UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21477
Name of Fund: Western Asset/Claymore U.S. Treasury Inflation Protected
Securities Fund 2
Fund Address: 100 Light Street
Baltimore, MD 21202
Name and address of agent for service: Richard M. Wachterman, Esq.
Legg Mason Wood Walker, Incorporated
100 Light Street
Baltimore, MD 21202
Registrant's telephone number, including area code: (410) 539-0000
Date of fiscal year end: 12/31/2004
Date of reporting period: 9/30/2004
Item 1 - Schedule of Investments
Portfolio of Investments
Western Asset/Claymore U.S. Treasury Inflation Protected Securities Fund 2
September 30, 2004 (Unaudited)
(Amounts in Thousands)
Maturity
Rate Date Par Value
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Long-Term Securities -- 147.6%
Corporate Bonds and Notes -- 2.9%
Electric -- 0.7%
The AES Corporation 8.875% 2/15/11 $ 5,000 $ 5,562
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Gas and Pipeline Utilities -- 1.2%
Dynegy Holdings Inc. 8.750% 2/15/12 5,000 5,200
The Williams Companies, Inc. 7.500% 1/15/31 5,000 5,025
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10,225
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Health Care -- 0.5%
Tenet Healthcare Corporation 7.375% 2/1/13 5,000 4,700
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Oil and Gas -- 0.5%
El Paso Corporation 7.750% 1/15/32 5,000 4,363
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Total Corporate Bonds and Notes (Identified Cost --
$23,783) 24,850
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Asset-Backed Securities -- 0.2%
Indexed Securities -- 0.2%
Mutual Fund Fee Trust XIII Series 2000-3 9.070% 7/1/08 5,271 1,728 /A/
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U.S. Government and Agency Obligations -- 120.3% Fixed Rate Securities -- 8.9%
United States Treasury Bonds 2.375% 1/15/25 72,348 75,370
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Indexed Securities -- 111.4%
United States Treasury Inflation-Protected Security 1.875% 7/15/13 53,111 54,013 /B/
United States Treasury Inflation-Protected Security 2.000% 1/15/14 870,301 891,141 /B/
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945,154
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Total U.S. Government and Agency Obligations (Identified Cost --
$1,030,085) 1,020,524
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Yankee Bonds /C/ -- 24.2%
Electric Utilities -- 0.6%
Empresa Nacional de Electricidad S.A. 7.875% 2/1/27 5,000 5,096
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Foreign Governments -- 20.4%
Federative Republic of Brazil 14.500% 10/15/09 15,510 20,008
Federative Republic of Brazil 8.000% 4/15/14 7,729 7,642
Federative Republic of Brazil 12.750% 1/15/20 4,100 5,197
Federative Republic of Brazil 10.125% 5/15/27 15,105 16,011
Federative Republic of Brazil 11.000% 8/17/40 11,710 13,127
Republic of Colombia 11.750% 2/25/20 15,980 19,535
Republic of Ecuador 8.000% 8/15/30 6,670 5,403 /D/
Republic of El Salvador 8.250% 4/10/32 5,030 5,030 /E/
Republic of Panama 9.375% 1/16/23 13,940 15,195
Republic of Peru 8.750% 11/21/33 15,260 15,145
Russian Federation 5.000% 3/31/30 36,800 35,398 /D/
United Mexican States 11.500% 5/15/26 10,170 15,306
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172,997
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Oil and Gas (Exploration and Production) -- 0.6%
Petroleos Mexicanos 4,410 4,983 /E/
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Special Purpose -- 2.0%
Aries Vermogensverwaltungs 9.600% 10/25/14 5,000 5,613 /E/
Petrozuata Finance, Inc. 8.220% 4/1/17 11,525 11,352 /E/
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16,965
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Telecommunications -- 0.3%
xtel SA
A 11.000% 12/15/13 500 513
Innova S. de R.L. 9.375% 9/19/13 2,300 2,501
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3,014
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Transportation -- 0.3%
Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. 1.000% 6/15/09 2,440 2,464
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Total Yankee Bonds (Identified Cost -- $200,083) 205,519
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Total Long-Term Securities (Identified Cost -- $1,255,599) 1,252,621
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Short-Term Securities -- 1.9%
Options Purchased -- 0.2%
Emerging Markets Bond Index Put, December 2004, Strike
Price $261.45 50,000 1
Emerging Markets Bond Index Put, January 2005, Strike
Price $266.40 50,000 6
U.S. Treasury Note Futures Call, December 2004, Strike
Price $123.00 1,185 19
U.S. Treasury Note Futures Put, December 2004, Strike
Price $111.00 2,800 1,487
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1,513
--------------
Repurchase Agreements -- 1.7%
Deutsche Bank AG
1.85%, dated 9/30/04, to be repurchased at $14,424
on 10/1/04
(Collateral: $14,448 Fannie Mae notes, 4.61%, due 10/10/13,
value $15,029) 14,424 14,424
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Total Short-Term Securities (Identified Cost -- $20,612) 15,937
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Total Investments -- 149.5% (Identified Cost -- $1,276,211) 1,268,558
Other Assets Less Liabilities -- (49.5)% (420,163)
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Net Assets -- 100.0% $ 848,395
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Actual Appreciation/
Expiration Contracts (Depreciation)
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Futures Contracts Written
.S. Treasury Note Futures
U December 2004 944 $ (315)
.S. Treasury Bond Futures December 2004
U 30 (33)
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$ (348)
=============
Options Written
.S. Treasury Note Futures Call, Strike Price $109.00
U December 2004 2,956 $ (754)
Emerging Markets Bond Index Call, December 2004, December 2004
Strike Price $319.50 50,000,000 (1,644)
Emerging Markets Bond Index Call, January 2005, January 2005
Strike Price $319.68 50,000,000 (1,870)
.S. Treasury Bond Futures Call, Strike Price $114.00
U December 2004 200 12
.S. Treasury Bond Futures Call, Strike Price $107.00
U December 2004 640 (803)
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$ (5,059)
=============
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/A/ The rates of interest earned on these securities are tied to the London
Interbank Offered Rate ("LIBOR"), the Consumer Price Index ("CPI"), or the
one-year Treasury Bill rate. The coupon rates are the rates as of September 30,
2004.
/B/ Treasury Inflation-Protected Security - Treasury security whose principal
value is adjusted daily in accordance with changes to the Consumer Price Index
for All Urban Consumers. Interest is calculated on the basis of the current
adjusted principal value.
/C/ Yankee Bond - A dollar-denominated bond issued in the U.S. by foreign
entities.
/D/ Stepped coupon security - A security with a predetermined schedule of
interest or dividend rate changes, at which time it begins to accrue interest or
pay dividends.
/E/ Rule 144a Security - A security purchased pursuant to Rule 144a under the
Securities Act of 1933 which may not be resold subject to that rule except to
qualified institutional buyers. These securities represent 3.2% of net assets.
Security Valuation
Securities owned by the Fund for which market quotations are readily available
are valued at current market value. Current market value means the last sale
price of the day or, in the absence of any such sales, the bid price obtained
from quotation reporting systems, pricing services or other approved methods.
Other assets and securities for which no quotations are readily available are
valued at fair value as determined in good faith by the Board of Trustees or
persons acting under their supervision. The factors considered in making such
valuations are subject to change over time and are reviewed periodically. The
values assigned to fair valued investments are based on available information
and do not necessarily represent amounts that might ultimately be realized,
since such amounts depend on future developments inherent in long-term
investments. Further, because of the inherent uncertainty of valuation, such
estimated values may differ significantly from the values that would have been
used had a ready market for the investments existed, and the differences could
be material. Securities with remaining maturities of 60 days or less are
generally valued at a readily available market price, or, if a market price is
not readily available, fair valued at amortized cost.
Options, Futures and Swap Agreements
The current market value of an exchange traded option is the last sale price or,
in the absence of a sale, the price obtained by reference to broker-dealer
quotations. Futures contracts are valued daily at the settlement price
established by the board of trade or exchange on which they are traded. Futures
contracts are marked-to-market on a daily basis. As the contract's value
fluctuates, payments known as variation margin are made by or received by the
Fund each day, depending on the daily fluctuations in the value of the contract.
The daily changes in contract value are recorded as unrealized gains or losses,
and the Fund recognizes a gain or loss when the contract is closed. Swap
agreements are priced daily based upon quotations from brokers and the change,
if any, is recorded as unrealized appreciation or depreciation.
Other information regarding the Fund is available in the Fund's most recent
Report to Shareholders. This information is available on the Securities and
Exchange Commission's website (www.sec.gov).
Item 2 - Controls and Procedures
(a) The Registrant's principal executive and principal financial officers
have concluded, based on their evaluation of the Registrant's
disclosure controls and procedures as of a date within 90 days of the
filing date of this report, that the Registrant's disclosure controls
and procedures are reasonably designed to ensure that information
required to be disclosed by the Registrant on Form N-Q is recorded,
processed, summarized and reported within the required time periods
and that information required to be disclosed by the Registrant in the
reports that it files or submits on Form N-Q is accumulated and
communicated to the Registrant's management, including its principal
executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure.
(b) There were no changes in the Registrant's internal control over
financial reporting during the Registrant's last fiscal quarter that
have materially affected, or are reasonably likely to materially
affect, the internal control over financial reporting.
Item 3 - Exhibits
Certifications pursuant to Rule 30a-2(a) under the Investment Company
Act of 1940 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/Claymore U.S. Treasury Inflation Protected Securities Fund 2
By: /s/ Randolph L. Kohn
---------------------------------
Randolph L. Kohn
President
Western Asset/Claymore U.S. Treasury Inflation Protected Securities Fund 2
Date: November 22, 2004
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/ Randolph L. Kohn
-------------------------------
Randolph L. Kohn
President
Western Asset/Claymore U.S. Treasury Inflation Protected Securities Fund 2
Date: November 22, 2004
By: /s/ Marie K. Karpinski
----------------------------------
Marie K. Karpinski
Treasurer and Principal Financial and Accounting Officer
Western Asset/Claymore U.S. Treasury Inflation Protected Securities Fund 2
Date: November 22, 2004