SecProbe.io

June 6, 2024
VIA E-mail
Jane Trust
Franklin Templeton 280 Park Avenue New York, New York 10017
Re: Western Asset Mortgage Opportunity Fund Inc. (the “Fund”)
File Nos. 811-22369; 333-279051
Dear Ms. Trust:
We have reviewed the regist ration statement on Form N-2 filed May 1, 2024, with the
Commission on behalf of the Fund (the “Registrat ion Statement”).  Our comments are set forth
below.  Please consider a comment made with respect to one section applicable to similar disclosure elsewhere in the Registration Statemen t.  All capitalized terms not otherwise defined
herein have the meaning given to them in the Registration Statement.
General
1. Please either confirm that any rights offe ring will not involve arrangements among the
Fund, any underwriters, and/or any broker dealers or th at FINRA will review any
proposed underwriting terms and other arrangem ents for a transaction described in the
Registration Statement and will issue a ‘no obj ections’ letter in advance of your offering.
2. The Fund’s most recent Form N-CSR refers to Credit Risk Transfer Securities and the
impact they had on Fund performance.  If thes e investment types will be a principal
investment type going forward, pl ease revise to disclose (a) what these investments are
and the types of investment exposures th ey provide (b) how they’re analyzed and
considered in the portfolio construction pr ocess and (c) any unique risks they present.
Prospectus
Cover
3. In Investment Strategies , the disclosure states “The Fund seeks to achieve its investment
objectives by investing primarily in a diverse  portfolio of mortgage-backed

Ms. Jane Trust
Page 2

securities…and mortgage whole loans [emphasis added].”  As the disclosure in the first
sentence on the Cover states the Fund is a “non-diversified” investment company, to
avoid confusion, please delete or replace “d iversified” as used here and throughout the
Registration Statement.  If the Fund is operating as a “diversified company” as that term
is defined in the 1940 Act, please consider  whether any additional changes to the
disclosure are necessary.
4. In Offering , the disclosure in the first lin e of the second paragraph states:

We may offer and sell our securities to or  through underwriters, through dealers or
agents that we designate from time to time , directly to purchasers, through at-the-
market offerings or through a combination of these methods.
Regarding this disclosure, please:
a. Explain to us who the “agents” referred to  in the disclosure are, what they do and
how they are compensated.  Please also e xplain to us the distinction between the
agents and underwriters/dealers and if the Fund would monitor the activities of
the agents.
b. As the Fund’s securities are listed, please e xplain in the disclosure what it means
for offerings to be “at-the-market”.

5. In Leverage , the disclosure in the last sentence states:

…the Fund may enter into additional reve rse repurchase agreements and/or use
similar investment management techniques that may provide leverage, but which are not subject to the foregoing 33 1/3% limitation so long as the Fund has covered its commitment with respect to such techniques by segregating liquid assets, entering into offsetting transactions or owni ng positions covering related obligations.

Please review this disclosure for accuracy a nd consistency with the regulation of reverse
repurchase agreements under rule 18f-4 under the 1940 Act.  See, Rule 18f-4(d)(1); Use
of Derivatives by Registered Investment  Companies and Business Development
Companies, Release No. IC-34084 at notes  710-749 (Nov. 2, 2020).  Please revise as
appropriate ( e.g., include language consistent with the disclosure in the last sentence of
the second paragraph of Leverage  on page 5).  Please ma ke corresponding changes as
needed throughout the Registration Statement.
6. Also in Leverage , the disclosure states the Fund may use leverage through Borrowings
“and possibly through the issuance of Preferre d Stock, in an aggregate amount of up to
approximately 33 1/3% of the Fund’s Ma naged Assets immediately after such
Borrowings and/or issuances of Preferred St ock.”  The Fund’s most recent Form N-CSR
discloses that the Fund uses leverage.  Pleas e revise here and thr oughout to indicate the
Fund’s actual amounts and types of existing leve rage in addition to your disclosure about
what the Fund may do in the future.  Also, pl ease clarify this disclosure to reflect the
requirement, as disclosed on page 47, that “[u]nder the 1940 Act, the Fund is not

Ms. Jane Trust
Page 3

permitted to issue Preferred Stock unless immediately after such issuance the value of the
Fund’s asset coverage is at  least 200% of the liquidation value of the outstanding
Preferred Stock.”
7. In addition to the disclosure regarding the Fund’s use of leverage, please prominently
disclose (in the required format ) and provide a cross-reference to the specific prospectus
discussion of any additional fact ors that make the offering speculative or one of high risk
(e.g., investment in high yield / dist ressed debt and subprime loans). See, Item 1.1.j. of
Form N-2.
Prospectus Summary
  The Offering (page 1)

8. Your disclosure references a “Rights Offeri ngs” section that we are unable to locate.
Please revise or advise as necessary.   Investment Objectives and Strategies (page 2)

9. Please revise your disclosure to indicate whether you focus on any specific tranches of
MBS.  To the extent you currently have ma terial exposure to lower rated or unrated
tranches, consider disclosing the extent of your exposure or tell us why you believe such
disclosure is not require d or otherwise material.

10. At the bottom of page 2, the disclosure states “The Fund also may invest up to 20% of its
Managed Assets in other permitted investments  [emphasis added].”  Please clarify in the
disclosure what “permitted investments” are.

11. On page 3, the disclosure in the first full se ntence states “The Fund also may invest in
any newly developed mortgage-related deriva tives that may hereafter become available
for mortgage investing.”  Please explain to us the types of inve stments referred to in this
disclosure.  Please also confirm the Fund will upd ate its risk disclosure as may be needed
following investment in new products.

12. On page 3, in the penultimate sentence of the second full paragraph, the disclosure states
“Derivatives counted towards the Fund’s 80% policy are valued based on market value.”
Please confirm derivatives included in  the Fund’s 80% policy have economic
characteristics similar to MBS and mortgage whole loans.  Also, please note,  the SEC’s
recently adopted amendments to rule 35d-1 ge nerally require funds to use a derivatives
instrument’s notional amount, rather than its  market value, to determine the Fund’s
compliance with its 80% policy.  See Investment Company Name s, Investment Company
Act Release No.  35000, at n. 234-262 (September 20, 2023).

Special Principal Risk Considerations (page 9)
13. On page 10, under Risk Related to Investments in MBS,  you state that “adverse changes in
economic conditions and circumstances, which are more likely to have an adverse impact

Ms. Jane Trust
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on MBS secured by loans on certain types of commercial properties” are a risk associated
with your investments.  We note you have si gnificant allocations to CMBS but it is
unclear what types of properties ( e.g., data centers, offices, storage, retail etc.) you have
exposure to and how economic conditions and ci rcumstances – such as interest rates,
inflation, work from home, are impacting your strategy and risks.  Please revise to
provide more granular disc losure about how you analyze and monitor your RMBS and
CMBS investments and provide more tailored risk disclosure  based on existing portfolio
holdings and current conditions.
14. On page 17, Derivatives Risk , the disclosure states “Not withstanding the foregoing, the
Fund may invest without limitation  in Treasury futures, Eurodollar futures, interest rate
swaps, swaptions or similar instruments and combinations thereof [emphasis added].”  Please clarify what this disclo sure means.  Are these derivatives exempt from the Fund’s
stated policy to invest no more than 20% of its Managed Assets in derivatives?  If so,
please explain to us why and why disclosure  indicating the Fund will not invest more
than 20% of its Managed Assets in derivatives is not misleading.

Risks (page 49)
15. On page 60, in the penul timate paragraph of Leverage Risk , the disclosure references
“non-agency RMBS” and “agency RMBS.”  Please explain in the disclosure the
difference between these two investments.
16. On page 66, in Tax Risks , the disclosure references th e Fund’s investment in debt
instruments issued with “original issue di scount.”  Are OID instruments a principal
investment strategy of the F und?  Based on your response to  us, we may have further
comments.
Net Asset Value (page 90)
17. In the fourth paragraph of this section, the di sclosure states that the “Manager has been
designated as the valuation designee and is responsible for the oversight of the daily
valuation process.”  Please disc lose the Manager’s conflict of receiving an asset-based
fee while determining the fair valuation of the Fund’s investments.
Distributions (page 91)

18. In the penultimate paragraph of  this section, the disclosure discusses Fund distributions
consisting of a return of capital.  Pleas e disclose specifically whether the Fund’s
distributions have included a return of capita l historically.  In addition, please define
“return of capital” and explain the conseque nces of a return of capital distribution
including the impact on a Stockholder’s tax basis ( e.g., include the disclosure at the end
of the second paragraph of Use of Proceeds  on page S-11).  Please include similar
disclosure on the prospectus Cover or provide  a cross-reference to the disclosure here.

Ms. Jane Trust
Page 5

Description of Shares (page 94)
19. In this section, please briefly discuss the t ypes of rights offerings the Fund may issue,
noting that the specific terms of any offe rings would be provided in a Prospectus
Supplement.  Please confirm that, in any ri ghts offering, the ratio will not exceed one new
share for each three rights held.

Certain Provisions in the Charter and Bylaws (page 99)
20. Under Maryland Control Share Acquisition Act  you state that if voting rights for the
holders of control shares are not approved “then the corporation may redeem for fair
value any or all of the control shares … subj ect to compliance with the 1940 Act.”  Please
tell us how these repurchases would be consis tent with sections 17(d), 23(c) and other
applicable provisions of the Investment Comp any Act and rules thereunder.  Please also
tell us whether this option is part of th e Fund’s organizational documents, or the
MCSAA, and the circumstances  under which the Fund would or would not expect to
exercise this option.
21. Please revise the MCSAA disclosure to di scuss recent court opinions addressing the
legality of control share statutes under the Investment Company Act.

Draft Supplement
22. Please consider adding examples showing the extent of the dilutive effect of the offering
when the subscription price is below net asset value on the pricing date.

* * * * * * * *

Ms. Jane Trust
Page 6

A response to this letter should be in the form of a pre-effective amendment filed
pursuant to Rule 472 under the Securities Act.   The pre-effective amendment should be
accompanied by a supplemental letter that includes your responses to each of these comments.
Where no change will be made in the filing in res ponse to a comment, please indicate this fact in
your supplemental letter and briefly state the basis for your position.
We remind you that the Fund and its management  are responsible for the accuracy and
adequacy of their disclosures, notwithstandi ng any review, comments, action, or absence of
action by the staff.
Should you have any questions regarding this  letter, please contact me at (202) 551-
6779  or Rossottok@sec.gov.
 Sincerely,
  /s/ Karen Rossotto   Karen Rossotto  Senior Counsel  cc: David W. Blass, Esq. and Ryan P. Br izek, Esq., Simpson Thacher & Bartlett LLP
Jay Williamson, Branch Chief Christina Fettig, Staff Accountant