Investment Commentary and Annual Report to ... - Western Asset

Annual Report to ShareholdersMortgage-Backed Securities—Continued%OFNET ASSETSRATEMATURITYDATEPAR/SHARESVALUEFixed Rate Securities—ContinuedBear Stearns Asset Backed Securities Trust2002-AC1 B4 7.000% 1/25/32 $ 1,103,081 $ 704,654 AEnterprise Mortgage Acceptance Co.1999-1 A1 6.420% 10/15/25 30,676 16,889 AGMAC Commercial Mortgage SecuritiesInc. 1998-C2 F 6.500% 5/15/35 1,000,000 947,101JP Morgan Chase Commercial MortgageSecurities Corp. 2008-C2 A1 5.017% 2/12/51 342,060 304,320Metropolitan Asset Funding Inc.1998-BI B1 8.000% 11/20/24 973,111 394,6702,881,726Indexed Securities C 24.7%American Home Mortgage InvestmentTrust 2007-A 4A 0.921% 7/25/46 660,199 277,435 ABayview Commercial Asset Trust2005-3A A2 0.871% 11/25/35 865,226 684,264 ABayview Commercial Asset Trust2007-5A A1 1.121% 10/25/37 1,011,761 935,879 ABear Stearns Structured Products Inc.2007-R11 A1A 1.995% 9/27/37 3,385,624 3,292,460 ABella Vista Mortgage Trust 2004-2 A1 0.841% 2/25/35 2,542,900 1,301,333BlackRock Capital Finance LP 1997-R2 B5 6.650% 12/25/35 566,610 5,666 AChevy Chase Mortgage Funding Corp.2004-4A A1 0.701% 10/25/35 2,883,723 1,534,614 AChevy Chase Mortgage Funding Corp.2005-4A A1 0.671% 10/25/36 2,639,856 1,169,312 ACNL Funding 1998-1 C2 2.228% 9/18/11 3,360,000 1,344,000 ACountrywide Alternative Loan Trust2005-J12 0.741% 8/25/35 375,053 180,879Countrywide Home Loans2004-HYB5 7A1 4.557% 4/20/35 4,491,253 2,155,801Countrywide Home Loans 2004-R1 1AF 0.871% 11/25/34 1,498,363 1,438,025 ACountrywide Home Loans 2005-09 1A1 0.771% 5/25/35 2,002,202 931,432Greenpoint Mortgage Funding Trust2005-AR5 2A2 0.741% 11/25/46 3,867,955 1,186,828Greenpoint Mortgage Funding Trust2005-AR5 3A2 0.741% 11/25/46 2,323,189 628,469GSMPS Mortgage Loan Trust2005-RP1 1AF 0.821% 1/25/35 353,017 280,616 A19