At April 30, 2022, the Fund had the following open reverse repurchase agreements:
At April 30, 2022, the Fund had the following open forward foreign currency contracts:
|
|
|
|
|
| Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
|
|
|
19 |
Statement of assets and liabilities (unaudited)
April 30, 2022
|
|
|
|
|
|
|
| Assets: |
|
|
|
|
| Investments in unaffiliated securities, at value (Cost — $328,525,262) |
|
$ |
323,806,242 |
|
| Investments in affiliated securities, at value (Cost — $4,226,054) |
|
|
4,226,054 |
|
| Foreign currency, at value (Cost — $839,176) |
|
|
827,274 |
|
| Cash |
|
|
993,606 |
|
| Receivable for securities sold |
|
|
4,866,181 |
|
| Interest and dividends receivable from unaffiliated investments |
|
|
4,153,888 |
|
| Deposits with brokers for open reverse repurchase agreements |
|
|
390,000 |
|
| Dividends receivable from affiliated investments |
|
|
602 |
|
| Prepaid expenses |
|
|
721 |
|
| Total Assets |
|
|
339,264,568 |
|
|
|
| Liabilities: |
|
|
|
|
| Loan payable (Note 5) |
|
|
90,000,000 |
|
| Payable for open reverse repurchase agreements (Note 3) |
|
|
22,322,888 |
|
| Payable for securities purchased |
|
|
4,553,476 |
|
| Distributions payable |
|
|
1,509,281 |
|
| Unrealized depreciation on forward foreign currency contracts |
|
|
1,001,544 |
|
| Investment management fee payable |
|
|
223,917 |
|
| Interest expense payable |
|
|
52,255 |
|
| Accrued foreign capital gains tax |
|
|
2,448 |
|
| Directors’ fees payable |
|
|
204 |
|
| Accrued expenses |
|
|
115,360 |
|
| Total Liabilities |
|
|
119,781,373 |
|
| Total Net Assets |
|
$ |
219,483,195 |
|
|
|
| Net Assets: |
|
|
|
|
| Par value ($0.001 par value; 14,943,374 shares issued and outstanding; 100,000,000 shares
authorized) |
|
$ |
14,943 |
|
| Paid-in capital in excess of par value |
|
|
268,874,930 |
|
| Total distributable earnings (loss) |
|
|
(49,406,678) |
|
| Total Net Assets |
|
$ |
219,483,195 |
|
|
|
| Shares Outstanding |
|
|
14,943,374 |
|
|
|
| Net Asset Value |
|
|
$14.69 |
|
See Notes to Financial
Statements.
|
|
|
|
|
|
20 |
|
|
|
Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
Statement of operations (unaudited)
For the Six Months Ended April 30, 2022
|
|
|
|
|
|
|
| Investment Income: |
|
|
|
|
| Interest |
|
$ |
9,812,041 |
|
| Dividends from unaffiliated investments |
|
|
61,553 |
|
| Dividends from affiliated investments |
|
|
930 |
|
| Less: Foreign taxes withheld |
|
|
(7,855) |
|
| Total Investment
Income |
|
|
9,866,669 |
|
|
|
| Expenses: |
|
|
|
|
| Investment management fee (Note 2) |
|
|
1,443,734 |
|
| Interest expense (Notes 3 and 5) |
|
|
402,728 |
|
| Transfer agent fees |
|
|
45,593 |
|
| Directors’ fees |
|
|
42,837 |
|
| Audit and tax fees |
|
|
27,291 |
|
| Legal fees |
|
|
23,240 |
|
| Fund accounting fees |
|
|
17,814 |
|
| Stock exchange listing fees |
|
|
6,199 |
|
| Shareholder reports |
|
|
5,621 |
|
| Custody fees |
|
|
3,896 |
|
| Insurance |
|
|
1,061 |
|
| Miscellaneous expenses |
|
|
4,248 |
|
| Total Expenses |
|
|
2,024,262 |
|
| Less: Fee waivers and/or expense reimbursements (Note 2) |
|
|
(615) |
|
| Net Expenses |
|
|
2,023,647 |
|
| Net Investment Income |
|
|
7,843,022 |
|
|
|
| Realized and Unrealized Gain (Loss) on Investments, Futures Contracts,
Forward Foreign Currency Contracts and Foreign Currency Transactions (Notes 1, 3 and 4): |
|
|
|
|
| Net Realized Gain (Loss) From: |
|
|
|
|
| Investment transactions in unaffiliated securities |
|
|
(6,760,884) |
|
| Futures contracts |
|
|
123,334 |
|
| Forward foreign currency contracts |
|
|
(1,760,499) |
|
| Foreign currency transactions |
|
|
(42,486) |
|
| Net Realized Loss |
|
|
(8,440,535) |
|
| Change in Net Unrealized Appreciation (Depreciation) From: |
|
|
|
|
| Investments in unaffiliated securities |
|
|
(39,481,728) |
† |
| Futures contracts |
|
|
(210,720) |
|
| Forward foreign currency contracts |
|
|
(1,026,729) |
|
| Foreign currencies |
|
|
(19,908) |
|
| Change in Net Unrealized Appreciation
(Depreciation) |
|
|
(40,739,085) |
|
| Net Loss on Investments, Futures Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions |
|
|
(49,179,620) |
|
| Decrease in Net Assets From Operations |
|
$ |
(41,336,598) |
|
| † |
Net of change in accrued foreign capital gains tax of $2,448. |
See Notes to Financial Statements.
|
|
|
|
|
| Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
|
|
|
21 |
Statements of changes in net assets
|
|
|
|
|
|
|
|
|
| For the Six Months Ended April 30, 2022 (unaudited)
and the Year Ended October 31, 2021 |
|
2022 |
|
|
2021 |
|
|
|
|
| Operations: |
|
|
|
|
|
|
|
|
| Net investment income |
|
$ |
7,843,022 |
|
|
$ |
15,927,616 |
|
| Net realized gain (loss) |
|
|
(8,440,535) |
|
|
|
479,434 |
|
| Change in net unrealized appreciation (depreciation) |
|
|
(40,739,085) |
|
|
|
3,869,130 |
|
| Increase (Decrease) in Net Assets From
Operations |
|
|
(41,336,598) |
|
|
|
20,276,180 |
|
|
|
|
| Distributions to Shareholders From (Note 1): |
|
|
|
|
|
|
|
|
| Total distributable earnings |
|
|
(9,055,685) |
|
|
|
(14,079,607) |
|
| Return of capital |
|
|
— |
|
|
|
(4,026,016) |
|
| Decrease in Net Assets From Distributions
to Shareholders |
|
|
(9,055,685) |
|
|
|
(18,105,623) |
|
|
|
|
| Fund Share Transactions: |
|
|
|
|
|
|
|
|
| Reinvestment of distributions (2,465 and 2,483 shares issued, respectively) |
|
|
44,419 |
|
|
|
45,464 |
|
| Increase in Net Assets From Fund Share
Transactions |
|
|
44,419 |
|
|
|
45,464 |
|
| Increase (Decrease) in Net
Assets |
|
|
(50,347,864) |
|
|
|
2,216,021 |
|
|
|
|
| Net Assets: |
|
|
|
|
|
|
|
|
| Beginning of period |
|
|
269,831,059 |
|
|
|
267,615,038 |
|
| End of period |
|
$ |
219,483,195 |
|
|
$ |
269,831,059 |
|
See Notes to Financial
Statements.
|
|
|
|
|
|
22 |
|
|
|
Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
Statement of cash flows (unaudited)
For the Six Months Ended April 30, 2022
|
|
|
|
|
|
|
| Increase (Decrease) in Cash: |
|
|
|
|
| Cash Flows from Operating Activities: |
|
|
|
|
| Net decrease in net assets resulting from operations |
|
$ |
(41,336,598) |
|
| Adjustments to reconcile net decrease in net assets resulting from operations to net cash
provided (used) by operating activities: |
|
|
|
|
| Purchases of portfolio securities |
|
|
(105,985,081) |
|
| Sales of portfolio securities |
|
|
113,128,419 |
|
| Net purchases, sales and maturities of short-term investments |
|
|
2,656,718 |
|
| Return of capital |
|
|
10,716 |
|
| Net amortization of premium (accretion of discount) |
|
|
(1,162,867) |
|
| Increase in receivable for securities sold |
|
|
(4,037,976) |
|
| Decrease in interest and dividends receivable from unaffiliated investments |
|
|
378,761 |
|
| Decrease in prepaid expenses |
|
|
3,151 |
|
| Increase in dividends receivable from affiliated investments |
|
|
(551) |
|
| Decrease in receivable from broker — net variation margin on open futures
contracts |
|
|
3,375 |
|
| Decrease in payable for securities purchased |
|
|
(298,694) |
|
| Decrease in investment management fee payable |
|
|
(37,432) |
|
| Decrease in Directors’ fees payable |
|
|
(4,069) |
|
| Increase in interest expense payable |
|
|
20,887 |
|
| Decrease in accrued expenses |
|
|
(19,365) |
|
| Net realized loss on investments |
|
|
6,760,884 |
|
| Change in net unrealized appreciation (depreciation) of investments and forward foreign
currency contracts |
|
|
40,508,457 |
|
| Net Cash Provided in Operating
Activities* |
|
|
10,588,735 |
|
|
|
| Cash Flows from Financing Activities: |
|
|
|
|
| Distributions paid on common stock (net of distributions payable) |
|
|
(9,011,017) |
|
| Decrease in payable for open reverse repurchase agreements |
|
|
(518,093) |
|
| Net Cash Used by Financing
Activities |
|
|
(9,529,110) |
|
| Net Increase in Cash and Restricted Cash |
|
|
1,059,625 |
|
| Cash and restricted cash at beginning of period |
|
|
1,151,255 |
|
| Cash and restricted cash at end of period |
|
$ |
2,210,880 |
|
| * |
Included in operating expenses is cash of $381,841 paid for interest fees on borrowings. |
| |
The following table provides a reconciliation of cash (including foreign currency) and restricted cash reported within the
Statement of Assets and Liabilities that sums to the total of such amounts shown on the Statement of Cash Flows. |
|
|
|
|
|
| |
|
April 30, 2022 |
|
| Cash |
|
$ |
1,820,880 |
|
| Restricted cash |
|
|
390,000 |
|
| Total cash and restricted cash shown in the Statement of Cash Flows |
|
$ |
2,210,880 |
|
| |
Restricted cash consists of cash that has been segregated to cover the Fund’s collateral or margin obligations under
derivative contracts and for reverse repurchase agreements. It is separately reported on the Statement of Assets and Liabilities as Deposits with brokers. |
|
|
|
|
|
| Non-Cash Financing Activities: |
|
|
|
|
| Proceeds from reinvestment of distributions |
|
$ |
44,419 |
|
See Notes to Financial
Statements.
|
|
|
|
|
| Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
|
|
|
23 |
Financial highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For a share of capital stock outstanding throughout each year ended
October 31, unless otherwise noted: |
|
| |
|
20221,2 |
|
|
20211 |
|
|
20201 |
|
|
20191 |
|
|
20181 |
|
|
20171 |
|
|
|
|
|
|
|
|
| Net asset value, beginning of period |
|
|
$18.06 |
|
|
|
$17.91 |
|
|
|
$18.41 |
|
|
|
$17.39 |
|
|
|
$19.20 |
|
|
|
$18.94 |
|
|
|
|
|
|
|
|
| Income (loss) from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net investment income |
|
|
0.52 |
|
|
|
1.07 |
|
|
|
1.03 |
|
|
|
0.99 |
|
|
|
0.99 |
|
|
|
1.07 |
|
| Net realized and unrealized gain (loss) |
|
|
(3.28) |
|
|
|
0.29 |
|
|
|
(0.32) |
|
|
|
1.24 |
|
|
|
(1.52) |
|
|
|
0.55 |
|
| Total income (loss) from
operations |
|
|
(2.76) |
|
|
|
1.36 |
|
|
|
0.71 |
|
|
|
2.23 |
|
|
|
(0.53) |
|
|
|
1.62 |
|
|
|
|
|
|
|
|
| Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net investment income |
|
|
(0.61) |
3 |
|
|
(0.94) |
|
|
|
(1.01) |
|
|
|
(0.69) |
|
|
|
(1.26) |
|
|
|
(1.36) |
|
| Return of capital |
|
|
— |
|
|
|
(0.27) |
|
|
|
(0.20) |
|
|
|
(0.52) |
|
|
|
(0.02) |
|
|
|
— |
|
| Total
distributions |
|
|
(0.61) |
|
|
|
(1.21) |
|
|
|
(1.21) |
|
|
|
(1.21) |
|
|
|
(1.28) |
|
|
|
(1.36) |
|
| Anti-dilutive impact of repurchase plan |
|
|
— |
|
|
|
— |
|
|
|
0.00 |
4,5 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
| Net asset value, end of period |
|
|
$14.69 |
|
|
|
$18.06 |
|
|
|
$17.91 |
|
|
|
$18.41 |
|
|
|
$17.39 |
|
|
|
$19.20 |
|
|
|
|
|
|
|
|
| Market price, end of period |
|
|
$14.20 |
|
|
|
$18.16 |
|
|
|
$16.53 |
|
|
|
$17.37 |
|
|
|
$15.20 |
|
|
|
$18.10 |
|
| Total return, based on NAV6,7 |
|
|
(15.65) |
% |
|
|
7.62 |
% |
|
|
4.27 |
% |
|
|
13.30 |
% |
|
|
(2.86) |
% |
|
|
8.92 |
% |
| Total return, based on Market Price8 |
|
|
(18.80) |
% |
|
|
17.43 |
% |
|
|
2.25 |
% |
|
|
22.89 |
% |
|
|
(9.38) |
% |
|
|
12.37 |
% |
|
|
|
|
|
|
|
| Net assets, end of period (millions) |
|
|
$219 |
|
|
|
$270 |
|
|
|
$268 |
|
|
|
$275 |
|
|
|
$260 |
|
|
|
$287 |
|
|
|
|
|
|
|
|
| Ratios to average net assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross expenses |
|
|
1.63 |
%9 |
|
|
1.53 |
% |
|
|
1.94 |
% |
|
|
2.33 |
% |
|
|
2.00 |
% |
|
|
1.79 |
% |
| Net expenses10 |
|
|
1.62 |
9,11 |
|
|
1.53 |
11 |
|
|
1.93 |
11 |
|
|
2.33 |
|
|
|
2.00 |
|
|
|
1.79 |
|
| Net investment income |
|
|
6.30 |
9 |
|
|
5.73 |
|
|
|
5.79 |
|
|
|
5.55 |
|
|
|
5.42 |
|
|
|
5.66 |
|
|
|
|
|
|
|
|
| Portfolio turnover rate |
|
|
30 |
% |
|
|
35 |
% |
|
|
50 |
% |
|
|
52 |
% |
|
|
85 |
% |
|
|
69 |
% |
|
|
|
|
|
|
|
| Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loan Outstanding, End of Period (000s) |
|
|
$90,000 |
|
|
|
$90,000 |
|
|
|
$90,000 |
|
|
|
$88,000 |
|
|
|
$88,000 |
|
|
|
$83,000 |
|
| Asset Coverage Ratio for Loan
Outstanding12 |
|
|
344 |
% |
|
|
400 |
% |
|
|
397 |
% |
|
|
413 |
% |
|
|
395 |
% |
|
|
446 |
% |
| Asset Coverage, per $1,000 Principal Amount of Loan Outstanding12 |
|
|
$3,439 |
|
|
|
$3,998 |
|
|
|
$3,974 |
|
|
|
$4,126 |
|
|
|
$3,952 |
|
|
|
$4,456 |
|
| Weighted Average Loan (000s) |
|
|
$90,000 |
|
|
|
$90,000 |
|
|
|
$88,716 |
|
|
|
$88,000 |
|
|
|
$84,625 |
|
|
|
$83,000 |
|
| Weighted Average Interest Rate on Loan |
|
|
0.83 |
% |
|
|
0.76 |
% |
|
|
1.75 |
% |
|
|
3.08 |
% |
|
|
2.50 |
% |
|
|
1.63 |
% |
See Notes to Financial
Statements.
|
|
|
|
|
|
24 |
|
|
|
Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
| 1 |
Per share amounts have been calculated using the average shares method. |
| 2 |
For the six months ended April 30, 2022 (unaudited). |
| 3 |
The actual source of the Fund’s current fiscal year distributions may be from net investment income, return of
capital or a combination of both. Shareholders will be informed of the tax characteristics of the distributions after the close of the fiscal year. |
| 4 |
Amount represents less than $0.005 per share. |
| 5 |
The repurchase plan was completed at an average repurchase price of $12.30 for 2,114 shares and $26,011 for the year ended
October 31, 2020. |
| 6 |
Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the
absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.
|
| 7 |
The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future
results. Total returns for periods of less than one year are not annualized. |
| 8 |
The total return calculation assumes that distributions are reinvested in accordance with the Fund’s dividend
reinvestment plan. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
| 10 |
The manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee
payable in connection with any investment in an affiliated money market fund. |
| 11 |
Reflects fee waivers and/or expense reimbursements. |
| 12 |
Represents value of net assets plus the loan outstanding at the end of the period divided by the loan outstanding at the
end of the period. |
See Notes to
Financial Statements.
|
|
|
|
|
| Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
|
|
|
25 |
Notes to financial statements (unaudited)
1. Organization and significant accounting policies
Western Asset Global Corporate Defined Opportunity Fund Inc. (the “Fund”) was incorporated in Maryland on September 17, 2009 and is registered as a
non-diversified, limited-term, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund’s primary investment objective is to provide current income and then to liquidate
and distribute substantially all of the Fund’s net assets to stockholders on or about December 2, 2024. As a secondary investment objective, the Fund will seek capital appreciation. The Fund seeks to achieve its investment objectives by
investing, under normal market conditions, at least 80% of its managed assets in a portfolio of U.S. and foreign corporate fixed-income securities of varying maturities.
The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles
(“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.
(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 typically 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. 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 Global 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
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26 |
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Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
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) |
The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those
securities.
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| Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
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27 |
Notes to financial statements
(unaudited) (cont’d)
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†: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Corporate Bonds & Notes |
|
|
— |
|
|
$ |
260,406,046 |
|
|
|
— |
|
|
$ |
260,406,046 |
|
| Sovereign Bonds |
|
|
— |
|
|
|
34,349,215 |
|
|
|
— |
|
|
|
34,349,215 |
|
| U.S. Government & Agency Obligations |
|
|
— |
|
|
|
15,076,839 |
|
|
|
— |
|
|
|
15,076,839 |
|
| Senior Loans |
|
|
— |
|
|
|
8,933,771 |
|
|
|
— |
|
|
|
8,933,771 |
|
| Convertible Bonds & Notes |
|
|
— |
|
|
|
3,043,545 |
|
|
|
— |
|
|
|
3,043,545 |
|
| Convertible Preferred Stocks |
|
|
— |
|
|
|
1,008,058 |
|
|
|
— |
|
|
|
1,008,058 |
|
| Preferred Stocks |
|
$ |
943,841 |
|
|
|
— |
|
|
|
— |
|
|
|
943,841 |
|
| Collateralized Mortgage Obligations |
|
|
— |
|
|
|
44,927 |
|
|
|
— |
|
|
|
44,927 |
|
| Total Long-Term Investments |
|
|
943,841 |
|
|
|
322,862,401 |
|
|
|
— |
|
|
|
323,806,242 |
|
| Short-Term Investments† |
|
|
4,226,054 |
|
|
|
— |
|
|
|
— |
|
|
|
4,226,054 |
|
| Total Investments |
|
$ |
5,169,895 |
|
|
$ |
322,862,401 |
|
|
|
— |
|
|
$ |
328,032,296 |
|
|
| LIABILITIES |
|
| Description |
|
Quoted Prices
(Level 1) |
|
|
Other Significant
Observable Inputs
(Level 2) |
|
|
Significant
Unobservable
Inputs
(Level 3) |
|
|
Total |
|
| Other Financial Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Forward Foreign Currency Contracts†† |
|
|
— |
|
|
$ |
1,001,544 |
|
|
|
— |
|
|
$ |
1,001,544 |
|
| † |
See Schedule of Investments for additional detailed categorizations. |
| †† |
Reflects the unrealized appreciation (depreciation) of the instruments. |
(b) Futures contracts. The Fund uses futures contracts generally to gain exposure to, or hedge against,
changes in interest rates or gain exposure to, or hedge against, changes in certain asset classes. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
Upon entering into a futures contract, the Fund is required to deposit cash or securities with a broker in an amount equal to a certain percentage of the contract
amount. This is known as the ‘‘initial margin’’ and subsequent payments (‘‘variation margin’’) are made or received by the Fund each day, depending on the daily fluctuation in the value of the contract. For
certain futures, including foreign denominated futures, variation margin is not settled daily, but is recorded as a net variation margin payable or receivable. The daily changes in contract value are recorded as unrealized appreciation or
depreciation in the Statement of Operations and the Fund recognizes a realized gain or loss when the contract is closed.
Futures contracts involve, to varying
degrees, risk of loss in excess of the amounts reflected in the financial statements. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.
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Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
(c) Forward foreign currency contracts. The Fund enters into a forward foreign currency contract to hedge
against foreign currency exchange rate risk on its non-U.S. dollar denominated securities or to facilitate settlement of a foreign currency denominated portfolio transaction. A forward foreign currency contract is an agreement between two parties to
buy and sell a currency at a set price with delivery and settlement at a future date. The contract is marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. When a forward foreign currency contract is
closed, through either delivery or offset by entering into another forward foreign currency contract, the Fund recognizes a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of
the contract at the time it is closed.
Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected on the Statement of
Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the
counterparties to meet the terms of their contracts.
(d) Loan participations. The Fund may invest in
loans arranged through private negotiation between one or more financial institutions. The Fund’s investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations,
the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement related to the loan, or any rights of off-set against the borrower and the Fund may not benefit directly from any collateral supporting
the loan in which it has purchased the participation.
The Fund assumes the credit risk of the borrower, the lender that is selling the participation and any other
persons interpositioned between the Fund and the borrower. In the event of the insolvency of the lender selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any off-set between the lender
and the borrower.
(e) Reverse repurchase agreements. The Fund may enter into reverse repurchase
agreements. Under the terms of a typical reverse repurchase agreement, a fund sells a security subject to an obligation to repurchase the security from the buyer at an agreed upon time and price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund’s use of the proceeds of the agreement may be restricted pending a determination by the counterparty, or its trustee or receiver, whether to enforce the Fund’s
obligation to repurchase the securities. In entering into reverse repurchase agreements, the Fund will pledge cash, U.S. government securities or other liquid debt obligations at least equal in value to its obligations with respect to reverse
repurchase agreements or will take other actions permitted by law to cover its obligations. If the market value of the collateral declines during the period, the Fund may be required to post additional collateral to cover its obligation. Cash
collateral that has been pledged to cover obligations of the Fund under reverse repurchase agreements, if any, will be reported separately in the Statement of Assets and Liabilities. Securities pledged as collateral are noted in the Schedule of
Investments. Interest payments made on reverse repurchase agreements are recognized as a component of “Interest expense” on the
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| Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
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|
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29 |
Notes to financial statements
(unaudited) (cont’d)
Statement of Operations. In periods of increased demand for the security, the Fund may receive a fee for use of the security by the counterparty, which may result in
interest income to the Fund.
(f) Cash flow information. The Fund invests in securities and distributes
dividends from net investment income and net realized gains, which are paid in cash and may be reinvested at the discretion of shareholders. These activities are reported in the Statements of Changes in Net Assets and additional information on cash
receipts and cash payments is presented in the Statement of Cash Flows.
(g) Foreign currency translation.
Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and
income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.
The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized
foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the
difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange rates.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a
result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
(h) Credit and market risk. The Fund invests in high-yield and emerging market instruments that are subject
to certain credit and market risks. The yields of high-yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Fund’s investments in securities rated below investment grade typically
involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The
consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Fund’s investments in non-U.S. dollar denominated securities may also result in foreign
currency losses caused by devaluations and exchange rate fluctuations.
|
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Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
Investments in securities that are collateralized by
real estate mortgages are subject to certain credit and liquidity risks. When market conditions result in an increase in default rates of the underlying mortgages and the foreclosure values of underlying real estate properties are materially below
the outstanding amount of these underlying mortgages, collection of the full amount of accrued interest and principal on these investments may be doubtful. Such market conditions may significantly impair the value and liquidity of these investments
and may result in a lack of correlation between their credit ratings and values.
(i) Foreign investment
risks. The Fund’s investments in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or may pay interest or
dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign
government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.
(j) Counterparty risk and credit-risk-related contingent features of derivative instruments. The Fund may
invest in certain securities or engage in other transactions where the Fund is exposed to counterparty credit risk in addition to broader market risks. The Fund may invest in securities of issuers, which may also be considered counterparties as
trading partners in other transactions. This may increase the risk of loss in the event of default or bankruptcy by the counterparty or if the counterparty otherwise fails to meet its contractual obligations. The Fund’s subadviser attempts to
mitigate counterparty risk by (i) periodically assessing the creditworthiness of its trading partners, (ii) monitoring and/or limiting the amount of its net exposure to each individual counterparty based on its assessment and
(iii) requiring collateral from the counterparty for certain transactions. Market events and changes in overall economic conditions may impact the assessment of such counterparty risk by the subadviser. In addition, declines in the values of
underlying collateral received may expose the Fund to increased risk of loss.
With exchange traded and centrally cleared derivatives, there is less counterparty
risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to
failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default of the clearing broker or clearinghouse.
The Fund has entered into master agreements, such as an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or
similar agreement, with certain of its derivative counterparties that govern over-the-counter (“OTC”) derivatives and provide for general obligations, representations, agreements, collateral posting terms, netting provisions in the event
of default or termination and credit related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in the Fund’s net assets or net asset value per share over a specified period of
time. If these credit related contingent features were triggered, the
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| Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
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|
|
31 |
Notes to financial statements
(unaudited) (cont’d)
derivatives counterparty could terminate the positions and demand payment or require additional collateral.
Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or
receivables with collateral held and/or posted and create one single net payment. However, absent an event of default by the counterparty or a termination of the agreement, the terms of the ISDA Master Agreements do not result in an offset of
reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the Fund and the applicable counterparty. The enforceability of the right to offset may vary by jurisdiction.
Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearinghouse for exchange traded derivatives
while collateral terms are contract specific for OTC traded derivatives. Cash collateral that has been pledged to cover obligations of the Fund under derivative contracts, if any, will be reported separately in the Statement of Assets and
Liabilities. Securities pledged as collateral, if any, for the same purpose are noted in the Schedule of Investments.
As of April 30, 2022, the Fund held
forward foreign currency contracts with credit related contingent features which had a liability position of $1,001,544. If a contingent feature in the master agreements would have been triggered, the Fund would have been required to pay this amount
to its derivatives counterparties.
(k) Security transactions and investment income. Security
transactions are accounted for on a trade date basis. Interest income (including interest income from payment-in-kind securities), adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Paydown gains and
losses on mortgage- and asset-backed securities are recorded as adjustments to interest income. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. Foreign dividend income is recorded on the
ex-dividend date or as soon as practicable after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the
extent any issuer defaults or a credit event occurs that impacts the issuer, the Fund may halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default or credit event.
(l) Distributions to shareholders. Distributions from net investment income of the Fund, if any, are
declared quarterly and paid on a monthly basis. The actual source of the Fund’s monthly distributions may be from net investment income, return of capital or a combination of both. Shareholders will be informed of the tax characteristics of the
distributions after the close of the fiscal year. Distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with
income tax regulations, which may differ from GAAP.
(m) Compensating balance arrangements. The Fund
has an arrangement with its custodian bank whereby a portion of the custodian’s fees is paid indirectly by credits earned on the Fund’s cash on deposit with the bank.
|
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32 |
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Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
(n) Federal and other taxes. It is the Fund’s policy to comply with the federal income and excise tax
requirements of the Internal Revenue Code of 1986 (the “Code”), as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute its taxable income and net realized gains, if any, to shareholders in
accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Fund’s financial statements.
Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of October 31, 2021, no provision
for income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by
the Internal Revenue Service and state departments of revenue.
Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and
capital gains at various rates. As of April 30, 2022, there were $2,448 of capital gains tax liabilities accrued on unrealized gains.
(o) Reclassification. GAAP requires that certain components of net assets be reclassified to reflect permanent differences between financial and tax reporting. These reclassifications have no
effect on net assets or net asset value per share.
2. Investment management agreement and other transactions with affiliates
Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Fund’s investment manager. Western Asset Management Company, LLC (“Western
Asset”), Western Asset Management Company Pte. Ltd. (“Western Asset Singapore”), Western Asset Management Company Ltd (“Western Asset Japan”) and Western Asset Management Company Limited (“Western Asset Limited”)
are the Fund’s subadvisers. LMPFA, Western Asset, Western Asset Singapore, Western Asset Japan and Western Asset Limited are indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (“Franklin Resources”).
LMPFA provides administrative and certain oversight services to the Fund. The Fund pays LMPFA an investment management fee, calculated daily and paid monthly, at an
annual rate of 0.80% of the Fund’s average daily net assets plus the amount of any borrowings and assets attributable to any preferred stock that may be outstanding (“managed assets”).
LMPFA delegates to Western Asset the day-to-day portfolio management of the Fund. Western Asset Singapore, Western Asset Japan and Western Asset Limited provide certain
subadvisory services to the Fund relating to currency transactions and investments in non-U.S. dollar denominated debt securities. For its services, LMPFA pays Western Asset a fee monthly, at an annual rate equal to 70% of the net management fee it
receives from the Fund. Western Asset Singapore, Western Asset Japan and Western Asset Limited do not receive any compensation from the Fund. Western Asset pays Western Asset Singapore, Western Asset Japan and Western Asset Limited a monthly
subadvisory fee in an amount equal to 100% of the management fee paid to Western Asset on the assets that Western Asset allocates to each such non-U.S. subadviser to manage.
During periods in which the Fund utilizes financial leverage, the fees paid to LMPFA will be higher than if the Fund did not utilize leverage because the fees are
calculated as a percentage of the Fund’s assets, including those investments purchased with leverage.
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| Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
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|
|
33 |
Notes to financial statements
(unaudited) (cont’d)
The manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an
affiliated money market fund.
During the six months ended April 30, 2022, fees waived and/or expenses reimbursed amounted to $615, all of which was an
affiliated money market fund waiver.
All officers and one Director of the Fund are employees of Franklin Resources or its affiliates and do not receive compensation
from the Fund.
3. Investments
During the
six months ended April 30, 2022, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S. Government & Agency Obligations were as follows:
|
|
|
|
|
|
|
|
|
| |
|
Investments |
|
|
U.S. Government &
Agency Obligations |
|
| Purchases |
|
$ |
101,823,110 |
|
|
$ |
4,161,971 |
|
| Sales |
|
|
109,010,833 |
|
|
|
4,117,586 |
|
At April 30, 2022, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments
for federal income tax purposes were substantially as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cost |
|
|
Gross
Unrealized
Appreciation |
|
|
Gross
Unrealized
Depreciation |
|
|
Net
Unrealized
Depreciation |
|
| Securities |
|
$ |
332,751,316 |
|
|
$ |
10,961,843 |
|
|
$ |
(15,680,863) |
|
|
$ |
(4,719,020) |
|
| Forward foreign currency contracts |
|
|
— |
|
|
|
— |
|
|
|
(1,001,544) |
|
|
|
(1,001,544) |
|
Transactions in reverse repurchase agreements for the Fund during the six months ended April 30, 2022 were as follows:
|
|
|
|
|
| Average Daily
Balance* |
|
Weighted Average
Interest Rate |
|
Maximum Amount
Outstanding |
| $22,521,663 |
|
0.222% |
|
$22,840,981 |
| * |
Averages based on the number of days that the Fund had reverse repurchase agreements outstanding. |
Interest rates on reverse repurchase agreements ranged from 0.090% to 0.550% during the six months ended April 30, 2022. Interest expense incurred on reverse
repurchase agreements totaled $25,165.
|
|
|
|
|
|
34 |
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Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
4. Derivative instruments
and hedging activities
Below is a table, grouped by derivative type, that provides information about the fair value and the location of derivatives
within the Statement of Assets and Liabilities at April 30, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITY DERIVATIVES1 |
|
| |
|
|
|
|
|
|
|
Foreign
Exchange Risk |
|
| Forward foreign currency contracts |
|
|
|
|
|
|
|
|
|
$ |
1,001,544 |
|
| 1 |
Generally, the balance sheet location for asset derivatives is receivables/net unrealized appreciation and for liability
derivatives is payables/net unrealized depreciation. |
The following tables provide information about the effect of derivatives and hedging
activities on the Fund’s Statement of Operations for the six months ended April 30, 2022. The first table provides additional detail about the amounts and sources of gains (losses) realized on derivatives during the period. The second
table provides additional information about the change in unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.
|
|
|
|
|
|
|
|
|
|
|
|
|
| AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED |
|
| |
|
Interest
Rate Risk |
|
|
Foreign
Exchange Risk |
|
|
Total |
|
| Futures contracts |
|
$ |
123,334 |
|
|
|
— |
|
|
$ |
123,334 |
|
| Forward foreign currency contracts |
|
|
— |
|
|
$ |
(1,760,499) |
|
|
|
(1,760,499) |
|
| Total |
|
$ |
123,334 |
|
|
$ |
(1,760,499) |
|
|
$ |
(1,637,165) |
|
|
| CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED |
|
| |
|
Interest
Rate Risk |
|
|
Foreign
Exchange Risk |
|
|
Total |
|
| Futures contracts |
|
$ |
(210,720) |
|
|
|
— |
|
|
$ |
(210,720) |
|
| Forward foreign currency contracts |
|
|
— |
|
|
$ |
(1,026,729) |
|
|
|
(1,026,729) |
|
| Total |
|
$ |
(210,720) |
|
|
$ |
(1,026,729) |
|
|
$ |
(1,237,449) |
|
During the six months ended April 30, 2022, the volume of derivative activity for the Fund was as follows:
|
|
|
|
|
| |
|
Average Market
Value |
|
| Futures contracts (to sell)† |
|
$ |
2,689,875 |
|
| Forward foreign currency contracts (to buy) |
|
|
29,263,167 |
|
| Forward foreign currency contracts (to sell)† |
|
|
320,521 |
|
| † |
At April 30, 2022, there were no open positions held in this derivative. |
|
|
|
|
|
| Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
|
|
|
35 |
Notes to financial statements
(unaudited) (cont’d)
The following table presents the Fund’s OTC derivative assets and liabilities by counterparty net of amounts available for offset under an ISDA Master Agreement and
net of the related collateral pledged (received) by the Fund as of April 30, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Counterparty |
|
Gross Assets
Subject to
Master
Agreements |
|
|
Gross
Liabilities
Subject to
Master
Agreements1 |
|
|
Net Assets
(Liabilities)
Subject to
Master
Agreements |
|
|
Collateral
Pledged
(Received) |
|
|
Net
Amount2 |
|
| Goldman Sachs Group Inc. |
|
|
— |
|
|
$ |
(1,001,544) |
|
|
$ |
(1,001,544) |
|
|
|
— |
|
|
$ |
(1,001,544) |
|
| 1 |
Absent an event of default or early termination, derivative assets and liabilities are presented gross and not offset in
the Statement of Assets and Liabilities. |
| 2 |
Represents the net amount receivable (payable) from (to) the counterparty in the event of default. |
5. Loan
The Fund has a revolving credit
agreement with National Australia Bank Limited (“Credit Agreement”) that allows the Fund to borrow up to an aggregate amount of $90,000,000. This Credit Agreement renews daily for a six month term unless notice to the contrary is given to
the Fund. The Fund pays a commitment fee at an annual rate of 0.20% on the unutilized portion of the loan commitment amount. The interest on the loan is calculated at a variable rate based on a benchmark (currently LIBOR, but subject to an
alternative benchmark upon the occurrence of certain benchmark transition events including the cessation of publication of LIBOR) plus any applicable margin. Securities held by the Fund are subject to a lien granted to National Australia Bank
Limited, to the extent of the borrowing outstanding and any additional expenses. The Fund’s Credit Agreement contains customary covenants that, among other things, may limit the Fund’s ability to pay distributions in certain circumstances,
incur additional debt, change its fundamental investment policies and engage in certain transactions, including mergers and consolidations, and require asset coverage ratios in addition to those required by the 1940 Act. In addition, the Credit
Agreement may be subject to early termination under certain conditions and may contain other provisions that could limit the Fund’s ability to utilize borrowing under the Credit Agreement. Interest expense related to the loan for the six months
ended April 30, 2022 was $377,530. For the six months ended April 30, 2022, the Fund had an average daily loan balance outstanding of $90,000,000 and the weighted average interest rate was 0.83%. At April 30, 2022, the Fund had
$90,000,000 of borrowings outstanding per this Credit Agreement.
6. Distributions subsequent to April 30, 2022
The following distributions have been declared by the Fund’s Board of Directors and are payable subsequent to the period end of this report:
|
|
|
|
|
|
|
|
|
| Record Date |
|
Payable Date |
|
|
Amount |
|
| 4/22/2022 |
|
|
5/2/2022 |
|
|
$ |
0.1010 |
|
| 5/23/2022 |
|
|
6/1/2022 |
|
|
$ |
0.1010 |
|
| 6/23/2022 |
|
|
7/1/2022 |
|
|
$ |
0.1010 |
|
| 7/22/2022 |
|
|
8/1/2022 |
|
|
$ |
0.1010 |
|
| 8/24/2022 |
|
|
9/10/2022 |
|
|
$ |
0.1010 |
|
|
|
|
|
|
|
36 |
|
|
|
Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
Notes to financial statements
(unaudited) (cont’d)
7. Stock repurchase program
On March 10,
2014, the Fund announced that the Fund’s Board of Directors (the “Board”) had authorized the Fund to repurchase in the open market up to 1,600,000 shares of the Fund’s outstanding common stock when the Fund’s shares are
trading at a discount to the net asset value. The Board directed management of the Fund to repurchase shares of common stock at such times and in such amounts as management reasonably believes may enhance stockholder value. The Fund is under no
obligation to purchase shares at any specific discount levels or in any specific amounts. During the six months ended April 30, 2022, the Fund did not repurchase any shares.
Since the Fund’s commencement of the stock repurchase program through April 30, 2022, the Fund repurchased 408,350 shares or 2.66% of its common shares
outstanding for the total amount of $7,013,966. The anti-dilutive impact of these share repurchases is included on the Financial Highlights.
8. Transactions with affiliated company
As
defined by the 1940 Act, an affiliated company is one in which the Fund owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control with the Fund. The following company was considered an affiliated
company for all or some portion of the six months ended April 30, 2022. The following transactions were effected in such company for the six months ended April 30, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Affiliate
Value at
October 31,
2021 |
|
|
Purchased |
|
|
Sold |
|
| |
|
Cost |
|
|
Shares |
|
|
Cost |
|
|
Shares |
|
| Western Asset Premier Institutional Government Reserves, Premium Shares |
|
$ |
6,882,772 |
|
|
$ |
32,463,878 |
|
|
|
32,463,878 |
|
|
$ |
35,120,596 |
|
|
|
35,120,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (cont’d) |
|
Realized
Gain (Loss) |
|
|
Dividend
Income |
|
|
Net Increase
(Decrease) in
Unrealized
Appreciation
(Depreciation) |
|
|
Affiliate
Value at
April 30,
2022 |
|
| Western Asset Premier Institutional Government Reserves, Premium Shares |
|
|
— |
|
|
$ |
930 |
|
|
|
— |
|
|
$ |
4,226,054 |
|
9. Deferred capital losses
As of October 31, 2021, the Fund had deferred capital losses of $28,569,393, which have no expiration date, that will be available to offset future taxable capital
gains.
10. Recent accounting pronouncement
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) –
Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, the FASB
|
|
|
|
|
| Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
|
|
|
37 |
Notes to financial statements
(unaudited) (cont’d)
issued ASU No. 2021-01, with further amendments to Topic 848. The amendments in the ASUs provide optional temporary accounting recognition and financial reporting
relief from the effect of certain types of contract modifications due to the planned discontinuation of the LIBOR and other interbank-offered based reference rates as of the end of 2021 and 2023. The ASUs are effective for certain reference
rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial
statements.
11. Other matters
The outbreak
of the respiratory illness COVID-19 (commonly referred to as “coronavirus”) has continued to rapidly spread around the world, causing considerable uncertainty for the global economy and financial markets. The ultimate economic fallout from
the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. The COVID-19 pandemic could adversely affect the value and liquidity of the Fund’s investments and negatively impact the Fund’s
performance. In addition, the outbreak of COVID-19, and measures taken to mitigate its effects, could result in disruptions to the services provided to the Fund by its service providers.
* * *
The
Fund’s investments, payment obligations, and financing terms may be based on floating rates, such as the London Interbank Offered Rate, or “LIBOR,” which is the offered rate for short-term Eurodollar deposits between major
international banks. On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR, stated that it will cease the publication of the overnight and one-, three-, six- and twelve-month USD LIBOR settings immediately following the
LIBOR publication on Friday, June 30, 2023. All other LIBOR settings, including the one-week and two-month USD LIBOR settings, have ceased publication as of January 1, 2022. There remains uncertainty regarding the nature of any replacement
rate and the impact of the transition from LIBOR on the Fund’s transactions and the financial markets generally. As such, the potential effect of a transition away from LIBOR on the Fund or the Fund’s investments cannot yet be determined.
* * *
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could
increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking
entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These
sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the
value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion. To the extent that the Fund has exposure to Russian investments or investments in
countries affected by the invasion, the Fund’s ability to price, buy, sell, receive or deliver
|
|
|
|
|
|
38 |
|
|
|
Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
such investments was impaired. The Fund could
determine at any time that certain of the most affected securities have little or no value. In addition, any exposure that the Fund may have to counterparties in Russia or in countries affected by the invasion could negatively impact the Fund’s
portfolio. The extent and duration of Russia’s military actions and the repercussions of such actions (including any retaliatory actions or countermeasures that may be taken by those subject to sanctions) are impossible to predict, but could
result in significant market disruptions, including in the oil and natural gas markets, and may negatively affect global supply chains, inflation and global growth. These and any related events could significantly impact the Fund’s performance
and the value of an investment in the Fund, even beyond any direct exposure the Fund may have to Russian issuers or issuers in other countries affected by the invasion. At April 30, 2022, the Fund had 0.71% of its net assets invested in
securities with significant economic risk or exposure to Russia.
|
|
|
|
|
| Western Asset Global Corporate Defined Opportunity Fund Inc. 2022 Semi-Annual Report |
|
|
|
39 |
Additional shareholder information (unaudited)
Results of annual meeting of shareholders
The
Annual Meeting of Shareholders of Western Asset Global Corporate Defined Opportunity Fund Inc. was held on April 8, 2022 for the purpose of considering and voting upon the proposals presented at the Meeting. The following table provides
information concerning the matters voted upon at the Meeting:
Election of directors
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nominees |
|
Votes For |
|
|
Votes Withheld |
|
|
Abstain |
|
| Robert D. Agdern |
|
|
12,027,517 |
|
|
|
121,641 |
|
|
|
133,137 |
|
| Eileen A. Kamerick |
|
|
12,055,111 |
|
|
|
100,577 |
|
|
|
126,607 |
|
At April 30, 2022, in addition to, Robert D. Agdern and Eileen A. Kamerick, the other Directors of the Fund were as follows:
Carol L. Colman
Daniel P. Cronin
Paolo M. Cucchi
William R. Hutchinson
Nisha Kumar
Jane Trust
Ratification of Selection of Independent Registered Public Accountants
To ratify the selection of PricewaterhouseCoopers LLP (“PwC”) as independent registered public accountants of the Fund for the fiscal year ended
October 31, 2022.
|
|
|
|
|
| For |
|
Against |
|
Abstain |
| 12,143,920 |
|
52,543 |
|
85,832 |
|
|
|
|
|
|
40 |
|
|
|
Western Asset Global Corporate Defined Opportunity Fund Inc. |
Dividend reinvestment plan (unaudited)
Unless you elect to receive distributions in cash (i.e., opt-out), all dividends, including any capital gain dividends and return of capital distributions, on your
Common Stock will be automatically reinvested by Computershare Trust Company, N.A., as agent for the stockholders (the “Plan Agent”), in additional shares of Common Stock under the Fund’s Dividend Reinvestment Plan (the
“Plan”). You may elect not to participate in the Plan by contacting the Plan Agent. If you do not participate, you will receive all cash distributions paid by check mailed directly to you by Computershare Trust Company, N.A., as dividend
paying agent.
If you participate in the Plan, the number of shares of Common Stock you will receive will be determined as follows:
(1) If the market price of the Common Stock (plus $0.03 per share commission) on the payment date (or, if the payment date is not a NYSE trading day, the
immediately preceding trading day) is equal to or exceeds the net asset value per share of the Common Stock at the close of trading on the NYSE on the payment date, the Fund will issue new Common Stock at a price equal to the greater of (a) the
net asset value per share at the close of trading on the NYSE on the payment date or (b) 95% of the market price per share of the Common Stock on the payment date.
(2) If the net asset value per share of the Common Stock exceeds the market price of the Common Stock (plus $0.03 per share commission) at the close of
trading on the NYSE on the payment date, the Plan Agent will receive the dividend or distribution in cash and will buy Common Stock in the open market, on the NYSE or elsewhere, for your account as soon as practicable commencing on the trading day
following the payment date and terminating no later than the earlier of (a) 30 days after the dividend or distribution payment date, or (b) the payment date for the next succeeding dividend or distribution to be made to the stockholders;
except when necessary to comply with applicable provisions of the federal securities laws. If during this period: (i) the market price (plus $0.03 per share commission) rises so that it equals or exceeds the net asset value per share of the
Common Stock at the close of trading on the NYSE on the payment date before the Plan Agent has completed the open market purchases or (ii) if the Plan Agent is unable to invest the full amount eligible to be reinvested in open market purchases,
the Plan Agent will cease purchasing Common Stock in the open market and the Fund shall issue the remaining Common Stock at a price per share equal to the greater of (a) the net asset value per share at the close of trading on the NYSE on the
day prior to the issuance of shares for reinvestment or (b) 95% of the then current market price per share.
Common Stock in your account will be held by the
Plan Agent in non-certificated form. Any proxy you receive will include all shares of Common Stock you have received under the Plan. You may withdraw from the Plan (i.e., opt-out) by notifying the Plan Agent in writing at 462 South 4th Street, Suite
1600, Louisville, KY 40202 or by calling the Plan Agent at 1-888-888-0151. Such withdrawal will be effective immediately if notice is received by the Plan Agent not less than ten business days prior to any dividend or distribution record date;
|
|
|
|
|
| Western Asset Global Corporate Defined Opportunity Fund Inc. |
|
|
|
41 |
Dividend reinvestment plan
(unaudited) (cont’d)
otherwise such withdrawal will be effective as soon as practicable after the Plan Agent’s
investment of the most recently declared dividend or distribution on the Common Stock.
Plan participants who sell their shares will be charged a service charge
(currently $5.00 per transaction) and the Plan Agent is authorized to deduct brokerage charges actually incurred from the proceeds (currently $0.05 per share commission). There is no service charge for reinvestment of your dividends or distributions
in Common Stock. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases. Because all dividends and distributions will be automatically reinvested in additional
shares of Common Stock, this allows you to add to your investment through dollar cost averaging, which may lower the average cost of your Common Stock over time. Dollar cost averaging is a technique for lowering the average cost per share over time
if the Fund’s net asset value declines. While dollar cost averaging has definite advantages, it cannot assure profit or protect against loss in declining markets.
Automatically reinvesting dividends and distributions does not mean that you do not have to pay income taxes due upon receiving dividends and distributions. Investors
will be subject to income tax on amounts reinvested under the Plan.
The Fund reserves the right to amend or terminate the Plan if, in the judgment of the Board of
Directors, the change is warranted. The Plan may be terminated, amended or supplemented by the Fund upon notice in writing mailed to stockholders at least 30 days prior to the record date for the payment of any dividend or distribution by the Fund
for which the termination or amendment is to be effective. Upon any termination, you will be sent cash for any fractional share of Common Stock in your account. You may elect to notify the Plan Agent in advance of such termination to have the Plan
Agent sell part or all of your Common Stock on your behalf. Additional information about the Plan and your account may be obtained from the Plan Agent at 462 South 4th Street, Suite 1600, Louisville, KY 40202 or by calling the Plan Agent at
1-888-888-0151.
|
|
|
|
|
|
42 |
|
|
|
Western Asset Global Corporate Defined Opportunity Fund Inc. |
Western Asset
Global Corporate Defined Opportunity Fund Inc.
Directors
Robert D. Agdern
Carol L. Colman
Daniel P. Cronin
Paolo M. Cucchi
William R. Hutchinson
Eileen A. Kamerick
Nisha Kumar
Jane Trust
Chairman
Officers
Jane Trust
President and Chief Executive Officer
Christopher Berarducci
Treasurer and Principal Financial Officer
Fred Jensen
Chief Compliance Officer
George P. Hoyt
Secretary and Chief Legal Officer
Thomas C. Mandia*
Senior Vice President
Jeanne M. Kelly
Senior Vice President
Western Asset Global Corporate
Defined Opportunity Fund Inc.
620 Eighth Avenue
47th Floor
New York, NY 10018
Investment manager
Legg Mason Partners Fund Advisor, LLC
Subadvisers
Western Asset Management Company, LLC
Western Asset Management Company
Limited
Western Asset Management Company Ltd
Western Asset Management Company
Pte. Ltd.
Custodian
The Bank of New York
Mellon
Transfer agent
Computershare Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
Independent registered public accounting firm
PricewaterhouseCoopers LLP
Baltimore, MD
Legal counsel
Simpson Thacher & Bartlett
LLP
900 G Street NW
Washington, DC 20001
New York Stock Exchange Symbol
GDO
| * |
Effective February 10, 2022, Mr. Mandia became a Senior Vice President. |
Legg Mason Funds Privacy and Security Notice
Your Privacy and the Security of Your Personal Information is Very
Important to the Legg Mason Funds
This Privacy and Security Notice (the “Privacy Notice”) addresses the Legg Mason Funds’ privacy and
data protection practices with respect to nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds’ distributor, Franklin Distributors, LLC, as well as Legg Mason-sponsored closed-end funds. The
provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.
The Type of Nonpublic Personal Information the Funds Collect About You
The Funds collect and maintain nonpublic personal information
about you in connection with your shareholder account. Such information may include, but is not limited to:
| • |
|
Personal information included on applications or other forms; |
| • |
|
Account balances, transactions, and mutual fund holdings and positions; |
| • |
|
Bank account information, legal documents, and identity verification documentation; |
| • |
|
Online account access user IDs, passwords, security challenge question responses; and |
| • |
|
Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of
an individual’s total debt, payment history, etc.). |
How the Funds Use Nonpublic Personal Information About You
The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with other
financial institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services
you have authorized or as permitted or required by law.
The Funds may disclose information about you to:
| • |
|
Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business, or
to comply with obligations to government regulators; |
| • |
|
Service providers, including the Funds’ affiliates, who assist the Funds as part of the ordinary course of business
(such as printing, mailing services, or processing or servicing your account with us) or otherwise perform services on the Funds’ behalf, including companies that may perform statistical analysis, market research and marketing services solely
for the Funds; |
| • |
|
Permit access to transfer, whether in the United States or countries outside of the United States to such Funds’
employees, agents and affiliates and service providers as required to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators; |
| • |
|
The Funds’ representatives such as legal counsel, accountants and auditors to enable the Funds to conduct ordinary
business, or to comply with obligations to government regulators; |
| • |
|
Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.
|
|
| NOT PART OF THE SEMI-ANNUAL
REPORT |
Legg Mason Funds Privacy and Security Notice (cont’d)
Except as otherwise permitted by applicable law, companies acting on the Funds’ behalf,
including those outside the United States, are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them to
perform. The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as permitted or required by applicable law, such as in connection with a law enforcement or regulatory
request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be required to disclose your nonpublic personal information to third parties. While it is the Funds’
practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will remain unchanged.
Keeping You Informed of the Funds’ Privacy and Security Practices
The Funds will notify you annually of their privacy policy as
required by federal law. While the Funds reserve the right to modify this policy at any time they will notify you promptly if this privacy policy changes.
The Funds’ Security Practices
The Funds maintain appropriate physical, electronic and procedural safeguards designed to guard
your nonpublic personal information. The Funds’ internal data security policies restrict access to your nonpublic personal information to authorized employees, who may use your nonpublic personal information for Fund business purposes only.
Although the Funds strive to protect your nonpublic personal information, they cannot ensure or warrant the security of any information you provide or transmit to
them, and you do so at your own risk. In the event of a breach of the confidentiality or security of your nonpublic personal information, the Funds will attempt to notify you as necessary, so you can take appropriate protective steps. If you have
consented to the Funds using electronic communications or electronic delivery of statements, they may notify you under such circumstances using the most current email address you have on record with them.
In order for the Funds to provide effective service to you, keeping your account information accurate is very important. If you believe that your account information is
incomplete, not accurate or not current, if you have questions about the Funds’ privacy practices, or our use of your nonpublic personal information, write the Funds using the contact information on your account statements, email the Funds by
clicking on the Contact Us section of the Funds’ website at www.franklintempleton.com, or contact the Fund at 1-888-777-0102.
Revised April 2018
Legg Mason California Consumer Privacy Act Policy
Although much of the personal information we collect is “nonpublic personal information” subject to federal law, residents of California may, in certain
circumstances, have additional rights under the California Consumer Privacy Act (“CCPA”). For example, if you are a broker,
|
| NOT PART OF THE SEMI-ANNUAL
REPORT |
Legg Mason Funds Privacy and Security Notice (cont’d)
dealer, agent, fiduciary, or representative acting by or on behalf of, or for, the account of any
other person(s) or household, or a financial advisor, or if you have otherwise provided personal information to us separate from the relationship we have with personal investors, the provisions of this Privacy Policy apply to your personal
information (as defined by the CCPA).
| • |
|
In addition to the provisions of the Legg Mason Funds Security and Privacy Notice, you may have the right to know the
categories and specific pieces of personal information we have collected about you. |
| • |
|
You also have the right to request the deletion of the personal information collected or maintained by the Funds.
|
If you wish to exercise any of the rights you have in respect of your personal information, you should advise the Funds by contacting them as set
forth below. The rights noted above are subject to our other legal and regulatory obligations and any exemptions under the CCPA. You may designate an authorized agent to make a rights request on your behalf, subject to the identification process
described below. We do not discriminate based on requests for information related to our use of your personal information, and you have the right not to receive discriminatory treatment related to the exercise of your privacy rights.
We may request information from you in order to verify your identity or authority in making such a request. If you have appointed an authorized agent to make a request
on your behalf, or you are an authorized agent making such a request (such as a power of attorney or other written permission), this process may include providing a password/passcode, a copy of government issued identification, affidavit or other
applicable documentation, i.e. written permission. We may require you to verify your identity directly even when using an authorized agent, unless a power of attorney has been provided. We reserve the right to deny a request submitted by an agent if
suitable and appropriate proof is not provided.
For the 12-month period prior to the date of this Privacy Policy, the Legg Mason Funds have not sold any of your
personal information; nor do we have any plans to do so in the future.
Contact Information
Address: Data Privacy Officer, 100 International Dr., Baltimore, MD 21202
Email: DataProtectionOfficer@franklintempleton.com
Phone:
1-800-396-4748
Revised October 2020
|
| NOT PART OF THE SEMI-ANNUAL
REPORT |
Western Asset Global Corporate Defined Opportunity Fund Inc.
Western Asset Global Corporate Defined Opportunity Fund Inc.
620 Eighth Avenue
47th Floor
New York, NY 10018
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase, at market
prices, shares of its stock.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first
and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov. To obtain information on Form N-PORT, shareholders can call the Fund at
1-888-777-0102.
Information on how the Fund voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a
description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling 1-888-777-0102, (2) at www.franklintempleton.com
and (3) on the SEC’s website at www.sec.gov.
Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding
the Fund may be found on Franklin Templeton’s website, which can be accessed at www.franklintempleton.com. Any reference to Franklin Templeton’s website in this report is intended to allow investors public access to information regarding
the Fund and does not, and is not intended to, incorporate Franklin Templeton’s website in this report.
This report is transmitted to the shareholders of
Western Asset Global Corporate Defined Opportunity Fund Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report.
Computershare Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
WASX012645 6/22 SR22-4422