARS | 1,310,000 | USD | 59,223 | Citibank N.A. | 10/3/18 | $ | (18,036 | ) | ||||||||||||||
| ARS | 1,510,000 | USD | 68,110 | Citibank N.A. | 10/5/18 | (20,710 | ) | |||||||||||||||
|
|
|
|||||||||||||||||||||
| Total | $ | (107,682 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||
Abbreviations used in this table:
| ARS | — Argentine Peso | |
| BRL | — Brazilian Real | |
| MXN | — Mexican Peso | |
| USD | — United States Dollar |
At June 30, 2018, the Fund had the following open swap contracts:
| CENTRALLY CLEARED INTEREST RATE SWAPS |
||||||||||||||||||||
| NOTIONAL AMOUNT |
TERMINATION DATE |
PAYMENTS MADE BY THE FUND† |
PAYMENTS RECEIVED BY THE FUND† |
UPFRONT PREMIUMS PAID (RECEIVED) |
UNREALIZED APPRECIATION |
|||||||||||||||
| $ | 2,500,000 | 6/28/23 | 1.238% semi-annually | 3-Month LIBOR quarterly | $ | (2,347 | ) | $ | 196,038 | |||||||||||
| 9,463,000 | 9/19/23 | 3-Month LIBOR quarterly | Daily Federal Funds Effective Rate + 0.364% quarterly | — | 5,314 | |||||||||||||||
| 25,000,000 | 6/28/26 | 1.454% semi-annually | 3-Month LIBOR quarterly | (36,190 | ) | 2,692,196 | ||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Total |
$ | 36,963,000 | $ | (38,537 | ) | $ | 2,893,548 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| † | 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.
21
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 03, 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 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. Prior to December 1, 2017, short-term fixed income securities that would mature in 60 days or less were valued at amortized cost, unless it was 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
22
Notes to Schedule of Investments (unaudited) (continued)
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.
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) |
23
Notes to Schedule of Investments (unaudited) (continued)
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 |
— | $ | 39,945,693 | $ | 650,537 | $ | 40,596,230 | |||||||||
| Corporate Bonds & Notes |
— | 37,539,633 | — | 37,539,633 | ||||||||||||
| Asset-Backed Securities |
— | 23,163,966 | 110,554 | 23,274,520 | ||||||||||||
| Sovereign Bonds |
— | 2,645,702 | — | 2,645,702 | ||||||||||||
| Preferred Stocks: |
||||||||||||||||
| Financials |
$ | 2,083,620 | — | — | 2,083,620 | |||||||||||
| Industrials |
— | — | 7,818 | 7,818 | ||||||||||||
| Mortgage-Backed Securities |
— | 1,689,493 | — | 1,689,493 | ||||||||||||
| Senior Loans |
— | 1,590,151 | — | 1,590,151 | ||||||||||||
| U.S. Government & Agency Obligations |
— | 368,230 | — | 368,230 | ||||||||||||
| Common Stocks |
— | — | 6,805 | 6,805 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 2,083,620 | $ | 106,942,868 | $ | 775,714 | $ | 109,802,202 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other Financial Instruments: |
||||||||||||||||
| Futures Contracts |
78,033 | — | — | 78,033 | ||||||||||||
| Forward Foreign Currency Contracts |
— | 4,198 | — | 4,198 | ||||||||||||
| Centrally Cleared Interest Rate Swaps |
— | 2,893,548 | — | 2,893,548 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Other Financial Instruments |
$ | 78,033 | $ | 2,897,746 | — | $ | 2,975,779 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 2,161,653 | $ | 109,840,614 | $ | 775,714 | $ | 112,777,981 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
24
Notes to Schedule of Investments (unaudited) (continued)
| LIABILITIES |
||||||||||||||||
| DESCRIPTION |
QUOTED PRICES (LEVEL 1) |
OTHER SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2) |
SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) |
TOTAL | ||||||||||||
| Other Financial Instruments: |
||||||||||||||||
| Futures Contracts |
$ | 60,280 | — | — | $ | 60,280 | ||||||||||
| Forward Foreign Currency Contracts |
— | $ | 111,880 | — | 111,880 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 60,280 | $ | 111,880 | — | $ | 172,160 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| † | See Schedule of Investments for additional detailed categorizations. |
25
| 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 22, 2018 | |
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 22, 2018 | |
| By |
/s/ RICHARD F. SENNETT | |
| Richard F. Sennett | ||
| Principal Financial Officer | ||
| Date: |
August 22, 2018 | |