- Quarterly Schedule of Portfolio Holdings of Registered Management Investment Company (N-Q)

 

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			811-7162
Western Asset High Income Fund Inc.
(Exact name of registrant as specified in charter)
55 Water Street, New York, NY					10041
(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:			[phone]
Date of fiscal year end:	December 31
Date of reporting period:	September 30, 2010

 

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ITEM 1.                  SCHEDULE OF INVESTMENTS

 

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WESTERN ASSET HIGH INCOME FUND INC.

 

FORM N-Q

SEPTEMBER 30, 2010

 

 

WESTERN ASSET HIGH INCOME FUND INC.

 

Schedule of investments (unaudited)

September 30, 2010

 

SECURITY		RATE		MATURITY DATE		FACE AMOUNT †			VALUE
CORPORATE BONDS & NOTES — 88.5%
CONSUMER DISCRETIONARY — 18.9%
Auto Components — 0.2%
Cooper-Standard Automotive Inc., Senior Notes		8.500%		5/1/18			90,000		$	93,825	(a)
Tenneco Inc., Senior Notes		7.750%		8/15/18		20,000			20,600		(a)
Total Auto Components									114,425
Automobiles — 1.3%
Ford Motor Credit Co., LLC, Senior Notes		9.875%		8/10/11		190,000			201,284
Ford Motor Credit Co., LLC, Senior Notes		7.500%		8/1/12		105,000			111,511
Motors Liquidation Co., Senior Debentures		8.375%		7/15/33		445,000			152,413		(b)
Motors Liquidation Co., Senior Notes		7.200%		1/15/11		440,000			144,100		(b)
Total Automobiles									609,308
Diversified Consumer Services — 1.9%
Realogy Corp., Senior Notes		10.500%		4/15/14		620,000			530,100
Service Corp. International, Senior Notes		7.500%		4/1/27		30,000			28,800
Sotheby’s, Senior Notes		7.750%		6/15/15		100,000			104,750
Stonemor Operating LLC/Cornerstone Family Services/Osiris Holdings, Senior Notes		10.250%		12/1/17		225,000			240,187		(a)
Total Diversified Consumer Services									903,837
Hotels, Restaurants & Leisure — 6.6%
Boyd Gaming Corp., Senior Subordinated Notes		7.125%		2/1/16		40,000			33,650
CCM Merger Inc., Notes		8.000%		8/1/13		220,000			202,400		(a)
Downstream Development Quapaw, Senior Notes		12.000%		10/15/15		165,000			158,606		(a)
El Pollo Loco Inc., Senior Notes		11.750%		11/15/13		275,000			199,375
El Pollo Loco Inc., Senior Secured Notes		11.750%		12/1/12		85,000			86,700
Harrah’s Operating Co. Inc., Senior Bonds		5.625%		6/1/15		361,000			236,455
Harrah’s Operating Co. Inc., Senior Notes		10.750%		2/1/16		229,000			185,490
Harrah’s Operating Co. Inc., Senior Secured Notes		11.250%		6/1/17		145,000			159,500
Inn of the Mountain Gods Resort & Casino, Senior Notes		12.000%		11/15/10		380,000			157,700		(b)(c)
Landry’s Holdings Inc., Senior Secured Notes		11.500%		6/1/14		90,000			84,150		(a)
Landry’s Restaurants Inc., Senior Secured Notes		11.625%		12/1/15		95,000			100,700
MGM MIRAGE Inc., Senior Notes		6.750%		9/1/12		300,000			285,000
MGM MIRAGE Inc., Senior Notes		6.750%		4/1/13		260,000			242,775
MGM Resorts International, Senior Secured Notes		10.375%		5/15/14		15,000			16,762
MGM Resorts International, Senior Secured Notes		11.125%		11/15/17		40,000			45,750
Mohegan Tribal Gaming Authority, Senior Secured Notes		11.500%		11/1/17		110,000			99,000		(a)
Mohegan Tribal Gaming Authority, Senior Subordinated Notes		8.000%		4/1/12		270,000			206,550
NCL Corp. Ltd., Senior Secured Notes		11.750%		11/15/16		180,000			202,500
Pinnacle Entertainment Inc., Senior Notes		8.625%		8/1/17		125,000			133,281
Pinnacle Entertainment Inc., Senior Subordinated Notes		7.500%		6/15/15		30,000			29,175
Pinnacle Entertainment Inc., Senior Subordinated Notes		8.750%		5/15/20		20,000			19,800
Sbarro Inc., Senior Notes		10.375%		2/1/15		95,000			57,475
Snoqualmie Entertainment Authority, Senior Secured Notes		4.428%		2/1/14		90,000			74,700		(a)(d)
Snoqualmie Entertainment Authority, Senior Secured Notes		9.125%		2/1/15		15,000			13,275		(a)
Station Casinos Inc., Senior Notes		6.000%		4/1/12		215,000			37		(b)(c)
Station Casinos Inc., Senior Notes		7.750%		8/15/16		90,000			9		(b)(c)
Station Casinos Inc., Senior Subordinated Notes		6.500%		2/1/14		175,000			18		(b)(c)
Station Casinos Inc., Senior Subordinated Notes		6.625%		3/15/18		20,000			78		(b)(c)
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., Secured Notes		7.750%		8/15/20		180,000			190,800		(a)
Total Hotels, Restaurants & Leisure									3,221,711
Internet & Catalog Retail — 0.7%
Netflix Inc., Senior Notes		8.500%		11/15/17		130,000			145,600
QVC Inc., Senior Secured Notes		7.375%		10/15/20		195,000			202,800		(a)
Total Internet & Catalog Retail									348,400

 

See Notes to Schedule of Investments.

 

1

 

WESTERN ASSET HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)

September 30, 2010

 

SECURITY		RATE		MATURITY DATE		FACE AMOUNT †			VALUE
Media — 5.2%
Cablevision Systems Corp., Senior Notes		7.750%		4/15/18			50,000		$	53,125
Cablevision Systems Corp., Senior Notes		8.000%		4/15/20		20,000			21,625
CCH II LLC/CCH II Capital Corp., Senior Notes		13.500%		11/30/16		64,850			77,334
CCO Holdings LLC/CCO Holdings Capital Corp., Senior Notes		8.125%		4/30/20		200,000			213,000		(a)
Cengage Learning Acquisitions Inc., Senior Notes		10.500%		1/15/15		140,000			139,825		(a)
Cengage Learning Acquisitions Inc., Senior Subordinated Notes		13.250%		7/15/15		130,000			129,675		(a)
Charter Communications Operating LLC/Charter Communications Operating Capital, Senior Secured Notes		10.875%		9/15/14		160,000			182,000		(a)
CSC Holdings Inc., Senior Debentures		7.875%		2/15/18		230,000			252,137
DISH DBS Corp., Senior Notes		6.625%		10/1/14		20,000			20,950
DISH DBS Corp., Senior Notes		7.750%		5/31/15		70,000			74,988
DISH DBS Corp., Senior Notes		7.875%		9/1/19		75,000			81,094
Gannett Co. Inc., Senior Notes		6.375%		9/1/15		40,000			39,750		(a)
Gannett Co. Inc., Senior Notes		7.125%		9/1/18		40,000			39,600		(a)
Globo Communicacoes e Participacoes SA, Bonds		7.250%		4/26/22		140,000			150,500		(a)
NET Servicos de Comunicacao SA, Bonds		7.500%		1/27/20		100,000			113,250		(a)
Nielsen Finance LLC/Nielsen Finance Co., Senior Notes		7.750%		10/15/18		350,000			347,434		(a)
Nielsen Finance LLC/Nielsen Finance Co., Senior Subordinated Notes, step bond		0.000%		8/1/16		280,000			281,750
ProQuest LLC/ProQuest Notes Co., Senior Notes		9.000%		10/15/18		80,000			81,600		(a)
Univision Communications Inc., Senior Secured Notes		12.000%		7/1/14		55,000			60,431		(a)
UPC Holding BV, Senior Notes		9.875%		4/15/18		65,000			69,550		(a)
Virgin Media Finance PLC, Senior Notes		9.125%		8/15/16		90,000			96,750
Total Media									2,526,368
Multiline Retail — 0.8%
Neiman Marcus Group Inc., Senior Notes		9.000%		10/15/15		170,000			177,438		(e)
Neiman Marcus Group Inc., Senior Secured Notes		7.125%		6/1/28		225,000			213,187
Total Multiline Retail									390,625
Specialty Retail — 1.5%
American Greetings Corp., Senior Notes		7.375%		6/1/16		275,000			281,187
American Greetings Corp., Senior Notes		7.375%		6/1/16		35,000			34,388
American Greetings Corp., Senior Notes		7.375%		6/1/16		20,000			19,400
Michaels Stores Inc., Senior Subordinated Bonds		11.375%		11/1/16		110,000			120,038
Michaels Stores Inc., Senior Subordinated Notes, step bond		0.000%		11/1/16		290,000			280,575
Total Specialty Retail									735,588
Textiles, Apparel & Luxury Goods — 0.7%
Oxford Industries Inc., Senior Secured Notes		11.375%		7/15/15		245,000			276,850
Phillips-Van Heusen Corp., Senior Notes		7.375%		5/15/20		80,000			84,700
Total Textiles, Apparel & Luxury Goods									361,550
TOTAL CONSUMER DISCRETIONARY									9,211,812
CONSUMER STAPLES — 1.6%
Beverages — 0.1%
Cott Beverages USA Inc., Senior Notes		8.125%		9/1/18		30,000			31,913		(a)
Food Products — 0.7%
Bumble Bee Foods LLC, Senior Secured Notes		7.750%		12/15/15		144,000			154,800
Michael Foods Inc., Senior Notes		9.750%		7/15/18		90,000			96,750		(a)
Smithfield Foods Inc., Senior Secured Notes		10.000%		7/15/14		60,000			69,300		(a)
Total Food Products									320,850
Household Products — 0.5%
Spectrum Brands Holdings Inc., Senior Secured Notes		9.500%		6/15/18		140,000			150,325		(a)
Visant Corp., Senior Notes		10.000%		10/1/17		80,000			83,800		(a)
Total Household Products									234,125

 

See Notes to Schedule of Investments.

 

2

 

WESTERN ASSET HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)

September 30, 2010

 

SECURITY		RATE		MATURITY DATE		FACE AMOUNT †			VALUE
Tobacco — 0.3%
Alliance One International Inc., Senior Notes		10.000%		7/15/16			150,000		$	163,125
TOTAL CONSUMER STAPLES									750,013
ENERGY — 13.8%
Energy Equipment & Services — 2.1%
Basic Energy Services Inc., Senior Secured Notes		11.625%		8/1/14		165,000			182,325
Complete Production Services Inc., Senior Notes		8.000%		12/15/16		110,000			113,850
GulfMark Offshore Inc., Senior Subordinated Notes		7.750%		7/15/14		160,000			161,400
Hercules Offshore LLC, Senior Secured Notes		10.500%		10/15/17		155,000			129,425		(a)
Key Energy Services Inc., Senior Notes		8.375%		12/1/14		190,000			201,400
Parker Drilling Co., Senior Notes		9.125%		4/1/18		140,000			142,800		(a)
PHI Inc., Senior Notes		8.625%		10/15/18		30,000			29,625		(a)
Transocean Inc., Senior Notes		6.625%		4/15/11		50,000			51,329
Total Energy Equipment & Services									1,012,154
Oil, Gas & Consumable Fuels — 11.7%
Belden & Blake Corp., Secured Notes		8.750%		7/15/12		365,000			359,525
Berry Petroleum Co., Senior Notes		10.250%		6/1/14		110,000			124,575
Brigham Exploration Co., Senior Notes		8.750%		10/1/18		150,000			155,250		(a)
Chesapeake Energy Corp., Senior Notes		6.625%		8/15/20		210,000			220,500
Compagnie Generale de Geophysique-Veritas, Senior Notes		7.500%		5/15/15		55,000			56,238
Compagnie Generale de Geophysique-Veritas, Senior Notes		9.500%		5/15/16		160,000			173,600
CONSOL Energy Inc., Senior Notes		8.250%		4/1/20		170,000			186,575		(a)
Continental Resources Inc., Senior Notes		7.125%		4/1/21		50,000			52,250		(a)
Corral Petroleum Holdings AB, Senior Bonds		2.000%		9/18/11		251,792			233,537		(a)(e)
Crosstex Energy LP/Crosstex Energy Finance Corp., Senior Notes		8.875%		2/15/18		90,000			94,725
Denbury Resources Inc., Senior Subordinated Notes		8.250%		2/15/20		128,000			140,320
El Paso Corp., Notes		7.875%		6/15/12		200,000			213,848
Energy Transfer Equity LP, Senior Notes		7.500%		10/15/20		130,000			137,475
Enterprise Products Operating LLP, Junior Subordinated Notes		8.375%		8/1/66		100,000			104,495		(d)
Enterprise Products Operating LLP, Subordinated Notes		7.034%		1/15/68		75,000			74,730		(d)
EXCO Resources Inc., Senior Notes		7.500%		9/15/18		240,000			239,700
Griffin Coal Mining Co. Pty Ltd., Senior Notes		9.500%		12/1/16		10,000			5,963		(a)(b)
Harvest Operations Corp., Senior Notes		6.875%		10/1/17		90,000			92,475		(a)
Inergy LP/Inergy Finance Corp., Senior Notes		7.000%		10/1/18		100,000			103,000		(a)
International Coal Group Inc., Senior Secured Notes		9.125%		4/1/18		20,000			21,400
KazMunaiGaz Finance Sub BV, Senior Notes		8.375%		7/2/13		100,000			111,000		(a)
Linn Energy LLC/Linn Energy Finance Corp., Senior Notes		8.625%		4/15/20		100,000			106,500		(a)
Linn Energy LLC/Linn Energy Finance Corp., Senior Notes		7.750%		2/1/21		110,000			111,513		(a)
LUKOIL International Finance BV, Bonds		6.356%		6/7/17		140,000			146,825		(a)
MarkWest Energy Partners LP/MarkWest Energy Finance Corp., Senior Notes		8.750%		4/15/18		45,000			48,825
Murray Energy Corp., Senior Secured Notes		10.250%		10/15/15		205,000			213,712		(a)
OPTI Canada Inc., Senior Secured Notes		9.000%		12/15/12		110,000			111,925		(a)
OPTI Canada Inc., Senior Secured Notes		9.750%		8/15/13		40,000			40,800		(a)
OPTI Canada Inc., Senior Secured Notes		8.250%		12/15/14		130,000			99,450
Overseas Shipholding Group Inc., Senior Notes		8.125%		3/30/18		140,000			146,125
Peabody Energy Corp., Senior Notes		7.375%		11/1/16		130,000			142,350
Peabody Energy Corp., Senior Notes		7.875%		11/1/26		40,000			44,300
Petrobras International Finance Co., Senior Notes		6.875%		1/20/40		55,000			63,236
Petroplus Finance Ltd., Senior Notes		6.750%		5/1/14		75,000			69,000		(a)
Petroplus Finance Ltd., Senior Notes		7.000%		5/1/17		60,000			52,500		(a)
Plains Exploration & Production Co., Senior Notes		10.000%		3/1/16		130,000			148,850
Plains Exploration & Production Co., Senior Notes		8.625%		10/15/19		115,000			126,212
Quicksilver Resources Inc., Senior Notes		11.750%		1/1/16		185,000			217,837

 

See Notes to Schedule of Investments.

 

3

 

 

WESTERN ASSET HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)

September 30, 2010

 

SECURITY		RATE		MATURITY DATE		FACE AMOUNT †			VALUE
Oil, Gas & Consumable Fuels — continued
SandRidge Energy Inc., Senior Toggle Notes		8.625%		4/1/15			210,000		$	211,050	(e)
Stone Energy Corp., Senior Notes		8.625%		2/1/17		90,000			88,875
Teekay Corp., Senior Notes		8.500%		1/15/20		220,000			240,625
TNK-BP Finance SA, Senior Notes		7.500%		7/18/16		210,000			234,150		(a)
Whiting Petroleum Corp., Senior Subordinated Notes		7.000%		2/1/14		10,000			10,600
Whiting Petroleum Corp., Senior Subordinated Notes		6.500%		10/1/18		110,000			113,025
Williams Partners LP, Senior Notes		5.250%		3/15/20		10,000			10,891
Total Oil, Gas & Consumable Fuels									5,700,357
TOTAL ENERGY									6,712,511
FINANCIALS — 12.9%
Capital Markets — 0.9%
Goldman Sachs Group Inc., Subordinated Notes		6.750%		10/1/37		110,000			114,698
Lehman Brothers Holdings Inc., Medium-Term Notes, Senior Notes		5.250%		2/6/12		140,000			31,675		(b)
Offshore Group Investments Ltd., Senior Secured Notes		11.500%		8/1/15		280,000			295,400		(a)
Total Capital Markets									441,773
Commercial Banks — 2.7%
BAC Capital Trust VI, Capital Securities, Junior Subordinated Notes		5.625%		3/8/35		140,000			131,953
CIT Group Inc., Senior Secured Bonds		7.000%		5/1/15		44,771			44,659
CIT Group Inc., Senior Secured Bonds		7.000%		5/1/16		94,619			93,673
CIT Group Inc., Senior Secured Bonds		7.000%		5/1/17		574,468			565,133
Credit Agricole SA, Subordinated Notes		8.375%		10/13/19		100,000			107,500		(a)(d)(f)
ICICI Bank Ltd., Subordinated Bonds		6.375%		4/30/22		140,000			141,095		(a)(d)
NB Capital Trust II, Junior Subordinated Notes		7.830%		12/15/26		140,000			144,732
NB Capital Trust IV, Junior Subordinated Notes		8.250%		4/15/27		90,000			92,925
Total Commercial Banks									1,321,670
Consumer Finance — 3.8%
Ally Financial Inc., Debentures		0.000%		6/15/15		410,000			296,225
Ally Financial Inc., Senior Bonds		0.000%		12/1/12		160,000			141,942
Ally Financial Inc., Senior Notes		7.500%		12/31/13		30,000			32,175
Ally Financial Inc., Senior Notes		8.300%		2/12/15		30,000			32,775		(a)
Ally Financial Inc., Senior Notes		7.500%		9/15/20		180,000			192,600		(a)
FMG Finance Pty Ltd., Senior Secured Notes		10.625%		9/1/16		95,000			117,444		(a)
Ford Motor Credit Co., LLC, Senior Notes		12.000%		5/15/15		405,000			510,555
GMAC International Finance BV, Senior Bonds		7.500%		4/21/15		100,000		EUR	140,074
SLM Corp., Medium-Term Notes, Senior Notes		8.450%		6/15/18		70,000			70,803
SLM Corp., Medium-Term Notes, Senior Notes		8.000%		3/25/20		310,000			308,125
Total Consumer Finance									1,842,718
Diversified Financial Services — 5.1%
AES Red Oak LLC, Secured Notes		9.200%		11/30/29		280,000			282,100
Astoria Depositor Corp., Pass-Through Certificates		8.144%		5/1/21		150,000			148,875		(a)
Bank of America Corp., Notes, Preferred Securities		8.000%		1/30/18		15,000			15,494		(d)(f)
Bankrate Inc., Senior Secured Notes		11.750%		7/15/15		70,000			75,250		(a)
Capital One Capital V, Junior Subordinated Notes, Cumulative Trust Preferred Securities		10.250%		8/15/39		110,000			119,763
Countrywide Capital III, Junior Subordinated Notes		8.050%		6/15/27		30,000			31,650
Express LLC/Express Finance Corp., Senior Notes		8.750%		3/1/18		130,000			137,800
Fresenius U.S. Finance II Inc., Senior Notes		9.000%		7/15/15		140,000			160,300		(a)
Interactive Data Corp., Senior Notes		10.250%		8/1/18		80,000			85,800		(a)(g)
International Lease Finance Corp., Medium-Term Notes		6.375%		3/25/13		220,000			222,200
International Lease Finance Corp., Medium-Term Notes, Senior Notes		5.625%		9/20/13		210,000			207,112
International Lease Finance Corp., Notes		5.875%		5/1/13		50,000			50,250
International Lease Finance Corp., Senior Notes		8.750%		3/15/17		90,000			96,750		(a)
International Lease Finance Corp., Senior Notes		8.875%		9/1/17		390,000			423,150
International Lease Finance Corp., Senior Secured Notes		7.125%		9/1/18		30,000			32,475		(a)

 

See Notes to Schedule of Investments.

 

4

 

WESTERN ASSET HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)

September 30, 2010

 

SECURITY		RATE		MATURITY DATE		FACE AMOUNT †			VALUE
Diversified Financial Services — continued
LBI Escrow Corp., Senior Secured Notes		8.000%		11/1/17			165,000		$	180,675	(a)
MBNA Capital A, Junior Subordinated Notes		8.278%		12/1/26		130,000			134,225
Midwest Gaming Borrower LLC/Midwest Finance Corp., Senior Secured Notes		11.625%		4/15/16		50,000			51,125		(a)
Total Diversified Financial Services									2,454,994
Insurance — 0.4%
American International Group Inc., Senior Notes		8.250%		8/15/18		100,000			117,000
MetLife Capital Trust IV, Junior Subordinated Notes		7.875%		12/15/37		60,000			63,300		(a)
Total Insurance									180,300
Real Estate Investment Trusts (REITs) — 0.0%
Host Hotels & Resorts, LP, Senior Notes		6.375%		3/15/15		20,000			20,575
TOTAL FINANCIALS									6,262,030
HEALTH CARE — 5.5%
Health Care Equipment & Supplies — 0.5%
Biomet Inc., Senior Notes		10.000%		10/15/17		110,000			121,963
Biomet Inc., Senior Notes		11.625%		10/15/17		40,000			44,750
Biomet Inc., Senior Toggle Notes		10.375%		10/15/17		50,000			55,750		(e)
Total Health Care Equipment & Supplies									222,463
Health Care Providers & Services — 4.8%
American Renal Holdings, Senior Secured Notes		8.375%		5/15/18		110,000			113,850		(a)
CRC Health Corp., Senior Subordinated Notes		10.750%		2/1/16		345,000			327,750
HCA Inc., Senior Notes		6.300%		10/1/12		275,000			280,500
HCA Inc., Senior Notes		6.250%		2/15/13		5,000			5,113
HCA Inc., Senior Secured Notes		7.875%		2/15/20		275,000			302,156
InVentiv Health Inc., Senior Notes		10.000%		8/15/18		50,000			49,812		(a)
Omnicare Inc., Senior Subordinated Notes		7.750%		6/1/20		30,000			30,825
Tenet Healthcare Corp., Senior Secured Notes		10.000%		5/1/18		240,000			275,400		(g)
Universal Hospital Services Inc., Senior Secured Notes		4.134%		6/1/15		50,000			43,250		(d)
Universal Hospital Services Inc., Senior Secured Notes		8.500%		6/1/15		190,000			192,137		(e)
US Oncology Holdings Inc., Senior Notes		6.737%		3/15/12		381,357			363,243		(d)(e)
US Oncology Inc., Senior Secured Notes		9.125%		8/15/17		210,000			223,650
Vanguard Health Holdings Co., II LLC, Senior Notes		8.000%		2/1/18		130,000			132,600
Total Health Care Providers & Services									2,340,286
Health Care Technology — 0.2%
Multiplan Inc., Senior Notes		9.875%		9/1/18		80,000			83,800		(a)
TOTAL HEALTH CARE									2,646,549
INDUSTRIALS — 10.3%
Aerospace & Defense — 1.4%
Freedom Group Inc., Senior Secured Notes		10.250%		8/1/15		190,000			201,875		(a)
Kratos Defense & Security Solutions Inc., Senior Secured Notes		10.000%		6/1/17		100,000			106,500
Triumph Group Inc., Senior Notes		8.625%		7/15/18		150,000			162,000
Wyle Services Corp., Senior Subordinated Notes		10.500%		4/1/18		205,000			203,975		(a)
Total Aerospace & Defense									674,350
Airlines — 2.6%
Air Canada, Senior Secured Notes		9.250%		8/1/15		70,000			71,050		(a)
Continental Airlines Inc., Pass-Through Certificates		9.250%		5/10/17		15,000			15,956		(g)
Continental Airlines Inc., Pass-Through Certificates, Subordinated Secured Notes		8.312%		4/2/11		47,099			47,452
Continental Airlines Inc., Pass-Through Certificates, Subordinated Secured Notes		7.339%		4/19/14		199,141			199,391
Continental Airlines Inc., Senior Secured Notes		6.750%		9/15/15		150,000			152,813		(a)
DAE Aviation Holdings Inc., Senior Notes		11.250%		8/1/15		410,000			415,166		(a)
Delta Air Lines Inc., Pass-Through Certificates, Subordinated Secured Notes		9.750%		12/17/16		57,014			61,005
Delta Air Lines Inc., Senior Secured Notes		9.500%		9/15/14		58,000			63,220		(a)
United Air Lines Inc., Senior Secured Notes		9.875%		8/1/13		210,000			228,900		(a)
Total Airlines									1,254,953

 

See Notes to Schedule of Investments.

 

5

 

WESTERN ASSET HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)

September 30, 2010

 

SECURITY		RATE		MATURITY DATE		FACE AMOUNT †			VALUE
Building Products — 0.9%
Ashton Woods USA LLC/Ashton Woods Finance Co., Senior Subordinated Notes, step bond		0.000%		6/30/15			54,600		$	27,573	(a)(c)
GTL Trade Finance Inc., Senior Notes		7.250%		10/20/17		139,000			155,506		(a)
GTL Trade Finance Inc., Senior Notes		7.250%		10/20/17		130,000			145,438		(a)
Rearden G Holdings EINS GmbH, Senior Notes		7.875%		3/30/20		100,000			107,500		(a)
Total Building Products									436,017
Commercial Services & Supplies — 1.6%
ACCO Brands Corp., Senior Secured Notes		10.625%		3/15/15		160,000			179,600
ACCO Brands Corp., Senior Subordinated Notes		7.625%		8/15/15		60,000			57,900
Altegrity Inc., Senior Subordinated Notes		11.750%		5/1/16		260,000			253,825		(a)
Garda World Security Corp., Senior Notes		9.750%		3/15/17		70,000			74,900		(a)
Geo Group Inc., Senior Notes		7.750%		10/15/17		155,000			163,525		(a)
RSC Equipment Rental Inc./RSC Holdings III LLC, Senior Secured Notes		10.000%		7/15/17		55,000			61,462		(a)
Total Commercial Services & Supplies									791,212
Construction & Engineering — 0.2%
Odebrecht Finance Ltd., Senior Notes		7.500%		10/18/17		100,000			109,500		(a)
Electrical Equipment — 0.2%
NES Rentals Holdings Inc., Senior Secured Notes		12.250%		4/15/15		130,000			102,700		(a)
Industrial Conglomerates — 0.3%
Leucadia National Corp., Senior Notes		8.125%		9/15/15		120,000			129,600
Marine — 0.4%
Trico Shipping AS, Senior Secured Notes		13.875%		11/1/14		210,000			188,475		(a)
Road & Rail — 1.7%
Kansas City Southern de Mexico, Senior Notes		12.500%		4/1/16		211,000			253,728
Kansas City Southern de Mexico, Senior Notes		8.000%		2/1/18		290,000			313,200		(a)
Kansas City Southern Railway, Senior Notes		13.000%		12/15/13		20,000			24,325
RailAmerica Inc., Senior Secured Notes		9.250%		7/1/17		213,000			234,566
Total Road & Rail									825,819
Trading Companies & Distributors — 0.7%
Ashtead Capital Inc., Notes		9.000%		8/15/16		100,000			104,000		(a)
Ashtead Holdings PLC, Senior Secured Notes		8.625%		8/1/15		90,000			93,150		(a)
H&E Equipment Services Inc., Senior Notes		8.375%		7/15/16		160,000			160,800
Total Trading Companies & Distributors									357,950
Transportation — 0.3%
Syncreon Global Ireland Ltd./Syncreon Global Finance US Inc., Senior Notes		9.500%		5/1/18		160,000			157,800		(a)
TOTAL INDUSTRIALS									5,028,376
INFORMATION TECHNOLOGY — 3.3%
Communications Equipment — 0.4%
Lucent Technologies Inc., Debentures		6.450%		3/15/29		285,000			208,762
Electronic Equipment, Instruments & Components — 0.6%
NXP BV/NXP Funding LLC, Senior Secured Notes		9.750%		8/1/18		280,000			299,600		(a)
IT Services — 1.4%
Ceridian Corp., Senior Notes		12.250%		11/15/15		143,775			136,946		(e)
Fidelity National Information Services Inc., Senior Notes		7.625%		7/15/17		40,000			42,900		(a)
Fidelity National Information Services Inc., Senior Notes		7.875%		7/15/20		70,000			75,775		(a)
First Data Corp., Senior Notes		9.875%		9/24/15		60,000			49,350
First Data Corp., Senior Notes		10.550%		9/24/15		363,512			295,807		(e)
GXS Worldwide Inc., Senior Secured Notes		9.750%		6/15/15		70,000			70,088
Total IT Services									670,866
Semiconductors & Semiconductor Equipment — 0.7%
Freescale Semiconductor Inc., Senior Notes		10.750%		8/1/20		40,000			40,300		(a)
Freescale Semiconductor Inc., Senior Secured Notes		9.250%		4/15/18		50,000			52,250		(a)
Freescale Semiconductor Inc., Senior Subordinated Notes		10.125%		12/15/16		190,000			173,850

 

See Notes to Schedule of Investments.

 

6

 

WESTERN ASSET HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)

September 30, 2010

 

SECURITY		RATE		MATURITY DATE		FACE AMOUNT †			VALUE
Semiconductors & Semiconductor Equipment — continued
Freescale Semiconductor Inc., Senior Toggle Notes		9.125%		12/15/14			57,776		$	58,065	(e)
Total Semiconductors & Semiconductor Equipment									324,465
Software — 0.2%
Aspect Software Inc., Senior Secured Notes		10.625%		5/15/17		105,000			109,594		(a)
TOTAL INFORMATION TECHNOLOGY									1,613,287
MATERIALS — 7.5%
Chemicals — 2.4%
Ashland Inc., Senior Notes		9.125%		6/1/17		265,000			304,750
CF Industries Inc., Senior Notes		6.875%		5/1/18		20,000			21,575
CF Industries Inc., Senior Notes		7.125%		5/1/20		80,000			87,700
FMC Finance III SA, Senior Notes		6.875%		7/15/17		80,000			86,000
Georgia Gulf Corp., Senior Secured Notes		9.000%		1/15/17		110,000			115,775		(a)
Ineos Finance PLC, Senior Secured Notes		9.000%		5/15/15		100,000			104,875		(a)
Kerling PLC, Senior Secured Notes		10.625%		1/28/17		93,000		EUR	133,914		(a)
Solutia Inc., Senior Notes		8.750%		11/1/17		95,000			104,262
Solutia Inc., Senior Notes		7.875%		3/15/20		120,000			128,850
Texas Petro Chemical Corp. Group LLC, Senior Secured Notes		8.250%		10/1/17		70,000			71,925		(a)(c)
Total Chemicals									1,159,626
Containers & Packaging — 1.7%
Ardagh Packaging Finance PLC, Senior Notes		9.125%		10/15/20		200,000			200,000		(a)
Ball Corp., Senior Notes		6.625%		3/15/18		30,000			31,650
Berry Plastics Corp., Senior Secured Notes		9.500%		5/15/18		160,000			151,200
Berry Plastics Holding Corp., Second Priority Senior Secured Notes		8.875%		9/15/14		70,000			68,425
Radnor Holdings Inc., Senior Notes		11.000%		3/15/11		100,000			0		(b)(c)(g)
Solo Cup Co., Senior Secured Notes		10.500%		11/1/13		135,000			140,400
Viskase Cos. Inc., Senior Secured Notes		9.875%		1/15/18		190,000			194,750		(a)(c)
Viskase Cos. Inc., Senior Secured Notes		9.875%		1/15/18		20,000			20,500		(a)(c)
Total Containers & Packaging									806,925
Metals & Mining — 1.3%
Evraz Group SA, Notes		8.875%		4/24/13		100,000			106,870		(a)
Evraz Group SA, Notes		9.500%		4/24/18		100,000			112,500		(a)
Ryerson Holding Corp., Senior Discount Notes		0.000%		2/1/15		280,000			129,500		(a)
Vale Overseas Ltd., Notes		8.250%		1/17/34		62,000			79,236
Vale Overseas Ltd., Notes		6.875%		11/21/36		100,000			114,496
Vedanta Resources PLC, Senior Notes		8.750%		1/15/14		100,000			108,000		(a)
Total Metals & Mining									650,602
Paper & Forest Products — 2.1%
Appleton Papers Inc., Senior Secured Notes		11.250%		12/15/15		346,000			257,770		(a)
Georgia-Pacific LLC, Senior Notes		8.250%		5/1/16		40,000			44,650		(a)
Neenah Paper Inc., Senior Notes		7.375%		11/15/14		50,000			50,313
NewPage Corp., Senior Secured Notes		11.375%		12/31/14		240,000			218,400
Smurfit Capital Funding PLC, Debentures		7.500%		11/20/25		200,000			180,000
Verso Paper Holdings LLC, Senior Secured Notes		11.500%		7/1/14		255,000			280,500
Verso Paper Holdings LLC, Senior Subordinated Notes		11.375%		8/1/16		20,000			18,075
Total Paper & Forest Products									1,049,708
TOTAL MATERIALS									3,666,861
TELECOMMUNICATION SERVICES — 9.7%
Diversified Telecommunication Services — 5.7%
Axtel SAB de CV, Senior Notes		7.625%		2/1/17		250,000			229,375		(a)
Axtel SAB de CV, Senior Notes		9.000%		9/22/19		8,000			7,420		(a)
CC Holdings GS V LLC, Senior Secured Notes		7.750%		5/1/17		10,000			11,100		(a)
Cincinnati Bell Telephone Co., Senior Debentures		6.300%		12/1/28		25,000			19,125
Hawaiian Telcom Communications Inc., Senior Subordinated Notes		12.500%		5/1/15		110,000			11		(b)(c)
Inmarsat Finance PLC, Senior Notes		7.375%		12/1/17		200,000			210,000		(a)
Intelsat Intermediate Holding Co., Ltd., Senior Discount Notes		9.500%		2/1/15		40,000			41,600
Intelsat Jackson Holdings Ltd., Senior Notes		9.500%		6/15/16		235,000			251,744

 

See Notes to Schedule of Investments.

 

7

 

 

WESTERN ASSET HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)

September 30, 2010

 

SECURITY		RATE		MATURITY DATE		FACE AMOUNT †			VALUE
Diversified Telecommunication Services  — continued
Intelsat Jackson Holdings Ltd., Senior Notes		11.250%		6/15/16			90,000		$	98,325
Intelsat Jackson Holdings Ltd., Senior Notes		11.500%		6/15/16		430,000			468,700
Level 3 Financing Inc., Senior Notes		9.250%		11/1/14		80,000			75,600
Level 3 Financing Inc., Senior Notes		10.000%		2/1/18		100,000			90,500
Qwest Communications International Inc., Senior Notes		8.000%		10/1/15		20,000			21,750
TW Telecom Holdings Inc., Senior Notes		8.000%		3/1/18		170,000			178,925
UBS Luxembourg SA for OJSC Vimpel Communications, Loan Participation Notes		8.250%		5/23/16		130,000			142,025		(a)
Valor Telecommunications Enterprises LLC/Finance Corp., Senior Notes		7.750%		2/15/15		100,000			103,555
Vimpel Communications, Loan Participation Notes		8.375%		4/30/13		100,000			108,375		(a)
West Corp., Senior Notes		8.625%		10/1/18		120,000			120,000		(a)
Wind Acquisition Holdings Finance SpA, Senior Notes		12.250%		7/15/17		400,008			430,509		(a)(e)
Windstream Corp., Senior Notes		8.625%		8/1/16		150,000			159,375
Total Diversified Telecommunication Services									2,768,014
Wireless Telecommunication Services — 4.0%
Cricket Communications Inc., Senior Secured Notes		7.750%		5/15/16		130,000			138,613
MetroPCS Wireless Inc., Senior Notes		7.875%		9/1/18		100,000			103,500
Sprint Capital Corp., Global Notes		6.900%		5/1/19		160,000			161,600
Sprint Capital Corp., Senior Notes		8.375%		3/15/12		385,000			413,875
Sprint Capital Corp., Senior Notes		6.875%		11/15/28		150,000			138,000
Sprint Capital Corp., Senior Notes		8.750%		3/15/32		550,000			580,250
True Move Co., Ltd., Notes		10.750%		12/16/13		395,000			421,662		(a)
Total Wireless Telecommunication Services									1,957,500
TOTAL TELECOMMUNICATION SERVICES									4,725,514
UTILITIES — 5.0%
Electric Utilities — 1.1%
EEB International Ltd., Senior Bonds		8.750%		10/31/14		100,000			109,500		(a)
Reliant Energy Mid-Atlantic Power Holdings LLC, Senior Notes		9.681%		7/2/26		230,000			239,775
Texas Competitive Electric Holdings Co. LLC, Senior Notes		10.250%		11/1/15		295,000			194,700
Total Electric Utilities									543,975
Gas Utilities — 0.3%
Suburban Propane Partners LP/Suburban Energy Finance Corp., Senior Notes		7.375%		3/15/20		120,000			128,100
Independent Power Producers & Energy Traders — 3.6%
Calpine Corp., Senior Secured Notes		7.875%		7/31/20		160,000			165,200		(a)
Colbun SA, Senior Notes		6.000%		1/21/20		100,000			105,851		(a)
Dynegy Holdings Inc., Senior Debentures		7.625%		10/15/26		180,000			109,350
Dynegy Inc., Bonds		7.670%		11/8/16		160,000			148,400
Edison Mission Energy, Senior Notes		7.750%		6/15/16		50,000			39,375
Edison Mission Energy, Senior Notes		7.625%		5/15/27		85,000			57,587
Energy Future Holdings Corp., Senior Notes		10.875%		11/1/17		315,000			190,575
Energy Future Holdings Corp., Senior Notes		11.250%		11/1/17		16,182			7,808		(e)
Energy Future Intermediate Holding Co. LLC/EFIH Finance Inc., Senior Secured Notes		10.000%		12/1/20		206,108			205,575
Foresight Energy LLC/Foresight Energy Corp., Senior Notes		9.625%		8/15/17		350,000			362,250		(a)
Mirant Americas Generation LLC, Senior Notes		9.125%		5/1/31		290,000			276,225
Mirant Mid Atlantic LLC, Pass-Through Certificates		10.060%		12/30/28		48,715			53,830
NRG Energy Inc., Senior Notes		7.375%		1/15/17		30,000			30,825
Total Independent Power Producers & Energy Traders									1,752,851
TOTAL UTILITIES									2,424,926
TOTAL CORPORATE BONDS & NOTES (Cost — $41,598,765)									43,041,879

 

See Notes to Schedule of Investments.

 

8

 

WESTERN ASSET HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)

September 30, 2010

 

SECURITY		RATE		MATURITY DATE		FACE AMOUNT †			VALUE
COLLATERALIZED SENIOR LOANS — 1.2%
CONSUMER DISCRETIONARY — 0.1%
Auto Components — 0.1%
Allison Transmission Inc., Term Loan B		3.010 - 3.050%		8/7/14			33,715		$	31,724	(h)
ENERGY — 0.4%
Energy Equipment & Services — 0.4%
Turbo Beta Ltd., Term Loan		14.500%		3/15/18		254,571			222,749		(c)(e)(h)
TELECOMMUNICATION SERVICES — 0.5%
Wireless Telecommunication Services — 0.5%
Vodafone Group PLC, Term Loan		6.875%		8/11/15		260,000			260,000		(e)(g)(h)
UTILITIES — 0.2%
Independent Power Producers & Energy Traders — 0.2%
Energy Future Holdings, Term Loan B3		3.758 - 3.789%		10/10/14		99,233			77,002		(h)
TOTAL COLLATERALIZED SENIOR LOANS (Cost — $625,982)									591,475
CONVERTIBLE BONDS & NOTES — 0.6%
INDUSTRIALS — 0.6%
Marine — 0.6%
Horizon Lines Inc., Senior Notes (Cost - $292,196)		4.250%		8/15/12		330,000			301,950
SOVEREIGN BONDS — 4.8%
Argentina — 0.8%
Republic of Argentina, GDP Linked Securities, Senior Bonds		3.169%		12/15/35		65,000			7,800		(k)
Republic of Argentina, Senior Bonds		7.000%		9/12/13		358,000			336,172
Republic of Argentina, Senior Bonds		7.000%		10/3/15		26,000			22,922
Republic of Argentina, Senior Notes		8.750%		6/2/17		25,000			24,219
Total Argentina									391,113
Brazil — 0.7%
Brazil Nota do Tesouro Nacional, Notes		10.000%		1/1/12		512,000		BRL	297,350
Brazil Nota do Tesouro Nacional, Notes		10.000%		1/1/14		29,000		BRL	16,280
Brazil Nota do Tesouro Nacional, Notes		10.000%		1/1/17		45,000		BRL	24,616
Total Brazil									338,246
Colombia — 0.3%
Republic of Colombia, Senior Notes		7.375%		3/18/19		100,000			127,000
Indonesia — 0.4%
Republic of Indonesia, Senior Bonds		10.250%		7/15/22		539,000,000		IDR	71,356
Republic of Indonesia, Senior Bonds		11.000%		9/15/25		297,000,000		IDR	41,645
Republic of Indonesia, Senior Bonds		10.250%		7/15/27		378,000,000		IDR	49,384
Republic of Indonesia, Senior Bonds		9.750%		5/15/37		408,000,000		IDR	50,261
Total Indonesia									212,646
Russia — 0.9%
RSHB Capital, Loan Participation Notes, Senior Secured Bonds		6.299%		5/15/17		140,000			146,650		(a)
RSHB Capital, Loan Participation Notes, Senior Secured Notes		7.175%		5/16/13		70,000			75,250		(a)
RSHB Capital, Loan Participation Notes, Senior Secured Notes		9.000%		6/11/14		150,000			172,875		(a)
Russian Agricultural Bank, Credit-Linked Notes (HSBC Bank PLC)		8.900%		12/20/10		1,224,000		RUB	38,586		(a)(g)
Total Russia									433,361
Turkey — 1.0%
Republic of Turkey, Senior Notes		7.000%		6/5/20		12,000			14,430
Republic of Turkey, Senior Notes		6.875%		3/17/36		417,000			486,847
Total Turkey									501,277
Venezuela — 0.7%
Bolivarian Republic of Venezuela		5.750%		2/26/16		386,000			269,737		(a)
Bolivarian Republic of Venezuela		7.650%		4/21/25		16,000			9,800

 

See Notes to Schedule of Investments.

 

9

 

WESTERN ASSET HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)

September 30, 2010

 

SECURITY		RATE		MATURITY DATE		FACE AMOUNT †			VALUE
Venezuela — continued
Bolivarian Republic of Venezuela, Collective Action Securities, Global Senior Bonds		9.375%		1/13/34			53,000		$	36,305
Bolivarian Republic of Venezuela, Collective Action Securities, Notes		10.750%		9/19/13		28,000			26,530
Bolivarian Republic of Venezuela, Global Senior Bonds		8.500%		10/8/14		12,000			10,140
Total Venezuela									352,512
TOTAL SOVEREIGN BONDS (Cost — $2,341,328)									2,356,155
						SHARES
COMMON STOCKS — 1.3%
CONSUMER DISCRETIONARY — 1.0%
Media — 1.0%
Charter Communications Inc.						10,703			347,847		*(g)
Charter Communications Inc., Class A Shares						3,836			124,670		*
SuperMedia Inc.						119			1,255		*
TOTAL CONSUMER DISCRETIONARY									473,772
ENERGY — 0.1%
Oil, Gas & Consumable Fuels — 0.1%
SemGroup Corp., Class A Shares						867			20,153		*
INDUSTRIALS — 0.0%
Building Products — 0.0%
Ashton Woods USA LLC, Class B Membership						17			7,651		(c)(g)
Nortek Inc.						229			9,028		*
TOTAL INDUSTRIALS									16,679
MATERIALS — 0.2%
Chemicals — 0.2%
Applied Extrusion Technologies Inc., Class B Shares						1,091			2,455		*(c)(g)
Georgia Gulf Corp.						6,273			102,501		*
TOTAL MATERIALS									104,956
TOTAL COMMON STOCKS (Cost — $741,680)									615,560
CONVERTIBLE PREFERRED STOCKS — 0.8%
FINANCIALS — 0.8%
Diversified Financial Services — 0.8%
Bank of America Corp.		7.250%				290			284,925
Citigroup Inc.		7.500%				806			95,519
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost — $367,435)									380,444
PREFERRED STOCKS — 1.3%
CONSUMER DISCRETIONARY — 0.2%
Automobiles — 0.2%
Saturns, Series F 2003-5		8.125%				3,935			99,949
FINANCIALS — 1.1%
Commercial Banks — 0.3%
Banesto Holdings Ltd.		10.500%				6,000			156,750		(a)
Diversified Financial Services — 0.8%
Citigroup Capital XII		8.500%				14,100			372,381		(d)
TOTAL FINANCIALS									529,131
TOTAL PREFERRED STOCKS (Cost — $570,106)									629,080

 

See Notes to Schedule of Investments.

 

10

 

WESTERN ASSET HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)

September 30, 2010

 

SECURITY

EXPIRATION DATE

WARRANTS

VALUE

WARRANTS — 0.0%

Buffets Restaurant Holdings

4/28/14

169

$

2

*(c)(g)

Charter Communications Inc.

11/30/14

209

1,343

*

Nortek Inc.

12/7/14

340

4,121

*

SemGroup Corp.

11/30/14

912

5,246

*

Turbo Beta Ltd.

11/1/14

1

0

*(c)(g)

TOTAL WARRANTS (Cost — $4,751)

10,712

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $46,542,243)

47,927,255

RATE

MATURITY DATE

FACE AMOUNT †

SHORT-TERM INVESTMENTS — 0.0%

U.S. Government Agencies — 0.0%

Federal National Mortgage Association (FNMA), Discount Notes (Cost - $6,990)

0.240%

5/9/11

7,000

6,992

(i)(j)

TOTAL INVESTMENTS — 98.5% (Cost — $46,549,233#)

47,934,247

Other Assets in Excess of Liabilities — 1.5%

713,443

TOTAL NET ASSETS — 100.0%

$

48,647,690

†

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

*

Non-income producing security.

(a)

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

(b)

The coupon payment on these securities is currently in default as of September 30, 2010.

(c)

Illiquid security.

(d)

Variable rate security. Interest rate disclosed is that which is in effect at September 30, 2010.

(e)

Payment-in-kind security for which part of the income earned may be paid as additional principal.

(f)

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

(g)

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

(h)

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

(i)

All or a portion of this security is held at the broker as collateral for open futures contracts.

(j)

Rate shown represents yield-to-maturity.

(k)

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

#

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

Abbreviations used in this schedule:

BRL

- Brazilian Real

EUR

- Euro

GDP

- Gross Domestic Product

IDR

- Indonesian Rupiah

OJSC

- Open Joint Stock Company

RUB

- Russian Ruble

 

See Notes to Schedule of Investments.

 

11

 

Notes to Schedule of Investments (unaudited)

 

1. Organization and Significant Accounting Policies

 

Western Asset High Income Fund Inc. (the “Fund”) was incorporated in Maryland and is registered as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund seeks to maintain a high level of current income by investing at least 80% of its net assets, plus any borrowings for investment purposes, in high-yield debt securities issued by U.S. and foreign corporations and foreign governments. As a secondary objective, the Fund seeks capital appreciation.

 

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

 

(a) Investment Valuation.   Debt securities are valued at the mean between the last quoted bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various other relationships between securities. Publicly traded foreign government debt securities are typically traded internationally in the over-the-counter market, and are valued at the mean between the last quoted bid and asked prices as of the close of business of that market. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities at fair value as determined in accordance with procedures approved by the Fund’s Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates fair value.

 

The Fund has adopted Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”). ASC Topic 820 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Fund’s investments, and requires additional disclosure about fair value. The hierarchy of inputs is summarized below.

 

·                   Level 1—quoted prices in active markets for identical investments

·                   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 methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of 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.

 

12

 

Notes to Schedule of Investments (unaudited) (continued)

 

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

 

DESCRIPTION		QUOTED PRICES (LEVEL 1)			OTHER SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2)			SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)			TOTAL
Long-term investments†:
Corporate bonds & notes		—			$	42,994,665		$	85,800		$	43,080,465
Collateralized senior loans		—			331,475			260,000			591,475
Convertible bonds & notes		—			301,950			—			301,950
Sovereign bonds		—			2,317,569			—			2,317,569
Common stocks:
Consumer discretionary		$	125,925		347,847			—			473,772
Industrials		9,028			—			7,651			16,679
Materials		102,501			—			2,455			104,956
Other common stocks		20,153			—			—			20,153
Convertible preferred stocks		380,444			—			—			380,444
Preferred stocks		472,330			156,750			—			629,080
Warrants		1,343			9,367			2			10,712
Total long-term investments		$	1,111,724		$	46,459,623		$	355,908		$	47,927,255
Short-term investments†		—			6,992			—			6,992
Total investments		$	1,111,724		$	46,466,615		$	355,908		$	47,934,247
Other financial instruments:
Futures contracts		$	(24,076	)	—			—			$	(24,076	)
Forward foreign currency contracts		—			$	(12,070	)	—			(12,070		)
Total other financial instruments		$	(24,076	)	$	(12,070	)	—			$	(36,146	)
Total		$	1,087,648		$	46,454,545		$	355,908		$	47,898,101

 

†See Schedule of Investments for additional detailed categorizations.

 

The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:

 

		CORPORATE			ASSET-						COMMON STOCKS
		BONDS &			BACKED			COLLATERALIZED			CONSUMER												ESCROWED			PREFERRED
INVESTMENTS IN SECURITIES		NOTES			SECURITIES			SENIOR LOANS			DISCRETIONARY			ENERGY			INDUSTRIALS			MATERIALS			SHARES			STOCKS			WARRANTS			TOTAL
Balance as of December 31, 2009		$	273,880		$	0	*	—			$	0	*	$	20,804		—			$	2,455		$	0	*	$	0	*	$	4,333		$	301,472
Accrued premiums /discounts		27,201			—			$	39		—			—			—			—			—			—			—			27,240
Realized gain (loss) 1		(10,295		)	(493,850		)	—			(22,000		)	—			—			—			—			(4,880		)	—			(531,025		)
Change in unrealized appreciation (depreciation) 2		40,503			493,850			1,690			22,000			(651		)	$	7,651		—			(0		)*	4,880			5,036			574,959
Net purchases (sales)		(245,489		)	—			258,271			—			—			0		*	—			—			—			—			12,782
Transfers into Level 3		—			—			—			—			—			—			—			—			—			—			—
Transfers out of Level 3		—			—			—			—			(20,153		)	—			—			—			—			(9,367		)	(29,520		)
Balance as of September 30, 2010		$	85,800			—		$	260,000			—			—		$	7,651		$	2,455			—			—		$	2		$	355,908
Net change in unrealized appreciation (depreciation) for investments in securities still held at September 30, 2010 2		$	5,800		—			$	1,690		—			—			$	7,651		—			—			—			$	2		$	15,143

 

* Value is less than $1.

1  This amount is included in net realized gain (loss) from investment transactions.

2  Change in unrealized appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.

 

(b) Repurchase Agreements. The Fund may enter into repurchase agreements with institutions that its investment adviser has determined are creditworthy. Each repurchase agreement is recorded at cost. Under the terms of a typical repurchase agreement, the Fund acquires a debt security subject to an obligation of the seller to repurchase, and of the Fund to resell, the security at an agreed-upon price and time, thereby determining the yield during the Fund’s holding period. When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian, acting on the Fund’s behalf, take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction maturity exceeds one business day, the value of the collateral is marked to market and measured against the value of the agreement in an effort to ensure the adequacy of the collateral. If the counterparty defaults, the Fund generally has the right to use the collateral to satisfy the terms of the repurchase transaction. However, if the market value of the collateral declines during the period in which the Fund seeks to assert its rights or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.

 

(c) Forward Foreign Currency Contracts. The Fund may enter 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.

 

13

 

Notes to Schedule of Investments (unaudited) (continued)

 

When entering into a forward foreign currency contract, 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) Futures Contracts. The Fund may use futures contracts to gain exposure to, or hedge against, changes in the value of interest rates or foreign currencies. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.

 

Upon entering into a futures contract, the Fund is required to deposit cash or cash equivalents with a broker in an amount equal to a certain percentage of the contract amount. This is known as the ‘‘initial margin’’ and subsequent payments (‘‘variation margin’’) are made or received by the Fund each day, depending on the daily fluctuation in the value of the contract. For certain futures, including foreign denominated futures, variation margin is not settled daily, but is recorded as a net variation margin payable or receivable. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded.

 

Futures contracts involve, to varying degrees, risk of loss. 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.

 

(e) 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.

 

(f) 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.

 

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.

 

(g) 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 investment 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 investment in non-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.

 

(h) Security Transactions.   Security transactions are accounted for on a trade date basis.

 

2.  Investments

 

At September 30, 2010, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

Gross unrealized appreciation		$	3,671,679
Gross unrealized depreciation		(2,286,665		)
Net unrealized appreciation		$	1,385,014

 

14

 

Notes to Schedule of Investments (unaudited) (continued)

 

At September 30, 2010, the Fund had the following open futures contracts:

 

		Number of		Expiration		Basis			Market			Unrealized
		Contracts		Date		Value			Value			Loss
Contracts to Buy:
U.S. Treasury Bonds		4		12/10		$	571,802		$	565,125		$	(6,677	)
Contracts to Sell:
U.S. Treasury 5-Year Notes		17		12/10		2,037,343			2,054,742			(17,399		)
Net unrealized loss on open futures contracts												$	(24,076	)

 

At September 30, 2010, the Fund had the following open forward foreign currency contracts:

 

Foreign Currency		Counterparty		Local Currency		Market Value			Settlement Date		Unrealized Loss
Contracts to Sell:
Euro		Citibank, N.A.		92,435		$	125,964		11/24/10		$	(7,193	)
Euro		Citibank, N.A.		100,000		136,272			11/24/10		(4,877		)
Net unrealized loss on open forward foreign currency contracts											$	(12,070	)

 

3. Derivative Instruments and Hedging Activities

 

Financial Accounting Standards Board Codification Topic 815 requires enhanced disclosure about an entity’s derivative and hedging activities.

 

The following is a summary of the Fund’s derivative instruments categorized by risk exposure at September 30, 2010.

 

               

 

		Futures Contracts					Forward Foreign Currency Contracts
Primary Underlying Risk Disclosure		Unrealized Appreciation		Unrealized Depreciation			Unrealized Appreciation		Unrealized Depreciation			Total
Interest Rate Contracts		—		$	(24,076	)	—		—			$	(24,076	)
Foreign Exchange Contracts		—		—			—		$	(12,070	)	(12,070		)
Total		—		$	(24,076	)	—		$	(12,070	)	$	(36,146	)

 

During the period ended September 30, 2010, the volume of derivative activity for the Fund was as follows:

 

		Average Market Value
Forward foreign currency contracts (to sell)		$	160,817
Futures contracts (to buy)		421,125
Futures contracts (to sell)		1,602,556

 

The Fund has several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and/or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern positions in swaps, over-the-counter options, and forward currency exchange contracts for each individual counterparty.

 

15

 

 

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 High Income Fund Inc.

 

 

By	/s/ R. Jay Gerken
	R. Jay Gerken
	Chief Executive Officer
Date:  November 23, 2010

 

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

 

 

By	/s/ R. Jay Gerken
	R. Jay Gerken
	Chief Executive Officer
Date:  November 23, 2010

 

By	/s/ Kaprel Ozsolak
	Kaprel Ozsolak
	Chief Financial Officer
Date:  November 23, 2010

 

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